Company Quick10K Filing
Quick10K
Meredith
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$59.18 45 $2,670
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-K 2018-06-30 Annual: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-06-30 Annual: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-K 2015-06-30 Annual: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-K 2014-06-30 Annual: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-06-10 Officers, Exhibits
8-K 2019-05-10 Earnings, Exhibits
8-K 2019-05-10 Earnings, Exhibits
8-K 2019-03-31 Other Events
8-K 2019-03-19 Officers, Exhibits
8-K 2019-03-11 Regulation FD, Exhibits
8-K 2019-02-11 Earnings, Exhibits
8-K 2019-02-11 Earnings, Exhibits
8-K 2019-02-06 Officers, Exhibits
8-K 2019-01-15 Officers, Exhibits
8-K 2018-11-15 Shareholder Vote, Other Events, Exhibits
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-10-03 Regulation FD, Exhibits
8-K 2018-09-06 Regulation FD, Exhibits
8-K 2018-08-10 Earnings, Exhibits
8-K 2018-05-15 Officers, Exhibits
8-K 2018-05-10 Earnings, Exhibits
8-K 2018-03-20 Exit Costs, Regulation FD, Exhibits
8-K 2018-03-15 Enter Agreement, M&A, Exhibits
8-K 2018-02-28 Regulation FD, Exhibits
8-K 2018-01-31
8-K 2018-01-29 Officers
8-K 2018-01-19 Other Events, Exhibits
8-K 2018-01-04 Regulation FD, Exhibits
TNDM Tandem Diabetes Care 3,740
ENPH Enphase Energy 1,490
CECO Career Education 1,350
CMO Capstead Mortgage 726
CVLY Codorus Valley Bancorp 210
CODA Coda Octopus Group 159
KMPH Kempharm 35
SLDV Security Land & Development 0
KNWN Know Labs 0
AAGI AG Acquisition Group II 0
MDP 2019-03-31
Part I Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
EX-31.1 fy19q3exhibit311.htm
EX-31.2 fy19q3exhibit312.htm
EX-32 fy19q3exhibit32.htm

Meredith Earnings 2019-03-31

MDP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 fy19q3mar10-q.htm 10-Q Document

 
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 March 31, 2019
Commission file number 1-5128
image6a07.jpg
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
Former name, former address, and former fiscal year, if changed since last report:  Not applicable

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 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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, par value $1
 
MDP
 
New York Stock Exchange

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 April 30, 2019
 
Common shares
40,070,414

Class B shares
5,098,373

Total common and Class B shares
45,168,787

 
 

















(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 March 31, 2019 and June 30, 2018
 
 
 
 
 
 
Condensed Consolidated Statements of Earnings (Loss) for the Three and Nine Months Ended March 31, 2019 and 2018
 
 
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended March 31, 2019 and 2018
 
 
 
 
 
 
Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended March 31, 2019 and 2018
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2019 and 2018
 
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements
 
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
 
 
 
Item 4.
Controls and Procedures
 
 
 
 
 
Part II - Other Information
 
 
 
 
 
Item 1A.
Risk Factors
 
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
 
Item 6.
Exhibits
 
 
 
 
 
Signature
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
March 31, 2019
 
June 30, 2018
(In millions)
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
52.5


$
437.6

Accounts receivable, net
 
594.0


542.0

Inventories
 
70.5


44.2

Current portion of subscription acquisition costs
 
216.4


144.0

Current portion of broadcast rights
 
10.8


9.8

Assets held-for-sale
 
362.3

 
725.8

Other current assets
 
59.3


114.3

Total current assets
 
1,365.8

 
2,017.7

Property, plant, and equipment
 
873.7

 
861.4

Less accumulated depreciation
 
(437.9
)
 
(377.6
)
Net property, plant, and equipment
 
435.8

 
483.8

Subscription acquisition costs
 
176.8

 
66.2

Broadcast rights
 
7.1

 
18.9

Other assets
 
276.4

 
263.3

Intangible assets, net
 
1,893.2

 
2,005.2

Goodwill
 
1,959.2

 
1,915.8

Total assets
 
$
6,114.3

 
$
6,770.9


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
 
March 31, 2019
 
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
 
10.3

 
8.9

Accounts payable
 
219.7

 
194.7

Accrued expenses and other liabilities
 
281.5

 
410.2

Current portion of unearned revenues
 
424.5

 
386.3

Liabilities associated with assets held-for-sale
 
187.1

 
211.1

Total current liabilities
 
1,123.1

 
1,228.9

Long-term debt
 
2,459.4

 
3,117.9

Long-term broadcast rights payable
 
9.5

 
20.8

Unearned revenues
 
229.5

 
129.2

Deferred income taxes
 
518.3

 
437.0

Other noncurrent liabilities
 
200.8

 
217.0

Total liabilities
 
4,540.6

 
5,150.8

 
 
 
 
 
Redeemable, convertible Series A preferred stock, par value $1 per share, $1,000 per share liquidation preference
 
535.7

 
522.6

 
 
 
 
 
Shareholders' equity
 
 
 
 
Series preferred stock, par value $1 per share
 

 

Common stock, par value $1 per share
 
40.1

 
39.8

Class B stock, par value $1 per share
 
5.1

 
5.1

Additional paid-in capital
 
212.6

 
199.5

Retained earnings
 
817.6

 
889.8

Accumulated other comprehensive loss
 
(37.4
)
 
(36.7
)
Total shareholders' equity
 
1,038.0

 
1,097.5

Total liabilities, redeemable convertible preferred stock, and shareholders' equity
 
$
6,114.3

 
$
6,770.9


See accompanying Notes to Condensed Consolidated Financial Statements.

