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Martha Stewart Living Omnimedia Reports Second Quarter 2012 Results

July 30, 2012

NEW YORK, July 30, 2012 Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the second quarter ended June 30, 2012. The Company reported revenue for the second quarter of $47.9 million.

Lisa Gersh, President and Chief Executive Officer, said, “Led by solid performance in merchandising and broadcasting, MSLO’s results were in line with our expectations for the quarter. We anticipated much of the weakness in publishing, and it’s important to note that while our publishing strategy is gaining traction, it will take additional time to yield the targeted results. This will slow our planned return to profitability, but we continue to anticipate improving performance for the Company in 2012.”

Second Quarter 2012 Summary

Revenues were $47.9 million in the second quarter of 2012, compared to $54.9 million in the second quarter of 2011, due to lower revenues in our publishing and broadcasting segments, partially offset by higher merchandising revenues.

Adjusted EBITDA loss for the second quarter of 2012 was $(0.3) million, compared to $(0.6) million in the prior-year period.

Operating loss for the second quarter of 2012 was $(2.9) million compared with $(2.5) million in the prior-year period.

Basic and diluted net loss per share was $(0.04) for the second quarter of 2012, compared to $(0.05) for the second quarter of 2011.

    Second Quarter 2012 Results by Segment

                          Three Months Ended, June 30
                           (unaudited, in thousands)

                                                    2012                 2011
                                                    ----                 ----
    REVENUES
         Publishing                              $28,806              $34,141
         Broadcasting                              4,589                7,801
         Merchandising                            14,489               12,918
                                                  ------               ------
         Total Revenues                          $47,884              $54,860
                                                 -------              -------

    ADJUSTED EBITDA
         Publishing                              $(4,610)             $(1,596)
         Broadcasting                              1,185                 (367)
         Merchandising                            10,343                8,519
         Corporate                                (7,194)              (7,147)
                                                  ------               ------
    Total Adjusted EBITDA                          $(276)               $(591)
                                                   -----                -----

    OPERATING (LOSS) / INCOME
         Publishing                              $(5,015)             $(1,915)
         Broadcasting                                536                 (482)
         Merchandising                            10,178                8,782
         Corporate                                (8,584)              (8,871)
                                                  ------               ------
    Total Operating Loss                         $(2,885)             $(2,486)
                                                 -------              -------

Publishing

Revenues in the second quarter of 2012 were $28.8 million, compared to $34.1 million in the prior year’s second quarter, due to lower print and digital advertising revenues. The decline was anticipated in part due to the timing of changes in the advertising sales staff.

Adjusted EBITDA loss was $(4.6) million in the second quarter of 2012, compared to $(1.6) million in the prior year’s quarter.

Operating loss was $(5.0) million for the second quarter of 2012, compared to $(1.9) million in the prior year’s quarter.

Recent Highlights

  • According to comScore Unified data, unique visitors across MSLO’s websites increased 17.3% in the quarter compared to the prior-year period.
  • Martha’s American Food, which was published in April, made The New York Times’ Bestseller List in the “Advice, How-to and Miscellaneous” category.
  • Martha Stewart Weddings for the iPad launched on May 21(st).
  • Martha Stewart CraftStudio App, MSLO’s first creativity app for iPad, launched in June, and went to #1 in the free Lifestyle App category; it was also an Editor’s Choice in Apple’s App Store and a top free App overall its first week.

Broadcasting

Revenues in the second quarter of 2012 were $4.6 million, compared to $7.8 million in the second quarter of 2011, as anticipated, due to decreased levels of new programming.

Adjusted EBITDA was $1.2 million for the second quarter of 2012, compared to an adjusted EBITDA loss of $(0.4) million in the prior year’s second quarter.

Operating income was $0.5 million for the second quarter of 2012, compared to an operating loss of $(0.5) million in the first quarter of 2011.

