Reader's Digest Announces Second Quarter Operating Profit Up 14 Percent On a Comparable Basis; Earnings Up 10 Percent On a Comparable Basis.PLEASANTVILLE Pleasantville. 1 Residential and resort city (1990 pop. 16,027), Atlantic co., SE N.J., just W of Atlantic City; settled 1702, inc. 1888. It is the trade center of an area known as "the Mainland. , NY--(BUSINESS WIRE)--January 27, 1999--The Reader's Digest Reader's Digest U.S.-based monthly magazine. Founded by DeWitt and Lila Wallace, it was first published in 1922 as a digest of articles of topical interest and entertainment value condensed from other periodicals. Association, Inc. (NYSE NYSE See: New York Stock Exchange : RDA RDA abbr. recommended daily allowance Recommended Dietary Allowance (RDA) The Recommended Dietary Allowances (RDAs) are quantities of nutrients in the diet that are required to maintain good health in people. , RDB See Oracle Rdb. 1. Rdb - Oracle Rdb 2. rdb - A roll-your-own database, created in the Unix toolkit philosophy. It appears to be written in the awk language, and is very compatible with awk. It uses awk's syntax and can be combined with awk commands. ) today announced adjusted operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $98.9 million for the fiscal 1999 second quarter ended December December: see month. 31, 1998, up 14 percent on a comparable basis from $86.4 million in the year-ago period. Adjusted earnings of $0.56 per share were up 10 percent on a comparable basis from $0.51 per share a year ago. Revenues for the quarter were down 4 percent compared with the second quarter last year. "Overall, results for our base business were in line with our expectations for the quarter," said Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs O. Ryder Ry·der , Albert Pinkham 1847-1917. American painter known for his rhythmic allegorical works, landscapes, and marine scenes, such as Toilers of the Sea (c. 1884). , Reader's Digest chairman and chief executive officer. "We finished the first half of the year with earnings of $0.58 per share, up 26 percent on a comparable basis from $0.46 per share in the first half last year. However, our business remains volatile. While customer response rates were generally better than expected in some of our major markets in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , such as Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , response rates on some product lines in the
United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. were lower than expected. In the quarter, we made good
progress on planned reductions in the number of mailings and the
elimination of certain unprofitable activities, both of which resulted
in lower revenues and improved margins.
"We are slightly ahead of schedule with our efforts to develop and implement the cost-reduction and re-engineering re-engineering - The examination and modification of a system to reconstitute it in a new form and the subsequent implementation of the new form. http://erg.abdn.ac.uk/users/brant/sre. initiatives we announced in September September: see month. . We began to see results of these efforts in the second quarter. The benefits of our Phase II actions should accelerate in the second half of the fiscal year, with still more significant improvements over the next two to three years." Ryder continued: "We continue to expect that full-year fiscal 1999 results will show a modest improvement over fiscal 1998, before the effect of the cost-reduction and re-engineering initiatives we announced in September. We also expect that customer response rates in major markets in Europe and in the United States will continue to be subject to volatility. We do not expect economic turmoil in developing markets, such as Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , to have a significant effect on our results for the balance of the year." Operating profit for the second quarter of fiscal 1999 improved compared with last year because lower product and promotional costs as a result of lower mail quantities and a reduced number of mailings more than offset a decline in revenues. The elimination of certain unprofitable activities, including the termination of certain alliances, also contributed to reduced costs. Revenues decreased compared with the second quarter of fiscal 1998, reflecting primarily lower unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. within books and home entertainment products in the United States. The decline was the result of lower mail quantities within individual mailings and a reduction in the number of promotional mailings during the quarter. To facilitate appropriate comparisons, results for the quarter have been adjusted to exclude the net positive effect ($46.4 million before taxes or $0.24 per share) of the following items: 1) Net other operating items and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. losses of $31.0 million before taxes or $0.20 per share, including -- New charges associated with our cost-reduction and re-engineering efforts ($51.3 million before taxes or $0.32 per share). -- Reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of charges taken previously to cover certain actions planned by prior management that are not expected to take place under the new long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategy for the company (a benefit of $35.0 million before taxes or $0.21 per share). -- Impairment losses relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of certain assets, principally computer hardware and software, as a result of our re-engineering efforts ($14.7 million before taxes or $0.09 per share). 