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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

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



For the Quarterly Period Ended June 30, 2005



OR



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



Commission file number  001-11112



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AMERICAN MEDIA OPERATIONS, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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



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



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



As of August 12, 2005 there
were 7,507.6 shares of common stock outstanding.



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

June 30, 2005



|                                                                                              |  |        
|--------------------------------------------------------------------------------------------- |  | -------
|                                                                                              |  | Page(s)
|PART I. FINANCIAL INFORMATION                                                                 |  |        
|Item 1. Financial Statements (Unaudited)-                                                     |  |        
|Condensed Consolidated Balance Sheets                                                         |  | 3      
|Condensed Consolidated Statements of Income (Loss)                                            |  | 4      
|Condensed Consolidated Statements of Comprehensive Income (Loss)                              |  | 5      
|Condensed Consolidated Statements of Cash Flows                                               |  | 6      
|Notes to Condensed Consolidated Financial Statements                                          |  | 7-14   
|                                                                                              | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 15-20  
|                                                                                              | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |  | 20     
|                                                                                              | 
|Item 4. Controls and Procedures                                                               |  | 21     
|PART II. OTHER INFORMATION                                                                    |  |        
|Item 1. Legal Proceedings                                                                     |  | 22     
|Item 6. Exhibits                                                                              |  | 22     
|                                                                                              | 
|Signatures                                                                                    |  | 23     



2



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in 000s, except share information)



|                                                                                         |  |               |           |   |               |   |           |  
|---------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ------------- | - | --------- | -
|                                                                                         |  | March 31,2005 |           |   | June 30, 2005 |  
|ASSETS                                                                                   |  |               |           |   |               |   |           |  
|CURRENT ASSETS:                                                                          |  |               |           |   |               |   |           |  
|Cash and cash equivalents                                                                |  | $             | 9,121     |   |               | $ | 9,433     |  
|Trade receivables, net                                                                   |  |               | 62,133    |   |               |   | 60,743    |  
|Income tax receivable                                                                    |  |               | 8,004     |   |               |   | 10,979    |  
|Inventories                                                                              |  |               | 35,131    |   |               |   | 37,488    |  
|Prepaid expenses and other                                                               |  |               | 17,510    |   |               |   | 20,270    |  
|                                                                                         |  |               |           |   |               |   |           |  
|Total current assets                                                                     |  |               | 131,899   |   |               |   | 138,913   |  
|                                                                                         |  |               |           |   |               |   |           |  
|PROPERTY AND EQUIPMENT:                                                                  |  |               |           |   |               |   |           |  
|Leasehold improvements                                                                   |  |               | 4,400     |   |               |   | 4,429     |  
|Machinery, fixtures and equipment                                                        |  |               | 41,637    |   |               |   | 39,462    |  
|Display racks                                                                            |  |               | 43,477    |   |               |   | 43,137    |  
|                                                                                         |  |               |           |   |               |   |           |  
|                                                                                         |  |               | 89,514    |   |               |   | 87,028    |  
|Less  accumulated depreciation                                                          |  |               | (51,150   | ) |               |   | (51,196   | )
|                                                                                         |  |               |           |   |               |   |           |  
|                                                                                         |  |               | 38,364    |   |               |   | 35,832    |  
|                                                                                         |  |               |           |   |               |   |           |  
|LONG TERM NOTE RECEIVABLE, net                                                           |  |               | 1,361     |   |               |   | 1,361     |  
|                                                                                         |  |               |           |   |               |   |           |  
|DEFERRED DEBT COSTS, net                                                                 |  |               | 19,950    |   |               |   | 19,542    |  
|                                                                                         |  |               |           |   |               |   |           |  
|OTHER LONG TERM ASSETS                                                                   |  |               | 3,469     |   |               |   | 3,369     |  
|                                                                                         |  |               |           |   |               |   |           |  
|GOODWILL, net of accumulated amortization of $74,757                                     |  |               | 661,639   |   |               |   | 661,639   |  
|                                                                                         |  |               |           |   |               |   |           |  
|OTHER INTANGIBLES, net of accumulated amortization of $122,173 and $125,694 respectively |  |               | 613,839   |   |               |   | 610,318   |  
|                                                                                         |  |               |           |   |               |   |           |  
|                                                                                         |  | $             | 1,470,521 |   |               | $ | 1,470,974 |  
|                                                                                         |  |               |           |   |               |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                     |  |               |           |   |               |   |           |  
|CURRENT LIABILITIES:                                                                     |  |               |           |   |               |   |           |  
|Current portion of term loan                                                             |  | $             | 5,859     |   |               | $ | 5,923     |  
|Accounts payable                                                                         |  |               | 34,456    |   |               |   | 47,096    |  
|Accrued expenses                                                                         |  |               | 61,250    |   |               |   | 54,354    |  
|Deferred revenues                                                                        |  |               | 28,677    |   |               |   | 25,440    |  
|                                                                                         |  |               |           |   |               |   |           |  
|Total current liabilities                                                                |  |               | 130,242   |   |               |   | 132,813   |  
|                                                                                         |  |               |           |   |               |   |           |  
|LONG TERM DEBT:                                                                          |  |               |           |   |               |   |           |  
|Term loan, net of current portion                                                        |  |               | 418,125   |   |               |   | 416,644   |  
|10.25% Senior Subordinated Notes Due 2009                                                |  |               | 400,000   |   |               |   | 400,000   |  
|Bond premium on 10.25% Senior Subordinated Notes Due 2009                                |  |               | 425       |   |               |   | 399       |  
|8.875% Senior Subordinated Notes Due 2011                                                |  |               | 150,000   |   |               |   | 150,000   |  
|                                                                                         |  |               |           |   |               |   |           |  
|                                                                                         |  |               | 968,550   |   |               |   | 967,043   |  
|                                                                                         |  |               |           |   |               |   |           |  
|DEFERRED INCOME TAXES                                                                    |  |               | 164,781   |   |               |   | 167,022   |  
|                                                                                         |  |               |           |   |               |   |           |  
|COMMITMENTS AND CONTINGENCIES (Note 12)                                                  |  |               |           |   |               |   |           |  
|STOCKHOLDERS EQUITY:                                                                    |  |               |           |   |               |   |           |  
|Common stock, $.20 par value; 7,507 shares issued and outstanding                        |  |               | 2         |   |               |   | 2         |  
|Additional paid-in capital                                                               |  |               | 281,701   |   |               |   | 281,671   |  
|Accumulated other comprehensive loss                                                     |  |               | (265      | ) |               |   | (808      | )
|Accumulated deficit                                                                      |  |               | (74,490   | ) |               |   | (76,769   | )
|                                                                                         |  |               |           |   |               |   |           |  
|TOTAL STOCKHOLDERS EQUITY                                                               |  |               | 206,948   |   |               |   | 204,096   |  
|                                                                                         |  |               |           |   |               |   |           |  
|                                                                                         |  | $             | 1,470,521 |   |               | $ | 1,470,974 |  
|                                                                                         |  |               |           |   |               |   |           |  



The accompanying notes
to condensed consolidated financial statements are an integral part of these condensed consolidated statements.