2


Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Earnings (Loss)
(Unaudited)

 
Three Months
 
 
Nine Months
Periods ended March 31,
2019
 
2018
 
 
2019
 
2018
(In millions except per share data)
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Advertising related
$
365.6

 
$
324.4

 
 
$
1,277.2

 
$
765.4

Consumer related
359.0

 
281.4

 
 
1,024.5

 
582.7

Other
18.8

 
45.2

 
 
79.4

 
113.4

Total revenues
743.4

 
651.0

 
 
2,381.1

 
1,461.5

Operating expenses
 
 
 
 
 
 
 
 
Production, distribution, and editorial
284.4

 
250.4

 
 
873.4

 
566.5

Selling, general, and administrative
305.8

 
294.6

 
 
995.3

 
639.7

Acquisition, disposition, and restructuring related activities
16.8

 
138.8

 
 
61.6

 
150.4

Depreciation and amortization
61.5

 
40.0

 
 
190.3

 
65.0

Impairment of long-lived assets

 

 
 

 
19.8

Total operating expenses
668.5

 
723.8

 
 
2,120.6

 
1,441.4

Income (loss) from operations
74.9

 
(72.8
)
 
 
260.5

 
20.1

Non-operating income (expense), net
4.1

 
(7.2
)
 
 
17.3

 
(5.9
)
Interest expense, net
(38.4
)
 
(45.6
)
 
 
(130.4
)
 
(55.9
)
Earnings (loss) from continuing operations before income taxes
40.6

 
(125.6
)
 
 
147.4

 
(41.7
)
Income tax benefit (expense)
(12.5
)
 
30.1

 
 
(16.3
)
 
139.0

Earnings (loss) from continuing operations
28.1

 
(95.5
)
 
 
131.1

 
97.3

Loss from discontinued operations, net of income taxes
(4.4
)
 
(14.7
)
 
 
(71.8
)
 
(14.7
)
Net earnings (loss)
$
23.7

 
$
(110.2
)
 
 
$
59.3

 
$
82.6

 
 
 
 
 
 
 
 
 
Earnings (loss) attributable to common shareholders
$
4.7

 
$
(123.2
)
 
 
$
0.5

 
$
69.1

 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share attributable to common shareholders
 
 
 
 
 
 
 
 
Continuing operations
$
0.20

 
$
(2.41
)
 
 
$
1.60

 
$
1.86

Discontinued operations
(0.10
)
 
(0.33
)
 
 
(1.59
)
 
(0.32
)
Basic earnings (loss) per common share
$
0.10

 
$
(2.74
)
 
 
$
0.01

 
$
1.54

Basic average common shares outstanding
45.3

 
45.0

 
 
45.3

 
44.9

 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share attributable to common shareholders
 
 
 
 
 
 
 
 
Continuing operations
$
0.20

 
$
(2.41
)
 
 
$
1.59

 
$
1.85

Discontinued operations
(0.10
)
 
(0.33
)
 
 
(1.58
)
 
(0.32
)
Diluted earnings (loss) per common share
$
0.10

 
$
(2.74
)
 
 
$
0.01

 
$
1.53

Diluted average common shares outstanding
45.6

 
45.0

 
 
45.4

 
45.5


See accompanying Notes to Condensed Consolidated Financial Statements.

3


Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

 
Three Months
 
 
Nine Months
Periods ended March 31,
2019
 
2018
 
 
2019
 
2018
(In millions)
 
 
 
 
 
 
 
 
Net earnings (loss)
$
23.7

 
$
(110.2
)
 
 
$
59.3

 
$
82.6

Other comprehensive income (loss), net of income taxes
 
 
 
 
 
 
 
 
Pension and other postretirement benefit plans activity
0.4

 
0.4

 
 
1.2

 
1.1

Unrealized foreign currency translation gain (loss), net
3.4

 
(2.0
)
 
 
(1.9
)
 
(2.0
)
Unrealized gain on interest rate swaps

 
(0.9
)
 
 

 

Other comprehensive income (loss), net of income taxes
3.8

 
(2.5
)
 
 
(0.7
)
 
(0.9
)
Comprehensive income (loss)
$
27.5

 
$
(112.7
)
 
 
$
58.6

 
$
81.7


See accompanying Notes to Condensed Consolidated Financial Statements.


4


Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)

(In millions except per share data)
Common
Stock - $1
par value
Class B
Stock - $1
par value
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
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

Net earnings



18.6

 

 
18.6

Other comprehensive loss, net of income taxes




 
(2.6
)
 
(2.6
)
Shares issued under incentive plans, net of forfeitures
0.1


1.3


 

 
1.4

Purchases of Company stock


(1.8
)

 

 
(1.8
)
Share-based compensation


5.7


 

 
5.7

Dividends paid
 
 
 
 
 
 
 
 
Common stock ($0.545 dividend per share)



(23.1
)
 

 
(23.1
)
Class B stock ($0.545 dividend per share)



(2.8
)
 

 
(2.8
)
Series A preferred stock ($22.19 dividend per share)



(14.4
)
 

 
(14.4
)
Accretion of Series A preferred stock



(4.3
)
 

 
(4.3
)
Balance at December 31, 2018
40.0

5.1

212.7

839.1

 
(41.2
)
 
1,055.7

Net earnings



23.7

 

 
23.7

Other comprehensive income, net of income taxes




 
3.8

 
3.8

Shares issued under various incentive plans, net of forfeitures
0.1


1.3


 

 
1.4

Purchases of Company stock


(4.1
)

 

 
(4.1
)
Share-based compensation


2.7


 

 
2.7

Dividends paid
 
 
 
 
 
 
 


Common stock ($0.575 dividend per share)



(24.3
)
 

 
(24.3
)
Class B stock ($0.575 dividend per share)



(2.9
)
 

 
(2.9
)
Series A preferred stock ($20.78 dividend per share)



(13.6
)
 

 
(13.6
)
Accretion of Series A preferred stock



(4.4
)
 

 
(4.4
)
Balance at March 31, 2019
$
40.1

$
5.1

$
212.6

$
817.6

 
$
(37.4
)
 
$
1,038.0


See accompanying Notes to Condensed Consolidated Financial Statements.


