News Releases
DES MOINES, Iowa, Oct. 24 /PRNewswire-FirstCall/ -- Meredith Corporation (NYSE: MDP), one of the nation's leading media and marketing companies, today reported fiscal 2008 first quarter earnings per share of $0.68, a 10 percent increase over the prior year quarter. Earnings from continuing operations increased 11 percent to $33 million in the quarter, and revenues rose 5 percent to $404 million.
"We posted outstanding advertising performance and market share gains in our magazine business in the quarter, along with strong results in our custom marketing operations," said Stephen M. Lacy, Meredith's President and Chief Executive Officer. "This record start to fiscal 2008 reflects the strength of our content creation and distribution capabilities, our sales and marketing expertise, and our strategic investments to position Meredith for continued profitable growth."
OPERATING HIGHLIGHTS Publishing
Publishing operating profit increased 16 percent over the prior-year quarter to $55 million. Publishing revenues rose 8 percent to $330 million. Publishing advertising revenues grew 13 percent, led by strong performances at Parents (+38%), More (+30%), Family Circle (+10%) and Better Homes and Gardens (+10%) magazines.
"We are very pleased with the gains in magazine advertising, especially our continued strength in the women's service field -- where Better Homes and Gardens and Family Circle now rank first and second -- along with the sharp rebound in our parenthood titles," Lacy said. "Additionally, our custom marketing and online businesses continue to post impressive revenue growth, and we are demonstrating the vibrancy of our brands through new and exciting licensing programs."
Yesterday, Meredith and Wal-Mart Stores, Inc. announced a multi-year licensing agreement for the design, marketing and retailing of a wide range of home products based on the Better Homes and Gardens brand. The program, the largest extension of products bearing the Better Homes and Gardens brand in its 85-year history, is expected to be available in Wal-Mart stores by the fall of 2008. These products will reflect Better Homes and Gardens' high standards and timeless style. This new licensing agreement will not impact financial results until fiscal 2009.
Meredith's collaboration with Wal-Mart, the world's largest retailer, holds strong marketplace potential. Research shows that Better Homes and Gardens readers are frequent Wal-Mart shoppers, and Meredith's largest advertising customers sell a significant amount of goods at Wal-Mart stores.
Meredith recently announced an agreement with Realogy Corporation to create a new residential real estate franchise under the Better Homes and Gardens brand. Realogy is the largest operator of real estate franchises in the United States, with brands such as CENTURY 21®, Coldwell Banker® and
ERA®. The Better Homes and Gardens franchise is expected to begin operations in July 2008.
Revenues at Meredith Integrated Marketing rose more than 50 percent and operating profit increased more than 80 percent. Results included increased contributions from three online marketing acquisitions over the last 18 months. On a comparable basis, revenues rose more than 15 percent and operating profit increased nearly 10 percent.
Earlier this month Meredith announced the acquisition of Directive, a database marketing and analytics company. Increasingly, database strategy and analysis drive other marketing activities, and Directive is another strategic addition to Meredith's growing array of custom marketing services.
Revenues at Meredith Interactive Media rose more than 20 percent, benefiting from the recent redesigns of BHG.com and Parents.com and strong performance at the Company's niche enthusiast sites. The number of unique visitors, registrations, subscription orders and time spent on the sites each grew approximately 15 percent. During the quarter, visitors to these sites viewed on average more than 100 million web pages and 825,000 videos per month.
Broadcasting
Broadcasting operating profit and earnings before interest, taxes, depreciation and amortization (EBITDA) declined 25 percent and 17 percent, respectively, reflecting the absence of political advertising in this off-election year. Total revenues declined $6 million, or 7 percent, to $75 million.
Net political revenues were $1 million compared to $9 million in the year-ago quarter. Non-political advertising revenues increased 3 percent in the quarter. Operating expenses declined 2 percent.
"In addition to non-political advertising growth, we were pleased with our success in driving non-traditional sources of revenues, including our Cornerstone programs, the Internet and our video initiatives," Lacy said. "This includes Meredith Video Solutions, which draws upon the production and distribution expertise of our Broadcasting group and the content and strong brands of our Publishing group to create compelling broadcast quality video."
Broadcasting online revenues more than doubled. Average monthly page views also doubled and the number of unique visitors rose five-fold, reflecting ongoing investments in technology, content, promotions and sales related activities. The number of videos streamed on Broadcasting's sites nearly doubled to 3.7 million.
