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Our Mission
We are Meredith Corporation, a publicly held media and marketing company founded upon service to
our customers and committed to building value for our shareholders.
Our cornerstone is a commitment to service journalism. From that, we have built businesses that serve
well-defined readers and viewers, deliver the messages of advertisers and extend our brand franchises
and expertise to related markets.
Our products and services distinguish themselves on the basis of quality, customer service and value
that can be trusted.
2018 Annual Report
Financial Highlights
Years Ended June 30 (In millions except per share data)
GAAP Results
Revenues
Income from operations
Net earnings
Earnings per share
Total assets
Total oustanding debt
Non-GAAP Results
Adjusted EBITDA(1)
2018
2017
2016
2015
2014
$ 2,247 $
1,713 $
1,650 $
1,594 $
1,469
99
99
1.47
6,727
3,196
309
189
4.16
131
34
0.75
242
137
3.02
187
114
2.50
2,730
2,627
2,843
2,544
701
695
795
715
$
421 $
362 $
320 $
319 $
264
Board of Directors
Donald A. Baer 2, 3
Mr. Baer, 63, a director
since 2014, is global
chairman of BCW, a
member of WPP PLC,
one of the world’s largest
strategic communications
businesses.
Donald C. Berg 1
Mr. Berg, 64, a director
since 2012, is the president
of DCB Advisory Services,
which provides consulting
services to food and
beverage companies.
Mell Meredith Frazier 2, 3
Ms. Frazier, 62, a director
since 2000, is vice chairman
of Meredith Corporation and
chairman of the Meredith
Corporation Foundation.
Thomas H. Harty
Mr. Harty, 55, a director
since 2017, is president
and chief executive officer
of Meredith Corporation,
the leading media and
marketing company
serving American women.
Frederick B. Henry 2, 3
Mr. Henry, 72, a director
since 1969, is president
of The Bohen Foundation,
a private charitable
foundation.
Revenue
5-Year CAGR: 9%
$2,247
$2,000
$1,713
$1,650
$1,594
1,500
$1,469
1,000
500
0
2014
2015
2016
2017
2018
$ in millions
$2.50
2.00
1.50
1.00
0.50
0
Dividend Per Share(2)
5-Year CAGR: 6%
$2.18
$2.08
$1.98
$1.83
$1.73
Joel W. Johnson 1
Mr. Johnson, 75, a director
since 1994, is the retired
chairman and chief
executive officer of Hormel
Foods Corporation, a leading
producer of meat and other
products. Mr. Johnson
will retire from the Board
of Directors, effective in
November 2018. We thank
Joel for his contributions to
the Company.
Officers
Stephen M. Lacy
Executive Chairman
2014
2015
2016
2017
2018
Thomas H. Harty
President and Chief Executive Officer
Patrick J. McCreery
President, Local Media Group
In Appreciation
Jonathan B. Werther
President, National Media Group
Joseph H. Ceryanec
Chief Financial Officer
Steven M. Cappaert
Corporate Controller
John S. Zieser
Chief Development Officer
and General Counsel
Non-GAAP amounts are not in accordance with GAAP (accounting principles generally accepted in the United States of America). While management believes
these measures contribute to an understanding of the Company’s financial performance, they should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP. See “Reconciliation of Non-GAAP Financial Measures” in the Appendix immediately following the included
Form 10-K.
(1) Adjusted EBITDA – Earnings before discontinued operations, interest, taxes, depreciation, amortization, non-operating expense, and special items.
(2) Annualized dividend per share at end of fiscal year.
Paul Karpowicz
Meredith Local Media Group President Paul Karpowicz, who joined Meredith in that role in 2005, retired from his position
on June 30, 2018. During Paul’s 13 years of leadership, Meredith’s Local Media Group increased its television footprint to 17
television stations, more than doubled revenues and nearly tripled operating profit. Along the way, Paul was inducted into the
Broadcasting & Cable Hall of Fame, and served as Chairman of the Television Board of the National Association of Broadcasters
on the CBS Affiliates Board and the Television Bureau of Advertising Board. We thank Paul for his many contributions to the
Company, and wish his successor, Patrick McCreery, well in his new role.
Beth J. Kaplan 1
Ms. Kaplan, 60, a
director since 2017, is
the managing member
of Axcel Partners, LLC,
investing in consumer-facing
early-stage and growth
companies founded and
led by women.
Stephen M. Lacy
Mr. Lacy, 64, a director
since 2004, is executive
chairman of Meredith
Corporation, the leading
media and marketing
company serving
American women.
Philip A. Marineau 1
Mr. Marineau, 71, a
director since 1998, is a
partner at LNK Partners,
a private equity firm.
Elizabeth E. Tallett 2, 3
Ms. Tallett, 69, a
director since 2008, is a
consultant to early stage
pharmaceutical and
healthcare companies.
Committee Assignments
1 Audit/Finance 2 Compensation 3 Nominating/Governance
consumer revenue
T h e N e w B a c h e l o r
R E A DY F OR LOV E
A F T E R H E A R T B R E A K
E
S I V
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N E W
P H O T O S
J a n u a r y 8 , 2 0 1 8
W o w !
J a n e Fo n d a
a t 8 0
LOV E & W H AT
I ’ V E L E A R N E D
Doing
national brands
It T hei r
Way!
HOW HARRY & MEGHAN
ARE CHANG ING
THE ROYAL RULES
S a ra h & J a c o b H o g g l e ,
m i s s i n g f o r 3 y e a r s
L I F E ,
W H E R E A R E
T H E S E
C H I L D R E N ?
A Fa t h e r ’s
A n g u i s h —
A M o t h e r ’s
S e c r e t s
175 million
unduplicated American consumers
80% of millennial women
#1 U.S.
Magazine Publisher
Led by People and Better Homes & Gardens
local television
17 stations
in 12 markets
Reaching 11% of US households
digital
140 million
monthly unique visitors
#1 in entertainment, food, lifestyle
brand licensing
#2 licensor
worldwide
trusted brands that lead
To Our Shareholders
On behalf of Meredith Corporation and our
employees, we want to thank you for your investment
in our Company. As a shareholder, you’ve entrusted
us with your financial resources. We take that
responsibility very seriously.
Fiscal 2018 was a transformative year for Meredith,
highlighted by our acquisition of Time Inc., which
closed on January 31, 2018. Additionally, we
continued to aggressively execute against a number of
well-defined strategic initiatives to generate growth in
revenues, operating profit and EBITDA, and increase
shareholder value over time.
Fiscal 2018 highlights included:
The acquisition of Time Inc., which:
Creates an unparalleled portfolio of national
media brands with greater scale and efficiency –
Combined, Meredith’s brands now reach over 175
million unduplicated American consumers, including
80 percent of U.S. millennial women. Meredith
is the No. 1 U.S. magazine operator, possessing
leading positions in celebrity entertainment, food,
lifestyle, parenting and home categories, as well as
enhanced positions in the beauty, fashion and luxury
advertising categories.
Advances Meredith’s digital position by adding
significant scale – With nearly 140 million unique
visitors in the U.S., Meredith now operates the largest
premium content digital network for American
consumers. This includes the No. 1 position in
the key categories of entertainment (People.com),
food (Allrecipes.com), and lifestyle (BHG.com and
MarthaStewart.com). Meredith now possesses richer
and deeper proprietary data, and has greater scale in
the high-growth and large video, branded content,
and programmatic advertising platforms. National
Media Group digital advertising revenues grew more
than 50 percent in fiscal 2018, and represented nearly
35 percent of the group’s total advertising.
Provides consumer revenue diversification and
growth – We expect approximately 45 percent of
fiscal 2019 National Media Group revenues to be
generated from consumer-related sources. These
are high-margin revenues that are not dependent on
advertising. These include subscription revenues,
where our national media brands now have paid
2 | Meredith Corporation 2018 Annual Report
AN ENTERTAINMENT POWERHOUSE
The centerpiece of our acquisition of Time Inc. is
the People brand. It brings to its audience of more
than 100 million consumers a unique mix of breaking
entertainment news, exclusive photos and videos, and
in-depth reporting on the most compelling newsmakers
of our time. From a scale standpoint, the People brand
has no equal. It is the largest single brand within the
Meredith portfolio. Its circulation is double its largest
competitor, and traffic to its digital properties surpasses
its competitors as well.
subscriptions of more than 40 million and a readership
of more than 120 million. These also include affinity
marketer Synapse, which we purchased as part of
the acquisition of Time Inc., along with our brand
licensing, and e-commerce activities.
Enhances our financial scale and flexibility
– Meredith anticipates generating annual cost
synergies that exceed $500 million in the first two
full years of combined operations after the Time
Inc. acquisition. We have an excellent track record
of achieving cost synergies with prior acquisitions,
and are confident in our ability to optimize the cost
structure of the combined business.
Positions Meredith on a growth track not
previously realizable – With the completion of this
acquisition, we have set a goal to deliver $1 billion of
debt reduction in fiscal 2019, and generate $1 billion
of annual EBITDA in fiscal 2020.
Continued strong and growing
contribution from our Local
Media Group:
Meredith’s portfolio of 17 high-performing television
stations in 12 markets delivered record revenues in
fiscal 2018. Additionally, operating profit was a record
for a non-political year.
Performance was driven by growth in retransmission
revenues, along with the addition of WPCH in Atlanta
and MNI Targeted Media (MNI), which was part of
the Time Inc. acquisition. MNI offers clients targeted
advertising solutions that are primarily digital and
aimed at the local and regional levels.
Revenues from the Local Media Group’s digital
activities more than doubled in fiscal 2018, driven
by MNI.
Fiscal 2018 political advertising revenues of $16
million were a record for a non-political year.
Successful execution of asset sales
to simplify and focus our National
Media Group portfolio:
We closed on the sale of the Golf brand, Time Inc.
UK and Meredith Xcelerated Marketing during fiscal
2018. We anticipate agreements to sell the TIME,
Sports Illustrated, Fortune and Money brands, along
with our 60 percent equity investment in Viant, to be
finalized in early fiscal 2019.
Finally, we continued to execute our
Total Shareholder Return strategy:
Our strategy is anchored by the very consistent and
strong cash flows generated by our portfolio of media
assets. Cash flow from operations was $151 million
in fiscal 2018. We grew our dividend by 4.8 percent
to $2.18 on an annualized basis, in fiscal 2018. This
was the 25th straight year of dividend growth and
qualifies Meredith for Dividend Aristocrat status.
Our Plans for Fiscal 2019
As we look toward fiscal 2019, we see several growth
drivers that are particularly exciting:
Increased contribution from the acquired Time
Inc. properties. We re-aligned our advertising
sales force immediately following the Time Inc.
acquisition, including installing publishers at the
brand level responsible for brand-specific sales.
With our new sales strategy now in place, we’re
in position to market our enhanced portfolio for
calendar 2019 advertising buys — which typically
happen in the early fall. We expect to deliver
improving advertising performance for the acquired
brands as fiscal 2019 progresses.
A larger and more profitable digital business.
With our significantly larger scale and our People.com
brand generating record traffic, we expect to drive
record digital revenues and profit for our National
Media Group. We also expect our Local Media Group
to generate record digital revenues and profit as it will
benefit from a full year of contribution from MNI.
Growing high-margin consumer revenue
activities. We expect to generate record consumer
revenues boosted by the addition of the acquired
brands and the very profitable Synapse business; our
industry-best brand licensing business; and growing
lead generation and e-commerce activities.
Improved adjusted EBITDA margins for our
National Media Group. We expect adjusted EBITDA
margins to be in the mid-20 percent range in fiscal
2019, driven by high-margin brands and business
activities, along with ongoing cost synergies.
STRONG POLITICAL
ADVERTISING FORECAST
We anticipate a strong political advertising cycle in fiscal
2019, coming on the heels of a record $63 million in fiscal
2017. There are nine open governor seats in our markets
— the most we’ve seen in decades — along with several
expected competitive races for U.S. Senate, including
open seats in Tennessee and Arizona. All told, we expect
between $55 million and $65 million of political-related
advertising revenues in fiscal 2019.
Political Advertising Revenues
(In Millions)
$39
$44
$35
$63
$55-65
FY11
FY13
FY15
FY17
FY19
Meredith Corporation 2018 Annual Report | 3
We’re looking at a potential record year for
political advertising in our Local Media Group. We
expect political advertising revenues in fiscal 2019 to
range from $55 to $65 million, with about one-third of
that booked in our first fiscal quarter and two-thirds
booked in our second fiscal quarter.
We expect stronger contributions from
non-political revenue sources in our Local Media
Group. This includes expected revenue and
profit growth at MNI. We also expect to renew
MVPD contracts representing approximately 35
percent of our subscriber base in fiscal 2019, and
current market rates are higher than our existing
agreements. We also plan to renew affiliation
agreements with the FOX Television Network in five
of our markets, so some of our revenue gains will be
absorbed by higher expenses.
Finally, we expect a more favorable combined
federal/state tax rate of approximately 28 percent,
compared to 39 percent prior to the passage of
the Tax Cuts and Jobs Act.
STABLE AND GROWING
CONSUMER REVENUE
We have accelerated our initiative to aggressively grow
revenue streams from individual consumers. This is
driven by the addition of the Time Inc. portfolio and our
expanded reach to 175 million unduplicated Americans.
Meredith now possesses a much larger consumer
database of 175 million individuals, and we will cross-
promote titles to increase subscription revenues, lower
acquisition costs and leverage newly acquired affinity
marketer Synapse. We also see enhanced brand licensing
and digital-first opportunities such as e-commerce and
affiliate content marketing, lead generation and paid
products, including membership programs built around
our brands.
175 million
individual consumers
SUBSCRIPTION | eCOMMERCE | BRAND LICENSING | SYNAPSE
Our Long-Term Vision
Looking to fiscal 2019 and beyond, we will continue to
focus on maximizing Total Shareholder Return, driven by:
A great portfolio of media assets that deliver
consistent and growing cash flows.
A balanced capital allocation strategy that
re-invests approximately half of our cash generation
into our business and returns the other half to our
shareholders.
A strong and proven management team that
consistently delivers results.
Our talented and creative employees play a vital role in
Meredith’s success. They include our inventive editorial
teams, innovative sales and marketing professionals,
dedicated support groups and a committed
management team. Our workforce is the best in the
media industry, underscored by our 116-year track
record of success.
In closing, we continue to be highly confident in
the strength and resilience of Meredith’s diversified
business model. We have proven adept at developing
our existing brands and profitably integrating acquired
properties. We have a long history of prudent capital
stewardship and an ongoing commitment to maximizing
Meredith’s Total Shareholder Return.
It is our mission and pledge to protect and grow the
value of your investment in Meredith over time.
Stephen M. Lacy
Executive Chairman
Mell Meredith Frazier
Vice Chairman
Thomas H Harty
President and Chief
Executive Officer
4 | Meredith Corporation 2018 Annual Report
Meredith connects the moments that
shape your world, and everyday life
2018 Form 10-K
MEREDITH CORPORATION
(This page has been left blank intentionally.)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2018
Commission file number 1-5128
MEREDITH CORPORATION
(Exact name of registrant as specified in its charter)
Iowa
(State or other jurisdiction of incorporation or organization)
42-0410230
(I.R.S. Employer Identification No.)
1716 Locust Street, Des Moines, Iowa
(Address of principal executive offices)
50309-3023
(ZIP Code)
Registrant’s telephone number, including area code: (515) 284-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $1
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of class
Class B Common Stock, par value $1
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth
company in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The registrant estimates that the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant at
December 29, 2017, (the last business day of the most recently completed second fiscal quarter) was approximately $2.5 billion based upon the
closing price on the New York Stock Exchange at that date.
Shares of stock outstanding at July 31, 2018
Common shares..............................................
Class B shares ................................................
Total common and Class B shares .................
39,787,777
5,107,813
44,895,590
DOCUMENT INCORPORATED BY REFERENCE
Certain portions of the Registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on
November 14, 2018, are incorporated by reference in Part III to the extent described therein.
TABLE OF CONTENTS
Part I
Business..................................................................................................................
Description of Business
National Media..................................................................................................
Local Media.......................................................................................................
Executive Officers of the Company .......................................................................
Employees ..............................................................................................................
Other.......................................................................................................................
Available Information.............................................................................................
Forward-Looking Statements.................................................................................
Risk Factors............................................................................................................
Unresolved Staff Comments ..................................................................................
Properties................................................................................................................
Legal Proceedings ..................................................................................................
Mine Safety Disclosures.........................................................................................
Part II
Market for Registrant’s Common Equity, Related Shareholder Matters, and
Issuer Purchases of Equity Securities................................................................
Selected Financial Data..........................................................................................
Management’s Discussion and Analysis of Financial Condition and
Results of Operations ........................................................................................
Quantitative and Qualitative Disclosures About Market Risk ...............................
Financial Statements and Supplementary Data......................................................
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..........................................................................................
Controls and Procedures.........................................................................................
Other Information...................................................................................................
Part III
Directors, Executive Officers, and Corporate Governance....................................
Executive Compensation........................................................................................
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters .............................................................................
Certain Relationships and Related Transactions and Director Independence........
Principal Accounting Fees and Services ................................................................
Part IV
Exhibits, Financial Statement Schedules ...............................................................
Form 10-K Summary .............................................................................................
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Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Signatures.......................................................................................................................................
122
Meredith Corporation and its consolidated subsidiaries are referred to in this Annual Report on Form 10-K
(Form 10-K) as Meredith, the Company, we, our, and us.
PART I
ITEM 1. BUSINESS
GENERAL
Meredith Corporation has been committed to service journalism since its inception in 1902 as an agricultural
publisher. In 1924, the Company published the first issue of Better Homes & Gardens. The Company entered the
television broadcasting business in 1948. On January 31, 2018, Meredith completed its acquisition of Time Inc.
(Time) which is now a wholly owned subsidiary of Meredith.
Meredith uses multiple media platforms—including print, digital, mobile, video, and broadcast television—to
provide consumers with content they desire and to deliver the messages of our advertising and marketing partners.
Nationally, Meredith serves over 175 million unduplicated American consumers and has a readership of more than
120 million, paid circulation of more than 40 million, and nearly 135 million monthly unique visitors. Meredith’s
broadcast television stations reach 11 percent of United States (U.S.) households.
The Company is incorporated under the laws of the State of Iowa. Our common stock is listed on the New York
Stock Exchange under the ticker symbol MDP.
The company operates two business segments: national media and local media. Our national media segment
includes leading national consumer media brands delivered via multiple media platforms including print magazines,
digital and mobile media, brand licensing activities, database-related activities, affinity marketing, and business-to-
business marketing products and services. Our focus is on the entertainment, food, lifestyle, parenting, and home
categories, which include titles such as People, Better Homes & Gardens, InStyle, Allrecipes, Real Simple, Shape,
Southern Living, and Martha Stewart Living among others. In addition to subscription magazines, in 2018 we
published nearly 275 special interest publications. Most of our brands are also available as digital editions on one or
more of the major digital newsstands and on major tablet devices. The national media segment’s extensive digital
presence consists of more than 60 websites, nearly 60 mobile-optimized websites, and 14 applications (apps). The
national media segment also includes brand licensing activities, affinity marketing, third-party marketing, a large
consumer database, and other related operations.
Our local media segment consists of 17 television stations located across the U.S. concentrated in fast growing
markets with related digital and mobile media assets. The television stations include seven CBS affiliates, five FOX
affiliates, two MyNetworkTV affiliates, one NBC affiliate, one ABC affiliate, and two independent stations. Local
media’s digital presence includes 12 websites, 12 mobile-optimized websites, and approximately 30 apps focused
on news, sports, and weather-related information. In addition, the local media segment sells geographic and
demographic-targeted digital and print advertising programs sold to third parties.
Financial information about industry segments can be found in Item 7-Management’s Discussion and Analysis of
Financial Condition and Results of Operations and in Item 8-Financial Statements and Supplementary Data under
Note 17.
The Company’s largest revenue source is advertising. National and local economic conditions affect the magnitude
of our advertising revenues. Both national media and local media revenues and operating results can be affected by
changes in the demand for advertising and consumer demand for our products. Magazine circulation revenues are
generally affected by national and regional economic conditions and competition from other forms of media.
1
Television advertising is seasonal and cyclical to some extent, traditionally generating higher revenues in the second
and fourth fiscal quarters and during key political contests and major sporting events.
BUSINESS DEVELOPMENTS
On January 31, 2018, Meredith completed its acquisition of Time for $3.2 billion and began operating as a
combined company on February 1, 2018. Time was a multi-platform media company with brands such as People,
InStyle, Real Simple, Southern Living, and Travel + Leisure. This transaction transformed Meredith into the leading
media and marketing company that reaches 175 million unduplicated U.S. consumers monthly. Meredith’s brands
now have a readership of more than 120 million and paid circulation of more than 40 million. The acquisition
greatly increased our digital scale. We now reach nearly 135 million monthly unique visitors in the U.S.
Subsequent to the acquisition of Time, Meredith completed the sale of the Golf brand in February 2018 and the sale
of Time Inc. (UK) Ltd (TIUK) in March 2018. In addition, we initiated a process to sell TIME, Sports Illustrated,
Fortune, Money, and affiliated brands as well as the Company’s 60 percent interest in Viant Technology LLC
(Viant), which were all acquired in the Time acquisition. These brands each have a different advertising base and
target audience than the rest of our magazine portfolio, and therefore, we believe they are better suited for success
with a new owner. We anticipate agreements to sell these businesses to be finalized in early fiscal 2019.
In March 2018, Meredith unveiled a new sales and marketing structure for national media. Meredith’s new national
media sales structure puts in place strategic account teams comprised of brand, corporate, and digital sellers and
marketers, with a principal point of contact for each key account.
In July 2017, we sold a 70 percent interest in Charleston Tennis LLC, which operates the Family Circle Tennis
Center. In May 2018, we closed the sale of Meredith Xcelerated Marketing (MXM).
The Magnolia Journal, launched in fiscal 2017 as a quarterly newsstand-only title, had continued success. In
October 2017, Meredith announced an increase to the rate base to 1.2 million starting with the Spring 2018 issue.
This increased rate base compares to the 400,000 initial rate base at launch in the Fall of 2016. In December The
Magnolia Journal was named to Ad Age’s Magazines of the Year list and in February 2018 was named Magazine
Launch of the Year by the Association of Magazine Media.
We also celebrated other key milestones and achievements for other brands in fiscal 2018. Martha Stewart Living
was also named to Ad Age’s Magazine of the Year List. Allrecipes, the leading global digital food brand, celebrated
the 20-year anniversary of its launch in July 1997. In April 2018, we launched a print edition of HelloGiggles, an
extension of the popular digital brand. The print magazine is a newsstand-only bi-annual publication with an initial
rate base of 500,000.
During fiscal 2018, Meredith debuted redesigns of several of our subscription magazines. The September 2017
issue of Parents contained a fresh, new look including a modern logo, lively layouts and photography, and an
evolved personality that reflects the candor, humor, and confidence of today’s mom. The redesign of Rachel Ray
Every Day, which debuted in its November 2017 issue, includes a vibrant and elevated approach to photography
and visuals, updated layouts and formats, and a revamped editorial lineup. Incorporating both new editorial content
and an elevated look and feel, the new Shape debuted with its May 2018 issue. Finally, the June 2018 edition of
Food & Wine included new sections, expanded content, and a bolder, more graphic cover.
Meredith entered into several new partnerships in fiscal 2018. In January 2018, Meredith announced a partnership
with Lisa Lillien to create Hungry Girl Magazine, which includes healthy recipes and lifestyle tips. In November
2017, Allrecipes announced that it now features AmazonFresh as a retailer embedded within the site’s top recipes.
This innovation enables home cooks to click to purchase a recipe’s ingredients and, where available, have them
delivered the same day through AmazonFresh home grocery delivery service. Also in November 2017, Meredith
announced a partnership with Direct Wines, Inc. to launch the “Better Homes & Gardens Wine Club”, which will
deliver 12 bottles of wine, tailored to each member’s taste, to its members every three months.
2
DESCRIPTION OF BUSINESS
National Media
National media contributed 69 percent of Meredith’s consolidated revenues and 34 percent of the combined
operating profit from national media and local media operations in fiscal 2018. These results reflect the acquired
Time business since the date of the acquisition. Better Homes & Gardens and People, our flagship brands, together
account for a significant percentage of revenues and operating profit of the national media segment and the
Company.
Magazines
Information for our major subscription magazine titles as of June 30, 2018, is as follows:
Title
1
Related Websites
Description
Frequency
per Year
Year-end
Rate Base 2
Better Homes & Gardens
BHG.com
Family Circle
People
Southern Living
Shape
Parents
FamilyFun 3
Martha Stewart Living
Real Simple
Cooking Light
FamilyCircle.com
People.com
PeopleenEspanol.com
SouthernLiving.com
Shape.com
Parents.com
Parents.com
MarthaStewart.com
MarthaStewartWeddings.com
RealSimple.com
CookingLight.com
MyRecipes.com
Women’s service
Women’s service
Celebrity
Travel and lifestyle
Women’s lifestyle
Parenting
Parenting
Women’s service
Women’s service
Women’s lifestyle and food
Rachel Ray Every Day
RachaelRayMag.com
Women’s lifestyle and food
InStyle
InStyle.com
Entertainment Weekly
EW.com
Allrecipes
Health
AllRecipes.com
Health.com
The Magnolia Journal
n/a
EatingWell
Midwest Living
Travel + Leisure
Food & Wine
EatingWell.com
MidwestLiving.com
TravelandLeisure.com
FoodandWine.com
Traditional Home
TraditionalHome.com
CoastalLiving.com
Coastal Living
Diabetic Living
Women’s lifestyle
Entertainment
Food
Women’s lifestyle
Women’s lifestyle
Food
Travel and lifestyle
Travel and lifestyle
Food
Home decorating
Travel and lifestyle
DiabeticLivingOnline.com
Food and lifestyle
Successful Farming
Agriculture.com
Wood
WoodMagazine.com
Farming business
Woodworking
12
12
53
12
10
12
9
10
12
11
10
13
39
6
10
4
6
6
12
12
8
10
4
13
7
7,600,000
4,000,000
3,400,000
2,800,000
2,500,000
2,200,000
2,100,000
2,050,000
1,975,000
1,775,000
1,700,000
1,700,000
1,500,000
1,350,000
1,350,000
1,200,000
1,000,000
950,000
950,000
925,000
850,000
650,000
500,000
390,000
340,000
n/a Not applicable as The Magnolia Journal does not have a Meredith-owned related website.
1
Titles held-for-sale are excluded from this table and discussion below.
2
3
Rate base is the circulation guaranteed to advertisers. Actual circulation generally exceeds rate base and for most of the Company’s
titles, is tracked by the Alliance for Audited Media, which issues periodic statements for audited magazines.
Title transitioned from a subscription magazine to a newsstand-only special interest publication subsequent to June 30, 2018.
3
In addition to these major magazine titles, we published nearly 275 special interest publications under
approximately 68 brands in fiscal 2018. The titles are issued from one to six times annually and sold primarily on
newsstands. A limited number of special interest publication subscriptions are also sold.
Magazine Advertising—Advertising revenues are generated primarily from sales to clients engaged in consumer
marketing. Many of Meredith’s larger magazines offer regional and demographic editions that contain similar
editorial content but allow advertisers to customize messages to specific markets or audiences. The Company sells
two primary types of magazine advertising: display and direct-response. Advertisements are either run-of-press
(printed along with the editorial portions of the magazine) or inserts (preprinted pages). Most of the national media
segment’s advertising revenues are derived from run-of-press display advertising. Meredith also possesses strategic
marketing capabilities, which provide clients and their agencies with access to all of Meredith’s media platforms
and capabilities, including print, television, digital, video, mobile, consumer events, and custom marketing. Our
team of creative and marketing experts delivers innovative solutions across multiple media channels that meet each
client’s unique advertising and promotional requirements.
The rates at which we sell print advertising depend on each magazine’s rate base, which is the circulation of the
magazine that we guarantee to our advertisers, as well as our audience size. If we are not able to meet our
committed rate base, the price paid by advertisers is generally subject to downward adjustments, including in the
form of future credits or discounts. Our published rates for each of our magazines are subject to negotiation with
each of our advertisers. We sell digital advertising primarily on a flat rate/sponsorship basis or on a cost per
thousand, or CPM, basis. Flat rate/sponsorship deals are sold on an exclusive basis to advertisers giving them
access to our major events. CPM deals are sold on an impression basis with a guarantee that we will deliver the
negotiated volume commitment. If we are not able to meet the impression goal, we will extend the campaign or
provide alternative placements.
Magazine Circulation— Most of our U.S. magazines are sold primarily by subscription and delivered to
subscribers through the mail. Subscriptions obtained through direct-mail solicitation, agencies, insert cards, the
internet, and other means are Meredith’s largest source of circulation revenues. Revenue per subscription and
related expenses can vary significantly by source. The majority of subscription magazines are also sold by single
copy. Single copies sold on newsstands are distributed primarily through magazine wholesalers, who have the right
to receive credit from the Company for magazines returned to them by retailers.
Newsstand sales include sales through traditional newsstands as well as supermarkets, convenience stores,
pharmacies and other retail outlets. We also publish branded books, including soft-cover “bookazines.” These are
distributed through magazine-style “check-out pockets” at retail outlets and traditional trade book channels. We
publish books on a diverse range of topics aligned with our brands, including special commemorative and
biographical books. We also publish books under various licensed third-party brands and a number of original titles.
Our Oxmoor House imprint publishes a variety of home, cooking, and health books under our lifestyle-oriented
brands as well as licensed third-party brands.
Our retail distribution operation, Time Inc. Retail (TIR) provides services relating to wholesale and retail
distribution, billing, and marketing. Under arrangements with TIR, third-party wholesalers purchase our magazines
and the magazines of our publisher clients, and those wholesalers sell and deliver copies of those magazines to
individual retailers. TIR is paid by the wholesalers for magazines they purchase. TIR generally advances funds to
our publisher clients based on their anticipated sales. Under the contractual arrangements with our publisher clients,
they generally bear the risk of loss for non-payment of any amounts due from wholesalers with respect to their
magazines. TIR also administers payments from our publisher clients to retailers for promotional allowances,
including for the placement of magazines at retail locations.
Digital and Mobile Media
We have 35 of our titles available as digital editions, with an audience of approximately 1.6 million. Digital
subscriptions and single copy sales collectively represent 3 percent of our total rate base.
4
National media’s more than 60 websites and nearly 60 mobile-optimized websites provide ideas and inspiration.
These branded websites focus on the topics that women care about most—celebrity entertainment, food, home,
entertaining, and meeting the needs of moms—and on delivering powerful content geared toward lifestyle topics
such as health, beauty, style, and wellness. Our Allrecipes brand alone accounts for 18 web and mobile sites serving
24 countries in 12 languages, one app across multiple platforms, and one Skill for Amazon Alexa. Fiscal 2018
digital traffic across our various platforms averaged 90 million unique monthly visitors prior to the acquisition of
Time and more than 135 million in the period following the acquisition of Time. Our brands have a strong social
networking presence as well. In fiscal 2018, national media reached 126 million Facebook fans, nearly 79 million
Twitter followers, just over 40 million Instagram followers, approximately 11 million Pinterest followers, about 42
million GooglePlus followers, and 9.5 million YouTube subscribers.
Other Sources of Revenues
Other revenues are derived from digital and customer relationship marketing, other custom publishing projects,
brand licensing agreements, and ancillary products and services.
Affinity Marketing—Synapse Group, Inc., a wholly owned subsidiary of Meredith that was acquired with
Meredith’s acquisition of Time, is an affinity marketing company that partners with publishers, brick and mortar
retailers, digital partners, airline frequent flier programs, and customer service and direct response call centers. It is
a major marketer of magazine subscriptions in the U.S. Building on its continuity marketing expertise, Synapse has
diversified its business to also market other products and services. For example, Synapse manages several branded
continuity membership programs and is developing continuity programs for product partners.
Brand Licensing—Meredith Brand Licensing generates revenue through multiple long-term trademark licensing
agreements with retailers, manufacturers, and service providers. Our licensing programs extend the reach of
Meredith brands into additional consumer channels in the U.S. and abroad. Currently the world’s second largest
global licensor, Meredith has direct-to-retail partnerships with leading companies including Better Homes &
Gardens at Walmart, Real Simple at Bed Bath & Beyond and TJ Maxx, InStyle branded hair salons at more than
260 JC Penney stores, Food & Wine for HSN, and 300 Southern Living shop-in-shops inside every Dillard’s
department store.
Our largest partnership is Better Homes & Gardens-branded products sold at Walmart stores in the U.S. and at
Walmart.com. The brand is represented by more than 3,000 products across multiple categories in the home décor,
outdoor living, and garden space. Meredith also has a long-term agreement to license the Better Homes & Gardens
brand to Realogy Corporation, which is entering its 10th year as a residential real estate franchise system operating
as Better Homes and Gardens Real Estate, LLC. The real estate network now includes more than 300 offices and
more than 11,000 real estate professionals across the U.S., Canada, Bahamas, Jamaica, and most recently,
Australia. Also in the real estate sector, the Southern Living and Coastal Living brands offer over 1,200 exclusive
home plans, 100 custom home builders, 30 residential communities, and more than 80 interior design professionals.
Other licensing agreements include the Southern Living Plant Collection at Home Depot, Lowes, and more than
5,000 independent garden centers; Southern Living and Real Simple with 1800 FLOWERS; plus activewear
collections designed for women under the Shape brand. Shape also introduced, in fiscal 2018, a new licensing
partnership with FGX International for a line of fashion sunglasses.
The EatingWell branded line of healthy frozen food entrées manufactured and distributed by Bellisio Foods Inc.
expanded its offering and presence in fiscal 2018. Consumers now have up to 14 frozen entrées to select from at
more than 12,000 regional and national grocery locations.
The Company expands its international reach primarily through international licensing agreements. Meredith’s
national media brands are currently distributed in nearly 80 countries, including a localized presence in more than
30 countries such as Australia, China, India, Mexico, Russia, and Turkey in print and digitally. The Company
continues to pursue activities that will serve consumers and advertisers while also extending and strengthening the
reach and vitality of our brands.
5
Meredith has licensed exclusive global rights to publish and distribute books based on our consumer-leading
brands, including the powerful Better Homes & Gardens imprint, to a book publisher. Meredith creates book
content and retains all approval and content rights while the publisher is responsible for book layout and design,
printing, sales and marketing, distribution, and inventory management. Meredith receives royalties based on sales
subject to a guaranteed minimum.
The Foundry—The Foundry is a creative content studio servicing clients across a broad range of industries. The
services include using our content creation expertise to develop content marketing programs across multiple
platforms, including native advertising that enable clients to engage new consumers and build long-term
relationships with existing customers.
Production and Delivery
Paper, printing, and postage costs accounted for 21 percent of the national media segment’s fiscal 2018 operating
expenses.
Coated publication paper is the major raw material essential to the national media segment. We directly purchase all
of the paper for our magazine production and custom publishing business. The Company has contractual
agreements with major paper manufacturers to ensure adequate supplies for planned publishing requirements. The
price of paper is driven by overall market conditions and is therefore difficult to predict. In fiscal 2018, average
paper prices decreased 1 percent. Paper prices declined 5 percent and 2 percent in fiscal 2017 and 2016,
respectively. Management anticipates slight increases in paper prices in fiscal 2019.
Meredith has multi-year printing contracts with two major domestic printers for the printing of our magazines.
Postage is a significant expense of the national media segment. We continually seek the most economical and
effective methods for mail delivery, including cost-saving strategies that leverage work-sharing opportunities
offered within the postal rate structure. Periodical postage accounts for over 80 percent of Meredith’s postage costs,
while other mail items—direct mail, replies, and bills—account for nearly 20 percent. The Governors of the United
States Postal Service (USPS) review prices for mailing services annually and adjust postage rates periodically. In
general, postage rate changes are capped by law at the rate of inflation as measured by the Consumer Price Index.
The most recent rate change was an increase of less than two percent effective January 2018. With the exception of
fiscal 2016, postage prices have risen in each of Meredith’s last five fiscal years. In fiscal 2016, we saw a rare
reduction in postage prices due to a roll-back of the temporary 4.3 percent exigent increase implemented in January
2014. While we expect postage prices to again increase in January 2019, an ongoing legislatively mandated review
of the existing law by the Postal Regulatory Commission could potentially result in adjustments to the current rate
setting regime. The impact of any such change could be effective as early as the first quarter of calendar 2019.
Meredith continues to work independently and with others to encourage and help the USPS find and implement
efficiencies to contain rate increases. We cannot, however, predict future changes in the postal rates or the impact
they will have on our national media business.
Subscription fulfillment services for certain of Meredith’s national media brands are provided by third parties.
While Meredith expects to transition all subscription fulfillment services to third-party providers in fiscal 2019,
during fiscal 2018 we provided fulfillment and related services for the national media brands acquired with Time as
well as for other publishers’ magazines. Other consumer marketing functions provided include fulfillment, customer
service and database management services, including order and payment processing and call-center support.
National magazine newsstand distribution services are also provided by third parties through multi-year agreements
as well as through our retail distribution operation TIR.
Competition
Publishing is a highly competitive business. The Company’s magazines and related publishing products and
services compete with other mass media, including the internet and many other leisure-time activities. Competition
for advertising dollars is based primarily on advertising rates, circulation levels, reader demographics, advertiser
results, and sales team effectiveness. Competition for readers is based principally on editorial content, marketing
6
skills, price, and customer service. While competition is strong for established titles, gaining readership for newer
magazines and specialty publications is especially competitive.
Local Media
Local media contributed 31 percent of Meredith’s consolidated revenues and 66 percent of the combined operating
profit from national media and local media operations in fiscal 2018. These results reflect the acquired Time
business since the date of the acquisition. Information about the Company’s television stations at June 30, 2018, is
as follows:
DMA
National
Rank 1
Network
Affiliation
Related Website
Expiration
Date of Network
Affiliation
Virtual
Channel
Expiration
Date of FCC
License
Average
Audience
Share 2
9
9
11
11
21
22
CBS
cbs46.com
August 2020
Independent
n/a
n/a
CBS
azfamily.com
August 2020
Independent
azfamily.com
n/a
CBS
kmov.com
June 2020
46
17
5
3
4
April 2021
4.1 %
April 2021
1.1 %
October 2022
5.9 %
October 2022
3.3 %
February 2022
10.8 %
FOX
kptv.com
December 2018
12
February 2023
5.6 %
22
MyNetworkTV
n/a
September 2020
49
February 2023
1.8 %
27
32
33
NBC
wsmv.com
December 2021
CBS
wfsb.com
June 2020
CBS
kctv5.com
August 2020
4
3
5
August 2021
7.7 %
April 2023
10.6 %
February 2022
9.1 %
33
MyNetworkTV
n/a
September 2020
62
February 2022
0.8 %
38
FOX
foxcarolina.com
December 2018
21
December 2020
3.3 %
Station,
Market
WGCL-TV
Atlanta, GA
WPCH-TV
Atlanta, GA
KPHO-TV
Phoenix, AZ
KTVK
Phoenix, AZ
KMOV
St. Louis, MO
KPTV
Portland, OR
KPDX
Portland, OR
WSMV-TV
Nashville, TN
WFSB
Hartford, CT
New Haven, CT
KCTV
Kansas City, MO
KSMO-TV
Kansas City, MO
WHNS
Greenville, SC
Spartanburg, SC
Asheville, NC
Anderson, SC
7
DMA
National
Rank 1
Network
Affiliation
Related Website
Expiration
Date of Network
Affiliation
Virtual
Channel
Expiration
Date of FCC
License
Average
Audience
Share 2
40
59
71
FOX
fox5vegas.com
December 2018
5
October 2022
5.1 %
FOX
fox10tv.com
December 2018
10
April 2021
6.0 %
CBS
wnem.com
August 2020
5
October 2021
12.8 %
116
ABC
FOX
westernmassnews.com
December 2019
December 2018
40
40.2
April 2023
9.9 %
3.0 %
116
CBS
westernmassnews.com
June 2020
3
April 2023
6.3 %
Station,
Market
KVVU-TV
Las Vegas, NV
WALA-TV
Mobile, AL
Pensacola, FL
WNEM-TV
Flint, MI
Saginaw, MI
Bay City, MI
WGGB-TV
Springfield, MA
Holyoke, MA
WSHM-LD
Springfield, MA
Holyoke, MA
n/a Not applicable
1 Designated Market Area (DMA) is a registered trademark of, and is defined by, Nielsen Media Research. The national rank is from the 2017-2018
DMA ranking.
2 Average audience share represents the estimated percentage of households using television tuned to the station in the DMA. The percentages shown reflect
the average total day shares (6:00 a.m. to 2:00 a.m.) for the November 2017, February 2018, and May 2018 measurement periods.
Operations
The principal sources of the local media segment’s revenues are: 1) local non-political advertising focusing on the
immediate geographic area of the stations; 2) national non-political advertising; 3) retransmission of our television
signals by cable, satellite, telecommunications, and over-the-top service providers; 4) geographic and demographic-
targeted digital and print advertising programs sold to third parties; 5) digital advertising on the stations’ websites,
mobile-optimized websites, and apps; and 6) political advertising which is cyclical with peaks occurring in our odd
numbered fiscal years (e.g., fiscal 2015, fiscal 2017) and particularly in our second fiscal quarter of those fiscal
years.
The stations sell commercial time to both local/regional and national advertisers. Rates for spot advertising are
influenced primarily by the market size, number of media competitors, including in-market broadcasters, and
audience ratings and demographics. The larger a station’s audience in any particular daypart, the more leverage a
station has in negotiating advertising rates. Generally, as supply and demand fluctuate in the market, so do a
station’s advertising rates. Most national advertising is sold by independent representative firms while local/regional
advertising is sold by the sales staff at each station.
Typically 40 to 50 percent of a market’s television advertising revenue is generated during local newscasts. Stations
are continually working to grow their news ratings, which in turn increase advertising revenues.
Meredith’s 16 national network affiliations at our television stations also influence advertising rates. Generally, a
network affiliation agreement provides a station the exclusive right to broadcast network programming in its local
service area. In return, the network has the right to sell most of the commercial advertising aired during network
programs and receives programming fees from the station.
8
Retransmission consent revenue is generated from cable, satellite, telecommunications, and over-the-top service
providers who pay Meredith for access to our television station signals so that they may retransmit our signals and
charge their subscribers for this programming. These fees increased in each of the last three fiscal years primarily
due to renegotiations of expiring contracts and negotiated contract step-ups on existing contracts effective during
the year.
Programming fees paid to the networks are in essence a portion of the retransmission consent fees that Meredith
receives from cable, satellite, telecommunications, and over-the-top service providers, which pay Meredith to carry
our television programming in our markets. In addition to increases in fiscal 2017, programming fees paid to the
networks increased significantly in fiscal 2018 due to renegotiations of expired contracts.
