Quantcast

Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2010 Results

February 16, 2011

NEW YORK, Feb. 16, 2011 /PRNewswire/ — Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the fourth quarter and full year ended December 31, 2010. The Company reported revenue for the fourth quarter and full year of $72.6 million and $230.8 million, respectively.

Charles Koppelman, Executive Chairman and Principal Executive Officer, said: “2010 was an important year in the transformation of the Company. It was the beginning of our partnership with The Home Depot, which further expands the breadth and depth of our merchandising business; we launched a new home for our growing array of broadcast content on Hallmark Channel; and we unveiled a variety of digital offerings and applications that we feel enhance our brands and make Martha Stewart content even more accessible to our consumers. As we enter 2011, we believe our extraordinary portfolio of content and products gives the Company a solid foundation on which to build in the quarters and years ahead.”

Robin Marino, President and Chief Executive Officer of Merchandising, stated: “Merchandising made impressive strides throughout the year. We just celebrated the first anniversary of our partnership with The Home Depot, which was an important contributor to our performance in 2010. Our Martha Stewart Collection at Macy’s delivered strong results throughout the holiday season. We are also pleased with the performance of Martha Stewart Crafts and Martha Stewart Pets at PetSmart. As our product portfolio continues to expand and diversify, our Merchandising business is gaining momentum and we are counting on it being a key driver of future growth for our Company.”

Fourth Quarter 2010 Summary

Revenues were $72.6 million in the fourth quarter of 2010, compared to $87.6 million in the fourth quarter of 2009. The fourth quarter of 2009 included $16.8 million in revenue from the Kmart relationship, which concluded in early 2010. Also impacting the results was revenue of $2.8 million from TurboChef in the fourth quarter of 2009 with no comparable revenue in the fourth quarter of 2010.

Adjusted EBITDA for the fourth quarter of 2010 was $5.6 million, compared to $23.1 million in the prior year period. The fourth quarter of 2009 included the Kmart and TurboChef revenue described above, as well as a $3 million cash make-whole payment.

Operating income for the fourth quarter of 2010 was $3.4 million, compared to $21.3 million for the fourth quarter of 2009 for the reasons noted above.

Basic and diluted net income per share was $0.08 and $0.07, respectively, for the fourth quarter of 2010, compared to $0.38 and $0.37, respectively, for the fourth quarter of 2009.

Full-Year 2010 Summary

Revenues were $230.8 million in 2010, compared to $244.8 million in 2009. Included in the results was $24.5 million revenue from Kmart in 2009 and $1.2 million revenue from Kmart in 2010. Also impacting the results was revenue of $7.3 million from TurboChef in 2009 with no comparable revenue in 2010.

Adjusted EBITDA for the full-year 2010 was $1.4 million, compared to $15.3 million in the prior year. Results in 2009 included the Kmart and TurboChef revenues mentioned above and a $3 million cash make-whole payment.

Operating loss for the full-year 2010 was $(8.7) million, compared to an operating loss of $(12.0) million in 2009. Included in the 2009 results was an impairment charge of $(11.4) million in the Merchandising segment.

Net loss per share was $(0.18) for the full-year 2010, compared to a net loss per share of $(0.27) in 2009. Included in the 2009 results was the previously mentioned impairment charge of $(11.4) million or $(0.21) per share.

    Fourth Quarter 2010 Results by Segment
                                    Three Months Ended, December
                                                 31
                                     (unaudited, in thousands)

                                          2010              2009
                                          ----              ----
    REVENUES
      Publishing                       $44,627           $47,619
      Broadcasting                      16,358            14,252
      Merchandising                     11,606            25,700
                                        ------            ------
      Total Revenues                   $72,591           $87,571
                                       =======           =======
    ADJUSTED EBITDA
        Publishing                      $4,714            $6,084
        Broadcasting                       920             3,612
        Merchandising                    7,024            23,783
        Corporate                       (7,071)          (10,388)
                                        ------           -------
        Total Adjusted EBITDA           $5,587           $23,091
                                        ======           =======

      OPERATING INCOME/(LOSS)
        Publishing                      $4,440            $5,759
        Broadcasting                       777             2,871
        Merchandising                    6,848            24,594
        Corporate                       (8,647)          (11,923)
                                        ------           -------
        Total Operating Income          $3,418           $21,301
                                        ======           =======

Publishing

As previously announced, results from our former Internet segment are now included in our Publishing segment for all periods presented.

