Meredith's Fiscal 2006 Earnings Per Share Increase 14 Percent28 July 2006
Meredith Corporation (NYSE: MDP) today reported that fiscal 2006 earnings per share rose 14 percent to $2.86. Income from operations grew 17 percent to $267 million and earnings before interest, taxes, depreciation and amortization (EBITDA) rose 19 percent to $312 million.
Revenues rose 31 percent to $1.6 billion in fiscal 2006 and advertising revenues increased 29 percent to $952 million. On a comparable basis (excluding Parents, Family Circle, Fitness, Child and Ser Padres magazines, which were acquired on July 1, 2005), Meredith's revenues grew 5 percent to $1.3 billion and advertising revenues rose 4 percent to $764 million.
For the fourth quarter of fiscal 2006, earnings per share increased 17 percent to $0.97. Income from operations grew 18 percent to $86 million and EBITDA rose 19 percent to $98 million. Revenues increased 28 percent to $426 million. On a comparable basis, revenues rose 4 percent to $345 million and advertising revenues grew 4 percent to $210 million.
"Fiscal 2006 was another strong year for Meredith," stated Meredith Chief Executive Officer Steve Lacy. "We increased our media footprint substantially and continued to execute our growth strategies." Fiscal 2006 highlights included:
-- The successful integration of the magazines acquired from Gruner +
Jahr. The addition of these titles significantly increased Meredith's
reach to younger and more diverse women. Additionally, their financial
performance was ahead of original expectations.
-- Outstanding performance by the Meredith Broadcasting Group in a
non-political year. Meredith Broadcasting replaced $19 million in
political advertising, grew revenues and increased EBITDA margin. This
performance was primarily due to strong gains in local advertising.
-- Continued growth in Meredith's diversified Publishing businesses,
including expansion of its Internet activities and custom marketing
capabilities. Interactive media and integrated marketing delivered
strong revenue and profit gains.
"These achievements produced earnings per share growth of 14 percent, which is an outstanding accomplishment for a non-political year," said Lacy.
OPERATING HIGHLIGHTS
Publishing
For fiscal 2006, Meredith Publishing operating profit increased 22 percent to $213 million, revenues grew 41 percent to $1.3 billion, and advertising revenues rose 49 percent to $641 million. On a comparable basis, publishing operating profit grew 5 percent and revenues increased 6 percent.
For the fourth quarter, Publishing operating profit grew 18 percent to $67 million. Revenues rose 34 percent to $340 million and advertising revenues increased 40 percent. On a comparable basis, publishing operating profit was down slightly and revenues increased 2 percent.
For fiscal 2006 and the fourth quarter, Publishing benefited from the inclusion of the acquired magazines and produced strong revenue and profit growth in its interactive media and integrated marketing operations. Publishing's results were impacted by lower than anticipated results in the Company's retail-based businesses and higher paper prices and postal rates.
"While we continue to encounter quarterly advertising volatility, we grew annual comparable Publishing advertising revenues in the mid-single digits, which is consistent with our average growth in the last four fiscal years," said Lacy. Publishing advertising revenues grew 5 percent on a comparable basis in fiscal 2006.
"Additionally, we gained market share and outperformed the industry," said Lacy. Meredith's advertising pages grew 2 percent on a comparable basis, while the industry was up slightly for the 12 months ended with the June 2006 issues, according to Publishers Information Bureau.
Broadcasting
For fiscal 2006, Broadcasting operating profit and EBITDA increased 2 percent to $88 and $112 million, respectively. EBITDA margin improved to 35.3 percent from 35.2 percent. Revenues increased 2 percent to $319 million as Meredith Broadcasting successfully replaced $19 million in net political advertising revenues.
For the fourth quarter, Broadcasting operating profit increased 21 percent to $29 million and EBITDA grew 17 percent to $35 million. EBITDA margin increased nearly 3 percentage points to 40.5 percent, representing the first non-political quarter in which the EBITDA margin exceeded 40 percent since the second quarter of fiscal 2000. Total revenues grew 9 percent to $87 million, including 8 percent growth in local non-political advertising and $3 million in net political advertising.
