NEW YORK, July 29 /PRNewswire-FirstCall/ -- Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the second quarter ended June 30, 2009. The Company reported revenue for the second quarter of $57.0 million, reflecting the challenging print advertising and retail sales environment. Results overall benefited from strong digital advertising growth, higher broadcasting profits and reduced corporate expenses.
Charles Koppelman, Executive Chairman and Principal Executive Officer, said, "MSLO is executing its business plan well in a tough economic environment. That is evidenced by 28% growth in Internet advertising revenue in the quarter compared to the same period last year as marketers respond to our popular online properties. Meanwhile, the operating efficiencies we have implemented over the past several quarters contributed to bottom line performance, as did higher profits from our Broadcasting segment. These factors helped to offset expected weakness in print advertising and lower merchandising revenue primarily due to the wind down of our Kmart relationship. Overall, we believe that MSLO is well-positioned with our core audiences. We look forward to demonstrating the growing power of our brands as the economy improves and as we position our Merchandising business for 2010 and beyond with new partners and new products."
Robin Marino, President and Chief Executive Officer of Merchandising, stated: "Although Merchandising is not immune to the challenging retail environment, we continue to execute on our diversification strategy. Earlier this week, we announced an agreement to create branded destination weddings as well as crafts classes and crafts camps at Sandals and Beaches resorts throughout the Caribbean. This initiative further extends our well-established and growing presence in the Weddings category. We've finalized the development of our Martha Stewart Clean products with The Hain Celestial Group and look forward to introducing these all-natural cleaning solutions in early 2010. Other than the expected lower revenue from Kmart, sales at Macy's and other merchandising partnerships remained relatively resilient in a difficult economy."
Second Quarter 2009 Summary
Revenues were $57.0 million in the second quarter of 2009, compared to $77.1 million in the second quarter of 2008. Lower revenues primarily reflect declines in magazine advertising revenue during a challenging period for the publishing industry, as well as lower merchandising revenues compared with the same period last year largely due to the winding down of our Kmart relationship. The Company's Internet and Broadcasting segments witnessed solid performance during the quarter.
Operating loss for the second quarter of 2009 was $(6.1) million, compared to operating income of $1.7 million for the second quarter of 2008. Included in the results is an impairment charge of $(5.5) million related to an equity investment. When the impairment charge recorded in the quarter is excluded, operating loss was $(0.6) million for the quarter.
Adjusted EBITDA for the second quarter of 2009 was $2.8 million, compared to $5.3 million in the prior year period. Cost savings initiatives implemented in prior periods helped offset lower revenue levels in the quarter.
Net loss per share was $(0.12) for the second quarter of 2009, compared to net income per share of $0.01 for the second quarter of 2008. Included in the results is an impairment charge of $(5.5) million or $(0.10) per share for the quarter related to an equity investment. When excluding the impairment charge recorded in the quarter, net loss per share was $(0.02) for the quarter.
Second Quarter 2009 Results by Segment
Three Months Ended, June 30
(unaudited, in thousands)
2009 2008
---- ----
REVENUES
Publishing $33,524 $46,265
Broadcasting 10,309 11,355
Internet 4,160 3,241
Merchandising 9,003 16,249
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Total Revenues $56,996 $77,110
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ADJUSTED EBITDA
Publishing $2,869 $8,043
Broadcasting 1,882 1,377
Internet 75 (1,385)
Merchandising 5,079 8,818
Corporate (7,131) (11,561)
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Total Adjusted EBITDA $2,774 $5,292
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OPERATING (LOSS)/INCOME
Publishing $2,995 $7,177
Broadcasting 1,678 855
Internet (470) (1,968)
Merchandising (691) 8,418
Corporate (9,614) (12,759)
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Total Operating (Loss)/Income $(6,102) $1,723
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Publishing
Revenues in the second quarter of 2009 were $33.5 million, compared to $46.3 million in the prior year's second quarter, due to a decline in advertising pages, timing of special issues and lower newsstand revenue.
