NEW YORK, Aug 11, 2003 /PRNewswire-FirstCall via COMTEX/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) today announced its results for the second quarter
and six-month period ended June 30, 2003.
Revenues for the second quarter of 2003 were $65.8 million, compared to
$78.6 million in the prior year's quarter. Operating income for the second
quarter was $1.5 million compared to $13.1 million for the second quarter of
2002, while operating income before depreciation and amortization ("OIDA") for
the second quarter of 2003 was $3.6 million, compared to $16.2 million in the
same period last year. Earnings per share from continuing operations were
$0.02 for the second quarter of 2003, compared to $0.16 in the 2002 quarter.
Sharon L. Patrick, President and Chief Executive Officer, said, "During an
exceptionally difficult quarter, our talented team responded to the challenges
presented by the effects of Martha Stewart's personal legal situation and
continued to earn the loyalty of readers, viewers, and customers by creating
and producing the unique how-to information and quality products for the home
that define our brand.
"We believe that the Martha Stewart Living core brand will continue to be
under pressure until resolution of Martha Stewart's personal legal situation.
Our strategy until then will be to continue to invest in sustaining our core
Martha Stewart Living brand equity, brand labels and other assets, all the
while investing in new properties like Everyday Food and controlling costs
wherever doing so does not conflict with those goals.
"Highlights for the quarter included our recent decision to launch our new
Everyday Food magazine, reflecting the strong consumer response to its four
test issues. We believe this near-term investment will generate long-term
profitability. We are excited by the prospects for this innovative magazine
aimed directly at the burgeoning market of the busy home cook. In addition,
the quarter included the successful launch of our Martha Stewart Signature
furniture collection, which has met with an excellent response and attests to
the enduring appeal of the brand. The Company also made further improvements
in its Internet/Direct Commerce segment during the quarter, generating better
results from increased operating efficiencies and a lower cost structure.
Looking to the third quarter, we are excited about the launch of our Martha
Stewart Everyday program with Sears Canada in September."
Second Quarter 2003 Results
Publishing
Revenues in the quarter were $39.6 million, compared to $47.3 million in
the year-ago period. OIDA was $9.4 million for the quarter, compared to
$16.6 million in the year-ago period. Operating income was $9.3 million,
compared to $16.5 million in the second quarter of 2002. The results reflect
lower advertising and circulation revenue in Martha Stewart Living magazine in
the quarter, partially offset by higher revenues from Everyday Food and Martha
Stewart Weddings. In addition to the publication of two issues of Everyday
Food in the 2003 quarter, the Company also published two issues of Martha
Stewart Weddings and two special issues, compared to one issue of Martha
Stewart Weddings and two special issues in the second quarter of 2002.
Television
Revenues in the second quarter of 2003 were $6.6 million, compared to
$7.2 million in the prior year's quarter. OIDA was $0.4 million for this
year's second quarter, compared to $1.4 million in the prior year's second
quarter. Operating income for the second quarter of 2003 was breakeven,
compared to $0.9 million in the second quarter of 2002. The decline in
performance was due primarily to lower ratings and advertising revenue from
the Company's nationally syndicated daily show, combined with higher
year-over-year marketing expenses, as well as the loss of high margin revenues
from CBS's The Early Show.
Merchandising
Revenues in the second quarter of 2003 were $11.8 million, compared to
$16.0 million in the prior year quarter. Revenues in the 2003 quarter reflect
the benefit of the launch of the Martha Stewart Signature line of furniture
and a higher royalty rate on our Martha Stewart Everyday products sold at
Kmart, offset by the impact on product sales of Kmart store closures and the
elimination of certain garden products. 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 $8.0 million, compared to $12.5 million in the prior year's
quarter. Second quarter 2003 operating income was $7.8 million, compared to
$12.4 million in the second quarter of 2002. The declines in operating income
and OIDA resulted from lower royalty revenue.
Internet/Direct Commerce
Revenues were $7.8 million, compared to $8.1 million in the same period a
year ago. Revenues declined in the quarter due to lower advertising revenues,
partially offset by higher commerce revenues. OIDA was $(4.3) million in the
2003 quarter, compared to $(6.7) million in the year-ago period. The reduced
loss resulted from significant progress made in reducing the cost structure of
the segment, including improved product gross margin, more efficient
fulfillment operations, as well as lower headcount and technology related
costs. The second quarter results do not yet reflect the operating benefits
the Company expects to achieve beginning in the third quarter resulting from
reduced and more targeted catalog circulation and a more focused and improved
product assortment. Operating loss was $(4.6) million for the second quarter
of 2003, compared to $(7.4) million in the second quarter of 2002.
