NEW YORK, July 27 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) announced its results today for the second quarter
of 2005.
Revenues for the second quarter of 2005 were $46.0 million, compared to
$44.1 million in the prior year's quarter. Operating income before
depreciation and amortization, and non-cash equity compensation ("OIDA") for
the second quarter of 2005 was a loss of $(11.2) million, compared to an OIDA
loss of $(15.2) million in the same period last year. Operating loss for the
second quarter was $(34.2) million, compared to an operating loss of $(17.8)
million for the second quarter of 2004. Loss per share from continuing
operations was $(0.65) for the second quarter of 2005, compared to a loss per
share from continuing operations of $(0.36) in the second quarter of 2004.
The current period results include a $16.8 million ($0.33 per share) non-cash
charge related to the vesting of certain warrants granted in connection with
the production of our new syndicated television show and certain other
employee-related charges of $3.2 million ($0.06 per share).
Susan Lyne, President and Chief Executive Officer, said: "The momentum we
began to build early in 2005 is starting to deliver a quantifiable improvement
in performance. We have exceeded our own plan both in terms of results and in
the success of our efforts to leverage the consumer connection with Martha and
the brand. We expect to achieve breakeven OIDA in the second half of 2005, an
improvement of approximately $15 million over the second half of 2004.
"In Publishing, our flagship magazine, Martha Stewart Living, continues to
achieve solid increases in advertising. At this point in the selling cycle, we
are feeling very good about indicators for 2006 advertising page growth.
Everyday Food continues to please readers and win new advertisers.
Importantly, we are working on numerous multi-platform opportunities that
allow us to offer advertisers access to a common, loyal and engaged audience
across print, broadcast and Internet.
"We are now hard at work readying the first season of our new daily
syndicated television show, 'Martha'. All business segments stand to benefit
from increased brand visibility as we return to television this fall with both
our new daytime show and 'The Apprentice: Martha Stewart'. Our recently
announced partnership with Discovery Communications will give us a platform to
create new lifestyle programming, while expanding the audience for our current
product.
"We are actively pursuing opportunities to capitalize on our libraries and
expertise by developing products that will enrich the daily lives of women
while generating cash flow for the Company. We are all mindful of the
standard our customers expect from us and we are focused on execution as we
look for new opportunities to inspire them."
Second Quarter 2005 Results by Segment
Publishing
Revenues in the second quarter of 2005 were $31.7 million, compared to
$23.7 million in the second quarter of 2004, up 34%. Adjusting for
Body + Soul, which was acquired in August 2004, revenue increased 24%. The
revenue growth was driven by higher advertising revenue in both Everyday Food
and Martha Stewart Living. Advertising pages in Martha Stewart Living
increased 42% in the quarter, while Everyday Food increased advertising pages
by 65%. Advertising revenue in both publications increased ahead of page
growth. We are currently focused on 2006 advertising revenue growth and we
are working on numerous multi-platform opportunities that allow us to offer a
common brand with loyal audiences across print, broadcast and Internet.
Building on our strong circulation trends, we will be raising the rate base of
Martha Stewart Living to 1.9 million copies per issue effective with the
January 2006 issue, up from 1.8 million. OIDA was a loss of $(2.6) million,
compared to a loss of $(3.7) million in the second quarter of 2004. Operating
loss was $(3.3) million for the second quarter of 2005, compared to an
operating loss of $(3.9) million in the second quarter of 2004. The improved
operating results are principally due to higher advertising revenue in both
Martha Stewart Living and Everyday Food. The 2005 quarter includes losses
related to Body + Soul magazine of $2.1 million.
Television
Revenues in the second quarter of 2005 were $1.8 million, compared to $3.1
million in the second quarter of 2004. The decline in revenue was primarily
related to the absence of our daily syndicated show, which stopped airing in
syndication in September 2004. During the quarter we have begun
pre-production activities for our new nationally syndicated program, entitled
'Martha', which is expected to begin airing on September 12th. The program has
been cleared in more than 96% of the country and sold in all top 20 U.S.
television markets. OIDA was a loss of $(2.7) million for the second quarter
of 2005, compared to a loss of $(3.5) million in the prior year's second
quarter. Operating loss for the second quarter of 2005 was $(20.0) million,
compared to an operating loss of $(3.5) million in the second quarter of 2004.
