UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1995
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 April 28, 1995
Common Stock, $1 par value 20,450,752
Class B Stock, $1 par value 7,018,486
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<PAGE>
Part I. FINANCIAL INFORMATION
Item I. Financial Statements
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31 June 30
Assets 1995 1994
- --------------------------------------------------------------------------
(in thousands)
Current Assets:
Cash and cash equivalents $ 5,895 $ 37,957
Marketable securities 1,000 12,178
Receivables, net 112,751 75,856
Inventories 42,284 34,962
Supplies and prepayments 22,561 18,509
Deferred income taxes 5,026 --
Subscription acquisition costs 54,490 111,567
Film rental costs 7,866 7,239
---------- ----------
Total Current Assets 251,873 298,268
---------- ----------
Property, Plant and Equipment (at cost) 246,215 231,158
Less accumulated depreciation (116,608) (106,503)
---------- ----------
Net Property, Plant and Equipment 129,607 124,655
---------- ----------
Deferred Film Rental Costs 4,858 3,874
Deferred Subscription Acquisition Costs 50,464 70,108
Other Assets 25,578 24,562
Goodwill and Other Intangibles
(at original cost less accumulated amortization) 432,028 343,000
---------- ----------
Total Assets $ 894,408 $ 864,467
========== ==========
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31 June 30
Liabilities and Stockholders' Equity 1995 1994
- --------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term indebtedness $ 9,669 $ 11,178
Current portion of long-term film rental contracts 8,570 6,683
Accounts payable 40,625 35,984
Accrued taxes and expenses 63,658 55,022
Unearned subscription revenues 161,438 152,952
Deferred income taxes -- 18,560
---------- ----------
Total Current Liabilities 283,960 280,379
---------- ----------
Long-Term Indebtedness 181,307 126,822
Long-Term Film Rental Contracts 6,360 4,118
Unearned Subscription Revenues 102,241 95,407
Deferred Income Taxes 24,215 37,011
Other Deferred Items 27,721 24,966
---------- ----------
Total Liabilities 625,804 568,703
---------- ----------
Minority Interests 35,949 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 80,000,000 shares; issued and outstanding
20,420,623 at March 31 and 20,238,330 at
June 30 (net of treasury shares, 11,632,624 at 20,421 10,119
March 31 and 11,526,656 shares at June 30.)
Class B stock, par value $1 per share,
convertible to Common Stock
Authorized 15,000,000; issued and outstanding
7,032,845 shares at March 31 and 7,203,864
at June 30. 7,033 3,602
Retained earnings 209,288 246,917
Unearned compensation (4,087) (2,877)
---------- ----------
Total Stockholders' Equity 232,655 257,761
---------- ----------
Total Liabilities and Stockholders' Equity $ 894,408 $ 864,467
========== ==========
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Three Months Nine Months
Ended March 31 Ended March 31
1995 1994* 1995 1994*
- -------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share)
Revenues (less returns and allowances):
Advertising $107,644 $ 86,696 $284,478 $245,142
Circulation 67,873 63,820 198,511 191,796
Consumer books 23,233 23,406 68,277 67,554
All other 31,699 31,841 94,214 88,192
--------- --------- --------- ---------
Total Revenues 230,449 205,763 645,480 592,684
--------- --------- --------- ---------
Operating Costs and Expenses:
Production, distribution and edit 94,006 84,456 261,549 246,776
Selling, general and admin 105,395 95,964 303,228 277,147
Depreciation and amortization 9,888 8,585 27,012 25,843
Non-recurring item -- -- -- 4,800
--------- --------- --------- ---------
Total Operating Costs and Expenses 209,289 189,005 591,789 554,566
--------- --------- --------- ---------
Income from Operations 21,160 16,758 53,691 38,118
Gain on dispositions 3,501 -- 3,501 11,997
Interest income - IRS settlement -- -- 8,554 --
Interest income 505 515 1,912 1,153
Interest expense (4,689) (3,185) (10,550) (8,875)
Minority interests (270) 770 1,044 1,935
--------- --------- --------- ---------
Earnings before Income Taxes and 20,207 14,858 58,152 44,328
Cumulative Effect of Change in
Accounting Principle
Income taxes 10,028 7,642 28,382 22,164
--------- --------- --------- ---------
Earnings before Cumulative Effect of
Change in Accounting Principle 10,179 7,216 29,770 22,164
Cumulative Effect of Change in
Accounting Principle -- -- (46,160) --
--------- --------- --------- ---------
Net Earnings (Loss) $ 10,179 $ 7,216 $(16,390) $ 22,164
========= ========= ========= =========
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Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Three Months Nine Months
Ended March 31 Ended March 31
1995 1994* 1995 1994*
- -------------------------------------------------------------------------------
(Dollar amounts in thousands, except per share)
Net Earnings (Loss) Per Share:
Earnings before Cumulative Effect of
Change in Accounting Principle $ 0.37 $ 0.26 $ 1.08 $ 0.78
Cumulative Effect of Change in
Accounting Principle -- -- (1.67) --
--------- --------- --------- ---------
Net Earnings (Loss) Per Share $ 0.37 $ 0.26 $ (0.59) $ 0.78
========= ========= ========= =========
Dividends Paid Per Share $ 0.10 $ 0.09 $ 0.28 $ 0.25
========= ========= ========= =========
Average Number of Shares
Outstanding 27,764,000 28,159,000 27,715,000 28,622,000
========== ========== ========== ==========
* Reclassified to conform with current-year presentation.
Special Note to Consolidated Statements of Earnings (Unaudited)
In December 1994, the FASB approved the issuance of Practice Bulletin 13 which
interpreted AICPA Statement of Position 93-7, "Reporting on Advertising Costs,"
previously adopted by the Company. This Practice Bulletin required the Company
to change from a method of deferring most subscription acquisition costs to
deferring only those costs generating future subscription revenues in excess
of future costs incurred. The Company reported this change as a change in
accounting principle, as of July 1, 1994. (See Note 1 to the Interim
Consolidated Financial Statements.)
