Meredith Corporation Q1 2007 Earnings Call Transcription

Meredith Corporation (MDP)

Q1 2007 Earnings Call

October 24, 2007 11:00 AM ET

Executives

Mike Lovell - Director IR

Stephen Lacy - CEO, President

John Griffin - Publishing Group President

Paul Karpowicz - Broadcasting Group President

Suku Radia - CFO, Principal Accounting Officer, VP and Acting Treasurer

Analysts

Michael Meltz - Bear Stearns

Barton Crockett - J.P. Morgan

Esther Chang - Merrill Lynch

Catriona Fallon - Citigroup

Eric Elbell - Fenimore Asset Management

Presentation

Operator

Good day ladies and gentleman and welcome to your Meredith Corp., first quarter earnings call (Operator Instructions)As a reminder this is being recorded.

I would now like to introduce your host for today’s conference, Mr. Mike Lovell. You may begin.

Mike Lovell - Director of Investor Relations

Good morning everyone, I’m Mike Lovell, director of investor relations for Meredith Corporation. Before chief executive officer Steve Lacy begins our presentation I’ll take care of a few housekeeping items.

In our remarks we will include statements that are considered forward looking within the meaning of federal security’s laws. The forward looking statements are based on management’s current knowledge and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from the forward looking statements.

Description of certain of those risks and uncertainties can be found in our earnings release issued today and then certain of our FCC filings. The company undertakes no obligation to update any forward looking statements. We will refer to non GAAP measures which, in combination with GAAP results provide additional analytic tools to understand our operations.

Tables that reconcile non GAAP measures to GAAP results are posted on our website. A transcript of this call will be posted to our website as well.

And with that Steve will begin our presentation.

Steven Lacy

Thank you Mike and good morning everyone. Participating with me this morning are publishing group president Jack Griffin, broadcasting group president Paul Karpowicz and Meredith chief financial officer Suku Radia.

I’ll begin with an overview of key accomplishments, discuss performance in our publishing and broadcasting groups and conclude by updating our current earnings outlook. Then we’ll be happy to answer any questions that you may have.

Our first quarter performance reflects a strong beginning to fiscal 2008 for Meredith. Earnings per share rose 10%, advertising revenues great 7%, generated more than $40 million in free cash flow, purchased over 900,000 shares, and retired $15 million in debt.

Our first quarter performance reflected the strengths that have made Meredith one of America’s top performing media and marketing companies. We combined a tremendous base of traditional publishing, broadcasting and marketing assets with the growing and profitable array of online, digital, and video initiative. This enables us to reach approximately 85 million American women every month with content, how and when they choose to receive it.

I’ll start this morning with the review of our publishing group operations. Publishing operating profit grew 16% over the prior year quarter to $55 million. Revenues rose 8% to $330 million. Publishing advertising revenues increased 13%. The categories of food and beverage, home, toiletries and cosmetics, and retail were particularly strong. They account for nearly 50% of magazine advertising revenue.

The resurgence in advertising revenues is particularly evident at four key Meredith brands, Parents, More, Family Circle, and our flagship Better Homes and Gardens.

Parents has weathered the recent softness in the parenthood sector and strengthened its leadership position. Advertising revenues increased nearly 40% in the quarter. In July we launched our new parenthood portal parents.com along with Parents TV, our new broadband video channel. In December, Parents TV will debut across the Comcast system as a new video on demand channel.

More continued to be a major creative and financial success. Advertising revenues grew 30% in the quarter. We plan to raise More’s rate base to 1.2 million beginning Feb 2008.

Family Circle continued to flourish under Meredith ownership. Advertising revenues increased 10% in the quarter and net revenues per advertising page grew 5%. It’s now the number two book in the women’s service field behind only Better Homes and Gardens. When we acquired the magazine in 2005 it was the number 5 title in a six title field.

