The Reader's Digest Association, Inc.
Media: William Adler, (914) 244-7585 william.adler@rd.com
Investor Relations: Richard Clark, (914) 244-5425 richard.clark@rd.com
Reader's Digest Association Reports Fiscal 2004 Earnings;
Full-Year Operating Profits at RD North America
and International Businesses Grow by Double Digits;
Full-Year Free Cash Flow Improves to $172 Million
PLEASANTVILLE, N.Y., July 29, 2004 -- The Reader's Digest Association,
Inc. (NYSE: RDA) today reported fourth quarter and full-year results for its
Fiscal 2004 year ended June 30, 2004.
"Overall, the fourth quarter was consistent with our prior guidance, and
we are pleased to report significantly improved profit performance at RD
North America and International Businesses. This was offset by continued
soft performance in the Consumer Business Services segment," said Thomas O.
Ryder, Chairman and Chief Executive Officer. "For the fiscal year, we
achieved most of the metrics we had established to measure progress in our
two-year plan, including generating $172 million in free cash flow - our
third consecutive annual increase."
Fiscal 2004 free cash flow (change in cash before the change in total
borrowings, dividends, share repurchases, divestitures and acquisitions) was
in line with expectations in the fourth quarter and was $172 million for the
year, up from $162 million in Fiscal 2003. The company reduced its total
debt outstanding to $722 million, down from $866 million at the close of
Fiscal 2003. At Fiscal 2004 year end, cash on hand was $50 million, versus
$51 million at the end of Fiscal 2003.
Summary of Consolidated Results
In millions, except per share data 4Q 2004 4Q 2003 FY 2004 FY 2003
Revenues $ 536 $ 564 $ 2,388 $ 2,475
Operating expenses (516) (544) (2,240)
Other operating items, net (6) (26) (15) (40)
------- ------- ------- -------
Operating profit (loss) 14 (6) 133 139
Other income and expense, net (5) (10) (40) (39)
Income tax benefit (provision) 3 3 (26) (39)
------- ------- ------- -------
Net income (loss) $ 12 $ (13) $ 67 $ 61
======= ======= ======= =======
Diluted earnings (loss) per share $ 0.12 $ (0.14) $ 0.66 $ 0.60
======= ======= ======= =======
In the Fiscal 2004 fourth quarter, RDA reported earnings of $0.12 per
share, in line with prior guidance that excluded restructuring and one-time
items. Reported results include a tax benefit of $0.05 per share. In the
prior-year period, RDA reported a loss of $(0.14) per share, which included a
$(0.20) per share restructuring charge. Fourth quarter Fiscal 2004 revenues
were $536 million, down 5 percent from $564 million in the prior-year
period. Reported operating profits were $14 million in the quarter, versus a
reported operating loss of $(6) million in Fiscal 2003.
Factors contributing to the year-over-year variance in reported results
for the fourth quarter include:
- A $3 million improvement in profits at RD North America, which grew by
20 percent, driven by increased profitability at U.S. Reader's Digest
magazine and sharply reduced losses at U.S. Books and Home Entertainment
(BHE).
- A $6 million improvement in profits at International Businesses, which
grew by 40 percent because of lower overhead costs, offsetting revenue
declines.
- A $(6) million increase in losses at CBS, mainly because of lower sales,
in part because of the timing of Easter, and higher investment spending
at BAF and QSP.
- Higher Corporate unallocated expenses, mostly non-cash, which increased
by $(3) million, primarily because of lower pension income.
- Lower Other operating items, including restructuring charges in the
current quarter: $(6) million versus $(26) million in the prior-year
period.
- In the Fiscal 2004 fourth quarter, Other income and (expense), net
includes a gain of $6 million, or $0.04 per share, from the sale of real
estate in Hong Kong.
For Fiscal 2004, RDA reported earnings of $0.66 per share, in line with
prior guidance, which excluded restructuring and one-time items. In Fiscal
2003, RDA reported earnings of $0.60 per share. Fiscal 2004 revenues were
$2.4 billion, down 3 percent from $2.5 billion in the prior-year period. RDA
reported operating profits of $133 million, versus operating profits of $139
million in Fiscal 2003.
