##### 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 June 30, 2008
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the transition period from                      to
 Commission file number: 000-17287
 Outdoor Channel Holdings, Inc.
  Delaware
(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 oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o
 o þ
  Class
    
    Number of Shares Outstanding at August 5, 2008Common Stock, $0.001 par value
    
    26,195,375




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##### 



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For The Period Ended June 30, 2008
 Table of Contents
 Part I. Financial InformationItem 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2008 and 2007
    
    
    4Unaudited Condensed Consolidated Statement of Stockholders Equity for the Six Months
Ended June 30, 2008
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June
30, 2008 and 2007
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3.
    
    Defaults Upon Senior Securities
    
    
    37Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    37Item 5.
    
    Other Information
    
    
    37Item 6.
    
    Exhibits
    
    
    38Signatures
    
    
    
    
    38EXHIBIT 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
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    60,507
    
    
    $
    25,260Investments in available-for-sale securities
    
    
    6,856
    
    
    
    46,155Accounts receivable, net of allowance for doubtful accounts of $446 and $240
    
    
    8,210
    
    
    
    8,299Income tax refund receivable
    
    
    229
    
    
    
    224Deferred tax assets, net
    
    
    705
    
    
    
    705Prepaid programming costs
    
    
    3,324
    
    
    
    3,522Other current assets
    
    
    1,367
    
    
    
    1,175Total current assets
    
    
    81,198
    
    
    
    85,340Property, plant and equipment, net
    
    
    10,910
    
    
    
    11,632Amortizable intangible assets, net
    
    
    136
    
    
    
    313Goodwill
    
    
    43,160
    
    
    
    43,160Investments in available-for-sale securities
    
    
    2,683
    
    
    
    Deferred tax assets, net
    
    
    9,239
    
    
    
    9,326Deposits and other assets
    
    
    1,688
    
    
    
    1,930Totals
    
    $
    149,014
    
    
    $
    151,701Liabilities and Stockholders EquityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    5,626
    
    
    $
    4,158Accrued severance payments
    
    
    43
    
    
    
    257Deferred revenue
    
    
    271
    
    
    
    261Current portion of deferred obligations
    
    
    53
    
    
    
    143Customer deposits
    
    
    
    
    
    
    14Total current liabilities
    
    
    5,993
    
    
    
    4,833Accrued severance payments, net of current portion
    
    
    11
    
    
    
    22Deferred obligations
    
    
    262
    
    
    
    269Total liabilities
    
    
    6,266
    
    
    
    5,124Commitments and contingencies  See Note 9Stockholders equity:Preferred stock, $0.001 par value; 25,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $0.001 par value; 75,000 shares authorized; 26,611 and 26,870
shares issued and outstanding
    
    
    27
    
    
    
    27Additional paid-in capital
    
    
    172,192
    
    
    
    175,570Accumulated other comprehensive income (loss)
    
    
    
    
    
    
    (59
    )Accumulated deficit
    
    
    (29,471
    )
    
    
    (28,961
    )Total stockholders equity
    
    
    142,748
    
    
    
    146,577Totals
    
    $
    149,014
    
    
    $
    151,701
  3




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Advertising
    
    $
    8,491
    
    
    $
    6,634
    
    
    $
    16,122
    
    
    $
    12,991Subscriber fees
    
    
    4,556
    
    
    
    4,775
    
    
    
    8,605
    
    
    
    9,524Total revenues
    
    
    13,047
    
    
    
    11,409
    
    
    
    24,727
    
    
    
    22,515Cost of services:Programming
    
    
    1,773
    
    
    
    1,633
    
    
    
    3,696
    
    
    
    3,104Satellite transmission fees
    
    
    549
    
    
    
    636
    
    
    
    1,175
    
    
    
    1,232Production and operations
    
    
    1,162
    
    
    
    904
    
    
    
    3,023
    
    
    
    2,274Other direct costs
    
    
    95
    
    
    
    17
    
    
    
    192
    
    
    
    55Total cost of services
    
    
    3,579
    
    
    
