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Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Jun. 30, 2014
Mar. 04, 2015
Entity Information [Line Items]
Document Type 10-K
Amendment Flag false
Document Period End Date Dec 31, 2014
Document Fiscal Period Focus FY
Document Fiscal Year Focus 2014
Trading Symbol MSO
Entity Registrant Name MARTHA STEWART LIVING OMNIMEDIA INC
Entity Central Index Key 0001091801
Current Fiscal Year End Date --12-31
Entity Filer Category Accelerated Filer
Entity Well-known Seasoned Issuer No
Entity Public Float $ 142,197,246
Entity Current Reporting Status Yes
Entity Voluntary Filers No
Class A Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding 32,236,549
Class B Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding 24,984,625
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Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
REVENUES
Total revenues $ 141,916 $ 160,675 $ 197,627
OPERATING COSTS AND EXPENSES
Production, distribution and editorial (58,720) (73,121) (103,347)
Selling and promotion (33,565) (45,033) (52,453)
General and administrative (38,122) (39,945) (45,148)
Depreciation and amortization (4,354) (3,758) (4,007)
Restructuring charges (3,637) [1] (3,439) [1] (4,811)
Impairment of trademark and goodwill (11,350) 0 (44,257)
Gain on sale of subscriber list, net 0 2,724 0
OPERATING LOSS (7,832) (1,897) (56,396)
OTHER INCOME / (EXPENSE)
Interest (expense) / income and other, net (435) 209 1,913
LOSS BEFORE INCOME TAXES (8,267) (1,688) (54,483)
Income tax benefit / (provision) 3,209 (84) (1,602)
NET LOSS (5,058) (1,772) (56,085)
LOSS PER SHARE - BASIC AND DILUTED
Net loss $ (0.09) $ (0.03) $ (0.83)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted 56,953,958 64,912,368 67,231,463
Publishing
REVENUES
Total revenues 82,139 96,493 122,540
OPERATING COSTS AND EXPENSES
Depreciation and amortization (469) (944) (742)
Restructuring charges (2,702) (2,004) [1] (1,971)
Impairment of trademark and goodwill (44,257)
Gain on sale of subscriber list, net 2,724
OPERATING LOSS (7,583) (14,781) (62,029)
Merchandise [Member]
REVENUES
Total revenues 57,371 59,992 57,574
OPERATING COSTS AND EXPENSES
Depreciation and amortization (51) (50) (52)
Restructuring charges (464) (583) [1] (81)
Impairment of trademark and goodwill 0
OPERATING LOSS 30,419 40,512 39,477
Broadcasting [Member]
REVENUES
Total revenues 2,406 4,190 17,513
OPERATING COSTS AND EXPENSES
Depreciation and amortization (4) (27) (388)
Restructuring charges 0 [1] (816)
Impairment of trademark and goodwill 0
OPERATING LOSS $ 127 $ 2,155 $ 2,354
[1] As disclosed on the Company's consolidated statements of cash flows, total non-cash equity compensation expense was $2.1 million, $2.0 million and $3.9 million in 2014, 2013 and 2012, respectively. Included in non-cash equity compensation expense were net charges to expense of approximately $0.1 million for 2013 and 2012, and reversals of expense in 2014 of approximately $0.03 million, which were generated in connection with restructuring activities. Accordingly, these amounts are reflected as restructuring charges in the Company's 2014, 2013 and 2012 consolidated statements of operations. See Note 17, Restructuring Charges for further information.
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Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
Net loss $ (5,058) $ (1,772) $ (56,085)
Amounts reclassified for net realized losses on available-for-sale securities included in net loss 496 423 320
Net unrealized losses on available-for-sale securities occurring during the period (41) (464) (592)
Other comprehensive income / (loss) 455 (41) (272)
Total comprehensive loss $ (4,603) $ (1,813) $ (56,357)
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
CURRENT ASSETS
Cash and cash equivalents $ 11,439 $ 21,884
Short-term investments 36,816 19,268
Restricted cash and investments 0 5,072
Accounts receivable, net 30,319 39,694
Paper inventory 0 2,901
Other current assets 3,108 3,876
Total current assets 81,682 92,695
PROPERTY AND EQUIPMENT, net 4,106 7,961
GOODWILL, net 0 850
OTHER INTANGIBLE ASSETS, net 34,700 45,200
OTHER NONCURRENT ASSETS 991 1,661
Total assets 121,479 148,367
CURRENT LIABILITIES
Accounts payable and accrued liabilities 14,753 12,464
Accrued payroll and related costs 5,706 8,665
Current portion of deferred subscription revenue 22 7,632
Current portion of deferred revenue 16,068 17,227
Total current liabilities 36,549 45,988
DEFERRED SUBSCRIPTION REVENUE 4 3,587
DEFERRED REVENUE 10,115 17,307
DEFERRED INCOME TAX LIABILITY 3,755 7,094
OTHER NONCURRENT LIABILITIES 2,371 3,916
Total liabilities 52,794 77,892
COMMITMENTS AND CONTINGENCIES      
SHAREHOLDERS' EQUITY
Capital in excess of par value 345,021 342,213
Accumulated deficit (276,109) (271,051)
Accumulated other comprehensive loss (24) (479)
Shareholders' equity before treasury stock 69,460 71,250
Less: Class A treasury stock—59,400 shares at cost (775) (775)
Total shareholders’ equity 68,685 70,475
Total liabilities and shareholders’ equity 121,479 148,367
Class A Common Stock
SHAREHOLDERS' EQUITY
Common Stock 322 307
Class B Common Stock
SHAREHOLDERS' EQUITY
Common Stock $ 250 $ 260
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Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Class A Common Stock
Common Stock, par value $ 0.01 $ 0.01
Common Stock, shares authorized 350,000,000 350,000,000
Common Stock, Shares, Issued 32,260,936 30,704,491
Common Stock, shares outstanding 32,201,536 30,645,091
Treasury stock, shares 59,400 59,400
Class B Common Stock
Common Stock, par value $ 0.01 $ 0.01
Common Stock, shares authorized 150,000,000 150,000,000
Common Stock, Shares, Issued 24,984,625 25,984,625
Common Stock, shares outstanding 24,984,625 25,984,625
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Consolidated Statement of Shareholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Class A Common Stock
Class B Common Stock
Capital in Excess of Par Value [Member]
Accumulated deficit [Member]
Total Accumulated Other Comprehensive Loss
Class A Treasury Stock [Member]
Class A Common Stock
Common Stock [Member]
Class B Common Stock
Common Stock [Member]
Beginning Balance at Dec. 31, 2011 $ 147,947 $ 409 $ 260 $ 336,661 $ (188,442) $ (166) $ (775)
Balance, Shares at Dec. 31, 2011 40,954,000 25,985,000 59,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (56,085) (56,085)
Other comprehensive loss (272) (272)
Issuance of shares of stock in conjunction with stock option exercises 153 1 152
Issuance of shares of stock in conjunction with stock option exercise, shares 78,000
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings (157) 2 (159)
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings, shares 189,000
Common stock dividends (2) (2)
Non-cash equity compensation 3,932 3,932
Ending Balance at Dec. 31, 2012 95,516 412 260 340,586 (244,529) (438) (775)
Balance, shares at Dec. 31, 2012 41,221,000 25,985,000 59,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (1,772) (1,772)
Other comprehensive loss (41) (41)
Issuance of shares of stock in conjunction with stock option exercises 116 1 115
Issuance of shares of stock in conjunction with stock option exercise, shares 60,000
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings (463) 4 (467)
Stock returned and retired during period, value 110 24,750
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings, shares (424,000)
Issuance of shares of stock in connection with equity sale, net of expenses (110)
Issuance of shares of stock in connection with equity sale, net of expenses, shares (11,000,000)
Common stock dividends (24,860) (24,750)
Non-cash equity compensation 1,979 1,979
Ending Balance at Dec. 31, 2013 70,475 307 260 342,213 (271,051) (479) (775)
Balance, shares at Dec. 31, 2013 30,705,000 25,985,000 59,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss (5,058) (5,058)
Other comprehensive loss 455 455
Stock Issued During Period, Shares, Conversion of Convertible Securities 1,000,000 (1,000,000)
Stock Issued During Period, Value, Conversion of Convertible Securities 10 (10)
Issuance of shares of stock in conjunction with stock option exercises 985 3 982
Issuance of shares of stock in conjunction with stock option exercise, shares 301,000
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings (285) 2 (287)
Issuance of shares of stock and restricted stock, net of cancellations and tax withholdings, shares (255,000)
Non-cash equity compensation 2,113 2,113
Ending Balance at Dec. 31, 2014 $ 68,685 $ 322 $ 250 $ 345,021 $ (276,109) $ (24) $ (775)
Balance, shares at Dec. 31, 2014 32,261,000 24,985,000 59,000
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Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,058) $ (1,772) $ (56,085)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash revenue (7,007) (1,840) (541)
Depreciation and amortization 4,354 3,758 4,007
Impairment charge 11,350 0 44,257
Non-cash equity compensation 2,113 1,979 3,939
Deferred income tax expense (3,338) (23) 1,243
Gain on sale of subscriber list, net 0 (2,724) 0
Gain on sales of cost-based investments 0 0 (1,165)
Other non-cash charges, net 1,499 193 7,769
Changes in operating assets and liabilities
Accounts receivable, net 9,375 (1,621) 10,164
Paper Inventory 2,901 1,543 2,645
Accounts payable and accrued liabilities and other 2,345 (479) (10,447)
Accrued payroll and related costs (2,959) (651) 2,308
Deferred subscription revenue (11,193) (4,240) (2,347)
Deferred revenue (1,344) 4,796 (221)
Other changes (332) (414) (5,130)
Total changes in operating assets and liabilities (1,207) (1,066) (3,028)
Net cash provided by / (used in) operating activities 2,706 (1,495) 396
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (518) (1,090) (1,314)
Purchases of short-term investments (42,307) (16,888) (38,113)
Sales of short-term investments 28,397 21,683 19,344
Proceeds from the sale of asset 0 673 1,165
Net cash (used in) / provided by investing activities (14,428) 4,378 (18,918)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 985 116 153
Shares held in payment of employee tax obligations (285) (463) (159)
Change in restricted cash 577 (577) 0
Net cash provided / (used in) by financing activities 1,277 (924) (6)
Net (decrease) / increase in cash (10,445) 1,959 (18,528)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 21,884 19,925 38,453
CASH AND CASH EQUIVALENTS, END OF YEAR 11,439 21,884 19,925
Return of shares of stock in connection with settlement with minority investor $ 0 $ 24,860 $ 0
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The Company
12 Months Ended
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
The Company
THE COMPANY
Martha Stewart Living Omnimedia, Inc. (together with its wholly owned subsidiaries, the “Company”) is a globally recognized lifestyle company committed to providing consumers with inspiring content and well-designed, high quality products. The Company’s business segments are currently Publishing, Merchandising and Broadcasting.
The Publishing segment primarily consists of the Company’s operations related to its magazines (Martha Stewart Living and Martha Stewart Weddings) and books, as well as its digital operations, which includes the content-driven website, marthastewart.com, and the digital distribution of video content. In October 2014, the Company entered into a Magazine, Content Creation and Licensing Agreement (the “MS Living Agreement”) with Meredith Corporation (“Meredith”), and, effective November 1, 2014, the Company discontinued publication of Martha Stewart Living and the Company's digital operations. Pursuant to the MS Living Agreement, Meredith assumed control of advertising sales, circulation and production of Martha Stewart Living and hosting, operating, maintaining, and providing advertising sales and related functions for marthastewart.com, marthastewartweddings.com and related digital assets. The Company will continue to own its underlying intellectual property, and create and provide all editorial content for Martha Stewart Living, marthastewart.com and marthastewartweddings.com. Under this arrangement, (1) Meredith pays the Company a per page fee for print content for Martha Stewart Living; (2) Meredith pays the Company a share of the digital advertising revenues, including video advertising revenues, it receives; and (3) Meredith will pay the Company a share of the annual operating profit from producing and distributing Martha Stewart Living.
Concurrently with the MS Living Agreement, the parties also entered into the Magazine Publishing Agreement (the “MS Weddings Agreement”). Pursuant to the MS Weddings Agreement, Meredith assumed responsibility for advertising sales, circulation and production of Martha Stewart Weddings and related special interest publications, including Martha Stewart’s Real Weddings, in the United States and Canada. The Company will continue to own its underlying intellectual property, and create and provide all editorial content for Martha Stewart Weddings and related special interest publications. The MS Weddings Agreement provides that Meredith will provide these services on a cost-plus basis. Meredith began delivering editions starting with the February 2015 issue of Martha Stewart Living and the Winter 2015 issue of Martha Stewart Weddings.
The Merchandising segment primarily consists of the Company’s operations related to the design and branding of merchandise and related collateral and packaging materials that are manufactured and distributed by its retail and wholesale partners in exchange for royalty income and, in certain agreements, design fees. The Merchandising segment also includes the licensing of talent services for television programming produced by or on behalf of third parties.
In 2012, the Company significantly restructured its Broadcasting segment, which included the termination of the Company's live audience television production operations. Subsequent to the restructuring, the Broadcasting segment consists of the Company's limited television production operations, television content library licensing and satellite radio operations. While future revenues and assets from these operations are not expected to be significant, the Company reported activities under the Broadcasting segment in 2014 to provide historical context.
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Significant Accounting Policies
12 Months Ended
Dec. 31, 2014
Accounting Policies [Abstract]
Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent accounting standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued an update on "Revenue from Contracts with Customers" (Topic 606), which completes the joint effort by the FASB and the International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and international financial reporting standards ("IFRS"). The joint project clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and IFRS. Specifically, it removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. For the Company, this update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The update may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company is currently evaluating the transition method that will be elected and the impact of the update on its financial statements and disclosures.

