##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the quarterly period ended September 30, 2008
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the transition period from           to
 Commission file number: 000-17287
 Outdoor Channel Holdings, Inc.
  Delaware
    
    33-0074499(State or other Jurisdiction
    
    (IRS Employer Identification Number)of incorporation or organization)
 43445 Business Park Drive, Suite 103
Temecula, California 92590
 (951) 699-6991
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Number of Shares Outstanding at October 28, 2008Common Stock, $0.001 par value
    
    25,292,091




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##### 



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For The Period Ended September 30, 2008
 Table of Contents
 Part I. Financial InformationItem 1.Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2008 and 2007
    
    
    4Unaudited Condensed Consolidated Statement of Stockholders Equity for the Nine Months Ended
September 30, 2008
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 2008 and 2007
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.Controls and Procedures
    
    
    28Part II. Other Information
    
    
    29Item 1.Legal Proceedings
    
    
    29Item 1A.Risk Factors
    
    
    29Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3.Defaults Upon Senior Securities
    
    
    38Item 4.Submission of Matters to a Vote of Security Holders
    
    
    38Item 5.Other Information
    
    
    38Item 6.Exhibits
    
    
    38Signatures
    
    
    39EX-31.1EX-31.2EX-32.1EX-32.2
   2




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 ITEM 1. Financial Statements.
 OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
  September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    57,317
    
    
    $
    25,260Investments in available-for-sale securities
    
    
    150
    
    
    
    46,155Accounts receivable, net of allowance for doubtful accounts of $593 and $240, respectively
    
    
    9,221
    
    
    
    8,299Income tax refund receivable
    
    
    236
    
    
    
    224Deferred tax assets, net
    
    
    705
    
    
    
    705Prepaid programming costs
    
    
    4,073
    
    
    
    3,522Other current assets
    
    
    1,393
    
    
    
    1,175Total current assets
    
    
    73,095
    
    
    
    85,340Property, plant and equipment, net
    
    
    10,394
    
    
    
    11,632Amortizable intangible assets, net
    
    
    48
    
    
    
    313Goodwill
    
    
    43,160
    
    
    
    43,160Investments in available-for-sale securities
    
    
    6,684
    
    
    
    Deferred tax assets, net
    
    
    7,574
    
    
    
    9,326Deposits and other assets
    
    
    1,772
    
    
    
    1,930Totals
    
    $
    142,727
    
    
    $
    151,701Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    5,493
    
    
    $
    4,158Accrued severance payments
    
    
    34
    
    
    
    257Deferred revenue
    
    
    400
    
    
    
    261Current portion of deferred obligations
    
    
    89
    
    
    
    143Customer deposits
    
    
    
    
    
    
    14Total current liabilities
    
    
    6,016
    
    
    
    4,833Accrued severance payments, net of current portion
    
    
    6
    
    
    
    22Deferred obligations
    
    
    249
    
    
    
    269Total liabilities
    
    
    6,271
    
    
    
    5,124Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 25,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $0.001 par value; 75,000 shares authorized; 25,343 and 26,870 shares issued
and outstanding, respectively
    
    
    25
    
    
    
    27Additional paid-in capital
    
    
    163,724
    
    
    
    175,570Accumulated other comprehensive loss, net of tax
    
    
    (216
    )
    
    
    (59
    )Accumulated deficit
    
    
    (27,077
    )
    
    
    (28,961
    )Total stockholders equity
    
    
    136,456
    
    
    
    146,577Totals
    
    $
    142,727
    
    
    $
    151,701
  3




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Operations
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Advertising
    
    $
    10,472
    
    
    $
    7,917
    
    
    $
    26,594
    
    
    $
    20,908Subscriber fees
    
    
    4,484
    
    
    
    4,739
    
    
    
    13,089
    
    
    
    14,263Total revenues
    
    
    14,956
    
    
    
    12,656
    
    
    
    39,683
    
    
    
    35,171Cost of services:Programming
    
    
    1,437
    
    
    
    1,521
    
    
    
    5,133
    
    
    
    4,625Satellite transmission fees
    
    
    398
    
    
    
    637
    
    
    
    1,573
    
    
    
    1,869Production and operations
    
    
    1,454
    
    
    
    1,101
    
    
    
    4,477
    
    
    
    3,375Other direct costs
    
    
    98
    
    
    
    46
    
    
    
    290
    
    
    
    101Total cost of services
    
    
    3,387
    
    
    
    3,305
    
    
    
    11,473
    
    
    
    9,970Other expenses:Advertising
    
    
    567
    
    
    
    1,558
    
    
    
    2,593
    
    
    
    4,088Selling, general and administrative
    
    
    6,592
    
    
    
    6,524
    
    
    
    21,342
    
    
    
    21,525Depreciation and amortization
    
    
    672
    
    
    
    686
    
    
    
    1,904
    
    
    
    1,993Total other expenses
    
    
    7,831
    
    
    
    8,768
    
    
    
