SECURITIES AND EXCHANGE COMISSION
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 September 30, 2001
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 November 3, 2001
Class A, $0.01 par value 15,117,620
Class B, $0.01 par value 33,619,375
----------
Total 48,736,995
==========
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 9
Part II. Other Information
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
1
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Martha Stewart Living Omnimedia, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
September 30, December 31,
2001 2000
------------ -----------
ASSETS (unaudited)
- ------
CURRENT ASSETS
Cash and cash equivalents $ 131,657 $127,425
Accounts receivable, net 49,270 48,993
Inventories 13,029 9,433
Deferred television production costs 4,119 3,949
Other current assets 8,699 6,013
--------- --------
Total current assets 206,774 195,813
--------- --------
PROPERTY, PLANT AND EQUIPMENT, net 46,066 37,349
--------- --------
INTANGIBLE ASSETS, net 48,590 47,207
--------- --------
OTHER ASSETS 5,588 17,045
--------- --------
Total assets $ 307,018 $297,414
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 43,944 $ 48,340
Accrued payroll and related costs 6,248 7,190
Income taxes payable 2,080 2,590
Current portion of deferred subscription income 28,235 28,782
--------- --------
Total current liabilities 80,507 86,902
--------- --------
DEFERRED SUBSCRIPTION INCOME 7,505 8,614
--------- --------
OTHER NONCURRENT LIABILITIES 4,396 5,782
--------- --------
Total liabilities 92,408 101,298
--------- --------
SHAREHOLDERS' EQUITY
Class A common stock, $.01 par value, 350,000 shares authorized; 15,120 and
14,559 shares issued in 2001
and 2000, respectively 151 146
Class B common stock, $.01 par value, 150,000 shares
authorized; 33,619 and 33,888 shares outstanding in 2001
and 2000, respectively 336 339
Capital in excess of par value 171,439 168,528
Retained earnings 43,279 27,103
Less Class A treasury stock-at cost (595) --
--------- --------
Total shareholders' equity 214,610 196,116
--------- --------
Total liabilities and shareholders' equity $ 307,018 $297,414
========= ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
Martha Stewart Living Omnimedia, Inc.
Condensed Consolidated Income Statements
(unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
2001 2000 2001 2000
---- ---- ---- ----
Revenues
Publishing $ 44,789 $ 38,546 $ 134,443 $ 126,647
Television 6,627 7,112 19,970 21,445
Merchandising 8,289 6,757 24,913 18,915
Internet/Direct Commerce 9,930 9,474 31,244 33,221
-------- -------- --------- ---------
Total revenues 69,635 61,889 210,570 200,228
-------- -------- --------- ---------
Operating costs and expenses
Production, distribution and editorial 36,765 34,396 109,509 107,040
Selling and promotion 11,851 9,689 35,261 32,226
General and administrative 10,627 10,279 32,189 31,111
Depreciation and amortization 3,038 2,325 8,980 6,761
-------- -------- --------- ---------
Total operating costs and expenses 62,281 56,689 185,939 177,138
-------- -------- --------- ---------
Income from operations 7,354 5,200 24,631 23,090
Interest income, net 866 1,388 3,258 4,086
-------- -------- --------- ---------
Income before income taxes 8,220 6,588 27,889 27,176
Income tax provision (3,451) (2,768) (11,713) (11,823)
-------- -------- --------- ---------
Net income $ 4,769 $ 3,820 $ 16,176 $ 15,353
======== ======== ========= =========
Earnings per share
Basic $ 0.10 $ 0.08 $ 0.33 $ 0.31
======== ======== ========= =========
Diluted $ 0.10 $ 0.08 $ 0.33 $ 0.31
======== ======== ========= =========
Weighted average common shares outstanding
Basic 48,727 48,365 48,617 48,752
Diluted 49,022 50,741 49,093 50,328
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
Martha Stewart Living Omnimedia, Inc.
Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 2001
(unaudited, in thousands)
Class A Class B Capital in Class A
common stock common stock Excess of Retained treasury stock
Shares Amount Shares Amount par value earnings Shares Amount Total
------ ------ ------ ------ --------- -------- ------ ------ -----
Balance at January 1, 2001 14,559 $146 33,888 $ 339 $168,528 $27,103 -- -- $ 196,116
Net income for the period -- -- -- -- -- 16,176 -- -- 16,176
Conversion of shares 269 3 (269) (3) -- -- -- -- --
Issuance of shares for stock
option exercises 292 2 -- -- 2,911 -- -- -- 2,913
Purchases of treasury shares -- -- -- -- -- -- (45) $(595) (595)
------ ---- ------- ----- -------- ------- --- ----- ---------
Balance of September 30, 2001 15,120 $151 33,619 $ 336 $171,439 $43,279 (45) $(595) $ 214,610
====== ==== ======= ===== ======== ======= === ===== =========
The accompanying notes are an integral part of this condensed
consolidated financial statement.
4
Martha Stewart Living Omnimedia, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
Nine Months Ended
September 30,
-----------------------
2001 2000
------- -------
Cash flows from operating activities
Net income $ 16,176 $ 15,353
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 8,980 6,761
Changes in operating assets and liabilities (17,619) 706
--------- ---------
Net cash provided by operating activities 7,537 22,820
--------- ---------
Cash flows from investing activities
Equity investment, net 13,096 (13,297)
Acquisition of business (3,892) --
Capital expenditures (14,827) (13,578)
--------- ---------
Net cash used in investing activities (5,623) (26,875)
--------- ---------
Cash flows from financing activities
Proceeds received from stock option exercises 2,913 688
Repurchase of common stock (595) (32,506)
--------- ---------
Net cash provided by (used in) financing activities 2,318 (31,818)
--------- ---------
Net increase (decrease) in cash 4,232 (35,873)
Cash and cash equivalents, beginning of period 127,425 154,749
--------- ---------
Cash and cash equivalents, end of period $ 131,657 $ 118,876
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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, 2000.
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, 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 costs
and benefits attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases.
e. New accounting pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"). 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 standard is effective beginning January 1, 2002. The Company has yet to
determine the impact of the standard on its financial position and results
of operations.
6
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:
September 30, December 31,
2001 2000
------------- ------------
Paper $ 4,883 $4,151
Product merchandise 8,146 5,282
------------- ------------
$13,029 $9,433
============= ============
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.
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 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 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.
7
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 (loss) from operations for each segment were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2001 2000 2001 2000
---- ---- ---- ----
Publishing $ 15,741 $ 13,132 $ 48,362 $ 46,902
Television 699 663 1,887 3,311
Merchandising 6,539 6,701 22,566 18,753
Internet/Direct Commerce (6,400) (5,680) (19,260) (17,091)
-------- -------- -------- --------
Total before corporate charges 16,579 14,816 53,555 51,875
Corporate charges (9,225) (9,616) (28,924) (28,785)
-------- -------- -------- --------
Income from operations $ 7,354 $ 5,200 $ 24,631 $ 23,090
======== ======== ======== ========
5. Equity transactions
In September 2001, the Board of Directors authorized the repurchase of up
to $5,000 of the Company's outstanding common stock. Pursuant to the
program, purchases of stock may be made from time-to-time, in the open
market, subject to market conditions and at prevailing market prices.
During the quarter ended September 30, 2001, the Company purchased 45
shares of its class A common stock at a cost of $595.
6. Acquisition of The Wedding List
In March 2001, the Company acquired certain assets and liabilities of The
Wedding List, a wedding registry and gift business. The purchase price was
approximately $3.9 million. Goodwill of approximately $3.6 million,
recognized from the transaction based upon a preliminary estimate of the
purchase price, is being amortized over twenty years.
