Exhibit 99.1
Gaiam Reports Second Quarter 2003 Results
Broomfield, CO, July 29, 2003. Gaiam, Inc. (Nasdaq: GAIA) announced results for its second quarter ended June 30, 2003. Gaiam is a multi-channel lifestyle company catering to customers who value personal development, healthy living and renewable energy.
The company will host a conference call today, July 29, 2003, at 2:30 p.m. M.D.T. (4:30 p.m. E.D.T.) to review its results for the second quarter 2003.
Dial-in No.: | | (800) 475-4943 |
Passcode: | | Gaiam |
For the second quarter ended June 30, 2003, Gaiam reported sales of $20.4 million, a decline of 15% from $24.1 million in the quarter ended June 30, 2002, primarily due to lower sales to retailers. Gaiam reported an operating loss of $1.0 million for the second quarter of 2003 compared to operating income of $1.7 million during the same period of 2002. Net loss for the second quarter was $760 thousand compared to net income of $1.0 million during the same period of 2002. For the second quarter ended June 30, 2003, the Company reported earnings (loss) per share of ($0.05) compared to $0.07 for the second quarter ended June 30, 2002. The $0.05 loss in the quarter was at the high side of guidance given at the last conference call, but includes total severances and implementation costs associated with expense reductions Gaiam undertook during the second quarter.
For the six months ended June 30, 2003, Gaiam reported sales of $43.7 million compared to $48.4 million for the same period in 2002, and posted an operating loss of $1.4 million for the first six months of 2003, compared to $2.9 million operating profit for the six months ended June 30, 2002. The net loss for the six months ended June 30, 2003 was $1.1 million, or a loss of $0.08 per share, compared to net profit of $1.8 million for the same period in 2002, or earnings of $0.12 per share.
Gaiam ended the first six months with $8.4 million in cash (up from $8.3 million at the end of the first quarter), no debt and full availability of $15 million of its line of credit. For the first six months of 2003, Gaiam generated $1.5 million cash contribution from its operations, compared to cash use of $4.6 million in the first six months of 2002.
“Even with the shift to positive operating cash flow we are obviously disappointed with our results, namely with the negative internal growth in our retailer channel,” said Jirka Rysavy, Chairman and Chief Executive Officer. “We have finished our announced expansion and restructuring of our sales force and reduction of labor cost. We are in process of consolidation of our distribution, which should be finished by the end of October.”
Gaiam has consolidated its operations into its Colorado headquarters, restructured its management organization and reduced its labor costs, and is in the process of consolidating its distribution operations into one centralized facility. Cost savings initiatives, after deducting the increased expense of doubling the sales force, are anticipated to save approximately $2.5 to $3.5 million annually. These benefits are expected to commence in the third quarter of 2003, and be fully realized by January 2004.
As part of Gaiam’s restructuring, Janet Mathews, Vice President of Business Development, resumed her previous role as CFO and along with Eva Williams, Gaiam’s Vice President of Sales, were promoted to executive officers. Eva Williams joined Gaiam in the fourth quarter of 2002 after a long career as head of sales for U.S. Leasing, and more recently as CEO of Red Zeppelin, a visual media company.
“As anticipated, we continued to see a decline in our business channel during the second quarter. Our sales to retailers remained weak especially in the department store, distributor, and mall based specialty store channels,” said Lynn Powers, President. “We have implemented new sales strategies including doubling our sales force, adding new product categories, segregating our products by channel, resetting store floor plans and initiating a grocery store launch for third quarter. Costs associated with these new initiatives are included in our second quarter numbers. We are beginning to see the effect of these changes and expect sales in third quarter to be approximately 20% higher than in the second.”
With the projected increase in sales of 20% over the second quarter, and the partial benefits resulting from our cost reduction initiatives, we anticipate a return to profitability in the third quarter. Additional guidance may be given on the conference call.
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,” “believe,” “will,” “should” or comparable terminology or by discussions of strategy. While the Company 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 the Company’s new products and services, the successful completion and integration of acquisitions, the possibility of negative economic conditions and other risks and uncertainties included in the Company’s filings with the Securities and Exchange Commission. The Company assumes no duty to update any forward-looking statements.
A replay of the conference call will begin 1 hour after the end of the call and will continue until Thursday, July 31st, at 5:00 p.m. E.D.T.