"Fiscal 2006 results were driven by strong growth in Meredith Broadcasting's core operations," said Lacy. "Local revenues grew 6 percent, including a 9 percent gain in local non-political advertising, while national non-political revenues increased 2 percent."
Meredith Broadcasting continued its news ratings improvement in the May 2006 rating book. Four of the Company's late newscasts were the market leader in terms of household ratings:
-- In Phoenix, Meredith's CBS affiliate finished number 1 in the market
for the first time ever.
-- In Portland, the Company's FOX affiliate's 10 p.m. news had a higher
rating than any other late newscast in the market.
-- In Hartford, Meredith's powerhouse CBS station continued its
long-standing market leadership.
-- In Kansas City, Meredith's CBS station was number 1 for the 9th sweeps
period in a row.
OTHER FINANCIAL INFORMATION
Meredith repurchased more than 2 million shares in the fourth quarter and nearly 3 million shares in fiscal 2006 as part of its ongoing share repurchase program. In fiscal 2005, Meredith repurchased slightly less than 2 million shares.
Net interest expense increased to $29 million in fiscal 2006 from $19 million in the prior year, primarily reflecting a higher average debt balance. Total debt was $565 million at June 30, 2006 versus $250 million at June 30, 2005 primarily due to the magazine acquisition. The weighted average interest rate was 5.2 percent on June 30, 2006 compared with 6.5 percent on June 30, 2005. Capital expenditures were $29 million in fiscal 2006.
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 Consolidated Statements of Earnings. All references to fiscal 2005 earnings per share are before the cumulative benefit of a change in accounting principle related to option expensing.
OUTLOOK
There are a number of uncertainties that may affect the Company's fiscal 2007 results. These include, but are not limited to, the volatility of overall advertising, and in particular, political advertising at the Company's television stations; the performance of the Company's retail-based businesses, primarily its special interest publications and books; paper prices; postal rates and the other matters referenced below under "Safe Harbor" and in certain of the Company's SEC filings.
For the first quarter of fiscal 2007, publishing advertising revenues are currently up slightly. Broadcasting pacings are currently running up in the mid-single digits. Political advertising generally books late. The Company currently expects to grow earnings per share 15 to 20 percent from the $0.52 per share earned in the first quarter of fiscal 2006.
For all of fiscal 2007, the Company currently expects to grow earnings per share 12 to 15 percent from the $2.86 earned in fiscal 2006.
CONFERENCE CALL WEBCAST
Meredith will host a conference call on July 26, 2006 at 11:00 a.m. EDT (10:00 a.m. CDT) to discuss results for fiscal 2006 and the fourth quarter. A live webcast will be accessible to the public on the Company's website http://www.meredith.com .
RATIONALE FOR USE AND ACCESS TO NON-GAAP MEASURES
Non-GAAP measures such as EBITDA should be construed not as alternative measures to the Company's net earnings and income from operations as defined under GAAP, but as supplemental information.
Management uses and presents GAAP and non-GAAP results to evaluate and communicate the performance of the Company. Because of EBITDA's focus on results from operations before depreciation and amortization, management believes that EBITDA provides an additional analytical tool to clarify the Company's results from core operations and delineate underlying trends. EBITDA is a common supplemental measure of performance used by investors and financial analysts. Meredith does not use EBITDA as a measure of liquidity, nor is EBITDA necessarily indicative of funds available for management's discretionary use.
Reconciliations of GAAP to non-GAAP measures are included in Table 1. The attached financial statements and reconciliation tables will be made available on the Company's web site. Interested parties should go to http://www.meredith.com/investors/index.html and click on "GAAP-Non-GAAP Reconciliation" in the navigation bar on the left side of the page.
SAFE HARBOR
This release contains certain forward-looking statements that are subject to risks and uncertainties. These statements are based on management's current knowledge and estimates of factors affecting the Company's operations. Statements in this announcement that are forward-looking include, but are not limited to, the statements regarding broadcast pacings, publishing advertising revenues, along with the Company's earnings per share outlook for the first quarter of fiscal 2007, as well as Meredith's earnings per share outlook for all of fiscal 2007.