2) A net gain of $77.4 million before taxes or $0.44 per share on the sale of certain assets and businesses, including: -- A gain on the sale of important works of art from the company's collection ($85.3 million before taxes or $0.50 per share). -- A loss on the sale of the company's operations in South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. ($7.9 million before taxes or $0.06 per share). In addition to completing further components of its previously announced re-engineering plans, the company is currently reviewing additional potential re-engineering activities. As a result, the company expects to record additional other operating items and impairment losses over the next twelve months. Results for the quarter are summarized below: Millions of dollars, Reported Adjusted Reported Adjusted 1999 vs. except earnings per share 2Q 1999 2Q 1999 2Q 1998 Reported 1998 (percent change) Revenues $781.0 $781.0 $812.5 (4)% Operating profit $67.9 $98.9 $86.4 14% Net income $86.5 $60.8 $54.3 12% Basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. earnings per share $0.80 $0.56 $0.51 10% (Adjusted second quarter fiscal 1999 results shown in this table exclude: 1) other operating items and impairment losses of $31.0 million before taxes or $0.20 per share; and 2) net gains on the sale of certain assets and businesses of $77.4 million before taxes or $0.44 per share. During the first quarter of fiscal 1999, the company reported a change in accounting principles related to the calculation of the market-related value of pension plan assets, which affects the recognition of previously unrecognized gains or losses. Reported and adjusted results for the second quarter of fiscal 1999 include a benefit of $4.8 million before taxes or $0.03 per share for reduced pension expense as a result of the change made in the first quarter. Full income statements of reported results are attached in Table 1 of 3.) GEOGRAPHIC AREA RESULTS [The discussion below compares second quarter fiscal 1999 with second quarter fiscal 1998. To address operating trends on a comparable basis, these geographic area results exclude the effects of the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of other operating items and impairment losses. See Table 3 of 3 for geographic area results.] United States -- Operating profit from U.S. operations improved compared with last year primarily because lower product and promotional costs as a result of the reduction in the mail quantities within individual mailings and the number of promotional mailings offset a decline in revenues. The termination of certain strategic alliances and unprofitable activities also reduced costs. Revenues of $364.8 million decreased 6 percent compared with last year. The decrease reflected primarily lower unit sales within books and home entertainment products, moderately offset by sales of a higher-priced product mix and revenues from the Good Catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. Company, which was acquired in October October: see month. 1998. Within books and home entertainment products, lower unit sales in most product lines reflected the timing of promotional mailings, lower customer response rates to promotional mailings in certain product lines, lower mail quantities within mailings and a reduced number of mailings. Although the company has strategically returned to traditional promotional formats in the United States, customer response rates appear to have been unfavorably affected by negative publicity concerning sweepstakes sweepstakes, contest or race, usually a horse race, on which a lottery is run. Prizes are awarded to the holders of winning tickets. In the case of a horse race, the draw is made from the names of all the horses entered in the race and vast numbers of blanks. marketing methods employed by other companies in the United States. In addition, certain products offered in certain product lines in fiscal 1999 did not have as broad appeal as those offered in the prior year. In fiscal 1999, the company reduced mail quantities within mailings based on expected product strength and the desire to reduce marginally profitable mailing activities. Europe -- Operating profit improved sharply compared with last year as a result of improved performance in Germany because of higher customer response to promotional mailings. Dramatically lower product and promotional costs as a result of the strategic reduction in the number of promotional mailings and the mail quantities within individual mailings, which more than offset the decline in revenues, also contributed to the year-over-year improvement. Reported revenues of $297.5 million decreased 3 percent compared with last year. Excluding the positive effect of changes in exchange rates, revenues in Europe decreased 6 percent. Lower revenues in the United Kingdom, Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). and most other developed markets were moderately offset by higher revenues in Germany. Improved customer response to promotional mailings in certain developed markets, resulting largely from a return to traditional promotion formats, was partially offset by strategic reductions in mail quantities. Revenues declined principally in books and home entertainment products and, to a lesser extent, because of lower circulation revenue for Reader's Digest Magazine. Within books and home entertainment products, lower unit sales primarily in video products, general books and series books were moderately offset by sales of a higher-priced product mix in most product lines. Pacific and Other Markets -- Operating profit from the company's Pacific and Other Markets(1) improved compared with last year primarily as a result of growth in Brazil, the timing of promotional expenses Noun 1. promotional expense - the cost of promoting a product business expense, trade expense - ordinary and necessary expenses incurred in a taxpayer's business or trade compared with last year and a reduction in mail quantities within individual mailings in certain markets. Revenues were $118.7 million, essentially flat compared with last year. Excluding the effect of changes in exchange rates, revenues increased 10 percent. Revenues increased primarily as a result of expansion in Brazil and, to a lesser extent, from improved sales in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of compared with the prior year when there was a postal strike The term postal strike or mail strike may refer to:
