Business News

PRIMEDIA Reports Fourth Quarter and Full Year 2010 Results

Monday 07. March 2011 - Announces 13th Consecutive Quarterly Dividend

PRIMEDIA Inc. (NYSE: PRM), a leading provider of online, print and mobile platforms that provide renters and new home buyers with the information and tools they need to find the ideal place to live, today reported results for the fourth quarter and full year ended December 31, 2010.
Fourth Quarter Highlights
Total revenue of $55.8 million, a $5.4 million decrease compared to fourth quarter 2009.
Apartments revenue of $46.7 million, a $3.8 million decrease compared to fourth quarter 2009.
Adjusted EBITDA of $19.3 million, a $2.0 million increase compared to fourth quarter 2009.
Adjusted EBITDA margin increased to 34.5% from 28.2% for fourth quarter 2009.
Income from continuing operations decreased $1.4 million to $6.0 million, or $0.13 per common share.
Net income of $6.3 million, or $0.14 per common share.
Full Year Highlights
Total revenue of $232.2 million, a $25.7 million decrease compared to 2009.
Apartments revenue of $193.5 million, a $12.6 million decrease compared to 2009.
Adjusted EBITDA of $68.8 million, a $9.4 million increase compared to 2009.
Adjusted EBITDA margin increased to 29.6% from 23.0% for 2009.
Income from continuing operations increased $15.1 million to $19.6 million, or $0.44 per common share.
Net income of $18.3 million, or $0.41 per common share.
Repurchased $14.4 million in long-term debt, resulting in a net gain of $1.4 million.
Adjusted EBITDA is a non-GAAP financial measure that is described and reconciled to the corresponding GAAP measure in the accompanying Financial Tables.
“During the fourth quarter of 2010, we continued to focus on growing our consumer audience by strengthening our online and mobile offerings, maximizing the leads we provide to our advertiser clients, growing our client count and streamlining our cost structure,” said Charles Stubbs, president and CEO of PRIMEDIA.
“As a result, our Apartments/Rentals Network of sites ranked ‘#1 in renter traffic’ among its competitors for the fourth quarter and the full year, averaging 3.8 million monthly unique visitors.* Apartments, our primary business, increased the number of apartment communities served by 5.3%, compared to fourth quarter 2009, and we increased the average monthly leads per community by over 25% on a full year basis. Consistent with our digital strategy, more than 80% of the leads we deliver to our advertiser clients are now derived from our websites and mobile applications.
“We continued to feel the effects of a challenging economic and market environment, with a 7.4% year-over-year revenue decline in our largest business during the fourth quarter, as our clients generally tended to reduce overall advertising spend. However, we reduced our operating expenses by 17%, increased Adjusted EBITDA by 12% and expanded our Adjusted EBITDA margin by 630 basis points during the quarter. Our intense focus on streamlining our cost structure as we transition our lead generation primarily to our digital platforms helped drive a 16% improvement in Adjusted EBITDA for the full year.
“PRIMEDIA has a strong financial foundation, and we remain committed to managing our businesses with focused discipline as we invest in innovative growth opportunities,” added Mr. Stubbs.
Fourth Quarter Revenue and Operations
Apartments – Apartment Guide, ApartmentGuide.com, Rentals.com and RentalHouses.com
Revenue for the Apartments division, representing approximately 94% of fourth quarter 2010 advertising revenue, declined to $46.7 million from $50.4 million in fourth quarter 2009. This decline included the impact of $0.6 million in revenue for which recognition will be delayed until first quarter 2011 as a result of clients transitioning contract renewals from Integrated advertising packages to Internet-based advertising packages. Cash flow is not affected by this delayed revenue recognition because billing cycles remain the same.
Apartment Guide, including ApartmentGuide.com, increased client count and grew the number of apartment communities served by 5.3%. Revenue declined 7.8% compared to fourth quarter 2009, primarily due to a decrease in revenue per community served. Revenue was impacted as a result of pricing pressure caused by negative economic and industry conditions, including high unemployment rates and low levels of new multi-family construction, and adverse market conditions, including relatively high occupancy levels and historically low effective rent levels. Competitive conditions also pressured pricing, as competitors continued to reduce advertising rates to retain clients.
Revenue from Rentals.com, including RentalHouses.com, decreased by 0.8% compared to fourth quarter 2009, primarily due to a decrease in revenue per listing, partially offset by an increase in the number of listings generated from property managers.
New Homes – NewHomeGuide.com, AmericanHomeGuides.com
