<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, 1995
/ / 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,
36,734,751 shares outstanding as of July 6, 1995.
<PAGE> 2
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
May 31, August 31,
1995 1994
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $438,806 $341,857
Accounts receivable (net of
allowance for doubtful accounts
of $4,283 and $4,412 at
May 31, 1995 and August 31,
1994, respectively) . . . . . . . . . . . . . . . . 47,601 41,231
Producer loans, advances and
deferred costs . . . . . . . . . . . . . . . . . . 21,810 21,314
Other current assets . . . . . . . . . . . . . . . . 734 419
-------- --------
Total current assets . . . . . . . . . . . . . . 508,951 404,821
-------- --------
LONG-TERM INVESTMENTS, at cost,
which approximates market . . . . . . . . . . . . . 70,006 88,191
-------- --------
FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . 11,899 10,631
Less - accumulated depreciation
and amortization . . . . . . . . . . . . . . . . . . (9,589) (9,099)
-------- --------
2,310 1,532
-------- --------
OTHER ASSETS:
Producer advances . . . . . . . . . . . . . . . . . . . 68,000 65,500
Other non-current assets . . . . . . . . . . . . . . . 9,748 9,518
-------- --------
77,748 75,018
-------- --------
$659,015 $569,562
======== ========
</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,
1995 1994
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities . . . . . . . . . . . . . . $ 17,899 $ 14,780
Payable to producers and others . . . . . . . . . 74,407 69,647
Income taxes payable:
Current . . . . . . . . . . . . . . . . . . . 20,852 23,506
Deferred . . . . . . . . . . . . . . . . . . 1,525 2,552
-------- --------
Total current liabilities . . . . . . . . 114,683 110,485
-------- --------
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, 49,869,145 shares
and 49,722,218 shares issued
at May 31, 1995 and
August 31, 1994, respectively . . . . . . . . . 499 497
Paid-in capital . . . . . . . . . . . . . . . . . 86,556 82,171
Retained earnings . . . . . . . . . . . . . . . . 752,318 665,339
Treasury stock, at cost; 13,141,394
shares and 12,960,894 shares
at May 31, 1995 and
August 31, 1994 respectively . . . . . . . . . (295,041) (288,930)
-------- --------
544,332 459,077
-------- --------
$659,015 $569,562
======== ========
</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,
------------------------- --------------------------
1995(1) 1994 1995(1) 1994
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . $142,632 $111,861 $433,448 $442,043
-------- -------- -------- --------
EXPENSES:
Producers' fees, programming
and other direct
operating costs. . . . . . . . . . . . . . 84,264 65,664 258,036 258,804
Selling, general and
administrative expenses . . . . . . . . . 18,265 18,264 54,068 60,974
-------- -------- -------- --------
102,529 83,928 312,104 319,778
-------- -------- -------- --------
Income from operations . . . . . . . . . 40,103 27,933 121,344 122,265
INTEREST AND
DIVIDEND INCOME . . . . . . . . . . . . . 5,497 3,398 14,526 9,766
-------- -------- -------- --------
Income before provision
for income taxes . . . . . . . . . . . 45,600 31,331 135,870 132,031
PROVISION FOR INCOME TAXES . . . . . . . . . 16,379 11,820 48,891 49,511
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . $ 29,221 $ 19,511 $ 86,979 $ 82,520
======== ======== ======== ========
PRIMARY EARNINGS PER
SHARE . . . . . . . . . . . . . . . . . . . $ 0.78 $ 0.52 $ 2.33 $ 2.17
======== ======== ======== ========
</TABLE>
_____________________________
(1) The results of operations for the nine and three months ended May 31, 1995
reflect a change in accounting for revenue recognition adopted prospectively in
the fourth quarter of fiscal 1994. On a basis of accounting comparable to that
employed for the nine month period ended May 31, 1994, revenues, net income and
earnings per share for the nine months ended May 31, 1995 would have been
approximately $31.4 million, $7.6 million and $.20 higher, respectively, than
that actually reported and, for the three months ended May 31, 1995, would have
been approximately $25.3 million, $5.7 million and $.15 lower, respectively,
than that actually reported. See Management's Discussion and Analysis of
Results of Operations and Financial Condition.