(1) (which comprises Asia, Australia, Canada, Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. ) BUSINESS SEGMENT RESULTS [The discussion below compares second quarter fiscal 1999 with second quarter fiscal 1998. To address operating trends on a comparable basis, these business segment results exclude the effects of the allocation of other operating items and impairment losses. See Table 3 of 3 for business segment results.] Reader's Digest Magazine revenues of $175.7 million were down 6 percent compared with last year. Excluding the effect of changes in exchange rates, revenues were down 5 percent. The decrease in revenues was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to lower circulation revenues caused by a lower number of copies sold, moderately offset by a higher average price per copy. Advertising revenues were essentially flat, with a higher number of advertising pages sold at a lower average price per page, principally in the United States, as a result of lower circulation levels. Lower circulation revenues were mainly the result of lower circulation levels in the United States and several other major markets, notably the United Kingdom and Germany. Operating profit for Reader's Digest Magazine decreased in the second quarter compared with last year, reflecting primarily lower circulation revenues, offset partially by the timing of promotional expenses in certain markets and lower promotional expenses in the United States. The company announced in October 1998 that it will reduce the rate base for Reader's Digest Magazine in the United States from 15 million copies per issue to 13.3 million for January-June 1999 issues and to 12.5 million copies beginning with the July July: see month. 1999 issue. Operating profit from Books and Home Entertainment Products (Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Books, Series and General Books, Recorded Music recorded music n → música grabada , Video and the Good Catalog) increased significantly because lower product and promotional costs as a result of lower mail quantities within individual mailings and the reduction in the number of promotional mailings more than offset the decline in revenues. The termination of certain strategic alliances and unprofitable activities also reduced costs. Revenues of $452.9 million decreased 5 percent compared with second quarter fiscal 1998. Changes in exchange rates had no effect on the decline in revenues, which occurred predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. in the United States. Revenues decreased primarily because of lower unit sales of general books and, to a lesser extent, series books and video products. Lower unit sales were moderately offset by a higher-priced product mix, notably in video products and general books. The decrease in general books unit sales was caused by lower mail quantities within individual mailings, a reduction in the number of mailings in the United States and Europe and the timing of promotional mailings in the United States. Higher average prices for general books were attributable to the mix of products sold in many markets and to price increases in the United States. Revenues from Special Interest Magazines were $27.3 million, a 9 percent increase compared with last year, reflecting primarily the acquisition of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Woodworker magazine in the second quarter of fiscal 1999. Excluding American Woodworker, revenues increased 1 percent, as higher advertising rates were moderately offset by lower circulation revenues. Operating profit increased primarily because of the higher advertising revenues and the timing of expenses. The special interest magazines group includes The Family Handyman, American Woodworker, American Health American Health Inc. is a company that manufactures health supplements. It is located in Holbrook, New York. One of its products is labeled the "Chewable Original Papaya Enzyme" with the attached registered trademark, "The 'After Meal Supplement'". for Women, New Choices: Living Even Better After 50 and Walking in the United States and Moneywise in the United Kingdom. Operating results for Other Businesses improved compared with last year primarily as a result of growth at QSP QSP Relay (amateur radio Q code) QSP Quality Software Products QSP Quality Samples Program QSP Quiet Supersonic Platform QSP Quick Start Package QSP Quality System Procedure QSP Quality Selection Process QSP Quality Seafood Programme , the company's youth fund-raising fund-raising, large-scale soliciting of voluntary contributions, especially in the United States. Fund-raising is widely undertaken by charitable organizations, educational institutions, and political groups to acquire sufficient funds to support their activities. organization, and lower product costs and promotional expenses in the merchandise catalog product line. Revenues of $125.1 million increased 1 percent compared with last year, primarily as a result of the growth at QSP, principally because of higher unit sales of music products, partially offset by a reduction in activity in the merchandise catalog product line worldwide. The Reader's Digest Association, Inc. is a global publisher and direct marketer of products that inform, enrich, entertain and inspire people of all ages and all cultures around the world. Worldwide revenues were $2.6 billion for the fiscal year ended June June: see month. 30, 1998. Global headquarters are located at Pleasantville, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Statements contained in this news release, if not historical, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which involve risks and uncertainties that could cause actual results to differ materially from the results described in the forward-looking statements. A discussion of factors that could affect the company's results is included in the company's reports filed with the Securities and Exchange Commission. [3 Tables Follow]
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
Three-month periods ended December 31, 1998 and 1997 (a)
Three-month periods ended December 31,
(In millions,
except per share data) Percentage
(unaudited) 1998 1997 Change
Revenues $781.0 $812.5 (4%)
Product, distribution and
editorial expenses 272.3 297.8 (9%)
Promotion, marketing and
administrative expenses 409.8 428.3 (4%)
Other operating items and
impairment losses 31.0 --- N/M
Operating profit 67.9 86.4 (21%)
Other income, net 75.8 0.4 N/M
Income before provision for
income taxes 143.7 86.8 65%
Provision for income taxes 57.2 32.5 76%
Net income $86.5 $54.3 59%
Basic and diluted earnings
per share $0.80 $0.51 57%
Dividends per common share $0.05 $0.225 (78%)
Average common shares
outstanding 107.2 106.3
N/M - Not meaningful.
