EXHIBIT 99.1
READER'S DIGEST ASSOCIATION ANNOUNCES 3Q FISCAL 2005 RESULTS:
- Results of $(1.33) Per Share Include Two Non-Cash Charges
Totaling $(142) Million, or $(1.41) Per Share;
- Adjusted EPS Increased Over Last Year's Quarter, Excluding
Non-Cash Charges
- Company Expects Revenue Growth and High Double-Digit
Operating Profit Growth for the Fourth Quarter;
- Company Sees Full-year EPS Guidance at High End of
Previously Announced Range;
- RDA Board Authorizes Share Repurchase Program of $100
Million Over the Next Two Years
PLEASANTVILLE, April 28, 2005 - The Reader's Digest
Association, Inc. (NYSE: RDA) today reported a loss of $(1.33)
per share for the third quarter of Fiscal 2005 ended March 31,
2005. Reported results include non-cash charges totaling $(142)
million, or $(1.41) per share: $(129) million, or $(1.32) per
share to reduce Books Are Fun goodwill; and $(13) million, or
$(0.09) per share, for amortization of previously deferred
magazine promotion expense. Excluding these charges, adjusted
EPS was $0.08 per share. In Fiscal 2004, third quarter reported
earnings were $0.02 per share, which included a non-cash charge
of $(0.04) per share related to the accelerated amortization of
deferred debt financing fees.
"Operating results were a little better than our internal
expectations," said Thomas O. Ryder, Chairman and Chief Executive
Officer. "We announced at the beginning of the fiscal year that
the third quarter would be down and would be followed by a
stronger fourth quarter. Our core businesses in RD North America
and RD International were stronger than we expected, and we are
aggressively addressing issues at Books Are Fun and QSP. We
continue to expect solid revenue and significant double-digit
operating profit growth in the fourth quarter. Full-year EPS
should come in at the high end of our previously announced
guidance range."
In accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets," the company analyzes and assesses
recoverability of all of its goodwill and intangibles in the
third quarter of each year. Declines in profits from historical
highs and disappointing results this year at Books Are Fun
necessitated a write-down. The charge is non-cash. The revised
valuation of this unit remains in excess of $300 million.
"Accounting regulations require this goodwill charge, but
that doesn't change our belief in the potential of this
business," Ryder said. "Books Are Fun is very profitable now and
should be more so when we fix some of the operating issues."
Revenues in the third quarter of Fiscal 2005 were $545
million, versus $561 million in the Fiscal 2004 quarter. The
company reported an operating loss of $(126) million, which
included the previously defined non-cash charges of $(142)
million. Excluding these charges, operating profit was $16
million versus $19 million in the Fiscal 2004 quarter.
Factors contributing to the year-over-year variance (other
than the non-cash charges) in reported results for the third
quarter include:
- An $8 million increase in operating profits at RD North
America, which improved by 54 percent. The increase in
operating profits would have been approximately $1 million
had magazine promotion expense in Fiscal 2004 been accounted
for in the same manner as in Fiscal 2005.
- A $(7) million decline in operating profits at RD
International, which would have been a decline of
approximately $(4) million had magazine promotion expense in
Fiscal 2004 been accounted for in the same manner as in
Fiscal 2005.
- A $(5) million decline in operating profits at Consumer
Business Services.
- A $14 million improvement in Other Income and (Expense),
Net, as a result of the sale of a non-strategic asset in
Fiscal 2005 (for $5 million) and the accelerated write-off
of $(7) million in deferred financing fees in the prior
year's results.
The company had free cash flow (change in cash before the
change in total borrowings, dividends, share repurchases,
divestitures and acquisitions) of $28 million. It reduced total
debt outstanding to $574 million, down from $596 million at the
close of second quarter. Cash on hand was $49 million, versus
$56 million at the end of the second quarter.
As previously announced, effective July 1, 2004, the company
began expensing magazine direct-response promotion costs as
incurred, versus the previous practice of deferring and
amortizing much of those costs. In connection with this change,
a non-cash charge of $(27) million was taken on June 30, 2004, to
reflect amortization of a portion of the then-existing deferred
promotion expense balance of $(104) million. The remaining
balance of previously deferred costs, $(77) million, or $(0.49)
per share, is being amortized over Fiscal 2005, with the
third-quarter impact being $(13) million, or $(0.09) per share.
