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Meredith Reports Fiscal 2010 Second Quarter Results

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Ad gains at Better Homes and Gardens help drive National Media profit growth
Local Media delivers growth in non-political advertising revenues

DES MOINES, Iowa--(BUSINESS WIRE)--Meredith Corporation (NYSE: MDP), the leading media and marketing company serving American women, today reported fiscal 2010 second quarter earnings per share of $0.42, including a previously announced special charge of $0.07 per share related to the repositioning of its Special Interest Media business. Excluding the special charge, earnings per share were $0.49 – slightly ahead of expectations.

In comparison, fiscal 2009 second quarter earnings per share were $0.28, including a special charge of $0.21. Excluding the special charge, fiscal 2009 second quarter earnings per share were $0.49.

Fiscal 2010 second quarter revenues were $337 million, compared to $361 million in fiscal 2009. Meredith recorded $14 million less ($0.19 per share) in net political advertising revenues during the second quarter of fiscal 2010 (a non-political year) compared to fiscal 2009.

Additional information on the special charges can be found in Tables 1-4 and in Meredith’s press releases dated January 14, 2010, and January 8, 2009.

“In the second quarter of fiscal 2010, we delivered higher operating profit in our National Media business; increased non-political advertising revenues 4 percent in our Local Media business; and continued to reduce total company expenses,” said Meredith President and Chief Executive Officer Stephen M. Lacy. “These achievements speak to the strength of our brands on both the national and local levels, as well as our efficiency initiatives.”

During the second quarter of fiscal 2010, Meredith delivered:

  • Sequential quarterly improvement in advertising performance in the National and Local media groups. Both groups outperformed their respective industries and gained advertising market share.
  • Growth in its connection to the consumer, as measured by magazine readership, television viewership and online traffic.
  • Double-digit growth in new revenue streams including brand licensing, retransmission fees and video content creation.
  • A reduction of 8 percent in total company operating expenses.

For the first six months of fiscal 2010, earnings per share were $0.82, compared to $0.69 in the prior year period. Revenues were $669 million, compared to $725 million in the prior year. Excluding special items in both periods (see Tables 1-4), earnings per share were $0.83 for the first six months of fiscal 2010, compared to $0.90 in the prior year. Meredith recorded $19 million less ($0.26 per share) in net political advertising in the first half of fiscal 2010 (a non-political year) compared to the prior year.

OPERATING DETAIL

National Media Group

Fiscal 2010 second quarter National Media Group operating profit was $32 million, compared to $23 million in the prior year. Excluding special charges in both periods, fiscal 2010 second quarter operating profit was $37 million, a 27 percent increase over the $29 million in the prior year.

Revenues were $261 million in the second quarter of fiscal 2010, compared to $277 million in the prior year. Advertising revenues were $117 million – a decline of 2 percent compared to the prior year – but the fourth consecutive quarter of advertising performance improvement. Better Homes and Gardens grew advertising revenues 7 percent in the second quarter of fiscal 2010. More and Fitness also grew advertising revenues.

National Media Group operating expenses declined 10 percent in the second quarter of fiscal 2010 compared to the prior year, including a 15 percent decrease in paper prices.

Meredith’s share of overall magazine industry advertising revenues increased to 11.7 percent during the second quarter of fiscal 2010 from 9.4 percent in the prior year, according to the latest data from the Publishers Information Bureau. Additionally, Meredith’s market share grew to 37.2 percent from 34.9 percent as measured against its 28-title competitive set.

Looking at several key measurements of the National Media Group’s strong connection to consumers:

  • Readership for Meredith’s major subscription magazines increased in the fall of 2009 compared to the spring of 2009, according to Mediamark Research and Intelligence.
  • Revenues, profit and related margin in Meredith’s circulation activities increased in the second quarter of fiscal 2010 compared to the prior year, driven in part by efficiencies in subscription operations.
  • Monthly average unique visitors across Meredith’s National Media Group Web sites rose more than 35 percent to more than 20 million in the second quarter of fiscal 2010 compared to the prior year, and monthly page views averaged more than 260 million. The total number of videos viewed per month quadrupled to more than 6 million.

