8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2010

MARTHA STEWART LIVING OMNIMEDIA, INC.
(Exact name of registrant as specified in its charter)

Delaware	001-15395	52-2187059
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

601 W. 26th Street New York, NY	10001
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 827-8000

Not applicable

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On July 28, 2010, Martha Stewart Living Omnimedia, Inc. (the “Company”) announced via press release its preliminary results of operations for its quarter ended June 30, 2010. A copy of the press release is attached as Exhibit 99.1 hereto. The information contained in this report shall be treated as furnished and not filed for purposes of the Securities Exchange Act of 1934, as amended.

Item 9.01 Financial Statements and Exhibits.

(d)	Exhibit		Description
		99.1	Press release dated July 28, 2010 by the Company, reporting its preliminary results of operations for the quarter ended June 30, 2010 (furnished and not filed herewith as described in Item 2.02).

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 hereunto duly authorized.  

MARTHA STEWART LIVING OMNIMEDIA, INC.

     
Date: July 28, 2010

By: /s/ Peter Hurwitz
Executive Vice President and General Counsel

EXHIBIT INDEX

Exhibit	Description
99.1	Press release dated July 28, 2010 by the Company, reporting its preliminary results of operations for the quarter ended June 30, 2010 (furnished and not filed herewith as described in Item 2.02).

EX-99.1

Exhibit 99.1

Martha Stewart Living Omnimedia Reports Second Quarter 2010 Results

— Results Reflect Strong Merchandising Performance with Expansion of Offerings at The Home Depot
and Launch of Martha Stewart Pets at PetSmart Stores

— Double-Digit Growth in Internet Advertising Revenue and Continued Stabilization in Print
Advertising Revenue

NEW YORK, July 28 /PRNewswire-FirstCall/ — Martha Stewart Living Omnimedia, Inc. (NYSE: MSO) today announced its results for the second quarter ended June 30, 2010. The Company reported revenue for the second quarter of $55.3 million. Results overall benefited from strong Merchandising sales, growth in Internet advertising revenue and continued stabilization in Publishing advertising revenue.

Charles Koppelman, Executive Chairman and Principal Executive Officer, said, “At the midpoint for the year, we are holding our own in the marketplace as we continue to aggressively roll out new relationships with partners like The Home Depot and new offerings such as our Martha Stewart Pets line at PetSmart that position the company for attractive growth. We’re seeing continued stabilization in Publishing and strong growth in Internet. We look forward to the launch of our new block of programming on Hallmark Channel in September.”

Robin Marino, President and Chief Executive Officer of Merchandising, stated: “Merchandising had a strong quarter. We expanded our presence at The Home Depot, building on our offerings in the Outdoor Living, Storage & Organization and Paint categories with the addition of a new Carpet program. We also launched our new Martha Stewart Pets line in PetSmart’s nearly 1,200 stores. We see a lot of opportunity in the thriving pet-care category where we have tremendous brand equity and an enthusiastic consumer base. Additionally, our Martha Stewart Collection at Macy’s and our Martha Stewart Crafts line at Michaels and independent retailers continued to perform well in the quarter. We feel very good about our Merchandising business and its prospects for long-term growth.”

Second Quarter 2010 Summary

Revenues were $55.3 million in the second quarter of 2010, compared to $57.0 million in the second quarter of 2009.

Adjusted EBITDA for the second quarter of 2010 was $1.8 million, compared to $2.8 million in the prior year period.

Operating loss for the second quarter of 2010 was $(0.8) million, compared to operating loss of $(6.1) million for the second quarter of 2009. Included in the 2009 second quarter results was an impairment charge of $(5.5) million in the Merchandising segment.

Net loss per share was $(0.02) for the second quarter of 2010, compared to net loss per share of $(0.12) for the second quarter of 2009. Included in the 2009 second quarter results was an impairment charge of $(0.10) per share in the Merchandising segment.