Revenue from New Homes, representing approximately 6% of fourth quarter 2010 advertising revenue, declined by 16.3% to $3.2 million from $3.8 million in fourth quarter 2009. This decline includes the impact of $0.1 million in delayed revenue recognition, as discussed above. The Company anticipates continued pressure on this business for the foreseeable future and remains focused on reducing costs, while maintaining close relationships with its advertising clients to best position this business for opportunities when economic conditions improve.
DistribuTech
DistribuTech, the Company’s distribution function, generated revenue of $6.0 million compared to $7.1 million in fourth quarter 2009, a 14.9% decline. This decline was primarily due to the planned reduction of retail locations serviced. The Company’s overall distribution strategy is to reduce print distribution costs, including the elimination of less effective locations, while focusing on retaining and servicing locations that produce the best results for PRIMEDIA advertisers.
Business Trends and Outlook
The Company is aggressively pursuing enhancements to its product portfolio to provide more flexibility to its clients, based on specific markets and market segments, to purchase more customized mixes of products, features and services on a stand-alone and package basis. These enhancements are intended to maximize clients’ advertising ROI and ultimately provide an opportunity for the Company to grow revenue as it continues to grow client count.
Given challenging economic and market conditions, the Company has limited visibility around 2011 revenue. For Apartments, the Company currently expects to see a 6.5% to 7.5% year-over-year decline in revenue for first quarter 2011, which includes delayed revenue recognition of approximately $0.6 million, or about 20% of such decline (see “Delayed Revenue Recognition” below for additional information). The Company also expects to see year-over-year declines in revenue for first quarter 2011 of approximately $1.0 million for New Homes and approximately $1.0 million for DistribuTech.
Other Fourth Quarter Financial Highlights
Operating Expenses
Operating Expenses declined by 16.8% to $36.6 million, driven primarily by reductions in Distribution and Circulation and Cost of Goods Sold. These reductions are the result of ongoing cost-cutting initiatives, which include print directory reformatting, distribution optimization and position eliminations, partially offset by an incremental increase in spending for Internet product development and search engine marketing.
Adjusted EBITDA
Total Adjusted EBITDA increased by 11.5% to $19.3 million from $17.3 million. This result reflects lower operating expenses of $7.4 million, offset by a decrease in revenue of $5.4 million. Adjusted EBITDA as a percentage of total net revenue increased to 34.5% from 28.2% in fourth quarter 2009.
Income and Earnings per Share from Continuing Operations
Income from continuing operations decreased to $6.0 million from $7.5 million in fourth quarter 2009. Diluted earnings per share from continuing operations decreased $0.04 to $0.13 from $0.17 in fourth quarter 2009. These decreases were primarily due to a decline in other income, increased amortization of intangible assets, provision for restructuring costs and non-cash compensation. These items were partially offset by increased Adjusted EBITDA and lower interest expense due to the $14.4 million repurchase of debt.
Net Income and Earnings per Share
Net income decreased to $6.3 million compared to $11.1 million in fourth quarter 2009. This change was mainly due to decreased discontinued operations and income from continuing operations. Earnings per common share was $0.14.
Free Cash Flow and Capital Expenditures
Free cash flow was $14.2 million, compared to $10.1 million for fourth quarter 2009. This change was primarily due to an increase in net cash provided by operating activities. The Company invested $3.0 million in capital expenditures, compared to $3.5 million in fourth quarter 2009. Free cash flow is a non-GAAP financial measure that is described and reconciled to the corresponding GAAP measure in the accompanying Financial Tables.
Balance Sheet
As of December 31, 2010, the Company’s cash and cash equivalents balance was $7.6 million, compared to $9.5 million as of December 31, 2009. The Company had debt, net of cash, of $201.6 million at December 31, 2010, compared to net debt of $215.8 million at December 31, 2009.
Dividend
The Board of Directors of the Company has authorized a regular quarterly cash dividend of $0.07 per share of common stock, payable on or about March 23, 2011, to stockholders of record on March 14, 2011.
Delayed Revenue Recognition
The Company will adopt Accounting Standards Update 2009-13, Multiple-Deliverable Revenue Arrangements, effective January 1, 2011. This accounting standard requires a potential change in revenue recognition for arrangements with multiple deliverables, and an evaluation of these deliverables to determine whether they represent separate units of accounting. The allocation of revenue among the units follows a prescribed methodology under the standard. Application of this standard is limited to contracts that are new or materially modified after the implementation date. Additional information regarding the Company’s adoption of this standard will be contained in the Company’s Form 10-K for the year ended December 31, 2010.