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Executives

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

Joseph H. Ceryanec – Vice President and Chief Financial Officer

Analysts

Matthew Chesler – Deutsche Bank

Meredith Corporation (MDP) Deutsche Bank’s 2012 Media and Telecommunications Conference Call February 28, 2012 9:40 AM ET

Matthew Chesler – Deutsche Bank

Good morning. I’m Matt Chesler, the Advertising Analyst at Deutsche Bank. It’s my pleasure to welcome today Meredith Corporation. With us is Chairman and CEO, Steve Lacy; and CFO, Joe Ceryanec. Thank you both for being here. I could imagine doing this conference without you. We’re going to start out with slides from Steve, and then we’ll go into Q&A.

Stephen M. Lacy

Well, thank you very much Matt and it is a real pleasure to be here today. I’m going to open with a brief Meredith’s overview along with our vision for the future, and then Joe Ceryanec will present our own total shareholder return financial strategy, which has been very well received by the investment community since we announced it in late October.

The next slide is simply to remind all of you that the presentation does include some forward-looking information and this is a reminder of the factors that could impact our results as we go forward.

For any of you who may be not familiar with the company, on the left-hand side of this slide are National Media brands with the addition of Allrecipes.com, an acquisition we expect to close on later this week will reach 100 million unduplicated women each and every month. Clearly, the leading media company serving women in the United States today.

Our Local Media business reaches about 10% of U.S. households and we are leading the broadcast industry in terms of gains in non-political advertising revenue. We’re also a significant business-to-business marketer offering clients such as Kraft, Nestlè, Chrysler, Lowe’s, expertise in digital, social, mobile and database marketing across the United States and now aboard with a recent investment in Iris communication.

Our connection to the end consumer is quite strong and is growing. Our National Media brands attract 150 million readers every month with the leadership position in food, in parenthood and in the home space. Better Homes and Gardens is a very strong multi-platform brand that includes quite a profitable brand licensing business at every Wal-Mart Store across the country.

Online, our brands attract over 40 million unique visitors every month and we’re clearly accelerating our digital presence with the acquisition of Allrecipes.com and expanding into tablets and mobile platforms as well.

We are in a great mix of network-affiliated stations in fast growing market and Meredith Accelerated Marketing is now an award-winning full-service digital agency with global capability. We have successfully extended our brands across many media platforms over time. This gives our consumer the flexibility to access our content when she prefers and also leads to growing consumer engagement. We build significant scale across these platforms offering our advisers and marketers multiple opportunities to reach our broad consumer audiences, which of course leads to revenue and cash flow growth over time.

To illustrate what we’ve accomplished, here is a quick snapshot of our activities over the last decade. Our National Media Group has expanded its content and diversified ad categories we doubled our share of magazine advertising through a series of acquisitions and also expanded in the digital and the high margin brand licensing business.

Our television stations have successfully focused on increasing hours of local news and establishing a much stronger local brand presence. And Meredith Accelerated Marketing has moved from primarily a custom publishing activity to more of a strategic partner with growing digital and CRM services and about half of that revenue in that business now comes from digital sources.

As we look to the future, we positioned ourselves to capitalize on the rapidly evolving marketplace. From a consumer standpoint, the fastest growing demographics of course are of still Baby Boomers and the younger generation wide that is just beginning to come into our wheelhouse in the earlier stages of family formation. We’ll serve both of these groups by emphasizing on content aimed at their particular lifestyle.

(Inaudible) possess is continuing to develop the distribution platforms that we need to reach these consumers including online, tablet, mobile and of course video. From a capability standpoint, we believe it’s very important to continue investing in non-advertising based businesses as well to gain access to new and growing budgets and serve our clients global needs.

As we look ahead to Meredith in 2015, we see continued growth and market leadership. Our National Media group will build on its leadership position in creating and distributing branded content for women across media platform. We’ll be aggressively executing our digital strategy including generating about half of our consumer marketing transactions or circulation transaction digitally or online. We’ll also have further expanded brand-licensing activity.