Recent Highlights

  • The Martha Stewart Show was nominated for a Daytime Emmy Award in the “Outstanding Lifestyle Program” category.
  • Martha completed shooting the first two seasons of “Martha Stewart’s Cooking School,” which is slated to debut on PBS in October 2012.

Merchandising

Revenues increased 12% to $14.5 million for the second quarter of 2012, as compared to $12.9 million in the prior year’s second quarter, primarily due to sales of the Martha Stewart Home Office line with Avery at Staples, design fees from J.C. Penney and strength in our Martha Stewart Pets line at PetSmart.

Adjusted EBITDA was $10.3 million for the second quarter of 2012, up from $8.5 million in the prior year’s first quarter.

Operating income was $10.2 million for the second quarter of 2012, up from $8.8 million in the first quarter of 2011.

Recent Highlights

  • MSLO strengthened its merchandising leadership team with the additions of Ann Bukawyn, EVP Global Licensing, and Michael Robinson, VP of e-Commerce.
  • The Martha Stewart Living craft furniture line at The Home Depot, developed for The Home Decorator’s Collection, is currently being featured in The Home Depot stores.
  • The Martha Stewart Collection at Macy’s had a solid quarter with strength in textiles.
  • Avery began shipping the Martha Stewart Home Office line of products overseas in advance of the line’s July launch at 137 Staples stores in the UK.
  • Martha Stewart Pets had a robust quarter at PetSmart with ongoing strength in apparel and continued expansion into new categories.
  • Emeril’s performance in the quarter was driven by sales of the chef’s All-Clad cookware line.

Corporate

Adjusted EBITDA was $(7.2) million in the second quarter of 2012 compared to $(7.1) million in the prior year’s quarter. Total Corporate expenses were $(8.6) million, compared to $(8.9) million in the prior year’s second quarter.

The Company will host a conference call with analysts and investors on July 30, 2012 at 8:30am EDT that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through August 13, 2012.

Use of Non-GAAP Financial Information

In addition to using net income to assess the organization’s overall financial health, Company management uses consolidated net income/(loss) before interest income or expense, taxes, depreciation and amortization, non-cash equity compensation expense, restructuring charges and other income/(expense) (“adjusted EBITDA”), a non-GAAP financial measure, to evaluate the performance of our businesses on a real-time basis. Adjusted EBITDA is considered an important indicator of operational strength, is a direct component of the Company’s annual compensation program, and is a significant factor in helping our management determine how to allocate resources and capital. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP. Management considers adjusted EBITDA to be a critical measure of operational health because it captures all of the revenue and ongoing operating expenses of our businesses without the influence of (i) interest charges, which result from our capital structure, not our ongoing business efforts, (ii) taxes, which relate to the overall organizational financial return, not that of any one business, (iii) the capital expenditure costs associated with depreciation and amortization, which are a function of historical decisions on infrastructure and capacity, (iv) the cost of non-cash equity compensation which, as a function of our stock price, can be highly variable, is not necessarily an indicator of current operating performance for any individual business unit, and is amortized over the various periods, (v) restructuring charges, which include charges such as employee severance and certain professional fees that do not necessarily reflect ongoing operating performance, and (vi) other income/(expense), which may include non-operational items.

Adjusted EBITDA provides a means to directly evaluate the ability of our business operations to generate returns on a real-time basis. We provide disclosure of adjusted EBITDA because we believe it is useful for investors to have means to assess our performance as we do. While adjusted EBITDA is a customized non-GAAP measure, it also provides a means to analyze value and compare our operating capabilities to those of companies with which we compete, many of which have different compensation plans, depreciation and amortization costs, capital structures and tax burdens. But please note that our non-GAAP results may differ from similar measures used by other companies, even if similar terms are used to identify such measures.

A limitation of adjusted EBITDA is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues for our overall organization. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures. Management also evaluates the cost of capitalized tangible and intangible assets by analyzing returns provided on the capital dollars deployed. A further limitation of adjusted EBITDA is that it does not include stock compensation expense related to our workforce. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income or other measures of financial performance reported in accordance with GAAP.

