With New Emeril Lagasse Business and Continued Focus on Costs, EBITDA Guidance
Remains Unchanged
NEW YORK, July 29 /PRNewswire-FirstCall/ -- Martha Stewart Living
Omnimedia, Inc. (NYSE: MSO) today announced its results for the second quarter
ended June 30, 2008, reporting a 5% increase in second quarter revenue to
$77.1 million, led by strong performance in merchandising and advertising
revenue growth across its media businesses.
Charles Koppelman, Executive Chairman of the Board, said, "We delivered
increased topline growth and an impressive improvement in profitability,
demonstrating the power of our brand and our team's ability to execute even in
challenging business conditions. The reason for our success is clear. We
continue to do what we do best: create original content and inspirational
products and market them across our robust omni-platforms. With
well-positioned media assets, expanding merchandising relationships, and a
growing international presence, we remain focused on producing sustained
growth and profitability."
Second Quarter 2008 Summary
Revenues rose 5% to $77.1 million compared to $73.4 million for the second
quarter of 2007. Merchandising had notably strong performance in the quarter
due to increased retail sales at Macy's, the expansion of MSLO's crafts line
into Wal-Mart and the launch of our flowers program, with 1-800-Flowers.com.
The segment also benefited from the newly acquired Emeril Lagasse franchise.
Addressing Merchandising performance, Robin Marino, President of
Merchandising and Co-Chief Executive Officer, said, "Sales of Martha
Stewart-branded products were strong in the second quarter despite the
difficult retail and economic environment, reflecting the value customers find
in our offerings. We are confident of the continued success for our lines at
Macy's and excited about the expansion of our crafts line into Wal-Mart, which
provides a great opportunity to reach mass-merchant customers. We're also
excited about opportunities to further extend the Emeril brand and its
portfolio of merchandising products."
The Publishing segment delivered strong performance in the quarter, due to
increased advertising revenue, excluding last year's contribution from the
since-closed Blueprint. Broadcasting revenues benefited from the addition of
Emeril programming as well as the TurboChef cross-marketing agreement, and the
Internet segment continued to gain traction.
Wenda Harris Millard, President of Media and Co-Chief Executive Officer,
commented on the performance of the Company's Media businesses, stating, "We
outperformed the print ad industry over the first half of the year, validating
the underlying strength of our titles as well as our ability to deliver
high-impact omni ad programs to marketers. These advantages continue to
position us well longer-term, despite headwinds for the overall advertising
industry that may continue through the second half of the year."
Operating income for the second quarter of 2008 was $1.7 million, compared
to an operating loss of $(7.8) million for the second quarter of 2007.
Adjusted EBITDA for the second quarter of 2008 was $5.3 million, compared
to $(0.8) million in the prior year period. The improvement in Adjusted
EBITDA was driven by the strong contributions from merchandising and
publishing, partially offset by certain non-recurring corporate costs of $1.5
million.
Other expense included a non-cash charge of $1.1 million related to the
accounting impact of marking certain assets under FAS 133 to fair value.
Net income per share from continuing operations was $0.01 for the second
quarter of 2008, compared to a net loss per share of ($0.13) for the second
quarter of 2007. Excluding the additional corporate costs and non-cash
accounting charge, net income would have been $2.9 million, or $0.05 per
share.
Second Quarter 2008 Results by Segment
Publishing
Revenues in the second quarter of 2008 were $46.3 million compared to
$47.5 million in the prior year's second quarter, driven by an increase in
revenue from Martha Stewart Living, offset by the absence of Blueprint.
Operating income was $7.2 million for the second quarter of 2008, compared
to $5.1 million in the second quarter of 2007.
Adjusted EBITDA was $8.0 million in the second quarter of 2008, up 18%
from $6.8 million in the prior year's quarter.
Highlights
-- Total ad revenue increased 6% in the quarter, when excluding the
prior-year contribution of Blueprint, which was discontinued in December 2007.
Ad rates continued to grow ahead of pages.
-- Comparable third quarter 2008 advertising revenue is currently trending
down approximately 15% over the prior year's quarter, and visibility remains
limited.
-- Ad categories showed continued strength in direct response and home
retail goods as well as growth in new categories from financial, apparel and
pet supplies.
