##### 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, 2007
 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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ
  Class
    
    Number of Shares Outstanding at January 29, 2008Common Stock, $0.001 par value
    
    26,982,500




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##### 



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For The Period Ended September 30, 2007
 Table of Contents
 Part I. Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and
December 31, 2006 (As Restated)
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 2007 and 2006 (As Restated)
    
    
    4Unaudited Condensed Consolidated Statement of Stockholders Equity for the Nine
Months Ended September 30, 2007 (As Restated)
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2007 and 2006 (As Restated)
    
    
    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
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27Part II. Other InformationItem 1A.
    
    Risk Factors
    
    
    29Item 6.
    
    Exhibits
    
    
    38Signatures
    
    
    38EXHIBIT 10.29EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 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 31,2007
    
    
    2006(Unaudited)
    
    
    (As Restated,Note 10)AssetsCurrent assets:Cash and cash equivalents
    
    $
    23,928
    
    
    $
    14,226Investment in available-for-sale securities
    
    
    45,252
    
    
    
    42,144Accounts receivable, net of allowance for doubtful accounts of $100 and $180
    
    
    8,837
    
    
    
    6,816Income tax refund receivable
    
    
    204
    
    
    
    2,299Deferred tax assets, net
    
    
    541
    
    
    
    608Prepaid programming costs
    
    
    3,008
    
    
    
    2,713Other current assets
    
    
    1,321
    
    
    
    835Assets of discontinued operations
    
    
    
    
    
    
    1,344Total current assets
    
    
    83,091
    
    
    
    70,985Property, plant and equipment, net
    
    
    11,935
    
    
    
    12,494Amortizable intangible assets, net
    
    
    401
    
    
    
    820Goodwill
    
    
    43,124
    
    
    
    43,816Deferred tax assets, net
    
    
    11,140
    
    
    
    11,344Deposits and other assets
    
    
    1,984
    
    
    
    2,101Assets of discontinued operations
    
    
    
    
    
    
    3,390Total assets
    
    $
    151,675
    
    
    $
    144,950Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    4,396
    
    
    $
    2,765Accrued severance payments
    
    
    100
    
    
    
    341Deferred revenue
    
    
    222
    
    
    
    610Current portion of deferred obligations
    
    
    96
    
    
    
    40Customer deposits
    
    
    12
    
    
    
    53Liabilities of discontinued operations
    
    
    
    
    
    
    463Total current liabilities
    
    
    4,826
    
    
    
    4,272Accrued severance payments, net of current portion
    
    
    28
    
    
    
    44Deferred obligations
    
    
    285
    
    
    
    326Liabilities of discontinued operations
    
    
    
    
    
    
    1,362Total liabilities
    
    
    5,139
    
    
    
    6,004Commitments 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: 26,172 and
25,507 shares issued and outstanding, respectively
    
    
    26
    
    
    
    26Additional paid-in capital
    
    
    173,893
    
    
    
    165,205Accumulated other comprehensive income (loss)
    
    
    (1
    )
    
    
    48Accumulated deficit
    
    
    (27,382
    )
    
    
    (26,333
    )Total stockholders equity
    
    
    146,536
    
    
    
    138,946Total liabilities and stockholders equity
    
    $
    151,675
    
    
    $
    144,950
  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 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    
    (As Restated,Note 10)
    
    
    
    
    
    
    Note 10)Revenues:Advertising
    
    $
    7,917
    
    
    $
    6,957
    
    
    $
    20,908
    
    
    $
    18,350Subscriber fees
    
    
    4,739
    
    
    
    4,348
    
    
    
    14,263
    
    
    
    13,072Total revenues
    
    
    12,656
    
    
    
    11,305
    
    
    
    35,171
    
    
    
    31,422Cost of services:Programming
    
    
    1,521
    
    
    
    2,095
    
    
    
    4,625
    
    
    
    5,816Satellite transmission fees
    
    
    637
    
    
    
    667
    
    
    
    1,869
    
    
    
    1,919Production and operations
    
    
    1,101
    
    
    
    986
    
    
    
    3,375
    
    
    
    3,053Other direct costs
    
    
    46
    
    
    
    45
    
    
    
    101
    
    
    
    54Total cost of services
    
    
    3,305
    
    
    
    3,793
    
    
    
    9,970
    
    
    
    10,842Other expenses:Advertising
    
    
    1,558
    
    
    
    1,537
    
    
    
    4,088
    
    
    
    5,299Selling, general and administrative
    
    
    6,524
    
    
    
    4,184
    
    
    
    21,525
    
    
    
    13,371Impairment of amortizable intangible assets
    
    
    
    
    
    
    9,540
    
    
    
    
    
    
    
    9,540Depreciation and amortization
    
    
    686
    
    
    
    843
    
    
    
    1,993
    
    
    