    25,839
    
    
    
    27,606Income (loss) from operations
    
    
    3,738
    
    
    
    583
    
    
    
    2,371
    
    
    
    (2,405
    )Interest and other income, net
    
    
    454
    
    
    
    882
    
    
    
    1,400
    
    
    
    2,397Income (loss) from continuing operations
before income taxes
    
    
    4,192
    
    
    
    1,465
    
    
    
    3,771
    
    
    
    (8
    )Income tax provision (benefit)
    
    
    1,798
    
    
    
    (33
    )
    
    
    1,887
    
    
    
    320Income (loss) from continuing operations
    
    
    2,394
    
    
    
    1,498
    
    
    
    1,884
    
    
    
    (328
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Net income (loss)
    
    $
    2,394
    
    
    $
    1,498
    
    
    $
    1,884
    
    
    $
    (299
    )Basic earnings (loss) per common share data:From continuing operations
    
    $
    0.10
    
    
    $
    0.06
    
    
    $
    0.07
    
    
    $
    (0.01
    )From discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Basic earnings per common share
    
    $
    0.10
    
    
    $
    0.06
    
    
    $
    0.07
    
    
    $
    (0.01
    )Diluted earnings (loss) per common share data:From continuing operations
    
    $
    0.09
    
    
    $
    0.06
    
    
    $
    0.07
    
    
    $
    (0.01
    )From discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Diluted earnings per common share
    
    $
    0.09
    
    
    $
    0.06
    
    
    $
    0.07
    
    
    $
    (0.01
    )Weighted average number of common shares
outstanding:Basic
    
    
    25,114
    
    
    
    26,054
    
    
    
    25,719
    
    
    
    25,846Diluted
    
    
    25,890
    
    
    
    26,747
    
    
    
    26,287
    
    
    
    25,846
  4




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statement of Stockholders Equity
 For the Nine Months Ended September 30, 2008
  AccumulatedAdditional
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Deficit
    
    
    TotalBalance, December 31, 2007
    
    
    26,870
    
    
    $
    27
    
    
    $
    175,570
    
    
    $
    (59
    )
    
    $
    (28,961
    )
    
    $
    146,577Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,884
    
    
    
    1,884Change in fair value of
available-for-sale
securities, net of taxes
of $133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )
    
    
    
    
    
    
    (157
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,727Common stock issued upon
exercise of stock options
    
    
    2
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Issuance of restricted stock
and performance shares to
employees and service
providers for services to be
rendered, net of forfeited
shares
    
    
    384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based employee and
service provider compensation
expense
    
    
    
    
    
    
    
    
    
    
    2,704
    
    
    
    
    
    
    
    
    
    
    
    2,704Purchase and retirement of
treasury stock related to
employee and service provider
share-based compensation
activity
    
    
    (51
    )
    
    
    
    
    
    
    (389
    )
    
    
    
    
    
    
    
    
    
    
    (389
    )Purchase and retirement of
treasury stock related to the
stock repurchase program
    
    
    (1,862
    )
    
    
    (2
    )
    
    
    (14,172
    )
    
    
    
    
    
    
    
    
    
    
    (14,174
    )Balance, September 30, 2008
    
    
    25,343
    
    
    $
    25
    
    
    $
    163,724
    
    
    $
    (216
    )
    
    $
    (27,077
    )
    
    $
    136,456
  5




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Cash Flows
  Nine Months EndedSeptember 30,2008
    
    
    2007Operating activities:Net income (loss)
    
    $
    1,884
    
    
    $
    (299
    )Adjustments to reconcile net income (loss) to net cash provided by operating
activities:Income from discontinued operations
    
    
    
    
    
    
    (29
    )Depreciation and amortization
    
    
    1,904
    
    
    
    1,993Amortization of subscriber acquisition fees
    
    
    367
    
    
    
    366Loss (gain) on sale of equipment
    
    
    41
    
    
    
    (1
    )Loss (gain) on sale of available-for-sale and auction-rate securities
    
    
    (75
    )
    
    
    Other-than-temporary impairment on auction-rate securities
    
    
    336
    
    
    
    Provision for doubtful accounts
    
    
    589
    
    
    
    100Share-based employee and service provider compensation
    
    
    2,704
    
    
    
    8,392Deferred tax provision, net
    
    
    1,885
    
    
    
    245Tax benefits from exercise of stock options in excess of recognized expense
    
    
    
    
    
    
    (7
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,459
    )
    
    
    (2,121
    )Income tax refund receivable
    
    
    (12
    )
    
    
    2,095Prepaid programming costs
    
    
    (551
    )
    
    
    (295
    )Other current assets
    
    
    (218
    )
    
    
    (486
    )Deposits and other assets
    
    
    (209
    )
    
    
    (250
    )Accounts payable and accrued expenses
    
    
    1,469
    
    
    
    1,558Deferred revenue
    
    
    139
    
    
    
