NEW YORK, Feb 23, 2005 /PRNewswire-FirstCall via COMTEX/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) announced its results today for the fourth quarter
and full-year period ended December 31, 2004.
Revenues for the fourth quarter of 2004 were $60.2 million, compared to
$70.9 million in the prior year's quarter. Operating loss for the fourth
quarter was $(9.5) million, compared to operating income of $2.3 million for
the fourth quarter of 2003. Operating income before depreciation and
amortization, and the amortization of non-cash stock compensation ("OIDA") for
the fourth quarter of 2004 was a loss of $(1.8) million, compared to OIDA of
$7.0 million in the same period last year. Loss per share from continuing
operations was $(0.14) for the fourth quarter of 2004, compared to income per
share from continuing operations of $0.05 in the fourth quarter of 2003.
Susan Lyne, President and Chief Executive Officer, said: "2004 was a year
of significant challenge for MSO, and we look at the coming year with both
realistic expectations and optimism for the future.
"We will focus our efforts on our greatest assets: the Martha Stewart
brand, our content and our creative capabilities. As the most comprehensive
and trusted source of 'how-to' information for the home, we are actively
exploring opportunities to develop new content, launch new brands and leverage
our existing asset library through new distribution channels. We see
opportunities to use our brand strengths and design capabilities to forge new
merchandising and marketing partnerships.
"The vitality of our brands is underscored by the positive circulation
trends for both Martha Stewart Living and Everyday Food magazines, both of
which outperformed industry metrics. We will focus on profitable business
prospects, and our exit from the online and print catalog business during the
fourth quarter of 2004 speaks to that.
"As March approaches, all of us at MSO -- just like our business partners
and our many millions of loyal consumers -- are eager to welcome Martha back.
Both station affiliates and advertisers have embraced MSO's new syndicated
television program featuring Martha Stewart. Come fall, we're certain viewers
will too."
Fourth Quarter 2004 Results By Segment
Publishing
Revenues in the fourth quarter of 2004 were $26.1 million, compared to
$33.1 million in the fourth quarter of 2003. Operating loss was $(11.3)
million for the fourth quarter of 2004, compared to operating income of $0.4
million in the fourth quarter of 2003. OIDA was a loss of $(11.1) million,
compared to income of $0.4 million in the fourth quarter of 2003. The loss
for the quarter is due mainly to a decline in advertising revenue in Martha
Stewart Living, as well as subscription acquisition spending for Everyday Food
magazine and losses related to Body & Soul magazine, which was acquired in
August 2004. The decline in advertising revenue from Martha Stewart Living
magazine was due to both a reduction in advertising pages as well as lower
advertising rates due to the rate base reduction effective with the January
2004 issue. Circulation revenue declined in the quarter due primarily to
lower subscription revenues from Martha Stewart Living, due to fewer
subscription copies sold. Everyday Food revenue increased sharply in the
quarter on strong circulation gains and higher advertising revenue due
principally to higher advertising rates related to our rate base increase.
Everyday Food, which launched in September 2003 with an initial rate base of
500,000, has increased its rate base to 800,000 effective with the January
2005 issue. This represents the second increase since launch. Based on the
continued subscriber demand, we plan to increase the rate base to 850,000 in
July 2005. This growth has been supported, in part, by our recent media
campaign, which targeted both advertisers and consumers.
Television
Revenues in the fourth quarter of 2004 were $1.1 million, compared to $5.9
million in the fourth quarter of 2003. Operating loss for the fourth quarter
of 2004 was $(1.4) million, compared to an operating loss of $(2.8) in the
fourth quarter of 2003. OIDA was a loss of $(1.4) million for the fourth
quarter of 2004, compared to OIDA of $(0.9) million in the prior year's fourth
quarter. The decline in revenue was due principally to the absence of our
daily syndicated show, which stopped airing in syndication in mid-September,
as well as the expiration of certain cable television agreements. In the
second quarter of 2005, we will begin production of a new syndicated daytime
show. The program will be distributed by NBC Universal Domestic Television
Distribution under a recently announced agreement. The prior-year period
included $1.7 million of accelerated depreciation related to the write-down to
fair-value of certain television studio assets.
