Exhibit 99.1
------------
TEXT OF PRESENTATION AT BEAR STEARNS MEDIA AND ENTERTAINMENT CONFERENCE ON
MARCH 5, 2001.
A live Webcast of the conference is accessible to the public on the company's
Web site, meredith.com. The Webcast will remain there through the end of March
2001.
{graphic omitted}
Bill Kerr
- ---------
Good afternoon. I want to thank Kevin Gruneich for inviting us to present
today.
With me are Suku Radia, our chief financial officer; Steve Lacy, president of
our Publishing Group; and Dirck Steimel, assistant manager of investor
communication.
Today, we're going to focus on our growth catalysts and our company strengths.
We believe this will give you a better understanding of our business as opposed
to simply providing you with a description of our company. Those of you less
familiar with Meredith may want to pick up one of our investor packets, where
you'll find more information about us.
{graphic omitted}
We're currently focused on two major issues as a company. First, we must
effectively manage through the current advertising environment. Second, we're
committed to delivering strong growth over time in both of our core businesses.
During our January 31st earnings call we provided a detailed discussion of the
current advertising downturn that is affecting us and other media companies --
something you are undoubtedly talking about at this conference. We also
outlined the steps we are taking in terms of both revenue generation and cost
control. Suku will update you on these issues during his comments.
I know many of you are concerned about the current advertising environment, and
I understand that concern. I've been in this business for almost 30 years.
I've seen advertising downturns before, and I've managed through them. While
we are focused on the short-term challenges in this advertising environment, we
cannot lose sight of the long term. I have confidence in the strengths of
Meredith, which provide the foundation for our long-term success.
- 1 -
{graphic omitted}
While Suku will review these in more detail, I'd like to enumerate some of
these strengths as we get underway.
1. We have a history of strong financial performance and our management team
is committed to building shareholder value.
2. We have very strong brands and we know how to develop and profit from them.
The Better Homes and Gardens brand in particular is unique in publishing in
terms of its depth and breadth.
3. Close to half of our revenue comes from nonadvertising sources -- with our
integrated marketing, book, and newsstand efforts producing particularly strong
results. This is very helpful in advertising downturns.
4. Our 60 million name database is the largest domestic database in the media
industry. A source of strength to our own publishing efforts, we are
increasingly using it to benefit our marketing partners.
5. Our Broadcasting Group -- while clearly underperforming -- has an enviable
set of growth markets and significant upside potential.
6. We have a solid balance sheet.
7. And our share repurchase program contributes meaningfully to shareholder
value.
- 2 -
{graphic omitted}
Our focus is to convert those strengths into catalysts for long-term growth.
When Suku and Steve talk to you they will touch on these areas.
First, we believe that there is great opportunity for margin growth in our
Broadcasting Group as we implement our improvement initiatives.
In publishing, we believe there is opportunity for growth at our existing
magazines, especially Better Homes and Gardens, Traditional Home, Country Home,
MORE, and our Special Interest Publications.
And we will continue to grow our significant sources of nonadvertising
revenues. Specific areas of emphasis include Integrated Marketing, books, and
circulation.
We will further enhance the functionality of our database, not only using it
for our own circulation and magazine launch programs, but also putting it to
work for integrated marketing customers. Finally, we have set a goal of
generating 1.5 million subscriptions online over the next three years, which
will result in significant cost savings over time. We have made good progress
toward this goal.
Suku and Steve will discuss these areas in greater detail.
Before we get further into the presentation, let me address one item.
On January 31 Franklin Mutual filed a 13d calling on us to take certain steps
they believe will increase shareholder value. While we take the views of our
shareholders seriously, like most companies it is our stated corporate policy
not to comment on rumors or speculation concerning mergers, acquisitions,
dispositions or changes in our corporate structure. We will adhere to that
policy today -- both in our formal comments and in the Q&A session.
{graphic omitted}
With that introduction, I'll turn the program over to Suku and Steve to provide
you with a business update and a closer look at the strengths and growth
catalysts I just mentioned.
- 3 -
{graphic omitted}
Suku Radia
- ----------
Thanks, Bill. On our January 31 call, we told you that third quarter
comparable advertising pages and revenues were down in the low-to-mid-single
digits for our Publishing Group. That information has not changed since our
call.
We also said that third fiscal quarter broadcasting pacings were down in the
low-double digits. As of Friday, third quarter broadcasting pacings had
improved and are now down in the high-single digits. Let me remind you that
pacings are a snapshot in time and they change continuously.
We are continuing our cost containment efforts. In anticipation of an
advertising slowdown, in the first half of fiscal 2001 we reduced costs by 8
percent versus our budget, and by 2 percent, or approximately $8 million,
compared to the prior-year period.