    (388
    )Customer deposits
    
    
    (14
    )
    
    
    (41
    )Accrued severance payments
    
    
    (239
    )
    
    
    (257
    )Deferred obligations
    
    
    (74
    )
    
    
    15Net cash provided by operating activities
    
    
    8,467
    
    
    
    10,590Investing activities:Purchases of property, plant and equipment
    
    
    (644
    )
    
    
    (943
    )Proceeds from sale of equipment
    
    
    15
    
    
    
    4Proceeds from sale of discontinued operations
    
    
    
    
    
    
    3,589Purchases of available-for-sale and auction-rate securities
    
    
    (27,181
    )
    
    
    (104,001
    )Proceeds from sale of available-for-sale and auction-rate securities
    
    
    65,952
    
    
    
    100,811Net cash provided by (used in) investing activities
    
    
    38,142
    
    
    
    (540
    )Financing activities:Proceeds from exercise of stock options
    
    
    11
    
    
    
    604Purchase and retirement of stock related to stock repurchase program
    
    
    (14,174
    )
    
    
    Purchase of treasury stock
    
    
    (389
    )
    
    
    (308
    )Tax benefits from exercise of stock options in excess of recognized expense
    
    
    
    
    
    
    7Net cash provided by (used in) financing activities
    
    
    (14,552
    )
    
    
    303Cash flows from discontinued operations:Net cash used in operating activities of discontinued operations
    
    
    
    
    
    
    (582
    )Net cash used in investing activities of discontinued operations
    
    
    
    
    
    
    (69
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (651
    )Net increase in cash and cash equivalents
    
    
    32,057
    
    
    
    9,702Cash and cash equivalents, beginning of period
    
    
    25,260
    
    
    
    14,226Cash and cash equivalents, end of period
    
    $
    57,317
    
    
    $
    23,928Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    13
    
    
    $
    99Supplemental disclosures of non-cash investing and financing activities:Effect of net decrease in fair value of available-for-sale securities,
net of deferred taxes
    
    $
    (157
    )
    
    $
    (49
    )Property, plant and equipment costs incurred but not paid
    
    $
    37
    
    
    $
    122Retirement of treasury stock
    
    $
    389
    
    
    $
    308
  6




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Notes to Unaudited Condensed Consolidated Financial Statements
  NOTE 1ORGANIZATION AND BUSINESS
 Description of Operations
     NOTE 2STOCK INCENTIVE PLANS
  
 7




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##### Table of Contents



1995 Stock Option Plan (1995 Plan).
 2004 Long-Term Incentive Plan (LTIP Plan).
 Non-Employee Director Stock Option Plan (NEDSOP).
     Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Nature of Award:Restricted stock
    
    $
    854
    
    
    $
    469
    
    
    $
    2,285
    
    
    $
    1,172Options
    
    
    138
    
    
    
    376
    
    
    
    419
    
    
    
    1,256Performance units
    
    
    
    
    
    
    1,016
    
    
    
    
    
    
    
    5,964Total share-based compensation expense
    
    $
    992
    
    
    $
    1,861
    
    
    $
    2,704
    
    
    $
    8,392
 8




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Classification of Compensation Expense:Cost of services:Production and operations
    
    $
    155
    
    
    $
    46
    
    
    $
    330
    
    
    $
    125Other expenses:Selling, general and administrative
    
    
    837
    
    
    
    1,815
    
    
    
    2,374
    
    
    
    8,267Total share-based compensation expense
    
    $
    992
    
    
    $
    1,861
    
    
    $
    2,704
    
    
    $
    8,392
  Nine Months EndedSeptember 30,2008
    
    2007Risk-free interest rate
    
    
    1.4  2.3%
    
    
    
    4.9  5.0%Dividend yield
    
    
    0.0%
    
    
    
    0.0%Expected life of the option
    
    

    0.1  0.3years
    
    
    

    0.8yearsVolatility factor
    
    
    33.6  52.6%
    
    
    
    39.2  39.5%Weighted average volatility factor
    
    
    45.4%
    
    
    
    39.4%
  Issuances of Common Stock by the Company
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Number of options exercised
    
    
    
    
    
    
    1
    
    
    
    2
    
    
    
    363Cash proceeds
    
    $
    
    
    
    $
    6
    
    
    $
    11
    
    
    $
    604Tax benefit from options exercised
    
    $
    
    
    
    $
    2
    
    
    $
    2
    
    
    $
    725
  9




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##### Table of Contents



Stock Options
 
 WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateOptions
    
    Shares
    
    
    Price
    
    
    Term (Yrs.)
    