Merchandising
Revenues in the fourth quarter of 2004 were $23.7 million, compared to
$22.5 million in the fourth quarter of 2003. The higher revenue is due in
part to an increase in revenue from Kmart resulting from contractual minimum
royalty guarantees, as well as revenue related to the dissolution of our
Martha Stewart Signature flooring program. Fourth-quarter 2004 operating
income was $19.8 million, compared to $18.3 million in the fourth quarter of
2003. OIDA was $20.0 million in the current period, compared to $18.5 million
in the prior year's quarter. Currently we are expanding our successful Martha
Stewart Signature(TM) furniture line with Bernhardt, introducing at retail 43
new SKUs from the Lily Pond(R), Skylands(TM), and Turkey Hill(TM) collections.
Internet/Direct Commerce
Revenues in the fourth quarter of 2004 were $9.3 million, compared to $9.4
million in the same period a year ago. The results for the quarter reflect the
Company's successful efforts at selling our remaining catalog-related
inventory, while continuing to grow our profitable flowers business and
deliver content. Operating loss was $(1.1) million for the fourth quarter of
2004, compared to $(1.2) million in the fourth quarter of 2003. OIDA was
$(0.8) million in the fourth quarter of 2004, compared to $(1.0) million in
the fourth quarter of 2003. The segment will focus its future efforts on
delivering content and increasing advertising revenues, while continuing to
grow our marthasflowers.com online flower business and to generate new
subscribers to our magazines.
Corporate Overhead
Corporate overhead, including depreciation and amortization and the
amortization of non-cash stock compensation, was $15.5 million, compared to
$12.3 million in the prior year's quarter. Corporate overhead, before
depreciation and amortization and the amortization of non-cash stock
compensation, was $8.5 million for the fourth quarter of 2004 compared to
$10.1 million in the fourth quarter of 2003. The year-over-year reduction in
OIDA was driven by lower compensation-related costs and lower professional
fees. Corporate overhead, including depreciation and amortization, increased
primarily due to the amortization of non-cash compensation. Amortization of
non-cash stock compensation expense was $6.0 million in the fourth quarter of
2004, compared to $1.1 million for the fourth quarter of 2003. The majority
of the increase in the 2004 quarter relates to a non-cash equity compensation
charge resulting from the modification of the terms of certain previously
granted employee stock options related to the retirement of our former Chief
Executive Officer.
Depreciation and Amortization
Depreciation and amortization was $1.7 million in the fourth quarter of
2004, compared to $3.6 million for the fourth quarter of 2003. The lower
depreciation in the current quarter was primarily a result of the acceleration
of depreciation of $1.7 million recorded in the fourth quarter of 2003 related
to the write-down to fair-value of certain television studio assets.
Full-year 2004 Operating Results
Revenues for the year ended December 31, 2004, were $187.4 million,
compared to $245.8 million for the year ended December 31, 2003. Operating
income (loss) was $(60.0) million for the year ended December 31, 2004,
compared to $(6.4) million for the year ended December 31, 2003, while OIDA
for the year ended December 31, 2004, was $(43.8) million, compared to $4.8
million in the same period one year ago. For the year ended December 31,
2004, net loss from continuing operations was $(59.1) million or $(1.19) per
share. This compares to net loss from continuing operations of $(1.9)
million, or $(0.04) per share, in the year ending December 31, 2003.
Trends and Outlook
James Follo, Chief Financial and Administrative Officer, commented: "We
continue to focus on maintaining our strong balance sheet while supporting and
investing in long-term growth opportunities. Our results for the fourth
quarter reflect a careful deployment of our financial resources, which allowed
us to finish the year with cash and short-term investments of $140 million.
Looking forward, we will continue to focus on improving our operating trends.
Our outlook for the first quarter is for a loss of approximately $(0.35) per
share."
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, inspiring and engaging consumers with unique
lifestyle content and high-quality products. MSO 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
11:00 a.m. ET that will be broadcast live over the Internet at
http://www.marthastewart.com.
