##### 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, 2009
 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 
of Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 1325 Avenue of Americas, 21st Floor
New York, NY 10019  (Address of principal executive offices)
 Registrants telephone number: (212) 977-9001
 þ o
 o o
  Large accelerated filer o   
    Accelerated filer o
    Non-accelerated filer þ
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



RHI ENTERTAINMENT, INC.
INDEX
 PagePART 1. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Qualitative and Quantitative Disclosures about Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART 2. OTHER INFORMATION
    
    
    28Item 1. Legal Proceedings
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults upon Senior Securities
    
    
    28Item 4. Submissions of Matters to a Vote on Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    30Signatures
    
    
    31EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part 1. Financial Information
 RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Balance Sheets
 September 30,
    
    
    December 31,2009
    
    
    2008(In thousands, except per share data)ASSETSCash
    
    $
    3,248
    
    
    $
    22,373Accounts receivable, net of allowance for doubtful
accounts and discount to present value of $6,190 and
$11,933, respectively
    
    
    107,822
    
    
    
    180,125Film production costs, net
    
    
    789,404
    
    
    
    780,122Property and equipment, net
    
    
    418
    
    
    
    370Prepaid and other assets, net
    
    
    21,688
    
    
    
    28,928Intangible assets, net
    
    
    1,395
    
    
    
    2,264Total assets
    
    $
    923,975
    
    
    $
    1,014,182LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accrued liabilities
    
    $
    41,967
    
    
    $
    51,477Accrued film production costs
    
    
    152,064
    
    
    
    195,328Debt
    
    
    589,589
    
    
    
    576,789Deferred revenue
    
    
    17,168
    
    
    
    13,530Total liabilities
    
    
    800,788
    
    
    
    837,124Stockholders equityCommon stock, par value $0.01 per share;125,000
shares authorized and 13,505 shares issued and
outstanding
    
    $
    135
    
    
    $
    135Additional paid-in capital
    
    
    150,435
    
    
    
    149,609Accumulated deficit
    
    
    (74,262
    )
    
    
    (36,195
    )Accumulated other comprehensive loss
    
    
    (5,228
    )
    
    
    (11,387
    )Total RHI Entertainment, Inc. stockholders equity
    
    
    71,080
    
    
    
    102,162Non-controlling interest in consolidated entity
    
    
    52,107
    
    
    
    74,896Total stockholders equity
    
    
    123,187
    
    
    
    177,058Total liabilities and stockholders equity
    
    $
    923,975
    
    
    $
    1,014,182
  3




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##### Table of Contents



RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Statements of Operations
 (Successor)
    
    
    (Predecessor)Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Period from
    
    
    Period fromEnded
    
    
    Ended
    
    
    Ended
    
    
    June 23, 2008 to
    
    
    January 1, 2008 toSeptember 30, 2009
    
    
    September 30, 2008
    
    
    September 30, 2009
    
    
    September 30, 2008
    
    
    June 22, 2008(In thousands, except per share data)RevenueProduction revenue
    
    $
    2,576
    
    
    $
    21,833
    
    
    $
    14,408
    
    
    $
    22,765
    
    
    $
    6,602Library revenue
    
    
    6,932
    
    
    
    31,693
    
    
    
    30,786
    
    
    
    33,182
    
    
    
    66,643Total revenue
    
    
    9,508
    
    
    
    53,526
    
    
    
    45,194
    
    
    
    55,947
    
    
    
    73,245Cost of sales (including film
production cost impairment charges
of $6,957 during the three and nine
months ended September 30, 2009)
    
    
    17,680
    
    
    
    38,247
    
    
    
    49,605
    
    
    
    39,550
    
    
    
    49,396Gross (loss) profit
    
    
    (8,172
    )
    
    
    15,279
    
    
    
    (4,411
    )
    
    
    16,397
    
    
    
    23,849Other costs and expenses:Selling, general and
administrative
    
    
    8,565
    
    
    
    9,814
    
    
    
    26,453
    
    
    
    10,546
    
    
    
    25,802Amortization of intangible assets
    
    
    270
    
    
    
    314
    
    
    
    869
    
    
    
    350
    
    
    
    671Fees paid to related parties:Management fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287Termination fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000
    
    
    
    (Loss) income from operations
    
    
    (17,007
    )
    
