SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 1998
THE READER'S DIGEST ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10434 13-1726769
(State or other juris- (Commission File (I.R.S. Employer
diction of incorporation Number) Identification No.)
or organization)
Pleasantville, New York 10570-7000
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(914) 238-1000
ITEM 5. Other Events.
Filed herewith as Exhibit 99.1 is a copy of the
company's news release, issued today, relating to certain
management changes.
ITEM 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial statements of business acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
Number Description
99.1 Press Release of The Reader's Digest
Association, Inc. dated July 27, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
THE READER'S DIGEST ASSOCIATION, INC.
(Registrant)
Date: July 27, 1998 /s/GEORGE S. SCIMONE
George S. Scimone
Vice President and Chief Financial
Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release of The Reader's Digest
Association, Inc. dated July 27, 1998
Exhibit 99.1
Contacts: Lesta Cordil (914) 244-5161 Janice Conklin (914) 244-7585
READER'S DIGEST ANNOUNCES GLOBAL REORGANIZATION
Redesign of Corporate Structure and Key Personnel Changes
Set Stage
for Strategy to Build Growth and Profitability
New Business Units Formed Around Customer Needs
PLEASANTVILLE, N.Y., July 27, 1998 - The Reader's Digest
Association, Inc. (NYSE: RDA, RDB) Chairman and CEO Thomas
O. Ryder today announced a global reorganization of the
company as the first step in a long-term strategy to build
on the company's fundamental strengths and create new growth
opportunities. Key objectives for the company, as outlined
today by Mr. Ryder in a letter to employees, include:
broadening the customer base of Reader's Digest to include
more younger customers and more products for older
customers, overhauling the company's work processes and cost
structure, and freeing up dollars from underperforming
assets to invest in growth opportunities.
"Reader's Digest stands today as a Company with great
potential," Mr. Ryder said. "However, we face very real and
serious challenges as a corporation and as a competitor in
the global marketplace. The most fundamental of these
challenges, one on which we must focus in everything we do,
is to restore growth to our company on behalf of our
shareholders by creating value for our customers."
Today's organizational redesign, which will put in place the
necessary people and structure to achieve the company's
goals, includes the following key elements:
Organizing operations into four business groups around
growth opportunities the company has identified among the full range of
customers it intends to serve.
Restructuring editorial organizations to ensure editorial quality and
integrity worldwide.
Reassigning certain executives as well as adding new people with key talents.
Establishing new reporting relationships to sharpen focus
and accountability.
Mr. Ryder will present the first phase of a two-part program
to revitalize the company in mid-September.
A copy of Mr. Ryder's letter to employees is attached to
this press release.
New Business Units
To better apply the company's management and marketing
talents to the needs of specific businesses and customers,
Reader's Digest operations are being restructured into four
separate business units.
Global Books and Home Entertainment Group will focus on the
challenges and opportunities of the company's largest
business unit and take advantage of its unmatched global
scale. M. John Bohane, currently Senior Vice President and
President, International Operations, has been named Senior
Vice President and President, Global Books and Home
Entertainment to lead this group.
U.S. Magazine Publishing Group is being formed with the
specific goal of building its flagship magazine and the
Special Interest Magazines, and to create clearer
accountability for the performance of the company's
magazines. Gregory G. Coleman, currently Senior Vice
President, Worldwide Publisher, has been named Senior Vice
President and President of this group.
International Magazine Publishing Group will be responsible
for overseeing the 47 editions of Reader's Digest outside
the United States and will capitalize on tremendous growth
opportunities around the world. Robert J. Krefting will
join Reader's Digest this week as Senior Vice President and
President of International Magazine Publishing. He brings
to the job 30 years of experience in magazine, direct
marketing and book publishing industries, including service
as President of CBS Magazines (now Hachette/Filipacchi).
QSP, Inc., the company's highly successful school and youth
fund-raising business, is being reestablished as a stand-
alone division so that it has a singular focus on the
substantial growth prospects in that business. Thomas A.
