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EX-10.1 - EXHIBIT 10.1 - AMERICAN MEDIA INCexhibit101_amendmentno1tor.htm
EX-32 - EXHIBIT 32 - AMERICAN MEDIA INCami-ex32_20151231.htm
EX-31.1 - EXHIBIT 31.1 - AMERICAN MEDIA INCami-ex311x20151231.htm
EX-31.2 - EXHIBIT 31.2 - AMERICAN MEDIA INCami-ex312x20151231.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 001-10784
American Media, Inc.
(Exact name of registrant as specified in its charter)
Delaware
65-0203383
State or other jurisdiction
of incorporation or organization
(I.R.S. Employer
Identification No.)
1000 American Media Way, Boca Raton, Florida 33464
(Address of principal executive offices) (Zip Code)
(561) 997-7733
(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 o
No þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
 
 
Yes þ
No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 
Accelerated filer
o
Non-accelerated filer
þ
(Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
 
 
Yes o
No þ

There is no public market for the registrant’s common stock. The number of shares outstanding of the registrant's common stock, $0.0001 par value, as of January 31, 2016 was 100.




AMERICAN MEDIA, INC.
 
QUARTERLY REPORT ON FORM 10-Q
For the Fiscal Quarter Ended December 31, 2015
 
TABLE OF CONTENTS

 
 
  Page(s)
 
 
 
 
 
 
 
 
 
Unaudited Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2015
 
 
 
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months ended December 31, 2015 and 2014
 
 
 
 
 
 
 
 
 
 





2


American Media, Inc. and its consolidated subsidiaries are referred to in this Quarterly Report on Form 10-Q (this "Quarterly Report") as American Media, AMI, the Company, we, our and us.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report for the fiscal quarter ended December 31, 2015 contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"). These forward-looking statements relate to our current beliefs regarding future events or our future operating or financial performance. By their nature, forward-looking statements involve risks, trends, and uncertainties that could cause actual results to differ materially from those anticipated in any forward-looking statements.

We have tried, where possible, to identify such statements by using words such as "believes," "expects," "intends," "estimates," "may," "anticipates," "will," "likely," "project," "plans," "should," "could," "potential" or "continue" and similar expressions in connection with any discussion of future operating or financial performance. Any forward-looking statement is and will be based upon our then current expectations, estimates and assumptions regarding future events and is applicable only as of the dates of such statement. We may also make written and oral forward-looking statements in the reports we file from time to time with the Securities and Exchange Commission (the "SEC").

Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, the following:
 
 
our high degree of leverage and significant debt service obligations;
 
 
 
 
 
 
our ability to implement our business strategy;
 
 
 
 
 
 
increased competition, including price competition and competition from other publications and other forms of media, such as television, radio and digital concentrating on celebrity news and health and fitness;
 
 
 
 
 
 
changes in general economic and business conditions, both nationally and internationally, which can influence the overall demand for our services and products by our customers and advertisers and affect the readership level of our publications as well as our advertising and circulation revenue;
 
 
 
 
 
 
changes in discretionary consumer spending patterns;
 
 
 
 
 
 
any disruption in the distribution of our magazines through wholesalers;
 
 
 
 
 
 
any loss of one or more of our key vendors or key advertisers;
 
 
 
 
 
 
changes in the price of fuel, paper, ink and postage;
 
 
 
 
 
 
the effects of possible credit losses;
 
 
 
 
 
 
whether we decide to engage in acquisitions, enter into partnerships and joint ventures or execute publishing services agreements in the future;
 
 
 
 
 
 
our ability to attract and retain experienced and qualified personnel;
 
 
 
 
 
 
adverse results in litigation matters or any regulatory proceedings;
 
 
 
 
 
 
any future impairment of our goodwill or other identified intangible assets;
 
 
 
 
 
 
the potential effects of threatened or actual terrorist attacks or other acts of violence, war or civil unrest;
 
 
 
 
 
 
our ability to maintain an effective system of internal controls over financial reporting;
 
 
 
 
 
 
unforeseen increases in employee benefit costs; and
 
 
 
 
 
 
changes in accounting standards.

These and other factors are discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015 (the “2015 Form 10-K”) under the heading “Part I, Item 1A. Risk Factors.”

We caution you not to place undue reliance on any forward-looking statement, which speaks only as of the date of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statement contained in this Quarterly Report, whether as a result of new information, future events or otherwise, except as required by law.

3


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
 
December 31,
2015
 
March 31,
2015
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents ($301 and $880 related to VIEs, respectively)
$
922

 
$
3,452

Trade receivables, net of allowance for doubtful accounts of $3,081 and $3,281, respectively ($1 related to VIEs)
19,577

 
39,412

Inventories ($0 and $95 related to VIEs, respectively)
834

 
873

Prepaid expenses and other current assets ($197 and $198 related to VIEs, respectively)
11,800

 
11,356

Total current assets
33,133

 
55,093

PROPERTY AND EQUIPMENT, NET:
 
 
 
Leasehold improvements
3,748

 
3,801

Furniture, fixtures and equipment
41,120

 
43,979

Less – accumulated depreciation
(33,971
)
 
(30,230
)
Total property and equipment, net ($15 and $25 related to VIEs, respectively)
10,897

 
17,550

OTHER ASSETS:
 
 
 
Deferred debt costs, net
4,560

 
6,383

Deferred rack costs, net
3,888

 
4,824

Investments in affiliates
1,419

 
803

Other long-term assets
2,830

 
3,193

Total other assets
12,697

 
15,203

GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
 
 
 
Goodwill
153,998

 
153,998

Other identified intangibles, net of accumulated amortization of $135,580 and $122,791, respectively ($6,000 related to VIEs)
212,804

 
224,181

Total goodwill and other identified intangible assets, net
366,802

 
378,179

TOTAL ASSETS
$
423,529

 
$
466,025

 
 
 
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable ($19 and $43 related to VIEs, respectively)
$
9,787

 
$
15,781

Accrued expenses and other liabilities ($0 and $194 related to VIEs, respectively)
29,381

 
44,015

Accrued interest
2,831

 
10,075

Deferred revenues ($0 and $589 related to VIEs, respectively)
25,618

 
26,734

Total current liabilities
67,617

 
96,605

NON-CURRENT LIABILITIES:
 
 
 
Senior secured notes, net
308,306

 
309,569

Revolving credit facility
18,200

 
14,700

Other non-current liabilities
8,239

 
8,352

Deferred income taxes
35,584

 
70,747

Total liabilities
437,946

 
499,973

COMMITMENTS AND CONTINGENCIES (see Note 11)


 


Redeemable noncontrolling interests (see Note 9)
3,000

 
3,000

STOCKHOLDERS' DEFICIT:
 
 
 
Common stock, $0.0001 par value; 100 shares authorized, issued and outstanding as of December 31, 2015 and March 31, 2015, respectively

 

Additional paid-in capital
945,037

 
945,037

Accumulated deficit
(962,024
)
 
(981,593
)
Accumulated other comprehensive loss
(430
)
 
(392
)
Total stockholders' deficit
(17,417
)
 
(36,948
)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$
423,529

 
$
466,025



The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

4


AMERICAN MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2015
 
2014
 
2015
 
2014
OPERATING REVENUES:
 
 
 
 
 
 
 
Circulation
$
38,191

 
$
43,982

 
$
112,438

 
$
127,003

Advertising
15,693

 
15,711

 
49,578

 
47,211

Other
1,260

 
452

 
11,168

 
10,741

Total operating revenues
55,144

 
60,145

 
173,184

 
184,955

OPERATING EXPENSES:
 
 
 
 
 
 
 
Editorial
5,480

 
6,193

 
18,645

 
21,177

Production
12,475

 
14,784

 
42,256

 
51,329

Distribution, circulation and other costs
8,908

 
9,577

 
26,582

 
29,767

Selling, general and administrative
15,899

 
19,217

 
45,953

 
64,213

Depreciation and amortization
6,513

 
3,947

 
19,858

 
9,985

Impairment of goodwill and intangible assets

 

 

 
18,458

Total operating expenses
49,275

 
53,718

 
153,294

 
194,929

OPERATING INCOME (LOSS)
5,869

 
6,427

 
19,890

 
(9,974
)
OTHER EXPENSES:
 
 
 
 
 
 
 
Interest expense
(9,608
)
 
(11,468
)
 
(29,308
)
 
(39,267
)
Amortization of deferred debt costs
(887
)
 
(487
)
 
(2,603
)
 
(2,544
)
Other income (expense)

 
3,479

 
(39
)
 
3,778

Total other expenses, net
(10,495
)
 
(8,476
)
 
(31,950
)
 
(38,033
)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(4,626
)
 
(2,049
)
 
(12,060
)
 
(48,007
)
INCOME TAX BENEFIT
(2,338
)
 
(12,405
)
 