Principles of consolidation
The consolidated financial statements include the accounts of all wholly owned subsidiaries. All intercompany transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management does not expect such differences to have a material effect on the Company’s consolidated financial statements.
Cash and cash equivalents
Cash and cash equivalents include cash equivalents that mature within three months of the date of purchase.
Short-term investments
Short-term investments include investments that have maturity dates in excess of three months, but generally less than one year, from the date of acquisition. See Note 3, Fair Value Measurements, and Note 4, Short Term Investments, for further discussion.
Paper inventory
Inventory consisting of paper is stated at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company began liquidating its paper inventory beginning January 1, 2014, and as of December 31, 2014 is no longer responsible for purchasing paper.
Property and equipment
Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the lease term or, if shorter, the estimated useful lives of the related assets.
The useful lives of the Company’s assets are as follows: 
Building
5 years
Furniture, fixtures and equipment
3 – 5 years
Computer hardware and software
3 – 5 years
Leasehold improvements
life of lease

Goodwill and other intangible assets
Intangible assets
The Company has an indefinite-lived intangible asset that is comprised of trademarks that were purchased on April 2, 2008 as part of the acquisition of the businesses owned and operated by Emeril Lagasse and certain affiliated parties, except for Emeril Lagasse’s restaurant-related business and foundation. This intangible asset, reported within the Merchandising segment, had carrying amounts as of December 31, 2014, 2013 and 2012 as set forth in the schedule below:
 
Trademarks
 
Other intangibles
 
Accumulated amortization — other intangibles
 
Total
Balance at December 31, 2012
$
45,200

 
$
6,160

 
$
(6,157
)
 
$
45,203

Amortization
expense

 

 
(3
)
 
(3
)
Balance at December 31, 2013
$
45,200

 
$
6,160

 
$
(6,160
)
 
$
45,200

Impairment charge
(10,500
)
 

 

 
(10,500
)
Balance at December 31, 2014
$
34,700

 
$
6,160

 
$
(6,160
)
 
$
34,700


The Company's trademarks, which are classified as intangible assets with indefinite useful lives, are reviewed annually on October 1st, or more frequently if circumstances warrant, for impairment by applying a fair-value based test in accordance with Accounting Standards Codification ("ASC") 350, "Intangibles - Goodwill and Other" ("ASC 350"). The Company performs the impairment test by comparing the fair value of an intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment charge for the excess value must be recorded. The Company estimates fair value using the discounted cash flow ("DCF") valuation methodology, in which future after-tax cash flows are discounted based on a market comparable weighted average cost of capital rate, adjusted for market and other risks where appropriate. The Company’s estimates, which are Level 3 unobservable inputs, are based on historical results and current economic and market trends, which drive key assumptions of revenue growth rates and operating margins, and therefore, are subject to uncertainty.
During 2014, the financial results of the Emeril Lagasse business were lower than expected, largely as a result of lower wholesale royalties in the housewares category that were impacted by a slower than expected start of certain new initiatives. In September 2014, in connection with the Company's 2015 budgeting process, the Company determined that: (1) an expected increase in wholesale royalties in the housewares category would be further delayed; (2) the distribution of housewares products to wider retail outlets became less certain; and (3) new food licensing partnerships that were expected to generate long-term growth were not yet meeting expectations. Accordingly, the Company reduced its long-term projections with respect to both the housewares and new food licensing businesses. As a result of lower-than-expected financial results and lower long-term projections, and in conjunction with the overall evaluation of the business, the Company determined that a triggering event had occurred during the three months ended September 30, 2014.
The Company completed an evaluation of the fair value of its indefinite-lived trademarks as of September 30, 2014 using a DCF analysis, which included the lower future growth assumptions discussed above. Other significant assumptions used in this DCF analysis included expected future margins, the discount rate and the perpetual growth rate. These assumptions are considered Level 3 unobservable inputs under the fair value hierarchy established by ASC 820, "Fair Value Measurements and Disclosures." As of September 30, 2014, the DCF analysis provided for a fair value of $34.7 million, which was below the carrying value of $45.2 million. This difference resulted in a non-cash intangible asset impairment charge of $10.5 million for the three months ended September 30, 2014. The impairment charge is included in "Impairment of trademark and goodwill" in the Consolidated Statements of Operations for the year ended December 31, 2014.
Although the Company considered all current information in calculating the amount of the impairment charge, future changes in events or circumstances could result in further decreases in the fair value of its indefinite-lived intangible asset. If actual results differ from the Company’s estimate of future cash flows, revenues, earnings and other factors, the Company may record additional impairment charges in the future.
With respect to the Company's annual test of its trademarks on October 1, 2014, the Company determined that the fair value of $34.7 million of its trademarks established as of September 30, 2014 was also the fair value as of October 1, 2014. In addition, the financial results of the Emeril Lagasse business for the three months ended December 31, 2014 were in line with the Company's expectations. Accordingly, the Company concluded that no further impairment charges were deemed necessary as of October 1, 2014 and through December 31, 2014.
Goodwill
The Company had goodwill that was generated upon the April 2, 2008 acquisition of certain businesses owned and operated by Emeril Lagasse and certain affiliated parties. This goodwill, reported within the Merchandising segment, had carrying amounts as of December 31, 2014 and 2013 as set forth in the schedule below:
 
Goodwill
Balance at December 31, 2013
$
850

Impairment charge
(850
)
Balance at December 31, 2014
$


The Company reviews goodwill for impairment by applying a fair-value based test annually on October 1st, or more frequently if circumstances warrant, in accordance with ASC 350. Goodwill impairment is measured based upon a two-step process. In the first step, the Company compares the fair value of a reporting unit with its carrying amount, including goodwill, using a discounted cash flow ("DCF") valuation method. Future after-tax cash flows are discounted based on a market comparable weighted average cost of capital rate, adjusted for market and other risks where appropriate. The Company’s estimates, which are Level 3 unobservable inputs, are based on historical results and current economic and market trends, which drive key assumptions of revenue growth rates and operating margins, and therefore, are subject to uncertainty. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is considered not impaired, thus rendering the second step in impairment testing unnecessary. If the fair value of the reporting unit is less than the carrying value, a second step is performed in which the implied fair value of the reporting unit's goodwill is compared to the carrying value of the goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. The implied fair value of the reporting unit’s goodwill is compared with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment charge for the excess value must be recorded.
As a result of the intangible asset impairment charge associated with the Emeril Lagasse trademarks described above, the Company determined that a triggering event had also occurred with respect to the goodwill associated with the Emeril Lagasse business during the three months ended September 30, 2014. The Company considers all business related to Emeril Lagasse to be aggregated into a single reporting unit, which is a component of the Merchandising segment. The Company calculated the fair value of the reporting unit using a DCF analysis based upon updated long-term projections as of September 30, 2014, which included lowered expectations for both the housewares and new food categories and lower future growth assumptions. Other significant assumptions used in this DCF analysis included expected future margins, the discount rate and the perpetual growth rate. All these assumptions are considered Level 3 unobservable inputs under the fair value hierarchy established by ASC 820, "Fair Value Measurements and Disclosures."
The step one impairment test as of September 30, 2014 resulted in a fair value of the reporting unit that was less than its carrying value. Therefore, the Company performed the second step of the goodwill impairment test in which the implied fair value of the reporting unit’s goodwill was compared to the carrying value of its goodwill. The implied fair value of the reporting unit’s goodwill was determined based on the difference between the fair value of the reporting unit and the net fair value of its identifiable assets and liabilities, which included minimal accounts receivable, accounts payable and deferred revenue. The reporting unit’s identifiable assets also included the revalued indefinite-lived intangible asset described above. As a result of performing this goodwill impairment test as of September 30, 2014, the Company determined that the implied fair value of the Emeril Lagasse reporting unit’s goodwill was zero. Therefore, the Company also recorded a non-recurring, non-cash goodwill impairment charge of $0.9 million for the three-month period ended September 30, 2014. The impairment charge is included in "Impairment of trademark and goodwill" in the Consolidated Statements of Operations for the year ended December 31, 2014.

Revenue recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable. Revenues and associated accounts receivable are recorded net of provisions for estimated future returns, doubtful accounts and other allowances. Allowances for uncollectible receivables are estimated based upon a combination of write-off history, aging analysis, and any specific, known troubled accounts.
The Company participates in certain revenue arrangements containing multiple deliverables. These arrangements generally consist of custom-created advertising programs delivered on multiple media platforms, as well as licensing programs which may also be supported by various promotional plans. Examples of significant program deliverables include print advertising pages in the Company’s publications, custom-created video content and integration on the Company's websites as well as advertising impressions delivered on the Company’s and partner websites.
ASC Topic 605, Revenue Recognition ("ASC 605") and Accounting Standards Update ("ASU") 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force) ("ASU 09-13") require that the Company examine separate contracts with the same entity or related parties that are entered into simultaneously or near the same time to determine if the arrangements should be considered a single arrangement in the determination of units of accounting. While both ASC 605 and ASU 09-13 require that units delivered have standalone value to the customer, ASU 09-13 modified the separation criteria in determining units of accounting by eliminating the requirement to obtain objective and reliable evidence of the fair value of undelivered items. As a result of the elimination of this requirement, the Company’s significant program deliverables generally meet the separation criteria under ASU 09-13, whereas under ASC 605 they did not qualify as separate units of accounting.
For those arrangements accounted for prior to the adoption of ASU 09-13, if the Company was unable to put forth objective and reliable evidence of the fair value of each deliverable, then the Company accounted for the deliverables as a combined unit of accounting rather than separate units of accounting. In this case, revenue is recognized as the earnings process is completed, generally over the fulfillment term of the last deliverable.
For those arrangements accounted for after the adoption of ASU 09-13, the Company is required to allocate fixed and determinable revenue based on the relative selling price of each deliverable which qualifies as a unit of accounting, even if such deliverables are not sold separately by either the Company itself or by other vendors. Determination of selling price is a judgmental process that requires numerous assumptions. The consideration is allocated at the inception of the arrangement to all deliverables based upon their relative selling prices. Selling prices for deliverables that qualify as separate units of accounting are determined using a hierarchy of: (1) vendor-specific objective evidence (“VSOE”), (2) third-party evidence and (3) best estimate of selling price. The Company has generally allocated consideration based upon its best estimate of selling price. The Company’s deliverables are generally priced with a wide range of discounts or premiums as the result of a variety of factors including the size of the advertiser and the volume and placement of advertising sold to the advertiser. The Company’s best estimate of selling price is intended to represent the price at which it would sell the deliverable if the Company were to sell the item regularly on a standalone basis. The Company considers market conditions, such as competitor pricing pressures, as well as entity-specific factors that are consistent with normal pricing practices, such as the recent history of the selling prices of similar products when sold on a standalone basis, the impact of the cost of customization, the size of the transaction, and other factors contemplated in negotiating the arrangement with the customer, when determining the best estimate of selling price. The fixed and determinable arrangement consideration is recognized as revenue as the earnings process is completed, generally at the time each unit of accounting is fulfilled (i.e., when magazine advertisements appear in an issue or when the digital impressions are served).
The Company follows certain segment-specific revenue recognition policies that are discussed below.
Publishing Segment
The Company's Publishing segment includes five major categories of revenues, which are recognized as follows:
Magazine advertising revenue: Revenue generated by the sales of advertising in Martha Stewart Living, Martha Stewart Weddings and related special interest publications is recorded based on the on-sale dates of magazines when the advertisement appears in the magazine and are stated net of agency commissions and cash and sales discounts.
Subscription revenue: Revenue from subscription contracts for Martha Stewart Living and Martha Stewart Weddings results from advance payments for subscriptions received from customers and is recognized on a straight-line basis over the life of the subscription contract as issues are delivered.
Newsstand revenue: Revenue generated by single copy sales of Martha Stewart Living and Martha Stewart Weddings is recognized based on the on-sale dates of magazines and is initially recorded based upon estimates of sales, net of returns, brokerage and estimates of newsstand-related fees. Estimated returns are recorded based upon historical experience.
Digital advertising revenue: Revenue generated from the Company’s websites and partner sites, prior to November 1, 2014, was generally based upon sales of impression-based and sponsorship advertisements. Revenue generated from partner sites were recorded gross or net of the partners' commissions, in accordance with the terms of the specific contracts. Digital advertising revenues were recorded in the period in which the advertisements were served.
Books revenue: Revenue associated with the delivery of editorial content for books results from advance payments received from the Company’s publishers and is recognized as manuscripts are delivered to and accepted by the publishers. Revenue is also earned from book publishing as sales on a unit basis exceed the advanced royalty.
Effective November 1, 2014, the Company discontinued publication of Martha Stewart Living and the Company's digital operations, and Meredith assumed responsibility for advertising sales, circulation and production in the United States and Canada of Martha Stewart Living, Martha Stewart Weddings and related special interest publications. Meredith also now hosts, operates, maintains, and provides advertising sales and related functions for marthastewart.com, marthastewartweddings.com and the Company's related digital assets. The Company will continue to own its underlying intellectual property, and create and provide all editorial content for these magazines and digital properties. See Note 1, The Company, for further discussion of the agreements that the Company entered into with Meredith.
As a result of the MS Living Agreement, the Company expects a significant impact on certain Publishing segment revenues and expenses. Specifically, with the elimination of Martha Stewart Living advertising and circulation revenues that began with the February 2015 issue and the digital advertising revenue share arrangement that began November 1, 2014, the Company expects total advertising and circulation revenues to decline. These revenue declines will be partially offset by the recognition of licensing revenue for print and digital editorial content that the Company provides to Meredith, which began November 1, 2014. The Company also expects its Publishing segment expenses to significantly decline due to the elimination of almost all of the Company's non-editorial related expenses for Martha Stewart Living and the Company's digital assets, including its websites. With respect to the MS Weddings Agreement, the Company will continue to record advertising and circulation revenue generated by Meredith on the Company's behalf for Martha Stewart Weddings and related special interest publications, as well as all costs associated with these magazines, including the Company's editorial expenses and Meredith's expenses for production, selling and distribution services that are provided to the Company on a cost-plus basis.
With respect to revenue recognition subsequent to November 1, 2014, the Company concluded that the MS Living Agreement and the MS Weddings Agreement are considered separate arrangements in accordance with ASU 09-13. The MS Weddings Agreement is not a revenue arrangement and does not contain any elements that are essential to any elements in the MS Living Agreement. Under the MS Weddings Agreement, Meredith will provide, on a cost-plus basis, publishing operation services, while the Company solely bears all financial risks and rewards of Martha Stewart Weddings and related special interest publications. Accordingly, revenues earned pursuant to the MS Weddings Agreement are recognized in accordance with the Company's historical policies surrounding magazine advertising, subscription and newsstand revenues, as described above. These revenues are presented on a gross basis on the Company's consolidated statements of operations, offset by related expenses also presented gross in the same statements.
The MS Living Agreement is a multiple-deliverable revenue arrangement that contains three separate units of accounting: 1) delivery of paid subscribers of Martha Stewart Living; 2) delivery of print editorial content for Martha Stewart Living; and 3) delivery of digital editorial content for inclusion on the websites, primarily marthastewart.com. The Company allocated the fixed and determinable arrangement consideration to these three units of accounting based on their relative selling prices, using the Company's best estimate of selling price as provided for under ASU 09-13. The fixed and determinable arrangement consideration, as of November 1, 2014, included deferred subscription revenue of approximately $8 million, which represented outstanding Martha Stewart Living subscription contracts that the Company was no longer obligated to fulfill.
Revenues generated under the MS Living Agreement are recognized as follows:
Delivery of paid subscribers: The Martha Stewart Living subscriber list was delivered to Meredith on November 1, 2014, with no further obligations of the Company. Accordingly, the Company recognized approximately $2 million in revenue on November 1, 2014, based on the relative selling price allocation of the total arrangement consideration.
Delivery of print editorial content: Revenue associated with the delivery of editorial pages for Martha Stewart Living are recognized when the pages are delivered and accepted, at a rate based on the relative selling price of the total arrangement consideration.
Delivery of digital editorial content: Revenue associated with the delivery of digital content for the websites are recognized upon delivery, which occurs at the same rate each month. Therefore, the Company recognizes a portion of the total arrangement consideration, based on the relative selling price, ratably each month.
Digital advertising revenues: Revenue generated by Meredith's sales of advertising on the website and other digital properties are recognized in the period that the advertisements are served. Only the Company's share of digital advertising revenue is recorded, net of commissions and certain third-party expenses, in accordance with the MS Living Agreement.
Magazine royalty: To the extent that the Martha Stewart Living magazine generates future operating profits, as defined in the MS Living Agreement, the Company's share of those profits will be included in the total arrangement consideration at the point those amounts are fixed and determinable. The increase to the total arrangement consideration will then prospectively be allocated based on the relative selling prices first established on November 1, 2014. The Company is only entitled to receive a portion of the operating profit, if any, at the end of each contractual fiscal year, with the first contractual fiscal year ending on June 30, 2016.
The Company's results for 2014 included revenues that were generated prior to the effective date of the Company's partnership with Meredith, as well as certain revenues that were generated under this partnership. The following is a summary of 2014 Publishing segment revenues:
Magazine advertising, subscription and newsstand revenues from Martha Stewart Living (10 issues) were recognized in 2014, similar to the 10 issues recorded in 2013. Although the effective date of the MS Living Agreement was November 1, 2014, Meredith began publishing Martha Stewart Living with the February 2015 issue, which had an on-sale date of January 2015. Accordingly, effective January 2015, magazine advertising, subscription and newsstand revenues related to Martha Stewart Living will no longer be recorded by the Company.
Magazine advertising, subscription and newsstand revenues from Martha Stewart Weddings (four issues) and related special interest publications (two issues) were recognized in 2014, with the same frequency recorded in 2013. The Company expects to continue to record revenues in 2015 related to Martha Stewart Weddings in accordance with the accounting policies first listed above.
Digital advertising revenue from the Company’s websites and on partner sites, through October 31, 2014, was recognized generally on a gross basis in accordance with the accounting policies first listed above. From November 1, 2014 through December 31, 2014, digital advertising revenue was recorded in accordance with the MS Living Agreement, which resulted in the recognition of only the Company's share of digital advertising revenue, net of commissions and certain third-party expenses. The Company expects to continue to record digital advertising revenue in 2015 in accordance with the policies pursuant to the MS Living Agreement.
Books revenue was recognized in 2014 in accordance with the accounting policies first listed above.
Revenue associated with the delivery of paid subscribers to Meredith of approximately $2 million was recognized on November 1, 2014, as described above.
Revenue associated with the delivery of print editorial content to Meredith was recognized in December 2014, when content for future issues of Martha Stewart Living were delivered to and accepted by Meredith.
Revenue associated with the delivery of digital editorial content to Meredith was recognized in November and December 2014, as described above.
Total revenues recognized pursuant to the MS Living Agreement with Meredith were $6.3 million in 2014.

