UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~September~~December 3031, 2008

¨	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 – 001-11112

AMERICAN MEDIA OPERATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware

59-2094424

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)


1000 American Media Way, Boca Raton, Florida		33464
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (561) 997-7733

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

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 ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~November~~January 3031, ~~2008~~2009, there were ~~7,507.~~6,000,000 shares of common stock outstanding.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

~~September~~December 3031, 2008

	~~Page(s)~~	Page(s)
CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS	3	3
~~PART I. FINANCIAL INFORMATION~~	PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 1.	Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2008 and as of September 30, 2008	4
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2008 and as of December 31, 2008		4
Unaudited Condensed Consolidated Statements of Income (Loss) for the Fiscal Quarter and Two Fiscal Quarters Ended September 30, 2007 and September 30, 2008	5
Unaudited Condensed Consolidated Statements of Loss for the Fiscal Quarter and Three Fiscal Quarters Ended December 31, 2007 and December 31, 2008		5
Unaudited Condensed Consolidated Statements of Cash Flows for the Two Fiscal Quarters Ended September 30, 2007 and September 30, 2008	6
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Fiscal Quarters Ended December 31, 2007 and December 31, 2008		6
Notes to Unaudited Condensed Consolidated Financial Statements	7	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures about Market Risk	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4T. Controls and Procedures	37
Item 4T.	Controls and Procedures	41
~~PART II. OTHER INFORMATION~~	PART II. OTHER INFORMATION
Item 1. Legal Proceedings	37
Item 1.	Legal Proceedings	41
Item 1A. Risk Factors	37
Item 1A.	Risk Factors	42
Item 6. Exhibits	37
Item 3.	Defaults Upon Senior Securities	48
Signatures	38
Item 5.	Other Information	48
Item 6.	Exhibits	48
Signatures		50

CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS

THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER

FROM THOSE PROJECTED IN FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~December 3031, 2008 (this “Form 10-Q”) to the “Company” or “us,” “we” or “our” are to American Media Operations, Inc. and its subsidiaries. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, readers of this Form 10-Q are advised that this Form 10-Q contains both statements of historical facts and forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties, which could cause our actual results to differ materially from those indicated by the forward-looking statements. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, income or loss, capital expenditures, capital structure and other financial items, (ii) statements regarding our plans and objectives, including planned introductions of new publications or other products, or estimates or predictions of actions by customers, advertisers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, (iv) outcomes of contingencies such as legal or any regulatory proceedings, and (v) statements of assumptions underlying other statements and statements about our business.

Factors that could affect our actual results include the following:

• our ability to refinance our debt;

•

our high degree of leverage and significant debt service obligations;

•

changes in discretionary consumer spending patterns;

• 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, affecting the readership level of our publications as well as advertising and circulation revenue;

•

our ability to realize expected benefits from cost savings and revenue enhancement initiatives;

• any downgrade in the rating of our securities;

•

increased competition, including price competition and competition from other publications and forms of media, such as television and radio programs and Internet sites concentrating on celebrity news and health and fitness;

•

our ability to implement our business strategy;

• changes in demand for our services and products by our customers and advertisers, including as a result of the current economic downturn;

•

changes in the price of fuel, paper or postage costs;

•

our net operating loss carryforwards may be limited as a result of our change in ownership under Section 382 of the Internal Revenue Code;

•

our ability to renew our wholesaler service agreements with respect to the distribution of our publications;

•

any loss of one or more of our key vendors;

•

our ability to attract and retain experienced and qualified personnel;

•

adverse results in litigation matters or any regulatory proceedings; and

•

our ability to maintain an effective system of internal controls over financial reporting.

For a further discussion of risk factors which could cause actual results to differ materially from those indicated by the forward-looking statements, see Item 1A, “Risk Factors,” in ~~our~~Part ~~Annual~~II ~~Report~~of onthis Form 10-~~K for the fiscal year ended March 31, 2008 (the “March 31, 2008 10-K”)~~Q. Any written or oral forward-looking statements made by us or on our behalf are subject to these factors. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements may vary materially from those described in this Form 10-Q as intended, planned, anticipated, believed, estimated or expected. The risk factors included in ~~the March~~Item 311A, ~~2008~~Part II, of this Form 10-KQ are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also harm our future results. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

The forward-looking statements included in this Form 10-Q are made only as of the date of this Form 10-Q. We do not intend, and do not assume any obligations, to update these forward looking statements, except as required by law.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

	March 31, 2008			~~September~~December 3031, 2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	64,166		$	2155,~~359~~501
Trade receivables, net of allowance for doubtful accounts of $7,521 and $7,124, respectively		57,074			58,529
Trade receivables, net of allowance for doubtful accounts of $7,521 and $6,853, respectively		57,074			47,166
Inventories		28,629			26,~~795~~209
Prepaid expenses and other current assets		14,229			1514,~~260~~839
Total current assets		164,098			~~121~~143,~~943~~715
PROPERTY AND EQUIPMENT, NET:
Leasehold improvements		1,648			1,~~676~~802
Furniture, fixtures and equipment		43,105			4226,~~461~~756
Less – accumulated depreciation		(39,656	)		(3923,~~390~~964	)
Total property and equipment, net		5,097			4,~~747~~594
OTHER ASSETS:
Deferred debt costs, net		14,050			1017,~~240~~722
Deferred rack costs, net		7,749			8,~~850~~168
Other long-term assets		2,750			2,~~702~~362
Total other assets		24,549			2128,~~792~~252
GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill		359,663			~~359~~244,~~663~~974
Other identified intangibles, net of accumulated amortization of $152,006 and $155,761, respectively		387,752			383,997
Other identified intangibles, net of accumulated amortization of $152,006 and $157,638, respectively		387,752			278,985
Total goodwill and other identified intangible assets		747,415			~~743~~523,~~660~~959
TOTAL ASSETS	$	941,159		$	~~892~~700,~~142~~520
LIABILITIES AND STOCKHOLDER’S DEFICIT
CURRENT LIABILITIES:
Term loan and revolving credit facility	$	12,629		$	~~459~~4,~~621~~500
Senior subordinated notes, net		—			~~413~~14,~~718~~009
Accounts payable		42,511			3026,~~923~~458
Accrued expenses and other liabilities		65,210			6859,~~869~~138
Accrued interest		24,247			2345,~~545~~016
Deferred revenues		41,666			4642,~~758~~256
Total current liabilities		186,263			1191,~~043,434~~377
NON-CURRENT LIABILITIES:
Term loan and revolving credit facility		497,371			—493,996
Senior subordinated notes, net		567,681			~~154~~554,~~728~~855
Deferred income taxes		88,926			9249,~~261~~405
Total liabilities		1,340,241			1,~~290~~289,~~423~~633
COMMITMENTS AND CONTINGENCIES (Note 9)
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDER’S DEFICIT:
Common stock, $.20 par value; 10,000 shares authorized; 7,508 shares issued and outstanding		2			2
Additional paid-in capital		281,671			281,671
Accumulated deficit		(680,897	)		(~~679~~870,~~886~~627	)
Accumulated other comprehensive income (loss)		142			(68159	)
Total stockholder’s deficit		(399,082	)		(~~398~~589,~~281~~113	)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT	$	941,159		$	~~892~~700,~~142~~520

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these Unaudited Condensed Consolidated Financial Statements.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (~~LOSS)

(in thousands)

	Fiscal Quarter Ended						~~Two~~Three Fiscal Quarters Ended
	September 30, 2007			September 30, 2008			September 30, 2007			September 30, 2008
	December 31, 2007			December 31, 2008			December 31, 2007			December 31, 2008
OPERATING REVENUES:
Circulation	$	7068,~~742~~221		$	6857,~~657~~855		$	~~137~~205,~~099~~320		$	~~136~~194,~~366~~221
Advertising		5037,~~383~~792			4834,~~961~~873			96134,~~886~~678			91126,~~206~~079
Other		108,~~789~~517			118,~~181~~560			1927,~~061~~578			2028,~~049~~609
Total operating revenues		~~131~~114,~~914~~530			~~128~~101,~~799~~288			~~253~~367,~~046~~576			~~247~~348,~~621~~909
OPERATING EXPENSES:
Editorial		1213,~~959~~142			1311,~~029~~730			2538,~~598~~740			2537,~~726~~456
Production		3632,~~427~~765			3833,~~639~~968			71104,~~773~~538			71105,~~910~~878
Distribution, circulation and other cost of sales		22,~~200~~021			2321,~~171~~685			4264,~~838~~859			4465,~~141~~826
Selling, general and administrative		2526,~~759~~299			22,~~367~~713			4874,~~683~~982			4568,~~987~~700
Depreciation and amortization		3,~~211~~059			2,~~625~~584			69,~~500~~559			57,~~337~~921
Total operating expenses		100,556			99,831			195,392			193,101
Provision for impairment of intangible assets and goodwill		—			217,824			—			217,824
OPERATING INCOME		31,358			28,968			57,654			54,520
Total operating expenses		97,286			310,504			292,678			503,605
OTHER INCOME (EXPENSE):
OPERATING INCOME (LOSS)		17,244			(209,216	)		74,898			(154,696	)
Interest expense		(24,818	)		(22,180	)		(49,509	)		(45,673	)
OTHER (EXPENSE) INCOME:
Senior subordinated notes to be issued		(17,291	)		—			(17,291	)		—
Interest expense		(25,089	)		(24,266	)		(74,598	)		(69,939	)
Amortization of deferred debt costs		(2,759	)		(2,806	)		(5,445	)		(5,552	)
Senior subordinated notes to be issued		182			—			(17,109	)		—
Other income (expense), net		203			(222	)		837			84
Amortization of deferred debt costs		(2,764	)		(2,803	)		(8,209	)		(8,355	)
Total other expense		(44,665	)		(25,208	)		(71,408	)		(51,141	)
Other income, net		821			156			1,658			240
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES AND (LOSS) INCOME FROM DISCONTINUED OPERATIONS		(13,307	)		3,760			(13,754	)		3,379
Total other expense		(26,850	)		(26,913	)		(98,258	)		(78,054	)
PROVISION FOR INCOME TAXES		3,876			3,137			3,368			2,868
LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND INCOME (LOSS) FROM DISCONTINUED OPERATIONS		(9,606	)		(236,129	)		(23,360	)		(232,750	)
(LOSS) INCOME FROM CONTINUING OPERATIONS		(17,183	)		623			(17,122	)		511
PROVISION (BENEFIT) FOR INCOME TAXES		4,363			(45,388	)		7,731			(42,520	)
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		(572	)		—			(756	)		500
LOSS FROM CONTINUING OPERATIONS		(13,969	)		(190,741	)		(31,091	)		(190,230	)
NET (LOSS) INCOME	$	(17,755	)	$	623		$	(17,878	)	$	1,011
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		7			—			(749	)		500
NET LOSS	$	(13,962	)	$	(190,741	)	$	(31,840	)	$	(189,730	)

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these Unaudited Condensed Consolidated Financial Statements.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Two Fiscal Quarters Ended
	Three Fiscal Quarters Ended
	September 30, 2007			September 30, 2008
	December 31, 2007			December 31, 2008
Cash Flows from Operating Activities:
Net (loss) income	$	(17,878	)	$	1,011
Net loss	$	(31,840	)	$	(189,730	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation of property and equipment		23,~~221~~147			12,~~582~~289
Amortization of other identified intangibles		46,~~279~~412			35,~~755~~632
Senior subordinated notes to be issued		17,291			—
Provision for impairment of intangible assets and goodwill		—			217,824
Provision for bad debts		762			1,413
Senior subordinated notes to be issued		17,109			—
Amortization of deferred debt costs		5,445			5,552
Provision for bad debts		1,966			2,043
Amortization of deferred rack costs		6,466			5,893
Amortization of deferred debt costs		8,209			8,355
Amortization of deferred rack costs		9,029			8,914
Write-off of deferred rack costs and property and equipment		195			—
Provision for excess and obsolete inventory		~~211~~221			82—
Deferred income tax provision		2,884			2,521
Deferred income tax provision (benefit)		6,997			(39,706	)
Other		(~~523~~655	)		~~447~~655
Decrease (increase) in operating assets:
Trade receivables		~~(6,703~~873	)		(27,~~868~~865	)
Inventories		~~(850~~1,940	)		12,~~752~~420
Prepaid expenses and other current assets		(~~1,785~~169	)		(~~1,031~~610	)
Deferred rack costs		(46,~~206~~509	)		(69,~~994~~333	)
Other long-term assets		(~~150~~176	)		48388
Increase (decrease) in operating liabilities:
Accounts payable		(14,~~254~~054	)		(1116,~~588~~053	)
Accrued expenses and other liabilities		(~~4,393~~375	)		1(8,~~562~~260	)
Accrued interest		(713,~~189~~554	)		~~(702~~20,769	)
Deferred revenues		(12,~~171~~580	)		~~5,092~~590
Management fee payable		2,000			2,000
Total adjustments and changes in operating assets and liabilities		1330,~~530~~026			8205,~~516~~782
Net cash (used in) provided by operating activities		(41,~~348~~814	)		916,~~527~~052
Cash Flows from Investing Activities:
Purchases of property and equipment		(~~805~~1,412	)		(1,~~242~~805	)
Proceeds from sale of assets		~~389~~408			1843
Proceeds from sale of discontinued operations		—			500
Investment in Mr. Olympia, LLC		(300	)		(300	)
Net cash used in investing activities		(~~716~~1,304	)		(1,~~024~~562	)
Cash Flows from Financing Activities:
Proceeds from revolving credit facility		—			3474,000
Term loan and revolving credit facility principal repayments		—			(8485,~~379~~504	)
Payment of deferred debt costs		(942	)		(~~408~~11,178	)
Net cash used in financing activities		(942	)		(5022,~~787~~682	)
Effect of exchange rate changes on cash		~~106~~195			(~~523~~473	)
Net Decrease in Cash and Cash Equivalents		(53,~~900~~865	)		(428,~~807~~665	)
Cash and Cash Equivalents, Beginning of Period		60,414			64,166
Cash and Cash Equivalents, End of Period	$	5456,~~514~~549		$	2155,~~359~~501
Supplemental Disclosures of Non-Cash Financing Activities Information:
Non-cash deferred debt costs (incurred but not paid)	$	—148		$	~~1,482~~997

The accompanying Notes to the Unaudited Condensed Consolidated Financial Statements are an integral part of these Unaudited Condensed Consolidated Financial Statements.

AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~December 3031, 2008

(1) Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements include the accounts of American Media Operations, Inc. and its subsidiaries (collectively, the “Company”). The Company is a wholly owned subsidiary of American Media, Inc. (“Media”). ~~Media’s parent entity is EMP Group L.L.C. (the “LLC”).~~ The Company consolidates all majority owned subsidiaries and investments in entities in which it has a controlling influence. Non-majority owned investments are accounted for using the equity method when the Company has the ability to significantly influence the operating decisions of the issuer. When the Company does not have the ability to significantly influence the operating decisions of an issuer, the cost method is used. For entities that are considered variable interest entities, the Company applies the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46-R, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51.” All intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements reflect all normal and recurring adjustments which are necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows as of the dates and for the periods presented. The Unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America for annual financial statements and should be read in conjunction with the financial statements and notes thereto for the year ended March 31, 2008 included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008 (the “March 31, 2008 10-K”), including the summary of significant accounting policies set forth in Note 1 thereof. The operating results for the fiscal quarter and ~~two~~three fiscal quarters ended ~~September~~ December 3031, 2008 are not necessarily indicative of the results to be expected for any future period or for the full fiscal year.

~~Liquidity~~On January 30, 2009, the Company successfully completed its cash tender offers and receipt of requisite consents in the related consent solicitations in respect of its then outstanding existing senior subordinated indebtedness, consisting of (1) $414.5 million aggregate principal amount of 10 1/4% Series B Senior Subordinated Notes due 2009 (the “2009 Notes”) and (2) $155.5 million aggregate principal amount of 8 7 /8% Senior Subordinated Notes due 2011 (the “2011 Notes”, and together with the 2009 Notes, the “Existing Notes”). $400.5 million of the 2009 Notes and $148.0 million of the 2011 Notes were validly tendered and accepted for payment and consents were delivered with respect to the Company’s Existing Notes.

~~The~~On ~~Company’s bank credit agreement entered into by the Company on~~ January 30, ~~2006 (as amended~~2009, the ~~“2006~~Company ~~Credit~~issued ~~Agreement”~~(i) ~~includes a~~ $6021.02 million ~~revolving~~aggregate ~~credit~~principal ~~facility~~amount (of the ~~“Revolving~~Company’s ~~Facility”)~~9% ~~and~~Senior aPIK ~~$450.0~~Notes ~~million~~due ~~term~~2013 ~~loan commitment~~ (the “~~Term~~Senior ~~Facility~~PIK Notes”). Asand ~~of September~~(ii) ~~30, 2008, there was~~ $20300.0 ~~million~~ ~~outstanding on the Revolving Facility and $439.6~~ million ~~outstanding~~aggregate onprincipal ~~the~~amount ~~Term~~of ~~Facility. The Company subsequently borrowed an additional $40.0 million on~~ the ~~Revolving Facility on October 1, 2008. The~~ Company’s ~~Revolving~~14% ~~Facility matures~~Senior inSubordinated ~~January~~Notes ~~2012~~due ~~and the Company’s Term Facility matures in January~~ 2013. ~~The Revolving Facility and~~ (the ~~Term~~“Senior ~~Facility~~Subordinated ~~both~~Notes” ~~will mature on February 1~~and, ~~2009~~together ifwith the ~~Company has more than $25.0 million of the 10.25% Series B~~ Senior ~~Subordinated~~ ~~Notes~~PIK ~~due May 1~~Notes, ~~2009 (~~the “~~2009~~New Notes”). ~~outstanding~~Also on ~~February~~ January 130, 2009., InMedia ~~addition~~sold 5,694,480 ~~the~~shares ~~Revolving~~of ~~Facility~~common ~~and~~stock (the ~~Term~~“Common ~~Facility~~Stock” ~~both~~and, ~~will~~together ~~mature~~with onthe ~~October 15~~New Notes, ~~2010~~the if“Securities”) ~~the~~for ~~Company~~an ~~has~~aggregate ~~more~~purchase ~~than~~price of $10126.02 million of, ~~the~~pursuant ~~8.875%~~to ~~Senior~~a ~~Subordinated~~purchase ~~Notes~~agreement ~~due~~ dated January 1529, ~~2011~~2009, ~~(the~~among ~~“2011~~Media, ~~Notes”~~the ~~and~~Company, ~~together with~~ the ~~2009~~other ~~Notes,~~parties ~~the~~named ~~“Notes”)~~therein ~~outstanding~~and onJ.P. ~~October 15,~~Morgan ~~2010~~Securities Inc. The ~~Company~~cash ~~has~~proceeds ~~classified~~received from the ~~entire~~offering ~~balance~~ of the ~~2006 Credit~~Securities ~~Agreement~~(the as“Offering”), atogether ~~current~~with ~~liability~~the onCompany’s ~~its~~cash ~~September 30~~on hand, ~~2008~~were ~~balance~~used ~~sheet~~to aspurchase the ~~2006~~Existing ~~Credit~~Notes ~~Agreement~~in ~~may mature within twelve months of September 30, 2008. The Company has also classified~~ the ~~entire~~tender ~~balance~~offers ofand ~~the~~to ~~2009~~pay ~~Notes~~approximately of $~~413~~35.70 million asof afees ~~current~~and ~~liability~~expenses onrelated ~~its~~to ~~September 30,~~the ~~2008~~Offering ~~balance~~and ~~sheet as~~ the ~~2009~~tender ~~Notes~~offers ~~mature~~and ~~within~~consent ~~twelve months of September 30, 2008~~solicitations.

InOn ~~order to refinance the Notes, on August~~December 2631, 2008, the Company ~~commenced~~amended ~~tender offers to purchase~~ and ~~consent~~restated ~~solicitations~~its ~~with~~bank ~~respect~~credit toagreement ~~all~~entered ofinto ~~the~~on ~~Notes. On~~ January 930, ~~2009,~~2006 ~~the~~(as ~~Company~~ amended ~~its tender offers and consent solicitations. To finance the purchase of the Notes in the tender offers and the payment for consents in the consent solicitations~~, ~~simultaneous with~~ the ~~tender~~“2006 ~~offers and consent solicitations, the Company is offering up to (a~~Credit Agreement”) ~~$21~~,~~245,380 aggregate~~ ~~principal~~among ~~amount of~~ the Company~~’s 9% senior PIK notes due 2013 (the “Senior PIK Notes”)~~, ~~and (b) $300~~Media,~~000,000~~ ~~aggregate principal amount of~~ the ~~Company’s~~lenders ~~14%~~party ~~senior subordinated notes due 2013 (the “Senior Subordinated Notes” and~~thereto, ~~together~~JPMorgan ~~with~~Chase ~~the Senior PIK Notes~~Bank, ~~the “New Notes”)~~N. ~~We are a wholly owned subsidiary of Media~~A., ~~Together~~as ~~with~~Administrative ~~the New Notes~~Agent, ~~Media~~and isDeutsche ~~also~~Bank ~~offering~~Securities 5Inc.,~~700,000~~ ~~shares~~as ofSyndication ~~Media’s~~Agent ~~common stock~~ (the ~~“Shares”~~ ~~and, together with the New Notes, the~~ “~~Offered~~2009 ~~Securities~~Credit Agreement”)~~, representing 95% of Media’s outstanding shares of common stock~~. InOn ~~order to tender Notes in the tender offers~~January 30, ~~a tendering holder must agree to purchase~~2009, ~~Offered~~concurrently ~~Securities~~with ~~for a purchase price equal to~~ the ~~consideration~~consummation such holder receives in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of ~~the~~its ~~restrictive~~cash ~~covenants and related defaults in the indentures governing the Notes. In connection with the~~ tender offers, ~~certain provisions of~~ the ~~2006~~2009 Credit Agreement ~~will~~became ~~be waived including the change of control event of default that would result from successful tender offers~~effective. ~~For a more complete description of the tender offers and consent solicitations, see Note 7, “Senior~~

As a result of the restructuring of the Company’s capital structure and the issuance of Common Stock by Media to the bondholders who participated in the cash tender offers completed on January 30, 2009 and receipt of requisite consent solicitations (the “Tendering Bondholders”), the Tendering Bondholders acquired 94.9% of Media’s Common Stock on January 30, 2009. Media’s equityholders prior to the financial restructuring (the “Existing Equityholders”) retained 5.1% of Media’s Common Stock. As part of the restructuring, Media’s parent entity, EMP Group, L.L.C., was dissolved.

For more information regarding the 2006 Credit Agreement, the 2009 Credit Agreement, the Existing Notes and the New Notes, see Note 6, “Credit Agreement,” and Note 7, “Senior Subordinated Indebtedness.”

~~Subordinated~~Wholesaler ~~Indebtedness.”~~Concentration The Company cannot make any assurances that such tender offers and consent solicitations will be successful. If such tender offers and consent solicitations are not successful, the Company will likely be required to restructure its capital structure through bankruptcy proceedings.

~~Given~~As of December 31, 2008, single copy revenue consisted of copies distributed to newsstands primarily by four wholesalers, which the ~~continued~~Company ~~weakness~~estimates represented 83% of the ~~credit~~newsstand ~~markets~~distribution market, ~~there~~as ~~can~~well as beseveral nosmaller ~~assurance~~wholesalers ~~that~~who represented the ~~Company~~remaining ~~can~~17%. ~~refinance~~Operating ~~its~~revenue ~~existing~~generated ~~Notes~~by orthese ~~obtain~~wholesalers ~~the~~is ~~additional~~included ~~capital~~in ~~necessary~~the toCelebrity ~~satisfy~~Publications, ~~its~~Tabloid ~~short-term~~Publications, ~~cash~~Women’s ~~needs~~Health onand ~~satisfactory~~Fitness ~~terms~~Publications and Corporate/Other segments. In the ~~event~~ three fiscal quarters ended December 31, 2008, three wholesalers each accounted for greater than 10% of the Company’s istotal ~~unable~~operating torevenue ~~extend~~and orin ~~refinance~~the aggregate accounted for approximately 36% of the ~~Notes,~~Company’s total operating revenue. In the ~~2006~~three ~~Credit~~fiscal ~~Agreement~~quarters ~~will~~ended ~~likely~~December 31, ~~mature~~2007, ~~early~~three wholesalers accounted for greater than 10% of the Company’s total operating revenue and in the aggregate accounted for approximately 38% of the Company’s total ~~will~~operating ~~not~~revenue. ~~have~~The ~~sufficient~~Company ~~funds~~currently has service agreements with two of these four wholesalers, which provide incentives to ~~repay~~maintain ~~such~~certain ~~indebtedness~~levels of service. InOne ~~such~~wholesaler ~~event~~service agreement was terminated by the wholesaler effective December 31, 2008. See Note 10, “Litigation,” for a description of the ~~Company~~litigation ~~may~~relating ~~have~~to such wholesaler. One of these wholesalers has ceased to ~~liquidate~~operate ~~assets~~and onis holding certain of its allotments of the Company’s monthly ~~unfavorable~~magazines. ~~terms,~~The orCompany beis ~~unable~~taking steps to ~~continue~~reclaim asthese amagazines. ~~going~~The ~~concern,~~Company’s ~~and~~operating ~~incur~~results ~~additional~~could ~~costs~~be ~~associated~~materially ~~with~~affected ~~bankruptcy~~by disruption of the distribution of the Company’s magazines through the wholesalers.

~~The~~(2) ~~accompanying~~Comprehensive ~~consolidated financial~~Loss statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the Company’s consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should it be unable to continue as a going concern.

~~(2)~~The ~~Comprehensive~~change ~~Income~~in the components of other comprehensive loss is comprised of foreign currency translation adjustments and is reported as follows (~~Loss~~in thousands):

The change in the components of other comprehensive income (loss) is comprised of foreign currency translation adjustments and is reported as follows (in thousands):


	Fiscal Quarter Ended						Three Fiscal Quarters Ended
	December 31, 2007			December 31, 2008			December 31, 2007			December 31, 2008
Net loss	$	(13,962	)	$	(190,741	)	$	(31,840	)	$	(189,730	)
Foreign currency translation adjustments, net of tax		(43	)		(91	)		(28	)		(301	)

Comprehensive loss	$	(14,005	)	$	(190,832	)	$	(31,868	)	$	(190,031	)

	Fiscal Quarter Ended						Two Fiscal Quarters Ended
	September 30, 2007			September 30, 2008			September 30, 2007			September 30, 2008
Net (loss) income	$	(17,755	)	$	623		$	(17,878	)	$	1,011
Foreign currency translation adjustments, net of tax		(10	)		(219	)		15			(210	)
Comprehensive (loss) income	$	(17,765	)	$	404		$	(17,863	)	$	801

(3) Inventories

Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) method. Inventories are comprised of the following (in thousands):

	March 31, 2008		~~September~~December 3031, 2008
Raw materials – paper	$	23,854	$	2322,~~081~~721
Finished product — paper, production and distribution costs of future issues		4,775		3,~~714~~488
Total inventory	$	28,629	$	26,~~795~~209

(4) Goodwill and Other Identified Intangible Assets

As of March 31, 2008 and ~~September~~December 3031, 2008, the Company had goodwill with carrying values of $359.7 million and ~~other~~$245.0 million, respectively, and other identified intangible assets not subject to amortization with carrying values of $352.3 million and $258.4 million, respectively. The other identified intangible assets not subject to amortization consist of tradenames with indefinite lives.

During the fiscal quarter ended December 31, 2008, the Company believed that the fair value of its goodwill and other intangible assets for certain reporting units may have declined below its carrying value primarily as a result of a change in management’s expectations of long-term cash flows resulting from declining profitability in fiscal year 2009 as a result of the continued overall market weakness due to the current economic slowdown. The Company concluded that it was required to perform an interim impairment test. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company has performed an impairment test for both the Company’s tradenames and goodwill and the Company is currently finalizing the second step of the goodwill impairment test. SFAS No. 142 provides a two-step impairment test for goodwill. The first step of the impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any. The second step of the impairment test compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.

~~Identified~~As ~~intangible~~a ~~assets~~result ~~with~~of ~~finite~~the ~~lives~~Company’s ~~subject~~impairment totesting ~~amortization~~under ~~consist~~SFAS ofNo. 142 ~~the~~and ~~following~~SFAS ~~at March~~No. 31144, ~~2008~~non-cash impairment charges for the fiscal quarter and ~~September~~three fiscal quarters ended December 3031, 2008 by reportable segment are as follows (in thousands):

			March 31, 2008								September 30, 2008
	CelebrityPublications			TabloidPublications			Women'sHealth and FitnessPublications		Corporate/Other		Total
	Range ofLives		Gross CarryingAmount			AccumulatedAmortization			Net		Gross CarryingAmount		AccumulatedAmortization			Net
Tradenames	$	42,193		$	31,930		$	13,019	$	6,778	$	93,920
Tradenames	8 - 27		$	14,186		$	(5,882	)	$	8,304	$	14,186	$	(6,104	)	$	8,082
Goodwill (1)		12,582			52,317			47,090		2,700		114,689
Covenants not to compete	5 - 10			22,500			(18,949	)		3,551		22,500		(20,003	)		2,497
Other Identified Intangibles		5,697			—			1,981		1,537		9,215
Subscriber lists	3 - 15			66,058			(45,825	)		20,233		66,058		(47,769	)		18,289
Provision for impairment of intangible assets and goodwill	$	60,472		$	84,247		$	62,090	$	11,015	$	217,824
Non-subscriber customer relationships	8			9,502			(6,110	)		3,392		9,502		(6,645	)		2,857
			$	112,246		$	(76,766	)	$	35,480	$	112,246	$	(80,521	)	$	31,725

~~Amortization expense of intangible assets was $2.~~(1) ~~million~~Amounts ~~and~~represent ~~$1.9~~estimated ~~million~~non-cash ~~for~~impairment ~~the~~charges ~~fiscal~~as ~~quarter~~these ~~ended September 30,~~charges ~~2007~~are probable and ~~2008,~~can ~~respectively,~~be ~~and~~reasonably $4estimated.3 ~~million~~The ~~and~~Company ~~$3.8~~will ~~million~~increase ~~for~~or decrease the ~~two~~amount ~~fiscal~~of ~~quarters~~these ~~ended September 30~~charges, ~~2007~~as ~~and 2008~~necessary, ~~respectively.~~based ~~Based~~upon onfinalizing the ~~carrying~~impairment ~~value~~test ofin ~~identified~~the ~~intangible~~fourth ~~assets~~fiscal ~~recorded~~quarter ~~at September 30, 2008, and assuming no subsequent impairment~~ of ~~the~~2009 ~~underlying~~prior ~~assets,~~to ~~the~~filing ~~amortization expense for~~ the ~~remainder~~Company’s of fiscal year 2009 ~~and~~Form ~~future fiscal years is expected to be as follows (in thousands):~~ 10-K.