(32,642
)
 
(17,552
)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
(2,288
)
 
10,356

 
20,582

 
(30,455
)
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES

 
(403
)
 

 
(407
)
NET INCOME (LOSS)
(2,288
)
 
9,953

 
20,582

 
(30,862
)
LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
(27
)
 
7

 
(1,013
)
 
(1,208
)
NET INCOME (LOSS) ATTRIBUTABLE TO AMERICAN MEDIA, INC. AND SUBSIDIARIES
$
(2,315
)
 
$
9,960

 
$
19,569

 
$
(32,070
)
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2015
 
2014
 
2015
 
2014
NET INCOME (LOSS)
$
(2,288
)
 
$
9,953

 
$
20,582

 
$
(30,862
)
Foreign currency translation adjustment
(37
)
 
(63
)
 
(38
)
 
(111
)
Comprehensive income (loss)
(2,325
)
 
9,890

 
20,544

 
(30,973
)
Less: comprehensive (income) loss attributable to noncontrolling interests
(27
)
 
7

 
(1,013
)
 
(1,208
)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO AMERICAN MEDIA, INC. AND SUBSIDIARIES
$
(2,352
)
 
$
9,897

 
$
19,531

 
$
(32,181
)



The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

5


AMERICAN MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(in thousands, except share information)

 
Nine Months Ended December 31, 2015
 
 
 
 
 
Accumulated
 
 
 
 
Additional
 
other
Total
 
Common stock
paid-in
Accumulated
comprehensive
stockholders'
 
Shares
Total
capital
deficit
loss
deficit
BALANCE, BEGINNING OF PERIOD
100

$

$
945,037

$
(981,593
)
$
(392
)
$
(36,948
)
Net income



19,569


19,569

Foreign currency translation




(38
)
(38
)
BALANCE, END OF PERIOD
100

$

$
945,037

$
(962,024
)
$
(430
)
$
(17,417
)



 
Nine Months Ended December 31, 2014
 
 
 
 
 
Accumulated
 
 
 
 
Additional
 
other
Total
 
Common stock
paid-in
Accumulated
comprehensive
stockholders'
 
Shares
Total
capital
deficit
loss
deficit
BALANCE, BEGINNING OF PERIOD
10,000,000

$
1

$
822,723

$
(954,466
)
$
(231
)
$
(131,973
)
Net loss



(32,070
)

(32,070
)
Foreign currency translation




(111
)
(111
)
Issuance of common stock
1,172,250


205



205

Retirement of common stock
(11,172,150
)
(1
)
1




Debt for equity conversion, net of expenses


121,535



121,535

Capital contribution


573



573

BALANCE, END OF PERIOD
100

$

$
945,037

$
(986,536
)
$
(342
)
$
(41,841
)




















The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

6


AMERICAN MEDIA, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Nine Months Ended December 31,
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
Net income (loss)
$
20,582

 
$
(30,862
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
19,858

 
10,825

Impairment of goodwill and intangible assets

 
18,458

Amortization of deferred debt costs
2,603

 
2,544

Amortization of deferred rack costs
3,852

 
4,249

Deferred income tax benefit
(33,445
)
 
(14,617
)
Non-cash payment-in-kind interest accretion

 
4,809

Provision for doubtful accounts

 
5,870

Gain on sale of assets
(15
)
 
(3,417
)
Other
(554
)
 
2,434

Changes in operating assets and liabilities:
 
 
 
Trade receivables
19,927

 
4,303

Inventories
39

 
8,819

Prepaid expenses and other current assets
(2,134
)
 
(2,249
)
Deferred rack costs
(2,916
)
 
(3,481
)
Other long-term assets
363

 
153

Accounts payable
(5,992
)
 
(6,597
)
Accrued expenses and other liabilities
(14,497
)
 
9,265

Accrued interest
(7,244
)
 
(11,234
)
Other non-current liabilities
(113
)
 
(85
)
Deferred revenues
(1,116
)
 
4,528

Total changes in operating assets and liabilities
(13,683
)
 
3,422

Net cash (used in) provided by operating activities
(802
)
 
3,715

INVESTING ACTIVITIES
 
 
 
Purchases of property and equipment
(500
)
 
(6,659
)
Purchases of intangible assets
(1,334
)
 
(2,520
)
Proceeds from sale of assets
24

 
3,009

Distributions from affiliates

 
2,570

Net cash used in investing activities
(1,810
)
 
(3,600
)
FINANCING ACTIVITIES
 
 
 
Proceeds from revolving credit facility
54,400

 
57,800

Repayments to revolving credit facility
(50,900
)
 
(59,200
)
Proceeds from issuance of senior secured notes

 
12,500

Senior secured notes repurchases
(2,000
)
 
(5,975
)
Capital contribution

 
573

Costs incurred in restructuring

 
(4,315
)
Redemption premium payment
(118
)
 

Payment of debt costs
(43
)
 

Payments to noncontrolling interest holders of Olympia
(1,150
)
 
(1,202
)
Net cash provided by financing activities
189

 
181

Effect of exchange rate changes on cash
(107
)
 
(248
)
Net (decrease) increase in cash and cash equivalents
(2,530
)
 
48

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
3,452

 
3,030

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
922

 
$
3,078

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Non-cash property and equipment (incurred but not paid)
$

 
$
2

Non-cash debt for equity exchange
$

 
$
123,960

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

7


AMERICAN MEDIA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015

Note 1 - Nature of the Business

Description of the Business

American Media, Inc. and its subsidiaries (collectively, the "Company", "AMI", "we", "our" or "us") owns and operates the leading celebrity and health and fitness media brands in the United States. AMI was incorporated under the laws of the State of Delaware in 1990 and is headquartered in Boca Raton, Florida. The Company is a wholly-owned subsidiary of AMI Parent Holdings, LLC, a Delaware limited liability company (the "Parent"), which is controlled by certain investors of the Company (collectively, the "Investors") pursuant to the merger consummated in August 2014 (the "Merger"). As a result of the Merger, the Parent acquired 100% of the issued and outstanding shares of common stock of the Company.

In January 2015, we sold our Shape, Fit Pregnancy and Natural Health publications, which comprised our Women's Active Lifestyle segment, for approximately $60 million in cash plus an earn-out of up to $60 million. See Note 10, "Dispositions" for further information. After giving effect to the divestiture of our Women's Active Lifestyle segment, the Company operates and reports financial and operating information in the following two segments: Celebrity Brands and Men's Active Lifestyle. The Company also provides general corporate services to its segments which is reported as a third, non-operating segment, Corporate and Other. See Note 12, "Business Segment Information" for further information regarding the Company's reporting segments.

As of December 31, 2015, we own and operate a diversified portfolio of 10 publications; National Enquirer, Star, Globe, National Examiner, OK! and Soap Opera Digest are published weekly; Men's Fitness, Muscle & Fitness and Flex are published 10 times per year and Muscle & Fitness Hers is published bi-monthly.

Our fiscal year ends on March 31, 2016 and may be referred to herein as fiscal 2016.

Liquidity

The Company is highly leveraged. As of December 31, 2015, the Company had approximately $326.5 million of outstanding indebtedness, consisting of $308.3 million of senior secured notes and $18.2 million under the revolving credit facility.

As further described in Note 4, "Revolving Credit Facility," subsequent to December 31, 2015, the terms of the revolving credit facility were amended and restated to, among other things, extend the maturity date to June 2017 and modify the financial covenants in effect through the date of maturity.

Over the next year, the cash interest payments due under the Company's debt agreements are approximately $36.3 million and there are no scheduled principal payments due. As of December 31, 2015, the Company has $0.9 million of cash and $12.4 million available for borrowing pursuant to the revolving credit facility.

Several of our smaller wholesalers and our second-largest wholesaler, Source Interlink Distribution ("Source"), ceased operations during fiscal 2015. Since then we have transitioned the previous wholesalers' newsstand distribution to the two remaining major wholesalers. This transition had an immediate adverse impact on single copy newsstand sales and liquidity during fiscal 2015 and into the first half of fiscal 2016.

The Company's substantial indebtedness could adversely affect the business, financial condition and results of operations. Specifically, the Company's level of indebtedness could have important consequences for the business and operations, including the following:

requiring the Company to dedicate a substantial portion of its cash flow from operations for payments on indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures and general corporate requirements or to carry out other aspects of the business;

placing the Company at a potential disadvantage compared to its competitors that have less debt;


8


increasing the Company's vulnerability to general adverse economic and industry conditions;

limiting the Company's ability to make material acquisitions or take advantage of business opportunities that may arise;

limiting the Company's flexibility in planning for, or reacting to, changes in the industry;

limiting the Company's ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements or to carry out other aspects of the business; and
  
exposing the Company to fluctuations in interest rates as the revolving credit facility has a variable rate of interest.

