UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 1, 1997
Meredith Corporation
(Exact name of registrant as specified in its charter)
Iowa 1-5128 42-0410230
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1716 Locust Street, Des Moines, Iowa 50309-3023
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code 515 - 284-3000
- 1 -
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of businesses acquired.
(1) Audited financial statements as of December 31, 1996 and for the year
ended December 31, 1996.
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Balance Sheet
December 31, 1996
Assets
Current assets:
Cash and cash equivalents $ 299,887
Accounts receivable (net of allowance
for doubtful accounts of $207,336) 11,111,425
Program rights 5,734,600
Prepaid expenses 494,756
-----------
Total current assets $ 17,640,668
Property and equipment:
Land $ 774,755
Buildings and improvements 2,744,662
Transmitter, studio and production equipment 20,586,957
Furniture, fixtures and equipment 1,270,147
Vehicles 127,693
-----------
Total 25,504,214
Less, accumulated depreciation (5,710,015)
-----------
Total property and equipment 19,794,199
Intangible assets (net of amortization)
Licenses and other costs 63,359,760
Other assets:
Program rights $ 6,258,404
Other 4,806
-----------
Total other assets 6,263,210
------------
Total assets $107,057,837
============
The accompanying notes are an integral part of this statement.
- 2 -
Liabilities and Accumulated Earnings
Current liabilities:
Accounts payable $ 1,760,182
Accrued expenses 915,685
Program contracts payable 6,156,743
------------
Total current liabilities $ 8,832,610
Long-term liabilities:
Program contracts payable $ 7,896,514
Deposits 119,890
-----------
Total long-term liabilities 8,016,404
Commitments and contingencies
Due to home office 74,503,215
Accumulated earnings 15,705,608
------------
Total liabilities and accumulated earnings $107,057,837
============
The accompanying notes are an integral part of this statement.
- 3 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Statement of Income and Accumulated Earnings
For the year ended December 31, 1996
Broadcasting income:
Gross time sales, net of commissions
of $8,242,343 $36,809,352
Production and other 1,019,116
Trade and barter 4,429,643
-----------
Total broadcasting income $42,258,111
Broadcasting expenses:
Program rights amortization $ 7,652,025
Selling and promotion 6,193,953
Other direct operating 3,738,197
General and administrative 3,608,935
Trade and barter 4,386,372
Depreciation 3,867,277
Amortization of licenses and other costs 4,874,722
----------
Total broadcasting expenses 34,321,481
-----------
Income from operations 7,936,630
Other income (expense), net (31,795)
-----------
Net income 7,904,835
Accumulated earnings, beginning of year 7,800,773
-----------
Accumulated earnings, end of year $15,705,608
===========
The accompanying notes are an integral part of this statement.
- 4 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Statement of Cash Flows
For the year ended December 31, 1996
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income $ 7,904,835
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization $ 8,741,999
Amortization of program rights-non barter 7,652,025
Program payments (6,206,447)
Loss on disposition of property
and equipment 31,795
(Increase) in assets:
Accounts receivable, net (1,788,970)
Prepaid expenses (140,915)
Other assets (1,262)
Increase in liabilities:
Accounts payable 100,908
Accrued expenses 203,034
-----------
Total adjustments to net income 8,592,167
-----------
Net cash provided by operating activities 16,497,002
Cash flows from investing activities:
Purchase of property and equipment $(1,525,376)
Proceeds from disposition of property
and equipment 800
-----------
Net cash used in investing activities (1,524,576)
Cash flows from financing activities:
Cash transfers to home office, net (14,820,738)
-----------
Net increase in cash and cash equivalents 151,688
Cash and cash equivalents, beginning of year 148,199
-----------
Cash and cash equivalents, end of year $ 299,887
===========
Supplemental schedule of noncash investment and financing activities:
Obligations of $2,593,301 were incurred during the year ended
December 31, 1996 when the Stations purchased broadcast rights.
The accompanying notes are an integral part of this statement.
- 5 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
Note 1. Nature of operations and summary of significant accounting policies:
Nature of Operations
- --------------------
KPDX, KFXO and WHNS (the "Stations") are television stations owned and operated
by First Media Television, L.P. (the "Partnership"). Effective on January 1,
1995, the Partnership acquired KPDX, a television station licensed to
Vancouver, Washington, which serves the Portland, Oregon television market and
WHNS, a television station licensed to Asheville, North Carolina, which serves
the Greenville-Spartanburg, South Carolina/Asheville, North Carolina television
market. In October 1996, the Partnership signed on KFXO, a low power
television station, which serves the Bend, Oregon television market.