About Martha Stewart Living Omnimedia, Inc.

Martha Stewart Living Omnimedia, Inc. (MSLO) is a leading provider of original “how-to” information, inspiring and engaging consumers with unique lifestyle content and high-quality products. MSLO is organized into the following business segments: Publishing, Broadcasting, and Merchandising. MSLO is listed on the New York Stock Exchange under the ticker symbol MSO.

Forward-Looking Statements

We have included in this press release certain “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts but instead represent only our current beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. These statements include estimates of future financial performance, potential opportunities, expected product line expansions and additions, future acceptability of our content and our businesses, anticipated growth, the success of our alliance with J.C. Penney and benefits from aligning our sales and marketing team and the success of the new team, and other statements that can be identified by terminology such as “may,” “will,” “should,” “could,” “position,” “expects,” “intends,” “plans,” “thinks,” “believes,” “estimates,” “potential,” “seem,” “counting” or “continue” or the negative of these terms or other comparable terminology. The Company’s actual results may differ materially from those projected in these statements, and factors that could cause such differences include: adverse reactions to publicity relating to Martha Stewart or Emeril Lagasse by consumers, advertisers and business partners; the failure of national and/or local economies to improve or renewed deterioration of such economies; shifts in our business strategies; a loss of the services of Ms. Stewart or Mr. Lagasse; a loss of the services of other key personnel; a renewed softening of the domestic advertising market; changes in consumer reading, purchasing and/or television viewing patterns to which our offerings are unable to respond; unanticipated increases in paper, postage or printing costs; operational or financial problems at any of our contractual business partners; the receptivity of consumers to our new product introductions; the inability to add to our partnerships or capitalize on existing partnerships or their termination; legal actions taken against us; and changes in government regulations affecting the Company’s industries.

Certain of these and other factors are discussed in more detail in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission, especially under the heading “Risk Factors,” which may be accessed through the SEC’s World Wide Web site at http://www.sec.gov/. The Company is under no obligation to update any forward-looking statements after the date of this release.

                                         Martha Stewart Living Omnimedia, Inc.
                                         Consolidated Statements of Operations
                                              Three Months Ended June 30,
                             (unaudited, in thousands, except share and per share amounts)

                                                                                                 2012        2011
                                                                                                 ----        ----
    REVENUES
                                                Publishing                                    $28,806     $34,141
                                                Broadcasting                                    4,589       7,801
                                                Merchandising                                  14,489      12,918
                                                Total revenues                                 47,884      54,860
                                                                                               ------      ------

    OPERATING COSTS AND EXPENSES
                                                 Production,
                                                 distribution
                                                 and editorial                                 25,585      31,580
                                                 Selling and
                                                 promotion                                     12,543      13,029
                                                 General and
                                                 administrative                                10,846      11,813
                                                 Depreciation
                                                 and
                                                 amortization                                   1,018         924
                                                 Restructuring
                                                 charges                                          777           -
                                                 Total operating costs and
                                                 expenses                                      50,769      57,346
                                                                                               ------      ------

    OPERATING LOSS                                                                             (2,885)     (2,486)

    OTHER INCOME / (EXPENSE)
                                                 Interest
                                                 income /
                                                 (expense),
                                                 net                                              276         (14)
                                                 Loss on equity
                                                 securities                                         -         (14)
                                                 Gain on sale
                                                 of cost-
                                                 based
                                                 investment                                       400           -
                                                 Other-than-
                                                 temporary
                                                 loss on cost-
                                                 based
                                                 investment                                       (88)          -
                                                 Total other income /
                                                 (expense)                                        588         (28)
                                                                                               (2,297)     (2,514)
    LOSS BEFORE INCOME TAXES

                                                 Income tax
                                                 provision                                       (407)       (424)