Factors contributing to the Fiscal 2004 variance in reported results
include:
- A $10 million improvement in profits at RD North America, which grew by
16 percent.
- An $8 million improvement in profits at International Businesses, which
grew by 16 percent.
- A $(27) million decline in profits at CBS, down 29 percent. Declines at
CBS reflect increased competition at QSP and a weaker product mix at BAF.
- Higher Corporate unallocated expenses, mostly non-cash, which increased
by $(22) million, primarily related to lower pension income.
- Lower Other operating items, including restructuring charges in the
current Fiscal Year. In Fiscal 2004, the company recorded charges of
$(15) million versus charges of $(40) million in the prior-year period.
Other income/(expense), net
Other income and (expense), net was $(5) million in the Fiscal 2004
fourth quarter, compared with $(10) million in the prior-year quarter. These
amounts primarily consist of net interest expense of $(10) million in this
quarter versus $(9) million in the year-ago period. The Fiscal 2004 quarter
includes a gain of $6 million on the sale of real estate in Hong Kong. The
current quarter also included approximately $(1) million in costs to carry
out a repricing amendment to the company's term loans. This amendment
allowed the company to substantially reduce the interest rate on this debt by
1 percentage point.
For the full year, Other income and (expense), net was $(40) million in
Fiscal 2004 versus $(39) million the prior year. These amounts include net
interest expense of $(43) million in Fiscal 2004 versus $(41) million in
Fiscal 2003. For Fiscal 2004, this expense category also reflects $(7)
million in non-cash expenses related to refinancing activities.
Accounting Change
The company has determined that it will change its accounting policy for
magazine direct response promotion costs effective July 1, 2004, and will
expense all magazine promotion costs as incurred. Historically, the company
has deferred and amortized certain magazine promotion costs in accordance
with AICPA Statement of Position 93-7, "Reporting on Direct Response
Advertising Costs." The company is seeking Securities and Exchange
Commission pre-clearance of the company's proposed accounting for the
treatment of the existing deferred promotion balance, which approximates $104
million as of June 30, 2004. The company intends to disclose the accounting
treatment for this balance when it is determined and prior to filing its Form
10-K annual report.
Income Taxes
Income Taxes for the quarter was a benefit of $3 million, which included
a $5 million benefit from the conclusion of federal tax audits.
Outlook
The end of Fiscal 2004 marked the midpoint of RDA's two-year plan to
achieve sustainable revenue and profit growth by Fiscal 2005. Included in
the plan are a series of actions ranging from re-engineering efforts to
cost-reduction initiatives, as well as incremental investment spending to
focus on activities that represent the best opportunity to drive future
growth.
Throughout the year, the company made progress against the plan,
particularly in RD North America and International Businesses. However, both
QSP and Books Are Fun had disappointing years that led to total company
performance that was lower than expected, and which should affect Fiscal 2005
as well. Overall, for Fiscal 2005 the company expects that it will have a
solid performance and will approach its goal of sustainable revenue and
profit growth.
The company expects that for Fiscal 2005:
1. Consolidated revenues should grow slightly, except for a couple of small
businesses that will be purposely downsized.
2. Operating profit should reflect the following performances from the
business units:
-- Low double-digit gains at RD North America.
-- Mid single-digit growth at International Businesses.
-- Flat to slightly lower results at CBS.
-- Lower Corporate unallocated expenses.
3. The estimates for operating profits should include at least $15 million
in new investments.
4. Other Income/expense, net should be favorable in Fiscal 2005, reflecting
lower interest expense and potential gains from international asset
sales.
5. EPS should be in the range of $0.77 to $0.87 per share, excluding any
restructuring charges and one-time items.
6. Free cash flow from operations should continue to be strong, exceeding
that of Fiscal 2004.
Year-over-year comparisons in the first and second quarters should be
favorable, while the timing of investments and promotional marketing campaign
activity will result in unfavorable comparisons in the third quarter and
improved results in the fourth quarter.