3



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(IN 000s)



|                                                          |  |                                 |         |   |                                   |   |         |  
|--------------------------------------------------------- |  | ------------------------------- | ------- | - | --------------------------------- | - | ------- | -
|                                                          |  | FiscalQuarterEndedJune 28, 2004 |         |   | Fiscal QuarterEnded June 30, 2005 |  
|OPERATING REVENUES:                                       |  |                                 |         |   |                                   |   |         |  
|Circulation                                               |  | $                               | 82,128  |   |                                   | $ | 80,945  |  
|Advertising                                               |  |                                 | 43,075  |   |                                   |   | 43,104  |  
|Other                                                     |  |                                 | 8,244   |   |                                   |   | 7,082   |  
|                                                          |  |                                 |         |   |                                   |   |         |  
|                                                          |  |                                 | 133,447 |   |                                   |   | 131,131 |  
|                                                          |  |                                 |         |   |                                   |   |         |  
|OPERATING EXPENSES:                                       |  |                                 |         |   |                                   |   |         |  
|Editorial                                                 |  |                                 | 14,699  |   |                                   |   | 15,412  |  
|Production                                                |  |                                 | 41,013  |   |                                   |   | 40,757  |  
|Distribution, circulation and other cost of sales         |  |                                 | 18,421  |   |                                   |   | 23,530  |  
|Selling, general and administrative expenses              |  |                                 | 23,407  |   |                                   |   | 24,241  |  
|Depreciation and amortization                             |  |                                 | 11,105  |   |                                   |   | 11,975  |  
|                                                          |  |                                 |         |   |                                   |   |         |  
|                                                          |  |                                 | 108,645 |   |                                   |   | 115,915 |  
|                                                          |  |                                 |         |   |                                   |   |         |  
|OPERATING INCOME                                          |  |                                 | 24,802  |   |                                   |   | 15,216  |  
|                                                          |  |                                
|INTEREST EXPENSE                                          |  |                                 | (23,436 | ) |                                   |   | (20,389 | )
|OTHER (EXPENSE) INCOME, net                               |  |                                 | (56     | ) |                                   |   | 1,624   |  
|                                                          |  |                                 |         |   |                                   |   |         |  
|                                                          |  |                                
|INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES |  |                                 | 1,310   |   |                                   |   | (3,549  | )
|                                                          |  |                                
|PROVISION (BENEFIT) FOR INCOME TAXES                      |  |                                 | 590     |   |                                   |   | (1,270  | )
|                                                          |  |                                 |         |   |                                   |   |         |  
|NET INCOME (LOSS)                                         |  | $                               | 720     |   |                                   | $ | (2,279  | )
|                                                          |  |                                 |         |   |                                   |   |         |  



The accompanying notes
to condensed consolidated financial statements are an integral part of these condensed consolidated statements.



4



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

(IN 000s)



|                                         |  |                                   |     |                                |   |        |  
|---------------------------------------- |  | --------------------------------- | --- | ------------------------------ | - | ------ | -
|                                         |  | Fiscal Quarter Ended June 28,2004 |     | FiscalQuarterEndedJune 30,2005 |  
|Net income (loss)                        |  | $                                 | 720 |                                | $ | (2,279 | )
|                                         |  |                                   |     |                                |   |        |  
|Other comprehensive income (loss)        |  |                                   |     |                                |   |        |  
|Foreign currency translation adjustments |  |                                   | 192 |                                |   | (543   | )
|                                         |  |                                   |     |                                |   |        |  
|Other comprehensive income (loss)        |  |                                   | 192 |                                |   | (543   | )
|                                         |  |                                   |     |                                |   |        |  
|Comprehensive income (loss)              |  | $                                 | 912 |                                | $ | (2,822 | )
|                                         |  |                                   |     |                                |   |        |  



The accompanying notes
to condensed consolidated financial statements are an integral part of these condensed consolidated statements.



5



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN 000s)



|                                                                                          |  |                                |         |   |                                 |   |        |  
|----------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ------------------------------- | - | ------ | -
|                                                                                          |  | FiscalQuarterEndedJune 28,2004 |         |   | FiscalQuarterEnded June 30,2005 |  
|Cash Flows from Operating Activities:                                                     |  |                                |         |   |                                 |   |        |  
|Net income (loss)                                                                         |  | $                              | 720     |   |                                 | $ | (2,279 | )
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities - |  |                                |         |   |                                 |   |        |  
|(Gain) loss on sale of fixed assets                                                       |  |                                | 9       |   |                                 |   | (11    | )
|Bond premium amortization                                                                 |  |                                | (26     | ) |                                 |   | (26    | )
|Depreciation of property and equipment and amortization of intangible assets              |  |                                | 11,105  |   |                                 |   | 11,975 |  
|Deferred debt cost amortization                                                           |  |                                | 1,654   |   |                                 |   | 1,605  |  
|Deferred income tax provision (benefit)                                                   |  |                                | 1,310   |   |                                 |   | 3,060  |  
|Decrease (increase) in -                                                                  |  |                                |         |   |                                 |   |        |  
|Receivables                                                                               |  |                                | (2,657  | ) |                                 |   | (1,585 | )
|Inventories                                                                               |  |                                | 6,237   |   |                                 |   | (2,357 | )
|Prepaid expenses and other                                                                |  |                                | (11,122 | ) |                                 |   | (3,579 | )
|Other long term assets                                                                    |  |                                | (470    | ) |                                 |   | 100    |  
|Increase (decrease) in -                                                                  |  |                                |         |   |                                 |   |        |  
|Accounts payable                                                                          |  |                                | 6,146   |   |                                 |   | 12,640 |  
|Accrued expenses                                                                          |  |                                | (1,547  | ) |                                 |   | (907   | )
|Accrued interest                                                                          |  |                                | (8,260  | ) |                                 |   | (5,989 | )
|Accrued income taxes                                                                      |  |                                | (196    | ) |                                 |   |       |  
|Deferred revenues                                                                         |  |                                | (2,854  | ) |                                 |   | (3,237 | )
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Total adjustments                                                                         |  |                                | (671    | ) |                                 |   | 11,689 |  
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Net cash provided by operating activities                                                 |  |                                | 49      |   |                                 |   | 9,410  |  
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Cash Flows from Investing Activities:                                                     |  |                                |         |   |                                 |   |        |  
|Capital expenditures                                                                      |  |                                | (4,337  | ) |                                 |   | (5,942 | )
|Proceeds from retired assets                                                              |  |                                |        |   |                                 |   | 31     |  
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Net cash used in investing activities                                                     |  |                                | (4,337  | ) |                                 |   | (5,911 | )
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Cash Flows from Financing Activities:                                                     |  |                                |         |   |                                 |   |        |  
|Term loan and revolving credit commitment principal repayments, net                       |  |                                | (1,384  | ) |                                 |   | (1,417 | )
|Return of equity investment                                                               |  |                                |        |   |                                 |   | (30    | )
|Payment of deferred debt costs                                                            |  |                                | (1,509  | ) |                                 |   | (1,197 | )
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Net cash used in financing activities                                                     |  |                                | (2,893  | ) |                                 |   | (2,644 | )
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Effect of Exchange Rate Changes on Cash                                                   |  |                                | 192     |   |                                 |   | (543   | )
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                      |  |                                | (6,989  | ) |                                 |   | 312    |  
|Cash and Cash Equivalents at Beginning of Period                                          |  |                                | 22,192  |   |                                 |   | 9,121  |  
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Cash and Cash Equivalents at End of Period                                                |  | $                              | 15,203  |   |                                 | $ | 9,433  |  
|                                                                                          |  |                                |         |   |                                 |   |        |  
|Supplemental Disclosures of Cash Flow Information:                                        |  |                                |         |   |                                 |   |        |  
|Cash paid during the period for -                                                         |  |                                |         |   |                                 |   |        |  
|Income taxes                                                                              |  | $                              | 150     |   |                                 | $ | 156    |  
|Interest                                                                                  |  |                                | 24,968  |   |                                 |   | 26,106 |  



The accompanying notes
to condensed consolidated financial statements are an integral part of these condensed consolidated statements.



6



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2005

(000s omitted in all tables)

(unaudited)



(1) BASIS OF PRESENTATION



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q. There has been no material change in the information disclosed in the notes to consolidated financial statements included in
the Annual Report on Form 10-K of American Media Operations, Inc. (a wholly-owned subsidiary of American Media, Inc.) and subsidiaries (the Company) for the fiscal year ended March 31, 2005.