Revenues in the fourth quarter of 2010 were $44.6 million, compared to $47.6 million in the prior year’s fourth quarter. The comparison with last year was negatively impacted by the timing of the Fall issue of Martha Stewart Weddings, for which revenues were recognized in the third quarter of 2010 and in the fourth quarter of 2009. In addition, print advertising revenue was down but was largely offset by an increase in digital advertising revenue.

Adjusted EBITDA was $4.7 million in the fourth quarter of 2010, compared to $6.1 million in the prior year’s quarter.

Operating income was $4.4 million for the fourth quarter of 2010, compared to $5.8 million in the fourth quarter of 2009.

Highlights

  • Digital advertising revenue was up 26% in the fourth quarter of 2010 versus the prior year quarter.
  • According to ComScore unified data, unique visitors across MSLO’s websites increased 40% compared to the fourth quarter of 2009 with page views up 69% over the prior year’s period.
  • Power Foods, MSLO’s latest cookbook, was published in December 2010 and promptly earned a spot on The New York Times’ Bestseller List in the Paperback Advice category.
  • A special issue of Martha Stewart Living, MSLO’s first digital magazine for the iPad, launched in November; the app quickly became the No. 1 paid app in the Lifestyle category on the App Store and was named one of Time Magazine’s top 10 magazine covers of 2010.
  • The “Martha Stewart Makes Cookies” baking app became the top-grossing app in the Lifestyle category on the App Store within hours of its November 2010 launch.

Broadcasting

Revenues in the fourth quarter of 2010 were $16.4 million, compared to $14.3 million in the fourth quarter of 2009, due to revenue from the delivery of new programming, partially offset by the absence of TurboChef from this year’s fourth quarter.

Adjusted EBITDA was $0.9 million for the fourth quarter of 2010 compared to $3.6 million in the prior year’s fourth quarter. The decrease is due primarily to the absence of TurboChef.

Operating income was $0.8 million for the fourth quarter of 2010, compared to operating income of $2.9 million in the fourth quarter of 2009.

Highlights

  • Ratings of The Martha Stewart Show on the Hallmark Channel improved over the course of the quarter, peaking during the December holiday season.
  • MSLO announced the addition of new programming on Hallmark Channel, including Martha Bakes, Martha Stewart’s first-ever baking series, and Petkeeping with Marc Morrone, a family-friendly series about pet care; both shows premiered in January 2011.
  • Hallmark Channel picked up Mad Hungry with Lucinda Scala Quinn for an additional 80 episodes; production began in January.
  • Chef Emeril Lagasse signed an agreement with the Food Network’s Cooking Channel for a new primetime show that is expected to debut in May. He also received a green light from Hallmark Channel for a new daily cooking show, which is expected to premiere in the fourth quarter of 2011.

Merchandising

Revenues were $11.6 million for the fourth quarter of 2010, as compared to $25.7 million in the prior year’s fourth quarter. Excluding Kmart revenues of $16.8 million, revenues increased 31% on a year-over-year basis in the fourth quarter.

Adjusted EBITDA was $7.0 million for the fourth quarter of 2010, compared to $23.8 million in the prior year’s fourth quarter. The fourth quarter of 2009 included Kmart revenue and a $3 million cash make-whole payment. Excluding Kmart and the make-whole payment, adjusted EBITDA increased 78% in the fourth quarter year-over-year.

Operating income was $6.8 million for the fourth quarter of 2010, compared to operating income of $24.6 million in the fourth quarter of 2009.