All of these amounts are non-cash. Excluding this amortization,
the change is expected to have a minimal impact on the full
fiscal year but will result in timing differences in year-to-year
quarter comparisons. As expected, these timing differences
resulted in unfavorable comparisons in the first half and are
expected to cause favorable comparisons in the second.
ther Income and (Expense), Net
Other Income and (Expense), Net was $(4) million this
quarter, favorable by $14 million compared with last year's third
quarter. Net interest expense was approximately $(10) million in
each period. The Fiscal 2005 third-quarter results included a $5
million gain on the sale of real estate in Portugal. In the
Fiscal 2004 third quarter, the company incurred $(7) million in
non-cash expenses from accelerated amortization of debt financing
fees related to the partial retirement of the company's term
loans and related interest rate caps.
Outlook
For the fourth quarter, the company expects revenues to
improve over the year-ago period, driving high double-digit
operating profit growth. Fourth quarter results will include a
$(7) million non-cash write-off of financing fees associated with
the company's replacement of term loans and a revolving credit
facility with a new $400 million revolver at more favorable
terms. The company expects to come in at the high end of its
previously announced Fiscal 2005 full-year EPS guidance of $0.77
to $0.87, not including amortization for deferred magazine
promotion and special items (including the goodwill charge and
debt financing fees). On a reported basis, the full-year loss is
expected to be between $(1.08) and $(0.98) per share.
Reconciliation of Previously Announced Fiscal
2005 Guidance EPS
Previously Announced Fiscal 2005 Guidance $0.77 - $0.87
Add:
Amortization of existing magazine deferred
promotion asset as of June 30, 2004 $(0.49)
Goodwill charge $(1.32)
Q4 FY05 write-off of deferred debt financing fees $(0.04)
Loss per share $(1.08) - $(0.98)
"The fourth quarter should be much stronger, with solid
revenue growth and double-digit operating profit improvement,"
Ryder said. "We expect continued strong performances from our
core businesses and progress at Books Are Fun and QSP. This
should produce operating profits at the high end of our
previously announced range."
Share Repurchase Program
The company's Board of Directors today authorized RDA to
repurchase $100 million of its common stock over the next two
years. Based on the stock price as of March 31, 2005, that
represents approximately 6 percent of outstanding shares.
Segment Information
Fiscal 2005 Fiscal 2004 Better
In millions Quarter 3 Quarter 3 (Worse)
Revenues:
Reader's Digest North America $ 211 $ 218 $ (7)
Reader's Digest International 239 239 --
Consumer Business Services 99 109 (10)
Intercompany eliminations (4) (4) --
----- ----- -----
Total revenues $ 545 $ 561 $ (16)
===== ===== =====
Operating (Loss) Profit:
Reader's Digest North America $ 22 $ 14 $ 8
Reader's Digest International 7 14 (7)
Consumer Business Services (4) 1 (5)
Corporate Unallocated (9) (10) 1
Deferred Promotion Amortization (13) -- (13)
Goodwill charge (129) -- (129)
----- ----- -----
Total operating (loss) profit $(126) $ 19 $(145)
===== ===== =====
RD North America (RDNA)
In the third quarter of Fiscal 2005, operating profits
at RDNA were $22 million, an increase of 54 percent, or $8
million over the year-ago period. Had magazine direct-response
advertising been accounted for in Fiscal 2004 in the same manner
as in Fiscal 2005, operating profits would have increased by
approximately $1 million from the year-ago period. Operating
profit improvements were driven by higher circulation profits at
Reader's Digest magazine, which offset lower advertising
profits. Profits at Reiman declined slightly in the quarter as
investment in new magazine launches Backyard Living and Cooking
for 2 offset lower promotion and operating costs.
Revenues at RDNA were $211 million, down $(7) million from
$218 million last year. The decline was driven by lower revenues
at U.S. Books and Home Entertainment mainly because of a
reduction in telemarketing activity and fewer "starts" at Select
Editions. This decline was partly offset by higher revenues at
RD Canada.
RDNA had two significant book "winners" during the quarter,
Extraordinary Uses for Ordinary Things, which sold over 100,000
copies in its first direct mail campaign, and The Complete Do It
Yourself Manual, sold via direct mail, trade and Books Are Fun.
