Outdoor Channel Holdings Reports Second Quarter 2010 Results

Outdoor Channel Holdings Reports Second Quarter 2010 Results

TEMECULA, Calif., Aug. 5 /PRNewswire-FirstCall/ -- Outdoor Channel Holdings, Inc. (NASDAQ:OUTD) today reported its financial results for the three months ended June 30, 2010.

Total revenues amounted to $16.8 million for the 2010 second quarter, a decrease of 12% compared with $19.2 million in the corresponding period a year ago. For the first six months of 2010, total revenues were $34.7 million, a decrease of 4% compared with $36.2 million in the corresponding period a year ago.

Advertising revenue for the 2010 second quarter increased 2% percent to $7.3 million from $7.1 million in the prior-year period on higher short-form and online advertising revenues, net of lower time-buy revenues. Subscriber fees totaled $4.5 million for the second quarter of 2010, a 16% decrease compared to subscriber fees of $5.3 million in the prior-year period due to changes in our reserves for potential most-favored nations ("MFN") liabilities with our distributors, and production services revenue totaled $5.1 million during the 2010 second quarter, a decrease of 25% compared to $6.8 million in the prior-year period due primarily to the continued reorganization of our Production Services business unit and resulting reduced low-margin and non-renewed projects.

"Our second quarter results reflect the ongoing advertising market recovery as we once again experienced growth in our short-form and online advertising sales," said Roger Werner, President & Chief Executive Officer. "We continue to offer unique opportunities to our advertising partners and have further strengthened our multi-platform category leadership position. While our reported subscriber revenue was adversely impacted because of changes in our reserves for potential MFN liabilities, we made strategic progress through a packaging upgrade in Houston and the further roll-out of our high-definition offering and we anticipate further gains in the subscribers in the back half of this year. Also, as announced in June, we implemented further measures aimed at improving the profitability of our Production Services business. Looking ahead, we are focused on executing our growth strategy and capitalizing on our many strengths as we enter our seasonally stronger half of the year."

Costs of services for the 2010 second quarter were $8.0 million, a 21% decrease compared to $10.1 million for the corresponding prior year period, primarily on reduced costs from lower activity and reduced staffing at our Production Services unit. SG&A, advertising and depreciation expenses were essentially unchanged for the quarter compared to the second quarter of 2009.

Our operating loss for the 2010 second quarter was $1.7 million compared to $1.3 million in the second quarter of 2009. The increase in our operating loss was primarily due to our decreased subscriber revenue, net of reduced losses at our Production Services unit and increased advertising revenues.

Our net loss for the 2010 second quarter was $1.2 million, or ($0.05) per diluted share, compared to a net loss of $937,000, or ($0.04) per diluted share, in the prior-year period. For the 2010 six-month period, our net loss was $2.7 million, or ($0.11) per diluted share, compared to a net loss of $2.3 million, or ($0.09) for the prior-year period.

Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense and acquisition and integration costs, was $17,000 in the 2010 second quarter, compared to $1.0 million in the prior-year period. For the legacy Outdoor Channel business, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense and acquisition and integration costs, totaled $829,000 for the 2010 second quarter compared to $2.7 million in the prior-year period.

For the six-month period, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense and acquisition and integration costs, totaled ($687,000) compared to $1.1 million in the prior-year period. For the legacy Outdoor Channel business, earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense and acquisition and integration costs, totaled $1.8 million for the 2010 six-month period compared to $4.2 million in the prior-year period.

Investor Conference Call

Outdoor Channel Holdings' management will host an investor conference call on August 5, 2010, at 2:00 p.m. PDT (5:00 p.m. EDT) to review the company's financials and operations for its second quarter ended June 30, 2010. Investment professionals are invited to participate in the live call by dialing 800-901-5218 (domestic) or 617-786-4511 (international) and using participant passcode 49188705. The call will be open to all other interested parties through a live, listen-only audio Internet broadcast in the Investor Relations section of the company's Web site, www.outdoorchannel.com. For those who are not able to listen to the live broadcast, the call will be archived on the web site for one year. A telephonic playback of the conference call also will be available through 5 p.m. PDT (8 p.m. EDT), August 12, 2010 by calling 888-286-8010 (domestic) or 617-801-6888 (international) and using participant passcode 85722865.

About Outdoor Channel Holdings, Inc.