5


Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity (Continued)
(Unaudited)

(In millions except per share data)
Common
Stock - $1
par value
Class B
Stock - $1
par value
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
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

Net earnings



159.4

 

 
159.4

Other comprehensive income, net of income taxes




 
1.0

 
1.0

Stock issued under various incentive plans, net of forfeitures
0.1


5.7


 

 
5.8

Purchases of Company stock
(0.1
)

(6.8
)

 

 
(6.9
)
Share-based compensation


3.4


 

 
3.4

Dividends paid
 
 
 
 
 
 
 


Common stock ($0.520 dividend per share)



(21.1
)
 

 
(21.1
)
Class B stock ($0.520 dividend per share)



(2.6
)
 

 
(2.6
)
Balance at December 31, 2017
39.6

5.1

58.9

1,060.6


(17.4
)

1,146.8

Net loss



(110.2
)
 

 
(110.2
)
Other comprehensive loss, net of income taxes




 
(2.5
)
 
(2.5
)
Stock issued under various incentive plans, net of forfeitures
0.1


1.1


 

 
1.2

Issuance of replacement Time share-based compensation awards


9.8


 

 
9.8

Purchases of Company stock


(3.6
)

 

 
(3.6
)
Share-based compensation


16.8


 

 
16.8

Issuance of warrants and options


115.6


 

 
115.6

Dividends paid
 
 
 
 
 
 
 


Common stock ($0.545 dividend per share)



(22.8
)
 

 
(22.8
)
Class B stock ($0.545 dividend per share)



(2.8
)
 

 
(2.8
)
Series A preferred stock ($13.692 dividend per share)



(8.9
)
 

 
(8.9
)
Accretion of Series A preferred stock



(2.9
)
 

 
(2.9
)
Reclassification adjustment for adoption of Accounting Standards Update 2018-02



4.0

 
(4.0
)
 

Balance at March 31, 2018
$
39.7

$
5.1

$
198.6

$
917.0


$
(23.9
)

$
1,136.5


See accompanying Notes to Condensed Consolidated Financial Statements.

6


Meredith Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Nine months ended March 31,
2019
 
2018
(In millions)
 
 
 
Cash flows from operating activities
 
 
 
Net earnings
$
59.3

 
$
82.6

Adjustments to reconcile net earnings to net cash provided by operating activities
 
 
 
Depreciation
74.0

 
32.1

Amortization
116.3

 
32.9

Share-based compensation
18.6

 
26.9

Deferred income taxes
75.4

 
(150.5
)
Amortization of original issue discount and debt issuance costs
6.1

 
3.9

Amortization of broadcast rights
15.1

 
14.4

Payments for broadcast rights
(14.3
)
 
(15.7
)
Gain (loss) on sale of assets
(9.8
)
 
8.6

Loss on extinguishment of debt
15.9

 

Write-down of impaired assets

 
19.8

Other operating activities, net
(3.1
)
 
10.0

Changes in assets and liabilities, net of acquisitions
(201.0
)
 
30.1

Net cash provided by operating activities
152.5

 
95.1

Cash flows from investing activities
 
 
 
Acquisitions of and investments in businesses, net of cash acquired
(18.3
)
 
(2,803.4
)
Proceeds from disposition of assets, net of cash sold
348.9

 
134.7

Additions to property, plant, and equipment
(28.6
)
 
(41.5
)
Other

 
3.8

Net cash provided by (used in) investing activities
302.0

 
(2,706.4
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of long-term debt
80.0

 
3,260.0

Repayments of long-term debt
(776.9
)
 
(760.6
)
Proceeds from preferred stock, warrants, and options issued, net of issuance costs

 
631.0

Dividends paid
(120.9
)
 
(81.8
)
Debt issuance costs paid

 
(70.8
)
Purchases of Company stock
(9.1
)
 
(28.2
)
Proceeds from common stock issued
3.9

 
19.0

Payment of acquisition-related contingent consideration
(19.3
)
 
(3.2
)
Net cash provided by (used in) financing activities
(842.3
)
 
2,965.4

Effect of exchange rate changes on cash and cash equivalents
(0.8
)
 

Change in cash in assets held-for-sale
3.5

 
(4.2
)
Net increase (decrease) in cash and cash equivalents
(385.1
)
 
349.9

Cash and cash equivalents at beginning of period
437.6

 
22.3

Cash and cash equivalents at end of period
$
52.5

 
$
372.2


See accompanying Notes to Condensed Consolidated Financial Statements.

7


Meredith Corporation and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements
 
(Unaudited)
 


1. Summary of Significant Accounting Policies

Basis of Presentation—The condensed consolidated financial statements include the accounts of Meredith Corporation and its wholly-owned and majority-owned subsidiaries (Meredith or the Company), after eliminating all significant intercompany balances and transactions. Meredith does not have any off-balance sheet arrangements.

The financial position and operating results of the Company's foreign operations are consolidated using primarily the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange as of the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Translation gains or losses on assets and liabilities are included as a component of accumulated other comprehensive loss.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (U.S. GAAP) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements, which are included in Meredith's Annual Report on Form 10-K/A (Form 10-K) for the year ended June 30, 2018, filed with the SEC.

The condensed consolidated financial statements as of March 31, 2019, and for the three and nine months ended March 31, 2019 and 2018, are unaudited but, in management's opinion, include all adjustments necessary for a fair presentation of the results of interim periods. All such adjustments are of a normal recurring nature. The year-end condensed consolidated balance sheet as of June 30, 2018, was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year.

Reclassification—Certain prior year amounts have been reclassified to conform to the fiscal 2019 presentation.

Adopted Accounting Pronouncements

ASU 2014-09—In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) (ASC 606) that updated and replaced existing revenue recognition guidance. The guidance includes a five-step framework to determine the timing and amount of revenue to recognize related to contracts with customers. Additionally, the guidance requires new and significantly enhanced disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows from customer contracts as well as judgments made by a company when following the framework.

The Company adopted the standard, including all updates made to the standard since original issuance, on July 1, 2018, using the modified retrospective method. The standard was applied to all contracts open as of July 1, 2018. The cumulative prior period effect of applying ASC 606 was $2.4 million, which resulted in an increase to retained earnings upon adoption.

The standard does not change the timing or pattern of revenue recognition for most of the Company's revenue contracts with the exception of contracts with value-added items or those that require combination under the standard. Refer to Note 11 for further discussion on the impacts of the adoption of this accounting standard.

The Company utilized various practical expedients offered by the guidance in our implementation. For the Company's contracts that have an original duration of twelve months or less, the Company does not impute interest

8


to account for a financing element. For all contracts with an original term of twelve months or less and for performance obligations tied to sales-based or usage-based royalties, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. Finally, consistent with historical practice, the Company excludes amounts collected from customers for sales taxes from its transaction prices.

