<PAGE> 1
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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number(s) - 333-83637 and 333-83637 01-13
AMERICAN MEDIA OPERATIONS, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 59-2094424
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
600 East Coast Avenue, Lantana, Florida 33464-0002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 540-1000
American Media Operations, Inc. (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, and (2) HAS BEEN subject to such filing requirements for
the past 90 days.
As of November 11, 1999 there were 7,507 shares of common stock outstanding.
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<PAGE> 2
TABLE OF ADDITIONAL REGISTRANT
GUARANTORS
<TABLE>
<CAPTION>
ADDRESS INCLUDING ZIP CODE
STATE OR OTHER I.R.S. AND TELEPHONE NUMBER
EXACT NAME JURISDICTION OF EMPLOYER INCLUDING AREA CODE
OF REGISTRANT GUARANTOR INCORPORATION OR IDENTIFICATION OF REGISTRANT GUARANTOR'S COMMISSION
AS SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER PRINCIPAL EXECUTIVE OFFICES FILE NUMBERS
- -------------------------------- ----------------- ---------------- -------------------------------- -------------
<S> <C> <C> <C>
American Media Marketing, Inc. Florida 65-0757297 600 East Coast Avenue 333-83637-08
Lantana, FL 33484 (561) 540-1000
Biocide, Inc. Delaware 58-2286482 600 East Coast Avenue 333-83637-09
Lantana, FL 33484 (561) 540-1000
Country Weekly, Inc. Delaware 65-0462019 600 East Coast Avenue 333-83637-10
Lantana, FL 33484 (561) 540-1000
Distribution Services, Inc. Delaware 59-1641185 600 East Coast Avenue 333-83637-03
Lantana, FL 33484 (561) 540-1000
Fairview Printing, Inc. Florida 59-2521785 600 East Coast Avenue 333-83637-04
Lantana, FL 33484 (561) 540-1000
Health Xtra, Inc. Florida 65-0886419 600 East Coast Avenue 333-83637-11
Lantana, FL 33484 (561) 540-1000
Marketing Services, Inc. Delaware 65-0228937 600 East Coast Avenue 333-83637-13
Lantana, FL 33484 (561) 540-1000
National Enquirer, Inc. Florida 59-2764097 600 East Coast Avenue 333-83637-01
Lantana, FL 33484 (561) 540-1000
NDSI, Inc. Delaware 59-2632066 600 East Coast Avenue 333-83637-06
Lantana, FL 33484 (561) 540-1000
Retail Marketing Network, Inc. Delaware 65-0503059 600 East Coast Avenue 333-83637-12
Lantana, FL 33484 (561) 540-1000
Star Editorial, Inc. Delaware 59-2719233 600 East Coast Avenue 333-83637-07
Lantana, FL 33484 (561) 540-1000
SOM Publishing, Inc. Florida 59-2429187 600 East Coast Avenue 333-83637-05
Lantana, FL 33484 (561) 540-1000
Weekly World News, Inc. Florida 59-1896614 600 East Coast Avenue 333-83637-02
Lantana, FL 33484 (561) 540-1000
</TABLE>
2
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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
SEPTEMBER 27, 1999
<TABLE>
<CAPTION>
Page(s)
-------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Company and Predecessor Financial Statements --
Consolidated Balance Sheets.............................................................. 4
Consolidated Statements of Income........................................................ 5-6
Consolidated Statements of Cash Flows.................................................... 7
Notes to Consolidated Financial Statements............................................... 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................... 12-17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk .......................................................................... 18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................................. 19
Signature................................................................................ 20
</TABLE>
3
<PAGE> 4
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 27 AND MARCH 29, 1999
(IN 000'S, EXCEPT SHARE INFORMATION)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR COMPANY
ARE NOT COMPARABLE IN CERTAIN RESPECTS (SEE NOTE 1).
<TABLE>
<CAPTION>
Predecessor
Company The Company
March 29, September 17,
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,823 $ 8,108
Receivables, net 7,977 11,809
Inventories 9,830 8,119
Prepaid expenses and other 2,650 8,679
----------- -----------
Total current assets 24,280 36,715
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Land and buildings 4,039 1,670
Machinery, fixtures and equipment 22,040 11,811
Display racks 19,543 12,274
----------- -----------
45,622 25,755
Less - accumulated depreciation (18,762) (3,658)
----------- -----------
26,860 22,097
----------- -----------
DEFERRED DEBT COSTS, net 5,728 20,505
----------- -----------
GOODWILL, net of accumulated amortization of $141,595 and $8,846 463,656 450,260
----------- -----------
OTHER INTANGIBLES, net of accumulated amortization of $51,686 and $10,488 96,314 509,324
----------- -----------
$ 616,838 $ 1,038,901
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of term loan $ 25,000 $--
Accounts payable 11,618 10,132
Accrued expenses 34,801 42,551
Deferred revenues 27,987 24,479
----------- -----------
Total current liabilities 99,406 77,162
----------- -----------
PAYABLE TO PARENT COMPANY 3,404 1,010
----------- -----------
LONG TERM DEBT:
Term Loan and Revolving Credit Commitment, net of current portion 246,000 340,000
10.25% Senior Subordinated Notes Due 2009 -- 250,000
11.63% Senior Subordinated Notes Due 2004 200,000 740
10.38% Senior Subordinated Notes Due 2002 134 134
----------- -----------
446,134 590,874
----------- -----------
DEFERRED INCOME TAXES (NOTE 4) 7,696 161,394
----------- -----------
CONTINGENCIES (NOTE 7)
STOCKHOLDER'S EQUITY:
Common stock, $.20 par value; 7,507 shares issued and outstanding 2 2
Additional paid-in capital 26,039 218,279
Retained earnings (deficit) 34,157 (9,820)
----------- -----------
TOTAL STOCKHOLDER'S EQUITY 60,198 208,461
----------- -----------
$ 616,838 $ 1,038,901
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these consolidated balance sheets.
