-----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, PlS9pwfTrxMPOPi42mnzlEHsFxX2TBGfLxB7/iR+Un322yWQ2Z4SKptnFJcsXk0I I4ZPI3P8UQfFgr1OOaLI9A== 0000950123-02-004614.txt : 20020503 0000950123-02-004614.hdr.sgml : 20020503 ACCESSION NUMBER: 0000950123-02-004614 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020503 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: 1934 Act SEC FILE NUMBER: 001-15395 FILM NUMBER: 02633142 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 y60267e10-q.txt MARTHA STEWART LIVING OMNIMEDIA, INC. 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, 2002 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 April 23, 2002 Class A, $0.01 par value 18,862,963 Class B, $0.01 par value 30,295,328 ---------- Total 49,158,291 ==========
Martha Stewart Living Omnimedia, Inc. Index to Form 10-Q
Page Part I. Financial information Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Part II. Other Information Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14
2 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 31, 2002 2001 ---------- ------------ ASSETS (unaudited) CURRENT ASSETS Cash and cash equivalents $ 143,838 $ 141,162 Accounts receivable, net 39,484 45,629 Inventories 13,945 12,952 Deferred television production costs 3,660 3,627 Other current assets 7,121 7,772 ---------- ---------- Total current assets 208,048 211,142 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, net 44,301 45,423 ---------- ---------- INTANGIBLE ASSETS, net 49,215 49,340 ---------- ---------- OTHER ASSETS 6,857 5,716 ---------- ---------- Total assets $ 308,421 $ 311,621 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 31,466 $ 40,649 Accrued payroll and related costs 3,933 5,988 Current portion of deferred subscription income 33,528 28,724 ---------- ---------- Total current liabilities 68,927 75,361 DEFERRED SUBSCRIPTION INCOME 7,864 9,071 OTHER NONCURRENT LIABILITIES 4,884 4,997 ---------- ---------- Total liabilities 81,675 89,429 ---------- ---------- SHAREHOLDERS' EQUITY Class A common stock, $.01 par value, 350,000 shares authorized; 18,878 and 15,160 shares issued in 2002 and 2001, respectively 188 152 Class B common stock, $.01 par value, 150,000 shares authorized; 30,295 and 33,619 outstanding in 2002 and 2001, respectively 303 336 Capital in excess of par value 175,117 173,470 Retained earnings 51,913 49,009 Less Class A treasury stock - 59 shares at cost (775) (775) ---------- ---------- Total shareholders' equity 226,746 222,192 ---------- ---------- Total liabilities and shareholders' equity $ 308,421 $ 311,621 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Martha Stewart Living Omnimedia, Inc. Condensed Consolidated Income Statements (unaudited, in thousands, except per share amounts)
Three Months Ended March 31, --------------------------- 2002 2001 -------- -------- Revenues Publishing $ 43,095 $ 46,577 Television 6,711 6,443 Merchandising 11,075 7,828 Internet/Direct Commerce 7,819 9,501 -------- -------- Total revenues 68,700 70,349 -------- -------- Operating costs and expenses Production, distribution and editorial 38,237 35,755 Selling and promotion 11,319 11,538 General and administrative 11,657 10,932 Depreciation and amortization 3,055 1,978 Amortization of intangible assets --- 738 -------- -------- Total operating costs and expenses 64,268 60,941 -------- -------- Income from operations 4,432 9,408 Interest income, net 490 1,295 -------- -------- Income before income taxes 4,922 10,703 Income tax provision (2,018) (4,495) -------- -------- Net income $ 2,904 $ 6,208 ======== ======== Basic earnings per share $ 0.06 $ 0.13 -------- -------- Basic average shares outstanding 48,945 48,516 -------- -------- Diluted earnings per share $ 0.06 $ 0.13 -------- -------- Diluted average shares outstanding 49,097 49,176 -------- --------
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Martha Stewart Living Omnimedia, Inc. Consolidated Statement of Shareholders' Equity For the Three Months Ended March 31, 2002 (unaudited, in thousands)
Class A Class B Capital in Class A common stock common stock Excess of par Retained treasury stock Shares Amount Shares Amount value earnings Shares Amount Total ------ ------ ------ ------ ------------- -------- ------ ------ -------- Balance at January 1, 2002 15,160 $ 152 33,619 $ 336 $173,470 $ 49,009 (59) $ (775) $222,192 Net income for the period -- -- -- -- -- 2,904 -- -- 2,904 Conversion of shares 3,324 33 (3,324) (33) -- -- -- -- -- Issuance of shares for stock option exercises 394 3 -- -- 1,647 -- -- -- 1,650 ------ ------ ------ ------ -------- -------- ------ ------ -------- Balance at March 31, 2002 18,878 $ 188 30,295 $ 303 $175,117 $ 51,913 (59) $ (775) $226,746 ====== ====== ====== ====== ======== ======== ====== ====== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Martha Stewart Living Omnimedia, Inc. Condensed Consolidated Statements of Cash Flows (unaudited, in thousands)
