Martha Stewart Living Omnimedia Reports Third Quarter 2010 Results

-- Quarterly Results Reflect Strong Merchandising Performance

-- Robust Gains in Internet Advertising Revenue; Continued Stabilization in Print Advertising Sales

Oct 27, 2010, 08:31 ET from Martha Stewart Living Omnimedia, Inc.

NEW YORK, Oct. 27 /PRNewswire-FirstCall/ -- Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the third quarter ended September 30, 2010. The Company reported revenue for the third quarter of $49.7 million.

Charles Koppelman, Executive Chairman and Principal Executive Officer, said, “For the past five years, we have been focused on diversifying and expanding our Merchandising business for long-term growth and we are seeing our efforts bear fruit in this quarter’s results. We are applying the same aggressive mindset to our Broadcasting business with our slate of new programming on Hallmark Channel. Broadcasting has been challenging due largely to the remaining run-off results from syndication in the quarter. Our Internet business continues to perform very well and our Publishing business had a solid quarter.”

Robin Marino, President and Chief Executive Officer of Merchandising, stated: “Merchandising delivered a strong performance in the quarter. Our two newest product lines — Martha Stewart Living at The Home Depot and Martha Stewart Pets at PetSmart — were important contributors and we continue to expand on our offerings with these retailers. Our Martha Stewart Collection at Macy’s and our Martha Stewart Crafts line also registered solid results in the quarter. We feel very positive about our Merchandising business as we look to the fourth quarter and beyond.”

Third Quarter 2010 Summary

Revenues were $49.7 million in the third quarter of 2010, compared to $49.8 million in the third quarter of 2009.  

Adjusted EBITDA for the third quarter of 2010 was a loss of $(5.6) million, flat with the prior year period. This year’s third quarter included the positive financial impact of a smaller cash bonus accrual in the quarter compared to last year’s quarter.  

Operating loss for the third quarter of 2010 was $(7.9) million, compared to operating loss of $(11.7) million for the third quarter of 2009. This year’s third quarter benefited from both the smaller cash accrual and the absence of any non-cash bonus accrual, which was included in last year’s third quarter.

Net loss per share was $(0.16) for the third quarter of 2010, compared to net loss per share of $(0.22) for the third quarter of 2009.

Third Quarter 2010 Results by Segment

Three Months Ended, September 30

(unaudited, in thousands)

2010

2009

REVENUES

Publishing

$    30,038

$    27,053

Broadcasting

5,795

11,036

Internet

4,280

2,761

Merchandising

9,575

8,931

Total Revenues

$    49,688

$    49,781

ADJUSTED EBITDA

 Publishing

$         (266)

$     (1,457)

 Broadcasting

(3,459)

1,893

 Internet

(576)

(1,415)

 Merchandising

5,464

4,252

 Corporate

(6,739)

(8,850)

 Total Adjusted EBITDA

$      (5,576)

$     (5,577)

OPERATING (LOSS)/INCOME

 Publishing

$            (368)

$     (2,480)

 Broadcasting

(4,074)

757

 Internet

(745)

(2,070)

 Merchandising

5,501

3,524

 Corporate

(8,222)

(11,412)

 Total Operating Loss

$      (7,908)

$    (11,681)

Publishing

Revenues in the third quarter of 2010 were $30.0 million, compared to $27.1 million in the prior year’s third quarter. The increase is primarily due to timing of the Fall issue of Martha Stewart Weddings, which was recognized in the third quarter of 2010 compared to the fourth quarter of 2009.  

Adjusted EBITDA was a loss of $(0.3) million in the third quarter of 2010, compared to a loss of $(1.5) million in the prior year’s quarter.

Operating loss was $(0.4) million for the third quarter of 2010, compared to operating loss of $(2.5) million in the third quarter of 2009.

Highlights

  • Martha Stewart Living advertising revenue was up 9% versus the prior year quarter.
  • MSLO’s first digital magazine for the iPad—a special issue of Martha Stewart Living—will launch in mid-November.
  • The Company increased the rate bases for Martha Stewart Living, Everyday Food and Whole Living magazines, effective with the January 2011 issues.

Broadcasting

Revenues in the third quarter of 2010 were $5.8 million, compared to $11.0 million in the third quarter of 2009 due to the absence of TurboChef in this year’s third quarter, lower revenue from the remaining runs of “The Martha Stewart Show” in syndication, lower revenue associated with “Whatever, Martha!,” which was delivered in the third quarter of last year and will be delivered in the fourth quarter of this year, and lower guaranteed radio revenue.

