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 December 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.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2038115
- --------------------------------------------------------------------------------
(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
--------------
(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 February 13, 2001.
Class Outstanding at February 13, 2001
- --------------------------------------------------------------------------------
Common Stock, $0.01 par value 9,284,000
Class A Common Stock, $0.01 par value 910,000
dick clark productions, inc.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2000
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 2000 (unaudited)
and June 30, 2000................................................................. 3
Consolidated Statements of Operations for the three and six months ended
December 31, 2000 (unaudited) and December 31, 1999 (unaudited)................... 4
Consolidated Statements of Cash Flows for the six months ended
December 31, 2000 (unaudited) and December 31, 1999 (unaudited)................... 5
Note to Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................. 7
PART II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders............................... 10
Item 6. Exhibits and Reports on Form 8-K.................................................. 11
SIGNATURES........................................................................ 12
2
dick clark productions, inc.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 2000
PART I. FINANCIAL INFORMATION
Item 1.
dick clark productions, inc.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
ASSETS 2000 2000
- ----------------------------------------------------------------- ---------------- ---------------
(unaudited)
Cash and cash equivalents $ 14,656,000 $ 5,298,000
Marketable securities 50,150,000 53,174,000
Accounts receivable 3,921,000 4,609,000
Program costs, net 8,383,000 5,599,000
Prepaid royalty, net 2,265,000 2,424,000
Current and deferred income taxes 449,000 373,000
Property, plant and equipment, net 10,556,000 11,058,000
Goodwill and other assets, net 1,492,000 1,388,000
---------------- ---------------
TOTAL ASSETS $ 91,872,000 $ 83,923,000
================ ===============
LIABILITIES & STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------
LIABILITIES:
Accounts payable $ 6,141,000 $ 6,143,000
Accrued residuals and participations 1,545,000 2,737,000
Production advances and deferred revenue 11,315,000 2,075,000
---------------- ---------------
TOTAL LIABILITIES 19,001,000 10,955,000
Commitments and contingencies
Minority interest 830,000 759,000
STOCKHOLDERS' EQUITY:
Class A common stock, $.01 par value,
2,000,000 shares authorized
910,000 shares issued and outstanding 9,000 9,000
Common stock, $.01 par value,
20,000,000 shares authorized
9,282,000 shares issued 93,000 93,000
Treasury stock, at cost, 1,493 shares (23,000) (23,000)
Additional paid-in capital 30,060,000 30,060,000
Retained earnings 41,902,000 42,070,000
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 72,041,000 72,209,000
---------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 91,872,000 $ 83,923,000
================ ===============
The accompanying note is an integral part of these consolidated balance sheets.
3
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
2000 1999 2000 1999
---------- ----------- ----------- -----------
Revenue $ 16,518,000 $ 22,646,000 26,967,000 $ 33,231,000
Costs related to revenue 16,367,000 20,358,000 25,993,000 29,889,000
-------------- -------------- --------------- --------------
Gross profit 151,000 2,288,000 974,000 3,342,000
General and administrative expense 1,458,000 1,179,000 2,873,000 2,346,000
-------------- -------------- --------------- --------------
Operating (loss) income (1,307,000) 1,109,000 (1,899,000) 996,000
Other (income) expense
Interest income (769,000) (579,000) (1,665,000) (1,128,000)
Minority interest expense 16,000 174,000 71,000 244,000
Other income (38,000) (10,000) (48,000) (363,000)
-------------- -------------- --------------- --------------
(Loss) income before (benefit) provision for income taxes (516,000) 1,524,000 (257,000) 2,243,000
(Benefit) provision for income taxes (178,000) 526,000 (89,000) 774,000
-------------- -------------- --------------- --------------
(Loss) income before cumulative effect of accounting change (338,000) 998,000 (168,000) 1,469,000
Cumulative effect of accounting change - - - (111,000)
Net (loss) income $ (338,000)$ 998,000 $ (168,000)$ 1,358,000
============== ============== =============== ==============
Per share data:
Basic earnings per share:
Before cumulative effect of accounting change $ (0.03)$ 0.10 $ (0.02)$ 0.14
Cumulative effect of accounting change - - - (0.01)
-------------- -------------- --------------- --------------
Net (loss) income $ (0.03)$ 0.10 $ (0.02)$ 0.13
============== ============== =============== ==============
Diluted earnings per share:
Before cumulative effect of accounting change $ (0.03)$ 0.10 $ (0.02)$ 0.14
Cumulative effect of accounting change - - - (0.01)
-------------- -------------- --------------- --------------
Net (loss) income $ (0.03)$ 0.10 $ (0.02)$ 0.13
============== ============== =============== ==============
Weighted average number of shares outstanding, basic 10,190,000 10,186,000 10,190,000 10,186,000
============== ============== =============== ==============
Weighted average number of shares outstanding, diluted 10,331,000 10,321,000 10,331,000 10,319,000
============== ============== =============== ==============
The accompanying note is an integral part of these consolidated statements.
