Gaiam Reports Third Quarter Fiscal 2009 Results

Third quarter revenue increases 23% to $74.4 million

Year-to-date free cash flow increases to $17.2 million

BOULDER, Colo., Nov. 4 /PRNewswire-FirstCall/ -- Gaiam, Inc. (Nasdaq: GAIA), a lifestyle media company, announced today results for its third quarter ended September 30, 2009. Gaiam will host a conference call today, November 4, 2009, at 2:30 p.m. MST (4:30 p.m. EST) to review the results.

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Revenue for the third quarter ended September 30, 2009 increased 23.5% to $74.4 million from $60.3 million recorded in the same period last year. The increase in sales was primarily due to the solar division, and to our trade business which grew 24.2% in the quarter, partially offset by the planned reduction in catalog circulation.

Gross profit increased to $35.8 million, or 48.1% of revenue, for the third quarter of 2009, from $33.8 million, or 56.1% of revenue, in the comparable quarter last year. The change in gross margin as a percentage of revenue reflects the growth of the lower margin solar business and the implementation of media category management at retail.

Selling and operating expenses decreased to $31.6 million or 42.5% of revenue during the third quarter of 2009, from $34.0 million or 56.5% of revenue during the same quarter last year, reflecting the significant cost saving measures, including reducing payroll costs, optimizing the direct business through reduced catalog prospecting and closing non-profitable businesses.

Operating income for the quarter increased to $945,000 from a loss of $17.3 million during the same quarter of the last year. Gaiam's prior year results included a $13.9 million pre-tax impairment charge related to the Company's acquired media libraries, website development costs and related assets.

In the third quarter of 2009, Gaiam generated free cash flow of $1.8 million, an $11.3 million improvement from the free cash flow use of $9.5 million during the same quarter of the prior year. For the first nine months of the year, Gaiam's free cash flow increased to $17.2 million, a $35.6 million improvement from the use of $18.4 million in cash during the same period last year.

For the first nine months of 2009, the Company generated $20.9 million in cash from operations and ended the quarter with $44.4 million in cash, up $12.5 million from the end of 2008, and up $1.7 million for the quarter. The Company's current ratio remained strong at 3.4.

"We believe we have turned the corner with respect to our performance. By focusing on our core growth strategies and cost savings, our operating performance improved in each of our business segments and we returned to profitability. It was an especially strong quarter for our trade business, where we reported over 24% growth in sales to retailers compared to the same quarter last year. We also leveraged our partnerships, releasing the first of many-to-come Discovery titles in the non-theatrical segment, and expanded our media category management in the fitness segment," said Lynn Powers, CEO and President. "We are seeing fourth quarter retail orders continue to improve and believe that we are well positioned from a product and inventory standpoint as we move into the important holiday season."

"We are pleased with the return to profitability and $17.2 million of free cash flow year-to-date. The positive trends experienced in the third quarter have continued and we expect to return to double-digit internal revenue growth, in-line with our historical rates, in the fourth quarter. Looking to 2010, we believe that our revenue momentum, new media relationships and strong balance sheet position us well to drive top and bottom line growth as well as growth in our market share in non-theatrical media," 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. CST on November 11, 2009.

    Replay number:  (203) 369-3171

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
                          September 30, 2009  September 30, 2008
                          ------------------  ------------------

     Net revenue           $74,439    100.0 %  $60,285    100.0 %

     Cost of goods sold     38,628     51.9 %   26,440     43.9 %
                            ------              ------

     Gross profit           35,811     48.1 %   33,845     56.1 %

     Selling and operating  31,641     42.5 %   34,049     56.5 %
     Corporate, general
      and administration     3,225      4.3 %    3,126      5.2 %
     Other expenses, net         -      0.0 %   13,947     23.1 %
                               ---              ------

     Income (loss) from
      operations               945      1.3 %  (17,277)   -28.7 %

     Interest and other
      income                    86      0.1 %      355      0.6 %
                                --                 ---

     Income (loss) before
      income taxes           1,031      1.4 %  (16,922)   -28.1 %

     Income tax expense
      (benefit)                388      0.5 %   (6,922)   -11.5 %
                               ---              ------

     Net income (loss)         643      0.9 %  (10,000)   -16.6 %

     Net (income)
      attributable to the
      noncontrolling
      interest                (278)    -0.4 %     (115)    -0.2 %
                              ----                ----

     Net income (loss)
      attributable to
      Gaiam, Inc              $365      0.5 % $(10,115)   -16.8 %
                              ====            ========

     Weighted-average
      shares outstanding:
       Basic                23,085              24,020
       Diluted              23,167              24,020

     Net income (loss) per
      share attributable
      to Gaiam, Inc.
      common shareholders:
       Basic                 $0.02              $(0.42)
       Diluted               $0.02              $(0.42)




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

                           Nine Months Ended     Nine Months Ended
                           September 30, 2009    September 30, 2008
                           ------------------    ------------------

     Net revenue           $190,837    100.0 %  $182,675    100.0 %

     Cost of goods sold      92,594     48.5 %    71,699     39.2 %
                             ------               ------

     Gross profit            98,243     51.5 %   110,976     60.8 %

     Selling and operating   96,269     50.5 %   102,686     56.2 %
     Corporate, general
      and administration      9,431      4.9 %     9,601      5.3 %
     Other expenses, net          -      0.0 %    40,655     22.2 %
                                ---               ------

     Loss from operations    (7,457)    -3.9 %   (41,966)   -22.9 %

     Interest and other
      income                    221      0.1 %    32,363     17.7 %
                                ---               ------

     Loss before income
      taxes                  (7,236)    -3.8 %    (9,603)    -5.2 %

     Income tax benefit      (2,699)    -1.4 %    (4,031)    -2.2 %
                             ------               ------

     Net loss                (4,537)    -2.4 %    (5,572)    -3.0 %

     Net loss attributable
      to the noncontrolling
      interest                  803      0.4 %       251      0.1 %
                                ---                  ---

     Net loss attributable
      to Gaiam, Inc.        $(3,734)    -2.0 %   $(5,321)    -2.9 %
                            =======              =======

     Weighted-average
      shares outstanding:
       Basic                 23,370               24,611
       Diluted               23,370               24,611

     Net loss per share
      attributable to
      Gaiam, Inc. common
      shareholders:
       Basic                 $(0.16)              $(0.22)
       Diluted               $(0.16)              $(0.22)



                               GAIAM, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                               (Unaudited)
                             (In thousands)

                                          September 30, December 31,
                                             2009          2008
                                          ------------- ------------
      Assets
      Current assets:
        Cash and cash equivalents           $44,437      $31,965
        Accounts receivable, net             31,383       33,664
        Inventory, net                       26,011       40,782
        Deferred advertising costs            3,496        2,578
        Receivable and deferred tax
         assets                              14,090       15,448
        Other current assets                  4,528        4,795
                                              -----        -----
      Total current assets                  123,945      129,232

      Property and equipment, net            28,341       27,381
      Media library, net                     12,541       12,102
      Deferred tax assets, net                7,184        6,076
      Goodwill                               24,166       23,180
      Other intangibles, net                    714          880
      Notes receivable and other assets       3,193        3,247
                                              -----        -----
      Total assets                         $200,084     $202,098
                                           ========     ========

      Liabilities and Equity
      Current liabilities:
        Accounts payable                    $28,650      $26,567
        Accrued liabilities                   7,948        6,885
                                              -----        -----
      Total current liabilities              36,598       33,452

      Total equity                          163,486      168,646
      Total liabilities and equity         $200,084     $202,098
                                           ========     ========

SOURCE Gaiam, Inc.