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Martha Stewart Living Omnimedia's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: MSO

Thank you, and now I'll turn the call over to Lisa.

Lisa Gersh

Thank you Katherine and good morning everyone. Our second quarter results were pretty much in line with our expectations.

Highlights include strong margins in Merchandising, as well as continued solid revenue growth and a modest profit in Broadcasting. Our Publishing results were weaker as we communicated they would be. More important is how we see the second half of the year as we execute on all of our turnaround plans, and I'll update you on where we are across each of our businesses. After that, I'll turn the call over to Ken and then we’ll take your questions.

I’d like to start with Merchandising. We had a solid quarter overall with adjusted EBITDA margins about 70%. Leading contributors to revenue growth in the quarter included J.C. Penney, where we continue our early design work as we prepare for the launch of that partnership in the first quarter of 2013. The Martha Stewart Home Office line with Avery sold exclusively at Staples in the United States, and now, the UK and strong performance in our pet’s line at Petsmart. Overall, our growth was offset by softness of the Home Depot relative to our expectations primarily in the soft flooring category.

I’d like to focus for a moment on recent developments with respect to J.C. Penney. First, we announced the substantial expansion of the commercial partnership, including additional product categories and an increase in the minimum guarantee. We will now receive a minimum of about $288 million over the course of the 10 year agreement, an increase of $110 million from what was originally planned. The opportunity to amend this agreement has been in place since the beginning. The decision to act on it now is a reflection of the great opportunities we and J.C. Penney see as the relationship builds.

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