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 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 further adverse reaction to the prolonged and continued
negative publicity relating to Martha Stewart by consumers, advertisers and
business partners; further adverse reaction by the Company's consumers,
advertisers and business partners to the outcome of Ms. Stewart's trial and
related sentencing arising from a sale of non-Company stock by Ms. Stewart; a
loss of the services of Ms. Stewart; a loss of the services of other key
personnel; an adverse resolution to the SEC enforcement proceeding currently
underway 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 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 December 31,
(in thousands, except per share amounts)
2004 2003 % change
REVENUES
Publishing $26,130 $33,111 -21.1%
Television 1,069 5,922 -81.9%
Merchandising 23,680 22,452 5.5%
Internet/Direct Commerce 9,333 9,377 -0.5%
Total revenues 60,212 70,862 -15.0%
OPERATING COSTS AND EXPENSES
Production, distribution
and editorial 29,447 33,777 12.8%
Selling and promotion 20,506 16,907 -21.3%
General and administrative 12,020 13,211 9.0%
Amortization of non-cash
stock compensation
expense 6,028 1,114 nm
Depreciation and amortization 1,696 3,589 52.7%
Total operating costs
and expenses 69,697 68,598 -1.6%
OPERATING INCOME (LOSS) (9,485) 2,264 nm
Interest income, net 607 349 73.9%
INCOME (LOSS) BEFORE
INCOME TAXES (8,878) 2,613 nm
Income tax benefit/
(provision) 1,658 (37) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS
FROM DISCONTINUED
OPERATIONS (7,220) 2,576 nm
Loss from discontinued
operations (109) (204) 46.6%
NET INCOME (LOSS) $ (7,329) $2,372 nm
INCOME (LOSS) PER SHARE -
BASIC AND DILUTED
Income (Loss) from
continuing operations $(0.14) $0.05
Loss from discontinued
operations (0.00) (0.00)
Net income (loss) $(0.15) $0.05
WEIGHTED AVERAGE SHARES
OUTSTANDING
BASIC 50,119 49,451
DILUTED 50,119 49,581
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended December 31,
(in thousands)
2004 2003 % change
REVENUES
Publishing $26,130 $33,111 -21.1%
Television 1,069 5,922 -81.9%
Merchandising 23,680 22,452 5.5%
Internet/Direct Commerce 9,333 9,377 -0.5%
Total revenues 60,212 70,862 -15.0%
OPERATING INCOME (LOSS)
BEFORE DEPRECIATION
AND AMORTIZATION
Publishing (11,116) 442 nm
Television (1,355) (853) -58.9%
Merchandising 20,009 18,493 8.2%
Internet/Direct Commerce (824) (1,005) 18.0%
Operating Income (Loss)
before Depreciation and
Amortization and Corporate
Overhead 6,714 17,077 -60.7%
Corporate Overhead (8,475) (10,110) 16.2%
Operating Income (Loss)
before Depreciation
and Amortization (1,761) 6,967 nm
Amortization of non-cash
stock compensation expense (6,028) (1,114) nm
Depreciation and
amortization (1,696) (3,589) 52.8%
OPERATING INCOME (LOSS) (9,485) 2,264 nm
Interest income, net 607 349 74.0%
INCOME (LOSS) BEFORE
INCOME TAXES (8,878) 2,613 nm
Income tax benefit/
(provision) 1,658 (37) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS (7,220) 2,576 nm
Income (Loss) from
discontinued operations (109) (204) 46.6%
NET INCOME (LOSS) $ (7,329) $2,372 nm
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Twelve Months Ended December 31,
(in thousands, except per share amounts)
2004 2003 % change
REVENUES
Publishing $96,035 $135,936 -29.4%
Television 10,505 25,704 -59.2%
Merchandising 53,386 53,395 0.0%
Internet/Direct Commerce 27,512 30,813 -10.8%
Total revenues 187,438 245,848 -23.8%
OPERATING COSTS AND EXPENSES
Production, distribution
and editorial 116,204 136,269 14.8%
Selling and promotion 59,351 51,621 -15.0%
General and administrative 55,716 53,170 -4.8%
Amortization of non-cash
stock compensation expense 9,499 1,524 nm
Depreciation and amortization 6,672 9,669 31.0%
Total operating costs and
expenses 247,442 252,253 1.9%
OPERATING LOSS (60,004) (6,405) nm
Interest income, net 1,799 1,439 25.1%
LOSS BEFORE INCOME TAXES (58,205) (4,966) nm
Income tax benefit/
(provision) (868) 3,043 nm
LOSS FROM CONTINUING
OPERATIONS BEFORE LOSS
FROM DISCONTINUED OPERATIONS (59,073) (1,923) nm
Loss from discontinued
operations, net of tax
benefit in 2003 (526) (848) 38.0%
NET LOSS $ (59,599) $(2,771) nm
LOSS PER SHARE -
BASIC AND DILUTED
Loss from continuing
operations $(1.19) $(0.04)
Loss from discontinued
operations (0.01) (0.02)
Net Loss $(1.20) $(0.06)
WEIGHTED AVERAGE SHARES
OUTSTANDING
BASIC and DILUTED 49,712 49,389
Martha Stewart Living Omnimedia, Inc.
