Published:
Meredith Third Quarter Net Earnings Per Share Rise 5 Percent
DES MOINES, Iowa, April 22 /PRNewswire-FirstCall/ -- Meredith Corporation
(NYSE: MDP), one of America's leading media and marketing companies, today
reported fiscal 2008 third quarter net earnings per share of $0.97, compared
to $0.92 per share in the prior-year quarter. Earnings per share from
continuing operations were $0.98. Total revenues were $401 million,
approximately even with the prior-year quarter.
Core earnings per share were also $0.98, an increase of 10 percent
compared to the prior-year quarter. Core earnings per share exclude
discontinued operations for fiscal 2008 and fiscal 2007, and a one-time tax
benefit in the third quarter of fiscal 2007. Core earnings are reconciled to
net earnings in Table 1.
For the first nine months of fiscal 2008, net earnings per share increased
6 percent to $2.40. Core earnings per share increased 7 percent to $2.39.
Total revenues increased to $1.2 billion, while advertising revenues were $724
million.
"We were pleased to deliver increased earnings per share in our third
quarter and year-to-date periods," said Meredith President and CEO Stephen M.
Lacy. "Our strategy to grow non-advertising sources of revenue such as
Meredith Integrated Marketing -- along with disciplined expense
management -- offset softer advertising demand across our businesses."
OPERATING DETAIL
Publishing
Fiscal third quarter Publishing operating profit was $65 million and
revenues were $323 million, both approximately even with the prior-year
quarter.
After an exceptionally strong first half of fiscal 2008 -- when Publishing
advertising revenues grew more than 10 percent -- in the third quarter
Publishing experienced weakness in the home, pharmaceuticals and direct
response advertising categories, partially offset by significant growth in
food, Meredith's largest advertising category. Publishing advertising revenues
were $155 million, compared to $161 million in the prior-year quarter. A
strong increase in net advertising revenue per page partially offset lower
page volume.
Circulation contribution and margin increased in the quarter, reflecting
the strength of Meredith's consumer appeal and subscription operations.
Circulation revenues declined, as expected, due primarily to the ongoing
transition of Parents, Family Circle and Fitness magazines to the Meredith
direct-to-publisher model.
Meredith's brands continue to demonstrate powerful consumer connection, as
evidenced by growth in readership. According to recent data from Mediamark
Research and Intelligence, readership across all of Meredith's titles is
currently 140 million -- up from 83 million 10 years ago. This increase can be
attributed to organic growth, acquisitions and launches of new brands.
"The vibrancy of our consumer brands has led to several important
licensing relationships with market leaders such as Wal-Mart Stores Inc.,
Realogy Corp. and Universal Furniture," Lacy said. "These relationships
further extend Meredith's brands to categories including home products, real
estate and furniture."
Third quarter revenues at Meredith Integrated Marketing rose nearly 50
percent and operating profit rose more than 150 percent. Results included
increased contributions from three marketing acquisitions over the last year:
Genex, New Media Strategies and Directive. On a comparable basis, revenues
rose over 30 percent and operating profit more than doubled due to continued
growth at Meredith's custom publishing activities.
Publishing's retail book operation was impacted by weak sales, and higher
than anticipated returns due primarily to inventory reductions at key
retailers. The recently formed Meredith Retail operation is focusing on
content, distribution and cost-reduction initiatives to strengthen financial
performance.
For the first nine months of fiscal 2008, Publishing operating profit
increased 12 percent to $165 million. Operating profit margin was 17.1
percent, up from 15.9 percent during the prior-year period. Publishing
revenues increased 4 percent to $962 million, and Publishing advertising
revenues increased 6 percent to $488 million.
Broadcasting
Fiscal third quarter Broadcasting operating profit was $19 million,
compared to $21 million in the prior-year quarter. Revenues were $78 million,
down slightly from the prior-year quarter.
During the quarter, growth in online, video, retransmission and political
revenues offset weakness in spot television advertising, particularly in the
automotive, retail and telecommunications categories.
Meredith's television stations continued to enhance their competitive
position among adults 25-54 in the February ratings book.Nashville
(+59 percent), Flint/Saginaw (+28 percent),Las Vegas (+23 percent) and
Greenville (+14 percent) all posted strong share growth in morning news. In
addition, five stations -- led byGreenville (+33 percent) andLas Vegas
(+24 percent) -- increased overall sign-on to sign-off ratings.
