Earnings Down at Reader's Digest

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The Reader's Digest Association Inc., yesterday, released lower quarterly earnings for the third quarter of Fiscal 2002, which ended March 31.

Reader's Digest said revenue fell 9 percent from $597.9 million to $541.8 million. Earnings were $16.4 million, or 16 cents per share, down from $27.9 million, or 27 cents per share, a year ago.

Reader's Digest began additional steps toward financial stability this month with the restructuring of its North America Books and Home Entertainment business segment and the debut of its Young Families continuity book club list on the market.

Both announcements came in the days leading to the release of the publisher's lower quarterly earnings for fiscal third-quarter 2002, which ended March 31.

Despite the decline, spokesman William Adler said the publisher was optimistic.

"The vast majority of all of this news that's coming out of Reader's Digest is connected with our strategic plan to move back onto the positive track, which is short-term growth and moving back onto the path that we were on for long-term growth," he said.

This week, Reader's Digest put its Young Families continuity book club file of 1.39 million program members on the market.

"The list has never before been available," said Amy Benicewicz, vice president of Catamount Group, Bethel, CT, which now manages the file. "Prior to this, the only way to reach these club members was through the package insert program, which we also started managing recently."

On April 18, the publisher said it would cut 100 jobs and exit some product lines as it restructures the BHE segment, which saw revenue fall 14 percent from the previous year. It also planned to eliminate an unprofitable catalog business and reduce its direct mail campaigns and mail volume. For fiscal year 2003, it expects to reduce BHE's mail promotions 40 percent.

The restructuring is to trim operating losses, which began in late fiscal year 2001 and worsened in fiscal year 2002. The company said it would exit the video business, except for children's videos, and reduce some continuity series and general books. It also will consolidate two business units, Health and Home, as it initiates new marketing campaigns, including an expanded "health affinity" publishing program that doesn't use sweepstakes promotions.

Officials are eyeing other non-sweepstakes direct mail, direct response television and telemarketing to expand marketing efforts. Areas of emphasis include Reader's Digest Young Families, Select Editions, Financial Services, annuals, music sold through DRTV and trade publishing. The publisher wants to develop new products for sale directly through Books Are Fun, its fastest-growing display marketing unit.

Reader's Digest also wants to leverage any benefits from its pending acquisition of Reiman Publications, which publishes magazines, books and a catalog about cooking and country lifestyles. Officials think Reiman's customer base includes millions of potential prospects for its products who have no relationship with Reader's Digest.

Books are the fastest-growing segment of Reiman's business, Adler said, providing a chance for the ailing BHE unit to benefit from the acquisition. The deal is expected to close before June 30, possibly as early as late May, he said.

The company said it would take an undisclosed charge for the restructuring. The Reader's Digest Association is based in Pleasantville, NY. Reiman Publications LLC is based in Greendale, WI.


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