NEW YORK (CNN/Money) -
Martha Stewart Living Omnimedia Inc. reported better-than-expected fourth-quarter operating income Tuesday, but warned that investigations into its namesake's sale of another company's stock will cause a first-quarter loss. Analysts expected a profit.
Shares of Martha Stewart fell about 4 percent Tuesday afternoon and are down about 68 percent since Stewart last year was linked to allegations that she had inside information before selling shares of ImClone Systems, a biotechnology company. Stewart has denied any wrongdoing.
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 CNNfn's Allan Chernoff takes a look at Martha Stewart's company scorecard and the ongoing investigation.
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"Although I am increasingly hopeful that my personal legal situation will be resolved in the near future, it is still inappropriate for me to discuss anything relating to them on this call," Stewart said during a conference call with analysts
The home furnishings and publishing company posted operating income of 6 cents a share, excluding special items, down from 13 cents it earned on that basis a year earlier. Analysts surveyed by earnings tracker First Call had forecast a 3-cent-a-share profit. Including restructuring charges, the company lost 3 cents a share in the latest quarter.
Revenue at the company fell 6 percent to $77.6 million, though, as revenue from its publishing, television and Internet/direct commerce units all lost ground. Only its merchandising unit saw increased revenue.
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The company also warned about its outlook in the wake of investigations into Stewart regarding her personal sale of ImClone Systems (IMCL: Research, Estimates) shares in late 2001. The company said those problems will likely result in a first-quarter operating loss of 6-to-8 cents a share. First Call's forecast was for earnings per share of 3 cents, with a range of EPS estimates from 2-to-5 cents.
"Our business continues to be negatively impacted by the ongoing uncertainty related to the investigations into the sale of non-Company stock by Martha Stewart," said Sharon Patrick, the company's president. "Until this situation is resolved, we will likely continue to face challenges throughout our businesses."
Still, the company said it is in good position to weather the storm with no debt, an increase in cash and short-term investments on its books in 2002 rising to $179 million at the end of the year from $141 million a year earlier.
"Our excellent balance sheet and diverse revenue streams provide a solid financial framework for our company as we enter 2003," said a statement from Stewart.
Federal prosecutors looking into the sale of ImClone stock have notified Stewart they have enough evidence to file criminal charges against her, according to published and broadcast reports last month. Stewart has denied any wrongdoing in the sale of about 4,000 shares of the stock in December 2001 the day before problems with the approval process for a key cancer drug was revealed to other investors.
The stock is unlikely to rebound as long as the unresolved probes hang over the company, said Kathleen Heany, an analyst at Brean Murray & Co. "Most investors have decided the company can survive without her as CEO. The problem is there's (been) no resolution, and uncertainty is the worst thing in the stock market."
Martha Stewart Living Omnimedia also announced a restructuring of its Internet/direct commerce unit. Under the plan it will send out a reduced circulation catalog with a more tightly focused product assortment. It took a restructuring charge of $7.7 million in the quarter.
Martha Stewart (MSO: Research, Estimates) shares fell 31 cents to $7.24 Tuesday afternoon.
-- Reuters contributed to this report.
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