<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 November 30, 1993
[ ] 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)
<TABLE>
<S> <C>
1700 Broadway
New York, New York 10019
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
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, 37,342,319 shares outstanding as of January 4, 1994.
<PAGE> 2
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
November 30, August 31,
1993 1993
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $329,521 $300,219
Accounts receivable (net of
allowance for doubtful accounts
of $4,262 and $4,212 at
November 30, 1993 and August 31,
1993, respectively) . . . . . . . . . . . . . . . . 165,686 101,667
Producer loans, advances and
deferred costs . . . . . . . . . . . . . . . . . . 18,008 25,600
Other current assets . . . . . . . . . . . . . . . . 254 235
-------- --------
Total current assets . . . . . . . . . . . . . . . 513,469 427,721
-------- --------
LONG-TERM INVESTMENTS, at cost,
which approximates market . . . . . . . . . . . . . 100,229 84,270
-------- --------
LONG-TERM ACCOUNTS RECEIVABLE (net of
unamortized discount of $66
and $79 at November 30, 1993 and
August 31, 1993, respectively) . . . . . . . . . . . 640 576
-------- --------
FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . 10,110 10,384
Less - accumulated depreciation
and amortization . . . . . . . . . . . . . . . . . (8,742) (8,573)
-------- --------
1,368 1,811
-------- --------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . 21,166 21,168
-------- --------
$636,872 $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>
November 30, August 31,
1993 1993
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities . . . . . . . . . . . . . . . . $ 14,830 $ 7,832
Payable to producers and others . . . . . . . . . . . 141,933 109,016
Income taxes payable:
Current . . . . . . . . . . . . . . . . . . . . . 24,589 13,559
Deferred . . . . . . . . . . . . . . . . . . . . 21,234 10,966
-------- --------
Total current liabilities . . . . . . . . . . 202,586 141,373
-------- --------
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, 49,549,113 shares
and 49,505,363 shares issued
at November 30, 1993 and
August 31, 1993, respectively . . . . . . . . . . . 495 495
Paid in capital . . . . . . . . . . . . . . . . . . . 78,038 76,647
Retained earnings . . . . . . . . . . . . . . . . . . 615,761 577,039
Treasury stock, at cost; 12,207,794
shares at November 30, 1993 and
August 31, 1993 . . . . . . . . . . . . . . . . . . (260,008) (260,008)
-------- --------
434,286 394,173
-------- --------
$636,872 $535,546
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
3
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KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
----------------------------------
1993 1992
-------- --------
(Dollars in thousands
except per share data)
<S> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . . $193,045 $169,714
-------- --------
EXPENSES:
Producers fees, programming
and other direct
operating costs . . . . . . . . . . . . . . . . . 111,843 93,823
Selling, general and
administrative expenses . . . . . . . . . . . . . 22,939 18,157
-------- --------
134,782 111,980
-------- --------
Income from operations . . . . . . . . . . . . . . 58,263 57,734
INTEREST AND DIVIDEND INCOME . . . . . . . . . . . . . . 3,200 3,380
-------- --------
Income before provision
for income taxes . . . . . . . . . . . . . . . 61,463 61,114
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . 22,741 22,612
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . $ 38,722 $ 38,502
======== ========
PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . $ 1.02 $ .98
======== ========
</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>
Three Months Ended
November 30,
----------------------------------
1993 1992
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . $ 38,722 $ 38,502
Items not affecting cash:
Depreciation and amortization . . . . . . . . . . . 169 214
Provision for doubtful accounts . . . . . . . . . . 50 125
Amortization of deferred
compensation . . . . . . . . . . . . . . . . . . -- 692
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . (64,117) (45,875)
Producer loans, advances and
deferred costs . . . . . . . . . . . . . . . . . 7,592 7,859
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . 6,998 2,307
Payable to producers and others . . . . . . . . . . 32,917 15,069
Income taxes payable . . . . . . . . . . . . . . . 21,298 4,768
Other, net . . . . . . . . . . . . . . . . . . . . 287 492
-------- --------
Net cash provided by operating
activities . . . . . . . . . . . . . . . . . . . . 43,916 24,153
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investments . . . . . . . . . . . . . (15,959) (25,364)
Additions to fixed assets . . . . . . . . . . . . . . . (46) (99)
-------- -------
Net cash used in investing activities . . . . . . . . . (16,005) (25,463)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock . . . . . . . . . . . . . . . . . . . . 1,391 3,385
-------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . 29,302 2,075
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD . . . . . . . . . . . . . . . . . . . . . 300,219 311,082
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD . . . . . . . . . . . . . . . . . . . . . $329,521 $313,157
======== ========
</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)
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.
As a result of a financial restructuring effected in August
1992, Buffalo Broadcasting Co. Inc. ("Buffalo"), formerly a wholly-owned
subsidiary of the Company, has been deconsolidated from the financial
statements of the Company as of August 4, 1992. As a result of such
deconsolidation, the Company now operates in only one business segment,
television programming.
The unaudited consolidated financial statements for the three
months ended November 30, 1993 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 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 ended November
30, 1993 are not necessarily indicative of the results of operations for the
full year. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition". 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 period.
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
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<PAGE> 7
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and distributed by the Company. The Oprah Winfrey Show accounted for
approximately 46% and 43% of revenues for the three months ended November 30,
1993 and 1992, respectively; Wheel of Fortune accounted for approximately 20%
and 23% of revenues, respectively, for such periods; Jeopardy! accounted for
approximately 15% and 17% of revenues, respectively, for such periods; and
Inside Edition accounted for approximately 7% of revenues for each such period.
