##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2010
 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
(State or other Jurisdiction 
of incorporation or organization)
    
    33-0074499
(IRS Employer Identification Number)
 43445 Business Park Drive, Suite 103
Temecula, California 92590
 (951) 699-6991
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller Reporting Company o(Do not check if a small reporting company)
 o þ
  Class
    
    Number of Shares Outstanding at August 5, 2010Common Stock, $0.001 par value
    
    25,391,040




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##### 



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Period Ended June 30, 2010
 Table of Contents
 Part I. Financial InformationItem 1.Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2010 and 2009
    
    
    4Unaudited Condensed Consolidated Statement of Stockholders Equity for the Six Months
Ended June 30, 2010
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June
30, 2010 and 2009
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.Controls and Procedures
    
    
    29Part II. Other InformationItem 1.Legal Proceedings
    
    
    30Item 1A.Risk Factors
    
    
    30Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3.Defaults Upon Senior Securities
    
    
    39Item 4.Removed and Reserved
    
    
    39Item 5.Other Information
    
    
    39Item 6.Exhibits
    
    
    39Signatures
    
    
    40EX-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
  June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    36,131
    
    
    $
    20,848Investments in available-for-sale securities
    
    
    21,998
    
    
    
    38,090Accounts receivable, net of allowance for doubtful accounts of $981 and $620
    
    
    10,884
    
    
    
    15,827Income tax refund receivable
    
    
    206
    
    
    
    Deferred tax assets, net
    
    
    2,442
    
    
    
    2,434Prepaid programming and production costs
    
    
    5,815
    
    
    
    6,111Other current assets
    
    
    2,294
    
    
    
    1,871Total current assets
    
    
    79,770
    
    
    
    85,181Property, plant and equipment, net
    
    
    13,209
    
    
    
    14,286Amortizable intangible assets, net
    
    
    634
    
    
    
    828Goodwill
    
    
    43,160
    
    
    
    43,160Investments in auction-rate securities
    
    
    5,050
    
    
    
    5,775Deferred tax assets, net
    
    
    4,131
    
    
    
    2,489Subscriber acquisition fees
    
    
    3,601
    
    
    
    4,371Deposits and other assets
    
    
    622
    
    
    
    688Totals
    
    $
    150,177
    
    
    $
    156,778Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    10,007
    
    
    $
    14,824Accrued severance payments
    
    
    497
    
    
    
    255Deferred revenue
    
    
    1,839
    
    
    
    1,469Current portion of deferred obligations
    
    
    50
    
    
    
    165Current portion of unfavorable lease
    
    
    143
    
    
    
    136Income taxes payable
    
    
    
    
    
    
    459Total current liabilities
    
    
    12,536
    
    
    
    17,308Deferred obligations
    
    
    157
    
    
    
    178Unfavorable lease
    
    
    921
    
    
    
    994Total liabilities
    
    
    13,614
    
    
    
    18,480Commitments 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; 25,284 and
25,444 shares issued and outstanding
    
    
    25
    
    
    
    25Additional paid-in capital
    
    
    166,244
    
    
    
    165,374Accumulated other comprehensive loss
    
    
    (380
    )
    
    
    (444
    )Accumulated deficit
    
    
    (29,326
    )
    
    
    (26,657
    )Total stockholders equity
    
    
    136,563
    
    
    
    138,298Totals
    
    $
    150,177
    
    
    $
    156,778
  3




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Advertising
    
    $
    7,253
    
    
    $
    7,105
    
    
    $
    14,545
    
    
    $
    14,899Subscriber fees
    
    
    4,504
    
    
    
    5,338
    
    
    
    9,335
    
    
    
    10,001Production services
    
    
    5,072
    
    
    
    6,770
    
    
    
    10,770
    
    
    
    11,289Total revenues
    
    
    16,829
    
    
    
    19,213
    
    
    
    34,650
    
    
    
    36,189Cost of services:Programming
    
    
    1,529
    
    
    
    1,409
    
    
    
    2,833
    
    
    
    3,081Satellite transmission fees
    
    
    393
    
    
    
    400
    
    
    
    784
    
    
    
    795Production and operations
    
    
    6,011
    
    
    
    8,210
    
    
    
    13,110
    
    
    
    14,803Other direct costs
    
    
    109
    
    
    
    110
    
    
    
    221
    
    
    
    207Total cost of services
    
    
    8,042
    
    
    
    10,129
    
    
    