Broadcasting online revenues increased nearly 50 percent during the
quarter. Average unique visitors rose four-fold to 8 million per month,
reflecting enhanced technology, content, promotions and sales-related
activities. More than 1.3 million videos were streamed on Broadcasting's sites
each month during the quarter.
"Better, an hour-long daily lifestyle television program produced by
Meredith Video Solutions that runs across our station group, is off to a
strong start," Lacy said. "The show builds on expertise from Meredith's
expansive brand portfolio across the home, shelter and parenthood categories.
It is currently in syndication to three non-Meredith stations, and 18
additional non-Meredith stations are scheduled to begin airing the show later
in calendar 2008."
For the first nine months of fiscal 2008, Broadcasting operating profit
was $60 million versus $79 million in the prior-year period. Revenues were
$240 million compared to $264 million, reflecting the cyclical decline in
political advertising. Net political revenues for the first nine months of
fiscal 2008 were $29 million less than the prior-year period.
OTHER FINANCIAL INFORMATION
Meredith generated more than $50 million in free cash flow during the
third fiscal quarter of 2008. Meredith repurchased approximately 1 million
shares in the quarter as part of its ongoing share repurchase program, more
than triple the 280,000 shares repurchased in the prior-year quarter. For the
first nine months of fiscal 2008, Meredith repurchased approximately 2.4
million shares, compared to 1.1 million shares in all of fiscal 2007. Meredith
has 1.2 million shares remaining under its current share repurchase
authorization.
Unallocated corporate expenses decreased in the quarter, due primarily to
lower management incentive accruals and employee benefit costs.
Total debt was $445 million as of March 31, 2008, versus $475 million as
of June 30, 2007. The weighted average interest rate was 4.8 percent on March
31, 2008.
Meredith increased its quarterly dividend 16 percent to 21-1/2 cents per
share during the fiscal third quarter. Meredith has paid a dividend for 61
consecutive years and has increased its dividend for 15 consecutive years.
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
consolidated statements of earnings.
OUTLOOK
Looking at the balance of fiscal 2008, Meredith is facing a weaker economy
and related advertising demand.
Fourth quarter Publishing advertising revenues and Broadcast pacings are
currently down in the low double digits, compared to the prior-year quarter.
Meredith anticipates a 6 percent increase in paper prices and a 3 percent
increase in postage rates, both effective in May 2008.
For the full fiscal year ending June 30, 2008, Meredith now expects to
report earnings per share of $3.15 to $3.20, compared to $3.31 reported for
fiscal 2007.
"I think it is important to note that our fundamentals are strong with
great brands, outstanding customer connections, expanding online and video
platforms, sound growth strategies, top-notch employees and management, and a
solid track record of increasing shareholder value over time," Lacy said. "Our
strategy is to capitalize on these strengths, carefully manage expenses, and
work aggressively to increase market share. We have successfully employed this
strategy during past times of economic weakness and down advertising cycles,
enabling Meredith to emerge in a stronger and more competitive position."
A number of uncertainties remain that may affect Meredith's outlook as
stated in this press release for results in the fourth quarter and full fiscal
year. These include overall advertising volatility; the performance of
Meredith's retail businesses; the amount of political advertising revenues
generated at its broadcast television stations; and paper prices and postal
rates. These and other uncertainties are referenced below under "Safe Harbor"
and in certain SEC filings.
CONFERENCE CALL WEBCAST
Meredith will host a conference call on April 22, 2008, at 11 a.m. EDT (10
a.m. CDT) to discuss fiscal third quarter results. A live webcast will be
accessible to the public on 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 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 Meredith's performance. 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 Meredith'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
as they include certain contractual and non-discretionary expenditures.
Core earnings and core earnings per share are supplemental non-GAAP
financial measures that exclude certain one-time items that are not expected
to recur and are not reflective of Meredith's core business activities. While
core earnings and core earnings per share are not a substitute for reported
earnings results under GAAP, Management believes this information is useful as
an aid in better understanding Meredith's current performance, performance
trends and financial condition.
