Gaiam, Inc. (NASDAQ: GAIA), a lifestyle media company,
announced today financial results for its fourth quarter and full
year ended December 31, 2011. Separately, Gaiam announced that
it entered into an agreement to acquire Vivendi Entertainment, a
division of Universal Music Group Distribution Corp., in an
accretive transaction. Gaiam will host a conference call today,
March 15, 2012, at 2:30 p.m. MT (4:30 p.m. ET) to review the
acquisition of Vivendi Entertainment and the 2011 fourth quarter
and full year results.
Dial-in No.: (800) 619-0355 (domestic) or (212)
547-0278 (international) Passcode: GAIAM
Acquisition of Vivendi Entertainment
This afternoon Gaiam announced that it entered into an agreement
to acquire the Vivendi Entertainment from Universal Music Group
Distribution in an accretive transaction that creates the largest
independent and third largest overall, non-theatrical media
distributor in the U.S. Under the terms of the agreement, Gaiam
will acquire Vivendi for $13.4 million plus net working capital.
The transaction is expected to be completed later this month,
subject to the satisfaction of customary closing conditions.
Lynn Powers CEO stated, “The acquisition of Vivendi
Entertainment brings a range of strategic and financial benefits to
the Company as the combination of both operations elevates the
Gaiam brand across the media and entertainment landscape, positions
us as a powerhouse independent distributor that should prove
attractive to new, quality studio partners and creates growth and
expansion opportunities. This is an exciting acquisition for Gaiam
and we believe it will generate immediate and lasting value for our
studio partners, retail customers, consumers and our
shareholders.”
2011 Fourth Quarter and Full Year Financial Review
Net revenue for the fourth quarter ended December 31, 2011
increased 15.1% year over year to $95.9 million from $83.3 million.
The increase is primarily attributable to the acquisition of
Alteris Renewables, Inc. (“Alteris”) in the solar segment,
partially offset by a sales decline in the direct to consumer
segment as a result of the Company’s efforts in 2011 to build a
foundation for growth in 2012 and beyond through the re-positioning
and re-branding of the direct response television, ecommerce, and
catalog businesses.
Net revenue for the year ended December 31, 2011 increased $0.5
million to $274.8 million from $274.3 in the prior-year. Full year
2011 net revenue includes $88.3 million for the business and $77.3
million for the direct to consumer segments.
Fourth quarter 2011 gross profit declined to $36.5 million, or
38.0% of net revenue, from $41.5 million, or 49.8% of net revenue,
during the comparable quarter last year. The decline is primarily
due to increased revenues in the lower margin solar segment and
changes in product sales mix in the business segment. Excluding the
solar segment, gross margin for the fourth quarter of 2011 was
48.3%.
Selling and operating expenses were $30.8 million, or 32.1% of
net revenue, in the fourth quarter of 2011, compared to $31.2
million, or 37.4% of net revenue, in the prior-year period. The
decrease was primarily the result of reduced television advertising
and catalog circulation in the direct to consumer segment,
partially offset by additional costs from the solar segment’s
acquisition of Alteris.
Corporate, general and administration expenses increased to $4.1
million for the fourth quarter of 2011 from $3.6 million in the
year-ago quarter reflecting the solar segment’s consolidation of
Alteris. As a percentage of net revenue, corporate, general and
administration expenses remained consistent at 4.3%.
Excluding the unusual non-cash items, net income for the fourth
quarter of 2011 was $1.4 million, or $0.06 per share, compared to
net income of $4.2 million, or $0.18 per share, in the prior-year
period. Including the non-cash goodwill impairment charge of $22.5
million necessitated by the market value of the Company’s common
stock, the net loss was $18.5 million, or $0.82 per share, for the
fourth quarter of 2011. (See Non-GAAP Financial Measurements on
page 7 of this press release.)
On December 31, 2011, Gaiam converted its Real Goods Solar, Inc.
(“Real Goods Solar”) Class B common shares, which had ten votes per
share, to Class A common shares, which have one vote per share.