    2,227Total other expenses
    
    
    8,768
    
    
    
    16,104
    
    
    
    27,606
    
    
    
    30,437Income (loss) from operations
    
    
    583
    
    
    
    (8,592
    )
    
    
    (2,405
    )
    
    
    (9,857
    )Interest expense
    
    
    12
    
    
    
    73
    
    
    
    12
    
    
    
    227Other income
    
    
    894
    
    
    
    715
    
    
    
    2,409
    
    
    
    1,981Income (loss) from continuing operations
before income taxes
    
    
    1,465
    
    
    
    (7,950
    )
    
    
    (8
    )
    
    
    (8,103
    )Income tax provision (benefit)
    
    
    (33
    )
    
    
    (2,982
    )
    
    
    320
    
    
    
    (2,791
    )Income (loss) from continuing operations
    
    
    1,498
    
    
    
    (4,968
    )
    
    
    (328
    )
    
    
    (5,312
    )Income (loss) from discontinued operations,
net of tax
    
    
    
    
    
    
    (331
    )
    
    
    29
    
    
    
    (2
    )Net income (loss)
    
    $
    1,498
    
    
    $
    (5,299
    )
    
    $
    (299
    )
    
    $
    (5,314
    )Basic earnings (loss) per common share data:From continuing operations
    
    $
    0.06
    
    
    $
    (0.20
    )
    
    $
    (0.01
    )
    
    $
    (0.21
    )From discontinued operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    Basic earnings per common share
    
    $
    0.06
    
    
    $
    (0.21
    )
    
    $
    (0.01
    )
    
    $
    (0.21
    )Diluted earnings (loss) per common share data:From continuing operations
    
    $
    0.06
    
    
    $
    (0.20
    )
    
    $
    (0.01
    )
    
    $
    (0.21
    )From discontinued operations
    
    $
    
    
    
    $
    (0.01
    )
    
    $
    
    
    
    $
    Diluted earnings per common share
    
    $
    0.06
    
    
    $
    (0.21
    )
    
    $
    (0.01
    )
    
    $
    (0.21
    )Weighted average number of common shares
outstanding:Basic
    
    
    26,054
    
    
    
    25,000
    
    
    
    25,846
    
    
    
    24,737Diluted
    
    
    26,747
    
    
    
    25,000
    
    
    
    25,846
    
    
    
    24,737
  4




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
 
 Unaudited Condensed Consolidated Statement of Stockholders Equity
For the Nine Months Ended September 30, 2007
 AccumulatedAdditional
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalBalance, December 31, 2006
(as restated, Note 10)
    
    
    25,507
    
    
    $
    26
    
    
    $
    165,205
    
    
    $
    48
    
    
    $
    (26,333
    )
    
    $
    138,946Comprehensive income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    (299
    )Effect of change in
fair value of
available-for-sale
securities, net of
deferred tax benefit of
$33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (49
    )Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (348
    )Common stock issued upon
exercise of stock options
    
    
    363
    
    
    
    
    
    
    
    604
    
    
    
    
    
    
    
    
    
    
    
    604Issuance of restricted
stock to employees and
service providers for
services to be rendered,
net of forfeited shares
    
    
    332
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based employee and
service provider
compensation expense
    
    
    
    
    
    
    
    
    
    
    8,392
    
    
    
    
    
    
    
    
    
    
    
    8,392Purchase and retirement of
treasury stock related to
employee and service
provider share-based
compensation activity
    
    
    (30
    )
    
    
    
    
    
    
    (308
    )
    
    
    
    
    
    
    
    
    
    
    (308
    )Cumulative effect of
adoption of new
accounting pronouncement
(Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750
    )
    
    
    (750
    )Balance, September 30, 2007
    
    
    26,172
    
    
    $
    26
    
    
    $
    173,893
    
    
    $
    (1
    )
    
    $
    (27,382
    )
    
    $
    146,536
  5




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
 Nine Months EndedSeptember 30,2007
    
    
    2006(As Restated,Note 10)Operating activities:Net loss
    
    $
    (299
    )
    
    $
    (5,314
    )Adjustments to reconcile income to net cash provided by operating activities
of continuing operations:Loss (income) from discontinued operations
    
    
    (29
    )
    
    
    2Depreciation and amortization
    
    
    2,359
    
    
    
    2,300Gain on sale of equipment
    
    
    (1
    )
    
    
    Impairment of amortizable intangible assets
    
    
    
    
    
    
    9,540Provision for doubtful accounts
    
    
    100
    
    
    
    74Share-based employee and service provider compensation
    
    
    8,392
    
    
    
    2,594Deferred tax provision (benefit)
    
    
    245
    
    
    
    (2,963
    )Tax benefits from exercise of stock options in excess of recognized expense
    
    
    (7
    )
    
