-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PGkXwfijg3vPtmpOMhwvMmCXQ5xfRktQ3l7v+ya3AugwMHHO1ZwLPctZv+v5Z043 NyjUAe+GVNP6SrrFNE9ZNg== 0000065011-94-000002.txt : 19940214 0000065011-94-000002.hdr.sgml : 19940214 ACCESSION NUMBER: 0000065011-94-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEREDITH CORP CENTRAL INDEX KEY: 0000065011 STANDARD INDUSTRIAL CLASSIFICATION: 2721 IRS NUMBER: 420410230 STATE OF INCORPORATION: IA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-05128 FILM NUMBER: 94505724 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-Q 1 12-31-93 10-Q FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1993 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) 515 - 284-3000 (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at January 31, 1994 Common Stock, $1 par value 10,538,011 Class B Stock, $1 par value 3,644,343 Page 1 of 29 Part I. FINANCIAL INFORMATION Item I. Financial Statements Meredith Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) Assets December 31 June 30 (in thousands) 1993 1993 - ---------------------------------- ---- ---- Current Assets: Cash and cash equivalents $ 9,212 $ 18,569 Marketable securities 16,532 21,422 Receivables, net 94,923 75,761 Inventories 30,911 32,383 Supplies and prepayments 17,756 18,206 Film rental costs 15,757 15,750 Subscription acquisition costs 103,465 105,342 -------- -------- Total Current Assets 288,556 287,433 -------- -------- Property, Plant and Equipment (at cost) 223,026 238,679 Less accumulated depreciation ( 97,652) (107,792) -------- -------- Net Property, Plant and Equipment 125,374 130,887 -------- -------- Deferred Film Rental Costs 11,417 12,073 Deferred Subscription Acquisition Costs 71,841 77,091 Other Assets 28,933 23,607 Goodwill and Other Intangibles (at original cost less accumulated amortization) 350,635 369,677 -------- -------- Total $ 876,756 $ 900,768 ======== ======== See accompanying Notes to Interim Consolidated Financial Statements. Page 2 of 29 Meredith Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) Liabilities and Stockholders' Equity December 31 June 30 (in thousands) 1993 1993 - ---------------------------------- ---- ---- Current Liabilities: Current portion of long-term indebtedness 7,667 2,556 Current portion of long-term film rental contracts 10,827 10,229 Accounts payable 27,418 43,368 Accrued taxes and expenses 53,819 55,946 Unearned subscription revenues 144,578 148,556 Deferred income taxes 21,791 21,819 -------- -------- Total Current Liabilities 266,100 282,474 Long-Term Indebtedness 126,737 131,945 Long-Term Film Rental Contracts 5,495 5,638 Unearned Subscription Revenues 98,454 102,107 Deferred Income Taxes 36,819 30,472 Other Deferred Items 28,651 23,876 -------- -------- Total Liabilities 562,256 576,512 -------- -------- Minority Interests 38,966 40,160 -------- -------- Stockholders' Equity: Series Preferred Stock, par value $1 per share Authorized 5,000,000 shares; none issued. -- -- Common Stock, par value $1 per share Authorized 50,000,000 shares; issued and outstanding 10,674,920 shares at December 31 and 11,129,726 at June 30 (net of treasury shares, 5,154,831 at December 31 and 4,645,420 shares at June 30). 10,675 11,130 Class B Stock, par value $1 per share Authorized 10,000,000 shares; issued and outstanding 3,659,309 shares at December 31 and 3,703,519 at June 30. 3,659 3,704 Retained earnings 264,734 272,090 Unearned compensation (3,534) (2,828) -------- -------- Total Stockholders' Equity 275,534 284,096 -------- -------- Total $ 876,756 $ 900,768 ======== ======== See accompanying Notes to Interim Consolidated Financial Statements. Page 3 of 29 Meredith Corporation and Subsidiaries Consolidated Statements of Earnings (Unaudited) Three Months Six Months Ended December 31 Ended December 31 1993 1992 1993 1992 - ------------------------------------------------------------------------------- (Dollar amounts in thousands, except per share) Revenues (less returns and allowances): Advertising $ 85,097 $ 79,954 $158,446 $161,133 Circulation 66,222 63,994 127,976 120,413 Consumer book 23,891 20,572 44,148 41,130 All other 29,420 25,600 56,351 44,893 -------- -------- -------- -------- Total Revenues 204,630 190,120 386,921 367,569 -------- -------- -------- -------- Operating Costs and Expenses: Production, distribution and edit 84,838 78,953 161,445 158,693 Selling, general and administrative 96,441 91,411 181,183 176,505 Depreciation and amortization 9,076 8,810 18,133 14,870 Unusual item (Note 4) 4,800 -- 4,800 -- -------- -------- -------- -------- Total Operating Costs and Expenses 195,155 179,174 365,561 350,068 -------- -------- -------- -------- Income from Operations 9,475 10,946 21,360 17,501 Gain on dispositions (Note 5) 11,997 -- 11,997 -- Interest income 206 484 638 1,275 Interest expense (2,875) (2,729) (5,690) (3,791) Minority interests 617 552 1,165 810 -------- -------- -------- -------- Earnings before Income Taxes 19,420 9,253 29,470 15,795 Income taxes (Note 2) 7,916 4,544 14,522 7,645 -------- -------- -------- -------- Net Earnings $ 11,504 $ 4,709 $ 14,948 $ 8,150 ======== ======== ======== ======== Net Earnings Per Share $ 0.80 $ 0.31 $ 1.04 $ 0.53 ======== ======== ======== ======== Dividends Paid Per Share $ 0.16 $ 0.16 $ 0.32 $ 0.32 ======== ======== ======== ======== Avg Number of Shares Outstanding 14366000 15363000 14427000 15493000 ======== ======== ======== ======== See accompanying Notes to Interim Consolidated Financial Statements. Page 4 of 29 Meredith Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended December 31 (in thousands) 1993 1992 * - ---------------------------------------------------------------------------- Cash Flows from Operating Activities: Earnings from continuing operations $ 14,948 $ 8,150 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Depreciation and amortization 18,133 14,870 Amortization of film contract rights 11,402 13,753 Deferred income taxes 6,756 -- Unusual item (net of taxes) 2,592 -- (Increase) in receivables (19,778) (11,837) Decrease (increase) in inventories 1,472 (1,874) Decrease in supplies and prepayments 360 5 Decrease in deferred subscription acquisition costs 7,127 15,263 (Decrease) in accounts payable and accruals (24,718) (10,098) Gain on dispositions (net of taxes) (8,197) -- (Reductions) to unearned subscription revenues (7,631) (7,645) Additions (Reductions) to other deferred items 746 (8,277) -------- -------- Net cash provided by operating activities 3,212 12,310 -------- -------- Cash Flows from Investing Activities: Investment in cable partnership, less cash acquired -- (32,740) Redemption of marketable securities 4,890 26,631 Proceedes from dispositions 33,000 -- (Additions) to property, plant, and equipment (10,554) (6,298) (Additions) to other assets (7,846) (4,093) -------- -------- Net cash provided (used) by investing activities 19,490 (16,500) -------- -------- Cash Flows from Financing Activities: Long-term indebtedness retired (97) (3,894) Payments for film rental contracts (8,452) (8,334) Proceeds from common stock issued 1,294 2,004 Purchase of company shares (20,165) (18,187) Dividends paid (4,639) (4,998) -------- -------- Net cash (used) by financing activities (32,059) (33,409) -------- -------- Net (decrease) in cash and cash equivalents (9,357) (37,599) Cash and cash equivalents at beginning of year 18,569 42,333 ------- -------- Cash and Cash Equivalents at End of Period $ 9,212 $ 4,734 ======== ======== * Reclassified to