Published: January 24, 2012
Meredith Corporation Reports Fiscal 2012 Second Quarter Results
DES MOINES, Iowa, Jan. 24, 2012 /PRNewswire/ -- Meredith Corporation (NYSE: MDP), the leading media and marketing company serving American women, today reported fiscal 2012 second quarter earnings per share of $0.70, compared to $0.88 in the year-ago period. Revenues were $329 million, compared to $366 million. Meredith recorded $21 million, or $0.28 per share, less of political advertising revenues in the second quarter of fiscal 2012 than in the year-ago period, which is expected in an off-election year.
"Our Local Media Group delivered an industry-leading 9 percent gain in non-political advertising revenues during the second quarter of fiscal 2012," said Meredith Chairman and Chief Executive Officer Stephen M. Lacy. "While the advertising market remained challenging for our National Media Group, we're seeing an improving trend as we look to early calendar 2012, particularly in the food and home advertising categories."
Lacy noted Meredith's Total Shareholder Return financial strategy, announced on October 25, has been very well received by the investment community. Key elements include (1) A 50 percent annual dividend increase to $1.53 from $1.02 per share that produced yields of 5 to 6 percent during the quarter; (2) A new $100 million share repurchase authorization; and (3) Ongoing strategic investments to drive incremental revenue and profit growth over time, such as today's announcement that Meredith would acquire Allrecipes.com from The Reader's Digest Association, Inc.
The addition of Allrecipes.com, the world's No. 1 digital food site, doubles the scale of the Meredith Women's Network in terms of both audience reach and revenues. It also fulfills two of Meredith's previously stated criteria for strategic acquisitions: (1) National media brands that provide access to new audiences and advertising categories; and (2) Digital platforms that significantly increase scale. With Allrecipes.com, the Meredith Women's Network will be the No. 1 premium owned and operated website in the Women's Lifestyle Category, according to the most recent comScore data.
"Allrecipes.com significantly enhances our digital platform," Lacy said. "It increases our relevance with a large and loyal group of consumers, and strengthens our position in the marketplace by connecting advertisers with an audience of 100 million consumers. It fits perfectly with our Total Shareholder Return Strategy, adding strategic value to Meredith, and is expected to drive incremental growth in revenues, profit and free cash flow over time."
Lacy noted that Meredith has executed the following strategic initiatives since the start of fiscal 2012:
-- Acquisition of the popular FamilyFun and Every Day with Rachael Ray
brands.
-- Launch of tablet editions of Meredith's national brands across the iPad,
NOOK Color, Kindle Fire and Samsung Galaxy platforms.
-- Extension of Meredith's very successful brand licensing arrangement for
its Better Homes and Gardens line of home and garden products with
Walmart through 2016.
-- Investment in Iris, a leading global marketing company, and the creation
of the Meredith-Iris Global Network to serve the increasing global needs
of domestic clients, and open doors to international clients.
-- Expansion of Meredith's daily syndicated The Better Show's reach to 150
markets across the country.
"I'm particularly pleased about the ongoing execution of our digital and video expansion strategy," said Lacy. "We've grown our audience online and on television, and we're aggressively extending our brands across tablet and mobile platforms. Digital and video are perfect complements to our leading portfolio of national brands - both for consumers and advertisers alike. We will continue to extend our reach on these platforms, and the acquisition of Allrecipes.com is our latest initiative."
For the first six months of fiscal 2012, earnings per share were $1.18, compared to $1.45 in the year-ago period. Revenues were $657 million, compared to $709 million. Meredith recorded $32 million, or $0.43 per share, less of political advertising revenues in the first six months of fiscal 2012 than in the year-ago period, which is expected in an off-election year.
OPERATING DETAIL
LOCAL MEDIA GROUP
Fiscal 2012 second quarter Local Media Group operating profit was $27 million, compared to $39 million in the year-ago period. Total revenues were $84 million, compared to $97 million. Meredith recorded $21 million less of political advertising revenue in the second quarter of fiscal 2012 than in the year ago period, which is expected in an off-election year. Expenses declined 3 percent, helping drive an EBITDA margin of nearly 40 percent.