4
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
DECEMBER 31,
2000 1999
--------------- ----------------
Cash flows from operating activities:
Net (loss) income $ (168,000) $ 1,358,000
Adjustments to reconcile net (loss) income to net cash
provided by operations:
Amortization expense 14,859,000 18,792,000
Depreciation expense 769,000 712,000
Investment in program costs (17,643,000) (18,702,000)
Minority interest, net 71,000 37,000
Changes in assets and liabilities:
Accounts receivable 688,000 299,000
Current and deferred income taxes (76,000) 530,000
Other assets 55,000 (588,000)
Accounts payable, accrued residuals and participations (1,194,000) 648,000
Production advances and deferred revenue 9,240,000 8,548,000
--------------- ----------------
Net cash provided by operations 6,601,000 11,634,000
--------------- ----------------
Cash flows from investing activities:
Purchases of marketable securities (7,003,000) (15,763,000)
Maturities of securities held to maturity 10,027,000 11,928,000
Expenditures on property, plant and equipment (270,000) (2,898,000)
Disposals of property, plant and equipment 3,000 7,000
--------------- ----------------
Net cash provided by (used in) investing activities 2,757,000 (6,726,000)
--------------- ----------------
Net increase in cash and cash equivalents 9,358,000 4,908,000
Cash and cash equivalents at beginning of the period 5,298,000 6,023,000
--------------- ----------------
Cash and cash equivalents at end of the period $ 14,656,000 $ 10,931,000
=============== ================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for income taxes $ 24,000 $ 173,000
=============== ================
The accompanying note is an integral part of these consolidated statements.
5
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------
(Unaudited)
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 accounting principles generally accepted in the United States
for interim financial information. Interim financial statements do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States 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, 2000, as included in the Company's 2000 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, 2000 financial statements
is in 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 December 31, 2000, and the results of its
operations and cash flows for the periods ended December 31, 2000 and 1999,
respectively, have been made. Operating results for the three-month and
six-month periods ended December 31, 2000 are not necessarily indicative of the
operating results for the entire fiscal year ending June 30, 2001.
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.
In April of 1998, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on
the Costs of Start-Up Activities." SOP 98-5 requires that all costs of start-up
activities be expensed as incurred and that unamortized balances are written-off
upon implementation. The Company adopted SOP 98-5 in the first quarter of the
fiscal year ending June 30, 2000. The financial impact was recorded as a
cumulative effect of an accounting change of $111,000, net of a tax benefit of
$60,000.
In June 2000, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 139, which, effective for financial statements for fiscal years
beginning after December 15, 2000, recinds FASB No. 53. The companies that were
previously subject to the requirements of SFAS No. 53 shall
6
now follow the guidance in the AICPA issued SOP 00-2, "Accounting by Producers
or Distributors of Films," issued in June 2000. The primary changes from the
guidance of SFAS No. 53 relate to the accounting for advertising and marketing
costs in accordance with SOP 93-7, "Reporting on Advertising Costs", limitations
on certain ultimate revenues that companies can use in their individual film
forecast method, and more specific guidance related to projects in development.
The Company adopted SOP 00-2 during the first quarter of the fiscal year ending
June 30, 2001. There has been no material impact on the financial results of the
Company as a result of adoption.
