Revenues
Revenues increased 9 percent in fiscal 2003 after declining 5 percent in the prior fiscal year. Exclusive of the impact of the American Baby Group acquisition and adjusted for same-station broadcasting revenues, fiscal 2003 revenues increased 8 percent. Same-station comparisons include revenues of KPTV-Portland in all periods and exclude revenues of the two Florida stations traded for KPTV in June 2002. The increase in comparable revenues reflected higher advertising revenues, including $20.9 million of political revenues at the broadcasting stations (primarily in the first half of fiscal 2003), and increased book sales. These revenue increases were partially offset by slightly lower revenues from magazine circulation and integrated marketing operations.

The decline in fiscal 2002 revenues from the prior year largely reflected two factors: the absence of revenues from operations that were discontinued late in fiscal 2001 and soft economic conditions. On a comparable basis (excluding discontinued publishing operations) revenues declined 3 percent. The decline primarily reflected lower magazine and broadcasting advertising revenues. Advertising demand in both businesses had been weak in the months leading into fiscal 2002, and the situation was exacerbated by the terrorist attacks of September 2001. In addition, net political advertising revenues at the broadcasting stations declined $12.6 million due to the biennial nature of election campaigns. Advertising demand slowly rebounded in the second half of the fiscal year. Fourth quarter fiscal 2002 advertising revenues grew 4 percent following comparative declines in the first three quarters. Revenues from Meredith's integrated marketing operations also declined in fiscal 2002. These declines were partially offset by higher circulation revenues.

Operating costs
Operating costs and expenses increased 4 percent in fiscal 2003 following a 5 percent decline in fiscal 2002. Fiscal 2001 operating costs and expenses included $25.3 million in nonrecurring items (see "Nonrecurring items"). When those items are excluded from the comparisons, fiscal 2002 costs were down 2 percent from the prior year.

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Fiscal 2003 production, distribution, and editorial costs increased 7 percent primarily due to the acquisition of the American Baby Group in December 2002. Excluding American Baby Group costs, the Company's production, distribution, and editorial costs increased 4 percent, reflecting higher volumes in publishing and higher postal rates. Higher volumes resulted from an increase in the number of advertising pages and books sold. Selling, general, and administrative expenses increased 6 percent in fiscal 2003. The increase was 3 percent, excluding American Baby Group costs, and primarily reflected higher performance-based incentive accruals. Depreciation and amortization expenses declined 41 percent in fiscal 2003 because of the significant amortization expense eliminated by the adoption of SFAS No. 142 (see "New accounting standards"). Excluding the impact of the new accounting standard, depreciation and amortization expenses increased 12 percent due to the amortization of intangibles resulting from the American Baby Group acquisition and higher depreciation expense primarily from investments in digital technology equipment at the broadcasting stations.

Fiscal 2002 production, distribution, and editorial costs decreased 6 percent, reflecting the absence of costs for discontinued titles included in the prior year, volume-related declines in manufacturing and paper costs, and lower paper prices. Partially offsetting these favorable variances were higher postal rates in publishing and higher amortization of broadcasting rights. Selling, general, and administrative expenses increased 1 percent in fiscal 2002 due to higher subscription acquisition costs, increased employee benefit costs, and higher unallocated corporate expenses. These expense increases were partially offset by lower costs attributable to the absence of discontinued titles. Depreciation and amortization expenses increased 4 percent in fiscal 2002.

The Company's workforce reduction program (part of the nonrecurring charge recorded in fiscal 2001) was expected to result in the reduction of certain costs in fiscal 2002. The anticipated savings were achieved but, as expected, were largely offset by other cost increases, primarily in employee benefits and postage. Companywide compensation costs, excluding benefits, decreased 2 percent in fiscal 2002. The average number of employees declined 6 percent from fiscal 2001.

Income from operations
Income from operations increased 51 percent in fiscal 2003, reflecting growth in revenues, the decline in amortization expense resulting from the adoption of SFAS No. 142, and improved operating margins. In fiscal 2002 income from operations declined 7 percent. Income from operations in fiscal 2001 included $25.3 million in nonrecurring charges. Excluding those charges, income from operations declined 22 percent in fiscal 2002. Fiscal 2002 results reflected the impact of weak advertising demand, especially following the September 2001 attacks.