Stations generally also pay networks for certain programming and services such as marquee sports (professional
football, college basketball, and Olympics) and news services. While Meredith’s relations with the networks
historically have been very good, the Company can make no assurances they will remain so over time.
The Federal Communications Commission (FCC) has permitted broadcast television station licensees to use their
digital spectrum for a wide variety of services such as high-definition television programming, audio, data, mobile
applications, and other types of communication, subject to the requirement that each broadcaster provide at least
one free video channel equal in quality to the current technical standards. Most of our stations are broadcasting one
or more additional programming streams on their digital channels: two of our markets have MyNetworkTV, nine
carry COZI TV, six broadcast the Escape network, three air the Bounce network, and three air the LAFF network.
The costs of television programming are significant. In addition to network fees, there are two principal
programming costs for Meredith: locally produced programming, including local news, and purchased syndicated
programming. The Company continues to increase our locally produced news and entertainment programming to
control content and costs and to attract advertisers. Syndicated programming costs are based largely on demand
from stations in the market and can fluctuate significantly.
Additionally, in fiscal 2018 as a part of the Time acquisition, MNI Targeted Media (MNI) became a part of local
media’s operations. Through MNI, we provide clients with a single point of contact for a range of targeted digital
and print advertising programs primarily on a local and regional level. Our digital products include programmatic
offerings and custom display advertising on local and national websites. Our print products include customized
geographic and demographic-targeted advertising programs in approximately 35 top U.S. magazines, including our
own national media magazines and those of other leading magazine publishers.
Competition
Meredith’s television stations compete directly for advertising dollars and programming in their respective markets
with other local television stations, radio stations, cable/satellite providers’ programming, and network local sales.
The stations further compete against these media competitors’ and other local and national digital and mobile media
properties. Other mass media providers, such as newspapers and their related websites and apps, are also
competitors. Advertisers compare audience viewership/consumption, market share, audience demographics, and
advertising rates, whether local, network, or syndicated, when making advertising decisions.
Regulation
The ownership, operation, and sale of broadcast television stations, including those licensed to the Company, are
subject to the jurisdiction of the FCC, which engages in extensive regulation of the broadcasting industry under
authority granted by the Communications Act of 1934, as amended (Communications Act), including authority to
promulgate rules and regulations governing broadcasting. The Communications Act requires broadcasters to serve
the public interest. Among other things, the FCC assigns frequency bands; determines stations’ locations and
operating parameters; issues, renews, revokes, and modifies station licenses; regulates and limits changes in
ownership or control of station licenses; regulates equipment used by stations; regulates station employment
practices; regulates certain program content, including commercial matters in children’s programming; has the
authority to impose penalties for violations of its rules or the Communications Act; and imposes annual fees on
9
stations. Reference should be made to the Communications Act, as well as to the FCC’s rules, public notices, and
rulings for further information concerning the nature and extent of federal regulation of broadcast stations.
Broadcast licenses are granted for eight-year periods. The Communications Act directs the FCC to renew a
broadcast license if the station has served the public interest and is in substantial compliance with the provisions of
the Communications Act and FCC rules and policies. Management believes the Company is in substantial
compliance with all applicable provisions of the Communications Act and FCC rules and policies and knows of no
reason why Meredith’s broadcast station licenses will not be renewed.
The FCC has, on occasion, changed the rules related to ownership of media assets, including rules relating to the
ownership of one or more television stations in a market. The FCC’s media ownership rules are subject to further
review by the FCC, various court appeals, petitions for reconsideration before the FCC, and possible actions by
Congress. We cannot predict the impact of any of these developments on our business.
The Communications Act and the FCC also regulate relationships between television broadcasters and cable,
satellite, and telecommunications television providers. Under these provisions, most cable systems must devote a
specified portion of their channel capacity to the carriage of the signals of local television stations that elect to
exercise this right to mandatory carriage. Alternatively, television stations may elect to restrict cable systems from
carrying their signals without their written permission, referred to as retransmission consent. Congress and the FCC
have established and implemented generally similar market-specific requirements for mandatory carriage of local
television stations by satellite television providers when those providers choose to provide a market’s local
television signals. These rules, including related rules on exclusivity, good faith bargaining, and over-the-top
carriage are subject to further review by the FCC and possible actions by Congress. We cannot predict the impact of
any of these developments on our business.
The FCC proposed a plan, called the National Broadband Plan, to increase the amount of spectrum available in the
U.S. for wireless broadband use. In furtherance of the National Broadband Plan, Congress enacted, and the
President signed into law, legislation authorizing the FCC to conduct a “reverse auction” for which television
broadcast licensees could submit bids to receive compensation in return for relinquishing all or a portion of their
rights in the television spectrum of their full service and/or Class A stations. Under the new law, the FCC may hold
one reverse auction and a follow-up auction for the newly freed spectrum. The FCC completed both auctions in
calendar 2017.
Even if a television licensee did not participate in the reverse auction, the results of the auction could materially
impact a station’s operations. The FCC has the authority to force a television station to change channels and/or
modify its coverage area to allow the FCC to rededicate certain channels within the television band for wireless
broadband use. Last year, the FCC released a list of television stations that must change their facilities as part of this
“repacking” process. Several of our stations are among the hundreds of stations selected for repacking of the
television band. The repacking process will be ongoing for several years and may change. The FCC will reimburse
us for certain repacking expenses subject to an overall industry cap on the reimbursed expenses of all repacked
television stations. We cannot predict whether or how this process will ultimately affect the Company or our
television stations.
In addition to the National Broadband Plan, Congress, certain States, and the FCC have under consideration, and in
the future may adopt, new laws, regulations, and policies regarding a wide variety of other matters that also could
affect, directly or indirectly, the operation, ownership transferability, and profitability of the Company’s broadcast
stations and affect the ability of the Company to acquire additional stations. In addition to the matters noted above,
these could include spectrum usage fees, regulation of political advertising rates, restrictions on the advertising of
certain products (such as alcoholic beverages or gambling), program content restrictions, and ownership rule
changes.
Other matters that could potentially affect the Company’s broadcast properties include technological innovations
and developments generally affecting competition in the mass communications industry for viewers or advertisers,
such as home video recording devices and players, satellite radio and television services, cable television systems,
10
newspapers, outdoor advertising, and internet-delivered video programming services. For example, the FCC
recently approved a proposal to allow the voluntary transition of television broadcasters to ATSC 3.0, known as
Next Generation Television. We cannot predict whether or how this process will ultimately affect the Company or
our television stations. Large mass communication transactions have also increased the scrutiny of federal and state
antitrust enforcement on the mass communications industry.
The information provided in this section is not intended to be inclusive of all regulatory provisions currently in
effect. Statutory provisions and FCC regulations are subject to change, and any such changes could affect future
operations and profitability of the Company’s local media segment. Management cannot predict what regulations or
legislation may be adopted, nor can management estimate the effect any such changes would have on the
Company’s television broadcasting operations.
EXECUTIVE OFFICERS OF THE COMPANY
Executive officers are elected to one-year terms each November. The current executive officers of the Company are:
Stephen M. Lacy—Executive Chairman (2018 - present) and a director of the Company since 2004. Formerly
Chairman and Chief Executive Officer (2016 - 2018) and Chairman, President, and Chief Executive Officer (2010 -
2016). Age 64.
Thomas H. Harty—President and Chief Executive Officer (2018 - present) and a director of the Company since
2017. Formerly President and Chief Operating Officer (2016 - 2018) and President, National Media Group (2010 -
2016). Age 55.
Jonathan B. Werther—President, National Media Group (2016 - present). Formerly Executive Vice President/
President Meredith Digital (2013 - 2016). Age 49.
Patrick McCreery—President, Local Media Group (July 1, 2018 - present). Formerly Local Media Group
Executive Vice President (2018), Vice President of News and Marketing (2014 - 2018), and Vice President and
General Manager, KPTV/KPDX (2008 - 2014). Age 47.
Joseph H. Ceryanec—Chief Financial Officer (2008 - present). Age 57.
John S. Zieser—Chief Development Officer/General Counsel and Secretary (2006 - present). Age 59.
EMPLOYEES
As of June 30, 2018, the Company had approximately 7,500 full-time and 415 part-time employees, of whom
approximately 6,850 were located in the United States, 50 in the Netherlands, 35 in the United Kingdom, 850 in
India, and 130 in other locations throughout Europe and Asia. Only a small percentage of our workforce is
unionized. We have various arrangements with our international employees that we believe to be customary for
multinational corporations. We have had no strikes or work stoppages during the last five years and consider
relations with our employees to be good.
OTHER
Name recognition and the public image of the Company’s trademarks (e.g., People, Better Homes & Gardens,
Parents) and television station call letters are vital to the success of our ongoing operations and to the introduction
of new businesses. The Company protects our brands by aggressively defending our trademarks and call letters.
11
The Company had no material expenses for research and development during the past three fiscal years. Revenues
from individual customers and revenues, operating profits, and identifiable assets of foreign operations were not
significant. Compliance with federal, state, and local provisions relating to the discharge of materials into the
environment and to the protection of the environment had no material effect on capital expenditures, earnings, or
the Company’s competitive position.
AVAILABLE INFORMATION
The Company’s corporate website is meredith.com. The content of our website is not incorporated by reference into
this Form 10-K. Meredith makes available free of charge through our website our Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished to the United States
Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practical after such documents are electronically filed with or furnished to the SEC.
Meredith also makes available on our website our corporate governance information including charters of all of our
Board Committees, our Corporate Governance Guidelines, our Code of Ethics, and our Bylaws. Copies of such
documents are also available free of charge upon written request.
FORWARD-LOOKING STATEMENTS
This Form 10-K, including the sections titled Item 1-Business, Item 1A-Risk Factors, and Item 7-Management’s
Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements
that relate to future events or our future financial performance. We may also make written and oral forward-looking
statements in our SEC filings and elsewhere. By their nature, forward-looking statements involve risks, trends, and
uncertainties that could result in actual results that are materially different than those anticipated in any forward-
looking statements. Such factors include, but are not limited to, those items described in Item 1A-Risk Factors
below, those identified elsewhere in this document, and other risks and factors identified from time to time in our
SEC filings. We have tried, where possible, to identify such statements by using words such as believe, expect,
intend, estimate, may, anticipate, will, likely, project, plan, and similar expressions in connection with any
discussion of future operating or financial performance. Any forward-looking statements are and will be based upon
our then-current expectations, estimates, and assumptions regarding future events and are applicable only as of the
dates of such statements. Readers are cautioned not to place undue reliance on such forward-looking statements that
are part of this filing; actual results may differ materially from those currently anticipated. The Company undertakes
no obligation to update or revise any forward-looking statements, whether as a result of new information, future
events, or otherwise.
ITEM 1A. RISK FACTORS
In addition to the other information contained or incorporated by reference into this Form 10-K, investors should
consider carefully the following risk factors when investing in our securities. In addition to the risks described
below, there may be additional risks that we have not yet perceived or that we currently believe are immaterial.
Risks Relating to the Acquisition of Time
The Company may fail to realize all of the anticipated benefits of the acquisition of Time, those benefits may
take longer to realize than expected, or the Company may encounter significant difficulties in integrating
Time’s business into our operations. If the acquisition does not achieve its intended cost savings results, the
business, financial condition, and results of operations could be materially and adversely affected. Although
the Company currently estimates annual cost synergies in excess of $500 million within the first two full years of
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combined operation and incurring costs to achieve those synergies of approximately $300 million spread evenly
between the first two years of operation, actual synergies and cost savings could differ materially from our current
expectations. Our ability to realize the anticipated benefits resulting from the acquisition of Time, including
anticipated synergies, will depend, to a large extent, on our ability to integrate Time’s business into our existing
operations. In addition, these synergies and cost savings are based on estimates and assumptions made that are
inherently uncertain, and are subject to significant business, economic, and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are beyond our control.
The combination of two independent businesses is a complex, costly, and time-consuming process that will require
significant management attention and resources. The integration process may disrupt the businesses and, if
implemented ineffectively, would limit the expected benefits to us. The failure to meet the challenges involved in
integrating the two businesses and to realize the anticipated benefits could cause an interruption of, or a loss of
momentum in, the activities of the Company and could adversely affect the results of operations of the Company.
In addition, the overall integration of the businesses may result in material unanticipated problems, expenses,
liabilities, competitive responses, loss of customer and other business relationships, and diversion of management’s
attention. The difficulties of combining the operations of the companies include, among others:
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the diversion of management’s attention to integration matters;
difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects
from the combination;
difficulties in the integration of operations and systems;
conforming standards, controls, procedures, accounting and other policies, business cultures, and
compensation structures between the two companies;
difficulties in the assimilation of employees and corporate cultures; and
challenges in attracting and retaining key personnel.
Many of these factors are outside of our control and any one of these factors could result in increased costs,
decreases in the amount of expected revenues, and additional diversion of management’s time and energy, which
could materially adversely impact our business, financial condition, and results of operations. In addition, even if
the operations are integrated successfully, the full benefits, including the synergies, cost savings, revenue growth, or
other benefits that are expected, may not be achieved within the anticipated time frame, or at all. Further, additional
unanticipated costs may be incurred in the integration of our businesses. All of these factors could decrease or delay
the expected accretive effect of the acquisition, and negatively impact our business, operating results, and financial
condition. As a result, we cannot provide any assurance that the acquisition of Time will result in the realization of
the full benefits that we anticipate.
The successful execution of the post-acquisition integration strategy will involve considerable risks and may
not be successful. If management is unable to minimize the potential disruption of the ongoing business and
distraction of management during the integration process, the anticipated benefits of the acquisition may not be
realized or realized as quickly as we anticipate. Realizing the benefits of the acquisition will depend in part on the
integration of technology, operations, and personnel while maintaining adequate focus on core businesses. There
may be overlaps in the current offerings of us and Time, which could negate some of the anticipated benefits and
enhanced revenue opportunities resulting from the acquisition. There are no assurances that any cost savings,
greater economies of scale, and other operational efficiencies, as well as revenue enhancement opportunities
anticipated from the combination of the two businesses will occur. Operating expenses may increase significantly in
the near term due to the increased headcount, expanded operations, and expense or changes related to post-
acquisition integration. To the extent that the Company’s expenses increase but its revenues do not, there are
unanticipated expenses related to the integration process, or there are significant costs associated with presently
unknown liabilities, our business, operating results, and financial condition may be materially and adversely
affected. In addition, failure to minimize the numerous risks associated with the post-acquisition integration strategy
also may adversely affect our business, operating results, and financial condition.
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Significant costs associated with the acquisition will be incurred. We have incurred and will incur substantial
expenses as a result of the acquisition of Time including expenses in connection with coordinating the businesses,
operations, policies, and procedures. These expenses include expenses we will incur in connection with achieving
synergies, and expenses associated with the new indebtedness that we incurred in connection with the acquisition.
While we have assumed that a certain level of integration expenses will be incurred, factors beyond our control
could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their
nature, are difficult to estimate accurately.
Employee uncertainty related to the acquisition could harm the Company. Employees may experience
uncertainty about their future role with the Company until or after strategies are executed. The integration team that
is working on effectively combining the companies’ businesses may streamline operations to achieve cost savings
or in response to general economic conditions. The integration process may cause disruptions among employees or
erode employee morale. Employee uncertainty may adversely affect the Company’s ability to attract new personnel
to fill key positions that may become available upon integration of the two businesses or to retain current employees
necessary to implement the Company’s strategies, either of which may disrupt the operations of the Company. We
may not succeed in retaining current employees. Management may not be successful in motivating continuing
employees and keeping them focused on the strategies and goals of the Company during potential workforce
reductions and other distractions relating to the acquisition.
Customers may delay or cancel business arrangements, or seek to modify existing relationships, as a result of
concerns over the acquisition or to extract negotiation leverage. The acquisition could cause potential customers
to delay or cancel contracts as a result of concerns over the acquisition. In particular, prospective customers could
be reluctant to purchase the Company’s products and services due to uncertainty about the direction of the
Company. Moreover, existing customers may seek to modify their relationships to extract leverage in connection
with current or anticipated contract negotiations. A delay or cancellation of purchases by potential customers or
modification of current arrangements by existing customers could have an adverse effect on our business, results of
operations, or financial condition.
We have recorded significant goodwill and other intangible assets in connection with the acquisition of Time
that could become impaired, resulting in significant non-cash charges against earnings. In connection with the
accounting for the acquisition of Time, we recorded a significant amount of intangible assets and goodwill. Under
accounting principles generally accepted in the United States of America (U.S. GAAP), the Company must assess,
at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible
assets has been impaired. Amortizing intangible assets will be assessed for impairment in the event of an
impairment indicator. Any reduction or impairment of the value of goodwill or other intangible assets will result in
a non-cash charge against earnings, which could materially adversely affect our results of operations.
Our business could be adversely impacted by the proposed divestiture of our non-core media assets. As
previously disclosed, we anticipate agreements to sell the TIME, Sports Illustrated, Fortune, and Money brands,
along with our 60 percent equity investment in Viant, to be finalized in early fiscal 2019. These brands and
businesses have different target audiences and advertising bases than the rest of our portfolio, and we believe each
is better suited for success with a new owner. Divestitures involve risks, including difficulties in the separation of
operations, services, products, and personnel; the diversion of management's attention from other business
concerns; the disruption of our day-to-day operations; and the potential loss of key employees. We may not receive
an acceptable offer for our non-core media assets and we may not be able to negotiate an acceptable definitive
agreement or consummate a sale transaction in a timely manner or at all. Dispositions may also involve continued
financial involvement in the divested business, such as through transition service agreements, guarantees, and
indemnities or other current or contingent financial obligations and liabilities, which could adversely affect our
future financial results. We cannot assure you that we will be successful in managing these or any other significant
risks that we encounter in divesting our non-core media assets.
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Risks Relating to Indebtedness and Equity
Our substantial level of indebtedness and our ability to incur significant additional indebtedness could
adversely affect our business, financial condition, and results of operations. Our level of indebtedness could
have important consequences. For example, it could:
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increase our vulnerability to general adverse economic and industry conditions;
limit our ability to obtain additional financing to fund future working capital, capital expenditures, and
other general corporate requirements or to carry out other aspects of our business;
increase our cost of borrowing;
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require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness,
thereby reducing the availability of such cash flow to fund working capital, capital expenditures, and other
general corporate requirements or to carry out other aspects of our business;
limit our ability to make material acquisitions or take advantage of business opportunities that may arise;
expose us to fluctuations in interest rates, to the extent our borrowings bear variable rates of interest;
limit our flexibility in planning for, or reacting to, changes in our business and industry;
place us at a potential disadvantage compared to our competitors that have less debt;
affect our credit ratings; and
limit our ability to pay dividends.
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Our ability to make scheduled payments on and to refinance our indebtedness will depend on and be subject to our
future financial and operating performance, which in turn is affected by general economic, financial, competitive,
business, and other factors beyond our control, including the availability of financing in the banking and capital
markets. Our business may fail to generate sufficient cash flow from operations or we may be unable to efficiently
repatriate the portion of our cash flow that is derived from our foreign operations or borrow funds in an amount
sufficient to enable us to make payments on our debt, to refinance our debt, or to fund our other liquidity needs. If
we were unable to make payments on or refinance our debt or obtain new financing under these circumstances, we
would have to consider other options, such as asset sales, equity issuances, or negotiations with our lenders to
restructure the applicable debt. The terms of our debt agreements and market or business conditions may limit our
ability to take some or all of these actions. In addition, if we incur additional debt, the related risks described above
could be exacerbated.
Our indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly or could prevent us from taking advantage of lower rates. A portion of our indebtedness consists
of term loans and revolving credit facility borrowings with variable rates of interest that expose us to interest rate
risk. If interest rates increase, our debt service obligations on the variable-rate indebtedness will increase even
though the amount borrowed remains the same, and our net income and cash flows will correspondingly decrease.
Even if we enter into interest rate swaps in the future in order to reduce future interest rate volatility, we may not
elect to maintain such interest rate swaps with respect to any of our variable-rate indebtedness, and any swaps we
enter into may not fully mitigate our interest rate risk. In addition, we have significant fixed-rate indebtedness that
includes prepayment penalties which could prevent us from taking advantage of any future decrease in interest rates
that may otherwise be applicable to us.
To service our indebtedness, we will require a significant amount of cash and our ability to generate cash
depends on many factors beyond our control. Our ability to make cash payments on and to refinance our
indebtedness, and to fund planned capital expenditures will depend on our ability to generate significant operating
cash flow in the future. Our ability to generate such cash flow is subject to general economic, financial, competitive,
legislative, regulatory, and other factors that are beyond our control. Our business may not generate cash flow from
operations in an amount sufficient to enable us to pay the principal, premium, if any, and interest on our
indebtedness, or to fund our other liquidity needs. If we cannot service our indebtedness, we may have to take
actions such as refinancing or restructuring our indebtedness, selling assets, issuing equity, or reducing or delaying
capital expenditures, strategic acquisitions, and investments. These actions, if necessary, may not be affected on
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commercially reasonable terms or at all. Our ability to refinance or restructure our debt will depend on the condition
of the capital markets and our financial condition at the applicable time. Any refinancing of our debt, if we are able
to refinance our debt at all, could be at higher interest rates and may require us to comply with more onerous
covenants, which could further restrict our business operations. Further, our credit agreements restrict our ability to
undertake, or use the proceeds from, such measures. Our ability to repay our indebtedness is largely dependent on
the generation of cash flow by our operating subsidiaries and our operating subsidiaries’ ability to make cash
available to us by dividend, intercompany loans, advances and other transactions, or otherwise. Our subsidiaries
may not be able to, or may not be permitted to, transfer cash to us to enable us to make payments in respect of our
indebtedness. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and
contractual restrictions, as well as the financial condition and operating requirements of our subsidiaries, may limit
our ability to obtain cash from our subsidiaries.
Covenants under the indenture governing our 2026 Senior Notes and our credit agreement may restrict our
business and operations in many ways, and if we do not effectively manage our covenants, our financial
conditions and results of operations could be adversely affected. The indenture governing our $1.4 billion
aggregate principal amount of 6.875 percent unsecured senior notes (2026 Senior Notes) and our credit agreement
impose various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:
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pay dividends or distributions, repurchase equity, prepay, redeem or repurchase certain debt, and make
certain investments;
incur additional debt and issue certain preferred stock;
provide guarantees in respect of obligations of other persons;
incur liens on assets;
engage in certain asset sales, including capital stock of our subsidiaries;
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enter into transactions with affiliates;
enter into agreements that restrict distributions from our subsidiaries;
designate subsidiaries as unrestricted subsidiaries; and
prohibit certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments
to us.
These covenants may:
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limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other
general business purposes;
limit our ability to use our cash flow or obtain additional financing for future working capital, capital
expenditures, acquisitions, or other general business purposes;
require us to use a substantial portion of our cash flow from operations to make debt service payments;
limit our flexibility to plan for, or react to, changes in our business and industry;
place us at a competitive disadvantage compared to less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
If we are unable to successfully manage the limitations and decreased flexibility on our business due to our
significant debt obligations, we may not be able to capitalize on strategic opportunities or grow our business to the
extent we would be able to without these limitations.
Our failure to comply with any of the covenants could result in a default under the credit agreement or the indenture
governing the 2026 Senior Notes, which could permit the administrative agent or the trustee, as applicable, or
permit the lenders or the holders of the 2026 Senior Notes to cause the administrative agent or the trustee, as
applicable, to declare all or part of any of our outstanding senior secured term loans or revolving loans or the 2026
Senior Notes to be immediately due and payable or to exercise any remedies provided to the administrative agent or
the trustee, including, in the case of the credit agreement, proceeding against the collateral granted to secure our
obligations under the credit agreement. An event of default under the credit agreement or the indenture governing
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the 2026 Senior Notes could also lead to an event of default under the terms of certain of our other agreements. Any
such event of default or any exercise of rights and remedies by our creditors could seriously harm our business.
The holder of our Series A preferred stock has rights that are senior to those of Meredith’s common
stockholders, and the terms of the Series A preferred stock may limit our ability to pay dividends. The
Series A preferred stock ranks senior to any other class or series of equity, including Meredith’s common stock and
class B stock, with respect to dividend rights and rights upon liquidation. Meredith is required to pay dividends on
the Series A preferred stock in cash or in kind at an annual rate. Meredith expects to continue to pay dividends on
Meredith’s common stock and class B stock, but for so long as the Series A preferred stock remains outstanding,
Meredith’s ability to declare or pay dividends or distributions on, or purchase or redeem, shares of Meredith’s
common stock and class B stock is subject to compliance with certain covenants. Meredith’s failure to comply with
the terms of the Series A preferred stock could restrict Meredith’s ability to pay dividends as expected.
Risks Relating to Income Taxes
The Tax Cuts and Jobs Act (the Tax Reform Act) could adversely affect the Company’s business and
financial condition. The Tax Reform Act, which was signed into law on December 22, 2017, includes numerous
provisions that will affect businesses and may adversely impact the Company’s business and financial condition.
Among other things, the Tax Reform Act includes limitations on a corporation’s ability to deduct certain expenses.
Specifically, beginning after December 31, 2017, the deduction of net interest expenses for any taxable year of a
corporate borrower will generally be capped at 30 percent of the “adjusted taxable income” of such corporate
borrower for such taxable year. For purposes of the foregoing provision, the term “adjusted taxable income”
generally refers to a corporation’s earnings before interest, taxes, and, in the case of taxable years beginning before
January 1, 2022, depreciation, amortization, and depletion. By contrast, prior to the adoption of the Tax Reform Act,
interest paid or accrued by a business was generally deductible in the computation of taxable income subject to
certain limitations. Accordingly, to the extent that the Tax Reform Act limits the amount of the Company’s net
interest expenses that is permitted to be deducted from the Company’s taxable income in a taxable year, the
Company will pay federal income taxes on more taxable income with respect to such taxable year, which could
adversely affect the Company’s business and financial condition, including, among other things, its liquidity and its
cost of capital. However, the Tax Reform Act’s reduction of the corporate tax rate may mitigate the effect of this
new limitation on the deductibility of net interest expenses.
The Time business could have an indemnification obligation to Time Warner, which could materially
adversely affect our financial condition. The complete legal and structural separation of Time Warner Inc.’s (Time
Warner) magazine publishing and related business from Time Warner (the Spin-Off) was completed by way of a pro
rata dividend of Time Inc. shares held by Time Warner to its stockholders as of May 23, 2014, based on a
distribution ratio of one share of Time Inc. common stock for every eight shares of Time Warner common stock
held (the Distribution). If, due to any of Time’s representations being untrue or Time’s covenants being breached, it
was determined that the Distribution did not qualify for non-recognition of gain and loss under Section 355 of the
Internal Revenue Code (the Code), or that an excess loss account existed at the date of the Spin-Off, Time could be
required to indemnify Time Warner for the resulting taxes and related expenses. Any such indemnification
obligation could materially adversely affect our financial condition.
Risks Relating to Business Operations
Advertising represents the largest portion of our revenues and advertising demand may fluctuate from
period to period. In fiscal 2018, 50 percent of our revenues were derived from advertising. Advertising constitutes
48 percent of our national media revenues and 54 percent of our local media revenues. Demand for advertising is
highly dependent upon the strength of the U.S. economy. During an economic downturn, demand for advertising
may decrease. The growth in alternative forms of media, particularly electronic media including those based on the
internet, has increased the competition for advertising dollars, which could in turn reduce expenditures for
magazine and television advertising or suppress advertising rates.
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Circulation revenues represent a significant portion of our revenues. Magazine circulation is another significant
source of revenue, representing 22 percent of total revenues and 31 percent of national media revenues. Preserving
the number of copies sold is critical for maintaining advertising sales. Magazines face increasing competition from
alternative forms of media and entertainment. As a result, sales of magazines through subscriptions and at the
newsstand could decline. As publishers compete for subscribers, subscription prices could decrease and marketing
expenditures may increase.
Technology in the media industry continues to evolve rapidly. Advances in technology have led to an increasing
number of alternative methods for the delivery of content and have driven consumer demand and expectations in
unanticipated directions. If we are unable to exploit new and existing technologies to distinguish our products and
services from those of our competitors or adapt to new distribution methods that provide optimal user experiences,
our business, financial condition, and prospects may be adversely affected. Technology developments also pose
other challenges that could adversely affect our revenues and competitive position. New delivery platforms may
lead to pricing restrictions, the loss of distribution control, and the loss of a direct relationship with consumers. We
may also be adversely affected if the use of technology developed to block the display of advertising on websites
proliferates. In addition, technologies such as subscription streaming media services and mobile video are
increasing competition for household audiences and advertisers. This competition may make it difficult for us to
grow or maintain our broadcasting and print revenues, which we believe may challenge us to expand the
contribution of our digital businesses.
Our websites and internal networks may be vulnerable to unauthorized persons accessing our systems, which
could disrupt our operations. The Company uses computers and other technology in substantially all aspects of
our business operations, and our revenues are increasingly dependent on digital products. Such increases expose us
to potential cyber incidents resulting from deliberate attacks or unintentional events. Our website activities involve
the storage and transmission of proprietary information, which we strive to protect from unauthorized access.
However, it is possible that unauthorized persons may be able to circumvent our protections and misappropriate
proprietary information, corrupt data, or cause interruptions or malfunctions in our digital operations. The results of
these incidents could include, but are not limited to, business interruption, public disclosure of nonpublic
information, decreased advertising revenues, misstated financial data, liability for stolen assets or information,
increased cybersecurity protection costs, litigation, financial consequences, and reputational damage adversely
affecting customer or investor confidence, any or all of which could adversely affect our business. We invest in
security resources and technology to protect our data and business processes against risk of data security breaches
and cyber-attack, but the techniques used to attempt attacks are constantly changing. A breach or successful attack
could have a negative impact on our operations or business reputation.
Evolving privacy and information security laws and regulations may impair our ability to market to
consumers. Meredith’s consumer database includes first-party data that is used to market our products to our
customers and is also rented to or used on behalf of marketing and advertising clients. As public awareness shifts to
data gathering and usage, privacy rights, and data protection, new laws and regulations may be passed that would
restrict or prevent us from utilizing this data. Such restrictions could reduce or eliminate this resource for generating
revenue for the Company.
World events may result in unexpected adverse operating results for our local media segment. Our local
media results could be affected adversely by world events such as wars, political unrest, acts of terrorism, and
natural disasters. Such events can result in significant declines in advertising revenues as the stations will not
broadcast or will limit broadcasting of commercials during times of crisis. In addition, our stations may have higher
newsgathering costs related to coverage of the events.
Our local media operations are subject to FCC regulation. Our broadcasting stations operate under licenses
granted by the FCC. The FCC regulates many aspects of television station operations including employment
practices, political advertising, indecency and obscenity, programming, signal carriage, and various other technical
matters. Violations of these regulations could result in penalties and fines. Changes in these regulations could
impact the results of our operations. The FCC also regulates the ownership of television stations. Changes in the
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ownership rules could adversely affect our ability to consummate future transactions or may favor our competitors.
Details regarding regulation and its impact on our local media operations are provided in Item 1-Business beginning
on page 9.
Loss of or changes in affiliation agreements could adversely affect operating results for our local media
segment. Due to the quality of the programming provided by the networks, stations that are affiliated with a
network generally have higher ratings than unaffiliated independent stations in the same market. As a result, it is
important for stations to maintain their network affiliations. Most of our stations have network affiliation
agreements. Seven are affiliated with CBS, five with FOX, two with MyNetworkTV, one with NBC, and one with
ABC. These television networks produce and distribute programming in exchange for each of our stations’
commitment to air the programming at specified times and for commercial announcement time during the
programming. We also make cash payments to the networks. These payments are in essence a portion of the
retransmission consent fees that Meredith receives from cable, satellite, and telecommunications service providers,
which pay Meredith to carry our television programming in our markets. These network relationships may also
include terms regarding over-the-top distribution. The non-renewal or termination of any of our network affiliation
agreements would prevent us from being able to carry programming of the affiliate network. This loss of
programming would require us to obtain replacement programming, which may involve higher costs and/or which
may not be as attractive to our audiences, resulting in reduced revenues. Furthermore, the non-renewal of any
retransmission consent agreement with a major cable, satellite, or telecommunications service provider could
adversely affect the economics of our relationship with the applicable network(s), advertising revenues, and our
local brands. If renewed, our network affiliation agreements and our retransmission agreements may be renewed on
terms that are less favorable to us. Our CBS affiliation agreements expire in June and August 2020. The
MyNetworkTV affiliation agreements expire in September 2020. Our FOX affiliation agreements expire in
December 2018. Our NBC affiliation agreement expires in December 2021 and our ABC affiliation agreement
expires in December 2019.
Client relationships are important to our brand licensing and consumer relationship marketing businesses.
Our ability to maintain existing client relationships and generate new clients depends significantly on the quality of
our products and services, our reputation, and the continuity of Company and client personnel. Dissatisfaction with
our products and services, damage to our reputation, or changes in key personnel could result in a loss of business.
Increases in paper and postage prices, which are difficult to predict and control, could adversely affect our
results of operations. Paper and postage represent significant components of our total cost to produce, distribute,
and market our printed products. In fiscal 2018, these expenses accounted for 11 percent of national media’s
operating costs. Paper is a commodity and its price can be subject to significant volatility. All of our paper supply
contracts currently provide for price adjustments based on prevailing market prices; however, we historically have
been able to realize favorable paper pricing through volume discounts. The USPS distributes substantially all of our
subscription magazines and many of our marketing materials. Postal rates are dependent on the operating efficiency
of the USPS and on legislative mandates imposed upon the USPS. Although we work with others in the industry
and through trade organizations to encourage the USPS to implement efficiencies that will minimize rate increases,
we cannot predict with certainty the magnitude of future price changes for paper and postage. Further, we may not
be able to pass such increases on to our customers.
Acquisitions pose inherent financial and other risks and challenges. As a part of our strategic plan, we have
acquired businesses and we expect to continue acquiring businesses in the future. These acquisitions can involve a
number of risks and challenges, any of which could cause significant operating inefficiencies and adversely affect
our growth and profitability. Such risks and challenges include underperformance relative to our expectations and
the price paid for the acquisition; unanticipated demands on our management and operational resources; difficulty
in integrating personnel, operations, and systems; retention of customers of the combined businesses; assumption of
contingent liabilities; and acquisition-related earnings charges. If our acquisitions are not successful, we may record
impairment charges. Our ability to continue to make acquisitions will depend upon our success at identifying
suitable targets, which requires substantial judgment in assessing their values, strengths, weaknesses, liabilities, and
potential profitability, as well as the availability of suitable candidates at acceptable prices and whether restrictions
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are imposed by regulations. Moreover, competition for certain types of acquisitions is significant, particularly in the
fields of broadcast stations and digital media. Even if successfully negotiated, closed, and integrated, certain
acquisitions may not advance our business strategy and may fall short of expected return on investment targets.
Impairment of goodwill and intangible assets is possible, depending upon future operating results and the
value of the Company’s stock. Although the Company wrote down certain of its intangible assets, including
goodwill and trademarks, by $22.7 million in fiscal 2018, $5.3 million in fiscal 2017, and $155.8 million in fiscal
2016, further impairment charges are possible. We test our goodwill and indefinite-lived intangible assets for
impairment during the fourth quarter of every fiscal year and on an interim basis if indicators of impairment exist.
Factors which influence the evaluation include, among many things, the Company’s stock price and expected future
operating results. If the carrying value of a reporting unit or an intangible asset is no longer deemed to be
recoverable, a potentially material non-cash impairment charge could be incurred. At June 30, 2018, goodwill and
intangible assets totaled $3.9 billion, or 58 percent of Meredith’s total assets, with $3.0 billion in the national media
segment and $907.1 million in the local media segment. The review of goodwill is performed at the reporting unit
level. The Company has three reporting units – national media, local media excluding MNI, and MNI. We
performed our most recent annual goodwill impairment test as of May 31, 2018. The fair value of the national
media reporting unit exceeded its net assets by 15 percent. The impairment analysis assumed only 50 percent of the
synergies expected to be realized from the acquisition of Time. Had 100 percent of the synergies been incorporated
into the future cash flows in the impairment analysis, the fair value would have exceeded carrying value by 43
percent. Qualitative impairment analyses were performed for the local media excluding MNI reporting unit and the
MNI reporting unit and resulted in no indications of impairment and thus, no quantitative assessments were
necessary. Changes in key assumptions about the economy or business prospects used to estimate fair value or other
changes in market conditions could result in additional impairment charges. Although these charges would be non-
cash in nature and would not affect the Company’s operations or cash flow, they would reduce stockholders’ equity
and reported results of operations in the period charged.
We have three classes of stock with different voting rights. We have three classes of stock: Series A preferred
stock, common stock, and class B stock. The Series A preferred stock is non-voting. Holders of common stock are
entitled to one vote per share and account for 44 percent of the voting power. Holders of class B stock are entitled to
ten votes per share and account for the remaining 56 percent of the voting power. There are restrictions on who can
own class B stock. The majority of Class B shares are held by members of Meredith’s founding family. Control by a
limited number of holders may make the Company a less attractive takeover target, which could adversely affect the
market price of our common stock. This voting control also prevents other shareholders from exercising significant
influence over certain of the Company’s business decisions.
Adverse changes in the equity markets or interest rates, changes in actuarial assumptions and legislative or
other regulatory actions could substantially increase our United Kingdom (U.K.) pension costs and could
result in a material adverse effect on our business, financial condition, and results of operations. Through one
of our U.K. subsidiaries acquired with the acquisition of Time, the Company sponsors the IPC Media Pension
Scheme (the IPC Plan), a defined benefit pension plan that is closed both to new participants and to the future
accrual of additional benefits for current participants. The majority of pensions in payment and deferred pensions in
excess of any guaranteed minimum pension are increased annually in line with the increase in the retail price index
up to a maximum of 5 percent. Concurrently with the acquisition of Time, the Company was substituted for Time as
the guarantor of all obligations of the statutory employers under the IPC Plan.
The most recent triennial valuation of the IPC Plan under U.K. pension regulations was completed as of April 5,
2015. Under the assumptions used in such valuation, which are more conservative than the assumptions used to
determine a pension plan’s funded status in accordance with U.S. GAAP, the IPC Plan was deemed to be
underfunded at that time by approximately £156 million. A triennial valuation of the IPC Plan is currently in
process and once completed, will be as of April 5, 2018.
Under the current deed of guarantee, the Company would be obligated to fund the IPC Plan’s “buyout deficit” (i.e.,
the amount that would be needed to purchase annuities to discharge the benefits under the plan) under certain
20
circumstances. Specifically, the Company would be required to deposit the buyout deficit into escrow if its debt in
excess of $50 million were not to be paid when due or were to come due prior to its stated maturity as a result of a
default (a Major Debt Acceleration) or if a Covenant Breach were to occur (as described below). The Company
would be permitted to recoup the escrowed funds under certain circumstances. However, if the Company, as the
sponsor, was to become insolvent, or if a Major Debt Acceleration were to occur (without being promptly cured),
any escrowed funds would be immediately contributed into the IPC Plan and the Company would be obligated to
immediately contribute into the IPC Plan any shortfall in the buyout deficit amount.
In connection with the completion of the sale of all issued shares of TIUK on March 15, 2018, and the substitution
of another U.K. subsidiary of the Company as the sole sponsor under the IPC Plan, the deed of guarantee was
amended to remove requirements to deposit the buyout deficit as a result of certain credit rating triggers. At the
same time, the Company agreed that the same subsidiaries of the Company that guarantee the Company’s 2026
Senior Notes would guarantee the obligations of the Company under the IPC Plan on a pari passu basis with the
obligations under the 2026 Senior Notes. In addition, the Company agreed to incorporate the terms of certain
covenants under the indenture governing the 2026 Senior Notes into the amended deed of guarantee effective as of
March 15, 2018. If a breach of such covenants by the Company or the subsidiary guarantors occurs (after certain
notice and cure periods) (a Covenant Breach), the Company would be required to deposit the buyout deficit (less
the amount of certain types of security in favor of the IPC Plan, currently provided in the form of a surety bond)
into escrow as described above.
If the Company had been required to fund the buyout deficit on June 30, 2018, the amount would have been
approximately £138 million. The amount of the buyout deficit changes daily and is determined by many factors,
including changes in the fair value of the IPC Plan assets and liabilities and interest rates.
It is possible that, following future valuations of the IPC Plan’s assets and liabilities or following future discussions
with the IPC Plan trustee, the annual funding obligation and/or the arrangements to ensure adequate funding for the
IPC Plan will change. The future valuations under the IPC Plan can be affected by a number of assumptions and
factors, including legislative changes, assumptions regarding interest rates, currency rates, inflation, mortality, and
retirement rates, the investment strategy and performance of the IPC Plan assets, and (in certain limited
circumstances) actions by the U.K. Pensions Regulator. Volatile economic conditions, including the U.K.’s
impending exit from the European Union, commonly referred to as Brexit, could increase the risk that the funding
requirements increase following the next triennial valuation. The U.K. Pensions Regulator also has powers under
the Pensions Act 2004 to impose a contribution notice or a financial support direction on the Company (and other
persons connected with the Company or the U.K. subsidiary which sponsors the IPC Plan) if, in the case of a
contribution notice, the U.K. Pensions Regulator reasonably believes such person has been party to an act, or
deliberate failure to act, intended to avoid pension liabilities or that is materially detrimental to the pension plan, or,
in the case of a financial support direction, if a plan employer is a service company or insufficiently resourced and
the Pensions Regulator considers it is reasonable to act against such a person. A significant increase in the funding
requirements for the IPC Plan or in the calculated “self-sufficiency deficit” or the calculated “risk-free self-
sufficiency deficit” could result in a material adverse effect on its business, financial condition, and results of
operations.
The preceding risk factors should not be construed as a complete list of factors that
may affect our future operations and financial results.
21
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Meredith is headquartered in Des Moines, IA. The Company owns buildings at 1716 and 1615 Locust Street and is
the sole occupant of these buildings. The Company believes these facilities are adequate for their intended use.
The national media segment operates mainly from the Des Moines offices and from multiple leased facilities in
New York, NY. The New York facilities are used primarily as advertising sales offices for all Meredith magazines
and as headquarters for brands including Family Circle, Shape, Parents, Rachael Ray Every Day, and all brands
acquired in the Time acquisition. We are in the process of transferring employees and operations from our leased
facility at 805 Third Avenue, New York, NY to the leased facility at 225 Liberty Street, New York, NY. We plan to
vacate the majority of the leased space at 805 Third Avenue by September 2018 and have entered into agreements
with unaffiliated third-party tenants to sublease approximately 70 percent of the leased space at this location.
The national media segment has also entered into leases for magazine editorial offices, national media sales offices,
technology centers, warehouses, and other operational functions in the states of Alabama, Arizona, Arkansas,
California, Colorado, Connecticut, Florida, Georgia, Illinois, Massachusetts, Michigan, Minnesota, New Jersey,
Pennsylvania, Texas, Vermont, and Washington; Washington, D.C.; and in the countries of Canada, China, India,
Japan, Netherlands, the Philippines, Singapore, and Switzerland. The Company believes these facilities are
sufficient to meet our current and expected future requirements.