    16,948
    
    
    
    18,886Other expenses:Advertising
    
    
    979
    
    
    
    924
    
    
    
    1,265
    
    
    
    1,383Selling, general and administrative
    
    
    8,536
    
    
    
    8,465
    
    
    
    18,933
    
    
    
    17,672Depreciation and amortization
    
    
    928
    
    
    
    967
    
    
    
    1,839
    
    
    
    1,855Total other expenses
    
    
    10,443
    
    
    
    10,356
    
    
    
    22,037
    
    
    
    20,910Loss from operations
    
    
    (1,656
    )
    
    
    (1,272
    )
    
    
    (4,335
    )
    
    
    (3,607
    )Interest and other income, net
    
    
    15
    
    
    
    28
    
    
    
    27
    
    
    
    52Loss from operations before income taxes
    
    
    (1,641
    )
    
    
    (1,244
    )
    
    
    (4,308
    )
    
    
    (3,555
    )Income tax benefit
    
    
    (485
    )
    
    
    (307
    )
    
    
    (1,639
    )
    
    
    (1,304
    )Net loss
    
    $
    (1,156
    )
    
    $
    (937
    )
    
    $
    (2,669
    )
    
    $
    (2,251
    )Loss per common share data:Basic
    
    $
    (0.05
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )Weighted average common shares outstanding:Basic
    
    
    24,488
    
    
    
    24,366
    
    
    
    24,470
    
    
    
    24,412Diluted
    
    
    24,488
    
    
    
    24,366
    
    
    
    24,470
    
    
    
    24,412
  4




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statement of Stockholders Equity
 For the Six Months Ended June 30, 2010
  Additional
    
    
    Accumulated OtherCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalBalance, December 31, 2009
    
    
    25,444
    
    
    $
    25
    
    
    $
    165,374
    
    
    $
    (444
    )
    
    $
    (26,657
    )
    
    $
    138,298Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,669
    )
    
    
    (2,669
    )Change in fair value of
auction-rate securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    64Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,605
    )Issuance of restricted stock
and performance shares to
employees for services to be
rendered, net of forfeited
shares
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based employee and
service provider compensation
expense
    
    
    
    
    
    
    
    
    
    
    1,809
    
    
    
    
    
    
    
    
    
    
    
    1,809Purchase and retirement of
treasury stock related to
employee and service provider
share-based compensation
activity
    
    
    (102
    )
    
    
    
    
    
    
    (598
    )
    
    
    
    
    
    
    
    
    
    
    (598
    )Purchase and retirement of
treasury stock related to the
stock repurchase program
    
    
    (62
    )
    
    
    
    
    
    
    (341
    )
    
    
    
    
    
    
    
    
    
    
    (341
    )Balance, June 30, 2010
    
    
    25,284
    
    
    $
    25
    
    
    $
    166,244
    
    
    $
    (380
    )
    
    $
    (29,326
    )
    
    $
    136,563
  5




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statements of Cash Flows
  Six Months EndedJune 30,2010
    
    
    2009Operating activities:Net loss
    
    $
    (2,669
    )
    
    $
    (2,251
    )Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    1,839
    
    
    
    1,855Amortization of subscriber acquisition fees
    
    
    770
    
    
    
    299Loss on sale of equipment
    
    
    101
    
    
    
    15Gain on sale of available-for-sale and auction-rate securities
    
    
    (11
    )
    
    
    (7
    )Provision for doubtful accounts
    
    
    470
    
    
    
    190Share-based employee and service provider compensation
    
    
    1,809
    
    
    
    2,123Deferred tax benefit, net
    
    
    (1,639
    )
    
    
    (1,305
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    4,473
    
    
    
    (498
    )Income tax (payable) refund receivable
    
    
    (676
    )
    
    
    (281
    )Prepaid programming costs
    
    
    296
    
    
    
    (1,066
    )Other current assets
    
    
    (423
    )
    
    
    738Deposits and other assets
    
    
    45
    
    
    
    (170
    )Subscriber acquisition fees
    
    
    (441
    )
    
    
    (991
    )Accounts payable and accrued expenses
    
    
    (4,527
    )
    
    
    (2,970
    )Deferred revenue
    
    
    370
    
    
    
    2,430Accrued severance payments
    
    
    242
    
    
    
    (14
    )Deferred obligations
    
    
    (136
    )
    
    
    (27
    )Unfavorable lease obligations
    
    
    (66
    )
    