The Partnership also owns and operates WCPX, a television station licensed to
Orlando, Florida which serves the Orlando-Daytona Beach-Melbourne, Florida
television market. The Partnership's home office is located in Atlanta,
Georgia. Certain general and administrative costs incurred at the home office
have been allocated to the Stations and WCPX based on their proportionate share
of gross time sales.
These financial statements reflect the operations of KPDX, KFXO, and WHNS.
Accordingly, these financial statements do not reflect the entire operations of
First Media Television, L.P.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents consist of cash in the bank and all highly liquid
investments with a maturity of three months or less. Cash and cash equivalents
balances deposited with financial institutions at times exceeded the federally
insured limit of $100,000. Management does not believe this causes any
additional risk.
- 6 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
Property and Equipment
- ----------------------
Property and equipment are stated at the Partnership's cost. Depreciation is
calculated using the straight-line method over the estimated useful lives as
follows:
Buildings and improvements 15-39 years
Transmitter, studio and production equipment 5 years
Furniture, fixtures and equipment 5- 7 years
Vehicles 5 years
Income Taxes
- ------------
No federal or state income taxes are payable by the Partnership, therefore none
have been provided for in the accompanying financial statements. The partners
are to include their respective share of profits and losses in their individual
tax returns.
Program Rights
- --------------
Program rights consist principally of rights to broadcast film and syndicated
programs and are recorded as an asset together with the related liability when
licenses are executed and the program is available for showing. Program rights
are recorded at the Partnership's cost. Program rights acquired and related
obligations incurred under license agreements for programs not available for
broadcast at the balance sheet date are excluded from the financial statements.
Program rights expected to be amortized in the succeeding year and program
payments due within one year are classified as current assets and current
liabilities, respectively. Agreements define the life of the license and the
number of showings available. The asset is amortized over the period the
program is available for broadcast using an accelerated method.
- 7 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
Licenses and Other Costs
- ------------------------
Licenses and other costs consist of certain allocated costs the Partnership
incurred upon acquiring KPDX and WHNS. These costs were determined by an
independent appraisal and are being amortized over 15 years.
Trade and Barter Sales and Expense
- ----------------------------------
Trade and barter transactions are recorded at the fair market value of the
programming, merchandise or services received and are recorded as income at the
time of broadcast. Services, programming or merchandise received are recorded
as expense at the time of usage.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2. Related Party Transactions:
As mentioned previously, the Partnership owns and operates the Stations, which
are Fox network affiliates. The Partnership also owns and operates WCPX, a CBS
network affiliate. The Partnership's home office is located in Atlanta,
Georgia. Various Partnership expenses are paid for by the home office and then
are allocated to the Stations, WCPX and the home office, as appropriate.
Conversely, the Stations regularly transfer cash deposits to the home office.
At December 31, 1996, the intracompany balance owed to the home office was
$74,503,215.
- 8 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
These financial statements include general and administrative expenses
attributable to the home office, which have been allocated to the Stations,
based on their proportionate share of gross time sales. For the year ended
December 31, 1996, home office expenses, which are reflected in these financial
statements, total $877,517. The intracompany liability to the home office and
accumulated earnings reflected in these financial statements have also been
adjusted for general and administrative expenses attributable to the home
office for the year ended December 31, 1995, which total $757,101.
The December 31, 1996 intracompany liability due to the home office has been
increased by $1,634,618 and accumulated earnings has been decreased by the same
amount as a result of these allocations of home office expenses.
On January 20, 1995, the Partnership obtained a $107 million seven-year working
capital and term loan agreement. As of December 31, 1996, the Partnership has
drawn down $78.5 million of the loan, and has an additional $12.5 million
available and undrawn under the working capital agreement. The debt and
related interest expense are reflected in the financial statements of the
Partnership's home office and have not been allocated to the Stations or WCPX.
The loan is collateralized in part by the Stations' assets.