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 at 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 Meredith'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 Meredith's earnings per share outlook for the fourth
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 Meredith's
industries; unexpected changes in interest rates; and the consequences of
acquisitions and/or dispositions. Meredith undertakes no obligation to update
any forward-looking statement, whether as a result of new information, future
events or otherwise.
ABOUT MEREDITH CORPORATION
Meredith Corporation (NYSE: MDP: http://www.meredith.com) is one of
America's premier media and marketing companies. Meredith combines well-known
national brands -- including Better Homes and Gardens, Parents, Ladies' Home
Journal, Family Circle, American Baby, Fitness and More -- with local
television brands in fast growing markets. Meredith is the industry leader in
creating content in key consumer interest areas such as home, family, health
and wellness and self-development. Meredith then uses multiple distribution
platforms -- including print, television, online, mobile and video -- to give
consumers content they desire and to deliver the messages of its marketing
partners. Additionally, Meredith uses its many assets to create powerful
custom marketing solutions for many of the nation's top brands and companies.
The goals of these programs are to increase consumer loyalty and produce
repeated consumer interaction. In the last two years, Meredith has
significantly added to its capabilities in this area through the acquisition
of cutting-edge companies in areas such as online, word-of-mouth and database
marketing. Meredith employs approximately 3,000 people throughoutthe United
States, including approximately 1,000 inDes Moines and 750 inNew York City.
Meredith's 2007 annual revenues were $1.6 billion.
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Period Ended Three Months Nine Months
March 31, 2008 2007 Change 2008 2007 Change
(In thousands
except per
share data)
Revenues
Advertising $230,212 $238,587 (3.5)% $723,803 $722,693 0.2 %
Circulation 87,072 91,401 (4.7)% 240,317 253,999 (5.4)%
All other 83,736 71,830 16.6 % 237,218 210,823 12.5 %
Total
revenues 401,020 401,818 (0.2)% 1,201,338 1,187,515 1.2 %
Operating
expenses
Production,
distribution,
and editorial 170,437 163,872 4.0 % 512,267 492,790 4.0 %
Selling,
general, and
administrative 140,378 148,481 (5.5)% 448,994 460,360 (2.5)%
Depreciation
and
amortization 11,856 11,285 5.1 % 35,999 33,349 7.9 %
Total
operating
expenses 322,671 323,638 (0.3)% 997,260 986,499 1.1 %
Income from
operations 78,349 78,180 0.2 % 204,078 201,016 1.5 %
Interest income 250 502 (50.2)% 898 1,172 (23.4)%
Interest expense (5,387) (6,561) (17.9)% (17,284) (21,333) (19.0)%
Earnings from
continuing
operations
before income
taxes 73,212 72,121 1.5 % 187,692 180,855 3.8 %
Income taxes 26,796 18,944 41.4 % 72,595 61,675 17.7 %
Earnings from
continuing
operations 46,416 53,177 (12.7)% 115,097 119,180 (3.4)%
Income (loss)
from discontinued
operations,
net of taxes (332) (7,868) NM 416 (8,348) NM
Net earnings $46,084 $45,309 1.7 % $115,513 $110,832 4.2 %
Basic earnings
per share
Earnings from
continuing
operations $1.00 $1.10 (9.1)% $2.43 $2.48 (2.0)%
Discontinued
operations (0.01) (0.16) NM 0.01 (0.17) NM
Basic earnings
per share $0.99 $0.94 5.3 % $2.44 $2.31 5.6 %
Basic average
shares
outstanding 46,672 48,170 (3.1)% 47,251 48,024 (1.6)%
Diluted earnings
per share
Earnings from
continuing
operations $0.98 $1.08 (9.3)% $2.39 $2.43 (1.6)%
Discontinued
operations (0.01) (0.16) NM 0.01 (0.17) NM
Diluted earnings
per share $0.97 $0.92 5.4 % $2.40 $2.26 6.2 %
Diluted average
shares
outstanding 47,420 49,300 (3.8)% 48,175 49,055 (1.8)%
Dividends paid
per share $0.215 $0.185 16.2 % $0.585 $0.505 15.8 %
NM - Not meaningful
Meredith Corporation and Subsidiaries
Segment Information (Unaudited)
Three Months Nine Months
Period Ended 2008 2007 Change 2008 2007 Change
March 31,
(In thousands)
Revenues
Publishing $323,474 $323,321 0.0 % $961,604 $923,435 4.1 %
