Year Defined by MSLO's New Partnerships, Acquisitions, and
Diversification
Company on Track to Seize New Opportunities in 2009 and Beyond
NEW YORK, Feb. 25 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) today announced its results for the fourth quarter
and for the year ended December 31, 2008. The company reported revenue for the
fourth quarter and full year of $72.9 million and $284.3 million,
respectively, as existing and newly acquired brands affirmed their resiliency
in an increasingly challenging economic environment.
Charles Koppelman, Executive Chairman of the Board, said, "In 2008,
anticipating the sunset of our Kmart business, we grew our brand portfolio
with the addition of Chef Emeril Lagasse, made strategic investments in
innovative digital platforms, broadened the availability and scope of our
retail products, delivered compelling integrated marketing programs via our
'omni' platform, and began to expand our reach into international markets.
The economic environment is challenging for everyone, but the diversity we
have built into the business model coupled with the exceptional value
proposition we offer lends us great support heading into 2009. We see many
exciting opportunities before us and we will go after the best of those
opportunities as we move forward."
Fourth Quarter 2008 Summary
Revenues were $72.9 million in the fourth quarter of 2008, compared to
$118.5 million in the fourth quarter of 2007. Kmart contractual minimums
accounted for $1.2 million in the fourth quarter of 2008. Kmart contractual
minimums and Blueprint accounted for $38.4 million in the fourth quarter of
2007. Excluding Kmart contractual minimums for both quarters and Blueprint for
the fourth quarter of 2007, revenues were $71.7 million in the fourth quarter
of 2008, compared to $80.1 million in the fourth quarter of 2007.
Merchandising performed well, witnessing contributions from our Martha
Stewart Collection exclusively at Macy's, Martha Stewart Crafts, Martha
Stewart for 1-800-FLOWERS.COM and Emeril-branded product lines. The Internet
segment demonstrated solid gains in advertising revenues and continued growth
in audience metrics. Despite the challenging advertising market, Publishing
continued to benefit from rate gains across all publications, and Broadcasting
had continued success with product integrations and international licensing.
Addressing Merchandising performance, Robin Marino, President of
Merchandising and Co-Chief Executive Officer, said, "Our merchandising
performance in a weak consumer spending environment underscores the value and
viability of our diverse product portfolio and brands. We look forward to
continued product line expansions and new roll-outs in 2009, including our
recently announced branded line of green home cleaning solutions with the Hain
Celestial Group."
Wenda Harris Millard, President of Media and Co-Chief Executive Officer,
commented on the performance of the Company's Media businesses, stating,
"While the advertising market is extremely challenging, affecting the
performance of our print publications in particular, our digital business
continues to gain traction. Marketers are increasingly turning to us to create
'omni' or cross-platform marketing programs, which they recognize as a
valuable strategy for reaching highly engaged audiences."
Adjusted EBITDA for the fourth quarter of 2008 was $10.4 million, compared
to $38.3 million in the prior-year period. Adjusted EBITDA for the quarter
benefited from cost-saving measures, including compensation-related savings.
The 2008 period reflected the anticipated reduction of minimum payments under
the Kmart contract. Contributions to Adjusted EBITDA from the Kmart minimum
were $1.2 million in the 2008 period and $36.5 million in the 2007 period.
Operating loss for the fourth quarter of 2008 was $(4.5) million, compared
to operating income of $33.0 million for the fourth quarter of 2007.
Net loss per share was $(0.15) for the fourth quarter of 2008, compared to
net income per share of $0.63 for the fourth quarter of 2007. Net loss in the
2008 quarter was impacted by a non-cash intangible asset impairment charge of
($9.3) million related to the Publishing segment, which is a loss per share of
$(0.17). When excluding the impairment charge recorded in the fourth quarter,
earnings per share was $0.02.
Full-Year 2008 Summary
Revenues were $284.3 million in 2008, compared to $327.9 million in 2007.
Kmart contractual minimums accounted for $5.0 million in 2008. Kmart
contractual minimums and Blueprint accounted for $46.5 million in 2007. When
excluding Kmart contractual minimums and Blueprint in 2008 and 2007, revenues
were $279.3 million for the full-year 2008, compared to $281.4 million for the
full-year 2007.
Adjusted EBITDA for full-year 2008 was $15.0 million, compared to $34.4
million in the prior-year period. Comparisons for revenues, operating income
and Adjusted EBITDA were affected by the issues described above, including the
anticipated reduction of minimum payments under the Kmart contract and the
closure of Blueprint.
Operating loss for the full-year 2008 was $(10.9) million, compared to
operating income of $7.7 million for the full-year 2007.
