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Press release from PR Newswire

Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2012 Results

Tuesday, February 26, 2013

Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2012 Results07:49 EST Tuesday, February 26, 2013NEW YORK, Feb. 26, 2013 /PRNewswire/ -- Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the fourth quarter and full year ended December 31, 2012. The Company reported revenue for the fourth quarter and full year of $56.4 million and $197.6 million, respectively.Dan Taitz, Interim Principal Executive Officer, said, "The Company produced higher Adjusted EBITDA for both the fourth quarter and full-year compared to the respective 2011 periods due to important actions taken to lower our cost structure and align our businesses for the future.  Merchandising delivered a strong holiday season and a good year overall with strong revenue growth and improved profit margins.  MSLO still has much work to do in 2013 as the Company positions itself to return to sustained profitability."Fourth Quarter 2012 SummaryTotal revenues were $56.4 million in the fourth quarter of 2012, compared to $61.7 million in the fourth quarter of 2011, due to lower revenues in the publishing and broadcasting segments, partially off-set by higher merchandising revenues.Total operating income for the fourth quarter of 2012 was $1.4 million, compared with a loss of $(0.04) million in the prior-year period. The fourth quarter of 2012 included $(3.5) million in charges related to the restructuring moves in our media business.  The fourth quarter of 2011 included a $(1.3) million restructuring charge related to severance costs and staffing adjustments.Adjusted EBITDA, which excludes the aforementioned charges, was $6.6 million for the fourth quarter of 2012, compared to $3.3 million in the prior year period. Basic and diluted net income per share was $0.02 for the fourth quarter of 2012, compared to $0.07 for the fourth quarter of 2011.  Net income for the fourth quarter of 2011 benefitted from approximately $4.7 million of other income, primarily reflecting a gain on the sale of the Company's equity interest in WeddingWire.  Full-Year 2012 SummaryTotal revenues were $197.6 million in 2012, compared to $221.4 million in 2011. Total operating loss for the full-year 2012 was $(56.4) million, compared to an operating loss of $(18.6) million in 2011. Included in 2012 results were restructuring and other non-recurring charges of $(49.1) million, which included a $(44.3) million non-cash impairment charge reflecting the write-down of goodwill related to the Company's publishing segment.  Restructuring and other non-recurring charges in 2011 totaled $(5.1) million.Adjusted EBITDA, which excludes the aforementioned charges, was $0.5 million for 2012, compared to an adjusted EBITDA loss of $(4.0) million in the prior year. Net loss per share was $(0.83) for the full-year 2012, compared to a net loss per share of $(0.28) in 2011. Excluding the restructuring and other non-recurring charges, net loss per share was $(0.10) and $(0.19), for 2012 and 2011, respectively.Fourth Quarter 2012 Results by SegmentThree Months Ended December 31(unaudited, in thousands)20122011REVENUES Publishing$    35,332$    38,798 Merchandising16,21913,130 Broadcasting4,8129,766Total Revenues$    56,363$    61,694ADJUSTED EBITDAPublishing$    (663)$ 1,676Merchandising11,4228,809Broadcasting 3,331(763)Corporate (7,502)(6,455)Total Adjusted EBITDA$  6,588$ 3,267 OPERATING INCOME / (LOSS)Publishing$        (2,343)$ 886Merchandising 11,3308,776Broadcasting 2,953(1,126)Corporate (10,580)(8,574)Total Operating Income / (Loss)$          1,360$        (38)Recent Business HighlightsAccording to comScore data, total unique visitors across MSLO's websites increased 24% in the quarter compared to the prior-year period. Following the expansion of MSLO's content business with new video partners Hulu and Hulu Plus and The AOL On Network, online video views ramped up across MarthaStewart.com and partner websites, totaling more than 26 million views in December to over 3 million unique users. Following the success of Martha Stewart's Cooking School Season 1, one of PBS' top watched overall shows, Season 2 of Martha Stewart's Cooking School and Season 1 of Martha Bakes are scheduled to launch in April. On February 19, 2013, Martha Stewart launched a new daily radio show, Martha Live, exclusively on SiriusXM. MSLO's latest book, Meatless: More Than 200 of the Very Best Vegetarian Recipes, was published by Clarkson Potter on January 8, 2013 and quickly became a New York Times bestseller.PublishingRevenues in the fourth quarter of 2012 were $35.3 million, compared to $38.8 million in the prior year's fourth quarter, due to lower print and digital advertising revenues as well as lower circulation revenues.  