Click here for Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2018 Commission file number 1-5128 MEREDITH CORPORATION (Exact name of registrant as specified in its charter) Iowa 42-0410230 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1716 Locust Street, Des Moines, Iowa 50309-3023 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (515) 284-3000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares of stock outstanding at October 31, 2018 Common shares 39,879,039 Class B shares 5,105,920 Total common and Class B shares 44,984,959 (This page has been left blank intentionally.) TABLE OF CONTENTS Page Part I - Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of September 30, 2018 and June 30, 2018 1 Condensed Consolidated Statements of Earnings for the Three Months Ended September 30, 2018 and 2017 3 Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2018 and 2017 4 Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended September 30, 2018 and 2017 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2018 and 2017 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 3. Quantitative and Qualitative Disclosures About Market Risk 38 Item 4. Controls and Procedures 39 Part II - Other Information Item 1A. Risk Factors 40 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 40 Item 6. Exhibits 41 Signature 42 Meredith Corporation and its consolidated subsidiaries are referred to in this Quarterly Report on Form 10-Q (Form 10-Q) as Meredith, the Company, we, our, and us . PART I FINANCIAL INFORMATION Item 1. Financial Statements Meredith Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) Assets September 30, 2018 June 30, 2018 (In millions) Current assets Cash and cash equivalents $ 144.0 $ 437.6 Accounts receivable, net 552.9 542.0 Inventories 50.3 44.2 Current portion of subscription acquisition costs 116.4 118.1 Current portion of broadcast rights 18.0 9.8 Assets held-for-sale 691.8 713.1 Other current assets 105.2 114.3 Total current assets 1,678.6 1,979.1 Property, plant, and equipment 862.1 861.4 Less accumulated depreciation (398.4) (377.6) Net property, plant, and equipment 463.7 483.8 Subscription acquisition costs 102.6 61.1 Broadcast rights 9.4 18.9 Other assets 269.8 263.3 Intangible assets, net 1,966.3 2,005.2 Goodwill 1,926.7 1,915.8 Total assets $ 6,417.1 $ 6,727.2 See accompanying Notes to Condensed Consolidated Financial Statements. 1 Meredith Corporation and Subsidiaries Condensed Consolidated Balance Sheets (continued) (Unaudited) Liabilities, Redeemable Convertible Preferred Stock, and Shareholders' Equity September 30, 2018 June 30, 2018 (In millions except per share data) Current liabilities Current portion of long-term debt $ — $ 17.7 Current portion of long-term broadcast rights payable 17.4 8.9 Accounts payable 161.4 194.7 Accrued expenses and other liabilities 344.0 410.2 Current portion of unearned revenues 360.5 360.4 Liabilities associated with assets held-for-sale 186.5 198.4 Total current liabilities 1,069.8 1,190.3 Long-term debt 2,937.4 3,117.9 Long-term broadcast rights payable 11.5 20.8 Unearned revenues 155.6 124.1 Deferred income taxes 433.6 437.0 Other noncurrent liabilities 203.3 217.0 Total liabilities 4,811.2 5,107.1 Redeemable, convertible Series A preferred stock, par value $1 per share, $1,000 per share liquidation preference 526.9 522.6 Shareholders' equity Series preferred stock, par value $1 per share — — Common stock, par value $1 per share 39.9 39.8 Class B stock, par value $1 per share 5.1 5.1 Additional paid-in capital 207.5 199.5 Retained earnings 865.1 889.8 Accumulated other comprehensive loss (38.6) (36.7) Total shareholders' equity 1,079.0 1,097.5 Total liabilities, redeemable convertible preferred stock, and shareholders' equity $ 6,417.1 $ 6,727.2 See accompanying Notes to Condensed Consolidated Financial Statements. 