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 March 31, 1998.
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 May 14, 1998.
Class Outstanding at May 14, 1998
- --------------------------------------------------------------------------------
Common Stock, $0.01 par value 8,021,000
Class A Common Stock, $0.01 par value 787,000
<PAGE>
ITEM 1. dick clark productions, inc.
FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1998 1997
----------- -----------
Assets
Cash and cash equivalents $13,798,000 $ 3,322,000
Marketable securities 31,139,000 28,432,000
Accounts receivable 3,828,000 4,221,000
Program costs, net 6,965,000 4,615,000
Prepaid royalty 3,128,000 3,128,000
Leasehold improvements and equipment 16,994,000 16,711,000
Goodwill and other assets 2,155,000 2,869,000
----------- -----------
Total Assets $78,007,000 $63,298,000
=========== ===========
Liabilities & Stockholders' Equity
Accounts payable $ 6,278,000 $ 5,958,000
Accrued residuals and participations 4,132,000 2,410,000
Production advances and deferred revenue 4,819,000 2,768,000
Current and deferred income taxes 4,993,000 936,000
----------- -----------
Total Liabilities 20,222,000 12,072,000
Commitments and contingencies
Minority interest 851,000 907,000
Stockholders' Equity:
Class A common stock, $.01 par value,
2,000,000 shares authorized
787,000 shares outstanding 7,000 7,000
Common stock, $.01 par value,
20,000,000 shares authorized
8,021,000 shares outstanding at March
31, 1998 and 8,013,000 shares
outstanding at June 30, 1997 76,000 76,000
Additional paid-in capital 8,262,000 8,205,000
Stock dividend to be distributed 5,230,000 --
Retained earnings 43,359,000 42,031,000
----------- -----------
Total Stockholders' Equity 56,934,000 50,319,000
----------- -----------
Total Liabilities & Stockholders' Equity $78,007,000 $63,298,000
=========== ===========
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross revenues $ 36,247,000 $ 22,243,000 $ 63,673,000 $ 43,060,000
Costs related to revenue 25,968,000 13,711,000 50,532,000 31,247,000
------------ ------------ ------------ ------------
Gross profit 10,279,000 8,532,000 13,141,000 11,813,000
General and administrative expenses 1,522,000 1,367,000 3,942,000 3,537,000
Minority interest expense 39,000 52,000 92,000 482,000
Interest and other income (529,000) (268,000) (1,514,000) (1,209,000)
------------ ------------ ------------ ------------
Income before provision
for income taxes 9,247,000 7,381,000 10,621,000 9,003,000
Provision for income taxes 3,541,000 2,917,000 4,063,000 3,538,000
------------ ------------ ------------ ------------
Net income $ 5,706,000 $ 4,464,000 $ 6,558,000 $ 5,465,000
============ ============ ============ ============
Basic earnings per share $ 0.65 $ 0.51 $ 0.74 $ 0.63
============ ============ ============ ============
Diluted earnings per share $ 0.65 $ 0.51 $ 0.74 $ 0.63
============ ============ ============ ============
Weighted average number of shares
outstanding 8,808,000 8,744,000 8,805,000 8,740,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 6,558,000 $ 5,465,000
Adjustments to reconcile net income to net cash
provided by operations
Amortization expense 34,297,000 20,294,000
Depreciation expense 1,623,000 1,067,000
Investment in program costs (36,117,000) (27,477,000)
Minority interest, net (56,000) 433,000
Disposals of leasehold improvements and equipment 68,000 80,000
Changes in assets and liabilities
Accounts receivable 393,000 178,000
Goodwill and other assets 184,000 (174,000)
Accounts payable, accrued residuals and participations 2,042,000 683,000
Production advances and deferred revenue 2,051,000 6,232,000
Current and deferred income taxes payable 4,057,000 3,087,000
------------ ------------
Net cash provided by operations 15,100,000 9,868,000
Cash flows from investing activities
Purchases of marketable securities (17,090,000) (20,168,000)
Sales of marketable securities 14,383,000 21,531,000
Capital expenditures (1,974,000) (4,129,000)
------------ ------------
Net cash used for investing activities (4,681,000) (2,766,000)
------------ ------------
Cash flows from financing activities
Exercise of stock options 57,000 118,000
------------ ------------
Net cash provided by financing activities 57,000 118,000
------------ ------------
Net increase in cash and cash equivalents 10,476,000 7,220,000
Cash and cash equivalents at beginning of the period 3,322,000 953,000
------------ ------------
Cash and cash equivalents at end of the period $ 13,798,000 $ 8,173,000
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 6,000 $ 450,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
dick clark productions, inc.