Merchandising Segment
Royalties from product designs and other Merchandising segment revenues are recognized on a monthly basis based on the specific mechanisms within each contract. Payments are typically made by the Company’s partners on a quarterly basis. Generally, revenues are recognized based on actual net sales, while any minimum guarantees are earned proportionately over the fiscal year.
Revenues related to television talent services for programming produced by or on behalf of third parties are generally recognized when services are performed, regardless of when the episodes air, within the Merchandising segment.
Broadcasting Segment
Television sponsorship revenues are generally recorded over the initial airing of new episodes. Licensing revenues from the Company’s radio programming are recorded on a straight-line basis over the term of the agreement.
Historically, the Company's Broadcasting segment included significant television production operations. In connection with those historical operations during 2012 and prior, the Company recognized television spot advertising, integration and licensing revenues. Television licensing revenues for content produced by the Company were recorded as earned in accordance with the specific terms of each agreement and were generally recognized upon delivery of the episodes to the licensee, provided that the license period began.
Advertising costs
Advertising costs, consisting primarily of direct-response advertising, are expensed in the period in which the related advertising campaign occurs.
Earnings per share
Basic earnings per share is computed using the weighted average number of actual common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that would occur from the exercise of stock options and the vesting of restricted stock and restricted stock units. For the years ended December 31, 2014, 2013 and 2012, the shares of the Company’s $0.01 par value Class A common stock (“Class A Common Stock”) subject to options, restricted stock and restricted stock units that were excluded from the computation of diluted earnings per share because their effect would have been antidilutive were 3,455,861, 5,445,252, and 5,883,719, respectively.
Equity compensation
The Company has issued stock-based compensation to certain of its employees. In accordance with the fair-value recognition provisions of ASC Topic 718, Share-Based Payments (“ASC Topic 718”) and SEC Staff Accounting Bulletin No. 107, compensation cost associated with employee grants recognized in the 2014, 2013 and 2012 was based on the grant date fair value. Employee stock option, restricted stock, and restricted stock unit ("RSU") awards with service period-based vesting triggers (“service period-based” awards) are amortized as non-cash equity compensation expense on a straight-line basis over the expected vesting period. The Company values service period-based option awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires numerous assumptions, including volatility of the Company’s Class A Common Stock and expected life of the option. Service period-based restricted stock and RSU awards are valued at the market value of traded shares on the date of grant. Options and RSUs with Class A Common Stock price-based vesting triggers (“price-based” awards) are valued using the Monte Carlo Simulation method which takes into account assumptions such as volatility of the Company’s Class A Common Stock, the risk-free interest rate based on the contractual term of the award, the expected dividend yield, the vesting schedule, and the probability that the market conditions of the award will be achieved. Compensation expense for price-based awards is recognized over the respective award's derived service period as calculated under the Monte Carlo Simulation method.
Other
Certain prior year financial information has been reclassified to conform to the 2014 financial statement presentation.
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Fair Value Measurements
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]
Fair Value Measurements
FAIR VALUE MEASUREMENTS
The Company categorizes its assets and liabilities measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:
Level 1: Observable inputs such as quoted prices for identical assets and liabilities in active markets obtained from independent sources.
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair value of the Company’s level 2 financial assets is primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case a weighted average market price is used.
Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the asset or liability.
The following tables present the Company’s assets that are measured at fair value on a recurring basis: 
 
December 31, 2014
(in thousands)
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Fair Value
Measurements
Short-term investments:
 
 
 
 
 
 
 
Mutual funds
$
2,492

 
$

 
$

 
$
2,492

U.S. government and agency securities

 
951

 

 
951

Corporate obligations

 
22,145

 

 
22,145

Other fixed income securities

 
491

 

 
491

International securities

 
10,311

 

 
10,311

Municipal obligations

 
426

 

 
426

Total
$
2,492

 
$
34,324

 
$

 
$
36,816

 

 
December 31, 2013
(in thousands)
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Fair Value
Measurements
Short-term investments:
 
 
 
 
 
 
 
Mutual funds
$
2,485

 
$

 
$

 
$
2,485

U.S. government and agency securities

 
2,233

 

 
2,233

Corporate obligations

 
14,159

*

 
14,159

Other fixed income securities

 
361

 

 
361

International securities

 
3,048

 

 
3,048

Municipal obligations

 
1,477

 

 
1,477

Total
$
2,485

 
$
21,278

 
$

 
$
23,763


* Included in this amount is a $4.5 million corporate obligation which had been used to collateralize the Company's line of credit with Bank of America, and was included in the line item "Restricted cash and investments," a component of current assets, on the 2013 consolidated balance sheet. Effective May 19, 2014, the Company is no longer required to hold such collateral (see Note 8, Credit Facilities, for further details).

Assets measured at fair value on a nonrecurring basis
The Company’s non-financial assets, such as goodwill, intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. The Company evaluates the recoverability of its indefinite-lived intangible asset and goodwill by performing impairment tests on an annual basis, as of October 1st, or when events or changes in circumstances indicate that the carrying amounts may not be recoverable. Any resulting asset impairment requires that the asset be recorded at its fair value. The Company's valuation methods to determine fair value utilize significant Level 3 unobservable inputs, which include discount rates, long-term growth rates and royalty rates.
During the three months ended September 30, 2014, the Company performed an interim review of the indefinite-lived intangible asset and goodwill in the Merchandising segment associated with the Emeril Lagasse business. As a result, during 2014, the Company recorded an aggregate non-cash impairment charge of $11.4 million to write down the value of these assets to their fair value. See Note 2, Summary of Significant Accounting Policies, for further information.
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Short Term Investments
12 Months Ended
Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Short Term Investments
SHORT-TERM INVESTMENTS
The Company's investments consist of marketable debt securities that are classified as available-for-sale and presented as "Short-term investments," a component of current assets on the consolidated balance sheets. The Company's available-for-sale securities represent investments available for current operations and may be sold prior to their stated maturities for strategic or operational reasons. The available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported in "Accumulated other comprehensive loss." The amortized cost of the available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization is netted against the related interest income and both are included in "Interest (expense) / income and other, net" in the Consolidated Statements of Operations.
Realized gains and losses are classified as other income or expense and included in "Interest (expense) / income and other, net" in the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method.
As of December 31, 2014 and 2013 the Company's amortized cost of its available-for-sale securities approximated fair value. Gross unrealized losses were $(0.03) million as of December 31, 2014, with gross unrealized gains that were insignificant. As of December 31, 2013, gross unrealized losses of $(0.5) million were partially offset by gross unrealized gains of $0.03 million. The Company considered the declines in market value of its marketable available-for-sale securities investment portfolio to be temporary in nature and did not consider any of its investments other-than-temporarily impaired as of December 31, 2014 and 2013. Contractual maturities for the Company's available-for-sale securities are generally within two years of December 31, 2014.
For the year ended December 31, 2014, the gross realized gains and losses on sales of available-for-sale marketable securities were $0.04 million and $(0.5) million, respectively, including gains reclassified out of accumulated other comprehensive loss of $0.03 million, with losses that were insignificant. See Note 5, Accumulated Other Comprehensive Loss, for further information.
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Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss
12 Months Ended
Dec. 31, 2014
Equity [Abstract]
Accumulated Other Comprehensive Loss
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive income/(loss), included as a component of shareholders' equity, consists of unrealized gains and losses affecting equity that, under GAAP, are excluded from net income/(loss). For the Company, accumulated other comprehensive loss is impacted by unrealized gains/(losses) on available-for-sale securities as of the reporting period date and by reclassification adjustments resulting from sales or maturities of available-for-sale securities. The components of accumulated other comprehensive loss as of December 31, 2014 and 2013 are set forth in the schedule below:
(in thousands)
Unrealized Gains/(Losses) on Available-for-sale Securities
 
Total Accumulated Other Comprehensive Loss
Balance at December 31, 2013
$
(479
)
 
$
(479
)
Amounts reclassified for net realized losses on available-for-sale securities included in net loss *
496

 
496

Unrealized losses on available-for-sale securities occurring during the period
(41
)
 
(41
)
Balance at December 31, 2014
$
(24
)
 
$
(24
)
* Amounts reclassified for previously unrealized losses on available-for-sale securities are included in "Interest (expense) / income and other, net" in the Consolidated Statements of Operations.
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Accounts Receivable, Net
12 Months Ended
Dec. 31, 2014
Receivables [Abstract]
Accounts Receivable, Net
ACCOUNTS RECEIVABLE, NET
The components of accounts receivable at December 31, 2014 and 2013 were as follows: 
(in thousands)
2014
 
