Martha Stewart Living Omnimedia Reports Third Quarter 2012 Results

      Martha Stewart Living Omnimedia Reports Third Quarter 2012 Results

PR Newswire

NEW YORK, Nov. 2, 2012

NEW YORK, Nov.2, 2012 /PRNewswire/ --Martha Stewart Living Omnimedia, Inc.
(NYSE: MSO) today announced its results for the third quarter ended September
30, 2012. The Company reported total revenues for the third quarter of $43.5
million.

Lisa Gersh, President and Chief Executive Officer, said, "Our performance in
the quarter was in line with our expectations but not our ambitions for the
Company. Including the Publishing segment actions announced yesterday, we
have taken actions designed to significantly reduce the cost structure of our
print and broadcasting operations this year, an important step toward
positioning MSLO for profitable growth. We are transitioning our content
operations to digital, mobile and video platforms that feature lower fixed
costs and align with evolving consumer preferences for how and where they
engage with our content. We are seeing some encouraging early results,
particularly in video. In the meantime, our Merchandising business continues
to generate attractive growth. Overall we believe we have made significant
progress in executing our strategy and anticipate that we will begin to
deliver the bottom-line benefits of this work in 2013."

Third Quarter 2012 Summary

Total revenues were $43.5 million in the third quarter of 2012, compared to
$52.2 million in the third quarter of 2011, due to lower revenues in the
publishing and broadcasting segments, partially off-set by higher
merchandising revenues.

Total operating loss for the third quarter of 2012 was $(50.7) million, which
included a $(44.3) million non-cash impairment charge reflecting the
write-down of goodwill related to the Company's publishing segment. The
write-down is the result of continued softness in the print publishing
industry overall and, specifically, a decrease in the Company's advertising
revenues. Total operating loss in the third quarter of 2011 was $(9.3)
million, which included a $(3.8) million restructuring charge related to
changes in executive management and professional fees.

Adjusted EBITDA loss for the third quarter of 2012 was $(4.0) million,
compared to $(2.3) million in the prior-year period.

Basic and diluted net loss per share was $(0.76) for the third quarter of
2012, compared to $(0.18) for the third quarter of 2011. Excluding the
impairment charge and restructuring charges in the third quarter of 2012, and
excluding restructuring charges in the third quarter of 2011, net loss per
share was $(0.09) and $(0.11), respectively.

Third Quarter 2012 Results by Segment

Three Months Ended, September 30

(unaudited, in thousands)


                        2012                 2011
REVENUES
Publishing             $  27,572          $  33,242
Broadcasting           2,744                6,626
Merchandising          13,233               12,336
Total Revenues          $  43,549          $  52,204


OPERATING INCOME/(LOSS)
 Publishing            $  (51,264)      $   (3,585)
 Broadcasting          281                (1,320)
 Merchandising         8,525              7,179
 Corporate             (8,231)            (11,568)
 Total Operating Loss  $    (50,689)    $   (9,294)


ADJUSTED EBITDA
 Publishing            $  (6,160)       $   (2,768)
 Broadcasting          379                (803)
 Merchandising         8,614              7,388
 Corporate             (6,814)            (6,160)
Total Adjusted EBITDA   $   (3,981)      $    (2,343)

Recent Business Highlights

  oThe first season of Martha Stewart's Cooking School debuted on PBS the
    first weekend in October. The program is being aired in more than 92% of
    households and in all top 50 markets.
  oIn September, MSLO announced that it has expanded its content business
    with new video partners Hulu and Hulu Plus, The AOL On Network and
    Fullscreen, Inc. The new agreements reflect MSLO's strategy to redefine
    its video business by providing content across multiple platforms,
    especially online.
  oAccording to comScore Unified data, total unique visitors across MSLO's
    websites increased 42% in the quarter compared to the same period in the
    prior year.
  oOn October 17^th -18^th, MSLO introduced American Made, a two-day,
    multimedia celebration of American artists, artisans and entrepreneurs at
    Grand Central Terminal -- created in partnership with title sponsors Avery
    Dennison and The UPS Store, and official sponsors jcpenney and Toyota, in
    close collaboration with Etsy.
  oThe Martha Stewart Home Office line with Avery launched in Staples stores
    in the UK and began rolling out in Officeworks stores in Australia in the
    quarter.
  oThe Home Depot expanded their assortment of Martha Stewart Living holiday
    products, which rolled out in stores last month.
  oLast week, MSLO announced a new partnership with FremantleMedia
    Enterprises, a key player in the global content and brand space, to
    co-develop television and digital video programming featuring contemporary
    lifestyle personalities.