The local media segment operates from facilities in the following locations: Atlanta, GA; Phoenix, AZ; St. Louis,
MO; Beaverton, OR; Nashville, TN; Rocky Hill, CT; Fairway, KS; Greenville, SC; Henderson, NV; Mobile, AL;
Saginaw, MI; and Springfield, MA. The property in St. Louis is leased, while the other properties are owned by the
Company. Each of the broadcast stations also maintains one or more owned or leased transmitter sites.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we are defendants in or parties to various legal claims, actions, and proceedings.
These claims, actions and proceedings are at varying stages of investigation, arbitration, or adjudication, and
involve a variety of areas of law. Time, which is now a wholly-owned subsidiary, previously reported on, and we
update below, the following legal proceedings.
On October 26, 2010, the Canadian Minister of National Revenue denied the claims by Time Inc. Retail (formerly
Time/Warner Retail Sales & Marketing, Inc.) (TIR) for input tax credits in respect of goods and services tax that
TIR had paid on magazines it imported into and had displayed at retail locations in Canada during the years 2006 to
2008, on the basis that TIR did not own those magazines and issued Notices of Reassessment in the amount of
approximately C$52 million. On January 21, 2011, TIR filed an objection to the Notices of Reassessment with the
Chief of Appeals of the Canada Revenue Agency (CRA), arguing that TIR claimed input tax credits only in respect
of goods and services tax it actually paid and, regardless of whether its payment of the goods and services tax was
appropriate or in error, it is entitled to a rebate for such payments. On September 13, 2013, TIR received Notices of
Reassessment in the amount of C$26.9 million relating to the disallowance of input tax credits claimed by TIR for
goods and services tax that TIR had paid on magazines it imported into and had displayed at retail locations in
22
Canada during the years 2009 to 2010. On October 22, 2013, TIR filed an objection to the Notices of Reassessment
received on September 13, 2013 with the Chief of Appeals of the CRA, asserting the same arguments made in the
objection TIR filed on January 21, 2011. Beginning in 2015, the collections department of the CRA requested
payment of both assessments plus accrued interest or the posting of sufficient security. In each instance, TIR
responded by stating that collection should remain stayed pending resolution of the issues raised by TIR’s objection.
Including interest accrued, the total of the reassessments claimed by the CRA for the years 2006 to 2010 was C$91
million as of November 30, 2015. On February 8, 2016, the Company filed an application for a remission order
with the International Trade Policy Division of Finance Canada to seek relief from the assessments and the CRA’s
collection efforts. The matter is currently subject to a proceeding in the Tax Court of Canada to resolve the issue of
whether TIR or the publishers are entitled to the input tax credits. On March 31, 2017, the Company and the CRA
jointly proposed a timetable for the completion of certain pre-trial steps related to this matter, which was approved
by the Tax Court. In accordance with the timetable, on April 28, 2017, TIR filed an Amended Notice of Appeal of
the assessments. In June 2017, the CRA filed a Reply to TIR's Amended Notice of Appeal and the Company filed an
answer to the CRA reply in July 2017. The parties are currently engaged in discovery. The Company denies liability
and intends to vigorously defend itself and pursue all defenses available to eliminate or mitigate liability.
In July 2017 and November 2017, Time received subpoenas from the Enforcement Division of the staff of the SEC
requiring Time to provide documents relating to its accounting for goodwill and asset impairments, restructuring
and severance costs, and its analysis and reporting of Time’s segments. The Company is cooperating with the SEC
in the investigation. Management cannot at this time predict the eventual scope or outcome of this matter.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
23
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION, DIVIDENDS, AND HOLDERS
The principal market for trading Meredith’s common stock is the New York Stock Exchange (trading symbol
MDP). There is no separate public trading market for Meredith’s class B stock, which is convertible share for share
at any time into common stock. Holders of both classes of stock receive equal dividends per share.
The range of trading prices for the Company’s common stock and the dividends per share paid during each quarter
of the past two fiscal years are presented below.
Fiscal 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
$
$
High
63.05
72.25
69.35
54.95
High
57.53
59.70
66.25
66.15
Low
Dividends
$
53.25
50.63
52.35
47.30
0.520
0.520
0.545
0.545
Low
Dividends
$
49.17
43.85
54.60
51.20
0.495
0.495
0.520
0.520
Meredith stock became publicly traded in 1946, and quarterly dividends have been paid continuously since 1947.
Meredith has increased our dividend for 25 consecutive years. It is currently anticipated that comparable dividends
will continue to be paid in the future.
On July 31, 2018, there were approximately 880 holders of record of the Company’s common stock and 490 holders
of record of class B stock.
24
COMPARISON OF SHAREHOLDER RETURN
The following graph compares the performance of the Company’s common stock during the period July 1, 2013, to
June 30, 2018, with the Standard and Poor’s (S&P) MidCap 400 Index and with a peer group of companies engaged
in multimedia businesses primarily with publishing and/or television broadcasting in common with the Company.
The S&P MidCap 400 Index is comprised of 400 mid-sized U.S. companies with a market cap in the range of $1.6
billion to $6.8 billion in primarily the information technology, financial, industrial, and consumer discretionary
industries weighted by market capitalization. The peer group selected by the Company for comparison, which is
weighted by market capitalization, is comprised of Media General, Inc. (until its acquisition by Nexstar
Broadcasting Group, Inc. on January 17, 2017); Nexstar Broadcasting Group, Inc.; TEGNA Inc.; The E.W. Scripps
Company; and Time Inc. (from June 9, 2014, the date its stock began trading to January 31, 2018, when it was
acquired by us).
The graph depicts the results for investing $100 in the Company’s common stock, the S&P MidCap 400 Index, and
the peer group at closing prices on June 30, 2013, assuming dividends were reinvested.
25
ISSUER PURCHASES OF EQUITY SECURITIES
The following table sets forth information with respect to the Company’s repurchases of common stock during the
quarter ended June 30, 2018.
(a)
Total number
of shares
purchased 1, 2
(b)
Average price
paid
per share
(c)
Total number of
shares
purchased as part of
publicly announced
programs
(d)
Approximate dollar
value of shares
that may yet be
purchased under the
programs
31,228
$ 54.11
9,218
9,982
50,428
50.99
52.31
31,228
4,262
9,982
45,472
(in millions)
$
56.9
56.6
56.1
Period
April 1 to
April 30, 2018
May 1 to
May 31, 2018
June 1 to
June 30, 2018
Total
1 The number of shares purchased includes 31,228 shares in April 2018, 4,262 shares in May 2018, and 9,982 shares in June 2018
delivered or deemed to be delivered to us in satisfaction of tax withholding on option exercises and the vesting of restricted shares. These
shares are included as part of our repurchase program and reduce the repurchase authority granted by our Board.
2 The number of shares purchased includes 4,956 shares in May 2018 deemed to be delivered to us on tender of stock in payment for the
exercise price of options. These shares do not reduce the repurchase authority granted by our Board.
In May 2014, Meredith announced the Board of Directors had authorized the repurchase of up to $100.0 million in
additional shares of the Company’s common and class B stock through public and private transactions.
For more information on the Company’s common and class B share repurchase program, see Item 7-Management’s
Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Share Repurchase
Program” on page 46.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the fiscal years 2014 through 2018 are contained under the heading “Five-Year Financial
History with Selected Financial Data” beginning on page 113 and are primarily derived from consolidated financial
statements for those years. Information contained in that table is not necessarily indicative of results of operations in
future years and should be read in conjunction with Item 7-Management’s Discussion and Analysis of Financial
Condition and Results of Operations and Item 8-Financial Statements and Supplementary Data of this Form 10-K.
26
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) consists of the
following sections:
Executive Overview ............................................................
Results of Operations ..........................................................
Liquidity and Capital Resources .........................................
Critical Accounting Policies................................................
Accounting and Reporting Developments ..........................
Page
27
31
42
47
50
MD&A should be read in conjunction with the other sections of this Form 10-K, including Item 1-Business, Item 6-
Selected Financial Data, and Item 8-Financial Statements and Supplementary Data. MD&A contains forward-
looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements
are based upon our current expectations and could be affected by many risks, uncertainties, and changes in
circumstances including the uncertainties and risk factors described throughout this filing, particularly in Item 1A-
Risk Factors. Important factors that could cause actual results to differ materially from those described in forward-
looking statements are set forth under the heading “Forward-Looking Statements” in Item 1-Business.
EXECUTIVE OVERVIEW
Meredith has been committed to service journalism for over 115 years. Meredith uses multiple media platforms—
including print, digital, mobile, video, and broadcast television—to provide consumers with content they desire and
to deliver the messages of its advertising and marketing partners.
Meredith operates two business segments. The national media segment reaches more than 175 million unduplicated
American consumers every month, including more than 80 percent of U.S. millennial women. Meredith is the No. 1
U.S. magazine operator, possessing leading positions in entertainment, food, lifestyle, parenting, and home content
creation, as well as enhanced positions in the beauty, fashion, and luxury advertising categories through well-known
brands such as People, Better Homes & Gardens, InStyle, Allrecipes, Real Simple, Shape, Southern Living, and
Martha Stewart Living. The national media segment features robust brand licensing activities, including more than
3,000 SKUs of branded products at Walmart stores across the U.S. and at Walmart.com. The national media
segment also includes leading affinity marketer Synapse, and The Foundry, the Company’s state-of-the-art creative
content studio.
Meredith’s local media segment includes 17 television stations reaching 11 percent of U.S. households. Meredith’s
portfolio is concentrated in large, fast-growing markets, with seven stations in the nation’s Top 25 markets—
including Atlanta, Phoenix, St. Louis, and Portland—and 13 in Top 50 markets. Meredith’s stations produce over
700 hours of local news and entertainment content each week, and operate leading local digital properties.
Both segments operate primarily in the U.S. and compete against similar media and other types of media on both a
local and national basis. In fiscal 2018, the national media segment accounted for 69 percent of the Company’s $2.2
billion in revenues while local media segment revenues contributed 31 percent. These results reflect the acquired
Time business since the date of the acquisition.
27
Meredith continued to aggressively execute a series of well-defined strategic initiatives in fiscal 2018 to generate
growth in revenue and increase shareholder value over time. These included:
The transformational acquisition of Time
◦ Creates an unparalleled portfolio of national media brands with greater scale and efficiency.
Combined, Meredith’s brands now reach over 175 million unduplicated American consumers,
including 80 percent of U.S. millennial women. Meredith is the No. 1 U.S. magazine operator,
possessing leading positions in entertainment, food, lifestyle, parenting, and home content creation,
as well as enhancing positions in the beauty, fashion, and luxury advertising categories.
◦ Advances Meredith’s digital position by adding significant scale. With nearly 135 million unique
visitors in the U.S., Meredith now operates the largest premium content digital network for U.S.
consumers. This includes the No. 1 position in the key categories of entertainment (People.com),
food (Allrecipes.com), and lifestyle (BHG.com and MarthaStewart.com). Meredith now possesses
richer and deeper proprietary data, and has greater scale in the high-growth and large video,
branded content, and programmatic advertising platforms. National media digital advertising
revenues grew more than 50 percent in fiscal 2018, and represented nearly 35 percent of the
national media’s total advertising.
◦
◦
Provides consumer revenue diversification and growth. Meredith’s national media brands now have
a readership of more than 120 million and paid circulation of more than 40 million magazine
subscriptions. Meredith expects to increase consumer generated revenue through ownership of
affinity marketer Synapse, which it acquired as part of the acquisition of Time, as well as from
diversified activities, including bundled circulation, brand licensing, and e-commerce activities.
Enhances financial scale and flexibility. Meredith anticipates generating annual cost synergies that
exceed $500 million in the first two full years of combined operations. Meredith has an excellent
track record of achieving cost synergies with prior acquisitions, and is confident in its ability to
optimize the cost structure of the combined business.
Continued strong and growing contribution from Meredith’s local media operations
◦ Meredith’s portfolio of 17 high-performing television stations in 12 markets delivered strong
revenue in fiscal 2018.
◦
Performance was driven by growth in retransmission revenues, along with the addition of WPCH in
Atlanta and MNI, which was part of the Time acquisition. MNI offers clients targeted advertising
solutions aimed primarily at the local and regional levels.
Successful execution of asset sales to simplify and focus Meredith’s national media portfolio
◦ Meredith closed on the sale of the Golf brand, TIUK and MXM during fiscal 2018. Additionally,
Meredith anticipates agreements to sell the Fortune, Money, Sports Illustrated, and TIME brands to
be finalized in early fiscal 2019.
◦ Discontinued operations in Meredith’s fiscal 2018 include TIME, Sports Illustrated, Fortune,
Money, and Viant, along with the Golf brand and TIUK.
28
Meredith remains committed to strong capital stewardship, and delivering top-third performance through its
successful Total Shareholder Return strategy. This includes:
•
Strong generation of cash flow. Cash flow from operations for the year ended June 30, 2018, was $151.4
million.
• Return of capital to shareholders through consistent and ongoing dividend increases. Meredith raised its
regular stock dividend by 4.8 percent to $2.18 on an annualized basis in January 2018. This marked the
25th straight year of dividend increases for Meredith, which has paid an annual dividend for 71 consecutive
years.
•
Share repurchases. Meredith’s ongoing share repurchase program has $56.1 million remaining under
current authorizations as of June 30, 2018.
NATIONAL MEDIA
Advertising revenues made up 48 percent of fiscal 2018 national media revenues. These revenues were generated
from the sale of advertising space in our magazines and on our digital properties to clients interested in promoting
their brands, products, and services to consumers. Changes in advertising revenues tend to correlate with changes in
the level of economic activity in the U.S. Indicators of economic activity include changes in the level of gross
domestic product, consumer spending, housing starts, unemployment rates, auto sales, and interest rates. Circulation
levels of Meredith’s magazines, reader demographic data, and the advertising rates charged relative to other
comparable available advertising opportunities also affect the level of advertising revenues.
Circulation revenues accounted for 31 percent of fiscal 2018 national media revenues. Circulation revenues result
from the sale of magazines to consumers through subscriptions and by single copy sales on newsstands in print
form, primarily at major retailers and grocery/drug stores, and in digital form on tablets and other media devices. In
the short term, subscription revenues, which accounted for 80 percent of circulation revenues, are less susceptible to
economic changes because subscriptions are generally sold for terms of one to three years. The same economic
factors that affect advertising revenues also can influence consumers’ response to subscription offers and result in
lower revenues and/or higher costs to maintain subscriber levels over time. Subscription revenues per copy and
related costs can also vary significantly by subscription source. Some subscription sources generate lower revenues
than other sources, but have proportionately lower related costs. A key factor in our subscription success is our
industry-leading database. It contains an abundance of attributes on 175 million individuals, which represents 80
percent of U.S. millennial women. The size and depth of our database is a key to our circulation model and allows
more precise consumer targeting. Newsstand revenues are more volatile than subscription revenues and can vary
significantly month to month depending on economic and other factors.
The remaining 21 percent of national media revenues came from a variety of activities that included the sale of
customer relationship marketing products and services; magazine subscriptions sales for third-party publishers;
brand licensing; digital lead generation; and other e-commerce sales, product sales, and related activities. These
other revenues are generally affected by changes in the level of economic activity in the U.S. including changes in
the level of gross domestic product, consumer spending, unemployment rates, and interest rates.
National media’s major expense categories are employee compensation costs and production and delivery of
publications and promotional mailings. Employee compensation, which includes benefits expense, represented 40
percent of national media’s operating expenses in fiscal 2018. Compensation expense is affected by salary and
incentive levels, the number of employees, the costs of our various employee benefit plans, and other factors.
Paper, postage, and production charges represented 21 percent of the segment’s operating expenses in fiscal 2018.
The price of paper can vary significantly on the basis of worldwide demand and supply for paper in general and for
specific types of paper used by Meredith. The printing of our publications is outsourced. We typically have multi-
29
year contracts for the printing of our magazines, a practice which reduces price fluctuations over the contract term.
Postal rates are dependent on the operating efficiency of the USPS and on legislative mandates imposed on the
USPS. The USPS adjusted rates most recently in January 2018, which resulted in an increase of less than two
percent. While we expect postage prices to increase again in January 2019, an ongoing legislatively mandated
review of the existing law by the Postal Regulatory Commission could potentially result in adjustments to the
current rate setting regime. Meredith continues to work independently and with others to encourage and help the
USPS find and implement efficiencies to contain rate increases.
The remaining 39 percent of fiscal 2018 national media expenses included costs for magazine newsstand
distribution, advertising and promotional efforts, and overhead costs for facilities and technology services.
LOCAL MEDIA
Local media derives the majority of its revenues—54 percent in fiscal 2018—from the sale of advertising both over
the air and on our stations’ digital and mobile media properties. The remainder comes from television
retransmission consent fees, television production, and other services.
The stations sell advertising to both local/regional and national accounts. Political advertising revenues are cyclical
in that they are significantly greater during biennial election campaigns (which take place primarily in odd-
numbered fiscal years) than at other times. We generate additional revenues from digital activities and programs
focused on local interests such as community events and college and professional sports.
Changes in advertising revenues tend to correlate with changes in the level of economic activity in the U.S. and in
the local markets in which we operate stations, and with the cyclical changes in political advertising discussed
previously. Programming content, audience share, audience demographics, and the advertising rates charged
relative to other available advertising opportunities also affect advertising revenues. On occasion, unusual events
necessitate uninterrupted television coverage and will adversely affect spot advertising revenues.
Local media’s major expense categories are employee compensation and programming fees paid to the networks.
Employee compensation represented 35 percent of local media’s operating expenses in fiscal 2018, and is affected
by the same factors noted for national media. Programming fees paid to the networks represented 27 percent of this
segment’s fiscal 2018 expenses. Sales and promotional activities, costs to produce local news programming, and
general overhead costs for facilities and technical resources accounted for most of the remaining 38 percent of local
media’s fiscal 2018 operating expenses.
FISCAL 2018 FINANCIAL OVERVIEW
• On January 31, 2018, Meredith completed its acquisition of Time. Time's operations have been included in
the Company's financial statements since February 1, 2018, the first day of operations for the combined
company. The acquisition was financed through the issuance of a combination of debt and preferred stock.
•
In May 2018, Meredith completed its sale of MXM.
• National media revenues increased 44 percent compared to the prior year primarily due to the addition of
Time revenues partially offset by declines in the revenues of our magazine operations. National media
operating profit decreased 33 percent primarily due to an increase in severance and related benefit costs of
$46.7 million, an increase in the impairment of trademarks of $17.4 million, and a decrease in the reduction
of the fair value adjustment related to previously accrued contingent consideration payable of $15.0 million.
•
Local media revenues increased 10 percent as compared to the prior year primarily due to increased
retransmission revenues and the addition of Time revenues. These increases were partially offset by a
decrease in political advertising revenues, as expected in a non-political year. Operating profit declined 12
30
percent primarily due to declines in higher-margin political advertising revenues due to the cyclical nature
of political advertising partially offset by increased retransmission consent related profit.
• Unallocated corporate expenses increased $135.3 million primarily due to charges for transaction and
integration related costs of $58.3 million and severance and related benefit costs of $52.5 million.
• Diluted earnings per common share from continuing operations decreased 57 percent to $1.79 from $4.16
in the prior year primarily due to the acquisition, disposition, and restructuring related activities costs
resulting in lower income from operations partially offset by the Company's deferred tax assets, deferred
tax liabilities, and tax reserves being remeasured as a result of the Tax Reform Act.
•
In fiscal 2018, we generated $151.4 million in operating cash flows, invested $2.8 billion in acquisitions of
and investments in businesses, and invested $53.2 million in capital improvements.
RESULTS OF OPERATIONS
2018
Years ended June 30,
(In millions except per share data)
Total revenues................................................................... $ 2,247.4
Costs and expenses ...........................................................
(1,952.3)
Acquisition, disposition, and restructuring related
activities............................................................................
Impairment of goodwill and other long-lived assets ........
Total operating expenses ..................................................
Income from continuing operations.................................. $
Net earnings from continuing operations ......................... $
Net earnings......................................................................
Diluted earnings per common share from continuing
operations .........................................................................
Diluted earnings per common share .................................
n/m - Not meaningful
(173.4)
(22.7)
(2,148.4)
99.0
114.0
99.4
1.79
1.47
Change
2017
Change
2016
31 % $ 1,713.3
41 % (1,387.7)
4 % $ 1,649.6
0 % (1,393.9)
(10.3)
n/m
267 %
(6.2)
53 % (1,404.2)
309.1
(68)% $
188.9
(40)% $
(47)%
188.9
36.4
n/m
(96)%
(161.5)
(8)% (1,519.0)
130.6
33.9
33.9
137 % $
457 % $
457 %
(57)%
(65)%
4.16
4.16
455 %
455 %
0.75
0.75
OVERVIEW
Following are brief descriptions of recent acquisitions and a discussion of the trends and uncertainties that affected
our businesses. Following the Overview is an analysis of the results of operations for the local media and national
media segments and an analysis of our consolidated results of operations for the last three fiscal years.
Acquisitions
Meredith acquired all of the outstanding shares of Time on January 31, 2018. In December 2016, Meredith acquired
the assets of a digital lead-generation company in the home services market and completed, in April 2017, the
acquisition of Peachtree TV, an independent station in Atlanta, Georgia, which was operated by Meredith prior to its
acquisition. The operating results of these acquisitions have been included in the Company’s consolidated operating
results since their respective acquisition dates. See Note 2 to the consolidated financial statements for further
information.
31
Trends and Uncertainties
Advertising revenues accounted for 50 percent of total revenues in fiscal 2018. Advertising demand is the
Company’s key uncertainty, and its fluctuation from period to period can have a material effect on operating results.
Demand for political advertising in the Company’s local media segment is cyclical in nature, generally following
the biennial cycle of election campaigns with peaks occurring in our odd fiscal years (e.g., fiscal 2015, fiscal 2017)
and particularly in our second fiscal quarter of those fiscal years. Other significant uncertainties that can affect
operating results include fluctuations in the cost of paper, postage rates, and over time, television programming
rights. The Company’s cash flows from operating activities, our primary source of liquidity, is adversely affected
when the advertising market is weak or when costs rise. One of our priorities is to manage our businesses prudently
during expanding and contracting economic cycles to maximize shareholder return over time. To manage the
uncertainties inherent in our businesses, we prepare monthly internal forecasts of anticipated results of operations
and monitor the economic indicators mentioned in the Executive Overview. See Item 1A-Risk Factors in this
Form 10-K for further discussion.
NATIONAL MEDIA
The following discussion reviews operating results for our national media segment, which includes magazine
publishing, digital and customer relationship marketing, digital and mobile media, affinity marketing, brand
licensing, database-related activities, and other related operations. The national media segment contributed 69
percent of Meredith’s consolidated revenues in fiscal 2018 and 34 percent of the combined operating profit from
national media and local media operations in fiscal 2018. These results reflect the acquired Time business since the
date of the acquisition.
National media revenues increased 44 percent in fiscal 2018. Operating costs and expenses increased 51 percent.
Acquisition, disposition, and restructuring related activities of $46.5 million and impairment charges of $22.7
million were recorded in the national media segment. Due to these increased expenses, operating profit declined 33
percent in fiscal 2018.
Fiscal 2017 national media revenues declined 2 percent. Costs and expenses decreased 3 percent and an impairment
charge of $5.3 million was recorded. Fiscal 2017 segment operating profit was $146.5 million.
National media operating results for the last three fiscal years were as follows:
Years ended June 30,
2018 Change
2017 Change
2016
(In millions)
Revenues.............................................................................. $ 1,555.8
Operating expenses
44 % $ 1,083.2
(2)% $ 1,101.2
Costs and expenses ............................................................
Acquisition, disposition, and restructuring related
activities.............................................................................
Impairment of goodwill and other long-lived assets .........
Total operating expenses ...................................................
Operating profit (loss).......................................................... $
(1,389.1)
51 %
(922.8)
(3)%
(954.4)
(46.5)
(22.7)
(1,458.3)
97.5
440 %
328 %
56 %
(33)% $
(8.6)
(5.3)
(936.7)
146.5
(8.7)
(2)%
(97)%
(155.8)
(16)% (1,118.9)
(17.7)
n/m $
n/m - Not meaningful
32
National Media Revenues
The table below presents the components of revenues for the last three fiscal years.
Years ended June 30,
(In millions)
Revenues
2018
Change
2017
Change
2016
Advertising ............................................................. $
Circulation ..............................................................
Other .......................................................................
746.3
489.3
320.2
Total revenues ............................................................. $ 1,555.8
43% $
520.1
52%
322.0
241.1
33%
44% $ 1,083.2
(1)% $
527.1
(2)%
328.6
245.5
(2)%
(2)% $ 1,101.2
Advertising Revenue
The following table presents advertising page information according to Publishers Information Bureau for our
major subscription-based magazines for the last three fiscal years:
Years ended June 30,
Better Homes & Gardens ............................................
People 2........................................................................
Family Circle...............................................................
Parents.........................................................................
Shape / Fitness.............................................................
Martha Stewart Living.................................................
InStyle 2........................................................................
Rachael Ray Every Day...............................................
Traditional Home ........................................................
Midwest Living ............................................................
Southern Living 2 .........................................................
EatingWell ...................................................................
Allrecipes.....................................................................
Real Simple 2 ...............................................................
Travel + Leisure 2........................................................
Wood ............................................................................
Entertainment Weekly 2................................................
Health 2........................................................................
Cooking Light 2............................................................
FamilyFun ...................................................................
Food & Wine 2 .............................................................
Coastal Living 2 ...........................................................
Fit Pregnancy and Baby / American Baby 1................
¹ Included as a feature in Parents, rather than published as a standalone title, effective February 2018.
2 Since date of acquisition in fiscal 2018
Change
(6)%
100 %
(11)%
(9)%
(20)%
(6)%
100 %
(18)%
(16)%
(13)%
100 %
3 %
(3)%
100 %
100 %
5 %
100 %
100 %
100 %
(42)%
100 %
100 %
(60)%
2018
979
962
847
803
708
567
550
423
371
362
325
314
289
286
273
217
216
212
208
183
182
117
91
2017
1,043
—
954
885
885
602
—
519
440
416
—
305
299
—
—
206
—
—
—
317
—
—
229
Change
3 %
—
1 %
(11)%
(2)%
7 %
—
6 %
(11)%
12 %
—
7 %
19 %
—
—
14 %
—
—
—
(24)%
—
—
(10)%
2016
1,009
—
948
994
905
565
—
491
496
373
—
286
252
—
—
181
—
—
—
418
—
—
254
National media advertising revenues increased 43 percent in fiscal 2018 primarily due to the addition of advertising
revenues of Time. These increases were partially offset by low-double digit declines in magazine advertising
revenues and advertising pages as compared to the prior year. Demand was weaker for the majority of the core
advertising categories.
33
National media advertising revenues decreased 1 percent in fiscal 2017. Digital advertising revenues grew 21
percent in fiscal 2017. Growth in digital advertising was primarily led by native, engagement-based video, and
programmatic advertising, along with shopper marketing revenues. Magazine advertising revenues declined 9
percent and advertising pages decreased 5 percent. Approximately 20 percent of the magazine ad revenues decline
and 55 percent of the ad pages decline were due to the closing of MORE magazine. Approximately 50 percent of the
remaining decline in magazine ad revenues and most of the remaining decline in ad pages were due to softness in
the parenting titles. Among our core advertising categories, the food and beverage, direct response, and beauty
categories showed strength while demand was weaker for the finance, prescription drug, and non-prescription drug
categories.
Circulation Revenues
Magazine circulation revenues increased 52 percent in fiscal 2018 primarily due to the addition of Time circulation
revenues of $190.2 million partially offset by a reduction in subscription revenues of $16.4 million and a decline in
newsstand revenues of $6.5 million.
Magazine circulation revenues declined 2 percent in fiscal 2017. Subscription revenues were down in the low-single
digits on a percentage basis. Newsstand revenues declined 1 percent. Subscription and newsstand revenues were
affected by the closure of MORE magazine. Newsstand revenues benefited from the strong performance of The
Magnolia Journal, Meredith’s new quarterly lifestyle magazine based on Joanna and Chip Gaines’ popular
Magnolia brand. The subscription revenues decline was also partially due to ongoing efforts to source a larger
percentage of magazine subscribers from Meredith’s own database instead of external agent sources. This direct-to-
publisher strategy increases circulation profit but lowers revenues over time. The direct-to-publisher strategy is
expected to adversely affect subscription revenues for the foreseeable future.
Other Revenues
Other revenues increased 33 percent in fiscal 2018 primarily due to the addition of other revenues from Time of
$126.1 million partially offset by declines of $27.2 million in MXM revenues, primarily due to the sale of MXM in
the fourth quarter of fiscal 2018 and of $10.0 million due to the sale of a majority stake in Charleston Tennis at the
beginning fiscal 2018.
Other revenues decreased 2 percent in fiscal 2017 primarily due to a decline in MXM revenues of $6.7 million due
to certain client losses and project scope reductions and a decrease in brand licensing revenues of $2.4 million.
These declines were partially offset by increases in e-commerce revenues of $8.2 million.
National Media Costs and Expenses
National media costs and expenses increased 51 percent in fiscal 2018 primarily due to the addition of Time
operating costs and expenses of $566.6 million and a decrease in the reduction of the fair value adjustment related
to previously accrued contingent consideration payable of $15.0 million. These increases were partially offset by
declines in circulation expenses of $22.7 million, decreases in employee compensation costs of $18.4 million,
declines in paper expense of $11.6 million, lower postage and other delivery costs of $10.0 million, and a decrease
in performance-based incentive accruals of $7.1 million.
Fiscal 2017 national media expenses decreased 3 percent. An increase in the reduction of previously accrued
contingent consideration payable of $15.3 million and a decline in paper expense of $10.7 million contributed to the
decline. Paper expenses declined due to both a decrease in the volume of paper used and a mid-single digit decline
in average paper prices as compared to fiscal 2016. Also contributing to the decline was decreases in postage and
other delivery costs of $8.2 million, lower employee compensation costs of $7.6 million, decreases in processing
costs of $6.1 million, and declines in non-payroll related editorial costs of $4.9 million. The closing of MORE
magazine contributed to the expense declines. These declines were partially offset by higher magazine and digital-
related production costs of $14.5 million and increases in circulation expenses of $5.8 million.
34
National Media Acquisition, Disposition, and Restructuring Related Activities
National media acquisition, disposition, and restructuring related activities increased from $8.6 million in fiscal
2017 to $46.5 million in fiscal 2018 primarily due to an increase in the severance and benefits related accrual of
$46.7 million partially offset by a gain related to the sale of MXM of $11.5 million, which was recorded as a
reduction in expenses.
Fiscal 2017 national media acquisition, disposition, and restructuring related activities decreased 2 percent as the
severance and benefits related accrual was approximately the same in both years.
National Media Impairment of Goodwill and Other Long-Lived Assets
The national media segment recorded pre-tax, non-cash impairment charges of $22.7 million in fiscal 2018 and $5.3
million in fiscal 2017 related to trademarks.
National Media Operating Profit (Loss)
National media operating profit decreased to $97.5 million in fiscal 2018. The decline was primarily due to
increased severance and benefits related costs of $46.7 million, an increase in the impairment of trademarks of
$17.4 million, and a decrease in the reduction of the fair value adjustment related to previously accrued contingent
consideration payable of $15.0 million partially offset by an increase in operating income from Time of $14.4
million.
Fiscal 2017 national media operating profit grew to $146.5 million. The reduction in impairment charges of $150.5
million and an increase in the reduction of previously accrued contingent consideration payable of $15.3 million in
fiscal 2017 contributed to the increase. In addition, growth in the operating profit of our digital operations of $21.6
million partially offset declines in the operating profit of our magazine operations of $14.4 million and MXM’s
operations of $7.2 million.
LOCAL MEDIA
The following discussion reviews operating results for the Company’s local media segment, which consists of 17
television stations and related digital and mobile media. With the acquisition of Time, the local media segment
acquired MNI, which generates revenue through the sale of geographic and demographic-targeted digital and print
advertising programs sold to third parties. The local media segment contributed 31 percent of Meredith’s
consolidated revenues in fiscal 2018 and 66 percent of the combined operating profit from local media and national
media operations in fiscal 2018.
Local media revenues increased 10 percent in fiscal 2018 as a slight increase in non-political revenues and a strong
increase in other revenues more than offset a $46.4 million reduction in political advertising, which is expected in a
non-political year. Local media operating profit declined 12 percent in fiscal 2018.
Fiscal 2017 local media revenues rose 15 percent and operating profit grew 36 percent primarily reflecting
increased cyclical political advertising and higher retransmission consent revenues.
35
Local media operating results for the last three fiscal years were as follows:
Years ended June 30,
2018
Change
2017
Change
2016
(In millions)
Revenues.................................................................................... $ 693.1
Operating expenses
10 % $ 630.1
15 % $ 548.4
Costs and expenses..................................................................
Acquisition, disposition, and restructuring related activities ..
(503.1)
(0.9)
Operating profit ......................................................................... $ 189.1
22 % (413.5)
(47)%
(1.7)
(12)% $ 214.9
(206)%
6 % (391.5)
1.6
36 % $ 158.5
Local Media Revenues
The table below presents the components of revenues for the last three fiscal years.
Years ended June 30,
(In millions)
Revenues
2018
Change
2017
Change
2016
Non-political advertising......................................... $
Political advertising.................................................
Other........................................................................
Total revenues .............................................................. $
354.2
16.1
322.8
693.1
1 % $
(74)%
49 %
10 % $
351.5
62.5
216.1
630.1
(6)% $
381 %
34 %
15 % $
374.1
13.0
161.3
548.4
Local media revenues increased 10 percent in fiscal 2018. Political advertising revenues totaled $16.1 million in the
current fiscal year compared to $62.5 million in the prior year. Fluctuations in political advertising revenues at our
stations and throughout the broadcasting industry generally follow the biennial cycle of election campaigns. Non-
political advertising revenues increased 1 percent in fiscal 2018. Local non-political advertising revenues increased
1 percent in fiscal 2018 while national non-political advertising revenues increased 2 percent in fiscal 2018. Digital
advertising revenues, a component of non-political advertising revenues, decreased 4 percent in fiscal 2018.
Local media revenues increased 15 percent in fiscal 2017. The increase was primarily due to higher political
advertising related to the November 2016 elections. Political advertising revenues totaled $62.5 million in fiscal
2017 compared with $13.0 million in fiscal 2016. Non-political advertising revenues decreased 6 percent in fiscal
2017, due primarily to political advertising displacement, the Super Bowl moving to FOX from CBS, and the
Summer Olympic games on NBC. Local non-political advertising revenues declined 5 percent and national non-
political advertising revenues decreased 11 percent in fiscal 2017. Digital advertising increased 17 percent as
compared to fiscal 2016 as a series of growth strategies continued to drive higher advertising rates across the station
group.
Other revenues increased 49 percent in fiscal 2018 primarily due to increased retransmission consent fees of $63.2
million and the addition of revenues from Time of $41.0 million. Other revenues increased 34 percent in fiscal 2017
primarily due to increased retransmission consent fees.
Local Media Operating Expenses
Local media operating expenses increased 21 percent in fiscal 2018 primarily due to higher programming fees paid
to affiliated networks of $53.8 million and the addition of operating expenses from Time of $37.8 million. Local
media operating expenses increased 6 percent in fiscal 2017 primarily due to higher programming fees paid to
affiliated networks.
36
Local Media Operating Profit
Local media operating profit decreased 12 percent in fiscal 2018 primarily due to lower political advertising
revenues due to the cyclical nature of political advertising partially offset by increased retransmission-related profit.
Fiscal 2017 local media operating profit increased 36 percent compared to fiscal 2016 primarily reflecting the
increase in higher-margin political advertising and retransmission consent revenues.
UNALLOCATED CORPORATE EXPENSES
Unallocated corporate expenses are general corporate overhead expenses not attributable to the operating groups.
These expenses for the last three fiscal years were as follows:
Years ended June 30,
(In millions)
Costs and expenses................................................................... $ 61.5
126.1
Acquisition, disposition, and restructuring related activities ...
Impairment of goodwill and other long-lived assets................
—
Unallocated corporate expenses............................................... $ 187.6
n/m - Not meaningful
2018
Change
2017
Change
2016
20% $ 51.4
—
n/m
0.9
n/m
259% $ 52.3
7 % $ 48.1
(43.5)
n/m
(84)%
5.6
413 % $ 10.2
Unallocated corporate expenses of $187.6 million increased $135.3 million in fiscal 2018, as a result of transaction
and integration related costs of $58.3 million, severance and related benefit costs of $52.5 million, $9.2 million for
the cash settlement of certain of Time’s outstanding share-based equity awards recognized as expense, $5.2 million
increase in professional services fees, and $3.5 million in accelerated share-based compensation expense related to
involuntary terminations.
Unallocated corporate expenses increased $42.1 million to $52.3 million in fiscal 2017 from $10.2 million in fiscal
2016 primarily due to the receipt of $60.0 million in January 2016 related to the termination of a merger agreement
with Media General, Inc. entered into in September 2015 which reduced operating expenses, partially offset by
$16.5 million of merger-related expenses.
CONSOLIDATED
Consolidated Operating Expenses
Consolidated operating expenses for the last three fiscal years were as follows:
Years ended June 30,
2018
Change
2017
Change
2016
(In millions)
Production, distribution, and editorial.................................. $
Selling, general, and administrative .....................................
Acquisition, disposition, and restructuring related
173.4
activities ...............................................................................
129.0
Depreciation and amortization .............................................
Impairment of goodwill and other long-lived assets............
22.7
Operating expenses .............................................................. $ 2,148.4
860.6
962.7
n/m - Not meaningful
43% $
32%
603.0
730.9
(1)% $
1 %
611.3
723.5
10.3
n/m
53.8
139%
267%
6.2
53% $ 1,404.2
(36.4)
n/m
59.1
(9)%
(96)%
161.5
(8)% $ 1,519.0
37
Production, Distribution, and Editorial Costs
Production, distribution, and editorial costs increased 43 percent in fiscal 2018 as compared to fiscal 2017 primarily
due to the addition of production, distribution, and editorial costs of Time of $238.4 million and increases in
programming fees paid to affiliated networks of $53.8 million. These increases were partially offset by declines in
paper costs of $11.6 million, lower postage and other delivery costs of $10.0 million, and a decrease in payroll and
related costs of $6.5 million.
Production, distribution, and editorial costs decreased 1 percent in fiscal 2017 as declines in paper expense of $10.7
million, employee compensation costs of $9.3 million, postage and other delivery costs of $8.2 million, processing
costs of $6.1 million, non-payroll related editorial costs of $4.9 million, and MXM production costs of $4.4 million
more than offset increases in programming fees paid to affiliated networks of $21.1 million and higher magazine
and digital-related production costs of $14.5 million.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased 32 percent in fiscal 2018 primarily due to the addition of
selling, general, and administrative expenses of Time of $289.1 million and a decrease in the reduction of the fair
value adjustment related to previously accrued contingent consideration payable of $15.0 million partially offset by
a reduction in circulation expenses of $22.7 million, declines in payroll and related costs of $11.7 million, a
decrease in non-payroll related costs in MXM of $6.3 million, and lower performance-based incentive accruals of
$6.1 million.
Fiscal 2017 selling, general, and administrative expenses increased 1 percent as increases in MXM selling and
general expenses of $8.4 million, higher circulation expenses of $5.8 million, increased employee compensation
costs of $4.7 million, higher performance-based incentive accruals of $3.9 million, and the write-down of
investments of $3.6 million, were partially offset by an increase in the reduction of previously accrued contingent
consideration payable of $15.3 million.
Acquisition, disposition, and restructuring related activities
Fiscal 2018 acquisition, disposition, and restructuring related activities expense primarily includes $104.9 million
of severance and related benefit costs and $59.9 million of transaction costs related to investment banking, legal,
accounting, and other professional fees and expenses plus integration costs primarily for business advisors and
software and systems implementations and modifications, and a credit for a gain on the sale of MXM of $11.5
million. Fiscal 2017 acquisition, disposition, and restructuring related activities expense primarily represented
severance and related benefit costs.
Depreciation and Amortization
Fiscal 2018 depreciation and amortization expense increased to $129.0 million from $53.8 million in fiscal 2017
primarily due to the addition of Time’s depreciation and amortization expense.
Depreciation and amortization expense declined 9 percent in fiscal 2017 primarily due to decreases in depreciation
in our local media segment.
Impairment of Goodwill and Other Long-lived Assets
The impairment of long-lived assets recorded in fiscal 2018 of $22.7 million and in fiscal 2017 of $6.2 million
related primarily to pre-tax, non-cash impairments of trademarks in the national media segment.
Operating Expenses
Employee compensation including benefits was the largest component of our operating expenses in fiscal 2018.
Employee compensation represented 38 percent of total operating expenses in fiscal 2018, compared to 34 percent
in fiscal 2017, and 31 percent in fiscal 2016. National media paper, production, and postage combined expense was
the second largest component of our operating costs in fiscal 2018, representing 14 percent of the total. These
expenses were 18 percent of total operating expense in both fiscal 2017 and fiscal 2016.
38
Income from Operations
Income from operations decreased 68 percent in fiscal 2018 primarily due to an increase in acquisition, disposition,
and restructuring related activities of $163.1 million, lower operating profit in our local media operations of $25.8
million, an increase of $17.4 million in impairment of trademarks, and a decrease in the reduction of the fair value
adjustment related to previously accrued contingent consideration payable of $15.0 million.
Income from operations increased 137 percent in fiscal 2017 primarily due to the non-cash impairment charges of
$161.5 million recorded in fiscal 2016. Absent the impairment charges, income from operations increased 6 percent
in fiscal 2017 primarily due to higher operating profits in our local media segment of $56.4 million, a reduction of
$16.5 million in merger-related expenses, and an increase in the reduction of previously accrued contingent
consideration payable of $15.3 million partially offset by the absence of the $60.0 million received by the Company
in fiscal 2016 in conjunction with the termination of the merger agreement.
Non-operating Expense, net
Fiscal 2018 non-operating expense relates primarily to the write-down of an equity method investment to fair value
as the investee was sold to an unrelated third-party in April 2018.
Interest Expense, net
Net interest expense was $96.9 million in fiscal 2018, $18.8 million in fiscal 2017, and $20.4 million in fiscal 2016.
Average long-term debt outstanding was $1.9 billion in fiscal 2018, $678.1 million in fiscal 2017, and $766.4
million in fiscal 2016. The Company’s approximate weighted average interest rate was 5.1 percent in fiscal 2018,
2.8 percent in fiscal 2017, and 2.7 percent in fiscal 2016. The weighted average interest rates include the effects of
derivative financial instruments until their termination in January 2018.