Gaiam’s voting ownership in Real Goods Solar was reduced to
approximately 38% effecting the deconsolidation of Real Goods Solar
on the date of conversion. Gaiam recorded a net non-cash gain of
$2.6 million on the deconsolidation. The loss on deconsolidation of
$4.5 million, after marking to fair value Gaiam’s equity method
investment in Real Goods Solar, was offset by the reversal of a
deferred tax liability of $7.1 million.
Powers added, “In 2011 we repositioned Gaiam for better
visibility and focus on our core businesses. With the
deconsolidation of Real Goods, signing of an agreement to acquire
Vivendi Entertainment and the revamping of our direct response
television business, we are poised for double digit organic revenue
growth in our core businesses and improved profitability through
synergies, increased productivity and enhanced product
offerings.”
In 2011, Gaiam repurchased a total of 628,000 shares of its
Class A common stock in open market transactions for $2.3 million.
Since the repurchases began, Gaiam has repurchased approximately
5.43 million shares representing approximately 24% of the shares
currently outstanding. After the deconsolidation of $11.8 million
of Real Goods Solar cash, the Company ended the year with $14.5
million in cash, no debt, and a working capital ratio of 2.9. The
Company generated $5.2 million of operating cash flow for the year
compared to a $5.0 million use of cash in 2010.
Jirka Rysavy, Chairman of Gaiam, concluded, “The Vivendi
acquisition will help elevate the Gaiam brand across the media
landscape, including digital outlets. Our stronger media
competitive position supplements our expected double digit internal
revenue growth in 2012 and enhances offerings on our digital
platforms.”
A replay of this afternoon’s conference call will be available
approximately one hour after the end of the call and will continue
until 11:00 p.m. CT on March 23, 2012.
Replay number: (800) 677-4611; (402) 998-1678
Passcode: GAIAM (42426)
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 62,000 retail doors, 14,600 store within
stores, a digital distribution platform and 10 million direct
customers, Gaiam is dedicated to providing solutions for the many
facets of 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.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three MonthsEndedDecember 31, 2011
Three MonthsEndedDecember 31, 2010 Net revenue
$ 95,919 100.0 % $ 83,331 100.0 % Cost of goods sold 59,434
62.0 % 41,802 50.2 % Gross profit
36,485 38.0 % 41,529 49.8 % Selling and operating 30,799
32.1 % 31,206 37.4 % Corporate, general and administration 4,148
4.3 % 3,569 4.3 % Non-cash goodwill impairment 22,456
23.4 % — 0.0 % Income (loss) from operations
(20,918 ) -21.8 % 6,754 8.1 % Loss on deconsolidation of
subsidiary (4,550 ) -4.7 % — 0.0 % Interest and other income
(expense) (182 ) -0.2 % 94 0.1 % Income
(loss) before income taxes (25,650 ) -26.7 % 6,848 8.2 %
Income tax expense (benefit) (7,488 ) -7.8 % 2,295
2.7 % Net income (loss) (18,162 ) -18.9 % 4,553 5.5 %
Net income attributable to the noncontrolling interest
(340 ) -0.4 % (337 ) -0.4 % Net income (loss)
attributable to Gaiam, Inc. $ (18,502 ) -19.3 % $ 4,216 5.1
% Weighted-average shares outstanding: Basic 22,691
23,268 Diluted 22,691 23,440 Net income (loss) per share
attributable to Gaiam, Inc. common shareholders: Basic $ (0.82 ) $
0.18 Diluted $ (0.82 ) $ 0.18
GAIAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except per share data)
Twelve MonthsEndedDecember 31, 2011
Twelve MonthsEndedDecember 31, 2010 Net
revenue $ 274,773 100.0 % $ 274,268 100.0 % Cost of goods sold
157,912 57.5 % 138,438 50.5 %
Gross profit 116,861 42.5 % 135,830 49.5 % Selling and
operating 110,008 40.0 % 117,152 42.7 % Corporate, general and
administration 13,291 4.8 % 12,534 4.6 % Subsidiary’s
acquisition-related costs 2,393 0.9 % — 0.0 % Non-cash goodwill