Second Quarter 2010 Results by Segment

	Three Months Ended, June 30
	(unaudited, in thousands)
	2010			2009
REVENUES
Publishing	$	30,612		$	33,524
Broadcasting		8,190			10,309
Internet		4,680			4,160
Merchandising		11,817			9,003
Total Revenues	$	55,299		$	56,996
ADJUSTED EBITDA
Publishing	$	2,348		$	2,869
Broadcasting		(1,342	)		1,882
Internet		4			75
Merchandising		7,652			5,079
Corporate		(6,843	)		(7,131	)
Total Adjusted EBITDA	$	1,819		$	2,774
OPERATING (LOSS)/INCOME
Publishing	$	2,092		$	2,995
Broadcasting		(1,458	)		1,678
Internet		(205	)		(470	)
Merchandising		7,329			(691	)
Corporate		(8,561	)		(9,614	)
Total Operating Loss	$	(803	)	$	(6,102	)

Publishing

Revenues in the second quarter of 2010 were $30.6 million, compared to $33.5 million in the prior year’s second quarter. The decrease is primarily due to the timing of the Spring issue of Martha Stewart Weddings, which was recognized in the second quarter of 2009 compared to the first quarter of 2010.

Adjusted EBITDA was $2.3 million in the second quarter of 2010, compared to adjusted EBITDA of $2.9 million in the prior year’s quarter.

Operating income was $2.1 million for the second quarter of 2010, compared to operating income of $3.0 million in the second quarter of 2009.

Highlights

• Excluding the Spring issue of Martha Stewart Weddings, advertising revenue was up 3% compared to the prior year’s quarter.

• Ad pages in the August issue of Martha Stewart Living are up 29% year-over-year.

• In the quarter, MSLO’s bestselling cookbook Everyday Food: Fresh Flavor Fast was released as Clarkson Potter’s first full-color illustrated digital cookbook; Chef Emeril Lagasse’s Farm to Fork: Cooking Local, Cooking Fresh was also released in an electronic format.

• MSLO announced plans to launch a UK edition of Martha Stewart Living in September 2010; the magazine is expected to be distributed throughout the UK, New Zealand and Australia.

Broadcasting

Revenues in the second quarter of 2010 were $8.2 million, compared to $10.3 million in the second quarter of 2009 due to lower revenue from The Martha Stewart Show, lower radio revenue and the absence of TurboChef in this year’s quarter.

Adjusted EBITDA was $(1.3) million for the second quarter of 2010, down from $1.9 million in the prior year’s second quarter primarily due to lower revenue described above as well as expenses related to The Emeril Lagasse Show.

Operating loss was $(1.5) million for the second quarter of 2010, compared to operating income of $1.7 million in the second quarter of 2009.

Highlights

• The Martha Stewart Show was honored as “Outstanding Lifestyle Program” at the 37^th Annual Daytime Entertainment Emmy Awards on June 25.

• Martha Stewart Living Omnimedia and Hallmark Channel unveiled two new series set to launch on the cable network this fall, featuring MSLO experts and personalities Lucinda Scala Quinn, Alexis Stewart and Jennifer Koppelman Hutt.

• Hallmark Channel also announced that it will feature two, hour-long, prime-time specials celebrating Halloween and Christmas, as well as two prime-time interview specials, all hosted by Martha.

• Chef Emeril Lagasse’s new TV show Fresh Food Fast premiered on the Food Network’s new Cooking Channel on July 10.

Internet

Revenues were $4.7 million in the second quarter of 2010, up 12% from $4.2 million in the second quarter of 2009.

Adjusted EBITDA was essentially breakeven in the second quarter of 2010 down slightly from $0.1 million in the prior year’s quarter.

Operating loss was $(0.2) million in the second quarter of 2010, compared to $(0.5) million in the second quarter of 2009.

Highlights

• Advertising revenue was up 13% compared to the prior year’s quarter.

• According to comScore panel data, unique visitors across MSLO’s websites increased 9% compared to the prior year’s quarter and 15% year-over-year for the first half of the year.

• Martha Stewart’s Everyday Food app for the iPhone and iPod Touch has been downloaded more than 160,000 times since its mid-February launch.

Merchandising

Revenues were $11.8 million for the second quarter of 2010, as compared to $9.0 million in the prior year’s second quarter. Included in the results is an additional $2.2 million in revenue received from the early termination of our agreement with 1-800-Flowers.com. Excluding this revenue, but including significant Kmart revenues in the prior year, Merchandising revenue was up 7% year-over-year.

Adjusted EBITDA was $7.7 million for the second quarter of 2010, compared to $5.1 million in the prior year’s second quarter.

Operating income was $7.3 million for the second quarter of 2010, compared to operating loss of $(0.7) million in the second quarter of 2009, which included an impairment charge of $(5.5) million.

Highlights

• The Martha Stewart Living paint line launched at The Home Depot Stores in the quarter followed by the roll out of a new branded carpet program. The line will be expanding into cabinetry in the fall followed by a holiday décor program.