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,
-----------------------------
1995 1994
-------- --------
(Dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,979 $ 82,520
Items not affecting cash:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . 492 417
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . (6,347) (35,747)
Producer loans, advances and
deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . (2,996) (48,413)
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,119 7,841
Payable to producers and others . . . . . . . . . . . . . . . . . . 4,760 8,283
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . (3,681) 16,623
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (530) 735
-------- --------
Net cash provided by operating activities . . . . . . . . . . . . . . . 81,796 32,259
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . 18,185 7,148
Additions to fixed assets . . . . . . . . . . . . . . . . . . . . . . . (1,275) (251)
-------- --------
Net cash provided by investing activities . . . . . . . . . . . . . . 16,910 6,897
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . 4,354 2,174
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (6,111) (21,315)
-------- --------
Net cash used in financing activities . . . . . . . . . . . . . . . . (1,757) (19,141)
-------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 96,949 20,015
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,857 300,219
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $438,806 $320,234
======== ========
</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 nine
months and three months ended May 31, 1995 have been prepared in accordance
with the instructions to Form 10-Q and 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. They do not,
however, 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, 1994 and the footnotes related thereto included in the
Company's Annual Report on Form 10-K from which the August 31, 1994 balances
presented herein have been derived. The results of operations for the nine
months and three months ended May 31, 1995 are not necessarily indicative of
the results of operations for the full year.
Revenue recognition
Historically, King World followed a practice of recognizing
license fees from the distribution of first-run syndicated television
properties at the commencement of the license period and as each show was
produced (even though the particular show may not have been broadcast by
television stations for several months). In the fourth quarter of the 1994
fiscal year, the Company adopted a change in accounting for revenue recognition
which was applied prospectively as a change in estimate as opposed to a change
in principle. Under the modified practice, license fees from first-run
syndicated television properties are recognized at the commencement of the
license period pursuant to noncancelable agreements and as each show is made
available to the licensee via satellite transmission, rather than at the time
6
<PAGE> 7
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the show is produced. Because transmission to the satellite takes place, on
the average, no more than two to three days prior to the broadcast of the
programming and in some cases up to several months after the programming is
produced, the effect of adopting the modified practice is to cause revenues to
be recognized closer to the air date than under the prior practice. In
addition, the accounting change will eliminate the quarterly revenue and
earnings fluctuations that were attributable to variations in production
schedules.
The impact of adopting the change was to cause revenues, net
income and earnings per share for the nine month period ended May 31, 1995 to
be approximately $31.4 million, $7.6 million and $.20 lower, respectively, than
they would have been under the prior practice, with no impact on cash flow.
Such revenues will be recognized in the fourth quarter of fiscal 1995 under the
modified practice.
The following pro forma financial information assumes the
Company's prior revenue recognition practice had been in effect for the first,
second and third quarters of fiscal 1995:
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
-------------------------------------
1995 Pro forma 1994
-------------- --------
(Dollars in thousands
except per share data)
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $464,824 $442,043
Income from operations . . . . . . . . . . . . . . . . . . . 133,277 122,265
Income before provision for
income taxes . . . . . . . . . . . . . . . . . . . . . . . 147,804 132,031
Net income . . . . . . . . . . . . . . . . . . . . . . . . . 94,594 82,520
======== ========
Primary earnings per
share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.53 $ 2.17
======== ========
</TABLE>
The Company typically receives a portion of the fees derived
from the licensing of syndicated television programming in the form of retained
advertising time, which is sold to advertisers by Camelot Entertainment Sales,
Inc. ("Camelot"), a wholly-owned subsidiary of the Company. Such revenues are
7
<PAGE> 8
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
recognized at the same time as the cash portion of the license fees derived
from such programming is recognized, in amounts adjusted for expected ratings.
That portion of recognized revenue that is to be paid to the producers and
owners of the licensed program material is accrued as the license fees are
earned.
License fees for non-first-run syndicated properties are
recognized at the gross contract amount (net of discount to present value
for license periods greater than one year) at the commencement of the
license 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 and distributed by the Company. The Oprah
Winfrey Show accounted for approximately 37% and 40% of revenues for the nine
months ended May 31, 1995 and 1994, respectively; Wheel of Fortune accounted
for approximately 21% and 19% of revenues for the nine months ended May 31,
1995 and 1994, respectively; Jeopardy! accounted for approximately 18% and 16%
of revenues for the nine months ended May 31, 1995 and 1994, respectively; and
Inside Edition accounted for approximately 8% of revenues for each of the nine
months ended May 31, 1995 and 1994.
