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Meredith posts profits amid ratings gains, advertising increases


Meredith Corp. said it swung to a profit in its fiscal first-quarter from a loss a year ago as its broadcasting division continued to gain new viewers and its magazines sold more advertising.

The publisher of Better Homes and Gardens and dozens of other magazines had net income of $19.8 million, or 38 cents a share, for the period ended Sept. 30. During the year-earlier quarter, the company posted a loss of $69.3 million, or $1.36 per share, which included a charge of $85.7 million, or $1.68 per share, related to a change in accounting rules. Excluding that charge, the company would have had profits of $16.5 million, or 32 cents. Revenues rose 9 percent to $272.7 million from $250 million.

Meredith continues to benefit from improvements in its broadcasting operations, which have steadily gained since Kevin O’Brien took over as head of the group. Within the company’s publishing division, which accounted for about 76 percent of revenues and a slightly higher share of profits, the company’s December purchase of American Baby magazine is adding to profits and its other magazines are attracting advertisers at a higher rate than rivals, including Martha Stewart Living Omnimedia, which has been hurt by the stock trading controversy surrounding its founder, Martha Stewart.

“In publishing, our magazines continue to benefit from a flight to quality as consumers and advertisers continue to turn to leading titles such as premier home and family publications,” said William Kerr, Meredith’s chairman and chief executive, on a call with analysts and investors last week.

Publishing revenues rose 11 percent to $206.7 million. Operating profit rose 14 percent to $33 million from the year-earlier period. The number of advertising pages at Meredith’s magazines grew an average of 10 percent, compared with an industry decline of 3 percent, the company said in a statement, citing information from Publishers Information Bureau.

American Baby magazine has helped Meredith reach younger women. The company intends to revamp the editorial content of American Baby in a move that will result in a greater focus on beauty, food and home-related issues to help busy mothers, “look their best, feed their families, decorate their homes and get better organized around a multitude of tasks,” Lacy said. The changes will happen in the magazine’s February issue.

The publishing division is also expanding its reach beyond traditional magazines. It won an agreement to publish an informational booklet for 700,000 customers of Publix Super Markets and will publish the monthly programming guide for Hughes Electronics Corp.’s DirecTV.

Meredith will publish an insert on cholesterol for Pfizer Inc.’s Lipitor drug early next year that will run in Better Homes and Gardens, Ladies’ Home Journal, More, Country Home and Midwest Living magazines. It will also publish reprints on the topic that will be distributed to physician offices around the nation and work with a survey firm to evaluate whether the insert was effective.

Within Meredith’s broadcasting division, which includes 12 television stations, revenues rose 3 percent to $66 million, compared to an industry-wide decline of 2 percent, the company said. Under O’Brien, the company’s television stations are gaining viewers, adding newscasts and, as a result, are increasing advertising revenue.

O’Brien said it is starting a news bureau in Washington, D.C. to provide its stations with more information from the nation’s capital. It also purchased a small television station in Springfield, Mass. – the nation’s 106th-largest market. Meredith gained a CBS affiliation for the station and intends to add newsgathering operations at some point in the near future. Costs are initially expected to be low because Meredith intends to share resources with its station in nearby Hartford, Conn.

“We’re beginning to develop a reputation for an outstanding news operation,” O’Brien said on the call. “We are changing viewing habits, improving ratings and selling adverting based on real ratings improvement in most of our markets.”

Improving ratings can lead to higher advertising rates. O’Brien said that a 1-point rating gain in a market the size of Atlanta, where Meredith owns a television station, could add $8 million a year to revenues.

“Once again, Meredith outperformed its broadcasting and publishing peers in a difficult quarter, and looks set to do it again in the December quarter,” wrote Merrill Lynch analyst Karl Choi in a note to clients, in which he reiterated a “buy” rating on Meredith shares.

Risks to Meredith’s performance in the future include a slower-than-expected recovery in spending by advertisers, a “roll back in media deregulation, and the potential for ill-received acquisitions,” Choi wrote.

Meredith shares have risen about 4 percent in the past year.   

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