Turning to earnings per share for the third quarter and the rest of the fiscal
year, we want to repeat the guidance we provided on January 31. Assuming the
advertising trends I mentioned earlier continue through the fiscal year, our
full-year earnings per share could be approximately 5 to 10 percent below the
previous year's earnings of $1.71, excluding nonrecurring items.
Because of the timing of our augmented interactive and circulation investments,
we expect the impact to earnings of these investments to be greater in the
third quarter than the fourth.
We announced since our last conference call that we have made some business
realignments with an eye toward controlling costs and not pursuing businesses
that don't fit with our long-term strategies. We want to funnel our resources
into the properties with the best growth potential. As a result, we have
decided not to produce new episodes of the Better Homes and Gardens television
show, we did not renew our agreement with Sears for the production of Mature
Outlook magazine, and we are transitioning Family Money into a newsstand-only
special interest publication.
These moves do not have a material impact on the company's financial results.
- 4 -
{graphic omitted}
With that business update, I'd like to spend a moment focusing on the strengths
outlined by Bill in more detail.
{graphic omitted}
First, we have a focused commitment to strong financial performance, as
reflected here.
At the same time, we are prepared to make investments that ensure the long-term
vitality of our company.
Investments in circulation, interactive media and integrated marketing, along
with a weak advertising environment, will adversely affect our EPS growth
pattern in fiscal 2001.
{graphic omitted}
We think investing to keep our brands strong is an absolute necessity,
especially in a period of slower economic growth.
Our strong brands give us an edge in a more competitive media landscape.
Well-known magazines such as Better Homes and Gardens and Ladies' Home Journal
are major contributors to our revenues and operating profit. In fact, for
every dollar of revenue produced by Better Homes and Gardens magazine, another
90 cents is generated by products and services formed under its umbrella.
Country Home and Traditional Home magazines, originally created under the
Better Homes and Gardens brand, have developed loyal followings. These two
magazines are recognized for their lifestyle content. We are encouraged by
their financial performance.
These are just a few examples of the many strong brands we own.
- 5 -
{graphic omitted}
A large proportion of our income is made up of nonadvertising revenue sources,
including integrated marketing, books, and circulation. For the first six
months of fiscal 2001, 56 percent of our publishing revenues and 41 percent of
total revenues came from nonadvertising sources. This is obviously an important
fact in light of the current weak advertising market.
{graphic omitted}
Our 60-million name database is one of our greatest strengths. We use it
primarily for targeting circulation mailings and launching new magazines.
Increasingly, we are using it to meet the marketing needs of our customers.
We're also in the process of unlocking the potential of our database for
broader marketing services.
For example, we are enhancing our technology infrastructure in order to have
real-time access to customer data from our Web sites. This allows us to more
effectively market our products and services to consumers when they're most
interested in receiving them. This includes improving our marketing campaign
management process, so that e-mail messages to our customers are targeted
automatically based on their interests.
{graphic omitted}
Moving on to additional Meredith strengths, this slide reflects our debt-to-
ebitda ratio in comparison to our peers. At about 2-to-1, we believe that we
have a strong balance sheet with an appropriate level of debt. Our debt at the
end of fiscal 2000 was $505 million, and it is currently approximately $500
million. Our fiscal 20000 EBITDA was $236.8 million.
- 6 -
{graphic omitted}
Our stock repurchase program is an important way to enhance shareholder value.
We repurchased 1.7 million shares in fiscal 2000 versus 1.1 million in fiscal
1999 and 900,000 in fiscal 1998. For the first half of fiscal 2001, we
repurchased 677,000 shares versus 405,000 shares in the same period last year.
Our board recently authorized an additional 2 million shares for repurchase,
giving us a total authorization of 3 million shares. We will continue to buy
back shares as appropriate and as market conditions allow.
{graphic omitted}
At this time we'll examine each of our growth catalysts in more depth,
beginning with our Broadcasting Group.
{graphic omitted}
While we have not yet realized the true potential of our strong broadcasting
assets, we are encouraged about the long-term health of this group, and we
believe it offers wonderful improvement potential. Our television stations are
located in many of the country's top growth markets, including Portland, Las
Vegas, Phoenix, Nashville, Atlanta and Orlando.
As we implement our broadcasting improvement initiatives, we believe stronger
performance combined with our outstanding markets provides tremendous
opportunity for shareholders.
Let's take a look at our broadcasting improvement initiatives.