NOTE 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, 1997, as included in the Company's 1997
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, 1997 balance sheet is included on page 29 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 March 31, 1998, and the results of its operations
and cash flows for the periods ended March 31, 1998 and 1997 respectively, have
been made. Operating results for the three-month and nine-month periods ended
March 31, 1998, are not necessarily indicative of the operating results for the
entire fiscal year.
In 1997, the Company adopted SFAS No. 128, "Earnings per Share," effective
December 15, 1997. As a result, the Company's reported earnings per share for
1996 were restated. Basics earnings per common share were computed by dividing
net income by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per common share were determined by applying
the treasury stock method to compute dilution for common stock equivalents.
On April 23, 1998, the Company declared a 5% common stock dividend to
stockholders of record on May 4, 1998. Accordingly, common stock share data have
been adjusted to include the effect of the stock dividend.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
The Company's business activities consist of two business segments:
entertainment operations and restaurant operations. The entertainment segment
contributed approximately 83% and 73% of the Company's consolidated revenues for
the three-month and nine-month
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<PAGE>
periods ending March 31, 1998, respectively. 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 feature
films in association with established studios that can provide financing
necessary for production.
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 and series where there
would be anticipated future revenues earned from rerun and other exploitation.
Successful television movies and series 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., the subsidiary through which the Company conducts its
corporate events business, are recognized when the services are completed for a
live event, 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-month and nine-month periods ended March 31, 1998,
were $36,247,000 and $63,673,000, compared to $22,243,000 and $43,060,000 for
the comparable periods in the previous fiscal year. The increase in revenues for
the three and nine months ended March 31, 1998, as compared to the corresponding
periods in the previous fiscal year, is primarily due to increased revenues from
television series and specials programming as well as revenues from additional
restaurants which were not operating during the period ended March 31, 1997.
Gross profit for television and corporate productions 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 decreased for the
three-month period ended March 31, 1998, as compared to the corresponding period
in the previous fiscal year, primarily as a result of decreased
5
<PAGE>
profitability recognized from television specials programming as well as
decreased profitability associated with the Company's corporate productions
business. Gross profit as a percentage of revenues decreased for the nine-month
period ended March 31, 1998, as compared to the corresponding period in the
previous fiscal year, primarily as a result of decreased profitability
recognized from television series and specials programming, offset in part by
increased profits from the Company's corporate productions 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 and cable 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.
Working capital requirements for the Company's corporate events business
are anticipated to be met by production revenues.
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 $44,937,000 as of March 31, 1998.
GENERAL
- -------
Certain statements in the foregoing Management's Discussion and Analysis
(the "MD&A") are not historical facts or information and certain other
statements in the MD&A are forward looking statements that involve risks and
uncertainties, including, without limitation, the Company's ability to develop
and sell television programming, timely completion of negotiations for new
restaurant sites and the ability to construct, finance and open new restaurants
and to attract new corporate productions clients, and such competitive and other
business risks as from time to time may be detailed in the Company's Securities
and Exchange Commission reports.
6
<PAGE>
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.
7
<PAGE>
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/ William S. Simon
-----------------------------
William S. Simon
Chief Accounting Officer and
Treasurer (Principal Financial
Officer and authorized to sign
on behalf of Registrant)
Date: May 14, 1998
8
<TABLE> <S> <C>
<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>
<CIK> 0000805370
<NAME> dick clark productions, inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,798
<SECURITIES> 31,139
<RECEIVABLES> 3,828
<ALLOWANCES> 0
<INVENTORY> 6,965
<CURRENT-ASSETS> 48,765
<PP&E> 23,392
<DEPRECIATION> 6,398
<TOTAL-ASSETS> 78,007
<CURRENT-LIABILITIES> 11,097
<BONDS> 0
<COMMON> 8,345
0
0
<OTHER-SE> 48,589
<TOTAL-LIABILITY-AND-EQUITY> 78,007
<SALES> 63,673
<TOTAL-REVENUES> 63,673
<CGS> 50,532
<TOTAL-COSTS> 50,532
<OTHER-EXPENSES> 4,034
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 10,621
<INCOME-TAX> 4,063
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