Three Months Ended March 31, ------------------------- 2002 2001 --------- --------- Cash flows from operating activities Net income $ 2,904 $ 6,208 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 3,055 2,716 Changes in operating assets and liabilities, net of assets acquired (3,000) (17,985) --------- --------- Net cash provided by (used in) operating activities 2,956 (9,061) --------- --------- Cash flows from investing activities Acquisition of business -- (3,824) Capital expenditures (1,933) (3,805) --------- --------- Net cash used in investing activities (1,933) (7,629) --------- --------- Cash flows from financing activities Issuance of note payable -- 2,000 Proceeds received from stock option exercises 1,650 1,221 --------- --------- Net cash provided by financing activities 1,650 3,221 --------- --------- Net increase (decrease) in cash 2,676 (13,469) Cash and cash equivalents, beginning of period 141,162 127,425 --------- --------- Cash and cash equivalents, end of period $ 143,838 $ 113,956 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Martha Stewart Living Omnimedia, Inc. Notes to Condensed Consolidated Financial Statements (unaudited, in thousands, except per share data) 1. Accounting policies a. General Martha Stewart Living Omnimedia, Inc., together with its subsidiaries, is herein referred to as the "Company." 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 condensed consolidated financial statements are unaudited and should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission with respect to its fiscal year ended December 31, 2001. 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 Commencing January 1, 2002, the Company Adopted Statement of Financial Accounting Standards No. 142, "Accounting for Goodwill and Other Intangible Assets". Under SFAS 142, goodwill is no longer subject to amortization over its estimated useful life. Rather, goodwill is subject to an annual assessment for impairment by applying a fair-value based test. The Company is in the process of finalizing its initial valuations and expects that it will record a charge in the range of $5 to $6 million to adjust the carrying value of goodwill upon the completion of the evaluation. 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 costs and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. e. Reclassifications The prior period presentation has been restated to conform with Emerging Issues Task Force Issue 01-09. These rules require that certain expenses historically presented as expenses be reclassified and netted against revenue. 7 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 December 31, 31, 2002 2001 -------- ------------ Paper $ 5,846 $ 4,526 Product merchandise 8,099 8,426 ------- ------- $13,945 $12,952 ======= =======
3. 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 those related to its book, radio, newspaper and music operations. The Television segment consists of the Company's television production operations that produce television programming that airs in syndication in the United States and on cable in the United States, Canada and certain other international markets, weekly segments on CBS's The Early Show broadcast, as well as periodic prime time specials. The Merchandising segment consists of the Company's operations related to the design of, and licensing of certain of the Company's trademarks in connection with, merchandise and related promotional and packaging materials that are distributed by its retail and manufacturing partners in exchange for royalty income. The Internet/Direct Commerce segment comprises the Company's operations relating to the Martha by Mail catalog, a wedding registry and gift business, and the website marthastewart.com Revenues for each segment are presented in the condensed consolidated income statements. Income from operations for each segment is as follows:
Three Months Ended March 31, ----------------------- 2002 2001 -------- -------- Publishing $ 15,213 $ 17,349 Television 355 299 Merchandising 7,440 7,560 Internet/Direct Commerce (9,217) (5,963) -------- -------- Total before corporate charges 13,791 19,245 Corporate (9,359) (9,837) -------- -------- Income from operations $ 4,432 $ 9,408 ======== ========
8 Martha Stewart Living Omnimedia, Inc. Notes to Condensed Consolidated Financial Statements (unaudited, in thousands, except per share data) 4. Supplemental Cash Flow Information
Three Months Ended March 31, ------------------ 2002 2001 ------ ------ Cash paid for interest $ 59 $ 122 Cash paid for income taxes 633 2,230
9 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 its subsidiaries. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED MARCH 31, 2002 TO THREE MONTHS ENDED MARCH 31, 2001
Three Months Ended March 31, 2002 2001 -------- -------- (in thousands, except per share amounts) Revenues Publishing $ 43,095 $ 46,577 Television 6,711 6,443 Merchandising 11,075 7,828 Internet/Direct Commerce 7,819 9,501 -------- -------- Total revenues 68,700 70,349 -------- -------- Operating costs and expenses Production, distribution and editorial 38,237 35,755 Selling and promotion 11,319 11,538 General and administrative 11,657 10,932 Depreciation and amortization 3,055 1,978 Amortization of intangible assets -- 738 -------- -------- Total operating costs and expenses 64,268 60,941 -------- -------- Income from operations 4,432 9,408 -------- -------- Interest income, net 490 1,295 -------- -------- Income before income taxes 4,922 10,703 -------- -------- Income tax provision (2,018) (4,495) -------- -------- Net income $ 2,904 $ 6,208 ======== ======== Earnings per share- basic $ 0.06 $ 0.13 ======== ======== Earnings per share- diluted $ 0.06 $ 0.13 ======== ========
