Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2011 Results

NEW YORK, March 1, 2012 /PRNewswire/ -- Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the fourth quarter and full year ended December 31, 2011. The Company reported revenue for the fourth quarter and full year 2011 of $61.7 million and $221.4 million, respectively.

Lisa Gersh, President and Chief Operating Officer, said, "Our fourth quarter results were in line with our expectations and underscore the importance of our work to return Martha Stewart Living Omnimedia to growth and profitability.  We have assembled an energized team that is focused on delivering on our strategic priorities, and we anticipate beginning to show the benefits of our actions in the second half of 2012, with a strong emphasis on improved execution in our print advertising sales.  We also anticipate revenue and margins in our merchandising business to show continued improvement this year, and see the longer-term outlook for this business as bullish in light of our new alliance with J.C. Penney and, as announced earlier this week, the extension of our relationship with The Home Depot through 2016."

Fourth Quarter 2011 Summary

Revenues were $61.7 million in the fourth quarter of 2011, compared to $72.6 million in the fourth quarter of 2010, primarily due to lower advertising revenue that impacted both our publishing and broadcasting segments, as anticipated, partially offset by higher merchandising revenue.   

Adjusted EBITDA for the fourth quarter of 2011 was $3.3 million, compared to $5.6 million in the prior year period.

Operating loss for the fourth quarter of 2011 was $(0.04) million compared with $3.4 million in the prior-year period. Included in the fourth quarter of 2011 was a $1.3 million restructuring charge related to severance costs and staffing adjustments.

Fourth quarter 2011 net income benefitted from approximately $5.0 million of other income, primarily reflecting a gain on the sale of the Company's equity interest in WeddingWire. 

Basic and diluted net income per share was $0.07 for the fourth quarter of 2011, compared to $0.08 and $0.07, respectively for the fourth quarter of 2010. 

In December, the Company declared and paid a special one-time dividend of $0.25 per share aggregating $16.7 million, and paid off the remaining $6 million debt originating from the purchase of the assets related to Emeril Lagasse's media and merchandising business.  MSLO ended 2011 with $49.5 million in cash, cash equivalents and short-term investments.

Full-Year 2011 Summary

Revenues were $221.4 million in 2011, compared to $230.8 million in 2010.

Adjusted EBITDA for the full-year 2011 was a loss of $(4.0) million, compared to Adjusted EBITDA of $1.4 million in the prior year.

Operating loss for the full-year 2011 was $(18.6) million, compared to an operating loss of $(8.7) million in 2010. Included in the 2011 results were restructuring charges of $5.1 million.

Net loss per share was $(0.28) for the full-year 2011, compared to a net loss per share of $(0.18) in 2010, inclusive of the impacts of the restructuring charges which were partially offset by higher other income as noted above.

Fourth Quarter 2011 Results by Segment



Three Months Ended, December 31

(unaudited, in thousands)




2011


2010

REVENUES

  Publishing

$    38,798


$    44,627

  Broadcasting

9,766


16,358

  Merchandising

13,130


11,606

Total Revenues

$    61,694


$    72,591






ADJUSTED EBITDA


  Publishing

$        1,676


$         4,714

  Broadcasting

(763)


920

  Merchandising

8,809


7,024

  Corporate

(6,455)


(7,071)

Total Adjusted EBITDA

$        3,267


$         5,587





OPERATING INCOME/ (LOSS)




  Publishing(1)

$        886


$         4,440

  Broadcasting(1)

(1,126)


777

  Merchandising(1)

8,776


6,848

  Corporate(1)

(8,574)


(8,647)

  Total Operating Income(1)

$         (38)


$         3,418




(1) The Company recorded restructuring charges in the fourth quarter of 2011 totaling (in thousands) $1,324, allocated as follows: Publishing: $478; Broadcasting: $246; Merchandising: $13; and Corporate: $587.



Publishing

Revenues in the fourth quarter of 2011 were $38.8 million, compared to $44.6 million in the prior year's fourth quarter, primarily due to lower print and digital advertising revenues.  

Adjusted EBITDA was $1.7 million in the fourth quarter of 2011, compared to $4.7 million in the prior year's quarter, primarily due to a decline in print and digital advertising sales. During January 2012, as part of a strategic move to align the Company's sales and marketing team around its magazine brands, MSLO began to build out the ad sales team with the goal of capturing more ad dollars and expects to see the benefits of this investment in the second half of 2012.