On a basis of accounting comparable to that employed for the
nine months ended May 31, 1994, The Oprah Winfrey Show, Wheel of Fortune,
Jeopardy!, and Inside Edition would have accounted for approximately 41%, 19%,
16% and 8%, respectively, of the Company's revenues for the nine months ended
May 31, 1995.
Stockholders' equity
Primary earnings per share has been computed using the
weighted average number of common shares outstanding of 37,435,000 and
37,662,000 shares, respectively, for the three months ended May 31, 1995 and
1994, and 37,327,000 and 37,986,000 shares, respectively, for the nine months
ended May 31, 1995 and 1994, 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
8
<PAGE> 9
KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
diluted earnings per share for both periods presented was not significant.
(2) Buffalo Broadcasting Co. Inc.
On May 25, 1995, the Company announced its agreement to sell
WIVB-TV, the CBS-affiliated VHF television station in Buffalo, New York (the
"Station") operated by Buffalo Broadcasting Co. Inc. ("Buffalo"), to LIN
Television Corporation for $95 million in cash. The consummation of the
transaction is subject to approval by the Federal Communications Commission.
The Company acquired Buffalo in December 1988 in a highly
leveraged transaction. In April 1992, the Company and Buffalo's lenders entered
into an agreement providing for a financial restructuring of Buffalo effective
August 4, 1992. As a result of such restructuring, Buffalo ceased to be a
consolidated subsidiary of King World. The Company's investment in Buffalo
subsequent to the restructuring was carried at cost.
If the foregoing sale of WIVB-TV is consummated, the Company
expects to recognize a $9 million pre-tax gain from such sale.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS AND THREE MONTHS ENDED MAY 31, 1995 AND 1994
Revenues
Revenues for the first nine months of fiscal 1995 decreased by
approximately 2% compared to the first nine months of fiscal 1994 due to the
adoption of a change in accounting for revenue recognition on a prospective
basis in the fourth quarter of fiscal 1994. Had revenues in the first nine
months of fiscal 1995 been recognized on a basis comparable to that of the
first nine months of fiscal 1994, revenues in the fiscal 1995 period would have
been approximately 5% higher than the prior period, due primarily to increased
cash license fees from The Oprah Winfrey Show and, to a lesser extent, an
increase in revenues derived from the sale of retained advertising time in
Wheel of Fortune and Jeopardy! as a result of the retention of one additional
30-second advertising spot per episode commencing with the 1994-1995 television
season. For the three months ended May 31, 1995, revenues were approximately
27% higher than the three months ended May 31, 1994, due to generally lower
production levels in the third fiscal quarter under the Company's prior revenue
recognition practice and would have been approximately 5% higher on a basis of
accounting comparable to the earlier period, due primarily to increased cash
license fees from The Oprah Winfrey Show and, to a lesser extent, an increase
in revenues derived from the sale of retained advertising time in Wheel of
Fortune.
The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside
Edition accounted for approximately 37%, 21%, 18% and 8%, respectively, of the
Company's revenues for the first nine months of fiscal 1995 compared to 40%,
19%, 16% and 8%, respectively, for the first nine months of fiscal 1994.
American Journal accounted for approximately 4% of the Company's revenues for
the nine months ended May 31, 1995 and 5% for the nine months ended May 31,
1994. Rolonda, which debuted in January 1994, accounted for approximately 3%
of the Company's revenues for the first nine months of fiscal 1995 and 2% for
the first nine months of fiscal 1994. The Les Brown Show accounted for
approximately 2% of the Company's revenues for the first nine months of fiscal
1994, but was cancelled in January 1994. On a basis of accounting comparable
to that employed for the first nine months of fiscal 1994, The Oprah Winfrey
Show, Wheel of Fortune, Jeopardy! and Inside Edition would have accounted for
for approximately 41%, 19%, 16% and 8%, respectively, and American Journal
and Rolonda would have ac-
10
<PAGE> 11
counted for approximately 5% and 3%, respectively, of the Company's
revenues for the first nine months of fiscal 1995.