On January 31, 2018, in connection with the Company's acquisition of Time, the Company repaid and terminated
Meredith's existing indebtedness. In connection with the payoff of this indebtedness, Meredith recognized a loss on
extinguishment of debt of $2.2 million. In conjunction with the repayment of its debt, the Company also settled the
associated interest rate swap agreements and recognized a gain on the settlement of $1.6 million.
On January 31, 2018, Meredith entered into a credit agreement that provided for $1.8 billion aggregate principal
amount of senior secured term loan (Term Loan B). The Term Loan B bears interest at the London Interbank
Offered Rate (LIBOR) plus 3.00 percent. The interest rate on the Term Loan B was 5.09 percent at June 30, 2018.
Also on January 31, 2018, Meredith issued $1.4 billion aggregate principal amount of the 2026 Senior Notes that
carry an interest rate of 6.875 percent. In connection with the issuance of this indebtedness, the Company incurred
$14.7 million of deferred financing costs and $56.0 million of discount costs that are being amortized into interest
expense over the lives of the respective facilities.
In addition, the Company incurred $17.5 million in fees that were recorded in interest expense related to an
undrawn bridge loan commitment fee.
Income Taxes
For fiscal 2018, Meredith recorded a tax benefit of $123.6 million primarily reflecting the remeasurement of the
Company’s deferred tax assets and liabilities and a reduced tax rate as a result of the Tax Reform Act. This tax
benefit was offset in part by non-deductible expenses including transaction costs. In fiscal 2017, the Company
recorded income tax expense of $101.4 million for an effective rate of 34.9 percent. The fiscal 2017 effective tax
rate was primarily impacted by a credit to income taxes of $6.7 million related to the resolution of certain federal
and state tax matters recorded in fiscal 2017. The Company’s effective tax rate was 69.2 percent in fiscal 2016. In
fiscal 2016, the Company recorded an impairment of goodwill of $116.9 million, of which approximately 20
percent was deductible for income tax purposes.
39
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the
Tax Reform Act. The Tax Reform Act makes broad and complex changes to the U.S. tax code that affected our
fiscal year ended June 30, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate, (2)
bonus depreciation that allows for full expensing of qualified property and (3) limitations on the deductibility of
interest expense and certain executive compensation and (4) a one-time transition tax on certain unrepatriated
earnings of foreign subsidiaries. The Tax Reform Act reduced the federal corporate tax rate to 21 percent in the
fiscal year ended June 30, 2018. Pursuant to Section 15 of the Internal Revenue Code, the Company applied a
blended corporate tax rate of 28 percent for fiscal 2018, which was based on the applicable tax rates before and
after the Tax Reform Act and the number of days in the year.
The SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the tax
effects of the Tax Reform Act. SAB 118 provides a measurement period that should not extend beyond one year
from the Tax Reform Act enactment date for companies to complete the accounting under Accounting Standards
Codification (ASC) 740 – Income Taxes (ASC 740). In accordance with SAB 118, a company must reflect the
income tax effects of those aspects of the Tax Reform Act for which the accounting under ASC 740 is complete. To
the extent that a company’s accounting for certain income tax effects of the Tax Reform Act is incomplete but it can
determine a reasonable estimate, it must record a provisional estimate in the consolidated financial statements. If a
company cannot determine a provisional estimate to be included in the consolidated financial statements, it should
continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the
enactment of the Tax Reform Act.
In connection with our initial analysis of the impact of the Tax Reform Act, we recorded a provisional net tax
benefit of $133.0 million in the quarter ended December 31, 2017. This net benefit primarily consists of a benefit
for the corporate rate reduction. As the Company was projecting a net operating loss for the fiscal year ended
June 30, 2018, deferred tax assets and liabilities expected to be recognized in the fiscal year ended June 30, 2018,
were remeasured using the 21 percent U.S. corporate tax rate. Due to our limited international operations, the
impact of the transitional tax was immaterial.
During the quarter ended June 30, 2018, we did not make any provisional adjustment to the amount. We continue to
assess new guidance issued by tax authorities as well as our ability to change certain methods of accounting and
expect to finalize our accounting for the provision of the Tax Reform Act within the measurement period.
Effective July 1, 2017, the Company adopted new accounting guidance related to share-based compensation. Under
this new guidance, excess tax benefits and deficiencies are to be recognized as a discrete component of the income
tax provision in the period they occur and not as an adjustment to additional paid-in capital. As such, the Company
recognized an excess tax benefit of $2.2 million as a credit to income tax expense in the Consolidated Statements of
Earnings in fiscal 2018.
Earnings from Continuing Operations and Earnings per Share from Continuing Operations
Fiscal 2018 earnings from continuing operations were $114.0 million ($1.79 per diluted share) compared to
earnings from continuing operations of $188.9 million ($4.16 per diluted share) for fiscal 2017. The decline in
earnings from continuing operations is primarily due to the decline in income from operations as discussed above
partially offset by the tax benefit recorded due to the Tax Reform Act.
Earnings from continuing operations were $188.9 million ($4.16 per diluted share) in fiscal 2017, up 457 percent
from $33.9 million ($0.75 per diluted share) in fiscal 2016, primarily due to the increase in political advertising and
retransmission consent revenues, the reduction in previously accrued contingent consideration payable, and the
credit to income taxes. Fiscal 2016 earnings per share was impacted by the goodwill and trademark impairments
recorded by the Company.
40
Loss from Discontinued Operations, Net of Income Taxes
The loss from discontinued operations represents the operating results of Golf Magazine until the date it was sold
and the associated loss on its sale; the operating results of TIUK until the date it was sold and the associated loss on
its sale; and the operations of the properties that are held-for-sale as of June 30, 2018, including TIME, Sports
Illustrated, Fortune, and Money brands and the Company’s investment in Viant Technology Inc.
The revenues and expenses for each of these properties have, along with associated income taxes, been removed
from continuing operations and reclassified into a single line item on the Consolidated Statements of Earnings titled
loss from discontinued operations, net of income taxes for the five-month period from the time we acquired the
properties through June 30, 2018, as follows:
Year ended June 30, 2018
(In millions except per share data)
Revenues ................................................................................ $
Costs and expenses ................................................................
Interest expense......................................................................
Loss on disposal.....................................................................
Loss before income taxes.......................................................
Income taxes ..........................................................................
Loss from discontinued operations, net of income taxes....... $
Loss per common share from discontinued operations
262.0
(250.6)
(12.2)
(12.3)
(13.1)
(1.5)
(14.6)
Basic ................................................................................ $
Diluted .............................................................................
(0.32)
(0.32)
Net Earnings and Earnings per Share
Net earnings were $99.4 million ($1.47 per diluted share) in fiscal 2018, down 47 percent from $188.9 million
($4.16 per diluted share) in fiscal 2017. The decrease in net earnings was primarily due to the decline in income
from operations and the loss from discontinued operations partially offset by the tax benefit recorded due to the Tax
Reform Act. While basic average common shares outstanding increased slightly, diluted average shares outstanding
decreased slightly.
Net earnings were $188.9 million ($4.16 per diluted share) in fiscal 2017, up 457 percent from $33.9 million ($0.75
per diluted share) in fiscal 2016, primarily due to the increase in political advertising and retransmission consent
revenues, the reduction in previously accrued contingent consideration payable, and the credit to income taxes.
Fiscal 2016 earnings per share was impacted by the goodwill and trademark impairments recorded by the Company.
Both average basic and diluted shares outstanding increased slightly.
41
LIQUIDITY AND CAPITAL RESOURCES
Years ended June 30,
2018
2017
2016
(In millions)
Cash flows from operating activities ............... $
Cash flows from investing activities ................
Cash flows from financing activities ...............
Effect of exchange rate changes.......................
Change in cash held-for-sale............................
Net cash flows .................................................. $
Cash and cash equivalents................................ $
Total long-term debt.........................................
Shareholders’ equity.........................................
Debt to total capitalization ...............................
151.4
(2,617.4)
2,916.7
(4.1)
(31.3)
415.3
437.6
3,195.5
1,097.5
74%
$
$
$
219.3
(117.7)
(104.3)
—
—
(2.7)
22.3
700.6
996.0
41%
$
$
$
226.6
(31.4)
(193.0)
—
—
2.2
25.0
695.0
889.0
44%
OVERVIEW
Meredith’s primary source of liquidity is cash generated by operating activities. Debt financing is typically used for
significant acquisitions. Our core businesses—magazine advertising and television broadcasting—have been strong
cash generators. Despite the introduction of many new technologies, we believe these businesses will continue to
have strong market appeal for the foreseeable future. As is true in any business, changes in the level of demand for
magazine and television advertising or our other products as well as changes in costs can have a significant effect
on operating results and cash flows.
Historically, Meredith has been able to absorb normal business downturns without significant increases in debt and
management believes the Company will continue to do so. We expect cash on hand, internally generated cash flow,
and available credit from financing agreements will provide adequate funds for operating and recurring cash needs
(e.g., working capital, capital expenditures, debt repayments, and cash dividends) into the foreseeable future. At
June 30, 2018, we had up to $346.6 million available under our revolving credit facility. While there are no
guarantees that we will be able to replace current credit agreements when they expire, we expect to be able to do so.
SOURCES AND USES OF CASH
Cash and cash equivalents increased $415.3 million in fiscal 2018; they decreased $2.7 million in fiscal 2017, and
increased $2.2 million in fiscal 2016. Over the three-year period, net cash provided by operating activities was used
for acquisitions, debt repayments, dividends, stock repurchases, and capital investments.
Operating Activities
The largest single component of operating cash inflows is cash received from advertising customers. Advertising
accounted for 50 percent or more of total revenues in each of the past three fiscal years. Other sources of operating
cash inflows include cash received from magazine circulation sales and other revenue-generating transactions such
as retransmission consent fees, customer relationship marketing, brand licensing, and product sales. Operating cash
outflows include payments to vendors and employees and payments of interest and income taxes. Our most
significant vendor payments are for production and delivery of publications and promotional mailings, network
programming fees, employee benefits (including pension plans), broadcast programming rights, and other services
and supplies.
42
Cash provided by operating activities totaled $151.4 million in fiscal 2018 compared with $219.3 million in fiscal
2017. The decrease in cash provided by operating activities is primarily due to the transaction, integration, and
severance-related costs associated with the Time acquisition.
Cash provided by operating activities totaled $219.3 million in fiscal 2017 compared with $226.6 million in fiscal
2016. The decrease in cash provided by operating activities is primarily due to the receipt, in fiscal 2016, of a net
$43.5 million reflecting a merger termination fee less merger-related expenses. This one-time receipt of cash is
included in cash provided by operating activities in fiscal 2016.
Changes in the Company’s cash contributions to qualified defined benefit pension plans can have a significant
effect on cash provided by operations. We did not make a pension contribution to our domestic plans in fiscal 2018.
In connection with the sale of TIUK, we contributed £60 million to the IPC Plan defined benefit pension plan in the
U.K. During fiscal 2017, we contributed $10.0 million to the defined benefit pension plans, and during fiscal 2016
we made a $5.0 million contribution. We do not anticipate a required contribution for the domestic pension plans in
fiscal 2019; however, we are required to make a £0.9 million per month contribution to the IPC Plan. In the event
that on November 25, 2021, the IPC Plan has a funding deficit valuing its liabilities with a gilts plus 50 basis point
(bps) discount rate, the Company, as the sponsor of the IPC Plan, will make a contribution equal to that funding
deficit. In the event that on November 25, 2025, the IPC Plan has a funding deficit valuing its liabilities with a gilts
flat discount rate, the Company will make a contribution equal to 50 percent of that funding deficit. In the event that
on November 25, 2026, the IPC Plan has a funding deficit valuing its liabilities with a gilts flat discount rate, the
Company will make a contribution equal to 50 percent of that funding deficit. In the event that on November 25,
2027, the IPC Plan has a funding deficit valuing its liabilities with a gilts flat discount rate, the Company will make
a contribution equal to that funding deficit. Contributions shall cease to be payable from the date that the IPC Plan
is confirmed to be fully funded.
Investing Activities
Investing cash inflows generally include proceeds from the sale of assets or a business. Investing cash outflows
generally include payments for the acquisition of new businesses; investments; and additions to property, plant, and
equipment.
Net cash used in investing activities rose to $2.6 billion in fiscal 2018 from $117.7 million in fiscal 2017 primarily
due to the acquisition of Time partially offset by cash received from the sales of TIUK and MXM.
Net cash used in investing activities increased to $117.7 million in fiscal 2017 compared to $31.4 million in fiscal
2016 primarily due to the increased cash outflows for acquisitions of businesses in fiscal 2017.
Financing Activities
Financing cash inflows generally include borrowings under debt agreements and proceeds from the exercise of
common stock options issued under share-based compensation plans. Financing cash outflows generally include the
repayment of long-term debt, repurchases of Company stock, the payment of dividends, and the payment of
acquisition-related contingent consideration.
Net cash provided by financing activities totaled $2.9 billion in fiscal 2018, compared with cash used in financing
activities of $104.3 million in the prior year. The change in cash flows from financing activities is primarily due to
$2.5 billion of net debt issuances in fiscal 2018 compared to net debt issuances of $5.6 million in fiscal 2017. In
addition, $631.0 million of preferred equity was issued in the current year. The new debt and preferred equity
issuances were related to the acquisition of Time.
Net cash used in financing activities totaled $104.3 million in fiscal 2017, compared with $193.0 million in fiscal
2016. The change in cash flows from financing activities is primarily due to a net $5.6 million of debt issuances in
fiscal 2017 compared to a net $100.0 million of debt payments in fiscal 2016.
43
Long-term Debt
At June 30, 2018, total long-term debt outstanding was $3.2 billion consisting of $1.8 billion under a variable-rate
term loan and $1.4 billion in fixed-rate unsecured senior notes.
The variable-rate credit facility includes the Term Loan B with $1.8 billion of aggregate principal and a five-year
senior secured revolving credit facility of $350.0 million, of which $175.0 million is available for the issuance of
letters of credit and $35.0 million of swingline loans. On June 30, 2018 there were no borrowings outstanding under
the revolving credit facility. There were $3.4 million of standby letters of credit issued under the revolving credit
facility resulting in availability of $346.6 million at June 30, 2018. The Term Loan B matures in 2025 and amortizes
at 1.0 percent per annum in equal quarterly installments until the final maturity date, at which time the remaining
principal and interest are due and payable. The interest rate under the Term Loan B is based on LIBOR plus 3.0
percent. The Term Loan B bore interest at a rate of 5.09 percent at June 30, 2018. The revolving credit facility has a
commitment fee ranging from 0.375 percent to 0.500 percent of the unused commitment. All interest rates and
commitment fees associated with this variable-rate revolving credit facility are derived from a leverage-based
pricing grid. The 2026 Senior Notes have an aggregate principal amount of $1.4 billion maturing in 2026 with an
interest rate of 6.875 percent per annum. Total outstanding principal is due at the final maturity date.
Prior to the acquisition of Time on January 31, 2018, we had $674.4 million of debt outstanding, which was repaid
with the proceeds from the new credit agreements.
Our new credit agreements, entered into on January 31, 2018, include a financial covenant that is applicable based
on a certain utilization level of the revolving credit line. Failure to comply with this covenant could result in the
debt becoming payable on demand. The covenant did not apply at June 30, 2018, as we were below the specified
utilization level on the revolving credit line.
Preferred Stock
On January 31, 2018, in exchange for a preferred equity investment of $650.0 million, Meredith issued 650,000
shares of perpetual convertible redeemable non-voting Series A preferred stock (Series A preferred stock) as well as
detachable warrants to purchase up to 1,625,000 shares of Meredith's common stock with an exercise price of $1.00
per share and options to purchase up to 875,000 shares of Meredith's common stock with an exercise price of
$70.50 per share.
The Series A preferred stock is non-callable during the first three years after issuance provided that Meredith may,
at its option, subject to the terms of the preferred stock, redeem all or a portion of the Series A preferred stock in
cash during such three-year period, if Meredith declares as a dividend and pays a redemption premium in cash as
provided in the Statement of Designation of Series A preferred stock at an amount equal to 6 percent of the Accrued
Stated Value of the Series A preferred stock as of the redemption date plus an amount, if any, equal to dividends to
the third year present valued at a discount rate based on U.S. Treasury notes with a maturity closest to the date that
is three years after the issuance date, plus 50 basis points. The Accrued Stated Value is an amount equal to: (i) the
Stated Value ($1,000 multiplied by the number of shares of Series A preferred stock outstanding); plus (ii) any
accrued and unpaid dividends thereof (including any accumulated dividends).
From and after the third anniversary of the issuance date of the Series A preferred stock, Meredith may redeem all
or a portion of the Series A preferred stock upon payment in cash for an amount equal to (i) the Call Premium
(defined below), plus (ii) the Accrued Stated Value of the Series A preferred stock as of the redemption date.
The Call Premium is an amount equal to the difference of (a) (i) the Accrued Stated Value of the Series A preferred
stock as of the redemption date, multiplied by (ii) (A) if such redemption occurs during the fourth or fifth year after
issuance, 106 percent, (B) if such redemption occurs during the sixth year after issuance, 103 percent, and (C) if
such redemption occurs after the sixth year after issuance, 100 percent, minus (b) the Accrued Stated Value as of the
redemption date.
44
In connection with any partial redemption by Meredith, Meredith may not redeem Series A preferred stock in an
amount less than $50 million of the Accrued Stated Value of the Series A preferred stock nor effect any redemption
resulting in less than $100 million of the Accrued Stated Value of the Series A preferred stock remaining
outstanding.
From and after the seventh anniversary of the issuance date, the holders of the Series A preferred stock may elect to
convert some or all of the Series A preferred stock into Meredith common stock at a ratio based on its Accrued
Stated Value divided by the volume weighted average price of Meredith common stock for the 30 trading days
immediately preceding the written notice of conversion.
Contractual Obligations
The following table summarizes our principal contractual obligations as of June 30, 2018:
Contractual obligations
Payments Due by Period
Total
Less than
1 Year
1-3
Years
4-5
Years
After 5
Years
(In millions)
Total long-term debt.................................................... $ 3,195.5
Debt interest 1 ..............................................................
Series A preferred stock dividends 2 ...........................
1,352.9
369.0
Broadcast rights and network programming...............
Contingent consideration 3 ..........................................
Operating leases ..........................................................
Purchase obligations and other ...................................
Benefit plans ...............................................................
Liability to Time Warner 4...........................................
366.3
25.5
824.3
114.9
401.2
26.0
$
18.0
$
36.0
$
36.0
$ 3,105.5
187.4
55.3
162.1
24.6
72.7
60.6
43.7
26.0
371.9
118.1
196.5
—
134.0
40.6
86.6
—
368.3
153.9
7.7
0.9
126.3
13.1
69.7
—
425.3
41.7
—
—
491.3
0.6
201.2
—
Total contractual cash obligations
$ 6,675.6
$
650.4
$
983.7
$
775.9
$ 4,265.6
1 Debt interest represents semi-annual interest payments due on fixed-rate unsecured senior notes and estimated interest payments on
variable-rate term loan outstanding at June 30, 2018. Interest payments on variable-rate debt is estimated using the interest rate as of
June 30, 2018.
2
Series A preferred stock dividends represent quarterly payments based on a fixed interest rate in years one through three and on
variable rates estimated using LIBOR as of June 30, 2018, in years four through six. While it is not certain when the Series A preferred
stock will be settled, the table assumes a conversion at the beginning of year seven.
3 While it is not certain if or when these contingent acquisition payments will be made, we have included the payments in the table based
on our best estimates of the amounts and dates when the contingencies may be resolved.
4 Represents certain obligations Time had with Time Warner at the time Time spun-off as a separate public company. These liabilities
primarily relate to a Tax Matters Agreement in which the Company will be required to indemnify Time Warner for open tax positions at
the date of the spin-off. While it is not certain when these payments will be made, we have included the payments in the table based on
our best estimates of the amounts and dates when the indemnifications may be resolved.
Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at
June 30, 2018, the Company is unable to make reasonably reliable estimates of the period of cash settlement.
Therefore, $58.9 million of unrecognized tax benefits have been excluded from the contractual obligations table
above. See Note 8 to the Consolidated Financial Statements for further discussion of income taxes.
Purchase obligations represent legally binding agreements to purchase goods and services that specify all significant
terms. Outstanding purchase orders, which represent authorizations to purchase goods and services but are not
legally binding, are not included in purchase obligations. We believe current cash balances, cash generated by future
operating activities, and cash available under current credit agreements will be sufficient to meet our contractual
45
cash obligations and other operating cash requirements for the foreseeable future. Projections of future cash flows
are, however, subject to substantial uncertainty as discussed throughout MD&A and particularly in Item 1A-Risk
Factors beginning on page 12. Debt agreements may be renewed or refinanced if we determine it is advantageous
to do so. We also have commitments in the form of standby letters of credit totaling $3.4 million that expire within
one year.
Share Repurchase Program
We have maintained a program of Company share repurchases for 30 years. In fiscal 2018, we spent $31.1 million
to repurchase an aggregate of 520,000 shares of Meredith common and class B stock at then current market prices.
We spent $53.3 million to repurchase an aggregate of 941,000 shares in fiscal 2017 and $31.1 million to repurchase
an aggregate of 651,000 shares in fiscal 2016.
We expect to continue repurchasing shares from time to time subject to market conditions. In May 2014, the Board
of Directors authorized the repurchase of up to $100.0 million in additional shares of the Company’s stock through
public and private transactions.
As of June 30, 2018, $56.1 million remained available under the current authorization for future repurchases. See
Item 5-Issuer Purchases of Equity Securities of this Form 10-K for detailed information on share repurchases during
the quarter ended June 30, 2018. Pursuant to the terms of our new debt facilities and our Series A preferred stock,
we may be subject to certain limitations with respect to our ability to conduct share repurchases, as further
discussed under Part I, Item 1A, Risk Factors.
Dividends
Meredith has paid quarterly dividends continuously since 1947 and we have increased our dividend annually for 25
consecutive years. The last increase occurred in January 2018 when the Board of Directors approved the quarterly
dividend of 54.50 cents per share effective with the dividend payable in March 2018. Given the current number of
shares outstanding, the increase will result in additional dividend payments of approximately $4.6 million annually.
In addition, we issued detachable warrants in our third fiscal quarter, which receive dividends at the rate of a
common stockholder. At our current dividend rate, we will incur $3.5 million of annual dividend payments in
conjunction with these detachable warrants.
Dividend payments on common and class B stock totaled $98.6 million, or $2.130 per share, in fiscal 2018
compared with $91.9 million, or $2.030 per share, in fiscal 2017, and $86.1 million, or $1.905 per share, in fiscal
2016.
Our newly designated Series A preferred stock accrues an annual dividend at either (a) to the extent paid in cash, in
an amount equal to the Cash Dividend Annual Rate (as set forth in the table below), multiplied by the Stated Value
(equal to the number of shares of Series A preferred stock outstanding multiplied by $1,000) or (b) if dividends are
not declared and paid in cash, we will deliver additional shares of Series A preferred stock, in kind, by issuing a
number of shares equal to (i) the Accrued Dividend Annual Rate (as set forth in the table below), multiplied by the
Stated Value for all outstanding shares of Series A preferred stock, divided by (ii) $1,000.
Year
Years 1 through 3
Year 4
Year 5
Year 6 through redemption
Accrued Dividend
Cash Dividend
Annual Rate
Annual Rate
9.0%
8.5%
LIBOR plus 900 bps
LIBOR plus 850 bps
LIBOR plus 950 bps
LIBOR plus 1000 bps
LIBOR plus 1050 bps LIBOR plus 1100 bps
Dividend payments on the Series A preferred stock totaled $22.9 million in fiscal 2018.
46
Pursuant to the terms of our new debt facilities and Series A preferred stock, we may be subject to certain
limitations with respect to our ability to pay dividends on our stock, as further discussed under Part I, Item 1A, Risk
Factors. However, we do not expect that such limitations will affect our ability to continue to pay regular dividends
consistent with past practice.
Capital Expenditures
Spending for property, plant, and equipment totaled $53.2 million in fiscal 2018, $34.8 million in fiscal 2017, and
$25.0 million in fiscal 2016. Spending for all fiscal years primarily related to assets acquired in the normal course
of business. In fiscal 2018, the Company incurred $6.3 million related to the spectrum repack required by the FCC.
We anticipate spending an additional $11.5 million in fiscal 2019 to complete the conversion. We expect that the
reimbursement from the FCC’s special fund will cover the majority of our capital costs and expense related to the
repacking. However, we cannot currently predict the effect of the repacking, whether the fund will be sufficient to
reimburse all of our expenses related to the repacking, the timing of reimbursement or any spectrum-related FCC
regulatory action. We have no material commitments for future capital expenditures. We expect funds for future
capital expenditures to come from operating activities or, if necessary, borrowings under credit agreements.
CRITICAL ACCOUNTING POLICIES
Meredith’s consolidated financial statements are prepared in accordance with U.S. GAAP. Our significant
accounting policies are summarized in Note 1 to the consolidated financial statements. The preparation of our
consolidated financial statements requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Some of these estimates and assumptions
are inherently difficult to make and subjective in nature. We base our estimates on historical experience, recent
trends, our expectations for future performance, and other assumptions as appropriate. We reevaluate our estimates
on an ongoing basis; actual results, however, may vary from these estimates.
The following are the accounting policies that management believes are most critical to the preparation of our
consolidated financial statements and require management’s most difficult, subjective, or complex judgments. In
addition, there are other items within the consolidated financial statements that require estimation but are not
deemed to be critical accounting policies. Changes in the estimates used in these and other items could have a
material impact on the consolidated financial statements.
BUSINESS COMBINATIONS
Accounting for acquisitions during fiscal 2018 required us to recognize assets acquired and liabilities assumed at
their acquisition date fair values. Estimates of fair value require judgments about future events and uncertainties. In
determining fair value, Meredith utilizes various forms of the income, cost, and market approaches depending on
the asset or liability being fair valued. The estimation of fair value requires significant judgments related to future
net cash flows, discount rates reflecting the risk inherent in each cash flow stream, market comparables, and other
factors. Inputs were generally determined by considering historical data, supplemented by current and anticipated
market conditions, strategy, and growth rates. The estimates and assumptions used to determine the preliminary
estimated fair value assigned to each class of assets and liabilities, as well as asset lives, may have a material impact
to the Company's consolidated financial statements, and were based upon assumptions believed to be reasonable but
that are inherently uncertain. Third-party valuation specialists have been engaged to assist in the valuation of certain
of these assets and liabilities. Goodwill as of the acquisition date is measured as the excess of consideration
transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. During
the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets
acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement
period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any
47
subsequent adjustments will be recorded to our Consolidated Statements of Earnings. See Note 2 for a discussion of
the acquisition of Time.
GOODWILL AND INTANGIBLE ASSETS
The Company has a significant amount of goodwill and indefinite-lived intangible assets that are reviewed at least
annually for impairment. At June 30, 2018, goodwill and intangible assets totaled $3.9 billion, or 58 percent of
Meredith’s total assets, with $3.0 billion in the national media segment and $907.1 million in the local media
segment. The impairment analysis of these assets is considered critical because of their significance to the Company
and our national media and local media segments.
Management is required to evaluate goodwill and intangible assets with indefinite lives for impairment on an annual
basis or when events occur or circumstances change that would indicate the carrying value exceeds the fair value. In
reviewing goodwill for impairment, the Company may first assess qualitative factors to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount.
Fair value is determined using a discounted cash flow model which requires us to estimate the future cash flows
expected to be generated by the reporting unit or to result from the use of the assets. These estimates depend upon
assumptions about future revenues (including projections of overall market growth and our share of market),
estimated costs, and appropriate discount rates where applicable. Our assumptions are based on historical data,
various internal estimates, and a variety of external sources and are consistent with the assumptions used in both our
short-term financial forecasts and long-term strategic plans. Depending on the assumptions and estimates used,
future cash flow projections can vary within a range of outcomes. Changes in key assumptions about the national
media and local media businesses and their prospects or changes in market conditions could result in an impairment
charge. See Item 1A.-Risk Factors for other factors which could affect our assumptions.
At May 31, 2018, the date that management last performed our annual review of impairment of goodwill and
intangible assets, management performed a quantitative goodwill impairment test for the national media reporting
unit, which involves comparing the fair value of the reporting unit to its carrying value. For other indefinite-lived
intangible assets, fair values were calculated using the discounted cash flow model. For the goodwill impairment
test, the Company selected equal weighting of the discounted cash flow and guideline public company methods as
the valuation approach to estimate fair value. The fair value of the national media reporting unit exceeded its net
assets by 15 percent. Holding other assumptions constant, a 100-basis point increase in the discount rate would
result in an estimated fair value that exceeds net assets by 9 percent. Holding other assumptions constant, a 100-
basis point decrease in the terminal growth rate would result in an estimated fair value that exceeds net assets by 10
percent. The impairment analysis assumed only 50 percent of the synergies expected to be realized from the
acquisition of Time. Had 100 percent of the synergies been incorporated into the future cash flows in the
impairment analysis, the fair value would have exceeded carrying value by 43 percent.
Qualitative impairment analyses were performed for the local media excluding MNI and the MNI reporting units
and resulted in no indications of impairment.
During fiscal 2018, Meredith made the strategic decision to no longer publish Fit Pregnancy and Baby magazine as
a standalone title, rather to include it as a feature within Parents magazine and to discontinue FamilyFun as a
subscription title and instead publish it only for sale on the newsstand. These decisions were determined to be
triggering events requiring Meredith to evaluate the trademarks within our Parents Network for impairment. As a
result of those analyses, the Company recorded pre-tax non-cash impairment charges of $22.7 million related to
those trademarks. In fiscal 2017, the Company recorded a pre-tax non-cash impairment charge of $5.3 million to
write-off the national media segment’s Mywedding trademark. See Note 5 to the consolidated financial statements
for additional information.
48
PENSION AND POSTRETIREMENT PLANS
Meredith has U.S. noncontributory pension plans covering substantially all employees who were employed by
Meredith prior to the Time acquisition. In connection with the acquisition, the Company assumed the obligations
under Time’s various international pension plans including plans in the U.K., Netherlands, and Germany. These
domestic and international plans include qualified (funded) plans as well as nonqualified (unfunded) plans. These
plans provide participating employees with retirement benefits in accordance with benefit provision formulas. The
nonqualified plans provide retirement benefits only to certain highly compensated employees. Meredith also
sponsors defined healthcare and life insurance plans that provide benefits to eligible retirees.
The accounting for pension and postretirement plans is actuarially based and includes assumptions regarding
expected returns on plan assets, discount rates, and the rate of increase in healthcare costs. We consider the
accounting for pension and postretirement plans critical to Meredith and both of our segments because of the
number of significant judgments required in accounting for the plans. More information on our assumptions and our
methodology in arriving at these assumptions can be found in Note 11 to the consolidated financial statements.
Changes in key assumptions could materially affect the associated assets, liabilities, and benefit expenses.
Depending on the assumptions and estimates used, these balances could vary within a range of outcomes. We
monitor trends in the marketplace and rely on guidance from employee benefit specialists to arrive at reasonable
estimates. These estimates are reviewed annually and updated as needed. Nevertheless, the estimates are subjective
and may vary from actual results.
Meredith will use a long-term rate of return on plan assets of 8.0 percent for the U.S. pension plans, the same for the
U.S. pension plans as used in fiscal 2018, and 4.9 percent for the international pension plans in developing fiscal
2019 pension costs. The fiscal 2018 rates were based on various factors that include but are not limited to the plans’
asset allocations, a review of historical capital market performance, historical plan performance, current market
factors such as inflation and interest rates, and a forecast of expected future asset returns. The U.S. pension plan
assets earned 9.0 percent in fiscal 2018 and 15.4 in fiscal 2017, while the international pension plans lost 0.8
percent for the five-month period ended June 30, 2018. If we had decreased our expected long-term rate of return
on plan assets by 0.5 percent in fiscal 2018, our pension expense would have increased by $0.7 million for the U.S.
pension plans and $1.8 million for the international pension plans.
Meredith will use a weighted average discount rate of 4.03 percent in developing the fiscal 2019 pension costs for
the U.S pension plans, up from a rate of 3.41 percent used in fiscal 2018, and 2.57 percent for the international
pension plans. If we had decreased the discount rate by 0.5 percent in fiscal 2018, our pension expense would have
increased by $0.1 million for the U.S. pension plans and decreased by $1.0 million for the international pension
plans.
Assumed rates of increase in healthcare cost levels have a significant effect on postretirement benefit costs. A one-
percentage-point increase in the assumed healthcare cost trend rate would have resulted in an increase of $0.4
million in the postretirement benefit obligation at June 30, 2018, and no increase in the aggregate service and
interest cost components of fiscal 2018 expense.
INCOME TAXES
Income taxes are recorded for the amount of taxes payable for the current year and include deferred tax assets and
liabilities for the effect of temporary differences between the financial and tax basis of recorded assets and liabilities
using enacted tax rates. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
As a result of the Tax Reform Act, signed into law on December 22, 2017, a blended federal rate of 28 percent
applies retroactively to the beginning of Meredith’s fiscal 2018. Net deferred tax liabilities totaled $432.5 million,
or 8 percent of total liabilities, at June 30, 2018.
49
We consider accounting for income taxes critical to our operations because management is required to make
significant subjective judgments in developing our provision for income taxes, including the determination of
deferred tax assets and liabilities, any valuation allowances that may be required against deferred tax assets, and
reserves for uncertain tax positions.
The Company operates in numerous taxing jurisdictions and is subject to audit in each of these jurisdictions. These
audits can involve complex issues that tend to require an extended period of time to resolve and may eventually
result in an increase or decrease to amounts previously paid to the taxing jurisdictions. Any such audits are not
expected to have a material effect on the Company’s consolidated financial statements.
ACCOUNTING AND REPORTING DEVELOPMENTS
ADOPTED OR PENDING ACCOUNTING PRONOUNCEMENTS
There were no new accounting pronouncements issued or effective during the fiscal year which have had or are
expected to have a material impact on the consolidated financial statements in fiscal 2018. In fiscal 2019 we expect
that the adoption of the new revenue recognition standard will have a material impact on our consolidated financial
statement disclosures. See Note 1 to the accompanying consolidated financial statements for information related to
our adoption of new accounting standards and for information on our anticipated adoption of recently issued
accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Meredith is exposed to certain market risks as a result of our use of financial instruments, in particular the potential
market value loss arising from adverse changes in interest rates. The Company does not utilize financial instruments
for trading purposes and does not hold any derivative financial instruments that could expose the Company to
significant market risk. There have been no significant changes in the market risk exposures since June 30, 2017.
Interest Rates
We generally manage our risk associated with interest rate movements through the use of a combination of variable
and fixed-rate debt. At June 30, 2018, Meredith had $1.4 billion in fixed-rate long-term debt outstanding. There
were no earnings or liquidity risks associated with the Company’s fixed-rate debt. The fair value of the fixed-rate
debt varies with fluctuations in interest rates. A 10 percent decrease in interest rates would have changed the fair
value of the fixed-rate debt to $1.5 billion from $1.4 billion at June 30, 2018.
At June 30, 2018, $1.8 billion of our debt was variable-rate debt. The Company is subject to earnings and liquidity
risks for changes in the interest rate on this debt. A 10 percent increase in LIBOR would increase annual interest
expense by $3.8 million.
Broadcast Rights Payable
The Company enters into broadcast rights contracts for our television stations. As a rule, these contracts are on a
market-by-market basis and subject to terms and conditions of the seller of the broadcast rights. These procured
rights generally are sold to the highest bidder in each market, and the process is very competitive. There are no
earnings or liquidity risks associated with broadcast rights payable. Fair values are determined using discounted
cash flows. At June 30, 2018, a 10 percent decrease in interest rates would have resulted in a $0.4 million increase
in the fair value of the available broadcast rights payable and the unavailable broadcast rights commitments.
50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Page
Report of Management ........................................................................................................................................
53
Report of Independent Registered Public Accounting Firm................................................................................
54
Financial Statements
Consolidated Balance Sheets as of June 30, 2018 and 2017.........................................................................
Consolidated Statements of Earnings for the Years Ended June 30, 2018, 2017, and 2016 .........................
Consolidated Statements of Comprehensive Income for the Years Ended June 30, 2018, 2017, and 2016 .
Consolidated Statements of Shareholders' Equity for the Years Ended June 30, 2018, 2017, and 2016......
Consolidated Statements of Cash Flows for the Years Ended June 30, 2018, 2017, and 2016 ....................
Notes to Consolidated Financial Statements.................................................................................................
56
58
59
60
61
63
Financial Statement Schedule
Schedule II-Valuation and Qualifying Accounts...........................................................................................
112
Five-Year Financial History with Selected Financial Data..................................................................................
113
51
(This page has been left blank intentionally.)
52
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Meredith Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Meredith Corporation and subsidiaries (the
Company) as of June 30, 2018 and 2017, the related consolidated statements of earnings, comprehensive income,
shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2018, and the
related notes and financial statement schedule II-Valuation and Qualifying Accounts (collectively, the consolidated
financial statements). We also have audited the Company’s internal control over financial reporting as of June 30,
2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of June 30, 2018 and 2017, and the results of its operations and its cash flows
for each of the years in the three-year period ended June 30, 2018, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of June 30, 2018, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired Time Inc. and subsidiaries (Time) during fiscal 2018, and management excluded from its
assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2018,
Time’s internal control over financial reporting associated with 59 percent of the Company’s total assets and 28
percent of revenue included in the consolidated financial statements as of and for the year ended June 30, 2018. Our
audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control
over financial reporting of Time.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Controls Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide a reasonable basis for our opinions.
54
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
We or our predecessor firms have served as the Company’s auditor since 1948.
Des Moines, Iowa
August 31, 2018
55
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
Assets
(In millions)
Current assets
Cash and cash equivalents .......................................................................................... $
June 30,
Accounts receivable
(net of allowances of $14.4 in 2018 and $8.0 in 2017)..........................................
Inventories...................................................................................................................
Current portion of subscription acquisition costs .......................................................
Current portion of broadcast rights .............................................................................
Assets held-for-sale.....................................................................................................
Other current assets.....................................................................................................
Total current assets ...................................................................................................
Property, plant, and equipment
Land ............................................................................................................................
Buildings and improvements ......................................................................................
Machinery and equipment...........................................................................................
Leasehold improvements ............................................................................................
Capitalized software....................................................................................................
Construction in progress .............................................................................................
Total property, plant, and equipment ..........................................................................
Less accumulated depreciation ...................................................................................
Net property, plant, and equipment ........................................................................
Subscription acquisition costs.....................................................................................
Broadcast rights ..........................................................................................................
Other assets .................................................................................................................
Intangible assets, net ...................................................................................................
Goodwill .....................................................................................................................
Total assets ................................................................................................................. $
See accompanying Notes to Consolidated Financial Statements
2018
2017
437.6
$
22.3
542.0
44.2
118.1
9.8
713.1
114.3
1,979.1
24.6
153.5
359.8
177.4
125.9
20.2
861.4
(377.6)
483.8
61.1
18.9
263.3
2,005.2
1,915.8
6,727.2
289.1
21.9
145.0
7.8
—
19.3
505.4
24.7
153.7
316.6
14.3
38.5
1.7
549.5
(359.7)
189.8
79.7
21.8
69.6
955.9
907.5
2,729.7
$
56
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
Liabilities, Redeemable Convertible Preferred Stock, and Shareholders’
Equity
June 30,
2018
2017
(In millions except per share data)
Current liabilities
Current portion of long-term debt............................................................................... $
Current portion of long-term broadcast rights payable...............................................
Accounts payable ........................................................................................................
Accrued expenses
Compensation and benefits.....................................................................................
Distribution expenses .............................................................................................
Other taxes and expenses........................................................................................
Total accrued expenses ...........................................................................................
Current portion of unearned revenues.........................................................................
Liabilities associated with assets held-for-sale ...........................................................
Total current liabilities .............................................................................................
Long-term debt............................................................................................................
Long-term broadcast rights payable............................................................................
Unearned revenues......................................................................................................
Deferred income taxes ................................................................................................
Other noncurrent liabilities .........................................................................................
Total liabilities ...........................................................................................................
17.7
8.9
194.7
122.3
10.0
277.9
410.2
360.4
198.4
1,190.3
3,117.9
20.8
124.1
437.0
217.0
5,107.1
Redeemable, convertible Series A preferred stock, par value $1 per share, $1,000
per share liquidation preference, authorized 2.5 shares, issued 0.7 shares .................
522.6
Shareholders’ equity
Series preferred stock, par value $1 per share
Authorized 2.5 shares; none issued ........................................................................
—
Common stock, par value $1 per share
$
62.5
9.2
66.6
69.0
5.3
28.1
102.4
219.0
—
459.7
635.7
22.5
106.5
384.7
124.6
1,733.7
—
—
Authorized 80.0 shares; issued and outstanding 39.8 shares in 2018 (excluding
24.8 treasury shares) and 39.4 shares in 2017 (excluding 24.8 treasury shares)....
39.8
39.4
Class B stock, par value $1 per share, convertible to common stock
Authorized 15.0 shares; issued and outstanding 5.1 shares in 2018 and 5.1
shares in 2017 .........................................................................................................
Additional paid-in capital ...........................................................................................
Retained earnings........................................................................................................
Accumulated other comprehensive loss......................................................................
Total shareholders’ equity ........................................................................................
Total liabilities, redeemable convertible preferred stock, and shareholders’
equity .......................................................................................................................... $
5.1
199.5
889.8
(36.7)
1,097.5
5.1
54.8
915.7
(19.0)
996.0
6,727.2
$
2,729.7
See accompanying Notes to Consolidated Financial Statements
57
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings
Years ended June 30,
(In millions except per share data)
Revenues
Advertising .................................................................................................... $
Circulation .....................................................................................................
All other.........................................................................................................
Total revenues.........................................................................................
Operating expenses
Production, distribution, and editorial ...........................................................
Selling, general, and administrative ..............................................................
Acquisition, disposition, and restructuring related activities ........................
Depreciation and amortization ......................................................................
Impairment of goodwill and other long-lived assets .....................................
Total operating expenses ........................................................................
Income from operations ..............................................................................
Non-operating expenses, net .........................................................................
Interest expense, net ......................................................................................
Earnings (loss) from continuing operations before income taxes .................
Income tax benefit (expense).........................................................................
Earnings from continuing operations ........................................................
Loss from discontinued operations, net of income taxes ..............................
Net earnings ................................................................................................. $
Earnings attributable to common shareholders ............................................. $
66.4
Basic earnings per share attributable to common shareholders
Continuing operations ................................................................................... $
Discontinued operations ................................................................................
Basic earnings per share ............................................................................. $
Basic average common shares outstanding ...................................................
Diluted earnings per share attributable to common shareholders
Continuing operations ................................................................................... $
Discontinued operations ................................................................................
Diluted earnings per share.......................................................................... $
Diluted average shares outstanding ...............................................................