Publishing

Revenues in the third quarter of 2012 were $27.6 million, compared to $33.2
million in the prior year's third quarter, due to lower print and digital
advertising revenues.

Operating loss was $(51.3) million for the third quarter of 2012, which
included a $(44.3) million non-cash impairment charge reflecting the
write-down of goodwill, compared to operating loss of $(3.6) million in the
prior year's quarter.

Adjusted EBITDA loss was $(6.2) million in the third quarter of 2012, compared
to $(2.8) million in the prior year's quarter.

As announced on November 1, MSLO has taken a series of actions to restructure
its media business placing more emphasis on digital, mobile and video
platforms. The actions which reduce the number of published print titles also
should result in a significantly lower cost structure, and a more sharply
focused ad sales force. The Company's actions are anticipated to result in a
reduction of approximately $33 to $35 million in annual operating expenses.

Broadcasting

Revenues in the third quarter of 2012 were $2.7 million, compared to $6.6
million in the third quarter of 2011. The decline reflects the Company's
strategic migration of its Broadcasting business away from the higher costs
associated with daily live television production, in favor of investment in
short-form video for digital formats and targeted broadcast initiatives.

Operating income was $0.3 million for the third quarter of 2012, compared to
an operating loss of $(1.3) million in the third quarter of 2011.

Despite lower revenue, adjusted EBITDA was $0.4 million for the third quarter
of 2012, compared to an adjusted EBITDA loss of $(0.8) million in the prior
year's third quarter.

Merchandising

Revenues increased 7.2% to $13.2 million for the third quarter of 2012, as
compared to $12.3 million in the prior year's third quarter, primarily due to
revenue from the Martha Stewart Home Office line with Avery and design fees
from J.C. Penney.

Operating income was $8.5 million for the third quarter of 2012, up from $7.2
million in the third quarter of 2011.

Adjusted EBITDA was $8.6 million for the third quarter of 2012, up from $7.4
million in the prior year's third quarter.

Corporate

Total Corporate expenses were $(8.2) million in the third quarter of 2012
compared to $(11.6) million in the prior year's third quarter. Adjusted EBITDA
loss was $(6.8) million in the third quarter of 2012 which included $0.6
million in legal and other professional fees compared to $(6.2) million in the
prior year's quarter.

The Company will host a conference call with analysts and investors on
November 2, 2012 at 8:30am EDT that will be broadcast live over the Internet
at www.marthastewart.com/ir, and an archived version will be available through
November 16, 2012.

Use of Non-GAAP Financial Information

In 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. 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 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, 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 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; 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 renewed softening of the domestic advertising market; changes
in consumer reading, purchasing and/or television viewing 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 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,

(unaudited, in thousands, except share and per share amounts)


                                           2012          2011
REVENUES
     Publishing                            $  27,572    $  33,242
     Broadcasting                          2,744         6,626
     Merchandising                         13,233        12,336
        Total revenues                     43,549        52,204
OPERATING COSTS AND EXPENSES
   Production, distribution and editorial  24,487        30,044
   Selling and promotion                   13,028        15,073
   General and administrative              10,972        11,562
   Depreciation and amortization           1,003         1,027
   Restructuring charges                   491           3,792
   Goodwill impairment                     44,257        —
        Total operating costs and expenses 94,238        61,498
OPERATING LOSS                             (50,689)      (9,294)
OTHER INCOME / (EXPENSE)
   Interest income, net                    221           61
   Loss on equity securities               —             (190)
    Total other income / (expense)   221           (129)

                                           (50,468)      (9,423)
LOSS BEFORE INCOME TAXES
 Income tax provision                (410)         (278)
NET LOSS                                   $  (50,878)  $  (9,701)
LOSS PER SHARE – BASIC AND DILUTED
Net loss                         $ (0.76)      $ (0.18)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted                67,271,211    54,989,823





Martha Stewart Living Omnimedia, Inc.

