Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2012 Results PR Newswire NEW YORK, Feb. 26, 2013 NEW 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 Summary Total 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 Summary Total 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 Segment Three Months Ended December 31 (unaudited, in thousands) 2012 2011 REVENUES Publishing $ 35,332 $ 38,798 Merchandising 16,219 13,130 Broadcasting 4,812 9,766 Total Revenues $ 56,363 $ 61,694 ADJUSTED EBITDA Publishing $ (663) $ 1,676 Merchandising 11,422 8,809 Broadcasting 3,331 (763) Corporate (7,502) (6,455) Total Adjusted EBITDA $ 6,588 $ 3,267 OPERATING INCOME / (LOSS) Publishing $ (2,343) $ 886 Merchandising 11,330 8,776 Broadcasting 2,953 (1,126) Corporate (10,580) (8,574) Total Operating Income / (Loss) $ 1,360 $ (38) Recent Business Highlights oAccording to comScore data, total unique visitors across MSLO's websites increased 24% in the quarter compared to the prior-year period. oFollowing 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 inDecember to over 3 million unique users. oFollowing 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. oOn February 19, 2013, Martha Stewart launched a new daily radio show, Martha Live, exclusively on SiriusXM. oMSLO'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. Publishing Revenues 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. Merchandising Revenues 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. Broadcasting Revenue 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. Corporate Adjusted 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 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. 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 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; 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 continuedsoftening of the domestic advertising market; our inability to expand our merchandising and licensing programs; changes in consumer reading andpurchasing 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 reviseany forward-looking statements after the date of this release. Martha Stewart Living Omnimedia, Inc. Consolidated Statements of Operations Three Months Ended December 31, (unaudited, in thousands, except share and per share amounts) 2012 2011 REVENUES Publishing $ 35,332 $ 38,798 Merchandising 16,219 13,130 Broadcasting 4,812 9,766 Total revenues 56,363 61,694 OPERATING COSTS AND EXPENSES Production, distribution and editorial 24,470 33,138 Selling and promotion 14,499 14,814 General and administrative 11,512 11,425 Depreciation and amortization 979 1,031 Restructuring charges 3,543 1,324 Total operating costs and expenses 55,003 61,732 OPERATING INCOME / (LOSS) 1,360 (38) OTHER INCOME / (EXPENSE) Interest income / (expense), net 144 (218) Gain on sale of cost-based investment — 7,647 Other-than-temporary loss on cost-based — (2,724) investments Total other income 144 4,705 INCOME BEFORE INCOME TAXES 1,504 4,667 Income tax provision (394) (470) NET INCOME $ 1,110 $ 4,197 INCOME PER SHARE – BASIC AND DILUTED Net income - Basic $ 0.02 $ 0.07 Net income - Diluted $ 0.02 $ 0.07 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 67,330,288 59,014,889 Diluted 67,621,961 59,605,829 Martha Stewart Living Omnimedia, Inc. Consolidated Statements of Operations Twelve Months Ended December 31 , (in thousands, except share and per share amounts) 2012 2011 (unaudited) REVENUES Publishing $ 122,540 $ 140,857 Merchandising 57,574 48,614 Broadcasting 17,513 31,962 Total revenues 197,627 221,433 OPERATING COSTS AND EXPENSES Production, distribution and editorial 103,347 127,084 Selling and promotion 52,453 57,208 General and administrative 45,148 46,641 Depreciation and amortization 4,007 3,978 Restructuring charges 4,811 5,116 Goodwill impairment 44,257 — Total operating costs and expenses 254,023 240,027 OPERATING LOSS (56,396) (18,594) OTHER INCOME / (EXPENSE) Interest income / (expense), net 836 (283) Income on equity securities — 15 Gain on sales of cost-based investments 1,165 7,647 Other-than-temporary loss on cost-based (88) (2,724) investments Total other income 1,913 4,655 (54,483) LOSS BEFORE INCOME TAXES (13,939) Income tax provision (1,602) (1,580) NET LOSS $ (56,085) $ (15,519) LOSS PER SHARE – BASIC AND DILUTED Net Loss $ (0.83) $ (0.28) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic and diluted 67,231,463 55,880,896 Martha Stewart Living Omnimedia, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, December 31, 2012 2011 (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 19,925 $ 38,453 Short-term investments 29,182 11,051 Accounts receivable, net 38,073 48,237 Paper inventory 4,580 7,225 Deferred television production costs 434 — Other current assets 3,335 4,858 Total current assets 95,529 109,824 PROPERTY AND EQUIPMENT, net 10,738 13,396 GOODWILL, net 850 45,107 OTHER INTANGIBLE ASSETS, net 45,203 45,215 OTHER NONCURRENT ASSETS, net 1,940 2,578 Total assets $ 154,260 $ 216,120 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 12,770 $ 23,728 Accrued payroll and related costs 9,316 7,008 Current portion of deferred subscription 13,168 16,018 revenue Current portion of other deferred revenue 5,605 5,147 Total current liabilities 40,859 51,901 DEFERRED SUBSCRIPTION REVENUE 4,478 3,975 OTHER DEFERRED REVENUE 1,113 2,333 DEFERRED INCOME TAX LIABILITY 7,117 5,874 OTHER NONCURRENT LIABILITIES 5,177 4,090 Total liabilities 58,744 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: 41,161,289 and 412 409 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: 25,984,625 260 260 shares issued and outstanding in 2012 and 2011 Capital in excess of par value 340,586 336,661 Accumulated deficit (244,529) (188,442) Accumulated other comprehensive loss (438) (166) 96,291 148,722 Less: Class A treasury stock – 59,400 shares at (775) (775) cost Total shareholders' equity 95,516 147,947 Total liabilities and $ 154,260 $ 216,120 shareholders' equity Martha Stewart Living Omnimedia, Inc. Supplemental Disclosures Regarding Non-GAAP Financial Information Three 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. 2012 2011 NET INCOME $ 1,110 $ 4,197 Income tax provision (394) (470) INCOME BEFORE INCOME TAXES 1,504 4,667 OTHER INCOME / (EXPENSE) Income / (expense), net 144 (218) Gain on sale of cost-based investment — 7,647 Other-than-temporary loss on cost-based investments — (2,724) Total other income 144 4,705 OPERATING INCOME / (LOSS) Publishing (2,343) 886 Merchandising 11,330 8,776 Broadcasting 2,953 (1,126) Corporate (10,580) (8,574) Total Operating Income / (Loss) 1,360 (38) RESTRUCTURING CHARGES Publishing 1,387 478 Merchandising — 13 Broadcasting 287 246 Corporate 1,869 587 Total Restructuring Charges 3,543 1,324 DEPRECIATION AND AMORTIZATION 190 230 Publishing 15 8 Merchandising 83 111 Broadcasting 691 682 Corporate Total Depreciation and Amortization 979 1,031 NON-CASH EQUITY COMPENSATION Publishing 103 82 Merchandising 77 12 Broadcasting 8 6 Corporate 518 850 Total Non-Cash Equity Compensation 706 950 ADJUSTED EBITDA Publishing (663) 1,676 Merchandising 11,422 8,809 Broadcasting 3,331 (763) Corporate (7,502) (6,455) Adjusted EBITDA $ 6,588 $ 3,267 Martha Stewart Living Omnimedia, Inc. Supplemental Disclosures Regarding Non-GAAP Financial Information Twelve 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. 2012 2011 NET 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), net 836 (283) Income on equity securities — 15 Gain on sales of cost-based 1,165 7,647 investments Other-than-temporary loss on (88) (2,724) cost-based investments Total other income 1,913 4,655 OPERATING (LOSS) / INCOME Publishing (62,029) (6,464) Merchandising 39,477 29,972 Broadcasting 2,354 (4,740) Corporate (36,198) (37,362) Total Operating Loss (56,396) (18,594) RESTRUCTURING CHARGES Publishing 1,971 828 Merchandising 81 13 Broadcasting 816 600 Corporate 1,943 3,675 Total Restructuring Charges 4,811 5,116 GOODWILL IMPAIRMENT 44,257 — DEPRECIATION AND AMORTIZATION Publishing 742 774 Merchandising 52 32 Broadcasting 388 470 Corporate 2,825 2,702 Total Depreciation and 4,007 3,978 Amortization NON-CASH EQUITY COMPENSATION Publishing 587 682 Merchandising 455 224 Broadcasting 50 67 Corporate 2,715 4,523 Total Non-Cash Equity Compensation 3,807 5,496 ADJUSTED EBITDA Publishing (14,472) (4,180) Merchandising 40,065 30,241 Broadcasting 3,608 (3,603) Corporate (28,715) (26,462) Adjusted EBITDA $ 486 $ (4,004) SOURCE Martha Stewart Living Omnimedia Website: http://www.marthastewart.com Contact: Katherine Nash, Martha Stewart Living Omnimedia, Inc. Corporate Communications, +1-212-827-8722, firstname.lastname@example.org
Martha Stewart Living Omnimedia Reports Fourth Quarter and Full Year 2012 Results
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