Operating income was $3.0 million for the second quarter of 2009, compared to operating income of $7.2 million in the second quarter of 2008.
Adjusted EBITDA was $2.9 million in the second quarter of 2009, compared to adjusted EBITDA of $8.0 million in the prior year's quarter.
Highlights
- Martha Stewart's Cupcakes debuted in the No. 2 spot on The New York Times Best Seller List within days of publication; it also appeared on The Washington Post and Publishers Weekly Best Seller Lists.
- Emeril at the Grill: A Cookbook for All Seasons appeared on best-seller lists in The New York Times and The Washington Post.
Broadcasting
Revenues in the second quarter of 2009 were $10.3 million, compared to $11.4 million in the second quarter of 2008.
Operating income was $1.7 million for the second quarter of 2009, compared to operating income of $0.9 million in the second quarter of 2008.
Adjusted EBITDA was $1.9 million for the second quarter of 2009, up from $1.4 million in the prior year's second quarter, due to lower production and staffing expenses in the quarter.
Highlights
- The Martha Stewart Show was nominated for four daytime Emmy Awards. The show's fifth season gets underway on September 14.
- Production for the second season of Whatever, Martha! on Fine Living Network is nearly complete; the new season will premiere on September 23.
- Emeril Green began its second season on Discovery's Planet Green network on April 20.
Internet
Revenues were $4.2 million in the second quarter of 2009, up from $3.2 million in the second quarter of 2008.
Operating loss was $(0.5) million in the second quarter of 2009, compared to $(2.0) million in the second quarter of 2008.
Adjusted EBITDA was $0.1 million in the second quarter of 2009, up from a loss of $(1.4) million in the second quarter of 2008, due to increased ad revenue coupled with continued expense management.
Highlights
- Digital advertising revenue increased 28% compared to the prior year's quarter.
- Page views increased 59% over the prior year's quarter.
- The recent launch of the "DIY Weddings Crafts Contest" in collaboration with Etsy.com generated the highest traffic day ever to our Weddings site and the highest level of engagement with 40 page views per visitor.
Merchandising
Revenues were $9.0 million for the second quarter of 2009, as compared to $16.2 million in the prior year's second quarter. As expected, the 2009 second quarter results include lower royalty revenue from Kmart as the relationship continues to wind down. In addition, prior-year period results benefitted from revenue related to an Emeril Lagasse endorsement program as well as initial shipments of Martha Stewart Crafts products to support entry into Wal-Mart stores nationwide.
Operating loss was $(0.7) million for the second quarter of 2009, compared to operating income of $8.4 million in the second quarter of 2008. The decline reflects an impairment charge of $(5.5) million related to an equity investment.
Adjusted EBITDA was $5.1 million for the second quarter of 2009, compared to $8.8 million in the prior year's second quarter.
Highlights
- The Martha Stewart Collection exclusively at Macy's continues to demonstrate solid performance. Some of our top-selling categories in the quarter included cookware, enameled cast iron, bakeware, bath towels and moderate bedding.
- Development for Martha Stewart Clean, a 10-SKU line of all-natural cleaning products with The Hain Celestial Group was completed. The line is scheduled to launch in early 2010.
- Chef Emeril Lagasse's updated collection of top-quality stainless steel cookware with All-Clad relaunched at Macy's this month.
Corporate
Total Corporate expenses were $(9.6) million in the second quarter of 2009 down from $(12.8) million in the prior year's quarter. Adjusted EBITDA loss was $(7.1) million in the second quarter of 2009, an improvement of 38% from $(11.6) million in the prior year's quarter, reflecting the positive impact of the Company's expense management actions. The second quarter of 2008 included $1.5 million in certain non-recurring costs.
The Company will host a conference call with analysts and investors on July 29th at 10:00 a.m. EDT 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, non-cash equity compensation and impairment charges ("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, (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, and (v) non-cash impairment charges, which are impacted by macro-economic conditions and do not necessarily reflect operating performance.
