Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 03, 2015 | |
Entity Information | ||
Entity Registrant Name | MARTHA STEWART LIVING OMNIMEDIA INC | |
Entity Central Index Key | 1,091,801 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Trading Symbol | MSO | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Common Stock | ||
Entity Information | ||
Entity Common Stock, Shares Outstanding | 57,496,693 | |
Class A Common Stock | ||
Entity Information | ||
Entity Common Stock, Shares Outstanding | 32,512,068 | |
Class B Common Stock | ||
Entity Information | ||
Entity Common Stock, Shares Outstanding | 24,984,625 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 4,680 | $ 11,439 |
Short-term investments | 37,152 | 36,816 |
Accounts receivable, net | 14,348 | 30,319 |
Other current assets | 2,766 | 3,108 |
Total current assets | 58,946 | 81,682 |
PROPERTY AND EQUIPMENT, net | 3,898 | 4,106 |
INTANGIBLE ASSETS - TRADEMARKS | 34,700 | 34,700 |
OTHER NONCURRENT ASSETS | 976 | 991 |
Total assets | 98,520 | 121,479 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 6,018 | 14,753 |
Accrued payroll and related costs | 1,777 | 5,706 |
Current portion of deferred revenue | 16,515 | 16,090 |
Total current liabilities | 24,310 | 36,549 |
DEFERRED REVENUE | 5,387 | 10,119 |
DEFERRED INCOME TAX LIABILITY | 4,612 | 3,755 |
OTHER NONCURRENT LIABILITIES | 1,812 | 2,371 |
Total liabilities | $ 36,121 | $ 52,794 |
COMMITMENTS AND CONTINGENCIES | ||
SHAREHOLDERS’ EQUITY | ||
Capital in excess of par value | $ 345,522 | $ 345,021 |
Accumulated deficit | (282,907) | (276,109) |
Accumulated other comprehensive loss | (16) | (24) |
Shareholders' equity before treasury stock | 63,174 | 69,460 |
Less: Class A treasury stock – 59,400 shares at cost | (775) | (775) |
Total shareholders’ equity | 62,399 | 68,685 |
Total liabilities and shareholders’ equity | 98,520 | 121,479 |
Class A Common Stock | ||
SHAREHOLDERS’ EQUITY | ||
Common Stock | 325 | 322 |
Class B Common Stock | ||
SHAREHOLDERS’ EQUITY | ||
Common Stock | $ 250 | $ 250 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Class A Common Stock | ||
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized | 350,000,000 | 350,000,000 |
Common Stock, shares issued | 32,571,468 | 32,260,936 |
Common Stock, shares outstanding | 32,512,068 | 32,201,536 |
Treasury stock, shares | 59,400 | 59,400 |
Class B Common Stock | ||
Common Stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized | 150,000,000 | 150,000,000 |
Common Stock, shares issued | 24,984,625 | 24,984,625 |
Common Stock, shares outstanding | 24,984,625 | 24,984,625 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
REVENUES | ||||
Revenues | $ 17,460 | $ 29,611 | $ 52,756 | $ 100,499 |
Production, distribution and editorial | (7,271) | (13,988) | (22,104) | (44,697) |
Selling and promotion | (1,327) | (9,081) | (3,586) | (27,343) |
General and administrative | (8,532) | (9,259) | (27,559) | (27,254) |
Depreciation and amortization | (550) | (783) | (1,458) | (4,651) |
Impairment of trademark and goodwill | 0 | (11,350) | 0 | (11,350) |
Merger transaction costs | (1,059) | 0 | (4,129) | 0 |
OPERATING LOSS | (1,279) | (14,850) | (6,080) | (14,796) |
Interest income / (expense) and other, net | 110 | 52 | 167 | (513) |
LOSS BEFORE INCOME TAXES | (1,169) | (14,798) | (5,913) | (15,309) |
Income tax (provision) / benefit | (310) | 3,733 | (885) | 3,408 |
NET LOSS | $ (1,479) | $ (11,065) | $ (6,798) | $ (11,901) |
LOSS PER SHARE – BASIC AND DILUTED | ||||
Net Loss Per Share, Basic and Diluted | $ (0.03) | $ (0.19) | $ (0.12) | $ (0.21) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||
Weighted Average Common Shares Outstanding, Basic and Diluted | 57,476,330 | 57,074,872 | 57,365,909 | 56,908,036 |
Publishing | ||||
REVENUES | ||||
Revenues | $ 5,323 | $ 15,781 | $ 17,176 | $ 57,516 |
Depreciation and amortization | (130) | (135) | (248) | (458) |
OPERATING LOSS | (2,404) | (6,246) | (6,160) | (10,746) |
Merchandising | ||||
REVENUES | ||||
Revenues | 11,669 | 13,691 | 34,650 | 41,494 |
Depreciation and amortization | (14) | (11) | (27) | (40) |
Impairment of trademark and goodwill | (11,350) | (11,350) | ||
OPERATING LOSS | 8,298 | (1,548) | 24,433 | 18,747 |
Broadcasting | ||||
REVENUES | ||||
Revenues | 468 | 139 | 930 | 1,489 |
Depreciation and amortization | 0 | (1) | 0 | (3) |
OPERATING LOSS | $ 305 | $ (36) | $ 186 | $ 26 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (1,479) | $ (11,065) | $ (6,798) | $ (11,901) |
Other comprehensive income / (loss): | ||||
Amounts reclassified for net realized losses / (gains) on available-for-sale securities included in net loss | 1 | 0 | (1) | 491 |
Net unrealized gains / (losses) on available-for-sale securities occurring during the period | 14 | 0 | 9 | (22) |
Other comprehensive income | 15 | 0 | 8 | 469 |
Total comprehensive loss | $ (1,464) | $ (11,065) | $ (6,790) | $ (11,432) |
Consolidated Statement of Share
Consolidated Statement of Shareholders' Equity - 9 months ended Sep. 30, 2015 - USD ($) shares in Thousands, $ in Thousands | Total | Capital in excess of par value | Accumulated deficit | Accumulated other comprehensive loss | Class A Treasury Stock | Class A Common StockCommon Stock | Class B Common StockCommon Stock |
Balance, shares at Dec. 31, 2014 | (59) | 32,261 | 24,985 | ||||
Balance at Dec. 31, 2014 | $ 68,685 | $ 345,021 | $ (276,109) | $ (24) | $ (775) | $ 322 | $ 250 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net loss | (6,798) | (6,798) | |||||