Nonoperating (expense) income
Nonoperating expense totaled $1.6 million in fiscal 2003 and included a loss on the sale of a subsidiary ($2.2 million) and the write-off of an investment in a start-up technology company ($1.6 million). These charges were partially offset by a gain related to final post closing adjustments on the June 2002 exchange of two Florida television stations for KPTV-Portland ($1.3 million) and proceeds from life insurance policies ($0.9 million).

Fiscal 2002 nonoperating income totaled $63.8 million, consisting of a noncash gain from the disposition of two television stations ($61.8 million) and proceeds from the demutualization of an insurance company with which Meredith holds policies ($2.0 million).

Fiscal 2001 nonoperating income was $21.5 million and represented a gain from the sale of Golf for Women magazine.

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Interest
Net interest expense was $27.2 million in fiscal 2003 compared with $32.6 million in fiscal 2002 and $31.9 million in fiscal 2001. Average long-term debt outstanding declined to $390 million in fiscal 2003 from $430 million in fiscal 2002 and $500 million in fiscal 2001. The favorable effect of declining debt outstanding was partially offset by higher interest rates. The Company's approximate weighted average interest rate was 7.0 percent in fiscal 2003, 6.8 percent in fiscal 2002, and 6.5 percent in 2001. The rate increases were a result of the April 2002 debt refinancing that converted $100 million in variable-rate debt to fixed-rate debt and the effect of interest rate swap contracts.

Fiscal 2002 interest expense also included a charge of $3.5 million due to the discontinuation of hedge accounting for a portion of Meredith's interest rate swap contracts. As a result of the April 2002 debt refinancing, the notional amount of interest rate swap contracts exceeded the variable-rate debt outstanding. Management determined it was probable the level of variable-rate debt would not increase to allow utilization of these swaps over the term of the swap contracts; related amounts in accumulated other comprehensive loss were therefore reclassified to earnings.

Income taxes
The Company's effective tax rate was 38.7 percent in each of the past three fiscal years.

Earnings and earnings per share
Net earnings were $5.3 million ($0.10 per share) in fiscal 2003 and included a charge of $85.7 million ($1.68 per share) for the cumulative effect of a change in accounting principle related to the adoption of SFAS No. 142. Earnings before the cumulative effect of a change in accounting principle were $91.1 million ($1.78 per share) compared with net earnings of $91.4 million ($1.79 per share) in fiscal 2002 and $71.3 million ($1.39 per share) in fiscal 2001. The slight decrease in earnings before the cumulative effect of a change in accounting principle in fiscal 2003 reflected the absence of the prior year's nonoperating gain on the swap of two Florida television stations for KPTV-Portland. That absence was largely offset by improved results from the publishing and broadcasting businesses and a significant decline in amortization expense from the adoption of SFAS No. 142. The 28 percent net earnings increase reported in fiscal 2002 was largely attributable to the significant nonoperating gain recorded in that year; operating profits were down for both publishing and broadcasting.

Supplemental disclosure of consolidated net earnings and earnings per share
The following supplemental disclosure reconciles earnings and diluted earnings per share before the cumulative effect of a change in accounting principle to adjusted earnings and earnings per share by identifying the after-tax effect of the special items. This presentation is not in accordance with GAAP and should not be considered in isolation or as a substitute for the historical analysis previously provided. See "Use of non-GAAP Financial Measures" for a discussion of management's rationale for the use of such measures.

The following analysis of segment results includes the presentation of adjusted segment operating profit. Adjusted segment operating profit is defined as segment operating profit plus amortization expense that would not have been recorded had the amortization provisions of SFAS No. 142 been in effect. This presentation is not in accordance with GAAP and should not be considered in isolation or as a substitute for the GAAP operating profit analysis. See "Use of non-GAAP Financial Measures" for a discussion of management's rationale for the use of such measures.

