Gaiam Reports Second Quarter Fiscal 2009 Results

Second quarter revenue increases to $60.5 million

Year-to-date free cash flow increases to $15.3 million

BOULDER, Colo., Aug. 5 /PRNewswire-FirstCall/ -- Gaiam, Inc. (Nasdaq: GAIA), a lifestyle media company announced today results for its second quarter ended June 30, 2009. Gaiam will host a conference call today, August 5, 2009, at 2:30 p.m. MDT (4:30 p.m. EDT) to review the results.

         Dial-in No.:  800-619-0355 (domestic) or 212-547-0278 (international)
         Passcode:     GAIAM

Revenue for the second quarter ended June 30, 2009 increased 5.7% to $60.5 million from $57.2 million recorded in the same period last year. The increase in sales was primarily due to the solar business, coupled with a solid improvement in the Company's trade domestic business, partially offset by a planned reduction in catalog circulation.

Gross profit decreased to $31.4 million or 52.0% of revenue for the second quarter of 2009, from $36.2 million, or 63.2% 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 implementation of media category management at retail.

Selling and operating expenses decreased $3.0 million, or 9.0%, to $30.7 million during the second quarter of 2009, from $33.7 million during the same quarter last year, reflecting cost saving measures, including reducing payroll costs, optimizing the direct business through reduced catalog prospecting and closing non-profitable businesses.

Net loss for the quarter was $1.0 million, or $0.04 per share, compared to net income of $2.6 million in the same period last year. Gaiam's prior year results included a gain on the initial public offering of its solar subsidiary Real Goods Solar, partially offset by impairments of some of its media library and related assets. Excluding these items, second quarter 2008 results would have been a loss of $0.1 million.

In the second quarter of 2009, Gaiam generated free cash flow of $8.2 million, a $13.8 million improvement from cash use of $5.6 million during the same quarter of the prior year. For the first six months of the year, Gaiam's free cash flow increased to $15.3 million, a $24.2 million improvement from cash use of $8.9 million during the same period last year.

During the quarter the Company repurchased 932,000 shares of its common stock for $2.8 million. This brings the total number of shares repurchased by the Company since beginning its share repurchase initiative, to 4.8 million shares. These purchases represent over 20% of the approximately 23 million shares currently outstanding. The Company still has 2.7 million shares remaining in its authorized share repurchase program.

For the first half of 2009, the Company generated $17.1 million in cash from operations and ended the quarter with $42.8 million in cash, up $10.8 million for the six months and $4.6 million for the quarter. The Company's current ratio during the last six months improved to 4.2.

During the quarter the Company signed an exclusive home video license agreement with Discovery Communications. Under the three-year license, Gaiam will release programming from Discovery Communications networks, including Discovery Channel, TLC, Animal Planet, ID: Investigation Discovery, Science Channel, HD Theater, and The Military Channel.

"We achieved top line growth in a difficult retail environment and increased our shelf space in both branded store within a store presence, which increased to 11,000 stores, and category management. The strategic licensing partnership with Discovery Communications leverages our strong retail breadth and merchandise expertise to distribute educational content and increase our non-theatrical market share," said Lynn Powers, President and CEO. "Additionally, the cost cutting measures we implemented continue to improve our results this quarter."

"We are pleased with the $15.3 million of free cash flow and the increase of our top line, after three quarters of sluggish economy driven declines. We believe the recent revenue increase, combined with our new strategic relationships and our strong financial position, constitute a good base for solid growth," 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 August 10, 2009.

          Replay number:  800-627-0199

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
                                        June 30, 2009       June 30, 2008
                                        -------------       -------------
    Net revenue                       $60,475     100.0%   $57,217    100.0%
    Cost of goods sold                 29,029      48.0%    21,064     36.8%
                                       ------               ------
    Gross profit                       31,446      52.0%    36,153     63.2%
    Selling and operating              30,685      50.7%    33,704     58.9%
    Corporate, general and
     administration                     2,937       4.9%     3,096      5.4%
    Other expenses, net                   ---       0.0%    26,708     46.7%
                                          ---               ------
    Loss from operations               (2,176)     -3.6%   (27,355)   -47.8%
    Interest and other income              61       0.1%    31,539     55.1%
                                           --              ------
    Income (loss) before income taxes  (2,115)     -3.5%     4,184      7.3%
    Income tax expense (benefit)         (838)     -1.4%     1,653      2.9%
                                         ----                -----
    Net income (loss)                  (1,277)     -2.1%     2,531      4.4%
    Net loss attributable to the
      noncontrolling interest             268       0.4%        50      0.1%
                                          ---                   --
    Net income (loss) attributable
     to Gaiam, Inc.                   $(1,009)     -1.7%    $2,581      4.5%
                                      =======               ======
    Weighted-average shares
     outstanding:
         Basic                         23,076               24,707
         Diluted                       23,076               24,895