1.80
(0.32)
1.48
44.9
1.79
(0.32)
1.47
45.2
2018
2017
2016
1,116.6
$
489.3
641.5
2,247.4
$
934.1
322.0
457.2
914.2
328.6
406.8
1,713.3
1,649.6
860.6
962.7
173.4
129.0
22.7
603.0
730.9
10.3
53.8
6.2
611.3
723.5
(36.4)
59.1
161.5
2,148.4
1,404.2
1,519.0
99.0
(11.7)
(96.9)
(9.6)
123.6
114.0
(14.6)
99.4
309.1
—
(18.8)
290.3
(101.4)
188.9
—
188.9
188.9
4.23
—
4.23
44.6
4.16
—
4.16
45.4
$
$
$
$
$
$
$
$
$
$
$
$
130.6
—
(20.4)
110.2
(76.3)
33.9
—
33.9
33.9
0.76
—
0.76
44.6
0.75
—
0.75
45.4
Dividends paid per share ............................................................................... $
2.130
$
2.030
$
1.905
See accompanying Notes to Consolidated Financial Statements
58
Meredith Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Years ended June 30,
2018
2017
2016
(In millions)
Net earnings .......................................................................................... $
Other comprehensive income (loss), net of income taxes
Pension and other postretirement benefit plans activity .......................
Unrealized foreign currency translation loss, net..................................
Unrealized gain (loss) on interest rate swaps ........................................
Other comprehensive income (loss), net of income taxes...............
Comprehensive income ....................................................................... $
99.4
$
188.9
$
33.9
(0.8)
(12.9)
—
(13.7)
85.7
$
5.3
—
4.2
9.5
198.4
$
(12.8)
—
(3.1)
(15.9)
18.0
See accompanying Notes to Consolidated Financial Statements.
59
Meredith Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(In millions except per share data)
Balance at June 30, 2015 .................................... $
Net earnings ..........................................................
Other comprehensive loss, net of tax....................
Stock issued under various incentive plans, net
of forfeitures .........................................................
Purchases of Company stock ................................
Share-based compensation....................................
Conversion of class B to common stock...............
Dividends paid, $1.905 per share
Common stock...............................................
Class B stock .................................................
Tax benefit from incentive plans ..........................
Balance at June 30, 2016 ....................................
Net earnings ..........................................................
Other comprehensive income, net of tax ..............
Stock issued under various incentive plans, net
of forfeitures .........................................................
Purchases of Company stock ................................
Share-based compensation....................................
Conversion of class B to common stock...............
Dividends paid, $2.030 per share
Common stock...............................................
Class B stock .................................................
Tax benefit from incentive plans ..........................
Balance at June 30, 2017 ....................................
Net earnings ..........................................................
Other comprehensive loss, net of tax....................
Stock issued under various incentive plans, net
of forfeitures .........................................................
Issuance of replacement Time share-based
compensation awards............................................
Purchases of Company stock ................................
Share-based compensation....................................
Issuance of warrants and options
Dividends paid, $2.130 per share
Common stock .................................................
Class B stock....................................................
Series A preferred stock ...................................
Accretion of Series A preferred stock...................
Cumulative effect adjustment for adoption of
Accounting Standards Update 2016-09 ................
Reclassification adjustment for adoption of
Accounting Standards Update 2018-02 ................
Common
Stock - $1
par value
Class B
Stock - $1
par value
Additional
Paid-in
Capital
37.7 $
—
—
6.9 $
—
—
Retained
Earnings
870.9
33.9
—
49.0 $
—
—
Accumulated
Other
Comprehensive
Income (Loss)
$
(12.6) $
—
(15.9)
0.6
(0.7)
—
1.7
—
—
—
39.3
—
—
0.9
(0.9)
—
0.1
—
—
—
39.4
—
—
0.9
—
(0.5)
—
—
—
—
—
—
—
—
—
—
—
(1.7)
—
—
—
5.2
—
—
—
—
—
(0.1)
—
—
—
5.1
—
—
—
—
—
—
—
—
—
—
—
—
—
20.3
(30.4)
12.8
—
—
—
2.6
54.3
—
—
37.1
(52.4)
12.8
—
—
—
3.0
54.8
—
—
18.4
9.8
(30.6)
30.4
115.6
—
—
—
—
1.1
—
—
—
—
—
(72.9)
(13.2)
—
818.7
188.9
—
—
—
—
—
(81.4)
(10.5)
—
915.7
99.4
—
—
—
—
—
—
(87.8)
(10.8)
(22.9)
(7.2)
(0.6)
4.0
—
—
—
—
—
—
—
(28.5)
—
9.5
—
—
—
—
—
—
—
(19.0)
—
(13.7)
—
—
—
—
—
—
—
—
—
—
(4.0)
Total
951.9
33.9
(15.9)
20.9
(31.1)
12.8
—
(72.9)
(13.2)
2.6
889.0
188.9
9.5
38.0
(53.3)
12.8
—
(81.4)
(10.5)
3.0
996.0
99.4
(13.7)
19.3
9.8
(31.1)
30.4
115.6
(87.8)
(10.8)
(22.9)
(7.2)
0.5
—
Balance at June 30, 2018 .................................... $
39.8 $
5.1 $
199.5 $
889.8
$
(36.7) $ 1,097.5
See accompanying Notes to Consolidated Financial Statements.
60
Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended June 30,
(In millions)
Cash flows from operating activities
Net earnings............................................................................................................... $
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation .......................................................................................................
Amortization.......................................................................................................
Share-based compensation .................................................................................
Amortization of original issue discount and debt issuance costs .......................
Deferred income taxes........................................................................................
Amortization of broadcast rights........................................................................
Payments for broadcast rights ............................................................................
Write-down of impaired assets...........................................................................
Fair value adjustment to contingent consideration.............................................
Excess tax benefits from share-based payments ................................................
Other operating activities, net
Changes in assets and liabilities, net of acquisitions/dispositions
Accounts receivable ....................................................................................
Inventories...................................................................................................
Other current assets .....................................................................................
Subscription acquisition costs .....................................................................
Other assets .................................................................................................
Assets and liabilities held-for-sale ..............................................................
Accounts payable ........................................................................................
Accrued expenses and other liabilities........................................................
Unearned subscription revenues .................................................................
Other noncurrent liabilities .........................................................................
Net cash provided by operating activities .................................................................
Cash flows from investing activities
Acquisitions of and investments in businesses, net of cash acquired ................
Proceeds from disposition of assets, net of cash sold ........................................
Additions to property, plant, and equipment ......................................................
Other...................................................................................................................
Net cash used in investing activities..........................................................................
Cash flows from financing activities
Proceeds from issuance of long-term debt .........................................................
Repayments of long-term debt ...........................................................................
Issued preferred stock, warrants, and options proceeds, net of issuance costs ..
Dividends paid....................................................................................................
Purchases of Company stock..............................................................................
Proceeds from common stock issued .................................................................
Excess tax benefits from share-based payments ................................................
Payment of acquisition related contingent consideration...................................
Debt acquisition costs.........................................................................................
Net cash provided by (used in) financing activities ..................................................
Effect of exchange rate changes on cash and cash equivalents.................................
Change in cash held-for-sale .....................................................................................
Net increase (decrease) in cash and cash equivalents ...............................................
Cash and cash equivalents at beginning of year ........................................................
Cash and cash equivalents at end of year.............................................................. $
See accompanying Notes to Consolidated Financial Statements
2018
2017
2016
99.4
$
188.9
$
33.9
54.2
74.8
30.4
6.1
(116.5)
19.2
(20.7)
23.0
(4.8)
—
13.1
12.6
(0.3)
(4.3)
45.4
(101.1)
28.4
(13.0)
73.6
(68.7)
0.6
151.4
(2,786.5)
219.2
(53.2)
3.1
(2,617.4)
3,260.0
(765.1)
631.0
(121.5)
(31.1)
19.3
—
(5.1)
(70.8)
2,916.7
(4.1)
(31.3)
415.3
22.3
437.6
$
34.8
19.1
12.8
—
42.5
17.6
(17.0)
9.8
(19.5)
(6.8)
—
(15.2)
(1.2)
4.7
4.7
(2.1)
—
(15.5)
8.3
(16.9)
(29.7)
219.3
(84.4)
1.5
(34.8)
—
(117.7)
380.0
(374.4)
—
(91.9)
(53.3)
38.0
6.8
(8.0)
(1.5)
(104.3)
—
—
(2.7)
25.0
22.3
$
39.4
19.7
12.8
—
9.1
16.7
(16.9)
162.0
(4.1)
(4.2)
—
10.7
3.5
(0.5)
(3.1)
4.9
—
(11.9)
(16.6)
(31.3)
2.5
226.6
(8.2)
1.8
(25.0)
—
(31.4)
167.5
(267.5)
—
(86.1)
(31.1)
20.9
4.2
(0.8)
(0.1)
(193.0)
—
—
2.2
22.8
25.0
61
Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Years ended June 30,
(In millions)
Supplemental disclosures of cash flow information
Cash paid
2018
2017
2016
Interest....................................................................................................... $
Income taxes .............................................................................................
Non-cash transactions
Broadcast rights financed by contracts payable ........................................
$
66.3
24.0
18.8
$
22.0
73.1
15.4
20.2
73.0
19.3
See accompanying Notes to Consolidated Financial Statements
62
Meredith Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations—Meredith Corporation (Meredith or the Company) is a diversified media company. The
Company has two reporting segments: national media and local media. The Company’s national media segment
includes print magazines, digital and mobile media, brand licensing activities, affinity marketing, database-related
activities, business-to-business marketing products, and other related operations. The local media segment includes
17 television stations and related digital and mobile media operations. Meredith’s operations are diversified
geographically primarily within the United States (U.S.) but also abroad in a limited number of locations in Europe
and Asia. The Company has a broad customer base.
Basis of Presentation—The consolidated financial statements include the accounts of Meredith and its wholly-
owned and majority-owned subsidiaries, after eliminating all significant intercompany balances and transactions.
The results of operations include those of Time Inc. (Time) since the date of acquisition (the Acquisition). See
Note 2 for further discussion. Meredith does not have any off-balance sheet arrangements. The Company’s use of
special-purpose entities was limited to Meredith Funding Corporation, whose activities were fully consolidated in
Meredith’s consolidated financial statements until the termination of its asset lending facility on January 31, 2018.
The financial position and operating results of the Company’s foreign operations are consolidated using primarily
the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of
exchange as of the balance sheet date, and local currency revenues and expenses are translated at average rates of
exchange during the period. Translation gains or losses on assets and liabilities are included as a component of
accumulated other comprehensive loss.
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements. The Company bases its estimates on
historical experience, management expectations for future performance, and other assumptions as appropriate. Key
areas affected by estimates include the allowance for doubtful accounts, which is based on historical experience and
management’s views on trends in the overall receivable aging, the assessment of the recoverability of long-lived
assets, including goodwill and other intangible assets, which is based on such factors as estimated future cash flows;
the determination of the net realizable value of broadcast rights, which is based on estimated future revenues;
pension and postretirement benefit expenses, which are determined based, in large part, on actuarial assumptions
regarding discount rates, expected returns on plan assets, and healthcare costs; and share-based compensation
expense, which is based on numerous assumptions including future stock price volatility and employees’ expected
exercise and post-vesting employment termination behavior. While the Company re-evaluates its estimates on an
ongoing basis, actual results may vary from those estimates.
Reclassifications—Certain prior years’ amounts have been reclassified to conform to fiscal 2018 presentation.
Cash and Cash Equivalents—Cash and short-term investments with original maturities of 3 months or less are
considered to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair
value.
Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily cash and cash equivalent deposits. Cash equivalent balances consist of money market
mutual funds with original maturities of 3 months or less. These cash and cash equivalent deposits are maintained
with several financial institutions. The deposits held at the various financial institutions may exceed federally
insured limits. Exposure to this credit risk is reduced by placing such deposits with major financial institutions and
monitoring their credit ratings and, therefore, these deposits bear minimal credit risk. There is also limited credit
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risk with respect to the money market mutual funds in which the Company invests as these funds all have issuers,
guarantors, and/or other counterparties of reputable credit.
At June 30, 2018, $411.1 million of cash and cash equivalents were held domestically, of which $370.2 million
were held in money market mutual funds. Of the total cash and cash equivalents, $26.5 million were held
internationally, primarily in Europe. Cash equivalents at June 30, 2018, were $373.1 million, which approximates
fair value due to their short-term nature, and is considered a Level 1 measurement as defined in Note 10.
Accounts Receivable—The Company’s accounts receivable are primarily due from advertisers. Credit is extended
to clients based on an evaluation of each client’s creditworthiness and financial condition; collateral is not required.
The Company maintains allowances for uncollectible accounts, rebates, rate adjustments, returns, and discounts.
The allowance for uncollectible accounts is based on the aging of such receivables and any known specific
collectability exposures. Accounts are written off when deemed uncollectible. Allowances for rebates, rate
adjustments, returns, and discounts are generally based on historical experience and current market conditions.
Concentration of credit risk with respect to accounts receivable is generally limited due to the large number of
geographically diverse clients and individually small balances.
Inventories—Inventories are stated at the lower of cost or net realizable value. Effective January 1, 2018, the
Company changed its method of accounting for paper inventory in the national media segment from the last-in,
first-out (LIFO) method to the weighted average cost method. The Company believes that the weighted average
cost method of accounting for paper inventory is preferable because it provides a better match of production costs
with revenues considering the limited volatility in paper prices due to the short production cycle.
The effect of the change was not considered material to the previously issued consolidated financial statements and,
as such, was adopted prospectively as of January 1, 2018. The cumulative effect of the change recorded in the third
quarter of fiscal 2018 was $1.3 million representing the removal of the LIFO costs reserve. This adjustment was
recorded to the production, distribution, and editorial line within the Consolidated Statements of Earnings.
Cost is determined on the first-in first-out or average basis for all other inventories.
Subscription Acquisition Costs—Subscription acquisition costs primarily represent magazine agency
commissions. These costs are deferred and amortized over the related subscription term, typically one to two years.
In addition, direct-response advertising costs that are intended to solicit subscriptions and are expected to result in
probable future benefits are capitalized. These costs are amortized over the period during which future benefits are
expected to be received. The asset balance of the capitalized direct-response advertising costs is reviewed quarterly
to ensure the amount is realizable. Any write-downs resulting from this review are expensed as subscription
acquisition advertising costs in the current period. Capitalized direct-response advertising costs were $7.6 million at
June 30, 2018 and $6.0 million at June 30, 2017. There were no material write-downs of capitalized direct-response
advertising costs in any of the fiscal years in the three-year period ended June 30, 2018.
Property, Plant, and Equipment—Property, plant, and equipment are stated at cost with the exception of the
property, plant, and equipment that was recorded at estimated fair value as of January 31, 2018, as a result of the
Acquisition. Additions to that acquired property, plant, and equipment since January 31, 2018, are stated at cost.
Costs of replacements and major improvements are capitalized, while costs of maintenance and repairs are charged
to operations as incurred. Depreciation expense is determined primarily using the straight-line method over the
estimated useful lives of the assets: 5-45 years for buildings and improvements, 3-6 years for capitalized software,
and 3-20 years for machinery and equipment. The costs of leasehold improvements are amortized over the lesser of
the useful lives of the improvements or the terms of the respective leases. Depreciation and amortization of
property, plant, and equipment was $54.2 million in fiscal 2018, $34.8 million in fiscal 2017, and $39.4 million in
fiscal 2016.
In fiscal 2016, management committed to a plan to sell the Company’s two corporate airplanes and classified them
as held-for-sale at June 30, 2017 and 2016. The airplanes were sold in early fiscal 2018. The estimated fair value of
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these airplanes of $1.9 million was included in the machinery and equipment line in the Consolidated Balance
Sheets at June 30, 2017. Losses resulting from fair value adjustments to these assets of $0.9 million and $5.6
million were recorded in the impairment of goodwill and other long-lived assets line in the Consolidated Statements
of Earnings in fiscal 2017 and 2016, respectively.
Broadcast Rights—Broadcast rights consist principally of rights to broadcast syndicated programs, sports, and
feature films. The total cost of these rights is recorded as an asset and as a liability when programs become
available for broadcast. The current portion of broadcast rights represents those rights available for broadcast that
are expected to be amortized in the succeeding year. These rights are valued at the lower of unamortized cost or
estimated net realizable value, and are generally charged to operations on an accelerated basis over the contract
period. Impairments of unamortized costs to net realizable value are included in production, distribution, and
editorial expenses in the Consolidated Statements of Earnings. There were no material impairments of unamortized
costs in fiscal years 2018, 2017, or 2016. Future write-offs can vary based on changes in consumer viewing trends
and the availability and costs of other programming.
Intangible Assets and Goodwill—Amortizable intangible assets consist primarily of advertiser relationships,
publisher relationships, network affiliation agreements, partner relationships, customer relationships, and
retransmission agreements. Intangible assets with finite lives are amortized over their estimated useful lives. The
useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to
future cash flows. Network affiliation agreements are amortized over the period of time the agreements are expected
to remain in place, assuming renewals without material modifications to the original terms and conditions
(generally 25 to 40 years from the original acquisition date). Other intangible assets are amortized over their
estimated useful lives, ranging from 1 to 10 years.
Intangible assets with indefinite lives include trademarks and Federal Communications Commission (FCC)
broadcast licenses. These licenses are granted for a term of up to eight years, but are renewable if the Company
provides at least an average level of service to its customers and complies with the applicable FCC rules and
policies and the Communications Act of 1934. The Company has been successful in every one of its past license
renewal requests and has incurred only minimal costs in the process. The Company expects the television
broadcasting business to continue indefinitely; therefore, the cash flows from the broadcast licenses are also
expected to continue indefinitely.
The Company has acquired trademark brands that have been determined to have indefinite lives. Those assets are
evaluated annually for impairment. The Company evaluates a number of factors to determine whether an indefinite
life is appropriate, including the competitive environment, market share, brand history, and operating plans. In
addition, when certain events or changes in operating conditions occur, an additional impairment assessment is
performed and indefinite-lived assets may be adjusted to a determinable life.
Goodwill and intangible assets which have indefinite lives, are not amortized but are tested for impairment annually
or when events occur or circumstances change that indicate the carrying value may exceed the fair value. Goodwill
impairment testing is performed at the reporting unit level. The Company has three reporting units – national media,
local media excluding MNI Targeted Media (MNI), and MNI. The Company also assesses, at least annually,
whether assets classified as indefinite-lived intangible assets continue to have indefinite lives.
The Company performs its goodwill impairment analysis annually as of May 31. At May 31, 2018, the date the
Company last performed its annual evaluation of impairment of goodwill, management elected to perform
qualitative impairment tests for the local media excluding MNI and the MNI reporting units and a quantitative
goodwill impairment test for the national media reporting unit. A quantitative impairment test, performed for a
goodwill reporting unit or indefinite-lived intangible assets involves determining the fair value of the reporting unit
or asset which is then compared to its carrying value.
Fair value to which carrying value is compared in the quantitative analysis is determined using a discounted cash
flow model, which requires us to estimate the future cash flows expected to be generated by the reporting unit or to
result from the use of the asset. These estimates include assumptions about future revenues (including projections of
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overall market growth and share of market), estimated costs, and appropriate discount rates where applicable. These
assumptions are based on historical data, various internal estimates, and a variety of external sources and are
consistent with the assumptions used in both short-term financial forecasts and long-term strategic plans.
Depending on the assumptions and estimates used, future cash flow projections can vary within a range of
outcomes. Changes in key assumptions used and their prospects or changes in market conditions could result in an
impairment charge.
Additional information regarding intangible assets and goodwill including a discussion of impairment charges taken
on goodwill and other long-lived intangible assets is provided in Note 5.
Impairment of Long-lived Assets—Long-lived assets (primarily property, plant, and equipment and amortizable
intangible assets) are reviewed for impairment whenever events and circumstances indicate the carrying value of an
asset may not be recoverable. Recoverability is measured by comparison of the forecasted undiscounted cash flows
of the operation to which the assets relate to the carrying amount of the assets. Tests for impairment or
recoverability require significant management judgment, and future events affecting cash flows and market
conditions could result in impairment losses.
Derivative Financial Instruments—Meredith does not engage in derivative or hedging activities, except to hedge
interest rate risk on debt. Prior to the Acquisition, Meredith held interest rate swaps designated and accounted for as
cash flow hedges in accordance with Accounting Standards Codification (ASC) 815, Derivatives and Hedging. In
connection with the repayment of the variable-rate private placement senior notes and bank term loans on
January 31, 2018, as further described in Note 7, the Company terminated these swaps. Refer to Note 7 for further
discussion on the gain recognized on this termination.
Prior to their termination, the effective portion of the change in the fair value of interest rate swaps was reported in
other comprehensive income (loss). The gain or loss included in other comprehensive income (loss) was
subsequently reclassified into net earnings on the same line in the Consolidated Statements of Earnings as the
hedged item in the same period that the hedge transaction affected net earnings. There were no material gains or
losses recognized in earnings for hedge ineffectiveness in fiscal 2018, 2017, or 2016.
Revenue Recognition—The Company’s primary source of revenue is advertising. Other sources include circulation
and other revenues.
Advertising revenues—Advertising revenues are recognized when advertisements are published (defined as an
issue’s on-sale date) or aired by the broadcasting station, net of provisions for estimated rebates, rate adjustments,
and discounts. Barter revenues are included in advertising revenue and are also recognized when the advertisements
are published or the commercials are broadcast. Barter advertising revenues and the offsetting expense are
recognized at the fair value of the advertising surrendered, as determined by similar cash transactions. Barter
advertising revenues were not material in any period. Digital advertising revenues are recognized ratably over the
contract period or as services are delivered.
Circulation revenues—Circulation revenues include magazine single copy and subscription revenue. Single copy
revenue is recognized on the publication’s on-sale date, net of provisions for estimated returns. The Company bases
its estimates for returns on historical experience and current marketplace conditions. Revenues from magazine
subscriptions are deferred and recognized proportionately as products are distributed to subscribers.
Other revenues—Revenues from content creation and other custom programs are recognized when the products or
services are delivered. In addition, the Company participates in certain arrangements containing multiple
deliverables. The guidance for accounting for multiple-deliverable arrangements requires that overall arrangement
consideration be allocated to each deliverable (unit of accounting) in the revenue arrangement based on the relative
selling price as determined by vendor specific objective evidence, third-party evidence, or estimated selling price.
The related revenue is recognized when each specific deliverable of the arrangement is delivered. Brand licensing-
based revenues are accrued generally monthly or quarterly based on the specific mechanisms of each contract.
Payments are generally made by the Company’s partners on a quarterly basis. Generally, revenues are accrued
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based on estimated sales and adjusted as actual sales are reported by partners. These adjustments are typically
recorded within three months of the initial estimates and have not been material. Any minimum guarantees are
typically earned evenly over the fiscal year. Retransmission consent revenues are recognized over the contract
period based on the negotiated fee and generally on a per subscriber basis. Revenues earned for placing magazines
with subscribers on behalf of third-party publishers is recognized once the subscriber’s name is transferred to the
publisher, on a net basis, with a reserve for estimated cancellations.
In certain instances, revenues are recorded gross in accordance with U.S. GAAP although the Company receives
cash for a lesser amount due to the netting of certain expenses. Amounts received from customers in advance of
revenue recognition are deferred as liabilities and recognized as revenue in the period earned.
Contingent Consideration—The Company estimates and records the acquisition date estimated fair value of
contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting
period, the Company estimates changes in the fair value of contingent consideration, and any change in fair value is
recognized in the Consolidated Statements of Earnings. An increase in the earn-out expected to be paid will result in
a charge to operations in the quarter that the anticipated fair value of contingent consideration increases, while a
decrease in the earn-out expected to be paid will result in a credit to operations in the quarter that the anticipated
fair value of contingent consideration decreases. The estimate of the fair value of contingent consideration requires
subjective assumptions to be made regarding future operating results, discount rates, and probabilities assigned to
various potential operating result scenarios. Future revisions to these assumptions could materially change the
estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future
financial results. Additional information regarding contingent consideration is provided in Note 2.
Advertising Expenses—The majority of the Company’s advertising expenses relate to direct-mail costs for
magazine subscription acquisition efforts. Advertising costs that are not capitalized are expensed the first time the
advertising takes place. Total advertising expenses included in the Consolidated Statements of Earnings were
$122.8 million in fiscal 2018, $63.9 million in fiscal 2017, and $72.6 million in fiscal 2016.
Deferred Financing Costs—Costs incurred to obtain financing are deferred and amortized to interest expense, net
on the Consolidated Statements of Earnings over the related financing period using the effective interest method.
The Company records deferred financing costs as a direct reduction of the carrying value of the related debt.
Financing costs related to revolving debt instruments or lines of credit are included in other assets on the
Consolidated Balance Sheets.
Income Taxes—The income tax provision is calculated under the liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in earnings in the period when such a change is enacted. The
Company recognizes the effect of income tax positions only if those positions are more likely than not of being
sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 percent likely
of being realized. Changes in recognition or measurement are reflected in the period in which the change in
judgment occurs.
Self-Insurance—The Company self-insures for certain medical claims, and its responsibility generally is capped
through the use of a stop loss contract with an insurance company at a certain dollar level. The dollar level varies
based on the insurance plan, and ranges between $350 thousand and $500 thousand. Third-party administrators are
used to process claims. The Company uses actual claims data and estimates of claims incurred-but-not-reported to
calculate estimated liabilities for unsettled claims on an undiscounted basis. Although management re-evaluates the
assumptions and reviews the claims experience on an ongoing basis, actual claims paid could vary significantly
from estimated claims.
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Pensions and Postretirement Benefits Other Than Pensions—Retirement benefits are provided to employees
through pension plans sponsored by the Company. Pension benefits are generally based on formulas that reflect
interest credits allocated to participants’ accounts based on years of benefit service and annual pensionable earnings.
It is the Company’s policy to fund the qualified pension plans to at least the extent required to maintain their fully
funded status. In addition, the Company provides health care and life insurance benefits for certain retired
employees, the expected costs of which are accrued over the years that the employees render services. It is the
Company’s policy to fund postretirement benefits as claims are paid. Additional information is provided in Note 11.
Share-based Compensation—The Company establishes fair value for its equity awards to determine their cost and
recognizes the related expense over the appropriate vesting period. The Company recognizes expense for stock
options, restricted stock, restricted stock units, and shares issued under the Company’s employee stock purchase
plan. See Note 12 for additional information related to share-based compensation expense.
Redeemable Preferred Stock—The Company has outstanding 650,000 shares of perpetual convertible redeemable
non-voting preferred stock, par value $1.00 per share, each share having an initial stated value of $1,000 per share
(the Series A preferred stock). Proceeds from the issuance were allocated on a relative fair value basis between the
preferred stock and other freestanding financial instruments issued with the preferred stock. The preferred stock is
classified as mezzanine equity and is accreted to its redemption value. Additional information is provided in
Note 13.
Comprehensive Income—Comprehensive income consists of net earnings and other gains and losses affecting
shareholders’ equity that, under U. S. GAAP, are excluded from net earnings. Other comprehensive income (loss)
includes changes in prior service costs and net actuarial losses from pension and postretirement benefit plans, net of
taxes, unrealized gains or losses resulting from foreign currency translation, and changes in the fair value of interest
rate swap agreements, net of taxes, to the extent that they are effective. As of June 30, 2018, there were no amounts
in other comprehensive income (loss) related to the interest rate swaps as such were settled in fiscal 2018, and all
previously unrealized changes in other comprehensive income (loss) were recognized in earnings. Refer to Note 7
for additional discussion on the swap termination.
Earnings Per Share—Basic earnings per share is calculated by dividing net earnings attributable to common
shareholders by the weighted average common and Class B shares outstanding for the period. Diluted earnings per
share calculation incorporated the shares utilized in the basic calculation but also included the dilutive effect, if any,
of the assumed exercise of securities, including the effect of shares issuable under the Company’s share-based
incentive plans. In connection with the issuance of the Series A preferred stock and detachable warrants on
January 31, 2018, the Company now has a two-class capital structure and applies the two-class method in the
calculation of earnings per share. The two-class method adjusts earnings to incorporate dividends declared on
common stock, preferred stock, and other securities in distributed earnings. In addition, it also incorporates
participating rights in other securities in undistributed earnings. Additional information is provided in Note 15.
Adopted Accounting Pronouncements—
ASU 2016-07—In March 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards
Update (ASU) simplifying the transition to the equity method of accounting. The new guidance eliminates the
requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant
influence over a previously held investment. The Company adopted this standard effective July 1, 2017. This
guidance was applied to one investment during the fiscal year, which simplified the transition from the cost method
to equity method. The application did not have any other impact on the Company’s results of operations, cash
flows, or disclosures.
ASU 2016-09—In March 2016, as a part of its simplification initiative, the FASB issued guidance on the
accounting for employee share-based payments. The new guidance is intended to simplify several aspects of the
accounting for share-based payment transactions, including the income tax treatment, classification of awards as
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either equity or liabilities, and classification on the statement of cash flows. The Company adopted this standard
effective July 1, 2017.
The adoption of this guidance resulted in the prospective recognition of realized excess tax benefits related to the
exercise or vesting of share-based awards in the Consolidated Statements of Earnings instead of in additional paid-
in capital within the Consolidated Balance Sheets. See Note 8 for discussion of the credits to income tax expense
recorded in the Consolidated Statements of Earnings. Using a modified retrospective application, the Company has
elected to recognize forfeitures as they occur and recorded a $1.1 million increase to additional paid-in capital, a
$0.6 million reduction to retained earnings, and a $0.5 million reduction to deferred taxes to reflect the incremental
share-based compensation expense, net of the related tax impacts, that would have been recognized in prior years
under the modified guidance. Presentation requirements for cash flows related to employee taxes paid using
withheld shares had no impact to all periods presented as such cash flows have historically been presented as
financing activities. The Company no longer classifies excess tax benefits related to share-based awards as a
financing cash inflow and an operating cash outflow. This classification requirement was adopted prospectively
and, as such, the Consolidated Statements of Cash Flows have not been retrospectively adjusted.
ASU 2018-02—In February 2018, the FASB issued guidance regarding the reclassification of certain tax effects
from accumulated other comprehensive loss. This amended guidance allows a reclassification from accumulated
other comprehensive loss to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of
2017 (the Tax Reform Act) which was signed into law on December 22, 2017. The Company early adopted this
amended guidance on January 1, 2018, and as a result, elected to reclassify $4.0 million of stranded tax effects from
accumulated other comprehensive loss to retained earnings using a specific identification approach. The adoption of
this guidance did not have an impact on the Company’s results of operations, cash flows, or disclosures.
ASU 2018-05—In March 2018, the FASB issued guidance which incorporates into ASC 740 – Income Taxes
(ASC 740), various United States Securities and Exchange Commission (SEC) guidance pursuant to the issuance of
SEC Staff Accounting Bulletin No. 118 (SAB 118), which was effective immediately. In December 2017, the SEC
issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting
requirements to recognize all of the effects of the Tax Reform Act in the period of enactment. SAB 118 allows for
calculations of the impacts of the Tax Reform Act to be considered provisional and subject to remeasurement upon
further collection, preparation, and analysis of relevant data and disclosure regarding the impacts of the Tax Reform
Act for which accounting under ASC 740 is incomplete. As the Company accounted for the tax effects of the Tax
Reform Act on a provisional basis under the guidance of SAB 118 prior to this update, the adoption of this guidance
did not have an impact on the consolidated financial statements.
Pending Accounting Pronouncements—
ASU 2014-09—In May 2014, the FASB issued an accounting standards update that replaces existing revenue
recognition guidance. The new standard requires a company to recognize revenue for the transfer of promised
goods or services equal to the amount it expects to receive in exchange for those goods or services. The standard
includes a five-step framework to determine the timing and amount of revenue to recognize related to contracts with
customers. Additionally, the standard requires new and significantly enhanced disclosures about the nature, amount,
timing, and uncertainty of revenue and cash flows from customer contracts as well as judgments made by a
company when following the framework.
The Company will adopt the standard beginning July 1, 2018 (fiscal 2019). The two permitted transition methods
are the full retrospective method, in which case the standard would be applied to each prior reporting period
presented and the cumulative effect of applying the standard would be recognized in the earliest period shown; or
the modified retrospective method, in which case the cumulative effect of applying the standard would be
recognized at the date of initial application. The Company will adopt the standard using the modified retrospective
method.
The Company is in the process of assessing and documenting the effect of the adoption of this standard on our
consolidated financial statements and related disclosures related to advertising, circulation, and other revenues, and
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completing the design and implementation of related controls. Based on our assessment to date, the Company does
not believe the adoption of the standard will change the timing of revenue recognition for most of our revenue
contracts, except for those with value-added items or that require combination under the standard. We do not
anticipate those impacts will have a material effect on our consolidated revenues subject to completion of our
evaluation. While the Company does not expect material changes to the amount or timing of our revenue
recognition, the Company will significantly expand our future disclosures on both a quarterly and annual basis as
required under the standard.
ASU 2016-01—In January 2016, the FASB issued guidance to improve and simplify accounting for financial
instruments. The updated guidance includes several provisions that are not applicable to the Company’s
consolidated financial statements, with the exception of changes to fair value disclosure. Under the new guidance,
public entities are no longer required to disclose the methods and significant assumptions used to estimate fair value
of financial instruments measured at amortized cost on the consolidated balance sheets. It also requires public
entities to use the exit price when measuring the fair value of financial instruments for disclosure purposes. The
guidance is effective for the Company in the first quarter of fiscal 2019. The adoption of this guidance requires a
change in our disclosures only and it is not expected to have an impact on our results of operations or cash flows.
ASU 2016-02—In February 2016, the FASB issued an accounting standards update that replaces existing lease
accounting standards. The new standard requires lessees to recognize on the balance sheet a right-of use asset,
representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms
greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the
amount, timing, and uncertainty of cash flows arising from leases. Treatment of lease payments in the statement of
earnings and statement of cash flows is relatively unchanged from previous guidance. The standard is to be applied
under the modified retrospective method, with elective reliefs, which requires application of the new guidance for
all periods presented. The FASB continues to issue amendments to further clarify provisions of this guidance. The
standard, including the amendments made since initial issuance, is effective for the Company beginning July 1,
2019, with early adoption permitted. The Company is currently in the process of evaluating our existing lease
portfolios, including accumulating all of the necessary information required to properly account for the leases under
the new standard. As such, the Company is currently evaluating the effect the guidance will have on our
consolidated financial statements.
ASU 2016-13—In June 2016, the FASB issued a standard that replaces the current incurred loss methodology for
recognizing credit losses with a current expected credit loss methodology. Under this standard, the establishment of
an allowance for credit losses reflects all relevant information about past events, current conditions, and reasonable
supportable forecasts rather than delaying the recognition of the full amount of a credit loss until the loss is
probable of occurring. The new standard changes the impairment model for most financial assets and certain other
instruments, including trade receivables. A modified retrospective implementation of this standard is effective in the
Company’s first quarter of fiscal 2021, with early adoption permitted in the first quarter of fiscal 2020. The
Company is currently evaluating the impact this guidance will have on our consolidated financial statements.
ASU 2016-15—In August 2016, the FASB issued an accounting standards update clarifying the classification of
certain cash receipts and payments in the statement of cash flows. The update is intended to reduce the diversity in
practice around how certain transactions are classified within the statement of cash flows. Retrospective adoption is
required in our first quarter of fiscal 2019 with early adoption permitted, including adoption in an interim period.
The Company is currently evaluating the impact this update will have on its consolidated financial statements;
however, the adoption is not expected to have a material impact in the presentation of our Consolidated Statements
of Cash Flows.
ASU 2017-01—In January 2017, the FASB issued an accounting standards update that clarifies the definition of a
business and adds guidance to assist entities in the determination of whether an acquisition (or disposal) represents
assets or a business. The update provides a test to determine whether or not an acquisition is a business. If
substantially all of the fair value of the assets acquired is concentrated in a single asset or a group of similar
identifiable assets, the acquired assets do not represent a business. If this test is not met, the update provides further
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guidance to evaluate if the acquisition represents a business. Prospective adoption is required in the first quarter of
fiscal 2019. Early adoption is permitted if certain transaction criteria are met. The Company does not believe the
adoption of this update will have a material impact prospectively, to the Company’s consolidated financial
statements.
ASU 2017-04—In January 2017, the FASB issued an accounting standards update that simplifies the subsequent
measurement of goodwill by eliminating Step 2 of the goodwill impairment test. The Step 2 test requires an entity
to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity will
record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value determined
in Step 1. This update also eliminates the qualitative assessment requirements for a reporting unit with zero or
negative carrying value. Prospective adoption is required in the first quarter of fiscal 2021, with early adoption
permitted. The Company is currently evaluating the impact this update will have on its consolidated financial
statements.
ASU 2017-07—In March 2017, the FASB issued an accounting standards update on the presentation of net periodic
pension and postretirement benefit costs. This guidance revises how employers that sponsor defined benefit pension
and other postretirement plans present the net periodic benefit costs in their income statement and requires that the
service cost component of net periodic benefit costs be presented in the same line items as other employee
compensation costs for the related employees. Of the components of net periodic benefit costs, only the service cost
component will be eligible for asset capitalization. The other components of net periodic benefit costs must be
presented separately from the line items that include the service cost and outside of the income from operations
subtotal. The update is effective for the first quarter of fiscal 2019, with early adoption permitted. The adoption is
expected to require reclassification of expenses in the Consolidated Statements of Earnings; however, it is not
expected to have an impact on the Company’s operating results or cash flows.
ASU 2017-09—In May 2017, the FASB issued guidance to clarify guidance related to changes in terms or
conditions of a share-based payment award. The purpose of this update is to provide guidance about which changes
to the terms or conditions of a share-based payment award require an entity to apply modification accounting in
ASC 718 – Compensation – Stock Compensation. The effective date is the first quarter of fiscal 2019 with early
adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our
results of operations, cash flows, or disclosures.
ASU 2017-12—In August 2017, the FASB issued guidance amending hedge accounting requirements. The purpose
of this guidance is to better align a company’s risk management activities and financial reporting requirements, and
to simplify the application of hedge accounting. The effective date is the first quarter of fiscal 2020, with early
adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our
results of operations, cash flows, or disclosures.
2. Acquisitions
Fiscal 2018
On January 31, 2018, Meredith completed its acquisition of all the outstanding shares of Time for $18.50 per share,
for a total transaction value of $3.2 billion, including the repayment of Time’s outstanding debt. As part of the
Acquisition, Meredith also repaid its outstanding debt. These transactions were funded through a combination of
borrowings under the Company’s new $1.8 billion secured term loan facility, the issuance of $1.4 billion of senior
unsecured notes, the issuance of preferred equity, and cash on hand (refer to Note 7 for additional information on
the long-term debt and Note 13 for additional information on the preferred equity).
In accordance with the merger agreement, certain of Time’s outstanding restricted stock units, performance stock
units, and in-the-money stock options were immediately vested, converted into the right to receive $18.50 per share,
and paid in cash. The value of these awards was apportioned between total purchase price consideration and
71
immediate expense. This expense is included in the acquisition, disposition, and restructuring related activities line
on the Consolidated Statements of Earnings. Additionally, certain of Time’s outstanding stock options and restricted
stock units were converted into mirror awards exercisable or earned in Meredith common stock. The conversion
was based on a ratio of $18.50 to the volume-weighted average per share closing price for Meredith’s stock on the
ten consecutive trading days ended on the complete trading day immediately prior to the acquisition closing date.
The value of these awards was apportioned between total purchase price consideration and unearned compensation
to be recognized over the remaining original vesting periods of the awards.
The following table summarizes the aggregate purchase price consideration paid to acquire Time:
(In millions)
Consideration paid to Time shareholders..................................................................................... $
Repayment of Time’s outstanding debt, including prepayment penalty ......................................
Cash consideration issued to settle outstanding share-based equity awards................................
Total cash consideration...............................................................................................................
Share-based equity awards issued to settle outstanding share-based equity awards ...................
Total consideration issued ............................................................................................................
Portion of cash settlement of outstanding share-based equity awards recognized as expense ....
Portion of share-based equity awards issued to be recognized as an expense, primarily
through fiscal 2021.......................................................................................................................
Total purchase price consideration............................................................................................... $
1,860.7
1,327.9
37.6
3,226.2
33.8
3,260.0
(9.2)
(24.0)
3,226.8
This transaction created a premier media and marketing company serving 175 million American consumers.
Meredith’s brands now have a readership of more than 120 million and paid circulation of more than 40 million.
The acquisition also increased Meredith’s digital position with nearly 135 million monthly unique visitors in the
U.S. While the majority of Time’s operations are reported in Meredith’s national media segment, one business unit
of Time is reported in Meredith’s local media segment and certain expenses are reported in unallocated corporate.
72
The Company accounted for this acquisition as a business combination under the acquisition method of accounting.
The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and
liabilities assumed at the date of acquisition. The fair values of the assets acquired and liabilities assumed were
based on management’s preliminary estimates of the fair values of Time’s net assets. The estimated fair values of
net assets and resulting goodwill are subject to the Company finalizing its analysis of the fair value of Time’s assets
and liabilities as of the acquisition date, and are subject to change pending the final valuation of these assets and
liabilities. In addition, information unknown at the time of the Time acquisition could result in adjustments to the
respective fair values and resulting goodwill. Differences between the preliminary and final estimated fair values
could be material. As additional information is obtained about these assets and liabilities within the measurement
period (not to exceed one year from the date of acquisition), the Company will refine its estimates of fair value and
reallocate the purchase price.
(In millions)
Cash and cash equivalents .................................................................................. $
Accounts receivable ............................................................................................
Inventory .............................................................................................................
Assets held-for-sale.............................................................................................
Other current assets.............................................................................................
Total current assets ...........................................................................................
Property, plant, and equipment ...........................................................................
Other assets .........................................................................................................
Intangible assets ..................................................................................................
Total identifiable assets acquired.....................................................................
Accounts payable ................................................................................................
Accrued liabilities ...............................................................................................
Current portion of unearned revenues.................................................................
Liabilities associated with assets held-for-sale ...................................................
Total current liabilities .....................................................................................
Unearned revenues..............................................................................................
Deferred income taxes ........................................................................................
Other noncurrent liabilities .................................................................................
Total liabilities assumed....................................................................................
Total identified net assets....................................................................................
Goodwill .............................................................................................................
Net assets acquired............................................................................................ $
399.9
290.9
22.8
1,006.1
60.0
1,779.7
300.8
98.0
1,146.8
3,325.3
140.0
195.6
192.1
315.7
843.4
41.7
172.2
104.4
1,161.7
2,163.6
1,063.2
3,226.8
The gross contractual amount of trade receivables acquired was $357.4 million and the contractual amount not
expected to be collected was $66.5 million at the acquisition date.
Subsequent to the initial purchase price allocation, the Company recorded adjustments that, in the aggregate,
increased goodwill by $17.8 million. The net change was due primarily to a decrease in the estimated fair value of
assets held-for-sale partially offset by a decrease in deferred tax liabilities and an increase in intangible assets.
