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Bertelsmann SE & Co. KGaA

Bertelsmann FY '02 Results Improve In Difficult Economic Times

Berlin (ots)

* Operating businesses strengthened against market trend
   * Improved performance in all divisions 
   * Operating EBITA up by Euro 363m to Euro 936m 
   * Operating Return on Sales of 5.1 percent
   * Net income high at nearly Euro 1bn 
   * Financial debt below Euro 3bn, despite high investments 
   * Cash Flow increased to Euro 1.1bn from Euro 294m
In 2002 Bertelsmann went against the market trend, improving its
results in a challenging economic environment. Operating EBITA rose
to Euro 936m from Euro 573m the previous year. All divisions were
able to improve their results, due to a resolute focus on core
businesses, creative successes in the content businesses, and
stringent cost controls. The operating Return on Sales climbed to 5.1
percent, vs. 3 percent the previous year. Net income before minority
interests amounted to Euro 968m. Despite high investments, net
financial debt was below Euro 3bn. Cash Flow increased from Euro 294m
to Euro 1.1bn. Internet losses were reduced by Euro 670m. At Euro
18.3bn, consolidated revenues were slightly below previous year
(pro-forma Euro 19.0bn) - mostly due to the weak dollar. The number
of employees was 80,632 as of December 31, 2002 vs. 80,296 as of
December 31, 2001.
Bertelsmann earned significantly more from operations in 2002 than
in the previous year. All divisions were able to sustainably improve
their performance in 2002 and - all except DirectGroup - were
operating in the black. Consolidated Operating EBITA rose from Euro
573m (pro-forma) to Euro 936m year-on-year. Operating EBITA on the
2002 statements include Internet losses, while Operating EBITA for
the previous year does not include Internet losses of Euro 808m. This
presentation of the 2002 result reflects the strategy of continuing
Internet activities only as part of the core businesses.
Bertelsmann was able to improve its results despite a decline in
revenues. The 3.5 percent decline vs. the previous year's pro-forma
figure was caused primarily by the weakness of the U.S. dollar vs.
the euro. The continuing decline in the advertising markets as well
as decreases in the music club business and the distribution of
independent music labels in the U.S. also contributed to this
development.
Net income before minority interests amounted to Euro 968m
(previous year: Euro 1.4bn). On the one hand, this reflects capital
gains totaling Euro 2.9bn (previous year: Euro 5.5bn), most of which
stemmed from the disposal of holdings in AOL Europe (Euro 2.8bn).
However, amortizations of goodwill and similar rights and impairments
impacted net income in the amount of Euro 2.5bn (previous year: Euro
1.4bn). The Euro 1.3bn impairment on the goodwill of the Zomba music
company, acquired in 2002, was a key factor. Bertelsmann has now
received all proceeds from the gradual disposal of AOL Europe
holdings.
In May 2003, a 15 percent dividend will once again be paid out on
Bertelsmann profit participation certificates, in accordance with the
Profit Participation Certificate Terms & Conditions.
At the Annual Press Conference in Berlin, Bertelsmann Chairman &
CEO Gunter Thielen declared : "Bertelsmann has focused its energy on
the core businesses, cut its losses, and markedly increased its
profitability. We earned significantly more than in 2001 in our
operating businesses and have stood our ground in a difficult
economic situation. We exploited synergy potential and strengthened
our market positions due to outstanding creative achievements. For
2003, we expect stable group revenues and a further increase in the
operating result despite a persistently difficult economic
environment."
Other Key Financials
Special items: The special items, which were not included in
Operating EBITA, were significantly reduced year-to-year. In 2002,
they amounted to minus Euro 111m (previous year: minus Euro 927m,
plus Internet losses of Euro 808m) and were attributable to
restructuring and write-downs, especially at DirectGroup.
Amortization of goodwill and similar rights amounted to Euro 2.5bn
(previous year: Euro 1.4bn) and were mainly driven by an impairment
on the goodwill of Zomba (Euro 1.3bn). The acquisition of Zomba,
until then the world's biggest independent music label with Top Acts
including Britney Spears, Nick Carter and Justin Timberlake, was
based on a put option signed in 1991. The worldwide decline in music
markets necessitated an impairment on the resulting goodwill.
Investments: Mainly due to the takeover of Zomba for Euro 2.3bn,
and the acquisition of another 22 percent in RTL Group for Euro
1.5bn, investments amounted to Euro 5.3bn in 2002 (previous year:
Euro 2.6bn). The acquisition price for Zomba has been netted by Euro
470m in cash and cash equivalents which were taken over as part of
the acquisition.