National Media Group “Other Revenues” declined in the second quarter of fiscal 2010 compared to the prior year. Reductions in revenues at Meredith Books – expected due to the implementation of the previously announced licensing agreement with John Wiley and Sons Inc. – and at Meredith Integrated Marketing – due to cutbacks in existing programs primarily in the automotive and retail sectors – were partially offset by higher Brand Licensing revenues.

Meredith Integrated Marketing won a major new assignment to develop and manage Chrysler Group’s customer relationship management initiatives in the United States and Canada. Additionally, Meredith Integrated Marketing saw a marked increase in the pipeline of new business activity during the quarter.

Brand Licensing revenues increased due primarily to an expansion of Meredith’s relationship with Walmart. The number of Better Homes and Gardens-branded SKUs nearly tripled to 1,500 compared to the prior year.

“Our National Media Group continued to gain share, execute multi-platform sales programs and develop its non-advertising based businesses,” Lacy said. “Additionally, I am particularly pleased with the strong consumer connection metrics we continue to deliver, be it magazine readership, online traffic or the performance of our branded products for sale at retail.”

For the first six months of fiscal 2010, operating profit was $70 million, compared to $57 million in the prior year. Excluding special charges in both periods operating profit was $76 million, compared to $63 million in the prior year. Advertising revenues were $255 million, compared to $264 million in the prior year.

Local Media Group

Fiscal 2010 second quarter Local Media Group operating profit was $17 million, compared to $22 million in the prior year, primarily due to $14 million less in net political advertising revenues. Total revenues were $76 million, compared to $84 million in the prior year. Non-political advertising revenues grew 4 percent, led by improved performance in professional services and retail-related advertising.

The Local Media Group outperformed the industry as a whole by approximately 3 percentage points in non-political advertising revenues during the quarter, according to the most recently available data from the Television Bureau of Advertising. Meredith stations in nine of its 10 television markets posted growth in non-political advertising revenues.

Local Media Group operating expenses declined 6 percent in the second quarter of fiscal 2010, compared to the prior year. Operating expenses were down 2 percent excluding the prior-year special charge. Meredith is centralizing certain functions across its television stations – including master control, traffic and research – to improve efficiency and lower costs.

Looking at several key measurements of the Local Media Group’s connection to consumers:

  • Many Meredith stations increased viewership in key day parts during the November sweeps, particularly in Atlanta where morning ratings more than doubled and late news ratings grew nearly 30 percent. Las Vegas grew ratings in both the morning and evening news, and Hartford maintained its No. 1 position in all newscasts.
  • The daily Better television show, produced by Meredith Video Studios, is now carried in more than 55 markets reaching more than 45 percent of U.S. households, including half of the nation’s top 10.

Revenues from retransmission fees nearly doubled in the second quarter of fiscal 2010 from the prior-year period, reflecting Meredith’s successful renegotiation of retransmission agreements with the cable and satellite operators in its markets. Revenues also grew at Meredith Video Studios, Meredith’s in-house video production group, driven primarily by growth in custom video projects for corporate clients.

“We’re encouraged by the strength of our connection with viewers, which has helped us grow non-political advertising revenues,” Lacy said. “We’re working to build upon this foundation and continuing to develop other sources of revenue, including retransmission fees and our video production activities.”

For the first six months of fiscal 2010, operating profit was $19 million, compared to $33 million in the prior year period, primarily due to $19 million less in net political advertising revenues. Revenues were $136 million, compared to $155 million.

OTHER FINANCIAL INFORMATION

Meredith generated more than $76 million in cash flow from operations during the first six months of fiscal 2010. Meredith’s total debt was $350 million at Dec. 31, 2009, $30 million less than at the prior fiscal year end. Meredith’s debt-to-EBITDA ratio was well under existing debt covenants at 1.7 to 1.

Unallocated corporate expenses rose approximately $2 million in the second quarter of fiscal 2010 compared to the prior year due primarily to third party consulting fees and higher retirement plan costs.

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.

OUTLOOK

Looking at the third quarter of fiscal 2010, with two of three magazine issues closed in the National Media Group, advertising revenues are currently flat to up slightly. Local Media Group non-political advertising pacings, which are a snapshot in time and change frequently, are currently up in the mid teens.

Meredith currently expects fiscal 2010 third quarter earnings per share to range from $0.55 to $0.60.