    
    (57
    )Net cash used in operating activities
    
    
    (173
    )
    
    
    (1,987
    )Investing activities:Purchases of property, plant and equipment
    
    
    (614
    )
    
    
    (1,361
    )Proceeds from sale of equipment
    
    
    93
    
    
    
    Cash paid to purchase assets of Winnercomm, net of cash acquired
    
    
    
    
    
    
    (5,746
    )Purchases of available-for-sale securities
    
    
    (48,984
    )
    
    
    (26,992
    )Proceeds from sale of available-for-sale and auction-rate securities
    
    
    65,900
    
    
    
    100Net cash provided by (used in) investing activities
    
    
    16,395
    
    
    
    (33,999
    )Financing activities:Purchase of treasury stock
    
    
    (598
    )
    
    
    (398
    )Purchase and retirement of treasury stock related to stock repurchase program
    
    
    (341
    )
    
    
    (347
    )Net cash used in financing activities
    
    
    (939
    )
    
    
    (745
    )Net increase in cash and cash equivalents
    
    
    15,283
    
    
    
    (36,731
    )Cash and cash equivalents, beginning of period
    
    
    20,848
    
    
    
    60,257Cash and cash equivalents, end of period
    
    $
    36,131
    
    
    $
    23,526Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    665
    
    
    $
    282Supplemental disclosures of non-cash investing and financing activities:Effect of net increase in fair value of auction-rate securities
    
    $
    64
    
    
    $
    70Property, plant and equipment costs incurred but not paid
    
    $
    127
    
    
    $
    296Subscriber acquisition fees incurred but not paid
    
    $
    
    
    
    $
    2,259Retirement of treasury stock
    
    $
    598
    
    
    $
    398
  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ACQUISITION
  Unaudited Pro Forma Financial Information
  7




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##### Table of Contents



Six Months EndedJune 30,2009Total revenues
    
    $
    37,137Net income loss
    
    $
    (2,858
    )Basic loss per share
    
    $
    (0.12
    )Diluted loss per share
    
    $
    (0.12
    )
 NOTE 3STOCK INCENTIVE PLANS
    2004 Long-Term Incentive Plan (LTIP Plan).
 Non-Employee Director Stock Option Plan (NEDSOP).
 8




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Nature of Award:Restricted stock
    
    $
    674
    
    
    $
    988
    
    
    $
    1,715
    
    
    $
    1,851RSUs
    
    
    59
    
    
    
    
    
    
    
    59
    
    
    
    Options
    
    
    12
    
    
    
    121
    
    
    
    35
    
    
    
    272Total share-based compensation expense
    
    $
    745
    
    
    $
    1,109
    
    
    $
    1,809
    
    
    $
    2,123
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Classification of Compensation Expense:Cost of services:Production and operations
    
    $
    85
    
    
    $
    109
    
    
    $
    158
    
    
    $
    214Other expenses:Selling, general and administrative
    
    
    660
    
    
    
    1,000
    
    
    
    1,651
    
    
    
    1,909Total share-based compensation expense
    
    $
    745
    
    
    $
    1,109
    
    
    $
    1,809
    
    
    $
    2,123
 Stock Options
  WeightedAverage
    
    
    Weighted AverageExercise
    
    
    Remaining ContractualOptions
    
    Shares
    
    
    Price
    
    
    Term (Yrs.)
    
    
    Aggregate Intrinsic Value(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)Outstanding at beginning of period
    
    
    650
    
    
    $
    12.58Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    (15
    )
    
    
    14.94Outstanding at end of period
    
    
    635
    
    
    $
    12.52
    
    
    
    2.09
    
    
    $
    Vested or expected to vest at end of period
    
    
    635
    
    
    $
    12.52
    
    
    
    2.09
    
    
    $
    Exercisable at end of period
    
    
    635
    
    
    $
    12.52
    
    
    
    2.09
    
    
    $
    
 9




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##### Table of Contents



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
    
    
    
    .76
    
    
    $
    10.19
    
    
    
    10
    
    
    $
    10.19$12.10  $12.10
    
    
    300
    
    
    
    1.30
    
    
    
    12.10
    
    
    
    300
    
    
    
    12.10$12.50  $12.50
    
    
    125
    
    
    
    3.47
    
    
    
    12.50
    
    
    
    125
    
    
    
    12.50$12.58  $12.58
    
    
    25
    
    
    
    .93
    
    
    
    12.58
    
    
    
    25
    
    
    
