Gaiam Reports 2012 Third Quarter Results

  Gaiam Reports 2012 Third Quarter Results

  - Expanded Media Licenses Now Include Hallmark Channel and The Jim Henson
                                  Company -

      - Revenue in Nine Months Rises 23.5% with Internal Growth of 13% -

             - Cash Flow From Operations Improves $19.8 Million -

Business Wire

BOULDER, Colo. -- November 05, 2012

Gaiam, Inc. (NASDAQ: GAIA), a lifestyle media company, today reported
financial results for the third quarter ended September30, 2012. Excluding
Real Goods Solar, Inc., deconsolidated from the Company on December31, 2011,
third quarter 2012 net revenue rose 3.0% to $43.0 million, compared to net
revenue of $41.8 million in the prior-year period. Revenue for the business
segment increased $7.5 million, or 38.6%, to $27.1 million, and excluding the
revenue benefit from the acquisition of Vivendi Entertainment, internal
revenue growth for the business segment was 15.2%. The revenue for the direct
to consumer segment was $15.9 million, compared to $22.2 million for the prior
year quarter. The decrease in direct to consumer sales primarily reflects the
Company’s previously discussed strategy of reducing media spend and optimizing
profitability in its DRTV business during a period in which the Olympic Games
and political campaign advertising have the effect of significantly increasing
costs. For the first nine months of fiscal 2012, net revenue rose
approximately $25.9 million, or 23.5%, with an internal revenue growth of
$14.2 million, or 13.0%, compared to the first nine months of fiscal 2011.

Gaiam will be hosting a conference call today, November5, 2012, beginning at
2:30p.m.MT (4:30p.m.ET). The conference call dial-in numbers are
212/231-2900 or 415/226-5355. Questions and answers will be reserved for
analysts and investors.

Lynn Powers, CEO of Gaiam, commented, “We are particularly pleased to see
continued growth in our media business, as its expanded scale, expertise and
operating efficiencies are proving integral to our efforts to provide
exceptional service to existing studio partner customers and in attracting
new, high-profile content, including our recent agreements with the Hallmark
Channel and The Jim Henson Company. Gaiam has emerged as the industry’s
leading independent content distributor and we expect to continue our momentum
with this business. In addition, we are pleased to see the continued evolution
of our Gaiam-branded products, including our Gaiam Restore line of wellness
accessories, across existing and new retail outlets.”

On December31, 2011, Gaiam converted its RSOL Class B common stock to ClassA
common stock that changed the GAAP accounting treatment for its approximate
38% ownership in RSOL from a consolidated basis to an equity method
(“deconsolidated”). As a result, for 2012 Gaiam’s interest in RSOL’s net
results are reflected as a single line in Gaiam’s financial statements,
whereas for 2011 RSOL’s financial position and results of operations are
consolidated into each line of Gaiam’s financial statements. The
year-over-year financial comparisons below are stated as if RSOL had been
deconsolidated as of January1, 2011.

Third quarter 2012 gross profit was $24.1 million, or 56.0% of net revenue,
compared to $24.1 million, or 57.6% of net revenue, during the comparable
quarter last year. The decrease in gross margin primarily reflects reduced net
revenues in the typically higher margin direct response television marketing
business, partially offset by the 100% margin (net fee revenue) of the Gaiam
Vivendi Entertainment business.

Operating expenses improved 360 basis points to 56.4% of net revenue, or $24.2
million, in the third quarter of 2012, compared to 60.0% of net revenue, or
$25.1 million, in the prior-year period. Included in operating expenses in the
2012 third quarter is $1.0 million in non-cash amortization expense related to
the Gaiam Vivendi Entertainment acquisition with no such similar expense in
the prior year period.

Operating loss was $0.2 million compared to a loss of $1.0 million in the
third quarter of 2011. Adjusted EBITDA increased to $2.2 million in the third
quarter of 2012 from $0.5 million in the prior-year period and rose by $8.7
million in the nine months ended September 30, 2012 to $5.3 million from a
loss in the same period in 2011.

Because of RSOL’s third quarter loss, including its non cash impairment
charges for some its assets, primarily goodwill and deferred taxes, Gaiam’s
recognition of its portion of RSOL’s loss, $14.3 million, reduced the GAAP
carrying values of Gaiam’s investments in RSOL to zero. Gaiam will not
recognize any future losses from RSOL.

