Gaiam Reports 2012 Third Quarter Results

Cash flow provided by operations for the nine months ended September 30, 2012 improved by $19.8 million to $19.4 million from a use of $0.4 million for the same period of last year. Also during the 2012 third quarter, Gaiam secured a new three year, $35 million asset-based credit facility from PNC Bank, N.A., which expires in July 2015. The credit facility currently carries an average rate of 3.64%. At September 30, 2012, the Company had outstanding borrowings against the credit facility of $20.9 million and cash of $19.1 million on its balance sheet.

Jirka Rysavy, Chairman of Gaiam, added, “Double digit internal revenue growth and a $20 million improvement in our operating cash flow during the first nine months are a good basis for entering into our seasonally strongest quarter.”

Following the completion of today’s conference call, a replay will be available until November 12, 2012 by dialing 800/633-8284 or 402/977-9140, passcode: 21609086.

About GAIAM

Gaiam, Inc. (NASDAQ: GAIA) is a leading producer and marketer of lifestyle media and fitness accessories. With a wide distribution network that consists of over 60,000 retail doors, 15,000 store within stores, and 6,000 media category management locations, and a digital distribution platform, Gaiam is dedicated to providing solutions for healthy and eco-conscious living. The Company dominates the health and wellness category and releases non-theatrical programming focused on family entertainment and conscious media. In addition, Gaiam has exclusive licensing agreements with Discovery Communications and other licensing partners. 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.
2012 RESULTS WITH REAL GOODS SOLAR DECONSOLIDATED
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
				Three Months Ended							Three Months Ended
				September 30, 2012							September 30, 2011
Net revenue				$	42,983			100.0	%		$	41,747			100.0	%
Cost of goods sold					18,912			44.0	%			17,686			42.4	%
Gross profit					24,071			56.0	%			24,061			57.6	%
Selling and operating					21,771			50.7	%			22,943			54.9	%
Corporate, general and administration					2,471			5.7	%			2,123			5.1	%
Loss from operations					(171	)		-0.4	%			(1,005	)		-2.4	%
Interest and other income (expense)					(192	)		-0.5	%			89			0.2	%
Loss from equity method investment					(15,940	)		-37.1	%			(179	)		-0.4	%
Loss before income taxes					(16,303	)		-38.0	%			(1,095	)		-2.6	%
Income tax benefit					(5,377	)		-12.5	%			(205	)		-0.5	%
Net loss					(10,926	)		-25.5	%			(890	)		-2.1	%
Net income attributable to the noncontrolling interest					(231	)		-0.5	%			(252	)		-0.6	%
Net loss attributable to Gaiam, Inc. (a)				$	(11,157	)		-26.0	%		$	(1,142	)		-2.7	%
Weighted-average shares outstanding:
Basic					22,704							23,205
Diluted					22,704							23,205
Net loss per share attributable to Gaiam, Inc. common shareholders:
Basic				$	(0.49	)					$	(0.05	)
Diluted				$	(0.49	)					$	(0.05	)

_____________________
(a)		Excluding the losses from our equity method investment in RSOL and a related tax benefit, the net loss attributable to Gaiam, Inc. was $0.4 million, or $0.01 per share, during the third quarter of 2012 and a net loss of $0.9 million, or $0.04 per share, during the third quarter of 2011.

GAIAM, INC.
2012 RESULTS WITH REAL GOODS SOLAR DECONSOLIDATED
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
				Nine Months Ended							Nine Months Ended
				September 30, 2012							September 30, 2011
Net revenue				$	135,762			100.0	%		$	109,889			100.0	%
Cost of goods sold					56,574			41.7	%			47,755			43.5	%
Gross profit					79,188			58.3	%			62,134			56.5	%
Selling and operating					72,828			53.6	%			63,437			57.7	%
Corporate, general and administration					8,125			6.0	%			6,623			6.0	%
Acquisition-related costs					1,667			1.2	%			—			—	%
Loss from operations					(3,432	)		-2.5	%			(7,926	)		-7.2	%
Interest and other income (expense)					(259	)		-0.2	%			203			0.2	%
Loss from equity method investment					(17,580	)		-12.9	%			(756	)		-0.7	%
Loss before income taxes					(21,271	)		-15.6	%			(8,479	)		-7.7	%
Income tax benefit					(6,938	)		-5.1	%			(2,631	)		-2.4	%
Net loss					(14,333	)		-10.5	%			(5,848	)		-5.3	%
Net income attributable to the noncontrolling interest					(96	)		-0.1	%			(168	)		-0.2	%
Net loss attributable to Gaiam, Inc. (a)				$	(14,429	)		-10.6	%		$	(6,016	)		-5.5	%
Weighted-average shares outstanding:
Basic					22,702							23,272
Diluted					22,702							23,272
Net loss per share attributable to Gaiam, Inc. common shareholders:
Basic				$	(0.64	)					$	(0.26	)
Diluted				$	(0.64	)					$	(0.26	)

_____________________
(a)		Excluding costs related to our acquisition of Vivendi Entertainment and the losses from our equity method investment in RSOL and a related tax benefit, the net loss attributable to Gaiam, Inc. was $1.4 million, or $0.08 per share, for the nine months ended September 30, 2012 and $5.3 million, or $0.23 per share, for the nine months ended September 30, 2011.

GAIAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
				September 30, 2012			December 31, 2011
Assets
Current assets:
Cash				$	19,057		$	14,545
Accounts receivable, net					34,200			31,113
Inventory, less allowances					37,442			29,205
Deferred advertising costs					3,421			3,303
Receivable and deferred tax assets					6,941			6,686
Receivables from equity method investee					83			2,176
Advances					17,543			5,336
Other current assets					2,564			1,969
Total current assets					121,251			94,333
Property and equipment, net					24,055			23,664
Media library, net					13,813			14,576
Deferred tax assets					17,874			12,636
Goodwill					9,405			2,673
Other intangibles, net					7,243			569
Equity method investment					—			14,300
Other assets					688			539
Total assets				$	194,329		$	163,290
Liabilities and Equity
Current liabilities:
Line of credit				$	20,925		$	—
Accounts payable					29,361			21,069
Participations payable					24,233			7,851
Accrued liabilities					2,931			3,196
Total current liabilities					77,450			32,116
Total equity					116,879			131,174
Total liabilities and equity				$	194,329		$	163,290

Non-GAAP Financial Measures For Earnings Before Share-Based Compensation, Acquisition-Related Costs, Interest, Loss From Equity Method Investment, Income Taxes, Depreciation and Amortization (Adjusted EBITDA)

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 and nine months ended September 30, 2012 and 2011, respectively. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate meaningful comparison of the results in the current period to those in the prior period 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.

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