<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 31, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ------ to -------
Commission File Number 1-9244
KING WORLD PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2565808
- - ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Broadway
New York, New York 10019
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212 315-4000
------------
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.01 par value,
36,957,069 shares outstanding as of July 1, 1994.
<PAGE> 2
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
May 31, August 31,
1994 1993
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $320,234 $300,219
Accounts receivable (net of
allowance for doubtful accounts
of $4,362 and $4,212 at
May 31, 1994 and August 31,
1993, respectively) . . . . . . . . . . . . . . . . . . . . . . . . 137,492 101,667
Producer loans, advances and
deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,513 25,600
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 496 235
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . 469,735 427,721
-------- --------
LONG-TERM INVESTMENTS, at cost,
which approximates market . . . . . . . . . . . . . . . . . . . . 77,122 84,270
-------- --------
LONG-TERM ACCOUNTS RECEIVABLE (net of
unamortized discount of $41
and $79 at May 31, 1994 and
August 31, 1993, respectively) . . . . . . . . . . . . . . . . . . . . 395 576
-------- --------
FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,316 10,384
Less - accumulated depreciation
and amortization . . . . . . . . . . . . . . . . . . . . . . . . . (8,940) (8,573)
--------- --------
1,376 1,811
--------- --------
OTHER ASSETS:
Producer loans and advances . . . . . . . . . . . . . . . . . . . . . 74,125 11,625
Other non current assets . . . . . . . . . . . . . . . . . . . . . . . 9,006 9,543
-------- --------
83,131 21,168
-------- --------
$631,759 $535,546
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
2
<PAGE> 3
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
May 31, August 31,
1994 1993
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities . . . . . . . . . . . . . . . . . . . . . . $ 15,673 $ 7,832
Payable to producers and others . . . . . . . . . . . . . . . . . 117,299 109,016
Income taxes payable:
Current . . . . . . . . . . . . . . . . . . . . . . . 21,459 13,559
Deferred . . . . . . . . . . . . . . . . . . . . . . . 19,689 10,966
-------- --------
Total current liabilities . . . . . . . . . . . . . . 174,120 141,373
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
none issued . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.01 par value;
75,000,000 shares autho-
rized, 49,556,963 shares
and 49,505,363 shares issued
at May 31, 1994 and
August 31, 1993, respectively . . . . . . . . . . . . . . . . . 496 495
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . 78,907 76,647
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 659,559 577,039
Treasury stock, at cost; 12,760,894
shares and 12,207,794 shares
at May 31, 1994 and August 31,
1993 respectively . . . . . . . . . . . . . . . . . . . . . . . (281,323) (260,008)
-------- --------
457,639 394,173
-------- --------
$631,759 $535,546
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
3
<PAGE> 4
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
----------------------------- ---------------------------
1994 1993 1994 1993
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . . $111,861 $ 87,939 $442,043 $370,732
-------- -------- -------- --------
EXPENSES:
Producers fees, programming
and other direct
operating costs . . . . . . . . . . . . . . . . . . 65,664 46,981 258,804 202,883
Selling, general and
administrative expenses . . . . . . . . . . . . . . 18,264 14,092 60,974 46,620
-------- -------- -------- --------
83,928 61,073 319,778 249,503
-------- -------- -------- --------
Income from operations . . . . . . . . . . . . . . 27,933 26,866 122,265 121,229
INTEREST AND
DIVIDEND INCOME . . . . . . . . . . . . . . . . . . . 3,398 2,954 9,766 8,702
-------- -------- -------- --------
Income before provision
for income taxes . . . . . . . . . . . . . . . . 31,331 29,820 132,031 129,931
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . 11,820 11,171 49,511 48,727
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 19,511 $ 18,649 $ 82,520 $ 81,204
======== ======== ======== ========
PRIMARY EARNINGS PER
SHARE . . . . . . . . . . . . . . . . . . . . . . . . $ 0.52 $ 0.49 $ 2.17 $ 2.11
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
4
<PAGE> 5
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
-----------------------------
1994 1993
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,520 $ 81,204
Items not affecting cash:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 1,635
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 150 375
Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,491
Amortization of deferred compensation . . . . . . . . . . . . . . . . . . . . . . . 87 2,077
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,747) (13,128)
Producer loans, advances and
deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48,413) 11,780
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,841 (270)
Payable to producers and others . . . . . . . . . . . . . . . . . . . . . . . . . . 8,283 (3,281)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,623 (8,003)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 718
-------- --------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . 32,259 74,598
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,148 (28,782)
Additions to fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251) (1,375)
-------- --------
Net cash provided by
(used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,897 (30,157)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 2,174 39,049
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,315) (91,362)
-------- --------
Net cash used in
financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,141) (52,313)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,015 (7,872)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,219 311,082
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320,234 $303,210
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
5
<PAGE> 6
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Summary of significant accounting policies
Principles of consolidation
The accompanying consolidated financial statements
include the accounts of King World Productions, Inc. ("King World") and its
wholly-owned subsidiaries. All significant intercompany transactions have been
eliminated. Unless the context suggests otherwise, the "Company", as used
herein, means King World and its subsidiaries.
