Oct 24, 2007
Executives Mike Lovell - Director IRStephen Lacy -CEO, PresidentJohn Griffin - Publishing Group PresidentPaul Karpowicz -Broadcasting Group PresidentSuku Radia - CFO, Principal Accounting Officer, VP and Acting TreasurerAnalysts Michael Meltz -Bear StearnsBarton Crockett - J.P. MorganEsther Chang - Merrill LynchCatriona Fallon - CitigroupEric Elbell - Fenimore Asset ManagementOperator Good day ladies and gentleman and welcome to your Meredith Corp.,first quarter earnings call (Operator Instructions)As a reminder this is beingrecorded.I would now like to introduce your host for today’sconference, Mr.
Mike Lovell. You may begin.Mike Lovell -Director of Investor Relations Good morning everyone, I’m Mike Lovell, director of investorrelations for Meredith Corporation.
Before chief executive officer Steve Lacybegins our presentation I’ll take care of a few housekeeping items.In our remarks we will include statements that areconsidered forward looking within the meaning of federal security’s laws. Theforward looking statements are based on management’s current knowledge andexpectations and are subject to certain risks and uncertainties that may causeactual results to differ materially from the forward looking statements.Description of certain of those risks and uncertainties canbe found in our earnings release issued today and then certain of our FCCfilings.
The company undertakes no obligation to update any forward lookingstatements. We will refer to non GAAP measures which, in combination with GAAPresults provide additional analytic tools to understand our operations.
Tables that reconcile non GAAP measures to GAAP results areposted on our website. A transcript of this call will be posted to our websiteas well.
And with that Steve will begin our presentation.Steven Lacy Thank you Mike and good morning everyone. Participating withme this morning are publishing group president Jack Griffin, broadcasting grouppresident Paul Karpowicz and Meredith chief financial officer Suku Radia.
I’ll begin with an overview of key accomplishments, discussperformance in our publishing and broadcasting groups and conclude by updatingour current earnings outlook. Then we’ll be happy to answer any questions thatyou may have.
Our first quarter performance reflects a strong beginning tofiscal 2008 for Meredith. Earnings per share rose 10%, advertising revenuesgreat 7%, generated more than $40 million in free cash flow, purchased over900,000 shares, and retired $15 million in debt.
Our first quarter performance reflected the strengths thathave made Meredith one of America’stop performing media and marketing companies. We combined a tremendous base oftraditional publishing, broadcasting and marketing assets with the growing andprofitable array of online, digital, and video initiative.
This enables us toreach approximately 85 million American women every month with content, how andwhen they choose to receive it. I’ll start this morning with the review of our publishinggroup operations.
Publishing operating profit grew 16% over the prior yearquarter to $55 million. Revenues rose 8% to $330 million.
Publishingadvertising revenues increased 13%. The categories of food and beverage, home, toiletriesand cosmetics, and retail were particularly strong.
They account for nearly 50%of magazine advertising revenue. The resurgence in advertising revenues is particularlyevident at four key Meredith brands, Parents, More, Family Circle, and ourflagship Better Homes and Gardens.
Parents has weathered the recent softness in the parenthoodsector and strengthened its leadership position. Advertising revenues increasednearly 40% in the quarter.
In July we launched our new parenthood portalparents.com along with Parents TV, our new broadband video channel. InDecember, Parents TV will debut across the Comcast system as a new video ondemand 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 baseto 1.2 million beginning Feb 2008.Family Circle continued to flourish under Meredith ownership.Advertising revenues increased 10% in the quarter and net revenues peradvertising page grew 5%.
It’s now the number two book in the women’s servicefield behind only Better Homes and Gardens. When we acquired the magazine in2005 it was the number 5 title in a six title field.
Better Homes and Gardens continues the strong performancethat began in the second half of our fiscal 2007, driven by new creative andsales leadership. Advertising revenues increased 10% and net revenues per advertisingpage increased 3%.