Our Local Media business will be the number one or number two-rated station in each market and possess robust online and mobile platforms of scale and growing non-traditional revenues such as Meredith Video Studios.

Our Marketing Services business of course will be larger and a recognized leader in providing digital marketing solution and more leverage our new international capabilities through the Iris Global Network.

So far in our fiscal 2012, which we will end this upcoming June 30, we’ve had very strong execution against these growth initiatives. We’ve grown our leadership position in food and in a parenthood spaces and created the Meredith Engagement Dividend, which proves to advertisers that they get a strong return on investment in Meredith magazine.

We’ve aggressively expanded our digital presence by acquiring Allrecipes.com, launching tablet and mobile products and growing the number of subscriptions that we sell online. We’ve also extended our Better Homes and Gardens licensing program at Wal-Mart through the year 2016.

Our Local Media Group is delivering very strong ratings, mobilizing our television website and has double the number of markets where our daily Better television show is (inaudible). We’ve recently rebranded Meredith Accelerated Marketing and cerated the Meredith-Iris Global Network expanding our offerings in healthcare and search engine optimization as well. And finally, we launched our new total shareholder return strategy that Joe Ceryanec will discuss in just a few moments.

To continue this success, we’re executing a series of key initiative that you see here on the slide and of course in addition we’ve remain very focused on our cost structure and continuing to achieve operating efficiency.

We recently went into much greater depth on all of these topics at an Investor Day that we held in our New York City offices on February 14. A webcast is available on the Investor Relations page of meredith.com, which has a lot of more depths around these growth initiatives.

But given our limited time today, I am going to focus on strategies that we’re pursuing to grow our digital activities, specifically our recent and very exciting acquisitions of Allrecipes.com, which is the number one food site in the world.

Our digital growth strategy began of course with expanding our audience. We’re also focused on accelerating our activities related to tablet, mobile, and video as part of our efforts to reach out more aggressively to the next-generation of consumers and of course maximize ad revenue.

Finally, we see a meaningful opportunity to expand our e-commerce activities by connecting our very high purchase intent audience with goods and services they want to buy. And Allrecipes.com will help accelerate all of these initiatives, so let’s take a look at Allrecipes in a bit more detail.

Allrecipes.com is a major digital scale play for Meredith. It is the most visited website in the United States and actually across the world. The number one food recipe channel on YouTube and its recipe app is the most downloaded in the space on Android and Apple mobile operating system. Over time, Allrecipes has achieved impressive historical growth and since 2008 revenues have grown at about 20% annually and operating profit at more than 30% annually to acquiring a very high growth in a high margin business.

With Allrecipes.com, we now dominate the top three media platform consumers turn to for cooking information. We clearly had the lead position already in food focused magazine additionally many of you might be familiar with our best selling Better Homes and Gardens red plaid cookbook, the largest selling cookbook in the world, now with Allrecipes we’re the leading player in digital as well.

What really sets Allrecipes.com apart is how well positioned it is really at the nexus of food portals, food publishers, PPG advertisers and food search engine optimization play. It has a vibrant and a loyal user community, which is really detailed here on the slide.

For Meredith, it brings unique expertise and digital dominance in the creation of proprietary search engine optimization based content. Additionally, Allrecipes’ management team is really top-notch and they’re excited about engaging and leveraging Meredith’s expertise and scale to help grow the business.

Putting Meredith our existing regional businesses and Allrecipes together, moves us immediately to the number one digital position in food and the number two position in the all-important women’s lifestyle categories. You'll see this puts us comfortably ahead of some well-known brands that you see here on the left. This will of course be a major boost to our advertising sales opportunities.

So to summarize our focus, this of course on driving growth in revenue, profit and free cash flow over time. to accomplish this, we’ll continue to strengthen our core business and expand in fast-growing ad categories, scale our digital and our video capabilities, expand sources of revenue that are not dependent on traditional advertising and execute strategic and tuck-in acquisitions and investments as they make themselves available.