Internet
Revenues were $3.2 million in the second quarter of 2008 compared to $2.5
million in the second quarter of 2007 when excluding $2.7 million revenue from
Martha Stewart Flowers. Flowers revenue was previously recorded in the
Internet segment and is now recorded in the Merchandising segment. The
increase in revenue for the quarter resulted from advertising revenue growth
of 31% that was more than offset by the transition to the Martha Stewart for
1-800-Flowers.com program.
Operating loss was $(2.0) million in the second quarter of 2008, compared
with an operating loss of ($2.1) million in the second quarter of 2007.
Adjusted EBITDA loss was $(1.4) million in the second quarter of 2008, an
improvement from an adjusted EBITDA loss of $(1.7) million in the second
quarter of 2007.
Highlights
-- Second quarter traffic showed solid gains, with page views increasing
23% over the prior year's quarter. These strong traffic and engagement trends
continue into the third quarter of 2008, with July page views trending up 50%
year-over-year.
-- The marthastewart.com website unveiled a suite of wedding planning
tools, powered by WeddingWire, enabling couples to plan and manage their
entire wedding experience on marthastewart.com.
Broadcasting
Revenues in the second quarter of 2008 were $11.4 million, compared to
$10.4 million in the second quarter of 2007, as a result of contributions from
the Emeril business and a new integrated marketing program with TurboChef.
Operating income was $0.9 million for the second quarter of 2008, compared
with an operating loss of ($0.9) million in the second quarter of 2007.
Adjusted EBITDA was $1.4 million for the second quarter of 2008, compared
to $1.1 million in the prior year's second quarter.
Highlights
-- Season 4 of The Martha Stewart Show is now cleared in over 90% of the
U.S. with better timeslots in certain key markets.
-- Emeril Green, a new original series featuring Chef Emeril Lagasse,
premiered on Planet Green, Discovery Communications' new eco-lifestyle
television network. The half-hour show airs Monday through Friday at 8 and
8:30 pm (ET/PT).
-- Emeril Live! premiered on Fine Living Network, airing seven nights a
week at 7 pm (ET/PT), followed by The Martha Stewart Show in primetime.
Merchandising
Revenues were $16.2 million for the second quarter of 2008, as compared to
$10.4 million in the prior year's second quarter. The increase was driven by
strong product sales at Macy's and the expansion of our crafts line into
Wal-Mart as well as contributions from Emeril and 1-800-Flowers.com.
Operating income was $8.4 million for the second quarter of 2008, compared
to $3.5 million in the second quarter of 2007.
Adjusted EBITDA was $8.8 million for the second quarter of 2008, more than
double Adjusted EBITDA of $3.9 million in the prior year's second quarter.
Highlights
-- The Martha Stewart Collection at Macy's witnessed strong sales during
the quarter and remains the No. 1 brand on Macy's bridal registry.
-- The Company has expanded the availability of the Martha Stewart Crafts
line with its entrance into Wal-Mart stores. Two new assortments -- Martha
Stewart Create and Martha Stewart Celebrate -- debuted in the majority of
Wal-Mart stores across the U.S. and Canada earlier this month.
-- With the successful launch of Martha Stewart for 1-800-Flowers.com, the
flowers program generated significant increases in the quarter. Orders shipped
in the month of May, which includes Mother's Day, were up approximately 50%
year-over-year. Average order value has grown by 30% year-over-year.
-- The quarter benefited from robust sales of Emeril's licensed kitchen
and food lines.
Corporate Expenses
Total Corporate expenses were $(12.8) million in the second quarter of
2008, compared to $(13.3) million in the prior year's quarter. Adjusted EBITDA
loss was $(11.6) million in the current period, which includes certain
non-recurring corporate costs of $1.5 million, compared to $(10.9) million in
the prior year period.
Trends and Outlook
Howard Hochhauser, Chief Financial Officer, commented, "Our operating
performance exceeded our expectations for the second quarter despite the
current economic environment. However, visibility into the second half of
2008 remains extremely limited, particularly in advertising. In spite of
these challenges, we continue to execute on our strategy. By bolstering the
revenue base with acquisitions like Emeril and new merchandising deals such as
our crafts expansion into Wal-Mart, coupled with disciplined operating expense
management within our businesses, we are in a good position to maintain our
outlook for the year and remain bullish about our potential longer term."