Broadcasting
Non-political
advertising 74,016 77,095 (4.0)% 231,676 228,120 1.6 %
Political
advertising 1,432 436 228.4 % 3,940 32,924 (88.0)%
Other revenues 2,098 966 117.2 % 4,118 3,036 35.6 %
Total
broadcasting 77,546 78,497 (1.2)% 239,734 264,080 (9.2)%
Total revenues $401,020 $401,818 (0.2)% $1,201,338 $1,187,515 1.2 %
Operating profit
Publishing $64,692 $64,379 0.5 % $164,637 $146,632 12.3 %
Broadcasting 18,689 20,587 (9.2)% 59,830 79,042 (24.3)%
Unallocated
corporate (5,032) (6,786) (25.8)% (20,389) (24,658)(17.3)%
Income from
operations $78,349 $78,180 0.2 % $204,078 $201,016 1.5 %
Depreciation and
amortization
Publishing $5,092 $4,701 8.3 % $15,597 $13,869 12.5 %
Broadcasting 6,262 6,128 2.2 % 18,969 18,018 5.3 %
Unallocated
corporate 502 456 10.1 % 1,433 1,462 (2.0)%
Total
depreciation
and
amortization $11,856 $11,285 5.1 % $35,999 $33,349 7.9 %
EBITDA(1)
Publishing $69,784 $69,080 1.0 % $180,234 $160,501 12.3 %
Broadcasting 24,951 26,715 (6.6)% 78,799 97,060 (18.8)%
Unallocated
corporate (4,530) (6,330) (28.4)% (18,956) (23,196)(18.3)%
Total EBITDA(1) $90,205 $89,465 0.8 % $240,077 $234,365 2.4 %
(1) EBITDA is earnings from continuing operations before interest, taxes,
depreciation, and amortization.
Meredith Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, June 30,
Assets 2008 2007
(In thousands)
Current assets
Cash and cash equivalents $45,478 $39,220
Accounts receivable, net 255,578 267,419
Inventories 62,968 48,836
Current portion of subscription
acquisition costs 65,455 70,553
Current portion of broadcast rights 15,966 11,307
Other current assets 22,377 15,305
Total current assets 467,822 452,640
Property, plant, and equipment 441,784 445,846
Less accumulated depreciation (247,657) (239,820)
Net property, plant, and equipment 194,127 206,026
Subscription acquisition costs 61,968 66,309
Broadcast rights 9,854 9,309
Other assets 96,874 101,178
Intangibles assets, net 784,586 794,996
Goodwill 508,651 459,493
Total assets $2,123,882 $2,089,951
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $125,000 $100,000
Current portion of long-term
broadcast rights payable 16,506 12,069
Accounts payable 101,071 78,156
Accrued expenses and other
liabilities 130,635 105,359
Current portion of unearned
subscription revenues 184,891 191,445
Total current liabilities 558,103 487,029
Long-term debt 320,000 375,000
Long-term broadcast rights payable 19,143 18,584
Unearned subscription revenues 165,216 167,873
Deferred income taxes 148,496 166,597
Other noncurrent liabilities 96,682 41,667
Total liabilities 1,307,640 1,256,750
Shareholders' equity
Common stock 37,049 38,970
Class B stock 9,218 9,262
Additional paid-in capital 63,216 58,945
Retained earnings 715,347 727,628
Accumulated other comprehensive
income (loss) (822) 2,499
Unearned compensation (7,766) (4,103)
Total shareholders' equity 816,242 833,201
Total liabilities and shareholders'
equity $2,123,882 $2,089,951
Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended March 31, 2008 2007
(In thousands)
Net cash provided by operating
activities $206,371 $170,450
Cash flows from investing activities
Acquisitions of businesses (16,525) (15,456)
Additions to property, plant, and
equipment (15,412) (29,014)
Net cash used in investing activities (31,937) (44,470)
Cash flows from financing activities
Proceeds from issuance of long-term
debt 120,000 115,000
Repayments of long-term debt (150,000) (180,000)
Purchases of Company stock (123,827) (48,372)
Proceeds from common stock issued 13,218 29,486
Dividends paid (27,659) (24,312)
Excess tax benefits from share-based
payments 205 2,264
Other (113) -
Net cash used in financing activities (168,176) (105,934)
Net increase in cash and cash
equivalents 6,258 20,046
Cash and cash equivalents at
beginning of period 39,220 30,713
Cash and cash equivalents at end of
period $45,478 $50,759
Meredith Corporation and Subsidiaries Table 1
Supplemental Disclosures Regarding Non-GAAP Financial Measures
CORE EARNINGS
Core earnings, which is reconciled to net earnings in the following table,
is defined as net earnings adjusted for certain one time items.
