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, 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2038815
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3003 West Olive Avenue, Burbank, California 91505-4590
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(Address of principal executive offices, including zip code)
(818) 841-3003
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(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 13, 1998.
Class Outstanding at November 13, 1998
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Common Stock, $0.01 par value 8,021,000
Class A Common Stock, $0.01 par value 787,000
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dick clark productions, inc.
Form 10-Q
For the Quarter Ended September 30, 1998
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PART I. FINANCIAL INFORMATION Page
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Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998 (unaudited)
and June 30, 1998 .......................................................... 3
Consolidated Statements of Operations for the three months ended
September 30, 1998 and September 30, 1997 (unaudited)....................... 4
Consolidated Statements of Cash Flows for the three months ended
September 30, 1998 and September 30, 1997 (unaudited)....................... 5
Notes to Consolidated Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 7
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................ 9
SIGNATURES.................................................................. 10
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dick clark productions, inc.
CONSOLIDATED BALANCE SHEETS
ITEM 1.
FINANCIAL STATEMENTS
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September 30,
1998 June 30,
(Unaudited) 1998
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Assets
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<S> <C> <C>
Cash and cash equivalents $ 6,828,000 $ 7,092,000
Marketable securities 31,927,000 32,211,000
Accounts receivable 4,646,000 6,673,000
Program costs, net 8,330,000 5,963,000
Prepaid royalty, net 2,957,000 3,041,000
Leasehold improvements and equipment 15,823,000 16,339,000
Goodwill and other assets, net 1,911,000 1,896,000
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Total assets $ 72,422,000 $ 73,215,000
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Liabilities & Stockholders' Equity
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Liabilities:
Accounts payable $ 5,016,000 $ 6,861,000
Accrued residuals and participations 2,491,000 3,241,000
Production advances and deferred revenue 4,123,000 1,861,000
Current and deferred income taxes 1,060,000 1,570,000
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Total liabilities 12,690,000 13,533,000
Commitments and contingencies
Minority interest 733,000 729,000
Stockholders' Equity:
Class A common stock, $.01 par value,
2,000,000 shares authorized
787,000 shares outstanding 8,000 8,000
Common stock, $.01 par value,
20,000,000 shares authorized
8,021,000 shares outstanding 80,000 80,000
Additional paid-in capital 13,831,000 13,831,000
Retained earnings 45,080,000 45,034,000
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Total stockholders' equity 58,999,000 58,953,000
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Total liabilities & stockholders' equity $ 72,422,000 $ 73,215,000
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The accompanying notes are an integral part of these consolidated balance
sheets.
3
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dick clark productions, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the Three Months Ended
September 30,
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1998 1997
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Revenue $ 13,138,000 $ 14,055,000
Costs related to revenue 12,270,000 13,067,000
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Gross profit 868,000 988,000
General and administrative expense 1,348,000 1,226,000
Minority interest expense 4,000 25,000
Interest and other income (557,000) (448,000)
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Income before provision
for income taxes 73,000 185,000
Provision for income taxes 27,000 70,000
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Net income $ 46,000 $ 115,000
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Per share data:
Basic earnings per share $ 0.01 $ 0.01
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Diluted earnings per share $ 0.01 $ 0.01
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Weighted average number of shares outstanding 8,808,000 8,801,000
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The accompanying notes are an integral part of these consolidated statements.
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<CAPTION>
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
September 30,
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1998 1997
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Cash flows from operating activities
Net income $ 46,000 $ 115,000
Adjustments to reconcile net income to net cash
provided by operations
Amortization expense 6,487,000 7,608,000
Depreciation expense 616,000 532,000
Investment in program costs (8,668,000) (7,829,000)
Minority interest, net 4,000 25,000
Disposals of property, plant and equipment 49,000 -
Changes in assets and liabilities
Accounts receivable 2,027,000 624,000
Other assets (117,000) 175,000
Accounts payable, accrued residuals and participations (2,592,000) (494,000)
Production advances and deferred revenue 2,262,000 639,000
Current and deferred income taxes payable (510,000) 65,000
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Net cash provided by (used for) operations (399,000) 1,460,000
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Cash flows from investing activities
Purchases of marketable securities (1,384,000) (2,014,000)
Sales of marketable securities 1,668,000 4,064,000
Expenditures on property, plant and equipment (149,000) (375,000)
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Net cash provided by investing activities 135,000 1,675,000
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Net increase (decrease) in cash and cash equivalents (264,000) 3,135,000
Cash and cash equivalents at beginning of the period 7,092,000 3,322,000
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Cash and cash equivalents at end of the period $ 6,828,000 $ 6,457,000
==================== =====================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 556,000 $ 5,000
==================== =====================
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The accompanying notes are an integral part of these consolidated statements.
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dick clark productions, inc.
NOTE TO FINANCIAL STATEMENTS
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(Unaudited)
1. Basis of Financial Statement Presentation
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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, 1998, as included in the Company's 1998 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, 1998
financial statements is included on page 34 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, 1998, and the results
of its operations and cash flows for the periods ended September 30, 1998
and 1997, respectively, have been made. Operating results for the
three-month period ended September 30, 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. Basic 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.
In June 1997, the FASB issued SFAS No. 130, 'Reporting
Comprehensive Income' which is effective for the Company's fiscal year
ending June 30, 1999. This statement established standards for the
reporting and display of comprehensive income and its components in
financial statements and thereby reports a measure of all changes in equity
of an enterprise that result from transactions and other economic events
other than transactions with owners. For the three-month periods ended
September 30, 1998 and 1997, the Company had no elements of comprehensive
income which would require additional financial statement disclosure.
In June 1997, the FASB issued SFAS No. 131, 'Disclosure about
Segments of An Enterprise and Related Information', which the Company will
adopt for the fiscal year ending June 30, 1999. This statement changes the
requirements under which public businesses report disaggregated
information.
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The Company's business activities consist of two business
segments: entertainment operations and restaurant operations. The
entertainment segment contributed approximately 55% of the Company's
consolidated revenues for the three-month period ended September 30, 1998.
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. Depending on the
type of contract, revenues for the Company's corporate projects 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.
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. Costs for
corporate projects are capitalized and expensed as revenues are recognized.
RESULTS OF OPERATIONS
Revenues for the three-month period ended September 30, 1998, were
$13,138,000, compared to $14,055,000 for the comparable period in the
previous fiscal year. The decrease in revenues for the three months ended
September 30, 1998, as compared to the corresponding period in the previous
fiscal year, is primarily due to decreased revenues from the Company's
corporate projects, offset in part by an increase in revenues from
television series programming.
Gross profit for the Company's 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 September 30, 1998, as compared
to the
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corresponding period in the previous fiscal year, primarily as a result of
decreased profitability associated with the Company's corporate projects.
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 and
corporate projects through license or syndication fees and production
revenues respectively, and has incurred no significant capital expenditure
commitments.
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
$38,755,000 as of September 30, 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.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 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.
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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.
Date: November 13, 1998 By: /s/ William S. Simon
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William S. Simon
Chief Financial Officer and Treasurer
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