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) March 30, 2000
Commission file number: 1-11106
PRIMEDIA Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3647573
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
745 Fifth Avenue, New York, New York
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(Address of principal executive offices)
10151
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(Zip Code)
Registrant's telephone number, including area code (212) 745-0100
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<PAGE>
ITEM 5. OTHER EVENTS
(a) Effective March 30, 2000, PRIMEDIA Inc. (the "Company") realigned its
segments to conform to its new strategic direction, including organization,
management and growth initiatives. The new segments are: Consumer (including
both traditional and new media operations of PRIMEDIA Consumer Magazines,
PRIMEDIA Enthusiast Group, Channel One, HPC Publications and Films for the
Humanities and Sciences) and Business-to-Business (including both traditional
and new media operations of PRIMEDIA Intertec, Bacon's, PRIMEDIA Workplace
Learning, QWIZ, Inc., Pictorial, Inc. and PRIMEDIA Information). These new
segments reflect the nature of the targeted audience, mirror the organizational
structure of the Company and should provide investors with a better
understanding of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) The Exhibits to this report are listed in the Index to Exhibits on page 4.
<PAGE>
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 thereunto duly authorized.
PRIMEDIA Inc.
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(Registrant)
Date: May 15, 2000 /s/ Thomas S. Rogers
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(Signature)
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2000 /s/ Robert J. Sforzo
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(Signature)
Senior Vice President and Controller
(Principal Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Press release, announcing the resegmentation of the
Company's operations.
<PAGE>
EXHIBIT 99.1
PRIMEDIA SETS FAST PACE OF CHANGE
CMGI and Liberty Media each purchase 5% stakes in company
B2B and Consumer Internet ventures to be created with CMGI, and Consumer
Broadband Video venture to be created with Liberty Digital
PRIMEDIA Announces Key New Hires, New Ventures, New Cost Initiatives, New Growth
Targets and Asset Sales
New York, March 30, 2000 -- PRIMEDIA (NYSE: PRM) Chairman and CEO Tom Rogers
today made several key announcements that begin to spell out the future
direction of the Company,including two very strategic investments in the
Company, as well as major moves in the areas of organizational structure, cost
initiatives, asset divestiture, and key growth initiatives. "Since I joined
PRIMEDIA five months ago our team moved very quickly to change the strategy and
culture of PRIMEDIA," said Rogers. "A company that wants to be the media company
of the future must turn on a dime and move aggressively as PRIMEDIA is doing. We
will have now hired senior operating managers, consummated numerous ads for
equity deals, entered into several alliances, and put in place a growth strategy
that launches our future."
Highlights of the plan include:
o The announcement of two significant investments in PRIMEDIA by Liberty Media
and CMGI, that validate the strength of the Company's asset base and new media
potential. These include:
o The purchase of a 5% stake in PRIMEDIA by CMGI in exchange for 1.53 million
shares of CMGI stock. The transaction will enable faster growth of PRIMEDIA's
B2B and B2C online communities and marketplaces. The companies will create joint
ventures in key verticals in the B2B and B2C spaces.
o Liberty Media will invest $200 million in cash in PRIMEDIA in exchange for a
5% stake and 1 1/2million warrants in the Company. Additionally, Liberty Media
or its interactive television and Internet affiliate, Liberty Digital, will
receive an option to acquire a 12 1/2% stake in the Company's newly formed
PRIMEDIA Broadband Video unit in exchange for cash, Liberty Digital Series A
common stock or Liberty Media Group tracking stock. PRIMEDIA will purchase $25
million of Liberty Digital stock to further cement the relationship between the
companies. The companies will work together to develop consumer broadband video
and other interactive video applications for PRIMEDIA's exclusive portfolio of
content.
"These transactions give us significant traction in our new media efforts," said
Rogers.
o The appointment of John Loughlin, former magazine publisher and former
president of Meredith Corporation's Broadcast Group to head PRIMEDIA's new
Magazine and Internet Group. "As president of the new consumer-focused PRIMEDIA
Magazine and Internet Group, John will bring vast experience in operating both
magazines and electronic media properties," said Rogers. Loughlin was president
of Meredith Corporation's Broadcast Group from 1997, and prior to that was a
group publisher both in the magazine division of Meredith and the New York Times
magazine division. "John represents that extremely rare combination of operating
experience in both the magazine publishing and electronic media businesses. He,
along with David Ferm, president of PRIMEDIA B2B Group, and formerly president
of Business Week, add considerable depth of operating experience to our print
businesses."
o The announcement of several alliances and ventures that accelerate PRIMEDIA's
position in the new media space. These joint ventures and alliances include
Military.com, Quiltcollector.com, CameraConnection.com, Umagic.com,
CarsDirect.com, which are being announced today, as well as previously
announced BabyPress Conference.com and printCafe.com. They follow on the heels
of the announced alliance between PRIMEDIA's New York magazine and
Cablevision Rainbow Media's MetroChannels to create a new media partnership
combining the brands and content of New York magazine and MetroChannels into the
first of its kind interactive and broadband convergence Internet site.