Better Homes and Gardens continues the strong performance that began in the second half of our fiscal 2007, driven by new creative and sales leadership. Advertising revenues increased 10% and net revenues per advertising page increased 3%. Additionally the Better Homes and Gardens brand continues to demonstrate it’s vibrancy through a series of new brand extensions.

Yesterday we announced a multi year licensing agreement with Wal-Mart for the design, marketing, and retailing of a wide range of home products based on the Better Homes and Gardens brand. The program, which is the largest extension of products bearing the Better Homes and Gardens brand in it’s 85 year history is expected to be available in Wal-Mart stores in the fall of 2008. These products will reflect Better Homes and Gardens high standards and timeless style. We are excited to be partnering with Wal-Mart to bring the Better Homes and Gardens type into the homes of millions of Americans. Meredith’s collaboration with Wal-Mart, the world’s largest retailer holds strong marketplace potential.

Consumer research shows that Better Homes and Gardens readers are frequent Wal-Mart shoppers and Meredith’s largest advertising customers move a significant amount of their products through Wal-Mart stores. Merchandise to be developed includes items in popular categories such as bedding and throws, bath accessories, dinnerware and kitchen textiles, and decorative pillows. Better Homes and Gardens creative staff will take an active role in product design and approve all items.

This new licensing agreement will not impact our financial results until fiscal 2009. We’ll provide information on the fiscal 2009 impact when we get a better sense of the timing and scale of the program.

Earlier this month, we announced an agreement with Realogy Corporation, to create a new residential real estate franchise under the Better Homes and Gardens brand. Realogy is the largest operator of real estate franchises in the United States with brands including Century 21, Caldwell banker, and ERA. The Better Homes and Gardens franchise is expected to begin operation in July of 2008.

Additionally our previously announced line of Better Homes and Gardens branded furniture went on sale during the quarter at more than 300 retail locations across the country. The collection is produced by universal furniture and includes a full line of wooden furniture and upholstered products for living rooms, bedrooms, and dining rooms at mid to upper middle price points.

We’re very excited about these three new growth initiatives across the Better Homes and Gardens brand.

Turning now to the advertising front, a key factor in our success is an increased emphasis on developing multiplatform advertising and marketing programs for our clients. We secured a series of new business wins in the quarter with programs spanning several Meredith media platforms.

For Proctor and Gamble, we’re creating a custom magazine that is distributed with Better Homes and Gardens, Family Circle, Ladies Home Journal, and Parents magazine. The content focuses on useful time saving tips for busy homeowners and parents highlighting new products from P and G.

In addition we’re running a companion program on Parents.com, leveraging our database and research expertise and incorporating new capabilities in word of mouth marketing from New Media Strategies, the company we acquired in January.

For Dodge, we’ve created a Caravan sweepstakes program that includes advertising in Better Homes and Gardens, Family Circle, and Ladies Home Journal magazines and across our website.

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Additionally, Meredith Video Solutions will integrate the Dodge caravan into a 30 minute holiday special produced and syndicated under the Family Circle brand.

For Clorox, we have launched a campaign called Living Green, in support of it’s environmentally friendly products. The program features a tour of 15 home shows across the country, arranged by Better Homes and Gardens. The program also includes advertising pages in Better Homes, a new Living Green website on bhg.com, an advertising spot on Meredith television station.

Meredith integrated marketing also had an outstanding quarter as revenues rose 50%

and operating profit jumped more than 80%. These results were driven by increased revenues and profitability in our core custom publishing business as well as contributions from our recent online acquisitions O'Grady Meyers, Genex and New Media Strategies

On a comparable basis revenues and operating profit increased 15% and 10% respectively.

Let me share three highlights from integrated marketing.

During the quarter we were awarded Kraft Food and Family custom marketing program. This account is the largest of its kind in the United States and possibly the largest custom program in the world, consists of a custom magazine delivered 5 times a year to 10 million consumers. It also includes content for a weekly email blast. We will publish the first issue for Kraft during the summer of 2008.

New media strategies, our word of mouth marketing business worked on campaigns involving three number one box office films.

