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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549



FORM 10-Q



(Mark One)



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



For the Quarterly Period Ended September 29, 2003



OR



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



Commission file number(s)  1-11112



AMERICAN MEDIA OPERATIONS, INC.

(Exact name of the registrant as specified in its charter)



|Delaware                                                       |  | 59-2094424                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employee Identification No.)
|                                                               | 
|1000 American Media Way, Boca Raton, Florida                   |  | 33464                            
|(Address of principal executive offices)                       |  | (Zip Code)                       



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



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  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 November 13, 2003 there were 7,507 shares of common stock outstanding.



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

SEPTEMBER 29, 2003



|                                                                                                 |  | Page(s)
|------------------------------------------------------------------------------------------------ |  | -------
|PART I.    FINANCIAL INFORMATION                                                                 |  |        
|                                                                                                 | 
|Item 1.    Financial Statements (Unaudited) -                                                    |  |        
|                                                                                                 | 
|Condensed Consolidated Balance Sheets                                                            |  | 3      
|                                                                                                 | 
|Condensed Consolidated Statements of Income                                                      |  | 45    
|                                                                                                 | 
|Condensed Consolidated Statements of Comprehensive Income                                        |  | 67    
|                                                                                                 | 
|Condensed Consolidated Statements of Cash Flows                                                  |  | 8      
|                                                                                                 | 
|Notes to Condensed Consolidated Financial Statements                                             |  | 916   
|                                                                                                 | 
|Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 1721  
|                                                                                                 | 
|Item 3.    Quantitative and Qualitative Disclosures about Market Risk                            |  | 2122  
|                                                                                                 | 
|Item 4.    Controls and Procedures                                                               |  | 23     
|                                                                                                 | 
|PART II.    OTHER INFORMATION                                                                    |  |        
|                                                                                                 | 
|Item 1.    Legal Proceedings                                                                     |  | 24     
|                                                                                                 | 
|Item 6.    Exhibits and Reports on Form 8-K                                                      |  | 24     
|                                                                                                 | 
|Signature                                                                                        |  | 25     



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in 000s, except share information)

|                                                                                        |  | March 31,2003 |           |   | Sept. 29,2003 |  
|--------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ------------- | -
|ASSETS                                                                                  |  |               |           |   |               |  
|CURRENT ASSETS:                                                                         |  |               |           |   |               |  
|Cash and cash equivalents                                                               |  | $             | 40,475    |   |               | $
|Receivables, net                                                                        |  |               | 52,553    |   |               |  
|Inventories                                                                             |  |               | 18,422    |   |               |  
|Prepaid expenses and other                                                              |  |               | 9,601     |   |               |  
|                                                                                        |  |               |           |   |               |  
|Total Current Assets                                                                    |  |               | 121,051   |   |               |  
|                                                                                        |  |               |           |   |               |  
|PROPERTY AND EQUIPMENT, at cost:                                                        |  |               |           |   |               |  
|Land and buildings                                                                      |  |               | 4,104     |   |               |  
|Machinery, fixtures and equipment                                                       |  |               | 34,564    |   |               |  
|Display racks                                                                           |  |               | 43,427    |   |               |  
|                                                                                        |  |               |           |   |               |  
|                                                                                        |  |               | 82,095    |   |               |  
|Less  accumulated depreciation                                                         |  |               | (35,987   | ) |               |  
|                                                                                        |  |               |           |   |               |  
|                                                                                        |  |               | 46,108    |   |               |  
|                                                                                        |  |               |           |   |               |  
|LONG TERM NOTE RECEIVABLE, net                                                          |  |               | 1,415     |   |               |  
|                                                                                        |  |               |           |   |               |  
|DEFERRED DEBT COSTS, net                                                                |  |               | 30,560    |   |               |  
|                                                                                        |  |               |           |   |               |  
|GOODWILL, net of accumulated amortization of $74,757                                    |  |               | 659,052   |   |               |  
|                                                                                        |  |               |           |   |               |  
|OTHER INTANGIBLES, net of accumulated amortization of $93,938 and $101,036 respectively |  |               | 642,074   |   |               |  
|                                                                                        |  |               |           |   |               |  
|                                                                                        |  | $             | 1,500,260 |   |               | $
|                                                                                        |  |               |           |   |               |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                    |  |               |           |   |               |  
|CURRENT LIABILITIES:                                                                    |  |               |           |   |               |  
|Current portion of term loan                                                            |  | $             | 9,813     |   |               | $
|Accounts payable                                                                        |  |               | 30,730    |   |               |  
|Accrued expenses                                                                        |  |               | 79,914    |   |               |  
|Deferred revenues                                                                       |  |               | 47,217    |   |               |  
|                                                                                        |  |               |           |   |               |  
|Total current liabilities                                                               |  |               | 167,674   |   |               |  
|                                                                                        |  |               |           |   |               |  
|PAYABLE TO PARENT COMPANY                                                               |  |               | 2,173     |   |               |  
|                                                                                        |  |               |           |   |               |  
|TERM LOAN AND REVOLVING CREDIT COMMITMENT, net of current portion                       |  |               | 458,997   |   |               |  
|                                                                                        |  |               |           |   |               |  
|SUBORDINATED INDEBTEDNESS:                                                              |  |               |           |   |               |  
|10.25% Senior Subordinated Notes Due 2009                                               |  |               | 400,000   |   |               |  
|Bond Premium on 10.25% Senior Subordinated Notes Due 2009                               |  |               | 633       |   |               |  
|8.875% Senior Subordinated Notes Due 2011                                               |  |               | 150,000   |   |               |  
|11.625% Senior Subordinated Notes Due 2004                                              |  |               | 740       |   |               |  
|                                                                                        |  |               |           |   |               |  
|                                                                                        |  |               | 551,373   |   |               |  
|                                                                                        |  |               |           |   |               |  
|DEFERRED INCOME TAXES                                                                   |  |               | 145,123   |   |               |  
|                                                                                        |  |               |           |   |               |  
|STOCKHOLDERS EQUITY:                                                                   |  |               |           |   |               |  
|Common stock, $.20 par value; 7,507 shares issued and outstanding                       |  |               | 2         |   |               |  
|Additional paid-in capital                                                              |  |               | 273,480   |   |               |  
|Accumulated other comprehensive loss                                                    |  |               | (314      | ) |               |  
|Accumulated deficit                                                                     |  |               | (98,248   | ) |               |  
|                                                                                        |  |               |           |   |               |  
|TOTAL STOCKHOLDERS EQUITY                                                              |  |               | 174,920   |   |               |  
|                                                                                        |  |               |           |   |               |  
|                                                                                        |  | $             | 1,500,260 |   |               | $
|                                                                                        |  |               |           |   |               |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN 000s)



