EXHIBIT 99.1
MARTHA STEWART LIVING OMNIMEDIA, INC.
ANNOUNCES FIRST QUARTER 2005 RESULTS
NEW YORK, NEW YORK, APRIL 26, 2005 -- Martha Stewart Living Omnimedia, Inc.
(NYSE: MSO) announced its results today for the first quarter of 2005.
Revenues for the first quarter of 2005 were $38.7 million, compared to $44.5
million in the prior year's quarter. Operating loss for the first quarter was
$(19.8) million, compared to an operating loss of $(16.5) million for the first
quarter of 2004. Operating income before depreciation and amortization, and the
amortization of non-cash equity compensation ("OIDA") for the first quarter of
2005 was a loss of $(14.9) million, compared to OIDA of $(13.4) million in the
same period last year. Loss per share from continuing operations was $(0.37) for
the first quarter of 2005, compared to a loss per share from continuing
operations of $(0.39) in the first quarter of 2004.
Susan Lyne, President and Chief Executive Officer, said: "2005 has started off
as we expected with the Company seeing momentum both from the strength of our
brand and Martha's return. Importantly, Martha's return has energized the entire
Company, and customers have enthusiastically welcomed her home. We thank them,
our corporate partners and advertisers for their continued support.
"We see early signs of improvement in our core publishing business, and while
this will not be an overnight recovery, we believe this trend will continue over
the long term. In particular, we are pleased by positive circulation trends and
an increase in advertising pages in recent issues of our flagship Martha Stewart
Living magazine, which we expect to achieve advertising page growth in excess of
30% in the second quarter. Everyday Food also continues to show strength in
advertising and circulation. Station demand and advertiser interest for our new
nationally syndicated daily television show is strong, with the show now cleared
in 90% of the U.S. markets. Importantly, we have also deepened our management
team with the addition of several executives - all of whom bring a high level of
industry expertise to the company.
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"Our recent announcements of exclusive deals with SIRIUS Satellite Radio to
launch the first channel dedicated to women's lifestyles and with Warner Home
Video to distribute a full line of how-to DVDs demonstrate our ability to
leverage the brand, our content, and our strong consumer relationships to create
long-term value. Both partnerships present a tremendous opportunity to make our
content more accessible to our loyal customer base and reach out to a new
audience.
"Recent awards for our television shows and magazines validate the consistently
high level of quality and creativity MSO brings to all of its products. The
National Magazine Awards for Martha Stewart Weddings and Kids: Fun Stuff To Do
Together as well as three Daytime Emmy nominations are tremendous
accomplishments for our company and represent the extraordinary talent of our
employees."
FIRST QUARTER 2005 RESULTS BY SEGMENT
PUBLISHING
Revenues in the first quarter of 2005 were $25.4 million, compared to $23.9
million in the first quarter of 2004. The increase in revenue was driven by
higher revenue from Everyday Food due to higher advertising rates and increased
circulation, as well as from revenue related to Body + Soul, which was acquired
in August 2004. These increases were partially offset by more modest declines in
advertising revenue in Martha Stewart Living. We expect Martha Stewart Living to
achieve an increase in pages in excess of 30% in the second quarter, with
revenue growing at a faster pace. Operating loss was $(8.7) million for the
first quarter of 2005, compared to an operating loss of $(3.8) million in the
first quarter of 2004. OIDA was a loss of $(7.7) million, compared to a loss of
$(3.7) million in the first quarter of 2004. The increased operating loss in the
quarter was due principally to losses related to Body + Soul magazine, higher
circulation costs in Martha Stewart Living due in part to a change in timing of
certain direct mail campaigns and certain non-recurring expenses in the quarter.
Having peaked in 2004, losses related to Everyday Food have begun to decline as
a result of increasing advertising and circulation revenue as well as lower
subscriber acquisition costs.
TELEVISION
Revenues in the first quarter of 2005 were $0.8 million, compared to $4.2
million in the first quarter of 2004. Operating loss for the first quarter of
2005 was $(2.3) million, compared to an operating loss of $(1.9) million in the
first quarter of 2004. OIDA was a loss of $(2.2) million for the first quarter
of 2005, compared to a loss of $(1.9) million in the prior year's first quarter.
The decline in revenue was
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primarily related to the absence of our daily syndicated show, which stopped
airing in syndication in September 2004. In September 2005, we will begin airing
our new nationally syndicated daily show. Production on this new series will
commence in the second quarter. The first quarter comparisons were also impacted
by the expiration of certain cable television agreements in 2004.
