EXHIBIT 99.1
MARTHA STEWART LIVING OMNIMEDIA, INC.
ANNOUNCES THIRD QUARTER 2004 RESULTS
NEW YORK, NEW YORK, OCTOBER 28, 2004 -- Martha Stewart Living Omnimedia, Inc.
(NYSE: MSO) announced its results today for the third quarter and nine-month
period ended September 30, 2004.
Revenues for the third quarter of 2004 were $38.7 million, compared to $51.2
million in the prior year's quarter. Operating loss for the third quarter was
$(16.2) million, compared to an operating loss of $(6.3) million for the third
quarter of 2003. Operating income before depreciation and amortization, and the
amortization of non-cash stock compensation ("OIDA") for the third quarter of
2004 was a loss of $(13.5) million, compared to a loss of $(4.3) million in the
same period last year. Loss per share from continuing operations was $(0.30) for
the third quarter of 2004, compared to a loss per share from continuing
operations of $(0.08) in the third quarter of 2003.
Sharon L. Patrick, President and Chief Executive Officer, said, "Despite the
losses in the quarter, we continue to benefit from strong consumer support for
our products, which offer that unique blend of `Martha Stewart' brand attributes
- -- inspirational `how-to' ideas translated into products that stand for quality,
style, usefulness and affordability. Our stalwart customer loyalty, now coupled
with the closure brought by Martha's decision, provides the foundation for early
signs of a rebound. With respect to our newer brands under the `Martha Stewart'
brand umbrella, during the quarter we acquired Body & Soul magazine, providing
us a foothold in the burgeoning `natural living' market. We announced that we
will extend our successful Everyday Food brand label, launching a new television
show in January featuring an ensemble cast and recipes and techniques from the
magazine, as well as increasing the magazine's rate base to 800,000, effective
with the January 2005 issue. We also further expanded our popular Martha Stewart
Signature (TM) furniture collections to much acclaim, winning the prestigious
Elle Deco International Design Award in the category of furniture for 2004.
"We have consistently maintained throughout this period of uncertainty that
MSO's circumstances and performance would begin to improve once Martha Stewart's
personal legal situation reached closure.
5
With closure brought by Martha's decision, we are becoming increasingly more
optimistic about the prospects of an advertising recovery in 2005. In addition,
we also began to prepare for Martha's return in Spring 2005 with the recent
announcement of our agreement with Mark Burnett, under which Mr. Burnett will
advise and consult with the company regarding various television matters. This
will include developing opportunities to evolve the future Martha Stewart Living
daily syndicated television show. In addition, Mark Burnett Productions will
develop and produce a primetime network television series to feature Martha
Stewart for fall 2005. We believe these developments, taken together,
demonstrate the enduring resiliency of the Company and the strength of our brand
and brand labels."
THIRD QUARTER 2004 RESULTS BY SEGMENT
PUBLISHING
Revenues in the third quarter of 2004 were $22.3 million, compared to $29.1
million in the third quarter of 2003. Operating loss was $(5.6) million for the
third quarter of 2004, compared to operating income of $1.3 million in the third
quarter of 2003. OIDA was a loss of $(5.4) million, compared to income of $1.4
million in the third quarter of 2003. The results primarily reflect lower
advertising revenue in the quarter from Martha Stewart Living magazine due to
the combined effect of lower advertising pages and lower advertising rates as a
result of the rate-base reduction effective with the January 2004 issue. The
rate-base reduction also had the effect of reducing Martha Stewart Living
subscription revenue in the quarter, although subscription revenue per copy has
increased over the same period and total circulation revenue for the segment
increased in the quarter. The increase in total circulation revenue was led by
increased revenue from Everyday Food, which continues to experience positive
consumer demand. The publishing results also include costs associated with our
brand advertising campaign, which is aimed at increasing advertiser interest in
our magazines while also generating consumer demand. The results also reflect
our continued investment in growing Everyday Food, principally in subscriber
acquisition efforts.
During the quarter we acquired the net assets of Body & Soul magazine and Dr.
