SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
of the Securities Exchange Act of 1934
Commission
For the Quarterly Period Ended September 30, 1997 File No. 33-76716
General Media, Inc.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3750988
- -------------------------------- ----------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
277 Park Avenue, New York, NY 10172
- ------------------------------- --------
(Address of Principal Executive Zip Code
Offices)
(212) 702-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 13, 1997
----- --------------------------------
Common stock, $.01 par value 475,000
<PAGE>
GENERAL MEDIA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
----
PART I- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II- OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote
of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
Exhibit Index 21
2
<PAGE>
Item 1. Financial Statements
General Media, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
and Accumulated Deficit
(unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------- -------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues
Publishing
Newsstand $ 40,814 $ 34,272 $ 13,319 $ 11,048
Advertising 20,887 19,490 6,693 6,542
Subscription 8,786 8,079 2,844 2,571
Other 3,562 2,963 1,203 961
Entertainment 11,708 11,034 3,771 4,309
-------- -------- -------- --------
85,757 75,838 27,830 25,431
-------- -------- -------- --------
Operating costs and expenses
Publishing-production, distribution and editorial 39,569 34,135 12,473 10,917
Entertainment- direct costs 5,999 4,979 2,009 1,687
Selling, general and administrative 33,060 31,404 10,542 10,661
Rent expense from affiliated companies 558 409 136 162
Depreciation and amortization 1,404 1,401 467 467
-------- -------- -------- --------
Total operating costs and expenses 80,590 72,328 25,627 23,894
-------- -------- -------- --------
Income from operations 5,167 3,510 2,203 1,537
-------- -------- -------- --------
Other income (expense)
Interest expense (7,431) (7,430) (2,478) (2,476)
Interest income 188 465 53 155
-------- -------- -------- --------
NET LOSS (2,076) (3,455) (222) (784)
Accumulated deficit-beginning of period (73,483) (74,012) (75,337) (76,683)
-------- -------- -------- --------
Accumulated deficit-end of period ($75,559) ($77,467) ($75,559) ($77,467)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
General Media, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(amounts in thousands)
December 31, September 30,
1996 1997
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,164 $ 9,841
Accounts receivable, net of allowance
for doubtful accounts 11,751 11,366
Inventories 5,250 4,284
Prepaid expenses and other current assets 2,692 3,296
Due from affiliated companies 624 1,139
Loan to affiliate 445
-------- --------
Total current assets 27,481 30,371
PROPERTY AND EQUIPMENT - AT COST;
net of accumulated depreciation 4,716 4,025
OTHER ASSETS
Intangible assets, net 3,810 3,348
Deferred subscription aquisition costs 2,162 2,670
Deferred debt issuance costs, net 3,977 3,235
Loan to affiliated company 1,086 1,086
Other 1,654 1,590
-------- --------
12,689 11,929
-------- --------
$ 44,886 $ 46,325
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 13,918 $ 16,826
Deferred subscription revenue 10,914 11,203
Other liabilities and accrued expenses 5,402 7,971
-------- --------
Total current liabilities 30,234 36,000
SENIOR SECURED NOTES 79,290 79,423
UNEARNED REVENUE 6,160 5,155
COMMITMENTS AND CONTINGENCIES
REDEEMABLE WARRANTS 1,791 1,791
STOCKHOLDERS' DEFICIENCY
Common stock, $.01 par value; 1,000,000
shares; issued and outstanding, 475,000 shares 5 5
Capital in excess of par value 1,418 1,418
Accumulated deficit (74,012) (77,467)
-------- --------
(72,589) (76,044)
-------- --------
$ 44,886 $ 46,325
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
General Media, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
(amounts in thousands)
Nine months ended
September 30,
-----------------
1996 1997
------- -------
Cash flows from operating activities
Net loss ($2,076) ($3,455)
Adjustments to reconcile net loss to
cash provided by operating activities
Depreciation and amortization 1,404 1,401
Amortization of debt issuance costs and discounts 875 875
Net change in operating assets and liabilities 4,572 5,064
------- -------
Net cash provided by operating activities 4,775 3,885
------- -------
Cash flows from investing activities
Capital expenditures (310) (248)
------- -------
Net cash used in investing activities (310) (248)
------- -------
Cash flows from financing activities
Advances to affiliated companies (639) (515)
Loan to affiliate (995) (445)
------- -------
Net cash used in financing activities (1,634) (960)
------- -------
Net increase in cash and cash equivalents 2,831 2,677
Cash and cash equivalents at beginning of period 4,380 7,164
------- -------
Cash and cash equivalents at end of period $ 7,211 $ 9,841
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
General Media, Inc. and Subsidiaries
Notes to Condensed Consolidated
Financial Statements (Unaudited)
(amounts in thousands)
1. Basis of Preparation
General Media, Inc. (the "Company") is a wholly-owned subsidiary of General
Media International, Inc. ("GMI"). 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 and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal, recurring adjustments
considered necessary for a fair presentation, have been included. The balance
sheet information for December 31, 1996 has been derived from the audited
financial statements at that date.
2. Inventories
Inventories consist of the following:
December 31, September 30,
1996 1997
------------ -------------
Paper and printing $2,581 $2,024
Editorials and pictorial 2,288 2,270
Film and programming costs 1,094 923
------ ------
5,963 5,217
Less- LIFO allowance-paper and printing 713 933
------ ------
$5,250 $4,284
====== ======
Paper and printing costs are valued at the lower of cost (last-in, first-out
method) or market. Editorials and pictorials are valued at actual cost, which is
not greater than market. Film and programming costs are valued at the direct
cost of production, less amounts amortized over the expected period of revenue,
generally twelve months from the film release date.
6
<PAGE>
General Media, Inc. and Subsidiaries
Notes to Condensed Consolidated
Financial Statements (Unaudited)
(amounts in thousands)
3. Management Charge
The Company incurs shared common indirect expenses for the benefit of GMI and
affiliated companies, including accounting, personnel, data processing, employee
relations and other administrative services. In addition, the Company is charged
by GMI and its subsidiaries for the benefit of other corporate overhead costs,
executive compensation and other costs which principally relate to office space.
These allocations are based on factors determined by management of the Company
to be appropriate for the particular item, including estimated relative time
commitments of managerial personnel, relative number of employees and relative
square footage of all space occupied. Management believes that the allocation
method and amounts are reasonable.
4. Senior Secured Notes
In December 1993, the Company issued $85 million of Senior Secured Notes (the
"Notes") at an issue price equal to 99.387% of the principal amount of the
Notes. The Notes mature on December 31, 2000 and bear interest at 10-5/8% per
annum, which is payable semiannually. In July 1995, the Company repurchased $5.0
million face amount of its outstanding Notes, including 5,000 warrants, for cash
of $4.1 million.