Outdoor Channel Holdings, Inc. owns and operates Outdoor Channel, America's leader in outdoor TV, and Winnercomm Inc., an Emmy Award winning production and interactive company. Outdoor Channel offers programming that captures the excitement of hunting, fishing, shooting, off-road motorsports, adventure and the Western lifestyle and can be viewed on multiple platforms including high definition, video-on-demand, as well as on a dynamic broadband website. Winnercomm Inc. is one of America's leading and highest quality producers of live sporting events and sports series for cable and broadcast television. Winnercomm also owns and operates the patented Skycam and CableCam aerial camera systems which provide dramatic overhead camera angles for major sports events, including college and NFL football. For more information please visit http://www.outdoorchannel.com/.

Nielsen Media Research Universe Estimates for Outdoor Channel

Nielsen Media Research is the leading provider of television audience measurement and advertising information services worldwide. Nielsen estimated that Outdoor Channel had approximately 35.6 million cable and satellite subscribers for August 2010. Please note that this estimate regarding Outdoor Channel's subscriber base is made by Nielsen Media Research and is theirs alone and does not represent opinions, forecasts or predictions of Outdoor Channel Holdings, Inc. or its management. Outdoor Channel Holdings, Inc. does not by its reference above or distribution imply its endorsement of or concurrence with such information.

Use of Non-GAAP Financial Information

This press release includes "non-GAAP financial measures" within the meaning of the Securities and Exchange Commission rules. The company believes that earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense and acquisition and integration costs, provides greater comparability regarding its ongoing operating performance. This information is not intended to be considered in isolation or as a substitute for net income (loss) calculated in accordance with U.S. GAAP. A reconciliation of the company's U.S. GAAP information to EBITDA, adjusted for the effects of share-based compensation expense and acquisition and integration costs is provided in the attached table.

Safe Harbor Statement

Statements in this news release that are not historical are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including statements, without limitation, about our expectations, beliefs, intentions, strategies regarding the future long-term value of the company resulting from the company's current actions or strategic initiatives and the future anticipated value of Outdoor Channel to our audience, distributors and advertisers. The company's actual results could differ materially from those discussed in any forward-looking statements. The company intends that such forward-looking statements be subject to the safe-harbor provisions contained in those sections. Such statements involve significant risks and uncertainties and are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements. Such factors include but are not limited to: (1) service providers discontinuing or refraining from carrying Outdoor Channel; (2) a decline in the number of viewers from having Outdoor Channel placed in unpopular cable or satellite packages, or increases in subscription fees, established by the service providers; (3) a decrease in advertising revenue as a result of a deterioration in general economic conditions; (4) managing the company's growth and the integration of acquisitions; (5) decreased profitability if we are unable to generate sufficient revenues from our Production Services operations to offset its fixed costs; and other factors which are discussed in the company's filings with the Securities and Exchange Commission. For these forward-looking statements, the company claims the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)

Three
Months Six Months
Ended Ended
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----

Revenues:
Advertising $7,253 $7,105 $14,545 $14,899
Subscriber fees 4,504 5,338 9,335 10,001
Production
services 5,072 6,770 10,770 11,289

Total revenues 16,829 19,213 34,650 36,189
------ ------ ------ ------

Cost of services:
Programming 1,529 1,409 2,833 3,081
Satellite
transmission
fees 393 400 784 795
Production and
operations 6,011 8,210 13,110 14,803
Other direct
costs 109 110 221 207
--- --- --- ---

Total cost of
services 8,042 10,129 16,948 18,886
----- ------ ------ ------

Other expenses:
Advertising 979 924 1,265 1,383
Selling, general
and
administrative 8,536 8,465 18,933 17,672
Depreciation and
amortization 928 967 1,839 1,855
--- --- ----- -----

Total other
expenses 10,443 10,356 22,037 20,910
------ ------ ------ ------

Loss from
operations (1,656) (1,272) (4,335) (3,607)

Interest and
other income,
net 15 28 27 52
--- --- --- ---

Loss from
operations
before income
taxes (1,641) (1,244) (4,308) (3,555)

Income tax
benefit (485) (307) (1,639) (1,304)
---- ---- ------ ------

Net loss $(1,156) $(937) $(2,669) $(2,251)
======= ===== ======= =======

Loss per common
share data:
Basic $(0.05) $(0.04) $(0.11) $(0.09)
====== ====== ====== ======
Diluted $(0.05) $(0.04) $(0.11) $(0.09)
====== ====== ====== ======

Weighted average
common shares
outstanding:
Basic 24,488 24,366 24,470 24,412
====== ====== ====== ======
Diluted 24,488 24,366 24,470 24,412
====== ====== ====== ======

OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited, in thousands)

June 30, December 31,
2010 2009
---- ----
Assets (unaudited)
Current assets:
Cash and cash equivalents $36,131 $20,848
Investment in available-for-sale
securities 21,998 38,090
Accounts receivable, net of allowance
for doubtful accounts 10,884 15,827
Other current assets 10,757 10,416
------ ------
Total current assets 79,770 85,181
------ ------

Property, plant and equipment, net 13,209 14,286
Goodwill and amortizable intangible
assets, net 43,794 43,988
Investments in auction-rate
securities 5,050 5,775
Deferred tax assets, net 4,131 2,489
Deposits and other assets 4,223 5,059
----- -----
Totals $150,177 $156,778
======== ========

Liabilities and Stockholders' Equity

Current liabilities $12,536 $17,308
Long-term liabilities 1,078 1,172
----- -----
Total liabilities 13,614 18,480
------ ------

Total stockholders' equity 136,563 138,298
------- -------
Totals $150,177 $156,778
======== ========

OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

Three Months
Ended
June 30,
--------
2010 2009
---- ----

Operating activities:
Net loss $(1,156) $(937)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 928 967
Amortization of subscriber
acquisition fees 366 177
Loss on sale of equipment 135 15
Gain on sale of available-
for-sale and auction-
rate securities - (7)
Provision for doubtful
accounts 57 114
Share-based employee and
service provider
compensation 745 1,109
Deferred tax benefit, net (481) (278)

Changes in operating assets
and liabilities:
Accounts receivable 194 (3,245)
Income tax (payable) refund
receivable (23) (29)
Prepaid programming costs 78 (299)
Other current assets (122) 151
Deposits and other assets 21 121
Subscriber acquisition fees (448) (978)
Accounts payable and
accrued expenses 1,684 1,845
Deferred revenue 396 1,303
Accrued severance payments 443 (6)
Deferred obligations (132) (165)
Unfavorable lease
obligations (33) (30)
--- ---
Net cash provided by (used
in) operating activities 2,652 (172)
----- ----

Investing activities:
Purchases of property,
plant and equipment (205) (758)
Proceeds from sale of
equipment 25 -
Cash paid to purchase
assets of Winnercomm, net
of cash acquired - -
Purchases of available-
for-sale securities (16,991) (16,998)
Proceeds from sale of
available-for-sale and
auction-rate securities 38,700 100
------ ---
Net cash provided by (used
in) investing activities 21,529 (17,656)
------ -------

Financing activities:
Purchase of treasury stock (231) (219)
Purchase and retirement of
treasury stock related to
stock repurchase program - (41)
Net cash used in financing
activities (231) (260)
---- ----

Net increase (decrease) in
cash and cash equivalents 23,950 (18,088)
Cash and cash equivalents,
beginning of period 12,181 41,614
------ ------
Cash and cash equivalents,
end of period $36,131 $23,526
======= =======

Supplemental disclosure of
cash flow information:

Income taxes paid $12 $ -
=== === ===

Supplemental disclosures of
non-cash investing and
financing activities:

Effect of net increase in
fair value of auction-
rate securities $54 $55
=== ===
Property, plant and
equipment costs incurred
but not paid $127 $296
==== ====
Subscriber acquisition fees
incurred but not paid $ - $1,509
=== === ======
Retirement of treasury
stock $231 $219
==== ====

Six Months
Ended
June 30,
--------
2010 2009
---- ----

Operating activities:
Net loss $(2,669) $(2,251)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 1,839 1,855
Amortization of subscriber
acquisition fees 770 299
Loss on sale of equipment 101 15
Gain on sale of available-
for-sale and auction-
rate securities (11) (7)
Provision for doubtful
accounts 470 190
Share-based employee and
service provider
compensation 1,809 2,123
Deferred tax benefit, net (1,639) (1,305)

Changes in operating
assets and liabilities:
Accounts receivable 4,473 (498)
Income tax (payable)
refund receivable (676) (281)
Prepaid programming costs 296 (1,066)
Other current assets (423) 738
Deposits and other assets 45 (170)
Subscriber acquisition
fees (441) (991)
Accounts payable and
accrued expenses (4,527) (2,970)
Deferred revenue 370 2,430
Accrued severance payments 242 (14)
Deferred obligations (136) (27)
Unfavorable lease
obligations (66) (57)
--- ---
Net cash provided by (used
in) operating activities (173) (1,987)
---- ------

