CKX 10Q 2009 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2009
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission FileNo. 000-17436

CKX, INC.

(Exact name of Registrant as specified in its charter)


Delaware		27-0118168
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

650 Madison Avenue

New York, New York 10022

(Address of Principal Executive Offices and Zip Code)

Registrant’s Telephone Number, Including Area Code:

(212) 838-3100

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.01 Per Share

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

As of November 3, 2009, there were 93,039,593 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS


	Part I	FINANCIAL INFORMATION
	Item 1	Financial Statements
		Condensed Consolidated Balance Sheets at September 30, 2009 (Unaudited) and December 31, 2008	3
		Condensed Consolidated Statements of Operations (Unaudited) for the three months ended September 30, 2009 and 2008	4
		Condensed Consolidated Statements of Operations (Unaudited) for the nine months ended September 30, 2009 and 2008	5
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2009 and 2008	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 4	Controls and Procedures	41

	Part II	OTHER INFORMATION
	Item 1	Legal Proceedings	42
	Item 6	Exhibits	42
EX-4.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

CKX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)


				December 31,
	September 30, 2009			2008
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	66,944		$	101,895
Receivables, net of allowance for doubtful accounts of $904 at September 30, 2009 and $803 at December 31, 2008		50,421			37,085
Due from related party		—			274
Inventories, net of allowance for obsolescence of $791 at September 30, 2009 and $649 at December 31, 2008		1,810			1,988
Prepaid expenses and other current assets		33,489			8,119
Prepaid income taxes		4,186			—
Deferred tax assets		2,502			4,941

Total current assets		159,352			154,302
Property and equipment — net		49,927			47,818
Receivables		2,381			3,267
Loans to related parties		1,765			1,765
Other assets		39,049			26,797
Goodwill		117,606			108,771
Other intangible assets — net		124,297			127,403
Deferred tax assets		4,671			5,938

TOTAL ASSETS	$	499,048		$	476,061


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	37,822		$	19,648
Accrued expenses		23,738			22,373
Current portion of long-term debt		482			489
Income taxes payable		—			5,526
Deferred revenue		11,621			30,745

Total current liabilities		73,663			78,781
Long-term liabilities:
Long-term debt		100,647			101,429
Deferred revenue		2,542			3,515
Other long-term liabilities		3,093			2,850
Deferred tax liabilities		21,894			23,744

Total liabilities		201,839			210,319

Redeemable restricted common stock — 534,082 shares outstanding at September 30, 2009 and 1,672,170 shares outstanding at December 31, 2008		7,347			23,002
Commitments and contingencies (see note 13)
CKX, Inc. stockholders’ equity:
Preferred stock, $.01 par value, authorized 75,000,000 shares:
Series B — 1,491,817 shares outstanding		22,825			22,825
Series C — 1 share outstanding		—			—
Common stock, $0.01 par value: authorized 200,000,000 shares, 96,822,130 shares issued at September 30, 2009 and 95,634,685 issued at December 31, 2008		968			956
Additionalpaid-in-capital		394,326			377,617
Accumulated deficit		(79,355	)		(106,619	)
Common stock in treasury — 4,477,438 shares at September 30, 2009 and 3,339,350 shares at December 31, 2008		(22,647	)		(7,647	)
Accumulated other comprehensive income (loss)		(33,698	)		(49,671	)

CKX, Inc. stockholders’ equity		282,419			237,461
Noncontrolling interests		7,443			5,279

Total equity		289,862			242,740

TOTAL LIABILITIES AND EQUITY	$	499,048		$	476,061

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

CKX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(amounts in thousands, except share and per share data)


	Three Months			Three Months
	Ended			Ended
	September 30, 2009			September 30, 2008

Revenue	$	87,395		$	96,977
Operating expenses:
Cost of sales		49,718			49,940
Selling, general and administrative expenses		18,115			20,761
Corporate expenses		4,911			3,605
Depreciation and amortization		5,033			5,322
Merger and distribution-related costs		—			272
Acquisition-related costs		309			—
Other expense (income)		(1,697	)		(5,631	)

Total operating expenses		76,389			74,269

Operating income		11,006			22,708
Interest income		53			297
Interest expense		(697	)		(1,320	)

Income before income taxes and equity in earnings of affiliates		10,362			21,685
Income tax (benefit ) expense		(1,781	)		12,152

Income before equity in earnings of affiliates		12,143			9,533
Equity in earnings of affiliates		97			299

Net income		12,240			9,832
Dividends on preferred stock		(456	)		(456	)

Net income available to CKX, Inc.		11,784			9,376
Less: Net income attributable to noncontrolling interests		(591	)		(688	)

Net income attributable to CKX, Inc.	$	11,193		$	8,688

Income per share:
Basic income per share	$	0.12		$	0.09

Diluted income per share	$	0.12		$	0.09

Average number of common shares outstanding:
Basic		92,850,007			97,054,680
Diluted		93,011,869			97,060,937

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

CKX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(amounts in thousands, except share and per share data)


	Nine Months			Nine Months
	Ended			Ended
	September 30, 2009			September 30, 2008

Revenue	$	248,434		$	250,724
Operating expenses:
Cost of sales		110,932			100,321
Selling, general and administrative expenses		55,667			57,921
Corporate expenses		14,820			11,906
Depreciation and amortization		14,031			16,411
Merger and distribution-related costs		525			1,955
Acquisition-related costs		2,542			—
Other expense (income)		4,143			(5,790	)

Total operating expenses		202,660			182,724

Operating income		45,774			68,000
Interest income		256			1,402
Interest expense		(2,653	)		(4,361	)

Income before income taxes and equity in (losses) earnings of affiliates		43,377			65,041
Income tax expense		12,548			32,032

Income before equity in (losses) earnings of affiliates		30,829			33,009
Equity in (losses) earnings of affiliates		(162	)		1,956

Net income		30,667			34,965
Dividends on preferred stock		(1,368	)		(1,368	)

Net income available to CKX, Inc.		29,299			33,597
Less: Net income attributable to noncontrolling interests		(2,035	)		(1,763	)

Net income attributable to CKX, Inc.	$	27,264		$	31,834

Basic income per share:
Income attributable to CKX, Inc. before preferred dividends	$	0.31		$	0.34
Dividends on preferred stock		(0.01	)		(0.01	)

Basic income per share	$	0.30		$	0.33

Diluted income per share:
Income attributable to CKX, Inc. before dividends on preferred stock	$	0.31		$	0.34
Dividends on preferred stock		(0.01	)		(0.01	)

Diluted income per share	$	0.30		$	0.33

Average number of common shares outstanding:
Basic		93,446,186			97,042,732
Diluted		93,498,202			97,087,326

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

CKX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in thousands)


	Nine Months			Nine Months
	Ended			Ended
	September 30, 2009			September 30, 2008

Cash flows from operating activities:
Net income	$	30,667		$	34,965
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		14,031			16,411
Write-off of deferred costs		874			—
Unrealized foreign currency losses (gains)		3,278			(4,667	)
Share-based payments		1,156			2,041
Equity in earnings (losses) of affiliates, net of cash received		162			(617	)
Deferred income taxes		3,585			(3,571	)
Non-cash interest expense		534			499
Provision for inventory and accounts receivable allowance		358			229
Changes in operating assets and liabilities:
Receivables		(10,572	)		(25,788	)
Prepaid expenses and other current assets		(17,026	)		(665	)
Prepaid income taxes		(4,186	)		—
Accounts payable and accrued expenses		15,340			17,037
Deferred revenue		(20,573	)		6,937
Income taxes payable		(5,526	)		15,234
Other		(12,071	)		2,917

Net cash provided by operating activities		31			60,962

Cash flows from investing activities:
Investment in Cirque du Soleil partnership		(6,050	)		—
Purchase of 51% interest in business, net of cash acquired of $936		(4,314	)		—
Purchases of property and equipment		(6,207	)		(6,013	)

Net cash used in investing activities		(16,571	)		(6,013	)

Cash flows from financing activities:
Purchase of redeemable restricted common stock		(15,000	)		—
Distributions to noncontrolling interest shareholders		(2,175	)		(1,275	)
Principal payments on debt		(774	)		(589	)
Dividends paid on preferred stock		(1,368	)		(1,368	)

Net cash used in financing activities		(19,317	)		(3,232	)

Effect of exchange rate changes on cash and cash equivalents		906			(2,875	)

Net (decrease) increase in cash and cash equivalents		(34,951	)		48,842

Cash and cash equivalents — beginning of period		101,895			50,947

Cash and cash equivalents — end of period	$	66,944		$	99,789

Supplemental cash flow data:
Cash paid during the period for:
Interest	$	2,352		$	4,146
Income taxes		19,923			20,726


Supplemental Cash Flow Information

The Company had the following non-cash investing and financing activities in the nine months ended September 30, 2009 (in thousands):

Accrued but unpaid Series B Convertible Preferred Stock Dividends	$	456
Accrued but unpaid investment in Cirque du Soleil partnership		3,757

The Company had the following non-cash investing and financing activities in the nine months ended September 30, 2008 (in thousands):

Distribution of final 2% ownership interest in FX Real Estate and Entertainment Inc.	$	6,175
Accrued but unpaid Series B Convertible Preferred Stock Dividends		456

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

CKX, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS


1.	Overview

General

CKX, Inc. (the “Company” or “CKX”) is engaged in the ownership, development and commercial utilization of entertainment content. As more fully described below, our primary assets and operations include:


	•	19 Entertainment Limited (“19 Entertainment”), which owns, among other properties, proprietary rights to theIDOLSandSo You Think You Can Dancetelevision brands, both of which air in the United States, and, together with local adaptations of the formats, around the world;

	•	An 85% ownership interest in Elvis Presley Enterprises (the “Presley Business” or “EPE”), which owns the rights to the name, image and likeness of Elvis Presley, certain music and other intellectual property created by or related to Elvis and, the operations of Graceland; and has partnered with Cirque du Soleil for the creation of Elvis Presley-themed shows and projects around the world; and

	•	An 80% ownership interest in Muhammad Ali Enterprises (the “Ali Business”), which owns the rights to the name, image and likeness of, as well as certain trademarks and other intellectual property related to Muhammad Ali.

The Company’s existing properties generate recurring revenue across multiple entertainment platforms, including music and television; licensing and merchandising; talent management; themed attractions and touring/live events.

The financial information in this report for the three and nine months ended September 30, 2009 and 2008 has not been audited, but in the opinion of management all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly such information have been included. The operating results for the three and nine months ended September 30, 2009 and 2008 are not necessarily indicative of the results to be expected for the full year due to the seasonal nature of some of the Company’s businesses. The financial statements included herein should be read in conjunction with the financial statements and notes included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008, as amended by the Company’s Current Report onForm 8-K, filed with the Securities and Exchange Commission on October 14, 2009.


2.	Exercise of Amended Call Option

In March 2005, in connection with the acquisition of 19 Entertainment, certain sellers of 19 Entertainment entered into a Put and Call Option Agreement that provided them with certain rights whereby, during a period of 20 business days beginning March 17, 2011, the Company could exercise a call right to purchase the common stock of such stockholders at a price equal to $24.72 per share and these sellers could exercise a put right to sell the common stock to the Company at a price equal to $13.18 per share. Of the 1,672,170 shares of common stock covered by the Put and Call Option Agreement, 1,507,135 were held by Simon Fuller.

On June 8, 2009, the Company entered into an amendment to the Put and Call Option Agreement with Mr. Fuller. Pursuant to the amendment, the call price with respect to 1,138,088 of Mr. Fuller’s shares (the “Interim Shares”) was reduced to $13.18 per share and the exercise periods for the put and call of such shares were accelerated to allow for their exercise at any time commencing on the date of the amended agreement. The terms of the original Put and Call Option Agreement remain in place with respect to Mr. Fuller’s remaining 369,047 shares of our common stock.

Immediately following execution of the amendment to the Put and Call Option Agreement, the Company exercised its call option with respect to the Interim Shares and paid to Mr. Fuller a gross purchase price of $15.0 million. The Interim Shares purchased by the Company were recorded as treasury shares. The Company recorded a cost of $0.8 million for payroll-related taxes associated with the exercise of the call option.

The remaining redeemable restricted common stock under the put and call option is a single equity instrument. As the stock is puttable to the Company at the option of these sellers, these shares are presented in the accompanying consolidated balance sheet as temporary equity under the heading Redeemable Restricted Common Stock at an estimated fair value inclusive of the put/call rights; the fair value of the remaining 534,082 shares is $7.3 million.