Looking to the remainder of the fiscal year, with limited visibility into customers’ 2010 advertising and marketing budgets, Meredith currently expects full year earnings per share to range from $1.90 to $2.05, excluding the special items reported in the first half of fiscal 2010.

A number of uncertainties remain that may affect Meredith’s outlook as stated in this press release for the second fiscal quarter and full year of 2010. These uncertainties are referenced below under “Safe Harbor” and in certain SEC filings.

CONFERENCE CALL WEBCAST

Meredith will host a conference call on January 21, 2010, at 11:00 a.m. EST to discuss fiscal 2010 second quarter results. A live webcast will be accessible to the public on the company’s Web site, www.meredith.com, and a replay will be available for one week. A transcript will be available within 48 hours after the call at www.meredith.com.

RATIONALE FOR USE AND ACCESS TO NON-GAAP MEASURES

Management uses and presents GAAP and non-GAAP results to evaluate and communicate the performance of the company. Non-GAAP measures should not be construed as alternatives to GAAP measures. EBITDA is a common supplemental measure of performance used by investors and financial analysts. Management believes that EBITDA provides an additional analytical tool to clarify the company’s results from core operations and delineate underlying trends. Meredith does not use EBITDA as a measure of liquidity or funds available for management’s discretionary use because it includes certain contractual and non-discretionary expenditures.

Results excluding the special charges recorded in the second quarter of fiscal 2010 and 2009, and the adjustment to deferred income tax liabilities recorded in the first quarter of fiscal 2010, are also supplemental non-GAAP financial measures. Management believes these items are not reflective of Meredith’s ongoing business activities. While results excluding the special charge and tax adjustment are not a substitute for reported earnings results under GAAP, management believes this information is useful as an aid in better understanding Meredith’s current performance, performance trends and financial condition. Reconciliations of non-GAAP to GAAP measures are included in the attached tables. The attached consolidated financial statements and reconciliation tables will be made available at www.meredith.com.

SAFE HARBOR

This release contains certain forward-looking statements that are subject to risks and uncertainties. These statements are based on management’s current knowledge and estimates of factors affecting the company and its operations. Statements in this announcement that are forward-looking include, but are not limited to, the statements regarding broadcasting pacings and publishing advertising revenues, along with the company’s earnings per share outlook for the third fiscal quarter and rest of fiscal 2010.

Actual results may differ materially from those currently anticipated. Factors that could adversely affect future results include, but are not limited to, downturns in national and/or local economies; a softening of the domestic advertising market; world, national or local events that could disrupt broadcast television; increased consolidation among major advertisers or other events depressing the level of advertising spending; the unexpected loss or insolvency of one or more major clients; the integration of acquired businesses; changes in consumer reading, purchasing and/or television viewing patterns; increases in paper, postage, printing or syndicated programming costs; changes in television network affiliation agreements; technological developments affecting products or methods of distribution; changes in government regulations affecting the company’s industries; unexpected changes in interest rates; and the consequences of acquisitions and/or dispositions. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

ABOUT MEREDITH CORPORATION

Meredith Corporation (NYSE:MDP) (a) is the leading media and marketing company serving American women. Meredith combines well-known national brands – including Better Homes and Gardens, Parents, Ladies’ Home Journal, Family Circle, American Baby, Fitness and More – with local television brands in fast-growing markets. Meredith is the industry leader in creating content in key consumer interest areas such as home, family, health and wellness and self-development. Meredith uses multiple distribution platforms – including print, television, online, mobile and video – to give consumers content they desire and to deliver the messages of its marketing partners. Additionally, Meredith uses its many assets to create powerful custom marketing solutions for many of the nation’s top brands and companies. Meredith has significantly added to its capabilities in this area through the acquisition of cutting-edge companies in areas such as online, word-of-mouth and database marketing.

Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
       
  Three Months Six Months
Period Ended December 31,   2009   2008 2009   2008
(In thousands except per share data)    
Revenues
Advertising $ 187,868 $ 201,800 $ 379,684 $ 413,626
Circulation 67,209 66,804 137,088 138,217
All other     81,778       92,680     152,498       173,511  

Total revenues

    336,855       361,284     669,270       725,354  
Operating expenses
Production, distribution, and editorial 142,911 162,310 294,004 332,421
Selling, general, and administrative 146,617 152,248 286,254 297,200
Depreciation and amortization     10,117       10,776     20,220       21,632  
Total operating expenses     299,645       325,334     600,478       651,253  
Income from operations 37,210 35,950 68,792 74,101
Interest income 9 107 19 227
Interest expense     (5,744 )     (5,353 )   (10,785 )     (10,787 )
Earnings from continuing operations before income taxes 31,475 30,704 58,026 63,541
Income taxes     12,521       13,301     20,731       27,070  
Earnings from continuing operations 18,954 17,403 37,295 36,471
Loss from discontinued operations, net of taxes     -       (4,860 )   -       (5,291 )
Net earnings   $ 18,954     $ 12,543   $ 37,295     $ 31,180  
 
Basic earnings per share
Earnings from continuing operations $ 0.42 $ 0.39 $ 0.82 $ 0.81
Discontinued operations     -       (0.11 )   -       (0.12 )
Basic earnings per share   $ 0.42     $ 0.28   $ 0.82     $ 0.69  
Basic average shares outstanding     45,288       44,951     45,223       45,096  
 
Diluted earnings per share
Earnings from continuing operations $ 0.42 $ 0.39 $ 0.82 $ 0.81
Discontinued operations     -       (0.11 )   -       (0.12 )
Diluted earnings per share   $ 0.42     $ 0.28   $ 0.82     $ 0.69  
Diluted average shares outstanding     45,547       45,072     45,432       45,219  
 
Dividends paid per share   $ 0.225     $ 0.215   $ 0.450     $ 0.430  
 
Meredith Corporation and Subsidiaries
Segment Information (Unaudited)
                   
  Three Months Six Months
Period Ended December 31,   2009   2008 2009   2008
(In thousands)    
Revenues
National media group
Advertising $ 117,431 $ 120,078 $ 254,633 $ 264,385
Circulation 67,209 66,804 137,088 138,217
Other revenues     76,535       90,026     141,058       167,973  
Total national media group     261,175       276,908     532,779       570,575  
Local media group
Non-political advertising 67,549 64,717 121,220 126,365
Political advertising 2,888 17,005 3,831 22,876
Other revenues     5,243       2,654     11,440       5,538  
Total local media group     75,680       84,376     136,491       154,779  
Total revenues   $ 336,855     $ 361,284   $ 669,270     $ 725,354  
 
Operating profit
National media group $ 31,774 $ 23,208 $ 70,367 $ 57,098
Local media group 17,063 22,329 19,463 33,025
Unallocated corporate     (11,627 )     (9,587 )   (21,038 )     (16,022 )
Income from operations   $ 37,210     $ 35,950   $ 68,792     $ 74,101  
 
Depreciation and amortization
National media group $ 3,642 $ 4,228 $ 7,149 $ 8,054
Local media group 5,960 6,448 12,082 12,517
Unallocated corporate     515       100     989       1,061  
Total depreciation and amortization   $ 10,117     $ 10,776   $ 20,220     $ 21,632  
 
EBITDA1
National media group $ 35,416 $ 27,436 $ 77,516 $ 65,152
Local media group 23,023 28,777 31,545 45,542
Unallocated corporate     (11,112 )     (9,487 )   (20,049 )     (14,961 )
Total EBITDA   $ 47,327     $ 46,726   $ 89,012     $ 95,733  

1 EBITDA is earnings from continuing operations before interest, taxes, depreciation, and amortization.

Meredith Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
           
  December 31,     June 30,
Assets   2009     2009
(In thousands)
Current assets
Cash and cash equivalents $ 23,882 $ 27,910
Accounts receivable, net 216,234 192,367
Inventories 25,028 28,151
Current portion of subscription acquisition costs 59,268 60,017
Current portion of broadcast rights 13,820 8,297
Other current assets     18,653         23,398  
Total current assets     356,885         340,140  
Property, plant, and equipment 452,037 444,904
Less accumulated depreciation     (259,378 )       (253,597 )
Net property, plant, and equipment 192,659 191,307
Subscription acquisition costs 57,732 63,444
Broadcast rights 4,476 4,545
Other assets 53,515 45,907
Intangible assets, net 556,892 561,581
Goodwill     487,416         462,379  
Total assets   $ 1,709,575       $ 1,669,303  
 
