Martha Stewart Living Omnimedia Reports Second Quarter 2012 Results

Martha Stewart Living Omnimedia Reports Second Quarter 2012 Results

NEW YORK, July 30, 2012 Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the second quarter ended June 30, 2012. The Company reported revenue for the second quarter of $47.9 million.

Lisa Gersh, President and Chief Executive Officer, said, "Led by solid performance in merchandising and broadcasting, MSLO's results were in line with our expectations for the quarter. We anticipated much of the weakness in publishing, and it's important to note that while our publishing strategy is gaining traction, it will take additional time to yield the targeted results. This will slow our planned return to profitability, but we continue to anticipate improving performance for the Company in 2012."

Second Quarter 2012 Summary

Revenues were $47.9 million in the second quarter of 2012, compared to $54.9 million in the second quarter of 2011, due to lower revenues in our publishing and broadcasting segments, partially offset by higher merchandising revenues.

Adjusted EBITDA loss for the second quarter of 2012 was $(0.3) million, compared to $(0.6) million in the prior-year period.

Operating loss for the second quarter of 2012 was $(2.9) million compared with $(2.5) million in the prior-year period.

Basic and diluted net loss per share was $(0.04) for the second quarter of 2012, compared to $(0.05) for the second quarter of 2011.


Second Quarter 2012 Results by Segment

Three Months Ended, June 30
(unaudited, in thousands)

2012 2011
---- ----
REVENUES
Publishing $28,806 $34,141
Broadcasting 4,589 7,801
Merchandising 14,489 12,918
------ ------
Total Revenues $47,884 $54,860
------- -------

ADJUSTED EBITDA
Publishing $(4,610) $(1,596)
Broadcasting 1,185 (367)
Merchandising 10,343 8,519
Corporate (7,194) (7,147)
------ ------
Total Adjusted EBITDA $(276) $(591)
----- -----

OPERATING (LOSS) / INCOME
Publishing $(5,015) $(1,915)
Broadcasting 536 (482)
Merchandising 10,178 8,782
Corporate (8,584) (8,871)
------ ------
Total Operating Loss $(2,885) $(2,486)
------- -------


Publishing

Revenues in the second quarter of 2012 were $28.8 million, compared to $34.1 million in the prior year's second quarter, due to lower print and digital advertising revenues. The decline was anticipated in part due to the timing of changes in the advertising sales staff.

Adjusted EBITDA loss was $(4.6) million in the second quarter of 2012, compared to $(1.6) million in the prior year's quarter.

Operating loss was $(5.0) million for the second quarter of 2012, compared to $(1.9) million in the prior year's quarter.

Recent Highlights


-- According to comScore Unified data, unique visitors across MSLO's
websites increased 17.3% in the quarter compared to the prior-year
period.
-- Martha's American Food, which was published in April, made The New York
Times' Bestseller List in the "Advice, How-to and Miscellaneous"
category.
-- Martha Stewart Weddings for the iPad launched on May 21(st).
-- Martha Stewart CraftStudio App, MSLO's first creativity app for iPad,
launched in June, and went to #1 in the free Lifestyle App category; it
was also an Editor's Choice in Apple's App Store and a top free App
overall its first week.
Broadcasting

Revenues in the second quarter of 2012 were $4.6 million, compared to $7.8 million in the second quarter of 2011, as anticipated, due to decreased levels of new programming.

Adjusted EBITDA was $1.2 million for the second quarter of 2012, compared to an adjusted EBITDA loss of $(0.4) million in the prior year's second quarter.

Operating income was $0.5 million for the second quarter of 2012, compared to an operating loss of $(0.5) million in the first quarter of 2011.

Recent Highlights


-- The Martha Stewart Show was nominated for a Daytime Emmy Award in the
"Outstanding Lifestyle Program" category.
-- Martha completed shooting the first two seasons of "Martha Stewart's
Cooking School," which is slated to debut on PBS in October 2012.
Merchandising

Revenues increased 12% to $14.5 million for the second quarter of 2012, as compared to $12.9 million in the prior year's second quarter, primarily due to sales of the Martha Stewart Home Office line with Avery at Staples, design fees from J.C. Penney and strength in our Martha Stewart Pets line at PetSmart.

Adjusted EBITDA was $10.3 million for the second quarter of 2012, up from $8.5 million in the prior year's first quarter.

Operating income was $10.2 million for the second quarter of 2012, up from $8.8 million in the first quarter of 2011.

