Gaiam, Inc. (GAIA)

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Gaiam, Inc. (GAIA)

Q4 2008 Earnings Call Transcript

March 10, 2009 at 4:30 pm ET


John Mills - Investor Relations, Integrated Corporate Relations Inc.

Jirka Rysavy - Chairman and Chief Executive Officer

Vilia Valentine - Chief Financial Officer and Treasurer

Lynn Powers - President


Mark Argento - Craig Hallum Capital Group, LLC

Ed Aaron - RBC Capital Markets

Michael Harkins - Levy, Harkins & Co.



Good afternoon and thank you for standing by for the fourth quarter 2008 financial results. Everyone now is in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator instructions) Today's conference is being recorded. If you have any objections you may disconnect at this time.

And now, I would like to introduce Mr. John Mills. Mr. Mills, you may begin.

John Mills

Thank you. Good afternoon everyone and welcome to Gaiam's fourth quarter and full year 2008 earnings conference call. The following constitutes the Safe Harbor statement of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters discussed in this call are forward-looking statements that involve risks and uncertainties including, but not limited to, general business conditions, integration of acquisitions, the timely development of new businesses, the impact of competition, and other risks detailed from time to time in the Company's SEC reports. The Company does not undertake any obligation to update forward-looking statements.

On the call today representing Gaiam is Jirka Rysavy, Chairman and Chief Executive Officer, Lynn Powers, President, and Vilia Valentine, CFO.

And now, I would like to turn the call over to the Company's Chairman and CEO, Jirka Rysavy. Go ahead, Jirka.

Jirka Rysavy

Thank you, John. So as widely discussed in the media as you probably know consumers took very conservative approach to holiday buying and retails heightened the focus on inventory, so our revenue for the quarter which ended December 31 decreased about 8.9% to $74.5 million from $81.8 million which we reported in the same period of ’07, and also driven by the decline in our market price of our common shares. In the fourth quarter, we have to look at FAS 142 and take goodwill impairment charge of about $42.3 million of which about $27.2 million was from consolidating our 56% on subsidiary impairment charge and $15.9 million was related to incurring goodwill in our direct segment of Gaiam.

Including these charges, we reported a net loss of $30.1 million or a $1.26 per share, excluding these charges, the disposition of businesses and loss from consolidating our real goods, we have about $0.05 loss for the quarter.

For the year, our revenue was $257.2 million, which is 2.2% decrease from $262.9 million in ’07, including impairments and the reported loss of $35.5 million or a $1.45 per share excluding that these impairment charges, disposed businesses and loss from consolidating real goods together with report a net income of $800,000 or $0.03 per share for the year. These impairment charges generated $8.4 million tax refund and also $7 million tax credit, both of those you can see as in a separate line in our current asset and balance sheet.

We continue to evaluate the opportunities which this environment brings companies like ours and in the Company that no debt and good balance sheet and good credit position. We still see additional opportunities to drive additional controlled space at retailers, and also expand our category management program, but store-to-store definitely is going to be our focus.

We ended the quarter with over 10,000 stores within a store and which is up from 7,000 at the end of ’07 and right now over 3,000 doors of category management which is obviously dramatically up from none from years ago because this program, it is relatively new for us.

Let me compare our results to the market or to our competitors, we actually deliver superior sell through for most of our retailers so we expect to gain additional stores. We are also continuing the transformation of our direct business from transactional selling through relationship model, through our communities and subscription club, and as of December, we grew the membership to over 250,000 but because of the current state of the economy we are changing our focus from rapid growth to foster elimination of our P&L losses in our community business. The losses were $0.04 in fourth quarter and $0.14 for the year.

Our cash position remained strong at $32 million and we also have additional $5.4 million of concurrent deferred tax benefit lines I mentioned which confers the tax refund and reflected as a credit. We still have no debt. We have a credit ratio of 3.9 and on top $15 million line of credit.

Free cash flow which we define as cash flow from the operation, operation less CapEx, it is our new mantra. That is why we want to focus company owned right now. They are already in process of streamlining our business units that experience the negative cash flow last year.

We also restructured company and took big savings from our payroll and Lynn will cover that. But Lynn, who is our president and CEO of North America for many years and she is my only report for last four or five years. She will assume the CEO title in addition to her title as the president. She will continue to report to me. Lynn will be focusing on making 2009 our highest revenue and best cash flow year ever and I will on going our community and making it an income contributor.

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