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 September 30, 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 October 31, 1995
Common Stock, $1 par value 20,850,436
Class B Stock, $1 par value 6,701,829
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30 June 30
Assets 1995 1995 *
- ------------------------------------------------------------------------
(in thousands)
Current assets:
Cash and cash equivalents $ 9,469 $ 11,825
Receivables, net 100,754 98,191
Inventories 43,478 46,781
Supplies and prepayments 17,867 23,774
Subscription acquisition costs 48,967 65,604
Film rental costs 17,404 4,423
--------- ---------
Total current assets 237,939 250,598
--------- ---------
Property, plant and equipment (at cost) 169,727 163,947
Less accumulated depreciation (103,060) (101,506)
--------- ---------
Net property, plant and equipment 66,667 62,441
--------- ---------
Net assets of discontinued operations 87,380 88,097
Deferred subscription acquisition costs 46,687 34,957
Deferred film rental costs 12,191 3,777
Other assets 22,320 21,290
Goodwill and other intangibles
(at original cost less accumulated amortization) 280,024 282,636
--------- ---------
Total assets $753,208 $743,796
========= =========
*Restated to reflect the cable segment as discontinued operations.
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Balance Sheets, continued
(Unaudited)
September 30 June 30
Liabilities and Stockholders' Equity 1995 1995 *
- ------------------------------------------------------------------------
Current liabilities:
Current portion of long-term indebtedness $ 15,000 $ 15,000
Current portion of long-term film rental contracts 17,014 7,290
Accounts payable 34,370 48,601
Accrued taxes and expenses 62,994 57,216
Unearned subscription revenues 148,122 150,927
--------- ---------
Total current liabilities 277,500 279,034
--------- ---------
Long-term indebtedness 65,000 75,000
Long-term film rental contracts 15,618 4,969
Unearned subscription revenues 96,314 96,381
Deferred income taxes 20,458 18,492
Other deferred items 29,411 28,870
--------- ---------
Total liabilities 504,301 502,746
--------- ---------
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 outstand-
ing 20,811,204 at September 30 and 20,579,565 at
June 30 (net of treasury shares, 11,573,693 at
September 30 and 11,601,465 at June 30.) 20,811 20,580
Class B stock, par value $1 per share,
convertible to common stock
Authorized 15,000,000 shares; issued and
outstanding 6,729,025 at September 30 and
6,905,062 at June 30. 6,729 6,905
Additional paid-in capital 1,199 873
Retained earnings 223,399 216,485
Unearned compensation (3,231) (3,793)
--------- ---------
Total stockholders' equity 248,907 241,050
--------- ---------
Total liabilities and stockholders' equity $753,208 $743,796
========= =========
*Restated to reflect the cable segment as discontinued operations.
See accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE>
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Three Months Ended September 30 1995 1994 *
- ---------------------------------------------------------------
(in thousands, except per share)
Revenues (less returns and allowances):
Advertising $101,660 $ 83,980
Circulation 66,701 62,951
Consumer books 17,991 24,182
All other 21,310 16,220
--------- ---------
Total revenues 207,662 187,333
--------- ---------
Operating costs and expenses:
Production, distribution and editorial 88,694 78,835
Selling, general and administrative 95,124 91,385
Depreciation and amortization 5,626 4,037
--------- ---------
Total operating costs and expenses 189,444 174,257
--------- ---------
Income from operations 18,218 13,076
Interest income - IRS settlement -- 8,554
Interest income 662 523
Interest expense (1,759) (43)
--------- ---------
Earnings from continuing operations
before income taxes 17,121 22,110
Income taxes 7,612 9,829
--------- ---------
Earnings from continuing operations 9,509 12,281
Discontinued operations:
Loss from cable operations (net of
income tax benefit of $27 in 1995
and expense of $48 in 1994) (717) (1,609)
--------- ---------
Earnings before cumulative effect of
change in accounting principle 8,792 10,672
Cumulative effect of change in
accounting principle -- (46,160)
--------- ---------
Net earnings (loss) $ 8,792 $(35,488)
========= =========
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Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited), continued
Three Months Ended September 30 1995 1994 *
- ---------------------------------------------------------------
(in thousands, except per share)
Net earnings (loss) per share:
Earnings from continuing operations $ 0.34 $ 0.44
Discontinued operations (0.03) (0.05)
Cumulative effect of change in
accounting principle -- (1.67)
--------- ---------
Net earnings (loss) per share $ 0.31 $ (1.28)
========= =========
Dividends paid per share $ 0.10 $ 0.09
========= =========
Average number of shares outstanding 28,082 27,657
========= =========
* Restated to reflect the cable segment as discontinued operations and the
cumulative effect of a change in accounting principle as of July 1, 1994.