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Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Pro forma amounts assuming the new accounting principle was applied during
all periods presented:
Three Months Nine Months
Ended March 31 Ended March 31
1995 1994 1995 1994
--------------------------------------------
(Dollar amounts in thousands, except per share)
Earnings before Cumulative Effect
of Change in Accounting Principle $ 10,179 $ 2,738 $ 29,770 $ 20,960
======== ======== ======== ========
Net Earnings $ 10,179 $ 2,738 $ 29,770 $ 20,960
======== ======== ======== ========
Earnings Per Share:
Earnings before Cumulative Effect
of Change in Accounting Principle $ 0.37 $ 0.10 $ 1.08 $ 0.73
======== ======== ======== ========
Net Earnings $ 0.37 $ 0.10 $ 1.08 $ 0.73
======== ======== ======== ========
All previously reported number of shares and per share information has been
restated to reflect the two-for-one stock split for shareholders of record on
March 1, 1995.
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31 1995 1994*
- -------------------------------------------------------------------------------
(in thousands)
Cash Flows from Operating Activities:
Earnings before cumulative effect of change in
accounting principle $ 29,770 $ 22,164
Less cumulative effect of change in accounting principle (46,160) --
-------- --------
(16,390) 22,164
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and amortization 27,012 25,843
Amortization of film contract rights 12,971 16,924
(Decrease) increase in deferred income taxes (36,382) 6,388
Non-recurring item (net of taxes) -- 2,592
(Increase) in receivables (37,152) (29,267)
(Increase) in inventories (7,322) (390)
(Increase) in supplies and prepayments (4,078) (1,361)
Decrease (increase) in subscription acquisition costs 76,721 (9,522)
Increase (decrease) in accounts payable and accruals 10,360 (19,952)
Gain on dispositions (net of taxes) (1,101) (8,197)
Increase in unearned subscription revenues 15,320 13,153
Increase in other deferred items 2,755 2,614
-------- --------
Net cash provided by operating activities 42,714 20,989
-------- --------
Cash Flows from Investing Activities:
Redemption of marketable securities 11,178 8,758
Proceeds from dispositions 49,000 33,000
Payment for purchase of business (159,000) --
Additions to property, plant, and equipment (18,470) (15,082)
Decrease (increase) in other assets 9,044 (6,255)
-------- --------
Net cash (used) provided by investing activities (108,248) 20,421
-------- --------
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Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended March 31 1995 1994*
- -------------------------------------------------------------------------------
(in thousands)
Cash Flows from Financing Activities:
Long-term indebtedness incurred 100,000 --
Long-term indebtedness retired (47,024) (117)
Payments for film rental contracts (10,777) (11,191)
Proceeds from common stock issued 2,719 2,208
Purchase of company shares (3,759) (38,165)
Dividends paid (7,687) (7,197)
-------- --------
Net cash provided (used) by financing activities 33,472 (54,462)
-------- --------
Net (decrease) in cash and cash equivalents (32,062) (13,052)
Cash and cash equivalents at beginning of year 37,957 18,569
-------- --------
Cash and Cash Equivalents at End of Period $ 5,895 $ 5,517
======== ========
*Reclassified to conform with current-year presentation.
Supplemental Schedule of Noncash Investing and Financing Activities:
- The Company received $2 million of preferred stock in Granite Broadcasting
Corporation in conjunction with the sale of two broadcasting stations in
December 1993.
See accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE>
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.
Change in accounting principle related to subscription acquisition costs:
The Company recognized a charge of $46,160,000 (post-tax) to earnings during
the quarter ended December 31, 1994 related to the implementation of Practice
Bulletin 13 "Direct-Response Advertising and Probable Future Benefits."
Practice Bulletin 13 was issued by the Accounting Standards Executive Committee
("AcSEC") of the American Institute of Certified Public Accountants (AICPA)
upon approval by the Financial Accounting Standards Board (FASB) in December,
1994. Practice Bulletin 13 was issued to interpret Statement of Position
("SOP") 93-7 "Reporting on Advertising Costs" issued by AcSEC in December,
1993.
The Company adopted SOP 93-7 in its fiscal year ended June 30, 1994. There was
no effect on the Company's financial statements from the adoption of SOP 93-7.
This was due to the Company's belief that its policy of capitalizing most
magazine subscriber acquisition costs and recognizing expense pro rata with the
delivery of magazines was materially in compliance with the requirements of SOP
93-7. SOP 93-7 specifies that direct-response advertising costs should be
capitalized if the direct-response advertising can be shown to both (1) result
in specific sales and (2) result in probable future benefits. Probable future
benefits are defined as probable future revenues in excess of future costs
incurred to attain those revenues.
The Company has two revenue streams related to the sale of magazine subscrip-
tions: subscriber and advertising revenues. The Company believed that both
types of revenue were related to its direct-response advertising efforts.
Practice Bulletin 13, however, was issued to interpret SOP 93-7 to specify that
only "primary revenues" (those revenues from sales to customers receiving and
responding to direct-response advertising efforts) could be used in determining
probable future revenues and benefits as defined by SOP 93-7.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
Therefore, in accordance with the requirements of Practice Bulletin 13, the
Company reported the change in accounting as a cumulative effect of a change in
accounting principle as of July 1, 1994, the beginning of the Company's current
fiscal year. The effect of adopting Practice Bulletin 13 on the Company's
consolidated statements of earnings were as follows:
Three Three Three Nine
Months Months Months Months
Ended Ended Ended Ended
Sept. 30, Dec. 31, March 30, March 30,
Earnings (Loss) 1994* 1994 1995 1995
- ------------------ --------- -------- --------- ---------
($ in thousands)
Effect on:
Earnings before
Cumulative Effect of
Change in Accounting
Principle $ 0 $(1,586) $(1,372) $ (2,958)
========= ======== ======== =========
Net Earnings (Loss) $(46,160) $(1,586) $(1,372) $(49,118)
========= ======== ======== =========
Earnings (Loss) Per Share
- -------------------------
Effect on:
Earnings before
Cumulative Effect of
Change in Accounting
Principle $ 0 $ (.06) $ (.05) $ (.11)
========= ======== ======== =========
Net Earnings (Loss) $ (1.67) $ (.06) $ (.05) $ (1.78)
========= ======== ======== =========
*Restated to reflect the adoption of Practice Bulletin 13 on July 1, 1994.
