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, 2000.
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
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(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, 2000.
Class Outstanding at May 11, 2000
- --------------------------------------------------------------------------------
Common Stock, $0.01 par value 9,282,000
Class A Common Stock, $0.01 par value 910,000
dick clark productions, inc.
Form 10-Q
For the Quarter Ended March 31, 2000
PART 1. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited)
and June 30, 1999..................................................... 3
Consolidated Statements of Operations for the three and nine months ended
March 31, 2000 and March 31, 1999 (unaudited)......................... 4
Consolidated Statements of Cash Flows for the nine months ended
March 31, 2000 and March 31, 1999 (unaudited)......................... 5
Notes to Consolidated Financial Statements............................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................... 11
SIGNATURES............................................................ 12
ITEM 1.
FINANCIAL STATEMENTS
dick clark productions, inc.
CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
ASSETS 2000 1999
---------------------------------------------- ----------------- ---------------
(Unaudited)
Cash and cash equivalents $ 11,175,000 $ 6,023,000
Marketable securities 47,979,000 39,075,000
Accounts receivable 5,868,000 4,540,000
Program costs, net 5,741,000 5,067,000
Prepaid royalty, net 2,497,000 2,728,000
Property, plant and equipment, net 12,980,000 10,907,000
Goodwill and other assets, net 1,404,000 1,578,000
----------------- ---------------
TOTAL ASSETS $ 87,644,000 $ 69,918,000
================= ===============
LIABILITIES & STOCKHOLDERS' EQUITY
---------------------------------------------
LIABILITIES:
Accounts payable $ 5,665,000 $ 4,369,000
Accrued residuals and participations 3,682,000 2,075,000
Production advances and deferred revenue 5,711,000 695,000
Current and deferred income taxes 2,871,000 316,000
----------------- ---------------
TOTAL LIABILITIES 17,929,000 7,455,000
Commitments and contingencies
Minority interest 769,000 652,000
STOCKHOLDERS' EQUITY:
Class A common stock, $.01 par value,
2,000,000 shares authorized
910,000 shares outstanding 9,000 9,000
Common stock, $.01 par value,
20,000,000 shares authorized
9,282,000 and 9,276,000 shares outstanding at
March 31, 2000 and June 30, 1999, respectively 93,000 93,000
Treasury stock, at cost, 1,493 shares
at March 31, 2000 (23,000) -
Additional paid-in capital 18,806,000 18,783,000
Stock dividend to be distributed 11,255,000 -
Retained earnings 38,806,000 42,926,000
----------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 68,946,000 61,811,000
----------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 87,644,000 $ 69,918,000
================= ===============
The accompanying notes are an integral part of these balance sheets
-3-
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
-------------------------- -------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
Revenue $ 31,507,000 $ 28,747,000 $ 64,738,000 $ 58,276,000
Costs related to revenue 21,723,000 21,268,000 51,612,000 47,703,000
------------- -------------- -------------- --------------
Gross profit 9,784,000 7,479,000 13,126,000 10,573,000
General and administrative expense 1,428,000 1,574,000 3,774,000 4,339,000
Minority interest expense 273,000 37,000 517,000 5,000
Interest and other income (733,000) (560,000) (2,224,000) (1,648,000)
------------- -------------- -------------- --------------
Income before provision for income taxes 8,816,000 6,428,000 11,059,000 7,877,000
Provision for income taxes 3,042,000 2,260,000 3,816,000 2,796,000
------------- -------------- -------------- --------------
Income before cumulative effect of accounting
change 5,774,000 4,168,000 7,243,000 5,081,000
Cumulative effect of accounting change - - (111,000) -
------------- -------------- -------------- --------------
Net income $ 5,774,000 $ 4,168,000 $ 7,132,000 $ 5,081,000
============= ============== ============== ==============
Per share data:
Basic earnings per share:
Before cumulative effect of accounting
change $ 0.57 $ 0.41 $ 0.71 $ 0.50
Cumulative effect of accounting change - - (0.01) -
------------- -------------- -------------- --------------
Net Income $ 0.57 $ 0.41 $ 0.70 $ 0.50
============= ============== ============== ==============
Diluted earnings per share:
Before cumulative effect of accounting
change $ 0.56 $ 0.40 $ 0.70 $ 0.49
Cumulative effect of accounting change - - (0.01) -
------------- -------------- -------------- --------------
Net Income $ 0.56 $ 0.40 $ 0.69 $ 0.49
============= ============== ============== ==============
Weighted average number of shares outstanding,
basic 10,190,000 10,183,000 10,188,000 10,177,000
============= ============== ============== ==============
Weighted average number of shares outstanding,
diluted 10,339,000 10,315,000 10,338,000 10,313,000
============= ============== ============== ==============
The accompanying notes are an integral part of these consolidated statements.
