<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000
COMMISSION FILE NUMBER 001-15395
Martha Stewart Living Omnimedia, Inc.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-2187059
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11 West 42nd Street 10036
New York, NY (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's Telephone Number, Including Area Code: (212) 827-8000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class May 9, 2000
----- -----------
<S> <C>
Class A, $0.01 par value 14,144,522
Class B, $0.01 par value 34,126,831
---------------
Total 48,271,353
===============
</TABLE>
<PAGE> 2
Martha Stewart Living Omnimedia, Inc.
Index to Form 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial information
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Index to Exhibits 16
</TABLE>
1
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Martha Stewart Living Omnimedia, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December
2000 31, 1999
-------- --------
<S> <C> <C>
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $105,116 $154,749
Accounts receivable, net 45,486 41,683
Inventories 9,291 6,163
Deferred television production costs 2,854 2,543
Other current assets 5,383 4,757
-------- --------
Total current assets 168,130 209,895
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net 19,676 18,709
-------- --------
INTANGIBLE ASSETS, net 49,420 50,157
-------- --------
OTHER ASSETS 16,264 3,010
-------- --------
Total assets $253,490 $281,771
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 36,390 $ 40,934
Current portion of deferred subscription income 29,450 26,938
-------- --------
Total current liabilities 65,840 67,872
-------- --------
DEFERRED SUBSCRIPTION INCOME 8,306 8,047
-------- --------
OTHER NONCURRENT LIABILITIES 6,853 6,450
-------- --------
Total liabilities 80,999 82,369
-------- --------
SHAREHOLDERS' EQUITY
Class A common stock, $.01 par value, 350,000 shares
authorized; 14,126 and 15,484 shares outstanding
in 2000 and 1999, respectively 141 155
Class B common stock, $.01 par value, 150,000 shares
authorized; 34,127 outstanding in 2000 and 1999 341 341
Capital in excess of par value 160,603 193,081
Retained earnings 11,406 5,825
-------- --------
Total shareholders' equity 172,491 199,402
-------- --------
Total liabilities and shareholders' equity $253,490 $281,771
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
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Martha Stewart Living Omnimedia, Inc.
Condensed Consolidated Income Statements
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues
Publishing $ 44,969 $ 35,536
Television 7,343 6,609
Merchandising 6,190 5,679
Internet/Direct Commerce 10,644 5,555
-------- --------
Total revenues 69,146 53,379
-------- --------
Operating costs and expenses
Production, distribution and editorial 36,133 26,312
Selling and promotion 11,203 9,856
General and administrative 10,351 8,449
Depreciation and amortization 2,112 1,342
-------- --------
Total operating costs and expenses 59,799 45,959
-------- --------
Income from operations 9,347 7,420
Interest income (expense), net 1,385 (457)
-------- --------
Income before income taxes 10,732 6,963
Income tax provision 5,151 344
-------- --------
Net income $ 5,581 $ 6,619
======== ========
Earnings per share - basic and diluted $ 0.11 (See Note)
========
</TABLE>
Note
Reference is made to Note 3 to the Condensed Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations for information about earnings per share data. On a basis comparative
to the three months ended March 31, 2000, basic and diluted earnings per share
for the three months ended March 31, 1999 would have been $0.07.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
Martha Stewart Living Omnimedia, Inc.