There was no effect on earnings from continuing operations in the first
quarter from adopting Practice Bulletin 13. The amount of subscription
acquisition costs that would have been expensed under Practice Bulletin 13
was the same amount that was expensed under the previous accounting method
for subscription costs.
The cumulative effect of the change in accounting principle, as of July 1, 1994
on the Company's balance sheet was to reduce subscription acquisition costs by
$76.9 million, deferred income tax liabilities by $30.7 million and retained
earnings by $46.2 million.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
2. Inventories
Major components of inventories are summarized below. Of total inventory
values shown, approximately 27 and 32 percent respectively, are under the LIFO
method at March 31, 1995 and June 30, 1994.
(unaudited)
March 31 June 30
1995 1994
-------- --------
($ in thousands)
Raw materials $22,701 $15,366
Work in process 18,890 13,132
Finished goods 13,088 15,086
-------- --------
54,679 43,584
Reserve for LIFO cost valuation (12,395) (8,622)
-------- --------
Total $42,284 $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 acquisi-
tion 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. A portion of this receivable,
relating to the Company's 1989 tax year, remains unpaid as of May 11, 1995,
pending final review by the Joint Committee on Taxation.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
4. Acquisition
On January 5, 1995, the Company purchased the assets of WSMV-TV, an NBC network
affiliated television station in Nashville, Tennessee, from Cook Inlet
Television Partners for $159 million. Cash from short-term investments and
lines of credit and a term borrowing of $100 million, obtained from a group of
four banks led by The Northern Trust Company as agent, were used to purchase
WSMV-TV.
The acquisition has been accounted for by the purchase method. The
Consolidated Balance Sheet as of March 31, 1995, the Consolidated Statements of
Earnings for the three and nine months ended March 31, 1995 and the
Consolidated Statement of Cash Flows for the nine months ended March 31, 1995
of Meredith Corporation and its subsidiaries reflect that acquisition. From
the date of acquisition of January 5, 1995, the effects of WSMV-TV revenues and
operating income on Company revenues and operating income, respectively, for
the nine months ended March 31, 1995, were not material.
Pro forma disclosure (as if the acquisition occurred at the beginning of
Meredith Corporation's fiscal year) of selected statement of earnings items for
the nine months ended March 31, 1995 and 1994 are as follows:
Nine Months Ended March 31
1995 1994
-------- --------
(Dollar amounts in thousands, except per share)
Revenues $661,970 $611,667
======== ========
Earnings before cumulative
effect of Change in Accounting
Principle $ 30,047 $ 22,051
Cumulative effect of Change in
Accounting Principle (46,160) --
-------- --------
Net (loss) earnings $(16,113) $ 22,051
======== ========
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
Nine Months Ended March 31
1995 1994
-------- --------
Net (loss) earnings per share
Earnings before cumulative
effect of Change in Accounting
Principle $ 1.09 $ .77
Cumulative Effect of Change in
Accounting Principle (1.67) --
------ ------
Net (loss) earnings $( .58) $ .77
====== ======
Recognition of goodwill resulted from the purchase. Goodwill is being
amortized over a 40 year period, consistent with industry practice, on a
straight-line basis.
5. Long-term Indebtedness
A $100 million term loan agreement between Meredith Corporation and four banks,
led by the Northern Trust Company as agent, was entered into related to the
purchase of WSMV-TV on January 5, 1995. Payments under this term loan
agreement are due as follows:
Fiscal Year ended June 30 Amount
------------------------- ------------
1995 $ 10 million
1996 15 million
1997 15 million
1998 35 million
1999 25 million
------------
Total $100 million
============
Interest is payable based on short-term LIBOR and/or prime rates of interest.
At March 31, 1995, the weighted average rate of interest for the term loan was
approximately 7.6 percent. The carrying amounts of the debt and related
interest payable approximate the fair values of these liabilities at March 31,
1995.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
6. 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 $91 million at March 31, 1995.) 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. One payment of $288,000 on
September 1, 1995, remains under the Agreement. The current value of the
Agreement as of May 4, 1995, is $280,000 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.
7. Cable Subsidiary Long-term Indebtedness and Disposition of Property
On December 29, 1994, Meredith/New Heritage Strategic Partners L.P. ("Strategic
Partners") entered into an amendment to the loan agreement it currently has
with ten banks, led by Toronto Dominion as agent. As of March 31, 1995, $91
million was owed under this loan agreement by Strategic Partners to the banks.
(This debt is non-recourse to Meredith Corporation.) The maturity date,
repayment provisions, required financial tests and capital expenditure limits
were the significant changes made to the loan agreement in the December 29
amendment. All financial tests, as amended, were met at March 31, 1995. The
maturity date was accelerated from March 31, 2001, to the earlier of March 31,
1996, or the date of the sale of all or the remaining portion of Strategic
Partners' cable television systems. The requirement for regularly scheduled
quarterly payments was discontinued. New repayment provisions required that
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<PAGE>
MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
upon the earlier of June 30, 1995, or the sale of the cable television system
in North Dakota, Strategic Partners pay the banks approximately $44 million.
On March 10, 1995, Strategic Partners paid the banks $44.3 million from the
proceeds received from the sale of its North Dakota systems on March 9, 1995.
(The Company continues to have an indirect interest in cable television systems
in the Minneapolis/ St. Paul area.)
The Company recognized a gain of $3,501,000 ($1,101,000 post-tax) in the
quarter ended March 31, 1995, on the sale of the North Dakota system, in which
it had an indirect ownership interest of approximately 70 percent.
