Gaiam Reports First Quarter Fiscal 2009 Results

Free cash flow increased to $7.1 million

BOULDER, Colo., May 6 /PRNewswire-FirstCall/ -- Gaiam, Inc. (Nasdaq: GAIA), a lifestyle media company announced today results for its first quarter ended March 31, 2009. Gaiam will host a conference call today, May 6, 2009, at 2:30 p.m. MDT (4:30 p.m. EDT) to review the results.

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Revenue for the first quarter ended March 31, 2009 decreased 14.2% to $55.9 million from $65.2 million recorded in the same period last year. The reduction in sales was primarily due to a decrease in consumer spending, closure of businesses, reporting of international revenues, which were effected by the transition from product sales to licensing, a planned reduction in catalog circulation and conservative retail buying throughout the quarter.

Gross profit decreased to $31.0 million or 55.4% of revenue for the first quarter of 2009, from $41.0 million, or 62.9% of revenue, in the comparable quarter last year. The change in gross margin reflects the company's investment in the lower margin solar business, and the effect of higher deductions and allowances to retailers.

Selling and operating expenses decreased $1.0 million, or 2.8%, to $33.9 million during the first quarter of 2009, from $34.9 million during the same quarter last year, partially reflecting recent cost control initiatives.

Operating loss for the first quarter of 2009 was $6.2 million compared to an operating gain of $2.7 million in the same quarter last year. Excluding the consolidation of our 56% own subsidiary Real Goods Solar, operating loss was $4.0 million in the quarter. Total net loss for the quarter was $3.1 million, or $0.13 per share, compared to net income of $2.2 million in the same period last year.

Included in the first quarter results are a number of costs related to the closing of a non-profitable business and large reductions in payroll and related severance payouts. On an annual basis, cost savings generated by these measures approximate $10 million.

"While our first quarter results reflect the broader market trends, we remain committed to our strategic plan. In this difficult economic climate, we are focused on the appropriate balance of cash conservation and investing in the growth strategies that will build our brand and partnerships," said Lynn Powers, President and CEO. "In addition, we continue to implement cost savings measures, including renegotiating freight contracts and product costs with our manufacturers, overhead restructuring, and optimizing our direct business through reduced catalog prospecting and increased online customer acquisition strategies."

"In the first quarter, we generated free cash flow of $7.1 million, a $10.5 million improvement from cash use of $3.4 million during the same quarter of the last year. We ended the quarter with $38.2 million in cash, up $6.2 million in last 90 days, no debt and a current ratio of 4.8, up from 3.9, at the end of last quarter. We continue to use the current macroeconomic environment as an opportunity to further expand our branded store within store presence at retail, which we have increased to 10,500 and focus on the free cash flow," said Jirka Rysavy, Chairman.

A replay of the call will begin approximately one hour after the end of the call and will continue until 11:00 p.m. CDT on May 11, 2009.

       Replay number:  866-373-1974

For more information about Gaiam, please visit www.gaiam.com, or call 1-800-869-3603.

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," "intend," "believe," "will," "should" or comparable terminology or by discussions of strategy. While Gaiam 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 Gaiam's filings with the Securities and Exchange Commission. Gaiam assumes no duty to update any forward-looking statements.

                                 GAIAM, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
                     (In thousands, except per share data)

                               Three Months Ended     Three Months Ended
                                March 31, 2009          March 31, 2008


    Net revenue                $55,923     100.0%      $65,173    100.0%

    Cost of goods sold          24,937      44.6%       24,195     37.1%

    Gross profit                30,986      55.4%       40,978     62.9%

    Operating expenses          37,212      66.5%       38,312     58.8%

    Income (loss) from
     operations                 (6,226)    -11.1%        2,666      4.1%

    Other income                    74       0.1%          469      0.7%

    Income (loss) before
     income taxes               (6,152)    -11.0%        3,135      4.8%

    Income tax expense
     (benefit)                  (2,249)     -4.0%        1,238      1.9%

    Net income (loss)           (3,903)     -7.0%        1,897      2.9%

    Net loss attributable to
     the noncontrolling interest   813       1.5%          316      0.5%

    Net income (loss)
     attributable to
     Gaiam, Inc.               $(3,090)     -5.5%       $2,213      3.4%

    Weighted-average shares
     outstanding:
         Basic                  23,957                  25,084
         Diluted                23,957                  25,352

    Net income (loss) per
     share attributable to
     Gaiam, Inc. common
     shareholders:
         Basic                 $(0.13)                  $0.09
         Diluted               $(0.13)                  $0.09



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

                                               March 31,       December 31,
                                                 2009              2008
                                              (Unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                 $38,198           $31,965
      Accounts receivable, net                   23,013            33,664
      Inventory, net                             32,581            40,782
      Deferred advertising costs                  2,569             2,578
      Receivable and deferred tax assets         13,249            15,448
      Other current assets                        4,854             4,795
    Total current assets                        114,464           129,232

    Property and equipment, net                  27,856            27,381
    Media library, net                           12,157            12,102
    Deferred tax assets, net                      7,416             6,076
    Goodwill                                     23,434            23,180
    Other intangibles, net                          828               880
    Notes receivable and other assets             3,230             3,247
    Total assets                               $189,385          $202,098

    Liabilities and Equity
    Current liabilities:
      Accounts payable                          $17,394           $26,567
      Accrued liabilities                         6,577             6,885
    Total current liabilities                    23,971            33,452

    Commitments and contingencies

    Equity:

    Gaiam, Inc. shareholders' equity:
     Class A common stock, $.0001 par value,
      150,000,000 shares authorized, 18,599,890
      and 18,541,201 shares issued and
      outstanding at March 31, 2009 and
      December 31, 2008, respectively                 2                 2
     Class B common stock, $.0001 par value,
      50,000,000 shares authorized, 5,400,000
      issued and outstanding at March 31, 2009
      and December 31, 2008                           1                 1
     Additional paid-in capital                 164,275           163,652
     Accumulated other comprehensive income          88                88
     Accumulated deficit                        (13,365)          (10,275)
    Total Gaiam, Inc. shareholders' equity      151,001           153,468
    Noncontrolling interest                      14,413            15,178
    Total equity                                165,414           168,646
    Total liabilities and equity               $189,385          $202,098

SOURCE Gaiam, Inc.