4
<PAGE> 5
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN 000'S)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE
PREDECESSOR COMPANY ARE NOT COMPARABLE IN
CERTAIN RESPECTS (SEE NOTE 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
--------------------- --------------------
Fiscal Quarter Fiscal Quarter
Ended September 28, Ended September 27,
1998 1999
--------------------- --------------------
<S> <C> <C>
OPERATING REVENUES:
Circulation $ 62,153 $ 62,090
Advertising 5,138 4,897
Other 5,247 5,740
-------- --------
72,538 72,727
-------- --------
OPERATING EXPENSES:
Editorial 7,284 6,841
Production 19,586 17,086
Distribution, circulation and other cost of sales 17,064 14,246
Selling, general and administrative expenses 6,187 7,656
Depreciation and amortization 7,966 15,039
-------- --------
58,087 60,868
-------- --------
Operating income 14,451 11,859
INTEREST EXPENSE (11,742) (14,770)
OTHER INCOME (EXPENSE), net (42) 33
-------- --------
Income (loss) before provision for income
taxes 2,667 (2,878)
PROVISION FOR INCOME TAXES (2,321) (1,072)
-------- --------
Net income (loss) $ 346 $ (3,950)
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
5
<PAGE> 6
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN 000'S)
THE FINANCIAL STATEMENTS OF THE COMPANY AND THE
PREDECESSOR COMPANY ARE NOT COMPARABLE IN
CERTAIN RESPECTS (SEE NOTE 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
------------------------------------- ------------------
Twenty Weeks
Two Fiscal Six Weeks From From May 7
Quarters March 30 Through
Ended Through September 27,
September 28, 1998 May 6, 1999 1999
------------------- ----------------- ------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Circulation $124,951 $26,215 $93,010
Advertising 10,692 2,640 8,043
Other 10,271 2,308 8,349
----------------- ----------------- ------------------
145,914 31,163 109,402
----------------- ----------------- ------------------
OPERATING EXPENSES:
Editorial 14,666 3,040 10,376
Production 40,522 7,784 25,759
Distribution, circulation and other cost of sales 35,266 6,624 21,964
Selling, general and administrative expenses 12,762 3,248 11,209
Depreciation and amortization 15,808 3,703 23,072
----------------- ----------------- ------------------
119,024 24,399 92,380
----------------- ----------------- ------------------
Operating income 26,890 6,764 17,022
INTEREST EXPENSE (23,937) (4,837) (23,335)
OTHER INCOME, net 4,151 25 26
----------------- ----------------- ------------------
Income (loss) before provision for
income taxes and extraordinary 1,952
charge 7,104 (6,287)
PROVISION FOR INCOME TAXES (5,364) (1,365) (952)
----------------- ----------------- ------------------
Income (loss) before extraordinary charge 1,740 587 (7,239)
EXTRAORDINARY CHARGE, net of income taxes of
$1,269 and $1,517, respectively (Note 5) (2,161) -- (2,581)
----------------- ----------------- ------------------
Net income (loss) $(421) $587 $(9,820)
================= ================= ==================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
6
<PAGE> 7
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000'S)
THE FINANCIAL STATEMENTS OF THE COMPANY AND
THE PREDECESSOR COMPANY ARE NOT
COMPARABLE IN CERTAIN RESPECTS (SEE NOTE 1).
<TABLE>
<CAPTION>
Predecessor Company The Company
------------------------------------ -------------------
Twenty Weeks
Two Fiscal Six Weeks From May 7
Quarters Ended From March 30 Through
September 28, Through September 27,
1998 May 6, 1999 1999
------------------ ----------------- -------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (421) $ 587 (9,820)
--------- -------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities -
Extraordinary charge, net of income taxes 2,161 -- 2,581
Depreciation and amortization 15,808 3,703 23,072
Deferred debt cost amortization 831 147 1,151
Decrease (increase) in -
Receivables, net (1,808) (369) (3,463)
Inventories 403 1,163 548
Prepaid expenses and other 3,629 1,793 (8,392)
Increase (decrease) in -
Accounts payable (3,340) (2,184) 697
Accrued expenses (2,180) (164) (2,596)
Accrued and current deferred income taxes (2,540) 1,267 3,890
Deferred revenues (4,645) (3,159) (349)
--------- -------- ---------
Total adjustments 8,319 2,197 17,139
--------- -------- ---------
Net cash provided by operating activities 7,898 2,784 7,319
--------- -------- ---------
Cash flows from investing activities:
Capital expenditures (7,689) (717) (3,615)
Acquisition of business, net of cash acquired -- -- (332,679)
--------- -------- ---------
Net cash used in investing activities (7,689) (717) (336,294)
--------- -------- ---------
Cash Flows from Financing Activities:
Issuance of common stock -- -- 235,000
Term loan and revolving credit commitment principal repayments (334,401) (10,000) (279,000)
Proceeds from revolving credit commitment 334,000 6,000 --
Repayment of subordinated senior subordinated indebtedness -- -- (199,260)
Proceeds from new term loan and credit facility -- -- 352,000
Proceeds from new senior subordinated indebtedness -- -- 250,000
Payment of deferred debt costs (1,964) -- (21,657)
--------- -------- ---------
Net cash (used in) provided by financing activities (2,365) (4,000) 337,083
--------- -------- ---------
Net (Decrease) Increase in Cash and Cash Equivalents (2,156) (1,933) 8,108
Cash and Cash Equivalents at Beginning of Period 7,405 3,823 --
========= ======== =========
Cash and Cash Equivalents at End of Period $ 5,249 $ 1,890 8,108
========= ======== =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for -
Income taxes $ 5,118 $ 80 $ 3,261
Interest 25,331 3,142 20,429
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
7
<PAGE> 8
AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1999
(000'S OMITTED IN ALL TABLES)
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Except as
disclosed herein, there has been no material change in the information
disclosed in the notes to consolidated financial statements included in the
Annual Report on Form 10-K of American Media Operations, Inc., and subsidiaries
for the fiscal year ended March 29, 1999. As discussed below, American Media
Operations, Inc. was purchased on May 7, 1999 resulting in a change in the
historical cost basis of various assets and liabilities, accordingly, the
historical financial information provided herein, for periods prior to May 7,
1999 is not comparable to post acquisition financial information. For purposes
of presentation, all historical financial information for periods prior to May
7, 1999 will be referred to as the "Predecessor Company" and all periods
subsequent to May 6, 1999 (the "Inception Period") will be referred to as the
"Company". A solid black vertical line has been inserted in tables where
financial information may not be comparable across periods.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included herein. Operating results for the fiscal
periods ended September 27, 1999 are not necessarily indicative of the results
that may be expected for future periods.
