Gaiam, Inc. reported revenues decreased 2.8% for the third quarter ended Sept. 30, to $72.3 million from $74.4 million recorded during the same quarter last year. The decline was primarily attributable to the company's focus on improving operating income by strategically reducing television advertising and catalog circulation, partially offset by sales growth in the business and solar segments. 

Gross profit decreased to $33.2 million, or 45.9% of net revenue, during the third quarter of 2010, from $35.8 million, or 48.1% of net revenue, during the comparable quarter last year. The change in gross margin resulted primarily from increased revenues in the lower margin solar segment and a higher mix of fitness products and accessories, driven by the launch of Reebok accessories at Target stores. Excluding the solar segment, gross profit, as a percentage of net revenue, was 56.5% during the third quarter of 2010.

Expenses improved during the quarter, the result of payroll and infrastructure cost reduction measures, as well as television advertising and catalog circulation optimization.   Expenses decreased $2.8 million, or 240 basis points as a percentage of net revenue, to $32.1 million, or 44.4% of net revenue, during the third quarter of 2010 from $34.9 million, or 46.8% of net revenue, during the same quarter last year. 

Income from operations during the third quarter of 2010 improved 13.5% to $1.1 million from $1.0 million during the same quarter last year.  Interest and other income during the third quarter of 2010 included a gain on an equity investment of $1.0 million. Net income was $0.9 million, or $0.04 per share, during the third quarter of 2010, compared to $0.4 million, or $0.02 per share, during the same quarter last year. 

For the first nine months of 2010, revenue was $190.9 million, compared to $190.8 million in same period of last year. Net income for the first nine months of 2010 improved $3.8 million to $59,000, or $0.00 per share, compared to a net loss of $3.7 million, or $0.16 per share, during the same period last year. 

The company ended the third quarter of 2010 with $40.8 million in cash and no debt.  Cash declined $7.5 million from the end of last year primarily due to the payment of an annual cash dividend of $3.5 million, or $0.15 per share, and the acquisition of Discovery's catalog media library from its previous licensor to complement the company's new licensing relationship with Discovery.

“We continue to execute our strategies to control costs, increase our branded store presence, optimize our marketing expenditures and invest in new products and digital delivery,” said Lynn Powers, CEO.  “As a result, this quarter our store-within-store presence grew to 14,500 doors compared to 12,500 doors last quarter and our warehouse consolidation is complete, furthering our cost savings. We continue to look forward to the opportunities that these strategies will create for us in the fourth quarter and beyond.”

“We are pleased with our $6.8 million improvement in operating income through September, as well as encouraged by a positive earnings outlook for our fourth quarter,” said Jirka Rysavy, chairman. “The 32% expansion of our store-within-store presentations during the last 12 months, the addition of our digital sales unit and improvements in our catalog business are good signs for revenue growth in 2011.”

GAIAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)






Three Months Ended
September 30, 2010


Three Months Ended
September 30, 2009
















Net revenue


$

72,328


100.0

%

$

74,439


100.0

%













Cost of goods sold


39,164


54.1

%

38,628


51.9

%













Gross profit


33,164


45.9

%

35,811


48.1

%













Selling and operating


29,161


40.3

%

31,641


42.5

%


Corporate, general and administration


2,930


4.1

%

3,225


4.3

%













Income from operations


1,073


1.5

%

945


1.3

%













Interest and other income


1,058


1.5

%

86


0.1

%













Income before income taxes


2,131


3.0

%

1,031


1.4

%













Income tax expense


801


1.1

%

388


0.5

%













Net income


1,330


1.9

%

643


0.9

%













Net (income) attributable to the noncontrolling interest


(478)


-0.7

%

(278)


-0.4

%













Net income attributable to Gaiam, Inc.


$

852


1.2

%

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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