The Notes are fully and unconditionally guaranteed, jointly and severally, by
each of the Company's direct and indirect subsidiaries (the "Subsidiary
Guarantors"). Each of the Subsidiary Guarantors is a wholly-owned subsidiary of
the Company. The Company is a holding company with no separate assets,
liabilities or operations other than its investment in its subsidiaries and the
Notes. Financial statements of the Subsidiary Guarantors have not been presented
because the aggregate assets, liabilities, operations and equity of the
Subsidiary Guarantors are substantially equivalent to the assets, liabilities,
operations and equity of the Company on a consolidated basis.
The Indenture contains covenants which, among other things, (i) restrict the
ability of the Company to dispose of assets, incur indebtedness, create liens
and make certain investments, (ii) require the Company to make an offer to
purchase outstanding notes if it fails to maintain a consolidated tangible net
worth (deficiency) of no more than ($81.6) million for two consecutive fiscal
quarters, and (iii) limits the Company's ability to pay dividends unless certain
financial performance tests are met. The Subsidiary Guarantors are permitted to
pay intercompany dividends on their shares of common stock. The ability of the
Company and its subsidiaries to incur additional debt is severely limited by
such covenants. As of September 30, 1997, the Company was in compliance with all
such covenants.
Should the Company continue to incur losses, such that the Company's net worth
(deficiency) declines below ($81.6) million for two consecutive quarters, the
Company would be required to purchase on the last day of the next following
fiscal quarter, ten percent of the principal amount of the Notes then
outstanding at a price of 101% of the principal amount thereof.
5. Statement of Cash Flows
Cash payments made for interest during the nine months ended September 30, 1997
and 1996 were $4.4 million in each such period.
7
<PAGE>
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Several of the Company's businesses can experience fluctuations in quarterly
performance. For example, newsstand revenues vary from issue to issue with
higher revenues for special and higher priced issues and any issue including
editorial or pictorial features that generate unusual public interest. In
addition, revenues from the licensing of the Company's trademarks, products and
videos vary with the timing of new agreements. As a result, the Company's
performance in any quarterly period is not necessarily reflective of full-year
results.
The Company is currently engaged in activities in two industry segments:
publishing and entertainment. The publishing segment of the Company is engaged
in the publication of Penthouse magazine and six affiliate magazines (the
"Affiliate Publications" and, together with Penthouse magazine, the "Mens
Magazines"), the licensing of the Penthouse brand name to publishers in foreign
countries and the publication of four specialty automotive magazines; Four
Wheeler, Stock Car Racing, Open Wheel and Drag Racing Monthly (the "Automotive
Magazines"). The entertainment segment of the Company produces a number of
adult-oriented entertainment products, including pay-per-call telephone lines,
videocassettes, pay-per-view programming, interactive products and internet
services.
Results of Operations (Three Months Ended September 30, 1997 vs. 1996)
The Company's revenues were $25.4 million for the three months ended September
30, 1997, compared to revenues of $27.8 million for the three months ended
September 30, 1996, a decrease of $2.4 million. Newsstand revenues were $11.1
million and $13.3 million for the three months ended September 30, 1997 and
1996, respectively, a decrease of $2.2 million. Newsstand revenues for Mens
Magazines were $9.9 and $12.3 million for the three months ended September 30,
1997 and 1996, respectively, a decrease of $2.4 million. Newsstand revenues from
the Automotive Magazines were $1.1 million for the three months ended September
30, 1997 and 1996. Advertising revenues were $6.5 million and $6.7 million for
the three months ended September 30, 1997 and 1996, respectively, a decrease of
$0.2 million. The decrease in advertising revenues is attributable to a $0.4
million decrease in Mens Magazines, partially offset by a $0.2 million increase
in Automotive Magazines. Subscription revenues were $2.6 million and $2.8
million for the three months ended September 30, 1997 and 1996, respectively, a
decrease of $0.2 million. The decrease in subscription revenues is attributable
to a $0.2 million decrease in subscription revenues from Mens Magazines.
Revenues for the Entertainment segment were $4.3 million and $3.8 million for
the three months ended September 30, 1997 and 1996, respectively, an increase of
$0.5 million. Revenues from the Company's video business were $0.8 million for
the three months ended September 30, 1997 and 1996. Revenues from the Company's
pay-per-call business were $2.3 million and $2.9 for the three months ended
September 30, 1997 and 1996, respectively, a decrease of $0.6 million. Revenues
from the Company's internet business were $1.3 million and $0.2 million for the
three months ended September 30, 1997 and 1996, respectively, an increase of
$1.1 million.
Income from operations was $1.5 million for the three months ended September 30,
1997, compared to $2.2 million for the three months ended September 30, 1996.
Income from operations was negatively impacted by decreased revenues, as
discussed above, which was partially offset by a decrease in production,
distribution and editorial costs resulting from a reduction in the number of
magazine copies printed and lower paper costs, as well as lower selling, general
and administrative expenses associated with lower sales and lower advertising
and
8
<PAGE>
Item 2. (Continued)
promotional expenses.
Net non-operating expenses were $2.3 million and $2.4 million for the three
months ended September 30, 1997 and 1996, respectively. Included in interest
expense is the amortization of debt issuance costs and discounts of $0.3 million
for the three months ended September 30, 1997 and 1996.
Net loss for the three months ended September 30, 1997 was ($0.8 ) million,
compared to ($0.2) million for the three months ended September 30, 1996, as a
result of the above discussed factors.
