Outdoor Channel Holdings Reports Third Quarter 2010 Results

Outdoor Channel Holdings Reports Third Quarter 2010 Results

Legacy Channel Revenues Grow 8% Over Year Ago Quarter; Consolidated EBITDA Adjusted for Share-based Compensation Increases 41% Over Year Ago Quarter

TEMECULA, Calif., Nov. 3, 2010 /PRNewswire-FirstCall/ -- Outdoor Channel Holdings, Inc. (Nasdaq: OUTD) today reported its financial results for the third quarter ended September 30, 2010.

Total revenues for the quarter were $22.9 million, a decrease of 3% compared with $23.6 million in the third quarter of 2009. Advertising revenue for the quarter increased 14% percent to $11.2 million from $9.9 million in the third quarter of 2009. Subscriber fees for the quarter were $4.2 million, a 5% decrease compared to subscriber fees of $4.4 million in the prior-year period due to changes in our estimated reserves for potential most-favored nations ("MFN") liabilities with our distributors, and production services revenue totaled $7.5 million for the quarter, a decrease of 20% compared to $9.3 million in the third quarter of 2009 due primarily to the continued reorganization of our Production Services business unit resulting in reduced low-margin and non-renewed projects.

Our operating income for the third quarter 2010 third quarter was $4.5 million compared to $2.0 million in the third quarter of 2009. The increase in our operating income was all at our Outdoor Channel segment and was driven primarily by increased advertising revenue and a decrease in sales, general and administrative ("SG&A") expense.

Our consolidated net income for the 2010 third quarter was $2.4 million, or $0.10 per diluted share, compared to net income of $1.4 million, or $0.05 per diluted share, in the prior-year period.

"Our strong bottom line results reflect the positive impact of the advertising market recovery and our efforts to reduce our operating costs," said Roger Werner, President & Chief Executive Officer. "We showed gains in all advertising components except long-form, including a triple digit year-over-year increase in our online advertising sales as we continue to invest in Outdoorchannel.com. Our Production Services unit generated positive EBITDA, after adjustment for share-based compensation, for the quarter and we believe our earlier cost cuts and reduction in lower-margin business there puts us on more solid footing going forward. Looking ahead, we have secured multi-year deals for virtually all of our content currently on the air and remain focused on strengthening our leadership position in the outdoor media category."

Review of Segment Operating Results

The Outdoor Channel ("TOC") posted operating income of $4.9 million for the quarter, an increase of 112% compared to operating income of $2.3 million for the third quarter of 2009. The strong increase in TOC's operating income was driven primarily by an 8% increase in net revenue driven by higher advertising revenues and a 26% decrease in SG&A costs, primarily on lower executive compensation expense and lower professional fees.

Our Production Services unit posted an operating loss for the quarter, before the effect of intercompany eliminations, of $88,000 compared to an operating loss of $60,000 for the third quarter of 2009 - essentially unchanged as a 15% decrease in production revenues was offset by lower costs of service, SG&A and depreciation reflecting management's continued right-sizing of the unit and its infrastructure costs.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense and acquisition and integration costs, was $6.0 million for the quarter, compared to $4.2 million in the prior-year period. TOC's earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense, totaled $5.9 million for the quarter compared to $3.8 million in the prior-year period. Production Services earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense, was $115,000 for the quarter compared to $396,000 in the prior-year period.

Investor Conference Call

Outdoor Channel Holdings' management will host an investor conference call on November 3, 2010, at 2:00 p.m. PT (5:00 p.m. ET) to review the company's financials and operations for its third quarter ended September 30, 2010. Investment professionals are invited to participate in the live call by dialing 866-804-6921 (domestic) or 857-350-1667 (international) and using participant passcode 87339014. 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 available to listen to the live broadcast, the call will be archived online for one year. A telephonic playback of the conference call also will be available through Wednesday, November 10, 2010, by calling 888-286-8010 (domestic) or 617-801-6888 (international) and using participant passcode 60687941.

For those who are not able to listen to the live broadcast, the call will be archived on the web site for one year.