Highlights

  • The Martha Stewart Living line at The Home Depot continued to perform well with notably strong results for the carpet program and the new holiday assortment, which included trees, ornaments, decor and lighting.
  • The Martha Stewart Collection at Macy’s demonstrated double-digit, year-over-year sales growth in the quarter, driven by a robust holiday selling season, and an expanded assortment of soft home textiles.
  • Martha Stewart Pets at PetSmart and Martha Stewart Crafts also had strong holiday seasons.
  • Emeril’s coffee line with Timothy’s performed well in the quarter; the chef also launched a new line of cutlery with Sterling, a division of Lehrhoff, on HSN.

Corporate

Adjusted EBITDA was a loss of $(7.1) million in the fourth quarter of 2010 compared to a loss of $(10.4) million in the prior year’s quarter. Total Corporate expenses were $(8.6) million in the fourth quarter of 2010 compared to $(11.9) million in the prior year’s quarter. The decrease is largely due to savings in compensation-related expenses and lower rent expense.

The Company will host a conference call with analysts and investors on February 16th at 11:00 a.m. EDT that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through March 3, 2011.

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, impairment, non-cash equity compensation expense and other expense (including loss on equity securities)(“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 appropriate period, (v) non-cash impairment charges, which are impacted by macro-economic conditions and do not necessarily reflect 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, 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; 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 December 31,
       (unaudited, in thousands, except per share amounts)
                                               2010          2009
                                               ----          ----
    REVENUES
      Publishing                            $44,627       $47,619
      Broadcasting                           16,358        14,252
      Merchandising                          11,606        25,700
                                             ------        ------
        Total revenues                       72,591        87,571
                                             ------        ------

    OPERATING COSTS AND EXPENSES
      Production, distribution and
       editorial                             38,397        34,310
      Selling and promotion                  17,399        17,762
      General and administrative             12,434        13,485
      Depreciation and amortization             943         1,881
      Impairment charge                           -       (1,168)
                                                ---        ------
        Total operating costs and expenses   69,173        66,270
                                             ------        ------
                                              3,418        21,301
    OPERATING INCOME

    OTHER INCOME/(EXPENSE)
      Interest expense, net                      (4)          (11)
      Gain on sale of short-term
       investments                            1,109             -
      Other                                       8             -
                                                ---           ---
             Total other income/(expense)     1,113           (11)
                                              4,531        21,290
    INCOME BEFORE INCOME TAXES

           Income tax provision                (427)         (537)

                                             $4,104       $20,753
    NET INCOME                               ======       =======

    INCOME PER SHARE - BASIC AND DILUTED
      Net income - Basic                      $0.08         $0.38
                                              =====         =====
      Net income- Diluted                     $0.07         $0.37
                                              =====         =====

    WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
           Basic                             54,512        54,065
           Diluted                           55,789        55,620

                 Martha Stewart Living Omnimedia, Inc.
                 Consolidated Statements of Operations
                    Twelve Months Ended December 31,
          (unaudited, in thousands, except per share amounts)
                                                  2010              2009
                                                  ----              ----
    REVENUES
      Publishing                              $145,573          $146,100
      Broadcasting                              42,434            46,111
      Merchandising                             42,806            52,566
                                                ------            ------
        Total revenues                         230,813           244,777
                                               -------           -------

    OPERATING COSTS AND EXPENSES
      Production, distribution and
       editorial                               124,235           121,522
      Selling and promotion                     60,288            59,333
      General and administrative                50,321            56,584
      Depreciation and amortization              4,632             7,874
      Impairment charge                              -            11,432
                                                   ---            ------
        Total operating costs and expenses     239,476           256,745
                                               -------           -------
                                                (8,663)          (11,968)
    OPERATING LOSS

    OTHER INCOME/(EXPENSE)
      Interest expense, net                        (66)             (101)
      Loss on sale of fixed asset                 (647)                -
      Gain on sale of short-term
       investments                               1,512                 -
      Loss on equity securities                      -              (547)
      Other                                        (15)             (236)
                                                   ---              ----
             Total other income/(expense)          784              (884)
                                                (7,879)          (12,852)
    LOSS BEFORE INCOME TAXES