    
    (825
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,121
    )
    
    
    (1,553
    )Income tax refund receivable
    
    
    2,095
    
    
    
    980Prepaid programming costs
    
    
    (295
    )
    
    
    (923
    )Other current assets
    
    
    (486
    )
    
    
    (386
    )Deposits and other assets
    
    
    (250
    )
    
    
    (1,212
    )Accounts payable and accrued expenses
    
    
    1,558
    
    
    
    699Deferred revenue
    
    
    (388
    )
    
    
    249Customer deposits
    
    
    (41
    )
    
    
    27Accrued severance payments
    
    
    (257
    )
    
    
    (15
    )Deferred obligations
    
    
    15
    
    
    
    53Net cash provided by operating activities of continuing operations
    
    
    10,590
    
    
    
    3,327Investing activities:Purchases of property, plant and equipment
    
    
    (943
    )
    
    
    (2,353
    )Proceeds
from sale of equipment
    
    
    4
    
    
    
    Proceeds from sale of discontinued operations
    
    
    3,589
    
    
    
    Purchases of available-for-sale securities
    
    
    (104,001
    )
    
    
    (112,279
    )Proceeds from sale of available-for-sale securities
    
    
    100,811
    
    
    
    112,430Net cash used in investing activities of continuing operations
    
    
    (540
    )
    
    
    (2,202
    )Financing activities:Principal payments on long-term debt and capital leases
    
    
    
    
    
    
    (524
    )Proceeds from exercise of stock options
    
    
    604
    
    
    
    813Purchase of treasury stock
    
    
    (308
    )
    
    
    (33
    )Tax benefits from exercise of stock options in excess of recognized expense
    
    
    7
    
    
    
    825Net cash provided by financing activities of continuing operations
    
    
    303
    
    
    
    1,081Cash flows from discontinued operations:Net cash used in operating activities of discontinued operations
    
    
    (582
    )
    
    
    (975
    )Net cash used in investing activities of discontinued operations
    
    
    (69
    )
    
    
    (75
    )Net cash used in financing activities of discontinued operations
    
    
    
    
    
    
    (9
    )Net cash used in discontinued operations
    
    
    (651
    )
    
    
    (1,059
    )Net increase in cash and cash equivalents
    
    
    9,702
    
    
    
    1,147Cash and cash equivalents, beginning of period
    
    
    14,226
    
    
    
    17,672Cash and cash equivalents, end of period
    
    $
    23,928
    
    
    $
    18,819Supplemental disclosure of cash flow information:Interest paid
    
    $
    12
    
    
    $
    226Income taxes paid
    
    $
    99
    
    
    $
    Supplemental disclosures of noncash investing and financing activities:Effect of net increase (decrease) in fair value of available-for-sale
securities, net of deferred taxes
    
    $
    (49
    )
    
    $
    8Property, plant and equipment costs incurred but not paid
    
    $
    122
    
    
    $
    24Effect of net increase in fair value of cash flow hedge
    
    $
    
    
    
    $
    44
  6




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OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
 NOTE 1ORGANIZATION AND BUSINESS
 Description of Operations
   Recent Accounting Pronouncements
   NOTE 2UNAUDITED INTERIM FINANCIAL STATEMENTS
    7




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NOTE 3STOCK INCENTIVE PLANS
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Nature of Award:Restricted stock
    
    $
    469
    
    
    $
    170
    
    
    $
    1,172
    
    
    $
    404Options
    
    
    376
    
    
    
    745
    
    
    
    1,256
    
    
    
    2,190Performance units
    
    
    1,016
    
    
    
    
    
    
    
    5,964
    
    
    
    Total share-based compensation expense
    
    $
    1,861
    
    
    $
    915
    
    
    $
    8,392
    
    
    $
    2,594
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Classification of Compensation Expense:Cost of services:Production and operations
    
    $
    46
    
    
    $
    57
    
    
    $
    125
    
    
    $
    139Other expenses:Selling, general and administrative
    
    
    1,815
    
    
    
    858
    
    
    
    8,267
    
    
    
    2,455Total share-based compensation expense
    
    $
    1,861
    
    
    $
    915
    
    
    $
    8,392
    
    
    $
    2,594
  Nine Months EndedSeptember 30,2007
    
    2006Risk-free interest rate
    
    
    4.9  5.0%
    
    
    
    4.3  4.9%Dividend yield
    
    
    0%
    
    
    
    0%Weighted average expected life
    
    
    0.8 years
    
    
    
    3.8 yearsVolatility factor
    
    
    39.2  39.5%
    
    
    
    52.3  58.9%Weighted average volatility factor
    
    
    39.4%
    
    
    
    54.6%
 8




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NOTE 4EARNINGS (LOSS) PER COMMON SHARE
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerators:Income (loss) from continuing operationsbasic
    