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 35.0 million cable and satellite subscribers for November 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
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)

Three Nine
Months Months
Ended Ended
September September
30, 30,
---------- ----------
2010 2009 2010 2009
---- ---- ---- ----

Revenues:
Advertising $11,225 $9,881 $25,770 $24,780
Subscriber fees 4,194 4,427 13,529 14,428
Production
services 7,480 9,322 18,250 20,611

Total revenues 22,899 23,630 57,549 59,819
------ ------ ------ ------

Cost of services:
Programming 938 902 3,771 3,983
Satellite
transmission
fees 397 400 1,181 1,195
Production and
operations 8,145 9,157 21,255 23,960
Other direct
costs 132 175 353 382
--- --- --- ---

Total cost of
services 9,612 10,634 26,560 29,520
----- ------ ------ ------

Other expenses:
Advertising 752 649 2,017 2,032
Selling, general
and
administrative 7,241 9,326 26,174 26,998
Depreciation and
amortization 748 993 2,587 2,848
--- --- ----- -----

Total other
expenses 8,741 10,968 30,778 31,878
----- ------ ------ ------

Income (loss)
from operations 4,546 2,028 211 (1,579)

Interest and
other income,
net (5) 14 22 66
--- --- --- ---

Income (loss)
from operations
before income
taxes 4,541 2,042 233 (1,513)

Income tax
provision
(benefit) 2,101 641 462 (663)
----- --- --- ----

Net income (loss) $2,440 $1,401 $(229) $(850)
====== ====== ===== =====

Earnings (loss)
per common share
data:
Basic $0.10 $0.06 $(0.01) $(0.03)
===== ===== ====== ======
Diluted $0.10 $0.05 $(0.01) $(0.03)
===== ===== ====== ======

Weighted average
number of common
shares
outstanding:
Basic 24,460 24,426 24,482 24,434
====== ====== ====== ======
Diluted 25,399 25,819 24,482 24,434
====== ====== ====== ======

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

September 30, December 31,
2010 2009
---- ----
Assets (unaudited)
Current assets:
Cash and cash equivalents $33,322 $20,848
Investment in available-for-sale
securities 27,992 38,090
Accounts receivable, net of allowance
for doubtful accounts 14,060 15,827
Other current assets 10,048 10,416
------ ------
Total current assets 85,422 85,181
------ ------

Property, plant and equipment, net 12,764 14,286
Goodwill and amortizable intangible
assets, net 43,731 43,988
Investments in auction-rate
securities 5,061 5,775
Deferred tax assets, net 2,645 2,489
Deposits and other assets 3,739 5,059
----- -----
Totals $153,362 $156,778
======== ========

Liabilities and Stockholders' Equity

Current liabilities $12,716 $17,308
Long-term liabilities 1,030 1,172
----- -----
Total liabilities 13,746 18,480
------ ------

Total stockholders' equity 139,616 138,298
------- -------
Totals $153,362 $156,778
======== ========

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

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

Operating activities:
Net income (loss) $2,440 $1,401
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization 748 993
Amortization of
subscriber acquisition
fees 419 254
Loss on sale of
equipment 8 6
Gain on sale of
available-for-sale
and auction-rate
securities - -
Provision for doubtful
accounts (13) 145
Share-based employee
and service provider
compensation 677 1,199
Deferred tax provision
(benefit), net 2,101 642

Changes in operating
assets and liabilities:
Accounts receivable (3,161) 1,620
Income tax (payable)
refund receivable (109) -
Prepaid programming
costs 944 (617)
Other current assets (438) (338)
Deposits and other
assets 63 191
Subscriber acquisition
fees (1,675) (3,233)
Accounts payable and
accrued expenses 1,769 2,954
Deferred revenue 175 (329)
Accrued severance
payments (329) 32
Deferred obligations (14) (6)
Unfavorable lease
obligations (35) (32)
--- ---
Net cash provided by
operating activities 3,570 4,882
----- -----