Net loss per share from continuing operations was $(0.29) for the
full-year 2008, compared to net income per share of $0.20 for the full-year
2007. When excluding the impairment charge recorded in the fourth quarter, net
loss per share was $(0.12).
Fourth Quarter 2008 Results by Segment
Publishing
Revenues in the fourth quarter of 2008 were $41.9 million, compared to
$49.4 million in the prior year's fourth quarter. Lower advertising pages and
the absence of Blueprint were partially offset by advertising rate gains
across all of the Company's publications.
Adjusted EBITDA was $5.6 million in the fourth quarter of 2008, up from
$0.1 million in the prior year's quarter. The increase was primarily due to
savings in staff costs and the elimination of expenses related to Blueprint.
Operating loss was $(4.5) million for the fourth quarter of 2008, compared
to an operating loss of $(1.1) million in the fourth quarter of 2007. Included
in the 2008 results is an intangible asset impairment charge of $(9.3)
million.
Highlights
- Ad rates witnessed ongoing strength in the quarter.
- The quarter benefited from successful omnimedia marketing programs,
including "My M&M's," which featured advertisements and content across
all of the Company's media platforms.
- Martha Stewart's Cooking School, the latest in the company's 12-book
publishing deal with Clarkson Potter, arrived in bookstores and
quickly became a bestseller.
Internet
Revenues were $5.9 million in the fourth quarter of 2008, compared to $7.2
million in the fourth quarter of 2007. Flowers revenue was previously
recorded in the Internet segment and is now recorded in the Merchandising
segment. The fourth quarter 2007 included $1.6 million in revenues for
marthastewartflowers.com. Excluding the flowers business, the increase in
revenue for the quarter resulted from advertising revenue growth of 11%.
Adjusted EBITDA was $1.4 million in the fourth quarter of 2008, an
improvement from $1.3 million in the fourth quarter of 2007.
Operating income was $0.9 million in the fourth quarter of 2008, compared
with $0.7 million in the fourth quarter of 2007.
Highlights
- Digital ad revenue for the quarter grew 11% year-over-year.
- Page views increased 43% over the prior year's quarter.
- The digital weddings franchise registered strong gains in traffic;
page views grew by 93% while unique users increased 24% in the quarter
year over year, driven in part by the introduction of tools powered by
WeddingWire, which the company invested in last year.
Broadcasting
Revenues in the fourth quarter of 2008 were $11.1 million, compared to
$12.1 million in the fourth quarter of 2007 due to lower ad revenues.
Adjusted EBITDA was $1.3 million for the fourth quarter of 2008, up from
$0.8 million in the prior year's fourth quarter due to lower production and
staffing expenses.
Operating loss was $(0.8) million for the fourth quarter of 2008, compared
with operating income of $0.3 million in the fourth quarter of 2007.
Highlights
- NBC Universal Domestic Television Distribution announced that The
Martha Stewart Show was renewed for a fifth season in national
syndication.
- Discovery's Planet Green network has renewed Emeril Green for a second
season, which will begin in April 2009.
Merchandising
Revenues were $13.9 million for the fourth quarter of 2008, as compared to
$49.8 million in the prior year's fourth quarter. As anticipated, the 2008
fourth quarter results included a $35 million reduction in contractual minimum
royalties from Kmart as compared to the prior year. Results this quarter
included the Martha Stewart Collection exclusively at Macy's, Martha Stewart
Crafts, Martha Stewart for 1-800-FLOWERS.COM and the Emeril business.
Adjusted EBITDA was $9.4 million for the fourth quarter of 2008, compared
to $44.0 million in the prior year's fourth quarter.
Operating income was $9.3 million for the fourth quarter of 2008, compared
to $43.4 million in the fourth quarter of 2007.
Highlights
- The company signed two licensing agreements for Emeril in the quarter:
a coffee line with Timothy's and a line of all-natural, organic, boxed
mixes with Sof'ella Gourmet Natural Foods.
- The top-selling categories for the Martha Stewart Collection at Macy's
this quarter included Cookware, Gadgets and Luxury Bedding.
- Martha Stewart Crafts benefited from expanded distribution into
Wal-Mart, improved performance at Michaels, and integrated marketing
initiatives.
Corporate Expenses
Total Corporate expenses were $(9.4) million in the fourth quarter of
2008, compared to $(10.4) million in the prior year's quarter. Adjusted EBITDA
loss was $(7.3) million in the current period, compared to $(7.9) million in
the prior-year period as careful expense management helped mitigate the impact
of lower Kmart royalties.