- 7 -
{graphic omitted}
First, we have been working to improve our selling efforts. We have increased
our sales staff by 22 percent over the last 18 months, primarily to find new
advertisers in each of our markets. In addition, we began a major initiative
last fall to examine sales structures at our stations, looking to optimize
selling practices across the group. We are focusing on inventory and pricing
strategies, account list management, and performance standards. As part of
this we will be hiring a group sales manager whose assignment will be to help
us create a world-class sales organization. Part of that will involve
structuring uniform systems and best practices across our group.
Our news expansions are complete. We now have 230 hours of locally produced
news across our group each week, up over 50 percent from two years ago. We
have branding and promotion efforts underway at our stations to increase
viewership of our local news. We believe this will result in improved ratings
- -- and thus revenues -- over time.
Cost containment efforts continue to be a priority for our group.
We're encouraged by our third quarter results at our newest television station,
WGCL in Atlanta. Atlanta is pacing up very strongly for our fiscal third
quarter, and is currently our top-performing station in terms of revenue growth
for the quarter. Our improvement plan for that station continues to focus on
improving our newscasts and other programming, along with reducing costs in
areas other than sales and news. In addition, we now have a solid sales team
in place at the station, a significant improvement since we completed the
acquisition in March 1999.
{graphic omitted}
With that look at our broadcasting improvement plan, I'm going to turn the
program over to Steve for a review of our publishing growth catalysts.
- 8 -
{graphic omitted}
Steve Lacy
- ----------
Thanks, Suku. It's a pleasure to be here today. Let me take a moment to
outline the areas of publishing that we think will generate the most
significant growth as we move forward:
1. We are implementing several groupwide initiatives, which I'll discuss in a
moment;
2. We are enhancing Better Homes and Gardens magazine;
3. We are harnessing the tremendous growth potential of our mid-sized titles,
especially Traditional Home and Country Home;
4. We are continuing to develop MORE magazine, which is a very hot property in
the industry and for our magazine group;
5. We are benefiting from a number of improvements to our newsstand-only
special interest publications;
6. And we are growing our nonadvertising revenues, which, as Bill and Suku
mentioned earlier, are more than 50% of the revenue of the group.
Let's take a look at each of these areas.
- 9 -
{graphic omitted}
We're taking specific actions that should boost revenue generation across our
Publishing Group.
First, we have established an aggressive sales incentive program to reward each
seller, manager and support person for achievement of pre-established sales
improvement objectives.
We believe that the ideal time to enhance our visibility in the market place is
during a period of slower advertising, when others are pulling back.
Therefore, we are launching a trade advertising campaign this spring, along
with a program to step up the pace of face-to-face customer contacts across the
group.
We are implementing a "home" initiative to focus on capturing additional
advertising revenues in furnishings and building, home improvement, and
remodeling categories.
Finally, in January we announced the creation of an enhanced group sales
function, known as Meredith Corporate Solutions. It's designed to use the full
range of Meredith's assets, along with those of our strategic partners, to
provide clients with more comprehensive advertising and marketing programs.
This effort involves deploying all of our assets, as well as the assets of our
strategic partners, to implement programs that meet client needs.
{graphic omitted}
Turning to Better Homes and Gardens magazine, it has a very strong share
position in the Women's Service field at 28 percent. Better Homes and Gardens
alone has a greater share than Hearst's two-book combination of Good
Housekeeping and Redbook. And as many of you know, Better Homes and Gardens
reaches 35 million readers each month.
This core franchise is critical to our company performance and we intend to
make sure it continues its strong record, especially in this difficult economic
period. I believe Better Homes' strong brand identification and its market
share leadership position -- along with the groupwide initiatives I just
mentioned -- will be critical in this process.
- 10 -
{graphic omitted}
Our mid-sized magazines, particularly Traditional Home and Country Home, are
performing very well, as indicated by their advertising sales achievements.
For our fiscal second quarter, ad pages and revenues for our mid-sized group of
magazines grew in the mid-single digit range.
Both titles are very strong from a circulation perspective. They have high
renewal rates, and good response rates from a very large direct-mail universe.
In fact, Cappell's Circulation Report just recognized Traditional Home as a
"Best of the Best of the Decade" recipient. This means that in the last
decade, Traditional Home as a brand has been able to increase its cover price,
increase units sold and improve its newsstand sell-through rate at the same
time. Cappell's calls this the circulation triple play -- it's the most
difficult thing to accomplish in the newsstand business.
Due to this circulation strength, we are increasing the frequency of
Traditional Home to 8 times in calendar 2002. We increased the frequency of
Country Home two years ago from six to eight times, and now we are increasing
the frequency to 10 times effective in the fall of 2002 and we are increasing
its rate base as well.
