June 6, 2002
Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549
Re: File Number S7-08-02
Dear Mr. Katz:
PRIMEDIA Inc. is a targeted media company with leading positions in both consumer and business-to-business markets. Our products serve highly specialized niches and capitalize on the growing trend toward targeted, rather than mass, information distribution.
We appreciate the opportunity to comment on the Commission's proposal to accelerate quarterly and annual filing dates. PRIMEDIA is very much in support of the Commission's initiative to provide investors with timely, accurate, and relevant disclosure of information. In an attempt to provide investors with the most accurate picture of PRIMEDIA's financial position, we provided approximately 30 percent more information in our fiscal year 2001 Form 10-K than in the previous year's filing. However, for the reasons specified below, we are opposed to shortening the filing period for Form 10-K to 60 days following a registrant's year end and for Form 10-Q to 30 days following the end of a registrant's fiscal quarters at this time.
PRIMEDIA, like many other companies, has grown primarily through a large number of acquisitions. Consequently, financial data needed to close our books and thus file annual and quarterly reports is received from several different geographic locations and disparate accounting systems. PRIMEDIA performs a detailed analysis of all financial data received from each business unit to ensure accurate financial reporting. The time required by this data gathering exercise presents a formidable obstacle to our being able to meet accelerated filing dates.
The current economic slowdown has severely impacted advertising dependent media companies like PRIMEDIA. In this challenging environment, we are attempting to operate the company as efficiently as possible while ensuring that we continue to meet current filing deadlines. If such deadlines are accelerated, our financial staff will be required to process the many data requests received from the external auditors in a condensed period of time in addition to carrying out their extensive responsibilities with respect to financial reporting. As such, we expect to incur an increase in costs and a risk to the quality of our reporting if we are required to file within the proposed time frame.
However, PRIMEDIA is currently in the process of upgrading, over the next one to two years, multiple information technology systems throughout the company. These upgrades are designed to make the financial reporting and analysis functions more efficient; however, it will be at least two years before the planned benefits are realized. If accurate information is sacrificed for the sake of timeliness, it is doubtful that the Commission's proposal would have its intended effect of improving the flow of information to investors. We believe there must be a balance struck between additional disclosure requirements and timely reporting. Companies must be allowed needed time to put the proper financial systems in place to achieve this balance.
The Commission has solicited comments on whether it should alternatively require registrants to file their reports by the earlier of the existing deadlines or a certain time period after their first earnings release for that period. We do not believe such a requirement would benefit investors, as this will provide incentive to delay earnings releases. Additionally, as there is currently no official guidance on what constitutes an earnings release, companies may alter the release to disclose favorable information without having had their official "earnings release". It would be extremely difficult for PRIMEDIA to shorten the period of time between the earnings release and the annual and quarterly filings due to the amount of work that is performed subsequent to the earnings release. Specifically, senior company management goes through the iterative and time-consuming process of constructing the Management Discussion and Analysis section of the filings to ensure accurate disclosure. Additionally, the audit committee of the Board of Directors performs a detailed review of the filing.
As an alternative to the Commission's proposal, we believe that taking steps to ensure the relevance of information reported via earnings releases is a more cost beneficial method of providing relevant, accurate, and timely information to the capital markets. This could include devising minimum required elements that must be included in earnings releases, such as GAAP measures of earnings. Lastly, if the Commission chooses to implement accelerated filing dates, we request that the Commission consider delaying the implementation of the proposed rule. Due to our system upgrades and process re-engineering, we expect to be able to comply with the accelerated filing dates in the future; however, to do so within the next 12 to 18 months would be difficult and costly.
Thank you for the opportunity to respond to the Commission's proposed rule.
Executive Vice President and Chief Financial Officer