In magazines, Backyard Living, Our Canada and Cooking for2, all
launched in the past 18 months, continue to grow in subscribers.
The company announced earlier this week plans to launch a new
cooking and lifestyle magazine, entitled Every Day with Rachael
Ray.
RD International (RDI)
In the third quarter, revenues at RDI were $239
million, flat versus the year-ago period. Excluding the effects
of foreign currency translation, revenues were down 5 percent.
Operating profits during the quarter were $7 million, down $(7)
million from $14 million last year. Had magazine direct-response
advertising costs in Fiscal 2004 been accounted for in the same
manner as in Fiscal 2005, operating profits would have declined
by approximately $(4) million versus the year-ago period. The
decline in profits principally reflects increased investment
activity in new-customer acquisition efforts and the shift in
timing of mail campaign activity. Profits for the first nine
months of Fiscal 2005 were up 36 percent as revenues firmed,
response and payment rates improved, foreign exchange rates
improved, and costs declined as a result of global efforts to
reduce operating costs and improve mailing efficiency and
execution that began approximately two years ago.
During the third quarter, RDI continued its investment in
initiatives to drive long-term revenue growth. Four new markets
launched during the past 12 months - Romania, Croatia, Slovenia
and Ukraine - continue to perform ahead of plan. RDI has made
plans to test six additional new countries in the coming months.
Consumer Business Services (CBS)
In the third quarter, Consumer Business Services reported
revenues of $99 million, a decline of 9 percent, and an operating
loss of $(4) million, $(5) million lower than the year-ago
period. The declines were principally driven by lower sales and
profits at BAF. Revenues at BAF declined by 10 percent in the
quarter. The revenue decline primarily reflects lower average
sales per event in the schools division. At QSP, revenues
declined by 8 percent primarily because of lower same-school
sales.
Through the first three quarters, QSP has benefited from
investment in sales force retention efforts and has significantly
reduced sales force turnover. QSP is currently ramping up for
next fall's selling season and has invested in new marketing
materials and prizes, and redesigned catalogs to drive student
participation in its magazine and gift businesses.
Books Are Fun continues to operate in a competitive
environment, with challenges within the market to grow the
average sales per event and the number of events. BAF is
focusing on strengthening its recruiting efforts and enhancing
selling programs to build on its market-leading position.
Corporate Unallocated
Corporate unallocated expenses were $(9) million in
this quarter versus $(10) million in the year-ago period.
Corporate unallocated expenses include the cost of governance and
other centrally managed expenses, as well as the costs of the
U.S. pension plans, post-retirement healthcare plans, and
executive compensation programs.
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:
- Adjusted EPS - This is a measure used by management in
evaluating operating performance as it provides the earnings per
share exclusive of non-operating items and significant non-cash
expenses.
Q3 FY 2005
Reconciliation of Reported EPS to Adjusted EPS EPS
Reported EPS $(1.33)
Add:
Amortization of existing magazine deferred
promotion asset as of June 30, 2004 $ 0.09
Goodwill charge ` $ 1.32
Adjusted EPS $ 0.08
- 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 may not recalculate due to
rounding.
Reconciliation of Free Cash Flow, Q3 Fiscal Q3 Fiscal
in millions 2005 (a) 2004
Reported change in cash per cash flow statement
(see Table 4) $ (7.7) $(11.6)
Less:
Change in total borrowings (22.0) (61.2)
Dividends (10.1) (5.2)
Debt Financing/Acquisition Costs -- (6.5)
Cash outlays related to Pleasantville facility sale (2.9) --
Cash outlays related to magazine divestitures (0.2) --
------ ------
Free Cash Flow Source $ 27.6 $ 61.3
====== ======
(a) Certain amounts do not recalculate due to rounding.
- 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 amounts the
company has the capacity to repay. 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.
- Previously Announced Fiscal 2005 Guidance (earnings per
share before the effects of the change in accounting for magazine
deferred promotion costs and special items, including
restructuring charges) - The Previously Announced Fiscal 2005
Guidance represented the company's full-year earnings-per-share
guidance announced July 29, 2004. At that time, the guidance was
provided excluding final resolution of the treatment of its
existing magazine deferred promotion asset (which was not
determinable at that time), and special items (including
restructuring charges). Subsequent to this date, the company
finalized the accounting for magazine deferred promotion costs.