conform with current year presentation. Page 5 of 29 Supplemental Schedule of Noncash Investing and Financing Activities: The Company received $2 million of preferred stock in Granite Broadcasting Corporation in conjunction with the sale of the broadcast stations in December 1993. Approximately $139 million in long-term debt was incurred by Meredith/New Heritage Strategic Partners, L.P. to purchase North Central Cable Communications Corporation on September 1, 1992. The Bismarck/Mandan, North Dakota, cable television system, which was acquired by Meredith/New Heritage Partnership in January 1992, was contributed to Meredith/New Heritage Strategic Partners, L.P., prior to September 1, 1992. This transfer reduced the Company's indirect ownership interest in the system by $12 million, or 27 percent. See accompanying Notes to Interim Consolidated Financial Statements. Page 6 of 29 MEREDITH CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Accounting Policy The information included in the foregoing interim financial statements is unaudited. In the opinion of management, all adjustments, which are of a normal recurring nature and necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. 2. Income Taxes On July 1, 1993, the Company adopted SFAS No. 109, "Accounting For Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are required, by SFAS No. 109, to be measured using the tax rate expected to be in effect when the taxes are actually paid or recovered. Income tax expense will increase or decrease in the same period in which a change in tax rates is enacted for the effect on deferred tax assets and liabilities. (The Company previously used the asset and liability method under Statement 96.) The effect of the adoption of SFAS No. 109 is immaterial on the financial statements. Therefore the prior period's financial statements have not been restated to apply the provisions of SFAS No. 109. The Omnibus Budget Reconciliation Act of 1993, enacted in the first quarter of fiscal 1994, raised the basic corporate federal income tax rate from 34 percent to 35 percent. The effect on the Company's financial statements of that increase for the first six months was $1,638,000 ($1,238,000 expense for the increase in net deferred tax liabilities, $118,000 expense due to an additional provision required for six months of fiscal 1993 and $282,000 expense for the first six months of fiscal 1994). For the six months ended December 31 ------------------ ($ in thousands) 1993 1992 ------------------------------------------------------------------- Currently payable: Federal $ 7,619 $6,078 State 1,822 1,567 ------- ------ 9,441 7,645 ------- ------ Deferred: Federal 4,100 - State 981 - ------- ------ 5,081 - ------- ------ Total $14,522 $7,645 ======= ====== Page 7 of 29 MEREDITH CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued (Unaudited) The tax effects of temporary differences that gave rise to the deferred income tax assets and liabilities at December 31, 1993 and June 30, 1993 are as follows: ($ in thousands) December 31 June 30 1993 1993* - ------------------------------------------------------------------------------ Deferred tax assets: Accumulated bad debt reserve $ 3,550 $ 3,495 Magazine and book return reserves 4,597 3,940 Reserve for postretirement benefits, other than pensions 5,582 5,257 All other assets 12,874 12,267 ------- ------- Total deferred tax asset 26,603 24,959 ------- ------- Deferred tax liabilities: Deferred subscription acquisition costs 63,804 60,037 Accumulated depreciation and amortization 8,076 8,327 Accumulated trademark amortization 5,712 5,667 All other liabilities 7,621 3,219 ------- ------- Total deferred tax liability 85,213 77,250 ------- ------- Net deferred tax liability $58,610 $52,291 ======= ======= *Reclassified to conform with current year presentation. Page 8 of 29 MEREDITH CORPORATION NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued (Unaudited) The effective tax rates for the six months ended December 31, 1993 and 1992 were 49.3 percent and 48.4 percent, respectively. The differences between these effective tax rates and the basic U. S. federal income tax rate for the following periods are as follows: Six Months Ended December 31 1993 1992 ------------------------------------------------------------------- Expected income tax (basic rate) 35.0% 34.0% Impact of basic rate increase 4.6 - State income taxes, less federal income tax benefits 5.8 6.3 Goodwill amortization 3.2 5.7 Non-deductible equity loss - cable group 3.4 3.1 Sale of television properties (3.1) - Other .4 ( .7) ----- ----- Effective income tax rate 49.3% 48.4% ===== ===== 3. Inventories Major components of inventories are summarized below. Of total inventory values shown, approximately 44 and 42 percent respectively are under the LIFO method at December 31, 1993 and June 30, 1993. December 31 June 30 1993 1993 -------- -------- ($ in thousands) Raw materials $16,302 $17,894 Work in process 12,602 11,793 Finished goods 12,639 11,978 -------- -------- 41,543 41,665 Reserve for LIFO cost valuation (10,632) (9,282) -------- -------- Total $30,911 $32,383 ======== ======== Page 9 of 29 4. Unusual Item The Company received tax assessments in the second quarter related to discontinued operations sold in prior years. An unusual item of $4.8 million was recognized to establish a reserve for possible liabilities related to these assessments. 5. Sale of Properties On December 23, 1993, the Company announced the sale of two broadcast television properties to Granite Broadcasting Corporation ("Granite") for $33 million, $2 million in preferred stock in Granite and a tax certificate. The two properties sold were WTVH, a CBS affiliate licensed to serve Syracuse, New York, and KSEE, an NBC affiliate licensed to serve Fresno, California. The Company received a tax certificate due to Granite being minority-owned. This certificate can be used, to the Company's benefit, if another broadcast property is purchased within two years of this sale. Had this sale occurred on July 1, 1993, the Company's advertising revenues would have decreased by approximately six percent for both the six months and three months ended December 31, 1993. The effect on consolidated net earnings and net earnings per share would not have been sigificant. 6. Contingencies Reference is made to Part II - OTHER INFORMATION, Item 1, Legal Proceedings of this Form 10-Q for the quarterly period ended December 31, 1993. Page 10 of 29 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Second Quarter Fiscal 1993-94 Vs. Second Quarter Fiscal 1992-93 Meredith Corporation net earnings for the quarter ended December 31, 1993 were $11,504,000, or 80 cents per share. Net earnings included a gain of $11,997,000 ($8,197,000 after tax or 57 cents per share) on the dispositions of the Syracuse and Fresno television properties and a charge of $4,800,000 ($2,592,000 after tax or a negative 18 cents per share) for an unusual item related to a reserve for possible tax liabilities on disposed properties. Excluding the post-tax impact of the gain on dispositions and the unusual item, earnings for the quarter were $5,899,000, or 41 cents per share, a 32 percent increase from comparable earnings per share of 31 cents, or $4,709,000, in the prior year second quarter. Improved results in the Broadcast, Book, Magazine and Real Estate Groups were the primary factors in the increase in comparable earnings. Three cents of the increase in comparable earnings