    
    Intrinsic Value(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)Outstanding at December 31, 2007
    
    
    1,442
    
    
    $
    12.48Granted
    
    
    
    
    
    
    Exercised
    
    
    (2
    )
    
    
    6.14Forfeited
    
    
    (23
    )
    
    
    12.11Expired
    
    
    (87
    )
    
    
    13.75Outstanding at September 30, 2008
    
    
    1,330
    
    
    $
    12.41
    
    
    
    2.07
    
    
    $
    Vested or expected to vest at
September 30, 2008
    
    
    1,325
    
    
    $
    12.41
    
    
    
    2.07
    
    
    $
    Exercisable at September 30, 2008
    
    
    1,266
    
    
    $
    12.35
    
    
    
    2.01
    
    
    $
    
  Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Term (Yrs.)
    
    
    Price
    
    
    Exercisable
    
    
    Price(In thousands)
    
    
    
    
    
    
    
    
    
    
    (In thousands)$10.19  $10.19
    
    
    10
    
    
    
    2.51
    
    
    $
    10.19
    
    
    
    5
    
    
    $
    10.19$11.60  $11.60
    
    
    500
    
    
    
    0.12
    
    
    
    11.60
    
    
    
    500
    
    
    
    11.60$12.10  $12.10
    
    
    300
    
    
    
    3.04
    
    
    
    12.10
    
    
    
    300
    
    
    
    12.10$12.11  $12.80
    
    
    295
    
    
    
    4.68
    
    
    
    12.64
    
    
    
    277
    
    
    
    12.64$13.90  $14.95
    
    
    200
    
    
    
    1.53
    
    
    
    14.27
    
    
    
    161
    
    
    
    14.20$15.75  $15.75
    
    
    25
    
    
    
    0.69
    
    
    
    15.75
    
    
    
    23
    
    
    
    15.75Total
    
    
    1,330
    
    
    
    2.07
    
    
    $
    12.41
    
    
    
    1,266
    
    
    $
    12.35
   Restricted Stock
  WeightedAverageGrant-DateShares
    
    
    Fair Value(in thousands)Nonvested at beginning of period
    
    
    697
    
    
    $
    10.25Granted
    
    
    424
    
    
    
    7.39Vested
    
    
    (178
    )
    
    
    10.72Forfeited
    
    
    (40
    )
    
    
    10.54Nonvested at end of period
    
    
    903
    
    
    $
    8.80
  10




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##### Table of Contents



Expense to be Recognized
  September 30, 2008Weighted AverageExpense Yet
    
    
    Remainingto be
    
    
    Requisite ServiceRecognized
    
    
    PeriodsStock options
    
    $
    535
    
    
    

    1.1 yearsRestricted stock
    
    
    6,292
    
    
    

    2.9 yearsPerformance units
    
    
    
    
    
    

    Total
    
    $
    6,827
    
    
    

    2.8 years
 NOTE 3EARNINGS (LOSS) PER COMMON SHARE
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Weighted average
shares used to
calculate basic
earnings (loss)
per share
    
    
    25,114
    
    
    
    26,054
    
    
    
    25,719
    
    
    
    25,846Dilutive effect of
potentially
issuable common
shares upon
exercise of
dilutive stock
options and
performance units
    
    
    776
    
    
    
    693
    
    
    
    568
    
    
    
    Weighted average
shares used to
calculate diluted
earnings (loss)
per share
    
    
    25,890
    
    
    
    26,747
    
    
    
    26,287
    
    
    
    25,846
  NOTE 4INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
  Level 1
    
    Inputs are unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement dateLevel 2
    
    Inputs other than Level 1 inputs that are either directly or indirectly observable; andLevel 3
    
    Unobservable inputs developed using estimates and assumptions developed by management,
which reflect those that a market participant would use.
 11




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Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents (1)
    
    $
    57,317
    
    
    $
    57,317
    
    
    $
    
    
    
    $
    Short-term investments available-for-sale securities
    
    
    150
    
    
    
    
    
    
    
    150
    
    
    
    Non-current investments in available-for-sale
securities (2)
    
    
    6,684
    
    
    
    
    
    
    
    
    
    
    
    6,684Total
    
    $
    64,151
    
    
    $
    57,317
    
    
    $
    150
    
    
    $
    6,684
 
 (1)
    
    Cash and cash equivalents consist primarily of treasury
bills and money market funds with original maturity dates
of three months or less, for which we determine fair value
through quoted market prices.(2)
    
    Investments in available-for-sale securities consist of
one auction-rate municipal security and three closed end
perpetual preferred auction-rate securities (PPS). PPS
were originally considered Level 2 financial assets and
valued using estimated market values as of the balance
sheet date obtained from an independent pricing service
employed by our broker dealers. These independent pricing
services carried these investments at par value, due to
the overall quality of the underlying investments and
taking into account credit ratings, and the anticipated
future market for such investments. However, in the three
months ending September 30, 2008, we began using
discounted cash flow analysis to more accurately measure
possible liquidity discounts. Because the discounted cash
flow analysis included unobservable inputs we transferred
these securities to Level 3 financial assets.   12




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Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2008Auction-Rate Securities:Balance at beginning of period
    
    $
    2,683
    
    
    $
    Transfers into Level 3
    
    
    4,350
    
    
    