Additionally the Better Homes and Gardens brand continues todemonstrate it’s vibrancy through a series of new brand extensions.Yesterday we announced a multi year licensing agreement withWal-Mart for the design, marketing, and retailing of a wide range of homeproducts based on the Better Homes and Gardens brand. The program, which is thelargest extension of products bearing the Better Homes and Gardens brand init’s 85 year history is expected to be available in Wal-Mart stores in the fallof 2008.
These products will reflect Better Homes and Gardens high standardsand timeless style. We are excited to be partnering with Wal-Mart to bring theBetter Homes and Gardens type into the homes of millions of Americans.
Meredith’scollaboration with Wal-Mart, the world’s largest retailer holds strongmarketplace potential. Consumer research shows that Better Homes and Gardensreaders are frequent Wal-Mart shoppers and Meredith’s largest advertisingcustomers move a significant amount of their products through Wal-Mart stores.Merchandise to be developed includes items in popular categories such asbedding and throws, bath accessories, dinnerware and kitchen textiles, anddecorative pillows.
Better Homes and Gardens creative staff will take an activerole in product design and approve all items. This new licensing agreement will not impact our financialresults until fiscal 2009.
We’ll provide information on the fiscal 2009 impactwhen 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 andGardens brand. Realogy is the largest operator of real estate franchises in theUnited States with brands including Century 21, Caldwell banker, and ERA.
The BetterHomes and Gardens franchise is expected to begin operation in July of 2008.Additionally our previously announced line of Better Homesand Gardens branded furniture went on sale during the quarter at more than 300 retaillocations across the country. The collection is produced by universal furnitureand includes a full line of wooden furniture and upholstered products forliving rooms, bedrooms, and dining rooms at mid to upper middle price points.
We’re very excited about these three new growth initiativesacross the Better Homes and Gardens brand. Turning now to the advertising front, a key factor in oursuccess is an increased emphasis on developing multiplatform advertising andmarketing programs for our clients.
We secured a series of new business wins inthe quarter with programs spanning several Meredith media platforms.For Proctor and Gamble, we’re creating a custom magazinethat is distributed with Better Homes and Gardens, Family Circle, Ladies HomeJournal, and Parents magazine. The content focuses on useful time saving tipsfor 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 newcapabilities in word of mouth marketing from New Media Strategies, the companywe acquired in January.For Dodge, we’ve created a Caravan sweepstakes program thatincludes advertising in Better Homes and Gardens, Family Circle, and LadiesHome Journal magazines and across our website.. Additionally, Meredith Video Solutions will integrate theDodge caravan into a 30 minute holiday special produced and syndicated underthe Family Circle brand.For Clorox, we have launched a campaign called Living Green,in support of it’s environmentally friendly products.
The program features atour 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 Greenwebsite on bhg.com, an advertising spot on Meredith television station. Meredith integrated marketing also had an outstandingquarter as revenues rose 50% and operating profit jumped more than 80%.
These resultswere driven by increased revenues and profitability in our core custompublishing business as well as contributions from our recent onlineacquisitions O'Grady Meyers, Genex and New Media Strategies On a comparable basis revenues and operating profitincreased 15% and 10% respectively. Let me share three highlights from integrated marketing.
During the quarter we were awarded Kraft Food and Familycustom marketing program. This account is the largest of its kind in the UnitedStates and possibly the largest custom program in the world, consists of acustom magazine delivered 5 times a year to 10 million consumers.
It alsoincludes content for a weekly email blast. We will publish the first issue forKraft during the summer of 2008.
New media strategies, our word of mouth marketing businessworked on campaigns involving three number one box office films.It also secured new business from CBS, ABC and the FXnetworks as well work on Fred Thompson’s presidential campaign.In the quarter we also acquired Directives, a databasemarketing and analytics company that is another key strategic (ph) initionto our growing stable of custom marketing service offering.In summary over the past two years we have transformedMeredith integrated marketing from a pure custom publisher, to a full marketingservice provider. This enables us to more successfully compete for and winmulti platform customer relationship marketing programs.Revenues at Meredith interactive media rose more than 20% inthe quarter, benefiting from recent redesigns on bhg.com and parents.com, andstrong performance across our niche enthusiasts sites.The number of unique visitors, registrations subscriptionorders and time spent on the site each grew approximately 15%.