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended September 30 1995 1994 *
- -----------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Earnings before cumulative effect of change in
accounting principle $ 8,792 $ 10,672
Less cumulative effect of change in accounting
principle -- (46,160)
--------- ---------
Net earnings (loss) 8,792 (35,488)
--------- ---------
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Loss from discontinued operations 717 1,609
Depreciation and amortization 5,626 4,037
Amortization of film contract rights 3,453 6,582
(Increase) in receivables (2,563) (35,225)
Decrease in inventories 3,303 1,267
Decrease (increase) in supplies and prepayments 5,907 (1,001)
Decrease in subscription acquisition costs 4,907 85,255
(Decrease) increase in accounts payable and accruals (8,427) 261
(Decrease) in unearned subscription revenues (2,872) (134)
Increase (decrease) in deferred income taxes 1,940 (31,605)
Increase in other deferred items 540 6,271
--------- ---------
Net cash provided by operating activities 21,323 1,829
--------- ---------
Cash flows from investing activities:
Redemption of marketable securities -- 2,039
Additions to property, plant, and equipment (7,730) (2,236)
(Increase) decrease in other assets (1,432) 6,947
--------- ---------
Net cash (used) provided by investing activities (9,162) 6,750
--------- ---------
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Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited), continued
For the Three Months Ended September 30 1995 1994 *
- -----------------------------------------------------------------------
(in thousands)
Cash flows from financing activities:
Long-term indebtedness retired (10,000) --
Payments for film rental contracts (3,581) (4,162)
Proceeds from common stock issued 1,818 926
Purchase of company shares -- (3,759)
Dividends paid (2,754) (2,463)
--------- ---------
Net cash (used) by financing activities (14,517) (9,458)
--------- ---------
Net (decrease) in cash and cash equivalents (2,356) (879)
Cash and cash equivalents at beginning of year 11,825 31,528
--------- ---------
Cash and cash equivalents at end of period $ 9,469 $ 30,649
========= =========
*Restated to reflect the cable segment as discontinued operations and
cumulative effect of a change in accounting principle as of July 1, 1994.
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.
Fiscal 1994 financial statements reflect the adoption of Practice Bulletin 13,
"Direct-Response Advertising and Probable Future Benefits" as of July 1, 1994.
Practice Bulletin 13 interpreted Statement of Position 93-7, "Reporting on
Advertising Costs." Practice Bulletin 13 requires the Company to expense most
direct-response subscription acquisition costs as incurred versus the Company's
prior accounting method of deferring most of those costs over the lives of the
related subscription revenues.
2. Discontinued Operations
The Company formalized plans to sell its remaining cable television systems and
therefore classified its cable segment as discontinued operations effective
September 30, 1995. Meredith/New Heritage Strategic Partners, L.P. ("Strategic
Partners"), of which the Company owns approximately 70 percent, is currently
negotiating the sale of these cable television systems located in Minneapolis.
(Strategic Partners sold its Bismarck/Mandan, North Dakota system in March
1995.) The Company believes Strategic Partners will complete the sale of its
cable operations within the next 12 months and will recognize a gain on the
sale. The amount of the gain is not yet determinable.