Other comprehensive income | 8 | 8 | |||||
Issuance of shares of stock in conjunction with stock option exercises, shares | 22 | ||||||
Issuance of shares of stock in conjunction with stock option exercises | 92 | 92 | $ 0 | ||||
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings, shares | 289 | ||||||
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings | (1,087) | (1,090) | $ 3 | ||||
Non-cash equity compensation | 1,499 | 1,499 | |||||
Balance, shares at Sep. 30, 2015 | (59) | 32,572 | 24,985 | ||||
Balance at Sep. 30, 2015 | $ 62,399 | $ 345,522 | $ (282,907) | $ (16) | $ (775) | $ 325 | $ 250 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (6,798) | $ (11,901) |
Adjustments to reconcile net loss to net cash (used in) / provided by operating activities: | ||
Non-cash revenue | (5,035) | (5,311) |
Depreciation and amortization | 1,458 | 4,651 |
Impairment of trademark and goodwill | 0 | 11,350 |
Non-cash equity compensation | 1,499 | 1,513 |
Deferred income tax expense / (benefit) | 857 | (3,534) |
Other non-cash charges, net | (184) | 1,209 |
Changes in operating assets and liabilities | ||
Accounts receivable, net | 15,971 | 19,203 |
Accounts payable and accrued liabilities and other | (9,188) | (749) |
Accrued payroll and related costs | (3,929) | (4,687) |
Deferred revenue | 728 | (5,868) |
Other changes | 298 | 1,642 |
Total changes in operating assets and liabilities | 3,880 | 9,541 |
Net cash (used in) / provided by operating activities | (4,323) | 7,518 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (797) | (624) |
Purchases of short-term investments | (31,867) | (41,569) |
Sales of short-term investments | 31,223 | 17,337 |
Net cash used in investing activities | (1,441) | (24,856) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds received from stock option exercises | 92 | 910 |
Shares withheld in payment of employee tax obligations | (1,087) | (286) |
Change in restricted cash | 0 | 577 |
Net cash (used in) / provided by financing activities | (995) | 1,201 |
Net decrease in cash and cash equivalents | (6,759) | (16,137) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 11,439 | 21,884 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ 4,680 | $ 5,747 |
General
General | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | General Martha Stewart Living Omnimedia, Inc., together with its subsidiaries, is herein referred to as “we,” “us,” “our,” "MSLO," or the “Company.” The information included in the foregoing interim consolidated financial statements is unaudited. In the opinion of management, all adjustments, all of which are of a normal recurring nature and necessary for a fair presentation of the results of operations for the interim periods presented, have been reflected herein. The results of operations for interim periods do not necessarily indicate the results to be expected for the entire year. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (the “SEC”) with respect to the Company’s fiscal year ended December 31, 2014 (the “2014 Form 10-K”) which may be accessed through the SEC’s website at http://www.sec.gov. The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management does not expect such differences to have a material effect on the Company’s consolidated financial statements. |
Merger Agreement
Merger Agreement | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Merger Agreement | Merger Agreement On June 22, 2015, the Company and Sequential Brands Group, Inc., a Delaware corporation (“Sequential”), entered into a definitive merger agreement pursuant to which Sequential would acquire 100% of the outstanding shares of MSLO for aggregate consideration valued at $6.15 per share, payable 50% in stock and 50% in cash (the "Merger"). Under the terms of the Merger, each of Sequential and MSLO will merge with and into subsidiaries of Singer Madeline Holdings, Inc., a newly formed public holding company (“TopCo”). TopCo will continue as a publicly traded company on the Nasdaq Stock Market under the symbol "SQBG" and will be renamed "Sequential Brands Group, Inc." Pursuant to the terms of the Merger, each share of Sequential common stock will be converted into one share of TopCo common stock. MSLO stockholders will be entitled to elect to receive either (a) $6.15 in cash or (b) a number of shares of TopCo common stock equal to $6.15 divided by the volume weighted average price of Sequential common stock during the five -day period ending on the trading day immediately prior to the closing of the Merger, for each share of MSLO common stock held. The cash and stock elections by MSLO stockholders will be subject to proration in the event of oversubscription, although any stockholder who elects 50% stock and 50% cash will not be subject to proration. The transaction is subject to customary closing conditions and approval by the holders of a majority of MSLO outstanding common stock not owned directly or indirectly by Martha Stewart or her affiliates. The Company is holding a special meeting of its stockholders on Wednesday, December 2, 2015 where stockholders of record as of the close of business on October 26, 2015 will vote to, among other things, approve the Merger. The Company incurred merger transaction costs of $1.1 million and $4.1 million for the three and nine months ended September 30, 2015, respectively, principally