The unaudited consolidated financial statements for
the three months and nine months ended May 31, 1994 have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and disclosures required by generally accepted accounting
principles for complete financial statements. For further information,
reference is made to the consolidated financial statements for the fiscal year
ended August 31, 1993 and the footnotes related thereto included in the
Company's Annual Report on Form 10-K from which the August 31, 1993 balances
presented herein have been derived.
The results of operations for the three months and
nine months ended May 31, 1994 are not necessarily indicative of the results of
operations for the full year. The unaudited consolidated financial statements
presented herein include, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for such periods.
Principal properties
The Company's principal properties are licenses to
distribute The Oprah Winfrey Show, Wheel of Fortune and Jeopardy!; and Inside
Edition, a first-run syndicated series produced and distributed by the Company.
The Oprah Winfrey Show accounted for approximately 40% and 42% of revenues for
the nine months ended May 31, 1994 and 1993, respectively; Wheel of Fortune
accounted for approximately 19% and 22% of revenues, respectively, for such
periods; Jeopardy! accounted for approximately 16% and 18% of revenues,
respectively, for such periods; and Inside Edition accounted for approximately
8% and 9% of revenues, respectively, for such periods.
6
<PAGE> 7
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stockholders' equity
Primary earnings per share has been computed using
the weighted average number of common shares outstanding of 37,662,000 and
38,113,000 shares, respectively, for the three months ended May 31, 1994 and
1993, and 37,986,000 and 38,426,000 shares, respectively, for the nine months
ended May 31, 1994 and 1993, which includes the dilutive effect from the
assumed exercise of vested and unvested stock options outstanding as of the end
of the period. The difference between primary and fully diluted earnings per
share for both periods presented was not significant.
On December 18, 1992, the Company announced that the
Board of Directors had approved a program to repurchase up to 2,000,000 shares
of its Common Stock from time to time in the open market and in privately
negotiated transactions. In the fiscal year ended August 31, 1993, an
aggregate 765,200 shares of Common Stock were repurchased in open market
transactions for an aggregate consideration of approximately $24.8 million, or
an average price of approximately $32.40 per share. Between March 22, 1994 and
May 10, 1994, the Company purchased an aggregate 553,100 shares of Common Stock
under such program in open market transactions for an aggregate consideration
of approximately $21.3 million, which represented an average price of
approximately $38.50 per share. As of July 1, 1994, there were 681,700 shares
available for repurchase under such program.
(2) Producer loans and advances
On March 17, 1994, the Company and Harpo, Inc., the
producer of The Oprah Winfrey Show ("Harpo"), announced that they had entered
into an extension and modification of their existing distribution agreement
relating to the distribution of The Oprah Winfrey Show in the 1995-1996 through
the 1999-2000 television seasons. Under the terms of the modified agreement,
the Company has been granted the exclusive right and has agreed to distribute
The Oprah Winfrey Show in first-run syndication in domestic television markets
and in international television markets, subject to Harpo's and Ms. Winfrey's
right to decline to produce and host the show in any season after the 1995-1996
season. In connection with such extension, the Company paid Harpo a
$60,000,000 advance against Harpo's profit participation for the 1995-1996
broadcast season. Such advance will be recouped from the share of adjusted
profits payable to Harpo for such season. The Company believes, based on sales
of The Oprah Winfrey Show to date, that revenues from the series for such
season will be sufficient to cover the recoupment of such advance.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
COMPARISON OF THREE MONTHS AND NINE MONTHS ENDED MAY 31, 1994 AND 1993
For the three months ended May 31, 1994, the
Company's revenues increased by approximately 27% compared to the third quarter
of fiscal 1993. The increase was primarily due to the introduction of two new
shows produced and distributed by the Company: American Journal, which debuted
in September 1993, and Rolonda, which debuted in January 1994. Such increase
also reflected increased cash license fees from The Oprah Winfrey Show,
reflecting both higher license fees per show for the 1993-1994 broadcast season
and a greater number of shows produced in the period. The Oprah Winfrey Show,
Wheel of Fortune, Inside Edition and Jeopardy! accounted for approximately 40%,
20%, 11% and 4%, respectively, of the Company's revenues for the three months
ended May 31, 1994, compared to 43%, 26%, 13% and 7%, respectively, for the
corresponding period of the prior year. American Journal and Rolonda accounted
for approximately 8% and 5%, respectively, of the Company's revenues for the
three months ended May 31, 1994.