    
    5,151
    
    
    
    (31,733
    )
    
    
    (499
    )
    
    
    (2,911
    )Other (expense) income:Interest expense, net
    
    
    (12,446
    )
    
    
    (9,855
    )
    
    
    (32,513
    )
    
    
    (10,674
    )
    
    
    (21,559
    )Interest income
    
    
    1
    
    
    
    17
    
    
    
    5
    
    
    
    20
    
    
    
    34Other income (expense), net
    
    
    934
    
    
    
    (1,001
    )
    
    
    (713
    )
    
    
    (934
    )
    
    
    706Loss before income taxes and
non-controlling interest in
loss of consolidated entity
    
    
    (28,518
    )
    
    
    (5,688
    )
    
    
    (64,954
    )
    
    
    (12,087
    )
    
    
    (23,730
    )Income tax (provision) benefit
    
    
    (503
    )
    
    
    (389
    )
    
    
    (1,021
    )
    
    
    (472
    )
    
    
    1,518Loss before non-controlling
interest in loss of
consolidated entity
    
    
    (29,021
    )
    
    
    (6,077
    )
    
    
    (65,975
    )
    
    
    (12,559
    )
    
    
    (22,212
    )Non-controlling interest in loss of
consolidated entity
    
    
    12,275
    
    
    
    2,570
    
    
    
    27,907
    
    
    
    5,312
    
    
    
    Net loss
    
    $
    (16,746
    )
    
    $
    (3,507
    )
    
    $
    (38,068
    )
    
    $
    (7,247
    )
    
    $
    (22,212
    )Loss per Share:Basic
    
    $
    (1.24
    )
    
    $
    (0.26
    )
    
    $
    (2.82
    )
    
    $
    (0.54
    )
    
    
    N/ADiluted
    
    $
    (1.24
    )
    
    $
    (0.26
    )
    
    $
    (2.82
    )
    
    $
    (0.54
    )
    
    
    N/AWeighted Average Shares Outstanding:Basic
    
    
    13,505
    
    
    
    13,500
    
    
    
    13,505
    
    
    
    13,500
    
    
    
    N/ADiluted
    
    
    13,505
    
    
    
    13,500
    
    
    
    13,505
    
    
    
    13,500
    
    
    
    N/A
  4




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RHI ENTERTAINMENT, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
 (Successor)
    
    
    (Predecessor)Nine Months
    
    
    Period from
    
    
    Period fromEnded
    
    
    June 23, 2008 to
    
    
    January 1, 2008 toSeptember  30, 2009
    
    
    September 30, 2008
    
    
    June 22, 2008(In thousands)Cash flows from operating activitiesNet loss
    
    $
    (38,068
    )
    
    $
    (7,247
    )
    
    $
    (22,212
    )Adjustments to reconcile net loss to net cash used in
operating activities:Amortization of film production costs
    
    
    31,920
    
    
    
    34,308
    
    
    
    43,579Non-controlling interest in loss of consolidated entity
    
    
    (27,907
    )
    
    
    (5,312
    )
    
    
    Amortization of interest rate swap value
    
    
    7,003
    
    
    
    
    
    
    
    Film production cost impairment charges
    
    
    6,957
    
    
    
    
    
    
    
    (Decrease) increase of accounts receivable reserves
    
    
    (5,743
    )
    
    
    1,498
    
    
    
    4,370Amortization of deferred debt financing cost
    
    
    2,534
    
    
    
    909
    
    
    
    549Deferred income taxes
    
    
    2,284
    
    
    
    (277
    )
    
    
    (1,558
    )Share-based compensation
    
    
    1,431
    
    
    
    528
    
    
    
    926Amortization of intangible assets
    
    
    869
    
    
    
    350
    
    
    
    671Realized loss on interest rate swaps
    
    
    848
    
    
    
    
    
    
    
    Depreciation and amortization of fixed assets
    
    
    164
    
    
    
    57
    
    
    
    93Amortization of debt discount
    
    
    
    
    
    
    
    
    
    
    355Change in operating assets and liabilities:Decrease (increase) in accounts receivable
    
    
    78,046
    
    
    
    (23,576
    )
    
    
    (4,694
    )Decrease (increase) in prepaid and other assets
    
    
    2,422
    
    
    