Fiscal Year	AmortizationExpense
2009	$	3,754
2010		6,845
2011		5,402
2012		4,651
2013		2,622
Thereafter		8,451
	$	31,725

Impairment Charge Assumptions

~~During~~The ~~the~~estimate ~~fiscal~~of ~~quarter~~fair ~~ended~~value ~~September 30,~~of ~~2008,~~ the Company’s ~~believed~~tradename ~~that~~and ~~the fair value of its~~ goodwill ~~and other intangible assets for certain~~ reporting units ~~may~~was ~~have declined below its carrying value~~ based on ~~management~~the Company’s ~~expectations~~projection of ~~long-term~~revenues, ~~cash~~operating ~~flows~~costs, ~~resulting~~and ~~from~~cash ~~declining~~flows ~~profitability~~considering ashistorical aand ~~result~~anticipated offuture ~~the~~results, ~~overall~~general ~~market weakness due to the current~~ economic ~~slowdown.~~and ~~The~~market ~~Company~~conditions ~~concluded~~as ~~that~~well itas ~~was~~the ~~required~~impact ~~to perform an interim impairment test in accordance with Statement~~ of ~~Financial~~planned ~~Accounting~~business ~~Standards (“SFAS”) No. 142, “Goodwill~~ and ~~Other Intangible~~ ~~Assets”~~operational ~~(“SFAS No~~strategies. ~~142”).~~ ~~Based~~The onvaluation ~~the~~employed ~~results~~a combination of ~~the~~present ~~interim~~value ~~impairment~~techniques ~~test,~~to ~~the~~measure ~~Company~~fair ~~concluded~~value ~~that its goodwill~~ and ~~other~~considered ~~intangible~~market ~~assets were not impaired as of September 30, 2008; however, there can be no assurances that they will not be impaired in future periods~~factors. IfThe ~~adverse~~key ~~events~~assumptions ~~were~~used to ~~occur~~determine ~~or circumstances were to change indicating that~~ the ~~carrying~~fair ~~amount~~value of ~~such~~the ~~assets~~Company’s ~~may~~tradename ~~not~~and begoodwill ~~fully~~reporting units ~~recoverable,~~for the ~~assets~~fiscal ~~would~~year be2009 ~~reviewed for~~ impairment ~~and~~ ~~the~~test ~~assets~~were: ~~may become impaired.~~

expected cash flow periods of five years;

terminal values based upon terminal growth rates ranging from 0% to 4%;

implied multiples used in the business enterprise value income and market approaches ranging from 3.4 to 5.9; and

discount rates ranging from 14% to 15% based on the Company’s best estimate of the weighted-average cost of capital adjusted for risks associated with the reporting units.

Management believes the rates used are consistent with the risks inherent in the Company’s current business model and with industry discount rates. Changes in management’s judgments and estimates could result in a significantly different estimate of the fair value of the reporting units and could result in a change in the impairment of tradenames and goodwill. A variance in the assumptions used could have had a significant impact on the amount of tradename and goodwill impairment charges recorded. For example:

a 100 basis point change in the discount rate would have caused an increase or decrease in the existing tradename impairment charges recognized by approximately $16.1 million;

a 100 basis point change in the discount rate would have changed the estimated fair value of tradenames in the Company’s other reporting units and may have caused those reporting units to incur tradename impairment charges;

a 5% decrease in the enterprise value may have caused goodwill impairment of one other publication; and

a 5% increase in the enterprise value would:

have caused no goodwill impairment charge to the Celebrity Publications segment;

have reduced the goodwill impairment charge to the Tabloid Publications segment by $8.6 million;

have reduced the goodwill impairment charge to the Women’s Health and Fitness Publications segment by $2.9 million; and

have reduced the goodwill impairment charge to the Corporate/Other segment by $0.1 million.

Changes in the carrying amount of goodwill by reportable segment are as follows (in thousands):


	Celebrity Publications			Tabloid Publications			Women’s Health and Fitness Publications			Corporate/ Other			Total
Balance as of March 31, 2008	$	85,873		$	143,991		$	83,649		$	46,150		$	359,663

Impairment charges in third fiscal quarter of 2009		(12,582	)		(52,317	)		(47,090	)		(2,700	)		(114,689	)


Balance as of December 31, 2008	$	73,291		$	91,674		$	36,559		$	43,450		$	244,974

Identified intangible assets with finite lives subject to amortization consist of the following at March 31, 2008 and December 31, 2008 (in thousands):


	Range of Lives	March 31, 2008							December 31, 2008
	Range of Lives	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Tradenames	8 -27	$	14,186	$	(5,882	)	$	8,304	$	14,186	$	(6,214	)	$	7,972
Covenants not to compete (a)	5 -10		22,500		(18,949	)		3,551		21,571		(20,530	)		1,041
Subscriber lists (b)	3 -15		66,058		(45,825	)		20,233		60,361		(48,741	)		11,620
Non-subscriber customer relationships (c)	8		9,502		(6,110	)		3,392		6,913		(6,913	)		—

		$	112,246	$	(76,766	)	$	35,480	$	103,031	$	(82,398	)	$	20,633

(a)	During the fiscal quarter ended December 31, 2008, the Company wrote off $0.5 million and $0.4 million of covenants not to compete related to the Women’s Health and Fitness Publications and Corporate/Other segments, respectively, based on its impairment test.

(b)	During the fiscal quarter ended December 31, 2008, the Company wrote off $5.7 million of subscriber lists related to the Celebrity Publications segment based on its impairment test.

(c)	During the fiscal quarter ended December 31, 2008, the Company wrote off $1.5 million and $1.1 million of customer relationships related to the Women’s Health and Fitness Publications and Corporate/Other segments, respectively, based on its impairment test.

Amortization expense of intangible assets was $2.1 million and $1.9 million for the fiscal quarters ended December 31, 2007 and 2008, respectively, and $6.4 million and $5.6 million for the three fiscal quarters ended December 31, 2007 and 2008, respectively. Based on the carrying value of identified intangible assets with finite lives recorded at December 31, 2008, and assuming no subsequent impairment of the underlying assets, the amortization expense for the remainder of fiscal year 2009 and future fiscal years is expected to be as follows (in thousands):


Fiscal Year	Amortization Expense
2009	$	968
2010		3,350
2011		2,622
2012		2,622
2013		2,622
Thereafter		8,449

	$	20,633

(5) Fair Value of Financial Instruments

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

	March 31, 2008						~~September~~December 3031, 2008
	CarryingAmount			Fair Value			CarryingAmount			Fair Value
Term loan	$	450,000		$	391,500		$	~~439~~438,~~621~~496		$	~~369~~228,~~282~~018
Revolving credit facility		60,000			49,800			2060,000			1631,~~900~~200
Subordinated notes		570,000	(a)		381,382	(a)		570,000	(a)		444,289	(a)
Existing Notes		570,000	(a)		381,382	(a)		570,000	(a)		114,717	(a)

(a)	Amount does not include bond premium and discount.

The fair value of the Company’s financial instruments is estimated based on the quoted market prices for the same or similar issues, or on the current rate offered to the Company for financial instruments of the same remaining maturities. The carrying amount for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

(6) Credit Agreement

~~The~~On January 30, 2006, the Company’s ~~Revolving~~entered ~~Facility~~into ~~matures~~the in2006 ~~January~~Credit ~~2012~~Agreement, which replaced its then existing amended and ~~the~~restated ~~Company’s~~credit ~~Term~~agreement ~~Facility~~dated ~~matures~~as inof January 23, ~~2013~~2003. ~~The~~On ~~Revolving~~December 31, ~~Facility~~2008, ~~and~~the Company entered into the ~~Term~~2009 ~~Facility~~Credit ~~both~~Agreement, ~~will~~which ~~mature~~became effective on ~~February~~January 130, 2009 if (the ~~Company~~ ~~has~~“Effective ~~more~~Date”), ~~than~~concurrently ~~$25.0~~with ~~million~~the consummation of the ~~2009~~Company’s ~~Notes~~cash ~~outstanding~~tender onoffers. ~~February 1,~~The 2009. InCredit ~~addition,~~Agreement ~~the~~includes ~~Revolving~~a ~~Facility~~$60.0 ~~and~~million revolving credit facility (the ~~Term~~“Revolving Facility”) ~~both~~and ~~will~~a ~~mature~~$450.0 onmillion ~~October 15,~~term ~~2010~~loan ifcommitment (the ~~Company~~“Term ~~has~~Facility”). ~~more~~The Revolving ~~than~~Facility ~~$10.0~~matures ~~million~~in ofJanuary 2012 and the ~~2011 Notes~~Term ~~outstanding~~Facility onmatures ~~October 15,~~in ~~2010~~January 2013. ~~The~~Because the Company ~~has~~completed ~~classified~~ the ~~entire~~refinancing ~~balance~~ of ~~the~~its ~~2006~~2009 ~~Credit~~Notes ~~Agreement~~on as a ~~current~~long-term ~~liability~~basis, onthe ~~its~~Company ~~September 30,~~has ~~2008~~classified ~~balance~~the ~~sheet~~appropriate asprincipal amount associated with the 2006 Credit Agreement ~~may~~as ~~mature~~non-current ~~within~~as ~~twelve months~~ of ~~September~~December 3031, 2008.

InDuring ~~order~~the tothree ~~refinance~~fiscal ~~the~~quarters ~~Notes,~~ended ~~on August~~December 2631, 2008, the Company ~~commenced tender offers to purchase and consent~~ ~~solicitations~~made ~~with~~required ~~respect~~quarterly toprincipal ~~all~~payments ofaggregating ~~the Notes~~$3.4 Onmillion ~~January 9,~~on ~~2009, the Company amended~~ its ~~tender~~2006 ~~offers~~Credit ~~and~~Agreement ~~consent~~term ~~solicitations~~loan commitment. ToThe ~~finance~~Company ~~the~~also ~~purchase~~made ofa ~~the~~fiscal ~~Notes~~year in2008 ~~the~~Excess ~~tender~~Cash ~~offers~~Flow ~~and the~~ payment ~~for~~(as ~~consents~~defined in the ~~consent solicitations,~~2006 ~~simultaneous~~Credit ~~with the tender offers and consent solicitations, the Company is offering (a~~Agreement) ~~$21,245,380~~ ~~aggregate principal amount~~ of ~~the~~$8.1 ~~Company’s~~million ~~Senior PIK Notes, (b)~~on June ~~$300~~30,~~000,000~~ ~~aggregate~~2008. ~~principal~~The ~~amount~~balance of the ~~Company’s~~ ~~Senior~~term ~~Subordinated~~loan ~~Notes~~under ~~and~~the ~~(c) 5,700,000~~2006 ~~Shares,~~Credit ~~representing~~Agreement ~~95%~~was ~~of Media’s outstanding shares of common stock~~$438.5 Inmillion ~~order~~on ~~to tender Notes in the tender offers~~December 31, a2008. ~~tendering~~The ~~holder~~revolving ~~must~~credit ~~agree~~facility tounder ~~purchase Offered Securities for a purchase price equal to~~ the ~~consideration~~2006 ~~being~~Credit ~~received~~Agreement bywas ~~such~~fully ~~holder~~drawn inon ~~tender~~December 31, ~~offers and consent solicitations~~2008. ~~Among~~Commitment ~~other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which~~fee ~~consents~~payments ~~remove~~during ~~substantially all of~~ the ~~restrictive~~three ~~covenants~~fiscal ~~and~~quarters ~~related~~ended ~~defaults~~December 31, in2008 ~~the~~were ~~indentures~~insignificant ~~governing~~as the ~~Notes.~~revolving Infacility ~~connection~~on ~~with~~ the ~~tender offers, certain provisions of the~~ 2006 Credit Agreement ~~will~~was befully ~~waived~~drawn ~~including~~during the ~~change~~entire ~~of control~~three ~~event~~fiscal ofquarters ~~default~~with ~~that~~the ~~would~~exception ~~result~~of ~~from successful tender offers. For~~ a ~~more~~few ~~complete description of the tender offers and consent solicitations, see Note 7, “Senior Subordinated Indebtedness~~days.” ~~The Company cannot make any assurances that such tender offers and consent solicitations will be successful.~~

~~Given~~The ~~the~~effective ~~continued~~interest ~~weakness~~rate ofunder the ~~credit~~2006 ~~markets~~Credit Agreement, ~~there~~including ~~can~~amounts beborrowed ~~no assurance~~under ~~that~~ the ~~Company~~term ~~can~~loan ~~refinance~~and ~~its~~revolving ~~existing~~facility ~~Notes~~on orthe ~~obtain~~2006 ~~the~~Credit ~~additional~~Agreement, ~~capital~~as ~~necessary~~of December 31, to2008, ~~satisfy~~was ~~its~~7.6%. ~~short~~The effective weighted-~~term~~average ~~cash~~interest ~~needs~~rates onunder ~~satisfactory~~the ~~terms.~~2006 InCredit ~~the~~Agreement ~~event~~for the ~~Company~~fiscal isquarters ~~unable~~ended toDecember 31, ~~extend~~2007 orand ~~refinance~~2008 ~~the~~were ~~Notes~~8.6% and 7.6%, respectively. The effective weighted-average interest rates under the 2006 Credit Agreement ~~will~~for ~~likely~~the ~~mature~~three ~~early~~fiscal ~~and~~quarters ~~the~~ended ~~Company~~December 31, ~~will~~2007 ~~not~~and ~~have~~2008 ~~sufficient~~were ~~funds~~8.6% toand ~~repay~~6.8%, ~~such indebtedness~~respectively. InThe ~~such~~decrease ~~event,~~in the ~~Company~~effective ~~may~~weighted-average ~~have~~interest torate ~~liquidate~~between ~~assets~~fiscal onquarters ~~unfavorable~~ended ~~terms~~December 31, 2007 orand be2008 ~~unable~~and tothree ~~continue~~fiscal asquarters aended ~~going concern~~December 31, 2007 and ~~incur additional~~2008 ~~costs~~is ~~associated~~tied ~~with~~to ~~bankruptcy~~the decrease in the London interbank offering rate (“LIBOR”).

~~During~~On ~~the two fiscal quarters ended September~~January 307, ~~2008~~2009, the Company ~~made~~and ~~the~~Media ~~required~~entered ~~quarterly principal~~into ~~payments~~a onforbearance ~~its~~agreement ~~Term~~with ~~Facility~~lenders ~~borrowing~~representing ~~totaling~~a ~~$2.3~~majority ~~million.~~of ~~The~~outstanding ~~Company~~amounts ~~also~~and ~~made~~commitments aunder ~~fiscal~~the ~~year~~2006 ~~2008~~Credit ~~Excess~~Agreement ~~Cash~~and ~~Flow~~the ~~payment~~administrative ~~(as~~agent ~~defined~~under in the 2006 Credit Agreement), ofpursuant ~~$8.1~~to ~~million~~which onsuch ~~June 30~~lenders and the administrative agent agreed, ~~2008.~~subject ~~The~~to ~~Company~~certain ~~paid~~termination ~~down~~events, ~~$34.0 million~~to offorbear ~~its~~until ~~Revolving~~the ~~Facility~~earliest onof ~~June~~(i) 30February 4, ~~2008~~2009, ~~and~~(ii) the ~~subsequently~~date ~~borrowed~~on ~~$34.0~~which ~~million~~any onof ~~July 1,~~the ~~2008.~~Existing ~~The~~Notes become ~~Company~~or ~~then~~are ~~paid~~declared ~~down~~to ~~$40.0~~be ~~million~~due and payable and (iii) the commencement of ~~its~~an ~~Revolving~~insolvency ~~Facility~~proceeding onwith ~~September 30~~respect to the Company, ~~2008~~Media or any of their subsidiaries, from exercising any rights and ~~subsequently~~remedies ~~borrowed~~under ~~$40.0~~the 2006 Credit Agreement as a ~~million~~result of the Company’s failure (a) to pay the interest payment due on ~~October~~the 2009 Notes on November 1, 2008., ~~Commitment~~(b) to ~~fee~~comply ~~payments~~with ~~during~~ the ~~two~~reporting ~~fiscal~~requirements ~~quarters~~in ~~ended~~the ~~September 30,~~2006 ~~2008~~Credit ~~were~~Agreement, ~~insignificant~~(c) to ascomply with the ~~Revolving~~corresponding reporting ~~Facility~~requirements ~~was~~in ~~fully~~the ~~drawn~~indentures ~~during~~governing the ~~entire~~Existing ~~two~~Notes ~~fiscal~~and ~~quarters~~(d) to comply with the ~~exception~~requirements of the indentures governing the Existing Notes in connection with its failure to meet a ~~few~~specified ~~days~~leverage ratio. The forbearance ~~near~~agreement ~~each~~ended ~~quarter~~on ~~end~~January 30, 2009 when the Company successfully completed its cash tender offers and consent solicitations with respect to the Existing Notes.

~~The~~11 effective interest rate under the 2006 Credit Agreement, including amounts borrowed under the Term Facility and Revolving Facility, as of September 30, 2008, was 6.0%. The effective weighted-average interest rates under the 2006 Credit Agreement for the fiscal quarters ended September 30, 2007 and 2008 were 8.7% and 6.0%, respectively. The effective weighted-average interest rates under the 2006 Credit Agreement for the two fiscal quarters ended September 30, 2007 and 2008 were 8.6% and 6.4%, respectively. The decrease in the effective weighted-average interest rate between fiscal quarters ended September 30, 2007 and 2008 and two fiscal quarters ended September 30, 2007 and 2008 is tied to the decrease in the London interbank offering rate (“LIBOR”).

~~introduction~~Under ofthe an2009 ~~interest~~Credit ~~rate floor~~Agreement, athe ~~broadening~~Company ofhas the ~~circumstances~~option ~~that would give rise~~ to ~~prepayment~~pay ofinterest ~~the~~based ~~loans~~on ~~and~~a ~~the~~floating ~~introduction~~base ofrate ~~more restrictive~~option ~~covenants,~~equal ~~particularly relating~~ to (i) the ~~indebtedness,~~greater ~~investments,~~of ~~restricted payments and capital expenditures. Although there can be no assurances,~~ the ~~Company~~JPMorgan ~~anticipates~~Chase ~~that~~Bank, ~~based~~N.A. ~~on current projections~~ (~~including~~“JPMorgan”) ~~projected~~prime ~~borrowings and~~rate ~~repayments~~or ~~under~~ the ~~Revolving~~federal ~~Facility),~~funds ~~its~~effective ~~operating~~rate ~~results~~plus ~~for~~0.5% ~~fiscal~~(subject ~~year 2009 will be sufficient~~ to ~~satisfy~~a ~~the~~floor ~~financial~~equal ~~covenants under the 2006 Credit Agreement after giving effect~~ to ~~the proposed amendments~~4.50%) If(“base ~~the~~rate ~~proposed~~loans”) ~~amendments do~~or ~~not become effective,~~ based on ~~the~~LIBOR ~~Company’s~~(subject ~~calculations,~~to ~~the~~a ~~Company~~floor ~~does~~equal ~~not expect~~ to 3.50%) be(“LIBOR ~~in compliance with the senior secured leverage ratio financial covenant as of December 31~~loans”), ~~2008~~in ~~and~~each incase ~~certain~~plus ~~future~~a ~~periods~~margin. The ~~Company’s ability~~margin toon ~~satisfy~~all ~~such~~base ~~financial~~rate ~~covenants~~loans is ~~dependent on its business performing in accordance with its projections~~5.5% Ifand the ~~performance~~margin ofon ~~the~~all ~~Company’s~~LIBOR ~~business~~loans ~~deviates~~is ~~from its projections, the Company may not be able to satisfy such financial covenants, including the senior secured leverage ratio~~6.5%. The Company’s ~~projections~~is ~~are~~required ~~subject~~ to arepay ~~number~~$1.1 ofmillion ~~factors, many~~ of ~~which~~principal ~~are~~on ~~events beyond~~ its ~~control,~~term ~~which~~loans ~~could~~on ~~cause~~a ~~the~~quarterly ~~Company’s~~basis. ~~actual results to differ~~In ~~materially~~addition, ~~from its projections. If~~ the Company ~~does~~is ~~not~~required ~~comply~~to ~~with~~make ~~these~~Excess orCash ~~other~~Flow ~~covenants~~payments ~~and~~(as ~~restrictions~~defined ~~contained~~ in the ~~2006~~2009 Credit Agreement), ~~the~~which ~~Company~~will ~~could~~be ~~default~~applied ~~under~~ratably ~~the~~to ~~2006 Credit Agreement. The outstanding debt under~~ the ~~2006 Credit Agreement could~~ then beoutstanding ~~declared~~term ~~immediately due and payable~~loans. ~~Moreover,~~Excess ~~the~~Cash ~~instruments~~Flow ~~governing~~payments ~~almost~~are ~~all~~due ofno ~~the~~later ~~Company’s~~than ~~other~~90 ~~debt~~days ~~contain~~after ~~cross-acceleration provisions so that an acceleration under any of~~ the ~~Company’s~~end ~~debt may result in a default under the Company’s other debt. If a cross-acceleration occurs, the maturity~~ of ~~the Company’s other debt could be accelerated and become immediately due and payable. If that happens, the Company may not be able to~~ ~~satisfy its debt obligations, which would have a substantial adverse effect on~~ the ~~Company’s~~fiscal ~~ability to continue as a going concern~~year.

~~On January 7,~~The 2009, ~~the~~Credit ~~Company~~Agreement ~~and~~includes ~~Media~~certain ~~entered~~representations ~~into~~and awarranties, ~~forbearance~~conditions ~~agreement~~precedent, ~~with~~affirmative ~~lenders~~covenants, ~~representing~~negative covenants aand ~~majority~~events of ~~outstanding~~default ~~amounts~~customary ~~and~~for ~~commitments~~agreements ~~under~~of ~~the~~this ~~2006~~type. ~~Credit~~The ~~Agreement~~negative ~~and~~covenants ~~the~~include ~~administrative~~financial ~~agent~~maintenance ~~under~~covenants ~~the~~comprised ~~2006~~of ~~Credit Agreement~~a leverage ratio, ~~pursuant~~a tosenior ~~which~~secured ~~such~~leverage ~~lenders~~ratio, ~~and~~a ~~the~~consolidated ~~administrative~~interest ~~agent~~expense ~~agreed~~coverage toratio, ~~subject~~and capital toexpenditure ~~certain~~limits. ~~termination~~The ~~events,~~2009 ~~forbear~~Credit ~~until~~Agreement ~~the~~also ~~earliest~~contains ofcertain ~~(i) February 4~~covenants that, ~~2009~~subject to certain exceptions, ~~(ii) the~~restrict ~~date~~paying ondividends, ~~which~~incurring ~~any~~additional ofindebtedness, ~~the~~creating ~~Existing~~liens, ~~Notes~~making ~~become~~acquisitions or other investments, ~~are~~entering ~~declared~~into tocertain bemergers ~~due~~or consolidations and ~~payable~~selling ~~and~~or ~~(iii) the~~otherwise ~~commencement~~disposing of anassets. ~~insolvency~~The ~~proceeding~~2009 ~~with~~Credit ~~respect~~Agreement toincludes ~~the~~a ~~Company,~~broadening ~~Media or any~~ of ~~their~~the ~~subsidiaries~~circumstances ~~from~~that ~~exercising~~would ~~any~~give ~~rights~~rise ~~and~~to ~~remedies~~prepayment ~~under~~of the ~~2006~~loans ~~Credit~~and ~~Agreement~~the asintroduction ~~a result~~ of ~~the~~more ~~Company’s~~restrictive ~~failure~~covenants, ~~(a) to~~particularly ~~pay~~relating ~~the~~to ~~interest~~indebtedness, ~~payment~~investments, ~~due~~restricted onpayments ~~the~~and ~~2009~~capital ~~Notes~~expenditures. onAlthough ~~November 1,~~there ~~2008,~~can ~~(b) to~~be ~~comply~~no ~~with~~assurances, the ~~reporting~~Company ~~requirements~~anticipates inthat, ~~the~~based ~~2006~~on ~~Credit~~current ~~Agreement,~~projections (~~c) to~~including ~~comply~~projected ~~with the corresponding requirements in~~borrowings ~~the~~and ~~indentures~~repayments ~~governing~~under the ~~Notes~~Revolving ~~and (d~~Facility) to, ~~comply~~its ~~with~~operating ~~the~~results ~~requirements~~for offiscal ~~the~~year ~~indentures~~2009 ~~governing~~will ~~the~~be ~~Notes~~sufficient into ~~connection~~satisfy ~~with~~the ~~its~~financial ~~failure~~covenants tounder ~~meet~~the a2009 ~~specified~~Credit ~~leverage ratio~~Agreement.

~~See~~The ~~Note~~indebtedness 13under the 2009 Credit Agreement is guaranteed by Media and the domestic subsidiaries of the Company and is secured by liens on substantially all of the assets of Media, ~~“Subsequent~~the ~~Events”~~Company and its domestic subsidiaries. In addition, the Company’s obligations are secured by a pledge of all of the issued and outstanding shares of, or other equity interests in, the Company and all of its 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.

The 2009 Credit Agreement requires the Company to pay, from the Effective Date until the termination of commitments under the Revolving Facility, a commitment fee equal to 1.0% of the unused portion of the revolving commitments.

Payments of principal due under the 2009 Credit Agreement (excluding any amounts required to be prepaid under the Excess Cash Flow provision) for the remainder of fiscal year 2009 and future fiscal years is as follows (in thousands):


Fiscal Year	Principal Amount
2009	$	1,125
2010		4,500
2011		4,500
2012		64,500
2013		423,871

	$	498,496

(7) Senior Subordinated Indebtedness

~~The~~On May 7, 1999, the Company issued $250.0 million in aggregate principal amount of the 2009 Notes. ~~mature~~On ~~on May~~February 114, ~~2009.~~2002, ~~The~~the Company ~~has~~issued ~~classified~~$150.0 ~~the~~million ~~entire~~in ~~balance~~aggregate principal amount of 2009 Notes. Pursuant to the terms of the indenture governing the 2009 Notes, ofthe Company issued an additional $~~413~~14.75 million asaggregate aprincipal ~~current~~amount ~~liability~~of 2009 Notes on ~~its September~~December 3013, ~~2008~~2007. ~~balance~~On ~~sheet~~January 23, as2003, the ~~2009~~Company issued $150.0 million aggregate principal amount of the 2011 Notes ~~mature~~and ~~within~~pursuant ~~twelve~~to ~~months~~the terms of ~~September~~the indenture governing the 2011 Notes, the Company issued an additional $5.5 million aggregate principal amount of 2011 Notes on December 3013, ~~2008~~2007.

InThe ~~connection~~Company ~~with~~failed ~~the~~to ~~consent~~make ~~agreements~~ the ~~Company~~required ~~entered~~semi-annual ~~into~~interest inpayment ~~March~~with ~~2006~~respect ~~with~~to ~~holders~~the of2009 aNotes ~~majority~~when ofdue ~~the~~on ~~outstanding~~November 1, ~~principal~~2008. ~~amount~~Such offailure ~~each~~resulted ~~series~~in an event of ~~the~~default ~~Notes,~~pursuant to the ~~Company~~terms ~~entered~~of ~~into~~the ~~supplemental~~indenture ~~indentures,~~governing the ~~purpose~~2009 ofNotes. ~~which~~The ~~was~~Company toalso ~~amend~~failed ~~the indentures relating~~ to make the ~~Notes~~ ~~to,~~required ~~among~~semi-annual ~~other~~interest ~~things,~~payment ~~require~~with ~~the~~respect ~~Company~~ to ~~meet~~the a2011 ~~specified~~Notes ~~leverage~~when ~~ratio~~due ason ~~of September~~January 3015, ~~2008~~2009. ~~The~~In addition, the Company failed to ~~meet~~file ~~the~~its ~~specified~~quarterly ~~leverage~~report ~~ratio~~on ofForm ~~7.25:1~~10-Q ~~required~~for ~~under~~ the ~~indentures~~period asended of September 30, 2008. Aswhen ~~a result,~~due on ~~or prior to December~~November 1514, ~~2009,~~2008. ~~the~~The Company ~~was~~also ~~required~~failed to ~~issue~~comply ~~either~~with ~~$50.0~~the ~~million~~requirements of ~~new~~indentures ~~equity~~governing orthe aExisting ~~sufficient~~Notes ~~amount~~relating ofto ~~equity~~its ~~such~~failure ~~that~~to meet ~~after~~a ~~giving~~specified ~~pro~~leverage ~~forma~~ratio ~~effect~~as toof ~~the~~September 30, ~~reduction~~2008. ofAs ~~indebtedness~~a result, the Company ~~would~~entered ~~have~~into ~~met the~~forbearance ~~required~~agreements ~~specified~~with ~~leverage~~existing ~~ratio.~~holders ~~Alternatively,~~of ~~the~~approximately ~~Company~~81% ~~could~~of ~~have~~the ~~issued~~then anoutstanding ~~additional~~aggregate ~~$36.3~~principal ~~million~~amount of 2009 Notes orand ~~made~~approximately 69% aof ~~cash~~the ~~payment~~then outstanding aggregate principal amount of ~~$20.7~~2011 ~~million~~Notes, pursuant to ~~existing~~which such holders ofagreed ~~Notes.~~to ~~The~~forbear ~~Company~~from ~~intends~~exercising toany ~~satisfy~~remedies ~~its~~under ~~obligations~~the toindentures ~~meet~~governing the ~~specified~~ ~~leverage~~Existing ~~ratio~~Notes as ofa ~~September 30,~~result ~~2008~~of bythe ~~issuing~~Company’s ~~equity~~aforementioned failures inuntil ~~connection with~~ the ~~offering~~Company ofsuccessfully ~~Offered~~completed ~~Securities,~~its ~~which~~cash ~~will~~tender ~~result~~offers inand ~~the~~consent ~~Company~~solicitations ~~satisfying~~with ~~such~~respect ~~ratio~~to onthe aExisting ~~pro forma basis~~Notes.

~~The~~12 Company has not currently entered into a financing agreement that permits the Company to refinance the 2009 Notes on a long-term basis. However, the Company is conducting, with respect to holders that are either “qualified institutional buyers” (as defined in Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”)) or persons outside the United States (in accordance with Regulation S of the Securities Act), (1) tender offers to purchase for cash any and all of its outstanding Notes and (2) related solicitations of consents from such holders of Notes to certain proposed amendments to the indentures governing the Notes (the “Proposed Amendments”). In addition, the Company is conducting a related solicitation of consents to the Proposed Amendments from all holders of Notes who do not, or are not eligible, to participate in the applicable tender offer.

Concurrently with the tender offers and consent solicitations, the Company is conducting an offering to the holders of Notes who participate in the tender offers of up to (a) $21,245,380 aggregate principal amount of the Company’s Senior PIK Notes, (b) $300,000,000 aggregate principal amount of the Company’s Senior Subordinated Notes and (c) 5,700,000 Shares, representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration being received by such holder in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. The Company cannot make any assurances that such tender offers and consent solicitations will be successful.

