NEW YORK, Oct. 27 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) announced its results today for the third quarter
of 2005.
Revenues for the third quarter of 2005 were $40.9 million, compared to
$38.7 million in the prior year's quarter. Operating income before
depreciation and amortization, and non-cash equity compensation ("OIDA") for
the third quarter of 2005 was a loss of $(11.5) million, compared to an OIDA
loss of $(13.5) million in the same period last year. Operating loss for the
third quarter was $(26.9) million, compared to an operating loss of $(16.2)
million for the third quarter of 2004. Loss per share from continuing
operations was $(0.51) for the third quarter of 2005, compared to a loss per
share from continuing operations of $(0.30) in the third quarter of 2004. The
current period results include a $10.8 million ($0.21 per share) non-cash
charge related to the vesting of certain warrants granted in connection with
the airing of "The Apprentice: Martha Stewart," a show in which we have no
economic interest, but which provides great promotional value.
Susan Lyne, President and Chief Executive Officer, said: "With new
initiatives underway in every area of the business, the revitalization of MSLO
is firmly underway. Third quarter earnings were modestly ahead of expectation,
largely on the strength of our core Publishing business. Direct mail response
rates are at record high levels, and we are increasing the rate base of our
flagship magazine Martha Stewart Living, effective with the January 2006
issue. Correspondingly, high renewal rates confirm the enduring bond with our
expanding audience of readers. Advertising continued to rebound in the
quarter, with Martha Stewart Living's pages up 48%. Fourth quarter ad pages
are currently expected to double, and advertising commitments for 2006 are
very strong."
Initial viewer response to our new daily syndicated television show,
'MARTHA,' has been strong, though ratings for the first five weeks were below
our expectations. With a clearer sense of what viewers respond to, we are
tweaking the format and promotion to drive more consistent ratings. Recent
trends confirm our modifications: the past two weeks saw increases in both
households and demo ratings; however, both remain below our budgeted
expectations.
"We continue to make investments necessary to support future growth,
including costs incurred in connection with new agreements with KB Home,
Sirius Satellite Radio, and Warner Home Video. Overall, we had a very
productive summer and early fall and we are all energized by the launch of new
product ideas and new businesses. We expect that our results will show strong
year-over-year improvement in the fourth quarter and for the full year."
Third Quarter 2005 Results by Segment
Publishing
Revenues in the third quarter of 2005 were $27.6 million, compared to
$22.2 million in the third quarter of 2004, an increase of 24%. Adjusting for
Body + Soul, which was acquired in August 2004, revenue increased 18%. The
revenue growth was driven by higher advertising revenue in both Martha Stewart
Living and Everyday Food. Advertising pages in Martha Stewart Living increased
48% in the quarter, ahead of our previous guidance of 35%. Everyday Food also
showed strong growth in the quarter, increasing advertising pages by 21%.
Both titles produced higher revenue per page as well. We currently expect the
strong growth in ad pages and revenue to continue throughout the remainder of
2005 and for the full year 2006. Based on current trends, we expect fourth
quarter advertising pages in Martha Stewart Living to double year-over-year,
resulting in a significant improvement in segment results. Circulation trends
continue to be strong, with renewal and new subscriber response rates at
record highs. OIDA loss was $(1.9) million, compared to a loss of $(5.4)
million in the third quarter of 2004. Operating loss was $(2.5) million for
the third quarter of 2005, compared to an operating loss of $(5.6) million in
the third quarter of 2004.
Television
Revenues in the third quarter of 2005 were $3.4 million, compared to $2.2
million in the third quarter of 2004. The quarter included three weeks of
contribution from our new syndicated daily show, which launched on September
12, 2005. While the initial ratings of the show are strong, with a season-to-
date household rating of 1.7 and upward trends in the last two weeks, they are
below our original expectations. It is worth noting that other parts of the
business have benefited from the launch. Our web traffic has increased 50%
over the same period one year ago, online magazine subscription sales are up
dramatically and sales of our Martha Stewart Everyday products at Kmart since
the September 12 launch have improved as well. OIDA was a loss of $(3.0)
million for the third quarter of 2005, compared to a loss of $(1.8) million in
the prior year's third quarter. Operating loss for the third quarter of 2005
was $(3.5) million, compared to an operating loss of $(1.8) million in the
third quarter of 2004.
