Shareholder and Financial Analyst Contact
Jim Jacobson
Director of Investor Relations
Phone (515) 284-2633
E-mail jim.jacobson@meredith.com
Media Contact
Art Slusark
Vice President-Corporate Communications
Phone (515) 284-3404
E-mail art.slusark@meredith.com
MEREDITH REPORTS THIRD FISCAL QUARTER
EARNINGS PER SHARE INCREASE OF 16 PERCENT
DES MOINES, IA, April 25, 2006-Meredith Corporation (NYSE: MDP) today reported that third quarter earnings per share increased 16 percent to $0.80 from $0.69 in the prior-year. Income from operations grew 18 percent to $73.6 million and earnings before interest, taxes, depreciation and amortization (EBITDA) rose 19 percent to $84.9 million.
Revenues rose 29 percent to $394.9 million in the third quarter and advertising revenues increased 27 percent to $227.8 million. On a comparable basis (excluding Parents, Family Circle, Fitness, Child and Ser Padres magazines, which were acquired on July 1, 2005), Meredith's revenues grew 6 percent to $324.4 million and advertising revenues rose 4 percent to $185.7 million.
"In Publishing, we continued to benefit from the new magazines and strong performance in our book and integrated marketing operations," stated William T. Kerr, Meredith's Chairman and Chief Executive Officer. "Advertising revenues increased. While results varied by magazine, Internet advertising was strong once again.
"In Broadcasting, we continued to monetize our ratings gains and increased EBITDA margin nearly three percentage points," Kerr stated. "In particular, our stations in our three largest markets-Atlanta, Phoenix and Portland-produced outstanding profit growth."
For the first nine months of fiscal 2006, earnings per share increased 14 percent to $1.90 from $1.67 before the cumulative benefit of a change in accounting principle in 2005 related to option expensing. Income from operations grew 16 percent to $180.3 million and EBITDA rose 19 percent to $214.5 million. Revenues increased 32 percent to $1.2 billion. On a comparable basis, revenues rose 5 percent to $936.7 million and advertising revenues grew 3 percent to $554.3 million.
OPERATING HIGHLIGHTS
Publishing
Publishing operating profit increased 12 percent to $61.4 million and revenues grew 35 percent to $319 million in the third quarter. On a comparable basis, publishing operating profit declined 2 percent and revenues grew 5 percent.
Third quarter Publishing results benefited from strong operating profit gains at the Company's book, integrated marketing and interactive media operations and the inclusion of the magazines acquired from Gruner + Jahr. These results were partially offset by a number of industry-wide factors including a slower magazine advertising environment, weak newsstand results, and higher paper and postal costs.
Advertising revenues grew 40 percent in the quarter primarily due to the addition of the new magazines. On a comparable basis, Publishing advertising revenues increased 2 percent. Internet growth continued to be strong and the mid-size magazines posted solid gains, which were partially offset by weakness in the Company's women's service field titles.
The Company continued to grow its diversified publishing businesses in the third quarter. Meredith Books grew revenues in the high teens and Meredith Integrated Marketing increased revenues in the low-double digits. The Company enhanced its integrated marketing capabilities to deliver custom marketing programs via the Internet with its recently announced April 2006 acquisition of O'Grady Meyers, a Los Angeles-based interactive marketing services firm. Meredith expects the acquisition to be modestly accretive to earnings in fiscal 2007.
For the first nine months of fiscal 2006, Publishing operating profit grew 24 percent to $146.3 million and revenues rose 43 percent to $939 million. On a comparable basis, operating profit grew 8 percent and revenues increased 7 percent.
Broadcasting
Broadcasting operating profit increased 24 percent to $20.1 million in the third quarter. EBITDA grew 18 percent to $26.1 million and EBITDA margin increased from 31.7 to 34.4 percent. Total revenues grew 9 percent to $75.9 million in the quarter, including a 10 percent gain in local advertising revenues.
Meredith improved ratings and audience share in certain key markets in the February 2006 book and continued to do an outstanding job of monetizing its ratings growth. The Company increased average revenue share in 5 of its 6 largest markets in the second half of calendar 2005, which is the most current market data available. On average, Meredith grew revenue share more than one percentage point in these markets, according to local market audits.
In March, the Company formed Meredith Video Solutions, which will utilize magazine content and brand strength as well as Broadcasting's production capabilities to develop video content. It will also secure distribution outlets across multiple media platforms, including the Internet, mobile devices, cable, satellite, network and syndicated television.