The Company plans to refinance all or a portion of its indebtedness on or before maturity. The Company cannot assure that it will be able to refinance any of its indebtedness on commercially reasonable terms or at all.

As a result of declining operating results and cash flow from operations. the Company implemented management action plans during fiscal 2016 that reduced expenses and capital expenditures. The management action plans included outsourcing technology and operation functions, digital content renegotiations, print order efficiencies and editorial and advertising sales staff consolidation.

Although the Company is significantly leveraged, it expects that the current cash balances, liquidity provided in connection with the revolving credit facility and cash generated from operations, should be sufficient to meet working capital, capital expenditures, debt service, and other cash needs for the next year.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The information included in the foregoing interim condensed consolidated financial statements is unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations for the interim periods presented, have been reflected herein. These unaudited condensed consolidated financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the audited financial statements and footnotes contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") with respect to the Company's fiscal year ended March 31, 2015 (the "2015 Form 10-K"), which may be accessed through the SEC's website at http://www.sec.gov.

The results of operations for interim periods presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year or any other subsequent interim period.

Principles of Consolidation

Our consolidated financial statements reflect our financial statements, those of our wholly-owned domestic and foreign subsidiaries and those of certain variable interest entities where we are the primary beneficiary. For consolidated entities where we own less than 100% of the equity, we record net income (loss) attributable to noncontrolling interests in our consolidated statements of income (loss) equal to the percentage of the interests retained in such entities by the respective noncontrolling parties. All material intercompany balances and transactions are eliminated in consolidation.

In determining whether we are the primary beneficiary of an entity and therefore required to consolidate, we apply a qualitative approach that determines whether we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. These considerations impact the way we account for our existing joint ventures. We continually assess whether we are the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions occur.

See Note 9, “Investments in Affiliates and Redeemable Noncontrolling Interests.”


9


Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("US GAAP") requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Management's estimates are based on the facts and circumstances available at the time estimates are made, past historical experience, risk of loss, general economic conditions and trends, and management's assessments of the probable future outcome of these matters. As a result, actual results could differ from those estimates.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out method. The Company writes down inventory for estimated obsolescence and/or excess or damaged inventory. Inventory write-downs during the nine months ended December 31, 2015 and 2014 were insignificant.

The Company is party to a long-term paper supply and purchasing agreement pursuant to which a third party manages all aspects of the Company's raw material paper inventory. As a result, the Company does not maintain raw material paper inventory. The finished product inventory, comprised of paper, production and distribution costs of future issues totaled $0.8 million and $0.9 million, respectively, at December 31, 2015 and March 31, 2015.

Concentrations

We rely on wholesalers for the retail distribution of our magazines. Several of our smaller wholesalers and our second-largest wholesaler, Source, ceased operations during fiscal 2015. A small number of wholesalers are responsible for a substantial percentage of the wholesale magazine distribution business. As of December 31, 2015, single copy revenues consisted of copies distributed to retailers primarily by two major wholesalers.

During the nine months ended December 31, 2015 and 2014, The News Group accounted for approximately 20% and 19%, respectively, of our total operating revenues and The Hudson Group accounted for approximately 5% of our total operating revenues. We have multi-year service arrangements with our major wholesalers, which provide incentives to maintain certain levels of service.

Recently Adopted Accounting Pronouncements

In April 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (Topic 205 and Topic 360) ("ASU 2014-08") which raises the threshold for disposals to qualify as discontinued operations. Under this new guidance, a discontinued operation is (1) a component of an entity or group of components that has been disposed of or is classified as held for sale that represents a strategic shift that has or will have a major effect on an entity's operations and financial results or (2) an acquired business that is classified as held for sale on the acquisition date. This guidance also requires expanded or new disclosures for discontinued operations, individually material disposals that do not meet the definition of a discontinued operation, an entity's continuing involvement with a discontinued operation following disposal, and retained equity method investments in a discontinued operation. ASU 2014-08 was effective for the Company on April 1, 2015. The adoption of ASU 2014-08 did not have an impact on the consolidated financial position, results of operations or cash flows.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"), which simplifies the presentation of deferred tax assets and deferred tax liabilities. The new guidance no longer requires the presentation of current deferred tax assets and deferred tax liabilities on a classified balance sheet, rather requiring all to be presented as non-current. This guidance is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The Company prospectively adopted this guidance in the third quarter of fiscal 2016. As required by this guidance, all deferred tax assets and liabilities are classified as non-current in our consolidated balance sheet as of December 31, 2015, which is a change from our historical presentation wherein certain of our deferred tax assets and liabilities were classified as current and the remainder were classified as non-current. The March 31, 2015 balance sheet has not been retrospectively adjusted. As this guidance impacts presentation only, the adoption of ASU 2015-17 did not have an impact on the results of operations or cash flows.


10


Recently Issued Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern (Topic 205) ("ASU 2014-15"), which establishes management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and setting rules for how this information should be disclosed in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016, with early adoption permitted. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial position results of operations or cash flows.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20) ("ASU 2015-01"), which simplifies the income statement presentation by eliminating the concept of extraordinary items. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial position, results of operations or cash flows.

In February 2015, the FASB issued ASU 2015-02, Consolidations, Amendments to the Consolidation Analysis (Topic 810) ("ASU 2015-02"), which changes the identification of variable interests, the variable interest characteristic for a limited partnership or similar entity and the primary beneficiary determination all of which are intended to improve the consolidation guidance as well as increase transparency and consistency of financial reporting. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2015, with early adoption permitted. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial position, results of operations or cash flows.

In April 2015, the FASB issued a proposal for a one-year deferral of the effective date for ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Under this proposal, the standard would be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. ASU 2014-09 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. As a result of the one-year deferral, ASU 2014-09 will now be effective for the Company on April 1, 2018 using one of two retrospective application methods. The Company has not determined the potential effects on the consolidated financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30) ("ASU 2015-03"), which requires the presentation of debt issuance costs to be reflected as a reduction from the face amount of the related debt, with amortization recorded as interest expense, rather than recording as a deferred asset. The guidance is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2015, and requires retrospective application. The Company does not expect the adoption of this guidance to have a significant impact on the consolidated financial position, results of operations or cash flows, although it will change the financial statement classification of the deferred debt cost. As of December 31, 2015 and March 31, 2015, the Company had $4.6 million and $6.4 million of net deferred debt costs, respectively, included on the consolidated balance sheets. Under the new guidance, the net deferred debt costs would offset the carrying amount of the respective debt on the consolidated balance sheets.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) ("ASU 2015-11"), which simplifies the measurement of inventory by requiring certain inventory to be subsequently measured at the lower of cost and net realizable value. The guidance is effective for fiscal years, and interim period within those years, beginning on or after December 15, 2016. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial position, results of operations or cash flows.

In August 2015, the FASB issued ASU 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting, to clarify that an entity may elect to present debt issuance costs related to a line-of-credit arrangement as an asset, regardless of whether or not there are any outstanding borrowings on the line-of-credit arrangement.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued accounting pronouncements that are not yet effective will not have a material impact on our financial position, results of operations or cash flows upon adoption.


11


Note 3 - Goodwill and Other Identified Intangible Assets

Goodwill

As of December 31, 2015 and March 31, 2015, the Company had goodwill with a carrying value of $154.0 million. The gross carrying amount and accumulated impairment losses of goodwill, as of December 31, 2015 and March 31, 2015, by reportable segment are as follows (in thousands):

 
Celebrity Brands
Men's Active Lifestyle
Corporate and Other
Total
Goodwill
$
428,518

$
116,806

$
13,680

$
559,004

Accumulated impairment losses
(304,595
)
(89,336
)
(11,075
)
(405,006
)
Goodwill, net of impairment losses
$
123,923

$
27,470

$
2,605

$
153,998


Other Identified Intangible Assets

Other identified intangible assets are comprised of the following (in thousands):

 
Range of lives
(in years)
December 31, 2015
March 31, 2015
Intangible assets subject to amortization:
 
 
 
     Tradenames
15 - 27
$
220,527

$
46,166

     Subscriber lists
3 - 15
32,702

32,702

     Customer relationships
5 - 10
2,300

2,300

     Other intangible assets
3
9,045

7,620

Total gross intangible assets subject to amortization
 
264,574

88,788

     Accumulated amortization
 
(57,770
)
(44,970
)
Total net intangible assets subject to amortization
 
206,804

43,818

Intangible assets not subject to amortization
Indefinite
6,000

180,363

Total other identified intangible assets, net
 
$
212,804

$
224,181


Effective April 1, 2015, certain tradenames with a net carrying value totaling approximately $174.4 million that were previously assigned indefinite lives have been assigned finite lives of 15 years. During the nine months ended December 31, 2015, the amortization expense of these tradenames totaled approximately $8.7 million.

