NEW YORK, Oct 30, 2003 /PRNewswire-FirstCall via COMTEX/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) today announced its results for the third quarter
and nine-month periods ended September 30, 2003.
Revenues for the third quarter of 2003 were $51.2 million, compared to
$70.9 million in the prior year's quarter. Operating income (loss) for the
third quarter was ($6.2) million, compared to $4.5 million for the third
quarter of 2002, while operating income (loss) before depreciation and
amortization ("OIDA") for the third quarter of 2003 was ($4.3) million,
compared to $7.3 million in the same period last year. Earnings (loss) per
share from continuing operations were ($0.08) for the third quarter of 2003,
compared to $0.06 in the 2002 quarter.
Sharon L. Patrick, President and Chief Executive Officer, said, "Despite
the challenges of the last five quarters, MSO is moving forward, managing with
a commitment to the long-term prospects of the Company, preserving the
excellence of our core media products and brand labels, safeguarding our
quality standards, and continuing to invest in talented people and in our
opportunities to grow the business. We are fortunate that our cash and
short-term securities position, which grew this quarter to $175 million,
allows these investments. As a result, consumer demand for our products
indicates that we are retaining our large core of loyal readers, viewers, and
shoppers.
"The third quarter produced a slate of successful new brand label programs
and product launches for MSO across business segments - Everyday Food
magazine, Petkeeping with Marc Morrone syndicated television show, Martha
Stewart Everyday exclusively at Sears Canada, and the introduction of the
Martha Stewart Signature Turkey Hill Furniture collection. Consumer and
market acceptance was strong across the board with all programs on track, and
Everyday Food exceeding its plan. We have also improved the performance of
our Internet/Direct Commerce segment, which is now operating on a
"right-sized," more efficient strategy, resulting in substantially lower costs
and an improved product offering. Additionally, we continue to take steps to
ensure that our employees are motivated and focused on producing outstanding
products that will lead to long-term growth in shareholder value. We are
proceeding through this period with an appropriate mix of confidence and
prudence, buoyed by the continued support from millions of our valued
customers."
Third Quarter 2003 Results By Segment
Publishing
Revenues in the quarter were $29.1 million, compared to $46.5 million in
the year-ago period. OIDA and operating income were $1.4 million for the
quarter, compared to $15.3 million in the year-ago period. The results reflect
lower advertising and circulation revenue from Martha Stewart Living magazine
in the quarter, investment spending in Everyday Food, and a change in the
timing of publication of Martha Stewart Weddings from the third quarter to the
second quarter. In addition to the publication of two issues of Everyday Food
in the 2003 quarter, the Company also published one Special Interest
Publication, compared to two Special Interest Publications in the third
quarter of 2002. The prior year quarter included the publication of the
Summer issue of Martha Stewart Weddings, while this year's Summer issue was
published in the second quarter.
Television
Revenues in the third quarter of 2003 were $6.6 million, compared to
$6.4 million in the prior year's quarter. OIDA was $0.2 million for this
year's third quarter, compared to $1.5 million in the prior year's third
quarter. Operating income for the third quarter of 2003 was breakeven,
compared to $1.1 million in the third quarter of 2002. The decline in
profitability was due primarily to higher production costs associated with the
Company's nationally syndicated daily show, in addition to lower production
costs recognized in the prior year's quarter resulting from the renewal of the
Company's licensing agreement with the Food Network.
Merchandising
Revenues in the third quarter of 2003 were $8.9 million, compared to
$10.1 million in the prior year quarter. Revenues in the 2003 quarter reflect
the combined effect of strong sales of our Martha Stewart Everyday products
sold at Kmart with a higher royalty rate on those products, as well as sales
of the Martha Stewart Signature line of furniture, offset by the impact on
product sales of Kmart store closures. Revenues recorded in the quarter from
the Company's contract with Kmart reflect royalties earned on actual product
sales, without giving effect to annual minimum royalty amounts that are
payable in early 2004. OIDA was $4.7 million, compared to $6.2 million in the
prior year's quarter. Third quarter 2003 operating income was $4.6 million,
compared to $6.0 million in the third quarter of 2002. The declines in
operating income and OIDA resulted principally from lower royalty revenue.
Internet/Direct Commerce
Revenues were $6.6 million, compared to $8.0 million in the same period a
year ago. The lower revenue in the quarter was due equally to lower
advertising revenues and lower product sales. The lower product sales were
primarily a result of planned lower circulation in the current year's quarter.
OIDA was $(1.7) million in the 2003 quarter, compared to $(5.9) million in the
year-ago period. The reduced loss is the result of the elimination of
unprofitable catalog circulation, an improvement in product gross margins,
favorable results of inventory disposition programs, as well as the benefits
from cost savings initiatives begun in the earlier part of this year.