The net revenues and income from operations of the Company were as follows:
Income
Net Revenue from operations
----------- ---------------
Three Three
Months Ended Months Ended
September 30, September 30,
------------- -------------
1996 1997 1996 1997
---- ---- ---- ----
Publishing Segment $ 24.0 $ 21.1 $ 1.2 $ 0.2
Entertainment Segment 3.8 4.3 1.0 1.3
------- ------- ------- -------
$ 27.8 $ 25.4 $ 2.2 $ 1.5
======= ======= ======= =======
Publishing Segment
The net revenues and income (loss) from operations of the Publishing Segment
were as follows :
Income
Net Revenue from operations
----------- ---------------
Three Three
Months Ended Months Ended
September 30, September 30,
------------- -------------
1996 1997 1996 1997
---- ---- ---- ----
Penthouse Magazine and
the Affiliate Publications $ 18.5 $15.4 $ (0.1) $ (0.5)
Foreign edition licensing 0.7 0. 6 0.6 0.3
Automotive Magazines 4.8 5.1 0.7 0.5
------ ------ ------ ------
$ 24.0 $ 21.1 $ 1.2 $ 0.2
====== ====== ====== ======
Penthouse Magazine and the Affiliate Publications
Revenues for Penthouse magazine and the Affiliate Publications were $15.4
million and $18.5 million for the three months ended September 30, 1997 and
1996, respectively, a decrease of $3.1 million. Newsstand revenue for the three
months ended September 30, 1997 was $9.9 million, compared to $12.2 million for
the three months ended September 30, 1996, a decrease of $2.3 million. The
decrease in newsstand revenue is primarily attributable to a 21% decrease in the
number of newsstand copies sold of Penthouse magazine, as well as a decrease of
15% in the number of newsstand copies sold of the Affiliate Publications. The
decrease in newsstand
9
<PAGE>
Item 2. (Continued)
circulation of the Affiliate Publications was partially the result of one less
issue of Penthouse Comix and Variations being published during the three months
ended September 30, 1997, as compared to the 1996 period. Advertising revenue
was $3.5 million for the three months ended September 30, 1997, compared to $3.9
million for the three months ended September 30, 1996, a decrease of $0.4
million. The decline in advertising revenue is primarily attributable to a 16%
decrease in ad pages sold in Penthouse magazine for the three months ended
September 30, 1997, as compared to the 1996 period. The Affiliate Publications
experienced a 10% decline in advertising pages sold during the three months
ended September 30, 1997, compared to the 1996 period. The decline was partially
due to one less issue of Penthouse Comix and Variations being published during
the three months ended September 30, 1997, as compared to the three months ended
September 30, 1996. Subscription revenue was $1.6 million and $1.9 million for
the three months ended September 30, 1997 and 1996, respectively, a decrease of
$0.3 million. This decrease is attributable to a decline in the net revenue per
subscription copy sold. The decreased revenue per copy was due primarily to a
change in the mix of sales between agency sales, which generate a lower per copy
remit rate, and direct to customer sales. Other revenue was $0.4 million for the
three months ended September 30, 1997 and 1996.
Publishing-production, distribution and editorial expenses were $8.3 million for
the three months ended September 30, 1997, compared to $10.0 million for the
three months ended September 30, 1996, a decrease of $1.7 million. Paper costs
were $3.3 million for the three months ended September 30, 1997, compared to
$4.4 million for the three months ended September 30, 1996, a decrease of $1.1
million. The decrease is due both to a decline in the cost of paper and the
reduced number of copies printed of certain publications, as well as one less
issue of Penthouse Comix and Variations being published during the three months
ended September 30, 1997, as compared to the three months ended September 30,
1996. Print costs were $2.9 million for the three months ended September 30,
1997, compared to $3.5 million for the three months ended September 30, 1996, a
decrease of $0.6 million. The decrease is due to the reduced number of copies
printed of certain publications, as well as one less issue of Penthouse Comix
and Variations being published during the three months ended September 30, 1997,
as compared to the three months ended September 30, 1996. Distribution costs
were $1.3 million for the three months ended September 30, 1997, compared to
$1.5 million for the three months ended September 30, 1996, a decrease of $0.2
million. The decrease is attributable to fewer overall copies being distributed
and lower costs associated with the sale of past issues of the Company's
publications sold as value-packs. Editorial costs were $0.8 million for the
three months ended September 30, 1997 and 1996. During the three months ended
September 30, 1997 the adjustment to the LIFO reserve resulted in an additional
expense of $0.3 million, as compared to the 1996 period.
Selling, general and administrative expenses were $7.3 million for the three
months ended September 30, 1997, compared to $8.1 million for the three months
ended September 30, 1996, a decrease of $0.8 million. The decrease is primarily
attributable to lower retail display allowances taken by retailers due to lower
newsstand sales ($0.3 million), lower legal expenses ($0.2 million) and lower
advertising sales commissions related to lower sales ($0.1 million).
Additionally, corporate overhead allocations to the Mens Magazine group were
lower ($0.6 million) during the three months ended September 30, 1997, compared
to the three months ended September 30, 1996. These decreases were partially
offset by increases in subscription and newsstand promotional spending ($0.2
million) and increased salaries ($0.2 million).
Rent expense from affiliated companies represents charges from affiliated
companies for the use of the Company's corporate and executive offices. The
charge is based upon the Company's proportionate share of the
10
<PAGE>
Item 2. (Continued)
operating expenses of such offices. Rent expense from affiliated companies was
$0.1 million for the three months ended September 30, 1997 and 1996,
respectively.
Depreciation and amortization was $0.2 million and $0.3 million for the three
months ended September 30, 1997 and 1996, respectively.
Foreign Edition Licensing
Revenues from licensing of foreign editions were $0.6 million and $0.7 million
for the three months ended September 30, 1997 and 1996, respectively. This
decrease is due primarily to the termination of a contract with the South
African licensee of Penthouse magazine and lower revenue received from various
other licensees.
Selling, general and administrative expenses were $0.3 million and $0.1 million
for the three month period ended September 30, 1997 and 1996, respectively, an
increase of $0.2 million. The increase is attributable to an increase in
corporate overhead allocations.
Automotive Magazines
Revenues for the Automotive Magazines were $5.1 million for the three months
ended September 30, 1997, compared to revenues of $4.8 million for the three
months ended September 30, 1996, an increase of $0.3 million. Newsstand revenues
were $1.1 million for the three months ended September 30, 1997 and 1996,
respectively. Advertising revenues were $3.1 million for the three months ended
September 30, 1997, compared to $2.8 million for the three months ended
September 30, 1996, an increase of $0.3 million, resulting from an increase in
advertising page rates and in advertising pages sold. Subscription revenues were
$0.9 million for the three month period ended September 30, 1997 and 1996,
respectively.
Publishing-production, distribution and editorial expenses were $2.6 million and
$2.5 million for the three months ended September 30, 1997 and 1996,
respectively, an increase of $0.1 million. Paper costs were $1.0 million for the
three months ended September 30, 1997 and September 30, 1996. Paper costs
decreased due to a decline in the cost of paper, however, these decreases were
offset by increased costs due to an increase in magazine copies printed and
increased pages per copy. Print costs were $1.0 million and $0.9 million for the
three months ended September 30, 1997 and 1996, respectively, an increase of
$0.1 million. The increase is primarily attributable to costs associated with
increased magazine copies printed and increased pages per issue. Distribution
costs were $0.5 million for the three months ended September 30, 1997 and 1996.
Editorial costs were $0.1 million for the three months ended September 30, 1997
and 1996.