3.	Terminated Merger Agreement

On June 1, 2007, the Company entered into an Agreement and Plan of Merger (as amended on August 1, 2007, September 27, 2007, January 23, 2008 and May 27, 2008, the “Merger Agreement”) with 19X, Inc., a Delaware corporation (“19X”), and 19X Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of 19X. Under the terms of the Merger Agreement, 19X had agreed to acquire CKX at a price of $12.00 per share in cash. 19X was initially formed for an unrelated purpose and has had no operations or business other than as contemplated by the Merger Agreement, including the related financings. Robert F.X. Sillerman, Chairman and Chief Executive Officer of CKX, and Simon R. Fuller, a director of CKX and the Chief Executive Officer of 19 Entertainment Limited, a wholly owned subsidiary of CKX, are the sole current stockholders of 19X.

On November 1, 2008, 19X delivered a letter to the Board of Directors of the Company terminating the Merger Agreement. Pursuant to the terms of the Merger Agreement, 19X was required to pay a termination fee of $37.5 million. Subsequently, Mr. Sillerman, on behalf of 19X, paid the termination fee comprised of $37.0 million by delivery of 3,339,350 shares of CKX common stock, at the contractually agreed to assumed valuation provided for in the Merger Agreement of $11.08 per share, with the remainder of the termination fee ($0.5 million) paid in cash.


4.	Transactions Involving FX Real Estate and Entertainment Inc.

About FXRE

CKX acquired an aggregate approximate 50% interest in FX Real Estate and Entertainment Inc. (“FXRE”) in June and September of 2007. As described below, on January 10, 2008 CKX distributed 100% of its interests in FXRE to CKX’s stockholders. The following information about FXRE is provided solely as background for the description of the historical transactions between the Company and FXRE. The Company does not own any interest in FXRE, has not guaranteed any obligations of FXRE nor is it a party to any continuing material transactions with FXRE.

FXRE owns 17.72 contiguous acres of land located on the southeast corner of Las Vegas Boulevard and Harmon Avenue in Las Vegas, Nevada. The Las Vegas property is currently occupied by a motel and several commercial and retail tenants. FXRE has disclosed that, as a result of the failure to repay all of the obligations owed to the lenders under the outstanding $475 million mortgage loan on FXRE’s Las Vegas property at maturity (January 6, 2009), its Las Vegas subsidiaries received a Notice of Trustee’s Sale, pursuant to which on November 18, 2009 the trustee will cause the Las Vegas property to be sold at a public auction to the highest bidder for cash so as to satisfy the outstanding obligations to the first lien lenders secured by the property. FXRE has previously disclosed that the Las Vegas property has been under the exclusive possession and control of a court-appointed receiver, at the request of the first lien lenders, since June 23, 2009. FXRE has further disclosed that neither it nor its subsidiaries are able to cure the default and satisfy such outstanding amounts and therefore are considering all possible legal options, including bankruptcy proceedings.

FXRE Distribution

As referenced above, prior to and a condition to the proposed merger with 19X, on January 10, 2008, CKX distributed to its stockholders two shares of common stock of FXRE for every ten shares of CKX common stock or preferred stock owned on the record date for the distribution. The distributed shares represented 100% of the interests in FXRE acquired by CKX in 2007. The total number of shares of FXRE common stock distributed to CKX stockholders was 19,743,349.

Terminated License Agreements

Simultaneous with the Company’s investment in FXRE in June 2007, EPE entered into a worldwide license agreement with FXRE, granting FXRE the exclusive right to utilize Elvis Presley-related intellectual property in connection with the development, ownership and operation of Elvis Presley-themed hotels, casinos and certain other real estate-based projects and attractions around the world. FXRE also entered into a worldwide license agreement with the Ali Business, granting FXRE the right to utilize Muhammad Ali-related intellectual property in connection with Muhammad Ali-themed hotels and certain other real estate-based projects and attractions.

Under the terms of the license agreements, FXRE was required to pay to EPE and the Ali Business a specified percentage of the gross revenue generated at the properties that incorporate the Elvis Presley and Muhammad Ali intellectual property, as applicable. FXRE was required to pay a guaranteed annual minimum royalty during each year of the agreement, which amount was to be recoupable against royalties paid during such year as described above. The aggregate guaranteed minimum royalty due for 2007 was $10.0 million, which was paid, together with interest of $0.4 million, in April 2008.

On March 9, 2009, following FXRE’s failure to make the $10 million annual guaranteed minimum royalty payments for 2008 when due, EPE and the Ali Business entered into a Termination, Settlement and Release agreement with FXRE, pursuant to which the parties agreed to terminate the EPE and Ali Business license agreements and to release each other from all claims related to or arising from such agreements. In consideration for releasing FXRE from any claims related to the license agreements, EPE and the Ali Business will receive 10% of any future net proceeds or fees received by FXRE from the saleand/or development of the Las Vegas properties, up to a maximum of $10 million. FXRE has the right to buy-out this participation right at any time prior to April 9, 2014 for a payment equal to (i) $3.3 million, plus (ii) 10% of any proceeds received from the sale of some or all of the Las Vegas properties during such buy-out period and for nine months thereafter, provided that the amount paid under (i) and (ii) shall not exceed $10 million.

As a result of the termination of the license agreements on March 9, 2009, during the three months ended March 31, 2009, the Company recognized $10.0 million in licensing revenue that had previously been deferred related to the license payment received in April 2008. Per the Company’s revenue recognition policy, revenue from multiple element licensing arrangements is only recognized when all the conditions of the arrangements tied to the licensing payments to CKX are met. The termination of the license agreements resulted in the elimination of all remaining conditions to the arrangement and thus the revenue which had previously been deferred was recognized.

During the three months ended March 31, 2009, the Company recorded a write-off of $0.9 million of deferred costs related to preliminary design work for a Graceland redevelopment initiative. The Company has determined that there is a strong likelihood that the original preliminary design plans may require significant modifications or abandonment for a redesign due to current economic conditions and a lack of certainty as to exact scope, cost, financing plan and timing of this project. The lack of certainty and likely need for significant modificationsand/or redesign was amplified by the termination of the FXRE license agreement, which had granted FXRE the rights to the development of one or more hotel(s) at Graceland as a component of the redevelopment initiative. Therefore, the Company determined that these cost should be written off in March 2009. The Company remains committed to the Graceland redevelopment and will continue to pursue opportunities on its own or with third parties.

Shared Services Agreement

Prior to June 30, 2009, CKX was party to a shared services agreement with FXRE, pursuant to which certain of our employees, including members of senior management, provided services for FXRE, and certain of FXRE’s employees, including members of senior management, were available to provide services for CKX. The services provided pursuant to the shared services agreement included management, legal, accounting and administrative. The agreement was terminated by mutual agreement of the parties effective as of June 30, 2009.

payment due from one party to the other for provided services performed by the parties during the prior calendar quarter, and (ii) prepare a report in reasonable detail with respect to the provided services so performed, including the value of such services and the net payment due. The parties were required to use their reasonable, good-faith efforts to determine the net payments due in accordance with the factors described in above. Charges under the shared services agreement were reviewed by the Audit Committee.

Prior to the termination of the agreement effective as of June 30, 2009, for the nine months ended September 30, 2009, CKX billed FXRE $0.2 million for professional services, primarily accounting and legal services, performed under the shared services agreement prior to its termination; these amounts have been paid to the Company in 2009. For the nine months ended September 30, 2008, CKX billed FXRE $1.3 million for professional services, primarily accounting and legal services, performed under the shared services agreement. These amounts were paid to the Company in 2008.


5.	Accounting Policies

During the nine months ended September 30, 2009, there have been no significant changes to the Company’s accounting policies and estimates as disclosed in the Company’sForm 10-K for the year ended December 31, 2008, other than the impact of the following:

Recently Issued Accounting Standards

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162, which was later superseded by the FASB Codification and included in Accounting Standards Codification (“ASC”)105-10, which is effective for the Company July 1, 2009. This standard does not alter current U.S. GAAP, but rather integrates existing accounting standards with other authoritative guidance. Under this standard, there will be a single source of authoritative U.S. GAAP for nongovernmental entities and will supersede all other previously issued non-SEC accounting and reporting guidance. The impact of this standard on the Company’s financial statements is limited to presentation and disclosure.

Effective January 1, 2009, the Company adopted the provisions of ASC 805 (formerly SFAS No. 141(R),Business Combinations) and ASC810-10-65 (formerly SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements,an amendment of ARB No. 51). The adoption of these standards changes the Company’s accounting treatment for business combinations on a prospective basis; the more significant changes are: 100% of fair values will be recognized when less than a 100% controlling interest is acquired that reflects a change in control of the acquired entity; contingent consideration arrangements are recorded at the estimated acquisition fair values and subsequent changes in fair values are reflected in earnings; and costs associated with merger and acquisition activities are expensed as incurred. Another change that impacted the accounting for prior acquisitions is that, beginning in 2009, changes to existing income tax valuation allowances and tax uncertainty accruals resulting from acquisitions will be recorded as adjustments to income tax expense. Under prior practice, these adjustments were recorded as adjustments to goodwill. Prior periods have been restated to conform to the 2009 presentation for noncontrolling interests.

In May 2009, the FASB issued SFAS No. 165,Subsequent Events, which was later superseded by the FASB Codification and included in ASC855-10, which is effective for the Company on July 1, 2009. This standard provides guidance for disclosing events that occur after the balance sheet date, but before financial statements are issued or available to be issued. The adoption of this standard did not have a significant impact on the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 166,Accounting for Transfers of Financial Assets — an amendment of FASB No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which was later superseded by the FASB Codification and included in ASC 860. This standard amends the criteria for a transfer of a financial asset to be accounted for as a sale, redefines a participating interest for transfers of portions of financial assets, eliminates the qualifying special-purpose entity concept and provides for new disclosures. This standard is effective for the Company beginning in 2010. The Company does not expect the adoption to have a material impact on the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 167,Amendments to FASB Interpretation No. 46(R), which was later superseded by the FASB Codification and included in ASC 810. The provisions of ASC 810 amends the consolidation guidance for variable interest entities (“VIE”) by requiring an on-going qualitative assessment of which entity has the power to direct matters that most significantly impact the activities of a VIE and has the obligation to absorb losses or benefits that could be potentially significant to the VIE. This standard is effective for the Company beginning in 2010. The Company is currently assessing the impact of the standard on its financial statements.


6.	Comprehensive Income (Loss)

The following table is a reconciliation of the Company’s net income to comprehensive income (loss) for the three and nine months ended September 30, 2009 and 2008 (in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008

Net income	$	12,240		$	9,832		$	30,667		$	34,965
Foreign currency translation adjustments		(4,459	)		(21,807	)		15,973			(21,569	)

		7,781			(11,975	)		46,640			13,396
Net income attributable to noncontrolling interests		(591	)		(688	)		(2,035	)		(1,763	)

Comprehensive income (loss)	$	7,190		$	(12,663	)	$	44,605		$	11,633

Foreign currency translation adjustments result from the conversion of 19 Entertainment’s financial statements.


7.	Earnings Per Share/Common Shares Outstanding

Basic earnings per share is calculated by dividing net income attributable to CKX, Inc. before dividends on preferred stock by the weighted-average number of shares outstanding during the period. Diluted earnings per share includes the determinants of basic earnings per share and, in addition, gives effect to potentially dilutive common shares. The diluted earnings per share calculations exclude the impact of the conversion of 1,491,817 shares of Series B Convertible Preferred shares and the impact of employee share-based stock plan awards that would be anti-dilutive. 693,350 and 763,650 shares were excluded from the calculation of diluted earnings per share due to stock plan awards that were anti-dilutive for the three months ended September 30, 2009 and 2008, respectively. 2,128,250 and 722,450 shares were excluded from the calculation of diluted earnings per share due to stock plan awards that were anti-dilutive for the nine months ended September 30, 2009 and 2008, respectively.