    3,190
    
    
    
    8,086
    
    
    
    6,665Other expenses:Advertising
    
    
    1,488
    
    
    
    1,816
    
    
    
    2,026
    
    
    
    2,530Selling, general and administrative
    
    
    7,133
    
    
    
    6,801
    
    
    
    14,750
    
    
    
    15,001Depreciation and amortization
    
    
    617
    
    
    
    658
    
    
    
    1,232
    
    
    
    1,307Total other expenses
    
    
    9,238
    
    
    
    9,275
    
    
    
    18,008
    
    
    
    18,838Income (loss) from operations
    
    
    230
    
    
    
    (1,056
    )
    
    
    (1,367
    )
    
    
    (2,988
    )Interest and other income, net
    
    
    408
    
    
    
    812
    
    
    
    946
    
    
    
    1,515Income (loss) from continuing operations
before income taxes
    
    
    638
    
    
    
    (244
    )
    
    
    (421
    )
    
    
    (1,473
    )Income tax provision
    
    
    367
    
    
    
    819
    
    
    
    89
    
    
    
    353Income (loss) from continuing operations
    
    
    271
    
    
    
    (1,063
    )
    
    
    (510
    )
    
    
    (1,826
    )Income (loss) from discontinued operations,
net of tax
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    29Net income (loss)
    
    $
    271
    
    
    $
    (1,070
    )
    
    $
    (510
    )
    
    $
    (1,797
    )Basic earnings (loss) per common share data:From continuing operations
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )From discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Basic earnings per common share
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )Diluted earnings (loss) per common share data:From continuing operations
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )From discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Diluted earnings per common share
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )Weighted average number of common shares
outstanding:Basic
    
    
    25,965
    
    
    
    25,857
    
    
    
    26,049
    
    
    
    25,728Diluted
    
    
    26,059
    
    
    
    25,857
    
    
    
    26,049
    
    
    
    25,728
  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, 2008
 AccumulatedAdditional
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    TotalBalance, December 31, 2007
    
    
    26,870
    
    
    $
    27
    
    
    $
    175,570
    
    
    $
    (59
    )
    
    $
    (28,961
    )
    
    $
    146,577Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )
    
    
    (510
    )Change in fair value of
available-for-sale
securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    59Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (451
    )Common stock issued upon
exercise of stock options
    
    
    2
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Issuance of restricted stock
and performance shares to
employees and service
providers for services to be
rendered, net of forfeited
shares
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based employee and
service provider
compensation expense
    
    
    
    
    
    
    
    
    
    
    1,712
    
    
    
    
    
    
    
    
    
    
    
    1,712Purchase and retirement of
treasury stock related to
employee and service
provider share-based
compensation activity
    
    
    (38
    )
    
    
    
    
    
    
    (290
    )
    
    
    
    
    
    
    
    
    
    
    (290
    )Purchase and retirement of
treasury stock related to
the share repurchase program
    
    
    (623
    )
    
    
    
    
    
    
    (4,811
    )
    
    
    
    
    
    
    
    
    
    
    (4,811
    )Balance, June 30, 2008
    
    
    26,611
    
    
    $
    27
    
    
    $
    172,192
    
    
    $
    
    
    
    $
    (29,471
    )
    
    $
    142,748
  5




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##### Table of Contents



OUTDOOR CHANNEL HOLDINGS, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
 Six Months EndedJune 30,2008
    
    
    2007Operating activities:Net loss
    
    $
    (510
    )
    
    $
    (1,797
    )Adjustments to reconcile net loss to net cash provided by operating activities:Income (loss) from discontinued operations
    
    
    
    
    
    
    (29
    )Depreciation and amortization
    
    
    1,232
    
    
    
    1,307Amortization of subscriber acquisition fees
    
    
    242
    
    
    
    244Gain on sale of equipment
    
    
    (5
    )
    
    
    Loss on sale of available-for-sale securities
    
    
    44
    
    
    