Replay number: (888) 562-6491
Contact: Janet Mathews, Chief Financial Officer (303) 222-3663
http: www.gaiam.com
Gaiam, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | Three months ended
June 30, 2003 | | Three months ended
June 30, 2002 | |
| | | | | | | | | |
Net Revenue | | $ | 20,352 | | 100.0 | % | $ | 24,067 | | 100.0 | % |
| | | | | | | | | |
Cost of goods sold | | 9,536 | | 46.9 | % | 9,885 | | 41.1 | % |
| | | | | | | | | |
Gross profit | | 10,816 | | 53.1 | % | 14,182 | | 58.9 | % |
| | | | | | | | | |
Operating expenses | | 11,805 | | 58.0 | % | 12,505 | | 52.0 | % |
| | | | | | | | | |
Income (loss) from operations | | (989 | ) | (4.9 | )% | 1,677 | | 6.9 | % |
| | | | | | | | | |
Interest (net) and other | | (79 | ) | (0.3 | )% | (109 | ) | (0.4 | )% |
| | | | | | | | | |
Profit (loss) before income taxes | | (1,068 | ) | (5.2 | )% | 1,568 | | 6.5 | % |
| | | | | | | | | |
Provision for income tax | | (405 | ) | (2.0 | )% | 557 | | 2.3 | % |
| | | | | | | | | |
Income (loss) before minority interest | | (663 | ) | (3.2 | )% | 1,011 | | 4.2 | % |
| | | | | | | | | |
Minority interest | | 97 | | 0.5 | % | 8 | | 0.0 | % |
| | | | | | | | | |
Net income (loss) | | $ | (760 | ) | (3.7 | )% | $ | 1,003 | | 4.2 | % |
| | | | | | | | | |
Shares outstanding: | | | | | | | | | |
Basic | | 14,594,413 | | | | 14,022,326 | | | |
Diluted | | 14,594,413 | | | | 14,468,424 | | | |
| | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | |
Basic | | $ | (0.05 | ) | | | $ | 0.07 | | | |
Diluted | | $ | (0.05 | ) | | | $ | 0.07 | | | |
Gaiam, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | Six months ended
June 30, 2003 | | Six months ended
June 30, 2002 | |
| | | | | | | | | |
Net Revenue | | $ | 43,720 | | 100.0 | % | $ | 48,351 | | 100.0 | % |
| | | | | | | | | |
Cost of goods sold | | 20,284 | | 46.4 | % | 19,900 | | 41.2 | % |
| | | | | | | | | |
Gross profit | | 23,436 | | 53.6 | % | 28,451 | | 58.8 | % |
| | | | | | | | | |
Operating expenses | | 24,825 | | 56.8 | % | 25,599 | | 52.9 | % |
| | | | | | | | | |
Income (loss) from operations | | (1,389 | ) | (3.2 | )% | 2,852 | | 5.9 | % |
| | | | | | | | | |
Interest (net) and other | | (150 | ) | (0.3 | )% | (139 | ) | (0.3 | )% |
| | | | | | | | | |
Profit (loss) before income taxes | | (1,539 | ) | (3.5 | )% | 2,713 | | 5.6 | % |
| | | | | | | | | |
Provision for income tax | | (604 | ) | (1.4 | )% | 963 | | 2.0 | % |
| | | | | | | | | |
Income (loss) before minority interest | | (935 | ) | (2.1 | )% | 1,750 | | 3.6 | % |
| | | | | | | | | |
Minority interest | | 178 | | 0.4 | % | (5 | ) | 0.0 | % |
| | | | | | | | | |
Net income (loss) | | $ | (1,113 | ) | (2.5 | )% | $ | 1,755 | | 3.6 | % |
| | | | | | | | | |
Shares outstanding: | | | | | | | | | |
Basic | | 14,586,501 | | | | 14,013,949 | | | |
Diluted | | 14,586,501 | | | | 14,500,285 | | | |
| | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | |
Basic | | $ | (0.08 | ) | | | $ | 0.12 | | | |
Diluted | | $ | (0.08 | ) | | | $ | 0.12 | | | |
GAIAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
| | June 30,
2003 | |
| | (Unaudited) | |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | | $ | 8,357,175 | |
Accounts receivable, net | | 13,925,040 | |
Accounts and notes receivable, other | | 977,998 | |
Inventory, less allowances | | 16,045,468 | |
Deferred advertising costs | | 2,063,281 | |
Other current assets | | 2,356,028 | |
Total current assets | | 43,724,990 | |
| | | |
Property and equipment, net | | 10,354,178 | |
Investments | | 7,865,192 | |
Capitalized production costs, net | | 5,981,144 | |
Video library, net | | 5,335,735 | |
Goodwill, net | | 10,288,251 | |
Deferred tax assets | | 2,519,244 | |
Other assets | | 646,665 | |
Total assets | | $ | 86,715,399 | |
| | | |
Liabilities and stockholders’ equity | | | |
Current liabilities: | | | |
Accounts payable | | $ | 8,044,759 | |
Accrued liabilities | | 4,058,668 | |
Income taxes payable | | 173,392 | |
Capital lease obligations, current | | 182,755 | |
Total current liabilities | | 12,459,574 | |
| | | |
Capital lease obligations, long-term | | 19,054 | |
Deferred tax liability | | 848,653 | |
Other liabilities | | 1,962,000 | |
Total liabilities | | 15,289,281 | |
Minority interest | | 2,651,994 | |
| | | |
Stockholders’ equity: | | | |
Class A common stock, $.0001 par value, 150,000,000 shares authorized, 9,200,980 shares issued and outstanding at June 30, 2003 | | 920 | |
Class B common stock, $.0001 par value, 50,000,000 shares authorized, 5,400,000 issued and outstanding at June 30, 2003 | | 540 | |
Additional paid-in capital | | 53,821,911 | |
Deferred compensation | | (107,865 | ) |
Retained earnings | | 15,058,618 | |
Total stockholders’ equity | | 68,774,124 | |
Total liabilities and stockholders’ equity | | $ | 86,715,399 | |