Summarized below are Q4 and full-year results by segment:
Segment Information
Quarter 4 Full-Year
Better/ Better/
In millions, except per share data FY 2004 FY 2003 (Worse) FY 2004 FY 2003 (Worse)
Revenues:
Reader's Digest North America $ 203 $ 209 $ (6) $ 835 $ 854 $ (19)
International Businesses 239 252 (13) 970 1,008 (38)
Consumer Business Services 96 110 (14) 609 641 (32)
Intercompany eliminations (2) (7) 5 (26) (28) 2
------- ------- ------- ------- ------- -------
Total revenues $ 536 $ 564 $ (28) $ 2,388 $ 2,475 $ (87)
======= ======= ======= ======= ======= =======
Operating profit (loss):
Reader's Digest North America $ 16 $ 13 $ 3 $ 71 $ 61 $ 10
International Businesses 21 15 6 57 49 8
Consumer Business Services (7) (1) (6) 64 91 (27)
Corporate unallocated (10) (7) (3) (44) (22) (22)
Other operating items, net (6) (26) 20 (15) (40) 25
------- ------- ------- ------- ------- -------
Total operating profit (loss) $ 14 $ (6) $ 20 $ 133 $ 139 $ (6)
======= ======= ======= ======= ======= =======
Reader's Digest North America
In the fourth quarter, operating profits at RD North America (RDNA) were
$16 million, an improvement of 20 percent over prior year. Full-year
operating profits grew to $71 million, up 16 percent versus the year-ago
results. The year-over-year improvement in the quarter represents the ninth
consecutive quarter of improved profits at RDNA. Gains for both the quarter
and the year largely reflect increases at Reader's Digest magazine, the
Special Interest Publications, U.S. BHE and revenue-driven profit growth in
Canada. These gains were partly offset by lower operating profit at Reiman,
which had softer magazine and book sales, increased marketing efforts to
expand Taste of Home magazine, investment in new magazine concept testing,
and development of new book titles to sell through BAF, U.S. BHE and Reiman.
RDNA profits for the year also reflect investment spending for two successful
magazine launches, Backyard Living and Our Canada.
Revenues at RDNA declined by 3 percent in the fourth quarter, to $203
million and 2 percent for all of Fiscal 2004, to $835 million. The declines
in both fourth quarter and full-year results reflect lower subscription
revenues and book sales. These declines were partly offset by the new
magazine launches (Backyard Living and Our Canada), incremental revenue from
the RD Specials magazine series, and revenue gains in Canada driven by
year-over-year advertising sales growth and the favorable effects of
foreign-currency exchange. Revenues at U.S. BHE were roughly flat for the
quarter and full year.
International Businesses
International Businesses operating profits were $21 million in the
fourth quarter, an improvement of 40 percent over last year. The strong
fourth quarter performance helped drive full-year operating profits to $57
million, an improvement of 16 percent versus the year-ago period (6 percent
excluding the effect of foreign currency translation). For both the fourth
quarter and full year, operating profits improved in most international
markets, most notably Australia, Mexico and France, largely as a result of
reduced costs. New business efforts continued in the fourth quarter with
successful new market launches in Romania, Croatia and Slovenia.
Revenues declined in both the fourth quarter and the full year,
reflecting planned reductions in promotional activity in most markets as part
of the company's strategy to stabilize results and improve execution and
response rates, as well as declining underlying trends in some markets.
Revenues were $239 million in the fourth quarter, a decline of 5 percent.
Excluding the effects of foreign currency translation, revenues fell by 11
percent. For the full year, revenues were $970 million, a decline of 4
percent. Excluding foreign currency translation, revenues fell by 13
percent.
Consumer Business Services
In the fourth quarter, CBS reported an operating loss of $(7) million,
versus a loss of $(1) million in the year-ago period. For the full year,
profits fell to $64 million, down from $91 million last year. These declines
were primarily the result of lower revenues, which declined by 12 percent to
$96 million in the quarter, and by 5 percent to $609 million for the year.
Quarterly revenues reflect weaker sales at QSP and BAF, as well as sharply
lower sales at RD Young Families as that unit reduced unprofitable marketing
activity. At QSP, the fourth quarter is typically a period of light
activity. Seasonal losses were greater in the quarter, reflecting lower
revenues from magazine and gift subscription sales and increased investment.