    12.58$12.80  $12.80
    
    
    125
    
    
    
    3.55
    
    
    
    12.80
    
    
    
    125
    
    
    
    12.80$14.86  $14.86
    
    
    50
    
    
    
    0.55
    
    
    
    14.86
    
    
    
    50
    
    
    
    14.86Total
    
    
    635
    
    
    
    2.09
    
    
    $
    12.52
    
    
    
    635
    
    
    $
    12.52
  Restricted Stock
  As of June 30, 2010WeightedAverageGrant-DateShares
    
    
    Fair Value(in thousands)Nonvested at beginning of period
    
    
    1,049
    
    
    $
    7.46Granted
    
    
    142
    
    
    
    5.50Vested
    
    
    (324
    )
    
    
    7.75Forfeited
    
    
    (138
    )
    
    
    6.97Nonvested at end of period
    
    
    729
    
    
    $
    7.04
  Restricted Stock Units
  As of June 30, 2010WeightedNumber of
    
    
    AverageRestricted
    
    
    Grant-DateStock Units
    
    
    Fair Value(in thousands)RSUs outstanding at beginning of period
    
    
    
    
    
    $
    Granted
    
    
    101
    
    
    
    5.97Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested at end of period
    
    
    101
    
    
    $
    5.97
 10




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##### Table of Contents



Expense to be Recognized
  June 30, 2010Weighted AverageExpense Yet to be
    
    
    Remaining RequisiteRecognized
    
    
    Service PeriodsRestricted stock
    
    $
    4,119
    
    
    2.1 yearsRSUs
    
    
    541
    
    
    0.9 yearsTotal
    
    $
    4,660
    
    
    2.0 years
 NOTE 4EARNINGS (LOSS) PER COMMON SHARE
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average shares used to calculate basic earnings (loss) per share
    
    
    24,488
    
    
    
    24,366
    
    
    
    24,470
    
    
    
    24,412Dilutive effect of potentially issuable common shares upon exercise of
dilutive stock options and performance units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares used to calculate diluted earnings (loss) per share
    
    
    24,488
    
    
    
    24,366
    
    
    
    24,470
    
    
    
    24,412
  NOTE 5INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
     11




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##### Table of Contents



Quoted Prices inActive Markets for
    
    
    Significant  Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents (1)
    
    $
    36,131
    
    
    $
    36,131
    
    
    $
    
    
    
    $
    Investments in available-for-sale securities (2)
    
    
    21,998
    
    
    
    21,998
    
    
    
    
    
    
    
    Non-current investments in auction-rate securities (3)
    
    
    5,050
    
    
    
    
    
    
    
    
    
    
    
    5,050Total
    
    $
    63,179
    
    
    $
    58,129
    
    
    $
    
    
    
    $
    5,050
 
 (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
treasury bills with original maturity dates in excess of
three months, for which we determine fair value through
quoted market prices.(3)
    
    Investments in auction-rate securities consist of one
auction-rate municipal security and one closed-end
perpetual preferred auction-rate security (PPS). PPS use
a discounted cash flow analysis to more accurately measure
possible liquidity discounts.   12




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    June 30, 2010Auction-Rate Securities:Balance at beginning of period
    
    $
    5,696
    
    
    $
    5,775Redeemed
    
    
    (700
    )
    
    
    (800
    )Realized gain on redemption
    
    
    
    
    
    
    11Unrealized gain included in
accumulated other
comprehensive loss
    
    
    54
    
    
    
    64Balance as of June 30, 2010
    
    $
    5,050
    
    
    $
    5,050
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest income
    
    $
    39
    
    
    $
    49
    
    
    $
    66
    
    
    $
    97Interest expense
    
    
    (24
    )
    
    
    (28
    )
    
    
    (50
    )
    
    
    (52
    )Gain on redemption of auction-rate
securities
    
    
    
    
    
    
    7
    
    
    
    11
    
    
    
    7Total interest and other income, net
    
    $
    15
    
    
    $
    28
    
    
    $
    27
    
    
    $
    52
 NOTE 6COMPREHENSIVE LOSS
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss, as reported
    
    $
    (1,156
    )
    
    $
    (937
    )
    
    $
    (2,669
    )
    
    $
    (2,251
    )Unrealized gain on auction-rate securities
    
    
    54
    
    
    $
    55
    
    
    
    64
    
    
    
    70Comprehensive loss
    
    $
    (1,102
    )
    
