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EX-21 - EXHIBIT 21 - SUBSIDIARIES - MEREDITH CORPfy14q4exhibit21.htm
EX-23 - EXHIBIT 23 - CONSENT - MEREDITH CORPfy14q4exhibit23.htm
EX-31.1 - EXHIBIT 31.1 CEO CERTIFICATION - MEREDITH CORPfy14q4exhibit311.htm
EX-31.2 - EXHIBIT 31.2 CFO CERTIFICATION - MEREDITH CORPfy14q4exhibit312.htm
EX-32 - EXHIBIT 32 - SECTION 906 CERTIFICATION OF CEO AND CFO - MEREDITH CORPfy14q4exhibit32.htm
10-K - PDF OF ENTIRE SUBMISSION - MEREDITH CORPfy14q4form10k.pdf
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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, 2014
Commission file number 1-5128

MEREDITH CORPORATION
(Exact name of registrant as specified in its charter)
 
 
Iowa
42-0410230
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
1716 Locust Street, Des Moines, Iowa
50309-3023
(Address of principal executive offices)
(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
 
Name of each exchange on which registered
 
 
Common Stock, par value $1
 
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.     x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x    Accelerated filer o     Non-accelerated filer o     Smaller reporting company 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 31, 2013, was $1,846,000,000 based upon the closing price on the New York Stock Exchange at that date.
Shares of stock outstanding at July 31, 2014
Common shares
36,778,633

Class B shares
7,699,516

Total common and Class B shares
44,478,149





DOCUMENT INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on
 November 12, 2014, are incorporated by reference in Part III to the extent described therein.
 
 
 
 
 
 
 
TABLE OF CONTENTS
 
 
 
 
 
Page
 
 
 
Part I
 
 
 
Business
 
 
 
Description of Business
 
 
 
 
     Local Media
 
 
 
     National 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 and Financial Statement Schedules
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 for more than 110 years. Meredith began in 1902 as an agricultural publisher. In 1924, the Company published the first issue of Better Homes and Gardens. The Company entered the television broadcasting business in 1948. Today, Meredith uses multiple media outlets—including print, broadcast television, digital, mobile, tablets, and video—to provide consumers with content they desire and to deliver the messages of its advertising and marketing partners. 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: local media and national media. Our local media segment consists of 14 owned television stations and one operated television station located across the United States (U.S.) in mostly fast growing markets, related digital and mobile media, and a national video creation unit. The owned television stations consist of seven CBS affiliates, three FOX affiliates, two MyNetworkTV affiliates, one NBC affiliate, and one independent station. Local media's digital presence includes 12 websites, 2 mobile-optimized websites, and 27 applications (apps) focused on news, sports, and weather-related information.

Our national media segment includes leading national consumer media brands delivered via multiple media platforms including print magazines and digital and mobile media, brand licensing activities, database-related activities, and business-to-business marketing products and services. It focuses on the home and family market and is a leading publisher of magazines serving women. In fiscal 2014, we published in print twenty-one subscription magazines, including Better Homes and Gardens, Parents, Family Circle, Allrecipes, EveryDay with Rachael Ray, and FamilyFun, and approximately 120 special interest publications. Twenty of our brands are also available as digital editions on various platforms. The national media segment's extensive digital media presence consists of more than 40 websites, almost 30 mobile-optimized websites, and nearly 20 apps. Of those websites and apps, the Allrecipes' brand accounts for 19 websites and 19 mobile sites serving 23 countries in 12 languages, and 3 mobile apps across multiple countries and platforms. The national media segment also includes digital and customer relationship marketing, which provides specialized marketing products and services to some of America's leading companies; a large consumer database; brand licensing activities; and other related operations.

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 15.

The Company's largest revenue source is advertising. National and local economic conditions affect the magnitude of our advertising revenues. Both local media and national media revenues and operating results can be affected by changes in the demand for advertising and consumer demand for our products. 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. Magazine circulation revenues are generally affected by national and regional economic conditions and competition from other forms of media.

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BUSINESS DEVELOPMENTS

In February 2014, Meredith completed its acquisition of KMOV, the CBS affiliate in St. Louis, Missouri, the nation's 21st largest television market. In June 2014, the Company completed its acquisition of KTVK, an independent station in Phoenix, Arizona, the nation's 12th largest television market.

Starting with a December 2013 issue, Meredith launched Allrecipes magazine, the print extension of Allrecipes.com, the world's most popular digital food destination. The Allrecipes magazine is being published six times a year and started with an initial rate base of 500,000. The rate base was increased to 650,000 beginning with the April 2014 issue.



DESCRIPTION OF BUSINESS

Local Media

Local media contributed 27 percent of Meredith's consolidated revenues and 50 percent of the combined operating profit from local media and national media operations in fiscal 2014. Information about the Company's television stations at June 30, 2014, follows:

Station,
Market
DMA
National
Rank  1
Network
Affiliation
Channel
Expiration
Date of FCC
License
Average
Audience
Share  2
 
 
 
 
 
 
WGCL-TV
9
CBS
46
4-1-2005 (3
4.5 %
Atlanta, GA
 
 
 
 
 
 
 
 
 
 
 
KPHO-TV
12
CBS
5
10-1-2006 3)
6.0 %
Phoenix, AZ
 
 
 
 
 
 
 
 
 
 
 
KTVK
12
Independent
3
10-1-2014
3.0 %
Phoenix, AZ
 
 
 
 
 
 
 
 
 
 
 
KMOV
21
CBS
4
2-1-2022
9.7 %
St. Louis, MO
 
 
 
 
 
 
 
 
 
 
 
KPTV
22
FOX
12
2-1-2007 (3)
5.8 %
Portland, OR
 
 
 
 
 
 
 
 
 
 
 
KPDX
22
MyNetworkTV
49
2-1-2015
2.3 %
Portland, OR
 
 
 
 
 
 
 
 
 
 
 
WSMV-TV
29
NBC
4
8-1-2005 (3)
9.7 %
Nashville, TN
 
 
 
 
 
 
 
 
 
 
 
WFSB
30
CBS
3
4-1-2015
10.5 %
Hartford, CT
 
 
 
 
 
New Haven, CT
 
 
 
 
 
 
 
 
 
 
 
KCTV
31
CBS
5
2-1-2006 (3)
10.0 %
Kansas City, MO
 
 
 
 
 
 
 
 
 
 
 
KSMO-TV
31
MyNetworkTV
62
2-1-2014 (3)
1.0 %
Kansas City, MO
 
 
 
 
 
 
 
 
 
 
 

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Station,
Market
DMA
National
Rank  1
Network
Affiliation
Channel
Expiration
Date of FCC
License
Average
Audience
Share  2
 
 
 
 
 
 
WHNS
37
FOX
21
12-1-2004 (3)
4.0 %
Greenville, SC
 
 
 
 
 
Spartanburg, SC
 
 
 
 
 
Asheville, NC
 
 
 
 
 
Anderson, SC
 
 
 
 
 
 
 
 
 
 
 
KVVU-TV
42
FOX
5
10-1-2006 (3)
4.8 %
Las Vegas, NV
 
 
 
 
 
 
 
 
 
 
 
WNEM-TV
68
CBS
5
10-1-2005 (3)
15.6 %
Flint, MI
 
 
 
 
 
Saginaw, MI
 
 
 
 
 
Bay City, MI
 
 
 
 
 
 
 
 
 
 
 
WSHM-LD
114
CBS
3
4-1-2015
6.7 %
Springfield, MA
 
 
 
 
 
Holyoke, MA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1   Designated Market Area (DMA) is a registered trademark of, and is defined by, Nielsen Media Research. The national rank is
     from the 2013-2014 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 2013, February 2014,
     and May 2014 measurement periods.
 
 
 
 
 
 
3   Renewal application pending. Under FCC rules, a license is automatically extended pending FCC processing and
     granting of the renewal application. We have no reason to believe that these licenses will not be renewed by the FCC.

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) political advertising which is seasonal with peaks occurring in our odd fiscal years (e.g. fiscal 2013, fiscal 2015) and particularly in our second fiscal quarter of those years; 4) retransmission of our television signal by satellite and cable systems and telecommunications companies; 5) station operation management fees; 6) digital advertising on the stations' websites and mobile websites; and 7) payments by advertisers for other services, such as the production of advertising materials.

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 in-market broadcasters, audience share, and audience demographics. The larger a station's audience share in any particular daypart, the more leverage a station has in setting advertising rates. Generally, as the market fluctuates with supply and demand, so does a station's advertising rates. Most national advertising is sold by an independent representative firm. The sales staff at each station generates local/regional advertising revenues.

Typically 30 to 40 percent of a market's television advertising revenue is generated by local newscasts. Station personnel are continually working to grow their news ratings, which in turn will augment revenues. The Company broadcasts local newscasts in high definition in nine of our markets and in wide screen format in our other two markets.

The national network affiliations of Meredith's 13 network-affiliated 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.

3




Our CBS affiliation agreements expire in April 2016 and August 2017. Our two MyNetworkTV affiliation agreements expire in September 2016. Our NBC affiliation agreement and our Fox affiliation agreements each expire in December 2017. Programming fees paid to NBC increased significantly in fiscal 2014. These payments are in essence a portion of the retransmission fees that Meredith receives from cable, satellite, and telecommunications service providers, which pay Meredith to carry our local television programming in their markets. These stations generally also pay networks for certain programming and services such as marquee sports (professional football, college basketball, and Olympics) and news services. The Company's Fox affiliates also pay the Fox network for additional advertising spots during prime-time programming. While Meredith's relations with the networks historically have been very good, the Company can make no assurances they will remain so over time.

Retransmission revenue is generated from cable, satellite and telecommunications 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 fiscal 2014 primarily due to having a full year of benefit from agreements that were renegotiated in fiscal 2013.

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. Several of our stations are broadcasting a second programming stream on their digital channel. Our Las Vegas, Phoenix, Hartford and Greenville stations currently broadcast a news/weather channel, our other Phoenix station broadcasts This TV Network, Flint-Saginaw has a MyNetworkTV affiliate, St. Louis broadcasts MeTV, Nashville has a Heartland Channel affiliate, and Kansas City airs MundoFox, an American Spanish language broadcast television network.

The costs of television programming are significant. In addition to network affiliation 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.

Meredith Video Studios (MVS) is our development, production, and multiplatform distribution company that produces video for use by Meredith's television stations and our local and national media websites, and is producing custom video for clients as well. Sponsorship opportunities include video billboards, product integration, channel sponsorships, and custom videos.