Actual results may differ materially from those currently anticipated. Factors that could adversely affect future results include, but are not limited to, downturns in national and/or local economies; a softening of the domestic advertising market; world, national, or local events that could disrupt broadcast television; increased consolidation among major advertisers or other events depressing the level of advertising spending; the unexpected loss of one or more major clients; the integration of the newly acquired businesses; changes in consumer reading, purchase, and/or television viewing patterns; unanticipated increases in paper, postage, printing or syndicated programming costs; changes in television network affiliation agreements; technological developments affecting products or methods of distribution; changes in government regulations affecting the Company's industries; unexpected changes in interest rates; and any acquisitions and/or dispositions. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
ABOUT MEREDITH CORPORATION
Meredith ( http://www.meredith.com ) is one of the nation's leading media and marketing companies with businesses centering on magazine and book publishing, television broadcasting, integrated marketing and interactive media. The Meredith Publishing Group features 25 subscription magazines -- including Better Homes and Gardens, Ladies' Home Journal, Family Circle, Parents, American Baby, Fitness, and Child -- and approximately 200 special interest publications. Meredith owns 14 television stations, including properties in top-25 markets Atlanta, Phoenix and Portland.
Meredith has approximately 350 books in print and has established marketing relationships with some of America's leading companies including The Home Depot, DIRECTV, DaimlerChrysler, Wal-Mart and Carnival Cruise Lines. Meredith's consumer database, which contains approximately 85 million names, is one of the largest domestic databases among media companies and enables magazine and television advertisers to target marketing campaigns precisely. Additionally, Meredith has an extensive Internet presence that includes 32 web sites and strategic alliances with leading Internet destinations. Meredith Hispanic Ventures publishes five Spanish-language titles, making Meredith the leading publisher serving Hispanic women in the United States.
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings - Unaudited
Three Months Twelve Months
Period Ended Percent Percent
June 30, 2006 2005 Change 2006 2005 Change
(In thousands
except per
share data)
Revenues
Advertising $259,176 $201,792 28.4 % $952,390 $737,752 29.1 %
Circulation 91,133 64,588 41.1 % 369,601 243,637 51.7 %
All other 76,083 65,976 15.3 % 275,573 239,900 14.9 %
Total revenues 426,392 332,356 28.3 % 1,597,564 1,221,289 30.8 %
Operating costs
and expenses
Production,
distribution
and editorial 171,487 135,353 26.7 % 670,549 524,628 27.8 %
Selling, general
and
administrative 157,171 114,628 37.1 % 614,742 433,302 41.9 %
Depreciation and
amortization 11,480 9,297 23.5 % 45,682 35,305 29.4 %
Total operating
costs and
expenses 340,138 259,278 31.2 % 1,330,973 993,235 34.0 %
Income from
operations 86,254 73,078 18.0 % 266,591 228,054 16.9 %
Interest income 208 104 100.0 % 987 803 22.9 %
Interest expense (6,853) (4,369) 56.9 % (30,214) (19,805) 52.6 %
Earnings before
income taxes
and cumulative
effect of change
in accounting
principle 79,609 68,813 15.7 % 237,364 209,052 13.5 %
Income taxes 31,048 26,631 16.6 % 92,572 80,903 14.4 %
Earnings before
cumulative effect
of change in
accounting
principle 48,561 42,182 15.1 % 144,792 128,149 13.0 %
Cumulative effect
of change in
accounting
