Acquisitions

Fiscal 2015

On October 31, 2014, Meredith acquired WGGB, the ABC affiliate in Springfield, Massachusetts. The results of WGGB's operations have been included in the condensed consolidated financial statements since that date. The acquisition-date fair value of the consideration totaled $53.3 million, which consisted of $50.0 million of cash and $3.3 million of contingent consideration. The contingent consideration arrangement requires the Company to pay contingent payments based on certain future regulatory actions. We estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. The fair value is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in Note 9. As of March 31, 2015, the Company estimates the future payments will range from zero to $4.0 million.

Effective November 1, 2014, Meredith completed its acquisition of Martha Stewart Living magazine and its related digital assets (collectively Martha Stewart Living Media Properties). In addition, Meredith entered into a 10‑year licensing arrangement with Martha Stewart Living Omnimedia (MSLO) for the licensing of the Martha Stewart Living trade name. The acquired business operations include sales and marketing, circulation, production, and other non-editorial functions. Meredith will source editorial content from MSLO. The results of the Martha Stewart Living Media Properties have been included in the condensed consolidated financial statements since the effective date. There was no cash consideration exchanged in this transaction.

On November 13, 2014, Meredith acquired 100 percent of the membership interests in MyWedding, LLC (Mywedding). Mywedding operates mywedding.com, one of the top wedding websites in the U.S., providing couples with a complete wedding planning product suite. The results of Mywedding have been included in the condensed consolidated financial statements since that date. The acquisition-date fair value of the consideration was $42.6 million, which consisted of $20.0 million of cash and $22.6 million of contingent consideration. The contingent consideration arrangement requires the Company to pay a contingent payment based on certain financial targets achieved during fiscal 2018 primarily based on earnings before interest, taxes, depreciation, and amortization (EBITDA), as defined in the acquisition agreement. The contingent consideration is not dependent on the continued employment of the sellers. We estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. The fair value is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in Note 9. As of March 31, 2015, the Company estimates the future payments will range from $11.1 million to $40.0 million. During the third quarter of fiscal 2015, the provisional amounts recorded to the advertiser relationships were decreased $0.6 million, trademark intangible assets were decreased $1.3 million, cash consideration increased $0.1 million due to a working capital adjustment, and a corresponding increase of $2.0 million was recorded to goodwill based on an updated valuation report and other fair value determinations.

On December 19, 2014, Meredith acquired WALA, the FOX affiliate in Mobile, Alabama-Pensacola, Florida. The results of WALA's operations have been included in the condensed consolidated financial statements since that date. The cash purchase price, including the purchase of working capital, was $89.9 million.

On December 30, 2014, Meredith acquired 100 percent of the outstanding stock of Selectable Media, Inc. (Selectable Media), a leading native and engagement-based digital advertising company. The results of Selectable Media have been included in the condensed consolidated financial statements since that date. The acquisition-date fair value of the consideration totaled $30.2 million, which consisted of $23.0 million of cash and $7.2 million of contingent consideration. The contingent consideration arrangement requires the Company to pay contingent payments based on certain financial targets over the next three fiscal years primarily based on revenue, as defined in the acquisition agreement. The contingent consideration is not dependent on the continued employment of the sellers. We estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. The fair value is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in Note 9. As of March 31, 2015, the Company estimates the future payments will range from $7.3 million to $8.0 million.

Effective February 1, 2015, Meredith completed its acquisition of Shape, Natural Health, and Fit Pregnancy magazines and their related digital assets (collectively Shape). Shape is the women's active lifestyle category leader with content focusing on exercise, beauty, nutrition, health, fashion, wellness, and other lifestyle topics to help women lead a healthier, active lifestyle. The results of Shape's digital operations and certain expenses related to the print operations have been included in the condensed consolidated financial statements since the effective date. The print operations will publish its first issue in the fourth quarter of fiscal 2015. The acquisition-date fair value of the consideration totaled $87.4 million, which consisted of $60.0 million of cash and $27.4 million of contingent consideration. The contingent consideration arrangement requires the Company to pay a contingent payment based on the achievement of certain financial targets over the next three fiscal years primarily based on operating profit, as defined in the acquisition agreement. We estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model. The fair value is based on significant inputs not observable in the market and thus represent a Level 3 measurement as defined in Note 9. As of March 31, 2015, the Company estimates the future payments will range from $26.0 million to $36.8 million.

As of the date of each acquisition, Meredith allocated the purchase price to the assets acquired and liabilities assumed based on their respective preliminary fair values. The Company is in the process of obtaining third-party valuations of fixed and intangible assets; therefore, the provisional measurements of fixed assets, intangible assets, goodwill, and deferred income tax balances are subject to change.