(2) CERTAIN TRANSACTIONS AND MERGER
On May 7, 1999, all of the common stock of the Company's parent, American
Media, Inc. ("Media") was purchased by EMP Acquisition Corp. ("EMP") a company
controlled by Evercore Capital Partners L.P., a private equity firm
("Evercore") for $837 million (the "Acquisition"). Proceeds to finance the
acquisition included (a) a cash equity investment of $235 million by Evercore
and certain other investors, (b) borrowings of $352 million under a new $400
million senior bank facility (the "New Credit Facility") and (c) borrowings of
$250 million in the form of senior subordinated notes (the "Notes"). These
proceeds were used to (d) acquire all of the outstanding common stock of Media
for $299.4 million, (e) repay $267 million then outstanding under the existing
credit agreement with our banks, (f) retire approximately $199.3 million of
Senior Subordinated Notes due 2004 and (g) pay transaction costs (collectively
(a) through (g), the "Transactions"). Upon consummation of the Transactions,
EMP was merged with and into Media (the "Merger") resulting in a change in
ownership control of both Media and the Company. The Transactions are
summarized as follows:
8
<PAGE> 9
Proceeds from:
Equity contribution $ 235,000
New credit facility 352,000
Notes 250,000
---------
$ 837,000
=========
Proceeds used to repay:
Existing credit facility $(267,000)
Existing subordinated notes (199,300)
Existing equity (299,400)
---------
$(765,700)
=========
Balance used to pay debt issuance costs,
debt tender offer premium, accrued interest
and other costs $ (71,300)
=========
Preliminary allocation of purchase price is as follows:
Net cash proceeds $ 837,000
Less repayment of existing debt (466,300)
Less cash assumed (1,900)
---------
Net cash paid 368,800
Fair value of liabilities (78,094)
Fair value of tangible assets acquired 41,973
---------
$ 332,679
=========
The Acquisition has been accounted for under the purchase method of accounting.
The excess of purchase price over the fair value of net tangible assets
acquired has been allocated between identified intangible assets including the
value of the tradenames and subscription lists of the Company's publications,
as determined through an independent appraisal, with the remainder allocated to
goodwill. The preliminary estimates of the fair values of other assets and
liabilities may be revised at a later date which may result in a change to the
value of goodwill or other assets and liabilities. These intangible assets are
being amortized on a straight-line basis over 20 years for tradenames and
goodwill and 9-15 years for subscription lists.
The following unaudited pro forma financial information gives effect to the
Transactions and excludes the results of Soap Opera Magazine and Soap Opera
News (collectively, the "Soap Opera Properties") which were sold in February
1999 for $10 million cash and possible additional consideration based upon the
future performance of certain of the buyer's titles, as if each had occurred as
of the beginning of each period presented:
<TABLE>
<CAPTION>
Predecessor Company
--------------------------------------------------
Two Fiscal Six Weeks From
Quarters Ended March 30 Through
September 28, 1998 May 6, 1999
------------------------- ------------------------
<S> <C> <C>
Operating revenues $133,645 $31,163
========= =========
Operating expenses $(86,865) $(26,863)
========= =========
Depreciation and amortization $(27,026) $(6,167)
========= =========
Operating income $19,754 $4,300
========= =========
Interest expense $(29,526) $(6,190)
========= =========
Net loss $(9,768) $(2,700)
========= =========
</TABLE>
9
<PAGE> 10
Included as a reduction to selling, general and administrative expenses in the
fiscal quarter ended September 27, 1999 is an additional gain of $370,000
resulting from settlement of certain liabilities in connection with the sale of
the Soap Opera Properties.
(3) INVENTORIES
Inventories are generally stated at the lower of cost or market. The Company
uses the last-in, first-out (LIFO) cost method of valuing its inventories,
which approximates the first-in, first-out (FIFO) cost method for the periods
presented. Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 29, September 27,
1999 1999
------------------- ------------------
<S> <C> <C>
Raw materials - paper $6,931 $5,209
Finished product - paper, production
and distribution costs of future issues 2,899 2,910
------------------- ------------------
$9,830 $8,119
=================== ==================
</TABLE>
(4) INCOME TAXES
The Company files a consolidated Federal income tax return with Media, and
calculates its income taxes on a separate return basis. Income taxes have been
provided based upon the Company's anticipated effective annual income tax rate.
In accordance with the Statement of Financial Accounting Standards ("SFAS") NO.