    $
    (882
    )

    
    $
    (2,605
    )
    
    $
    (2,181
    )
 NOTE 7GOODWILL AND INTANGIBLE ASSETS
    13




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##### Table of Contents



June 30, 2010AccumulatedGross
    
    
    Amortization
    
    
    NetTrademark
    
    $
    219
    
    
    $
    196
    
    
    $
    23Internet domain names
    
    
    97
    
    
    
    73
    
    
    
    24Customer relationships
    
    
    980
    
    
    
    450
    
    
    
    530Patents
    
    
    80
    
    
    
    23
    
    
    
    57Programming library
    
    
    50
    
    
    
    50
    
    
    
    Total amortizable intangible assets
    
    $
    1,426
    
    
    $
    792
    
    
    $
    634
   Years Ending December 31,
    
    Amount2010 (remaining 6 months)
    
    $
    1202011
    
    
    1802012
    
    
    1672013
    
    
    1622014 and thereafter
    
    
    5Total
    
    $
    634
 NOTE 8LINES OF CREDIT
  NOTE 9ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  June 30, 2010
    
    
    December 31, 2009Trade accounts payable
    
    $
    2,167
    
    
    $
    4,849Accrued payroll and related expenses
    
    
    2,688
    
    
    
    4,488Estimated make-good accrual
    
    
    751
    
    
    
    281Estimated most-favored nation accrual
    
    
    739
    
    
    
    260Accrued launch support commitment
    
    
    1,664
    
    
    
    3,046Accrued expenses
    
    
    1,998
    
    
    
    1,900Total
    
    $
    10,007
    
    
    $
    14,824
 NOTE 10INCOME TAX BENEFIT
   14




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NOTE 11RELATED PARTY TRANSACTIONS
   NOTE 12COMMITMENTS AND CONTINGENCIES
       15




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
    
    If the Company terminates Mr. Langstons employment without cause, or Mr. Langston
resigns for good reason, Mr. Langston will receive (i) monthly severance payments of $17
(less taxes) for nine (9) months (resulting in an aggregate severance payment of $153) if
such termination or resignation is not in connection with a change in control of the
Company; and (ii) monthly severance payments of approximately $27 for twelve (12) months
(resulting in an aggregate severance payment of $325) if such termination or resignation is
in connection with a change in control of the Company.
    
    If the Company terminates Mr. Allens employment without cause, or Mr. Allen resigns for
good reason, Mr. Allen will receive (i) monthly severance payments of $31 (less taxes) for
twelve (12) months (resulting in an aggregate severance payment of $375) if such
termination or resignation is not in connection with a change in control of the Company;
and (ii) monthly severance payments of approximately $42 for twelve (18) months (resulting
in an aggregate severance payment of $750) if such termination or resignation is in
connection with a change in control of the Company.
 Operating Leases
       16




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NOTE 13SEGMENT INFORMATION
   Income (Loss)
    
    
    
    
    
    
    DepreciationAs of and for the Three Months Ended:
    
    
    
    
    
    Before Income
    
    
    Total
    
    
    andJune 30, 2010TOC
    
    $
    11,757
    
    
    $
    (207
    )
    
    $
    83,927
    
    
    $
    413Production Services
    
    
    5,072
    
    
    
    (1,434
    )
    
    
    6,571
    
    
    
    515Subtotals of Segments
    
    
    16,829
    
    
    
    (1,641
    )
    
    
    90,498
    
    
    
    928Corporate*
    
    
    
    
    
    
    
    
    
    
    59,679
    
    
    
    Totals
    
    $
    16,829
    
    
    $
    (1,641
    )
    
    $
    150,177
    
    
    $
    928June 30, 2009TOC
    
    $
    12,443
    
    
    $
    1,266
    
    
    $
    85,065
    
    
    $
    508Production Services
    
    
    6,770
    
    
    
    (2,510
    )
    
    
    11,572
    
    
    
    459Subtotals of Segments
    
    
    19,213
    
    
    
    (1,244
    )
    
    
    96,637
    
    
    
    967Corporate*
    
    
    
    
    
    
    
    
    
    
    55,445
    
    
    
    Totals
    
    $
    19,213
    
    
    $
    (1,244
    )
    
    $
    152,082
    
    
    $
    967
 17




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Income (Loss)
    
    
    
    
    
    
    DepreciationBefore Income
    
    
    Total
    
    
    andAs of and for the Six Months Ended:
    