Belli will continue as QSP President.
Editorial Organizations
Christopher P. Willcox, Senior Vice President and Reader's
Digest Editor-in-Chief, will assume global editorial
responsibility for both Reader's Digest as well as Select
Editions (formerly Condensed Books). Mr. Ryder also
announced the creation of a Worldwide Editorial Council,
which Mr. Ryder will chair, to provide an on-going forum for
issues of editorial quality and integrity, as well as
editorial personnel development.
Key Corporate Executive Changes
Among the other personnel changes announced today as part of
the organizational redesign are the following:
Thomas D. Gardner, currently Vice President of U.S.
Marketing, has been named Senior Vice President, Business
Planning and Development. He will be responsible for
strategic planning and for all new business development and
acquisition initiatives.
Elizabeth G. Chambers will join the company in August in
the newly created position of Vice President, Business
Redesign. She will have primary responsibility
redesigning the business processes of Reader's Digest.
She has been a partner at McKinsey & Company.
Michael A. Brizel, currently Vice President, Legal U.S.
and Associate General Counsel, has been named Vice President
and General Counsel for the Company.
Clifford H.R. DuPree becomes Vice President and
Corporate Secretary, having served in that post on an acting
basis since September 1997.
Steven J. Morello, will join the company in August as
Vice President, Public Relations. He most recently was
President and CEO of the New York Convention and Visitors
Bureau.
George S. Scimone, currently Vice President and Chief
Financial Officer, has been named Senior Vice President and
Chief Financial Officer. George will be responsible for the
Global Finance and Information Technology functions.
Gary S. Rich, as announced previously, will join the
company on August 3 as Senior Vice President, Human
Resources, Public Relations and Facilities. He will be
responsible for these functions on a worldwide basis.
Reporting Relationships of Staff Functions
Additionally, Mr. Ryder announced that as part of the
organization redesign, there will be a change in the primary
reporting relationships of key staff groups including
Finance, Human Resources, and Legal. To promote greater
internal control of corporate business, individuals in these
groups will now report primarily to the heads of their staff
groups rather than to business unit heads, as they do now.
"Change in an organization - especially one with a proud 76-
year heritage - never comes easily," Mr. Ryder told
employees in his letter today. "But the changes we are
announcing today are essential if we are to move forward in
rebuilding this great company.
"With the unmatched Reader's Digest name and products and
with the talent, dedication and hard work of every employee,
I believe we can enter the next century as a revitalized,
vibrant company - a company that excels in the worldwide
marketplace and creates tremendous value for its
shareholders and employees," Mr. Ryder said.
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 the
world over. The company reported revenues of $2.8 billion in
the fiscal year ending June 30, 1997. Global headquarters is
in Pleasantville, N.Y.
Attachment - Mr. Ryder's letter to Employees
ORGANIZATIONAL ANNOUNCEMENT
Thomas O. Ryder
Chairman and Chief Executive Officer
July 27, 1998
Dear Colleague:
The Reader's Digest Association, Inc. stands today as a
Company with great potential. Our flagship magazine has the
widest readership of any magazine on the planet. We enjoy a
global reach without precedent for a publishing company.
And, with our unparalleled brand name and marketing
capabilities, we have the opportunity to provide trusting
consumers with a broad range of outstanding products,
including magazines, books, videos, music and on-line
programming.
However, as you are aware, we face very real and serious
challenges as a corporation and as a competitor in the
global marketplace. The most fundamental of these
challenges, one on which we must focus in everything we do,
is to restore growth to our Company on behalf of our
shareholders by creating value for our customers.
In order to meet this challenge, there are four key
objectives that will drive our actions over the next two to
three years:
1. We will reassess the customers we serve and the products
we create for them. Our goal is to take greater
advantage of the trusting relationship we have with
older customers by broadening our product offerings for
them, while more aggressively appealing to younger
consumers with our products and marketing efforts.
2. In everything we do as a company, we will work "better,
faster and cheaper" than our competitors. To that end,
we are launching a top priority reexamination of our
work processes and cost structure.