Segment Information
Twelve Months Ended December 31,
(in thousands)
2004 2003 % change
REVENUES
Publishing $96,035 $135,936 -29.4 %
Television 10,505 25,704 -59.2 %
Merchandising 53,386 53,395 0.0 %
Internet/Direct Commerce 27,512 30,813 -10.8 %
Total revenues 187,438 245,848 -23.8 %
OPERATING INCOME (LOSS)
BEFORE DEPRECIATION
AND AMORTIZATION
Publishing (23,996) 19,964 nm
Television (8,482) 358 nm
Merchandising 37,115 38,439 -3.5 %
Internet/Direct Commerce (7,874) (15,074) 47.8 %
Operating Income (Loss) before (3,237) 43,687 nm
Depreciation and Amortization
and Corporate Overhead
Corporate Overhead (40,596) (38,899) -4.4 %
Operating Income (Loss) before
Depreciation and Amortization (43,833) 4,788 nm
Amortization of non-cash stock
compensation expense (9,499) (1,524) nm
Depreciation and
amortization (6,672) (9,669) 31.0 %
OPERATING LOSS (60,004) (6,405) nm
Interest income, net 1,799 1,439 25.1 %
LOSS BEFORE INCOME TAXES (58,205) (4,966) nm
Income tax benefit/
(provision) (868) 3,043 nm
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS (59,073) (1,923) nm
Loss from discontinued
operations, net of tax
benefit in 2003 (526) (848) 38.0 %
NET LOSS $(59,599) $(2,771) nm
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
December 31, December 31,
2004 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $104,647 $165,566
Short-term investments 35,309 3,100
Accounts receivable, net 27,894 39,758
Inventories, net 5,229 7,485
Deferred television production costs - 3,465
Income taxes receivable 6,321 5,658
Deferred income taxes, net - 5,024
Other current assets 3,573 4,422
Total current assets 182,973 234,478
PROPERTY, PLANT, AND EQUIPMENT, net 17,175 22,673
INTANGIBLE ASSETS, net 54,264 44,257
DEFERRED INCOME TAXES - 3,224
OTHER NONCURRENT ASSETS 6,828 4,470
Total assets $261,240 $309,102
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $25,604 $26,628
Accrued payroll and related costs 9,407 10,360
Income taxes payable 412 167
Current portion of deferred
subscription income 27,160 23,833
Total current liabilities 62,583 60,988
DEFERRED SUBSCRIPTION INCOME 7,668 7,133
OTHER NONCURRENT LIABILITIES 3,361 4,316
Total liabilities $73,612 $72,437
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01
par value, 350,000 shares authorized:
21,660 and 19,628 shares issued
in 2004 and 2003, respectively 217 196
Class B common stock, $0.01 par value,
150,000 shares authorized:
29,123 and 30,059 shares outstanding
in 2004 and 2003, respectively 291 301
Capital in excess of par value 196,781 183,744
Unamortized restricted stock (2,793) (307)
Retained earnings (6,093) 53,506
188,403 237,440
Less class A treasury stock Â?
59 shares at cost (775) (775)
Total shareholders'
equity 187,628 236,665
Total liabilities and
shareholders' equity $261,240 $309,102
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Three Months Ended December 31,
(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 stock compensation, (OIDA), a non-
GAAP measure. In order to reconcile OIDA to operating income, depreciation
and amortization are added back to operating income.