The second quarter of 2005 results were also impacted by severance costs of
approximately $0.7 million, while the prior year quarter was impacted by the
write-down of deferred television production costs of $1.5 million, resulting
from the early termination of a cable television licensing agreement. The
current quarter operating loss includes a non-cash charge of $16.8 million
associated with the vesting of certain warrants granted in connection with the
production of the syndicated program.
Merchandising
Revenues in the second quarter of 2005 were $10.2 million, compared to
$10.9 million in the second quarter of 2004. The lower revenue was
principally due to lower sales of our Martha Stewart Everyday products at
Kmart, with relative strength in garden and housewares, offsetting weakness in
soft home. The decline in royalty revenue from sales at Kmart in the quarter
will not impact full-year results from operations, as we are paid based on
guaranteed annual amounts. OIDA was $6.3 million in the current period,
compared to $5.5 million in the prior year's quarter. Second-quarter 2005
operating income was $6.0 million, compared to $5.3 million in the second
quarter of 2004. We recently launched Everyday Rooms, an assortment of
affordable, stylish, easy-to-assemble furniture, available exclusively at
Kmart stores nationwide. These new products, which include 20 pieces for the
bedroom, kitchen, and living room, have been well received by consumers.
During the quarter we also previewed the fourth collection of Martha Stewart
Signature Furniture - Opal Point. This line of furniture will officially
launch at the October furniture market and hit retail floors in early January.
The prior year quarter included $1.5 million of non-recurring professional
fees.
Internet/Direct Commerce
Revenues in the second quarter of 2005 were $2.2 million, compared to
$6.4 million in the same period a year ago. Revenue in the current quarter
principally reflects our online flower business, Marthasflowers.com.
Advertising revenue also increased in the quarter, although small in absolute
terms. Total revenue would have increased 18% in the quarter excluding the
results of the catalog operation, which was discontinued earlier this year.
OIDA was a loss of $(0.9) million in the second quarter of 2005, compared to a
loss of $(2.2) million in the second quarter of 2004. Operating loss was
$(1.1) million for the second quarter of 2005, compared to an operating loss
of $(2.4) million in the second quarter of 2004. As advertising revenue
continues to strengthen, and costs continue to moderate throughout the
remainder of the year, we expect to further reduce our losses in this segment.
Corporate Expenses
Corporate overhead, before depreciation and amortization and non-cash
equity compensation, was $11.3 million in second quarter of both 2005 and
2004. The current quarter includes certain non-recurring employee-related
costs of $1.5 million. Corporate expenses, including depreciation and
amortization and non-cash equity compensation, was $15.8 million, compared to
$13.3 million in the prior year's quarter. Higher levels of non-cash equity
compensation in the current year's quarter principally resulted from director
compensation and accelerated vesting of equity associated with employee
severance.
Trends and Outlook
James Follo, Chief Financial and Administrative Officer, commented: "We
expect to report significant year-over-year improvements in the second half of
2005 operating results, reflecting continued improvements in circulation and
advertising revenues, the September launch of new television and radio
programs, as well as the benefits associated with our Kmart contract whereby
we record the minimum payments due to MSLO in our fourth quarter. Accordingly,
we expect to report an OIDA loss in the third quarter of approximately $12-$13
million, followed by fourth quarter OIDA profit of $11-$12 million. We expect
to report a third quarter operating loss in the range of $25-$26 million and a
fourth quarter operating loss in the range of $1-$2 million. Both quarters
will include non-cash charges estimated at approximately $13 million,
principally reflecting charges related to the vesting of warrants granted in
connection with certain television programs."
Use of Non-GAAP Financial Information
The Company believes OIDA, a non-GAAP financial measure, is an appropriate
measure when evaluating the operating performance of its business segments and
the Company on a consolidated basis. OIDA is used externally by the Company's
investors, analysts, and industry peers. OIDA is among the primary metrics
used by management for planning and forecasting of future periods, and is
considered an important indicator of the operational strength of the Company's
businesses. The Company believes the presentation of this measure is relevant
and useful for investors because it allows investors to view performance in a
manner similar to the method used by the Company's management and makes it
easier to compare the Company's results with other companies that have
different capital structures or tax rates. The Company believes OIDA 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 OIDA 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 OIDA to operating
income (loss) is provided supplementary in the financial statements included
with this release.