MERCHANDISING
Revenues in the first quarter of 2005 were $9.4 million, compared to $10.8
million in the first quarter of 2004. The revenue decline was due to lower sales
from our Martha Stewart Everyday product line, with sales declines in home and
paint product lines partially offset by increases in sales of garden and
housewares products. First-quarter 2005 operating income was $5.8 million,
compared to $6.5 million in the first quarter of 2004. OIDA was $6.1 million in
the current period, compared to $6.7 million in the prior year's quarter. In
May, we will be expanding the Martha Stewart Everyday product line to include a
new line of ready-to-assemble furniture. This product line will feature 42 new
SKU's with furniture for the bedroom, kitchen and living room.
INTERNET/DIRECT COMMERCE
Revenues in the first quarter of 2005 were $3.1 million, compared to $5.6
million in the same period a year ago. The quarter reflects sales from the
wind-down of our catalog-related operations and strong results from our flowers
business - marthasflowers.com. Although small, this business represents a
profitable growth opportunity for the company. Operating loss was $(1.5) million
for the first quarter of 2005, compared to $(2.7) million in the first quarter
of 2004. OIDA was a loss of $(1.2) million in the first quarter of 2005,
compared to a loss of $(2.4) million in the first quarter of 2004. The quarter
reflects continued investment in the content portion of this segment. We expect
the losses in the business segment to moderate throughout the year, principally
due to a declining cost structure.
CORPORATE EXPENSES
Corporate expenses, including depreciation and amortization and the amortization
of non-cash equity compensation, was $13.1 million, compared to $14.6 million in
the prior year's quarter. Corporate overhead, before depreciation and
amortization and the amortization of non-cash equity compensation, was $9.9
million for the first quarter of 2005, compared to $12.0 million in the first
quarter of 2004. The year-over-year improvement in OIDA was principally driven
by lower professional fees in the quarter.
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TRENDS AND OUTLOOK
James Follo, Chief Financial and Administrative Officer, commented: "Trends in
our business are expected to improve as the year progresses, reflecting improved
advertising revenue and the September 2005 launch of the syndicated television
program as well as moderating losses in the Internet/Direct Commerce segment.
Our balance sheet remains strong with $147 million in cash and short-term
investments. For the second quarter of 2005, we expect to report an operating
loss of approximately $31 million, including a non-cash charge of approximately
$15 million related to the expected vesting of certain previously issued
warrants granted in connection with the production of our syndicated television
program. We expect to report an OIDA loss in the second quarter of approximately
$12 million, compared to an OIDA loss in the second quarter of 2004 of
approximately $15 million."
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, 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.
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The Company will host a conference call with analysts and investors at 12:00
p.m. ET that will be broadcast live over the Internet at
www.marthastewart.com/ir.
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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
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: adverse reactions to publicity relating to Martha Stewart by consumers,
advertisers and business partners; an adverse resolution to the pending SEC
enforcement proceeding 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 loss of the services of Ms. Stewart; a loss of the services of
other key personnel; 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.
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.
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Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Three Months Ended March 31,
(in thousands, except per share amounts)
2005 2004 % change
-------- -------- --------
REVENUES
Publishing $ 25,355 $ 23,922 6.0%
Television 797 4,177 -80.9%
Merchandising 9,392 10,789 -12.9%
Internet/Direct Commerce 3,122 5,613 -44.4%
-------- -------- --------
Total revenues 38,666 44,501 -13.1%
-------- -------- --------
OPERATING COSTS AND EXPENSES
Production, distribution and editorial 23,565 28,940 18.6%
Selling and promotion 16,579 13,448 -23.3%
General and administrative 13,398 15,523 13.7%
Amortization of non-cash equity compensation 3,219 1,455 -121.2%
Depreciation and amortization 1,687 1,674 -0.8%
-------- -------- --------
Total operating costs and expenses 58,448 61,040 4.2%
-------- -------- --------
OPERATING LOSS (19,782) (16,539) -19.6%
Interest income, net 769 362 nm
-------- -------- --------
LOSS BEFORE INCOME TAXES (19,013) (16,177) -17.5%
Income tax provision (23) (3,143) 99.3%
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS (19,036) (19,320) 1.5%
-------- -------- --------
Loss from discontinued operations (132) (161) 18.0%
-------- -------- --------
NET LOSS $(19,168) $(19,481) 1.6%
======== ======== ========
LOSS PER SHARE - BASIC AND DILUTED
Loss from continuing operations $ (0.37) $ (0.39)
Loss from discontinued operations (0.00) (0.00)
-------- --------
Net loss $ (0.38) $ (0.39)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 50,863 49,464
Diluted 50,863 49,464
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Martha Stewart Living Omnimedia, Inc.
