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, 2001.
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 23-2038115
- ------------------------------- -------------------
(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
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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, 2001.
Class Outstanding at May 11, 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 March 31, 2001
PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2001 (unaudited)
and June 30, 2000............................................................... 3
Condensed Consolidated Statements of Operations for the three and
nine months ended March 31, 2001 and March 31, 2000 (unaudited)................. 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 2001 and March 31, 2000 (unaudited)..................... 5
Notes to Condensed 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, JUNE 30,
ASSETS 2001 2000
- --------------------------------------------------------- ---------------------------------------
(unaudited)
Cash and cash equivalents $ 6,015,000 $ 5,298,000
Marketable securities 58,931,000 53,174,000
Accounts receivable 3,602,000 4,609,000
Program costs, net 11,450,000 5,599,000
Prepaid royalty, net 2,191,000 2,424,000
Current and deferred income taxes - 373,000
Property and equipment, net 10,239,000 11,058,000
Goodwill and other assets, net 1,458,000 1,388,000
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TOTAL ASSETS $ 93,886,000 $ 83,923,000
================== =================
LIABILITIES & STOCKHOLDERS' EQUITY
- ---------------------------------------------------------
LIABILITIES:
Accounts payable $ 4,941,000 $ 6,143,000
Accrued residuals and participations 3,051,000 2,737,000
Production advances and deferred revenue 8,103,000 2,075,000
Current and deferred income taxes 1,507,000 -
------------------ -----------------
TOTAL LIABILITIES 17,602,000 10,955,000
Commitments and contingencies
Minority interest 493,000 759,000
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 shares issued at June 30, 2000 and
9,284,000 shares issued at March 31, 2001 93,000 93,000
Treasury stock, at cost, 1,493 shares issued at June 30, 2000 - (23,000)
Additional paid-in capital 30,078,000 30,060,000
Retained earnings 45,611,000 42,070,000
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TOTAL STOCKHOLDERS' EQUITY 75,791,000 72,209,000
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 93,886,000 $ 83,923,000
================== =================
The accompanying notes are an integral part of these condensed consolidated balance sheets.
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dick clark productions, inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------- ------------------------------
2001 2000 2001 2000
------------- -------------- --------------- --------------
Revenue $ 22,251,000 $ 31,507,000 $ 49,218,000 $ 64,738,000
Costs related to revenue 15,896,000 21,723,000 41,889,000 51,612,000
------------- -------------- --------------- --------------
Gross profit 6,355,000 9,784,000 7,329,000 13,126,000
General and administrative expense 1,631,000 1,428,000 4,504,000 3,774,000
------------- -------------- --------------- --------------
Operating income 4,724,000 8,356,000 2,825,000 9,352,000
Other expense (income)
Interest income (924,000) (732,000) (2,589,000) (1,860,000)
Minority interest expense 10,000 273,000 81,000 517,000
Other income (39,000) (1,000) (87,000) (364,000)
------------- -------------- --------------- --------------
Income before provision for income taxes 5,677,000 8,816,000 5,420,000 11,059,000
Provision for income taxes 1,959,000 3,042,000 1,870,000 3,816,000
------------- -------------- --------------- --------------
Income before cumulative effect of accounting change $ 3,718,000 5,774,000 3,550,000 7,243,000
Cumulative effect of accounting change - - - (111,000)
------------- -------------- --------------- --------------
Net income $ 3,718,000 $ 5,774,000 $ 3,550,000 $ 7,132,000
============= ============== =============== ==============
Per share data:
Basic earnings per share:
Before cumulative effect of accounting change $ 0.36 $ 0.57 $ 0.35 $ 0.71
Cumulative effect of accounting change - - - (0.01)
------------- -------------- --------------- --------------
Net income $ 0.36 $ 0.57 $ 0.35 $ 0.70
============= ============== =============== ==============
Diluted earnings per share:
Before cumulative effect of accounting change $ 0.36 $ 0.56 $ 0.34 $ 0.70
Cumulative effect of accounting change - - - (0.01)
------------- -------------- --------------- --------------
Net income $ 0.36 $ 0.56 $ 0.34 $ 0.69
============= ============== =============== ==============
Weighted average number of shares outstanding, basic 10,193,000 10,190,000 10,191,000 10,188,000
============= ============== =============== ==============
Weighted average number of shares outstanding, diluted 10,343,000 10,339,000 10,335,000 10,338,000
============= ============== =============== ==============
The accompanying notes are an integral part of these condensed consolidated statements.
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dick clark productions, inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
MARCH 31,
------------------------------------
2001 2000
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Cash flows from operating activities:
Net income $ 3,550,000 $ 7,132,000
Adjustments to reconcile net income to net cash
Provided by operations:
Amortization expense 23,262,000 31,736,000
Depreciation expense 1,125,000 1,134,000
Investment in program costs (29,113,000) (31,297,000)
Minority interest, net (266,000) 117,000
Changes in assets and liabilities:
Accounts receivable 1,007,000 (1,328,000)
Current and deferred income taxes 1,880,000 2,555,000
Other assets 163,000 (708,000)
Accounts payable, accrued residuals and participations (888,000) 2,903,000
Production advances and deferred revenue 6,028,000 5,016,000
---------------- ---------------
Net cash provided by operations 6,748,000 17,260,000
---------------- ---------------
Cash flows from investing activities:
Purchases of marketable securities $ (31,223,000) $ (23,510,000)
Maturities of securities held to maturity 25,466,000 14,609,000
Expenditures on property and equipment (306,000) (3,214,000)
Disposals of property and equipment - 7,000
---------------- ---------------
Net cash (used in) investing activities (6,063,000) (12,108,000)
---------------- ---------------
Cash flows from financing activities:
Proceeds from sale of common stock 32,000 -
---------------- ---------------
Net cash provided by financing activities 32,000 -
---------------- ---------------
Net increase in cash and cash equivalents 717,000 5,152,000
Cash and cash equivalents at beginning of the period 5,298,000 6,023,000
---------------- ---------------
Cash and cash equivalents at end of the period $ 6,015,000 $ 11,175,000
================ ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 42,000 $ 1,207,000
================ ===============
The accompanying notes are an integral part of these condensed consolidated statements.
