Meredith Corporation ( MDP)

F3Q11 Earnings Call

April 27, 2011 11:00 am ET

Executives

Mike Lovell – Director of Investor Relations

Stephen M. Lacy – Chairman, President and Chief Executive Officer

Joseph H. Ceryanec – Vice President and Chief Financial Officer

Paul Karpowicz – President, Meredith Local Media Group

Tom Harty – President, Meredith National Media Group

Analysts

Richard Ingrassia – Roth Capital Partners LLC

Jason Bazinet – Citigroup

Michael Corty – Morningstar, Inc.

Barry Lucas – Gabelli & Company

Presentation

Operator

Ladies and gentlemen thank you for standing by. Welcome to the Meredith Corporation Reports Fiscal 2011 Third Quarter Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions given at that time. As a reminder this conference is being recorded. (Operator Instructions)

I would now like to turn the conference over to your host Director of Investor Relations, Mike Lovell. Please go ahead Mike.

Mike Lovell

Good morning and thanks everyone for joining us. We’ll star the call today with comments from our Chairman and Chief Executive Officer Steve Lacy; and our Chief Financial Officer, Joe Ceryanec. And then we’ll turn the call over to questions. Also on the line this morning are Paul Karpowicz, President of our Local Media Group; and Tom Harty, President of our National Media Group.

As a reminder an archive of today’s discussion will be available later this afternoon on our investor website and a transcript will follow that. I’ll also remind you that that our remarks today include forward-looking statements and that actual results may differ from forecasts. Some of the reasons why are described at the end of our press release issued earlier this morning and in some of our SEC filings.

And with that, Steve will begin.

Stephen M. Lacy

Well good morning everyone and thank you all for joining us on our third quarter call. Earlier today we reported fiscal 2011 third quarter earnings per share of $0.67. While that’s down slightly from $0.69 in the year ago period it’s above the high end of our previously disclosed earnings estimate range for the quarter. Many of our businesses continued their year-over-year growth during third quarter. Our local media group achieved a 5% increase in non-political advertising revenue and that’s on top of a 16% gain in the year ago quarter. That’s a sixth consecutive quarter of non-political television advertising revenue growth.

Meredith integrated marketing also delivered 8% growth in revenue and our brand licensing business grew revenue by 15%. We believe the exception as previously communicated was national media group print and digital advertising revenue which was off about 11%. We believe a number of contributing factors resulted in belt-tightening by certain of our major national media group advertising clients during the quarter. These include the impact of rapidly rising commodity prices, our response to tepid holiday sales at mid and value price retailers and a continued weak housing marketplace. This resulted in an industry wide weakness in categories such as food, prescription and over the counter drugs and home. And as a remainder these are categories where Meredith over indexes the industry taken as a whole by a two to one margin.

In addition we faced more difficult comparisons from the prior year period when the national media group delivered its strongest ad revenue performance of the fiscal year. We’re seeing national media advertising revenue declines moderate to the mid single-digit range as we move into our fiscal fourth quarter. We of course have initiated special initiatives for our sales teams and continued to devote significant resources to executing Meredith 360 integrated sales programs.

We continue careful expense management with total company operating expenses down 3% and national media group operating expenses down 5% in the third quarter. We expect expenses to decline in our fourth quarter of fiscal 2011 as well.

Turning now to for a moment to fiscal 2011 nine months company performance, we’ve achieved earnings growth of nearly 40% in that period. We are now trending toward the high end of the earnings expectations we provided back at the start of fiscal 2011 which were $2.40 to $2.75 a share. Today we believe we will finish 2011 in a stronger position and our range is now $2.72 to $2.78 a share for the full fiscal year.

The key factors driving this performance included 5% growth in total company ad revenue, a record $34 million in net political advertising revenue generated at the local media group level 5% growth in local media non-political advertising revenue and double-digit revenue growth by Meredith integrated marketing and brand licensing along with a 2% reduction in total company operating expenses and as a remainder that’s on top of a 5% reduction in the prior year period.

We continue to take significant steps in fiscal ‘11 to advance our digital strategy. We launched tablet additions of our top brands including Better Homes and Gardens, Parents and Fitness on the iPad, NOOK and video platforms. We launched mobile sites for Better Homes and Gardens, Parents and Fitness and introduced innovative mobile apps as well. Additionally we implemented several initiatives that are successfully moving more and more consumer marketing transactions online including subscription, acquisition and renewal.

Meanwhile our local media group has created a number of popular mobile apps that are increasing brand loyalty and generating revenue. Last week we announced plans to relaunch enhance station website by the end of the fiscal ‘11 that will include additional social media applications. As I’ll detail a bit later on the call all of these digital initiatives are central to our ongoing success at increasing our consumer audience.

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