Looking more closely at non-political advertising performance in the second quarter of fiscal 2012, compared to the year-ago period:
-- Revenues rose 9 percent to $75 million, the ninth-consecutive quarter of
year-over-year improvement. Performance was strongest at Meredith's
stations in Atlanta, Hartford, Las Vegas and Portland.
-- Automotive advertising revenues increased 15 percent, on top of 17
percent growth in the year-ago period. Professional services, the
second-largest category, grew 19 percent, also on top of 17 percent
growth in the year-ago period.
-- Digital advertising revenues increased more than 50 percent.
"Once again we were able to drive industry-leading performance in non-political advertising revenues through our very strong connection to local viewers," Lacy said. "It was the second-best performance for a non-political second quarter in Meredith's history, and November 2011 was one of our strongest rating books in the last decade. Television continues to be the most powerful medium to deliver customers to local businesses and service providers."
Meredith television stations delivered very strong year-over-year ratings growth during the most recent November measurement period in the important adults ages 25 to 54 demographic. Of note:
-- WGCL (CBS Atlanta) delivered double-digit ratings growth in morning,
afternoon and evening news viewership.
-- KPHO (CBS Phoenix) delivered double-digit ratings growth in morning,
afternoon and late news.
-- KPDX (FOX Portland) delivered double-digit ratings growth in morning,
evening and late news.
-- KVVU (FOX Las Vegas) delivered double-digit ratings growth in afternoon,
evening and late news.
-- WFSB (CBS Hartford) retained its No. 1 position in all news periods and
day parts.
Other revenues grew 31 percent in the second quarter of fiscal 2012, driven primarily by Meredith's management of Peachtree TV (WPCH-TV) in Atlanta, which began on March 28, 2011. Also, Meredith Video Studios posted solid revenue growth, driven in part by The Better Show, which aired its 1,000th episode during the quarter, and the creation of custom video content for corporate marketing clients including Kraft Foods and Kmart.
For the first six months of fiscal 2012, Local Media Group operating profit was $38 million, compared to $55 million in the year-ago period. Revenues were $154 million, compared to $173 million. Meredith recorded $32 million less of political advertising revenues in the first six months of fiscal 2012 than in the year-ago period, which is expected in an off-election year. Expenses declined 2 percent.
NATIONAL MEDIA GROUP
Fiscal 2012 second quarter National Media Group operating profit was $36 million, compared to $42 million in the year-ago period. Revenues were $244 million, compared to $268 million. Expenses decreased 8 percent.
Fiscal 2012 second quarter advertising revenues were $107 million, compared to $122 million in the year-ago period. Fiscal 2012 second-quarter weighted average net advertising revenues per magazine page increased 8 percent, due primarily to a change in mix and stronger pricing.
The advertising declines were primarily related to food and consumer packaged goods producers - who have been particularly impacted by higher commodity prices - and pharmaceutical companies - who brought fewer new drugs to market. Meredith over-indexes the industry by more than 2 to 1 in these two categories.
The home, non-prescription drug and financial services-related advertising categories each posted double-digit revenue growth during the second quarter of fiscal 2012, their second-consecutive quarter of year-over-year growth.
"We are seeing gains in food-related advertising in early calendar 2012, and we believe overall advertising performance will improve as calendar 2012 progresses," Lacy said. "Our largest clients have had time to adjust to economic conditions, and our innovative Meredith Engagement Dividend - which guarantees marketers a return on their advertising investment in Meredith magazines - is gaining traction in the marketplace. Magazine industry advertising as a whole has held up fairly well in calendar 2011, particularly in categories such as beauty and financial services, where we are expanding our efforts via multi-platform marketing programs."