Operating loss was $(2.0) million for the third quarter of 2003, compared to
$(6.7) million in the third quarter of 2002. Depreciation and amortization in
the third quarter of 2003 was $0.2 million, compared to $0.7 million in the
third quarter of 2002, primarily as a result of a write down of costs
associated with the Company's website taken in the fourth quarter of 2002.
Corporate Overhead
Corporate overhead, before depreciation and amortization, was $8.9 million
for the third quarter of 2003, compared to $9.8 million in the third quarter
of 2002. Corporate overhead, including depreciation and amortization, was
$10.1 million, compared to $11.3 million in the prior year's quarter. The
improvement in corporate expenses is primarily the result of lower legal fees
and general cost savings, offset by higher insurance costs.
Depreciation and amortization
Depreciation and amortization of $1.9 million in the third quarter of 2003
compares to $2.8 million for the third quarter 2002, due primarily to lower
depreciation resulting from a write down of costs associated with the
Company's website taken in the fourth quarter of 2002.
Nine Month 2003 Operating Results
Revenues for the nine months ended September 30, 2003, were
$175.0 million, compared to $217.5 million for the nine months ended September
30, 2002. Operating income (loss) was $(12.2) million for the nine months
ended September 30, 2003, compared to $23.4 million for the nine months ended
September 30, 2002, while OIDA for the nine months ended September 30, 2003,
was $(6.1) million, compared to $32.4 million in the same period one year ago.
For the nine month period ended September 30, 2003, net loss from continuing
operations of $(6.8) million, or $(0.14) per share, compares to net income
from continuing operations of $14.7 million, or $0.30 per share, in the nine
month period ending September 30, 2002.
The results for the nine months ended September 30, 2002, included the
cumulative effect of an 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).
Trends and Outlook
James Follo, Chief Financial Officer, commented, "Our results in the
quarter were better than expected in each business segment, primarily as a
result of steps we took to reduce the losses in our Internet/Direct Commerce
segment, our decision to adjust the rate base of Martha Stewart Living
magazine, and good cost control throughout our businesses. Looking forward,
we will continue to invest in products and people, while focusing on building
long-term profitability. Our current expectations for the fourth quarter are
for earnings per share of approximately $0.05 to $0.07."
Basis of Presentation
The Company believes OIDA 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 in the financial statements included with this
release.
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.
The Company will host a conference call with analysts and investors at
11:30 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 further adverse reaction to the prolonged and
continued negative publicity relating to Martha Stewart by consumers,
advertisers and business partners; a loss of the services, or diminution in
the reputation, of Ms. Stewart; further adverse reaction by the Company's
consumers, advertisers and business partners to the uncertainty relating to
the nature of the resolution of the criminal and civil proceedings pending
against Ms. Stewart concerning a sale of non-Company stock by Ms. Stewart and
any adverse resolution of such proceedings; adverse resolution of some or all
of the Company's ongoing litigation; any loss of the services of the Company's
key personnel; downturns in national and/or local economies; 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; 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 September 30,
(unaudited, in thousands, except per share amounts)
2003 2002 % change
REVENUES
Publishing $29,147 $46,515 -37.3%
Television 6,579 6,362 3.4%
Merchandising 8,852 10,060 -12.0%
Internet/Direct Commerce 6,602 7,994 -17.4%
Total revenues 51,180 70,931 -27.8%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 31,212 38,853 -19.7%
Selling and promotion 12,047 11,073 8.8%
General and administrative 12,216 13,689 -10.8%
Depreciation and amortization 1,885 2,841 -33.7%
Total operating costs and
expenses 57,360 66,456 -13.7%
OPERATING INCOME (LOSS) (6,180) 4,475 nm
Interest income, net 293 545 -46.2%
INCOME (LOSS) BEFORE
INCOME TAXES (5,887) 5,020 nm
Income tax benefit (provision) 2,169 (2,058) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS (3,718) 2,962 nm
Loss from discontinued operations,
net of tax benefit (122) (197) 38.1%
NET INCOME (LOSS) $(3,840) $2,765 nm
EARNINGS (LOSS) PER SHARE -
BASIC AND DILUTED
Income (loss) from continuing
operations $(0.08) $0.06
Loss from discontinued
operations (0.00) (0.00)
Net Income (loss) $(0.08) $0.06
WEIGHTED AVERAGE SHARES OUTSTANDING-
Basic 49,537 49,209
Diluted 49,537 49,316
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended September 30,
(unaudited, in thousands)
2003 2002 % change
REVENUES
Publishing $29,147 $46,515 -37.3%
Television 6,579 6,362 3.4%
Merchandising 8,852 10,060 -12.0%
Internet/Direct Commerce 6,602 7,994 -17.4%
Total revenues 51,180 70,931 -27.8%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
Publishing 1,436 15,335 -90.6%
Television 202 1,534 -86.8%
Merchandising 4,729 6,195 -23.7%
Internet/ Direct Commerce (1,735) (5,919) 70.7%
Operating Income before
Depreciation and Amortization
before
Corporate Overhead 4,632 17,145 -73.0%
Corporate Overhead (8,927) (9,829) 9.2%
Operating Income (Loss) before
Depreciation and Amortization (4,295) 7,316 nm
Depreciation and amortization (1,885) (2,841) 33.7%
OPERATING INCOME (LOSS) (6,180) 4,475 nm
Interest income, net 293 545 -46.2%
INCOME (LOSS) BEFORE INCOME TAXES (5,887) 5,020 nm
Income tax benefit (provision) 2,169 (2,058) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS (3,718) 2,962 nm
Loss from discontinued operations,
net of tax benefit (122) (197) 38.1%
NET INCOME (LOSS) $(3,840) $2,765 nm
Martha Stewart Living Omnimedia, Inc.