~~The~~Upon ~~Company failed to make~~ the ~~required~~consummation ~~semi-annual~~of ~~interest payment with respect to~~ the ~~2009~~tender ~~Notes~~offers ~~when due on November 1, 2008,~~ and onconsent ~~December 1,~~solicitations ~~2008, such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. The Company also expects to fail to make the required semi-annual interest payment~~ with respect to the ~~2011~~Existing Notes ~~when due~~ on January 1530, 2009~~. In addition~~, the Company ~~failed~~paid toall ~~file~~accrued ~~this~~and ~~quarterly~~unpaid ~~report~~interest onthrough ~~Form 10-Q for the period ended September~~January 30, ~~2008 when due on November 14~~2009, ~~2008. The Company has also failed to comply~~ with ~~the~~respect ~~requirements of the indentures governing the Notes relating~~ to ~~its failure to meet a specified leverage ratio as of September 30, 2008, as described above. As a result,~~ the ~~Company~~Existing ~~entered into forbearance agreements with existing holders of approximately 81% of the outstanding aggregate principal amount of 2009~~ Notes ~~and~~accepted ~~approximately~~for ~~69%~~purchase ofon ~~the outstanding aggregate principal amount of 2011 Notes, pursuant to which~~ such ~~holders have agreed to forbear until the earliest of (i) 5:00 p.m., New York City time, on February 4, 2009, (ii) the~~ date ~~upon~~as ~~which~~part ~~any~~ of the ~~Notes~~total ~~become~~consideration ~~or are declared~~ to beTendering ~~due~~Bondholders. ~~and payable, (iii) the commencement (voluntary or involuntary) of an insolvency proceeding~~Immediately ~~with~~after ~~respect to~~ the ~~Company~~consummation ~~or any~~ of ~~its~~such subsidiaries, (iv) the date upon which the forbearance agreement by the lenders holding more than a majority of the borrowings under the Company’s credit facility expires, terminates or is breached and (v) if the Company has not launched the tender offers and ~~related~~consent ~~offering~~solicitations, of the ~~Offered~~Company ~~Securities~~used cash on ~~the~~hand ~~terms that may be agreed~~ to bypay ~~the parties hereto, in the sole discretion of such parties, prior~~ to ~~such date, January 10, 2009, from exercising~~ any ~~remedies~~non-Tendering ~~under~~Bondholders ~~the indentures governing the Notes as a result~~ of the ~~Company’s~~Existing ~~(a) failure~~Notes ~~to comply with~~ the ~~reporting~~semi-annual ~~requirements of the indentures governing the Notes, (b) deferred~~ interest ~~payments~~payment with respect to ~~the~~their ~~Notes~~2009 ~~or (c) failure to comply with the requirements of the indentures governing the~~ Notes ~~relating~~that towas ~~the~~due ~~Company’s failure to meet a specified leverage ratio as of September 30, 2008. The Company intends to satisfy its~~on ~~obligations to meet the specified leverage ratio as of September~~November 301, 2008 byand ~~issuing equity in connection~~ with ~~the~~respect ~~offering~~to ~~of Offered Securities, which will result in~~ the ~~Company~~2011 ~~satisfying~~Notes ~~such~~that ~~ratio~~was due on aJanuary 15, ~~pro forma basis~~2009.

On January 29, 2009, the Company executed the following supplemental indentures which eliminated substantially all of the restrictive covenants, certain events of default and other related provisions in the indentures governing the Existing Notes: (8i) ~~Discontinued~~the ~~Operations~~Ninth Supplemental Indenture among the Company, the Guarantors named therein and HSBC Bank USA, National Association, as trustee, with respect to the 2009 Notes, and (ii) the Seventh Supplemental Indenture among the Company, the Guarantors named therein and HSBC Bank USA, National Association, as trustee, with respect to the 2011 Notes.

InOn ~~order~~January 30, to2009, ~~improve~~ the Company’s ~~profitability~~issued ~~and~~(i) $21.2 ~~future~~million ~~net~~aggregate ~~cash~~principal amount ~~flows,~~of the ~~Company~~Senior ~~discontinued~~PIK ~~various~~Notes ~~publications~~and ~~during~~(ii) $300.0 ~~fiscal~~million ~~years~~aggregate ~~2007~~principal ~~and~~amount ~~2008~~of ~~and~~Senior ~~has~~Subordinated ~~accounted~~Notes. ~~for~~Also ~~them~~on inJanuary 30, ~~accordance~~2009, ~~with~~Media ~~the~~sold ~~provisions~~5,694,480 shares of ~~SFAS~~Common ~~No. 144,~~Stock ~~“Accounting~~ for ~~the Impairment~~an oraggregate ~~Disposal~~purchase price of ~~Long-Lived Assets” (“SFAS No~~$126. ~~144”).~~2 ~~Operating~~million, pursuant ~~results~~to ofa ~~these~~purchase ~~publications~~agreement ~~have~~dated ~~been~~January 29, ~~classified~~2009, asamong ~~discontinued~~Media, ~~operations~~the ~~for~~Company, ~~all~~the ~~periods~~other ~~presented.~~parties ~~These~~named ~~publications~~therein ~~were~~and ~~previously~~J.P. ~~included~~Morgan ~~in the~~Securities ~~Corporate/Other segment~~Inc.

~~The~~On January 30, ~~following~~2009, ~~table~~$400.5 ~~sets~~million ~~forth~~of ~~total~~the ~~operating~~2009 ~~revenues,~~Notes ~~pre-tax~~and ~~income~~$148.0 ~~(loss)~~million ~~from~~of ~~discontinued~~the ~~operations,~~2011 ~~income~~Notes ~~taxes~~were validly tendered and accepted for payment and consents were delivered with respect to the Existing Notes. Because the Company completed the refinancing ~~income~~of ~~(loss)~~its ~~from~~2009 ~~discontinued~~Notes ~~operations~~on ~~for~~a long-term basis, the ~~fiscal~~Company ~~quarter~~has ~~and~~classified ~~two~~the ~~fiscal~~principal ~~quarters~~amount ~~ended~~associated ~~September~~with the tendered portion of the 2009 Notes as non-current as of December 3031, ~~2007~~2008. ~~and~~The ~~2008~~cash proceeds received from the Offering, ~~respectively~~together (with the Company’s cash on hand, were used to purchase the Existing Notes in ~~thousands):~~the tender offers and to pay approximately $35.0 million of fees and expenses related to the Offering and the tender offers and consent solicitations.

	Fiscal Quarter EndedSeptember 30,					Two Fiscal Quarters EndedSeptember 30,
	2007			2008		2007			2008
Total operating revenues	$	238		$	—	$	880		$	—
Pre-tax (loss) income from discontinued operations	$	(572	)	$	—	$	(756	)	$	500
Income taxes		—			—		—			—
(Loss) income from discontinued operations	$	(572	)	$	—	$	(756	)	$	500	(a)

The Senior PIK Notes are unsecured senior obligations of the Company and are effectively subordinated to all of the Company’s existing and future secured debt, including obligations under the Company’s 2009 Credit Agreement. The Senior PIK Notes will mature on May 1, 2013. Interest on the Senior PIK Notes will accrue at the rate of 9% per annum based upon the outstanding principal amount. The 2009 Credit Agreement prohibits the payment of cash interest on the Senior PIK Notes.

The Senior Subordinated Notes are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to the Company’s existing and future senior debt, including obligations under the Company’s 2009 Credit Agreement and the Senior PIK Notes. The Senior Subordinated Notes will mature on November 1, 2013. Interest on the Senior Subordinated Notes will accrue at the rate of 14% per annum based upon the outstanding principal amount of the Senior Subordinated Notes (with (i) 10% per annum payable in cash, (ii) 2% per annum payable, at the Company’s option, either in cash or by the issuance of additional Senior Subordinated Notes, and (iii) 2% per annum payable (x) in cash when the Company’s Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is greater than $27.5 million and (y) at the Company’s option, either in cash or by the issuance of additional Senior Subordinated Notes when the Company’s Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is less than or equal to $27.5 million).

As of the date hereof, the 2009 Credit Agreement does not permit the payment of cash interest on the Senior Subordinated Notes (i) at a rate in excess of 10% per annum when the Company’s Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is less than or equal to $27.5 million and (ii) at a rate in excess of 12% per annum when the Company’s Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is greater than $27.5 million.

The Company will pay interest on the New Notes semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2009. Interest for the first interest period with respect to (a) the Senior PIK Notes will be paid entirely by the issuance of additional Senior PIK Notes and (b) the Senior Subordinated Notes will be paid at the rate of 10% per annum in cash and 4% per annum in the form of additional Senior Subordinated Notes.

Under the indenture governing the Senior PIK Notes (the “Senior PIK Notes Indenture”) and the indenture governing the Senior Subordinated Notes (the “Senior Subordinated Indenture” and, together with the Senior PIK Notes Indenture, the “Indentures”), the Company is permitted to redeem some or all of the New Notes, at its option, at redemption prices set forth below.


Year	Percentage
January 30, 2009 to October 31, 2009	103.00	%
November 1, 2009 to October 31, 2010	102.00	%
November 1, 2010 to October 31, 2011	101.00	%
November 1, 2011 and thereafter	100.00	%

The Indentures contain a number of covenants that, among other things, limit the Company’s ability and that of its restricted subsidiaries, subject to important exceptions and qualifications, to: borrow money; guarantee other indebtedness; use assets as security in other transactions; pay dividends on stock, redeem stock or redeem subordinated debt; make investments; enter into agreements that restrict the payment of dividends by subsidiaries; sell assets; enter into affiliate transactions; sell capital stock of subsidiaries; enter into new lines of business; and merge or consolidate. In addition, the Indentures impose certain requirements as to future subsidiary guarantors and contain certain customary events of default.

(8) Income Taxes

The Company recorded a benefit for income taxes of $45.4 million and $42.5 million for the fiscal quarter and three fiscal quarters ended December 31, 2008, respectively. During the fiscal quarter ended December 31, 2008, the Company recorded non-cash impairment charges under SFAS No. 142 and SFAS No. 144 of $217.8 million, which resulted in an income tax benefit of $46.8 million due to the reversal of previously recorded deferred income tax liabilities.

During the fiscal quarter ended December 31, 2008, the Company received consents from the Internal Revenue Service related to changes in tax accounting methods. Primarily due to the ability to carryback net operating losses resulting from these consents, the Company’s unrecognized tax benefits decreased by $4.2 million for the three fiscal quarters ended December 31, 2008, which resulted in an income tax receivable of $2.3 million, plus interest of $1.0 million. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2008, the Company’s unrecognized tax benefits were $4.1 million.

The Company is evaluating the tax effects of the restructuring of the Company’s capital structure and the completion of its cash tender offers, which may result in the recognition of cancellation of indebtedness income and the utilization of all or a portion of the Company’s previously valued net operating loss carry-forwards. Further, as a result of the Tendering Bondholders acquiring 94.9% of Media’s Common Stock, the Company underwent an ownership change under Internal Revenue Code Section 382, which could also provide annual limitations on the use of any remaining net operating loss carryovers or built-in deductions.

(9) Discontinued Operations

In order to improve the Company’s profitability and future net cash flows, the Company discontinued various publications during fiscal years 2007 and 2008 and has accounted for them in accordance with the provisions of SFAS No. 144. Operating results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in the Corporate/Other segment.

The following table sets forth total operating revenues, pre-tax income (loss) from discontinued operations, income taxes and income (loss) from discontinued operations for the fiscal quarter and three fiscal quarters ended December 31, 2007 and 2008, respectively (in thousands):


	Fiscal Quarter Ended December 31,				Three Fiscal Quarters Ended December 31,
	2007		2008		2007			2008
Total operating revenues	$	23	$	—	$	903		$	—


Pre-tax income (loss) from discontinued operations	$	7	$	—	$	(749	)	$	500
Income taxes		—		—		—			—

Income (loss) from discontinued operations	$	7	$	—	$	(749	)	$	500	(a)

(a)	Represents a gain on the proceeds from the sale of one of the discontinued operations.

~~(9)~~14 ~~Litigation~~

Various suits and claims arising from the publication of the Company’s magazines have been instituted against the Company. The Company has insurance policies that likely would be available to recover any reasonably foreseeable material litigation costs and expenses. The Company periodically evaluates and assesses the risks and uncertainties associated with litigation independent from those associated with the Company’s potential claim for recovery from third party insurance carriers. At present, in the opinion of management, after consultation with outside legal counsel, the liability resulting from litigation, if any, will not have a material effect on the Company’s Unaudited Condensed Consolidated Financial Statements.

(10) ~~Business~~Litigation ~~Segment Information~~

On February 9, 2009, Media and the Company’s subsidiary, Distribution Services, Inc. (“DSI”), were sued in the Federal District Court for the Southern District of New York along with several other major publishers, magazine wholesalers, and distributors, for allegedly “boycotting” Source Interlink Distribution L.L.C. (“Source”) as a wholesaler, and other related claims. In August 2008, Source had notified Media of its non-renewal of its contract with Media as of December 31, 2008. Thereafter, Media operated without a contract with Source, which Source has characterized as an “at will” arrangement. In January 2009, Source sought to impose a 7 cent per-copy increase for each magazine distributed by Source. This would have represented approximately a 21 cent per-copy increased charge for each Media magazine actually sold. When Media refused to pay the increase, Source terminated its so-called “at-will” relationship with Media. Like Media, three other publishers, Bauer Publishing Co., Time Inc. and Hachette Filipacchi Media, U.S., declined the 7 cent per-copy increase. In its lawsuit, Source claimed that the four publishers, including Media, were colluding with other wholesalers and distributors to boycott Source as a wholesaler. Source sought an injunction requiring Media and the other publishers to continue to do business with it, treble damages in an unspecified amount and other relief. On February 11, 2009, the court granted a temporary restraining order which mandates that Media must continue doing business with Source under terms and conditions as of January 2009, i.e., not including the 7 cent per-copy increase. On February 18, 2009, Source announced that it had reached a settlement with Time Inc. and its distribution company. Consequently, Source has announced that it is abandoning its request for a court order requiring the publishers to do business with Source. Media and DSI believe that their insurance will cover at least a portion of their costs for the defense of the action brought by Source and that they have good defenses to the asserted claims. Discovery is just beginning in this matter and the outcome of the litigation, therefore, is not possible to predict nor is it possible for the Company to estimate the impact, if any, of these events on its operations.

In addition, various suits and claims arising from the publication of the Company’s magazines have been instituted against the Company. The Company has insurance policies that likely would be available to recover any reasonably foreseeable material litigation costs and expenses. The Company periodically evaluates and assesses the risks and uncertainties associated with such litigation independent from those associated with the Company’s potential claim for recovery from third party insurance carriers. At present, in the opinion of management, after consultation with outside legal counsel, the liability resulting from such litigation, if any, will not have a material effect on the Company’s Unaudited Condensed Consolidated Financial Statements.

(11) Business Segment Information

The Company has aggregated its business into five reporting segments: Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications, Distribution Services and Corporate/Other. The aggregation of the Company’s business is based upon the Company’s publications having the following similarities: economic characteristics including gross margins, types of products and services, types of production processes, type or class of customer, and method of distribution, as required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS No. 131”).

The Celebrity Publications segment aggregation includes Star and Country Weekly.

The Tabloid Publications segment aggregation includes National Enquirer, Globe, and National Examiner.

The Women’s Health and Fitness Publications segment aggregation includes Shape and Fit Pregnancy.

The Distribution Services segment is comprised of ~~Distribution Services~~DSI, ~~Inc. (“DSI”)~~ which arranges for the placement of the Company’s publications and third-party publications with retailers , and monitors through its regional managers and merchandising staff that these publications are properly displayed in stores, primarily national and regional supermarket chains and major retail chains such as Wal-Mart, Kroger Companies, Safeway, Super Valu/Albertson’s, Stop & Shop/Giant Food, ~~Pathmark~~Publix, ~~Winn~~H.E. ~~Dixie~~Butt, ~~and~~ Food Lion/Sweetbay, Great A&P Tea Company and Winn Dixie. DSI coordinates (also known as acting as a “category manager/front-end advisor”) the racking of magazine fixtures for selected retailers. In addition, DSI provides sales of marketing, merchandising and information gathering services for third parties including non-magazine clients.

The Corporate/Other segment aggregation includes the following publications: Muscle & Fitness, Men’s Fitness, Muscle & Fitness Hers, Flex, Natural Health, Sun, and Mira!. In addition, the Corporate/Other segment also includes ancillary sales and corporate overhead. Ancillary sales primarily relate to licensing, syndication and new media. Corporate expenses not allocated to other segments include production and circulation department costs, and executive staff support departments such as information technology, accounting, legal, human resources and administration. While most of the publications aggregated in the Corporate/Other segment have certain similar economic characteristics and also similar products and services, production processes, type or class of customers, and method of distribution as some of the other publications which are aggregated into the other reporting segments (Celebrity Publications, Tabloid Publications and Women’s Health and Fitness Publications), their gross margins are dissimilar with such other publications. Accordingly, the Company has aggregated those publications into the Corporate/Other reporting segment.

The Company’s accounting policies are the same for all reportable segments.

1315

Segment Data

The following table presents the results of, and assets employed in, the Company’s five reporting segments for the fiscal quarter and ~~two~~three fiscal quarters ended ~~September~~December 3031, 2007 and 2008, respectively. The 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 advertising and other 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. The results of operations exclude the results of our discontinued operations for all periods presented. See Note 89, “Discontinued Operations,” for a discussion regarding discontinued operations.

			~~Segment (in thousands)~~	Segment (in thousands)													~~(in thousands)~~						(in thousands)
			~~CelebrityPublications~~	CelebrityPublications		~~TabloidPublications~~		TabloidPublications	~~Women’s Healthand FitnessPublications~~		~~DistributionServices~~Women’s Healthand FitnessPublications			~~Corporate/Other (1)~~	DistributionServices		~~EliminationEntries~~Corporate/Other (1)			~~ConsolidatedTotal~~EliminationEntries			ConsolidatedTotal
Operating revenues
Quarter ended September 30,	2007		$	33,375		$	36,908		$	25,489	$	8,145		$	30,357		$	(2,360	)(2)	$	131,914
Quarter ended December 31,	2007			$	32,161			$	35,807		$	15,666			$	8,400	$	24,714		$	(2,218	)(2)	$	114,530
	2008		$	~~30,440~~$	25,318	$	~~34,775~~	$	$31,302	~~24,524~~	$	913,~~239~~071		$	~~32,039~~$	8,290	$	(225,~~218~~512	~~)(2)~~	$	~~128~~(2,~~799~~205	)(2)	$	101,288
Two Quarters ended September 30,	2007		$	65,083		$	71,591		$	47,845	$	15,884		$	57,124		$	(4,481	)(2)	$	253,046
Three Quarters ended December 31,	2007			$	97,244			$	107,398		$	63,511			$	24,284	$	81,838		$	(6,699	)(2)	$	367,576
	2008		$	~~62,444~~$	87,762	$	~~68,967~~	$	$100,269	~~43,870~~	$	1756,~~369~~941		$	~~59,292~~$	25,659	$	(484,~~321~~804	~~)(2)~~	$	~~247~~(6,~~621~~526	)(2)	$	348,909
Operating income (loss)
Quarter ended September 30,	2007		$	9,970		$	18,325		$	10,067	$	2,036		$	(9,040	)	$	—		$	31,358
Quarter ended December 31,	2007			$	7,590			$	16,589		$	3,064			$	2,028	$	(12,027	)	$	—		$	17,244
	2008	(3)	$	~~6,838~~$	(59,050	$)	~~16,010~~	$	$(71,516	~~6,558~~)	$	2(61,~~668~~506	)	$	~~(3,106~~$	)1,359	$	—(18,503	)	$	~~28,968~~—		$	(209,216	)
Two Quarters ended September 30,	2007		$	18,359		$	34,192		$	19,083	$	3,806		$	(17,786	)	$	—		$	57,654
Three Quarters ended December 31,	2007			$	25,949			$	50,781		$	22,147			$	5,834	$	(29,813	)	$	—		$	74,898
	2008	(3)	$	~~15,041~~$	(44,009	$)	~~31,575~~	$	$(39,941	~~13,155~~)	$	4(48,~~662~~351	)	$	~~(9,913~~$	)6,021	$	—(28,416	)	$	~~54,520~~—		$	(154,696	)
Depreciation and amortization
Quarter ended September 30,	2007		$	490		$	658		$	—	$	7		$	2,056		$	—		$	3,211
Quarter ended December 31,	2007			$	496			$	655		$	—			$	4	$	1,904		$	—		$	3,059
	2008		$	~~431~~$	430	$	~~656~~	$	$655	—	$	31—		$	~~1,507~~$	47	$	—1,452		$	~~2,625~~—		$	2,584
Two Quarters ended September 30,	2007		$	984		$	1,315		$	—	$	16		$	4,185		$	—		$	6,500
Three Quarters ended December 31,	2007			$	1,480			$	1,970		$	—			$	20	$	6,089		$	—		$	9,559
	2008		$	~~862~~$	1,292	$	~~1,311~~	$	$1,966	—	$	62—		$	~~3,102~~$	109	$	—4,554		$	~~5,337~~—		$	7,921
Amortization of deferred rack costs
Provision for Impairment of Intangible Assets and Goodwill
Quarter ended September 30,	2007		$	513		$	1,163		$	187	$	—		$	977		$	—		$	2,840
Quarter ended December 31,	2007			$	—			$	—		$	—			$	—	$	—		$	—		$	—
	2008		$	~~797~~$	60,472	$	~~1,300~~	$	$84,247	~~105~~	$	—62,090		$	~~735~~$	—	$	—11,015		$	~~2,937~~—		$	217,824
Two Quarters ended September 30,	2007		$	1,329		$	2,585		$	383	$	—		$	1,974		$	—		$	6,271
Three Quarters ended December 31,	2007			$	—			$	—		$	—			$	—	$	—		$	—		$	—
	2008		$	~~1,597~~$	60,472	$	~~2,562~~	$	$84,247	~~184~~	$	—62,090		$	~~1,550~~$	—	$	—11,015		$	~~5,893~~—		$	217,824
Total Assets
Amortization of deferred rack costs
At March 31, 2008			$	179,319		$	335,125		$	103,889	$	17,246		$	305,580		$	—		$	941,159
Quarter ended December 31,	2007			$	506			$	1,122		$	140			$	—	$	813		$	—		$	2,581
At September 30, 2008			$	175,917		$	333,401		$	103,204	$	20,653		$	258,967		$	—		$	892,142
	2008			$	833			$	1,327		$	166			$	—	$	695		$	—		$	3,021
Three Quarters ended December 31,	2007			$	1,835			$	3,707		$	523			$	—	$	2,787		$	—		$	8,852
	2008			$	2,430			$	3,889		$	350			$	—	$	2,245		$	—		$	8,914
Total Assets
At March 31, 2008				$	179,319			$	335,125		$	103,889			$	17,246	$	305,580		$	—		$	941,159
At December 31, 2008				$	112,026			$	245,665		$	91,638			$	19,275	$	231,916		$	—		$	700,520

(1) Income tax expense (benefit) of $34.94 million and $3(45.14) million, interest expense of $2425.81 million and $2224.23 million, other expense related to senior subordinated notes to be issued of $170.32 million and $0, and amortization of deferred debt costs of $2.8 million and $2.8 million for the fiscal quarters ended ~~September~~December 3031, 2007 and ~~September~~December 3031, 2008, respectively, are included in the Corporate/Other segment. Income tax expense (benefit) of $37.47 million and $2(42.95) million, interest expense of $4974.56 million and $4569.79 million, other expense related to senior subordinated notes to be issued of $17.31 million and $0, and amortization of deferred debt costs of $58.42 million and $58.64 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2007 and ~~September~~December 3031, 2008, respectively, are included in the Corporate/Other segment.

(2)	Amount represents revenues from transactions with other operating segments of the Company.

14(3) Operating income (loss) includes the provision for impairment of tradenames and other identified intangible assets of $47.9 million for Celebrity Publications, $31.9 million for Tabloid Publications, $15.0 million for Women’s Health and Fitness Publications and $8.3 million for Corporate/Other and the provision for impairment of goodwill of $12.6 million for Celebrity Publications, $52.3 million for Tabloid Publications, $47.1 million for Women’s Health and Fitness Publications and $2.7 million for Corporate/Other. The amounts related to the provision for impairment of goodwill represent estimated non-cash impairment charges as these charges are probable and can be reasonably estimated. The Company is currently finalizing the second step of the goodwill impairment test. The Company will increase or decrease the amount of these goodwill impairment charges, as necessary, based upon finalizing its review of the impairment test in the fourth fiscal quarter of 2009 prior to filing the Company’s fiscal year 2009 Form 10-K.

(1112) Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which enhances existing guidance for measuring assets and liabilities at fair value. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. The provisions of SFAS No. 157 were effective for the Company on April 1, 2008. The adoption of this statement did not have a material impact on the Company’s results of operations, financial position, cash flows or disclosures. In February 2008, the FASB issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years beginning after November 15, 2008. With this deferral, the Company has not applied the provisions of SFAS No. 157 to non-financial assets and liabilities. The Company is still assessing the impact the adoption of SFAS No. 157 for non-financial assets and liabilities will have on its results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin No. 51 (“ARB 51”) to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB Statement No. 141(R). The Company is currently evaluating the impact of the adoption of SFAS No. 160 on its financial statements, which is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement must be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP No. 142-3”). FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, in order to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R, “Business Combinations” (revised 2007), and other U.S. generally accepted accounting principles. FSP No. 142-3 is effective for the Company as of April 1, 2009, and will be applied prospectively to intangible assets acquired after the effective date.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to United States Auditing Standards Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company is currently evaluating the impact, if any, that the adoption of SFAS No. 162 will have on its results of operations, financial position or cash flows.

In October 2008, the FASB issued Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active” (12“FSP No. FAS 157-3”). ~~Supplemental~~FSP ~~Condensed~~No. ~~Consolidating~~FAS ~~Financial~~157-3 ~~Information~~provides clarification on determining fair value under SFAS No. 157 when markets are inactive. FSP No. FAS 157-3 was effective immediately upon issuance by the FASB on October 10, 2008. The adoption of FSP No. FAS 157-3 did not have an impact on the Company’s results of operations, financial position or cash flows.

~~The following tables present condensed consolidating financial information of~~ (a13) ~~the~~ ~~parent~~Supplemental ~~company,~~Condensed ~~American~~Consolidating ~~Media~~Financial ~~Operations,~~Information Inc., as issuer of the Notes, (b) on a combined basis, the subsidiary guarantors of the Notes, and (c) on a combined basis, the subsidiaries that are not guarantors of the Notes. Separate financial statements of the subsidiary guarantors are not presented because each of the subsidiary guarantors is 100% owned by the parent company issuer 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, the Company includes the following:

15The following tables present condensed consolidating financial information of (a) the parent company, American Media Operations, Inc., as issuer of the Existing Notes, (b) on a combined basis, the subsidiary guarantors of the Existing Notes, and (c) on a combined basis, the subsidiaries that are not guarantors of the Existing Notes. Separate financial statements of the subsidiary guarantors are not presented because each of the subsidiary guarantors is 100% owned by the parent company issuer 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 RegulationS-X under the Securities Exchange Act of 1934, the Company includes the following:

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF ~~SEPTEMBER~~DECEMBER 3031, 2008

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations			CondensedConsolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	~~1,358~~465		$	1953,~~558~~936		$	~~443~~1,100		$	—		$	2155,~~359~~501
Trade receivables, net		—			5645,~~357~~223			21,~~172~~943			—			5847,~~529~~166
Inventories		—			2625,~~251~~779			~~544~~430			—			26,~~795~~209
Prepaid expenses and other current assets		~~1,309~~19			1317,~~573~~796			~~492~~420			(~~114~~3,396	)		1514,~~260~~839
Total current assets		~~2,667~~484			~~115~~142,~~739~~734			3,~~651~~893			(~~114~~3,396	)		~~121~~143,~~943~~715
PROPERTY AND EQUIPMENT, NET:
Leasehold improvements		—			1,~~676~~802			—			—			1,~~676~~802
Furniture, fixtures and equipment		—			4226,~~002~~375			~~459~~381			—			4226,~~461~~756
Less – accumulated depreciation		—			(3823,~~990~~627	)		(~~400~~337	)		—			(3923,~~390~~964	)
Total property and equipment, net		—			4,~~688~~550			5944			—			4,~~747~~594
OTHER ASSETS:
Deferred debt costs, net		1017,~~240~~722			—			—			—			1017,~~240~~722
Deferred rack costs, net		—			8,~~850~~168			—			—			8,~~850~~168
Other long-term assets		—			2,~~694~~355			87			—			2,~~702~~362
Investment in subsidiaries		~~565~~418,~~137~~887			~~372~~661			—			(~~565~~419,~~509~~548	)		—
Total other assets		~~575~~436,~~377~~609			11,~~916~~184			87			(~~565~~419,~~509~~548	)		2128,~~792~~252
GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill		—			~~355~~240,~~153~~464			4,510			—			~~359~~244,~~663~~974
Other identified intangibles, net		6,000			~~377~~272,~~997~~985			—			—			~~383~~278,~~997~~985
Total goodwill and other identified intangible assets		6,000			~~733~~513,~~150~~449			4,510			—			~~743~~523,~~660~~959
TOTAL ASSETS	$	~~584~~443,~~044~~093		$	~~865~~671,~~493~~917		$	8,~~228~~454		$	(~~565~~422,~~623~~944	)	$	~~892~~700,~~142~~520
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Term loan and revolving credit facility	$	~~459~~4,~~621~~500		$	—		$	—		$	—		$	~~459~~4,~~621~~500
Senior subordinated notes, net		~~413~~14,~~718~~009			—			—			—			~~413~~14,~~718~~009
Accounts payable		—			2925,~~837~~626			~~1,086~~832			—			3026,~~923~~458
Accrued expenses and other liabilities		85,~~617~~810			5648,~~797~~701			~~138~~471			34,~~317~~156			6859,~~869~~138
Accrued interest		2345,~~544~~015			1			—			—			2345,~~545~~016
Deferred revenues		—13			4641,~~272~~852			~~486~~391			—			4642,~~758~~256
Total current liabilities		~~905~~69,~~500~~347			~~132~~116,~~907~~180			1,~~710~~694			34,~~317~~156			1191,~~043,434~~377
NON-CURRENT LIABILITIES:
Senior subordinated notes, net		154,728			—			—			—			154,728
Term loan and revolving credit facility		493,996			—			—			—			493,996
Deferred income taxes		—			95,893			(201	)		(3,431	)		92,261
Senior subordinated notes, net		554,855			—			—			—			554,855
Due to (from) affiliates		(77,903	)		71,556			6,347			—			—
Deferred income taxes		—			57,210			(253	)		(7,552	)		49,405
Total liabilities		982,325			300,356			7,856			(114	)		1,290,423
Due to (from) affiliates		(85,992	)		79,640			6,352			—			—
Total liabilities		1,032,206			253,030			7,793			(3,396	)		1,289,633
STOCKHOLDER’S EQUITY (DEFICIT):
Total stockholder’s equity (deficit)		(~~398~~589,~~281~~113	)		~~565~~418,~~137~~887			~~372~~661			(~~565~~419,~~509~~548	)		(~~398~~589,~~281~~113	)
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)	$	~~584~~443,~~044~~093		$	~~865~~671,~~493~~917		$	8,~~228~~454		$	(~~565~~422,~~623~~944	)	$	~~892~~700,~~142~~520

1618

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2008

(in thousands)


	Parent			Guarantors			Non-Guarantors			Eliminations			Condensed Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	156		$	60,534		$	3,476		$	—		$	64,166
Trade receivables, net		—			54,392			2,682			—			57,074
Inventories		—			28,058			571			—			28,629
Prepaid expenses and other current assets		38			13,694			610			(113	)		14,229