The following table presents operating results for the Company's publishing segment, which includes magazine and book publishing, integrated marketing, interactive media, brand licensing, and other related operations.

Revenues
Publishing revenues increased 10 percent in fiscal 2003 due to strong growth in advertising and book revenues and the acquisition of the American Baby Group. Excluding the American Baby Group, revenues increased 6 percent. Publishing revenues declined 5 percent in fiscal 2002, reflecting weak advertising demand and the absence of revenues from discontinued operations. Adjusted for operations discontinued in fiscal 2001, revenues declined 2 percent in fiscal 2002. Discontinued operations included Golf for Women, Family Money, and Mature Outlook magazines and the California Tourism and American Park Network publications. To enhance comparability, the following discussion excludes revenue from the American Baby Group and the discontinued titles.

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Comparable publishing advertising revenues increased 11 percent in fiscal 2003 following a 3 percent decline in fiscal 2002. The September 11, 2001 terrorist attacks and the resulting economic slowdown negatively affected advertising demand in fiscal 2002. The impact of the attacks and the slow recovery that followed was evident in quarterly results. All first quarter fiscal 2002 issues were closed prior to September 11, and comparable advertising revenues were up 2 percent for that quarter. They were down 13 percent in the second quarter, down 6 percent in the third, and up 5 percent in the fourth quarter. Improvement continued in fiscal 2003 with the year-over-year growth increasing in each quarter compared to the prior quarter.

The fiscal 2002 decline in advertising demand was widespread, affecting most categories of advertising and most of the Company's titles. Management took steps to build market share during these difficult times, which contributed to the recovery in revenues in the second half of fiscal 2002 and in fiscal 2003. These steps included initiatives designed to capture a greater share of advertisers' budgets, specific market share incentives for sellers, and a trade industry promotional program. These efforts achieved notable market share gains. The combined advertising revenue market share of Better Homes and Gardens and Ladies' Home Journal in the women's service field was over 43 percent in fiscal 2003 and has increased in each of the last two fiscal years. Country Home and Traditional Home magazines also increased advertising revenue share with respect to competing titles in fiscal 2002 and fiscal 2003.

Comparable magazine circulation revenues decreased 2 percent in fiscal 2003 following a 5 percent increase in fiscal 2002. Fiscal 2003 subscription revenues were affected by a slight decline in average revenue per copy for several titles due to an increase in the term of direct mail offers. Fiscal 2003 newsstand revenues increased from the prior year despite industrywide weakness in the second half of the fiscal year. The industry downturn coincided with the U.S. involvement in the conflict in Iraq. The growth in fiscal 2002 circulation revenues came primarily from increased newsstand sales of many titles, including Better Homes and Gardens Special Interest Publications, Creative Collection titles, and Ladies' Home Journal magazine. Subscription revenues increased in fiscal 2002 due to higher sales of newer titles such as MORE magazine and higher average prices for several titles. The fiscal 2002 circulation revenue increase included a favorable adjustment to an accrual for retailer allowances resulting from the final settlement of a discontinued program. Excluding that adjustment, comparable circulation revenues increased 4 percent in fiscal 2002.

Other publishing revenues increased 7 percent in fiscal 2003 on a comparable basis. This growth followed a 9 percent decline in fiscal 2002. Fiscal 2003's growth was primarily the result of an increase in the volume of book sales. Book revenues increased 27 percent largely due to the fall 2002 release of the 12th edition of the Better Homes and Gardens New Cook Book and the spring 2003 release of a book based on The Learning Channel® cable network's popular Trading Spaces® decorating show. Fiscal 2002 revenues from book sales declined 2 percent in part because of weak consumer demand following the September 11 attacks. A more significant factor in the decline in other publishing revenues in fiscal 2002 was lower sales volume in integrated marketing. In fiscal 2002 and, to a lesser extent, fiscal 2003, new integrated marketing business was insufficient to offset programs reduced or eliminated by existing clients. Integrated marketing new business sales improved significantly in fiscal 2003, but, due to long lead times, revenues from most new programs will not be recorded until fiscal 2004.