It also secured new business from CBS, ABC and the FX networks as well work on Fred Thompson’s presidential campaign.

In the quarter we also acquired Directives, a database marketing and analytics company that is another key strategic (ph) inition to our growing stable of custom marketing service offering.

In summary over the past two years we have transformed Meredith integrated marketing from a pure custom publisher, to a full marketing service provider. This enables us to more successfully compete for and win multi platform customer relationship marketing programs.

Revenues at Meredith interactive media rose more than 20% in the quarter, benefiting from recent redesigns on bhg.com and parents.com, and strong performance across our niche enthusiasts sites.

The number of unique visitors, registrations subscription orders and time spent on the site each grew approximately 15%. During the quarter visitors to these sites viewed, on average, more than 100 million page views and 825 thousand videos per month.

Among sales successes Meredith interactive and Meredith video solutions teamed up with the Better Homes and Gardens test kitchen to develop custom recipes for Fibersure, a dietary supplement. The recipes will appear as integrated content on bhg.com and the Better TV broadband video channel.

In broadcasting, operating profit and earnings before interest depreciation and amortization declined 25% and 17% respectively, reflecting the absence of political advertising in this off election year. Total revenues declined 6 million or 7% to $75 million. Net political advertising revenues were 1 million compared to $9 million in the year ago quarter. Non political advertising revenues increased 3% in the quarter. We also successfully contained costs as operating expenses declined 2%.

Most of our stations experienced growth in the July ratings book in morning news which is the fastest growing time of day in terms of viewers and advertising revenue. Four of our stations Portland, Kansas City, Las Vegas and Greenville grew their morning ratings more than 30%. Additionally our share of viewers in the desirable adult 25-54 demographic grew an average of 35%.

Broadcasting online revenues, an average monthly page views doubled. The number of unique visitors also rose five fold, reflecting ongoing investments in technology, content, promotions and sales related activities. The number of videos streamed on our broadcasting site nearly double to 3.7 million as well.

During the quarter Meredith launched BETTER, a daily lifestyle television program. The BETTER show airs across the Meredith station group and is syndicated to three non Meredith stations. Content from the BETTER show is also available online on Better TV and Parents TV, our broadband video channel.

Earlier this week we announced an agreement with Comcast where Meredith provided parenthood content will début on all Comcast cable systems on the new video on demand channel branded Parents TV. It will reach more than 12 million households and Meredith and Comcast will share in the advertising revenues.

Turning now to full company financial metrics, our total debt at the end of the quarter is 460 million and our weighted average interest rate was 5.1%.

As I noted earlier we generated more than $40 million in free cash flow in the quarter.

We purchased approximately 900 thousand shares and reduced our debt by $15 million.

Our overall affective tax rate in fiscal 2008 is expected to be 39% with some quarter to quarter variants due to the adoption of FIN 48.

We expect our effective tax rate in the second third and fourth quarters for fiscal 08 to be 40.6%, 37%, and 39.6% respectively.

With that review of our business operations, let me turn to our expectations for the second quarter and the full year fiscal 2008.

Publishing advertising revenues for the second fiscal quarter are currently up in the mid to high single digits, led by strong performance at our parenthood and woman service titles.

Overall broadcast pasting are currently running down in the mid to high teens.

Broadcast nonpolitical revenues are pacing up in the mid single digits. As a result we expect second quarter earnings per share to approximate $.72 equal to the $.72 in the year ago quarter.

Even with the absence of $24 million in net political advertising revenues recorded in the second quarter of fiscal 2007. Looking to the remainder of fiscal 2008, there is currently limited visibility into advertising budgets which generally reset effective of January 1 of 2008.

In addition the company is absorbing an annualized postal rate increase of more than $13 million in fiscal 2008. Given these factors we continue to expect fiscal 2008 earnings per share to range from $3.50 to $3.55, with growth in the second half of fiscal 2008 spread evenly between the third and the fourth quarters.