Selling, general and administrative expenses were $1.9 million and $1.5 million
for the three months ended September 30, 1997 and 1996, respectively, an
increase of $0.4 million. The increase is primarily attributable to an increase
in corporate overhead allocations charged to the Automotive Magazines ($0.2
million) and increased subscription acquisition spending ($0.2 million) during
the three months ended September 30, 1997, as compared to the three months ended
September 30, 1996.
Depreciation and amortization was $0.2 million for the three months ended
September 30, 1997, compared to $0.1 million for the three months ended
September 30, 1996, an increase of $0.1 million.
11
<PAGE>
Item 2. (Continued)
Entertainment Segment
Revenues from the Entertainment Segment were $4.3 million for the three months
ended September 30, 1997, compared to $3.8 million for the three months ended
September 30, 1996, an increase of $0.5 million. Revenues from the Company's
video and CD-ROM business were $0.8 million for the three months ended September
30, 1997 and 1996. Revenues from the Company's pay-per-call business were $2.3
million and $2.9 for the three months ended September 30, 1997 and 1996,
respectively, a decrease of $0.6 million. Revenues from the Company's internet
business were $1.3 million and $0.2 million for the three months ended September
30, 1997 and 1996, respectively, an increase of $1.1 million. The video business
experienced increased revenue as a result of increased licensing revenues and
revenue received from a pay-per-view venture, which were offset by lower
revenues as a result of the discontinued sale of its unprofitable CD-ROM
products and accordingly there were no revenues during the three months ended
September 30,1997. The decrease in pay-per-call revenues is at least partially
attributable to lower circulation of the Company's Mens Magazines. Internet
revenues increased due to revenues received from the sale of subscriptions to
the Company's "Private Collection", contained within the Company's internet site
that began operations in April, 1997. Revenues were also received from a new
arrangement, whereby the Company receives a minimum guaranteed revenue from
another internet site "linked" to the Company's internet site. Such arrangement
also began in April of 1997.
Direct costs were $1.7 million for the three months ended September 30, 1997,
compared to $2.0 million for the three months ended September 30, 1996, a
decrease of $0.3 million. The Company's video division experienced a $0.2
million decrease in direct expenses primarily associated with lower video
production costs and the discontinuation of the Company's CD-ROM business.
Pay-per-call direct costs decreased $0.2 million due to lower sales volume, as
previously discussed.
Selling, general and administrative expenses were $1.3 million and $0.8 million
for the three months ended September 30, 1997 and September 30, 1996,
respectively, an increase of $0.5 million. The Company's video division expenses
increased $0.3 million due primarily to an increase in corporate overhead
allocations, as well as an increase in commission expense related to the new
licence agreements referred to above. Computer processing and consulting fees
relating to the internet business increased $0.2 million for the period, as cost
have increased to support higher revenues.
Results of Operations (Nine Months Ended September 30, 1997 vs. 1996)
The Company's revenues were $75.8 million for the nine months ended September
30, 1997, compared to revenues of $85.7 million for the nine months ended
September 30, 1996, a decrease of $9.9 million. Newsstand revenues were $34.3
million and $40.8 million for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of $6.5 million. Newsstand revenues for Mens Magazines
were $30.8 and $37.3 million for the nine months ended September 30, 1997 and
1996, respectively, a decrease of $6.5 million. Newsstand revenues from the
Automotive Magazines were $3.5 million and $3.6 million for the nine months
ended September 30, 1997 and 1996, respectively, a decrease of $0.1 million.
Advertising revenues were $19.5 million and $20.9 million for the nine months
ended September 30, 1997 and 1996, respectively, a decrease $1.4 million. The
decrease in advertising revenues is attributable to a $2.1 million decrease in
Mens Magazines, partially offset by a $0.7 million increase in Automotive
Magazines. Subscription revenues were $8.1 million and $8.8 million for the nine
months ended September 30, 1997 and 1996, respectively, a decrease of $0.7
million. The decrease in subscription revenues is attributable to a $0.6 million
decrease in revenues from Mens
12
<PAGE>
Item 2. (Continued)
Magazines and a $0.1 million decrease in revenues from Automotive Magazines.
Revenues for the Entertainment segment were $11.0 million and $11.7 million for
the nine months ended September 30, 1997 and 1996, respectively, a decrease of
$0.7 million. Revenues from the Company's video business decreased $0.1 million,
revenues from the Company's pay-per-call business decreased $1.2 million and
revenues from the Company's internet business increased $0.1 million during the
nine months ended September 30, 1997, as compared to the nine month period ended
September 30, 1996.
Income from operations was $3.5 million for the nine months ended September 30,
1997, compared to $5.2 million for the nine months ended September 30, 1996.
Income from operations was negatively impacted by decreased revenues, as
discussed above, which was partially offset by a decrease in production,
distribution and editorial costs resulting from a reduction in the number of
magazine copies printed, as well as lower selling expenses associated with lower
sales, headcount reductions due to corporate restructuring and other spending
efficiencies, which reduced selling, general and administrative costs in 1997.
Net non-operating expenses were $6.9 million and $7.2 million for the nine
months ended September 30, 1997 and 1996, respectively. Included in interest
expense is the amortization of debt issuance costs and discounts of $0.9 million
for the nine months ended September 30, 1997 and 1996.
Net loss for the nine months ended September 30, 1997 was ($3.5 ) million,
compared to ($2.1) million for the nine months ended September 30, 1996, as a
result of the above discussed factors.
The net revenues and income from operations of the Company were as follows:
Income
Net Revenue from operations
----------- ---------------
Three Three
Months Ended Months Ended
September 30, September 30,
------------- -------------
1996 1997 1996 1997
---- ---- ---- ----
Publishing Segment $74.0 $64.8 $ 2.5 $ 1.3
Entertainment Segment 11.7 11.0 2.7 2.2
----- ----- ----- -----
$85.7 $75.8 $ 5.2 $ 3.5
===== ===== ===== =====
13
<PAGE>
Item 2. (Continued)
Publishing Segment
The net revenues and income (loss) from operations of the Publishing Segment
were as follows :
Income
Net Revenue from operations
----------- ---------------
Three Three
Months Ended Months Ended
September 30, September 30,
------------- -------------
1996 1997 1996 1997
---- ---- ---- ----
Penthouse Magazine and
the Affiliate Publications $56.9 $47.3 $(1.1) $(1.5)
Foreign edition licensing 2.0 1.7 1.6 1.2
Automotive Magazines 15.1 15.8 2.0 1.6
---- ---- --- ---
$74.0 $64.8 $2.5 $1.3
===== ======= ==== ====
Penthouse Magazine and the Affiliate Publications
Revenues for Penthouse magazine and the Affiliate Publications were $47.3
million and $56.9 million for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of $9.6 million. Newsstand revenue for the nine months
ended September 30, 1997 was $30.7 million, compared to $37.2 million for the
nine months ended September 30, 1996, a decrease of $6.5 million. The decrease
in newsstand revenue is primarily attributable to a decrease of 19% in the
number of newsstand copies sold of Penthouse magazine, as well as a decrease of
14% in the number of newsstand copies sold of the Affiliate Publications during
the nine months ended September 30, 1997, as compared to the 1996 period.