Total current assets		194			156,678			7,339			(113	)		164,098

PROPERTY AND EQUIPMENT, NET:
Leasehold improvements		—			1,648			—			—			1,648
Furniture, fixtures and equipment		—			42,600			505			—			43,105
Less – accumulated depreciation		—			(39,234	)		(422	)		—			(39,656	)

Total property and equipment, net		—			5,014			83			—			5,097

OTHER ASSETS:
Deferred debt costs, net		14,050			—			—			—			14,050
Deferred rack costs, net		—			7,749			—			—			7,749
Other long-term assets		—			2,741			9			—			2,750
Investment in subsidiaries		530,899			3,984			—			(534,883	)		—

Total other assets		544,949			14,474			9			(534,883	)		24,549

GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS:
Goodwill		—			355,153			4,510			—			359,663
Other identified intangibles, net		6,000			381,752			—			—			387,752

Total goodwill and other identified intangible assets		6,000			736,905			4,510			—			747,415


TOTAL ASSETS	$	551,143		$	913,071		$	11,941		$	(534,996	)	$	941,159


LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Term loan	$	12,629		$	—		$	—		$	—		$	12,629
Accounts payable		87			41,342			1,082			—			42,511
Accrued expenses and other liabilities		4,838			55,939			(18	)		4,451			65,210
Accrued interest		24,246			1			—			—			24,247
Deferred revenues		134			40,952			580			—			41,666

Total current liabilities		41,934			138,234			1,644			4,451			186,263

NON-CURRENT LIABILITIES:
Term loan and revolving credit facility		497,371			—			—			—			497,371
Senior subordinated notes, net		567,681			—			—			—			567,681
Deferred income taxes		—			93,567			(77	)		(4,564	)		88,926
Due to (from) affiliates		(156,761	)		150,371			6,390			—			—

Total liabilities		950,225			382,172			7,957			(113	)		1,340,241


STOCKHOLDER’S EQUITY (DEFICIT):
Total stockholder’s equity (deficit)		(399,082	)		530,899			3,984			(534,883	)		(399,082	)

TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)	$	551,143		$	913,071		$	11,941		$	(534,996	)	$	941,159

1719

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF ~~INCOME~~LOSS

FOR THE FISCAL QUARTER ENDED ~~SEPTEMBER~~DECEMBER 3031, 2008

(in thousands)

	Parent			Guarantors			~~Non-Guarantors~~	Non-Guarantors		~~Eliminations~~	Eliminations		CondensedConsolidated
OPERATING REVENUES:
Circulation	$	—		$	6756,~~273~~666		$	~~1,384~~$	1,189	$	—$	—	$	6857,~~657~~855
Advertising		—			4733,~~288~~348			~~1,673~~	1,525		—	—		4834,~~961~~873
Other		~~2,933~~371			7,~~926~~899			~~322~~	290		—	—		118,~~181~~560
Total operating revenues		~~2,933~~371			~~122~~97,~~487~~913			~~3,379~~	3,004		—	—		~~128~~101,~~799~~288
OPERATING EXPENSES:
Editorial		—			1211,~~917~~543			~~112~~	187		—	—		1311,~~029~~730
Production		~~1,794~~419			3532,~~913~~630			~~932~~	919		—	—		3833,~~639~~968
Distribution, circulation and other cost of sales		—			2221,~~611~~111			~~560~~	574		—	—		2321,~~171~~685
Selling, general and administrative		~~264~~10			21,~~018~~825			~~1,085~~	878		—	—		22,~~367~~713
Depreciation and amortization		—			2,~~614~~575			11	9		—	—		2,~~625~~584
Total operating expenses		2,058			95,073			2,700			—			99,831
Provision for impairment of intangible assets and goodwill		—			217,824				—			—		217,824
OPERATING INCOME		875			27,414			679			—			28,968
Total operating expenses		429			307,508				2,567			—		310,504
OPERATING (LOSS) INCOME		(58	)		(209,595	)			437			—		(209,216	)
OTHER INCOME (EXPENSE):
Interest expense		(2224,~~180~~274	)		—8			—	—		—	—		(2224,~~180~~266	)
Amortization of deferred debt costs		(2,~~806~~803	)		—			—	—		—	—		(2,~~806~~803	)
Other (expense) income, net		~~(437~~13	)		~~174~~138			41	5		—	—		~~(222~~156	)
Total other (expense) income		(2527,~~423~~064	)		~~174~~146			41	5		—	—		(2526,~~208~~913	)
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES AND EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		(24,548	)		27,588			720			—			3,760
(LOSS) INCOME BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND EQUITY IN (LOSSES) EARNINGS OF CONSOLIDATED SUBSIDIARIES		(27,122	)		(209,449	)			442			—		(236,129	)
(BENEFIT) PROVISION FOR INCOME TAXES		(9,343	)		12,269			211			—			3,137
PROVISION (BENEFIT) FOR INCOME TAXES		17,317			(62,858	)			153			—		(45,388	)
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		15,828			509			—			(16,337	)		—
EQUITY IN (LOSSES) EARNINGS OF CONSOLIDATED SUBSIDIARIES		(146,302	)		289				—			146,013		—
NET INCOME	$	623		$	15,828		$	509		$	(16,337	)	$	623
NET (LOSS) INCOME	$	(190,741	)	$	(146,302	)		$	289		$	146,013	$	(190,741	)

1820

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF ~~INCOME~~LOSS

FOR THE ~~TWO~~THREE FISCAL QUARTERS ENDED ~~SEPTEMBER~~DECEMBER 3031, 2008

(in thousands)

	Parent			Guarantors			Non-Guarantors		Eliminations			CondensedConsolidated	~~CondensedConsolidated~~
OPERATING REVENUES:
Circulation	$	—		$	~~133~~190,~~475~~141		$	24,~~891~~080	$	—		$	$194,221	~~136,366~~
Advertising		—			87120,~~602~~950			35,~~604~~129		—			126,079	~~91,206~~
Other		23,~~933~~304			1624,~~442~~341			~~674~~964		—			28,609	~~20,049~~
Total operating revenues		23,~~933~~304			~~237~~335,~~519~~432			710,~~169~~173		—			348,909	~~247,621~~
OPERATING EXPENSES:
Editorial		—			2536,~~294~~837			~~432~~619		—			37,456	~~25,726~~
Production		12,~~794~~213			68100,~~163~~793			12,~~953~~872		—			105,878	~~71,910~~
Distribution, circulation and other cost of sales		—			4264,~~957~~068			1,~~184~~758		—			65,826	~~44,141~~
Selling, general and administrative		~~264~~274			4365,~~785~~610			12,~~938~~816		—			68,700	~~45,987~~
Depreciation and amortization		—			57,~~314~~889			2332		—			7,921	~~5,337~~
Total operating expenses		2,058			185,513			5,530		—				193,101
Provision for impairment of intangible assets and goodwill		—			217,824			—		—			217,824
OPERATING INCOME		875			52,006			1,639		—				54,520
Total operating expenses		2,487			493,021			8,097		—			503,605
OTHER INCOME (EXPENSE):
OPERATING INCOME (LOSS)		817			(157,589	)		2,076		—			(154,696	)
Interest expense		(45,482	)		(191	)		—		—				(45,673	)
OTHER INCOME (EXPENSE):
Amortization of deferred debt costs		(5,552	)		—			—		—				(5,552	)
Interest expense		(69,756	)		(183	)		—		—			(69,939	)
Other (expense) income, net		(437	)		441			80		—				84
Amortization of deferred debt costs		(8,355	)		—			—		—			(8,355	)
Total other (expense) income		(51,471	)		250			80		—				(51,141	)
Other (expense) income, net		(424	)		579			85		—			240
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND INCOME FROM DISCONTINUED OPERATIONS		(50,596	)		52,256			1,719		—				3,379
Total other (expense) income		(78,535	)		396			85		—			(78,054	)
(BENEFIT) PROVISION FOR INCOME TAXES		(17,317	)		19,668			517		—				2,868
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN (LOSSES) EARNINGS OF CONSOLIDATED SUBSIDIARIES AND (LOSS) INCOME FROM DISCONTINUED OPERATIONS		(77,718	)		(157,193	)		2,161		—			(232,750	)
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		34,290			1,202			—		(35,492	)			—
(BENEFIT) PROVISION FOR INCOME TAXES		—			(43,190	)		670		—			(42,520	)
INCOME FROM CONTINUING OPERATIONS		1,011			33,790			1,202		(35,492	)			511
EQUITY IN (LOSSES) EARNINGS OF CONSOLIDATED SUBSIDIARIES		(112,012	)		1,491			—		110,521			—
INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			500			—		—				500
(LOSS) INCOME FROM CONTINUING OPERATIONS		(189,730	)		(112,512	)		1,491		110,521			(190,230	)
NET INCOME	$	1,011		$	34,290		$	1,202	$	(35,492	)		$	1,011
INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			500			—		—			500
NET (LOSS) INCOME	$	(189,730	)	$	(112,012	)	$	1,491	$	110,521		$	(189,730	)

1921

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE FISCAL QUARTER ENDED ~~SEPTEMBER~~DECEMBER 3031, 2007

(in thousands)

	Parent			Guarantors			Non-Guarantors		Eliminations			CondensedConsolidated
OPERATING REVENUES:
Circulation	$	—		$	6966,~~308~~507		$	1,~~434~~714	$	—		$	7068,~~742~~221
Advertising		—			4835,~~779~~987			1,~~604~~805		—			5037,~~383~~792
Other		~~2,862~~(14	)		78,~~631~~183			~~296~~348		—			108,~~789~~517
Total operating revenues		~~2,862~~(14	)		~~125~~110,~~718~~677			3,~~334~~867		—			~~131~~114,~~914~~530
OPERATING EXPENSES:
Editorial		—			12,~~687~~804			~~272~~338		—			1213,~~959~~142
Production		~~1,840~~40			3331,~~648~~704			~~939~~1,021		—			3632,~~427~~765
Distribution, circulation and other cost of sales		—			21,~~584~~428			~~616~~593		—			22,~~200~~021
Selling, general and administrative		~~144~~—			2425,~~646~~231			~~969~~1,068		—			2526,~~759~~299
Depreciation and amortization		—			3,~~190~~055			214		—			3,~~211~~059
Total operating expenses		~~1,984~~40			9594,~~755~~222			23,~~817~~024		—			~~100~~97,~~556~~286
OPERATING INCOME		878			29,963			517		—			31,358
OPERATING (LOSS) INCOME		(54	)		16,455			843		—			17,244
OTHER INCOME (EXPENSE):
Interest expense		(2425,~~739~~017	)		(7972	)		—		—			(2425,~~818~~089	)
Senior subordinated notes to be issued		~~(17,291~~182	)		—			—		—			~~(17,291~~182	)
Amortization of deferred debt costs		(2,~~759~~764	)		—			—		—			(2,~~759~~764	)
Other (expense) income, net		(447	)		611			39		—			203
Other income, net		27			695			99		—			821
Total other (expense) income		(4527,~~236~~572	)		~~532~~623			3999		—			(4426,~~665~~850	)
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED OPERATIONS		(44,358	)		30,495			556		—			(13,307	)
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND INCOME FROM DISCONTINUED OPERATIONS		(27,626	)		17,078			942		—			(9,606	)
(BENEFIT) PROVISION FOR INCOME TAXES		(98,~~501~~306	)		1312,~~209~~367			~~168~~302		—			34,~~876~~363
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES		175,~~102~~358			~~388~~640			—		(175,~~490~~998	)		—
(LOSS) INCOME FROM CONTINUING OPERATIONS		(1713,~~755~~962	)		175,~~674~~351			~~388~~640		(175,~~490~~998	)		(1713,~~183~~969	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			(572	)		—		—			(572	)
INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			7			—		—			7
NET (LOSS) INCOME	$	(1713,~~755~~962	)	$	175,~~102~~358		$	~~388~~640	$	(175,~~490~~998	)	$	(1713,~~755~~962	)

2022

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF LOSS

FOR THE ~~TWO~~THREE FISCAL QUARTERS ENDED ~~SEPTEMBER~~DECEMBER 3031, 2007

(in thousands)

Parent

Guarantors

Non-Guarantors

Eliminations

CondensedConsolidated

OPERATING REVENUES:

Circulation

—

~~134~~200,~~121~~628

24,~~978~~692

—

~~137~~205,~~099~~320

Advertising

—

93129,~~401~~388

35,~~485~~290

—

96134,~~886~~678

Other

2,~~862~~848

1523,~~595~~778

~~604~~952

—

1927,~~061~~578

Total operating revenues

2,~~862~~848

~~243~~353,~~117~~794

710,~~067~~934

—

~~253~~367,~~046~~576

OPERATING EXPENSES:

Editorial

—

2437,~~960~~764

~~638~~976

—

2538,~~598~~740

Production

1,~~840~~880

6799,~~995~~699

12,~~938~~959

—

71104,~~773~~538

Distribution, circulation and other cost of sales

—

4163,~~654~~082

1,~~184~~777

—

4264,~~838~~859

Selling, general and administrative

144

4671,~~543~~774

13,~~996~~064

—

4874,~~683~~982

Depreciation and amortization

—

69,~~461~~516

3943

—

69,~~500~~559

Total operating expenses

12,~~984~~024

~~187~~281,~~613~~835

58,~~795~~819

—

~~195~~292,~~392~~678

OPERATING INCOME

~~878~~824

5571,~~504~~959

12,~~272~~115

—

5774,~~654~~898

OTHER INCOME (EXPENSE):

OTHER (EXPENSE) INCOME:

Interest expense

(4974,~~326~~343

)

(~~183~~255

)

—

(4974,~~509~~598

)

Senior subordinated notes to be issued

(17,~~291~~109

)

—

(17,~~291~~109

)

Amortization of deferred debt costs

(58,~~445~~209

)

—

(58,~~445~~209

)

Other (expense) income, net

(~~447~~420

)

1,~~231~~926

53152

—

~~837~~1,658

Total other (expense) income

(72100,~~509~~081

)

1,~~048~~671

53152

—

(7198,~~408~~258

)

(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES, EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES AND LOSS FROM DISCONTINUED OPERATIONS

(7199,~~631~~257

)

5673,~~552~~630

12,~~325~~267

—

(1323,~~754~~360

)

(BENEFIT) PROVISION FOR INCOME TAXES

(1624,~~342~~648

)

1931,~~310~~677

~~400~~702

—

37,~~368~~731

EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES

3742,~~411~~769

~~925~~1,565

—

(3844,~~336~~334

)

—

(LOSS) INCOME FROM CONTINUING OPERATIONS

(1731,~~878~~840

)

3843,~~167~~518

~~925~~1,565

(3844,~~336~~334

)

(1731,~~122~~091

)

LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES

—

(~~756~~749

)

—

(~~756~~749

)

NET (LOSS) INCOME

(1731,~~878~~840

)

3742,~~411~~769

~~925~~1,565

(3844,~~336~~334

)

(1731,~~878~~840

)

2123

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE ~~TWO~~THREE FISCAL QUARTERS ENDED ~~SEPTEMBER~~DECEMBER 3031, 2008

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations			CondensedConsolidated
Cash Flows from Operating Activities:
Net cash (used in) provided by operating activities	$	(4449,~~025~~677	)	$	5667,~~057~~623		$	~~995~~1,606		$	(3,500	)	$	916,~~527~~052
Cash Flows from Investing Activities:
Purchases of property and equipment		—			(1,~~237~~796	)		(59	)		—			(1,~~242~~805	)
Proceeds from sale of assets		—			1843			—			—			1843
Proceeds from sale of discontinued operations		—			500			—			—			500
Investment in Mr. Olympia, LLC		(300	)		—			—			—			(300	)
Net cash used in investing activities		(300	)		(~~719~~1,253	)		(59	)		—			(1,~~024~~562	)
Cash Flows from Financing Activities:
Due to (from) affiliates		9672,~~314~~968			(9672,~~314~~968	)		—			—			—
Proceeds from revolving credit facility		3474,000			—			—			—			3474,000
Term loan and revolving credit facility principal repayments		(8485,~~379~~504	)		—			—			—			(8485,~~379~~504	)
Payment of deferred debt costs		(~~408~~11,178	)		—			—						(~~408~~11,178	)
Dividend paid to parent		—			—			(3,500	)		3,500			—
Net cash provided by (used in) financing activities		4550,~~527~~286			(9672,~~314~~968	)		(3,500	)		3,500			(5022,~~787~~682	)
Effect of exchange rate changes on cash		—			—			(~~523~~473	)		—			(~~523~~473	)
Net Increase (Decrease) in Cash and Cash Equivalents		~~1,202~~309			(406,~~976~~598	)		(32,~~033~~376	)		—			(428,~~807~~665	)
Cash and Cash Equivalents, Beginning of Period		156			60,534			3,476			—			64,166
Cash and Cash Equivalents, End of Period	$	~~1,358~~465		$	1953,~~558~~936		$	~~443~~1,100		$	—		$	2155,~~359~~501

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE ~~TWO~~THREE FISCAL QUARTERS ENDED ~~SEPTEMBER~~DECEMBER 3031, 2007

(in thousands)

	Parent			Guarantors			Non-Guarantors			Eliminations		CondensedConsolidated
Cash Flows from Operating Activities:
Net cash (used in) provided by operating activities	$	(5284,~~988~~321	)	$	4781,~~399~~299		$	1,~~241~~208		$	—	$	(41,~~348~~814	)
Cash Flows from Investing Activities:
Purchases of property and equipment		—			(~~686~~1,388	)		(~~119~~24	)		—		(~~805~~1,412	)
Proceeds from sale of assets		—			~~389~~408			—			—		~~389~~408
Investment in Mr. Olympia, LLC		(300	)		—			—			—		(300	)
Net cash used in investing activities		(300	)		(~~297~~980	)		(~~119~~24	)		—		(~~716~~1,304	)
Cash Flows from Financing Activities:
Due to (from) affiliates		5487,~~944~~550			(5487,~~944~~550	)		—			—		—
Payment of deferred debt costs		(942	)		—			—			—		(942	)
Net cash provided by (used in) financing activities		5486,~~002~~608			(5487,~~944~~550	)		—			—		(942	)
Effect of exchange rate changes on cash		—			—			~~106~~195			—		~~106~~195
Net Increase (Decrease) in Cash and Cash Equivalents		~~714~~1,987			(7,~~842~~231	)		1,~~228~~379			—		(53,~~900~~865	)
Cash and Cash Equivalents, Beginning of Period		—			58,522			1,892			—		60,414
Cash and Cash Equivalents, End of Period	$	~~714~~1,987		$	5051,~~680~~291		$	3,~~120~~271		$	—	$	5456,~~514~~549

2224

(1314) Subsequent Events

~~The~~In ~~effectiveness~~April of2003, ~~the~~Media, ~~amendment~~THL toManagers ~~the~~V, ~~2006~~LLC, ~~Credit~~an ~~Agreement~~affiliate ~~is conditioned upon the consummation~~ of ~~the~~Thomas ~~tender~~H. ~~offers~~Lee ~~and~~Partners ~~offerings~~L.P. (~~the~~ “~~Offerings~~T.H. Lee”), ~~currently being conducted by the Company~~ and ~~Media~~Evercore toAdvisors ~~holders of the Company’s existing notes as well as the satisfaction of other customary conditions~~L.P., ~~The~~an ~~amended~~affiliate ~~2006 Credit Agreement will permit the issuance~~ of ~~the~~Evercore ~~notes~~Partners ~~currently~~LLP ~~being~~(“Evercore”), ~~offered~~entered byinto ~~the~~a ~~Company~~management in agreement (the ~~Offerings~~“Management ~~and~~Agreement”) ~~will~~pursuant ~~result in certain other changes~~ to ~~the~~which ~~2006~~THL ~~Credit~~Managers ~~Agreement~~V, ~~including~~LLC ~~without~~and ~~limitation,~~Evercore ~~the~~Advisors ~~following:~~L.P. ~~(i) the~~provided ~~maximum~~certain ~~senior~~management ~~secured leverage ratio~~ and ~~the~~advisory ~~minimum~~services ~~interest~~to ~~expense~~Media ~~coverage~~and ~~ratio~~its ~~levels~~subsidiaries ~~will~~for bean ~~changed;~~annual ~~(ii) the~~fee ~~variable component~~ of ~~applicable~~ ~~interest~~$1.0 ~~rates~~million ~~will~~each. beManagement ~~subject~~fees toof a$1.0 million ~~floor~~were ~~equal~~paid to, ineach ~~the case~~ of ~~Eurodollar~~Evercore ~~loans,~~and 3T.5%H. ~~and,~~Lee in ~~the~~fiscal ~~case~~year ~~of alternate base rate loans, 4~~2006.~~5%;~~ ~~(iii) interest~~Pursuant ~~rate margins will increase~~ to ~~5.5%~~certain ~~in the case~~ of ~~alternate base rate loans and 6.5% in~~ the ~~case~~supplemental ofindentures ~~Eurodollar loans; (iv)~~ the ~~term~~Company ~~loans~~entered ~~will~~into bein ~~subject~~fiscal toyear ~~hard~~2007, ~~call~~such ~~protection~~fees for ~~three~~fiscal years ~~following~~2007, ~~the~~2008 ~~amendment~~ and ~~restatement~~2009 ofhave ~~the~~been ~~2006~~accrued ~~Credit~~and ~~Agreement (excluding mandatory prepayments from excess cash flow);~~payments ~~(v) subject~~for tosuch ~~limited~~fees ~~exceptions,~~were ~~the Company will~~ not bemade ~~permitted~~beginning toin ~~repay,~~fiscal ~~prepay,~~year ~~redeem~~2007 or ~~acquire~~thereafter. ~~any~~As ~~notes;~~required ~~(vi) 75% of any equity proceeds raised~~ by ~~Media,~~ the ~~Company~~2009 orCredit ~~their~~Agreement, ~~subsidiaries (other than from certain holders of~~ the ~~notes)~~ ~~must~~Management beAgreement ~~applied~~was toterminated ~~the~~as ~~mandatory prepayment~~ of ~~term loans; (vii)~~January ~~substantial~~30, ~~limitations~~2009 on reinvestment rights from the proceeds of asset dispositions or casualty events will be added which may result in more extensive prepayment requirements in respect thereof; (viii) the portion of excess cash flow that must be applied to the mandatory prepayment of term loans will increase from 50% to 75%; and ~~(ix) the~~unpaid ~~baskets~~management ~~for~~fees ~~permitted~~totaling ~~indebtedness,~~$6.0 ~~investments,~~million ~~restricted payments~~were ~~and capital expenditures will be reduced~~waived.

23In January 2009, the Company terminated approximately 70 employees to improve the Company’s profitability and future net cash flows. This activity resulted in a charge of approximately $2.0 million for termination benefits, which will be recorded in the fourth quarter of fiscal year 2009.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is a discussion of our financial condition and results of operations for the fiscal quarter and ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008. This discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the Notes thereto. The accompanying Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes the results of our discontinued operations for the fiscal quarter and ~~two~~three fiscal quarters ended ~~September~~ December 3031, 2008 and 2007, respectively. See Note 89, “Discontinued Operations,” in the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I herein for a discussion regarding discontinued operations.

Executive Summary

~~American~~The ~~Media Operations, Inc.~~Company’s ~~(the “Company”)~~ results for fiscal year 2009 are being adversely affected by ~~the~~ overall market weakness due to the current economic slowdown. These difficult conditions have impacted the businesses and results of operations of the Company and we do not expect these conditions to improve in the ~~near~~ near-term.

We are a leading publisher in the field of celebrity journalism and health and fitness magazines. Our publications include Star, Shape, Men’s Fitness, Fit Pregnancy, Natural Health, Muscle & Fitness, Muscle & Fitness Hers, Flex, National Enquirer, Globe, Country Weekly, Mira!, Sun, National Examiner and other publications. Our magazines comprise approximately 2221% of total U.S. and Canadian newsstand circulation for audited (by the Audited Bureau of Circulations or “ABC”) weekly publications. For the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, total average newsstand and subscription circulation per issue for all of our publications that are currently published and have a frequency of six or more times per year was approximately 7.32 million copies.

For the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, approximately 5556% ~~and 54%, respectively,~~ of our total operating revenues were from circulation. Single copy sales accounted for approximately 82% and 83% of such circulation revenues in the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, and the remainder was from subscription sales.

Our advertising revenue is primarily generated by national advertisers, including sports nutrition products, entertainment, packaged goods, pharmaceutical, sports apparel, beauty and cosmetics, fashion and direct response. For the ~~two~~ three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, approximately 3736% and 3837%, respectively, of our total operating revenues were from advertising.

Our primary operating costs and expenses are comprised of editorial, production, distribution, circulation and other cost of sales and selling, general and administrative expenses. The largest components of our costs are related to production, which includes printing, ~~and~~ paper ~~expenses,~~ and circulation expenses. Circulation costs primarily include the costs associated with subscription fulfillment, subscription postage and newsstand transportation. Editorial costs include salaries and costs associated with freelancers, manuscripts and photographs.

WeDuring ~~implemented initiatives relating to cost savings and revenue enhancements opportunities (~~the third ~~“Management Action Plan”) during the~~ fiscal quarter ended ~~June~~December 3031, 2008, ~~that~~ we ~~currently~~recorded ~~expect~~a ~~will result in approximately~~ $25217.98 million ofnon-cash ~~cost~~impairment ~~savings~~charge ~~and~~relating ~~approximately~~to ~~$7.7~~our ~~million~~goodwill, oftradenames ~~revenue~~and ~~enhancements~~other ~~during~~identified ~~fiscal~~intangibles. ~~year 2009~~The asamounts ~~compared~~related to ~~our~~the ~~fiscal~~provision ~~year~~for ~~2009~~impairment ~~budget.~~of ~~Costs~~goodwill represent ~~savings~~estimated ~~primarily~~non-cash ~~include~~impairment ~~cost~~charges ~~reductions~~as ~~related~~these tocharges ~~employee-related~~are ~~expenses~~probable and ~~selling,~~can ~~general~~be ~~and~~reasonably ~~administrative~~estimated. ~~expenses,~~We asare ~~well~~currently asfinalizing ~~production~~the ~~and~~second ~~subscription~~step ~~expenses.~~of ~~Revenue enhancements~~the ~~include~~goodwill ~~certain~~impairment ~~cover~~test. ~~price~~We ~~increases~~will ~~and~~increase or decrease the ~~publishing~~amount of anthese ~~additional~~goodwill impairment ~~issue~~charges, ofas ~~seven~~necessary, ofbased ~~our~~upon ~~publications,~~finalizing asthe ~~well~~impairment astest in the ~~publication~~fourth fiscal quarter of ~~four~~2009 ~~special~~prior ~~interest~~to ~~publications~~filing ~~during~~the Company’s fiscal year 2009 Form 10-K. WeFor ~~may~~a ~~not~~detailed ~~ultimately~~description beof ~~able~~this toimpairment charge, see Note 4, ~~realize~~“Goodwill ~~some~~and orOther ~~any~~Identified ofIntangible Assets,” in the ~~benefits~~Notes ofto ~~these~~Unaudited ~~initiatives~~Condensed Consolidated Financial Statements in this Form 10-Q.

~~During~~We implemented ~~the~~initiatives ~~fiscal~~relating ~~quarter~~to ~~ended~~cost ~~September 30,~~savings ~~2008,~~and werevenue ~~believed~~enhancements ~~that~~opportunities (the ~~fair~~“Management ~~value~~Action ~~of goodwill~~Plan”) ~~and~~during ~~other~~the ~~intangible~~fiscal ~~assets~~quarter ~~for~~ended ~~certain~~June 30, of2008 ~~our~~which ~~reporting~~were ~~units~~expected ~~may~~to ~~have~~result ~~declined~~in ~~below~~approximately ~~its~~$21.0 ~~carrying~~million ~~value~~of ~~based~~cost savings onand ~~management’s~~approximately ~~expectations~~$2.0 million of ~~long-term~~revenue ~~cash~~enhancements ~~flows~~during ~~resulting~~fiscal ~~from~~year ~~declining~~2009 ~~profitability~~ as acompared ~~result of the overall market weakness due~~ to ~~the~~our ~~current~~fiscal ~~economic~~year ~~slowdown~~2009 budget. We ~~concluded~~currently ~~that~~expect wethe ~~were~~Management ~~required~~Action Plan to ~~perform~~result ~~an interim impairment test~~ in ~~accordance~~approximately ~~with~~$25.7 ~~Statement~~million of ~~Financial~~cost ~~Accounting~~savings ~~Standards~~and approximately ~~(“SFAS”) No~~$8. ~~142,~~2 ~~“Goodwill~~million ~~and Other~~of ~~Intangible~~revenue ~~Assets”~~enhancements ~~(“SFAS~~during ~~No. 142”).~~fiscal ~~Based~~year on2009 ~~the~~as ~~results~~compared ofto ~~the~~our ~~interim~~fiscal ~~impairment~~year ~~test,~~2009 webudget. ~~concluded~~Cost ~~that~~savings ~~our~~primarily ~~goodwill~~include ~~and~~cost ~~other~~reductions ~~intangible~~related ~~assets~~to ~~were~~employee-related ~~not~~expenses ~~impaired~~and asselling, ofgeneral ~~September 30~~and administrative expenses, ~~2008;~~as ~~however,~~well ~~there~~as ~~can~~production ~~be no~~and ~~assurances~~subscription ~~that~~expenses. ~~they~~Revenue ~~will~~enhancements ~~not~~include becertain ~~impaired~~cover inprice ~~future~~increases ~~periods.~~and Ifthe ~~adverse~~publishing ~~events~~of ~~were~~an toadditional ~~occur~~issue orof ~~circumstances~~seven ~~were~~of toour ~~change~~publications, ~~indicating~~as ~~that~~well as the ~~carrying~~publication ~~amount~~ of ~~such~~four ~~assets~~special ~~may~~interest publications ~~not~~during befiscal ~~fully~~year ~~recoverable,~~2009. ~~the~~We ~~assets~~may ~~would~~not ultimately be ~~reviewed~~able ~~for impairment~~to ~~and~~realize some of the ~~assets~~benefits ~~may~~of ~~become~~these ~~impaired~~initiatives.

~~The~~We ~~bank~~also ~~credit~~implemented ~~agreement~~additional initiatives ~~entered~~relating ~~into~~to bycost ussavings onopportunities ~~January 30, 2006~~ (~~as amended,~~ the “~~2006~~Supplemental ~~Credit Agreement~~Management Action Plan”) ~~includes~~during athe ~~$60.0~~fiscal ~~million~~quarter ~~revolving~~ended ~~credit~~March 31, ~~facility~~2009 ~~(the~~that ~~“Revolving~~we ~~Facility”)~~currently ~~and~~expect awill ~~$450.0~~result ~~million~~in ~~term~~additional ~~loan~~annual ~~commitment~~savings ~~(the~~of ~~“Term~~approximately ~~Facility”)~~$23.5 million. AsFor ofthe ~~September~~fiscal quarter ending March 3031, ~~2008~~2009, ~~there~~we ~~was~~expect to realize approximately $202.06 million ~~outstanding~~of ~~on the~~these ~~Revolving~~additional ~~Facility~~cost savings. Cost savings primarily include cost reductions related to employee-related expenses and ~~$439~~production and subscription expenses.6 ~~million~~We ~~outstanding~~may onnot ultimately be able to realize some of the ~~Term~~benefits of these initiatives.