We have a tremendous amount of confidence in the long-term strength of our brands, our very robust business model and the sustainability of our future cash flow. We have a very long history of returning significant cash to our shareholders and we continue to do that through our total shareholder return strategy that I'm going to ask Joe Ceryanec to jump into in a bit more detail. and then I'll be back up for the Q&A. Thank you.

Joseph H. Ceryanec

Thanks, Steve. So if you look at this chart, investors over the next several years believe that the S&P leading returns will be in the 7% to 8% range with top quartile companies delivering in 13% to 14% annually. Now our goal that you’re going to go through today is to show you how we believe we can exceed the median and be in the top quartile as far as returns.

Now these expectations have come down as we’ve gone through the recession over the last couple of years. Now the way we look at total shareholder return has really broken into three components. And we use this slide, really as the agenda for my discussion today. So the first component is really part of revenue in earnings growth and I’m going to walk through some of the specific revenue and earnings implications, the operating group strategy that Steve shared with you earlier. secondly, we delivered shareholder return by returning cash to shareholders. we're going to walk through Meredith's history of delivering strong free cash flow and returning a significant amount of that to the shareholders. And finally, I’ll close by bringing these elements together and summarizing our view of how we’ll deliver total shareholder return.

So, if you look at this slide, we have quantified the expected revenue and earnings impact, I looked at the strategies that Steve summarized earlier. As he said, again, at our Investor Day, we went into a lot more detail by business unit and what these strategies in tale. so from the revenue generation standpoint, we believe that by 2015, so this is basically our fiscal ‘11 to fiscal ‘15 that we can grow revenues between $150 million and $250 million from these initiatives and that would represent about 2% to 4% CAGR on the top line.

Now if you take these same initiatives and look at what we believe the operating profit impact would be, we believe again these same strategies could deliver between $40 million and $85 million of operating profit growth again from $11 million to $15 million, which would represent about 4% to 8% CAGR on our bottom line.

As we move to the second category, which is delivering free cash flow and returns to shareholders, we have a long history of growing our free cash flow and returning a meaningful presence or a meaningful amount of that to the shareholders. The business model that we developed at Meredith generates very strong cash flows and even in difficult times like we experienced in 2009 and 2010, a record of free cash flow was quite impressive.

Now over the past couple of years and during the recession that we've gone through, we felt that most responsible use of our cash was a) maintaining the dividend and growing the dividend, but also de-leveraging and paying down our debt and that was really due to very uncertain times in the financial markets, but really to de-lever the business, so we could add to our portfolio when those opportunities arose.

And as a result, today we’re in an excellent position to be able to seize on those opportunities over the last nine months, we’ve announced a series of what we would call tuck-in, small acquisitions including Rachael Ray, EatingWell and FamilyFun and as Steve mentioned, we expect to close the Allrecipes transaction yet this week.

At the same time, we’ve continued to return cash to shareholders. And we paid dividends for 65 straight years and have raised it actually for the past 19 again, we are raising our dividend even in the depths of the recession. Now this past fall, as our leverage was well below one-time, we took a hard look at our capital structure and our operating results. we concluded that we could significantly increase our dividend and we increased a 50% in fact and still have the flexibility to invest in the business. and so today, we're paying $1.53 a year on our shares and that represents a little bit less than 5% return on today’s share price.

At the same time, we also initiated or reinvigorated our share repurchase program and received authorization from our board to repurchase 100 million of share buybacks and you can see our share buyback history on the right side of this chart. From a debt standpoint, we would expect to end this fiscal year, so June 30, 2012 with about $375 million of debt and that includes an incremental $175 million for the Allrecipes acquisition. But even with that incremental debt we’re still will de-levered at about 1.5 times. and so we still fell we've got plenty of flexibility going forward.