Note 3. Program Contracts Payable:
The Stations' program contracts payable as of December 31, 1996 are summarized
as follows:
Payments Total Unavailable Available
Due In Programming Programs Programs
-------- ----------- ----------- -----------
1997 $ 6,255,067 $ 98,324 $ 6,156,743
----------- ----------- -----------
1998 5,106,720 273,337 4,833,383
1999 3,055,087 255,391 2,799,696
2000 631,591 374,356 257,235
2001 213,580 207,380 6,200
2002 and beyond 234,710 234,710 --
----------- ----------- -----------
Total long-term 9,241,688 1,345,174 7,896,514
----------- ----------- -----------
Total $15,496,755 $ 1,443,498 $14,053,257
=========== =========== ===========
- 9 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
Note 4. Commitments:
Future minimum lease payments under noncancellable operating leases at December
31, 1996, are:
Year Ending
December 31, Amount
------------ ----------
1997 $ 338,578
1998 320,022
1999 290,853
2000 276,555
2001 253,769
2002 and beyond 506,472
----------
Total minimum lease payments $1,986,249
==========
These minimum lease payments have not been reduced by noncancellable future
lease rentals which totaled $1,550,795 at December 31, 1996.
The Stations lease space on their towers to other television and radio stations
and other companies. These leases are generally long-term leases that expire
in one to five years. Lease income from these leases was $342,485 for the year
ended December 31, 1996 and is recorded as Production and Other Income in the
Statement of Income and Accumulated Earnings.
Rent expense charged to operations was $323,187 for the year ended December 31,
1996.
- 10 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
Note 5. Employee Benefit Plans:
The Partnership has a defined contribution plan pursuant to Section 401(k) of
the Internal Revenue Code, whereby participants may contribute a percentage of
compensation up to the maximum allowed under the Code. Employees are eligible
to participate if they are full-time employees, age 21 or over, and have
completed one year of service with the Partnership. The plan provides for the
Partnership to contribute one-half of amounts contributed by employees up to 6%
of salary. The Stations' matching contributions charged to operations were
$91,481 for the year ended December 31, 1996.
Note 6. Contingencies:
FCC Licenses
- ------------
On September 12, 1994, Video Marketing Network, Inc. ("VMN"), licensee of
television station WASV-TV, Asheville, North Carolina, and Pappas Telecasting
Companies ("Pappas"), proposed assignee of WASV-TV, filed with the FCC a
Petition to Deny the application of WHNS License Partnership and Cannell
Communications, L.P. ("Cannell") for consent to assign the license of WHNS-TV,
Asheville, North Carolina, to WHNS License Partnership. Pappas' and VMN's
Petition to Deny alleged that Cannell had challenged WASV-TV's license, license
renewal and assignment applications for the purpose of delay and obstruction in
violation of the FCC's "strike petition" policy. WHNS License Partnership and
Cannell filed an Opposition to the Petition to Deny denying the allegations.
VMN and Pappas filed a reply pleading to which WHNS License Partnership and
Cannell filed a supplemental response. On December 30, 1994, the FCC issued a
letter decision granting the WHNS-TV assignment application and denying Pappas'
and VMN's Petition to Deny, finding that Cannell had not violated the FCC's
"strike petition" policy. The WHNS-TV assignment was consummated on January
20, 1995. On February 6, 1995, VMN and Pappas filed a Joint Petition for
Reconsideration of the FCC's letter decision. WHNS License Partnership and
First Media Television, L.P. filed an Opposition to Petition for
Reconsideration with the FCC on February 22, 1995, and VMN and Pappas filed a
Reply on March 6, 1995. The FCC has not acted on the Joint Petition for
Reconsideration and related pleadings. Management believes that this petition
is without merit.
- 11 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Notes to Financial Statements
December 31, 1996
Note 7. Disclosures Regarding the Fair Value of Financial Instruments:
Cash and Cash Equivalents
- -------------------------
The carrying amount approximates fair value because of the short maturity of
those instruments.
Other
- -----
The carrying amounts reported on the Balance Sheet at December 31, 1996, for
all other assets and liabilities (and all other liabilities not appearing on
the Balance Sheet) subject to SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments," approximate their respective fair values. Fair value
estimates are made at a specific point in time based on relevant market and
financial instrument information. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could significantly
affect these estimates.
Note 8. Subsequent Event:
On January 23, 1997, the Partnership entered into an agreement to sell
substantially all of its assets related to the Stations and WCPX for an
aggregate sale price of $435 million. The sale is expected to settle during
1997, subject to various conditions including an FCC approval.
- 12 -
Independent Auditors' Report
----------------------------
To the Partners of
First Media Television, L.P.