Investing activities:
Purchases of property,
plant and equipment (329) (714)
Proceeds from sale of
equipment 14 111
Cash paid to purchase
assets of Winnercomm,
net of cash acquired - -
Purchases of available-
for-sale securities (27,989) (4,998)
Proceeds from sale of
available-for-sale
and auction-rate
securities 22,000 500
------ ---
Net cash provided by
(used in) investing
activities (6,304) (5,101)
------ ------

Financing activities:
Purchase of treasury
stock (75) (84)
Purchase and retirement
of stock related to
stock repurchase
program - -
Net cash used in
financing activities (75) (84)
--- ---

Net increase (decrease)
in cash and cash
equivalents (2,809) (303)
Cash and cash
equivalents, beginning
of period 36,131 23,526
------ ------
Cash and cash
equivalents, end of
period $33,322 $23,223
======= =======

Supplemental disclosure
of cash flow
information:

Income taxes paid $120 $99
==== ===

Nine Months
Ended
September 30,
-------------
2010 2009
---- ----

Operating activities:
Net income (loss) $(229) $(850)
Adjustments to reconcile
net income (loss) to net
cash provided by (used
in) operating
activities:
Depreciation and
amortization 2,587 2,848
Amortization of
subscriber acquisition
fees 1,189 553
Loss on sale of equipment 109 21
Gain on sale of
available-for-sale and
auction-rate
securities (11) (7)
Provision for doubtful
accounts 457 335
Share-based employee and
service provider
compensation 2,486 3,322
Deferred tax provision
(benefit), net 462 (663)

Changes in operating
assets and liabilities:
Accounts receivable 1,312 1,122
Income tax (payable)
refund receivable (785) (281)
Prepaid programming costs 1,240 (1,683
Other current assets (861) 400
Deposits and other assets 108 21
Subscriber acquisition
fees (2,116) (4,224)
Accounts payable and
accrued expenses (2,758) (16
Deferred revenue 545 2,101
Accrued severance
payments (87) 18
Deferred obligations (150) (33)
Unfavorable lease
obligations (101) (89)
---- ---
Net cash provided by
operating activities 3,397 2,895
----- -----

Investing activities:
Purchases of property,
plant and equipment (943) (2,075)
Proceeds from sale of
equipment 107 111
Cash paid to purchase
assets of Winnercomm,
net of cash acquired - (5,746)
Purchases of available-
for-sale securities (76,973) (31,990)
Proceeds from sale of
available-for-sale and
auction-rate securities 87,900 600
------ ---
Net cash provided by
(used in) investing
activities 10,091 (39,100)
------ -------

Financing activities:
Purchase of treasury
stock (673) (482)
Purchase and retirement
of stock related to
stock repurchase program (341) (347)
Net cash used in
financing activities (1,014) (829)
------ ----

Net increase (decrease)
in cash and cash
equivalents 12,474 (37,034)
Cash and cash
equivalents, beginning
of period 20,848 60,257
------ ------
Cash and cash
equivalents, end of
period $33,322 $23,223
======= =======

Supplemental disclosure
of cash flow
information:

Income taxes paid $785 $381
==== ====

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

Supplemental disclosures
of non-cash investing
and financing
activities:

Effect of net increase
in fair value of
auction-rate
securities $11 $12
=== ===
Property, plant and
equipment costs
incurred but not paid $47 $168
=== ====
Subscriber acquisition
fees incurred but not
paid $ - $929
=== === ====
Retirement of treasury
stock $75 $84
=== ===

Nine Months
Ended
September 30,
-------------
2010 2009
---- ----

Supplemental disclosures
of non-cash investing
and financing
activities:

Effect of net increase in
fair value of auction-
rate securities $75 $82
=== ===
Property, plant and
equipment costs incurred
but not paid $47 $168
Subscriber acquisition
fees incurred but not
paid $ - $3,188
Retirement of treasury
stock $673 $482
==== ====

Revenues Three Months Ended
------------------
September 30,
-------------
2010 2009
---- ----

TOC $15,419 $14,308
Production Services 8,684 10,196
Eliminations (1,204) (874)
Total revenues $22,899 $23,630

Cost of Services

TOC $3,874 $3,316
Production Services 6,690 7,918
Eliminations (952) (600)
Total cost of
services $9,612 $10,634