8. Common and Class B Stock
At the Annual Meeting of Stockholders on November 14, 1994, the stockholders of
the Company approved an amendment to increase the number of authorized shares
of class B stock from the number of shares outstanding to 15 million shares and
common stock from 50 million to 80 million shares. On January 30, 1995, the
Board of Directors of the Company approved a two-for-one stock split, in the
form of a stock dividend, for stockholders of record March 1, 1995. All
reported number of shares and per share information in these interim financial
statements reflect the two-for-one stock split.
9. Contingencies
Reference is made to Part II, Item 1. Legal Proceedings of the Company's Form
10-Q for the quarterly period ended September 30, 1994.
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations: Third Quarter Fiscal 1995 Compared with Third Quarter
Fiscal 1994
Meredith Corporation net earnings for the quarter ended March 31, 1995 were
$10,179,000, or 37 cents per share, compared to prior-year third quarter net
earnings of $7,216,000, or 26 cents per share. Current year results include a
post-tax gain of $1,101,000, or four cents per share, from the sale of the
Bismarck, North Dakota cable television system. The Company indirectly owned
approximately 70 percent of the system. Excluding this gain, third quarter
earnings were $9,078,000, or 33 cents per share, a 27 percent per-share
increase from comparable prior year results. Record profits in the Company's
Broadcast and Magazine Groups were the primary factor in the improvement. All
per share amounts reflect a two-for-one stock split for stockholders of record
on March 1, 1995.
Revenues for the three months ended March 31, 1995 were $230,449,000, a twelve
percent increase from prior-year third quarter revenues of $205,763,000.
Advertising revenues increased 24 percent primarily due to gains from magazine
operations and the five comparable television stations. The acquisition of
WSMV-TV, an NBC affiliate in Nashville, in January 1995 accounted for
approximately 30 percent of the advertising revenue increase.
Revenues by Segment
Three Months Ended March 31 1995 1994
-------------------------------------------------------------------
Publishing $181,088 $166,923
Broadcast 30,927 21,209
Real Estate 5,361 4,970
Cable 13,081 12,674
Less: Inter-segment Revenue (8) (13)
-------- --------
Total Revenues $230,449 $205,763
======== ========
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Income from operations was $21,160,000 in the fiscal third quarter compared to
operating income of $16,758,000 in the prior-year period. The operating margin
rose from 8.1 percent of net revenues in the fiscal 1994 third quarter to 9.2
percent in the current quarter. Excluding the $2 million negative operating
effect of the change in accounting principle (see further explanation in
Publishing Segment discussion) the operating margin increased 25 percent. 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 March 31 1995 1994*
- --------------------------------------------------------------------------
Production, distribution and editorial (PD&E) 40.8% 41.0%
Selling, general and administrative (SG&A) 45.7% 46.6%
Depreciation and amortization 4.3% 4.2%
* Reclassified to conform with current-year presentation.
PD&E expense declined slightly as a percentage of revenues. The benefit of
increased advertising revenues in the Broadcast Group was partially offset by
higher paper and postage costs in the Publishing Segment.
SG&A expenses decreased as a percentage of revenues as the rate of revenue
growth outpaced expense increases, despite the negative operating effect of the
subscription accounting change on current year results. Prior year SG&A
expenses would have been 50.3 percent of net revenues on a pro forma basis if
the accounting change was reflected in the prior year. The higher pro-forma
expense ratio, compared to the current quarter, reflects a larger volume of
subscriber acquisition efforts in the prior year third quarter.
A discussion of results by segment follows:
Publishing: Revenues in the Magazine Group increased ten percent from the
prior-year third quarter primarily due to increased advertising revenues
resulting from growth in advertising pages and net revenues per page. All
titles reported higher ad revenues. Better Homes and Gardens and Ladies' Home
Journal, the Company's two largest circulation titles, each recorded
advertising revenue gains of approximately 12 percent due to a combination of
increased ad pages and higher net revenues per page. Other titles with double-
digit percentage gains in ad revenues, primarily due to increased ad pages,
included Traditional Home, WOOD and the Company's line-up of Better Homes and
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<PAGE>
Gardens Special Interest Publications. Similar percentage gains in revenues
for Successful Farming and Midwest Living magazines reflected a combination of
increased ad pages and higher net revenues per page. Magazine Group
circulation revenues were up seven percent from the prior year primarily due to
the growth of new titles, including Crayola Kids and Better Homes and Gardens
Floral & Nature Crafts. Lower ancillary revenues in the Magazine Group, due to
a decline in the sales volume of specialty products and services, partially
offset the advertising and circulation revenue gains.
Magazine Group profits increased to record levels for the third quarter despite
the negative operating effect of a change in accounting principle related to
subscription acquisition costs. In December 1994, the Financial Accounting
Standards Board (FASB) approved the issuance of Practice Bulletin 13 which
interpreted AICPA Statement of Position 93-7, "Reporting on Advertising Costs,"
previously adopted by the Company. Practice Bulletin 13 required the Company
to change from a method of deferring most subscription acquisition costs to
deferring only those costs generating future subscription revenues in excess
of future costs incurred. Therefore, subscription acquisition expenses may now
vary significantly by quarter, depending on the timing of subscriber promotion
efforts.
Excluding the effect of this change in accounting principle, profits increased
16 percent from the prior year period. Better Homes and Gardens and Ladies'
Home Journal magazines led the Group with double-digit percentage profit
improvements resulting primarily from gains in advertising revenues. Increased
ad revenues also were the primary factor in improved results for Successful
Farming, WOOD, Midwest Living and the Better Homes and Gardens Special Interest
Publications. The profit increases were negatively affected by a postage
increase of approximately 13 percent in January 1995 and rising paper costs.
Current quarter profits were also held down by higher new title start-up costs
and expansion in the custom publishing area. The increase in new title start-
up costs primarily reflected costs associated with a new bi-monthly gardening
magazine, "home garden," which was introduced in the Company's fiscal third
quarter.