Produced by MVS, The Better Show, our daily lifestyle television show, currently airs every weekday in more than 160 markets reaching 80 percent of U.S. television households, including Top 10 markets such as New York, Los Angeles, Philadelphia, Dallas, Boston, and Atlanta. Meredith recently renewed The Better Show for an eighth season.

Competition
Meredith's television stations compete directly for advertising dollars and programming in their respective markets with other local television stations, radio stations, and cable television providers. Other mass media providers such as newspapers and their websites are also competitors. Advertisers compare market share, audience demographics, and advertising rates, and take into account audience acceptance of a station's programming, whether local, network, or syndicated.

Regulation
The ownership, operation, and sale of broadcast television and radio 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

4



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 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 local 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 and satellite 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.

The FCC has proposed a plan, called the National Broadband Plan, to increase the amount of spectrum available in the United States 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 another auction for the newly freed spectrum. The FCC must complete both auctions by 2022. In May 2014, the FCC adopted a Report and Order setting forth the basic framework for the reverse auction and the subsequent repacking of broadcast television signals into a new television band plan.

Even if a television licensee does 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. We cannot predict whether or how this will affect the Company or its television stations.

In addition to the National Broadband Plan, Congress 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), 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, newspapers, outdoor advertising, and internet-delivered video programming services.


5



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.


National Media

National media contributed 73 percent of Meredith's consolidated revenues and 50 percent of the combined operating profit from local media and national media operations in fiscal 2014. Better Homes and Gardens magazine, our flagship brand, continues to account for a significant percentage of revenues and operating profit of the national media segment and the Company.

Magazines
Information for our major magazine titles as of June 30, 2014, follows:

Title
Description
Frequency
per Year
Year-end
 Rate Base

1 
 
 
 
 
 
Better Homes and Gardens
Women's service
12
7,600,000

 
Family Circle
Women's service
12
4,000,000

 
Parents
Parenthood
12
2,200,000

 
FamilyFun
Parenthood
10
2,100,000

 
American Baby
Parenthood
12
2,000,000

 
EveryDay with Rachael Ray
Women's lifestyle and food
10
1,700,000

 
Fitness
Women's lifestyle
10
1,500,000

 
More
Women's lifestyle (age 40+)
10
1,300,000

 
Midwest Living
Travel and lifestyle
6
950,000

 
Ser Padres
Hispanic parenthood
8
850,000

 
Traditional Home
Home decorating
8
850,000

 
EatingWell
Women's lifestyle and food
6
750,000

 
Allrecipes
Food
6
650,000

 
Siempre Mujer
Hispanic women's lifestyle
6
550,000

 
Wood
Woodworking
7
450,000

 
Successful Farming
Farming business
13
420,000

 
1
 
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.

In addition to these major magazine titles, we published approximately 120 special interest publications under approximately 80 titles in fiscal 2014, primarily under the Better Homes and Gardens brand. The titles are issued from one to six times annually and sold primarily on newsstands. A limited number of subscriptions are also sold to certain special interest publications. The following titles were published quarterly or more frequently: American Patchwork & Quilting, Country Gardens, Diabetic Living, Do It Yourself, Kitchen and Bath Ideas, and Quilts & More.

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

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(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 a strategic marketing unit, Meredith 360°, which provides 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.

Magazine Circulation—Subscriptions obtained through direct-mail solicitation, agencies, insert cards, the internet, and other means are Meredith's largest source of circulation revenues. All of our subscription magazines, except American Baby, Ser Padres, and Successful Farming, 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.

Digital and Mobile Media
We have 20 of our brands available as digital tablet editions, with an audience of approximately 690,000. Paid digital customers represent 3 percent of our total rate base. For four of our brands, we offer digital editions that are enhanced for the tablet to include bonus content.

National media's more than 40 websites and nearly 30 mobile-optimized websites provide ideas and inspiration. These branded websites focus on the topics that women care about most—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 apps, which focus on the same topics, reached nearly 31 million cumulative downloads during fiscal 2014. Digital traffic across our various platforms averaged 51 million unique monthly visitors in fiscal 2014, reaching an all-time high of 58 million during the fiscal year. Our brands have a strong social networking presence as well. In fiscal 2014, national media reached over 13 million Facebook fans, over 2 million Twitter followers, and nearly 2 million Pintrest followers.

In fiscal 2014, we generated 7 million digital orders for print magazine subscriptions, an increase of 18 percent over the prior year. We now receive over one-third of our orders from digital sources.

Other Sources of Revenues
Other revenues are derived from digital and customer relationship marketing, other custom publishing projects, brand licensing agreements, ancillary products and services, and book sales.

Meredith Xcelerated Marketing—Meredith Xcelerated Marketing (MXM) is a leading content-powered, customer engagement agency that provides fully-integrated marketing solutions for some of the world's top brands, including Kraft, Lowe's, Honda, Chrysler, Kia, and Allergan. Through its rich 45-year history, MXM has established itself as the dominant force in content marketing with deep expertise in mobile, social media, customer relationship management, and advanced analytics. Its revenue is independent of advertising and circulation, though sometimes its services are sold as part of larger programs that include advertising components.

MXM employs over 600 people in eight offices globally: New York; Los Angeles; Washington, D.C.; Dallas; Des Moines; Detroit; Windsor, Canada; and Hyderabad, India. In addition, the Meredith-iris Global Network, Meredith's partnership with iris Nation Worldwide Limited, serves the increasing global needs of MXM's domestic clients while also opening the doors to new clients in the European and Asia-Pacific markets.

Brand Licensing—Brand licensing consists of the licensing of various proprietary trademarks in connection with retail programs conducted through a number of retailers and manufacturers, and multiple licensing agreements that extend several of Meredith's brands internationally.

Meredith's largest licensing agreement is for Better Homes and Gardens branded products at Wal-Mart Stores, Inc. (Walmart). During fiscal 2014, we continued to expand the scope of Better Homes and Gardens branded products at Walmart stores. Our current licensing agreement with Walmart continues through 2016.

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Meredith also has a long-term agreement to license the Better Homes and Gardens brand to Realogy Corporation (Realogy), which continues to build a residential real estate franchise system based on the Better Homes and Gardens brand. The network now includes more than 250 offices across the United States and Canada and more than 8,300 agents.

Meredith's titles are currently distributed in more than 70 countries—including more than 25 licensed local editions in countries such as Australia, China, Indonesia, Italy, Russia, and Turkey. During fiscal 2014, Meredith renewed and expanded several agreements that expanded the reach of our popular media brands in Greece, Philippines, and Russia.

The Company continues to pursue brand extensions that will serve consumers and advertisers alike and also extend and strengthen the reach and vitality of our brands.

Meredith Books—Meredith has licensed exclusive global rights to publish and distribute books based on our consumer-leading brands, including the powerful Better Homes and 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 net sales subject to a guaranteed minimum.

Production and Delivery
Paper, printing, and postage costs accounted for 31 percent of the national media segment's fiscal 2014 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 2014, average paper prices decreased 4 percent. They declined 5 percent in fiscal 2013. Average paper prices increased 3 percent in fiscal 2012. Management anticipates paper prices will fall in the low to mid-single digits during fiscal 2015 and that fiscal 2015 average paper prices will be down in the low to mid-single digits compared to fiscal 2014.

Meredith has printing contracts with two major domestic printers for 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 78 percent of Meredith's postage costs, while other mail items—direct mail, replies, and bills—account for 22 percent. The Governors of the United States Postal Service (USPS) review prices for mailing services annually and adjust postage rates periodically. Though prices and price increases for various USPS products vary, overall average price increases are capped by law at the rate of inflation as measured by the Consumer Price Index, which was 1.7 percent in fiscal 2014. However, the USPS obtained approval for an additional increase of 4.3 percent, effective in January 2014, to cover recent financial losses, bringing the total price increase to 6.0 percent. The additional rate increase is currently set to phase out once losses have been recovered but may become permanent depending on the outcome of court appeals. Postage prices have risen in each of Meredith's last four fiscal years. Over the longer term, prices have increased in eight of the last nine fiscal years for Meredith.

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 Meredith's national media segment are provided by third parties. National magazine newsstand distribution services are provided by third parties through multi-year agreements.

8




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 skills, price, and customer service. While competition is strong for established titles, gaining readership for newer magazines and specialty publications is especially competitive.


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—Chairman, President, and Chief Executive Officer (2010 - present) and a director of the Company since 2004. Formerly President and Chief Executive Officer (2006 - 2010). Age 60.

Thomas H. Harty—President-National Media Group (2010 - present). Formerly President-Consumer Magazines (2009 - 2010) and Vice President-Magazine Group (2004 - 2009). Age 51.

Paul A. Karpowicz—President-Local Media Group (2005 - present). Age 61.

Joseph H. Ceryanec—Vice President-Chief Financial Officer (2008 - present). Age 53.

John S. Zieser—Chief Development Officer/General Counsel and Secretary (2006 - present). Age 55.


EMPLOYEES

As of June 30, 2014, the Company had approximately 3,500 full-time and 100 part-time employees. Only a small percentage of our workforce is unionized. We consider relations with our employees to be good.


OTHER

Name recognition and the public image of the Company's trademarks (e.g., Better Homes and Gardens and 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.

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 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

9



makes available on our website our corporate governance information including charters of all of our Board Committees, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, our Code of Ethics for CEO and Senior Financial Officers, 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 cause actual results to differ materially from 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.

Advertising represents the largest portion of our revenues. In fiscal 2014, 53 percent of our revenues were derived from advertising. Advertising constitutes 45 percent of our national media revenues and 73 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.

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 circulation 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

10



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, new and emerging 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 print and broadcasting revenues, which we believe may challenge us to expand the contribution of our online and other 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 in substantially all aspects of its business operations. Our website activities involve the storage and transmission of proprietary information, which we endeavor to protect from unauthorized access. However, it is possible that unauthorized persons may be able to circumvent our protections and misappropriate proprietary information or cause interruptions or malfunctions in our digital operations. 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.

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 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 ownership rules could affect our ability to consummate future transactions. Details regarding regulation and its impact on our local media operations are provided in Item 1-Business beginning on page 4.

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, three with Fox, two with MyNetworkTV, and one with NBC. 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. In most cases, we also make cash payments to the networks. These payments are in essence a portion of the retransmission fees that Meredith receives from cable, satellite, and telecommunications service providers, which pay Meredith to carry its local television programming in their markets. 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. Our CBS affiliation agreements expire in April 2016 and August 2017. Our two MyNetworkTV affiliation agreements expire in September 2016. Our NBC affiliation agreement and our Fox affiliation agreements each expire in December 2017.

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.


