Reader's Digest reported that revenue fell 4% for the second quarter ended December 31, to $796.4 million, and net income dropped 21%, to $66.5 million. And in a dramatic illustration of how times have changed at the company, RD announced it was putting its headquarters in Pleasantville, N.Y., up for sale.
Commenting on second-quarter/six-month results, company chairman Tom O. Ryder said RD remains focused on "fixing the business." He said he was satisfied with the progress the company has made toward turning around its businesses in the first half of the fiscal year and that the company was "on track" to have a stronger final six months.
Sales in the first half of fiscal 2004 fell 4%, to $1.3 billion, and net income was down 33%, to $53.1.million.
Ryder said the company's core operations are ahead of plan and that U.S. Books and Home Entertainment group was doing better than expected. Ryder told analysts in a conference call that U.S. BHE "could well return to profitability this year." The unit has been dramatically slimmed down and has had successes with certain book lines including health care and music. Ryder said there still is "some nipping and tucking" to do at BHE since RD "hasn't solved all the problems or found all the opportunities."
Disappointing results were turned in by Books Are Fun and the fund-raising unit QSP. The two accounted for $270 million of the consumer business service's $299 million in sales and all but $1 million of the division's $81 million operating profits. Still, sales were off 8% at BAF and QSP, while profits fell 20%. Bob Raymond, who oversees BAF, said sales were down at both BAF's school display and corporate book fair operations. He attributed the decline in the school display business to product shortages, which have now been fixed, while fewer fairs and lower sales per fair combined to bring down sales in the book fairs. Raymond said the lower sales at the fairs was due to a weak response to new products and that the unit had changed the product mix to include more cookbooks, low-carb diet books and regional books.
In announcing the decision to look for a buyer for its headquarters, RD said it had determined that the facility was "far larger" than RD needs. Under the proposal, RD would lease back part of the office for at least 20 years. The site includes 690,000 square feet of office space that sits on 114 acres. Constant downsizing over the past several years has trimmed RD's Pleasantville staff to approximately 800 employees, and the company uses only about half of the available space. The company has nearly 2,000 employees in other locations in the U.S. and another 2,000 in other countries. Ryder said he expects a deal for the headquarters to be completed in six months. RD will use the cash infusion to pay down debt.
Built in 1939 by RD founders DeWitt and Lila Wallace, the RD's headquarters is home to the RD magazine unit, U.S. Books and Home Entertainment, QSP, RD Young Families, the trade publishing group as well as various corporate functions. At one point the headquarters building held a multimillion-dollar art collection, but it was sold off in 1998 and 1999.