NEW YORK, April 26 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) announced its results today for the first quarter
of 2005.
Revenues for the first quarter of 2005 were $38.7 million, compared to
$44.5 million in the prior year's quarter. Operating loss for the first
quarter was $(19.8) million, compared to an operating loss of $(16.5) million
for the first quarter of 2004. Operating income before depreciation and
amortization, and the amortization of non-cash equity compensation ("OIDA")
for the first quarter of 2005 was a loss of $(14.9) million, compared to OIDA
of $(13.4) million in the same period last year. Loss per share from
continuing operations was $(0.37) for the first quarter of 2005, compared to a
loss per share from continuing operations of $(0.39) in the first quarter of
2004.
Susan Lyne, President and Chief Executive Officer, said: "2005 has started
off as we expected with the Company seeing momentum both from the strength of
our brand and Martha's return. Importantly, Martha's return has energized the
entire Company, and customers have enthusiastically welcomed her home. We
thank them, our corporate partners and advertisers for their continued
support.
"We see early signs of improvement in our core publishing business, and
while this will not be an overnight recovery, we believe this trend will
continue over the long term. In particular, we are pleased by positive
circulation trends and an increase in advertising pages in recent issues of
our flagship Martha Stewart Living magazine, which we expect to achieve
advertising page growth in excess of 30% in the second quarter. Everyday Food
also continues to show strength in advertising and circulation. Station demand
and advertiser interest for our new nationally syndicated daily television
show is strong, with the show now cleared in 90% of the U.S. markets.
Importantly, we have also deepened our management team with the addition of
several executives -- all of whom bring a high level of industry expertise to
the company.
"Our recent announcements of exclusive deals with SIRIUS Satellite Radio
to launch the first channel dedicated to women's lifestyles and with Warner
Home Video to distribute a full line of how-to DVDs demonstrate our ability to
leverage the brand, our content, and our strong consumer relationships to
create long-term value. Both partnerships present a tremendous opportunity to
make our content more accessible to our loyal customer base and reach out to a
new audience.
"Recent awards for our television shows and magazines validate the
consistently high level of quality and creativity MSLO brings to all of its
products. The National Magazine Awards for Martha Stewart Weddings and Kids:
Fun Stuff To Do Together as well as three Daytime Emmy nominations are
tremendous accomplishments for our company and represent the extraordinary
talent of our employees."
First Quarter 2005 Results by Segment
Publishing
Revenues in the first quarter of 2005 were $25.4 million, compared to
$23.9 million in the first quarter of 2004. The increase in revenue was
driven by higher revenue from Everyday Food due to higher advertising rates
and increased circulation, as well as from revenue related to Body + Soul,
which was acquired in August 2004. These increases were partially offset by
more modest declines in advertising revenue in Martha Stewart Living. We
expect Martha Stewart Living to achieve an increase in pages in excess of 30%
in the second quarter, with revenue growing at a faster pace. Operating loss
was $(8.7) million for the first quarter of 2005, compared to an operating
loss of $(3.8) million in the first quarter of 2004. OIDA was a loss of
$(7.7) million, compared to a loss of $(3.7) million in the first quarter of
2004. The increased operating loss in the quarter was due principally to
losses related to Body + Soul magazine, higher circulation costs in Martha
Stewart Living due in part to a change in timing of certain direct mail
campaigns and certain non-recurring expenses in the quarter. Having peaked in
2004, losses related to Everyday Food have begun to decline as a result of
increasing advertising and circulation revenue as well as lower subscriber
acquisition costs.
Television
Revenues in the first quarter of 2005 were $0.8 million, compared to $4.2
million in the first quarter of 2004. Operating loss for the first quarter of
2005 was $(2.3) million, compared to an operating loss of $(1.9) million in
the first quarter of 2004. OIDA was a loss of $(2.2) million for the first
quarter of 2005, compared to a loss of $(1.9) million in the prior year's
first quarter. The decline in revenue was primarily related to the absence of
our daily syndicated show, which stopped airing in syndication in September
2004. In September 2005, we will begin airing our new nationally syndicated
daily show. Production on this new series will commence in the second
quarter. The first quarter comparisons were also impacted by the expiration
of certain cable television agreements in 2004.