Advertising revenue was $10.0 million for the nine months ended September 30,
1997, compared to $12.1 million for the nine months ended September 30, 1996, a
decrease of $2.1 million. The decline in advertising revenue is primarily
attributable to a 17% decrease in ad pages sold in Penthouse magazine and a 22%
decline in advertising pages sold in the Affiliate Publications during the nine
months ended September 30, 1997, compared to the 1996 period. The decline in
newsstand circulation also resulted in lower advertising rates in 1997.
Subscription revenue was $5.4 million and $6.0 million for the nine months ended
September 30, 1997 and 1996, respectively, a decrease of $0.6 million. This
decrease is primarily attributable to decreased revenue per copy due to a change
in the mix of sales between agency sales, which generate a lower revenue per
copy, and direct to customer sales. Other revenue was $1.2 million for the nine
months ended September 30, 1997, compared to $1.5 million for the nine months
ended September 30, 1996, a decrease of $0.3 million. The decrease in other
revenues is primarily attributable to a decrease in revenues received from the
sale of past issues of the Company's publications sold as value-packs and a
decrease in royalty revenue.
Publishing-production, distribution and editorial expenses were $26.5 million
for the nine months ended September 30, 1997, compared to $31.5 million for the
nine months ended September 30, 1996, a decrease of $5.0 million. Paper costs
were $9.4 million for the nine months ended September 30, 1997, compared to
$13.2 million for the nine months ended September 30, 1996, a decrease of $3.8
million. The decrease is due both to a decline in the cost of paper and the
reduced number of copies printed of certain publications during the nine
14
<PAGE>
Item 2. (Continued)
months ended September 30, 1997, as compared to the nine months ended September
30, 1996. Print costs were $10.3 million for the nine months ended September 30,
1997, compared to $10.7 million for the nine months ended September 30, 1996, a
decrease of $0.4 million. The decrease is due to decreased number of copies
printed during the nine months ended September 30, 1997, as compared to the nine
months ended September 30, 1996. Distribution costs were $3.9 million for the
nine months ended September 30, 1997, compared to $4.5 million for the nine
months ended September 30, 1996, a decrease of $0.6 million. The decrease is
attributable to fewer copies being distributed and lower distribution costs
associated with lower sales of value-packs. Editorial costs were $2.6 million
for the nine months ended September 30, 1997, compared to $2.7 million for the
nine months ended September 30, 1996, a decrease of $0.1 million, due to
decreased spending levels in Penthouse Comix and Forum, partially offset by
higher writeoffs of obsolete pictorial inventory. Other production costs of $0.5
million were incurred during the nine months ended September 30, 1996 related to
an insert placed in certain publications to promote the Company's pay-per-call
services. During the nine months ended September 30, 1997 the adjustment to the
LIFO reserve increased expense by $0.4 million, as compared to the 1996 period.
Selling, general and administrative expenses were $21.4 million for the nine
months ended September 30, 1997, compared to $25.0 million for the nine months
ended September 30, 1996, a decrease of $3.6 million. The decrease is primarily
attributable to lower salaries, employee benefits, travel and entertainment, and
temporary personnel expenses in 1997 ($0.2million), lower advertising
expenditures and related costs ($0.7 million), lower advertising sales
commissions due to lower advertising sales($0.2 million) and lower retail
display allowances taken by retailers due to lower newsstand sales ($0.8
million). Additionally, corporate overhead allocations to the Mens Magazine
group were $1.6 million lower during the nine months ended September 30, 1997,
compared to the nine months ended September 30, 1996.
Rent expense from affiliated companies represents charges from affiliated
companies for the use of the Company's corporate and executive offices. The
charge is based upon the Company's proportionate share of the operating expenses
of such offices. Rent expense from affiliated companies was $0.4 million for the
nine months ended September 30, 1997, compared to $0.6 million for the nine
months ended September 30, 1996, a decrease of $0.2 million, due to lower
operating costs incurred by the affiliated companies resulting in a lower rent
charge.
Depreciation and amortization was $0.6 million and $0.9 million for the nine
months ended September 30, 1997 and 1996, respectively.
Foreign Edition Licensing
Revenues from licensing of foreign editions were $1.7 million and $2.0 million
for the nine months ended September 30, 1997 and 1996, respectively. This
decrease is due primarily to the loss of the South African licensee of Penthouse
magazine and reduced revenues from several licensees.
Selling, general and administrative expenses were $0.5 million for the nine
months ended September 30, 1997 and 1996, respectively.
Automotive Magazines
Revenues for the Automotive Magazines were $15.8 million for the nine months
ended September 30, 1997,
15
<PAGE>
Item 2. (Continued)
compared to revenues of $15.1 million for the nine months ended September 30,
1996, an increase of $0.7 million. Newsstand revenues were $3.5 million and $3.6
million for the nine months ended September 30, 1997 and 1996, respectively, a
decrease of $0.1 million, due primarily to an automotive special issue being
published during the nine months ended September 30, 1996. Advertising revenues
were $9.5 million for the nine months ended September 30, 1997, compared to $8.8
million for the nine months ended September 30, 1996, an increase of $0.7
million, resulting primarily from an increase in advertising page rates and an
increase in advertising pages sold. Subscription revenues were $2.7 million and
$2.8 million for the nine month period ended September 30, 1997 and 1996,
respectively, a decrease of $0.1 million due primarily to a decline in the
revenue per subscription copy sold.
Publishing-production, distribution and editorial expenses were $7.7 million and
$8.1 million for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of $0.4 million. Paper costs were $2.8 million for the
nine months ended September 30, 1997, compared to $3.5 million for the nine
months ended September 30, 1996, a decrease of $0.7 million. The decrease in
paper costs is primarily attributable to a decrease in the cost of paper and an
automotive special being published during the nine months ended September 30,
1996, partially offset by costs associated with more magazine copies being
printed and more pages per issue. Print costs were $3.0 million and $2.9 million
for the nine months ended September 30, 1997 and 1996, respectively, an increase
of $0.1 million. The increase is primarily attributable to costs associated with
increased copies printed and increased pages per issue. Distribution costs were
$1.6 million and $1.5 million for the nine months ended September 30, 1997 and
1996, respectively, an increase of $0.1 million. The increase is due primarily
to more copies being distributed in 1997. Editorial costs were $0.2 million for
the nine months ended September 30, 1997 and 1996.