For the first nine months of fiscal 2006, Broadcasting operating profit declined to $59.1 million from $62.7 million and revenues declined slightly to $232.2 million from $233 million. These results reflect the cyclical decline in political advertising, partially offset by 8 percent growth in non-political advertising.
OTHER FINANCIAL INFORMATION
Net interest expense increased to $22.6 million in the first nine months of fiscal 2006 from $14.7 million in the prior-year period, primarily reflecting a higher average debt balance. Total debt was $520 million at March 31, 2006 versus $600 million at the closing of the new magazine acquisition on July 1, 2005. The weighted average interest rate was 5.12 percent on March 31, 2006 compared with 6.19 percent on March 31, 2005.
Capital expenditures were $5.8 million in the third quarter and $20.8 million in the first nine months of fiscal 2006. Meredith repurchased 918,000 shares in the first nine months of fiscal 2006 and more than 1.1 million shares to date in fiscal 2006 as part of its ongoing share repurchase program.
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 statements of earnings.
OUTLOOK
Broadcast pacings, which are a snapshot in time and change frequently, are currently running up in the high-single digits for the fourth quarter. Publishing advertising revenues are expected to be flat to up slightly on a comparable basis.
The Company continues to believe that earnings per share will approximate $0.96 for the fourth quarter and $2.86 for fiscal 2006, which would be a 14 percent increase from the $2.50 Meredith earned in fiscal 2005 (before the cumulative effect of a change in accounting principle).
CONFERENCE CALL WEBCAST
Meredith will host a conference call on April 25, 2006 at 11:00 a.m. EDT (10:00 a.m. CDT) to discuss results for the third quarter and first nine months of fiscal 2006. A live webcast will be accessible to the public on the Company's website www.meredith.com.
RATIONALE FOR USE AND ACCESS TO NON-GAAP MEASURES
Non-GAAP measures such as EBITDA should be construed not as alternative measures to the Company's net earnings and income from operations as defined under GAAP, but as supplemental information.
Management uses and presents GAAP and non-GAAP results to evaluate and communicate the performance of the Company. Because of EBITDA's focus on results from operations before depreciation and amortization, management believes that EBITDA provides an additional analytical tool to clarify the Company's results from core operations and delineate underlying trends. EBITDA is a common supplemental measure of performance used by investors and financial analysts. Meredith does not use EBITDA as a measure of liquidity, nor is EBITDA necessarily indicative of funds available for management's discretionary use.
Reconciliations of GAAP to non-GAAP measures are included in Table 1. The attached financial statements and reconciliation tables will be made available on the Company's web site. Interested parties should go to http://www.meredith.com/investors/index.html and click on "GAAP-Non-GAAP Reconciliation" in the navigation bar on the left side of the page.
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 broadcast pacings, publishing advertising revenues, along with the Company's earnings per share outlook for the fourth quarter of fiscal 2006, as well as Meredith's earnings per share outlook for all of fiscal 2006.
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 of one or more major clients; the integration of the newly acquired businesses; changes in consumer reading, purchase, and/or television viewing patterns; unanticipated 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 any acquisitions and/or dispositions. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
ABOUT MEREDITH CORPORATION
Meredith (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 Child - and approximately 200 special interest publications. Meredith owns 14 television stations, including properties in top-25 markets Atlanta, Phoenix and Portland, and an AM radio station.
Meredith has approximately 350 books in print and has established marketing relationships with some of America's leading companies including The Home Depot, DIRECTV, DaimlerChrysler, Wal-Mart and Carnival Cruise Lines. 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 target marketing campaigns precisely. Additionally, Meredith has an extensive Internet presence that includes 32 web sites and strategic alliances with leading Internet destinations. Meredith Hispanic Ventures publishes five Spanish-language titles, making Meredith the largest Hispanic publisher in the United States.