The Previously Announced Fiscal 2005 Guidance is presented to
facilitate an understanding of the impact of the company's change
in magazine deferred promotion accounting on its guidance.
Management uses Fiscal 2005 Guidance to assess the company's
actual performance relative to its full-year expectations on a
per-share basis. During Fiscal 2005, special items identified to
date include the non-cash goodwill charge and the accelerated
amortization of deferred debt financing fees. A reconciliation
of this amount is included in the "Outlook" section, above.
The company will host a conference call with financial
analysts to discuss the company's third quarter results on
Thursday, April 28, 2005, at 8:30 a.m. EST. The company invites
investors to listen to the webcast of the conference call at the
company's Investor Relations Web site, www.rd.com/investors. The
site will 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. A transcript of the conference call will be posted on
www.rd.com/investors.
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, Backyard
Living, Cooking for 2, Birds & Blooms, Country, Country Woman,
Country Discoveries, Reminisce, and Farm & Ranch, 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; Reader's Digest Young
Families; Adult and Children's Trade Publishing; financial
services marketing alliances; and Select Editions, series and
general books, health and home books, and music and video
products in the United States and Canada.
Consumer Business Services - Books Are Fun, a display
marketer in North America selling books, gifts and other items;
and QSP, Inc. and QSP Canada, schools and youth fundraising
companies.
Reader's Digest International - 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; 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. 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 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.
Reader's Digest does not undertake to update any forward-looking
statements.
###
Table 1 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share data)
(unaudited)
Three-month period ended Nine-month period ended
March 31, 2005 and 2004 (A) March 31, 2005 and 2004
Fiscal Year Better/ Fiscal Year Better/
2005 2004 (Worse) 2005 2004 (Worse)
Revenues $544.9 $561.0 (3%) $1,832.9 $1,852.1 (1%)
Product, distribution and editorial expenses (232.5) (234.9) 1% (743.9) (753.3) 1%
Promotion, marketing and administrative expenses (309.5) (307.0) (1%) (1,033.8) (970.1) (7%)
Goodwill charge (B) (129.0) -- N/M (129.0) -- N/M
Other operating items, net (C) -- -- N/M -- (9.1) N/M
------- ----- ---- ------- ------- ---
Operating (loss) profit (126.1) 19.1 N/M (73.8) 119.6 N/M
Other income and (expense), net (D) (3.8) (17.5) 78% (18.3) (35.1) 48%
------- ----- ---- ------- ------- ---
(Loss) income before income tax (129.9) 1.6 N/M (92.1) 84.5 N/M
Income tax benefit (provision) 0.3 0.6 (50%) (9.9) (29.3) 66%
------- ----- ---- ------- ------- ---
Net (loss) income ($129.6) $2.2 N/M ($102.0) $55.2 N/M
======= ===== ==== ======= =======
Basic (loss) earnings per share:
Weighted average common shares outstanding 97.6 97.1 97.4 97.0
Basic (loss) earnings per share ($1.33) $0.02 N/M ($1.06) $0.56 N/M
======= ===== ==== ======= =======
Diluted (loss) earnings per share:
Adjusted weighted average common shares outstanding 97.6 99.4 97.4 99.2
Diluted (loss) earnings per share ($1.33) $0.02 N/M ($1.06) $0.55 N/M
======= ===== ==== ======= ======= ===
Dividends per common share $0.10 $0.05 -- $0.20 $0.15 --
(A) RDA reports on a fiscal year beginning July 1. The three-month periods ended March 31, 2005 and 2004 are the third fiscal
quarters of fiscal year 2005 and fiscal year 2004, respectively. Operating results for any interim period are not necessarily
indicative of the results for an entire year.
(B) In accordance with Statement of Financial Accounting Standards (SFAS) No.142, Goodwill and Other Intangible Assets, RDA
conducted its annual recovery assessment for all reporting units for the quarter ended March 31, 2005. The analysis resulted in a
non-cash charge of $(129.0) million, or $(1.32) per share, to reduce the carrying amount of Books Are Fun goodwill.
(C) Other operating items, net in Fiscal 2004 is comprised of restructuring charges of $(9.1) million, or $(0.06) per share
primarily for severance. The charges are related to the company's global restructuring and cost-reduction program announced in
Fiscal 2003.
