Exhibit 99.1
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TEXT OF PRESENTATION AT MID-YEAR MEDIA REVIEW CONFERENCE ON JUNE 19, 2001.
The company's presentation is accessible to the public on the company's Web
site, meredith.com. It will remain there until August 1, 2001.
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Bill
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Good morning. Glad to be presenting at the Mid-Year Media Review today.
Thanks to Gracia Martore, Mary Wilson and the folks at Gannett for pulling the
conference together.
With me today are Steve Lacy, president of our Publishing Group; and Jerry
Kaplan, president of our Magazine Group; who will be presenting. Suku Radia,
our chief financial officer, is here to assist us during the Q&A session.
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By way of an agenda, here's what we plan to discuss today. We will cover three
items:
First, I'll provide a brief update on our tactical efforts to manage through
the current and continuing industry downturn in advertising. Secondly, I'd
like to give you an opportunity to hear from -- and start to get to know -- our
very strong new publishing team. Besides implementing short-term measures to
deal with the current advertising recession, I've asked them to focus their
efforts on ensuring we strengthen our already powerful competitive position for
the long run. Finally, we'll answer your questions about our business.
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Before I get started, however, our lawyers asked me to read this safe harbor
statement.
During today's presentation, we'll be discussing forward-looking information
that is subject to certain risks and uncertainties based on our current
knowledge and estimates of factors affecting the company's operations. Actual
results may differ materially from those currently anticipated. Factors which
could adversely affect future results include, but are not limited to, changes
in advertising and consumer demand, paper prices, postal rates and other
adverse economic conditions nationally, regionally or in specific local
markets. A complete description can be found on page 20 of our fiscal 2000
annual report.
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Let's begin with an update on the current state of our business.
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As you heard in yesterday's remarks by Robert Coen and others, both the
publishing and broadcasting industries continue to experience an advertising
slowdown. The same is true at Meredith, as we continue to see advertising
trends that are very consistent with what we reported in our most recent 10-Q
and our May 2 conference call.
In Publishing, our fourth fiscal quarter (second calendar quarter) comparable
ad pages and revenues are down in the mid-single digits, as previously
indicated.
On the Broadcasting front, our fourth quarter pacings remain down in the
high-single digits, the same as reported in our last 10-Q. That's an
improvement since our May 2 conference call, when we reported that they were
down in the low double-digits. Remember that pacings are a snapshot in time,
and they change frequently. You should also note that June pacings in general
are traditionally quite volatile.
As we indicated in our last earnings conference call, we've responded to the
downturn and are working hard to manage our costs across the board. We reduced
costs by 2 percent in our fiscal third quarter and the first nine months of the
fiscal year versus the prior-year periods. We achieved those overall cost
reductions despite higher paper prices, a January postal increase, continued
interactive media and circulation spending, and Broadcasting Group sales and
news initiatives.
With regard to staffing, we're more than 200 positions below our budget. In the
third quarter we reduced our actual headcount by 2 percent. On April 18 we
announced that we are offering a one-time, special voluntary early retirement
program that applied to 154 employees, to be completed this month as we
complete our fiscal fourth quarter.
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Looking at fiscal 2001, we believe that the First Call consensus of $1.53 per
share, excluding one-time and nonrecurring items, is achievable. This is
consistent with the guidance we've given several times since January.
As many of you know, we have announced several one-time items that will impact
the fourth fiscal quarter. We will experience a one-time gain, primarily from
the recent sale of Golf for Women magazine. We also will incur a one-time
charge for our staff reduction programs and write-offs of certain Internet
investments and broadcast film rights.
Looking at fiscal 2002, our current visibility is limited; however we want to
reiterate some factors that we think will affect our results:
1. First fiscal quarter advertising in publishing and broadcasting is trending
much like the previous two quarters, including the quarter we're in.
2. In fiscal 2001 our Broadcasting Group booked $14 million in net political
advertising that will be absent in fiscal 2002.
3. While we've done a good job managing our costs -- and will intensify these
efforts -- we are also concerned about rising external costs, including health
care, pension, and postal price increases.
Because of these factors, we're being cautious as we develop expectations about
our fiscal 2002 performance. We urge you to do the same. We'll provide more
information related to our outlook during our fourth quarter conference call in
August.
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While the bulk of today's meeting will focus on publishing initiatives, let me
say a few words about our broadcasting initiatives.
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We are very focused on increasing broadcasting revenues. Here's an update on
our progress.