The consolidated financial statements include the accounts of American Media
Operations, Inc., a wholly-owned subsidiary of American Media, Inc. (Media), and its subsidiaries. Medias parent entity is EMP Group LLC. The Company is a leading publisher in the field of celebrity journalism, health &
fitness, country music and Spanish language magazines. The Companys publications includeStar, Shape, Celebrity Living, Mens Fitness, Fit Pregnancy, Natural Health, Muscle & Fitness, Flex,MPH,Shape en Espanol,
Looking Good Now, National Enquirer, Globe, Country Weekly, Mira!,and other weekly and monthly publications. One of the Companys subsidiaries, Distribution Services, Inc. (DSI), arranges for the placement and merchandising of
the Companys publications and third party publications at retail outlets throughout the United States and Canada. All significant intercompany transactions and balances have been eliminated in consolidation.



In the opinion of management, all adjustments considered necessary for a fair
presentation have been included herein. Operating results for the fiscal period ended June 30, 2005, are not necessarily indicative of the results that may be expected for future periods.



The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



During the fourth quarter of fiscal year 2005, the Company
changed its reporting period from a 52-53 week year ending on the last Monday in March to a calendar month reporting period ending March 31. This change did not increase or decrease the number of days for the current quarter compared to last
years quarter.



(2) REVENUE RECOGNITION



Substantially all publication sales, except subscriptions, are made through
unrelated distributors. Issues, other than special topic issues, are placed on sale approximately one week prior to the issue date for the Companys weekly publications. Revenues and related expenses for the Companys weekly publications
and special topic issues are recognized for financial statement purposes after delivery has occurred and all services have been rendered, which coincides with the on-sale date. Monthly issues revenue and related expenses are recognized at the date
the copies are received by the Companys third party wholesalers. On or about the date each issue is placed on sale, the Company receives a percentage of the issues estimated newsstand sales proceeds for the Companys publications as
an advance from the distributors.



We have established, through
DSI, our own marketing organization whose primary function is to arrange for the sales and marketing, placement and merchandising of our publications and third-party publications at retail



7



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outlets throughout the United States and Canada. DSI does not physically distribute our publications. All distribution of our publications is made through
third-party distributors. DSI negotiates and arranges for the placement, merchandising, and sales and marketing of our publications and third-party publications at each retailers place of business.



Revenues from copy sales are net of expected sales returns, which are
established in accordance with GAAP, after considering such factors as sales history and available market information. All of the Companys publications are sold with full return privileges. The Companys national distributors provide the
Company weekly reporting on the actual returns by publication and by issue of each publication. The Company utilizes this data as well as the Companys long-term history of sales data by publication to estimate the actual anticipated sale of
the Companys publications and the Companys experience has demonstrated that the actual sale of each issue of each magazine can be reasonably estimated based on this information. The Companys in-house circulation department has
developed sophisticated financial models which the Company utilizes when projecting the anticipated sale of magazines. These models take into account, by publication, actual historical unit sales as a percentage of the total number of magazines
published for each issue by publication, current return flow data provided by the Companys national distributors relative to historical return flow data compared to actual historical unit sales and seasonal trends. Revenues are also net of
product placement costs (retail display allowances) paid to the retailers.



Subscriptions received in advance of the issue date are recognized as income over the term of the subscription as they are fulfilled and mailed to the subscriber. Advertising revenues are recognized in the period in
which the related advertising appears in the publications.



Deferred revenues relates to money received in advance for subscriptions.



Other revenues, primarily from marketing services performed for third parties by DSI are recognized when the service is performed.



(3) INVENTORIES



Inventories are stated at the lower of cost or market. We use the first-in, first-out (FIFO) cost method of valuation. Inventories are comprised of the
following:



|                                                                             |  |               |        |               |   |       
|---------------------------------------------------------------------------- |  | ------------- | ------ | ------------- | - | ------
|                                                                             |  | March 31,2005 |        | June 30, 2005
|Raw materials  paper                                                        |  | $             | 32,877 |               | $ | 34,969
|Finished product - paper, production and distribution costs of future issues |  |               | 2,254  |               |   | 2,519 
|                                                                             |  |               |        |               |   |       
|                                                                             |  | $             | 35,131 |               | $ | 37,488
|                                                                             |  |               |        |               |   |       



(4) SUBSCRIPTION ACQUISITION COSTS



Subscription acquisition costs are expensed the first
time the advertising takes place, except for certain direct-response advertising, the primary purpose of which is to elicit sales from customers who can be shown to have responded specifically to the advertising and that result in probable future
economic benefits. Direct-response advertising consists of television advertising for subscriptions, product promotional mailings, telemarketing and subscription promotions. These direct-response advertising costs are capitalized as assets and
amortized over the estimated period of future benefit, which is generally the related one-year subscription period. At March 31, 2005 and June 30, 2005, $4.3 million and $4.8 million, respectively, of subscription acquisition advertising was
reported as assets. Amortization of direct-response advertising is included in distribution, circulation and other cost of sales expenses in the consolidated statements of income. Amortization expense related to subscription acquisition advertising
was $3.3 million and $1.5 million for the quarters ended June 28, 2004 and June 30, 2005, respectively.



8



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(5) GOODWILL AND OTHER INTANGIBLE ASSETS



Intangible assets not subject to amortization had a carrying value of $557.4 million as of March 31, 2005 and June 30, 2005,
and consist of tradenames with indefinite lives.



Intangible
assets subject to amortization consist of the following:



|                                      |  |               |  |                     |         |                         |   |         |     |  |                     |        |                         |   |         |     |   |         |   |  |   |       
|------------------------------------- |  | ------------- |  | ------------------- | ------- | ----------------------- | - | ------- | --- |  | ------------------- | ------ | ----------------------- | - | ------- | --- | - | ------- | - |  | - | ------
|                                      |  |               |  | March 31, 2005      |         | June 30, 2005          
|                                      |  | Range ofLives |  | GrossCarryingAmount |         | AccumulatedAmortization |   |         | Net |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | Net
|Covenants not to compete              |  | 5-10          |  | $                   | 22,500  |                         | $ | (10,361 | )   |  | $                   | 12,139 |                         | $ | 22,500  |     | $ | (11,088 | ) |  | $ | 11,412
|Subscriber lists                      |  | 3-15          |  |                     | 66,171  |                         |   | (31,794 | )   |  |                     | 34,377 |                         |   | 66,171  |     |   | (33,673 | ) |  |   | 32,498
|Advertising relationships             |  | 3             |  |                     | 7,750   |                         |   | (5,303  | )   |  |                     | 2,447  |                         |   | 7,750   |     |   | (5,914  | ) |  |   | 1,836 
|Non-subscriber customer relationships |  | 8             |  |                     | 10,150  |                         |   | (2,639  | )   |  |                     | 7,511  |                         |   | 10,150  |     |   | (2,944  | ) |  |   | 7,206 
|                                      |  |               |  |                     |         |                         |   |         |     |  |                     |        |                         |   |         |     |   |         |   |  |   |       
|                                      |  |               |  | $                   | 106,571 |                         | $ | (50,097 | )   |  | $                   | 56,474 |                         | $ | 106,571 |     | $ | (53,619 | ) |  | $ | 52,952
|                                      |  |               |  |                     |         |                         |   |         |     |  |                     |        |                         |   |         |     |   |         |   |  |   |       



Amortization expense
of intangible assets for the fiscal quarters ended June 28, 2004 and June 30, 2005, was $3.6 million and $3.5 million, respectively. Based on the carrying value of identified intangible assets recorded at June 30, 2005, and assuming no subsequent
impairment of the underlying assets, the annual amortization expense is expected to be as follows:



|            |  |   |       
|----------- |  | - | ------
|Fiscal Year |  |  
|2006        |  | $ | 8,516 
|2007        |  |   | 8,269 
|2008        |  |   | 8,114 
|2009        |  |   | 7,466 
|2010        |  |   | 6,771 
|Thereafter  |  |   | 13,816
|            |  |   |       
|Total       |  | $ | 52,952
|            |  |   |       



(6) INCOME TAXES



The Company accounts for income taxes under the liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. The provision for income taxes includes deferred income taxes resulting from items reported in different periods for
income tax and financial statement purposes. Deferred tax assets and liabilities represent the expected future tax consequences of the differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in the period that includes the enactment date.



