Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Meredith Corporation (NYSE: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

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.

Now let’s take a closer look at our two major business operations beginning with the local media group. Fiscal 2011 third quarter local media operating profit was $13 million and revenues were $71 million both increases over the prior year period. Eight of our 12 television stations grew revenue led by Kansas City, Portland and Las Vegas. Our local media business posted its sixth consecutive quarter of year-over-year growth in non-political advertising revenue. Our non-political advertising revenue growth of 5% was certainly better than the industry average at eight of our 10 largest categories grew revenue.

From a category perspective, growth was led by automotive, retail and media. Auto advertising was up 13%, its fifth straight quarter of double-digit growth. For the nine months ended March 31, local media operating profit was $69 million more than double the $32 million earned in the year ago period. Revenues were $244 million up nearly 20% from a year ago.

Our midst of network affiliations end markets is helping our results. Another factor is our success and continued growth and strong connection with the local consumer. During the most recent February ratings period late news viewership increased sharply at our stations in Atlanta, Phoenix, Portland and Las Vegas. Our CBS affiliates in Hartford continue to lead that market finishing first in every news time period. Morning news viewership grew more than 25% in both Atlanta and Kansas City. Better our daily life style program produced by Meredith Video Studios launched in Boston during the fiscal third quarter. The show now airs in eight of the nation’s top 10 markets.

In total Better reaches 70% of U.S. television households across more than 90 markets. Also Meredith Video Studios recently reached an agreement with premier retail networks to create custom video content that PRN will distribute to millions of shoppers in more than 4,500 retail and supermarket locations across the country.

On March 28, Meredith CBS Atlanta began managing the day-to-day operation of Turner Broadcasting Peachtree TV in the rapidly growing Atlanta marketplace. This strategic partnership provides us with access to a larger share of the growing Atlanta advertising marketplace because of Peachtree's younger viewership, strong lineup of sports programming, and increased inventory in both access and prime time day parts. Additionally it raises our overall profile in Atlanta, the number eighth television marketplace in the country.

Now turning to our national media group, fiscal 2011 third quarter operating profit was $48 million compared to $51 million generated a year ago. Revenues were down about 5%. However, we also reduced operating expenses by 5% resulting in a strong operating margin of 18%.

As I mentioned earlier, advertising revenues in both print and digital declined in the third quarter although we drove higher average rates per page in magazine advertising. For the first nine months of fiscal ‘11 national media group operating profit was a $128 million up 6% over the $121 million earned in the year ago period before special items. Our 360 degree advertising sales capabilities where we aggregate the scale audiences we build across multiple media platforms continued to provide Meredith with a competitive advantage in the marketplace.

Over the last two years we’ve nearly tripled revenues from these programs that incorporate more than one media platform. New programs launched during the third quarter include initiatives for (Inaudible) and Colgate. In addition to strengthening our relationship with advertisers and sponsors these programs reinforced our tie to the individual consumer.

During the third quarter of fiscal ‘11 our consumer audience continues to grow and strengthened. Leadership for our measured magazines increased 2% over the year ago period reaching a $111 million according to the most recent data available from Mediamark Research and Intelligence. Our National Media websites delivered over 22 million monthly unique visitors and more than 250 million monthly page views.

Better Homes and Gardens and Parents are now among the strongest magazine brands on the popular social networking site such as Facebook and Twitter and we are now generating more than 5% of our total digital traffic from social media sources. Our mobile websites for Better Homes and Gardens, Parents and Fitness that we launch last summer also continued to grow in consumer popularity. During the quarter we also launched interactive iPad addition of Better Homes and Gardens, Parents and Fitness brands.

We also launched Tablet versions of many of the other brands including selective Special Interest Media titles, Successful Farming, Siempre Mujer, and WOOD during the quarter. These new products are generating positive user feedback and positioning us well for this new digital platform going forward.

Finally our branded presence at retail continues to grow, lead by expansion of the Better Homes and Gardens branded line of Home products sold at Wal-Mart stores across the country and in Canada. The program now includes approximately 3,000 SKUs and that’s up from about 2,000 a year ago at this time.