Meredith Corporation and Subsidiaries | ||||||||||||||
Consolidated Statements of Earnings - Unaudited | ||||||||||||||
| Three Months | Nine Months | ||||||||||||
Percent | Percent | |||||||||||||
Period ended March 31, |
| 2006 |
| 2005 |
| Change |
|
| 2006 |
| 2005 |
| Change | |
(In thousands except per share data) | ||||||||||||||
Revenues | ||||||||||||||
Advertising | $ | 227,843 | $ | 178,785 | 27.4 % | $ | 693,214 | $ | 535,960 | 29.3 % | ||||
Circulation | 95,888 | 64,962 | 47.6 % | 278,468 | 179,049 | 55.5 % | ||||||||
All other | 71,193 | 61,770 | 15.3 % | 199,490 | 173,924 | 14.7 % | ||||||||
Total revenues |
| 394,924 |
| 305,517 | 29.3 % |
| 1,171,172 |
| 888,933 | 31.8 % | ||||
Operating costs and expenses | ||||||||||||||
Production, distribution and editorial | 157,908 | 136,699 | 15.5 % | 499,062 | 389,275 | 28.2 % | ||||||||
Selling, general and administrative | 152,081 | 97,685 | 55.7 % | 457,571 | 318,674 | 43.6 % | ||||||||
Depreciation and amortization | 11,290 | 8,831 | 27.8 % | 34,202 | 26,008 | 31.5 % | ||||||||
Total operating costs and expenses |
| 321,279 |
| 234,215 | 32.1 % |
| 990,835 |
| 733,957 | 35.0 % | ||||
Income from operations | 73,645 | 62,302 | 18.2 % | 180,337 | 154,976 | 16.4 % | ||||||||
Interest income | 412 | 259 | 59.1 % | 779 | 699 | 11.4 % | ||||||||
Interest expense |
| (7,437) |
| (5,094) | 46.0 % |
| (23,361) |
| (15,436) | 51.3 % | ||||
Earnings before income taxes and cumulative | ||||||||||||||
effect of change in accounting principle | 66,620 | 57,467 | 15.9 % | 157,755 | 140,239 | 12.5 % | ||||||||
Income taxes |
| 25,979 |
| 22,239 | 16.8 % |
| 61,524 |
| 54,272 | 13.4 % | ||||
Earnings before cumulative effect of | ||||||||||||||
change in accounting principle | 40,641 | 35,228 | 15.4 % | 96,231 | 85,967 | 11.9 % | ||||||||
Cumulative effect of change in accounting | ||||||||||||||
principle, net of tax |
| - |
| - | - |
| - |
| 893 | (100.0)% | ||||
Net earnings | $ | 40,641 | $ | 35,228 | 15.4 % | $ | 96,231 | $ | 86,860 | 10.8 % | ||||
Basic earnings per share | ||||||||||||||
Before cumulative effect of change in | ||||||||||||||
accounting principle | $ | 0.82 | $ | 0.71 | 15.5 % | $ | 1.95 | $ | 1.72 | 13.4 % | ||||
Cumulative effect of change in | ||||||||||||||
accounting principle |
| - |
| - | - |
| - |
| 0.02 | (100.0)% | ||||
Net basic earnings per share | $ | 0.82 | $ | 0.71 | 15.5 % | $ | 1.95 | $ | 1.74 | 12.1 % | ||||
Basic average shares outstanding |
| 49,524 |
| 49,649 | (0.3)% |
| 49,361 |
| 49,943 | (1.2)% | ||||
Diluted earnings per share | ||||||||||||||
Before cumulative effect of change in | ||||||||||||||
accounting principle | $ | 0.80 | $ | 0.69 | 15.9 % | $ | 1.90 | $ | 1.67 | 13.8 % | ||||
Cumulative effect of change in | ||||||||||||||
accounting principle |
| - | - | - |
| - |
| 0.02 | (100.0)% | |||||
Net diluted earnings per share | $ | 0.80 | $ | 0.69 | 15.9 % | $ | 1.90 | $ | 1.69 | 12.4 % | ||||
Diluted average shares outstanding |
| 50,852 |
| 50,990 | (0.3)% |
| 50,747 |
| 51,441 | (1.3)% | ||||
Dividends paid per share | $ | 0.160 | $ | 0.140 |
| 14.3 % |
| $ | 0.440 | $ | 0.380 |
| 15.8 % | |
Meredith Corporation and Subsidiaries | ||||||||||||||
Segment Information - Unaudited | ||||||||||||||
| Three Months |
| Nine Months | |||||||||||
Percent | Percent | |||||||||||||
Period ended March 31, |
| 2006 |
| 2005 |
| Change |
|
| 2006 |
| 2005 |
| Change | |
(In thousands) | ||||||||||||||
Revenues | ||||||||||||||
Publishing | $ | 319,011 | $ | 235,730 | 35.3 % | $ | 938,954 | $ | 655,971 | 43.1 % | ||||
Broadcasting | ||||||||||||||