A number of uncertainties remain that may effect our outlook as stated for our second quarter and the full fiscal year. These include overall advertising volatility, the performance of our retail based businesses, paper prices, and postal rates. These and other uncertainties are referenced in our safe harbor statement and in certain of Meredith FCC filings.

To conclude this morning, I am very pleased to report another record quarter for our shareholders and that we are off to such a strong start in fiscal 2008.

Looking ahead we continue to focus on four areas, strengthening and growing our publishing business and brands, integrating and expanding our custom marketing capabilities, maximizing the margin opportunity in our broadcasting business, and aggressively expanding our online and video platform.

At this time we’d be happy to answer any questions that you may have.

Question-and-Answer Session

Operator

Thank you. (Operator instructions). Our first question comes from Michael Meltz from Bear Stearns.

Michael Meltz - Bear Stearns

Great. Thank you. I don’t know if you can hear that echo, but I can. I think I have three questions. In terms of your second quarter guidance for flat EPS can you talk a little bit about how the publishing margin expectation despite the cost cuts your, it seems like you’re looking for good margin drive. I just want to make sure I understand what’s going on there. Second question, can you tell us what the revenue contribution in the first quarter was from all of the acquisitions, what was the actual dollar amount. And then I have one follow up/

Steven Lavy

Suku is digging through the numbers, Michael, on those first two questions, so just give us a second here.

Suku Radia

Michael the revenue contribution was about $8 million, from the acquisitions; those were all the integrated marketing acquisitions

Steven Lacy

So that’s your second question.

Suku Radia

And that, you know, Michael that does not include O’Grady Myers of course because that was comparable, we had already acquired that.

Michael Meltz - Bear Stearns

Yup.

Suku Radia

And in the second quarter the publishing operating profit margin expectation is in the mid teens

Michael Meltz - Bear Stearns

Mid teens. Okay. And then last question for you. Regarding the Wal-Mart deal, understanding the ink’s not dry. Can you just tell us are there going to be minimum payments associated with that? You know, roughly how many skews do you think this will launch with? Any more additional information you could give us will be helpful.

Steven Lacy

Yeah, let me provide a little additional color around this. Wal-Mart announced this program yesterday as part of what I guess is their annual investor day and you’re right that all of the fine details are not entirely worked out but it will be a broad based program in the home category and there will be minimum payments and it really depends on the timing, meaning which month in the fall it launches, as the design firm works with our creative folks and obviously the number of skews that we’ll have in this initial time period. So as we have that information we’ll continue to update and provide more definitive information. The financial impact will begin sometime in fiscal 2009 and whether there is a first quarter impact or maybe no impact until our second fiscal quarter we’re just not sure yet Michael. We’ll be very transparent as we have more information.

Michael Meltz - Bear Stearns

Steve, I guess I’m trying to understand whether this will be significant or material to Meredith. Is this something that will launch with 500 skews, when it’s up and running will it have 500 skews or 5000 skews.

Steven Lacy

Michael at this point in time I don’t have that level of information. We have every reason to believe that the program will be successful and will grow over time and will be quite meaning full but where we will be in the early goings especially in fiscal 09 as people start to put their models together I just really don’t have more definitive information but it will be a broad based program in the home category

Michael Meltz - Bear Stearns

Okay. Thank you.

Steven Lacy

Thank you.

Operator

Our next question comes from Barton Crockett with J.P. Morgan

Barton Crockett - J.P. Morgan

Ok. Great. I want to ask a question first about the magazine site and then go back into the Wal-Mart effort and some of what looks like licensing deals. On the magazine site can you just kind of give us a breakdown of the page trends? I mean we had looked at some data that suggested November had started off a little bit light but maybe we’re off and so if you can just kind of give us the November, December, January kind of view that’s (inaudible) into your guidance?

Steven Lacy

We’re not, and Suku’s getting some information out, always at this point in time Michael in the quarter we have not completely finished the last two months of issues but we can give you some information on November at this point in time.