Andrew Weil's Self Healing newsletter for cash of $6.5 million. This acquisition
provides MSO with the opportunity to both enter a new, promising market and to
launch "natural living" as a new "omni" lifestyle category and brand for the
company.
6
TELEVISION
Revenues in the third quarter of 2004 were $2.2 million, compared to $6.6
million in the third quarter of 2003. Operating loss for the third quarter of
2004 was $(1.8) million, compared to breakeven in the third quarter of 2003.
OIDA was a loss of $(1.8) million for the third quarter of 2004, compared to
OIDA of $0.2 million in the prior year's third quarter. The decline in revenue
and profitability was principally related to the wind-down of our daily show,
which stopped airing in syndication in mid-September. The original one-hour
episodes are now shown exclusively on The Style Network as part of a previously
announced licensing agreement. The segment was also negatively impacted by the
expiration of certain other cable licensing agreements.
MERCHANDISING
Revenues in the third quarter of 2004 were $8.0 million, compared to $8.9
million in the third quarter of 2003. The decline in revenue was a result of
lower sales of Martha Stewart Everyday products at Kmart. Third-quarter 2004
operating income was $4.8 million, compared to $4.6 million in the third quarter
of 2003. OIDA was $4.9 million in the current period, compared to $4.7 million
in the prior year's quarter. Reduced compensation costs benefited the current
period results. The decline in royalty revenue from sales at Kmart in the
quarter will not impact full-year results from operations, as we are paid based
on guaranteed annual amounts. We are leveraging the success of Martha Stewart
Signature furniture with Bernhardt with the introduction of 43 new SKUs,
including additions to each of the three collections -- Lily Pond(R),
Skylands(TM), and Turkey Hill(TM) -- as well as to the range of upholstery
options. The new products will be available to consumers at furniture retailers
nationwide in March 2005.
INTERNET/DIRECT COMMERCE
Revenues in the third quarter of 2004 were $6.2 million, compared to $6.6
million in the same period a year ago. The lower revenues in the quarter were
due to lower catalog-related product sales, partially offset by higher revenue
from marthasflowers, our direct-to-consumer floral business. Operating loss was
$(2.7) million for the third quarter of 2004, compared to $(2.0) million in the
third quarter of 2003. OIDA was $(2.4) million in the third quarter of 2004,
compared to $(1.7) million in the third quarter of 2003. We continue to wind
down the operations of this business, with our last catalog planned for fourth
quarter. Next year, we will focus on gaining efficiencies in the content portion
of our website, while expanding our flower business and continuing to drive
magazine subscription orders.
7
CORPORATE OVERHEAD
Corporate overhead, including depreciation and amortization and the amortization
of non-cash stock compensation, was $10.9 million, compared to $10.1 million in
the prior year's quarter. Corporate overhead, before depreciation and
amortization and the amortization of non-cash stock compensation, was $8.8
million for the third quarter of 2004 and 2003. Corporate overhead including
depreciation and amortization increased primarily due to the amortization of
non-cash compensation. Amortization of non-cash stock compensation expense was
$1.0 million in the third quarter of 2004, compared to $0.1 million for the
third quarter of 2003. The expense in the 2004 quarter principally relates to
the amortization of the value of restricted stock units granted in connection
with a November 2003 stock option exchange program.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization was $1.7 million in the third quarter of 2004,
compared to $1.9 million for the third quarter of 2003. The lower depreciation
in the current quarter was a result of lower depreciation of television-studio
assets that were fully depreciated in 2003.
NINE MONTH 2004 OPERATING RESULTS
Revenues for the nine months ended September 30, 2004, were $127.2 million,
compared to $175.0 million for the nine months ended September 30, 2003.
Operating loss was $(50.5) million for the nine months ended September 30, 2004,
compared to $(8.7) million for the nine months ended September 30, 2003, while
OIDA for the nine months ended September 30, 2004, was $(42.1) million, compared
to $(2.2) million in the same period one year ago. For the nine-month period
ending September 30, 2004, net loss from continuing operations was $(51.9)
million, or $(1.05) per share, compared to a net loss from continuing operations
of $(4.5) million, or $(0.09) per share, in the nine-month period ending
September 30, 2003.