Amortization expense of intangible assets was $12.8 million and $2.9 million during the nine months ended December 31, 2015 and 2014, respectively. Based on the carrying value of identified intangible assets recorded at December 31, 2015, and assuming no subsequent impairment of the underlying assets, the amortization expense is expected to be as follows (in thousands):

Fiscal Year
 
Amortization Expense
2016
 
$
4,330

2017
 
16,200

2018
 
15,290

2019
 
14,736

2020
 
14,501

  Thereafter
 
141,747

 
 
$
206,804



12


Impairments

The Company did not record any impairment charges during the nine months ended December 31, 2015. The Company continues to evaluate goodwill and other identified intangible assets for impairment. Goodwill and other identified intangible assets are material components of the Company's financial statements and impairment charges to the Company's goodwill or other identified intangible assets in future periods could be material to the Company's results of operations.

During an evaluation of goodwill and other identified intangible assets at September 30, 2014, the Company determined that indicators were present in certain reporting units which would suggest the fair value of the reporting unit may have declined below the carrying value. This decline was primarily due to the continuing softness in the U.S. economy, which impacted consumer spending, including further declines in certain advertising markets, resulting in lowered future cash flow projections.

As a result, an interim impairment test of goodwill and other indefinite-lived intangible assets was performed as of September 30, 2014 for certain reporting units in accordance with FASB Accounting Standards Codification (“ASC”) Topic No. 350, “Goodwill and Other Intangible Assets” (“ASC 350”). Impairment testing for goodwill is a two-step process. The first step compares the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step of the test is performed to measure the amount of the impairment charge, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying value of that goodwill and an impairment charge is recorded for the difference. Impairment testing for indefinite-lived intangible assets, consisting of tradenames, compares the fair value of the tradename to the carrying value and an impairment charge is recorded for any excess carrying value over fair value.

The evaluation performed, as of September 30, 2014, resulted in the carrying value of goodwill and tradenames for certain reporting units to exceed the estimated fair value. As a result, the Company recorded a pre-tax non-cash impairment charge of $8.9 million and $8.5 million to reduce the carrying value of goodwill and tradenames, respectively, during the quarter ended September 30, 2014.

Note 4 - Revolving Credit Facility

The Company maintains a revolving credit facility that provides for borrowing up to $35.0 million, less outstanding letters of credit, which matures in December 2016 (the "Revolving Credit Facility"). The Investors became a lending party to the Revolving Credit Facility in March 2015 and represent a commitment of approximately 42% of the Revolving Credit Facility.

The Company has the option to pay interest based on (i) a floating base rate option equal to the greatest of (x) the prime rate in effect on such day; (y) the federal funds effective rate in effect on such day plus ½ of 1%; and (z) one month LIBOR (but no less than 2%) plus 1%, or (ii) LIBOR, in each case, plus a margin. The interest rate under the Revolving Credit Facility has ranged from 8.00% to 8.25% during the nine months ended December 31, 2015 and 2014. In addition, the Company is required to pay a commitment fee ranging from 0.50% to 0.75% on the unused portion of the revolving commitment. Commitment fees paid during the nine months ended December 31, 2015 and 2014 were insignificant.

During the nine months ended December 31, 2015, the Company borrowed $54.4 million and repaid $50.9 million under the Revolving Credit Facility. At December 31, 2015, the Company had available borrowing capacity of $12.4 million after considering the $18.2 million outstanding balance and the $4.4 million outstanding letter of credit.

As further discussed below, in February 2016, the Company amended the Revolving Credit Facility (the "Amended Revolver") to, among other things, extend the maturity date to June 2017 and modify the financial covenants in effect through the date of maturity.

The outstanding balance of $18.2 million at December 31, 2015 is included in non-current liabilities, as the maturity date of the Amended Revolver is June 2017.

The indebtedness under the Revolving Credit Facility, as amended, is guaranteed by certain of the domestic subsidiaries of the Company and is secured by liens on substantially all the assets of the Company and certain of its domestic subsidiaries. In addition, the Company’s obligations are secured by a pledge of all the issued and outstanding shares of, or other equity interests in, certain of the Company's existing or subsequently acquired or organized domestic subsidiaries and a percentage of the capital stock of, or other equity interests in, certain of its existing or subsequently acquired or organized foreign subsidiaries.


13


Covenants

Our Revolving Credit Facility, as amended, includes certain representations and warranties, conditions precedent, affirmative covenants, negative covenants and events of default. The negative covenants include financial maintenance covenants comprised of a first lien leverage ratio, a consolidated leverage ratio and an interest coverage ratio. The Revolving Credit Facility, as amended, also contain certain covenants that, subject to certain exceptions, restrict paying dividends, incurring additional indebtedness, creating liens, making acquisitions or other investments, entering into certain mergers or consolidations and selling or otherwise disposing of assets. With respect to the dividend restrictions, there is a cap on the total amount of cash available for distribution to our common stockholders.

With regard to the financial maintenance covenants, the first lien leverage ratio covenant must be equal to or less than 4.50 to 1.00 from April 1, 2015 through December 2016. The consolidated leverage ratio covenant must be equal to or less than 5.50 to 1.00 from October 1, 2015 through December 2016. The interest coverage ratio must be equal to or greater than 1.50 to 1.00 from April 1, 2015 through December 2016.

As of December 31, 2015, the Company was in compliance with its covenants under the Revolving Credit Facility.

Although there can be no assurances, management believes that, based on current expectations (including expected borrowings and repayments under the Amended Revolver), the Company's operating results for fiscal 2016 will be sufficient to satisfy the financial covenants under the Amended Revolver. The Company’s ability to satisfy the financial covenants is dependent on the business performing in accordance with its expectations.  If the performance of the Company’s business deviates significantly from its expectations, the Company may not be able to satisfy such financial covenants.  The Company's expectations are subject to a number of factors, many of which are events beyond its control, which could cause its actual results to differ materially from its expectations. If the Company does not comply with its financial covenants, the Company will be in default under the Amended Revolver.

Amended Revolver

In February 2016, the Company, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders from time to time party to the Revolving Credit Facility, as amended, restated, modified or supplemented from time to time, entered into the Amended Revolver with the lenders (the “Consenting Lenders”) constituting the Required Lenders (as defined in the Revolving Credit Facility) to, among other things, extend the maturity date to June 2017, modify the financial covenants in effect through the date of maturity, and provide for certain other provisions.

With regard to the financial covenants, the first lien leverage ratio covenant must be equal to or less than 4.25 to 1.00 from January 1, 2016 through June 2017, provided that the first lien leverage ratio covenant will be lowered to 4.00 to 1.00 if the outstanding aggregate principal amount of the Company's first lien notes is less than $250 million. The consolidated leverage ratio covenant must be equal to or less than 5.25 to 1.00 from January 1, 2016 through June 2017, provided that the consolidated leverage ratio covenant will be lowered to 5.00 to 1.00 if the outstanding principal amount of the Company's first lien notes is less than $250 million. The interest coverage ratio was not amended and must be equal to or greater than 1.50 to 1.00 from January 1, 2016 through June 2017.

Note 5 - Senior Secured Notes

Our senior secured notes are comprised of the first lien notes, the second lien notes and the new second lien notes and are collectively referred to herein as the "Senior Secured Notes" and consisted of the following (in thousands):

 
 
December 31, 2015
 
March 31, 2015
   First Lien Notes
 
$
273,175

 
$
275,175

   Second Lien Notes
 
2,198

 
2,198

   New Second Lien Notes
 
39,024

 
39,024

   Unamortized discount
 
(6,091
)
 
(6,828
)
Total debt obligations
 
308,306

 
309,569

Less: current portion of long-term debt
 

 

Noncurrent debt obligations
 
$
308,306

 
$
309,569



14


The future maturities of the Senior Secured Notes as of December 31, 2015 are as follows (in thousands):

Fiscal Year
 
Amount
2016
 
$

2017
 

2018
 
273,175

2019
 
2,198

2020
 

Thereafter
 
39,024

Total future maturities
 
314,397

Unamortized discount
 
(6,091
)
Total debt obligations
 
$
308,306


First Lien Notes

In December 2010, we issued $385.0 million aggregate principal amount of senior secured notes, which bear interest at a rate of 11.5% per annum and mature in December 2017 (the "First Lien Notes"). Interest on the First Lien Notes is payable semi-annually on June 15th and December 15th of each year and is computed on the basis of a 360-day year comprised of twelve 30-day months.