109, "Accounting for Income Taxes", deferred taxes are recognized for temporary
differences related to identified intangible assets other than goodwill. The
temporary difference is calculated based on the difference between the new book
bases of the amounts allocated to tradenames and subscription lists and their
historical tax bases. Accordingly, as of May 7, 1999, a deferred tax liability
of approximately $162 million has been recorded with a corresponding increase
in goodwill.
(5) CREDIT AGREEMENT
As of September 27, 1999 the Company's effective interest rate on borrowings
under the New Credit Agreement was 8.7%. The effective rate for borrowings
under the New Credit Agreement averaged 8.7% for the fiscal quarter ended
September 27, 1999 as compared to 7.4% on borrowings under the prior credit
agreement for the fiscal quarter ended September 28, 1998. The effective rate
for borrowings under the New Credit Agreement averaged 8.6% for the Inception
Period and under the prior credit agreement averaged 7.1% for the period from
March 30 through May 6, 1999, as compared to 7.5% for the two fiscal quarters
ended September 28, 1998.
In the fiscal quarter ended June 29, 1998, approximately $3.4 million, ($2.2
million net of income taxes) was charged to extraordinary loss related to the
write-off of deferred debt costs as a result of the refinancing of the prior
credit facility. In connection with the Transactions, a fee related to an
unused bridge loan commitment totaling approximately $4.1 million ($2.6 million
net of income taxes) was charged to extraordinary loss in the Inception Period.
American Media Operations, Inc. has no material assets or operations other than
investments in its subsidiaries. The Notes are unconditionally guaranteed, on a
senior subordinated basis, by all of its material subsidiaries. Each subsidiary
that will be organized in the future by the Company, unless such subsidiary is
designated as an unrestricted subsidiary, will jointly, severally, fully and
unconditionally guarantee the Notes on a senior subordinated basis. Note
guarantees are joint and several, full and unconditional and general unsecured
obligations of the note guarantors. The note guarantors are the Company's
wholly-owned subsidiaries. At present, the note guarantors comprise all of the
Company's direct and indirect subsidiaries, other than one inconsequential
subsidiary. Note guarantees are subordinated in right of payment to all
existing and future senior debt of the note guarantors, including the New
10
<PAGE> 11
Credit Facility, and are also effectively subordinated to all secured
obligations of note guarantors to the extent of the assets securing such
obligations, including the New Credit Facility. Furthermore, the Notes
indenture permits note guarantors to incur additional indebtedness, including
senior debt, subject to certain limitations. We have not presented separate
financial statements and other disclosures concerning each of the note
guarantors because management has determined that such information is not
material to investors.
So long as the factors set forth in the paragraph immediately above remain true
and correct, under applicable SEC rules and regulations, the Company believes
that note guarantors will not need to individually comply with the reporting
requirements of the Securities Exchange Act of 1934 ("Exchange Act"), nor will
the Company have to include separate financial statements and other disclosures
concerning each of the note guarantors in its Exchange Act reports. In that
regard, the Company will request a no-action letter from the SEC concurring
with the Company's position on this issue. While there can be no assurance, the
Company expects to receive a favorable response to our no-action letter
request.
(6) OTHER INCOME (EXPENSE), NET
Included in Other Income (Expense), net in the accompanying consolidated
statement of income for the two fiscal quarters ended September 28, 1998 is a
net gain of $4.4 million from the settlement of certain litigation.
(7) LITIGATION
Various suits and claims arising in the ordinary course of business have been
instituted against the Company. The Company has various insurance policies
available to recover potential legal costs incurred by it. The Company
periodically evaluates and assesses the risks and uncertainties associated with
litigation independent from those associated with its potential claim for
recovery from third party insurance carriers. At present, in the opinion of
management, after consultation with legal counsel, the liability resulting from
litigation, if any, will not have a material effect on the Company's
consolidated financial statements.
(8) SUBSEQUENT EVENT
On November 1, 1999 the Company acquired all of the common stock of Globe
Communications Corp. and certain of the publishing assets and liabilities of
Globe International, Inc. (collectively, the "Globe Properties") for total
consideration of $105 million, including $100 million in cash and $5 million in
equity of the Company. The Globe Properties consist of several tabloid style
magazines, including Globe, National Examiner and Sun as well as other titles
including Cracked, Lifestyle Specials, Detective Series and Mini Mags, which
together generate approximately $108 million in revenue annually. Proceeds to
finance the acquisition of the Globe Properties included an expansion of our
existing senior bank facility of $90 million, approximately $14 million from
the Company's existing revolving line of credit and the issuance of $5 million
of equity in the Company. These proceeds were used to acquire the Globe
Properties and to pay transaction costs. The transaction will be accounted for
under the purchase method of accounting, and accordingly, results of operations
will be included in the financial statements from the date of acquisition, and
the assets and liabilities will be recorded based upon their fair values at the
date of acquisition.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In connection with the Transactions and Merger, which were accounted for under
the purchase method of accounting, we reflected a new basis of accounting for
various assets and liabilities. Accordingly, the historical financial
information provided herein, for periods prior to May 7, 1999 is not comparable
to post acquisition financial information. To facilitate a meaningful
discussion of the comparative operating performance for the fiscal quarter and
two fiscal quarters ended September 27, 1999 and September 28, 1998, the
financial information in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is presented on a traditional
comparative basis unless otherwise indicated. We believe the traditional
comparative presentation provides the best financial information as the only
material change in the historical operations for periods before and after May
6, 1999, other than the sale of certain properties as discussed below, is an
increase in interest expense related to higher levels of indebtedness and
increased amortization expense resulting from a substantial increase in
intangible assets.
In February 1999, we ceased publication of Soap Opera News and Soap Opera
Magazine (collectively, the "Soap Opera Assets") and sold certain of the
trademarks and other soap opera publishing assets relating to these magazines
to Primedia, Inc. Accordingly, operations of the Soap Opera Assets are included
in operations for the fiscal quarter and the two fiscal quarters ended
September 28, 1998, but are not included in operations for the fiscal quarter
or the two fiscal quarters ended September 27, 1999.