Since we bought WGCL in Atlanta in 1999, we have invested heavily in news and
sales improvements. Third quarter revenue growth of 29 percent, decreased
dilution from the acquisition, and increasing market share are evidence that
those investments are beginning to pay off. While the fourth quarter is not
as dramatic, WGCL is still pacing up in a market that is pacing down. On
Monday, the Georgia Association of Broadcasters named it "television station of
the year."
Looking at our group as a whole, we recently completed sales audits at each of
our stations, and each market has a specific improvement plan tailored to its
needs. In addition, we have further increased our focus on generating new
local business, we're raising the bar related to our sales performance, and we
hired a new group sales manager to develop sales talent and make sure our sales
initiatives are effectively implemented across our group.
Finally, we now have 230 hours of locally produced news across our group each
week, up over 50 percent from two years ago. Our expansion investments in this
area are complete, and our expenses will become fully comparable in the fiscal
2002 third quarter.
We're already seeing the impact of these actions, as most of our stations
produced improved revenue share in the third fiscal quarter.
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While we all are understandably concerned about the current advertising
environment, I think it is critically important to be focused on where we will
be after the recession. Our cost programs are important, but long-term success
will come from our revenue initiatives.
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While we're here in New York today, we want to spend some time discussing the
changes taking place in our Publishing Group. We're pleased that a focused
management succession plan led to a smooth transition between editors at Better
Homes and Gardens magazine, which we announced recently. In fact, Steve and
Jerry will discuss staffing changes including three new editors and two new
sales executives. We're also pleased with the transition from retiring group
president Chris Little to the new Publishing Group management -- Steve Lacy and
Jerry Kaplan. Steve and Jerry -- who assumed their duties in November -- form
a dynamic management team. Steve brings a keen intellect, incredible drive and
a no-nonsense approach to getting things done. Many of you know him from his
days as CFO and as president of our Interactive and Integrated Marketing Group,
and I think you've probably developed a respect for his ability to quickly
learn and assimilate new situations. Jerry brings 27 years of magazine
experience -- primarily in sales -- along with a keen business sense related to
magazine publishing and a deep knowledge of the industry. They've already made
some significant changes to our Publishing Group strategy.
So with that introduction, I'll turn the program over to Publishing Group
President Steve Lacy, who will expand on the Publishing Group strategy, and
discuss our strategies to grow nonadvertising revenues and increase our
circulation contribution.
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Steve
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Thanks, Bill. Jerry and I plan to cover four broad areas today.
First, I'll discuss how we are building revenues in Books and Integrated
Marketing. I'll also focus on our strategies to increase our circulation
margin.
Jerry will then discuss the magazine advertising and editorial side of the
business. Our key strategy in this area relates to our strong home and family
positioning. As you will see throughout our discussion today, we are
reasserting our claim as the leader in the home and family market. We are the
clear leaders in this area of the business, and we're going to make sure the
industry -- and our advertisers -- know it.
I'd like to kick things off with a discussion of our efforts to grow revenues
in the Book and Integrated Marketing areas.
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For the first nine months of fiscal 2001, 55 percent of the Publishing Group
revenue came from nonadvertising sources. This is obviously an important fact
in light of the current weaker advertising market.
These revenues primarily result from our activities in Books, Integrated
Marketing and traditional circulation. I'll discuss each of these areas in my
comments that follow.
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We've made great progress in our book business since the early 1990s when the
book group was losing money. In the past three years, book revenues have risen
more than 50 percent and operating profit has more than doubled.
Book continues its strong performance, especially in the area of proprietary
books sold at Home Depot stores across the country.
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We have accomplished our growth in books by leveraging our home and family
expertise to extend our own brands. We also have shared that knowledge with
other companies, building brand extensions for them as well.
In fiscal 2001 we are introducing four new books for The Home Depot. That's in
addition to the six titles we've produced over the past five years. For good
customer Ortho, we have published 50 new or revamped titles since we took over
the business in 1997. We've recently added a partnership with Waverly, the
leading producer of decorator fabrics and wallcovering, and Stanley Works, the
nation's leading toolmaker.
We'll have complimentary copies of a number of our books for you outside the
room at the end of our presentation.
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Integrated Marketing is another significant source of revenue growth for the
Publishing Group. In fact, revenues from our top five relationships have grown
four-fold in the past three years.