|                                                  |  | Two FiscalQuartersEndedSept. 23,2002 |         |   | Two FiscalQuartersEndedSept. 29,2003 |  
|------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------ | -
|OPERATING REVENUES:                               |  |                                      |         |   |                                      |  
|Circulation                                       |  | $                                    | 150,180 |   |                                      | $
|Advertising                                       |  |                                      | 19,410  |   |                                      |  
|Other                                             |  |                                      | 11,325  |   |                                      |  
|                                                  |  |                                      |         |   |                                      |  
|                                                  |  |                                      | 180,915 |   |                                      |  
|                                                  |  |                                      |         |   |                                      |  
|OPERATING EXPENSES:                               |  |                                      |         |   |                                      |  
|Editorial                                         |  |                                      | 18,447  |   |                                      |  
|Production                                        |  |                                      | 49,452  |   |                                      |  
|Distribution, circulation and other cost of sales |  |                                      | 24,470  |   |                                      |  
|Selling, general and administrative expenses      |  |                                      | 22,912  |   |                                      |  
|Loss on insurance settlement                      |  |                                      | 117     |   |                                      |  
|Restructuring expense                             |  |                                      |        |   |                                      |  
|Depreciation and amortization                     |  |                                      | 15,146  |   |                                      |  
|                                                  |  |                                      |         |   |                                      |  
|                                                  |  |                                      | 130,544 |   |                                      |  
|                                                  |  |                                      |         |   |                                      |  
|OPERATING INCOME                                  |  |                                      | 50,371  |   |                                      |  
|INTEREST EXPENSE, net                             |  |                                      | (24,846 | ) |                                      |  
|OTHER INCOME (EXPENSE), net                       |  |                                      | 103     |   |                                      |  
|                                                  |  |                                      |         |   |                                      |  
|INCOME BEFORE PROVISION FOR INCOME TAXES          |  |                                      | 25,628  |   |                                      |  
|PROVISION FOR INCOME TAXES                        |  |                                      | 9,590   |   |                                      |  
|                                                  |  |                                      |         |   |                                      |  
|NET INCOME                                        |  | $                                    | 16,038  |   |                                      | $
|                                                  |  |                                      |         |   |                                      |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN 000s)



|                                                  |  | FiscalQuarter Ended Sept. 23,2002 |         |   | FiscalQuarter Ended Sept. 29,2003 |  
|------------------------------------------------- |  | --------------------------------- | ------- | - | --------------------------------- | -
|OPERATING REVENUES:                               |  |                                   |         |   |                                   |  
|Circulation                                       |  | $                                 | 76,630  |   |                                   | $
|Advertising                                       |  |                                   | 9,515   |   |                                   |  
|Other                                             |  |                                   | 5,947   |   |                                   |  
|                                                  |  |                                   |         |   |                                   |  
|                                                  |  |                                   | 92,092  |   |                                   |  
|                                                  |  |                                   |         |   |                                   |  
|OPERATING EXPENSES:                               |  |                                   |         |   |                                   |  
|Editorial                                         |  |                                   | 9,880   |   |                                   |  
|Production                                        |  |                                   | 24,134  |   |                                   |  
|Distribution, circulation and other cost of sales |  |                                   | 12,661  |   |                                   |  
|Selling, general and administrative expenses      |  |                                   | 11,674  |   |                                   |  
|Loss on insurance settlement                      |  |                                   | 21      |   |                                   |  
|Restructuring expense                             |  |                                   |        |   |                                   |  
|Depreciation and amortization                     |  |                                   | 8,315   |   |                                   |  
|                                                  |  |                                   |         |   |                                   |  
|                                                  |  |                                   | 66,685  |   |                                   |  
|                                                  |  |                                   |         |   |                                   |  
|OPERATING INCOME                                  |  |                                   | 25,407  |   |                                   |  
|INTEREST EXPENSE, net                             |  |                                   | (11,380 | ) |                                   |  
|OTHER INCOME (EXPENSE), net                       |  |                                   | 53      |   |                                   |  
|                                                  |  |                                   |         |   |                                   |  
|INCOME BEFORE PROVISION FOR INCOME TAXES          |  |                                   | 14,080  |   |                                   |  
|PROVISION FOR INCOME TAXES                        |  |                                   | 6,094   |   |                                   |  
|                                                  |  |                                   |         |   |                                   |  
|NET INCOME                                        |  | $                                 | 7,986   |   |                                   | $
|                                                  |  |                                   |         |   |                                   |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(IN 000s)



|                                         |  | TwoFiscal Quarters Ended Sept. 23,2002 |        | TwoFiscal Quarters Ended Sept. 29,2003 |  
|---------------------------------------- |  | -------------------------------------- | ------ | -------------------------------------- | -
|Net income                               |  | $                                      | 16,038 |                                        | $
|                                         |  |                                        |        |                                        |  
|Other comprehensive income (loss)        |  |                                        |        |                                        |  
|Interest rate swap adjustment            |  |                                        | 359    |                                        |  
|Foreign currency translation adjustments |  |                                        |       |                                        |  
|                                         |  |                                        |        |                                        |  
|Other comprehensive income (loss)        |  |                                        | 359    |                                        |  
|                                         |  |                                        |        |                                        |  
|Comprehensive income                     |  | $                                      | 16,397 |                                        | $
|                                         |  |                                        |        |                                        |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME

(IN 000s)



|                                         |  | Fiscal Quarter Ended Sept. 23,2002 |       | Fiscal Quarter Ended Sept. 29,2003 |  
|---------------------------------------- |  | ---------------------------------- | ----- | ---------------------------------- | -
|Net income                               |  | $                                  | 7,986 |                                    | $
|                                         |  |                                    |       |                                    |  
|Other comprehensive loss                 |  |                                    |       |                                    |  
|Foreign currency translation adjustments |  |                                    |      |                                    |  
|                                         |  |                                    |       |                                    |  
|Other comprehensive loss                 |  |                                    |      |                                    |  
|                                         |  |                                    |       |                                    |  
|Comprehensive income                     |  | $                                  | 7,986 |                                    | $
|                                         |  |                                    |       |                                    |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN 000s)



|                                                                                  |  | Two Fiscal Quarters Ended Sept. 23,2002 |         |   | Two Fiscal Quarters Ended Sept. 29,2003 |  
|--------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | --------------------------------------- | -
|Cash Flows from Operating Activities:                                             |  |                                         |         |   |                                         |  
|Net income                                                                        |  | $                                       | 16,038  |   |                                         | $
|                                                                                  |  |                                         |         |   |                                         |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                                         |         |   |                                         |  
|Loss (gain) on sale of fixed assets                                               |  |                                         | 32      |   |                                         |  
|Bond premium amortization                                                         |  |                                         | (63     | ) |                                         |  
|Depreciation of property and equipment and amortization of intangible assets      |  |                                         | 15,146  |   |                                         |  
|Deferred debt cost amortization                                                   |  |                                         | 2,249   |   |                                         |  
|Non-cash compensation charge                                                      |  |                                         | 46      |   |                                         |  
|Decrease (increase) in                                                           |  |                                         |         |   |                                         |  
|Receivables                                                                       |  |                                         | 2,209   |   |                                         |  
|Inventories                                                                       |  |                                         | 1,339   |   |                                         |  
|Prepaid expenses and other                                                        |  |                                         | (3,223  | ) |                                         |  
|Increase (decrease) in                                                           |  |                                         |         |   |                                         |  
|Accounts payable                                                                  |  |                                         | (4,657  | ) |                                         |  
|Accrued expenses                                                                  |  |                                         | 8,341   |   |                                         |  
|Accrued interest                                                                  |  |                                         | 5,195   |   |                                         |  
|Payable to Parent Company                                                         |  |                                         | (30     | ) |                                         |  
|Accrued income taxes                                                              |  |                                         | 3,357   |   |                                         |  
|Deferred revenues                                                                 |  |                                         | (4,238  | ) |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Total adjustments                                                                 |  |                                         | 25,703  |   |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Net cash provided by operating activities                                         |  |                                         | 41,741  |   |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Cash Flows from Investing Activities:                                             |  |                                         |         |   |                                         |  
|Capital expenditures                                                              |  |                                         | (11,401 | ) |                                         |  
|Proceeds from the sale of fixed assets                                            |  |                                         |        |   |                                         |  
|Acquisition of business                                                           |  |                                         |        |   |                                         |  
|Loss on insurance settlement                                                      |  |                                         | 3,785   |   |                                         |  
|Payment received on long term note receivable                                     |  |                                         |        |   |                                         |  
|Allocable insurance proceeds for carrying value of Boca facility                  |  |                                         | 35      |   |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Net cash provided by (used in) investing activities                               |  |                                         | (7,581  | ) |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Cash Flows from Financing Activities:                                             |  |                                         |         |   |                                         |  
|Term loan and revolving credit commitment principal repayments                    |  |                                         | (16,537 | ) |                                         |  
|Capital contribution                                                              |  |                                         |        |   |                                         |  
|Payment of deferred debt costs                                                    |  |                                         | (1,293  | ) |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Net cash provided by (used in) financing activities                               |  |                                         | (17,830 | ) |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Effect of Exchange Rate Changes on Cash                                           |  |                                         |        |   |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Net Increase (Decrease) in Cash and Cash Equivalents                              |  |                                         | 16,330  |   |                                         |  
|Cash and Cash Equivalents at Beginning of Period                                  |  |                                         | 18,676  |   |                                         |  
|                                                                                  |  |                                         |         |   |                                         |  
|Cash and Cash Equivalents at End of Period                                        |  | $                                       | 35,006  |   |                                         | $
|                                                                                  |  |                                         |         |   |                                         |  
|Supplemental Disclosures of Cash Flow Information:                                |  |                                         |         |   |                                         |  
|Cash paid during the period for                                                  |  |                                         |         |   |                                         |  
|Income taxes                                                                      |  | $                                       | 6,352   |   |                                         | $
|Interest                                                                          |  |                                         | 21,567  |   |                                         |  



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



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AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 29, 2003

(000s omitted in all tables)

(unaudited)



(1) BASIS OF PRESENTATION



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP (accounting principles generally
accepted in the United States of America) 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, 2003.



In the opinion of management, all adjustments considered necessary for a fair
presentation have been included herein. Operating results for the fiscal period ended September 29, 2003 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.



(2) ACQUISITIONS



On January 23, 2003 the Company and EMP Group LLC, the
owner of 100% of the common stock of American Media, Inc., acquired Weider Publications LLC (the Weider Acquisition), a newly formed company to which the magazine business of Weider Publications, Inc. and Weider Interactive Networks,
Inc. had been contributed by Weider Health and Fitness LLC and Weider Interactive Networks, Inc. The aggregate purchase price was $357.3 million, which includes a post-closing working capital adjustment of $7.3 million.



The following unaudited pro forma financial information gives effect to the
Weider acquisition as if it had occurred as of the beginning of the period presented:



|                   |  | Two Fiscal QuartersEnded Sept. 23, 2002
|------------------ |  | ---------------------------------------
|Operating revenues |  | $                                      
|Net income         |  | $                                      



The unaudited pro
forma results of operations are presented for informational purposes only and may not necessarily reflect the future results of operations of the Company or what the results of operations would have been had the Company owned and operated the Weider
properties as of the beginning of the period presented.



(3) 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; however, circulation revenues and related expenses are recognized for financial
statement purposes on an issue date



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basis (i.e., off sale date). Special topic and monthly issues revenue and related expenses are recognized at the on sale date. On or about the date each
issue is placed on sale, the Company receives a percentage of the issues estimated sales proceeds for our publications as an advance from the distributors. All of our publications are sold with full return privileges.