per share was due to shares repurchased by the Company. The net assets of WTVH, a CBS affiliate licensed to serve Syracuse, New York, and the common stock of a Company subsidiary that owned KSEE, an NBC affiliate licensed to serve Fresno, California, were sold to Granite Broadcasting Corporation effective December 26, 1993. The effect on fiscal 1994 advertising revenues and profits are expected to be immaterial when compared to the prior year. The Company received tax assessments in the second quarter related to discontinued operations sold in prior years. An unusual item was recognized to establish a reserve for these possible tax liabilites. At this time, the Company intends to protest these assessments but has established a reserve which it believes will be sufficient to cover any potential liabilities. Revenues for the three months ended December 31, 1993 were $204,630,000, an eight percent increase from prior year second quarter revenues of $190,120,000. All categories of revenues increased. Some of the factors contributing to the total increase were stronger broadcast and magazine advertising revenues, circulation revenues on new magazines and special issues, and increased book sales through retail and direct marketing channels. Income from operations was $9,475,000 in the second quarter compared to $10,946,000 in the prior year period. The operating margin declined from 5.8 percent of net revenues in the fiscal 1993 second quarter to 4.6 percent in the current quarter due to the recognition of an unusual item. The operating margin, excluding the effect of the unusual item, was 7.0 percent. This was an increase of 21 percent from the comparable prior year quarter. The following table shows the percentage of revenues each major expense classification represented in the current and prior year quarters: Page 11 of 29 Expense as Percentage of Revenues Three Months Ended December 31 1993 1992 - --------------------------------------------------------------------- Production, distribution and editorial (PD&E) 41.5% 41.5% Selling, general and administrative (SG&A) 47.1% 48.1% Depreciation and amortization 4.4% 4.6% Unusual item 2.3% -- PD&E expenses were unchanged as a percentage of revenues as lower programming expense at the broadcast television stations was offset by increases in publishing production costs. SG&A expenses declined one percent of revenues as compared to the prior year period primarily due to favorable magazine circulation expenses. A discussion of results by segment follows: Publishing: Revenues in the Magazine Group increased seven percent from the prior year second quarter. Total advertising revenues for ongoing titles increased ten percent, with many titles posting double-digit percentage increases from the prior-year quarter. Increased net revenue per advertising page led to revenue increases for Ladies' Home Journal, Country Home, Successful Farming and Traditional Home. Country America and Golf For Women reported higher advertising revenues primarily due to increased ad pages. Better Homes and Gardens ad revenues, that were down in the first quarter compared to prior year, rebounded in the second quarter to match the prior year's performance. Revenues from new titles and special issues led to a five percent increase in Magazine Group circulation revenues compared to the prior- year quarter. Second quarter Magazine Group operating profits increased 11 percent over the prior year quarter. Ladies' Home Journal reported a very strong improvement in the second quarter. Ad revenues increased 14% and, due to the sale of two special issues, newsstand profits were up. Improved results were also recorded by Successful Farming and the custom publishing operation. Increased ad revenues and favorable production costs led to the improvement in Successful Farming. Increased revenues and profits from premium sales benefitted custom publishing. Better Homes and Gardens profits were below the prior year quarter primarily due to lower contributions from newsstand sales and list rental revenues. Prior year second quarter results were held down by a loss on Metropolitan Home magazine that was sold in November 1992. Book Group revenues increased ten percent from the prior year second quarter due to increased sales volume in the retail and direct mail operations. Lower volumes in syndication programs and the Craftways operations, primarily resulting from planned downsizing, partially offset the increases. Page 12 of 29 Book Group operating profit increased significantly from the prior year quarter. Retail operations reported very strong second quarter results with profits up more than 80 percent. Increased sales of new and backlist titles led to the strong performance. The book clubs also reported improved results for the quarter primarily due to lower promotion expenses. Syndication results were unfavorable compared to the prior year due to lower volumes in renewal programs and increased starter programs with higher promotion expenses. List marketing profits also declined due to lower sales volume and increased database costs. Paper is an essential raw material to the Publishing segment and represents a significant expense. Paper price increases that occurred in the first quarter of the fiscal year have been largely offset by additional rebates negotiated from suppliers. The Company does not expect to experience a shortage of paper in the foreseeable future but does expect a similar price increase in the next six months. Broadcast: Increases in both local and national advertising revenues combined with lower programming expenses to result in a profit increase of more than 45% for the Broadcast Group. Overall revenues were up seven percent for the Group. The Company's independent station in Phoenix, KPHO, led the Group in revenue and profit improvement. All of the stations reported improved operating results except for KCTV, the Kansas City CBS affiliate, due to lower national advertising revenues. Real Estate: Second quarter revenues and profits in the Real Estate Group increased significantly from the prior year quarter. Transaction fees, the revenues generated from member firms' home sales activity, increased nine percent. Revenues and profits from the sale of custom products were also greater than in the prior year quarter. Cable Television: Revenues increased two percent in the cable operations due to increased subscriber counts, additional pay channel subscribers and increased advertising revenues. These increases were partially offset by a lower rate per subscriber due to the cable industry re-regulation which took effect in September 1993. This decline in revenue per subscriber led to lower operating profits, before interest expense, at the Minnesota system. Higher interest rates and lower operating results at the Minnesota system led to an increase in the net loss of the cable operations in the current quarter. Other: Interest income declined in the current quarter due to lower interest- earning cash balances that resulted from Company stock repurchases and the timing of payments to the Company's pension plans. Corporate nonoperating expenses increased compared to the prior year quarter due to the timing of spending and increased consulting expense. The effective tax rate for the second quarter is less than the rate in the prior year, despite the increase in the federal income tax rate. This is due to a lower effective tax rate on the gain on the dispositions of the broadcast