Operating income was $0.9 million for the fourth quarter of 2011, compared to $4.4 million in the prior year's quarter.

Highlights for the Quarter

  • According to comScore Unified data, unique visitors across MSLO's websites increased 7% in the quarter compared to the prior-year period.
  • Subscriptions were up across all titles and each magazine delivered readers in excess of its rate base in the quarter.
  • Martha's 75th book, Martha's Entertaining, was published in October, followed by Everyday Food: Light in December.
  • Martha Stewart Living's Egg Dyeing 101 app was named "Best Single-Purpose Educational App" at Advertising Age's annual Media Vanguard Awards in November.

Broadcasting

Revenues in the fourth quarter of 2011 were $9.8 million, compared to $16.4 million in the fourth quarter of 2010, a decline that was anticipated in light of lower programming and advertising revenue.

Adjusted EBITDA was a loss of $(0.8) million for the fourth quarter of 2011 compared to adjusted EBITDA of $0.9 million in the prior year's fourth quarter as cost reductions helped offset the decline in revenue.

Operating loss for the fourth quarter of 2011 was $(1.1) million compared to operating income of $0.8 million in 2010.

Highlights for the Quarter

  • MSLO delivered 26 new episodes of Petkeeping with Marc Morrone, which began airing in January.
  • The primetime special Martha's Halloween premiered on Hallmark Channel.
  • The Company extended its agreement to provide programming 24 hours a day, seven days a week on the Martha Stewart Living Radio channel on SiriusXM channel 110.
  • Martha will be hosting the 45th Pillsbury Bake-Off Contest with a series of segments leading up to the finals, and concluding with the announcement of the grand-prize winner via live broadcast on "The Martha Stewart Show" on Hallmark Channel on March 27.

Merchandising

Revenues were up 13% to $13.1 million for the fourth quarter of 2011, as compared to $11.6 million in the prior year's fourth quarter, primarily due to strong sales of the Martha Stewart Living line at The Home Depot.

Adjusted EBITDA was $8.8 million for the fourth quarter of 2011, up from $7.0 million in the prior year's fourth quarter.

Operating income was $8.8 million for the fourth quarter of 2011, up from $6.8 million in the fourth quarter of 2010.  

Highlights for the Quarter

  • The Company announced a strategic alliance with J.C. Penney Company, Inc., joining forces to build distinct Martha Stewart stores in jcpenney department stores and to jointly develop an e-commerce site, featuring Martha Stewart products, know-how and advice.  The stores and website are expected to launch in 2013. The alliance includes a 10-year commercial agreement and a $38.5 million strategic investment by J.C. Penney in MSLO which was completed in December 2011.
  • Under the Company's new partnership with Avery, initial shipments of the new Martha Stewart Home Office™ product line were delivered to Staples® stores nationwide.
  • The Martha Stewart Living line at The Home Depot continued to perform well, with particularly strong sales in the specialty paint program, which was introduced in 2011, and in holiday merchandise.
  • Performance in the quarter for the Martha Stewart Collection at Macy's was driven by textiles.
  • Martha Stewart Pets marked its first anniversary at PetSmart registering strong growth across the entire product line, particularly in apparel, bedding and toys.
  • Emeril's business benefited from two appearances on HSN in the quarter, as well as his first appearance on The Shopping Channel in Canada.

Corporate

Adjusted EBITDA reflects charges of $(6.5) million in the fourth quarter of 2011 compared to charges of $(7.1) million in the prior year's quarter.  Total Corporate expenses were $(8.6) million, including $(0.6) million of the total $(1.3) million restructuring charge, in the fourth quarter of 2011 compared to total Corporate expenses of $(8.6) million in the prior year's quarter.

The Company will host a conference call with analysts and investors on March 1, 2012 at 8:30am EST that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through March 15, 2012.