    NET LOSS                                                                                  $(2,704)    $(2,938)
                                                                                              =======     =======

    LOSS PER SHARE - BASIC AND
     DILUTED
                                                Net loss                                       $(0.04)     $(0.05)
                                                                                              =======

    WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
           Basic and diluted                                                               67,224,593  54,765,846

                                         Martha Stewart Living Omnimedia, Inc.
                                         Consolidated Statements of Operations
                                              Six Months Ended June 30 ,
                             (unaudited, in thousands, except share and per share amounts)

                                                                                                 2012        2011
                                                                                                 ----        ----
    REVENUES
                                                Publishing                                    $59,636     $68,817
                                                Broadcasting                                    9,957      15,570
                                                Merchandising                                  28,122      23,147
                                                Total revenues                                 97,715     107,534
                                                                                               ------     -------

    OPERATING COSTS AND EXPENSES
                                                 Production,
                                                 distribution
                                                 and editorial                                 54,390      63,902
                                                 Selling and
                                                 promotion                                     24,926      27,321
                                                 General and
                                                 administrative                                22,664      23,654
                                                 Depreciation
                                                 and
                                                 amortization                                   2,025       1,920
                                                 Restructuring
                                                 charges                                          777           -
                                                 Total operating costs and
                                                 expenses                                     104,782     116,797
                                                                                              -------     -------

    OPERATING LOSS                                                                             (7,067)     (9,263)

    OTHER INCOME / (EXPENSE)
                                                 Interest
                                                 income /
                                                 (expense),
                                                 net                                              471        (126)
                                                 Income on
                                                 equity
                                                 securities                                         -         205
                                                 Gain on sales
                                                 of cost-
                                                 based
                                                 investments                                    1,165           -
                                                 Other-than-
                                                 temporary
                                                 loss on cost-
                                                 based
                                                 investment                                       (88)          -
                                                 Total other income                             1,548          79
                                                                                               (5,519)
    LOSS BEFORE INCOME TAXES                                                                               (9,184)

                                                 Income tax
                                                  provision                                      (798)       (831)

    NET LOSS                                                                                  $(6,317)   $(10,015)
                                                                                              =======    ========

    LOSS PER SHARE - BASIC AND DILUTED
                                                Net Loss                                       $(0.09)     $(0.18)
                                                                                              =======

    WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
           Basic and diluted                                                               67,161,415  54,740,849

                                             Martha Stewart Living Omnimedia, Inc.
                                                  Consolidated Balance Sheets
                                      (in thousands, except share and per share amounts)

                                      June 30,                                                        December 31,
                                                        2012                                                  2011
                                     (unaudited)
                                     ----------
    ASSETS
    CURRENT ASSETS
                         Cash and cash
                         equivalents                                                         $20,214                  $38,453
                         Short-term
                         investments                                                          35,317                   11,051
                         Accounts
                         receivable, net                                                      33,023                   48,237
                        Paper inventory                                                        4,214                    7,225
                         Deferred television
                         production costs                                                      1,946                        -
                         Other current
                         assets                                                                3,723                    4,858
                                                              Total current assets                          98,437                   109,824
                                                                                                            ------                   -------

    PROPERTY, PLANT AND EQUIPMENT, net                                                                      12,367                    13,396
    GOODWILL, net                                                                                           45,107                    45,107
    OTHER INTANGIBLE ASSETS, net                                                                            45,209                    45,215
    OTHER NONCURRENT ASSETS, net                                                                             2,322                     2,578
                                                                                                             -----                     -----
                                                              Total assets                                $203,442                  $216,120
                                                                                                          ========                  ========

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
                         Accounts payable and
                         accrued liabilities                                                 $16,579                  $23,728
                         Accrued payroll and
                         related costs                                                         5,519                    7,008
                         Current portion of
                         deferred subscription
                         revenue                                                              14,430                   16,018
                         Current portion of
                         other deferred
                         revenue                                                               7,388                    5,147
                                                              Total current liabilities                     43,916                    51,901
                                                                                                            ------                    ------

