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Outdoor Channel Holdings Reports Fourth Quarter And Full Year 2012 Results

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 merger related 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 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 merger related 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 decline in viewership and revenues related to increased competition within the outdoor television segment; (4) a decrease in advertising revenue as a result of a deterioration in general economic conditions; (5) managing the Company's growth and the integration of future acquisitions, if any; (6) 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
Consolidated Statements of Operations
(in thousands)
         
  Three Months Ended Year Ended
  December 31 December 31
  2012 2011 2012 2011
Revenues:  (unaudited)    
Advertising  $ 11,794  $ 11,288  $ 39,648  $ 36,918
Subscriber fees  5,741  5,395  21,584  20,155
Production services  7,858  6,908  16,090  14,782
         
Total revenues  25,393  23,591  77,322  71,855
         
Cost of services:        
Programming  2,230  2,188  8,365  7,511
Satellite transmission fees  430  402  1,726  1,590
Production and operations  7,093  6,489  20,792  19,616
Other direct costs  5  39  382  280
         
Total cost of services  9,758  9,118  31,265  28,997
         
Other expenses:        
Advertising  3,251  924  7,423  2,845
Selling, general and administrative  7,196  6,816  29,502  30,385
Merger related expenses  1,286  --   1,942  -- 
Depreciation and amortization  761  735  2,898  2,874
         
Total other expenses  12,494  8,475  41,765  36,104
         
Total operating expenses  22,252  17,593  73,030  65,101
         
Income from operations  3,141  5,998  4,292  6,754
         
Other-than-temporary impairment on auction-rate securities  (680)  --   (680)  -- 
Interest and other income, net  30  3  90  18
         
Income from operations before income taxes  2,491  6,001  3,702  6,772
         
Income tax provision  1,240  4,546  1,808  4,927
         
Net income  1,251  1,455  1,894  1,845
Net income attributable to noncontrolling interest  --   --   --   -- 
         
Net income attributable to controlling interest  $ 1,251  $ 1,455  $ 1,894  $ 1,845
         
Earnings per common share data:        
Basic  $ 0.05  $ 0.06  $ 0.08  $ 0.07
Diluted  $ 0.05  $ 0.06  $ 0.07  $ 0.07
         
Weighted average number of common shares outstanding        
Basic  25,507  24,912  25,137  24,821
Diluted  26,214  25,686  25,736  25,633
         
         
OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Segment Operating Results
(in thousands)
         
  Three Months Ended Year Ended
  December 31 December 31
  2012 2011 2012 2011
   (unaudited)    
Revenues        
         
TOC  $ 17,535  $ 16,683  $ 61,232  $ 57,073
Production Services  2,445  2,529  6,963  9,228
Aerial Cameras  6,451  4,728  12,018  8,663
Eliminations  (1,038)  (349)  (2,891)  (3,109)
Total revenues  $ 25,393  $ 23,591  $ 77,322  $ 71,855
         
Cost of Services        
         
TOC  $ 4,644  $ 4,715  $ 18,914  $ 17,806
Production Services  1,881  2,079  6,022  7,874
Aerial Cameras  4,128  2,879  9,132  6,342
Eliminations  (895)  (555)  (2,803)  (3,025)
Total cost of services  $ 9,758  $ 9,118  $ 31,265  $ 28,997
         
Other Expenses        
         
TOC  $ 11,288  $ 6,905  $ 37,186  $ 28,966
Production Services  407  703  1,590  3,203
Aerial Cameras  809  887  3,009  3,955
Eliminations  (10)  (20)  (20)  (20)
Total other expenses  $ 12,494  $ 8,475  $ 41,765  $ 36,104
         
Income (Loss) from Operations        
         
TOC  $ 1,603  $ 5,063  $ 5,132  $ 10,301
Production Services  157  (253)  (649)  (1,849)
Aerial Cameras  1,514  962  (123)  (1,634)
Eliminations  (133)  226  (68)  (64)
Income from operations  $ 3,141  $ 5,998  $ 4,292  $ 6,754
         
         
OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Reconciliation of U.S. GAAP Measures to U.S. Non-GAAP Measures
(unaudited, in thousands)
         
  Three Months Ended Year Ended
  December 31 December 31
  2012 2011 2012 2011
         
Net Income  $ 1,251  $ 1,455  $ 1,894  $ 1,845
         
Add/Subtract:        
Other-than-temporary impairment on auction-rate securities  680  --  680  --
Interest and other income, net  (30)  (3)  (90)  (18)
Income tax  1,240  4,546  1,808  4,927
Depreciation and amortization  761  735  2,898  2,874
         
EBITDA  $ 3,902  $ 6,733  $ 7,190  $ 9,628
         
Adjusted for:        
Share-based compensation expense  940  802  3,517  3,153
Merger related costs  1,286  --  1,942  --
         
EBITDA as adjusted for share-based compensation expense  $ 6,128  $ 7,535  $ 12,649  $ 12,781
         
Summary of Cost of Services        
Share-based compensation expense  $ 87  $ 60  $ 271  $ 238
Cost of services  9,671  9,058  30,994  28,759
Total cost of services  $ 9,758  $ 9,118  $ 31,265  $ 28,997
         
Summary of Selling, General and Administrative        
Share-based compensation expense  $ 853  $ 742  $ 3,246  $ 2,915
Selling, general and administrative  6,343  6,074  26,256  27,470
Total selling, general and administrative  $ 7,196  $ 6,816  $ 29,502  $ 30,385
         