During fiscal 2012, the Company redeemed $20.0 million in aggregate principal amount of First Lien Notes. During fiscal 2014, the Company repurchased approximately $2.3 million in aggregate principal amount of First Lien Notes. During fiscal 2015, the Company repurchased approximately $55.5 million in aggregate principal amount of First Lien Notes. In addition, during fiscal 2015, the Company exchanged approximately $32.0 million in aggregate principal amount of First Lien Notes, plus accrued and unpaid interest, for approximately $39.0 million aggregate principal amount of new second lien senior secured notes, which bear interest at a rate of 7.0% per annum and mature in July 2020 (the "New Second Lien Notes"), pursuant to an exchange agreement (the "New Second Lien Notes Exchange Agreement"), as further described below. During the first quarter of fiscal 2016, the Company repurchased approximately $2.0 million in aggregate principal amount of First Lien Notes, at a price equal to 105.9% of the aggregate principal amount thereof, plus accrued and unpaid interest in the open market.

The First Lien Notes are guaranteed on a first lien senior secured basis by the same subsidiaries of the Company that guarantee the Revolving Credit Facility. The First Lien Notes and the guarantees thereof are secured by a first-priority lien on substantially all our assets (subject to certain permitted liens and exceptions), pari passu with the liens granted under our Revolving Credit Facility, provided that in the event of a foreclosure on the collateral or insolvency proceedings, obligations under our Revolving Credit Facility will be repaid in full with proceeds from the collateral prior to the obligations under the First Lien Notes.

Under the First Lien Notes Indenture, the Company has the option to redeem the First Lien Notes, in whole or in part, at the redemption prices set forth below, plus accrued and unpaid interest through the redemption date, if redeemed during the 12-month period beginning on December 15th of each of the years indicated below:

Year
 
Percentage
2015
 
102.875%
2016 and thereafter
 
100%

Second Lien Notes

In December 2010, we issued $104.9 million aggregate principal amounts of senior secured notes, which bear interest at a rate of 13.5% per annum and mature in June 2018 (the "Second Lien Notes"). Interest on the Second Lien Notes is payable semi-annually on June 15th and December 15th of each year and is computed on the basis of a 360-day year comprised of twelve 30-day months.

In October 2013, we exchanged approximately $94.3 million aggregate principal amount of Second Lien Notes for an equal aggregate principal amount of new second lien senior secured notes, which bear interest at a rate of 10.0% per annum, are payable in kind, and mature in June 2018 (the “Second Lien PIK Notes”), pursuant to an exchange agreement (the “Second Lien PIK Notes Exchange Agreement”).


15


In September 2014, pursuant to the debt for equity exchange agreement with the Parent and the Investors, the Investors exchanged approximately $7.8 million aggregate principal amount of Second Lien Notes and all of the outstanding Second Lien PIK Notes, plus accrued and unpaid interest, for equity interest in the Parent. As a result, the Company's obligation under the Second Lien PIK Notes were satisfied in full.

During fiscal 2015, the Company repurchased approximately $0.6 million in aggregate principal amount of Second Lien Notes.

The Second Lien Notes are guaranteed on a second lien senior secured basis by the same subsidiaries of the Company that guarantee our Revolving Credit Facility and the First Lien Notes. The Second Lien Notes and the guarantees thereof are secured by a second-priority lien on substantially all our assets (subject to certain permitted liens and exceptions).

Under the Second Lien Notes Indenture, the Company has the option to redeem the Second Lien Notes, in whole or in part, at the redemption prices set forth below, plus accrued and unpaid interest through the redemption date, if redeemed during the 12-month period beginning on December 15th of each of the years indicated below:

Year
 
Percentage
2015
 
103.375%
2016 and thereafter
 
100%

New Second Lien Notes

In January 2015, we issued approximately $39.0 million aggregate principal amount of New Second Lien Notes, which bear interest at a rate of 7.0% per annum and mature in July 2020. Interest on the New Second Lien Notes is payable semi-annually on July 15th and January 15th of each year and is computed on the basis of a 360-day year comprised of twelve 30-day months. As described above, the New Second Lien Notes were issued in exchange for $32.0 million aggregate principal amount of First Lien Notes pursuant to the New Second Lien Notes Exchange Agreement.

The New Second Lien Notes are guaranteed on a second lien senior secured basis by the same subsidiaries of the Company that guarantee our Revolving Credit Facility, the First Lien Notes and the Second Lien Notes. The New Second Lien Notes and the guarantees thereof are secured by a second-priority lien on substantially all our assets (subject to certain permitted liens and exceptions).

Under the New Second Lien Notes Indenture, the Company has the option to redeem the New Second Lien Notes at any time prior to January 15, 2018 at a redemption price equal to 100% of the principal amount, plus a “make-whole” premium and accrued and unpaid interest through the redemption date. At any time prior to January 15, 2018, the Company may redeem up to 35% of the New Second Lien Notes from the net cash proceeds of one or more qualified equity offerings at a redemption price of 107% of the principal amount, plus accrued and unpaid interest through the redemption date, provided that at least 65% of the aggregate principal amount of the New Second Lien Notes remains outstanding after the redemption. The Company has the option to redeem the New Second Lien Notes on or after January 15, 2018, in whole or in part, at the redemption prices set forth below, plus accrued and unpaid interest through the redemption date, if redeemed during the 12-month period beginning on January 15th of each of the years indicated below:

Year
 
Percentage
2018
 
107%
2019
 
103.5%
2020 and thereafter
 
100%


16


Note 6 - Fair Value of Financial Instruments

FASB ASC Topic 825, Financial Instruments requires the Company to disclose the fair value of financial instruments that are not measured at fair value in the accompanying financial statements. The fair value of the Company’s financial instruments has been estimated primarily by using inputs, other than quoted prices in active markets, that are observable either directly or indirectly. However, the use of different market assumptions or methods of valuation could result in different fair values.

FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), established a three-tier fair value hierarchy, which prioritizes the use of inputs used in measuring fair value as follows:

Level 1    Observable inputs such as quoted prices in active markets for identical assets and liabilities;
Level 2    Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3    Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The estimated fair value of the Company’s financial instruments is as follows (in thousands):

 
 
 
December 31, 2015
 
March 31, 2015
 
 
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
First Lien Notes
Level 2
 
$
273,175

 
$
271,809

 
$
275,175

 
$
282,742

Second Lien Notes
Level 2
 
2,198

 
2,060

 
2,198

 
2,337

New Second Lien Notes
Level 2
 
32,933

 
38,409

 
32,196

 
33,655


The fair value of the First Lien Notes, the Second Lien Notes and the New Second Lien Notes is estimated using quoted market prices for the same or similar issues.

As of December 31, 2015 and March 31, 2015, the Company did not have financial assets or liabilities that would require measurement on a recurring basis, based on the guidance in ASC 820. The Company's financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and the Revolving Credit Facility. The carrying amount of these accounts approximates fair value.

Assets measured at fair value on a nonrecurring basis

The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized. The Company did not record any impairment charges during the nine months ended December 31, 2015. During an evaluation of goodwill and other identified intangible assets at September 30, 2014, the carrying value of goodwill and tradenames for certain reporting units exceeded fair value. See Note 3, "Goodwill and Other Identified Intangible Assets," for further discussion on measuring the Company's non-financial assets, specifically goodwill and tradenames.

Note 7 - Income Taxes

The asset and liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company's valuation allowance related to its deferred tax assets, which was $27.1 million at March 31, 2015, was released during the first quarter of fiscal 2016 based on the weight of positive evidence that the deferred tax assets will be realized due to the reclassification of certain tradenames from indefinite-lived to finite-lived, effective April 1, 2015. In the past, the Company's deferred tax liabilities related to indefinite-lived intangible assets were not considered a future source of income to support the realization of deferred tax assets within the net operating loss carryforward period.

As discussed in Note 2, "Summary of Significant Accounting Policies," the Company prospectively adopted ASU 2015-17 in the third quarter of fiscal 2016. As required by this guidance, all deferred tax assets and liabilities are classified as non-current in our consolidated balance sheet as of December 31, 2015, which is a change from our historical presentation wherein certain of our deferred tax assets and liabilities were classified as current and the remainder were classified as non-current. The March 31, 2015 balance sheet has not been retrospectively adjusted.


17


Note 8 - Related Party Transactions

As discussed in Note 4, "Revolving Credit Facility," in March 2015, the Investors became a lending party to the Revolving Credit Facility and represent a commitment of approximately 42% of the Revolving Credit Facility.

As discussed in Note 5, "Senior Secured Notes," during the first quarter of fiscal 2016, the Company repurchased approximately $2.0 million in aggregate principal amount of First Lien Notes, plus accrued and unpaid interest, in the open market from the Investors.
 
Mr. Elkins, a former member of our Board of Directors provided certain financial advisory services to the Company through Roxbury Advisory, LLC ("Roxbury"), a company controlled by Mr. Elkins, while he was a member of our Board of Directors. In August 2014, the consulting agreement between Roxbury and the Company was terminated. Payments for the services received from Roxbury totaled $50,000 during nine months ended December 31, 2014 and the Company had no outstanding payables to Roxbury at December 31, 2015 or March 31, 2015.
 
