Meredith Delivers Record Fiscal 2011 Second Quarter Results

DES MOINES, Iowa, Jan. 25, 2011 /PRNewswire/ -- Meredith Corporation (NYSE: MDP), the leading media and marketing company serving American women, today reported fiscal 2011 second quarter earnings per share of $0.88, a record high for a second fiscal quarter. In the year-ago quarter, earnings per share were $0.42 ($0.49 before special items). Revenues rose 9 percent to $367 million.

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Fiscal 2011 second quarter performance was driven by revenue growth across all of Meredith's major businesses, combined with disciplined expense management. Highlights included:

• A 14 percent increase in total Company advertising revenues;
• Local Media Group advertising revenue growth of 30 percent, including $22 million in net political advertising;
• National Media Group advertising revenue growth of 5 percent, including more than 30 percent growth in online revenues across Meredith's national websites;
• Meredith Integrated Marketing revenue growth of 14 percent, led by expansion of digital and customer relationship management (CRM) services for national clients; and
• Brand Licensing revenue growth of more than 35 percent, driven by continued expansion of Better Homes and Gardens branded products at Walmart stores.

Fiscal 2011 second quarter operating expenses were down 1 percent from the year ago period (up 1 percent before special items), and operating margins grew to 19 percent. Over a two-year period, operating expenses have declined 9 percent (6 percent before special items).

Earnings per share for the first six months of fiscal 2011 were a record $1.45, up 77 percent from the year-ago period (75 percent before prior-year special items). Revenues were $711 million, a 6 percent increase. Advertising revenues increased 11 percent to $420 million. Meredith produced record fiscal first-half net political television advertising revenues of $34 million.

"We are extremely pleased to deliver record earnings per share performance for both the second quarter and the first half of fiscal 2011," said Meredith Chairman and Chief Executive Officer Stephen M. Lacy. "Our success was due to growth in our national and local businesses; continued expansion of newer revenue streams including Integrated Marketing and Brand Licensing; and careful control of our expenses. This diversified business strategy positions Meredith for continued long-term growth and to deliver increased shareholder value over time."

OPERATING DETAIL

LOCAL MEDIA GROUP

Fiscal 2011 second quarter Local Media Group operating profit was $39 million, resulting in a 46 percent EBITDA margin, and more than double the $17 million in operating profit reported in the year-ago quarter. Revenues rose nearly 30 percent to $97 million.

Net political advertising revenues were $22 million in the quarter, led by strong political spending, particularly at Meredith's Hartford, Las Vegas, Portland and Kansas City stations.  For the season, Meredith increased political advertising revenues nearly 50 percent from the last election cycle as efforts to increase market share – particularly for its Fox affiliates – yielded results.

Fiscal 2011 second quarter non-political advertising revenues were $69 million, up 3 percent from the year-ago quarter.  Nine of Meredith's 10 largest advertising categories grew revenues, led by automotive, professional services and retail.

Meredith television stations delivered strong ratings during the most recent November measurement period:

• Meredith's CBS affiliates in Hartford and Kansas City were No. 1, and Phoenix and Saginaw were No. 2, in sign-on to sign-off. Additionally, Atlanta finished No. 2 in the important late news time period.
• Meredith's NBC affiliate in Nashville was No. 2 in sign-on to sign-off.
• Meredith's Fox affiliate in Las Vegas was No. 1 in both morning and late news, while Portland was No. 1 in late news.

Fiscal 2011 second quarter revenues grew at Meredith Video Studios, due primarily to the Better daily syndicated television show and custom video production for corporate clients. The Better show increased its carriage to more than 80 markets reaching nearly 60 percent of U.S. television households. During the quarter, Better launched in Los Angeles – the nation's second-largest television market – and the show now airs in four of the five largest markets in the United States.

For the first six months of fiscal 2011, Local Media Group operating profit was $55 million, nearly triple the $19 million earned in the year-ago period.  Revenues were $173 million, up 27 percent from the year-ago period.

Early last week, Meredith announced it has entered into a Joint Services Agreement (JSA) with Turner Broadcasting System, Inc. in the fast-growing Atlanta market.  Specifically, Meredith-owned CBS Atlanta (WGCL-TV) will manage the day-to-day operations of Turner's Peachtree TV (WPCH-TV). The JSA – which covers functions such as advertising sales, marketing and promotions and technical operations – will take effect late in Meredith's third quarter of fiscal 2011.