2013
Advertising
$
16,287

 
$
19,190

Licensing
13,311

 
19,218

Other
2,625

 
2,134

 
32,223

 
40,542

Less: reserve for credits and uncollectible accounts
1,904

 
848

 
$
30,319

 
$
39,694

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Property, Plant And Equipment, Net
12 Months Ended
Dec. 31, 2014
Property, Plant and Equipment [Abstract]
Property, Plant And Equipment, Net
PROPERTY AND EQUIPMENT, NET
The components of property and equipment at December 31, 2014 and 2013 were as follows: 
(in thousands)
2014
 
2013
Buildings
$
308

 
$
285

Furniture, fixtures and equipment
5,288

 
5,541

Computer hardware and software
8,268

 
10,174

Leasehold improvements
22,009

 
26,310

Total Property and Equipment
35,873

 
42,310

Less: accumulated depreciation and amortization
31,767

 
34,349


$
4,106

 
$
7,961


Depreciation and amortization expenses related to property and equipment were $4.4 million, $3.8 million and $4.0 million for 2014, 2013 and 2012, respectively. Included in the amount for 2014, was $2.1 million of non-recurring accelerated amortization of leasehold improvements related to the consolidation of the Company's primary office space during February 2014. The Company's property and equipment are located domestically.
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Credit Facilities
12 Months Ended
Dec. 31, 2014
Debt Disclosure [Abstract]
Credit Facilities
CREDIT FACILITIES
On May 19, 2014, the Company entered into an Amendment to the Amended and Restated Loan Agreement between the Company and Bank of America, N.A., dated February 14, 2012, (the "Amended Credit Agreement"), which provided for the continued arrangement for a line of credit with Bank of America, N.A. of $5.0 million. Borrowings under this line of credit are available for investment opportunities, working capital, and the issuance of letters of credit. The annual interest rate on outstanding amounts is equal to a floating rate of 1-month London Interbank Offered Rate (“LIBOR”) Daily Floating Rate plus 1.85%. The annual unused commitment fee is equal to 0.25%.
Prior to the Amended Credit Agreement, the line of credit was required to be secured by cash or investment collateral of at least $5.0 million. Accordingly, the Company maintained restricted investments of $4.5 million and restricted cash of $0.6 million as of December 31, 2013. The aggregate of these amounts was included in the line item "Restricted cash and investments," a component of current assets, on the Consolidated Balance Sheet as of December 31, 2013. Effective with the May 19, 2014 amendment, the line of credit was no longer required to be secured by cash or investment collateral; instead the Company must maintain unencumbered liquid assets having an aggregate market value of not less than 100% of any outstanding principal amounts, in addition to the aggregate standby letters of credit issued, under the facility.
The Amended Credit Agreement expires on June 30, 2015, at which time outstanding amounts borrowed under the agreement, if any, become due and payable. As of December 31, 2014 and 2013, the Company had no outstanding borrowings against its line of credit, but had outstanding letters of credit of $1.0 million and $1.6 million, respectively.
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Shareholders' Equity
12 Months Ended
Dec. 31, 2014
Stockholders' Equity Note [Abstract]
Shareholders' Equity
SHAREHOLDERS’ EQUITY
Return of Shares
On October 21, 2013, the Company and J.C. Penney Corporation, Inc. (“J.C. Penney”) entered into the Third Amendment (the “Amendment”) to the J.C. Penney/MSLO Agreement dated December 6, 2011 (the “Commercial Agreement”). The Amendment reduced the term of the Commercial Agreement, and provided for the return of the 11,000,000 shares of Class A Common Stock, par value $0.01 per share, of the Company held by J.C. Penney (the “Returned Shares”) and the one (1) share of the Company’s Series A Preferred Stock, par value $0.01 per share, held by J.C. Penney (the “Series A Preferred Stock”). Upon surrender by J.C. Penney of the Returned Shares and the Series A Preferred Stock, the Company retired these shares and J.C. Penney removed its Series A designees from the Board of Directors (the “Board”) of the Company. Upon cancellation of the Series A Preferred Stock, J.C. Penney was no longer entitled to designate for election any members of the Company’s Board.
The Company concluded that the Commercial Agreement and the Amendment should be considered one overall arrangement. Accordingly, the modification was accounted for at the fair value of the Returned Shares, at approximately $24.9 million based upon the closing price of the shares on October 21, 2013. In connection with this non-cash transaction, the Company recorded charges to accumulated deficit and Class A Common Stock of approximately $24.8 million and $0.1 million, respectively. Offsetting these charges was deferred revenue of approximately $24.9 million. The deferred revenue is being recognized on a straight-line basis as royalty revenue within the Merchandising segment over the amended term (ending on June 30, 2017). During 2014 and 2013, the Company recognized approximately $6.7 million and $1.3 million, respectively, in non-cash royalty revenue related to this transaction.
Common Stock
The Company has two classes of common stock outstanding. The $0.01 par value Class B common stock (“Class B Common Stock”) is identical in all respects to Class A Common Stock, except with respect to voting and conversion rights. Each share of Class B Common Stock entitles its holder to ten votes and is convertible on a one-for-one basis to Class A Common Stock at the option of the holder and automatically upon most transfers.
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Employee And Non-Employee Benefit And Compensation Plans
12 Months Ended
Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Employee And Non-Employee Benefit And Compensation Plans
EMPLOYEE BENEFIT AND SHARE-BASED COMPENSATION PLANS
Retirement Plans
The Company established a 401(k) retirement plan effective July 1, 1997, available to substantially all employees. An employee can contribute up to a maximum of 25% of compensation to the plan, or the maximum allowable contribution by the Internal Revenue Code, whichever is less. The Company may contribute, at its discretion, an amount equal to 50% of the salary deferral contributions of the participant, limited to 3% of eligible compensation. Employees vest ratably in employer-matching contributions over a period of four years of service. The employer-matching contributions, net of forfeitures, totaled approximately $0.5 million, $0.7 million and $0.8 million in 2014, 2013 and 2012, respectively.
The Company does not sponsor any post-retirement or post-employment benefit plans.
Stock Incentive Plans
Prior to May 2008, the Company had several stock incentive plans that permitted the Company to grant various types of share-based incentives to key employees, directors and consultants. The primary types of incentives granted under these plans were stock options and restricted shares of Class A Common Stock. The Compensation Committee of the Board was authorized to grant awards for up to a maximum of 10,000,000 underlying shares of Class A Common Stock under the Martha Stewart Living Omnimedia, Inc. Amended and Restated 1999 Stock Incentive Plan (the “1999 Plan”), and awards for up to a maximum of 600,000 underlying shares of Class A Common Stock under the Company’s Non-Employee Director Stock and Option Compensation Plan (the “Non-Employee Director Plan”).
In April 2008, the Board adopted the Martha Stewart Living Omnimedia, Inc. Omnibus Stock and Option Compensation Plan (the “Stock Plan”), which was approved by the Company’s stockholders at the Company’s 2008 annual meeting in May 2008. The Stock Plan initially had 10,000,000 shares of Class A Common Stock available for issuance. In March 2012, the Board adopted an amendment to the Stock Plan, which was approved by the Company's stockholder's at the Company's annual meeting in May 2012. The amendment provided for an increase of 4,557,000 in the number of shares of Class A Common Stock available for award. The primary types of incentives that have been granted under the Stock Plan are stock options and RSUs. As of December 31, 2014, 6,327,129 shares were available for grant under the Stock Plan.
Compensation expense is recognized in: production, distribution and editorial; selling and promotion; general and administrative; and restructuring expense lines of the Company’s consolidated statements of operations. For 2014, 2013 and 2012, the Company recorded non-cash equity compensation expense of $2.1 million, $2.0 million, and $3.9 million, respectively.
Stock Options
Options which were issued under the 1999 Plan were granted with an exercise price equal to the closing price of Class A Common Stock on the most recent prior date for which a closing price was available, without regard to after-hours trading. Options granted under the Stock Plan are granted with an exercise price equal to the closing price of the Class A Common Stock on the date of grant. Stock options have a term not to exceed 10 years. The Compensation Committee determines the vesting period and terms for the Company’s stock options, which may include service period-based or price-based vesting triggers. Generally, service period-based employee stock options vest over a period typically ranging from two to four years. Service period-based non-employee director options generally vest over a one-year period from the date of grant. Price-based options vest only when the specific vesting triggers of the award are achieved. Option awards do not provide for accelerated vesting upon retirement, death, or disability unless specifically included in the applicable award agreement. The amount of non-cash equity compensation expense the Company recognizes during a period is based on the portion of the option awards that are ultimately expected to vest. The Company estimates option forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates.
Non-cash equity compensation expense derived from options for 2014, 2013 and 2012 was $0.6 million, $0.8 million and $1.7 million, respectively. As of December 31, 2014, there was $0.7 million of total unrecognized compensation cost related to stock options to be recognized over a weighted average period of 1.46 years. Such amounts will be adjusted for changes in estimated forfeitures. The intrinsic value (defined as the difference between the market price on the date of exercise and the grant date price) of options exercised during 2014 and 2012 was $0.6 million and $0.1 million, respectively. In 2013, this value was insignificant.
Prior Plans:
Changes in outstanding options under the 1999 Plan and the Non-Employee Director Plan (collectively, the "Prior Plans") during 2014 were as follows: 
 
Number of
shares
subject to
options
 
Weighted
average
exercise
price
 
Weighted-average remaining contractual term
 
Aggregate intrinsic value ($000) *
Outstanding as of December 31, 2013
875,000

 
$
7.06

 

 

Cancelled—service period-based
(30,000
)
 
7.63

 

 

Options exercisable and outstanding as of December 31, 2014
845,000

 
$
7.04

 
0.17
 
$


* The intrinsic value is defined as the difference between closing stock price on December 31, 2014 and the grant date price.
No stock options were granted under the Prior Plans in 2014, 2013 or 2012. Vesting of shares subject to stock options under the Prior Plans was completed in 2011.
Stock Plan:
Service period-based option awards
During 2014 there was an insignificant number of employee service period-based option awards granted under the Stock Plan. The fair value of 2013 or 2012 employee service period-based option awards granted under the Stock Plan was estimated on the grant dates using the Black-Scholes option-pricing model on the basis of the following weighted average assumptions: 
 
2013
 
2012
Risk-free interest rates
0.5% – 1.0%
 
0.4% – 0.6%
Dividend yields
Zero
 
Zero
Expected volatility
58.45% – 60.34%
 
61.80% – 63.48%
Average expected term
3.7 years
 
3.7 years
Average fair market value per option granted
$1.15
 
$1.79

Price-based option awards
The fair value of employee price-based option awards in 2014 under the Stock Plan was estimated on the grant dates using the Monte Carlo option-pricing model on the basis of the following weighted average assumptions: 
 
2014
Risk-free interest rates
2.01% – 2.04%
Dividend yields
Zero
Expected volatility
60.52% – 61.19%
Average expected term
0.4 - 1.7 years
Average fair market value per option granted
1.54

During 2013 and 2012 no price-based option awards were granted.
Changes in outstanding options under the Stock Plan during 2014 were as follows: 
 
Number of
shares
subject to
options
 
Weighted
average
exercise price
 
Weighted-average remaining contractual term
 
Aggregate intrinsic value*
Outstanding as of December 31, 2013
3,656,675

 
$
4.38

 
 
 
 
Granted—service period-based
25,070

 
5.12

 
 
 
 
Granted—price-based
185,000

 
8.38

 
 
 
 
Exercised—service period-based
(300,952
)
 
3.27

 
 
 
 
Cancelled—service period-based
(159,128
)
 
4.58

 
 
 
 
Cancelled—priced-based
(100,000
)
 
9.00

 
 
 
 
Outstanding as of December 31, 2014
3,306,665

 
$
3.74

 
6.47
 
$3,531,899
Options exercisable at December 31, 2014
2,343,122

 
$
3.43

 
5.48
 
$2,837,529

* The intrinsic value is defined as the difference between closing stock price on December 31, 2014 and the grant date price.
The total fair value of shares subject to stock options vested under the Stock Plan during 2014, 2013 and 2012 was $0.9 million, $1.4 million and $0.9 million, respectively. Changes in the nonvested outstanding options are as follows:
 
Shares
 
Weighted-average grant-date fair value
Nonvested options outstanding at December 31, 2011
3,206,351

 
$
1.89

Granted-service period-based
505,000

 
1.72

Vested-service period-based
(635,758
)
 
1.75

Forfeited or expired-service period-based
(392,477
)
 
2.36

Nonvested options outstanding at December 31, 2012
2,683,116

 
$
1.79

Granted-service period-based
1,190,000

 
0.90

Vested-service period-based
(937,875
)
 
1.73

Forfeited or expired-service period-based
(669,146
)
 
1.82

Forfeited or expired-priced-based
(725,000
)
 
1.71

Nonvested options outstanding at December 31, 2013
1,541,095

 
$
1.32

Granted-service period-based
25,070

 
1.99

Granted-price-based
185,000

 
1.62

Vested-service period-based
(647,552
)
 
1.65

Forfeited or expired-service period-based
(40,070
)
 
2.06

Forfeited or expired-price-based
(100,000
)
 