Operating loss was $(2.3) million for the fourth quarter of 2012, which included a $(1.4) million charge related to restructuring moves, compared to operating income of $0.9 million in the prior year's quarter.Adjusted EBITDA loss was $(0.7) million in the fourth quarter of 2012, compared to adjusted EBITDA of $1.7 million in the prior year's quarter.MerchandisingRevenues increased 23.5% to $16.2 million for the fourth quarter of 2012, as compared to $13.1 million in the prior year's fourth quarter primarily due to the increase in royalty revenue from Macy's, design fees from J.C. Penney and revenue from the Martha Stewart Home Office line with Avery.Operating income was $11.3 million for the fourth quarter of 2012, up from $8.8 million in the fourth quarter of 2011.  Adjusted EBITDA was $11.4 million for the fourth quarter of 2012, up from $8.8 million in the prior year's fourth quarter. BroadcastingRevenue in the fourth quarter of 2012 was $4.8 million, compared to $9.8 million in the fourth quarter of 2011.  The overall decline from the prior-year results reflects the absence of live television programming, as the Company concluded The Martha Stewart Show in mid-2012.  Operating income was $3.0 million for the fourth quarter of 2012, compared to an operating loss of $(1.1) million in the fourth quarter of 2011. Adjusted EBITDA was $3.3 million for the fourth quarter of 2012, compared to an adjusted EBITDA loss of $(0.8) million in the prior year's fourth quarter.CorporateAdjusted EBITDA reflects charges of $(7.5) million in the fourth quarter of 2012 compared to charges of $(6.5) million in the prior year's quarter.  Total Corporate expenses were $(10.6) million, compared to $(8.6) million in the prior year's fourth quarter. Included in this year's fourth quarter is approximately $0.8 million in legal expenses related to the Macy's litigation. The Company will host a conference call with analysts and investors on February 26, 2013 at 8:30 am EST that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through March 11, 2013.Use of Non-GAAP Financial InformationIn addition to using net income to assess the organization's overall financial health, Company management uses consolidated net income/(loss) before interest income or expense, taxes, depreciation and amortization, impairment, non-cash equity compensation expense, restructuring charges and other income/(expense) ("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) non-cash impairment charges, which are impacted by macro-economic conditions and do not necessarily reflect operating performance, (v) 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 various periods (vi) restructuring charges, which include non-recurring charges such as employee severance and certain professional fees that do not necessarily reflect ongoing operating performance and (vii) other income/(expense) which may include non-operational items.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. 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 non-cash equity 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 the following business segments: Publishing, Merchandising and Broadcasting. MSLO is listed on the New York Stock Exchange under the ticker symbol MSO.Forward-Looking StatementsWe 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, changes to our cost structure, potential opportunities, expected product line changes, future acceptability of our content and our businesses, the success of our strategic initiatives, anticipated growth, including particularly statements with respect to margins, the success of our alliance with J.C. Penney and benefits