Merchandising
Revenues in the third quarter of 2005 were $8.3 million, compared to $8.0
million in the third quarter of 2004. The revenue increase was principally
related to payments from our program with Sears Canada. Sales of our Martha
Stewart Everyday products at Kmart declined in the quarter, with weakness in
soft home partially offset by sales related to our recently introduced
furniture line - Everyday Rooms. The decline in royalty revenue from sales at
Kmart in the quarter will not impact full-year results from operations, as we
currently receive guaranteed annual amounts. OIDA was $4.3 million in the
current period, compared to $4.9 million in the prior year's quarter. OIDA
was negatively impacted by higher costs in the quarter related to increases in
staffing as we invest to support our new product launches. Third-quarter 2005
operating income was $4.1 million, compared to $4.8 million in the third
quarter of 2004.
Internet/Direct Commerce
Revenues in the third quarter of 2005 were $1.6 million, compared to $6.2
million in the same period a year ago. Revenue in the current quarter
principally reflects our online flower business. Advertising revenue also
increased in the quarter, representing a high-margin growth opportunity for
the company. Total revenue would have increased 48% in the quarter excluding
the results of the catalog operation, which was closed earlier this year.
OIDA was a loss of $(0.7) million in the third quarter of 2005, compared to a
loss of $(2.4) million in the third quarter of 2004. Operating loss was
$(1.0) million for the third quarter of 2005, compared to an operating loss of
$(2.7) million in the third quarter of 2004.
Corporate Expenses
Corporate expenses, before depreciation and amortization and non-cash
equity compensation, were $10.2 million in third quarter of 2005 compared to
$8.8 million in the third quarter of 2004. The increase in corporate expenses
is related to professional fees associated with recruiting new management as
well as other costs associated with developing new products and consumer
research. Corporate expenses, including depreciation and amortization and
non-cash equity compensation, were $23.9 million, compared to $10.9 million in
the prior year's quarter. Higher levels of non-cash equity compensation in the
current year's quarter principally relate to the vesting of certain warrants
granted in connection with the airing of "The Apprentice: Martha Stewart."
Trends and Outlook
James Follo, Chief Financial and Administrative Officer, commented: "We
currently expect revenues in the fourth quarter of 2005 to be approximately
$80 million, OIDA to be approximately $11 million and operating income to be
approximately break-even. These results will reflect significant revenue
growth in publishing principally due to higher advertising revenues, and in
television principally due to the revenues from the 'MARTHA' program.
Operating results will reflect significant year-over-year improvement,
principally in publishing and merchandising, offset by higher corporate
expenses principally due to higher consulting and professional fees."