CHANGE IN ACCOUNTING POLICY
In the third quarter of 2004, the Company changed its accounting policy for
subscription-acquisition costs in its publishing segment. The Company previously
recognized as expense its estimate of annual subscription-acquisition costs
ratably throughout the year. The Company will now recognize
subscription-acquisition costs in the period in which the acquisition efforts
take place. The change in accounting policy has no impact on full-year results
of operations or earnings (loss) per share as all
8
subscription acquisition costs will continue to be expensed in the year
incurred. Additional disclosures are provided at the end of the release
detailing the quarterly impact of the change.
TRENDS AND OUTLOOK
James Follo, Chief Financial and Administrative Officer, commented, "Our results
for the quarter reflect our continued focus on cost reductions where
appropriate, while investing in new business initiatives. OIDA was better than
expected in each business segment, principally due to careful cost control as
well as lower than anticipated marketing expenses. Our cash position also
remains strong with a cash and short-term investment balance of approximately
$151 million. We will continue to prudently deploy our significant financial
resources to see us through the early stages of our rebound. Our outlook for the
fourth quarter is for a loss of approximately $(0.20) per share."
BASIS OF PRESENTATION
The Company believes OIDA is an appropriate measure when evaluating the
operating performance of its business segments and the Company on a consolidated
basis. OIDA is used externally by the Company's investors, analysts, and
industry peers. OIDA is among the primary metrics used by management for
planning and forecasting of future periods, and is considered an important
indicator of the operational strength of the Company's businesses. The Company
believes the presentation of this measure is relevant and useful for investors
because it allows investors to view performance in a manner similar to the
method used by the Company's management and makes it easier to compare the
Company's results with other companies that have different capital structures or
tax rates. The Company believes OIDA should be considered in addition to, not as
a substitute for, operating income (loss), net income (loss), cash flows, and
other measures of financial performance prepared in accordance with generally
accepted accounting principles ("GAAP"). As OIDA is not a measure of performance
calculated in accordance with GAAP, this measure may not be comparable to
similarly titled measures employed by other companies. A reconciliation of OIDA
to operating income (loss) is provided in the financial statements included with
this release.
Martha Stewart Living Omnimedia, Inc. (MSO) is a leading provider of original
"how-to" information that turns dreamers into doers, inspiring and engaging
consumers with unique lifestyle content and high-quality products. MSO is
organized into four business segments: Publishing, Television, Merchandising,
and Internet/Direct Commerce. Martha Stewart Living Omnimedia, Inc. is listed on
the New York Stock Exchange under the ticker symbol MSO.
9
The Company will host a conference call with analysts and investors at 12:00
noon ET that will be broadcast live over the Internet at www.marthastewart.com.
###
This press release contains 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 can be
identified by terminology such as "may," "will," "should," "could," "expects,"
"intends," "plans," "anticipates," "believes," "estimates," "potential" or
"continue" or the negative of these terms or other comparable terminology. The
Company's actual results may differ materially from those projected in these
statements, and factors that could cause such differences include further
adverse reaction to the prolonged and continued negative publicity relating to
Martha Stewart by consumers, advertisers and business partners; further adverse
reaction by the Company's consumers, advertisers and business partners to the
outcome of Ms. Stewart's trial and related sentencing arising from a sale of
non-Company stock by Ms. Stewart; a loss of the services of Ms. Stewart; a loss
of the services of other key personnel; an adverse resolution to the SEC
enforcement proceeding currently underway against Ms. Stewart arising from her
personal sale of non-Company stock; adverse resolution of some or all of the
Company's ongoing litigation; downturns in national and/or local economies;
shifts in our business strategies; a softening of the domestic advertising
market; changes in consumer reading, purchasing and/or television viewing
patterns; unanticipated increases in paper, postage or printing costs;
operational or financial problems at any of our contractual business partners;
the receptivity of consumers to our new product introductions; and changes in
government regulations affecting the Company's industries. Certain of these and
other factors are discussed in more detail in the Company's filings with the
Securities and Exchange Commission, especially under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations", 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.