principle, net
of taxes - - - - 893 (100.0)%
Net earnings $48,561 $42,182 15.1 % $144,792 $129,042 12.2 %
Basic earnings
per share
Before cumulative
effect of
change in
accounting
principle $0.99 $0.86 15.1 % $2.94 $2.57 14.4 %
Cumulative effect
of change in
accounting
principle - - - - 0.02 (100.0)%
Basic earnings
per share $0.99 $0.86 15.1 % $2.94 $2.59 13.5 %
Basic average
shares
outstanding 49,146 49,281 (0.3)% 49,307 49,777 (0.9)%
Diluted earnings
per share
Before cumulative
effect of
change in
accounting
principle $0.97 $0.83 16.9 % $2.86 $2.50 14.4 %
Cumulative effect
of change in
accounting
principle - - - - 0.02 (100.0)%
Diluted earnings
per share $0.97 $0.83 16.9 % $2.86 $2.52 13.5 %
Diluted average
shares
outstanding 50,202 50,557 (0.7)% 50,610 51,220 (1.2)%
Dividends paid
per share $0.16 $0.14 14.3 % $0.60 $0.52 15.4 %
Meredith Corporation and Subsidiaries
Segment Information - Unaudited
Three Months Twelve Months
Period ended Percent Percent
June 30, 2006 2005 Change 2006 2005 Change
(In thousands)
Revenues
Publishing $339,774 $252,819 34.4 % $1,278,728 $908,790 40.7 %
Broadcasting
Non-political
advertising 82,062 77,715 5.6 % 307,668 287,514 7.0 %
Political
advertising 3,049 151 n/m 3,878 18,834 (79.4)%
Other revenues 1,507 1,671 (9.8)% 7,290 6,151 18.5 %
Total
broadcasting 86,618 79,537 8.9 % 318,836 312,499 2.0 %
Total revenues $426,392 $332,356 28.3 % $1,597,564 $1,221,289 30.8 %
Operating profit
Publishing $66,718 $56,615 17.8 % $213,007 $174,251 22.2 %
Broadcasting 29,004 24,003 20.8 % 88,145 86,662 1.7 %
Unallocated
corporate (9,468) (7,540) 25.6 % (34,561) (32,859) 5.2 %
Income from
operations $86,254 $73,078 18.0 % $266,591 $228,054 16.9 %
Depreciation and
amortization
Publishing $5,114 $2,801 82.6 % $19,234 $9,832 95.6 %
Broadcasting 6,055 6,062 (0.1)% 24,252 23,263 4.3 %
Unallocated
corporate 311 434 (28.3)% 2,196 2,210 (0.6)%
Total
depreciation and
amortization $11,480 $9,297 23.5 % $45,682 $35,305 29.4 %
EBITDA
Publishing $71,832 $59,416 20.9 % $232,241 $184,083 26.2 %
Broadcasting 35,059 30,065 16.6 % 112,397 109,925 2.2 %
Unallocated
corporate (9,157) (7,106) 28.9 % (32,365) (30,649) 5.6 %
Total EBITDA $97,734 $82,375 18.6 % $312,273 $263,359 18.6 %
n/m - not meaningful
Meredith Corporation and Subsidiaries
Condensed Consolidated Balance Sheets - Unaudited
June 30, June 30,
(In thousands) 2006 2005
Assets
Current assets
Cash and cash equivalents $30,713 $29,788
Accounts receivable, net 239,368 176,669
Inventories 52,032 41,562
Current portion of subscription
acquisition costs 79,565 27,777
Current portion of broadcast rights 12,498 13,539
Other current assets 17,344 15,160
Total current assets 431,520 304,495
Property, plant and equipment 417,831 398,882
Less accumulated depreciation (223,033) (205,926)
Net property, plant and equipment 194,798 192,956
Subscription acquisition costs 74,538 24,722
Broadcast rights 13,412 7,096
Other assets 81,218 58,589
Intangibles, net 806,264 707,068
Goodwill 438,925 196,382
Total assets $2,040,675 $1,491,308
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $50,000 $125,000
Current portion of broadcast rights payable 14,744 18,676
Accounts payable 79,892 48,462
Accrued expenses and other liabilities 118,972 119,526
Current portion of unearned subscription
revenues 200,338 127,416
Total current liabilities 463,946 439,080
Long-term debt 515,000 125,000
Long-term broadcast rights payable 21,755 17,208
Unearned subscription revenues 169,494 112,358
Deferred income taxes 125,049 93,929
Other noncurrent liabilities 47,327 51,906
Total liabilities 1,342,571 839,481
Shareholders' equity
Common stock 38,774 39,700
Class B stock 9,417 9,596
Additional paid-in capital 56,012 55,346