o The reformulation and resegmentation of the Company into a Consumer Group
(Magazines, Consumer Guides, Channel One and Films for the Humanities &
Sciences) and a Business-to-Business Group (Technical and trade magazines,
PRIMEDIA Workplace Learning, IndustryClick and Bacon's Information). "PRIMEDIA
was just too hard to understand, and we need a public face that mirrors our new
organization," said Rogers. Three years of quarterly segmented data is
attached to this release.
o A group of 20 divestitures including Pictorial, Qwiz and 18 directories. "One
of PRIMEDIA's great strengths is our scale in terms of the number of niche areas
in which we own brand-leading businesses, and we are offering these units for
sale because they do not have significant scalability, synergy with our core
businesses or integration potential with our other units," said Rogers. Proceeds
are expected to be between $125 - $150 million.
o A 6-point growth focus. This includes accelerating organic growth; building
new media value from PRIMEDIA's existing properties; participating in growth of
new media businesses through strategic joint venture alliances; PRIMEDIA's
reducing reliance on acquisitions for growth; improving productivity through
cost reduction and integration; and improving the balance sheet over time.
o Growth targets that accelerate top-line and bottom-line growth while improving
productivity. "PRIMEDIA must accelerate its growth in its traditional business.
Quarters like the first quarter of 2000, which will be basically flat versus
prior year (on a restated basis), are not acceptable for our new company going
forward," said Rogers. The new growth targets include:
o The acceleration of organic revenue and earnings before
interest, taxes, depreciation, amortization and one-time
(credits) and charges ("EBITDA") growth from traditional
businesses in 2000 to a run rate by year-end of 8-10% and
acceleration beyond 10% in 2001.
o The doubling of new media revenues in 2000 to at least $50
million, and doubling again in 2001 to $100 million. This will
require investment in new media of between $100 - $120 million
in 2000 of which 1/3 will be capital and 2/3 expense. Much of
the funding will come from cash from operations and the sale
of investments in Venture companies. Total losses on the new
media side are expected to increase from $32 million in 1999
to $80 - $90 million in 2000.
o Cost savings initiatives that will result in $25-$35 million
in savings to EBITDA in 2001. These improvements will come
from a combination of company-wide shared services programs
and sourcing initiatives. Savings will be earmarked for new
media business growth. The Company will also establish a
restructuring and integration reserve for costs related to
these initiatives during the second quarter.
o Intentions to capitalize on PRIMEDIA's Internet growth. "We have also
set as a goal the taking public of at least one of our B2B Internet
units, either IndustryClick or specific verticals it oversees, between
now and end of the first quarter of 2001."
o An increase of $50 million over the next two years in the funding of
the highly successful PRIMEDIA Ventures. PRIMEDIA Ventures is currently
invested in such companies as CarsDirect.com, MyPoints.com and
SocialNet, and has a portfolio worth more than $128 million on an
initial investment of $21 million. "We will continue to look for
appropriate new media investments while we sell appreciated stakes in
certain portfolio companies to help fund our new media growth
initiatives."
o The appointment of other senior executives including Eileen Maura
Murphy, as vice president, corporate communications and Jeff Ballabon,
as vice president, public policy. Murphy will play a critical role in
building the public persona of PRIMEDIA. Ballabon will have
responsibility for all of the Company's government affairs and public
policy initiatives. "Eileen did an exceptional job as vice president,
communications, at ABC News. Jeff has been a leading force in
government affairs at Channel One."
o New media growth initiatives are being accelerated, and the exciting
new launch of GR8RIDE.com will be geared toward the hard-core auto
enthusiast. PRIMEDIA's IndustryClick expects to launch at least five
new B2B vertical on-line communities by the third quarter and 15 more
by year-end.
"We have enunciated key elements of our strategy; hired the Company's principal
managers; reorganized the Company to maximize our ability to integrate old media
and new media operations; entered into several strategic ventures; acquired a
number of equity positions in Internet companies using advertising inventory;
determined which assets make sense to divest; announced major cost-saving
initiatives; expanded our venture investment fund, and put in place aggressive
growth targets. All in five months time! We are moving fast to reshape PRIMEDIA,
and there will be much more progress to come," concluded Rogers.
PRIMEDIA Inc. is a targeted media company, reaching consumer and
business-to-business audiences through print, Internet, live events, video and
radio. Some key consumer brands include Seventeen, New York, Chicago, Fly
Fisherman, Channel One Network, Horticulture, Modern Bride and American Baby and
some key business-to-business brands include IntelliChoice, Telephony, Ward's,
PROMO, SIMBA and American Demographics. Some of its more than 200 Internet sites
include Seventeen.com, Mediacentral.com, Apartmentguide.com and Modernbride.com.
This release contains certain forward-looking statements concerning PRIMEDIA's
operations, economic performance and financial condition. These statements are
based upon a number of assumptions and estimates, which are inherently subject
to uncertainties and contingencies, many of which are beyond the control of the
Company, and reflect future business decisions, which are subject to change.