10
CONTACT: Investors -- Howard Hochhauser, VP Finance and Investor Relations of
Martha Stewart Living Omnimedia, Inc., 212-827-8530; Media -- Elizabeth Estroff,
AVP, Corporate Communications, of Martha Stewart Living Omnimedia, Inc.,
212-827-8281.
11
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Three Months Ended September 30,
(in thousands, except per share amounts)
2004 2003 % change
-------- -------- ----------
REVENUES
Publishing $ 22,273 $ 29,147 -23.6%
Television 2,203 6,579 -66.5%
Merchandising 8,014 8,852 -9.5%
Internet/Direct Commerce 6,201 6,602 -6.1%
-------- -------- ----------
Total revenues 38,691 51,180 -24.4%
-------- -------- ----------
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 27,405 31,442 12.8%
Selling and promotion 12,472 11,867 -5.1%
General and administrative 12,310 12,124 -1.5%
Amortization of non-cash stock compensation expense (a) 991 143 -593.0%
Depreciation and amortization 1,667 1,885 11.6%
-------- -------- ----------
Total operating costs and expenses 54,845 57,461 4.6%
-------- -------- ----------
OPERATING LOSS (16,154) (6,281) -157.2%
Interest income, net 511 293 74.4%
-------- -------- ----------
LOSS BEFORE INCOME TAX BENEFIT (15,643) (5,988) -161.2%
Income tax benefit 806 2,172 -62.9%
-------- -------- ----------
(14,837) (3,816) -288.8%
LOSS FROM CONTINUING OPERATIONS BEFORE LOSS FROM DISCONTINUED OPERATIONS -------- -------- ----------
Loss from discontinued operations (129) (122) -5.7%
-------- -------- ----------
NET LOSS $(14,966) $ (3,938) -280.0%
======== ======== ==========
LOSS PER SHARE -- BASIC AND DILUTED
Loss from continuing operations $ (0.30) $ (0.08)
Loss from discontinued operations (0.00) (0.00)
-------- ---------
Net loss $
(0.30) $ (0.08)
======== =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 49,698 49,537
Diluted 49,698 49,537
12
Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended September 30,
(in thousands)
2004 2003 % change
-------- -------- -------
REVENUES
Publishing $ 22,273 $ 29,147 -23.6%
Television 2,203 6,579 -66.5%
Merchandising 8,014 8,852 -9.5%
Internet/Direct Commerce 6,201 6,602 -6.1%
-------- -------- -------
Total revenues 38,691 51,180 -24.4%
-------- -------- -------
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION
Publishing (5,404) 1,385 nm
Television (1,765) 203 nm
Merchandising 4,898 4,742 3.3%
Internet/Direct Commerce (2,437) (1,734) -40.5%
-------- -------- -------
Operating Income (Loss) before Depreciation and Amortization (4,708) 4,596 nm
and Corporate Overhead
Corporate Overhead (8,788) (8,849) 0.7%
-------- -------- -------
Operating Loss before Depreciation and Amortization (13,496) (4,253) -217.3%
Amortization of non-cash stock compensation expense (991) (143) -593.0%
Depreciation and amortization (1,667) (1,885) 11.6%
-------- -------- -------
OPERATING LOSS (16,154) (6,281) -157.2%
Interest income, net 511 293 74.4%
-------- -------- -------
LOSS BEFORE INCOME TAX BENEFIT (15,643) (5,988) -161.2%
Income tax benefit 806 2,172 -62.9%
-------- -------- -------
LOSS FROM CONTINUING OPERATIONS BEFORE LOSS FROM DISCONTINUED (14,837) (3,816) -288.8%
OPERATIONS -------- -------- -------
Loss from discontinued operations (129) (122) -5.7%
-------- -------- -------
NET LOSS $(14,966) $ (3,938) -280.0%
======== ======== =======
13
Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Nine Months Ended September 30,
(in thousands, except per share amounts)
2004 2003 % change
--------- --------- ----------
REVENUES
Publishing $ 69,905 $ 102,825 -32.0%
Television 9,436 19,782 -52.3%
Merchandising 29,706 30,943 -4.0%