7. Supplemental cash flow information
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2001 2000 2001 2000
---- ---- ---- ----
Cash paid for interest $ 94 $ 145 $ 325 $ 508
Cash paid for income taxes $1,823 $1,891 $12,222 $8,961
8
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 SEPTEMBER 30, 2001 TO THREE MONTHS ENDED
SEPTEMBER 30, 2000
Three Months Ended
September 30,
---------------------------------------
2001 2000
----------------- -------------------
(in thousands, except per share amounts)
Revenues
Publishing $ 44,789 $ 38,546
Television 6,627 7,112
Merchandising 8,289 6,757
Internet/Direct Commerce 9,930 9,474
-------- --------
Total revenues 69,635 61,889
-------- --------
Operating costs and expenses
Production, distribution and editorial 36,765 34,396
Selling and promotion 11,851 9,689
General and administrative 10,627 10,279
Depreciation and amortization 3,038 2,325
-------- --------
Total operating costs and expenses 62,281 56,689
Income from operations 7,354 5,200
Interest income, net 866 1,388
-------- --------
Income before income taxes 8,220 6,588
Income tax provision (3,451) (2,768)
-------- --------
Net income $ 4,769 $ 3,820
======== ========
Earnings per share-basic $ 0.10 $ 0.08
======== ========
Earnings per share-diluted $ 0.10 $ 0.08
======== ========
Revenues. Total revenues increased $7.7 million or 12.5%, to $69.6 million for
the three months ended September 30, 2001, from $61.9 million for the three
months ended September 30, 2000. Publishing revenues increased $6.2 million, or
16.2%, to $44.8 million for the three months ended September 30, 2001, from
$38.5 million for the three months ended September 30, 2000. This increase was
primarily due to an increase in advertising pages sold in, and increased
newsstand sales of, Martha Stewart Living magazine resulting from the initial
publication of an August issue. Television revenues decreased $.5 million, or
7%, to $6.6 million for the three months ended September 30, 2001, from $7.1
million for the three months ended September 30, 2000. The decrease is due
primarily to lower syndication advertising revenues on the Martha Stewart Living
program due to lower ratings partially as a result of pre-emptions in the weeks
following the September 11 event. Merchandising revenues increased $1.5 million,
or 22.7%, to $8.3 million for the three months ended September 30, 2001, from
$6.8 million for the three months ended September 30, 2000 primarily as a result
of an increase in royalty rate under our new agreement with Kmart Corporation,
effective as of August 1, 2001. Internet/Direct Commerce revenues increased $.5
million, or 4.8%, to $9.9 million for the three months ended September 30, 2001,
from $9.4 million for the three months ended September 30, 2000, due primarily
to increased product sales resulting from the Wedding List acquisition in March
2001.
9
Production, distribution and editorial. Production, distribution and editorial
expenses increased $2.4 million, or 6.9%, to $36.8 million for the three months
ended September 30, 2001, from $34.4 million for the three months ended
September 30, 2000. Publishing segment costs increased $1.9 million reflecting
increased costs for Martha Stewart Living magazine due primarily to the initial
August publication of Martha Stewart Living in the third quarter. Merchandising
costs increased $.8 million due to the elimination of certain design cost
reimbursements from Kmart Corporation as part of our new agreement which
commenced in August. Television costs decreased $.4 million, primarily as a
result of lower distribution costs associated with lower revenues, as previously
discussed, and lower production costs incurred during the three months ended
September 30, 2001.
Selling and promotion. Selling and promotion expenses increased $2.2 million, or
22%, to $11.9 million for the three months ended September 30, 2001, from $9.7
million for the three months ended September 30, 2000. Publishing segment costs
increased $1.6 million resulting from higher advertising and circulation costs
incurred to support higher revenues, including revenues from the initial August
publication of Martha Stewart Living. Internet/Direct Commerce segment costs
increased $.5 million resulting from the acquisition of the Wedding List.
General and administrative. General and administrative expenses increased $.3
million, or 3.4 %, to $10.6 million for the three months ended September 30,
2001, from $10.3 million for the three months ended September 30, 2000. The
higher expenses have been incurred primarily as a result of higher occupancy
costs related to our new office facility, which we began occupying in December
2000 partially offset by lower compensation costs.