Operating costs
Costs increased 9 percent in fiscal 2003 after declining 4 percent in fiscal 2002. Excluding costs of the newly acquired American Baby Group in fiscal 2003 and amortization expense no longer required under SFAS No. 142 in fiscal 2002, costs increased 4 percent in fiscal 2003. The increase in comparable costs reflected higher sales volume in advertising pages and books, higher postal rates, and higher payroll and employee benefit costs. Partially offsetting these increases were lower sales volume from integrated marketing, lower paper prices, and lower magazine subscription acquisition costs. The fiscal 2002 decline reflected the absence of costs for discontinued titles, management's cost control initiatives, lower paper prices, and a smaller investment in interactive media operations. Partially offsetting these declines were higher postal rates and higher costs for employee benefits.

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Paper, printing, and postage costs of the magazine and book operations account for approximately 40 percent of the publishing segment's operating costs. As a result of weaker market demand for paper and newly negotiated vendor relationships, the Company's average paper prices declined approximately 11 percent in fiscal 2002. Average paper prices remained steady early in fiscal 2003 and began to increase in the second half of the fiscal year. Because of the timing of the price changes, average paper prices were down approximately 8 percent in fiscal 2003. Paper prices are driven by overall market conditions and are difficult to predict, but management anticipates they will increase as paper demand grows during the next fiscal year.

Postal rates for periodicals rose 10 percent in June 2002 following increases of almost 3 percent in July 2001 and nearly 10 percent in January 2001. The Postmaster General has stated that no further rate increases will be requested until at least 2006. Meredith continues to work with others in the industry and through trade organizations to encourage the Postal Service to implement efficiencies and contain rates.

Operating profit and adjusted operating profit
Publishing operating profit increased 19 percent in fiscal 2003 following a 12 percent decline in fiscal 2002. The adoption of SFAS No. 142 effective July 1, 2002 eliminated much of the publishing segment's amortization expense for intangible assets and goodwill. Adjusted operating profit (stated as if the amortization provisions of SFAS No. 142 had been effective July 1, 2000) increased 17 percent in fiscal 2003. Major contributors were higher advertising revenues, increased book sales and operating profits, and lower paper prices. They were partially offset by higher postal rates and increased employee costs. The decline in fiscal 2002 adjusted operating profit was primarily a result of lower advertising revenues and lower integrated marketing sales. The revenue decline was partially offset by lower operating costs.

The following table presents operating results for the Company's broadcasting segment, which consists of network-affiliated television stations, including their interactive media operations.

Revenues
Broadcasting revenues increased 7 percent in fiscal 2003 following a 6 percent decline in fiscal 2002. On June 17, 2002, Meredith exchanged its Orlando and Ocala, FL television stations for KPTV in Portland, OR. The exchange negatively affected revenues in fiscal 2003, but did not have a material effect on operating profits because of cost savings associated with the duopoly in Portland. On a same-station basis, revenues increased 15 percent in fiscal 2003. Same-station comparisons include revenues of KPTV-Portland and exclude revenues of the two Florida stations in all periods.

Excluding political advertising, same-station broadcasting revenues increased 7 percent in fiscal 2003 after being down 1 percent in fiscal 2002. To build station revenues, management changes were implemented, programming procurement procedures were improved, newscasts were revamped, and sales practices were modified. These initiatives contributed to ratings increases and revenue growth that exceeded industry averages.

Fiscal 2002 revenues were affected not only by the absence of political revenues but also by an industrywide weakness in the demand for television advertising. Demand had begun to weaken in fiscal 2001, and the terrorist attacks had an immediate worsening effect. Meredith's September 2001 advertising revenues, which had been pacing even with the prior fiscal year's, ended the month down 20 percent. Part of the decline resulted from the uninterrupted news coverage the Company's stations provided for several days following September 11 and the postponement of the following weekend's sporting events. The balance was caused by the dramatic slowdown in advertising following the attacks. Broadcasting revenues were down an average of 13 percent in the first and second quarters of fiscal 2002, rebounded to flat in the third, and rose 4 percent in the fourth quarter.