0.76

Nonvested options outstanding at December 31, 2014
963,543

 
$
1.13


Restricted stock and RSUs
Restricted stock represents shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. RSUs represent the contingent right to one share of Class A Common Stock. The Compensation Committee determines the vesting period and terms for the Company’s restricted stock and RSUs, which may include service period-based or price-based vesting triggers. Service period-based restricted stock and RSUs generally vest over a period typically ranging from two to four years. Price-based RSUs vest only when the specific vesting triggers of the award are achieved. The amount of non-cash equity compensation expense the Company recognizes during a period is based on the portion of the restricted stock and RSU awards that are ultimately expected to vest. The Company estimates restricted stock and RSU forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. Restricted stock and RSUs do not provide for accelerated vesting upon retirement, death, or disability unless specifically included in the applicable award agreement.
Restricted stock and RSU expense for 2014, 2013 and 2012 was $1.6 million, $1.1 million and $2.3 million, respectively.
Service period-based restricted stock
The fair value of service period-based nonvested restricted stock under the Prior Plans was determined based on the most recent prior date for which a closing price was available, without regard to after-hours trading. Vesting of these awards was completed as of December 31, 2011.
The fair value of service period-based nonvested restricted stock under the Stock Plan was determined based on the closing price of the Company’s Class A Common Stock on the grant dates. The total fair value of shares vested in 2014 was insignificant. For 2013 and 2012 this amount was $0.1 million. A summary of the shares of service period-based restricted stock is as follows: 
 
Shares
 
Weighted
Average Grant
Date Value
Outstanding and nonvested at December 31, 2011
8,352

 
$
4.49

Granted
25,202

 
3.26

Vested
(33,554
)
 
3.65

Outstanding and nonvested at December 31, 2012

 
$

Granted
26,966

 
2.71

Vested
(26,966
)
 
2.71

Outstanding and nonvested at December 31, 2013

 
$

Granted
9,424

 
4.24

Vested
(9,424
)
 
4.24

Outstanding and nonvested at December 31, 2014

 


Service period-based RSUs
The fair value of service period-based nonvested RSUs under the Stock Plan was determined based on the closing price of the Company’s Class A Common Stock on the grant dates. The total fair value of shares vested during 2014, 2013 and 2012 was $1.0 million, $1.4 million and $0.4 million, respectively. As of December 31, 2014, there was $1.3 million of total unrecognized compensation cost related to service period-based nonvested RSUs to be recognized over a weighted-average period of 2.01 years. A summary of the shares of service period-based RSUs is as follows:

Shares
 
Weighted
Average  Grant
Date Value
Outstanding and nonvested at December 31, 2011
539,698

 
$
4.29

Granted
302,163

 
3.19

Vested
(119,635
)
 
4.14

Forfeitures
(2,500
)
 
3.95

Outstanding and nonvested at December 31, 2012
719,726

 
$
3.93

Granted
814,500

 
2.53

Vested
(438,353
)
 
3.64

Forfeitures
(353,790
)
 
3.89

Outstanding and nonvested at December 31, 2013
742,083

 
$
2.69

Granted
225,297

 
4.93

Vested
(390,625
)
 
2.61

Forfeitures
(32,771
)
 
4.92

Outstanding and nonvested at December 31, 2014
543,984

 
$
3.40


Price-based RSUs
The fair value of nonvested price-based RSUs under the Stock Plan was determined based on the closing price of the Company’s Class A Common Stock on the grant dates using the Monte Carlo Simulation method which takes into account assumptions such as volatility of the Company’s Class A Common Stock, the risk-free interest rate based on the contractual term of the award, the expected dividend yield, the vesting schedule, and the probability that the market conditions of the award will be achieved. As of December 31, 2014, 2013 and 2012 no price-based RSUs had vested. As of December 31, 2014, there was $0.5 million of total unrecognized compensation cost related to nonvested price-based RSUs to be recognized over a weighted-average period of approximately 1.18 years. The table below summarizes the Monte Carlo Simulation weighted average assumptions:
 
2014
Risk-free interest rates
0.94% – 1.69%
Dividend yields
Zero
Expected volatility
49.05% – 50.98%
Average expected term
0.4 - 2.6 years
Average fair market value per RSU granted
2.28
A summary of the shares of price-based RSUs is as follows:
 
Shares
 
Weighted
Average  Grant
Date Value
Outstanding and nonvested at December 31, 2011
440,000

 
$
3.07

No activity during 2012

 

Outstanding and nonvested at December 31, 2012
440,000

 
$
3.07

Granted
930,000

 
0.65

Forfeitures
(400,000
)
 
3.19

Outstanding and nonvested at December 31, 2013
970,000

 
$
0.77

Granted
242,500

 
2.28

Forfeitures
(110,000
)
 
1.32

Outstanding and nonvested at December 31, 2014
1,102,500

 
$
0.94


RSU awards to Chief Executive Officer in 2013
During the fourth quarter of 2013 the Company issued RSU awards under the Stock Plan to its newly appointed Chief Executive Officer, as provided for in his employment agreement. The first RSU award provides that the Chief Executive Officer receive 400,000 RSUs, with service-period based vesting triggers, of which approximately 133,333 RSUs vest on each December 31, 2014, 2015 and 2016. Non-cash equity compensation expense of approximately $0.3 million was recorded during the year ended December 31, 2014 related to this award. As of December 31, 2014, there was $0.6 million of total unrecognized compensation cost related to this service-period based RSU to be recognized over a period of 2 years.
The Company also made an RSU award to this executive which includes price-based vesting triggers. The price-based RSUs consist of the contingent right to receive an aggregate of 800,000 shares of Class A Common Stock, of which 200,000 RSUs will vest at such time as the trailing average closing price during any thirty (30) consecutive days during the period beginning on October 28, 2013 and ending on December 31, 2016 (the “Performance Period”) has been at least $6, an additional 200,000 RSUs will vest at such time as such trailing average closing price during any thirty (30) consecutive days during the Performance Period has been at least $8, an additional 200,000 RSUs will vest at such time as such trailing average closing price during any thirty (30) consecutive days during the Performance Period has been at least $10, and the final 200,000 RSUs will vest at such time as such trailing average closing price during any thirty (30) consecutive days during the Performance Period has been at least $12. Non-cash equity compensation expense of approximately $0.2 million was recorded during the year ended December 31, 2014 related to this price-based award. As of December 31, 2014, there was $0.2 million of total unrecognized compensation cost related to this price-based RSU award to be recognized over varying derived service periods.
The following table summarizes the assumptions used in applying the Monte Carlo Simulation method to value this price-based award:
 
2013
Risk-free interest rate
0.65%
Dividend yields
Zero
Expected volatility
48.31%
Derived service periods
1.84 - 2.44 years
Estimated value of price-based RSUs
$0.29 - $0.94
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Income taxes
12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]
Income taxes
INCOME TAXES
The Company follows ASC Topic 740, Income Taxes (“ASC 740”). Under the asset and liability method of ASC 740, deferred assets and liabilities are recognized for the future costs and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company periodically reviews the requirements for a valuation allowance and makes adjustments to such allowances when changes in circumstances result in changes in the Company’s judgment about the future realization of deferred tax assets. ASC 740 places greater emphasis on historical information, such as the Company’s cumulative operating results than it places on estimates of future taxable income. The Company considered all income sources, including other comprehensive income, in determining the amount of deferred taxes recorded. The Company intends to maintain a valuation allowance until evidence would support the conclusion that it is more likely than not that the deferred tax asset will be realized. The Company has recorded $3.2 million of tax benefit during the year ended December 31, 2014. Included in that amount was $4.5 million of non-recurring net tax benefit which was primarily related to the tax impact from the impairment of an indefinite-lived intangible asset and goodwill (see Note 2, Summary of Significant Accounting Policies, for further information). Due to the indefinite life of the intangible asset and goodwill for book purposes, the related deferred tax liability cannot serve as a source of taxable income to support deferred tax assets. Accordingly, the impairment resulted in a reduction to the deferred tax liability previously recorded to the Consolidated Statements of Operations. In addition, the amount recorded included a non-recurring tax benefit to revalue deferred tax liabilities as a result of the change in the state rate for which deferred taxes are measured. The Company has a cumulative net deferred tax liability of $3.8 million as of December 31, 2014.
The benefit / (provision) for income taxes consist of the following for 2014, 2013, and 2012: 
(in thousands)
2014
 
2013
 
2012
Current Income Tax (Expense) Benefit
 
 
 
 
 
Federal
$

 
$

 
$

State and local
(35
)
 
53

 
(107
)
Foreign
(94
)
 
(160
)
 
(252
)
Total current income tax expense
(129
)
 
(107
)
 
(359
)
Deferred Income Tax Benefit / (Expense)
 
 
 
 
 
Federal
2,596

 
20

 
(1,061
)
State and local
742

 
3

 
(182
)
Total deferred income tax benefit / (expense)
3,338

 
23

 
(1,243
)
Income tax benefit / (provision)
$
3,209

 
$
(84
)
 
$
(1,602
)



A reconciliation of the federal income tax benefit / (provision) at the statutory rate to the effective rate for 2014, 2013, and 2012 is as follows: 
(in thousands)
2014
 
2013
 
2012
Computed tax benefit at the federal statutory rate of 35%
$
2,894

 
$
591

 
$
19,069

State income taxes, net of federal benefit
(52
)
 
(19
)
 
(57
)
Non-deductible compensation
(647
)
 
(91
)
 
(537
)
Non-deductible expense
(189
)
 
(113
)
 
(131
)
Non-deductible goodwill impairment
(323
)
 
1,257

 
(15,490
)
Tax on foreign income
(94
)
 
(104
)
 
(252
)
Valuation allowance
1,579

 
(1,686
)
 
(4,186
)
Other
41

 
81

 
(18
)
Income tax benefit / (provision)
$
3,209

 
$
(84
)
 
$
(1,602
)
Effective tax rate
(38.8
)%
 
5.0
%
 
2.9
%

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013 were as follows:
(in thousands)
2014
 
2013
Deferred Tax Assets
 
 
 
Provision for doubtful accounts
$
674

 
$
614

Accrued rent
1,308

 
1,572

Reserve for newsstand returns
168

 
100

Accrued compensation
3,173

 
4,854

Deferred revenue
7,741

 
1,582

NOL/credit carryforwards
46,712

 
56,567

Depreciation
4,875

 
5,374

Amortization of intangible assets
5,477

 
6,054

Other
597

 
208

Total deferred tax assets
70,725

 
76,925

Deferred Tax Liabilities
 
 
 
Prepaid expenses
(251
)
 
(585
)
Amortization of intangible assets
(3,755
)
 
(7,094
)
Total deferred tax liabilities
(4,006
)
 
(7,679
)
Valuation allowance
(70,474
)
 
(76,340
)
Net Deferred Tax Liability
$
(3,755
)
 
$
(7,094
)

At December 31, 2014, the Company had aggregate federal net operating loss carryforwards of $114.1 million (before-tax), which will be available to reduce future taxable income through 2034, with the majority expiring in years 2024 and 2025. The Company had federal and state tax credit and capital loss carryforwards of $3.2 million (tax effected), which begin to expire in 2015. To the extent the Company achieves positive net income in the future, the net operating loss and credits carryforwards may be utilized and the Company’s valuation allowance will be adjusted accordingly.
ASC 740 further establishes guidance on the accounting for uncertain tax positions. As of December 31, 2014, the Company reduced the ASC 740 liability to zero. The Company treats interest and penalties due to a taxing authority on unrecognized tax positions as interest and penalty expense.
The Company is no longer subject to U.S. federal income tax examinations by tax authorities for the years before 2005 and state examinations for the years before 2003. The Company does not anticipate that the liability will change significantly over the next 12 months.
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Related Party Transactions
12 Months Ended
Dec. 31, 2014
Related Party Transactions [Abstract]
Related Party Transactions
RELATED PARTY TRANSACTIONS
In July 2013, pursuant to a Letter Agreement, the Board and Martha Stewart agreed to certain modifications to the employment agreement between Ms. Stewart and the Company, dated April 1, 2009 (the “Employment Agreement”) and the Intangible Asset License Agreement, dated as of June 13, 2008, by and between Lifestyle Research Center, LLC. ("LRC"), the successor in interest to MS Real Estate Management Company, and the Company (the “IAL”). As amended, the Employment Agreement will continue in effect until June 30, 2017 and the IAL will continue in effect until September 15, 2017.
The Company and Ms. Stewart agreed that effective as of July 1, 2013 her annual base salary under the Employment Agreement would be reduced by $0.2 million to $1.8 million, and payment or reimbursement of business and certain other expenses would be made in accordance with a founder expense policy adopted by the Board. In accordance with the Employment Agreement, Ms. Stewart is entitled to an annual bonus in an amount determined by the Compensation Committee, with a target bonus equal to $1.0 million and a maximum annual bonus of 150% of the target amount. For 2014, Ms. Stewart received a bonus of $0.6 million.
In order to simplify the reimbursement of expenses to Ms. Stewart, effective as of January 1, 2014, the Company amended the July 1, 2013 founder expense policy to allow for a non-accountable expense allowance to Ms. Stewart of $0.03 million per year in lieu of individual expense reimbursements in several categories.
The parties to the IAL also agreed that the annual licensing fee under the IAL would be reduced by $0.3 million to $1.7 million, effective September 15, 2013.
LRC is responsible, at its expense, to maintain and landscape the properties in a manner consistent with past practices; provided, however, that the Company is responsible for approved business expenses associated with security and telecommunications systems and security personnel related to Ms. Stewart at the properties, and must reimburse LRC for up to $0.1 million of approved and documented household expenses. In 2014, the Company reimbursed LRC $0.02 million for approved and documented household expenses. In 2013 and 2012, the Company reimbursed LRC $0.03 million for these expenses.
The Company also reimbursed LRC for certain costs borne by LRC associated with various Company business activities, which were conducted at properties covered by the IAL. In 2014, the Company reimbursed LRC $0.03 million. In each of 2013 and 2012, the Company reimbursed LRC $0.02 million and $0.03 million, respectively, for these expenses.
On February 28, 2001, the Company entered into a Split-Dollar Agreement with Ms. Stewart and The Martha Stewart Family Limited Partnership (the “MS Partnership”). Because the intent of the agreement was frustrated by the enactment of Sarbanes-Oxley and so that the parties could realize the existing cash surrender value of the policies rather than risking depleting the future surrender value, the Company, Ms. Stewart and the MS Partnership terminated the Split-Dollar Agreement, as amended, effective November 9, 2009. As part of the arrangement, the Company reimbursed the MS Partnership approximately $0.3 million for the premiums paid towards the policies. This amount, if determined to be taxable, would be subject to an estimated $0.3 million tax gross-up payable by the Company to the MS Partnership. Accordingly, the Company's estimated tax gross-up payable of $0.3 million was included in accounts payable and accrued liabilities on the consolidated balance sheets as of December 31, 2014 and 2013.
Related party compensation expense includes salary, bonus and non-cash equity compensation as determined under ASC Topic 718. Alexis Stewart, the daughter of Ms. Stewart, is a beneficial owner of more than 10% of the Company’s stock. During the second quarter of 2013, the Company granted Alexis Stewart stock appreciation rights ("SARs") in exchange for options pursuant to which she would receive shares of Class A Common Stock equal to the difference between the fair market value of Class A Common Stock on July 1, 2013 and the exercise price of her options. The SARs became fully vested on July 1, 2013. During 2012, she was employed by the Company and served in various capacities from which she earned an aggregate compensation of $0.03 million. The Company has also employed certain other members of Ms. Stewart’s family. Aggregate compensation for these employees was $0.5 million in 2014 and $0.4 million in both 2013 and 2012.
In 2013, the Company made charitable contributions of approximately $0.02 million to a foundation with which Ms. Stewart is affiliated. In 2014 and 2012, no such contributions were made.
For the period December 6, 2011 through October 20, 2013, J.C. Penney held an approximate 16.4% investment in the Company's total Class A and Class B Common Stock outstanding and accordingly was considered a related party. The Company derives revenues from J.C. Penney, inclusive of design fees, advertising, television sponsorship and creative services. The Company recorded revenues earned from J.C. Penney of $11.6 million during the period January 1, 2013 through October 20, 2013 and $8.1 million for year ended December 31, 2012. See Note 9, Shareholders' Equity, for further discussion of J.C. Penney.
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Commitments And Contingencies
12 Months Ended
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
Commitments And Contingencies
COMMITMENTS AND CONTINGENCIES
Operating Leases
During 2014, the Company leased office facilities, filming locations, and equipment under operating lease agreements. Leases for the Company’s offices and facilities expire between 2015 and 2018, and some of these leases are subject to the Company’s renewal. Total rent expense charged to operations for all such leases, was approximately $7.9 million, $9.7 million and $12.3 million for 2014, 2013, and 2012, respectively, net of sublease income of $0.7 million in 2012. There was no sublease income recognized in 2014 and 2013. The Company’s 2012 operating leases included its television production facilities and television administrative offices, which were terminated during 2012. Rent expense for operating leases, which may include free rent or fixed escalation amounts in addition to minimum lease payments, is recognized on a straight-line basis over the duration of each lease term.
The following is a schedule of future minimum payments under operating leases at December 31, 2014. The table includes total minimum lease payment commitments which include rent and other charges: 
(in thousands)
Operating
Lease Payments
 