ASU 2016-01—In January 2016, the FASB issued guidance to improve and simplify accounting for financial instruments. The updated guidance includes several provisions that are not applicable to the Company’s condensed consolidated financial statements with the exception of changes to fair value disclosures. Under the new guidance, public entities are no longer required to disclose the methods and significant assumptions used to estimate fair value of financial instruments measured at amortized cost on the balance sheet. It also requires public entities to use the exit price when measuring the fair value of financial instruments for disclosure purposes. The guidance was adopted in the first quarter of fiscal 2019. The adoption of this guidance required a change in the Company's disclosures only and did not have an impact on the Company's financial position, results of operations, or cash flows.

ASU 2016-15—In August 2016, the FASB issued an accounting standards update clarifying the classification of certain cash receipts and payments in the statement of cash flows. The update is intended to reduce the diversity in practice regarding how certain transactions are classified within the statement of cash flows. The update was effective beginning in the first quarter of fiscal 2019 and was adopted retrospectively as required by the ASU.

As a result of the update, the Company reclassified a cash outflow of $0.8 million from financing activities to operating activities related to contingent considerations paid in excess of that recognized as a liability on the date of acquisition and reclassified a cash inflow of $0.7 million from operating activities to investing activities related to cash proceeds from corporate owned life insurance in the nine months ended March 31, 2018. The update is not expected to have a material impact on the classification of future cash flows.

ASU 2017-01—In January 2017, the FASB issued an accounting standards update that clarifies the definition of a business and adds guidance to assist entities in the determination of whether an acquisition (or disposal) represents assets or a business. The update provides a test to determine whether or not an acquisition is a business. If substantially all of the fair value of the assets acquired is concentrated in a single asset or a group of similar identifiable assets, the acquired assets do not represent a business. If this test is not met, the update provides further guidance to evaluate if the acquisition represents a business. The Company prospectively adopted the guidance in the first quarter of fiscal 2019. The adoption did not have an impact to the Company’s condensed consolidated financial statements.

ASU 2017-07—In March 2017, the FASB issued an accounting standards update on the presentation of net periodic pension and postretirement benefit costs. This guidance revises how employers that sponsor defined benefit pension and other postretirement plans present the net periodic benefit costs in their income statement and requires that the service cost component of net periodic benefit costs be presented in the same line items as other employee compensation costs. The other components of net periodic benefit costs must be presented separately from the line items that include the service cost and outside of the income from operations subtotal.

As required by the standard, the Company adopted the update on July 1, 2018, retrospectively to July 1, 2016, which resulted in an increase in production, distribution, and editorial expenses of $0.8 million and $2.4 million, an increase in selling, general, and administrative expenses of $3.8 million and $3.4 million, and a decrease in non-operating income (expense), net of $4.6 million and $5.8 million for the three and nine months ended March 31, 2018, respectively. The Company elected the practical expedient allowed by the update and utilized previously disclosed components of net periodic benefit costs from the pension and other postretirement benefit plan note in the June 30, 2018, Form 10-K. For the three months ended March 31, 2019, the implementation of this guidance resulted in an increase in production, distribution, and editorial expenses of $1.3 million, an increase in selling, general, and administrative expenses of $2.6 million, and an increase in non-operating income (expense), net of $3.9 million. For the nine months ended March 31, 2019, the implementation of this guidance resulted in an increase in production, distribution, and editorial expenses of $1.3 million, an increase in selling, general, and

9


administrative expenses of $10.4 million, and an increase in non-operating income (expense), net of $11.7 million, compared to that which would have been reported under previous guidance.

ASU 2017-09—In May 2017, the FASB issued additional guidance that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under this guidance, an entity does not apply modification accounting to a share-based payment award if the award's fair value, vesting conditions, and classification as an equity or liability instrument are the same immediately before and after the change. This guidance was adopted in the first quarter of fiscal 2019. The adoption of this guidance did not have an impact on the Company's condensed consolidated financial statements.

ASU 2018-15—In August 2018, the FASB issued guidance on accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The guidance is effective for the Company beginning in the first quarter of fiscal 2021 with early adoption permitted. The amendments in the update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this guidance prospectively, effective July 1, 2018. The adoption did not have a material impact on the Company's condensed consolidated financial statements.

In August 2018, the SEC issued a final rule that amends certain of its disclosure requirements. Specifically, the final rule modifies or eliminates disclosures that are redundant, duplicative, overlapping, outdated, or superseded in light of other SEC or U.S. GAAP disclosure requirements or changes in the information environment. Several aspects of the final rule are applicable to the Company but did not have a material impact on the Company's condensed consolidated financial statements. The amendments were effective November 5, 2018, and were implemented in the first quarter of fiscal 2019.

Pending Accounting Pronouncements

ASU 2016-02—In February 2016, the FASB issued an accounting standards update that replaces existing lease accounting standards. The new standard requires lessees to recognize on the balance sheet a right-of use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. Treatment of lease payments in the statement of earnings and statement of cash flows is relatively unchanged from previous guidance. This standard is required to be applied using a modified retrospective approach, which gives the option of applying the new guidance as of the effective date with enhanced disclosure requirements for comparative periods presented under prior lease guidance or applying the new standard at the beginning of the earliest comparative period presented. The FASB continues to issue amendments to further clarify provisions of this guidance. The standard, including the amendments made since initial issuance, is effective for the Company beginning July 1, 2019, with early adoption permitted. The Company is in the process of evaluating our existing lease portfolios, including accumulating all of the necessary information required to properly account for the leases under the new standard. As such, the Company is currently evaluating the effect the guidance will have on the Company's consolidated financial statements.

ASU 2018-13—In August 2018, the FASB issued an accounting standards update which changes the fair value measurement disclosure requirements. The update removes, modifies, and adds certain additional disclosures. The effective date is the first quarter of fiscal 2021, with early adoption permitted for any eliminated or modified disclosures. The adoption of this guidance requires a change in disclosures only and is not expected to have an impact on the Company's consolidated financial statements.