Excluding the non-cash equity investment loss of $15.9 million from RSOL and a
related tax benefit of $5.1 million, Gaiam reported a net loss for the quarter
of $0.4 million, or $0.01 per share, compared to a net loss of $0.9 million,
or $0.04 per share, in the same quarter last year. Including the loss from
Gaiam’s equity investment in RSOL, Gaiam reported a net loss of $11.2 million,
or $0.49 per share, for the third quarter of 2012. (See Non-GAAP Financial
Measurements.)

The table below summarizes the Company’s 2012 third quarter results, 2011 pro
forma third quarter results (as if RSOL was deconsolidated) and 2011 third
quarter historical results:

                                                           
                                   Three Months Ended
                                   September 30,
(in millions except per            2012        2011              2011
share data)                        Actual      (With RSOL        (With RSOL
                                               Deconsolidated)   Consolidated)
Net revenues                       $ 43.0      $   41.8          $   73.3
Gross profit                         24.1          24.1              31.9
Operating expenses ^(1)              24.2          25.1              33.2
Operating loss before                (0.2  )       (1.0    )         (1.3   )
acquisition-related costs
Acquisition-related costs            —             —                 0.4
Adjusted EBITDA ^(2)                 2.2           0.5               0.8
Net loss excluding
acquisition-related costs            (0.4  )       (0.9    )         (1.0   )
and RSOL (Non-GAAP)^(2)
Net loss attributable to             (11.2 )       (1.1    )         (1.2   )
Gaiam
Diluted loss per share               (0.49 )       (0.05   )         (0.05  )
attributable to Gaiam
                                                                 

_____________________
       Total operating expenses excluding charges related to a business
(1)   acquisition of $0.4 million for the three months ended September 30,
       2011 with RSOL consolidated.
(2)    Non-GAAP Financial Measures can be found later in this release.

Revenue for the first nine months of 2012 increased $25.9 million, or 23.5%,
to $135.8 million. Internal net revenue growth was $14.2 million or 13.0%.
Gross profit margin for the nine months ended September 30, 2012 increased to
58.3% of net revenue, compared to 56.5% in the comparable year-ago period.
Operating loss declined $4.5 million, or 56.7%, to $3.4 million for the nine
months ended September 30, 2012 from an operating loss of $7.9 million for the
same period last year.

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 November12, 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             2,471      5.7   %    2,123     5.1   %
administration
                                                                       
Loss from operations                (171    )   -0.4  %     (1,005 )   -2.4  %
Interest and other income           (192    )   -0.5  %     89         0.2   %
(expense)
Loss from equity method            (15,940 )   -37.1 %    (179   )   -0.4  %
investment
                                                                       
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         (231    )   -0.5  %    (252   )   -0.6  %
the noncontrolling interest
                                                                       
Net loss attributable to          $ (11,157 )   -26.0 %   $ (1,142 )   -2.7  %
Gaiam, Inc. (a)
                                                                       
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  )
                                                                       

_____________________
       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
(a)   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             8,125       6.0   %     6,623       6.0   %
administration
Acquisition-related costs         1,667      1.2   %    —          —     %
                                                                       
Loss from operations               (3,432  )   -2.5  %     (7,926  )   -7.2  %
Interest and other income          (259    )   -0.2  %     203         0.2   %
(expense)
Loss from equity method           (17,580 )   -12.9 %    (756    )   -0.7  %
investment
                                                                       
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                (96     )   -0.1  %    (168    )   -0.2  %
interest
                                                                       
Net loss attributable to         $ (14,429 )   -10.6 %   $ (6,016  )   -5.5  %
Gaiam, Inc. (a)
                                                                       
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   )
                                                                       

_____________________
       Excluding costs related to our acquisition of Vivendi Entertainment and
       the losses from our equity method investment in RSOL and a related tax
(a)   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,   December 31,
                                              2012            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 September30, 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.