    3,056
    
    
    
    (2,457
    )Additions to film production costs
    
    
    (44,259
    )
    
    
    (61,837
    )
    
    
    (54,909
    )(Decrease) increase in accounts payable and accrued
liabilities
    
    
    (10,588
    )
    
    
    (2,336
    )
    
    
    6,327(Decrease) increase in accrued film production costs
    
    
    (43,264
    )
    
    
    25,889
    
    
    
    (997
    )Increase (decrease) in deferred revenue
    
    
    3,638
    
    
    
    3,416
    
    
    
    (2,374
    )Net cash used in operating activities
    
    
    (31,713
    )
    
    
    (30,574
    )
    
    
    (32,331
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    (212
    )
    
    
    (77
    )
    
    
    (81
    )Net cash used in investing activities
    
    
    (212
    )
    
    
    (77
    )
    
    
    (81
    )Cash flows from financing activitiesSale of common stock
    
    
    
    
    
    
    189,000
    
    
    
    Payment of offering costs and fees
    
    
    
    
    
    
    (15,016
    )
    
    
    Borrowings from credit facilities
    
    
    13,800
    
    
    
    157,679
    
    
    
    80,093Repayments of credit facilities
    
    
    (1,000
    )
    
    
    (284,900
    )
    
    
    (44,708
    )Deferred debt financing costs
    
    
    
    
    
    
    (4,626
    )
    
    
    Second lien pre-payment penalty
    
    
    
    
    
    
    (2,600
    )
    
    
    Member capital contributions
    
    
    
    
    
    
    
    
    
    
    29,135Distribution to KRH
    
    
    
    
    
    
    (35,700
    )
    
    
    Net cash provided by financing activities
    
    
    12,800
    
    
    
    3,837
    
    
    
    64,520Net (decrease) increase in cash
    
    
    (19,125
    )
    
    
    (26,814
    )
    
    
    32,108Cash, beginning of period
    
    
    22,373
    
    
    
    33,515
    
    
    
    1,407Cash, end of period
    
    $
    3,248
    
    
    $
    6,701
    
    
    $
    33,515Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    32,583
    
    
    $
    12,418
    
    
    $
    23,845Cash paid for income taxes
    
    
    1,183
    
    
    
    424
    
    
    
    1,968
  5




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RHI ENTERTAINMENT, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
 (1) Business and Organization
      6




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(2) Basis of Presentation
    (3) Summary of Significant Accounting Policies
  (a) Use of Estimates
  (b) Comprehensive Loss
  (c) Segment Information
  7




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(d) New Accounting Pronouncements Adopted
         (4) Loss Per Share, Basic and Diluted
  8




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(5) Non-Controlling Interest
   Total Holdings II members equity as of June 22, 2008
    
    $
    108,766RHI Entertainment 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
    
    
    473Non-controlling interest in unrealized loss on interest rate swaps
    
    
    (3,853
    )Non-controlling interest allocation for the period from June 23, 2008 to December 31, 2008
    
    
    (3,380
    )Non-controlling interest in loss of consolidated entity for the period from June 23, 2008 to December 31, 2008
    
    
    (26,534
    )Non-controlling interest in consolidated entity as of December 31, 2008
    
    $
    74,896Non-controlling interest in share-based compensation
    
    
    605Non-controlling interest in unrealized gain on interest rate swaps
    
    
    1,551Non-controlling interest in amortization of the fair market value of interest rate swaps de-designated as hedges
    
    
    2,962Non-controlling interest allocation for the nine months ended September 30, 2009
    
    
    5,118Non-controlling interest in loss of consolidated entity for the nine months ended September 30, 2009
    
    
    (27,907
    )Non-controlling interest in consolidated entity as of September 30, 2009
    
    $
    52,107
 (6) Film Production Costs, Net
  September 30,
    
    
    December 31,2009
    
    
    2008Completed films
    
    $
    1,015,847
    
    
    $
    984,805Crown Film Library
    
    
    145,368
    
    
    
    145,290Films in process and development
    
    
    22,676
    
    
    
    18,0121,183,891
    
    
    
    1,148,107Accumulated amortization
    
    
    (394,487
    )
    
    
    (367,985
    )$
    789,404
    
    
    $
    780,122
 9




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##### Table of Contents



(Successor)
    