Consolidated Income Statement
Nine Months Ended September 30,
(unaudited, in thousands, except per share amounts)
2003 2002 % change
REVENUES
Publishing $102,825 $136,932 -24.9%
Television 19,782 20,323 -2.7%
Merchandising 30,943 37,110 -16.6%
Internet/Direct Commerce 21,436 23,127 -7.3%
Total revenues 174,986 217,492 -19.5%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 101,255 115,005 -12.0%
Selling and promotion 39,647 33,411 18.7%
General and administrative 40,218 36,715 9.5%
Depreciation and amortization 6,080 8,976 -32.3%
Total operating costs and
expenses 187,200 194,107 -3.6%
OPERATING INCOME (LOSS) (12,214) 23,385 nm
Interest income, net 1,090 1,603 -32.0%
INCOME (LOSS) BEFORE INCOME
TAXES (11,124) 24,988 nm
Income tax benefit (provision) 4,353 (10,245) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (6,771) 14,743 nm
Loss from discontinued operations,
net of tax benefit (644) (2,336) 72.4%
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (7,415) 12,407 nm
Cumulative effect of accounting
change, net of tax benefit -- (3,137) nm
NET INCOME (LOSS) $(7,415) $9,270 nm
EARNINGS (LOSS) PER SHARE -
BASIC AND DILUTED
Income (loss) from continuing
operations $(0.14) $0.30
Loss from discontinued
operations (0.01) (0.05)
Cumulative effect of accounting
change -- (0.06)
Net Income (Loss) $(0.15) $0.19
WEIGHTED AVERAGE SHARES OUTSTANDING-
Basic 49,553 49,050
Diluted 49,553 49,205
Martha Stewart Living Omnimedia, Inc.
Segment Information
Nine Months Ended September 30,
(unaudited, in thousands)
2003 2002 % change
REVENUES
Publishing $102,825 $136,932 -24.9%
Television 19,782 20,323 -2.7%
Merchandising 30,943 37,110 -16.6%
Internet/Direct Commerce 21,436 23,127 -7.3%
Total revenues 174,986 217,492 -19.5%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
Publishing 15,825 47,157 -66.4%
Television 1,210 3,696 -67.3%
Merchandising 19,909 26,301 -24.3%
Internet/ Direct Commerce (14,048) (19,357) 27.4%
Operating Income before
Depreciation and Amortization
before Corporate Overhead 22,896 57,797 -60.4%
Corporate Overhead (29,030) (25,436) -14.1%
Operating Income (Loss) before
Depreciation and
Amortization (6,134) 32,361 nm
Depreciation and amortization (6,080) (8,976) 32.3%
OPERATING INCOME (LOSS) (12,214) 23,385 nm
Interest income, net 1,090 1,603 -32.0%
INCOME (LOSS) BEFORE INCOME
TAXES (11,124) 24,988 nm
Income tax benefit (provision) 4,353 (10,245) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (6,771) 14,743 nm
Loss from discontinued operations,
net of tax benefit (644) (2,336) 72.4%
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (7,415) 12,407 nm
Cumulative effect of accounting
change, net of tax benefit -- (3,137) nm
NET INCOME (LOSS) $ (7,415) $ 9,270 nm
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
2003 2002
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $141,666 $131,664
Short-term investments 33,730 47,286
Accounts receivable, net 25,958 37,796
Inventories, net 9,666 8,654
Deferred television production costs 4,060 4,179
Income taxes receivable 5,334 --
Deferred income taxes 7,028 7,028
Other current assets 5,874 4,756
Total current assets 233,316 241,363
PROPERTY, PLANT, AND EQUIPMENT, net 26,217 31,288
INTANGIBLE ASSETS, net 44,257 44,257
DEFERRED INCOME TAXES 2,827 2,827
OTHER NONCURRENT ASSETS 4,575 4,807
Total assets $311,192 $324,542
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $38,290 $40,517
Accrued payroll and related costs 9,243 9,385
Income taxes payable -- 323
Current portion of deferred subscription income 22,744 24,932
Total current liabilities 70,277 75,157
DEFERRED SUBSCRIPTION INCOME 6,653 7,715
OTHER NONCURRENT LIABILITIES 4,454 5,035
Total liabilities 81,384 87,907
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value, 350,000
shares authorized: 19,517 and 19,342 shares issued
in 2003 and 2002, respectively 195 194
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 181,705 181,629
Unamortized restricted stock (480) (993)
Retained earnings 48,862 56,277
230,583 237,410
Less class A treasury stock - 59 shares at cost (775) (775)
Total shareholders' equity 229,808 236,635
Total liabilities and shareholders' equity $311,192 $324,542
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, a GAAP measure,
and Operating Income before Depreciation and Amortization (OIDA), a non-GAAP
measure. In order to reconcile OIDA to operating income, depreciation and
amortization are added back to operating income.