Note 9 - Investments in Affiliates and Redeemable Noncontrolling Interests

Consolidated Joint Ventures

Mr. Olympia, LLC

In April 2005, the Company entered into a limited liability company agreement to form a joint venture, Mr. Olympia, LLC (“Olympia”), to manage and promote the Mr. Olympia fitness events. At any time prior to October 2019, the Company could be required to purchase all the limited liability company units, from the other limited liability company member, for a fixed price of $3.0 million cash (the "Olympia Put Option"). Any time from October 2019 through April 2020, the Company could require the other limited liability company member to sell, to the Company, all its limited liability company units for $3.0 million cash (the “Olympia Call Option”).

In April 2005, the other limited liability company member licensed certain trademarks related to the Mr. Olympia fitness events (collectively, the “Olympia Trademarks”) to Olympia for $3.0 million, payable by the Company over a 10-year period (the “License Fee”). Upon the exercise of the Olympia Put Option or the Olympia Call Option, the ownership of the Olympia Trademarks will be transferred to Olympia. If the Olympia Put Option or the Olympia Call Option is not exercised, then Olympia will retain the license to the Olympia Trademarks in perpetuity. The License Fee has been recorded as other identified intangibles, and the final payment was made in April 2013.

The Company has a variable interest in the Olympia joint venture, a variable interest entity. The Olympia joint venture is deemed a variable interest entity because there is insufficient equity investment at risk. The Company concluded it is the primary beneficiary because the holder of the Olympia Put Option has the ability to cause the Company to absorb the potential losses of the joint venture and the Company controls the activities that most significantly impact the economic performance of Olympia. As a result, the Company accounts for the Olympia joint venture as a consolidated subsidiary.

The Company follows the accounting for noncontrolling interest in equity that is redeemable at terms other than fair value. Accordingly, the Company has reflected the noncontrolling interest's equity within temporary equity for the Olympia joint venture as the Olympia joint venture’s securities are currently redeemable, pursuant to the terms of the Olympia Put Option. As a result, the Company has recorded the Olympia Put Option, at a minimum, equal to the maximum redemption amount as “Redeemable noncontrolling interests” in the accompanying financial statements.

Effective September 2015, the Company and the other limited liability company member agreed that the distributions made, by Olympia, to the other limited liability company member would be $1.0 million per year, without deduction or offset, and would represent the only distribution payments to which the other limited liability company member would be entitled to as a member of Olympia. Olympia's net income attributable to noncontrolling interests during the nine months ended December 31, 2015 was $1.0 million and during the nine months ended December 31, 2014 was $1.3 million.


18


Zinczenko-AMI Ventures, LLC

In February 2013, the Company entered into a limited liability company agreement to form a joint venture, Zinczenko-AMI Media Ventures, LLC ("ZAM"), to create a book publishing division. ZAM was initially capitalized by the Company and the other limited liability company member (the "ZAM LLC Member") and the Company and the ZAM LLC Member each received an initial ownership interest of 51% and 49%, respectively, in ZAM. In accordance with the terms of the limited liability company agreement, the Company is responsible for the day-to-day operations and management of ZAM.

The Company has a variable interest in the ZAM joint venture, a variable interest entity. The ZAM joint venture is deemed a variable interest entity because there is insufficient equity investment at risk. The Company concluded it is the primary beneficiary because the Company controls the activities that most significantly impact the economic performance of ZAM as manager of the day-to-day operations. As a result, the Company accounts for the ZAM joint venture as a consolidated subsidiary.

The operating results of ZAM were insignificant to the Company's unaudited condensed consolidated financial statements during the three and nine months ended December 31, 2015 and 2014.

Redeemable Noncontrolling Interests

The following table reconciles equity attributable to the redeemable noncontrolling interests (in thousands):

 
Three Months Ended December 31,
Nine Months Ended December 31,
 
2015
2014
2015
2014
Balance, beginning of period
$
4,000

$
4,259

$
3,000

$
3,000

Capital distributions
(1,000
)
(1,202
)
(1,000
)
(1,202
)
Net income attributable to noncontrolling interests

43

1,000

1,302

Other

(100
)

(100
)
Balance, end of period
$
3,000

$
3,000

$
3,000

$
3,000


Unconsolidated Joint Ventures

We have other joint ventures that we do not consolidate as we lack the power to direct the activities that significantly impact the economic performance of these entities. The Company's investments in affiliates are carried at the fair value of the investment consideration at the date acquired, plus the Company's equity in undistributed earnings from that date. Unless otherwise disclosed below, the operating results of our unconsolidated joint ventures were insignificant to the Company's unaudited condensed consolidated financial statements during the three and nine months ended December 31, 2015 and 2014.

Radar Online, LLC

In October 2008, the Company entered into a limited liability company agreement to form Radar Online, LLC, a joint venture ("Radar"), to manage Radar Online, a website focusing on celebrity and entertainment news. Though the Company owns 50% of Radar and can exercise significant influence, it does not control the activities that most significantly impact the economic performance of this joint venture. As a result, the Company accounts for the investment in Radar using the equity method. The operating results of Radar were insignificant to the Company’s unaudited condensed consolidated financial statements for the nine months ended December 31, 2015 and 2014. The management fees receivable from Radar totaled $2.0 million and $1.9 million as of December 31, 2015 and March 31, 2015, respectively, and is presented within other long-term assets in the accompanying unaudited condensed consolidated financial statements.


19


Select Media Services, LLC

In September 2013, the Company contributed substantially all of its assets comprising the Company's distribution and merchandising businesses operated by In Store Services, Inc., formerly known as Distribution Services, Inc. ("DSI"), a wholly-owned subsidiary of American Media, Inc., and $2.3 million in cash in exchange for a 27.5% membership interest in Select Media Services, LLC, a joint venture ("Select"), which operates as a merchandising and in-store services business. Though the Company can exercise significant influence, it does not control the activities that most significantly impact the economic performance of this joint venture. As a result, the Company accounts for the investment in Select using the equity method.

The membership interest and cash contribution in Select were adjusted in September 2014, pursuant to a one-time retroactive adjustment back to September 2013. The Company's membership interest was replaced with a participation interest in the earnings of Select and the initial capital contribution was refunded to the Company in October 2014 along with the distribution of the Company's participation interest for the twelve months ended August 31, 2014.

In June 2015, the Company's participation interest in Select was modified and Select redeemed the Company's interest in Select for approximately $1.7 million, which is reflected in other revenues in the accompanying unaudited condensed consolidated financial statements. The proceeds were received in July 2015.

Note 10 - Dispositions

Shape, Fit Pregnancy and Natural Health

In January 2015, the Company and Weider Publications, LLC, a wholly-owned subsidiary of the Company, entered into an asset purchase agreement (the "Purchase Agreement") with Meredith Corporation ("Meredith"). The Purchase Agreement provided for the sale of the Company's Shape, Fit Pregnancy and Natural Health brands and magazines, which comprised its Women's Active Lifestyle segment. The Company received the initial cash consideration of $60.0 million on January 30, 2015 when the transaction closed. The Company is further entitled to additional consideration (the "Additional Consideration"), in the form of a one-time payment, following the completion of Meredith's 2018 fiscal year on June 30, 2018. The Additional Consideration, up to $60.0 million, will be based upon 40% of the accumulated adjusted operating profit of the combination of the Company's Shape brand and Meredith's Fitness brand.

Pursuant to the Purchase Agreement, the Company continued to publish the Shape, Fit Pregnancy and Natural Health magazines with on-sale dates through March 31, 2015, after which Meredith assumed publishing responsibilities for such titles. Effective as of the closing, Meredith assumed control over the digital assets used with Shape, Fit Pregnancy and Natural Health. The Company will have no continuing involvement in the operations of these publications subsequent to March 31, 2015.

Discontinued Operations

Net revenue, pre-tax income from discontinued operations, income tax provision and loss from discontinued operations, net of income taxes are as follows, in thousands:

 
Three Months Ended
 
Nine Months Ended
 
December 31, 2014
Net revenue
$
10,540

 
$
38,171

Pre-tax income from discontinued operations
104

 
2,976

Income tax provision
507

 
3,383

Loss from discontinued operations, net of income taxes
$
(403
)
 
$
(407
)


20


Note 11 - Commitments and Contingencies

Litigation

On March 10, 2009, Anderson News, L.L.C. and Anderson Services, L.L.C., magazine wholesalers (collectively, “Anderson”), filed a lawsuit against American Media, Inc., DSI (now known as In-Store Services, Inc.), and various magazine publishers, wholesalers and distributors in the Federal District Court for the Southern District of New York (the “Anderson Action”). Anderson's complaint alleged that the defendants violated Section 1 of the Sherman Act by engaging in a purported industry-wide conspiracy to boycott Anderson and drive it out of business. Plaintiffs also purported to assert claims for defamation, tortious interference with contract and civil conspiracy. The complaint did not specify the amount of damages sought. On August 2, 2010, the District Court dismissed the action in its entirety with prejudice and without leave to replead and, on October 25, 2010, denied Anderson's motion for reconsideration of the dismissal decision. Anderson appealed the District Court's decisions.