Trends and Outlook
Allison Jacques, Controller and the Company's principal financial officer,
commented, "Our business segments performed relatively well in the fourth
quarter against a deteriorating macro-economic backdrop. We also took actions
during the year to reduce our overall corporate overhead structure, and
streamlined creative and production operations across the company. With the
outlook for 2009 being uncertain, we expect to remain disciplined and flexible
with respect to operating expenses and capital allocation decisions.
Fundamentally, our business remains healthy with a robust balance sheet,
evidenced by $60 million in cash, cash equivalents and short-term
investments."
The Company will host a conference call with analysts and investors on
February 25 at 11:00 a.m. ET that will be broadcast live over the Internet at
www.marthastewart.com/ir.
Use of Non-GAAP Financial Information
In addition to using net income to assess the organization's overall
financial health, Company management uses net income before interest, taxes,
depreciation, amortization non-cash equity compensation and impairment
charges ("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 and (v) non-cash impairment charges, which do not
necessarily reflect current operating performance.
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 whom 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 and other statements
that 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
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 further 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 most recent Quarterly Report 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.
Web site: http://www.marthastewart.com
http://www.marthastewart.com/ir
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Three Months Ended, December 31,
(unaudited, in thousands, except per share amounts)
2008 2007
REVENUES
Publishing $41,938 $49,416
Merchandising 13,935 49,807
Internet 5,889 7,206
Broadcasting 11,092 12,055
Total revenues 72,854 118,484
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 31,619 41,202
Selling and promotion 19,545 26,977
General and administrative 13,303 15,640
Depreciation and amortization 3,551 1,699
Impairment charge 9,349 -
Total operating costs and expenses 77,367 85,518
OPERATING (LOSS) / INCOME (4,513) 32,966
OTHER (EXPENSE) / INCOME
Interest (expense) / income, net (49) 450
Loss on equity securities (1,456) -
Loss in equity interest (277) -
Total other (expense) / income (1,782) 450
(LOSS) / INCOME BEFORE INCOME TAXES (6,295) 33,416
Income tax provision (1,717) (108)
NET (LOSS) / INCOME $(8,012) $33,308
(LOSS) / INCOME PER SHARE - BASIC AND DILUTED
Net (Loss) / Income $(0.15) $0.63
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 53,668 52,551
Diluted 53,668 52,650
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Twelve Months Ended December 31,
(unaudited, in thousands, except per share amounts)
2008 2007
REVENUES
Publishing $163,540 $183,727
Merchandising 57,866 84,711
Internet 15,576 19,189
Broadcasting 47,328 40,263
Total revenues 284,310 327,890
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 136,709 154,921
Selling and promotion 71,504 89,179
General and administrative 69,632 68,514
Depreciation and amortization 7,973 7,562
Impairment charge 9,349 -
Total operating costs and expenses 295,167 320,176
OPERATING (LOSS) / INCOME (10,857) 7,714
OTHER (EXPENSE) / INCOME
Interest income, net 490 2,771
Other income - 432
Loss on equity securities (2,221) -
Loss in equity interest (763) -
Total other (expense) / income (2,494) 3,203
(LOSS) / INCOME BEFORE INCOME TAXES (13,351) 10,917
Income tax provision (2,314) (628)
NET (LOSS) / INCOME $(15,665) $10,289
(LOSS) / INCOME PER SHARE - BASIC AND DILUTED
Net (Loss) / Income $(0.29) $0.20
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 53,360 52,449
Diluted 53,360 52,696
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
December 31, December 31,
2008 2007
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $50,204 $30,536
Short-term investments 9,915 26,745
Accounts receivable, net 52,500 94,195
Inventory 6,053 4,933
Deferred television production costs 4,076 5,316
Income taxes receivable 40 513
Other current assets 3,712 3,921
Total current assets 126,500 166,159
PROPERTY, PLANT AND EQUIPMENT, net 14,422 17,086
GOODWILL AND OTHER INTANGIBLE ASSETS, net 93,312 53,605
INVESTMENT IN EQUITY INTEREST, net 5,749 -
OTHER NONCURRENT ASSETS 21,302 18,417
Total assets $261,285 $255,267
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $27,877 $27,425
Accrued payroll and related costs 7,525 13,863
Income taxes payable 142 1,246
Current portion of deferred
subscription income 22,597 25,578
Current portion of other deferred
revenue 7,582 5,598
Total current liabilities 65,723 73,710
DEFERRED SUBSCRIPTION REVENUE 6,874 9,577
OTHER DEFERRED REVENUE 13,334 14,482
LOAN PAYABLE 19,500 -
DEFERRED INCOME TAX LIABILITY 1,854 -
OTHER NONCURRENT LIABILITIES 3,005 1,969
Total liabilities 110,290 99,738
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value,
350,000 shares authorized: 28,204
and 26,738 shares issued in 2008 and
2007, respectively 282 267
Class B common stock, $0.01 par value,
150,000 shares authorized: 26,690 and
26,722 shares outstanding in 2008 and
2007, respectively 267 267
Capital in excess of par value 283,248 272,132
Accumulated deficit (132,027) (116,362)
151,770 156,304
Less class A treasury stock - 59
shares at cost (775) (775)
Total shareholders' equity 150,995 155,529
Total liabilities and
shareholders' equity $261,285 $255,267
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 operating (loss)/income, a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income, depreciation and amortization,
non-cash equity compensation, and non-cash impairment charges are added
back to operating (loss)/income.