Liabilities and Shareholders' Equity          
Current liabilities
Current portion of long-term debt $ 175,000 $ -
Current portion of long-term broadcast rights payable 15,940 10,560
Accounts payable 101,154 86,381
Accrued expenses and other liabilities 102,338 81,544
Current portion of unearned subscription revenues     170,261         170,731  
Total current liabilities 564,693 349,216
Long-term debt 175,000 380,000
Long-term broadcast rights payable 11,762 11,851
Unearned subscription revenues 140,548 148,393
Deferred income taxes 76,547 64,322
Other noncurrent liabilities     106,265         106,138  
Total liabilities     1,074,815         1,059,920  
Shareholders' equity
Common stock 36,199 35,934
Class B stock 9,125 9,133
Additional paid-in capital 60,937 53,938
Retained earnings 558,874 542,006
Accumulated other comprehensive loss     (30,375 )       (31,628 )
Total shareholders' equity     634,760         609,383  
Total liabilities and shareholders' equity   $ 1,709,575       $ 1,669,303  
 
Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
           
Six Months Ended December 31,   2009     2008
(In thousands)      
Net cash provided by operating activities   $ 76,032       $ 83,028  
 
Cash flows from investing activities
Acquisitions of businesses (16,304 ) (5,195 )
Additions to property, plant, and equipment (14,938 ) (15,185 )
Proceeds from dispositions of assets     -         636  
Net cash used in investing activities     (31,242 )       (19,744 )
 
Cash flows from financing activities
Proceeds from issuance of long-term debt 85,000 120,000
Repayments of long-term debt (115,000 ) (150,000 )
Purchases of Company stock (195 ) (21,562 )
Dividends paid (20,427 ) (19,430 )
Proceeds from common stock issued 1,718 2,457
Excess tax benefits from share-based payments 131 966
Other     (45 )       -  
Net cash used in financing activities     (48,818 )       (67,569 )
Net decrease in cash and cash equivalents (4,028 ) (4,285 )
Cash and cash equivalents at beginning of period     27,910         37,644  
Cash and cash equivalents at end of period   $ 23,882       $ 33,359  
 
Meredith Corporation and Subsidiaries   Table 1
Supplemental Disclosures Regarding Non-GAAP Financial Measures
                 

Special Items - During the second quarter of fiscal 2010, Meredith recorded a special charge which relates primarily to the cost of a repositioning of our Special Interest Media operations. Please see Meredith's press release dated January 14, 2010, for additional information relating to this special charge. In the first quarter of fiscal 2010, Meredith recorded an income tax benefit. This benefit is reflected in the special items for the six months ended December 31, 2009.

 

The following table shows results of operations excluding the special items and as reported with the difference being the special items. Results of operations excluding the special items are non-GAAP measures. Management's rationale for presenting non-GAAP measures is included in the text of this earnings release.

           
Period Ended December 31, 2009   Three Months     Six Months
  Excluding     Excluding    
Special Special As Special Special As
    Items   Items     Reported Items   Items     Reported
(In thousands except per share data)
Revenues
Advertising $ 187,868 $ - $ 187,868 $ 379,684 $ - $ 379,684
Circulation 67,209 - 67,209 137,088 - 137,088
All other     81,778       -         81,778     152,498       -         152,498  
Total revenues     336,855       -         336,855     669,270       -         669,270  
Operating expenses
Production, distribution, and editorial 141,464 1,447 (a) 142,911 292,557 1,447 (a) 294,004
Selling, general, and administrative 142,594 4,023 (b) 146,617 282,231 4,023 (b) 286,254
Depreciation and amortization     10,117       -         10,117     20,220       -         20,220  
Total operating expenses     294,175       5,470         299,645     595,008       5,470         600,478  
Income from operations 42,680 (5,470 ) 37,210 74,262 (5,470 ) 68,792
Interest income 9 - 9 19 - 19
Interest expense     (5,744 )     -         (5,744 )   (10,785 )     -         (10,785 )
Earnings before income taxes 36,945 (5,470 ) 31,475 63,496 (5,470 ) 58,026
Income taxes     14,627       (2,106 ) (c)     12,521     25,813       (5,082 ) (c)     20,731  
Net earnings   $ 22,318     $ (3,364 )     $ 18,954   $ 37,683     $ (388 )     $ 37,295  
 