We have audited the accompanying balance sheet of KPDX, KFXO, and WHNS
(television stations owned and operated by First Media Television, L.P.) as of
December 31, 1996, and the related statements of income and accumulated
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KPDX, KFXO and WHNS as of
December 31, 1996, and the results of the Stations' operations and cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Matthews, Carter and Boyce
McLean, Virginia
February 14, 1997
- 13 -
(2) Unaudited financial statements as of March 31, 1997 and for the three
months ended March 31, 1997 and 1996.
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Balance Sheet (Unaudited)
March 31, 1997
($ in 000s)
Assets
Current assets:
Cash and cash equivalents $ 1,097
Accounts receivable, net 8,427
Program rights 6,258
Prepaid expenses 378
--------
Total current assets 16,160
--------
Property, plant and equipment
Land 775
Buildings and improvements 2,749
Transmitter, studio and production equipment 20,626
Furniture, fixtures and equipment 1,353
Vehicles 165
--------
Total 25,668
Less accumulated depreciation (6,701)
--------
Total property, plant and equipment 18,967
Intangible assets, net of amortization 61,637
Program rights 8,911
Other assets 5
--------
Total assets $105,680
========
- 14 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Balance Sheet (Unaudited)
March 31, 1997
($ in 000s)
Liabilities and Accumulated Earnings
Current liabilities:
Accounts payable $ 1,282
Accrued expenses 670
Program contracts payable 6,614
--------
Total current liabilities 8,566
Program contracts payable 10,398
Deposits 153
Due to home office 69,466
Accumulated earnings 17,097
--------
Total liabilities and accumulated earnings $105,680
========
- 15 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Statements of Income and Accumulated Earnings (Unaudited)
For the three months ended March 31, 1997 and 1996
($ in 000s)
Three Months Ended
March 31
1997 1996
------- -------
Broadcasting revenues:
Gross time sales, net of commissions $ 8,656 $ 7,259
Production and other 204 427
Trade and barter 884 1,220
------- -------
Total revenues 9,744 8,906
------- -------
Broadcasting expenses:
Program rights amortization 1,599 2,010
Selling and promotion 1,645 1,522
Other direct operating 1,013 833
General and administration 1,091 814
Trade and barter 786 1,126
Depreciation 999 934
Amortization 1,209 1,209
------- -------
Total expenses 8,342 8,448
------- -------
Income from operations 1,402 458
Other (expense), net (10) (1)
------- -------
Net income 1,392 457
Accumulated earnings, beginning of year 15,705 7,801
------- -------
Accumulated earnings, end of period $17,097 $ 8,258
======= =======
- 16 -
KPDX, KFXO and WHNS
(Television Stations Owned and Operated
by First Media Television, L.P.)
Statements of Cash Flows (Unaudited)
For the three months ended March 31, 1997 and 1996
($ in 000s)
Three Months Ended
March 31
1997 1996
------- -------
Cash flows from operating activities
Net income $ 1,392 $ 457
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 2,207 2,144
Amortization of program rights - non barter 1,599 2,010
Program payments (1,816) (1,566)
Decrease in assets
Accounts receivable 2,684 2,426
Prepaid expenses 117 49
(Decrease) in liabilities
Accounts payable (478) (303)
Accrued expenses (213) (12)
------- -------
Total adjustments to net income 4,100 4,748
------- -------
Net cash provided by operating activities 5,492 5,205
Cash flows from investing activities
Purchase of property and equipment (189) (196)
Cash flows from financing activities
Cash transfers to home office (4,506) (4,431)
------- -------
Net increase in cash and cash equivalents 797 578
Cash and cash equivalents, beginning of period 300 148
------- -------
Cash and cash equivalents, end of period $ 1,097 $ 726
======= =======
- 17 -
(b) Pro forma financial information.
(1) Description of transaction, entities involved and periods for which the
pro forma financial information is presented.
On July 1, 1997, Meredith Corporation (the company) purchased the assets of
KPDX(TV), a television station serving the Portland, OR market, WHNS(TV), a
television station serving the Greenville, SC/Spartansburg, SC/Asheville, NC
market and KFXO-LP, a television station serving the Bend, OR market (the three
stations) from First Media Television, L.P. The purchased assets of the three
stations included their respective FCC authorizations, FOX television network
affiliations contracts and all real and personal property used in operating the
three television stations. The purchase price for the three stations was $216
million which the Company believed approximated the fair value of the total
assets acquired based on then current market conditions. The acquisition was
financed by cash from short-term investments and a revolving credit facility
from a group of banks led by Wachovia Bank, N.A. as agent.