ASU 2018-14—In August 2018, the FASB issued an accounting standards update which adds, removes, and modifies disclosure requirements related to defined benefit pension and other postretirement plans. The update amends only annual disclosure requirements. Retrospective adoption of the update is required in fiscal 2022 with

10


early adoption permitted. The adoption of this guidance requires a change in disclosures only and is not expected to have an impact on the Company's consolidated financial statements.

ASU 2019-02—In March 2019, the FASB issued an accounting standards update which aligns the accounting for production costs of episodic television series with the accounting for production costs of films. In addition, the update modifies certain aspects of the capitalization, impairment, presentation and disclosure requirements in the accounting standards for entities in the film and broadcast entertainment industries. The update is effective for the Company in the first quarter of fiscal 2020 and must be applied prospectively. Early adoption is permitted. The Company is currently assessing the impact this update will have on the Company's consolidated financial statements.


2. Acquisitions

On February 28, 2019, Meredith acquired 100 percent of the membership interests in Linfield Media, LLC (Linfield Media), a marketing business focused on online savings and deals, for $16.6 million in cash. The results of Linfield Media have been included in the condensed consolidated financial statements since that date.

On January 31, 2018, Meredith completed the acquisition of all the outstanding shares of Time Inc. (Time). The fair values of the assets acquired and liabilities assumed were based on management’s preliminary estimates of the fair values of Time’s net assets. The estimated fair values of net assets and resulting goodwill were subject to the Company finalizing its analysis of the fair value of Time’s assets and liabilities as of the acquisition date, which occurred in the third quarter of fiscal 2019.

In the first nine months of fiscal 2019, the Company recorded purchase price allocation adjustments relating to the Time acquisition that increased goodwill by $24.6 million, reduced assets held-for-sale by $19.9 million and increased deferred income tax liabilities by $4.7 million. These adjustments resulted from new information about facts and circumstances that existed at the time of the acquisition. The measurement period is now closed.

In preparing its condensed consolidated financial statements for the three and nine months ended March 31, 2019, the Company identified errors in the accounting for certain magazine subscriptions in prior periods beginning at the time of the acquisition of Time. The errors were due to the incorrect coding of certain magazine subscriptions by Time, which resulted in the subscriptions being recorded on a net basis instead of a gross basis in the Company's national media segment.

As a result of these errors, consumer related revenue and selling, general, and administrative expense were understated on the Company's Condensed Consolidated Statements of Earnings (Loss) and subscription acquisition costs and unearned revenues were understated on the Company's Condensed Consolidated Balance Sheets. As these errors also affected certain of the brands held-for-sale (see Note 4), assets held-for-sale and liabilities associated with assets held-for-sale were also understated on the Company's Condensed Consolidated Balance Sheets.

Also, in the quarter ended March 31, 2019, the Company recorded an out-of-period adjustment to correct the impact on the opening Time balance sheet of these coding errors. The effect of the adjustment was to reduce selling, general, and administrative expenses by $10.0 million, and increase goodwill by $7.4 million and income tax expense by $2.6 million as of and for the three and nine months ended March 31, 2019.

In accordance with Staff Accounting Bulletin (SAB) No. 99, Materiality, the Company calculated the effect of these errors and determined that they were not material, individually or in the aggregate, to previously issued financial statements and, therefore, amendment of previously filed reports was not required. As permitted by SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company corrected, in the current filing, previously reported results.


11


In accordance with Accounting Standards Codification (ASC) 250, Accounting Changes and Error Corrections, the effect of the correction on each financial statement line item for each period affected is as follows:

Condensed Consolidated Balance Sheet as of June 30, 2018
As Reported
Adjustment
As Adjusted
(in millions)
 
 
 
Current portion of subscription acquisition costs
$
118.1

$
25.9

$
144.0

Assets held-for-sale
713.1

12.7

725.8

Subscription acquisition costs
61.1

5.1

66.2

Current portion of unearned revenues
360.4

25.9

386.3

Liabilities associated with assets held-for-sale
198.4

12.7

211.1

Unearned revenues
124.1

5.1

129.2


Condensed Consolidated Statements of Earnings (Loss)
As Reported
Adjustment
As Adjusted
(in millions)
 
 
 
For the three months ended March 31, 2018
 
 
 
Consumer related revenue
$
279.2

$
2.2

$
281.4

Selling, general, and administrative expense
292.4

2.2

294.6

 
 

 
For the nine months ended March 31, 2018
 

 
Consumer related revenue
580.5

2.2

582.7

Selling, general, and administrative expense
637.5

2.2

639.7

 
 
 
 
For the three months ended June 30, 2018
 
 
 
Consumer related revenue
328.3

6.4

334.7

Selling, general, and administrative expense
337.6

6.4

344.0

 
 
 
 
For the three months ended September 30, 2018
 
 
 
Consumer related revenue
301.2

12.3

313.5

Selling, general, and administrative expense
336.1

12.3

348.4

 
 
 
 
For the three months ended December 31, 2018
 
 
 
Consumer related revenue
336.8

15.2

352.0

Selling, general, and administrative expense
325.9

15.2

341.1



3. Inventories

Major components of inventories are summarized below.

(In millions)
March 31, 2019
 
June 30, 2018
Raw materials
 
$
47.0

 
$
32.1

Work in process
 
21.0

 
9.6

Finished goods
 
2.5

 
2.5

Inventories
 
$
70.5

 
$
44.2




12


4. Assets Held-for-Sale, Discontinued Operations, and Dispositions

Assets Held-for-Sale and Discontinued Operations

The Company announced after the acquisition of Time that it was exploring the sale of the TIME, Sports Illustrated, Fortune, and Money and affiliated brands and its investment in Viant Technology LLC (Viant). The TIME and Fortune brands were sold during the second quarter of fiscal 2019. In April 2019, due to a change in strategic vision, a decision was made to retain the Money brand. As this decision was made in the fourth quarter of fiscal 2019, the operations of the Money brand will be classified as continuing operations and the prior-year comparative periods will be recast to reflect this change beginning in the fourth quarter of fiscal 2019. Management expects sales of the Sports Illustrated brand and Viant to close during calendar 2019.