Turning to circulation, total circulation revenues declined due to previously announced magazine rate based changes and the repositioning of our Special Interest Media business. As an example we published 26 special interest media titles in the third quarter of this year compared to 41 in the year ago period. We doubled the number of online subscription orders year-over-year from magazine titles in the third quarter of fiscal ‘11. This is a critical initiative because digital subscription orders are more profitable and they also give us a better opportunity to cross and up sell our products when compared to traditional direct marketing methods.

Meredith Integrated Marketing revenues grew 8% in the quarter reflecting our ongoing success at executing cross platform programs incorporating capabilities including content development, customer relationship management, digital mobile and of course social marketing. During the quarter we executed a significant expansion of our work with lows and renewed major CRM contracts with Kraft and Chrysler as well.

To summarize the national media group discussion this morning, while it was a difficult quarter for certain categories of both print and digital advertising were seen those declines moderate as we move into our fourth fiscal quarter. We’re growing our consumer audience and delivering the messages of our advertising and marketing clients across multiple platforms. We continue to aggressively develop businesses that are not dependent on traditional advertising and aggressively manage our expenses.

Now I’ll turn the discussion over to Joe Ceryanec our CFO for a financial update and outlook. And then we’ll be happy to answer any questions that you might have.

Joseph H. Ceryanec

Thanks Stephen. Good morning everybody. As Steve mentioned for the first fiscal year-to-date our earnings per share were up over $2.12 which is up 37% from the prior year period or 39% before the special items. For the first nine months of the year our revenue growth and controlled of expenses delivered an increase and our operating profit margin of nearly 400 basis points to over 16% for the first nine months. Also for the first nine months of the fiscal year we’ve reduced our debt by $75 million or 25% of the total. On March 31 our debt balance was $225 million and our debt-to-EBITA ratio was less than 121. We’ve also increased our dividends to shareholders by 11%. That means we pay dividends for 64 consecutive years and we’ve raised it the last 18 years straight.

And that includes raising our dividend during the recession or many other companies were cutting or eliminating their dividends altogether. We’ve also invested in new initiatives such as the launch of the tablet versions of our magazines and mobile platforms of our key brands.

As we’ve been messaging for some time now we look to balance our cash used between reinvestment and our business and return to our shareholders. Historically we maintained this balance and we expect to continue the same mix into the future. So far in fiscal ‘11 we’ve invested approximately $60 million in our business. That includes CapEx of about $20 million and as well as $40 million in acquisitions for the Hyperfactory and Real Girls Media as well as the final contingent payments for new media strategies and Gen X.

Also in fiscal 2011 we’ve returned more than $40 million to shareholders through dividends and share buybacks. We repurchased approximately on 110,000 shares in the quarter as part of our repurchased program and for the first nine months of fiscal 2011 we’ve repurchased to about 300,000 shares leaving as with 1 million shares under authorization. We revisit this authorization as needed.

We continue to search for acquisitions that will meaningfully grow our business. And in the meantime, we will continue to return on capital to our shareholders and pay down debt.

Now as we turn to our outlook for the fourth quarter and full year. As we looked through reminder of fiscal ‘11, we expect our fiscal 2011 full-year earnings per share to range from $2.72 to $2.78. This range represents an increase of approximately 20% over fiscal 2010. It's also at the upper end of the guidance range that we provided on our last earnings call and the mid point of our current guidance as at the high point of the original $2.40 to $2.75 range that we provided at the beginning of our fiscal year. So clearly, we expect to perform at the top end of our initial projections or fiscal 2011.

Now as we look more specifically at the fourth quarter of fiscal ‘11, National Media Group advertising is expected to finish the quarter down in the mid-single digit range compared to the prior year period. I will remind you that we currently have two of our three magazine issues closed for our fourth quarter.

Local Media Group non-political advertising revenue with nine weeks remaining in the quarter is currently facing up in the mid-single digit range compared to the prior year period. Additionally the Local Media Group will be cycling against 4 million and net political advertising that we recorded in the fourth quarter of our fiscal 2010. We currently expect fiscal 2011 fourth quarter earnings per share to range from $0.60-$0.66.

So I will conclude our prepared remarks. We continue to make progress towards our vision 2013 which is our goal of regaining and surpassing the performance we achieved prior to the recession and we remain committed to building our shareholders value overtime.