Basic earnings per share   $ 0.49     $ (0.07 )     $ 0.42   $ 0.83     $ (0.01 )     $ 0.82  
Basic average shares outstanding     45,288       45,288         45,288     45,223       45,223         45,223  
 
Diluted earnings per share   $ 0.49     $ (0.07 )     $ 0.42   $ 0.83     $ (0.01 )     $ 0.82  
Diluted average shares outstanding     45,547       45,547         45,547         45,432       45,432         45,432  

(a) Write-off of art and manuscript inventory
(b) Severance expense and write-off of subscription acquisition costs
(c) Tax benefit on the write-off of art and manuscript inventory and subscription acquisition costs, severance expense, and a favorable adjustment made to deferred income tax liabilities as a result of state and local legislation enacted during the first fiscal quarter.

Meredith Corporation and Subsidiaries   Table 2
Supplemental Disclosures Regarding Non-GAAP Financial Measures
           
The following table shows results of operations excluding the special items and as reported with the difference
being the special items discussed in Table 1.
 
Period Ended December 31, 2009   Three Months Six Months
Excluding Excluding
Special Special As Special Special As
    Items   Items     Reported Items   Items     Reported
(In thousands)
Revenues
National media group
Advertising $ 117,431 $ - $ 117,431 $ 254,633 $ - $ 254,633
Circulation 67,209 - 67,209 137,088 - 137,088
Other revenues     76,535       -         76,535     141,058       -         141,058  
Total national media group     261,175       -         261,175     532,779       -         532,779  
Local media group
Non-political advertising 67,549 - 67,549 121,220 - 121,220
Political advertising 2,888 - 2,888 3,831 - 3,831
Other revenues     5,243       -         5,243     11,440       -         11,440  
Total local media group     75,680       -         75,680     136,491       -         136,491  
Total revenues   $ 336,855     $ -       $ 336,855   $ 669,270     $ -       $ 669,270  
 
Operating profit
National media group $ 37,244 $ (5,470 ) (a) $ 31,774 $ 75,837 $ (5,470 ) (a) $ 70,367
Local media group 17,063 - 17,063 19,463 - 19,463
Unallocated corporate     (11,627 )     -         (11,627 )   (21,038 )     -         (21,038 )
Income from operations   $ 42,680     $ (5,470 )     $ 37,210   $ 74,262     $ (5,470 )     $ 68,792  
 
Depreciation and amortization
National media group $ 3,642 $ - $ 3,642 $ 7,149 $ - $ 7,149
Local media group 5,960 - 5,960 12,082 - 12,082
Unallocated corporate     515       -         515     989       -         989  
Total depreciation and amortization   $ 10,117     $ -       $ 10,117   $ 20,220     $ -       $ 20,220  
 
EBITDA1
National media group $ 40,886 $ (5,470 ) (a) $ 35,416 $ 82,986 $ (5,470 ) (a) $ 77,516
Local media group 23,023 - 23,023 31,545 - 31,545
Unallocated corporate     (11,112 )     -         (11,112 )   (20,049 )     -         (20,049 )
Total EBITDA   $ 52,797     $ (5,470 )     $ 47,327       $ 94,482     $ (5,470 )     $ 89,012  

1 EBITDA is earnings from continuing operations before interest, taxes, depreciation, and amortization.

(a) Write-off of art and manuscript inventory and subscription acquisition costs and severance expense.

Meredith Corporation and Subsidiaries   Table 3
Supplemental Disclosures Regarding Non-GAAP Financial Measures
                 

Special Items - During the second quarter of fiscal 2009, Meredith recorded a special charge which relates primarily to the cost of a companywide workforce reduction of approximately 250 employees; the closure of Country Home magazine, effective with the March 2009 issue; and the relocation of the creative functions of the ReadyMade brand and Parents.com to Des Moines. Please see Meredith's press release dated January 8, 2009, for additional information relating to the special charge.

 

The following table shows results of operations excluding the special items and as reported with the difference being the special items. Results of operations excluding the special items are non-GAAP measures. Management's rationale for presenting non-GAAP measures is included in the text of this earnings release.