During the quartervisitors to these sites viewed, on average, more than 100 million page viewsand 825 thousand videos per month. Among sales successes Meredith interactive and Meredithvideo solutions teamed up with the Better Homes and Gardens test kitchen to developcustom recipes for Fibersure, a dietary supplement.
The recipes will appear asintegrated content on bhg.com and the Better TV broadband video channel.In broadcasting, operating profit and earnings beforeinterest depreciation and amortization declined 25% and 17% respectively,reflecting the absence of political advertising in this off election year. Totalrevenues declined 6 million or 7% to $75 million.
Net political advertisingrevenues were 1 million compared to $9 million in the year ago quarter. Nonpolitical advertising revenues increased 3% in the quarter.
We alsosuccessfully contained costs as operating expenses declined 2%.Most of our stations experienced growth in the July ratingsbook in morning news which is the fastest growing time of day in terms ofviewers and advertising revenue. Four of our stations Portland, Kansas City,Las Vegas and Greenville grew their morning ratings more than 30%.
Additionallyour share of viewers in the desirable adult 25-54 demographic grew an average of35%.Broadcasting online revenues, an average monthly page viewsdoubled. The number of unique visitors also rose five fold, reflecting ongoinginvestments in technology, content, promotions and sales related activities.The number of videos streamed on our broadcasting site nearly double to 3.7million as well.
During the quarter Meredith launched BETTER, a dailylifestyle television program. The BETTER show airs across the Meredith stationgroup and is syndicated to three non Meredith stations.
Content from the BETTERshow is also available online on Better TV and Parents TV, our broadband videochannel.Earlier this week we announced an agreement with Comcastwhere Meredith provided parenthood content will début on all Comcast cablesystems on the new video on demand channel branded Parents TV. It will reachmore than 12 million households and Meredith and Comcast will share in theadvertising revenues.Turning now to full company financial metrics, our totaldebt at the end of the quarter is 460 million and our weighted average interestrate was 5.1%.As I noted earlier we generated more than $40 million infree cash flow in the quarter.
We purchased approximately 900 thousand shares and reducedour debt by $15 million. Our overall affective tax rate in fiscal 2008 is expected tobe 39% with some quarter to quarter variants due to the adoption of FIN 48.We expect our effective tax rate in the second third andfourth quarters for fiscal 08 to be 40.6%, 37%, and 39.6% respectively.
With that review of our business operations, let me turn toour expectations for the second quarter and the full year fiscal 2008. Publishing advertising revenues for the second fiscalquarter are currently up in the mid to high single digits, led by strong performanceat our parenthood and woman service titles.
Overall broadcast pasting are currently running down in themid to high teens.Broadcast nonpolitical revenues are pacing up in the midsingle digits. As a result we expect second quarter earnings per share toapproximate $.72 equal to the $.72 in the year ago quarter.
Even with the absence of $24 million in net politicaladvertising revenues recorded in the second quarter of fiscal 2007. Looking tothe remainder of fiscal 2008, there is currently limited visibility intoadvertising budgets which generally reset effective of January 1 of 2008.
In addition the company is absorbing an annualized postalrate increase of more than $13 million in fiscal 2008. Given these factors wecontinue 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 thirdand the fourth quarters.A number of uncertainties remain that may effect our outlookas stated for our second quarter and the full fiscal year.
These includeoverall advertising volatility, the performance of our retail based businesses,paper prices, and postal rates. These and other uncertainties are referenced inour safe harbor statement and in certain of Meredith FCC filings.
To conclude this morning, I am very pleased to reportanother record quarter for our shareholders and that we are off to such astrong start in fiscal 2008.Looking ahead we continue to focus on four areas,strengthening and growing our publishing business and brands, integrating andexpanding our custom marketing capabilities, maximizing the margin opportunityin our broadcasting business, and aggressively expanding our online and videoplatform.At this time we’d be happy to answer any questions that youmay have.Question-and-AnswerSession Operator Thank you. (Operator instructions).
Our first question comes from Michael Meltzfrom Bear Stearns.Michael Meltz - BearStearns Great. Thank you.
