Business News

Meredith Reports Fiscal 2012 Fourth Quarter And Full Year Results

Thursday 26. July 2012 - Fourth Quarter Revenues and Earnings Per Share Grow; Magazine & Digital Audiences Hit New Highs

Fiscal 2012 Featured 50% Dividend Increase; Investments in New Digital, Parenthood and Food Brands
Meredith Corporation (NYSE: MDP;www.meredith.com), the leading media and marketing company serving American women, today reported fiscal 2012 fourth quarter revenues grew 6 percent to $375 million, and earnings per share grew 2 percent to $0.67, both from the prior-year period.
Meredith achieved the following business highlights during the fourth quarter of fiscal 2012 when compared to the prior-year period:
— Consumer engagement strengthened across all of Meredith’s media
platforms. Magazine readership rose to a record 116 million.
Meredith’s local television station group delivered a strong May ratings
book. Also, total traffic to Company websites approximately doubled to
an average of nearly 40 million unique visitors per month, a record
high.
— Local Media Group revenues grew 9 percent, driven by gains in both
non-political and political advertising revenues. Operating profit rose
42 percent, which included a 2 percent decline in expenses, and produced
a strong EBITDA margin of 40 percent.
— National Media Group revenues grew 5 percent. Advertising revenues
increased 12 percent, fueled by the recent acquisitions of the
Allrecipes.com, EveryDay with Rachael Ray and FamilyFun brands. Absent
the recent acquisitions, advertising revenues were down 3 percent.
Circulation revenues increased 20 percent, and were up 5 percent
excluding the recent acquisitions.
— Total Company digital advertising revenues increased 95 percent, as
National Media Group digital advertising revenues doubled, and Local
Media Group digital advertising revenues increased more than 70 percent.
“It was a solid quarter highlighted by the strengthening of important consumer touchpoints; continued excellent television advertising performance; and strong circulation metrics along with improving advertising in the National Media Group,” said Meredith Chairman and CEO Stephen M. Lacy.
FISCAL 2012 REVIEW
Fiscal 2012 earnings per share were $2.31, including a special charge of $0.19 per share recorded in the fiscal third quarter. Excluding the special charge, earnings per share were $2.50, in-line with Meredith’s previously stated expectations. These results compare to earnings per share of $2.78 in fiscal 2011, when Meredith recorded $0.38 per share, or $28 million, more political advertising revenues. Total revenues were $1.4 billion in both years.
“In fiscal 2012 we acquired Allrecipes.com – the world’s largest digital food brand – and implemented our Total Shareholder Return strategy, which is delivering a dividend yield of approximately 5 percent,” Lacy said. “Additionally, we launched new tablet and mobile platforms, and acquired leading consumer brands that increased our presence in the important parenthood and food verticals. We also enhanced our brand licensing, video content creation, marketing services and e-commerce businesses.”
Lacy noted Meredith continues to aggressively execute a series of well-defined strategic initiatives to generate growth in revenue, operating profit and free cash flow, and increase shareholder value over time. As detailed below and in the operating sections, fiscal 2012 actions included:
— Implementation of a Total Shareholder Return (TSR) strategy. Key
elements of the strategy include: (1) A current annual dividend of $1.53
per share; (2) A $100 million share repurchase program; and (3) Ongoing
strategic investments to scale the business and increase shareholder
value over time. Since the launch of Meredith’s TSR strategy on October
25, 2011 through June 30, 2012, Meredith’s stock price increased 28
percent, and its dividend yielded approximately 5 percent. That equates
to a total return of 33 percent to shareholders.
— Acquisition of Allrecipes.com, doubling Meredith’s digital presence. The
acquisition makes Meredith the No. 1 digital food media company, and
moves it into the Top 3 in the digital women’s lifestyle category.
— Launch of tablet editions and mobile platforms. Meredith currently has
20 of its national brands available across the iPad, NOOK Tablet/NOOK
Color, Kindle Fire, Samsung Galaxy and Google Play platforms. Meredith’s
National Media Group now has nearly 20 apps focused on food, parenthood
and health. Meredith’s Local Media Group has over 30 apps focused on
news, sports and weather.
— Purchase of the EveryDay with Rachael Ray and FamilyFun brands. These
acquisitions helped increase Meredith’s share of the U.S. magazine
industry advertising revenues to 11.8 percent, according to the most
recent data from Publishers Information Bureau.
— Extension of Meredith’s very successful brand licensing arrangement with
Walmart for the Better Homes and Gardens line of home and garden
products through 2016. There are currently more than 3,000 SKUs of BHG
branded products available at Walmart stores across the United States.
— Expansion and monetization of Local Media Group video content through an
increase in local news programming, along with more national video
content creation.
