<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995.
OR
(_) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File No. 0-15192
DICK CLARK PRODUCTIONS, INC.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2038815
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3003 West Olive Avenue, Burbank, California 91505-4590
------------------------------------------------------
(Address of principal executive offices, including zip code)
(818) 841-3003
---------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Below are indicated the number of shares outstanding of each of the registrant's
classes of common stock as of November 8, 1995.
<TABLE>
<CAPTION>
Class Outstanding at November 8, 1995
- ---------------------------------------- -------------------------------
<S> <C>
Common Stock, $0.01 par value 7,528,500
Class A Common Stock, $0.01 par value 750,000
</TABLE>
<PAGE>
DICK CLARK PRODUCTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Unaudited)
1. Basis of Financial Statement Presentation
-----------------------------------------
The consolidated financial statements of dick clark productions, inc.
and subsidiaries (collectively the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Interim financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete year-end financial statements. The accompanying
financial statements should be read in conjunction with the more detailed
financial statements and related footnotes for the fiscal year ended June 30,
1995, as included in the Company's 1995 Annual Report on Form 10-K (the
"Annual Report") filed with the Securities and Exchange Commission. A signed
independent accountant's report regarding the June 30, 1995 balance sheet is
included on page 31 of the Annual Report. Significant accounting policies
used by the Company are summarized in Note 2 to the financial statements
included in the Annual Report.
In the opinion of management, all adjustments (which include only
recurring normal adjustments) required for a fair presentation of the
financial position of the Company as of September 30, 1995, and the results
of its operations and cash flows for the periods ended September 30, 1995 and
1994 respectively, have been made. Operating results for the three-month
period ended September 30, 1995, are not necessarily indicative of the
operating results for the entire fiscal year.
2. Prepaid Royalties
-----------------
Pursuant to a Redemption and Settlement Agreement dated June 30, 1990
(the "Redemption Agreement") between Harmon Entertainment Corporation
("Harmon"), a previous co-venturer with the Company in its restaurant
business, the Company, dick clark restaurants, inc. ("dcri") and certain
other parties, the Company had an obligation to pay Harmon a royalty of up to
$10,000,000 at a rate of 1.5% of all restaurant revenues of which $1,000,000
was advanced to Harmon at the time the Redemption Agreement was entered into
by the parties thereto. Pursuant to a recent modification to the Redemption
Agreement entered into during the fiscal quarter ended December 31, 1994, the
Company paid Harmon $3,128,000 as a pre-payment of the remaining portion of
the royalty. As part of this transaction, Harmon paid the Company $358,000
in settlement of amounts owed to the Company by Harmon pursuant to the
findings of an audit conducted in connection with the Redemption Agreement.
As a result of the pre-payment, the Company has satisfied in full its royalty
obligation to Harmon under the Redemption Agreement. Harmon also dropped a
previously asserted claim that Harmon was owed certain other amounts under
the Redemption Agreement. The Company will amortize the pre-paid royalty at
the rate of 1.5% of revenues after the $1,000,000 advanced to Harmon is
recouped.
1
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
-------
A majority of the Company's revenues are derived from its television
production business which primarily involves the production and licensing of
television programming. The Company's television programming is generally
licensed to the major television networks, cable networks, domestic and
foreign syndicators, and advertisers. The Company also receives production
fees from program buyers who retain ownership of the programming. In
addition, the Company derives revenues from the rerun broadcast of its
programs on network and cable television and in foreign markets, as well as
the licensing of its media and film archives for use in feature films,
television movies, etc. The Company, on a limited basis, also develops
theatrical films in association with established studios that can provide
financing necessary for production.
The Company also derives substantial revenue from its entertainment-
related businesses, including a restaurant business (dick clark restaurants,
inc. and its subsidiaries), and a corporate events and production business
(dick clark corporate productions, inc.). These businesses combined
contributed approximately 47% and 56% of the Company's consolidated revenues
for the three-month periods ended September 30, 1995 and 1994, respectively.
License fees for the production of television programming are paid to
the Company pursuant to license agreements during production and upon
delivery of the programs or shortly thereafter. Revenues from network and
cable television license agreements are recognized for financial statement
purposes upon delivery of each program or in the case of a series, each
episode. Revenues from the rerun broadcast of television programming (both
domestic and foreign) are recognized for each program when a particular
program becomes contractually available for broadcast.