During the quarter, Meredith launched Better, a daily lifestyle television program. The Better show airs across the Meredith station group and is syndicated to three non-Meredith stations. Content from the Better show is also available online at http://www.better.tv/ and http://www.parents.tv/, Meredith's broadband video channels.
Earlier this week, Meredith announced an agreement with Comcast Corp. where Meredith parenthood video content will debut on all Comcast cable systems on a new video on demand channel branded Parents TV. It will reach more than 12 million households, and Meredith and Comcast will share in the advertising revenue.
OTHER FINANCIAL INFORMATION
Meredith continued to generate strong free cash flow. The Company repurchased approximately 900,000 shares in the quarter as part of its ongoing share repurchase program, compared to 570,000 shares in the prior year period.
Meredith retired $15 million of debt during the quarter. Total debt was $460 million as of September 30, 2007, versus $560 million as of September 30, 2006. The weighted average interest rate was 5.1 percent on September 30, 2007, compared with 5.3 percent at September 30, 2006.
All earnings per share figures in the text of this release are diluted. Both basic and diluted earnings per share can be found in the attached statement of earnings.
OUTLOOK
Publishing advertising revenues for the second fiscal quarter are currently up in the mid-to-high single digits, led by strong performance at Meredith's parenthood and women's service field titles. Overall Broadcast pacings are currently running down in the mid-to-high teens. Broadcast non-political revenues are pacing up in the mid-single digits.
As a result, Meredith expects fiscal second quarter earnings per share to approximate $0.72, equal to the $0.72 earned in the year-ago quarter, even with the absence of $24 million in net political advertising revenues recorded in the second quarter of fiscal 2007.
Looking to the remainder of fiscal 2008, there is limited visibility into advertising budgets which generally reset effective January 1. In addition, the Company is absorbing an annualized postal rate increase of more than $13 million in fiscal 2008.
Given these factors, Meredith continues to expect fiscal 2008 earnings per share to range from $3.50 to $3.55, with growth in the second half of fiscal 2008 spread evenly between the third and fourth quarters.
A number of uncertainties remain that may affect our outlook as stated in this press release for results in the second quarter and full fiscal year. These include overall advertising volatility; the performance of the Company's retail businesses; and paper prices and postal rates. These and other uncertainties are referenced below under "Safe Harbor" and in certain of the Company's SEC filings.
CONFERENCE CALL WEBCAST
Meredith will host a conference call on Oct. 24, 2007, at 11 a.m. EDT (10 a.m. CDT) to discuss fiscal first quarter results. A live webcast will be accessible to the public on the Company's web site, http://www.meredith.com/, and a replay will be available for one week after the call. A transcript will be available within 48 hours following the conference call on http://www.meredith.com/.
RATIONALE FOR USE AND ACCESS TO NON-GAAP MEASURES
Management uses and presents GAAP and non-GAAP results to evaluate and communicate the performance of the Company. Non-GAAP measures should not be construed as alternatives to GAAP measures. EBITDA and free cash flow are common supplemental measures of performance used by investors and financial analysts. Management believes that EBITDA and free cash flow provide additional analytical tools to clarify the Company's results from core operations and delineate underlying trends. Meredith does not use EBITDA or free cash flow as a measure of liquidity or funds available for management's discretionary use because they include certain contractual and non-discretionary expenditures.
Reconciliations of non-GAAP to GAAP measures are included in the attached tables. The attached consolidated financial statements and reconciliation tables will be made available on the Company's web site, http://www.meredith.com/investors/index.html. Please click on "Non-GAAP/GAAP Reconciliation."
SAFE HARBOR
This release contains certain forward-looking statements that are subject to risks and uncertainties. These statements are based on management's current knowledge and estimates of factors affecting the Company's operations. Statements in this announcement that are forward-looking include, but are not limited to, the statements regarding broadcasting pacings and publishing advertising revenues, along with the Company's earnings per share outlook for the second quarter and all of fiscal 2008.