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, Television, Merchandising, and Internet/Direct
Commerce. Martha Stewart Living Omnimedia, Inc. is listed on the New York
Stock Exchange under the ticker symbol MSO.
The Company will host a conference call with analysts and investors at
11:30 a.m. EDT that will be broadcast live over the Internet at
http://www.marthastewart.com/ir.
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 can be identified by terminology such as "may,"
"will," "should," "could", "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 by consumers, advertisers and business partners; an adverse
resolution to the pending SEC enforcement proceeding against Ms. Stewart
arising from her personal sale of non-Company stock; adverse resolution of
some or all of the Company's ongoing litigation; downturns in national and/or
local economies; shifts in our business strategies; a loss of the services of
Ms. Stewart; a loss of the services of other key personnel; 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; 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 of
Financial Condition and Results of Operations", 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,
(in thousands, except per share amounts)
2005 2004 % change
REVENUES
Publishing $31,707 $23,748 33.5 %
Television 1,847 3,056 -39.6 %
Merchandising 10,162 10,903 -6.8 %
Internet/Direct Commerce 2,235 6,365 -64.9 %
45,951 44,072 4.3 %
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 24,872 30,412 18.2 %
Selling and promotion 16,148 12,924 -24.9 %
General and administrative 16,145 15,903 -1.5 %
Non-cash equity compensation 21,276 1,025 nm
Depreciation and amortization 1,720 1,635 -5.2 %
Total operating costs and expenses 80,161 61,899 -29.6 %
OPERATING LOSS (34,210) (17,827) -91.9 %
Interest income, net 890 319 179.0 %
LOSS BEFORE INCOME TAXES (33,320) (17,508) -90.3 %
Income tax provision (59) (189) 68.8 %
LOSS FROM CONTINUING OPERATIONS BEFORE
LOSS FROM DISCONTINUED OPERATIONS (33,379) (17,697) -88.6 %
Loss from discontinued operations (120) (127) 5.5 %
NET LOSS $(33,499) $(17,824) -87.9 %
LOSS PER SHARE - BASIC AND DILUTED
Loss from continuing operations $(0.65) $(0.36)
Loss from discontinued operations (0.00) (0.00)
Net loss $(0.65) $(0.36)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic and Diluted 51,166 49,572
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended June 30,
(in thousands)
2005 2004 % change
REVENUES
Publishing $31,707 $23,748 33.5 %
Television 1,847 3,056 -39.6 %
Merchandising 10,162 10,903 -6.8 %
Internet/Direct Commerce 2,235 6,365 -64.9 %
Total revenues 45,951 44,072 4.3 %
OPERATING INCOME (LOSS) BEFORE DEPRECIATION
AND AMORTIZATION AND NON-CASH EQUITY
COMPENSATION
Publishing (2,595) (3,743) 30.7 %
Television (2,663) (3,472) 23.3 %
Merchandising 6,274 5,517 13.7 %
Internet/Direct Commerce (897) (2,177) 58.8 %
Operating Income (Loss) before 119 (3,875) nm
Depreciation and Amortization
and Corporate Expense and
Non-Cash Equity Compensation
Corporate Expense (11,333) (11,292) -0.4 %
Operating Loss before Depreciation and
Amortization and Corporate Expense
and Non-Cash Equity Compensation (11,214) (15,167) 26.1 %
Non-cash equity compensation (21,276) (1,025) nm
Depreciation and amortization (1,720) (1,635) -5.2 %
OPERATING LOSS (34,210) (17,827) -91.9 %
Interest income, net 890 319 179.0 %
LOSS BEFORE INCOME TAXES (33,320) (17,508) -90.3 %
Income tax provision (59) (189) 68.8 %
LOSS FROM CONTINUING OPERATIONS BEFORE
LOSS FROM DISCONTINUED OPERATIONS (33,379) (17,697) -88.6 %
Loss from discontinued operations (120) (127) 5.5 %
NET LOSS $(33,499) $(17,824) -87.9 %
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Six Months Ended June 30,
(in thousands, except per share amounts)
2005 2004 % change
REVENUES
Publishing $57,062 $47,670 19.7 %
Television 2,644 7,233 -63.4 %
Merchandising 19,554 21,692 -9.9 %
Internet/Direct Commerce 5,357 11,978 -55.3 %
84,617 88,573 -4.5 %
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 48,368 59,352 18.5 %
Selling and promotion 32,744 26,372 -24.2 %
General and administrative 29,595 31,426 5.7 %
Non-cash equity compensation 24,495 2,480 nm
Depreciation and amortization 3,407 3,309 -3.0 %
Total operating costs and expenses 138,609 122,939 -12.7 %
OPERATING LOSS (53,992) (34,366) -57.1 %
Interest income, net 1,659 681 143.6 %
LOSS BEFORE INCOME TAXES (52,333) (33,685) -55.4 %
Income tax provision (82) (3,332) nm
LOSS FROM CONTINUING OPERATIONS BEFORE
LOSS FROM DISCONTINUED OPERATIONS (52,415) (37,017) -41.6 %
Loss from discontinued operations (252) (288) 12.5 %
NET LOSS $(52,667) $(37,305) -41.2 %
LOSS PER SHARE - BASIC AND DILUTED
Loss from continuing operations $(1.03) $(0.75)
Loss from discontinued operations (0.00) (0.01)
Net loss $(1.03) $(0.75)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic and Diluted 51,015 49,518
Martha Stewart Living Omnimedia, Inc.