Operating costs
Operating costs declined 11 percent in fiscal 2003 following a slight decline in fiscal 2002. The elimination of amortization expense for intangible assets and goodwill, effective with the adoption of SFAS No. 142 on July 1, 2002, was the primary reason for the decline in operating costs in fiscal 2003. When fiscal 2002 costs are adjusted to exclude such amortization, operating costs were down 1 percent in fiscal 2003. Also affecting the cost comparisons were charges for the write-down of broadcast rights to net realizable value of $2.4 million in fiscal 2003, $3.7 million in fiscal 2002, and $9.9 million in fiscal 2001. Excluding the broadcast rights write-downs, operating costs were down slightly in fiscal 2003 following a 3 percent increase in fiscal 2002. The cost increase in fiscal 2002 reflected higher amortization of broadcasting rights and increased employee compensation costs.

Operating profit and adjusted operating profit
Including the effect of no longer amortizing most intangible assets and goodwill, broadcasting operating profit increased 216 percent in fiscal 2003. If the amortization provisions of SFAS No. 142 had also been in effect in fiscal 2001 and 2002, adjusted operating profit would have increased 47 percent in fiscal 2003 following a 25 percent decline in fiscal 2002. Most of the fluctuation in adjusted operating profit is attributable to changes in advertising revenues.

Supplemental disclosure of broadcasting EBITDA
Meredith's broadcasting EBITDA is defined as broadcasting segment operating profit plus depreciation and amortization expense. EBITDA is not a GAAP financial measure and should not be considered in isolation or as a substitute for GAAP financial measures. See discussion of management's rationale for the use of EBITDA in "Use of non-GAAP Financial Measures." Broadcasting EBITDA was as follows:

The EBITDA margin, or EBITDA as a percentage of segment revenues, was 29.6 percent in fiscal 2003, 23.5 percent in fiscal 2002, and 27.6 percent in fiscal 2001. The fourth quarter of fiscal 2003 represented the fifth consecutive quarter of year-over-year improvement in this ratio.

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Unallocated Corporate Expenses
Unallocated corporate expenses are general corporate overhead expenses not attributable to the operating groups.

Unallocated corporate expenses increased 33 percent in fiscal 2003 following a 24 percent increase in fiscal 2002. The increase in fiscal 2003 reflected higher performance-based incentive accruals, higher employee benefit expenses and increased costs for professional services such as insurance and auditing fees. The fiscal 2002 increase came primarily from higher consulting and pension expenses as well as costs to terminate an outsourcing contract. The increase in consulting expenses stemmed from a review of vendor relationships and an analysis of opportunities for process improvements. The increase in pension expense resulted from lower than expected returns on plan assets. Pension expense calculations use numerous assumptions. If actual results differ from these assumptions, expense in future periods may increase or decrease. The outsourcing contract termination has resulted in lower costs going forward.

The following tables provide reconciliations among segment operating profit, adjusted segment operating profit, and broadcasting segment EBITDA (a measure of segment earnings before depreciation and amortization). Broadcasting EBITDA margin is defined as segment EBITDA divided by segment revenues.

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Meredith's primary source of funds for operations is cash generated by operating activities. Debt financing is typically used for acquisitions. The Company's core businesses-magazine and book publishing and television broadcasting-have been strong cash generators. Despite the introduction of many new technologies such as the Internet and cable and satellite television, management believes these businesses will continue to have strong market appeal for the foreseeable future. As with any business, operating results and cash flows are subject to changes in demand for the Company's products. Changes in the level of demand for magazine and television advertising and/or other products can have a significant effect on cash flows.

Historically, Meredith has been able to absorb normal business downturns without significant increases in debt, and management believes the Company will continue to do so. Management therefore expects that cash on hand, internally generated cash flow, and borrowings from credit agreements will provide funds for any additional operating and recurring cash needs (e.g., working capital, capital expenditures, and cash dividends) into the foreseeable future.

Cash and cash equivalents decreased $5.9 million in fiscal 2003; they decreased $8.0 million in fiscal 2002. Major factors affecting the change in cash usage included a 26 percent increase in cash provided by operations, the acquisition of the American Baby Group, and the effect of that acquisition on the change in net debt outstanding during the period.