(7) CREDIT AGREEMENT



The Companys bank credit agreement (the Credit Agreement) is comprised of three separate term loan commitments and a $60 million
revolving credit commitment. The Companys Credit Agreement expires in April 2007. As of June 30, 2005, the Company had $422.6 million of borrowings under the term loan commitments and there were no amounts outstanding under the revolving
credit commitment. The revolving credit commitment, which expires in April 2006, allows funds to be borrowed and repaid from time to time with permanent reductions in the revolving credit commitment permitted at the Companys option. The
Company is required to pay a commitment fee ranging from 3/8% to 1/2% of the unused portion of the revolving commitment.



The Companys Credit Agreement was amended on June 21, 2005. This amendment made certain financial maintenance covenants less restrictive. The Credit
Agreement requires the Company to be in compliance with



9



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certain financial maintenance covenants which include, but are not limited to, maintaining a total leverage ratio (consolidated total debt to debt covenant
EBITDA) less than 7.50 through the maturity of the Credit Agreement. The Credit Agreement also requires the Company to maintain a senior leverage ratio (consolidated total senior debt to debt covenant EBITDA) less than 3.50 through the maturity of
the Credit Agreement. In addition, the Company must maintain an interest expense coverage ratio (debt covenant EBITDA to consolidated interest expense) greater than 1.50 through the maturity of the Credit Agreement. The Company must also maintain a
fixed charge coverage ratio (debt covenant EBITDA minus taxes paid in cash to consolidated fixed charges) greater than 1.10 through the maturity of the Credit Agreement. The Companys total leverage ratio as of June 30, 2005 was 7.08, the
Companys senior leverage ratio was 3.07, the Companys interest expense coverage ratio was 1.81 and the Companys fixed charge coverage ratio was 1.67. The Credit Agreement also contains certain covenants that, among others, restrict
paying cash dividends, incurring additional indebtedness, entering into certain mergers or consolidations, making capital expenditures and selling or otherwise disposing of assets. As of June 30, 2005, the Company was in compliance with all of the
covenants and conditions of the Credit Agreement. Although there can be no assurances, based on current projections, the Company anticipates that our operating results over the next twelve months will be sufficient to satisfy the financial covenants
and conditions of our Credit Agreement, as amended.



Borrowings
under the term loan commitments are payable in varying quarterly installments through April 2007. The Company is also required to make Excess Cash Flow payments (as defined), which will be applied ratably to the then outstanding term loans. There
were no required Excess Cash Flow payments for the quarter ended June 30, 2005.



Principal payments due under the Credit Agreement (excluding any amounts that may be borrowed under the revolving credit commitment or required to be prepaid under the Excess Cash Flow provision) are as follows:



|            |  |   |        
|----------- |  | - | -------
|Fiscal Year |  |  
|2006        |  | $ | 4,442  
|2007        |  |   | 313,964
|2008        |  |   | 104,161
|            |  |   |        
|            |  | $ | 422,567
|            |  |   |        



The Companys
obligations under the Credit Agreement are guaranteed by all of the Companys subsidiaries and by Media. The obligations and such guarantees are secured by (i) a pledge by the Company of all of the capital stock of its subsidiaries, (ii) a
pledge of all of the capital stock of the Company and (iii) a security interest in substantially all of the assets of the Companys subsidiaries.



Management fees are included in selling, general and administrative expenses. In connection with the recapitalization of the Company as discussed in
footnote 9, the Companys management fees are $2 million per annum for fiscal 2005 and 2006.



The effective interest rate under the Credit Agreement, including amounts borrowed under the term loan commitments and revolving credit commitment, as of
June 30, 2005 was 6.0% and the weighted average effective interest rates for the fiscal quarters ended June 28, 2004 and June 30, 2005 were 3.9% and 6.0%, respectively.



(8) SUBORDINATED INDEBTEDNESS



On May 7, 1999, the Company issued $250.0 million in aggregate principal amount of 10.25% Senior Subordinated Notes, which mature on May 1, 2009. Interest
on these notes is payable in semi-annual installments on May 1st and November 1st of each year. These notes are redeemable at the Companys option. The indenture under which the notes were issued includes certain restrictive covenants that
prohibit payment of dividends and limit, among other things, the Companys ability to incur indebtedness, give guarantees, make investments, sell assets and merge or consolidate. The notes are guaranteed on a senior subordinated basis by all
the Companys current subsidiaries.



10



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On February 14, 2002, the Company issued $150.0 million in aggregate principal amount of 10.25% Series B
Senior Subordinated Notes due May 2009 through a private placement. The gross proceeds from the offering were $150.8 million including a premium on the notes of $0.8 million. The Company used the gross proceeds of the offering (a) to make a $75.4
million distribution to EMP Group LLC, (b) to prepay $68.4 million of the term loans under the Credit Agreement and (c) to pay transaction costs. These notes are unsecured and subordinated in right of payment to all the Companys existing and
future senior indebtedness. These notes rank equally with all the Companys existing and future senior subordinated indebtedness. These notes are guaranteed on a senior subordinated basis by all the Companys current subsidiaries.



On January 23, 2003, the Company issued $150.0 million
aggregate principal amount of 8.875% Senior Subordinated Notes due 2011 through a private placement. The net proceeds from the offering were $145.9 million, including a discount on the notes of $4.1 million. The Company used the net proceeds of the
offering to (a) fund the acquisition of Weider Publications LLC, and (b) pay transaction costs. These notes are unsecured and subordinated in right of payment to all the Companys existing and future senior indebtedness. These notes rank
equally with all of the Companys existing and future senior subordinated indebtedness. These notes are guaranteed on a senior subordinated basis by all of the Companys current subsidiaries.



The Company has no material assets or operations other than investments in
its subsidiaries. The subordinated notes are unconditionally guaranteed, on a senior subordinated basis, by all of the Companys domestic subsidiaries. Each domestic subsidiary that will be organized in the future by the Company, unless such
subsidiary is designated as an unrestricted subsidiary, will jointly, severally, fully and unconditionally guarantee the subordinated notes on a senior subordinated basis. Subordinated note guarantees are joint and several, full and unconditional
and general unsecured obligations of the note guarantors. The subordinated note guarantors are the Companys wholly owned domestic subsidiaries. At present, the note guarantors comprise all of the Companys direct and indirect domestic
subsidiaries. Note guarantees are subordinated in right of payment to all existing and future senior debt of the note guarantors, including the Credit Agreement, and are also effectively subordinated to all secured obligations of note guarantors to
the extent of the assets securing such obligations, including the Credit Agreement. Furthermore, the subordinated notes indentures permit note guarantors to incur additional indebtedness, including senior debt, subject to certain limitations. The
Company has not presented separate financial statements and other disclosures concerning each of the note guarantors, as these disclosures are not applicable under SEC rules and regulations.



So long as the factors set forth in the paragraph immediately above remain
true and correct, under applicable SEC rules and regulations, the Companys note guarantors will not need to individually comply with the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act), nor will the
Company have to include separate financial statements and other disclosures concerning each of the note guarantors in its Exchange Act reports.