    9,725Unrealized losses included in
accumulated other comprehensive
loss
    
    
    (349
    )
    
    
    (349
    )Other-than-temporary impairment
    
    
    
    
    
    
    (336
    )Transfers into Level 2
    
    
    
    
    
    
    (2,356
    )Balance as of September 30, 2008
    
    $
    6,684
    
    
    $
    6,684
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income
    
    $
    335
    
    
    $
    875
    
    
    $
    1,629
    
    
    $
    2,354Interest expense
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    (12
    )Dividend income
    
    
    
    
    
    
    18
    
    
    
    32
    
    
    
    54Loss on sale of equity securities
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    Other-than-temporary impairment on
auction-rate securities
    
    
    
    
    
    
    
    
    
    
    (336
    )
    
    
    Realized gain on sale of auction-rate
securities
    
    
    119
    
    
    
    
    
    
    
    119
    
    
    
    Gain on sale of equipment
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Total interest and other income, net
    
    $
    454
    
    
    $
    882
    
    
    $
    1,400
    
    
    $
    2,397
 NOTE 5COMPREHENSIVE INCOME
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss), as reported
    
    $
    2,394
    
    
    $
    1,498
    
    
    $
    1,884
    
    
    $
    (299
    )Unrealized losses available-for-sale securities, net of tax
    
    
    (216
    )
    
    
    (15
    )
    
    
    (157
    )
    
    
    (49
    )Comprehensive income
    
    $
    2,178
    
    
    $
    1,483
    
    
    $
    1,727
    
    
    $
    (348
    )
 NOTE 6GOODWILL AND INTANGIBLE ASSETS
   September 30, 2008AccumulatedGross
    
    
    Amortization
    
    
    NetAdvertising customer relationships
    
    $
    1,972
    
    
    $
    1,972
    
    
    $
    Trademark
    
    
    219
    
    
    
    171
    
    
    
    48Total intangible assets
    
    $
    2,191
    
    
    $
    2,143
    
    
    $
    48
 13




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Years Ending December 31,
    
    Amount2008 (remaining 3 months)
    
    $
    32009
    
    
    152010
    
    
    152011
    
    
    112012
    
    
    4Total
    
    $
    48
 NOTE 7LINES OF CREDIT
  NOTE 8INCOME TAX PROVISION (BENEFIT)
   NOTE 9RELATED PARTY TRANSACTIONS
    14




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NOTE 10COMMITMENTS AND CONTINGENCIES
      Operating Leases
    15




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NOTE 11DISCONTINUED OPERATIONS
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Membership Division revenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,632Income from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29
 NOTE 12RECENT ACCOUNTING PRONOUNCEMENTS
      16




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17




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 Safe Harbor Statement
   General
  Gold Prospector & Treasure Hunters in the Great Outdoors
  Critical Accounting Policies and Estimates
  18




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Prepaid Programming Costs
  Revenue Recognition
     Valuation of Goodwill
  Income Taxes
  19




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Stock Incentive Plans
    Subscriber Acquisition Fees
   20




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Comparison of Operating Results for the Three Months Ended September 30, 2008 and September 30,
2007
 
 Change
    
    
    % of Total Revenue2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007Revenues:Advertising
    
    $
    10,472
    
    
    $
    7,917
    
    
    $
    2,555
    
    
    
    32.3
    %
    
    
    70.0
    %
    
    
    62.6
    %Subscriber fees
    
    
    4,484
    
    
    
    4,739
    
    
    
    (255
    )
    
    
    (5.4
    )
    
    
    30.0
    
    
    
    37.4Total revenues
    
    
    14,956
    
    
    
    12,656
    
    
    
    2,300
    
    
    
    18.2
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    1,437
    
    
    
    1,521
    
    
    
    (84
    )
    
    
    (5.5
    )
    
    
    9.6
    
    
    
    12.0Satellite transmission fees
    
    
    398
    
    
    
    637
    
    
    
    (239
    )
    
    
    (37.5
    )
    
    
    2.7
    
    
    
    5.0Production and operations
    
    
    1,454
    
    
    
    1,101
    
    
    
    353
    
    
    
    32.1
    
    
    
    9.7
    
    
    
    8.7Other direct costs
    
    
    98
    
    
    
    46
    
    
    
    52
    
    
    
    113.0
    
    
    
    0.7
    
    
    
    0.4Total cost of services
    
    
    3,387
    
    
    
    3,305
    
    
    
    82
    
    
    
    2.5
    
    
    
    22.6
    
    
    
    26.1Other expenses:Advertising
    
    
    567
    
    
    
    1,558
    
    
    
    (991
    )
    
    
    (63.6
    )
    
    
    3.8
    
    
    
    12.3Selling, general and
administrative
    
    
    6,592
    
    
    
    6,524
    
    
    
    68
    
    
    
    1.0
    
    
    
    44.1
    
    
    
    51.5Depreciation and amortization
    
    
    672
    
    
    