Production costs of television programs are capitalized and charged to
operations on an individual basis in the ratio that the current year's gross
revenues bear to management's estimate of the total revenues for each program
from all sources. Substantially all television production costs are
amortized in the initial year of delivery except for television movies where
there would be anticipated future revenues earned from rerun and other
exploitation. Successful television movies can achieve substantial revenues
from rerun broadcasts in both foreign and domestic markets after the initial
broadcast, thereby allowing a portion of the production costs to be amortized
against future revenues. Distribution costs of television programs are
expensed in the period incurred.
Depending on the type of contract, revenues for dick clark corporate
productions, inc. are recognized when the services are completed for a live
event,
2
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when a tape or film is delivered to a customer, or when services are
completed pursuant to a particular phase of a contract which provides for
periodic payments. Costs for corporate event productions are capitalized and
expensed as revenues are recognized.
RESULTS OF OPERATIONS
---------------------
Revenues for the three months ended September 30, 1995 were $8,384,000
compared with $8,451,000, for the comparable period in the previous fiscal
year. The revenues remained relatively unchanged for the three months ended
September 30, 1995 as compared to the corresponding period in the previous
fiscal year, as a result of increased revenues from the corporate production
business, increased sales from the dick clark media archives subsidiary,
offset by a decrease in revenues from the Geviderm cosmetic line, as well as
reduced sales from the restaurant business. Restaurant sales decreased due to
the initial opening period last year that were not replicated in the current
fiscal year.
Gross profit for any period is a function of the profitability of the
individual programs and projects delivered during that period. Gross profit
as a percentage of revenues remained unchanged for the three-month period
ended September 30, 1995, as compared to the corresponding period in the
previous fiscal year. This was the result of increased profitability
recognized from the aforementioned increased sales from the dick clark media
archives subsidiary which was offset by decreased profitability of the
Geviderm cosmetic line, as well as the Company's television production
business.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company has funded its working capital requirements for television
production primarily through installment payments from license fees from the
television networks and minimum guaranteed distribution payments from
independent distributors. The Company has generally been able to cover the
costs of its television programming through license or syndication fees and
has incurred no significant capital expenditure commitments.
The Company intends to continue to accelerate the opening of additional
American Bandstand Grill restaurants. In connection with the implementation
of this strategy, the Company modified the Redemption Agreement to buy-out
Harmon's right to all future royalty payments (see Note 2 to the Financial
Statements). In arriving at the amount of the pre-payment, the Company's
decision was based on certain assumptions including, the number of
restaurants the Company expects to open, the anticipated revenue from each
restaurant over a period of fifteen years, and a factor to discount the
stream of payments to present value.
The Company expects that the opening of additional restaurants will be
financed from available capital and alternative financing methods such as
joint ventures and limited recourse borrowings. In August of 1993, the
Company opened a dance-club-only version of the American Bandstand Grill in
Reno, Nevada which was
3
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financed through a joint venture arrangement. The two restaurants opened
during fiscal 1994 were financed by the Company. The Company plans to open a
restaurant in Cincinatti, Ohio in January of 1996 and it is possible that it
will begin construction of one additional location in fiscal 1996 at a total
estimated capital investment of $4,000,000 which will be funded by the
Company.
Capital requirements for the Company's corporate events business, dick
clark corporate productions, inc., are anticipated to be immaterial to the
Company's overall capital position.
The Company expects that its available capital base and cash generated
from operations will be more than sufficient to meet its cash requirements
for the foreseeable future.
The Company has no outstanding bank borrowings or other borrowed
indebtedness and had cash and marketable securities (principally consisting
of government securities) of approximately $28,015,000 as of September 30,
1995.
4
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PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. Not Applicable
Item 5. None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Financial Data Schedule
(b) Reports
No event has occurred during the quarter for which
this report is filed that would require the filing
of a report on Form 8-K and, therefore, no such
report has been filed.
5
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
dick clark productions, inc.
---------------------------------------------------
by: /s/ Kenneth H. Ferguson
-----------------------------------------------
Kenneth H. Ferguson
Chief Financial Officer and Treasurer
(Principal Financial Officer and authorized
to sign on behalf of Registrant)
Date: November 8, 1995
6
<PAGE>
ITEM 1.
FINANCIAL STATEMENTS
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, June 30,
1995 1995
------------- ------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 2,763,000 $ 3,297,000
Marketable securities 25,252,000 25,769,000
Accounts receivable 1,868,000 2,303,000
Program costs, net 6,319,000 4,306,000
Prepaid royalty 3,128,000 3,128,000
Leasehold improvements and
equipment 7,290,000 7,152,000
Goodwill and other assets 2,362,000 2,353,000
----------- -----------
Total assets $48,982,000 $48,308,000
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Accounts payable $ 2,817,000 $ 4,109,000
Accrued residuals and participations 1,470,000 1,438,000
Production advances and deferred revenue 5,937,000 4,097,000
Current and deferred income taxes 336,000 348,000
----------- -----------
Total liabilities 10,560,000 9,992,000
Commitments and contingencies --- ---
Minority interest 570,000 524,000
Stockholders' equity:
Class A common stock, $.01 par value,
2,000,000 shares authorized 750,000
shares outstanding 7,000 7,000
Common stock, $.01 par value, 20,000,000
shares authorized 7,528,500 shares
outstanding 76,000 76,000
Additional paid-in capital 7,790,000 7,790,000
Retained earnings 29,979,000 29,919,000
----------- -----------
Total stockholders' equity 37,852,000 37,792,000
Total liabilities and stockholders'
equity $48,982,000 $48,308,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
7
<PAGE>
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
Gross revenues $8,384,000 $8,451,000
Costs related to revenue 7,683,000 7,700,000
---------- ----------
Gross profit 701,000 751,000
General and administrative expenses 996,000 1,051,000
Minority interest expense 46,000 30,000
Interest and other income (433,000) (359,000)
---------- ----------
Income before provision for income taxes 92,000 29,000
Provision for income taxes 32,000 10,000
---------- ----------
Net income $ 60,000 $ 19,000
========== ==========
Net income per share $ 0.01 $ 0.00
========== ==========
Weighted average number of shares outstanding 8,279,000 8,277,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
8
<PAGE>
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 60,000 $ 19,000
Adjustments to reconcile net income to net
cash provided by operations
Amortization expense 4,734,000 3,598,000
Depreciation expense 249,000 235,000
Minority interest, net 46,000 30,000
Disposals of L/H Improvements & Equipment 15,000 0
Changes in assets and liabilities
Accounts receivable 435,000 846,000
Goodwill and other assets (36,000) (114,000)
Accounts payable, accrued residuals
and participations (1,260,000) 386,000
Production advances and deferred revenue 1,840,000 205,000
Current and deferred income taxes payable (12,000) (55,000)
----------- ----------
Net cash provided by operations 6,071,000 5,150,000
Cash flows from investing activities
Investment in program costs (6,720,000) (5,652,000)
Purchases of marketable securities (1,435,000) (827,000)
Sales of marketable securities 1,952,000 1,996,000
Capital expenditures (402,000) (158,000)
----------- ----------
Net cash used for investing activities (6,605,000) (4,641,000)
----------- ----------
Net increase (decrease) in cash and cash
equivalents (534,000) 509,000
Cash and cash equivalents at beginning
of the year 3,297,000 4,336,000
----------- ----------
Cash and cash equivalents at end of the period $ 2,763,000 $ 4,845,000
=========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for income taxes $ 44,000 $ 65,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 2,763
<SECURITIES> 25,252
<RECEIVABLES> 1,868
<ALLOWANCES> 0
<INVENTORY> 6,319
<CURRENT-ASSETS> 29,883
<PP&E> 7,290
<DEPRECIATION> 2,251
<TOTAL-ASSETS> 48,982
<CURRENT-LIABILITIES> 8,754
<BONDS> 0
<COMMON> 7,873
0
0
<OTHER-SE> 37,852
<TOTAL-LIABILITY-AND-EQUITY> 48,982
<SALES> 8,384
<TOTAL-REVENUES> 8,384
<CGS> 7,683
<TOTAL-COSTS> 7,683
<OTHER-EXPENSES> 1,042
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (433)
<INCOME-PRETAX> 92
<INCOME-TAX> 32
<INCOME-CONTINUING> 60
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