(9) RECAPITALIZATION OF EQUITY



On April 17, 2003, the Company completed a series of transactions whereby principals and affiliates of Evercore Partners LLP (Evercore) and
Thomas H. Lee Company (T.H. Lee), David J. Pecker (the Chief Executive Officer of the Company), other members of Company management and certain other investors contributed approximately $434.6 million in cash and existing ownership
interests, valued at approximately $73.3 million, of EMP Group LLC, the Companys ultimate parent, to a merger entity which was then merged with and into EMP Group LLC in exchange for newly issued ownership interests of EMP Group.



Upon completion of the merger, EMP Group LLCs existing limited
liability company agreement was amended and restated in its entirety. Under the new agreement, the board of managers of EMP Group LLC consists of three designees of Evercore, three designees of T.H. Lee, one of whom is subject to Evercores
prior approval, and the Chief Executive Officer of American Media, Inc., who is subject to the approval of



11



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Evercore and T.H. Lee. While Evercore and T.H. Lee jointly control EMP Group LLC, the new limited liability company agreement requires that certain
significant actions of EMP Group LLC be approved by David J. Pecker and a majority of the other investors of EMP Group LLC.



In addition, in connection with the merger, David J. Pecker and American Media, Inc. entered into a new employment agreement, which governs the terms of
David J. Peckers employment as Chief Executive Officer of American Media, Inc. for a term of five years. Also, American Media, Inc., THL Managers V, L.L.C., an affiliate of T.H. Lee, and Evercore Advisors L.P., an affiliate of Evercore,
entered into a Management Agreement pursuant to which THL Managers V, L.L.C. and Evercore Advisors L.P. provide certain management and advisory services to American Media, Inc. for an annual fee of $1.0 million each. The fee of this Management
Agreement is amortized to expense by the Company over the annual period.



(10) DEFERRED DEBT COSTS



Certain costs
incurred in connection with the issuance of our long-term debt have been deferred and are amortized as part of interest expense over periods from 1 to 10 years. For the fiscal quarters ended June 28, 2004 and June 30, 2005, amortization of deferred
debt costs, which is included in interest expense in the accompanying consolidated statements of income, totaled approximately $1.7 million and $1.6 million, respectively.



In connection with the Companys issuance of $150 million of 10.25% Series B Senior Subordinated Notes due 2009 on
February 14, 2002, $7.0 million of issuance costs have been deferred and are being amortized as part of interest expense over the life of the notes. In connection with the Companys issuance of $150 million of 8.875% Senior Subordinated Notes
due 2011 on January 23, 2003, $7.9 million of issuance costs have been deferred and are being amortized as part of interest expense over the life of the notes. In connection with the Companys increase in the Credit Agreement of $140 million on
January 23, 2003, $3.5 million of issuance costs have been deferred and are being amortized as part of interest expense over the life of the Credit Agreement.



In connection with the Companys Credit Agreement amendment on February 17, 2004, $0.3 million of issuance costs have been deferred and will be
amortized as part of interest expense over the life of the amendment. This amendment provided for an increase in the leverage ratio from 6.25 to 6.50 for the fiscal quarters ended December 29, 2003 and March 29, 2004.



In connection with the Companys Credit Agreement amendment on June 21,
2005, $1.0 million of issuance costs have been deferred and will be amortized as part of interest expense over the life of the amendment. This amendment made certain financial maintenance covenants less restrictive as described above.



(11) FAIR VALUE OF FINANCIAL INSTRUMENTS



The estimated fair value of our financial instruments is as follows:



|                                        |  |                |         |   |               |   |         |                |  |   |            |   |  |   |         |  
|--------------------------------------- |  | -------------- | ------- | - | ------------- | - | ------- | -------------- |  | - | ---------- | - |  | - | ------- | -
|                                        |  | March 31, 2005 |         |   | June 30, 2005 |  
|                                        |  | CarryingAmount |         |   | Fair Value    |   |         | CarryingAmount |  |   | Fair Value |  
|Term loan, including current portion    |  | $              | 423,984 |   |               | $ | 423,984 |                |  | $ | 422,567    |   |  | $ | 422,567 |  
|Subordinated indebtedness               |  | $              | 550,000 |   |               | $ | 567,500 |                |  | $ | 550,000    |   |  | $ | 543,125 |  
|Interest rate swap receivable (payable) |  | $              | (2,300  | ) |               | $ | (2,300  | )              |  | $ | (969       | ) |  | $ | (969    | )



The fair value of our
financial instruments is estimated based on the quoted market prices for the same or similar issues or on the current rate offered to us 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.



Effective August 20, 2003, we entered into an interest rate swap agreement, which effectively converted a



12



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portion of our fixed-rate debt to variable rate debt. The agreement is scheduled to expire in January 2007 and has a notional amount of $150 million. Under
this agreement, we receive a fixed rate of 8.875% and pay LIBOR in arrears plus a spread of 5.38% subject to a collar adjustment. As of June 30, 2005, the fair value of this swap was a liability of $1.0 million. The change in the fair value of the
swap has been recognized as a reduction to interest expense for the fiscal quarter ended June 30, 2005. On January 15, 2004, we received $1.6 million in connection with the interim settlement of this swap agreement. On July 15, 2004, we received
$1.2 million in connection with the interim settlement of this swap agreement. On January 18, 2005 we received $0.2 million in connection with the interim settlement of this swap agreement. On July 15, 2005 we received $0.2 million in connection
with the interim settlement of this swap agreement. The next reset date for this swap agreement is January 15, 2006. At each reset date the Company either receives or pays money based on the fair value of the swap as of that date.



(12) COMMITMENTS AND CONTINGENCIES



Various suits and claims arising in the ordinary course of business have
been instituted against us. We have insurance policies available to recover potential legal costs. We periodically evaluate and assess the risks and uncertainties associated with litigation independent from those associated with our 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
consolidated financial statements.



(13) RESTRUCTURING ACTIVITIES



During the fiscal year ended March 31, 2005, the Company
initiated a plan to relocate the National Enquirer publication to New York City. The Companys relocation plan involved the termination of 34 employees. This activity resulted in fiscal 2005 charges of $2.3 million for termination
benefits and $0.2 million for costs associated with the relocation of employees. During the quarter ended June 30, 2005, the Company has paid termination benefits totaling $0.8 million and relocation costs of $0.1 million. The Company has an accrual
at June 30, 2005 of $1.5 million for the remaining termination benefits associated with this action. These severance benefits will be paid out through December 2006.



|                     |  |                           |       |                   |   |      |                         |  |                            |       |                    |   |     |                        |   |      |   |  |   |      
|-------------------- |  | ------------------------- | ----- | ----------------- | - | ---- | ----------------------- |  | -------------------------- | ----- | ------------------ | - | --- | ---------------------- | - | ---- | - |  | - | -----
|                     |  | 2005 RestructuringExpense |       | 2005 CashPayments |   |      | Balances March 31, 2005 |  | 2006 Restructuring Expense |       | 2006 Cash Payments |   |     | Balances June 30, 2005
|Accrued liabilities: |  |                           |       |                   |   |      |                         |  |                            |       |                    |   |     |                        |   |      |   |  |   |      
|Severance            |  | $                         | 2,297 |                   | $ |     |                         |  | $                          | 2,297 |                    | $ |    |                        | $ | (759 | ) |  | $ | 1,538
|Relocation           |  |                           | 185   |                   |   | (185 | )                       |  |                            |      |                    |   | 125 |                        |   | (125 | ) |  |   |     
|                     |  |                           |       |                   |   |      |                         |  |                            |       |                    |   |     |                        |   |      |   |  |   |      
|                     |  | $                         | 2,482 |                   | $ | 185  | )                       |  | $                          | 2,297 |                    | $ | 125 |                        | $ | (884 | ) |  | $ | 1,538
|                     |  |                           |       |                   |   |      |                         |  |                            |       |                    |   |     |                        |   |      |   |  |   |      



(14) NEW ACCOUNTING PRONOUNCEMENTS



In May 2005, the Financial Accounting Standards Board
(FASB) issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154 requires retrospective application to prior periods
financial statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in
accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle should be recognized in the period of the accounting change. SFAS 154 also requires that a change in depreciation,
amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. SFAS 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS 154 was issued. The Company is required to adopt the provisions of SFAS
154, as applicable, beginning in fiscal 2007.



