Note 1 — Organization and Business
Description of Operations
Outdoor Channel Holdings, Inc. (“Outdoor Channel Holdings”) is incorporated under the laws of the State of Delaware. Collectively, with our subsidiaries, and consolidated affiliate, the terms “we,” “us,” “our” and the “Company” refer to Outdoor Channel Holdings, Inc. as a consolidated entity, except where noted or where the context makes clear the reference is only to Outdoor Channel Holdings, Inc. or one of our subsidiaries. Outdoor Channel Holdings, Inc. wholly owns OC Corporation which in turn wholly owns The Outdoor Channel, Inc. (“TOC”). Outdoor Channel Holdings is also the sole member of 43455 BPD, LLC, which is the entity that owns the building that houses our broadcast facility. TOC operates Outdoor Channel, which is a national television network devoted to traditional outdoor activities, such as hunting, fishing, shooting sports and other related lifestyle programming. Outdoor Channel Holdings also wholly owns Winnercomm, Inc., which is referred to as “Production Services.” The Production Services business relates to the production, development and marketing of sports programming. Winnercomm, Inc. wholly owns CableCam, LLC and SkyCam, LLC which comprise our Aerial Camera business. The Aerial Camera business is engaged in providing aerial camera services for customer owned telecasts.
In August 2011, TOC entered into an agreement with Professional Bass Tour (“PBT”) to establish Major League Fishing, LLC (“MLF”), a joint venture created to produce a new style of professional competitive bass fishing tournaments to air exclusively on Outdoor Channel. We are a 50% owner in MLF, control the venture’s board of managers and will fund 100% of the costs of the venture via preferred capital contributions bearing a priority return which must be redeemed before MLF can make profit distributions. Accordingly, we are deemed the primary beneficiary and MLF is being treated as a variable interest entity, as defined by Accounting Standards Codification (“ASC”) ASC 810, and MLF has been consolidated in our accompanying financial statements. Profits shall be allocated pro rata in proportion to the number of membership interests of MLF and losses shall be allocated in a similar proportionate manner but only while a member’s capital account is positive. Losses in excess of member’s capital are not allocated to members but will be only allocated to us. As of December 31, 2012, we have contributed approximately $1.8 million to MLF and no amounts have been contributed by PBT. MLF recorded a loss for the year ended December 31, 2012.
Proposed Merger Transaction
On November 15, 2012, we entered into the InterMedia Merger Agreement with InterMedia Outdoors Holdings, LLC. The InterMedia Merger Agreement would have created a holding company that would have owned and operated two television cable networks targeting outdoor enthusiasts. On March 13, 2013 we terminated the InterMedia Merger Agreement and entered into a merger agreement with Kroenke Sports & Entertainment, LLC (“KSE). See Note 17.
Principles of Consolidation
The consolidated financial statements include the accounts of Outdoor Channel Holdings and its subsidiaries and also includes the accounts of MLF, our variable interest entity described above. All material intercompany accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, judgments and assumptions. We believe that our estimates, judgments and assumptions made when accounting for items and matters such as customer retention patterns, allowance for bad debts, useful lives of assets, asset valuations including cash flow projections, recoverability of assets, potential unasserted claims under contractual obligations, income taxes, reserves and other provisions and contingencies are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can affect reported amounts of assets and liabilities as of the dates of the consolidated balance sheet and reported amount of consolidated revenues and expenses for the periods presented. Accordingly, actual results could materially differ from those estimates.