So with that, we’d now like to open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions). The first question comes from Richard Ingrassia. Go ahead please.

Richard Ingrassia – Roth Capital Partners LLC

Thanks. Good morning guys.

Stephen M. Lacy

Hi, Rich. How you doing?

Richard Ingrassia – Roth Capital Partners LLC

I’m good. Thank you. I’m not sure want to take this I’ll just throw it up there. Is there a, what can you quantify the margin differential and digital magazines in anyway, but maybe more importantly are you finding these to be new subs or sub switching from front reader switching from front?

Stephen M. Lacy

Well let me start with that with my thoughts Rich and then I’ll ask Tom Harty to add anything. First of all the our digital addition are available for sale on a single copy basis at this point in time I think you recall of that the concerti and the next as a media concerti we will be launching a digital store front that we will participate in, but that won’t be feel a bit later in the summer time period. It is very similar now to if you picked up an individual copy at the new stand or at the airport and that’s how they are available. So there is no…

Richard Ingrassia – Roth Capital Partners LLC

No subscribes have been.

Stephen M. Lacy

No subscription capabilities yet available in the marketplace.

Richard Ingrassia – Roth Capital Partners LLC

Okay. And then overtime on the margin differential, any sense for that?

Stephen M. Lacy

Well. I think it obviously depends a great deal as we talk before on consumer adoptions but as a remainder the combination of paper, printing and delivery is about 40% of the cost of the magazine operation. Obviously we eliminate a portion of that although there is some degree of incremental expense in creating the digital copies. Bu net-net if we were five years from now, in a position where we’d move 10% to 15% of our audience in guaranteed rate base to a tablet edition, there would be financial benefits at the bottomline compared to print for share.

Richard Ingrassia – Roth Capital Partners LLC

Okay. Fair enough. And then on your other business, the licensing do you have a sense for, I mean do you expect it to grow in a similar way over this calendar year. Can you speak to a schedule of new product line launches at Wal-Mart and then on integrated marketing, I know it’s more difficult to predict there but those are project pipelines suggest the same high single-digit revenue increases this calendar year?

Stephen M. Lacy

Yeah, I’ll take them in reverse order. When you look Rich at industry estimates or really what we have done overtime, I think that kind of high single digit growth trajectory for Meredith integrated marketing is quite reasonable. And we’ve actually achieved better than that over recent years. The Better Homes and Gardens program does have scheduled incremental product launches as we go into the holiday season that is becoming pretty robust in the marketplace and I think we are going to probably begin to see that growth moderate a bit.

But once again it’s actually more important in terms of the store traffic that they are able to generate and the consumer acceptance of the products. We’re also in discussions in terms of taking the product outside or the program outside of the U.S. which would be a really exciting opportunity, but we don’t have anything formal to report on that just yet.

Richard Ingrassia – Roth Capital Partners LLC

Okay, and then maybe just I’ll end asking the obligatory update on M&A strategy question?

Stephen M. Lacy

Yeah and I think that is a great question in some ways what Joe was getting to in our return of capital. We actually just had our half day session yesterday with a series of opportunities that we are looking at. There is a particular unnamed station that would fit beautifully into Paul local media group portfolio there are two very interesting opportunities that we would add Meredith integrated marketing an East Coast presence that were quite interested in particular on the creative side and in Tom’s business there is a an interesting what I would think as more as the tuck in acquisition that relates to our food strategy and maybe a piece of something that might be a greater scale should it become available in the market. So we continue as I know you are aware to be very aggressive from our development perspective that’s obviously a part of how we’ll continue to grow the portfolio. So thanks for asking.

Richard Ingrassia – Roth Capital Partners LLC

Thank you.

Operator

Next question comes from Robert McMath. Go ahead please.

Unidentified Analyst

Hello, can you comment on how pricing is developing at National Media Group?

Stephen M. Lacy

Sure, I am going to just turn that directly over to Tom Harty who lives and breathes that every day.

Tom Harty

This fiscal year our yield, our CPN yield are late prepaid. It’s been improving quite nicely. During the downturn, we gave back some of our rates to maintain share and now we’re seeing mid single-digit return of rates this fiscal year. Does that answer your question?