Suku Radia

Barton, on, let me and I may not directly answer your question but the information I have really obviously is more focused on the ad revenues for the quarter. And in the low single digits for October, mid teens for November and mid single for December, so all translating to mid to high single digit as a range as Steve just pointed out in the outlook

Barton Crockett - J.P. Morgan

Ok that’s great. And then

Steven Lacy

Some of that is estimates when you get out to December at this point. That’s how we put together the mid to high single digit guidance

Barton Crockett - J.P. Morgan

Ok that’s great. Switching here, sir, to this Wal-Mart deal, to understand, can you give us some sense, who’s making this stuff and is there any inventory that you are taking and similarly, this furniture thing you were talking about, I mean who makes the furniture and who sells it? I assume you just get a license so maybe there is not inventory risk, just clarify that.

Steven Lacy

Sure, yeah, thank you. I appreciate that question. Really in all three of the programs we talked about this morning Realogy and Wal-Mart and the program for Better Homes and Gardens’ furniture with universal, they are licensing agreements and we provide the Better Homes and Gardens brand, we provide creative expertise and guidance on product selection and design. In the case of the Wal-Mart arrangement, there will be an outside design firm selected by Wal-Mart and Meredith that will be very very involved in the product design although we have of course approval over design and products and packaging and then the products once designed, will be sourced through a manufacturer. Meredith is really involved in providing the brands and in making sure the products meet our quality standards, but we are not involved in the actual production or the inventorying or the selling at retail of these programs. We’ll be assisting that with merchandizing and data base programs and that sort of thing obviously ‘cause we are though a royalty arrangement we are all co-incented to have all of the programs grow and be successful.

Barton Crockett - J.P. Morgan

Ok and just to follow up a little bit, on the universal furniture, what retail stores would this show up in? Can you give us some sense?

Steven Lacy

We can certainly get back to you with a listing of retail stores, but they tend to be independently owned and sort of mid to upper-mid tier furniture stores. I have a listing here, let me see if I can rattle off some that you might recognize, let’s see. You know it is in all the major cities here, Houston, San Antonio, Star Furniture in Houston and San Antonio, Jordan’s in Boston, Bear’s in Miami and Fort Lauderdale, Stacy’s in Dallas, Darvin Furniture in Chicago, so there is a lengthy list here, Nebraska Furniture Mart in Omaha and Kansas City, and so that sort of retail furniture operation.

Barton Crockett - J.P. Morgan

Ok, and to understand, I mean these licensing fees. I assume you guys have some flowing through the other publishing line right now. Could you give us a sense of the magnitude there, and some sense of just qualitatively, how much of an increase in the business are we really talking about with all this stuff that we’re newly seeing right now?

Steven Lacy

I will ask Suku to give you a sense of what is flowing through there at this point in time because we have several smaller programs and once again in terms of how the three programs that we just recently announced, how they are really going to play out and really impact fiscal ’09. We’re going to come back in further discussions and be more definitive on that. You know, in the case of Realogy as an example, it really depends on between now and the launch date how many franchises they sign up, and then we can make a pretty good estimation. In the case of Wal-Mart, obviously, it depends a great deal on how many FKU’s and which month the program launches. But, Suku, you can give a sense of the current year.

Suku Radia

Barton, in terms of fiscal ’08, between Better Homes and Gardens, and Parents the gross revenues are about 15 million in licensing, and that’s just the revenue side of this.

Barton Crockett - J.P. Morgan

Ok, all righty, I’ll step aside for now. Thanks a lot.

Steven Lacy

OK, thank you

Operator

(Operator’s instructions) Our next question comes from Esther Chang from Merrill Lynch

Esther Chang -Merrill Lynch

Hi, thanks. Just a quick question on paper prices, they seem to be heading up, so I was wondering if you could talk about what happened in the quarter and maybe your expectations for Q2

Steven Lacy

Paper prices are actually for us down a little bit in the quarter but we are having those same conversations and feel the potential for upward pressure as we get into the second half of the year. And once again, just as a reminder, our paper prices can reset each calendar quarter and they are based on the five largest purchasers of paper that each one of our paper supplier has. And so we sort of ride on the average increase or decrease of the five largest paper customers of each of our suppliers and so we will of course, continue to provide information about how that actually plays out but we are hearing the same sort of rumblings about what would be the early goings of calendar ’08.

