SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1995.
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No. 0-15192
DICK CLARK PRODUCTIONS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2038815
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3003 West Olive Avenue, Burbank, California 91505-4590
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(Address of principal executive offices, including zip code)
(818) 841-3003
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Below are indicated the number of shares outstanding of each of the registrant's
classes of common stock as of May 11, 1995.
Class Outstanding at May 11, 1995
- -------------------------------------- ---------------------------
Common Stock, $0.01 par value 7,528,500
Class A Common Stock, $0.01 par value 750,000
PART 1. FINANCIAL INFORMATION
ITEM 1. DICK CLARK PRODUCTIONS, INC.
FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
(Unaudited)
MARCH 31, JUNE 30,
1995 1994
----------- -----------
ASSETS
------
Cash and cash equivalents $ 5,482,000 $ 4,336,000
Marketable securities 23,981,000 24,348,000
Accounts receivable 3,036,000 3,944,000
Program costs, net 2,741,000 1,474,000
Prepaid Royalty 3,128,000 ---
Leasehold improvements and equipment 6,900,000 7,162,000
Current and deferred taxes receivable 0 83,000
Goodwill and other assets 2,616,000 2,970,000
----------- -----------
Total assets $47,884,000 $44,317,000
=========== ===========
LIABILITES & STOCKHOLDERS' EQUITY
---------------------------------
Accounts payable $ 3,618,000 $ 5,492,000
Accrued residuals and participations 1,584,000 1,881,000
Production advances and deferred revenue 3,571,000 2,286,000
Current and deferred income taxes 1,469,000 ---
----------- -----------
Total liabilities 10,242,000 9,659,000
Commitments and contingencies 0 0
Minority Interest 493,000 965,000
Stockholders' equity:
Class A common stock, $.01 par value,
2,000,000 shares authorized
750,000 shares outstanding 7,000 7,000
Common stock, $.01 par value,
20,000,000 shares authorized
7,527,000 shares outstanding 76,000 76,000
Additional paid-in capital 7,790,000 7,783,000
Retained earnings 29,276,000 25,827,000
----------- -----------
Total stockholders' equity 37,149,000 33,693,000
=========== ===========
Total liabilities & stockholders' equity $47,884,000 $44,317,000
=========== ===========
The accompanying notes are an integral part of these consolidated balance
sheets.
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
March 31, March 31,
------------------------------ ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Gross revenues $16,190,000 $19,465,000 $34,510,000 $45,881,000
Costs related to revenue 11,407,000 12,982,000 28,669,000 38,128,000
----------- ----------- ----------- -----------
Gross profit 4,783,000 6,483,000 5,841,000 7,753,000
General and administrative expenses 617,000 638,000 1,614,000 1,603,000
Minority interest expense 26,000 0 77,000 484,000
Interest and other income (366,000) (372,000) (1,156,000) (1,063,000)
----------- ----------- ----------- -----------
Income before provision
for income taxes 4,506,000 6,217,000 5,306,000 6,729,000
Provision for income taxes 1,577,000 2,176,000 1,857,000 2,355,000
----------- ----------- ----------- -----------
Income before cumulative effect
of accounting change $ 2,929,000 $ 4,041,000 $ 3,449,000 $ 4,374,000
Cumulative effect of accounting change --- --- --- 262,000
----------- ----------- ----------- -----------
Net income $ 2,929,000 $ 4,041,000 $ 3,449,000 $ 4,636,000
=========== ============ ============ ============
Income per share
Before cumulative effect of
accounting change 0.35 0.49 0.42 0.53
Cumulative effect of accounting change 0.00 0.00 0.00 0.03
----------- ----------- ----------- -----------
Net income $ 0.35 $ 0.49 $ 0.42 $ 0.56
============ =========== =========== ============
Weighted average number of shares outstanding 8,278,000 8,265,000 8,277,000 8,265,000
=========== =========== =========== ============
The accompanying notes are an integral part of these consolidated statements.
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Nine Months Ended
March 31,
--------------------------------
1995 1994
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Cash flows from operating activities
Net income $ 3,449,000 $ 4,636,000
Adjustments to reconcile net income to net cash
provided by operations
Amortization expense 16,194,000 32,595,000
Depreciation expense 734,000 347,000
Minority interest, net (472,000) 763,000
Disposals of leasehold improvements & equipment 3,000 0
Changes in assets and liabilities
Accounts receivable 908,000 (509,000)
Prepaid Royalty (3,128,000) 0
Goodwill and other assets (84,000) (264,000)
Accounts payable and accrued residuals, participations (2,171,000) (223,000)
Production advances and deferred revenue 1,285,000 (3,189,000)
Current and deferred income taxes payable 1,552,000 1,708,000
------------ ------------
Net cash provided by operations 18,270,000 35,864,000
Cash flows from investing activities
Investment in program costs (17,023,000) (28,835,000)
Purchase of marketable securities (6,948,000) (12,354,000)
Sales of marketable securities 7,315,000 7,282,000
Capital expenditures (475,000) (3,318,000)
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Net cash used for investing activities (17,131,000) (37,225,000)
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Cash flows from financing activities
Exercise of stock options 7,000 ---
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Net cash provided from financing activities 7,000 0
Net increase (decrease) in cash and cash equivalents 1,146,000 (1,361,000)
Cash and cash equivalents at beginning of the year 4,336,000 2,776,000
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Cash and cash equivalents at end of period $ 5,482,000 $ 1,415,000
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 305,000 $ 627,000
============ ============
The accompanying notes are an integral part of these consolidated
statements.