3. We will free up critical dollars to fund new products
and programs by converting idle, underperforming or
underused assets to more serviceable forms.
4. We will quickly identify and invest in internally-
generated growth opportunities, while also developing
and acquiring new businesses that fit strategically with
our many existing strengths.
To reach our ambitious but vitally necessary goals, we are
announcing today this first major step: the redesign of The
Reader's Digest Association, Inc. organization.
Structure is a key determinant of how effectively people are
able to work together. After a detailed review of the
Company, we believe a new structure will make us more
efficient, sharpen the focus on the unique opportunities and
challenges in each of our businesses, help spread good ideas
and practices more quickly throughout the organization, and
create clearer accountability for financial and operating
results. Like any good organization, this structure will
evolve as our objectives and circumstances change.
The redesign we are announcing today has four major
elements:
Organizing our operations into four new business groups
based on customer interests, while making greater use of our
global scale and specialized talents;
Restructuring editorial organizations to ensure global
editorial quality and integrity;
Establishing new reporting relationships to sharpen
focus and accountability; and
Changing responsibilities for certain individuals while
hiring some new people from outside the company with the
special skills we need.
1. Newly-Created Business Groups
The challenges in each of our product groups are distinctly
different. By reorganizing our businesses into four
separate groups, we will be better able to apply our
Company's management and marketing talent to the unique
needs of each group and its customers.
Global Books and Home Entertainment Group will take
advantage of our unmatched global scale, and help focus on
the problems and opportunities of our largest business.
Within this Group there will be four strategic business
units in the United States and three geographic units
outside the U.S. Each of these units, which are organized
around similarities in their customers and business issues,
will have specific product development and profit-and-loss
responsibility. This change will allow some of our most
talented individuals to concentrate solely on the BHE
business and will provide them with the authority and
responsibility for acting on behalf of customers and
shareholders in managing their businesses. This will also
facilitate greater use of our global scale and talent in
product development and purchasing, thus helping us to
produce better products less expensively.
M. John Bohane has been named Senior Vice President and
President, Global Books and Home Entertainment and will
report to me. Currently Senior Vice President and
President, International Operations, John will be
responsible for all of our Books and Home Entertainment
products in the U.S. and internationally. You will soon
receive a message from John outlining additional changes to
support this group.
United States Magazine Publishing Group will have
responsibility for all key magazine functions, except
Reader's Digest editorial, and will have final profit-and-
loss responsibility for magazines in the U.S. This group
will bring stronger accountability for the performance of
our magazines, and will have a specific goal of building our
flagship magazine and the Special Interest Magazines.
Gregory G. Coleman, currently Senior Vice President,
Worldwide Publisher has been named Senior Vice President and
President of U.S. Magazine Publishing and will report to
me. He will be responsible for U.S. advertising,
subscription sales and newsstand sales. He also will be
responsible for production, fulfillment and customer
service, although these functions will be centralized in a
unit directed by Al Perruzza, who will report to John
Bohane. Editorial staffs of the Special Interest Magazines
will continue to report to Greg.
International Magazine Publishing Group will be responsible
for overseeing magazine publishing efforts of our 47
editions outside the United States. By creating this group,
we will help ensure consistent quality in our magazine
publishing efforts internationally and, importantly,
capitalize on tremendous growth opportunities we have around
the world. It also will allow us to better leverage our
unique competitive advantage - a global brand and presence
combined with local infrastructure, people and values in
more markets than anyone else in the industry. This group
will be a relatively small team providing strategic guidance
and business oversight to our country Managing Directors,
and will share with them profit-and-loss responsibility for
the magazines. (Managing Directors will report both to this
group for Magazines and to John Bohane's group for Books and
Home Entertainment.)