On April 25, 2000, the Company declared a 10% stock dividend of
the common stock and Class A common stock to all holders of record as of the
close of business on May 25, 2000, which was distributed on June 23, 2000. On
both May 15, 1998 and June 11, 1999, the Company distributed a 5% stock dividend
of the common stock and Class A common stock to all holders of record as of the
close of business on May 4, 1998 and May 21, 1999, respectively. Accordingly,
stock share data have been adjusted for all periods presented to include the
effect of the stock dividends.
The consolidated financial statements of prior periods reflect
certain reclassifications to conform with classifications adopted in the current
period.
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 70% and 62% of the Company's consolidated
revenue for the three-month and six-month periods ended December 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 revenue 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 revenue 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. Revenue from network and cable
television license agreements is recognized for financial statement purposes
upon delivery of each program or in the case of a series, each episode. Revenue
from the rerun broadcast of television programming (both domestic and foreign)
is recognized for each program when a particular program becomes contractually
available for broadcast. Depending on the type of contract, revenue for the
Company's communications projects is 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.
7
Production costs of television programs are capitalized and
charged to operations on an individual basis in the ratio that the current
year's gross revenue bears to management's estimate of the total revenue 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 revenue earned from rerun and
other exploitation. Successful television movies and series can achieve
substantial revenue 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 revenue. Distribution costs of television
programs are expensed in the period incurred. Costs for communications projects
are capitalized and expensed as revenue is recognized.
Revenue from restaurant operations is recognized upon provision of
goods and services to customers. The Company also licenses the restaurant
concept to HMSHost. Up-front non-refundable franchise fees from licenses are
recognized upon entering into agreements. Additional license fees are recognized
as reported to the Company by the licensees.
Results of Operations
- ---------------------
Revenue for the three-month and six-month periods ended December
31, 2000, was $16,518,000 and $26,967,000, compared to $22,646,000 and
$33,231,000 for the comparable periods in the previous fiscal year. The decrease
in revenue for the three-month and six-month periods ended December 31, 2000, as
compared to the corresponding periods in the prior fiscal year, is primarily due
to a decrease in revenue from the entertainment operations. The decrease in
revenue from entertainment operations was primarily due to the delivery of fewer
corporate communications projects and less television series revenue, slightly
offset by increased specials revenue. During the three-month and six-month
periods ended December 31, 2000, revenue from restaurant operations remained
consistent as compared to the corresponding periods in the prior fiscal year. An
increase in restaurant revenues, primarily due to the inclusion of revenue from
two new restaurants, was offset by decreased revenue from existing units and
lost revenue from the closing of the St. Louis unit.
Gross profit as a percentage of revenue decreased for the
three-month and six-month periods ended December 31, 2000, as compared to the
corresponding periods in the prior fiscal year, primarily as a result of
decreased profitability from entertainment operations, offset in part by a
smaller gross loss in restaurant operations. Gross profit for the Company's
entertainment operations for any period is a function of the profitability of
the individual programs and projects delivered during that period. During the
three-month and six-month periods ended December 31, 2000, as compared to the
corresponding periods in the prior year, the majority of the Company's corporate
communications projects and television series productions were less profitable.
Current trends in the television production industry, including increased
competition from networks, general economic conditions, and the possibility of a
strike by the Writer's Guild of America are not expected to change during the
remainder of the current fiscal year. In addition, the Company does not
presently anticipate an increase in revenue from its corporate communications
business during the remainder of this fiscal year, with the performance of this
business being significantly reduced when compared to the prior fiscal year. The
Company's gross losses from restaurant operations decreased for the three-month
and six-month periods ended December 31, 2000, as compared to the corresponding
periods in the prior fiscal year. The decrease is primarily attributed to
greater profitability in new units, which had start-up costs expensed in the
quarter ended December 31, 1999, offset by a decline in same store sales, which
yielded decreased profitability.
8
Operating losses were incurred for the three-month and six-month
periods ended December 31, 2000, as compared to operating income in the
corresponding periods in prior fiscal year. The operating losses occurred
primarily as a result of decreased gross profit and increased general and
administrative expense. The increase in general and administrative expense is
primarily a result of the decrease in capitalized production overhead to
television series and one-time costs associated with the outsourcing of the
restaurant group's management functions to Lincoln Restaurant Group in December
2000.