Use of Non-GAAP Financial Information
The Company believes OIDA, a non-GAAP financial measure, 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 the 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. (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, 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. EDT 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 September 30,
(in thousands, except per share amounts)
2005 2004 % change
REVENUES
Publishing $27,564 $22,235 24.0%
Television 3,395 2,203 54.1%
Merchandising 8,340 8,014 4.1%
Internet/Direct Commerce 1,555 6,201 -74.9%
Total Revenues 40,854 38,653 5.7%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 23,387 27,405 14.7%
Selling and promotion 13,418 12,473 -7.6%
General and administrative 15,553 12,272 -26.7%
Non-cash equity compensation 13,275 990 nm
Depreciation and amortization 2,075 1,667 -24.5%
Total operating costs and
expenses 67,708 54,807 -23.5%
OPERATING LOSS (26,854) (16,154) -66.2%
Interest income, net 1,033 511 102.2%
LOSS BEFORE INCOME TAXES (25,821) (15,643) -65.1%
Income tax benefit (provision) (125) 806 -115.5%
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS
(25,946) (14,837) -74.9%
Loss from discontinued operations (122) (129) 5.4%
NET LOSS $(26,068) $ (14,966) -74.2%
LOSS PER SHARE - BASIC AND DILUTED
Loss from continuing
operations $(0.51) $(0.30)
Loss from discontinued
operations (0.00) (0.00)
Net loss $(0.51) $(0.30)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 50,849 49,698
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended September 30,
(in thousands)
2005 2004 % change
REVENUES
Publishing $27,564 $22,235 24.0%
Television 3,395 2,203 54.1%
Merchandising 8,340 8,014 4.1%
Internet/Direct Commerce 1,555 6,201 -74.9%
Total Revenues 40,854 38,653 5.7%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
AND NON-CASH EQUITY COMPENSATION
Publishing (1,877) (5,402) 65.3%
Television (3,047) (1,765) -72.6%
Merchandising 4,344 4,897 -11.3%
Internet/Direct Commerce (723) (2,437) 70.3%
Operating Loss before Depreciation
and Amortization and Corporate
Expense and Non-Cash Equity
Compensation (1,303) (4,707) 72.3%
Corporate Expense (10,201) (8,790) -16.1%
Operating Loss before
Depreciation and Amortization
and Corporate Expense and
Non-Cash Equity Compensation (11,504) (13,497) 14.8%
Non-cash equity compensation (13,275) (990) nm
Depreciation and amortization (2,075) (1,667) -24.5%
OPERATING LOSS (26,854) (16,154) -66.2%
Interest income, net 1,033 511 102.2%
LOSS BEFORE INCOME TAXES (25,821) (15,643) -65.1%
Income tax (provision) benefit (125) 806 -115.5%
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS (25,946) (14,837) -74.9%
Loss from discontinued
operations (122) (129) 5.4%
NET LOSS $(26,068) $ (14,966) -74.2%
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Nine Months Ended September 30,
(in thousands, except per share amounts)
2005 2004 % change
REVENUES
Publishing $84,626 $69,905 21.1%
Television 6,039 9,436 -36.0%
Merchandising 27,894 29,706 -6.1%
Internet/Direct Commerce 6,912 18,179 -62.0%
Total Revenues 125,471 127,226 -1.4%
OPERATING COSTS AND EXPENSES
Production, distribution and
editorial 71,755 86,757 17.3%
Selling and promotion 46,162 38,845 -18.8%
General and administrative 45,148 43,698 -3.3%
Non-cash equity compensation 37,770 3,469 nm
Depreciation and amortization 5,482 4,976 -10.2%
Total operating costs and
expenses 206,317 177,745 -16.1%
OPERATING LOSS (80,846) (50,519) -60.0%
Interest income, net 2,692 1,192 125.8%
LOSS BEFORE INCOME TAXES (78,154) (49,327) -58.4%
Income tax provision (207) (2,526) 91.8%
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS (78,361) (51,853) -51.1%
Loss from discontinued
operations (374) (417) 10.3%
NET LOSS $(78,735) $ (52,270) -50.6%
LOSS PER SHARE - BASIC AND DILUTED
Loss from continuing
operations $(1.54) $(1.05)
Loss from discontinued
operations (0.01) (0.01)
Net loss $(1.55) $(1.05)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 50,959 49,578
Martha Stewart Living Omnimedia, Inc.
