NEW YORK, April 30 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) today announced its results for the first quarter
of 2003. Revenues for the quarter were $58.0 million, compared to $68.0
million in the prior year's quarter. First quarter 2003 operating income
(loss) was $(7.5) million compared to $5.8 million for the first quarter of
2002. EBITDA (loss) for the first quarter of 2003 was $(5.4) million, compared
to $8.8 million in the same period one year ago. Earnings (loss) per share
from continuing operations were $(0.09) for the first quarter of 2003,
compared to $0.08 in the 2002 quarter.
"Our business results reflect considerable pressure associated with the
continuing governmental investigations of my sale of non-Company stock. In the
face of these pressures, the Company nonetheless remains focused on creating
and producing the original how-to content and quality products that fuel our
Company and define our brand, thus ensuring our core customer following. These
recent ideas and products include the new digest-sized Everyday Food magazine
and our recently launched Martha Stewart Signature furniture collection, both
of which are experiencing early strong consumer response," said Martha
Stewart, Chairman and Chief Executive Officer.
Sharon Patrick, President and Chief Operating Officer, commented, "Our
philosophy for managing through this sustained period of uncertainty has been
to invest in preserving the growth potential of our core assets through strict
adherence to quality standards, retention of our talented employees, and
maintenance of production schedules -- as well as to invest in new growth
opportunities such as Everyday Food. Additionally, we are carefully managing
costs in those areas that do not conflict with our preservation and growth
objectives, as demonstrated by our Internet/Direct Commerce segment
restructuring, which is proceeding on plan. Once the current uncertainty is
resolved, the Company will assess the necessary steps to optimize financial
results. We believe that this strategy, while currently producing near-term
losses, best maximizes long-term shareholder value."
First Quarter 2003 Results
The Company posted revenues in the quarter of $58.0 million, compared to
$68.0 million for the prior year's quarter. Publishing revenues in the
quarter were $34.1 million, compared to $43.1 million in the year-ago period.
The decline is principally due to a reduction in advertising and circulation
revenue from Martha Stewart Living magazine, partially offset by revenue from
Everyday Food. Advertising pages in Martha Stewart Living declined 28% in the
quarter, according to Media Industry Newsletter. In addition to the
publication of two test issues of Everyday Food, the Company published two
special interest publications in the first quarter of 2003, compared to one
issue in the first quarter of 2002. Television revenues were $6.6 million in
the current year's quarter, compared to $6.7 million in the prior year's
quarter. Increased revenues from cable television programs were offset by
lower revenues from the syndicated program and the loss of airtime on CBS's
The Early Show. Merchandising segment revenues in the first quarter of 2003
decreased 7% to $10.3 million, from $11.1 million in the first quarter of
2002. Revenues in the 2003 quarter reflect higher revenue from the
introduction of Martha Stewart Signature products, offset by lower sales of
our Martha Stewart Everyday products sold at Kmart. Revenues recorded in the
quarter from our contract with Kmart reflect royalties earned on actual
product sales, without giving effect to annual minimum royalty amounts that
are payable in early 2004. Revenues in the Internet/Direct Commerce segment
were $7.0 million, compared to $7.1 million in the same period a year ago,
resulting from lower advertising revenues, offset by higher revenues from
product sales.
First quarter 2003 consolidated operating loss was $(7.5) million compared
to operating income of $5.8 million in the first quarter of 2002. First
quarter 2003 consolidated EBITDA (loss) was $(5.4) million, compared to $8.8
million in the first quarter of 2002. First quarter 2003 operating income from
the Publishing segment was $5.0 million compared to $15.2 million in the first
quarter of 2002. Publishing EBITDA was $5.0 million for the quarter, compared
to $15.3 million in the year-ago period. Lower advertising and circulation
revenue in Martha Stewart Living magazine and lower advertising revenues from
special issues in the quarter contributed to the operating income and EBITDA
decline. First quarter 2003 operating income in the Television segment was
$0.2 million, compared to $0.4 million in the first quarter of 2002.