The following table shows the reconciliation of the Company’s basic common shares outstanding to the Company’s diluted common shares outstanding for the three and nine months ended September 30, 2009 and 2008:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008

Basic common shares outstanding (including redeemable restricted common stock)		92,850,007		97,054,680		93,446,186		97,042,732
Incremental shares for assumed exercise of Series C preferred stock, restricted stock and stock options		161,862		6,257		52,016		44,594

Diluted common shares outstanding (including redeemable restricted common stock)		93,011,869		97,060,937		93,498,202		97,087,326


8.	Intangible Assets and Goodwill

Intangible assets as of September 30, 2009 consist of (in thousands):


	Weighted
	Average		Gross					Net
	Remaining		Carrying		Accumulated			Carrying
	Useful Life		Amount		Amortization			Amount

Definite Lived Intangible Assets:
Presley record, music publishing, film and video rights		10.3 years	$	28,900	$	(8,812	)	$	20,088
Other Presley intangible assets		12.4 years		13,622		(6,218	)		7,404
19 Entertainment IDOLS television programming, merchandising and sponsorship relationships		2.5 years		64,476		(41,053	)		23,423
19 Entertainment other artist management, recording, merchandising, sponsorship and model relationships		2.8 years		18,654		(12,791	)		5,863
MBST artist contracts, profit participation rights and other intangible assets		2.2 years		4,270		(3,116	)		1,154

			$	129,922	$	(71,990	)	$	57,932

The gross carrying amount of intangible assets of $129.9 million as of September 30, 2009 in the table above differs from the amount of $117.7 million as of December 31, 2008 in the table below due to foreign currency movements of $6.7 million and intangible assets of $5.5 million recorded related to the acquisition of a 51% interest in Storm Model Management (“Storm”), a U.K.-based modeling agency, in exchange for $4.3 million in cash paid at closing, which is net of cash acquired of $0.9 million. The initial purchase price allocations, including those amounts allocated to intangible assets, are preliminary. The Company consolidates the results of operations of Storm since the date of acquisition (August 6, 2009) in the 19 Entertainment operating segment.


	Balance at
	September 30,
	2009

Indefinite Lived Intangible Assets:
Presley and Ali trademarks, publicity rights and other intellectual property	$	66,365

Intangible assets as of December 31, 2008 consist of (in thousands):


	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount

Definite Lived Intangible Assets:
Presley record, music publishing, film and video rights	$	28,900	$	(7,353	)	$	21,547
Other Presley intangible assets		13,622		(5,265	)		8,357
19 Entertainment IDOLS television programming, merchandising and sponsorship relationships		58,644		(30,948	)		27,696
19 Entertainment other artist management, recording, merchandising, sponsorship and model relationships		12,252		(10,538	)		1,714
MBST artist contracts, profit participation rights and other intangible assets		4,270		(2,546	)		1,724

	$	117,688	$	(56,650	)	$	61,038


	Balance at
	December 31,
	2008

Indefinite Lived Intangible Assets:
Presley and Ali trademarks, publicity rights and other intellectual property	$	66,365

Amortization expense for definite lived intangible assets was $11.0 million and $14.1 million for the nine months ended September 30, 2009 and 2008, respectively. At September 30, 2009, the projected future amortization expense for definite lived intangible assets, assuming no further acquisitions or dispositions, is as follows (in thousands):


For the three months ending December 31, 2009	$	3,800
For the years ending December 31,
2010		14,800
2011		13,600
2012		5,800
2013		3,800

Goodwill as of September 30, 2009 consists of (in thousands):


	Balance at				Balance at
	December 31,				September 30,
	2008		Adjustments		2009

Presley royalties and licensing	$	14,413	$	—	$	14,413
Presley Graceland operations		10,166		—		10,166
19 Entertainment		80,907		8,835		89,742
MBST		2,175		—		2,175
Ali Business		1,110		—		1,110

Total	$	108,771	$	8,835	$	117,606

The increase in goodwill from December 31, 2008 to September 30, 2009 reflects foreign currency movements of $8.0 million and goodwill of $0.8 million recorded related to the acquisition of the 51% investment in Storm. The Company will perform its annual impairment analysis of long-lived assets in the fourth quarter. Given the present volatility and disruption in the world financial markets and the weakening of the global economy, the Company’s annual impairment testing may identify impairments of long-lived assets which would be recorded in the fourth quarter.


9.	Debt

The Company is party to a revolving credit agreement (the “Credit Facility”) with various lenders. The total availability under the Credit Facility was effectively reduced from $150.0 million to $141.7 million in October 2008 due to the bankruptcy of one of the lenders, Lehman Commercial Paper, Inc., a subsidiary of Lehman Brothers, Inc. As of September 30, 2009, the Company had drawn down $100.0 million under the Credit Facility, the proceeds of which were used in June 2007 to make the initial investment in FXRE referenced elsewhere herein. A commitment fee of 0.375%-0.50% on the daily unused portion of the Credit Facility is payable monthly in arrears. Under the Credit Facility, the Company may make Eurodollar borrowings or base rate borrowings. The $100.0 million outstanding at September 30, 2009 bears interest at the Eurodollar rate resulting in an effective annual interest rate at September 30, 2009 of 1.75% based upon a margin of 150 basis points. Deferred financing fees are included in other assets on the consolidated balance sheets and are amortized over the remaining term of the agreement, which ends on May 24, 2011.

The Credit Facility contains covenants that regulate the Company’s and its subsidiaries’ incurrence of debt, disposition of property and capital expenditures. The Company and its subsidiaries were in compliance with all financial loan covenants as of September 30, 2009.

At September 30, 2009, the Company also had $1.1 million outstanding under a subordinated promissory note issued in connection with the acquisition of the Presley Business, which bears interest at the rate of 5.385% per annum. The principal and interest under the note are payable in equal annual installments of principal and interest of $550,000 each, with a final installment of remaining principal and interest due and payable on February 7, 2012. On July 14, 2009 the Company prepaid a $300,000 principal payment due in February 2012 under this note.

The fair value of the Company’s debt has been calculated using a present value model and observable market rates at $87.1 million as of September 30, 2009 reflecting the favorable interest rates on the Company’s debt instruments.


10.	Equity

Changes in stockholders’ equity attributable to CKX, Inc. and non-controlling interests for the nine months ended September 30, 2009 and 2008 are as follows (in thousands):


				Noncontrolling
	CKX, Inc.			Interests			Total

Balance at January 1, 2009	$	237,461		$	5,279		$	242,740
Net income		28,632			2,035			30,667
Distributions/distributions payable to noncontrolling interest shareholders		—			(2,300	)		(2,300	)
Series B preferred dividends		(1,368	)		—			(1,368	)
Other comprehensive income		15,973			—			15,973
Purchase of 51% interest in business		—			2,471			2,471
Other		1,721			(42	)		1,679

Balance at September 30, 2009	$	282,419		$	7,443		$	289,862


				Noncontrolling
	CKX, Inc.			Interests			Total

Balance at January 1, 2008	$	289,704		$	4,757		$	294,461
Net income		33,202			1,763			34,965
Distributions to noncontrolling interest shareholders		—			(1,275	)		(1,275	)
Series B preferred dividends		(1,368	)		—			(1,368	)
Other comprehensive income		(21,569	)		—			(21,569	)
Other		2,040			11			2,051

Balance at September 30, 2008	$	302,009		$	5,256		$	307,265


11.	Share-Based Payments

Share-based compensation expense was $1.2 million and $2.0 million for the nine months ended September 30, 2009 and 2008, respectively.

During the nine months ended September 30, 2009, the Company granted 1,412,000 stock options to employees. These options vest 20% on each anniversary of the date of grant. The options expire 10 years from the date of grant and were granted with an exercise price equal to the fair market value of the underlying common stock on the date of grant ($4.19). The weighted average fair value of the grants was $1.99 per option. Compensation expense is being recognized ratably over the vesting period, assuming 10%-25% of the options granted will not vest. The following assumptions were used in valuing the stock options granted during the nine months ended September 30, 2009:


Risk-free average interest rate	2.4	%
Volatility	44.8	%
Expected life (years)	6.5
Dividend yield	0.0	%

The Company estimates forfeitures based on management’s experience. The expected volatility is based on the Company’s historical share price volatility, and an analysis of comparable public companies operating in our industry.


12.	Income Taxes

based on expected income, statutory rates and permanent differences applicable to the Company in the various jurisdictions in which the Company operates.

For the nine months ended September 30, 2009, the Company recorded a provision for income taxes of $12.5 million, reflecting the Company’s estimated 2009 effective tax rate of 36.9% and a one-time beneficial adjustment in the second quarter of $0.8 million for the expensing of 2008 costs relating to a deal that the Company has ceased pursuing, as well as a third quarter benefit of $2.8 million primarily relating to the filing of the 2008 federal income tax return, a $1.8 million tax expense relating to uncertain tax positions and a tax benefit of $1.6 million relating to potential tax refunds.

For the nine months ended September 30, 2008, the Company recorded a provision for income taxes of $32.0 million, reflecting the Company’s estimated 2008 effective tax rate of 50.0% and a one time adjustment in the second quarter of $0.6 million to the rate applied to the unremitted earnings of unconsolidated affiliates, a deferred tax liability, as well as a third quarter benefit of $1.1 million related to the filing of the 2007 federal tax return.

For the three months ended September 30, 2009, the Company recorded a benefit for income taxes of $1.8 million. The provision is comprised of $0.8 million reflecting the general tax provision for the quarter offset by a one time benefit of $2.8 million primarily relating to the filing of the 2008 federal income tax return, a $1.8 million tax expense relating to uncertain tax positions, and a tax benefit of $1.6 million relating to potential tax refunds. The general tax provision of $0.8 million for the quarter reflects a reduction in the annual estimated effective tax rate to 36.9% from 45.9% at the end of the second quarter.

For the three months ended September 30, 2008, the Company recorded a provision for income taxes of $12.2 million. The provision is comprised of $13.3 million reflecting the general tax provision for the quarter offset by a third quarter benefit of $1.1 million related to the filing of the 2007 federal tax return.

The decrease in the 2009 annual effective tax rate relates primarily to the Company expecting to owe less foreign taxes as a percentage of income than was anticipated in the third quarter of 2008, receiving a larger benefit from the utilization of the Company’s foreign tax credit and not capitalizing any deal costs.

The Company’s uncertain tax positions increased in the third quarter of 2009 by $1.8 million. The increase relates primarily to accounting method issues. The Company does not expect any material changes to the estimated amount of liability associated with its uncertain tax positions through September 30, 2010. It is not possible at this time to determine the effect on the effective tax rate if all the uncertain tax positions were settled with the taxing authorities.

The Company generally recognizes accrued interest and penalties related to uncertain tax positions through income tax expense. As of September 30, 2009, the Company had approximately $0.5 million accrued for interest and penalties.

Open tax years related to federal, state and local filings are for the years ended December 31, 2006, 2007 and 2008. The Internal Revenue Service has commenced an audit of the Company’s tax year ended December 31, 2006. New York State has completed its audit for the tax years ended July 1, 2003, July 1, 2004 and March 17, 2005 for 19 Entertainment Inc. and completed its tax audit of the Company’s tax years ended December 31, 2005, 2006 and 2007 with no material changes.

The United Kingdom’s Revenue & Customs (“HMRC”) has reviewed the historic 19 Entertainment Ltd. UK group through December 2006 with the exception of a few entities where their review deadlines have been routinely extended into 2009. HMRC usually has 24 months from the end of the accounting period to review and query each return.


13.	Commitments and Contingencies

Elvis Cirque du Soleil Show

On August 17, 2006, the Company announced that, together with its subsidiaries, Elvis Presley Enterprises, Inc. and Elvis Presley Enterprises LLC, it had reached an agreement with Cirque du Soleil and MGM Mirage (“MGM”) to create a permanent Elvis Presley show at MGM CityCenter’s ARIA resort and casino in Las Vegas, Nevada. The Elvis Presley Cirque du Soleil show is expected to open to the public in January 2010. The show is being developed and will operate in a partnership jointly owned by Cirque du Soleil and the Company and has been determined by

the Company to be a variable interest entity. The Company is not the primary beneficiary of the partnership and does not control its main operating functions and therefore accounts for its investment under the equity method of accounting. The Company’s maximum exposure to loss as a result of its involvement with the partnership is its funding for the show, which is its investment in the partnership. CKX and Cirque du Soleil have each agreed to pay one-half of the creative development and production costs of the show. CKX expects its portion of the investment to be approximately $24 million, with the largest amount expected to be funded in the later stages of development. The Company incurred expenditures for the development of the show of $3.1 million in 2008 and $9.8 million in the nine months ended September 30, 2009. The Company expects to fund the remaining $11.1 million over the remainder of 2009 and in early 2010. The amount incurred to date of $12.9 million is recorded within other assets on the accompanying condensed consolidated balance sheet as of September 30, 2009.

Redeemable Restricted Common Stock

In connection with the acquisition of 19 Entertainment, certain sellers of 19 Entertainment entered into a Put and Call Option Agreement that provided them with certain rights whereby, during a period of 20 business days beginning March 17, 2011, the Company could exercise a call right to purchase the common stock of such stockholders at a price equal to $24.72 per share and these sellers could exercise a put right to sell the common stock to the Company at a price equal to $13.18 per share. The put and call rights applied to 1,672,170 of the shares issued in connection with the 19 Entertainment acquisition, 1,507,135 of which were owned by Simon Fuller. Following the exercise of the amended call option described in note 2 above, 534,082 shares remain subject to the Put and Call Option Agreement.

