Financial analysis of Vertis, Inc. and Martha Stewart Living Omnimedia

Accounting

Company #1: Vertis, Inc. (service company)

The first publicly traded company looked at for this paper is Vertis, Inc., a provider of advertising, media and marketing services, headquartered in Baltimore, Maryland. Although Vertis does produce some items, such as newspaper inserts for Sunday newspapers, they are known mostly as a service company. Their services include advertising and creative services, database services, account planning, consumer research, pre-press media services, direct marketing, ad-building software, geo-demographic targeting, online marketing, among other media and digital services.

The annual report for 2004 is not available yet, so this paper will look at the Vertis annual report for 2003. Meantime, the "total current assets" for December 31, 2003 were $266,576 (that does not include "property, plant and equipment, goodwill," and "other long-term assets") and the "total current liabilities (excluding current portion of long-term debt)" were $327,109.

Doing the math brings the amount of debt for Vertis at the end of 2003 to $60,533. "Is the company in trouble or in good shape?" Vertis is a company that is in some trouble, it is clear; they reported net income of $5.9 million in the 4th Quarter of 2003 and a net loss for the year 2003 (ended Dec. 31) of $95.9 million; but the Vertis figures show that as "an improvement" because for the 4th Quarter of 2002 Vertis showed net income of $5.5 million and a net loss of $120.1 million for the year ending Dec. 31, 2002. How well is the company doing in its operations? The Vertis Annual Report shows a trend that is flat: Dean Durbin, CFO, said "the advertising market conditions were extremely challenging in 2003...[but] excluding the consulting costs associated with the marketing study mentioned earlier and the negative impact of the grocery strike in California, our fourth quarter EBITDA would have exceeded the 2002 fourth quarter results by 6.1%." Even in these difficult economic times, he continued, "we reduced total debt by $41 million and finished the year safely within our debt covenant requirements." The EBITDA for the 12 months ending 2003 was $172,683; for the 12 months ending Dec. 2002, the EBITDA was $100,990. Vertis is a company that is struggling.

Company #3: Williams-Sonoma, Inc. (product company)

Williams-Sonoma is a San Francisco-based retailer of high-end kitchen appliances, dishes, cookware, that reported (11/18/04) their "net revenues for the 3rd quarter of 2004 increased 14.2% over the third quarter of fiscal year 2003 to $722.8 million," according to the press release by the company.

Current assets for the quarter ending Oct. 31, 2004, $766,995; current liabilities for the same period: $478,040. That is a plus $288,955.

Cash flows from investing activities after 39 weeks in 2003 was $131,852; and during the same period in 2004 it jumped to $144,828. The company is increasing its investment in operations. And Cash flow from "operating activities" was $55,095 in the first 39 weeks of 2003, and it grew to $77,486 in the same time frame in 2004.

Overall, growth in cash flows for Williams-Sonoma shows that the trend for this company is growth, up, positive.

Grades for three companies: #1, Vertis, D (flat financial picture)

2, Martha Stewart, A (very strong potential for growth despite terribly bad PR)

3, Williams-Sonoma, B. (sturdy retail sales based on good reputation and marketing)