2014

Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2012 Results

NEW YORK, Feb. 26, 2013 /PRNewswire/ -- Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the fourth quarter and full year ended December 31, 2012. The Company reported revenue for the fourth quarter and full year of $56.4 million and $197.6 million, respectively.

Dan Taitz, Interim Principal Executive Officer, said, "The Company produced higher Adjusted EBITDA for both the fourth quarter and full-year compared to the respective 2011 periods due to important actions taken to lower our cost structure and align our businesses for the future.  Merchandising delivered a strong holiday season and a good year overall with strong revenue growth and improved profit margins.  MSLO still has much work to do in 2013 as the Company positions itself to return to sustained profitability."

Fourth Quarter 2012 Summary

Total revenues were $56.4 million in the fourth quarter of 2012, compared to $61.7 million in the fourth quarter of 2011, due to lower revenues in the publishing and broadcasting segments, partially off-set by higher merchandising revenues.

Total operating income for the fourth quarter of 2012 was $1.4 million, compared with a loss of $(0.04) million in the prior-year period. The fourth quarter of 2012 included $(3.5) million in charges related to the restructuring moves in our media business.  The fourth quarter of 2011 included a $(1.3) million restructuring charge related to severance costs and staffing adjustments.

Adjusted EBITDA, which excludes the aforementioned charges, was $6.6 million for the fourth quarter of 2012, compared to $3.3 million in the prior year period.

Basic and diluted net income per share was $0.02 for the fourth quarter of 2012, compared to $0.07 for the fourth quarter of 2011.  Net income for the fourth quarter of 2011 benefitted from approximately $4.7 million of other income, primarily reflecting a gain on the sale of the Company's equity interest in WeddingWire. 

Full-Year 2012 Summary

Total revenues were $197.6 million in 2012, compared to $221.4 million in 2011.

Total operating loss for the full-year 2012 was $(56.4) million, compared to an operating loss of $(18.6) million in 2011. Included in 2012 results were restructuring and other non-recurring charges of $(49.1) million, which included a $(44.3) million non-cash impairment charge reflecting the write-down of goodwill related to the Company's publishing segment.  Restructuring and other non-recurring charges in 2011 totaled $(5.1) million.

Adjusted EBITDA, which excludes the aforementioned charges, was $0.5 million for 2012, compared to an adjusted EBITDA loss of $(4.0) million in the prior year.

Net loss per share was $(0.83) for the full-year 2012, compared to a net loss per share of $(0.28) in 2011. Excluding the restructuring and other non-recurring charges, net loss per share was $(0.10) and $(0.19), for 2012 and 2011, respectively.

Fourth Quarter 2012 Results by Segment

Three Months Ended December 31

(unaudited, in thousands)




2012


2011

REVENUES




 Publishing


$    35,332


$    38,798

 Merchandising


16,219


13,130

 Broadcasting


4,812


9,766

Total Revenues


$    56,363


$    61,694





ADJUSTED EBITDA




Publishing


$    (663)


$ 1,676

Merchandising


11,422


8,809

Broadcasting


3,331


(763)

Corporate


(7,502)


(6,455)

Total Adjusted EBITDA


$  6,588


$ 3,267

 

OPERATING INCOME / (LOSS)










Publishing


$        (2,343)


$ 886

Merchandising


11,330


8,776

Broadcasting


2,953


(1,126)

Corporate


(10,580)


(8,574)

Total Operating Income / (Loss)


$          1,360


$        (38)









Recent Business Highlights

  • According to comScore data, total unique visitors across MSLO's websites increased 24% in the quarter compared to the prior-year period.
  • Following the expansion of MSLO's content business with new video partners Hulu and Hulu Plus and The AOL On Network, online video views ramped up across MarthaStewart.com and partner websites, totaling more than 26 million views in December to over 3 million unique users.
  • Following the success of Martha Stewart's Cooking School Season 1, one of PBS' top watched overall shows, Season 2 of Martha Stewart's Cooking School and Season 1 of Martha Bakes are scheduled to launch in April.
  • On February 19, 2013, Martha Stewart launched a new daily radio show, Martha Live, exclusively on SiriusXM.
  • MSLO's latest book, Meatless: More Than 200 of the Very Best Vegetarian Recipes, was published by Clarkson Potter on January 8, 2013 and quickly became a New York Times bestseller.

Publishing

Revenues in the fourth quarter of 2012 were $35.3 million, compared to $38.8 million in the prior year's fourth quarter, due to lower print and digital advertising revenues as well as lower circulation revenues. 

Operating loss was $(2.3) million for the fourth quarter of 2012, which included a $(1.4) million charge related to restructuring moves, compared to operating income of $0.9 million in the prior year's quarter.

Adjusted EBITDA loss was $(0.7) million in the fourth quarter of 2012, compared to adjusted EBITDA of $1.7 million in the prior year's quarter.

Merchandising

Revenues increased 23.5% to $16.2 million for the fourth quarter of 2012, as compared to $13.1 million in the prior year's fourth quarter primarily due to the increase in royalty revenue from Macy's, design fees from J.C. Penney and revenue from the Martha Stewart Home Office line with Avery.