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 revenue 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
short-term government securities held to maturity) of approximately $64,806,000
as of December 31, 2000.
General
- -------
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, to implement its licensing and related strategy
for its restaurant operations, and to attract new corporate communications
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.
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):
9
BUSINESS SEGMENTS
ENTERTAINMENT RESTAURANT TOTAL
- --------------------------------------------------------- ------------------- ------------------- ------------------
Three-months ended December 31, 2000
Revenue $ 11,587 $ 4,931 $ 16,518
Gross profit (loss) 561 (410) 151
Operating (loss) (183) (1,124) (1,307)
Identifiable assets 77,452 14,420 91,872
- --------------------------------------------------------- ------------------- ------------------- ------------------
Three-months ended December 31, 1999
Revenue $ 17,532 $ 5,114 $ 22,646
Gross profit 2,751 (463) 2,288
Operating income (loss) 2,210 (1,101) 1,109
Identifiable assets 64,752 16,287 81,039
- --------------------------------------------------------- ------------------- ------------------- ------------------
BUSINESS SEGMENTS
ENTERTAINMENT RESTAURANT TOTAL
- --------------------------------------------------------- ------------------- ------------------- ------------------
Six-months ended December 31, 2000
Revenue $ 16,850 $ 10,117 $ 26,967
Gross profit (loss) 1,449 (475) 974
Operating income (loss) (120) (1,779) (1,899)
- --------------------------------------------------------- ------------------- ------------------- -----------------
Six-months ended December 31, 1999
Revenue $ 23,186 $ 10,045 $ 33,231
Gross profit (loss) 4,021 (679) 3,342
Operating income (loss) 2,922 (1,926) 996
- --------------------------------------------------------- ------------------- ------------------- ------------------
PART II. OTHER INFORMATION
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company held its Annual Meeting of Stockholders on
November 2, 2000. The meeting was held to (1) elect the Board of Directors and
(2) to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the year ending June 30, 2001.
The number of votes cast for each proposal is set forth below.
Proposal Number 1 - Election of the Board of Directors of the Company:
- -----------------
10
Vote of Common Stock and Class A Common Stock:
- ------------------------------- ---------------- -----------------
Name: For: Withhold
- ----- ---- ---------
Authority:
----------
- ------------------------------- ---------------- -----------------
Richard W. Clark 17,789,403 436
- ------------------------------- ---------------- -----------------
Karen W. Clark 17,789,161 678
- ------------------------------- ---------------- -----------------
Francis C. La Maina 17,789,283 556
- ------------------------------- ---------------- -----------------
Enrique F. Senior 17,787,464 2,375
- ------------------------------- ---------------- -----------------
Lewis Klein 17,789,403 436
- ------------------------------- ---------------- -----------------
Jeffrey B. Logsdon 17,787,464 2,375
- ------------------------------- ---------------- -----------------
Robert A. Chuck 17,787,464 2,375
- ------------------------------- ---------------- -----------------
Each of the nominees was elected to the Board of Directors.
Proposal Number 2 - Ratification of the appointment of Arthur Andersen
- ----------------- LLP as the Company's independent auditors for the
year ending June 30, 2001:
Vote of Common Stock and Class A Common Stock:
- ---------------------------------- -------------- --------------- ----------------- ----------------------
Name: For: Against: Abstention: Broker Non-Vote:
- ----- ---- -------- ----------- ----------------
- ---------------------------------- -------------- --------------- ----------------- ----------------------
Ratification of the appointment 17,787,275 2,442 122 0
of Arthur Andersen LLP as the
Company's independent auditors
for the year ending December 31,
2001
- ---------------------------------- -------------- --------------- ----------------- ----------------------
The appointment of Arthur Andersen LLP as the Company's independent auditors for
the year ending June 30, 2001 was ratified.
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.
----------------------------
By: /s/ William S. Simon
---------------------------
William S. Simon
Chief Financial Officer and Treasurer
(Principal financial officer and authorized
to sign on behalf of registrant)
Date: February 14, 2001
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