stations. Page 13 of 29 First Six Months Fiscal 1993-94 Vs. First Six Months Fiscal 1992-93 Meredith Corporation net earnings for the six months ended December 31, 1993 were $14,948,000, or $1.04 per share. Net earnings included a gain of $11,997,000 ($8,197,000 after tax or 57 cents per share) on the dispositions of the Syracuse and Fresno television properties and a charge of $4,800,000 ($2,592,000 after tax or a negative 18 cents per share) for an unusual item related to a reserve for possible tax liabilities on disposed properties. Excluding the post-tax impact of the gain on dispositions and the unusual item, comparable earnings for the six months were $9,343,000, or 65 cents per share, a 23 percent increase from prior year-to-date earnings per share of 53 cents or $8,150,000. Improved results in the Broadcast and Publishing Groups were the primary factors in the increase in comparable earnings. These improvements were partially offset by a larger loss on cable operations due to the timing of the purchase of the Minnesota system and cable industry re-regulation. Five cents of the increase in comparable earnings per share was due to shares repurchased by the Company. The net assets of WTVH, a CBS affiliate licensed to serve Syracuse, New York, and the common stock of a Company subsidiary that owned KSEE, an NBC affiliate licensed to serve Fresno, California, were sold to Granite Broadcasting Corporation effective December 26, 1993. The effect on fiscal 1994 advertising revenues and profits are expected to be immaterial when compared to the prior year. The Company received tax assessments in the second quarter related to discontinued operations sold in prior years. An unusual item was recognized to establish a reserve for these possible tax liabilites. At this time, the Company intends to protest these assessments but has established a reserve which it believes will be sufficient to cover any potential liabilities. Revenues for the six months ended December 31, 1993 were $386,921,000, a five percent increase from prior year revenues of $367,569,000. Factors contributing to the increase included an additional two months of revenue from the Minnesota cable television system, increased magazine circulation revenues and increased retail and direct marketing book sales. Income from operations was $21,360,000 for the six months compared to $17,501,000 in the prior year period. The operating margin rose from 4.8 percent of net revenues last year to 5.5 percent, despite the negative effect of the unusual item, in the current year period. Excluding the effect of the unusual item, the operating margin was 6.8 percent, an increase of 42 percent from the comparable prior year period. The following table shows the percentage of revenues each major expense classification represented in the current and prior year periods: Expense as Percentage of Revenues Six Months Ended December 31 1993 1992 - --------------------------------------------------------------------- Production, distribution and editorial (PD&E) 41.7% 43.2% Selling, general and administrative (SG&A) 46.8% 48.0% Depreciation and amortization 4.7% 4.0% Unusual item 1.2% -- Page 14 of 29 PD&E expenses declined as a percentage of revenues primarily due to lower programming expense at the broadcast television stations. The inclusion of six months of cable operations versus four months in the prior year also contributed to the decline as cable has a relatively low PD&E expense ratio. SG&A expenses also declined as a percentage of revenues compared to the prior year period. A favorable adjustment to accrued music license fees in the Broadcast Group, based on an industry settlement with ASCAP (American Society of Composers, Authors & Publishers) was the biggest single factor. Lower promotion expenses in the Book Group also contributed. Depreciation and amortization expense rose as a percentage of net revenues due to the timing of the Minnesota cable television system acquisition on September 1, 1992. A discussion of results by segment follows: Publishing: Revenues in the Magazine Group increased three percent from the revenues recorded in the six months ended December 31, 1992. Total advertising revenues declined five percent, primarily due to the sale of Metropolitan Home magazine in November 1992. Excluding Metropolitan Home, advertising revenues increased slightly from the prior year period. A first quarter decline in Better Homes and Gardens advertising revenues was offset by increases in ad revenues for almost all of the Company's other titles. Increases in excess of 25% were reported by Traditional Home, Country America and Golf For Women, primarily due to additional ad pages. Each of these titles also reported higher net revenue per page, in part due to increased rate bases for each of the titles. Circulation revenues in the Magazine Group increased almost eight percent compared to the prior-year six month period. An increase in newsstand sales of the Better Homes and Gardens Special Interest Publications was the biggest factor in the improvement, followed by increased subscription revenues from new titles, especially American Patchwork & Quilting. Magazine Group operating profits for the first six months of fiscal 1994 increased 13 percent over the prior year period. Strong newsstand sales and profits were reported by Better Homes and Gardens Special Interest Publications, Ladies Home Journal (including special issues), Country Gardens and Traditional Home. These titles also benefitted from increased advertising revenues, as did Country America which reported a 45 percent increase in ad revenues, primarily due to increased ad pages. Profits in the first six months of the prior year were held down by a loss on Metropolitan Home magazine (sold in November 1992). These improvements, when compared to the prior year, were partially offset by a decline in Better Homes and Gardens profits that resulted primarily from lower advertising revenues. Book Group revenues increased two percent from the prior year period due to increased sales volume in the retail and direct mail operations. Lower volumes in Craftways, syndication programs and most of the book clubs, primarily a result of planned downsizing, partially offset the increases. Page 15 of 29 Book Group operating results improved significantly from the first six months of the prior year, primarily due to increased profits from the Group's retail marketing operations. Strong sales of both new and backlist titles combined with lower reserves for book returns to result in the profit increase. The book clubs also reported improved results for the period due to lower merchandise return rates and lower promotion expenses. Partially offsetting these improvements were declines in the direct mail and syndication operations. Direct mail results were unfavorable due to increased product development costs. The decline in syndication results reflected an increase in lower margin starter programs due to increased product testing. Broadcast: Revenues increased almost five percent in the Broadcast Group due to stronger sales of both local and national advertising. The revenue increase combined with lower programming expenses and a favorable adjustment to accrued music license fees to result in a profit increase of more than 60% for the Broadcast Group. Programming costs have been held down by a combination of cost saving measures including the purchase of more first run programming. KPHO, the Company's