SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 28, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number(s) – 1-11112
AMERICAN MEDIA OPERATIONS, INC.
(Exact name of the registrant as specified in its charter)
| Delaware | 59-2094424 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employee Identification No.) | |
| 1000 American Media Way, Boca Raton, Florida | 33464 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (561) 997-7733
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 12, 2004 there were 7,507 shares of common stock outstanding.
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
June 28, 2004
| Page(s) | ||
| PART I. FINANCIAL INFORMATION | ||
| Item 1. Financial Statements (Unaudited) - |
||
| 3 | ||
| 4 | ||
| 5 | ||
| 6 | ||
| 7-13 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14-18 | |
| Item 3. Quantitative and Qualitative Disclosures about Market Risk |
18-19 | |
| 20 | ||
| PART II. OTHER INFORMATION | ||
| 21 | ||
| 21 | ||
| 22 | ||
2
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in 000’s, except share information)
| March 29, 2004 |
June 28, 2004 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 22,192 | $ | 15,203 | ||||
| Receivables, net |
66,907 | 69,564 | ||||||
| Inventories |
34,518 | 28,281 | ||||||
| Prepaid expenses and other |
11,391 | 22,513 | ||||||
| Total Current Assets |
135,008 | 135,561 | ||||||
| PROPERTY AND EQUIPMENT, at cost: |
||||||||
| Land and buildings |
4,580 | 4,231 | ||||||
| Machinery, fixtures and equipment |
41,003 | 41,118 | ||||||
| Display racks |
46,810 | 43,721 | ||||||
| 92,393 | 89,070 | |||||||
| Less – accumulated depreciation |
(47,340 | ) | (47,243 | ) | ||||
| 45,053 | 41,827 | |||||||
| LONG TERM NOTE RECEIVABLE, net |
1,384 | 1,384 | ||||||
| DEFERRED DEBT COSTS, net |
24,996 | 24,851 | ||||||
| OTHER LONG TERM ASSETS |
1,459 | 1,929 | ||||||
| GOODWILL, net of accumulated amortization of $74,757 |
661,639 | 661,639 | ||||||
| OTHER INTANGIBLES, net of accumulated amortization of $108,142 and $111,693 respectively |
627,937 | 624,386 | ||||||
| $ | 1,497,476 | $ | 1,491,577 | |||||
| LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of term loan |
$ | 5,734 | $ | 5,800 | ||||
| 11.625% Senior Subordinated Notes Due 2004 |
740 | 740 | ||||||
| Accounts payable |
42,076 | 48,222 | ||||||
| Accrued expenses |
59,395 | 49,392 | ||||||
| Deferred revenues |
39,614 | 36,760 | ||||||
| Total current liabilities |
147,559 | 140,914 | ||||||
| TERM LOAN AND REVOLVING CREDIT COMMITMENT, net of current portion |
433,918 | 432,468 | ||||||
| SUBORDINATED INDEBTEDNESS: |
||||||||
| 10.25% Senior Subordinated Notes Due 2009 |
400,000 | 400,000 | ||||||
| Bond Premium on 10.25% Senior Subordinated Notes Due 2009 |
530 | 504 | ||||||
| 8.875% Senior Subordinated Notes Due 2011 |
150,000 | 150,000 | ||||||
| 550,530 | 550,504 | |||||||
| DEFERRED INCOME TAXES |
158,323 | 159,633 | ||||||
| STOCKHOLDER’S EQUITY: |
||||||||
| Common stock, $.20 par value; 7,507 shares issued and outstanding |
2 | 2 | ||||||
| Additional paid-in capital |
281,857 | 281,857 | ||||||
| Accumulated other comprehensive income (loss) |
(28 | ) | 164 | |||||
| Accumulated deficit |
(74,685 | ) | (73,965 | ) | ||||
| TOTAL STOCKHOLDER’S EQUITY |
207,146 | 208,058 | ||||||
| $ | 1,497,476 | $ | 1,491,577 | |||||
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
3
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN 000’s)
| Fiscal Quarter June 30, 2003 |
Fiscal Quarter June 28, 2004 |
|||||||
| OPERATING REVENUES: |
||||||||
| Circulation |
$ | 79,344 | $ | 82,128 | ||||
| Advertising |
37,693 | 43,075 | ||||||
| Other |
7,937 | 8,244 | ||||||