RESULTS OF OPERATIONS
Fiscal Quarter Ended September 27, 1999 vs Fiscal Quarter Ended
September 28, 1998
Total operating revenues were $72,727,000 for the current fiscal quarter, which
remained relatively flat compared to operating revenues of the same prior
fiscal year quarter. Excluding revenues related to the Soap Opera Assets,
operating revenues increased by $6,698,000, primarily due to an increase in
single copy revenues.
Circulation revenues (which include all single copy and subscription sales) of
$62,090,000 remained relatively flat for the current fiscal quarter compared to
the same prior year quarter. Excluding the Soap Opera Assets, circulation
revenues increased $6,162,000 or 11.0% when compared to the same prior year
period, due in part, to higher circulation revenues generated from three
additional special issues of the Star. Single copy unit sales for the National
Enquirer and Star remained flat when compared to the same prior year quarter.
Circulation revenues were favorably impacted by $.10 cover price increases
effective with the July 27, 1999 issues for National Enquirer, Star and Weekly
World News.
Country Weekly's average weekly circulation decreased 5.8% for the current
fiscal quarter as compared to the same prior year quarter. The decline in
circulation revenues caused by such decreases in circulation was offset by a
$.20 cover price increase in March of 1999. New management has addressed this
softness by redesigning and relaunching Country Weekly effective with the
October 6, 1999 issue. In addition, a new editor and publisher have been named.
Subscription revenues of $9,247,000 decreased $993,000 or 9.7% for the current
fiscal quarter compared to the same prior year quarter. Excluding the Soap
Opera Assets, subscription revenues decreased $205,000 or 2.2% compared to the
same prior year quarter, reflecting a decrease in National Enquirer and Star
unit sales of 4.6% and 5.8%, respectively, which was partially offset by an
increase in Weekly World News. One method of increasing the subscription bases
of our publications has been to offer discounted subscriptions through an
agent; however, management's new direction is to be more newsstand driven.
12
<PAGE> 13
For the current fiscal quarter, advertising revenues of $4,897,000 decreased
$241,000 or 4.7% from $5,138,000 in the same prior year quarter. Excluding
revenues related to the Soap Opera Assets, advertising revenues remained flat.
Although national advertising increased by $761,000 or 47% it was offset by a
decrease in mail order and classified advertising due to management's decision
not to accept certain mail order and fractional advertising to correspond with
the new design of the publications.
Total operating expenses for the current fiscal quarter increased by $2,781,000
when compared to the same prior year quarter. Excluding expenses related to the
Soap Opera Assets and depreciation and amortization expense, operating expenses
increased by $4,051,000. This increase primarily relates to increased
editorial, production and distribution expenses related to the publication of
three Star specials (which were more than offset by increased revenues as
mentioned above) as well as TV advertising. Amortization expense increased by
$7,323,000 due to the increase in intangible asset balances as well as a
reduction in the related amortizable lives, primarily goodwill, from 40 years
to 20 years. This increase in amortization expense solely relates to the period
subsequent to the Transactions.
Interest expense increased for the current fiscal quarter by $3,028,000 to
$14,770,000 compared to the same prior year quarter. This increase in interest
expense solely relates to the period subsequent to the Transactions as a result
of a higher average effective interest rate and higher levels of indebtedness.
Our effective income tax rates exceed the federal statutory income tax rate of
35% because of the effect of goodwill amortization which is not deductible for
income tax reporting purposes.
Two Fiscal Quarters Ended September 27, 1999 vs Two Fiscal Quarters Ended
September 28, 1998
Total operating revenues were $140,565,000 for the current two fiscal quarters,
a decrease of $5,349,000 or 3.7% from total operating revenues of $145,914,000
for the same prior year period. Excluding revenues related to the Soap Opera
Assets, operating revenues increased $6,921,000, primarily due to an increase
in single copy revenue.
Circulation revenues (which include all single copy and subscription sales) of
$119,225,000 decreased $5,726,000 or 4.6% for the current two fiscal quarters
compared to the same prior year quarters. Excluding the Soap Opera Assets,
circulation revenues increased $6,039,000 or 5.3% when compared to the same
prior year period, due in part, to higher circulation revenues generated from
three additional special issues of the Star. Single copy unit sales for the
National Enquirer and Star remained flat when compared to the same prior year
period. Circulation revenues were favorably impacted by $.10 cover price
increases effective with the July 27, 1999 issues for National Enquirer, Star
and Weekly World News.
Country Weekly's average weekly circulation decreased 10.0% for the current two
fiscal quarters as compared to the same prior year quarters. The decline in
circulation revenues caused by such decreases in circulation was partially
offset by a $.20 cover price increase in March of 1999. New management has
addressed this softness by redesigning and relaunching Country Weekly effective
with the October 6, 1999 issue. In addition, a new editor and publisher have
been named.
Subscription revenues of $18,892,000 decreased $2,496,000 for the current two
fiscal quarters as compared to the same prior year period. Excluding the Soap
Opera Assets, subscription revenues have decreased $841,000 or 4.3% compared to
the same prior year quarters, reflecting a decrease in National Enquirer and
Star unit sales of 13.7% and 16.8%, respectively. One method of increasing the
subscription bases of our publications has been to offer discounted
subscriptions through an agent; however, management's new direction is to be
more newsstand driven.
13
<PAGE> 14
For the current two fiscal quarters, advertising revenues of $10,683,000
remained flat over the same prior year quarters. Excluding revenue from the
Soap Opera Assets, advertising revenues increased by $467,000 or 4.6% primarily
as a result of increased national advertising in National Enquirer, Star and
Country Weekly, offset by lower direct and classified advertising at the
National Enquirer and Star due to management's decision not to accept certain
mail order and fractional advertising to correspond with the new design of the
publications.