    Net income (loss) per share
     attributable to Gaiam, Inc.
     common shareholders:
         Basic                         $(0.04)               $0.10
         Diluted                       $(0.04)               $0.10


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


                                      Six Months Ended     Six Months Ended
                                        June 30, 2009        June 30, 2008
                                        -------------        -------------

    Net revenue                       $116,398   100.0%   $122,390    100.0%
    Cost of goods sold                  53,966    46.4%     45,259     37.0%
                                        ------              ------
    Gross profit                        62,432    53.6%     77,131     63.0%
    Selling and operating               64,628    55.5%     68,637     56.1%
    Corporate, general and
     administration                      6,206     5.3%      6,475      5.3%
    Other expenses, net                    ---     0.0%     26,708     21.8%
                                           ---              ------
    Loss from operations                (8,402)   -7.2%    (24,689)   -20.2%
    Interest and other income              135     0.1%     32,008     26.2%
                                           ---              ------
    Income (loss) before income taxes   (8,267)   -7.1%      7,319      6.0%
    Income tax expense (benefit)        (3,087)   -2.7%      2,891      2.4%
                                        ------               -----
    Net income (loss)                   (5,180)   -4.4%      4,428      3.6%
    Net loss attributable to the
     noncontrolling interest             1,081     0.9%        366      0.3%
                                         -----                 ---
    Net income (loss) attributable
     to Gaiam, Inc.                    $(4,099)   -3.5%     $4,794      3.9%
                                       =======              ======
    Weighted-average shares
     outstanding:
         Basic                          23,514              24,895
         Diluted                        23,514              25,120

    Net income (loss) per share
     attributable to Gaiam, Inc.
     common shareholders:
         Basic                          $(0.17)              $0.19
         Diluted                        $(0.17)              $0.19


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

                                                  June 30,     December 31,
                                                    2009          2008
                                                    ----          ----
                                                 (Unaudited)
    Assets
    Current assets:
      Cash and cash equivalents                   $42,755        $31,965
      Accounts receivable, net                     21,585         33,664
      Inventory, net                               28,251         40,782
      Deferred advertising costs                    2,004          2,578
      Receivable and deferred tax assets           13,496         15,448
      Other current assets                          4,560          4,795
                                                    -----          -----
    Total current assets                          112,651        129,232

    Property and equipment, net                    28,216         27,381
    Media library, net                             12,056         12,102
    Deferred tax assets, net                        7,985          6,076
    Goodwill                                       24,166         23,180
    Other intangibles, net                            771            880
    Notes receivable and other assets               3,211          3,247
                                                    -----          -----
    Total assets                                 $189,056       $202,098
                                                 ========       ========

    Liabilities and Equity
    Current liabilities:
      Accounts payable                            $21,026        $26,567
      Accrued liabilities                           5,672          6,885
                                                    -----          -----
    Total current liabilities                      26,698         33,452

    Commitments and contingencies

    Equity:
    Gaiam, Inc. shareholders' equity:
      Class A common stock, $.0001 par
       value, 150,000,000 shares authorized,
       17,684,226 and 18,541,201 shares issued
       and outstanding at June 30, 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
       June 30, 2009 and December 31, 2008              1              1
      Additional paid-in capital                  161,998        163,652
      Accumulated other comprehensive income           88             88
      Accumulated deficit                         (14,568)       (10,275)
                                                  -------        -------
    Total Gaiam, Inc. shareholders' equity        147,521        153,468
    Noncontrolling interest                        14,837         15,178
                                                   ------         ------
    Total equity                                  162,358        168,646
                                                  -------        -------
    Total liabilities and equity                 $189,056       $202,098
                                                 ========       ========

Non-GAAP Financial Measures

The Company has utilized the non-GAAP information set forth below as an additional device to aid in understanding and analyzing its financial results for the three months ended June 30, 2008. Management believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the Company's business and facilitate meaningful comparison of the results in the current period to those in prior periods and future periods. Reference to these non-GAAP measures should not be considered a substitute for results that are presented in a manner consistent with GAAP.

A reconciliation of the Company's GAAP net loss to its non-GAAP net loss for the three months ended June 30, 2008 is set forth below (in millions except share and per share data):

                                                            Three Months
                                                               Ended
                                                           June 30, 2008
                                                           -------------

    Net income                                                  $2.6

    Exclusion of non-cash gain on issuance of Real
     Goods Solar stock                                         (19.2)
    Exclusion of non-cash impairment of goodwill and
     intangible assets                                          16.5
                                                                ----
    Non-GAAP net income (loss)                                 $(0.1)
                                                               =====

    Non-GAAP weighted average shares used in earnings
     per share calculation                                24,707,000
                                                          ==========
    Non-GAAP earnings (loss) per share                        $(0.00)
                                                              ======

SOURCE Gaiam, Inc.