11



Paper and postage prices are difficult to predict and control. Paper and postage represent significant components of our total cost to produce, distribute, and market our printed products. In fiscal 2014, these expenses accounted for 22 percent of national media's operating costs. Paper is a commodity and its price has been 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 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 are imposed by regulations. Moreover, competition for certain types of acquisitions is significant, particularly in the fields of broadcast stations and interactive 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. We test our goodwill and intangible assets, including FCC licenses, 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 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 impairment charge could be incurred. At June 30, 2014, goodwill and intangible assets totaled $1.7 billion, or 66 percent of Meredith's total assets, with $955.3 million in the national media segment and $721.8 million in the local media segment. The review of goodwill is performed at the reporting unit level. The Company has three reporting units, local media, magazine brands, and MXM. As of May 31, 2014, the date that management last performed its annual review of impairment of goodwill and intangible assets, the fair value of the local media reporting unit significantly exceeded its net assets, the fair value of the magazine brands reporting unit exceeded its net assets by 20 percent, and the fair value of the MXM reporting unit exceeded its net assets by more than 40 percent. Changes in key assumptions about the economy or business prospects used to estimate fair value or other changes in market conditions could result in an impairment charge. Although these charges would be non-cash in nature and would not affect the Company's operations or cash flow, they would adversely affect stockholders' equity and reported results of operations in the period charged.

We have two classes of stock with different voting rights. We have two classes of stock: common stock and Class B stock. Holders of common stock are entitled to one vote per share and account for approximately 30 percent of the voting power. Holders of Class B stock are entitled to ten votes per share and account for the remaining 70 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.
 
 
 
The preceding risk factors should not be construed as a complete list of factors that
may affect our future operations and financial results.
 
 
 

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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 local media segment operates from facilities in the following locations: Atlanta, GA; Phoenix, AZ; Beaverton, OR; Rocky Hill, CT; Nashville, TN; Fairway, KS; St. Louis, MO; Greenville, SC; Henderson, NV; Springfield, MA; Saginaw, MI; and New York, NY. The Company believes these properties are adequate for their intended use. The properties in St. Louis, Springfield, and New York are 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.

The national media segment operates mainly from the Des Moines offices and from a leased facility in New York, NY. The New York facility is used primarily as advertising sales offices for all Meredith magazines and as headquarters for Family Circle, Parents, FamilyFun, American Baby, EveryDay with Rachael Ray, Fitness, More, and Siempre Mujer properties. Allrecipes.com operates out of leased space in Seattle, WA. We have also entered into leases for magazine editorial offices, customer relationship marketing operations, and national media sales offices in the states of California, Illinois, Massachusetts, Michigan, Texas, Vermont, and Virginia. The Company believes these facilities are sufficient to meet our current and expected future requirements.



ITEM 3. LEGAL PROCEEDINGS


There are various legal proceedings pending against the Company arising from the ordinary course of business. In the opinion of management, liabilities, if any, arising from existing litigation and claims are not expected to have a material effect on the Company's earnings, financial position, or liquidity.



ITEM 4. MINE SAFETY DISCLOSURES


Not applicable.




13



 
 
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.

 
High

 
Low

 
Dividends

Fiscal 2014
 
 
 
 
 
First Quarter
$
49.10

 
$
42.44

 
$
0.4075

Second Quarter
53.84

 
46.70

 
0.4075

Third Quarter
52.45

 
40.11

 
0.4325

Fourth Quarter
48.45

 
43.01

 
0.4325

 
 
 
 
 
 
 
 
 
 
 
 
 
High

 
Low

 
Dividends

Fiscal 2013
 
 
 
 
 
First Quarter
$
37.84

 
$
30.00

 
$
0.3825

Second Quarter
35.79

 
29.27

 
0.3825

Third Quarter
45.95

 
33.52

 
0.4075

Fourth Quarter
48.37

 
36.06

 
0.4075


Meredith stock became publicly traded in 1946, and quarterly dividends have been paid continuously since 1947. Meredith has increased our dividend for 21 consecutive years. It is currently anticipated that comparable dividends will continue to be paid in the future.

On July 31, 2014, there were approximately 1,165 holders of record of the Company's common stock and 605 holders of record of Class B stock.


COMPARISON OF SHAREHOLDER RETURN

The following graph compares the performance of the Company's common stock during the period July 1, 2009, to June 30, 2014, 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 $1.2 billion to $5.1 billion in the financial, information technology, industrial, and consumer discretionary industries covering more than 7 percent of the U.S. equities market and is weighted by market capitalization. The Peer Group

14



selected by the Company for comparison, which is also weighted by market capitalization, is comprised of Gannett Co., Inc.; Graham Holding Company (formerly The Washington Post Company); Martha Stewart Living Omnimedia, Inc.; Media General, Inc.; and The E.W. Scripps Company. Belo Corp. was removed from our Peer group as it was acquired by Gannett Co., Inc. during fiscal 2014.

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, 2009, assuming dividends were reinvested.


15



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, 2014.
Period
(a)
Total number
of shares
purchased 1, 2, 3
(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
 
 
 
 
 
 
 
 
 
(in thousands)
April 1 to
April 30, 2014
6,948
 
 
$
45.12

 
 
3,692
 
 
$
15,628

 
May 1 to
May 31, 2014
154,071
 
 
45.00
 
 
94,889
 
 
111,375

 
June 1 to
June 30, 2014
70,656
 
 
44.70
 
 
70,076
 
 
108,243

 
Total
231,675
 
 
44.92
 
 
168,657
 
 
 
 
1 
Total number of shares purchased includes the purchase of 282 shares of Class B common stock in June 2014.
2 
The number of shares purchased includes 3,692 shares in April 2014, 9,237 shares in May 2014, and 93 shares in June 2014 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. The number of shares repurchased excludes shares we reacquired pursuant to forfeitures of restricted stock.
3 
The number of shares purchased includes 3,256 shares in April 2014, 59,182 shares in May 2014, and 580 shares in June 2014 deemed to be delivered to us on tender of stock in payment for the exercise price of options. Effective July 1, 2013, these shares are no longer included as part of our repurchase program and thus they do not reduce the repurchase authority granted by our Board.

In October 2011, the Board of Directors authorized the repurchase of up to $100.0 million in shares of the Company's stock through public and private transactions. In May 2014, the Board authorized an additional $100.0 million in shares for repurchase.

Effective July 1, 2013, shares that are deemed to be delivered to us on tender of stock in payment for the exercise price of options do not reduce the repurchase authority granted by our Board. Shares delivered or deemed to be delivered to us in satisfaction of tax withholding on option exercises and the vesting of restricted shares continue to reduce the repurchase authority granted by our Board.

For more information on the Company's 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 33.



ITEM 6. SELECTED FINANCIAL DATA


Selected financial data for the fiscal years 2010 through 2014 is contained under the heading "Five-Year Financial History with Selected Financial Data" beginning on page 79 and is 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.




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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:

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 Corporation has been committed to service journalism for more than 110 years. Today, Meredith uses multiple media outlets—including print, broadcast television, digital, mobile, tablets, and video—to provide consumers with content they desire and to deliver the messages of its advertising and marketing partners.

Meredith operates two business segments. The local media segment includes 15 owned or operated television stations reaching 10 percent of U.S. households. Meredith’s portfolio is concentrated in large, fast-growing markets, with seven stations in the nation’s Top 25—including Atlanta, Phoenix, and Portland—and 13 in Top 50 markets. Meredith’s stations produce approximately 525 hours of local news and entertainment content each week, and operate leading local digital destinations. Additionally, MVS produces The Better Show, a syndicated daily lifestyle television program reaching 80 percent of U.S. TV households.

Meredith’s national media segment reaches 100 million unduplicated American women, including 60 percent of millennial women. Meredith is the leader in creating content across media platforms in key consumer interest areas such as food, home, parenthood, and health through well-known brands such as Better Homes and Gardens, Parents, and Allrecipes. The national media segment features robust brand licensing activities, including over 3,000 SKUs of branded products at 4,000 Walmart stores across the U.S. MXM provides expertise in mobile, social media, customer relationship management, and advanced analytics for many of the nation’s top companies and brands.

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 2014, the national media segment accounted for 73 percent of the Company's $1.5 billion in revenues while local media segment revenues contributed 27 percent.


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Meredith's balanced portfolio consistently generates substantial free cash flow, and the Company is committed to growing Total Shareholder Return (TSR) through dividend payments, share repurchases, and strategic business investments. Meredith’s current annualized dividend of $1.73 per share yields approximately 4 percent. Meredith has paid a dividend for 67 straight years and increased it for 21 consecutive years.

In Fiscal 2014, we aggressively executed on our TSR strategy by deploying capital in high cash flow businesses and growing the amount of cash returned to our shareholders. For example, we added great new television stations to our local media portfolio; executed a number of initiatives to strengthen and grow our national media segment; increased our dividend; and expanded our share repurchase program. Fiscal 2014 highlights include:

Strengthening of our portfolio of media businesses through acquisitions and new launches. For example, we:

Executed agreements to buy the broadcast assets of stations in three markets - KTVK, an independent station in Phoenix, the nation's 12th largest television market; KMOV, the CBS affiliate in St. Louis, the nation’s 21st largest television market; and WGGB, the ABC affiliate in Springfield, Massachusetts. The KTVK and KMOV acquisitions closed in fiscal 2014 and the WGGB acquisition is expected to close in the first quarter of fiscal 2015.
Successfully launched Allrecipes magazine, which Media Industry Newsletter called the “Hottest Launch of the Year.”
Strengthened our parenthood activities by integrating the Parenting and Baby Talk brands that we acquired late in fiscal 2013. In the spring of fiscal 2015, we expect to launch an English-language parenting magazine for U.S. Hispanic moms called Parents Latina.

Growing revenues and operating profit from activities that are not dependent on advertising. We delivered significant growth in retransmission-related revenues and profit in our local media segment. Within our national media segment, we grew revenues related to circulation and brand licensing, while MXM solidified its relationship with its top 10 clients.

Proving the effectiveness of advertising on both broadcast and print platforms. Broadcast television continues to demonstrate its unique effectiveness to local advertisers as we delivered 8 percent growth in local media non-political advertising. Our national media segment was named “Advertisers’ Favorite Media Company” for the second time in four years by Advertiser Perceptions, which annually surveys thousands of leading advertising agencies and marketers.

Finally, in fiscal 2014 we again successfully executed our TSR strategy. We increased our dividend another 6 percent in fiscal 2014 and we repurchased 1.6 million shares. We also invested more than $400 million in growing the television side of our business.