Total operating expenses for the current two fiscal quarters decreased by
$2,245,000 when compared to the same prior year period. Excluding expenses
related to the Soap Opera Assets and depreciation and amortization expense,
operating expenses increased by $3,702,000 or 4.3%. This increase primarily
relates to increased editorial, production and distribution expenses related to
the publication of three Star specials (which were more than offset by
increased revenues as mentioned above) as well as TV advertising. Amortization
expense increased by $11,228,000 due to the increase in intangible asset
balances as well as a reduction in the related amortizable lives, primarily
goodwill, from 40 years to 20 years. This increase in amortization expense
solely relates to the period subsequent to the Transactions.
Interest expense increased for the current two fiscal quarters by $4,235,000 to
$28,172,000 compared to the same prior year quarters. This increase in interest
expense solely relates to the period subsequent to the Transactions as a result
of a higher average effective interest rate and higher levels of indebtedness.
Other income was $51,000 for the current two fiscal quarters compared to income
of $4,151,000 for the same prior year period which had a net gain of $4.4
million from the favorable settlement of certain litigation.
Our effective income tax rates exceed the federal statutory income tax rate of
35% because of the effect of goodwill amortization which is not deductible for
income tax reporting purposes.
In connection with the Transactions, a fee related to an unused bridge loan
commitment totaling approximately $4.1 million ($2.6 million net of income
taxes) was charged to extraordinary loss in the Inception Period. During the
fiscal quarter ended June 29, 1998, we recorded an extraordinary charge
totaling approximately $3.4 million ($2.2 million net of income taxes) related
to the write-off of deferred debt issuance costs and other charges relating to
the refinancing of indebtedness.
LIQUIDITY AND CAPITAL RESOURCES
We have substantially increased our indebtedness in connection with the
Transactions and the acquisition of Globe Communications Corporation and
certain publishing assets and liabilities of Globe International, Inc. As a
result of the New Credit Agreement and the Notes, our liquidity requirements
will be significantly increased, primarily due to increased interest and
principal payment obligations under the New Credit Agreement which, other than
certain excess cash flow payment obligations, will commence in fiscal 2002. We
believe that the net cash generated from operating activities and amounts
available under the $60.0 million revolving credit facility will be sufficient
to fund our debt service requirements under the New Credit Agreement and the
Notes, to make capital expenditures and to cover working capital requirements.
As of September 27, 1999, there were no amounts outstanding on the revolving
credit facility. As of November 10, 1999, $17 million has been drawn from the
Company's revolving credit facility primarily to fund the acquisition of the
Globe Properties as discussed in Note 8. to the consolidated financial
statements. We believe, however, that based upon our current level of
operations and anticipated growth, it will be necessary to refinance the Notes
upon their maturity. To the extent we make future acquisitions, we may require
new sources of funding, including additional debt, or equity financing or some
combination thereof. There can be no assurances that such additional sources of
funding will be available to us on acceptable terms.
14
<PAGE> 15
Our ability to make scheduled payments of principal and interest under the New
Credit Agreement and the Notes, as well as our other obligations and
liabilities, is subject to our future operating performance which is dependent
upon general economic, financial, competitive, legislative, regulatory,
business and other factors beyond our control.
At September 27, 1999, we had cash and cash equivalents of $8.1 million and a
working capital deficit of $40.4 million. We do not consider our working
capital deficit as a true measure of our liquidity position as our working
capital needs typically are met by cash generated by our business. Our working
capital deficits result principally from:
o our policy of using available cash to reduce borrowings which are recorded
as noncurrent liabilities, thereby reducing current assets without a
corresponding reduction in current liabilities;
o our minimal accounts receivable level relative to revenues, as most of our
sales revenues are received from national distributors as advances based
on estimated single copy circulation; and
o accounting for deferred revenues as a current liability. Deferred revenues
are comprised of deferred subscriptions, advertising and single copy
revenues and represent payments received in advance of the period in which
the related revenues will be recognized.
Historically, our primary sources of liquidity have been cash generated from
operations and amounts available under our credit agreements, which have been
used to fund shortfalls in available cash. For the Inception Period, cash
provided by financing activities totaling $337.1 million was primarily used to
fund the Transactions. Cash from operations of $10.1 million generated from
operations for the two fiscal quarters ended September 27, 1999, together with
cash on hand on March 30, 1999 of $3.8 million, was used to fund capital
expenditures as well as pay down the revolving credit facility. For the two
fiscal quarters ended September 28, 1998, cash provided by operating activities
totaling $7.9 million was used primarily to fund capital expenditures totaling
$7.7 million.
We made capital expenditures in the two fiscal quarters ended September 27,
1999 and September 28, 1998 totaling $4.3 million and $7.7 million,
respectively. The relatively high levels of capital spending for the prior year
fiscal quarter reflected increased capital spending on Soap Opera News display
pockets and upgrades of our computer information systems.
At September 27, 1999 our outstanding indebtedness totaled $590.9 million, of
which $340.0 million represented borrowings under the New Credit Agreement. In
connection with the acquisition of the Globe Properties as discussed in Note 8.
to the Consolidated Financial Statements, we expanded our New Credit Agreement
by $90 million. The effective rate for borrowings under the New Credit
Agreement averaged 8.6% for the Inception Period and under the prior credit
agreement averaged 7.1% for the period from March 30, 1999 through May 6, 1999
as compared to 7.5% for the two fiscal quarters ended September 28, 1998. In
order to reduce our exposure to interest rate risk, we have entered into a
$100.0 million interest rate swap agreement expiring in November 2000 under
which we pay a fixed rate of 5.95%.
