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 September 27, 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 November 10, 2004 there were 7,507 shares of common stock outstanding.
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
September 27, 2004
| Page(s) | ||
| PART I. FINANCIAL INFORMATION | ||
| Item 1. Financial Statements (Unaudited) - |
||
| 3 | ||
| 4-5 | ||
| 6-7 | ||
| 8 | ||
| 9-16 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17–22 | |
| Item 3. Quantitative and Qualitative Disclosures about Market Risk |
22 | |
| 23 | ||
| PART II. OTHER INFORMATION | ||
| 24 | ||
| 24 | ||
| 25 | ||
2
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in 000’s, except share information)
| March 29, 2004 |
September 27, 2004 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 22,192 | $ | 15,642 | ||||
| Receivables, net |
66,907 | 64,774 | ||||||
| Inventories |
34,518 | 20,904 | ||||||
| Prepaid expenses and other |
11,391 | 16,058 | ||||||
| Total Current Assets |
135,008 | 117,378 | ||||||
| PROPERTY AND EQUIPMENT, at cost: |
||||||||
| Land and buildings |
4,580 | 4,313 | ||||||
| Machinery, fixtures and equipment |
41,003 | 42,684 | ||||||
| Display racks |
46,810 | 46,644 | ||||||
| 92,393 | 93,641 | |||||||
| Less – accumulated depreciation |
(47,340 | ) | (52,112 | ) | ||||
| 45,053 | 41,529 | |||||||
| LONG TERM NOTE RECEIVABLE, net |
1,384 | 1,384 | ||||||
| DEFERRED DEBT COSTS, net |
24,996 | 23,238 | ||||||
| OTHER LONG TERM ASSETS |
1,459 | 2,130 | ||||||
| GOODWILL, net of accumulated amortization of $74,757 |
661,639 | 661,639 | ||||||
| OTHER INTANGIBLES |
627,937 | 620,835 | ||||||
| $ | 1,497,476 | $ | 1,468,133 | |||||
| LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of term loan |
$ | 5,734 | $ | 5,731 | ||||
| 11.625% Senior Subordinated Notes Due 2004 |
740 | 740 | ||||||
| Accounts payable |
42,076 | 35,930 | ||||||
| Accrued expenses |
59,395 | 53,558 | ||||||
| Deferred revenues |
39,614 | 29,237 | ||||||
| Total current liabilities |
147,559 | 125,196 | ||||||
| TERM LOAN AND REVOLVING CREDIT COMMITMENT, net of current portion |
433,918 | 421,087 | ||||||
| SUBORDINATED INDEBTEDNESS: |
||||||||
| 10.25% Senior Subordinated Notes Due 2009 |
400,000 | 400,000 | ||||||
| Bond Premium on 10.25% Senior Subordinated Notes Due 2009 |
530 | 478 | ||||||
| 8.875% Senior Subordinated Notes Due 2011 |
150,000 | 150,000 | ||||||
| 550,530 | 550,478 | |||||||
| DEFERRED INCOME TAXES |
158,323 | 160,930 | ||||||
| STOCKHOLDER’S EQUITY: |
||||||||
| Common stock, $.20 par value; 7,507 shares issued and outstanding |
2 | 2 | ||||||
| Additional paid-in capital |
281,857 | 281,757 | ||||||
| Accumulated other comprehensive income (loss) |
(28 | ) | (53 | ) | ||||
| Accumulated deficit |
(74,685 | ) | (71,264 | ) | ||||
| TOTAL STOCKHOLDER’S EQUITY |
207,146 | 210,442 | ||||||
| $ | 1,497,476 | $ | 1,468,133 | |||||
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)
| Two Fiscal Quarters Ended Sept. 29, 2003 |
Two Fiscal Quarters Sept. 27, |
|||||||
| OPERATING REVENUES: |
||||||||
| Circulation |
$ | 159,816 | $ | 169,087 | ||||
| Advertising |
76,168 | 85,448 | ||||||
| Other |
15,863 | 15,474 | ||||||
| 251,847 | 270,009 | |||||||
| OPERATING EXPENSES: |