The Company's revenues for the nine months ended May
31, 1994 increased by approximately 19% from the corresponding period of the
prior year. Such increase was primarily due to the introduction of new shows,
as discussed above (including The Les Brown Show, which debuted in September
1993 and was cancelled in January 1994) and increased cash license fees from
The Oprah Winfrey Show, reflecting higher license fees per show and a greater
number of shows produced in the period. To a lesser extent, the increase was
attributable to an increase in revenues derived from the sale of retained
advertising time on Wheel of Fortune, Jeopardy! and Inside Edition. The Oprah
Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for
approximately 40%, 19%, 16% and 8%, respectively, of the Company's revenues for
the nine months ended May 31, 1994, compared to 42%, 22%, 18% and 9%,
respectively, for the corresponding period of the prior year. American
Journal, Rolonda and The Les Brown Show accounted for approximately 5%, 2% and
2%, respectively, of the Company's revenues for the nine months ended May 31,
1994.
License fees for first-run syndicated television
properties are recognized at the commencement of the license period pursuant to
noncancelable agreements and as each show is produced and becomes available for
its first broadcast (even though the particular show may not be broadcast by a
television station for several months). The Company receives a portion of such
license fees in the form of retained advertising time, which
8
<PAGE> 9
is sold to advertisers by Camelot Entertainment Sales, Inc., a wholly-owned
subsidiary of the Company. Such revenues are recognized when the time is sold
pursuant to noncancelable agreements and as the shows on which the advertising
is to be aired are produced and become available for broadcast, in amounts
adjusted for expected ratings.
Because quarterly variations in the production of
first-run television programs distributed by the Company have an effect on the
Company's revenues and related costs from quarter to quarter, comparisons of
the quarterly results of operations are not necessarily indicative of longer
term trends in the Company's business. For the 1993-1994 broadcast season, a
change in the production schedule of The Oprah Winfrey Show resulted in the
Company recognizing a greater proportion of that season's revenues in the first
nine months of its 1994 fiscal year compared with the prior year. Based on the
current production schedule, it appears that fewer episodes will be produced in
the fourth quarter of the 1994 fiscal year, which would result in the Company
recognizing reduced revenues and earnings with respect to the series for such
quarter as compared to the prior year.
Producers fees, programming and other direct
operating costs primarily include the producers' share of both cash license
fees from the sale of programming to television stations and revenues derived
from the sale of retained advertising time to advertisers with respect to
programming distributed by the Company; participation fees payable by the
Company to producers and talent; and production and distribution costs for
first-run syndicated programming. The share of license fees payable by the
Company to producers, talent and others is generally paid as cash license fees
and revenues derived from the sale of retained advertising time are received
from television stations and advertisers.
Producers fees, programming and other direct
operating costs increased by 40% and 28%, respectively, for the three months
and nine months ended May 31, 1994, primarily as a result of production costs
associated with the introduction of American Journal and Rolonda, and as a
result of the higher level of revenue generated by The Oprah Winfrey Show (of
which the producer is entitled to a greater percentage in the 1993-1994
broadcast season compared with the prior season). In the nine months ended May
31, 1994, producers fees, programming and other direct operating costs also
included production costs associated with The Les Brown Show.
In December 1993, the Company entered into new
employment agreements with its four highest paid executive officers. The
agreements provide, among other things, for bonuses that are
9
<PAGE> 10
intended to qualify as "performance based compensation" (within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended). The payment
of such bonuses is contingent upon the Company's achieving specified
performance goals, including, in certain cases, specified target prices for the
Company's Common Stock during preestablished measurement periods. As a result,
the Company's compensation expense will increase if the Common Stock price
exceeds the specified target prices during the applicable measurement periods.
The first measurement date for such bonuses is August 31, 1994.
Selling, general and administrative expenses for the
three and nine months ended May 31, 1994 increased by approximately 30% and
31%, respectively, compared with the corresponding periods of the prior year.
The increase in selling, general and administrative expenses for the three
month period is primarily attributable to payments and reserves for the
executive bonuses referred to above (which are expected to be recorded in the
fourth quarter as well) and, to a lesser extent, an increase in advertising and
promotion costs associated with the introduction of American Journal and
Rolonda. (During the corresponding period of fiscal 1993, no new shows were
introduced.) The increase in selling, general and administrative expenses for
the nine month period is primarily attributable to the increased advertising
and promotion costs associated with such new shows and The Les Brown Show. The
Company expects that continued marketing efforts for American Journal and
Rolonda will result in additional advertising and promotion costs during the
last quarter of fiscal 1994.