Prior year financial statements have been restated to reflect the cable segment
as discontinued operations. Revenues for the cable segment totaled $12.2
million for the first quarter of fiscal 1996 versus prior-year revenues for the
period of $12.8 million. Interest expense is reflected in the loss from
discontinued cable operations based on debt that is specifically attributed to
the cable segment and is non-recourse to Meredith Corporation. Net interest
expense attributed to the cable segment was $1.8 million and $2.7 million for
the first quarter of fiscal 1996 and 1995, respectively. Assets and
liabilities of the discontinued operations have been reclassified on the
consolidated balance sheet from their historic classification to separately
identify them as net assets of discontinued operations. These net assets of
discontinued operations at September 30, 1995, consist of goodwill and other
intangibles $141.4 million, net property, plant and equipment $70.8 million,
net of long-term debt ($87.3) million and other net liabilities ($37.5)
million.
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<PAGE>
MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
3. Inventories
Major components of inventories are summarized below. Of total inventory
values shown, approximately 59 and 55 percent respectively, are under the LIFO
method at September 30, 1995 and June 30, 1995.
(unaudited)
September 30 June 30
1995 1995
-------- --------
($ in thousands)
Raw materials $34,778 $32,320
Work in process 9,531 13,801
Finished goods 13,103 13,059
-------- --------
57,412 59,180
Reserve for LIFO cost valuation (13,934) (12,399)
-------- --------
Total $43,478 $46,781
======== ========
4. Cable Subsidiary Long-Term Indebtedness
Strategic Partners owed $87.3 million as of September 30, 1995, to a group of
ten banks under a loan agreement. Interest was payable under interest rate
swap agreements until September 1, 1995. The weighted-average interest rate
payable under the swap agreements on the bank debt outstanding at June 30,
1995, was 7.06 percent (before an applicable margin of 1.25 percent).
On September 1, 1995, interest rates on the total outstanding borrowing of
$87.3 million converted to short-term rates based on Eurodollar, prime and/or
certificate of deposit rates as provided in the loan agreement. As of
September 30, 1995, the weighted-average rate of interest on Strategic
Partners' debt was 6.90 percent.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations: First Quarter Fiscal 1996 Compared with First Quarter
Fiscal 1995
(Note: All per-share amounts are computed on a post-tax basis and reflect a
two-for-one stock split in March 1995.)
Meredith Corporation net earnings for the quarter ended September 30, 1995,
were $8,792,000, or 31 cents per share. Prior-year first quarter results,
including the cumulative effect of a change in accounting principle related to
subscription acquisition costs, were a net loss of ($35,488,000), or ($1.28)
per share. The cable segment has been classified as discontinued operations as
management expects the cable properties to be sold within the next year.
Earnings from continuing operations were $9,509,000, or 34 cents per share, in
the fiscal 1996 first quarter. This represents a 26 percent increase from
prior-year earnings from continuing operations of $7,534,000, or 27 cents per
share, excluding the post-tax impact of IRS interest income. Improvements in
the Company's broadcasting and magazine operations were the biggest factors in
the increase. Including interest income from the IRS, which was primarily
related to the favorable resolution of the Ladies' Home Journal tax case,
prior-year earnings from continuing operations were $12,281,000, or 44 cents
per share.
Revenues from continuing operations for the three months ended September 30,
1995, were $207,662,000, an 11 percent increase from prior-year first quarter
revenues of $187,333,000. Increased advertising revenues in the magazine and
television broadcasting operations were the most significant factor in the
increase. A decline in consumer book revenues occurred reflecting the
elimination of most direct-response promotion efforts due to the previously-
announced strategic alliance with The Reader's Digest Association, Inc. This
alliance gives Reader's Digest the rights for direct-response marketing of
Meredith-trademarked products.
Income from operations was $18,218,000 in the first quarter, a 39 percent
increase from prior-year first quarter results. The operating margin rose from
7.0 percent of net revenues in the fiscal 1995 first quarter to 8.8 percent in
the current quarter. Lower selling, general and administrative expenses, as a
percentage of revenues, due to the sharp decline in book direct-response
promotion expenses was the primary factor in the margin improvement.
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<PAGE>
Operating costs and expenses rose 9 percent from $174,257,000 in the fiscal
1995 first quarter to $189,444,000 in the current quarter. The primary factors
in the increase were higher magazine paper and postage expenses (a result of
both volume and price increases), increased circulation expenses (due to the
timing of magazine subscription promotion mailings and the growth of newer
titles) and higher amortization expense (from the amortization of intangible
assets that resulted from the acquisition of WSMV-TV in January 1995).