The unaudited pro forma financial information is presented for the following
periods:
Combined Statements of Earnings: for the twelve months ended June 30, 1996
and for the nine months ended March 31,
1997
Combined Balance Sheet: as of March 31, 1997
The unaudited pro forma Combined Statements of Earnings for both periods
present the pro forma results of operations for the company and its
subsidiaries as if the company purchased the assets of the three stations at
the beginning of the respective period stated. (On July 1, 1995, for the
twelve months ended June 30, 1996, and on July 1, 1996, for the nine months
ended March 31, 1997.) The unaudited pro forma Combined Balance Sheet as of
March 31, 1997, presents the pro forma financial position of the company and
its subsidiaries assuming that the assets of the three stations were purchased
on March 31, 1997.
Pro forma Combined Statement of Earnings (Unaudited)
Meredith Corporation and Subsidiaries and
KPDX, WHNS and KFXO television stations
For the twelve months ended June 30, 1996
The following pro forma condensed statement of earnings combines the audited
consolidated statement of earnings for the twelve months ended June 30, 1996,
of Meredith Corporation and subsidiaries and the unaudited statement of
- 18 -
earnings for the twelve months ended June 30,1996, for the three stations. The
income statement for the three stations was derived by using the December 31,
1995, audited financial statements, for First Media Television, L.P. after
adjusting for WCPX-TV, which was not acquired by the company with the three
stations in this transaction, adding results of the three stations for the six
months ended June 30, 1996, and subtracting their results for the six months
ended June 30, 1995. The pro forma combination has been accounted for as a
purchase. The statement of earnings should be read with the accompanying
notes.
(in 000s, except per share)
(Unaudited)
Meredith Three
Corporation Stations
12 Months 12 Months
Ended Ended (Unaudited) (Unaudited)
June 30, June 30, Pro Forma Pro Forma
1996 1996 Adjustments Combined
----------- ---------- ----------- ----------
Revenues $867,137 $39,675 $ $906,812
-------- ------- --------
Production, distribution
and editorial 366,408 18,384 384,792
Selling, general and
administrative 378,094 8,985 (837)a 386,242
Depreciation and
amortization 25,130 10,012 (10,012)b 32,601
7,471 c
-------- ------- --------
Total operating costs 769,632 37,381 803,635
-------- ------- --------
Income from operations 97,505 2,294 103,177
Gain on dispositions 5,898 5,898
Interest income 2,183 0 (633)d 1,550
Interest expense (5,530) 0 (12,284)e (17,814)
-------- ------- --------
Income from continuing
operations before taxes 100,056 2,294 92,811
Income taxes (45,399) 2,898 f (42,501)
-------- ------- --------
Earnings from continuing
operations $ 54,657 $ 2,294 $ 50,310
======== ======= ========
Earnings per share from
continuing operations $0.97 $0.89
======== ========
Average shares outstanding 56,345 56,345
======== ========
- 19 -
Notes to Pro Forma Combined Statement of Earnings for the year ended June 30,
1996 (Unaudited)
a) to eliminate a management fee under previous ownership.
b) to eliminate the depreciation of fixed assets and amortization of
intangibles under previous ownership.
c) to record depreciation of $1,624,000 and amortization of $5,847,000 based on
an independent appraisal of fixed assets and intangibles for the first 12
months of ownership.
d) to eliminate interest income of $633,000 earned on cash investments by
Meredith Corporation. The average interest rate earned on cash investments
for the year was 5.35 percent.
e) to record interest expense of $12,284,000 based on average outstanding
borrowings of $204.2 million at an average annual interest rate of 6.0
percent and deferred loan fee amortization of $33,000.
f) to record the tax effect of the three stations' earnings and pro forma
adjustments at the statutory rate of 40%.
Pro forma Combined Statement of Earnings (Unaudited)
Meredith Corporation and Subsidiaries and
KPDX, WHNS and KFXO television stations
For the nine months ended March 31, 1997
The following pro forma condensed statement of earnings combines the unaudited
consolidated statement of earnings for the nine months ended March 31, 1997, of
Meredith Corporation and subsidiaries and the unaudited statement of earnings
for the nine months ended March 31, 1997, for the three stations. The income
statement for the three stations were derived by using the December 31, 1996,
audited financial statements for the three stations, adding results of the
three stations for the three months ended March 31, 1997, and subtracting their
results for the six months ended June 30, 1996. The pro forma combination has
been accounted for as a purchase. The statement of earnings should be read
with the accompanying notes.