Ryan Seacrest Agreement

On July 7, 2009, the Company entered into two agreements with Ryan Seacrest, the host ofAmerican Idol, and certain of his affiliates to (i) ensure Mr. Seacrest’s availability for three future seasons ofAmerican Idol(years 2010, 2011 and 2012) and acquire Mr. Seacrest’s prime time television network exclusivity for future potential projects during the term of the agreement, and (ii) obtain the right to use Mr. Seacrest’s personal goodwill, merchandising rights, rights to his name, voice and image, and rights of publicity and promotion related toAmerican Idol. Under the terms of the agreements, the Company paid $22.5 million upon execution of the agreements on July 7, 2009 and will pay Mr. Seacrest an additional $22.5 million in monthly installments during the term, for a total guaranteed amount of $45 million. The Company is in the process of negotiating with Fox and Fremantle for compensation related to Mr. Seacrest’s services onAmerican Idol. The amounts paid by such parties, if any, will either be paid directly to the Company or remitted to the Company by Mr. Seacrest.

Contingencies

There are various lawsuits and claims pending against the Company. The Company believes that any ultimate liability resulting from these actions or claims will not have a material adverse effect on the Company’s results of operations, financial condition or liquidity.

On December 14, 2007 and February 1, 2008, two shareholder derivative actions were instituted, and later consolidated (the “Action”), against the Company, its directors, 19X and 19X Acquisition Corp. in connection with the proposed merger described in note 3 above. The Action challenged the Board’s approval of the Merger, alleging among other things, that the proposed transaction favored Mr. Sillerman over CKX’s public stockholders.

(ii) that under any circumstance in which 19X must pay CKX a termination fee, that fee would be increased to $37.5 million from $37 million; (iii) that not less than $500,000 of the termination fee had to be paid in cash (whereas the original Merger Agreement had no cash requirement); and (iv) the stock, if any, used to pay the balance of the termination fee would be valued at $11.08 per share rather than $12 per share, as provided in the original Merger Agreement.

The Merger was thereafter terminated and, on November 21, 2008, Mr. Sillerman, (on behalf of 19X) paid the $37.5 million termination fee by delivering 3,339,350 shares of CKX stock and $500,000 in cash to CKX. The $500,000 in cash and 256,016 of those shares were paid pursuant to the settlement agreement terms described above.

On July 31, 2009, the parties to the Action entered into a stipulation agreeing that the claims asserted in the litigation had become moot. In that connection, CKX has agreed to pay the fees and expenses incurred by plaintiffs’ counsel in litigating the Action in an aggregate amount of $675,000. On September 30, 2009, the Court entered a final order dismissing the Action with prejudice as to plaintiffs and their counsel.

The Company recorded a provision for this settlement in the three months ended June 30, 2009 of $525,000 representing the settlement amount of $675,000 less expected insurance proceeds of $150,000. This provision is reflected in the Company’s consolidated statement of operations as merger and distribution-related costs.


14.	Segment Information

The Company currently has four reportable segments: Presley Business — Royalties and Licensing, Presley Business — Graceland Operations, 19 Entertainment and the Ali Business. These designations have been made as the discrete operating results of these segments are reviewed by the Company’s chief operating decision maker to assess performance and make operating decisions. In 2009, MBST is reported in the 19 Entertainment segment due to a change in management structure; in 2008, MBST was reported as part of Corporate and Other for segment purposes. All amounts reflected for 2008 have been recasted to conform to the 2009 presentation. All inter-segment transactions have been eliminated in the condensed consolidated financial statements.

The Company evaluates its operating performance based on several factors, including a financial measure of operating income before non-cash depreciation of tangible assets and non-cash amortization of intangible assets and non-cash compensation (which the Company refers to as “OIBDAN”). The Company considers OIBDAN to be an important indicator of the operational strengths and performance of our businesses and the critical measure the chief operating decision maker (CEO) uses to manage and evaluate our businesses, including the ability to provide cash flows to service debt. However, a limitation of the use of OIBDAN as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in the Company’s businesses or stock-based compensation expense. Accordingly, OIBDAN should be considered in addition to, not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with US GAAP as OIBDAN is not a GAAP equivalent measurement.

In the three months ended March 31, 2009, the Company recorded a provision for severance costs of $1.4 million at the Ali Business due to the restructuring of the business.


	Presley Business
	Royalties and		Graceland		19
Segment Information	Licensing		Operations		Entertainment		Ali Business			Corporate			Total
	(Amounts in thousands)
Three months ended September 30, 2009:
Revenue	$	2,302	$	12,416	$	71,396	$	1,281		$	—		$	87,395

Operating income (loss)	$	644	$	3,728	$	11,195	$	804		$	(5,365	)	$	11,006

Depreciation and amortization	$	645	$	594	$	3,640	$	9		$	145		$	5,033

OIBDAN	$	1,294	$	4,352	$	14,971	$	813		$	(4,987	)	$	16,443

Three months ended September 30, 2008:
Revenue	$	5,242	$	12,554	$	78,798	$	383		$	—		$	96,977

Operating income (loss)	$	1,632	$	2,830	$	22,174	$	(24	)	$	(3,904	)	$	22,708

Depreciation and amortization	$	645	$	566	$	4,069	$	15		$	27		$	5,322

OIBDAN	$	2,286	$	3,417	$	26,936	$	(5	)	$	(3,687	)	$	28,947

Nine months ended September 30, 2009:
Revenue	$	18,714	$	29,157	$	197,303	$	3,260		$	—		$	248,434

Operating income (loss)	$	12,807	$	4,768	$	45,905	$	484		$	(18,190	)	$	45,774

Depreciation and amortization	$	1,936	$	1,773	$	9,980	$	39		$	303		$	14,031

OIBDAN	$	14,769	$	6,618	$	56,262	$	528		$	(17,216	)	$	60,961

Nine months ended September 30, 2008:
Revenue	$	13,370	$	29,464	$	205,041	$	2,849		$	—		$	250,724

Operating income (loss)	$	5,728	$	4,106	$	71,534	$	573		$	(13,941	)	$	68,000

Depreciation and amortization	$	1,936	$	1,681	$	12,669	$	45		$	80		$	16,411

OIBDAN	$	7,692	$	5,848	$	85,556	$	630		$	(13,274	)	$	86,452

Asset Information:
Segment assets at September 30, 2009	$	91,054	$	73,821	$	203,324	$	31,026		$	99,823		$	499,048

Segment assets at December 31, 2008	$	84,437	$	74,359	$	153,083	$	31,362		$	132,820		$	476,061

Below is a reconciliation of the Company’s OIBDAN to net income:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
	(Amounts in thousands)

OIBDAN	$	16,443		$	28,947		$	60,961		$	86,452
Depreciation and amortization		(5,033	)		(5,322	)		(14,031	)		(16,411	)
Non-cash compensation		(404	)		(917	)		(1,156	)		(2,041	)
Interest income		53			297			256			1,402
Interest expense		(697	)		(1,320	)		(2,653	)		(4,361	)
Equity in earnings (losses) of affiliates		97			299			(162	)		1,956
Income tax (benefit) expense		1,781			(12,152	)		(12,548	)		(32,032	)

Net income	$	12,240		$	9,832		$	30,667		$	34,965


15.	Related Party Transactions

Please see note 2, Exercise of Amended Call Option.

Please see note 3, Terminated Merger Agreement.

Please see note 4, Transactions Involving FX Real Estate and Entertainment Inc.

The Company subleases from a third party 16,810 square feet, comprising the entire 16th floor and a portion of the 15th floor at 650 Madison Avenue, for its principal corporate offices in New York, New York. The remainder of the 15th floor at 650 Madison Avenue was historically subleased from the same sublessor by Flag Anguilla Management (“Flag Anguilla”), a company in which Robert F.X. Sillerman, the Company’s Chairman and CEO, is the majority shareholder. Both the CKX and Flag Anguilla subleases had cross default provisions, so that a default by Flag Anguilla under its sublease

could result in the sublessor calling a default under the CKX sublease, thereby forcing CKX to vacate its office space. For administrative convenience and to protect CKX from any cross default risk, CKX had historically paid the rent for the full space directly to the sublessor, and Flag Anguilla had then immediately reimbursed CKX for its portion of the monthly rent ($42,000). Starting in October 2008, Flag Anguilla stopped reimbursing CKX for its portion of the monthly rent. In order to avoid a potential cross default as referenced above, CKX elected to continue to make payment on the full space and seek payment after the fact from Flag Anguilla. As of January 31, 2009, CKX had made unreimbursed rental and related payments (including real estate taxes and operating expenses) for the benefit of Flag Anguilla in the amount of $212,626. All amounts paid by the Company on behalf of Flag Anguilla were reimbursed to the Company in March 2009. The Company did not make any further payments on Flag Anguilla’s behalf in respect of rent due in 2009.

Following payment of the outstanding amounts referenced above, effective April 1, 2009, the Company reached an agreement with Flag Anguilla, Flag Luxury Properties, a company in which Robert F.X. Sillerman owns approximately 33% of the outstanding equity, and FXRE, pursuant to which (i) Flag Anguilla assigned its sublease for the 15th floor to CKX, and (ii) CKX sublicensed a portion of such space to each of Flag Anguilla, Flag Luxury Properties and FXRE. The terms of the agreements run concurrent with the term of CKX’s sublease for the space (expiring in 2013). CKX is responsible for payment of the full rental amount each month to the sublandlord, and each of Flag Anguilla, Flag Luxury Properties and FXRE will pay its pro rata share of the rent for the space it occupies to CKX, with such payments to be made on the first day of every month during the term. Each agreement is terminable at the option of Flag Anguilla, FXRE or Flag Luxury Properties, as the case may be, on 90 days written notice, and is terminable at the option of CKX upon the failure of a FXRE or Flag Luxury Properties, as the case may be, to make a single rental payment when due, subject to a five (5) day cure period. As of September 30, 2009, Flag Anguilla, FXRE and Flag Luxury Properties are each current on all rent payments.

On May 1, 2009, we invested $100,000 in the form of a convertible promissory note in a venture-stage music-oriented technology company that is affiliated with a former director of the Company. The Company expensed the full amount of this investment as and when the funds were used. On August 31, 2009, we entered into a letter of intent with this same company setting forth terms for a proposed technology license and development services agreement. Upon execution of the letter of intent, the Company paid $100,000 as an advance license fee, with an additional $50,000 advance license fee paid on October 13, 2009. As with the initial May investment, these amounts have been recorded as development expense. The letter of intent requires the Company to pay an additional $750,000 due upon execution and delivery of a long form development service agreement.


16.	Subsequent Events

The Company evaluated subsequent events through November 5, 2009.

* * * * * * * * *

FORWARD LOOKING STATEMENTS

In addition to historical information, thisForm 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or other similar expressions, although not all forward-looking statements contain these identifying words. All statements in this Quarterly Report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities and Exchange Commission (“SEC”). We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the historical financial statements and footnotes of the registrant included in its Annual Report onForm 10-K for the year ended December 31, 2008. Our future results of operations may change materially from the historical results of operations reflected in our historical financial statements.

General

We are engaged in the ownership, development and commercial utilization of entertainment content. As more fully described below, our primary assets and operations include:


	•	19 Entertainment Limited, which owns, among other properties, proprietary rights to theIDOLSandSo You Think You Can Dancetelevision brands, both of which air in the United States, and, together with local adaptations of the format, around the world;

	•	An 85% ownership interest in Elvis Presley Enterprises, which owns the rights to the name, image and likeness of Elvis Presley, certain music and other intellectual property created by or related to Elvis Presley and the operations of Graceland and has partnered with Cirque du Soleil for the creation of Elvis Presley-themed shows and projects around the world; and

	•	An 80% ownership interest in Muhammad Ali Enterprises, which owns the rights to the name, image and likeness of, as well as certain trademarks and other intellectual property related to Muhammad Ali.

Our existing properties generate recurring revenue across multiple entertainment platforms, including music and television; licensing and merchandising; talent management; themed attractions and touring/live events.

The Company owns an 85% interest in the Presley Business. The former owner of the Presley Business maintains a 15% interest in the business, is entitled to certain future distributions and has other contractual rights. The Company owns an 80% interest in the Ali Business. The former owner of the Ali Business maintains a 20% interest in the business and is entitled to certain future distributions and has other contractual rights.