For the three months ended May 31, 1995, The Oprah Winfrey
Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for
approximately 38%, 21%, 18% and 8%, respectively, of the Company's revenues
compared to 40%, 20%, 4% and 11%, respectively, for the three months ended May
31, 1994. American Journal accounted for approximately 4% of the Company's
revenues for the three months ended May 31, 1995 compared to 8% for the three
months ended May 31, 1994, and Rolonda accounted for approximately 3% of the
Company's revenues for the three months ended May 31, 1995 and 5% of the
Company's revenues for the three months ended May 31, 1994. The Les Brown Show
accounted for approximately 1% of the Company's revenues for the three months
ended May 31, 1994. On a basis of accounting comparable to that employed for
the three months ended May 31, 1994, The Oprah Winfrey Show, Wheel of Fortune,
Jeopardy! and Inside Edition would have accounted for approximately 43%, 21%,
4% and 11%, respectively, and American Journal and Rolonda would have accounted
for approximately 9% and 4%, respectively, of the Company's revenues for the
three months ended May 31, 1995.
Producers' fees, programming and other direct operating costs
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
decreased by less than 1% in the nine months ended May 31, 1995 compared to the
nine months ended May 31, 1994. Because the recognition of these costs
generally coincides with the recognition of the revenues with which they are
associated, the adoption of the modified accounting practice in the fourth
quarter of fiscal 1994 caused such costs to be substantially lower in the first
quarter of fiscal 1995 than they would have been under the prior revenue
recognition practice. For the three months ended May 31, 1995, producers'
fees, programming and other direct operating costs increased by approximately
28% compared to the three months ended May 31, 1994. On a basis of accounting
comparable to that employed in the comparable periods of fiscal
11
<PAGE> 12
1994, producers' fees, programming and other direct operating costs would have
increased by approximately 6% in the first nine months and 5% in the third
quarter of fiscal 1995 over the corresponding periods of the prior fiscal year,
primarily as a result of the higher level of revenues generated by The Oprah
Winfrey Show, Wheel of Fortune and Jeopardy! (a portion of which is payable to
the producers of such series) and, to a lesser extent, increased production
costs associated with Inside Edition, American Journal and Rolonda.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased by
approximately 11% in the first nine months of fiscal 1995 over the
corresponding period of the prior fiscal year primarily due to the accounting
change. Selling, general and administrative expenses for the three months
ended May 31, 1995 were comparable to the three months ended May 31, 1994. On
a basis of accounting comparable to that employed in the first nine months of
fiscal 1994, such expenses would have decreased by approximately 7% for the
nine months ended May 31, 1995 and by approximately 3% for the three months
ended May 31, 1995 due primarily to lower advertising and promotion costs.
In December 1993, the Company entered into new employment
agreements with four executive officers. The agreements provide, among other
things, for new 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), including bonuses payable upon the introduction of
new shows and bonuses contingent upon the Company's Common Stock achieving
specified target prices during pre-established measurement periods.
As of May 31, 1995, the performance targets associated with
certain stock and stock appreciation units granted in December 1993 to Roger
King, the Company's Chairman of the Board, and Michael King, the Company's
President and Chief Executive Officer, were achieved, resulting in the payment
by the Company subsequent to May 31 of a lump-sum pre-tax cash bonus to each of
them of approximately $5 million. These units had become eligible for
redemption on August 31, 1994 and each of the subsequent fiscal quarters
through the third quarter of fiscal 1995, subject to the achievement of the
specified performance goals. Additional cash bonuses in respect of units that
will become eligible for redemption on August 31, 1995 will be payable if the
performance goals specified for the fourth quarter of fiscal 1995 are achieved.
12
<PAGE> 13
Net income and primary earnings per share
The Company's operating income for the first nine months of
fiscal 1995 decreased by approximately 1% compared to the corresponding period
of the prior year, primarily due to the change in accounting for revenue
recognition. Had the prior method of revenue recognition been employed in the
first nine months of fiscal 1995, the Company's operating income for such
period would have been approximately 9% higher than the comparable period of
fiscal 1994. Reported net income for the first nine months of fiscal 1995
increased by 5% compared to the corresponding period of the prior year. Absent
the accounting change, net income would have been approximately $12.1 million
(or 15%) higher than the first nine months of fiscal 1994, reflecting higher
operating income, higher interest income earned on the Company's cash and
investments (due primarily to an increase in interest rates over the prior
year), and a lower effective tax rate for the first nine months of fiscal 1995.