- 20 -
(in 000s, except per share)
(Unaudited) (Unaudited)
Meredith Three
Corporation Stations
9 Months 9 Months
Ended Ended (Unaudited) (Unaudited)
March 31, March 31, Pro Forma Pro Forma
1997 1997 Adjustments Combined
----------- ---------- ----------- ----------
Revenues $631,987 $32,564 $ $664,551
-------- ------- --------
Production, distribution
and editorial 258,221 11,250 - 269,471
Selling, general and
administrative 273,899 7,805 (678)a 281,026
Depreciation and
amortization 17,259 6,663 (6,663)b 22,863
5,604 c
-------- ------- --------
Total operating costs 549,379 25,718 573,360
-------- ------- --------
Income from operations 82,608 6,846 91,191
Interest income 3,120 -- (2,517)d 603
Interest expense (1,134) -- (7,294)e (8,428)
-------- ------- --------
Income from continuing
operations before taxes 84,594 6,846 83,366
Income taxes (36,629) -- 491 f (36,138)
-------- ------- --------
Earnings from continuing
operations $ 47,965 $ 6,846 $ 47,228
======== ======= ========
Earnings per share from
continuing operations $0.86 $0.85
======== ========
Average shares outstanding 55,605 55,605
======== ========
- 21 -
Notes to Pro Forma Combined Statement of Earnings for the nine months ended
March 31, 1997 (Unaudited)
a) to eliminate a management fee under previous ownership.
b) to eliminate the depreciation of fixed assets and amortization of
intangibles under prior ownership.
c) to record depreciation of $1,218,000 and amortization of $4,386,000 based on
an independent appraisal of fixed assets and intangibles for the first 9
months of ownership.
d) to eliminate interest income of $2,517,000 earned on cash investments by
Meredith Corporation. The average interest rate earned on cash investments
for the year was 4.75 percent.
e) to record interest expense of $7,294,000 based on average outstanding
borrowings of $168.5 million at an average annual interest rate of 6.0
percent, deferred loan fee amortization of $25,000 and net of $312,000 of
capitalized interest.
f) to record the tax effect of the three stations' earnings and pro forma
adjustments at the statutory rate of 40%.
Pro forma Combined Balance Sheet (Unaudited)
Meredith Corporation and Subsidiaries and
KPDX, WHNS and KFXO television stations
March 31, 1997
The following pro forma condensed balance sheet combines the unaudited
consolidated balance sheet of Meredith Corporation and subsidiaries as of March
31, 1997, and the unaudited balance sheet for the three stations as of March
31, 1997. The pro forma combination has been accounted for as a purchase. The
balance sheet should be read with the accompanying notes.
(in 000s)
(Unaudited) (Unaudited)
Meredith Three
Corporation Stations (Unaudited) (Unaudited)
March 31, March 31, Pro Forma Pro Forma
Assets 1997 1997 Adjustments Combined
- ------ ----------- ---------- ----------- ----------
Cash and cash equivalents $ 53,422 $ 1,097 $ (1,097)a $ 12,729
(40,528)c
(165)d
Marketable securities 50,472 -- (50,472)c --
Net receivables 96,432 8,427 (8,427)a 96,432
Inventories 25,970 -- 25,970
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Supplies and prepayments 9,062 378 (378)a 8,762
(300)e
Film rental costs 10,690 6,258 (6,258)a 17,210
6,520 b
Deferred income taxes 14,790 -- 14,790
Subscription acquisition costs 56,920 -- 56,920
-------- -------- --------
Total current assets 317,758 16,160 232,813
Property, plant and equipment 194,612 25,668 (25,668)a 210,352
15,740 b
Less accumulated depreciation(110,904) (6,701) 6,701 a (110,904)
-------- -------- --------
Net property, plant and
equipment 83,708 18,967 99,448
Subscription costs 40,924 -- 40,924
Film rental costs 6,887 8,911 (8,911)a 16,262
9,375 b
Other assets 21,205 5 (5)a 21,370
165 d
Goodwill and other
intangibles 274,462 61,637 (61,637)a 476,849
202,087 b
300 e
-------- -------- --------
Total assets $744,944 $105,680 $887,666
======== ======== ========
Current portion of
long-term debt $ -- $ -- $ 25,000 c $ 25,000
Current portion of film
rental contracts 13,277 6,614 (6,614)a 20,137
6,860 b
Accounts payable 29,760 1,282 (1,282)a 29,760
Accrued taxes and expenses 78,698 670 (670)a 78,698