Our strong growth in Integrated Marketing continues, with revenues up nearly 15
percent in the first three quarters of fiscal 2001, and operating profit up a
greater percentage than that. We continue to add new relationships with
leading companies, including Carnival Cruise Lines, Hershey's, and others.
We are also expanding many of our existing Integrated Marketing relationships,
such as United Healthcare, Nestle and Kodak. While these opportunities often
include some form of advertising in our magazines, they tend to evolve into
long-term strategic relationships.
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Another Publishing Group growth initiative relates to circulation. The
circulation contribution (or margin) from our magazines was up for the third
quarter. Let me speak for a moment about how we plan to continue that trend
into the future.
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We believe we can continue to grow our circulation margin by increasing our
efforts in three areas: Direct mail, newsstand sales and online subscriptions.
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We've increased the use of focus groups to help us create more effective direct
mail packages for magazines.
About a year ago, we conducted focus group research and then tested a new
direct mail package for MORE magazine. The package -- which you can see here
on the right side of this slide -- tested very well, so we used it in an actual
circulation mailing conducted in January of 2001. The response rate from the
January mailing was nearly double that of prior MORE magazine mailings. We are
continuing to refine this approach with the June mailing for MORE as well.
We also used the focus group approach for a new Better Homes and Gardens test
package. Our January 2001 test yielded nearly a 20 percent increase in
response rates. We will continue to refine the package with the June
circulation mailing, and we are expanding our use of these focus groups across
our magazine portfolio.
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We continue to deliver strong results on the newsstand.
While many in the industry are experiencing weak newsstand performance, our
revenues are growing at a strong rate. At the same time, we've been able to
increase the efficiency of our newsstand operation and reduce magazine
production.
Here are some important statistics:
According to Harrington Associates, newsstand revenues across the magazine
industry declined about 4 percent in calendar 2000. Conversely, comparable
newsstand sales for Meredith magazines grew in the high-single digit range in
calendar 2000. Also, our newsstand efficiency improved about two full
percentage points. These results are on top of extremely tough comparisons.
In calendar 1999, Meredith retail dollars were also up in the high-single
digits.
We've bucked the industry trend in part by placing checkout pockets in
nontraditional sources such as Home Depot Stores, and by increasing our
presence at book superstores like Barnes and Noble, along with large retailers
like Wal-Mart. Our magazine sales at Home Depot stores have increased over 60
percent since we added 40,000 additional check-out pockets last October.
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We have put a high priority on moving circulation to the Internet due to the
potential for reducing subscription acquisition costs. A strong Internet
presence -- along with major Internet alliances -- is critical in achieving our
online circulation goals.
Page views for all Meredith sites grew about 70 percent and unique visitors
grew about 150 percent for the fiscal 2001 third quarter versus a year ago.
The number of registered users on Meredith sites continues to grow. About 50
percent of our current registrants are not Meredith magazine subscribers,
illustrating the potential for new customer acquisition in this area.
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During our fiscal second quarter conference call we told you about our new
agreement with The Microsoft Network and a much expanded relationship with
America Online. Both relationships are now fully implemented. With regard to
The Microsoft Network, you can see our content and online subscription offers
by visiting www.homeadvisor.com. Turning to America Online, we now have more
anchor tenant positions on AOL, and our brands are also featured on CompuServe
and Netscape as well. AOL is showcasing our content on welcome screen
promotions, which drives subscription sales and additional traffic to our
sites.
To illustrate the importance of these relationships, consider this example: On
April 16, 2001, AOL ran a Ladies' Home Journal promotion called, "Best Cities
for Women" on the welcome screen. On the day, the promotion drove 8 times the
usual number of page views to the Ladies' Home Journal site.
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In the third quarter, our online magazine subscription orders grew more than
130 percent when compared to the prior-year period. We're on track to meet our
goal of generating 1.5 million gross magazine subscriptions from the Internet
by the end of fiscal 2003, including approximately 250,000 online subscriptions
this fiscal year.
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With that look at Book, Integrated Marketing and circulation initiatives, Jerry
Kaplan will discuss growth strategies to fuel advertising revenue in our
magazine group.
But first, I'd like to say a few words to introduce the portfolio and discuss
recent decisions Jerry and I made to strengthen it.
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One of the first things Jerry and I did when we assumed our new positions in
November was take an in-depth look at our magazine lineup. In essence, are we
getting the best return for our investments and, if not, how should we redirect
resources?