Total Assets: Assets at the end of 2002 totaled Euro 22.2 billion
(December 31, 2001: Euro 23.7 billion). Total assets have thus
decreased despite considerable acquisitions, primarily due to a
reduction of current assets and of cash and cash equivalents. At 34.9
percent (previous year: 35.3 percent), the equity ratio was well
above the 25 percent target.
Net financial debt: Despite high investments, net financial debt,
i.e. the financial debt including finance leasing obligations netted
by cash and cash equivalents - amounted to Euro 2.7bn (previous year:
Euro 859m). The company's long-term target is that net financial debt
should not exceed one-and-a-half times the cash flow. In 2002, this
pay back factor was at 2.5 years. Bertelsmann plans to increase its
financial flexibility, primarily with the initiated disposal of the
BertelsmannSpringer specialist-publishing group.
Revenues by Region: In 2002, 31.1 percent of total revenue was
generated in Germany, 35.5 percent in the other European countries,
27.5 percent in the U.S. and 5.9 percent in other countries. Revenue
contribution from the U.S. was down due to the weak dollar, as well
as the slowdown in the U.S. music club business and in the U.S.
distribution of independent music labels.
Divisions
RTL Group, Europe's No.1 in television, radio and TV production,
had revenues of Euro 4.4 billion in 2002 (previous year: Euro 4.1
billion). Despite weak advertising markets, the company achieved
Operating EBITA of Euro 465 million, a significant increase over the
previous year (Euro 385 million). Especially in Germany, RTL Group's
most important market, the advertising market was considerably down
for the second consecutive year. RTL Group was able to compensate for
this with internationally successful formats, a broad portfolio -
both in terms of types of business and geography, cost management and
a diversified revenue structure. In major markets such as Germany,
France and Great Britain, the RTL Group TV stations were able to
maintain or increase their audience share. In Germany, the RTL family
of stations headed by market leader RTL Television was able to add
advertising market shares as well. It was an especially good year for
the production subsidiary FremantleMedia, which developed an
unprecedented number of program ideas and distributed them all over
the world. One particular international triumph was FremantleMedia's
TV format "Pop Idol," which enjoyed great success upon its launch in
2001 in Great Britain and went on to achieve record ratings in 2002
as "American Idol" in the U.S. and as "Deutschland sucht den
Superstar" in Germany.
Random House, the world's leading trade book publisher,
outperformed a persistently weak international book economy to
achieve ambitious earnings goals, thanks to excellent publishing
performance and rigorous cost management. The growth in revenues was
counterbalanced by the weak dollar. As a result, revenues, at Euro
2.0 billion, remained stagnant at previous-year levels. Meanwhile,
Operating EBITA reached Euro 168 million for 2002 (previous year:
Euro 33 million). During 2002, Random House made significant
reductions in corporate overhead and operating expenses without
compromising the editorial accomplishments of its more than 100
publishing imprints worldwide. Book sales were up after two
economically weak years for the book industry, especially in the
English-speaking regions. This allowed Random House to offset the
recession in the German-speaking book market. The Random House Group,
comprising the United Kingdom, Australasia, and South Africa, posted
the best result of any of the division's territorial companies,
achieving, as in the past, a 12 percent Return on Sales. In the U.S.,
U.K. and Germany, Random House placed more than 300 titles on the
leading national bestseller lists in 2002. Random House led the
publishing industry with the most "New York Times" bestsellers -182 -
for the fourth consecutive year in the U.S.
Gruner + Jahr, Europe's biggest magazine publisher, generated
revenues of Euro 2.8 billion in 2002 (previous year: Euro 3.0
billion). Most of this decline in revenues was the result of the
disposal of the newspaper activities in Berlin, which were only
consolidated through June 30, 2002. The decline in the advertising
market, especially in Germany, put an additional strain on revenues.
Operating EBITA amounted to Euro 226 million (previous year: Euro 198
million). 2002 Operating EBITA includes Internet losses, while
pro-forma Operating EBITA 2001 was adjusted for Internet losses of
Euro 88 million. Taking the Internet losses for 2001 into account,
Operating EBITA has therefore doubled year-on-year from Euro 110
million to Euro 226 million. Gruner + Jahr was able to master the
difficult general conditions in 2002 with a number of countermeasures
taken early on and thanks to its international portfolio. Measures
ranged from innovations such as the launch of new magazine titles -
for example "Woman" in Germany - to extensive cost and efficiency
measures. The high share of revenues generated outside Germany, i.e.
more than 60 percent, was largely able to compensate the negative
trend in the German market. G+J USA increased its advertising sales
by over 13 percent.
