United states securities and exchange commission



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Report of Independent Auditors

The Board of Managers

TV Guide Entertainment Group, LLC

We have audited the accompanying consolidated balance sheets of TV Guide Entertainment Group, LLC (the “Company”) as of March 31, 2012 and 2011, and the related consolidated statements of operations, changes in members' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TV Guide Entertainment Group, LLC at March 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP


Los Angeles, California

May 30, 2012



1





























TV Guide Entertainment Group, LLC

 

 

 

 

Consolidated Balance Sheets

(In thousands)

 

 

 

 

 

 

 

 

 

March 31

 

2012

 

2011

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

9,960




 

$

10,734




Accounts receivable, net

17,948




 

21,168




Programming costs

12,170




 

10,478




Prepaid expenses and other current assets

1,470




 

1,117




Total current assets

41,548




 

43,497




 

 

 

 

Noncurrent assets:

 

 

 

Property and equipment, net

13,544




 

16,995




Programming costs, net of current portion

16,245




 

30,547




Amortizable intangible assets, net

53,802




 

60,858




Goodwill

152,599




 

152,599




Other assets

665




 

246




Total assets

$

278,403




 

$

304,742




 

 

 

 

Liabilities and members’ equity (deficit)

 

 

 

Current liabilities:

 

 

 

Accounts payable and other accrued liabilities

$

14,773




 

$

18,002




Due to related party

5,067




 

3,679




Current portion of capital lease obligation

1,008




 

944




Deferred revenue

1,702




 

1,933




Accrued programming costs

8,429




 

7,568




Total current liabilities

30,979




 

32,126




 

 

 

 

Noncurrent liabilities:

 

 

 

Capital lease obligation, net of current portion

8,337




 

9,345




Deferred revenue, net of current portion

3,331




 

4,360




Due to related party, net of current portion

8,571




 

8,994




Accrued programming costs, net of current portion

13,168




 

17,655




Mandatorily redeemable preferred units

230,412




 

200,724




Total liabilities

294,798




 

273,204




 

 

 

 

Members’ equity (deficit)

(16,395

)

 

31,538




Total liabilities and members’ equity (deficit)

$

278,403




 

$

304,742




 

 

 

 

See accompanying notes.

 

 

 


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TV Guide Entertainment Group, LLC

 

 

 

 

Consolidated Statements of Operations

(In thousands)

 

 

 

 

 

Year Ended March 31

 

2012

 

2011

Revenues:

 

 

 

Advertising, including related party advertising of

   $1,864 and $2,133, respectively



$

69,624




 

$

83,857




Subscriber fees

29,122




 

30,321




Other, including related-party other revenue of $480

   and $0, respectively



2,153




 

1,502




Total revenues

100,899




 

115,680




Cost of services:

 

 

 

Programming, including related party programming

   of $7,842 and $1,586, respectively



51,279




 

36,368




Other direct costs

1,510




 

2,001




Total cost of services

52,789




 

38,369




Other expenses:

 

 

 

Advertising

13,148




 

13,963




Selling, general and administrative, including related

   party charges of $1,366 and $1,632, respectively



40,292




 

47,001




Depreciation and amortization

11,602




 

15,331




Total other expenses

65,042




 

76,295




Operating (loss) income

(16,932

)

 

1,016




Other income, net

15




 






Interest expense, net

(31,518

)

 

(29,556

)

Net loss

(48,435

)

 

(28,540

)

 

 

 

 

See accompanying notes.

 

 

 



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