2004 2003 % change
OPERATING INCOME (LOSS)
Publishing $(11,333) $350 nm
Television (1,412) (2,812) 49.8 %
Merchandising 19,819 18,312 8.3 %
Internet/ Direct Commerce (1,071) (1,239) 13.6 %
Operating Income (Loss)
before Corporate
Overhead 6,003 14,611 -59.0 %
Corporate Overhead (15,488) (12,347) -25.5 %
Total Operating Income
(Loss) (9,485) 2,264 nm
DEPRECIATION AND AMORTIZATION
Publishing 203 42 -383.4%
Television 57 1,959 nm
Merchandising 190 168 -13.1 %
Internet/ Direct Commerce 247 234 -5.6 %
Corporate Overhead 999 1,186 15.8 %
Total Depreciation and
Amortization 1,696 3,589 52.8 %
AMORTIZATION OF NON-CASH
STOCK COMPENSATION
Publishing 14 50 72.0 %
Television - - -
Merchandising - 13 nm
Internet/ Direct Commerce - - -
Corporate Overhead 6,014 1,051 nm
Total Amortization 6,028 1,114 nm
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION AND
AMORTIZATION OF NON-CASH STOCK
COMPENSATION
Publishing (11,116) 442 nm
Television (1,355) (853) -58.9 %
Merchandising 20,009 18,493 8.2 %
Internet/ Direct Commerce (824) (1,005) 18.0 %
Operating Income (Loss) before
Depreciation and
Amortization, Amortization of
Non-Cash Stock
Compensation and before
Corporate Overhead 6,714 17,077 -60.7 %
Corporate Overhead (8,475) (10,110) 16.2 %
Operating Income (Loss) Before
Depreciation and
Amortization and Amortization
of Non-Cash Stock Compensation $(1,761) $6,967 nm
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Twelve Months Ended December 31,
(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 stock compensation, (OIDA), a non-
GAAP measure. In order to reconcile OIDA to operating income, depreciation
and amortization are added back to operating income.
2004 2003 % change
OPERATING INCOME (LOSS)
Publishing $(24,611) $19,597 nm
Television (8,712) (2,616) 233.1 %
Merchandising 36,427 37,717 -3.5 %
Internet/ Direct Commerce (8,861) (16,013) 44.7 %
Operating Income (Loss)
before Corporate
Overhead (5,757) 38,685 nm
Corporate Overhead (54,247) (45,090) -20.3 %
Total Operating Loss (60,004) (6,405) -836.9 %
DEPRECIATION AND AMORTIZATION
Publishing 472 165 -186.1 %
Television 230 2,974 92.3 %
Merchandising 760 671 -13.3 %
Internet/ Direct Commerce 987 960 -2.8 %
Corporate Overhead 4,223 4,899 13.8 %
Total Depreciation and
Amortization 6,672 9,669 31.0 %
AMORTIZATION OF NON-CASH STOCK
COMPENSATION EXPENSE (BENEFIT)
Publishing 143 202 nm
Television - - -
Merchandising (72) 51 nm
Internet/ Direct Commerce - (21) nm
Corporate Overhead 9,428 1,292 nm
Total Amortization 9,499 1,524 nm
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
AND AMORTIZATION OF NON-CASH
STOCK COMPENSATION
Publishing (23,996) 19,964 nm
Television (8,482) 358 nm
Merchandising 37,115 38,439 -3.5 %
Internet/ Direct Commerce (7,874) (15,074) 47.8 %
Operating Income (Loss) before
Depreciation and Amortization,
Amortization of Non-Cash Stock
Compensation and before
Corporate Overhead (3,237) 43,687 nm
Corporate Overhead (40,596) (38,899) -4.4 %
Operating Income (Loss) Before
Depreciation and
Amortization and Amortization
of Non-Cash Stock
Compensation $(43,833) $4,788 nm
SOURCE Martha Stewart Living Omnimedia, Inc.
Investors - Howard Hochhauser, VP, Finance and Investor Relations of Martha Stewart
Living Omnimedia, Inc., +1-212-827-8530; Media - Elizabeth Estroff, AVP, Corporate
Communications of Martha Stewart Living Omnimedia, Inc., +1-212-827-8281