Due to the factors discussed above, the Company's
operating income for the three months ended May 31, 1994 increased by
approximately 4% compared to the corresponding period of the prior year, and
operating income for the nine months ended May 31, 1994 increased by 1%
compared to the corresponding period of the prior year. Net income increased
by approximately 5% and 2%, respectively, for the three months and nine months
ended May 31, 1994, reflecting the increase in operating income and higher
interest income earned on the Company's cash and investments due to
moderate increases in interest rates. Primary earnings per share increased by
approximately 6% and 3%, respectively, in the three months and nine months
ended May 31, 1994 as a result of increased net income and a smaller number of
shares outstanding as a result of the Company's ongoing stock repurchase
program.
Because quarterly variations in the production of
first run television programs distributed by the Company have an effect on the
Company's revenues and related costs from quarter to quarter, the Company
believes that the twelve-month cumulative
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<PAGE> 11
results of its operations may be helpful in evaluating its ongoing
financial performance. The following table sets forth selected financial data
derived from the Company's consolidated statements of income for the twelve
months ended May 31, 1994 and 1993, respectively (dollars in thousands, except
per share data):
<TABLE>
<CAPTION>
Twelve Months Ended
May 31,
------------------------------
1994 1993
-------- --------
(Unaudited)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $545,623 $468,775
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,252 101,810
Primary earnings per share . . . . . . . . . . . . . . . . . . . . . . . . 2.71 2.64
</TABLE>
As a result of a financial restructuring effected in
August 1992, Buffalo Broadcasting Co. Inc., formerly a wholly-owned subsidiary
of the Company ("Buffalo"), was deconsolidated from the financial statements of
the Company as of August 4, 1992. The results of operations of Buffalo through
August 4, 1992 are included in net income for the twelve months ended May 31,
1993, which had the effect of decreasing primary earnings per share by $.04 for
the period. Revenues for the twelve months ended May 31, 1993 have been
restated to give effect to the deconsolidation of Buffalo from King World, and
therefore exclude the revenues of Buffalo.
The Company's results of operations are highly
dependent upon the viewing preferences of television audiences and the
Company's ability to acquire distribution rights to, or itself produce,
television programming that achieves broad and enduring audience acceptance.
The success of the Company's programming could be significantly affected by
changes in viewer preferences or the unavailability of new programming or
talent. Moreover, the amount of revenue derived from the sale of retained
advertising time is dependent upon a large number of factors, such as household
ratings, the demographic composition of the viewing audience, and economic
conditions generally and in the advertising business in particular. In the
recent past, the advertising market has been somewhat depressed, although
conditions generally improved in fiscal 1993 compared to fiscal 1992 and the
improvement has continued into fiscal 1994.
Due to the success of the shows distributed by the
Company and in order to mitigate the influence of some of the factors referred
to above, the Company has been obtaining multi-year licenses and license
renewals from television stations for its principal distribution properties,
extending in some cases through the 1999-2000 broadcast season. In general,
these
11
<PAGE> 12
licenses and renewals have been at rates as favorable or more favorable to the
Company than the rates applicable to the current broadcast season. All such
licenses and renewals are contingent upon the continued production of the
series by their respective producers through the broadcast seasons for which the
licenses run.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital resources to fund
development, production and promotion costs of independently produced
programming, including, in some instances, advances to producers and talent, to
produce its own programs and to acquire distribution rights to new programming.
In acquiring distribution rights from independent producers, King World has
tried to avoid making significant capital commitments to such producers until
it has obtained broadcast commitments from a substantial number of television
stations. In the past, King World has attempted in many instances to reduce
its capital commitment to new programming by developing new programs and series
through partnerships and joint ventures and by test marketing newly developed
programs prior to making significant commitments to the funding of production
costs.
As a result of these strategies and the success of
its existing syndication properties, to date, King World has funded
substantially all programming acquisition, development and production costs and
advances from its operations.