Operating income was $11.3 million for the fourth quarter of 2012, up from $8.8 million in the fourth quarter of 2011. 

Adjusted EBITDA was $11.4 million for the fourth quarter of 2012, up from $8.8 million in the prior year's fourth quarter.

Broadcasting

Revenue in the fourth quarter of 2012 was $4.8 million, compared to $9.8 million in the fourth quarter of 2011.  The overall decline from the prior-year results reflects the absence of live television programming, as the Company concluded The Martha Stewart Show in mid-2012. 

Operating income was $3.0 million for the fourth quarter of 2012, compared to an operating loss of $(1.1) million in the fourth quarter of 2011.

Adjusted EBITDA was $3.3 million for the fourth quarter of 2012, compared to an adjusted EBITDA loss of $(0.8) million in the prior year's fourth quarter.

Corporate

Adjusted EBITDA reflects charges of $(7.5) million in the fourth quarter of 2012 compared to charges of $(6.5) million in the prior year's quarter.  Total Corporate expenses were $(10.6) million, compared to $(8.6) million in the prior year's fourth quarter. Included in this year's fourth quarter is approximately $0.8 million in legal expenses related to the Macy's litigation.

The Company will host a conference call with analysts and investors on February 26, 2013 at 8:30 am EST that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through March 11, 2013.

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, 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) non-cash impairment charges, which are impacted by macro-economic conditions and do not necessarily reflect operating performance, (v) 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 (vi) restructuring charges, which include non-recurring charges such as employee severance and certain professional fees that do not necessarily reflect ongoing operating performance and (vii) 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. 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 non-cash equity 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, Merchandising and Broadcasting. 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, changes to our cost structure, potential opportunities, expected product line changes, future acceptability of our content and our businesses, the success of our strategic initiatives, 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; our failure to successfully implement our anticipated growth strategies; a loss of the services of Ms. Stewart or Mr. Lagasse; continued high turnover among our employees; a continued softening of the domestic advertising market; our inability to expand our merchandising and licensing programs; changes in consumer reading and purchasing 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 publicly update or revise 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 amounts)



2012


2011

REVENUES





Publishing

$     35,332


$     38,798


Merchandising

16,219


13,130


Broadcasting

4,812


9,766



Total revenues

56,363


61,694





OPERATING COSTS AND EXPENSES





Production, distribution and editorial

24,470


33,138


Selling and promotion

14,499


14,814


General and administrative

11,512


11,425


Depreciation and amortization

979


1,031


Restructuring charges

3,543


1,324



Total operating costs and expenses

55,003


61,732





OPERATING INCOME / (LOSS)

1,360


(38)





OTHER INCOME / (EXPENSE)





Interest income / (expense), net

144


(218)


Gain on sale of cost-based investment


7,647


Other-than-temporary loss on cost-based investments


(2,724)



Total other income

144


4,705





INCOME BEFORE INCOME TAXES

1,504


4,667






Income tax provision

(394)


(470)









NET INCOME

$   1,110


$    4,197





INCOME PER SHARE – BASIC AND DILUTED





Net income - Basic

$ 0.02


$ 0.07


Net income - Diluted

$ 0.02


$ 0.07





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING





Basic

67,330,288


59,014,889


Diluted

67,621,961


59,605,829




Martha Stewart Living Omnimedia, Inc.

Consolidated Statements of Operations

Twelve Months Ended December 31 ,

(in thousands, except share and per share amounts)



2012

(unaudited)


2011

REVENUES





Publishing

$    122,540


$      140,857


Merchandising

57,574


48,614


Broadcasting

17,513


31,962



Total revenues

197,627


221,433





OPERATING COSTS AND EXPENSES









Production, distribution and editorial

103,347


127,084


Selling and promotion

52,453


57,208


General and administrative

45,148


46,641


Depreciation and amortization

4,007


3,978


Restructuring charges

4,811


5,116


Goodwill impairment

44,257




Total operating costs and expenses

254,023


240,027





OPERATING LOSS

(56,396)


(18,594)





OTHER INCOME / (EXPENSE)





Interest income / (expense), net

836


(283)


Income on equity securities


15


Gain on sales of cost-based investments

1,165


7,647


Other-than-temporary loss on cost-based investments

(88)


(2,724)


       Total other income

1,913


4,655

 

LOSS BEFORE INCOME TAXES

(54,483)


 

(13,939)





       Income tax provision

(1,602)


(1,580)









NET LOSS

$    (56,085)


$   (15,519)








LOSS PER SHARE – BASIC AND DILUTED





Net Loss

$        (0.83)


$       (0.28)







WEIGHTED AVERAGE COMMON SHARES OUTSTANDING




       Basic and diluted

67,231,463


55,880,896

 

Martha Stewart Living Omnimedia, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)






December 31,

2012

(unaudited)


