UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A-1
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1994
Commission file number 1-5128
Meredith Corporation
(Exact name of registrant as specified in its charter)
Iowa 42-0410230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1716 Locust Street, Des Moines, Iowa 50309-3023
(Address of principal executive offices) (ZIP Code)
515 - 284-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
Common Stock, $1 par value 10,145,338
Class B Stock, $1 par value 3,564,186
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Part I. FINANCIAL INFORMATION
Item I. Financial Statements
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Assets September 30 June 30
(in thousands) 1994 1994
- ---------------------------------- ------------ --------
Current Assets:
Cash and cash equivalents $ 36,455 $ 37,957
Marketable securities 10,139 12,178
Receivables, net 111,571 75,856
Inventories 33,695 34,962
Supplies and prepayments 19,285 18,509
Subscription acquisition costs 102,283 111,567
Film rental costs 10,228 7,239
-------- --------
Total Current Assets 323,656 298,268
-------- --------
Property, Plant and Equipment (at cost) 235,200 231,158
Less accumulated depreciation (109,538) (106,503)
-------- --------
Net Property, Plant and Equipment 125,662 124,655
-------- --------
Deferred Film Rental Costs 6,397 3,874
Deferred Subscription Acquisition Costs 71,528 70,108
Other Assets 26,904 24,562
Goodwill and Other Intangibles
(at original cost less accumulated amortization) 328,236 343,000
-------- --------
Total Assets $ 882,383 $ 864,467
======== ========
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Liabilities and Stockholders' Equity September 30 June 30
(in thousands) 1994 1994
- ------------------------------------ ------------ -------
Current Liabilities:
Current portion of long-term indebtedness $ 8,916 $ 11,178
Current portion of long-term film rental contracts 10,535 6,683
Accounts payable 31,165 35,984
Accrued taxes and expenses, other 62,368 55,022
Unearned subscription revenues 145,884 152,952
Deferred income taxes 18,010 18,560
-------- --------
Total Current Liabilities 276,878 280,379
Long-Term Indebtedness 126,462 126,822
Long-Term Film Rental Contracts 8,150 4,118
Unearned Subscription Revenues 102,341 95,407
Deferred Income Taxes 36,729 37,011
Other Deferred Items 31,322 24,966
-------- --------
Total Liabilities 581,882 568,703
-------- --------
Minority Interests 37,364 38,003
-------- --------
Stockholders' Equity:
Series Preferred Stock, par value $1 per share
Authorized 5,000,000 shares; none issued. -- --
Common Stock, par value $1 per share
Authorized 50,000,000 shares; issued and outstanding
10,123,030 at September 30 and 10,119,165 at
June 30 (net of treasury shares, 5,835,816 at
September 30 and 5,763,328 shares at June 30) 10,123 10,119
Class B Stock, par value $1 per share, convertible
to Common Stock
Authorized, issued and outstanding
3,582,439 shares at September 30 and
3,601,932 at June 30 3,582 3,602
Retained earnings 254,198 246,917
Unearned compensation (4,766) (2,877)
-------- --------
Total Stockholders' Equity 263,137 257,761
-------- --------
Total Liabilities and Stockholders' Equity $ 882,383 $ 864,467
======== ========
See accompanying Notes to Interim Consolidated Financial Statements.
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Consolidated Statements of Earnings (Unaudited)
Meredith Corporation and Subsidiaries
Three Months Ended September 30 1994 1993 *
- ----------------------------------------------------------------------------
($ in thousands, except per share)
Revenues (less returns and allowances):
Advertising $ 83,980 $ 73,349
Circulation 62,951 61,754
Consumer books 24,182 20,257
All other 29,034 26,931
--------- ---------
Total Revenues 200,147 182,291
--------- ---------
Operating Costs and Expenses:
Production, distribution and editorial 82,565 77,045
Selling, general and administrative 95,422 84,742
Depreciation and amortization 8,573 8,619
--------- ---------
Total Operating Costs and Expenses 186,560 170,406
--------- ---------
Income from Operations 13,587 11,885
Interest income - IRS settlement 8,554 --
Interest income 549 432
Interest expense (2,816) (2,815)
Minority interests 675 548
--------- ---------
Earnings before Income Taxes 20,549 10,050
Income taxes 9,877 6,606
--------- ---------
Net Earnings $ 10,672 $ 3,444
========= =========
Net Earnings Per Share $ 0.77 $ 0.24
========= =========
Dividends Paid Per Share $ 0.18 $ 0.16
========= =========
Average Number of Shares Outstanding 13,829,000 14,568,000
========= =========
* Reclassified to conform with current-year presentation.