Exercise of Amended Call Option

On June 8, 2009, the Company entered into an amendment to the Put and Call Option Agreement with Mr. Fuller. Pursuant to the amendment, the call price with respect to 1,138,088 of Mr. Fuller’s shares (the “Interim Shares”) was reduced to $13.18 per share and the exercise periods for the put and call of such shares were accelerated to allow for the their exercise at any time commencing on the date of the amended agreement. The terms of the original Put and Call Option Agreement remain in place with respect to Mr. Fuller’s remaining 369,047 shares of common stock.

Immediately following execution of the amendment to the Put and Call Option Agreement, the Company exercised its call option with respect to the Interim Shares and paid to Mr. Fuller a gross purchase price of $15.0 million. The Interim Shares purchased by the Company have been recorded as treasury shares. The Company recorded a cost of $0.8 million for payroll-related taxes associated with the exercise of the call option.

In order to comply with the Company’s internal corporate governance policies as well as NASDAQ Listing Rule 5630 regarding approval of related party transactions, the independent directors of the Company’s Board of Directors unanimously approved the amendment to the put and call option agreement and exercise of the call option with respect to the Interim Shares. The Company’s Board of Directors, acting upon such recommendation of the

independent directors of the Board of Directors, also unanimously approved (except for Mr. Fuller, who abstained) the amendment and the immediate exercise with respect to the Interim Shares.

Mr. Fuller’s employment agreement with the Company, which was entered into at the time of the Company’s acquisition of 19 Entertainment in March 2005, expires by its terms in March 2011. The Compensation Committee of the Company’s Board of Directors has commenced negotiations with Mr. Fuller on a long term extension of that agreement. Based upon the initial discussion taking place, the Company expects that such an extension, if reached, will involve cash compensation and other incentives (including stock based incentive compensation) significantly in excess of those contained in Mr. Fuller’s existing employment agreement. Any such agreement will require the approval of the Company’s Compensation Committee and certain stock awards not covered by the Company’s existing stock incentive plan may require the approval of the Company’s stockholders.

Terminated Merger Agreement

On November 1, 2008, 19X delivered a letter to the Board of Directors of the Company terminating the Merger Agreement. Pursuant to the terms of the Merger Agreement, 19X was required to pay a termination fee of $37.5 million. Subsequently, 19X paid the termination fee comprised of $37.0 million by delivery of 3,339,350 shares of CKX common stock, at the contractually agreed to assumed valuation provided for in the Merger Agreement of $11.08 per share, with the remainder of the termination fee ($0.5 million) paid in cash.

Transactions Involving FX Real Estate and Entertainment Inc.

About FXRE

FXRE Distribution

preferred stock owned on the record date for the distribution. The distributed shares represented 100% of the interests in FXRE acquired by CKX in 2007. The total number of shares of FXRE common stock distributed to CKX stockholders was 19,743,349.

Terminated License Agreements

Simultaneous with our investment in FXRE, EPE entered into a worldwide license agreement with FXRE, granting FXRE the exclusive right to utilize Elvis Presley-related intellectual property in connection with the development, ownership and operation of Elvis Presley-themed hotels, casinos and certain other real estate-based projects and attractions around the world. FXRE also entered into a worldwide license agreement with the Ali Business, granting FXRE the right to utilize Muhammad Ali-related intellectual property in connection with Muhammad Ali-themed hotels and certain other real estate-based projects and attractions.

Shared Services Agreement

Charges under the shared services agreement were made on a quarterly basis and were determined by taking into account a number of factors, including but not limited to, the overall type and volume of services provided, the individuals involved, the amount of time spent by such individuals and their current compensation rate with the Company with which they are employed. Each quarter, representatives of the parties met to (i) determine the net payment due from one party to the other for provided services performed by the parties during the prior calendar quarter, and (ii) prepare a report in reasonable detail with respect to the provided services so performed, including the value of such services and the net payment due. The parties were required to use their reasonable, good-faith efforts to determine the net payments due in accordance with the factors described in above. Charges under the shared services agreement were reviewed by the Audit Committee.

19 Entertainment

19 Entertainment generates revenue from the creation and production of entertainment properties. Our primary revenue sources include production and license fees and related ratings and rankings bonuses from television programs, and royalties from the sale of recorded music by artists signed to our record labels. We also derive revenue from the sale of merchandise, sponsorships and tours based on our television programs and recorded music artists, and fee income from management clients.

The majority of our revenue is derived from production and license fees and related performance bonuses from producing and licensing theIDOLStelevision show format in various countries and ancillary revenue streams from theIDOLSbrand. Ancillary revenue from theIDOLS brand is generated through agreements which provide us with the option to sign finalists on theIDOLStelevision shows to long-term recording and management contracts, concert tours we produce featuringIDOLSfinalists and the sale of sponsorships and merchandise involving theIDOLSbrand.

The majority of ourIDOLSrelated revenue is generated through agreements with our global television production and distribution partner, FremantleMedia, and our principal global record label partners Ronagold for seasonsAmerican Idol 1throughAmerican Idol 4and Simco for all seasons subsequent toAmerican Idol 4. Therefore, we are highly dependent upon the continued ability of these entities to successfully maintain theIDOLSbrand and promote our recording artists.

Other thanAmerican Idol, which is discussed below, theIDOLStelevision shows are generally produced or licensed under one year contracts under which each local television network has the right, but not the obligation, to renew the agreement for additional years. Our recording artists are generally signed to long-term recording contracts under which we and Sony Music have the right, but not the obligation, to require the artist to release a specified number of albums.

Our revenue from the IDOLS brand is also highly dependent upon the continued success of theAmerican Idolseries which currently airs on the Fox television network in the United States, and local adaptations of the IDOLS television show which air around the world. Our revenue is also dependent upon the continued success and productivity of our recording artists and management clients. A portion of our revenue from theAmerican Idolseries is dependent upon the number of hours of programming we deliver. The eighth broadcast season aired 50.0 hours in 2009. In 2008 we aired 52.5 hours. On November 28, 2005, 19 Entertainment entered into a series of agreements with Fox, FremantleMedia and Sony Music/Simco, related to theAmerican Idoltelevision program. Under the terms of the agreements, Fox has guaranteed the 2010 season ofAmerican Idol, with an automatic renewal for the 2011 season upon the show achieving certain minimum ratings. Additional terms of the agreements call for Fox to order a minimum of 37 hours and a maximum of 45 hours ofAmerican Idolprogramming each season (though 19 Entertainment and FremantleMedia can agree to produce additional hours) and to pay 19 Entertainment and FremantleMedia an increased license fee per season. Fox also agreed to make an annual payment to 19 Entertainment tied to the most recent recording agreement with Sony Music.

related to Mr. Seacrest’s services onAmerican Idol. The amounts paid by such parties, if any, will either be paid directly to the Company or remitted to the Company by Mr. Seacrest. The Company will amortize the aggregate payments of $45 million to cost of sales over the three-year term of the arrangement as theAmerican Idolseries airs, which is in accordance with our accounting policy,Television Production Costs, as described in the Company’sForm 10-K.

19 Entertainment’s revenue is seasonal in nature, reflecting the timing of our television shows and tours in various markets. Historically, 19 Entertainment generated higher revenue during the first three quarters of the calendar year, which corresponds to the dates on Fox in the United States ourAmerican Idolshow is broadcast (the first and second quarters) and the dates ourSo You Think You Can Danceseries airs (the second and third quarters). In 2009, Fox ordered additional broadcast hours ofSo You Think You Can Dancewhich is airing in the third and fourth quarters of 2009. We also airedSuperstars of Dance, a special series, on NBC in the first quarter of 2009. As a result of the additional season ofSo You Think You Can Dancewe expect our revenue in the fourth quarter of 2009 to be significantly higher than the prior year.

19 Entertainment’s revenue reflects its contractual share of theIDOLStelevision revenue representing producer, format and licensing fees as well as ratings and ratings bonuses and does not include the revenue earned or the production costs incurred directly by our production and distribution partner, FremantleMedia. 19 Entertainment records all of the television and sponsorship revenue forSo You Think You Can DanceandSuperstars of Danceand our operating expenses include the contractual share that we distribute to our production partners.

Our significant costs to operate 19 Entertainment include salaries and other compensation, royalties, tour expenses, rents and general overhead costs. Our discretionary costs include salary and overhead costs incurred in the development of new entertainment content.

Presley Business

The Presley Business consists of entities which ownand/or control the commercial utilization of the name, image and likeness of Elvis Presley, the operation of the Graceland museum and related attractions, as well as revenue derived from Elvis Presley’s television specials, films and certain of his recorded musical works. The Presley Business consists of two reportable segments: Royalties and Licensing — intellectual property, including the licensing of the name, image, likeness and trademarks associated with Elvis Presley, as well as other ownedand/or controlled intellectual property and the collection of royalties from certain motion pictures, television specials and recorded musical works and music compositions; and Graceland Operations — the operation of the Graceland museum and related attractions and retail establishments, including Elvis Presley’s Heartbreak Hotel and other ancillary real estate assets.

The Royalties and Licensing segment generates revenue from the exploitation of the name, image and likeness of Elvis Presley, including physical and intellectual property owned or created by Elvis Presley during his life. The primary revenue source of this segment comes from licensing Elvis’ name and likeness for consumer products, commercials and other uses and royalties and other income derived from intellectual property created by Elvis Presley including records, movies, videos and music publishing. Licensing revenue is primarily derived from long-term contracts with terms of one to five years. Although we seek to obtain significant minimum guarantees, our licensing revenue varies based on the actual product sales generated by licensees. The intellectual property created by Elvis during his lifetime which we own has generally been assigned to third parties for commercial exploitation under long-term agreements.

Although we maintain certain controls over the use of this content and, in certain cases, have rights to terminate these agreements if the third party fails to perform, our revenue from this intellectual property is highly dependant upon the ability of third parties to successfully market the content.

The Graceland Operations segment generates its primary revenue from ticket and merchandise sales and related income from public tours of Graceland as well as from the operation of Elvis Presley’s Heartbreak Hotel and the other ancillary real estate assets. Revenue from Graceland has historically been seasonal with sharply higher numbers of visitors during the late spring and summer seasons as compared to the fall and winter seasons.

Most of the Presley Business’ revenue sources are dependant upon the public’s continued interest in Elvis Presley and the intellectual property he created.

Our significant costs to operate the Presley Business include salaries, rent and other general overhead costs. Most of our costs do not vary significantly with our revenue. Our discretionary costs are generally in our marketing and promotions department which we primarily incur to maintainand/or increase the number of visitors to Graceland. We also incur expenses in exploring opportunities to bring Elvis-related attractions to Las Vegas and other strategic locations throughout the world.

Ali Business

The Ali Business consists of the commercial exploitation of the name, image, likeness and intellectual property of Muhammad Ali, primarily through endorsement and licensing arrangements.

The primary revenue source comes from licensing Muhammad Ali’s name and likeness for consumer products, commercials and other uses. Licensing revenue is primarily derived from long-term contracts with terms of one to five years. Although we seek to obtain significant minimum guarantees, our licensing revenue varies based on the actual product sales generated by licensees. The intellectual property that is owned by the Company is licensed to third parties for commercial exploitation under long-term agreements. Although we maintain certain controls over the use of this content and, in certain cases, have rights to terminate these agreements if the third party fails to perform, our revenue from this intellectual property is highly dependant upon the ability of third parties to successfully market the content. Most of our revenue sources are dependant upon the public’s continued interest in Muhammad Ali and associated intellectual property. The Ali Business also generates revenue from sports memorabilia signings performed by Mr. Ali.

Our significant costs to operate the Ali Business include commissions, salaries and other general overhead costs. With the exception of commissions, most of our costs do not vary significantly with our revenue.

Use of OIBDAN

We evaluate our operating performance based on several factors, including a financial measure of operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets and non-cash compensation (which we refer to as “OIBDAN”). The Company considers OIBDAN to be an important indicator of the operational strengths and performance of our businesses and the critical measure the chief operating decision maker (CEO) uses to manage and evaluate our businesses, including the ability to provide cash flows to service debt. However, a limitation of the use of OIBDAN as a performance measure is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenue in our businesses or stock-based compensation expense. Accordingly, OIBDAN should be considered in addition to, not as a substitute for, operating income (loss), net income (loss) and other measures of financial performance reported in accordance with US GAAP as OIBDAN is not a GAAP equivalent measurement.

We have reconciled OIBDAN to operating income in the following consolidated operating results table for the Company for the three and nine months ended September 30, 2009 and 2008.