Non-political advertising | 72,200 | 68,216 | 5.8 % | 225,607 | 209,799 | 7.5 % | ||||||||
Political advertising | 664 | 104 | 538.5 % | 828 | 18,683 | (95.6)% | ||||||||
Other revenues | 3,049 | 1,467 | 107.8 % | 5,783 | 4,480 | 29.1 % | ||||||||
| Total broadcasting |
| 75,913 |
| 69,787 | 8.8 % |
| 232,218 |
| 232,962 | (0.3)% | ||||
Total revenues | $ | 394,924 | $ | 305,517 | 29.3 % | $ | 1,171,172 | $ | 888,933 | 31.8 % | ||||
Operating profit | ||||||||||||||
Publishing | $ | 61,366 | $ | 54,996 | 11.6 % | $ | 146,289 | $ | 117,636 | 24.4 % | ||||
Broadcasting | 20,073 | 16,220 | 23.8 % | 59,141 | 62,659 | (5.6)% | ||||||||
Unallocated corporate | (7,794) | (8,914) | (12.6)% | (25,093) | (25,319) | (0.9)% | ||||||||
Income from operations | $ | 73,645 | $ | 62,302 | 18.2 % | $ | 180,337 | $ | 154,976 | 16.4 % | ||||
Depreciation and amortization | ||||||||||||||
Publishing | $ | 4,637 | $ | 2,270 | 104.3 % | $ | 14,120 | $ | 7,031 | 100.8 % | ||||
Broadcasting | 6,036 | 5,886 | 2.5 % | 18,197 | 17,201 | 5.8 % | ||||||||
Unallocated corporate | 617 | 675 | (8.6)% | 1,885 | 1,776 | 6.1 % | ||||||||
Total depreciation and amortization | $ | 11,290 | $ | 8,831 | 27.8 % | $ | 34,202 | $ | 26,008 | 31.5 % | ||||
EBITDA | ||||||||||||||
Publishing | $ | 66,003 | $ | 57,266 | 15.3 % | $ | 160,409 | $ | 124,667 | 28.7 % | ||||
Broadcasting | 26,109 | 22,106 | 18.1 % | 77,338 | 79,860 | (3.2)% | ||||||||
Unallocated corporate | (7,177) | (8,239) | (12.9)% | (23,208) | (23,543) | (1.4)% | ||||||||
Total EBITDA | $ | 84,935 | $ | 71,133 |
| 19.4 % |
| $ | 214,539 | $ | 180,984 |
| 18.5 % | |
Meredith Corporation and Subsidiaries | ||||
Condensed Consolidated Balance Sheets | ||||
(Unaudited) | ||||
March 31, | June 30, | |||
(In thousands) |
| 2006 |
| 2005 |
Assets | ||||
Current assets | ||||
Cash and cash equivalents | $ | 15,544 | $ | 29,788 |
Accounts receivable, net | 233,371 | 176,669 | ||
Inventories | 59,342 | 41,562 | ||
Current portion of subscription acquisition costs | 85,080 | 27,777 | ||
Current portion of broadcast rights | 14,352 | 13,539 | ||
Other current assets | 13,540 | 15,160 | ||
Total current assets |
| 421,229 |
| 304,495 |
Property, plant and equipment, net | 420,263 | 398,882 | ||
Less accumulated depreciation |
| (225,775) |
| (205,926) |
Net property, plant and equipment | 194,488 | 192,956 | ||
Subscription acquisition costs | 73,108 | 24,722 | ||
Broadcast rights | 8,843 | 7,096 | ||
Other assets | 68,338 | 58,589 | ||
Intangibles, net | 809,675 | 707,068 | ||
Goodwill | 431,434 | 196,382 | ||
Total assets | $ | 2,007,115 | $ | 1,491,308 |
Liabilities and Shareholders' Equity | ||||
Current liabilities | ||||
Current portion of long-term debt | $ | - | $ | 125,000 |
Current portion of broadcast rights payable | 18,178 | 18,676 | ||
Accounts payable | 47,210 | 48,462 | ||
Accrued expenses and other liabilities | 125,432 | 119,526 | ||
Current portion of unearned subscription revenues |
| 209,524 |
| 127,416 |
Total current liabilities | 400,344 | 439,080 | ||
Long-term debt | 520,000 | 125,000 | ||
Long-term broadcast rights payable | 16,608 | 17,208 | ||
Unearned subscription revenues | 169,088 | 112,358 | ||
Deferred income taxes | 115,533 | 93,929 | ||
Other noncurrent liabilities | 47,687 | 51,906 | ||
Total liabilities |
| 1,269,260 |
| 839,481 |
Shareholders' equity | ||||
Common stock | 40,310 | 39,700 | ||
Class B stock | 9,429 | 9,596 | ||
Additional paid-in capital | 68,530 | 55,346 | ||
Retained earnings | 624,588 | 550,115 | ||
Accumulated other comprehensive loss | (1,025) | (1,025) | ||
Unearned compensation | (3,977) | (1,905) | ||