Earnings from continuing operations before interest, taxes, depreciation and
amortization ("EBITDA") were $23,844,000 in the first quarter, up 39 percent
from $17,113,000 in the prior-year period primarily due to improvements in
broadcasting and magazine operating results.
Net interest expense (excluding IRS interest income) increased due to debt
incurred for the purchase of the Nashville television station.
Segment information for continuing operations:
Three months ended September 30 1995 1994
- -----------------------------------------------------------------------------
Revenues
Publishing $166,563 $155,069
Broadcasting 35,223 25,983
Real Estate 6,206 6,293
Less: Inter-segment revenues (330) (12)
-------- --------
Total Revenues $207,662 $ 187,333
======== =========
Operating Profit
Publishing $ 9,070 $ 10,263
Broadcasting 12,761 6,269
Real Estate 1,020 699
Unallocated corporate expense (4,633) (4,155)
-------- ---------
Total Operating Profit $ 18,218 $ 13,076
======== =========
Publishing: Revenues in the publishing segment increased 7 percent from the
prior-year first quarter primarily due to increased advertising revenues that
resulted from an 18 percent increase in advertising pages. The Company's
flagship title, Better Homes and Gardens, recorded an advertising page gain of
15 percent from the prior-year quarter. Other titles with ad page gains of 15
percent or more included Country Home, Midwest Living, Golf For Women and
Country Home Country Gardens. The addition of home garden magazine and new
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custom publications also contributed to the ad revenue increase. The Company
may begin to see a slowdown in ad revenue growth due to softness in the overall
economy. Publishing circulation revenues increased 6 percent from the prior-
year quarter primarily due to higher revenues from newer titles. A higher
sales volume of custom publications and premiums also contributed to the
increase in publishing segment revenues. These increases were partially offset
by the aforementioned decline in book direct-response volumes.
First quarter publishing segment operating profits declined 12 percent from the
prior-year period due to increased operating losses in the book business and a
sharp increase in LIFO inventory expense ($1,535,000 in the current-year
quarter versus $698,000 in the prior-year quarter) resulting from rising paper
prices. These factors more than offset record operating results from magazine
operations largely due to the outstanding performance of Better Homes and
Gardens magazine. Higher advertising revenues and lower subscription expenses
(due to fewer promotional mailings) were the primary contributors to Better
Homes and Gardens' improvement. Country Home magazine reported significant
improvement from the prior year due to increased ad revenues. Operating
profits from the Company's group of magazine craft titles also improved,
primarily due to favorable subscription expenses. Lower new title start-up and
testing costs also contributed to the improvement in magazine operating
profits. Operating profits at Ladies' Home Journal magazine declined from the
prior-year quarter primarily due to increased subscription expenses resulting
from a larger volume of promotional mailings.
Increased operating losses in the book business resulted primarily from lower
response rates and higher paper and postage costs in the book clubs. Operating
profits decreased in the retail book area due to the timing of provisions for
product returns. The Company downsized the book operations' staff by
approximately 28 percent late in the first quarter. This downsizing is
expected to reduce future costs of the book operations. The Company's
strategic alliance with the Reader's Digest Association, Inc., is still in the
testing phase and had no significant impact on first-quarter results.
Revenues and profits from the Company's garden licensing agreement with Wal-
Mart Stores, Inc., showed little change from the prior-year first quarter. The
Company has announced plans for another licensing agreement with Wal-Mart
involving Better Homes and Gardens Floral & Nature Crafts-labeled merchandise
and signs. These products are scheduled to appear in Wal-Mart stores
throughout the country early in calendar 1996.
Paper is the major raw material required in the publishing segment. Substan-
tial paper price increases in the past year have resulted from increased global
demand and limited supplies. Paper prices increased nearly 30 percent in
fiscal 1995. A July 1, 1995, increase boosted prices by an additional 9
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percent. A 5 percent price increase on October 1 is expected to affect
approximately two-thirds of the Company's future paper purchases. (Free sheet
paper stock was excluded from the latest paper price increase.) While the
Company has contractual agreements to ensure adequate supplies of paper for
current publishing requirements, further price increases are expected in fiscal
1996. LIFO inventory expense increased 120 percent in the first quarter
reflecting price increases in the last twelve months and anticipated price
increases.