Circulation revenues increased during the second quarter of fiscal 2012, driven by a gain in subscription revenues. Online orders for print magazine subscriptions nearly doubled to more than 500,000 compared to the year-ago period, due primarily to more aggressive website and email marketing programs as well as efforts to shift to online billing and renewals. Meredith is particularly focused on driving online subscriptions and paperless transactions because of cost saving and up-selling opportunities.
Meredith's brands continued their strong engagement with American consumers in the second quarter of fiscal 2012 compared to the prior-year period, as demonstrated by:
-- An increase in readership of Meredith's magazines, which stood at a
record 113 million according to Fall 2011 data from Mediamark Research
and Intelligence.
-- Strong traffic growth for Meredith's branded websites, as monthly unique
visitors and page views rose more than 50 percent each to 20 million,
and 450 million, respectively. The multi-channel brand Recipe.com has
grown to approximately 2 million monthly unique visitors in its first
six months of operation. The acquisition of Allrecipes.com will double
the Meredith Women's Network's monthly unique visitors to 40 million.
-- Expansion of Meredith's electronic tablet issues and capabilities,
including a strong presence on the newly launched Amazon Kindle Fire and
Barnes & Noble NOOK Tablet, as well as product availability on the Apple
iPad and NOOK Color devices.
-- More magazine's second annual television special was aired in 145
markets reaching 85 percent of U.S. television households.
Fiscal 2012 second quarter other revenues were $73 million, compared to $82 million in the year-ago period. Results were primarily due to select clients within Meredith Xcelerated Marketing that scaled back programs for the same commodity-related reasons that impacted advertising results earlier in calendar 2011. Meredith Xcelerated Marketing's programs are typically long-term in nature, and its results typically lag shorter-term changes in economic conditions.
For the first six months of fiscal 2012, National Media Group operating profit was $72 million, compared to $82 million in the year-ago period. Revenues were $503 million, compared to $535 million. Expenses decreased 5 percent.
OTHER FINANCIAL INFORMATION
For the trailing 12 month period ended December 31, 2011, Meredith:
-- Generated nearly $200 million in cash flow from operations.
-- Repurchased approximately 1.2 million shares of Company stock.
-- Maintained a conservative debt-to-EBITDA ratio of approximately 1 to 1.
The weighted average interest rate on Meredith's debt was 4.4 percent at
December 31, 2011.
In addition, total Company expenses declined 7 percent in the second quarter of fiscal 2012, the sixth consecutive sequential quarter of year-over-year expense reductions. For the first half of fiscal 2012, total Company expenses declined 4 percent, compared to the year-ago period.
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 Condensed Consolidated Statements of Earnings.
OUTLOOK
Looking at the third quarter of fiscal 2012, compared to the year-ago period:
-- With two of three magazine issues closed, Meredith expects third quarter
National Media Group advertising revenue performance to be flat to up in
the low-single digits.
-- With nine weeks remaining in the quarter, Local Media Group
non-political advertising revenues are currently pacing up in the
mid-single digits.
Meredith currently expects fiscal 2012 third quarter earnings per share to range from $0.65 to $0.70. Meredith expects fiscal 2012 earnings per share to range from $2.55 to $2.75. Both estimates exclude the anticipated effects of the acquisition of Allrecipes.com, as noted in the press release that Meredith issued earlier today.
A number of uncertainties remain that may affect Meredith's outlook as stated in this press release for the third fiscal quarter and full year of fiscal 2012. These uncertainties are referenced below under "Safe Harbor" and in certain filings with the U.S. Securities and Exchange Commission.
CONFERENCE CALL WEBCAST
Meredith will host a conference call on January 24, 2012 at 11 a.m. EST to discuss second quarter fiscal 2012 results. A live webcast will be accessible to the public on the Company's website, www.meredith.com, and a replay will be available for two weeks. A transcript will be available within 48 hours of the call at www.meredith.com.
