Outdoor Channel Holdings, Inc. today reported its operating results for the fourth quarter and full year ended December 31, 2011.
Based on changes in how we monitor and measure our various businesses, we have determined that our aerial camera units, SkyCam and CableCam, should now be reported together as a separate segment. Accordingly, prior period segment information for “Production Services” has been revised to retroactively reflect aerial cameras as a separate segment and Production Services now includes solely our Winnercomm results for all periods discussed in this release or set forth in the accompanying tables.
Consolidated revenues for the quarter were $23.6 million, a 9% decrease compared with $25.8 million in the fourth quarter of 2010, driven primarily by the continued and largely expected decrease in revenues from our Production Services segment. Advertising revenue for the quarter increased 1% percent to $11.3 million from $11.2 million in the fourth quarter of 2010 on higher endemic ad sales, net of lower online ad sales. Subscriber fees for the quarter were $5.4 million, an increase of 22% compared to $4.4 million for the prior-year period on increased subscribers and rates and reduced accruals for most-favored nation reserves compared to a year ago. Production Services revenue totaled $6.9 million for the quarter, a decrease of 32% compared to $10.1 million in the fourth quarter of 2010 due primarily to the impact of cancelled and non-renewed contracts at our Winnercomm operations over the past year and a slight decrease in our aerial camera related revenues.
Total operating expenses for the fourth quarter were $17.6 million, an 18% decrease compared to $21.4 million in operating expense for the fourth quarter of 2010, driven primarily by a decrease in operating costs relating to reduced projects at our Winnercomm business, and lower advertising expense.
Resulting operating income for the fourth quarter 2011 was $6.0 million, a 37% increase from the $4.4 million of operating profit generated in the fourth quarter of 2010. Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for the effects of share-based compensation expense, was $7.5 million, a 27% increase compared to $5.9 million for the fourth quarter of 2010.
On a segment basis, our Outdoor Channel unit (“TOC”) reported revenues of $16.7 million for the quarter, a 7% increase compared to $15.7 million of revenue for the fourth quarter of 2010 driven primarily by stronger subscription fees. TOC’s EBITDA, adjusted for share-based compensation expense, was $6.1 million, a 28% increase over the fourth quarter of 2010.
Our Production Services unit generated revenues (before intercompany eliminations) for the quarter of $2.5 million, a 55% decrease compared to $5.6 million for the fourth quarter of 2010 resulting primarily from previously cancelled and non-renewed contracts. Production Services’ EBITDA (including intercompany eliminations), adjusted for share-based compensation expense, was essentially unchanged at $0.2 million as a reduction in expenses offset the decline in revenue.
Our Aerial Cameras unit generated revenues for the quarter of $4.7 million, a 3% decrease compared to $4.9 million in revenue for the fourth quarter of 2010 resulting from a slight decrease in events during the quarter. The Aerial Camera unit’s EBITDA, adjusted for share-based compensation expense, increased 31% to $1.2 million primarily on reduced legal expense related to our ActionCam litigation.
Consolidated net income for both the fourth quarter of 2011 and 2010 was $1.5 million, or $.06 per diluted share, as higher pre-tax income in the 2011 quarter was offset by higher deferred income taxes relating to the expiration of previously granted stock options.
“We delivered solid revenue growth at our core TOC unit during the fourth quarter and for the full year as we continued to capitalize on our category leadership position,” said Tom Hornish, President and Chief Executive Officer. “We also made significant gains in our total household distribution, adding over two million homes over the final five months of 2011. While combined revenues at our Production Services and Aerial Cameras segments were down in the fourth quarter, due mostly to the prior elimination of low-margin business, as well as the cancellation of other business at Winnercomm, we improved the segments’ year-over-year adjusted EBITDA despite non-recurring costs related to those segments’ recent office moves. Looking ahead, we are focused on further expanding the distribution of our network, supporting those efforts with a more aggressive marketing plan and improving profitability and adjusted EBITDA at both our Production Services and Aerial Cameras segments.”
Full-Year Financial Results
On a full year basis, consolidated net revenues were $71.9 million, a 14% decrease compared to $83.3 million as a 4% revenue gain at TOC, driven by subscriber fees, was more than offset by reduced production services revenues at Winnercomm, and to a much lesser degree, reduced revenues at our aerial cameras business.
Operating expenses for the year were $65.1 million compared to $78.8 million in operating expenses for 2010, a 17% decrease driven principally by the reduction in Winnercomm business and our advertising expense.
Resulting operating income for 2011 was $6.8 million, a 47% increase from $4.6 million in operating income for 2010 with all of that gain coming from our TOC segment. EBITDA, adjusted for share-based compensation expense, was $12.8 million, a 14% increase compared to $11.2 million for 2010, with a $2.0 million increase in TOC’s adjusted EBITDA being offset by a $0.4 million decline in the adjusted EBITDA of our Aerial Cameras segment on a 5% decline in revenue and a slight decline in our gross margin rate due to facility move related costs in 2011. The full year adjusted EBITDA for our Production Services segment was essentially unchanged at just under negative $1.0 million.
Our consolidated net income for the year finished at $1.8 million, or $.07 per diluted share, compared to net income of $1.2 million, or $.05 per diluted share, for 2010.