A reconciliation of the GAAP net loss to the non-GAAP earnings before
share-based compensation, acquisition-related costs, interest, loss from
equity method investment, income taxes, depreciation and amortization
(“Adjusted EBITDA”) is set forth below (unaudited, in millions):

                                                           
                                               Pro Forma         RSOL
                                               RSOL              Consolidated
                                               Deconsolidated
                                For the        For the Three     For the Three
                                Three          Months            Months
                                Months         Ended             Ended
                                Ended          September 30,     September 30,
                                September      2011              2011
                                30, 2012
Net loss                        $  (10.9  )    $    (0.9   )     $   (1.2   )
Exclusion of income tax            (5.4   )         (0.2   )         (0.5   )
benefit
Exclusion of loss from             15.9             0.2              —
equity method investment
Exclusion of interest and          0.2              (0.1   )         0.0
other expense (income)
Exclusion of                       —                —                0.4
acquisition-related costs
Exclusion of share-based           0.2              0.2              0.5
compensation
Exclusion of depreciation         2.2            1.3            1.6    
and amortization
                                                                 
Non-GAAP Adjusted EBITDA        $  2.2        $    0.5         $   0.8    
                                                                 
                                                                 
                                               Pro Forma         RSOL
                                               RSOL              Consolidated
                                               Deconsolidated
                                For the Nine   For the Nine      For the Nine
                                Months         Months            Months
                                Ended          Ended             Ended
                                September      September 30,     September 30,
                                30, 2012       2011              2011
Net loss                        $  (14.3  )    $    (5.8   )     $   (7.1   )
Exclusion of income tax            (6.9   )         (2.6   )         (3.2   )
benefit
Exclusion of loss from             17.6             0.7              —
equity method investment
Exclusion of interest and          0.3              (0.2   )         (0.1   )
other expense (income)
Exclusion of                       1.7              —                2.4
acquisition-related costs
Exclusion of share-based           0.8              0.8              1.1
compensation
Exclusion of depreciation         6.1            3.7            4.4    
and amortization
                                                                 
Non-GAAP Adjusted EBITDA        $  5.3         $    (3.4   )     $   (2.5   )
                                                                 

Non-GAAP Financial Measures For Exclusion Of Acquisition-Related Costs and
Loss From Equity Method Investment

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 September30, 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 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 GAAP net loss to the non-GAAP net loss is set forth below
as indicated (unaudited, in millions):

                                                                                           
                                       Pro Forma        RSOL                       Pro Forma        RSOL
                                       RSOL             Consolidated               RSOL             Consolidated
                                       Deconsolidated                              Deconsolidated
                           For the                      For the        For the                      For the
                           Three       For the          Three Months   Nine        For the          Nine Months
                           Months      Three Months     Ended          Months      Nine Months      Ended
                           Ended       Ended            September      Ended       Ended            September
                           September   September 30,    30,            September   September 30,    30,
                           30,         2011             2011           30,         2011             2011
                           2012                                        2012
Net loss
attributable to            $ (11.2 )   $   (1.1    )    $  (1.2   )    $ (14.4 )   $   (6.0    )    $  (6.4   )
Gaiam, Inc.
Exclusion of
acquisition-related          —             —               0.2           1.1           —               1.4
costs (a)
Exclusion of loss
from equity method          10.8        0.2           —           11.9        0.7           —      
investment (b)
                                                                                                    
Non-GAAP net loss
attributable to            $ (0.4  )   $   (0.9    )    $  (1.0   )    $ (1.4  )   $   (5.3    )    $  (5.0   )
Gaiam, Inc.
                                                                                                    
A reconciliation of GAAP net loss per share to the non-GAAP net loss per share is set forth below as indicated
(unaudited, shares in millions):
                                                                                                    
                                       Pro Forma        RSOL                       Pro Forma        RSOL
                                       RSOL             Consolidated               RSOL             Consolidated
                                       Deconsolidated                              Deconsolidated
                           For the                      For the        For the                      For the
                           Three       For the          Three Months   Nine        For the          Nine Months
                           Months      Three Months     Ended          Months      Nine Months      Ended
                           Ended       Ended            September      Ended       Ended            September
                           September   September 30,    30,            September   September 30,    30,
                           30,         2011             2011           30,         2011             2011
                           2012                                        2012
Net loss per share
attributable to            $ (0.49 )   $   (0.05   )    $  (0.05  )    $ (0.64 )   $   (0.26   )    $  (0.27  )
Gaiam, Inc. common
shareholders—diluted
Exclusion of
acquisition-related          —             —               0.01          0.04          —               0.06
costs per share (a)
Exclusion of loss
from equity method          0.48        0.01          —           0.52        0.03          —      
investment per share
(b)
                                                                                                    