13



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(15) OTHER INCOME (EXPENSE)



The Company received $1.6 million in cash from a barter advertising agreement during the quarter ended June 30, 2005. The
Company provided advertising to a third party during fiscal 2001 in exchange for equity in the respective company. There was no revenue recognized related to this transaction in fiscal 2001 as the fair value of the equity received was not
determinable; only the cost to provide advertising space was recognized.



(16) SUBSEQUENT EVENT



As of January 1, 2004,
the Company, and Oak Productions, Inc. (Oak) entered into a Consulting Services Agreement (the Consulting Services Agreement), pursuant to which Oak agreed to provide various editorial consulting and other services for a
five-year term. In consideration for the consulting services, the Company agreed to pay Oak a percentage of the advertising revenues of certain respective publications and to also grant Oak a return in the Company based on the valuation of certain
publications (Phantom Equity Interests). The Phantom Equity Interests represent the contractual right to the receipt of a payout upon a liquidity event. Upon the occurrence of a liquidity event, the Phantom Equity Interests would fully
vest, and the Company would pay Oak an amount equal to 1% of the total enterprise value of certain of the Companys publications. A liquidity event would be triggered by a sale of certain of the Companys publications, a sale of the
Company to a third party, a change in control of the Company, or by an initial public offering. If a liquidity event did not occur by the end of the five year term, the Company could have been required to repurchase the Phantom Equity Interests.
Additionally, if a liquidity event did not occur by the end of the five year term the Company would have had the right to repurchase the Phantom Equity Interests from Oak.



The Company and Oak entered into another agreement dated January 1, 2004 (the Agreement to Make Contributions),
pursuant to which the Company agreed to make specified contributions to certain organizations for a term of five calendar years.



On July 15, 2005, the Company and Oak mutually agreed to terminate the Consulting Services Agreement and the Agreement to Make Contributions effective as
of that date. The Company and Oak also agreed that they would have no rights or obligations arising on or after that date under any of the provisions of the Agreement to Make Contributions and the Consulting Services Agreement, including any right
to further compensation there under, and that all rights, benefits and obligations with respect to the equity interest described above were terminated and relinquished as of that date.



14



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Executive Summary



We are a leading publisher in the field of celebrity journalism, health & fitness, country music and Spanish language magazines. Our publications
includeStar, Shape, Celebrity Living, Mens Fitness, Fit Pregnancy, Natural Health, Muscle & Fitness, Flex,MPH,Shape en Espanol, Looking Good Now, National Enquirer, Globe, Country Weekly, Mira!,and other weekly and
monthly publications.



Please note that in our fiscal quarter
ended June 30, 2005 we recognized one less issue of Fit Pregnancydue to the timing of delivery to our third party wholesalers. Revenues and EBITDA (for purposes of our Credit Agreement debt covenant calculation) from this one issue which
will be recognized in our second quarter is $1.9 million and $1.1 million, respectively.



Results of Operations



Fiscal
Quarter Ended June 30, 2005 vs. Fiscal Quarter Ended June 28, 2004



Revenues



Total operating revenues were $131.1
million for the current fiscal quarter representing a decrease of $2.3 million, or 1.7%, from the prior years comparable fiscal quarter. Revenues for the current fiscal quarter compared to the prior years comparable fiscal quarter were
flat after adjusting for the issue of Fit Pregnancy discussed above that was not recognized in the current fiscal quarter.



Advertising revenues were $43.1 million for the current fiscal quarter and also for the prior years comparable fiscal quarter. The prior years
comparable fiscal quarter included $1.2 million of revenue from the issue of Fit Pregnancy mentioned above. Excluding this extra issue of Fit Pregnancy, advertising revenues increased $1.2 million or 2.7%. This increase in advertising
revenue primarily relates to an increase in Star of approximately $2.2 million or 68%, as compared to the prior years comparable fiscal quarter. The increase in Star advertising revenue was partially offset by a decline in
advertising revenue of $1.0 million primarily related to the National Enquirer, Mens FitnessandMuscle & Fitness.



Overall newsstand revenue was down $1.6 million or 2.3% primarily as a result of a 13.5% reduction in unit sales for our weekly newspaper publications.
The reduction in unit sales was partially offset by cover price increases of our weekly newspaper publications of 10.5%. Unit sales for our newspaper publications are down 6.0% as compared to the quarter ended March 31, 2005. The primary driver of
the decline in newsstand units relates to the National Enquirer. We relocated theNational Enquirerfrom Florida to New York with a new staff and re-launched the publication in April 2005. For the first six issues of the second quarter
newsstand sales have increased 8.4% for the National Enquirer versus the current fiscal quarter and are flat as compared to the quarter ended March 31, 2005 (prior to the relocation). Newsstand sales for Star and our other weekly
newspaper publications declined 3.6% and 6.7%, respectively, versus the prior years comparable fiscal quarter. Subscription revenue is up $0.4 million or 3.6% as compared to the prior years comparable fiscal quarter primarily related to
Starwhich has increased circulation in units by 108%.



Other revenues are down approximately $1.2 million or 14.1% due to the inclusion in other revenues of a one-time custom magazine published in the prior year as well as the unfavorable timing of certain international licensing agreements.



15



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Operating Expenses



Operating expenses increased by $7.3 million, or 6.7% as compared to the prior years comparable fiscal quarter. This increase relates to costs
associated with the launch of Celebrity Living and Looking Good Now($2.6 million), costs related to our continued subscription investment to maintain the highest quality subscriptions ($4.4 million) and an increase in depreciation and
amortization ($0.9 million).



Interest Expense



Interest expense decreased for the current fiscal quarter by $3.0 million to
$20.4 million. This decrease in interest expense primarily related to our interest rate swap agreement ($5.1 million). In the current quarter we recognized an interest expense benefit of $1.3 million related to our interest rate swap versus
increased interest expense of $3.8 million in the prior years comparable fiscal quarter related to our swap. Offsetting this benefit was a higher effective interest rate on our Credit Agreement during the current fiscal quarter of 6.0% as
compared to 3.9% in the prior years comparable fiscal quarter ($2.1 million).



Other Income (Expense)



Other income (expense)
increased for the current fiscal quarter by $1.7 million to $1.6 million as compared to the prior years comparable fiscal quarter. The increase in other income (expense) relates to $1.6 million in cash received from a barter advertising
agreement during the current fiscal quarter. We provided advertising to a third party during fiscal 2001 in exchange for equity in the respective company. There was no revenue recognized related to this transaction; only the cost to provide
advertising space was recognized.



Income Taxes



The provision for income taxes decreased for the current fiscal quarter by
$1.9 million to a benefit of $1.3 million due to the overall decrease in pre-tax income. The effective tax rate for the fiscal quarters ended June 30, 2005 and June 28, 2004 was 36% and 45%, respectively.



LIQUIDITY AND CAPITAL RESOURCES



Our primary sources of liquidity are cash generated from operations and
amounts available to be borrowed under our bank credit agreement (the Credit Agreement). The Credit Agreement is comprised of three separate term loan commitments and a $60 million revolving credit commitment. As of June 30, 2005, we had
cash and cash equivalents of $9.4 million, working capital of $6.1 million and no amounts outstanding on the revolving credit facility.