Primary earnings per share, which were $.16 higher in the first nine months of
fiscal 1995 compared to the first nine months of fiscal 1994, would have been
$.36 (or 17%) higher in the first nine months of fiscal 1995 compared with the
first nine months of fiscal 1994 had the prior method of revenue recognition
been employed, due to the increase in net income and a smaller number of shares
outstanding as a result of the Company's ongoing stock repurchase program.
For the three months ended May 31, 1995, operating income
increased by approximately 44% compared to the corresponding period of the
prior year, while net income and earnings per share each increased by
approximately 50%. On a basis of accounting comparable to that employed for
the three months ended May 31, 1994, operating income, net income and earnings
per share would have increased by approximately 10%, 21% and 22%, respectively,
over the comparable period of fiscal 1994, due primarily to the factors
discussed above for the nine month period.
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 in general and in the
advertising business in particular.
13
<PAGE> 14
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 as far
into the future as the 1999-2000 broadcast season. In general, these licenses
and renewals have been at rates as favorable or more favorable to the Company
than the rates applicable to the 1993-1994 and 1994-1995 broadcast seasons.
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.
The Company believes that the impact of inflation on its
operations has not been significant.
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. As a result of this strategy 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.
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 new series. The introductions of American Journal and The
Les Brown Show in the 1993-1994 broadcast season, and Rolonda, which premiered
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.
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 became obligated to pay Harpo certain
minimum amounts against its participation fees for
14
<PAGE> 15
such periods, irrespective of the amount of license fees generated by the
series in such periods. Harpo's participation fees for the 1993-1994 broadcast
season exceeded such minimum amounts for the 1993-1994 and 1994-1995 broadcast
seasons. The loan was due to be repaid in two installments of $8,625,000 each,
one of which was paid in July 1994 and the other of which was paid in June
1995.
Under the terms of the Company's agreement with Harpo, the
Company has the exclusive right, and has agreed, to distribute episodes of The
Oprah Winfrey Show produced through the 1999-2000 television season, 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. Under the agreement, the Company has, among
other things, agreed to pay Harpo production fees and 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. The Company has paid Harpo a $60,000,000 advance against its
minimum participation fees for the 1995-1996 broadcast season. Based on the
license agreements in place for the 1995-1996 broadcast season, the revenues
from the series will be sufficient to recoup such amount.
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.
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 years ended August 31, 1994 and 1993, 753,100 and
765,200 shares, respectively, of Common Stock were repurchased in open market
transactions, for aggregate consideration of approximately $28.9 million (or
approximately $38.40 per share) and $24.8 million (or approximately $32.40 per
share), respectively. In the first quarter of fiscal 1995, the Company
repurchased an aggregate 40,000 shares for aggregate consideration of
approximately $1.44 million (or approximately $36.00 per share), and in the
second quarter of fiscal 1995, the Company repurchased an additional 140,500
shares for aggregate consideration of approximately $4.7 million (or
approximately $33.25 per share). No repurchases were
15
<PAGE> 16
made by the Company in the third quarter of fiscal 1995. As of July 6, 1995,
there remained 301,200 shares available for repurchase under such program. 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.
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PART II - OTHER INFORMATION
None.
17
<PAGE> 18
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/ Steven A. LoCascio
---------------------------------
Steven A. LoCascio,
Vice President and Controller
As Chief Accounting Officer
and on behalf of the Registrant
July 13, 1995
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EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
<CASH> 438,806
<SECURITIES> 0
<RECEIVABLES> 51,884
<ALLOWANCES> 4,283
<INVENTORY> 0
<CURRENT-ASSETS> 508,951
<PP&E> 11,899
<DEPRECIATION> (9,589)
<TOTAL-ASSETS> 659,015
<CURRENT-LIABILITIES> 114,683
<BONDS> 0
<COMMON> 499
0
0
<OTHER-SE> 543,833
<TOTAL-LIABILITY-AND-EQUITY> 659,015
<SALES> 0
<TOTAL-REVENUES> 142,632
<CGS> 0
<TOTAL-COSTS> 84,264
<OTHER-EXPENSES> 18,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 45,600
<INCOME-TAX> 16,379
<INCOME-CONTINUING> 29,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,221
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
</TABLE>