See accompanying Notes to Interim Consolidated Financial Statements.
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Consolidated Statements of Cash Flows (Unaudited)
Meredith Corporation and Subsidiaries
For the Three Months Ended September 30 1994 1993 *
- ----------------------------------------------------------------------------
(in thousands)
Cash Flows from Operating Activities:
Net earnings $ 10,672 $ 3,444
Adjustments to Reconcile Net Earnings to
Net Cash Provided (Used) by Operating Activities:
Depreciation and amortization 8,573 8,619
Amortization of film contract rights 6,582 5,936
(Decrease) increase in deferred income taxes (832) 1,238
(Increase) in receivables (35,715) (7,149)
Decrease (increase) in inventories 1,267 (2,784)
(Increase) in supplies and prepayments (776) (311)
Decrease in deferred subscription
acquisition costs 7,864 5,119
Incr (decr) in accounts payable and accruals 2,527 (26,687)
(Reductions) to unearned subscription revenues (134) (2,287)
Additions (reductions) to other deferred items 6,356 (2,404)
--------- ---------
Net cash provided (used) by operating activities 6,384 (17,266)
Cash Flows from Investing Activities: --------- ---------
Redemption of marketable securities 2,039 9,344
(Additions) to property, plant, and equipment (6,133) (4,489)
Reduction to other assets 8,288 1,257
--------- ---------
Net cash provided by investing activities 4,194 6,112
Cash Flows from Financing Activities: --------- ---------
Increase in short-term debt -- 18,000
Long-term indebtedness retired (2,622) (61)
Payments for film rental contracts (4,162) (4,238)
Proceeds from common stock issued 926 707
Purchase of company shares (3,759) (16,417)
Dividends paid (2,463) (2,329)
--------- ---------
Net cash (used) by financing activities (12,080) (4,338)
--------- ---------
Net (decrease) in cash and cash equivalents (1,502) (15,492)
Cash and cash equivalents at beginning of year 37,957 18,569
--------- ---------
Cash and Cash Equivalents at End of Period $ 36,455 $ 3,077
========= =========
* Reclassified to conform with current-year presentation.
See accompanying Notes to Interim Consolidated Financial Statements.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management, all adjustments, which are of a
normal recurring nature and necessary for a fair presentation of the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the entire year.
The Company adopted AICPA Statement of Position ("SOP") 93-7 "Reporting on
Advertising Costs" effective July 1, 1993. There was no effect on the
Company's fiscal 1994 financial statements as the Company believed its
accounting policy for the deferral of subscription acquisition costs was
materially in compliance with the requirements of SOP 93-7. In October 1994,
the Company became aware of a proposed practice bulletin issued by the AICPA
Accounting Standards Executive Committee subject to approval by the Financial
Accounting Standards Board ("FASB"). This practice bulletin interprets SOP 93-
7 by stating that only "primary" revenues (as defined in the proposed practice
bulletin) should be considered when determining probable future revenues.
(Under SOP 93-7, probable future revenues are used in determining the amount of
direct response advertising costs that can be capitalized.) The Company
currently considers advertising revenues, defined as "secondary" revenues in
the proposed practice bulletin, in this determination. This practice bulletin,
if approved by the FASB, is expected to be effective for companies on the later
of December 31, 1994 or the date SOP 93-7 is adopted. The Company cannot
quantify the effect of this practice bulletin on its financial statements at
this time. However, if the practice bulletin is approved by the FASB in its
proposed form, Company management anticipates that it will be required to
record the cumulative effect of this proposed change in accounting principle.
This change is expected to have a material effect on the Company's statement of
financial position (including stockholders' equity) and net earnings for fiscal
1995 but no material effect is anticipated on fiscal 1995 operating earnings.