For the third quarter of 2008, we expect revenues in the range of $65.0 to
$67.0 million, operating loss in the range of $(0.5) million to break-even and
adjusted EBITDA in the range of $3.5 to $4.0 million. This outlook includes
contributions from the Emeril acquisition.
For the full-year 2008, inclusive of Emeril, we anticipate revenue of
approximately $300.0 million, operating income in the range of $8.5 to $13.5
million and adjusted EBITDA in the range of $23.0 to $28.0 million. Our third
quarter and full-year guidance reflect anticipated savings from reduction in
costs and expenses.
The Company will host a conference call with analysts and investors on
July 29 at 10:00 a.m. ET that will be broadcast live over the Internet at
www.marthastewart.com/ir.
Use of Non-GAAP Financial Information
In addition to using net income to assess the organization's overall
financial health, Company management uses net income before interest, taxes,
depreciation, amortization and non-cash equity compensation ("adjusted
EBITDA"), a non-GAAP financial measure, to evaluate the performance of our
businesses on a real-time basis. Adjusted EBITDA is considered an important
indicator of operational strength, is a direct component of the Company's
annual compensation program, and is a significant factor in helping our
management determine how to allocate resources and capital. Adjusted EBITDA is
used in addition to and in conjunction with results presented in accordance
with GAAP. Management considers adjusted EBITDA to be a critical measure of
operational health because it captures all of the revenue and ongoing
operating expenses of our businesses without the influence of (i) interest
charges, which result from our capital structure, not our ongoing business
efforts, (ii) taxes, which relate to the overall organizational financial
return, not that of any one business, (iii) the capital expenditure costs
associated with depreciation and amortization, which are a function of
historical decisions on infrastructure and capacity, and (iv) the cost of non-
cash equity compensation which, as a function of our stock price, can be
highly variable, is not necessarily an indicator of current operating
performance for any individual business unit, and is amortized over the
appropriate period.
Adjusted EBITDA provides a means to directly evaluate the ability of our
business operations to generate returns on a real-time basis. We provide
disclosure of adjusted EBITDA because we believe it is useful for investors to
have means to assess our performance as we do. While adjusted EBITDA is a
customized non-GAAP measure, it also provides a means to analyze value and
compare our operating capabilities to those of companies with whom we compete,
many of which have different compensation plans, depreciation and amortization
costs, capital structures and tax burdens. But please note that our non-GAAP
results may differ from similar measures used by other companies, even if
similar terms are used to identify such measures.
A limitation of adjusted EBITDA is that it does not reflect the periodic
costs of certain capitalized tangible and intangible assets used in generating
revenues for our overall organization. Management evaluates the costs of such
tangible and intangible assets through other financial measures such as
capital expenditures. Management also evaluates the cost of capitalized
tangible and intangible assets by analyzing returns provided on the capital
dollars deployed. A further limitation of adjusted EBITDA is that it does not
include stock compensation expense related to our workforce. Adjusted EBITDA
should be considered in addition to, and not as a substitute for, net income
or other measures of financial performance reported in accordance with GAAP.
About Martha Stewart Living Omnimedia, Inc.
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, Internet, Broadcasting, and Merchandising. MSLO
is listed on the New York Stock Exchange under the ticker symbol MSO.