Consolidated Statement of Shareholders' Equity
For the Three Months Ended March 31, 2000
(unaudited, in thousands)
<TABLE>
<CAPTION>
Class A Class B
common stock common stock
------------ ------------
Capital in
excess of Retained
Shares Amount Shares Amount par value earnings Total
------ ------ ------ ------ --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 15,484 $ 155 34,127 $ 341 $ 193,081 $ 5,825 $ 199,402
Net income for the period -- -- -- -- -- 5,581 5,581
Repurchase of shares (1,366) (14) -- -- (32,492) -- (32,506)
Issuance of shares for stock
option exercises 8 -- -- -- 14 -- 14
------ --------- ------ --------- --------- --------- ---------
Balance at March 31, 2000 14,126 $ 141 34,127 $ 341 $ 160,603 $ 11,406 $ 172,491
====== ========= ====== ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 6
Martha Stewart Living Omnimedia, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 5,581 $ 6,619
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 2,112 1,342
Changes in operating assets and liabilities (9,184) (2,009)
--------- ---------
Net cash provided by (used in) operating
activities (1,491) 5,952
--------- ---------
Cash flows from investing activities
Equity investment (13,297) --
Capital expenditures (2,353) (517)
--------- ---------
Net cash used in investing activities (15,650) (517)
--------- ---------
Cash flows from financing activities
Repurchase of common stock (32,492) --
Principal repayment of long term debt -- (27,650)
Long term debt borrowings -- 15,000
--------- ---------
Net cash used in financing activities (32,492) (12,650)
--------- ---------
Net decrease in cash (49,633) (7,215)
Cash and cash equivalents, beginning of period 154,749 24,578
--------- ---------
Cash and cash equivalents, end of period $ 105,116 $ 17,363
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 7
Martha Stewart Living Omnimedia, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited, in thousands, except
per share data)
Martha Stewart Living Omnimedia, Inc. (together with its subsidiary, the
"Company") includes the operations, assets and liabilities of Martha Stewart
Living Omnimedia LLC ("MSLO"), a predecessor to the Company and its former
parent, which was merged with and into the Company on October 22, 1999. This
merger was accounted for as a combination of companies under common control and
accordingly, the financial statements for prior periods have been retroactively
restated.
1. Accounting policies
a. General
The information included in the foregoing interim condensed consolidated
financial statements is unaudited. In the opinion of management, all
adjustments which are of a normal recurring nature and necessary for a fair
presentation of the results of operations for the interim periods presented
have been reflected herein. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the entire
year. These consolidated financial statements are unaudited and should be
read in conjunction with the audited financial statements included in the
Company's Form 10-K filed with the Securities and Exchange Commission with
respect to its fiscal year ending December 31, 1999.
b. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
c. Intangible assets
Intangible assets, representing the excess of purchase price over net assets
acquired, include the value assigned to subscriber lists, trade names and
goodwill, and are being amortized over twenty years. Management reassesses
quarterly the appropriateness of both the carrying value and remaining life
of intangible assets, principally based on forecasts of future undiscounted
cash flows.
d. Income taxes
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under the asset and liability method of SFAS
109, deferred assets and liabilities are recognized for the future
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
Prior to the Company's conversion to a C corporation as a result of its
merger with MSLO on October 22, 1999, no provision had been made in the
accompanying condensed consolidated financial statements for federal income
taxes since, pursuant to provisions of the Internal Revenue Code, the
results of operations of MSLO during the relevant time periods were
reportable by the members of MSLO on their individual tax returns. However,
MSLO was subject to certain foreign, state and city income taxes.
6
<PAGE> 8
Martha Stewart Living Omnimedia, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited, in thousands, except
per share data)
2. Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
March 31, December
2000 31, 1999
------ ------
<S> <C> <C>
Paper $5,701 $3,465
Catalog merchandise 3,590 2,698
------ ------
$9,291 $6,163
====== ======
</TABLE>
3. Earnings per share
Earnings per share are computed in accordance with SFAS No. 128, "Earnings
Per Share". Basic earnings per share are calculated by dividing net income
by the weighted-average number of common shares outstanding during each
period. Diluted earnings per share include the determinants of basic
earnings per share and, in addition, give effect to dilutive potential
common shares.
The computations of basic and diluted earnings per share for the three
months ended March 31, 2000 are set forth below:
<TABLE>
<S> <C>
Numerator for basic and diluted earnings per
share-net income available to common
shareholders $ 5,581
-------
Denominator for basic earnings per share-
weighted average number of common shares
outstanding 49,616
Effect of dilutive securities-dilutive
potential common shares 1,548
-------
Denominator for diluted earnings per share-
weighted average number of common shares
and dilutive potential common shares 51,164
=======
Basic earnings per share $ 0.11
-------
Diluted earnings per share $ 0.11
-------
</TABLE>
7
<PAGE> 9
Martha Stewart Living Omnimedia, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited, in thousands, except
per share data)
The Company became a "C" corporation on October 22, 1999. Prior thereto, it
operated as a limited liability company. Historical earnings per share have
not been presented for the three months ended March 31, 1999, since prior to
becoming a "C" corporation the Company had LLC interests outstanding and no
common shares outstanding. Furthermore, historical earnings do not reflect
income taxes that would have been charged had the Company been a "C"
corporation. The pro forma adjustment to income tax provision below reflects
the income taxes that would have been recorded had the Company been a "C"
corporation at January 1, 1999. Pro forma weighted average common shares
outstanding reflects the average shares that would have been outstanding had
the conversion to a "C" corporation been done as of January 1, 1999.