Adjusted EBITDA was a loss of $(3.5) million for the third quarter of 2010 compared to adjusted EBITDA of $1.9 million in the prior year's third quarter.

Operating loss was $(4.1) million for the third quarter of 2010, compared to operating income of $0.8 million in the third quarter of 2009.

Highlights

  • MSLO launched a slate of programming on Hallmark Channel on September 13, including the sixth season of “The Martha Stewart Show,” and two new series featuring MSLO experts and personalities, “Whatever with Alexis & Jennifer” and “Mad Hungry with Lucinda Scala Quinn.”
  • On September 19, Martha Stewart hosted “Martha Stewart Presents: The Women Who Dress America,” the first in a series of hour-long, primetime interview specials on Hallmark Channel.
  • Martha is also hosting a series of holiday specials on Hallmark Channel; “Tricking and Treating with Martha Stewart” aired on October 10, and “Martha Stewart’s Holiday Open House” is expected to air in December.
  • Chef Emeril Lagasse’s “Fresh Food Fast” has been well received on Food Network’s Cooking Channel; the show premiered on July 10.

Internet

Revenues were $4.3 million in the third quarter of 2010, compared to $2.8 million in the third quarter of 2009, due to strong advertising growth.  

Adjusted EBITDA was a loss of $(0.6) million in the third quarter of 2010 compared to a loss of $(1.4) million in the prior year’s quarter.  

Operating loss was $(0.7) million in the third quarter of 2010, compared to $(2.1) million in the third quarter of 2009.

Highlights

  • Advertising revenue was up over 50% in the third quarter compared to the prior year’s quarter.  
  • According to comScore panel data, unique visitors across MSLO’s websites increased 31% compared to the prior year’s quarter, with page views up 37% over the prior year’s period.
  • “Martha Stewart’s Everyday Food” app for the iPhone and iPod Touch has been downloaded nearly 200,000 times since its mid-February launch; a version of the app launched on HP’s new line of Photosmart wi-fi printers in September.
  • The new “Martha Stewart Makes Cookies” iPad app is expected to launch on November 1, coinciding with the publication of “Holiday Cookies,” a special magazine issue available on newsstands beginning November 1.

Merchandising

Revenues were $9.6 million for the third quarter of 2010, as compared to $8.9 million in the prior year's third quarter.

Adjusted EBITDA was $5.5 million for the third quarter of 2010, compared to $4.3 million in the prior year's third quarter.

Operating income was $5.5 million for the third quarter of 2010, compared to operating income of $3.5 million in the third quarter of 2009.

Highlights

  • The Martha Stewart Living line at The Home Depot is performing very well, driven by sales of the new carpet program. The cabinets, countertops and hardware program launched in the quarter and a holiday décor assortment began rolling out in early October.
  • The Martha Stewart Collection at Macy’s demonstrated continued strength led by sales in the soft home category; the lower price point Martha Stewart Essentials program launched successfully in the quarter.
  • Martha Stewart Crafts performed well in the quarter due to expanded distribution, including shipments of seasonal Halloween products into Jo-Ann Fabrics & Crafts, and Martha’s HSN appearance in July.
  • Martha Stewart Pets at PetSmart had a robust debut, led by solid sales of toys, feeding bowls and accessories, and grooming tools; the line is expected to expand in Spring 2011.
  • Chef Emeril Lagasse’s core partnerships, including his All-Clad cookware, his coffee with Timothy’s and his line of appliances with T-Fal, registered strong double-digit growth in wholesale sales in the quarter.

Corporate

Adjusted EBITDA was a loss of $(6.7) million in the third quarter of 2010 compared to a loss of $(8.9) million in the prior year’s quarter.  Total Corporate expenses were $(8.2) million in the third quarter of 2010 down from $(11.4) million in the prior year's quarter.  

The Company will host a conference call with analysts and investors on October 27, 2010 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 November 11, 2010.