2426

~~Facility.~~On WeJanuary 30, ~~subsequently~~2009, ~~borrowed~~we ansuccessfully ~~additional~~completed ~~$40.0~~our ~~million~~cash ontender ~~the~~offers ~~Revolving~~and ~~Facility~~receipt onof ~~October 1,~~requisite ~~2008.~~consents ~~The Revolving Facility matures~~ in ~~January~~the ~~2012~~related ~~and~~consent ~~the~~solicitations ~~Term Facility matures~~ in ~~January~~respect ~~2013.~~of ~~The~~our ~~Revolving~~outstanding ~~Facility~~senior ~~and~~subordinated ~~the Term Facility both will mature on February 1~~notes, ~~2009~~consisting ifof ~~we have more than~~ (1) $25414.05 million ofaggregate ~~the~~principal amount of 10~~.25~~ 1/4% Series B Senior Subordinated Notes due ~~May 1,~~ 2009 (the “2009 Notes”) ~~outstanding on February 1, 2009. In addition, the Revolving Facility~~ and ~~the Term Facility both will mature on October~~ (2) ~~15, 2010 if we have more than~~ $10155.05 million ofaggregate ~~the~~principal amount of 8~~.875~~ 7/8% Senior Subordinated Notes due ~~January 15,~~ 2011 (the “2011 Notes” and, together with the 2009 Notes, the “Existing Notes”) ~~outstanding on October 15, 2010~~. We have classified the entire balance of the 2006 Credit Agreement as a current liability on our September 30, 2008 balance sheet as the 2006 Credit Agreement may mature within twelve months of September 30, 2008$400.5 Wemillion ~~have also classified the entire balance~~ of the 2009 Notes ofand $~~413~~148.70 million of asthe a2011 ~~current~~Notes ~~liability~~were onvalidly ~~our September 30,~~tendered ~~2008~~and ~~balance~~accepted ~~sheet~~for aspayment ~~the~~and ~~2009~~consents ~~Notes~~were ~~mature~~delivered ~~within~~with ~~twelve~~respect ~~months~~to ofthe ~~September 30,~~Existing ~~2008~~Notes.

InOn ~~order to refinance the Notes, on August~~December 2631, 2008, we ~~commenced~~amended ~~tender offers to purchase~~ and ~~consent~~restated ~~solicitations~~our ~~with~~Credit ~~respect~~Agreement todated ~~all~~as of ~~the Notes. On~~ January 930, ~~2009,~~2006 ~~we amended our tender offers and consent solicitations. To finance~~ (the ~~purchase~~“2006 ofCredit ~~the Notes in the tender offers and the payment for consents in the consent solicitations~~Agreement), ~~simultaneous~~among ~~with~~ the ~~tender offers and consent solicitations~~Company, ~~we are offering (a) $21,245,380 aggregate principal amount of~~ our 9%parent ~~senior~~company ~~PIK notes due 2013~~ (~~the~~ “~~Senior PIK Notes~~Media”) ~~and (b) $300~~,~~000,000~~ ~~aggregate principal amount of our 14% senior subordinated notes due 2013 (~~the ~~“Senior~~lenders ~~Subordinated~~party ~~Notes” and~~thereto, ~~together~~JPMorgan ~~with~~Chase ~~the Senior PIK Notes~~Bank, ~~the “New Notes”)~~N.A., ~~We are a~~as ~~wholly~~Administrative ~~owned~~Agent ~~subsidiary~~and ofDeutsche ~~American~~Bank ~~Media,~~Securities Inc. ~~(“Media”). Together with the New Notes~~, ~~Media~~as isSyndication ~~also~~Agent ~~offering 5,700,000 shares of Media’s common stock~~ (the “~~Shares”~~2009 ~~and,~~Credit ~~together with the New Notes, the “Offered Securities~~Agreement”)~~, representing 95% of Media’s outstanding shares of common stock~~. InOn ~~order to tender Notes in the tender offers~~January 30, ~~a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration such holder receives in the tender offers and consent solicitations. Among other matters~~2009, ~~tendering~~concurrently ~~holders~~with ~~must also deliver their consents to specified amendments to~~ the ~~indentures,~~consummation ~~which consents remove substantially all~~ of ~~the~~our ~~restrictive~~cash ~~covenants and related defaults in the indentures governing the Notes. In connection with the~~ tender offers, ~~certain provisions of~~ the ~~2006~~2009 Credit Agreement ~~will~~became ~~be waived including the change of control event of default that would result from successful tender offers~~effective. For a more complete description of the tender offers and consent solicitations, see Note 7, “Senior Subordinated Indebtedness.” We cannot make any assurances that such tender offers and consent solicitations will be ~~successful.~~

~~Given~~On ~~the~~January 30, ~~continued~~2009, ~~weakness~~we issued (i) $21.2 million aggregate principal amount of ~~the~~9% ~~credit~~Senior ~~markets,~~PIK ~~there~~Notes ~~can~~due be2013 no(the ~~assurance~~“Senior ~~that~~PIK weNotes”) and ~~can~~(ii) $300.0 ~~refinance~~million ~~our~~aggregate ~~existing~~principal amount of 14% Senior Subordinated Notes ordue ~~obtain~~2013 (the ~~additional~~ ~~capital~~“Senior ~~necessary~~Subordinated toNotes” ~~satisfy~~and, ~~our~~together ~~short-term~~with ~~cash~~the ~~needs~~Senior onPIK ~~satisfactory~~Notes, ~~terms~~the “New Notes”). InAlso ~~the~~on ~~event~~January 30, we2009, ~~are~~Media sold ~~unable~~5,694,480 toshares ~~extend~~of orcommon ~~refinance~~stock (the ~~Notes~~“Common Stock” and, ~~amend~~together orwith ~~waive~~ the ~~2006~~New ~~Credit~~Notes, ~~Agreement~~the ~~with~~“Securities”) ~~respect~~for toan ~~the~~aggregate ~~change~~purchase price of ~~control~~$126.2 ~~event~~million, ofpursuant ~~default that~~to ~~would~~a ~~result~~purchase ~~from~~agreement ~~successful~~dated ~~tender~~January 29, ~~offers~~2009, among Media, the ~~2006~~Company, ~~Credit~~the ~~Agreement~~other ~~will~~parties ~~likely~~named ~~mature~~therein ~~early~~ and weJ.P. ~~will~~Morgan ~~not~~Securities ~~have~~Inc. ~~sufficient~~The ~~funds~~cash toproceeds ~~repay~~from ~~such~~the ~~indebtedness.~~offering Inof ~~such~~the ~~event,~~Securities we(the ~~may~~“Offering”), ~~have~~together towith ~~liquidate~~our ~~assets~~cash on ~~unfavorable terms~~hand, orwere beused ~~unable~~to purchase the Existing Notes in the tender offers and to ~~continue~~pay asapproximately a$35.0 ~~going~~million ~~concern,~~of fees and ~~incur~~expenses ~~additional~~related ~~costs~~to ~~associated~~the ~~with~~Offering ~~bankruptcy~~and the tender offers and consent solicitations.

~~The~~As ~~accompanying consolidated financial statements have been~~a ~~prepared~~result inof ~~conformity~~the ~~with~~restructuring ~~accounting~~of ~~principles~~our ~~generally~~capital ~~accepted~~structure inand the ~~United~~issuance ~~States~~ of ~~America~~Common ~~applicable~~Stock toby aMedia ~~going~~to ~~concern, which contemplates~~ the ~~realization~~bondholders ofwho ~~assets~~participated ~~and~~in the ~~satisfaction~~cash oftender ~~liabilities~~offers incompleted ~~the~~on ~~normal~~January 30, ~~course~~2009 ofand ~~business. Accordingly,~~receipt ~~our~~of ~~consolidated~~requisite ~~financial~~consent ~~statements~~solicitations do(the “Tendering ~~not~~Bondholders”), ~~reflect~~the ~~any~~Tendering ~~adjustments~~Bondholders ~~related~~acquired to94.9% ~~the~~of ~~recoverability~~Media’s ofCommon ~~assets~~Stock ~~and~~on ~~satisfaction~~January 30, of2009. ~~liabilities~~Media’s ~~that~~equityholders ~~might~~prior beto ~~necessary~~the ~~should~~financial werestructuring be(the ~~unable~~“Existing toEquityholders”) ~~continue~~retained 5.1% asof aMedia’s ~~going~~Common ~~concern~~Stock.

We ~~expect~~are toevaluating ~~incur~~the ~~approximately~~tax ~~$35.0~~effects ~~million~~of the restructuring of ~~fees~~our ~~relating~~capital tostructure and the ~~refinancing~~completion of our cash tender offers, which may result in the ~~Notes~~recognition of cancellation of indebtedness income and the ~~amendment~~utilization of all or a portion of our previously valued net operating loss carry-forwards. Further, as a result of the ~~2006~~Tendering ~~Credit~~Bondholders ~~Agreement~~acquiring 94.9% of Media’s Common Stock, we underwent an ownership change under Internal Revenue Code Section 382, which could also provide annual limitations on the use of any remaining net operating loss carryovers or built-in deductions.

We27 failed to make the required semi-annual interest payment with respect to the 2009 Notes when due on November 1, 2008, and on December 1, 2008, such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. We also expect to fail to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15, 2009. In addition, we failed to file this quarterly report on Form 10-Q for the period ended September 30, 2008 when due on November 14, 2008. We have also failed to comply with the requirements of the indentures governing the Notes relating to our failure to meet a specified leverage ratio as of September 30, 2008. As a result, we entered into forbearance agreements with existing holders of approximately 81% of the outstanding aggregate principal amount of 2009 Notes and approximately 69% of the outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders have agreed to forbear until the earliest of (i) 5:00 p.m., New York City time, on February 4, 2009, (ii) the date upon which any of the Notes become or are declared to be due and payable, (iii) the commencement (voluntary or involuntary) of an insolvency proceeding with respect to the Company or any of its subsidiaries, (iv) the date upon which the forbearance agreement by the lenders holding more than a majority of the borrowings under the Company’s credit facility expires, terminates or is breached and (v) if the Company has not launched the tender offers and related offering of the Offered Securities on the terms that may be agreed to by the parties hereto, in the sole discretion of such parties, prior to such date, January 10, 2009, from exercising any remedies under the indentures governing the Notes as a result of the Company’s (a) failure to comply with the reporting requirements of the indentures governing the Notes, (b) deferred interest payments with respect to the Notes or (c) failure to comply with the requirements of the indentures governing the Notes relating to the Company’s failure to meet a specified leverage ratio as of September 30, 2008. We intend to satisfy our obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in our satisfying such ratio on a pro forma basis. In connection with the forbearance agreements related to the Notes, we also entered

into a forbearance agreement with lenders representing a majority of outstanding amounts and commitments under the 2006 Credit Agreement and the administrative agent under the 2006 Credit Agreement, pursuant to which such lenders and the administrative agent agreed, subject to certain termination events, to forbear until the earliest of (i) February 4, 2009, (ii) the date on which any of the Existing Notes become or are declared to be due and payable and (iii) the commencement of an insolvency proceeding with respect to the Company, Media or any of their subsidiaries from exercising any rights and remedies under the 2006 Credit Agreement as a result of our failure (a) to pay the interest payment due on the 2009 Notes on November 1, 2008, (b) to comply with the reporting requirements of the 2006 Credit Agreement, (c) to comply with the corresponding requirements in the indentures governing the Notes and (d) to comply with the requirements of the indentures governing the Notes in connection with the failure to meet a specified leverage ratio.

RESULTS OF OPERATIONS

The following table presents our results of operations by segment for the periods indicated (in thousands).:

	For the Fiscal Quarter EndedSeptember 30,						For the Two Fiscal Quarters EndedSeptember 30,
	For the Fiscal Quarter EndedDecember 31,						For the Three Fiscal Quarters EndedDecember 31,
	2007			2008			2007			2008
Operating Revenue
Celebrity Publications	$	3332,~~375~~161		$	3025,~~440~~318		$	6597,~~083~~244		$	6287,~~444~~762
Tabloid Publications		3635,~~908~~807			3431,~~775~~302			71107,~~591~~398			68100,~~967~~269
Women’s Health and Fitness Publications		2515,~~489~~666			2413,~~524~~071			4763,~~845~~511			4356,~~870~~941
Distribution Services		8,~~145~~400			98,~~239~~290			1524,~~884~~284			1725,~~369~~659
Corporate/Other		3024,~~357~~714			3225,~~039~~512			5781,~~124~~838			5984,~~292~~804
Intersegment Eliminations		(2,~~360~~218	)		(2,~~218~~205	)		(46,~~481~~699	)		(46,~~321~~526	)
Total Operating Revenue	$	~~131~~114,~~914~~530		$	~~128~~101,~~799~~288		$	~~253~~367,~~046~~576		$	~~247~~348,~~621~~909
Operating Income (Loss)
Operating Income (Loss) (1)
Celebrity Publications	$	97,~~970~~590		$	6(59,~~838~~050	)	$	1825,~~359~~949		$	15(44,~~041~~009	)
Tabloid Publications		1816,~~325~~589			16(71,~~010~~516	)		3450,~~192~~781			31(39,~~575~~941	)
Women’s Health and Fitness Publications		103,~~067~~064			6(61,~~558~~506	)		1922,~~083~~147			13(48,~~155~~351	)
Distribution Services		2,~~036~~028			21,~~668~~359			35,~~806~~834			46,~~662~~021
Corporate/Other		(912,~~040~~027	)		(318,~~106~~503	)		(1729,~~786~~813	)		(928,~~913~~416	)
Total Operating Income	$	31,358		$	28,968		$	57,654		$	54,520
Total Operating Income (Loss)	$	17,244		$	(209,216	)	$	74,898		$	(154,696	)

~~Comparison~~(1) ofOperating ~~Fiscal~~income ~~Quarter~~(loss) ~~Ended~~for ~~September 30~~the fiscal quarter and three fiscal quarters ended December 31, 2008 vsincludes impairment losses for tradenames, goodwill and other identified intangibles of $60.5 ~~Fiscal~~million ~~Quarter~~for ~~Ended~~Celebrity ~~September 30~~Publications, ~~2007~~ $84.2 million for Tabloid Publications, $62.1 million for Women’s Health and Fitness Publications and $11.0 million for Corporate/Other segments. The amounts related to the provision for impairment of goodwill represent estimated non-cash impairment charges as these charges are probable and can be reasonably estimated. We are currently finalizing the second step of the goodwill impairment test. We will increase or decrease the amount of these goodwill impairment charges, as necessary, based upon the completion of our review of the impairment test in the fourth fiscal quarter of 2009 prior to filing the Company’s fiscal year 2009 Form 10-K. See Note 4, “Goodwill and Other Identified Intangible Assets,” in the Notes to Unaudited Condensed Consolidated Financial Statements in this Form 10-Q.

Comparison of Fiscal Quarter Ended December 31, 2008 vs. Fiscal Quarter Ended December 31, 2007

Operating Revenue

Total operating revenue was $~~128~~101.83 million and $~~131~~114.95 million for the fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease in revenue of $313.12 million, or 211.46%. This decrease was primarily due to ~~overall~~softness ~~market weakness~~ in ~~advertising spending~~newsstand ~~due~~sales tocaused by the current economic slowdown, which ~~triggered~~resulted ~~decreases~~ in ~~advertising~~lower ~~revenue~~circulation revenues as a result of a reduced number of single copies sold in our Celebrity Publications, Tabloid Publications, Corporate/Other and Women’s Health and Fitness Publications ~~and~~segments. ~~Tabloid~~Furthermore, ~~Publications~~the ~~segments~~continued asoverall ~~well~~market asweakness ain ~~decrease~~advertising inspending ~~circulation~~due to the current economic slowdown ~~revenues~~triggered decreases in advertising revenue in our ~~Tabloid~~Celebrity Publications and ~~Corporate/Other~~Women’s Health and Fitness Publications segments. These decreases were partially offset by increases in advertising revenues in our Corporate/Other segment primarily as a result of the impact to operating revenue of having one additional issue of ~~Muscle &~~Flex ~~Fitness~~ in the fiscal quarter ended ~~September~~December 3031, 2008 when compared to the prior year, ~~and an increase in service revenues in our Distributions Services segment~~period.

~~Single~~As of December 31, 2008, single copy revenue ~~consists~~consisted of copies distributed to newsstands primarily by four wholesalers, which we estimate ~~represent~~represented 8583% of the newsstand distribution market, as well as several smaller wholesalers who ~~represent~~represented the remaining 1517%. Operating revenue generated by these wholesalers is included in the Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications and Corporate/Other segments. In the fiscal quarter ended ~~September~~December 3031, 2008, three wholesalers each accounted for greater than 10% of our total operating revenue and, in the aggregate, accounted for approximately 3637% of our total operating revenue. In the fiscal quarter ended ~~September~~ December 3031, 2007, ~~one~~three ~~wholesaler~~wholesalers accounted for greater than 10% of our total operating revenue and, in the aggregate, accounted for approximately 1141% of our total operating revenue. ~~Our~~We ~~operating~~currently ~~results~~have ~~could~~service beagreements ~~materially affected~~with iftwo ~~one or more~~ of these four wholesalers ~~stopped distributing our publications. We have service agreements with these wholesalers~~, which provide incentives to maintain certain levels of service. ~~Two~~One ~~of these~~ wholesaler service ~~agreements~~ ~~require~~

2628

atagreement ~~least~~was 90terminated ~~and~~by ~~120~~the ~~days’~~wholesaler ~~prior~~effective ~~notice of termination, respectively, with terms expiring on~~ December 31, ~~2009~~2008. ~~One~~See ~~of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on June~~Item 301, ~~2009.~~Part ~~One of these wholesaler service agreements requires at least 90 days’ prior notice of termination~~II, ~~with~~“Legal ~~a term expiring on December 31~~Proceedings,” ~~2008. Notice of termination has been given and we are~~ in ~~the process of negotiating a further renewal of~~ this ~~service agreement. The levels of service under this wholesaler service agreement are expected to continue uninterrupted~~ ~~until a new agreement is in place.~~

Form 10-Q for a description of the litigation relating to such wholesaler. One of these wholesalers has ceased to operate and is holding certain of its allotments of our monthly magazines. We are taking steps to reclaim these magazines. Our operating results could be materially affected by disruption of the distribution of our magazines through the wholesalers.

Operating Expense

Total operating expense, before the non-cash provision for impairment of intangible assets and goodwill, was $9992.87 million and $~~100~~97.63 million for the fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease of $04.86 million, or 04.7%. This decrease in operating expense is primarily due to lower selling, general and administrative expenses due to decreases in advertising expenses, asreduced ~~a result of the aforementioned market weakness in advertising spending as well as lower~~ personnel-related costs primarily as a result of our Management Action Plan, lower professional fees, and a reduction in depreciation and amortization expense primarily due to certain assets becoming fully depreciated. ~~These~~The ~~decreases~~decrease in operating expense ~~were~~was ~~partially~~also ~~offset~~caused by ~~increases~~lower in editorial, ~~production~~ ~~and~~ distribution, circulation and other costs of sales expenses as a result of our Management Action Plan. These decreases in operating expense were partially offset by increases in production expenses due to higher paper costs ~~and~~for ~~one~~the production of the additional ~~issue~~issues of ~~Shape~~Flex and Men’s ~~Muscle &~~ Fitness during the quarter ended ~~September~~December 3031, 2008 when compared to the prior year period. In addition, we recorded a provision for impairment of intangible assets and goodwill of $217.8 million during the fiscal quarter ended December 31, 2008. This non-cash impairment charge resulted in operating expenses totaling $310.5 million for the fiscal quarter ended December 31, 2008.

Interest Expense

Interest expense was $2224.23 million and $2425.8 1 million for the fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease of $20.68 million, or 103.63%. This decrease in interest expense is primarily attributable to a lower effective weighted-average interest rate on the ~~Term~~term ~~Facility~~facility and ~~Revolving~~revolving ~~Facility~~facility under our 2006 Credit Agreement during the fiscal quarter ended ~~September~~December 3031, 2008 of 67.06% as compared to 8.76% for the prior year comparable period. The decrease in the effective weighted-average interest rate is tied to the decrease in the London interbank offering rate (“LIBOR”).

Other Income ~~(Expense)~~, net

Other income ~~(expense)~~ was ($0.2) million and $0.28 million for the fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease of $0.46 million, or 81.0%. This decrease in other income ~~(expense)~~, net was due to a decrease in interest income as a result of lower interest rates.

Income Taxes

During the fiscal quarter ended December 31, 2008, we recorded non-cash impairment charges in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), of $217.8 million, which resulted in an income tax benefit of $46.8 million due to the reversal of previously recorded deferred income tax liabilities. We recorded a $345.14 million income tax ~~expense~~benefit for the fiscal quarter ended ~~September~~ December 3031, 2008, which was ~~primarily~~comprised ~~due~~of to a domestic tax ~~expense~~benefit of $245.96 million and foreign tax expense of $0.2 million. We recorded a $34.94 million income tax expense for the fiscal quarter ended ~~September~~December 3031, 2007, which was primarily due to domestic tax expense of $34.71 million and foreign tax expense of $0.23 million.

Celebrity Publications Segment

Operating Revenue

Total operating revenue in the Celebrity Publications segment was $3025.43 million for the fiscal quarter ended ~~September~~December 3031, 2008, representing a decrease of $26.98 million, or 821.83%, from the prior year comparable period. This decrease in revenue was primarily attributable ~~to decreases in~~ ~~Star and Country Weekly advertising revenue due~~ to the ~~aforementioned~~following: market weakness in advertising spending and the additional impact to operating revenue of having one less issue of Country Weekly during the fiscal quarter ended September 30, 2008 when compared to the prior year.

~~Operating~~• ~~Income~~a $4.4 million and $0.3 million decrease in Star and Country Weekly newsstand revenues, respectively, due to a reduced number of single copies sold as a result of the aforementioned softness in newsstand sales; and

~~Operating~~• ~~income~~a ~~in the Celebrity Publications segment decreased in the fiscal quarter ended September 30, 2008 from the prior year comparable period by~~ $32.12 million, ~~or 31.4%, to $6.8 million. This~~ decrease in ~~operating~~ ~~income~~Star isadvertising ~~primarily~~revenues ~~attributable~~due to the ~~above-mentioned~~aforementioned ~~operating~~market ~~revenue~~weakness ~~decrease.~~in advertising spending.

2729

Operating Income (Loss)

Operating income before the non-cash provision for impairment of intangible assets and goodwill in the Celebrity Publications segment decreased in the fiscal quarter ended December 31, 2008 from the prior year comparable period by $6.2 million, or 81.3%, to $1.4 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decrease, one expanded issue of Star during the fiscal quarter ended December 31, 2008 when compared to the prior year period and higher paper costs. These decreases in operating income were partially offset by lower Star printing expenses as a result of reduced print orders and lower Star and Country Weekly transportation, distribution and other costs of sales expenses mainly driven by the decrease in print orders. The decrease in operating income was compounded by a provision recorded for impairment of intangible assets and goodwill in the Celebrity Publications segment of $60.5 million during the fiscal quarter ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Celebrity Publications segment of $59.1 million for the fiscal quarter ended December 31, 2008.

Tabloid Publications Segment

Operating Revenue

Total operating revenue in the Tabloid Publications segment was $3431.83 million for the fiscal quarter ended ~~September~~December 3031, 2008, representing a decrease of $24.15 million, or 512.86%, from the prior year comparable period. This decrease in revenue was primarily attributable to the following:

• a $13.07 million and $0.86 million decrease in ~~Globe and~~ National Enquirer and Globe newsstand revenues, respectively, due to ~~decreases~~fewer in single copies sold ~~which~~primarily ~~were~~as a result of the aforementioned softness in newsstand sales, partially offset by cover price increases for each publication from $3.29 to $3.49 at the end of fiscal year 2008; and

• a $0.64 million decrease in National Enquirer advertising revenue due to a planned rate base reduction in January 2008 ~~and the aforementioned market weakness in advertising spending~~.

~~Operating~~These ~~Income~~decreases in operating revenues were partially offset by a $0.3 million increase in National Examiner newsstand revenues primarily due to a cover price increase from $2.49 to $3.29 in the beginning of the fiscal quarter ended December 31, 2008.

Operating ~~income~~Income in(Loss) the Tabloid Publications segment decreased in the fiscal quarter ended September 30, 2008 from the prior year comparable period by $2.3 million, or 12.6%, to $16.0 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decrease.

Operating income before the non-cash provision for impairment of intangible assets and goodwill in the Tabloid Publications segment decreased in the fiscal quarter ended December 31, 2008 from the prior year comparable period by $3.9 million, or 23.3%, to $12.7 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decrease and higher paper costs, offset, in part, by a National Enquirer rate base reduction in January 2008. These decreases to operating income were partially offset by reduced National Enquirer and Globe production, transportation, distribution and other costs of sales expenses mainly driven by the decrease in subscription-related promotion expenses and lower advertising expenses. The decrease in operating income was compounded by a provision recorded for impairment of intangible assets and goodwill in the Tabloid Publications segment of $84.2 million during the fiscal quarter ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Tabloid Publications segment of $71.5 million for the fiscal quarter ended December 31, 2008.

Women’s Health and Fitness Publications Segment

Operating Revenue

Total operating revenue in the Women’s Health and Fitness Publications segment was $2413.51 million for the fiscal quarter ended ~~September~~December 3031, 2008, representing a decrease of $12.06 million, or 316.86%, from the prior year comparable period. This decrease in revenue was primarily attributable to a decrease in Shape advertising revenue due to reduced advertising pages and lower advertising revenue per page as a result of the aforementioned market weakness in advertising spending ~~as well as a decrease in Shape newsstand revenue due to a reduced number of single copies sold~~. ~~These decreases were partially offset by the impact to operating revenue of having one additional issue of Shape during the fiscal quarter ended September 30, 2008 when compared to the prior year.~~

Operating Income (Loss)

Operating income before the non-cash provision for impairment of intangible assets and goodwill in the Women’s Health and Fitness Publications segment decreased in the fiscal quarter ended ~~September~~December 3031, 2008, from the prior year comparable period by $32.5 million, or 3480.9%, to $60.6 million. This decrease in operating income was primarily attributable to the above-mentioned operating revenue decrease and a $30.14 million increase in ~~editorial,~~Shape production ~~and~~expenses ~~distribution,~~caused ~~circulation~~primarily ~~and~~by ~~other~~higher ~~costs~~print oforders ~~sales~~as ~~expenses~~a ~~mainly~~result ~~driven~~of ~~by the~~one ~~additional~~expanded issue of Shape during the ~~fiscal~~ quarter ended ~~September~~December 3031, 2008 when compared to the prior year period, coupled with higher paper costs. These decreases into operating income were partially offset by alower ~~$0.6~~Shape ~~million~~advertising, editorial ~~decrease~~and intransportation, ~~Shape~~distribution ~~advertising~~and ~~expense.~~

other costs of sales expenses. The decrease in operating income was compounded by a provision recorded for impairment of intangible assets and goodwill in the Women’s Health and Fitness Publications segment of $62.1 million during the fiscal quarter ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Women’s Health and Fitness Publications segment of $61.5 million for the fiscal quarter ended December 31, 2008.

Distribution Services Segment

Operating Revenue

Total operating revenue in the Distribution Services segment, which is comprised of Distribution Services, Inc. (“DSI”), ~~was~~decreased slightly to $76.01 million, net of eliminations, for the fiscal quarter ended ~~September~~December 3031, 2008, ~~representing~~as ancompared ~~increase~~to ~~of $1.2 million, or 21.4%, from~~ the prior year ~~comparable~~ period. ~~This increase in revenue was primarily attributable to an increase in services related to the installation of magazine fixtures and in-store data collection for DSI’s outside clients.~~

Operating Income

Operating income in the Distribution Services segment ~~increased~~decreased in the fiscal quarter ended ~~September~~December 3031, 2008, from the prior year comparable period by $0.67 million, or 3133.0%, to $21.74 million. This ~~increase~~decrease in operating income is ~~primarily~~ attributable to ~~the~~an ~~above-mentioned revenue~~ increase, ~~partially~~in ~~offset~~the bycost anof ~~increase~~services related to the ~~direct~~installation ~~costs~~ of ~~providing~~magazine ~~these services~~fixtures and in-store data collection for DSI’s outside clients and the above-mentioned revenue decrease.

Corporate/Other Segment

Operating Revenue

Total operating revenue in the Corporate/Other segment was $3225.05 million for the fiscal quarter ended ~~September~~December 3031, 2008, representing an increase of $10.78 million, or 53.52%, from the prior year comparable period. This increase in revenue is primarily attributable to a combined $31.26 million increase in Flex and Muscle & Fitness advertising revenue primarily due to ~~an increase in advertising pages per issue and higher advertising revenue per page as well as~~ (i) the ~~additional~~ impact ~~to operating revenue~~ of ~~having~~ one additional issue of ~~Muscle &~~Flex ~~Fitness~~ during the ~~fiscal~~ quarter ended ~~September~~December 3031, 2008 when compared to the prior year period, and (ii) higher advertising pages. These publications have ~~not~~ been asless impacted by the current economic downturn due to the ~~sport~~ nutritional ~~and~~ supplement segment ~~not~~ being asless affected ~~sensitive~~by tothe current economic ~~cycles~~environment. These increases in operating revenues were partially offset by ~~reduced~~a ~~newsstand~~combined ~~revenue~~$0.8 ~~related~~million todecrease ~~our~~in ~~MiniMag~~Flex ~~publications due to lower newsstand sales~~ and ~~decreases~~Muscle & ~~in Men’s~~ Fitness ~~and~~newsstand ~~Natural Health advertising~~ revenues primarily due to ~~the~~lower overseas ~~aforementioned~~newsstand ~~market~~revenues ~~weakness~~as ina ~~general~~result ~~advertising~~of ~~spending~~unfavorable currency rates.

Operating Loss

Operating loss before the non-cash provision for impairment of intangible assets and goodwill in the Corporate/Other segment decreased in the fiscal quarter ended ~~September~~ December 3031, 2008, from the prior year comparable period by $54.95 million, or 6537.67%, to $37.15 million. This decrease in operating loss is ~~primarily~~ due to the above-mentioned operating revenue increase, aas ~~$3.8~~well ~~million reduction in selling, general and administrative expenses primarily due to lower professional fees, legal, advertising and personnel-related costs primarily~~ as athe ~~result~~following: ~~of our Management Action Plan, and lower depreciation and amortization expense primarily due to certain assets becoming fully depreciated.~~

~~Comparison~~• ofa ~~Two~~$3.2 ~~Fiscal~~million ~~Quarters~~reduction ~~Ended~~in ~~September 30~~selling, ~~2008~~general ~~vs.~~and ~~Two~~administrative ~~Fiscal~~expenses ~~Quarters~~primarily ~~Ended~~due ~~September 30~~to lower professional fees, ~~2007~~ legal, advertising and personnel-related costs primarily as a result of our Management Action Plan, offset in part by higher severance expense;

•

a $0.9 million reduction in editorial expenses caused primarily by reduction in personnel-related costs as a result of our Management Action Plan; and

•

a $0.5 million decrease in depreciation and amortization expense primarily due to certain assets becoming fully depreciated.