for legal and financial advisory services related to the Merger and prior strategic negotiations with other third parties. The business description and financial results in this Quarterly Report on Form 10-Q apply only to the Company’s business, and, apart from the merger transaction costs incurred by the Company, do not reflect the potential effects of the Merger. For further information regarding the Merger and the special meeting of stockholders, please refer to (i) the TopCo registration statement on Form S-4, filed with the SEC by TopCo on July 29, 2015, as amended (the “TopCo S-4”), (ii) the combined proxy statement/prospectus filed with the SEC by the Company on October 27, 2015 on Schedule 14A, which forms a part of the TopCo S-4, and (iii) the Company’s Current Reports on Form 8-K filed with the SEC on June 22, 2015, June 24, 2015 and October 22, 2015. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Recent accounting standards In July 2015, the Financial Accounting Standards Board ("FASB") announced a one-year deferral of the effective date for Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The standard is now effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. ASU 2014-09 c ompletes the joint effort by the FASB and the International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and international financial reporting standards ("IFRS"). The joint project clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and IFRS. Specifically, it removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The core principle contemplated by ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The Company is required to adopt ASU 2014-09 on January 1, 2018, with early adoption permitted beginning January 1, 2017. The update may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company is currently evaluating the transition method that will be elected and the impact of the update on its financial statements and disclosures. The Company’s significant accounting policies are discussed in detail in its 2014 Form 10-K, specifically in Note 2, Summary of Significant Accounting Policies , in the Notes to Consolidated Financial Statements. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The Company categorizes its assets measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset. The three levels of the fair value hierarchy are: • Level 1: Observable inputs such as quoted prices for identical assets and liabilities in active markets obtained from independent sources. • Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company’s Level 2 securities are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. • Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the asset or liability. The Company has no liabilities that are measured at fair value on a recurring basis. The following tables present the Company’s assets that are measured at fair value on a recurring basis: September 30, 2015 (in thousands) Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements Short-term investments: Equity security $ 69 $ — $ — $ 69 U.S. government and agency securities — 1,512 — 1,512 Corporate obligations — 17,036 — 17,036 Other fixed income securities — 1,256 — 1,256 International securities — 17,111 — 17,111 Municipal obligations — 168 — 168 Total $ 69 $ 37,083 $ — $ 37,152 December 31, 2014 (in thousands) Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements Short-term investments: Fixed income mutual fund $ 2,492 $ — $ — $ 2,492 U.S. government and agency securities — 951 — 951 Corporate obligations — 22,145 — 22,145 Other fixed income securities — 491 — 491 International securities — 10,311 — 10,311 Municipal obligations — 426 — 426 Total $ 2,492 $ 34,324 $ — $ 36,816 Assets measured at fair value on a nonrecurring basis The Company’s non-financial assets, such as intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. The Company evaluates the recoverability of its indefinite-lived intangible asset by performing impairment tests on an annual basis, as of each October 1, or when events or changes in circumstances indicate that the carrying amounts may not be recoverable. Any resulting asset impairment requires that the asset be recorded at its fair value. The Company's valuation methods to determine fair value utilize significant Level 3 unobservable inputs, which include discount rates, long-term growth rates and royalty rates. |
Short-Term Investments
Short-Term Investments | 9 Months Ended |
Sep. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Short-Term Investments | Short-Term Investments The Company's investments primarily consist of marketable debt securities that are classified as available-for-sale and presented as "Short-term investments," a component of current assets on the consolidated balance sheets. The Company's available-for-sale securities represent investments available for current operations and may be sold prior to their stated maturities for strategic or operational reasons. The available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported in "Accumulated other comprehensive loss." The amortized cost of the available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization is netted against the related interest income and both are included in "Interest income / (expense) and other, net" in the consolidated statements of operations. Realized gains and losses are classified as other income or expense and included in "Interest income / (expense) and other, net" in the consolidated statements of operations. The cost of securities sold is based on the specific identification method. As of September 30, 2015 and December 31, 2014, the Company's amortized cost of its available-for-sale securities approximated fair value. Gross unrealized gains and losses as of September 30, 2015 and December 31, 2014 were insignificant. The Company considered the declines in market value of its marketable available-for-sale securities investment portfolio to be temporary in nature and did not consider any of its investments other-than-temporarily impaired as of September 30, 2015 or as of December 31, 2014. Contractual maturities for the Company's available-for-sale securities are generally within two years of September 30, 2015. During the three months ended September 30, 2015 and 2014, and the nine months ended September 30, 2015, the gross realized gains and losses on sales of available-for-sale marketable securities, as well as amounts reclassified out of accumulated other comprehensive loss, were insignificant. During the nine months ended September 30, 2014, the gross realized gains and losses on sales of available-for-sale marketable securities were $0.03 million and $ (0.5) million , respectively, which are presented net as “Interest Income / (expense) and other, net” on the consolidated statements of operations. Included in the net realized loss on sales of available-for-sale marketable securities during the nine months ended September 30, 2014 were amounts reclassified out of accumulated other comprehensive loss of $(0.5) million . See Note 6, Accumulated Other Comprehensive Loss , in these Notes to Consolidated Financial Statements for further information. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Accumulated other comprehensive income / (loss), included as a component of shareholders' equity, consists of unrealized gains and losses affecting equity that, under GAAP, are excluded from net income / (loss). For the Company, accumulated other comprehensive loss is impacted by unrealized gains / (losses) on available-for-sale securities as of the reporting period date and by reclassification adjustments resulting from sales or maturities of available-for-sale securities. The components of accumulated other comprehensive loss as of September 30, 2015 and December 31, 2014 are set forth in the schedule below: (in thousands) Unrealized Gains/(Losses) on Available-for-Sale Securities Total Accumulated Other Comprehensive Loss Balance at December 31, 2014 $ (24 ) $ (24 ) Amounts reclassified for net realized gains on available-for-sale securities included in net loss * (1 ) (1 ) Net unrealized gains on available-for-sale securities occurring during the period 9 9 Balance at September 30, 2015 $ (16 ) $ (16 ) * Amounts reclassified for previously unrealized losses on available-for-sale securities are included in "Interest income /(expense) and other, net" in the consolidated statements of operations. |
Credit Facilities
Credit Facilities | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Credit Facilities On June 30, 2015, the Company entered into an Amendment to the Amended and Restated Loan Agreement between the Company and Bank of America, N.A., dated February 14, 2012, (the "Amended Credit Agreement"), which reduced the Company's line of credit with Bank of America, N.A. from $5.0 million to $2.5 million . Borrowings under this line of credit are available for investment opportunities, working capital, and the issuance of letters of credit. The annual interest rate on outstanding amounts is equal to a floating rate of 1-month LIBOR Daily Floating Rate plus 1.85% . The annual unused commitment fee is equal to 0.25% . The Amended Credit Agreement expires on June 30, 2016 , at which time outstanding amounts borrowed under the agreement, if any, become due and payable. As of September 30, 2015 and December 31, 2014 , the Company had no outstanding borrowings against its line of credit, but had outstanding letters of credit of $1.0 million on both dates. |
Property and Equipment, net
Property and Equipment, net | 9 Months Ended |
Sep. 30, 2015 | |
Capital Leases of Lessor [Abstract] | |
Property and Equipment, net | Property and Equipment, net On February 1, 2015 , the Company entered into a capital lease for computer equipment. The lease provides for a three-year term for $0.7 million ending February 1, 2017 . Minimum annual payments pursuant to the lease are as follows: Cash Payments (in thousands) 2015 $ 230 2016 230 2017 230 The present value of these minimum lease payments was $0.7 million . Imputed interest was immaterial. The present value of the minimum lease payments, along with associated accumulated amortization of the capital lease of $0.2 million , were included within "Property and Equipment, net" on the consolidated balance sheet as of September 30, 2015. Ownership of the computer equipment transfers to the Company at the end of the lease term. Accordingly, the computer equipment under this capital lease is being amortized over three years , consistent with the Company's normal depreciation policy for owned computer assets. Depreciation and amortization expense was $0.6 million and $1.5 million during the three and nine months ended September 30, 2015, respectively. Included in these amounts were $0.1 million and $0.2 million , respectively, of amortization of assets recorded under a capital lease. For the nine months ended September 30, 2014, depreciation and amortization expense was $4.7 million , which included $2.1 million from the non-recurring accelerated amortization of leasehold improvements related to the consolidation of the Company's primary office space during February 2014. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company follows ASC Topic 740, Income Taxes (“ASC 740”). Under the asset and liability method of ASC 740, deferred assets and liabilities are recognized for the future costs and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company periodically reviews the requirements for a valuation allowance and makes adjustments to such allowances when changes in circumstances result in changes in the Company’s judgment about the future realization of deferred tax assets. The Company intends to maintain a valuation allowance until evidence would support the conclusion that it is more likely than not that the deferred tax assets will be realized. The Company recorded $0.3 million and $0.9 million of net tax expense during the three and nine months ended September 30, 2015. The tax expense was primarily attributable to differences between the financial statement carrying amounts of past acquisitions of certain indefinite-lived intangible assets and their respective tax bases. ASC 740 further establishes guidance on the accounting for uncertain tax positions. As of September 30, 2015 , the liability for uncertain tax positions balance was zero . The Company is no longer subject to U.S. federal income tax examinations by tax authorities for the years before 2005 and state examinations for the years before 2003 . The Company does not anticipate that the liability will change significantly over the next twelve months. |
Industry Segments
Industry Segments | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Industry Segments | Industry Segments The Company is a globally recognized lifestyle company committed to providing consumers with inspiring content and well-designed, high quality products. The Company’s business segments are currently Publishing, Merchandising and Broadcasting. The Publishing segment primarily consists of the Company’s operations related to producing content for Martha Stewart Living , Martha Stewart Weddings and books, as well as for the content-driven website, marthastewart.com , and for digital distribution of video content. In October 2014, the Company entered into a Magazine, Content Creation and Licensing Agreement (the “MS Living Agreement”) with Meredith Corporation (“Meredith”), and, effective November 1, 2014, the Company discontinued publication of Martha Stewart Living and the Company's digital operations. Pursuant to the MS Living Agreement, Meredith assumed control of advertising sales, circulation and production of Martha Stewart Living and special interest publications, and hosting, operating, maintaining, and providing advertising sales and related functions for marthastewart.com, marthastewartweddings.com and related digital assets. The Company continues to own its underlying intellectual property, and create and provide all editorial content for Martha Stewart Living , marthastewart.com and marthastewartweddings.com . Concurrently with the MS Living Agreement, the parties also entered into the Magazine Publishing Agreement (the “MS Weddings Agreement”). Pursuant to the MS Weddings Agreement, Meredith assumed responsibility for advertising sales, circulation and production of Martha Stewart Weddings and related special interest publications, including Martha Stewart's Real Weddings . The Company continues to own its underlying intellectual property, and create and provide all editorial content for Martha Stewart Weddings and related special interest publications. Under the MS Weddings Agreement, Meredith provides these services on a cost-plus basis. Meredith began delivering editions starting with the February 2015 issue of Martha Stewart Living and the Winter 2015 issue of Martha Stewart Weddings . For further discussion of our partnership with Meredith, see the Notes to Consolidated Financial Statements in our 2014 Form 10-K, specifically Note 1, The Company and Note 2, Summary of Significant Accounting Policies. The Merchandising segment primarily consists of the Company’s operations related to the design and branding of merchandise and related collateral and packaging materials that are manufactured and distributed by its retail and wholesale partners in exchange for royalty income and, in certain agreements, design fees. The Merchandising segment also includes the licensing of talent services to third parties for television programming and commercials. The Broadcasting segment consists of the Company's limited television production operations and television content library licensing. Segment information for the three months ended September 30, 2015 and 2014 is as follows: (in thousands) Publishing Merchandising Broadcasting Corporate Consolidated 2015 Revenues $ 5,323 $ 11,669 $ 468 $ — $ 17,460 Non–cash equity compensation (24 ) (8 ) — (369 ) (401 ) Depreciation and amortization (130 ) (14 ) — (406 ) (550 ) Merger transaction costs — — — (1,059 ) (1,059 ) Operating (loss) / income (2,404 ) 8,298 305 (7,478 ) (1,279 ) 2014 Revenues $ 15,781 $ 13,691 $ 139 $ — $ 29,611 Non–cash equity compensation (28 ) (10 ) — (436 ) (474 ) Depreciation and amortization (135 ) (11 ) (1 ) (636 ) (783 ) Impairment of trademark and goodwill — (11,350 ) — — (11,350 ) Operating loss (6,246 ) (1,548 ) (36 ) (7,020 ) (14,850 ) Segment information for the nine months ended September 30, 2015 and 2014 is as follows: (in thousands) Publishing Merchandising Broadcasting Corporate Consolidated 2015 Revenues $ 17,176 $ 34,650 $ 930 $ — $ 52,756 Non–cash equity compensation (110 ) (32 ) — (1,357 ) (1,499 ) Depreciation and amortization (248 ) (27 ) — (1,183 ) (1,458 ) Merger transaction costs — — — (4,129 ) (4,129 ) Operating (loss) / income (6,160 ) 24,433 186 (24,539 ) (6,080 ) 2014 Revenues $ 57,516 $ 41,494 $ 1,489 $ — $ 100,499 Non–cash equity compensation (111 ) (89 ) (1 ) (1,312 ) (1,513 ) Depreciation and amortization (458 ) (40 ) (3 ) (4,150 ) (4,651 ) Impairment of trademark and goodwill — (11,350 ) — — (11,350 ) Operating (loss) / income (10,746 ) 18,747 26 (22,823 ) (14,796 ) |
Other Information
Other Information | 9 Months Ended |
Sep. 30, 2015 | |
Other Information [Abstract] | |
Other Information | Other Information Production, distribution and editorial expenses, selling and promotion expenses, and general and administrative expenses are each presented exclusive of depreciation and amortization, which are disclosed separately on the Company's consolidated statements of operations. Additionally, certain prior year amounts have been reclassified to conform to the current year presentation. In 2014, the Company incurred restructuring expenses of $3.6 million comprised primarily of employee severance and other employee-related termination costs, as well as contract termination costs. As of September 30, 2015, liabilities associated with these expenses were approximately $0.6 million , of which the Company expects to pay the majority prior to June 30, 2016. |
Legal Matters
Legal Matters | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Matters | Legal Matters On May 19, 2015 , R.R. Donnelley & Sons Co. (“RRD”) filed a lawsuit against the Company in the Circuit Court of Cook County, Illinois titled R.R. Donnelley & Sons Co. v. Martha Stewart Living Omnimedia, Inc. In such lawsuit, RRD claims, in two counts, that the Company improperly terminated its commercial printing agreement with RRD to print Martha Stewart Living and Martha Stewart Weddings following the Company's entrance into agreements with Meredith Corporation to publish the magazines. RRD seeks damages in the amount of $7.7 million . On July 21, 2015 , the Company filed a Motion to Dismiss and to Strike. In the Company's motion, the Company maintained, under both counts, that there was no breach and that the claimed damages are unsupported or wholly speculative. On August 27, 2015, RRD filed a Response to the Company's Motion to Dismiss and Strike maintaining that the Company's Motions to Dismiss should be denied and that the Company's motion to strike RRD’s consequential damages should be denied. The Company responded to RRD's reply on September 24, 2015. On October 27, 2015, the Circuit Court of Cook County, Illinois granted the Company's motion to dismiss with respect to RRD’s first count and denied the Company's motion to dismiss with respect to RRD’s second count and resulting consequential damages. The Company believes that it has meritorious defenses to the claims made by RRD, and intends to vigorously defend such claims. Future litigation costs in this matter may be significant. In addition, the Company is party to legal proceedings in the ordinary course of business, including, but not limited to, product liability claims for which the Company is indemnified by its licensees. None of these proceedings is deemed material, though the costs of defending certain litigations have been and may continue to be significant. Since the announcement of the Merger, a number of putative stockholder class action lawsuits have been filed in the Court of Chancery of the State of Delaware, alleging, among other things, that the members of the MSLO board breached their fiduciary duties and that Sequential and its board aided and abetted the alleged breaches of fiduciary duties. The Company, Sequential and each of their respective directors believe these lawsuits are without merit and intend to defend them vigorously. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Assets Measured At Fair Value | The following tables present the Company’s assets that are measured at fair value on a recurring basis: September 30, 2015 (in thousands) Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements Short-term investments: Equity security $ 69 $ — $ — $ 69 U.S. government and agency securities — 1,512 — 1,512 Corporate obligations — 17,036 — 17,036 Other fixed income securities — 1,256 — 1,256 International securities — 17,111 — 17,111 Municipal obligations — 168 — 168 Total $ 69 $ 37,083 $ — $ 37,152 December 31, 2014 (in thousands) Quoted Market Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurements Short-term investments: Fixed income mutual fund $ 2,492 $ — $ — $ 2,492 U.S. government and agency securities — 951 — 951 Corporate obligations — 22,145 — 22,145 Other fixed income securities — 491 — 491 International securities — 10,311 — 10,311 Municipal obligations — 426 — 426 Total $ 2,492 $ 34,324 $ — $ 36,816 |
Accumulated Other Comprehensi21
Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive loss as of September 30, 2015 and December 31, 2014 are set forth in the schedule below: (in thousands) Unrealized Gains/(Losses) on Available-for-Sale Securities Total Accumulated Other Comprehensive Loss Balance at December 31, 2014 $ (24 ) $ (24 ) Amounts reclassified for net realized gains on available-for-sale securities included in net loss * (1 ) (1 ) Net unrealized gains on available-for-sale securities occurring during the period 9 9 Balance at September 30, 2015 $ (16 ) $ (16 ) * Amounts reclassified for previously unrealized losses on available-for-sale securities are included in "Interest income /(expense) and other, net" in the consolidated statements of operations. |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Capital Leases of Lessor [Abstract] | |
Schedule of Minimum Lease Payments | Minimum annual payments pursuant to the lease are as follows: Cash Payments (in thousands) 2015 $ 230 2016 230 2017 230 |
Industry Segments (Tables)
Industry Segments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Segment Information | Segment information for the three months ended September 30, 2015 and 2014 is as follows: (in thousands) Publishing Merchandising Broadcasting Corporate Consolidated 2015 Revenues $ 5,323 $ 11,669 $ 468 $ — $ 17,460 Non–cash equity compensation (24 ) (8 ) — (369 ) (401 ) Depreciation and amortization (130 ) (14 ) — (406 ) (550 ) Merger transaction costs — — — (1,059 ) (1,059 ) Operating (loss) / income (2,404 ) 8,298 305 (7,478 ) (1,279 ) 2014 Revenues $ 15,781 $ 13,691 $ 139 $ — $ 29,611 Non–cash equity compensation (28 ) (10 ) — (436 ) (474 ) Depreciation and amortization (135 ) (11 ) (1 ) (636 ) (783 ) Impairment of trademark and goodwill — (11,350 ) — — (11,350 ) Operating loss (6,246 ) (1,548 ) (36 ) (7,020 ) (14,850 ) Segment information for the nine months ended September 30, 2015 and 2014 is as follows: (in thousands) Publishing Merchandising Broadcasting Corporate Consolidated 2015 Revenues $ 17,176 $ 34,650 $ 930 $ — $ 52,756 Non–cash equity compensation (110 ) (32 ) — (1,357 ) (1,499 ) Depreciation and amortization (248 ) (27 ) — (1,183 ) (1,458 ) Merger transaction costs — — — (4,129 ) (4,129 ) Operating (loss) / income (6,160 ) 24,433 186 (24,539 ) (6,080 ) 2014 Revenues $ 57,516 $ 41,494 $ 1,489 $ — $ 100,499 Non–cash equity compensation (111 ) (89 ) (1 ) (1,312 ) (1,513 ) Depreciation and amortization (458 ) (40 ) (3 ) (4,150 ) (4,651 ) Impairment of trademark and goodwill — (11,350 ) — — (11,350 ) Operating (loss) / income (10,746 ) 18,747 26 (22,823 ) (14,796 ) |
Merger Agreement (Details)
Merger Agreement (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 22, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 |
Business Acquisition [Line Items] | |||||
Merger transaction costs | $ 1,059 | $ 0 | $ 4,129 | $ 0 | |
Martha Stewart Living Omnimedia, Inc. | |||||
Business Acquisition [Line Items] | |||||
Percentage of outstanding shares acquired | 100.00% | ||||
Aggregate consideration value (in dollars per share) | $ 6.15 | ||||
Percentage of acquisition paid in stock | 50.00% | ||||
Percentage of acquisition paid in cash | 50.00% | ||||
Number of shares converted in acquisition | 1 | ||||
Period of time prior to closing used to determine option 2 in number of shares | 5 days |
Fair Value Measurements (Assets
Fair Value Measurements (Assets Measured At Fair Value) (Details) - Fair value measurements on a recurring basis - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | $ 37,152 | $ 36,816 |
Equity security | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 69 | |
Fixed income mutual fund | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 2,492 | |
U.S. government and agency securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 1,512 | 951 |
Corporate obligations | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 17,036 | 22,145 |
Other fixed income securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 1,256 | 491 |
International securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 17,111 | 10,311 |
Municipal obligations | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 168 | 426 |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 69 | 2,492 |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) | Equity security | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 69 | |
Quoted Market Prices in Active Markets for Identical Assets (Level 1) | Fixed income mutual fund | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 2,492 | |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 37,083 | 34,324 |
Significant Other Observable Inputs (Level 2) | U.S. government and agency securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 1,512 | 951 |
Significant Other Observable Inputs (Level 2) | Corporate obligations | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 17,036 | 22,145 |
Significant Other Observable Inputs (Level 2) | Other fixed income securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 1,256 | 491 |
Significant Other Observable Inputs (Level 2) | International securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | 17,111 | 10,311 |
Significant Other Observable Inputs (Level 2) | Municipal obligations | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Short-term investments | $ 168 | $ 426 |
Short-Term Investments (Details
Short-Term Investments (Details) - Debt Securities - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Schedule of Available-for-sale Securities | ||
Contractual maturity | 2 years | |