Esther Chang -Merrill Lynch

Ok, and on the TV side, I was wondering if you could talk a little bit about political, how that’s shaping up for Q2 and also TV auto performance in the quarter.

Steven Lacy

Ok, first of all, just as a reminder, once again in the first quarter, we recorded about a million in political, and it was about 9 million a year ago. And in the second quarter, Paul would you like to give a little color on political?

Paul Karpowicz

Sure, on the political side, we really have not seen much presidential primary money to date. The Political that we are seeing currently is mostly issue money in very specific markets. So we do have some political already booked for the second quarter but we’re cautiously optimistic that states like Nevada and South Carolina that have early primaries, will start to see more activity as we get closer to the end of the year. The issue money is coming in actually quite nicely, and it’s coming in to some of our FOX stations in Portland, and Las Vegas where we have made a really concentrated push with our fox stations to make sure we can get our political share up equal or better to our share of regular business. So, I think the political advertising climate is very much a wild card at this point. We know there is a lot of money out there. When it’s going to come in and where it’s going to come in I think is still to be determined.

Esther Chang -Merrill Lynch

OK, and about auto performance in the quarter?

Paul Karpowicz

Auto performance is actually better than we would have expected. We’re actually looking pretty good on the automotive right now. Our import money, the Toyotas and the Hyundai’s, looks pretty good, so again, we’re feeling better about where the automotive advertising outlook is going to be for the full second quarter when it’s completed. It’s all coming in late, and this is a trend we have been seeing of the last couple of quarters, but the sense is the networks are very tight, that the networks are filled and as a result we are seeing more dollars coming in later in the quarter. The networks are filled, and as a result we’re seeing more dollars coming in later in the quarter and that’s. Again a lot of that is automotive. And Suku’s got the actuals for you for Q1.

Suku Radia

As for any given quarter, the range as you know this ranges between 25% and 30% of total advertising revenues in broadcasting. On an overall basis auto revenues were down in the low single digits for the quarter. However that being said if you take a look at, if you slice and dice it further, you will see that as (inaudible) of the imports were pretty strong and the local (inaudible) was strong at the national level it’s the big three that would have been weaker.

Esther Chang - Merrill Lynch

Gotcha. Great thank you.

Steven Lacy

Thank you

Operator

Our next question comes from Barton Crockett from J. P. Morgan.

Barton Crockett - J. P. Morgan

Ok great. I just got back in the queue here. I was wondering if you could talk a little bit, address publicly the question of the applicability or not applicability do you guys have some of the restructuring efforts we’ve seen in some of the newspapers broadcasting company scripts and (inaudible) separating and trying to unlock value.

Do you guys see any potential to do that at your place or not?

And how do you evaluate that type of scenario?

Steven Lacy

Well I think Barton. One of the big questions is will it in fact unlock value? and I guess time will tell. As we really look at our businesses, I think we’re in all sincerity such a different place then some of the other companies that you have mentioned. Because our core businesses are performing well and we see them as opportunities to build additional businesses around and our print operation as an example is vibrant and I think these three licensing announcements around Better Homes and Gardens really demonstrates that vibrancy. So we’re very interested and we’re studying these trends. Actions we will be talking about this in our upcoming board meeting and educating everyone. But my question really is, will there be any value unlocked? And I think the other thing in terms of looking at Meredith. If you were to do that between publishing and broadcasting you would have I think additional expense in two fairly small businesses to try and deal with and I’m not sure that would work well in our situation.

Barton Crockett - J. P. Morgan

Ok great that makes sense, and just to follow up on the magazine side. I was wondering if you could give us a little more color on the strength on the parents magazine what’s driving that? I thought high oil prices had hurt some of the product sales there? And frankly I have been wondering if the lead paint stuff on toys might weigh a little bit. and just what’s kind of come back now?