The Easter selling period skewed more toward the third quarter of Fiscal 2004
versus Fiscal 2003, which had an adverse effect on QSP sales. Profits
declined at BAF in the quarter on lower sales, reflecting fewer school and
corporate events. Average sales per event for both schools and corporate
declined modestly, but the declines were less than in the second and third
quarters.
For the full year, revenues for BAF and QSP declined by 6 percent and 7
percent respectively. At QSP, profits fell on revenue declines, reflecting
fewer magazine and gift subscription sales throughout the year due to
increased competition and higher sales staff turnover. Further contributing
to profit declines was investment in sales force expansion. At BAF, a
revenue shortfall also drove profits lower. Weaker product mix, mostly in
the second quarter, caused unfavorable variances in events and event averages.
These declines for the year were partly offset by an 18 percent increase
in Trade Publishing revenues because of increased sales of Children's
Publishing products, principally the highly successful Movie Theater
interactive book series. In Fiscal 2005, Trade Publishing will introduce the
first product in a new Music Player interactive book series, as well as
several new NASCAR-related titles.
Corporate Unallocated
Corporate unallocated expenses were $(10) million in the quarter. This
category primarily reflects the company's cost of governance as well as other
centrally managed expenses. It also includes the accounting for U.S. pension
plans, post-retirement healthcare costs, and executive compensation
programs. For the Fiscal 2004 quarter, the $3 million unfavorable variance
was mostly non-cash and primarily attributable to a $5 million decrease in
pension income derived from the company's over-funded U.S. pension plan. For
Fiscal 2004, Corporate unallocated expenses were $(44) million versus $(22)
million in the prior year. The full-year increase was due to lower pension
income, additional compensation expense from a greater mix of restricted
stock versus stock options, and higher post-retirement healthcare costs.
Non-GAAP Financial Measures
The company publicly reports its financial information in accordance
with accounting principles generally accepted in the United States (GAAP).
To facilitate external analysis of the company's operating performance, the
company also presents financial information that may be considered "non-GAAP
financial measures" under Regulation G and related reporting requirements
promulgated by the Securities and Exchange Commission. Non-GAAP financial
measures should be evaluated in conjunction with, and are not a substitute
for, GAAP financial measures. The following non-GAAP financial measures
included in this release are used by the company in its internal analysis of
the business.
- Free Cash Flow (change in cash before the change in total borrowings,
dividends, share repurchases, divestitures and acquisitions) - Free cash
flow is presented to provide period-to-period cash flow trends generated
by the business before any discretionary, finance-related uses/sources
of cash. It is used by management to reconcile the change in net debt
from period to period. Certain amounts do not recalculate due to
rounding.
Reconciliation of Free Cash Flow, Three-month periods ended Twelve-month periods ended
June 30, June 30,
In millions 2004 2003 2004 2003
Reported change in cash per cash flow
statement (see Table 4) $ (6.5) $ (29.7) $ (1.0) $ (56.3)
Less:
Change in total borrowings, net (15.2) (50.8) (144.5) (85.3)
Dividends paid (5.2) (5.2) (20.7) (21.0)
Acquisition costs and financing fees (1.1) (2.7) (7.6) (2.7)
Share repurchases -- -- -- (101.7)
Recapitalization costs (Cash Payments) -- 2.5 -- (7.9)
Free Cash Flow Source $ 15.0 $ 26.5 $ 171.8 $ 162.3
- Net Debt (total borrowings less cash and cash equivalents) - Net debt is
one of management's measures of leverage and is an approximate measure
of the company's debt less cash on hand. The company typically manages
its cash and debt by using any "excess" cash (i.e., cash in excess of a
desired on-hand amount) to make principal payments on its outstanding
debt.
RDA will host a conference call with financial analysts to discuss the
company's fourth quarter and full-year Fiscal 2004 results on July 29, 2004
at 8:30 a.m. ET. The company invites investors to listen to the webcast of
the conference call at the Investor Relations section of the company's Web
site, www.rd.com/investors. This will also include a reconciliation of
non-GAAP financial measures that may be disclosed on the conference call or
from time to time in other oral, webcast or broadcast public announcements by
the company.