In accordance with accounting guidance, a business that, on acquisition, or within a short period following the acquisition (usually within three months), meets the criteria to be classified as held-for-sale is considered a discontinued operation. As all of the required criteria for held-for-sale classification were met, the assets and liabilities related to these operations were included as assets held-for-sale and liabilities associated with assets held-for-sale in the Condensed Consolidated Balance Sheets as of June 30, 2018. As the sale of the TIME and Fortune brands closed during the second quarter of fiscal 2019, only the assets and liabilities of Sports Illustrated and affiliated brands, Money, and Viant were included in assets held-for-sale and liabilities associated with assets held-for-sale as of March 31, 2019. The assets and liabilities that are deemed held-for-sale are classified as current based on the anticipated disposal date. The revenue and expenses of those brands and Viant, as well as the revenues and expenses of the Golf brand and Time Inc. (UK) Ltd (TIUK), the sales of which closed in the third quarter of fiscal 2018, were included in loss from discontinued operations, net of income taxes on the Condensed Consolidated Statements of Earnings (Loss) for the periods prior to their sales. All discontinued operations relate to the national media segment.

The following table presents the major components which are included in assets held-for-sale and liabilities associated with assets held-for-sale.

(in millions)
March 31, 2019
June 30, 2018
Current assets
 
 
Cash and cash equivalents
$
5.8

$
2.3

Accounts receivable, net
70.7

94.6

Inventories
0.1

1.1

Other current assets
41.5

22.1

Total current assets
118.1

120.1

Net property, plant, and equipment
14.2

14.1

Other assets
25.5

1.0

Intangible assets, net
44.9

113.1

Goodwill
159.6

477.5

Total assets held-for-sale
$
362.3

$
725.8

 
 
 
Current liabilities
 
 
Accounts payable
$
42.7

$
45.2

Accrued expenses and other liabilities
13.1

15.1

Current portion of unearned revenues
83.2

122.1

Total current liabilities
139.0

182.4

Unearned revenues
47.5

28.0

Other noncurrent liabilities
0.6

0.7

Total liabilities associated with assets held-for-sale
$
187.1

$
211.1


13


Amounts applicable to discontinued operations in the Condensed Consolidated Statements of Earnings (Loss) are as follows:

 
Three Months
 
Nine Months
Periods ended March 31,
2019
 
2018
 
2019
 
2018
(In millions except per share data)
 
 
 
 
 
 
 
Revenues
$
76.3

 
$
135.1

 
$
344.0

 
$
135.1

Costs and expenses
(81.0
)
 
(134.6
)
 
(320.5
)
 
(134.6
)
Interest expense
(2.9
)
 
(5.2
)
 
(19.0
)
 
(5.2
)
Gain (loss) on disposal
0.4

 
(11.9
)
 
0.4

 
(11.9
)
Earnings (loss) before income taxes
(7.2
)
 
(16.6
)
 
4.9

 
(16.6
)
Income tax benefit (expense)
2.8

 
1.9

 
(76.7
)
 
1.9

Loss from discontinued operations, net of income taxes
$
(4.4
)
 
$
(14.7
)
 
$
(71.8
)
 
$
(14.7
)
Loss per share from discontinued operations
 
 
 
 
 
 
 
Basic
$
(0.10
)
 
$
(0.33
)
 
$
(1.59
)
 
$
(0.32
)
Diluted
(0.10
)
 
(0.33
)
 
(1.58
)
 
(0.32
)

The Company does not allocate interest to discontinued operations unless the interest is directly attributable to the discontinued operations or is interest on debt that is required to be repaid as a result of the disposal transaction. Interest expense included in discontinued operations reflects an estimate of interest expense and extinguishment loss related to the debt that was repaid with the proceeds from the sales of the TIME and Fortune brands and interest expense on debt that will be repaid with the proceeds from the sales of the Sports Illustrated and affiliated brands and the investment in Viant.

The discontinued operations did not have depreciation, amortization, or significant non-cash investing items for the nine months ended March 31, 2019. Share-based compensation expense related to discontinued operations of $2.0 million and $2.3 million is included in the calculation of net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2019 and 2018, respectively.

Dispositions

On October 31, 2018, Meredith closed on the sale of the TIME brand to an unrelated third party for $190.0 million in cash. On December 21, 2018, Meredith closed on the sale of the Fortune brand to an unrelated third party for $150.0 million in cash. There was a gain of $0.4 million recognized on the sales. Meredith continues to provide accounting, finance, human resources, information technology, and other similar support services for a short period of time under Transition Services Agreements (TSA) with each buyer. In addition, Meredith continues to provide consumer marketing, subscription fulfillment, paper purchasing, printing, and other services under Outsourcing Agreements (OA) with each buyer. The services performed under the OAs have varying terms ranging from 1 to 5 years. Income of $1.8 million and $2.8 million, for the three and nine months ended March 31, 2019, respectively, earned from performing services under the OAs, is recorded in other revenue in the Condensed Consolidated Statements of Earnings (Loss) while income of $13.5 million and $16.0 million, for the three and nine months ended March 31, 2019, respectively, earned from performing services under the TSAs is recorded as a reduction of selling, general, and administrative expenses in the Condensed Consolidated Statements of Earnings (Loss).

On July 1, 2017, Meredith's national media segment sold a 70 percent interest in Charleston Tennis LLC, which operates the Family Circle Tennis Center, to an unrelated third party. In return, Meredith received $0.6 million in cash and a note receivable for $8.5 million. The note receivable was due in annual installments over a period of 8 years. At June 30, 2018, there was $3.2 million in unamortized discount and an allowance of $3.0 million recorded against the note. This transaction generated a gain of $3.3 million, which was recorded in acquisition, disposition, and restructuring related activities in the Condensed Consolidated Statements of Earnings (Loss). Of this gain, $1.0

14


million related to the remeasurement of the retained investment. As Meredith retained a 30 percent interest, had a seat on the board, and had approval rights over certain limited matters, Meredith accounted for this investment under the equity method of accounting.

In September 2018, Meredith sold its remaining 30 percent interest in Charleston Tennis LLC to an unrelated third party. In return, Meredith received cash of $13.3 million, of which $5.1 million was for the Company's remaining 30 percent interest and $8.2 million was repayment of the principal and interest accrued on the note receivable recorded upon the Company's sale of a 70 percent interest in July 2017. The Company recognized a gain on the sale of $10.4 million, of which $4.1 million represented a gain on the Company's 30 percent interest and is recorded in non-operating income, net in the Condensed Consolidated Statements of Earnings (Loss), while the remainder is recorded in acquisition, disposition, and restructuring related activities in the Condensed Consolidated Statements of Earnings (Loss), as such represents recovery of a previously impaired note receivable.