independent station in Phoenix, reported the most substantial improvement in operating results. Advertising revenues at the station have increased 19 percent from the prior year period due to a stronger sales force and an improving economy in the Phoenix market. Real Estate: Profits in the Real Estate Group increased significantly from the first six months of fiscal 1993. Transaction fees, the revenues generated from member firms' home sales activity, increased seven percent due to continued strength in the residential housing market. Revenues and profits from the sale of ancillary products and services also increased. Cable Television: Increases in revenues and declines in operating results for the cable television operations reflect the acquisition of the Minnesota system on September 1, 1992. This system is the larger of two cable television systems, of which the Company owns approximately 70 percent. Six months' ownership in the current period, versus four months in the prior year period, was the primary reason for the revenue growth of approximately 44 percent. Operating profit, before interest expense, also increased but the profit margin declined due to the additional amortization of acquisition expenses (associated with the Minnesota system purchase) and the impact on operations of cable industry re-regulation. Two additional months of interest expense resulted in a larger net loss for the cable operations in the current period. The Company is evaluating its options in relation to continued investment in cable television. Other: The increase in interest expense in the current period reflects an additional two months of debt financing related to the acquisition of the Minnesota cable television system. Interest income declined in the current period due to lower interest-earning cash balances that resulted from Company stock repurchases, timing of payments to the Company's pension plan and the September 1992 investment in the cable television partnership. Corporate nonoperating expenses increased compared to the prior year period due to increased consulting expenses. Page 16 of 29 The effective tax rate for the six months ended December 31, 1993 exceeds the rate in the prior year period primarily due to the increase in the federal corporate tax rate, that was enacted in August 1993. Accounting rules require that the effect of a tax rate change on deferred items be reflected in earnings in the period the change is enacted. To date that increase in the corporate tax rate has reduced earnings per share by 11 cents. This increase was partially offset by the favorable effect from the disposition of the broadcast television stations. Liquidity and Capital Resources Net cash provided by operating activities totaled $3,212,000 for the six months ended December 31, 1993. This was a decrease of $9,098,000 from the comparable prior year period. The decrease in cash provided was mostly due to a larger increase in receivables and a smaller decrease in deferred subscription acquisition costs. Revenue increases in the Broadcast, Book and Magazine Groups led to increased receivables. The decrease in deferred subscription acquisition costs was less primarily due to the sale of Metropolitan Home magazine in the prior year period. The larger decrease in accounts payable and accruals is primarily a result of reclassifications affecting deferred income taxes and other deferred items. Investing activities provided cash of $19,490,000 in the six months ended December 31, 1993. In the comparable prior year period investing activities used $16,500,000. The difference resulted primarily from the proceeds received from the disposition of the two broadcast television stations in the current period. Also contributing was a prior year investment in the cable partnership to purchase the Minnesota cable television system. These items are partially offset by cash provided by a larger redemption of marketable securities in the prior year. Net cash used by financing activities declined slightly from $33,409,000 in the six months ended December 31, 1992 to $32,059,000 in the current period. Less cash was used by the cable partnership to retire long-term debt in the current period. This was partially offset by a small increase in the use of cash to purchase Company common stock. The increase results from a higher average cost per share. The Company currently has a Board of Directors' authorization to repurchase up to one million shares of Company stock. Approximately one-fourth of those shares has been repurchased as of this date. Capital expenditures in fiscal 1994 are expected to increase by approximately 30% over fiscal 1993 levels. This increase is primarily due to the timing of the Minnesota cable television system acquisition. All planned expenditures in the cable television systems occur in the ordinary course of business. No material commitments for expenditures to upgrade the cable distribution systems have been made. Most of the Company's other capital spending relates to plans for new and upgraded computer networks to implement new publishing systems technology for the pupose of reducing long-term processing costs. However, at this time, the Company has made no material commitments for capital expenditures. At this time, management expects that cash on hand, plus internally-generated cash flow, will provide funds for capital expenditures, cash dividends and other operational cash needs for foreseeable periods. Short-term lines of credit will be used on an as-needed basis for short-term working capital needs. The Company does not expect the need for any long-term source of cash to meet operating requirements. Page 17 of 29 PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company has received federal income tax deficiency notices relative to its 1986, 1987, 1988, 1989 and 1990 tax years. Generally, the claimed deficiencies relate to the amortization of intangibles and other matters connected with the acquisition of Ladies' Home Journal magazine. The issues remaining unresolved through December 31, 1993, would have an approximate $12 million tax cost if decided totally adverse to the Company. The Company has contested the remaining deficiencies in The United States Tax Court in a trial ended October 6, 1992. Management believes that the Company's position was strengthened by the Supreme Court decision issued April 20, 1993, regarding the Newark Morning Ledger Company case. The Tax Court decision, involving the Company, is expected in the first half of calendar 1994. The Company continues to expect that the ultimate resolution of this matter will not have a material adverse effect on its financial condition. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of Stockholders was held on November 8, 1993 at the Company's headquarters in Des Moines, Iowa. (b) The name of each director elected at the Annual Meeting is shown under Item 4.(c). The other directors whose terms of office continued after the meeting were: Robert A. Burnett, Frederick B. Henry, Richard S. Levitt, E. T. Meredith III, Nicholas L. Reding, Gerald D. Thornton and Daniel Yankelovich (c) Four Class I directors for terms expiring in 1996 were elected at the annual meeting. The following directors were elected at that meeting in uncontested elections: Number of shareholder votes* ---------------------------- For Withhold ---------- -------- Class I directors Pierson M. Grieve 38,024,378 247,038 Robert E. Lee 38,027,634 243,782 Jack D. Rehm 38,119,999 151,417 Barbara S. Uehling 38,021,243 250,173 *As specified on the proxy card, if no vote For or Withhold was specified, the vote was voted For the election of the named director. Page 18 of 29 Item 4.