Some of these assumptions may not materialize, and unanticipated events will
occur which can affect the Company's results.
Resegmented Data (unaudited) ($ millions)
The following information represents the Company's resegmented results
excluding the Supplemental Education Group and certain other divestitures and
including pro forma Internet results. EBITDA represents earnings before
interest, taxes, depreciation, amortization and one-time (credits) and charges.
The pro forma Internet results include assumptions made to present
PRIMEDIA Internet activities as if they were conducted as stand-alone
operations.
We applied standard Internet industry ranges and methodologies to our
historical operating results to calculate revenues and expenses for on-line
sales of print products, third-party commerce, proprietary product sales,
on-line subscriptions, on-line display and classified advertisements and
pay-per-use services.
The information for the Internet businesses is provided for
informational purposes only, should not be construed to be indicative of the
historical results had these Internet businesses been operated as stand-alone
operations and is not intended to project future results of operations of the
Internet businesses.
<TABLE>
<CAPTION>
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1999 1Q 2Q 3Q 4Q Total
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Segment Sales EBITDA Sales EBITDA Sales EBITDA Sales EBITDA Sales EBITDA
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Consumer:
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Traditional $250.8 $ 54.1 $256.8 $ 60.9 $253.1 $ 53.0 $280.3 $ 72.9 $ 1,041.0 $240.9
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Internet 2.5 (3.3) 3.5 (3.2) 4.3 (4.9) 3.0 (12.3) 13.3 (23.7)
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Total $253.3 $ 50.8 $260.3 $ 57.7 $257.4 $ 48.1 $283.3 $ 60.6 $ 1,054.3 $217.2
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B2B:
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Traditional $122.6 $ 23.1 $135.0 $ 34.3 $123.6 $ 25.5 $141.1 $ 44.7 $ 522.3 $127.6
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Internet 2.2 (0.7) 2.4 (1.0) 2.3 (1.7) 3.5 (3.4) 10.4 (6.8)
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Total $124.8 $ 22.4 $137.4 $ 33.3 $125.9 $ 23.8 $144.6 $ 41.3 $ 532.7 $120.8
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Corporate OH - (7.0) - (7.0) - (8.2) - (12.9) - (35.1)
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Total $378.1 $ 66.2 $397.7 $ 84.0 $383.3 $ 63.7 $427.9 $ 89.0 $ 1,587.0 $302.9
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<TABLE>
<CAPTION>
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1998 1Q 2Q 3Q 4Q Total
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Segment Sales EBITDA Sales EBITDA Sales EBITDA Sales EBITDA Sales EBITDA
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Consumer:
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Traditional $201.6 $ 46.5 $231.5 $ 52.8 $234.1 $ 50.7 $254.2 $ 61.2 $ 921.4 $211.2
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Internet 1.3 (1.5) 1.3 (1.3) 1.4 (1.4) 1.6 (2.1) 5.6 (6.3)
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Total $202.9 $ 45.0 $232.8 $ 51.5 $235.5 $ 49.3 $255.8 $ 59.1 $ 927.0 $204.9
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B2B:
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Traditional $105.2 $ 20.3 $124.4 $ 30.9 $113.7 $ 23.8 $143.7 $ 47.7 $ 487.0 $122.7
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Internet 0.5 (0.2) 0.6 (0.4) 1.4 (0.8) 2.3 (0.7) 4.8 (2.1)
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Total $105.7 $ 20.1 $125.0 $ 30.5 $115.1 $ 23.0 $146.0 $ 47.0 $ 491.8 $120.6
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Corporate OH - (6.4) - (6.8) - (6.5) - (8.6) - (28.3)
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Total $308.6 $ 58.7 $357.8 $ 75.2 $350.6 $ 65.8 $401.8 $ 97.5 $ 1,418.8 $297.2
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</TABLE>
<TABLE>
<CAPTION>
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1997 1Q 2Q 3Q 4Q Total
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Segment Sales EBITDA Sales EBITDA Sales EBITDA Sales EBITDA Sales EBITDA
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Consumer:
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Traditional $167.9 $ 41.3 $184.2 $ 50.8 $193.4 $ 46.2 $203.7 $ 47.6 $ 749.2 $185.9
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Internet - - - - - - - - - -
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Total $167.9 $ 41.3 $184.2 $ 50.8 $193.4 $ 46.2 $203.7 $ 47.6 $ 749.2 $185.9
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B2B:
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Traditional $ 88.7 $ 16.7 $ 91.1 $ 24.7 $ 84.0 $ 16.0 $114.4 $ 39.2 $ 378.2 $ 96.6
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Internet - - - - - - - - - -
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Total $ 88.7 $ 16.7 $ 91.1 $ 24.7 $ 84.0 $ 16.0 $114.4 $ 39.2 $ 378.2 $ 96.6
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Corporate OH - (6.8) - (6.0) - (6.5) - (6.3) - (25.6)
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Total $256.6 $ 51.2 $275.3 $ 69.5 $277.4 $ 55.7 $318.1 $ 80.5 $ 1,127.4 $256.9
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