Revenues from copy sales are net of reserves provided for expected sales
returns, which are established in accordance with GAAP, after considering such factors as sales history and available market information. We continually monitor the adequacy of the reserves and make adjustments when necessary. 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 subscriptions as served. Advertising revenues are recognized in the period in which the related advertising appears in
the publications.



Deferred revenues are comprised of the
following:



|              |  | March 31, 2003 |        | Sept. 29,2003
|------------- |  | -------------- | ------ | -------------
|Single Copy   |  | $              | 7,971  |              
|Subscriptions |  |                | 38,376 |              
|Advertising   |  |                | 870    |              
|              |  |                |        |              
|              |  | $              | 47,217 |              
|              |  |                |        |              



Other revenues,
primarily from marketing services performed for third parties by Distribution Services, Inc. (DSI), a wholly-owned subsidiary, are recognized when the service is performed.



(4) 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, 2003 |        | Sept. 29, 2003
|--------------------------------------------------------------------------- |  | -------------- | ------ | --------------
|Raw materials  paper                                                       |  | $              | 11,154 |               
|Finished product  paper, productionand distribution costs of future issues |  |                | 7,268  |               
|                                                                            |  |                |        |               
|                                                                            |  | $              | 18,422 |               
|                                                                            |  |                |        |               



(5) GOODWILL AND OTHER INTANGIBLE
ASSETS



Other intangibles, net, consists of the following:



|                                      |  | March 31, 2003 |         |   | Sept. 29, 2003 |  
|------------------------------------- |  | -------------- | ------- | - | -------------- | -
|Tradenames  indefinite-lived         |  | $              | 629,441 |   |                | $
|Covenants not to compete              |  |                | 22,500  |   |                |  
|Subscriber lists                      |  |                | 66,171  |   |                |  
|Advertising relationships             |  |                | 7,750   |   |                |  
|Non-subscriber customer relationships |  |                | 10,150  |   |                |  
|                                      |  |                |         |   |                |  
|                                      |  |                | 736,012 |   |                |  
|Less: accumulated amortization        |  |                | (93,938 | ) |                |  
|                                      |  |                |         |   |                |  
|                                      |  | $              | 642,074 |   |                | $
|                                      |  |                |         |   |                |  



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The changes in the carrying amount of goodwill for the two fiscal quarters ended September 29, 2003 can
be summarized as follows:



|                             |  | Sept. 29, 2003
|---------------------------- |  | --------------
|Balance, beginning of period |  | $             
|Acquisition of Weider        |  |               
|                             |  |               
|Balance, end of period       |  | $             
|                             |  |               



The increase in
goodwill for the two fiscal quarters ended September 29, 2003 primarily relates to additional employee termination costs incurred in connection with the Weider acquisition. These termination costs are a result of the relocation of certain operations
from the Companys Woodland Hills, California and Boston offices to New York.



Goodwill and intangibles with indefinite lives will be tested for impairment annually or more frequently when events or circumstances indicate that an impairment may have occurred. The Company uses the beginning of
its fiscal fourth quarter as the date for its annual impairment tests. The Company performed its annual impairment test for fiscal 2003 as of the beginning of the fourth quarter of fiscal 2003 and found no impairment.



Amortization expense of other intangible assets for the fiscal quarter ended
September 29, 2003 was $7.1 million. Based on the carrying value of identified intangible assets recorded at September 29, 2003, and assuming no subsequent impairment of the underlying assets, annual amortization expense for the next five fiscal
years is expected to be as follows:



|Fiscal Year |  |  
|----------- |  | -
|2004        |  | $
|2005        |  |  
|2006        |  |  
|2007        |  |  
|2008        |  |  



(6) INCOME TAXES



The Company accounts for income taxes under the liability method in
accordance with 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), which was comprised of a $340 million term loan commitment, was amended on November 1, 1999 in connection with an acquisition to increase the term loan amount to
$430 million and provide a $60 million revolving credit commitment. We also amended the Credit Agreement on February 14, 2002, in connection with the issuance of subordinated notes. The amendment included changes to the interest rates discussed
below, as well as changes to certain financial covenants. The Company amended the Credit Agreement on May 22, 2002. This amendment restructured the marginal interest rate on the Companys term loans. Additionally, the Company amended the Credit



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Agreement on January 23, 2003, in connection with the Weider Acquisition to increase the term loan amount by $140 million.



(a) Borrowings under the term loan commitments are payable
in varying quarterly installments from July 2001 through April 2007. We are required to make Excess Cash Flow payments (as defined), which will be applied ratably to the then outstanding term loans. Included in the current portion of the term loan
in the accompanying condensed consolidated balance sheet as of March 31, 2003 is $3,274,000 of required Excess Cash Flow relating to fiscal 2003.



(b) Revolving Credit Commitment  The Credit Agreement also provides for additional borrowings up to a maximum of $60 million.
This 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 our option. As of September 29, 2003, no amounts were outstanding under
the revolving credit facility.



(c)
Commitment Fees  We are required to pay a commitment fee ranging from 3/8% to 1/2% of the unused portion of the revolving commitment.



(d) Guarantees, Collateral and Financial Covenants  Our obligations under the Credit Agreement are guaranteed by all of our
subsidiaries. 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.



In addition
to the above, 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. We are also required to satisfy certain financial tests relating to operating cash flow and debt coverage ratios.



The effective interest rate under the Credit Agreement, including amounts borrowed under the term loan commitments and revolving credit commitment, as of
September 29, 2003 was 4.0% and the weighted average effective interest rates for the two fiscal quarters ended September 23, 2002 and September 29, 2003 were 5.6% and 4.1%, respectively.



Effective March 26, 2002, we entered into two interest rate swap agreements, which effectively converted a portion of our
fixed-rate debt to variable rate debt. The first agreement, which was originally scheduled to expire in May 2004, had a notional amount of $125 million. Under this agreement, we were to receive a fixed rate of 10.25% and were to pay LIBOR in arrears
plus a spread of 5.265%. The second agreement, which was originally scheduled to expire in May 2005, had a notional amount of $25 million. Under this agreement, we were to receive a fixed rate of 10.25% and we were to pay LIBOR in arrears plus a
spread of 4.885%. On June 29, 2002, we received $3,277,000 to terminate these two interest rate swap agreements. This amount received was recognized as a reduction of interest expense for the quarter ended June 24, 2002.



