Costs of lawsuit settlement drive Gaiam to loss in third quarter

LOUISVILLE — Gaiam Inc., a lifestyles media company and provider of yoga, wellness and fitness products, on Thursday reported a loss of $8.8 million, or 36 cents per share, for its third quarter that ended Sept. 30.

The loss was a result of Gaiam incurring $10.7 million in costs associated with arbitration and settlement of a lawsuit filed against Gaiam by Los Angeles-based Cinedigm Corp. earlier this year.

Cinedigm Corp. sued Louisville-based Gaiam alleging there was fraud and wrongful conduct in the $51.5 million deal in 2013 in which Cinedigm bought Gaiam’s home entertainment division, GVE Video distribution.

Cinedigm (Nasdaq: CIDM) claimed it was owed more than $30 million in damages for misstatements about working capital when it bought Gaiam’s home-entertainment division.

Cinedigm alleged that Gaiam (Nasdaq: GAIA) did not disclose, or hid, information about the real financial condition of the division. Cinedigm claimed that Gaiam hid the fact it would not be able to hit a sales benchmark related to WWE Entertainment, forcing Cinedigm to pay millions to WWE after the deal closed.

In its earnings report, Gaiam officials said, “The company entered into the settlement to eliminate the uncertainty and risk inherent in any litigation, significantly reduce the professional fees and costs that the litigation would require, and significantly reduce the distraction imposed by the process on management. The company believes it has adequately accrued for the pending arbitration and does not expect any material additional settlements beyond the current estimate.

For the quarter, Gaiam posted revenue of $51.3 million, a 24 percent increase compared with $41.3 million in revenue for the same quarter a year ago.