    Revenues
    
    
    Taxes
    
    
    Assets
    
    
    AmortizationJune 30, 2010TOC
    
    $
    23,880
    
    
    $
    (572
    )
    
    $
    83,927
    
    
    $
    818Production Services
    
    
    10,770
    
    
    
    (3,736
    )
    
    
    6,571
    
    
    
    1,021Subtotals of Segments
    
    
    34,650
    
    
    
    (4,308
    )
    
    
    90,498
    
    
    
    1,839Corporate*
    
    
    
    
    
    
    
    
    
    
    59,679
    
    
    
    Totals
    
    $
    34,650
    
    
    $
    (4,308
    )
    
    $
    150,177
    
    
    $
    1,839June 30, 2009TOC
    
    $
    24,900
    
    
    $
    1,359
    
    
    $
    85,065
    
    
    $
    1,008Production Services
    
    
    11,289
    
    
    
    (4,914
    )
    
    
    11,572
    
    
    
    847Subtotals of Segments
    
    
    36,189
    
    
    
    (3,555
    )
    
    
    96,637
    
    
    
    1,855Corporate*
    
    
    
    
    
    
    
    
    
    
    55,445
    
    
    
    Totals
    
    $
    36,189
    
    
    $
    (3,555
    )
    
    $
    152,082
    
    
    $
    1,855
 
 *
    
    Corporate overhead expenses consist primarily of executive, legal and administrative functions
not associated directly with either TOC or Production Services. We allocate a portion of these
expenses to our Production Services segment, but the majority is captured in our TOC segment.
Corporate assets consist primarily of cash not held in our operating accounts and
available-for-sale securities. NOTE 14RECENT ACCOUNTING PRONOUNCEMENTS
   NOTE 15SUBSEQUENT EVENTS
   18




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 Safe Harbor Statement
   General
    Critical Accounting Policies and Estimates
   Subscriber Acquisition Fees
  19




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Prepaid Programming Costs
  Revenue Recognition
      20




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Valuation of Goodwill
      Income Taxes
    21




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Stock Incentive Plans
   Comparison of Operating Results for the Three Months Ended June 30, 2010 and June 30, 2009
   Change
    
    
    % of Total Revenue2010
    
    
    2009
    
    
    $
    
    
    %
    
    
    2010
    
    
    2009Revenues:Advertising
    
    $
    7,253
    
    
    $
    7,105
    
    
    $
    148
    
    
    
    2.1
    %
    
    
    43.1
    %
    
    
    37.0
    %Subscriber fees
    
    
    4,504
    
    
    
    5,338
    
    
    
    (834
    )
    
    
    (15.6
    )
    
    
    26.8
    
    
    
    27.8Production services
    
    
    5,072
    
    
    
    6,770
    
    
    
    (1,698
    )
    
    
    (25.1
    )
    
    
    30.1
    
    
    
    35.2Total revenues
    
    
    16,829
    
    
    
    19,213
    
    
    
    (2,384
    )
    
    
    (12.4
    )
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    1,529
    
    
    
    1,409
    
    
    
    120
    
    
    
    8.5
    
    
    
    9.1
    
    
    
    7.3Satellite transmission fees
    
    
    393
    
    
    
    400
    
    
    
    (7
    )
    
    
    (1.8
    )
    
    
    2.3
    
    
    
    2.1Production and operations
    
    
    6,011
    
    
    
    8,210
    
    
    
    (2,199
    )
    
    
    (26.8
    )
    
    
    35.7
    
    
    
    42.7Other direct costs
    
    
    109
    
    
    
    110
    
    
    
    (1
    )
    
    
    (0.9
    )
    
    
    0.6
    
    
    
    0.6Total cost of services
    
    
    8,042
    
    
    
    10,129
    
    
    
    (2,087
    )
    
    
    (20.6
    )
    
    
    47.8
    
    
    
    52.7Other expenses:Advertising
    
    
    979
    
    
    
    924
    
    
    
    55
    
    
    
    6.0
    
    
    
    5.8
    
    
    
    4.8Selling, general and
administrative
    
    
    8,536
    
    
    
    8,465
    
    
    
    71
    
    
    
    0.8
    
    
    
    50.7
    
    
    
    44.1Depreciation and amortization
    
    
    928
    
    
    
    967
    
    
    
    (39
    )
    
    
    (4.0
    )
    
    
    5.5
    
    
    
    5.0Total other expenses
    
    
    10,443
    
    
    