Adjusted pro forma basic and diluted earnings per share for the three months
ended March 31, 1999 are calculated based upon the number of common shares
outstanding as if all common shares issued in connection with the Company's
initial public offering and the July 27, 1999 investment by Kleiner Perkins
Caufield & Byers in the Company were outstanding as of January 1, 1999 in
order to better reflect comparability between periods. Proceeds received
from these transactions have not been included in the calculation of
earnings per share. There was no dilution from common stock equivalents
outstanding during such periods.
The computations of pro forma and adjusted pro forma basic and diluted
earnings per share for the three months ended March 31, 1999 are set forth
below:
<TABLE>
<S> <C>
Net income $ 6,619
Pro forma adjustment to income tax provision (3,171)
--------
Pro forma net income $ 3,448
========
Pro forma earnings per share- basic and
diluted $ 0.09
--------
Pro forma weighted average common shares outstanding 39,176
--------
Adjusted pro forma earnings per share- basic
and diluted $ 0.07
--------
Adjusted pro forma weighted average common
shares outstanding 49,583
--------
</TABLE>
4. Industry segments
The Company is a leading creator of original "how to" content and related
products for homemakers and other consumers. The Company's business segments
are Publishing, Television, Merchandising and Internet/Direct Commerce. The
Publishing segment primarily consists of the Company's magazine operations,
and also includes book publishing, newspaper syndication and radio
syndication. The Television segment includes a daily television program that
airs in syndication in the United States and on cable in the United States
and Canada, as well as weekly segments on CBS's The Early Show broadcast, as
well as periodic prime time specials. The Merchandising segment consists
solely of royalty revenues generated by the sale of Martha Stewart branded
products. The Internet/Direct Commerce segment comprises the sale of Martha
by Mail products through the Company's website and print catalog, as well as
advertising revenues derived from advertisements on the website.
8
<PAGE> 10
Martha Stewart Living Omnimedia, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited, in thousands, except
per share data)
Revenues for each segment are presented in the condensed consolidated income
statements. Income from operations for each segment were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
-------- --------
<S> <C> <C>
Publishing $ 17,439 $ 11,500
Television 1,307 453
Merchandising 6,129 5,627
Internet/Direct Commerce (5,971) (1,629)
-------- --------
Total before corporate charges 18,904 15,951
Corporate charges (9,557) (8,531)
-------- --------
Income from operations $ 9,347 $ 7,420
======== ========
</TABLE>
5. Equity Transactions
In March 2000, the Company repurchased 1.366 million shares of Class A
common stock from Time Publishing Ventures, Inc. at a purchase price of
$23.79 per share for a total consideration of $32.5 million. Concurrently,
Time's put and call rights relating to its remaining equity terminated. The
shares were retired upon repurchase.
6. Other Assets
Included in other assets at March 31, 2000 is a minority equity investment
of $13.3 million in BlueLight.com, an e-commerce company, representing a 5%
ownership interest. The investment is carried at cost.
7. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------
2000 1999
------ ------
<S> <C> <C>
Cash paid for interest $ 194 $2,197
Cash paid for income taxes 344 354
</TABLE>
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In this report, the terms "we," us," "our" and "MSO" refer to Martha Stewart
Living Omnimedia, Inc., and, unless the context requires otherwise, Martha
Stewart Living Omnimedia LLC ("MSLO"), the legal entity that prior to October
22, 1999 operated the business we now operate.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 TO THREE MONTHS ENDED MARCH 31,
1999
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
---- ----
(in thousands, except per
share amounts)
<S> <C> <C>
Revenues
Publishing $ 44,969 $ 35,536
Television 7,343 6,609
Merchandising 6,190 5,679
Internet/Direct Commerce 10,644 5,555
-------- --------
Total revenues 69,146 53,379
-------- --------
Operating costs and expenses
Production, distribution and editorial 36,133 26,312
Selling and promotion 11,203 9,856
General and administrative 10,351 8,449
Depreciation and amortization 2,112 1,342
-------- --------
Total operating costs and expenses 59,799 45,959
-------- --------
Income from operations 9,347 7,420
-------- --------
Interest income (expense), net 1,385 (457)
-------- --------
Income before income taxes 10,732 6,963
-------- --------
Income tax provision 5,151 344
-------- --------
Net income 5,581 6,619
-------- --------
Pro forma adjustment to income tax provision -- (3,171)
-------- --------
Pro forma net income $ 5,581 $ 3,448
======== ========
Earnings per share- diluted $ 0.11 $ 0.07
======== ========
</TABLE>
Revenues. Total revenues increased $15.7 million, or 29.5%, to $69.1 million for
the three months ended March 31, 2000, from $53.4 million for the three months
ended March 31, 1999. Publishing revenues increased $9.4 million, or 26.5%, to
$45.0 million for the three months ended March 31, 2000, from $35.5 million for
the three months ended March 31, 1999. This increase was primarily due to an
increase in advertising revenues as a result of an increase in advertising pages
sold in Martha Stewart Living magazine, as well as the publication of Martha
Stewart Baby in March 2000. Television revenues increased $0.7 million, or
11.1%, to $7.3 million for the three months ended March 31, 2000 from $6.6
million for the three months ended March 31, 1999. The increase is due primarily
to additional revenues associated with the higher syndication revenues from the
second half hour of our daily program and revenues received from our cable
program from Martha's Kitchen, partially offset by reduced advertising revenues
from lower ratings during the three months ended March 31, 2000. Merchandising
revenues increased $0.5 million, or 9.0%, to $6.2 million for the three months
ended March 31, 2000, from $5.7 million for the three months ended March 31,
1999, primarily as a result of additional revenues received from our Martha
Stewart Everyday Garden product line. Internet/Direct Commerce revenues
increased $5.1 million, or 91.6%, to $10.6 million for the three months ended
March 31, 2000, from $5.6 million for the three months ended March 31, 1999, due
to increased merchandise sales resulting from higher catalog circulation,
increased Internet traffic and advertising revenues.
10
<PAGE> 12
Production, distribution and editorial. Production, distribution and editorial
expenses increased $9.8 million, or 37.3%, to $36.1 million for the three months
ended March 31, 2000, from $26.3 million for the three months ended March 31,
1999. Internet/Direct Commerce costs increased $7.9 million due to an increase
in cost of goods sold and fulfillment costs, each as a result of higher
revenues, as well as increased catalog production and distribution costs
resulting from higher catalog circulation. In addition, costs increased due to
increased investment in developing and maintaining our Internet site. Publishing
segment costs increased $2.4 million reflecting increased costs for Martha
Stewart Living magazine due to an increase in the number of pages printed per
issue and additional costs associated with the publication of Martha Stewart
Baby. Television costs decreased $0.7 million, primarily as a result of lower
production costs.
Selling and promotion. Selling and promotion expenses increased $1.3 million, or
13.7% to $11.2 million for the three months ended March 31, 2000, from $9.9
million for the three months ended March 31, 1999. Publishing segment costs
increased $0.9 million resulting from higher advertising and circulation costs
incurred to support higher publishing segment revenues. Internet/Direct Commerce
segment costs increased $0.4 million resulting from higher costs associated with
higher revenues.
General and administrative. General and administrative expenses, consisting
primarily of costs relating to the executive office, finance, professional
services, information technology, facilities and human resources, increased $1.9
million, or 22.5%, to $10.4 million for the three months ended March 31, 2000,
from $8.4 million for the three months ended March 31, 1999. The higher expenses
have been incurred as a result of continued infrastructure development to
support higher levels of revenue, including the growth of our Internet/Direct
Commerce segment.
Depreciation and amortization. Depreciation and amortization increased $0.8
million, or 57.4% to $2.1 million for the three months ended March 31, 2000,
from $ 1.3 million for the three months ended March 31, 1999. The increase is
attributable to higher levels of property and equipment.