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 September 29, 2003, the fair value of this swap was $1,535,000. This amount was recognized as a reduction of interest expense for the quarter ended September 29, 2003.



(8) FRONTLINE MARKETING



On November 27, 2000, the Company sold its 80% owned subsidiary, FMI, to the
minority shareholder for a $2.5 million note receivable (the FMI Note). The FMI Note initially had a short-term component of $500,000, which amount has been paid in full, and a long-term component of $2,000,000 which is payable to



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us based on defined cash flow of FMI. The FMI Note bears interest at 9%. Due to the uncertainty of FMIs ability to generate defined cash flow for the
repayment of the FMI Note, we initially reserved $1.6 million of the FMI Note. No gain or loss was initially recognized on this transaction. As of September 29, 2003, the FMI Notes balance was $1.4 million due to payments received from FMI.



(9) ANTHRAX INCIDENT



The Companys Boca Raton headquarters, which housed substantially all
of the Companys operations (including its photo, clipping and research libraries), executive offices and certain administrative functions, was closed on October 7, 2001 by the Palm Beach County Department of Health when traces of anthrax were
found on a computer keyboard following the death of a photo editor of the Sunfrom inhalation anthrax. The Company entered into a two-year lease for a 53,000 square foot facility two blocks from its current Boca Raton headquarters. In
February 2002, the Palm Beach County of Health quarantined the building for an additional 18 months.



In May 2002, the Company and its insurance carrier reached a final compromise regarding the Companys insurance claim and the Company received a
compromised payment. The insurance proceeds resulted in a net gain on the insurance settlement of $7,613,000 for the fiscal year ended March 31, 2003. During the fiscal year ended March 31, 2003, the Company incurred costs for maintaining the Boca
facility such as security and utilities, which were netted against the gain on insurance settlement. The Company expensed these costs as incurred.



On April 17, 2003, the Company sold its anthrax-contaminated headquarters in Boca Raton, Florida to 5401 Broken Sound LLC. As a result of the sale, the
Company will continue its two-year lease in the 53,000 square foot facility described above. 5401 Broken Sound LLC paid $40,000 as consideration for the transfer of ownership. During the quarter ended September 29, 2003, compensation expense
totaling $200,000 was paid in connection with the sale of this facility. This was recorded as loss on insurance settlement in the consolidated statement of income for the quarter ended September 29, 2003.



(10) LITIGATION



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. In the opinion of management, none of the suits and claims currently pending will have a material adverse effect on the Companys financials statements.



(11) DEFERRED DEBT COSTS



Certain costs incurred in connection with the issuance of our long-term debt have been deferred and are amortized using the effective interest rate method
as part of interest expense over periods from 7 to 10 years.



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 were deferred and are being amortized as part of interest expense over
the life of the notes.



In connection with our issuance of $150
million of 8.875% Senior Subordinated Notes due 2011 on January 23, 2003, $8.4 million of issuance costs were deferred and are being amortized as part of interest expense over the life of the notes. Additionally, in connection with our increase in
the Credit Agreement of $140 million on January 23, 2003, $3.5 million of financing costs were deferred and are being amortized as part of interest expense over the life of the Credit Agreement.



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(12) SUBORDINATED INDEBTEDNESS



On May 7, 1999, the Company issued $250,000,000 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 our option at prices ranging from 105.1% to 100% of their face amount after April 2004. The
indenture under which the notes were issued includes certain restrictive covenants that limit, among other things, our ability to incur indebtedness, give guarantees, pay dividends, make investments, sell assets and merge or consolidate.



On February 14, 2002, the Company issued $150,000,000 in aggregate
principal amount of 10.25% Series B Senior Subordinated Notes due 2009 through a private placement. The gross proceeds from the offering were $150,750,000 including a premium on the notes of $750,000. The Company used the gross proceeds of the
offering (a) to make a $75,375,000 distribution to EMP Group LLC, (b) to prepay $68,375,000 of the term loans under the Credit Agreement and (c) to pay transaction costs. The notes are unsecured and subordinated in right of payment to all our
existing and future senior indebtedness. The notes rank equally with all our existing and future senior subordinated indebtedness. The notes are guaranteed on a senior subordinated basis by all our current subsidiaries.



On January 23, 2003, the Company issued $150,000,000 in aggregate principal
amount of 8.875% Senior Subordinated Notes due 2011 through a private placement. The net proceeds from the offering were $145,875,000, including a discount on the notes of $4,125,000. We used the net proceeds of the offering to (a) fund the
acquisition of Weider Publications LLC, and (b) pay the transaction costs. These notes are unsecured and subordinated in right of payment to all our existing and future senior indebtedness. The notes rank equally with all our existing and future
senior subordinated indebtedness. The notes are guaranteed on a senior subordinated basis by all our current subsidiaries.



(13) 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 management and certain other investors contributed approximately $434.6 million in cash and existing ownership interests of
EMP Group LLC, our ultimate parent, valued at approximately $73.3 million, to a merger entity which was then merged with and into EMP Group LLC in exchange for newly issued ownership interests of EMP Group LLC.



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 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, have
entered into a Management Agreement pursuant to which THL Managers V, L.L.C. and Evercore Advisors L.P. will provide certain management and advisory services to American Media, Inc. for an annual fee of $1.0 million each. This Management Agreement
is amortized to expense by the Company over the annual period. Additionally, $2.3 million of management bonuses were granted as part of the recapitalization. These bonuses were charged to expense by the Company during the fiscal quarter ended June
30, 2003. Additionally, the intercompany



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payable to American Media, Inc. was eliminated as a result of the recapitalization.



(14) RESTRUCTURING ACTIVITIES



During the fiscal quarter ended September 29, 2003, the Company initiated a plan to relocate the Star and Mira! publications to New York
City. The Companys relocation plan involved the termination of 93 employees. This activity resulted in a charge of approximately $2,566,000 for termination benefits and $139,000 for costs associated with the relocation of existing employees.
Through September 29, 2003, the Company has paid termination benefits to 55 employees totaling $436,000 and paid $139,000 of costs associated with the relocation of existing employees. The Company has an accrual at September 29, 2003, of $2,130,000
for the remaining termination benefits associated with this action. These severance benefits will be paid out through October 2004. The Company has completed its restructuring plan.