We have no material assets or operations other than the investments in our
subsidiaries. The Notes are unconditionally guaranteed, on a senior
subordinated basis, by all of our material subsidiaries. Each subsidiary that
will be organized in the future by us, unless such subsidiary is designated as
an unrestricted subsidiary, will jointly, severally, fully and unconditionally
guarantee the Notes on a senior subordinated basis. Note guarantees are joint
and several, full and unconditional and general unsecured obligations of the
note guarantors. The note guarantors are our wholly-owned subsidiaries. At
present, the note guarantors comprise all of our direct and indirect
15
<PAGE> 16
subsidiaries, other than one inconsequential subsidiary. Note guarantees are
subordinated in right of payment to all existing and future senior debt of the
note guarantors, including the New Credit Facility, and are also effectively
subordinated to all secured obligations of note guarantors to the extent of the
assets securing such obligations, including the New Credit Facility.
Furthermore, the Notes indenture permits note guarantors to incur additional
indebtedness, including senior debt, subject to certain limitations. We have
not presented separate financial statements and other disclosures concerning
each of the note guarantors because management has determined that such
information is not material to investors.
So long as the factors set forth in the paragraph immediately above remain true
and correct, under applicable SEC rules and regulations, we believe that note
guarantors will not need to individually comply with the reporting requirements
of the Exchange Act, nor will we have to include separate financial statements
and other disclosures concerning each of the note guarantors in its Exchange
Act reports. In that regard, we will request a no-action letter from the SEC
concurring with our position on this issue. While there can be no assurance, we
expect to receive a favorable response to our no-action letter request.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
The following table and discussion summarizes EBITDA for the current fiscal
quarter and six months ended September 27, 1999 and September 28, 1998. Fiscal
year 1998 EBITDA amounts presented below exclude the operations of Soap Opera
Magazine and Soap Opera News which were sold in February, 1999.
<TABLE>
<CAPTION>
Predecessor
Company The Company Predecessor Company The Company
- ------------------------- ------------------------ ------------------------------------------------------ -----------------------
Fiscal Quarter Fiscal Quarter Two Fiscal Quarters March 30, 1999 May 7, 1999
Ended Sept. 28, Ended Sept. 27, Ended Sept. 28, Through Through
1998 1999 1998 May 6, 1999 Sept. 27, 1999
- ------------------------- ------------------------ --------------------------- -------------------------- -----------------------
<S> <C> <C> <C> <C>
$23,951 $26,898 $46,780 $10,467 $40,094
</TABLE>
The Company defines EBITDA as net income (loss) before extraordinary charges,
interest expense, income taxes, depreciation and amortization and other income
(expense). For the fiscal quarter and six months ended September 28, 1998 a
management fee of $300,000 and $562,000 was included in other income (expense)
and therefore must be included as a reduction of EBITDA in 1998. For the
current fiscal quarter and six month period ended September 27, 1999 a $188,000
and $376,000 management fee is included in selling, general and administrative
and therefore is included in the calculation of EBITDA. EBITDA is presented and
discussed because the Company considers EBITDA an important indicator of the
operational strength and performance of its business including the ability to
provide cash flows to service debt and fund capital expenditures. EBITDA,
however, should not be considered an alternative to operating or net income
(loss), as an indicator of the performance of the Company, or as an alternative
to cash flows from operating activities as a measure of liquidity, in each case
determined in accordance with generally accepted accounting principles
("GAAP").
YEAR 2000 RISK
The Year 2000 issue is the result of computer programs that were written using
only two digits, rather than four, to represent a year. Date-sensitive software
or hardware may not be able to distinguish between the years 1900 and 2000 and
programs that perform arithmetic operations; comparisons or sorting of date
fields may begin yielding incorrect results. This could potentially cause a
system failure or miscalculations that could disrupt operations. To address the
impact of the Year 2000 issue on our computer programs, embedded chips and
significant third-party suppliers of goods and services we have formed a task
force led by our information services department. This task force has completed
its inventory of the potential Year 2000 issues that may exist. Certain key
systems (e.g. financial applications) have already been identified as Year 2000
compliant; in addition, because of the recent replacement of a majority of the
Company's computer hardware, we believe there is little likelihood that this
equipment is not Year 2000 compliant. We believe the largest areas of internal
16
<PAGE> 17
risk for Year 2000 noncompliance are internally developed software applications
and the handheld communications devices used in merchandising by our
subsidiary, Distribution Services, Inc. We have purchased specialized software
that will allow us to identify and correct Year 2000 problems within our
software applications. We have modified and tested the major business
applications and plan to address the secondary business systems by November
1999. Our information services department, working with the handheld
communication devices, has determined that remediation of the existing
handhelds is the appropriate cause of action. We expect to complete this
remediation work by December 1999.
At the present time, the Y2K project is estimated to cost approximately
$500,000 and will be funded through cash flows from operations. Approximately
$250,000 of the estimated Year 2000 costs will relate to hardware and software
purchases and will be capitalized with the remainder being expensed as
incurred.
At present, we believe our technology systems will be Year 2000 compliant and
that the Year 2000 issue will not present a materially adverse risk to our
future results of operations, financial position or cash flow. However, there
can be no assurance that our systems will be Year 2000 compliant prior to
December 31, 1999 or that the costs incurred will not materially exceed the
amounts budgeted. If there are incidences of noncompliance, we plan to allocate
internal resources and retain dedicated consultants to address such incidences.
In the event that our computers are not Year 2000 compliant by December 31,
1999, and as a result of that noncompliance business interruptions occur, we
could incur significant losses in revenues due to such business interruptions,
which could have a material adverse effect on our future results of operations,
financial position or cash flow.