RATIONALE FOR USE AND ACCESS TO NON-GAAP RESULTS
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 is a common supplemental measure of performance used by investors and financial analysts. Management believes that EBITDA provides an additional analytical tool to clarify the Company's results from core operations and delineate underlying trends. Meredith does not use EBITDA 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 condensed consolidated financial statements and reconciliation tables will be made available at www.meredith.com.
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 and its operations. Statements in this announcement that are forward-looking include, but are not limited to, the statements regarding advertising revenues and investment spending, along with the Company's revenue and earnings per share outlook for the third fiscal quarter and full year fiscal 2012.
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, syndicated programming or other 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 Corporation (NYSE: MDP; www.meredith.com) is the leading media and marketing company serving American women. Meredith features multiple well-known national brands - including Better Homes and Gardens, Parents, Family Circle, Ladies' Home Journal, Fitness, More, American Baby, Every Day with Rachael Ray and FamilyFun- along 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 uses multiple distribution platforms - including print, television, online, mobile, tablets, and video - to give consumers content they desire and to deliver the messages of its advertising and marketing partners.
Additionally, Meredith uses its many assets to create powerful custom marketing solutions for many of the nation's top brands and companies. Meredith Xcelerated Marketing has significantly added to its capabilities in recent years through the acquisition of cutting-edge companies in digital, mobile, social, healthcare, database, and international marketing. Most recently, Meredith made a strategic investment in London-based Iris Worldwide, a leader in experiential marketing.
A hallmark of Meredith's business model and financial profile is its ability to consistently generate substantial free cash flow by leveraging the strength of its multi-platform portfolio. Meredith is committed to increasing Total Shareholder Return through dividend payments, share repurchases and strategic business investments. Meredith has paid a dividend for 64 straight years and increased its dividend for 18 consecutive years.
Meredith
Corporation
and
Subsidiaries
Condensed Consolidated
Statements of Earnings
(Unaudited)
Three Months Six Months
------------ ----------
Periods
Ended
December
31, 2011 2010 2011 2010
-------- ---- ---- ---- ----
(In
thousands
except
per
share
data)
Revenues
Advertising $183,636 $213,755 $367,953 $418,580
Circulation 63,902 63,737 130,491 129,677
All
other 81,179 88,441 158,182 160,416
Total
revenues 328,717 365,933 656,626 708,673
-------- ------- ------- ------- -------
Operating
expenses
Production,
distribution,
and
editorial 128,412 137,251 265,303 280,092
Selling,
general,
and
administrative 134,940 148,506 277,905 290,438
Depreciation
and
amortization 10,505 9,663 20,337 19,448
Total
operating
expenses 273,857 295,420 563,545 589,978
--------- ------- ------- ------- -------
Income
from
operations 54,860 70,513 93,081 118,695
Interest
expense,
net (2,897) (3,351) (5,616) (6,862)
-------- ------ ------ ------ ------
Earnings
from
continuing
operations
before
income
taxes 51,963 67,162 87,465 111,833
Income
taxes (20,369) (26,065) (34,244) (44,674)
------ ------- ------- ------- -------
Earnings
from
continuing
operations 31,594 41,097 53,221 67,159
Loss
from
discontinued
operations,
net
of
taxes - (540) - (895)
------------ --- ---- --- ----
Net
earnings $31,594 $40,557 $53,221 $66,264
--------- ------- ------- ------- -------
Basic
earnings
per
share
Earnings
from
continuing