We considered our content creation areas of strength, the makeup of our
database, and our competitive position in the advertising marketplace. These
factors led us to make a series of decisions, including the recent decision to
sell Golf for Women magazine.
We also plan to add magazines that fit our current lineup. We're currently
testing Living Room on the newsstand. This is a decorating magazine focused on
young adults in their 20s and 30s -- an age group highly prized by advertisers,
but not well-served by magazines. We'll keep you apprised of its progress.
Of equal importance, we're investing in existing titles and areas that hold
greater potential, be it through frequency increases, rate base increases,
brand extensions, promotional campaigns, special events, sales incentives, etc.
Jerry's doing a great job spearheading these efforts. He'll now provide more
detail on specific actions we're taking to grow our advertising revenues.
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Jerry
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Thanks, Steve. We are investing in our existing magazines because we know they
are a good strategic fit for us, and they will be crucial to the growth of our
publishing business.
I'd like to walk you through the investments we're making and the actions we're
taking to strengthen our magazine business, beginning with our "home"
initiative.
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The purpose of this initiative is to establish a dominant position for Meredith
in the minds of our clients, and the major ad agencies. When they think about
home, we want them to think Meredith first. It is what we have always done
well -- and nobody in publishing does it better.
I'll start with a look at our advertising campaign which is currently running
in various trade publications. I'll then discuss our newly created sales
incentives, and our focus on the shelter category.
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As portrayed on this slide, we are reasserting our claim as the leader in the
home and family market. We are the clear leaders in this area, and we are
going to make sure the industry -- and our advertisers -- know it.
We are excited about the look and feel of the campaign. And we believe our
timing is perfect because it's hitting the market when others are pulling back
on advertising and brand promotion -- further increasing our visibility.
The print campaign is currently running in major trade publications. There are
also ads on telephone kiosks near key advertising agencies throughout New York
City. In fact, there's a kiosk two blocks away at 57th and 8th.
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Better Homes and Gardens magazine has a very strong revenue share position in
the Women's Service field at 27 percent. Alone, BH&G has a greater share than
Hearst's two-book combination of Good Housekeeping and Redbook. Better Homes
and Gardens and Ladies' Home Journal combined have 37 percent of the ad revenue
share in the field.
However, despite their strong positioning, share for our two books has
decreased slightly. This is unacceptable and we have undertaken specific
initiatives to build back that share.
So another aspect of the "home" initiative focuses on compensating our sales
force for increasing market share in the shelter field.
Specifically, we have added special sales incentives for all ad sellers. In
addition, we created a program for Better Homes and Gardens and Ladies' Home
Journal sales staffs related to increasing market share in the Women's Service
category. Based on the last closing, we're starting to see encouraging
results.
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The final piece of the "home" initiative involves focusing more on our strong
shelter-related publications. We've done a great job increasing our market
share in these areas. In fact, for calendar 2000, Meredith had the top share
of shelter advertising revenues among such companies as Gruner & Jahr,
Hachette, Hearst and Time Warner.
Despite this success, we believe there is even more room for ad revenue growth,
as well as the potential to tap into promotional budgets. This will be a key
focus for Meredith in the future.
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Beyond the groupwide "home" initiative, we have decided to invest in many of
our individual magazines.
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This slide outlines the specific titles in which we are making the most
significant investments. I will now provide more detail on the actions we're
taking to strengthen each of the magazines listed on this slide, beginning with
Better Homes and Gardens.
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Better Homes and Gardens will benefit from the "home" initiative I just
described.
In addition, as Bill mentioned, we named Karol DeWulf Nickell as
editor-in-chief of the magazine, replacing Jean LemMon.
Most recently, Karol had been the Editor-in-Chief of Traditional Home, where
she demonstrated a tremendous ability to create content that resonates well
with upscale consumers. She is a nationally known and respected magazine
editor, and her successful career spans many Meredith shelter publications,
making her the ideal candidate for this critical assignment. She will bring a
fresh approach to the position, which we believe will broaden the magazine's
appeal to the readers most coveted by advertisers.
We're following Karol's appointment with a major editorial research project to
guide the future development and expansion of the magazine.
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This is a time of exciting change for Ladies' Home Journal.
Dan Lagani began work as the magazine's publisher in January of this year. He
most recently was publisher of George magazine. However prior to that he was
the Eastern Advertising Manager and Group Advertising Manager at Meredith's
Better Homes and Gardens and Country Home magazines. He's an excellent
publisher who is already familiar with our markets.