Going forward, we are aggressively pursuing these parallel paths designed to accelerate revenue growth and increase operating profit margins and cash flow over time:

First, we are working to grow our existing businesses organically. This includes our magazine, television, digital, licensing, and marketing services businesses.

Second, we are pursuing opportunities to add to our portfolio in both our national and local media groups.

Third, we are aggressively managing costs; and

Finally, we are executing our TSR Strategy, as highlighted by our established pattern of dividend increases and corresponding very attractive yield; share repurchase authorizations and buybacks; and our accretive acquisitions in both segments.


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LOCAL MEDIA

Local media derives the majority of its revenues—73 percent in fiscal 2014—from the sale of advertising both over the air and on our stations' websites and apps. The remainder comes from television retransmission fees, station operation management fees, television production services, 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. MVS produces video content for Meredith stations, non-Meredith stations, online distribution, and corporate customers. We have generated additional revenues from internet 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 44 percent of local media's operating expenses in fiscal 2014. Compensation expense is affected by salary and incentive levels, the number of employees, the costs of our various employee benefit plans, and other factors. Programming fees paid to the networks represented 16 percent of this segment's fiscal 2014 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 40 percent of local media's fiscal 2014 operating expenses.


NATIONAL MEDIA

Advertising revenues made up 45 percent of fiscal 2014 national media revenues. These revenues were generated from the sale of advertising space in our magazines and on our websites 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 2014 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 81 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. A key factor in our subscription success is our industry-leading database. It contains approximately 100 million entries that include information on about three-quarters of American homeowners, which includes 60 percent of millennial women, providing an average of 800 data points for each name. 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 24 percent of national media revenues came from a variety of activities that included the sale of customer relationship marketing products and services and books as well as brand licensing, product sales, and other related activities. MXM offers integrated promotional, database management, relationship, and direct

19



marketing capabilities for corporate customers, both in printed and digital forms. 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 production and delivery of publications and promotional mailings and employee compensation costs. Paper, postage, and production charges represented 31 percent of the segment's operating expenses in fiscal 2014. 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-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 increased rates most recently in January 2014. At this time, the USPS has not proposed any future rate increases other than making permanent a previous rate increase of 4.3 percent that is currently set to phase out once USPS loses have been recovered. Meredith works with others in the industry and through trade organizations to encourage the USPS to implement efficiencies and contain rate increases.

Employee compensation, which includes benefits expense, represented 26 percent of national media's operating expenses in fiscal 2014, and is affected by the same factors noted for local media.The remaining 43 percent of fiscal 2014 national media expenses included costs for magazine newsstand and book distribution, advertising and promotional efforts, and overhead costs for facilities and technology services.


FISCAL 2014 FINANCIAL OVERVIEW

Meredith completed its acquisition of KMOV, the CBS affiliate in St. Louis, Missouri in February 2014 and completed its acquisition of KTVK, an independent station in Phoenix, Arizona in June 2014.

In February 2014, the Company entered into a $150 million note purchase agreement. Proceeds were used for the acquisition of KMOV.

In March 2014, Meredith entered into a credit agreement that provides a revolving credit facility of $200 million and a term loan of $250 million, both of which expire in March 2019. The term loan was used to fund the purchase of the acquisition of the KTVK and an interest in certain of KASW's broadcast assets. Our prior revolving credit facility was paid off in March 2014.

Local media revenues increased 7 percent in fiscal 2014 as revenues from the station acquisitions and strong increases in other revenues more than offset a $34.1 million reduction in political advertising, which is expected in a non-political year. Local media operating profit declined 9 percent in fiscal 2014. The local media segment recorded $5.5 million in acquisition costs that were expensed during the year.

National media revenues declined 3 percent from the prior year as declines in our magazine operations of $29.1 million and in our integrated marketing operations of $5.2 million more than offset increased revenues in our licensing operations of $3.9 million. National media operating profit declined 18 percent due primarily to a larger restructuring charge in the current year of $20.8 million as compared to the prior year restructuring charge of $6.4 million. In addition, decreases in the operating profit of our magazine operations of $23.8 million more than offset improved operating results in our interactive media operations of $8.6 million and our licensing operations of $3.9 million.

During fiscal 2014, management committed to several performance improvement plans related primarily to business realignments including integration of local media acquisitions, converting Ladies' Home Journal from a monthly subscription magazine to a newsstand only quarterly special interest publication, the closing of our medical sales force training business, and other selected workforce reductions. In connection with these plans, the Company recorded a pre-tax restructuring charge of $24.5 million. This charge

20



includes $11.9 million for severance and related benefit costs, $10.3 million for the impairment of intangible assets, the write-down of fixed assets of $0.9 million, vacated building and lease accruals of $0.7 million, and other accruals and write-downs of $0.7 million. The Company also recorded $1.4 million in reversals of excess restructuring reserves accrued in prior years.

Diluted earnings per share decreased 9 percent to $2.50 from $2.74 in fiscal 2013.

In fiscal 2014, we generated $178.1 million in operating cash flows, invested $417.5 million in acquisitions of and investments in businesses, and invested $24.8 million in capital improvements.



RESULTS OF OPERATIONS

Years ended June 30,
2014

 
Change
2013

 
Change
2012

(In millions except per share data)
 
 
 
 
 
 
 
 
 
Total revenues
$
1,468.7

 
0
 %
 
$
1,471.3

 
7
%
 
$
1,376.7

Costs and expenses
1,222.3

 
1
 %
 
1,215.1

 
6
%
 
1,146.6

Depreciation and amortization
59.9

 
32
 %
 
45.4

 
2
%
 
44.3

Total operating expenses
1,282.2

 
2
 %
 
1,260.5

 
6
%
 
1,190.9

Income from operations
$
186.5

 
(12
)%
 
$
210.8

 
13
%
 
$
185.8

Net earnings
$
113.5

 
(8
)%
 
$
123.7

 
18
%
 
$
104.4

Diluted earnings per share
2.50

 
(9
)%
 
2.74

 
19
%
 
2.31


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

The Company completed its acquisition of KMOV in February 2014 and its acquisition of KTVK in June 2014. In fiscal 2013, we acquired Parenting and Babytalk magazines and related digital assets and the remaining interest in Living the Country Life, LLC. Effective July 1, 2011, Meredith acquired EatingWell Media Group. Also during fiscal 2012, we completed the following acquisitions: the October 2011 acquisition of EveryDay with Rachael Ray magazine and its related digital assets, the January 2012 acquisition of FamilyFun and its related assets, the March 2012 acquisition of Allrecipes.com, and the May 2012 acquisition of ShopNation. These acquisitions were not material to our consolidated financial statements. The 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.

Trends and Uncertainties

Advertising demand is the Company's key uncertainty, and its fluctuation from period to period can have a material effect on operating results. Advertising revenues accounted for 53 percent of total revenues in fiscal 2014. 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

21



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.


LOCAL MEDIA

The following discussion reviews operating results for the Company's local media segment, which consists of 14 owned television stations and one managed station, related digital and mobile media, and video creation operations. The local media segment contributed 27 percent of Meredith's consolidated revenues and 50 percent of the combined operating profit from local media and national media operations in fiscal 2014.

Local media revenues increased 7 percent in fiscal 2014 as revenues from the station acquisitions and strong increases in other revenues more than offset a $34.1 million reduction in political advertising, which is expected in a non-political year. Local media operating profit declined 9 percent in fiscal 2014.

Local media revenues increased 19 percent in fiscal 2013 as both political advertising and other revenues increased significantly. Local media operating profit increased 41 percent in fiscal 2013 on the strength of political advertising and other revenues.

Local media operating results for the last three fiscal years were as follows:

Years ended June 30,
2014

 
Change
2013

 
Change
2012

(In millions)
 
 
 
 
 
 
 
 
 
Revenues
$
402.8

 
7
 %
 
$
376.1

 
19
%
 
$
316.3

Operating expenses
(289.7
)
 
15
 %
 
(252.0
)
 
11
%
 
(228.0
)
Operating profit
$
113.1

 
(9
)%
 
$
124.1

 
41
%
 
$
88.3


Local Media Revenues

The table below presents the components of revenues for the last three fiscal years.

Years ended June 30,
2014

 
Change
2013

 
Change
2012

(In millions)
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
Non-political advertising
$
290.7

 
8
 %
 
$
268.8

 
(1
)%
 
$
270.7

Political advertising
4.9

 
(87
)%
 
39.0

 
476
 %
 
6.8

Other
107.2

 
57
 %
 
68.3

 
76
 %
 
38.8

Total revenues
$
402.8

 
7
 %
 
$
376.1

 
19
 %
 
$
316.3


Local media revenues increased 7 percent in fiscal 2014. Non-political advertising revenues increased 8 percent in fiscal 2014 as compared to the prior year primarily due to the addition of local media acquisitions non-political revenue of $14.7 million. Local non-political advertising revenues increased 8 percent. National non-political advertising increased 5 percent in fiscal 2014. Political advertising revenues totaled $4.9 million in fiscal 2014 compared with $39.0 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 (which take place primarily in our odd-numbered fiscal years). Political advertising may displace a certain amount of non-political advertising; therefore, the revenues may not be entirely incremental. The automotive, telecommunications, and retail categories were stronger, while the electronics, drug, and education categories were weaker. Online advertising revenues grew more than 15 percent in fiscal 2014 driven by increased traffic across the desktop and video platforms, the launch of new mobile apps, and addition of local media acquisitions. Other revenue, which was

22



primarily retransmission fees from cable and satellite operators and station management fees, grew significantly in fiscal 2014 primarily reflecting increased retransmission fees due to having a full year of benefit from agreements that were renegotiated in fiscal 2013.

Local media total revenues increased 19 percent in fiscal 2013, reflecting higher political advertising related to the November 2012 elections. Political advertising revenues totaled $39.0 million in fiscal 2013 compared with $6.8 million in the prior year. Non-political advertising revenues decreased 1 percent in fiscal 2013 as political advertising displaced some non-political advertising. Local non-political advertising revenues decreased 2 percent in fiscal 2013. National non-political advertising revenues increased 1 percent as compared to the prior year. In fiscal 2013, the automotive, furnishings, and media categories were stronger. Online advertising revenues, a small but growing percentage of non-political advertising revenues, increased 8 percent as compared to the prior year. Other revenue increased significantly in fiscal 2013 primarily reflecting increased retransmission fees.

Local Media Operating Expenses

Local media operating expenses increased 15 percent in fiscal 2014 primarily due to increased programming fees paid to the networks of $14.8 million, the addition of local media acquisition expenses of $14.1 million, transaction costs related to the acquisitions of $5.5 million, higher payroll and related costs of $2.8 million partially offset by lower legal service costs of $3.6 million. In fiscal 2014, the local media segment recorded a restructuring charge of $3.7 million including severance and related benefit costs of $3.4 million and an accrual to vacate a building of $0.3 million.