Selected magazine rate base reductions have been announced, largely in response
to skyrocketing paper prices. Ladies' Home Journal will reduce its rate base
from 5 million to 4.5 million with the February 1996 issue. Country America
magazine has cut its rate base from 1 million to 900,000 and WOOD magazine's
rate base will drop from 650,000 to 600,000. The Company does not plan any
across-the-board rate base reductions. In fact, Traditional Home magazine
plans to increase its rate base from 750,000 to 775,000 in 1996.
Broadcasting: The addition of newly-acquired WSMV-TV in Nashville and improved
results at KPHO-TV in Phoenix resulted in record first quarter operating
profits for the broadcasting segment. Advertising revenues increased 33
percent from the prior-year first quarter primarily due to the addition of
WSMV-TV, acquired in January 1995. Ad revenues of comparable stations
increased 3 percent due to gains at KPHO-TV and WOFL-TV in Orlando. The
increase at KPHO-TV primarily reflected its September 1994 CBS affiliation,
while WOFL-TV benefited from stronger national ad sales. Advertising revenues
declined at the Company's stations in Las Vegas and Saginaw. The Las Vegas
station, KVVU-TV, was hurt by a weaker overall ad market and the addition of
two new stations in the market. The decline at WNEM-TV in Saginaw was
primarily due to a decrease in national ad revenues. Lower political ad
revenues in the current quarter affected all stations. The television
broadcasting industry experienced strong growth in advertising revenues in
calendar 1994 and the first half of 1995. Looking forward, it appears that the
rate of growth may slow and some markets may see declines in ad revenues versus
the comparable prior-year period.
Operating profits for the broadcasting segment increased 104 percent from first
quarter fiscal 1995. Excluding the results of newly-acquired WSMV-TV,
comparable operating profits increased by 50 percent primarily due to a
significant improvement at KPHO-TV. The Phoenix station benefited from higher
ad revenues and the absence of prior-year expenses related to its CBS
affiliation. Results also improved at the Company's stations in Orlando and
Kansas City, while revenue-related declines occurred at the Las Vegas and
Saginaw stations.
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<PAGE>
On July 20, 1995, the Company announced it had reached an agreement to acquire
the assets of WOGX-TV, a Fox affiliate serving Ocala-Gainesville, Florida. The
sale, which is expected to close in January 1996, was approved by the Federal
Communications Commission on October 23, 1995.
Real Estate: First quarter revenues were down slightly in the Real Estate
segment due to a lower sales volume of custom listing publications. Operating
profits increased 46 percent from the prior-year first quarter mostly due to
prior-year expenses for the termination of a group marketing agreement with an
outside party.
Discontinued Operations: In September 1995, plans to sell the cable television
systems owned by Meredith/New Heritage Strategic Partners, L.P., were
formalized. The Company indirectly owns approximately 70 percent of these
systems, which serve 120,000 subscribers in the Minneapolis area. Management
expects the cable properties to be sold within the next year and the sale to
result in a gain. Cable segment revenues declined 5 percent from $12,814,000
to $12,223,000 due to the March 1995 sale of a North Dakota cable television
system serving 24,000 subscribers. Revenues of the Minneapolis systems
increased 15 percent due to increased subscriber counts and higher revenues per
subscriber, a result of authorized rate increases. The net loss from cable
operations in the current quarter was reduced due to lower interest expense
(resulting from the use of sale proceeds from the North Dakota system to pay
down debt) and higher operating profits at the Minneapolis systems.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $2,356,000 in the current quarter to
$9,469,000 at September 30, 1995. This compares to a cash decrease of $879,000
in the fiscal 1995 first quarter. The difference reflected increased use of
cash for debt retirement and additional purchases of fixed assets. These
increased uses of cash were partially offset by additional cash provided by
operating activities in the current quarter due to higher operating income and
a smaller increase in accounts receivable. The substantial increase in
accounts receivable in the prior-year first quarter reflected amounts owed to
the Company for taxes and interest related to the IRS settlement of the Ladies'
Home Journal tax case. This settlement also resulted in a $9 million reduction
of goodwill, the benefit of which will be realized over the remaining life of
the goodwill. The cumulative effect of a change in accounting principle in the
prior-year quarter, which reduced subscription acquisition costs, deferred
income taxes and net earnings, had no cash effect.