Non-GAAP net income
(loss) per share
attributable to            $ (0.01 )   $   (0.04   )    $  (0.04  )    $ (0.08 )   $   (0.23   )    $  (0.21  )
Gaiam, Inc. common
shareholders—diluted
                                                                                                    
Weighted average
shares used in net          22.7        23.2          23.2        22.7        23.3          23.3   
loss per share
calculations—diluted
                                                                                                    

_____________________
       Net of taxes of $0.2 million for the three months ended September 30,
       2011 and $0.6 million and $1.0 million for the nine months ended
(a)   September 30, 2012 and 2011, respectively. Income taxes were computed
       at an effective tax rate of approximately 35.5% for 2012 and 39.5% for
       2011.
       Net of taxes of $5.1 million and $5.7 million for the three and nine
(b)    months ended September 30, 2012, respectively. Income taxes were
       computed at an effective tax rate of approximately 35.5%.

                                                      
GAIAM, INC.
2011 RESULTS WITH REAL GOODS SOLAR CONSOLIDATED
CONDENSED 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 %   $ 73,333   100.0 %
Cost of goods sold                   18,912     44.0  %    41,419  56.5  %
                                                                       
Gross profit                          24,071      56.0  %     31,914   43.5  %
Selling and operating                 21,771      50.7  %     29,860   40.7  %
Corporate, general and                2,471       5.7   %     3,311    4.5   %
administration
Acquisition-related costs            —          —     %    383     0.5   %
                                                                       
Loss from operations                  (171    )   -0.4  %     (1,640 ) -2.2  %
Interest and other expense            (192    )   -0.5  %     (15    ) 0.0   %
Loss from equity method              (15,940 )   -37.1 %    —       —     %
investment
                                                                       
Loss before income taxes              (16,303 )   -38.0 %     (1,655 ) -2.2  %
Income tax benefit                   (5,377  )   -12.5 %    (466   ) -0.6  %
                                                                       
Net loss                              (10,926 )   -25.5 %     (1,189 ) -1.6  %
Net income attributable to           (231    )   -0.5  %    (40    ) -0.1  %
the noncontrolling interest
                                                                       
Net loss attributable to            $ (11,157 )   -26.0 %   $ (1,229 ) -1.7  %
Gaiam, Inc.
                                                                       
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  )
                                                                       

                                                                
GAIAM, INC.
2011 RESULTS WITH REAL GOODS SOLAR CONSOLIDATED
CONDENSED 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 %   $ 178,854     100.0 %
Cost of goods sold                56,574     41.7  %    98,478     55.1  %
                                                                       
Gross profit                       79,188      58.3  %     80,376      44.9  %
Selling and operating              72,828      53.6  %     79,209      44.3  %
Corporate, general and             8,125       6.0   %     9,143       5.1   %
administration
Acquisition-related costs         1,667      1.2   %    2,393      1.3   %
                                                                       
Loss from operations               (3,432  )   -2.5  %     (10,369 )   -5.8  %
Interest and other income          (259    )   -0.2  %     92          0.0   %
(expense)
Loss from equity method           (17,580 )   -12.9 %    —          —     %
investment
                                                                       
Loss before income taxes           (21,271 )   -15.6 %     (10,277 )   -5.8  %
Income tax benefit                (6,938  )   -5.1  %    (3,169  )   -1.8  %
                                                                       
Net loss                           (14,333 )   -10.5 %     (7,108  )   -4.0  %
Net (income) loss
attributable to the               (96     )   -0.1  %    738        0.4   %
noncontrolling interest
                                                                       
Net loss attributable to         $ (14,429 )   -10.6 %   $ (6,370  )   -3.6  %
Gaiam, Inc.
                                                                       
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   )             $ (0.27   )
Diluted                          $ (0.64   )             $ (0.27   )

Contact:

Gaiam, Inc.
Steve Thomas, 303-222-3782
Chief Financial Officer
Steve.thomas@gaiam.com
or
JCIR
Joseph N. Jaffoni, Norberto Aja, Richard Land
212-835-8500
gaia@jcir.com