    $
    1,498
    
    
    $
    (4,968
    )
    
    $
    (328
    )
    
    $
    (5,312
    )Denominators:Weighted average common shares
outstandingbasic
    
    
    26,054
    
    
    
    25,000
    
    
    
    25,846
    
    
    
    24,737Dilutive effect of potentially issuable common
shares upon exercise of dilutive stock options
of the Company as adjusted for the application
of the treasury stock method
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    Diluted weighted average common shares
outstanding
    
    
    26,747
    
    
    
    25,000
    
    
    
    25,846
    
    
    
    24,737
 9




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##### Table of Contents



NOTE 5EQUITY TRANSACTIONS
 Issuances of Common Stock by the Company
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Number of options exercised
    
    
    1
    
    
    
    168
    
    
    
    363
    
    
    
    660Cash proceeds
    
    $
    6
    
    
    $
    213
    
    
    $
    604
    
    
    $
    813Tax benefit from options exercised
    
    $
    2
    
    
    $
    619
    
    
    $
    725
    
    
    $
    1,463
    Stock Options
  Weighted
    
    
    AggregateWeighted
    
    
    Average
    
    
    IntrinsicShares
    
    
    Average
    
    
    Remaining
    
    
    Value(in
    
    
    Exercise
    
    
    Contractual
    
    
    (inOptions
    
    thousands)
    
    
    Price
    
    
    Term
    
    
    thousands)Outstanding at beginning of period
    
    
    3,272
    
    
    $
    9.48Granted
    
    
    
    
    
    
    Exercised
    
    
    (363
    )
    
    
    1.67Forfeited
    
    
    (180
    )
    
    
    13.52Outstanding at end of period
    
    
    2,729
    
    
    $
    10.26
    
    
    
    2.1
    
    
    $
    4,941Vested or expected to vest at end of period
    
    
    2,675
    
    
    $
    10.18
    
    
    
    2.1
    
    
    $
    4,941Exercisable at end of period
    
    
    2,095
    
    
    $
    9.29
    
    
    
    1.7
    
    
    $
    4,941
  10




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Restricted Stock
  WeightedShares
    
    
    Average(in
    
    
    Grant-Datethousands)
    
    
    Fair ValueNonvested at beginning of period
    
    
    314
    
    
    $
    12.73Granted
    
    
    380
    
    
    
    10.01Vested
    
    
    (62
    )
    
    
    12.46Forfeited
    
    
    (48
    )
    
    
    12.91Nonvested at end of period
    
    
    584
    
    
    $
    10.98
  Expense to be Recognized
  As of September 30, 2007Weighted AverageRemainingExpense Yet
    
    
    Requisite Serviceto be Recognized
    
    
    PeriodsStock options
    
    $
    3,019
    
    
    2.53 yearsRestricted stock
    
    
    4,851
    
    
    2.82 yearsPerformance units
    
    
    619
    
    
    0.15 yearsTotal
    
    $
    8,489
    
    
    2.52 years
 NOTE 6RELATED PARTY TRANSACTIONS
   11




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NOTE 7DISCONTINUED OPERATIONS
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Membership Division revenue
    
    $
    
    
    
    $
    2,112
    
    
    $
    1,632
    
    
    $
    4,441Income (loss) from operations
    
    
    
    
    
    
    265
    
    
    
    73
    
    
    
    27Income (loss) from
discontinued operations, net
of tax
    
    $
    
    
    
    $
    (331
    )
    
    $
    29
    
    
    $
    (2
    )
  December 31,2006Assets held for sale:Current assets
    
    $
    1,344Property, plant and equipment, net
    
    
    3,352Deposits and other assets
    
    
    38Total assets of discontinued operations
    
    $
    4,734Liabilities of discontinued operations:Current liabilities
    
    $
    463Deferred revenue, net of current portion
    
    
    1,362Total liabilities of discontinued operations
    
    
    1,825Net assets of discontinued operations
    
    $
    2,909
 NOTE 8INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES
  12




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##### Table of Contents



As of
    
    
    As ofSeptember 30, 2007
    
    
    December 31, 2006Auction rate securities
    
    $
    44,440
    
    
    $
    41,250Equity securities
    
    
    812
    
    
    
    894Total available-for-sale securities
    
    $
    45,252
    
    
    $
    42,144
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest income
    
    $
    875
    
    
    $
    694
    
    
    $
    2,354
    
    
    $
    1,926Dividend income
    
    
    18
    
    
    
    21
    
    
    
    54
    
    
    
    55Subtotal
    
    
    893
    
    
    
    715
    
    
    
    2,408
    
    
    
    1,981Gain on sale of equipment
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Total other income
    