    PredecessorThree Months
    
    Three Months
    
    Nine Months
    
    Period from
    
    Period fromEnded
    
    Ended
    
    Ended
    
    June 23, 2008 to
    
    January 1, 2008 toSeptember 30, 2009
    
    September 30, 2008
    
    September 30, 2009
    
    September 30, 2008
    
    June 22, 2008(In thousands)Overhead costs
capitalized
    
    $
    2,434
    
    
    $
    3,434
    
    
    $
    7,219
    
    
    $
    3,714
    
    
    $
    6,775Interest capitalized
    
    
    194
    
    
    
    165
    
    
    
    451
    
    
    
    191
    
    
    
    313Amortization of
completed films
    
    
    5,769
    
    
    
    31,258
    
    
    
    25,699
    
    
    
    32,200
    
    
    
    40,595Amortization of
Crown Film Library
    
    
    193
    
    
    
    981
    
    
    
    804
    
    
    
    1,072
    
    
    
    2,608
    (7) Debt
  September 30,
    
    
    December 31,2009
    
    
    2008First Lien Term Loan
    
    $
    175,000
    
    
    $
    175,000Revolver
    
    
    339,589
    
    
    
    326,789Second Lien Term Loan
    
    
    75,000
    
    
    
    75,000$
    589,589
    
    
    $
    576,789
  10




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Interest Rate Swaps
     11




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(8) Related Party Transactions
   (9) Share-based Compensation
 1 3
   12




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(10) Commitments and Contingencies
  Putative Shareholder Class Action Lawsuit
  ION Settlement
    13




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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
     14




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Discussion of consolidated financial information
 Revenue
   Cost of sales
   Selling, general and administrative expense
  Interest expense, net
  Income taxes
     15




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Results of operations
 Three months ended September 30, 2009 compared to the three months ended September 30, 2008
  Three months ended September 30,Increase/2009
    
    
    2008
    
    
    
    (Decrease)RevenueProduction revenue
    
    $
    2,576
    
    
    $
    21,833
    
    
    
    $
    (19,257
    )Library revenue
    
    
    6,932
    
    
    
    31,693
    
    
    
    
    (24,761
    )Total revenue
    
    
    9,508
    
    
    
    53,526
    
    
    
    
    (44,018
    )Cost of sales (including film production cost impairment charges of $6,957
for three months ended September 30, 2009)
    
    
    17,680
    
    
    
    38,247
    
    
    
    
    (20,567
    )Gross (loss) profit
    
    
    (8,172
    )
    
    
    15,279
    
    
    
    
    (23,451
    )Other costs and expenses:Selling, general and administrative
    
    
    8,565
    
    
    
    9,814
    
    
    
    
    (1,249
    )Amortization of intangible assets
    
    
    270
    
    
    
    314
    
    
    
    
    (44
    )(Loss) income from operations
    
    
    (17,007
    )
    
    
    5,151
    
    
    
    
    (22,158
    )Other (expense) income:Interest expense, net
    
    
    (12,446
    )
    
    
    (9,855
    )
    
    
    
    (2,591
    )Interest income
    
    
    1
    
    
    
    17
    
    
    
    
    (16
    )Other income (expense), net
    
    
    934
    
    
    
    (1,001
    )
    
    
    
    1,935Loss before income taxes and non-controlling interest in loss of
consolidated entity
    
    
    (28,518
    )
    
    
    (5,688
    )
    
    
    
    (22,830
    )Income tax provision
    
    
    (503
    )
    
    
    (389
    )
    
    
    
    (114
    )Loss before non-controlling interest in loss of consolidated entity
    
    
    (29,021
    )
    
    
    (6,077
    )
    
    
    
    (22,944
    )Non-controlling interest in loss of consolidated entity
    
    
    12,275
    
    
    
    2,570
    
    
    
    
    9,705Net loss
    
    $
    (16,746
    )
    
    $
    (3,507
    )
    
    
    $
    (13,239
    )Basic and diluted loss per share.
    
    $
    (1.24
    )
    
    $
    (0.26
    )
    
    
    $
    (0.98
    )
 16




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Revenue, cost of sales and gross profit
 Three Months Ended September 30,2009
    
    
    2008As a
    
    
    
    
    
    
    As aPercentage
    
    
    
    
    
    
    Percentage
    
    
    $ Increase/
    
    
    % Increase/Amount
    
    
    of Revenue
    
    
    Amount
    
    
    of Revenue
    
    
    (Decrease)
    
    
    (Decrease)(Dollars in thousands)Production revenue
    
    $
    2,576
    
    
    
    27
    %
    
    $
    21,833
    
    
    
    41
    %
    
    $
    (19,257
    )
    
    
    (88
    )%Library revenue
    
    
    6,932
    
    
    
    73
    %
    
    
    31,693
    
    
    
    59
    %
    
    
    (24,761
    )
    
    
    (78
    )%Total revenue
    
    
    9,508
    
    
    
    100
    %
    
    
    53,526
    
    
    
    100
    %
    
    
    (44,018
    )
    
    
    (82
    )%Cost of sales
(including film
production cost
impairment charges
of $6,957 for the
three months ended
September 30, 2009)
    
    
    17,680
    
    
    
    186
    %
    
    
    38,247
    
    
    
    71
    %
    
    
    (20,567
    )
    
    
    (54
    )%Gross (loss) profit
    
    $
    (8,172
    )
    
    
    (86
    )%
    
    $
    15,279
    
    
    
    29
    %
    
    $
    (23,451
    )
    
    
    (153
    )%
       17




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##### Table of Contents



Other costs and expenses
 Three Months EndedSeptember 30,
    
    $ Increase/
    
    %Increase/2009
    
    2008
    
    (Decrease)
    
    (Decrease)(Dollars in thousands)Selling, general and administrative
    
    $
    8,565
    
    
    $
    9,814
    
    
    $
    (1,249
    )
    
    
    (13
    )%Amortization of intangible assets
    
    
    270
    
    
    
    314
    
    
    
    (44
    )
    
    
    (14
    )%
  Interest expense, net
  Other income (expense), net
  Income tax provision
  Net loss
  18




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##### Table of Contents



Nine months ended September 30, 2009 compared to the nine months ended September 30, 2008
  (a)
    
    
    (b)
    
    
    
    (a) + (b)Successor
    
    
    Predecessor
    
    
    
    Combined (1)
    
    
    SuccessorNine Months
    
    
    Nine MonthsPeriod from
    
    
    Period from
    
    
    
    Ended
    
    
    EndedJune 23, 2008 to
    
    
    January 1, 2008
    
    
    
    September 30,
    
    
    September 30,
    
    
    Increase/September 30, 2008
    
    

to June 22, 2008
    
    
    
    2008
    
    
    2009
    
    
    (Decrease)RevenueProduction revenue
    
    $
    22,765
    
    
    $
    6,602
    
    
    
    $
    29,367
    
    
    $
    14,408
    
    
    $
    (14,959
    )Library revenue
    
    
    33,182
    
    
    
    66,643
    
    
    
    
    99,825
    
    
    
    30,786
    
    
    
    (69,039
    )Total revenue
    
    
    55,947
    
    
    
    73,245
    
    
    
    
    129,192
    
    
    
    45,194
    
    
    
    (83,998
    )Cost of sales (including film production cost
impairment charges of $6,957 during the
nine months ended September 30, 2009)
    
    
    39,550
    
    
    
    49,396
    
    
    
    
    88,946
    
    
    
    49,605
    
    
    
    (39,341
    )Gross profit (loss)
    
    
    16,397
    
    
    
    23,849
    
    
    
    
    40,246
    
    
    
    (4,411
    )
    
    
    (44,657
    )Other costs and expenses:Selling, general and administrative
    
    
    10,546
    
    
    
    25,802
    
    
    
    
    36,348
    
    
    
    26,453
    
    
    
    (9,895
    )Amortization of intangible assets
    
    
    350
    
    
    
    671
    
    
    
    
    1,021
    
    
    
    869
    
    
    
    (152
    )Fees paid to related parties:Management fees
    
    
    
    
    
    
    287
    
    
    
    
    287
    
    
    
    
    
    
    
    (287
    )Termination fee
    
    
    6,000
    
    
    
    
    
    
    
    
    6,000
    
    
    
    
    
    
    
    (6,000
    )Loss from operations
    
    
    (499
    )
    
    
    (2,911
    )
    