Fiscal 2003 cash provided by operating activities grew to $172.4 million from $136.8 million in the prior fiscal year, reflecting an increase in earnings excluding the fiscal 2003 noncash charge for a change in accounting principle and the fiscal 2002 noncash gain from the television station swap for KPTV. Also contributing to the increase in cash provided by operating activities were favorable changes in deferred income taxes and unearned subscription revenues partially offset by an increase in accounts receivable.

The December 2002 acquisition of the American Baby Group for $117.6 million was financed with $100.0 million in debt from existing credit facilities and cash on hand. Debt outstanding decreased $10.0 million in fiscal 2003 in spite of the debt incurred for the acquisition. The Company reported an $85.0 million net decrease in debt outstanding during the previous fiscal year.

Tax deductible contributions to qualified pension plans totaled $12.0 million in fiscal 2003 compared with $5.7 million in fiscal 2002. Though not required to do so, the Company expects to contribute approximately $9.0 million to these plans in fiscal 2004.

Long-term debt
At June 30, 2003, long-term debt outstanding totaled $375.0 million. It consisted of $75.0 million under an asset-backed commercial paper facility and $300.0 million in fixed-rate unsecured senior notes.

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In April 2002, Meredith entered into a revolving agreement to sell all of its rights, title, and interest in the majority of its accounts receivable related to advertising, book, and miscellaneous revenues to Meredith Funding Corporation, a special-purpose entity established to purchase accounts receivable from Meredith. At June 30, 2003, $133.1 million of accounts receivable, net of reserves, were outstanding under the agreement. Meredith Funding Corporation in turn sells receivable interests to an asset-backed commercial paper conduit administered by Bank One, N.A. In consideration of the sale, Meredith receives cash and a subordinated note that bears interest at the prime rate (4.00 percent at June 30, 2003) from Meredith Funding Corporation.

The revolving agreement is structured as a true sale under which the creditors of Meredith Funding Corporation will be entitled to be satisfied out of the assets of Meredith Funding Corporation prior to any value being returned to Meredith or its creditors. The accounts of Meredith Funding Corporation are fully consolidated in Meredith's consolidated financial statements. The asset-backed commercial paper facility has a capacity of up to $100 million and renews annually in April. Meredith has the ability and the intent to renew the facility each year. Hence, the principal is reflected as due on April 9, 2007, the facility termination date. The interest rate changes monthly and is based on a fixed spread over the average commercial paper cost to the lender. The interest rate was 1.54 percent in June 2003.

The fixed-rate unsecured senior notes are in amounts of $50 million and $75 million and are due from March 1, 2005 to April 1, 2008. Interest rates range from 6.39 percent to 6.65 percent.

Meredith has a revolving credit facility of $150 million that expires on April 5, 2007. At June 30, 2003, borrowings made under the revolving credit facility were subject to an interest rate of 1.85%. This rate is variable based on LIBOR and the Company's leverage ratio. No amount was borrowed under this facility at June 30, 2003.

All of the Company's debt agreements include financial covenants, and failure to comply with any such covenants could result in the debt becoming payable on demand. A summary of the Company's significant financial covenants and their status at June 30, 2003 follows:

The Company was in compliance with these and all other debt covenants at June 30, 2003 and expects to remain so in the future.

Meredith uses interest rate swap contracts to manage interest cost and risk associated with possible increases in variable interest rates. These contracts effectively fix the base interest rate on a substantial portion of the variable-rate credit facilities, but the applicable margins vary based on the Company's debt-to-EBITDA ratio. The swap contracts expire in June 2004. The average notional amount of indebtedness outstanding under the contracts was $166 million in fiscal 2003 and will be $132 million in fiscal 2004. The Company is exposed to credit-related losses in the event of nonperformance by counterparties to the contracts. Given the strong creditworthiness of the counterparties, management does not expect any of them to fail to meet their obligations. The weighted average interest rate on debt outstanding at June 30, 2003, including the effect of hedged interest rate swap contracts, was approximately 6.5 percent.

