Primedia reports net debt of $1.2 billion at end of first quarter

By Jennifer Lanning Drey

Portland, Ore., May 3 - Primedia Inc. ended the first quarter with net debt of $1.2 billion, down from $1.3 billion at Dec. 31, chief financial officer Kevin Neary said Thursday during the company's quarterly earnings conference call.

Primedia's cash balance was $145 million at the end of the quarter, with $257 million available under its revolving credit line.

During the call, Neary highlighted the fact that lower debt levels allowed Primedia's interest expense to drop to $29.1 million for the quarter, approximately $2 million less than during the same period in 2006.

Primedia also lowered corporate overhead by $1.2 million in the quarter, due primarily to lower compensation expenses resulting from headcount reductions.

"The company continues to improve its financial profile," Neary said.

Primedia has adequate resources to finance the implementation of its operating strategy and growth initiatives, meet its cash and other fixed obligations and service its debt for the foreseeable future, according to a company news release.

The company reported free cash flow of negative $2.4 million for the first quarter, compared with $1.8 million in the same period in 2006. The change was primarily due to the timing of vendor payments and increased cash taxes paid, partially offset by higher segment EBITDA, interest income and lower debt service, Neary said.

Also during Thursday's call, Primedia chief executive officer Dean B. Nelson told listeners that the company's board of directors is on track in its process of exploring the possibility of a sale of the Enthusiast Media business. The board anticipates announcing the outcome of that process in May, with a transaction closing in the third quarter, he said.

"The board continues to be encouraged by the strong investment and debt markets and, as a result, views the current environment as extremely favorable for a sale," Nelson said.

Lowered revenue growth guidance

The company also reduced its guidance for 2007 revenue growth from mid single-digit percentage growth to low single-digit percentage growth. Nelson said the revision was made because expected improvements in the Auto Guide are not materializing as quickly as expected.

Primedia reported net revenue of $80.0 million for the first quarter, down from $81.4 million for the comparable period in 2006.

The drop in overall revenue was primarily the result of a decline in advertising revenue generated by the company's Apartment Guide, which faced challenging market conditions during the quarter.

In the remainder of the year, Primedia expects to see revenue growth in its New Home Guide and Auto Guide, as well as in its single-unit rental property business, partially offset by a full-year decline in its Apartment Guide, Nelson said.

Primedia is a New York-based targeted media company.

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