Depreciation and amortization. Depreciation and amortization increased $.7
million, or 31%, to $3.0 million for the three months ended September 30, 2001,
from $2.3 million for the three months ended September 30, 2000. The increase is
attributable to higher levels of property and equipment associated with our new
facility.
Interest income, net. Interest income, net was $.9 million for the three months
ended September 30, 2001, compared to interest income of $1.4 million for the
three months ended September 30, 2000. Increased average cash balances were more
than offset by lower earned interest rates.
Income tax provision. The income tax provision for the three months ended
September 30, 2001 was $3.5 million representing a 42% effective income tax
rate. The income tax provision for the three months ended September 30, 2000 was
$2.8 million representing a comparable 42% effective income tax rate.
Net income. Net income was $4.8 million for the three months ended September 30,
2001, compared to net income of $3.8 million for the three months ended
September 30, 2000, as a result of the above mentioned factors.
10
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2001 TO NINE MONTHS ENDED
SEPTEMBER 30, 2000
Nine Months Ended
September 30,
---------------------------------------
2001 2000
---------------- ----------------
(in thousands, except per share amounts)
Revenues
Publishing $ 134,443 $ 126,647
Television 19,970 21,445
Merchandising 24,913 18,915
Internet/Direct Commerce 31,244 33,221
--------- ---------
Total revenues 210,570 200,228
--------- ---------
Operating costs and expenses
Production, distribution and editorial 109,509 107,040
Selling and promotion 35,261 32,226
General and administrative 32,189 31,111
Depreciation and amortization 8,980 6,761
--------- ---------
Total operating costs and expenses 185,939 177,138
Income from operations 24,631 23,090
Interest income, net 3,258 4,086
--------- ---------
Income before income taxes 27,889 27,176
Income tax provision (11,713) (11,823)
--------- ---------
Net income $ 16,176 $ 15,353
========= =========
Earnings per share-basic $ 0.33 $ 0.31
========= =========
Earnings per share-diluted $ 0.33 $ 0.31
========= =========
Revenues. Total revenues increased $10.3 million, or 5.2%, to $210.6 million for
the nine months ended September 30, 2001, from $200.2 million for the nine
months ended September 30, 2000. Publishing revenues increased $7.8 million, or
6.2%, to $134.4 million for the nine months ended September 30, 2001, from
$126.6 million for the nine months ended September 30, 2000. This increase was
primarily due to an increase in advertising pages sold in, and increased
newsstand sales resulting from, an increase in titles published from 12 to 15
including the initial August publication of Martha Stewart Living, the
publication of a custom published magazine, Martha Stewart Everyday Garden, and
the initial publication of Martha Stewart Kids. Television revenues decreased
$1.4 million, or 6.9%, to $20.0 million for the nine months ended September 30,
2000, from $21.4 million for the nine months ended September 30, 2000. The
decrease is due primarily to lower syndication advertising revenues on the
Martha Stewart Living program due to lower ratings. Merchandising revenues
increased $6.0 million, or 31.7%, to $24.9 million for the nine months ended
September 30, 2001, from $18.9 million for the nine months ended September 30,
2000, primarily as a result of increased sales of Martha Stewart Everyday
products sold at Kmart which included the launch of new kitchen keeping and
decorating product lines and increased product sales in the garden product line
and the increased royalty rate commencing in August. Internet/Direct Commerce
revenues decreased $2.0 million, or 6.0%, to $31.2 million for the nine months
ended September 30, 2001, from $33.2 million for the nine months ended September
30, 2000, due to lower advertising of $1.4 million and lower product sales of
$.6 million.
Production, distribution and editorial. Production, distribution and editorial
expenses increased $2.5 million, or 2.3%, to $109.5 million for the nine months
ended September 30, 2001, from $107.0 million for the nine months ended
September 30, 2000. Publishing segment costs increased $4.8 million reflecting
the increased publication schedule. Merchandising costs increased $.6 million
reflecting the changed terms of the Kmart contract whereby our costs are no
longer reimbursed. Internet/Direct Commerce costs decreased $2.8 million due
primarily to reduced costs of catalog production and circulation, web site costs
and outside consultants.