Sarah Mahoney joined us in July of 2000 as the magazine's editor, reporting to
editor-in-chief Myrna Blyth. Sarah has experience editing such magazines as
Fitness, Parents, and SmartMoney.
This new team is already making important changes at the magazine. For example,
the November 2001 issue will celebrate "The Power of Women, a comprehensive
survey of female potential, influence and performance." It also marks the
launch of LHJ's new marketing platform which defines "The Power of Women" as
the essence of LHJ. New branded pages in upcoming issues will set Ladies' Home
Journal apart, and we are enhancing its editorial through more parenting
coverage, updated graphics and bolder photography.
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We will increase the frequency of Country Home to nine times a year in calendar
2002 and 10 times in 2003. That's up from the current eight times per year.
Its rate base will grow 10 percent to 1.1 million -- effective January 2002.
Its advertising performance is strong. Country Home's share of pages in its
field grew by nearly two points for the first nine months of fiscal 2001, while
its revenue share grew by more than three points.
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Traditional Home has also been extremely successful. For the first nine months
of fiscal 2001, its share increased by nearly a full point in both ad pages and
revenues.
We will publish the magazine eight times in calendar 2002, versus six times in
calendar 2001.
With Karol Nickell's move to Better Homes and Gardens, Mark Mayfield will join
us as editor-in-chief of Traditional Home. Mark comes from Southern Progress
Corporation, a subsidiary of AOL Time Warner. At Southern Progress, he was
editor of Southern Accents magazine for six years before being promoted to vice
president, editor and publisher of entree magazine earlier this year.
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MORE magazine, which was launched in 1998, is aimed at upscale women over 40.
In February, we raised its frequency to 10 times a year, up from six times per
year previously. We also raised its rate base to 600,000 in February, and
we're raising it to 650,000 this fall.
Response rates to our circulation mailings have met our expectations. Steve
already mentioned the success we've experienced this year.
Finally, its advertising pages and revenues grew significantly for fiscal 2001
versus the prior-year period.
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Our strong group of Special Interest Publications has continued its steady
growth rate. In fiscal 2001, we'll publish 46 titles and 120 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. And SIP newsstand sales continue to grow.
For calendar 2000, retail sales grew 15 percent over the prior-year period.
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 more upside there.
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, building-type products. We're
also increasing some frequencies and we are upgrading the cover stock and trim
sizes for many of our titles.
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Turning back to our Magazine Group actions, the final initiative I want to
discuss related to advertising revenue growth is the creation of Meredith
Corporate Solutions.
We recently formed this group from our existing group sales operation. It is
designed to use the full range of our company assets and resources, providing
clients with comprehensive advertising and marketing programs.
Meredith Corporate Solutions has reorganized our Detroit operation to place
more emphasis on this important market, primarily comprised of automotive
advertisers. Previously, this operation employed several advertising rep
firms, along with the Meredith sales staff. As a result of this
reorganization, we are increasing the staff and bringing all sales in-house for
improved control and focus on revenue growth.
Michael Brownstein, one of our leading sales executives, is managing this
group.
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A good illustration of the potential of Corporate Solutions is a recent program
we developed with Toyota and The Home Depot. Toyota wanted to gain visibility
for its Tundra pickup truck in the do-it-yourself market. So we used our
ongoing Home Depot relationship to develop a wide-ranging program to help them
do that. As a result, do-it-yourself tips from our Home Depot 1-2-3 books are
running opposite Toyota ads in many of our magazines.
The program also includes a sweepstakes promotion, a direct mail program, a
test drive program and Tundra displays at selected Home Depot stores. This
program has been a win for all involved. Look for similar programs as Michael
and his team continue their great work.
I'll now turn the program back to Bill for a discussion of Meredith's
strengths.
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Bill
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Thanks to Steve and Jerry for the great work they're doing. To wrap up the
publishing section, we think that our strategy of focusing on our core areas of
expertise will strengthen our group. Combined with the growth of
nonadvertising revenues and major cost cutting initiatives such as our online
subscription program, we're positioned well for future strong financial
performance.
Let me close by summarizing the strengths that will be instrumental in
achieving the growth objectives we're focusing on:
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. More than half of our publishing 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 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.
Thanks for listening today. We're hard at work implementing our strategies to
withstand the current downturn in advertising and to build long-term
shareholder value.
We'll be happy to answer your questions.
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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.
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