The company reports business results in three segments:
- Reader's Digest North America - Reader's Digest magazine in the United
States and Canada; Reiman Media Group, including magazines Taste of
Home, Light & Tasty, Quick Cooking, Birds & Blooms, Country, Country
Woman, Country Discoveries, Reminisce, Backyard Living, Farm & Ranch
Living and Crafting Traditions, as well as books, cooking schools,
country tours and other enterprises; The Family Handyman, American
Woodworker, Reader's Digest Large Print Edition and U.S. Selecciones
magazines; Our Canada; Select Editions, series and general books, health
and home books and products, and music and video products in the United
States and Canada.
- Consumer Business Services - Books Are Fun; Young Families and
children's products in the United States and Canada; adult and
children's trade books; QSP, Inc. and QSP Canada; and financial services
marketing alliances and other strategic initiatives in the United States.
- International Businesses - Products sold in more than 60 countries
outside the United States and Canada, including: Select Editions, series
and general books, music, video and Young Families products; Reader's
Digest magazine in 48 editions and 19 languages, Special Interest
magazines in the Czech Republic, a personal finance magazine in the
United Kingdom, and The Family Handyman in Australia; Books Are Fun
operations in France, Mexico and Spain; and financial services marketing
partnerships and other initiatives in more than 30 countries.
The Reader's Digest Association, Inc. (RDA) is a global publisher and
direct marketer of products that inform, enrich, entertain and inspire people
of all ages and cultures around the world. Global headquarters are located
at Pleasantville, New York. The company's main Web site is at www.rd.com.
This release may include "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements inherently involve risks and uncertainties that could cause
actual future results and occurrences to differ materially from the
forward-looking statements. The Reader's Digest Association, Inc.'s
filings with the Securities and Exchange Commission, including its reports
on Forms 10-K, 10-Q and 8-K, contain a discussion of additional factors
that could affect future results and occurrences. RDA does not undertake
to update any forward-looking statements.
###
Table 1 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Statements of Income
(In millions, except per share data)
(unaudited)
Three-month period ended Twelve-month period ended
June 30, 2004 and 2003 (A) June 30, 2004 and 2003
Fiscal Year Better/ Fiscal Year Better/
2004 2003 (Worse) 2004 2003 (Worse)
Revenues $536.4 $563.6 (5%) $2,388.5 $2,474.9 (3%)
Product, distribution and editorial expenses (219.6) (236.7) 7% (972.9) (1,002.2) 3%
Promotion, marketing and administrative expenses (297.2) (306.5) 3% (1,267.3) (1,293.8) 2%
Other operating items, net (5.9) (26.5) 78% (15.0) (39.8) 62%
------ ------ --- -------- -------- ---
Operating profit (loss) 13.7 (6.1) N/M 133.3 139.1 (4%)
Other income and (expense), net (B) (4.9) (10.4) 53% (40.0) (38.7) (3%)
------ ------ --- -------- -------- ---
Income before income tax benefit 8.8 (16.5) N/M 93.3 100.4 (7%)
Income tax benefit (provision) 3.0 3.4 (12%) (26.2) (39.1) 33%
------ ------ --- -------- -------- ---
Net income (loss) $11.8 ($13.1) N/M $67.1 $61.3 9%
====== ====== === ======== ======== ===
Basic earnings (loss) per share:
Weighted average common shares outstanding 97.1 96.9 97.1 98.1
Basic earnings (loss) per share $0.12 ($0.14) N/M $0.68 $0.61 11%
====== ====== === ======== ======== ===
Diluted earnings (loss) per share:
Weighted average common shares outstanding 99.4 96.9 99.2 99.2
Diluted earnings (loss) per share $0.12 ($0.14) N/M $0.66 $0.60 10%
====== ====== === ======== ======== ===
Dividends per common share $0.05 $0.05 -- $0.20 $0.20 --
(A) RDA reports on a fiscal year beginning July 1. The three-month periods ended June 30, 2004 and 2003 are the fourth fiscal
quarters of fiscal year 2004 and fiscal year 2003, respectively. Operating results for any interim period are not necessarily
indicative of the results for an entire year.