DICK CLARK PRODUCTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Unaudited)
1. Basis of Financial Statement Presentation
-----------------------------------------
The consolidated financial statements of dick clark productions, inc.
and subsidiaries (collectively the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Interim financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete year-end financial statements. The accompanying
financial statements should be read in conjunction with the more detailed
financial statements and related footnotes for the fiscal year ended June 30,
1994, as included in the Company's 1994 Annual Report on Form 10-K (the
"Annual Report") filed with the Securities and Exchange Commission. A signed
independent accountant's report regarding the June 30, 1994 balance sheet is
included on page 25 of the Annual Report. Significant accounting policies
used by the Company are summarized in Note 3 to the financial statements
included in the Annual Report.
In the opinion of management, all adjustments (which include only
recurring normal adjustments) required for a fair presentation of the
financial position of the Company as of March 31, 1995, and the results of
its operations and cash flows for the periods ended March 31, 1995 and 1994
respectively, have been made. Operating results for the three-month period
ended March 31, 1995, are not necessarily indicative of the operating results
for the entire fiscal year.
2. Income Taxes
------------
Effective July 1, 1993, the Company adopted the provisions of the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events
that have been included in financial statements or tax returns. Under this
method of accounting, deferred tax liabilities and assets are determined
based upon the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. In connection with the
implementation of SFAS 109, the Company recorded a $262,000 credit to income
during the period ended September 30, 1993, which represents the cumulative
effect of this accounting change for all prior periods.
3. Prepaid Royalties
-----------------
Pursuant to a redemption and settlement agreement dated June 30, 1990
(the "Redemption Agreement") between Harmon Entertainment Corporation
("Harmon"), a previous co-venturer with the Company in its restaurant
business, the Company, dick clark restaurants, inc. ("dcri") and certain
other parties, the Company had an obligation to pay Harmon a royalty of up to
$10,000,000 at a rate of 1.5% of all restaurant revenues of which $1,000,000
was advanced to Harmon at the time the Redemption Agreement was entered into
by the parties thereto. Pursuant to a recent modification to the Redemption
Agreement during the fiscal quarter ended December
31, 1994, the Company paid Harmon $3,128,000 as pre-payment of the remaining
portion of this obligation. As part of this transaction, Harmon paid the
Company $358,000 in settlement of amounts owed to the Company by Harmon
pursuant to the findings of an audit conducted in connection with the
Redemption Agreement. As a result of the pre-payment, the Company has
satisfied in full its royalty obligation to Harmon under the Redemption
Agreement. Harmon also dropped a previously asserted claim that it was owed
certain other amounts under the Redemption Agreement. The Company will
amortize the pre-paid royalty at the rate of 1.5% of revenues after the
cumulative revenues from all restaurants exceed the amount necessary to
satisfy the initial $1,000,000 previously paid.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
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A majority of the Company's revenues are derived from its television
production business which primarily involves the production and licensing of
television programming. The Company's television programming is generally
licensed to the major television networks, cable networks, domestic and
foreign syndicators, and advertisers. The Company also receives production
fees from program buyers who retain ownership of the programming. In
addition, the Company derives revenues from the rerun broadcast of its
programs on network and cable television and in foreign markets, as well as
the licensing of its media and film archives for use in feature films,
television movies, etc. The Company, on a limited basis, also develops
theatrical films in association with established studios that can provide
financing necessary for production.
The Company also derives substantial revenue from its entertainment-
related businesses, including a restaurant business (dick clark restaurants,
inc. and its subsidiaries), a corporate events and production business (dick
clark corporate productions, inc.), and a skin care business (geviderm,
inc.). These businesses combined contributed approximately 41% of the
Company's consolidated revenues for the nine-month period ended March 31,
1995.
License fees for the production of television programming are paid to
the Company pursuant to license agreements during production and upon
delivery of the programs or shortly thereafter. Revenues from network and
cable television license agreements are recognized for financial statement
purposes upon delivery of each program or in the case of a series, each
episode. Revenues from the rerun broadcast of television programming (both
domestic and foreign) are recognized for each program when it becomes
contractually available for broadcast.
Production costs of television programs are capitalized and charged to
operations on an individual basis in the ratio that the current year's gross
revenues bear to management's estimate of the total revenues for each program
from all sources. Substantially all television production costs are
amortized in the initial year of delivery except for television movies where
there would be anticipated future revenues earned
from rerun and other exploitation. Successful television movies can achieve
substantial revenues from rerun broadcasts in both foreign and domestic
markets after the initial broadcast, thereby allowing a portion of the
production costs to be amortized against future revenues. Distribution costs
of television programs are expensed in the period incurred.