In the quarter ended September 30, 1994, $3.8 million was spent for the
repurchase of 168,000 shares of Company common stock. No shares were
repurchased in the current quarter.
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<PAGE>
At September 30, 1995, the Company owed $80 million under a loan agreement with
four banks. The debt was incurred for the purchase of WSMV-TV, a television
station located in Nashville, Tenn., in January 1995. A $10 million pre-
payment of this debt was made in August 1995. The loan agreement requires
annual and/or semi-annual payments through 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.
Discontinued Operations: 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, 1995, $87.3 million was owed under the
term loan agreement Strategic Partners has with ten banks. Required financial
ratio tests, as amended, were met for the first fiscal quarter of 1996. All
borrowings outstanding under the loan agreement are due on the earlier of March
31, 1996, or the date of sale of Strategic Partners' cable television systems.
In light of Strategic Partners' intent to sell its assets, the lenders have
indicated they would support a request to extend the maturity date. Strategic
Partners' debt is non-recourse to Meredith Corporation.
Capital expenditures in the first quarter were $7.7 million versus prior-year
spending of $2.2 million. Fiscal 1996 spending for continuing operations is
expected to exceed fiscal 1995 levels by approximately 150 percent. This
increase reflects actual and planned spending for leasehold improvements to new
consolidated office space in New York City and for construction of a new office
building in Des Moines. Spending for the New York project is expected to total
approximately $11 million and will occur in fiscal 1996. The new office
building and related improvements in Des Moines are expected to cost
approximately $36 million (exclusive of capitalized interest). Fiscal 1996
spending for this project is expected to be approximately $7 million, with the
balance of the spending to occur in fiscal 1997 and 1998. Funds for capital
expenditures are expected to be provided by operating activities and short-term
bank debt. The Company has made no other material commitments for capital
expenditures.
At this time, management expects that cash on hand, internally-generated cash
flow and short-term bank debt under existing bank lines of credit will provide
funds for capital expenditures, cash dividends, the purchase of WOGX-TV and
other operational cash needs for foreseeable periods. At September 30, 1995,
Meredith Corporation had unused 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.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10a) First Amendment to 1992 Meredith Corporation Stock Incentive Plan
Agreements with Jack D. Rehm, Chairman and Chief Executive Officer
10b) Statement re: First Amendments to 1992 Meredith Corporation Stock
Incentive Plan Agreements
11) Statement re computation of per share earnings
27) Financial Data Schedule
99) Additional financial information from the Company's first quarter
press release dated October 25, 1995
(b) Reports on Form 8-K
No Form 8-K was filed during the quarter ended September 30, 1995.
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: November 9, 1995
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<PAGE>
Index to Exhibits
Exhibit
Number Item
------- -----------------------------------------------------------
10a First Amendment to 1992 Meredith Corporation Stock Incentive
Plan Agreements (the "Agreements") with Jack D. Rehm,
Chairman and Chief Executive Officer. (The Agreements were
filed as Exhibits 10a(1) and 10a(2) to the Company's Form
10-Q dated September 30, 1992.)
10b Statement re: First Amendments to 1992 Meredith Corporation
Stock Incentive Plan Agreements
11 Statement re computation of per share earnings
27 Financial Data Schedule
99 Additional financial information from the Company's first
quarter press release dated October 25, 1995.