"This strategic partnership provides us access to a larger share of the growing Atlanta advertising marketplace because of Peachtree's younger viewership; strong lineup of sports programming; and increased inventory in both access and prime-time dayparts," Lacy said. "Additionally, it raises our overall profile in Atlanta, the No. 8 television market in the country."

NATIONAL MEDIA GROUP

Fiscal 2011 second quarter National Media Group operating profit was $41 million, up 30 percent from $32 million in the year-ago quarter (up 11 percent from $37 million before special items).  Revenues were $269 million, up 3 percent.

Total advertising revenues were $123 million, up 5 percent from the year-ago period on higher net advertising revenue per magazine page. Growth was led by the prescription and non-prescription drug, household supplies, and media and entertainment categories.

Online advertising revenues increased more than 30 percent, driven by growth in the parenthood, retail and consumer packaged goods categories. This included multi-platform advertising programs for clients such as Kraft Foods Inc., Campbell Soup Co. and Wal-Mart Stores Inc., among others.

Circulation revenues declined 4 percent in the second quarter of fiscal 2011, as expected, due to previously announced magazine frequency changes including the repositioning of the Special Interest Media business.  Special Interest Media profit increased significantly in the quarter over the year-ago period as a result of the repositioning.

Meredith's connection to the consumer grew strongly during the second quarter of fiscal 2011.  For example:

• Meredith's measured magazines grew overall readership 2 percent from the year-ago period, according to Fall 2010 data from Mediamark Research and Intelligence.
• Monthly average unique visitors across Meredith's National Media websites were nearly 20 million and monthly page views averaged 300 million.  Meredith launched the Better Homes and Gardens' Celebrate the Holidays iPad app – and it was named to Apple's Hot Trends 2010 list.  The Company also completed its acquisition of Real Girls Media, which is expected to add more than 4 million monthly unique visitors to the Meredith Women's Network in the third fiscal quarter.
• Brand licensing revenues grew more than 35 percent, led by continued expansion of the Better Homes and Gardens-branded line of home products sold at Walmart stores.  The program includes approximately 2,500 SKUs, up from approximately 1,500 in the year-ago quarter.  Additionally, Better Homes and Gardens magazine launched in Russia under license during the quarter.

Meredith Integrated Marketing's fiscal 2011 second quarter operating profit increased more than 20 percent on revenue growth of 14 percent.  Results were driven in large part by expanded relationships with existing clients, including Chrysler Group LLC, Lowe's Cos., Chubb Group of Insurance Cos. and Mitsubishi Motors.  These gains reflect successful execution of Meredith Integrated Marketing's cross-platform approach that incorporates capabilities such as content development, CRM, digital, mobile and social marketing.

"Increasing non-advertising revenues is a strategic priority," Lacy said. "Given current program expansion commitments, along with a robust pipeline of RFPs for new business, we expect revenue growth at Meredith Integrated Marketing to continue in early calendar 2011."

For the first six months of fiscal 2011, National Media Group operating profit was $80 million, up 14 percent from the $70 million earned in the year-ago period (up 6 percent from $76 million before special items).  Revenues were $538 million compared to $533 million in the year-ago period.

OTHER FINANCIAL INFORMATION

During the first half of fiscal 2011, Meredith generated $85 million in cash flow from operations and reduced its total debt by $55 million to $245 million.  The weighted average interest rate on Meredith's debt was 5.0 percent, and its debt-to-EBITDA ratio was less than 1 to 1 at December 31, 2010.

Unallocated corporate expenses declined 12 percent in the second quarter and first half of fiscal 2011, due primarily to lower benefits expenses and consulting fees, partially offset by higher investment spending in Next Issue Media and related Tablet development.

All earnings per share figures in the text of this release are diluted.  Both basic and diluted earnings per share can be found in the attached condensed consolidated statements of earnings.  Information on the special items in the prior year periods is available in Tables 1 and 2 and Meredith's earnings release dated January 21, 2010.

OUTLOOK

Looking to the remainder of fiscal 2011, with limited visibility into customers' 2011 advertising and marketing budgets, Meredith continues to expect fiscal 2011 full year earnings per share to range from $2.60 to $2.80, which would represent a 15 to 25 percent increase over fiscal 2010.