December 31,
2011

ASSETS




CURRENT ASSETS





Cash and cash equivalents

$       19,925


$     38,453


Short-term investments

29,182


11,051


Accounts receivable, net

38,073


48,237


Paper inventory

4,580


7,225


Deferred television production costs

434



Other current assets

3,335


4,858


Total current assets

95,529


109,824





PROPERTY AND EQUIPMENT, net

10,738


13,396

GOODWILL, net

850


45,107

OTHER INTANGIBLE ASSETS, net

45,203


45,215

OTHER NONCURRENT ASSETS, net

1,940


2,578


Total assets

$     154,260


$    216,120





LIABILITIES AND SHAREHOLDERS' EQUITY




CURRENT LIABILITIES





Accounts payable and accrued liabilities

$       12,770


$      23,728


Accrued payroll and related costs

9,316


7,008


Current portion of deferred subscription revenue

13,168


16,018


Current portion of other deferred revenue

5,605


5,147


Total current liabilities

40,859


51,901





DEFERRED SUBSCRIPTION REVENUE

4,478


3,975

OTHER DEFERRED REVENUE

1,113


2,333

DEFERRED INCOME TAX LIABILITY

7,117


5,874

OTHER NONCURRENT LIABILITIES

5,177


4,090


Total liabilities

58,744


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: 41,161,289 and 40,893,964 shares issued and outstanding in 2012 and 2011, respectively

412


409

Class B Common Stock, $0.01 par value, 150,000,000 shares authorized: 25,984,625 shares issued and outstanding in 2012 and 2011

260


260

Capital in excess of par value

340,586


336,661

Accumulated deficit

(244,529)


(188,442)

Accumulated other comprehensive loss

(438)


(166)


96,291


148,722

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

(775)


(775)


Total shareholders' equity

95,516


147,947


Total liabilities and shareholders' equity

$    154,260


$     216,120

 

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 loss, a GAAP measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile net loss to adjusted EBITDA, non-cash equity compensation, depreciation and amortization, restructuring charges, other income/(expense) and income taxes are added back.








2012


2011



NET INCOME

$ 1,110


$ 4,197









Income tax provision

(394)


(470)









INCOME BEFORE INCOME TAXES

1,504


4,667









OTHER INCOME / (EXPENSE)






Income / (expense), net

144


(218)



Gain on sale of cost-based investment


7,647



Other-than-temporary loss on cost-based investments


(2,724)



Total other income

144


4,705









OPERATING INCOME / (LOSS)






Publishing

(2,343)


886



Merchandising

11,330


8,776



Broadcasting

2,953


(1,126)



Corporate

(10,580)


(8,574)



Total Operating Income / (Loss)

1,360


(38)









RESTRUCTURING CHARGES






Publishing

1,387


478



Merchandising


13



Broadcasting

287


246



Corporate

1,869


587



Total Restructuring Charges

3,543


1,324









DEPRECIATION AND AMORTIZATION

190


230



Publishing

15


8



Merchandising

83


111



Broadcasting

691


682



Corporate






Total Depreciation and Amortization

979


1,031









NON-CASH EQUITY COMPENSATION






Publishing

103


82



Merchandising

77


12



Broadcasting

8


6



Corporate

518


850



Total Non-Cash Equity Compensation

706


950









ADJUSTED EBITDA






Publishing

(663)


1,676



Merchandising

11,422


8,809



Broadcasting

3,331


(763)



Corporate

(7,502)


(6,455)



Adjusted EBITDA

$    6,588


$    3,267



 

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 net loss to adjusted EBITDA, non-cash equity compensation, depreciation and amortization, restructuring charges, non-cash impairment charges, other income/(expense) and income taxes are added back.








2012


2011



NET LOSS

$ (56,085)


$ (15,519)









Income tax provision

(1,602)


(1,580)









LOSS BEFORE INCOME TAXES

(54,483)


(13,939)









OTHER INCOME / (EXPENSE)






Interest income / (expense), net

836


(283)



Income on equity securities


15



Gain on sales of cost-based investments

1,165


7,647



Other-than-temporary loss on cost-based investments

(88)


(2,724)



Total other income

1,913


4,655









OPERATING (LOSS) / INCOME






Publishing

(62,029)


(6,464)



Merchandising

39,477


29,972



Broadcasting

2,354


(4,740)



Corporate

(36,198)


(37,362)



Total Operating Loss

(56,396)


(18,594)









RESTRUCTURING CHARGES






Publishing

1,971


828



Merchandising

81


13



Broadcasting

816


600



Corporate

1,943


3,675



Total Restructuring Charges

4,811


5,116









GOODWILL IMPAIRMENT

44,257










DEPRECIATION AND AMORTIZATION






Publishing

742


774



Merchandising

52


32



Broadcasting

388


470



Corporate

2,825


2,702



Total Depreciation and Amortization

4,007


3,978









NON-CASH EQUITY COMPENSATION






Publishing

587


682



Merchandising

455


224



Broadcasting

50


67



Corporate

2,715


4,523



Total Non-Cash Equity Compensation

3,807


5,496









ADJUSTED EBITDA






Publishing

(14,472)


(4,180)



Merchandising

40,065


30,241



Broadcasting

3,608


(3,603)



Corporate

(28,715)


(26,462)



Adjusted EBITDA

$ 486


$ (4,004)



 

SOURCE Martha Stewart Living Omnimedia



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