Selling, general and administrative expenses were $5.9 million and $4.6 million
for the nine months ended September 30, 1997 and 1996, respectively, an increase
of $1.3 million. The increase is primarily attributable to an increase in
corporate overhead allocations charged to the Automotive Magazines($0.7
million), increased employees costs ($0.2 million), increased professional
fees($0.1 million) and increased subscription spending ($0.2 million) during the
nine months ended September 30, 1997, as compared to the nine months ended
September 30, 1996.
Depreciation and amortization was $0.6 million for the nine months ended
September 30, 1997, compared to $0.4 million for the nine months ended September
30, 1996, an increase of $0.2 million.
Entertainment Segment
Revenues from the Entertainment Segment were $11.0 million for the nine months
ended September 30, 1997, compared to $11.7 million for the nine months ended
September 30, 1996, a decrease of $0.7 million. The Company's video and CD-ROM
business revenues were $2.4 million for the nine months ended September 30, 1997
and 1996 , the pay-per-call business revenues decreased $1.8 million and the
internet business revenues increased $1.1 million. The video business
experienced increased revenue as a result of increased licensing revenues and
revenue received from a pay-per-view venture, which were offset by decreased
revenues as a result of the Company's discontinuing the sale of its unprofitable
CD-ROM products. The decrease in pay-per-call revenues is primarily attributable
to a required reduction in the extension of credit to callers that did not meet
certain criteria established by the Company, the purpose of which was to reduce
the amount of customer charge backs to a level acceptable to credit card
companies. The new credit criteria took effect in mid June of 1996.
16
<PAGE>
Item 2. (Continued)
Additionally, lower circulation of the Company's Mens Magazines contributed to
lower revenues. Internet revenues increased due to revenues received from the
sale of subscriptions to the Company's "Private Collection", contained within
the Company's internet site that began operations in April, 1997. Revenues were
also received from a new arrangement, whereby the Company receives a minimum
guaranteed revenue from another internet site "linked" to the Company's internet
site. Such arrangement also began in April of 1997.
Direct costs were $5.0 million for the nine months ended September 30, 1997,
compared to $6.0 million for the nine months ended September 30, 1996, a
decrease of $1.0 million. The Company's video division experienced a $0.4
million decrease in direct costs primarily associated with lower video
production costs, offset by higher fulfillment and distribution costs associated
with a higher sales volume. Pay-per-call direct costs decreased $0.5 million,
due to lower sales volume, as previously discussed.
Selling, general and administrative expenses were $3.6 million and $3.0 million
for the nine months ended September 30, 1997 and 1996, respectively, an increase
of $0.6 million. The Company's video division expenses increased $0.4 million
due primarily to an increase in corporate overhead allocations as well as an
increase in expenses related to the new license agreements referred to above.
Computer processing and consulting fees relating to the internet business
increased $0.2 million for the period, as the volume for that business has
increased.
Liquidity and Capital Resources
At September 30, 1997, the Company had $9.8 million in cash and cash
equivalents, compared to $7.2 million at December 31, 1996. The increase in cash
and cash equivalents during the nine months ended September 30, 1997 resulted
from net cash flows provided by operating activities of $3.9 million, cash flows
used in investing activities of $0.2 million, and cash flows used in financing
activities of $1.0 million.
Cash flows from operating activities
Net cash provided by operating activities was $3.9 million for the nine months
ended September 30, 1997, compared to net cash provided by operating activities
of $4.6 million for the nine months ended September 30, 1996. Net cash provided
by operating activities for the nine months ended September 30, 1997 was
primarily the result of lower paper inventory levels in 1997 and increased
accounts payable balances due to timing of payments to vendors. Net cash
provided by operating activities for the nine months ended September 30, 1996
was primarily the result of lower paper inventory levels and lower subscription
acquisition cost due to lower spending levels in 1996.
Cash flows from investing activities
Cash used in investing activities for capital expenditures was $0.2 million and
$0.3 million for nine months ended September 30, 1997 and 1996, respectively.
Cash flows from financing activities
Cash flows used in financing activities were $1.0 million for the nine months
ended September 30, 1997, compared to cash flows used in financing activities of
$1.6 million for the nine months ended September 30, 1996. Affiliated company
investments and advances at September 30, 1997 increased $0.5 million from the
December 31, 1996 balance, whereby the Company is owed $1.1 million by GMI as of
September 30, 1997. These balances regularly result from the impact of certain
cost sharing and expense allocation agreements with
17
<PAGE>
Item 2. (Continued)
GMI and its subsidiaries, whereby certain costs, such as shared corporate
salaries and overhead, are paid by the Company and a portion charged to GMI and
its subsidiaries as incurred. These charges generally result in amounts due to
the Company, and are generally repaid sixty days after the end of each quarter
in accordance with the terms of an expense sharing agreement. The reimbursement
by GMI, in the amount of $1.1 million, has not been made as of November 13,
1997. Demand for such payment has been made in writing. Management of the
Company believes that GMI and its subsidiaries have sufficient assets to enable
the Company to recover its advance through liquidation of certain of those
assets or through the refinancing of GMI's debts. The principal shareholder of
GMI has guaranteed the entire amount due to the Company. GMI has agreed in
writing to repay the entire amount due from the proceeds of certain pending
transactions. In 1997, the Company loaned the principal shareholder of GMI $0.4
million. The loan is evidenced by a promissory note, bears interest at 12% per
annum, and is payable by December 31, 1997.
The ability of the Company to incur additional debt is severely limited by the
terms of its Notes and the Indenture. Pursuant to the Indenture, the Company may
not declare a dividend on its common stock, subject to certain exceptions,
unless it meets certain financial covenants set forth therein. The Subsidiary
Guarantors under the Indenture, however, are permitted to make intercompany
dividends on their common stock.
Future outlook
The Company's cash balance at September 30, 1997 was $9.8 million, compared to
$7.2 million at December 31, 1996. The Company is obligated to make a $4.2
million interest payment on its Notes on December 31, 1997.
The Company's results from operations continues to be negatively impacted by
decreased newsstand circulation and advertising revenues from Mens Magazines.