Consolidated Statements of Operations

Nine Months Ended September 30 ,

(unaudited, in thousands, except share and per share amounts)


                                                2012          2011
REVENUES
Publishing                            $ 87,208     $   102,059
Broadcasting                          12,701        22,195
Merchandising                         41,355        35,484
Total revenues                   141,264       159,738
OPERATING COSTS AND EXPENSES
        Production, distribution and editorial  78,877        93,948
        Selling and promotion                   37,954        42,394
        General and administrative              33,636        35,214
        Depreciation and amortization           3,028         2,947
        Restructuring charges                   1,268         3,792
        Goodwill impairment                     44,257        —
Total operating costs and        199,020       178,295
expenses
OPERATING LOSS                                  (57,756)      (18,557)
OTHER INCOME / (EXPENSE)
        Interest income / (expense), net        693           (65)
        Income on equity securities             —             15
        Gain on sales of cost-based investments 1,165         —
        Other-than-temporary loss on cost-based (88)          —
        investment
         Total other income / (expense)   1,770         (50)
                                                             
                                                (55,986)
LOSS BEFORE INCOME TAXES                                      (18,607)
 Income tax provision                     (1,209)       (1,109)
NET LOSS                                        $  (57,195)  $  (19,716)
LOSS PER SHARE – BASIC AND DILUTED
        Net Loss                                $ (0.85)      $ (0.36)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 Basic and diluted                        67,198,281    54,824,752





Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
                                                  September 30,
                                                                 December 31,
                                                  2012
                                                                 2011
                                                  (unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents               $  17,414     $   38,453
Short-term investments                  34,211         11,051
Accounts receivable, net                30,244         48,237
Paper inventory                         4,035          7,225
Deferred television production costs    934            —
Other current assets                    5,495          4,858
                      Total current assets        92,333         109,824
PROPERTY, PLANT AND EQUIPMENT, net                11,498         13,396
GOODWILL, net                                     850            45,107
OTHER INTANGIBLE ASSETS, net                      45,206         45,215
OTHER NONCURRENT ASSETS, net                      2,309          2,578
                      Total assets                $  152,196    $  216,120
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable and accrued liabilities     $  18,430     $   23,728
     Accrued payroll and related costs            4,715          7,008
     Current portion of deferred subscription     12,614         16,018
     revenue
     Current portion of other deferred revenue    7,652          5,147
                      Total current liabilities   43,411         51,901
DEFERRED SUBSCRIPTION REVENUE                     3,776          3,975
OTHER DEFERRED REVENUE                            403            2,333
DEFERRED INCOME TAX LIABILITY                     6,806          5,874
OTHER NONCURRENT LIABILITIES                      4,164          4,090
                      Total liabilities           58,560         68,173


COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Series 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: 41,136,646 and     411            409
40,893,964 shares issued and outstanding in 2012
and 2011, respectively
Class B Common Stock, $0.01 par value,
150,000,000 shares authorized: 25,984,625  shares 260            260
issued and outstanding in 2012 and 2011
Capital in excess of par value                    339,765        336,661
Accumulated deficit                               (245,639)      (188,442)
Accumulated other comprehensive loss              (386)          (166)
                                                  94,411         148,722
Less: Class A treasury stock – 59,400 shares at   (775)          (775)
cost
                      Total shareholders' equity  93,636         147,947
                      Total liabilities and       $  152,196    $   216,120
                      shareholders' equity



Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Three Months Ended September 30,
(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.

                                            2012        2011
NET LOSS                                    $ (50,878)  $ (9,701)
Income tax provision                        (410)       (278)
LOSS BEFORE INCOME TAXES                    (50,468)    (9,423)
OTHER INCOME / (EXPENSE)
 Interest income, net                    221         61
 Loss on equity securities               —           (190)
 Total other income / (expense)      221         (129)
OPERATING (LOSS) / INCOME
 Publishing                              (51,264)    (3,585)
 Broadcasting                            281         (1,320)
 Merchandising                           8,525       7,179
 Corporate                               (8,231)     (11,568)
 Total Operating Loss                (50,689)    (9,294)
RESTRUCTURING CHARGES
 Publishing                              491         350
 Broadcasting                            —           354
 Corporate                               —           3,088
 Total Restructuring Charges         491         3,792
GOODWILL IMPAIRMENT                         44,257      —
DEPRECIATION AND AMORTIZATION
 Publishing                              187         194
 Broadcasting                            87          128
 Merchandising                           14          8
 Corporate                               715         697
 Total Depreciation and Amortization 1,003       1,027
NON-CASH EQUITY COMPENSATION
 Publishing                              169         273
 Broadcasting                            11          35
 Merchandising                           75          201
 Corporate                               702         1,623
 Total Non-Cash Equity Compensation  957         2,132
ADJUSTED EBITDA
 Publishing                              (6,160)     (2,768)
 Broadcasting                            379         (803)
 Merchandising                           8,614       7,388
 Corporate                               (6,814)     (6,160)
 Adjusted EBITDA                    $ (3,981)   $ (2,343)



Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Nine Months Ended September 30,
(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.

                                                       2012        2011
NET LOSS                                               $ (57,195)  $ (19,716)
Income tax provision                                   (1,209)     (1,109)
LOSS BEFORE INCOME TAXES                               (55,986)    (18,607)
OTHER INCOME / (EXPENSE)
 Interest income / (expense), net                   693         (65)
 Income on equity securities                        —           15
 Gain on sales of cost-based investments            1,165       —
 Other-than-temporary loss on cost-based investment (88)        —
 Total other income / (expense)                 1,770       (50)
OPERATING (LOSS) / INCOME
 Publishing                                         (59,686)    (7,349)
 Broadcasting                                       (599)       (3,616)
 Merchandising                                      28,147      21,196
 Corporate                                          (25,618)    (28,788)
 Total Operating Loss                           (57,756)    (18,557)
RESTRUCTURING CHARGES
 Publishing                                         584         350
 Broadcasting                                       529         354
 Merchandising                                      81          —
 Corporate                                          74          3,088
 Total Restructuring Charges                    1,268       3,792
GOODWILL IMPAIRMENT                                    44,257      —
DEPRECIATION AND AMORTIZATION
 Publishing                                         552         543
 Broadcasting                                       305         359
 Merchandising                                      37          24
 Corporate                                          2,134       2,021
 Total Depreciation and Amortization            3,028       2,947
NON-CASH EQUITY COMPENSATION
 Publishing                                         484         600
 Broadcasting                                       42          61
 Merchandising                                      378         211
 Corporate                                          2,197       3,674
 Total Non-Cash Equity Compensation             3,101       4,546
ADJUSTED EBITDA
 Publishing                                         (13,809)    (5,856)
 Broadcasting                                       277         (2,842)
 Merchandising                                      28,643      21,431
 Corporate                                          (21,213)    (20,005)
Adjusted EBITDA                                $ (6,102)   $ (7,272)





Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Three Months Ended September 30,
(unaudited, in thousands, except share and per share amounts)


The following table presents a reconciliation of consolidated net loss, a GAAP measure, to
consolidated net loss excluding restructuring and goodwill impairment charges, a non-GAAP
measure. In order to reconcile net loss to net loss excluding restructuring and goodwill
impairment charges, restructuring and goodwill impairment charges are added back to net loss.
                                                                       2012        2011
                                                                      $         $ 
                                                                       (50,878)    (9,701)
NET LOSS

                                                                       491         3,792
RESTRUCTURING CHARGES

                                                                       44,257      —
GOODWILL IMPAIRMENT

                                                                       $        $ 
NET LOSS EXCLUDING RESTRUCTURING AND                                  (6,130)    (5,909)
GOODWILL IMPAIRMENT CHARGES

                                                                       $       $ 
LOSS PER SHARE – BASIC AND DILUTED                                     (0.76)    (0.18)
NET LOSS

                                                                       0.01        0.07
RESTRUCTURING CHARGES, PER SHARE

                                                                       0.66        —
GOODWILL IMPAIRMENT, PER SHARE

                                                                       $       $ 
NET LOSS EXCLUDING RESTRUCTURING AND GOODWILL                          (0.09)     (0.11)
 IMPAIRMENT CHARGES


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                             67,271,211  54,989,823
 BASIC AND
DILUTED



SOURCE Martha Stewart Living Omnimedia, Inc.

Website: http://www.marthastewart.com
Contact: Katherine Nash, Martha Stewart Living Omnimedia, Inc. Corporate
Communications, +1-212-827-8722, knash@marthastewart.com
 
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