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Passengers On A Sinking Ship?

Creating Keepsakes and it’s sister publications Simple Scrapbooks and Paper Crafts are without question a dominant presence in the scrapbook publishing industry. But those publications are owned by publishing corporation Primedia, and questions are being raised by recent events involving their parent corporation. Are they passengers on a sinking ship?

Primedia’s stock has declined in value 41% since January 1st. (Forbes.com, 11-7-05) The company’s CEO departed suddenly a few weeks ago. At the same time Primedia announced that a plan was being considered to split the company into two separate entities (one for consumer guides and one for specialty magazines, which would include the scrapbook magazines) but that reasonable offers for the company’s assets would also be entertained. (Seattle Post-Intelligencer, 10-25-05) Following those announcements two major business credit bureaus, Moody’s and S&P, either lowered or said they were considering further lowering the company’s credit ratings, which are already in junk territory. (Reuters, 10-25-05 and Reuters, 10-25-05)

Primedia released it’s third quarter earnings today and the report simply added to the bleak financial picture of the corporation in previous quarters. The company reported per-share earnings of $.79, an increase from the same quarter last year of $.77. That sounds like a huge turnaround until the increase is explained by the sale of Primedia’s business information publications in the third quarter. Their operating net in the third quarter was a 6 cent per share operating loss, an increase over the 5 cent per share operating loss in the same quarter in 2004. (Business Week Online, 11-8-05) The overall earnings forecast for 2005 for Primedia is for a double-digit decline over last year even with the asset sell-off. (Reuters, 10-24-05)

So are Primedia’s scrapbook magazines going to drown as passengers on a ship that seems to be sinking? Not likely. They are successful enterprises and therefore have some value to Primedia to sell. One report last week was that Primedia is trying to sell and convert to cash it’s entire group of craft magazines. (Folio, 11-4-05) Goldman Sachs, the company supposedly engaged in doing that, was also retained to advise management in splitting the company. (Reuters, 10-24-05) Being sold could actually benefit the scrapbook and craft publications if they get sold to a company with more cash than Primedia currently has with which to back them.

It’s highly unlikely they will drown but it sure will be interesting to see who will throw them a lifeline.

(Author’s Note: The promised article about fonts has been delayed slightly to allow the last two entries on up-to-the minute news.)

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