(c) continued In addition, stockholders of the Company approved the Meredith Corporation 1993 Stock Option Plan for Non-Employee Directors which was stated as Exhibit A in the Company's Proxy Statement for the Annual Meeting of Stockholders on November 8, 1993 and is incorporated herein by reference. The shareholder vote on the proposal was as follows: Broker # For # Against # Abstain # Non-Votes ---------- --------- --------- ----------- 36,034,691 1,804,820 431,905 None reported Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 1) Material contracts: Meredith Corporation Deferred Compensation Plan: Exhibit 10 2) Statement re computation of per share earnings: Exhibit 11 (b) Reports on Form 8-K No Form 8-K was filed during the quarter ended December 31, 1993. Page 19 of 29 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEREDITH CORPORATION Registrant (Larry D. Hartsook) Larry D. Hartsook Vice President - Finance (Principal Financial and Accounting Officer) Date: February 10, 1994 Page 20 of 29 EX-10 2 EXHIBIT 10 FOR 12-31-93 10-Q Exhibit 10 MEREDITH CORPORATION ____________________________ DEFERRED COMPENSATION PLAN ____________________________ ARTICLE I Purpose The purpose of the Deferred Compensation Plan (the "Plan") of Meredith Corporation (the "Company") is to offer eligible senior officers and other key employees of the Company who are designated by the Committee (defined below), the opportunity to defer the receipt of compensation payments they may otherwise become entitled to, under terms advantageous to such executives, and the Company, for the periods provided in the Plan. ARTICLE II Definitions For purposes of this Plan, the following terms shall have the following meanings: 2.1 "Account" shall have the meaning specified in Section 4.1. 2.2 "Annual Compensation" shall mean the aggregate of the Participant's base salary as in effect on the first day of the calendar year or Short Year, as the case may be, to which an election under this Plan relates and any incentive bonuses or other incentive compensation payable in cash to such Participant during such year. 2.3 "Beneficiary" shall have the meaning specified in Section 7.5. 2.4 "Committee" shall have the meaning specified in Section 6.1. 2.5 "Deferred Amount" shall mean at any time the sum of (i) all of a Participant's Deferred Compensation attributable to a particular calendar year or Short Year plus (ii) all Increments credited as of such date to the Account of such Participant with respect to such year, as provided in Section 4.2. 2.6 "Deferred Compensation" shall mean that portion of Annual Compensation to which a Participant is entitled, the payment of which the Participant has elected or is required to defer under this Plan. 2.7 "Designated Deferral Period" shall have the meaning specified in Section 3.1. Page 21 of 29 2.8 "Election Date" shall have the meaning specified in Section 3.2. 2.9 "Eligible Participant" shall mean any employee of the Company who is a senior officer or other key employee of the Company and who is designated by the Committee as an eligible Participant in this Plan with respect to any calendar year or Short Year. 2.10 "Increments" shall have the meaning specified in Section 4.2. 2.11 "Participant" shall mean any employee of the Company who is or will be an Eligible Participant on any date which is an Election Date. 2.12 "Payout Period" shall have the meaning specified in Section 5.3. 2.13 "Return on Shareholders' Equity" shall mean the amount determined by dividing the accumulated net after-tax earnings of the Company from continuing operations before extraordinary items for the applicable fiscal year by the ending stockholders' equity of the Company for that year. 2.14 "Short Year" shall have the meaning specified in Section 3.2. 2.15 "Specified Amount" shall have the meaning specified in Section 3.1. ARTICLE III Deferral Election 3.1 Election. (a) Subject to the limitations to be prescribed by the Committee pursuant to Section 3.3, each Participant may elect to have the payment of a Specified Amount of his or her Annual Compensation deferred pursuant to this Plan for the Designated Deferral Period. The "Specified Amount" shall mean the portion of the Participant's Annual Compensation for a particular calendar year or Short Year which the Participant elects to defer hereunder, provided however that such amount shall not be less than $15,000.00 and provided further that such amount shall be specified in increments of $5,000.00. (b) The "Designated Deferral Period" shall mean one of the following periods as selected by the Participant with respect to his or her Deferred Compensation for the particular calendar year or Short Year: (i) until a specified date in the future, or (ii) until a date which is sixty (60) days following the Participant's termination of employment with the Company; provided however that the Committee shall have the authority to require deferral beyond the expiration of the Designated Deferral Period to the extent necessary to avoid a limitation on the deductibility by the Company of the Deferred Amount or any portion thereof pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). For purposes of this Section 3.1, it shall not be considered a termination of employment when a Participant is granted a military or personal leave of absence by the Company or when a Participant is transferred from the Company or a subsidiary of the Company to another subsidiary or to the Company or to any affiliate as defined in Section 414 of the Code. Page 22 of 29 (c) In addition, in the case of any Participant who, with respect to a particular calendar year or Short Year during the term of this Plan, is or may in the judgment of the Committee be a "covered employee" under Section 162(m) of the Code for such calendar year or Short Year, and who may have "applicable employee remuneration" (as defined in said Section of the Code) for that year of more than $1 million, the Committee may in its sole discretion treat the Participant as having elected to defer that portion of his or her Annual Compensation for the particular year which is necessary to avoid the application of Section 162(m) of the Code to such year. Any Annual Compensation which is deferred as a result of this Section 3.1(c) shall be deemed to have a Designated Deferral Period which ends on the first date upon which the Deferred Compensation resulting from this Section 3.1(c) can be paid without causing or increasing a limitation on the Company's ability to deduct compensation paid to the Participant pursuant to Section 162(m) of the Code. 3.2 Deferral Election. An election under Section 3.1 shall be in writing on a form prescribed by the Committee. A separate election shall be made for each calendar year or Short Year and shall be delivered to the Committee on or before the Election Date for such calendar year or Short Year. The "Election Date" for a calendar year for which a deferral election is being made shall be the last day of the immediately preceding calendar year. The "Election Date" in the case of (i) an employee who becomes an Eligible Participant for the first time after the beginning of a calendar year or (ii) in the case of the first year for which this Plan is effective (items (i) and (ii) each being a "Short Year"), the "Election Date" shall be 30 days after such employee receives notice that he or she has become an Eligible Participant for such Short Year and the election shall be applicable only with respect to the Participant's Annual Compensation payable by the Company after the Election Date. Each written election shall set forth the Specified Amount of the Participant's Annual Compensation for the calendar year covered by the election (or the remainder thereof in the case of a Short Year) the Participant desires to have deferred, the Designated Deferral Period, and the Payout Period with respect to the Deferred Amount for such year. An election, once made, shall be irrevocable. 