Interest income (expenses), net. Interest income (expenses), net was $1.4
million for the three months ended March 31, 2000, compared to interest expense
of $0.5 million for the three months ended March 31, 1999. Interest income for
the three months ended March 31, 2000 resulted from higher cash balances
primarily related to the proceeds received from our initial public offering in
October 1999. During the three months ended March 31, 1999, we had outstanding
long term debt which resulted in interest expense in that period. Such long term
debt was fully repaid in July 1999.
Income tax provision. Income tax provision for the three months ended March 31,
2000 was $5.2 million, representing a 48% effective income tax rate. Income tax
provision during March 31, 1999 was $0.3 million. During the three months ended
March 31, 1999, we operated as a limited liability company and were therefore
not subject to Federal income tax on our earnings. In connection with our
initial public offering in October 1999, we became a "C" corporation and
accordingly our earnings are subject to income taxes from that date forward. The
pro forma adjustment to income tax provision of $3.2 million reflects the
additional taxes that would have been provided had we been a "C" corporation
during that time.
Net income. Net income was $5.6 million for the three months ended March 31,
2000, compared to pro forma net income of $3.4 million for the three months
ended March 31, 1999, as a result of the above mentioned factors.
Earnings per share. Earnings per share were $0.11 per share for the three months
ended March 31, 2000. Earnings per share for the three months ended March 31,
1999 of $ 0.07 has been computed on a pro forma basis assuming we had been a "C"
corporation at January 1, 1999 and the shares issued in connection with our
initial public offering and the July 27, 1999 investment by Kleiner Perkins
Caufield & Byers in the Company were outstanding as of January 1, 1999, in order
to better reflect comparability between periods.
11
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $105.1 million at March 31, 2000, compared to
$154.7 million at December 31, 1999.
Cash flows used in operating activities were $1.5 million during the three
months ended March 31, 2000, compared to cash provided by operating activities
of $6.0 million for the three months ended March 31, 1999. Cash flows used in
operating activities for the three months ended March 31, 2000 was primarily a
result of decreased accounts payable and increased accounts receivable and
inventory, partially offset by net income for the period. Cash provided by
operating activities for the three months ended March 31, 1999 was primarily the
result of net income for the period.
Cash flows used in investing activities were $15.7 million for the three months
ended March 31, 2000, reflecting a $13.3 million equity investment in
BlueLight.com, an e-commerce company, and $2.4 million in capital expenditures
for property and equipment. Cash flows used in investing activities were $0.5
million during the three months ended March 31, 1999, representing capital
expenditures for property and equipment. We expect capital expenditures to
approximate $25 million in 2000, as the company expands its facilities to
provide for future growth and we continue to invest in our technology
infrastructure.
Cash flows used in financing activities for the three months ended March 31,
2000 were $32.5 million. In March 2000, we repurchased 1.366 million shares of
our Class A common stock for $32.5 million from Time Publishing Ventures, Inc.
Cash used in financing activities was $12.3 million during the three months
ended March 31, 1999 representing the repayment of $27.7 million of outstanding
long term debt payable to Time Publishing Ventures, Inc. with the proceeds
received from a $15 million term loan from Bank of America and existing cash
balances.
We have a line of credit with Bank of America in the amount of $10.0 million,
which is available to us for seasonal working capital requirements and general
corporate purposes. As of March 31, 2000, we had no outstanding borrowings under
this facility.
We believe that our available cash balances, together with any cash generated
from operations and any funds available under existing credit facilities will be
sufficient to meet our operating and recurring cash needs for foreseeable
periods.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Several of our businesses can experience fluctuations in quarterly performance.
For example, Martha Stewart Living magazine is published ten times annually:
three issues in each of the first and second quarters and two issues in each of
the third and fourth quarters. Martha Stewart Weddings is published four times
annually: one issue in each of the second and third quarters and two issues in
the fourth quarter. In addition, we periodically publish special interest
publications. Furthermore, the number of advertising pages per issue tends to be
higher in issues published in the fourth quarter. Revenue and income from
operations for the television segment tend to be higher in the fourth quarter
due to generally higher ratings and the broadcasts of prime time television
specials. Internet/Direct Commerce revenues also tend to be higher in the fourth
quarter due to increased consumer spending during that period. Revenues from the
Merchandising segment can vary significantly from quarter to quarter due to new
product launches and the seasonal nature of certain products.
