-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WjMA9/N/wsFnJaZ5V86jbaVMjH3IzjROh/KSg15oSCUmUMeX23CGz0aGBadNRShn h7wiDAGstgnCVedEnDZ5qw== 0000065011-96-000019.txt : 19961027 0000065011-96-000019.hdr.sgml : 19961027 ACCESSION NUMBER: 0000065011-96-000019 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19961024 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEREDITH CORP CENTRAL INDEX KEY: 0000065011 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 420410230 STATE OF INCORPORATION: IA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-05128 FILM NUMBER: 96647402 BUSINESS ADDRESS: STREET 1: 1716 LOCUST ST CITY: DES MOINES STATE: IA ZIP: 50309 BUSINESS PHONE: 5152843000 FORMER COMPANY: FORMER CONFORMED NAME: MEREDITH PUBLISHING CO DATE OF NAME CHANGE: 19710317 10-K405/A 1 AMENDMENT TO 6/30/96 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996 Commission file number 1-5128 Meredith Corporation (Exact name of registrant as specified in its charter) Iowa 42-0410230 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) 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 Stock, par value $1 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 [ ] 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] The registrant estimates the aggregate market value of voting stock held by non-affiliates of the registrant at July 31, 1996, was $712,644,000 based upon the closing price on the New York Stock Exchange at that date. Number of common shares outstanding at July 31, 1996: 20,278,501 Number of class B shares outstanding at July 31, 1996: 6,568,377 ---------- Total common and class B shares outstanding 26,846,878 ========== - 1 - DOCUMENT INCORPORATED BY REFERENCE Description of document Part of the Form 10-K ------------------------------------ -------------------------------- Certain portions of the Registrant's Proxy Statement for the Annual Part III to the extent described Meeting of Stockholders to be therein. held on November 11, 1996 The registrant hereby amends the following item of its 1996 Annual Report on Form 10-K as set forth in the pages attached hereto: Part I, Item 1. Business - 2 - PART I Item 1. Business General - ------- Meredith Corporation (the Company) was founded in 1902 by Edwin Thomas Meredith, and incorporated in Iowa in 1905. Since its start with Successful Farming magazine, the Company has expanded its operations, primarily in magazine publishing and television broadcasting, through internal growth and acquisitions. Today, Meredith Corporation has three operating segments for reporting purposes: Publishing, Broadcasting, and Real Estate. Virtually all businesses within each segment operate in the United States. The Publishing segment includes magazine and book publishing and brand licensing operations. The Broadcasting segment includes the operation of seven network-affiliated television stations. The Real Estate segment includes franchise and marketing operations. In previously reported fiscal years, the Company's segments included a cable television segment. It was classified as discontinued in fiscal 1996 due to the intended sale of all cable television operations, and prior years' financial results have been restated accordingly. The Company's largest source of revenues is magazine and television advertising. Television advertising tends to be seasonal in nature with higher revenues traditionally reported in the second and fourth fiscal quarters. Certain other revenues are also somewhat seasonal, such as real estate franchise fees which are generally highest during the spring and summer months. Trademarks (e.g. Better Homes and Gardens, Ladies' Home Journal) are very important to the Company's Publishing segment. Better Homes and Gardens and its familiar "house and trees" logo is also crucial to the Real Estate segment. Local recognition of television station call letters is important in maintaining audience shares in the Broadcasting segment. Name recognition and the public image of these trademarks are vital to both ongoing operations and the introduction of new businesses. Accordingly, the Company aggressively defends it trademarks. The Company did not have any material expenses for research and development during any of the past three fiscal years. There is no material effect on capital expenditures, earnings and the competitive position of the Company regarding compliance with federal, state and local provisions relating to the discharge of materials into the environment and to the protection of the environment. - 3 - The Company had 2,310 employees at June 30, 1996 (including 153 part-time employees and 252 employees in the discontinued cable operation). Business Developments - --------------------- The Company formalized plans to sell all of its ownership interest in cable television systems and therefore classified its Cable segment as a discontinued operation effective September 30, 1995. In April 1996, the Meredith/New Heritage Partnership, of which the Company indirectly owns 96 percent, announced the signing of an agreement to sell its 73 percent ownership interest in Meredith/New Heritage Strategic Partners, L.P. Pending approvals, the sale is expected