Segment Information
Nine Months Ended September 30,
(in thousands except per share amounts)
2005 2004 % change
REVENUES
Publishing $84,626 $69,905 21.1%
Television 6,039 9,436 -36.0%
Merchandising 27,894 29,706 -6.1%
Internet/Direct Commerce 6,912 18,179 -62.0%
Total Revenues 125,471 127,226 -1.4%
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
AND NON-CASH EQUITY COMPENSATION
Publishing (12,164) (12,880) 5.6%
Television (7,872) (7,127) -10.5%
Merchandising 16,719 17,106 -2.3%
Internet/Direct Commerce (2,868) (7,050) 59.3%
Operating Loss before
Depreciation and Amortization
and Corporate Expense and
Non-Cash Equity Compensation (6,185) (9,951) 37.8%
Corporate Expense (31,409) (32,123) 2.2%
Operating Loss before
Depreciation and Amortization
and Non-Cash Equity
Compensation (37,594) (42,074) 10.6%
Non-cash equity compensation (37,770) (3,469) nm
Depreciation and amortization (5,482) (4,976) -10.2%
OPERATING LOSS (80,846) (50,519) -60.0%
Interest income, net 2,692 1,192 125.8%
LOSS BEFORE INCOME TAXES (78,154) (49,327) -58.4%
Income tax provision (207) (2,526) 91.8%
LOSS FROM CONTINUING OPERATIONS
BEFORE LOSS FROM DISCONTINUED
OPERATIONS (78,361) (51,853) -51.1%
Loss from discontinued
operations (374) (417) 10.3%
NET LOSS $(78,735) $(52,270) -50.6%
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
2005 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $31,244 $104,647
Short-term investments 90,798 35,309
Accounts receivable, net 20,318 31,332
Inventories, net 4,838 5,229
Deferred television production costs 6,132 -
Income taxes receivable 5,107 6,321
Other current assets 5,278 3,573
Total current assets 163,715 186,411
PROPERTY, PLANT AND EQUIPMENT, net 18,368 17,175
INTANGIBLE ASSETS, net 53,827 54,264
OTHER NONCURRENT ASSETS 5,977 6,828
Total assets $241,887 $264,678
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $27,589 $25,604
Accrued payroll and related costs 9,599 9,407
Income taxes payable 365 412
Current portion of deferred subscription income 30,100 27,160
Current portion of deferred revenue 4,881 -
Total current liabilities 72,534 62,583
DEFERRED SUBSCRIPTION INCOME 7,545 7,668
DEFERRED REVENUE 3,903 3,438
OTHER NONCURRENT LIABILITIES 3,088 3,361
Total liabilities 87,070 77,050
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value, 350,000
shares authorized: 24,637 and 21,660 shares
outstanding in 2005 and 2004, respectively 246 217
Class B common stock, $0.01 par value, 150,000
shares authorized: 26,873 and 29,123 shares
outstanding in 2005 and 2004, respectively 269 291
Capital in excess of par value 251,380 196,781
Unamortized restricted stock (11,475) (2,793)
Accumulated deficit (84,828) (6,093)
155,592 188,403
Less class A treasury stock - 59 shares at cost (775) (775)
Total shareholders' equity 154,817 187,628
Total liabilities and shareholders' equity $241,887 $264,678
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Three Months Ended September 30,
(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 non-cash
equity compensation, (OIDA), a non-GAAP measure. In order to reconcile OIDA
to operating income, depreciation and amortization and non-cash equity
compensation are added back to operating income.