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 which 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, Broadcasting, Internet, 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 include estimates of future financial performance, potential opportunities, expected product line expansions and additions, future acceptability of our content and our businesses and other statements that 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 or Emeril Lagasse by consumers, advertisers and business partners; further downturns in national and/or local economies; shifts in our business strategies; a loss of the services of Ms. Stewart or Mr. Lagasse; a loss of the services of other key personnel; a further 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 businesses.
Certain of these and other factors are discussed in more detail in the Company's most recent Annual Report on Form 10-K and 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)
2009 2008
---- ----
REVENUES
Publishing $33,524 $46,265
Broadcasting 10,309 11,355
Internet 4,160 3,241
Merchandising 9,003 16,249
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Total revenues 56,996 77,110
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OPERATING COSTS AND EXPENSES
Production, distribution and editorial 29,311 36,720
Selling and promotion 13,556 18,051
General and administrative 12,584 19,093
Depreciation and amortization 2,147 1,523
Impairment charge 5,500 -
------ ------
Total operating costs and expenses 63,098 75,387
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OPERATING (LOSS) / INCOME (6,102) 1,723
OTHER INCOME / (EXPENSE)
Interest (expense) / income, net (81) 56
Income / (loss) on equity securities 209 (1,131)
Loss in equity interest - (214)
------ ------
Total other income / (expense) 128 (1,289)
(LOSS) / INCOME BEFORE INCOME TAXES (5,974) 434
Income tax provision (400) (106)
NET (LOSS) / INCOME $(6,374) $328
======= =======
(LOSS) / EARNINGS PER SHARE - BASIC AND DILUTED
Net (loss) / income $(0.12) $0.01
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 53,820 53,476
Diluted 53,820 55,588
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Six Months Ended June 30,
(unaudited, in thousands, except per share amounts)
2009 2008
---- ----
REVENUES
Publishing $61,885 $87,057
Broadcasting 20,823 21,916
Internet 6,782 6,655
Merchandising 17,936 29,315
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Total revenues 107,426 144,943
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OPERATING COSTS AND EXPENSES
Production, distribution and editorial 57,480 72,756
Selling and promotion 28,337 36,765
General and administrative 26,698 35,355
Depreciation and amortization 3,899 2,879
Impairment charge 12,600 -
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Total operating costs and expenses 129,014 147,755
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OPERATING LOSS (21,588) (2,812)
OTHER (EXPENSE) / INCOME
Interest (expense) / income, net (89) 539
Loss on equity securities (547) (1,131)
Loss in equity interest (236) (214)
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Total other expense (872) (806)
LOSS BEFORE INCOME TAXES (22,460) (3,618)
Income tax provision (758) (288)
NET LOSS $(23,218) $(3,906)
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LOSS PER SHARE - BASIC AND DILUTED
Net Loss $(0.43) $(0.07)
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted 53,793 53,087
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
June 30,
2009 December 31,
(unaudited) 2008
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $44,947 $50,204
Short-term investments 8,851 9,915
Accounts receivable, net 37,163 52,500
Inventory 4,838 6,053
Deferred television production costs 4,351 4,076
Income taxes receivable 40 40
Other current assets 6,781 3,712
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Total current assets 106,971 126,500
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PROPERTY, PLANT AND EQUIPMENT, net 11,825 14,422
GOODWILL AND OTHER INTANGIBLE ASSETS, net 93,306 93,312
OTHER NONCURRENT ASSETS, net 13,931 27,051
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Total assets $226,033 $261,285
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $18,441 $27,877
Accrued payroll and related costs 4,735 7,525
Income taxes payable 75 142
Current portion of deferred
subscription income 19,451 22,597
Current portion of other deferred
revenue 19,644 7,582
Current portion loan payable 1,000 -
------ ------
Total current liabilities 63,346 65,723
------ ------
DEFERRED SUBSCRIPTION REVENUE 5,844 6,874
OTHER DEFERRED REVENUE 4,421 13,334
LOAN PAYABLE 16,500 19,500
DEFERRED INCOME TAX LIABILITY 2,509 1,854
OTHER NONCURRENT LIABILITIES 3,067 3,005
------ -------
Total liabilities 95,687 110,290
------ -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value,
350,000 shares authorized: 28,039 and
28,204 shares outstanding in 2009 and
2008, respectively 280 282
Class B common stock, $0.01 par value,
150,000 shares authorized: 26,690
shares outstanding in 2009 and 2008 267 267
Capital in excess of par value 285,657 283,248
Accumulated deficit (155,245) (132,027)
Accumulated other comprehensive income 162 -
------- -------
131,121 151,770
------- -------
Less class A treasury stock - 59 shares
at cost (775) (775)
------- -------
Total shareholders' equity 130,346 150,995
------- -------
Total liabilities and
shareholders' equity $226,033 $261,285
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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, depreciation and amortization, non-cash equity compensation, and non-cash impairment charges are added back to operating income/(loss).