    10,356
    
    
    
    87
    
    
    
    0.8
    
    
    
    62.1
    
    
    
    53.9Loss from operations
    
    
    (1,656
    )
    
    
    (1,272
    )
    
    
    (384
    )
    
    
    30.2
    
    
    
    (9.8
    )
    
    
    (6.6
    )Interest and other income, net
    
    
    15
    
    
    
    28
    
    
    
    (13
    )
    
    
    (46.4
    )
    
    
    0.1
    
    
    
    0.1Loss from operations before
income taxes
    
    
    (1,641
    )
    
    
    (1,244
    )
    
    
    (397
    )
    
    
    31.9
    
    
    
    (9.8
    )
    
    
    (6.5
    )Income tax benefit
    
    
    (485
    )
    
    
    (307
    )
    
    
    (178
    )
    
    
    58.0
    
    
    
    (2.9
    )
    
    
    (1.6
    )Net loss
    
    $
    (1,156
    )
    
    $
    (937
    )
    
    $
    (219
    )
    
    
    23.4
    %
    
    
    (6.9
    )%
    
    
    (4.9
    )%
  22




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Comparison of Operating Results for the Six Months Ended June 30, 2010 and June 30, 2009
  Change
    
    
    % of Total Revenue2010
    
    
    2009
    
    
    $
    
    
    %
    
    
    2010
    
    
    2009-Revenues:Advertising
    
    $
    14,545
    
    
    $
    14,899
    
    
    $
    (354
    )
    
    
    (2.4
    )%
    
    
    42.0
    %
    
    
    41.2
    %Subscriber fees
    
    
    9,335
    
    
    
    10,001
    
    
    
    (666
    )
    
    
    (6.7
    )
    
    
    26.9
    
    
    
    27.6Production services
    
    
    10,770
    
    
    
    11,289
    
    
    
    (519
    )
    
    
    (4.6
    )
    
    
    31.1
    
    
    
    31.2Total revenues
    
    
    34,650
    
    
    
    36,189
    
    
    
    (1,539
    )
    
    
    (4.3
    )
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    2,833
    
    
    
    3,081
    
    
    
    (248
    )
    
    
    (8.0
    )
    
    
    8.2
    
    
    
    8.5Satellite transmission fees
    
    
    784
    
    
    
    795
    
    
    
    (11
    )
    
    
    (1.4
    )
    
    
    2.3
    
    
    
    2.2Production and operations
    
    
    13,110
    
    
    
    14,803
    
    
    
    (1,693
    )
    
    
    (11.4
    )
    
    
    37.8
    
    
    
    40.9Other direct costs
    
    
    221
    
    
    
    207
    
    
    
    14
    
    
    
    6.8
    
    
    
    0.6
    
    
    
    0.6Total cost of services
    
    
    16,948
    
    
    
    18,886
    
    
    
    (1,938
    )
    
    
    (10.3
    )
    
    
    48.9
    
    
    
    52.2Other expenses:Advertising
    
    
    1,265
    
    
    
    1,383
    
    
    
    (118
    )
    
    
    (8.5
    )
    
    
    3.7
    
    
    
    3.8Selling, general and
administrative
    
    
    18,933
    
    
    
    17,672
    
    
    
    1,261
    
    
    
    7.1
    
    
    
    54.6
    
    
    
    48.8Depreciation and amortization
    
    
    1,839
    
    
    
    1,855
    
    
    
    (16
    )
    
    
    (0.9
    )
    
    
    5.3
    
    
    
    5.1Total other expenses
    
    
    22,037
    
    
    
    20,910
    
    
    
    1,127
    
    
    
    5.4
    
    
    
    63.6
    
    
    
    57.8Loss from operations
    
    
    (4,335
    )
    
    
    (3,607
    )
    
    
    (728
    )
    
    
    20.2
    
    
    
    (12.5
    )
    
    
    (10.0
    )Interest and other income, net
    
    
    27
    
    
    
    52
    
    
    
    (25
    )
    
    
    (48.1
    )
    
    
    0.1
    
    
    
    0.1Loss from operations before
income taxes
    
    
    (4,308
    )
    
    
    (3,555
    )
    
    
    (753
    )
    
    
    21.2
    
    
    
    (12.4
    )
    
    
    (9.8
    )Income tax benefit
    
    
    (1,639
    )
    
    
    (1,304
    )
    
    
    (335
    )
    
    
    25.7
    
    
    