These decreases in operating loss were partially offset by a $0.8 million increase in production expenses due to one additional issue of Flex during the fiscal quarter ended December 31, 2008 when compared to the prior year period, coupled with higher paper costs. In addition, we recorded a provision for impairment of intangible assets and goodwill in the Corporate/Other segment of $11.0 million during the fiscal quarter ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Corporate/Other segment of $18.5 million for the fiscal quarter ended December 31, 2008.

Comparison of Three Fiscal Quarters Ended December 31, 2008 vs. Three Fiscal Quarters Ended December 31, 2007

Operating Revenue

Total operating revenue was $~~247~~348.69 million and $~~253~~367.06 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease in revenue of $518.47 million, or 25.1%. This decrease was primarily due to ~~overall~~softness ~~market weakness~~ in ~~advertising~~newsstand spending due to the current economic slowdown, which triggered decreases in advertising revenue in our Celebrity Publications, Tabloid Publications and Women’s Health and Fitness Publications segments, partially offset by an increase in advertising revenue in our Corporate/Other segment primarily as a result of the impact to operating revenue of having one additional issue of Muscle & Fitness in the two fiscal quarters ended September 30, 2008 when compared to the prior year.

Single copy revenue consists of copies distributed to newsstands primarily by four wholesalers, which we estimate represent 85% of the newsstand distribution market, as well as several smaller wholesalers who represent the remaining 15%. Operating revenue generated by these wholesalers is included in the Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications and Corporate/Other segments. In the two fiscal quarters ended September 30, 2008, three wholesalers each accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 37% of our total operating revenue. In the two fiscal quarters ended September 30, 2007, one wholesaler accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 12% of our total operating revenue. Our operating results could be materially affected if one or more of these four wholesalers stopped distributing our publications. We have service agreements with these wholesalers, which provide incentives to maintain certain levels of service. Two of these wholesaler service agreements require at least 90 and 120 days’ prior notice of termination, respectively, with terms expiring on December 31, 2009. One of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on June 30, 2009. One of these wholesaler service agreements requires at least 90 days’ prior notice of termination, with a term expiring on December 31, 2008. Notice of termination has been given and we are in the process of negotiating a further renewal of this service agreement. The levels of service under this wholesaler service agreement are expected to continue uninterrupted until a new agreement is in place.

Operating Expense

Total operating expense was $193.1 million and $195.4 million for the two fiscal quarters ended September 30, 2008 and 2007, respectively, representing a decrease of $2.3 million, or 1.2%. This decrease in operating expense is primarily due to a decrease in selling, general and administrative expenses due to decreases in advertising expenses and personnel-related costs primarily as a result of our Management Action Plan, lower professional fees, and a reduction in depreciation and amortization expense, primarily due to certain assets becoming fully depreciated. These decreases in operating expense were partially offset by increases in distribution, circulation and other costs of sales mainly due to the additional issues of Shape and Muscle & Fitness in the two fiscal quarters ended September 30, 2008 when compared to the prior year.

sales caused by the current economic slowdown, which resulted in lower circulation revenues as a result of a reduced number of single copies sold in our Tabloid Publications, Celebrity Publications, Corporate/Other and Women’s Health and Fitness Publications segments. Furthermore, the overall market weakness in advertising spending due to the current economic slowdown triggered decreases in advertising revenue in our Celebrity Publications, Women’s Health and Fitness Publications and Tabloid Publications segments. These decreases were partially offset by an increase in advertising revenue in our Corporate/Other segment as a result of the impact to operating revenue of having one additional issue of Muscle & Fitness and Flex in the three fiscal quarters ended December 31, 2008 when compared to the prior year period and an increase in advertising pages.

As of December 31, 2008, single copy revenue consisted of copies distributed to newsstands primarily by four wholesalers, which we estimate represented 83% of the newsstand distribution market, as well as several smaller wholesalers who represented the remaining 17%. Operating revenue generated by these wholesalers is included in the Celebrity Publications, Tabloid Publications, Women’s Health and Fitness Publications and Corporate/Other segments. In the three fiscal quarters ended December 31, 2008, three wholesalers each accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 36% of our total operating revenue. In the three fiscal quarters ended December 31, 2007, three wholesalers accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 38% of our total operating revenue. We currently have service agreements with two of these four wholesalers, which provide incentives to maintain certain levels of service. One wholesaler service agreement was terminated by the wholesaler effective December 31, 2008. See Item 1, Part II, “Legal Proceedings,” in this Form 10-Q for a description of the litigation relating to such wholesaler. One of these wholesalers has ceased to operate and is holding certain of its allotments of our monthly magazines. We are taking steps to reclaim these magazines. Our operating results could be materially affected by disruption of the distribution of our magazines through the wholesalers.

Operating Expense

Total operating expense, before the non-cash provision for impairment of intangible assets and goodwill, was $285.8 million and $292.7 million for the fiscal quarters ended December 31, 2008 and 2007, respectively, representing a decrease of $6.9 million, or 2.4%. This decrease in operating expense is primarily due to decreases in editorial and selling, general and administrative expenses due to the Management Action Plan and lower advertising expenses as a result of the aforementioned market weakness in advertising spending, reduced personnel-related costs primarily as a result of our Management Action Plan, and lower professional fees. The decrease in operating expense was also caused by lower depreciation and amortization expense, primarily due to certain assets becoming fully depreciated. These decreases in operating expense were partially offset by increases in production, distribution, circulation and other costs of sales mainly due to the additional issues of Shape, Muscle & Fitness and Flex during the three fiscal quarters ended December 31, 2008 when compared to the prior year period and higher paper costs. In addition, we recorded a provision for impairment of intangible assets and goodwill of $217.8 million during the three fiscal quarters ended December 31, 2008. This non-cash impairment charge resulted in operating expenses totaling $503.6 million for the three fiscal quarters ended December 31, 2008.

Interest Expense

Interest expense was $4569.79 million and $4974.56 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease of $34.87 million, or 76.72%. This decrease in interest expense is primarily attributable to a lower effective weighted-average interest rate on our ~~Term~~term ~~Facility~~facility and ~~Revolving~~revolving ~~Facility~~facility under our 2006 Credit Agreement during the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 of 6.48% as compared to 8.6% for the prior year comparable period. The decrease in the effective weighted-average interest rate is tied to the decrease in the LIBOR.

Other Income, net

Other income, net was $0.12 million and $01.87 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively, representing a decrease of $01.75 million, or 9085.05%. This decrease in other income, net was due to a decrease in interest income as a result of lower interest rates.

Discontinued Operations

We discontinued ~~various~~one ~~publications~~publication during fiscal ~~years~~year 2008 and four publications during fiscal year 2007 in order to improve our profitability and future net cash flows. The total income (loss) from discontinued operations was $0.5 million and $(0.87) million, net of taxes, for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 and 2007, respectively. The income from discontinued operations for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 related to the gain on the sale of one of the discontinued ~~operations~~publications. Operating results of these publications have been classified as discontinued operations for all periods presented. These publications were previously included in the Corporate/Other segment. See Note 89, “Discontinued Operations,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I herein for further discussion.

Income Taxes

During the fiscal quarter ended December 31, 2008, we recorded non-cash impairment charges in accordance with SFAS No. 142 and SFAS No. 144 of $217.8 million, which resulted in an income tax benefit of $46.8 million due to the reversal of previously recorded deferred income tax liabilities. We recorded a $242.95 million income tax ~~expense~~benefit for the ~~two~~ three fiscal quarters ended ~~September~~December 3031, 2008, which was ~~primarily~~comprised ~~due~~of toa domestic tax ~~expense~~benefit of $243.42 million and foreign tax expense of $0.57 million. We recorded a $37.47 million income tax expense for the ~~two~~three fiscal quarters ended ~~September~~ December 3031, 2007, which was primarily due to domestic tax expense of $37.0 million and foreign tax expense of $0.47 million.

Celebrity Publications Segment

Operating Revenue

Total operating revenue in the Celebrity Publications segment was $6287.48 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, representing a decrease of $29.65 million, or 49.18%, from the prior year comparable period. This decrease in revenue was primarily attributable to decreases in Star and Country Weekly advertising revenue due to the aforementioned market weakness in advertising spending. ~~and~~This ~~the~~decrease ~~additional~~was ~~impact~~also due to ~~operating revenue~~lower ofStar ~~having~~and ~~one less issue of~~ Country Weekly ~~during~~newsstand ~~the~~revenue ~~two~~attributable ~~fiscal quarters ended September 30, 2008 when compared~~ to the ~~prior~~aforementioned ~~year.~~softness ~~These~~in ~~decreases~~newsstand ~~were~~sales, partially offset by ana ~~increase in~~ Star ~~newsstand revenue attributable to a~~ cover price increase from $3.49 to $3.99 at the end of fiscal year 2008~~, offset, in part, by a decrease in newsstand copies sold~~.

Operating Income (Loss)

Operating income before the non-cash provision for impairment of intangible assets and goodwill in the Celebrity Publications segment decreased in the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 from the prior year comparable period by $39.35 million, or 1836.16%, to $1516.05 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decrease coupled with higher ~~subscription~~paper costs. ~~caused~~This bydecrease in operating income was ~~initiatives~~partially tooffset ~~maintain~~by ~~our~~reduced ~~base~~advertising ~~and~~expenses. ~~higher~~This ~~transportation-related~~decrease ~~costs~~in ~~caused~~operating income was compounded by ~~fuel~~a ~~surcharges~~provision ~~directly~~recorded ~~related~~for toimpairment ~~the~~of ~~increase~~intangible assets and goodwill in the ~~price~~Celebrity Publications segment of ~~oil~~$60.5 million during ~~this~~the ~~period~~three fiscal quarters ended December 31, 2008. ~~These~~This ~~cost~~non-cash ~~increases~~impairment ~~were~~charge ~~partially~~resulted ~~offset~~in byan ~~reduced~~operating ~~advertising~~loss ~~expenses~~in the Celebrity Publications segment of $44. 0 million for the three fiscal quarters ended December 31, 2008.

Tabloid Publications Segment

Operating Revenue

Total operating revenue in the Tabloid Publications segment was $69100.03 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, representing a decrease of $27.61 million, or 36.76%, from the prior year comparable period. This decrease in revenue was primarily attributable to the following:

• a $14.3 million and $1.7 million decrease in National Enquirer ~~advertising~~and ~~revenue~~Globe newsstand revenues, respectively, due to alower ~~planned~~single ~~rate~~copies ~~base~~sold, ~~reduction~~partially ~~from~~offset ~~1.1~~by ~~million~~cover toprice ~~950,000~~increases infor ~~January~~each ~~2008~~publication ~~coupled~~from ~~with~~$3.29 ~~the~~to ~~aforementioned~~$3.49 ~~market~~at ~~weakness~~the inend ~~advertising~~of ~~spending;~~fiscal ~~and~~year 2008;

30• one less issue of National Enquirer in the United Kingdom during the three fiscal quarters ended December 31, 2008 when compared to the prior year period; and

~~Table~~• ofa ~~Contents~~$1.6 million decrease in National Enquirer advertising revenue due to the aforementioned market weakness in advertising spending coupled with a planned rate base reduction from 1.1 million to 950,000 in January 2008.

• a $1.1 million and $0.6 million decrease in Globe and National Enquirer newsstand revenues, respectively, due to lower single copies sold which were partially offset by cover price increases for each publication from $3.29 to $3.49 at the end of fiscal year 2008.

These decreases in revenue were partially offset by a $0.4 million increase in National Enquirer subscription revenue due to subscription price increases.

Operating Income (Loss)

Operating income before the non-cash provision for impairment of intangible assets and goodwill in the Tabloid Publications segment decreased in the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 from the prior year comparable period by $2.6.5 million, or 712.78%, to $3144.63 million. This decrease in operating income is primarily attributable to the above-mentioned operating revenue decline, coupled with higher National Enquirer editorial and legal expenses, as well as an increase in National Examiner production expenses primarily due to increased book size. ~~These~~This ~~decreases~~decrease in operating income ~~were~~was partially offset by reduced National Enquirer advertising expenses and production expenses as a result of planned rate base reductions. ~~which~~Decreases ~~lowered~~in ~~production~~operating ~~expenses~~income inwere also partially offset by reduced National Enquirer and Globe transportation, distribution and other ~~advertising~~costs of sales expenses inmainly ~~National~~driven ~~Enquirer.~~by the decrease

in single copies sold. This decrease in operating income was compounded by a provision recorded for impairment of intangible assets and goodwill in the Tabloid Publications segment of $84.2 million during the three fiscal quarters ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Tabloid Publications segment of $39.9 million for the three fiscal quarters ended December 31, 2008.

Women’s Health and Fitness Publications Segment

Operating Revenue

Total operating revenue in the Women’s Health and Fitness Publications segment was $4356.9 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, representing a decrease of $46.06 million, or 810.3%, from the prior year comparable period. This decrease in revenue was primarily attributable to athe ~~reduction~~softness in ~~Shape~~the advertising ~~revenue~~market, ~~due~~which tocaused ~~fewer~~Shape advertising ~~pages and lower revenue per~~ page asrates ato ~~result~~decline. ofThis ~~the~~was ~~advertising~~compounded ~~market~~by ~~softness coupled with~~ lower ~~Shape~~ newsstand revenue. These decreases were partially offset by the impact to operating revenue of having one additional issue of Shape during the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 when compared to the prior year period, as well as higher Shape subscription revenues.

Operating Income (Loss)

Operating income before the non-cash provision for impairment of intangible assets and goodwill in the Women’s Health and Fitness Publications segment decreased in the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, from the prior year comparable period by $58.9 4 million, or 3138.10%, to $13.27 million. This decrease in operating income was primarily attributable to the above-mentioned operating revenue decrease coupled with a $2.67 million increase in editorial, production and distribution, circulation and other cost of sales expenses associated primarily with the additional issue of Shape during the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 when compared to the prior year. period, coupled with higher paper costs. These items were partially offset by a decrease of $01.81 million in Shape advertising expenses as a result of the aforementioned market weakness in advertising spending. The decrease in operating income was compounded by a provision recorded for impairment of intangible assets and goodwill in the Women’s Health and Fitness Publications segment of $62.1 million during the three fiscal quarters ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Women’s Health and Fitness Publications segment of $48.4 million for the three fiscal quarters ended December 31, 2008.

Distribution Services Segment

Operating Revenue

Total operating revenue in the Distribution Services segment, which is comprised of DSI, was $1319.01 million, net of eliminations, for the ~~two~~ three fiscal quarters ended ~~September~~December 3031, 2008, representing an increase of $1.65 million, or 148.48%, from the prior year comparable period. This increase in revenue was primarily attributable to an increase in services related to the installation of magazine fixtures and in-store data collection for DSI’s outside clients.

Operating Income

Operating income in the Distribution Services segment increased in the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, from the prior year comparable period by $0.92 million, or 223.52%, to $46.70 million. This increase in operating income is primarily attributable to the above-mentioned operating revenue increase, partially offset by an increase to the direct costs of providing these services.

Corporate/Other Segment

Operating Revenue

Total operating revenue in the Corporate/Other segment was $5984.38 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, representing an increase of $23.20 million, or 3.86%, from the prior year comparable period. This increase in revenue is primarily attributable to a combined $35.7 3 million increase in Flex and Muscle & Fitness advertising revenue due to ~~an increase in advertising pages per issue and higher advertising revenue per page as well as~~ the ~~additional~~ impact ~~to operating revenue~~ of having one additional issue of Flex and Muscle & Fitness during the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 when compared to the prior year period and an increase in advertising pages. These publications have ~~not~~ been asless impacted by the current economic downturn due to the ~~sport~~ nutritional ~~and~~ supplement segment ~~not~~ being asless ~~sensitive~~affected toby the current economic ~~cycles~~environment. These increases were partially offset by ~~decreases in newsstand revenues related to our MiniMag publications due to lower newsstand sales and a decrease in Men’s Fitness and Natural Health advertising revenues due to~~ the ~~aforementioned~~following: ~~market weakness in advertising spending.~~

•

a $0.8 million and $0.5 million decrease in newsstand revenues for Mira! and Sun, respectively, due to the aforementioned softness in newsstand sales, coupled with one less issue of each publication during the three fiscal quarters ended December 31, 2008; and

•

a combined $0.9 million decrease in Flex and Muscle & Fitness newsstand revenues primarily due to lower overseas newsstand revenues as a result of unfavorable currency rates.

Operating Loss

Operating loss before the non-cash provision for impairment of intangible assets and goodwill in the Corporate/Other segment decreased in the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, from the prior year comparable period by $712.94 million, or 44 41.36%, to $917.94 million. This decrease in operating loss is ~~primarily~~ due to the above-mentioned revenue increase, a $2.0 million reduction in editorial and production costs primarily due to reduced print orders, a $1.1 million decrease in depreciation and amortization expense, primarily due to certain assets becoming fully depreciated, and a $3.0 million combined reduction in personnel-related costs primarily as a result of our Management Action Plan, lower professional fees and legal costs. These decreases to operating ~~loss were partially offset by an investment in sales promotions expenses for Men’s Fitness, which we expect will generate advertising~~ revenue ~~in upcoming issues, and an~~ increase inas ~~subscription costs~~well ~~caused~~as bythe ~~initiatives~~following: ~~to maintain our subscription base.~~

•

a $6.2 million reduction in selling, general and administrative expenses primarily due to lower personnel-related costs, lower professional fees, legal costs, and advertising expenses as a result of our Management Action Plan;

•

a $2.1 million reduction in editorial and production costs due to reduced print orders and lower personnel-related costs as a result of our Management Action Plan; and

•

a $1.5 million reduction in depreciation and amortization expense primarily due to certain assets becoming fully depreciated.

These decreases to operating loss were partially offset by an increase in sales promotions expenses for Men’s Fitness, a $0.5 million increase in transportation, distribution and other costs of sales expenses primarily related to the additional issues of Flex and Muscle & Fitness during the three fiscal quarters ended December 31, 2008 when compared to the prior year period, and higher paper costs. In addition, we recorded a provision for impairment of intangible assets and goodwill in the Corporate/Other segment of $11.0 million during the three fiscal quarters ended December 31, 2008. This non-cash impairment charge resulted in an operating loss in the Corporate/Other segment of $28.4 million for the three fiscal quarters ended December 31, 2008.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash generated from operations, cash on hand and amounts available to be borrowed under our ~~2006~~2009 Credit Agreement. See Note 6, “Credit Agreement,” in the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I herein.

As of ~~September~~ December 3031, 2008, we had cash and cash equivalents of $2155.45 million, ~~and~~ $2060.0 million outstanding on our ~~Revolving~~revolving ~~Facility~~facility under our 2006 Credit Agreement, and a working capital deficit of $~~921~~47.57 million. ~~On September 30, 2008, we paid down $40.0 million of Revolving Facility and subsequently borrowed $40.0 million on October 1, 2008.~~ The increase in working capital deficit of $~~899~~25.35 million from $22.2 million at March 31, 2008 primarily resulted from: (i) an ~~additional~~increase of $~~447~~20.08 million ~~related~~in toaccrued interest as a result of the ~~our~~Company ~~Term~~deciding ~~Facility~~not ~~and~~to ~~Revolving~~make ~~Facility~~the ~~being~~semi-annual ~~classified~~interest payments in respect of the 2009 Notes that was due on November 1, 2008 as awell ~~current~~as ~~liability~~the timing of interest payment on our 2006 Credit Agreement, (ii) $~~413~~14.70 million related to our 2009 Notes being classified as a current liability, ~~and~~ (iii) a $429.89 million decrease in ~~cash~~trade ~~and~~receivables ~~cash~~as ~~equivalents primarily~~a ~~due~~result toof alower ~~net~~revenues coupled with improved collections, and (iv) an $408.07 million ~~payment~~decrease ~~towards~~in ~~our~~cash ~~Revolving~~and ~~Facility,~~cash aequivalents. ~~fiscal~~These ~~year~~items were ~~2008~~partially ~~Excess~~offset ~~Cash~~by ~~Flow~~(i) a ~~payment~~$16.1 ~~(as~~million ~~defined~~decrease in ~~the~~accounts ~~2006~~payable ~~Credit~~primarily ~~Agreement)~~due to lower production-related expenditures and timing of vendor payments, (ii) an $8.1 million ~~and~~decrease ~~required~~in ~~quarterly~~the ~~principal~~current ~~payments~~portion onof our ~~Term~~term ~~Facility~~facility under ~~borrowing~~our ~~totaling~~2006 ~~$2.3~~Credit ~~million.~~Agreement ~~These~~as ~~items~~a ~~were~~result ~~partially~~of ~~offset~~the byCompany anmaking the 2008 Excess Cash Flow payment, and (iii) a $~~11.~~6.1 million decrease in ~~accounts~~accrued ~~payable~~expenses ~~primarily~~and ~~due~~other ~~to timing of vendor payments~~liabilities.

In order to refinance the Notes, on August 26, 2008, we commenced tender offers to purchase and consent solicitations with respect to all of the Notes. On January 9, 2009, we amended the tender offers and consent solicitations. To finance the purchase of the Notes in the tender offers and the payment for consents in the consent solicitations, simultaneous with the tender offers and consent solicitations, we are offering the New Notes. Together with the New Notes, Media is offering 5,700,000 Shares, representing 95% of Media’s outstanding shares of common stock. In order to tender Notes in the tender offers, a tendering holder must agree to purchase Offered Securities for a purchase price equal to the consideration being received by such holder in the tender offers and consent solicitations. Among other matters, tendering holders must also deliver their consents to specified amendments to the indentures, which consents remove substantially all of the restrictive covenants and related defaults in the indentures governing the Notes. We cannot make any assurances that such tender offers and consent solicitations will be successful. If we are not able to refinance the Notes in the tender offers, the 2006 Credit Agreement will likely mature early and we will not have sufficient funds to repay such indebtedness. In such event, we may have to liquidate assets on unfavorable terms, or be unable to continue as a going concern, and incur additional costs associated with bankruptcy. Assuming we are able to successfully refinance the Notes as described herein, we currently believe that available funds and cash flows generated by operations, if any, will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12twelve months. We believe that available cash at ~~September~~December 3031, 2008 ~~and amounts available under our Revolving Facility~~ should help mitigate future possible cash flow requirements. To the extent we make future acquisitions, we may require new sources of funding, including additional debt, equity financing or some combination thereof. There can be no assurances that we will be able to secure additional sources of funding or that such additional sources of funding will be available to us on acceptable terms or at all.

32At December 31, 2008, our outstanding indebtedness totaled $1.1 billion, of which $498.5 million represented borrowings under the 2006 Credit Agreement and $568.9 million represented the Existing Notes. See “Risk Factors” in Item 1A, Part II, of this Form 10-Q and the discussion that follows under the caption entitled “Credit Agreement and Senior Subordinated Indebtedness” for risks associated with our indebtedness.

At September 30, 2008, our outstanding indebtedness totaled $1.0 billion, of which $459.6 million represented borrowings under the 2006 Credit Agreement and $568.4 million represented the Notes. At November 30, 2008, we had cash and cash equivalents of approximately $43.3 million and borrowings of $499.6 million under the 2006 Credit Agreement. See “Risk Factors” in our March 31, 2008 10-K and the discussion that follows under “Credit Agreement and Senior Subordinated Indebtedness” for risks associated with our indebtedness.

The effectiveness of the amendment to the 2006 Credit Agreement is conditioned upon the consummation of the tender offers and offerings (the “Offerings”) currently being conducted by the Company and Media to holders of the Company’s existing notes as well as the satisfaction of other customary conditions. The amended 2006 Credit Agreement will permit the issuance of the notes currently being offered by us in the Offerings and will result in certain other changes to the 2006 Credit Agreement, including without limitation, the following: (i) The maximum senior secured leverage ratio and the minimum interest expense coverage ratio levels will be changed; (ii) the variable component of applicable interest rates will be subject to a floor equal to, in the case of Eurodollar loans, 3.5% and, in the case of alternate base rate loans, 4.5%; (iii) interest rate margins will increase to 5.5% in the case of alternate base rate loans and 6.5% in the case of Eurodollar loans; (iv) the term loans will be subject to hard call protection for three years following the amendment and restatement of the 2006 Credit Agreement (excluding mandatory prepayments from excess cash flow); (v) subject to limited exceptions, we will not be permitted to repay, prepay, redeem or acquire any notes; (vi) 75% of any equity proceeds raised by Media, the Company or their subsidiaries (other than from certain holders of the notes) must be applied to the mandatory prepayment of term loans; (vii) substantial limitations on reinvestment rights from the proceeds of asset dispositions or casualty events will be added which may result in more extensive prepayment requirements in respect thereof; (viii) the portion of excess cash flow that must be applied to the mandatory prepayment of term loans will increase from 50% to 75%; and (ix) the baskets for permitted indebtedness, investments, restricted payments and capital expenditures will be reduced.

Cash Flows

Net cash provided by operating activities was $916.51 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, as compared to cash used in operating activities of $41.38 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2007. During the three ~~two~~ fiscal quarters ended ~~September~~December 3031, 2008, net cash provided by operating activities was primarily attributable to $15197.41 million of non-cash expenses (excluding amortization of deferred rack costs), a $520.18 million increase in ~~deferred~~accrued interest ~~revenues~~as ~~primarily~~a ~~due~~result of the Company deciding not to make the ~~timing~~semi-annual ofinterest ~~advances~~payment ~~related~~in respect to ~~single~~the ~~copy~~2009 ~~sales~~Notes that was due on November 1, an2008 ~~increase~~as inwell ~~management~~as ~~fee~~the ~~payable~~timing of interest payment on our 2006 Credit Agreement, a $27.09 million decrease in trade receivables, a $12.84 million decrease in inventories, an increase in management fee payable of $2.0 million, a $10.6 million increase in ~~accrued~~deferred ~~expenses~~revenues and ~~other~~a ~~liabilities and~~ $1.0.4 million ofdecrease ~~net~~in ~~income~~other long-term assets. These items were partially offset by ana net loss of $11189.67 million, a $16.1 million decrease in accounts payable primarily due to lower production-related expenditures and timing of vendor payments, aan $28.9 3 million ~~increase~~decrease in ~~trade~~accrued ~~receivables~~expenses and other liabilities primarily due to reduced personnel-related costs, a $10.14 million net decrease in deferred rack costs, and a $1.0.6 million increase in prepaid expenses and other current assets ~~and a $0~~.7 ~~million decrease in accrued interest.~~ During the ~~two~~three fiscal quarters ended ~~September~~ December 3031, 2007, net cash used in operating activities was primarily attributable to a net loss of $1731.98 million ~~net loss~~, a $713.26 million decrease in accrued interest, which occurred because ~~our~~of ~~2006 Credit Agreement requires us to pay interest at least every 90 days, or sooner, if our interest lock-in period is less than 90 days, which increased~~ the ~~amount~~timing of ~~cash~~ interest ~~paid~~payments ~~during~~on ~~the~~our ~~fiscal~~Existing ~~quarter~~Notes ~~ended~~and ~~September 30, 2007, a $6.7 million increase in trade receivables (primarily as a result of the increase in~~ our ~~advertising~~2006 ~~revenues)~~Credit Agreement, a $4.~~4 million decrease in accrued expenses and other liabilities, a $~~1.8 million ~~increase in prepaid expenses and other current assets, a $1.3 million~~ decrease in accounts payable and a $1.2 .6 million decrease in deferred revenues. These items were partially offset by $3243.84 million of non-cash expenses (excluding amortization and write-off of deferred rack costs), a $2.37 million net decrease in deferred rack costs, a $1.9 million net decrease in inventories, a $0.9 million net decrease in trade receivables and a $2.0 million increase in the management fee payable.

Net cash used in investing activities was $1.06 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 as compared to $01.73 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2007. Net cash used in investing activities for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 was primarily attributable to $1.28 million for purchases of property and equipment and $0.3 million related to the investment in Mr. Olympia, LLC, partially offset by $0.5 million related to proceeds from the sale of discontinued operations. The use of cash for investing activities for the ~~two~~three fiscal quarters ended ~~September~~ December 3031, 2007 was primarily attributable to $01.84 million for purchases of property and equipment and $0.3 million related to the investment in Mr. Olympia, LLC, partially offset by $0.4 million related to proceeds from the sale of fixed assets.

Net cash used in financing activities was $5022.87 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008, as compared to $0.9 million for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2007. Net cash used in financing activities for the ~~two~~three fiscal quarters ended ~~September~~December 3031, 2008 primarily consisted of ~~net~~$11.2 ~~repayments~~million onrelated to costs associated with the ~~Revolving~~Offering, ~~Facility~~the oftender ~~$40~~offers ~~million~~and consent solicitations, and the 2009 Credit Agreement, a fiscal year 2008 Excess Cash Flow payment of $8.1 million, and required quarterly principal payments on the ~~Term~~term ~~Facility~~facility totaling $2.3 ~~million and payments of $0~~.4 million ~~related to deferred debt costs~~. Net cash used in financing activities for the ~~two~~ three fiscal quarters ended ~~September~~December 3031, 2007 consisted of payments of $0.9 million related to deferred debt costs.

Credit Agreement and Senior Subordinated Indebtedness

~~Our~~On ~~Revolving~~January 30, ~~Facility~~2006, ~~matures~~we inentered ~~January~~into ~~2012~~the ~~and~~2006 ~~our~~Credit ~~Term~~Agreement, ~~Facility~~which ~~matures~~replaced inour ~~January~~then ~~2013,~~existing ~~but~~amended ~~both~~and ~~will~~restated ~~mature~~credit onagreement ~~February~~dated as of January 123, 2003. ~~2009~~On ifDecember 31, 2008, we ~~have~~entered ~~more~~into ~~than~~the ~~$25.0 million~~2009 ofCredit ~~our~~Agreement, ~~2009~~which ~~Notes~~became ~~outstanding~~effective on ~~February~~January 130, 2009. In(the ~~addition~~“Effective Date”), concurrently with the ~~Revolving~~consummation ~~Facility~~of ~~and~~its ~~the~~cash ~~Term~~tender ~~Facility~~offers. ~~both~~The ~~will~~2009 ~~mature~~Credit onAgreement includes ~~October 15,~~a ~~2010~~$60.0 ifmillion werevolving ~~have~~credit ~~more~~facility ~~than~~(the “Revolving Facility”) and a $10450.0 million ofterm ~~our~~loan ~~2011~~commitment ~~Notes~~(the ~~outstanding~~“Term ~~on October 15, 2010~~Facility”). WeThe ~~have~~Revolving ~~classified~~Facility ~~the~~matures ~~entire~~in ~~balance~~January of2012 and the ~~2006~~Term ~~Credit~~Facility ~~Agreement~~matures asin January a2013. ~~current~~Because ~~liability~~we oncompleted the refinancing of our ~~September 30~~2009 Notes on a long-term basis, ~~2008~~we ~~balance~~have ~~sheet~~classified asthe appropriate principal amount associated with the 2006 Credit Agreement ~~may~~as ~~mature~~non-current ~~within~~as ~~twelve months~~ of ~~September~~December 3031, 2008.