On April 3, 2012, the Second Circuit issued a decision reversing the dismissal of the lawsuit and reinstating the antitrust and state law claims (except the defamation claim, which Anderson withdrew), and, on January 7, 2013, the United States Supreme Court declined to review the Second Circuit decision. Following the Second Circuit decision, the case has been proceeding in the District Court and the parties engaged in discovery. On February 14, 2014, American Media, Inc. filed an amended answer and counterclaim in the Anderson Action asserting an antitrust claim against Anderson News. L.L.C. and Charles Anderson, Jr. based on the same events as Anderson’s claims. Two other defendants also filed the same counterclaim. Fact discovery was completed in May 2014 and expert discovery was completed in October 2014. Anderson submitted an expert report calculating that damages are approximately $470 million, which would be subject to trebling should Anderson prevail against the defendants in the lawsuit. Defendants, including American Media, Inc. and DSI, also have submitted an expert report on damages, which opines that, separate and apart from the question of liability, Anderson has suffered no damages.

On December 15, 2014, the parties in the Anderson Action filed motions for summary judgment and to strike certain proposed expert testimony. On August 20, 2015, the District Court granted the summary judgment filed by American Media, Inc., DSI and the other defendants, dismissing all of Anderson’s claims against defendants, and granted in part the motions to strike certain of Anderson’s proposed expert testimony. The court also granted summary judgment dismissing the counterclaims filed by American Media, Inc. and the two other defendants, but did not grant Anderson’s motion to strike defendants’ expert testimony. On August 25, 2015, Anderson filed its notice of appeal of the District Court’s decision granting defendants’ motions. On September 15, 2015, American Media, Inc. filed its notice of appeal of the District Court’s decision granting the motion for summary judgment dismissing the counterclaim. Anderson filed its appellate brief with the U.S. Court of Appeals for the Second Circuit (the “Court of Appeals”) on December 8, 2015. American Media, Inc. and DSI will file their appellate brief with the Court of Appeals by March 8, 2016. The briefing of the appeals should be completed in May 2016.

Anderson is in chapter 11 bankruptcy proceedings in Delaware bankruptcy court. On June 10, 2010, American Media, Inc. filed a proof of claim in that proceeding for $5.6 million (which it amended on December 3, 2013 to reflect the counterclaim (described above) it planned to file in the Anderson Action), but Anderson asserts that it has no assets to pay unsecured creditors like American Media, Inc. An independent court-appointed examiner has identified claims that Anderson could assert against Anderson insiders in excess of $340.0 million.

In an order of the Delaware bankruptcy court, entered on November 14, 2011, American Media, Inc. and four other creditors (collectively, the “Creditors”), which also are defendants in the Anderson Action, were granted the right to file lawsuits against Anderson insiders asserting Anderson's claims identified by the examiner. The Creditors' retention of counsel to pursue the claims on a contingency fee basis was also approved. On November 14, 2011, pursuant to this order, a complaint was filed against 10 defendants. After a temporary stay of discovery pending conclusion of fact discovery in the Anderson Action, discovery in the bankruptcy action proceeded. On December 12, 2014, defendants in the adversary action moved for partial summary judgment seeking dismissal of certain of the Creditors’ claims. The motion was denied on June 11, 2015.


21


While it is not possible to predict the outcome of the Anderson Action or to estimate the impact on American Media, Inc. and DSI of a final judgment against American Media, Inc. and DSI (if that were to occur), American Media, Inc. and DSI believe that the claims asserted by Anderson, in the Anderson Action, are meritless. American Media, Inc. and DSI have antitrust claim insurance that covers defense costs. American Media, Inc. and DSI have filed a claim for insurance coverage with regard to the Anderson Action and certain of their defense costs are being paid by the insurer, and, in the event of a settlement or a damages award by the Court and subject to the applicable policy limits, American Media, Inc. and DSI anticipate seeking reimbursement from the insurer for payment of such settlement or damages. American Media, Inc. and DSI will continue to vigorously defend the case.

In addition, because the focus of some of our publications often involves celebrities and controversial subjects, the risk of defamation or invasion of privacy litigation exists. Our experience indicates that the claims for damages made in celebrity lawsuits are usually inflated and such lawsuits are usually defensible and, in any event, any reasonably foreseeable material liability or settlement would likely be covered by insurance, subject to any applicable deductible and limit. We also periodically evaluate and assess the risks and uncertainties associated with our pending litigation disregarding the existence of insurance that would cover liability for such litigation. At present, in the opinion of management, after consultation with outside legal counsel, the liability resulting from pending litigation, even if insurance were not available, is not expected to have a material effect on our consolidated financial statements.

Note 12 - Business Segment Information

The Company has three reporting segments: Celebrity Brands, Men’s Active Lifestyle and Corporate and Other. The operating segments are based on each having the following characteristics: the operating segments engage in similar business activities from which they earn revenues and incur expenses; the operating results are regularly reviewed by the chief operating decision maker (the "CODM"), and there is discrete financial information. The Company does not aggregate any of its operating segments.

The Celebrity Brands segment includes National Enquirer, Star, Globe, National Examiner, OK! and Soap Opera Digest.

The Men’s Active Lifestyle segment includes Men’s Fitness, Muscle & Fitness, Flex and Muscle & Fitness Hers.

The Corporate and Other segment includes international licensing, photo syndication to third parties and corporate overhead. Corporate overhead expenses are not allocated to other segments and include production, circulation, executive staff, information technology, accounting, legal, human resources and administration department costs. The Corporate and Other segment also includes print and digital advertising sales and strategic management direction in the following areas: manufacturing, subscription circulation, logistics, event marketing and full back office financial functions. 

The Company’s accounting policies for the business segments are the same as those described in Note 2, "Summary of Significant Accounting Policies." The following information includes certain intersegment transactions and is, therefore, not necessarily indicative of the results had the operations existed as stand-alone businesses. Intersegment transactions represent intercompany services, which are billed at what management believes are prevailing market rates. These intersegment transactions, which represent transactions between operating units in different business segments, are eliminated in consolidation.


22


Segment information for the three and nine months ended December 31, 2015 and 2014 are as follows (in thousands):

 
Three Months Ended December 31,
 
Nine Months Ended December 31,

2015
 
2014
 
2015
 
2014
Operating revenues
 
 
 
 
 
 
 
Celebrity Brands
$
41,943

 
$
45,506

 
$
125,877

 
$
135,116

Men's Active Lifestyle
11,396

 
12,325

 
43,093

 
44,973

Corporate and Other
1,805

 
2,314

 
4,214

 
4,866

Total operating revenues
$
55,144

 
$
60,145

 
$
173,184

 
$
184,955

Operating income (loss)
 
 
 
 
 
 
 
Celebrity Brands
$
14,846

 
$
18,275

 
$
43,437

 
$
49,026

Men's Active Lifestyle (1)
2,387

 
2,191

 
10,911

 
(7,682
)
Corporate and Other
(11,364
)
 
(14,039
)
 
(34,458
)
 
(51,318
)
Total operating income (loss)
$
5,869

 
$
6,427

 
$
19,890

 
$
(9,974
)
Depreciation and amortization
 
 
 
 
 
 
 
Celebrity Brands
$
3,292

 
$
409

 
$
9,861

 
$
1,366

Men's Active Lifestyle
964

 
912

 
2,891

 
1,440

Corporate and Other
2,257

 
2,626

 
7,106

 
7,179

Total depreciation and amortization
$
6,513

 
$
3,947

 
$
19,858

 
$
9,985

Impairment of goodwill and intangible assets
 
 
 
 
 
 
 
Men's Active Lifestyle
$

 
$

 
$

 
$
17,403

Corporate and Other

 

 

 
1,055

Total impairment of goodwill and intangible assets
$

 
$

 
$

 
$
18,458

Amortization of deferred rack costs
 
 
 
 
 
 
 
Celebrity Brands
$
1,129

 
$
1,337

 
$
3,809

 
$
3,923

Men's Active Lifestyle
20

 
18

 
43

 
46

Total amortization of deferred rack costs
$
1,149

 
$
1,355

 
$
3,852

 
$
3,969


(1) Includes impairment charge of $17.4 million to reduce the carrying value of goodwill and tradenames during the nine months ended December 31, 2014. See Note 3, "Goodwill and Other Identified Intangible Assets" for further discussion.

