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[KING WORLD LOGO]
FOR IMMEDIATE RELEASE
KING WORLD REPORTS EARNINGS FOR FISCAL 1994
CHANGES ACCOUNTING FOR REVENUE RECOGNITION
NO IMPACT ON CASH FLOW
NEW YORK, N.Y. -- November 10, 1994 -- King World Productions, Inc. (NYSE: KWP)
today reported net income and earnings per share for the fiscal year ended
August 31, 1994. The Company also announced a modification of its existing
revenue recognition practice, which had the one-time impact of causing fourth
fiscal quarter revenues, net income and earnings per share to be approximately
$60.7 million, $12.9 million, and $0.34 per share lower, respectively, than
they would have been under the prior practice. These revenues will be
recognized in subsequent periods. Assuming the previous accounting practice
was employed for all four quarters, revenues for fiscal 1994 would have been
approximately 14% higher than fiscal 1993, and earnings per share would have
been approximately 1% higher. The accounting change had no impact on cash
flow.
Results for the full year and fourth quarter are as follows:
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Fiscal Year Ended August 31,
- ----------------------------
(in millions except per share amounts)
Change from
1994 1993 to 1994
------------------- ------------------
As Prior As Prior
Reported Practice* 1993 Reported Practice
-------- --------- ---- -------- --------
Revenues $480.7 $541.4 $474.3 + 1% +14%
Net Income $ 88.3 $101.2 $101.9 (13%) -
Earnings Per Share $ 2.33 $ 2.67 $ 2.65 (12%) +1%
Weighted Average
Number of Shares
Outstanding 37.9 37.9 38.4
*Full year results presented as if prior accounting practice had been
employed for the fourth quarter.
Fourth Quarter Ended August 31,
- -------------------------------
(in millions except per share amounts)
Change from
1994 1993 to 1994
------------------- ------------------
As Prior As Prior
Reported Practice* 1993 Reported Practice
-------- --------- ---- -------- --------
Revenues $ 38.6 $ 99.3 $103.6 (63%) (4%)
Net Income $ 5.8 $ 18.7 $ 20.7 (72%) (10%)
Earnings Per Share $ 0.15 $ 0.50 $ 0.55 (73%) (9%)
Weighted Average
Number of Shares
Outstanding 37.6 37.6 38.0
*Fourth quarter results presented as if prior accounting practice had been
employed.
"Major milestones for King World in fiscal 1994 included the extension of our
distribution agreement for THE OPRAH WINFREY SHOW through the 1999-2000
television season; the licensing of our shows as far into the future as the
1999-2000 television season, which resulted in a revenue backlog of over $2.0
billion; and our successful launches of AMERICAN JOURNAL and ROLONDA," said
Stephen W. Palley, Executive Vice President and Chief
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Operating Officer of King World. "During the 1993-1994 television season WHEEL
OF FORTUNE and JEOPARDY! retained their positions as the number one and number
two ranked strips in syndication, and THE OPRAH WINFREY SHOW remained the top
ranked talk show on television. INSIDE EDITION was once again ranked in the
top ten first-run strips, a position it has maintained in every sweeps period
since the show's inception. AMERICAN JOURNAL was the number one freshman strip
of the 1993-1994 television season."
Mr. Palley added, "King World maintains its leading position in the growing
market for syndicated television programming. Our customer base, broadcast
television stations, is stronger than ever, and we continue to selectively
explore ideas for new shows in a disciplined manner to meet the increasing
demand for King World programming.
"Our balance sheet has continued to strengthen throughout the year. At August
31, 1994, our cash position was $430 million, an increase of $46 million from
the $384 million we reported at fiscal 1993's year end, after paying a $60
million profit participation advance to HARPO, Inc., the producer of THE OPRAH
WINFREY SHOW, and using $29 million of cash to repurchase our common stock.
Our financial strength and flexibility has allowed us to continue our stock
repurchase program during the year, and provides the Company with the ability
to pursue new business opportunities and acquisitions."
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Modified Revenue Recognition Practice
- -------------------------------------
Beginning with the fourth fiscal quarter of 1994, King World began recognizing
revenues from first-run programming licensed to television stations when the
shows are made available to the stations via satellite transmission, rather
than when the shows are produced. Certain programs syndicated by King World
are produced several months before satellite transmission for initial telecast.
Under the prior practice, revenues from these and all other licensed shows were
recognized as the shows were produced, provided that certain other conditions
were satisfied. Because television industry production schedules can be highly
seasonal, this practice tended to result in King World's reported revenues and
earnings being higher in the early part of each fiscal year.
Under the modified practice, revenues from a program will be recognized much
closer to the date of its telecast, when King World transmits the show to a
satellite transponder for accessing by its licensee television stations.
Generally, the period between such transmission and the actual broadcast of the
programming is not more than several days. As a consequence of the modified
practice, the revenues and earnings derived from first-run syndicated series
will be relatively evenly distributed from quarter to quarter.
The accounting change will result in King World recognizing revenues from
first-run syndicated programming somewhat later than under the prior practice.
This effect will be greater for WHEEL OF FORTUNE and JEOPARDY!, which have a
longer lag time
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between production and satellite transmission, and less for THE OPRAH WINFREY
SHOW, INSIDE EDITION, AMERICAN JOURNAL and ROLONDA, which are produced closer
to the time the shows are satellite transmitted for access by King World's
licensees.