Sublease
Receipts *
 
Net Operating
Lease Payments
2015
$
8,566

 
$
542

 
$
8,024

2016
8,562

 
538

 
8,024

2017
7,602

 

 
7,602

2018
554

 

 
554

Total
$
25,284

 
$
1,080

 
$
24,204

* The Company subleased certain properties at a loss. These losses were recognized at the time the sublease was executed and accordingly, the Company does not recognize any rent expense or offsetting sublease receipts for the remainder of the sublease agreements. The table above provides the total minimum cash lease payments and cash receipts for future periods.
Legal Matters
The Company is party to legal proceedings in the ordinary course of business, including product liability claims for which the Company is indemnified by its licensees. None of these proceedings is deemed material.
Other
See Note 8, Credit Facilities, for discussion of the Company’s line of credit with Bank of America.
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Selected Quarterly Financial Data
12 Months Ended
Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
Selected Quarterly Financial Data
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except share and per share data) 
Year ended Year ended December 31, 2014
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
Total
Revenues
$
33,268

 
$
37,620

 
$
29,611

 
$
41,417

 
$
141,916

Operating (loss) / income
$
(2,190
)
 
$
2,244

 
$
(14,850
)
 
$
6,964

 
$
(7,832
)
Net (loss) / income
$
(2,603
)
 
$
1,767

 
$
(11,065
)
 
$
6,843

 
$
(5,058
)
(Loss) / earnings per share—basic and diluted
$
(0.05
)
 
$
0.03

 
$
(0.19
)
 
$
0.12

 
$
(0.09
)
Weighted average common shares outstanding
 
 
 
 
 
 
 
 
 
Basic
56,680,826

 
56,964,079

 
57,074,872

 
57,090,226

 
56,953,958

Diluted
56,680,826

 
57,729,551

 
57,074,872

 
57,875,017

 
56,953,958

Year ended Year ended December 31, 2013
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
Total
Revenues
$
37,224

 
$
42,198

 
$
33,848

 
$
47,405

 
$
160,675

Operating (loss) / income
$
(3,045
)
 
$
(636
)
 
$
(4,076
)
 
$
5,860

 
$
(1,897
)
Net (loss) / income
$
(3,273
)
 
$
(1,180
)
 
$
(4,295
)
 
$
6,976

 
$
(1,772
)
(Loss) / earnings per share—basic and diluted
$
(0.05
)
 
$
(0.02
)
 
$
(0.06
)
 
$
0.12

 
$
(0.03
)
Weighted average common shares outstanding
 
 
 
 
 
 
 
 
 
Basic
67,241,626

 
67,371,869

 
67,490,820

 
57,630,635

 
64,912,368

Diluted
67,241,626

 
67,371,869

 
67,490,820

 
58,011,641

 
64,912,368

Note: Basic and diluted earnings per share are computed independently for each quarter and full year presented. Accordingly, the sum of the quarterly earnings per share data may not agree with the calculated full year earnings per share. For the year ended December 31, 2014, the non-cash trademark and goodwill impairment charge, net of the tax credit, amounted to $0.14 per share.
Fourth Quarter 2014 Items:
Results included restructuring charges of $3.6 million. Restructuring charges included employee severance and other employee-related termination costs, as well as contract termination costs.
Fourth Quarter 2013 Items:
Results included restructuring charges of $2.8 million. Restructuring charges included employee severance and other employee-related termination costs.
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Gain on Sale of Subscriber List, net
12 Months Ended
Dec. 31, 2014
Discontinued Operations and Disposal Groups [Abstract]
Gain on Sale of Subscriber List, net
GAIN ON SALE OF SUBSCRIBER LIST, NET
On January 2, 2013 the Company sold certain intangible assets related to Whole Living magazine in exchange for consideration of approximately $1.0 million. Pursuant to the sale, the subscription contracts for the print and digital editions of the magazine, as well as the rights and benefits of the subscribers, were transferred to the buyer. The agreement also required that the Company reimburse the buyer up to $0.1 million for customer refunds resulting from the transaction and paid by the buyer through June 30, 2013. Accordingly, the Company received $0.9 million in cash on the close of the transaction, and, in early July 2013, received the remainder of the refund reserve which was not utilized by the buyer. As a result of selling the Whole Living subscriber list, and thus transferring the subscription liability fulfillment obligation to the buyer, the Company recognized its existing $2.2 million deferred subscription revenue, resulting in a gain of $2.7 million as a component of operations. This gain on sale of subscriber list, net, reflected on the Company's consolidated statement of operations for the year ended December 31, 2013, was recorded within the Publishing segment and consisted of the $1.0 million list sale price, less broker fees and other costs of $0.5 million incurred in connection with the transaction, as well as the $2.2 million release of the deferred subscription revenue liability.
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Industry Segments
12 Months Ended
Dec. 31, 2014
Disclosure Industry Segments Segment Information [Abstract]
Industry Segments
INDUSTRY SEGMENTS
The Company is a globally recognized lifestyle company committed to providing consumers with inspiring content and well-designed, high quality products. The Company’s business segments are currently Publishing, Merchandising and Broadcasting.
The Publishing segment primarily consists of the Company’s operations related to its magazines and books, as well as its digital operations which includes the content-driven website, marthastewart.com. The Merchandising segment primarily consists of the Company’s operations related to the design and branding of merchandise and related collateral and packaging materials that are distributed by its retail and manufacturing partners in exchange for royalty income and, in certain agreements, design fees. The Merchandising segment also includes the licensing of talent services for television programming produced by or on behalf of third parties. During 2014, the Broadcasting segment consisted of the Company's limited television operations and its satellite radio operations. See Note 1, The Company, for a discussion of the Company's restructuring activities in the Publishing and Broadcasting segments.
The accounting policies for the Company’s business segments are the same as those described in Note 2, Summary of Significant Accounting Policies.
Segment information for 2014, 2013, and 2012 is as follows: 
(in thousands)
Publishing
 
Merchandising
 
Broadcasting
 
Corporate
 
Consolidated
2014
 
 
 
 
 
 
 
 
 
Revenues
$
82,139

 
$
57,371

 
$
2,406

 
$

 
$
141,916

Non-cash equity compensation *
(153
)
 
(103
)
 
(1
)
 
(1,884
)
 
(2,141
)
Depreciation and amortization
(469
)
 
(51
)
 
(4
)
 
(3,830
)
 
(4,354
)
Restructuring charges *
(2,702
)
 
(464
)
 

 
(471
)
 
(3,637
)
Impairment of trademark and goodwill

 
(11,350
)
 

 

 
(11,350
)
Operating (loss) / income
(7,583
)
 
30,419

 
127

 
(30,795
)
 
(7,832
)
Total assets
17,476

 
47,291

 
1,239

 
55,473

 
121,479

Capital expenditures
143

 
19

 
2

 
354

 
518

2013
 
 
 
 
 
 
 
 
 
Revenues
$
96,493

 
$
59,992

 
$
4,190

 
$

 
$
160,675

Non-cash equity compensation *
(376
)
 
(237
)
 
(8
)
 
(1,287
)
 
(1,908
)
Depreciation and amortization
(944
)
 
(50
)
 
(27
)
 
(2,737
)
 
(3,758
)
Restructuring charges *
(2,004
)
 
(583
)
 

 
(852
)
 
(3,439
)
Gain on sale of subscriber list, net
2,724

 

 

 

 
2,724

Operating (loss) / income
(14,781
)
 
40,512

 
2,155

 
(29,783
)
 
(1,897
)
Total assets
25,245

 
64,876

 
1,290

 
56,956

 
148,367

Capital expenditures
187

 
5

 

 
898

 
1,090

2012
 
 
 
 
 
 
 
 
 
Revenues
$
122,540

 
$
57,574

 
$
17,513

 
$

 
$
197,627

Non-cash equity compensation *
(587
)
 
(455
)
 
(50
)
 
(2,715
)
 
(3,807
)
Depreciation and amortization
(742
)
 
(52
)
 
(388
)
 
(2,825
)
 
(4,007
)
Restructuring charges *
(1,971
)
 
(81
)
 
(816
)
 
(1,943
)
 
(4,811
)
Goodwill impairment
(44,257
)
 

 

 

 
(44,257
)
Operating (loss) / income
(62,029
)
 
39,477

 
2,354

 
(36,198
)
 
(56,396
)
Total assets
31,232

 
87,213

 
19,619

 
16,196

 
154,260

Capital expenditures
236

 
105

 
41

 
932

 
1,314


* As disclosed on the Company's consolidated statements of cash flows, total non-cash equity compensation expense was $2.1 million, $2.0 million and $3.9 million in 2014, 2013 and 2012, respectively. Included in non-cash equity compensation expense were net charges to expense of approximately $0.1 million for 2013 and 2012, and reversals of expense in 2014 of approximately $0.03 million, which were generated in connection with restructuring activities. Accordingly, these amounts are reflected as restructuring charges in the Company's 2014, 2013 and 2012 consolidated statements of operations. See Note 17, Restructuring Charges for further information.
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Restructuring Charges
12 Months Ended
Dec. 31, 2014
Restructuring and Related Activities [Abstract]
Restructuring Charges
RESTRUCTURING CHARGES
The Company incurred restructuring charges of approximately $3.6 million, $3.4 million and $4.8 million in 2014, 2013 and 2012, respectively. In 2014, restructuring expense included reversals of non-cash equity compensation expense of approximately $0.03 million. In each of 2013 and 2012, restructuring expense included net non-cash compensation expense of approximately $0.1 million. Of the amounts charged to restructuring expense during 2014, approximately $2.0 million were payable as of December 31, 2014. The Company expects to use cash of $1.7 million in 2015 and $0.3 million in 2016 to relieve this liability.
In 2014, total restructuring charges included $2.7 million incurred in the Publishing segment in connection with the Company's partnership with Meredith (see Note 1, The Company, for further information). These Publishing segment restructuring charges primarily consisted of $1.6 million in employee severance and other employee-related termination costs, as well as $1.1 million in contract termination costs. The Company does not expect to incur significant additional charges in the future associated with this Publishing segment restructuring. The Company also incurred restructuring charges of $0.9 million in the Merchandising segment and Corporate, which primarily consisted of employee severance costs.
In 2013 and 2012, the Company incurred restructuring charges associated with a significant reorganization of its Publishing business. In 2012, the Company also incurred restructuring charges associated with significant changes in its Broadcasting business, as well as charges related to the departure of the Company's then-current President and Chief Executive Officer. In each of 2013 and 2012, restructuring charges primarily consisted of employee severance and other employee-related termination costs.
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Other Information
12 Months Ended
Dec. 31, 2014
Disclosure Other Information Additional Information [Abstract]
Other Information
OTHER INFORMATION
The Company’s financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses. The carrying amounts of these accounts approximate fair value. The Company had restricted cash and investments to secure the line of credit through May 19, 2014. These assets were included as components of current assets on the Consolidated Balance Sheet as of December 31, 2013. Effective with the amended credit agreement dated May 19, 2014, the line of credit is no longer secured by cash or investment collateral.
Total revenues from the Company's three business segments were $141.9 million, $160.7 million and $197.6 million in 2014, 2013 and 2012 respectively. Revenues from domestic sources were $137.9 million, $153.3 million and $187.4 million in 2014, 2013 and 2012, respectively. Revenues from foreign sources (primarily from Canada) were $4.0 million, $7.4 million and $10.2 million in 2014, 2013 and 2012, respectively.
Advertising expense, including subscription acquisition costs, was $5.8 million, $6.9 million and $9.5 million for 2014, 2013, and 2012, respectively.
Production, distribution and editorial expenses; selling and promotion expenses; and general and administrative expenses are all presented exclusive of depreciation and amortization, impairment charges, restructuring charges and gain on sale of subscriber list, net, which are shown separately within “Operating Costs and Expenses.”
Income taxes paid in 2014, 2013 and 2012 were $0.2 million, $0.5 million and $0.5 million, respectively.
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Schedule II - Valuation And Qualifying Accounts
12 Months Ended
Dec. 31, 2014
Valuation and Qualifying Accounts [Abstract]
Schedule II - Valuation And Qualifying Accounts
MARTHA STEWART LIVING OMNIMEDIA, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2014, 2013 and 2012
(in thousands)
Description
Balance,
Beginning
of Year
 