operations $0.70 $0.90 $1.18 $1.48
Discontinued
operations - (0.01) - (0.02)
------------ --- ----- --- -----
Basic
earnings
per
share $0.70 $0.89 $1.18 $1.46
-------- ----- ----- ----- -----
Basic
average
shares
outstanding 44,838 45,571 44,923 45,527
----------- ------ ------ ------ ------
Diluted
earnings
per
share
Earnings
from
continuing
operations $0.70 $0.89 $1.18 $1.47
Discontinued
operations - (0.01) - (0.02)
------------ --- ----- --- -----
Diluted
earnings
per
share $0.70 $0.88 $1.18 $1.45
-------- ----- ----- ----- -----
Diluted
average
shares
outstanding 45,044 45,912 45,115 45,849
----------- ------ ------ ------ ------
Dividends
paid
per
share $0.3825 $0.2300 $0.6375 $0.4600
--------- ------- ------- ------- -------
Meredith Corporation and Subsidiaries
Segment Information (Unaudited)
Three Months Six Months
------------ ----------
Periods Ended
December 31, 2011 2010 2011 2010
------------- ---- ---- ---- ----
(In thousands)
Revenues
National media group
Advertising $107,180 $122,352 $231,637 $257,854
Circulation 63,902 63,737 130,491 129,677
Other revenues 73,233 82,394 140,799 147,667
Total national media
group 244,315 268,483 502,927 535,198
--------------------- ------- ------- ------- -------
Local media group
Non-political
advertising 75,382 69,376 134,659 127,124
Political
advertising 1,074 22,027 1,657 33,602
Other revenues 7,946 6,047 17,383 12,749
Total local media group 84,402 97,450 153,699 173,475
----------------------- ------ ------ ------- -------
Total revenues $328,717 $365,933 $656,626 $708,673
-------------- -------- -------- -------- --------
Operating profit
National media
group $35,797 $42,200 $71,801 $81,830
Local media group 27,156 38,549 38,213 55,277
Unallocated
corporate (8,093) (10,236) (16,933) (18,412)
Income from
operations $54,860 $70,513 $93,081 $118,695
----------- ------- ------- ------- --------
Depreciation and amortization
National media
group $3,832 $3,337 $7,193 $6,689
Local media group 6,175 5,816 12,164 11,744
Unallocated
corporate 498 510 980 1,015
Total depreciation
and amortization $10,505 $9,663 $20,337 $19,448
------------------ ------- ------ ------- -------
EBITDA(1)
National media
group $39,629 $45,537 $78,994 $88,519
Local media group 33,331 44,365 50,377 67,021
Unallocated
corporate (7,595) (9,726) (15,953) (17,397)
Total EBITDA(1) $65,365 $80,176 $113,418 $138,143
-------------- ------- ------- -------- --------
(1) EBITDA is earnings from continuing operations before interest, taxes, depreciation, and amortization.
Meredith Corporation and
Subsidiaries
Condensed Consolidated
Balance Sheets (Unaudited)
December 31, June 30,
Assets 2011 2011
------ ---- ----
(In thousands)
Current assets
Cash and cash equivalents $26,118 $27,721
Accounts receivable, net 210,126 212,365
Inventories 21,107 21,529
Current portion of
subscription acquisition
costs 56,410 54,581
Current portion of broadcast
rights 7,870 3,974
Other current assets 21,987 13,568
Total current assets 343,618 333,738
-------------------- ------- -------
Property, plant, and
equipment 458,583 459,257
Less accumulated
depreciation (260,660) (272,819)
---------------- -------- --------
Net property, plant, and
equipment 197,923 186,438
Subscription acquisition
costs 65,947 54,286
Broadcast rights 1,655 1,292
Other assets 75,039 66,940
Intangible assets, net 554,866 545,101
Goodwill 566,894 525,034
Total assets $1,805,942 $1,712,829
------------ ---------- ----------
Liabilities and
Shareholders' Equity
---------------------
Current liabilities
Current portion of long-
term debt $50,000 $50,000
Current portion of long-
term broadcast rights
payable 10,942 8,548
Accounts payable 52,882 82,878
Accrued expenses and other
liabilities 106,420 115,735
Current portion of unearned
subscription revenues 166,841 151,831
--------------------------- ------- -------
Total current liabilities 387,085 408,992
Long-term debt 200,000 145,000
Long-term broadcast rights
payable 5,937 5,431