5. Intangible Assets and Goodwill

Intangible assets consisted of the following:
 
March 31, 2019
 
 
June 30, 2018
(In millions)
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
 
 
Gross
Amount
 
Accumulated
Amortization
 
Net
Amount
Intangible assets
   subject to amortization
 
 
 
 
 
 
 
 
 
 
 
 
National media
 
 
 
 
 
 
 
 
 
 
 
 
Advertiser relationships
$
213.4

 
$
(84.3
)
 
$
129.1

 
 
$
212.3

 
$
(41.1
)
 
$
171.2

Publisher relationships
125.0

 
(20.9
)
 
104.1

 
 
125.0

 
(7.4
)
 
117.6

Partner relationships
95.0

 
(18.6
)
 
76.4

 
 
95.0

 
(6.6
)
 
88.4

Customer relationships
70.7

 
(38.2
)
 
32.5

 
 
67.5

 
(14.0
)
 
53.5

Other
22.8

 
(14.2
)
 
8.6

 
 
22.0

 
(11.9
)
 
10.1

Local media
 
 
 
 
 
 
 
 
 
 
 
 
Network affiliation agreements
229.3

 
(153.5
)
 
75.8

 
 
229.3

 
(148.6
)
 
80.7

Advertiser relationships
12.5

 
(4.8
)
 
7.7

 
 
25.0

 
(3.5
)
 
21.5

Retransmission agreements
27.9

 
(18.1
)
 
9.8

 
 
27.9

 
(14.9
)
 
13.0

Other
1.7

 
(1.1
)
 
0.6

 
 
1.7

 
(0.8
)
 
0.9

Total
$
798.3

 
$
(353.7
)
 
444.6

 
 
$
805.7

 
$
(248.8
)
 
556.9

Intangible assets not
   subject to amortization
 
 
 
 
 
 
 
 
 
 
 
 
National media
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks
 
 
 
 
765.6

 
 
 
 
 
 
765.3

Internet domain names
 
 
 
 
7.8

 
 
 
 
 
 
7.8

Local media
 
 
 
 
 
 
 
 
 
 
 
 
FCC licenses
 
 
 
 
675.2

 
 
 
 
 
 
675.2

Total
 
 
 
 
1,448.6

 
 
 
 
 
 
1,448.3

Intangible assets, net
 
 
 
 
$
1,893.2

 
 
 
 
 
 
$
2,005.2


Amortization expense was $116.3 million and $32.9 million for the nine months ended March 31, 2019, and 2018, respectively. Annual amortization expense for intangible assets is expected to be as follows: $155.1 million in fiscal 2019, $140.9 million in fiscal 2020, $87.4 million in fiscal 2021, $41.6 million in fiscal 2022, and $39.6 million in fiscal 2023.


15


Changes in the carrying amount of goodwill were as follows:

Nine months ended March 31,
2019
 
 
2018
(In millions)
National
Media
 
Local
Media
 
Total
 
 
National
Media
 
Local
Media
 
Total
Balance at beginning of period
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
1,800.0

 
$
115.8

 
$
1,915.8

 
 
$
943.8

 
$
80.6

 
$
1,024.4

Accumulated impairment losses

 

 

 
 
(116.9
)
 

 
(116.9
)
Total goodwill
1,800.0

 
115.8

 
1,915.8

 
 
826.9

 
80.6

 
907.5

Activity during the period
 
 
 
 
 
 
 
 
 
 
 
 
Transfer to assets held-for-sale

 

 

 
 
(54.9
)
 

 
(54.9
)
Acquisitions
10.6

 
0.8

 
11.4

 
 
1,045.4

 

 
1,045.4

Acquisition adjustments
32.0

 

 
32.0

 
 
0.1

 

 
0.1

Balance at end of period
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
1,842.6

 
116.6

 
1,959.2

 
 
1,934.4

 
80.6

 
2,015.0

Accumulated impairment losses

 

 

 
 
(116.9
)
 

 
(116.9
)
Total goodwill
$
1,842.6

 
$
116.6

 
$
1,959.2

 
 
$
1,817.5

 
$
80.6

 
$
1,898.1



6. Restructuring Accrual

As part of the Company's plan to realize cost synergies from its acquisition of Time, in the third quarter of fiscal 2018, management committed to a performance improvement plan to reduce headcount by approximately 1,800 employees, primarily in the national media group and unallocated corporate departments. In connection with this plan, in the third quarter of fiscal 2018, the Company recorded pre-tax restructuring charges of $94.2 million for severance and related benefit costs related to the involuntary termination of employees. These costs and write-downs are recorded in acquisition, disposition, and restructuring related activities in the Condensed Consolidated Statements of Earnings (Loss). While the headcount reductions were substantially completed by January 2019, the severance and related benefit costs will continue to be paid out during calendar 2019.

In addition to the Time acquisition-related plan under which restructuring costs continue to be incurred in fiscal 2019, additional performance improvement plans were made and executed upon in the first quarter of fiscal 2019 related to the strategic decisions to merge Cooking Light magazine with EatingWell, transition Coastal Living from a subscription magazine to a special interest publication, to consolidate much of the local media's digital advertising functions with MNI Targeted Media, and to outsource newsstand sales and marketing operations. During the second quarter of fiscal 2019, the Company substantially completed the closure of Time Customer Service (TCS) and the consolidation of New York office space. The fiscal 2019 performance improvement plans affected approximately 250 people, approximately 175 in the national media segment, approximately 25 in the local media segment, and the remainder in unallocated corporate. The majority of severance and related benefit costs related to these actions are expected to be paid out during fiscal 2019. In connection with these plans, in the third quarter and first nine months of fiscal 2019, the Company recorded pre-tax restructuring charges of $9.2 million and $44.5 million, respectively, for severance and related benefit costs related to the involuntary termination of employees and $6.8 million and $24.5 million, respectively, in other accruals related primarily to the closure of TCS and the consolidation of office space. These costs are recorded in acquisition, disposition, and restructuring related activities in the Condensed Consolidated Statements of Earnings (Loss).