Merchandising
Revenues in the first quarter of 2005 were $9.4 million, compared to $10.8
million in the first quarter of 2004. The revenue decline was due to lower
sales from our Martha Stewart Everyday product line, with sales declines in
home and paint product lines partially offset by increases in sales of garden
and housewares products. First-quarter 2005 operating income was $5.8
million, compared to $6.5 million in the first quarter of 2004. OIDA was $6.1
million in the current period, compared to $6.7 million in the prior year's
quarter. In May, we will be expanding the Martha Stewart Everyday product
line to include a new line of ready-to-assemble furniture. This product line
will feature 42 new SKU's with furniture for the bedroom, kitchen and living
room.
Internet/Direct Commerce
Revenues in the first quarter of 2005 were $3.1 million, compared to $5.6
million in the same period a year ago. The quarter reflects sales from the
wind-down of our catalog-related operations and strong results from our
flowers business -- marthasflowers.com. Although small, this business
represents a profitable growth opportunity for the company. Operating loss
was $(1.5) million for the first quarter of 2005, compared to $(2.7) million
in the first quarter of 2004. OIDA was a loss of $(1.2) million in the first
quarter of 2005, compared to a loss of $(2.4) million in the first quarter of
2004. The quarter reflects continued investment in the content portion of
this segment. We expect the losses in the business segment to moderate
throughout the year, principally due to a declining cost structure.
Corporate Expenses
Corporate expenses, including depreciation and amortization and the
amortization of non-cash equity compensation, was $13.1 million, compared to
$14.6 million in the prior year's quarter. Corporate overhead, before
depreciation and amortization and the amortization of non-cash equity
compensation, was $9.9 million for the first quarter of 2005, compared to
$12.0 million in the first quarter of 2004. The year-over-year improvement in
OIDA was principally driven by lower professional fees in the quarter.
Trends and Outlook
James Follo, Chief Financial and Administrative Officer, commented:
"Trends in our business are expected to improve as the year progresses,
reflecting improved advertising revenue and the September 2005 launch of the
syndicated television program as well as moderating losses in the
Internet/Direct Commerce segment. Our balance sheet remains strong with $147
million in cash and short-term investments. For the second quarter of 2005,
we expect to report an operating loss of approximately $31 million, including
a non-cash charge of approximately $15 million related to the expected vesting
of certain previously issued warrants granted in connection with the
production of our syndicated television program. We expect to report an OIDA
loss in the second quarter of approximately $12 million, compared to an OIDA
loss in the second quarter of 2004 of approximately $15 million."
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. (NYSE: MSO) 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
12:00 p.m. ET 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 March 31,
(in thousands, except per share amounts)
2005 2004 % change
REVENUES
Publishing $25,355 $23,922 6.0%
Television 797 4,177 -80.9%
Merchandising 9,392 10,789 -12.9%
Internet/Direct Commerce 3,122 5,613 -44.4%
Total revenues 38,666 44,501 -13.1%
OPERATING COSTS AND EXPENSES
Production, distribution
and editorial 23,565 28,940 18.6%
Selling and promotion 16,579 13,448 -23.3%
General and administrative 13,398 15,523 13.7%
Amortization of non-cash
equity compensation 3,219 1,455 -121.2%
Depreciation and amortization 1,687 1,674 -0.8%
Total operating costs and expenses 58,448 61,040 4.2%
OPERATING LOSS (19,782) (16,539) -19.6%
Interest income, net 769 362 nm
LOSS BEFORE INCOME TAXES (19,013) (16,177) -17.5%
Income tax provision (23) (3,143) nm
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS (19,036) (19,320) 1.5%
Loss from discontinued operations (132) (161) 18.0%
NET LOSS $(19,168) $(19,481) 1.6%
LOSS PER SHARE - BASIC AND DILUTED
Loss from continuing operations $(0.37) $(0.39)
Loss from discontinued operations (0.00) (0.00)
Net loss $(0.38) $(0.39)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 50,863 49,464
Diluted 50,863 49,464