And to illustrate that, this chart here really takes our 2011 fiscal year free cash flow of $185 million and then pro forma that amount for the incremental dividend as well as the impact of the Allrecipes acquisition. So you’ll see the net debt increase and amounts paid for acquisitions for the year. So even with the higher dividend and with the series of acquisitions we've done, we would still have over $50 million of free cash available to further de-lever a share buybacks or other M&A activities.

Now, as we kind of bring this whole TSR together, you'll see on the top, at number one, earnings growth, so if you remember the charts we presented a few minutes ago, we said that some of these activities that we’re working on, we would expect we’ll grow our top line 2% to 4% with a normal amount of leveraging our cost structure, we’ve been believed those same initiatives can generate 4% to 8% bottom line. as we said, our dividend is currently yielding almost 5% with the share buybacks we feel we can generate another 2% in TSR to buybacks. so if you add together, net income growth and the free cash flow contribution, we feel we can deliver 8% to 15% growth over the next three years.

Now in addition to that, there is change in valuation, which would be increase on our [PE] through changes in our portfolio, and if you add all these together, we believe it very possible that we would be in the top quartile of companies in the S&P for delivering shareholder returns.

So that kind of that forward look, this slide just basically reiterates what we said in January and this is our view of our earnings for our third fiscal quarter, which will end at March 31 this year, we were reiterating our expectations of delivering between $0.65 and $0.75 a share and we're also reiterating that we expect to de-lever to $2.55 to $2.75 for the fiscal year ended June 30 2012.

And this outlook does not include any impact of Allrecipes, which on our shareholder call, we said would be mildly diluted this fiscal year. So when we announce our earnings next month, we’ll give further guidance on Allrecipes’ expectations. All right.

Stephen M. Lacy

So I’m going to do a quick wrap up and then we’ll jump into the Q&A. we think there is a very compelling investment thesis here with the Meredith Corporation; we’re very powerful media and marketing company with trusted brands and an unrivaled reach of the female audience. We operate a great group of local television stations in growing markets and in our marketing services business we have evolved to a full service digital agency. We have a plan in place to produce solid growth and earnings. And in free cash flow our management team is strong and proven over the long haul and we have been paying as Joe said a dividend for 65 years growing it for 19, with a current yield of almost 5%.

We’re executing a series of strategy to grow revenue, profit and of course free cash flow, and believe that will result in total shareholder return in the 10% to 15% range over a forward looking three year planning horizon, so we should be happy to answer any questions that you might have in the remaining time, we have this morning.

Question-and-Answer Session

Stephen M. Lacy

Yes, please.

Unidentified Analyst

(Inaudible) Sorry can you give us a view on the TV broadcast demand scale from your perspective and it’s Meredith that to buyer, seller, TV stations in 2012?

Stephen M. Lacy

You know we’re really I think much more bullish on the local television market than may be we were 24 months ago, the advertising revenue there has really bounce back very, very well and we see nice recovery especially in the couple of our markets Phoenix and Las Vegas that were hit really, really hard by the downturn. We always love the opportunity to move into a political cycle and once again because our fiscal year for us, that’s benefit of that is next year in our fiscal 2013, and we also feel I think much more optimistic today than maybe a year or so ago about our upcoming network renewal and affiliation agreement negotiations and the opportunity to significantly increase our retransmission revenue. So that when we net all that out, we think we’ll be in at least as good a position a year from now as we are today and we were really kind of uncertain about that so we started testing the market and renegotiating some of our MSL agreement.

So net-net, we’re pretty bullish on local television, we are clearly active in M&A opportunities, but we have a pretty disciplined approach. We were very heavily involved in the recent McGraw-Hill transaction, but we established the range. On one end, where we – we’re doing a high five as we had picked up the four stations with that price, in a place where we stopped and it went well beyond that, and so we stopped. But we think as especially as it relates to the TSR strategy that business is really strong free cash flow generator and we think over the relative near term, we’ll perform pretty well. Okay, go ahead.

