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 September 30, 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
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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
(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 November 12, 2001.
Class Outstanding at November 12, 2001
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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 September 30, 2001
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2001
(unaudited) and June 30, 2001................................................. 3
Condensed Consolidated Statements of Operations for the three-months
ended September 30, 2001 and September 30, 2000 (unaudited)................... 4
Condensed Consolidated Statements of Cash Flows for the three-months
ended September 30, 2001 and September 30, 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
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................... 10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................. 11
Item 2. Changes in Securities and Use of Proceeds..................................... 11
Item 3. Defaults Upon Senior Securities............................................... 11
Item 4. Submission of Matters to a Vote of Security Holders........................... 11
Item 5. Other Information............................................................. 11
Item 6. Exhibits and Reports on Form 8-K.............................................. 11
Signatures.................................................................... 12
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ITEM 1.
FINANCIAL STATEMENTS
DICK CLARK PRODUCTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
ASSETS 2001 2001
--------------------------------------------------------------- ------------- -------------
(unaudited)
Cash and cash equivalents $ 8,348,000 $ 5,030,000
Marketable securities 53,899,000 59,088,000
Accounts receivable 2,512,000 2,333,000
Program costs, net 5,742,000 5,288,000
Prepaid royalty, net 2,002,000 2,087,000
Current and deferred income taxes 427,000 75,000
Property and equipment, net 9,714,000 10,009,000
Goodwill and other assets, net 1,646,000 1,458,000
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Total assets $ 84,290,000 $ 85,368,000
============== =============
LIABILITIES & STOCKHOLDERS' EQUITY
---------------------------------------------------------------
LIABILITIES:
Accounts payable $ 4,362,000 $ 5,506,000
Accrued participations and residuals 1,116,000 1,472,000
Production advances and deferred revenue 1,192,000 496,000
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TOTAL LIABILITIES 6,670,000 7,474,000
Commitments and contingencies
Minority interest 499,000 498,000
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
9,284,000 shares issued 93,000 93,000
Additional paid-in capital 30,078,000 30,078,000
Retained earnings 46,941,000 47,216,000
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TOTAL STOCKHOLDERS' EQUITY 77,121,000 77,396,000
-------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 84,290,000 $ 85,368,000
============== =============
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
SEPTEMBER 30,
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2001 2000
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Revenue $ 7,010,000 $ 10,449,000
Costs related to revenue 7,071,000 9,626,000
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Gross (loss) profit (61,000) 823,000
General and administrative expense 1,177,000 1,415,000
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Operating loss (1,238,000) (592,000)
Interest income 817,000 906,000
Minority interest expense (1,000) (55,000)
Other income 2,000 -
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(Loss) income before benefit (provision) for income taxes (420,000) 259,000
Benefit (provision) for income taxes 145,000 (89,000)
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Net (loss) income $ (275,000) $ 170,000
================= ==================
Per share data:
Basic earnings per share: $ (0.03) $ 0.02
================= ==================
Diluted earnings per share: $ (0.03) $ 0.02
================= ==================
Weighted average number of shares outstanding, basic 10,194,000 10,190,000
================= ==================
Weighted average number of shares outstanding, diluted 10,194,000 10,336,000
================= ==================
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 Three Months Ended
September 30,
-----------------------
2001 2000
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Cash flows from operating activities:
Net (loss) income $ (275,000) $ 170,000
Adjustments to reconcile net (loss) income to net cash
used by operations:
Amortization expense 2,182,000 4,307,000
Depreciation expense 358,000 364,000
Investment in program costs (2,636,000) (7,040,000)
Minority interest, net 1,000 54,000
Changes in assets and liabilities:
Accounts receivable (179,000) 1,490,000
Current and deferred income taxes (352,000) 89,000
Other assets (103,000) (59,000)
Accounts payable (1,144,000) (1,384,000)
Accrued participations and residuals (356,000) (1,216,000)
Production advances and deferred revenue 696,000 1,865,000
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Net cash used by operations (1,808,000) (1,360,000)
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Cash flows from investing activities:
Purchases of marketable securities - (726,000)
Maturities of marketable securities held to maturity 5,189,000 4,663,000
Purchases of property and equipment (63,000) (198,000)
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Net cash provided by investing activities 5,126,000 3,739,000
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Net increase in cash and cash equivalents 3,318,000 2,379,000
Cash and cash equivalents, beginning of the period 5,030,000 5,298,000
--------- ----------
Cash and cash equivalents, end of the perio $ 8,348,000 $ 7,677,000
========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $ 224,000 $ 20,000
========= ==========
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
September 30, 2001
(Unaudited)
1. Basis of Financial Statement Presentation
-----------------------------------------
The condensed 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, 2001, as included in the Company's 2001 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, 2001 financial statements
is included on page 20 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 September 30, 2001, and the results of its operations and
cash flows for the periods ended September 30, 2001 and 2000, respectively, have
been made. Operating results for the three-months ended September 30, 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 June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations." This statement has eliminated the flexibility to account for some
mergers and acquisitions as pooling of interests, and effective as of July 1,
2001, all business combinations are to be accounted for using the purchase
method. The Company adopted SFAS No. 141 as of July 1, 2001, and there was no
impact on the Company's financial statements. All acquisition transactions that
the Company enters into prospectively must be accounted for using the purchase
method.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." Under this statement goodwill and intangible assets with indefinite
lives are no longer subject to amortization, but rather an annual assessment of
impairment by applying a fair-value-based test. The Company will implement SFAS
No. 142 on July 1, 2002. The impact of such adoption has not been determined.