    Other-than-temporary impairment on auction-rate securities
    
    
    336
    
    
    
    Provision for doubtful accounts
    
    
    464
    
    
    
    68Share-based employee and service provider compensation
    
    
    1,712
    
    
    
    6,531Deferred tax provision, net
    
    
    87
    
    
    
    360Tax benefits from exercise of stock options in excess of recognized expense
    
    
    
    
    
    
    (7
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (375
    )
    
    
    (1,148
    )Income tax refund receivable
    
    
    (5
    )
    
    
    2,077Prepaid programming costs
    
    
    198
    
    
    
    500Other current assets
    
    
    (192
    )
    
    
    (315
    )Deposits and other assets
    
    
    
    
    
    
    (314
    )Accounts payable and accrued expenses
    
    
    1,602
    
    
    
    398Deferred revenue
    
    
    10
    
    
    
    (84
    )Customer deposits
    
    
    (14
    )
    
    
    (41
    )Accrued severance payments
    
    
    (225
    )
    
    
    (173
    )Deferred obligations
    
    
    (97
    )
    
    
    (17
    )Net cash provided by operating activities
    
    
    4,504
    
    
    
    7,560Investing activities:Purchases of property, plant and equipment
    
    
    (478
    )
    
    
    (709
    )Proceeds from sale of equipment
    
    
    15
    
    
    
    Proceeds from sale of discontinued operations
    
    
    
    
    
    
    3,589Purchases of available-for-sale and auction-rate securities
    
    
    (27,176
    )
    
    
    (59,550
    )Proceeds from sale of available-for-sale and auction-rate securities
    
    
    63,472
    
    
    
    53,890Net cash provided by (used in) investing activities
    
    
    35,833
    
    
    
    (2,780
    )Financing activities:Proceeds from exercise of stock options
    
    
    11
    
    
    
    598Purchase and retirement of stock
    
    
    (4,811
    )
    
    
    Purchase of treasury stock
    
    
    (290
    )
    
    
    (272
    )Tax benefits from exercise of stock options in excess of recognized expense
    
    
    
    
    
    
    7Net cash (used in) provided by financing activities
    
    
    (5,090
    )
    
    
    333Cash flows from discontinued operations:Net cash used in operating activities of discontinued operations
    
    
    
    
    
    
    (581
    )Net cash used in investing activities of discontinued operations
    
    
    
    
    
    
    (69
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (650
    )Net increase in cash and cash equivalents
    
    
    35,247
    
    
    
    4,463Cash and cash equivalents, beginning of period
    
    
    25,260
    
    
    
    14,226Cash and cash equivalents, end of period
    
    $
    60,507
    
    
    $
    18,689Supplemental disclosure of cash flow information:Income taxes paid
    
    $
    6
    
    
    $
    8Supplemental disclosures of non-cash investing and financing activities:Effect of net increase (decrease) in fair value of available-for-sale
securities, net of deferred taxes
    
    $
    59
    
    
    $
    (34
    )Property, plant and equipment costs incurred but not paid
    
    $
    36
    
    
    $
    30Retirement of treasury stock
    
    $
    290
    
    
    $
    272
  6




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##### Table of Contents



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




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##### Table of Contents



1995 Stock Option Plan (1995 Plan).
 2004 Long-Term Incentive Plan (LTIP Plan).
 Non-Employee Director Stock Option Plan (NEDSOP).
     Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Nature of Award:Restricted stock
    
    $
    622
    
    
    $
    467
    
    
    $
    1,431
    
    
    $
    702Options
    
    
    178
    
    
    
    186
    
    
    
    281
    
    
    
    881Performance units
    
    
    
    
    
    
    2,098
    
    
    
    
    
    
    
    4,948Total share-based compensation expense
    
    $
    800
    
    
    $
    2,751
    
    
    $
    1,712
    
    
    $
    6,531
 8




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Classification of Compensation Expense:Cost of services:Production and operations
    
    $
    76
    
    
    $
    88
    
    
    $
    175
    
    
    $
    79Other expenses:Selling, general and administrative
    
    
    724
    
    
    