Fiscal 2013 local media operating expenses increased 11 percent as compared to the prior year primarily due to increased programming fees paid to the networks of $25.4 million partially offset by a reduction in film amortization expense of $2.3 million. In fiscal 2013, the local media segment recorded a restructuring charge of $1.5 million for severance and related benefits costs.

Local Media Operating Profit

Local media operating profit declined 9 percent in fiscal 2014 compared with fiscal 2013 primarily due to a change in the mix of revenues from higher margin political advertising revenues to lower margin other revenues and increased operating expenses as discussed above.

Fiscal 2013 local media operating profit increased 41 percent as compared to fiscal 2012. The increase was primarily due to the strength of political advertising revenues and higher other revenues partially offset by increased programming fees paid to the networks.


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, brand licensing, database-related activities, and other related operations. The national media segment contributed 73 percent of Meredith's consolidated revenues and 50 percent of the combined operating profit from local media and national media operations in fiscal 2014.


23



In fiscal 2014, national media revenues declined 3 percent and segment operating profit decreased 18 percent. In fiscal 2013, national media revenues increased 3 percent while segment operating profit grew 4 percent. National media operating results for the last three fiscal years were as follows:

Years ended June 30,
2014

 
Change
2013

 
Change
2012

(In millions)
 
 
 
 
 
 
 
 
 
Revenues
$
1,065.9

 
(3
)%
 
$
1,095.2

 
3
%
 
$
1,060.4

Operating expenses
(952.8
)
 
0
 %
 
(957.2
)
 
3
%
 
(927.4
)
Operating profit
$
113.1

 
(18
)%
 
$
138.0

 
4
%
 
$
133.0


National Media Revenues

The table below presents the components of revenues for the last three fiscal years.

Years ended June 30,
2014

 
Change
2013

 
Change
2012

(In millions)
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
Advertising
$
482.8

 
(6
)%
 
$
515.8

 
5
 %
 
$
492.3

Circulation
327.2

 
2
 %
 
322.2

 
13
 %
 
285.3

Other
255.9

 
0
 %
 
257.2

 
(9
)%
 
282.8

Total revenues
$
1,065.9

 
(3
)%
 
$
1,095.2

 
3
 %
 
$
1,060.4


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,
2014

 
Change
2013

 
Change
2012

Parents
1,256

 
2
 %
 
1,231

 
(1
)%
 
1,248

Better Homes and Gardens
1,174

 
(7
)%
 
1,263

 
(11
)%
 
1,416

Family Circle
962

 
(16
)%
 
1,147

 
(15
)%
 
1,343

Fitness
729

 
(5
)%
 
766

 
(5
)%
 
805

EveryDay with Rachael Ray ¹
628

 
(3
)%
 
645

 
n/m

 
335

More
611

 
(11
)%
 
685

 
(6
)%
 
725

FamilyFun ¹
543

 
(3
)%
 
558

 
n/m

 
165

Ladies' Home Journal
517

 
(26
)%
 
703

 
(17
)%
 
844

Traditional Home
495

 
(12
)%
 
562

 
2
 %
 
553

Midwest Living
402

 
5
 %
 
382

 
(4
)%
 
398

American Baby
348

 
(6
)%
 
370

 
(16
)%
 
439

EatingWell
293

 
31
 %
 
223

 
10
 %
 
203

¹ Since date of acquisition in fiscal 2012
 
 
 
 
 
 
 
 
 
n/m - Not meaningful
 
 
 
 
 
 
 
 
 

National media advertising revenues decreased 6 percent in fiscal 2014. Magazine advertising revenues declined 7 percent. Total advertising pages decreased in the high-single digits on a percentage basis in fiscal 2014 with most of our titles showing declines. Among our advertising categories, direct response and non-prescription drugs showed strength while demand was weaker for toiletries and cosmetics, food and beverage, and retail. Online advertising revenues in our digital and mobile media operations declined 1 percent in fiscal 2014.

24




National media advertising revenues increased 5 percent in fiscal 2013. Magazine advertising revenues declined 2 percent in fiscal 2013 as compared to fiscal 2012. Total advertising pages decreased in the low-single digits on a percentage basis. Excluding advertising revenues and pages from acquisitions completed by the national media segment during fiscal 2012, magazine advertising revenues and advertising pages decreased 9 percent in fiscal 2013 with most titles showing declines. Among our core advertising categories, demand was weaker for the majority of categories. Online advertising revenues in our digital and mobile media operations increased more than 60 percent in fiscal 2013. Excluding online advertising revenues from acquisitions completed by the national media segment during fiscal 2012, online advertising revenues increased 8 percent in fiscal 2013.

Circulation Revenues
Magazine circulation revenues increased 2 percent in fiscal 2014. While subscription revenues increased in the low-single digits, newsstand revenues declined in the high-single digits. The increase in subscription revenues is primarily due to the additional distribution of the recently launched Allrecipes magazine with Meredith's legacy titles and the additional subscribers obtained through the acquisition of Parenting and Babytalk magazines. The decline in newsstand revenues is primarily due to weakness in special interest media and other titles.

Magazine circulation revenues increased 13 percent in fiscal 2013. Excluding circulation revenues from acquisitions completed by the national media segment during fiscal 2012, magazine circulation revenues increased 6 percent as subscription revenues grew 10 percent while newsstand revenues declined 6 percent. The increase in subscription revenues is primarily due to a test issue of a magazine based on the Allrecipes brand and growth in our legacy titles.

Other Revenues
Other revenues were flat in fiscal 2014. MXM revenues decreased in the mid-single digits in fiscal 2014 due primarily to weakness in our health and digital customer relation marketing practices. Brand licensing revenues grew approximately 10 percent primarily due to continued strong sales of Better Homes and Gardens’ licensed products at Walmart stores.

Fiscal 2013 other revenues decreased 9 percent. MXM revenues were down approximately 10 percent in fiscal 2013 due primarily to reductions in programs from certain clients. In addition, other revenues declined primarily due to lower sales of books. Brand licensing revenues grew 7 percent in fiscal 2013.

National Media Operating Expenses

National media operating expenses were flat in fiscal 2014. Fiscal 2014 paper costs declined $9.6 million primarily due to the decrease in printing volumes. In addition to the decrease in the volume of paper used, paper expense also decreased due to a mid-single digit decline in average paper prices as compared to the prior year. Payroll and related costs were down $7.9 million due primarily to actions taken in the prior year. Postage and other delivery and fulfillment costs declined $5.9 million and editorial costs declined by $4.5 million. Performance-based incentive accruals decreased by $5.1 million. Mostly offsetting these declines were increases in circulation expenses of $10.1 million and paid search costs of $3.2 million. Circulation expenses rose due to an increase in agent expenses.

In addition, in fiscal 2014, the national media segment recorded a $20.8 million restructuring charge. This compares to a $6.4 million restructuring charge recorded by national media in fiscal 2013. The $20.8 million restructuring charge included the impairment of intangible assets of $10.3 million, severance and related benefit costs of $8.5 million, the write-down of fixed assets of $0.9 million, a vacated lease accrual of $0.4 million, and other accruals and write-downs of $0.7 million. Partially offsetting these charges was a $1.1 million reversal of excess restructuring accrual previously recorded by the national media segment.

National media operating expenses increased 3 percent in fiscal 2013 primarily due to operating expenses related to acquisitions completed by the national media segment during fiscal 2012 increasing $72.1 million and circulation expenses increasing $12.6 million. These increases were partially offset by declines in paper of $15.4 million,

25



processing of $6.6 million, postage and other delivery costs of $4.4 million, and editorial costs of $2.1 million primarily due to the decrease in advertising pages. In addition to the decrease in the volume of paper used, paper expense also decreased due to a mid-single digit decline in average paper prices as compared to the prior year. In accord with the decrease in MXM's revenues, customer relationship marketing production expenses declined $14.3 million. Net restructuring costs declined $6.5 million in fiscal 2013 and there was a lack of acquisition costs in fiscal 2013 compared to $2.7 million of acquisition costs incurred in fiscal 2012.

National Media Operating Profit

National media operating profit decreased 18 percent in fiscal 2014. The decrease in operating profit was primarily due to a larger restructuring charge recorded in fiscal 2014 as compared to the restructuring charge recorded in fiscal 2013. In addition, decreases in the operating profit of our magazine operations of $23.8 million more than offset improved operating results in our interactive media operations of $8.6 million and our licensing operations of $3.9 million.

In fiscal 2013, national media operating profit grew 4 percent compared with the prior year primarily due to there being lower restructuring charges recorded in fiscal 2013 than were recorded in fiscal 2012 and the lack of acquisition expenses in fiscal 2013. In addition, operating profit from acquisitions completed by the national media segment during fiscal 2012 increased $6.6 million and brand licensing operations operating profit increased by $2.8 million. These increases were partially offset by declines in operating profit of our magazine operations of $10.2 million and customer relationship marketing operations of $2.0 million.


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,
 
2014

 
Change
 
2013

 
Change
 
2012

(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
Unallocated corporate expenses
 
$
39.7

 
(23
)%
 
 
$
51.3

 
44
%
 
 
$
35.5


Unallocated corporate expenses decreased 23 percent in fiscal 2014 as fiscal 2013 results included a charge of $5.1 million for professional fees and expenses related to a strategic transaction that did not materialize. Decreases in investment spending in Next Issue Media of $4.1 million and charitable contributions of $1.5 million also contributed to the decline.

Unallocated corporate expenses increased 44 percent in fiscal 2013 compared with the prior year. Fiscal 2013 results included a charge of $5.1 million for professional fees and expenses related to a strategic transaction that did not materialize. In addition, increases in performance-based incentive accruals of $3.4 million; medical, pension, and other benefit costs of $2.8 million; consulting costs of $2.6 million; and investment spending in Next Issue Media of $1.5 million were partially offset by a reduction in building rent of $1.6 million.



26



CONSOLIDATED

Consolidated Operating Expenses

Consolidated operating expenses for the last three fiscal years were as follows:

Years ended June 30,
2014

 
Change
2013

 
Change
2012

(In millions)
 
 
 
 
 
 
 
 
 
Production, distribution, and editorial
$
567.0

 
1
%
 
$
561.1

 
2
%
 
$
547.6

Selling, general, and administrative
655.2

 
0
%
 
654.1

 
9
%
 
599.0

Depreciation and amortization
59.9

 
32
%
 
45.4

 
2
%
 
44.3

Operating expenses
$
1,282.2

 
2
%
 
$
1,260.5

 
6
%
 
$
1,190.9


Production, Distribution, and Editorial Costs
Fiscal 2014 production, distribution, and editorial costs increased 1 percent. Increases in programming fees paid to the networks of $14.8 million and the addition of local media acquisition expenses of $6.1 million offset declines in national media paper costs of $9.6 million, postage and other delivery and fulfillment costs of $5.9 million, and editorial costs of $4.5 million.