Recent Highlights


-- MSLO strengthened its merchandising leadership team with the additions
of Ann Bukawyn, EVP Global Licensing, and Michael Robinson, VP of
e-Commerce.
-- The Martha Stewart Living craft furniture line at The Home Depot,
developed for The Home Decorator's Collection, is currently being
featured in The Home Depot stores.
-- The Martha Stewart Collection at Macy's had a solid quarter with
strength in textiles.
-- Avery began shipping the Martha Stewart Home Office line of products
overseas in advance of the line's July launch at 137 Staples stores in
the UK.
-- Martha Stewart Pets had a robust quarter at PetSmart with ongoing
strength in apparel and continued expansion into new categories.
-- Emeril's performance in the quarter was driven by sales of the chef's
All-Clad cookware line.
Corporate

Adjusted EBITDA was $(7.2) million in the second quarter of 2012 compared to $(7.1) million in the prior year's quarter. Total Corporate expenses were $(8.6) million, compared to $(8.9) million in the prior year's second quarter.

The Company will host a conference call with analysts and investors on July 30, 2012 at 8:30am EDT that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through August 13, 2012.

Use of Non-GAAP Financial Information

In addition to using net income to assess the organization's overall financial health, Company management uses consolidated net income/(loss) before interest income or expense, taxes, depreciation and amortization, non-cash equity compensation expense, restructuring charges and other income/(expense) ("adjusted EBITDA"), a non-GAAP financial measure, to evaluate the performance of our businesses on a real-time basis. Adjusted EBITDA is considered an important indicator of operational strength, is a direct component of the Company's annual compensation program, and is a significant factor in helping our management determine how to allocate resources and capital. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP. Management considers adjusted EBITDA to be a critical measure of operational health because it captures all of the revenue and ongoing operating expenses of our businesses without the influence of (i) interest charges, which result from our capital structure, not our ongoing business efforts, (ii) taxes, which relate to the overall organizational financial return, not that of any one business, (iii) the capital expenditure costs associated with depreciation and amortization, which are a function of historical decisions on infrastructure and capacity, (iv) the cost of non-cash equity compensation which, as a function of our stock price, can be highly variable, is not necessarily an indicator of current operating performance for any individual business unit, and is amortized over the various periods, (v) restructuring charges, which include charges such as employee severance and certain professional fees that do not necessarily reflect ongoing operating performance, and (vi) other income/(expense), which may include non-operational items.

Adjusted EBITDA provides a means to directly evaluate the ability of our business operations to generate returns on a real-time basis. We provide disclosure of adjusted EBITDA because we believe it is useful for investors to have means to assess our performance as we do. While adjusted EBITDA is a customized non-GAAP measure, it also provides a means to analyze value and compare our operating capabilities to those of companies with which we compete, many of which have different compensation plans, depreciation and amortization costs, capital structures and tax burdens. But please note that our non-GAAP results may differ from similar measures used by other companies, even if similar terms are used to identify such measures.

A limitation of adjusted EBITDA is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues for our overall organization. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures. Management also evaluates the cost of capitalized tangible and intangible assets by analyzing returns provided on the capital dollars deployed. A further limitation of adjusted EBITDA is that it does not include stock compensation expense related to our workforce. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income or other measures of financial performance reported in accordance with GAAP.

About Martha Stewart Living Omnimedia, Inc.

Martha Stewart Living Omnimedia, Inc. (MSLO) is a leading provider of original "how-to" information, inspiring and engaging consumers with unique lifestyle content and high-quality products. MSLO is organized into the following business segments: Publishing, Broadcasting, and Merchandising. MSLO is listed on the New York Stock Exchange under the ticker symbol MSO.

Forward-Looking Statements

We have included in this press release certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts but instead represent only our current beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. These statements include estimates of future financial performance, potential opportunities, expected product line expansions and additions, future acceptability of our content and our businesses, anticipated growth, the success of our alliance with J.C. Penney and benefits from aligning our sales and marketing team and the success of the new team, and other statements that can be identified by terminology such as "may," "will," "should," "could," "position," "expects," "intends," "plans," "thinks," "believes," "estimates," "potential," "seem," "counting" or "continue" or the negative of these terms or other comparable terminology. The Company's actual results may differ materially from those projected in these statements, and factors that could cause such differences include: adverse reactions to publicity relating to Martha Stewart or Emeril Lagasse by consumers, advertisers and business partners; the failure of national and/or local economies to improve or renewed deterioration of such economies; shifts in our business strategies; a loss of the services of Ms. Stewart or Mr. Lagasse; a loss of the services of other key personnel; a renewed softening of the domestic advertising market; changes in consumer reading, purchasing and/or television viewing patterns to which our offerings are unable to respond; unanticipated increases in paper, postage or printing costs; operational or financial problems at any of our contractual business partners; the receptivity of consumers to our new product introductions; the inability to add to our partnerships or capitalize on existing partnerships or their termination; legal actions taken against us; and changes in government regulations affecting the Company's industries.