(B) Other income and (expense), net for the three-month period ended June 30, 2004 includes $(0.8) million in expenses associated
with the repricing amendment to RDA's term loans as well as a $6.1 million, or $0.04 per share, gain on sale of real estate in Hong
Kong. The twelve-month period ended June 30, 2004 includes $(7.3) million, or $(0.05) per share, due to the writte-off of deferred
debt financing fees in connection with the partial retirement of RDA's term loans/related interest rate caps and costs for the
aforementioned repricing amendment. For the twelve-month period ended June 30, 2003, other income and (expense), net includes net
expenses of $(3.3) million or $(0.03) per share related to costs incurred in connection with RDA's share recapitalization and a
gain of $2.2 million, or $0.02 per share, on the sale of a building in Australia.
Table 2 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Revenues and Operating Profit by Operating Segments
(In millions)
(unaudited)
Three-month period ended Twelve-month period ended
June 30, 2004 and 2003 (A) June 30, 2004 and 2003
Fiscal Year Fiscal Year
Better/ Better/
2004 2003 (Worse) 2004 2003 (Worse)
Revenues
Reader's Digest North America $202.9 $209.3 (3%) $835.4 $854.4 (2%)
International Businesses 239.5 251.7 (5%) 969.5 1,007.8 (4%)
Consumer Business Services 96.0 109.6 (12%) 609.2 640.8 (5%)
Intercompany eliminations (B) (2.0) (7.0) 71% (25.6) (28.1) 9%
------ ------ -- -------- -------- --
Total Revenues $536.4 $563.6 (5%) $2,388.5 $2,474.9 (3%)
====== ====== == ======== ======== ==
Operating profit (loss)
Reader's Digest North America $16.0 $13.3 20% $70.5 $60.6 16%
International Businesses 20.7 14.8 40% 57.0 49.1 16%
Consumer Business Services (6.6) (0.8) N/M 64.5 90.6 (29%)
Corporate unallocated (C) (10.5) (6.9) (52%) (43.7) (21.4) (104%)
------ ------ -- -------- -------- ---
$19.6 $20.4 (4%) $148.3 $178.9 (17%)
Other operating items, net (5.9) ($26.5) N/M ($15.0) (39.8) N/M
------ ------ -- -------- -------- ---
Total operating profit (loss) $13.7 ($6.1) N/M $133.3 $139.1 (4%)
====== ====== == ======== ======== ===
(A) RDA reports on a fiscal year beginning July 1. The three-month periods ended June 30, 2004 and 2003 are the fourth fiscal
quarters of fiscal year 2004 and fiscal year 2003, respectively. Operating results for any interim period are not necessarily
indicative of the results for an entire year.
(B) In the normal course of business, the company's segments enter into transactions with one another. These intercompany
transactions are recorded by each segment at amounts as if the transactions were with third parties and, therefore, affect segment
performance. Operating segment revenues, above, are presented gross before intercompany eliminations. However, intercompany
revenues and associated expenses are eliminated in consolidation and are not reflected in the company's consolidated results.
(C) Corporate unallocated expenses include the cost of governance and other centrally managed expenses, as well as the accounting
for U.S. pension plans, post-retirement healthcare costs, and executive compensation programs which are not allocated to the
operating segments. Governance and centrally managed expenses include costs such as corporate finance and general management,
investor and public relations, legal, treasury, and any related information technology and facility costs utilized by these
departments.
N/M - Not meaningful.