For the third quarter of fiscal 2011:

• Meredith will be cycling against its strongest quarterly performance in the prior year for both National Media Group advertising and Local Media Group non-political advertising.
• National Media Group advertising remains volatile on an issue-to-issue basis across brands and categories.  After a mid-single-digit increase in the second quarter of fiscal 2011, with two of three magazine issues closed, third quarter advertising revenues are currently down in the mid-single digits, compared to the prior-year period.
• Local Media Group non-political advertising pacings are volatile on a week-to-week basis across markets and categories.  After a low-single-digit percent increase in the second quarter of fiscal 2011, with nine weeks remaining, third quarter pacings are currently up in the high-single digits, compared to the prior-year period.  
• As a result, Meredith currently expects fiscal 2011 third quarter earnings per share to range from $0.60 to $0.65.

A number of uncertainties remain that may affect Meredith's outlook as stated in this press release for the third fiscal quarter and full year of 2011. These uncertainties are referenced below under "Safe Harbor" and in certain of its SEC filings.

CONFERENCE CALL WEBCAST

Meredith will host a conference call on January 25, 2011 at 11:00 a.m. EST to discuss second quarter fiscal 2011 results.  A live webcast will be accessible to the public on the Company's website, www.meredith.com, and a replay will be available for one week.  A transcript will be available within 48 hours of the call at www.meredith.com.

RATIONALE FOR USE AND ACCESS TO NON-GAAP MEASURES

Management uses and presents GAAP and non-GAAP results to evaluate and communicate the performance of the Company. Non-GAAP measures should not be construed as alternatives to GAAP measures.  EBITDA is a common supplemental measure of performance used by investors and financial analysts.  Management believes that EBITDA provides an additional analytical tool to clarify the Company's results from core operations and delineate underlying trends.  Meredith does not use EBITDA as a measure of liquidity or funds available for management's discretionary use because it includes certain contractual and non-discretionary expenditures.

Results excluding the special items recorded in first half of fiscal 2010 are also supplemental non-GAAP financial measures.  Management believes these items are not reflective of Meredith's ongoing business activities.  While results excluding the special items are not a substitute for reported results under GAAP, management believes this information is useful as an aid in better understanding Meredith's current performance, performance trends and financial condition.  Reconciliations of non-GAAP to GAAP measures are included in the attached tables.  The attached condensed consolidated financial statements and reconciliation tables will be made available at www.meredith.com.

SAFE HARBOR

This release contains forward-looking statements that are subject to risks and uncertainties.  These statements are based on management's current knowledge and estimates of factors affecting the Company and its operations.  Statements in this announcement that are forward-looking include, but are not limited to, the statements regarding advertising revenues and investment spending, along with the Company's revenue and earnings per share outlook for the third fiscal quarter and full year fiscal 2011.

Actual results may differ materially from those currently anticipated.  Factors that could adversely affect future results include, but are not limited to, downturns in national and/or local economies; a softening of the domestic advertising market; world, national or local events that could disrupt broadcast television; increased consolidation among major advertisers or other events depressing the level of advertising spending; the unexpected loss or insolvency of one or more major clients; the integration of acquired businesses; changes in consumer reading, purchasing and/or television viewing patterns; increases in paper, postage, printing, syndicated programming or other costs; changes in television network affiliation agreements; technological developments affecting products or methods of distribution; changes in government regulations affecting the Company's industries; unexpected changes in interest rates; and the consequences of acquisitions and/or dispositions.  The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

ABOUT MEREDITH CORPORATION

Meredith Corporation (NYSE:MDP; www.meredith.com) is the leading media and marketing company serving American women.  Meredith features multiple well-known national brands – including Better Homes and Gardens, Parents, Family Circle, Ladies' Home Journal, Fitness, More and American Baby – along with local television brands in fast-growing markets.  Meredith is the industry leader in creating content in key consumer interest areas such as home, family, health and wellness and self-development.  Meredith uses multiple distribution platforms – including print, television, online, mobile and video – to give consumers content they desire and to deliver the messages of its marketing partners.  Additionally, Meredith uses its many assets to create powerful custom marketing solutions for many of the nation's top brands and companies.  Meredith has significantly added to its capabilities in this area through the acquisition of cutting-edge companies in areas such as digital, mobile, word-of-mouth, social and database marketing.

SOURCE Meredith Corporation

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