A one-time charge of $527 million tied mainly to a writedown of goodwill resulted in an operating loss of $535.9 million at Reader’s Digest for the third quarter ended March 31, compared to a loss of $8.2 million in the third period of fiscal 2008, the company said in a filing with the SEC. Total revenue fell 16.7%, to $479.1 million. Sales were off in all three operation segments, dropping 10.3% in the Reader’s Digest U.S. division, to $162.2 million, as most of the unit’s “affinity” groups were hurt by the recession. Among the areas that had soft sales were children’s publishing and certain direct mail titles in the food and entertainment group. International sales fell 23.6%, to $298.4 million, with results hurt by the change in currency translation and a decline in most of its major markets. Sales in the school & education group fell 3.5%, to $24.5 million.
In March, Reader’s Digest said it was looking for a buyer its Gareth Stevens library publishing business; in the SEC filing, RD said it continues to explore the sale of the company, but said “there is doubt as to whether a sale is probable.” Stevens publishes about 2,200 titles for the supplemental school market. RD is on course to close the World Almanac Education Library Services unit soon. Both Stevens and WAELS had been part of the school & education group.
For the nine month period, sales were off 8%, to $1.66 billion and the company had an operating loss of $560.6 million, up from a $41.6 million loss in the comparable period in fiscal 2008. In January, RD announced plans to eliminate 280 positions, and it said expects employee reductions to be completed by the end of June with severance payments completed by the end of Junen 2010. RD reported severance accruals of $26.2 million.