    $
    894
    
    
    $
    715
    
    
    $
    2,409
    
    
    $
    1,981
 NOTE 9INCOME TAX PROVISION (BENEFIT)
   13




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NOTE
10RESTATEMENT OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2006 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
  
    
    the recognition of deferred tax asset related to certain options to acquire common shares of TOC that
were outstanding on September 8, 2004 when we completed its acquisition,
 
    
    certain revenue cutoff issues which generally result in intra-period timing fluctuations,
 
    
    accounting for the cost escalation provisions related to the terms of the lease of our headquarters,
 
    
    recognition of additional income tax expense for a short-fall in our windfall benefit pool,
 
    
    adjustment to the estimated useful life of our leasehold improvements to match the terms of our lease of our
headquarters, and
 
    
    the exclusion from expense recognition of restricted shares issued to a service
provider with performance conditions that when met would result in some or all of the shares being
vested.
      As Originally Reportedand Adjusted forDiscontinued Operations
    
    As Restated
    
    ChangeCurrent deferred tax assets
    
    $
    575
    
    
    $
    608
    
    
    $
    33Total current assets
    
    
    70,952
    
    
    
    70,985
    
    
    
    33Property, plant and equipment, net
    
    
    12,445
    
    
    
    12,494
    
    
    
    49Goodwill
    
    
    44,457
    
    
    
    43,816
    
    
    
    (641
    )Deferred tax assets, net
    
    
    10,956
    
    
    
    11,344
    
    
    
    388Total assets
    
    
    145,121
    
    
    
    144,950
    
    
    
    (171
    )Accounts payable and accrued expenses
    
    
    2,766
    
    
    
    2,765
    
    
    
    (1
    )Current portion of deferred obligation
    
    
    
    
    
    
    40
    
    
    
    40Total current liabilities
    
    
    4,233
    
    
    
    4,272
    
    
    
    39Deferred obligations
    
    
    344
    
    
    
    326
    
    
    
    (18
    )Total liabilities
    
    
    5,983
    
    
    
    6,004
    
    
    
    21Additional paid-in capital
    
    
    165,779
    
    
    
    165,205
    
    
    
    (574
    )Accumulated deficit
    
    
    (26,715
    )
    
    
    (26,333
    )
    
    
    382Total stockholders equity
    
    
    139,138
    
    
    
    138,946
    
    
    
    (192
    )Total liabilities and stockholders equity
    
    $
    145,121
    
    
    $
    144,950
    
    
    $
    (171
    )
 14




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As OriginallyReported andAdjusted forDiscontinuedOperations
    
    As Restated
    
    ChangeFor the three months ended September 30, 2006Advertising revenue
    
    $
    6,834
    
    
    $
    6,957
    
    
    $
    123Total revenues
    
    
    11,182
    
    
    
    11,305
    
    
    
    123Production and operations
    
    
    1,014
    
    
    
    986
    
    
    
    (28
    )Other direct costs
    
    
    
    
    
    
    45
    
    
    
    45Total cost of services
    
    
    3,776
    
    
    
    3,793
    
    
    
    17Advertising expense
    
    
    1,634
    
    
    
    1,537
    
    
    
    (97
    )Selling, general and administrative
    
    
    4,264
    
    
    
    4,184
    
    
    
    (80
    )Depreciation and amortization
    
    
    847
    
    
    
    843
    
    
    
    (4
    )Total other expenses
    
    
    16,285
    
    
    
    16,104
    
    
    
    (181
    )Loss from operations
    
    
    (8,879
    )
    
    
    (8,592
    )
    
    
    287Loss from continuing operations before
income taxes
    
    
    (8,237
    )
    
    
    (7,950
    )
    
    
    284Income tax provision (benefit)
    
    
    (3,000
    )
    
    
    (2,982
    )
    
    
    18Net loss
    
    
    (5,568
    )
    
    
    (5,299
    )
    
    
    269Loss per common share:Basic from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.20
    )
    
    $
    0.02Diluted from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.20
    )
    
    $
    0.02Basic earnings per common share
    
    $
    (0.21
    )
    
    $
    (0.21
    )
    
    $
    Diluted earnings per common share
    
    $
    (0.21
    )
    
    $
    (0.21
    )
    
    $
    Weighted average number of basic common shares
    
    
    24,813
    
    
    
    25,000
    
    
    
    187Weighted average number of diluted common shares
    
    
    24,813
    
    
    
    25,000
    
    
    
    187
 15




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As OriginallyReported andAdjusted forDiscontinuedOperations
    
    As Restated
    
    ChangeFor the nine months ended September 30, 2006Advertising revenue
    
    $
    18,219
    
    
    $
    18,350
    
    
    $
    131Total revenues
    
    
    31,291
    
    
    
    31,422
    
    
    
    131Programming
    
    
    5,816
    
    
    
    5,816
    
    
    