(a) The company reports on a fiscal year beginning July 1. The
three-month periods ended December 31, 1998 and 1997 are the second
fiscal quarters of fiscal year 1999 and fiscal year 1998,
respectively. Operating results for any interim period are not
necessarily indicative of the results for an entire year.
-0-
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
Six-month periods ended December 31, 1998 and 1997 (a)
Six-month periods ended December 31,
(In millions,
except per share data) Percentage
(unaudited) 1998 1997 Change
Revenues $1,356.0 $1,373.9 (1%)
Product, distribution and
editorial expenses 484.8 501.3 (3%)
Promotion, marketing and
administrative expenses 755.7 799.7 (6%)
Other operating items and
impairment losses 31.0 70.0 (56%)
Operating profit 84.5 2.9 N/M
Other income, net 63.2 6.6 N/M
Income before provision
for income taxes 147.7 9.5 N/M
Provision for income taxes 58.7 11.6 N/M
Income (loss) before
cumulative effect of change
in accounting principles 89.0 (2.1) N/M
Cumulative effect of change in
accounting principles for
pension assets (net of tax
provision of $15.2) 25.3 --- N/M
Net income (loss) $114.3 ($2.1) N/M
Basic and diluted earnings
(loss) per share:
Before cumulative effect of
change in accounting
principles $0.82 ($0.03) N/M
Cumulative effect of change
in accounting principles 0.24 --- N/M
Basic and diluted earnings
(loss) per share $1.06 ($0.03) N/M
Dividends per common
share $0.275 $0.45 (39%)
Average common shares
outstanding 107.2 106.3
N/M - Not meaningful.
(a) The company reports on a fiscal year beginning July 1. The
six-month periods ended December 31, 1998 and 1997 are the first six
months of fiscal year 1999 and fiscal year 1998, respectively.
Operating results for any interim period are not necessarily
indicative of the results for an entire year.
-0-
Table 3 of 3
The Reader's Digest Association, Inc. and Subsidiaries
Revenues by Business Segments and Geographic Areas
Three and six-month periods ended December 31, 1998 and 1997
Three-month periods Six-month periods
ended December 31, ended December 31,
(In millions) Percentage Percentage
(unaudited) 1998 1997 Change 1998 1997 Change
BUSINESS SEGMENTS
Reader's Digest
Magazine $175.7 $187.1 (6%) $343.3 $359.2 (4%)
Books and Home
Entertainment
Products 452.9 476.5 (5%) 825.2 828.5 ---
Special Interest
Magazines 27.3 25.0 9% 50.2 46.3 8%
Other Businesses,
net of
intersegment
sales(a) 125.1 123.9 1% 137.3 139.9 (2%)
Total
Revenues $781.0 $812.5 (4%) $1,356.0 $1,373.9 (1%)
GEOGRAPHIC AREAS
United States $364.8 $387.2 (6%) $621.3 $635.7 (2%)
Europe 297.5 306.8 (3%) 519.5 524.5 (1%)
Pacific and
Other Markets(b) 118.7 118.5 --- 215.2 213.7 1%
Total Revenues $781.0 $812.5 (4%) $1,356.0 $1,373.9 (1%)
(a) Other Businesses includes QSP, Inc., the company's youth
fund-raising organization and merchandise catalogs in selected
countries.
(b) Pacific and Other Markets includes Asia, Australia, Canada, Latin
America, New Zealand and South Africa.
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