The following summarizes the activity in the Companys reserve related to this activity for the fiscal quarter ended
September 29, 2003 (in thousands):



|                     |  | Restructuring Expense |       | CashPayments |   |      | Balance Sept. 29, 2003
|-------------------- |  | --------------------- | ----- | ------------ | - | ---- | ----------------------
|Accrued liabilities: |  |                       |       |              |   |      |                       
|Severance            |  | $                     | 2,566 |              | $ | (436 | )                     
|Relocation           |  |                       | 139   |              |   | (139 | )                     
|                     |  |                       |       |              |   |      |                       
|                     |  | $                     | 2,705 |              | $ | (575 | )                     
|                     |  |                       |       |              |   |      |                       



In connection with the relocation of
Star Magazine, the Company entered into an agreement to lease an additional 33,000 square feet in its One Park Avenue building in New York City. The lease term for this additional space is from November 2003 to March 2010.



(15) NEW ACCOUNTING PRONOUNCEMENTS



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 superceded EITF Consensus No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring). SFAS No. 146 affects the timing of the recognition of costs associated with an exit or disposal plan by requiring them to be recognized when incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No.
146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on our condensed consolidated financial statements.



In November 2002, the FASB issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This Interpretation expands the disclosures to be made by a guarantor about its obligations under certain
guarantees and requires that, at the inception of a guarantee, a guarantor recognize a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this Interpretation are
effective for guarantees issued or modified after December 31, 2002. The adoption of this Interpretation did not have a material effect on our condensed consolidated financial statements.



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN
46). This Interpretation requires variable interest entities (commonly referred to as SPEs) to be consolidated by the primary beneficiary of the entity if certain criteria are met. FIN 46 is effective immediately for all new variable
interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual



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period beginning after December 15, 2003. The adoption of this Interpretation did not have a material effect on our condensed consolidated financial
statements.



In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for contracts entered into or modified after
June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our condensed consolidated financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.
This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as
a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 30, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 150 did not have a material impact on our condensed consolidated financial statements.



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



Please note that on January 23, 2003, we acquired Weider Publications, LLC. Accordingly, the three and six months ended September 29, 2003, includes
the results of the Weider publications.



Results of Operations



Fiscal Quarter Ended September 29, 2003 vs. Fiscal Quarter Ended
September 23, 2002



Total operating revenues were $126,873,000 for the
current fiscal quarter. Operating revenues increased by $34,781,000, or 37.8%, from the prior years comparable fiscal quarter. This increase is primarily due to the Weider acquisition. Circulation revenue increased $3.8 million, primarily due
to the Weider acquisition partially offset by decreased single copy sales from our tabloids. Advertising revenues increased 304.4%, from $9.5 million to $38.5 million, primarily due to the Weider acquisition.



Circulation revenues (which include all single copy and subscription sales) were $80,472,000
for the current fiscal quarter. Circulation revenues increased by $3,842,000, or 5.0%, when compared to the prior years comparable fiscal quarter. This circulation increase was primarily related to the Weider acquisition partially offset by a
19.0% decrease in unit sales for the tabloids from the prior years quarter. The overall newsstand circulation in terms of units for all checkout titles in the industry is down approximately 11.3% for the six months ended June 30, 2003 compared
to the prior years period.



Advertising revenues were $38,475,000 for the
current fiscal quarter. Advertising revenues increased by $28,960,000, or 304.4%, when compared to the prior years comparable fiscal quarter. This increase was primarily due to the Weider acquisition which contributed $28.8 million.



Total operating expenses for the current fiscal quarter increased by
$33,130,000, or 49.7%, when compared to the prior years comparable fiscal quarter. This increase was primarily due to the Weider acquisition.



Interest expense increased for the current fiscal quarter by $6,259,000 to $17,639,000 compared to the prior years comparable fiscal quarter. This increase in
interest expense relates to a higher amount of debt outstanding for the current fiscal quarter due to the Weider acquisition offset by a lower average effective interest rate. Additionally, we recognized a reduction of interest expense of $1,535,000
for the current fiscal quarter related to our interest rate swap agreement entered into during the current quarter.



Two Fiscal Quarters Ended September 29, 2003 vs. Two Fiscal Quarters Ended September 23, 2002



Total operating revenues were $251,847,000 for the two current fiscal quarters. Operating revenues increased by $70,932,000, or 39.2%, from
the prior years comparable two fiscal quarters. This increase was primarily related to the Weider acquisition. Circulation revenue increased $9.6 million, or 6.4%, when compared to the two prior years comparable fiscal quarters. The
circulation increase was primarily related to the Weider acquisition partially offset by a 15.6% decrease in unit sales for the tabloids from the two prior years comparable fiscal quarters. The overall newsstand circulation in terms of units
for all checkout titles in the industry is down approximately 11.3% for the six months ended June 30, 2003 compared to the prior years period.



Advertising revenues were $76,168,000 for the two current fiscal quarters. Advertising revenues increased by $56,758,000, or 292.4%, when compared to the two prior
years comparable fiscal quarters. This increase was primarily due to the Weider acquisition which contributed $55.7 million, coupled with an increase of $1.1



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million for the tabloids. For the nine months ended September 2003, the National Enquirer and Star are up 4.6% in pages, while the industry is
flat.



Total operating expenses for the two current fiscal quarters increased
by $65,355,000, or 50.0%, when compared to the two prior years comparable fiscal quarters. This increase was primarily due to the Weider acquisition.



Interest expense increased for the two current fiscal quarters by $12,843,000 to $37,689,000 compared to the prior years comparable fiscal quarters. This increase
in interest expense relates to a higher amount of debt outstanding for the two current fiscal quarters due to the Weider acquisition offset by lower average effective interest rate. On June 29, 2002 and October 8, 2002, we received $3,277,000 and
$3,978,000, respectively, to terminate our interest rate swap agreements. The $3,277,000 and $3,905,000 of the $3,978,000 were recognized as a reduction to interest expense for the two prior years comparable fiscal quarters. Additionally, we
recognized a reduction of interest expense of $1,535,000 for the two current fiscal quarters related to our interest rate swap agreement entered into during the current quarter.