InDuring ~~order~~the tothree ~~refinance~~fiscal ~~the~~quarters ~~Notes,~~ended ~~on August~~December 2631, 2008, we ~~commenced~~made ~~tender~~required ~~offers~~quarterly toprincipal ~~purchase~~payments ~~and~~aggregating ~~consent~~$3.4 ~~solicitations~~million ~~with~~on ~~respect~~our to2006 ~~all~~Credit ofAgreement ~~the Notes. On~~term ~~January 9,~~loan ~~2009, we amended the tender offers and consent solicitations~~commitment. ToWe ~~finance~~also ~~the~~made ~~purchase~~a offiscal ~~the~~year ~~Notes~~2008 inExcess ~~the~~Cash ~~tender~~Flow ~~offers and the~~ payment ~~for~~(as ~~consents~~defined in the ~~consent~~2006 ~~solicitations,~~Credit ~~simultaneous with the tender offers and consent solicitations, we are offering (a~~Agreement) ~~$21,245,380~~ ~~aggregate principal amount~~ of ~~our~~$8.1 ~~Senior~~million ~~PIK~~on ~~Notes, and (b)~~June ~~$300~~30,~~000,000~~ ~~aggregate~~2008. ~~principal~~The ~~amount~~balance of ~~our~~the ~~Senior~~term ~~Subordinated~~loan ~~Notes.~~under Wethe ~~are~~2006 aCredit ~~wholly~~Agreement ~~owned~~was ~~subsidiary of Media~~$438.5 ~~Together~~million ~~with~~on ~~the New Notes~~December 31, ~~Media is offering 5,700,000 Shares, representing 95% of Media’s outstanding shares of common stock~~2008. InThe ~~order~~revolving tocredit ~~tender~~facility ~~Notes~~under in the ~~tender~~2006 ~~offers,~~Credit aAgreement ~~tendering~~was ~~holder~~fully ~~must~~drawn ~~agree~~on toDecember 31, ~~purchase~~2008. ~~Offered~~Commitment ~~Securities~~fee ~~for~~payments aduring ~~purchase price equal to~~ the ~~consideration~~three ~~such~~fiscal ~~holder~~quarters ~~receives~~ended ~~in the tender offers and consent solicitations. Among other matters~~December 31, ~~tendering~~2008 ~~holders~~were ~~must~~insignificant ~~also~~as ~~deliver their consents to specified amendments to~~ the ~~indentures, which consents remove substantially~~ ~~all~~revolving offacility ~~the~~on ~~restrictive covenants and related defaults in~~ the ~~indentures governing the Notes. In connection with the tender offers, certain provisions of the~~ 2006 Credit Agreement ~~will~~was befully ~~waived~~drawn ~~including~~during the ~~change~~entire ofthree ~~control~~fiscal ~~event~~quarters ofwith ~~default~~the ~~that would~~exception ~~result~~of ~~from successful tender offers. For~~ a ~~more~~few ~~complete description of the tender offers and consent solicitations, see Note 7, “Senior Subordinated Indebtedness~~days.” ~~We cannot make any assurances that such tender offers and consent solicitations will be successful.~~

IfThe weeffective interest ~~are~~rate ~~not~~under ~~able~~the to2006 ~~refinance~~Credit ~~the~~Agreement, ~~Notes~~including inamounts borrowed under the ~~tender~~term ~~offers,~~loan and revolving facility on the 2006 Credit Agreement, ~~will~~as ~~likely~~of ~~mature~~December 31, ~~early~~2008, ~~and~~was 7.6%. The effective weighted-average interest rates under the 2006 weCredit ~~will~~Agreement ~~not~~for ~~have~~the ~~sufficient~~fiscal ~~funds~~quarters toended ~~repay~~December 31, ~~such~~2007 ~~indebtedness~~and 2008 were 8.6% Inand ~~such~~7.6%, ~~event~~respectively. The effective weighted-average interest rates under the 2006 Credit Agreement for the three fiscal quarters ended December 31, we2007 and ~~may~~2008 ~~have~~were to8.6% ~~liquidate~~and ~~assets~~6.8%, onrespectively. ~~unfavorable~~The ~~terms~~decrease in the effective weighted-average interest rate between fiscal quarters ended December 31, or2007 beand ~~unable~~2008 toand ~~continue~~three asfiscal aquarters ~~going~~ended ~~concern~~December 31, 2007 and ~~incur~~2008 ~~additional~~is ~~costs~~tied ~~associated~~to ~~with~~the decrease ~~bankruptcy~~in LIBOR.

We36 ~~expect to incur approximately $35.0 million of fees relating to the refinancing of the Notes and the amendment of the 2006 Credit Agreement.~~

During the two fiscal quarters ended September 30, 2008, we made the required quarterly principal payments on our Term Facility borrowing totaling $2.3 million. We also made a fiscal year 2008 Excess Cash Flow payment of $8.1 million on June 30, 2008. We paid down $34.0 million of our Revolving Facility on June 30, 2008, and subsequently borrowed $34.0 million on July 1, 2008. We then paid down $40.0 million of our Revolving Facility on September 30, 2008, and subsequently borrowed $40.0 million on October 1, 2008. Commitment fee payments during the two fiscal quarters ended September 30, 2008 were insignificant as the Revolving Facility was fully drawn during the entire two fiscal quarters with the exception of a few days near each quarter end.

The effective interest rate under the 2006 Credit Agreement, including amounts borrowed under the Term Facility and Revolving Facility, as of September 30, 2008, was 6.0%. The effective weighted-average interest rates under the 2006 Credit Agreement for the fiscal quarters ended September 30, 2007 and 2008 were 8.7% and 6.0%, respectively. The effective weighted-average interest rates under the 2006 Credit Agreement for the two fiscal quarters ended September 30, 2007 and 2008 were 8.6% and 6.4%, respectively. The decrease in the effective weighted-average interest rate between fiscal quarters ended September 30, 2007 and 2008 and two fiscal quarters ended September 30, 2007 and 2008 is tied to the decrease in LIBOR.

The 2006 Credit Agreement 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 leverage ratio, a senior secured leverage ratio, a consolidated interest expense coverage ratio, and capital expenditure limits. The 2006 Credit Agreement also contains 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. Concurrently with the successful completion of the offering of the New Notes, we expect to amend and restate the 2006 Credit Agreement. The proposed amendments include revised financial covenant levels, an increase in interest rate margins, the introduction of an interest rate floor, a broadening of the circumstances that would give rise to prepayment of the loans and the introduction of more restrictive covenants, particularly relating to indebtedness, investments, restricted payments and capital expenditures. Although there can be no assurances, we anticipate that, based on current projections (including projected borrowings and repayments under the Revolving Facility), our operating results for fiscal year 2009 will be sufficient to satisfy the financial covenants under the 2006 Credit Agreement after giving effect to the proposed amendments. If the proposed amendments do not become effective, based on our calculations, we do not expect to be in compliance with the senior secured leverage ratio financial covenant as of December 31, 2008 and in certain future periods. Our ability to satisfy such financial covenants is dependent on our business performing in accordance with our projections. If the performance of our business deviates from our projections, we may not be able to satisfy such financial covenants, including the senior secured leverage ratio. Our projections are subject to a number of factors, many of which are events beyond our control, which could cause our actual results to differ materially from our projections. If we do

~~not~~On ~~comply~~January 7, 2009, the Company and Media entered into a forbearance agreement with ~~these~~lenders orrepresenting ~~other~~a ~~covenants~~majority of ~~and~~outstanding ~~restrictions~~amounts ~~contained~~and incommitments under the 2006 Credit Agreement, weand ~~could~~the ~~default~~administrative agent under the 2006 Credit Agreement., ~~The~~pursuant to which such lenders and the administrative agent agreed, subject to certain termination events, to ~~outstanding~~forbear ~~debt~~until ~~under~~the earliest of (i) February 4, 2009, (ii) the ~~2006~~date ~~Credit~~on ~~Agreement~~which ~~could~~any ~~then~~of bethe Existing Notes become or are declared ~~immediately~~to be due and payable. ~~Moreover,~~and (iii) the ~~instruments~~commencement ~~governing~~of ~~almost~~an ~~all~~insolvency ofproceeding ~~our~~with ~~other~~respect ~~debt~~to ~~contain~~the ~~cross-acceleration~~Company, Media ~~provisions~~or soany ~~that~~of antheir ~~acceleration~~subsidiaries, ~~under~~from exercising any ofrights ~~our~~and ~~debt may~~remedies under the 2006 Credit Agreement as a result inof the Company’s failure (a) to ~~default~~pay ~~under~~the ~~our~~interest ~~other~~payment ~~debt.~~due Ifon athe ~~cross-acceleration~~2009 ~~occurs~~Notes on November 1, 2008, (b) to comply with the ~~maturity~~reporting ofrequirements ~~our~~in ~~other~~the ~~debt~~2006 ~~could~~Credit beAgreement, ~~accelerated~~(c) to ~~and~~comply ~~become~~with ~~immediately~~the ~~due~~corresponding ~~and~~reporting ~~payable.~~requirements Ifin ~~that~~the ~~happens,~~indentures wegoverning ~~may~~the ~~not~~Existing beNotes ~~able~~and (d) to ~~satisfy~~comply ~~our~~with ~~debt~~the ~~obligations,~~requirements ~~which~~of the indentures ~~would~~governing ~~have~~the Existing Notes in connection with its failure to meet a ~~substantial~~specified ~~adverse~~leverage ~~effect~~ratio. The forbearance agreement ended on January 30, 2009 when we successfully completed our ~~ability~~cash totender ~~continue~~offers asand aconsent ~~going~~solicitations ~~concern~~with respect to the Existing Notes.

OnUnder ~~January 7,~~the 2009 Credit Agreement, we ~~and~~have ~~Media~~the ~~entered~~option ~~into~~to apay ~~forbearance agreement~~interest ~~with~~based ~~lenders~~on ~~representing~~ a ~~majority~~floating ofbase ~~outstanding~~rate ~~amounts~~option ~~and~~equal ~~commitments~~to ~~under~~ (i) the ~~2006~~greater of ~~Credit Agreement and~~ the ~~administrative~~JPMorgan ~~agent~~Chase ~~under~~Bank, ~~the~~N.A. ~~2006~~(“JPMorgan”) ~~Credit~~prime ~~Agreement,~~rate ~~pursuant~~or tothe ~~which~~federal ~~such~~funds ~~lenders~~effective ~~and~~rate ~~the~~plus ~~administrative~~0.5% ~~agent agreed,~~ (subject to ~~certain~~a ~~termination~~floor ~~events,~~equal to ~~forbear~~4.50%) ~~until the earliest of~~ (~~i) February 4,~~“base ~~2009,~~rate ~~(ii~~loans”) ~~the~~ ~~date~~or based on ~~which~~LIBOR ~~any~~(subject ofto ~~the~~a ~~Existing~~floor ~~Notes~~equal ~~become or are declared~~ to be3.50%) ~~due and payable and~~ (~~iii~~“LIBOR loans”) ~~the~~, ~~commencement~~in ofeach ~~an insolvency~~case ~~proceeding~~plus ~~with~~a ~~respect~~margin. toThe ~~the~~margin ~~Company,~~on ~~Media~~all orbase ~~any~~rate ofloans ~~their~~is ~~subsidiaries~~5.5% ~~from exercising any rights~~ and ~~remedies under~~ the ~~2006~~margin ~~Credit~~on ~~Agreement~~all asLIBOR aloans ~~result~~is of6.5%. ~~our~~We ~~failure~~are ~~(a)~~ required to ~~pay~~repay ~~the~~$1.1 ~~interest~~million ~~payment~~of ~~due~~principal on ~~the~~our ~~2009~~term ~~Notes~~loans on ~~November 1,~~ ~~2008,~~a ~~(b) to~~quarterly ~~comply~~basis. ~~with~~In ~~the~~addition, ~~reporting~~we ~~requirements~~are inrequired ~~the~~to make ~~senior~~Excess ~~secured~~Cash ~~credit~~Flow ~~agreement,~~payments (~~c) to~~as ~~comply~~defined ~~with~~in the ~~corresponding~~2009 ~~requirements~~Credit inAgreement), ~~the~~which ~~indentures~~will ~~governing~~be ~~the~~applied ~~Notes~~ratably ~~and (d)~~ to ~~comply~~the ~~with~~then ~~the requirements~~outstanding ofterm ~~the~~loans. ~~indentures~~Excess ~~governing~~Cash ~~the~~Flow ~~Notes~~payments inare ~~connection~~due ~~with~~no ~~its~~later ~~failure~~than to90 ~~meet~~days aafter ~~specified~~the ~~leverage~~end ~~ratio~~of the fiscal year.

The 2009 ~~Notes~~Credit ~~mature~~Agreement onincludes ~~May 1, 2009.~~certain Werepresentations ~~have~~and ~~classified~~warranties, ~~the~~conditions ~~entire~~precedent, ~~balance~~affirmative ofcovenants, ~~the~~negative ~~2009~~covenants ~~Notes~~and events of ~~$413.7~~default customary ~~million~~for asagreements aof ~~current~~this ~~liability~~type. onThe ~~our~~negative ~~September 30,~~covenants ~~2008~~include ~~balance~~financial ~~sheet~~maintenance ascovenants ~~the~~comprised ~~2009~~of ~~Notes~~a ~~mature~~leverage ~~within twelve months of September 30~~ratio, ~~2008.~~a Wesenior ~~have~~secured ~~not~~leverage ~~currently entered~~ratio, ~~into~~ a ~~financing~~consolidated ~~agreement~~interest ~~that~~expense ~~permits~~coverage usratio, toand ~~refinance~~capital ~~the~~expenditure limits. The 2009 ~~Notes~~Credit onAgreement aalso ~~long-term~~contains ~~basis.~~certain ~~However,~~covenants ~~we are conducting~~that, ~~with~~subject ~~respect~~ to ~~holders~~certain ~~that~~exceptions, ~~are~~restrict ~~either~~paying ~~“qualified~~dividends, ~~institutional~~incurring ~~buyers”~~additional ~~(as~~indebtedness, ~~defined~~creating inliens, ~~Rule~~making ~~144A~~acquisitions ofor ~~the Securities~~other ~~Act~~investments, ofentering ~~1933,~~into ascertain ~~amended~~mergers ~~(the~~or consolidations ~~“Securities~~and ~~Act”))~~selling or ~~persons~~otherwise ~~outside~~disposing ~~the~~of ~~United~~assets. ~~States~~The ~~(in~~2009 ~~accordance~~Credit ~~with~~Agreement ~~Regulation~~includes Sa broadening of the ~~Securities~~circumstances ~~Act),~~that ~~(1) tender~~would ~~offers~~give rise to ~~purchase~~prepayment ~~for~~of ~~cash~~the ~~any~~loans and ~~all~~the introduction of ~~our~~more ~~outstanding~~restrictive ~~Notes~~covenants, ~~and~~particularly ~~(2) related~~relating ~~solicitations~~to ofindebtedness, ~~consents~~investments, ~~from~~restricted ~~such~~payments ~~holders~~and ofcapital ~~Notes~~expenditures. toAlthough ~~certain~~there ~~proposed~~can ~~amendments~~be tono ~~the~~assurances, ~~indentures~~we ~~governing~~anticipate ~~the~~that, ~~Notes~~based ~~(the~~on ~~“Proposed~~current ~~Amendments”).~~projections In(including ~~addition,~~projected weborrowings ~~are~~and ~~conducting~~repayments aunder ~~related~~the ~~solicitation~~Revolving ~~of consents to~~Facility), ~~the~~our ~~Proposed~~operating ~~Amendments~~results ~~from~~for ~~all~~fiscal ~~holders~~year of2009 ~~Notes~~will ~~who~~be dosufficient ~~not,~~to orsatisfy ~~are~~the ~~not~~financial ~~eligible,~~covenants tounder ~~participate in~~ the ~~applicable~~2009 ~~tender~~Credit ~~offer~~Agreement.

InThe ~~connection~~indebtedness ~~with the~~under ~~consent~~the ~~agreements~~2009 weCredit ~~entered~~Agreement ~~into~~is inguaranteed ~~March~~by ~~2006~~Media ~~with~~and ~~holders~~the ofdomestic asubsidiaries ~~majority~~ of the ~~outstanding~~Company ~~principal~~and ~~amount~~is ofsecured ~~each~~by ~~series~~liens ofon ~~the~~substantially ~~Notes,~~all weof ~~entered into supplemental indentures,~~ the ~~purpose~~assets of ~~which~~Media, ~~was to amend~~ the ~~indentures~~Company ~~relating~~and toits ~~the Notes~~domestic ~~to,~~subsidiaries. ~~among~~In ~~other things~~addition, ~~require~~our usobligations toare ~~meet~~secured by a ~~specified~~pledge ~~leverage~~of ~~ratio~~all as of ~~September 30, 2008. We failed to meet~~ the ~~specified~~issued ~~leverage~~and ~~ratio~~outstanding ofshares ~~7.25:1 required under the indentures as~~ of ~~September 30~~, ~~2008. As a result, on~~ or ~~prior to~~other ~~December 15, 2009, we were required to issue either $50.0 million of new~~ equity orinterests ~~a sufficient amount of equity such that after giving pro forma effect to the reduction of indebtedness~~in, ~~we would have met~~ the ~~required~~Company ~~specified~~and ~~leverage ratio.~~all ~~Alternatively,~~of weour ~~could~~existing ~~have~~or ~~issued~~subsequently anacquired ~~additional~~or ~~$36.3~~organized ~~million~~domestic ofsubsidiaries ~~Notes~~and ~~or made~~ a ~~cash~~percentage ~~payment~~ of ~~$20.7 million to existing holders of Notes. We intend to satisfy our obligations to meet~~ the ~~specified~~capital ~~leverage~~stock ~~ratio as~~ of ~~September 30~~, ~~2008~~ byor ~~issuing~~other equity interests in, ~~connection~~certain ~~with the offering~~ of ~~Offered Securities, which will result in~~ our ~~satisfying~~existing ~~such~~or ~~ratio~~subsequently onacquired aor ~~pro~~organized ~~forma~~foreign ~~basis~~subsidiaries.

~~We failed~~The ~~to make the required semi-annual interest payment with respect to the~~ 2009 ~~Notes~~Credit ~~when~~Agreement ~~due~~requires onus ~~November 1, 2008, and on December 1, 2008, such failure resulted in an event of default pursuant~~ to ~~the terms of the indenture governing the 2009 Notes. We also expect to fail to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15~~pay, ~~2009.~~from ~~In addition, we failed to file this quarterly report on Form 10-Q for~~ the ~~period ended~~ ~~September 30,~~Effective ~~2008~~Date when due on November 14, 2008. We have also failed to comply with the requirements of the indentures governing the Notes relating to our failure to meet a specified leverage ratio as of September 30, 2008. As a result, we entered into forbearance agreements with existing holders of approximately 81% of the outstanding aggregate principal amount of 2009 Notes and approximately 69% of the outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders have agreed to forbear until the ~~earliest~~termination of ~~(i)~~commitments 5:00 p.m., New York City time, on February 4, 2009, (ii) the date upon which any of the Notes become or are declared to be due and payable, (iii) the commencement (voluntary or involuntary) of an insolvency proceeding with respect to the Company or any of its subsidiaries, (iv) the date upon which the forbearance agreement by the lenders holding more than a majority of the borrowings under the ~~Company’s~~Revolving ~~credit facility expires~~Facility, terminates or is breached and (v) if the Company has not launched the tender offers and related offering of the Offered Securities on the terms that may be agreed to by the parties hereto, in the sole discretion of such parties, prior to such date, January 10, 2009, from exercising any remedies under the indentures governing the Notes as a ~~result~~commitment offee ~~the~~equal ~~Company’s (a) failure~~ to ~~comply~~1.0% ~~with the reporting requirements~~ of the ~~indentures~~unused ~~governing~~portion ~~the Notes, (b) deferred interest payments with respect to the Notes or (c) failure to comply with the requirements~~ of the ~~indentures~~revolving ~~governing the Notes relating to the Company’s failure to meet a specified leverage ratio as of September 30, 2008~~commitments. We intend to satisfy its obligations to meet the specified leverage ratio as of September 30, 2008 by issuing equity in connection with the offering of Offered Securities, which will result in our satisfying such ratio on a pro forma basis.

35On May 7, 1999, we issued $250.0 million in aggregate principal amount of the 2009 Notes. On February 14, 2002, we issued $150.0 million in aggregate principal amount of the 2009 Notes. Pursuant to the terms of the indenture governing the 2009 Notes, we issued an additional $14.5 million aggregate principal amount of 2009 Notes on December 13, 2007. On January 23, 2003, we issued $150.0 million aggregate principal amount of the 2011 Notes and pursuant to the terms of the indenture governing the 2011 Notes, we issued an additional $5.5 million aggregate principal amount of 2011 Notes on December 13, 2007.

We failed to make the required semi-annual interest payment with respect to the 2009 Notes when due on November 1, 2008. Such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. We also failed to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15, 2009. In addition, we failed to file our quarterly report on Form 10-Q for the period ended September 30, 2008 when due on November 14, 2008. We also failed to comply with the requirements of indentures governing the Existing Notes relating to our failure to meet a specified leverage ratio as of September 30, 2008. As a result, we entered into forbearance agreements with existing holders of approximately 81% of the then outstanding aggregate principal amount of 2009 Notes and approximately 69% of the then outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders agreed to forbear from exercising any remedies under the indentures governing the Existing Notes as a result of our aforementioned failures until we successfully completed our cash tender offers and consent solicitations with respect to the Existing Notes.

Upon the consummation of the tender offers and consent solicitations with respect to the Existing Notes on January 30, 2009, we paid all accrued and unpaid interest through January 30, 2009, with respect to the Existing Notes accepted for purchase on such date as part of the total consideration to Tendering Bondholders. Immediately after the consummation of such tender offers and consent solicitations, we used cash on hand to pay to any non-Tendering Bondholders of the Existing Notes the semi-annual interest payment with respect to their 2009 Notes that was due on November 1, 2008 and with respect to the 2011 Notes that was due on January 15, 2009.

On January 29, 2009, we executed the following supplemental indentures which eliminated substantially all of the restrictive covenants, certain events of default and other related provisions in the indentures governing the Existing Notes: (i) the Ninth Supplemental Indenture among the Company, the Guarantors named therein and HSBC Bank USA, National Association, as trustee, with respect to the 2009 Notes, and (ii) the Seventh Supplemental Indenture among the Company, the Guarantors named therein and HSBC Bank USA, National Association, as trustee, with respect to the 2011 Notes.

On January 30, 2009, we issued (i) $21.2 million aggregate principal amount of Senior PIK Notes and (ii) $300.0 million aggregate principal amount of Senior Subordinated Notes. Also on January 30, 2009, Media sold 5,694,480 shares of Common Stock for an aggregate purchase price of $126.2 million, pursuant to a purchase agreement dated January 29, 2009, among Media, the Company, the other parties named therein and J.P. Morgan Securities Inc.

On January 30, 2009, $400.5 million of the 2009 Notes and $148.0 million of the 2011 Notes were validly tendered and accepted for payment and consents were delivered with respect to the Existing Notes. Because we completed the refinancing of our 2009 Notes on a long-term basis, we have classified the principal amount associated with the tendered portion of the 2009 Notes as non-current as of December 31, 2008. The cash proceeds received from the Offering, together with our cash on hand, were used to purchase the Existing Notes in the tender offers and to pay approximately $35.0 million of fees and expenses related to the Offering and the tender offers and consent solicitations.

The Senior PIK Notes are unsecured senior obligations of the Company and are effectively subordinated to all of our existing and future secured debt, including obligations under our 2009 Credit Agreement. The Senior PIK Notes will mature on May 1, 2013. Interest on the Senior PIK Notes will accrue at the rate of 9% per annum based upon the outstanding principal amount. The 2009 Credit Agreement prohibits the payment of cash interest on the Senior PIK Notes.

The Senior Subordinated Notes are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to our existing and future senior debt, including obligations under our 2009 Credit Agreement and the Senior PIK Notes. The Senior Subordinated Notes will mature on November 1, 2013. Interest on the Senior Subordinated Notes will accrue at the rate of 14% per annum based upon the outstanding principal amount of the Senior Subordinated Notes (with (i) 10% per annum payable in cash, (ii) 2% per annum payable, at our option, either in cash or by the issuance of additional Senior Subordinated Notes, and (iii) 2% per annum payable (x) in cash when our Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is greater than $27.5 million and (y) at our option, either in cash or by the issuance of additional Senior Subordinated Notes when our Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is less than or equal to $27.5 million).

As of the date hereof, the 2009 Credit Agreement does not permit the payment of cash interest on the Senior Subordinated Notes (i) at a rate in excess of 10% per annum when our Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is less than or equal to $27.5 million and (ii) at a rate in excess of 12% per annum when our Excess Cash Flow for the most recently completed fiscal year ended prior to an interest payment date is greater than $27.5 million.

We will pay interest on the New Notes semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2009. Interest for the first interest period with respect to (a) the Senior PIK Notes will be paid entirely by the issuance of additional Senior PIK Notes and (b) the Senior Subordinated Notes will be paid at the rate of 10% per annum in cash and 4% per annum in the form of additional Senior Subordinated Notes.

Under the indenture governing the Senior PIK Notes (the “Senior PIK Notes Indenture”) and the indenture governing the Senior Subordinated Notes (the “Senior Subordinated Indenture” and, together with the Senior PIK Notes Indenture, the “Indentures”), we are permitted to redeem some or all of the New Notes, at our option, at redemption prices set forth below.


Year	Percentage
January 30, 2009 to October 31, 2009	103.00	%
November 1, 2009 to October 31, 2010	102.00	%
November 1, 2010 to October 31, 2011	101.00	%
November 1, 2011 and thereafter	100.00	%

The Indentures contain a number of covenants that, among other things, limit our ability and that of our restricted subsidiaries, subject to important exceptions and qualifications, to: borrow money; guarantee other indebtedness; use assets as security in other transactions; pay dividends on stock, redeem stock or redeem subordinated debt; make investments; enter into agreements that restrict the payment of dividends by subsidiaries; sell assets; enter into affiliate transactions; sell capital stock of subsidiaries; enter into new lines of business; and merge or consolidate. In addition, the Indentures impose certain requirements as to future subsidiary guarantors and contain certain customary events of default.

Contractual Obligations

In April 2003, Media, THL Managers V, LLC, an affiliate of Thomas H. Lee Partners L.P. (“T.H. Lee”), and Evercore Advisors L.P., an affiliate of Evercore Partners LLP (“Evercore”), entered into a management agreement (the “Management Agreement”) pursuant to which THL Managers V, LLC and Evercore Advisors L.P. provided certain management and advisory services to Media and its subsidiaries for an annual fee of $1.0 million each. Management fees of $1.0 million were paid to each of Evercore and T.H. Lee in fiscal year 2006. Pursuant to certain of the supplemental indentures we entered into in fiscal year 2007, such fees for fiscal years 2007, 2008 and 2009 have been accrued and payments for such fees were not made beginning in fiscal year 2007 or thereafter. As required by the 2009 Credit Agreement, the Management Agreement was terminated as of January 30, 2009 and unpaid management fees totaling $6.0 million were waived.

As a result of the effectiveness our 2009 Credit Agreement and the completion of our cash tender offers and receipt of requisite consents in the related consent solicitations in respect of our Existing Notes on January 30, 2009, we incurred the following

contractual and other obligations in connection with the restructuring of our capital structure. See Note 6, “Credit Agreement,” and Note 7, “Senior Subordinated Indebtedness,” in the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I herein. For a complete listing of our contractual obligations, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2008.

The impact that these contractual obligations are expected to have on our liquidity and cash flow in future periods is as follows (in thousands):


	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		4-5 Years		More Than 5 Years
Long-term debt obligations, principal (1)	$	841,270	$	18,527	$	16,502	$	806,241	$	—
Long-term debt obligations, interest (2)		409,928		70,869		162,702		176,357		—

Total contractual obligations	$	1,251,198	$	89,396	$	179,204	$	982,598	$	—

(1)	Includes principal payments on both our fixed-rate and variable-rate obligations.

(2)

Includes interest payments on both our fixed-rate and variable-rate obligations as well as additional notes issued in place of interest payments in accordance with the Indentures. The interest payments associated with our variable-rate obligations (for amounts borrowed under the both the 2006 Credit Agreement and 2009 Credit Agreement) are based upon interest rates forecasted for the remainder of fiscal year 2009. The interest to be paid on variable-rate obligations is affected by changes in our capital applicable borrowing rate subject to a 10% floor, which materially affect the contractual obligation amounts to be paid. See Note 7, “Senior Subordinated Indebtedness,” in the Notes to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I herein.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which enhances existing guidance for measuring assets and liabilities at fair value. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. The provisions of SFAS No. 157 were effective for us on April 1, 2008. The adoption of this statement did not have a material impact on our results of operations, financial position, cash flows or disclosures. In February 2008, the FASB issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years beginning after November 15, 2008. With this deferral, we have not applied the provisions of SFAS No. 157 to non-financial assets and liabilities. We are still assessing the impact the adoption of SFAS No. 157 for non-financial assets and liabilities will have on our results of operations, financial position or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 amends Accounting Research Bulletin No. 51 (“ARB 51”) to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB Statement No. 141(R). We are currently evaluating the impact of the adoption of SFAS No. 160 on our financial statements, which is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement must be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of Intangible Assets,” (“FSP No. 142-3”). FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, in order to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R, “Business Combinations” (revised 2007), and other U.S. generally accepted accounting principles. FSP No. 142-3 is effective for us as of April 1, 2009, and will be applied prospectively to intangible assets acquired after the effective date.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to United States Auditing Standards Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” We are currently evaluating the impact, if any, that the adoption of SFAS No. 162 will have on our results of operations, financial position or cash flows.