Unidentified Analyst

Yeah, it does Tom. Thanks. Another one here, what was the digital ad growth in the quarter?

Tom Harty

The digital advertising actually declined 17% in the third quarter. And it was really related to the same sets of advertisers that we saw declines from in the print area. But digital was actually down.

Unidentified Analyst

So you experienced decline both on the digital ad on the print from that, those classes of advertisers which you called out earlier?

Tom Harty

That’s correct.

Unidentified Analyst

Okay. Just curious on how the June ad pages are trending?

Tom Harty

The fourth quarter we’re looking for our declines to moderate. So we sorry to comment specifically on an issue, we do have some of our June issues still a little bit outstanding that are not totally closed yet, but mid declines are what we’re looking at.

Stephen M. Lacy

What we call that a few moments ago, a mid-single digits sort of a decline and as Tom just said the June issued are not quite closed yet.

Unidentified Analyst

Right.

Stephen M. Lacy

Okay.

Unidentified Analyst

Okay. That answers my question. Thank you.

Operator

Next question comes from Jason Bazinet. Go ahead please.

Jason Bazinet – Citigroup

Well thanks so much. I think in the past you talked about paper cost representing about 20% at the operating expenses with a national. And just given what’s going on with commodities as wondering you guys have any early read in terms of where paper prices are trending are likely to trend next year?

Stephen M. Lacy

Yeah there Jason they are definitely trending up. It is sort of a one commodity that we deal with here and I’ll ask Joe to give you a little bit more specifics in terms of what we have seen in recent past.

Joseph H. Ceryanec

Sure. So Jason we’ve just I think as you know we’ve reset our contracts at the beginning of the calendar year. And then there is a quarterly price adjustment. So as we just crossed April 1st we did see an increase of about 2% over the prior quarter. Our expectations where we we’ll end the year for paper prices vis-à-vis the prior year are about 3% up you may remember the last year our fiscal ’10 we saw a significant paper price declines as we move through the year. And then in the first half of run fiscal still saw some softness, but really the last two quarters we’ve seen those prices firm there been a couple of plants then taking off line which obviously tightens the pricing. So definitely up and then as we’re looking in the next year we’re expecting more the same frankly.

Jason Bazinet – Citigroup

You think it could go double-digit in terms of up I mean just looking while the other commodities or is that too zercovinian?

Joseph H. Ceryanec

Well as it relates us specifically for calendar ‘11 because we locked into our contracts the beginning of the year.

Jason Bazinet – Citigroup

Yeah.

Joseph H. Ceryanec

The buffers and the up and down would prevent us from going up ‘11.

Jason Bazinet – Citigroup

Okay

Joseph H. Ceryanec

I can’t respond what might happen is we renew those contracts at the beginning of ‘12.

Jason Bazinet – Citigroup

Okay.

Stephen M. Lacy

I think it might recall also as if we talk about this before that we go to market with our volume along that with timing now we do that during the both calendar quarter and get a market research is really effective at the beginning of the calendar year so that kind of bifurcates our fiscal if you will but as Joe said for calendar ’11 we have protection that will keep it from being double digit and then will turn out to see what demand is and you know what happens when we go back to the marker place of the end of calendar ’11 and that of course impact the back half of our fiscal ’12.

Jason Bazinet – Citigroup

We just – if I can just ask one more question on this?

Stephen M. Lacy

Sure.

Jason Bazinet – Citigroup

Would you characterize the sort of a coated people you use are sort of in international commodity that sort of impacted by a weak dollar or is it really more driven by the supply demand dynamics of the plan?

Tom Harty

This is Tom, I would comment that is more to supply demand affective we see in United States more than any sort of currency fluctuation.

Jason Bazinet – Citigroup

Okay, thank you.

Stephen M. Lacy

Thanks Jason.

Operator

Next question comes from Michael Meltz. Go ahead please.

Stephen M. Lacy

Hi, Michael how do we help you.

Operator

Mr. Meltz, unmute yourself please.

Stephen M. Lacy

You want to go on to the next question and maybe he’ll circle back around.

Operator

Okay, the next question comes from Mike Corty. Go ahead please.