In announcing the accounting change, Anthony Hull, Chief Financial Officer,
said "King World will now be aligning its recognition of revenues more closely
with its earnings process and cash flow. We expect the change to almost
entirely eliminate the quarter-to-quarter fluctuations in reported earnings,
which were caused by program production schedules rather than King World's
distribution activities. The accounting change will allow investors to more
easily understand and follow trends in our core business."
Review of Financial Results
- ---------------------------
Had revenues in the fourth quarter of fiscal 1994 been recognized on a basis
comparable to prior periods, revenues for fiscal 1994 would have been
approximately 14% higher than fiscal 1993, due primarily to the introduction of
new shows produced and distributed by the Company (AMERICAN JOURNAL, which
debuted in September 1993, ROLONDA, which debuted in January 1994, and THE LES
BROWN SHOW, which debuted in September 1993 and was canceled in January 1994),
increased cash license fees from THE OPRAH WINFREY SHOW and INSIDE EDITION and,
to a lesser extent, an increase in revenues derived from the sale of retained
advertising time on WHEEL OF FORTUNE, JEOPARDY! and INSIDE EDITION.
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Without the change in accounting practice, net income would have been
approximately equal to fiscal 1993. Higher revenues were offset primarily by
production costs and promotional expenses related to the new shows and payment
of a higher percentage of THE OPRAH WINFREY SHOW's profits to its producer
HARPO, Inc., which together caused a slight decrease in operating income.
Primary earnings per share for fiscal 1994, which were decreased by $0.34 due
to the accounting change, would have been 1% higher than fiscal 1993 results
had the prior method of revenue recognition been employed in the fourth quarter
of fiscal 1994, due to a smaller number of shares outstanding as a result of
the Company's ongoing stock repurchase program.
To facilitate understanding of the modification to the Company's accounting
practice, the following table is provided, which sets forth King World's
earnings per share for the fiscal years 1993 and 1994 three ways: 1) as
reported, 2) assuming the prior accounting practice had been employed
throughout the fiscal years, and 3) assuming the modified practice of revenue
recognition had been employed throughout the fiscal years. These comparisons
are provided solely to allow investors to better understand the impact of the
modified accounting practice and to permit comparisons of King World's future
quarterly earnings to past results. The unaudited pro forma information is for
illustrative purposes only and does not purport to represent the Company's
actual results of operations for any period.
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IMPACT OF ACCOUNTING MODIFICATION ON EARNINGS PER SHARE
-------------------------------------------------------
Pro Forma Impact of the Accounting Modification
-----------------------------------------------
(1) (2) (3) (3)-(2)
FISCAL PRIOR MODIFIED
1993: AS REPORTED PRACTICE PRACTICE DIFFERENCE
- ---- ----------- -------- -------- ----------
First Quarter $0.98 $0.98 $0.69 ($0.29)
Second Quarter 0.62 0.62 0.64 0.02
Third Quarter 0.49 0.49 0.69 0.20
Fourth Quarter 0.55 0.55 0.62 0.07
----- ----- ----- ------
Full year $2.65 $2.65 $2.64 ($0.01)
===== ===== ===== =======
FISCAL
1994:
- ----
First Quarter $1.02 $1.02 $0.65 ($0.37)
Second Quarter 0.64 0.64 0.65 0.01
Third Quarter 0.52 0.52 0.67 0.15
Fourth Quarter 0.15* 0.50 0.67 0.17
------ ----- ----- ------
Full Year $2.33 $2.67 $2.64 ($0.03)
===== ===== ===== =======
* - After the one-time impact of implementing the accounting change.
As illustrated in the above table, apart from the one-time impact of
implementing the change, the modified accounting practice has little effect on
full year earnings, and results in a portion of income that previously would
have been recorded in the first quarter of a fiscal year being recognized later
in such fiscal year.
King World is the leading worldwide distributor of first-run programming,
including WHEEL OF FORTUNE, JEOPARDY! and THE OPRAH WINFREY SHOW, the three
highest rated strips in syndication. The
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Company produces and distributes INSIDE EDITION, AMERICAN JOURNAL and ROLONDA.
King World distributes its own library of 68 feature films and 210 television
programs, and the Mr. Food television insert. The Company's barter subsidiary,
Camelot Entertainment Sales, Inc., sells national advertising time in King
World and other television programming. WHEEL OF FORTUNE and JEOPARDY! are
produced by Columbia TriStar Television, a Sony Pictures Entertainment Company.
THE OPRAH WINFREY SHOW is produced by HARPO Productions, Inc.
[SEE ATTACHED TABLE]
For further information, contact: Allyson Kossow Felix
King World Productions, Inc.
(212) 315-4000
Lisa La Magna
Abernathy MacGregor Scanlon
(212) 371-5999
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KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended August 31,
-----------------------------
1994(1) 1993
------ --------
(Dollars in thousands except
per share data)
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $480,659 $474,312
-------- --------
EXPENSES:
Producers' fees, programming and
other direct operating costs . . . . . . . . . . . . . . . . . . . . . . . . . 279,465 265,357
Selling, general and admini-
strative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,616 58,005
-------- --------
353,081 323,362
-------- --------
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,578 150,950
INTEREST AND DIVIDEND INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,261 11,642
-------- --------
Income before provision for
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,839 162,592
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,539 60,656
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,300 $101,936
======== ========
PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.33 $2.65
======== ========
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1 The results of operations for fiscal 1994 reflect a change in accounting
for revenue recognition adopted prospectively in the fourth quarter of fiscal
1994. The one-time impact of adopting such change was to cause revenues, net
income and earnings per share to be approximately $60.7 million, $12.9 million,
and $0.34 per share lower, respectively, than they would have been under the
prior practice.
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