Following extensive restructuring and strategic realignment, BMG
delivered a year of strong chart performances and increasing market
shares. With Operating EBITA of Euro 125 million (previous year:
minus Euro 79 million), BMG successfully managed a return to
profitability. Due to the weak dollar and a decline in the U.S.
distribution of independent labels, revenues declined to Euro 2.7
billion (previous year: Euro 3.0 billion). But because BMG's own U.S.
labels sustained their revenues, BMG improved its market share in a
globally declining music market from about eight percent to nearly
ten percent. In the U.S., BMG improved its current-album market share
to over 17 percent, making it the country's No.2 music major. This
was achieved with a series of successful releases by stars including
Carlos Santana, Christina Aguilera and Rod Stewart, new CDs
commemorating the 25th anniversary of Elvis Presley's death, and the
introduction of young, innovative artists such as Avril Lavigne and
P!nk. A total of 22 BMG albums sold more than a million copies each
in 2002, seven more than in 2001. BMG further strengthened its
position by taking over Zomba and buying up the remaining 50 percent
in the joint venture J Records. The Zomba takeover will be reflected
in revenues and earnings as of 2003.
In 2002, the media services provider arvato achieved revenues of
Euro 3.7bn (previous year: Euro 3.5bn) and Operating EBITA of Euro
217m (previous year: Euro 167m). arvato's business units grappled
with a downbeat economy, insolvent customers and pricing pressure.
However, seen overall, the division proved its dynamic force yet
again, with increases in revenues and earnings. In particular, the
arvato direct services unit, which services roughly 35 million
consumers in more than 20 languages, was able to accelerate its
growth rate again and strengthen its position as one of Europe's
biggest providers of customer programs and service centers. The
Distribution division, part of arvato logistic services, registered
strong growth. arvato print's printing facilities were largely
working at capacity in 2002. The print services provider MOHN Media
concluded the biggest investment program in its history (over Euro 75
million). In the U.S., the printers experienced stronger than
expected growth. arvato storage media was able to compensate for an
overall decrease in CD production volumes by increased production in
the DVD sector. The storage media manufacturer Sonopress achieved
turnaround in the U.S. In September 2002, Hartmut Ostrowski took over
as CEO of arvato.
DirectGroup, which comprises book clubs, music clubs and
e-commerce activities in 20 countries, generated revenues of Euro
2.7bn (previous year: Euro 3.1bn) in 2002. The decline in revenue is
mainly attributable to an adjustment of the membership base in the
U.S. music club, an extensive withdrawal from pure media e-commerce
and - due to the strong presence in the U.S. - to the weak dollar.
Operating EBITA amounted to minus Euro 150m, well below the previous
year's Operating EBITA of minus Euro 61m. Operating EBITA 2002
includes Internet losses, while the pro forma Operating EBITA 2001
was adjusted for Internet losses of Euro 399m. Taking the Internet
losses for 2001 into account, the Operating EBITA has improved by
Euro 310m. In August 2002, Ewald Walgenbach, formerly Bertelsmann's
Chief Operating Officer, succeeded Klaus Eierhoff as the CEO of
DirectGroup. As part of the change, the division focused on its Club
businesses, streamlined its portfolio and carried out extensive
restructuring. This included, in particular, the withdrawal,
integration or restructuring of BOL and CDNOW. The majority of Club
businesses showed an operating profit again in 2002. Of the big
Clubs, only Germany and the U.K. did not manage a return to
profitability.
The specialist-publishing division BertelsmannSpringer, an
internationally renowned provider of science and trade information,
achieved revenues of Euro 731m in 2002 (previous year: Euro 748m).
This decline is mainly attributable to a significant deterioration in
business-to-business advertising, which constitutes a considerable
portion of BertelsmannSpringer's revenue. Operating EBITA amounted to
Euro 71m (previous year: Euro 59m). The division, which publishes
approx. 25,000 book titles and 700 magazines, has been under Arnold
Bahlmann's management since August 2002 and is intended to be
divested during the first half of 2003.