Segment information for the assets employed as of December 31, 2015 and March 31, 2015 are as follows (in thousands):

Total Assets
December 31,
2015
 
March 31,
2015
Celebrity Brands
$
315,520

 
$
330,850

Men's Active Lifestyle
79,625

 
86,775

Corporate and Other (2)
28,384

 
48,400

Total assets
$
423,529

 
$
466,025


(2) Amounts are primarily comprised of inventories, prepaid expenses, property and equipment, deferred debt costs and certain other assets.


23


Geographic Data

The Company operates principally in two geographic areas, the United States of America and Europe. There were no significant transfers between geographic areas during the three and nine months ended December 31, 2015 and 2014. The following tables present revenue by geographic area for the three and nine months ended December 31, 2015 and 2014 and the assets employed as of December 31, 2015 and March 31, 2015 are as follows (in thousands):

 
Three Months Ended December 31,
 
Nine Months Ended December 31,

2015
 
2014
 
2015
 
2014
Operating revenues:
 
 
 
 
 
 
 
United States of America
$
53,876

 
$
57,698

 
$
168,780

 
$
176,715

Europe
1,268

 
2,447

 
4,404

 
8,240

Total operating revenues
$
55,144

 
$
60,145

 
$
173,184

 
$
184,955



December 31,
2015
 
March 31,
2015
Assets:
 
 
 
United States of America
$
416,725

 
$
458,197

Europe
6,804

 
7,828

Total assets
$
423,529

 
$
466,025


Note 13 - Capital Structure

The Company has authorized 100 shares of $0.0001 par value common stock. At December 31, 2015, there were 100 shares of common stock issued and outstanding. As discussed in Note 1, "Nature of the Business," the Company is a wholly-owned subsidiary of the Parent, which is controlled by the Investors pursuant to the Merger.

We did not make any dividend payments during the nine months ended December 31, 2015 and 2014, and we do not anticipate paying any dividends on our common stock in the foreseeable future. The terms of our Revolving Credit Facility, as amended, restrict our ability to pay dividends, and any future indebtedness that we may incur could preclude us from paying dividends. With respect to the dividend restriction, the Revolving Credit Facility, as amended, and the indentures governing the Senior Secured Notes include a cap on the total amount of cash available for distribution to our common stockholders.

Note 14 - Supplemental Condensed Consolidating Financial Information

The following tables present condensed consolidating financial statements of (a) the parent company, American Media, Inc., as issuer of the Senior Secured Notes; (b) on a combined basis, the subsidiary guarantors of the Senior Secured Notes; and (c) on a combined basis, the subsidiaries that are not guarantors of the Senior Secured Notes. Separate financial statements of the subsidiary guarantors are not presented because the parent company owns all outstanding voting stock of each of the subsidiary guarantors and the guarantee by each subsidiary guarantor is full and unconditional and joint and several. As a result and in accordance with Rule 3-10(f) of Regulation S-X under the Securities Exchange Act of 1934, as amended, the Company includes the following tables in these notes to the condensed consolidated financial statements:


24


SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2015
(in thousands)
 
Parent
 
Guarantors
 
Non Guarantors
 
Eliminations
 
Condensed Consolidated
    ASSETS
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
97

 
$
825

 
$

 
$
922

Trade receivables, net

 
19,186

 
391

 

 
19,577

Inventories

 
813

 
21

 

 
834

Prepaid expenses and other current assets

 
16,872

 
415

 
(5,487
)
 
11,800

Total current assets

 
36,968

 
1,652

 
(5,487
)
 
33,133

PROPERTY AND EQUIPMENT, NET:
 
 
 
 
 
 
 
 
 
Leasehold improvements

 
3,748

 

 

 
3,748

Furniture, fixtures and equipment

 
41,080

 
40

 

 
41,120

Less – accumulated depreciation

 
(33,946
)
 
(25
)
 

 
(33,971
)
Total property and equipment, net

 
10,882

 
15

 

 
10,897

OTHER ASSETS:
 
 
 
 
 
 
 
 
 
Deferred debt costs, net
4,560

 

 

 

 
4,560

Deferred rack costs, net

 
3,888

 

 

 
3,888

Investments in affiliates
545,140

 
(497
)
 

 
(543,224
)
 
1,419

Other long-term assets
57,794

 
2,830

 

 
(57,794
)
 
2,830

Due from affiliates

 
299,714

 

 
(299,714
)
 

Total other assets
607,494

 
305,935

 

 
(900,732
)
 
12,697

GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
 
 
 
 
 
 
Goodwill

 
149,488

 
4,510

 

 
153,998

Other identified intangibles, net

 
206,804

 
6,000

 

 
212,804

Total goodwill and other identified intangible assets

 
356,292

 
10,510

 

 
366,802

TOTAL ASSETS
$
607,494

 
$
710,077

 
$
12,177

 
$
(906,219
)
 
$
423,529

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Accounts payable
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
9,762

 
$
25

 
$

 
$
9,787

Accrued expenses and other liabilities

 
24,062

 
5,319

 

 
29,381

Accrued interest
2,831

 

 

 

 
2,831

Deferred revenues

 
25,506

 
112

 

 
25,618

Total current liabilities
2,831

 
59,330

 
5,456

 

 
67,617

NON-CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
Senior secured notes
308,306

 

 

 

 
308,306

Revolving credit facility
18,200

 

 

 

 
18,200

Other non-current liabilities

 
8,239

 

 

 
8,239

Deferred income taxes

 
99,105

 
(240
)
 
(63,281
)
 
35,584

Due to affiliates
295,574

 

 
4,140

 
(299,714
)
 

Total liabilities
624,911

 
166,674

 
9,356

 
(362,995
)
 
437,946

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
Redeemable noncontrolling interests

 

 
3,000

 

 
3,000

STOCKHOLDERS' (DEFICIT) EQUITY:
 
 
 
 
 
 
 
 
 
Total stockholders' (deficit) equity
(17,417
)
 
543,403

 
(179
)
 
(543,224
)
 
(17,417
)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
$
607,494

 
$
710,077

 
$
12,177

 
$
(906,219
)
 
$
423,529



25


SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 2015
(in thousands)
 
Parent
 
Guarantors
 
Non Guarantors
 
Eliminations
 
Condensed Consolidated
    ASSETS
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
1,040

 
$
2,412

 
$

 
$
3,452

Trade receivables, net

 
38,058

 
1,354

 

 
39,412

Inventories

 
739

 
134

 

 
873

Prepaid expenses and other current assets

 
16,207

 
636

 
(5,487
)
 
11,356

Total current assets

 
56,044

 
4,536

 
(5,487
)
 
55,093

PROPERTY AND EQUIPMENT, NET:
 
 
 
 
 
 
 
 
 
Leasehold improvements

 
3,801

 

 

 
3,801

Furniture, fixtures and equipment

 
43,189

 
790

 

 
43,979

Less – accumulated depreciation

 
(29,465
)
 
(765
)
 

 
(30,230
)
Total property and equipment, net

 
17,525

 
25

 

 
17,550

OTHER ASSETS:
 
 
 
 
 
 
 
 
 
Deferred debt costs, net
6,383

 

 

 

 
6,383

Deferred rack costs, net

 
4,824

 

 

 
4,824

Investments in affiliates
587,126

 
224

 

 
(586,547
)
 
803

Other long-term assets

 
3,193

 

 

 
3,193

Due from affiliates

 
300,246

 

 
(300,246
)
 

Total other assets
593,509

 
308,487

 

 
(886,793
)
 
15,203

GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill

 
149,488

 
4,510

 

 
153,998

Other identified intangibles, net

 
218,181

 
6,000

 

 
224,181

Total goodwill and other identified intangible assets

 
367,669

 
10,510

 

 
378,179

TOTAL ASSETS
$
593,509

 
$
749,725

 
$
15,071

 
$
(892,280
)
 
$
466,025

 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
15,434

 
$
347

 
$

 
$
15,781

Accrued expenses and other liabilities

 
104,580

 
5,393

 
(65,958
)
 
44,015

Accrued interest
10,075

 

 

 

 
10,075

Deferred revenues

 
25,718

 
1,016

 

 
26,734

Total current liabilities
10,075

 
145,732

 
6,756

 
(65,958
)
 
96,605

NON-CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
Senior secured notes
309,569

 

 

 

 
309,569

Revolving credit facility
14,700

 

 

 

 
14,700

Other non-current liabilities

 
8,352

 

 

 
8,352

Deferred income taxes

 
10,250

 
26

 
60,471

 
70,747

Due to affiliates
296,113

 

 
4,133

 
(300,246
)
 

Total liabilities
630,457

 
164,334

 
10,915

 
(305,733
)
 
499,973

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
Redeemable noncontrolling interests

 

 
3,000

 

 
3,000

STOCKHOLDERS' (DEFICIT) EQUITY:
 
 
 
 
 
 
 
 
 
Total stockholders' (deficit) equity
(36,948
)
 
585,391

 
1,156

 
(586,547