11
Selling and promotion. Selling and promotion expenses increased $3.0 million, or
9.4%, to $35.2 million for the nine months ended September 30, 2001 from $32.2
million for the nine months ended September 30, 2000. Publishing segment costs
increased $1.0 million resulting from circulation costs incurred to support
higher circulation revenues due largely to the increased frequency of Martha
Stewart Living magazine. Internet/Direct Commerce segment costs increased $1.6
million resulting from higher costs associated with media purchases and
increased costs from the acquired business.
General and administrative. General and administrative expenses increased $1.1
million, or 3%, to $32.2 million for the nine months ended September 30, 2001,
from $31.1 million for the nine months ended September 30, 2000. The higher
expenses have been incurred primarily as a result of higher occupancy costs
related to our new office facility, which we began occupying in December 2000.
Depreciation and amortization. Depreciation and amortization increased $2.2
million, or 33% to $9.0 million for the nine months ended September 30, 2001,
from $6.8 million for the nine months ended September 30, 2000. The increase is
attributable to higher levels of property and equipment associated with our new
facility.
Interest income, net. Interest income, net was $3.3 million for the nine months
ended September 30, 2001, compared to interest income of $4.0 million for the
nine months ended September 30, 2000 due to lower earned interest rates during
2001.
Income tax provision. The income tax provision for the nine months ended
September 30, 2001 was $11.7 million, representing a 42.0% effective income tax
rate. The income tax provision during the nine months ended September 30, 2000
was $11.8 million, representing a 43.5% effective rate. The lower rate in 2001
is due to the effect of tax-free interest income earned on invested cash.
Net income. Net income was $16.2 million for the nine months ended September 30,
2001, compared to net income of $15.4 million for the nine months ended
September 30, 2000, as a result of the above-mentioned factors.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $7.5 million during the nine months
ended September 30, 2001, compared to $22.8 million during the nine months ended
September 30, 2000, resulting primarily from net income for the period,
partially offset by payments for accounts payable and accrued liabilities.
Payments for accounts payable and accrued liabilities in the nine months ended
September 30, 2001 exceeded the prior year primarily as a result of timing of
payments for our new office facility and our internet technology upgrade
project.
Cash flows used in investing activities were $5.6 million for the nine months
ended September 30, 2001, reflecting capital expenditures of $14.8 million
primarily for our internet technology upgrade project, $3.9 million used to
acquire The Wedding List, offset by net investment proceeds of $13.1 million
received primarily from the sale of our equity investment in BlueLight.com. Cash
flows used in investing activities were $26.9 million during the nine months
ended September 30, 2000, reflecting the initial investment in BlueLight.com of
$13.3 million and capital expenditures of $13.6 million primarily related to
development of the Company's new office facility.
Cash flows provided from financing activities for the nine months ended
September 30, 2001 were $2.3 million representing proceeds received from the
exercise of employee stock options, partially offset by purchases under the
stock repurchase program. Cash used in financing activities during the preceding
year of $31.8 million primarily reflected the repurchase of Class A common stock
from Time Publishing Ventures, Inc.
12
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 September 30, 2001, 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.
Revenue and income from operations in the Publishing segment can vary based upon
the number of titles published within the quarter, which varies from
quarter-to-quarter. Revenue and income from operations for the Television
segment have historically been higher in the fourth quarter due to generally
higher ratings and the broadcast of prime time television specials.
Internet/Direct Commerce revenues have historically tended 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.
13
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; a softening of the domestic advertising market;
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 problems at any of our contractual business partners;
the receptivity of consumers to our product introductions; changes in government
regulations affecting our industries; and the continuing adverse impact on the
economy in general of the September 11 terrorist attacks. 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
No exhibits are filed as part of this report:
(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
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: November 13, 2001 By: /s/ James Follo
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Name: James Follo
Title: Executive Vice President, Chief Financial Officer
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