Both magazines have impressive market shares. Traditional Home revenue share
increased 1.6 percent for the last six months of calendar 2000, and Country
Home's revenue share increased 2 percentage points for the same period against
their principal competitors.
{graphic omitted}
We continue to be pleased with the performance of MORE magazine.
We are increasing its frequency to 10 times annually and its rate base to
600,000 beginning in February. In addition, we're planning to increase its
rate base again next fall.
Response rates to our mailings so far are in line with our expectations. The
first large direct mail group expired with the August issue, and we're
encouraged by the renewal rate.
According to the Audit Bureau of Circulation's latest FAS-FAX report, MORE
magazine was the total circulation gain leader among women's fashion magazines
for the second half of calendar 2000. Its circulation was up 16.5 percent for
the period versus the prior year.
With regard to advertising sales, on a "comparable basis", when adjusted for
the change in frequency, MORE advertising revenues increased 36 percent
comparing the fiscal 2001 second quarter to the prior year.
- 11 -
{graphic omitted}
Our strong group of Special Interest Publications has continued its steady
growth rate. In fiscal 2001, we'll publish 46 titles and 102 issues.
These Special Interest Publications are exceptionally strong sellers on
the newsstand. From 1992 through 1999, Meredith SIP newsstand revenues grew by
nearly 75 percent -- more than twice the growth rate of the entire newsstand
category for the same time period. In fact, among standard size magazines, our
group of special interest publications is outsold on the newsstand only by
People and Cosmopolitan magazines. Fiscal year-to-date results indicate that
the SIP newsstand sales continued to increase.
We've been successful at increasing cover prices while maintaining sell-through
levels. For example, newsstand cover prices for our "Beautiful" and "Simply
Perfect" series are now at $5.99. We think there is further opportunity in
this area.
Finally, we're making many of our SIPs more attractive to advertisers. We
expanded our "Beautiful" series to include Beautiful Kitchens and Beautiful
Baths. This series lends itself well to luxury advertisers. We increased the
frequencies of Kitchen and Bath Ideas, Home Plan Ideas and Decorating to
bi-monthly from quarterly, and we are upgrading the cover stock and trim sizes
for many of our titles.
- 12 -
{graphic omitted}
I mentioned nonadvertising revenue growth as a major company strength. Now
let's take a moment to look at our largest sources of nonadvertising revenues:
Meredith Integrated Marketing, our book business, and circulation.
{graphic omitted}
Our Integrated Marketing business continues to grow, with second quarter
revenues up in the mid-single digits with profits up considerably more. We
have recently entered into a relationship with Sub-Zero, the manufacturer of
premium refrigerators and other appliances, to produce a high-end kitchen
design book to be sold at Sub-Zero dealers and leading bookstores. We also
have several other new relationships with leading companies, including La-Z-Boy
Furniture Galleries, Hershey's, The Home Service Store and Carnival Cruise
Lines. We continue to build on our broad existing relationships, including The
Home Depot, Kraft, Nestle, United Healthcare and Iams.
While these relationships often include some form of advertising in Meredith
magazines, they have grown well beyond advertising to in-depth strategic
relationships with our clients. The growth has been impressive, and revenue
for our top five relationships has increased four-fold in the past three years.
PAGE>
- 13 -
{graphic omitted}
Our book business is another significant source of strength in nonadvertising
revenues. We've made great progress in this area since the early 1990s when
the book group was losing money for the company taken as a whole. In the past
three years, book revenues have risen more than 50 percent and operating profit
has more than doubled. We now have more than 300 books in print and
distribution.
It continues its strong performance, with double-digit revenue and operating
profit growth during the fiscal 2001 second quarter.
{graphic omitted}
We have accomplished our growth in books by leveraging our expertise in the
home and family category and by partnering with leading companies such as The
Home Depot and Ortho. In fiscal 2001 we are introducing four new books for The
Home Depot, in addition to the six titles we have produced over the past five
years on behalf of The Home Depot. For Ortho, we have published 50 new or
revamped titles since we took over the business in 1997. We've recently added
partnerships with Waverly, the leading producer of decorator fabrics and
wallcovers, and Stanley Works, the nation's leading toolmaker.
Pictured here are some of our newer book titles. We continue to emphasize
decorating and brand extensions. Last year, two of our more successful titles
were Better Homes and Gardens Real Life Decorating, and Traditional Home
Signature Style. This year, we're introducing a cornerstone decorating title
from Country Home called New Country Style.
In addition, cooking remains a solid and core category for the book operation.
