Case 11: Corporate Governance at Martha Stewart Living Omnimedia: Not “A Good Thing” C-137
Exhibit 5 MSO Financial Statements, 2008–2012 ($ in thousands, except per share data)
2012 2011 2010 2009 2008
REVENUES
Publishing 122,540 140,857 145,573 146,100 179,116
Merchandising 57,574 48,614 42,806 52,566 57,866
Broadcasting 17,513 31,962 42,434 46,111 47,328
Total revenues 197,627 221,433 230,813 244,777 284,310
Operating income (loss) (56,396) (18,594) (8,663) (11,968) (10,857)
Net loss (56,085) (15,519) (9,596) (14,578) (15,665)
PER SHARE DATA
Earnings (loss) per share:
Basic and diluted—Net loss $(0.83) $(0.28) $(0.18) $(0.27) $(0.29)
Weighted average common shares outstanding:
Basic and diluted 67,231,463 55,880,896 54,440,490 53,879,785 53,359,538
Dividends per common share $0.25
FINANCIAL POSITION
Cash and cash equivalents 19,925 38,453 23,204 25,384 50,204
Short-term investments 29,182 11,051 10,091 13,085 9,915
Total assets 154,260 216,120 222,314 229,791 261,285
Long-term obligations 7,500 13,500 19,500
Shareholders’ equity 95,516 147,947 139,033 143,820 150,995
OTHER FINANCIAL DATA
Cash flow provided by (used in) operating activities 239 (2,220) 1,872 (9,273) 39,699
Cash flow provided by (used in) investing activities (18,918) 6,886 153 (9,617) (38,856)
Cash flow provided by (used in) financing activities 151 10,583 (4,205) (5,930) 18,825NOTES TO SELECTED FINANCIAL DATA:
Loss from continuing operations:
2012 results include a non-cash goodwill impairment charge related to the Publishing segment of approximately $44.3 million and restructuring charges of approximately
$4.8 million.
2011 results include restructuring charges of approximately $5.1 million.
2010 results include the recognition of substantially all of the exclusive license fee of approximately $5 million from Hallmark Channel for a significant portion of MSO’s
library of programming, as well as licensing revenue for other new programming delivered to Hallmark Channel.
2009 results include a net benefit to operating loss of approximately $20 million from certain items, including the revenue from Kmart of $14.5 million, the recognition
of previously deferred Kmart royalties of $10 million as non-cash revenue, and an incremental $3.9 million from the conclusion of MSO’s relationship with TurboChef
Technologies, Inc.
Source: MSO 2012 Form 10-K.
Stewart’s and Koppelman’s daughters teamed up to host
a short-lived satellite-radio talk show and a poorly received
cable TV program called “Whatever Martha,” in which they
made fun of old Martha Stewart shows. Stewart’s daughter
was paid as much as $407,680 a year as a broadcast talent,
and Koppelman’s daughter received as much as $350,675 a
year. MSO also employed Stewart’s sister-in-law as a senior
vice president for as much as $200,633 a year; her brother-
in-law as property manager for as much as $146,000 a year,
and her sister as a blogger for as much as $81,000 a year.
Meanwhile, management cut employee head count
by 8 percent in a company-wide reorganization.A Turning Point
The ban on Stewart’s serving as a corporate officer
expired in 2011, freeing her to take the CEO slot. The
69-year-old rejoined the board, but decided not to take
the CEO job, saying she was too busy with her TV shows,
cookbooks, and public appearances.