Certain of these and other factors are discussed in more detail in the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission, especially under the heading "Risk Factors," which may be accessed through the SEC's World Wide Web site at http://www.sec.gov/. The Company is under no obligation to update any forward-looking statements after the date of this release.






Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Three Months Ended June 30,
(unaudited, in thousands, except share and per share amounts)

2012 2011
---- ----
REVENUES
Publishing $28,806 $34,141
Broadcasting 4,589 7,801
Merchandising 14,489 12,918
Total revenues 47,884 54,860
------ ------

OPERATING COSTS AND EXPENSES
Production,
distribution
and editorial 25,585 31,580
Selling and
promotion 12,543 13,029
General and
administrative 10,846 11,813
Depreciation
and
amortization 1,018 924
Restructuring
charges 777 -
Total operating costs and
expenses 50,769 57,346
------ ------

OPERATING LOSS (2,885) (2,486)

OTHER INCOME / (EXPENSE)
Interest
income /
(expense),
net 276 (14)
Loss on equity
securities - (14)
Gain on sale
of cost-
based
investment 400 -
Other-than-
temporary
loss on cost-
based
investment (88) -
Total other income /
(expense) 588 (28)
(2,297) (2,514)
LOSS BEFORE INCOME TAXES

Income tax
provision (407) (424)


NET LOSS $(2,704) $(2,938)
======= =======

LOSS PER SHARE - BASIC AND
DILUTED
Net loss $(0.04) $(0.05)
=======

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted 67,224,593 54,765,846





Martha Stewart Living Omnimedia, Inc.
Consolidated Statements of Operations
Six Months Ended June 30 ,
(unaudited, in thousands, except share and per share amounts)

2012 2011
---- ----
REVENUES
Publishing $59,636 $68,817
Broadcasting 9,957 15,570
Merchandising 28,122 23,147
Total revenues 97,715 107,534
------ -------

OPERATING COSTS AND EXPENSES
Production,
distribution
and editorial 54,390 63,902
Selling and
promotion 24,926 27,321
General and
administrative 22,664 23,654
Depreciation
and
amortization 2,025 1,920
Restructuring
charges 777 -
Total operating costs and
expenses 104,782 116,797
------- -------

OPERATING LOSS (7,067) (9,263)

OTHER INCOME / (EXPENSE)
Interest
income /
(expense),
net 471 (126)
Income on
equity
securities - 205
Gain on sales
of cost-
based
investments 1,165 -
Other-than-
temporary
loss on cost-
based
investment (88) -
Total other income 1,548 79
(5,519)
LOSS BEFORE INCOME TAXES (9,184)

Income tax
provision (798) (831)


NET LOSS $(6,317) $(10,015)
======= ========

LOSS PER SHARE - BASIC AND DILUTED
Net Loss $(0.09) $(0.18)
=======

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted 67,161,415 54,740,849







Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)

June 30, December 31,
2012 2011
(unaudited)
----------
ASSETS
CURRENT ASSETS
Cash and cash
equivalents $20,214 $38,453
Short-term
investments 35,317 11,051
Accounts
receivable, net 33,023 48,237
Paper inventory 4,214 7,225
Deferred television
production costs 1,946 -
Other current
assets 3,723 4,858
Total current assets 98,437 109,824
------ -------

PROPERTY, PLANT AND EQUIPMENT, net 12,367 13,396
GOODWILL, net 45,107 45,107
OTHER INTANGIBLE ASSETS, net 45,209 45,215
OTHER NONCURRENT ASSETS, net 2,322 2,578
----- -----
Total assets $203,442 $216,120
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued liabilities $16,579 $23,728
Accrued payroll and
related costs 5,519 7,008
Current portion of
deferred subscription
revenue 14,430 16,018
Current portion of
other deferred
revenue 7,388 5,147
Total current liabilities 43,916 51,901
------ ------

DEFERRED SUBSCRIPTION REVENUE 3,744 3,975
OTHER DEFERRED REVENUE 637 2,333
DEFERRED INCOME TAX LIABILITY 6,495 5,874
OTHER NONCURRENT LIABILITIES 5,144 4,090
----- -----
Total liabilities 59,936 68,173
------ ------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Series A Preferred
Stock, 1 share issued
and outstanding in
2012 and 2011 - -
Class A Common Stock,
$0.01 par value,
350,000,000 shares
authorized:
41,086,472 and
40,893,964 shares
issued and
outstanding in 2012
and 2011,
respectively 411 409
Class B Common Stock,
$0.01 par value,
150,000,000 shares
authorized:
25,984,625shares
issued and
outstanding in 2012
and 2011 260 260
Capital in excess of
par value 338,723 336,661
Accumulated deficit (194,761) (188,442)
Accumulated other
comprehensive loss (352) (166)
144,281 148,722
------- -------
Less: Class A treasury stock - 59,400 shares at cost (775) (775)
---- ----
Total shareholders' equity 143,506 147,947
-------
Total liabilities and shareholders'
equity $203,442 $216,120
==============================





Martha Stewart Living Omnimedia,
Inc.
Supplemental Disclosures Regarding
Non-GAAP Financial Information
Three Months Ended June 30,
(unaudited, in thousands)
The following table presents
segment and consolidated financial
information, including a
reconciliation of net loss, a GAAP
measure, and adjusted EBITDA, a
non-GAAP measure.In order to
reconcile adjusted EBITDA to net
loss, non-cash equity
compensation, depreciation and
amortization, restructuring
charges, other income/(expense)
and income taxes are added back.