Consolidated Operating Results Three Months Ended September 30, 2009

Compared to Three Months Ended September 30, 2008


	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,
	2009			2008			Variance
				(In thousands)

Revenue	$	87,395		$	96,977		$	(9,582	)
Operating expenses		76,389			74,269			2,120
Other expense (income)		(1,697	)		(5,631	)		3,934
Operating income		11,006			22,708			(11,702	)
Income tax (benefit) expense		(1,781	)		12,152			(13,933	)
Net income attributable to CKX, Inc.		11,193			8,688			2,505

Operating income	$	11,006		$	22,708		$	(11,702	)
Depreciation and amortization		5,033			5,322			(289	)
Non-cash compensation		404			917			(513	)

OIBDAN	$	16,443		$	28,947		$	(12,504	)

Revenue decreased $9.6 million in 2009 due primarily to a decline inAmerican Idoland music revenue and reduced royalty and licensing revenue at the Presley Business partially offset by additionalSo You Think You Can Dancerevenue and increased revenue at the Ali business. Higher operating expenses of $2.1 million for the three months ended September 30, 2009 resulted from lower foreign exchange gains compared to the prior year quarter offset by higher corporate expenses and acquisition-related costs.

19 Entertainment

The following tables provide a breakdown of 19 Entertainment’s revenue, cost of sales, selling, general and administrative expenses and other costs, OIBDAN and operating income for the three months ended September 30, 2009 and 2008:


Three Months Ended September 30, 2009	Revenue		Cost of Sales
	(In thousands)

American Idol(including television production, foreign syndication, sponsorship, merchandise and touring)	$	21,289	$	(9,728	)	$	11,561
OtherIDOLStelevision programs (including license fees and sponsorship)		3,158		(121	)		3,037
So You Think You Can Danceand other television productions		36,869		(30,223	)		6,646
Recorded music, management clients and other		10,080		(7,391	)		2,689

	$	71,396	$	(47,463	)	$	23,933
Selling, general and administrative expenses, excluding non-cash compensation							(10,634	)
Other income							1,672

OIBDAN						$	14,971

OIBDAN						$	14,971
Depreciation and amortization							(3,640	)
Non-cash compensation							(136	)

Operating income						$	11,195


Three Months Ended September 30, 2008	Revenue		Cost of Sales
	(In thousands)

American Idol(including television production, foreign syndication, sponsorship, merchandise and touring)	$	28,156	$	(11,380	)	$	16,776
OtherIDOLStelevision programs (including license fees and sponsorship)		4,544		(178	)		4,366
So You Think You Can Danceand other television productions		32,201		(26,220	)		5,981
Recorded music, management clients and other		13,897		(8,695	)		5,202

	$	78,798	$	(46,473	)	$	32,325
Selling, general and administrative expenses, excluding non-cash compensation							(11,020	)
Other income							5,631

OIBDAN						$	26,936

OIBDAN						$	26,936
Depreciation and amortization							(4,069	)
Non-cash compensation							(693	)

Operating income						$	22,174

American Idolrevenue declined $6.9 million primarily due to reduced tour sponsorship deals and one less tour date and a reduction in tour minimum guarantees. The global recession unfavorably impacted sponsorship revenue. Cost of sales declined $1.7 million due to reduced tour costs and commissions on sponsorship deals.

OtherIDOLSrevenue declined $1.4 million due to reduced sponsorship and television revenue in international markets.

Revenue fromSo You Think You Can Danceincreased $6.9 million due to 6 hours broadcast in the additional season that commenced in September, which was partially offset by 2 fewer hours broadcast in the season that ended in August. TheSo You Think You Can Dancetour contributed $1.2 million of the revenue increase due to the timing of tour dates and commercial revenue declined $0.5 million. Other television revenue declined $2.2 million due to non-recurring projects in 2008 partially offset by a tape sale ofSuperstars of Dance. Cost of sales increased due to the additional broadcast hours forSo You Think You Can Dancepartially offset by costs on the prior year’s non-recurring projects.

Recorded music revenue declined $3.1 million in 2009 due to lower record sales. Management revenue decreased $0.7 million primarily due to reduced touring schedules for several artists as they work on new album releases scheduled for the second half of 2009 and reduced management fees at MBST. The Storm acquisition, completed on August 6, 2009, contributed $1.6 million in revenue. Cost of sales declined $1.3 million due to lower music royalties partially offset by the Storm acquisition.

Selling, general and administrative expenses declined by $0.4 million due primarily to more costs being allocated to specific projects. Other income of $1.7 million and $5.6 million for the three months ended September 30, 2009 and 2008, respectively, represents foreign exchange gains generated at 19 Entertainment for transactions recorded in currencies other than the U.K. pound sterling functional currency. The foreign exchange gains in both periods reflect the weakening of the U.K. pound compared to the U.S. dollar.

Presley Business — Royalties and Licensing

The following table provides a breakdown of Presley Business — Royalties and Licensing revenue, cost of sales, selling, general and administrative expenses and OIBDAN for the three months ended September 30, 2009 and 2008:


	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,
	2009			2008			Variance
				(In thousands)

Revenue	$	2,302		$	5,242		$	(2,940	)
Cost of sales		(50	)		(1,406	)		1,356
Selling, general and administrative expense, excluding non-cash compensation		(958	)		(1,550	)		592

OIBDAN	$	1,294		$	2,286		$	(992	)

OIBDAN	$	1,294		$	2,286			(992	)
Depreciation and amortization		(645	)		(645	)		—
Non-cash compensation		(5	)		(9	)		4

Operating income	$	644		$	1,632		$	(988	)

The decrease in royalties and licensing revenue of $2.9 million for three months ended September 30, 2009 compared to 2008 was due to the 2008 distribution of “Elvis: Viva Las Vegas” DVD documentary (“Elvis Viva DVD”) which contributed $1.8 million, lower royalties from merchandise licensing of $0.6 million, and lower film, publishing and record royalties of $0.5 million. The global recession has unfavorably impacted royalty income from all sources. Royalties and licensing cost of sales decreased $1.4 million primarily due to the cost of production and commissions related to the 2008 Elvis Viva DVD distribution. Royalties and licensing selling, general and administrative expenses decreased $0.6 million primarily due to lower expenses related to the Elvis Viva DVD distribution of $0.3 million and lower licensing and legal fees.

Presley Business — Graceland Operations

The following table provides a breakdown of the Presley Business — Graceland Operations revenue, cost of sales, selling, general and administrative expenses and OIBDAN for the three months ended September 30, 2009 and 2008:


	Three Months			Three Months
	Ended			Ended
	September 30,			September 30,
	2009			2008			Variance
	(In thousands)

Revenue	$	12,416		$	12,554		$	(138	)
Cost of sales		(1,901	)		(2,019	)		118
Selling, general and administrative expense, excluding non-cash compensation		(6,163	)		(7,118	)		955

OIBDAN	$	4,352		$	3,417		$	935

OIBDAN	$	4,352		$	3,417		$	935
Depreciation and amortization		(594	)		(566	)		(28	)
Non-cash compensation		(30	)		(21	)		(9	)

Operating income	$	3,728		$	2,830		$	898

Graceland Operations revenue was down $0.1 million for three months ended September 30, 2009 compared to 2008 due to favorable results from tours and exhibits being offset by retail and ancillary revenue. Tour and exhibit revenue of $4.9 million in the three months ended September 30, 2009 increased $0.2 million compared to the prior year period. This increase resulted from a 2.6% increase in attendance to 179,784 in 2009 from 175,159 in 2008 and a 1.5% increase in per visitor spending. Retail operations revenue of $4.7 million in the three months ended September 30, 2009 was down $0.1 million compared to the prior year with an increase in attendance offset by a reduction in per visitor spending and lowere-commerce retail sales. Other revenue, primarily hotel room revenue and ancillary real estate income, of $2.8 million for the three months ended September 30, 2009, decreased

$0.2 million compared to the same period in 2008 due to lower hotel occupancy, lower revenue from sponsorships and special events and lower rental revenue from ancillary real estate assets adjoining Graceland.

Graceland Operations cost of sales decreased by $0.1 million in the three months ended September 30, 2009 compared to the prior year period due to cost improvements on merchandise sales. Graceland Operations selling, general and administrative expenses decreased $1.0 million in the three months ended September 30, 2009 compared to the prior year period, primarily due to a $0.5 million provision in 2008 for estimated losses due to the early termination of the sublease of a property leased by the Presley Business in downtown Memphis, lower expenses related to special events of $0.2 million and a decrease in other variable expenses at Graceland operations.

Ali Business

The Ali Business contributed $1.3 million and $0.4 million of revenue for the three months ended September 30, 2009 and 2008, respectively. The increase was due to higher licensing fees as well as memorabilia signings by Mr. Ali in the third quarter of 2009 as compared to the prior period. Operating expenses decreased by $0.1 million for the three months ended September 30, 2009 from the prior period primarily due to the increased commissions offset by reduced personnel costs due to the restructuring of the business in early 2009. OIBDAN increased to $0.8 million compared to $(0.1) million in the prior year period.

Corporate and Other

Corporate Expenses and Other Costs

The Company incurred corporate overhead expenses of $4.9 million and $3.6 million for the three months ended September 30, 2009 and 2008, respectively. The increase of $1.3 million primarily reflects $0.7 million of executive bonus expenses which were not recorded until the fourth quarter in 2008 due to the absence of a formal bonus plan in 2008, a $0.3 million reduction in the allocation of expenses to FXRE under the shared services agreement terminated as of June 30, 2009 and $0.2 million in increased professional fees.

During the three months ended September 30, 2009, the Company incurred $0.3 million of acquisition-related costs, consisting of third party due diligence costs for potential acquisitions that were under evaluation and costs for the acquisition of the 51% interest in the Storm Modeling Agency (“Storm”).

During the three months ended September 30, 2008, the Company incurred merger and distribution-related costs of $0.3 million. These costs primarily include the costs of the Special Committee of the Board of Directors formed to review the Merger and other merger-related costs, including legal and accounting costs.

Interest Income/Expense

The Company had interest expense of $0.7 million and $1.3 million in the three months ended September 30, 2009 and 2008, respectively. The decrease in interest expense is primarily due to a reduction in the average borrowing rate on the revolving credit facility from 4.10% to 1.85%. The Company had interest income of $0.1 million and $0.3 million in the three months ended September 30, 2009 and 2008, respectively. The decline in interest income reflects the Company shifting its U.S. cash balances to non-interest bearing accounts in late 2008 to qualify for unlimited insurance coverage offered under the FDIC Temporary Guarantee Program, which was extended through the end of 2013.

Income Taxes

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at the time. The Company’s effective tax rate is based on expected income, statutory rates and permanent differences applicable to the Company in the various jurisdictions in which the Company operates.

a one time benefit of $2.8 million primarily relating to the filing of the 2008 federal income tax return, a $1.8 million tax expense relating to uncertain tax positions and a tax benefit of $1.6 million relating to potential tax refunds. The general tax provision of $0.8 million for the quarter reflects a reduction in the annual estimated effective tax rate to 36.9% from 45.9% at the end of the second quarter.

The decrease in the 2009 annual effective tax rate relates primarily to the Company expecting to owe less foreign taxes, as a percentage of income than was anticipated in the third quarter of 2008 receiving a larger benefit from the utilization of the Company’s foreign tax credit and not capitalizing any deal costs.

Open tax years related to federal, state and local filings are for the years ended December 31, 2006, 2007 and 2008. The Internal Revenue Service has commenced an audit of the Company’s tax year ended December 31, 2006. New York State has completed its audit for the tax years ended July 1, 2003, July 1, 2004 and March 17, 2005 for 19 Entertainment Inc. and its tax audit of the Company’s tax years ended December 31, 2005, 2006 and 2007 with no material changes.

Equity in Earnings (Losses) of Affiliates

The Company recorded earnings of $0.1 million and $0.3 million from unconsolidated affiliates for the three months ended September 30, 2009 and 2008, respectively, related to the Company’s investment in Beckham Brands Limited. The decrease is due primarily to Mr. Beckham’s services being loaned to AC Milan in 2009 which resulted in a reduction of payments from the LA Galaxy in 2009.

Noncontrolling Interests

Net income attributable to noncontrolling interests of $0.6 million and $0.7 million for the three months ended September 30, 2009 and 2008, respectively, primarily reflect shares in the net income of the Presley Business and the Ali Business related to the equity interests retained by the former owners.