Stockholders' equity
Primary earnings per share has been computed using the
weighted average number of common shares outstanding of 38,111,000 and
39,161,000, respectively, for the three months ended November 30, 1993 and
1992, 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.
Supplemental cash flow information
Income taxes paid approximated $1.2 million and $14.4 million
for the three months ended November 30, 1993 and 1992, respectively.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1993 AND 1992
For the three months ended November 30, 1993, the Company's
revenues increased by approximately 14%, primarily due to increased cash
license fees from The Oprah Winfrey Show and the introduction in the 1993-1994
broadcast season of two new shows, American Journal and The Les Brown Show
(both produced and distributed by the Company). Revenues from Wheel of
Fortune, Jeopardy! and Inside Edition in the first quarter of fiscal 1994 were
comparable to the first quarter of fiscal 1993, notwithstanding a smaller
number of shows produced during the current period, reflecting higher revenues
on a per show basis.
The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside
Edition accounted for approximately 46%, 20%, 15% and 7%, respectively, of the
Company's revenues for the three months ended November 30, 1993, compared to
43%, 23%, 17% and 7%, respectively, for the corresponding period of the
previous year. American Journal and The Les Brown Show each accounted for
approximately 3% of the Company's revenues for the three months ended November
30, 1993. The Company has announced the cancellation of The Les Brown Show
effective January 14, 1994. The Company has commenced production of Rolonda, a
new talk show starring the television journalist Rolonda Watts, which is
scheduled to premiere in first-run strip syndication on January 17, 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 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.
Producers fees, programming and other direct operating costs
primarily include the producers' share of both cash license
8
<PAGE> 9
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 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 19% for the three months ended November 30, 1993, primarily 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) as well as increased
production costs associated with the introduction of American Journal and The
Les Brown Show.
Selling, general and administrative expenses for the three
months ended November 30, 1993 increased by approximately 26% compared with the
three months ended November 30, 1992 primarily as a result of increased
advertising and promotion costs associated with the introduction of American
Journal and The Les Brown Show. (During the first quarter of fiscal 1993, no
new shows were introduced.) The introduction of Rolonda in the second quarter
of fiscal 1994 is expected to result in additional advertising and promotion
expenditures during the remaining three quarters of fiscal 1994.
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 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 measument periods. As a result, the Company's compensation
expense will increase if the Common Stock price exceeds the specified targets
during the applicable measurement periods.
In the quarter ended November 30, 1993, the Company's operating
income and net income increased by approximnately 1% compared to the
corresponding period of the prior year. Primary earnings per share increased
by approximately 4% as a result of the smaller number of shares outstanding in
the November 30, 1993 period.
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 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 November 30, 1993 and 1992, respectively
(dollars in thousands, except per share data):
9
<PAGE> 10
<TABLE>
<CAPTION>
Twelve Months Ended
November 30,
-----------------------
1993 1992
-------- --------
(Unaudited)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $497,643 $473,842
Net income . . . . . . . . . . . . . . . . . . . . . . . 102,156 96,821
Primary earnings per share . . . . . . . . . . . . . . . 2.68 2.48
</TABLE>
The results of operations of Buffalo through August 4, 1992
are included in net income for the twelve months ended November 30, 1992,
which had the effect of decreasing primary earnings per share by $.16 for the
period. Revenues for the twelve months ended November 30, 1992 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 the first
quarter of fiscal 1994. Such factors also have an impact on the amount of cash
license fees the Company receives from its programming and, for some
programming, the rates for the current broadcast season and subsequent seasons
for which the programming has been renewed are generally somewhat lower than
license fee rates for past seasons. Unless this effect is offset by increased
license fees from the Company's other existing programming and from newly
acquired or newly produced programming, the Company's operating results will be
adversely affected.
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
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<PAGE> 11
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. Such loan is repayable in two equal installments
of $8,625,000 on July 1, 1994 and July 1, 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 but its participation percentage
will remain unchanged thereafter under the agreement currently in effect.
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 introduction of The Les Brown Show and
American Journal in the 1993-1994 broadcast season, and Rolonda, which is
scheduled to premiere in first-run syndication on January 17, 1994, has
required the expenditure by King World of substantial amounts to fund
development, production and promotion costs. The Company intends 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
11
<PAGE> 12
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.
On December 18, 1992, the Company purchased an aggregate
2,252,000 shares of Common Stock from certain executive officers of the Company
at a price per share of $32.50, the closing price of the Common Stock on the
New York Stock Exchange on December 17, 1992. The aggregate consideration paid
by the Company to such officers (net of the proceeds from option exercises) was
approximately $47.1 million. Such purchases were financed out of the Company's
available cash and liquid investments. Also 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. Under such program, the Company
purchased an aggregate 765,200 shares of Common Stock in open market
transactions in the fiscal year ended August 31, 1993, for an aggregate
consideration of approximately $24.8 million, or an average price of
approximately $32.40 per share. 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.
PART II - OTHER INFORMATION
None.
12
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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.
KING WORLD PRODUCTIONS, INC.
By: /s/ Jeffrey E. Epstein
----------------------------------
Jeffrey E. Epstein
As Chief Financial Officer
and on behalf of the Registrant
January 6, 1994
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