(D) Other income and (expense), net for the three-month period ended March 31, 2005 includes a $5.3 million gain on the sale of
real estate in Portugal. For the three-month period ended March 31, 2004, other income and (expense), net includes $(6.5) million
due to the write-off of deferred debt financing fees in connection with the partial retirement of RDA's term loans and related
interest rate caps.
N/M - Not meaningful.
Table 2 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Revenues and Operating Profit (Loss) by Operating Segments
(In millions)
(unaudited)
Three-month period ended Nine-month period ended
March 31, 2005 and 2004 (A) March 31, 2005 and 2004
Fiscal Year Fiscal Year
Restated (B) Better/ Restated (B) Better/
2005 2004 (Worse) 2005 2004 (Worse)
Revenues
Reader's Digest North America $211.2 $217.7 (3%) $689.2 $702.2 (2%)
Reader's Digest International 238.8 238.7 -- 759.8 730.0 4%
Consumer Business Services 99.3 109.0 (9%) 404.6 443.5 (9%)
Intercompany eliminations (C) (4.4) (4.4) -- (20.7) (23.6) 12%
------ ------ --- -------- -------- ---
Total Revenues $544.9 $561.0 (3%) $1,832.9 $1,852.1 (1%)
====== ====== === ======== ======== ===
Operating profit (loss)
Reader's Digest North America $21.9 $14.2 54% $63.0 $59.4 6%
Reader's Digest International 7.3 13.9 (47%) 49.2 36.3 36%
Consumer Business Services (4.1) 1.2 N/M 38.6 66.2 (42%)
Corporate unallocated (D) (9.1) (10.2) 11% (30.9) (33.2) 7%
------ ------ --- -------- -------- ---
$16.0 $19.1 (16%) $119.9 $128.7 (7%)
Deferred promotion amortization (E) (13.1) -- N/M (64.7) -- N/M
Goodwill charge (F) ($129.0) -- N/M ($129.0) -- N/M
Other Operating Items, net (G) -- -- N/M -- ($9.1) N/M
------ ------ --- -------- -------- ---
Total operating (loss) profit ($126.1) $19.1 N/M ($73.8) $119.6 N/M
====== ====== === ======== ======== ===
(A) RDA reports on a fiscal year beginning July 1. The three-month periods ended March 31, 2005 and 2004 are the third fiscal
quarters of fiscal year 2005 and fiscal year 2004, respectively. Operating results for any interim period are not necessarily
indicative of the results for an entire year.
(B) The results for fiscal 2004 have been restated for the transfer of the Young Families, Financial Services and Trade Publishing
businesses from the Consumer Business Services segment to the Reader's Digest North America segment.
(C) 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.
(D) 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.
(E) The deferred promotion amortization of $(13.1) million reflects the expensing of the deferred magazine promotion asset as of
June 30, 2004, and includes $(0.2) million from the effects of foreign exchange. For the nine-month period ended March 31, 2005,
the total deferred promotion amortization is $(64.7) and includes $(0.5) million from the effects of foreign exchange.
(F) RDA's annual recovery assessment resulted in a non-cash charge of $(129.0) million for the quarter ended March 31, 2005, to
reduce the carrying amount of Books Are Fun goodwill.
(G) Other Operating Items, net in Fiscal 2004 is comprised of restructuring charges of $(9.1) million primarily for severance.
The charges are related to the company's global restructuring and cost-reduction program announced in Fiscal 2003.
N/M - Not meaningful.
