Martha Stewart Living Third-Quarter Loss Widens on Impairment Charge
The company narrowed its broadcasting unit loss but took a charge tied to the Emeril Lagasse trademark and merchandise unit goodwill
Martha Stewart Living Omnimedia on Tuesday reported a widened third-quarter loss as its broadcasting unit posted a narrowed operating loss, but its merchandising unit swung to a loss and recorded an impairment charge.
The firm reported a third-quarter loss of $10.9 million, compared with a loss of $4.3 million in the year-ago period. Its operating loss for the third quarter was $14.7 million, which included an $11.4 million non-cash impairment charge reflecting an $11.4 million write-down of the Emeril Lagasse trademark and goodwill recorded in the company's merchandising segment. Total operating loss in the third quarter of 2013 had been $4.1 million.
Quarterly revenue fell 12 percent from $33.8 million to $29.8 million amid declines in all units — publishing, broadcasting and merchandising. The loss excluding the charge for the quarter came in slightly below the loss projected by Wall Street analysts, but revenue also fell somewhat below expectations.
Broadcasting unit revenue was down 53 percent from $294,000 to $139,000 amid lower radio licensing revenue. The unit posted a narrowed operating loss of $36,000, down from a year-ago loss of $214,000.
Said CEO Dan Dienst, a turnaround specialist tasked with putting the company back on solid financial footing: "Results for the third quarter, which is seasonally our weakest quarter of the year, were in line with expectations but do not reflect the current transformation taking place at MSLO."
He added: "The significant partnership we recently announced with Meredith Corporation allows us to leverage their scale and expertise to fully monetize our award-winning content. The partnership is immediately accretive to earnings and a winning relationship for our consumers as well as our valued shareholders. Starting Nov. 1, MSLO will be a refocused content and design company with a strong foundation built on long-term profitable growth."
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CFO Ken West on an earnings conference call explained the Lagasse-related write-down. "Operating results for our Emeril brand and merchandize dropped below our expectation and, as a result, we have re-valued our Emeril trademark and goodwill initially recorded upon the acquisition of the brand at an aggregate of $46.1 million," he said. "This revaluation concluded with a non-cash writedown of such trademark and goodwill of approximately $11.4 million reflected in the company’s operating results for the current quarter."
Dienst said he was optimistic of the outlook for the Lagasse business going forward. "We've got a new show out with TNT, and it's been a while since we've had a really good expression of his talent on television, 2 million viewers on average across multiple platforms for the new On the Menu series," the CEO said. "It's a cooking competition show, its right where the chef should be and his team should be, getting some good traction with some new items that are coming out."
Explaining his team's strategy compared to the company's past, Dienst told analysts: "It is noteworthy as it marks the last quarter in MSLO’s old configuration, a configuration that had an enormous amount of resources and focus dedicated to a media business that due to our small scale was fundamentally uncompetitive in certain respects." He said people should now view the company "as a design and content creation company, a company that is asset lighter, nimbler and can focus on and monetize what it does best, creating designs and inspirational content for our loyal retail partners and their customers, as well as the devoted consumers of our content in print and online."
Oct. 28, 10:45 a.m. Updated with conference call comments.