Idon’t know if you can hear that echo, but I can. I think I have threequestions.
In terms of your second quarter guidance for flat EPS can you talk alittle bit about how the publishing margin expectation despite the cost cutsyour, it seems like you’re looking for good margin drive. I just want to makesure I understand what’s going on there.
Second question, can you tell us whatthe 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 firsttwo questions, so just give us a second here.Suku Radia Michael the revenue contribution was about $8 million, fromthe acquisitions; those were all the integrated marketing acquisitionsSteven Lacy So that’s your second question.Suku Radia And that, you know, Michael that does not include O’Grady Myersof course because that was comparable, we had already acquired that.Michael Meltz - BearStearns Yup.Suku Radia And in the second quarter the publishing operating profitmargin expectation is in the mid teensMichael Meltz - BearStearns Mid teens.
Okay. And then last question for you.
Regardingthe Wal-Mart deal, understanding the ink’s not dry. Can you just tell us arethere going to be minimum payments associated with that?
You know, roughly howmany skews do you think this will launch with? Any more additional informationyou could give us will be helpful.Steven Lacy Yeah, let me provide a little additional color around this.
Wal-Martannounced this program yesterday as part of what I guess is their annualinvestor day and you’re right that all of the fine details are not entirelyworked out but it will be a broad based program in the home category and therewill be minimum payments and it really depends on the timing, meaning whichmonth in the fall it launches, as the design firm works with our creative folksand 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 moredefinitive information. The financial impact will begin sometime in fiscal 2009and whether there is a first quarter impact or maybe no impact until our secondfiscal quarter we’re just not sure yet Michael.
We’ll be very transparent as wehave more information.Michael Meltz - BearStearns Steve, I guess I’m trying to understand whether this will besignificant or material to Meredith. Is this something that will launch with500 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 ofinformation.
We have every reason to believe that the program will besuccessful and will grow over time and will be quite meaning full but where wewill be in the early goings especially in fiscal 09 as people start to puttheir models together I just really don’t have more definitive information butit will be a broad based program in the home categoryMichael Meltz - BearStearns Okay. Thank you.Steven Lacy Thank you.Operator Our next question comes from Barton Crockett with J.P.MorganBarton Crockett -J.P.
Morgan Ok. Great.
I want to ask a question first about the magazinesite and then go back into the Wal-Mart effort and some of what looks likelicensing deals. On the magazine site can you just kind of give us a breakdownof the page trends?
I mean we had looked at some data that suggested Novemberhad started off a little bit light but maybe we’re off and so if you can justkind 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, alwaysat this point in time Michael in the quarter we have not completely finishedthe last two months of issues but we can give you some information on Novemberat this point in time.Suku Radia Barton, on, let me and I may not directly answer yourquestion but the information I have really obviously is more focused on the adrevenues for the quarter. And in the low single digits for October, mid teensfor November and mid single for December, so all translating to mid to highsingle digit as a range as Steve just pointed out in the outlookBarton Crockett -J.P.
Morgan Ok that’s great. And thenSteven Lacy Some of that is estimates when you get out to December atthis point.
That’s how we put together the mid to high single digit guidanceBarton Crockett -J.P. Morgan Ok that’s great.
Switching here, sir, to this Wal-Martdeal, to understand, can you give ussome sense, who’s making this stuff and is there any inventory that you aretaking and similarly, this furniture thing you were talking about, I mean whomakes the furniture and who sells it? Iassume you just get a license so maybe there is not inventory risk, justclarify that.Steven Lacy Sure, yeah, thank you.
I appreciate that question. Really in all three of the programs we talked about this morning Realogyand Wal-Mart and the program for Better Homes and Gardens’ furniture withuniversal, they are licensing agreements and we provide the Better Homes andGardens brand, we provide creative expertise and guidance on product selectionand design.
In the case of the Wal-Martarrangement, there will be an outside design firm selected by Wal-Mart andMeredith that will be very very involved in the product design although we haveof course approval over design and products and packaging and then the productsonce designed, will be sourced through a manufacturer. Meredith is really involved in providing thebrands and in making sure the products meet our quality standards, but we arenot involved in the actual production or the inventorying or the selling atretail of these programs.
