-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WYBMq2xbqC+ISEvRDs6O3b6449jSw0Z4FDZgF2L6YkZirOqe75tPyxO9w9oNo+Eo gHOEPBfXUpf6/zXAfNgbnQ== 0000950123-00-005070.txt : 20000516 0000950123-00-005070.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950123-00-005070 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARTHA STEWART LIVING OMNIMEDIA INC CENTRAL INDEX KEY: 0001091801 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 522187059 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15395 FILM NUMBER: 633139 BUSINESS ADDRESS: STREET 1: 20 WEST 43RD STREET CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2128278000 MAIL ADDRESS: STREET 1: 20 WEST 43RD STREET CITY: NEW YORK STATE: NY ZIP: 10036 10-Q 1 MARTHA STEWART LIVING OMNIMEDIA, INC. 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) 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)
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.
Outstanding at Class May 9, 2000 ----- ----------- Class A, $0.01 par value 14,144,522 Class B, $0.01 par value 34,126,831 --------------- Total 48,271,353 ===============
2 Martha Stewart Living Omnimedia, Inc. Index to Form 10-Q
Page ---- 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
1 3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Martha Stewart Living Omnimedia, Inc. Condensed Consolidated Balance Sheets (in thousands, except per share amounts)
March 31, December 2000 31, 1999 -------- -------- 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 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 4 Martha Stewart Living Omnimedia, Inc. Condensed Consolidated Income Statements (unaudited, in thousands, except per share amounts)
Three Months Ended March 31, ----------------------- 2000 1999 -------- -------- 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) ========
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 5 Martha Stewart Living Omnimedia, Inc. Consolidated Statement of Shareholders' Equity For the Three Months Ended March 31, 2000 (unaudited, in thousands)
Class A Class B common stock common stock ------------ ------------ Capital in excess of Retained Shares Amount Shares Amount par value earnings Total ------ ------ ------ ------ --------- -------- ----- 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 ====== ========= ====== ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 6 Martha Stewart Living Omnimedia, Inc. Condensed Consolidated Statements of Cash Flows (unaudited, in thousands)
Three Months Ended March 31, ------------------------- 2000 1999 --------- --------- 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 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 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 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:
March 31, December 2000 31, 1999 ------ ------ Paper $5,701 $3,465 Catalog merchandise 3,590 2,698 ------ ------ $9,291 $6,163 ====== ======
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: 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 -------
7 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: 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 --------
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 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:
Three Months Ended March 31, --------------------------- 2000 1999 -------- -------- 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 ======== ========
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
For the Three Months Ended March 31, ------------------------ 2000 1999 ------ ------ Cash paid for interest $ 194 $2,197 Cash paid for income taxes 344 354
9 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
Three Months Ended March 31, --------------------- 2000 1999 ---- ---- (in thousands, except per share amounts) 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 ======== ========
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 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 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 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 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:
EXHIBIT NUMBER EXHIBIT TITLE ------ ------------- 27.1 -- Financial Data Schedule for the Three Months Ended March 31, 2000.
(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 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. 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)
15 17 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT TITLE - ------ ------------- 27.1 -- Financial Data Schedule for the Three Months Ended March 31, 2000.
16 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 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. 1,000 3-MOS DEC-31-2000 MAR-31-2000 105,116 0 45,486 0 9,291 168,130 19,676 0 253,490 65,840 0 0 0 482 172,009 253,490 0 69,146 36,133 36,133 23,666 0 (1,385) 10,732 5,151 5,581 0 0 0 5,581 0.11 0.11
-----END PRIVACY-ENHANCED MESSAGE-----