These adjustments resulted from new information about facts and circumstances that existed at the time of the
acquisition.
73
The following table provides details of the acquired intangible assets (based on the preliminary assessment of the
fair value of assets acquired):
(In millions)
Intangible assets subject to amortization
Advertiser relationships ................................................................................... $
Publisher relationships.....................................................................................
Partner relationships ........................................................................................
Customer relationships ....................................................................................
Total ....................................................................................................................
Intangible assets not subject to amortization
223.5
125.0
95.0
63.3
506.8
Trademarks ......................................................................................................
Intangible assets, net ........................................................................................... $
640.0
1,146.8
The weighted average useful life of advertiser relationships is 3 years, publisher relationships is 7 years, partner
relationships is 6 years, and customer relationships is 2 years. Due to the timing of the acquisition and the
complexities involved with determining fair value of the intangible assets acquired, the Company has not yet
completed the valuation of the identified intangibles. The preliminary purchase price allocation has been developed
based on preliminary estimates of fair values. Therefore, there may be adjustments made to the purchase price
allocation that could result in changes to the preliminary fair values allocated, assigned useful lives, and associated
amortization recorded.
Goodwill is attributable primarily to expected synergies and the assembled workforces. Of total goodwill recorded
of $1.1 billion, $93.6 million is expected to be deductible for income tax purposes.
Transaction and integration costs incurred by Meredith were $59.9 million in fiscal 2018. These costs are included
in the acquisition, disposition, and restructuring related activities line in the Consolidated Statements of Earnings.
The following table presents the amounts of Time’s revenue and earnings included in Meredith’s Consolidated
Statements of Earnings since the date of the acquisition for the years ended June 30, 2018 and 2017. Also presented
are the unaudited pro-forma consolidated results of operations – revenues, net earnings (loss), and diluted net
earnings (loss) per share of the combined entity for the years ended June 30, 2018 and 2017, as if the acquisition
had occurred on July 1, 2016, the beginning of fiscal 2017:
Years ended June 30,
(In millions except per share data)
Actual Time total revenues ....................................... $
Actual Time net loss .................................................
2018
2017
$
625.3
(74.4)
—
—
Pro-forma total revenue ............................................
Pro-forma net earnings (loss)....................................
Pro-forma diluted net earnings (loss) per share ........
3,115.5
223.2
3.16
3,669.9
(28.6)
(2.37)
The unaudited pro-forma consolidated results above are based on the historical financial statements of Meredith and
Time and are not necessarily indicative of the results of operations that would have been achieved if the acquisition
was completed on July 1, 2016 (the beginning of the 2017 fiscal year), and are not indicative of the future operating
results of the combined company. This pro-forma financial information is based upon preliminary purchase price
allocations and various assumptions and estimates. The pro-forma consolidated results of operations include the
effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible
assets acquired. The pro-forma totals above also reflect the impact of transactions made to finance the acquisition
74
(see Note 7 and Note 13) and exclude historical interest of each entity and the prepayment penalty. The impact of
the discontinued operations have been removed from pro-forma revenue for each of the periods presented.
Historical intercompany transactions between Meredith and Time have also been removed. Transaction and
integration costs related to the acquisition of Time have been excluded from the above pro-forma consolidated
results of operations due to their non-recurring nature. The pro-forma net earnings (loss) were also adjusted for the
tax effects related to the other pro-forma adjustments.
Included within the pro-forma results above, are $26.4 million and $202.6 million of impairment charges for long-
lived assets for the years ended June 30, 2018, and 2017, respectively. The pro-forma results above also include
restructuring charges related to the Time transaction of $150.6 million for the year ended June 30, 2018. There were
no restructuring charges related to the acquisition recorded in the year ended June 30, 2017.
Fiscal 2017
During fiscal 2017, Meredith paid $84.4 million for the acquisitions of WPCH-TV (Peachtree TV), an independent
television station in Atlanta, Georgia, and the assets of a digital lead-generation company in the home services
market.
On December 7, 2016, Meredith acquired the assets of a digital lead-generation company in the home services
market, which has been rebranded Meredith Performance Marketing by the Company. The acquisition-date fair
value of the consideration was $21.1 million, which consisted of $13.4 million of cash and $7.7 million of
contingent consideration. The contingent consideration arrangement requires the Company to pay contingent
payments based on the achievement of certain operational targets in fiscal 2017 and on financial performance
during fiscal 2017 through fiscal 2021 measured in terms of earnings before interest, taxes, depreciation, and
amortization (EBITDA) as defined in the acquisition agreement. The contingent consideration is not dependent on
the continued employment of the sellers. The Company estimated the fair value of the contingent consideration
using a probability-weighted discounted cash flow model. The fair value is based on significant inputs not
observable in the market and thus represents a Level 3 measurement as defined in Note 10. The Company paid no
contingent consideration in fiscal 2018, and paid $2.6 million in contingent consideration in 2017. Although
operating performance for the brand has been positive, revised projections in revenues resulted in lower projected
EBITDA than anticipated at acquisition. Therefore, the Company recognized non-cash credits to operations of $3.8
million and $0.4 million in fiscal 2018 and 2017, respectively, to reduce the estimated contingent consideration
payable. These credits are recorded in the selling, general, and administrative expense line on the Consolidated
Statements of Earnings. As of June 30, 2018, the Company estimates the future payments will range from $0.9
million to $1.5 million.
Effective April 21, 2017, Meredith acquired Peachtree TV, which was operated by Meredith prior to its acquisition.
The results of Peachtree TV’s operations have been included in the consolidated financial statements since that date.
The cash purchase price was $70.0 million.
75
The following table summarizes the fair value of total consideration transferred and the recognized amounts of
identifiable assets acquired and liabilities assumed by segment during the year ended June 30, 2017:
(In millions)
Consideration
Cash ......................................................................... $
Payment in escrow...................................................
Contingent consideration arrangements ..................
Fair value of total consideration transferred............ $
Recognized amounts of identifiable assets
acquired and liabilities assumed
Total identifiable assets acquired ............................ $
Total liabilities assumed ..........................................
Total identified net assets ........................................
Goodwill..................................................................
$
National
Media
Acquisition
Local
Media
Acquisition
Total
11.8
1.6
7.7
21.1
8.6
—
8.6
12.5
21.1
$
$
$
$
70.0
—
—
70.0
81.6
(23.4)
58.2
11.8
70.0
$
$
$
$
81.8
1.6
7.7
91.1
90.2
(23.4)
66.8
24.3
91.1
The following table provides details of the acquired intangible assets by acquisition:
(In millions)
Intangible assets subject to amortization
National
Media
Acquisition
Local
Media
Acquisition
Total
Retransmission agreements ..................................... $
Customer list............................................................
Other........................................................................
Total ............................................................................
Intangible assets not subject to amortization
— $
4.2
4.4
8.6
6.7
—
0.7
7.4
FCC licenses............................................................
Intangible assets.......................................................... $
—
8.6
$
50.4
57.8
$
$
6.7
4.2
5.1
16.0
50.4
66.4
The useful life of the customer list is 10 years, and other national media intangible assets’ useful life is 5 years. The
useful lives of the retransmission agreements are 10 years and local media other intangible assets’ useful life is 4
years.
For these acquisitions, goodwill is attributable primarily to expected synergies and the assembled workforces.
Goodwill, with an assigned value of $24.3 million, is expected to be fully deductible for tax purposes.
During fiscal 2017, acquisition related costs of $0.3 million were incurred. These costs are included in the
acquisition, disposition, and restructuring related activities line in the Consolidated Statements of Earnings.
Prior
On December 30, 2014, Meredith acquired 100 percent of the outstanding stock of Selectable Media. The
contingent consideration arrangement requires the Company to pay contingent payments based on certain financial
targets over three fiscal years, primarily based on revenue, as defined in the acquisition agreement. The final
payment of $4.0 million was paid in fiscal 2018.
76
In February 2015, Meredith completed its acquisition of Shape. The contingent consideration arrangement requires
the Company to pay contingent payments based on certain financial targets over three fiscal years, primarily based
on operating profit, as defined in the acquisition agreement. Revised projections in advertising revenue have
resulted in lower projected operating profits and therefore lower estimates to contingent consideration payable than
originally expected. The Company recognized non-cash credits to operations of $2.0 million in fiscal 2018, $1.3
million in fiscal 2017, and $4.9 million in fiscal 2016, to reduce the estimated contingent consideration payable.
These credits were recorded in the selling, general, and administrative expense line on the Consolidated Statements
of Earnings. As of June 30, 2018, the Company estimates future payments to be $19.2 million.
3. Inventories
Inventories consist mainly of paper stock, editorial content, books, and other merchandise and are stated at the
lower of cost or estimated net realizable value. Cost is determined using the first-in, first-out method for books and
weighted average cost method for paper and other merchandise.
Effective January 1, 2018, the Company prospectively changed its method of accounting for paper inventory from
the last-in, first-out (LIFO) method to the weighted average cost method. Of total net inventory values shown 65
percent at June 30, 2017, were determined using the LIFO method. LIFO inventory income included in the
Consolidated Statements of Earnings was $1.3 million in fiscal 2018, $1.7 million in fiscal 2017, and $0.7 million
in fiscal 2016.
June 30,
2018
2017
(In millions)
Raw materials ............................................... $
Work in process ............................................
Finished goods..............................................
Reserve for LIFO cost valuation ..................
Inventories .................................................... $
32.1
9.6
2.5
44.2
—
44.2
$
$
13.4
8.7
1.1
23.2
(1.3)
21.9
4. Assets Held-for-Sale, Discontinued Operations, and Dispositions
Assets Held-for-Sale
The Company classifies assets as being held-for-sale when the following criteria are met: management has
committed to a plan to sell the asset; the asset is available for immediate sale in its present condition; an active
program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated; the
sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale
within one year; the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair
value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will
be made or that the plan will be withdrawn. Long-lived assets that are classified as held-for-sale are recorded at the
lower of carrying value or fair value less costs to sell. Fair value is based on current market values or discounted
future cash flows using Level 3 inputs determined based on the Company’s experience and knowledge of the
market, including the use of advisers. Fair value is preliminary and is expected to be finalized upon completion of
the sales, which are expected to occur within calendar 2018. The key assumptions used to determine the fair value
include discount rates, estimated cash flows, royalty rates, and revenue growth rates. The discount rate used is
based on several factors including a weighted average cost of capital analysis, and adjustments for market risk and
company specific risk. Estimated cash flows are based upon internally developed estimates of the undiscounted
cash flows attributable to the assets and include only future cash flows that are directly associated with and that are
expected to arise as a direct result of the use and eventual disposition of the assets. Royalty rates are based on
77
comparable licensing agreements and revenue growth rates are based on industry knowledge and historical
performance. Property and equipment are not depreciated, and intangibles assets are not amortized once classified
as held-for-sale. The assets and liabilities that are deemed held-for-sale are classified as current based on the
anticipated disposal date.
The following table presents the major components which are included in assets held-for-sale and liabilities
associated with assets held-for-sale (including TIME, Sports Illustrated, Fortune, Money, and its investment in Viant
Technology LLC (Viant)):
(in millions)
Current assets
Cash and cash equivalents.......................................................... $
Accounts receivable, net ............................................................
Inventories..................................................................................
Other current assets ....................................................................
Total current assets...................................................................
Net property, plant, and equipment ............................................
Other assets ................................................................................
Intangible assets, net ..................................................................
Goodwill.....................................................................................
Total assets held-for-sale .......................................................... $
Current liabilities
Accounts payable ....................................................................... $
Accrued expenses and other liabilities .......................................
Current portion of unearned revenues........................................
Total current liabilities.............................................................
Unearned revenues .....................................................................
Other noncurrent liabilities.........................................................
Total liabilities associated with assets held-for-sale .............. $
June 30,
2018
2.3
94.6
1.1
9.4
107.4
14.1
1.0
113.1
477.5
713.1
45.2
15.1
109.4
169.7
28.0
0.7
198.4
Discontinued Operations
A disposal of a component of an entity or a group of components of an entity is required to be reported as
discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s
operations and financial results when the components of an entity meets the criteria to be classified as held-for-sale.
When all of the criteria to be classified as held-for-sale are met, including management having the authority to
approve the action and committing to a plan to sell the entity, the major assets and liabilities are to be reported as
components of total assets and liabilities separate from those balances of the continuing operations. The
Consolidated Statements of Earnings reported for current and prior periods shall report the results of operations of
the discontinued operations, including any gain or loss recognized, in the period in which a discontinued operation
either has been disposed of or is classified as held-for-sale. The results of all discontinued operations, less
applicable income taxes (benefit), shall be reported as a component of net earnings separate from the net earnings
from continuing operations.
The Company announced after the Acquisition that it is exploring the sale of the TIME, Sports Illustrated, Fortune,
and Money affiliated brands and its investment in Viant. Management expects these sales to close during calendar
2018. In accordance with accounting guidance, a business that, on acquisition, or within a short period following
the acquisition (usually within three months), meets the criteria to be classified as held-for-sale is also considered a
78
discontinued operation. As all of the required criteria for held-for-sale classification were met, the assets and
liabilities related to these operations have been included as assets held-for-sale and liabilities associated with assets
held–for-sale in the Consolidated Balance Sheets as of June 30, 2018. The revenue and expenses, along with
associated taxes, for these operations were included in the loss from discontinued operations, net of income taxes
line on the Consolidated Statements of Earnings. All discontinued operations relate to the national media segment.
Prior to the Acquisition, Time entered into an agreement to sell the Golf brand. This sale closed in February 2018.
Revenue and expenses from the date of the acquisition until disposal along with associated taxes for the Golf brand
were included in the loss from discontinued operations, net of income taxes line on the Consolidated Statements of
Earnings.
In February 2018, the Company entered into an agreement to sell Time Inc. (UK) Ltd (TIUK), a United Kingdom
(U.K.) multi-platform publisher with approximately 60 brands. The sale closed in March 2018. Revenue and
expenses from the date of acquisition until disposal along with associated taxes for TIUK were included in the loss
from discontinued operations, net of income taxes line on the Consolidated Statements of Earnings.
In connection with the sale of TIUK, a liability of $9.2 million was recorded in other liabilities in connection with a
lease guarantee by Time. The guarantee is related to a lease of office space by TIUK in the U.K. through
December 31, 2025. The carrying value of the lease guarantee was $8.7 million at June 30, 2018. The Company is
only obligated to pay for the lease guarantee in the event that TIUK fails to perform under the lease agreement. If
TIUK fails to perform under the lease agreement, the maximum lease guarantee obligation for which the Company
would be liable is approximately $78.8 million as of June 30, 2018. The Company has assessed that it is unlikely
that TIUK will not perform its obligations under the lease.
The Company does not allocate interest to discontinued operations unless the interest is directly attributable to the
discontinued operations or is interest on debt that is required to be repaid as a result of the disposal transaction.
Interest expense included in discontinued operations reflects an estimate of interest expense related to the debt that
will be repaid with the proceeds from the sale of the TIME, Sports Illustrated, Fortune, Money, and affiliated brands
and of Viant.
Amounts applicable to discontinued operations in the Consolidated Statements of Earnings are as follows:
Year ended June 30,
(In millions except per share data)
Revenues ................................................................................ $
Costs and expenses ................................................................
Interest expense......................................................................
Loss on disposal.....................................................................
Loss before income taxes.......................................................
Income taxes ..........................................................................
Loss from discontinued operations, net of income taxes....... $
Loss per share from discontinued operations
2018
262.0
(250.6)
(12.2)
(12.3)
(13.1)
(1.5)
(14.6)
Basic ................................................................................ $
Diluted .............................................................................
(0.32)
(0.32)
The discontinued operations did not have depreciation, amortization, capital expenditures or significant non-cash
investing items for the period from acquisition through June 30, 2018. Share-based compensation expense of $3.7
million is included in the net cash provided by operating activities in the Consolidated Statements of Cash Flows.
79
The Company has announced the closure of Time Customer Service (TCS) in Tampa, Florida. As of June 30, 2018,
TCS did not meet the criteria above for held-for-sale or discontinued operations treatment.
Dispositions
In March 2018, the Company announced an agreement to sell Meredith Xcelerated Marketing (MXM). This
transaction closed in May 2018. The Company did not report the operations of MXM as discontinued operations as
the sale does not represent a strategic shift that will have a major effect on the Company’s operations and financial
results. The results of MXM, as well as the gain of $11.5 million on the sale, which is included as a credit in the
acquisition, disposition, and restructuring related activities line, are included within continuing operations in the
Consolidated Statements of Earnings. A loss of $0.8 million and a profit of $11.2 million and $18.5 million were
included in earnings (loss) from continuing operations before income taxes related to MXM for the years ended
June 30, 2018, 2017, and 2016, respectively.
Effective July 1, 2017, Meredith’s national media segment sold a 70 percent interest in Charleston Tennis LLC,
which operates the Family Circle Tennis Center, to an unrelated third party. In return, Meredith received $0.6
million in cash and a note receivable for $8.5 million. The note receivable is due in annual installments over a
period of 8 years. At June 30, 2018, there was $3.2 million in unamortized discount and an allowance of $3.0
million recorded against the note. This transaction generated a gain of $3.3 million, which was recorded in the
selling, general, and administrative line of the Consolidated Statements of Earnings. Of this gain, $1.0 million
related to the remeasurement of the retained investment. As Meredith retains a 30 percent interest, has a seat on the
board, and has approval rights over certain limited matters, Meredith now accounts for this investment under the
equity method of accounting.
80
5. Intangible Assets and Goodwill
Intangible assets consist of the following:
June 30,
2018
2017
Gross
Amount
Accumulated
Amortization
Net
Amount
Gross
Amount
Accumulated
Amortization
Net
Amount
(In millions)
Intangible assets
subject to amortization
National media
Advertiser relationships ......... $
Publisher relationships ...........
Partner relationships...............
Customer lists ........................
Other ......................................
Local media
Network..................................
Advertiser relationships .........
Retransmission agreements....
Other ......................................
Total............................................ $
Intangible assets not
subject to amortization
National media
Trademarks.............................
Internet domain names...........
Local media
FCC licenses ..........................
Total............................................
Intangible assets, net ..................
$
$
18.6
—
—
7.3
22.3
229.3
—
27.9
1.7
307.1
$
$
(15.5) $
—
—
(3.4)
(9.8)
(142.2)
—
(10.7)
(0.5)
(182.1) $
212.3
125.0
95.0
67.5
22.0
229.3
25.0
27.9
1.7
805.7
$
$
(41.1) $
(7.4)
(6.6)
(14.0)
(11.9)
(148.6)
(3.5)
(14.9)
(0.8)
(248.8) $
171.2
117.6
88.4
53.5
10.1
80.7
21.5
13.0
0.9
556.9
765.3
7.8
675.2
1,448.3
$ 2,005.2
$
3.1
—
—
3.9
12.5
87.1
—
17.2
1.2
125.0
147.9
7.8
675.2
830.9
955.9
Amortization expense was $74.8 million in fiscal 2018, $19.1 million in fiscal 2017, and $19.7 million in fiscal
2016. Future amortization expense for intangible assets is expected to be as follows: $155.0 million in fiscal 2019,
$140.3 million in fiscal 2020, $86.9 million in fiscal 2021, $41.0 million in fiscal 2022, and $40.2 million in fiscal
2023. Actual future amortization expense could differ from these estimates as a result of future acquisitions,
dispositions, and other factors.
During fiscal 2018, Meredith made the strategic decision to no longer publish Fit Pregnancy and Baby magazine as
a standalone title, rather to include it as a feature within Parents magazine and to discontinue FamilyFun as a
subscription title and instead publish it only for sale on newsstand. These decisions were determined to be
triggering events requiring Meredith to evaluate the trademarks within the Company’s Parents Network for
impairment. The fair values of the trademarks are determined based on significant inputs not observable in the
market. The reduction in advertising revenue caused by the discontinuation of Fit Pregnancy and Baby and the
change in FamilyFun to a newsstand only title, as well as updated revenue projections for the Parents Network
resulted in an impairment of the trademarks. As such, during fiscal 2018, the national media segment recorded a
non-cash impairment charge of $22.7 million to partially impair the trademarks within the Company’s Parents
Network. This impairment charge is recorded in the impairment of goodwill and other long-lived assets line in the
Consolidated Statements of Earnings. No other impairments of indefinite-lived intangible assets were recorded as a
result of the Company’s annual impairment tests performed as of May 31, 2018.
81
Due to continued weakness in the Mywedding.com revenue forecasts and a lack of sales growth from brand support
efforts, the annual impairment analysis performed as of May 31, 2017, of the Mywedding trademark indicated an
impairment. As such, during fiscal 2017, the national media segment recorded a non-cash impairment charge of
$5.3 million to fully impair the Mywedding trademark. No other impairments of indefinite-lived intangible assets
were recorded as a result of the Company’s annual impairment tests performed as of May 31, 2017.
During fiscal 2016, the Company recorded a non-cash impairment charge of $38.9 million on the national media
segment’s American Baby trademark. Management determined that this trademark was fully impaired as part of
management’s decision to discontinue the use of the American Baby brand following its combination with the Fit
Pregnancy brand. These impairment charges are recorded in the impairment of goodwill and other long-lived assets
line in the Consolidated Statements of Earnings. No other impairments of indefinite-lived intangible assets were
recorded as a result of the Company’s annual impairment tests performed as of May 31, 2016.
Changes in the carrying amount of goodwill were as follows:
(In millions)
Balance at June 30, 2016
Goodwill................................................... $
Accumulated impairment losses ..............
Acquisitions..................................................
Balance at June 30, 2017
Goodwill...................................................
Accumulated impairment losses ..............
Acquisitions..................................................
Disposals 1 ....................................................
Balance at June 30, 2018
Goodwill...................................................
Accumulated impairment losses ..............
National
Media
Local
Media
Total
931.3 $
(116.9)
814.4
12.5
68.8 $
—
68.8
11.8
943.8
(116.9)
826.9
1,028.0
(54.9)
80.6
—
80.6
35.2
—
1,000.1
(116.9)
883.2
24.3
1,024.4
(116.9)
907.5
1,063.2
(54.9)
1,800.0
—
1,800.0 $
$
115.8
—
115.8 $
1,915.8
—
1,915.8
1 In connection with the sale of MXM, goodwill was reduced by $171.8 million and accumulated
impairment losses was reduced by $116.9 million.
Historically, the Company’s goodwill reporting units were magazine brands, MXM, and local media. Due to the
sale of MXM and acquisition of Time, management reevaluated its goodwill reporting units. As a result, the
Company’s reporting units are now national media, local media excluding MNI, and MNI. No reallocation of
existing goodwill was required as a result of the change in reporting units as the goodwill attributable to the
previous MXM reporting unit was disposed of in the sale of MXM and the goodwill attributable to MNI results
from the acquisition of Time.
The national media reporting unit aligns to our national media operating segment. The local media excluding MNI
and MNI segments, which have $80.6 million and $35.2 million of goodwill, respectively, at June 30, 2018, are
both within our local media operating segment.
During its annual impairment reviews as of May 31, 2018, management performed a quantitative goodwill
impairment test for the national media reporting unit. Based on the results of this analysis, the fair value exceeded
the carrying value and thus resulted in no indication of impairment.
82
The Company performed qualitative assessments for the local media excluding MNI reporting unit and the MNI
reporting unit during its annual impairment reviews as of May 31, 2018, neither of which indicated impairment.
Therefore, quantitative goodwill impairment analyses for the local media excluding MNI reporting unit and the
MNI reporting unit were not deemed necessary in fiscal 2018.
In fiscal 2017, the Company performed its annual goodwill impairment analysis on the magazine brands, MXM,
and local media reporting units as of May 31, 2017. No impairments were recorded as a result of these reviews.
In fiscal 2016, the Company determined that triggering events, including reduced operating and cash flow forecasts,
required the Company to perform an evaluation of goodwill for the MXM reporting unit for impairment. Due to the
timing of the triggering events, this testing was performed in conjunction with the Company’s annual impairment
testing as of May 31, 2016. This evaluation indicated that the carrying value of MXM’s goodwill exceeded its
estimated fair value. As a result, the Company recorded a pre-tax non-cash impairment charge of $116.9 million to
reduce the carrying value of MXM’s goodwill in fiscal 2016. The Company recorded an income tax benefit of $9.5
million related to this charge. This impairment charge is recorded in the impairment of goodwill and other long-
lived assets line in the Consolidated Statements of Earnings.
Meredith performed a goodwill impairment analysis on the magazine brands and local media reporting units as of
May 31, 2016. No impairments were recorded as a result of these reviews.
6. Restructuring Accruals
During fiscal 2018, management committed to and executed upon several performance improvement plans,
including those related to the integration of Time as well as other smaller restructurings.
As part of the Company’s plan to realize cost synergies from the Acquisition management committed to a
performance improvement plan to reduce headcount. In addition to the Acquisition related plan, smaller
performance improvement plans took place during the year that were related to the strategic decisions to no longer
publish Fit Pregnancy and Baby magazine as a standalone title, but instead to include it as a feature within Parents
magazine, and to no longer publish FamilyFun and Martha Stewart Weddings as subscription titles, but rather to sell
them on the newsstand as special interest publications. The fiscal 2018 performance improvement plans affected
approximately 1,800 employees, primarily in the national media and unallocated corporate departments. In
connection with these plans the Company recorded a pre-tax restructuring charge of $104.9 million for severance
and related benefit costs related to the involuntary termination of employees and other write-downs of $0.5 million,
which are recorded in the acquisition, disposition, and restructuring related activities line of the Consolidated
Statements of Earnings. The headcount reductions are expected to be substantially completed by January 2019.
Details of the severance and related benefit costs by segment for the performance improvement plans are as
follows:
Year ended June 30, 2018
(in millions)
National media ......................................................
Local media...........................................................
Unallocated Corporate ..........................................
Amount
Accrued
Total Amount
Expected to be
Incurred
$
$
51.5
0.9
52.5
104.9
$
$
52.5
0.9
54.0
107.4
During fiscal 2017, management committed to several performance improvement plans related primarily to
business realignments. These actions resulted in selected workforce reductions. In connection with these plans, the
83
Company recorded pre-tax restructuring charges totaling $12.4 million including $11.9 million for severance and
related benefit costs related to the involuntary termination of employees and other accruals of $0.3 million. The
majority of severance costs have been paid out. The plans affected approximately 215 employees. The Company
also wrote down manuscript and art inventory by $0.2 million. These costs and expenses are recorded in the
acquisition, disposition, and restructuring related activities line of the Consolidated Statements of Earnings.
During fiscal 2016, management committed to several performance improvement plans that resulted in selected
workforce reductions related primarily to business realignments from recent acquisitions and the closing of MORE
magazine effective following the publication of the April 2016 issue. In connection with these plans, the Company
recorded pre-tax restructuring charges of $10.3 million. The restructuring charges included severance and related
benefit costs of $9.8 million related to the involuntary termination of employees. These plans affected
approximately 150 employees. The Company also wrote down related manuscript and art inventory by $0.5 million,
These costs and expenses are recorded in the acquisition, disposition, and restructuring related activities of the
Consolidated Statements of Earnings.
During the years ended June 30, 2018, 2017, and 2016, the Company recorded reversals of $0.8 million, $1.8
million, and $3.2 million, respectively, of excess restructuring reserves accrued in prior fiscal years. The reversals
of excess restructuring reserves are recorded as a credit in the acquisition, disposition, and restructuring related
activities line of the Consolidated Statements of Earnings.
Details of changes in the Company’s restructuring accrual are as follows:
Years ended June 30,
(in millions)
Balance at beginning of year ......................................... $
Accrual on Time’s opening balance sheet .....................
Accruals .........................................................................
Cash payments...............................................................
Other accruals ................................................................
Reversal of excess accrual.............................................
Balance at end of year ................................................... $
Employee
Terminations
2018
Other Exit
Costs
Total
8.7 $
38.5
104.9
(49.9)
(0.1)
(0.8)
101.3 $
— $
6.6
1.4
(1.7)
—
—
6.3 $
8.7
45.1
106.3
(51.6)
(0.1)
(0.8)
107.6
2017
Employee
Terminations
7.4
$
—
11.9
(8.8)
—
(1.8)
8.7
$
As of June 30, 2018, of the $107.6 million liability, $91.6 million was classified as current liabilities on the
Consolidated Balance Sheets, with the remaining $16.0 million classified as noncurrent liabilities. Amounts
classified as noncurrent liabilities are expected to be paid through 2020 and relate primarily to severance costs.
84
7. Long-term Debt
Long-term debt consists of the following:
(In millions)
Variable-rate credit facility
June 30, 2018
Unamortized
Discount and
Debt Issuance
Costs
Principal
Balance
Carrying
Value
Senior credit facility term loan, due 1/31/2025 .......................... $
Revolving credit facility of $350 million, due 1/31/2023...........
1,795.5 $
—
(33.4) $
—
1,762.1
—
Senior Unsecured Notes
6.875% senior notes, due 2/1/2026..............................................
Total long-term debt ........................................................................
Current portion of long-term debt ...................................................
Long-term debt ................................................................................ $
1,400.0
3,195.5
(18.0)
3,177.5 $
(26.5)
(59.9)
0.3
(59.6) $
1,373.5
3,135.6
(17.7)
3,117.9
(In millions)
Variable-rate credit facilities
June 30, 2017
Unamortized
Discount and
Debt Issuance
Costs
Principal
Balance
Carrying
Value
Asset-backed bank facility of $100 million, due 10/20/2017 ..... $
Revolving credit facility of $200 million, due 11/30/2021.........
Term loan due 11/30/2021 ..........................................................
Private placement notes
3.04% senior notes, due 3/1/2018................................................
Floating rate senior notes, due 12/19/2022..................................
Floating rate senior notes, due 2/28/2024....................................
Total long-term debt ........................................................................
Current portion of long-term debt ...................................................
Long-term debt ................................................................................ $
75.0 $
85.0
240.6
50.0
100.0
150.0
700.6
(62.5)
638.1 $
— $
—
(2.0)
—
(0.2)
(0.2)
(2.4)
—
(2.4) $
75.0
85.0
238.6
50.0
99.8
149.8
698.2
(62.5)
635.7
The following table shows principal payments on the debt due in succeeding fiscal years:
Years ending June 30,
(In millions)
2019 ................................................. $
18.0
2020 .................................................
18.0
2021 .................................................
18.0
2022 .................................................
18.0
2023 .................................................
18.0
3,105.5
Thereafter.........................................
Total long-term debt ........................ $ 3,195.5
On January 31, 2018, in connection with the Acquisition, the Company repaid and terminated its existing
indebtedness. In connection with the payoff of this indebtedness, Meredith recognized a loss on extinguishment of
85
debt of $2.2 million. Also in conjunction with the repayment of debt, the Company settled the associated interest
rate swap agreements and recognized a gain on the settlement of $1.6 million. The loss on extinguishment of debt
and gain on the settlement of the swaps are both presented in the interest expense, net line in the Consolidated
Statements of Earnings.
In connection with the Acquisition, on January 31, 2018, the Company entered into new credit arrangements with a
total capacity of $3.6 billion comprised of a variable-rate credit facility and senior unsecured notes. The variable-
rate credit facility includes a secured term loan (Term Loan B) with $1.8 billion of aggregate principal and a five-
year senior secured revolving credit facility of $350.0 million, of which $175.0 million is available for the issuance
of letters of credit and $35.0 million of swingline loans. On June 30, 2018 there were no borrowings outstanding
under the revolving credit facility. There were $3.4 million of standby letters of credit issued under the revolving
credit facility resulting in availability of $346.6 million at June 30, 2018. The Term Loan B matures in 2025 and
amortizes at 1.0 percent per annum in equal quarterly installments until the final maturity date, at which time the
remaining principal and interest are due and payable.
The interest rate under the Term Loan B is based on LIBOR plus a spread of 3.0 percent while the revolving credit
facility bears interest at LIBOR plus a spread ranging from 2.5 percent to 3.0 percent. The Term Loan B bore
interest at a rate of 5.09 percent at June 30, 2018. The revolving credit facility has a commitment fee ranging from
0.375 percent to 0.500 percent of the unused commitment. All interest rates and commitment fees associated with
this variable-rate revolving credit facility are derived from a leverage-based pricing grid. The senior unsecured
notes have an aggregate principal balance of $1.4 billion maturing in 2026 (2026 Senior Notes) with an interest rate
of 6.875 percent per annum. Total outstanding principal is due at the final maturity date.
In connection with the issuance of this indebtedness, the Company incurred $14.7 million of deferred financing
costs and $56.0 million of discount costs that are being amortized into interest expense over the lives of the
respective facilities.
During the third quarter of fiscal 2018, the Company also incurred a $17.5 million bridge loan commitment fee. The
fee is presented in the interest expense, net line in the Consolidated Statements of Earnings.
Interest expense related to long-term debt and the amortization of the associated debt issuance costs totaled $92.9
million in fiscal 2018, $18.8 million in fiscal 2017, and $20.3 million in fiscal 2016.
8. Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the
Tax Reform Act. The Tax Reform Act makes broad and complex changes to the U.S. tax code that affected our
fiscal year ended June 30, 2018, including, but not limited to, (1) reducing the U.S. federal corporate tax rate, (2)
bonus depreciation that allows for full expensing of qualified property and (3) limitations on the deductibility of
interest expense and certain executive compensation and (4) a one-time transition tax on certain unrepatriated
earnings of foreign subsidiaries. The Tax Reform Act reduced the federal corporate tax rate to 21 percent in the
fiscal year ended June 30, 2018. Pursuant to Section 15 of the Internal Revenue Code, the Company applied a
blended corporate tax rate of 28 percent for fiscal 2018, which was based on the applicable tax rates before and
after the Tax Reform Act and the number of days in the year.
The SEC issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Reform Act.
SAB 118 provides a measurement period that should not extend beyond one year from the Tax Reform Act
enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company
must reflect the income tax effects of those aspects of the Tax Reform Act for which the accounting under ASC 740
is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Reform Act is
incomplete but it can determine a reasonable estimate, it must record a provisional estimate in the consolidated
financial statements. If a company cannot determine a provisional estimate to be included in the consolidated
86
financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in
effect immediately before the enactment of the Tax Reform Act.
In connection with our initial analysis of the impact of the Tax Reform Act, we recorded a provisional net tax
benefit of $133.0 million in the quarter ended December 31, 2017. This net benefit primarily consists of a benefit
for the corporate rate reduction. As the Company was projecting a net operating loss for the fiscal year ended
June 30, 2018, deferred tax assets and liabilities expected to be recognized in the fiscal year ended June 30, 2018,
were remeasured using the 21 percent U.S. corporate tax rate. Due to our limited international operations, the
impact of the transitional tax was immaterial.
During the quarter ended June 30, 2018, we did not make any provisional adjustment to the amount. We continue to
assess new guidance issued by tax authorities as well as our ability to change certain methods of accounting and
expect to finalize our accounting for the provision of the Tax Reform Act within the measurement period.
Effective July 1, 2017, the Company adopted new accounting guidance related to share-based compensation. Under
this new guidance, excess tax benefits and deficiencies are to be recognized as a discrete component of the income
tax provision in the period they occur and not as an adjustment to additional paid-in capital. As such, the Company
recognized an excess tax benefit of $2.2 million as a credit to income tax expense in the Consolidated Statements of
Earnings in fiscal 2018.
The following table shows income tax expense attributable to earnings from continuing operations before income
taxes:
Years ended June 30,
(In millions)
Currently payable
2018
2017
2016
Federal ................................. $
State .....................................
Foreign.................................
1.8
1.2
0.2
3.2
Deferred
Federal .................................
State .....................................
Foreign.................................
(129.9)
3.2
(0.1)
(126.8)
Income taxes............................... $ (123.6)
$
$
62.2
0.4
—
62.6
33.0
5.8
—
38.8
101.4
$
$
59.2
7.3
—
66.5
8.3
1.5
—
9.8
76.3
The differences between the statutory U.S. federal income tax rate and the effective tax rate were as follows:
Years ended June 30,
U.S. statutory tax rate ...................................................
State income taxes, less federal income tax benefits ....
Foreign operations ........................................................
Rate change...................................................................
Settlements - audits / tax litigation ...............................
Impairment of goodwill ................................................
Sale of domestic subsidiary ..........................................
Other .............................................................................
Effective income tax rate ..............................................
2018
28.1%
27.8
(74.2)
1,312.5
10.4
—
67.3
(89.5)
1,282.4%
2017
35.0%
3.0
—
—
(2.3)
—
—
(0.8)
34.9%
2016
35.0%
3.6
—
—
(0.4)
29.3
—
1.7
69.2%
87
The Company’s effective tax rate was 1,282.4 percent in fiscal 2018, 34.9 percent in fiscal 2017, and 69.2 percent
in fiscal 2016. The fiscal 2018 effective tax rate was primarily impacted by a credit to income taxes of $133.0
million related to tax reform. The fiscal 2017 effective tax rate was primarily impacted by a credit to income taxes
of $6.7 million related to the resolution of certain federal and state tax uncertainties recorded in fiscal 2017. In
fiscal 2016, the Company recorded an impairment of goodwill of $116.9 million, of which approximately 20
percent was deductible for income tax purposes.
The tax effects of temporary differences that gave rise to deferred tax assets and deferred tax liabilities were as
follows:
June 30,
(In millions)
Deferred tax assets
2018
2017
Accounts receivable allowances and return reserves......................... $
Compensation and benefits ................................................................
Indirect benefit of uncertain state and foreign tax positions..............
Investment in foreign subsidiary........................................................
Tax loss carryforwards .......................................................................
All other assets...................................................................................
Total deferred tax assets ...........................................................................
Valuation allowance..................................................................................
Net deferred tax assets..............................................................................
Deferred tax liabilities
Subscription acquisition costs............................................................
Accumulated depreciation and amortization .....................................
Deferred gains from dispositions .......................................................
All other liabilities .............................................................................
Total deferred tax liabilities......................................................................
Net deferred tax liability........................................................................... $
6.8
44.0
6.4
62.1
128.5
8.0
255.8
(21.1)
234.7
43.4
600.9
15.7
7.2
667.2
432.5
$
$
11.0
47.2
5.1
—
—
7.7
71.0
—
71.0
86.4
329.8
29.8
9.7
455.7
384.7
The Company has $102.4 million of net operating loss carryforwards for federal purposes and $137.2 million for
state purposes, which, if unused, have expiration dates through fiscal 2038. The Company has $251.4 million of
capital loss carryforwards. It is expected that all federal net operating loss carryforwards and all capital loss
carryforwards will be utilized prior to expiration.
There was an increase in the valuation allowance of approximately $21.1 million during the fiscal 2018, which was
recorded in connection with the Acquisition and which related primarily to foreign and state net operating losses.
88
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as
follows:
Years ended June 30,
(In millions)
Balance at beginning of year ..................................................... $
Increase in positions acquired in business combination............
Increases in tax positions for prior years ...................................
Decreases in tax positions for prior years..................................
Increases in tax positions for current year .................................
Settlements ................................................................................
Lapse in statute of limitations....................................................
Balance at end of year ............................................................... $
2018
2017
29.5
31.9
0.4
—
5.6
(4.2)
(3.0)
60.2
$
$
37.9
—
0.8
(3.1)
2.9
(0.2)
(8.8)
29.5
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $49.7
million as of June 30, 2018, and $18.2 million as of June 30, 2017. The Company recognizes interest and penalties
related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest and
penalties related to unrecognized tax benefits was $8.4 million and $6.0 million as of June 30, 2018 and 2017,
respectively.
The total amount of unrecognized tax benefits at June 30, 2018, may change significantly within the next 12
months, decreasing by an estimated range of $24.5 million to $6.7 million. The change, if any, may result primarily
from foreseeable federal and state examinations, ongoing federal and state examinations, anticipated state
settlements, expiration of various statutes of limitation, the results of tax cases, or other regulatory developments.
The Company’s federal tax returns for fiscal years prior to fiscal 2013 are no longer subject to IRS examination.
However, certain items from completed examinations of fiscal 2006 through fiscal 2012 are still pending final
resolution as of June 30, 2018. Fiscal 2013 through fiscal 2015 are under IRS examination. In addition, Time is
under IRS examination for the period 2008 - 2014 (pre-spin). The Company has various state income tax
examinations ongoing and at various stages of completion, but generally the state income tax returns have been
audited or closed to audit through fiscal 2005.
The complete legal and structural separation of Time Warner Inc.’s (Time Warner) magazine publishing and related
business from Time Warner (the Spin-Off) was completed by way of a pro rata dividend of Time Inc. shares held by
Time Warner to its stockholders as of May 23, 2014, based on a distribution ratio of one share of Time Inc. common
stock for every eight shares of Time Warner common stock held (the Distribution). In connection with the
acquisition of Time, the Company assumed the Tax Matters Agreement (TMA) entered into with Time Warner that
requires Time to indemnify Time Warner for certain tax liabilities for periods prior to the Spin-Off from Time
Warner, which was completed on June 6, 2014. With respect to taxes other than those incurred in connection with
the Spin-Off, the TMA provides that the Company will indemnify Time Warner for (1) any taxes of Time and its
subsidiaries for all periods after the Distribution and (2) any taxes of the Time Warner group for periods prior to the
Distribution to the extent attributable to Time or its subsidiaries. For purposes of the indemnification described in
clause (2), however, Time will generally be required to indemnify Time Warner only for any such taxes that are paid
in connection with a tax return filed after the Distribution or that result from an adjustment made to such taxes after
the Distribution. In these cases, Time’s indemnification obligations generally would be computed based on the
amount by which the tax liability of the Time Warner group is greater than it would have been absent Time’s
inclusion in its tax returns (or absent the applicable adjustment). Time and Time Warner will generally have joint
control over tax authority audits or other tax proceeding related to Time specific tax matters. As of June 30, 2018,
the Company has recorded a liability in connection with the TMA of $26.0 million.
89
9. Commitments and Contingent Liabilities
The Company has commitments under certain firm contractual arrangements (firm commitments) to make future
payments. These firm commitments secure the future rights to various assets and services to be used in the normal
course of operations. Commitments not recorded on the Consolidated Balance Sheets consist primarily of operating
lease arrangements, talent commitments, and purchase obligations for goods and services. Other commitments,
which are recorded on the Consolidated Balance Sheets, consist primarily of debt and pension obligations.
Commitments expected to be paid over the next five years and thereafter are as follow:
Payments Due In
Years ending June 30,
2019
2020
2021
2022
2023 Thereafter
Total
(in millions)
Operating leases ................................ $
Broadcast rights payable
Recorded commitments.................
Unavailable rights .........................