Newsstand circulation has continued to decline during the first nine months of
1997 resulting in continued net losses to the Company. While it is difficult to
predict future newsstand sales of the Company's magazines, it is unlikely that
the Company can achieve profitable results of operations during 1997, if such
sales continue to decline. Furthermore, under the Indenture, should the Company
incur additional losses in the future, such that the Company's tangible net
worth (deficiency) declines from the amount at September 30, 1997 of ($79.4)
million, below ($81.6) million for two consecutive quarters, the Company would
be required to purchase on the last day of the next following fiscal quarter,
ten percent of the principal amount of the Notes then outstanding at a price of
101 % of the principal amount thereof .
Forward-Looking Statements
In addition to historical information, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements. The forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in such forward looking statements. Readers are cautioned not to place
undue reliance in these forward-looking statements, which reflect management's
opinions only as of the date hereof. The Company undertakes no obligation to
revise or publicly release the results of any revision to these forward looking
statements.
18
<PAGE>
Part II-Other Information
Item 1. Legal Proceedings
In August 1996, an action was brought against the Company alleging various
wrongs in connection with the Company's dealings with the former editor of
Penthouse Comix and Mens Adventure Comix. The complaint alleges RICO violations,
breach of contract, trademark and copyright infringement and other charges and
demands damages in excess of $20 million. The Company believes that the claim is
without merit and has tendered defense of this action to its insurance carrier.
In the opinion of management, the outcome of this litigation is not reasonably
likely to have a material adverse effect on the Company's financial position or
results of operations.
Item 6. Exhibits and reports on Form 8-K
(a) The exhibits listed in the "Exhibit Index" are filed as part
of this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
19
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
General Media, Inc.
(Registrant)
Dated: November 13, 1997 By: /s/ Patrick J. Gavin
------------------------
Signature
Patrick J. Gavin
Executive Vice President
Chief Financial Officer and Treasurer
(Duly Authorized Officer and
Principal Accounting Officer)
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Item
- ----------- ----
*10.1 Amendment and Extension by and among R.R. Donnelly & Sons and
General Media International, Inc., General Media, Inc.,
General Media Communications, Inc. And General Media
Automotive Group, Inc.
27 Financial Data Schedule
- ----------
* Confidential Treatment has been requested with respect to certain
information contained in this exhibit.
21
EXHIBIT 10.1 TO QUARTERLY REPORT CONFIDENTIAL INFORMATION OMITTED WHERE
ON FORM 10-Q OF INDICATED BY "[*]" AND FILED SEPARATELY
GENERAL MEDIA, INC. WITH THE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2
OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT AND EXTENSION
This Amendment by and among R. R. Donnelley & Sons Company ("Printer") and
General Media International, Inc., General Media, Inc., General Media
Communications, Inc., and General Media Automotive Group, Inc.. (collectively
the "Publishers") is effective as of the date of signing. The parties agree to
amend all the printing agreements by and among the Printer and Publishers as
follows:
1. Effective with the date identified in the price schedules for each of the
magazines, the existing prices and price schedules shall be superseded and
replaced by the attached Schedule "N' Prices and/or Exhibit "X' Price
Schedules, for each of the following magazines: Penthouse, Girls of
Penthouse, Four Wheeler, Penthouse Comix, Stock Car, Hot Talk, and
Penthouse Letters magazines (the "Publications"). The parties agree to
attach the revised prices to the appropriate printing agreement and which
will be escalated thereafter according to the terms of the appropriate
Agreements.
In all the attached Schedule "A" Prices and/or Exhibit "A" Price Schedules
with an effective date of January 1, 1998, the press running prices
reflect the equivalent reduction of [*] *per thousand equivalent 32 pages,
prior to the regularly scheduled escalation. This [*] per thousand
equivalent 32 pages reduction equates to an approximate [*] reduction on
an annualized basis, based on 1996 production of Publishers titles in
Printer's Des Moines Division, over and above the manufacturing cuts
outlined in Printer's February 28, 1997, letter to Publishers.
Notwithstanding any of the above, for all attached Schedule "A" Prices
and/or Exhibit "A" Price Schedules with effective dates of March 1, 1997,
the price cuts shall become effective March 1, 1997, or upon payment of
all monies owed Printer by Publishers for debts relating to the past
printing of Omni Magazine and Longevity Magazine, whichever date is later.
The amount owed Printer by Publishers for debts relating to the past
printing of Omni Magazine and Longevity Magazine as of May 6, 1997 totals
$493,544.18 (does not include accrued interest). As provided in the next
sentence, until such debts are repaid, including all accrued interest thru
repayment in full, Printer shall apply the pre-March 1, 1997 Price
Schedule dated January 1, 1997. Printer agrees to reduce Publishers'
existing debt to Printer by the difference between the January 1, 1997
Price Schedule and the price schedules to be in-effect per this agreement.
After an amount equal to Publishers debts, including interest, to Printer
has been so applied, Printer shall begin invoicing Publishers magazines
per the price schedule to be in- effect per this agreement and shall
assign such debts to General Media, Inc. Printer shall apply the annual
CPI escalation to all price schedules per the terms of our existing
agreement. In the event that any of the Publishers are in material default
under the terms of any Agreement with Printer or under the terms of any
note due to Printer, the next price reduction shall not become effective
until any such default has been cured.
- --------
[*] Confidential Portions Omitted Where Indicated and Filed Separately with the
Commission.
<PAGE>
2. The Paper Specifications & Requirements Schedules for all of the
Agreements shall be deleted and replaced with the attached revised
schedules, effective with March 1, 1997, production. The parties agree to
attach the revised Paper Specifications & Requirements Schedules to the
appropriate printing agreements.
3. All language in all Agreements pertaining to Printer supplied paper or
Publisher supplied paper shall be replaced with the following:
Printer shall be solely responsible for initiating and executing paper
requisitions for the production of Penthouse, Girls of Penthouse, Four
Wheeler, Penthouse Comix, Stock Car, Open Wheel, Drag Racing Monthly
(formerly known as Super Stock & Drag Illustrated), Hot Talk, and
Penthouse Letters magazines. Printer agrees to purchase all papers through
sources as directed by Publishers. The prices charged Publishers for cover
and body paper will be equal to the price paid by Printer plus [*] for
such paper. The price paid by Printer will be construed as the amount
actually paid net of all discounts except discounts for early payment.
Paper in Printer's inventory that is designated as non-usable after sixty
(60) days, through mutual agreement by Publishers and Printer, shall be
invoiced under the terms above and shall be charged storage at the prices
stated in Schedule "A" Prices and/or Exhibit "A" Price Schedule for the
appropriate magazine for which such paper was originally ordered.