Steven Lacy

Jack why don’t you speak about what’s going on in the parenthood field a little more broadly. And than talk about our own business in particular if you would please?

Jack Griffin

Sure, well I think you see in the results that the past performance in Parents magazine is very strong 40% in the quarter. And we turned a quarter in our parenthood business about midway through the calendar year with both Parents and American baby. And I think if you look at the competitive performance in particular. In this stage through November issues Parents magazine has a 425 page lead on its nearest competitor and a year ago it was about half of that. So Parents is taking huge amounts of share out of the parenthood category. It’s clearly the strong brand. It’s got enormous reach circulation has tremendous fundamentals underneath it. And it’s a terrific product. I think if you go beyond that and you look at all the things we have done with the brand from Parents TV to the parents portal and I think it’s a fair statement to say that when our Parenthood Teen goes to market they’re going multi platform. Blogs and podcasts and videos and every single product extension you can think of to package together, that the competition just can’t provide. So you can see it on the revenue performance, you can see it in the share performance, and the category strength is broad based. The endemic advertisers that a year ago weren’t spending are now spending money aggressively. They are spending money online and offline. And we’re taking it in both places and we’ve got a terrific editorial product, and we’ve got a terrific management team. We’ve got alignment and it’s all just working.

Steven Lacy

Does that answer your question?

Barton Crockett - J. P. Morgan

Yeah that does help and I think I will leave it there thanks a lot.

Steven Lacy

Thank you

Operator

Our next question comes from Catriona Fallon from Citigroup

Catriona Fallon - Citigroup

Hi it’s actually Catriona Fallon Citigroup. I understand there is limited visibility into the advertising revenue for 08, but I was wondering if you could just build a little bit on what sort of medians you have set up so far with your clients? and what type of longer term contracts might you have where there is some visibility into where advertising revenue can go for 08 at this point?

Steven Lacy

Well I’ll ask Jack and Paul to comment. But we need to be very transparent.

There are no long term advertising contracts with clients. In either of our businesses so in the case of are publishing activity it is an issue to issue sale. On the internet it’s a month to month activity. And in our broadcast business it is very much a month to month sale. So there aren’t any long term contracts.

Jack and Paul why don’t you each sort of talk about where we are in the cycle and as we generally say at this time of the year, we really get around Christmas time before we start to get a sense of what the new calendar year will look like. But, Jack why don’t you start and than we’ll ask Paul to just sort of explain the cycle and where we are in the cycle.

Jack Griffin

It’s right about now that most of the major advertisers are setting budgets for next year, and in particular doing the media mix allocation that determines what money goes to what media. At the same time, I just got back from the association of national advertisers convention. Last weekend and did have a number of meetings down there, and I guess I would characterize the marketplace this way.

Advertisers are spending money where there is quality, and advertisers and marketers are increasingly looking toward multi platform solution providers. And when you look at Meredith you see that way our brands knit together against women, you see the platforms across which we deliver the content, you see the strong brands and you see the alignment that we have and the way that we go to market.

And so that’s our story in the market place and you can see that it’s worked in this calendar year and we’re aggressively telling that story out in the marketplace in general, to anybody who will listen. And there are a lot of people who want to listen to that story. So we don’t have any quantitative visibility but we have very aggressive activity and we’re in the market place everyday offering value to marketers with our brands and our programs and our products.

Paul Karpowicz

Ok on the TV side as I indicated before our cycle is a little bit later than it’s traditionally been. And by no means have we given up on the quarter that we are in so we’re still doing a tremendous amount of business within this quarter.

Having said that to Jack’s’ point many of the television advertisers are also looking ahead into next year. And we’re focusing on our major sports packages, and those types of things which will carry us through the Superbowl, the Playoffs, the final four all those types of things. So we’ve got a lot of activity there is a lot of things going on.