Total commitments............................ $
66.8 $
62.2 $
58.9 $
55.2 $
54.6 $
459.5 $
757.2
8.9
11.3
87.0 $
6.1
12.8
81.1 $
5.6
2.3
66.8 $
4.7
—
59.9 $
3.7
—
58.3 $
0.7
—
460.2 $
29.7
26.4
813.3
The Company occupies certain facilities and uses certain equipment under long-term, non-cancelable operating
lease agreements through 2032. Future minimum operating lease payments have been reduced by future minimum
sublease income of $6.6 million in fiscal 2019, $6.6 million in fiscal 2020, $7.4 million in fiscal 2021, $8.2 million
in fiscal 2022, $8.4 million in fiscal 2023, and $32.8 million thereafter. Non-cancellable sublease income is
committed through 2026. Rent expense under such leases was $45.9 million in fiscal 2018, $20.1 million in fiscal
2017, and $20.9 million in fiscal 2016.
The Company has recorded commitments for broadcast rights payable in future fiscal years. The Company also is
obligated to make payments under contracts for broadcast rights not currently available for use and therefore not
included in the consolidated financial statements. Such unavailable rights amounted to $26.4 million at June 30,
2018. The fair value of these commitments for unavailable broadcast rights, determined by the present value of
future cash flows discounted at the Company’s current borrowing rate, was $24.4 million at June 30, 2018.
Legal Proceedings
In the ordinary course of business, Meredith is a defendant in or party to various legal claims, actions, and
proceedings. These claims, actions and proceedings are at varying stages of investigation, arbitration, or
adjudication, and involve a variety of areas of law. Time, which is now a wholly-owned subsidiary, previously
reported on, and the Company updates below, the following legal proceedings.
On October 26, 2010, the Canadian Minister of National Revenue denied the claims by Time Inc. Retail (formerly
Time/Warner Retail Sales & Marketing, Inc.) (TIR) for input tax credits in respect of goods and services tax that
TIR had paid on magazines it imported into and had displayed at retail locations in Canada during the years 2006 to
2008, on the basis that TIR did not own those magazines and issued Notices of Reassessment in the amount of
approximately C$52 million. On January 21, 2011, TIR filed an objection to the Notices of Reassessment with the
Chief of Appeals of the Canada Revenue Agency (CRA), arguing that TIR claimed input tax credits only in respect
of goods and services tax it actually paid and, regardless of whether its payment of the goods and services tax was
appropriate or in error, it is entitled to a rebate for such payments. On September 13, 2013, TIR received Notices of
Reassessment in the amount of C$26.9 million relating to the disallowance of input tax credits claimed by TIR for
goods and services tax that TIR had paid on magazines it imported into and had displayed at retail locations in
Canada during the years 2009 to 2010. On October 22, 2013, TIR filed an objection to the Notices of Reassessment
received on September 13, 2013 with the Chief of Appeals of the CRA, asserting the same arguments made in the
objection TIR filed on January 21, 2011. Beginning in 2015, the collections department of the CRA requested
payment of both assessments plus accrued interest or the posting of sufficient security. In each instance, TIR
90
responded by stating that collection should remain stayed pending resolution of the issues raised by TIR’s objection.
Including interest accrued, the total of the reassessments claimed by the CRA for the years 2006 to 2010 was C$91
million as of November 30, 2015. On February 8, 2016, the Company filed an application for a remission order
with the International Trade Policy Division of Finance Canada to seek relief from the assessments and the CRA’s
collection efforts. The matter is currently subject to a proceeding in the Tax Court of Canada to resolve the issue of
whether TIR or the publishers are entitled to the input tax credits. On March 31, 2017, the Company and the CRA
jointly proposed a timetable for the completion of certain pre-trial steps related to this matter, which was approved
by the Tax Court. In accordance with the timetable, on April 28, 2017, TIR filed an Amended Notice of Appeal of
the assessments. In June 2017, the CRA filed a Reply to TIR's Amended Notice of Appeal and the Company filed an
answer to the CRA reply in July 2017. The parties are currently engaged in discovery. The Company denies liability
and intends to vigorously defend itself and pursue all defenses available to eliminate or mitigate liability.
In July 2017 and November 2017, Time received subpoenas from the Enforcement Division of the staff of the SEC
requiring Time to provide documents relating to its accounting for goodwill and asset impairments, restructuring
and severance costs, and its analysis and reporting of Time’s segments. The Company is cooperating with the SEC
in the investigation. Management cannot at this time predict the eventual scope or outcome of this matter.
The Company establishes an accrued liability for specific matters, such as a legal claim, when the Company
determines both that a loss is probable and the amount of the loss can be reasonably estimated. Once established,
accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of any loss
ultimately incurred in relation to matters for which an accrual has been established may be higher or lower than the
amounts accrued for such matters. Due to the inherent difficulty of predicting the outcome of litigation, claims and
other matters, the Company often cannot predict what the eventual outcome of a pending matter will be, or what the
timing or results of the ultimate resolution of a matter will be. Accordingly, for the matters described above, the
Company is unable to predict the outcome or reasonably estimate a range of possible loss.
10. Fair Value Measurements
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. Specifically, it establishes a
hierarchy prioritizing the use of inputs in valuation techniques. The defined levels within the hierarchy are as
follows:
• Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2
Inputs other than quoted prices included within Level 1 that are either directly or indirectly
observable; and
• Level 3 Assets or liabilities for which fair value is based on valuation models with significant unobservable
pricing inputs and which result in the use of management estimates.
The following table sets forth the carrying value and the estimated fair value of the Company’s financial
instruments not measured at fair value on a recurring basis:
(In millions)
Broadcast rights payable....................................... $
Long-term debt .....................................................
June 30, 2018
June 30, 2017
Carrying
Value
29.7
3,135.6
$
Fair Value
27.4
3,179.8
Carrying
Value
$
31.7
698.2
$
Fair Value
30.5
700.7
The fair value of broadcast rights payable was determined using the present value of expected future cash flows
discounted at the Company’s current borrowing rate with inputs included in Level 3. The fair value of total long-
term debt is based on pricing from observable market information in a non-active market, therefore is included in
Level 2.
91
As of June 30, 2018, the Company had assets related to its qualified pension plans measured at fair value. The
required disclosures regarding such assets are presented within Note 11. In addition, the Company has liabilities
related to contingent consideration payables that are valued at estimated fair value as discussed in Note 2.
The following table sets forth the assets and liabilities measured at fair value on a recurring basis:
(In millions)
Machinery and equipment
June 30, 2018
June 30, 2017
Corporate airplanes, held-for-sale ................... $
Other assets
Interest rate swaps ...........................................
Accrued expenses and other liabilities
Contingent consideration.................................
Interest rate swaps ...........................................
Deferred compensation plans ..........................
Other noncurrent liabilities
Contingent consideration.................................
Deferred compensation plans ..........................
$
—
—
24.6
—
8.4
0.8
21.0
1.9
0.2
4.0
0.6
0.3
30.2
2.1
The fair value of interest rate swaps was determined based on discounted cash flows derived using market
observable inputs including swap curves that were included in Level 2. The fair value of deferred compensation
plans is derived from quotes from observable market information, and thus represent Level 2 measurements. The
fair values of the contingent consideration and corporate airplanes are based on significant inputs not observable in
the market and thus represent Level 3 measurements.
At June 30, 2018, certain national media trademarks were partially impaired during fiscal 2018 and thus deemed to
be measured at fair value on a non-recurring basis which totaled $33.0 million. Those trademarks were not
considered to be measured at fair value as of June 30, 2017. The fair values of the trademarks are determined based
on significant inputs not observable in the market and thus represents a Level 3 measurement. The key assumptions
used to determine the fair value include discount rates, estimated cash flows, royalty rates, and revenue growth
rates. The discount rate used is based on several factors including market interest rates, a weighted average cost of
capital analysis based on the target capital structure, and includes adjustments for market risk and Company specific
risk. Estimated cash flows are based upon internally developed estimates and the revenue growth rates are based on
industry knowledge and historical performance. For further discussion, refer to Note 5.
92
The following table represents the changes in the fair value of Level 3 contingent consideration, corporate airplanes,
trademarks, investment in Next Issue Media, and lease guarantees for the years ended June 30, 2018 and 2017.
Years ended June 30,
2018
2017
(in millions)
Contingent consideration
Balance at beginning of year ................................................... $
Accrual on Time’s opening balance sheet 1 .............................
Additions due to acquisitions...................................................
Payments 1 ...............................................................................
Fair value adjustment of contingent consideration..................
Balance at end of year.............................................................. $
Corporate airplanes held-for-sale
Balance at beginning of year ................................................... $
Fair value adjustment of corporate airplanes...........................
Sale ..........................................................................................
Balance at end of year.............................................................. $
Trademarks
Balance at beginning of year 2 ................................................. $
Impairment...............................................................................
Balance at end of year.............................................................. $
Investment in Next Issue Media
Balance at beginning of year 3 ................................................. $
Additions due to investment and acquisition...........................
Equity method investment losses.............................................
Impairment...............................................................................
Sale ..........................................................................................
Balance at end of year.............................................................. $
Lease guarantee
Balance at beginning of year ................................................... $
Accrual on Time’s opening balance sheet ...............................
Issuance of new guarantees .....................................................
Fair market value adjustment of lease guarantees ...................
Foreign currency exchange impact..........................................
Balance at end of year.............................................................. $
$
$
$
34.2
1.1
—
(5.1)
(4.8)
25.4
1.9
—
(1.9)
— $
$
$
$
55.7
(22.7)
33.0
11.0
3.3
(3.6)
(9.3)
(1.4)
— $
— $
3.6
9.2
(0.4)
(0.5)
11.9
$
56.6
—
7.7
(10.6)
(19.5)
34.2
2.8
(0.9)
—
1.9
5.3
(5.3)
—
—
—
—
—
—
—
—
—
—
—
—
—
1 Of this amount, $0.5 million was classified in liabilities associated with assets held-for-sale on the opening balance
sheet, and was subsequently paid in fiscal 2018.
2 Book value of trademarks impaired during the year.
3 Book value of investment impaired during the year.
The fair value adjustment of contingent consideration is the change in the estimated earn out payments based on
projections of performance and the amortization of the present value discount. The fair value adjustment of
contingent consideration is included in selling, general, and administrative line on the Consolidated Statements of
Earnings.
93
In fiscal 2016, the Company committed to a plan to sell the Company’s two corporate airplanes. In conjunction with
that plan, the Company classified the airplanes as held-for-sale and wrote the assets down to fair value. The
airplanes were recorded at fair value until their sale in fiscal 2018.
The fair value adjustment of corporate airplanes and impairment of trademarks are included in the impairment of
goodwill and other long-lived assets in the Consolidated Statement of Earnings. Next Issue Media was reported as a
cost method investment as of June 30, 2017, and the impairment of this investment is recorded in non-operating
expense, net in the Consolidated Statement of Earnings.
In the Acquisition, the Company assumed lease guarantees related to space leased by various former Time
subsidiaries. The fair value of the lease guarantees was derived using a probability weighted present value of
expected future payments using the with-and-without approach, for which the Company used unobservable inputs
that are classified as Level 3 under the fair value hierarchy. The lease guarantee liabilities are being amortized into
earnings on a straight-line basis over the lives of the respective leases, the longest of which extends through
November 2030. The lease guarantees are not considered to be measured at fair value at June 30, 2018.
11. Pension and Postretirement Benefit Plans
Defined Contribution Plans
The Company sponsors defined contribution saving plans for most of its U.S. based employees. Eligible Company
employees may participate in the Meredith Savings and Investment Plan. In connection with the Acquisition, certain
employees still participate in the defined contribution savings plan that Time had in place for their employees in the
U.S., the Time Inc. Savings Plan. The Company’s existing and assumed Time defined contribution plans allow
eligible employees to contribute a percentage of their salary, commissions, and bonuses in accordance with plan
limitations and provisions of Section 401(k) of the Internal Revenue Code (Section 401(k)) and the Company
makes matching contributions to each plan subject to the limits of the respective 401(k) Plans.
For the Meredith Savings and Investment Plan, the Company currently matches 100 percent of the first 4 percent
and 50 percent of the next 1 percent of employee contributions. For the Time Inc. Savings Plan, the Company
matches 100 percent of the first 4 percent and 50 percent of the next 2 percent of eligible compensation. In addition
to the annual employer contribution made to the Time Inc. Savings Plan, following the plan year, the Company
makes an employer match contribution of up to 5 percent of each participant’s compensation less any employer
matching contribution made within the plan year to those participants who contributed up to 6 percent of their
compensation for the plan year.
Both plans allow employees to choose among various investment options. The Meredith Savings and Investment
Plan also includes an investment option in the Company’s common stock. Matching contributions are invested in
the same manner as the participants’ pre-tax contributions. Company contribution expense under these plans totaled
$19.6 million in fiscal 2018, $10.9 million in fiscal 2017, and $9.6 million in fiscal 2016.
In connection with the Acquisition, the Company assumed responsibility for sponsoring The Time Inc.
Supplemental Savings Plan (Supplemental Plan). The Supplemental Plan permits eligible employees who
participate in the Time Inc. Savings Plan and are limited in the amount they can contribute under Section 401(k) to
defer a percentage of eligible compensation and receive a company matching deferral of up to 5 percent of eligible
compensation. The matching contributions vest after two years of Company service pursuant to Section 409A of the
Internal Revenue Code and limitations described in the Supplemental Plan.
The Company sponsors the Meredith Corporation Deferred Compensation Plan. In connection with the Acquisition,
the Company assumed responsibility for sponsoring The Time Inc. Deferred Compensation Plan, which is a frozen
plan (collectively the Deferred Compensation Plans). The Deferred Compensation Plans allow participants to defer
certain bonuses and salaries. No actual monies are set aside in respect of the Deferred Compensation Plans and
participants have no rights to Company assets in respect of plan liabilities in excess of general unsecured creditors.
94
The liabilities associated with the plans fluctuate with hypothetical yields of the underlying investments. Liabilities
for the uncollateralized plans, were approximately $29.4 million at June 30, 2018, of which approximately $8.4
million was reflected in accrued compensation and benefits and approximately $21.0 million was reflected within
other noncurrent liabilities on the Consolidated Balance Sheets.
Pension and Postretirement Plans
Meredith has U.S. noncontributory pension plans covering substantially all employees who were employed by
Meredith prior to the Acquisition. In connection with the Acquisition, the Company assumed the obligations under
Time’s various international pension plans including plans in the U.K., Netherlands, and Germany. These domestic
and international plans include qualified (funded) plans as well as nonqualified (unfunded) plans. These plans
provide participating employees with retirement benefits in accordance with benefit provision formulas. The
nonqualified plans provide retirement benefits only to certain highly compensated employees. The Company also
sponsors defined healthcare and life insurance plans that provide benefits to eligible retirees.
Obligations and Funded Status
The following tables present changes in, and components of, the Company’s net assets/liabilities for pension and
other postretirement benefits:
June 30,
Pension
Postretirement
Domestic
2018
2017
Inter-
national
2018
Domestic
2018
2017
(In millions)
Change in benefit obligation
Benefit obligation, beginning of year ............................. $ 170.9 $ 161.9
Acquisitions 1 ..................................................................
—
12.5
Service cost .....................................................................
4.9
Interest cost .....................................................................
—
Participant contributions .................................................
0.5
Plan amendments ............................................................
3.6
Net actuarial loss (gain) ..................................................
(12.5)
Benefits paid (including lump sums) ..............................
—
Curtailments ....................................................................
—
Foreign currency exchange rate impact ..........................
Benefit obligation, end of year........................................ $ 179.4 $ 170.9
—
13.0
5.9
—
1.2
2.4
(12.9)
(1.1)
—
Change in plan assets
Fair value of plan assets, beginning of year.................... $ 139.2 $ 122.6
Acquisitions 1 ..................................................................
—
18.5
Actual return on plan assets ............................................
10.6
Employer contributions...................................................
—
Participant contributions .................................................
(12.5)
Benefits paid (including lump sums) ..............................
—
Foreign currency exchange rate impact ..........................
Fair value of plan assets, end of year .............................. $ 139.0 $ 139.2
—
12.0
0.7
—
(12.9)
—
$ — $
836.6
—
8.0
—
—
(21.0)
(44.1)
—
(58.0)
$ 721.5
$
9.3 $
—
0.1
0.3
0.8
—
(0.8)
(1.3)
—
—
8.4 $
9.7
—
0.1
0.3
0.8
—
(0.2)
(1.4)
—
—
9.3
$ — $ — $ —
—
—
0.6
0.8
(1.4)
—
$ — $ —
867.7
(6.7)
88.9
—
(44.1)
(64.3)
$ 841.5
—
—
0.5
0.8
(1.3)
—
Over (under) funded status, end of year.......................... $ (40.4) $ (31.7)
$ 120.0
$
(8.4) $
(9.3)
1 The International pension plans were acquired with the acquisition of Time Inc. on January 31, 2018.
95
Benefits paid directly from Meredith assets are included both in employer contributions and benefits paid.
In connection with the sale of TIUK, the Company contributed £60.0 million to the IPC Media Pension Scheme
(IPC Plan) defined benefit pension plan in the U.K. We retained the IPC Plan in the sale of TIUK.
The following amounts are recognized in the Consolidated Balance Sheets:
June 30,
(In millions)
Other assets
Pension
Domestic
International
Postretirement
Domestic
2018
2017
2018
2018
2017
Prepaid benefit cost ................................................... $ 16.9
$ 16.9
$ 137.4
$ — $ —
Accrued expenses-compensation and benefits
Accrued benefit liability............................................
(9.9)
(5.8)
(0.2)
(0.6)
(0.7)
Other noncurrent liabilities
Accrued benefit liability............................................
(42.8)
Net amount recognized, end of year ................................ $ (40.4) $ (31.7)
(47.4)
(17.2)
$ 120.0
(7.8)
(8.4) $
(8.6)
(9.3)
$
The accumulated benefit obligation for the domestic defined benefit pension plans was $164.7 million and $154.0
million at June 30, 2018 and 2017, respectively. The accumulated benefit obligation for the international defined
benefit pension plans was $721.5 million at June 30, 2018.
The following table provides information about pension plans with projected benefit obligations and accumulated
benefit obligations in excess of plan assets:
June 30,
(In millions)
Projected benefit obligation .................. $
Accumulated benefit obligation ............
Fair value of plan assets ........................
Domestic
2018
2017
International
2018
$
57.3
51.6
0.1
48.7
42.6
0.1
$
28.4
28.4
11.0
96
Costs
The components of net periodic benefit costs recognized in the Consolidated Statements of Earnings were as
follows:
Pension
Postretirement
Domestic
2017
2016
2018
Years ended June 30,
(In millions)
Components of net periodic benefit costs
Service cost.................................................. $ 13.0 $ 12.5 $ 11.9
Interest cost..................................................
5.9
(11.0)
Expected return on plan assets.....................
0.2
Prior service cost (credit) amortization........
0.6
Actuarial loss (gain) amortization ...............
Settlement charge.........................................
5.6
Net periodic benefit costs (credit)................ $ 10.7 $ 12.0 $ 13.2
5.9
(10.5)
0.3
2.0
—
4.9
(9.2)
0.2
3.6
—
Inter-
national
2018
Domestic
2017
2018
2016
$ — $
8.0
(17.9)
—
—
0.2
0.1
0.4
—
(0.4)
(0.7)
—
$ (9.7) $ (0.3) $ (0.3) $ (0.6)
0.1 $
0.3
—
(0.4)
(0.3)
—
0.1 $
0.3
—
(0.4)
(0.3)
—
The amortization of amounts related to unrecognized prior service costs/credit and net actuarial gain/loss were
reclassified out of other comprehensive income as components of net periodic benefit costs.
The pension settlement charge recorded in fiscal 2016 related to cash distributions paid by the pension plan during
fiscal 2016 exceeding a prescribed threshold. This required that a portion of pension losses within accumulated
other comprehensive loss be realized in the period that the related pension liabilities were settled.
Amounts recognized in the accumulated other comprehensive loss component of shareholders’ equity for Company-
sponsored plans were as follows:
June 30,
Pension
Postretirement
Domestic
International
Domestic
2018
2017
2018
2018
2017
(In millions)
Unrecognized net actuarial losses (gains), net of taxes.... $ 20.7 $ 18.5
0.7
Unrecognized prior service cost (credit), net of taxes......
Total.................................................................................. $ 22.2 $ 19.2
1.5
$
$
2.6
—
2.6
$
$
(1.8) $
—
(1.8) $
(1.2)
(0.2)
(1.4)
During fiscal 2019, the Company expects to recognize as part of its net periodic benefit costs $1.9 million of net
actuarial losses and $0.5 million of prior service costs for the pension plans, and $0.6 million of net actuarial gains
and no prior service costs for the postretirement plan, net of taxes, in the accumulated other comprehensive loss
component of shareholders’ equity at June 30, 2018.
97
Assumptions
Benefit obligations were determined using the following weighted average assumptions:
June 30,
Weighted average assumptions
Discount rate ....................................................
Rate of compensation increase.........................
n/a - Not applicable
Pension
Domestic
International
2018
2017
2018
Postretirement
Domestic
2018
2017
4.03%
3.50%
3.41%
3.50%
2.57%
n/a
4.10% 3.65%
3.50% 3.50%
Net periodic benefit costs were determined using the following weighted average assumptions:
Years ended June 30,
Weighted average assumptions
Discount rate.................................
Expected return on plan assets .....
Rate of compensation increase .....
n/a - Not applicable
Pension
Postretirement
Domestic
2017
2018
2016
Inter-
national
2018
Domestic
2017
2018
2016
3.41%
8.00%
3.50%
2.98%
8.00%
3.50%
3.75%
8.00%
3.50%
2.57%
4.87%
3.50%
3.65%
n/a
3.50%
3.40%
n/a
3.50%
4.20%
n/a
3.50%
Plan trend rates are the annual rates of increase expected for medical benefits payable from the Plan. The assumed
health care trend rates used to measure the expected cost of benefits were as follows:
Assumed healthcare cost trend rates as of June 30,
Rate of increase in health care cost levels
Postretirement
2017
2016
2018
Initial level.......................................................
Ultimate level ..................................................
Years to ultimate level .....................................
6.50%
5.00%
4 years
7.00%
5.00%
5 years
7.00%
5.00%
6 years
Pension expense is calculated using a number of actuarial assumptions, including an expected long-term rate of
return on assets and a discount rate. In developing the expected long-term rate of return on plan assets, the
Company considered long-term historical rates of return, plan asset allocations as well as the opinions and outlooks
of investment professionals and consulting firms. Returns projected by such consultants and economists are based
on broad equity and bond indices. The objective is to select an average rate of earnings expected on existing plan
assets and expected contributions to the plan during the year. The Company reviews this long-term assumption on a
periodic basis.
The value (market-related value) of plan assets is multiplied by the expected long-term rate of return on assets to
compute the expected return on plan assets, a component of net periodic pension cost. The market-related value of
plan assets is a calculated value that recognizes changes in fair value over three years.
98
Assumed rates of increase in healthcare cost have a significant effect on the amounts reported for the healthcare
plans. A change of one percentage point in the assumed healthcare cost trend rates would have the following effects:
One
Percentage
Point Increase
One
Percentage
Point Decrease
(In millions)
Effect on service and interest cost components for fiscal 2018...............
Effect on postretirement benefit obligation as of June 30, 2018 .............
$ —
0.4
$ —
(0.3)
Plan Assets
The targeted and weighted average asset allocations by asset category for investments held by the Company’s
pension plans are as follows:
Domestic
International
2018 Allocation
2017 Allocation
2018 Allocation
June 30,
Equity securities......................
Fixed-income securities ..........
Other securities 1 .....................
Total ........................................
Target
70%
30%
—%
100%
Actual
70%
30%
—%
100%
Target
70%
30%
—%
100%
Actual
71%
29%
—%
100%
Target
32%
17%
51%
100%
Actual
18%
29%
53%
100%
1 Other primarily includes pooled investment funds.
Meredith’s investment policy for domestic plans seeks to maximize investment returns while balancing the
Company’s tolerance for risk. The plan fiduciaries oversee the investment allocation process. This includes
selecting investment managers, setting long-term strategic targets, and monitoring asset allocations. Target
allocation ranges are guidelines, not limitations, and plan fiduciaries may occasionally approve allocations above or
below a target range, or elect to rebalance the portfolio within the targeted range. The investment portfolio contains
a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across
domestic and international stocks and between growth and value stocks and small and large capitalizations. The
primary investment strategy currently employed is a dynamic target allocation method that periodically rebalances
among various investment categories depending on the current funded position. This program is designed to
actively move from return-seeking investments (such as equities) toward liability-hedging investments (such as
long-duration fixed-income) as funding levels improve. The reverse effect occurs when funding levels decrease.
The trustees of the IPC Plan have delegated the day-to-day investment decisions of the IPC Plan to a large
international fiduciary manager—and utilize an investment manager to monitor investment performance and the
reporting of the fiduciary manager. The investment objective of the IPC Plan is to invest the assets prudently with
the intention that the benefits promised to the members are provided. Funding level based de-risking triggers have
been established such that the investment strategy evolves as the funding level moves along an agreed glide path.
As the funding level improves, the investment strategy will de-risk. Each trigger level specifies a minimum interest
rate and hedge rate ratio and a maximum allocation to growth assets—which target a diversified portfolio using
specialist managers and asset classes.
Equity securities did not include any Meredith Corporation common or class B stock at June 30, 2018 or 2017.
99
Fair value measurements for domestic pension plan assets were as follows:
June 30, 2018
Total
Fair Value
Quoted
Prices
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
(In millions)
Investments in registered investment companies ....
Equity .................................................................. $
Fixed Income ......................................................
Pooled separate accounts.........................................
Total assets at fair value .......................................... $
97.0
40.4
1.6
139.0
June 30, 2017
Investments in registered investment companies ....
Equity .................................................................. $
Fixed Income ......................................................
Pooled separate accounts.........................................
Total assets at fair value .......................................... $
98.2
40.7
0.3
139.2
$
$
$
$
74.0
—
—
74.0
76.8
—
—
76.8
$
$
$
$
23.0
40.4
1.6
65.0
21.4
40.7
0.3
62.4
$
$
$
$
—
—
—
—
—
—
—
—
Fair value measurements for international pension plan assets, which were acquired in the Time acquisition, were as
follows:
June 30, 2018
Total
Fair Value
Quoted
Prices
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
(In millions)
Cash and cash equivalents....................................... $
Pooled investments..................................................
Equity ..................................................................
Fixed Income ......................................................
Other ...................................................................
Guaranteed investment contract ..............................
Total assets at fair value .......................................... $
17.6
$
155.1
242.0
415.8
11.0
841.5
$
5.2
—
—
—
—
5.2
$
12.4
$
155.1
242.0
415.8
11.0
836.3
$
$
—
—
—
—
—
—
The international pension plans hold investments in liability matching funds whose objective is to provide
leveraged returns equal to that of the liabilities. In order to do so, these funds invest in the respective UK Treasury
Gilt bonds, Gilt Total Return Swaps, Repurchase Transactions, and cash or money markets to provide liquidity to
meet payment obligations or post as collateral in the derivative transactions they enter into. These liability matching
funds are included in Other, in the fair value level table above.
The Company primarily utilizes the market approach for determining recurring fair value. The fair value of the
guaranteed investment contract has been determined based on the higher of the surrender value of the contract or
the present value of the underlying bonds based on a discounted cash flow model. Refer to Note 10 for a discussion
of the three levels in the hierarchy of fair values.
Cash Flows
Although the Company does not have a minimum funding requirement for the pension plans in fiscal 2019, the
Company is currently determining what voluntary pension plan contributions, if any, will be made in fiscal 2019 to
the domestic plan. Actual contributions will be dependent upon investment returns, changes in pension obligations,
100
and other economic and regulatory factors. Meredith expects to contribute $0.6 million to its postretirement plan in
fiscal 2019.
Monthly contributions of £0.9 million are required to be made to the IPC Plan. In the event that on November 25,
2021, the IPC Plan has a funding deficit valuing its liabilities with a gilts plus 50 basis point (bps) discount rate, the
Company, as the sponsor of the IPC Plan, will make a contribution equal to that funding deficit. In the event that on
November 25, 2025, the IPC Plan has a funding deficit valuing its liabilities with a gilts flat discount rate, the
Company will make a contribution equal to 50 percent of that funding deficit. In the event that on November 25,
2026, the IPC Plan has a funding deficit valuing its liabilities with a gilts flat discount rate, the Company will make
a contribution equal to 50 percent of that funding deficit. In the event that on November 25, 2027, the IPC Plan has
a funding deficit valuing its liabilities with a gilts flat discount rate, the Company will make a contribution equal to
that funding deficit. Contributions shall cease to be payable from the date that the IPC Plan is confirmed to be fully
funded.
The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
Years ending June 30,
(In millions)
2019....................................... $
2020.......................................
2021.......................................
2022.......................................
2023.......................................
2024-2028 .............................
Pension
Benefits
Postretirement
Benefits
Domestic
International
13.3
14.4
16.3
17.9
18.3
110.9
29.8 $
31.6
22.9
15.9
16.4
87.6
Domestic
0.6
$
0.7
0.7
0.6
0.6
2.7
Other
The Company maintains collateral assignment split-dollar life insurance arrangements on certain key officers and
retirees. The net periodic pension cost for fiscal 2018, 2017, and 2016 was $0.6 million, $0.5 million, and $0.4
million, respectively, and the accrued liability at June 30, 2018 and 2017, was $3.1 million and $4.3 million,
respectively.
12. Share-based Compensation
Meredith has a shareholder-approved stock incentive plan. More detailed descriptions of these plans follow.
Compensation expense recognized for these plans was $30.4 million in fiscal 2018, $12.8 million in fiscal 2017,
and $12.8 million in fiscal 2016. The total income tax benefit recognized in earnings was $6.9 million in fiscal
2018, $4.8 million in fiscal 2017, and $4.6 million in fiscal 2016.
Stock Incentive Plan
Meredith has a stock incentive plan that permits the Company to issue stock options, restricted stock, stock
equivalent units, restricted stock units, and performance shares to key employees and directors of the Company.
Approximately 8.0 million shares remained available for future awards under the plan as of June 30, 2018. Forfeited
awards, shares deemed to be delivered to us on tender of stock in payment for the exercise price of options, and
shares reacquired pursuant to tax withholding on option exercises and the vesting of restricted shares and restricted
stock units increase shares available for future awards. The plan is designed to provide an incentive to contribute to
the achievement of long-range corporate goals; provide flexibility in motivating, attracting, and retaining
employees; and to align more closely the employees’ interests with those of shareholders.
101
The Company has awarded restricted stock and restricted stock units to eligible key employees and to non-
employee directors under the plan. In addition, certain awards are granted based on specified levels of Company
stock ownership. All awards have restriction periods tied primarily to employment and/or service. The awards
granted to employees generally vest over three or five years and the awards granted to directors vest one-third each
year during the three-year period from date of grant. The grant date of awards is the date the Compensation
Committee of the Board of Directors approves the granting of the awards. The awards are recorded at the market
value of traded shares on the date of the grant as unearned compensation. The initial values of the grants are
amortized over the vesting periods.
The Company’s restricted stock activity during the year ended June 30, 2018, was as follows:
Restricted Stock
(Shares in thousands and Aggregate Intrinsic Value in millions)
Nonvested at June 30, 2017.......................................
Granted ......................................................................
Vested ........................................................................
Nonvested at June 30, 2018.......................................
Shares
38.4
8.5
(26.3)
20.6
Weighted Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
$ 41.85
52.00
39.57
48.94
$
1.0
As of June 30, 2018, there was no unearned compensation cost related to restricted stock granted under the plan.
The weighted average grant date fair value of restricted stock granted during the years ended June 30, 2018, 2017,
and 2016 was $52.00, $47.65, and $47.01, respectively. The total fair value of shares vested during the years ended
June 30, 2018, 2017, and 2016, was $1.5 million, $7.9 million, and $8.5 million, respectively.
The Company’s restricted stock unit activity during the year ended June 30, 2018, was as follows:
Restricted Stock Units
Units
Weighted Average
Grant Date
Fair Value
Aggregate
Intrinsic
Value
(Units in thousands and Aggregate Intrinsic Value in millions)
Nonvested at June 30, 2017.....................................
Granted 1..................................................................
Vested ......................................................................
Forfeited ..................................................................
Nonvested at June 30, 2018...........................................
1 Includes restricted stock units previously granted under the Time incentive plan and converted into 409 restricted stock units
upon acquisition.
$ 47.80
47.26
43.47
51.43
49.78
431.1
555.6
(370.7)
(50.3)
565.7
28.9
$
As of June 30, 2018, there was $9.7 million of unearned compensation cost related to restricted stock units granted
under the plan. That cost is expected to be recognized over a weighted average period of 2.0 years. The weighted
average grant date fair value of restricted stock units granted during the years ended June 30, 2018, 2017, and 2016
was $47.26, $52.97, and $44.44, respectively. The total fair value of shares vested during the years ended June 30,
2018, 2017, and 2016 was $20.4 million, $0.2 million, and $0.1 million, respectively.
Meredith also has outstanding stock equivalent units resulting from the deferral of compensation of employees and
directors under various deferred compensation plans. The period of deferral is specified when the deferral election
is made. These stock equivalent units are issued at the market price of the underlying stock on the date of deferral.
In addition, shares of restricted stock and restricted stock units may be converted to stock equivalent units upon
vesting.
102
The following table summarizes the activity for stock equivalent units during the year ended June 30, 2018:
Stock Equivalent Units
(Units in thousands and Aggregate Intrinsic Value in millions)
Balance at June 30, 2017...........................................
Additions ...................................................................
Converted to common stock......................................
Balance at June 30, 2018...........................................
Units
296.1
26.1
(3.1)
319.1
Weighted Average
Issue Date
Fair Value
Aggregate
Intrinsic
Value
$ 37.81
50.97
35.16
38.92
$
3.9
The total intrinsic value of stock equivalent units converted to common stock was $0.1 million in fiscal 2018, $0.2
million in fiscal 2017, and $0.1 million for fiscal year 2016.
Meredith has granted nonqualified stock options to certain employees and directors under the plan. The grant date
of options issued is the date the Compensation Committee of the Board of Directors approves the granting of the
options or a date thereafter as specified by the Committee. The exercise price of options granted is set at the fair
value of the Company’s common stock on the grant date. All options granted under the plan expire at the end of 10
years. Options granted to employees vest three years from the date of grant and options granted to directors vest
one-third each year during the three-year period from date of grant.
A summary of stock option activity and weighted average exercise prices follows:
Stock Options
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(Options in thousands and Aggregate Intrinsic Value in millions)
Outstanding July 1, 2017 ............................................
Granted 1 .....................................................................
Exercised.....................................................................
Forfeited ......................................................................
Outstanding June 30, 2018..........................................
Exercisable June 30, 2018...........................................
1 Includes options previously granted under the Time incentive plan and converted into 374 options upon acquisition.
$ 44.34
55.89
39.36
54.18
50.56
$ 43.63
1,836.7
1,237.8
(485.5)
(167.8)
2,421.2
714.1
7.7
5.7
$
$
7.6
5.7
The fair value of each option is estimated as of the date of grant using the Black-Scholes option-pricing model. The
expected volatility was based on historical volatility of the Company’s common stock, Meredith’s new capital
structure (for options granted on or subsequent to January 31, 2018), and other factors. The expected life of options
granted incorporates historical employee exercise and termination behavior. Different expected lives are used for
separate groups of employees who have similar historical exercise patterns. The risk-free rate for periods that
coincide with the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
103
The following summarizes the assumptions used in determining the fair value of options granted:
Years ended June 30,
Risk-free interest rate ...................................
Expected dividend yield ...............................
Expected option life......................................
Expected stock price volatility .....................
2018
1.8-2.6%
4%
4.9-7 yrs
28-36%
2017
1.3-2.1%
4%
7 yrs
29%
2016
1.8-2.0%
4%
7 yrs
36%
The weighted average grant date fair value of options granted during the years ended June 30, 2018, 2017, and
2016, was $13.58, $9.35, and $10.80, respectively. The total intrinsic value of options exercised during the years
ended June 30, 2018, 2017, and 2016 was $10.9 million, $15.2 million, and $8.0 million, respectively. As of
June 30, 2018, there was $7.7 million in unrecognized compensation cost for stock options granted under the plan.
This cost is expected to be recognized over a weighted average period of 2.0 years.
Cash received from option exercises under all share-based payment plans for the years ended June 30, 2018, 2017,
and 2016 was $19.1 million, $37.9 million, and $18.2 million, respectively. The actual tax benefit realized for the
tax deductions from option exercises totaled $2.7 million, $5.9 million, and $3.0 million, respectively, for the years
ended June 30, 2018, 2017, and 2016.
Employee Stock Purchase Plan
As of January 1, 2016, the ESPP was suspended indefinitely. The ESPP allowed employees to purchase shares of
Meredith common stock through payroll deductions at the lesser of 85 percent of the fair market value of the stock
on either the first or last trading day of an offering period. The ESPP had quarterly offering periods. One million
five hundred thousand common shares were authorized and approximately 0.2 million shares remained available for
issuance under the ESPP. Compensation cost for the ESPP was based on the present value of the cash discount and
the fair value of the call option component as of the grant date using the Black-Scholes option-pricing model. The
term of the option was 3 months, the term of the offering period, and the expected stock price volatility was 36
percent in fiscal 2016. In fiscal 2016 the Company issued 45,000 ESPP shares that had an average market price of
$42.91, an average purchase price of $35.94, and an average fair value of $6.77.
13. Redeemable Series A Preferred Stock
Effective January 30, 2018, out of the total authorized 5,000,000 shares of preferred stock, par value $1.00 per
share, the Company designated a series of 2,500,000 shares which was issued in and constitute a single series
known as “Series A Preferred Stock” with each share having an initial stated value of $1,000 per share (the Series A
preferred stock).
On January 31, 2018, in exchange for a preferred equity investment of $650.0 million, Meredith issued 650,000
shares of perpetual convertible redeemable non-voting Series A preferred stock as well as detachable warrants to
purchase up to 1,625,000 shares of Meredith’s common stock with an exercise price of $1.00 per share and options
to purchase up to 875,000 shares of Meredith’s common stock with an exercise price of $70.50 per share.
The Company has classified the Series A preferred stock as temporary equity in the Consolidated Balance Sheets.
The Company allocated the net proceeds of $631.0 million ($650.0 million aggregate gross proceeds received less
$19.0 million in transaction costs) based on the relative aggregate fair values on the date of issuance as follows:
$103.1 million to the warrants, $12.5 million to the options, and $515.4 million to the Series A preferred stock. The
discount on the Series A preferred stock is being accreted using the effective interest method to retained earnings as
a deemed dividend from the date of issuance through the seventh anniversary of the issuance date (i.e., the date the
Series A preferred stock becomes convertible).
104
The Series A preferred stock is non-callable during the first three years after issuance provided that Meredith may,
at its option, subject to the terms of the preferred stock, redeem all or any portion of the Series A preferred stock in
cash during such three-year period, if Meredith declares as a dividend and pays a redemption premium in cash an
amount equal to 6 percent of the Accrued Stated Value of the Series A preferred stock as of the redemption date plus
an amount, if any, equal to dividends to the third year present valued at a discount rate based on U.S. Treasury notes
with a maturity closest to the date that is three years after the issuance date, plus 50 basis points. The Accrued
Stated Value is an amount equal to: (i) the Stated Value ($1,000 multiplied by the number of shares of Series A
preferred stock outstanding); plus (ii) any accrued and unpaid dividends thereof (including any accumulated
dividends).
From and after the third anniversary of the issuance date of the Series A preferred stock, Meredith may redeem all
or any portion of the Series A preferred stock in cash for an amount equal to (i) the Call Premium (defined below),
plus (ii) the Accrued Stated Value of the Series A preferred stock as of the redemption date.
The Call Premium is an amount equal to the difference of (A) (i) the Accrued Stated Value of the Series A preferred
stock as of the redemption date, multiplied by (ii) (a) if such redemption occurs during the fourth or fifth year after
issuance, 106 percent, (b) if such redemption occurs during the sixth year after issuance, 103 percent, and (c) if such
redemption occurs after the sixth year after issuance, 100 percent, minus (B) the Accrued Stated Value as of the
redemption date.
In connection with any partial redemption by Meredith, Meredith may not redeem Series A preferred stock in an
amount less than $50.0 million of the Accrued Stated Value of the Series A preferred stock nor effect any
redemption resulting in less than $100.0 million of the Accrued Stated Value of the Series A preferred stock
remaining outstanding.
From and after the seventh anniversary of the issuance date, the holders of the Series A preferred stock may elect to
convert some or all of the Series A preferred stock into Meredith common stock at a ratio based on its Accrued
Stated Value divided by the volume weighted average price of Meredith common stock for the 30 trading days
immediately preceding the written notice of conversion.
The Series A preferred stock accrues an annual dividend at either (a) to the extent paid in cash, an amount equal to
the Cash Dividend Annual Rate (as set forth in the table below), multiplied by the Stated Value (equal to the number
of shares of Series A preferred stock outstanding multiplied by $1,000) or (b) if dividends are not declared and paid
in cash, the Company will deliver additional shares of Series A preferred stock, in kind, by issuing a number of
shares equal to (i) the Accrued Dividend Annual Rate (as set forth in the table below), multiplied by the Stated
Value for all outstanding shares of Series A preferred stock, divided by (ii) $1,000.
Year
Years 1 through 3
Year 4
Year 5
Year 6 through redemption
Accrued Dividend
Cash Dividend
Annual Rate
Annual Rate
9%
8.5%
LIBOR plus 900 bps
LIBOR plus 850 bps
LIBOR plus 950 bps
LIBOR plus 1000 bps
LIBOR plus 1050 bps LIBOR plus 1100 bps
The Series A preferred stock ranks senior to any other class or series of equity, including Meredith’s common stock
and class B stock, with respect to dividend rights and rights upon liquidation. Dividends with respect to any quarter
may only be paid all in cash or all in additional shares of Series A preferred stock, and may not be paid in a
combination of cash and shares of Series A preferred stock. All Series A preferred stock dividends (regardless of
whether paid in additional shares of Series A preferred stock or cash) are prior to and in preference over any
dividend on any common stock or class B stock and will be declared and fully paid before any dividends are
declared and paid, or any other distributions or redemptions are made, on any common stock or class B stock.
105
14. Common Stock
The Company has two classes of common stock outstanding: common and class B. Each class receives equal
dividends per share. Class B stock, which has 10 votes per share, is not transferable as class B stock except to
family members of the holder or certain other related entities. At any time, class B stock is convertible, share for
share, into common stock with one vote per share. Class B stock transferred to persons or entities not entitled to
receive it as class B stock will automatically be converted and issued as common stock to the transferee. The
principal market for trading the Company’s common stock is the New York Stock Exchange (trading symbol MDP).
No separate public trading market exists for the Company’s class B stock.
From time to time, the Company’s Board of Directors has authorized the repurchase of shares of the Company’s
common stock and class B stock. In May 2014, the Board approved the repurchase of $100.0 million of shares. As
of June 30, 2018, $56.1 million remained available under the current authorizations for future repurchases.