Production, distribution, and editorial costs increased 2 percent in fiscal 2013 as compared to the prior year. Programming fees paid to the networks increased $25.4 million and expenses related to acquisitions completed by the national media segment during fiscal 2012 increased $24.7 million. These increases were partially offset by declines in national media paper of $15.4 million, processing of $6.6 million, postage and other delivery expenses of $4.4 million, and editorial costs of $2.1 million; customer relationship marketing production costs of $5.9 million; and local media film amortization of $2.3 million.

Selling, General, and Administrative Expenses
Fiscal 2014 selling, general, and administrative expenses were flat as compared to the prior year. In fiscal 2014, the Company recorded a $13.1 million restructuring charge. This compares to a $7.8 million restructuring charge recorded in fiscal 2013. The $13.1 million restructuring charge recorded in fiscal 2014 including severance and related benefit costs of $11.9 million, vacated building and lease accruals of $0.7 million, and other accruals of $0.5 million. Partially offsetting these charges was a $1.4 million reversal of excess restructuring accrual previously accrued.

Circulation expenses rose $10.1 million in fiscal 2014. The addition of local media acquisition expenses added $5.3 million. Declines in performance-based incentive accruals of $6.3 million, expenses related to a fiscal 2013 strategic transaction that did not materialize of $5.1 million, investment spending in Next Issue Media of $4.1 million, local media legal costs of $3.6 million, employee compensation costs of $2.5 million, favorable curtailment credit related to our postretirement benefit plan of $1.5 million, and charitable contributions of $1.5 million mostly offset the increases.

Selling, general, and administrative expenses increased 9 percent in fiscal 2013. During fiscal 2013, the Company recorded a restructuring charge of $7.8 million, including $7.4 million for severance and related benefit costs and a vacated lease accrual of $0.4 million related to business realignments. Partially offsetting these charges was an $0.8 million reversal of excess restructuring accrual previously accrued. Fiscal 2013 results also included a charge of $5.1 million for professional fees and expenses related to a strategic transaction that did not materialize.

In addition, contributing to the increase were expenses from acquisitions completed by the national media segment during fiscal 2012 of $44.4 million; circulation expenses of $12.6 million; medical, pension, and other benefit costs of $7.3 million; performance-based incentive accruals of $6.0 million; and consulting costs of $2.2 million. These increases were partially offset by reductions in customer relationship marketing selling expenses of $6.3 million,

27



net restructuring costs of $6.2 million, employee compensation costs of $4.3 million, and acquisition costs $2.7 million.

Depreciation and Amortization
Depreciation and amortization expense increased 32 percent in fiscal 2014. Due to restructuring plans committed to by management during fiscal 2014, trademarks of $9.5 million and customer lists of $0.8 million were deemed to be impaired and were written off. In addition, the Company recorded an impairment charge of $0.9 million on fixed assets primarily due to the closing of the Company's medical sales force training business. Excluding these impairments, depreciation and amortization expense increased primarily due to the acquisition of KMOV.

Depreciation and amortization increased 2 percent in fiscal 2013 as compared to the prior year primarily due to the increased depreciation expenses from acquisitions completed by the national media segment during fiscal 2012.

Operating Expenses
Employee compensation including benefits was the largest component of our operating expenses in fiscal 2014. Employee compensation represented 33 percent of total operating expenses in fiscal 2014 compared to 34 percent in fiscal 2013, and 33 percent in fiscal 2012. National media paper, production, and postage combined expense was the second largest component of our operating costs in fiscal 2014, representing 23 percent of the total. In fiscal 2013, these expenses represented 24 percent and in fiscal 2012, they were 27 percent.

Income from Operations

Income from operations decreased 12 percent in fiscal 2014. The decrease in income from operations was primarily due to a larger restructuring charge recorded in the current year than was recorded in the prior year. In addition, decreases in the operating profit of our magazine operations of $23.8 million more than offset improved operating results in our interactive media operations of $8.6 million and our licensing operations of $3.9 million.

Income from operations rose 13 percent in fiscal 2013 as compared to the prior year primarily due to revenue growth and higher operating profits of $35.8 million in our local media segment and increased operating profit from acquisitions completed by the national media segment during fiscal 2012 of $6.6 million. These increases were partially offset by the increased unallocated corporate expenses of $15.7 million and declines in operating results in our magazine operations of $10.2 million.

Net Interest Expense

Net interest expense was $12.2 million in fiscal 2014, $13.4 million in fiscal 2013, and $12.9 million in fiscal 2012. Average long-term debt outstanding was $428.8 million in fiscal 2014, $367.7 million in fiscal 2013, and $305.4 million in fiscal 2012. The Company's approximate weighted average interest rate was 2.7 percent in fiscal 2014, 3.7 percent in fiscal 2013, and 4.2 percent in fiscal 2012.

Income Taxes

The Company's effective tax rate was 34.9 percent in fiscal 2014, 37.4 percent in fiscal 2013, and 39.6 percent in fiscal 2012. Our effective tax rate was primarily impacted by our lower pretax earnings due to the impairment and restructuring charges recorded in fiscal 2014 and a tax benefit from the realignment of international operations. The decrease in the fiscal 2013 effective tax rate is primarily due to tax benefits from the resolution of state and local tax contingencies.

Net Earnings and Earnings per Share

Net earnings were $113.5 million ($2.50 per diluted share) in fiscal 2014, down 8 percent from $123.7 million ($2.74 per diluted share) in fiscal 2013. The decrease in net earnings was primarily due to a larger restructuring charge recorded in the current year than was recorded in the prior year. In addition, decreases in the operating profit

28



of our magazine operations of $23.8 million more than offset improved operating results in our interactive media operations of $8.6 million and our licensing operations of $3.9 million. Both average basic and diluted shares outstanding increased slightly.

Net earnings were $123.7 million ($2.74 per diluted share) in fiscal 2013, up 18 percent from $104.4 million ($2.31 per diluted share) in fiscal 2012. The improvement was primarily the result of revenue growth and higher operating profits in our local media segment of $35.8 million, increased operating profits from the prior year national media acquisitions of $6.6 million and a lower effective tax rate. These increases were partially offset by the increased unallocated corporate expenses of $15.7 million and declines in operating results in our magazine of $10.1 million. Both average basic and diluted shares outstanding decreased slightly.



LIQUIDITY AND CAPITAL RESOURCES

Years ended June 30,
2014

 
2013

 
2012

(In millions)
 
 
 
 
 
Cash flows from operating activities
$
178.1

 
$
189.1

 
$
181.9

Cash flows from investing activities
(442.3
)
 
(76.2
)
 
(284.7
)
Cash flows from financing activities
273.1

 
(111.1
)
 
100.9

Net cash flows
$
8.9

 
$
1.9

 
$
(1.9
)
Cash and cash equivalents
$
36.6

 
$
27.7

 
$
25.8

Long-term debt (including current portion)
715.0

 
350.0

 
380.0

Shareholders' equity
891.7

 
854.3

 
797.4

Debt to total capitalization
45 %

 
29 %

 
32 %



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 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, operating results and cash flows are subject to changes in demand for our products and changes in costs. Changes in the level of demand for magazine and television advertising or other products can have a significant effect on 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, 2014, we had up to $180.0 million available under our revolving credit facility and up to $30.0 million available under our asset-backed bank facility (depending on levels of accounts receivable). 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 $8.9 million in fiscal 2014 and $1.9 million in fiscal 2013. They decreased $1.9 million in fiscal 2012. Over the three-year period, net cash provided by operating activities was used for acquisitions, debt repayments, dividends, stock repurchases, and capital investments.


29



Operating Activities

The largest single component of operating cash inflows is cash received from advertising customers. Advertising accounted for more than 50 percent 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 transactions such as customer relationship marketing, retransmission consent fees, 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, broadcasting programming rights, employee benefits (including pension plans), network programming fees, and other services and supplies.

Cash provided by operating activities totaled $178.1 million in fiscal 2014 compared with $189.1 million in fiscal 2013. The change is primarily due to the timing of cash payments such as income tax payments and lower net earnings (excluding the impact of non-cash impairments).

Cash provided by operating activities totaled $189.1 million in fiscal 2013 compared with $181.9 million in fiscal 2012. The increase is primarily due to higher net earnings partially offset by a reduction in the current year deferred income taxes compared to the prior year.

Changes in the Company's cash contributions to qualified defined benefit pension plans can have a significant effect on cash provided by operations. We have not made any contributions in the last three fiscal years. We do not anticipate a required contribution in fiscal 2015.

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 was $442.3 million in fiscal 2014 compared to $76.2 million in fiscal 2013. The increase primarily reflects cash used for the purchase of the broadcast stations in the current year.

Net cash used in investing activities decreased to $76.2 million in fiscal 2013 from $284.7 million in the prior year. The decrease primarily reflects more cash used in the prior year for acquisitions as well as higher spending in the prior year for additions to property, plant, and equipment due to a move into our new leased facilities in New York in fiscal 2012.

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, and the payment of dividends.

Net cash provided by financing activities totaled $273.1 million in fiscal 2014, compared with net cash used in financing activities of $111.1 million in the prior year. The change in cash from financing activities is primarily due to net debt of $365.0 million being incurred in the current year, primarily to finance the broadcast acquisitions, compared to a net $30.0 million debt reduction in the prior year.

Net cash used in financing activities totaled $111.1 million in the year ended June 30, 2013, compared with net cash provided by financing activities of $100.9 million in fiscal 2012. The change in cash from financing activities is primarily due to a net $30.0 million debt reduction in fiscal 2013, compared to net debt of $185.0 million being incurred in fiscal 2012 primarily to finance acquisitions. Also effecting the change in cash used for financing activities was increased use of cash for higher dividend payments due to the increased dividend per share rate and

30



increased purchases of Company common stock in fiscal 2013 offset by increased proceeds from common stock issued.