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In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and associated asset retirement costs. The purpose of this statement is
to develop consistent accounting of asset retirement obligations and related
costs in the financial statements and provide more information about future cash
outflows, leverage and liquidity regarding retirement obligations and the gross
investment in long-lived assets. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
will implement SFAS No. 143 on July 1, 2002. The impact of such adoption has not
been determined.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for fiscal
years beginning after December 15, 2001. This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supercedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", for the disposal of a segment of a business (as
previously defined in that Opinion). This statement also amends Accounting
Research Bulletin No. 51, "Consolidated Financial Statements", to eliminate the
exception to consolidation for subsidiary for which control is likely to be
temporary. The Company will adopt SFAS No. 144 on July 1, 2002. The Company has
not yet determined the impact of such adoption.
The condensed consolidated financial statements of the previous fiscal
period reflect certain reclassifications to conform with classifications 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
(dollars in thousands) Entertainment Restaurants Total
Three-months ended September 30, 2001
Revenue $ 2,702 $ 4,308 $ 7,010
Gross profit (loss) 1 300 (361) (61)
Operating (loss) 1 (514) (724) (1,238)
Identifiable assets 71,494 12,796 84,290
Three-months ended September 30, 2000
Revenue $ 5,263 $ 5,186 $10,449
Gross profit (loss) 1 968 (145) 823
Operating income (loss) 1 63 (655) (592)
Identifiable assets 68,041 15,371 83,412
<FN>
1 Gross profit (loss) and operating income (loss) exclude interest income, minority
interest expense, and other income.
</FN>
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
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The Company's business activities consist of two business segments:
entertainment operations and restaurant operations. The entertainment segment
contributed approximately 39% of the Company's consolidated revenue for the
three-months ended September 30, 2001. 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.
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 various applications of the
restaurant concept to HMSHost Corporation. Up-front franchise fees from licenses
are recognized upon entering into agreements. License royalties are recognized
as reported to the Company by the licensees.
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RESULTS OF OPERATIONS
- ---------------------
Revenue for the three-months ended September 30, 2001, was $7,010,000
compared to $10,449,000 for the comparable period in the previous fiscal year.
The decrease in revenue for the three-months ended September 30, 2001, as
compared to the corresponding period in the previous fiscal year, is primarily
due to decreased revenue from entertainment operations, primarily the result of
reduced television series and specials production. In addition, revenue from
restaurant operations decreased for the three-months ended September 30, 2001,
as compared to the corresponding period in the previous fiscal year, as a result
of decreased revenue from existing units and lost revenue from one closed unit.
The Company incurred a gross loss during the three-months ended September
30, 2001 which was primarily due to decreased profitability in entertainment
operations as well as an increase in gross losses in restaurant operations.
Gross profit for the Company's entertainment productions for any period is a
function of the profitability of the individual programs and projects delivered
during that period. The Company had decreased profitability in entertainment
operations for the three-months ended September 30, 2001, as compared to gross
profit for the corresponding period in the previous fiscal year, primarily as a
result of decreased profitability recognized from television series production.
The Company's gross losses from restaurant operations increased for the
three-months ended September 30, 2001, as compared to the corresponding period
in the previous fiscal year, as a result of decreased profitability in existing
units, offset in part by the closure of an unprofitable unit in fiscal 2000.
Operating losses increased for the three-months ended September 30, 2001 as
compared to the corresponding period in the previous fiscal year. Operating
losses increased primarily as a result of decreased gross profit, offset in part
by decreased general and administrative expense. The decrease in general and
administrative expense for the three-months ended September 30, 2001 when
compared to the same period in the previous fiscal year is primarily
attributable to the Company's outsourcing of the restaurant management function
in December 2000 and an overall reduction in personnel throughout the Company.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company has funded its working capital requirements for television
production primarily through installment payments from license fees from
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 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 $62,247,000 as of September 30, 2001.
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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 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.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk in the normal course of its investing
activities. The Company does not have significant exposure to fluctuations in
interest rates because it invests primarily in United States Treasury Notes and
Treasury Bills and has no debt. The Company does not undertake any specific
actions to cover its exposure to interest rate risk.
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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, the
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
Vice President of Finance, Treasurer and
Chief Financial Officer
(Principal financial officer and authorized
to sign on behalf of registrant)
Date: November 14, 2001
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