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, 1999.
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 12, 1999.
Class Outstanding at May 12, 1999
Common Stock, $0.01 par value 8,433,000
Class A Common Stock, $0.01 par value 827,000
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DICK CLARK PRODUCTIONS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 (unaudited)
and June 30, 1998................................................... 3
Consolidated Statements of Operations for the three months ended
March 31, 1999 and March 31, 1998 (unaudited) and for the nine
months ended March 31, 1999 and March 31, 1998 (unaudited).......... 4
Consolidated Statements of Cash Flows for the nine months ended
March 31, 1999 and March 31, 1998 (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....................................10
SIGNATURES..........................................................11
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<CAPTION>
ITEM 1. DICK CLARK PRODUCTIONS, INC.
FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
MARCH 31,
1999 JUNE 30,
(UNAUDITED) 1998
------------------- ---------------------
ASSETS
- --------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 8,131,000 $ 7,092,000
Marketable securities 39,066,000 32,211,000
Accounts receivable 5,492,000 6,673,000
Program costs, net 5,716,000 5,963,000
Prepaid royalty, net 2,802,000 3,041,000
Leasehold improvements and equipment 15,211,000 16,339,000
Goodwill and other assets, net 1,730,000 1,896,000
------------------- ---------------------
TOTAL ASSETS $ 78,148,000 $ 73,215,000
=================== =====================
LIABILITIES & STOCKHOLDERS' EQUITY
- --------------------------------------------------------------
LIABILITIES:
Accounts payable $ 4,559,000 $ 6,861,000
Accrued residuals and participations 3,375,000 3,241,000
Production advances and deferred revenue 1,953,000 1,861,000
Current and deferred income taxes 3,450,000 1,570,000
------------------- ---------------------
TOTAL LIABILITIES 13,337,000 13,533,000
Commitments and contingencies
Minority interest 668,000 729,000
Stockholders' Equity:
Class A common stock, $.01 par value,
2,000,000 shares authorized 827,000
shares outstanding 8,000 8,000
Common stock, $.01 par value, 20,000,000 shares
authorized 8,433,000 shares outstanding at
March 31, 1999 and 8,423,000 shares
outstanding at June 30, 1998 80,000 80,000
Additional paid-in capital 13,940,000 13,831,000
Stock dividend to be distributed 4,850,000 0
Retained earnings 45,265,000 45,034,000
------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 64,143,000 58,953,000
------------------- ---------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 78,148,000 $ 73,215,000
=================== =====================
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
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<TABLE>
<CAPTION>
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------------- --------------------------------
1999 1998 1999 1998
--------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 28,747,000 $ 36,247,000 $ 58,276,000 $ 63,673,000
Costs related to revenue 21,268,000 25,968,000 47,703,000 $ 50,532,000
--------------- ---------------- -------------- ---------------
Gross profit 7,479,000 10,279,000 10,573,000 13,141,000
General and administrative expense 1,574,000 1,522,000 4,339,000 3,942,000
Minority interest expense 37,000 39,000 5,000 92,000
Interest and other income (560,000) (529,000) (1,648,000) (1,514,000)
--------------- ---------------- -------------- ---------------
Income before provision for income
taxes 6,428,000 9,247,000 7,877,000 10,621,000
Provision for income taxes 2,260,000 3,541,000 2,796,000 4,063,000
--------------- ---------------- -------------- ---------------
Net income $ 4,168,000 $ 5,706,000 $ 5,081,000 $ 6,558,000
=============== ================ ============== ===============
Per share data:
Basic earnings per share $ 0.45 $ 0.62 $ 0.55 $ 0.71
=============== ================ ============== ===============
Diluted earnings per share $ 0.44 $ 0.61 $ 0.54 $ 0.70
=============== ================ ============== ===============
Weighted average number of shares
outstanding 9,258,000 9,249,000 9,252,000 9,245,000
=============== ================ ============== ===============
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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 NINE MONTHS ENDED
MARCH 31,
---------------------------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,081,000 $ 6,558,000
Adjustments to reconcile net income to net cash
provided by operations:
Amortization expense 30,910,000 34,297,000
Depreciation expense 1,483,000 1,623,000
Investment in program costs (30,149,000) (36,117,000)
Minority interest, net (61,000) (56,000)
Disposals of property, plant and equipment 71,000 68,000
Changes in assets and liabilities:
Accounts receivable 1,181,000 393,000
Other assets (109,000) 184,000
Accounts payable, accrued residuals and participations (2,168,000) 2,042,000
Production advances and deferred revenue 92,000 2,051,000
Current and deferred income taxes payable 1,880,000 4,057,000
------------------ -------------------
Net cash provided by operations 8,211,000 15,100,000
------------------ -------------------
Cash flows from investing activities:
Purchases of marketable securities (24,032,000) (17,090,000)
Sales of marketable securities 17,177,000 14,383,000
Expenditures on property, plant and equipment (426,000) (1,974,000)
------------------ -------------------
Net cash used for investing activities (7,281,000) (4,681,000)
------------------ -------------------
Cash flows from financing activities:
Exercise of stock options 109,000 57,000
------------------ ---------------------
Net increase in cash and cash equivalents 1,039,000 10,476,000
Cash and cash equivalents at beginning of period 7,092,000 3,322,000
------------------ -------------------
Cash and cash equivalents at end of period $ 8,131,000 $ 13,798,000
================== ===================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 1,008,000 $ 6,000
================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
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DICK CLARK PRODUCTIONS, INC.
NOTE TO CONSOLIDATED 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, 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 March 31, 1999, and the results of its operations
and cash flows for the periods ended March 31, 1999 and 1998, respectively, have
been made. Operating results for the three-month and nine-month periods ended
March 31, 1999 are not necessarily indicative of the operating results for the
entire fiscal year.