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 ("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 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 four business segments: Publishing, Broadcasting, Internet, 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," "anticipates," "believes," "estimates," "potential" 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; further downturns in national and/or local 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; failure to achieve results from Hallmark Channel broadcasting comparable to our expectations; 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." These reports 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 September 30,

(unaudited, in thousands, except per share amounts)

2010

2009

REVENUES

Publishing

$     30,038

$    27,053

Broadcasting

5,795

11,036

Internet

4,280

2,761

Merchandising

9,575

8,931

Total revenues

49,688

49,781

OPERATING COSTS AND EXPENSES

Production, distribution and editorial

29,184

29,732

Selling and promotion

14,803

13,232

General and administrative

11,982

16,402

Depreciation and amortization

1,627

2,096

Total operating costs and expenses

57,596

61,462

OPERATING LOSS

(7,908)

(11,681)

OTHER (EXPENSE) / INCOME

Interest income/(expense), net

46

(1)

Loss on sale of fixed asset

(647)

-

Gain on sale of short-term investments

403

-

Other

(5)

-

Total other expense  

(203)

(1)

LOSS BEFORE INCOME TAXES

(8,111)

(11,682)

Income tax provision

(475)

(432)

NET LOSS

$      (8,586)

$    (12,114)

LOSS PER SHARE – BASIC AND DILUTED

Net loss

$     (0.16)

$    (0.22)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Basic and Diluted

54,487

53,865

Martha Stewart Living Omnimedia, Inc.

Consolidated Statements of Operations

Nine Months Ended September 30,

(unaudited, in thousands, except per share amounts)

2010

2009

REVENUES

  Publishing

$      88,901

$    88,938

  Broadcasting

26,076

31,859

  Internet

12,044

9,543

  Merchandising

31,200

26,867

   Total revenues

158,221

157,207

OPERATING COSTS AND EXPENSES

  Production, distribution and editorial

85,837

87,212

  Selling and promotion

42,889

41,569

  General and administrative

37,887

43,100

  Depreciation and amortization

3,689

5,994

  Impairment charge

-

12,600

   Total operating costs and expenses

170,302

190,475

OPERATING LOSS

(12,081)

(33,268)

OTHER EXPENSE

  Interest expense, net

(62)

(91)

  Loss on sale of fixed asset

(647)

-

  Gain on sale of short-term investments

403

-

  Loss on equity securities

-

(547)

  Other

(24)

(236)

   Total other expense

(330)

(874)

LOSS BEFORE INCOME TAXES

(12,411)

(34,142)

  Income tax provision

(1,289)

(1,190)

NET LOSS

$     (13,700)

$    (35,332)

LOSS PER SHARE – BASIC AND DILUTED

  Net Loss

$       (0.25)

$        (0.66)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

  Basic and diluted

54,416

53,817

Martha Stewart Living Omnimedia, Inc.

Consolidated Balance Sheets

(in thousands, except per share amounts)

September 30,

2010

(unaudited)

December 31,

2009

ASSETS          

CURRENT ASSETS      

  Cash and cash equivalents

$   27,238

$    25,384

  Short-term investments

14,167

13,085

  Receivable – Sale of short-term investment

1,001

-

  Accounts receivable, net

39,705

56,364

  Inventory

5,285

5,166

  Deferred television production costs

6,162

3,788

  Other current assets

5,066

5,709

     Total current assets

98,624

109,496

PROPERTY, PLANT AND EQUIPMENT, net

14,767

17,268

GOODWILL, net

45,107

45,107

OTHER INTANGIBLE ASSETS, net

46,550

47,070

OTHER NONCURRENT ASSETS, net

11,847

10,850

     Total assets

$   216,895

$    229,791

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

  Accounts payable and accrued liabilities

$    26,728

$    26,752

  Accrued payroll and related costs

8,538

7,495

  Current portion of deferred subscription income

15,935

18,587

  Current portion of other deferred revenue

6,132

4,716

  Current portion loan payable

1,500

-

     Total current liabilities

58,833

57,550

DEFERRED SUBSCRIPTION INCOME

4,626

5,672

OTHER DEFERRED REVENUE

1,803

2,759

LOAN PAYABLE

9,000

13,500

DEFERRED INCOME TAX LIABILITY

4,208

3,200

OTHER NONCURRENT LIABILITIES

3,638

3,290

     Total liabilities

82,108

85,971

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

  Class A common stock, $0.01 par value, 350,000 shares authorized:

     28,433 and 28,313 shares outstanding in 2010 and 2009,

     respectively.