to close in the second quarter of fiscal 1997. This sale will complete the Company's exit from the cable television business. Meredith Corporation expects to record a net gain of approximately $15 to $20 million after taxes from the sale. In July 1995, the Company announced an alliance with The Reader's Digest Association, Inc., granting Reader's Digest the rights for direct-response marketing of certain Meredith-trademarked products. In December 1995, the Company sold to Book-of-the-Month Club, Inc., the accounts receivable, membership lists and product inventory of three book clubs: Better Homes and Gardens Crafts Club, Better Homes and Gardens Cook Book Club and Country Homes and Gardens Book Club. These actions resulted in a significantly smaller book publishing operation for the Company, with a primary focus on the sale of books through retail marketing channels. In January 1996, the Company acquired the assets of WOGX, a FOX-affiliated television station serving the Ocala/Gainesville, Florida market. In fiscal 1996, all of the Company's New York City employees were relocated into consolidated office space. The Company entered into a long-term lease agreement for these offices at considerable cost savings. Also in June 1996, ground was broken for the construction of a new office building in Des Moines, adjacent to current corporate headquarters. When completed, this building will increase operational efficiency by enabling all Des Moines employees to be located on a corporate campus. Overview of Fiscal 1996 Financial Results - ----------------------------------------- Fiscal 1996 revenues for the Company were $867,137,000, an increase of 5 percent over fiscal 1995 revenues of $829,401,000. This increase was primarily due to higher advertising revenues in both the Company's magazine and broadcasting operations. Advertising revenues in the Broadcasting segment were boosted by an additional six months of operations of WSMV-TV in Nashville, acquired by the Company in January 1995. - 4 - Company operating profit in fiscal 1996 increased to $97,505,000 from $72,702,000 in fiscal 1995, an increase of 34 percent. All business groups reported higher operating profits in fiscal 1996. Fiscal 1996 net earnings were $53,940,000, or $1.91 per share. In fiscal 1995, the Company experienced a net loss of $6,315,000, or 23 cents per share due to the recognition of a non-cash charge for the cumulative effect of a change in accounting principle. (See Note 3 to Consolidated Financial Statements on page F-35 of this Form 10-K.) Fiscal 1996 earnings per share from continuing operations before special items were $1.82, up 28 percent from comparable fiscal 1995 results. Special items included the gain on sale of book clubs in fiscal 1996 and IRS interest income in fiscal 1995. See Financial Information about Industry Segments beginning on page F-4 of this Form 10-K. Description of Business - ----------------------- PUBLISHING - ---------- Years ended June 30 1996 1995 1994 ------------------- -------- -------- -------- (in thousands) Publishing revenues $696,285 $683,331 $622,953 Publishing operating profit $ 64,107 $ 48,636 $ 45,678 Publishing revenues, representing 80 percent of the Company's consolidated revenues in fiscal 1996, increased 2 percent as higher magazine advertising revenues more than offset the decline in revenues resulting from the downsizing of book operations. This downsizing had a favorable effect on book operating results which combined with a strong performance in magazine publishing to result in a 32 percent increase in Publishing operating profit. Magazine - -------- Magazine operations account for more than 90 percent of the revenues and operating profit of the Publishing segment. Meredith Corporation currently publishes 19 subscription magazines that appeal primarily to consumers in the home and family market. Key advertising and circulation information for major subscription titles is as follows: - 5 - Title Frequency Rate Base Ad Pages ----- --------- --------- -------- Better Homes and Gardens - Home service Fiscal 1996 Monthly 7,600,000 1,753 Fiscal 1995 Monthly 7,600,000 1,592 Ladies' Home Journal - Women's service Fiscal 1996 Monthly 4,500,000 1,445 Fiscal 1995 Monthly 5,000,000 1,482 Country Home - Home decorating Fiscal 1996 Bi-monthly 1,000,000 558 Fiscal 1995 Bi-monthly 1,000,000 531 Country America - Country music and lifestyle Fiscal 1996 10x/year 900,000 467 Fiscal 1995 10x/year 1,000,000 599 Midwest Living - Regional travel and lifestyle Fiscal 1996 Bi-monthly 815,000 587 Fiscal 1995 Bi-monthly 815,000 561 Traditional Home - Home decorating Fiscal 1996 Bi-monthly 775,000 515 Fiscal 1995 Bi-monthly 725,000 474 WOOD - Woodworking projects and techniques Fiscal 1996 9x/year 600,000 332 Fiscal 1995 9x/year 650,000 328 Successful Farming - Farm information Fiscal 1996 12x/year 485,000 590 Fiscal 1995 12x/year 485,000 641 Golf for Women - Golf instruction and information Fiscal 1996 Bi-monthly 325,000 367 Fiscal 1995 Bi-monthly 325,000 322 Crayola Kids - Kids' reading, crafts and games Fiscal 1996 Bi-monthly 350,000 107 Fiscal 1995 Bi-monthly 300,000 96 Rate base is the circulation guaranteed