PW: RD Revises Bonus Plan, Rejects New Board Nominations

Jim Milliot |

Dec 08, 1997

[ PW Home ] [ Bestsellers ] [ Subscribe ] [ Search ]

News

RD Revises Bonus Plan, Rejects New Board Nominations
Jim Milliot -- 12/8/97
Reader's Digest's disappointing financial performance led to a number of moves prior to the publisher's annual meeting, which is set for December 12.
In a filing with the Securities &Exchange Commission made public in late November, RD reported that it has suspended some cash bonuses for executives, while also canceling some previously granted stock incentives. Instead of offering cash bonuses, the company's board of directors decided to offer long-term incentives in the form of new stock options. RD will "invest its limited cash resources in its operations," the company said.

Late last month, the company also rejected a request by Corporate Value Partners, which owns 1.1 million RD shares, to nominate Frank Macchiarola, president of St. Francis College, and William Mayer, a member of Corporate Value Partners, to RD's board of directors. In a letter to Corporate Value, RD noted that even though two current board members are not standing for re-election, the company has decided to reduce the number of board members from 10 to eight, and thus there are no vacancies. Richard Grubman, a spokesperson for Corporate Value, said he was surprised RD acted so quickly in rejecting the company's suggestion without even offering to interview the potential nominees. Grubman said representatives from Corporate Value would attend the Dec. 12 annual meeting.

After a weak fiscal year that ended June 30, 1997, RD showed little improvement for the first quarter that ended September 30, with the company reporting an operating loss of $13.5 million, compared to an operating profit of $46.6 million in the first quarter of fiscal '97. Sales fell 12%, to $561.4 million. The operating loss excluded the $70-million write-off RD took in the quarter, which resulted in an overall loss of $83.5 million for the period.

According to RD, about $40 million of the write-off went to cover severance costs associated with workforce reductions in Europe, the U.S. and at the corporate level. The remaining $30 million was written down due to the discontinuation of certain businesses and the realignment of business processes and operations.

The book and home-entertainment products division had the largest sales decline in the quarter, with revenues down 20%, to $352 million. RD attributed the decrease to lower sales in its condensed books and general books operations in both the U.S. and Europe, as well as to lower sales of book series in Europe.
Back To News
--->

A version of this article appeared in the 12/08/1997 issue of Publishers Weekly under the headline: