##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended
September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to
 001-34102
(Commission File Number)
 RHI ENTERTAINMENT, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    36-4614616(State or Other Jurisdiction
    
    (I.R.S. Employerof Incorporation or Organization)
    
    Identification No.)
 1325 Avenue of Americas, 21 st Floor
New York, NY 10019  (Address of principal executive offices)  Registrants telephone number: (212) 977-9001
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



RHI ENTERTAINMENT, INC.
INDEX
 PagePART 1. FINANCIAL INFORMATIONItem 1. Financial
StatementsItem 2. Managements Discussion and
Analysis of Financial Condition and
Results of Operations
    
    
    13Item 3. Qualitative and Quantitative
Disclosures about Risk
    
    
    24Item 4. Controls and
Procedures
    
    
    24PART 2. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 2. Unregistered Sales of Equity
Securities and Use of
Proceeds
    
    
    25Item 3. Defaults upon Senior
Securities
    
    
    25Item 4. Submissions of Matters to a Vote
on Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    26Signatures
    
    
    27EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  2




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##### Table of Contents



Part 1. Financial Information
 RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Balance Sheets
 (Successor)
    
    
    (Predecessor)September 30,
    
    
    December 31,2008
    
    
    2007(In thousands, except per share data)ASSETSCash
    
    $
    6,701
    
    
    $
    1,407Accounts receivable, net of allowance for doubtful accounts
and
discount to present value of $12,179 and $6,311, respectively
    
    
    136,161
    
    
    
    113,759Film production costs, net
    
    
    793,196
    
    
    
    754,337Property and equipment, net
    
    
    407
    
    
    
    399Prepaid and other assets, net
    
    
    31,379
    
    
    
    20,055Intangible assets, net
    
    
    2,579
    
    
    
    3,600Goodwill
    
    
    59,838
    
    
    
    59,838Total assets
    
    $
    1,030,261
    
    
    $
    953,395LIABILITIES AND STOCKHOLDERS/MEMBERS EQUITYAccounts payable and accrued liabilities
    
    $
    43,868
    
    
    $
    40,172Accrued film production costs
    
    
    157,548
    
    
    
    132,656Debt
    
    
    568,789
    
    
    
    655,951Deferred revenue
    
    
    25,245
    
    
    
    24,203Non-controlling interest in consolidated entity
    
    
    99,325
    
    
    
    Total liabilities
    
    
    894,775
    
    
    
    852,982Members equity
    
    
    
    
    
    
    112,270Stockholders equity
    
    
    135
    
    
    
    Common stock, par value $0.01 per share;125,000 shares
authorized and 13,500 shares issued and outstandingAdditional paid-in capital
    
    
    149,269
    
    
    
    Retained deficit
    
    
    (7,247
    )
    
    
    Accumulated other comprehensive loss
    
    
    (6,671
    )
    
    
    (11,857
    )Total stockholders / members equity
    
    
    135,486
    
    
    
    100,413Total liabilities and stockholders / members equity
    
    $
    1,030,261
    
    
    $
    953,395
  3




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##### Table of Contents



RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Statements of Operations
 (Successor)
    
    
    (Predecessor)Three Months
    
    
    Period from
    
    
    Three Months
    
    
    Period from
    
    
    Nine MonthsEnded
    
    
    June 23, 2008 to
    
    
    Ended
    
    
    January 1, 2008 to
    
    
    EndedSeptember 30, 2008
    
    
    September 30, 2008
    
    
    September 30, 2007
    
    
    June 22, 2008
    
    
    September 30, 2007(In thousands, except per share data)RevenueProduction revenue
    
    $
    21,833
    
    
    $
    22,765
    
    
    $
    14,398
    
    
    $
    6,602
    
    
    $
    23,080Library revenue
    
    
    31,693
    
    
    
    33,182
    
    
    
    14,349
    
    
    
    66,643
    
    
    
    35,644Total revenue
    
    
    53,526
    
    
    
    55,947
    
    
    
    28,747
    
    
    
    73,245
    
    
    
    58,724Cost of sales
    
    
    38,247
    
    
    
    39,550
    
    
    
    18,014
    
    
    
    49,396
    
    
    
    36,895Gross profit
    
    
    15,279
    
    
    
    16,397
    
    
    
    10,733
    
    
    
    23,849
    
    
    
    21,829Other costs and expenses:Selling, general and administrative
    
    
    9,814
    
    
    
    10,546
    
    
    
    9,125
    
    
    
    25,802
    
    
    
    29,746Amortization of intangible assets
    
    
    314
    
    
    
    350
    
    
    
    332
    
    
    
    671
    
    
    
    996Fees paid to related parties:Management fees
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    287
    
    
    
    450Termination fee
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from operations
    
    
    5,151
    
    
    
    (499
    )
    
    
    1,126
    
    
    
    (2,911
    )
    
    
    (9,363
    )Other (expense) income:Interest expense, net
    
    
    (9,855
    )
    
    
    (10,674
    )
    
    
    (13,361
    )
    
    
    (21,559
    )
    
    
    (39,100
    )Interest income
    
    
    17
    
    
    
    20
    
    
    
    51
    
    
    
    34
    
    
    
    154Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,297
    )Other income (expense), net
    
    
    (1,001
    )
    
    
    (934
    )
    
    
    262
    
    
    
    706
    
    
    
    645Loss before income taxes and
non-controlling interest in loss of
consolidated entity
    
    
    (5,688
    )
    
    
    (12,087
    )
    
    
    (11,922
    )
    
    
    (23,730
    )
    
    
    (64,961
    )Income tax (provision) benefit
    
    
    (389
    )
    
    
    (472
    )
    
    
    (475
    )
    
    
    1,518
    
    
    
    2,325Loss before non-controlling interest
in loss of consolidated entity
    
    
    (6,077
    )
    
    
    (12,559
    )
    
    
    (12,397
    )
    
    
    (22,212
    )
    
    
    (62,636
    )Non-controlling interest in loss of
consolidated entity
    
    
    2,570
    
    
    
    5,312
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (3,507
    )
    
    $
    (7,247
    )
    
    $
    (12,397
    )
    
    $
    (22,212
    )
    
    $
    (62,636
    )Loss per Share:Basic
    
    $
    (0.26
    )
    
    $
    (0.54
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ADiluted
    
    $
    (0.26
    )
    
    $
    (0.54
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AWeighted Average Shares Outstanding:Basic
    
    
    13,500
    
    
    
    13,500
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ADiluted
    
    
    13,500
    
    
    
    13,500
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  4




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RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
 (Successor)
    
    
    (Predecessor)Period from
    
    
    Period from
    
    
    Nine MonthsJune 23, 2008 to
    
    
    January 1, 2008 to
    
    
    EndedSeptember 30, 2008
    
    
    June 22, 2008
    
    
    September 30, 2007(In thousands)Cash flows from operating activitiesNet loss
    
    $
    (7,247
    )
    
    $
    (22,212
    )
    
    $
    (62,636
    )Adjustments to reconcile net loss to
net cash used in operating activities:Amortization of film production
costs
    
    
    34,308
    
    
    
    43,579
    
    
    
    29,094Non-controlling interest in loss of
consolidated entity
    
    
    (5,312
    )
    
    
    
    
    
    
    Increase of accounts
receivable reserves
    
    
    1,498
    
    
    
    4,370
    
    
    
    421Amortization of deferred debt
financing cost
    
    
    909
    
    
    
    549
    
    
    
    1,583Share-based compensation
    
    
    528
    
    
    
    926
    
    
    
    1,455Amortization of intangible assets
    
    
    350
    
    
    
    671
    
    
    
    996Deferred income taxes
    
    
    (277
    )
    
    
    (1,558
    )
    
    
    841Depreciation and amortization of fixed
assets
    
    
    56
    
    
    
    93
    
    
    
    155Loss on disposal of fixed assets
    
    
    1
    
    
    
    
    
    
    
    2Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    17,297Amortization of debt discount
    
    
    
    
    
    
    355
    
    
    
    340Change in operating assets and
liabilities:(Increase) decrease in accounts
receivable
    
    
    (23,576
    )
    
    
    (4,694
    )
    
    
    24,875Decrease (increase) in prepaid and
other assets
    
    
    3,056
    
    
    
    (2,457
    )
    
    
    (12,720
    )Additions to film production
costs
    
    
    (61,837
    )
    
    
    (54,909
    )
    
    
    (108,128
    )(Decrease) increase in accounts
payable and accrued liabilities
    
    
    (2,336
    )
    
    
    6,327
    
    
    
    (5,572
    )Increase (decrease) in accrued film
production costs
    
    
    25,889
    
    
    
    (997
    )
    
    
    (9,984
    )Increase (decrease) in deferred
Revenue
    
    
    3,416
    
    
    
    (2,374
    )
    
    
    18,628Net cash used in operating
activities
    
    
    (30,574
    )
    
    
    (32,331
    )
    
    
    (103,353
    )
  5




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RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Statements of Cash Flows (continued)
 (Successor)
    
    
    (Predecessor)Period from
    
    
    Period from
    
    
    Nine MonthsJune 23, 2008 to
    
    
    January 1, 2008 to
    
    
    EndedSeptember 30, 2008
    
    
    June 22, 2008
    
    
    September 30, 2007(In thousands)Cash flows from investing activitiesPurchase of property and equipment
    
    
    (77
    )
    
    
    (81
    )
    
    
    (125
    )Net cash used in investing
activities
    
    
    (77
    )
    
    
    (81
    )
    
    
    (125
    )Cash flows from financing activitiesSale of common stock
    
    
    189,000
    
    
    
    
    
    
    
    Payment of offering costs and fees
    
    
    (15,016
    )
    
    
    
    
    
    
    Borrowings from credit facilities
    
    
    157,679
    
    
    
    80,093
    
    
    
    702,597Repayments of credit facilities
    
    
    (284,900
    )
    
    
    (44,708
    )
    
    
    (595,500
    )Deferred debt financing costs
    
    
    (4,626
    )
    
    
    
    
    
    
    (3,316
    )Second lien pre-payment penalty
    
    
    (2,600
    )
    
    
    
    
    
    
    Member capital contributions
    
    
    
    
    
    
    29,135
    
    
    
    20Distribution to KRH
    
    
    (35,700
    )
    
    
    
    
    
    
    Net cash provided by
financing activities
    
    
    3,837
    
    
    
    64,520
    
    
    
    103,801Net (decrease) increase in cash
    
    
    (26,814
    )
    
    
    32,108
    
    
    
    323Cash, beginning of period
    
    
    33,515
    
    
    
    1,407
    
    
    
    3,751Cash, end of period
    
    $
    6,701
    
    
    $
    33,515
    
    
    $
    4,074Supplemental disclosure of cash flow
information:Cash paid for interest
    
    $
    12,418
    
    
    $
    23,845
    
    
    $
    37,001Cash paid for income taxes
    
    
    424
    
    
    
    1,968
    
    
    
    3,473
  6




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RHI ENTERTAINMENT, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
 (1) Business and Organization
    (2) Basis of Presentation
    7




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(3) Summary of Significant Accounting Policies
  (a) Use of Estimates
  (b) Comprehensive Loss
  (c) Segment Information
  (d) New Accounting Pronouncements Adopted
   8




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(4) Loss Per Share, Basic and Diluted
  (5) Non-Controlling Interest
   Total Holdings II members equity as of June 22, 2008
    
    $
    108,766RHI Inc. investment in Holdings II
    
    
    173,984Non-controlling interest associated with distribution to KRH
    
    
    (34,972
    )Total post-IPO Holdings II members equity
    
    
    247,778Non-controlling interest of KRH
    
    
    42.3
    %Initial allocation of non-controlling interest in consolidated
entity
    
    
    104,810Non-controlling interest in share-based
compensation
    
    
    223Non-controlling interest in unrealized loss on interest rate swaps
    
    
    (396
    )Non-controlling interest allocation for the period from June 23, 2008 to September 30,
2008
    
    
    (173
    )Non-controlling interest in loss of consolidated entity for the period from June 23, 2008 to
September 30, 2008
    
    
    (5,312
    )Non-controlling interest in consolidated entity as of September 30,
2008
    
    $
    99,325
 9




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##### Table of Contents



(6) Film Production Costs, Net
  (Successor)
    
    
    (Predecessor)September 30,
    
    
    December 31,2008
    
    
    2007Completed films
    
    $
    914,838
    
    
    $
    830,220Crown Film Library
    
    
    145,193
    
    
    
    144,084Films in process and development
    
    
    41,819
    
    
    
    12,2111,101,850
    
    
    
    986,515Accumulated amortization
    
    
    (308,654
    )
    
    
    (232,178
    )$
    793,196
    
    
    $
    754,337
  (Successor)
    
    (Predecessor)Three Months
    
    Period from
    
    Three Months
    
    Period from
    
    Nine MonthsEnded
    
    June 23, 2008 to
    
    Ended
    
    January 1, 2008 to
    
    EndedSeptember 30, 2008
    
    September 30, 2008
    
    September 30, 2007
    
    June 22, 2008
    
    September 30, 2007(In thousands)Overhead costs capitalized
    
    $
    3,434
    
    
    $
    3,714
    
    
    $
    3,574
    
    
    $
    6,775
    
    
    $
    10,403Interest capitalized
    
    
    165
    
    
    
    191
    
    
    
    702
    
    
    
    313
    
    
    
    1,461Amortization of completed films
    
    
    31,258
    
    
    
    32,200
    
    
    
    12,300
    
    
    
    40,595
    
    
    
    27,974Amortization of Crown Film Library
    
    
    981
    
    
    
    1,072
    
    
    
    759
    
    
    
    2,608
    
    
    
    759
  (7) Debt
  (Successor)
    
    
    (Predecessor)September 30,
    
    
    December 31,2008
    
    
    2007First Lien Term Loan
    
    $
    175,000
    
    
    $
    175,000Revolver
    
    
    318,789
    
    
    
    225,625New Second Lien Term Loan
    
    
    75,000
    
    
    
    Second Lien Term Loan (net of $4,674
of unamortized
discount)
    
    
    
    
    
    
    255,326$
    568,789
    
    
    $
    655,951
  10




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11




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##### Table of Contents



Interest Rate Swaps
   (8) Related Party Transactions
   (9) Commitments and Contingencies
   12




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Item 2. Managements Discussion and analysis of Financial Condition and Results of Operations
   In this discussion, unless the context otherwise requires, the terms RHI Inc., the
Company, we, us and our refer to RHI Entertainment, Inc. and its subsidiaries including RHI
Entertainment Holdings II, LLC and RHI Entertainment, LLC.
 Overview
     13




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Discussion of consolidated financial information
 Revenue
   Cost of sales
   Selling, general and administrative expense
  Interest expense, net
  Income taxes
    14




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Results of operations
 Three months ended September 30, 2008 compared to the three months ended September 30, 2007
  Successor
    
    
    PredecessorThree Months
    
    
    Three MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2008
    
    
    2007
    
    
    (Decrease)RevenueProduction revenue
    
    $
    21,833
    
    
    $
    14,398
    
    
    $
    7,435Library revenue
    
    
    31,693
    
    
    
    14,349
    
    
    
    17,344Total revenue
    
    
    53,526
    
    
    
    28,747
    
    
    
    24,779Cost of sales
    
    
    38,247
    
    
    
    18,014
    
    
    
    20,233Gross profit
    
    
    15,279
    
    
    
    10,733
    
    
    
    4,546Other costs and expenses:Selling, general and
administrative
    
    
    9,814
    
    
    
    9,125
    
    
    
    689Amortization of intangible
assets
    
    
    314
    
    
    
    332
    
    
    
    (18
    )Fees paid to related parties:Management fees
    
    
    
    
    
    
    150
    
    
    
    (150
    )Income (loss) from
operations
    
    
    5,151
    
    
    
    1,126
    
    
    
    4,025Other (expense) income:Interest expense, net
    
    
    (9,855
    )
    
    
    (13,361
    )
    
    
    (3,506
    )Interest income
    
    
    17
    
    
    
    51
    
    
    
    (34
    )Other (expense) income, net
    
    
    (1,001
    )
    
    
    262
    
    
    
    (1,263
    )Loss before income taxes
and non-controlling
interest in loss of
consolidated entity
    
    
    (5,688
    )
    
    
    (11,922
    )
    
    
    (6,234
    )Income tax provision
    
    
    (389
    )
    
    
    (475
    )
    
    
    (86
    )Loss before
non-controlling interest
in loss of consolidated
entity
    
    
    (6,077
    )
    
    
    (12,397
    )
    
    
    (6,320
    )Non-controlling interest in
loss of consolidated
entity
    
    
    2,570
    
    
    
    
    
    
    
    2,570Net loss
    
    $
    (3,507
    )
    
    $
    (12,397
    )
    
    $
    (8,890
    )Basic and diluted loss per
share.
    
    $
    (0.26
    )
    
    
    N/A
    
    
    
    N/A
 15




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Revenue, cost of sales and gross profit
 Three Months Ended September 30,2008
    
    
    2007As a
    
    
    
    
    
    
    As aPercentage
    
    
    
    
    
    
    Percentage
    
    
    $ Increase/
    
    
    % Increase/Amount
    
    
    of Revenue
    
    
    Amount
    
    
    of Revenue
    
    
    (Decrease)
    
    
    (Decrease)(Dollars in thousands)Production revenue
    
    $
    21,833
    
    
    
    41
    %
    
    $
    14,398
    
    
    
    50
    %
    
    $
    7,435
    
    
    
    52
    %Library revenue
    
    
    31,693
    
    
    
    59
    %
    
    
    14,349
    
    
    
    50
    %
    
    
    17,344
    
    
    
    121
    %Total revenue
    
    
    53,526
    
    
    
    100
    %
    
    
    28,747
    
    
    
    100
    %
    
    
    24,779
    
    
    
    86
    %Cost of sales
    
    
    38,247
    
    
    
    71
    %
    
    
    18,014
    
    
    
    63
    %
    
    
    20,233
    
    
    
    112
    %Gross profit
    
    $
    15,279
    
    
    
    29
    %
    
    $
    10,733
    
    
    
    37
    %
    
    $
    4,546
    
    
    
    42
    %
     Other costs and expenses
 Three Months EndedSeptember 30,
    
    $ Increase/
    
    %Increase/2008
    
    2007
    
    (Decrease)
    
    (Decrease)(Dollars in thousands)Selling, general and administrative
    
    $
    9,814
    
    
    $
    9,125
    
    
    $
    689
    
    
    
    8
    %Amortization of intangible assets
    
    
    314
    
    
    
    332
    
    
    
    (18
    )
    
    
    (5
    )%Fees to related parties
    
    
    
    
    
    
    150
    
    
    
    (150
    )
    
    
    (100
    )%
 16




---



##### Table of Contents



Interest expense, net
  Other (expense) income, net
  Income tax provision
  Net loss
  17




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##### Table of Contents



Nine months ended September 30, 2008 compared to the nine months ended September 30, 2007
  (a)
    
    
    (b)
    
    
    
    (a) + (b)Successor
    
    
    Predecessor
    
    
    
    Combined (1)
    
    
    PredecessorPeriod
    
    
    PeriodFrom
    
    
    fromJune 23,
    
    
    January 1,
    
    
    
    Nine Months
    
    
    Nine Months2008 to
    
    
    2008 to
    
    
    
    Ended
    
    
    EndedSeptember 30,
    
    
    June 22,
    
    
    
    September 30,
    
    
    September 30,
    
    
    Increase/2008
    
    
    2008
    
    
    
    2008
    
    
    2007
    
    
    (Decrease)(In thousands, except per share data)RevenueProduction revenue
    
    $
    22,765
    
    
    $
    6,602
    
    
    
    $
    29,367
    
    
    $
    23,080
    
    
    $
    6,287Library revenue
    
    
    33,182
    
    
    
    66,643
    
    
    
    
    99,825
    
    
    
    35,644
    
    
    
    64,181Total revenue
    
    
    55,947
    
    
    
    73,245
    
    
    
    
    129,192
    
    
    
    58,724
    
    
    
    70,468Cost of sales
    
    
    39,550
    
    
    
    49,396
    
    
    
    
    88,946
    
    
    
    36,895
    
    
    
    52,051Gross profit
    
    
    16,397
    
    
    
    23,849
    
    
    
    
    40,246
    
    
    
    21,829
    
    
    
    18,417Other costs and expenses:Selling, general and administrative
    
    
    10,546
    
    
    
    25,802
    
    
    
    
    36,348
    
    
    
    29,746
    
    
    
    6,602Amortization of intangible assets
    
    
    350
    
    
    
    671
    
    
    
    
    1,021
    
    
    
    996
    
    
    
    25Fees paid to related parties:Management fees
    
    
    
    
    
    
    287
    
    
    
    
    287
    
    
    
    450
    
    
    
    (163
    )Termination fee
    
    
    6,000
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    6,000Loss from operations
    
    
    (499
    )
    
    
    (2,911
    )
    
    
    
    (3,410
    )
    
    
    (9,363
    )
    
    
    (5,953
    )Other (expense) income:Interest expense, net
    
    
    (10,674
    )
    
    
    (21,559
    )
    
    
    
    (32,233
    )
    
    
    (39,100
    )
    
    
    (6,867
    )Interest income
    
    
    20
    
    
    
    34
    
    
    
    
    54
    
    
    
    154
    
    
    
    (100
    )Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,297
    )
    
    
    (17,297
    )Other income, net
    
    
    (934
    )
    
    
    706
    
    
    
    
    (228
    )
    
    
    645
    
    
    
    (873
    )Loss before income taxes and
non-controlling interest in loss of
consolidated entity
    
    
    (12,087
    )
    
    
    (23,730
    )
    
    
    
    (35,817
    )
    
    
    (64,961
    )
    
    
    (29,144
    )Income tax (provision) benefit
    
    
    (472
    )
    
    
    1,518
    
    
    
    
    1,046
    
    
    
    2,325
    
    
    
    (1,279
    )Loss before non-controlling interest
in loss of consolidated entity
    
    
    (12,559
    )
    
    
    (22,212
    )
    
    
    
    (34,771
    )
    
    
    (62,636
    )
    
    
    (27,865
    )Non-controlling interest in loss of
consolidated entity
    
    
    5,312
    
    
    
    
    
    
    
    
    5,312
    
    
    
    
    
    
    
    5,312Net loss
    
    $
    (7,247
    )
    
    $
    (22,212
    )
    
    
    $
    (29,459
    )
    
    $
    (62,636
    )
    
    
    (33,177
    )Basic and diluted loss per share
    
    $
    (0.54
    )
    
    
    N/A
    
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Represents the combined results for the Predecessor and Successor
period presented. The combined results are non-GAAP financial measures
and should not be used in isolation or substitution of Predecessor and
Successor results. We believe the combined results help to provide a
presentation of our results for comparability purposes to prior
periods. 18




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##### Table of Contents



Revenue, cost of sales and gross profit
 Nine Months Ended September 30,2008
    
    
    2007As a
    
    
    
    
    
    
    As aPercentage
    
    
    
    
    
    
    Percentage
    
    
    $ Increase/
    
    
    % Increase/Amount
    
    
    of Revenue
    
    
    Amount
    
    
    of Revenue
    
    
    (Decrease)
    
    
    (Decrease)(Dollars in thousands)Production revenue
    
    $
    29,367
    
    
    
    23
    %
    
    $
    23,080
    
    
    
    39
    %
    
    $
    6,287
    
    
    
    27
    %Library revenue
    
    
    99,825
    
    
    
    77
    %
    
    
    35,644
    
    
    
    61
    %
    
    
    64,181
    
    
    
    180
    %Total revenue
    
    
    129,192
    
    
    
    100
    %
    
    
    58,724
    
    
    
    100
    %
    
    
    70,468
    
    
    
    120
    %Cost of sales
    
    
    88,946
    
    
    
    69
    %
    
    
    36,895
    
    
    
    63
    %
    
    
    52,051
    
    
    
    141
    %Gross profit
    
    $
    40,246
    
    
    
    31
    %
    
    $
    21,829
    
    
    
    37
    %
    
    $
    18,417
    
    
    
    84
    %
     19




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##### Table of Contents



Other costs and expenses
 Nine Months Ended September 30,
    
    $ Increase/
    
    % Increase/2008
    
    2007
    
    (Decrease)
    
    (Decrease)(Dollars in thousands)Selling, general and administrative
    
    $
    36,348
    
    
    $
    29,746
    
    
    $
    6,602
    
    
    
    22
    %Amortization of intangible assets
    
    
    1,021
    
    
    
    996
    
    
    
    25
    
    
    
    3
    %Fees to related parties
    
    
    6,287
    
    
    
    450
    
    
    
    5,837
    
    
    
    1,297
    %
   Interest expense, net
  Other (expense) income, net
  Income tax benefit
  20




---



##### Table of Contents



Net loss
  Liquidity and capital resources
      21




---



##### Table of Contents



(a)
    
    (b)
    
    (a) + (b)Successor
    
    Predecessor
    
    Combined
    
    PredecessorPeriod from
    
    Period from
    
    Nine Months
    
    Nine MonthsJune 23, 2008
    
    January 1,
    
    Ended
    
    Endedto September 30,
    
    2008 to June 22,
    
    September 30,
    
    September 30,2008
    
    2008
    
    2008
    
    2007(Dollars in thousands)Net cash used in operating
activities
    
    $
    (30,574
    )
    
    $
    (32,331
    )
    
    $
    (62,905
    )
    
    $
    (103,353
    )Net cash used in investing
activities
    
    
    (77
    )
    
    
    (81
    )
    
    
    (158
    )
    
    
    (125
    )Net cash provided by financing
activities
    
    
    3,837
    
    
    
    64,520
    
    
    
    68,357
    
    
    
    103,801Cash (end of period)
    
    
    6,701
    
    
    
    33,515
    
    
    
    6,701
    
    
    
    4,074
 Operating activities
   Investing activities
  Financing activities
   22




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##### Table of Contents



Contractual obligations
  Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    
    More ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(Dollars in thousands)Off balance sheet arrangements:Operating lease commitments (1)
    
    $
    38,365
    
    
    $
    3,207
    
    
    $
    7,470
    
    
    $
    7,052
    
    
    $
    20,636Obligations pursuant to ION
Agreement (2)
    
    
    15,140
    
    
    
    15,140
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (3)
    
    
    21,039
    
    
    
    18,879
    
    
    
    2,160
    
    
    
    
    
    
    
    74,544
    
    
    
    37,226
    
    
    
    9,630
    
    
    
    7,052
    
    
    
    20,636Contractual obligations reflected on the
balance sheet:Debt obligations (4)
    
    
    568,789
    
    
    
    
    
    
    
    17,500
    
    
    
    476,289
    
    
    
    75,000Accrued film production costs (5)
    
    
    63,206
    
    
    
    51,072
    
    
    
    12,134
    
    
    
    
    
    
    
    Other contractual obligations (6)
    
    
    6,296
    
    
    
    6,296
    
    
    
    
    
    
    
    
    
    
    
    638,291
    
    
    
    57,368
    
    
    
    29,634
    
    
    
    476,289
    
    
    
    75,000Total contractual obligations
    
    $
    712,835
    
    
    $
    94,594
    
    
    $
    39,264
    
    
    $
    483,341
    
    
    $
    95,636
 
 (1)
    
    Operating lease commitments represent future minimum payment obligations on various long-term
noncancellable leases for office and storage space.(2)
    
    Obligations pursuant to the ION Agreement represent minimum guarantee payments associated with our
arrangement to provide programming to ION for its primetime weekend schedule.(3)
    
    Purchase obligation amounts represent a contractual commitment to exclusively license the rights in
and to a film that is not complete.(4)
    
    Debt obligations exclude interest payments and include future principal payments due on our bank
debt (see Note 7).(5)
    
    Accrued film production costs represent contractual amounts payable for the completed films as well
as costs incurred for the buy out of certain participations.(6)
    
    Other contractual obligations primarily represent commitments to settle various accrued liabilities. Off-balance sheet arrangements
  Critical accounting policies and estimates
 www.sec.gov
 Recent accounting pronouncements
  23




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##### Table of Contents



www.sec.gov
 
 Item 3. Quantitative and Qualitative Disclosures about Risk
 Interest rate risk
  Foreign currency risk
   Credit risk
  
 Item 4. Controls and Procedures
   24




---



##### Table of Contents



Part 2. Other Information
 Item 1. Legal Proceedings
  
 Item 1a. Risk Factors
 www.sec.gov
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submissions of Matters to a Vote on Security Holders
  
 Item 5. Other Information
  25




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Exhibit31.1
    
    Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 26




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##### Table of Contents



SIGNATURE
  Date: November 6, 2008
    
    By: /s/ Robert A. Halmi, Jr

Robert A. Halmi, Jr.Chairman, President & ChiefExecutive Officer(Principal Executive Officer)Date: November 6, 2008
    
    By: /s/ William J. AliberWilliam J. AliberChief Financial Officer(Principal Accounting Officer)
 27




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit31.1
    
    Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 28