Television EBITDA was $0.6 million for this year's first quarter, compared to
$0.8 million in the prior year's first quarter. Declines in Television
operating income and EBITDA were primarily due to higher marketing expenses
incurred in the current year's quarter, as well as the loss of high margin
revenues from CBS's The Early Show. First quarter 2003 operating income in the
Merchandising segment was $7.0 million, compared to $7.4 million in the first
quarter of 2002. Merchandising EBITDA was $7.2 million, compared to $7.6
million in the prior year's quarter. The operating income and EBITDA decline
resulted from lower royalty revenue. Operating loss in the Internet/Direct
Commerce segment was $(8.3) million for the first quarter of 2003, compared to
$(7.4) million in the first quarter of 2002. The Internet/Direct Commerce
segment's EBITDA loss was $(8.0) million in the 2003 quarter, compared to
$(6.7) million in the year-ago period. The current year's quarterly results
include non-recurring costs of approximately $1.2 million, including severance
costs and consulting fees, associated with the restructuring of the segment.
In addition, the increase in the operating and EBITDA losses for the quarter
resulted from lower advertising revenue and the costs associated with
increased catalog circulation. Operating loss in the Internet/Direct Commerce
segment in the 2003 quarter benefited from lower depreciation. Corporate
overhead increased to $10.2 million, compared to $8.0 million in the prior
year's quarter, primarily as a result of higher legal and professional fees
incurred as a result of corporate issues resulting from investigations into a
personal sale of non-Company stock by Martha Stewart, as well as higher
insurance costs. Including depreciation and amortization, corporate overhead
was $11.5 million for the first quarter of 2003, compared to $9.8 million in
the first quarter of 2002.
Consolidated depreciation and amortization decreased $0.9 million to $2.1
million in the first quarter of 2003, compared to $3.0 million for the first
quarter 2002, due primarily to lower depreciation resulting from the
write-down of website development costs in the fourth quarter of 2002.
Net income (loss) from continuing operations of $(4.3) million, or $(0.09)
per share, in the first quarter of 2003 compares to net income from continuing
operations of $3.7 million, or $0.08 per share, in the first quarter of 2002.
The 2002 first quarter results included the cumulative effect of
accounting change resulting from the adoption of FAS 142 that resulted in the
reduction to the carrying value of the Company's goodwill by $5.0 million
($3.1 million after tax).
Basis of Presentation
The Company believes EBITDA (earnings before interest, taxes, depreciation
and amortization) is an appropriate measure when evaluating the operating
performance of its business segments and the Company on a consolidated basis.
EBITDA is defined as operating income (loss) before depreciation and
amortization. EBITDA is used externally by the Company's investors, analysts,
and industry peers. The Company believes EBITDA should be considered in
addition to, not as a substitute for, operating income (loss), net income
(loss), cash flows, and other measures of financial performance prepared in
accordance with generally accepted accounting principles ("GAAP"). As EBITDA
is not a measure of performance calculated in accordance with GAAP, this
measure may not be comparable to similarly titled measures employed by other
companies. A reconciliation of EBITDA to operating income (loss) is provided
in the financial statements included with this release.
Trends and Outlook
James Follo, the Company's Chief Financial Officer, commented, "Our large
cash balance, strong balance sheet, and low capital requirements allow us to
take a long-term view of the business, while we carefully manage our costs in
the near term. Our current outlook for the second quarter of 2003 is for a
loss from continuing operations of approximately $(0.03) to $(0.05) per
share."
Martha Stewart Living Omnimedia, Inc. (MSO) is a leading provider of
original how-to information that turns dreamers into doers, inspiring and
engaging consumers with unique content and high-quality products for the home.
MSO's creative experts develop content within eight core areas -- Home,
Cooking and Entertaining, Gardening, Crafts, Holiday, Keeping, Weddings, and
Baby and Kids -- that provide consumers with ideas and products to celebrate
their homes and the domestic arts. MSO is organized into four business
segments -- Publishing, Television, Merchandising and Internet/Direct
Commerce.