2009 2008
---- ----
ADJUSTED EBITDA
Publishing $2,869 $8,043
Broadcasting 1,882 1,377
Internet 75 (1,385)
Merchandising 5,079 8,818
Corporate (7,131) (11,561)
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Adjusted EBITDA 2,774 5,292
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NON-CASH EQUITY COMPENSATION
Publishing (183) 773
Broadcasting 136 222
Internet 28 91
Merchandising 253 375
Corporate 995 585
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Total Non-Cash Equity Compensation 1,229 2,046
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DEPRECIATION AND AMORTIZATION
Publishing 57 93
Broadcasting 68 300
Internet 517 492
Merchandising 17 25
Corporate 1,488 613
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Total Depreciation and Amortization 2,147 1,523
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IMPAIRMENT ON MERCHANDISING EQUITY
INVESTMENT 5,500 -
------ -------
OPERATING (LOSS) / INCOME
Publishing 2,995 7,177
Broadcasting 1,678 855
Internet (470) (1,968)
Merchandising (691) 8,418
Corporate (9,614) (12,759)
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Total Operating (Loss) / Income (6,102) 1,723
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OTHER INCOME / (EXPENSE)
Interest (expense) / income, net (81) 56
Income / (loss) on equity securities 209 (1,131)
Loss in equity interest - (214)
------ -------
Total other income / (expense) 128 (1,289)
(LOSS) / INCOME BEFORE INCOME TAXES (5,974) 434
Income tax provision (400) (106)
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NET (LOSS) / INCOME $(6,374) $328
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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, depreciation and amortization, non-cash equity compensation, and non-cash impairment charges are added back to operating income/(loss).
2009 2008
---- ----
ADJUSTED EBITDA
Publishing $1,506 $10,450
Broadcasting 2,913 1,899
Internet (1,464) (3,195)
Merchandising 10,578 15,799
Corporate (15,761) (20,905)
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Adjusted EBITDA (2,228) 4,048
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NON-CASH EQUITY COMPENSATION
Publishing 253 1,423
Broadcasting 264 460
Internet 69 151
Merchandising 409 736
Corporate 1,866 1,211
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Total Non-Cash Equity Compensation 2,861 3,981
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DEPRECIATION AND AMORTIZATION
Publishing 131 192
Broadcasting 138 410
Internet 969 870
Merchandising 35 49
Corporate 2,626 1,358
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Total Depreciation and Amortization 3,899 2,879
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IMPAIRMENT ON MERCHANDISING EQUITY
INVESTMENT 12,600 -
------- -------
OPERATING (LOSS) / INCOME
Publishing 1,122 8,835
Broadcasting 2,511 1,029
Internet (2,502) (4,216)
Merchandising (2,466) 15,014
Corporate (20,253) (23,474)
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Total Operating Loss (21,588) (2,812)
------- -------
OTHER (EXPENSE) / INCOME
Interest (expense) / income, net (89) 539
Loss on equity securities (547) (1,131)
Loss in equity interest (236) (214)
------- -------
Total other expense (872) (806)
LOSS BEFORE INCOME TAXES (22,460) (3,618)
Income tax provision (758) (288)
------- -------
NET LOSS $(23,218) $(3,906)
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