    2,663
    
    
    
    1,537
    
    
    
    6,452Total share-based compensation expense
    
    $
    800
    
    
    $
    2,751
    
    
    $
    1,712
    
    
    $
    6,531
  Six Months EndedJune 30,2008
    
    2007Risk-free interest rate
    
    1.4  2.3%
    
    4.9  5.0%Dividend yield
    
    0.0%
    
    0.0%Expected life of the option
    
    0.1  0.3 years
    
    0.8 yearsVolatility factor
    
    33.6  52.6%
    
    39.2  39.5%Weighted average volatility factor
    
    45.4%
    
    39.4%
  Issuances of Common Stock by the Company
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Number of options exercised
    
    
    2
    
    
    
    30
    
    
    
    2
    
    
    
    362Cash proceeds
    
    $
    11
    
    
    $
    152
    
    
    $
    11
    
    
    $
    598Tax benefit from options exercised
    
    $
    2
    
    
    $
    32
    
    
    $
    2
    
    
    $
    723
  Stock Options
  9




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateOptions
    
    Shares
    
    
    Price
    
    
    Term (Yrs.)
    
    
    Intrinsic Value(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)Outstanding at December 31, 2007
    
    
    1,442
    
    
    $
    12.48Granted
    
    
    
    
    
    
    Exercised
    
    
    (2
    )
    
    
    6.14Forfeited
    
    
    (23
    )
    
    
    12.11Expired
    
    
    (60
    )
    
    
    14.50Outstanding at June 30, 2008
    
    
    1,357
    
    
    $
    12.41
    
    
    
    2.28
    
    
    $
    Vested or expected to vest at June 30, 2008
    
    
    1,351
    
    
    $
    12.40
    
    
    
    2.28
    
    
    $
    Exercisable at June 30, 2008
    
    
    1,288
    
    
    $
    12.34
    
    
    
    2.21
    
    
    $
    
  Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Term (Yrs.)
    
    
    Price
    
    
    Exercisable
    
    
    Price(In thousands)
    
    
    
    
    
    
    
    
    
    
    (In thousands)$10.19  $10.19
    
    
    10
    
    
    
    2.76
    
    
    $
    10.19
    
    
    
    5
    
    
    $
    10.19$11.60  $11.60
    
    
    500
    
    
    
    0.37
    
    
    
    11.60
    
    
    
    500
    
    
    
    11.60$12.10  $12.10
    
    
    300
    
    
    
    3.30
    
    
    
    12.10
    
    
    
    300
    
    
    
    12.10$12.11  $12.80
    
    
    322
    
    
    
    4.68
    
    
    
    12.59
    
    
    
    305
    
    
    
    12.60$13.90  $14.95
    
    
    200
    
    
    
    1.79
    
    
    
    14.27
    
    
    
    155
    
    
    
    14.21$15.75  $15.75
    
    
    25
    
    
    
    .95
    
    
    
    15.75
    
    
    
    23
    
    
    
    15.75Total
    
    
    1,357
    
    
    
    2.28
    
    
    $
    12.41
    
    
    
    1,288
    
    
    $
    12.34
   Restricted Stock
  WeightedAverageGrant-DateShares
    
    
    Fair Value(in thousands)Nonvested at beginning of period
    
    
    697
    
    
    $
    10.25Granted
    
    
    424
    
    
    
    7.39Vested
    
    
    (133
    )
    
    
    11.13Forfeited
    
    
    (24
    )
    
    
    11.05Nonvested at end of period
    
    
    964
    
    
    $
    8.85
  10




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##### Table of Contents



Expense to be Recognized
  June 30, 2008Weighted AverageExpense Yet
    
    
    Remainingto be
    
    
    Requisite ServiceRecognized
    
    
    PeriodsStock options
    
    $
    682
    
    
    1.3 yearsRestricted stock
    
    
    7,097
    
    
    3.1 yearsPerformance units
    
    
    
    
    