Depending on the type of contract, revenues for dick clark corporate
productions, inc. are recognized when the services are completed for a live
event, when a tape or film is delivered to a customer, or when services are
completed pursuant to a particular phase of a contract which provides for
periodic payments. Costs for corporate event productions are capitalized and
expensed as revenues are recognized.
RESULTS OF OPERATIONS
---------------------
Revenues for the three and nine months ended March 31, 1995 were
$16,190,000 and $34,510,000 respectively, compared with $19,465,000 and
$45,881,000 respectively, for the comparable periods in the previous fiscal
year. The decrease in revenues for the three months and nine months ended
March 31, 1995 as compared to the corresponding period in the previous fiscal
year is primarily attributable to reduced revenues from the Company's
television production business as well as reduced revenues from the
Company's corporate events and production business. The decrease in revenues
for the nine months ended March 31, 1995, as compared to the corresponding
period in the previous fiscal year is further explained by a reduction in
the number of movies for television produced by the Company. The decrease in
revenues for the three months and nine months ended March 31, 1995 was offset
in part by revenues contributed by the two new "Dick Clark's American
Bandstand Grill" (TM) restaurants which opened in April and May of 1994.
Gross profit for any period is a function of the profitability of the
individual programs and projects delivered during that period. Gross profit
as a percentage of revenues decreased for the three-month and nine-month
periods ended March 31, 1995, as compared to the corresponding periods in the
previous fiscal year, primarily as a result of reduced profitability
recognized from the Company's television production business, as well as a
reduction in the profitability of the Company's corporate events and
production business. The decrease in gross profits, as a percent of sales,
was offset in part by increased gross profits generated from the two new
aforementioned "Dick Clark's American Bandstand Grill" (TM) restaurants.
Minority interest expense decreased for the nine-month period ended March 31,
1995, as compared to the corresponding period in the previous fiscal year
due to the rebroadcast of previously-produced "Super Bloopers and New
Practical Jokes" during fiscal 1994, which resulted in higher gross profits
contributed by the C&C Joint Venture during that period. There were no such
rebroadcasts in the first nine months of fiscal 1995. The C&C Joint Venture,
of which the Company has a 51% interest, produced the "Super Bloopers and New
Practical Jokes" television specials. The Bloopers Specials currently being
produced by the Company do not include the practical joke segments and are
owned 100% by the Company and there is therefore no minority interest expense
associated with them.
In connection with the implementation of SFAS 109, the Company recorded
a $262,000 benefit during the first quarter of fiscal 1994, which represents
the cumulative
effect of this change. (See Note 2 to the Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has funded its working capital requirements for television
production primarily through installment payments from license fees from the
television networks and minimum guaranteed distribution payments from
independent distributors. The Company has generally been able to cover the
costs of its television programming through license or syndication fees and
has incurred no significant capital expenditure commitments.
The Company intends to continue to accelerate the opening of additional
American Bandstand Grill restaurants. In connection with the implementation
of this strategy, the Company modified the Redemption Agreement to buy-out
Harmon's right to all future royalty payments (see Note 3 to the Financial
Statements). In arriving at the amount of the pre-payment, the Company's
decision was based on certain assumptions including, the number of
restaurants the Company expects to open, the anticipated revenue from each
restaurant over a period of fifteen years, and a factor to discount the
stream of payments to present value.
The Company expects that the opening of additional restaurants will be
financed from available capital and alternative financing methods such as
joint ventures and limited recourse borrowings. In August of 1993, the
Company opened a dance-club-only version of the American Bandstand Grill in
Reno, Nevada which was financed through a joint venture arrangement. The two
restaurants opened during fiscal 1994 were financed by the Company. The
Company is in the process of identifying additional sites and it is possible
that it will begin construction of two additional locations in fiscal 1996 at
an estimated capital investment of $4,000,000 which will be funded by the
Company.
Capital requirements for the Company's corporate events business, dick
clark corporate productions, inc., are anticipated to be immaterial to the
Company's overall capital position.
The Company expects that its available capital base and cash generated
from operations will be more than sufficient to meet its cash requirements
for the foreseeable future.
The Company has no outstanding bank borrowings or other borrowed
indebtedness and had cash and marketable securities (principally consisting
of government securities) of approximately $29,463,000 as of March 31, 1995.
PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. Not Applicable
Item 5. None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports
No event has occurred during the quarter for
which this report is filed that would require
the filing of a report on Form 8-K and,
therefore, no such report has been filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DICK CLARK PRODUCTIONS, INC.
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by: /s/ Kenneth H. Ferguson
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Kenneth H. Ferguson
Chief Financial Officer and Treasurer
(Principal Financial Officer and authorized
to sign on behalf of Registrant)
Date: May 11, 1995