Book Group revenues declined slightly from the prior year third quarter. Lower
sales volumes in the direct response and book club operations were nearly
offset by higher sales volumes through retail marketing channels. Operating
results for the Group were disappointing and below the prior year's
performance. Declining circulation contribution from Cross Stitch & Country
Crafts and higher costs associated with the catalog operations led to larger
losses in the craft area. Increased new member acquisition efforts and higher
product return rates held-down profits in the book clubs. Increased profits
from retail marketing operations, due to higher sales and lower product return
rates, partially offset the declines experienced in other Book Group
operations.
- 18-
<PAGE>
Revenues and profits from the Company's licensing agreement with Wal-Mart
Stores, Inc., increased from the prior year quarter.
Broadcast: Increases in local and national advertising revenues and the
January 1995 acquisition of WSMV-TV in Nashville resulted in record third
quarter profits for the Broadcast Group. Advertising revenues of the five
previously owned stations increased 15 percent from the prior year third
quarter led by increases at KPHO in Phoenix and WOFL in Orlando. Increased
market demand for advertising led to higher spot rates which fueled the revenue
growth. Increased revenues at KPHO also reflected its affiliation with the CBS
network effective September 10, 1994. Broadcast Group profits of the five
comparable stations increased 80 percent from fiscal 1994 third quarter
earnings. The biggest increases were at KPHO and WOFL, reflecting their strong
advertising revenue gains. Lower programming expenses also contributed to the
improved performance, especially at KPHO. The decline in programming expense
at KPHO reflects a reduced need for station-supplied programming, due to its
affiliation with CBS, which led to a write-down of certain film assets in the
fourth quarter of the prior year. Revenues and profits at WSMV-TV, the
Company's new NBC affiliated station, contributed to the Group's strong
performance. Interest expense on the debt incurred for the purchase reduced
the favorable effect of WSMV-TV on net earnings of the Company.
Real Estate: Third quarter revenues increased 8 percent in the Real Estate
Group due to higher transaction fee revenues and increased sales of custom
products to members. The increase in transaction fees, which are generated by
members' sales volumes, reflected continued strength in existing home sales.
Profits also exceeded the prior year third quarter, primarily due to revenue
increases.
Cable Television: On March 9, 1995, Meredith/New Heritage Strategic Partners,
L.P. ("Strategic Partners") sold its cable television system in Bismarck, North
Dakota. This system was the smaller of two cable television properties, of
which the Company indirectly owned approximately 70 percent. (The Company
still has an indirect ownership interest in a cable television system in the
Minneapolis/St. Paul area.) Third quarter revenues increased three percent
from the prior year period due to growth in the number of subscribers. Lower
average revenue per subscriber, a result of government re-regulation of cable
pricing, partially offset the increase in revenues from additional subscribers.
The sale of the North Dakota system had no material effect on comparative
revenues due to the timing of the sale. Operating profits, before interest
expense, also exceeded the prior year period due to the revenue increase.
Interest expense declined from the prior year period, as proceeds from the sale
were used to reduce Strategic Partners' outstanding bank debt as required by
its loan agreement. This resulted in a smaller net loss for the cable
operations for the quarter compared to the prior year.
- 19 -
<PAGE>
Other: Total interest expense increased from the prior year period due to debt
incurred for the purchase of WSMV-TV. The increase was partially offset by the
reduction in interest expense for the cable operations, as previously noted.
The decrease in the overall effective tax rate, from 51 percent in the fiscal
1994 third quarter to 50 percent in the current quarter, reflected increased
operating earnings which lessened the effect of non-deductible items on the
overall tax rate.
Results of Operations: First Nine Months Fiscal 1995 Compared with First Nine
Months Fiscal 1994
The effect of a change in accounting principle resulted in a net loss of
$16,390,000, or a negative 59 cents per share, for the first nine months of
fiscal 1995. In December 1994, the FASB approved the issuance of Practice
Bulletin 13 which interpreted AICPA Statement of Position 93-7, "Reporting on
Advertising Costs," previously adopted by the Company. Practice Bulletin 13
required the Company to change from a method of deferring most subscription
acquisition costs to deferring only those costs generating future subscription
revenues in excess of future costs incurred. The cumulative effect of this
change in accounting principle, as of July 1, 1994, was to reduce subscription
acquisition costs by $76.9 million, deferred income tax liabilities by $30.7
million and net earnings by $46.2 million, or $1.67 per share.
Earnings before the cumulative effect of a change in accounting principle were
$29,770,000, or $1.08 per share and included the following special items:
- Post-tax interest income of $4,747,000, or 17 cents per share, from a
favorable settlement with the Internal Revenue Service ("IRS").
- A post-tax gain of $1,101,000, or four cents per share, on the sale of the
North Dakota cable television system.
Fiscal 1994 net earnings for the nine months ended March 31, 1994 were
$22,164,000, or 78 cents per share, and included the following special items:
- A post-tax gain of $8,197,000 (28 cents per share) on the dispositions of
the Syracuse and Fresno television properties.
- A non-recurring post-tax charge of $2,592,000 (nine cents per share) for
taxes on disposed properties.
All per share amounts reflect a two-for-one stock split for shareholders of
record on March 1, 1995.
- 20 -
<PAGE>
Excluding these one-time occurrences, earnings were $23,922,000, or 87 cents
per share, for the nine months ended March 31,1995, a 47 percent increase from
comparable prior year per-share earnings of 59 cents, or $16,559,000. The
improvement resulted primarily from increased profits in the Broadcast and
Magazine Groups. Also contributing were improvements in Real Estate and
Licensing operations. 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 IRS for those tax years were contested
in United States Tax Court in fiscal 1993. These tax deficiency notices
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 first nine months of fiscal 1995 were $645,480,000, a nine
percent increase from prior year revenues of $592,684,000. Advertising
revenues increased 16 percent primarily due to gains from magazine operations
and the five comparable television stations. The January 1995 acquisition of
WSMV-TV, an NBC network affiliate in Nashville, contributed to the advertising
revenue increase. The growth of new magazine products led to the four percent
increase in circulation revenues. Increases in Real Estate Group revenues and
the addition of revenues from a licensing agreement (beginning in January 1994)
were the primary factors in the increase in other revenues.