Robert J. Krefting will join our Company this week as Senior
Vice President and President of International Magazine
Publishing, reporting to me. Bob has more than 30 years'
experience in the magazine, direct marketing and book
publishing industries. He served as President of CBS
Magazines (now Hachette/Filipacchi) and was a member of the
Board of Directors of American Family Publishers. Most
recently, he was engaged in a series of entrepreneurial
ventures, including ones in both the venture capital and the
publishing field. Reporting directly to Bob will be Tony
Gosling, Director, International Magazine Marketing, and Tom
Witschi, Vice President and Associate Publisher,
International Magazine Publishing.
Greg Coleman and Bob Krefting, who have worked together in
the past, bring highly complementary, world-class talents to
the magazine units. Although they will have responsibility
for separate businesses, they will share their best skills
on global issues, with Greg taking a lead in global
advertising and Bob a lead in global business and
circulation issues.
QSP, Inc., our highly successful school and youth group fund-
raising Company, will be reestablished as a stand-alone
business unit. Thomas A. Belli, QSP President, will
continue in that role and will report directly to me. QSP
is a business that is very different from our others, and I
believe it has substantial growth prospects that are best
achieved with the singular focus this move will provide.
2. Editorial Organizations
Christopher P. Willcox, Senior Vice President and Editor-in-
Chief, Reader's Digest magazine will have global editorial
responsibility for Reader's Digest magazine and Select
Editions/Condensed Books. These are our flagship
publications, and they serve largely the same audience.
Tanis Erdmann, Editor-in-Chief of Select Editions, will
report to Chris and will join him in an effort to rethink
the way we create our products using our substantial global
leverage and scale.
Books and Home Entertainment editorial functions will report
as follows:
Iain Parsons will be Vice President and Global Editor-in-
Chief of General Books, and will report to John Bohane.
Editors of General Books in our companies will have primary
reporting relationships with their Managing Directors, but
will have a secondary reporting relationship to Iain. Iain
will have primary responsibility for product quality and
cost.
David Palmer will be Vice President and Editor-in-Chief of
General Books, U.S., reporting to John Bohane. David will
have primary responsibility for the quality of our General
Books in the U.S.
Heads of Music and Video editorial in the U.S. and
International companies will report respectively to their
business unit General Manager in the U.S. and to the
Managing Director in other countries.
Editors-in-Chief of our Special Interest Magazines will
report to Greg Coleman in the U.S. and to the Managing
Directors in other countries.
In addition, editors-in-chief of our Special Interest
Magazines will join Chris Willcox, Tanis Erdmann, Marcia
Rockwood, Iain Parsons and David Palmer as members of a new
Worldwide Editorial Council. Chaired by me, this Council
will be a forum for addressing issues of editorial quality
and integrity, as well as personnel development.
3. Reporting Relationships of Staff Groups
As part of the organization redesign, there will be a change
in the primary reporting relationships of key staff groups,
including Finance, Human Resources and Legal. Key people
within these functional groups now report primarily ("solid
line" on an organization chart) to business unit heads and
secondarily ("dotted line") to the heads of their staff
group.
We believe we can promote greater internal control of our
business -- and help ensure optimal career development
opportunities for our people - by reversing those reporting
relationships. Going forward, the primary reporting
relationship will be to the staff group, and the secondary
to the business units. With this change, George S. Scimone,
currently Vice President and Chief Financial Officer, has
been named Senior Vice President and Chief Financial
Officer. George will be responsible for the Global Finance
and Information Technology functions. As announced
previously, Gary S. Rich will join the Company on August 3rd
as Senior Vice President, Human Resources, Public Relations
and Facilities. He will be responsible for these functions
on a worldwide basis.
This change will have little direct impact on most members
of these staff groups - and involves no personnel shifts
directly. However, it will ensure that while staff groups
continue to help achieve the business objectives of
individual units, they also will focus intently on achieving
our overall corporate goals and enhancing shareholder value.
4. New Responsibilities and New People
As I said above, we are also announcing new assignments for
several of our colleagues as well as the addition of new
people to our company- all with an eye toward helping us
focus on and meet the business challenges and opportunities
we face. Today's announcements include:
Thomas D. Gardner, currently Vice President of U.S.