    686
    
    
    
    (14
    )
    
    
    (2.0
    )
    
    
    4.5
    
    
    
    5.4Total other expenses
    
    
    7,831
    
    
    
    8,768
    
    
    
    (937
    )
    
    
    (10.7
    )
    
    
    52.4
    
    
    
    69.3Income from operations
    
    
    3,738
    
    
    
    583
    
    
    
    3,155
    
    
    
    541.2
    
    
    
    25.0
    
    
    
    4.6Interest and other income, net
    
    
    454
    
    
    
    882
    
    
    
    (428
    )
    
    
    (48.5
    )
    
    
    3.0
    
    
    
    7.0Income from continuing
operations before income taxes
    
    
    4,192
    
    
    
    1,465
    
    
    
    2,727
    
    
    
    186.1
    
    
    
    28.0
    
    
    
    11.6Income tax provision (benefit)
    
    
    1,798
    
    
    
    (33
    )
    
    
    1,831
    
    
    NM
    
    
    
    12.0
    
    
    
    (0.3
    )Income from continuing operations
    
    
    2,394
    
    
    
    1,498
    
    
    
    896
    
    
    
    59.8
    
    
    
    16.0
    
    
    
    11.8Income from discontinued
operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    2,394
    
    
    $
    1,498
    
    
    $
    896
    
    
    
    59.8
    %
    
    
    16.0
    %
    
    
    11.8
    %
 
 NM
    =
    not meaningful  21




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Comparison of Operating Results for the Nine Months Ended September 30, 2008 and September 30, 2007
 
 Change
    
    
    % of Total Revenue2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007Revenues:Advertising
    
    $
    26,594
    
    
    $
    20,908
    
    
    $
    5,686
    
    
    
    27.2
    %
    
    
    67.0
    %
    
    
    59.4
    %Subscriber fees
    
    
    13,089
    
    
    
    14,263
    
    
    
    (1,174
    )
    
    
    (8.2
    )
    
    
    33.0
    
    
    
    40.6Total revenues
    
    
    39,683
    
    
    
    35,171
    
    
    
    4,512
    
    
    
    12.8
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    5,133
    
    
    
    4,625
    
    
    
    508
    
    
    
    11.0
    
    
    
    12.9
    
    
    
    13.2Satellite transmission fees
    
    
    1,573
    
    
    
    1,869
    
    
    
    (296
    )
    
    
    (15.8
    )
    
    
    4.0
    
    
    
    5.3Production and operations
    
    
    4,477
    
    
    
    3,375
    
    
    
    1,102
    
    
    
    32.7
    
    
    
    11.3
    
    
    
    9.6Other direct costs
    
    
    290
    
    
    
    101
    
    
    
    189
    
    
    
    187.1
    
    
    
    0.7
    
    
    
    0.3Total cost of services
    
    
    11,473
    
    
    
    9,970
    
    
    
    1,503
    
    
    
    15.1
    
    
    
    28.9
    
    
    
    28.3Other expenses:Advertising
    
    
    2,593
    
    
    
    4,088
    
    
    
    (1,495
    )
    
    
    (36.6
    )
    
    
    6.5
    
    
    
    11.6Selling, general and
administrative
    
    
    21,342
    
    
    
    21,525
    
    
    
    (183
    )
    
    
    (0.9
    )
    
    
    53.8
    
    
    
    61.2Depreciation and amortization
    
    
    1,904
    
    
    
    1,993
    
    
    
    (89
    )
    
    
    (4.5
    )
    
    
    4.8
    
    
    
    5.7Total other expenses
    
    
    25,839
    
    
    
    27,606
    
    
    
    (1,767
    )
    
    
    (6.4
    )
    
    
    65.1
    
    
    
    78.5Income (loss) from operations
    
    
    2,371
    
    
    
    (2,405
    )
    
    
    4,776
    
    
    
    198.6
    
    
    
    6.0
    
    
    
    (6.8
    )Interest and other income, net
    
    
    1,400
    
    
    
    2,397
    
    
    
    (997
    )
    
    
    (41.6
    )
    
    
    3.5
    
    
    
    6.8Income (loss) from continuing
operations before income taxes
    
    
    3,771
    
    
    
    (8
    )
    
    
    3,779
    
    
    NM
    
    
    
    9.5
    
    
    
    Income tax provision
    
    
    1,887
    
    
    
    320
    
    
    
    1,567
    
    
    
    489.7
    
    
    
    4.8
    
    
    
    0.9Income (loss) from continuing
operations
    
    
    1,884
    
    
    
    (328
    )
    
    
    2,212
    
    
    
    674.4
    
    
    
    4.7
    
    
    
    (0.9
    )Income from discontinued
operations, net of tax
    
    
    
    
    
    
    29
    
    
    
    (29
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    0.1Net income (loss)
    
    $
    1,884
    
    
    $
    (299
    )
    
    $
    2,183
    
    
    