to advertisers. - 6 - Ad pages are as reported to Publisher's Information Bureau, Agricom, or if unreported, as calculated by the publisher using a similar methodology. Better Homes and Gardens magazine, the Company's flagship, accounts for a significant percentage of revenues and operating profits of the Publishing segment and the Company. Country America, published by Country America Corporation, is jointly owned by Meredith Corporation (which owns 80 percent), TNN:The Nashville Network, and Group W Satellite Communications. In fiscal 1997, Country America will begin publishing on a bi-monthly schedule. Crayola Kids is published by Meredith Custom Publishing under a license from Binney & Smith Properties, Inc., makers of Crayola crayons. Other subscription magazines published by the Company include Cross Stitch & Needlework and three Better Homes and Gardens craft titles (Decorative Woodcrafts, Floral & Nature Crafts and American Patchwork & Quilting). The Company discontinued publication of home garden magazine and three small woodworking/craft titles in fiscal 1996. All subscription titles, except Successful Farming, are also sold on newsstands. Successful Farming is available only by subscription to qualified farm families. In addition, one of the larger contributors to revenues and operating profit of magazine publishing is a group of magazines sold primarily on the newsstand, the Better Homes and Gardens Special Interest Publications. These titles are issued from one to four times annually. Approximately 40 different titles (75 issues) were published in fiscal 1996 in categories including decorating, do- it-yourself, home plans, crafts, gardening, holidays and cooking. Total annual advertising and circulation revenues of these publications exceed those of other Company-owned titles, except Better Homes and Gardens and Ladies' Home Journal. Several subscription magazines also publish related specialty magazines sold primarily on newsstands. Ladies' Home Journal published two special interest issues in fiscal 1996. Country Home published four editions of Country Gardens and one Holidays at Home edition in fiscal 1996. Traditional Home introduced Renovation Style, publishing two issues in fiscal 1996. In addition, the Company publishes numerous craft magazines sold primarily on newsstands. Meredith Custom Publishing (MCP) provides custom publishing services to advertisers and other external clients on both one-time and periodic bases. Current clients for ongoing periodicals include Sears Roebuck & Company, Northwest Airlines and The Home Depot. MCP operates California Tourism - 7 - Publications, a wholly-owned subsidiary of Meredith Corporation, that produces travel publications for the California Division of Tourism. MCP also publishes travel guides for other states and cities. MCP published a series of brochures for Metropolitan Life Insurance Company in fiscal 1996. MCP manages the licensing agreement with Hallmark Cards, Inc., which involves the marketing of Better Homes and Gardens Heart and Home Collection cards and specialty products. The creation and sale of premiums and specialty products, typically for one-time promotional purposes, are also significant sources of revenues for the custom publishing operations. Meredith Custom Marketing develops comprehensive integrated marketing programs which may include magazine advertising, custom publishing and resources from other operating segments. American Park Network, a wholly owned subsidiary, publishes the country's largest collection of visitor guide magazines for national, state and wildlife parks. American Park Network published 20 guides, primarily furnished free to park visitors, in fiscal 1996. Magazine operations also realize revenues from the sale of ancillary products and services. The Company also has a 50 percent interest in a monthly Australian edition of Better Homes and Gardens magazine. Magazine Advertising - -------------------- Years ended June 30 1996 1995 1994 ------------------- -------- -------- -------- (in thousands) Magazine advertising revenues $308,959 $276,312 $236,814 Advertising revenues are generated primarily from sales to clients engaged in consumer advertising. Many of the Company's larger magazines offer advertisers different regional and demographic editions which contain the same basic editorial material but permit advertisers to concentrate their advertising in specific markets or to target specific audiences. The Company sells three primary types of magazine advertising: run of press, mail order and insert. Most of the Company's advertising pages and revenues are derived from run of press advertising. Meredith has a group sales staff specializing in advertising sales across titles. - 8 - Magazine Circulation - -------------------- Years ended June 30 1996 1995 1994 ------------------- -------- -------- -------- (in thousands) Magazine circulation revenues $272,406 $269,029 $257,453 Subscription revenues, the largest source of circulation revenues, are generated through direct-mail solicitation, agencies, insert cards and other means. Newsstand sales, including single-copy sales at supermarkets, drug- stores and