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended March 31,
(in thousands)
2005 2004 % change
REVENUES
Publishing $25,355 $23,922 6.0%
Television 797 4,177 -80.9%
Merchandising 9,392 10,789 -12.9%
Internet/Direct Commerce 3,122 5,613 -44.4%
Total revenues 38,666 44,501 -13.1%
OPERATING (INCOME) LOSS BEFORE
DEPRECIATION AND AMORTIZATION
Publishing (7,692) (3,735) -105.9%
Television (2,162) (1,890) -14.4%
Merchandising 6,101 6,692 -8.8%
Internet/Direct Commerce (1,248) (2,436) 48.8%
Operating Loss before
Depreciation and Amortization
and Corporate Expense (5,001) (1,369) nm
Corporate Expense (9,875) (12,041) 18.0%
Operating Loss before
Depreciation and Amortization (14,876) (13,410) -10.9%
Amortization of non-cash
equity compensation (3,219) (1,455) nm
Depreciation and amortization (1,687) (1,674) -0.8%
OPERATING LOSS (19,782) (16,539) -19.6%
Interest income, net 769 362 112.4%
LOSS BEFORE INCOME TAXES (19,013) (16,177) -17.5%
Income tax provision (23) (3,143) nm
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS (19,036) (19,320) 1.5%
Loss from discontinued operations (132) (161) -18.0%
NET LOSS $(19,168) $(19,481) 1.6%
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
March 31, December 31,
2005 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $85,071 $104,647
Short-term investments 61,930 35,309
Accounts receivable, net 13,840 31,332
Inventories, net 3,864 5,229
Income taxes receivable 5,107 6,321
Other current assets 2,867 3,573
Total current assets 172,679 186,411
PROPERTY, PLANT, AND EQUIPMENT, net 15,966 17,175
INTANGIBLE ASSETS, net 54,130 54,264
OTHER NONCURRENT ASSETS 6,816 6,828
Total assets $249,591 $264,678
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $20,337 $25,604
Accrued payroll and related costs 5,985 9,407
Income taxes payable 403 412
Current portion of deferred subscription income 29,844 27,160
Total current liabilities 56,569 62,583
DEFERRED SUBSCRIPTION INCOME 7,797 7,668
DEFERRED ROYALTY REVENUE 3,750 3,438
OTHER NONCURRENT LIABILITIES 3,273 3,361
Total liabilities 71,389 77,050
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value, 350,000
shares authorized: 22,493 and 21,660 shares
issued in 2005 and 2004, respectively 225 217
Class B common stock, $0.01 par value, 150,000
shares authorized: 29,123 shares outstanding in
2005 and 2004 291 291
Capital in excess of par value 214,694 196,781
Unamortized restricted stock (10,972) (2,793)
Accumulated deficit (25,261) (6,093)
178,977 188,403
Less class A treasury stock - 59 shares at cost (775) (775)
Total shareholders' equity 178,202 187,628
Total liabilities and
shareholders' equity $249,591 $264,678
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Three Months Ended March 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 equity 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
OPERATING INCOME (LOSS)
Publishing $(8,718) $(3,848)
Television (2,272) (1,947)
Merchandising 5,815 6,489
Internet/ Direct Commerce (1,509) (2,679)
Operating Loss before Corporate Expenses (6,684) (1,985)
Corporate Expenses (13,098) (14,554)
Total Operating Loss (19,782) (16,539)
DEPRECIATION AND AMORTIZATION
Publishing 247 62
Television 46 57
Merchandising 209 190
Internet/ Direct Commerce 252 243
Corporate Expenses 933 1,122
Total Depreciation and Amortization 1,687 1,674
AMORTIZATION OF NON-CASH EQUITY COMPENSATION
Publishing 779 51
Television 64 --
Merchandising 77 13
Internet/ Direct Commerce 9 --
Corporate Expenses 2,290 1,391
Total Amortization of Non-Cash Equity
Compensation 3,219 1,455
OPERATING INCOME (LOSS) BEFORE DEPRECIATION
AND AMORTIZATION AND AMORTIZATION OF NON-CASH
EQUITY COMPENSATION
Publishing (7,692) (3,735)
Television (2,162) (1,890)
Merchandising 6,101 6,692
Internet/ Direct Commerce (1,248) (2,436)
Operating Loss before Depreciation and
Amortization, Amortization of Non-Cash Equity
Compensation and before Corporate Expenses (5,001) (1,369)
Corporate Expenses (9,875) (12,041)
Operating Loss Before Depreciation and
Amortization and Amortization of Non-Cash
Equity Compensation $(14,876) $(13,410)
SOURCE Martha Stewart Living Omnimedia, Inc.
/CONTACT: Investors, Howard Hochhauser, VP Finance and Investor Relations,
+1-212-827-8530; Media, Elizabeth Estroff, AVP, Corporate Communications,
+1-212-827-8281, both of Martha Stewart Living Omnimedia/
/Web site: http://www.marthastewart.com
http://www.marthastewart.com/ir /
(MSO)