4. The terms of the Agreements for Penthouse magazine (executed April 30,
1980), Stock Car Racing and Open Wheel and Drag Racing Monthly (formerly
known as Super Stock & Drag Illustrated) magazines (executed July 15,
1991), Girls of Penthouse magazine (executed May 13, 1987), Four Wheeler
magazine (executed May 1, 1987), Penthouse Comix magazine, and Hot Talk
and Penthouse Letters magazines (executed July 20, 1993) are hereby
extended to cover all production through December 31, 2003.
5. Effective upon execution, Terms of Payment for all Publishers titles
produced by Printer shall be net cash thirty (30) days after date of
invoice for each issue. The above provisions may be reviewed by us and
should there be a substantial adverse change in your credit standing or in
the event that you do not comply with terms of these provisions, we will
have the right to change terms of payment, and our obligation to perform
further work (other than work in progress) will be subject to reaching
mutual agreement on revised terms. Printer will promptly notify Publisher
upon reaching a decision to not perform further work, and Publisher
retains the right to take such further work (other than work in progress)
to a different Printer.
6. Effective within sixty (60) days after execution of this Amendment,
Printer agrees to begin a transition plan to move the Publications
produced in Printer's Des Moines Division to computer-to-plate technology.
7. Except as provided in this Amendment, all other provisions of the
Agreements for each of the Publications shall remain in full force and
effect.
- ----------
[*] Confidential Portions Omitted Where Indicated and Filed Separately with the
Commission.
<PAGE>
In Witness Whereof, the parties have caused this Amendment to be signed by their
duly authorized officers as of the date noted above.
R.R. Donnelley & Sons Company
By: /s/Danny L.Davis Date July 20, 1997
--------------------------------------------
Danny L. Davis:
Senior Vice President, Magazine Publishing Services
General Media International, Inc.
General Media, Inc.
General Media Communications, Inc.
General Media Automotive Group, Inc.
By: /s/Eugene Boffa, Jr. Date July 8, 1997
--------------------------------------------
Eugene Boffa, Jr.:
President & Chief Operating Officer
By: /s/Patrick J. Gavin Date July 3, 1997
--------------------------------------------
Patrick J. Gavin
Executive Vice President, Chief Financial Officer, & Treasurer
<PAGE>
GENERAL MEDIA INTERNATIONAL, INC.
PROPOSED PRESSROOM PRICING
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
*** * * ** ** ** ***
PENTHOUSE FOUR GOP PH HOT TALK PH LETTERS PH COMIX STOCK CAR
WHEELER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 Print Order: [*] [*] [*] [*] [*] [*] [*]
Press Forms
Web Offset
Cover 4/C Rate: [*] [*] [*] [*] [*] [*] [*]
Proposed Rate: [*] [*] [*] [*] [*] [*] [*]
32 4/C Rate: [*] [*] [*] [*] [*] [*] [*]
Proposed Rate: [*] [*] [*] [*] [*] [*] [*]
16 4/C Rate: [*] [*] [*] [*] [*] [*] [*]
Proposed Rate: [*] [*] [*] [*] [*] [*] [*]
8 4/C Rate: [*] [*] [*] [*] [*] [*] [*]
Proposed Rate: [*] [*] [*] [*] [*] [*] [*]
Rotogravure
56 Page Rate: [*]
Proposed Rate: [*]
48 Page Rate: [*]
Proposed Rate: [*]
</TABLE>
Note: Above pressroom pricing totals [*] in savings based upon 1996
productions figures. These prices will be implemented March 1, 1997*,
July 1, 1997** and January 1, 1998***.
- ----------
[*] Confidential Portions Omitted Where Indicated and Filed Separately with the
Commission.
<PAGE>
GENERAL MEDIA INTERNATIONAL, INC.
PROPOSED MAKEREADY PRICING
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
*** * * ** **
PENTHOUSE FOUR WHEELER GOP PH HOT TALK PH LETTERS PH COMIX STOCK CAR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 Print Order: [*] [*] [*] [*] [*] [*] [*]
Press Forms
Web Offset
Cover 4/C:
Current MR: [*] [*] [*] [*] [*] [*] [*]
Proposed MR: [*] [*] [*]
32 4/C:
Current MR: [*] [*] [*] [*] [*] [*] [*]
Proposed MR: [*] [*] [*]
16 4/C:
Current MR: [*] [*] [*] [*] [*] [*] [*]
Proposed MR: [*] [*] [*]
8 4/C:
Current MR: [*] [*] [*] [*] [*] [*] [*]
Proposed MR: [*] [*] [*]
Rotogravure
56 Page [*]
Makeready: [*]
Cylinders:
48 Page
Makeready: [*]
Cylinders: [*]
</TABLE>
Note: Above makeready proposed pricing totals [*] in savings based upon 1996
production figures. These prices will be implemented March 1, 1997*, and
January 1, 1998***.
- ----------
[*] Confidential Portions Omitted Where Indicated and Filed Separately with the
Commission.
<PAGE>
GENERAL MEDIA INTERNATIONAL, INC.
PROPOSED CONTRACT PAPER WASTE STANDARDS
IN EFFECT MARCH 1, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PENTHOUSE FOUR WHEELER GOP PH HOT TALK PH LETTERS PH COMIX STOCK CAR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 Print Order: [*] [*] [*] [*] [*] [*] [*]
Press Forms
Web Offset
Cover
Makeready: [*] [*] [*] [*] [*] [*] [*]
Current Run: [*] [*] [*] [*] [*] [*] [*]
Proposed Run: [*] [*] [*] [*] [*] [*] [*]
32 Page 4/C
Makeready: [*] [*] [*] [*] [*] [*] [*]
Current Run: [*] [*] [*] [*] [*] [*] [*]
Proposed Run: [*] [*] [*] [*] [*] [*] [*]
16 Page Dup 4/C
Makeready: [*] [*] [*] [*] [*] [*] [*]
Current Run: [*] [*] [*] [*] [*] [*] [*]
Proposed Run: [*] [*] [*] [*] [*] [*] [*]
8 Page Uncoated 3/C
Makeready: [*]
Current Run: [*]
Proposed Run: [*]
Rogravure
56 Page
Makeready: [*]
Current Run: [*]
Proposed Run: [*]
48 Page
Makeready: [*]
Current Run: [*]
Proposed Run: [*]
</TABLE>
Note: Above paper reductions total [*] based upon 1996 paper billings. This
represents a [*] reduction or [*] pounds at [*] per cwt pricing.
- ----------
[*] Confidential Portions Omitted Where Indicated and Filed Separately with
the Commission.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GENERAL
MEDIA, INC'S SEPTEMBER 30, 1997 FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