other retail outlets, also are important sources of circulation revenues for most magazines. Magazine wholesalers have the right to receive credit for magazines returned to them by retailers. Books - ----- Years ended June 30 1996 1995 1994 ------------------- -------- -------- -------- (in thousands) Consumer book revenues $ 56,481 $ 86,568 $ 86,040 The Company publishes and markets a line of 225 consumer home and family service books, published primarily under the Better Homes and Gardens trademark. They are sold through retail book and specialty stores, mass merchandisers and other means. Approximately 40 new or revised titles were published during fiscal 1996. Books are primarily sold on a fully returnable basis. The Company has also retained the direct-marketing rights to selected annual trademarked titles. The decline in consumer book revenues in fiscal 1996 reflects the elimination of most book direct-response marketing revenues due to the July 1995 Reader's Digest alliance and the December 1995 sale of three book clubs. The Company expects to receive royalties for the use of Meredith trademarks as a result of these actions. - 9 - Brand Licensing - --------------- The Company has licensed Wal-Mart Stores, Inc., to operate Better Homes and Gardens Garden Centers in its stores nationwide. In addition, Wal-Mart stores began to offer Better Homes and Gardens Floral & Nature Crafts-labeled products in January 1996. The Company receives royalties for sales of licensed products offered exclusively in Wal-Mart stores. Other Publishing - ---------------- The Company has licensed Multicom Publishing, Inc., in which it has a minority ownership interest, to develop and publish CD-ROM titles based on Meredith's home and family editorial products. The Company earns royalties on the sales of these titles. In addition, several of the Company's magazines have established web sites on the Internet. The most extensive of these web sites is Successful Farming @griculture Online, which recently began offering subscriptions to premium services in addition to its core material. Also, The Better Homes Kitchen is available through CompuServe. None of these ventures is currently a material source of revenues. Production and Delivery - ----------------------- The major raw materials essential to this segment are coated and uncoated publication paper and book-grade papers. Strong demand and a relatively fixed level of supply resulted in sharp increases in paper prices in fiscal 1995 and early fiscal 1996. Since January 1996, market conditions have softened and some reductions in the Company's paper prices have occurred. At June 30, 1996, the Company's paper prices were about 35 percent higher than two years ago. Since then, major paper suppliers have announced further price reductions. However, price increases may occur later in fiscal 1997. The Company has contractual agreements with major paper manufacturers to ensure adequate supplies of paper for planned publishing requirements. Efforts to minimize the impact of price increases to-date have included changes in magazine rate base levels and paper type and weight. Postage is also a significant expense to this segment due to the large volume of magazine and subscription promotion mailings. A postal rate increase in January 1995 resulted in an annual increase of approximately 13 percent. The Publishing operations continually seek the most economical and effective methods for mail delivery. Accordingly, certain cost-saving measures, such as pre-sorting and drop-shipping to central postal centers, are utilized. The - 10 - Board of Governors of the U. S. Postal Service has approved increased discounts, effective July 1, 1996, for carrier-route sorting. The Company believes this will result in cost savings for the Publishing segment. Some magazine subscription invoices include a separate charge for postage and handling. Paper and postage expenses together account for approximately one-third of the Publishing segment's operating costs. The Company has printing contracts for all of it's magazine titles. It's two largest titles, Better Homes and Gardens and Ladies' Home Journal, are printed under long-term contracts with a major United States printer. All of the Company's published books are manufactured by outside printers with the Company usually supplying the paper. Book manufacturing contracts are generally on a title-by-title basis. Most fulfillment services for the Company's Publishing segment are provided by an unrelated third party under negotiated contract terms. National newsstand distribution services are also provided by an unrelated third party under a multi-year agreement. Competition - ----------- Publishing is a highly competitive business. The Company's magazines, books, and related publishing products and services compete with other mass media and many other types of leisure-time activities. Overall competitive factors in this segment include price, editorial quality and customer service. Competition for advertising dollars in magazine operations is primarily based on advertising rates, reader response to advertisers' products and services and effectiveness of sales teams. Better