    730.1
    %
    
    
    4.7
    %
    
    
    (0.9
    )%
 
 NM =
    
    not meaningful(percentages may not add due to rounding) Revenues
  Results of Operations
  22




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Cost of Services
    23




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##### Table of Contents



Other Expenses
     24




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##### Table of Contents



Income (Loss) from Operations
  Interest and Other Income, Net
  25




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Income (Loss) from Continuing Operations Before Income Taxes
  Income Tax Provision (Benefit)
   Income (Loss) from Continuing Operations
  Income from Discontinued Operations, Net of Tax
  Net Income (Loss)
  Liquidity and Capital Resources
  26




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auction-rate
      27




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
      
 ITEM 4. CONTROLS AND PROCEDURES.
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
 28




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PART IIOTHER INFORMATION
 
 ITEM 1. Legal Proceedings.
   
 ITEM 1A. Risk Factors.
  Cable and satellite service providers could discontinue or refrain from carrying Outdoor Channel,
or decide to not renew our distribution agreements, which could substantially reduce the number of
viewers and harm our operating results.
  If our channel is placed in unpopular program packages by cable or satellite service providers, or
if service fees are increased for our subscribers, the number of viewers of our channel may decline
which could harm our business and operating results.
  29




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We may not be able to grow our subscriber base at a sufficient rate to offset planned increased
costs, decreased revenue or at all, and as a result our revenues and profitability may not increase
and could decrease.
  We do not control the methodology used by Nielsen to estimate our subscriber base or television
ratings, and changes, or inaccuracies, in such estimates could cause our advertising revenue to
decrease.
  A deterioration in general economic conditions may cause a decrease in, or hinder our ability to
grow, our advertising revenues.
  If we offer favorable terms or incentives to service providers in order to grow our subscriber
base, our operating results may be harmed or your percentage of the Company may be diluted.
  30




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If, in our attempt to increase our number of subscribers, we structure favorable terms or
incentives with one service provider in a way that would require us to offer the same terms or
incentives to all other service providers, our operating results may be harmed.
  Consolidation among cable and satellite operators may harm our business.
  The cable and satellite television industry is subject to substantial governmental regulation for
which compliance may increase our costs, hinder our growth and possibly expose us to penalties for
failure to comply.
    Our investments in adjustable rate securities are subject to risks which may affect the liquidity
of these investments and could cause additional impairment charges.
  31




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We may not be able to effectively manage our future growth or the integration of acquisitions, and
our growth may not continue, which may substantially harm our business and prospects.
  We may not be able to secure additional advertising accounts, and as a result, our revenues and
profitability may be negatively impacted.
  We cannot be certain in the future that we will be able to report that our controls are without
material weakness or to complete our evaluation of those controls in a timely fashion.
   Expenses relating to programming costs are generally increasing and a number of factors can cause
cost overruns and delays, and our operating results may be adversely impacted if we are not able to
successfully recover the costs of developing and acquiring new programming.
  32




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Our operating results may vary significantly, and historical comparisons of our operating results
are not necessarily meaningful and should not be relied upon as an indicator of future performance.
  
    
    carriage decisions of cable and satellite service providers;
    
    demand for advertising, advertising rates and offerings of competing media;
    
    changes in the growth rate of cable and satellite subscribers;
    
    cable and satellite service providers capital and marketing expenditures and
their impact on programming offerings and penetration;
    
    seasonal trends in viewer interests and activities;
    
    pricing, service, marketing and acquisition decisions that could reduce
revenues and impair quarterly financial results;
    
    the mix of cable television and satellite-delivered programming products and
services sold and the distribution channels for those products and services;
    
    our ability to react quickly to changing consumer trends;
    
    increased compensation expenses resulting from the hiring or promotion of
highly qualified employees;
    
    specific economic conditions in the cable television and related industries;
and
    
    changing regulatory requirements.
  Changes to financial accounting standards or our accounting estimates may affect our reported
operating results.
  If we fail to develop and distribute popular programs, our viewership would likely decline, which
could cause advertising and subscriber fee revenues to decrease.
  33




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The market in which we operate is highly competitive, and we may not be able to compete
effectively, particularly against competitors with greater financial resources, brand recognition,
marketplace presence and relationships with service providers.
   Changes in corporate governance and securities disclosure and compliance practices have increased
and may continue to increase our legal compliance and financial reporting costs.
  The satellite infrastructure that we use may fail or be preempted by another signal, which could
impair our ability to deliver programming to our cable and satellite service providers.
  Natural disasters and other events beyond our control could interrupt our signal.
  34




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Seasonal increases or decreases in advertising revenue may negatively affect our business.
  We may be unable to access capital, or offer equity as an incentive for increased subscribers or
for acquisitions, on acceptable terms to fund our future growth and operations.
  We may not be able to attract and retain key personnel.
  New video recording technologies may reduce our advertising revenue.
 ®
 Cable and satellite television programming signals have been stolen or could be stolen in the
future, which reduces our potential revenue from subscriber fees and advertising.
  35