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, including particularly statements with respect to margins, the success of our alliance with J.C. Penney and benefits from aligning our sales and marketing 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; 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 December 31,

(unaudited, in thousands, except share and per share data)



2011


2010



REVENUES


Publishing

$    38,798


$     44,627




Broadcasting

9,766


16,358




Merchandising

13,130


11,606





Total revenues

61,694


72,591




OPERATING COSTS AND EXPENSES


Production, distribution and editorial

33,138


39,454




Selling and promotion

14,814


17,399




General and administrative

11,425


11,377




Depreciation and amortization

1,031


943




Restructuring charges

1,324






Total operating costs and expenses

61,732


69,173



OPERATING (LOSS) / INCOME

(38)


3,418




OTHER INCOME /(EXPENSE)


Interest expense, net

(218)


(4)




Gain on sale of short-term investments


1,109




Gain on equity securities


8




Net gain on sale of cost-based investment

7,647





Other-than-temporary loss on cost-based investments

(2,724)





      Total other income

4,705


1,113




INCOME BEFORE INCOME TAXES

4,667


4,531









      Income tax provision

(470)


(427)










NET INCOME

$   4,197


$      4,104









INCOME PER SHARE – BASIC AND DILUTED






      Net income — Basic

$      0.07


$    0.08



      Net income — Diluted

$      0.07


$    0.07









WEIGHTED AVERAGE COMMON SHARES OUTSTANDING






      Basic

59,014,889


54,512,490



      Diluted

59,605,829


55,789,142






Martha Stewart Living Omnimedia, Inc.

Consolidated Statements of Operations

Twelve Months Ended December 31,

(unaudited, in thousands, except share and per share data)



2011


2010



REVENUES


Publishing

$    140,857


$      145,573




Broadcasting

31,962


42,434




Merchandising

48,614


42,806





Total revenues

221,433


230,813




OPERATING COSTS AND EXPENSES


Production, distribution and editorial

127,084


128,194




Selling and promotion

57,208


60,288




General and administrative

46,641


46,362




Depreciation and amortization

3,978


4,632




Restructuring charges

5,116






Total operating costs and expenses

240,027


239,476



OPERATING LOSS

(18,594)


(8,663)




OTHER INCOME /(EXPENSE)


Interest expense, net

(283)


(66)




Loss on sale of fixed asset


(647)




Gain on sale of short-term investments


1,512




Gain / (loss) on equity securities

15


(15)




Net gain on sale of cost-based investment

7,647





Other-than-temporary loss on cost-based investments

(2,724)





      Total other income

4,655


784




LOSS BEFORE INCOME TAXES

(13,939)



(7,879)









      Income tax provision

(1,580)


(1,717)










NET LOSS

$    (15,519)


$     (9,596)









LOSS PER SHARE – BASIC AND DILUTED






      Net Loss

$    (0.28)


$         (0.18)









WEIGHTED AVERAGE COMMON SHARES OUTSTANDING






      Basic and diluted

55,880,896


54,440,490






Martha Stewart Living Omnimedia, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)




December 31,
2011
(unaudited)


December 31,
2010


ASSETS          

CURRENT ASSETS      

         Cash and cash equivalents

$       38,453


$        23,204

         Short-term investments

11,051


10,091

         Accounts receivable, net

48,237


59,250

         Inventory

7,225


5,309

         Deferred television production costs


2,413

         Other current assets

4,858


4,772

                   Total current assets

109,824


105,039





PROPERTY, PLANT AND EQUIPMENT, net

13,396


14,507

GOODWILL, net

45,107


45,107

OTHER INTANGIBLE ASSETS, net

45,215


46,547

OTHER NONCURRENT ASSETS, net

2,578


11,114

                   Total assets

$    216,120


$      222,314

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

         Accounts payable and accrued liabilities

$    23,728


$       30,062

         Accrued payroll and related costs

7,008


6,541

         Current portion of deferred subscription revenue

16,018


18,734

         Current portion of other deferred revenue

5,147


4,732

         Current portion loan payable


1,500

                   Total current liabilities

51,901


61,569

DEFERRED SUBSCRIPTION REVENUE

3,975


4,529

OTHER DEFERRED REVENUE

2,333


1,413

LOAN PAYABLE


7,500

DEFERRED INCOME TAX LIABILITY

5,874


4,527

OTHER NONCURRENT LIABILITIES

4,090


3,743

                   Total liabilities

68,173


83,281


COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

     Class A common stock, $0.01 par value, 350,000,000 shares authorized:
     40,893,964 and 28,753,212 shares issued and outstanding in 2011 and 2010,
     respectively