Long-term Debt

At June 30, 2014, long-term debt outstanding totaled $715.0 million ($250.0 million under a term loan, $225.0 million in fixed-rate unsecured senior notes, $150.0 million in floating-rate unsecured senior notes, $70.0 million under an asset-backed bank facility, and $20.0 million outstanding under a revolving credit facility). Of the fixed-rate unsecured senior notes, $75.0 million is due in the next 12 months. We expect to repay the senior notes with cash from operations and credit available under existing credit agreements. The fixed-rate senior notes are repayable in amounts of $25.0 million and $50.0 million and are due from July 13, 2014, to March 1, 2018. Interest rates on the fixed-rate senior notes range from 2.62 percent to 7.19 percent with a weighted average interest rate of 3.41 percent.

In February 2014, Meredith issued $150.0 million in floating-rate senior notes which are due in February 2024. The interest rate under the notes is based on a fixed spread over LIBOR. None of the floating-rate senior notes are due in the next 12 months.

In connection with the asset-backed bank facility, we entered into a revolving agreement. Under this agreement, we currently sell all of our rights, title, and interest in the majority of our accounts receivable related to advertising and miscellaneous revenues to Meredith Funding Corporation, a special-purpose entity established to purchase accounts receivable from Meredith. At June 30, 2014, $150.9 million of accounts receivable net of reserves were outstanding under the agreement. Meredith Funding Corporation in turn sells receivable interests to a major national bank. In consideration of the sale, Meredith receives cash and a subordinated note that bears interest at the prime rate, 3.25 percent at June 30, 2014, from Meredith Funding Corporation.

The revolving agreement is structured as a true sale under which the creditors of Meredith Funding Corporation will be entitled to be satisfied out of the assets of Meredith Funding Corporation prior to any value being returned to Meredith or its creditors. The accounts of Meredith Funding Corporation are fully consolidated in Meredith's consolidated financial statements. The asset-backed bank facility has a capacity of up to $100.0 million. The interest rate on the asset-backed bank facility is variable based on the London Interbank Offered Rate (LIBOR) plus a fixed spread. The interest rate was 1.04 percent as of June 30, 2014. The renewed facility will expire in April 2015.

During fiscal 2014, Meredith entered into a credit agreement that provided for a revolving credit facility of $200.0 million and a term loan of $250.0 million, which expire in March 2019. The interest rate under both facilities is variable based on LIBOR and Meredith's debt to trailing 12 month EBITDA ratio (earnings before interest, taxes, depreciation, and amortization as defined in the debt agreement). The term loan is payable in quarterly installments based on an amortization schedule as set forth in the agreement. The commitment fees under both facilities range from 0.125 percent to 0.25 percent of the unused commitment based on the Company's leverage ratio. At June 30, 2014, $250.0 million was outstanding under the term loan and $20.0 million was outstanding under the revolver. Of the term loan, $12.5 million is due in the next 12 months.


31



We believe our debt agreements are material to discussions of Meredith's liquidity. All of our debt agreements include financial covenants, and failure to comply with any such covenants could result in the debt becoming payable on demand. A summary of the most significant financial covenants and their status at June 30, 2014, is as follows:

 
Required at
June 30, 2014
Actual at
June 30, 2014
Ratio of debt to trailing 12 month EBITDA1
Less than 3.75
2.68
Ratio of EBITDA1 to interest expense
Greater than 2.75
14.94
1 EBITDA is earnings before interest, taxes, depreciation, and amortization as defined in the debt agreements.
 

The Company was in compliance with these and all other financial covenants at June 30, 2014.

Contractual Obligations

The following table summarizes our principal contractual obligations as of June 30, 2014:

 
 
 
 
Payments Due by Period
 
Contractual obligations
 
Total

 
Less than
1 Year

 
1-3
Years

 
4-5
Years

 
After 5
Years

(In millions)
 
 
 
 
 
 
 
 
 
Long-term debt
$
715.0

 
$
87.5

 
$
137.5

 
$
340.0

 
$
150.0

Debt interest 1
57.5

 
13.4

 
20.1

 
11.9

 
12.1

Broadcast rights and network programming 2
223.7

 
64.5

 
127.1

 
31.2

 
0.9

Contingent consideration 3
2.6

 

 

 
2.6

 

Operating leases
170.7

 
18.8

 
35.3

 
27.7

 
88.9

Purchase obligations and other 4
59.2

 
24.9

 
23.1

 
5.5

 
5.7

Total contractual cash obligations
$
1,228.7

 
$
209.1

 
$
343.1

 
$
418.9

 
$
257.6

 
 
1
Debt interest represents semi-annual interest payments due on fixed-rate senior notes outstanding at June 30, 2014 and estimated interest payments on variable-rate term loan and variable-rate private placement senior notes outstanding at June 30, 2014. Interest payments on variable-rate debt is estimated using the effective interest rate as of June 30, 2014.
2
Commitments for broadcasting rights and network programming consist of future rights to broadcast television programming and future programming costs pursuant to network affiliate agreements. Broadcast rights include $29.5 million owed for broadcast rights that are not currently available for airing and are therefore not included in the Consolidated Balance Sheet at June 30, 2014.
3
These amounts include contingent acquisition payments. While it is not certain if and /or 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 contingencies may be resolved.
4
Purchase obligations and other includes expected postretirement benefit payments.

Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at June 30, 2014, the Company is unable to make reasonably reliable estimates of the period of cash settlement. Therefore, $45.6 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 7 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 cash obligations and other operating cash requirements for the foreseeable future. Projections of future cash flows

32



are, however, subject to substantial uncertainty as discussed throughout MD&A and particularly in Item 1A-Risk Factors beginning on page 10. 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 $1.2 million that expire within one year.

Share Repurchase Program

We have maintained a program of Company share repurchases for 26 years. In fiscal 2014, we spent $78.2 million to repurchase an aggregate of 1,640,000 shares of Meredith Corporation common and Class B stock at then current market prices. We spent $54.7 million to repurchase an aggregate of 1,477,000 shares in fiscal 2013 and $26.9 million to repurchase an aggregate of 976,000 shares in fiscal 2012. We expect to continue repurchasing shares from time to time subject to market conditions. In October 2011, the Board of Directors authorized the repurchase of up to $100.0 million in shares of the Company's stock through public and private transactions. 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, 2014, $108.2 million remained available under the current authorizations for future repurchases. The status of the repurchase program is reviewed at each quarterly Board of Directors meeting. 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, 2014.

Dividends

Meredith has paid quarterly dividends continuously since 1947 and we have increased our dividend annually for 21 consecutive years. The last increase occurred in February 2014 when the Board of Directors approved the quarterly dividend of 43.25 cents per share effective with the dividend payable in March 2014. Given the current number of shares outstanding, the increase will result in additional dividend payments of approximately $4.4 million annually. Dividend payments totaled $75.4 million, or $1.6800 per share, in fiscal 2014 compared with $70.5 million, or $1.5800 per share, in fiscal 2013, and $63.0 million, or $1.4025 per share, in fiscal 2012.

Capital Expenditures

Spending for property, plant, and equipment totaled $24.8 million in fiscal 2014, $26.0 million in fiscal 2013, and $35.7 million in fiscal 2012. Current and prior year investments primarily relate to assets acquired in the normal course of business. Fiscal 2012 spending primarily related to leasehold improvements related to our move into new leased facilities in New York along with assets acquired in the normal course of business. The Company has no material commitments for 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 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.

33



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, 2014, goodwill and intangible assets totaled $1.7 billion, or 66 percent of Meredith's total assets, with $955.3 million in the national media segment and $721.8 million in the local media segment.

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. At May 31, 2014, the date the Company last performed its annual evaluation of impairment of goodwill, management elected to perform the two-step goodwill impairment test for all reporting units. The first step of this test is to compare the fair value of a reporting unit to its carrying value. In reviewing other indefinite-lived intangible assets for impairment, the Company compares the fair value of the asset to the asset’s carrying value.

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 local media and national 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. Also see Note 4 to the consolidated financial statements for additional information. The impairment analysis of these assets is considered critical because of their significance to the Company and our local media and national media segments.


BROADCAST RIGHTS

Broadcast rights, which consist primarily of rights to broadcast syndicated programs and feature films, are recorded at cost when the programs become available for airing. Amortization of broadcast rights is generally recorded on an accelerated basis over the contract period. Broadcast rights valued at $7.7 million were included in the Consolidated Balance Sheet at June 30, 2014. In addition, we had entered into contracts valued at $29.5 million not included in the Consolidated Balance Sheet at June 30, 2014, because the related programming was not yet available for airing.

Broadcast rights are valued at the lower of unamortized cost or net realizable value. The determination of net realizable value requires us to estimate future net revenues expected to be earned as a result of airing of the programming. Future revenues can be affected by changes in the level of advertising demand, competition from other television stations or other media, changes in television programming ratings, changes in the planned usage of programming materials, and other factors. Changes in such key assumptions could result in an impairment charge.


PENSION AND POSTRETIREMENT PLANS

Meredith has noncontributory pension plans covering substantially all employees. These 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.


34



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. More information on our assumptions and our methodology in arriving at these assumptions can be found in Note 8 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 assets of 8.0 percent in developing fiscal 2015 pension costs, the same as used in fiscal 2014. The fiscal 2014 rate was 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 pension plan assets earned 20.2 percent in fiscal 2014 and 12.9 percent in fiscal 2013. If we had decreased our expected long-term rate of return on plan assets by 0.5 percent in fiscal 2014, our pension expense would have increased by $0.6 million.

Meredith will use a discount rate of 3.57 percent in developing the fiscal 2015 pension costs, down from a rate of 3.92 percent used in fiscal 2014. If we had decreased the discount rate by 0.5 percent in fiscal 2014, our pension expense would have increased by $0.1 million.

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, 2014, and no increase in the aggregate service and interest cost components of fiscal 2014 expense.


REVENUE RECOGNITION

Revenues from the newsstand sale of magazines are recorded net of our best estimate of expected product returns. Net revenues from newsstand sales totaled 5 percent of fiscal 2014 national media segment revenues. Allowances for returns are subject to considerable variability. Return allowances may exceed 65 percent for magazines sold on the newsstand. Estimation of these allowances for future returns is considered critical to the national media segment and the Company as a whole because of the potential impact on revenues.

Estimates of magazine newsstand returns are based on historical experience and current marketplace conditions. Allowances for returns are adjusted continually on the basis of actual results. Unexpected changes in return levels may result in adjustments to net revenues.


SHARE-BASED COMPENSATION EXPENSE

Meredith has a stock incentive plan that permits us to grant various types of share-based incentives to key employees and directors. The primary types of incentives granted under the plan are stock options and restricted shares of common stock. Share-based compensation expense totaled $12.2 million in fiscal 2014. As of June 30, 2014, unearned compensation cost was $6.0 million for restricted stock and $3.5 million for stock options. These costs will be recognized over weighted average periods of 1.8 years and 1.7 years, respectively.