We believe that the net cash generated from operating activities and amounts available under the $60.0 million revolving credit facility will be
sufficient to provide the liquidity necessary to meet our financial commitments for at least the next twelve months. Our revolving credit commitment expires in April 2006 and our Credit Agreement expires in April 2007. We believe that, based upon
our current level of operations and anticipated growth, it will be necessary to refinance the Credit Agreement by June 2006 and the subordinated notes upon their maturity. 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 such additional sources of funding will be available to us on acceptable terms.



Cash provided by operating activities was $9.4 million for the quarter ended
June 30, 2005. Cash used in investing activities was $5.9 million for the quarter ended June 30, 2005 and was primarily used to fund capital expenditures.



Cash used in financing activities was $2.6 million for the quarter ended June 30, 2005. During the quarter ended June 30, 2005 we made term loan
repayments of $1.4 million and incurred deferred debt costs of $1.2 million. Our ability to make scheduled payments of principal and interest under the Credit Agreement and the subordinated notes, as well as our other obligations and liabilities, is
subject to our future operating performance which is dependent upon general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.



At June 30, 2005, our outstanding indebtedness totaled $973.0 million, of which $422.6 million represented borrowings under
our Credit Agreement. As of June 30, 2005, there were no amounts outstanding under the revolving credit commitment.



16



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We amended our Credit Agreement on June 21, 2005. This amendment to our Credit Agreement made certain
financial maintenance covenants less restrictive. Our Credit Agreement requires us to be in compliance with certain financial maintenance covenants which include but are not limited to, maintaining: (1) a total leverage ratio (consolidated total
debt to debt covenant EBITDA) less than 7.50, (2) a senior leverage ratio (consolidated total senior debt to debt covenant EBITDA) less than 3.50, (3) an interest expense coverage ratio (debt covenant EBITDA to consolidated interest expense) greater
than 1.50, and (4) a fixed charge coverage ratio (debt covenant EBITDA minus taxes paid in cash to consolidated fixed charges) greater than 1.10. The Credit Agreement also contains certain covenants that, among others, restrict paying cash
dividends, incurring additional indebtedness, entering into certain mergers or consolidations, making capital expenditures and selling or otherwise disposing of assets. As of June 30, 2005, the Company was in compliance with all of these covenants
and conditions. The Companys total leverage ratio as of June 30, 2005 was 7.08, our senior leverage ratio was 3.07, our interest expense coverage ratio was 1.81 and our fixed charge coverage ratio was 1.67. Additionally, as of June 30, 2005,
we were in compliance with all of the additional covenants and conditions of our Credit Agreement. Although there can be no assurances, based on current projections, we anticipate that our operating results over the next twelve months will be
sufficient to satisfy the financial covenants and conditions of our Credit Agreement, as amended.



The effective interest rate under our Credit Agreement, including amounts borrowed under the term loan commitments and revolving credit commitment, as of
June 30, 2005, was 6.0%, and the weighted average interest rates under our Credit Agreement for the fiscal quarters ended June 28, 2004 and June 30, 2005 were 3.9% and 6.0%, respectively.



As described above, calculations of the leverage ratios, the interest expense coverage ratio and the fixed charge coverage
ratio utilize debt covenant EBITDA. The following table and discussion summarizes debt covenant EBITDA for the fiscal quarters ended June 28, 2004 and June 30, 2005 (dollars in 000s). Debt covenant EBITDA should not be construed as a
measurement of financial performance. Debt covenant EBITDA is presented to identify add-backs to and deductions from net income as required under the terms of our Credit Agreement. Accordingly, debt covenant EBITDA is presented as it is a meaningful
measure of our debt compliance. Non-compliance with these maintenance covenants could result in the termination of the commitments under the Credit Agreement and the requirement to immediately repay all amounts outstanding under the Credit
Agreement.



17



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|                                                                        |  |                                   |        |                                   |   |        |  
|----------------------------------------------------------------------- |  | --------------------------------- | ------ | --------------------------------- | - | ------ | -
|                                                                        |  | Fiscal QuarterEnded June 28, 2004 |        | Fiscal QuarterEnded June 30, 2005 |  
|Net income (loss)                                                       |  | $                                 | 720    |                                   | $ | (2,279 | )
|Add (deduct):                                                           |  |                                   |        |                                   |   |        |  
|Interest expense                                                        |  |                                   | 23,436 |                                   |   | 20,389 |  
|Income taxes                                                            |  |                                   | 590    |                                   |   | (1,270 | )
|Depreciation and amortization                                           |  |                                   | 11,105 |                                   |   | 11,975 |  
|Other (income) expense, net (1)                                         |  |                                   | 56     |                                   |   | (1,624 | )
|Restructuring charge (2)                                                |  |                                   |       |                                   |   | 125    |  
|Star and National Enquirer re-launch and new titles launch expenses (3) |  |                                   | 3,859  |                                   |   | 3,608  |  
|Management fees (4)                                                     |  |                                   | 500    |                                   |   | 500    |  
|                                                                        |  |                                   |        |                                   |   |        |  
|Debt Covenant EBITDA                                                    |  | $                                 | 40,266 |                                   | $ | 31,424 |  
|                                                                        |  |                                   |        |                                   |   |        |  

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| | (1) | Net loss for the fiscal quarter ended June 30, 2005 includes $1.6 million related to cash received from a barter advertising agreement during the current fiscal quarter. We provided
advertising to a third party during fiscal 2001 in exchange for equity in the respective company. There was no revenue recognized related to this transaction; only the cost to provide advertising space was recognized.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | As noted in Footnote 13 to the consolidated financial statements, net income for the fiscal quarter ended June 30, 2005, includes a restructuring charge of $0.1 million.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The Companys Credit Agreement allows for the add-back of certain non-recurring Star and National Enquirer re-launch costs and expenses relating to the launch of
new magazine titles to the extent such charges and expenses were incurred during such quarters.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The Companys amended Credit Agreement allows for the add-back of management fees.
| | --- | ----------------------------------------------------------------------------------



Effective August 20, 2003, we entered into an interest rate swap agreement which effectively converted a portion of our
fixed-rate debt to variable rate debt. The agreement is scheduled to expire in January 2007 and has a notional amount of $150 million. Under this agreement, we receive a fixed rate of 8.875% and pay LIBOR in arrears plus a spread of 5.38% subject to
a collar adjustment. As of June 30, 2005, the fair value of this swap was a liability of $1.0 million. The change in the fair value of the swap has been recognized as a reduction in interest expense for the fiscal quarter ended June 30, 2005. On
January 15, 2004, we received $1.6 million in connection with the interim settlement of this swap agreement. On July 15, 2004, we received $1.2 million in connection with the interim settlement of this swap agreement. On January 15, 2005 we received
$0.2 million in connection with the interim settlement of this swap agreement. On July 18, 2005 we received $0.2 million in connection with the interim settlement of this swap agreement. The next reset date for this swap agreement is January 15,
2006. At each reset date the Company either receives or pays money based on the fair value of the swap as of that date.



We are subject to interest risk on our credit facilities and any future financing requirements. Our fixed rate debt consists of senior subordinated notes.



American Media Operations, Inc. has no material assets or
operations other than the investments in our subsidiaries. The subordinated notes are unconditionally guaranteed, on a senior subordinated basis, by all of our domestic subsidiaries. Each domestic subsidiary that will be organized in the future by
us, unless such subsidiary is designated as an unrestricted subsidiary, will jointly, severally, fully and unconditionally guarantee the subordinated notes on a senior subordinated basis. Subordinated note guarantees are joint and several, full and
unconditional and general unsecured obligations of the note guarantors. The note guarantors are our subsidiaries. At present, the note guarantors comprise all of our direct and indirect domestic subsidiaries. Note guarantees are subordinated in
right of payment to all existing and future senior debt of the note guarantors, including the Credit Agreement, and are also effectively subordinated to all secured obligations of note guarantors to the extent of the assets securing such
obligations, including the Credit Agreement. Furthermore, the subordinated note indentures permit note guarantors to incur additional indebtedness, including senior debt, subject to certain limitations. We have not presented separate financial
statements and other disclosures concerning each of the note guarantors, as these disclosures are not applicable under SEC rules and regulations.