Retained earnings 599,413 550,115
Accumulated other comprehensive loss (2,077) (1,025)
Unearned compensation (3,435) (1,905)
Total shareholders' equity 698,104 651,827
Total liabilities and shareholders' equity $2,040,675 $1,491,308
Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows - Unaudited
Twelve months ended June 30, 2006 2005
(In thousands)
Net cash provided by operating activities $193,989 $170,904
Cash flows from investing activities
Acquisitions of businesses (367,854) (35,387)
Additions to property, plant and equipment (29,236) (23,845)
Proceeds from disposals of assets 2,500 2,050
Other - 3,401
Net cash used in investing activities (394,590) (53,781)
Cash flows from financing activities
Proceeds from issuance of long-term debt 590,000 85,000
Repayment of long-term debt (275,000) (135,000)
Purchases of Company stock (145,235) (97,458)
Proceeds from common stock issued 52,106 23,438
Dividends paid (29,578) (25,828)
Excess tax benefits from share-based
payments 9,937 3,288
Other financing activities (704) 502
Net cash provided by (used in) financing
activities 201,526 (146,058)
Net increase (decrease) in cash and cash
equivalents 925 (28,935)
Cash and cash equivalents at beginning of
period 29,788 58,723
Cash and cash equivalents at end of period
$30,713 $29,788
Meredith Corporation and Subsidiaries Table 1
Supplemental Disclosures Regarding Non-GAAP Financial Measures
Consolidated EBITDA, which is reconciled to net earnings in the following
tables, is defined as earnings before interest, taxes, depreciation and
amortization.
Segment EBITDA is a measure of segment earnings before depreciation and
amortization.
Segment EBITDA margin is defined as segment EBITDA divided by segment
revenues.
Three months ended June 30, 2006
Broad- Unallocated
Publishing casting Corporate Total
(In thousands)
Revenues $339,774 $86,618 $- $426,392
Operating profit $66,718 $29,004 $(9,468) $86,254
Depreciation and amortization 5,114 6,055 311 11,480
EBITDA $71,832 $35,059 $(9,157) 97,734
Less:
Depreciation and amortization (11,480)
Net interest expense (6,645)
Income taxes (31,048)
Net earnings $48,561
Segment EBITDA margin 21.1% 40.5%
Twelve months ended June 30, 2006
Broad- Unallocated
Publishing casting Corporate Total
(In thousands)
Revenues $1,278,728 $318,836 $- $1,597,564
Operating profit $213,007 $88,145 $(34,561) $266,591
Depreciation and amortization 19,234 24,252 2,196 45,682
EBITDA $232,241 $112,397 $(32,365) 312,273
Less:
Depreciation and amortization (45,682)
Net interest expense (29,227)
Income taxes (92,572)
Net earnings $144,792
Segment EBITDA margin 18.2% 35.3%
Three months ended June 30, 2005
Broad- Unallocated
Publishing casting Corporate Total
(In thousands)
Revenues $252,819 $79,537 $- $332,356
Operating profit $56,615 $24,003 $(7,540) $73,078
Depreciation and amortization 2,801 6,062 434 9,297
EBITDA $59,416 $30,065 $(7,106) 82,375
Less:
Depreciation and amortization (9,297)
Net interest expense (4,265)
Income taxes (26,631)
Earnings before cumulative effect
of change in accounting principle $42,182
Segment EBITDA margin 23.5% 37.8%
Twelve months ended June 30, 2005
Broad- Unallocated
Publishing casting Corporate Total
(In thousands)
Revenues $908,790 $312,499 $- $1,221,289
Operating profit $174,251 $86,662 $(32,859) $228,054
Depreciation and amortization 9,832 23,263 2,210 35,305
EBITDA $184,083 $109,925 $(30,649) 263,359
Less:
Depreciation and amortization (35,305)
Net interest expense (19,002)
Income taxes (80,903)
Earnings before cumulative
effect
of change in accounting
principle $128,149
Segment EBITDA margin 20.3% 35.2%
Source: prnewswire
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