    
    
    (3,410
    )
    
    
    (31,733
    )
    
    
    (28,323
    )Other (expense) income:Interest expense, net
    
    
    (10,674
    )
    
    
    (21,559
    )
    
    
    
    (32,233
    )
    
    
    (32,513
    )
    
    
    (280
    )Interest income
    
    
    20
    
    
    
    34
    
    
    
    
    54
    
    
    
    5
    
    
    
    (49
    )Other income (expense), net
    
    
    (934
    )
    
    
    706
    
    
    
    
    (228
    )
    
    
    (713
    )
    
    
    (485
    )Loss before income taxes and
non-controlling interest in loss of
consolidated entity
    
    
    (12,087
    )
    
    
    (23,730
    )
    
    
    
    (35,817
    )
    
    
    (64,954
    )
    
    
    (29,137
    )Income tax (provision) benefit
    
    
    (472
    )
    
    
    1,518
    
    
    
    
    1,046
    
    
    
    (1,021
    )
    
    
    (2,067
    )Loss before non-controlling interest
in loss of consolidated entity
    
    
    (12,559
    )
    
    
    (22,212
    )
    
    
    
    (34,771
    )
    
    
    (65,975
    )
    
    
    (31,204
    )Non-controlling interest in loss of
consolidated entity
    
    
    5,312
    
    
    
    
    
    
    
    
    5,312
    
    
    
    27,907
    
    
    
    22,595Net loss
    
    $
    (7,247
    )
    
    $
    (22,212
    )
    
    
    $
    (29,459
    )
    
    $
    (38,068
    )
    
    $
    (8,609
    )Basic and diluted loss per share.
    
    $
    (0.54
    )
    
    
    N/A
    
    
    
    
    N/A
    
    
    $
    (2.82
    )
    
    
    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. These
combined results form the basis for the ensuing discussion of the results of our operations. 19




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##### Table of Contents



Revenue, cost of sales and gross profit
 Nine Months Ended September 30,2009
    
    
    2008As a
    
    
    
    
    
    
    As aPercentage
    
    
    
    
    
    
    Percentage
    
    
    $ Increase/
    
    
    % Increase/Amount
    
    
    of Revenue
    
    
    Amount
    
    
    of Revenue
    
    
    (Decrease)
    
    
    (Decrease)(Dollars in thousands)Production revenue
    
    $
    14,408
    
    
    
    32
    %
    
    $
    29,367
    
    
    
    23
    %
    
    $
    (14,959
    )
    
    
    (51
    )%Library revenue
    
    
    30,786
    
    
    
    68
    %
    
    
    99,825
    
    
    
    77
    %
    
    
    (69,039
    )
    
    
    (69
    )%Total revenue
    
    
    45,194
    
    
    
    100
    %
    
    
    129,192
    
    
    
    100
    %
    
    
    (83,998
    )
    
    
    (65
    )%Cost of sales
(including film
production cost
impairment charges
of $6,957 during
the nine months
ended September 30,
2009)
    
    
    49,605
    
    
    
    110
    %
    
    
    88,946
    
    
    
    69
    %
    
    
    (39,341
    )
    
    
    (44
    )%Gross (loss) profit
    
    $
    (4,411
    )
    
    
    (10
    )%
    
    $
    40,246
    
    
    
    31
    %
    
    $
    (44,657
    )
    
    
    (111
    )%
     20




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##### Table of Contents



Other costs and expenses
 Nine Months EndedSeptember 30,
    
    $ Increase/
    
    % Increase/2009
    
    2008
    
    (Decrease)
    
    (Decrease)(Dollars in thousands)Selling, general and administrative
    
    $
    26,453
    
    
    $
    36,348
    
    
    $
    (9,895
    )
    
    
    (27
    )%Amortization of intangible assets
    
    
    869
    
    
    
    1,021
    
    
    
    (152
    )
    
    
    (15
    )%Fees to related parties
    
    
    
    
    
    
    6,287
    
    
    
    (6,287
    )
    
    
    (100
    )%
   Interest expense, net
  21




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##### Table of Contents



Other income (expense), net
  Income tax (provision) benefit
  Net loss
  Liquidity and capital resources
    22




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23




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##### Table of Contents



(a)
    
    (b)
    