Revenues by Segment
Nine Months Ended March 31 1995 1994
-------------------------------------------------------------------
Publishing $500,694 $463,148
Broadcast 87,995 76,116
Real Estate 17,662 15,223
Cable 39,168 38,229
Less: Inter-segment Revenue (39) (32)
-------- --------
Total Revenues $645,480 $592,684
======== ========
- 21 -
<PAGE>
Income from operations was $53,691,000 for the nine months ended March 31,
1995, compared to $38,118,000 in the prior year period. The operating margin
increased from 6.4 percent of net revenues in the prior year period to 8.3
percent in the current period. Excluding the non-recurring charge from the
prior year and the $4.9 million negative operating effect of the change in
accounting principle in the current year, the operating margin increased 26
percent. The following table shows the percentage of revenues each major
expense classification represented in the current and prior year periods:
Expenses as Percentage of Revenues
Nine Months Ended March 31 1995 1994*
- ---------------------------------------------------------------------------
Production, distribution and editorial (PD&E) 40.5% 41.6%
Selling, general and administrative (SG&A) 47.0% 46.8%
Depreciation and amortization 4.2% 4.4%
Non-recurring items -- .8%
* Reclassified to conform with current year presentation.
PD&E expense declined as a percentage of total revenues due to increased
advertising revenues and lower programming expenses in the Broadcast Group.
The decline was partially offset by increased paper and postage costs.
SG&A expenses increased slightly as a percentage of revenues compared to the
prior year period. The operating effect of the change in accounting principle,
related to subscription acquisition costs, caused the increase. Prior year
SG&A expenses would have been 47.1 percent of net revenues on a pro forma basis
if the accounting change was reflected in the prior year, or virtually no
change from the current year period.
The charge for non-recurring items represents a prior-year reserve for taxes on
disposed properties.
A discussion of results by segment follows:
Publishing: Revenues in the Magazine Group increased 10 percent from the prior
year period. Advertising revenues grew 16 percent primarily due to strong
advertising page gains by virtually all titles. Better Homes and Gardens and
Ladies' Home Journal, the Company's two largest circulation titles, reported ad
page increases of 12 percent and seven percent, respectively. Traditional Home,
Country Home, Wood, Successful Farming, Golf For Women and
- 22 -
<PAGE>
the Better Homes and Gardens Special Interest Publications reported double-
digit percentage gains in ad pages. Magazine Group circulation revenues
increased five percent primarily due to higher subscription revenues on new
titles, including Crayola Kids and Better Homes and Gardens Floral & Nature
Crafts.
Magazine Group profits increased from the prior year period despite the
unfavorable effect on operating results of the change in accounting principle
related to subscription acquisition costs. Excluding that impact, Magazine
Group profits were up 19 percent, largely due to the strong performance of its
flagship title, Better Homes and Gardens magazine. Advertising revenue growth
fueled the Better Homes and Gardens profit increase and also led to improved
performances by Ladies' Home Journal, Golf For Women, Successful Farming, and
WOOD magazines and the Company's lineup of Better Homes and Gardens Special
Interest Publications. Partially offsetting these improvements were increases
in paper and postage costs, increased costs for new magazine start-ups and
expansion in the custom publishing area. The increase in new title start-up
costs primarily reflects costs associated with a new bi-monthly gardening
magazine, "home garden," which was introduced in the Company's fiscal third
quarter.
Book Group revenues declined slightly in the nine months ended March 31, 1995
compared to the prior year period. Declining subscription levels for Cross
Stitch & Country Crafts and lower sales volumes in direct response operations
were nearly offset by increased sales volumes through retail marketing
channels. Book Group operating results also lagged behind the prior year.
Lower sales volumes and higher promotion costs were the primary factor in the
decline of the direct response operations results. Lower circulation
contribution caused a decline for Cross Stitch & Country Crafts. Increased
investment in new member acquisition held down profits for Better Homes and
Gardens Crafts Club, the largest of the Company's five book clubs. Partially
offsetting these declines were higher profits for retail marketing due to
increased sales volumes and lower product return rates.
Nine months of revenues and profits from the Company's licensing agreement with
Wal-Mart Stores, Inc., in the current period, versus three months in the prior
year, contributed to the improvement in Publishing segment results. Better
Homes and Gardens Garden Centers opened in more than 2,000 stores nationwide in
January 1994.
Paper and postage are significant and essential expenses in the Publishing
segment. Paper prices, which were relatively stable in fiscal 1994 have
increased approximately 30 percent since the end of fiscal 1994. This includes
an April 1995 price increase of approximately nine percent that will impact the
fiscal year's fourth quarter results. The price increases reflect a tightening
- 23 -
<PAGE>
of the paper market due to strong demand and a relatively fixed level of
supply. The Company does not expect to experience a shortage of paper in the
foreseeable future due to long-term contracts and solid relationships with
major suppliers. However, the current tight market is expected to lead to
further price increases. Each 10 percent increase in price equates to
approximately $10 million in increased annual paper costs for the Company based
on current annual volumes. The Company is considering changes in paper types
and weights in an effort to minimize the impact of current and expected future
price increases, but only where management believes product quality will not be
adversely affected. A postal rate increase of approximately 13 percent
occurred in January 1995 increasing the Company's current level of postage
costs by approximately $10 million on an annual basis.
Broadcast: Broadcast Group revenues increased 16 percent in the nine months
ended March 31, 1995 including approximately three months of revenue from newly
acquired WSMV-TV in Nashville. Prior year-to-date revenues included six months
of revenue from two television stations sold in December 1993. Comparable
stations' revenues increased 22 percent due to strong local and national
advertising revenues. Each of these five stations reported higher ad revenues,
a result of higher spot rates due to increased market demand for television
advertising. KPHO, the Company's station in Phoenix, experienced the largest
increase primarily due to its September 1994 affiliation with the CBS network.