Internet/Direct Commerce 18,179 21,436 -15.2%
--------- --------- ----------
Total revenues 127,226 174,986 -27.3%
--------- --------- ----------
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 86,757 102,492 15.4%
Selling and promotion 38,845 34,714 -11.9%
General and administrative 43,696 39,959 -9.3%
Amortization of non-cash stock compensation expense (b) 3,471 410 -746.6%
Depreciation and amortization 4,976 6,080 18.2%
--------- --------- ----------
Total operating costs and expenses 177,745 183,655 3.2%
--------- --------- ----------
OPERATING LOSS (50,519) (8,669) -482.8%
Interest income, net 1,192 1,090 9.4%
--------- --------- ----------
LOSS BEFORE INCOME TAXES (49,327) (7,579) -550.8%
Income tax provision (benefit) (2,526) 3,080 nm
--------- --------- ----------
LOSS FROM CONTINUING OPERATIONS BEFORE LOSS FROM DISCONTINUED
OPERATIONS (51,853) (4,499) -1052.5%
--------- --------- ----------
Loss from discontinued operations, net of tax benefit in 2003 (417) (644) 35.2%
--------- --------- ----------
NET LOSS $ (52,270) $ (5,143) -916.3%
========= ========= ==========
LOSS PER SHARE -- BASIC AND DILUTED
Loss from continuing operations $ (1.05) $ (0.09)
Loss from discontinued operations (0.01) (0.01)
--------- ---------
Net Loss $ (1.05) $ (0.10)
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 49,578 49,553
Diluted 49,578 49,553
14
Martha Stewart Living Omnimedia, Inc.
Segment Information
Nine Months Ended September 30,
(in thousands)
2004 2003 % change
--------- --------- --------
REVENUES
Publishing $ 69,905 $ 102,825 -32.0%
Television 9,436 19,782 -52.3%
Merchandising 29,706 30,943 -4.0%
Internet/Direct Commerce 18,179 21,436 -15.2%
--------- --------- --------
Total revenues 127,226 174,986 -27.3%
--------- --------- --------
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION
Publishing (12,880) 19,522 nm
Television (7,127) 1,211 nm
Merchandising 17,106 19,946 -14.2%
Internet/Direct Commerce (7,050) (14,069) 49.9%
--------- --------- --------
Operating Income (Loss) before Depreciation and Amortization (9,951) 26,610 nm
and Corporate Overhead
Corporate Overhead (32,121) (28,789) -11.6%
--------- --------- --------
Operating Loss before Depreciation and Amortization (42,072) (2,179) -1830.8%
Amortization of non-cash stock compensation expense (3,471) (410) -746.6%
Depreciation and amortization (4,976) (6,080) 18.2%
--------- --------- --------
OPERATING LOSS (50,519) (8,669) -482.8%
Interest income, net 1,192 1,090 9.4%
--------- --------- --------
LOSS BEFORE INCOME TAXES (49,327) (7,579) -550.8%
Income tax provision (benefit) (2,526) 3,080 nm
--------- --------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE LOSS FROM DISCONTINUED (51,853) (4,499) -1052.5%
OPERATIONS
--------- --------- --------
Loss from discontinued operations, net of tax benefit in 2003 (417) (644) 35.2%
--------- --------- --------
NET LOSS $ (52,270) $ (5,143) -916.3%
========= ========= ========
15
Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
2004 2003
------------ -----------
ASSETS
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 112,306 $ 165,566
Short-term investments 38,891 3,100
Accounts receivable, net 15,233 39,758
Inventories, net 8,093 7,485
Deferred television production costs 25 3,465
Income taxes receivable 533 5,658
Deferred income taxes, net 1,270 5,024
Other current assets 2,947 4,422
--------- ---------
TOTAL CURRENT ASSETS 179,298 234,478
--------- ---------
PROPERTY, PLANT, AND EQUIPMENT, net 18,593 22,673
--------- ---------
INTANGIBLE ASSETS, net 54,263 44,257
--------- ---------