Summary of Interest and Other Income, net        
Interest income  $ 44  $ 27  $ 165  $ 111
Interest and other expense  (14)  (24)  (75)  (93)
Total interest and other income, net  $ 30  $ 3  $ 90  $ 18
         
EBITDA as adjusted by Segment        
Outdoor Channel  $ 4,125  $ 6,122  $ 11,862  $ 14,446
Production Services *  155  226  (192)  (969)
Aerial Cameras  1,848  1,187  979  (696)
         
EBITDA as adjusted for share-based compensation expense  $ 6,128  $ 7,535  $ 12,649  $ 12,781
         
* - eliminations included in Production Services segment        
         
     
OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(audited, in thousands)
     
  December 31, 2012 December 31, 2011
     
Assets    
Current assets:    
Cash and cash equivalents  $ 30,476  $ 19,498
Investment in available-for-sale securities  27,494  40,049
Accounts receivable, net of allowance for doubtful accounts  15,066  13,657
Other current assets  17,799  14,066
Total current assets  90,835  87,270
     
Property, plant and equipment, net  14,121  11,875
Goodwill and amortizable intangible assets, net  43,330  43,538
Investments in auction-rate securities  --   4,940
Deferred tax assets, net  453  754
Deposits and other assets  953  809
     
Totals  $ 149,692  $ 149,186
     
Liabilities and Stockholders' Equity    
     
Current liabilities  $ 17,313  $ 14,955
Long-term liabilities  749  906
Total liabilities  18,062  15,861
     
Total Outdoor Channel Holdings, Inc. stockholders' equity  131,630  133,325
Noncontrolling interest  --   -- 
Total equity  131,630  133,325
     
Totals  $ 149,692  $ 149,186
     
         
OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
         
  Three Months Ended Year Ended
  December 31 December 31,
  2012 2011 2012 2011
Operating activities:  (unaudited)    
Net income  $ 1,251  $ 1,455  $ 1,894  $ 1,845
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation and amortization  761  735  2,898  2,874
Amortization of subscriber acquisition fees  151  345  1,582  1,511
Loss on sale of equipment  --   120  17  151
Other-than-temporary impairment on auction-rate securities  680  --   680  -- 
Provision for doubtful accounts  188  139  188  262
Share-based employee and director compensation  940  802  3,517  3,153
Deferred tax provision, net  (945)  1,454  (666)  1,796
Excess tax benefit from share-based compensation (68) -- (68) --
         
Changes in operating assets and liabilities:        
Accounts receivable  (854)  (2,006)  (1,597)  2,835
Income tax refund receivable and payable, net  1,009  1,981  (721)  (704)
Programming and production costs  256  (17)  (3,569)  (792)
Other current assets  (204)  183  (61)  (1,547)
Deposits and other assets  (2)  10  101  107
Subscriber acquisition fees  (935)  --   (1,435)  (191)
Accounts payable and accrued expenses  469  1,463  1,893  (2,099)
Deferred revenue  193  (1,468)  1,340  118
Deferred obligations  (26)  76  43  83
Unfavorable lease obligations  (42)  (38)  (164)  (149)
Net cash provided by operating activities  2,822  5,234  5,872  9,253
         
Investing activities:        
Purchases of property, plant and equipment  (1,762)  (636)  (4,742)  (2,167)
Purchase of intangibles  --   --   --   (85)
Proceeds from sale of equipment  --   53  138  53
Purchases of available-for-sale securities  (18,988)  (19,020)  (72,256)  (83,590)
Proceeds from sale of available-for-sale and auction-rate securities  16,010  12,118  89,363  70,736
Net cash provided by (used in) investing activities  (4,740)  (7,485)  12,503  (15,053)
         
Financing activities:        
Purchase of treasury stock  (144)  (150)  (1,157)  (1,050)
Payment of dividends on common stock  (6,308)  (6,230)  (6,308)  (6,230)
Excess tax benefit from share-based compensation  68  --   68  -- 
Net cash used in financing activities  (6,384)  (6,380)  (7,397)  (7,280)
         
Net increase (decrease) in cash and cash equivalents  (8,302)  (8,631)  10,978  (13,080)
Cash and cash equivalents, beginning of period  38,778  28,129  19,498  32,578
Cash and cash equivalents, end of period  $ 30,476  $ 19,498  $ 30,476  $ 19,498
         
Supplemental disclosure of cash flow information:        
Income taxes paid, net of refund  $ 1,204  $ 1,185  $ 3,207  $ 3,752
         
Supplemental disclosure of non-cash investing and financing activities:        
Reclassification adjustment of other-than-temporary impairment losses on auction-rate securities recognized in net income, net of tax  $ 289  $ --   $ 289  $ -- 
Change in fair value of available-for-sale and auction-rate securities, net of tax  $ (25)  $ 40  $ 2  $ 65
Property, plant and equipment costs incurred but not paid  $ 313  $ 211  $ 313  $ 211
Subscriber acquisition fees incurred but not paid $ -- $ 488 $ -- $ 488
         
CONTACT: For Company:
         Tom Allen
         Executive Vice President / Chief Operating & Financial Officer
         800-770-5750
         tallen@outdoorchannel.com
         
         For Investors:
         Brad Edwards
         Brainerd Communicators, Inc.
         212-986-6667
         edwards@braincomm.com

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