           
Period Ended December 31, 2008   Three Months     Six Months
  Excluding     Excluding    
Special Special As Special Special As
    Items   Items     Reported Items   Items     Reported
(In thousands except per share data)
Revenues
Advertising $ 201,800 $ - $ 201,800 $ 413,626 $ - $ 413,626
Circulation 66,804 - 66,804 138,217 - 138,217
All other     92,680       -         92,680     173,511       -         173,511  
Total revenues     361,284       -         361,284     725,354       -         725,354  
Operating expenses
Production, distribution, and editorial 162,310 - 162,310 332,421 - 332,421
Selling, general, and administrative 143,215 9,033 (a) 152,248 288,167 9,033 (a) 297,200
Depreciation and amortization     10,776       -         10,776     21,632       -         21,632  
Total operating expenses     316,301       9,033         325,334     642,220       9,033         651,253  
Income from operations 44,983 (9,033 ) 35,950 83,134 (9,033 ) 74,101
Interest income 107 - 107 227 - 227
Interest expense     (5,353 )     -         (5,353 )   (10,787 )     -         (10,787 )
Earnings before income taxes 39,737 (9,033 ) 30,704 72,574 (9,033 ) 63,541
Income taxes     16,823       (3,522 )       13,301     30,592       (3,522 )       27,070  
Earnings from continuing operations 22,914 (5,511 ) 17,403 41,982 (5,511 ) 36,471
Loss from discontinued operations, net of taxes     (736 )     (4,124 ) (b)     (4,860 )   (1,167 )     (4,124 ) (b)     (5,291 )
Net earnings   $ 22,178     $ (9,635 )     $ 12,543   $ 40,815     $ (9,635 )     $ 31,180  
 
Basic earnings per share
Earnings from continuing operations $ 0.51 $ (0.12 ) $ 0.39 $ 0.93 $ (0.12 ) $ 0.81
Discontinued operations     (0.02 )     (0.09 )       (0.11 )   (0.03 )     (0.09 )       (0.12 )
Basic earnings per share   $ 0.49     $ (0.21 )     $ 0.28   $ 0.90     $ (0.21 )     $ 0.69  
Basic average shares outstanding     44,951       44,951         44,951     45,096       45,096         45,096  
 
Diluted earnings per share
Earnings from continuing operations $ 0.51 $ (0.12 ) $ 0.39 $ 0.93 $ (0.12 ) $ 0.81
Discontinued operations     (0.02 )     (0.09 )       (0.11 )   (0.03 )     (0.09 )       (0.12 )
Diluted earnings per share   $ 0.49     $ (0.21 )     $ 0.28   $ 0.90     $ (0.21 )     $ 0.69  
Diluted average shares outstanding     45,072       45,072         45,072         45,219       45,219         45,219  

(a) Severance expense
(b) Severance expense and the write-down of art and manuscript inventory and subscription acquisition costs, net of taxes

Meredith Corporation and Subsidiaries   Table 4
Supplemental Disclosures Regarding Non-GAAP Financial Measures
           
The following table shows results of operations excluding the special items and as reported with the difference
being the special items discussed in Table 3.
                               
Period Ended December 31, 2008   Three Months Six Months
Excluding Excluding
Special Special As Special Special As
    Items   Items     Reported Items   Items     Reported
(In thousands)
Revenues
National media group
Advertising $ 120,078 $ - $ 120,078 $ 264,385 $ - $ 264,385
Circulation 66,804 - 66,804 138,217 - 138,217
Other revenues     90,026       -         90,026     167,973       -         167,973  
Total national media group     276,908       -         276,908     570,575       -         570,575  
Local media group
Non-political advertising 64,717 - 64,717 126,365 - 126,365
Political advertising 17,005 - 17,005 22,876 - 22,876
Other revenues     2,654       -         2,654     5,538       -         5,538  
Total local media group     84,376       -         84,376     154,779       -         154,779  
Total revenues   $ 361,284     $ -       $ 361,284   $ 725,354     $ -       $ 725,354  
 
Operating profit
National media group $ 29,248 $ (6,040 ) (a) $ 23,208 $ 63,138 $ (6,040 ) (a) $ 57,098
Local media group 24,342 (2,013 ) (b) 22,329 35,038 (2,013 ) (b) 33,025
Unallocated corporate     (8,607 )     (980 ) (c)     (9,587 )   (15,042 )     (980 ) (c)     (16,022 )
Income from operations   $ 44,983     $ (9,033 )     $ 35,950   $ 83,134     $ (9,033 )     $ 74,101  
 