409


288

     Class B common stock, $0.01 par value, 150,000,000 shares authorized:  
     25,984,625 and 26,317,960 shares issued and outstanding in 2011 and 2010,
     respectively

260


263

     Series A Preferred Stock, one share issued and outstanding in 2011


     Capital in excess of par value

336,661


295,576

     Accumulated deficit

(188,442)


(156,201)

     Accumulated other comprehensive loss

(166)


(118)


148,722


139,808

     Less: class A treasury stock – 59,400 shares at cost

(775)


(775)

                   Total shareholders' equity

147,947


139,033

                   Total liabilities and shareholders' equity

$    216,120


$   222,314











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/(loss), 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, restructuring charges, other income/(expense) and income taxes are added back to net income.






2011


2010




ADJUSTED EBITDA

 Publishing

$    1,676


$    4,714



 Broadcasting

(763)


920



 Merchandising

8,809


7,024



 Corporate

(6,455)


(7,071)



Adjusted EBITDA

3,267


5,587



NON-CASH EQUITY COMPENSATION






 Publishing

82


69



 Broadcasting

6


13



 Merchandising

12


168



 Corporate

850


976



   Total Non-Cash Equity Compensation

950


1,226



DEPRECIATION AND AMORTIZATION

 Publishing

230


205



 Broadcasting

111


130



 Merchandising

8


8



 Corporate

682


600



   Total Depreciation and Amortization

1,031


943



RESTRUCTURING CHARGES

 Publishing

478


 Broadcasting

246


 Merchandising

13


 Corporate

587


   Total Restructuring Charges

1,324



OPERATING INCOME / (LOSS)

 Publishing

886


4,440



 Broadcasting

(1,126)


777



 Merchandising

8,776


6,848



 Corporate

(8,574)


(8,647)



    Total Operating (loss) / income

(38)


3,418









OTHER INCOME / (EXPENSE)






 Interest expense, net

(218)


(4)



 Gain on sale of short-term investments


1,109



 Gain on equity securities


8



 Net gain on sale of cost-based investment

7,647




 Other-than-temporary loss on cost-based investments

(2,724)




 Total other income

4,705


1,113




INCOME BEFORE INCOME TAXES

4,667


4,531










 Income tax provision

(470)


(427)










NET INCOME

$    4,197


$   4,104






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 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 to net loss.





2011


2010




ADJUSTED EBITDA

 Publishing

$    (4,180)


$      4,329



 Broadcasting

(3,603)


(470)



 Merchandising

30,241


25,847



 Corporate

(26,462)


(28,336)



Adjusted EBITDA

(4,004)


1,370



NON-CASH EQUITY COMPENSATION






Publishing

682


552



Broadcasting

67


230



Merchandising

224


803



Corporate

4,523


3,816



   Total Non-Cash Equity Compensation

5,496


5,401



DEPRECIATION AND AMORTIZATION

 Publishing

774


1,127



 Broadcasting

470


878



 Merchandising

32


43



 Corporate

2,702


2,584



   Total Depreciation and Amortization

3,978


4,632



RESTRUCTURING CHARGES

 Publishing

828


 Broadcasting

600


 Merchandising

13


 Corporate

3,675


   Total Restructuring Charges

5,116



OPERATING (LOSS) / INCOME

 Publishing

(6,464)


2,650



 Broadcasting

(4,740)


(1,578)



 Merchandising

29,972


25,001



 Corporate

(37,362)


(34,736)



    Total Operating Loss

(18,594)


(8,663)









OTHER INCOME / (EXPENSE)






 Interest expense, net

(283)


(66)



 Loss on sale of fixed asset


(647)



 Gain on sale of short-term investments


1,512



 Gain / (loss) on equity securities

15


(15)



 Net gain on sale of cost-based investment

7,647




 Other-than-temporary loss on cost-based investments

(2,724)




 Total other income

4,655


784




LOSS BEFORE INCOME TAXES

(13,939)


(7,879)










 Income tax provision

(1,580)


(1,717)










NET LOSS

$   (15,519)


$   (9,596)






SOURCE Martha Stewart Living Omnimedia, Inc.



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