           Income tax provision                 (1,717)           (1,726)

                                               $(9,596)         $(14,578)
    NET LOSS                                   =======          ========

    LOSS PER SHARE - BASIC AND DILUTED
      Net Loss                                  $(0.18)           $(0.27)
                                                ======            ======

    WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
           Basic and diluted                    54,440            53,880

                    Martha Stewart Living Omnimedia, Inc.
                         Consolidated Balance Sheets
                   (in thousands, except per share amounts)
                                                December 31,  December 31,
                                                ------------  ------------
                                                         2010          2009
                                                         ----          ----
                                                 (unaudited)
                                                 -----------
    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents                       $23,204       $25,384
      Short-term investments                           10,091        13,085
      Accounts receivable, net                         59,250        56,364
      Inventory                                        5,309         5,166
      Deferred television production costs             2,413         3,788
      Other current assets                             4,772         5,709
                                                       -----         -----
                         Total current
                         assets                      105,039       109,496
                                                     -------

    PROPERTY, PLANT AND EQUIPMENT, net                14,507        17,268
    GOODWILL, net                                     45,107        45,107
    OTHER INTANGIBLE ASSETS, net                      46,547        47,070
    OTHER NONCURRENT ASSETS, net                      11,114        10,850
                                                      ------        ------
                        Total assets                $222,314      $229,791
                                                    ========

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Accounts payable and accrued
       liabilities                                   $30,062       $26,752
      Accrued payroll and related costs                6,541         7,495
      Current portion of deferred
       subscription income                            18,734        18,587
      Current portion of other deferred
       revenue                                         4,732         4,716
      Current portion loan payable                     1,500             -
                                                       -----           ---
                         Total current
                         liabilities                  61,569        57,550
                                                      ------
                                                       4,529         5,672
    DEFERRED SUBSCRIPTION INCOME
    OTHER DEFERRED REVENUE                             1,413         2,759
    LOAN PAYABLE                                       7,500        13,500
    DEFERRED INCOME TAX LIABILITY                      4,528         3,200
    OTHER NONCURRENT LIABILITIES                       3,742         3,290
                                                       -----         -----
                        Total liabilities             83,281        85,971
                                                      ------

    COMMITMENTS AND CONTINGENCIES
    SHAREHOLDERS' EQUITY
       Class A common stock, $0.01 par
        value, 350,000 shares authorized:                288           283
       28,753 and 28,313 shares outstanding in 2010 and
        2009, respectively.
       Class B common stock, $0.01 par
        value, 150,000 shares authorized:                263           267
       26,318 and 26,690 shares outstanding in 2010 and
        2009, respectively.
       Capital in excess of par value                295,576       290,387
       Accumulated deficit                          (156,201)     (146,605)
       Accumulated other comprehensive
        (loss)/income                                   (118)          263
                                                        ----           ---
                                                     139,808       144,595
                                                     -------       -------
       Less class A treasury stock - 59
        shares at cost                                  (775)         (775)
                                                        ----          ----
                         Total shareholders'
                         equity                      139,033       143,820
                                                     -------
                         Total liabilities
                         and shareholders'
                         equity                     $222,314      $229,791
                                                  ==========

                    Martha Stewart Living Omnimedia, Inc.
      Supplemental Disclosures Regarding Non-GAAP Financial Information
                       Three Months Ended December 31,
                          (unaudited, in thousands)

    The following table presents segment and consolidated financial
    information, including a
    reconciliation of net income, a GAAP measure, and adjusted EBITDA, a
    non-GAAP measure.  In
    order to reconcile adjusted EBITDA to net income, non-cash equity
    compensation, depreciation
    and amortization, non-cash impairment charge adjustments, other
    income/(expense) and income
    taxes are added back.
                                                2010           2009
                                                ----           ----
    ADJUSTED EBITDA
      Publishing                              $4,714         $6,084
      Broadcasting                               920          3,612
      Merchandising                            7,024         23,783
      Corporate                               (7,071)      (10,388)
                                              ------        -------
    Adjusted EBITDA                            5,587         23,091
                                               -----         ------