YEAR 2000
The Year 2000 issue concerns the inability of information and non information
systems to recognize and process date-sensitive information after 1999 due to
the use of only the last two digits to refer to a year. This problem could have
affected information systems and other information that relies on
microprocessors.
12
<PAGE> 14
We conducted a review of our computer systems and software to identify any
potential malfunctions due to misidentification of the Year 2000. We also made
inquiries of our important third-party vendors, service providers, customers and
partners to determine whether our business relationships with these parties
could be adversely affected by Year 2000 issues. We have not experienced any
material adverse consequences related to Year 2000 failures of our systems or
equipment or those of third parties. While management does not expect any future
material issues related to Year 2000 to occur, we will continue to monitor these
issues and the related costs if they occur.
13
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds
Our first registration statement on Form S-1 (File No. 333-84001) under the
Securities Act of 1933 was declared effective by the Securities and Exchange
Commission on October 18, 1999. Since the completion of the offering, we have
used approximately $32.5 million to repurchase 1,366,000 shares of our Class A
common stock from Time Publishing Ventures, Inc and approximately $13.3 million
of the proceeds to purchase an equity interest in BlueLight.com, L.L.C. We have
applied the balance of the proceeds from our public offering to working capital
and other general corporate purposes.
ITEM 5: OTHER INFORMATION
Cautionary Statement Pursuant to The Private Securities Litigation Reform Act of
1995
We have included in this Quarterly Report certain "forward looking statements"
as that term is defined in The Private Securities Litigation Reform Act of 1995.
These forward-looking statements are not historical facts but instead represent
only our belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of our control. It is possible that our actual
results may differ, possibly materially, from the anticipated results indicated
in these forward-looking statements. These statements can be identified by
terminology such as "may," "will," "should," "could," "expects," "intends,"
"plans," "anticipates," "believes," "estimates," "potential" or "continue" or
the negative of these terms or other comparable terminology. Our actual results
may differ materially from those projected in these statements, and factors that
could cause such differences include downturns in national and/or local
economies; a softening of the domestic advertising market; increased
consolidation among major advertisers or other events depressing the level of
advertising spending; changes in consumer reading, purchasing and/or television
viewing patterns; unanticipated increases in paper, postage or printing costs;
technological developments affecting products or methods of distribution such as
the Internet or e-commerce; and changes in government regulations affecting our
industries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
<S> <C>
27.1 -- Financial Data Schedule for the Three Months
Ended March 31, 2000.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the period
covered by this report.
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
MARTHA STEWART LIVING OMNIMEDIA, INC.
Date: May 12, 2000 By: /s/ Helen Murphy
---------------------------------
Name: Helen Murphy
Title: Chief Financial and Administrative Officer
(Duly Authorized Officer and Principal
Financial Officer)
</TABLE>
15
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
<S> <C>
27.1 -- Financial Data Schedule for the Three Months
Ended March 31, 2000.
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at March 31, 2000 and the Condensed
Consolidated Income Statement for the three months ended March 31, 2000 of
Martha Stewart Living Omnimedia, Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 105,116
<SECURITIES> 0
<RECEIVABLES> 45,486
<ALLOWANCES> 0
<INVENTORY> 9,291
<CURRENT-ASSETS> 168,130
<PP&E> 19,676
<DEPRECIATION> 0
<TOTAL-ASSETS> 253,490
<CURRENT-LIABILITIES> 65,840
<BONDS> 0
0
0
<COMMON> 482
<OTHER-SE> 172,009
<TOTAL-LIABILITY-AND-EQUITY> 253,490
<SALES> 0
<TOTAL-REVENUES> 69,146
<CGS> 36,133
<TOTAL-COSTS> 36,133
<OTHER-EXPENSES> 23,666
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,385)
<INCOME-PRETAX> 10,732
<INCOME-TAX> 5,151
<INCOME-CONTINUING> 5,581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,581
<EPS-BASIC> 0.11
<EPS-DILUTED> 0.11
</TABLE>