Homes and Gardens and Ladies' Home Journal compete for readers and advertising dollars primarily in the women's service magazine category. Both are part of a group known as the "Seven Sisters," which also includes Family Circle, Good Housekeeping, McCall's, Redbook and Woman's Day magazines, published by other companies. In fiscal 1996, the combined advertising revenue market share of Better Homes and Gardens and Ladies' Home Journal magazines totaled 37 percent. This share exceeded all other corporate publishers included in the Seven Sisters. - 11 - BROADCASTING - ------------ Years ended June 30 1996 1995 1994 ------------------- -------- -------- -------- (in thousands) Broadcasting advertising revenues $137,964 $116,460 $ 95,525 Broadcasting total revenues $145,932 $121,690 $100,012 Broadcasting operating profit $ 52,311 $ 41,883 $ 19,189 Broadcasting revenues, representing 17 percent of the Company's consolidated revenues in fiscal 1996, increased 20 percent and operating profit increased 25 percent in fiscal 1996. These increases were primarily due to a full year's ownership of WSMV-TV, an NBC affiliate in Nashville acquired in January 1995. The following table lists selected information regarding the Company's television stations: Station, Channel, DMA Major Market, Network National Expiration Average Commercial Affiliation, TV Homes Market Date of Audience TV Stations Frequency in DMA Rank FCC License Share in Market - ----------------- --------- -------- ----------- -------- ----------- KPHO-TV, Ch. 5 1,170,000 17 10- 1-1998 10.5% 4 VHF Phoenix, Ariz. 3 UHF (CBS) VHF WOFL-TV, Ch. 35 998,000 22 2- 1-1997 9.8% 3 VHF Orlando, Fla. 3 UHF (FOX) UHF KCTV, Ch. 5 780,000 32 2- 1-1998 18.0% 3 VHF Kansas City, Mo. 3 UHF (CBS) VHF WSMV-TV, Ch. 4 766,000 33 8- 1-1997 20.0% 3 VHF Nashville, Tenn. 2 UHF (NBC) VHF WNEM-TV, Ch. 5 450,000 60 10- 1-1997 19.5% 2 VHF Flint/Saginaw, Mich. 2 UHF (CBS) VHF - 12 - KVVU-TV, Ch. 5 400,000 66 10- 1-1998 10.5% 4 VHF Las Vegas, Nev. 3 UHF (FOX) VHF WOGX-TV, Ch. 51 95,000 167 2- 1-1997 12.5% 2 UHF Ocala/Gainesville, Fla. (FOX) UHF VHF (very high frequency) stations transmit on channels 2 through 13; UHF (ultra high frequency) stations transmit on channels above 13. Technical factors and area topography determine the market served by a television station. Designated Market Area (DMA), as defined by A. C. Nielsen Company (Nielsen), is an exclusive geographic area consisting of all counties in which local stations receive a preponderance of total viewing hours. The market rank is the Nielsen 1995-96 DMA rank based on estimated television households as reported by Nielsen Media Research. Average audience share represents the estimated percentage of households using television tuned to the station. The percentages shown reflect the average Nielsen ratings share for the July 1995, November 1995, February 1996 and May 1996 measurement periods from 9 a.m. to midnight daily. The number of major commercial television stations reported is from "Investing in Television, '96 Market Report" dated May 1996. The Company's station and all other stations reporting revenues are included. Public television stations are not included. WOGX was acquired in January 1996. WSMV was acquired in January 1995. WNEM became a CBS affiliate in January 1995. Previously, it was an NBC affiliate. KPHO became a CBS affiliate in September 1994. It was previously an independent station. Operations - ---------- Advertising is the principal source of revenues for the Broadcasting segment. The stations sell commercial time to both local and national advertisers. Rates for national and local spot advertising are influenced primarily by the - 13 - market size and audience demographics for programming. Most national advertising is sold by a national advertising representative firm. Local advertising revenues are generated by sales staff at each station's location. All of the Company's television stations are network affiliates and as such receive programming and/or cash compensation from their national network. In exchange, much of the advertising time during this programming is sold by the network. Affiliation with a national network has an important influence on a station's revenues. The audience share drawn by a network's programming affects the rates at which advertising time is sold. New and extended network affiliation contracts signed in the past two years have increased the Company's network compensation. Competition - ----------- Meredith television stations compete directly for advertising dollars and programming in each of their markets with other television stations and cable television providers. Other mass media providers such as newspapers and radio stations also provide competition for market advertising dollars and for entertainment and news information. Ownership consolidation continues to occur in the television broadcast industry. In addition, the Telecommunication Act of 1996 is expected to increase competition in part due to the ability of new video service providers (e.g. telephone companies) to enter the industry. The Company cannot predict the effects of these actions on the future results of