Unidentified Analyst

(Inaudible)

Stephen M. Lacy

That’s a very good question, and we were altogether yesterday talking about that. We haven’t really seen any impacts of that yet, at this point, but it’s a good thing to be cautious about. It also interestingly enough has an impact on what the consumer does in Wal-Mart in terms of the products that they buy and all of that should have persist, but we really haven’t seen any impact, really haven’t seen change in sort of our view the current outlook for television advertising at least at this point.

Unidentified Analyst

(Inaudible)

Stephen M. Lacy

Our involvement in the home category that’s really around building and remodeling, it has very little to do with new home starts if you will, so it’s like it’s [DiE For Kitchen], what we done really high end master bath and that was really hot when you could refinance your house, pull out a 100 grand and (inaudible). And we haven’t seen really a lot of strong up tick in that category has stabilized and is increasing right now, but it’s off a very little base from coming down pretty significantly in 9 and 10.

Unidentified Analyst

(Inaudible)

Stephen M. Lacy

And they do that. There is no doubt and we got a – we come with a lot of different things you can do on a weekend for $300 and those kind of project, but really, really feedstock for us is the big blow the back of the house out, do the big kitchen and naturally gets a really high end advertisers, we get a very high CPM. So that other activity is going on. We do a tremendous amount of work for lows as an example in our custom marketing business and Meredith Xcelerated marketing is one of our top three clients. We do all their website works, their outbound email marketing, their social, all their magazines, so we get money that way and of course with Wal-Mart we get out mostly through our Better Homes and Gardens licensing program as well. Yes another question please.

Unidentified Analyst

Concerning your over the year, UBS utilizing your spectrum for your [DOT Twos, Threes] and are you coming up with a content or are you bringing content in from other providers?.

Joseph H. Ceryanec

We’re really coming up with the content on our own weather channel, traffic information that sort of things. It’s not big revenue drivers, but we have found some opportunity and we think really the mobile platform is probably the biggest opportunity as we look forward, because of the ability to provide U.S. the consumer where every URL weather and traffic and new sound lights if you will and drive you back to the regular news camp.

Yes sir please, in the back?

Unidentified Analyst

With regard to acquisition strategy and matrix in the past few years you made acquisitions like you’ve done in the new ways that you’re actually able to delever and return value back to shareholders, will make those acquisitions to the same (inaudible). Two questions, one would you be going for the right acquisition to lever us and then second when you look at the acquisitions as you mention with Allrecipes, it will create some short term solution for a longer term gain, what sort of short term solution you’re willing to tolerate to make the right acquisition.

Stephen M. Lacy

So I’ll ask Joe to be a little bit more granular around some of those metrics, but the answer is we would be willing to lever up a bit further, because we’re only going to be at about 1.5 times EBITDA even when you sold Allrecipes in, so I think we still got some head room, and from a perspective of thinking about the consumer in Allrecipes to be able to be not only number one in prints, but also to be number in digital, with the dollars moving around by platform and especially with this younger Gen Y coming along, but it is very comfortable in a digital only environment, we think that an opportunity like Allrecipes make a lot of sense, but Joe you might give a little more color around, how we think about those metrics and sort of what might be the high watermark be in terms of leverage and that sort of things.

Joseph H. Ceryanec

So when we announced this TSR strategy that I went through last October, we actually created a deck and put it on a website, which was really kind of our M&A, that you just what we look for and what type of leverage would be – we would be comfortable with, and on that we can get on our website, but we said that we will go for three times, leverage for a very strategic acquisition assuming we can see that leverage point come down relatively quickly.

We said you know kind of our comfort point was about 2.5, but very short period of time we go to three. I think to the Allrecipes point, we made a conscious effort and at least that’s dilutive is because we are investing some money up front in that business, that was part of Reader's Digest, and Reader's had not invested very much in growing that digital asset and we feel there was an opportunity to really create some incremental value with some shorter term investment. And so we’re consciously investing in the business, which will be dilutive for probably the next six to nine months, but we believe that it’s going to be a nice return on the other side on that business. That state your question.