    Production and operations
    
    
    3,208
    
    
    
    3,053
    
    
    
    (155
    )Other direct costs
    
    
    54
    
    
    
    54
    
    
    
    Total cost of services
    
    
    10,997
    
    
    
    10,842
    
    
    
    (155
    )Advertising expense
    
    
    5,299
    
    
    
    5,299
    
    
    
    Selling, general and administrative
    
    
    13,391
    
    
    
    13,371
    
    
    
    (20
    )Depreciation and amortization
    
    
    2,276
    
    
    
    2,227
    
    
    
    (49
    )Total other expenses
    
    
    30,506
    
    
    
    30,437
    
    
    
    (69
    )Loss from operations
    
    
    (10,212
    )
    
    
    (9,857
    )
    
    
    355Interest expense
    
    
    226
    
    
    
    227
    
    
    
    1Other income
    
    
    1,981
    
    
    
    1,981
    
    
    
    Loss from continuing operations before
income taxes
    
    
    (8,457
    )
    
    
    (8,103
    )
    
    
    354Income tax provision (benefit)
    
    
    (3,036
    )
    
    
    (2,791
    )
    
    
    245Net loss
    
    
    (5,423
    )
    
    
    (5,314
    )
    
    
    109Earnings (loss) per common share:Basic from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.22
    )
    
    $
    Diluted from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.22
    )
    
    $
    Basic earnings per common share
    
    $
    (0.22
    )
    
    $
    (0.22
    )
    
    $
    Diluted earnings per common share
    
    $
    (0.22
    )
    
    $
    (0.22
    )
    
    $
    Weighted average number of basic common shares
    
    
    24,404
    
    
    
    24,737
    
    
    
    333Weighted average number of diluted common shares
    
    
    24,404
    
    
    
    24,737
    
    
    
    333
 16




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As OriginallyReported andAdjusted forDiscontinuedOperations
    
    As Restated
    
    ChangeFor the nine months ended September 30, 2006Net loss
    
    $
    (5,423
    )
    
    $
    (5,314
    )
    
    $
    109Depreciation and amortization
    
    
    2,348
    
    
    
    2,300
    
    
    
    (48
    )Provision for doubtful accounts
    
    
    88
    
    
    
    74
    
    
    
    (14
    )Share-base employee and service provider
compensation
    
    
    2,785
    
    
    
    2,594
    
    
    
    (191
    )Deferred tax provision (benefit), net
    
    
    (3,209
    )
    
    
    (2,963
    )
    
    
    246Tax benefits from exercise of stock options in excess of recognized expense


(711
)


(825
)


(114
)Change in:Accounts receivable
    
    
    (1,422
    )
    
    
    (1,553
    )
    
    
    (131
    )Other current assets
    
    
    (395
    )
    
    
    (386
    )
    
    
    9Deposits and other assets
    
    
    (1,211
    )
    
    
    (1,212
    )
    
    
    (1
    )Deferred obligations
    
    
    37
    
    
    
    53
    
    
    
    16Net cash provided by operating activities of
continuing operations
    
    
    3,441
    
    
    
    3,327
    
    
    
    (114
    )Tax benefits from exercise of stock options in excess of recognized expense



711



825



114Net cash provided by financing activities of
continuing operations
    
    
    967
    
    
    
    1,081
    
    
    
    114Net increase in cash and cash equivalents
    
    
    1,147
    
    
    
    1,147
    
    
    
    Cash and cash equivalents, beginning of period
    
    
    17,672
    
    
    
    17,672
    
    
    
    Cash and cash equivalents, end of period
    
    
    18,819
    
    
    
    18,819
    
    
    
    Property, plant and equipment costs incurred but
not paid
    
    $
    
    
    
    $
    24
    
    
    $
    24
 NOTE 11SUBSEQUENT EVENTS
    17




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18




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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
  Recent Accounting Pronouncements
   19




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##### Table of Contents



Comparison of Operating Results for the Three Months Ended September 30, 2007 and September 30,
2006
  Change
    
    
    % of Total Revenue2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    
    (As Restated,
    
    
    
    
    
    
    (As Restated,Note 10)
    
    
    
    
    
    
    Note 10)
    
    
    
    
    
    
    Note 10)Revenues:Advertising
    
    $
    7,917
    
    
    $
    6,957
    
    
    $
    960
    
    
    
    13.8
    %
    
    
    62.6
    %
    
    
    61.5
    %Subscriber fees
    
    
    4,739
    
    
    
    4,348
    
    
    
    391
    
    
    
    9.0
    
    
    
    37.4
    
    
    
    38.5Total revenues
    
    
    12,656
    
    
    
    11,305
    
    
    
    1,351
    
    
    
    12.0
    
    
    
    100.0
    
    
    