    DEFERRED SUBSCRIPTION REVENUE                                                                            3,744                     3,975
    OTHER DEFERRED REVENUE                                                                                     637                     2,333
    DEFERRED INCOME TAX LIABILITY                                                                            6,495                     5,874
    OTHER NONCURRENT LIABILITIES                                                                             5,144                     4,090
                                                                                                             -----                     -----
                                                              Total liabilities                             59,936                    68,173
                                                                                                            ------                    ------

    COMMITMENTS AND CONTINGENCIES

    SHAREHOLDERS' EQUITY
                         Series A Preferred
                         Stock, 1 share issued
                         and outstanding in
                         2012 and 2011                                                             -                        -
                         Class A Common Stock,
                         $0.01 par value,
                         350,000,000 shares
                         authorized:
                         41,086,472 and
                         40,893,964 shares
                         issued and
                         outstanding in 2012
                         and 2011,
                         respectively                                                            411                      409
                         Class B Common Stock,
                         $0.01 par value,
                         150,000,000 shares
                         authorized:
                         25,984,625shares
                         issued and
                         outstanding in 2012
                         and 2011                                                                260                      260
                         Capital in excess of
                         par value                                                           338,723                  336,661
                        Accumulated deficit                                                 (194,761)               (188,442)
                         Accumulated other
                         comprehensive loss                                                     (352)                    (166)
                                                                                                           144,281                   148,722
                                                                                                           -------                   -------
    Less: Class A treasury stock - 59,400 shares at cost                                                      (775)                     (775)
                                                                                                              ----                      ----
                                                              Total shareholders' equity                   143,506                   147,947
                                                                                                           -------
                         Total liabilities and shareholders'
                         equity                                                             $203,442                 $216,120
                        ==============================

         Martha Stewart Living Omnimedia,
                       Inc.
       Supplemental Disclosures Regarding
          Non-GAAP Financial Information
           Three Months Ended June 30,
            (unaudited, in thousands)
         The following table presents
          segment and consolidated financial
          information, including a
          reconciliation of net loss, a GAAP
          measure, and adjusted EBITDA, a
          non-GAAP measure.In order to
          reconcile adjusted EBITDA to net
          loss, non-cash equity
          compensation, depreciation and
          amortization, restructuring
          charges, other income/(expense)
          and income taxes are added back.

                                                                 2012              2011
                                                                 ----              ----
    ADJUSTED EBITDA
                                  Publishing                           $(4,610)          $(1,596)
                                  Broadcasting                           1,185              (367)
                                  Merchandising                         10,343             8,519
                                  Corporate                             (7,194)           (7,147)
                                                                       -------
                                  Adjusted EBITDA                         (276)             (591)
                                                                          ----              ----

    NON-CASH EQUITY COMPENSATION
                                  Publishing                               127               188
                                  Broadcasting                              15                 2
                                  Merchandising                             70              (271)
                                  Corporate                                602             1,052
                                                                           ---
                                  Total Non-Cash Equity Compensation       814               971
                                                                           ---               ---

    DEPRECIATION AND AMORTIZATION
                                  Publishing                               185               131
                                  Broadcasting                             105               113
                                  Merchandising                             14                 8
                                  Corporate                                714               672
                                                                           ---
                                  Total Depreciation and Amortization    1,018               924
                                                                         -----               ---

    RESTRUCTURING CHARGES
                                  Publishing                                93                 -
                                  Broadcasting                             529                 -
                                  Merchandising                             81                 -
                                  Corporate                                 74                 -
                                                                           ---
                                  Total Restructuring Charges              777                 -
                                                                           ---               ---