2012 2011
---- ----
ADJUSTED EBITDA
Publishing $(4,610) $(1,596)
Broadcasting 1,185 (367)
Merchandising 10,343 8,519
Corporate (7,194) (7,147)
-------
Adjusted EBITDA (276) (591)
---- ----

NON-CASH EQUITY COMPENSATION
Publishing 127 188
Broadcasting 15 2
Merchandising 70 (271)
Corporate 602 1,052
---
Total Non-Cash Equity Compensation 814 971
--- ---

DEPRECIATION AND AMORTIZATION
Publishing 185 131
Broadcasting 105 113
Merchandising 14 8
Corporate 714 672
---
Total Depreciation and Amortization 1,018 924
----- ---

RESTRUCTURING CHARGES
Publishing 93 -
Broadcasting 529 -
Merchandising 81 -
Corporate 74 -
---
Total Restructuring Charges 777 -
--- ---

OPERATING (LOSS) / INCOME
Publishing (5,015) (1,915)
Broadcasting 536 (482)
Merchandising 10,178 8,782
Corporate (8,584) (8,871)
-------
Total Operating Loss (2,885) (2,486)
------ ------

OTHER INCOME / (EXPENSE)
Interest income / (expense), net 276 (14)
Loss on equity securities - (14)
Gain on sale of cost-based
investment 400 -
Other-than-temporary loss on
cost-based investment (88) -
----
Total other income / (expense) 588 (28)
(2,297) (2,514)
LOSS BEFORE INCOME TAXES

Income tax provision (407) (424)
---- ----

NET LOSS $(2,704) $(2,938)
======= =======





Martha Stewart Living Omnimedia,
Inc.
Supplemental Disclosures Regarding
Non-GAAP Financial Information
Six Months Ended June 30,
(unaudited, in thousands)
The following table presents
segment and consolidated financial
information, including a
reconciliation of operating
income/(loss), a GAAP measure,
and adjusted EBITDA, a non-GAAP
measure.In order to reconcile
adjusted EBITDA to net loss, non-
cash equity compensation,
depreciation and amortization,
restructuring charges, other
income/(expense) and income taxes
are added back.




2012 2011
---- ----
ADJUSTED EBITDA
Publishing $(7,649) $(3,088)
Broadcasting (102) (2,038)
Merchandising 20,029 14,043
Corporate (14,399) (13,846)
--------
Adjusted EBITDA (2,121) (4,929)
------ ------

NON-CASH EQUITY COMPENSATION
Publishing 315 327
Broadcasting 31 26
Merchandising 303 11
Corporate 1,495 2,050
-----
Total Non-Cash Equity Compensation 2,144 2,414
----- -----

DEPRECIATION AND
AMORTIZATION
Publishing 365 350
Broadcasting 218 231
Merchandising 23 15
Corporate 1,419 1,324
-----
Total Depreciation and Amortization 2,025 1,920
----- -----

RESTRUCTURING CHARGES
Publishing 93 -
Broadcasting 529 -
Merchandising 81 -
Corporate 74 -
---
Total Restructuring Charges 777 -
--- ---

OPERATING (LOSS) / INCOME
Publishing (8,422) (3,765)
Broadcasting (880) (2,295)
Merchandising 19,622 14,017
Corporate (17,387) (17,220)
--------
Total Operating Loss (7,067) (9,263)
------ ------

OTHER INCOME / (EXPENSE)
Interest income /
(expense), net 471 (126)
Income on equity
securities - 205
Gain on sales of
cost-based
investments 1,165 -
Other-than-
temporary loss
on cost-based
investment (88) -
----
Total other income 1,548 79
(5,519) (9,184)
LOSS BEFORE INCOME TAXES

Income tax
provision (798) (831)
-----

NET LOSS $(6,317) $(10,015)
======= ========


SOURCE Martha Stewart Living Omnimedia, Inc.

Martha Stewart Living Omnimedia, Inc.

CONTACT: Katherine Nash, Martha Stewart Living Omnimedia, Inc. Corporate Communications, 212-827-8722, knash@marthastewart.com

Web Site: http://www.marthastewart.com


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