We’ll beassisting that with merchandizing and data base programs and that sort of thingobviously ‘cause we are though a royalty arrangement we are all co-incented tohave all of the programs grow and be successful.Barton Crockett -J.P. Morgan Ok and just to follow up a little bit, on the universalfurniture, 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 retailstores, but they tend to be independently owned and sort of mid to upper-midtier furniture stores. I have a listinghere, let me see if I can rattle off some that you might recognize, let’ssee.
You know it is in all the majorcities 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, DarvinFurniture in Chicago, so there is a lengthy list here, Nebraska Furniture Martin 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 throughthe other publishing line right now. Could you give us a sense of the magnitude there, and some sense of justqualitatively, how much of an increase in the business are we really talkingabout 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 flowingthrough there at this point in time because we have several smaller programsand once again in terms of how the three programs that we just recentlyannounced, how they are really going to play out and really impact fiscal’09.
We’re going to come back in furtherdiscussions and be more definitive on that. You know, in the case of Realogy as an example, it really depends onbetween now and the launch date how many franchises they sign up, and then wecan make a pretty good estimation.
Inthe case of Wal-Mart, obviously, it depends a great deal on how many FKU’s andwhich 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 andGardens, and Parents the gross revenues are about 15 million in licensing, andthat’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 youOperator (Operator’s instructions) Our next question comes fromEsther Chang from Merrill LynchEsther Chang -MerrillLynch Hi, thanks.
Just aquick question on paper prices, they seem to be heading up, so I was wonderingif you could talk about what happened in the quarter and maybe yourexpectations for Q2Steven Lacy Paper prices are actually for us down a little bit in thequarter but we are having those same conversations and feel the potential forupward pressure as we get into the second half of the year. And once again, just as a reminder, our paperprices can reset each calendar quarter and they are based on the five largestpurchasers of paper that each one of our paper supplier has.
And so we sort of ride on the averageincrease or decrease of the five largest paper customers of each of oursuppliers and so we will of course, continue to provide information about howthat actually plays out but we are hearing the same sort of rumblings aboutwhat would be the early goings of calendar ’08.Esther Chang -MerrillLynch Ok, and on the TV side, I was wondering if you could talk alittle bit about political, how that’s shaping up for Q2 and also TV autoperformance in the quarter.Steven Lacy Ok, first of all, just as a reminder, once again in thefirst quarter, we recorded about a million in political, and it was about 9million a year ago. And in the secondquarter, Paul would you like to give a little color on political?Paul Karpowicz Sure, on the political side, we really have not seen muchpresidential primary money to date.
ThePolitical that we are seeing currently is mostly issue money in very specificmarkets. So we do have some politicalalready booked for the second quarter but we’re cautiously optimistic thatstates like Nevada and South Carolina that have early primaries, will start tosee more activity as we get closer to the end of the year.
The issue money is coming in actually quitenicely, and it’s coming in to some of our FOX stations in Portland,and Las Vegaswhere we have made a really concentrated push with our fox stations to makesure we can get our political share up equal or better to our share of regularbusiness. So, I think the politicaladvertising climate is very much a wild card at this point.
We know there is a lot of money outthere. When it’s going to come in andwhere it’s going to come in I think is still to be determined.
Esther Chang -MerrillLynch OK, and about auto performance in the quarter?Paul Karpowicz Auto performance is actually better than we would haveexpected. We’re actually looking prettygood on the automotive right now.
Ourimport money, the Toyotas and the Hyundai’s, looks pretty good, so again, we’refeeling better about where the automotive advertising outlook is going to befor the full second quarter when it’s completed. It’s all coming in late, and this is a trendwe have been seeing of the last couple of quarters, but the sense is the networksare very tight, that the networks are filled and as a result we are seeing moredollars coming in later in the quarter.
The networks are filled, and as aresult 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 rangesbetween 25% and 30% of total advertising revenues in broadcasting. On anoverall 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 itfurther, you will see that as (inaudible) of the imports were pretty strong andthe local (inaudible) was strong at the national level it’s the big three thatwould have been weaker.