Repurchases of the Company’s common and class B stock are as follows:
Years ended June 30,
(In millions)
Number of shares .......................
Cost at market value................... $
2018
2017
2016
0.5
31.1
$
0.9
53.3
$
0.7
31.1
Shares deemed to be delivered to the Company on tender of stock in payment for the exercise price of options do
not reduce the repurchase authority granted by the Board. Shares tendered for the exercise price of stock options
were 0.3 million shares at a cost of $19.1 million in fiscal 2018, 0.6 million shares at a cost of $37.5 million in
fiscal 2017, and 0.4 million shares at a cost of $18.0 million in fiscal 2016.
15. Earnings Per Common Share
The calculation of basic earnings per share for each period is based on the weighted average number of common
and class B shares outstanding during the period. The calculation of diluted earnings per share for each period is
based on the weighted average number of common and class B shares outstanding during the period plus the effect,
if any, of dilutive common stock equivalent shares.
The following table presents the calculations of earnings per share:
Years ended June 30,
(In millions except per share data)
Net earnings............................................................................................................. $
Participating warrant dividend ................................................................................
Preferred stock dividend..........................................................................................
Accretion of Series A preferred stock......................................................................
Other securities dividends .......................................................................................
Basic earnings attributable to common shareholders .............................................. $
2018
2017
2016
99.4 $
(1.8)
(22.9)
(7.2)
(1.1)
66.4 $
188.9 $
—
—
—
—
188.9 $
33.9
—
—
—
—
33.9
44.6
0.76
Basic weighted-average common shares outstanding .............................................
Basic earnings per share .......................................................................................... $
44.9
1.48 $
44.6
4.23 $
106
Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. The dilutive effects of these share-based awards
were computed using the two-class method.
Years ended June 30,
(In millions except per share data)
Basic weighted-average common shares outstanding .............................................
Dilutive effect of stock options and equivalents .....................................................
Diluted weighted-average shares outstanding.........................................................
44.9
0.3
45.2
44.6
0.8
45.4
2018
2017
2016
Diluted earnings attributable to common shareholders........................................... $
Diluted earnings per share.......................................................................................
66.4 $
1.47
188.9 $
4.16
44.6
0.8
45.4
33.9
0.75
For the year ended June 30, 2018, 0.7 million convertible preferred shares, 0.7 million warrants, 0.3 million
common stock equivalents, and 0.2 million shares of restricted stock were not included in the computation of
dilutive loss per share. These securities have an antidilutive effect on the earnings per share calculation (the diluted
earnings per share becoming higher than basic earnings per share). Therefore, these securities are not taken into
account in determining the weighted average number of shares for the calculation of diluted earnings per share for
the year ended June 30, 2018.
In addition, antidilutive options excluded from the above calculations totaled 0.8 million options for the year ended
June 30, 2018 ($62.71 weighted average exercise price), 0.3 million options for the year ended June 30, 2017
($54.28 weighted average exercise price), and 1.3 million options for the year ended June 30, 2016 ($49.02
weighted average exercise price).
In the years ended June 30, 2018, 2017 and 2016, options were exercised to purchase 0.5 million, 0.9 million, and
0.5 million common shares, respectively.
16. Other Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events
and circumstances from nonowner sources. Comprehensive income (loss) includes net earnings as well as items of
other comprehensive income (loss).
107
The following table summarizes the items of other comprehensive income (loss) and the accumulated other
comprehensive loss balances:
(In millions)
Balance at June 30, 2015....................................
Current-year adjustments, pre-tax .................
Tax benefit .....................................................
Other comprehensive loss .......................
Balance at June 30, 2016....................................
Current-year adjustments, pre-tax .................
Tax expense ...................................................
Other comprehensive income .................
Balance at June 30, 2017....................................
Current-year adjustments, pre-tax .................
Tax expense ...................................................
Other comprehensive loss .......................
Reclassification to retained earnings 1...........
Balance at June 30, 2018....................................
Minimum
Pension/Post
Retirement
Liability
Adjustments
Foreign
Currency
Translation
Interest
Rate
Swaps
Accumulated
Other
Comprehensive
Income (Loss)
$
$
(11.3)
(20.8)
8.0
(12.8)
(24.1)
8.6
(3.3)
5.3
(18.8)
(0.5)
(0.3)
(0.8)
(4.2)
(23.8)
$
$
— $
—
—
—
—
—
—
—
—
(12.9)
—
(12.9)
—
(12.9)
$
(1.3)
(5.0)
1.9
(3.1)
(4.4)
6.8
(2.6)
4.2
(0.2)
0.4
(0.4)
—
0.2
—
$
$
(12.6)
(25.8)
9.9
(15.9)
(28.5)
15.4
(5.9)
9.5
(19.0)
(13.0)
(0.7)
(13.7)
(4.0)
(36.7)
1 Reclassification relates to the one-time adjustment for the adoption of ASU 2018-02.
17. Financial Information about Industry Segments
Meredith is a diversified media company focused primarily on service journalism. On the basis of products and
services, the Company has established two reportable segments: national media and local media. The national
media segment focuses on the distribution of our nationally recognized brands through magazine publishing, digital
and mobile media, brand licensing, database-related activities, and other related operations. The local media
segment consists primarily of the operations of network-affiliated television stations. Virtually all of the Company’s
revenues are generated in the U.S. and substantially all of the assets reside within the U.S. Intersegment transactions
are eliminated.
There are two principal financial measures reported to the chief executive officer (the chief operating decision
maker) for use in assessing segment performance and allocating resources. Those measures are operating profit and
EBITDA. Operating profit for segment reporting, disclosed below, is revenues less operating costs and unallocated
corporate expenses. Segment operating expenses include allocations of certain centrally incurred costs such as
employee benefits, occupancy, information systems, accounting services, internal legal staff, and human resources
administration. These costs are allocated based on actual usage or other appropriate methods, primarily number of
employees. Unallocated corporate expenses are corporate overhead expenses not attributable to the operating
groups. Interest income and expense are not allocated to the segments. In accordance with authoritative guidance on
disclosures about segments of an enterprise and related information, EBITDA is not presented below.
Significant non-cash items included in segment operating expenses other than depreciation and amortization of
fixed and intangible assets include impairments of national media trademarks and goodwill and the amortization of
broadcast rights in the local media segment. Impairments of national media trademarks and goodwill were $22.7
million in fiscal 2018, $5.3 million in fiscal 2017, and $155.8 million in fiscal 2016. Broadcast rights amortization
totaled $19.2 million in fiscal 2018, $17.6 million in fiscal 2017, and $16.7 million in fiscal 2016.
108
Segment assets include intangible, fixed, and all other non-cash assets identified with each segment. Jointly used
assets such as office buildings and information technology equipment are allocated to the segments by appropriate
methods, primarily number of employees. Unallocated corporate assets consist primarily of cash and cash items,
assets allocated to or identified with corporate staff departments, and other miscellaneous assets not assigned to a
segment.
The following table presents financial information by segment:
Years ended June 30,
2018
2017
2016
(In millions)
Revenues
National media ....................................................................................... $
Local media............................................................................................
Total revenues, gross..............................................................................
Intersegment revenue elimination..........................................................
Total revenue.......................................................................................... $
Segment profit (loss)
National media ....................................................................................... $
Local media............................................................................................
Unallocated corporate ............................................................................
Income from operations .........................................................................
Non-operating expenses, net..................................................................
Interest expense, net...............................................................................
Earnings (loss) from continuing operations before income taxes.......... $
Depreciation and amortization
National media ....................................................................................... $
Local media............................................................................................
Unallocated corporate ............................................................................
Total depreciation and amortization....................................................... $
1,555.8
693.1
2,248.9
(1.5)
2,247.4
97.5
189.1
(187.6)
99.0
(11.7)
(96.9)
(9.6)
92.9
33.2
2.9
129.0
Assets
National media ....................................................................................... $
Local media............................................................................................
Unallocated corporate ............................................................................
Total assets ............................................................................................. $
5,158.3
1,204.6
364.3
6,727.2
Capital expenditures
National media ....................................................................................... $
Local media............................................................................................
Unallocated corporate ............................................................................
Total capital expenditures ...................................................................... $
11.0
22.1
21.2
54.3
$
$
$
$
$
$
$
$
$
$
1,083.2
630.1
1,713.3
—
1,713.3
146.5
214.9
(52.3)
309.1
—
(18.8)
290.3
17.5
34.8
1.5
53.8
1,487.1
1,124.9
117.7
2,729.7
4.5
12.2
18.1
34.8
$
$
$
$
$
$
$
$
$
$
1,101.2
548.4
1,649.6
—
1,649.6
(17.7)
158.5
(10.2)
130.6
—
(20.4)
110.2
18.7
38.3
2.1
59.1
1,478.2
1,054.4
94.2
2,626.8
4.7
17.3
3.0
25.0
109
18. Selected Quarterly Financial Data (unaudited)
Year ended June 30, 2018
(In millions except per share data)
Revenues
National media.................................................. $
Local media.......................................................
Intersegment elimination ..................................
Total revenues ................................................... $
Operating profit
National media.................................................. $
Local media.......................................................
Unallocated corporate .......................................
Income (loss) from operations .......................... $
Earnings (loss) from continuing operations...... $
Discontinued operations ...................................
Net earnings (loss)........................................... $
Basic earnings per share attributable to
common shareholders
Earnings (loss) from continuing operations...... $
Net earnings (loss) ............................................
Diluted earnings per share attributable to
common shareholders
Earnings (loss) from continuing operations......
Net earnings (loss) ............................................
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$
$
$
$
$
$
$
239.0
153.8
—
392.8
28.3
40.9
(12.4)
56.8
33.4
—
33.4
0.75
0.75
0.73
0.73
$
$
$
$
$
$
$
247.5
170.2
—
417.7
12.2
50.5
(25.4)
37.3
159.3
—
159.3
3.55
3.55
3.49
3.49
479.3
170.2
(0.7)
648.8
$
$
590.0
198.9
(0.8)
788.1
$ 1,555.8
693.1
(1.5)
$ 2,247.4
$
9.0
38.9
(116.0)
(68.1) $
(95.4) $
(14.7)
(110.1) $
48.0
58.8
(33.8)
73.0
16.7
0.1
16.8
$
$
$
$
97.5
189.1
(187.6)
99.0
114.0
(14.6)
99.4
(2.41) $
(2.74)
(0.06) $
(0.06)
1.80
1.48
(2.41)
(2.74)
(0.06)
(0.06)
1.79
1.47
Dividends per share ........................................
0.520
0.520
0.545
0.545
2.130
In the second quarter of fiscal 2018, the Company recorded an impairment of a trademark of $19.8 million,
transaction expenses associated with the Acquisition of $12.1 million, and a $3.1 million pre-tax restructuring
charge.
In the third quarter of fiscal 2018, the Company recorded $153.0 million in costs related to acquisition, disposition,
and restructuring related costs associated with the Acquisition, and a $12.9 million loss on an equity method
investment. In addition, the quarter’s results include two-months of contribution from the acquired Time properties.
The fourth quarter was the first full quarter in which the acquired Time properties’ operations were included in the
results. The Company recorded an additional $31.1 million in acquisition, disposition, and restructuring related
costs, and a $2.9 million impairment of a trademark. These charges were partially offset by a gain on the sale of
MXM of $11.5 million.
As a result of changes in shares outstanding during the year as well as the issuance of Series A preferred stock on
January 31, 2018, the sum of the four quarters’ earnings per share may not necessarily equal the earnings per share
for the year. See Note 13 for additional information on the Series A preferred stock and Note 15 for detail on the
calculation of earnings per share.
110
Year ended June 30, 2017
(In millions except per share data)
Revenues
National media.................................................. $
Local media.......................................................
Total revenues ................................................... $
Operating profit
National media.................................................. $
Local media.......................................................
Unallocated corporate .......................................
Income from operations .................................... $
Earnings from continuing operations................ $
Discontinued operations ...................................
Net earnings..................................................... $
Basic earnings per share attributable to
common shareholders
Earnings from continuing operations................ $
Net earnings ......................................................
Diluted earnings per share attributable to
common shareholders
Earnings from continuing operations................
Net earnings ......................................................
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
$
$
$
$
$
$
$
247.3
152.6
399.9
24.1
50.6
(13.9)
60.8
34.0
—
34.0
0.76
0.76
0.75
0.75
$
$
$
$
$
$
$
259.4
183.2
442.6
46.8
76.8
(13.8)
109.8
71.8
—
71.8
1.61
1.61
1.58
1.58
$
$
$
$
$
$
$
283.3
142.1
425.4
41.3
41.2
(12.5)
70.0
39.8
—
39.8
0.89
0.89
0.87
0.87
293.2
152.2
445.4
$ 1,083.2
630.1
$ 1,713.3
$
$
$
$
$
34.3
46.3
(12.1)
68.5
43.3
—
43.3
0.97
0.97
0.95
0.95
146.5
214.9
(52.3)
309.1
188.9
—
188.9
4.23
4.23
4.16
4.16
Dividends per share ........................................
0.495
0.495
0.520
0.520
2.030
In the second quarter of fiscal 2017, the Company recorded a reduction in contingent consideration payable of
$19.6 million, a pre-tax restructuring charge of $8.1 million, and $1.7 million for the write-down of an investment.
In the third quarter of fiscal 2017, the Company recorded a reduction in contingent consideration payable of $1.1
million.
In the fourth quarter of fiscal 2017, the Company recorded a non-cash impairment charge of $5.3 million to fully
impair the Mywedding trademark, a pre-tax restructuring charge of $4.3 million, the write-down of an investment
of $1.9 million, and the reversal of excess restructuring reserves accrued in prior fiscal years of $1.8 million.
As a result of changes in shares outstanding during the year, the sum of the four quarters’ earnings per share may
not necessarily equal the earnings per share for the year.
111
Meredith Corporation and Subsidiaries
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Additions
Reserves Deducted from Receivables
in the Consolidated Financial
Statements:
Balance at
beginning of
period
Charged to
costs and
expenses
Charged to
other
accounts
Acquired
Deductions
Balance at
end of
period
(In millions)
Fiscal year ended June 30, 2018
Reserve for doubtful accounts..... $
Reserve for returns ......................
Income tax valuation allowance..
Total........................................ $
Fiscal year ended June 30, 2017
Reserve for doubtful accounts..... $
Reserve for returns ......................
Total........................................ $
Fiscal year ended June 30, 2016
Reserve for doubtful accounts..... $
Reserve for returns ......................
Total........................................ $
6.5
1.5
—
8.0
7.0
1.3
8.3
6.5
2.0
8.5
$
$
$
$
$
$
— $
—
21.4
21.4 $
— $
—
— $
— $
—
— $
12.5 $
3.1
—
15.6 $
4.5 $
4.0
8.5 $
4.8 $
3.8
8.6 $
— $
—
—
— $
— $
—
— $
— $
—
— $
(6.8) $
(2.4)
(0.3)
(9.5) $
(5.0) $
(3.8)
(8.8) $
(4.3) $
(4.5)
(8.8) $
12.2
2.2
21.1
35.5
6.5
1.5
8.0
7.0
1.3
8.3
112
Meredith Corporation and Subsidiaries
FIVE-YEAR FINANCIAL HISTORY WITH SELECTED FINANCIAL DATA
2018
Years ended June 30,
(In millions except per share data)
Results of operations
Revenues................................................................................. $ 2,247.4
1,823.3
Costs and expenses .................................................................
173.4
Acquisition, disposition, and restructuring related activities..
129.0
Depreciation and amortization................................................
22.7
Impairment of goodwill and other long-lived assets ..............
99.0
Income from operations..........................................................
(11.7)
Non-operating expenses, net...................................................
(96.9)
Net interest expense................................................................
123.6
Income taxes ...........................................................................
114.0
Earnings from continuing operations......................................
(14.6)
Discontinued operations .........................................................
Net earnings
99.4
$
Basic earnings per share information
Earnings from continuing operations
Discontinued operations
Net earnings
Diluted earnings per share information
Earnings from continuing operations
Discontinued operations
Net earnings
Average diluted shares outstanding ....................................
$
$
$
$
1.80
(0.32)
1.48
1.79
(0.32)
1.47
45.2
2.130
72.25
47.30
Other per share information
Dividends................................................................................ $
Stock price-high......................................................................
Stock price-low.......................................................................
Financial position at June 30,
Current assets.......................................................................... $ 1,979.1
788.8
Working capital.......................................................................
6,727.2
Total assets..............................................................................
3,165.3
Long-term obligations (including current portion).................
522.6
Redeemable, convertible Series A preferred stock .................
1,097.5
Shareholders’ equity ...............................................................
Number of employees at June 30,........................................
7,924
2017
2016
2015
2014
$ 1,713.3
1,333.9
10.3
53.8
6.2
309.1
—
(18.8)
(101.4)
188.9
—
188.9
$
$ 1,649.6
1,334.8
(36.4)
59.1
161.5
130.6
—
(20.4)
(76.3)
33.9
—
33.9
$
$ 1,594.2
1,276.8
17.5
56.5
1.3
242.1
—
(19.3)
(86.0)
136.8
—
136.8
$
$ 1,468.7
1,204.9
17.4
48.7
11.2
186.5
—
(12.2)
(60.8)
113.5
—
113.5
$
$
$
$
$
$
$
4.23
—
4.23
4.16
—
4.16
45.5
2.030
66.25
43.85
505.4
45.7
2,729.7
729.9
—
996.0
3,653
$
$
$
$
$
$
0.76
—
0.76
0.75
—
0.75
45.4
1.905
53.11
35.03
481.2
3.3
2,626.8
703.6
—
889.0
3,790
$
$
$
$
$
$
3.07
—
3.07
3.02
—
3.02
45.3
1.780
57.22
41.95
482.5
(48.5)
2,843.3
802.8
—
951.9
3,878
$
$
$
$
$
$
2.54
—
2.54
2.50
—
2.50
45.4
1.680
53.84
40.11
493.1
10.0
2,543.8
723.8
—
891.7
3,639
This selected financial data should be read in conjunction with the consolidated financial statements and related
notes included in Item 8-Financial Statements and Supplementary Data of this Form 10-K. Over the last five fiscal
years, we have acquired a number of companies, the most significant of which was the acquisition of Time on
January 31, 2018. The results of our acquired companies have been included in our consolidated financial
statements since their respective dates of acquisition. Long-term obligations include broadcast rights payable and
Company debt associated with continuing operations.
113
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Meredith conducted an evaluation under the supervision and with the participation of management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as amended (the
Exchange Act)) as of June 30, 2018. On the basis of this evaluation, Meredith’s Chief Executive Officer and Chief
Financial Officer have concluded the Company’s disclosure controls and procedures are effective in ensuring that
information required to be disclosed in the reports that Meredith files or submits under the Exchange Act are (i)
recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and (ii) accumulated and communicated to Meredith’s management, including the
Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934,
as amended. Under the supervision and with the participation of management, including the Chief Executive
Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and
operation of internal control over financial reporting based on criteria established in Internal Control-Integrated
Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
On January 31, 2018, the Company completed its acquisition of Time. Management is in the process of evaluating
Time’s existing controls and procedures, and integrating Time into the Company’s internal control over financial
reporting. In accordance with SEC staff guidance permitting a company to exclude an acquired business from
management’s assessment of the effectiveness of internal control over financial reporting for the year in which the
acquisition is completed, management has excluded Time from its assessment of the effectiveness of internal
control over financial reporting as of June 30, 2018. Time represents 59 percent of the Company’s total assets as of
June 30, 2018 and 28 percent of revenue for the year ended June 30, 2018.
On the basis of the evaluation performed, management concluded that internal control over financial reporting was
effective as of June 30, 2018.
KPMG LLP, an independent registered public accounting firm, has issued an audit report on the effectiveness of the
Company’s internal control over financial reporting. This report appears on page 54.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended
June 30, 2018, that have materially affected or are reasonably likely to materially affect the Company’s internal
control over financial reporting.
114
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this Item is set forth in Registrant’s Proxy Statement for the Annual Meeting of
Shareholders to be held on November 14, 2018, under the captions “Election of Directors,” “Corporate
Governance,” “Meetings and Committees of the Board” and “Section 16(a) Beneficial Ownership Reporting
Compliance,” and in Part I of this Form 10-K beginning on page 11 under the caption “Executive Officers of the
Company” and is incorporated herein by reference.
The Company has adopted a Code of Business Conduct and Ethics and a Code of Ethics for CEO and Senior
Financial Officers. These codes are applicable to the Chief Executive Officer, Chief Financial Officer, Controller,
and any persons performing similar functions. The Company’s Code of Business Conduct and Ethics and the
Company’s Code of Ethics for CEO and Senior Financial Officers are available free of charge on the Company’s
corporate website at meredith.com. Copies of the codes are also available free of charge upon written request to the
Secretary of the Company. The Company will post any amendments to the Code of Business Conduct and Ethics
and the Code of Ethics for CEO and Senior Financial Officers, as well as any waivers that are required to be
disclosed by the rules of either the U.S. Securities and Exchange Commission or the New York Stock Exchange on
the Company’s corporate website.
There have been no material changes to the procedures by which shareholders of the Company may recommend
nominees to the Company’s Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in Registrant’s Proxy Statement for the Annual Meeting of
Shareholders to be held on November 14, 2018, under the captions “Compensation Discussion and Analysis,”
“Compensation Committee Report,” “Summary Compensation Table,” “Director Compensation,” and
“Compensation Committee Interlocks and Insider Participation” and is incorporated herein by reference.
115
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Certain information required by this Item is set forth in Registrant’s Proxy Statement for the Annual Meeting of
Shareholders to be held on November 14, 2018, under the captions “Security Ownership of Certain Beneficial
Owners and Management” and “Equity Compensation Plans” is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by this Item is set forth in Registrant’s Proxy Statement for the Annual Meeting of
Shareholders to be held on November 14, 2018, under the captions “Related Person Transaction Policy and
Procedures” and “Corporate Governance - Director Independence” and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is set forth in Registrant’s Proxy Statement for the Annual Meeting of
Shareholders to be held on November 14, 2018, under the caption “Audit Committee Disclosure” and is
incorporated herein by reference.
116
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements listed under (a) 1. and the financial statement schedule listed under
(a) 2. of the Company and its subsidiaries are filed as part of this report as set forth in the Index on page 51
(Item 8).
(a) Financial Statements, Financial Statement Schedule, and Exhibits
1. Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2018 and 2017
Consolidated Statements of Earnings for the Years Ended June 30, 2018, 2017, and 2016
Consolidated Statements of Comprehensive Income for the Years Ended June 30, 2018, 2017, and 2016
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2018, 2017, and 2016
Consolidated Statements of Cash Flows for the Years Ended June 30, 2018, 2017, and 2016
Notes to Consolidated Financial Statements
Five-Year Financial History with Selected Financial Data
2. Financial Statement Schedule for the years ended June 30, 2018, 2017, and 2016
Schedule II-Valuation and Qualifying Accounts
All other Schedules have been omitted because the items required by such schedules are not present in
the consolidated financial statements, are covered in the consolidated financial statements or notes
thereto, or are not significant in amount.
3. Exhibits
Certain of the exhibits to this Form 10-K are incorporated herein by reference, as specified:
(See Index to Attached Exhibits on page E-1 of this Form 10-K.)
2.1
2.2
3.1
Agreement and Plan of Merger, dated as of November 26, 2017, by and among Meredith
Corporation, Gotham Merger Sub, Inc. and Time Inc. is incorporated herein by reference to
Exhibit 2.1 to the Company’s Current Report on Form 8-K filed November 27, 2017.
Separation and Distribution Agreement, dated June 4, 2014, between Time Warner Inc. and
Time Inc., incorporated herein by reference to Exhibit 2.1 to Time Inc.’s Current Report on
Form 8-K filed on June 5, 2014. #
The Company's Restated Articles of Incorporation, as amended, are incorporated herein by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the period
ended December 31, 2003.
117
3.2
3.3
4.1
Articles of Amendment to the Restated Articles of Incorporation of Meredith Corporation,
including the Statement of Designation of Series A Preferred Stock of Meredith Corporation
attached as Appendix I is incorporated herein by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed January 31, 2018.
The Restated Bylaws, as amended, are incorporated herein by reference to Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2015.
Indenture, dated as of January 31, 2018, by and among Meredith Corporation, the Guarantors,
and U.S. Bank National Association, as Trustee is incorporated herein by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K filed January 31, 2018.
4.2
Form of Note (included in Exhibit 4.1)
4.3
4.4
First Supplemental Indenture, dated as of January 31, 2018, by and among Meredith
Corporation, the Guarantors, and U.S. Bank National Association, as Trustee, is incorporated
herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed
January 31, 2018.
Sale and Purchase Agreement dated as of October 30, 2015 among the Time Inc, Time Inc.
(UK) Blue Fin Holdings Limited, and Blue Fin UK Limited is incorporated herein by
reference to Exhibit 4.1 to Time Inc.’s Current Report on Form 8-K filed October 30, 2015.
10.1
Indemnification Agreement in the form entered into between the Company and its officers
and directors is incorporated herein by reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-Q for the period ended December 31, 1988. *
10.2 Meredith Corporation Deferred Compensation Plan, dated as of November 8, 1993, is
incorporated herein by reference to Exhibit 10 to the Company’s Quarterly Report on
Form 10-Q for the period ended December 31, 1993. *
10.3 Meredith Corporation Employee Stock Purchase Plan of 2002, as amended, is incorporated
herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed
November 13, 2012. *
10.4
10.5
Amended and Restated Replacement Benefit Plan effective January 1, 2001, is incorporated
herein by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2003. *
Amended and Restated Supplemental Benefit Plan effective January 1, 2001, is incorporated
herein by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2003. *
10.6 Meredith Corporation 2004 Stock Incentive Plan is incorporated herein by reference to
Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2008. *
10.7
Form of Nonqualified Stock Option Award Agreement between Meredith Corporation and the
named employee for the 2004 Stock Incentive Plan is incorporated herein by reference to
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended
December 31, 2004. *
118
10.8
10.9
10.10
10.11
10.12
10.13
Form of Continuing Nonqualified Stock Option Award Agreement for Non-Employee
Directors under the Company’s Amended and Restated 2004 Stock Incentive Plan is
incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the period ended December 31, 2011. *
Employment Agreement dated January 20, 2006, and re-executed August 24, 2009, between
Meredith Corporation and Stephen M. Lacy is incorporated herein by reference to Exhibit
10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009.
First amendment to the aforementioned agreement is incorporated herein by reference to
Exhibit 10 to the Company’s Current Report on Form 8-K filed November 10, 2009. *
Employment Agreement dated August 10, 2016, between Meredith Corporation and
Thomas H. Harty is incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed August 12, 2016. *
Employment Agreement dated August 10, 2016, between Meredith Corporation and
Jonathan B. Werther is incorporated herein by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed August 12, 2016. *
Employment Agreement dated August 14, 2008, and re-executed August 24, 2009, between
Meredith Corporation and John S. Zieser is incorporated herein by reference to Exhibit 10.17
to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2009. *
Employment Agreement dated June 1, 2015, between Meredith Corporation and Joseph H.
Ceryanec is incorporated herein by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed June 5, 2015. *
10.14
Employment Agreement dated May 9, 2018 and effective July 1, 2018, between Meredith
Corporation and Patrick McCreery. *
10.15 Amended and Restated Severance Agreement in the form entered into between the Company
and its executive officers is incorporated herein by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the period ended December 31, 2016. *
10.16 Meredith Corporation 2014 Stock Incentive Plan is incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 18, 2014. *
10.17
10.18
10.19
10.20
Form of the Nonqualified Stock Option Award Agreement for Employees for the 2014 Stock
Incentive Plan is incorporated by reference to Exhibit 10.20 to the Company's Annual Report
on Form 10–K filed on August 29, 2017. *
Form of the Nonqualified Stock Option Award Agreement for Non-Employee Directors for
the 2014 Stock Incentive Plan is incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10–K filed on August 29, 2017. *
Form of the Restricted Stock Award Agreement for Employees for the 2014 Stock Incentive
Plan is incorporated by reference to Exhibit 10.22 to the Company's Annual Report on
Form 10–K filed on August 29, 2017. *
Form of the Restricted Stock Award Agreement for Non-Employee Directors for the 2014
Stock Incentive Plan is incorporated by reference to Exhibit 10.23 to the Company's Annual
Report on Form 10–K filed on August 29, 2017. *
119
10.21
10.22
10.23
Form of Restricted Stock Unit Award Agreement - Time Vested for the 2014 Stock Incentive
Plan is incorporated by reference to Exhibit 10.24 to the Company's Annual Report on
Form 10–K filed on August 29, 2017. *
Form of Restricted Stock Unit Award Agreement - Performance-Based for the 2014 Stock
Incentive Plan is incorporated by reference to Exhibit 10.25 to the Company's Annual Report
on Form 10–K filed on August 29, 2017. *
Credit Agreement, dated as of January 31, 2018, by and among Meredith Corporation, the
Guarantors, the lenders party thereto from time to time and Royal Bank of Canada, as
administrative agent and collateral agent, is incorporated herein by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K filed January 31, 2018.
10.24 Deed of Guarantee in Relation to the IPC Media Pension Scheme, dated as of January 31,
2018, by and among Meredith Corporation, Time Inc. (UK) Ltd, IPC Media Pension Trustee
Limited and Time Inc. is incorporated herein by reference to Exhibit 10.2 to the Company’s
Current report on Form 8-K filed January 31, 2018.
10.25 Amended and Restated Deed of Guarantee in Relation to the IPC Media Pension Scheme,
dated as of March 15, 2018, by and among Meredith Corporation, IPC Media Pension Trustee
Limited, and International Publishing Corporation Limited, is incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 21,
2018.
10.26 Warrant to Purchase Class A Common Stock, dated as of January 31, 2018, is incorporated
herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed
January 31, 2018.
10.27 Option to Purchase Class A Common Stock, dated as of January 31, 2018, is incorporated
herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed
January 31, 2018.
10.28
10.29
10.30
10.31
10.32
Registration Rights Agreement, dated as of January 31, 2018, by and between Meredith
Corporation and KED MDP Investments, LLC, is incorporated herein by reference to
Exhibit 10.5 to the Company’s Current Report on Form 8-K filed January 31, 2018.
Tax Matters Agreement, dated June 4, 2014, between Time Warner Inc. and Time Inc. is
incorporated herein by reference to Exhibit 10.2 to Time Inc.’s Current Report on Form 8-K
filed on June 5, 2014.
Time Inc. Supplemental Savings Plan, dated and effective January 1, 2011, restated
January 1, 2014, is incorporated herein by reference to Exhibit 10.17 to Amendment No. 2 to
Time Inc.’s Registration Statement on Form 10 filed on March 7, 2014. *
Time Inc. Deferred Compensation Plan, dated and effective November 18, 1998, restated
January 1, 2014, incorporated herein by reference to Exhibit 10.18 to Amendment No. 2 to
Time Inc.’s Registration Statement on Form 10 filed on March 7, 2014. *
Time Inc. Deferred Compensation Plan, dated and effective November 18, 1998, restated
January 1, 2014 and applicable to amounts deferred prior to January 1, 2005, incorporated
herein by reference to Exhibit 10.19 to Amendment No. 2 to Time Inc.’s Registration
Statement on Form 10 filed on March 7, 2014. *
18.1
Letter from KPMG LLP regarding change in inventory costing, incorporated herein by
reference to Exhibit 18.1 to the Company’s Quarterly Report on Form 10-Q for the period
ended March 31, 2018.
120
21
23
31.1
31.2
32
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the
Securities Exchange Act, as amended.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
The Company agrees to furnish to the Commission, upon request, a copy of each agreement with respect to
long-term debt of the Company for which the amount authorized thereunder does not exceed 10 percent of
the total assets of the Company on a consolidated basis.
*
#
†
Management contract or compensatory plan or arrangement
Confidential treatment has been granted with respect to portions of this exhibit (indicated by asterisks) and those portions have
been separately filed with the SEC.
These certifications are being furnished solely to accompany this Annual Report on Form 10-K pursuant to 18 U.S.C.
Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not
to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any
general incorporation language in such filing.
ITEM 16. FORM 10-K SUMMARY
None.
121
Reconciliation of Non-GAAP Financial Measure
The following table provides a reconciliation between the financial measure that is not in accordance with
accounting principles generally accepted in the United States of America (GAAP), or the non-GAAP financial
measure, used in the annual report to shareholders and the most directly comparable GAAP financial measure. This
information is not part of the Company's Annual Report on Form 10-K as filed with the United States Securities and
Exchange Commission.
Adjusted EBITDA, a supplemental non-GAAP financial measure, is defined as net earnings before discontinued
operations, taxes, interest, non-operating expense, depreciation, amortization, and special items. While Adjusted
EBITDA is not a substitute for reported results under GAAP, management believes this information is useful as an
aid in further understanding Meredith’s current performance, performance trends, and financial condition.
Years ended June 30,
(In millions)
Net earnings ....................................................................... $
Loss from discontinued operations, net of income taxes ....
Earnings from continuing operations .............................
Income taxes .......................................................................
Interest expense, net............................................................
Non-operating expense, net ................................................
Income from operations ......................................................
Depreciation and amortization ............................................
Special items 1.....................................................................
Adjusted EBITDA............................................................. $
2018
2017
2016
2015
2014
99.4 $
14.6
114.0
(123.6)
96.9
11.7
99.0
129.0
193.0
188.9 $
—
188.9
101.4
18.8
—
309.1
53.8
(0.7)
33.9 $
—
33.9
76.3
20.4
—
130.6
59.1
130.7
136.8 $
—
136.8
86.0
19.3
—
242.1
56.5
20.7
113.5
—
113.5
60.8
12.2
—
186.5
48.7
28.6
421.0 $
362.2 $
320.4 $
319.3 $
263.8
1
●
●
●
●
●
Fiscal 2018 special items include severance and related benefit charges, transaction and integration costs, the impairment of
other long-lived assets, and other net miscellaneous write-downs and accruals partially offset by a gain on the sale of a
business.
Fiscal 2017 special items include the write-down of contingent consideration payable, the impact of the resolution of certain
federal and state tax matters, and a reduction in previously accrued restructuring charges partially offset by severance and
related benefit charges and the write-down of impaired assets.
Fiscal 2016 special items include the impairment of goodwill and other long-lived assets, merger-related costs, severance and
related benefit costs, a pension settlement charge, and other net miscellaneous write-downs and accruals partially offset by a
merger termination fee and a reduction in previously accrued restructuring charges.
Fiscal 2015 special items include severance and related benefit costs, the write-down of impaired assets, acquisition and
disposal transaction costs, and other miscellaneous write-down and accruals.
Fiscal 2014 special items include severance and related benefit costs; the write-down of certain identifiable intangibles, fixed
assets, and art and manuscript inventory; television station acquisition transaction costs; vacated building and lease accruals;
the write-off of deferred financing costs; and other miscellaneous accruals partially offset by a tax benefit from realignment of
international operations and a reduction in previously accrued restructuring charges.
Appendix
Corporate Information
MEREDITH CORPORATION
Meredith Corporation (NYSE: MDP; meredith.com) has
been committed to service journalism for more than
115 years. Today, Meredith uses multiple distribution
platforms — including broadcast television, print, digital,
mobile and video — to provide consumers with content
they desire and to deliver the messages of its advertising
and marketing partners.
ANNUAL MEETING
Holders of Meredith Corporation stock are invited to
attend the annual meeting of shareholders at 10 a.m.
Central Standard Time on November 14, 2018, at the
Company’s principal office, 1716 Locust Street,
Des Moines, IA.
STOCK EXCHANGE
Common stock of Meredith Corporation is listed on
the New York Stock Exchange. The exchange symbol
for Meredith is MDP. CUSIP Number: 589433101. Class
B stock of Meredith Corporation (issued as a dividend
on common stock in December 1986) is not listed.
The transfer of Class B stock is limited to the lineal
descendants of original owners, their spouses, or trusts/
family partnerships for the benefit of those persons.
Requests for transfer to any other person or entity
will require a share-for-share conversion to common
stock. Conversion prior to sale is recommended.
CUSIP Number: 589433200. The Company’s Chief
Executive Officer has certified to the New York Stock
Exchange that he is not aware of any violation by the
Company of the New York Stock Exchange Corporate
Governance Listing Standards. The most recently
required certification was submitted to the exchange on
December 7, 2017.
REGISTRAR AND TRANSFER AGENT
EQ Shareowner Services, PO Box 64854, St. Paul, MN
55164-0854 or 1110 Centre Pointe Curve, Suite 101,
Mendota Heights, MN 55120-4100, 800-468-9716 or
651-450-4064, email: stocktransfer@eq-us.com
DIVIDEND REINVESTMENT
Meredith Corporation offers a dividend reinvestment
plan that automatically reinvests shareholder dividends
for the purchase of additional shares of stock. To
obtain more information or to join the plan, contact EQ
Shareowner Services at 800-468-9716 or write to the
preceding addresses.
FORM 10-K
A copy of the Meredith Corporation Fiscal 2018 Annual
Report on Form 10-K to the Securities and Exchange
Commission (SEC) is included in this report and available
at meredith.com. Additional copies are available without
charge to shareholders by calling 515-284-3000. The
Company has filed as an exhibit to the Annual Report on
Form 10-K the certification of its chief executive officer
and chief financial officer required by Section 302 of the
Sarbanes-Oxley Act.
QUARTERLY INFORMATION
To receive copies of Meredith Corporation quarterly SEC
filings, earnings releases and dividend releases, please
visit meredith.com, or call 515-284-3000.
INVESTOR CONTACT
Meredith Corporation Investor Relations
1716 Locust Street, Des Moines, IA 50309-3023
515-284-3000 (meredith.com)
OUR COMMITMENT TO THE ENVIRONMENT
As a leading media and marketing communications
company, Meredith serves millions of consumers who
come to our brands for timeless advice about food,
decorating, building, parenting, gardening, beauty, crafts,
health and well-being — and more. We realize that to take
care of our homes and families, we must take care of the
planet. Meredith has in place a number of sustainable
business practices, as well as a network of environmental
sustainability ambassadors whose goal is to recommend
ongoing changes that will enable us to be an even more
responsible member of the global community. To see our
progress, please visit our corporate social responsibility
report at Meredith.com.
Financial Highlights
Years Ended June 30 (In millions except per share data)
GAAP Results
Revenues
Income from operations
Net earnings
Earnings per share
Total assets
Total oustanding debt
Non-GAAP Results
Adjusted EBITDA(1)
2018
2017
2016
2015
2014
$ 2,247 $
1,713 $
1,650 $
1,594 $
1,469
99
99
1.47
6,727
3,196
309
189
4.16
131
34
0.75
242
137
3.02
187
114
2.50
2,730
2,627
2,843
2,544
701
695
795
715
$
421 $
362 $
320 $
319 $
264
Board of Directors
Donald A. Baer 2, 3
Mr. Baer, 63, a director
since 2014, is global
chairman of BCW, a
member of WPP PLC,
one of the world’s largest
strategic communications
businesses.
Donald C. Berg 1
Mr. Berg, 64, a director
since 2012, is the president
of DCB Advisory Services,
which provides consulting
services to food and
beverage companies.
Mell Meredith Frazier 2, 3
Ms. Frazier, 62, a director
since 2000, is vice chairman
of Meredith Corporation and
chairman of the Meredith
Corporation Foundation.
Thomas H. Harty
Mr. Harty, 55, a director
since 2017, is president
and chief executive officer
of Meredith Corporation,
the leading media and
marketing company
serving American women.
Frederick B. Henry 2, 3
Mr. Henry, 72, a director
since 1969, is president
of The Bohen Foundation,
a private charitable
foundation.
Revenue
5-Year CAGR: 9%
$2,247
$2,000
$1,713
$1,650
$1,594
1,500
$1,469
1,000
500
0
2014
2015
2016
2017
2018
$ in millions
$2.50
2.00
1.50
1.00
0.50
0
Dividend Per Share(2)
5-Year CAGR: 6%
$2.18
$2.08
$1.98
$1.83
$1.73
Joel W. Johnson 1
Mr. Johnson, 75, a director
since 1994, is the retired
chairman and chief
executive officer of Hormel
Foods Corporation, a leading
producer of meat and other
products. Mr. Johnson
will retire from the Board
of Directors, effective in
November 2018. We thank
Joel for his contributions to
the Company.
Officers
Stephen M. Lacy
Executive Chairman
2014
2015
2016
2017
2018
Thomas H. Harty
President and Chief Executive Officer
Patrick J. McCreery
President, Local Media Group
In Appreciation
Jonathan B. Werther
President, National Media Group
Joseph H. Ceryanec
Chief Financial Officer
Steven M. Cappaert
Corporate Controller
John S. Zieser
Chief Development Officer
and General Counsel
Non-GAAP amounts are not in accordance with GAAP (accounting principles generally accepted in the United States of America). While management believes
these measures contribute to an understanding of the Company’s financial performance, they should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP. See “Reconciliation of Non-GAAP Financial Measures” in the Appendix immediately following the included
Form 10-K.
(1) Adjusted EBITDA – Earnings before discontinued operations, interest, taxes, depreciation, amortization, non-operating expense, and special items.
(2) Annualized dividend per share at end of fiscal year.
Paul Karpowicz
Meredith Local Media Group President Paul Karpowicz, who joined Meredith in that role in 2005, retired from his position
on June 30, 2018. During Paul’s 13 years of leadership, Meredith’s Local Media Group increased its television footprint to 17
television stations, more than doubled revenues and nearly tripled operating profit. Along the way, Paul was inducted into the
Broadcasting & Cable Hall of Fame, and served as Chairman of the Television Board of the National Association of Broadcasters
on the CBS Affiliates Board and the Television Bureau of Advertising Board. We thank Paul for his many contributions to the
Company, and wish his successor, Patrick McCreery, well in his new role.
Beth J. Kaplan 1
Ms. Kaplan, 60, a
director since 2017, is
the managing member
of Axcel Partners, LLC,
investing in consumer-facing
early-stage and growth
companies founded and
led by women.
Stephen M. Lacy
Mr. Lacy, 64, a director
since 2004, is executive
chairman of Meredith
Corporation, the leading
media and marketing
company serving
American women.
Philip A. Marineau 1
Mr. Marineau, 71, a
director since 1998, is a
partner at LNK Partners,
a private equity firm.
Elizabeth E. Tallett 2, 3
Ms. Tallett, 69, a
director since 2008, is a
consultant to early stage
pharmaceutical and
healthcare companies.
Committee Assignments
1 Audit/Finance 2 Compensation 3 Nominating/Governance
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Our Mission
We are Meredith Corporation, a publicly held media and marketing company founded upon service to
our customers and committed to building value for our shareholders.
Our cornerstone is a commitment to service journalism. From that, we have built businesses that serve
well-defined readers and viewers, deliver the messages of advertisers and extend our brand franchises
and expertise to related markets.
Our products and services distinguish themselves on the basis of quality, customer service and value
that can be trusted.
2018 Annual Report