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WIKI ANALYSIS
PRIMEDIA, Inc. (PRM-NYSE) is a targeted media company offering print and Internet publications, and reports through one segment (after recently selling its two other segments):
Consumer Source (38% of 2006 revenue 45% of EBITDA):
PRIMEDIA is the parent company of Consumer Source, the largest publisher and distributor of free apartment, new home, and pre-owned car advertising guides in the United States with Apartment Guide/ApartmentGuide.com, New Home Guide/ NewHomeGuide.com, and Auto Guide/AutoGuide.com. These dedicated directories provide the company's advertisers with some of the most cost-effective channels available to reach their customers. Consumer Source owns and operates America's largest online single unit rental property business consisting of RentClicks.com, RentalHouses.com, HomeRentalAds.com, and Rentals.com.
The company distributes its print guides through its proprietary distribution network, DistribuTech, the leading national distributor of free publications with over 60,000 distribution locations. The company's online guides, the primary engines of PRIMEDIA's current and expected future growth are visited by approximately 49 million users annually, and are marketed to these end-customers through print guides, search engine optimization, email marketing, and partnerships with leading online companies such as Google, Yahoo and Advertising.com.
Apartment Guide/ApartmentGuide.com:
With Apartment Guide publications in 74 regional markets and a monthly circulation of 1.5 million, PRIMEDIA is the largest publisher of rental guides in the U.S. Nearly all of the advertising revenue is generated by large apartment community managers, the majority of whom purchase one-year advertising contracts. The publication's wide distribution primarily retail locations and leading national websites provide an advantage over competitors.
New Home Guide/Newhomeguide.com:
PRIMEDIA publishes 37 guides in 27 major markets with the majority of advertising paid by builders and developers. Newhomeguide.com received over 3 million unique users in 2006. This division competes with local newspapers and national competitors such as Network Communications (publisher of New Home Finder), Move Inc. (publisher of Move.com), and Homestore (publisher of HomeBuilder.com).
Auto Guide/AutoGuide.com:
Consumer Guides launched its first Auto Guide in Charlotte, North Carolina in March 2004, and has expanded to 13 publications in six states. The company believes that the auto advertising market provides an attractive growth opportunity for PRIMEDIA. The company competes primarily with Trader Publishing Company (Auto Trader and Auto Mart), Classified Media Ventures (Cars.com) and eBay (eBay Automotive).
DistribuTech: DistribuTech, the nation's largest distributor of free publications, distributes PRIMEDIA's consumer guides and over 2,400 third-party titles. In 2006, publications were distributed to approximately 60,000 leading grocery, convenience, video and drug stores, universities, military bases, major employers, and other locations in 73 metropolitan areas.
Discontinued Operations:
Education Segment:
In 4Q06, the company decided to sell its Education Segment, which consists of Channel One (a proprietary network for secondary schools), Films Media Group (a leading source of educational video), and Primedia Healthcare (a medical education business). Channel One News is the highest rated teen television program, reaching over 7 million teens in more than 300,000 classrooms across the U.S. Channel One generates the majority of its revenue by selling two minutes of ad time during each 12-minute daily newscast, which does not air during the summer months. Films Media Group distributes videos, DVDs, and CDs to schools, colleges and libraries in North America. Its products are sold mostly through direct mail to teachers, instructors and librarians, and mainly serve students in grades 8 to 12. Its major competitors are Discovery Communications, PBS Video and Schlessinger Media, a division of Library Video Company.
PRIMEDIA completed the sale of its Films Media Group (FMG) to Facts on File, Inc., a publisher of print and online reference material for schools and libraries on May 21, 2007, and the sale of its Channel One News business to Alloy on April 23, 2007. PRIMEDIA Healthcare is classified as discontinued operation, and sale process for this business is in progress.
Enthusiast Media Division Sale:
On January 31, 2007, the company completed the sale of its Outdoors Group (hunting, shooting and fishing titles), which was part of the Enthusiast Media Segment for $170 million.
On May 14, 2007, PRM announced that it agreed to sell its Enthusiast Media division (62% of 2006 revenue 55% of EBITDA) for $1.2 billion. The fourth largest producer of magazine ad pages in the U.S., Enthusiast Media publishes 76 consumer magazines, 91 Internet websites, creates 2 TV video programs and sponsors 66 annual events. Their magazines include Motor Trend, Hot Rod, Soap Opera Digest, and Guns and Ammo. The sale was completed on August 1, 2007.
COMPANY HISTORY
After Robert Maxwell acquired Macmillan in 1989, the publishing house's management left to form PRIMEDIA s predecessor, Knemas KIII Communications with KKR. William Reilly, the new entity s CEO, intended to repeat his success as president of Macmillan from 1981 to 1988 during which time earnings grew at an average annual rate of 23% and the stock soared 12 fold. They replicated Macmillan s successful strategy, focusing on niche markets, dominating them and growing both organically and through acquisitions. In 1989, the company acquired Macmillan s Direct Marketing Group and technical magazine publisher, Intertec Publishing. The next year, it acquired auto industry publisher, Ward s Communications, and a book club group. In 1991, the company was renamed K-III Communications. That year it purchased from Rupert Murdoch s News US several magazines, including Soap Opera Digest, Seventeen, New York and the Daily Racing Forum. During the next couple years, K-III acquired many disparate trade publications and the Funk & Wagnalls encyclopedia. In 1994, the company acquired a secretarial school, Katherine Gibbs Schools, whose seller had purchased it five years earlier from Macmillan, and Channel One.
With debt mounting, the company's EBITDA covered its interest expense and preferred stock dividends by just 1.6 times. To continue its acquisition spree, the company went public, raising $141 million. The company deployed the funds into the acquisition of 14 magazines from Cahners, which included Modern Bride. K-III Communications was renamed PRIMEDIA in 1997.
In 2000, PRIMEDIA sought to expand into the online market, acquiring About.com, a collection of special-interest web sites for stock originally valued at $690 million and emap usa for $515 million. At the same time, the cash-strapped company began to shed underperforming businesses, including Modern Bride and Seventeen magazines.
After PRIMEDIA acquired About.com in October 2000, its stock price, which had begun to decline with the overall market in March 2000, tumbled further. After reaching a high of $23 in March 2000, the stock fell from its level of about $17 around the time of the about.com acquisition to just over $4 at the end of 2001. The company sold it for $410 million to the New York Times in early 2005.
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