Unearned subscription
revenues 143,330 120,024
Deferred income taxes 176,853 160,709
Other noncurrent liabilities 99,674 97,688
Total liabilities 1,012,879 937,844
----------------- --------- -------
Shareholders' equity
Common stock 36,049 36,282
Class B stock 8,740 8,776
Additional paid-in capital 51,666 58,274
Retained earnings 712,315 687,816
Accumulated other
comprehensive loss (15,707) (16,163)
Total shareholders' equity 793,063 774,985
-------------------------- ------- -------
Total liabilities and
shareholders' equity $1,805,942 $1,712,829
--------------------- ---------- ----------
Meredith Corporation and
Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended December 31, 2011 2010
----------------------------- ---- ----
(In thousands)
Net cash provided by operating
activities $68,747 $84,524
------------------------------ ------- -------
Cash flows from investing
activities
Acquisitions of businesses (55,548) (28,556)
Additions to property, plant, and
equipment (26,621) (11,168)
Other (1,563) -
Net cash used in investing
activities (83,732) (39,724)
-------------------------- ------- -------
Cash flows from financing
activities
Proceeds from issuance of long-
term debt 85,000 12,500
Repayments of long-term debt (30,000) (67,500)
Purchases of Company stock (15,311) (6,030)
Dividends paid (28,722) (21,017)
Proceeds from common stock issued 2,332 6,622
Excess tax benefits from share-
based payments 83 317
Other - (51)
Net cash provided by (used in)
financing activities 13,382 (75,159)
------------------------------ ------ -------
Net decrease in cash and cash
equivalents (1,603) (30,359)
Cash and cash equivalents at
beginning of period 27,721 48,574
---------------------------- ------ ------
Cash and cash equivalents at end of
period $26,118 $18,215
----------------------------------- ------- -------
Meredith Corporation and Subsidiaries Table 1
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 December 31, 2011 Six Months Ended December 31, 2011
------------------------------------ ----------------------------------
National Local Unallocated Corporate Total National Local Unallocated Corporate Total
Media Media Media Media
----- ----- ----- -----
(In thousands)
Revenues $244,315 $84,402 $ - $328,717 $502,927 $153,699 $ - $656,626
-------- ------- --- -------- -------- -------- --- --------
Operating profit $35,797 $27,156 $(8,093) $54,860 $71,801 $38,213 $(16,933) $93,081
Depreciation and amortization 3,832 6,175 498 10,505 7,193 12,164 980 20,337
--- ---
EBITDA $39,629 $33,331 $(7,595) 65,365 $78,994 $50,377 $(15,953) 113,418
------- ------- ------- ------- ------- --------
Less:
Depreciation and amortization (10,505) (20,337)
Net interest expense (2,897) (5,616)
Income taxes (20,369) (34,244)
Earnings from continuing operations $31,594 $53,221
------- -------
Segment EBITDA margin 16.2% 39.5% 15.7% 32.8%
---- ---- ---- ----
Three Months Ended December 31, 2010 Six Months Ended December 31, 2010
------------------------------------ ----------------------------------
National Local Unallocated Corporate Total National Local Unallocated Corporate Total
Media Media Media Media
----- ----- ----- -----
(In thousands)
Revenues $268,483 $97,450 $ - $365,933 $535,198 $173,475 $ - $708,673
-------- ------- --- -------- -------- -------- --- --------
Operating profit $42,200 $38,549 $(10,236) $70,513 $81,830 $55,277 $(18,412) $118,695
Depreciation and amortization 3,337 5,816 510 9,663 6,689 11,744 1,015 19,448
--- -----
EBITDA $45,537 $44,365 $(9,726) 80,176 $88,519 $67,021 $(17,397) 138,143
------- ------- ------- ------- ------- --------
Less:
Depreciation and amortization (9,663) (19,448)
Net interest expense (3,351) (6,862)
Income taxes (26,065) (44,674)
Earnings from continuing operations $41,097 $67,159
------- -------
Segment EBITDA margin 17.0% 45.5% 16.5% 38.6%
--------------------- ---- ---- ---- ----
SOURCE Meredith Corporation
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