2005 2004 % change
OPERATING INCOME (LOSS)
Publishing $(2,544) $(5,576) 54.4%
Television (3,537) (1,822) -94.1%
Merchandising 4,055 4,805 -15.6%
Internet/Direct Commerce (963) (2,685) 64.1%
Operating Loss before
Corporate Expenses (2,989) (5,278) 43.4%
Corporate Expense (23,865) (10,876) -119.4%
Total Operating Loss (26,854) (16,154) -66.2%
DEPRECIATION AND AMORTIZATION
Publishing 247 149 -65.8%
Television 462 57 -710.5%
Merchandising 211 189 -11.6%
Internet/Direct Commerce 231 248 6.9%
Corporate Expense 924 1,024 9.8%
Total Depreciation and
Amortization 2,075 1,667 -24.5%
NON-CASH EQUITY COMPENSATION
Publishing 420 25 Nm
Television 28 - Nm
Merchandising 78 (97) Nm
Internet/Direct Commerce 9 - Nm
Corporate Expense 12,740 1,062 Nm
Total Non-Cash Equity
Compensation 13,275 990 Nm
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION AND NON-CASH
EQUITY COMPENSATION
Publishing (1,877) (5,402) 65.3%
Television (3,047) (1,765) -72.6%
Merchandising 4,344 4,897 -11.3%
Internet/Direct Commerce (723) (2,437) 70.3%
Operating Loss before Depreciation
and Amortization, Non-Cash Equity
Compensation and Corporate
Expenses (1,303) (4,707) 72.3%
Corporate Expense (10,201) (8,790) -16.1%
Total Operating Loss Before
Depreciation and Amortization
and Non-Cash Equity
Compensation $(11,504) $(13,497) 14.8%
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Nine Months Ended September 30,
(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 non-cash
equity compensation, (OIDA), a non-GAAP measure. In order to reconcile OIDA
to operating income, depreciation and amortization and non-cash equity
compensation are added back to operating income.
2005 2004 % change
OPERATING INCOME (LOSS)
Publishing $(14,526) $(13,276) -9.4%
Television (25,836) (7,300) -253.9%
Merchandising 15,858 16,608 -4.5%
Internet/Direct Commerce (3,618) (7,790) 53.6%
Operating Loss before
Corporate Expenses (28,122) (11,758) -139.2%
Corporate Expense (52,724) (38,761) -36.0%
Total Operating Loss (80,846) (50,519) -60.0%
DEPRECIATION AND AMORTIZATION
Publishing 742 269 -175.8%
Television 609 173 -252.0%
Merchandising 629 570 -10.4%
Internet/Direct Commerce 722 740 2.4%
Corporate Expense 2,780 3,224 13.8%
Total Depreciation and
Amortization 5,482 4,976 -10.2%
NON-CASH EQUITY COMPENSATION
Publishing 1,620 127 nm
Television 17,355 - nm
Merchandising 232 (72) nm
Internet/Direct Commerce 28 - nm
Corporate Expense 18,535 3,414 nm
Total Non-Cash Equity
Compensation 37,770 3,469 nm
OPERATING INCOME (LOSS) BEFORE
DEPRECIATION AND AMORTIZATION
AND NON-CASH EQUITY COMPENSATION
Publishing (12,164) (12,880) 5.6%
Television (7,872) (7,127) -10.5%
Merchandising 16,719 17,106 -2.3%
Internet/Direct Commerce (2,868) (7,050) 59.3%
Operating Loss before
Depreciation and Amortization,
Non-Cash Equity Compensation,
and Corporate Expenses (6,185) (9,951) 37.8%
Corporate Expense (31,409) (32,123) 2.2%
Total Operating Loss Before
Depreciation and Amortization
and Non-Cash Equity
Compensation $(37,594) $(42,074) 10.6%
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Fourth Quarter Guidance Reconciliation
(in millions)
The following table presents consolidated financial information, including
a reconciliation of operating income, a GAAP measure, and Operating Income
before Depreciation and Amortization, including non-cash equity compensation,
(OIDA), a non-GAAP measure. In order to reconcile OIDA to operating income,
depreciation and amortization and non-cash equity compensation are added back
to operating income.
FOURTH QUARTER GUIDANCE RECONCILIATION
Operating Income $ 0.0
Depreciation and Amortization 2.0
Non-Cash Equity Compensation 9.0
Operating Income Before Depreciation and
Amortization and Non-Cash Equity Compensation $ 11.0
SOURCE Martha Stewart Living Omnimedia, Inc.
CONTACT: 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., +1-212-389-4444/
/Web site: http://www.marthastewart.com
http://www.marthastewart.com/ir /
(MSO)