In addition, there is a risk that a significant supplier of goods or services
may not be Year 2000 compliant. We are communicating with our significant
suppliers of goods and services to obtain reasonable assurance that their
products and business systems will be Year 2000 compliant. We rely on certain
suppliers to deliver a broad range of goods and services, including prepress
operations, printing services, paper, wholesale distribution, mailings and
banking services. Although we have taken, and will continue to take, reasonable
efforts to gather information to determine and verify the readiness of products
and dependencies, there can be no assurance that reliable information will be
offered or otherwise available. In order to mitigate the effects of a
significant supplier's potential failure to remediate the Year 2000 issue in a
timely manner, we would take appropriate actions including arranging for
alternate suppliers, re-running processes if errors occur and using manual
intervention to ensure the continuation of operations where necessary. Should
this happen, it may result in significant delays in business operations
including, but not limited to, delays in delivery of products resulting in loss
of revenues, increased operating costs, loss of customers or suppliers, or
other significant disruptions to our business which could have a material
adverse effect on our future results of operations, financial position or cash
flow.
INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Form 10-Q may include forward-looking
statements which reflect our Company's views with respect to future events and
financial performance. These forward-looking statements are subject to certain
risks and uncertainties which could cause actual results to differ materially
from both historical or anticipated results and readers are cautioned not to
place undue reliance upon them. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Factors that, among others, could
cause actual results to differ materially from historical results or those
anticipated include: 1) our high degree of leverage and significant debt
service obligations 2) market conditions for our publications 3) competition 4)
market prices for the paper used in printing our publications 5) our ability to
develop new publications and services 6) changes in economic climate, including
interest rate risk 7) outcome of pending and future litigation and 8) potential
adverse effects of unresolved Year 2000 problems including external key
suppliers.
17
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial
statements. We are subject to interest risk on our credit facilities and any
future financing requirements. Our fixed rate debt consists primarily of Senior
Subordinated Notes, as well as $100 million of interest rate swap agreements on
our term loan and revolving loan. The interest rate swap agreements effectively
convert a portion of our variable rate debt to fixed-rate debt. The interest
rate swap agreement which expires in November 2000 has a fixed interest rate of
5.95%.
The following table presents the future principal payment obligations and
weighted average interest rates associated with our existing long-term
instruments assuming our actual level of long-term indebtedness (in 000's):
<TABLE>
<CAPTION>
2000 2001 2002 2003 Thereafter
---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Liabilities:
Long-Term Debt
$250,000 Fixed Rate (10.25%) -- -- -- -- $250,000
$740 Fixed Rate (11.63%) -- -- -- -- $ 740
$134 Fixed Rate (10.38%) -- -- -- $ 134 --
Term Loan and Revolving Loan
Variable Rate (8.7% for the period
Ended September 27, 1999) -- -- $9,300 $16,150 $314,550
Interest Rate Derivatives:
Interest Rate Swaps:
Variable to Fixed $ 100,000 -- -- -- --
Average Pay Rate (5.95%)
Average Receive Rate (5.34%)
</TABLE>
Interest rate changes result in increases or decreases in our income before
taxes and cash provided from operating activities. A 1% change in our weighted
interest rate on our variable debt net of the effect of our interest rate swap
would result in a change of $600,000 in our interest expense for the three
months ended September 27, 1999.
Our primary market risk exposures relate to (1) the interest rate risk on
long-term and short-term borrowings, (2) our ability to refinance our Senior
Subordinated Notes at maturity at market rates, (3) the impact of interest rate
movements on our ability to meet interest expense requirements and comply with
financial covenants and (4) the impact of interest rate movements on our
ability to obtain adequate financing to fund acquisitions. We manage the
interest rate risk on our outstanding long-term and short-term debt through our
use of fixed and variable rate debt. While we cannot predict or manage our
ability to refinance existing debt or the impact interest rate movements will
have on our ability to refinance existing debt or the impact interest rate
movements will have on our existing debt, we continue to evaluate our financial
position on an ongoing basis.
18
<PAGE> 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
During the fiscal quarter ended September 27, 1999, the Company filed no
reports on Form 8-K.
19
<PAGE> 20
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed by the
undersigned, thereto duly authorized.
AMERICAN MEDIA OPERATIONS, INC.
-------------------------------
Registrant
Date: September 12, 1999 By /s/ JOHN A. MILEY
------------------ -------------------------------
John A. Miley
Executive Vice President
Chief Financial Officer
By /s/ LAWRENCE A. BORNSTEIN
-------------------------------
Lawrence A. Bornstein
Vice President of Finance
Chief Accounting Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN MEDIA OPERATIONS, INC. FOR THE FISCAL QUARTER
ENDED SEPTEMBER 27, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-27-2000
<PERIOD-START> MAR-30-1999
<PERIOD-END> SEP-27-1999
<CASH> 8,108
<SECURITIES> 0
<RECEIVABLES> 11,809
<ALLOWANCES> 469
<INVENTORY> 8,119
<CURRENT-ASSETS> 36,715
<PP&E> 25,755
<DEPRECIATION> 3,658
<TOTAL-ASSETS> 1,038,901
<CURRENT-LIABILITIES> 77,162
<BONDS> 590,874
0
0
<COMMON> 2
<OTHER-SE> 208,459
<TOTAL-LIABILITY-AND-EQUITY> 1,038,901
<SALES> 140,565
<TOTAL-REVENUES> 140,565
<CGS> 116,779
<TOTAL-COSTS> 116,779
<OTHER-EXPENSES> 51
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,172
<INCOME-PRETAX> (4,335)
<INCOME-TAX> 2,317
<INCOME-CONTINUING> (6,652)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,581)
<CHANGES> 0
<NET-INCOME> (9,233)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