    
    Total
    
    $
    7,779
    
    
    2.97 years
 NOTE 3EARNINGS (LOSS) PER COMMON SHARE
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average
shares used to
calculate basic
earnings (loss) per
share
    
    
    25,965
    
    
    
    25,857
    
    
    
    26,049
    
    
    
    25,728Dilutive effect of
potentially issuable
common shares upon
exercise of dilutive
stock options and
performance units
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    Weighted average
shares used to
calculate diluted
earnings (loss) per
share
    
    
    26,059
    
    
    
    25,857
    
    
    
    26,049
    
    
    
    25,728
  NOTE 4INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
     11




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Fair Value Measurements at June 30, 2008 usingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Investment securities:Auction-rate securities
    
    $
    6,856
    
    
    $
    
    
    
    $
    6,856
    
    
    $
    Auction-rate securities, non-current
    
    
    2,683
    
    
    
    
    
    
    
    
    
    
    
    2,683Total investment securities
    
    $
    9,539
    
    
    $
    
    
    
    $
    6,856
    
    
    $
    2,683
     Balance as of December 31, 2007
    
    $
    Transfers into Level 3
    
    
    5,375Other-than-temporary impairment
    
    
    (217
    )Transfers into Level 2
    
    
    (2,475
    )Balance as of June 30, 2008
    
    $
    2,683
 12




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest income
    
    $
    484
    
    
    $
    795
    
    
    $
    1,294
    
    
    $
    1,479Dividend income
    
    
    
    
    
    
    17
    
    
    
    32
    
    
    
    36Loss on sale of equity securities
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    Other-than-temporary impairment on
auction-rate securities
    
    
    (76
    )
    
    
    
    
    
    
    (336
    )
    
    
    Total interest and other income, net
    
    $
    408
    
    
    $
    812
    
    
    $
    946
    
    
    $
    1,515
 NOTE 5GOODWILL AND INTANGIBLE ASSETS
   June 30, 2008AccumulatedGross
    
    
    Amortization
    
    
    NetAdvertising customer relationships
    
    $
    1,972
    
    
    $
    1,888
    
    
    $
    84Trademark
    
    
    219
    
    
    
    167
    
    
    
    52Total intangible assets
    
    $
    2,191
    
    
    $
    2,055
    
    
    $
    136
    Years Ending December 31,
    
    Amount2008 (remaining 6 months)
    
    $
    912009
    
    
    152010
    
    
    152011
    
    
    112012
    
    
    4Total
    
    $
    136
 NOTE 6LINES OF CREDIT
  13




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NOTE 7INCOME TAX PROVISION (BENEFIT)
   NOTE 8RELATED PARTY TRANSACTIONS
    NOTE 9COMMITMENTS AND CONTINGENCIES
    14




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Operating Leases
    NOTE 10DISCONTINUED OPERATIONS
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Membership Division revenue
    
    $
    
    
    
    $
    363
    
    
    $
    
    
    
    $
    1,632Income from continuing operations
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    73Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    29
 NOTE 11RECENT ACCOUNTING PRONOUNCEMENTS
   15




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16




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
 Safe Harbor Statement
   General
  Gold Prospector & Treasure Hunters in the Great Outdoors
  Critical Accounting Policies and Estimates
  17




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##### Table of Contents



Prepaid Programming Costs
  Revenue Recognition
     Valuation of Goodwill
  Income Taxes
  18




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Stock Incentive Plans
    Subscriber Acquisition Fees
   19




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Comparison of Operating Results for the Three Months Ended June 30, 2008 and June 30, 2007
  Change
    
    
    % of Total Revenue2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007Revenues:Advertising
    
    $
    8,491
    
    
    $
    6,634
    
    
    $
    1,857
    
    
    
    28.0
    %
    
    
    65.1
    %
    
    
    58.1
    %Subscriber fees
    
    
    4,556
    
    
    
    4,775
    
    
    
    (219
    )
    
    
    (4.6
    )
    
    
    34.9
    
    
    