Table 3 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Balance Sheets
As of June 30, 2004 and June 30, 2003
(In millions)
(unaudited)
June 30, June 30,
2004 2003
Assets
Cash and cash equivalents $ 50.3 $ 51.3
Accounts receivable, net 229.0 256.5
Inventories 152.0 155.7
Prepaid and deferred promotion costs 134.1 132.7
Prepaid expenses and other current assets 148.6 191.8
---------- ----------
Total current assets 714.0 788.0
Property, plant and equipment, net 155.8 162.5
Goodwill 1,009.5 1,009.4
Other intangible assets, net 173.9 212.3
Other noncurrent assets 412.6 427.3
---------- ----------
Total assets $ 2,465.8 $ 2,599.5
========== ==========
Liabilities and Stockholders' Equity
Loans and notes payable $ 83.9 $ 31.3
Accounts payable 110.6 97.5
Accrued expenses 268.7 281.4
Income taxes payable 19.0 36.5
Unearned revenue 403.4 414.8
Other current liabilities 12.3 19.7
---------- ----------
Total current liabilities 897.9 881.2
Postretirement and postemployment benefits other than pensions 119.5 121.9
Unearned revenues 129.3 127.6
Long-term debt 637.7 834.7
Other noncurrent liabilities 200.6 233.8
---------- ----------
Total liabilities 1,985.0 2,199.2
Capital stock 17.8 17.6
Paid-in capital 210.1 215.0
Retained earnings 1,348.0 1,301.6
Accumulated other comprehensive (loss) income (89.3) (109.2)
Treasury stock, at cost (1,005.8) (1,024.7)
---------- ----------
Total stockholder's equity 480.8 400.3
---------- ----------
Total liabilities and stockholder's equity $ 2,465.8 $ 2,599.5
========== ==========
Table 4 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
Twelve-month periods ended June 30, 2004 and 2003
(In millions)
(unaudited)
Three-month period ended Twelve-month period ended
June 30, (A) June 30,
2004 2003 2004 2003
Reclassified (A) Reclassified (A)
Cash flows from operating activities
Net income (loss) $11.8 ($13.1) $67.1 $61.3
Depreciation and amortization 15.5 16.6 63.2 64.7
Asset impairments 0.3 3.2 1.1 3.2
Amortization of debt issuance costs 1.3 1.1 12.1 4.3
Stock-based compensation 2.4 1.4 10.2 6.2
Net gain on marketable securities and sales of certain assets (6.1) (1.4) (10.0) (8.6)
Changes in current assets and liabilities
Accounts receivable, net 27.2 42.8 34.1 55.0
Inventories 14.6 30.5 6.4 6.4
Unearned revenues (37.4) (42.1) (14.3) (12.1)
Accounts payable and accrued expenses 8.8 (1.1) (6.8) (20.1)
Other, net (2.1) 12.3 19.4 4.2
Changes in noncurrent assets and liabilities (23.3) (19.8) (8.1) (2.4)
----- ----- ------ ------
Net change in cash due to operating activities 13.0 30.4 174.4 162.1
----- ----- ------ ------
Cash flows from investing activities
Proceeds from maturities and sales of marketable securities -- -- 0.8 5.2
Purchases of licensing agreements -- (3.0) (1.3) (10.5)
Proceeds from other long-term investments -- -- 3.0 --
Proceeds from sales of property, plant and equipment 6.5 1.8 7.1 5.5
Capital expenditures (3.8) (5.9) (16.1) (15.7)
----- ----- ------ ------
Net change in cash due to investing activities 2.7 (7.1) (6.5) (15.5)
----- ----- ------ ------
Cash flows from financing activities
Proceeds / (repayments) of revolving credit and
short-term debt, net 44.6 (0.1) 43.9 (0.6)
Repayments of term loan (59.8) (50.7) (488.4) (84.7)
Proceeds from senior notes offering -- -- 300.0 --
Payments of debt financing fees (1.1) (2.7) (7.6) (2.7)
Common stock repurchased -- -- -- (101.7)
Dividends paid (5.2) (5.3) (20.7) (21.0)
Proceeds from employee stock purchase plan and exercise
of stock options 1.1 2.5 2.5 4.3
Other, net (0.1) 0.4 0.5 0.8
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Net change in cash due to financing activities (20.5) (55.9) (169.8) (205.6)
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Effect of exchange rate changes on cash (1.7) 2.9 0.9 2.7
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Net change in cash and cash equivalents (6.5) (29.7) (1.0) (56.3)
----- ----- ------ ------
Cash and cash equivalents at beginning of period 56.8 81.0 51.3 107.6
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Cash and cash equivalents at end of period $50.3 $51.3 $50.3 $51.3
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(A) RDA reports on a fiscal year beginning July 1. The three-month periods ended June 30, 2004 and 2003 are the fourth fiscal
quarters of fiscal year 2004 and fiscal year 2003, respectively. Operating results for any interim period are not necessarily
indicative of the results for an entire year. In some instances, prior year amounts have been reclassified to conform to the
current year presentation.