Exhibit 10a
FIRST AMENDMENT
TO
1992 MEREDITH CORPORATION
STOCK INCENTIVE PLAN
AGREEMENTS
The Agreements dated August 12, 1992 (150,000 shares at $13.22), and August 12,
1992 (150,000 shares at $16.525), by and between Meredith Corporation (the
"Company") and Jack D. Rehm (the "Optionee") with respect to Nonqualified Stock
Options granted to Optionee under the 1992 Meredith Corporation Stock Incentive
Plan (collectively, the "Agreements") are amended as follows:
A. Paragraphs 4, 5 and 6 of the Agreements are deleted in their entirety and
the following paragraphs are inserted in their place:
4. Termination of Employment by Death. If, without having fully exercised
this Option, Optionee s employment with the Company is terminated by
reason of death, any outstanding Options granted to Participant that are
not exercisable at the date of termination shall become fully
exercisable, except for Options granted within six (6) months prior to
the date of death, which Options shall not become fully exercisable until
the next business day after the sixth month anniversary of the Date of
Grant. Optionee s beneficiary (or such persons that have acquired
Optionee s rights under the Option by will or by the laws of descent and
distribution) shall have the same right to exercise this Option as
Optionee had during his or her lifetime, for a period ending on the Date
of Expiration set forth above.
5. Termination of Employment by Disability. If, without having fully
exercised this Option, Optionee s employment with the Company is
terminated by reason of Disability (as defined in the Plan), any
outstanding Options granted to Participant that are not exercisable at
the date of termination shall become fully exercisable, except for
Options granted within six (6) months prior to the date of termination,
which Options shall not become fully exercisable until the next business
day after the sixth month anniversary of the Date of Grant. Optionee
shall have the same right to exercise this Option as Optionee had during
his or her employment for a period ending on the Date of Expiration set
forth above.
- 1 -
<PAGE>
6. Termination of Employment by Retirement. If, without having fully
exercised this Option, Optionee s employment with the Company is
terminated by reason of Retirement (as defined under the then established
rules of the Company s tax-qualified retirement plans), any outstanding
options granted to Participant that are not exercisable at the date of
termination shall become fully exercisable, except for Options granted
within six (6) months prior to the date of termination, which Options
shall not become fully exercisable until the next business day after the
sixth month anniversary of the Date of Grant. Optionee shall have the
same right to exercise this Option as Optionee had during his or her
employment for a period ending on the Date of Expiration set forth above.
B. All other terms and conditions of the Agreements remain in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed
effective as of the 9th day of August, 1995.
/s/ Thomas L. Slaughter
-----------------------
Thomas L. Slaughter
Vice President-General
Counsel and Secretary
OPTIONEE
/s/ Jack D. Rehm
- ----------------
JACK D. REHM
- 2 -
Exhibit 10b
Statement re: First Amendments to 1992 Meredith Corporation Stock Incentive
Plan Agreements
Meredith Corporation has stock incentive plan agreements with certain
employees. The 1992 Meredith Corporation Stock Incentive Plan was filed as
Exhibit 10b to the Company's Form 10-K dated June 30, 1992.
First Amendments to 1992 Meredith Corporation Stock Incentive Plan Agreements
between Meredith Corporation and the following named executive officers are not
filed herewith pursuant to Instruction 2, to Item 601 of Regulation S-K as they
are substantially identical in all material respects, except as to the parties
thereto and the number of shares and exercise prices of the referenced
agreements, to the first amendment to the agreement filed as Exhibit 10a in
this Form 10-Q for the period ended September 30, 1995. The executive officers
named in the first amendments to the agreements not filed with the Commission
are as follows:
William T. Kerr
Larry D. Hartsook
Philip A. Jones
Christopher M. Little
Allen L. Sabbag
Exhibit 11
----------
MEREDITH CORPORATION
Computation of Primary and Fully Diluted Per
Common Share Earnings - Treasury Stock Method
For the Three Months Ended September 30, 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 27,511 27,511 27,367 27,367
Dilutive effect of unexercised
stock options in thousands 571 686 290 290
------ ------ ------ ------
Total 28,082 28,197 27,657 27,657
====== ====== ====== ======
Primary and fully
diluted earnings per common share
1995 1994
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Earnings per share from
continuing operations $ .34 $ .34 $ .44 $ .44
Discontinued operations ( .03) ( .03) ( .05) ( .05)
Cumulative effect of change in
accounting principle - - (1.67) (1.67)
----- ----- ----- -----
Net earnings (loss) per share $ .31 $ .31 ($1.28) ($1.28)
===== ===== ===== =====
Note: Primary - Based on average market prices.