    NON-CASH EQUITY COMPENSATION
      Publishing                                  69           (219)
      Broadcasting                                13            188
      Merchandising                              168            344
      Corporate                                  976            764
                                                 ---            ---
        Total Non-Cash Equity Compensation     1,226          1,077
                                               -----          -----

    DEPRECIATION AND AMORTIZATION
      Publishing                                 205            544
      Broadcasting                               130            553
      Merchandising                                8             13
      Corporate                                  600            771
                                                 ---            ---
    Total Depreciation and Amortization          943          1,881
                                                 ---          -----

    IMPAIRMENT CHARGE
      Merchandising                                -         (1,168)
                                                 ---         ------
        Total Impairment Charge                    -         (1,168)
                                                 ---         ------

    OPERATING (LOSS) / INCOME
      Publishing                               4,440          5,759
      Broadcasting                               777          2,871
      Merchandising                            6,848         24,594
      Corporate                               (8,647)      (11,923)
                                              ------        -------
    Total Operating Income                     3,418         21,301
                                               -----         ------

    OTHER INCOME / (EXPENSE)
      Interest expense, net                       (4)           (11)
      Gain on equity securities                    8              -
      Gain on sale of short-term
       investments                             1,109              -
                                               -----            ---
      Total other income/(expense)             1,113            (11)
                                               4,531         21,290
    INCOME BEFORE INCOME TAXES

      Income tax provision                      (427)          (537)
                                                ----           ----

    NET INCOME                                $4,104        $20,753
                                              ======        =======

                   Martha Stewart Living Omnimedia, Inc.
    Supplemental Disclosures Regarding Non-GAAP Financial Information
                      Twelve Months Ended December 31,
                         (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, non-cash impairment
    charges, other income/(expense) and income taxes are added back.
                                                      2010           2009
                                                      ----           ----
    ADJUSTED EBITDA
      Publishing                                    $4,329         $3,255
      Broadcasting                                    (470)         8,418
      Merchandising                                 25,847         38,613
      Corporate                                    (28,336)       (35,001)
                                                   -------        -------
    Adjusted EBITDA                                  1,370         15,285
                                                     -----         ------

    NON-CASH EQUITY COMPENSATION
      Publishing                                       552          1,233
      Broadcasting                                     230            889
      Merchandising                                    803          1,468
      Corporate                                      3,816          4,357
                                                     -----          -----
        Total Non-Cash Equity Compensation           5,401          7,947
                                                     -----          -----

    DEPRECIATION AND AMORTIZATION
      Publishing                                     1,127          2,191
      Broadcasting                                     878          1,389
      Merchandising                                     43             62
      Corporate                                      2,584          4,232
                                                     -----          -----
        Total Depreciation and Amortization          4,632          7,874
                                                     -----          -----

    IMPAIRMENT CHARGE
    Merchandising                                        -         11,432
                                                       ---         ------
        Total Impairment Charge                          -         11,432
                                                       ---         ------

    OPERATING (LOSS) / INCOME
      Publishing                                     2,650           (169)
      Broadcasting                                  (1,578)         6,140
      Merchandising                                 25,001         25,651
      Corporate                                    (34,736)       (43,590)
                                                   -------        -------
        Total Operating Loss                        (8,663)       (11,968)
                                                    ------        -------

    OTHER INCOME / (EXPENSE)
      Interest expense, net                            (66)          (101)
      Loss on sale of fixed asset                     (647)             -
      Gain on sale of short-term investments         1,512              -
      Loss on equity securities                          -           (547)
      Other                                            (15)          (236)
                                                       ---           ----
      Total other income/(expense)                     784           (884)
                                                    (7,879)       (12,852)
    LOSS BEFORE INCOME TAXES

      Income tax provision                          (1,717)        (1,726)
                                                    ------         ------

    NET LOSS                                       $(9,596)      $(14,578)
                                                   =======       ========

SOURCE Martha Stewart Living Omnimedia, Inc.


Source: newswire



comments powered by Disqus