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dick clark productions, inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
1. Basis of Financial Statement Presentation
-----------------------------------------
These condensed consolidated financial statements of dick clark
productions, inc. and subsidiaries (collectively the "Company") have been
prepared in accordance with accounting principals 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 principals 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 March 31, 2001, and the results of
its operations and cash flows for the periods ended March 31, 2001 and
2000, respectively, have been made. Operating results for the three-month
and nine-month periods ended March 31, 2001 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.
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, rescinds FASB No. 53. The
companies that were previously subject to the requirements of SFAS No. 53
now follow the guidance in the AICPA issued SOP 00-2, "Accounting by
Producers or Distributors of Films", which was 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 was 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 stockholders 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
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distributed a 5% stock dividend of the common stock and Class A common
stock to all stockholders 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 condensed consolidated financial statements of prior periods
reflect certain reclassifications to conform with the reclassifications
adopted in the current period.
2. 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 RESTAURANT TOTAL
- --------------------------------------------------------------------------------------------------------------
Three-months ended March 31, 2001
Revenue $17,769 $4,482 $22,251
Gross profit (loss)(1) 6,495 (140) 6,355
Operating income (loss)(1) 5,405 (681) 4,724
Identifiable assets 80,184 13,702 93,886
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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
Operating income (loss)(1) 9,337 (981) 8,356
Identifiable assets 70,833 16,811 87,644
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1 Gross profit and operating income (loss) exclude interest income, minority
interest expense and other income.
BUSINESS SEGMENTS
ENTERTAINMENT RESTAURANT TOTAL
- --------------------------------------------------------------------------------------------------------------
Nine-months ended March 31, 2001
Revenue $34,619 $14,599 $49,218
Gross profit (loss)(1) 7,944 (615) 7,329
Operating income (loss)(1) 5,285 (2,460) 2,825
- --------------------------------------------------------------------------------------------------------------
Nine-months ended March 31, 2000
Revenue $49,553 $15,185 $64,738
Gross profit (loss)(1) 14,154 (1,028) 13,126
Operating income (loss)(1) 12,259 (2,907) 9,352
- --------------------------------------------------------------------------------------------------------------
1 Gross profit and operating income (loss) exclude interest income, minority
interest expense and other income.
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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 80% and 70% of the
Company's consolidated revenues for the three-month and nine-month periods
ended March 31, 2001, respectively. 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 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 also, on a limited basis, 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.
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 bear 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 revenues. 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 HMS Host. Up-front franchise fees from licenses are recognized
upon entering into agreements. Additional license fees are recognized as
reported to the Company by the licensees.
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RESULTS OF OPERATIONS
---------------------
Revenue for the three-month and nine-month periods ended March
31, 2001, was $22,251,000 and $49,218,000, compared to $31,507,000 and
$64,738,000 for the comparable periods in the previous fiscal year. The
decrease in revenue for the three-month and nine-month periods ended March
31, 2001, as compared to the corresponding period in the previous fiscal
year, was primarily due to a decrease in entertainment revenue. The
decrease in revenue from entertainment operations for the three-month
period ended March 31, 2001, as compared to the corresponding period in the
previous fiscal year, was primarily due to decreased annual shows and
series revenue. The decrease in revenue from entertainment operations for
the nine-month period ended March 31, 2001, as compared to the
corresponding period in the previous fiscal year, was primarily due to
decreased series, annual show, and corporate communications revenue.
Revenue from restaurant operations for the three-month and nine-month
periods ended March 31, 2001, decreased primarily due to a decline in same
store sales, as well as the closure of the St. Louis unit in December 2000.
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. During the three-month period ended March 31,
2001, as compared to the corresponding period in the previous fiscal year,
gross profit decreased, primarily as a result of decreased profitability on
our annual shows. During the nine-month period ended March 31, 2001, as
compared to the corresponding period in the previous fiscal year, gross
profit decreased, primarily as a result of less profitable television
series productions, annual shows, and corporate communications projects.
Current trends in the television production industry, including increased
competition from networks and general economic conditions, 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 period ended March 31,
2001, as compared to the quarter in the previous fiscal year, due to
slightly improved operating margins. For the nine-month period ended March
31, 2001, the Company's gross losses from restaurant operations decreased
primarily due to pre-opening expenditures incurred in the second quarter of
fiscal 2000 for the two restaurants opened during that quarter.
Operating income decreased for the three-month and nine-month
periods ended March 31, 2001 as compared to the corresponding periods in
prior fiscal year. Operating income decreased 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
corporate communications projects between the two periods.
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 $64,946,000 as of March 31,
2001.
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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, 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.
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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
None.
(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.
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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
-------------------------
William S. Simon
Chief Financial Officer and Treasurer
(Principal financial officer and authorized
to sign on behalf of registrant)
Date: May 15, 2001
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