Segment Information
Six Months Ended June 30,
(in thousands except per share amounts)
2005 2004 % change
REVENUES
Publishing $57,062 $47,670 19.7 %
Television 2,644 7,233 -63.4 %
Merchandising 19,554 21,692 -9.9 %
Internet/Direct Commerce 5,357 11,978 -55.3 %
Total revenues 84,617 88,573 -4.5 %
OPERATING INCOME (LOSS) BEFORE DEPRECIATION
AND AMORTIZATION AND NON-CASH EQUITY
COMPENSATION
Publishing (10,287) (7,478) -37.6 %
Television (4,825) (5,362) 97 %
Merchandising 12,375 12,209 1.4 %
Internet/Direct Commerce (2,145) (4,613) 53.5 %
Operating Loss before Depreciation and (4,882) (5,244) 6.5 %
Amortization and Corporate Expense and
Non-Cash Equity Compensation
Corporate Expense (21,208) (23,333) 6.2 %
Operating Loss before Depreciation and
Amortization and Non-Cash
Equity Compensation (26,090) (28,577) 8.7 %
Non-cash equity compensation (24,495) (2,480) nm
Depreciation and amortization (3,407) (3,309) -3.0 %
OPERATING LOSS (53,992) (34,366) -57.1 %
Interest income, net 1,659 681 143.6 %
LOSS BEFORE INCOME TAXES (52,333) (33,685) -55.4 %
Income tax provision (82) (3,332) nm
LOSS FROM CONTINUING OPERATIONS BEFORE
LOSS FROM DISCONTINUED OPERATIONS (52,415) (37,017) -41.6 %
Loss from discontinued operations (252) (288)
NET LOSS $(52,667) $(37,305) -41.2 %
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
June 30, December 31,
2005 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $28,203 $104,647
Short-term investments 107,352 35,309
Accounts receivable, net 21,520 31,332
Inventories, net 3,787 5,229
Deferred television production costs 1,997 -
Income taxes receivable 5,107 6,321
Other current assets 5,432 3,573
Total current assets 173,398 186,411
PROPERTY, PLANT, AND EQUIPMENT, net 16,091 17,175
INTANGIBLE ASSETS, net 53,973 54,264
OTHER NONCURRENT ASSETS 5,755 6,828
Total assets $249,217 $264,678
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $23,596 $25,604
Accrued payroll and related costs 10,658 9,407
Income taxes payable 394 412
Current portion of deferred subscription
income 32,005 27,160
Total current liabilities 66,653 62,583
DEFERRED SUBSCRIPTION INCOME 6,697 7,668
DEFERRED ROYALTY REVENUE 5,423 3,438
OTHER NONCURRENT LIABILITIES 3,135 3,361
Total liabilities 81,908 77,050
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value, 350,000
shares authorized: 22,731 and 21,660 shares
issued in 2005 and 2004, respectively 227 217
Class B common stock, $0.01 par value, 150,000
shares authorized: 28,701 and 29,123 shares
outstanding in 2005 and 2004, respectively 287 291
Capital in excess of par value 237,771 196,781
Unamortized restricted stock (11,441) (2,793)
Accumulated deficit (58,760) (6,093)
168,084 188,403
Less class A treasury stock - 59 shares at cost (775) (775)
Total shareholders' equity 167,309 187,628
Total liabilities and shareholders' equity $249,217 $264,678
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Three Months Ended June 30,
(in thousands)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income, a GAAP measure,
and Operating Income before Depreciation and Amortization, including the
amortization of non-cash equity compensation, (OIDA), a non-GAAP measure. In
order to reconcile OIDA to operating income, depreciation and amortization and
non-cash equity compensation are added back to operating income.