LIQUIDITY AND CAPITAL RESOURCES



We have substantially increased our indebtedness in connection with the Weider acquisition. Our liquidity requirements have been significantly increased, primarily due to
increased interest and principal payment obligations under the Credit Agreement and our subordinated notes. 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 fund our debt service requirements under the Credit Agreement and the subordinated notes, to make capital expenditures and to cover working capital requirements. As of September 29, 2003, there were no amounts outstanding on the
revolving credit facility. We believe, however, that based upon our current level of operations and anticipated growth, it will be necessary to refinance 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.



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 September 29, 2003, we had cash and cash equivalents of $22.6
million and a working capital deficiency of $18.7 million. We do not consider our working capital deficiency to be a true measure of our liquidity position as our working capital needs typically are met by cash generated by our business. Our working
capital deficiency resulted principally from:



| |  | our policy of using available cash to reduce borrowings which are recorded as noncurrent liabilities, thereby reducing current assets without a corresponding reduction in current
liabilities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | accounting for deferred revenues as a current liability. Deferred revenues are comprised of deferred subscriptions, advertising and single copy revenues and represent payments
received in advance of the period in which the related revenues will be recognized.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Historically, our primary sources of liquidity have been cash generated from operations and amounts available under our credit agreements, which have been used to fund shortfalls in available cash.



We made capital expenditures in the fiscal quarters ended September 23, 2002 and September
29, 2003 totaling $11.4 million and $12.5 million, respectively.



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At September 29, 2003, our outstanding indebtedness totaled $1,013.9 million, of which $462.5 million represented
borrowings under the credit agreement and $0.6 million represents unamortized bond premium. At November 13, 2003, our outstanding indebtedness totaled $1,012.4 million, of which $461.0 million represented borrowings under the credit agreement. As of
September 29, 2003, the Companys effective interest rate on borrowings under the credit agreement was 4.0%. The effective rate for borrowings under the credit agreement averaged 4.1% for the two fiscal quarters ended September 29, 2003. The
effective rate for borrowings under the credit agreement averaged 5.6% for the two fiscal quarters ended September 23, 2002.



We have 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 facility, and are also effectively
subordinated to all secured obligations of note guarantors to the extent of the assets securing such obligations, including the credit facility. 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.



Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA)



The following table and discussion summarizes EBITDA
for the three and six months ended September 23, 2002 and September 29, 2003 (dollars in 000s):



|                              |  | FiscalQuarter Ended Sept. 23,2002 |        |   | Fiscal Quarter Ended Sept. 29, 2003 |   |        | Two Fiscal Quarters Ended Sept. 23, 2002 |  |   | Two Fiscal Quarters Ended Sept 29, 2003
|----------------------------- |  | --------------------------------- | ------ | - | ----------------------------------- | - | ------ | ---------------------------------------- |  | - | ---------------------------------------
|Net income (1) (2)            |  | $                                 | 7,986  |   |                                     | $ | 5,938  |                                          |  | $ | 16,038                                 
|Add (deduct) -                |  |                                   |        |   |                                     |   |        |                                          |  |   |                                        
|Interest expense              |  |                                   | 11,380 |   |                                     |   | 17,639 |                                          |  |   | 24,846                                 
|Income taxes                  |  |                                   | 6,094  |   |                                     |   | 3,576  |                                          |  |   | 9,590                                  
|Depreciation and amortization |  |                                   | 8,315  |   |                                     |   | 10,193 |                                          |  |   | 15,146                                 
|Other (income) expense, net   |  |                                   | (53    | ) |                                     |   | (95    | )                                        |  |   | (103                                   
|                              |  |                                   |        |   |                                     |   |        |                                          |  |   |                                        
|EBITDA                        |  | $                                 | 33,722 |   |                                     | $ | 37,251 |                                          |  | $ | 65,517                                 
|                              |  |                                   |        |   |                                     |   |        |                                          |  |   |                                        



|(1) | As noted in Footnote 13, net income for the two fiscal quarters ended September 29, 2003, includes a one-time non-recurring $2.3 million bonus as an expense granted to certain
members of management as part of the recapitalization. This bonus was funded with cash contributed as part of the recapitalization.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As noted in Footnote 14, net income for the two fiscal quarters ended September 29, 2003 includes a $2.7 million restructuring charge.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



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The Company defines EBITDA as net income (loss) before interest expense, income taxes, depreciation and amortization, and
other income (expense). EBITDA should not be considered in isolation or as a substitute for net income or cash flows from operating activities, which have been prepared in accordance with GAAP, or as a measure of our operating performance,
profitability or liquidity. We believe EBITDA provides useful information regarding our ability to service our debt, and we understand that such information is considered by certain investors to be an additional basis for evaluating a companys
ability to pay interest and repay debt. EBITDA is a widely used performance measure for publishing companies and is provided here as a supplemental measure of operating performance to net income calculated in accordance with GAAP.



New Accounting Pronouncements



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. SFAS No. 146 superceded EITF Consensus No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).
SFAS No. 146 affects the timing of the recognition of costs associated with an exit or disposal plan by requiring them to be recognized when incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on our condensed consolidated financial statements.



In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This Interpretation expands the disclosures to be made by a guarantor about its obligations under certain guarantees and requires that, at the
inception of a guarantee, a guarantor recognize a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this Interpretation are effective for guarantees issued or
modified after December 31, 2002. The adoption of this Interpretation did not have a material effect on our condensed consolidated financial statements.



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). This Interpretation requires
variable interest entities (commonly referred to as SPEs) to be consolidated by the primary beneficiary of the entity if certain criteria are met. FIN 46 is effective immediately for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 15, 2003. The adoption of this Interpretation
did not have a material effect on our condensed consolidated financial statements.



In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is
effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our condensed consolidated financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within
its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 30, 2003, and otherwise is effective at the beginning of the first interim period beginning after
June 15, 2003. The adoption of this Statement did not have a material impact on our condensed consolidated financial statements.