Notes:
Operating EBITA: Operating EBITA represents the earnings before
financial result, taxes and amortizations of goodwill and similar
rights, as well as before capital gains/losses and other special
items, primarily restructuring costs. Internet losses are included in
the Operating EBITA as of 2002.
Pro-forma figures: Having changed its accounting standards from
the German Commercial Code (HGB) to International Financial Reporting
Standards (IFRS, formerly IAS) and reported an abbreviated fiscal
year (from July through December 2001), Bertelsmann herewith submits
its first financial statement during which 2002 is identical to the
calendar year. To facilitate comparability, pro-forma figures were
calculated for 2001.These figures assume a scope of consolidation as
at December 31, 2001, i.e. with RTL Group and France Loisirs shown
fully consolidated for the calendar year 2001.
Revenues by Division
2002                 Pro forma
                                                              2001
   Division           Germany   International      Total      Total
                       Euro         Euro           Euro       Euro
                     millions     millions       millions   millions
RTL Group          2,132        2,230         4,362      4,054
   Random House         143        1,852         1,995      2,039
   Gruner + Jahr      1,039        1,761         2,800      2,973
   BMG                  252        2,462         2,714      2,982
   Arvato             1,629        2,039         3,668      3,520
   DirectGroup          395        2,312         2,707      3,089
Total for all      5,590       12,656        18,246     18,657
   divisions except 
   BertelsmannSpringer
BertelsmannSpringer  364          367           731        748
   Total for all 
   Divisions          5,954       13,023        18,977     19,405
   Other                 46            4            50        192
   Intercompany revenues (309)      (406)         (715)      (618)
   Consolidated revenues  5,691   12,621        18,312     18,979
Analysis of the Net Income
2002           Pro forma
                                                               2001
                                     Euro millions     Euro millions
   Operating EBITA by division
RTL Group                              465               385
   Random House                           168                33
   Gruner + Jahr                          226               198
   BMG                                    125               (79)
   Arvato                                 217               167
   DirectGroup                           (150)              (61)
   Total Operating EBITA by division    1,051               643
   BertelsmannSpringer                     71                59
   Corporate / consolidation             (186)             (129)
   Operating EBITA                        936               573
   Internet losses                         -               (808)
   Special items                         (111)             (927)
   Amortization of goodwill* 
   and similar rights
      - Regular                          (784)             (856)
      - Impairments                    (1,668)             (518)
   Capital gains/losses                 2,918             5,533
   Profit before financial result and taxes   1,291       2,997
   Financial result                            (266)       (433)
   Taxes on income                              (57)     (1,186)
   Net income before minority interests         968       1,378
   Minority interests                           (40)       (143)
   Net income after minority interests          928       1,235
* Inclusive amortization of goodwill from associated companies.
About Bertelsmann AG
Bertelsmann, a media and entertainment company, commands globally
leading positions in the major markets. Its core business is the
creation of first-class media content: Bertelsmann includes RTL
Group, Europe's No. 1 in television and radio, as well as the world's
biggest book-publishing group, Random House, with some 250 publishing
imprints (Alfred A. Knopf, Bantam, Siedler Verlag, Goldmann). Gruner
+ Jahr, the European No.1 in magazine publishing (stern, GEO,
Capital, Femme Actuelle, Family Circle, Parents), Bertelsmann Music
Group (BMG) with its roughly 200 labels (RCA, Arista, Jive, J
Records) and artists such as Alicia Keys, Dido and Pink, as well as
the special-information publisher BertelsmannSpringer also stand for
creativity and powerful brands. Bertelsmann's direct-to-customer
businesses are bundled in DirectGroup: book and music clubs with more
than 40 million members all over the world. The arvato corporate
division bundles the group's media services, which include the
expanding units arvato logistics services and arvato direct services
(service centers, distribution, customer relationship management),
along with state-of-the-art printers, storage media production and
comprehensive IT-services.
For further questions, please contact:
Oliver Herrgesell
Senior Vice President Media Relations
Phone: ++49 - 5241 - 80-24 66 
oliver.herrgesell@bertelsmann.com
Our Information on the Internet (www.bertelsmann.com):
* Press release and presentation charts from the Annual Press
  Conference 
* Excerpts from the Annual Report 2002: Management Report and
  Consolidated Financial Statements 
* Video recording of the Annual Press Conference
* Photos of all Executive Board members for download:
  http://www.bertelsmann.com/news/photos/photos.cfm
* CVs of all Executive Board members

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