    (4.7
    )
    
    
    (3.6
    )Net loss
    
    $
    (2,669
    )
    
    $
    (2,251
    )
    
    $
    (418
    )
    
    
    18.6
    %
    
    
    (7.7
    
    
    
    )%          (6.2
    )%
     Revenues
  23




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24




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Cost of Services
        25




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Other Expenses
       26




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Loss from Operations
  Interest and Other Income, Net
  Loss from Operations Before Income Taxes
  Income Tax Benefit
   Net Loss
  Liquidity and Capital Resources
  27




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  28




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ITEM 4. CONTROLS AND PROCEDURES.
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
 29




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PART IIOTHER INFORMATION
 
 ITEM 1. Legal Proceedings.
    
 ITEM 1A. Risk Factors.
  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.
  30




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If our channel is placed in unpopular program packages by our 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.
  A deterioration in general economic conditions may cause a decrease in, or hinder our ability to
grow, our advertising revenues.
  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 maintain sufficient revenue relating to our production business to offset its
fixed costs, and as a result our profitability may 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.
  31




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We may not be able to grow our subscriber base of Outdoor Channel 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 could have an aerial camera fall, harming our reputation and possibly causing damage exceeding
our liability insurance limits.
  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.
  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 service providers may harm our business.
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The cable, satellite and telco 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 auction-rate securities are subject to risks which may affect the liquidity of
these investments and could cause additional impairment charges.
  We may not be able to secure sufficient or additional advertising revenue, and as a result, our
profitability may be negatively impacted.
   33




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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 and production 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, acquiring and producing new
programming.
  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 service providers;
    
    demand for advertising, advertising rates and offerings of competing media;
    
    changes in the growth rate of cable, satellite and telco subscribers;
    
    service providers capital and marketing expenditures and their impact on programming
offerings and penetration;
    
    seasonal trends in viewer interests and activities;
    
    our advertising sales, for both Outdoor Channel and our Production Services, tend to be
more robust during the second half of each year, while expenses remain relatively constant
throughout the year;
    
    pricing, service, marketing and acquisition decisions that could reduce revenues and
impair quarterly financial results;
    
    the mix of cable television, satellite-delivered and telco programming products and
services sold and the distribution channels for those products and services;
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
    
    our ability to react quickly to changing consumer trends;
    
    increased compensation expenses resulting from the hiring or promotion of highly
qualified employees;
    
    our need to retain some employees on a full-time basis throughout the year so that we
have the minimally necessary personnel available during the busiest seasons;
    
    the necessity to do some projects that may be minimally profitable, if at all, in order
to establish a business relationship with a strategic customer;
    
    specific economic conditions in the pay television and related industries; and
    
    changing regulatory requirements.
  Changes to financial accounting standards or our accounting estimates may affect our reported
operating results.
  Our expansion into international operations has inherent risks, including currency exchange rate
fluctuations, possible governmental seizure of property, and our inability or increased costs
associated with enforcing our rights, including intellectual property rights.
  If we fail to develop and distribute popular programs, our viewership would likely decline, which
could cause advertising and subscriber fee revenues to decrease.
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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 service providers.
  Natural disasters and other events beyond our control could interrupt our signal.
  Seasonal increases or decreases in advertising revenue may negatively affect our business.
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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.
  Cable, satellite and telco television programming signals have been stolen or could be stolen in
the future, which reduces our potential revenue from subscriber fees and advertising.
  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.
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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;
    
    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 pay television industry are constantly changing, and our failure to acquire or
maintain state-of-the-art technology may harm our business and competitive advantage.
  38




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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.
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 ITEM 3.    Defaults Upon Senior Securities.
  
 ITEM 4.   Removed and Reserved.
 
 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)10.41
    
    Employment Agreement with Douglas J. Langston dated
June 28, 2010 (filed as Exhibit 99.2 to the Companys
Current Report on Form 8-K filed on July 1, 2010 and
incorporated herein by reference)10.42
    
    Employment Agreement with Thomas D. Allen dated June
29, 2010 (filed as Exhibit 99.3 to the Companys
Current Report on Form 8-K filed on July 1, 2010 and
incorporated herein by reference)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. 39




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SIGNATURES
  OUTDOOR CHANNEL HOLDINGS, INC./s/ Thomas D. AllenThomas D. AllenAuthorized Officer, Chief Financial Officer and
Principal Accounting Officer
Date: August 6, 2010 40