“We have a clear strategic growth plan in place and are executing initiatives that extend across all of our businesses, have significant digital components, and capitalize on the broad content creation and marketing capabilities we possess,” Lacy said.
OPERATING DETAIL
LOCAL MEDIA GROUP
Meredith’s Local Media Group – which consists of local television affiliates in mostly fast-growing markets and a national video content creation unit – delivered another strong quarter, and an outstanding fiscal 2012.
“Our results represent successful execution of our strategy to (1) Maximize advertising revenues; (2) Develop non-traditional revenue streams, including digital, mobile and custom video production; and (3) Expand retransmission-related revenues,” said Meredith Local Media Group President Paul Karpowicz. “Our aggressive pursuit of this strategy has delivered strong results, including nearly three years of consecutive quarterly growth in non-political advertising revenues.”
Fiscal 2012 fourth quarter Local Media Group operating profit increased 42 percent to $27 million, and total revenues grew 9 percent to $85 million.
Non-political advertising revenues grew 6 percent to $69 million, the 11(th)-straight quarter of year-over-year improvement. Political advertising revenues were $3 million, compared to $1 million in the prior-year period.
Fiscal 2012 full-year Local Media Group operating profit was $88 million, including a special charge of $1 million recorded in the third quarter. Excluding that special charge, operating profit was $89 million, up 2 percent from the prior-year period – quite an achievement since fiscal 2011 benefitted from $28 million more of political advertising revenues. Fiscal 2012 revenues were $316 million compared to $322 million. Fiscal 2012’s EBITDA margin was 36 percent, the highest since fiscal 2007.
Karpowicz noted several business highlights in fiscal 2012, including:
— Non-political advertising revenues grew 6 percent to $271 million. The
important automotive and professional services categories were
particularly strong. Nine of Meredith’s 12 stations posted higher
non-political advertising revenues, led by Las Vegas, Phoenix and
Hartford.
— Digital advertising revenues increased more than 55 percent, boosted by
enhancements to the station’s websites and the launch of new mobile
apps.
— Other revenues grew more than 25 percent to $39 million. This was
driven primarily by Meredith’s management of Peachtree-TV (WPCH-TV) in
Atlanta, which began on March 28, 2011.
— Operating expenses declined 3 percent, driven primarily by savings in
programming and video production costs.
Meredith’s connection with viewers also increased in fiscal 2012 as witnessed by (1) Expansion of local news hours; (2) Growth of The Better Show, its national daily women’s lifestyle program that was recently renewed for a sixth season; and (3) Launch of the Digs Channel on YouTube, where Meredith Video Studios is producing original short-form video content focused on home and garden-related topics.
“As we look ahead, we’ve focused on driving continued growth in non-political advertising revenues; maximizing political advertising revenues; and protecting and growing retransmission-related revenues,” Karpowicz said. “We will also continue to produce original programming and extend and monetize that content to digital and mobile platforms.”
NATIONAL MEDIA GROUP
Meredith’s National Media Group – which includes leading national consumer media brands delivered over multiple platforms, brand licensing activities, and business-to-business marketing products and services – executed a series of strategic initiatives in fiscal 2012 designed to position the business for long-term growth in revenue and operating profit.
“We faced a challenging magazine advertising marketplace that impacted results, but I’m confident the strategic steps taken to broaden and deepen our scale with consumers and advertisers alike will lead to growth and margin improvement over time,” said Meredith National Media Group President Tom Harty.
Fiscal 2012 fourth quarter National Media Group operating profit was $38 million, and revenues were $290 million. That compares operating profit of $49 million and revenues of $275 million in the prior-year period.
Advertising revenues grew 12 percent compared to the prior-year period. Excluding recent acquisitions, advertising revenues declined 3 percent. The retail, over-the-counter drug and financial services categories were stronger, while the prescription drug category, which has been challenged due to fewer new drug launches, was significantly weaker.
Circulation revenues increased 20 percent compared to the prior-year period, and grew 5 percent excluding the recent acquisitions. Meredith generated approximately 1.1 million digital orders for print magazine subscriptions during the fourth quarter, quadruple the prior-year period.
Meredith’s connection to consumers continued to strengthen, demonstrating the vitality and appeal of its brands and content. Readership of Meredith magazines increased to a record 116 million, according to the most recent data from Mediamark Research and Intelligence. Digital traffic increased as monthly unique visitors and page views each more than doubled to record levels, driven primarily by the acquisition of Allrecipes.com, new digital consumer marketing initiatives and creative enhancements to existing websites.