| 124,974 | 133,447 | |||||||
| OPERATING EXPENSES: |
||||||||
| Editorial |
13,712 | 14,699 | ||||||
| Production |
31,943 | 41,013 | ||||||
| Distribution, circulation and other cost of sales |
18,592 | 18,421 | ||||||
| Selling, general and administrative expenses |
21,819 | 23,407 | ||||||
| Depreciation and amortization |
10,018 | 11,105 | ||||||
| 96,084 | 108,645 | |||||||
| OPERATING INCOME |
28,890 | 24,802 | ||||||
| INTEREST EXPENSE, net |
(20,050 | ) | (23,436 | ) | ||||
| OTHER EXPENSE, net |
(155 | ) | (56 | ) | ||||
| INCOME BEFORE PROVISION FOR INCOME TAXES |
8,685 | 1,310 | ||||||
| PROVISION FOR INCOME TAXES |
3,303 | 590 | ||||||
| NET INCOME |
$ | 5,382 | $ | 720 | ||||
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
4
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(IN 000’s)
| Fiscal Quarter Ended June 30, 2003 |
Fiscal Quarter Ended June 28, 2004 | |||||
| Net income |
$ | 5,382 | $ | 720 | ||
| Other comprehensive income |
||||||
| Foreign currency translation adjustments |
58 | 192 | ||||
| Other comprehensive income |
58 | 192 | ||||
| Comprehensive income |
$ | 5,440 | $ | 912 | ||
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
5
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000’s)
| Fiscal Quarter Ended June 30, 2003 |
Fiscal Quarter Ended June 28, 2004 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 5,382 | $ | 720 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - |
||||||||
| Loss on sale of fixed assets |
12 | 9 | ||||||
| Bond premium amortization |
(26 | ) | (26 | ) | ||||
| Depreciation of property and equipment and amortization of intangible assets |
10,018 | 11,105 | ||||||
| Deferred debt cost amortization |
1,586 | 1,654 | ||||||
| Non-cash compensation charge |
23 | — | ||||||
| Decrease (increase) in - |
||||||||
| Receivables |
1,375 | (2,657 | ) | |||||
| Inventories |
(10,953 | ) | 6,237 | |||||
| Prepaid expenses and other |
(8,966 | ) | (11,122 | ) | ||||
| Other long term assets |
— | (470 | ) | |||||
| Increase (decrease) in - |
||||||||
| Accounts payable |
(2,804 | ) | 6,146 | |||||
| Accrued expenses |
7,270 | (1,547 | ) | |||||
| Accrued interest |
(7,136 | ) | (6,950 | ) | ||||
| Accrued income taxes |
768 | (196 | ) | |||||
| Deferred revenues |
(6,164 | ) | (2,854 | ) | ||||
| Total adjustments |
(14,997 | ) | (671 | ) | ||||
| Net cash provided by (used in) operating activities |
(9,615 | ) | 49 | |||||
| Cash Flows from Investing Activities: |
||||||||
| Capital expenditures |
(6,800 | ) | (4,337 | ) | ||||
| Acquisition of business |
(8,421 | ) | — | |||||
| Net cash used in investing activities |
(15,221 | ) | (4,337 | ) | ||||
| Cash Flows from Financing Activities: |
||||||||
| Term loan and revolving credit commitment principal repayments |
(4,816 | ) | (1,384 | ) | ||||
| Capital contribution |
6,138 | — | ||||||
| Payment of deferred debt costs |
(241 | ) | (1,509 | ) | ||||
| Net cash provided by (used in) financing activities |
1,081 | (2,893 | ) | |||||
| Effect of Exchange Rate Changes on Cash |
58 | 192 | ||||||
| Net Decrease in Cash and Cash Equivalents |
(23,697 | ) | (6,989 | ) | ||||
| Cash and Cash Equivalents at Beginning of Period |
40,475 | 22,192 | ||||||
| Cash and Cash Equivalents at End of Period |
$ | 16,778 | $ | 15,203 | ||||
| Supplemental Disclosures of Cash Flow Information: |
||||||||
| Cash paid during the period for - |
||||||||
| Income taxes |
$ | 287 | $ | 150 | ||||
| Interest |
25,360 | 24,968 | ||||||
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
6
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 28, 2004
(000’s omitted in all tables)
(unaudited)
(1) BASIS OF PRESENTATION