Gaiam Reports Second Quarter 2005 Results

Gaiam Reports Second Quarter 2005 Results

- Revenue Increases 28% Year-Over-Year to $21.7 Million

- Cash Flow from Operations grows 33% to $2.2 million

BROOMFIELD, Colo., Aug. 4 /PRNewswire-FirstCall/ -- Gaiam, Inc. (NASDAQ:GAIA), a lifestyle media company catering to people who value personal development, natural health and inspirational entertainment, today announced results for the second quarter and six months ended June 30, 2005.

Second quarter revenue was $21.7 million, a 28% increase from $17.0 million recorded in the second quarter of 2004, primarily due to strong sales in the Company's retail business segment. Gaiam's retail business segment, which distributes media and other proprietary products to retailers, generated revenue of $9.7 million in the second quarter of 2005, a 45% increase from $6.7 million in the comparable 2004 period. Revenue for the company's direct to consumer segment was $12 million, or 16% higher in the second quarter of 2005 than in the comparable period in 2004. The improvement of the overall revenue growth rate to 28%, from 11% in the preceding quarter, represents Gaiam's fourth consecutive quarter of accelerating internal growth.

During the second quarter of 2005, Gaiam generated cash from operating activities of $2.2 million, and increased its cash position at June 30, 2005 to $12.3 million, up from $10.9 million at March 31, 2005. Net loss for the second quarter was $766 thousand, or $0.05 per share, compared to a loss of $2.2 million, or $0.15 per share, reported in the same period last year. Depreciation and amortization for the quarter ended June 30, 2005 were $850 thousand.

For the six months ended June 30, 2005, Gaiam achieved net revenue of $48.0 million, an 18% increase from $40.8 million recorded in the same period last year. The net loss for the first six months of 2005 was $650 thousand, or $0.04 per share, as compared to $2.5 million, or $0.17 per share, for the first six months of 2004. Gaiam has no debt and an unused $15 million line of credit. After the end of the quarter, Gaiam added another $18 million to its cash position as a result of our private placement of stock to funds advised by Prentice Capital Management.

"Our strong second quarter performance reflects the traction of our media business model and the growing demand for products that support healthy living, wellness and fitness," said Lynn Powers, President. "Despite a seasonally slow quarter, we were able to combine revenue improvements with cost savings to reduce our second quarter net loss by two-thirds. We continue to gain media shelf space with our mass merchants and video retailers, and expect to secure additional space following the anticipated closing of the GoodTimes Entertainment acquisition in the third quarter."

Jirka Rysavy, Chairman and Chief Executive Officer, commented, "We are encouraged by our results for the first half of 2005, which are largely due to our efforts over the past two years to improve operating efficiency and scalability. Our focus on DVD distribution and programming is producing the results we had intended and we believe that we are well-positioned to continue to grow our market share."

This press release includes forward-looking statements relating to matters that are not historical facts. Forward-looking statements may be identified by the use of words such as "expect," "believe," "will," "should" or comparable terminology or by discussions of strategy. While the Company believes its assumptions and expectations underlying forward-looking statements are reasonable, there can be no assurance that actual results will not be materially different. Risks and uncertainties that could cause materially different results include, among others, introduction of new products and services, completion and integration of acquisitions, the possibility of negative economic conditions, and other risks and uncertainties included in the Company's filings with the Securities and Exchange Commission. The Company assumes no duty to update any forward-looking statements.

The company will host a conference call today, August 4, 2005, at 2:30 p.m. MDT (4:30 p.m. EDT) to review its results for the second quarter of 2005.

Dial-in No.: (888) 566-5774
Passcode: GAIAM

Additional guidance or information may be given on the conference call. A replay of the call will begin 1 hour after the end of the call and will continue until 5:00 p.m. E.D.T. on August 7th.

Replay No.: (800) 964-3814

Gaiam, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

Three months ended Three months ended
June 30, 2005 June 30, 2004

Net revenue $ 21,706 100.0% $ 17,031 100.0%

Cost of goods sold 11,149 51.4% 8,491 49.9%

Gross profit 10,557 48.6% 8,540 50.1%

Operating expenses 11,828 54.5% 12,174 71.5%

Loss from operations (1,271) (5.9%) (3,634) (21.3%)

Other income (expense) (8) 0.0% 76 0.4%

Loss before income taxes (1,279) (5.9%) (3,558) (20.9%)

Income tax benefit (532) (2.5%) (1,297) (7.6%)

Minority interest in net
(income) loss of
consolidated subsidiaries (19) (0.1%) 46 0.3%

Net loss $ (766) (3.5%) $ (2,215) (13.0%)

Shares outstanding:
Basic 14,820 14,686
Diluted 14,820 14,686

Loss per share:
Basic $ (0.05) $ (0.15)
Diluted $ (0.05) $ (0.15)

Gaiam, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

Six months ended Six months ended
June 30, 2005 June 30, 2004

Net revenue $ 48,030 100.0% $ 40,806 100.0%

Cost of goods sold 23,724 49.4% 19,590 48.0%

Gross profit 24,306 50.6% 21,216 52.0%

Operating expenses 25,290 52.7% 25,179 61.7%

Income (loss) from
operations (984) (2.0%) (3,963) (9.7%)

Other income (expense) 108 0.2% 132 0.3%

Income (loss) before income
taxes (876) (1.8%) (3,831) (9.4%)

Income tax expense (benefit) (402) (0.8%) (1,413) (3.5%)

Minority interest in net
income of consolidated
subsidiaries (176) (0.4%) (126) (0.3%)

Net income (loss) $ (650) (1.4%) $ (2,544) (6.2%)

Shares outstanding:
Basic 14,820 14,650
Diluted 14,820 14,650

Earnings (loss) per share:
Basic $ (0.04) $ (0.17)
Diluted $ (0.04) $ (0.17)

GAIAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)

June 30, December 31,
Assets 2005 2004
(Unaudited)
Current assets:
Cash and cash equivalents $ 12,259 $ 10,439
Accounts receivable, net 8,129 13,914
Income tax and other receivables 3,023 3,000
Inventory, less allowances 15,594 16,503
Deferred advertising costs 1,994 2,635
Deferred tax assets 715 1,145
Other current assets 1,462 1,324
Total current assets 43,176 48,960

Property and equipment, net 7,128 7,857
Investments 7,865 7,865
Capitalized production costs, net 5,326 5,457
Media library, net 5,060 5,427
Goodwill and other intangibles 9,537 9,757
Non-current deferred tax assets 3,685 2,657
Other assets 431 307
Total assets $ 82,208 $ 88,287

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 8,948 $ 12,910
Accrued liabilities 3,080 3,698
Income taxes payable 390 864
Total current liabilities 12,418 17,472

Minority interest 4,373 4,469

Commitments and contingencies

Stockholders' equity:
Class A common stock, $.0001 par value,
150,000,000 shares authorized, 9,420,118
and 9,411,897 shares issued and
outstanding at June 30, 2005 and
December 31, 2004, respectively 1 1
Class B common stock, $.0001 par value,
50,000,000 shares authorized,
5,400,000 issued and outstanding at
June 30, 2005 and December 31, 2004 1 1
Additional paid-in capital 54,982 54,933
Accumulated other comprehensive income 522 850
Retained earnings 9,911 10,561
Total stockholders' equity 65,417 66,346
Total liabilities and stockholders' equity $ 82,208 $ 88,287

Source: Gaiam, Inc.

CONTACT: John Mills or Andrew Greenbaum, both of Integrated Corporate
Relations, Inc., +1-310-395-2215, jmills@icrinc.com

Web site: http://www.gaiam.com/

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