THE READER'S DIGEST ASSOCIATION, INC.
READER'S DIGEST ROAD
PLEASANTVILLE, NY 10570-7000
MICHAEL S. GELTZEILER TELEPHONE: (914) 244-7515
Chief Financial Officer FAX: (914) 244-5665
michael_geltzeiler@rd.com
February 3, 2006
Mr. Joseph A. Foti
Senior Assistant Chief Accountant
Division of Corporation Finance
Securities and Exchange Commission
Washington, DC 20549
Re: The Reader's Digest Association, Inc.
Commission File No.: 001-10434
Form 10-K: For the year ended June 30, 2005
Form 10-Q: For the quarter ended September 30, 2005
Dear Mr. Foti:
Enclosed are our responses to your comment letter dated January 30, 2006,
regarding the above-referenced filings made by The Reader's Digest
Association, Inc. (the "Company") with the U.S. Securities and Exchange
Commission.
The Company acknowledges that:
- the Company is responsible for the adequacy and accuracy of the
disclosure in the filings;
- staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to
the filing; and
- the Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
Please do not hesitate to call me (914-244-7515) or our Controller, Tom Barry
(914-244-5232), if you have any additional questions.
Sincerely,
/s/MICHAEL S. GELTZEILER
cc: Tom Barry
Form 10-K for the year ended June 30, 2005
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
1. We note that your disclosure in Item 7A references the relevant
discussion in the Currency Risk Management section of MD&A, which also
references Note 7 to the financial statements. Although Note 7
discusses interest rate risk and the cash flow hedges that were entered
we do not believe it appropriately discusses your foreign exchange
risk. In future filings, please present a sensitivity analysis for the
effects of your foreign exchange risk, as required by Item 305 in
Regulation S-K.
Company response:
We will comply in future SEC filings.
Item 9A. Controls and Procedures
2. We note your conclusion that your disclosure controls and procedures
were "sufficient to provide reasonable assurance". Item 307 of
Regulation S-K requires that management conclude on the effectiveness of
the disclosure controls and procedures. Please confirm to us that the
disclosure controls and procedures were effective as of the end of the
period covered by the end of your Form 10-K. Additionally, in future
filings, please refer to the effectiveness of the disclosure controls
and procedures in your Item 9A disclosure. If you indicate that your
disclosure controls and procedures are designed to provide reasonable
assurance, you must conclude that they are effective at the reasonable
assurance level.
Company response:
We confirm that our disclosure controls and procedures were effective as
of June 30, 2005. We will comply in future SEC filings.
Item 13. Certain Relationships and Related Transactions
3. We note your disclosure that information with respect to certain
relationships and related transactions can be found under the caption
"Transactions with Management and Other Related Parties" in the Proxy
Statement for the November 18, 2005 meeting. Please list for us, and
disclose in the notes to the financial statements in future filings, any
related party transactions required to be disclosed under SFAS 57 as
there does not appear to be such a section in the Proxy Statement or the
notes to the financial statements.
Company response:
For the fiscal year ended June 30, 2005, there were no transactions with
management or other related parties that required disclosure pursuant to
SFAS No. 57. In future filings, if we have transactions that require
disclosure pursuant to SFAS No. 57, such transactions will be
appropriately disclosed.
Statements of Cash Flows
4. We note your presentation of changes in noncurrent assets and
liabilities, net of effects of acquisitions and dispositions as an
operating cash flow activity. In future filings, please separately
present the change in each noncurrent asset and liability to the extent
the amounts are material.
Company response:
We will comply in future SEC filings.
Notes to the Financial Statements
Note 4. Other (Expense) Income, Net
5. We note from your disclosure of the components of other (expense) income
that the net gain on sale of certain assets, includes gains on the sale
of buildings, Moneywise magazine, fine art and other non-strategic
assets. In future filings, please classify the gain or loss on the sale
of long-lived assets as part of operating loss or profit. See paragraph
45 of SFAS No. 144.
Company response:
We will comply in future SEC filings.
Note 5. Supplemental Balance Sheet Information
6. We note that 54% of the accrued expenses balance is attributed to
"other, principally operating expenses." To the extent that any of the
amounts included in this "other" category are more than 5% of total
current liabilities, please separately list for us and disclose in
future filings each amount. See Rule 5-02.20 of Regulation S-X.
Company response:
None of the amounts included in the "other, principally operating
expenses" category are more than 5% of total current liabilities. In
future filings, if we have amounts in the "other, principally operating
expenses" category that are more than 5% of total current liabilities,
such amounts will be appropriately disclosed.
2005 Annual Report
7. We note your presentation of adjusted earnings per share, in which you
eliminate the effect of charges for goodwill impairment, deferred
promotion costs, and other items. This non-GAAP performance measure does
not comply with the requirements of Item 10(c) of Regulation S-K because
it eliminates items reasonably likely to recur within two years or
occurring within the previous two years. In future filings, please
eliminate presentation of this non-GAAP performance measure. Refer to
Item 10(c) of S-K and questions 8 and 9 of the staff's "Frequently Asked
Questions Regarding the Use of Non-GAAP Financial Measures" dated June
13, 2003.
Company response:
We will comply in future SEC filings.