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As a result of the debt refinancing completed in April 2002 and subsequent debt repayments, Meredith had swap contracts that no longer met the qualifications for hedge accounting. These swap contracts were deemed to be ineffective and dedesignated as hedge contracts. Before the dedesignations, expense related to fair market value adjustments on the swap contracts had been recorded in other comprehensive income (loss). Upon the dedesignations, the loss was required to be amortized into earnings over the life of the swap contracts. Interest expense of $1.3 million was recorded in fiscal 2002 for such amortization and changes in fair market value. Subsequent to the dedesignations, management determined that it was probable the level of variable-rate debt would not increase to allow use of the dedesignated swaps over the term of the swap contracts. Therefore, $3.5 million remaining in accumulated other comprehensive loss related to the dedesignated swap contracts was reclassified as interest expense in the fourth quarter of fiscal 2002. Changes in the fair market value of the dedesignated swap contracts resulted in a $0.9 million reduction of interest expense in fiscal 2003.

Contractual obligations
The following table presents the long-term debt maturities, required payments under contractual agreements for broadcast rights and other purchase obligations, and future minimum lease payments under noncancelable leases as of June 30, 2003:

Funds for meeting contractual cash obligations are expected to come from cash generated by future operating activities. Debt agreements may be renewed or refinanced if the Company determines it is advantageous to do so. Contractual obligations for broadcast rights shown in the preceding table include $55.8 million for broadcast rights that are not currently available for airing and are therefore not included in the Consolidated Balance Sheet at June 30, 2003. Meredith also has commitments in the form of standby letters of credit and other guarantees totaling $1.6 million. Approximately half of the commitments expire within one year; the rest of them are long-term.

Share repurchase program
Meredith has maintained a program of Company share repurchases for more than ten years. In fiscal 2003, the Company spent $31.5 million to repurchase an aggregate of 761,000 shares of Meredith Corporation common stock at market prices. The Company spent $30.2 million to repurchase an aggregate of 877,000 shares in fiscal 2002. Meredith has spent more than $100 million on Company share repurchases over the past three fiscal years and, subject to market conditions, expects to repurchase additional shares from time to time in the foreseeable future. As of July 31, 2003, approximately 820,000 shares were authorized for repurchase. The status of the repurchase program is reviewed at each quarterly Board of Directors meeting.

Dividends
Meredith has paid quarterly dividends continuously since 1947. In February 2003, the Board of Directors increased the quarterly dividend 6 percent, or one-half cent per share, to 9.5 cents per share effective with the dividend payable on March 14, 2003. Given the current number of shares outstanding, this increase will result in additional dividend payments of approximately $1 million annually. Dividends paid in fiscal 2003 were $18.4 million, or 37 cents per share, compared with $17.3 million, or 35 cents per share, in fiscal 2002.

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Capital expenditures
Expenditures for property, plant, and equipment were $26.6 million in fiscal 2003 compared with $23.4 million in fiscal 2002. The increase reflected higher spending for equipment and remodeling associated with the consolidation of the Portland duopoly and for the initial transition to digital technology at five television stations. The Company has no material commitments for capital expenditures. Funds for capital expenditures are expected to come from operating activities or, if necessary, borrowings under credit agreements.

Outlook for fiscal 2004
First quarter publishing advertising revenues are running up in the mid-teens on a percentage basis. Excluding the American Baby Group, they are running up in the mid-single digits. Broadcasting advertising bookings are currently pacing up in the mid-single digits on a percentage basis from the prior first quarter total. Broadcasting pacing data are as of a moment in time and subject to change.

Fiscal 2003 results included $20.9 million in net political advertising revenues, of which $6.3 million were recorded in the first quarter and $14.1 million were recorded in the second quarter. This will create challenging comparisons, especially in the second quarter of fiscal 2004.

For the first quarter and the twelve months of fiscal 2004, management believes low double-digit earnings per share growth is realistic. In the first quarter of fiscal 2003, the Company reported earnings per share of $0.32 before the cumulative effect of a change in accounting principle related to SFAS No. 142.