Martha Stewart Living Omnimedia Inc
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iii llii Hill Hill llil lHl iil ll 12026851 MARTHA STEWART LIVING OMNIMEDIA INC 2011 ANNUAL REPORT 2012 NOTICE OF ANNUAL MEETING AND PROXY STATEMENT Letter From Lisa Gersh Dear Fellow Stockholders in mid-2011 We deal since arrived at Martha Stewart Living Omnimedia Our team has accomplished great in executive and business-unit positions we signed new partnerships added strong and energized leadership key sustainable and crafted plan designed to deliver long- that offer substantial promise for the future we strategic in when posted It is clear that the performance 2011 we term growth over the next three to five years companys reflect view of MSLOs potential We believe our strategic plan net loss is not acceptable and it does not our of four in mid-2012 Our plan consists major components will significantly improve performance beginning bases in sales Our titles have robust readership First we are focused on driving improvement advertising print have been effective in migrating our readers to digital platforms On the digital side we believe we already To audience and the of our iPad editions evidenced both by the strength of our website by growing popularity leaders who are with the audiences we deliver we have installed seasoned taking align our financial performance sales and to strengthen our digital-sales more brand-centric approach to print-advertising are working has brand sales at our individual titles each of which strong equity capability In print we are pursuing stronger advertisers in such as beauty fashion and parenting and are broadening our content to appeal to categories and with our titles vibrant continually bringing fresh Behind these efforts is creative team charged keeping by relevant ideas to our readers and advertisers call of television and video business What we currently Our second strategic initiative is the reinvention our in look like different business by the end of 2012 Our core competency Broadcasting should begin to very built around how-to information as well as an entertainment component video is that we deliver great than hours of Emeril and Lucinda Scala Quinn In fact we own more 2500 personalities like Martha Lagasse initiatives to the brand experience we as we enhance this evergreen content which we are fully digitizing pursue of Channel of as we are in the final our Hallmark agreement provide to consumers In terms new content year of from broadcasters and cable networks to independent production we are talking with variety parties about innovative to leverage what we do best companies and digital platforms opportunities business through multiple avenues The third element of our strategy is to continue to grow our Merchandising with over one billion in annual and The business is performing very well by category by product by geography in revenue and operating sales at retail across our base of partnerships and is generating double-digit growth on better continue to as new partners come income But we believe it can do even as existing relationships grow already and as we take to improve profit margins beyond board domestically and potentially internationally steps attractive levels watershed and commercial with J.C Penney is The December 2011 signing of our strategic partnership and the revenue of at least $172 million development The deals 10-year commercial partnership promises our J.C 16.6 equity stake in MSLO significantly strengthens strategic component including Penneys percent continue to other for the launch of the commercial partnership in 2013 we explore balance sheet As we gear up the Martha Stewart where we can establish brand equity as demonstrated by new opportunities in categories sold at Staples Home Office with Avery line currently exclusively continue to show momentum In early 2012 The Home In the meantime our existing merchandising efforts and with us to sell Martha Stewart Living products Macys Depot extended and expanded its partnership nationwide These extensions to sell the Martha Stewart Collection at its stores renewed its agreement of in and we are another great year growth underscore the vibrancy of the Martha brand at retail expecting Merchandising in 2012 The fourth and final piece of our is to run each of strategic plan our segments more efficiently allocating greater measure of resources toward revenue-generating activities In Publishing we reduced editorial and support expenses in late 2011 that in investing savings leadership charged with driving our brand-centric and digitally focused advertising-sales In strategy Broadcasting our move away from live programming enables us to eliminate studio lease and production infrastructure delivering substantial cost savings Expense across each of management our businesses will remain priority We are focused on the very implementing plan we have put in place and we are excited about what lies ahead We believe we have brands and audiences strong that can be leveraged across traditional- and new-media formats We have terrific team in place and we are determined deliver to We also have greatly improved financial With the from position proceeds the J.C Penney investment and from the 2011 sale of our interest in WeddingWire we were able to eliminate our bank debt pay one-time special dividend to stockholders and end the with year approximately $50 million in cash us the to giving flexibility support our growth objectives In closing want to thank our stockholders for their patience and continued interest in MSLO We are focused on sustainable delivering growth and profitability and building value for the future Sincerely Lisa Gersh President Chief Operating Officer MARTHA STEWART Founder Dear Fellow Stockholders in our business including new with it interesting and promising changes The year that just passed brought many to be wherever all of which reflect our determination media offerings and new merchandising partnerships reaches 66 million consumers consumers want and need us Martha Stewart Living Omnimedia approximately in over each month and has retail with more than 8500 products across all media platforms growing presence 38000 retail locations extended our merchandising business Earlier this year we In 2012 we will continue to build on our flourishing of will be Home that our Martha Stewart Living line products successful relationship with The Depot ensuring has been an excellent stores into 2016 The Home Depot available in the home-improvement retailers 2000-plus of the extended we are broadening our offerings addition to our merchandising portfolio and as part agreement assortment of merchandise We are delighted there to include line of craft furniture and an expanded holiday Collection the offer the beautiful that have made our Martha Stewart No that in 2012 we continue to products Martha the stores bridal We recently introduced our home brand at Macys and the leading brand on registry file at planning binders notebooks Stewart Home Office with Avery line sold exclusively Staples featuring Martha beautiful and functional We also further extended our folders and desk and pantry organizers that are for and And our Martha Stewart Cratts line now Stewart Pets line at PetSmart with products cats puppies and loom with Lion Brand and craft paint with Plaid includes yarns offer our of alliance with J.C Penney to consumers In addition in December last year we forged strategic and to Martha Stewart-branded beautiful well-designed products in Martha Stewart stores develop joint and in online location The stores c-commerce site where consumers will be able to access our products single of both in 2013 dreams of and looking forward to the launch c-commerce site fulfill long-standing mine Im Under the of editor in is our media business leadership Just as our merchandising business is evolving so too readers all the creative content that our expect chief Pilar Guzmán Martha Stewart Living magazine is offering reach new such and fashion which should allow us to from us including venturing into categories as beauty has fresh look and spirit Alanna at the helm Whole Living readers and new advertising partners With Stang Food fans with more fabulous Sarah is Everyday that is as inspiring as it is informative while Carey energizing for dinner Martha Stewart video newsletter that answers the eternal question Whats recipes and daily thanks in measure to editor in chief Elizabeth Weddings remains the No bridal magazine on newsstands large Graves and editorial director Darcy Miller transformative as becomes an increasingly important The media business is in the midst of truly change digital destinations for consumers the forefront of that Our websites are go-to platform At MSLO we are at change month And in 2011 we more than million unique visitors each seeking how-to lifestyle content reaching The consumer and subscriptions to our magazines response unveiled several amazing apps began offering digital subscribers with combined digital readership including print to our digital editions has been very positive introduced iPad of total circulation And thats before weve even accessing digital editions exceeding percent which will be available in that format this year editions of Whole Living and Martha Stewart Weddings MARTHA STEWART LIVING OMNIMEDIA Its also worth that mentioning our books business is thriving In 2011 we extended our long-standing relationship with Clarkson Potter with new agreement to publish 12 more books through 2016 We added four new titles to our library last with the of year publication Martha Stewarts New Pies Tarts