Table 3 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
As of March 31, 2005 and June 30, 2004
(In millions)
(unaudited)
March 31, June 30,
2005 2004
Assets
Cash and cash equivalents $48.7 $50.3
Accounts receivable, net 264.5 229.0
Inventories 183.2 152.0
Prepaid and deferred promotion costs 48.5 106.9
Prepaid expenses and other current assets 181.8 152.1
-------- --------
Total current assets 726.7 690.3
Property, plant and equipment, net 117.5 155.8
Goodwill 881.0 1,009.5
Other intangible assets, net 145.2 173.9
Other noncurrent assets 421.5 413.2
-------- --------
Total assets $2,291.9 $2,442.7
======== ========
Liabilities and Stockholders' Equity
Loans and notes payable $58.7 $83.9
Accounts payable 111.1 110.6
Accrued expenses 285.4 268.7
Income taxes payable 43.2 15.5
Unearned revenue 435.2 403.4
Other current liabilities 9.9 10.2
-------- --------
Total current liabilities 943.5 892.3
Long-term debt 515.4 637.7
Postretirement and postemployment benefits other than pensions 116.5 119.5
Unearned revenues 133.8 129.3
Other noncurrent liabilities 220.9 200.8
-------- --------
Total liabilities 1,930.1 1,979.6
Capital stock 18.6 17.8
Paid-in capital 207.1 210.1
Retained earnings 1,207.6 1,330.4
Accumulated other comprehensive loss (77.4) (89.4)
Treasury stock, at cost (994.1) (1,005.8)
-------- --------
Total stockholders' equity 361.8 463.1
-------- --------
Total liabilities and stockholders' equity $2,291.9 $2,442.7
======== ========
Table 4 of 4
The Reader's Digest Association, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(In millions)
(unaudited)
Three-month period ended Nine-month period ended
March 31, (A) March 31,
2005 2004 2005 2004
Cash flows from operating activities
Net (loss) income ($129.6) $2.2 ($102.0) $55.2
Depreciation and amortization 14.6 15.5 45.0 47.7
Asset impairments --- 0.3 -- 0.8
Goodwill charge 129.0 --- 129.0 --
Amortization of debt issuance costs 1.1 6.8 3.1 9.4
Stock-based compensation 2.7 2.2 8.2 7.8
Net gain on marketable securities and sales of certain
assets (5.3) (0.1) (12.6) (3.8)
Changes in current assets and liabilities, net of effects of
acquisitions and dispositions
Accounts receivable, net 74.9 84.0 (22.7) 6.9
Inventories (9.3) (1.6) (27.1) (8.2)
Unearned revenues (3.3) (10.3) 22.8 23.1
Accounts payable and accrued expenses (40.8) (33.1) 3.6 (15.6)
Other, net 23.5 2.3 67.6 22.1
Changes in noncurrent assets and liabilities, net of effects
of acquisitions and dispositions (24.7) (3.5) (1.0) 16.0
---- ---- ----- -----
Net change in cash due to operating activities 32.8 64.7 113.9 161.4
---- ---- ----- -----
Cash flows from investing activities
Proceeds from sales of marketable securities -- -- -- 0.8
Purchases of licensing agreements -- -- -- (1.3)
Proceeds from other long-term investments -- -- 2.8 3.0
Proceeds from sales of property, plant and equipment 1.0 0.4 11.2 0.6
Proceeds from the sale of the Pleasantville facility (1.4) -- 46.8 --
Magazine divestitures (0.2) -- 1.3 --
Capital expenditures (5.4) (3.7) (13.0) (12.3)
---- ---- ----- -----
Net change in cash due to investing activities (6.0) (3.3) 49.1 (9.2)
---- ---- ----- -----
Cash flows from financing activities
Proceeds / (repayments) of revolving credit and short-term
facilities, net 8.0 (0.1) (36.5) (0.7)
Repayments of term loan (30.0) (61.1) (111.0) (128.6)
Dividends paid (10.1) (5.2) (20.5) (15.5)
Cash paid for financing fees -- (6.5) (0.5) (6.5)
Proceeds from employee stock purchase plan and exercise
of stock options -- -- 1.4 1.4
Other, net (0.4) 0.6 (2.3) 0.6
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Net change in cash due to financing activities (32.5) (72.3) (169.4) (149.3)
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Effect of exchange rate changes on cash (2.0) (0.7) 4.8 2.6
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Net change in cash and cash equivalents (7.7) (11.6) (1.6) 5.5
---- ---- ----- -----
Cash and cash equivalents at beginning of period 56.4 68.4 50.3 51.3
---- ---- ----- -----
Cash and cash equivalents at end of period $48.7 $56.8 $48.7 $56.8
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(A) RDA reports on a fiscal year beginning July 1. The three-month periods ended March 31, 2005 and 2004 are the third fiscal
quarters of fiscal year 2005 and fiscal year 2004, respectively. Operating results for any interim period are not necessarily
indicative of the results for an entire year.