2. Inventories
Major components of inventories are summarized below. Of total inventory
values shown, approximately 34 and 32 percent respectively are under the LIFO
method at September 30, 1994 and June 30, 1994.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
September 30 June 30
1994 1994
-------- --------
($ in thousands)
Raw materials $14,242 $15,366
Work in process 12,648 13,132
Finished goods 16,124 15,086
-------- --------
43,014 43,584
Reserve for LIFO cost valuation (9,319) (8,622)
-------- --------
Total $33,695 $34,962
======== ========
3. Internal Revenue Service ("IRS") Settlement
The Company recognized interest income in the first quarter of fiscal 1995 of
$8,554,000 (pre-tax) related to the settlement of its 1986 through 1990 tax
years. Federal income tax deficiency notices from the IRS related to those tax
years were contested by the Company in United States Tax Court in fiscal 1993.
These tax deficiency notices were primarily related to the Company's
acquisition of Ladies' Home Journal magazine in January 1986. In March 1994,
the Company received a favorable decision from the Tax Court. The appeal
period with respect to this decision expired on September 16, 1994. The
Company also recognized a benefit of approximately $9 million which reduced the
goodwill recorded in connection with the Ladies' Home Journal acquisition. The
benefit of this reduction will be realized over the remaining life of the
goodwill. The Company recorded a receivable from the IRS in the first quarter
related to these issues of approximately $18 million.
4. Acquisition
On August 19, 1994, Meredith Corporation announced that it had reached an
agreement to acquire the assets of WSMV-TV, an NBC affiliate in Nashville,
Tennessee, from Cook Inlet Television Partners. The Company will pay $159
million for WSMV-TV and plans to finance the acquisition with cash and bank
debt. The acquisition is expected to close in January 1995, pending Federal
Communications Commission and other regulatory approvals.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
5. Derivative Financial Instruments
The Company adopted Statement of Financial Accounting Standards No. 119
"Disclosure About Derivative Financial Instruments and Fair Value of Financial
Instruments" in the first quarter of fiscal 1995. The Company has a
subsidiary, Meredith/New Heritage Strategic Partners, L.P. ("Strategic
Partners") in which it has an indirect ownership interest of approximately 70
percent. Strategic Partners entered into a Swap Rate Agreement (the
"Agreement") on September 1, 1992 for $90 million of the debt outstanding under
its loan agreement with 10 banks. The Agreement is in effect through September
1, 1995 and established that Strategic Partners would receive payment based on
the six-month LIBOR interest rate, reset semi-annually, and make payments at
the fixed interest rate of 7.1 percent. The purpose of the Agreement is to
reduce interest rate risk by fixing the interest rate on $90 million of
Strategic Partners' debt. (Total debt outstanding under Strategic Partners'
term loan agreement was $135 million at September 30, 1994.) The fixed rate
payable, including the applicable margin (as defined in the underlying loan
agreement) is approximately 8.6 percent. This rate is accrued and charged to
interest expense through the term of the Agreement. Remaining payments under
the Agreement are $793,000 on March 1, 1995 and payment to or from Strategic
Partners on September 1, 1995 based on the six-month LIBOR interest rate on
March 1, 1995. The current value of the Agreement as of November 9, 1994, is
$779,000 for the March 1, 1995 payment and $165,000 for the September 1, 1995
payment. The Agreement was entered into for a purpose other than trading.
Strategic Partners' management believes there is no market risk or significant
credit risk associated with the Agreement.
6. Contingencies
Reference is made to part II - OTHER INFORMATION, Item 1, Legal Proceedings of
this Form 10-Q for the quarterly period ended September 30, 1994.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Quarter Fiscal 1994-95 Compared With First Quarter Fiscal 1993-94
Meredith Corporation net earnings for the quarter ended September 30, 1994 were
$10,672,000, or 77 cents per share. Net earnings included post-tax interest
income from the IRS of $4,747,000, or 34 cents per share, primarily related to
the favorable resolution of the Ladies' Home Journal tax case. Excluding that
one-time benefit, earnings were $5,925,000, or 43 cents per share, an increase
of more than 70 percent from prior-year first quarter earnings of $3,444,000,
or 24 cents per share. All of the Company's operating groups, except cable,
contributed to increased earnings, as did a lower effective tax rate. Tax
expense in the prior-year quarter included a nine cent per share charge for the
impact of the increase in the federal corporate tax rate on the Company's
deferred tax liabilities. Two cents of the increase in comparable earnings per
share resulted from fewer shares outstanding due to the Company's share
repurchase program.