Fully Diluted - Based on the higher of the average market price
or the market price at September 30 of each year.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Consolidated Balance Sheet at September 30, 1995 and the Consolidated Statement
of Earnings for the three months ended September 30, 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 9,469
<SECURITIES> 0
<RECEIVABLES> 100,754<F1>
<ALLOWANCES> 0
<INVENTORY> 43,478
<CURRENT-ASSETS> 237,939
<PP&E> 169,727
<DEPRECIATION> 103,060
<TOTAL-ASSETS> 753,208
<CURRENT-LIABILITIES> 277,500
<BONDS> 65,000
<COMMON> 27,540
0
0
<OTHER-SE> 221,367
<TOTAL-LIABILITY-AND-EQUITY> 753,208
<SALES> 207,662
<TOTAL-REVENUES> 207,662
<CGS> 88,694
<TOTAL-COSTS> 88,694
<OTHER-EXPENSES> 5,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,759
<INCOME-PRETAX> 17,121
<INCOME-TAX> 7,612
<INCOME-CONTINUING> 9,509
<DISCONTINUED> (717)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,792
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
<FN>
<F1>Net of allowances
</FN>
</TABLE>
Exhibit 99
Additional financial information from Meredith Corporation's press release
dated October 25, 1995, re: results of the first quarter ended September 30,
1995.
Meredith Corporation and Subsidiaries
Segment Information (Unaudited)
Three Months Ended September 30 1995 1994 Variance
- ------------------------------------------------------------------------------
(in thousands)
Revenues
Publishing $166,563 $155,069 $11,494
Broadcasting 35,223 25,983 9,240
Real Estate 6,206 6,293 (87)
Less: Inter-segment revenues (330) (12) (318)
-------- -------- -------
Total Revenues $207,662 $187,333 $20,329
======== ======== =======
Operating Profit
Publishing $ 9,070 $ 10,263 $(1,193)
Broadcasting 12,761 6,269 6,492
Real Estate 1,020 699 321
Unallocated corporate expense (4,633) (4,155) (478)
-------- -------- -------
Total Operating Profit $ 18,218 $ 13,076 $ 5,142
Interest income - IRS settlement -- 8,554 (8,554)
Interest income 662 523 139
Interest expense (1,759) (43) (1,716)
-------- -------- -------
Earnings from continuing operations
before income taxes 17,121 22,110 (4,989)
Income taxes 7,612 9,829 (2,217)
-------- -------- -------
Earnings from Continuing Operations $ 9,509 $ 12,281* $(2,772)
======== ======== =======
*Note: Earnings for the quarter ended September 30, 1994 include $4,747,000
(17 cents per share) in post-tax interest income from the favorable
IRS settlement of the Ladies' Home Journal tax case.
<PAGE>
MEREDITH CORPORATION
FIRST QUARTER 1996 EARNINGS PER SHARE AT-A-GLANCE
Earnings per share are shown for continuing operations before special items.
The cable segment has been classified as a discontinued operation.
- -- First quarter earnings per share from continuing operations before special
items increased 26 percent to 34 cents, marking the 13th consecutive
quarter of improved comparable earnings.
- -- Prior-year earnings per share from continuing operations were 27 cents,
excluding the 17 cents per share in post-tax interest income from the
favorable IRS settlement of the Ladies' Home Journal magazine tax case.
- -- The chart below depicts the quarterly and fiscal year earnings per share
before special items and discontinued operations:
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Fiscal Year
-------- -------- -------- -------- -----------
F1993 .12 .18 .21 .19 .70
F1994 .17 .26 .32 .26 1.01
F1995 .27 .38 .38 .39 1.42
F1996 .34
- -- Net results in the prior-year first quarter were a loss of ($1.28) per
share, including a one-time, non-cash charge of ($1.67) per share for the
cumulative effect of a change in accounting principle related to the
treatment of subscription acquisition costs.