2005 2004
OPERATING INCOME (LOSS)
Publishing $(3,264) $(3,852)
Television (20,027) (3,531)
Merchandising 5,988 5,314
Internet/ Direct Commerce (1,146) (2,426)
Operating Loss before Corporate
Expenses (18,449) (4,495)
Corporate Expenses (15,761) (13,332)
Total Operating Loss (34,210) (17,827)
DEPRECIATION AND AMORTIZATION
Publishing 248 58
Television 101 59
Merchandising 209 191
Internet/ Direct Commerce 239 249
Corporate Expenses 923 1,078
Total Depreciation and Amortization 1,720 1,635
NON-CASH EQUITY COMPENSATION
Publishing 421 51
Television 17,263 -
Merchandising 77 12
Internet/ Direct Commerce 10 -
Corporate Expenses 3,505 962
Total Non-Cash Equity Compensation 21,276 1,025
OPERATING INCOME (LOSS) BEFORE DEPRECIATION
AND AMORTIZATION AND NON-CASH
EQUITY COMPENSATION
Publishing (2,595) (3,743)
Television (2,663) (3,472)
Merchandising 6,274 5,517
Internet/ Direct Commerce (897) (2,177)
Operating Income (Loss) before
Depreciation and Amortization,
Non-Cash Equity Compensation, and
Corporate Expenses 119 (3,875)
Corporate Expenses (11,333) (11,292)
Operating Loss Before Depreciation and
Amortization and Non-Cash Equity
Compensation $(11,214) $(15,167)
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Six Months Ended June 30,
(in thousands)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income, a GAAP measure,
and Operating Income before Depreciation and Amortization, including the
amortization of non-cash equity compensation, (OIDA), a non-GAAP measure. In
order to reconcile OIDA to operating income, depreciation and amortization and
non-cash equity compensation are added back to operating income.
2005 2004
OPERATING INCOME (LOSS)
Publishing $(11,982) $(7,700)
Television (22,299) (5,478)
Merchandising 11,803 11,803
Internet/ Direct Commerce (2,655) (5,105)
Operating Loss before Corporate
Expenses (25,133) (6,480)
Corporate Expenses (28,859) (27,886)
Total Operating Loss (53,992) (34,366)
DEPRECIATION AND AMORTIZATION
Publishing 495 120
Television 147 116
Merchandising 418 381
Internet/ Direct Commerce 491 492
Corporate Expenses 1,856 2,200
Total Depreciation and Amortization 3,407 3,309
NON-CASH EQUITY COMPENSATION
Publishing 1,200 102
Television 17,327 -
Merchandising 154 25
Internet/ Direct Commerce 19 -
Corporate Expenses 5,795 2,353
Total Non-Cash Equity Compensation 24,495 2,480
OPERATING INCOME (LOSS) BEFORE DEPRECIATION
AND AMORTIZATION AND NON-CASH
EQUITY COMPENSATION
Publishing (10,287) (7,478)
Television (4,825) (5,362)
Merchandising 12,375 12,209
Internet/ Direct Commerce (2,145) (4,613)
Operating Loss before Depreciation and
Amortization, Non-Cash Equity
Compensation, and Corporate Expenses (4,882) (5,244)
Corporate Expenses (21,208) (23,333)
Operating Loss Before Depreciation and
Amortization and Non-Cash Equity
Compensation $(26,090) $(28,577)
SOURCE Martha Stewart Living Omnimedia, Inc.
/CONTACT: Investors - Howard Hochhauser, VP Finance and Investor
Relations, +1-212-827-8530, or Media - Elizabeth Estroff, AVP, Corporate
Communications, +1-212-827-8281, both of Martha Stewart Living Omnimedia,
Inc./
/Web site: http://www.marthastewart.com /
(MSO)
