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 December 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 February 10, 1999.
Class Outstanding at February 10, 1999
Common Stock, $0.01 par value 8,028,000
Class A Common Stock, $0.01 par value 787,000
<PAGE>
dick clark productions, inc.
Form 10-Q
For the Quarter Ended December 31, 1998
Cover Page...............................................................1
Index....................................................................2
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets...........................3
Consolidated Statements of Operations................4
Consolidated Statements of Cash Flows.................5
Notes to Consolidated Financial Statements...........6
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Conditions........7
PART II - Other Information
Item 6 - Exhibits and Reports on Form 8-K......................10
Signatures..............................................................11
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<PAGE>
ITEM 1. dick clark productions, inc.
FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 June 30,
(Unaudited) 1998
----------------- -------------
Assets
- ------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 8,771,000 $ 7,092,000
Marketable securities 35,823,000 32,211,000
Accounts receivable 5,524,000 6,673,000
Program costs, net 9,264,000 5,963,000
Prepaid royalty, net 2,876,000 3,041,000
Leasehold improvements and equipment 15,519,000 16,339,000
Goodwill and other assets, net 1,821,000 1,896,000
----------------- -------------
Total assets $ 79,598,000 $ 73,215,000
================= =============
Liabilities & Stockholders' Equity
- ------------------------------------------------------------
Liabilities:
Accounts payable $ 4,642,000 $ 6,861,000
Accrued residuals and participations 2,418,000 3,241,000
Production advances and deferred revenue 10,285,000 1,861,000
Current and deferred income taxes 1,625,000 1,570,000
----------------- -------------
Total liabilities 18,970,000 13,533,000
Commitments and contingencies
Minority interest 697,000 729,000
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
8,028,000 shares outstanding at December 31, 1998 and
8,021,000 shares outstanding at June 30, 1998 80,000 80,000
Additional paid-in capital 13,896,000 13,831,000
Retained earnings 45,947,000 45,034,000
----------------- -------------
Total stockholders' equity 59,931,000 58,953,000
----------------- -------------
Total liabilities & stockholders' equity $ 79,598,000 $ 73,215,000
================= =============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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<PAGE>
dick clark productions, inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
December 31, December 31,
------------------------------ -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 16,391,000 $ 13,371,000 $ 29,529,000 $ 27,426,000
Costs related to revenue 14,165,000 11,497,000 26,435,000 24,564,000
------------- ------------- ------------- -------------
Gross profit 2,226,000 1,874,000 3,094,000 2,862,000
General and administrative expense 1,417,000 1,194,000 2,765,000 2,420,000
Minority interest expense (36,000) 28,000 (32,000) 53,000
Interest and other income (531,000) (537,000) (1,088,000) (985,000)
------------- ------------- ------------- -------------
Income before provision
for income taxes 1,376,000 1,189,000 1,449,000 1,374,000
Provision for income taxes 509,000 452,000 536,000 522,000
------------- ------------- ------------- -------------
Net income $ 867,000 $ 737,000 $ 913,000 $ 852,000
============= ============= ============= =============
Per share data:
Basic earnings per share $ 0.10 $ 0.08 $ 0.10 $ 0.10
============= ============= ============= =============
Diluted earnings per share $ 0.10 $ 0.08 $ 0.10 $ 0.10
============= ============= ============= =============
Weighted average number of shares outstanding 8,809,000 8,806,000 8,809,000 8,803,000
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended
December 31,
-----------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 913,000 $ 852,000
Adjustments to reconcile net income to net cash
provided by operations:
Amortization expense 15,377,000 14,166,000
Depreciation expense 999,000 1,063,000
Investment in program costs (18,310,000) (16,743,000)
Minority interest, net (32,000) (94,000)
Disposals of property, plant and equipment 64,000 55,000
Changes in assets and liabilities:
Accounts receivable 1,149,000 211,000
Other assets (128,000) 160,000
Accounts payable, accrued residuals and participations (3,041,000) (168,000)
Production advances and deferred revenue 8,424,000 9,318,000
Current and deferred income taxes payable 55,000 517,000
-----------------
-----------------
Net cash provided by (used for) operations 5,470,000 9,337,000
----------------- -----------------
Cash flows from investing activities:
Purchases of marketable securities (14,092,000) (12,278,000)
Sales of marketable securities 10,479,000 8,121,000
Expenditures on property, plant and equipment (243,000) (1,858,000)
----------------- -----------------
Net cash provided by investing activities (3,856,000) (6,015,000)
----------------- -----------------
Cash flows from financing activities:
Exercise of stock options 65,000 57,000
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 1,679,000 3,379,000
Cash and cash equivalents at beginning of the period 7,092,000 3,322,000
----------------- -----------------
Cash and cash equivalents at end of the period $ 8,771,000 $ 6,701,000
================= =================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 556,000 $ 5,000
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
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, 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 December 31, 1998, and the results of its
operations and cash flows for the periods ended December 31, 1998 and 1997,
respectively, have been made. Operating results for the three-month and
six-month periods ended December 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. 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.
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 and six-month periods ended December 31, 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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<PAGE>
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 68% and 62% of the Company's consolidated revenues for
the three-month and six-month periods ending December 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. 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 six-month periods ended December 31,
1998, were $16,391,000 and $29,529,000, compared to $13,371,000 and $27,426,000
for the comparable periods in the previous fiscal year. The increase in revenues
for the three-months ended December 31, 1998, as compared to the corresponding
period in the previous fiscal year, is primarily due to increased revenues from
television series as well as increased revenues from the Company's
communication's projects, offset in part by a decrease in revenues from
television specials. The increase in revenues for the six-months ended December
31, 1998 as compared to the corresponding period in the previous fiscal year, is
primarily due to increased revenues from television series, offset in part by a
decrease in revenues from television specials and the Company's communication's
projects.
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<PAGE>
Revenues from restaurant operations remained consistent in the three
and six-month periods ended December 31, 1998 as a decrease in revenues from
existing units was 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 remained constant
for the three-month and six-month periods ended December 31, 1998, as compared
to the corresponding periods in the previous fiscal year, primarily as a result
of decreased profitability recognized from television specials programming,
offset by increased profitability recognized from television series programming.
The company's gross profits from restaurant operations decreased for
the three-month and six-month periods ended December 31, 1998, as compared to
the corresponding periods in the previous fiscal year, as a result of decreased
profitability in existing units, partially offset by profits from one new
restaurant operation.
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 a lease to open and operate a
restaurant in Schaumburg, Illinois in the summer of calendar 1999 at an
estimated capital investment, net of landlord contributions, of $985,000. The
investment 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 $44,594,000 as of December 31, 1998.
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 changes were made 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 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
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<PAGE>
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 has communicated 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. There are no
significant customers or vendors of the Company for which a material Year 2000
issue exists, hence there will be no 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 in the final stages 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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<PAGE>
PART II. OTHER INFORMATION
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.
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<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 Financial Officer and
Treasurer
(Principal financial officer
and authorized to sign on
behalf of registrant)
Date: February 12, 1999
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<ARTICLE> 5
<CIK> 0000805370
<NAME> dick clark productions,inc.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 3-MOS
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