Consolidated Operating Results Nine Months Ended September 30, 2009

Compared to Nine Months Ended September 30, 2008


	Nine Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2009		2008			Variance
	(In thousands)

Revenue	$	248,434	$	250,724		$	(2,290	)
Operating expenses		202,660		182,724			19,936
Other expense (income)		4,143		(5,790	)		9,933
Operating income		45,774		68,000			(22,226	)
Income tax expense		12,548		32,032			(19,484	)
Net income attributable to CKX, Inc.		27,264		31,834			(4,570	)

Operating income	$	45,774	$	68,000		$	(22,226	)
Depreciation and amortization		14,031		16,411			(2,380	)
Non-cash compensation		1,156		2,041			(885	)

OIBDAN	$	60,961	$	86,452		$	(25,491	)

Revenue decreased $2.3 million in 2009 as revenue from a new television program,Superstars of Dance,higher revenue fromSo You Think You Can Danceand licensing fees from the terminated FXRE license agreements were offset by reducedAmerican Idoland music and management revenue at 19 Entertainment. Higher operating expenses of $19.9 million for the nine months ended September 30, 2009 resulted primarily from costs related toSuperstars of Danceand higher production costs forSo You Think You Can Dance.

19 Entertainment


Nine Months Ended September 30, 2009	Revenue		Cost of Sales
	(In thousands)

American Idol(including television production, foreign syndication, sponsorship, merchandise and touring)	$	77,269	$	(17,689	)	$	59,580
OtherIDOLStelevision programs (including license fees and sponsorship)		8,695		(359	)		8,336
So You Think You Can Danceand other television productions		75,562		(63,038	)		12,524
Recorded music, management clients and other		35,777		(24,309	)		11,468

	$	197,303	$	(105,395	)	$	91,908
Selling, general and administrative expenses, excluding non-cash compensation							(31,478	)
Other expense							(4,168	)

OIBDAN						$	56,262

OIBDAN						$	56,262
Depreciation and amortization							(9,980	)
Non-cash compensation							(377	)

Operating income						$	45,905


Nine Months Ended September 30, 2008	Revenue		Cost of Sales
	(In thousands)

American Idol(including television production, foreign syndication, sponsorship, merchandise and touring)	$	94,029	$	(21,304	)	$	72,725
OtherIDOLStelevision programs (including license fees and sponsorship)		11,723		(423	)		11,300
So You Think You Can Danceand other television productions		54,737		(46,969	)		7,768
Recorded music, management clients and other		44,552		(24,421	)		20,131

	$	205,041	$	(93,117	)	$	111,924
Selling, general and administrative expenses, excluding non-cash compensation							(32,158	)
Other income							5,790

OIBDAN						$	85,556

OIBDAN						$	85,556
Depreciation and amortization							(12,669	)
Non-cash compensation							(1,353	)

Operating income						$	71,534

American Idol 8aired 50 series hours in the U.S. in the nine months ended September 30, 2009 whileAmerican Idol 7aired 52.5 series hours in the U.S. in the comparable 2008 season.American Idolrevenue declined by $16.8 million due to a decrease of 2.5 hours of programming, reduced revenue from foreign syndication and reduced on-air and off-air sponsorship deals, partially offset by an increase in guaranteed license fees. The decline in foreign syndication revenue reflects the renewal of an agreement under less favorable terms to broadcastAmerican Idolin the U.K. and the impact of foreign exchange and the global recession has unfavorably impacted sponsorship revenue. Television ratings forAmerican Idoldeclined in 2009 by approximately 10%, reflecting an overall decline in network television viewing. Cost of sales declined $3.6 million due to reduced tour costs and commissions on sponsorship deals.

OtherIDOLSrevenue declined $3.0 million due primarily to reduced sponsorship and television revenue in international markets.

Revenue fromSo You Think You Can Danceincreased $11.1 million due to 6 hours broadcast in the additional season that commenced in September. The season that concluded in August 2009 broadcast 37 hours, the same as in 2008. TheSo You Think You Can Dancetour contributed $3.3 million of the revenue increase due to the timing of tour dates for the U.S. tour and the introduction of a Canadian tour in 2009 while commercial revenue declined $0.2 million. Other television revenue increased $9.7 million representing a contribution of $10.2 million fromSuperstars of Dance,a special series aired on NBC in the first quarter of 2009 partially offset by non-recurring projects in 2008. Cost of sales increased $16.1 million due to the production costs forSuperstars of Danceand additional broadcast hours forSo You Think You Can Dancepartially offset by costs for the non-recurring projects in the prior year.

Music revenue declined $3.5 million due to lower record sales. Management revenue decreased $5.3 million primarily due to management fees from the Spice Girls’ reunion tour in 2008 and reduced touring schedules for several artists as they work on new album releases scheduled for the second half of 2009 and reduced management fees at MBST. The Storm acquisition, completed on August 6, 2009, contributed $1.6 million in revenue. Cost of sales was flat with the prior year as lower music royalties were offset by Storm costs and prior year tour costs.

Selling, general and administrative expenses decreased by $0.7 million due primarily to more costs being allocated to specific projects. Other expense of $4.2 million and other income of $5.8 million for the nine months ended September 30, 2009 and 2008, respectively, represents foreign exchange gains and losses generated at 19 Entertainment for transactions recorded in currencies other than the U.K. pound sterling functional currency. The 2009 expense was due to strengthening of the U.K. pound compared to the U.S. dollar while the 2008 gain was due to the weakening of the U.K. pound compared to the U.S. dollar.

Presley Business — Royalties and Licensing

The following table provides a breakdown of Presley Business — Royalties and Licensing revenue, cost of sales, selling, general and administrative expenses and OIBDAN for the nine months ended September 30, 2009 and 2008:


	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2009			2008			Variance
	(In thousands)

Revenue	$	18,714		$	13,370		$	5,344
Cost of sales		(720	)		(1,718	)		998
Selling, general and administrative expense, excluding non-cash compensation		(3,225	)		(3,960	)		735

OIBDAN	$	14,769		$	7,692		$	7,077

OIBDAN	$	14,769		$	7,692		$	7,077
Depreciation and amortization		(1,936	)		(1,936	)		—
Non-cash compensation		(26	)		(28	)		2

Operating income	$	12,807		$	5,728		$	7,079

The increase in royalties and licensing revenue of $5.3 million for the nine months ended September 30, 2009 was due to the recognition of $9.0 million of revenue, which had previously been deferred, related to the terminated FXRE license agreement. The increase was offset by 2008 revenue from the distribution of Elvis Viva DVD documentary of $1.8 million, lower merchandise licensing royalties of $1.3 million in the current period as 2008 had a strong carryover effect from the prior anniversary year and by lower sales in the current period of a limited edition collectible DVD box set of Elvis movies launched in 2007 of $0.5 million. Other royalties decreased by a net $0.1 million for the nine months ended September 30, 2009 with higher revenue from the sale of television and video rights of $0.7 million offsetting lower record, publishing and film royalties. The global recession has unfavorably impacted royalty income from all sources. Royalties and licensing cost of sales decreased $1.0 million due to lower cost of production and commissions of $0.9 million related to the distribution of the 2008 Elvis Viva DVD and lower cost of sales of the DVD box set. Royalties and licensing selling, general and administrative expenses decreased by $0.7 million in the current period primarily due to lower advertising and marketing costs for the DVD box set of $0.3 million, lower cost of Elvis Viva DVD $0.3 million and lower legal expense.

Presley Business — Graceland Operations


	Nine Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2009			2008			Variance
	(In thousands)

Revenue	$	29,157		$	29,464		$	(307	)
Cost of sales		(4,358	)		(4,587	)		229
Selling, general and administrative expense, excluding non-cash compensation		(18,181	)		(19,029	)		848

OIBDAN	$	6,618		$	5,848		$	770

OIBDAN	$	6,618		$	5,848		$	770
Depreciation and amortization		(1,773	)		(1,681	)		(92	)
Non-cash compensation		(77	)		(61	)		(16	)

Operating income	$	4,768		$	4,106		$	662

Graceland Operations revenue decreased $0.3 million for nine months ended September 30, 2009 compared to 2008 due to favorable results from tours and exhibits offset by lower ancillary revenue. Tour and exhibit revenue of $11.9 million for the nine months ended September 30, 2009 increased $0.5 million over the prior year. This

increase resulted from a 2.1% increase in visitor spending and a 2.3% increase in attendance to 440,800 in 2009 from 430,829 in 2008. Retail operations revenue of $10.8 million for the nine months ended September 30, 2009 decreased $0.2 million compared to the prior year due to a slight decrease in per-visitor spending and lowere-commerce revenue, offset by the increase in attendance. Other revenue, primarily hotel room revenue and ancillary real estate income of $6.5 million for the nine months ended September 30, 2009, was down $0.6 million compared to the prior year. The decline was due to lower hotel occupancy, resulting from fewer foreign travelers, and the loss of rental income from ancillary real estate primarily due to the closure of one property.

Graceland Operations cost of sales decreased by $0.2 million for the nine months ended September 30, 2009 compared to the prior year due to cost improvements.

Graceland Operations selling, general and administrative expenses decreased $0.8 million for the nine months ended September 30, 2009 primarily due to a $0.5 million provision recorded in 2008 for estimated losses due to the early termination of the sublease of a property leased by the Presley Business in downtown Memphis, lower expenses related to special events of $0.2 million, and decreases in advertising of $0.1 million, salaries and benefits of $0.3 million, professional and legal costs primarily related to master plan initiatives of $0.4 million and other operating expense. These declines were offset by the write-off of $0.9 million of deferred costs related to preliminary design work for the Graceland redevelopment initiative. The Company has determined that there is a strong likelihood that the original preliminary design plans may require significant modifications or abandonment for a redesign due to current economic conditions and a lack of certainty as to exact scope, cost, financing plan and timing of this project. The lack of certainty and likely need for significant modificationsand/or redesign was amplified by the termination of the FXRE license agreement, which had granted FXRE the rights to the development of one or more hotel(s) at Graceland as a component of the redevelopment initiative. Therefore, the Company determined that these cost should be written off in March 2009. The Company remains committed to the Graceland re-development and will continue to pursue opportunities on its own or with third parties.

Ali Business

The Ali Business contributed $3.2 million and $2.8 million of revenue for the nine months ended September 30, 2009 and 2008, respectively. Revenue increased by $0.4 million primarily due to the recognition of $1.0 million of revenue related to the terminated FXRE licensing agreement which had previously been deferred and an increase in licensing fees offset by a decline in revenue from fewer memorabilia signings by Mr. Ali in 2009 compared to the prior year period. Operating expenses increased to $2.8 million for the nine months ended September 30, 2009 from $2.3 million in the prior year period primarily due to accrued severance costs of $1.4 million due to the restructuring of the business in early 2009 which subsequently reduced personnel costs. This was partially offset by decreased commissions and operating costs. OIBDAN declined to $0.5 million from $0.6 million in the prior year period.

Corporate and Other

Corporate Expenses and Other Costs

The Company incurred corporate overhead expenses of $14.8 million and $11.9 million for the nine months ended September 30, 2009 and 2008, respectively. The increase of $2.9 million primarily reflects $1.4 million of executive bonus expenses which were not recorded until the fourth quarter in 2008 due to the absence of a formal bonus plan in 2008, $0.8 million in payroll-related taxes incurred due to the redemption of the redeemable restricted common stock in June 2009 and a $1.0 million reduction in the allocation of expenses to FXRE under the shared services agreement terminated as of June 30, 2009 offset by a $0.5 million reduction in employee-related costs.

During the nine months ended September 30, 2009, the Company incurred $2.5 million of acquisition-related costs, consisting of third party due diligence costs for potential acquisitions that were under evaluation and costs for the acquisition of the 51% interest in Storm.

During the nine months ended September 30, 2009, the Company incurred costs related to the terminated merger agreement of $0.5 million, primarily related to the settlement of the stockholder litigation described elsewhere herein. During the nine months ended September 30, 2008, the Company incurred merger and distribution-related costs of $2.0 million. These costs primarily include the costs of the Special Committee of

the Board of Directors formed to review the Merger and other merger-related costs, including legal and accounting costs.

Interest Income/Expense

The Company had interest expense of $2.7 million and $4.4 million in the nine months ended September 30, 2009 and 2008, respectively. The decrease in interest expense is primarily due to a reduction in the average borrowing rate on the revolving credit facility from 4.60% to 2.49%. The Company had interest income of $0.3 million and $1.4 million in the nine months ended September 30, 2009 and 2008, respectively; interest income in 2008 included $0.5 million in interest income from FXRE on the 2007 license payments and the FXRE loan. The decline in interest income also reflects the Company shifting its U.S. cash balances to non-interest bearing accounts in late 2008 to qualify for unlimited insurance coverage offered under the FDIC Temporary Guarantee Program, which was extended through the end of 2013.