Notwithstanding the Company's efforts to limit its
risk, the distribution of television programming is highly competitive
and the Company may be obliged to offer, among other things, guarantees and
cash advances to acquire, renew or extend distribution rights. In connection
with the extension for the 1993-1994 and 1994-1995 broadcast seasons of the
commitment by Harpo, Inc. ("Harpo"), the producer of The Oprah Winfrey Show, to
produce The Oprah Winfrey Show for those seasons, the Company made an
interest-free loan to Harpo and is obligated to pay Harpo certain minimum
amounts against its participation fees for such periods, irrespective of the
amount of license fees generated by the series in such periods. The loan is
due in two installments of $8,625,000 each, which are due in July 1994 and July
1995. The Company believes, based on sales of The Oprah Winfrey Show to date,
that revenues from the series will be sufficient to cover such minimum amounts
and to enable Harpo to repay the loan. In addition, Harpo is entitled to
greater participation fees in the 1993-1994 broadcast season as compared to
past seasons.
12
<PAGE> 13
On March 17, 1994, the Company and Harpo announced
that they had entered into an extension and modification of their existing
distribution agreement relating to the distribution of The Oprah Winfrey Show
in the 1995-1996 through the 1999- 2000 television seasons. Under the terms of
the modified agreement, the Company has been granted the exclusive right and
has agreed to distribute The Oprah Winfrey Show in first-run syndication in
domestic television markets and in international television markets, subject to
Harpo's and Ms. Winfrey's right to decline to produce and host the show in any
season after the 1995-1996 season. The modified agreement, among other things,
establishes the production fees payable to Harpo in the first two subject
seasons and commits the Company to guaranty payments to Harpo at levels which,
commencing with the 1995-1996 season, will be substantially higher than those
currently in effect. In addition, in the 1997-1998 season and thereafter,
profit sharing arrangements between Harpo and the Company currently in effect
will terminate and the Company will instead receive distribution fees based on
a percentage of gross revenues derived from the series. In connection with the
extension of its agreement with Harpo, the Company paid Harpo a $60,000,000
advance against Harpo's profit participation for the 1995-1996 broadcast
season. For more information regarding the extension of the Company's contract
with Harpo, reference is made to the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 18, 1994.
As King World has developed and produced its own
programming for syndication, it has assumed a greater portion of the risk
associated with the introduction of a new series. The introductions of
American Journal and The Les Brown Show in the 1993-1994 broadcast season, and
Rolonda, which premiered in first-run syndication in January 1994, have
necessitated the expenditure by King World of substantial amounts to fund
development, production and promotion costs. The Company has funded and
intends to continue to fund such costs out of its internal cash resources.
From time to time, the Company has used cash reserves
and/or borrowed funds to make acquisitions of and investments in broadcast and
related properties in the entertainment field, to repurchase shares of its
Common Stock and to fund development and production of new programming. The
Company continues to evaluate opportunities in these areas, and may seek to
raise capital in public or private securities markets to finance such
activities if it considers it advantageous to do so.
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In December 1992, the Company announced that the
Board of Directors had approved a program to repurchase up to 2,000,000 shares
of its Common Stock from time to time in the open market and in privately
negotiated transactions. In the fiscal year ended August 31, 1993, an
aggregate 765,200 shares of Common Stock were repurchased in open market
transactions for an aggregate consideration of approximately $24.8 million, or
an average price of approximately $32.40 per share. Between March 22, 1994 and
May 10, 1994, the Company purchased an aggregate 553,100 shares of Common Stock
under such program in open market transactions for an aggregate consideration
of approximately $21.3 million, which represented an average price of $38.50
per share. Such purchases were financed, and any additional purchases under
the stock repurchase program are to be financed, out of the Company's available
cash and liquid investments. The Company intends to continue to repurchase
shares of Common Stock in the open market and in privately negotiated
transactions if and when it deems it advantageous to do so. As of July 1,
1994, there were 681,700 shares available for repurchase under such program.
As of May 31, 1994, the Company's accounts receivable
amounted to approximately $137.9 million (net of allowance for doubtful
accounts and unamortized discount to present value), substantially all of which
was due within one year. Based on its past experience and current
expectations, the Company maintains an allowance for doubtful accounts which
was approximately $4.4 million at May 31, 1994.
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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(10.1) Letter Agreement dated March 17, 1994 between Harpo, Inc. and the Company incorporated by
reference to the Company's Current Report on Form 8-K, dated March 18, 1994, as amended by
Form 8-K/A, dated May 18, 1994.
(b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K, dated March 18, 1994, reporting the amendment
dated March 17, 1994 of the Company's agreement with Harpo, Inc. relating to the distribution of
The Oprah Winfrey Show. The Company filed an amendment on Form 8-K/A relating to the Company's
Current Report, dated March 18, 1994 on May 18, 1994.
</TABLE>
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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.
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<S> <C>
KING WORLD PRODUCTIONS, INC.
By: /s/ Anthony E. Hull
--------------------------------
Anthony E. Hull
As Chief Financial Officer
and on behalf of the Registrant
July 7, 1994
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