Depreciation and amortization in the second quarter of 2003 was $0.2 million,
compared to $0.7 million in the second 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 $9.9 million
for the second quarter of 2003, compared to $7.6 million in the second quarter
of 2002. Corporate overhead, including depreciation and amortization,
increased to $11.1 million, compared to $9.3 million in the prior year's
quarter, primarily as a result of higher legal and professional fees incurred
as a result of corporate issues resulting from investigations into a personal
sale of non-Company stock by Martha Stewart, as well as higher insurance and
corporate promotion costs.
Depreciation and amortization
Depreciation and amortization decreased $1.1 million to $2.1 million in
the second quarter of 2003, compared to $3.1 million for the second 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.
Six month 2003 Operating Results
Revenues for the six months ended June 30, 2003 were $123.8 million,
compared to $146.6 million for the six months ended June 30, 2002. Operating
income (loss) was $(6.0) million for the six months ended June 30, 2003,
compared to $18.9 million for the six months ended June 30, 2002, while OIDA
for the six months ended June 30, 2003 was $(1.8) million, compared to
$25.0 million in the same period one year ago. For the six month period ending
June 30, 2003, net loss from continuing operations of $(3.1) million, or
$(0.06) per share, compares to net income from continuing operations of
$11.8 million, or $0.24 per share, in the six month period ending June 30,
2002.
The results for the six months ended June 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, the Company's Chief Financial Officer, commented, "We
continue to maintain our strong financial position, including $172 million in
cash and short-term investments at quarter-end. We recognize that the
challenges we face are likely to persist for some time, and we are carefully
balancing that against our opportunities for growth and our commitment to
building value for the long-term. Our current outlook for the third quarter
is for a loss per share of approximately $(0.15) and for the full-year 2003, a
loss of approximately $(0.18) to $(0.20) 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 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
11:00 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; an inability to
execute the restructuring of our Internet/Direct Commerce segment as planned;
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.
CONTACT: Investors - James Follo, Chief Financial Officer of Martha
Stewart Living Omnimedia, Inc., 212-827-8218; Media -
- Elizabeth Estroff of
Martha Stewart Living Omnimedia, Inc., 212-827-8281.
Martha Stewart Living Omnimedia, Inc.
Consolidated Income Statement
Three Months Ended June 30,
(unaudited, in thousands, except per share amounts)
2003 2002 % change
REVENUES
Publishing $39,617 $47,323 -16.3%
Television 6,588 7,249 -9.1%
Merchandising 11,763 15,974 -26.4%
Internet/Direct Commerce 7,814 8,056 -3.0%
Total revenues 65,782 78,602 -16.3%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 35,473 39,380 -9.9%
Selling and promotion 13,724 11,656 17.7%
General and administrative 13,028 11,368 14.6%
Depreciation and amortization 2,054 3,118 -34.1%
Total operating costs and
expenses 64,279 65,522 -1.9%
OPERATING INCOME 1,503 13,080 -88.5%
Interest income, net 395 568 -30.5%
INCOME BEFORE INCOME TAXES 1,898 13,648 -86.1%
Income tax (provision) (665) (5,596) 88.1%
INCOME FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS 1,233 8,052 -84.7%
Loss from discontinued operations, net
of tax benefit (302) (1,313) 77.0%
NET INCOME $931 $6,739 -86.2%
EARNINGS PER SHARE - BASIC AND DILUTED
Income from continuing operations $0.02 $0.16
Loss from discontinued operations (0.01) (0.03)
Net Income $0.02 $0.14
WEIGHTED AVERAGE SHARES OUTSTANDING -
Basic 49,488 49,166
Diluted 49,627 49,373
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended June 30,
(unaudited, in thousands)
2003 2002 % change
REVENUES
Publishing $39,617 $47,323 -16.3%
Television 6,588 7,249 -9.1%
Merchandising 11,763 15,974 -26.4%
Internet/Direct Commerce 7,814 8,056 -3.0%
Total revenues 65,782 78,602 -16.3%
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION
Publishing 9,376 16,569 -43.4%
Television 387 1,373 -71.8%
Merchandising 7,976 12,508 -36.2%
Internet/ Direct Commerce (4,308) (6,693) 35.6%
Operating Income (Loss) before
Depreciation and Amortization before
Corporate Overhead 13,431 23,757 -43.5%
Corporate Overhead (9,874) (7,559) -30.6%
Operating Income before Depreciation
and Amortization 3,557 16,198 -78.0%
Depreciation and amortization (2,054) (3,118) 34.1%
OPERATING INCOME 1,503 13,080 -88.5%
Interest income, net 395 568 -30.5%
INCOME BEFORE INCOME TAXES 1,898 13,648 -86.1%
Income tax (provision) (665) (5,596) 88.1%
INCOME FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS 1,233 8,052 -84.7%
Loss from discontinued operations, net
of tax benefit (302) (1,313) 77.0%
NET INCOME $931 $6,739 -86.2%
Martha Stewart Living Omnimedia, Inc.