Revenues. Total revenues decreased $1.6 million, or 2.3%, to $68.7 million for the three months ended March 31, 2002, from $70.3 million for the three months ended March 31, 2001. Publishing revenues decreased $3.5 million, or 7.5%, to $43.1 million for the three months ended March 31, 2002, from $46.6 million for the three months ended March 31, 2001. This decrease was primarily due to the impact of publishing one less special issue in the quarter, which was partially offset by higher advertising revenues resulting from an advertising rate increase. Television revenues increased $0.3 million, or 4.2%, to $6.7 million for the three months ended March 31, 2002, from $6.4 million for the three months ended March 31, 2001. The increase is due primarily to revenues earned on two new cable programs, which was partially offset by an industry-wide decline in advertising rates. Merchandising revenues increased $3.3 million, or 41.5%, to $11.1 million for the three months ended March 31, 2002, from $7.8 million for the three months ended March 31, 2001, primarily as a result of an increased royalty rate under our agreement with Kmart, and revenue from the successful launches of the new Martha Stewart Everyday Keeping and Martha Stewart Everyday Decorating product lines at Kmart. Internet/Direct Commerce revenues decreased $1.7 million, or 17.7%, to $7.8 million for the three months ended March 31, 2002, from $9.5 million for the three months ended March 31, 2001, due to lower advertising revenues of $.4 million and the impact of lower catalog circulation. Product revenues were also negatively impacted from the relocation of our fulfillment center to a new center. Production, distribution and editorial. Production, distribution and editorial expenses increased $2.5 million, or 7.0%, to $38.2 million for the three months ended March 31, 2002, from $35.8 million for the three months ended March 31, 2001. Merchandising segment costs increased by $2.5 million due to the 10 elimination of cost reimbursements from Kmart as part of our new agreement, which commenced in August 2001. Publishing segment costs decreased $1.3 million primarily from the impact of a reduction in paper and printing costs associated with publishing one less special issue in the quarter. Internet/Direct Commerce segment costs increased $1.2 million primarily due to costs associated with the acquired Wedding List business. The segments costs also were negatively impacted by approximately $1.3 million attributable to moving our call and fulfillment center and employee costs associated with staff reductions during the quarter. Selling and promotion. Selling and promotion expenses decreased $0.2 million, or 2.0%, to $11.3 million for the three months ended March 31, 2002, from $11.5 million for the three months ended March 31, 2001. Publishing segment costs decreased $0.1 million resulting primarily from lower circulation costs associated with publishing one less special issue in the quarter. Internet/Direct Commerce segment costs decreased $0.1 million resulting from lower promotional spending, partially offset by costs from the acquired Wedding List business. General and administrative. General and administrative expenses increased $0.7 million, or 6.6%, to $11.7 million for the three months ended March 31, 2002, from $10.9 million for the three months ended March 31, 2001. The higher expenses primarily reflect the nature of the revised Kmart Agreement in which certain costs are no longer reimbursed. Depreciation and amortization. Depreciation and amortization increased $0.4 million, or 12.5%, to $3.1 million for the three months ended March 31, 2002, from $2.7 million for the three months ended March 31, 2001. The increase is primarily due to increased depreciation of our new website which we launched in November 2001. Furthermore, in the current year we have adopted the new SFAS 142 accounting rules. Accordingly, there is no expense in the current period for the amortization of goodwill. If this standard had been in effect for the prior year's period, the impact would have been to reduce amortization expense by $.7 million ($.01 per share). Under SFAS 142, goodwill is subject to annual assessment for impairment by applying a fair-value based test. The Company is in the process of finalizing its initial valuations and expects that it will record a charge in the range of $5 to $6 million to adjust the carrying value of goodwill upon the completion of the evaluation. Interest income, net. Interest income, net was $0.5 million for the three months ended March 31, 2002, compared to $1.3 million for the three months ended March 31, 2001, due to significantly lower interest rates which more than offset increased average cash balances during the 2002 quarter. Income tax provision. Income tax provision for the three months ended March 31, 2002 was $2.0 million, representing a 41% effective income tax rate. Income tax provision for the three months ended March 31, 2001 was $4.5 million, representing a 42% effective income tax rate. The lower rate in 2002 is due primarily to the effect of reduced non-deductible amortization of intangibles offset by reduced tax benefits from tax-free interest income. Net income. Net income was $2.9 million for the three months ended March 31, 2002, compared to net income of $6.2 million for the three months ended March 31, 2001, as a result of the above mentioned factors. Earnings per share. Basic and diluted earnings per share were $0.06 per share for the three months ended March 31, 2002, compared to $0.13 for the three months ended March 31, 2001. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $143.8 million at March 31, 2002, compared to $141.2 million at December 31, 2001. Cash flows from operating activities were $3.0 million during the three months ended March 31, 2002, resulting primarily from net income for the quarter. Cash flows used in operating activities were $9.1 million during the three months ended March 31, 2001 resulting primarily from net income which was more than completely offset by payments for accounts payable and accrued liabilities. 11 Cash flows used in investing activities were $1.9 million for the three months ended March 31, 2002, reflecting $1.9 million of capital expenditures, primarily for an internet technology project. Cash flows used in investing activities were $7.6 million during the three months ended March 31, 2001, reflecting a $3.8 million investment in The Wedding List and capital expenditures of $3.8 million. Cash flows provided by financing activities for the three months ended March 31, 2002 were $1.7 million, representing proceeds received from the exercise of employee stock options. Cash flows provided by financing activities were $3.2 million during the three months ended March 31, 2001, representing the issuance of a $2.0 million short term note payable in connection with The Wedding List acquisition and $1.2 million of proceeds received from the exercise of employee stock options. 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, 2002, 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 Weddings is published four times annually: one issue in each of the second and third quarters and two issues in the fourth quarter. Additionally, the publication schedule of special issue magazines can vary from quarter to quarter. Revenue and income from operations for the Television segment tend to be higher in the fourth quarter due to the broadcast of a holiday prime-time television special. 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 from quarter to quarter due to new product launches and the seasonality of certain product lines. 12 PART II: OTHER INFORMATION 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, but are not limited to, downturns in national and/or local economies; shifts in our own business strategies; 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; operational or financial problems at any of our contractual business partners; the receptivity of consumers to our new product introductions; unexpected developments in Kmart Corporation's Chapter 11 proceedings; and changes in government regulations affecting our industries. Additional information regarding some of these and other important factors that could cause actual results to differ from those in our forward-looking statements is contained in the prospectus forming part of our registration statement on Form S-1 (File No. 333-84001) under the caption "Risk Factors." ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibit is filed as part of this report: EXHIBIT NUMBER EXHIBIT TITLE ------- --------------------- 99.2 Letter of Martha Stewart Living Omnimedia, Inc., dated May 3, 2002, addressed to the Securities and Exchange Commission, regarding representations to Martha Stewart Living Omnimedia, Inc. from Arthur Andersen LLP. (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. 13 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 3, 2002 By: /s/ James Follo ---------------------------------------------------- Name: James Follo Title: Executive Vice President, Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 14 EX-99.2 3 y60267ex99-2.txt LETTER TO THE SECURITIES AND EXCHANGE COMMISSION Exhibit 99.2 MARTHA STEWART LIVING OMNIMEDIA, INC. 11 WEST 42ND STREET NEW YORK, NY 10036 LETTER TO COMMISSION PURSUANT TO TEMPORARY NOTE 3T May 3, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0408 Ladies and Gentlemen: Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Martha Stewart Living Omnimedia, Inc. ("MSO") has obtained a letter of representation from Arthur Andersen LLP ("Andersen") stating that Andersen's review of MSO's financial stetments for the quarter ending March 31, 2002 was subject to their quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Andersen personnel working on the audit and availability of national office consultation. Availability of personnel at foreign affiliates of Andersen is not relevant to this audit. Very truly yours, Martha Stewart Living Omnimedia, Inc. /s/ James Follo James Follo EVP, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----