The Company recognized interest income in the first quarter of $8,554,000 (pre-
tax) related to the settlement of its 1986 through 1990 tax years. Federal
income tax deficiency notices from the Internal Revenue Service for those tax
years were contested in United States Tax Court in fiscal 1993. These tax
deficiency notices were primarily related to the Company's acquisition of
Ladies' Home Journal magazine in January 1986. In March 1994, the Company
received a favorable decision from the Tax Court. The appeal period, with
respect to this decision, expired on September 16, 1994. In addition to the
interest income reported above, the Company recognized a benefit of
approximately $9 million which reduced the goodwill recorded in connection with
the Ladies' Home Journal acquisition. The benefit of this reduction will be
realized over the remaining life of the goodwill.
Revenues for the three months ended September 30, 1994 were $200,147,000, a ten
percent increase from prior-year first quarter revenues of $182,291,000.
Increased advertising revenues in the Magazine and Broadcast Groups and higher
sales volumes in the Book Group were the most significant factors in the
increase. Revenues by segment were as follows:
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Revenues by Segment
Three Months Ended September 30 1994 1993
-------------------------------------------------------------------
Publishing $155,069 $139,865
Broadcast 25,983 24,608
Real Estate 6,293 4,910
Cable 12,814 12,914
Less: Inter-segment revenue (12) (6)
-------- --------
Total revenues $200,147 $182,291
======== ========
Income from operations was $13,587,000 in the first quarter, a 14 percent
increase from the prior-year first quarter. The operating margin rose slightly
from 6.5 percent of net revenues in the fiscal 1994 first quarter to 6.8
percent in the current quarter. The following table shows the percentage of
revenues each major expense classification represented in the current and prior
year quarter:
Expenses as Percentage of Revenues
Three Months Ended September 30 1994 1993
- ------------------------------------------------------------------------
Production, distribution and editorial (PD&E) 41.3% 42.3%
Selling, general and administrative (SG&A) 47.7% 46.5%
Depreciation and amortization 4.3% 4.7%
PD&E expenses declined as a percentage of revenues due to increased advertising
revenues in the Broadcast Group.
SG&A expenses increased approximately one percent of revenues compared to the
prior-year first quarter. (However, when compared to the 1994 fiscal year,
SG&A expenses were unchanged as a percentage of revenues.) The primary factor
in the increase from the prior-year first quarter was the reversal of accrued
music license fees in the Broadcast Group in the first quarter of fiscal 1994.
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A discussion of results by segment follows:
Publishing: Revenues in the Magazine Group increased nine percent from the
prior-year first quarter primarily due to increased advertising revenues from a
24 percent increase in advertising pages. Most of the group's titles reported
higher ad pages and revenues. Better Homes and Gardens and Ladies' Home
Journal, the Company's two largest circulation titles, recorded advertising
pages gains of 18 and 16 percent, respectively. Other titles with ad page
gains in excess of 20 percent included Traditional Home, Country Home,
Successful Farming and WOOD. Magazine Group circulation revenues were up four
percent from the prior year primarily due to subscription revenues on new
titles, including Crayola Kids and Better Homes and Gardens Craft & Wear.
The Magazine Group reported record first quarter operating profits, up 11
percent from the prior-year period largely due to the strong performances of
Better Homes and Gardens and Ladies' Home Journal. Both of these magazines
increased profits more than 25 percent compared to the fiscal 1994 first
quarter primarily due to higher advertising revenues. Other titles that
improved significantly from the prior-year quarter included Successful Farming,
Golf For Women and Country Home, which benefited from increased ad revenues,
and Better Homes and Gardens American Patchwork & Quilting which posted
favorable subscription results. Current quarter profits were held down by
higher new title start-up and testing costs and expansion in the custom
publishing area.
Book Group revenues increased 16 percent from the prior-year first quarter due
to higher sales volumes in the retail marketing and direct mail operations.
Operating results for the Group also showed substantial improvement.
Continuing the trend of recent quarters, the improvement was led by strong
performances in the retail marketing and book club operations. Increased sales
of backlist titles were the primary factor in a 14 percent increase in retail
marketing's profits. Improvement in the book clubs' performance largely
reflected increased sales volume per member and lower product return rates in
Better Homes and Garden Crafts Club, the largest of the Company's five book
clubs. Craftways' operating results lagged behind the prior-year first quarter
due to lower circulation nets for Cross Stitch & Country Crafts. Despite
revenue growth, direct mail operating results also fell short of the prior year
quarter due to higher promotion costs.