284

283

  Class B common stock, $0.01 par value, 150,000 shares authorized:

     26,568 and 26,690 shares outstanding in 2010 and 2009,

     respectively.

266

267

  Capital in excess of par value

294,304

290,387

  Accumulated deficit

(160,305)

(146,605)

  Accumulated other comprehensive income

1,013

263

135,562

144,595

  Less class A treasury stock – 59 shares at cost

(775)

(775)

     Total shareholders' equity

134,787

143,820

     Total liabilities and shareholders' equity

$     216,895

$   229,791

Martha Stewart Living Omnimedia, Inc.

Supplemental Disclosures Regarding Non-GAAP Financial Information

Three Months Ended September 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 operating  income/(loss), depreciation and amortization, and  non-cash equity compensation are added back to operating income/(loss).  

2010

2009

ADJUSTED EBITDA

  Publishing

$       (266)

$    (1,457)

  Broadcasting

(3,459)

1,893

  Internet

(576)

(1,415)

  Merchandising

5,464

4,252

  Corporate

(6,739)

(8,850)

Adjusted EBITDA

(5,576)

(5,577)

NON-CASH EQUITY COMPENSATION

  Publishing

33

967

  Broadcasting

3

437

  Internet

(15)

163

  Merchandising

(50)

714

  Corporate

734

1,727

   Total Non-Cash Equity Compensation

705

4,008

DEPRECIATION AND AMORTIZATION

  Publishing

69

56

  Broadcasting

612

699

  Internet

184

492

  Merchandising

13

14

  Corporate

749

835

   Total Depreciation and Amortization

1,627

2,096

OPERATING (LOSS) / INCOME

  Publishing

(368)

(2,480)

  Broadcasting

(4,074)

757

  Internet

(745)

(2,070)

  Merchandising

5,501

3,524

  Corporate

(8,222)

(11,412)

   Total Operating Loss

(7,908)

(11,681)

OTHER INCOME / (EXPENSE)

Interest income/(expense), net

46

(1)

Loss on sale of fixed asset

(647)

-

Gain on sale of short-term investments

403

-

Other

(5)

-

Total other expense

(203)

(1)

LOSS BEFORE INCOME TAXES

(8,111)

(11,682)

Income tax provision

(475)

(432)

NET LOSS

$   (8,586)

$   (12,114)

Martha Stewart Living Omnimedia, Inc.

Supplemental Disclosures Regarding Non-GAAP Financial Information

Nine Months Ended September 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 operating income/(loss), depreciation and amortization, non-cash equity compensation, and non-cash impairment charges are added back to operating income/(loss).  

2010

2009

ADJUSTED EBITDA

  Publishing

$   1,265

$    49

  Broadcasting

(1,389)

4,806

  Internet

(1,650)

(2,879)

  Merchandising

18,824

14,830

  Corporate

(21,267)

(24,611)

Adjusted EBITDA

(4,217)

(7,805)

NON-CASH EQUITY COMPENSATION

  Publishing

465

1,219

  Broadcasting

217

700

  Internet

17

234

  Merchandising

635

1,123

  Corporate

2,841

3,593

   Total Non-Cash Equity Compensation

4,175

6,869

DEPRECIATION AND AMORTIZATION

  Publishing

169

186

  Broadcasting

748

837

  Internet

753

1,461

  Merchandising

35

49

  Corporate

1,984

3,461

   Total Depreciation and Amortization

3,689

5,994

IMPAIRMENT ON MERCHANDISING EQUITY INVESTMENTS

-

12,600

OPERATING (LOSS) / INCOME

  Publishing

631

(1,356)

  Broadcasting

(2,354)

3,269

  Internet

(2,420)

(4,574)

  Merchandising

18,154

1,058

  Corporate

(26,092)

(31,665)

    Total Operating Loss

(12,081)

(33,268)

OTHER INCOME / (EXPENSE)

Interest expense, net

(62)

(91)

Loss on sale of fixed asset

(647)

-

Gain on sale of short-term investments

403

-

Loss on equity securities

-

(547)

Other

(24)

(236)

Total other expense

(330)

(874)

LOSS BEFORE INCOME TAXES

(12,411)

(34,142)

Income tax provision

(1,289)

(1,190)

NET LOSS

$   (13,700)

$   (35,332)

SOURCE Martha Stewart Living Omnimedia, Inc.



RELATED LINKS

http://www.marthastewart.com