Michael Corty – Morningstar, Inc.

Good morning. I had a quick question on the circulation revenue. It was down 9% in the third quarter but excluding any, I’m trying get out may be what it was without the special items like the pluses and minuses more of an organic number just to see what the trend is on the circulation revenue?

Stephen M. Lacy

Yeah, this once again as the bit of the reminder. In January a year ago, we took the number of special interest media titles down pretty significantly and then also announced a couple of rate base reductions. And so as best you can if you work factor all of that out and try to squire it up, you’d be close to flat, but maybe down a point or two. And the challenge on that is really that even at this point in time you don’t have final, final, final [leads] on all the special interest media titles. So you got some pretty good estimates that we put in and record. But that would be sort of I think a pretty good way to look at it.

Michael Corty – Morningstar, Inc.

Okay, that’s helpful. And I just add one more. In terms of the digital magazines, in terms of the single copies eventually the subscriptions. Can you, I know it’s kind of early, but can you talk a little bit about kind of the pricing strategy there in terms of obviously there is a dynamic between trying to get print subscribers to subscribe on a digital basis than it also trying to get other users that you don’t subscribe to the print to do the online. Can you talk about and decide about much on the pricing in terms of how you are going to build that digital audience?

Tom Harty

The business model still evolving because right now with Apple, we can only sell single copy sales. We are very excited about the future of selling subscriptions. But we don’t have that worked out currently with Apple. 90% of our current circulation is subscriptions in our traditional business, so we are spending a lot of time talking about how we’re going to attack this but until we have success with Apple and then allowing us to get at the data associated with purchasers. It’s really up in the air. But so far what we're seeing in the single copy area is an adaption of about a percentage or about the same as what we see on the print side. Very early, we’re a month into this to give you some scale of what were seeing we’ve had 50,000 downloads in the first month of the application and about 4,700 people actually purchased single copy sales. So, just gives you a frame of reference that it’s very, very small to start off compared to our traditional business.

Michael Corty – Morningstar, Inc.

Alright, great. Thank you.

Operator

And the next question comes from Barry Lucas. Go ahead please.

Barry Lucas – Gabelli & Company

Thank you and good morning. Couple of items, I think in the release, there is about 2 million of corporate line went to development of tablet applications. So, Steve or Joe maybe you could ballpark what do you think A) the total investment will be and then B) is anything running through the national side of the business today?

Tom Harty

Barry, let me start with the investment. Just to be clear we said the 2 million in corporate expenses was due in part to the investment in the tablet and next issue media. The other thing I’d point out when you look at corporate last year was, our third quarter was quite low but on a year-to-date basis we’re pretty much flat with last year. We expect this year our investment between our own internal investment and the actual investment in the joint venture to be about $5.5 million.

Last year we had a small amount. I don’t remember the amount off hand. I want to say, it was kind of a startup of net social media and it was probably it was just over a billion buck. These kind of got say a $4.5 million more this year than last year of investment. It is all sitting on the corporate business now until we turn the corner and the next year when we actually will be selling and producing revenues against the tablet and investment although will continue to maintain net social media at the parent company level. I think it’s a little early to call or talk about our next year and what that investment might be I think we’ll do that in July when we get our guidance for next year and we given update on tablet spending next year. Is that helps Barry.

Barry Lucas – Gabelli & Company

Yes it does. Thanks Steve another just also we got Joe here housekeeping question that your tax rate has been down somewhere around through the years that as it frequently does. You got a feel for the full year tax rate or fourth quarter or anyway you want to describe that?

Joseph H. Ceryanec

Yeah I think Barry you did see third quarter down. I think as we’ve talked in the past there is a phenomenon as we cross years under audit or the statue fronts out or we may have had some contingencies set up as those years past we’re able to eliminate those and that was the phenomenon we saw in the third quarter this year I think our effective rate was a little over a 36.5%. We do expect fourth quarter to come back a call to a more normalized rate which for the year we would play maybe 39% to 39.5% for the year as what we would expect our effective rate to be.

Barry Lucas – Gabelli & Company

Lastly last items since it come up to the couple of different ways balance one less than 1x leverage couple of small maybe larger acquisitions in the pipeline or in the hopper or something you are considering, share repurchases, the dividend all that stuff, if you throw that all up against the wall, Steve what do you think is in an appropriate leverage that you would be comfortable with, either appropriate or comfort level that you can see for now Meredith?