Revenues and profits from the Company's licensing agreement with Wal-Mart
Stores, Inc., also contributed to the improvement in first quarter Publishing
segment results. Better Homes and Gardens Garden Centers opened in more than
2,000 stores nationwide in January 1994.
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Paper and postage are significant and essential expenses in the Publishing
segment. Paper prices, which have been relatively stable over the past year,
increased approximately seven percent on October 1, 1994. The increase in price
indicates a tightening of the paper market. While the Company does not expect
to experience a shortage of paper in the foreseeable future, the current tight
market could lead to further price increases in fiscal 1995. In addition, a
postal rate increase is expected early in calendar 1995. The amount of the
increase is subject to the determination of the United States Postal Rate
Commission.
Broadcast: Increases in local and national advertising revenues led to a
significant profit increase for the Broadcast Group. Advertising revenues of
its five currently owned stations increased 27 percent compared with the prior-
year first quarter. Increased market demand for advertising led to higher spot
rates. The revenue increase at KPHO, the Company's television station in
Phoenix, also reflected its affiliation with the CBS network effective
September 10, 1994. Broadcast Group profits increased 58 percent from
comparable fiscal 1994 first quarter earnings. This comparison with prior-year
results excludes a favorable adjustment to accrued music license fees and the
operating results of two stations since sold. All of the stations, except
KPHO, reported higher profits primarily due to the revenue increases. Lower
programming expenses also contributed to most of the stations' improved
performances. Profits at KPHO were virtually even with the prior-year first
quarter as start-up costs associated with the CBS affiliation offset its
revenue gains. The CBS affiliation is expected to have a favorable long-term
effect on the revenues and profits of KPHO.
As previously announced, the Company plans to purchase WSMV-TV, an NBC
affiliate serving the Nashville, Tennessee market. The Federal Communications
Commission has granted initial approval of the sale which is expected to close
in January 1995.
Real Estate: First quarter revenues jumped 28 percent in the Real Estate Group
due to higher transaction fee revenues and increased product and publication
sales volumes. The increase in transaction fees, which are generated by
members' sales volumes, reflected continued strength in existing home sales.
Group profits also exceeded the prior-year first quarter, primarily due to the
revenue increases. The improvement was partially offset by expenses related to
the restructuring of a marketing agreement with an outside party.
Cable Television: Revenues declined slightly in the Company's cable television
operations despite continued subscriber growth at both the North Dakota and
Minnesota systems, of which the Company indirectly owns approximately 70
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percent. Lower average revenue per subscriber, a result of government re-
regulation of cable pricing, led to the revenue decline. Rate re-regulation
was also the primary factor in the decline in operating profits before interest
expense. After interest expense, the cable television operations experienced a
net loss in the quarter.
Other: Interest expense, which relates primarily to the cable operations'
debt, was virtually unchanged from the prior year. Interest income (not
including interest income from the IRS settlement) increased primarily due to
additional cash available for investment generated from fiscal 1994 cash flows.
Corporate nonoperating expenses increased due to higher administrative expenses
and one-time favorable adjustments in the prior-year quarter.
The decrease in the effective tax rate, from 66 percent in the fiscal 1994
first quarter to 48 percent in the current quarter, primarily reflected the
negative impact of the increase in the federal corporate tax rate in fiscal
1994. The prior-year first quarter provision included the impact of the rate
increase on the Company's deferred tax liabilities. The Company's effective
tax rate also benefited from increased earnings in the current quarter, which
lessened the effect of non-deductible items on the overall tax rate.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $1,502,000 in the current quarter to
$36,455,000 at September 30, 1994. This compares to a decrease of $15,492,000
in the fiscal 1994 first quarter. The difference was primarily the result of
increased cash provided by operating activities in the current quarter due to
higher earnings and a smaller decline in accounts payable and accruals. The
larger decline in accounts payable and accruals in the prior-year first quarter
resulted from a large contribution to a Company pension plan and payments for
paper purchased in June 1993 in anticipation of a July 1993 price increase.