Forward-Looking Statements
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; 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 most recent Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission, especially under the heading "Risk
Factors", 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, June 30,
(unaudited, in thousands, except per share amounts)
2008 2007
REVENUES
Publishing $46,265 $47,478
Merchandising 16,249 10,352
Internet 3,241 5,183
Broadcasting 11,355 10,433
Total revenues 77,110 73,446
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 36,565 38,881
Selling and promotion 18,051 22,172
General and administrative 19,248 17,920
Depreciation and amortization 1,523 2,263
Total operating costs and expenses 75,387 81,236
OPERATING INCOME / (LOSS) 1,723 (7,790)
OTHER INCOME / (EXPENSE)
Interest income, net 56 775
Other income / (expense) (1,131) 432
Total other income / (expense) (1,075) 1,207
INCOME / (LOSS) BEFORE INCOME TAXES AND
LOSS IN EQUITY INTEREST 648 (6,583)
Income tax provision (106) (154)
Loss in equity interest (214) -
NET INCOME / (LOSS) $328 $(6,737)
EARNINGS / (LOSS) PER SHARE - BASIC
AND DILUTED
Net income / (loss) per share $0.01 $(0.13)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 53,476 52,386
Diluted 55,588 52,386
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Six Months Ended June 30,
(unaudited, in thousands, except per share amounts)
2008 2007
REVENUES
Publishing $87,057 $88,096
Merchandising 29,315 23,952
Internet 6,655 8,713
Broadcasting 21,916 19,389
Total revenues 144,943 140,150
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 72,584 78,609
Selling and promotion 36,765 42,403
General and administrative 35,527 35,239
Depreciation and amortization 2,879 4,241
Total operating costs and expenses 147,755 160,492
OPERATING LOSS (2,812) (20,342)
OTHER INCOME / (EXPENSE)
Interest income, net 539 1,547
Other income / (expense) (1,131) 432
Total other income / (expense) (592) 1,979
LOSS BEFORE INCOME TAXES AND LOSS
IN EQUITY INTEREST (3,404) (18,363)
Income tax provision (288) (243)
Loss in equity interest (214) -
NET LOSS $(3,906) $(18,606)
LOSS PER SHARE - BASIC AND DILUTED
Net loss per share $(0.07) $(0.36)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted 53,087 52,382
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
June 30, December 31,
2008 2007
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $43,267 $30,536
Short-term investments 490 26,745
Accounts receivable, net 52,766 94,195
Inventories 5,511 4,933
Deferred television production costs 6,056 5,316
Income taxes receivable 9 513
Other current assets 2,773 3,921
Total current assets 110,872 166,159
RESTRICTED CASH 28,500 -
PROPERTY, PLANT AND EQUIPMENT, net 15,100 17,086
INTANGIBLE ASSETS, net 105,372 53,605
INVESTMENT IN EQUITY INTEREST, net 4,001 -
OTHER NONCURRENT ASSETS 21,311 18,417
Total assets $285,156 $255,267
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $25,854 $27,425
Accrued payroll and related costs 11,449 13,863
Income taxes payable 672 1,246
Current portion of deferred subscription
income 24,255 25,578
Current portion of deferred revenue 12,337 5,598
Current portion loan payable 6,000 -
Total current liabilities 80,567 73,710
DEFERRED SUBSCRIPTION REVENUE 7,260 9,577
DEFERRED REVENUE 14,048 14,482
LOAN PAYABLE 22,500 -
OTHER NONCURRENT LIABILITIES 2,751 1,969
Total liabilities 127,126 99,738
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value,
350,000 shares authorized: 27,780 and
26,738 shares issued in 2008 and 2007,
respectively 278 267
Class B common stock, $0.01 par value,
150,000 shares authorized: 26,690 and
26,722 shares outstanding in 2008 and 2007,
respectively 267 267
Capital in excess of par value 279,707 272,132
Accumulated deficit (120,268) (116,362)
Accumulated other comprehensive loss (1,179) -
158,805 156,304
Less class A treasury stock - 59 shares
at cost (775) (775)
Total shareholders' equity 158,030 155,529
Total liabilities and shareholders'
equity $285,156 $255,267
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/(loss), a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income/(loss), depreciation and amortization and
non-cash equity compensation are added back to operating income/(loss).