Income Taxes

For the nine months ended September 30, 2009, the Company recorded a provision for income taxes of $12.5 million, reflecting the Company’s estimated 2009 effective tax rate of 36.9% and a one-time beneficial adjustment in the second quarter of $0.8 million for the expensing of 2008 costs relating to a deal that the Company has ceased pursuing as well as a third quarter benefit of $2.8 million primarily relating to the filing of the 2008 federal income tax return, a $1.8 million tax expense relating to uncertain tax positions and a tax benefit of $1.6 million relating to potential tax refunds.

The decrease in the 2009 annual effective tax rate relates primarily to the Company expecting to owe less foreign taxes, as a percentage of income than was anticipated in the third quarter of 2008, receiving a larger benefit from the utilization of the Company’s foreign tax credit and not capitalizing any deal costs.

Equity in Earnings (Losses) of Affiliates

The Company recorded a loss of $0.2 million and income of $2.0 million from unconsolidated affiliates for the nine months ended September 30, 2009 and 2008, respectively, related to the Company’s investment in Beckham Brands Limited. The decrease is due primarily to Mr. Beckham’s services being loaned to AC Milan in 2009 which resulted in a reduction of payments from the LA Galaxy in 2009.

Noncontrolling Interests

Net income attributable to noncontrolling interests of $2.0 million and $1.8 million for the nine months ended September 30, 2009 and 2008, respectively, primarily reflect shares in the net income of the Presley Business and the Ali Business related to the equity interests retained by the former owners.

Cash Flow for the nine months ended September 30, 2009 and 2008

Operating Activities

Net cash provided by operating activities was less than $0.1 million for the nine months ended September 30, 2009, a decrease of $60.9 million from the same period in the prior year. This reflects primarily the payments to Ryan Seacrest of $23.3 million, a decrease in net income of $4.3 million, recognition of $10.0 million of revenue

from the FXRE license payments in 2009 for which the cash was received in 2008 and normal seasonal patterns in cash collections on certainAmerican Idolrevenue streams.

Net cash provided by operating activities was $61.0 million for the nine months ended September 30, 2008, reflecting net income of $35.0 million, which includes depreciation and amortization expenses of $16.4 million and the impact of seasonal changes in working capital levels.

Investing Activities

Net cash used in investing activities was $16.6 million for the nine months ended September 30, 2009, primarily reflecting the investment in the Cirque du Soleil partnership of $6.1 million, the acquisition of a 51% interest in Storm for $4.3 million, net of cash acquired, and capital expenditures of $6.2 million, including the purchase of a fractional interest in a corporate airplane.

Net cash used in investing activities was $6.0 million for the nine months ended September 30, 2008 reflecting capital expenditures related primarily to the purchase of additional land adjacent to Graceland.

Financing Activities

Cash used in financing activities was $19.3 million for the nine months ended September 30, 2009. The Company made payments of $15.0 million related to the purchase of restricted redeemable common stock. The Company also made distributions of $2.2 million to noncontrolling interest shareholders, principal payments on notes payable of $0.8 million and dividend payments of $1.4 million to the holder of the Series B Convertible Preferred Stock.

Cash used in financing activities was $3.2 million for the nine months ended September 30, 2008. The Company made distributions to noncontrolling interest shareholders of $1.3 million, principal payments on notes payable of $0.6 million and dividend payments of $1.4 million to the holder of the Series B Convertible Preferred Stock.

Uses of Capital

At September 30, 2009, the Company had $101.1 million of debt outstanding and $66.9 million in cash and cash equivalents.

We believe that our current cash on hand together with the $41.7 million available under the Company’s revolving credit facility and cash flow from operations will be sufficient to fund our current operations, including payments of interest and principal due on the Company’s debt, dividends on our Series B Convertible Preferred Stock, mandatory minimum distributions to the noncontrolling shareholder in the each of the Presley Business and Ali Business and capital expenditures.

Capital Expenditures

We presently anticipate that our capital expenditures for 2009 will total approximately $7.0 million. We will also incur significant expenditures for the development of the Elvis Presley show in Las Vegas with Cirque du Soleil and MGM Mirage (“MGM”). We incurred $9.8 million in the nine months ended September 30, 2009 and expect to incur an additional $11.1 million over the remainder of 2009 and in early 2010.

We announced preliminary plans to re-develop our Graceland attraction including an expanded visitors center, developing new attractions and merchandising shops and building a new boutique convention hotel. This project is conditioned on a number of factors, including obtaining necessary approvals and concessions from local and state authorities. Although we have not yet determined the exact scope, cost, financing plan and timing of this project, we expect that the redevelopment of Graceland will take several years and could require a substantial financial investment by the Company. The Company remains committed to the Graceland redevelopment and will continue to pursue opportunities on its own or with third parties.

Future Acquisitions

We intend to acquire additional businesses that fit our strategic goals. We expect to finance our future acquisitions of entertainment related businesses from cash on hand, our revolving credit facility, new credit

facilities, additional debt and equity offerings, issuance of our equity directly to sellers of businesses and cash flow from operations. However, no assurance can be given that we will be able to obtain adequate financing to complete any potential future acquisitions we might identify.

Dividends

Our Series B Convertible Preferred Stock requires payment of a cash dividend of 8% per annum in quarterly installments. On an annual basis, our total dividend payment on the Series B Convertible Preferred Stock is $1.8 million. If we fail to make our quarterly dividend payments to the holders of the Series B Convertible Preferred Stock on a timely basis, the dividend rate increases to 12% and all amounts owing must be paid within three business days in shares of common stock valued at the average closing price over the previous 30 consecutive trading days. After such payment is made, the dividend rate returns to 8%. All such dividend payments were made on a timely basis.

We have no intention of paying any cash dividends on our common stock for the foreseeable future.

Commitments and Contingencies

There are various lawsuits and claims pending against us and which we have initiated against others. We believe that any ultimate liability resulting from these actions or claims will not have a material adverse effect on our results of operations, financial condition or liquidity.

On May 27, 2008, the parties to the litigation agreed to settle the Action on terms that were subsequently reflected in an amendment to the Merger Agreement. The terms of the settlement included, among others,: (i) that holders of not less than 73% of CKX’s outstanding capital stock entitled to vote on the Merger had to vote in favor of the transaction in order for it to be consummated, rather than 50%, as provided in the original Merger Agreement; (ii) that under any circumstance in which 19X must pay CKX a termination fee, that fee would be increased to $37.5 million from $37 million; (iii) that not less than $500,000 of the termination fee had to be paid in cash (whereas the original Merger Agreement had no cash requirement); and (iv) the stock, if any, used to pay the balance of the termination fee would be valued at $11.08 per share rather than $12 per share, as provided in the original Merger Agreement.

In addition to our scheduled maturities of debt, obligations to redeem preferred stock and obligations to the seller of the Presley Business, to certain sellers of 19 Entertainment and to the sellers of MBST and the Ali Business, we have future cash obligations under various types of contracts. We lease office space and equipment under long-term operating leases. We have also entered into long-term employment agreements with certain of our executives and other key employees. These employment agreements typically contain provisions that allow us to terminate the contract with good cause.

Elvis Cirque du Soleil Show

On August 17, 2007, the Company announced that, together with its subsidiaries, Elvis Presley Enterprises, Inc. and Elvis Presley Enterprises LLC, it has reached an agreement with Cirque du Soleil and MGM to create a permanent Elvis Presley show at MGM CityCenter’s ARIA resort and casino in Las Vegas, Nevada. The Elvis Presley show is expected to open to the public with the ARIA resort and casino in January 2010. CKX and Cirque du Soleil have each agreed to pay one-half of the creative development and production costs of the Elvis Presley show. CKX expects its portion of the investment to be approximately $24 million, with the largest amount expected to be funded in the later stages of development. The Company incurred expenditures for the development of the show of $3.1 million in 2008 and $9.8 million in the nine months ended September 30, 2009. The Company expects to fund the remaining $11.1 million over the remainder of 2009 and in early 2010.

Ryan Seacrest Agreement

Annual Impairment Review

The Company will perform its annual impairment analysis in the fourth quarter. To date, no triggering events have occurred. Given the present volatility and disruption in the world financial markets and the weakening of the global economy, the Company’s annual impairment testing may identify impairments of long-lived assets which would be recorded in the fourth quarter.

Inflation

Inflation has affected the historical performances of the businesses primarily in terms of higher operating costs for salaries and other administrative expenses. Although the exact impact of inflation is indeterminable, we believe that the Presley Business has offset these higher costs by increasing prices at Graceland and for intellectual property licenses and that 19 Entertainment has offset these higher costs by increasing fees charged for its production services and higher royalty and sponsorship rates.

Critical Accounting Policies

During the nine months ended September 30, 2009, there have been no significant changes related to the Company’s critical accounting policies and estimates as disclosed in the Company’sForm 10-K for the year ended December 31, 2008.

Impact of Recently Issued Accounting Standards

reporting guidance. The impact of this standard on the Company’s financial statements is limited to presentation and disclosure.

Off Balance Sheet Arrangements

As of September 30, 2009, we did not have any off balance sheet arrangements as defined in Item 303 (a)(4)(ii) of SECRegulation S-K.


Item 3.	*Quantitative and Qualitative Disclosure About Market Risk*

We are exposed to market risk arising from changes in market rates and prices, including movements in foreign currency exchange rates, interest rates and the market price of our common stock. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.

Interest Rate Risk

We had $101.1 million of total debt outstanding at September 30, 2009, of which $100.0 million was variable rate debt.

Assuming a hypothetical increase in the Company’s variable interest rate of 100 basis points, our net income for the nine months ended September 30, 2009 would have decreased by approximately $0.5 million.

Any future borrowings under the Company’s revolving credit facility commitment would be variable rate debt and the Company would therefore have additional exposure to interest rate risk.

Foreign Exchange Risk

We have significant operations outside the United States, principally in the United Kingdom. Some of our foreign operations are conducted in local currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we operate.

Assuming a hypothetical weakening of the U.S. dollar exchange rate with the U.K. pound sterling of 10%, our net income for the nine months ended September 30, 2009 would have decreased by approximately $2.1 million, reflecting an excess of U.K. pound sterling denominated operating expenses over U.K. pound sterling denominated revenue.

As of September 30, 2009, we have not entered into any foreign currency option contracts or other financial instruments intended to hedge our exposure to changes in foreign exchange rates. We intend to continue to monitor our operations outside the United States and in the future may seek to reduce our exposure to such fluctuations by entering into foreign currency option contracts or other hedging arrangements.

19 Entertainment Put and Call Option


Item 4.	*Controls and Procedures*

Evaluation of Disclosure Controls and Procedures

Management, with the participation of the Company’s chief executive officer, Robert F.X. Sillerman, and its chief financial officer, Thomas P. Benson, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934Rules 13a-15 (e) or15d-15 (e)) as of September 30, 2009. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, our disclosure controls and procedures were effective.

Changes in Internal Controls over Financial Reporting

No changes in internal control over financial reporting have occurred during the three months ended September 30, 2009 that have materially affected CKX’s internal controls over financial reporting.

Part II — Other Information


Item 1.	*Legal Proceedings*

We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.


Item 6.	*Exhibits*


Exhibit
No.			Description

	4	.1	Form of Promissory Term Note made on July 13, 2009, payable to Priscilla Presley (Filed herewith).
	31	.1	Certification of Principal Executive Officer (Filed herewith).
	31	.2	Certification of Principal Financial Officer (Filed herewith).
	32	.1	Section 1350 Certification of Principal Executive Officer (Filed herewith).
	32	.2	Section 1350 Certification of Principal Financial Officer (Filed herewith).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CKX, Inc.


	BY:	/s/ Robert F.X. Sillerman


	Name:	Robert F.X. Sillerman

Chief Executive Officer and

Chairman of the Board


	BY:	/s/ Thomas P. Benson


	Name:	Thomas P. Benson

Chief Financial Officer, Executive

Vice President and Treasurer

(Principal Accounting Officer)

DATE: November 6, 2009

INDEX TO EXHIBITS


Exhibit
No.			Description

	4	.1	Form of Promissory Term Note made on July 13, 2009, payable to Priscilla Presley (Filed herewith).
	31	.1	Certification of Principal Executive Officer.
	31	.2	Certification of Principal Financial Officer.
	32	.1	Section 1350 Certification of Principal Executive Officer.
	32	.2	Section 1350 Certification of Principal Financial Officer.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

CKX (CKXE) Inactive 10-Q2009 Q3 Quarterly report

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