||||||||
| Editorial |
29,107 | 29,186 | ||||||
| Production |
64,922 | 81,127 | ||||||
| Distribution, circulation and other cost of sales |
38,677 | 39,877 | ||||||
| Selling, general and administrative expenses |
40,077 | 50,676 | ||||||
| Loss on insurance settlement |
200 | — | ||||||
| Restructuring expense |
2,705 | — | ||||||
| Depreciation and amortization |
20,211 | 22,075 | ||||||
| 195,899 | 222,941 | |||||||
| OPERATING INCOME |
55,948 | 47,068 | ||||||
| INTEREST EXPENSE, net |
(37,689 | ) | (40,975 | ) | ||||
| OTHER INCOME (EXPENSE), net |
(60 | ) | (101 | ) | ||||
| INCOME BEFORE PROVISION FOR INCOME TAXES |
18,199 | 5,992 | ||||||
| PROVISION FOR INCOME TAXES |
6,879 | 2,571 | ||||||
| NET INCOME |
$ | 11,320 | $ | 3,421 | ||||
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 INCOME
(IN 000’s)
| Fiscal Quarter Ended Sept. 29, 2003 |
Fiscal Quarter Ended Sept. 27, 2004 |
|||||||
| OPERATING REVENUES: |
||||||||
| Circulation |
$ | 80,472 | $ | 86,959 | ||||
| Advertising |
38,475 | 42,373 | ||||||
| Other |
7,926 | 7,230 | ||||||
| 126,873 | 136,562 | |||||||
| OPERATING EXPENSES: |
||||||||
| Editorial |
15,395 | 14,487 | ||||||
| Production |
32,979 | 40,114 | ||||||
| Distribution, circulation and other cost of sales |
20,085 | 21,456 | ||||||
| Selling, general and administrative expenses |
18,258 | 27,269 | ||||||
| Loss on insurance settlement |
200 | — | ||||||
| Restructuring expense |
2,705 | — | ||||||
| Depreciation and amortization |
10,193 | 10,970 | ||||||
| 99,815 | 114,296 | |||||||
| OPERATING INCOME |
27,058 | 22,266 | ||||||
| INTEREST EXPENSE, net |
(17,639 | ) | (17,539 | ) | ||||
| OTHER INCOME (EXPENSE), net |
95 | (45 | ) | |||||
| INCOME BEFORE PROVISION FOR INCOME TAXES |
9,514 | 4,682 | ||||||
| PROVISION FOR INCOME TAXES |
3,576 | 1,981 | ||||||
| NET INCOME |
$ | 5,938 | $ | 2,701 | ||||
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
COMPREHENSIVE INCOME
(IN 000’s)
| Two Fiscal Quarters Ended Sept. 29, 2003 |
Two Fiscal Quarters Ended Sept. 27, |
|||||||
| Net income |
$ | 11,320 | $ | 3,421 | ||||
| Other comprehensive income (loss) |
||||||||
| Foreign currency translation adjustments |
(95 | ) | (25 | ) | ||||
| Other comprehensive income (loss) |
(95 | ) | (25 | ) | ||||
| Comprehensive income |
$ | 11,225 | $ | 3,396 | ||||
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements.
6
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(IN 000’s)
| Fiscal Quarter Ended Sept. 29, 2003 |
Fiscal Quarter Ended Sept. 27, 2004 | ||||||
| Net income |
$ | 5,938 | $ | 2,701 | |||
| Other comprehensive income (loss) |
|||||||
| Foreign currency translation adjustments |
(153 | ) | 217 | ||||
| Other comprehensive income (loss) |
(153 | ) | 217 | ||||
| Comprehensive income |
$ | 5,785 | $ | 2,918 | |||
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements.
7
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000’s)
| Two Fiscal Quarters Sept. 29, 2003 |
Two Fiscal Quarters Ended Sept. 27, 2004 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 11,320 | $ | 3,421 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities - |
||||||||
| Gain on sale of fixed assets |
(68 | ) | (28 | ) | ||||
| Bond premium amortization |
(52 | ) | ||||||