Consolidated Income Statement
Six Months Ended June 30,
(unaudited, in thousands, except per share amounts)
2003 2002 % change
REVENUES
Publishing $73,678 $90,417 -18.5%
Television 13,203 13,960 -5.4%
Merchandising 22,091 27,050 -18.3%
Internet/Direct Commerce 14,833 15,134 -2.0%
Total revenues 123,805 146,561 -15.5%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 71,099 76,151 -6.6%
Selling and promotion 26,545 22,338 18.8%
General and administrative 28,003 23,027 21.6%
Depreciation and amortization 4,195 6,135 -31.6%
Total operating costs and
expenses 129,842 127,651 1.7%
OPERATING INCOME (LOSS) (6,037) 18,910 nm
Interest income, net 797 1,058 -24.7%
INCOME (LOSS) BEFORE INCOME TAXES (5,240) 19,968 nm
Income tax benefit (provision) 2,184 (8,187) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (3,056) 11,781 nm
Loss from discontinued operations, net
of tax benefit (523) (2,139) 75.5%
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (3,579) 9,642 nm
Cumulative effect of accounting
change, net of tax benefit -. (3,137) nm
NET INCOME (LOSS) $(3,579) $6,505 nm
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED
Income (loss) from
continuing operations $(0.06) $0.24
Loss from discontinued operations (0.01) (0.04)
Cumulative effect of
accounting change -- (0.06)
Net Income (Loss) $(0.07) $0.13
WEIGHTED AVERAGE SHARES OUTSTANDING --
Basic 49,560 48,968
Diluted 49,560 49,147
Martha Stewart Living Omnimedia, Inc.
Segment Information
Six Months Ended June 30,
(unaudited, in thousands)
2003 2002 % change
REVENUES
Publishing $73,678 $90,417 -18.5%
Television 13,203 13,960 -5.4%
Merchandising 22,091 27,050 -18.3%
Internet/Direct Commerce 14,833 15,134 -2.0%
Total revenues 123,805 146,561 -15.5%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
Publishing 14,388 31,821 -54.8%
Television 1,008 2,162 -53.4%
Merchandising 15,179 20,107 -24.5%
Internet/ Direct Commerce (12,313) (13,442) 8.4%
Operating Income (Loss) before
Depreciation and Amortization
before Corporate Overhead 18,262 40,648 -55.1%
Corporate Overhead (20,104) (15,603) -28.8%
Operating Income (Loss) before
Depreciation and Amortization (1,842) 25,045 nm
Depreciation and amortization (4,195) (6,135) 31.6%
OPERATING INCOME (LOSS) (6,037) 18,910 nm
Interest income, net 797 1,058 -24.7%
INCOME (LOSS) BEFORE INCOME TAXES (5,240) 19,968 nm
Income tax benefit (provision) 2,184 (8,187) nm
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (3,056) 11,781 nm
Loss from discontinued operations, net
of tax benefit (523) (2,139) 75.5%
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (3,579) 9,642 nm
Cumulative effect of accounting
change, net of tax benefit -. (3,137) nm
NET INCOME (LOSS) $(3,579) $6,505 nm
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
June 30, December 31,
2003 2002
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $125,487 $131,664
Short-term investments 46,986 47,286
Accounts receivable, net 28,943 37,796
Inventories, net 7,234 8,654
Deferred television production costs 4,195 4,179
Income taxes receivable 2,932 -.