Depreciation and amortization
National media group $ 4,228 $ - $ 4,228 $ 8,054 $ - $ 8,054
Local media group 6,448 - 6,448 12,517 - 12,517
Unallocated corporate     100       -         100     1,061       -         1,061  
Total depreciation and amortization   $ 10,776     $ -       $ 10,776   $ 21,632     $ -       $ 21,632  
 
EBITDA1
National media group $ 33,476 $ (6,040 ) (a) $ 27,436 $ 71,192 $ (6,040 ) (a) $ 65,152
Local media group 30,790 (2,013 ) (b) 28,777 47,555 (2,013 ) (b) 45,542
Unallocated corporate     (8,507 )     (980 ) (c)     (9,487 )   (13,981 )     (980 ) (c)     (14,961 )
Total EBITDA   $ 55,759     $ (9,033 )     $ 46,726       $ 104,766     $ (9,033 )     $ 95,733  

1 EBITDA is earnings from continuing operations before interest, taxes, depreciation, and amortization.

(a) Severance expense for national media group
(b) Severance expense for local media group
(c) Severance expense for Corporate personnel

Meredith Corporation and Subsidiaries   Table 5
Supplemental Disclosures Regarding Non-GAAP Financial Measures
               
EBITDA
Consolidated EBITDA, which is reconciled to earnings from continuing operations in the following tables, is defined as earnings from continuing operations before interest, taxes, depreciation, and amortization.
 
Segment EBITDA is a measure of segment earnings before depreciation and amortization.
Segment EBITDA margin is defined as segment EBITDA divided by segment revenues.
       
  Three Months Ended December 31, 2009 Six Months Ended December 31, 2009
National   Local Media   Unallocated   National   Local Media   Unallocated  
    Media Group   Group   Corporate   Total Media Group   Group   Corporate   Total
(In thousands)
Revenues $ 261,175     $ 75,680     $ -     $ 336,855   $ 532,779     $ 136,491     $ -     $ 669,270  
 
Operating profit $ 31,774 $ 17,063 $ (11,627 ) $ 37,210 $ 70,367 $ 19,463 $ (21,038 ) $ 68,792
Depreciation and amortization   3,642       5,960       515       10,117     7,149       12,082       989       20,220  
EBITDA $ 35,416     $ 23,023     $ (11,112 ) 47,327 $ 77,516     $ 31,545     $ (20,049 ) 89,012
Less:
Depreciation and amortization (10,117 ) (20,220 )
Net interest expense (5,735 ) (10,766 )
Income taxes   (12,521 )   (20,731 )
Earnings from continuing operations $ 18,954   $ 37,295  
 
Segment EBITDA margin   13.6 %     30.4 %   14.5 %     23.1 %
 
                               
Three Months Ended December 31, 2008 Six Months Ended December 31, 2008
National Local Media Unallocated

 

National Local Media Unallocated

 

   

Media Group

  Group   Corporate  

Total

Media Group   Group   Corporate  

Total

(In thousands)
Revenues $ 276,908     $ 84,376     $ -     $ 361,284   $ 570,575     $ 154,779     $ -     $ 725,354  
 
Operating profit $ 23,208 $ 22,329 $ (9,587 ) $ 35,950 $ 57,098 $ 33,025 $ (16,022 ) $ 74,101
Depreciation and amortization   4,228       6,448       100       10,776     8,054       12,517       1,061       21,632  
EBITDA $ 27,436     $ 28,777     $ (9,487 ) 46,726 $ 65,152     $ 45,542     $ (14,961 ) 95,733
Less:
Depreciation and amortization (10,776 ) (21,632 )
Net interest expense (5,246 ) (10,560 )
Income taxes   (13,301 )   (27,070 )
Earnings from continuing operations $ 17,403   $ 36,471  
 
Segment EBITDA margin     9.9 %     34.1 %           11.4 %     29.4 %        

Contacts:

Meredith Corporation
Shareholder/Financial Analyst Contact:
Mike Lovell, 515-284-3622
Director of Investor Relations
E-mail: Mike.Lovell@Meredith.com
or
Media Contact:
Art Slusark, 515-284-3404
VP/Corporate Communications
E-mail: Art.Slusark@Meredith.com

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