Unearned subscription revenue 153,287 -- 153,287
-------- -------- --------
Total current liabilities 275,022 8,566 306,882
Long-term debt -- -- 100,000 c 100,000
Long-term film contracts 7,835 10,398 (10,398)a 18,697
10,862 b
Unearned subscription revenue 94,666 -- 94,666
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Deferred income taxes 25,433 -- 25,433
Other deferred items 23,915 153 (153)a 23,915
-------- -------- --------
Total liabilities 426,871 19,117 569,593
-------- -------- --------
Common stock 40,906 -- 40,906
Class B stock 12,671 -- 12,671
Retained earnings 267,379 -- 267,379
Unearned compensation (2,883) -- (2,883)
-------- -------- --------
Total stockholders' equity 318,073 -- 318,073
-------- -------- --------
Partners' equity
Due to home office -- 69,466 (69,466)a --
Accumulated earnings -- 17,097 (17,097)a --
-------- -------- --------
Total partners' equity -- 86,563 --
-------- -------- --------
Total liabilities and equity $744,944 $105,680 $887,666
======== ======== ========
Notes to Pro Forma Combined Balance Sheet as of March 31, 1997 (Unaudited)
a) to eliminate all assets and liabilities of the three stations as recorded on
the previous owner's financial records.
b) to record the appraisal value of all net assets acquired by Meredith
Corporation (fixed assets - $15,740,000, film contracts of $15,895,000, film
liabilities of $17,722,000, and intangibles of $202,087,000).
c) to record cash used from cash and cash equivalents of $40,528,000 and
marketable securities of $50,472,000; and to record long-term debt totaling
$125,000,000 in conjunction with the station purchase.
d) to record the deferred finance charge of $165,000 related to the loan
agreement for debt incurred to purchase the three stations.
e) to reclassify $300,000 in prepaid acquisition costs related to purchase of
the three stations.
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Item 7 (c) Exhibits
(2) Asset Purchase Agreement by and between First Media Television,
L.P., as seller and Meredith Corporation, as buyer dated as of
January 23, 1997. (Incorporated herein by reference to Exhibit 2
to the company's Form 10-Q for the period ended March 31, 1997.)
(2a) Letter agreement dated June 2, 1997, from First Media Television,
L.P. to Meredith Corporation, amending (2) above. (Incorporated
herein by reference to Exhibit 2a to the company's Form 8-K dated
July 1, 1997.)
(4) Credit Agreement dated as of July 1, 1997, among Meredith
Corporation and a group of banks with Wachovia Bank, N.A., as
agent. (Incorporated herein by reference to Exhibit 4 to the
company's Form 8-K dated July 1, 1997.)
(23) Consent of Independent Certified Public Accountants
(99) Press release dated July 1, 1997, issued by Meredith Corporation.
(Incorporated by reference to the company's Form 8-K dated July 1,
1997.)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEREDITH CORPORATION
Registrant
(Larry D. Hartsook)
Larry D. Hartsook
Vice President - Finance
(Principal Financial and
Accounting Officer)
Date: September 11, 1997
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Exhibit Index
Exhibit #
---------
( 2) Asset Purchase Agreement by and between First Media
Television, L.P., as seller and Meredith
Corporation, as buyer dated as of January 23, 1997.
(Incorporated herein by reference to Exhibit 2
to the company's Form 10-Q for the period ended
March 31, 1997.)
(2a) Letter agreement dated June 2, 1997, from First
Media Television, L.P. to Meredith Corporation,
amending (2) above. (Incorporated herein by
reference to Exhibit 2a to the company's Form 8-K
dated July 1, 1997.)
( 4) Credit Agreement dated as of July 1, 1997, among
Meredith Corporation and a group of banks with
Wachovia Bank, N.A., as agent. (Incorporated herein
by reference to Exhibit 4 to the company's Form 8-K
dated July 1, 1997.)
(23) Consent of Independent Certified Public Accountants
(99) Press release dated July 1, 1997, issued by Meredith
Corporation. (Incorporated by reference to the
company's Form 8-K dated July 1, 1997.)
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