    (a) + (b)Successor
    
    Predecessor
    
    Combined
    
    SuccessorPeriod 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
    
    2009(Dollars in thousands)Net cash used in operating activities
    
    $
    (30,574
    )
    
    $
    (32,331
    )
    
    $
    (62,905
    )
    
    $
    (31,713
    )Net cash used in investing activities
    
    
    (77
    )
    
    
    (81
    )
    
    
    (158
    )
    
    
    (212
    )Net cash provided by financing activities
    
    
    3,837
    
    
    
    64,520
    
    
    
    68,357
    
    
    
    12,800Cash (end of period)
    
    
    6,701
    
    
    
    33,515
    
    
    
    6,701
    
    
    
    3,248
 Operating activities
  Investing activities
  Financing activities
   24




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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)
    
    $
    35,155
    
    
    $
    3,762
    
    
    $
    7,261
    
    
    $
    6,981
    
    
    $
    17,151Purchase obligations (2)
    
    
    41,931
    
    
    
    39,046
    
    
    
    2,885
    
    
    
    
    
    
    
    77,086
    
    
    
    42,808
    
    
    
    10,146
    
    
    
    6,981
    
    
    
    17,151Contractual obligations reflected on the balance sheet:Debt obligations (3)
    
    
    589,589
    
    
    
    
    
    
    
    52,500
    
    
    
    462,089
    
    
    
    75,000Accrued film production costs (4)
    
    
    49,883
    
    
    
    49,596
    
    
    
    287
    
    
    
    
    
    
    
    Other contractual obligations (5)
    
    
    10,597
    
    
    
    6,597
    
    
    
    2,000
    
    
    
    2,000
    
    
    
    650,069
    
    
    
    56,193
    
    
    
    54,787
    
    
    
    464,089
    
    
    
    75,000Total contractual obligations(6)
    
    $
    727,155
    
    
    $
    99,001
    
    
    $
    64,933
    
    
    $
    471,070
    
    
    $
    92,151
 
 (1)
    
    Operating lease commitments represent future minimum payment obligations on various long-term
noncancellable leases for office (primarily New York City headquarters) and storage space.(2)
    
    Purchase obligation amounts represent a contractual commitment to exclusively license the
rights in and to a film that is not complete.(3)
    
    Debt obligations exclude interest payments and include future principal payments due on our
bank debt (see Note 7).(4)
    
    Accrued film production costs represent contractual amounts payable for the completed films
as well as costs incurred for the buy out of certain participations.(5)
    
    Other contractual obligations primarily represent commitments to settle various accrued
liabilities.(6)
    
    Excluded from the table are $1.6 million of unrecognized tax obligations associated with FIN
48 for which the timing of payment is not estimable. Off-balance sheet arrangements
  Critical accounting policies and estimates
  Recent accounting pronouncements
  25




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##### Table of Contents



Consolidation of Variable Interest Entities,
   26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Risk
 Interest rate risk
  Foreign currency risk
   Credit risk
  
 Item 4. Controls and Procedures
   27




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##### Table of Contents



Part 2. Other Information
 
 Item 1. Legal Proceedings
 Putative Shareholder Class Action Lawsuit
  ION Settlement
    Item 1a. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  28




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##### Table of Contents



Item 4. Submissions of Matters to a Vote on Security Holders
  
 Item 5. Other Information
  29




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Exhibit10.1
    
    Settlement Agreement and Release, dated July 15, 2009, by and between RHI Entertainment
Distribution, LLC and ION Media Networks, Inc. (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K filed with the SEC on August 12, 2009).31.1*
    
    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.
 
 *
    
    Filed herewith. 30




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##### Table of Contents



SIGNATURE
  Date: November 10, 2009
    
    By:
    
    Robert A. Halmi, JrRobert A. Halmi, Jr.President & Chief Executive Officer(Principal Executive Officer)Date: November 10, 2009
    
    By:
    
    William J. AliberWilliam J. AliberChief Financial Officer(Principal Accounting Officer)
 31




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit10.1
    
    Settlement Agreement and Release, dated July 15, 2009, by and between RHI Entertainment
Distribution, LLC and ION Media Networks, Inc. (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K filed with the SEC on August 12, 2009).31.1*
    
    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.
 
 *
    
    Filed herewith. 32