Broadcast Group profits increased 60 percent from the prior year period.
Profits of the five comparable stations were up 73 percent for the nine month
period. This comparison excludes a favorable adjustment to accrued music
license fees recorded in fiscal 1994. Increased ad revenues and lower
programming expenses were the primary factors in the improvement. Each of the
five comparable television stations reported significant profit improvement.
As with revenues, KPHO reported the largest percentage profit improvement. The
CBS affiliation is expected to have a favorable long-term effect on the
revenues and profits of KPHO. The decline in programming expense at KPHO
reflected the write-down of certain film assets in the fourth quarter of the
prior year due to reduced programming needs resulting from its affiliation
with CBS. Declines in programming expenses at the other stations reflected
increased use of first-run syndicated programming.
The Company purchased WSMV-TV, an NBC affiliate serving the Nashville,
Tennessee market, for $159 million on January 5, 1995. This was the largest
purchase in the history of the Company and is expected to have a significant
and favorable impact on Broadcast Group annual revenues and operating results.
Interest expense on the debt incurred for the purchase reduced the favorable
effect of WSMV-TV results on net earnings of the Company.
- 24 -
<PAGE>
Real Estate: Higher transaction fee revenues and increased product and
publication sales volumes led to a 16 percent increase in Real Estate Group
revenues in the first nine months of fiscal 1995. The increase in transaction
fees, which are generated by member's sales volume, reflected continued
strength in existing home sales. The revenue increases were also the primary
factor in a double-digit percentage profit increase for the Group.
Cable: On March 9, 1995, Meredith/New Heritage Strategic Partners, L.P.
("Strategic Partners") sold its cable television system in North Dakota, the
smaller of two cable television properties, of which the Company indirectly
owned approximately 70 percent. Revenues increased three percent from the
prior year period as subscriber growth more than offset the negative effects of
federally-mandated subscriber rate rollbacks. The sale of the North Dakota
system had no material effect on comparative revenues in the current period due
to the timing of the sale. Profits, before interest expense, showed little
change from the prior year period. Including interest expense, the cable
television operations continued to experience a net loss. The net loss was
slightly less than in the comparable prior year period primarily due to lower
interest expense. Proceeds from the sale of the North Dakota system were used
to reduce Strategic Partners' outstanding bank debt (as required by its loan
agreement).
Other: Interest income (excluding interest income from the favorable IRS
settlement) increased due to additional cash available for investment (prior to
the January 1995 purchase of WSMV-TV) and higher effective yields. Interest
expense, primarily from debt of the cable operations in the prior year period,
increased due to debt incurred for the purchase of WSMV-TV.
The Company's effective tax rate declined from 50 percent in the nine months
ended March 31, 1994, to 49 percent in the current period. The current year
provision benefited from increased operating earnings which lessened the effect
of non-deductible items on the overall tax rate. This benefit was offset
slightly by a higher tax rate recorded on the gain on the cable disposition.
The prior year provision benefited from a favorable effective tax rate on the
gain on the disposition of two television stations. However, this benefit was
partially offset in the prior year by the unfavorable impact of the federal
corporate tax rate increase on the Company's deferred tax liabilities.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $32,062,000 in the nine months ended
March 31, 1995, to $5,895,000. This compared to a decrease of $13,052,000 in
the first nine months of fiscal 1994. The difference was primarily due to the
purchase of WSMV-TV and in the prior year, proceeds from the dispositions of
two television properties. The proceeds from the current year sale of a cable
- 25 -
<PAGE>
television system were used to reduce the outstanding debt of the cable
partnership. Partially offsetting these differences were increased cash
provided by operating activities, a reduction in cash used for the repurchase
of Company shares and long-term debt incurred by the Company to purchase WSMV-
TV in the current period. Higher earnings (before the change in accounting
principle which had no cash effect) and an increase in accounts payable and
accruals led to the increase in cash provided by operations. The increase in
accounts payable and accruals reflected additional paper purchases prior to a
April 1995 price increase. Accounts payable and accruals declined in the
prior-year period due to payments for paper purchased in June 1993 in
anticipation of a July 1993 paper price increase.
The decreases in subscription acquisition costs, deferred income taxes and
retained earnings, from June 30, 1994 to March 31, 1995, reflected the
recognition of the cumulative effect (as of July 1, 1994) of the change in
accounting principle recorded in the current fiscal year. The increase in
accounts receivable during the period was due to higher advertising receivables
in magazine and broadcast operations resulting from increased revenues, the
acquisition of WSMV-TV and the remaining balance due from the Internal Revenue
Service related to the tax settlement. Goodwill and other intangibles
increased from the purchase of WSMV-TV.
On January 5, 1995, Meredith Corporation purchased the assets of WSMV-TV, a
television station located in Nashville, Tennessee. The purchase price for
WSMV-TV was $159 million. The acquisition was financed by cash from short-term
investments and lines of credit and a term borrowing of $100 million from a
group of four banks led by The Northern Trust Company as agent. The first
payment of $10 million is due under the term loan agreement on June 1, 1995.
The final payment is due on December 31, 1998, the term loan maturity date.
Operating cash flows of the Company are expected to provide adequate funds for
debt and interest payments.
At September 30, 1994, Strategic Partners failed to meet certain financial
ratios related to operating cash flow as required by the loan agreement it has
with ten banks. In light of Strategic Partners' efforts to sell its assets in
part or in whole, the banks waived compliance with the affected covenants, and
their rights and remedies under the loan agreement as a result of the defaults,
for the fiscal year first quarter. On December 29, 1994, Strategic Partners
and the banks amended the aforementioned loan agreement. Significant amended
terms and provisions related to the maturity date, repayment provisions,
required financial tests and capital expenditure limits. (See Note 7 to the
Interim Consolidated Financial Statements.) The required financial ratio
tests, as amended, were met by Strategic Partners at March 31, 1995. Strategic
Partners' debt is non-recourse to Meredith Corporation. Strategic Partners
continues to explore the disposition of its remaining cable television system
in Minnesota.