    OPERATING (LOSS) / INCOME
                                  Publishing                            (5,015)           (1,915)
                                  Broadcasting                             536              (482)
                                  Merchandising                         10,178             8,782
                                  Corporate                             (8,584)           (8,871)
                                                                       -------
                                  Total Operating Loss                  (2,885)           (2,486)
                                                                        ------            ------

    OTHER INCOME / (EXPENSE)
                                  Interest income / (expense), net         276               (14)
                                  Loss on equity securities                  -               (14)
                                   Gain on sale of cost-based
                                   investment                              400                 -
                                   Other-than-temporary loss on
                                   cost-based investment                   (88)                -
                                                                          ----
                                  Total other income / (expense)           588               (28)
                                                               (2,297)           (2,514)
    LOSS BEFORE INCOME TAXES

                                  Income tax provision                    (407)             (424)
                                                                          ----              ----

    NET LOSS                                                  $(2,704)          $(2,938)
                                                              =======           =======

         Martha Stewart Living Omnimedia,
                       Inc.
       Supplemental Disclosures Regarding
          Non-GAAP Financial Information
            Six Months Ended June 30,
            (unaudited, in thousands)
         The following table presents
          segment and consolidated financial
          information, including a
          reconciliation of operating
          income/(loss), a GAAP measure,
          and adjusted EBITDA, a non-GAAP
          measure.In order to reconcile
          adjusted EBITDA to net loss, non-
          cash equity compensation,
          depreciation and amortization,
          restructuring charges, other
          income/(expense) and income taxes
          are added back.

                                                                 2012                2011
                                                                 ----                ----
    ADJUSTED EBITDA
                                 Publishing                             $(7,649)           $(3,088)
                                 Broadcasting                              (102)            (2,038)
                                 Merchandising                           20,029             14,043
                                 Corporate                              (14,399)           (13,846)
                                                                       --------
                                 Adjusted EBITDA                         (2,121)            (4,929)
                                                                         ------             ------

    NON-CASH EQUITY COMPENSATION
                                 Publishing                                 315                327
                                 Broadcasting                                31                 26
                                 Merchandising                              303                 11
                                 Corporate                                1,495              2,050
                                                                          -----
                                 Total Non-Cash Equity Compensation       2,144              2,414
                                                                          -----              -----

    DEPRECIATION AND
     AMORTIZATION
                                 Publishing                                 365                350
                                 Broadcasting                               218                231
                                 Merchandising                               23                 15
                                 Corporate                                1,419              1,324
                                                                          -----
                                  Total Depreciation and Amortization     2,025              1,920
                                                                          -----              -----

    RESTRUCTURING CHARGES
                                 Publishing                                  93                  -
                                 Broadcasting                               529                  -
                                 Merchandising                               81                  -
                                 Corporate                                   74                  -
                                                                            ---
                                 Total Restructuring Charges                777                  -
                                                                            ---                ---

    OPERATING (LOSS) / INCOME
                                 Publishing                              (8,422)            (3,765)
                                 Broadcasting                              (880)            (2,295)
                                 Merchandising                           19,622             14,017
                                 Corporate                              (17,387)           (17,220)
                                                                       --------
                                 Total Operating Loss                    (7,067)            (9,263)
                                                                         ------             ------

    OTHER INCOME / (EXPENSE)
                                  Interest income /
                                  (expense), net                            471               (126)
                                  Income on equity
                                  securities                                  -                205
                                  Gain on sales of
                                  cost-based
                                  investments                             1,165                  -
                                  Other-than-
                                  temporary loss
                                  on cost-based
                                  investment                                (88)                 -
                                                                           ----
                                 Total other income                       1,548                 79
                                                               (5,519)             (9,184)
    LOSS BEFORE INCOME TAXES

                                   Income tax
                                    provision                              (798)              (831)
                                                                          -----

    NET LOSS                                                  $(6,317)           $(10,015)
                                                              =======            ========

SOURCE Martha Stewart Living Omnimedia, Inc.


Source: PR Newswire