The increase in accounts receivable from June 30, 1994 reflects the refund
expected from the IRS in settlement of the Company's 1986 through 1990 tax
years. The change in cash used by financing activities reflects prior-year
cash provided by short-term debt, net of higher spending for Company share
repurchases.
In the quarter ended September 30, 1994, $3.8 million was spent for the
repurchase of Company common stock. This compares with spending of $16.4
million for shares in the prior first quarter. As of September 30, 1994,
approximately 194,000 shares may be repurchased under an existing authorization
by the Board of Directors. The status of the repurchase program is reviewed at
each quarterly Board of Directors meeting.
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Long-term debt was incurred by Meredith/New Heritage Strategic Partners, L.P.
("Strategic Partners"), in conjunction with Strategic Partners' acquisition of
North Central Cable Communications Corporation on September 1, 1992. At
September 30, 1994, $135 million was owed under the term loan agreement
Strategic Partners has with ten banks. The first payment of $2.6 million, due
under the loan agreement, was made by Strategic Partners on September 30, 1994.
The loan agreement requires Strategic Partners to meet certain operating and
financial tests. At September 30, 1994, Strategic Partners failed to meet the
required financial ratios related to operating cash flow. In light of
Strategic Partners' efforts to sell its assets in part or in whole, the banks
have waived compliance with the affected covenants and their rights and
remedies under the loan agreement as a result of the defaults for the quarter
ended September 30, 1994. In addition, Strategic Partners is currently working
with the banks to amend the current loan amortization schedule. Without an
amendment (or the sale of its assets in part or whole), the operating cash
flows of Strategic Partners may not provide sufficient funds to meet the
payment terms of the loan agreements. Strategic Partners' debt is non-recourse
to Meredith Corporation.
Capital expenditures in fiscal 1995 are expected to increase by approximately
ten percent over fiscal 1994 levels. This growth will primarily result from
increased spending at the Company's television station in Phoenix to facilitate
increased news programming and upgrade other receiving and transmission
equipment related to its recent CBS affiliation. Other planned spending
includes continued investment in new and upgraded computer networks. The
Company also intends to enter into a lease agreement for office space in New
York City, which will allow consolidation of all New York City employees in one
location to achieve reduced occupancy costs in the future. This project is
expected to cost approximately $10 million with spending to occur primarily in
fiscal 1996. In addition, the Company plans to spend approximately $36 million
in fiscal 1996 through 1998 for a new office building and related improvements
in Des Moines. The Company has made no other material commitments for capital
expenditures.
The planned purchase of WSMV-TV for $159 million will be financed with cash and
bank debt.
At this time, management expects that cash on hand, plus internally-generated
cash flow, will provide funds for capital expenditures, cash dividends and
other operational cash needs for foreseeable periods. Short-term lines of
credit will be used on an as-needed basis for short-term working capital needs.
The Company does not expect the need for any long-term source of cash to meet
working capital requirements.
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The Company adopted AICPA Statement of Position ("SOP") 93-7 "Reporting on
Advertising Costs" effective July 1, 1993. There was no effect on the
Company's fiscal 1994 financial statements as the Company believed its
accounting policy for the deferral of subscription acquisition costs was
materially in compliance with the requirements of SOP 93-7. In October 1994,
the Company became aware of a proposed practice bulletin issued by the AICPA
Accounting Standards Executive Committee subject to approval by the Financial
Accounting Standards Board ("FASB"). This practice bulletin interprets SOP 93-
7 by stating that only "primary" revenues (as defined in the proposed practice
bulletin) should be considered when determining probable future revenues.
(Under SOP 93-7, probable future revenues are used in determining the amount of
direct response advertising costs that can be capitalized.) The Company
currently considers advertising revenues, defined as "secondary" revenues in
the proposed practice bulletin, in this determination. This practice bulletin,
if approved by the FASB, is expected to be effective for companies on the later
of December 31, 1994 or the date SOP 93-7 is adopted. The Company cannot
quantify the effect of this practice bulletin on its financial statements at
this time. However, if the practice bulletin is approved by the FASB in its
proposed form, Company management anticipates that it will be required to
record the cumulative effect of this proposed change in accounting principle.
This change is expected to have a material effect on the Company's statement of
financial position (including stockholders' equity) and net earnings for fiscal
1995 but no material effect is anticipated on fiscal 1995 operating earnings.
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: January 27, 1995
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