- 26 -
<PAGE>
The Board of Directors approved a two-for-one stock split, in the form of a
share dividend, payable to stockholders of record on March 1, 1995. All
references to previously reported number of shares and per share information
have been restated to reflect the stock split.
In the nine months ended March 31, 1995, $3.8 million was spent for the
repurchase of 168,000 shares of Company common stock. This compares with
spending of $38.2 million for 1,977,000 shares in the prior year period. As of
March 31, 1995, approximately 388,000 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.
On January 30, 1995, the Board of Directors increased the quarterly dividend by
11 percent, or one cent per share, to ten cents per share (on a restated basis)
with the dividends payable on March 15, 1995. On an annual basis, the effect
of this increase would be to pay additional dividends of approximately $1
million at the current number of shares outstanding.
Capital expenditures in fiscal 1995 are expected to increase by approximately
fifteen percent over fiscal 1994 levels. This growth has resulted primarily
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 becoming a CBS affiliate in September 1994.
Other capital spending in the current year includes equipment upgrades for the
recently acquired television station in Nashville, technical equipment for
other television stations and continued investment in new and upgraded computer
networks throughout Company operations. The Company also has entered into a
lease agreement for new office space in New York City, which will allow
consolidation of all New York City employees in one location and reduction of
future occupancy costs. This project is expected to initially cost
approximately $11 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.
At this time, management expects that cash on hand, plus internally-generated
cash flow, will provide funds for capital expenditures, cash dividends,
scheduled debt payments and other operational cash needs for foreseeable
periods (excluding Strategic Partners' scheduled debt payments which are
expected to be funded by proceeds from the sale of its cable television
systems, or refinanced if necessary). Short-term lines of credit will continue
to be used on an as-needed basis for working capital needs. At March 31, 1995,
Meredith Corporation had three unused committed lines of credit totaling $23
million. The Company does not expect the need for any long-term source of cash
to meet working capital requirements.
- 27-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part II, Item 1. Legal Proceedings of the Company's Form
10-Q for the period ended September 30, 1994.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11) Statement re computation of per share earnings
27) Financial Data Schedule
(b) Reports on Form 8-K
1) A Form 8-K dated January 5, 1995 was filed during the quarter ended
March 31, 1995 (Item 2. Acquisition or Disposition of Assets and Item
7. Financial Statements and Exhibits) reporting the acquisition of
WSMV-TV, a television station in Nashville, Tennessee, from Cook Inlet
Television Partners.
2) A Form 8-K/A-1 dated January 5, 1995 was filed during the quarter
ended March 31, 1995 (Item 7. Financial Statements and Exhibits)
with financial statements of WSMV-TV for the year ended December 31,
1994, and pro forma financial information for the Company and WSMV-TV
for the year ended June 30, 1994 and the six months ended December 31,
1994 related to the acquisition of WSMV-TV.
3) A Form 8-K dated January 24, 1995 was filed during the quarter ended
March 31, 1995 (Item 5. Other Information) reporting a change in
accounting principle related to the treatment of magazine subscription
acquisition costs by the Company and its effects on first and second
quarter fiscal year results.
- 28 -
<PAGE>
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: May 11, 1995
- 29 -
<PAGE>
Index to Exhibits
Exhibit
Number Item
------- -----------------------------------------------------------
11 Statement re computation of per share earnings
27 Financial Data Schedule
Exhibit 11
----------
MEREDITH CORPORATION
Computation of Primary and Fully Diluted Per
Common Share Earnings - Treasury Stock Method
For the Nine Months Ended March 31, 1995 and 1994
(Unaudited)
Weighted average number of shares
(in thousands)
1995 1994
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Weighted average number of shares
outstanding in thousands 27,408 27,408 28,622 28,622
Dilutive effect of unexercised
stock options in thousands 307 333 188 236
------ ------ ------ ------
Total 27,715 27,741 28,810 28,858
====== ====== ====== ======
Primary and fully
diluted earnings per common share
1995 1994
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Earnings per share before
cumulative effect of change
in accounting principle $1.08 $1.08 $ .78* $ .78*
Cumulative effect of change in
accounting principle (1.67) (1.67) - -
----- ----- ----- -----
Net (loss) earnings per share ($ .59) ($ .59) $ .78* $ .78*
===== ===== ===== =====
Note: Primary - Based on average market prices.
Fully Diluted - Based on the higher of the average market price
or the market price at December 31 of each year.
*Dilution less than three percent from earnings per common share
outstanding
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Consolidated Balance Sheet at March 31, 1995 and the Consolidated Statement of
Earnings for the nine months ended March 31, 1995 of Meredith Corporation and
Subsidiaries AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000065011
<NAME> MEREDITH CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,895
<SECURITIES> 1,000
<RECEIVABLES> 131,896
<ALLOWANCES> 19,145
<INVENTORY> 42,284
<CURRENT-ASSETS> 251,873
<PP&E> 246,215
<DEPRECIATION> 116,608
<TOTAL-ASSETS> 894,408
<CURRENT-LIABILITIES> 283,960
<BONDS> 181,307
<COMMON> 27,454
0
0
<OTHER-SE> 205,201
<TOTAL-LIABILITY-AND-EQUITY> 894,408
<SALES> 645,480
<TOTAL-REVENUES> 645,480
<CGS> 261,549
<TOTAL-COSTS> 261,549
<OTHER-EXPENSES> 27,012
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,550
<INCOME-PRETAX> 58,152
<INCOME-TAX> 28,382
<INCOME-CONTINUING> 29,770
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<EXTRAORDINARY> 0
<CHANGES> 46,160
<NET-INCOME> (16,390)
<EPS-PRIMARY> (.59)
<EPS-DILUTED> (.59)
</TABLE>