Unidentified Analyst

(Inaudible)

Joseph H. Ceryanec

I think it’s really a case by case.

Unidentified Analyst

(Inaudible)

Stephen M. Lacy

Sure, so I understand that some of the questions are coming through on the webcast very well, so I’m going to restate it. It’s really a valuation of Allrecipes, how did we look at the business and how do we really think about that business going forward from a top line and from a profitability perspective. So we look Joe at what, three or five different ways you could value a digital business like that. Most of pulls revenue evaluation on unique visitors.

Joseph H. Ceryanec

Public company coms, recent – other transaction…

Stephen M. Lacy

… recent transaction. So, a whole series of things that a little, and DCF of course. A little different then sort of the formulaic way we look at a television station or a magazine where we’ve been assets for 110 years. And we feel really very comfortable about the metrics we came up with around all recipes, really for two or three different reasons. First and foremost, because it kind of rockets up to that number one position from an advertising perspective, but more importantly, because of some things that they were not doing with that brand. So, though it’s the largest digital food site in the world, but it’s only a digital brand. We would never operate any of our brands on only one platform. So we think there is a magazine opportunity, we think there is a television show opportunity, we think of all the things that HDTV and the food network have done to move those brands out in a multi-platform way.

Unfortunately under the ownership of the Readers Digest and their financial issues it’s a one platform brand, and even though it is the number one digital site, if you go to your smartphone, it has not been optimized for smartphone access, which all of our businesses where almost three years ago. So, there are some fundamental things that have not been done that we think are really serious low hanging fruit. We’re selling today about 20% of our subscriptions digitally with about half the traffic that all recipes have.

So as Joe said earlier, the opportunity to sell more of our print, subscriptions to what is a very engaged food audience is another really great opportunity, plus they don’t do anything with all that traffic from an e-commerce perspective, which is highly unusual. So, we’ve got some very aggressive growth initiative to further monetize that traffic beyond traditional advertising and to do it in more of a multi-platform way. So, yes sir.

Unidentified Analyst

Thanks. I was wondering if you could help us flush out the retrans opportunities.

Stephen M. Lacy

Sure.

Unidentified Analyst

I think the broadcasters – might be getting a $1, $1.50 at the month for their owned and operated stations. I was wondering if you guys get something similar, and then how much of that do you have to share back with the broadcasters, and then how far long are you in getting these deals done. Some must be already done and in your guidance are the – do you have a lot of contracts left to re-negotiate?

Stephen M. Lacy

Well, it’s not done and it’s not in our guidance. Our fox (inaudible)

Joseph H. Ceryanec

Our fox, we have three fox stations that affiliation agreements up June 30, ’12, so coming up and our four of our six CBS stations will be up for renewal in August of ‘12. So, our fiscal ’13 will include the reverse retrans impact if you will, of those renewed contracts.

Stephen M. Lacy

At the same time all of or MSL arrangements were done about five years ago, and all of them, Joe will be complete by…

Joseph H. Ceryanec

In our fiscal ’13. So they were new at various stages, but basically July 1, ’12 to July 1, ’13 all are major and then so satellites, phone company contracts will be up. So, while we will be sharing with the networks, we have the ability to go back and re-negotiate kind of the retrans and as Steve said earlier, our feeling is that we will be at least in that neutral from where we are today, if not better off. And if the networks can get those kind of rates we probably can – there in the bigger markets we probably don’t get quite that, but if we could get close to that we’d be feeling very good.

Stephen M. Lacy

On average today, we’re doing about a quarter (inaudible), so we’re way out of market, and we know that. We just haven’t had the ability to re-negotiate. So, we’ll be around out in the hall, if anybody wants to talk to us. We appreciate all of you being here and Matt do you have anything?

Matthew Chesler – Deutsche Bank

Just want to thank you both for being here.

Stephen M. Lacy

Okay, thank you all for being here this morning. We appreciate it.

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