Available-for-sale debt securities, gross realized gain | $ 30 | |
Available-for-sale debt securities, gross realized loss | (500) | |
Reclassification out of Accumulated Other Comprehensive Income | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale debt securities, gross realized loss | $ (500) |
Accumulated Other Comprehensi27
Accumulated Other Comprehensive Loss (Schedule of Accumulated Other Comprehensive Income (Loss) (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015USD ($) | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Beginning balance | $ (24) | |
Amounts reclassified for net realized gains on available-for-sale securities included in net loss | (1) | [1] |
Net unrealized gains on available-for-sale securities occurring during the period | 9 | |
Ending balance | (16) | |
Unrealized Gains/(Losses) on Available-for-Sale Securities | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward] | ||
Beginning balance | (24) | |
Amounts reclassified for net realized gains on available-for-sale securities included in net loss | (1) | [1] |
Net unrealized gains on available-for-sale securities occurring during the period | 9 | |
Ending balance | $ (16) | |
[1] | Amounts reclassified for previously unrealized losses on available-for-sale securities are included in "Interest income /(expense) and other, net" in the consolidated statements of operations. |
Credit Facilities (Details)
Credit Facilities (Details) - USD ($) | Jun. 30, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | Feb. 14, 2012 |
Debt Disclosure [Abstract] | ||||
Line of credit facility, current borrowing capacity | $ 2,500,000 | $ 5,000,000 | ||
Debt Instrument [Line Items] | ||||
Unused commitment fees | 0.25% | |||
Outstanding borrowing under line of credit | 0 | $ 0 | ||
Outstanding letters of credit | $ 1,000,000 | $ 1,000,000 | ||
London Interbank Offered Rate (LIBOR) | ||||
Debt Instrument [Line Items] | ||||
Annual interest rate spread | 1.85% |
Property and Equipment, net (De
Property and Equipment, net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Feb. 01, 2015 | |
Property, Plant and Equipment | |||||
Minimum payments through the end of the lease term | $ 700 | ||||
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
2015 minimum lease payments | 230 | ||||
2016 minimum lease payments | 230 | ||||
2017 minimum lease payments | 230 | ||||
Depreciation and amortization | $ 550 | $ 783 | $ 1,458 | $ 4,651 | |
Amortization expense of assets recorded under a capital lease | 100 | $ 200 | |||
Computer Hardware And Software | |||||
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
Capital lease period of amortization | 3 years | ||||
Leasehold Improvements | |||||
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
Depreciation and amortization | $ 2,100 | ||||
Property and Equipment, net | |||||
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||||
Present value of minimum lease payments | $ 700 | ||||
Accumulated amortization of the capital lease | $ 200 | $ 200 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ||||
Tax (benefit) / provision | $ 310,000 | $ (3,733,000) | $ 885,000 | $ (3,408,000) |
Unrecognized Tax Benefits | $ 0 | $ 0 |
Industry Segments (Industry Inf
Industry Segments (Industry Information) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Segment Reporting Information | ||||
Revenues | $ 17,460 | $ 29,611 | $ 52,756 | $ 100,499 |
Non–cash equity compensation | (401) | (474) | (1,499) | (1,513) |
Depreciation and amortization | (550) | (783) | (1,458) | (4,651) |
Merger transaction costs | (1,059) | 0 | (4,129) | 0 |
Impairment of trademark and goodwill | 0 | (11,350) | 0 | (11,350) |
Operating (loss) / income | (1,279) | (14,850) | (6,080) | (14,796) |
Publishing | ||||
Segment Reporting Information | ||||
Revenues | 5,323 | 15,781 | 17,176 | 57,516 |
Non–cash equity compensation | (24) | (28) | (110) | (111) |
Depreciation and amortization | (130) | (135) | (248) | (458) |
Operating (loss) / income | (2,404) | (6,246) | (6,160) | (10,746) |
Merchandising | ||||
Segment Reporting Information | ||||
Revenues | 11,669 | 13,691 | 34,650 | 41,494 |
Non–cash equity compensation | (8) | (10) | (32) | (89) |
Depreciation and amortization | (14) | (11) | (27) | (40) |
Impairment of trademark and goodwill | (11,350) | (11,350) | ||
Operating (loss) / income | 8,298 | (1,548) | 24,433 | 18,747 |
Broadcasting | ||||
Segment Reporting Information | ||||
Revenues | 468 | 139 | 930 | 1,489 |
Non–cash equity compensation | 0 | 0 | 0 | (1) |
Depreciation and amortization | 0 | (1) | 0 | (3) |
Operating (loss) / income | 305 | (36) | 186 | 26 |
Corporate | ||||
Segment Reporting Information | ||||
Non–cash equity compensation | (369) | (436) | (1,357) | (1,312) |
Depreciation and amortization | (406) | (636) | (1,183) | (4,150) |
Merger transaction costs | (1,059) | (4,129) | ||
Operating (loss) / income | $ (7,478) | $ (7,020) | $ (24,539) | $ (22,823) |
Other Information (Details)
Other Information (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2014 | Sep. 30, 2015 | |
Other Information [Abstract] | ||
Restructuring expenses | $ 3.6 | |
Restructuring liability | $ 0.6 |
Legal Matters Legal Matters (De
Legal Matters Legal Matters (Details) - R.R. Donnelley & Sons Co. v. Martha Stewart Living Omnimedia, Inc $ in Millions | May. 19, 2015USD ($)count |
Loss Contingencies [Line Items] | |
Number of counts in lawsuit | 2 |
Amount of damages sought | $ | $ 7.7 |