Actual results may differ materially from those currently anticipated. Factors that could adversely affect future results include, but are not limited to, downturns in national and/or local economies; a softening of the domestic advertising market; world, national or local events that could disrupt broadcast television; increased consolidation among major advertisers or other events depressing the level of advertising spending; the unexpected loss or insolvency of one or more major clients; the integration of acquired businesses; changes in consumer reading, purchasing and/or television viewing patterns; increases in paper, postage, printing or syndicated programming costs; changes in television network affiliation agreements; technological developments affecting products or methods of distribution; changes in government regulations affecting the Company's industries; unexpected changes in interest rates; and the consequences of acquisitions and/or dispositions. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
ABOUT MEREDITH CORPORATION
Meredith (http://www.meredith.com/) is one of the nation's leading media and marketing companies with businesses centering on magazine and book publishing, television broadcasting, integrated marketing and interactive media. The Meredith Publishing Group features 25 subscription magazines -- including Better Homes and Gardens, Ladies' Home Journal, Family Circle, Parents, American Baby, Fitness and More -- and publishes approximately 180 special interest publications under approximately 80 titles. Meredith has more than 400 books in print. Meredith owns 13 television stations, including properties in top-25 markets Atlanta, Phoenix and Portland, OR. Additionally, Meredith has an extensive online presence that includes more than 40 web sites and two broadband channels -- Better.tv and Parents.tv.
Meredith Integrated Marketing has established marketing relationships with some of America's leading companies. Meredith's consumer database, which contains approximately 85 million names, is one of the largest domestic databases among media companies and enables magazine and television advertisers to conduct precise targeted-marketing campaigns. Meredith publishes five Spanish-language titles, making Meredith the leading publisher serving Hispanic women in the United States.
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Three Months Ended September 30, 2007 2006 Change
(In thousands except per share data)
Revenues
Advertising $254,756 $238,569 6.8 %
Circulation 80,286 83,761 (4.1)%
All other 69,452 64,021 8.5 %
Total revenues 404,494 386,351 4.7 %
Operating expenses
Production, distribution,
and editorial 175,898 167,565 5.0 %
Selling, general, and administrative 155,819 150,940 3.2 %
Depreciation and amortization 12,261 11,030 11.2 %
Total operating expenses 343,978 329,535 4.4 %
Income from operations 60,516 56,816 6.5 %
Interest income 352 233 51.1 %
Interest expense (6,163) (7,320) (15.8)%
Earnings from continuing
operations before
income taxes 54,705 49,729 10.0 %
Income taxes 21,335 19,543 9.2 %
Earnings from continuing
operations 33,370 30,186 10.5 %
Income from discontinued
operations, net of taxes - 310 (100.0)%
Net earnings $33,370 $30,496 9.4 %
Basic earnings per share
Earnings from continuing operations $0.70 $0.63 11.1 %
Discontinued operations - 0.01 (100.0)%
Basic earnings per share $0.70 $0.64 9.4 %
Basic average shares outstanding 47,795 47,996 (0.4)%
Diluted earnings per share
Earnings from continuing operations $0.68 $0.62 9.7 %
Discontinued operations - - -
Diluted earnings per share $0.68 $0.62 9.7 %
Diluted average shares outstanding 48,828 48,854 (0.1)%
Dividends paid per share $0.185 $0.160 15.6 %
Meredith Corporation and Subsidiaries
Segment Information (Unaudited)
Three Months Ended September 30, 2007 2006 Change
(In thousands)
Revenues
Publishing $329,522 $305,448 7.9 %
Broadcasting
Non-political advertising 72,913 70,734 3.1 %
Political advertising 1,072 8,558 (87.5)%
Other revenues 987 1,611 (38.7)%
Total broadcasting 74,972 80,903 (7.3)%
Total revenues $404,494 $386,351 4.7 %
Operating profits
Publishing $55,433 $47,828 15.9 %
Broadcasting 13,416 17,991 (25.4)%
Unallocated corporate (8,333) (9,003) 7.4 %
Income from operations $60,516 $56,816 6.5 %
Depreciation and amortization
Publishing $5,200 $4,588 13.3 %
Broadcasting 6,521 5,931 9.9 %
Unallocated corporate 540 511 5.7 %
Total depreciation and
amortization $12,261 $11,030 11.2 %
EBITDA(1)
Publishing $60,633 $52,416 15.7 %
Broadcasting 19,937 23,922 (16.7)%
Unallocated corporate (7,793) (8,492) (8.2)%
Total EBITDA(1) $72,777 $67,846 7.3 %
(1) EBITDA is earnings from continuing operations before interest, taxes,
depreciation, and amortization.