BH&G's New Grilling Book was a winner in fiscal 2000, and we continue to
introduce new titles such as BH&G's Simple Secrets.
- 14 -
{graphic omitted}
Turning to circulation and newsstand, many publishers have been hurt by recent
negative newsstand trends. In contrast, for Meredith, the newsstand has been a
real source of growth. Our newsstand dollar sales grew 65 percent from 1992 to
1999 versus industry growth of 30 percent for the same period. Our crafts
group was especially strong during that timeframe, with dollar sales up seven-
fold. We're adding 42,000 additional check-out pockets at The Home Depot and
thousands of other high-visibility pockets at Wal-Mart and Barnes and Noble
stores across the country. This brings our total number of checkout pockets to
more than 600,000, which bodes well for newsstand sales growth.
While there has been tremendous consolidation in newsstand distribution and
servicing, this area of the magazine industry continues to operate
inefficiently. We have placed increased emphasis on achieving higher
sell-through and less waste. In fact, in the first six months of our current
fiscal year versus the same period last year, we decreased production of
newsstand copies by a little over 1 percent, increased unit sales by 8 percent
and increased dollar sales by 9 percent versus the same period a year ago.
As we've been emphasizing in earlier discussions, we are focused on generating
significantly more subscriptions online. This is a very important effort
because the financial payoff potential is so high. Let's take a look at this
initiative in more detail.
- 15 -
{graphic omitted}
Traffic across our Web properties is critical in achieving our online
circulation and revenue goals, and it continues to climb on our publishing
sites. This grid shows results for the first six months of fiscal 2001
compared to the prior year. As you can see, page views increased 40 percent to
129.3 million, and unique visitors increased 92 percent to 2.3 million.
In recent rankings by Media Metrix, PC Data and Nielsen/Net Ratings, BHG.com
was ranked in the top ten of all magazine web sites, and it was the top women's
magazine site in all three rankings.
We also recently surpassed the 1 million mark in user registrations.
Also significant, but not highlighted on this slide, is the fact that we have
moved more than 11 percent of our customer service transactions to the Web.
This has important cost-reduction opportunities.
{graphic omitted}
Using this traffic growth, we have challenged ourselves to generate 1.5 million
subscriptions from the Internet over the next three years, including the
current year. That breaks down to approximately 250,000 subscriptions in the
current year, 500,000 subscriptions in the second year and 750,000
subscriptions in the third year. We're on track at this time to meet that
goal.
In the second quarter, our online subscriptions more than tripled when compared
to the prior-year period. In the first six months of fiscal 2001, we generated
as many subscriptions online as we did in all of fiscal 2000.
- 16 -
{graphic omitted}
In January, we announced a new multi-year agreement to provide interactive
content to the Microsoft Network's HomeAdvisor.com. Under the agreement,
interactive content from BHG.com will appear on HomeAdvisor.com, and will be
made available to more than 56 million users per month. Additionally,
HomeAdvisor will provide millions of impressions and links to our
subscription-selling site. We believe these links will help us generate
thousands of online magazine subscriptions per year.
We also recently signed a new, expanded agreement with America Online. The
new agreement will enhance our initiative to generate more magazine
subscriptions via the Internet by featuring Better Homes and Gardens and other
magazine titles on the Shop@AOL online destinations, providing consumers with
one-click access to purchasing our subscriptions online.
{graphic omitted}
We're very enthusiastic about the future of our Publishing Group. We have
strong, well-respected brands, growing nonadvertising revenues, an opportunity
for significant cost reduction through the generation of online subscriptions,
and the industry's largest and most comprehensive database. We're capitalizing
on those strengths as we implement our publishing growth initiatives.
Bill will now wrap things up and then we'll answer your questions.
- 17 -
{graphic omitted}
Bill Kerr
- ---------
Thanks, Steve and Suku. To summarize our presentation today, I think you
should remember four key points:
First, we are taking the necessary steps to effectively manage through the
current advertising downturn.
Second, we are very much on track with the EPS guidance we gave on January 31.
Your third takeaway should be the fact that we have many strengths that will be
beneficial as we grow our company.
Finally, we have a number of catalysts that will drive the growth of our
business.
We'll be happy to take your questions at this time.
- 18 -
INFORMATION RELATING TO
FORWARD-LOOKING STATEMENTS
This presentation and management's public commentary contain 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. 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; increased consolidation among major advertisers or other
events depressing the level of advertising spending; the unexpected loss of one
or more major clients; changes in consumer reading, purchase, order 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 such as the Internet or e-commerce; changes in
government regulations affecting the company's industries; unexpected changes
in interest rates; and any acquisitions and/or dispositions.
- 19 -