    41.9Total revenues
    
    
    13,047
    
    
    
    11,409
    
    
    
    1,638
    
    
    
    14.4
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    1,773
    
    
    
    1,633
    
    
    
    140
    
    
    
    8.6
    
    
    
    13.6
    
    
    
    14.3Satellite transmission fees
    
    
    549
    
    
    
    636
    
    
    
    (87
    )
    
    
    (13.7
    )
    
    
    4.2
    
    
    
    5.6Production and operations
    
    
    1,162
    
    
    
    904
    
    
    
    258
    
    
    
    28.5
    
    
    
    8.9
    
    
    
    7.9Other direct costs
    
    
    95
    
    
    
    17
    
    
    
    78
    
    
    
    458.8
    
    
    
    0.7
    
    
    
    0.1Total cost of services
    
    
    3,579
    
    
    
    3,190
    
    
    
    389
    
    
    
    12.2
    
    
    
    27.4
    
    
    
    28.0Other expenses:Advertising
    
    
    1,488
    
    
    
    1,816
    
    
    
    (328
    )
    
    
    (18.1
    )
    
    
    11.4
    
    
    
    15.9Selling, general and
administrative
    
    
    7,133
    
    
    
    6,801
    
    
    
    332
    
    
    
    4.9
    
    
    
    54.7
    
    
    
    59.6Depreciation and amortization
    
    
    617
    
    
    
    658
    
    
    
    (41
    )
    
    
    (6.2
    )
    
    
    4.7
    
    
    
    5.8Total other expenses
    
    
    9,238
    
    
    
    9,275
    
    
    
    (37
    )
    
    
    (0.4
    )
    
    
    70.8
    
    
    
    81.3Income (loss) from operations
    
    
    230
    
    
    
    (1,056
    )
    
    
    1,286
    
    
    
    (121.8
    )
    
    
    1.8
    
    
    
    (9.3
    )Interest and other income, net
    
    
    408
    
    
    
    812
    
    
    
    (404
    )
    
    
    (49.8
    )
    
    
    3.1
    
    
    
    7.1Income (loss) from continuing
operations before income taxes
    
    
    638
    
    
    
    (244
    )
    
    
    882
    
    
    
    (361.5
    )
    
    
    4.9
    
    
    
    (2.1
    )Income tax provision
    
    
    367
    
    
    
    819
    
    
    
    (452
    )
    
    
    (55.2
    )
    
    
    2.8
    
    
    
    7.2Income (loss) from continuing
operations
    
    
    271
    
    
    
    (1,063
    )
    
    
    1,334
    
    
    
    (125.5
    )
    
    
    2.1
    
    
    
    (9.3
    )Loss from discontinued
operations, net of tax
    
    
    
    
    
    
    (7
    )
    
    
    7
    
    
    
    (100.0
    )
    
    
    
    
    
    
    (0.1
    )Net income (loss)
    
    $
    271
    
    
    $
    (1,070
    )
    
    $
    1,341
    
    
    
    (125.3
    )%
    
    
    2.1
    %
    
    
    (9.4
    )%
  20




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Comparison of Operating Results for the Six Months Ended June 30, 2008 and June 30, 2007
  Change
    
    
    % of Total Revenue2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007Revenues:Advertising
    
    $
    16,122
    
    
    $
    12,991
    
    
    $
    3,131
    
    
    
    24.1
    %
    
    
    65.2
    %
    
    
    57.7
    %Subscriber fees
    
    
    8,605
    
    
    
    9,524
    
    
    
    (919
    )
    
    
    (9.6
    )
    
    
    34.8
    
    
    
    42.3Total revenues
    
    
    24,727
    
    
    
    22,515
    
    
    
    2,212
    
    
    
    9.8
    
    
    
    100.0
    
    
    
    100.0Cost of services:Programming
    
    
    3,696
    
    
    
    3,104
    
    
    
    592
    
    
    
    19.1
    
    
    
    14.9
    
    
    
    13.8Satellite transmission fees
    
    
    1,175
    
    
    
