Martha Stewart Living Omnimedia Inc. Reports Operating Results (10-Q)
Martha Stewart Living Omnimedia Inc. has a market cap of $279.2 million; its shares were traded at around $5.08 with a P/E ratio of 56.5 and P/S ratio of 1.2. MSO is in the portfolios of Chuck Royce of Royce& Associates.
Highlight of Business Operations:Production, distribution and editorial expenses decreased $0.6 million due to the timing of the 2010 spring issue of Martha Stewart Weddings and lower paper costs, partially offset by higher art and editorial compensation and story costs. Selling and promotion expenses decreased $1.1 million due to lower subscriber acquisitions and newsstand-related costs and the discontinuation of Dr. Andrew Weils Self Healing newsletter and special interest publications, partially offset by the timing of marketing promotional costs. General and administrative expenses decreased $0.2 million largely due to lower headcount and lower facilities-related charges, partially offset by a reversal of non-cash compensation in the prior-year period.
Broadcasting revenues decreased 21% for the three months ended June 30, 2010 from the prior-year period. Advertising revenue was essentially flat as the increase in integrations and modestly higher overall advertising rates were fully offset by the decline in household ratings for The Martha Stewart Show. In addition, advertising revenue includes revenue from our new radio agreement. Radio licensing revenue decreased $1.0 million as a result of our new agreement with Sirius XM, which provides for lower licensing fees than the previous agreement, but also provides an opportunity to replace a portion of the licensing fees through advertising sales. Television licensing and other revenue decreased $1.2 million mostly due to the absence of revenue from our TurboChef relationship, which contributed revenues to the second quarter of 2009, and the timing of our international license renewals, partially offset by the inclusion of certain licensing revenues related to Emeril Lagasses television programming in the second quarter of 2010.
Production, distribution and editorial costs increased $0.2 million from the prior-year period due to higher compensation costs from increased headcount. Selling and promotion expenses increased $0.4 million due to higher consumer marketing costs, as well as higher compensation expenses from increased headcount and higher commissions. Depreciation and amortization expenses decreased $0.3 million primarily due to the full depreciation by the second quarter of 2010 of the costs associated with the 2007 launch of our redesigned website.
Merchandising revenues increased 31% for the three months ended June 30, 2010 from the prior-year period. Royalty and other revenue increased $5.5 million due to the additional $2.2 million in one-time revenue from the early termination of our agreement with 1-800-Flowers.com, as well as the contribution from our new merchandising relationships and higher royalty rates and sales volume from certain of our existing partners. The increase in royalty and other revenue was partially offset by the inclusion of $2.7 million of revenues in the second quarter of 2009 related to our agreement with Kmart, which ended in January 2010.
Production, distribution and editorial expenses decreased $0.3 million due primarily to lower allocated facilities costs, as compared to the prior-year period. The allocation policy for facilities expenses changed in 2010 for the Merchandising segment only. All allocated rent and facilities charges will now be reflected in the general and administrative expense category in the Merchandising segment instead of allocated throughout the various expense categories based on headcount. This allocation change does not impact any of our other business segments. Selling and promotion expenses increased $0.3 million mostly as a result of services that we provide to our partners for reimbursable creative services projects, as well as higher consulting fees. General and administrative costs increased $0.4 million primarily due to higher allocated facilities costs due to the change in policy described above. In the second quarter of 2009, we recorded non-cash impairment charges of $5.5 million related to our cost-based equity investment in United Craft MS Brands, LLC.
Corporate operating costs and expenses decreased 11% for the three months ended June 30, 2010 from the prior-year period. General and administrative expenses decreased $0.2 million due to lower rent expense from the consolidation of certain offices, partially offset by higher compensation and related expenses. Depreciation and amortization expenses decreased $0.9 million due to lower depreciation expense also related to the relocation of our office space.
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