2003 2002 % change
REVENUES
Publishing $29,147 $46,515 -37.3%
Television 6,579 6,362 3.4%
Merchandising 8,852 10,060 -12.0%
Internet/Direct Commerce 6,602 7,994 -17.4%
Total Revenues 51,180 70,931 -27.8%
OPERATING INCOME (LOSS)
Publishing 1,395 15,295 -90.9%
Television (34) 1,117 nm
Merchandising 4,561 6,037 -24.4%
Internet/ Direct Commerce (1,970) (6,660) 70.4%
Operating Income before
Corporate Overhead 3,952 15,789 -75.0%
Corporate Overhead (10,132) (11,314) 10.4%
Total Operating Income (6,180) 4,475 nm
DEPRECIATION AND AMORTIZATION
Publishing 41 40 2.5%
Television 236 417 -43.4%
Merchandising 168 158 6.3%
Internet/ Direct Commerce 235 741 -68.3%
Corporate Overhead 1,205 1,485 -18.9%
Total Depreciation and
Amortization 1,885 2,841 -33.7%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
Publishing 1,436 15,335 -90.6%
Television 202 1,534 -86.8%
Merchandising 4,729 6,195 -23.7%
Internet/ Direct Commerce (1,735) (5,919) 70.7%
Operating Income before
Depreciation and Amortization
before Corporate Overhead 4,632 17,145 -73.0%
Corporate Overhead (8,927) (9,829) 9.2%
Total Operating Income (Loss)
Before Depreciation and
Amortization $(4,295) $7,316 nm
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, a GAAP measure, and Operating
Income before Depreciation and Amortization (OIDA), a non-GAAP measure. In
order to reconcile OIDA to operating income, depreciation and amortization are
added back to operating income.
2003 2002 % change
REVENUES
Publishing $102,825 $136,932 -24.9%
Television 19,782 20,323 -2.7%
Merchandising 30,943 37,110 -16.6%
Internet/Direct Commerce 21,436 23,127 -7.3%
Total Revenues 174,986 217,492 -19.5%
OPERATING INCOME (LOSS)
Publishing 15,702 47,038 -66.6%
Television 195 2,409 -91.9%
Merchandising 19,406 25,826 -24.9%
Internet/ Direct Commerce (14,775) (21,478) 31.2%
Operating Income before
Corporate Overhead 20,528 53,795 -61.8%
Corporate Overhead (32,742) (30,410) -7.7%
Total Operating Income (Loss) (12,214) 23,385 nm
DEPRECIATION AND AMORTIZATION
Publishing 123 119 3.4%
Television 1,015 1,287 -21.1%
Merchandising 503 475 5.9%
Internet/ Direct Commerce 727 2,121 -65.7%
Corporate Overhead 3,712 4,974 -25.4%
Total Depreciation and
Amortization 6,080 8,976 -32.3%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
Publishing 15,825 47,157 -66.4%
Television 1,210 3,696 -67.3%
Merchandising 19,909 26,301 -24.3%
Internet/ Direct Commerce (14,048) (19,357) 27.4
Operating Income before
Depreciation and Amortization
before Corporate Overhead 22,896 57,797 -60.4%
Corporate Overhead (29,030) (25,436) -14.1%
Total Operating Income (Loss)
Before Depreciation and
Amortization $(6,134) $32,361 nm
SOURCE Martha Stewart Living Omnimedia, Inc.
Investors - James Follo, Chief Financial Officer,
+1-212-827-8218; Media - Elizabeth Estroff, +1-212-827-8281, both of Martha
Stewart Living Omnimedia, Inc.
http://www.marthastewart.com