-4-
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months Ended
March 31,
--------------------------------
2000 1999
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Cash flows from operating activities:
Net income $ 7,132,000 $ 5,081,000
Adjustments to reconcile net income to net cash
provided by operations:
Amortization expense 31,736,000 30,910,000
Depreciation expense 1,134,000 1,483,000
Investment in program costs (31,297,000) (30,149,000)
Minority interest, net 117,000 (61,000)
Disposals of property, plant and equipment 7,000 71,000
Changes in assets and liabilities:
Accounts receivable (1,328,000) 1,181,000
Other assets (708,000) (109,000)
Accounts payable, accrued residuals and participations 2,903,000 (2,168,000)
Production advances and deferred revenue 5,016,000 92,000
Current and deferred income taxes payable 2,555,000 1,880,000
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Net cash provided by operations 17,267,000 8,211,000
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Cash flows from investing activities:
Purchases of marketable securities (23,510,000) (24,032,000)
Sales of marketable securities 14,609,000 17,177,000
Expenditures on property, plant and equipment (3,214,000) (426,000)
------------- --------------
Net cash used for investing activities (12,115,000) (7,281,000)
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Cash flows from financing activities:
Exercise of stock options - 109,000
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Net cash provided by financing activities - 109,000
Net increase in cash and cash equivalents 5,152,000 1,039,000
Cash and cash equivalents at beginning of the period 6,023,000 7,092,000
------------- --------------
Cash and cash equivalents at end of the period $ 11,175,000 $ 8,131,000
============= ==============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 1,207,000 $ 1,008,000
============= ==============
The accompanying notes are an integral part of these consolidated statements.
-5-
dick clark productions, inc.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
1. Basis of Financial Statement Presentation
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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, 1999, as included in the Company's 1999 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, 1999
financial statements is included on page 28 of the Annual Report.
Significant accounting policies used by the Company are summarized in Note
2 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, 2000, and the results of
its operations and cash flows for the periods ended March 31, 2000 and
1999, respectively, have been made. Operating results for the three-month
and nine-month periods ended March 31, 2000 are not necessarily indicative
of the operating results for the entire fiscal year.
The carrying values of the Company's assets are reviewed when
events and circumstances indicate that the carrying value of an asset may
not be recoverable. If it is determined that an impairment loss has
occurred based on undiscounted future cash flows, then a loss is recognized
in the statement of operations using a discounted cash flow or fair value
model.
For the three-month and nine-month periods ended March 31, 2000
and 1999, the Company had no elements of comprehensive income other than
net income.
In April, 1998, the AICPA issued Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities." This SOP requires that all
nongovernmental entities expense costs of start-up activities (pre-opening,
pre-operating and organizational costs) as those costs are incurred and
requires the write-off of any unamortized balances upon implementation. SOP
98-5 is effective for financial statements issued for periods beginning
after December 15, 1998. The Company adopted SOP 98-5 in the first quarter
of the fiscal year ending June 30, 2000. The financial impact of SOP 98-5
was recorded in the first quarter as a cumulative effect of an accounting
change of $111,000, net of a tax benefit of $60,000.
On May 10, 2000, the Company declared a 10% common stock dividend
to stockholders of record on May 25, 2000. The Company previously paid 5%
common stock dividends in June, 1999 and May, 1998. Accordingly, common
stock share data have been adjusted to include the effect of the stock
dividends.
Included in the Company's Balance Sheet for the period ended March
31, 2000 are shares of Treasury Stock, which were acquired through a
non-cash transaction in which an employee exchanged outstanding shares of
the Company's Common Stock to compensate for the exercise price of
incentive stock options.
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BUSINESS SEGMENT INFORMATION
----------------------------
The Company's business activities consist of two business segments:
entertainment operations and restaurant operations. The factors for determining
the reportable segments were based on the distinct nature of their operations.
They are managed as separate business units because each requires and is
responsible for executing a unique business strategy, as managed by the
respective chief operating decision makers. Summarized financial information
concerning the Company's reportable segments is shown in the following tables
(in thousands):
BUSINESS SEGMENTS
ENTERTAINMENT RESTAURANTS TOTAL
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Three-months ended March 31, 2000
Revenue $26,367 $ 5,140 $31,507
Gross profit (loss) 1 10,133 (349) 9,784
Identifiable assets 70,833 16,811 87,644
- --------------------------------------------------------- ------------------- ------------------- ------------------
Three-months ended March 31, 1999
Revenue $23,774 $4,973 $28,747
Gross profit (loss) 1 7,615 (136) 7,479
Identifiable assets 57,258 20,890 78,148
- --------------------------------------------------------- ------------------- ------------------- ------------------
1 Does not include corporate overhead of $903,000 and $992,000 for entertainment
and $632,000 and $582,000 for the restaurant segment during the three-months
ended March 31, 2000 and 1999, respectively. Gross profit also excludes minority
interest expense and interest and other income.