There is an expectation that many advertisers will want to get in earlier because they think political will start to heavy up through the calendar first and second quarters of next year. So we do expect that our pacing as we start looking ahead at the first quarter and second will probably be in a positive light but at this point it’s just very very early stages and there is not a heck of a lot of visibility there.

Steven Lacy

I hope you can feel from what both Jack and Paul said that we’ve got aggressive activities in place to take a disproportionate share of whatever advertising is available really across all of our businesses, as we turn the corner into the New Year. And once again as we continue to have these sorts of discussions we’ll provide updated information about the marketplace and become more quantitative as we get later in the year.

Catriona Fallon - Citigroup

Great, and also you spoken recently about increases in rating in share and specifically the ad rate in some of your both morning and late news? And I am wondering if there is any update what is going on with the ad rates?

Steven Lacy

Relative to the July book, we experienced some very strong ratings growth particularly with our morning news cast. We were very pleased with those and as a result we’ve been able to drive our CPM’s and CPP’s ultimately driving the unit rate, without the heavy pressure of political, it does create a little bit of a problem because we don’t have the same degree of pressure that we had a year ago at this time when we had all the political dollars in there. But just non political dollars against non political dollars because we have been able to increase our ratings, we have also been able to drive right in our news day parts as well.

We’re very happy to see that kind of performance there.

Catriona Fallon - Citigroup

Great, I just have one more question. On the draw, on the back of the magazines. Can you just give an update on how you are trying to work with some of the major distributors on the draw? And is there any change there? Are we seeing a little bit better situation with some of the distributors?

Steven Lacy

Well I’ll start it and ask Jack to add if he would like to.

We have been working very very aggressively to be as efficient at retail as we possibly can and actually more important than the actual quantity of the draw is having the draw in the right physical locations where they actually all happens.

We have seen improvements in that. I would say that there is still industry wide a lot of work that could be done to make that more efficient. And jack please add anything to that if you would like to.

Jack Griffin

Well I think as we’ve talked to you over the past year or so. We’ve put in place an aggressive program to manage draw and to direct draw. And in fact have Meredith staffers at key wholesalers working with wholesalers to put our products where consumers want to buy them. And at the same time we’ve introduced a new incentive program at the wholesaler’s level. And we’ve been very pleased to see how those programs have impacted the compliance and getting the product at retail. So our news stand product sales for the most part are holding up, and we are opening up new channels of distribution as we talk to you before. It is clearly, a lot of activity going on in the whole sale end and national distributor arena. We are very pleased with the job that our national distributor, Time Warner, is doing for us, in managing the dynamics and we are in active discussions with both the distributor channel and the wholesalers to make the situation as efficient as it can be for all the parties involved.

Catriona Fallon - Citigroup

Wonderful. Thank you.

Operator

Our next question comes from Eric Elbell from Fenimore Asset Management

Eric Elbell - Fenimore Asset Management

Good morning gentlemen.

Steven Lacy

Hi Eric. How are you?

Eric Elbell - Fenimore Asset Management

Good. Just a quick question. Did you provide a figure for the estimated revenue for corner stones and the other sort of non pure TV revenue for the quarter?

Steven Lacy

I do not believe that we provided that in what we have talked about so far. We can dig through our financial information and see if we can’t provide that for you.

Eric Elbell - Fenimore Asset Management

Great.

Steven Lacy

So, just give us a couple seconds. I’ve got our percentage income increase on corner stones.

Suku Radia

They increased 29% over the prior year quarter.

Eric Elbell - Fenimore Asset Management

Increased 29%.

Suku Radia

A huh.

Eric Elbell - Fenimore Asset Management

Okay. Great. Thank you.

Operator

(Operator Instructions) I am not showing any further questions.

Steven Lacy

Well, thank you all for participating today and for your continued support of Meredith. We'll get back to work on delivering strong results. Thanks.

Operator

Ladies and gentleman that does conclude our teleconference today. Thank you for participating and for using AT&T teleconference. You may now disconnect.

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