In 1997, the Company adopted Statement of Financial Accounting
Standards (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 Financial Accounting Standards Board (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 and nine-month periods ended March
31, 1999 and 1998, 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 May 11, 1999, the Company declared a 5% common stock dividend to
stockholders of record on May 21, 1999. The Company previously paid 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
dividends.
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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 83% and 72% of the Company's consolidated revenues for
the three-month and nine-month periods ending March 31, 1999, 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. Depending on the type of contract, revenues for the
Company's communication's 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 communication's projects are capitalized and
expensed as revenues are recognized.
RESULTS OF OPERATIONS
Revenues for the three-month and nine-month periods ended March 31,
1999, were $28,747,000 and $58,276,000, compared to $36,247,000 and $63,673,000
for the comparable periods in the previous fiscal year. The decrease in revenues
for the three-months ended March 31, 1999, as compared to the corresponding
period in the previous fiscal year, is primarily due to decreased revenues from
television series production. The decrease in revenues for the nine-months ended
March 31, 1999, as compared to the corresponding period in the previous fiscal
year, is primarily due to decreased revenues from television specials and
communications projects, offset in part by an increase in revenues from
television series production. Revenues from restaurant operations decreased for
the three-month and nine-month periods ended March 31, 1999, as compared to the
corresponding
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periods in the previous fiscal year, as a result of decreased revenues from
existing units, partially offset by revenues from one additional unit, which
opened in January, 1998.
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 increased for the
three-month period ended March 31, 1999, as compared to the corresponding period
in the previous fiscal year, primarily as a result of increased profitability
recognized from television series and specials, offset in part by decreased
profitability associated with the Company's film group projects. Gross profit as
a percentage of revenues increased for the nine-month period ended March 31,
1999, as compared to the corresponding period in the previous fiscal year,
primarily as a result of increased profitability recognized from television
series, offset in part by decreased profitability from television specials and
the Company's film group projects.
The Company's gross profits from restaurant operations decreased for
the three-month and nine-month periods ended March 31, 1999, as compared to the
corresponding periods in the previous fiscal year, as a result of decreased
profitability in existing units due to negative year over year, same store
sales. The decrease in gross profits was partially offset by profits from one
additional unit.
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 recently signed leases to open and operate a dick clark's
AB Diner in Schaumburg, Illinois, a suburb of Chicago, and a dick clark's
American Bandstand Grill in Auburn Hills, Michigan, a suburb of Detroit, in the
fall of calendar 1999. The total estimated capital investment of $2,126,000 will
be funded by the company.
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 $47,197,000 as of March 31, 1999.
YEAR 2000
The Company has assessed and continues to assess the impact of the Year
2000 Issue on its reporting systems and operations. The Year 2000 Issue exists
because computer systems and applications were historically designed to use two
digit fields to designate a year, and date sensitive systems may not recognize
2000 at all, or if recognized, as 1900.
Information Technology systems account for most of the Year 2000 work
and include all computer systems and technology managed by the Company. All core
systems have been assessed and work is being undertaken to test and implement
changes where required. Information Technology vendors and suppliers have been
contacted as to their Year 2000 compliance and their responses have been
factored into the Company's plans. Normal software version upgrades and hardware
replacements, for which budget allocations had been
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made, have solved a majority of the Company's Year 2000 Issues. As such, the
Year 2000 costs are included in the Company's normal expenditures for system
maintenance and upgrades and not as a separate Year 2000 cost category. Based on
the nature of the Company's business, it is not expected that any non-financial
software applications and hardware that may be impacted by the Year 2000 Issue
would cause any interruption in operations.
The Company is communicating with its significant customers and vendors
to understand their Year 2000 Issues and how they might prepare themselves to
manage those issues as they relate to the Company. To date, no significant
customers or vendors have informed the Company that a material Year 2000 Issue
exists which will have a material effect on the Company.
The Company expects to complete any changes required to overcome the
Year 2000 Issue during fiscal 1999. The Company expects that the total cost to
remediate the Year 2000 Issue will not be material to its results of operations,
liquidity, or capital resources. The Company is currently in the process of
developing a Year 2000 contingency plan, which will be completed during fiscal
1999.
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.
By: /s/ WILLIAM S. SIMON
--------------------------------------------
William S. Simon
Chief Financial Officer and Treasurer
(Principal financial officer and authorized
to sign on behalf of registrant)
Date: May 12, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
27.1 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> <C>
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS 9-MOS
<CASH> 8,131 8,131
<SECURITIES> 39,066 39,066
<RECEIVABLES> 5,492 5,492
<ALLOWANCES> 0 0
<INVENTORY> 5,716 5,716
<CURRENT-ASSETS> 52,689 52,689
<PP&E> 23,771 23,771
<DEPRECIATION> 8,560 8,560
<TOTAL-ASSETS> 78,148 78,148
<CURRENT-LIABILITIES> 6,512 6,512
<BONDS> 0 0
<COMMON> 14,028 14,028
0 0
0 0
<OTHER-SE> 50,115 50,115
<TOTAL-LIABILITY-AND-EQUITY> 78,148 78,148
<SALES> 28,747 58,276
<TOTAL-REVENUES> 28,747 58,276
<CGS> 21,268 47,703
<TOTAL-COSTS> 21,268 47,703
<OTHER-EXPENSES> 1,611 4,344
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (560) (1,648)
<INCOME-PRETAX> 6,428 7,877
<INCOME-TAX> 2,260 2,796
<INCOME-CONTINUING> 4,168 5,081
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,168 5,081
<EPS-PRIMARY> 0.45 0.55
<EPS-DILUTED> 0.44 0.54
</TABLE>