2 Meredith Corporation and Subsidiaries Condensed Consolidated Statements of Earnings (Unaudited) Three months ended September 30, 2018 2017 (In millions except per share data) Revenues Advertising related $ 422.7 $ 209.2 Consumer related 301.2 149.6 Other 32.8 34.0 Total revenues 756.7 392.8 Operating expenses Production, distribution, and editorial 286.1 156.6 Selling, general, and administrative 336.1 170.7 Acquisition, disposition, and restructuring related activities 17.1 (3.3) Depreciation and amortization 63.7 12.6 Total operating expenses 703.0 336.6 Income from operations 53.7 56.2 Non-operating income, net 7.3 0.6 Interest expense, net (41.4) (5.1) Earnings from continuing operations before income taxes 19.6 51.7 Income tax expense (3.6) (18.3) Earnings from continuing operations 16.0 33.4 Income from discontinued operations, net of income taxes 1.0 — Net earnings $ 17.0 $ 33.4 Earnings (loss) attributable to common shareholders $ (2.6) $ 33.4 Basic earnings (loss) per share attributable to common shareholders Continuing operations $ (0.08) $ 0.75 Discontinued operations 0.02 — Basic earnings (loss) per common share $ (0.06) $ 0.75 Basic average common shares outstanding 45.1 44.8 Diluted earnings (loss) per share attributable to common shareholders Continuing operations $ (0.08) $ 0.73 Discontinued operations 0.02 — Diluted earnings (loss) per common share $ (0.06) $ 0.73 Diluted average shares outstanding 45.1 45.6 See accompanying Notes to Condensed Consolidated Financial Statements. 3 Meredith Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three months ended September 30, 2018 2017 (In millions) Net earnings $ 17.0 $ 33.4 Other comprehensive income (loss), net of income taxes Pension and other postretirement benefit plans activity 0.4 0.3 Unrealized foreign currency translation loss, net (2.3) — Unrealized gain on interest rate swaps — 0.3 Other comprehensive income (loss), net of income taxes (1.9) 0.6 Comprehensive income $ 15.1 $ 34.0 See accompanying Notes to Condensed Consolidated Financial Statements. 4 Meredith Corporation and Subsidiaries Condensed Consolidated Statements of Shareholders' Equity (Unaudited) Accumulated Common Class B Additional Other Stock - $1 Stock - $1 Paid-in Retained Comprehensive (In millions except per share data) par value par value Capital Earnings Loss Total Balance at June 30, 2018 $ 39.8 $ 5.1 $ 199.5 $ 889.8 $ (36.7) $ 1,097.5 Net earnings — — — 17.0 — 17.0 Other comprehensive loss, net of income taxes — — — — (1.9) (1.9) Shares issued under incentive plans, net of forfeitures 0.2 — 0.9 — — 1.1 Purchases of Company stock (0.1) (3.1) — (3.2) Share-based compensation — — 10.2 — — 10.2 Dividends paid Common stock ($0.545 dividend per share) — — — (23.0) — (23.0) Class B stock ($0.545 dividend per share) — — — (2.8) — (2.8) Series A preferred stock ($21.49 dividend per share) — — — (14.0) — (14.0) Accretion of Series A preferred stock — — — (4.3) — (4.3) Cumulative effect adjustment for adoption of Accounting Standards Update 2014-09 — — — 2.4 — 2.4 Balance at September 30, 2018 $ 39.9 $ 5.1 $ 207.5 $ 865.1 $ (38.6) $ 1,079.0 Accumulated Common Class B Additional Other Stock - $1 Stock - $1 Paid-in Retained Comprehensive (In millions except per share data) par value par value Capital Earnings Loss Total Balance at June 30, 2017 $ 39.4 $ 5.1 $ 54.8 $ 915.7 $ (19.0) $ 996.0 Net earnings — — — 33.4 — 33.4 Other comprehensive income, net of income taxes — — — — 0.6 0.6 Stock issued under various incentive plans, net of forfeitures 0.5 — 11.5 — — 12.0 Purchases of Company stock (0.3) — (17.4) — — (17.7) Share-based compensation — — 6.7 — — 6.7 Dividends paid Common stock ($0.520 dividend per share) — — — (20.9) — (20.9) Class B stock ($0.520 dividend per share) — — — (2.7) — (2.7) Cumulative effect adjustment for adoption of Accounting Standards Update 2016-09 — — 1.0 (0.6) — 0.4 Balance at September 30, 2017 $ 39.6 $ 5.1 $ 56.6 $ 924.9 $ (18.4) $ 1,007.8 See accompanying Notes to Condensed Consolidated Financial Statements.