Total shareholders' equity |
| 737,855 |
| 651,827 |
Total liabilities and shareholders' equity | $ | 2,007,115 | $ | 1,491,308 |
|
| |||
Meredith Corporation and Subsidiaries | |||||||
Nine months ended March 31, |
| 2006 |
|
| 2005 | ||
(In thousands) |
| ||||||
Net cash provided by operating activities | $ | 116,545 |
| $ | 104,247 | ||
Cash flows from investing activities | |||||||
Acquisitions of businesses | (359,465) | (35,262) | |||||
Additions to property, plant and equipment | (20,829) | (17,408) | |||||
Proceeds from disposals of assets | 2,500 | 2,050 | |||||
Other |
| - |
|
| 3,205 | ||
Net cash used in investing activities |
| (377,794) |
|
| (47,415) | ||
Cash flows from financing activities | |||||||
Proceeds from issuance of long-term debt | 490,000 | 60,000 | |||||
Repayments of long-term debt | (220,000) | (90,000) | |||||
Excess tax benefits from share-based payments | 18,804 | 2,491 | |||||
Proceeds from common stock issued | 27,895 | 18,928 | |||||
Purchases of Company stock | (47,233) | (85,173) | |||||
Dividends paid | (21,758) | (18,931) | |||||
Other financing activities | (703) | (256) | |||||
Net cash provided by (used in) financing activities |
| 247,005 |
|
| (112,941) | ||
Net decrease in cash and cash equivalents | (14,244) | (56,109) | |||||
Cash and cash equivalents at beginning of period |
| 29,788 |
|
| 58,723 | ||
Cash and cash equivalents at end of period | $ | 15,544 |
| $ | 2,614 | ||
Meredith Corporation and Subsidiaries | |||||||||
Supplemental Disclosures Regarding Non-GAAP Financial Measures | Table 1 | ||||||||
Consolidated EBITDA, which is reconciled to net earnings in the following tables, is defined as earnings 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, 2006 | Nine months ended March 31, 2006 | |||||||
Unallocated | Unallocated | ||||||||
| Publishing | Broadcasting | Corporate | Total | Publishing | Broadcasting | Corporate | Total | |
(In thousands) | |||||||||
Revenues | $ 319,011 | $ 75,913 | $ - | $ 394,924 | $ 938,954 | $ 232,218 | $ - | $ 1,171,172 | |
Operating profit | $ 61,366 | $ 20,073 | $ (7,794) | $ 73,645 | $ 146,289 | $ 59,141 | $ (25,093) | $ 180,337 | |
Depreciation and amortization | 4,637 | 6,036 | 617 | 11,290 | 14,120 | 18,197 | 1,885 | 34,202 | |
EBITDA | $ 66,003 | $ 26,109 | $ (7,177) | 84,935 | $ 160,409 | $ 77,338 | $ (23,208) | 214,539 | |
Less: | |||||||||
Depreciation and amortization | (11,290) | (34,202) | |||||||
Net interest expense | (7,025) | (22,582) | |||||||
Income taxes | (25,979) | (61,524) | |||||||
Net earnings | $ 40,641 | $ 96,231 | |||||||
Segment EBITDA margin | 20.7% | 34.4% | 17.1% | 33.3% | |||||
Three months ended March 31, 2005 | Nine months ended March 31, 2005 | ||||||||
Unallocated | Unallocated | ||||||||
| Publishing | Broadcasting | Corporate | Total | Publishing | Broadcasting | Corporate | Total | |
(In thousands) | |||||||||
Revenues | $ 235,730 | $ 69,787 | $ - | $ 305,517 | $ 655,971 | $ 232,962 | $ - | $ 888,933 | |
Operating profit | $ 54,996 | $ 16,220 | $ (8,914) | $ 62,302 | $ 117,636 | $ 62,659 | $ (25,319) | $ 154,976 | |
Depreciation and amortization | 2,270 | 5,886 | 675 | 8,831 | 7,031 | 17,201 | 1,776 | 26,008 | |
EBITDA | $ 57,266 | $ 22,106 | $( 8,239) | 71,133 | $ 124,667 | $ 79,860 | $ (23,543) | 180,984 | |
Less: | |||||||||
Depreciation and amortization | (8,831) | (26,008) | |||||||
Net interest expense | (4,835) | (14,737) | |||||||
Income taxes | (22,239) | (54,272) | |||||||
Net earnings | $ 35,228 | $ 85,967 | |||||||
Segment EBITDA margin | 24.3% | 31.7% | 19.0% | 34.3% | |||||