    1,232
    
    
    
    (57
    )
    
    
    (4.6
    )
    
    
    4.8
    
    
    
    5.5Production and operations
    
    
    3,023
    
    
    
    2,274
    
    
    
    749
    
    
    
    32.9
    
    
    
    12.2
    
    
    
    10.1Other direct costs
    
    
    192
    
    
    
    55
    
    
    
    137
    
    
    
    249.1
    
    
    
    0.8
    
    
    
    0.2Total cost of services
    
    
    8,086
    
    
    
    6,665
    
    
    
    1,421
    
    
    
    21.3
    
    
    
    32.7
    
    
    
    29.6Other expenses:Advertising
    
    
    2,026
    
    
    
    2,530
    
    
    
    (504
    )
    
    
    (19.9
    )
    
    
    8.2
    
    
    
    11.2Selling, general and
administrative
    
    
    14,750
    
    
    
    15,001
    
    
    
    (251
    )
    
    
    (1.7
    )
    
    
    59.7
    
    
    
    66.6Depreciation and amortization
    
    
    1,232
    
    
    
    1,307
    
    
    
    (75
    )
    
    
    (5.7
    )
    
    
    5.0
    
    
    
    5.8Total other expenses
    
    
    18,008
    
    
    
    18,838
    
    
    
    (830
    )
    
    
    (4.4
    )
    
    
    72.8
    
    
    
    83.7Loss from operations
    
    
    (1,367
    )
    
    
    (2,988
    )
    
    
    1,621
    
    
    
    (54.3
    )
    
    
    (5.5
    )
    
    
    (13.3
    )Interest and other income, net
    
    
    946
    
    
    
    1,515
    
    
    
    (569
    )
    
    
    (37.6
    )
    
    
    3.8
    
    
    
    6.7Loss from continuing operations
before income taxes
    
    
    (421
    )
    
    
    (1,473
    )
    
    
    1,052
    
    
    
    (71.4
    )
    
    
    (1.7
    )
    
    
    (6.5
    )Income tax provision
    
    
    89
    
    
    
    353
    
    
    
    (264
    )
    
    
    (74.8
    )
    
    
    0.4
    
    
    
    1.6Loss from continuing operations
    
    
    (510
    )
    
    
    (1,826
    )
    
    
    1,316
    
    
    
    (72.1
    )
    
    
    (2.1
    )
    
    
    (8.1
    )Income from discontinued
operations, net of tax
    
    
    
    
    
    
    29
    
    
    
    (29
    )
    
    
    (100.0
    )
    
    
    
    
    
    
    0.1Net loss
    
    $
    (510
    )
    
    $
    (1,797
    )
    
    $
    1,287
    
    
    
    (71.6
    )%
    
    
    (2.1
    )%
    
    
    (8.0
    )%
  Revenues
  Results of Operations
  21




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Cost of Services
    22




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Other Expenses
     23




---



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Income (Loss) from Operations
  Interest and Other Income, Net
  Income (Loss) from Continuing Operations Before Income Taxes
  24




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Income Tax Provision
   Income (Loss) from Continuing Operations
  Income (Loss) from Discontinued Operations, Net of Tax
  Net Income (Loss)
  Liquidity and Capital Resources
   25




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26




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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
      
 ITEM 4.
    
    CONTROLS AND PROCEDURES.
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
 27




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##### Table of Contents



PART IIOTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings.
  
 ITEM 1A.
    