Esther Chang - Merrill Lynch Gotcha. Great thank you.
Steven Lacy Thank youOperator 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 littlebit, address publicly the question of the applicability or not applicability doyou guys have some of the restructuring efforts we’ve seen in some of thenewspapers broadcasting company scripts and (inaudible) separating and trying to unlock value.Do you guys see any potential to do that at your place ornot? And how do you evaluate that type of scenario?
Steven Lacy Well I think Barton. One of the big questions is will it infact unlock value?
and I guess time will tell. As we really look at ourbusinesses, I think we’re in all sincerity such a different place then some ofthe other companies that you have mentioned.
Because our core businesses areperforming well and we see them as opportunities to build additional businessesaround and our print operation as an example is vibrant and I think these threelicensing announcements around Better Homes and Gardens really demonstratesthat vibrancy. So we’re very interested and we’re studying these trends.
Actionswe will be talking about this in our upcoming board meeting and educatingeveryone. But my question really is,will there be any value unlocked?
And I think the other thing in terms oflooking at Meredith. If you were to dothat between publishing and broadcasting you would have I think additionalexpense in two fairly small businesses to try and deal with and I’m not surethat would work well in our situation.Barton Crockett - J.
P. Morgan Ok great that makes sense, and just to follow up on themagazine side.
I was wondering if you could give us a little more color on thestrength on the parents magazine what’s driving that? I thought high oil priceshad hurt some of the product sales there?
And frankly I have been wondering ifthe lead paint stuff on toys might weigh a little bit. and just what’s kind ofcome back now?
Steven Lacy Jack why don’t you speak about what’s going on in theparenthood 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 pastperformance in Parents magazine is very strong 40% in the quarter.
And weturned a quarter in our parenthood business about midway through the calendaryear with both Parents and American baby. And I think if you look at thecompetitive performance in particular.
In this stage through November issuesParents magazine has a 425 page lead on its nearest competitor and a year agoit was about half of that. So Parents istaking huge amounts of share out of the parenthood category.
It’s clearly thestrong brand. It’s got enormous reach circulation has tremendous fundamentalsunderneath it.
And it’s a terrific product. I think if you go beyond that and you look at all the things we havedone with the brand from Parents TV to the parents portal and I think it’s afair statement to say that when our Parenthood Teen goes to market they’regoing multi platform.
Blogs and podcasts and videos and every single productextension you can think of to package together, that the competition just can’tprovide. So you can see it on the revenue performance, you can see it in theshare performance, and the category strength is broad based.
The endemic advertisers that a year agoweren’t spending are now spending money aggressively. They are spending moneyonline and offline.
And we’re taking it in both places and we’ve got a terrificeditorial product, and we’ve got a terrific management team. We’ve gotalignment 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 thanksa lot.Steven Lacy Thank youOperator Our next question comes from Catriona Fallon from CitigroupCatriona Fallon - Citigroup Hi it’s actually Catriona Fallon Citigroup. I understandthere is limited visibility into the advertising revenue for 08, but I waswondering if you could just build a little bit on what sort of medians you haveset up so far with your clients?
and what type of longer term contracts mightyou have where there is some visibility into where advertising revenue can gofor 08 at this point?Steven Lacy Well I’ll ask Jack and Paul to comment. But we need to bevery 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 anissue to issue sale. On the internet it’s a month to month activity.
And in our broadcast business it is very mucha 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 weare in the cycle and as we generally say at this time of the year, we reallyget around Christmas time before we start to get a sense of what the newcalendar year will look like. But, Jack why don’t you start and than we’ll askPaul 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 aresetting budgets for next year, and in particular doing the media mix allocationthat determines what money goes to what media. At the same time, I just gotback from the association of national advertisers convention.
Last weekend anddid have a number of meetings down there, and I guess I would characterize themarketplace this way. Advertisers are spending money where there is quality, andadvertisers and marketers are increasingly looking toward multi platformsolution providers.