• The Martha Stewart Collection at Macy’s continues to perform well, driven by strong sales in the soft home and housewares categories.

• The Martha Stewart Pets line launched exclusively at PetSmart Stores in the U.S. and Canada and on petsmart.com. The new line includes a wide range of pet-related products, including collars, leashes, bedding, feeding, grooming and bathing supplies.

• Martha Stewart successfully debuted live at HSN on July 19 to promote Martha Stewart Crafts products.

• Emeril launched his new Red Marble Steaks with Allen Brothers on May 1; the premium, high-quality cuts of beef are available for purchase online.

Corporate

Adjusted EBITDA was a loss of $(6.8) million in the second quarter of 2010 compared to $(7.1) million in the prior year’s quarter. Total Corporate expenses were $(8.6) million in the second quarter of 2010 down from $(9.6) million in the prior year’s quarter.

The Company will host a conference call with analysts and investors on July 28th at 11:00 a.m. EDT that will be broadcast live over the Internet at www.marthastewart.com/ir, and an archived version will be available through August 12, 2010.

Use of Non-GAAP Financial Information

In addition to using net income to assess the organization’s overall financial health, Company management uses consolidated net income/(loss) before interest income or expense, taxes, depreciation and amortization, impairment, non-cash equity compensation expense and other expense (including loss on equity securities)(“adjusted EBITDA”), a non-GAAP financial measure, to evaluate the performance of our businesses on a real-time basis. Adjusted EBITDA is considered an important indicator of operational strength, is a direct component of the Company’s annual compensation program, and is a significant factor in helping our management determine how to allocate resources and capital. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP. Management considers adjusted EBITDA to be a critical measure of operational health because it captures all of the revenue and ongoing operating expenses of our businesses without the influence of (i) interest charges, which result from our capital structure, not our ongoing business efforts, (ii) taxes, which relate to the overall organizational financial return, not that of any one business, (iii) the capital expenditure costs associated with depreciation and amortization, which are a function of historical decisions on infrastructure and capacity, (iv) the cost of non-cash equity compensation which, as a function of our stock price, can be highly variable, is not necessarily an indicator of current operating performance for any individual business unit, and is amortized over the appropriate period, (v) non-cash impairment charges, which are impacted by macro-economic conditions and do not necessarily reflect operating performance, and (vi) other expense which may include non-operational items such as loss on equity securities.

Adjusted EBITDA provides a means to directly evaluate the ability of our business operations to generate returns on a real-time basis. We provide disclosure of adjusted EBITDA because we believe it is useful for investors to have means to assess our performance as we do. While adjusted EBITDA is a customized non-GAAP measure, it also provides a means to analyze value and compare our operating capabilities to those of companies with which we compete, many of which have different compensation plans, depreciation and amortization costs, capital structures and tax burdens. But please note that our non-GAAP results may differ from similar measures used by other companies, even if similar terms are used to identify such measures.

A limitation of adjusted EBITDA is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues for our overall organization. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures. Management also evaluates the cost of capitalized tangible and intangible assets by analyzing returns provided on the capital dollars deployed. A further limitation of adjusted EBITDA is that it does not include stock compensation expense related to our workforce. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income or other measures of financial performance reported in accordance with GAAP.

About Martha Stewart Living Omnimedia, Inc.

Martha Stewart Living Omnimedia, Inc. (MSLO) is a leading provider of original “how-to” information, inspiring and engaging consumers with unique lifestyle content and high-quality products. MSLO is organized into four business segments: Publishing, Broadcasting, Internet, and Merchandising. MSLO is listed on the New York Stock Exchange under the ticker symbol MSO.

Forward-Looking Statements

We have included in this press release 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 current beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. These statements include estimates of future financial performance, potential opportunities, expected product line expansions and additions, future acceptability of our content and our businesses, anticipated growth, and other statements that can be identified by terminology such as “may,” “will,” “should,” “could,” “position,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “potential” or “continue” or the negative of these terms or other comparable terminology. The Company’s actual results may differ materially from those projected in these statements, and factors that could cause such differences include: adverse reactions to publicity relating to Martha Stewart or Emeril Lagasse by consumers, advertisers and business partners; further downturns in national and/or local economies; shifts in our business strategies; a loss of the services of Ms. Stewart or Mr. Lagasse; a loss of the services of other key personnel; a renewed softening of the domestic advertising market; changes in consumer reading, purchasing and/or television viewing patterns; unanticipated increases in paper, postage or printing costs; operational or financial problems at any of our contractual business partners; the receptivity of consumers to our new product introductions; the inability to add to our partnerships or capitalize on existing partnerships; and changes in government regulations affecting the Company’s industries.