Following this release, the Company will host a conference call with
analysts and investors at 11:00 am ET that will be broadcast live over the
Internet at www.marthastewart.com/ir.
This press release contains 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 and can be
identified by the use of terminology such as "may," "will," "should," "could",
"expects," "plans," and "intends." The Company's actual results may differ
materially from those projected in these statements, and factors that could
cause such differences include prolonged and continued negative publicity
relating to Martha Stewart; a loss of the services, or diminution in the
reputation, of Martha Stewart; the effect on the Company of the uncertainty
relating to the nature and timing of the resolution of the ongoing
governmental investigations concerning a sale of non-Company stock by Martha
Stewart and any adverse resolution of such investigations; adverse resolution
of some or all of the Company's ongoing litigation; downturns in national
and/or local economies; an inability to execute the restructuring of our
Internet/Direct Commerce segment as planned; shifts in our business
strategies; a softening of the domestic advertising market; changes in
consumer reading, purchasing and/or television viewing patterns; 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; unexpected developments in Kmart
Corporation's Chapter 11 proceedings; 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 filings with the Securities and
Exchange Commission, especially under the heading "Management's Discussion and
Analysis", 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 Income Statement
Three Months Ended March 31,
(in thousands, except per share amounts)
2003 2002 % change
REVENUES
Publishing $34,060 $43,095 -21.0%
Television 6,615 6,711 -1.4%
Merchandising 10,328 11,075 -6.7%
Internet/Direct Commerce 7,019 7,078 -0.8%
Total revenues 58,022 67,959 -14.6%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 35,625 36,771 -3.1%
Selling and promotion 12,821 10,682 20.0%
General and administrative 14,974 11,658 28.4%
Depreciation and amortization 2,141 3,017 -29.0%
Total operating costs
and expenses 65,561 62,128 5.5%
OPERATING INCOME (LOSS) (7,539) 5,831 -229.3%
Interest income, net 402 490 -18.0%
INCOME (LOSS) BEFORE INCOME
TAXES (7,137) 6,321 -212.9%
Income tax benefit (provision) 2,849 (2,593) 209.9%
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE (4,288) 3,728 -215.0%
Loss from discontinued operations,
net of tax benefit (221) (825) 73.2%
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (4,509) 2,903 -255.3%
Cumulative effect of accounting
change, net of tax benefit -- (3,137) nm
NET (LOSS) $(4,509) $(234) nm
EARNINGS (LOSS) PER SHARE -
BASIC AND DILUTED
Income (loss) from continuing
operations $(0.09) $0.08
Loss from discontinued
operations (0.00) (0.02)
Cumulative effect of
accounting change -- (0.06)
Net (Loss) $ (0.09) $(0.00)
WEIGHTED AVERAGE SHARES
OUTSTANDING --
Basic and Diluted 49,631 48,945
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended March 31,
(in thousands)
2003 2002 % change
REVENUES
Publishing $34,060 $43,095 -21.0%
Television 6,615 6,711 -1.4%
Merchandising 10,328 11,075 -6.7%
Internet/Direct Commerce 7,019 7,078 -0.8%
Total revenues 58,022 67,959 -14.6%
EBITDA
Publishing 5,013 15,252 -67.1%
Television 621 789 -21.3%
Merchandising 7,203 7,599 -5.2%
Internet/ Direct Commerce (8,005) (6,748) -18.6%
EBITDA before corporate
overhead 4,832 16,892 -71.4%
Corporate overhead (10,230) (8,044) -27.2%
Total EBITDA (5,398) 8,848 -161.0%
Depreciation and amortization (2,141) (3,017) 29.0%
OPERATING INCOME (LOSS) (7,539) 5,831 -229.3%
Interest income, net 402 490 -18.0%
INCOME (LOSS) BEFORE
