A look back – 2006: “The Company is in the process of assessing the business.”

June 13, 2018

Note: Obligation, Inc. published this on November 8, 2006:

PRIMEDIA Reports Third Quarter 2006 Results
Tuesday November 7, 8:30 am ET

“However, the magnitude of other challenges has increased, causing us to reduce 2006 guidance. Channel One is having a worse-than-expected 2006 selling season. Enthusiast Media’s International Automotive category continues to decline as the overall tuner market has not yet stabilized. Additionally, expenses related to assessing the potential spin-off, which are non-recurring, are expected to total approximately $5 million in 2006, or $3 million more than forecasted, principally as a result of having to perform extensive tax work relating to NOLs,” said Dean Nelson, Chairman, President and CEO of PRIMEDIA.

Consolidated Guidance: In 2006, the Company expects PRIMEDIA Inc. to deliver low single digit percentage revenue growth, and flat Segment EBITDA growth, both lower than previous guidance of mid-single digit and low-to-mid single digit percentage growth, respectively. The Company expects that the declines in Channel One and International Automotive, combined with the increase in spin-related expenses, will reduce 2006 revenue by approximately $17 million, and 2006 Segment EBITDA by approximately $13 million below the Company’s original forecast.

From Jim Metrock:

Normally Channel One is barely mentioned in the conference call where PRIMEDIA announces their quarterly financial results. This Tuesday, Channel One was front-and-center and for all the wrong reasons. Channel One is doing so poorly that the company is dragging down the rest of the larger parent company.

PRIMEDIA is having to change its financial projections due in part to Channel One’s
“worse-than-expected” performance.

“Worse-than-expected”?? What were they expecting? The country has passed Channel One by. Schools ignore the Channel One contract. School time is more important than having 15-year-old 19″ TV sets hanging from the wall.

Advertisers now see more downside to advertising on Channel One than upside.

Education (Includes Channel One, Films Media Group, and PRIMEDIA Healthcare)

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($ millions)	Third Quarter			First Nine Months
	2006	2005	Percent Change	2006	2005	Percent Change
Revenue, net (a)
– Advertising	$ 3.7	$ 4.2	– 11.9%	$ 17.1	$ 23.7	-27.8%
– Other	$ 6.9	$ 6.8	1.5%	$ 23.5	$ 24.5	-4.1%
Total Net Revenue	$ 10.6	$ 11.0	-3.6%	$ 40.6	$ 48.2

a) This presentation eliminates all intra-segment activity.

Channel One, which represents all of the Segment’s advertising revenue and a portion of Other revenue, is falling significantly short of expectations for its 2006 fourth quarter selling season. As a result, its impact on 2006 Segment and consolidated revenue and Segment EBITDA is expected to be substantial, as indicated in the consolidated guidance section at the beginning of this document. The Company is in the process of assessing the business.

In October, Channel One secured a $2.25 million grant from the John S. and James L. Knight Foundation to fund a three-year, national campaign to promote teens’ awareness and appreciation of the First Amendment. The educational campaign will launch in January 2007.

Channel One launched the 2006-7 broadcast season from its state-of-the-art, fully digitized newsroom in Washington, D.C. Relocating the studio to the heart of the nation’s capitol also reduces operating costs by an estimated $2 million annually. The positive impact on expenses related to the move was realized beginning this quarter.

Channel One Network Advertising Revenue ($ millions)
Year	1st Qtr	2nd Qtr	3rd Qtr	4th Qtr
2006	7.4	5.9	3.7
2005	10.2	9.4	4.2	10.7
2004	10.0	9.2	6.8	13.1
2003	11.6	11.6	6.5	14.9