Certain of these and other factors are discussed in more detail in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission, especially under the heading “Risk Factors,” which may be accessed through the SEC’s World Wide Web site at http://www.sec.gov. The Company is under no obligation to update any forward-looking statements after the date of this release.

Martha Stewart Living Omnimedia, Inc.

Consolidated Statements of Operations

Three Months Ended June 30,

(unaudited, in thousands, except per share amounts)

	2010			2009
REVENUES
Publishing	$	30,612		$	33,524
Broadcasting		8,190			10,309
Internet		4,680			4,160
Merchandising		11,817			9,003
Total revenues		55,299			56,996
OPERATING COSTS AND EXPENSES
Production, distribution and editorial		29,124			29,311
Selling and promotion		13,479			13,556
General and administrative		12,559			12,584
Depreciation and amortization		940			2,147
Impairment charge		—			5,500
Total operating costs and expenses		56,102			63,098
OPERATING LOSS		(803	)		(6,102	)
OTHER (EXPENSE) / INCOME
Interest expense, net		(27	)		(81	)
(Loss) / income on equity securities		(19	)		209
Total other (expense) / income		(46	)		128
LOSS BEFORE INCOME TAXES		(849	)		(5,974	)
Income tax provision		(400	)		(400	)
NET LOSS	$	(1,249	)	$	(6,374	)
LOSS PER SHARE – BASIC AND DILUTED
Net loss	$	(0.02	)	$	(0.12	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and Diluted		54,389			53,820

Martha Stewart Living Omnimedia, Inc.

Consolidated Statements of Operations

Six Months Ended June 30,

(unaudited, in thousands, except per share amounts)

	2010			2009
REVENUES
Publishing	$	58,863		$	61,885
Broadcasting		20,281			20,823
Internet		7,764			6,782
Merchandising		21,626			17,936
Total revenues		108,534			107,426
OPERATING COSTS AND EXPENSES
Production, distribution and editorial		56,653			57,480
Selling and promotion		28,086			28,337
General and administrative		25,905			26,698
Depreciation and amortization		2,062			3,899
Impairment charge		—			12,600
Total operating costs and expenses		112,706			129,014
OPERATING LOSS		(4,172	)		(21,588	)
OTHER EXPENSE
Interest expense, net		(108	)		(89	)
Loss on equity securities		(19	)		(547	)
Other loss		—			(236	)
Total other expense		(127	)		(872	)
LOSS BEFORE INCOME TAXES		(4,299	)		(22,460	)
Income tax provision		(814	)		(758	)
NET LOSS	$	(5,113	)	$	(23,218	)
LOSS PER SHARE – BASIC AND DILUTED
Net Loss	$	(0.09	)	$	(0.43	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		54,360			53,793

Martha Stewart Living Omnimedia, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)

	June 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	28,910		$	25,384
Short-term investments		14,456			13,085
Accounts receivable, net		41,138			56,364
Inventory		4,376			5,166
Deferred television production costs		4,490			3,788
Other current assets		5,957			5,709
Total current assets		99,327			109,496
PROPERTY, PLANT AND EQUIPMENT, net		16,886			17,268
GOODWILL, net		45,107			45,107
OTHER INTANGIBLE ASSETS, net		47,064			47,070
OTHER NONCURRENT ASSETS, net		12,724			10,850
Total assets	$	221,108		$	229,791
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	21,891		$	26,752
Accrued payroll and related costs		6,208			7,495
Current portion of deferred subscription income		17,674			18,587
Current portion of other deferred revenue		6,151			4,716
Current portion loan payable		1,500			—
Total current liabilities		53,424			57,550
DEFERRED SUBSCRIPTION INCOME		4,957			5,672
OTHER DEFERRED REVENUE		2,215			2,759
LOAN PAYABLE		10,500			13,500
DEFERRED INCOME TAX LIABILITY		3,888			3,200
OTHER NONCURRENT LIABILITIES		3,532			3,290
Total liabilities		78,516			85,971
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Class A common stock, $0.01 par value, 350,000 shares authorized: 28,329 and 28,313 shares outstanding in 2010 and 2009, respectively		283			283
Class B common stock, $0.01 par value, 150,000 shares authorized: 26,690 shares outstanding in 2010 and 2009		267			267
Capital in excess of par value		293,708			290,387
Accumulated deficit		(151,718	)		(146,605	)
Accumulated other comprehensive income		827			263
		143,367			144,595
Less class A treasury stock — 59 shares at cost		(775	)		(775	)
Total shareholders’ equity		142,592			143,820
Total liabilities and shareholders’ equity	$	221,108		$	229,791

Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Three Months Ended June 30,
(unaudited, in thousands)

The following table presents segment and consolidated financial information, including a reconciliation of net loss, a GAAP measure, to adjusted EBITDA, a non-GAAP measure. Adjusted EBITDA can be reconciled to net loss by adding back interest expense net, taxes, depreciation and amortization, impairment, non-cash equity compensation expense and other expense (including (loss)/income on equity securities) to net loss.

	2010			2009
ADJUSTED EBITDA
Publishing	$	2,348		$	2,869
Broadcasting		(1,342	)		1,882
Internet		4			75
Merchandising		7,652			5,079
Corporate		(6,843	)		(7,131	)
Adjusted EBITDA		1,819			2,774
NON-CASH EQUITY COMPENSATION
Publishing		207			(183	)
Broadcasting		44			136
Internet		24			28
Merchandising		312			253
Corporate		1,095			995
Total Non-Cash Equity Compensation		1,682			1,229
DEPRECIATION AND AMORTIZATION
Publishing		49			57
Broadcasting		72			68
Internet		185			517
Merchandising		11			17
Corporate		623			1,488
Total Depreciation and Amortization		940			2,147
IMPAIRMENT ON MERCHANDISING EQUITY INVESTMENTS		—			5,500
OPERATING (LOSS) / INCOME
Publishing		2,092			2,995
Broadcasting		(1,458	)		1,678
Internet		(205	)		(470	)
Merchandising		7,329			(691	)
Corporate		(8,561	)		(9,614	)
Total Operating Loss		(803	)		(6,102	)
OTHER INCOME / (EXPENSE)
Interest (expense) / income, net		(27	)		(81	)
(Loss) / income on equity securities		(19	)		209
Total other (expense) / income		(46	)		128
LOSS BEFORE INCOME TAXES		(849	)		(5,974	)
Income tax provision		(400	)		(400	)
NET LOSS	$	(1,249	)	$	(6,374	)

Martha Stewart Living Omnimedia, Inc.
Supplemental Disclosures Regarding Non-GAAP Financial Information
Six Months Ended June 30,
(unaudited, in thousands)

The following table presents segment and consolidated financial information, including a reconciliation of net loss, a GAAP measure, to adjusted EBITDA, a non-GAAP measure. Adjusted EBITDA can be reconciled to net loss by adding back interest expense net, taxes, depreciation and amortization, impairment, non-cash equity compensation expense and other expense (including loss on equity securities) to net loss.

	2010			2009
ADJUSTED EBITDA
Publishing	$	1,530		$	1,506
Broadcasting		2,071			2,913
Internet		(1,073	)		(1,464	)
Merchandising		13,360			10,578
Corporate		(14,528	)		(15,761	)
Adjusted EBITDA		1,360			(2,228	)
NON-CASH EQUITY COMPENSATION
Publishing		432			253
Broadcasting		215			264
Internet		33			69
Merchandising		685			409
Corporate		2,105			1,866
Total Non-Cash Equity Compensation		3,470			2,861
DEPRECIATION AND AMORTIZATION
Publishing		100			131
Broadcasting		136			138
Internet		569			969
Merchandising		22			35
Corporate		1,235			2,626
Total Depreciation and Amortization		2,062			3,899
IMPAIRMENT ON MERCHANDISING EQUITY INVESTMENTS		—			12,600
OPERATING (LOSS) / INCOME
Publishing		998			1,122
Broadcasting		1,720			2,511
Internet		(1,675	)		(2,502	)
Merchandising		12,653			(2,466	)
Corporate		(17,868	)		(20,253	)
Total Operating Loss		(4,172	)		(21,588	)
OTHER EXPENSE
Interest expense, net		(108	)		(89	)
Loss on equity securities		(19	)		(547	)
Other loss		—			(236	)
Total other expense		(127	)		(872	)
LOSS BEFORE INCOME TAXES		(4,299	)		(22,460	)
Income tax provision		(814	)		(758	)
NET LOSS	$	(5,113	)	$	(23,218	)

CONTACT: Katherine Nash, Corporate Communications and Investor Relations, Martha Stewart Living Omnimedia, Inc., 212-827-8722, knash@marthastewart.com.