Investing activities:
Purchases of property,
plant and equipment (614) (1,361)
Proceeds from sale of
equipment 93 -
Cash paid to purchase
assets of Winnercomm, net
of cash acquired - (5,746)
Purchases of available-
for-sale securities (48,984) (26,992)
Proceeds from sale of
available-for-sale and
auction-rate securities 65,900 100
------ ---
Net cash provided by (used
in) investing activities 16,395 (33,999)
------ -------

Financing activities:
Purchase of treasury stock (598) (398)
Purchase and retirement of
treasury stock related to
stock repurchase program (341) (347)
Net cash used in financing
activities (939) (745)
---- ----

Net increase (decrease) in
cash and cash equivalents 15,283 (36,731)
Cash and cash equivalents,
beginning of period 20,848 60,257
------ ------
Cash and cash equivalents,
end of period $36,131 $23,526
======= =======

Supplemental disclosure of
cash flow information:

Income taxes paid $665 $282
==== ====

Supplemental disclosures
of non-cash investing
and financing activities:

Effect of net increase in
fair value of auction-
rate securities $64 $70
=== ===
Property, plant and
equipment costs incurred
but not paid $127 $296

Subscriber acquisition
fees incurred but not
paid $ - $2,259
===
Retirement of treasury
stock $598 $398
==== ====

OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-U.S. GAAP MEASURES TO U.S. GAAP
(unaudited, in thousands)
The following table sets forth the reconciliation of net loss to
earnings before interest, taxes, depreciation and
amortization (EBITDA), adjusted for the effects of share-based
compensation expense and acquisition and
integration costs:

Three Months
Ended
June 30,
--------
2010 2009
---- ----

Net loss $(1,156) $(937)

Add/Subtract:
Interest and other
income, net 15 28
Income tax benefit (485) (307)
Depreciation and
amortization 928 967
--- ---

EBITDA (728) (305)

Adjusted for:
Share-based
compensation expense 745 1,109
Acquisition and
integration costs - 230
--- ---

EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $17 $1,034
=== ======

Summary of cost of
services
Share-based
compensation expense $85 $109
Cost of services 7,957 10,020
----- ------
Total cost of services $8,042 $10,129
====== =======

Summary of selling,
general and
administrative
Share-based
compensation expense $660 $1,000
Acquisition and
integration costs - 230
Selling, general and
administrative 7,876 7,235
----- -----
Total selling, general
and administrative $8,536 $8,465
====== ======

Summary of other income
Interest income, net $15 $28
Dividend income - -
Other income (loss) - -
--- ---
Total other income $15 $28
=== ===

EBITDA as adjusted by
segment
Legacy Outdoor Channel $829 $2,667
Production Services (812) (1,633)
---- ------
EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $17 $1,034
=== ======

Six Months
Ended
June 30,
--------
2010 2009
---- ----

Net loss $(2,669) $(2,251)

Add/Subtract:
Interest and other
income, net 27 52
Income tax benefit (1,639) (1,304)
Depreciation and
amortization 1,839 1,855

EBITDA (2,496) (1,752)

Adjusted for:
Share-based
compensation expense 1,809 2,123
Acquisition and
integration costs - 680
--- ---

EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $(687) $1,051
===== ======

Summary of cost of
services
Share-based
compensation expense $158 $214
Cost of services 16,790 18,672
------ ------
Total cost of services $16,948 $18,886
======= =======

Summary of selling,
general and
administrative
Share-based
compensation expense $1,651 $1,909
Acquisition and
integration costs - 680
Selling, general and
administrative 17,282 15,083
------ ------
Total selling, general
and administrative $18,933 $17,672
======= =======

Summary of other income
Interest income, net $27 $52
Dividend income - -
Other income (loss) - -
--- ---
Total other income $27 $52
=== ===

EBITDA as adjusted by
segment
Legacy Outdoor Channel $1,751 $4,219
Production Services (2,438) (3,168)
------ ------
EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $(687) $1,051
===== ======

Source: Outdoor Channel Holdings, Inc.

CONTACT: For Company: Tom Allen, Chief Financial Officer,
+1-951-699-6991, ext. 287, tallen@outdoorchannel.com; or For Investors: Brad
Edwards, Brainerd Communicators, Inc., +1-212-986-6667, edwards@braincomm.com,
or For Media: Nancy Zakhary, Brainerd Communicators, Inc., +1-212-986-6667,
nancy@braincomm.com

Web Site: http://www.outdoorchannel.com/

-------
Profile: intent