DEFERRED INCOME TAXES 3,224 3,224
--------- ---------
OTHER NONCURRENT ASSETS 6,844 4,470
--------- ---------
TOTAL ASSETS $ 262,222 $ 309,102
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 26,180 $ 26,628
Accrued payroll and related costs 10,761 10,360
Income taxes payable 1,029 167
Current portion of deferred subscription income 23,845 23,833
--------- ---------
TOTAL CURRENT LIABILITIES 61,815 60,988
--------- ---------
DEFERRED SUBSCRIPTION INCOME 8,342 7,133
OTHER NONCURRENT LIABILITIES 4,227 4,316
--------- ---------
TOTAL LIABILITIES $ 74,384 $ 72,437
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value, 350,000 shares authorized:
20,378 and 19,628 shares issued in 2004 and 2003, respectively 204 196
Class B common stock, $0.01 par value, 150,000 shares authorized:
29,423 and 30,059 shares outstanding in 2004 and 2003, respectively 294 301
Capital in excess of par value 186,879 183,744
Unamortized restricted stock - (307)
Retained earnings 1,236 53,506
--------- ---------
188,613 237,440
Less class A treasury stock -- 59 shares at cost (775) (775)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 187,838 236,665
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $262,222 $ 309,102
========= =========
16
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Three Months Ended September 30,
(in thousands)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income, a GAAP measure, and
Operating Income before Depreciation and Amortization, including the
amortization of non-cash stock compensation, (OIDA), a non-GAAP measure. In
order to reconcile OIDA to operating income, depreciation and amortization are
added back to operating income.
2004 2003
-------- --------
OPERATING INCOME (LOSS)
Publishing $ (5,577) $ 1,294
Television (1,822) (33)
Merchandising 4,805 4,563
Internet/ Direct Commerce (2,685) (1,970)
-------- --------
Operating Income (Loss) before Corporate (5,279) 3,854
Overhead
Corporate Overhead (10,875) (10,135)
-------- --------
TOTAL OPERATING LOSS (16,154) (6,281)
-------- --------
DEPRECIATION AND AMORTIZATION
Publishing 146 41
Television 57 236
Merchandising 190 166
Internet/ Direct Commerce 248 235
Corporate Overhead 1,026 1,207
-------- --------
TOTAL DEPRECIATION AND AMORTIZATION 1,667 1,885
-------- --------
AMORTIZATION OF NON-CASH STOCK COMPENSATION
Publishing 27 50
Television - -
Merchandising (97) 13
Internet/ Direct Commerce - 1
Corporate Overhead 1,061 79
-------- --------
TOTAL AMORTIZATION 991 143
-------- --------
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION AND AMORTIZATION OF
NON-CASH STOCK COMPENSATION
Publishing (5,404) 1,385
Television (1,765) 203
Merchandising 4,898 4,742
Internet/ Direct Commerce (2,437) (1,734)
-------- --------
Operating Income (Loss) before Depreciation (4,708) 4,596
and Amortization, Amortization of Non-
Cash Stock Compensation and before
Corporate Overhead
Corporate Overhead (8,788) (8,849)
-------- --------
OPERATING LOSS BEFORE DEPRECIATION AND AMORTIZATION AND AMORTIZATION OF NON-
CASH STOCK COMPENSATION $(13,496) $ (4,253)
======== ========
17
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Nine Months Ended September 30,
(in thousands)
The following table presents segment and consolidated financial
information, including a reconciliation of operating income, a GAAP measure, and
Operating Income before Depreciation and Amortization, including the
amortization of non-cash stock compensation, (OIDA), a non-GAAP measure. In
order to reconcile OIDA to operating income, depreciation and amortization are
added back to operating income.