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Because we expect to become increasingly dependent upon our intellectual property rights, our
inability to protect those rights could negatively impact our ability to compete.
  We may face intellectual property infringement claims that could be time-consuming, costly to
defend and result in our loss of significant rights.
  Some of our existing stockholders can exert control over us and may not make decisions that are in
the best interests of all stockholders.
  The market price of our common stock has been and may continue to be subject to wide fluctuations.
  Anti-takeover provisions in our certificate of incorporation, our bylaws and under Delaware law
may enable our incumbent management to retain control of us and discourage or prevent a change of
control that may be beneficial to our stockholders.
  
    
    allow the authorized number of directors to be changed only by resolution of
our board of directors;
    
    establish a classified board of directors, providing that not all members of
the board be elected at one time;
 36




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
    
    require a 66 2/3% stockholder vote to remove a director, and only for cause;
    
    authorize our board of directors to issue without stockholder approval blank
check preferred stock that, if issued, could operate as a poison pill to dilute the stock
ownership of a potential hostile acquirer to prevent an acquisition that is not approved by
our board of directors;
    
    require that stockholder actions must be effected at a duly called
stockholder meeting and prohibit stockholder action by written consent;
    
    establish advance notice requirements for stockholder nominations to our
board of directors or for stockholder proposals that can be acted on at stockholder meetings;
    
    except as provided by law, allow only our board of directors to call a
special meeting of the stockholders; and
    
    require a 66 2/3% stockholder vote to amend our certificate of incorporation
or bylaws.
  Technologies in the cable and satellite television industry are constantly changing, and our
failure to acquire or maintain state-of-the-art technology may harm our business and competitive
advantage.
  If our goodwill becomes impaired, we will be required to recognize a noncash charge which could
have a significant effect on our reported net earnings.
  Future issuance by us of preferred shares could adversely affect the holders of existing shares,
and therefore reduce the value of existing shares.
  We do not expect to pay dividends in the foreseeable future.
  37




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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
   Total Number
    
    
    Maximumof Shares
    
    
    Approximate DollarPurchased as
    
    
    Value that May YetTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Be Used to Purchaseof Shares
    
    
    Average Price
    
    
    Announced
    
    
    Shares Under thePeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Program
    
    
    ProgramApril 15, 2008
through April 30,
2008
    
    
    83,800
    
    
    $
    7.45
    
    
    
    83,800
    
    
    $
    14,375,994May 1, 2008
through May
31, 2008
    
    
    245,962
    
    
    
    7.75
    
    
    
    245,962
    
    
    
    12,470,804June 1, 2008
through June
30, 2008
    
    
    292,787
    
    
    
    7.80
    
    
    
    292,787
    
    
    
    10,188,156July 1, 2008
through July
31, 2008
    
    
    403,506
    
    
    
    6.84
    
    
    
    403,506
    
    
    
    7,426,836August 1, 2008
through August
31, 2008
    
    
    377,630
    
    
    
    7.55
    
    
    
    377,630
    
    
    
    4,575,027September 1, 2008
through
September 30, 2008
    
    
    458,592
    
    
    
    8.18
    
    
    
    458,592
    
    
    
    825,766Total
    
    
    1,862,277
    
    
    $
    7.61
    
    
    
    1,862,277
  
 ITEM 3. Defaults Upon Senior Securities.
  
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  
 ITEM 5. Other Information.
  
 ITEM 6. Exhibits.
 ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Outdoor Channel Holdings,
Inc, a Delaware corporation (filed as Exhibit 3.1 to the
Companys Current Report on Form 8-K filed on September 20,
2004 and incorporated herein by reference)3.2
    
    By-Laws of Outdoor Channel Holdings, Inc., a Delaware
corporation (filed as Exhibit 3.2 to the Companys Current
Report on Form 8-K filed on September 20, 2004 and
incorporated herein by reference)4.1
    
    Instruments defining the rights of security holders,
including debentures (see Exhibits 3.1 and 3.2 above and
Exhibit 4.1 to the Companys Form 10-Q for the period ended
June 30, 2005)31.1
    
    Certification by Chief Executive Officer31.2
    
    Certification by Chief Financial Officer32.1 *
    
    Section 1350 Certification by Chief Executive Officer32.2 *
    
    Section 1350 Certification by Chief Financial Officer
 
 *
    
    Pursuant to Commission Release No. 33-8238, this certification will be treated as
accompanying this Quarterly Report on Form 10-Q and not filed as part of such report for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of Section 18 of the Securities Exchange Act of 1934, as amended, and this
certification will not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the registrant specifically incorporates it by reference. 38




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##### Table of Contents



SIGNATURES
  OUTDOOR CHANNEL HOLDINGS, INC./s/ Shad L. BurkeShad L. BurkeAuthorized Officer, Chief Financial Officer and
Principal Accounting Officer
Date: October 31, 2008 39