“The Company anticipates that a capital investment will be required after 2003 to continue the current business operations…”

November 16, 2003

From Jim Metrock:

Public companies are required to file a quarterly report, called a 10-Q, to the SEC. In this report, a firm is required to disclose relevant information regarding their financial position. The report is due 35 days after each of the first three fiscal quarters. After the fourth quarter, the firm files their annual 10-K report.

The controversial Channel One corporation is owned by PRIMEDIA which just recently released their third quarter 10-Q. The last sentence we quote from the 10-Q is the important one. It is the same sentence that was in the second quarter10-Q. PRIMEDIA would rather not tell the world that Channel One is on the “bubble” but they have to “tell it like it is” because investors could sue the company if relevant financial information about a substantial part of its business was kept hidden.

Channel One needs additional “capital investment” “to continue the current business operations.” Ladies and gentlemen, that means Channel One News will be OUT OF BUSINESS – KAPUT – if they DON’T get this additional investment.

Channel One is getting pressure from schools across the country. School boards and superintendents are being grilled by the public about their contract with Channel One. School administrators don’t like the fact that Channel One treats some school districts as “first class” customers and others as “second class” customers. First-class schools get Channel One’s brand new 27″ television sets that are easier to see in the back of a standard-size classroom. Second-class schools have the ancient 19″ sets that most likely were installed in 1990, 1991, or 1992. These 19″ sets make up the bulk of Channel One’s inventory. Schools don’t want the 19″ sets anymore and they are letting Channel One know about it. Channel One doesn’t have the money set aside to replace all the old TV sets and the other old equipment. Therefore, Channel One needs to find a source of money and so far they haven’t been successful in that search.

Employees of Channel One ought to be extremely concerned. They face one of two futures and neither are pretty. PRIMEDIA could decide to scrap the whole company. They could donate the television equipment to schools and take a tax write-off. Channel One has been going downhill for several years and it isn’t the revenue producer it once was. The growing concern with its marketing of junk food to overweight children and its sick obsession with advertising sexually-inappropriate and violent movies to students all work against Channel One’s efforts to paint itself as a benefit to students. That is why it isn’t surprising that no company has stepped up to buy Channel One.

The other future involves new ownership or at least new partners. The present management, with its new partners, or a totally new owner will have to make radical changes to Channel One News for it to survive. Upper management will be axed. The payroll will be cut even more than it has been. Channel One will be forced to shrink the number of schools they serve and will probably have to remove most of the advertising on the show, relying instead on PSA money. Revenue from PSAs won’t support the Channel One anchors and executives in the lifestyle they have grown accustomed to.

But we, the public, should not wait around while Channel One News slowly dies. This company can’t die quick enough. Every school day Channel One News robs schoolchildren of their education and taxpayers of their money. Help put this business out of commission – if your schools are still showing Channel One, then raise a fuss. Demand that Channel One be kicked out of the classroom so more time can be devotedto academic courses.

Form 10-Q for PRIMEDIA INC
14-Nov-2003
Quarterly Report
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS

[We will only reprint the parts of this long document that pertain to Channel One. Figures in thousands.]

“PRIMEDIA Television sales decreased $7,198 from 2002 primarily due to declines at Channel One and Films for the Humanities and Sciences. Channel One sales declined as revenue from new accounts was offset by lower combined spending from several large accounts, including Pepsi and Gatorade as a result of their merger.”

“PRIMEDIA Television saw a quarter-over-quarter sales decline of $1,617, with the majority of this decline coming at the Films for Humanities and Sciences unit. Films for the Humanities and Sciences, a distributor of video content to secondary schools and colleges, continues to face the adverse effects of state and local school budget cuts with sales declining $929 in 2003. The third quarter is seasonally the lowest revenue quarter for PRIMEDIA Television’s school-focused businesses, Channel One and Films for the Humanities and Sciences.”

“The Company anticipates that a capital investment will be required after 2003 to continue the current business operations and to maintain profit margins at Channel One. PRIMEDIA expects spending would begin in 2004 and extend over a three-year period. However, management is pursuing alternative solutions which would decrease the required capital investment of the Company and provide additional significant revenue streams.”