2014

Martha Stewart Living Omnimedia Reports Second Quarter 2012 Results

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 21st.
  • 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)

 

LOSS BEFORE INCOME TAXES

(2,297)


(2,514)






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

 

LOSS BEFORE INCOME TAXES

(5,519)


 

(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,

2012

(unaudited)


December 31,

 2011

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: 25,984,625 shares 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)

 

LOSS BEFORE INCOME TAXES

(2,297)


(2,514)









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

 

LOSS BEFORE INCOME TAXES

(5,519)


(9,184)






  Income tax provision

(798)


(831)




NET LOSS

$    (6,317)


$   (10,015)

 

SOURCE Martha Stewart Living Omnimedia, Inc.



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