Stephen M. Lacy

Well, if you go back, Barry because you’ve followed for a long time, in the dozen or so years that I have been here at a couple of different points in time due to the acquisition we have been at sort of the three times leverage range or pretty darn close to that. And I certainly think we could get comfortably in that sort of a range which gives us a tremendous amount of headroom as you know by doing the math. And obviously because we are such a very, very strong cash generator that then we have been able to pay that way down at a pretty aggressive flip and get the opportunity to add to the portfolio again and that's obviously the longer-term strategy here.

Tom Harty

Barry, let’s remind you and you might – you tried picking in the footnotes, but we do have a debt covenants that would limit our leverage ratio to 3.75. So Steve mentioned three we've seen in the past, I think we would be comfortably for the right acquisition. What we do have a governor if you will in the (inaudible) 3.75.

Barry Lucas – Gabelli & Company

Thanks for the color. I appreciate it.

Stephen M. Lacy

Thank you, Barry.

Operator

The next question comes from Nadia (inaudible). Go ahead please.

Unidentified Analyst

Hi guys. I’m in Michael’s questions, we apologize for the earlier mix up. Just a couple of questions, can you give us any color on how TV advertisers have paced in, in each of the months for April, May and June versus the plus five that you have for the fourth quarter and how is auto looking? Have you seen any softness due to the issues in Japan?

Stephen M. Lacy

Nadia, I think we’ll have to get back to you with that month-by-month because we don’t have it here at our fingertips, but Paul obviously there is lot of interest in automotive. Why don’t you give a sense to having just gone through all of those revenue reviews with your senior leadership last week?

Paul Karpowicz

Okay, I’d be happy to. We just finished last week an overall review with each of the stations in the sales management. And we were very curious about that very question. Because automotive has clearly then what’s driving our growth, we have had a couple cancellations or couple Lexus cancellations in a few markets, but it really is not amounted to March. To date we haven’t seen anything else any other significant pull backs here from Toyota or Honda. On the other side we’ve seen the domestic spending continue to move along quite nicely. So, so far the overall outlook for both foreign and domestic has been pretty good domestic as been stronger and we’re still waiting to see there is another shoot of drop on the foreign spending. But today we’ve really not seen it yet.

Unidentified Analyst

Okay, thank you for that color. And just one last question, I think in your prepared remarks Steve you mentioned that national cash cost looks to be down. What should we look for in the fourth quarter for national and TV cash cost?

Stephen M. Lacy

Once again I don’t have cash cost here. I mean what I think we were referring to was operating costs and that’s kind of all in that we said company wide would be down a bit in the fourth quarter and it will be down probably in kind of a low single-digit range in the national media group side, but that’s total all in operating costs that you would see on the phase of the income statement.

Unidentified Analyst

Okay. And would you expect the broadcast interviews down or up slightly?

Stephen M. Lacy

Expect what again to be down or up slightly.

Unidentified Analyst

The local do you expect local…?

Stephen M. Lacy

No I think broadcasting will be up a little bit.

Tom Harty

Yeah, Nadia I think what you will see is what we expect in the fourth quarter is on the operating expense side pretty similar to what we saw this quarter. We would expect national media to be down a couple percent maybe not the five that were down this quarter, but two to three broadcast we expect to be up a couple percent due to as we are producing more news we’ve had some higher production costs. As we continue to grow the video business and the better show. So at a mag the national media down a couple percent and the broadcast up a couple percent. And I think might point I made that Barry is I think on the corporate side for the year we would expect to be pretty close to where we ended the year last year.

Unidentified Analyst

Okay. Thank you for all color. Those were all my questions.

Operator

(Operator Instructions).

Stephen M. Lacy

Okay. Well thank you all for participating today and Joe and Mike Lovell and I are certainly available for the balance of day for any follow-on questions there might be. Thank you very much.

Operator

Ladies and gentlemen that does conclude the conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Meredith CEO Discusses F3Q11 Results - Earnings Call Transcript
This Transcript
All Transcripts