2004 2003
-------- ---------
OPERATING INCOME (LOSS)
Publishing $(13,278) $ 19,247
Television (7,300) 196
Merchandising 16,608 19,405
Internet/ Direct Commerce (7,790) (14,774)
-------- --------
Operating Income (Loss) before Corporate Overhead (11,760) 24,074
Corporate Overhead (38,759) (32,743)
-------- --------
TOTAL OPERATING LOSS (50,519) (8,669)
-------- --------
DEPRECIATION AND AMORTIZATION
Publishing 269 123
Television 173 1,015
Merchandising 570 503
Internet/ Direct Commerce 740 726
Corporate Overhead 3,224 3,713
-------- --------
TOTAL DEPRECIATION AND AMORTIZATION 4,976 6,080
-------- --------
AMORTIZATION OF NON-CASH STOCK COMPENSATION EXPENSE (BENEFIT)
Publishing 129 152
Television - -
Merchandising (72) 38
Internet/ Direct Commerce - (21)
Corporate Overhead 3,414 241
-------- --------
TOTAL AMORTIZATION 3,471 410
-------- --------
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION AND AMORTIZATION OF
NON-CASH STOCK COMPENSATION
Publishing (12,880) 19,522
Television (7,127) 1,211
Merchandising 17,106 19,946
Internet/ Direct Commerce (7,050) (14,069)
-------- --------
Operating Income (Loss) before Depreciation and (9,951) 26,610
Amortization, Amortization of Non-Cash Stock
Compensation and before Corporate Overhead
Corporate Overhead (32,121) (28,789)
-------- --------
OPERATING LOSS BEFORE DEPRECIATION AND AMORTIZATION AND AMORTIZATION OF NON-CASH
STOCK COMPENSATION $(42,072) $ (2,179)
======== ========
18
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Allocation of Amortization
of non-cash Stock Compensation Expense
Three and Nine Months Ended September 30,
(in thousands)
(a) The amortization of non-cash stock compensation expense for the three month
periods ended September 30, should be allocated as follows:
2004 2003
-------- ---------
Production, distribution and editorial $ 10 $ 26
Selling and promotion 10 26
General and administrative 971 91
-------- ---------
TOTAL $ 991 $ 143
======== =========
(b) The amortization of non-cash stock compensation expense for the nine month
periods ended September 30, should be allocated as follows:
2004 2003
------- -------
Production, distribution and editorial $ 60 $ 76
Selling and promotion 60 76
General and administrative 3,351 258
------- -------
TOTAL $ 3,471 $ 410
======= =======
19
Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Change in Accounting Policy For
Subscription Acquisition Costs
(in thousands, except per share amounts)
In the third quarter of 2004, the Company changed its accounting policy for
subscription acquisition costs in its publishing segment. The Company previously
recognized as expense its estimate of annual subscription acquisition costs
ratably throughout the year. The Company will now recognize subscription
acquisition costs in the period in which the acquisition efforts take place. The
change in accounting policy has no impact on full year results of operations or
earnings (loss) per share as subscription acquisition costs will continue to be
expensed in the year incurred.
The following table reflects the impact of the accounting change on previously
reported quarters for the years ended December 31, 2004 and 2003:
Three Months Ended
-------------------------------
March 30, June 30,
2004 2004
----------- -----------
Net loss previously reported $ (20,257) $ (19,293)
Impact of change in accounting policy 776 1,469
----------- -----------
Net loss- restated $ (19,481) $ (17,824)
=========== ===========
Net Loss Per Share -- Basic and
Diluted
Net loss previously reported $ (0.41) $ (0.39)
Impact of change in accounting policy 0.02 0.03
----------- -----------
Net loss per share- restated $ (0.39) $ (0.36)
=========== ===========
Three Months Ended
------------------------------------------------------------------------ Year Ended
March 30, June 30, September December December
2003 2003 30, 2003 31, 2003 1, 2003
--------- ------- --------- -------- ----------
Net income (loss) previously
reported $(4,506) $ 931 $(3,840) $ 4,644 $ (2,771)
Impact of change in accounting
policy, net of income taxes 1,342 1,029 (98) (2,273) --
------- ------- ------- ------- -------
Net loss- restated $(3,164) $ 1,960 $(3,938) $ 2,371 $(2,771)
======= ======= ======= ======= =======
Net Income (Loss) Per Share -- Basic and Diluted
Net income (loss) previously
reported $(0.09) $ 0.02 $ (0.08) $ 0.09 $ (0.06)
Impact of change in accounting
policy, net of income taxes 0.03 0.02 0.00 (0.05) --
------ ------- ------- ------- -------
Net income (loss) per share- $(0.06) $ 0.04 $ (0.08) $ 0.04 $ (0.06)
restated ====== ======= ======= ======= ========
20