from aligning our sales and marketing team, and other statements that can be identified by terminology such as "may," "will," "should," "could," "position," "expects," "intends," "plans," "thinks," "believes," "estimates," "potential," "seem," "counting" 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; the failure of national and/or local economies to improve or renewed deterioration of such economies; our failure to successfully implement our anticipated growth strategies; a loss of the services of Ms. Stewart or Mr. Lagasse; continued high turnover among our employees; a continued softening of the domestic advertising market; our inability to expand our merchandising and licensing programs; changes in consumer reading and purchasing patterns to which our offerings are unable to respond; 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; the inability to add to our partnerships or capitalize on existing partnerships; legal actions taken against us; 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 Annual Report on Form 10-K and Quarterly Reports 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 publicly update or revise any forward-looking statements after the date of this release. Martha Stewart Living Omnimedia, Inc.Consolidated Statements of OperationsThree Months Ended December 31, (unaudited, in thousands, except share and per share amounts)20122011REVENUESPublishing$     35,332$     38,798Merchandising16,21913,130Broadcasting4,8129,766Total revenues56,36361,694OPERATING COSTS AND EXPENSESProduction, distribution and editorial24,47033,138Selling and promotion14,49914,814General and administrative11,51211,425Depreciation and amortization9791,031Restructuring charges3,5431,324Total operating costs and expenses55,00361,732OPERATING INCOME / (LOSS)1,360(38)OTHER INCOME / (EXPENSE)Interest income / (expense), net144(218)Gain on sale of cost-based investment?7,647Other-than-temporary loss on cost-based investments?(2,724)Total other income1444,705INCOME BEFORE INCOME TAXES 1,5044,667Income tax provision(394)(470)NET INCOME$   1,110$    4,197INCOME PER SHARE ? BASIC AND DILUTEDNet income - Basic$ 0.02$ 0.07Net income - Diluted$ 0.02$ 0.07WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBasic67,330,28859,014,889Diluted67,621,96159,605,829Martha Stewart Living Omnimedia, Inc.Consolidated Statements of OperationsTwelve Months Ended December 31 , (in thousands, except share and per share amounts)2012(unaudited)2011REVENUESPublishing$    122,540$      140,857Merchandising57,57448,614Broadcasting17,51331,962Total revenues197,627221,433OPERATING COSTS AND EXPENSESProduction, distribution and editorial103,347127,084Selling and promotion52,45357,208General and administrative45,14846,641Depreciation and amortization4,0073,978Restructuring charges4,8115,116Goodwill impairment44,257?Total operating costs and expenses254,023240,027OPERATING LOSS (56,396)(18,594)OTHER INCOME / (EXPENSE)Interest income / (expense), net836(283)Income on equity securities?15Gain on sales of cost-based investments1,1657,647Other-than-temporary loss on cost-based investments(88)(2,724)       Total other income1,9134,655 LOSS BEFORE INCOME TAXES (54,483) (13,939)       Income tax provision(1,602)(1,580)NET LOSS$    (56,085)$   (15,519)LOSS PER SHARE ? BASIC AND DILUTEDNet Loss$        (0.83)$       (0.28)WEIGHTED AVERAGE COMMON SHARES OUTSTANDING       Basic and diluted67,231,46355,880,896 Martha Stewart Living Omnimedia, Inc.Consolidated Balance Sheets(in thousands, except share and per share amounts)December 31,2012(unaudited)December 31,2011ASSETSCURRENT ASSETSCash and cash equivalents$       19,925$     38,453Short-term investments29,18211,051Accounts receivable, net38,07348,237Paper inventory4,5807,225Deferred television production costs434?Other current assets3,3354,858Total current assets95,529109,824PROPERTY AND EQUIPMENT, net10,73813,396GOODWILL, net 85045,107OTHER INTANGIBLE ASSETS, net45,20345,215OTHER NONCURRENT ASSETS, net1,9402,578Total assets$     154,260$    216,120LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities$       12,770$      23,728Accrued payroll and related costs9,3167,008Current portion of deferred subscription revenue13,16816,018Current portion of other deferred