2008 2007
ADJUSTED EBITDA
Publishing $8,043 $6,779
Merchandising 8,818 3,902
Internet (1,385) (1,705)
Broadcasting 1,377 1,126
Adjusted EBITDA before Corporate Expenses 16,853 10,102
Corporate Expenses (11,561) (10,889)
Adjusted EBITDA 5,292 (787)
NON-CASH EQUITY COMPENSATION
Publishing 773 1,434
Merchandising 375 355
Internet 91 90
Broadcasting 222 1,160
Corporate Expenses 585 1,701
Total Non-Cash Equity Compensation 2,046 4,740
DEPRECIATION AND AMORTIZATION
Publishing 93 295
Merchandising 25 97
Internet 492 349
Broadcasting 300 837
Corporate Expenses 613 685
Total Depreciation and Amortization 1,523 2,263
OPERATING INCOME / (LOSS)
Publishing 7,177 5,050
Merchandising 8,418 3,450
Internet (1,968) (2,144)
Broadcasting 855 (871)
Operating Income before Corporate Expenses 14,482 5,485
Corporate Expenses (12,759) (13,275)
Total Operating Income / (Loss) 1,723 (7,790)
OTHER INCOME / (EXPENSE)
Interest income, net 56 775
Other income / (expense) (1,131) 432
Total Other Income / (Expense) (1,075) 1,207
INCOME / (LOSS) BEFORE INCOME TAXES AND
LOSS IN EQUITY INTEREST 648 (6,583)
Income tax provision (106) (154)
Loss in equity interest (214) -
NET INCOME / (LOSS) $328 $(6,737)
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/(loss), a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income/(loss), depreciation and amortization and
non-cash equity compensation are added back to operating income/(loss).
2008 2007
ADJUSTED EBITDA
Publishing $10,450 $9,157
Merchandising 15,799 11,134
Internet (3,195) (3,978)
Broadcasting 1,899 1,776
Adjusted EBITDA before Corporate Expenses 24,953 18,089
Corporate Expenses (20,905) (21,318)
Adjusted EBITDA 4,048 (3,229)
NON-CASH EQUITY COMPENSATION
Publishing 1,423 2,219
Merchandising 736 715
Internet 151 164
Broadcasting 460 7,046
Corporate Expenses 1,211 2,728
Total Non-Cash Equity Compensation 3,981 12,872
DEPRECIATION AND AMORTIZATION
Publishing 192 588
Merchandising 49 193
Internet 870 505
Broadcasting 410 1,699
Corporate Expenses 1,358 1,256
Total Depreciation and Amortization 2,879 4,241
OPERATING INCOME / (LOSS)
Publishing 8,835 6,350
Merchandising 15,014 10,226
Internet (4,216) (4,647)
Broadcasting 1,029 (6,969)
Operating Income before Corporate Expenses 20,662 4,960
Corporate Expenses (23,474) (25,302)
Total Operating Loss (2,812) (20,342)
OTHER INCOME / (EXPENSE)
Interest income, net 539 1,547
Other income / (expense) (1,131) 432
Total Other Income / (Expense) (592) 1,979
LOSS BEFORE INCOME TAXES AND LOSS IN
EQUITY INTEREST (3,404) (18,363)
Income tax provision (288) (243)
Loss in equity interest (214) -
NET LOSS $(3,906) $(18,606)
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Guidance Reconciliation
(in millions)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income/(loss), a GAAP
measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile
adjusted EBITDA to operating income/(loss), depreciation and amortization and
non-cash equity compensation are added back to operating income/(loss).
Third Quarter Guidance Reconciliation
Guidance Range
Adjusted EBITDA $3.5 $4.0
Depreciation and Amortization (1.5) (1.5)
Non-Cash Equity Compensation (2.5) (2.5)
Operating Loss (0.5) -
Interest and Other Income - 0.5
Pre-tax Income / (Loss) (0.5) 0.5
Income Taxes - -
Net Income / (Loss) (0.5) 0.5
Earnings / (Loss) Per Share $(0.01) $0.01
Avg. Diluted Shares Outstanding 55.5 55.5
Full Year 2008 Guidance Reconciliation
Guidance Range
Adjusted EBITDA $23.0 $28.0
Depreciation and Amortization (6.5) (6.5)
Non-Cash Equity Compensation (8.0) (8.0)
Operating Income 8.5 13.5
Interest and Other Expense (0.5) (0.5)
Pre-tax Income 8.0 13.0
Income Taxes - -
Net Income 8.0 13.0
Earnings Per Share $0.15 $0.24
Avg. Diluted Shares Outstanding 54.9 54.9
SOURCE Martha Stewart Living Omnimedia, Inc.
CONTACT: Elizabeth Estroff, SVP, Corporate Communications, of
Martha
Stewart Living Omnimedia, Inc., 1-212-827-8281,
eestroff@marthastewart.com/
Web site: http://www.marthastewart.com /
(MSO)