Additions
Charged to
Revenues,
Costs and
Expenses
 
Additions/
(Deductions)
Charged to
Balance Sheet
Accounts
 
(Deductions)
Charged to
Revenues,
Costs and
Expenses
 
Balance,
End of Year
Allowance for doubtful accounts:
 
 
 
 
 
 
 
 
 
Year ended December 31,
 
 
 
 
 
 
 
 
 
2014
$
848

 
$
559

 
$
741

 
$
(244
)
 
$
1,904

2013
1,617

 
885

 
(1,230
)
 
(424
)
 
848

2012
1,630

 
997

 
(109
)
 
(901
)
 
1,617

 
 
 
 
 
 
 
 
 
 
Reserve for valuation allowance on the deferred tax asset:
 
 
 
 
 
 
 
 
 
Year ended December 31,
 
 
 
 
 
 
 
 
 
2014
$
76,340

 
$

 
$

 
$
(5,866
)
 
$
70,474

2013
81,981

 

 

 
(5,641
)
 
76,340

2012
77,647

 
4,334

 

 

 
81,981

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Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2014
Accounting Policies [Abstract]
Recent accounting standards
Recent accounting standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued an update on "Revenue from Contracts with Customers" (Topic 606), which completes the joint effort by the FASB and the International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and international financial reporting standards ("IFRS"). The joint project clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and IFRS. Specifically, it removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. For the Company, this update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The update may be applied using one of two methods: retrospective application to each prior reporting period presented, or retrospective application with the cumulative effect of initially applying the update recognized at the date of initial application. The Company is currently evaluating the transition method that will be elected and the impact of the update on its financial statements and disclosures.

Principles of consolidation
Principles of consolidation
The consolidated financial statements include the accounts of all wholly owned subsidiaries. All intercompany transactions have been eliminated.
Use of estimates
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management does not expect such differences to have a material effect on the Company’s consolidated financial statements.
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents include cash equivalents that mature within three months of the date of purchase.
Short-term investments
Short-term investments
Short-term investments include investments that have maturity dates in excess of three months, but generally less than one year, from the date of acquisition. See Note 3, Fair Value Measurements, and Note 4, Short Term Investments, for further discussion.
Inventories
Inventory consisting of paper is stated at the lower of cost or market. Cost is determined using the first-in, first-out method.
Property, plant, and equipment
Property and equipment
Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the lease term or, if shorter, the estimated useful lives of the related assets.
The useful lives of the Company’s assets are as follows: 
Building
5 years
Furniture, fixtures and equipment
3 – 5 years
Computer hardware and software
3 – 5 years
Leasehold improvements
life of lease
Goodwill and intangible assets
Goodwill and other intangible assets
Intangible assets
The Company has an indefinite-lived intangible asset that is comprised of trademarks that were purchased on April 2, 2008 as part of the acquisition of the businesses owned and operated by Emeril Lagasse and certain affiliated parties, except for Emeril Lagasse’s restaurant-related business and foundation. This intangible asset, reported within the Merchandising segment, had carrying amounts as of December 31, 2014, 2013 and 2012 as set forth in the schedule below:
 
Trademarks
 
Other intangibles
 
Accumulated amortization — other intangibles
 
Total
Balance at December 31, 2012
$
45,200

 
$
6,160

 
$
(6,157
)
 
$
45,203

Amortization
expense

 

 
(3
)
 
(3
)
Balance at December 31, 2013
$
45,200

 
$
6,160

 
$
(6,160
)
 
$
45,200

Impairment charge
(10,500
)
 

 

 
(10,500
)
Balance at December 31, 2014
$
34,700

 
$
6,160

 
$
(6,160
)
 
$
34,700


The Company's trademarks, which are classified as intangible assets with indefinite useful lives, are reviewed annually on October 1st, or more frequently if circumstances warrant, for impairment by applying a fair-value based test in accordance with Accounting Standards Codification ("ASC") 350, "Intangibles - Goodwill and Other" ("ASC 350"). The Company performs the impairment test by comparing the fair value of an intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment charge for the excess value must be recorded. The Company estimates fair value using the discounted cash flow ("DCF") valuation methodology, in which future after-tax cash flows are discounted based on a market comparable weighted average cost of capital rate, adjusted for market and other risks where appropriate. The Company’s estimates, which are Level 3 unobservable inputs, are based on historical results and current economic and market trends, which drive key assumptions of revenue growth rates and operating margins, and therefore, are subject to uncertainty.
During 2014, the financial results of the Emeril Lagasse business were lower than expected, largely as a result of lower wholesale royalties in the housewares category that were impacted by a slower than expected start of certain new initiatives. In September 2014, in connection with the Company's 2015 budgeting process, the Company determined that: (1) an expected increase in wholesale royalties in the housewares category would be further delayed; (2) the distribution of housewares products to wider retail outlets became less certain; and (3) new food licensing partnerships that were expected to generate long-term growth were not yet meeting expectations. Accordingly, the Company reduced its long-term projections with respect to both the housewares and new food licensing businesses. As a result of lower-than-expected financial results and lower long-term projections, and in conjunction with the overall evaluation of the business, the Company determined that a triggering event had occurred during the three months ended September 30, 2014.
The Company completed an evaluation of the fair value of its indefinite-lived trademarks as of September 30, 2014 using a DCF analysis, which included the lower future growth assumptions discussed above. Other significant assumptions used in this DCF analysis included expected future margins, the discount rate and the perpetual growth rate. These assumptions are considered Level 3 unobservable inputs under the fair value hierarchy established by ASC 820, "Fair Value Measurements and Disclosures." As of September 30, 2014, the DCF analysis provided for a fair value of $34.7 million, which was below the carrying value of $45.2 million. This difference resulted in a non-cash intangible asset impairment charge of $10.5 million for the three months ended September 30, 2014. The impairment charge is included in "Impairment of trademark and goodwill" in the Consolidated Statements of Operations for the year ended December 31, 2014.
Although the Company considered all current information in calculating the amount of the impairment charge, future changes in events or circumstances could result in further decreases in the fair value of its indefinite-lived intangible asset. If actual results differ from the Company’s estimate of future cash flows, revenues, earnings and other factors, the Company may record additional impairment charges in the future.
With respect to the Company's annual test of its trademarks on October 1, 2014, the Company determined that the fair value of $34.7 million of its trademarks established as of September 30, 2014 was also the fair value as of October 1, 2014. In addition, the financial results of the Emeril Lagasse business for the three months ended December 31, 2014 were in line with the Company's expectations. Accordingly, the Company concluded that no further impairment charges were deemed necessary as of October 1, 2014 and through December 31, 2014.
Goodwill
The Company had goodwill that was generated upon the April 2, 2008 acquisition of certain businesses owned and operated by Emeril Lagasse and certain affiliated parties. This goodwill, reported within the Merchandising segment, had carrying amounts as of December 31, 2014 and 2013 as set forth in the schedule below:
 
Goodwill
Balance at December 31, 2013
$
850

Impairment charge
(850
)
Balance at December 31, 2014
$


The Company reviews goodwill for impairment by applying a fair-value based test annually on October 1st, or more frequently if circumstances warrant, in accordance with ASC 350. Goodwill impairment is measured based upon a two-step process. In the first step, the Company compares the fair value of a reporting unit with its carrying amount, including goodwill, using a discounted cash flow ("DCF") valuation method. Future after-tax cash flows are discounted based on a market comparable weighted average cost of capital rate, adjusted for market and other risks where appropriate. The Company’s estimates, which are Level 3 unobservable inputs, are based on historical results and current economic and market trends, which drive key assumptions of revenue growth rates and operating margins, and therefore, are subject to uncertainty. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is considered not impaired, thus rendering the second step in impairment testing unnecessary. If the fair value of the reporting unit is less than the carrying value, a second step is performed in which the implied fair value of the reporting unit's goodwill is compared to the carrying value of the goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. The implied fair value of the reporting unit’s goodwill is compared with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment charge for the excess value must be recorded.
As a result of the intangible asset impairment charge associated with the Emeril Lagasse trademarks described above, the Company determined that a triggering event had also occurred with respect to the goodwill associated with the Emeril Lagasse business during the three months ended September 30, 2014. The Company considers all business related to Emeril Lagasse to be aggregated into a single reporting unit, which is a component of the Merchandising segment. The Company calculated the fair value of the reporting unit using a DCF analysis based upon updated long-term projections as of September 30, 2014, which included lowered expectations for both the housewares and new food categories and lower future growth assumptions. Other significant assumptions used in this DCF analysis included expected future margins, the discount rate and the perpetual growth rate. All these assumptions are considered Level 3 unobservable inputs under the fair value hierarchy established by ASC 820, "Fair Value Measurements and Disclosures."
The step one impairment test as of September 30, 2014 resulted in a fair value of the reporting unit that was less than its carrying value. Therefore, the Company performed the second step of the goodwill impairment test in which the implied fair value of the reporting unit’s goodwill was compared to the carrying value of its goodwill. The implied fair value of the reporting unit’s goodwill was determined based on the difference between the fair value of the reporting unit and the net fair value of its identifiable assets and liabilities, which included minimal accounts receivable, accounts payable and deferred revenue. The reporting unit’s identifiable assets also included the revalued indefinite-lived intangible asset described above. As a result of performing this goodwill impairment test as of September 30, 2014, the Company determined that the implied fair value of the Emeril Lagasse reporting unit’s goodwill was zero. Therefore, the Company also recorded a non-recurring, non-cash goodwill impairment charge of $0.9 million for the three-month period ended September 30, 2014. The impairment charge is included in "Impairment of trademark and goodwill" in the Consolidated Statements of Operations for the year ended December 31, 2014.