    Risk Factors.
  Cable and satellite service providers could discontinue or refrain from carrying Outdoor Channel,
or decide to not renew our distribution agreements, which could substantially reduce the number of
viewers and harm our operating results.
  If our channel is placed in unpopular program packages by cable or satellite service providers, or
if service fees are increased for our subscribers, the number of viewers of our channel may decline
which could harm our business and operating results.
  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.
  28




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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.
  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 cable and satellite operators may harm our business.
  29




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The cable and satellite television industry is subject to substantial governmental regulation for
which compliance may increase our costs, hinder our growth and possibly expose us to penalties for
failure to comply.
    Our investments in adjustable rate securities are subject to risks which may affect the liquidity
of these investments and could cause additional impairment charges.
  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.
  30




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We may not be able to secure additional advertising accounts, and as a result, our revenues and
profitability may be negatively impacted.
  We cannot be certain in the future that we will be able to report that our controls are without
material weakness or to complete our evaluation of those controls in a timely fashion.
   Expenses relating to programming costs are generally increasing and a number of factors can cause
cost overruns and delays, and our operating results may be adversely impacted if we are not able to
successfully recover the costs of developing and acquiring new programming.
  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;
 31




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
    
    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.
  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.
  32




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Changes in corporate governance and securities disclosure and compliance practices have increased
and may continue to increase our legal compliance and financial reporting costs.
  The satellite infrastructure that we use may fail or be preempted by another signal, which could
impair our ability to deliver programming to our cable and satellite service providers.
  Natural disasters and other events beyond our control could interrupt our signal.
  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.
  33




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##### Table of Contents



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.
  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.
  34




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We may face intellectual property infringement claims that could be time-consuming, costly to
defend and result in our loss of significant rights.
  Some of our existing stockholders can exert control over us and may not make decisions that are in
the best interests of all stockholders.
  The market price of our common stock has been and may continue to be subject to wide fluctuations.
  Anti-takeover provisions in our certificate of incorporation, our bylaws and under Delaware law may
enable our incumbent management to retain control of us and discourage or prevent a change of
control that may be beneficial to our stockholders.
  
    
    allow the authorized number of directors to be changed only by resolution of
our board of directors;
    
    establish a classified board of directors, providing that not all members of
the board be elected at one time;
    
    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;
 35




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##### Table of Contents




    
    except as provided by law, allow only our board of directors to call a
special meeting of the stockholders; and
    
    require a 66 2/3% stockholder vote to amend our certificate of incorporation
or bylaws.
  Technologies in the cable and satellite television industry are constantly changing, and our
failure to acquire or maintain state-of-the-art technology may harm our business and competitive
advantage.
  If our goodwill becomes impaired, we will be required to recognize a noncash charge which could
have a significant effect on our reported net earnings.
  Future issuance by us of preferred shares could adversely affect the holders of existing shares,
and therefore reduce the value of existing shares.
  We do not expect to pay dividends in the foreseeable future.
  36




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##### Table of Contents



ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
   Total Number
    
    
    Maximumof Shares
    
    
    Approximate DollarPurchased as
    
    
    Value that May YetTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Be Used to Purchaseof Shares
    
    
    Average Price
    
    
    Announced
    
    
    Shares Under thePeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Program
    
    
    ProgramApril 15, 2008 through April 30, 2008
    
    
    83,800
    
    
    $
    7.45
    
    
    
    83,800
    
    
    $
    9,375,994May 1, 2008 through May 31, 2008
    
    
    245,962
    
    
    
    7.75
    
    
    
    245,962
    
    
    
    7,470,804June 1, 2008 through June 30, 2008
    
    
    292,787
    
    
    
    7.80
    
    
    
    292,787
    
    
    
    5,188,156Total
    
    
    622,549
    
    
    $
    7.73
    
    
    
    622,549
  
 ITEM 3.
    
    Defaults Upon Senior Securities.
  
 ITEM 4.
    
    Submission of Matters to a Vote of Security Holders.
   Name
    
    Votes in Favor
    
    Votes WithheldAjit M. Dalvi
    
    21,105,459
    
    2,486,620David D. Kinley
    
    21,470,739
    
    2,121,340Michael L. Pandzik
    
    21,315,764
    
    2,276,315
   
 ITEM 5.
    
    Other Information.
  37




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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)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. 
 SIGNATURES
  OUTDOOR CHANNEL HOLDINGS, INC./s/ Shad L. BurkeShad L. BurkeAuthorized Officer, Chief Financial Officer and
Principal Accounting OfficerDate: August 8, 2008 38