Segment Information
Three Months Ended March 31,
(in thousands)
2005 2004 % change
-------- -------- --------
REVENUES
Publishing $ 25,355 $ 23,922 6.0%
Television 797 4,177 -80.9%
Merchandising 9,392 10,789 -12.9%
Internet/Direct Commerce 3,122 5,613 -44.4%
-------- -------- --------
Total revenues 38,666 44,501 -13.1%
-------- -------- --------
OPERATING (INCOME) LOSS BEFORE DEPRECIATION AND AMORTIZATION
Publishing (7,692) (3,735) -105.9%
Television (2,162) (1,890) -14.4%
Merchandising 6,101 6,692 -8.8%
Internet/Direct Commerce (1,248) (2,436) 48.8%
-------- -------- --------
Operating Loss before Depreciation and Amortization (5,001) (1,369) nm
and Corporate Expense
Corporate Expense (9,875) (12,041) 18.0%
-------- -------- --------
Operating Loss before Depreciation and Amortization (14,876) (13,410) -10.9%
Amortization of non-cash equity compensation (3,219) (1,455) nm
Depreciation and amortization (1,687) (1,674) -0.8%
-------- -------- --------
OPERATING LOSS (19,782) (16,539) -19.6%
Interest income, net 769 362 112.4%
-------- -------- --------
LOSS BEFORE INCOME TAXES (19,013) (16,177) -17.5%
Income tax provision (23) (3,143) nm
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS (19,036) (19,320) 1.5%
-------- -------- --------
Loss from discontinued operations (132) (161) -18.0%
-------- -------- --------
NET LOSS $(19,168) $(19,481) 1.6%
======== ======== ========
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Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
March 31, December 31,
2005 2004
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 85,071 $ 104,647
Short-term investments 61,930 35,309
Accounts receivable, net 13,840 31,332
Inventories, net 3,864 5,229
Income taxes receivable 5,107 6,321
Other current assets 2,867 3,573
--------- ---------
TOTAL CURRENT ASSETS 172,679 186,411
PROPERTY, PLANT, AND EQUIPMENT, net 15,966 17,175
INTANGIBLE ASSETS, net 54,130 54,264
OTHER NONCURRENT ASSETS 6,816 6,828
--------- ---------
TOTAL ASSETS $ 249,591 $ 264,678
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 20,337 $ 25,604
Accrued payroll and related costs 5,985 9,407
Income taxes payable 403 412
Current portion of deferred subscription income 29,844 27,160
--------- ---------
TOTAL CURRENT LIABILITIES 56,569 62,583
--------- ---------
DEFERRED SUBSCRIPTION INCOME 7,797 7,668
DEFERRED ROYALTY REVENUE 3,750 3,438
OTHER NONCURRENT LIABILITIES 3,273 3,361
--------- ---------
TOTAL LIABILITIES 71,389 77,050
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Class A common stock, $0.01 par value, 350,000 shares authorized:
22,493 and 21,660 shares issued in 2005 and 2004, respectively 225 217
Class B common stock, $0.01 par value, 150,000 shares authorized:
29,123 shares outstanding in 2005 and 2004 291 291
Capital in excess of par value 214,694 196,781
Unamortized restricted stock (10,972) (2,793)
Accumulated deficit (25,261) (6,093)
--------- ---------
178,977 188,403
Less class A treasury stock - 59 shares at cost (775) (775)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 178,202 187,628
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 249,591 $ 264,678
========= =========
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Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non- GAAP Financial Information
Three Months Ended March 31,
(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 equity 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 $ (8,718) $ (3,848)
Television (2,272) (1,947)
Merchandising 5,815 6,489
Internet/Direct Commerce (1,509) (2,679)
-------- --------
Operating Loss before Corporate Expenses (6,684) (1,985)
Corporate Expenses (13,098) (14,554)
-------- --------
TOTAL OPERATING LOSS (19,782) (16,539)
-------- --------
DEPRECIATION AND AMORTIZATION
Publishing 247 62
Television 46 57
Merchandising 209 190
Internet/Direct Commerce 252 243
Corporate Expenses 933 1,122
-------- --------
TOTAL DEPRECIATION AND AMORTIZATION 1,687 1,674
-------- --------
AMORTIZATION OF NON-CASH EQUITY COMPENSATION
Publishing 779 51
Television 64 --
Merchandising 77 13
Internet/Direct Commerce 9 --
Corporate Expenses 2,290 1,391
-------- --------
TOTAL AMORTIZATION OF NON-CASH EQUITY COMPENSATION 3,219 1,455
-------- --------
OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND AMORTIZATION AND
AMORTIZATION OF NON-CASH EQUITY COMPENSATION
Publishing (7,692) (3,735)
Television (2,162) (1,890)
Merchandising 6,101 6,692
Internet/Direct Commerce (1,248) (2,436)
-------- --------
Operating Loss before Depreciation and Amortization,
Amortization of Non-Cash Equity Compensation and before
Corporate Expenses (5,001) (1,369)
Corporate Expenses (9,875) (12,041)
-------- --------
OPERATING LOSS BEFORE DEPRECIATION AND AMORTIZATION AND
AMORTIZATION OF NON-CASH EQUITY COMPENSATION $(14,876) $(13,410)
======== ========
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