3.3 Limitations on Deferral Elections. The Committee shall set, from time to time, limitations on the amount of or type of Annual Compensation which may be subject to deferral hereunder, including, but not limited to, establishing annual limitations relating to grades of employees, and/or compensation levels. The applicable limitations for a particular calendar year or Short Year shall be set forth in an attachment to the form of deferral election relating to such year. ARTICLE IV Treatment of Deferred Amounts 4.1 Memorandum Account. The Company shall establish a memorandum account (the "Account") for each Participant who has Deferred Compensation under this Plan from time to time during the calendar year or Short Year. The amount of such Deferred Compensation shall be credited to such Participant's Account on the date or dates during the calendar year or Short Year on which the Deferred Compensation would have been payable to the Participant but for the deferral under this Plan. Page 23 of 29 4.2 Increments. Each Participant's Deferred Amount shall be deemed to earn "interest" at a rate equal to the lower of (i) the base rate charged by CitiBank N.A. on corporate loans to responsible and substantial borrowers in effect from time to time, which is also referred to as the "prime rate," or (ii) the Company's Return on Shareholders' Equity for the immediately preceding fiscal year of the Company; provided, however, that in the event the Return on Shareholders' Equity is less than or equal to zero, the Committee shall have the authority to establish, in its sole discretion, an interest rate in place of the Return on Shareholders' Equity for the immediately preceding fiscal year. Any interest deemed to have been earned on the Participant's Deferred Amount shall be an "Increment" for purposes of this Plan. The Company will separately record the Increments relating to the Deferred Compensation attributable to a particular calendar year or Short Year to reflect the fact that a Participant may have elected a different Designated Deferral Period with respect to each year in which he or she participates in the Plan. 4.3 Assets. No assets shall be segregated or earmarked in respect of any Deferred Amount and no Participant shall have any right to assign, transfer, pledge or hypothecate his or her interest, or any portion thereof, in his or her Account. The Plan and the crediting of Accounts hereunder shall not constitute a trust and shall merely be for the purpose of recording an unsecured contractual obligation. All amounts payable pursuant to the terms of this Plan shall be paid from the general assets of the Company. 4.4 Reports. Until the entire Deferred Amount in an Account shall have been paid in full, the Company will furnish to each Participant a report, at least annually, setting forth transactions in such Account and the status of his or her Account. ARTICLE V Payment of Deferred Amounts 5.1 Amount of Payment. The amount to be paid to a Participant following the expiration of the Designated Deferral Period with respect to any calendar year or Short Year shall be an amount equal to the Deferred Amount in respect of such year. 5.2 Form of Payment. All payments of Deferred Amounts under this Plan shall be made in cash. 5.3 Payment of Deferred Amount. The Deferred Compensation credited to a Participant's Account (increased by the Increments attributable thereto) with respect to a particular calendar year or Short Year shall be payable in a lump sum or a series of annual installments immediately following the end of the Designated Deferral Period; provided however that the Committee shall have the authority to require deferral of amounts otherwise payable in accordance with this Section 5.3 to the extent necessary to avoid a limitation on the deductibility by the Company of the Deferred Amount (or a portion thereof) pursuant to Section 162(m) of the Code. In this regard, each Participant may elect, at the time of his or her Deferral Election, the number of annual installments (which shall not be less than 2 nor more than 10) over which the Deferred Amounts shall be paid (the "Payout Period"). Page 24 of 29 5.4 Payment Following Death or Permanent Disability. Notwithstanding the Designated Deferral Period or the Payout Period selected by the Participant, if the employment of a Participant is terminated as a result of the Participant's death or permanent disability, the entire Deferred Amount credited to such Participant's Account shall be payable in a lump sum to such Participant (or, in the case of death, to his or her Beneficiary) on a date which is sixty (60) days after the Participant's death or termination of employment due to permanent disability; provided however that the Committee shall have the authority to require deferral of amounts otherwise payable in accordance with this Section 5.4 to the extent necessary to avoid a limitation on the deductibility by the Company of the Deferred Amount (or a portion thereof) pursuant to Section 162(m) of the Code. For purposes of this Plan, a Participant's employment shall be deemed to have been terminated as a result of permanent disability in the event the Participant suffers a physical illness, injury or other impairment in respect to which the Participant is entitled to receive benefits under the long-term disability plan maintained by the Company. 5.5 Acceleration of Payments. Notwithstanding any other provision of this Plan to the contrary, the Committee, in its sole discretion, is empowered to accelerate the payment of Deferred Amounts, without a prepayment penalty, to a Participant for any reason the Committee may determine to be appropriate. Neither the Company nor the Committee shall have any obligation to make any such acceleration for any reason whatsoever. ARTICLE VI Administration 6.1 Committee. The Plan shall be administered and interpreted by the Compensation Committee appointed from time to time by the Board of Directors of the Company (the "Committee"). The Committee shall have full authority to construe and interpret the terms and provisions of the Plan, to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its administrative responsibilities as it shall, from time to time, deem advisable, and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan, or in any election hereunder, in the manner and to the extent it shall deem necessary to carry the Plan into effect. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board of Directors of the Company, or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns. Any actions to be taken by the Committee will require the consent of a majority of the Committee members. Page 25 of 29 6.2 Liability. No member of the Board of Directors of the Company, no employee of the Company and no member of the Committee (nor the Committee itself) shall be liable for any act or action hereunder whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated or, except in circumstances involving his or her bad faith, gross negligence or fraud, for anything done or omitted to be done by such person. The Company will fully indemnify and hold the members of the Committee harmless from any liability hereunder, except in circumstances involving his or her bad faith, gross negligence or fraud. The Company or the Committee may consult with legal counsel, who may be counsel for the Company or other counsel, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel. ARTICLE VII Miscellaneous 7.1 Amendment or Termination. Notwithstanding any other provision of this Plan, the Board of Directors of the Company may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however that any such amendment, suspension or termination may not, without the Participant's consent, adversely affect any Deferred Amount credited to him or her for any calendar year or Short Year ended prior to the effective date of such amendment, suspension or termination. Notwithstanding the foregoing, upon any termination of this Plan, the Board of Directors of the Company may in its sole discretion accelerate the payment of all Deferred Amounts credited as of the date of termination of this Plan without a prepayment penalty. The Plan shall remain in effect until terminated pursuant to this Section 7.1. 7.2 Expenses. The Company will bear all expenses incurred by it in administering this Plan. 7.3 Withholding. The Company shall have the right to deduct from any payment to be made pursuant to this Plan, as well as from any other payments to be made by the Company to the Participant, any Federal, state or local taxes required by law to be withheld. 7.4 No Obligation. Neither this Plan nor any elections hereunder shall create any obligation on the Company to continue any other existing award plans or policies or to establish or continue any other programs, plans or policies of any kind. Neither this Plan nor any election made pursuant to this Plan shall give any Participant or other employee any right with respect to continuance of employment by the Company or any subsidiary or of any specific aggregate amount of compensation, nor shall there be a limitation in any way on the right of the Company or any subsidiary by which an employee is employed to terminate such employee at any time for any reason whatsoever or for no reason, nor shall this Plan create a contract of employment. Page 26 of 29 7.5. Designation of Beneficiary. In the event of the death of a Participant, the amount payable under Section 5.1 hereof shall, unless the Participant shall designate to the contrary as provided below, thereafter be made to such person or persons who, as of the date payment is to be made under this Plan, would receive distribution of the Participant's account balance, if any, under the terms of the Meredith Savings and Investment Plan. Notwithstanding the preceding sentence, a Participant may specifically designate the person or persons (who may be designated successively or contingently) to receive payments under this Plan following the Participant's death by filing a written beneficiary designation with the Company during the Participant's lifetime. Such beneficiary designation shall be in such form as may be prescribed by the Company and may be amended from time to time or may be revoked by the Participant pursuant to written instruments filed with the Company during his or her lifetime. Beneficiaries designated by a Participant may be any natural or legal person or persons, including a fiduciary, such as a trustee of a trust or the legal representative of an estate. Unless otherwise provided by the beneficiary designation filed by a Participant, if all of the persons so designated die before a Participant on the occurrence of a contingency not contemplated in such beneficiary designation, then the amount payable under this Plan shall be paid to the person or persons determined in accordance with the first sentence of this Section 7.5. 7.6 No Assignment; Resolution of Disputes. Except as provided in Section 7.5 hereof, no right or interest in any Account or Deferred Amount under this Plan shall be assignable or transferable, and no right or interest of any Participant in any Account hereunder or to any Deferred Amount shall be subject to any lien, obligation or liability of such Participant. In the event any conflicting demands are made upon the Company with respect to any payments due as a result of this Plan, provided that the Company shall not have received prior written notice that said conflicting demands have been finally settled by court adjudication, arbitration, joint order or otherwise, the Company may pay to the Participant any and all amounts due hereunder and thereupon the Company shall stand fully relieved and discharged of any further duties or liabilities under this Plan. 7.7 Applicable Law. This Plan and the obligations of the Company hereunder shall be subject to all applicable Federal and state laws, rules and regulations and to such approvals by any governmental or regulatory agency as may from time to time be required. The Board of Directors of the Company may make such changes in this Plan as may be necessary or desirable, in the opinion of the Board of Directors, to comply with the laws, rules and regulations of any governmental or regulatory authority, or to be eligible for tax benefits under the Internal Revenue Code of 1986, as amended, or any other laws or regulations of any Federal, state, or local government. 7.8 Governing Law. This Plan and all actions taken in connection herewith shall be governed and construed in accordance with the substantive laws of the State of Iowa (regardless of the law that might otherwise govern under applicable Iowa principles of conflict of laws). Page 27 of 29 7.9 Construction. Wherever any words are used in this Plan in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. The titles to sections of this Plan are intended solely as a convenience and shall not be used as an aid in construction of any provisions thereof. 7.10 Effective Date. This Plan was adopted by the Board of Directors of the Company on November 8, 1993. Page 28 of 29 EX-11 3 EXHIBIT 11 FOR 12-31-93 10-Q Exhibit 11 MEREDITH CORPORATION Computation of Primary and Fully Diluted Per Common Share Earnings - Treasury Stock Method For the Six Months Ended December 31, 1993 and 1992 (Unaudited) Weighted average number of shares 1993 1992 Fully Fully Primary Diluted Primary Diluted ------- ------- ------- ------- Weighted average number of shares outstanding in thousands 14,427 14,427 15,493 15,493 Dilutive effect of unexercised stock options and management incentive deferred awards in thousands 90 110 20 20 ------ ------ ------ ------ Total 14,517 14,537 15,513 15,513 ====== ====== ====== ====== Primary and fully diluted earnings per common share 1993 1992 Fully Fully Primary Diluted Primary Diluted ------- ------- ------- ------- Net earnings per share $1.03* $1.03* $ .53 $ .53 ===== ===== ===== ===== Note: Primary - Based on average market prices. Fully Diluted - Based on the higher of the average market price or the market price at December 31 of each year. *Dilution less than three percent from earnings per common share outstanding and therefore not considered to be material. Page 29 of 29 -----END PRIVACY-ENHANCED MESSAGE-----