Revenue recognition
Revenue recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable. Revenues and associated accounts receivable are recorded net of provisions for estimated future returns, doubtful accounts and other allowances. Allowances for uncollectible receivables are estimated based upon a combination of write-off history, aging analysis, and any specific, known troubled accounts.
The Company participates in certain revenue arrangements containing multiple deliverables. These arrangements generally consist of custom-created advertising programs delivered on multiple media platforms, as well as licensing programs which may also be supported by various promotional plans. Examples of significant program deliverables include print advertising pages in the Company’s publications, custom-created video content and integration on the Company's websites as well as advertising impressions delivered on the Company’s and partner websites.
ASC Topic 605, Revenue Recognition ("ASC 605") and Accounting Standards Update ("ASU") 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force) ("ASU 09-13") require that the Company examine separate contracts with the same entity or related parties that are entered into simultaneously or near the same time to determine if the arrangements should be considered a single arrangement in the determination of units of accounting. While both ASC 605 and ASU 09-13 require that units delivered have standalone value to the customer, ASU 09-13 modified the separation criteria in determining units of accounting by eliminating the requirement to obtain objective and reliable evidence of the fair value of undelivered items. As a result of the elimination of this requirement, the Company’s significant program deliverables generally meet the separation criteria under ASU 09-13, whereas under ASC 605 they did not qualify as separate units of accounting.
For those arrangements accounted for prior to the adoption of ASU 09-13, if the Company was unable to put forth objective and reliable evidence of the fair value of each deliverable, then the Company accounted for the deliverables as a combined unit of accounting rather than separate units of accounting. In this case, revenue is recognized as the earnings process is completed, generally over the fulfillment term of the last deliverable.
For those arrangements accounted for after the adoption of ASU 09-13, the Company is required to allocate fixed and determinable revenue based on the relative selling price of each deliverable which qualifies as a unit of accounting, even if such deliverables are not sold separately by either the Company itself or by other vendors. Determination of selling price is a judgmental process that requires numerous assumptions. The consideration is allocated at the inception of the arrangement to all deliverables based upon their relative selling prices. Selling prices for deliverables that qualify as separate units of accounting are determined using a hierarchy of: (1) vendor-specific objective evidence (“VSOE”), (2) third-party evidence and (3) best estimate of selling price. The Company has generally allocated consideration based upon its best estimate of selling price. The Company’s deliverables are generally priced with a wide range of discounts or premiums as the result of a variety of factors including the size of the advertiser and the volume and placement of advertising sold to the advertiser. The Company’s best estimate of selling price is intended to represent the price at which it would sell the deliverable if the Company were to sell the item regularly on a standalone basis. The Company considers market conditions, such as competitor pricing pressures, as well as entity-specific factors that are consistent with normal pricing practices, such as the recent history of the selling prices of similar products when sold on a standalone basis, the impact of the cost of customization, the size of the transaction, and other factors contemplated in negotiating the arrangement with the customer, when determining the best estimate of selling price. The fixed and determinable arrangement consideration is recognized as revenue as the earnings process is completed, generally at the time each unit of accounting is fulfilled (i.e., when magazine advertisements appear in an issue or when the digital impressions are served).
The Company follows certain segment-specific revenue recognition policies that are discussed below.
Publishing Segment
The Company's Publishing segment includes five major categories of revenues, which are recognized as follows:
Magazine advertising revenue: Revenue generated by the sales of advertising in Martha Stewart Living, Martha Stewart Weddings and related special interest publications is recorded based on the on-sale dates of magazines when the advertisement appears in the magazine and are stated net of agency commissions and cash and sales discounts.
Subscription revenue: Revenue from subscription contracts for Martha Stewart Living and Martha Stewart Weddings results from advance payments for subscriptions received from customers and is recognized on a straight-line basis over the life of the subscription contract as issues are delivered.
Newsstand revenue: Revenue generated by single copy sales of Martha Stewart Living and Martha Stewart Weddings is recognized based on the on-sale dates of magazines and is initially recorded based upon estimates of sales, net of returns, brokerage and estimates of newsstand-related fees. Estimated returns are recorded based upon historical experience.
Digital advertising revenue: Revenue generated from the Company’s websites and partner sites, prior to November 1, 2014, was generally based upon sales of impression-based and sponsorship advertisements. Revenue generated from partner sites were recorded gross or net of the partners' commissions, in accordance with the terms of the specific contracts. Digital advertising revenues were recorded in the period in which the advertisements were served.
Books revenue: Revenue associated with the delivery of editorial content for books results from advance payments received from the Company’s publishers and is recognized as manuscripts are delivered to and accepted by the publishers. Revenue is also earned from book publishing as sales on a unit basis exceed the advanced royalty.
Effective November 1, 2014, the Company discontinued publication of Martha Stewart Living and the Company's digital operations, and Meredith assumed responsibility for advertising sales, circulation and production in the United States and Canada of Martha Stewart Living, Martha Stewart Weddings and related special interest publications. Meredith also now hosts, operates, maintains, and provides advertising sales and related functions for marthastewart.com, marthastewartweddings.com and the Company's related digital assets. The Company will continue to own its underlying intellectual property, and create and provide all editorial content for these magazines and digital properties. See Note 1, The Company, for further discussion of the agreements that the Company entered into with Meredith.
As a result of the MS Living Agreement, the Company expects a significant impact on certain Publishing segment revenues and expenses. Specifically, with the elimination of Martha Stewart Living advertising and circulation revenues that began with the February 2015 issue and the digital advertising revenue share arrangement that began November 1, 2014, the Company expects total advertising and circulation revenues to decline. These revenue declines will be partially offset by the recognition of licensing revenue for print and digital editorial content that the Company provides to Meredith, which began November 1, 2014. The Company also expects its Publishing segment expenses to significantly decline due to the elimination of almost all of the Company's non-editorial related expenses for Martha Stewart Living and the Company's digital assets, including its websites. With respect to the MS Weddings Agreement, the Company will continue to record advertising and circulation revenue generated by Meredith on the Company's behalf for Martha Stewart Weddings and related special interest publications, as well as all costs associated with these magazines, including the Company's editorial expenses and Meredith's expenses for production, selling and distribution services that are provided to the Company on a cost-plus basis.
With respect to revenue recognition subsequent to November 1, 2014, the Company concluded that the MS Living Agreement and the MS Weddings Agreement are considered separate arrangements in accordance with ASU 09-13. The MS Weddings Agreement is not a revenue arrangement and does not contain any elements that are essential to any elements in the MS Living Agreement. Under the MS Weddings Agreement, Meredith will provide, on a cost-plus basis, publishing operation services, while the Company solely bears all financial risks and rewards of Martha Stewart Weddings and related special interest publications. Accordingly, revenues earned pursuant to the MS Weddings Agreement are recognized in accordance with the Company's historical policies surrounding magazine advertising, subscription and newsstand revenues, as described above. These revenues are presented on a gross basis on the Company's consolidated statements of operations, offset by related expenses also presented gross in the same statements.
The MS Living Agreement is a multiple-deliverable revenue arrangement that contains three separate units of accounting: 1) delivery of paid subscribers of Martha Stewart Living; 2) delivery of print editorial content for Martha Stewart Living; and 3) delivery of digital editorial content for inclusion on the websites, primarily marthastewart.com. The Company allocated the fixed and determinable arrangement consideration to these three units of accounting based on their relative selling prices, using the Company's best estimate of selling price as provided for under ASU 09-13. The fixed and determinable arrangement consideration, as of November 1, 2014, included deferred subscription revenue of approximately $8 million, which represented outstanding Martha Stewart Living subscription contracts that the Company was no longer obligated to fulfill.
Revenues generated under the MS Living Agreement are recognized as follows:
Delivery of paid subscribers: The Martha Stewart Living subscriber list was delivered to Meredith on November 1, 2014, with no further obligations of the Company. Accordingly, the Company recognized approximately $2 million in revenue on November 1, 2014, based on the relative selling price allocation of the total arrangement consideration.
Delivery of print editorial content: Revenue associated with the delivery of editorial pages for Martha Stewart Living are recognized when the pages are delivered and accepted, at a rate based on the relative selling price of the total arrangement consideration.
Delivery of digital editorial content: Revenue associated with the delivery of digital content for the websites are recognized upon delivery, which occurs at the same rate each month. Therefore, the Company recognizes a portion of the total arrangement consideration, based on the relative selling price, ratably each month.
Digital advertising revenues: Revenue generated by Meredith's sales of advertising on the website and other digital properties are recognized in the period that the advertisements are served. Only the Company's share of digital advertising revenue is recorded, net of commissions and certain third-party expenses, in accordance with the MS Living Agreement.
Magazine royalty: To the extent that the Martha Stewart Living magazine generates future operating profits, as defined in the MS Living Agreement, the Company's share of those profits will be included in the total arrangement consideration at the point those amounts are fixed and determinable. The increase to the total arrangement consideration will then prospectively be allocated based on the relative selling prices first established on November 1, 2014. The Company is only entitled to receive a portion of the operating profit, if any, at the end of each contractual fiscal year, with the first contractual fiscal year ending on June 30, 2016.
The Company's results for 2014 included revenues that were generated prior to the effective date of the Company's partnership with Meredith, as well as certain revenues that were generated under this partnership. The following is a summary of 2014 Publishing segment revenues:
Magazine advertising, subscription and newsstand revenues from Martha Stewart Living (10 issues) were recognized in 2014, similar to the 10 issues recorded in 2013. Although the effective date of the MS Living Agreement was November 1, 2014, Meredith began publishing Martha Stewart Living with the February 2015 issue, which had an on-sale date of January 2015. Accordingly, effective January 2015, magazine advertising, subscription and newsstand revenues related to Martha Stewart Living will no longer be recorded by the Company.
Magazine advertising, subscription and newsstand revenues from Martha Stewart Weddings (four issues) and related special interest publications (two issues) were recognized in 2014, with the same frequency recorded in 2013. The Company expects to continue to record revenues in 2015 related to Martha Stewart Weddings in accordance with the accounting policies first listed above.
Digital advertising revenue from the Company’s websites and on partner sites, through October 31, 2014, was recognized generally on a gross basis in accordance with the accounting policies first listed above. From November 1, 2014 through December 31, 2014, digital advertising revenue was recorded in accordance with the MS Living Agreement, which resulted in the recognition of only the Company's share of digital advertising revenue, net of commissions and certain third-party expenses. The Company expects to continue to record digital advertising revenue in 2015 in accordance with the policies pursuant to the MS Living Agreement.
Books revenue was recognized in 2014 in accordance with the accounting policies first listed above.
Revenue associated with the delivery of paid subscribers to Meredith of approximately $2 million was recognized on November 1, 2014, as described above.
Revenue associated with the delivery of print editorial content to Meredith was recognized in December 2014, when content for future issues of Martha Stewart Living were delivered to and accepted by Meredith.
Revenue associated with the delivery of digital editorial content to Meredith was recognized in November and December 2014, as described above.
Total revenues recognized pursuant to the MS Living Agreement with Meredith were $6.3 million in 2014.

Merchandising Segment
Royalties from product designs and other Merchandising segment revenues are recognized on a monthly basis based on the specific mechanisms within each contract. Payments are typically made by the Company’s partners on a quarterly basis. Generally, revenues are recognized based on actual net sales, while any minimum guarantees are earned proportionately over the fiscal year.
Revenues related to television talent services for programming produced by or on behalf of third parties are generally recognized when services are performed, regardless of when the episodes air, within the Merchandising segment.
Broadcasting Segment
Television sponsorship revenues are generally recorded over the initial airing of new episodes. Licensing revenues from the Company’s radio programming are recorded on a straight-line basis over the term of the agreement.
Historically, the Company's Broadcasting segment included significant television production operations. In connection with those historical operations during 2012 and prior, the Company recognized television spot advertising, integration and licensing revenues. Television licensing revenues for content produced by the Company were recorded as earned in accordance with the specific terms of each agreement and were generally recognized upon delivery of the episodes to the licensee, provided that the license period began.
Advertising costs
Advertising costs
Advertising costs, consisting primarily of direct-response advertising, are expensed in the period in which the related advertising campaign occurs.
Earnings per share
Earnings per share
Basic earnings per share is computed using the weighted average number of actual common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that would occur from the exercise of stock options and the vesting of restricted stock and restricted stock units.
Equity compensation
Equity compensation
The Company has issued stock-based compensation to certain of its employees. In accordance with the fair-value recognition provisions of ASC Topic 718, Share-Based Payments (“ASC Topic 718”) and SEC Staff Accounting Bulletin No. 107, compensation cost associated with employee grants recognized in the 2014, 2013 and 2012 was based on the grant date fair value. Employee stock option, restricted stock, and restricted stock unit ("RSU") awards with service period-based vesting triggers (“service period-based” awards) are amortized as non-cash equity compensation expense on a straight-line basis over the expected vesting period. The Company values service period-based option awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires numerous assumptions, including volatility of the Company’s Class A Common Stock and expected life of the option. Service period-based restricted stock and RSU awards are valued at the market value of traded shares on the date of grant. Options and RSUs with Class A Common Stock price-based vesting triggers (“price-based” awards) are valued using the Monte Carlo Simulation method which takes into account assumptions such as volatility of the Company’s Class A Common Stock, the risk-free interest rate based on the contractual term of the award, the expected dividend yield, the vesting schedule, and the probability that the market conditions of the award will be achieved.
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Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2014
Accounting Policies [Abstract]
Useful Lives of the Company's Assets
The useful lives of the Company’s assets are as follows: 
Building
5 years
Furniture, fixtures and equipment
3 – 5 years
Computer hardware and software
3 – 5 years
Leasehold improvements
life of lease
The components of property and equipment at December 31, 2014 and 2013 were as follows: 
(in thousands)
2014
 
2013
Buildings
$
308

 
$
285

Furniture, fixtures and equipment
5,288

 
5,541

Computer hardware and software
8,268

 
10,174

Leasehold improvements
22,009

 
26,310

Total Property and Equipment
35,873

 
42,310

Less: accumulated depreciation and amortization
31,767

 
34,349


$
4,106

 
$
7,961

Components of Intangible Assets
This intangible asset, reported within the Merchandising segment, had carrying amounts as of December 31, 2014, 2013 and 2012 as set forth in the schedule below:
 
Trademarks
 
Other intangibles
 
Accumulated amortization — other intangibles
 
Total
Balance at December 31, 2012
$
45,200

 
$
6,160

 
$
(6,157
)
 
$
45,203

Amortization
expense

 

 
(3
)
 
(3
)
Balance at December 31, 2013
$
45,200

 
$
6,160

 
$
(6,160
)
 
$
45,200

Impairment charge
(10,500
)
 

 

 
(10,500
)
Balance at December 31, 2014
$
34,700

 
$
6,160

 
$
(6,160
)
 
$
34,700

Components of Goodwill
This goodwill, reported within the Merchandising segment, had carrying amounts as of December 31, 2014 and 2013 as set forth in the schedule below:
 
Goodwill
Balance at December 31, 2013
$
850

Impairment charge
(850
)
Balance at December 31, 2014
$

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Fair Value Measurements (Tables)
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]
Assets Measured At Fair Value
The following tables present the Company’s assets that are measured at fair value on a recurring basis: 
 
December 31, 2014
(in thousands)
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Fair Value
Measurements
Short-term investments:
 
 
 
 
 
 
 
Mutual funds
$
2,492

 
$

 
$

 
$
2,492

U.S. government and agency securities

 
951

 

 
951

Corporate obligations

 
22,145

 

 
22,145

Other fixed income securities

 
491

 

 
491

International securities

 
10,311

 

 
10,311

Municipal obligations

 
426

 

 
426

Total
$
2,492

 
$
34,324

 
$

 
$
36,816

 

 
December 31, 2013
(in thousands)
Quoted Market
Prices in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Fair Value
Measurements
Short-term investments:
 
 
 
 
 
 
 
Mutual funds
$
2,485

 
$

 
$

 
$
2,485

U.S. government and agency securities

 
2,233

 

 
2,233

Corporate obligations

 
14,159

*

 
14,159

Other fixed income securities

 
361

 

 
361

International securities

 
3,048

 

 
3,048

Municipal obligations

 
1,477

 

 
1,477

Total
$
2,485