And when you look at Meredith you see that way our brandsknit together against women, you see the platforms across which we deliver thecontent, you see the strong brands and you see the alignment that we have andthe way that we go to market. And so that’s our story in the market place and you can seethat it’s worked in this calendar year and we’re aggressively telling thatstory out in the marketplace in general, to anybody who will listen.
And thereare a lot of people who want to listen to that story. So we don’t have anyquantitative visibility but we have very aggressive activity and we’re in themarket place everyday offering value to marketers with our brands and ourprograms and our products.
Paul Karpowicz Ok on the TV side as I indicated before our cycle is alittle bit later than it’s traditionally been. And by no means have we given upon the quarter that we are in so we’re still doing a tremendous amount ofbusiness within this quarter.
Having said that to Jack’s’ point many of the televisionadvertisers are also looking ahead into next year. And we’re focusing on ourmajor sports packages, and those types of things which will carry us throughthe Superbowl, the Playoffs, the final four all those types of things.
So we’vegot a lot of activity there is a lot of things going on. There is an expectation that many advertisers will want toget in earlier because they think political will start to heavy up through thecalendar first and second quarters of next year.
So we do expect that our pacing as we startlooking ahead at the first quarter and second will probably be in a positivelight but at this point it’s just very very early stages and there is not aheck of a lot of visibility there. Steven Lacy I hope you can feel from what both Jack and Paul said thatwe’ve got aggressive activities in place to take a disproportionate share ofwhatever advertising is available really across all of our businesses, as weturn the corner into the New Year.
And once again as we continue to have thesesorts of discussions we’ll provide updated information about the marketplaceand become more quantitative as we get later in the year. Catriona Fallon - Citigroup Great, and also you spoken recently about increases inrating in share and specifically the ad rate in some of your both morning andlate news?
And I am wondering if thereis any update what is going on with the ad rates? Steven Lacy Relative to the July book, we experienced some very strongratings growth particularly with our morning news cast.
We were very pleasedwith those and as a result we’ve been able to drive our CPM’s and CPP’sultimately driving the unit rate, without the heavy pressure of political, itdoes create a little bit of a problem because we don’t have the same degree ofpressure that we had a year ago at this time when we had all the politicaldollars in there. But just non political dollars against non political dollarsbecause we have been able to increase our ratings, we have also been able todrive 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 theback of the magazines.
Can you just give an update on how you are trying towork with some of the major distributors on the draw? And is there any change there?
Are we seeinga little bit better situation with some of the distributors? Steven Lacy Well I’ll start it and ask Jack to add if he would liketo.
We have been working very very aggressively to be asefficient at retail as we possibly can and actually more important than the actualquantity of the draw is having the draw in the right physical locations wherethey actually all happens. We have seen improvements in that.
I would say that there isstill industry wide a lot of work that could be done to make that moreefficient. 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 orso. 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 wholesalersto put our products where consumers want to buy them.
And at the same timewe’ve introduced a new incentive program at the wholesaler’s level. And we’vebeen very pleased to see how those programs have impacted the compliance andgetting the product at retail.
So our news stand product sales for the mostpart are holding up, and we are opening up new channels of distribution as wetalk to you before. It is clearly, a lot of activity going on in the whole saleend and national distributor arena.
We are very pleased with the job that ournational distributor, Time Warner, is doing for us, in managing the dynamicsand we are in active discussions with both the distributor channel and thewholesalers to make the situation as efficient as it can be for all the partiesinvolved. Catriona Fallon -Citigroup Wonderful.
Thank you.Operator Our next question comes from Eric Elbell from Fenimore AssetManagementEric 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 forthe estimated revenue for corner stones and the other sort of non pure TVrevenue for the quarter?
Steven Lacy I do not believe that we provided that in what we havetalked about so far. We can dig through our financial information and see if wecan’t provide that for you.Eric Elbell -Fenimore Asset Management Great.Steven Lacy So, just give us a couple seconds.
I’ve got our percentageincome 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 furtherquestions. Steven Lacy Well, thank you all for participating today and for yourcontinued support of Meredith.
We'll get back to work on delivering strongresults. Thanks.Operator Ladies and gentleman that does conclude our teleconferencetoday.
Thank you for participating and for using AT&T teleconference. Youmay now disconnect.