Other revenues were $74 million, compared to $87 million in the prior-year period. This was due primarily to select clients of Meredith Xcelerated Marketing (MXM), the Company’s business-to-business marketing services agency, scaling back programs in response to current economic conditions. However, the new business pipeline improved during the quarter.
Fiscal 2012 full year National Media Group operating profit was $133 million, including a special charge taken in the third quarter of $13 million. Excluding the special charge, operating profit was $147 million. Fiscal 2011 operating profit was $179 million, excluding a special benefit of $1 million. Revenues were $1.1 billion in both periods. Operating expenses rose 3 percentdue to the recent acquisitions, but were down 3 percent excluding them.
Harty singled out several strategic initiatives executed by the National Media Group in fiscal 2012 that will help drive long-term growth including:
— Expansion in the food category highlighted by the acquisition of
Allrecipes.com, the world’s No. 1 digital food brand, and EveryDay with
Rachael Ray magazine and its related digital assets.
— Growth in the parenthood category including the acquisition of the
FamilyFun brand, editorial enhancements to Parents and American Baby
magazines, and the relaunch of Parents.com.
— Introduction of the Meredith Sales Guarantee, an innovative program
proving that advertising in Meredith titles increases retail sales.
Currently, more than a dozen brands are participating in the program
including ones from Johnson & Johnson, Kimberly-Clark and Tyson Foods.
— Acceleration of online consumer marketing activities, including tripling
digital orders for print magazine subscriptions to 3.2 million.
Meredith is particularly focused on driving digital subscriptions and
paperless transactions because of cost-savings and up-selling
opportunities. Meredith realizes approximately $5 in incremental profit
per digital order over the average life of a subscription, compared to
an order generated by direct mail.
— Investment in Iris Worldwide, a leading global marketing company, and
the creation of the Meredith-Iris Global Network to serve the increasing
global needs of domestic clients, and open doors to international
clients.
“Going forward, we are focused on leveraging our enhanced scale to (1) Maximize advertising revenues, especially in the digital arena; (2) Move more consumer transactions online, particularly magazine subscription orders; (3) Drive growth in our non-advertising related activities, such as brand licensing, marketing services and e-commerce; and (4) Continue to achieve operational efficiencies,” Harty concluded.
OTHER FINANCIAL INFORMATION
On Oct. 25, 2011, Meredith initiated its Total Shareholder Return strategy. Key elements include: (1) A 50 percent annual dividend increase to $1.53; (2) A $100 million share repurchase program; and (3) Ongoing strategic investments to generate growth in revenue, operating profit and free cash flow, and increase shareholder value over time.
Consistent with this strategy, Meredith repurchased approximately 1 million shares of Company stock, or 2 percent of its outstanding shares in fiscal 2012, at an average price of $27.55. At June 30, 2012, $87 million remained under the current repurchase authorization.
Total debt was $380 million at June 30, 2012, reflecting the addition of $175 million for the acquisition of Allrecipes.com. Meredith’s debt-to-EBITDA ratio was 1.6 to 1, and the weighted average interest rate was 3.8 percent at June 30, 2012.
Fiscal 2012 corporate expenses declined 16 percent from the prior-year period, due primarily to lower expenses related to incentive compensation, consulting and development of the tablet platform.
During fiscal 2012, Meredith generated approximately $182 million in cash flow from operations.
All earnings per share figures in the text of this release are diluted. Both basic and diluted earnings per share can be found in the attached Condensed Consolidated Statements of Earnings. Information on the special items in both fiscal 2012 and fiscal 2011 is available in Tables 1-4 and in certain previously communicated press releases.
OUTLOOK
Meredith expects fiscal 2013 full year earnings per share will range from $2.60 to $2.95. Looking more closely at full year fiscal 2013:
— Meredith continues to face limited visibility due to an ongoing
uncertain domestic and international economic climate; the potential
impact of the U.S. Presidential election; and other factors.
— The Company expects a total of $25 to $30 million of political
advertising revenues at its television stations, with the majority being
booked in the second fiscal quarter.
Meredith expects fiscal 2013 first quarter earnings per share will range from $0.50 to $0.55. Looking more closely at the first quarter of fiscal 2013:
— National Media Group advertising revenues are expected to be up in the
high-single digits including recent acquisitions, and down in the
high-single digits excluding recent acquisitions.
— Local Media Group non-political advertising revenues are expected to be
up in the low-single digits. Approximately one-third of the total
fiscal 2013 political advertising revenue is expected to be recorded in
the first fiscal quarter.
A number of uncertainties remain that may affect Meredith’s outlook as stated in this press release for the first quarter and full year fiscal 2013. These and other uncertainties are referenced below under “Safe Harbor” and in certain filings with the U.S. Securities and Exchange Commission.