Meredith Corporation ( MDP)

F4Q11 (Qtr End 06/30/2011) Earnings Call

July 28, 2011 11:00 am ET

Executives

Mike Lovell - Director of IR

Steve Lacy - Chairman and CEO

Joe Ceryanec - CFO

Paul Karpowicz - President of Local Media Group

Tom Harty - President of National Media Group

Analysts

Jason Bazinet - Citi

Michael Corty - Morningstar

William Bird - NI

John Crowther - Piper Jaffray

Michael Meltz - JPMorgan

Barry Lucas - Gabelli & Company

Presentation

Operator

Welcome to the Meredith Corporation's fiscal 2011 fourth quarter and full year results conference call. (Operator Instructions) As a reminder this conference is being recorded today, Thursday, July 28, 2011.

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

Mike Lovell

Good morning and thanks everyone for joining us. We'll start today with comments from Chairman and Chief Executive Officer, Steve Lacy; followed by 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.

An archive of today's discussion will be available later this afternoon on our investor website and a transcript will follow that. Let me remind you all that that our remarks today will include some forward-looking statements and that actual results may differ from forecasts. Some of the reasons why are described at the end of our news release issued earlier today and in some of our SEC filings.

And with that, Steve will begin.

Steve Lacy

Thank you very much, Mike and good morning everyone. I am certainly pleased to report that we delivered growth in revenue, profit and cash flow during our fiscal 2011. We grew total company revenue, and several of our business activities delivered record revenue performance including political and digital advertising as well as Meredith's integrated marketing and brand licensing.

Local non-political advertising revenue grew 4%, a second year in a row of growth. We decreased total company operating expenses by 2%. This is the third year in a row that we've delivered expense reductions from operation. We increased total company operating profit by 22% and expanded our operating profit margin to 16% and that's up from 13% last year.

We grew free cash flow by 11%. We returned nearly 40% of this cash to our shareholders through dividends and our share re-purchase program significantly more than last year. We increased our dividend 11% and restarted our share re-purchase program.

In addition to these financial highlights, we increased our already strong connection with American consumers in fiscal 2011. This overarching initiative really spans all of our media and marketing platforms and lies at the heart of Meredith's unique consumer proposition.

Meredith continues to reach 75 million American women at important life stages providing them with valuable information on caring for their families, their home and their own health and well-being.

As we continue to aggregate these large consumer audiences, we're confident that advertisers and marketers alike will continue to use Meredith's properties to reach the consumer. To position the company for the future while accelerating revenue profit and cash flow growth, we're continuing to execute against a series of very well-defined strategic initiative, first of all, increasing our already strong consumer connection.

We completed creative enhancements to several of our major magazines and have more planned for fiscal '12. We grew magazine readership and television viewership while generating double-digit increases in traffic across our 60-plus websites. Additionally, the Better syndicated daily lifestyle television show will broaden its reach to more than 80% of American households this fall by adding New York City, the nation's top market.

We're also strengthening our core-magazine and television businesses. Advertising rates grew in both of our business over the prior year. Operating margins improved in both national and the local media group. We completed a number of re-engineering initiative to improve efficiency and reduce costs as we look to the future.

We continue to aggressively expand our digital activities; we re-launched a series of key websites including BHG.com and Recipe.com and have more digital enhancements planned for fiscal '12 including the rapid expansion of our mobile apps and additional tablet addition.

We're also extending our key brands to new products and services. Our Better Homes and Gardens brand licensing program continues to grow at Walmart stores, and is now about six times larger than when the program was launched less than three years ago.

In fiscal 2012, we'll be promoting recent product extensions including paint, bath décor, and ceiling fans and lighting while continuing to emphasize our core bed, bath and décor products. We continued to significantly grow Meredith's integrated marketing, delivering record revenue in fiscal 2011. We secured key contract renewals with clients, including Kraft and Chrysler and significantly expanded our programs with major clients such as Lowe's and Ford.

Cross-selling new services to existing clients and winning major new business are of course pillars of Meredith's integrated marketing growth strategy. Our goal is to grow this business into our third major activity by fiscal 2014. We've also completed several acquisitions and investments to increase our scale our capability.

We assumed day-to-day operations of Turner Broadcasting System's Peachtree TV in the fast-growing Atlanta marketplace. We purchased the EatingWell Media Group, completed our acquisition of the digital Real Girls Media Network and acquired mobile marketing leader, The Hyperfactory.

Importantly, we significantly grew the amount of cash that we've returned to our shareholders. Our business is built on a model that delivers very strong, stable and growing cash flow. We generated about $2 billion in cash flow over the last decade and returned about half of that cash to our shareholders over this time frame.

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