The following table summarizes the total estimated fair values of the assets acquired and liabilities assumed by segment during the nine months ended March 31, 2015:



(In thousands)	Local Media Acquisitions				National Media Acquisitions				Total
Accounts receivable		$	4,375			$	4,060			$	8,435
Current portion of broadcast rights		1,582				—				1,582
Other current assets		1,437				1,070				2,507
Property, plant, and equipment		13,695				140				13,835
Other noncurrent assets		1,907				3,063				4,970
Intangible assets		107,518				33,875				141,393
Total identifiable assets acquired		130,514				42,208				172,722
Deferred subscription revenue		—				(51,976		)		(51,976		)
Current portion of broadcast rights		(1,582		)		—				(1,582		)
Other current liabilities		(1,718		)		(7,702		)		(9,420		)
Long-term liabilities		(5,242		)		(58,835		)		(64,077		)
Total liabilities assumed		(8,542		)		(118,513		)		(127,055		)
Net identifiable assets acquired		121,972				(76,305		)		45,667
Goodwill		17,974				179,424				197,398
Net assets acquired		$	139,946			$	103,119			$	243,065

The following table provides details of the acquired intangible assets by acquisition:



(In thousands)	WGGB		Martha Stewart		Mywedding		WALA		Selectable Media		Shape		Total
Intangible assets
subject to amortization
National media
Advertiser relationships	$	—	$	2,500	$	2,100	$	—	$	3,200	$	3,150	$	10,950
Customer lists	—		1,500		—		—		—		2,650		4,150
Other	—		—		—		—		700		975		1,675
Local media
Retransmission agreements	761		—		—		3,254		—		—		4,015
Other	70		—		—		102		—		—		172
Total	831		4,000		2,100		3,356		3,900		6,775		20,962
Intangible assets not
subject to amortization
National media
Trademarks	—		—		5,200		—		300		7,200		12,700
Internet domain names	—		—		—		—		—		4,400		4,400
Local media
FCC licenses	33,116		—		—		70,215		—		—		103,331
Total	33,116		—		5,200		70,215		300		11,600		120,431
Intangible assets, net	$	33,947	$	4,000	$	7,300	$	73,571	$	4,200	$	18,375	$	141,393

The above purchase price allocations are considered preliminary and are subject to revisions when the valuations of intangible assets are finalized upon receipt of the various final valuation reports for those assets from third party valuation experts.

The useful life of the advertiser relationships ranges from three to five years, the customer lists' useful lives are two years, and other national media intangible assets' useful lives are three to five years. The useful lives of the retransmission agreements are six years and local media other intangible assets' useful lives are three years.

For all acquisitions, goodwill is attributable primarily to expected synergies and the assembled workforces. Goodwill, with a provisionally assigned value of $172.3 million, is expected to be fully deductible for tax purposes.

Mywedding and Selectable Media are subject to legal and regulatory requirements, including but not limited to those related to taxation, in each of the jurisdictions in the countries in which they operate. The Company has conducted a preliminary assessment of liabilities arising in each of these jurisdictions, and has recognized provisional amounts in its initial accounting for the acquisitions for all identified liabilities in accordance with the business combinations guidance. However, the Company is continuing its review of these matters during the measurement period, and if new information about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, or any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized.

During the second quarter of fiscal 2015, acquisition related costs of $1.3 million were incurred. During the third quarter of fiscal 2015, acquisition related costs of $0.1 million were incurred. These costs are included in the selling, general, and administrative line in the Condensed Consolidated Statements of Earnings.

Fiscal 2014

Effective February 28, 2014, Meredith acquired KMOV. The results of KMOV's operations have been included in the consolidated financial statements since that date. During fiscal 2015, the Company finalized the determination of the fair values of the assets acquired and liabilities assumed. During fiscal 2015, the provisional amounts recorded to fixed assets were decreased $0.5 million, network affiliation agreements intangible assets were increased $1.0 million, other intangibles were decreased $0.1 million, and a corresponding decrease of $0.4 million was recorded to goodwill based on an updated valuation report and other fair value determinations. These adjustments did not have a significant impact on our Consolidated Balance Sheet as of June 30, 2014. Therefore, we have not retrospectively adjusted for these measurement period adjustments.

Effective June 19, 2014, Meredith acquired KTVK and an interest in the assets of KASW. The results of KTVK's operations have been included in the consolidated financial statements since that date. As part of the Federal Communications Commission's (FCC) approval of the transaction, Meredith was required to sell its interest in the KASW assets. Accordingly, this interest was shown on the Condensed Consolidated Balance Sheet as assets held for sale at June 30, 2014. As of June 30, 2014, the final valuation of the intangible assets acquired was not complete. As a result, the recorded intangible asset values were based on provisional estimates of fair value. The valuation of such assets was updated during the nine-month period ended March 31, 2015, and as a result the provisional amount recorded to assets held for sale were retrospectively increased $23.0 million, partially offset by $1.4 million of estimated costs to sell. A corresponding respective adjustment to the assets of KTVK was recorded as a $23.9 million reduction to the FCC license and $0.8 million reduction of goodwill, partially offset by a $1.7 million increase in retransmission agreements. All adjustments were based on an updated preliminary valuation report. The Company is in the process of obtaining final third-party valuations of fixed and intangible assets; thus, the provisional measurements of fixed assets, intangible assets, goodwill, and deferred income tax balances are subject to change for KTVK and KASW. The sale of the Company's interest in the KASW assets was completed in the third quarter of fiscal 2015. The comparative information as of June 30, 2014, was retrospectively adjusted, as required by the accounting guidance for business combinations, to reflect the updated values assigned to each of the intangible assets.

The measurement period adjustments related to fiscal 2014 acquisitions did not have a significant impact on our Condensed Consolidated Statements of Earnings for the three and nine months ended March 31, 2015. Therefore, we have not retrospectively adjusted this financial information.