the Company's broadcasting operations. Regulation - ---------- Television broadcasting operations are subject to regulation by the Federal Communications Commission (FCC) under the Communications Act of 1934, as amended (Communications Act). Under the Communications Act, the FCC performs many regulatory functions including granting of station licenses and determining regulations and policies which affect the ownership, operation, programming and employment practices of broadcast stations. The FCC must approve all television licenses and therefore compliance with FCC regulations is essential to the operation of this segment. The maximum term for which the FCC may grant and renew broadcast licenses was increased from five to eight years by the 1996 Act. The Company is not aware of any reason why its television station licenses would not be renewed. The 1996 Act changed the former ownership limit of twelve television stations or total national audience reach of no more than 25 percent of television households. Under the 1996 Act, the 25 percent limit was raised to 35 percent and there is no limit on the - 14 - absolute number of stations that may be owned. (The information given in this section is not intended to be a complete listing of all regulatory provisions currently in effect.) Congressional legislation and FCC rules are subject to change and these groups may adopt regulations that could affect future operations and profitability of the Company's Broadcasting segment. The FCC recently proposed the adoption of rules for implementing digital advanced television service. Additional related proposals are expected in the near future. The Company cannot predict what changes to current legislation will be adopted or determine what impact any changes could have on its television broadcasting operations. REAL ESTATE - ----------- Years ended June 30 1996 1995 1994 ------------------- -------- -------- -------- (in thousands) Real Estate revenues $ 25,303 $ 24,429 $ 21,813 Real Estate operating profit $ 3,496 $ 2,298 $ 1,914 Increased revenues and operating profit in the Company's Real Estate segment resulted primarily from increased franchise fees received from member firms. Operations - ---------- The Better Homes and Gardens Real Estate Service is a national residential real estate marketing service which licenses the rights to exclusive territories to selected real estate firms. Members and affiliates (real estate companies affiliated with larger member firms) totaled 787 in the United States and 19 in Canada and other countries on June 30, 1996. The primary revenue sources of the Real Estate segment are franchise fees (based on a percentage of each member's gross commission income on residential housing sales) and the sale of marketing programs and materials to member firms. Competition - ----------- The real estate business is highly competitive and customer service remains vital to the success of this segment. The Real Estate Service competes for members with other national real estate franchise networks primarily on the - 15 - bases of benefits provided to the member and fees for membership. Some ownership consolidation of national franchise networks has occurred recently in the industry. Currently, the Better Homes and Gardens Real Estate Service is one of the five largest residential real estate franchise networks in the country. DISCONTINUED OPERATION - ---------------------- On April 19, 1996, the Company, through its cable venture, Meredith/New Heritage Partnership, announced the signing of an agreement to sell the venture's 73 percent ownership interest in Meredith/New Heritage Strategic Partners, L.P. (Strategic Partners) to its minority partner, Continental Cablevision, Inc. (Continental). Strategic Partners owns and operates cable television systems with approximately 126,000 subscribers in the Minneapolis/St. Paul area. These systems are the only cable television operations currently owned by Strategic Partners. (Previously, Strategic Partners also owned a system with 24,000 subscribers in Bismarck, North Dakota, which was sold in March 1995.) Pending approvals from local franchise authorities, the FCC and others, the sale is expected to close during the second quarter of fiscal 1997. The total value of the systems has been placed at $262.5 million. Meredith Corporation expects to receive approximately $115 to $120 million in cash (net of taxes)and recognize a gain estimated at $15 to $20 million (net of taxes) from the sale. The calculation of the estimated gain includes actual deferred and expected net operating results of the Cable segment from September 30, 1995 until the sale date. (See Note 2 to Consolidated Financial Statements on page F-32 of this Form 10-K for financial and other information related to the discontinued cable operation.) - 16- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, there unto duly authorized. MEREDITH CORPORATION (Registrant) /s/ Larry D. Hartsook ------------------------- Larry D. Hartsook Vice President - Finance (on behalf of the Registrant and as principal accounting and financial officer) Date: October 24, 1996 - 17 - -----END PRIVACY-ENHANCED MESSAGE-----