3639

In October 2008, the FASB issued Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active” (“FSP No. FAS 157-3”). FSP No. FAS 157-3 provides clarification on determining fair value under SFAS No. 157 when markets are inactive. FSP No. FAS 157-3 was effective immediately upon issuance by the FASB on October 10, 2008. The adoption of FSP No. FAS 157-3 did not have an impact on our results of operations, financial position or cash flows.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the fiscal quarter ended ~~September~~December 3031, 2008, there were no significant changes related to the Company’s market risk exposure since March 31, 2008.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~September~~December 3031, 2008, the end of the period covered by this Form 10-Q, our management performed, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of ~~September~~December 3031, 2008, our disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

No changes were made in our internal control over financial reporting during the quarter ended ~~September~~December 3031, 2008, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Because~~On February 9, 2009, Media and our subsidiary, DSI, were sued in the ~~focus~~Federal ofDistrict ~~some~~Court for the Southern District of ~~our~~New ~~publications~~York along with several other major publishers, magazine wholesalers, and distributors, for allegedly ~~often~~“boycotting” ~~involves~~Source ~~celebrities~~Interlink orDistribution ~~controversial~~L.L.C. ~~subjects~~(“Source”) as a wholesaler, ~~the~~and ~~risk~~other related claims. In August 2008, Source had notified Media of ~~defamation~~its ornon-renewal ~~invasion~~of its contract with Media as of ~~privacy~~December 31, 2008. Thereafter, ~~litigation~~Media ~~exists~~operated without a contract with Source, which Source has characterized as an “at will” arrangement. In January 2009, Source sought to impose a 7 cent per-copy increase for each magazine distributed by Source. This would have represented ~~Our~~approximately ~~experience~~a ~~indicates~~21 ~~that~~cent ~~the~~per-copy ~~claims~~increased charge for ~~damages~~each ~~made~~Media inmagazine ~~such~~actually ~~lawsuits~~sold. When ~~are~~Media ~~usually~~refused ~~defensible~~to pay the increase, Source terminated its so-called “at-will” relationship with Media. Like Media, three other publishers, Bauer Publishing Co., Time Inc. and ~~heavily~~Hachette ~~inflated~~Filipacchi Media, U.S., declined the 7 cent per-copy increase. In its lawsuit, Source claimed that the four publishers, including Media, were colluding with other wholesalers and distributors to boycott Source as a wholesaler. Source sought an injunction requiring Media and the other publishers to continue to do business with it, treble damages in ~~any~~an ~~event~~unspecified amount and other relief. On February 11, ~~any~~2009, ~~reasonably~~the ~~foreseeable~~court ~~material~~granted ~~liability~~a ortemporary ~~settlement~~restraining ~~would~~order ~~likely~~which bemandates ~~covered~~that byMedia ~~insurance~~must continue doing business with Source under terms and conditions as of January 2009, i.e., not including the 7 cent per-copy increase. On February ~~There~~18, ~~are~~2009, ~~currently~~Source noannounced ~~claims~~that ~~pending~~it had reached a settlement with Time Inc. and its distribution company. Consequently, Source has announced that weit is abandoning its request for a court order requiring the publishers to do business with Source. Media and DSI believe ~~would~~that ~~have~~their insurance will cover at least a ~~material~~portion ~~adverse~~of ~~effect~~their costs for the defense of the action brought by Source and that they have good defenses to the asserted claims. Discovery is just beginning in this matter and the outcome of the litigation, therefore, is not possible to predict nor is it possible for the Company to estimate the impact, if any, of these events on ~~our~~its operations.

In addition, because the focus of some of our publications often involves celebrities or controversial subjects, the risk of defamation or invasion of privacy litigation exists. Our experience indicates that the claims for damages made in such lawsuits are usually defensible and heavily inflated and, in any event, any reasonably foreseeable material liability or settlement would likely be covered by insurance. There are currently no such claims pending that we believe would have a material adverse effect on our operations.

Item 1A. Risk Factors

~~There~~Our business faces many risks. We have ~~been~~described nobelow the material ~~changes~~risks that we face. There may be additional risks that we do not yet know of or that we do not currently perceive to ~~the Company’s~~be ~~risk~~material ~~factors,~~that asmay ~~previously~~also impact ~~disclosed~~our inbusiness. Each of the ~~Company’s~~risks ~~March 31,~~and ~~2008~~uncertainties ~~10-K~~described inbelow ~~response~~could lead to ~~Item 1A~~events ~~thereof,~~or ~~during~~circumstances ~~the~~that ~~fiscal~~have ~~quarter~~a ~~ended~~material ~~September 30~~adverse effect on our business, ~~2008~~results of operations, cash flows, financial condition and business prospects.

OUR SUBSTANTIAL DEBT COULD IMPAIR OUR ABILITY TO OPERATE AND EXPOSE US TO CERTAIN RISKS.

Our future performance could be affected by our substantial amount of debt. As of December 31, 2008, our total principal amount of outstanding debt was approximately $1.1 billion, consisting of $498.5 million principal amount of debt under our 2006 Credit Agreement and $568.9 million principal amount of Existing Notes. As of January 31, 2009, our total principal amount of outstanding debt was approximately $841.3 million, consisting of $498.5 million principal amount of debt under our 2009 Credit Agreement, $21.5 million principal amount of Existing Notes, $21.2 million principal amount of Senior PIK Notes and $300.0 million principal amount of Senior Subordinated Notes. Our total consolidated interest expense for the three fiscal quarters ended December 31, 2008 was $69.9 million. In addition, subject to certain exceptions, the covenants in the 2009 Credit Agreement restrict us from paying dividends in cash, securities or other property, incurring additional debt, entering into certain mergers or consolidations, making acquisitions, investments or capital expenditures and selling or otherwise disposing of assets. See Note 6, “Credit Agreement,” and Note 7, “Senior Subordinated Indebtedness,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of Part I herein for details.

Our high level of debt could have important consequences for our business and operations, including the following:

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our debt level requires that a substantial portion of our cash flow from operations be used for the payment of interest on debt, reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements;

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we may have difficulty refinancing our debt in the future and the terms of any such refinancing, if available at all, may be less favorable to us than the terms of our existing debt;

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some of our debt under the 2009 Credit Agreement has a variable rate of interest, which exposes us to the risk of increased interest rates;

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we may have a much higher level of debt than certain of our competitors, which may put us at a competitive disadvantage;

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our debt level makes it more difficult for us to comply with the financial covenants in our 2009 Credit Agreement, which could result in a default and an acceleration of all amounts outstanding thereunder;

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our debt level makes us more vulnerable to economic downturns and adverse developments in our business;

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our debt level reduces our flexibility in responding to changing business and economic conditions, including increased competition in the publishing industry; and

•

our debt level limits our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategy.

Under the 2009 Credit Agreement, we also must comply with certain specified financial ratios and tests. Our ability to satisfy such ratios and tests are dependent on our business performing in accordance with our projections. If the performance of our business deviates from our projections, we may not be able to satisfy such ratios and tests, including the senior secured leverage ratio under the 2009 Credit Agreement. If we do not comply with these or other covenants and restrictions, we could default under the 2009 Credit Agreement. Our outstanding debt under the 2009 Credit Agreement, together with accrued interest, could then be declared immediately due and payable. Our ability to comply with such provisions may be affected by events beyond our control. Moreover, the instruments governing almost all of our other debt contain cross-acceleration provisions so that an acceleration under any of our debt may result in a default under our other debt instruments. If a cross-acceleration occurs, the maturity of almost all of our debt could be accelerated and become immediately due and payable. If that happens, we would not be able to satisfy our debt obligations, which would have a substantial adverse effect on our ability to continue as a going concern.

Obligations under the 2009 Credit Agreement are secured by substantially all of our assets and the assets of all of our domestic subsidiaries. In addition, our obligations under the 2009 Credit Agreement are secured by a pledge of all of the issued and outstanding shares of, or other equity interests in, substantially all of our existing or subsequently acquired or organized domestic subsidiaries and a percentage of the capital stock of, or other equity interests in, certain of our subsequently acquired or organized foreign subsidiaries. If we or one of our restricted subsidiaries are declared bankrupt or insolvent or if we default under the 2009 Credit Agreement, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such debt, the lenders could foreclose on the pledged stock of our subsidiaries and on the assets in which they have been granted a security interest, even if an event of default exists under either series of our New Notes at such time. We may not have sufficient funds to repay our New Notes after the foreclosure on such assets.

OUR BUSINESS AND RESULTS OF OPERATIONS ARE AFFECTED BY AND DEPENDENT UPON DISCRETIONARY CONSUMER SPENDING PATTERNS.

Our business is sensitive to a number of factors that influence the level of discretionary consumer spending, including political and economic conditions, such as recessionary and inflationary environments. Notably, recent increases in the retail price of gasoline and the potential for further increases in gasoline and other energy costs, increases in credit card, home mortgage, and other borrowing costs, and declines in housing values could lead to declines in overall consumer confidence and discretionary spending. A decline in discretionary consumer spending on publications, particularly those sold at retailers’ checkout counters and those targeting certain demographics particularly affected by challenging economic conditions, could have a material adverse effect on our business, operating results and profitability.

GENERAL ECONOMIC TRENDS, AS WELL AS TRENDS IN ADVERTISING SPENDING AND COMPETITION, ALONG WITH DECLINES IN SINGLE COPY CIRCULATION, MAY REDUCE OUR ADVERTISING AND CIRCULATION REVENUES WHICH REPRESENT THE VAST MAJORITY OF OUR REVENUES.

Our advertising and circulation revenues, which accounted for 92% of our total operating revenues during the three fiscal quarters ended December 31, 2008, are subject to the risks arising from adverse changes in domestic and global market conditions (i.e., recessionary environments or increases in gas prices and interest rates) and possible shifting of advertising spending from print to Internet or other media or decreases in advertising budgets. Extraordinary weather conditions, such as hurricanes (i.e., Hurricane Katrina in fiscal year 2006), can impact newsstand sales, advertising revenues and other revenues like distribution. Any adverse impact of economic conditions on our business may result in reductions in advertising and circulation revenue.

Our circulation revenues are subject to the risks arising from our ability to institute price increases for our print products and are affected by competition from other publications and other forms of media available in our various markets, changing consumer lifestyles resulting in decreasing amounts of free time, declining frequency of regular magazine buying among young people, and increasing costs of circulation acquisition.

We believe that the principal factors contributing to the declines in our single copy circulation include: (1) the current economic slowdown; (2) increased competition from other publications and forms of media, such as certain newspapers, television and radio programs and Internet sites concentrating on celebrity news; (3) a general industry-wide decline in single copy circulation of individual publications due to an increasing number of publications in the industry; and (4) diminished service levels from wholesalers who distribute our magazines to retailers and fill the pockets at checkout counters as a result of consolidation among wholesalers and their related efforts to cut expenses.

Historically, we have been able to offset some of the declines in single copy circulation, in part, through increases in cover prices. We cannot assure you that we will be able to increase cover prices without decreasing circulation, or be able to take other measures, such as increasing advertising revenue rates or pages, and decrease promotion expenses of our titles to offset such circulation declines, or that the single copy circulation declines described above will be reversed. Continued declines in circulation could have a material adverse effect on our business and financial performance and condition.

WE MAY NOT BE ABLE TO REALIZE EXPECTED BENEFITS FROM COST SAVINGS AND REVENUE ENHANCEMENT INITIATIVES.

We implemented our Management Action Plan during the fiscal quarter ended June 30, 2008 which was expected to result in approximately $21.0 million of cost savings and approximately $2.0 million of revenue enhancements during fiscal year 2009 as compared to our fiscal year 2009 budget. We currently expect the Management Action Plan to result in approximately $25.7 million of cost savings and approximately $8.2 million of revenue enhancements during fiscal year 2009 as compared to our fiscal year 2009 budget. Cost savings primarily include cost reductions related to employee-related expenses and selling, general and administrative

expenses, as well as production and subscription expenses. Revenue enhancements include certain cover price increases and the publishing of an additional issue of seven of our publications, as well as the publication of four special interest publications during fiscal year 2009. We may not ultimately be able to realize some of the benefits of these initiatives.

We also implemented our Supplemental Management Action Plan during the fiscal quarter ended March 31, 2009 that we currently expect will result in additional annual savings of approximately $23.5 million. For the fiscal quarter ending March 31, 2009, we expect to realize approximately $2.6 million of cost savings. Cost savings primarily include cost reductions related to employee-related expenses and production and subscription expenses. We may not ultimately be able to realize some of the benefits of these initiatives.

IF WE FAIL TO IMPLEMENT OUR BUSINESS STRATEGY, OUR BUSINESS WILL BE ADVERSELY AFFECTED.

Our future financial performance and success are dependent in large part upon our ability to successfully implement our business strategy. We cannot assure you that we will be able to successfully implement our business strategy or be able to improve our operating results. In particular, we cannot assure you that we will be able to increase circulation of our publications, obtain new sources of advertising revenues, generate additional revenues by building on the brand names of our publications, attract new clients for DSI or raise the cover prices of our publications without causing a decline in circulation. Furthermore, any growth through acquisitions and investments will be dependent upon identifying suitable acquisition or investment candidates and successfully consummating such transactions and integrating the acquired operations at reasonable costs. We may not successfully integrate any acquired businesses and may not be able to achieve anticipated revenue and cost benefits.

Such acquisitions and investments may require additional funding which may be provided in the form of additional debt, equity financing or a combination thereof. We cannot assure you that any such additional financing will be available to us on acceptable terms or at all or that we will be permitted under the terms of the 2009 Credit Agreement (or any replacement thereof) or under the terms of our Indentures to obtain such financing for such purpose.

Any failure to successfully implement our business strategy may adversely affect our ability to service our indebtedness, including our ability to make principal and interest payments on the debt. We may, in addition, decide to alter or discontinue certain aspects of our business strategy at any time.

WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT.

Star, National Enquirer, Globe, National Examiner, Sun, Mira! and Country Weekly compete in varying degrees with other publications sold at retailers’ checkout counters, as well as forms of media concentrating on celebrity news, such as certain tabloids, magazines and television and radio programs. We believe that historical declines in single copy circulation of National Enquirer, Globe and National Examiner have resulted in part from increased competition from these publications and forms of media. Competition for circulation is largely based upon the content of the publication, its placement in retail outlets and its price. Competition for advertising revenues is largely based upon circulation levels, readership, demographics, prices and advertising results. Certain of our competitors have substantially larger operating staffs, greater capital resources and greater revenues from their publications. In this respect, we may be at a competitive disadvantage with such entities. We believe that currently our most significant direct competitors in the print media are Time Warner Inc. (which publishes People, People’s Country, In Style and Entertainment Weekly), Wenner Media, Inc. (which publishes US Weekly and Men’s Journal), Rodale Inc. (which publishes Men’s Health and Women’s Health), Bauer Publishing (which publishes In-Touch and Life & Style), Condé Nast Publications, Inc. (which publishes Self and Cookie) and Northern & Shell North America Ltd. (which publishes OK!). As use of the Internet and new on-line ventures focusing on celebrity news increase, we will face additional competition.

In addition, we compete with many other companies providing marketing and distribution services, such as full-service national distributors, wholesalers and publishers with their own marketing organizations. Certain of our competitors have substantially larger operating staffs and greater capital resources. In this respect, we may be at a competitive disadvantage with such entities.

Increased competition may result in less demand for our products and services which may have a material adverse effect on our business, results of operations and financial condition.

OUR NET OPERATING LOSS CARRYFORWARDS MAY BE LIMITED AS A RESULT OF AN OWNERSHIP CHANGE UNDER SECTION 382 OF THE INTERNAL REVENUE CODE.

Internal Revenue Code Section 382 (“IRC 382”) contains rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating

loss carryforwards and certain built in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes among stockholders owning directly or indirectly 5% or more of the stock of a company or any change in ownership arising from a new issuance of stock by the company.

As a result of the Tendering Bondholders acquiring 94.9% of Media’s Common Stock, we underwent an ownership change under IRC 382. Accordingly, our ability to use our net operating loss carryforwards and to recognize certain built in losses will be subject to the limitations of IRC 382. Depending on the resulting limitation, a portion of our net operating loss carryforwards could expire before we are able to use them. Our inability to utilize our net operating loss carryforwards could have a material adverse effect on our financial condition and results of operations.

OUR BUSINESS AND RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY INCREASES IN FUEL COSTS AND INCREASES IN THE PRICE OF PAPER OR POSTAGE.

Many aspects of our business have been directly affected by increases in the cost of fuel. Increased fuel costs have translated into increased costs for the products and services we receive from our third party suppliers including, but not limited to, increased production and distribution costs for our products. In particular, paper and postage represent significant components of our total cost to produce and distribute our printed products. Paper is a commodity and its price has been subject to significant volatility. Furthermore, because the United States Postal Service distributes substantially all of our subscription publications and many of our marketing materials, increases in the cost of postage to mail our subscription publications may have an adverse effect on our business. We cannot predict with certainty the magnitude of future price changes in paper and postage or how increases in fuel costs will affect our third party suppliers and the rates they charge us. If fuel, paper or postage prices increase, and we cannot pass these costs on to our customers, such increases may have a material adverse effect on our business, results of operations and financial condition.

OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE LOSE ONE OR MORE OF OUR VENDORS.

A loss of one or more of our vendors related to production or circulation or a disruption in one of those vendors’ businesses or a failure by one of them to meet our production or circulation needs on a timely basis could cause temporary shortages in needed materials or services which could have a negative effect on our business and results of operations.

TERRORIST ATTACKS AND OTHER ACTS OF VIOLENCE OR WAR MAY AFFECT THE FINANCIAL MARKETS AND OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Terrorist attacks may negatively affect our operations and financial condition. There can be no assurance that there will not be further terrorist attacks against the United States or U.S. businesses. These attacks or armed conflicts may directly impact our physical facilities or those of our retailers and customers. These events could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and world financial markets and economy. They could result in an economic recession in the United States or abroad. Any of these occurrences could have a material adverse impact on our business, results of operations and financial condition.

OUR PERFORMANCE COULD BE ADVERSELY AFFECTED IF WE LOSE OUR KEY PERSONNEL.

We believe that our success is largely dependent on the abilities and experience of our senior management team. The loss of the services of one or more of these senior executives could adversely affect our ability to effectively manage our overall operations or successfully execute current or future business strategies. We do not maintain key man life insurance on the lives of our senior management. We have entered into employment contracts with our senior management team, all of which contain non-compete provisions. While we believe that we could find replacements for these key personnel, the loss of their services could have a significant adverse effect on our operations.

PENDING AND FUTURE LITIGATION OR REGULATORY PROCEEDINGS COULD MATERIALLY AFFECT OUR OPERATIONS.

Because the focus of some of our publications often involves celebrities or controversial subjects and because of our news gathering techniques, the risk of defamation or invasion of privacy litigation or the filing of criminal charges exists. While we have not historically experienced any difficulty obtaining insurance coverage, we cannot assure you that we will be able to do so in the future at rates acceptable to us or at all. There are currently no such claims pending that we believe would have a material adverse effect on our operations. We cannot assure you that any pending or future litigation, if adversely determined, would not have a material adverse effect on our business, results of operations and financial condition.

The SEC is conducting an informal inquiry in connection with the restatement of our financial statements for the fiscal year ended March 31, 2005, and the fiscal quarters ended June 30, 2005 and September 30, 2005 (the “Restatement”). We are cooperating fully with this inquiry. We cannot predict the outcome of this inquiry, including whether the SEC will take any action against us. Likewise, we are unable to predict whether there will be private civil litigation as a result of the Restatement.

IF OUR GOODWILL OR OTHER IDENTIFIABLE INTANGIBLE ASSETS BECOME IMPAIRED, WE MAY BE REQUIRED TO RECORD A SIGNIFICANT CHARGE TO EARNINGS.

As of December 31, 2008, the net book value of our goodwill and other intangible assets was approximately $524.0 million. Accounting rules require us to record a charge against our earnings to the extent that any of these assets are impaired. Accordingly, impairment of our goodwill, tradenames, covenants not to compete, subscriber lists, advertising relationships, non-subscriber customer relationships or the impairment of other intangible assets due to litigation, obsolescence, competitive factors or other reasons could result in a material charge against our earnings and have a material adverse effect on our results of operations. As of December 31, 2008, certain goodwill, tradenames and other identified intangibles were evaluated for impairment and determined to be impaired. The impairment charges recorded during the fiscal quarter ended December 31, 2008 were $93.9 million relating to tradenames, $114.7 million relating to goodwill and $9.2 million relating to other identified intangibles. The amounts related to the provision for impairment of goodwill represent estimated non-cash impairment charges as these charges are probable and can be reasonably estimated. We will increase or decrease the amount of these goodwill impairment charges, as necessary, based upon the completion of our review of the impairment test in the fourth fiscal quarter of 2009 prior to filing the our fiscal year 2009 Form 10-K.

FUTURE ACQUISITIONS, PARTNERSHIPS AND JOINT VENTURES MAY REQUIRE SIGNIFICANT RESOURCES AND/OR RESULT IN SIGNIFICANT UNANTICIPATED LOSSES, COSTS OR LIABILITIES.

In the future, we may seek to grow the Company and its businesses by making acquisitions or entering into partnerships and joint ventures. Any future acquisition, partnership or joint venture may require that we make a significant cash investment, issue stock or incur substantial debt. In addition, acquisitions, partnerships or investments may require significant managerial attention, which may be diverted from our other operations. These capital, equity and managerial commitments may impair the operation of our businesses. Furthermore, any future acquisitions of businesses or facilities could entail a number of additional risks, including:

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problems with effective integration of operations;

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the inability to maintain key pre-acquisition business relationships;

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increased operating costs;

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exposure to unanticipated liabilities; and

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difficulties in realizing projected efficiencies, synergies and cost savings.

We have incurred indebtedness to finance past acquisitions. We may finance future acquisitions with additional indebtedness, subject to limits in our debt agreements. As a result, we could face the financial risks associated with incurring additional indebtedness such as reducing our liquidity and access to financing markets and increasing the amount of cash flow required to service such indebtedness.

SOME PROVISIONS OF DELAWARE LAW AND MEDIA’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS WELL AS OUR STOCKHOLDERS AGREEMENT, MAY DETER THIRD PARTIES FROM ACQUIRING US.

Provisions contained in Media’s amended and restated certificate of incorporation and the laws of Delaware, the state in which Media is incorporated, could make it more difficult for a third party to acquire us, even if doing so might be beneficial to Media’s stockholders. Provisions of Media’s amended and restated certificate of incorporation impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause Media to take other corporate actions that Media’s stockholders desire.

WE MAY NOT BE ABLE TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL AND DISCLOSURE CONTROLS OVER FINANCIAL REPORTING.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports, effectively prevent fraud and operate successfully. If we cannot provide reliable financial reports or prevent fraud, our operating results and reputation would be harmed. As part of our ongoing monitoring, we may discover material weaknesses or significant deficiencies in our internal control over financial reporting under standards adopted by the Public Company Accounting Oversight Board that require remediation.

We cannot assure that internal or disclosure control deficiencies might not be identified in the future. Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could, among other things, result in losses from fraud or error, cause us to not satisfy our reporting obligations, cause investors to lose confidence in our reported financial information or harm our reputation, all of which could have a material adverse effect on our results of operations and financial condition.

WE MAY SUFFER CREDIT LOSSES THAT COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

We extend unsecured credit to most of our customers. We recognize that extending credit and setting appropriate reserves for receivables is largely a subjective decision based on knowledge of the customer and the industry. Credit exposure also includes the amount of estimated unbilled sales. The level of credit is influenced by the customer’s credit history with us and other available information, including industry-specific data.

We share equally in the credit risk for sales to our wholesalers under our agreement with our largest national distributor.

We maintain a reserve account for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to pay, additional allowances might be required.

OUR SINGLE COPY REVENUES CONSIST OF COPIES SOLD PRIMARILY TO THREE WHOLESALERS.

As of December 31, 2008, single copy revenues consist of copies distributed to newsstands primarily by four wholesalers, which we estimate represented 83% of the newsstand distribution market, as well as several smaller wholesalers who represented the remaining 17%. In the three fiscal quarters ended December 31, 2008, three wholesalers each accounted for greater than 10% of our total operating revenue and in the aggregate accounted for approximately 36% of our total operating revenue. We currently have service agreements with two of these four wholesalers, which provide incentives to maintain certain levels of service. We cannot assure that these contracts will be renewed on favorable terms, or that the terms will be extended or that our relationship with these wholesalers will be extended at all when these contracts expire. One wholesaler service agreement was terminated by the wholesaler effective December 31, 2008. See Item 1, Part II, “Legal Proceedings,” in this Form 10-Q for a description of the litigation relating to such wholesaler. One of these wholesalers has ceased to operate and is holding certain of its allotments of our monthly magazines. We are taking steps to reclaim these magazines. Our operating results could be materially affected by disruption of the distribution of our magazines through the wholesalers.

EMPLOYEE BENEFIT COSTS ARE INCREASING SIGNIFICANTLY.

Health insurance costs have increased significantly faster than inflation on an annual basis during the past few years. We also anticipate that in coming years, the cost of health care will continue to escalate, causing an increase to our expenses and employee contributions.

Item 3. Defaults Upon Senior Securities

We failed to make the required semi-annual interest payment with respect to the 2009 Notes when due on November 1, 2008. Such failure resulted in an event of default pursuant to the terms of the indenture governing the 2009 Notes. We also failed to make the required semi-annual interest payment with respect to the 2011 Notes when due on January 15, 2009. In addition, we failed to file our quarterly report on Form 10-Q for the period ended September 30, 2008 when due on November 14, 2008. We also failed to comply with the requirements of indentures governing the Existing Notes relating to its failure to meet a specified leverage ratio as of September 30, 2008. As a result, we entered into forbearance agreements with existing holders of approximately 81% of the then outstanding aggregate principal amount of 2009 Notes and approximately 69% of the then outstanding aggregate principal amount of 2011 Notes, pursuant to which such holders agreed to forbear from exercising any remedies under the indentures governing the Existing Notes as a result of our aforementioned failures until we successfully completed our cash tender offers and consent solicitations with respect to the Existing Notes.

Upon the consummation of the tender offers and consent solicitations with respect to the Existing Notes on January 30, 2009, the Company paid all accrued and unpaid interest through January 30, 2009, with respect to the Existing Notes accepted for purchase on such date as part of the total consideration to Tendering Bondholders. Immediately after the consummation of such tender offers and consent solicitations, the Company used cash on hand to pay to any non-Tendering Bondholders of the Existing Notes the semi-annual interest payment with respect to their 2009 Notes that was due on November 1, 2008 and with respect to the 2011 Notes that was due on January 15, 2009.

Item 5. Other Information

(b) On January 30, 2009, the Existing Equityholders, certain employees of Media, certain Tendering Bondholders (collectively representing approximately 78% of the outstanding principal amount of Existing Notes), the Existing Equityholders’ representative and Media entered into a Stockholders Agreement (the “Stockholders Agreement”). Concurrently, each of the Company and Media filed its amended and restated Certificate of Incorporation, pursuant to which the boards of directors of the Company and Media, as of January 30, 2009, were initially composed of five members. The Stockholders Agreement provides that, upon agreement of Angelo, Gordon & Co., L.P., Avenue Capital Management II, L.P., Capital Research and Management Company, Capital Guardian Trust Company and Capital International, Inc., Credit Suisse Securities (USA) LLC and Regiment Capital Management, LLC, who beneficially own or control approximately 79.7% of the outstanding shares of Media’s Common Stock (the “Committee Holders”), such boards of directors shall be expanded to seven directors and the two newly created vacancies will be filled by the designees of such Committee Holders. Thereafter, the Stockholders Agreement provides that each board of directors of the Company and Media shall be composed of seven members. The Stockholders Agreement provides that six of such directors of each board shall initially be designated by Committee Holders and the other director shall be the chief executive officer of the Company and Media. Under the terms of the Stockholders Agreement, the Committee Holders will have the following designation rights: (A) so long as a Committee Holder holds shares representing 10% or more of the outstanding Common Stock of Media, it will have the right to designate one director and (B) for so long as Committee Holders collectively hold shares representing more than 50% of the outstanding Common Stock of Media, the remaining directors will be designated by the approval of Committee Holders (i) representing a majority in number of the Committee Holders and (ii) representing more than 50% of Common Stock held by the Committee Holders. The parties to the Stockholders Agreement will be obligated to vote for the directors designated in accordance with the foregoing terms.

Item 6. Exhibits

3.1		Amended and Restated ~~By-laws~~Certificate of Incorporation of the Company.
10.1		American Media, Inc. EBITDA Incentive Plan for Michael Porche, effective for fiscal year 2009. **
3.2		Amended and Restated By-laws of the Company.
10.2		American Media, Inc. Newsstand Net Profit Plan for Michael Porche, effective for fiscal year 2009. **
4.1		Ninth Supplemental Indenture dated as of January 29, 2009, among the Company, the Note Guarantors (defined therein) and HSBC Bank USA, National Association (as successor in interest to JPMorgan Chase Bank, N.A.), as Trustee.
31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).
4.2		Seventh Supplemental Indenture dated as of January 29, 2009, among the Company, the Note Guarantors (defined therein) and HSBC Bank USA, National Association (as successor in interest to J.P. Morgan Trust Company, National Association), as Trustee.
31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).
4.3		Indenture dated as of January 30, 2009, among the Company, the Guarantors named therein and Wilmington Trust FSB, as Trustee, with respect to the Senior PIK Notes.
32		Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**48 ~~Portions of the above exhibits have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.~~


4.4		Indenture dated as of January 30, 2009, among the Company, the Guarantors named therein and Wilmington Trust FSB, as Trustee, with respect to the Senior Subordinated Notes.

10.1		Amended and Restated Credit Agreement dated as of December 30, 2008, among Media, the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Deutsche Bank Securities Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., General Electric Capital Corporation and Lehman Commercial Paper Inc., as Documentation Agents.

10.2		Purchase Agreement dated as of January 29, 2009 among Media, the Company, the Guarantors named therein and J.P. Morgan Securities Inc., as the Initial Purchaser.

31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).

31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).

32		Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

	~~AMERICAN MEDIA OPERATIONS, INC.~~	AMERICAN MEDIA OPERATIONS, INC.
	~~Registrant~~	Registrant
Date: January 9, 2009
Date: February 19, 2009
	~~/s/ DAVID J. PECKER~~	/s/ DAVID J. PECKER
	~~David J. Pecker~~	David J. Pecker
	Chief Executive Officer
		Chief Executive Officer (principal executive officer)
	(principal executive officer)
Date: February 19, 2009
Date: January 9, 2009	/s/ DEAN D. DURBIN
		/s/ DEAN D. DURBIN
	~~Dean D. Durbin~~	Dean D. Durbin
	Chief Financial Officer and Chief Operating Officer
		Chief Financial Officer and Chief Operating Officer (principal financial officer)
	(principal financial officer)

3850

Exhibits

Exhibit No.		Description
3.1		Amended and Restated ~~By-laws~~Certificate of Incorporation of the Company.
10.1		American Media, Inc. EBITDA Incentive Plan for Michael Porche, effective for fiscal year 2009.**
3.2		Amended and Restated By-laws of the Company.
10.2		American Media, Inc. Newsstand Net Profit Plan for Michael Porche, effective for fiscal year 2009.**
4.1		Ninth Supplemental Indenture dated as of January 29, 2009, among the Company, the Note Guarantors (defined therein) and HSBC Bank USA, National Association (as successor in interest to JPMorgan Chase Bank, N.A.), as Trustee.
4.2		Seventh Supplemental Indenture dated as of January 29, 2009, among the Company, the Note Guarantors (defined therein) and HSBC Bank USA, National Association (as successor in interest to J.P. Morgan Trust Company, National Association), as Trustee.
4.3		Indenture dated as of January 30, 2009, among the Company, the Guarantors named therein and Wilmington Trust FSB, as Trustee, with respect to the Senior PIK Notes.
4.4		Indenture dated as of January 30, 2009, among the Company, the Guarantors named therein and Wilmington Trust FSB, as Trustee, with respect to the Senior Subordinated Notes.
10.1		Amended and Restated Credit Agreement dated as of December 30, 2008, among Media, the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Deutsche Bank Securities Inc., as Syndication Agent, and Bear Stearns Corporate Lending Inc., General Electric Capital Corporation and Lehman Commercial Paper Inc., as Documentation Agents.
10.2		Purchase Agreement dated as of January 29, 2009 among Media, the Company, the Guarantors named therein and J.P. Morgan Securities Inc., as the Initial Purchaser.
31.1		Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a).
32		Certification of principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**51 ~~Portions of the above exhibits have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.~~

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