EX-99.1 2 y68054exv99w1.txt EX-99.1: PRESS RELEASE 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