2008 2007
ADJUSTED EBITDA
Publishing $5,585 $131
Merchandising 9,421 43,980
Internet 1,420 1,304
Broadcasting 1,286 781
Corporate Expenses (7,349) (7,853)
Adjusted EBITDA 10,363 38,343
NON-CASH EQUITY COMPENSATION
Publishing 641 887
Merchandising 141 464
Internet 57 252
Broadcasting 203 227
Corporate Expenses 934 1,848
Total Non-Cash Equity Compensation 1,976 3,678
DEPRECIATION AND AMORTIZATION
Publishing 93 303
Merchandising 18 90
Internet 435 394
Broadcasting 1,878 254
Corporate Expenses 1,127 658
Total Depreciation and Amortization 3,551 1,699
IMPAIRMENT ON PUBLISHING ASSETS 9,349 -
OPERATING (LOSS) / INCOME
Publishing (4,498) (1,059)
Merchandising 9,262 43,426
Internet 928 658
Broadcasting (795) 300
Corporate Expenses (9,410) (10,359)
Total Operating (Loss) / Income (4,513) 32,966
OTHER (EXPENSE) / INCOME
Interest (expense) / income, net (49) 450
Loss on equity securities (1,456) -
Loss in equity interest (277) -
Total other (expense) / income (1,782) 450
(LOSS) / INCOME BEFORE INCOME TAXES (6,295) 33,416
Income tax provision (1,717) (108)
NET (LOSS) / INCOME $(8,012) $33,308
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 operating (loss)/income, a
GAAP measure, and adjusted EBITDA, a non-GAAP measure. In order to
reconcile adjusted EBITDA to operating income, depreciation and
amortization, non-cash equity compensation, and non-cash impairment
charges are added back to operating (loss)/income.
2008 2007
ADJUSTED EBITDA
Publishing $19,007 $17,023
Merchandising 33,986 59,159
Internet (2,829) (4,394)
Broadcasting 6,165 1,548
Corporate Expenses (41,338) (38,942)
Adjusted EBITDA 14,991 34,394
NON-CASH EQUITY COMPENSATION
Publishing 2,855 4,297
Merchandising 1,038 1,555
Internet 230 501
Broadcasting 807 6,866
Corporate Expenses 3,596 5,899
Total Non-Cash Equity Compensation 8,526 19,118
DEPRECIATION AND AMORTIZATION
Publishing 379 1,188
Merchandising 90 375
Internet 1,737 1,242
Broadcasting 2,578 2,201
Corporate Expenses 3,189 2,556
Total Depreciation and Amortization 7,973 7,562
IMPAIRMENT ON PUBLISHING ASSETS 9,349 -
(LOSS) / OPERATING INCOME
Publishing 6,424 11,538
Merchandising 32,858 57,229
Internet (4,796) (6,137)
Broadcasting 2,780 (7,519)
Corporate Expenses (48,123) (47,397)
Total Operating (Loss) / Income (10,857) 7,714
OTHER INCOME/ (EXPENSE)
Interest income, net 490 2,771
Other income - 432
Loss on equity securities (2,221) -
Loss in equity interest (763) -
Total Other (Expense) / Income (2,494) 3,203
(LOSS) / INCOME BEFORE INCOME TAXES (13,351) 10,917
Income tax provision (2,314) (628)
NET (LOSS) / INCOME $(15,665) $10,289
SOURCE Martha Stewart Living Omnimedia, Inc.
CONTACT: Elizabeth Estroff, SVP, Corporate Communications,
+1-212-827-8281, eestroff@marthastewart.com/
Web Site: http://www.marthastewart.com/ir /
(MSO)