Three Months Nine Months
Period Ended March 31, 2008 2007 2008 2007
(In thousands)
Core earnings $46,416 $43,776 $115,097 $109,779
Discontinued operations, net of tax (332) (7,868) 416 (8,348)
Tax settlement(1) - 9,401 - 9,401
Net earnings $46,084 $45,309 $115,513 $110,832
CORE EARNINGS PER SHARE
Core earnings per share, which is reconciled to diluted earnings per
share in the following table, is defined as diluted earnings per
share adjusted for certain one time items.
Three Months Nine Months
Period Ended March 31, 2008 2007 2008 2007
Core earnings per share $0.98 $0.89 $2.39 $2.24
Discontinued operations, net of tax (0.01) (0.16) 0.01 (0.17)
Tax settlement 1 - 0.19 - 0.19
Diluted earnings per share $0.97 $0.92 $2.40 $2.26
(1) An income tax benefit of $9.4 million was recognized in the third
quarter of fiscal 2007 for the reversal of previously recorded taxes.
This resulted from the resolution of a tax contingency related to a
loss on the sale of stock in Craftways, a business sold in fiscal
2003. Recognition of the benefit was deferred until tax-related
contingencies were resolved.
Meredith Corporation and Subsidiaries Table 2
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 March 31, 2008
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $323,474 $77,546 $- $401,020
Operating profit $64,692 $18,689 $(5,032) $78,349
Depreciation and amortization 5,092 6,262 502 11,856
EBITDA $69,784 $24,951 $(4,530) 90,205
Less:
Depreciation and amortization (11,856)
Net interest expense (5,137)
Income taxes (26,796)
Earnings from continuing operations $46,416
Segment EBITDA margin 21.6% 32.2%
Three Months Ended March 31, 2007
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $323,321 $78,497 $- $401,818
Operating profit $64,379 $20,587 $(6,786) $78,180
Depreciation and amortization 4,701 6,128 456 11,285
EBITDA $69,080 $26,715 $(6,330) 89,465
Less:
Depreciation and amortization (11,285)
Net interest expense (6,059)
Income taxes (18,944)
Earnings from continuing operations $53,177
Segment EBITDA margin 21.4% 34.0%
Nine Months Ended March 31, 2008
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $961,604 $239,734 $- $1,201,338
Operating profit $164,637 $59,830 $(20,389) $204,078
Depreciation and amortization 15,597 18,969 1,433 35,999
EBITDA $180,234 $78,799 $(18,956) 240,077
Less:
Depreciation and amortization (35,999)
Net interest expense (16,386)
Income taxes (72,595)
Earnings from continuing
operations $115,097
Segment EBITDA margin 18.7% 32.9%
Nine Months Ended March 31, 2007
Unallocated
Publishing Broadcasting Corporate Total
(In thousands)
Revenues $923,435 $264,080 $- $1,187,515
Operating profit $146,632 $79,042 $(24,658) $201,016
Depreciation and amortization 13,869 18,018 1,462 33,349
EBITDA $160,501 $97,060 $(23,196) 234,365
Less:
Depreciation and amortization (33,349)
Net interest expense (20,161)
Income taxes (61,675)
Earnings from continuing
operations $119,180
Segment EBITDA margin 17.4% 36.8%
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 Nine Months
Period Ended March 31, 2008 2007 2008 2007
(In thousands)
Free cash flow $53,070 $54,717 $135,684 $123,515
Depreciation and amortization (11,856) (11,285) (35,999) (33,349)
Capital expenditures 5,202 9,745 15,412 29,014
Earnings from continuing operations $46,416 $53,177 $115,097 $119,180
SOURCE Meredith Corporation
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