    100.00Cost of services:Programming
    
    
    1,521
    
    
    
    2,095
    
    
    
    (574
    )
    
    
    (27.4
    )
    
    
    12.0
    
    
    
    18.5Satellite transmission fees
    
    
    637
    
    
    
    667
    
    
    
    (30
    )
    
    
    (4.5
    )
    
    
    5.0
    
    
    
    5.9Production and operations
    
    
    1,101
    
    
    
    986
    
    
    
    115
    
    
    
    11.7
    
    
    
    8.7
    
    
    
    8.7Other direct costs
    
    
    46
    
    
    
    45
    
    
    
    1
    
    
    
    2.2
    
    
    
    0.4
    
    
    
    0.4Total cost of services
    
    
    3,305
    
    
    
    3,793
    
    
    
    (488
    )
    
    
    12.9
    
    
    
    26.1
    
    
    
    33.5Other expenses:Advertising
    
    
    1,558
    
    
    
    1,537
    
    
    
    21
    
    
    
    1.4
    
    
    
    12.3
    
    
    
    13.6Selling, general and
administrative
    
    
    6,524
    
    
    
    4,184
    
    
    
    2,340
    
    
    
    55.9
    
    
    
    51.6
    
    
    
    37.0Impairment of amortizable
intangible assets
    
    
    
    
    
    
    9,540
    
    
    
    (9,540
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    84.4Depreciation and amortization
    
    
    686
    
    
    
    843
    
    
    
    (157
    )
    
    
    (18.6
    )
    
    
    5.4
    
    
    
    7.5Total other expenses
    
    
    8,768
    
    
    
    16,104
    
    
    
    (7,336
    )
    
    
    (45.6
    )
    
    
    69.3
    
    
    
    142.5Income (loss) from operations
    
    
    583
    
    
    
    (8,592
    )
    
    
    9,175
    
    
    
    (106.8
    )
    
    
    4.6
    
    
    
    (76.0
    )Interest expense
    
    
    12
    
    
    
    73
    
    
    
    (61
    )
    
    
    (83.6
    )
    
    
    0.1
    
    
    
    0.6Other income
    
    
    894
    
    
    
    715
    
    
    
    179
    
    
    
    25.0
    
    
    
    7.1
    
    
    
    6.3Income (loss) from continuing
operations before income taxes
    
    
    1,465
    
    
    
    (7,950
    )
    
    
    9,415
    
    
    
    (118.4
    )
    
    
    11.6
    
    
    
    (70.3
    )Income tax provision (benefit)
    
    
    (33
    )
    
    
    (2,982
    )
    
    
    2,949
    
    
    
    (98.9
    )
    
    
    (0.2
    )
    
    
    (26.4
    )Income (loss) from continuing
operations
    
    
    1,498
    
    
    
    (4,968
    )
    
    
    6,466
    
    
    
    (130.2
    )
    
    
    11.8
    
    
    
    (43.9
    )Income (loss) from discontinued
operations, net of tax
    
    
    
    
    
    
    (331
    )
    
    
    331
    
    
    
    (100.0
    )
    
    
    
    
    
    
    (3.0
    )Net income (loss)
    
    $
    1,498
    
    
    $
    (5,299
    )
    
    $
    6,797
    
    
    
    (128.3
    )%
    
    
    11.8
    %
    
    
    (46.9
    )%
 20




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Comparison of Operating Results for the Nine Months Ended September 30, 2007 and September 30, 2006
  Change
    
    
    % of Total Revenue2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006(As Restated,
    
    
    
    
    
    
    (As Restated,
    
    
    
    
    
    
    (As Restated,Note 10)
    
    
    
    
    
    
    Note 10)
    
    
    
    
    
    
    Note 10)Revenues:Advertising
    
    $
    20,908
    
    
    $
    18,350
    
    
    $
    2,558
    
    
    
    13.9
    %
    
    
    59.4
    %
    
    
    58.4
    %Subscriber fees
    
    
    14,263
    
    
    
    13,072
    
    
    
    1,191
    
    
    
    9.1
    
    
    
    40.6
    
    
    
    41.6Total revenues
    
    
    35,171
    
    
    
    31,422
    
    
    
    3,749
    
    
    
    11.9
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    4,625
    
    
    
    5,816
    
    
    
    (1,191
    )
    
    
    (20.5
    )
    
    
    13.1
    
    
    
    18.5Satellite transmission fees
    
    
    1,869
    
    
    
    1,919
    
    
    
    (50
    )
    
    
    (2.6
    )
    
    
    5.3
    
    
    
    6.1Production and operations
    
    
    3,375
    
    
    
    3,053
    
    
    
    322
    
    
    
    10.5
    
    
    
    9.6
    
    
    
    9.7Other direct costs
    
    
    101
    
    
    
    54
    
    
    