16


Details of the severance and related benefit costs by segment for these performance improvement plans are as follows:

 
Amount Accrued in the Period
Total Amount Expected to be Incurred
 
Three Months
Nine Months
Periods ended March 31,
2019
2018
2019
2018
(in millions)
 
 
 
 
 
 
National media
$
4.7

$
36.3

$
28.0

$
36.3

 
$
30.0

Local media

0.8

1.7

0.8

 
1.7

Unallocated Corporate
4.5

57.1

14.8

57.1

 
14.8

 
$
9.2

$
94.2

$
44.5

$
94.2

 
$
46.5


In addition to the restructuring charges recorded in the third quarter of fiscal 2018 due to the Time acquisition, during the second quarter of fiscal 2018, management committed to a performance improvement plan including the strategic decision to no longer publish Fit Pregnancy and Baby magazine as a standalone title, rather including it as a feature within Parents magazine and other restructurings. These actions resulted in selected workforce reductions primarily in the national media group. In connection with this plan, the Company recorded, in the second quarter of fiscal 2018, pre-tax restructuring charges totaling $3.1 million including $3.0 million for severance and related benefit costs related to the involuntary termination of employees and other write-downs of $0.1 million. The majority of severance costs were paid out by December 31, 2018. The plan affected approximately 90 employees. These costs are recorded in acquisition, disposition, and restructuring related activities in the Condensed Consolidated Statements of Earnings (Loss).

Details of changes in the Company's restructuring accrual are as follows:

 
Employee Terminations
Other Exit Costs
Total
 
Employee Terminations
Other Exit Costs
Total
Nine months ended March 31,
 
2019
 
2019
 
2019
 
 
2018
 
2018
 
2018
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
101.3

 
$
6.3

 
$
107.6

 
 
$
8.7

 
$

 
$
8.7

Accrual on Time's opening balance sheet
 

 

 

 
 
38.5

 
6.6

 
45.1

Accruals
 
44.5

 
24.5

 
69.0

 
 
97.2

 
0.3

 
97.5

Cash payments
 
(84.6
)
 
(11.9
)
 
(96.5
)
 
 
(18.4
)
 
(0.5
)
 
(18.9
)
Reversal of excess accrual
 
(7.2
)
 
(1.6
)
 
(8.8
)
 
 
(0.3
)
 

 
(0.3
)
Balance at end of period
 
$
54.0

 
$
17.3

 
$
71.3

 
 
$
125.7

 
$
6.4

 
$
132.1


As of March 31, 2019, of the $71.3 million liability, $58.7 million was classified as current liabilities on the Condensed Consolidated Balance Sheet, with the remaining $12.6 million classified as noncurrent liabilities. Amounts classified as noncurrent liabilities are expected to be paid through 2026 and relate primarily to lease payments for space that has been vacated.



17


7. Long-term Debt

Long-term debt consisted of the following:

 
March 31, 2019
June 30, 2018
(In millions)
Principal Balance
Unamortized Discount and Debt Issuance Costs
Carrying
Value
Principal Balance
Unamortized Discount and Debt Issuance Costs
Carrying
Value
Variable-rate credit facility
 
 
 
 
 
 
Senior credit facility term loan, due 1/31/2025
$
1,227.5

$
(18.8
)
$
1,208.7

$
1,795.5

$
(33.4
)
$
1,762.1

Revolving credit facility of $350 million, due 1/31/2023






Senior Unsecured Notes
 
 
 
 
 
 
6.875% senior notes, due 2/1/2026
1,272.9

(22.2
)
1,250.7

1,400.0

(26.5
)
1,373.5

Total long-term debt
2,500.4

(41.0
)
2,459.4

3,195.5

(59.9
)
3,135.6

Current portion of long-term debt



(18.0
)
0.3

(17.7
)
Long-term debt
$
2,500.4

$
(41.0
)
$
2,459.4

$
3,177.5

$
(59.6
)
$
3,117.9


The variable-rate senior credit facility term loan (Term Loan B) matures in 2025 and was originally scheduled to amortize at 1.0 percent per annum in equal quarterly installments until the final maturity date, at which time the remaining principal and interest are due and payable. However, as $200.0 million was paid on the Term Loan B in the first quarter of fiscal 2019, there are no future amortization requirements under the credit agreement.

Additional payments totaling $368.0 million were made on the Term Loan B in the second and third quarters of fiscal 2019. In addition to the Term Loan B repayments that occurred in the first nine months of fiscal 2019, the Company also repurchased $127.1 million of its senior unsecured notes maturing in 2026 (2026 Senior Notes). These payments were all made in advance of scheduled maturities and thus were considered extinguishments of the debt. Therefore, as a result of these prepayments, extinguishment losses of $0.8 million and $13.8 million were recognized in the third quarter and first nine months of fiscal 2019, respectively. The extinguishment loss for the nine-month period included a premium paid on the repurchase of the 2026 Senior Notes of $1.8 million.

The original interest rate under the Term Loan B was based on the London Interbank Offered Rate (LIBOR) plus a spread of 3.0 percent. The Company repriced the Term Loan B effective October 26, 2018. The new interest rate under the Term Loan B is based on LIBOR plus a spread of 2.75 percent as of the repricing date until maturity or when the Company's leverage ratio drops below 2.25 to 1, at which time the spread will decrease to 2.5 percent.

The accounting for the repricing of the Term Loan B was evaluated on a creditor-by-creditor basis to determine whether the transaction should be accounted for as a modification or extinguishment. Certain creditors chose not to participate in the repricing and ceased being creditors of the Company. As a result of these extinguishments, the Company recorded a debt extinguishment loss of $2.1 million in the second quarter of fiscal 2019 to write off the pro-rata amount of unamortized debt discount and deferred issuance costs related to these creditors. For the remainder of the creditors, this transaction was accounted for as a modification because on a creditor-by-creditor basis, the difference between the present value of the cash flows to those creditors before and after the repricing was less than 10 percent.

Of the total debt extinguishment loss of $15.9 million for the nine months ended March 31, 2019, $9.3 mi