impairment 22,456 8.2 % — 0.0 %
Income (loss) from operations (31,287 ) -11.4 % 6,144 2.2 %
Loss on deconsolidation of subsidiary (4,550 ) -1.7 % — 0.0 %
Interest and other income (expense) (90 ) 0.0 % 1,291
0.5 % Income (loss) before income taxes (35,927 )
-13.1 % 7,435 2.7 % Income tax expense (benefit)
(10,657 ) -3.9 % 2,366 0.8 % Net income (loss)
(25,270 ) -9.2 % 5,069 1.9 % Net (income) loss attributable
to the noncontrolling interest 398 0.1 % (794
) -0.3 % Net income (loss) attributable to Gaiam, Inc. $
(24,872 ) -9.1 % $ 4,275 1.6 %
Weighted-average shares outstanding: Basic 23,126 23,226 Diluted
23,126 23,383 Net income (loss) per share attributable to Gaiam,
Inc. common shareholders: Basic $ (1.08 ) $ 0.18 Diluted $ (1.08 )
$ 0.18
GAIAM, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands)
December 31,2011 December
31,2010 Assets Current assets: Cash $ 14,545 $
28,773 Accounts receivable, net 31,113 50,322 Inventory, less
allowances 29,205 33,218 Deferred advertising costs 3,303 2,341
Receivable and deferred tax assets 6,686 8,803 Receivable from
equity method investee 2,176 — Note receivable and other current
assets 7,305 10,220 Total current assets
94,333 133,677 Property and equipment, net 23,664 27,861
Media library, net 14,576 15,596 Deferred tax assets 12,636 3,145
Goodwill 2,673 25,861 Other intangibles, net 569 813 Equity method
investment 14,300 — Other assets 539 480 Total
assets $ 163,290 $ 207,433
Liabilities and
Equity Current liabilities: Accounts payable $ 21,069 $ 27,837
Accrued liabilities 11,047 10,834 Total
current liabilities 32,116 38,671 Total equity
131,174 168,762 Total liabilities and equity $
163,290 $ 207,433
Non-GAAP Financial
Measures
We have utilized the non-GAAP information set forth below as an
additional device to aid in understanding and analyzing our
financial results for the quarter and year ended December 31,
2011. We believe that these non-GAAP measures will allow for a
better evaluation of the operating performance of our 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 our quarter and year ended December 31,
2011 GAAP net loss to our non-GAAP net income (loss) is set forth
below (unaudited, in millions):
For the QuarterEndedDecember 31, 2011 For the
YearEndedDecember 31, 2011 Net loss attributable to Gaiam,
Inc. $ (18.5 ) $ (24.9 )
Exclusion of Real Goods Solar’s
acquisition-related costs (net of taxes of $0.6 million) (a)
— 1.8 Exclusion of non-cash impairment of goodwill (no
taxes) 22.5 22.5
Exclusion of loss on deconsolidation of
Real Goods Solar (net of taxes of $7.1 million for each period)
(b)
(2.6 ) (2.6 ) Non-GAAP net income (loss) attributable to
Gaiam, Inc. $ 1.4 $ (3.2 )
A reconciliation of our quarter and year
ended December 31, 2011 GAAP net loss per share to our
non-GAAP net income (loss) per share is set forth below (unaudited,
in millions except share and per share data):
For the QuarterEndedDecember 31, 2011 For the
YearEndedDecember 31, 2011 Net loss per share attributable
to Gaiam, Inc. common shareholders - diluted $ (0.82 ) $ (1.08 )
Exclusion of Real Goods Solar’s
acquisition-related costs per share (net of taxes of $0.6 million)
(a)
— 0.08 Exclusion of non-cash impairment of goodwill per
share (no taxes) 0.99 0.97
Exclusion of loss on deconsolidation of
Real Goods Solar per share (net of taxes of $7.1 million for each
period)
(0.11 ) (0.11 )
Non-GAAP net income (loss) per share
attributable to Gaiam, Inc. common shareholders - diluted
$ 0.06 $ (0.14 ) Weighted average shares used in net income
(loss) per share calculations - diluted 22,691,000 23,126,000
__________
(a) Income taxes were computed at Real Goods Solar’s
combined effective tax rate of approximately 42% after excluding
permanent tax differences of $1.1 million. (b) Income taxes were
computed at Gaiam’s combined effective tax rate of approximately
35.5%.
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