    47
    
    
    
    87.0
    
    
    
    0.3
    
    
    
    0.2Total cost of services
    
    
    9,970
    
    
    
    10,842
    
    
    
    (872
    )
    
    
    (8.0
    )
    
    
    28.3
    
    
    
    34.5Other expenses:Advertising
    
    
    4,088
    
    
    
    5,299
    
    
    
    (1,211
    )
    
    
    (22.9
    )
    
    
    11.6
    
    
    
    16.9Selling, general and
administrative
    
    
    21,525
    
    
    
    13,371
    
    
    
    8,154
    
    
    
    61.0
    
    
    
    61.2
    
    
    
    42.5Impairment of amortizable
intangible assets
    
    
    
    
    
    
    9,540
    
    
    
    (9,540
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    30.4Depreciation and amortization
    
    
    1,993
    
    
    
    2,227
    
    
    
    (234
    )
    
    
    (10.5
    )
    
    
    5.7
    
    
    
    7.1Total other expenses
    
    
    27,606
    
    
    
    30,437
    
    
    
    (2,831
    )
    
    
    (9.3
    )
    
    
    78.5
    
    
    
    96.9Income (loss) from operations
    
    
    (2,405
    )
    
    
    (9,857
    )
    
    
    7,452
    
    
    
    (75.6
    )
    
    
    (6.8
    )
    
    
    (31.4
    )Interest expense
    
    
    12
    
    
    
    227
    
    
    
    (215
    )
    
    
    (94.7
    )
    
    
    
    
    
    
    0.7Other income
    
    
    2,409
    
    
    
    1,981
    
    
    
    428
    
    
    
    21.6
    
    
    
    6.8
    
    
    
    6.3Income (loss) from continuing
operations before income taxes
    
    
    (8
    )
    
    
    (8,103
    )
    
    
    8,095
    
    
    
    (99.9
    )
    
    
    
    
    
    
    (25.8
    )Income tax provision (benefit)
    
    
    320
    
    
    
    (2,791
    )
    
    
    3,111
    
    
    
    (111.5
    )
    
    
    0.9
    
    
    
    (8.9
    )Income (loss) from continuing
operations
    
    
    (328
    )
    
    
    (5,312
    )
    
    
    4,984
    
    
    
    (93.8
    )
    
    
    (0.9
    )
    
    
    (16.9
    )Income (loss) from discontinued
operations, net of tax
    
    
    29
    
    
    
    (2
    )
    
    
    31
    
    
    
    (1,550.0
    )
    
    
    0.1
    
    
    
    Net income (loss)
    
    $
    (299
    )
    
    $
    (5,314
    )
    
    $
    5,015
    
    
    
    (94.4
    )%
    
    
    (0.8
    )%
    
    
    (16.9
    )%
 Revenues
   21




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Cost of Services
    22




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Other Expenses
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Income (Loss) from Operations
  Interest Expense
  Other Income
  Income (Loss) from Continuing Operations Before Income Taxes
  Income Tax Provision (Benefit)
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Income (Loss) from Continuing Operations
  Income (Loss) from Discontinued Operations, Net of Tax
  Net Income (Loss)
  Liquidity and Capital Resources
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
    
 ITEM 4. CONTROLS AND PROCEDURES.
 Evaluation of disclosure controls and procedures.
  Managements report on internal control over financial reporting.
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Remediation plan for material weaknesses in internal control over financial reporting.
   Changes in internal control over financial reporting.
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PART IIOTHER INFORMATION
 
 ITEM 1A. Risk Factors.
  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.
  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.
  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.
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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.
  If our channels are 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.
  Consolidation among cable and satellite operators may harm our business.
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We may not be able to effectively manage our future growth, and our growth may not continue, which
may substantially harm our business and prospects.
  We may not be able to secure additional national advertising accounts, and as a result, our
revenues and profitability may be negatively impacted.
  We have found a material weakness in our internal controls over financial reporting, and 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.
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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 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.
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If we fail to develop and distribute popular programs, our viewership would likely decline, which
could cause advertising and subscriber fee revenues to decrease.
  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.
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Natural disasters and other events beyond our control could interrupt our signal.
  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, 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.
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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.
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
    
    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 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.
  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.
  If our goodwill becomes impaired, we will be required to take a noncash charge which could have a
significant effect on our reported net earnings.
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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.
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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)10.29
    
    Amendment to Loan Agreement and Note and related
agreements by and between the Company and U.S. Bank N.A.
dated as of September 21, 200731.1
    
    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. 
 SIGNATURES
  OUTDOOR CHANNEL HOLDINGS, INC./s/ Shad L. BurkeShad L. BurkeAuthorized Officer, Interim Chief Financial Officer, Chief
Accounting Officer and Principal Accounting Officer
Date: February 1, 2008 38