Deferred income taxes 7,028 7,028
Other current assets 3,092 4,756
Total current assets 225,897 241,363
PROPERTY, PLANT, AND EQUIPMENT, net 27,730 31,288
INTANGIBLE ASSETS, net 44,257 44,257
DEFERRED INCOME TAXES 2,827 2,827
OTHER NONCURRENT ASSETS 4,466 4,807
Total assets $305,177 $324,542
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $30,154 $40,517
Accrued payroll and related costs 5,318 9,385
Income taxes payable -- 323
Current portion of deferred
subscription income 25,148 24,932
Total current liabilities 60,620 75,157
DEFERRED SUBSCRIPTION INCOME 6,465 7,715
OTHER NONCURRENT LIABILITIES 4,685 5,035
Total liabilities 71,770 87,907
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value,
350,000 shares authorized: 19,459 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 181,612 181,629
Unamortized restricted stock (624) (993)
Retained earnings 52,698 56,277
234,182 237,410
Less class A treasury stock - 59 shares at cost (775) (775)
Total shareholders' equity 233,407 236,635
Total liabilities and shareholders' equity $305,177 $324,542
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Three Months Ended June 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 39,617 47,323 -16.3%
Television 6,588 7,249 -9.1%
Merchandising 11,763 15,974 -26.4%
Internet/Direct Commerce 7,814 8,056 -3.0%
Total Revenues 65,782 78,602 -16.3%
OPERATING INCOME (LOSS)
Publishing 9,335 16,530 -43.5%
Television 2 937 -99.8%
Merchandising 7,808 12,350 -36.8%
Internet/ Direct Commerce (4,552) (7,434) 38.8%
Operating Income before
Corporate Overhead 12,593 22,383 -43.7%
Corporate Overhead (11,090) (9,303) -19.2%
Total Operating Income 1,503 13,080 -88.5%
DEPRECIATION AND AMORTIZATION
Publishing 41 39 5.1%
Television 385 436 -11.7%
Merchandising 168 158 6.3%
Internet/ Direct Commerce 244 741 -67.1%
Corporate Overhead 1,216 1,744 -30.3%
Total Depreciation and
Amortization 2,054 3,118 -34.1%
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION
Publishing 9,376 16,569 -43.4%
Television 387 1,373 -71.8%
Merchandising 7,976 12,508 -36.2%
Internet/ Direct Commerce (4,308) (6,693) 35.6%
Operating Income before
Depreciation and Amortization before
Corporate Overhead 13,431 23,757 -43.5%
Corporate Overhead (9,874) (7,559) -30.6%
Total Operating Income
(Loss) Before
Depreciation and Amortization 3,557 16,198 -78.0%
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Six Months Ended June 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 73,678 90,417 -18.5%
Television 13,203 13,960 -5.4%
Merchandising 22,091 27,050 -18.3%
Internet/Direct Commerce 14,833 15,134 -2.0%
Total Revenues 123,805 146,561 -15.5%
OPERATING INCOME (LOSS)
Publishing 14,306 31,742 -54.9%
Television 229 1,293 -82.3%
Merchandising 14,842 19,790 -25.0%
Internet/ Direct Commerce (12,804) (14,819) 13.6%
Operating Income before
Corporate Overhead 16,573 38,006 -56.4%
Corporate Overhead (22,610) (19,096) -18.4%
Total Operating Income (Loss) (6,037) 18,910 nm
DEPRECIATION AND AMORTIZATION
Publishing 82 79 3.8%
Television 779 869 -10.4%
Merchandising 337 317 6.3%
Internet/ Direct Commerce 491 1,377 -64.3%
Corporate Overhead 2,506 3,493 -28.3%
Total Depreciation and
Amortization 4,195 6,135 -31.6%
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION
Publishing 14,388 31,821 -54.8%
Television 1,008 2,162 -53.4%
Merchandising 15,179 20,107 -24.5%
Internet/ Direct Commerce (12,313) (13,442) 8.4%
Operating Income before
Depreciation and Amortization
before Corporate Overhead 18,262 40,648 -55.1%
Corporate Overhead (20,104) (15,603) -28.8%
Total Operating Income (Loss)
Before Depreciation and
Amortization (1,842) 25,045 nm
SOURCE Martha Stewart Living Omnimedia, Inc.
Investors, James Follo, Chief Financial Officer,
+1-212-827-8218, or Media, Elizabeth Estroff, +1-212-827-8281, both of Martha
Stewart Living Omnimedia, Inc.
http://www.marthastewart.com