Other Expenses (1)

TOC $6,659 $8,690
Production Services 2,082 2,338
Eliminations - (60)
Total other expenses $8,741 $10,968

Income (loss) from
Operations

TOC $4,886 $2,302
Production Services (88) (60)
Eliminations (252) (214)
Income (loss) from
operations $4,546 $2,028

Revenues Nine Months Ended
-----------------
September 30,
-------------
2010 2009
---- ----

TOC $39,299 $39,208
Production
Services 20,182 22,325
Eliminations (1,932) (1,714)
Total revenues $57,549 $59,819
------- -------

Cost of Services

TOC $11,958 $11,093
Production
Services 16,388 19,799
Eliminations (1,786) (1,372)
Total cost of
services $26,560 $29,520
------- -------

Other Expenses (1)

TOC $23,087 $24,553
Production
Services 7,691 7,385
Eliminations - (60)
Total other
expenses $30,778 $31,878
------- -------

Income (loss) from
Operations

TOC $4,254 $3,562
Production
Services (3,897) (4,859)
Eliminations (146) (282)
Income (loss) from
operations $211 $(1,579)
==== =======
(1) Includes advertising expense, selling, general and
administrative expense and depreciation and amortization expense.

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 income
(loss) to earnings before interest, taxes, depreciation and
amortization (EBITDA), adjusted for the effects share-based
compensation expense and acquisition and integration costs:

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

Net income (loss) $2,440 $1,401

Add/Subtract:
Interest and other
income, net (5) 14
Income tax provision
(benefit) 2,101 641
Depreciation and
amortization 748 993
--- ---

EBITDA 5,294 3,021

Adjusted for:
Share-based
compensation expense 677 1,199
Acquisition and
integration costs - -
--- ---

EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $5,971 $4,220
====== ======

Summary of cost of
services
Share-based
compensation expense $36 $22
Cost of services 9,576 10,612
----- ------
Total cost of services $9,612 $10,634
====== =======

Summary of selling,
general and
administrative
Share-based
compensation expense $641 $1,177
Acquisition and
integration costs - -
Selling, general and
administrative 6,600 8,149
----- -----
Total selling, general
and administrative $7,241 $9,326
====== ======

Summary of interest and
other income, net
Interest income, net $(5) $14
Dividend income - -
Other income (loss) - -
--- ---
Total interest and other
income, net $(5) $14
=== ===

EBITDA as adjusted by
segment
Legacy Outdoor Channel $5,856 $3,824
Production Services 115 396
--- ---
EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $5,971 $4,220
====== ======

Nine Months
Ended
September 30,
-------------
2010 2009
---- ----

Net income (loss) $(229) $(850)

Add/Subtract:
Interest and other
income, net 22 66
Income tax provision
(benefit) 462 (663)
Depreciation and
amortization 2,587 2,848

EBITDA 2,798 1,269

Adjusted for:
Share-based
compensation expense 2,486 3,322
Acquisition and
integration costs - 680
--- ---

EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $5,284 $5,271
====== ======

Summary of cost of
services
Share-based
compensation expense $194 $236
Cost of services 26,366 29,284
------ ------
Total cost of services $26,560 $29,520
======= =======

Summary of selling,
general and
administrative
Share-based
compensation expense $2,292 $3,086
Acquisition and
integration costs - 680
Selling, general and
administrative 23,882 23,232
------ ------
Total selling, general
and administrative $26,174 $26,998
======= =======

Summary of interest and
other income, net
Interest income, net $22 $66
Dividend income - -
Other income (loss) - -
--- ---
Total interest and other
income, net $22 $66
=== ===

EBITDA as adjusted by
segment
Legacy Outdoor Channel $7,608 $8,041
Production Services (2,324) (2,770)
------ ------
EBITDA as adjusted for
share-based
compensation expense
and acquisition and
integration costs $5,284 $5,271
====== ======

SOURCE Outdoor Channel Holdings, Inc.

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, +1-212-986-6667, nancy@braincomm.com, both of Brainerd Communicators, Inc.

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

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