Marketing, has been named Senior Vice President, Business
Planning and Development and will report to me. Tom will be
responsible for strategic planning, creating our annual
business plan and for all new business development and
acquisition initiatives. He will also lead the Vision Team
and will integrate its work into the planning and
development process. The Vision Team will be responsible
for creating a picture of what The Reader's Digest
Association, Inc. will become, the clients we will serve,
the products we will serve them with and the commitments we
will make to stakeholders. The Team will begin with a
candid assessment of where we are now and will outline the
major initiatives required to reach our vision. Tom will
announce members of the Vision Team shortly.
Elizabeth G. Chambers will join us in August in the newly-
created position of Vice President, Business Redesign, and
will report to me. Libby will have primary responsibility
for redesigning our business processes in order for us to be
"better, faster and cheaper" than our competitors. This
will include helping key managers to understand the business
redesign process, to set targets for restructuring our
costs, and to build meaningful monitoring systems. Libby
has been a Partner at McKinsey & Company, where she
consulted for some of America's leading companies.
Michael A. Brizel, currently Vice President, Legal US and
Associate General Counsel, and a member of our legal team
for nine years, has been named Vice President and General
Counsel for the Company reporting to me. He will be
responsible for directing our global legal activities - both
protecting our legal interests and helping foster financial
growth. Mike is taking over from Laurie Rothenberg and the
firm of Fried, Frank, Harris, Shriver & Jacobson who have
been providing additional assistance on an interim basis.
She will be returning to her firm with both our affection
and our gratitude for the help she has given us. We expect
that Laurie, through her firm, will continue to make a
substantial contribution to our Company.
Clifford H.R. DuPree, has been named Vice President and
Corporate Secretary, after having served in that position on
an acting basis since September 1997. As Corporate
Secretary, Cliff will report directly to me. He will also
report to Mike Brizel on legal matters.
Stephen J. Morello will join us next week as Vice President,
Public Relations, reporting to Gary Rich. Steve's most
recent position was as President/CEO of the New York
Convention and Visitors Bureau. Previously he spent more
than 20 years in New York state government, including
tenures as press secretary to Governor Mario Cuomo and
before that to Governor Hugh Carey. Lesta Cordil will
return to her former role as Director of Product Publicity,
reporting to Steve. I would like to thank Lesta for her
tireless efforts in managing the Public Relations function
over the last several months.
For your information, I have attached an organization chart
of the senior management team.
As a result of these changes, Marcia Lefkowitz and Dick
Garvey will be leaving Reader's Digest. Marcia has been
one of the great individual contributors to the success of
Reader's Digest for 30 years. And last year, upon George
Grune's return, she came back at his request to help
identify and deal with critical issues we faced in the U.S.
business. She will now hand over the reins to long-time
colleagues in the U.S. with our great respect and thanks.
Dick Garvey has also earned the respect and affection of
many here for his high standards and work ethic. Dick has
helped to reshape the way we think about branding and
testing and has helped sharpen our strategic focus. Please
join me in wishing Marcia and Dick all the best in the
future.
I promised you at the May 28th Town Hall Meeting a report in
one hundred days on my plans for the Company. This change
in organization foreshadows that thinking. I now see the
plan to revitalize the Company developing in two phases.
The first phase will be announced in mid-September and will
be discussed with members of the financial community and
other interested parties. It will deal with targets for
restructuring our costs and raising capital. The second
phase will be presented in December or January and will
concentrate on our plans to build the business.
Change in an organization - especially one with a proud 76-
year heritage - never comes easily. But the changes we are
announcing today are essential if we are to move forward in
rebuilding and growing this great company. With the
unmatched Reader's Digest name and products and with the
talent, dedication and hard work of every employee, I
believe we can enter the next century as a revitalized,
vibrant company - a company that excels in the worldwide
marketplace and creates tremendous value for its
shareholders and employees. I look forward to succeeding
in that mission with you.