Restricted shares are valued at the market value of traded shares on the date of grant. The valuation of stock options requires numerous assumptions. We determine the fair value of each option as of the date of grant using the Black-Scholes option-pricing model. This model requires inputs for the expected volatility of our stock price, expected life of the option, and expected dividend yield, among others. We base our assumptions on historical data, expected

35



market conditions, and other factors. In some instances, a range of assumptions is used to reflect differences in behavior among various groups of employees. In addition, we estimate the number of options and restricted stock expected to eventually vest. This is based primarily on past experience.

We consider the accounting for share-based compensation expense critical to Meredith and both of our segments because of the number of significant judgments required. More information on our assumptions can be found in Note 11 to the consolidated financial statements. Changes in these assumptions could materially affect the share-based compensation expense recognized as well as various liability and equity balances.


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. Income tax expense was 34.9 percent of earnings before income taxes in fiscal 2014. Net deferred tax liabilities totaled $296.7 million, or 18 percent of total liabilities, at June 30, 2014.

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. See Note 1 to the consolidated financial statements for further detail on applicable accounting pronouncements that were adopted in fiscal 2014 or will be effective for fiscal 2015.



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, 2013.


36



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, 2014, Meredith had $225.0 million outstanding in fixed-rate long-term debt. There are no earnings or liquidity risks associated with the Company's fixed-rate debt. The fair value of the fixed-rate debt (based on discounted cash flows reflecting borrowing rates currently available for debt with similar terms and maturities) 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 $228.2 million from $227.0 million at June 30, 2014.

At June 30, 2014, $490 million 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 interest rates would increase annual interest expense by $0.8 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, 2014, a 10 percent decrease in interest rates would have resulted in an immaterial change in the fair value of the available broadcast rights payable and the unavailable broadcast rights commitments.


37



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Supplementary Data
 
 
Page
 
 
 
 
Financial Statements
 
Consolidated Balance Sheets as of June 30, 2014 and 2013
Consolidated Statements of Earnings for the Years Ended June 30, 2014, 2013, and 2012
Consolidated Statements of Comprehensive Income for the Years Ended June 30, 2014, 2013, and 2012
Consolidated Statements of Shareholders' Equity for the Years Ended June 30, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the Years Ended June 30, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
 
 
 
 
Financial Statement Schedule
 




38



Report of Independent Registered Public Accounting Firm


The Board of Directors and Shareholders
Meredith Corporation:

We have audited the accompanying consolidated balance sheets of Meredith Corporation and subsidiaries (the Company) as of June 30, 2014 and 2013, and 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, 2014. In connection with our audits of the consolidated financial statements, we have also audited the consolidated financial statement schedule, Schedule II-Valuation and Qualifying Accounts. We also have audited the Company's internal control over financial reporting as of June 30, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these consolidated financial statements and financial statement schedule, 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 Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. 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.

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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Meredith Corporation and subsidiaries as of June 30, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2014, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all

39



material respects, the information set forth therein. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ KPMG LLP
Des Moines, Iowa
August 25, 2014




40



REPORT OF MANAGEMENT




To the Shareholders of Meredith Corporation:

Meredith management is responsible for the preparation, integrity, and objectivity of the financial information included in this Annual Report on Form 10-K. We take this responsibility very seriously as we recognize the importance of having well-informed, confident investors. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include amounts based on our informed judgments and estimates. We have adopted appropriate accounting policies and are fully committed to ensuring that those policies are applied properly and consistently. In addition, we strive to report our consolidated financial results in a manner that is relevant, complete, and understandable. We welcome any suggestions from those who use our reports.

To meet our responsibility for financial reporting, our internal control systems and accounting procedures are designed to provide reasonable assurance as to the reliability of financial records. In addition, our internal audit staff monitors and reports on compliance with Company policies, procedures, and internal control systems.

The consolidated financial statements and the effectiveness of the Company's internal control over financial reporting have been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (United States). The independent registered public accounting firm was given unrestricted access to all financial records and related information, including all Board of Directors and Board committee minutes.

The Audit Committee of the Board of Directors is responsible for reviewing and monitoring the Company's accounting policies, internal controls, and financial reporting practices. The Audit Committee is also directly responsible for the appointment, compensation, and oversight of the Company's independent registered public accounting firm. The Audit Committee consists solely of independent directors who meet with the independent registered public accounting firm, management, and internal auditors to review accounting, auditing, and financial reporting matters. To ensure complete independence, the independent registered public accounting firm has direct access to the Audit Committee without the presence of management representatives.

At Meredith, we have always placed a high priority on good corporate governance and will continue to do so in the future.


/s/ Joseph Ceryanec

Joseph Ceryanec
Chief Financial Officer




41



FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Meredith Corporation and Subsidiaries
Consolidated Balance Sheets

Assets
June 30,
2014

 
2013

(In thousands)
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
36,587

 
$
27,674

Accounts receivable
     (net of allowances of $7,813 in 2014 and $10,559 in 2013)
257,644

 
232,305

Inventories
24,008

 
28,386

Current portion of subscription acquisition costs
96,893

 
97,982

Current portion of broadcast rights
4,551

 
2,831

Assets held for sale
32,900

 

Other current assets
17,429

 
18,514

Total current assets
470,012

 
407,692

Property, plant, and equipment
 
 
 
Land
23,363

 
20,318

Buildings and improvements
143,169

 
131,653

Machinery and equipment
314,949

 
295,476

Leasehold improvements
14,125

 
14,815

Construction in progress
5,610

 
1,993

Total property, plant, and equipment
501,216

 
464,255

Less accumulated depreciation
(296,168
)
 
(277,938
)
Net property, plant, and equipment
205,048

 
186,317

Subscription acquisition costs
101,533

 
99,433

Broadcast rights
3,114

 
3,634

Other assets
86,935

 
69,848

Intangible assets, net
835,531

 
584,281

Goodwill
841,627

 
788,854

Total assets
$
2,543,800

 
$
2,140,059

 
 
 
 
See accompanying Notes to Consolidated Financial Statements
 
 
 

42





Meredith Corporation and Subsidiaries
Consolidated Balance Sheets (continued)

Liabilities and Shareholders' Equity
June 30,
2014

 
2013

(In thousands except per share data)
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt 
$
87,500

 
$
50,000

Current portion of long-term broadcast rights payable 
4,511

 
4,089

Accounts payable
81,402

 
78,458

Accrued expenses
 
 
 
Compensation and benefits
57,637

 
56,030

Distribution expenses
8,504

 
12,505

Other taxes and expenses
69,906

 
64,141

Total accrued expenses
136,047

 
132,676

Current portion of unearned subscription revenues
173,643

 
191,448

Total current liabilities
483,103

 
456,671

Long-term debt
627,500

 
300,000

Long-term broadcast rights payable
4,327

 
5,096

Unearned subscription revenues
151,533

 
163,809

Deferred income taxes
277,477

 
247,487

Other noncurrent liabilities
108,208

 
112,700

Total liabilities
1,652,148

 
1,285,763

Shareholders' equity
 
 
 
Series preferred stock, par value $1 per share
 
 
 
Authorized 5,000 shares; none issued

 

Common stock, par value $1 per share
 
 
 
Authorized 80,000 shares; issued and outstanding 36,776 shares in 2014 (excluding 24,395 treasury shares) and 36,242 shares in 2013 (excluding 23,992 treasury shares)
36,776

 
36,242

Class B stock, par value $1 per share, convertible to common stock
 
 
 
Authorized 15,000 shares; issued and outstanding 7,700 shares in 2014 and 8,324 shares in 2013
7,700

 
8,324

Additional paid-in capital
41,884

 
50,170

Retained earnings
814,050

 
775,901

Accumulated other comprehensive loss
(8,758
)
 
(16,341
)
Total shareholders' equity
891,652

 
854,296

Total liabilities and shareholders' equity
$
2,543,800

 
$
2,140,059

 
 
 
 
See accompanying Notes to Consolidated Financial Statements
 
 
 


43



Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings

Years ended June 30,
2014

 
2013

 
2012

(In thousands except per share data)
 
 
 
 
 
Revenues
 
 
 
 
 
Advertising
$
778,391

 
$
823,690

 
$
769,815

Circulation
327,214

 
322,223

 
285,254

All other
363,103

 
325,427

 
321,618

Total revenues
1,468,708

 
1,471,340

 
1,376,687

Operating expenses
 
 
 
 
 
Production, distribution, and editorial
567,024

 
561,058

 
547,564

Selling, general, and administrative
655,241

 
654,098

 
599,026

Depreciation and amortization
59,928

 
45,350

 
44,326

Total operating expenses
1,282,193

 
1,260,506

 
1,190,916

Income from operations
186,515

 
210,834

 
185,771

Interest income
10

 
17

 
8

Interest expense
(12,186
)
 
(13,447
)
 
(12,904
)
Earnings before income taxes
174,339

 
197,404

 
172,875

Income taxes
(60,798
)
 
(73,754
)
 
(68,503
)
Net earnings
$
113,541

 
$
123,650

 
$
104,372

 
 
 
 
 
 
Basic earnings per share
$
2.54

 
$
2.78

 
$
2.33

Basic average shares outstanding
44,636

 
44,455

 
44,825

 
 
 
 
 
 
Diluted earnings per share
$
2.50

 
$
2.74

 
$
2.31

Diluted average shares outstanding
45,410

 
45,085

 
45,100

 
 
 
 
 
 
Dividends paid per share
$
1.6800

 
$
1.5800

 
$
1.4025

 
 
 
 
 
 
See accompanying Notes to Consolidated Financial Statements
 
 
 
 
 



44



Meredith Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income

Years ended June 30,
2014

 
2013

 
2012

(In thousands)
 
 
 
 
 
Net earnings
$
113,541

 
$
123,650

 
$
104,372

Other comprehensive income (loss), net of income taxes
 
 
 
 
 
Pension and other postretirement benefit plans activity
7,583

 
6,774

 
(6,952
)
Other comprehensive income (loss), net of income taxes
7,583

 
6,774

 
(6,952
)
Comprehensive income
$
121,124

 
$
130,424

 
$
97,420

 
 
 
 
 
 
See accompanying Notes to Consolidated Financial Statements
 
 
 
 
 




45



Meredith Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity

(In thousands except per share data)
Common
Stock - $1
par value
 
Class B
Stock - $1
par value
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
 Income (Loss)
 Total
Balance at June 30, 2011
$
36,282

 
$
8,776

 
$
58,274

 
$
687,816

 
$