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Forward-Looking Statements



Some of the information presented in this 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,                                                                                         |  |  ̈ |  | changes in the costs of paper used by us,                                                                                          
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------
|  |  |                                                                                                                                                               | 
| ̈ |  | our ability to increase circulation and advertising revenues, market conditions for our publications,                                                         |  |  ̈ |  | any future changes in management,                                                                                                  
|  |  |                                                                                                                                                               | 
| ̈ |  | our ability to develop new publications and services,                                                                                                         |  |  ̈ |  | general risks associated with the publishing industry,                                                                             
|  |  |                                                                                                                                                               | 
| ̈ |  | outcomes of pending and future litigation,                                                                                                                    |  |  ̈ |  | declines in spending levels by advertisers and consumers,                                                                          
|  |  |                                                                                                                                                               | 
| ̈ |  | the effects of terrorism, including bio-terrorism, on our business,                                                                                           |  |  ̈ |  | the ability in a challenging environment to continue to develop new sources of circulation,                                        
|  |  |                                                                                                                                                               | 
| ̈ |  | increasing competition by domestic and foreign media companies,                                                                                               |  |  ̈ |  | increased costs and business disruption resulting from diminished service levels from our wholesalers, and                         
|  |  |                                                                                                                                                               | 
| ̈ |  | lower than expected valuations associated with cash flows and revenues may result in the inability to realize the value of recorded intangibles and goodwill, |  |  ̈ |  | 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.



Effective March 26, 2002, we entered
into two interest rate swap agreements, which effectively converted a portion of our fixed-rate debt to variable rate debt. The first agreement, which was originally scheduled to expire in May 2004, had a notional amount of $125 million. Under this
agreement, we were to receive a fixed rate of 10.25% and were to pay LIBOR in arrears plus a spread of 5.265%. The second agreement, which was originally scheduled to expire in May 2005, had a notional amount of $25 million. Under this agreement, we
were to receive a fixed rate of 10.25% and we were to pay LIBOR in arrears plus a spread of 4.885%. On June 29, 2002, we received $3,277,000 to terminate these two interest rate swap agreements. This amount received was recognized as a reduction of
interest expense for the quarter ended June 24, 2002.



Additionally, effective
June 28, 2002, we entered into two new interest rate swap agreements, which effectively converted a portion of fixed-rate debt to variable rate debt. The first agreement, which was originally scheduled to expire in May 2004, had a notional amount of
$125 million. Under this agreement, we were to receive a fixed rate of 10.25% and pay LIBOR in arrears plus a spread of 6.49%. The second agreement, which was originally scheduled to expire in May 2005, had a notional amount of $25 million. Under
this agreement, we were to receive a fixed rate of 10.25% and pay LIBOR in arrears plus a spread of 5.99%. On October 8, 2002, we received $3,978,000 to terminate these two interest rate swap agreements, which was recognized as a reduction of
interest expense for the fiscal year ended March 31, 2003.



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



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portion of our fixed-rate debt to variable 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 September 29, 2003, the fair value of this swap was $1,535,000. This amount was recognized as a reduction of interest
expense for the quarter ended September 29, 2003.



Contractual Obligations



The following table presents the future principal payment obligations and
weighted average interest rates (excluding any amounts that may be borrowed under the credit commitment or required to be prepaid under the excess cash flow provision) associated with our existing long-term instruments assuming our actual level of
indebtedness (dollars in 000s):



|                                                                           |  | Fiscal Year Ended
|-------------------------------------------------------------------------- |  | -----------------
|                                                                           |  | 2004             
|Liabilities:                                                               |  |                  
|                                                                           |  |                  
|$400,000 Fixed Rate (10.25%)                                               |  |                  
|                                                                           |  |                  
|$150,000 Fixed Rate (8.875%)                                               |  |                  
|                                                                           |  |                  
|$740 Fixed Rate (11.625%)                                                  |  |                  
|                                                                           |  |                  
|Term Loan and Revolving Loan Variable Rate (4.0% as of September 29, 2003) |  | $                



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 interest rate on our variable debt would result in a change of $1,531,000 in our interest expense for the three months ended
September 29, 2003.



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 or the impact interest rate movements will have on our
existing debt, we continue to evaluate our financial position on an ongoing basis.



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ITEM 4. CONTROLS AND PROCEDURES



(a) Disclosure Controls and Procedures:



The
Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and
procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the quarter covered by this report, the Companys disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.



(b) Internal Control Over Financial Reporting:



The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial
Officer, also conducted an evaluation of the Companys internal control over financial reporting to determine whether any changes occurred during the quarter covered by this report that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting. Based on the evaluation, there has been no such change during the period covered by this report.



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See footnote 10
of Part I, Item I.



Item 6. Exhibits and Reports on Form 8-K



a. Exhibits



Exhibit 31.1 Certification
Pursuant to Rule 13(a) -14(a) or 15(d)  14(a), as Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.



Exhibit 31.2 Certification Pursuant to Rule 13(a) -14(a) or 15(d)  14(a), as Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.



Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002



Exhibit 32.2 Certification Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



b. Reports on Form 8-K during the quarter ended September 29, 2003



Form 8-K filed July 1, 2003, announcing the appointment of Bonnie Fuller as Executive Vice President/Chief Editorial Director of American Media Operations, Inc.



Form 8-K filed August 14, 2003, announcing American Media Operations, Inc.s financial
results for the quarter ended June 30, 2003.



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SIGNATURE



Pursuant to the requirements of Section
13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned, thereto duly authorized.



|                        |  |  |  |  |  | AMERICAN MEDIA OPERATIONS, INC.
|----------------------- |  |  |  |  |  | -------------------------------
|                        |  |  |  |  |  |                                
|                        |  |  |  |  |  |                                
|Date: November 13, 2003 |  |  |  |  |  |                                
|                        |  |  |  |  |  |                                
|                        |  |  |  |  |  |                                
|                        |  |  |  |  |  |                                
|                        |  |  |  |  |  |                                







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Exhibit Index



|Exhibit Number |  | Description                                                                                                                     
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------
|               | 
|Exhibit 31.1   |  | Certification Pursuant to Rule 13(a)-14(a) or 15(d)-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|               | 
|Exhibit 31.2   |  | Certification Pursuant to Rule 13(a)-14(a) or 15(d)-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|               | 
|Exhibit 32.1   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002          
|               | 
|Exhibit 32.2   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002