So long as the factors set forth in the paragraph immediately above remain true and correct, under applicable SEC rules and regulations, our note
guarantors will not need to individually comply with the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), nor will we have to include separate financial statements and other disclosures
concerning each of the note guarantors in its Exchange Act reports.



18



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New Accounting Pronouncements



In May 2005 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS No. 154). SFAS 154 requires retrospective application to prior periods financial
statements for changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also requires that retrospective application of a change in accounting
principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle, such as a change in non-discretionary profit-sharing payments resulting from an accounting change, should be recognized in the period of
the accounting change. SFAS 154 also requires that a change in depreciation, amortization, or depletion method for long-lived, non-financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle.
SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date
SFAS 154 was issued. The Company is required to adopt the provisions of SFAS 154, as applicable, beginning in fiscal 2007.



Critical Accounting Policies and Estimates



During the fiscal quarter ended June 30, 2005, there were no significant changes related to the Companys critical accounting policies and estimates
as disclosed in the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2005.



Forward-Looking Statements



Some of the information presented in this Quarterly Report on Form 10-Q constitutes forward-looking statements, including, in particular, the statements about our plans, strategies and prospects under the heading Managements
Discussion and Analysis of Financial Condition and Results of Operations. We have based these forward-looking statements on our current assumptions, expectations and projections about future events. We caution you that a variety of factors
could cause business conditions and results to differ materially from what is contained in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions about us, including, among other things:



| |  |  | our high degree of leverage and significant debt service obligations,
| | - |  | ---------------------------------------------------------------------



| |  |  | our ability to refinance existing debt,
| | - |  | ---------------------------------------



| |  |  | our ability to increase circulation and advertising revenues,
| | - |  | -------------------------------------------------------------



| |  |  | market conditions for our publications,
| | - |  | ---------------------------------------



| |  |  | our ability to develop new publications and services,
| | - |  | -----------------------------------------------------



| |  |  | outcomes of pending and future litigation,
| | - |  | ------------------------------------------



| |  |  | the effects of terrorism, including bio-terrorism, on our business,
| | - |  | -------------------------------------------------------------------



| |  |  | increasing competition by media companies,
| | - |  | ------------------------------------------



| |  |  | lower than expected valuations associated with cash flows and revenues may result in the inability to realize the value of recorded intangibles and goodwill,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | actions of rating agencies,
| | - |  | ---------------------------



| |  |  | changes in the costs of paper used by us,
| | - |  | -----------------------------------------



| |  |  | any future changes in management,
| | - |  | ---------------------------------



| |  |  | general risks associated with the publishing industry,
| | - |  | ------------------------------------------------------



| |  |  | declines in spending levels by advertisers and consumers,
| | - |  | ---------------------------------------------------------



19



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| |  |  | the ability in a challenging environment to continue to develop new sources of circulation,
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | increased costs and business disruption resulting from diminished service levels from our wholesalers, and
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | the introduction and increased popularity over the long term of alternative technologies for the provision of news and information.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed to certain market risks that are inherent in our financial statements. We are subject to interest risk on our credit facilities and any
future financing requirements. Our fixed rate debt consists primarily of senior subordinated notes.



Interest rate changes result in increases or decreases in our income before taxes and cash provided from operating activities. A 1% change in our weighted
average interest rate on our variable rate debt would have resulted in a change of $1.4 million in our interest expense for the fiscal quarter ended June 30, 2005.



Effective August 20, 2003, we entered into an interest rate swap agreement which effectively converted a portion of our
fixed-rate debt to variable rate debt. The agreement is scheduled to expire in January 2007 and has a notional amount of $150 million. Under this agreement, we receive a fixed rate of 8.875% and pay LIBOR in arrears plus a spread of 5.38% subject to
a collar adjustment. As of June 30, 2005, the fair value of this swap was a liability of $1.0 million. The change in the fair value of the swap has been recognized as a reduction in interest expense for the fiscal quarter ended June 30, 2005. On
January 15, 2004, we received $1.6 million in connection with the interim settlement of this swap agreement. On July 15, 2004, we received $1.2 million in connection with the interim settlement of this swap agreement. On January 15, 2005 we received
$0.2 million in connection with the interim settlement of this swap agreement. On July 18, 2005 we received $0.2 million in connection with the interim settlement of this swap agreement. The next reset date for this swap agreement is January 15,
2006. At each reset date the Company either receives or pays money based on the fair value of the swap as of that date.



Our primary market risk exposures relate to (1) the interest rate risk on long-term and short-term borrowings, (2) our ability to refinance our senior
subordinated notes at maturity at market rates, (3) the impact of interest rate movements on our ability to meet interest expense requirements and comply with financial covenants and (4) the impact of interest rate movements on our ability to obtain
adequate financing to fund acquisitions. We manage the interest rate risk on our outstanding long-term and short-term debt through our use of fixed and variable rate debt. While we cannot predict or manage our ability to refinance existing debt or
the impact interest rate movements will have on our ability to refinance existing debt, we continue to evaluate our financial position on an ongoing basis.



20



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ITEM 4. CONTROLS AND PROCEDURES



As of June 30, 2005, the Companys management performed an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls
and procedures pursuant to Exchange Act Rule 15d-15(b). Based upon that evaluation, our principal executive officer and principal financial officer concluded that a material weakness existed in our internal control over financial reporting as of
June 30, 2005, as was also previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2005 (the Fiscal 2005 10-K). As a result of this material weakness, our principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures are not effective in providing them with material information relating to the Company as required to be disclosed in our periodic filings with the SEC. As was also set
forth in the Fiscal 2005 10-K, the material weakness in internal control over financial reporting as of June 30, 2005 related to the fact that we lacked a sufficient complement of personnel with a level of financial reporting expertise commensurate
with our financial reporting requirements to resolve non-routine or complex accounting matters.



Management, with oversight from the Audit Committee, has been addressing this material weakness in our internal control over financial reporting by
working to add additional personnel to our financial staff and is committed to effectively remediating the weakness as expeditiously as possible. Although the Companys remediation efforts are well underway, the material weakness will not be
considered remediated until this process is implemented in full and operational for a period of time, and our principal executive officer and principal financial officer conclude that our revised internal control over financial reporting no longer
have a material weakness and our disclosure controls and procedures are operating effectively.



Appearing as exhibits to this quarterly report are certificates by our principal executive officer and principal financial officer, which are required by Section 302 of the Sarbanes-Oxley Act of 2002. The information
set forth in this Item 4 should be read in conjunction with these Section 302 certificates. Additionally, our principal executive officer and principal financial officer have provided certain certificates to the SEC pursuant to Section 906 of the
Sarbanes-Oxley Act as exhibits to this quarterly report.



21



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See footnote 12 of Part I, Item I.



Item 6. Exhibits



Exhibit
31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



Exhibit 31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



Exhibit 32 Certification of principal executive officer and principal
financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



22



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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.

Registrant



Date: August 12, 2005



/s/ DAVID J. PECKER

David J. Pecker

Chairman of the Board, President,

Chief Executive Officer and Director

(principal executive officer)



Date: August 12, 2005



/s/ MARK
J. BROCKELMAN

Mark J. Brockelman

Vice President and Chief Accounting Officer

(principal financial officer)



23



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Exhibit Index



|            |  |                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                            
|31.1        |  | Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                
|            | 
|31.2        |  | Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                
|            | 
|32          |  | Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



24