Martha Stewart Living Omnimedia Inc. Reports Operating Results (10-Q)

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Aug 11, 2009
Martha Stewart Living Omnimedia Inc. (MSO, Financial) filed Quarterly Report for the period ended 2009-06-30.

Martha Stewart Living Omnimedia Inc. is a leading creator of original `how to` content and related products for homemakers and other consumers. The company leverages the well-known `Martha Stewart` brand name across a broad range of media and retail outlets providing consumers with the `how to` ideas products and other resources they need to raise the quality of living in and around their homes. Martha Stewart Living Omnimedia Inc. has a market cap of $215.5 million; its shares were traded at around $3.93 with and P/S ratio of 0.8.

Highlight of Business Operations:

On August 7, 2009, Martha Stewart Living Omnimedia, Inc. (the Company) and its wholly-owned subsidiary, MSLO Emeril Acquisition Sub LLC (the Borrower), entered into an Amended and Restated Loan Agreement (the Amended and Restated Loan Agreement) with Bank of America, N.A. (the Bank), which Amended and Restated Loan Agreement replaces in its entirety the loan agreement dated April 4, 2008 (the Original Loan Agreement) among the Company, the Borrower and the Bank. Pursuant to the Original Loan Agreement, on April 7, 2008 the Borrower borrowed a $30 million term loan from the Bank (the Loan), of which $17,500,000 was outstanding on August 7, 2009. The term and conditions of the Loan are now governed by the Amended and Restated Loan Agreement instead of the Original Loan Agreement. The Amended and Restated Loan Agreement requires the Borrower to continue repaying the Loan in principal installments of $1.5 million, plus accrued interest, on the last day of each calendar quarter, with the balance of the principal of the Loan, plus accrued interest, due on December 7, 2012. The Borrower may prepay the Loan in whole or in part at any time without penalty or premium. The Loan is guaranteed by the Company and its domestic subsidiaries (other than MSLO Shared IP Sub LLC (the Shared IP Sub)).

The Amended and Restated Loan Agreement also contains a variety of customary affirmative and negative covenants that, among other things, limit the Companys and its subsidiaries ability to incur additional debt, suffer the creation of liens on their assets, pay dividends or repurchase stock, make investments or loans, sell assets, enter into transactions with affiliates other than on arms length terms, make capital expenditures, merge into or acquire other entities or liquidate. The negative covenants expressly permit the Company to, among other things: incur an additional $15 million of debt during the term of the Loan to finance permitted investments or acquisitions; incur $15 million of earnout liabilities during the term of the Loan in connection with permitted acquisitions; spend up to $30 million during the term of the Loan repurchasing its stock or paying dividends thereon (so long as no default or event of default existed at the time of or would result from such repurchase or dividend payment and, if the Cash Collateral has been released, the Company would be in pro forma compliance with the above-described financial covenants assuming such repurchase or dividend payment had occurred at the beginning of the most recently-ended four-quarter period); make investments and acquisitions (so long as no default or event of default existed at the time of or would result from such investment or acquisition and, if the Cash Collateral has been released, the Company would be in pro forma compliance with the above-described financial covenants assuming the investment or acquisition had occurred at the beginning of the most recently-ended four-quarter period); make up to $7.5 million in capital expenditures in each fiscal year, provided that the Company can carry over any unspent amount to any subsequent fiscal year (but in no event may the Company make more than $15 million in capital expenditures in any fiscal year); sell its investment in WeddingWire, Inc. (or any asset the Company might receive in conversion or exchange for such investment); and sell assets during the term of the Loan comprising, in the aggregate, up to 10% of the Companys consolidated shareholders equity (so long as the Company receives at least 75% of the consideration in cash, no default or event of default existed at the time of or would result from such sale and, if the Cash Collateral has been released, the Company would be in pro forma compliance with the above-described financial covenants assuming the sale had occurred at the beginning of the most recently-ended four-quarter period).

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