BUSINESS SEGMENTS
ENTERTAINMENT RESTAURANTS TOTAL
- --------------------------------------------------------- ------------------- ------------------- ------------------
Nine-months ended March 31, 2000
Revenue $49,553 $15,185 $64,738
Gross profit (loss) 1 14,154 (1,028) 13,126
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Nine-months ended March 31, 1999
Revenue $42,167 $16,109 $58,276
Gross profit 1 10,543 30 10,573
- --------------------------------------------------------- ------------------- ------------------- ------------------
1 Does not include corporate overhead of $2,002,000 and $2,490,000 for
entertainment and $1,879,000 and $1,849,000 for the restaurant segment during
the nine-months ended March 31, 2000 and 1999, respectively. Gross profit also
excludes minority interest expense and interest and other income.
-7-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
------------
The Company's business activities consist of two business
segments: entertainment operations and restaurant operations. The
entertainment segment contributed approximately 84% and 77% of the
Company's consolidated revenues for the three-month and nine-month periods
ended March 31, 2000. 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 also derives revenues from the
development and execution of non-traditional marketing communications
programs, corporate meetings and special events, new product introductions,
trade shows and exhibits, event marketing, film, video and leisure
attractions. The Company, on a limited basis, also develops feature films
in association with established studios that can provide financing
necessary for production.
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 a particular
program becomes contractually available for broadcast. Depending on the
type of contract, revenues for the Company's communications projects 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.
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 and series where there would be anticipated future revenues earned
from rerun and other exploitation. Successful television movies and series
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. Costs for
communications projects are capitalized and expensed as revenues are
recognized.
-8-
RESULTS OF OPERATIONS
---------------------
Revenues for the three-month and nine-month periods ended March
31, 2000, were $31,507,000 and $64,738,000, compared to $28,747,000 and
$58,276,000 for the comparable periods in the previous fiscal year. The
increase in revenues for the three-month period ended March 31, 2000, as
compared to the corresponding period in the previous fiscal year, is
primarily due to increased revenues from television series and specials
programming. The increase in revenues for the nine-month period ended March
31, 2000, as compared to the corresponding period in the previous fiscal
year, is primarily due to increased revenues from television series and
specials programming and communications projects, offset in part by
decreased revenues in same store sales from restaurant operations. Included
in revenues for the three-month and nine-month periods ended March 31, 2000
were revenues from two new restaurants which were not in operation during
the corresponding period in the previous fiscal year.
Gross profit for the Company's productions 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
increased for the three-month period ended March 31, 2000, as compared to
the corresponding period in the previous fiscal year, primarily as a result
of increased profitability from television series and specials programming.
Gross profit as a percentage of revenue for the nine-months ended March 31,
2000 increased compared to the corresponding period in the previous fiscal
year due to increased profitability from the Company's television and
communications projects, offset in part by decreased profitability in
restaurant operations.
The Company's gross profits from restaurant operations decreased
for the three-month and nine-month periods ended March 31, 2000, as
compared to the corresponding periods in the previous fiscal year, as a
result of decreased profitability in existing units due to a decline in
same store sales.
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 and cable networks and minimum guaranteed
distribution payments from independent distributors. The Company has
generally been able to cover the costs of its television programming and
corporate projects through license or syndication fees and production
revenues respectively, and has incurred no significant capital expenditure
commitments.
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 $59,154,000 as of March 31,
2000.
-9-
GENERAL
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Certain statements in the foregoing Management's Discussion and
Analysis (the "MD&A") are not historical facts or information and certain
other statements in the MD&A are forward looking statements that involve
risks and uncertainties, including, without limitation, the Company's
ability to develop and sell television programming, timely completion of
negotiations for new restaurant sites and the ability to construct, finance
and open new restaurants and to attract new corporate productions clients,
and such competitive and other business risks as from time to time may be
detailed in the Company's Securities and Exchange Commission reports.
-10-
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
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.
-11-
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/ William S. Simon
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William S. Simon
Chief Financial Officer and Treasurer
(Principal financial officer and authorized
to sign on behalf of registrant)
Date: May 11, 2000