revenue5,6055,147Total current liabilities40,85951,901DEFERRED SUBSCRIPTION REVENUE4,4783,975OTHER DEFERRED REVENUE1,1132,333DEFERRED INCOME TAX LIABILITY7,1175,874OTHER NONCURRENT LIABILITIES5,1774,090Total liabilities58,74468,173 COMMITMENTS AND CONTINGENCIESSHAREHOLDERS' EQUITYSeries A Preferred Stock, 1 share issued and outstanding in 2012 and 2011??Class A Common Stock, $0.01 par value, 350,000,000 shares authorized: 41,161,289 and 40,893,964 shares issued and outstanding in 2012 and 2011, respectively412409Class B Common Stock, $0.01 par value, 150,000,000 shares authorized: 25,984,625 shares issued and outstanding in 2012 and 2011260260Capital in excess of par value340,586336,661Accumulated deficit(244,529)(188,442)Accumulated other comprehensive loss(438)(166)96,291148,722Less: Class A treasury stock ? 59,400 shares at cost(775)(775)Total shareholders' equity95,516147,947Total liabilities and shareholders' equity$    154,260$     216,120 Martha Stewart Living Omnimedia, Inc.Supplemental Disclosures Regarding Non-GAAP Financial InformationThree Months Ended December 31, (unaudited, in thousands)The following table presents segment and consolidated financial information, including a reconciliation of net loss, a GAAP measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile net loss to adjusted EBITDA, non-cash equity compensation, depreciation and amortization, restructuring charges, other income/(expense) and income taxes are added back.20122011NET INCOME$ 1,110$ 4,197Income tax provision(394)(470)INCOME BEFORE INCOME TAXES 1,5044,667OTHER INCOME / (EXPENSE)Income / (expense), net144(218)Gain on sale of cost-based investment?7,647Other-than-temporary loss on cost-based investments?(2,724)Total other income 1444,705OPERATING INCOME / (LOSS)Publishing(2,343)886Merchandising11,3308,776Broadcasting2,953(1,126)Corporate(10,580)(8,574)Total Operating Income / (Loss) 1,360(38)RESTRUCTURING CHARGESPublishing1,387478Merchandising?13Broadcasting287246Corporate 1,869587Total Restructuring Charges3,5431,324DEPRECIATION AND AMORTIZATION190230Publishing158Merchandising83111Broadcasting691682CorporateTotal Depreciation and Amortization9791,031NON-CASH EQUITY COMPENSATION Publishing10382Merchandising7712Broadcasting86Corporate 518850Total Non-Cash Equity Compensation706950ADJUSTED EBITDAPublishing(663)1,676Merchandising11,4228,809Broadcasting3,331(763)Corporate (7,502)(6,455)Adjusted EBITDA$    6,588$    3,267 Martha Stewart Living Omnimedia, Inc.Supplemental Disclosures Regarding Non-GAAP Financial InformationTwelve Months Ended December 31, (unaudited, in thousands)The following table presents segment and consolidated financial information, including a reconciliation of net loss, a GAAP measure, and adjusted EBITDA, a non-GAAP measure. In order to reconcile net loss to adjusted EBITDA, non-cash equity compensation, depreciation and amortization, restructuring charges, non-cash impairment charges, other income/(expense) and income taxes are added back.20122011NET LOSS$ (56,085)$ (15,519)Income tax provision(1,602)(1,580)LOSS BEFORE INCOME TAXES(54,483)(13,939)OTHER INCOME / (EXPENSE)Interest income / (expense), net836(283)Income on equity securities?15Gain on sales of cost-based investments1,1657,647Other-than-temporary loss on cost-based investments(88)(2,724)Total other income1,9134,655OPERATING (LOSS) / INCOMEPublishing(62,029)(6,464)Merchandising39,47729,972Broadcasting2,354(4,740)Corporate (36,198)(37,362)Total Operating Loss(56,396)(18,594)RESTRUCTURING CHARGESPublishing1,971828Merchandising8113Broadcasting816600Corporate 1,9433,675Total Restructuring Charges4,8115,116GOODWILL IMPAIRMENT 44,257?DEPRECIATION AND AMORTIZATIONPublishing742774Merchandising5232Broadcasting 388470Corporate 2,8252,702Total Depreciation and Amortization4,0073,978NON-CASH EQUITY COMPENSATIONPublishing587682Merchandising455224Broadcasting5067Corporate 2,7154,523Total Non-Cash Equity Compensation3,8075,496ADJUSTED EBITDAPublishing(14,472)(4,180)Merchandising40,06530,241Broadcasting3,608(3,603)Corporate(28,715)(26,462)Adjusted EBITDA$ 486$ (4,004) SOURCE Martha Stewart Living OmnimediaFor further information: Katherine Nash, Martha Stewart Living Omnimedia, Inc. Corporate Communications, +1-212-827-8722, knash@marthastewart.com