INCOME TAXES (7,137) 6,321 -212.9%
Income tax benefit (provision) 2,849 (2,593) 209.9%
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE (4,288) 3,728 -215.0%
Loss from discontinued operations,
net of tax benefit (221) (825) 73.2%
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (4,509) 2,903 -255.3%
Cumulative effect of accounting
change, net of tax benefit -- (3,137) nm
NET (LOSS) $(4,509) $(234) nm
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
March 31, December 31,
2003 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $119,257 $131,664
Short-term investments 47,286 47,286
Accounts receivable, net 27,754 37,796
Inventories, net 9,211 8,654
Deferred television production costs 4,296 4,179
Income taxes receivable 3,331 --
Deferred income taxes 7,028 7,028
Other current assets 4,373 4,756
Total current assets 222,536 241,363
PROPERTY, PLANT, AND EQUIPMENT, net 29,466 31,288
INTANGIBLE ASSETS, net 44,257 44,257
DEFERRED INCOME TAXES 2,827 2,827
OTHER NONCURRENT ASSETS 4,500 4,807
Total assets $303,586 $324,542
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $30,446 $ 40,517
Accrued payroll and related costs 2,607 9,385
Income taxes payable -- 323
Current portion of deferred subscription
income 25,657 24,932
Total current liabilities 58,710 75,157
DEFERRED SUBSCRIPTION INCOME 7,939 7,715
OTHER NONCURRENT LIABILITIES 4,676 5,035
Total liabilities 71,325 87,907
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value,
350,000 shares authorized: 19,347 and
19,342 shares issued in 2003 and 2002,
respectively 194 194
Class B common stock, $0.01 par value,
150,000 shares authorized: 30,059 and
30,295 shares outstanding in 2003 and 2002,
respectively 301 303
Capital in excess of par value 181,542 181,629
Unamortized restricted stock (768) (993)
Retained earnings 51,767 56,277
233,036 237,410
Less class A treasury stock - 59 shares
at cost (775) (775)
Total shareholders' equity 232,261 236,635
Total liabilities and
shareholders' equity $303,586 $324,542
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended March 31,
(in thousands)
The following table presents segment information and a reconciliation of
EBITDA, a non-GAAP financial measure, to operating income (loss) on both a
consolidated and segment basis. To reconcile EBITDA to operating income
(loss), depreciation and amortization are deducted from EBITDA.
2003 2002 % change
REVENUES
Publishing $34,060 $43,095 -21.0%
Television 6,615 6,711 -1.4%
Merchandising 10,328 11,075 -6.7%
Internet/Direct Commerce 7,019 7,078 -0.8%
Total revenues $58,022 $67,959 -14.6%
EBITDA
Publishing $ 5,013 $15,252 -67.1%
Television 621 789 -21.3%
Merchandising 7,203 7,599 -5.2%
Internet/ Direct Commerce (8,005) (6,748) -18.6%
EBITDA before corporate
overhead 4,832 16,892 -71.4%
Corporate overhead (10,230) (8,044) -27.2%
Total EBITDA (loss) $(5,398) $8,848 -161.0%
DEPRECIATION AND AMORTIZATION
Publishing $( 41) $(40) 2.5%
Television (394) (434) -9.0%
Merchandising (168) (158) 6.3%
Internet/ Direct Commerce (247) (636) -61.2%
Corporate (1,291) (1,749) -26.2%
Total depreciation and
amortization $(2,141) $(3,017) -29.0%
OPERATING INCOME (LOSS)
Publishing $ 4,972 $15,212 -67.3%
Television 227 355 -36.3%
Merchandising 7,035 7,441 -5.5%
Internet/ Direct Commerce (8,252) (7,384) -11.8%
Corporate (11,521) (9,793) -17.6%
Total operating income
(loss) $(7,539) $5,831 -229.3%
SOURCE Martha Stewart Living Omnimedia, Inc.
/CONTACT: Investors - James Follo, Chief Financial Officer of Martha
Stewart Living Omnimedia, Inc., +1-212-827-8218; Media - Elizabeth Estroff of
Martha Stewart Living Omnimedia, Inc., +1-212-827-8281; or Steve Lipin of
Brunswick Group, Inc., +1-212-333-3810, for Martha Stewart Living Omnimedia,
Inc./
/Web site: http://www.marthastewart.com /
(MSO)