Meredith Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, June 30,
Assets 2007 2007
(In thousands)
Current assets
Cash and cash equivalents $25,483 $39,220
Accounts receivable, net 273,117 267,419
Inventories 54,981 48,836
Current portion of subscription
acquisition costs 64,882 70,553
Current portion of broadcast rights 23,324 11,307
Other current assets 25,082 15,305
Total current assets 466,869 452,640
Property, plant, and equipment 442,741 445,846
Less accumulated depreciation (242,489) (239,820)
Net property, plant, and equipment 200,252 206,026
Subscription acquisition costs 61,210 66,309
Broadcast rights 9,044 9,309
Other assets 96,794 101,178
Intangibles assets, net 791,413 794,996
Goodwill 460,547 459,493
Total assets $2,086,129 $2,089,951
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $135,000 $100,000
Current portion of long-term
broadcast rights payable 23,872 12,069
Accounts payable 81,551 78,156
Accrued expenses and other
liabilities 107,174 105,359
Current portion of unearned
subscription revenues 182,160 191,445
Total current liabilities 529,757 487,029
Long-term debt 325,000 375,000
Long-term broadcast rights payable 18,889 18,584
Unearned subscription revenues 163,298 167,873
Deferred income taxes 136,923 166,597
Other noncurrent liabilities 99,761 41,667
Total liabilities 1,273,628 1,256,750
Shareholders' equity
Common stock 38,191 38,970
Class B stock 9,255 9,262
Additional paid-in capital 64,106 58,945
Retained earnings 709,492 727,628
Accumulated other comprehensive
income 1,493 2,499
Unearned compensation (10,036) (4,103)
Total shareholders' equity 812,501 833,201
Total liabilities and shareholders'
equity $2,086,129 $2,089,951
Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended September 30, 2007 2006
(In thousands)
Net cash provided by operating
activities $61,806 $31,337
Cash flows from investing activities
Acquisitions of businesses - (15)
Additions to property, plant, and
equipment (4,273) (5,670)
Net cash used in investing activities (4,273) (5,685)
Cash flows from financing activities
Proceeds from issuance of long-term
debt 75,000 10,000
Repayments of long-term debt (90,000) (15,000)
Purchases of Company stock (49,772) (27,489)
Proceeds from common stock issued 2,293 5,818
Dividends paid (8,830) (7,686)
Excess tax benefits from share-based
payments 39 463
Net cash used in financing activities (71,270) (33,894)
Net decrease in cash and cash
equivalents (13,737) (8,242)
Cash and cash equivalents at
beginning of period 39,220 30,713
Cash and cash equivalents at end of
period $25,483 $22,471
Meredith Corporation and Subsidiaries
Supplemental Disclosures Regarding Non-GAAP Financial Measures
EBITDA
Consolidated EBITDA, which is reconciled to earnings from continuing
operations in the following tables, is defined as earnings from
continuing operations before interest, taxes, depreciation, and
amortization.
Segment EBITDA is a measure of segment earnings before depreciation and
amortization.
Segment EBITDA margin is defined as segment EBITDA divided by segment
revenues.
Three Months Ended September 30, 2007
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $329,522 $ 74,972 $ - $404,494
Operating profit $ 55,433 $ 13,416 $ (8,333) $ 60,516
Depreciation and
amortization 5,200 6,521 540 12,261
EBITDA $ 60,633 $19,937 $ (7,793) 72,777
Less:
Depreciation and
amortization (12,261)
Net interest expense (5,811)
Income taxes (21,335)
Earnings from continuing
operations $ 33,370
Segment EBITDA margin 18.4% 26.6%
Three Months Ended September 30, 2006
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $305,448 $80,903 $ - $386,351
Operating profit $47,828 $17,991 $ (9,003) $ 56,816
Depreciation and
amortization 4,588 5,931 511 11,030
EBITDA $52,416 $23,922 $ (8,492) 67,846
Less:
Depreciation and
amortization (11,030)
Net interest expense (7,087)
Income taxes (19,543)
Earnings from continuing
operations $30,186
Segment EBITDA margin 17.2% 29.6%
FREE CASH FLOW
Free cash flow, which is reconciled to earnings from continuing
operations in the following table, is defined as earnings from
continuing operations plus depreciation and amortization less capital
expenditures.
Three Months Ended September 30, 2007 2006
(In thousands)
Free cash flow $41,358 $35,546
Depreciation and amortization (12,261) (11,030)
Capital expenditures 4,273 5,670
Earnings from continuing operations $33,370 $30,186
SOURCE: Meredith Corporation
CONTACT: Shareholder-Financial Analyst Contact, Mike Lovell, Director of
Investor Relations, +1-515-284-3622, Mike.Lovell@Meredith.com , or Media, Art
Slusark, VP-Corporate Communications, +1-515-284-3404,
Art.Slusark@Meredith.com, both of Meredith Corporation
Web site: http://www.meredith.com/