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, 2000.
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 23-2038115
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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, 2000.
Class Outstanding at November 13, 2000
----- ---------------------------------
Common Stock, $0.01 par value 9,281,000
Class A Common Stock, $0.01 par value 910,000
<PAGE>
dick clark productions, inc.
Form 10-Q
For the Quarter Ended September 30, 2000
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION Page
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Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheets as of September 30, 2000 (unaudited)
and June 30, 2000................................................................ 3
Consolidated Statements of Operations for the three months ended
September 30, 2000 and September 30, 1999 (unaudited)............................ 4
Consolidated Statements of Cash Flows for the three months ended
September 30, 2000 and September 30, 1999 (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
</TABLE>
2
<PAGE>
ITEM 1.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
dick clark productions, inc.
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
Assets 2000 2000
------------------------------------- ------------------- ----------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 7,677,000 $ 5,298,000
Marketable securities 49,237,000 53,174,000
Accounts receivable 3,119,000 4,609,000
Program costs, net 8,442,000 5,599,000
Prepaid royalty, net 2,344,000 2,424,000
Current and deferred income taxes 284,000 373,000
Property, plant and equipment, net 10,892,000 11,058,000
Goodwill and other assets, net 1,417,000 1,388,000
------------------ ----------------
Total assets $ 83,412,000 $ 83,923,000
================== ================
Liabilities & Stockholders' Equity
----------------------------------
Liabilities:
Accounts payable $ 4,759,000 $ 6,143,000
Accrued residuals and participations 1,521,000 2,737,000
Production advances and deferred revenue 3,940,000 2,075,000
Current and deferred income taxes - -
------------------ ----------------
Total liabilities 10,220,000 10,955,000
Commitments and contingencies
Minority interest 813,000 759,000
Stockholders' Equity:
Class A common stock, $.01 par value,
2,000,000 shares authorized
910,000 shares outstanding 9,000 9,000
Common stock, $.01 par value,
20,000,000 shares authorized
9,282,000 shares issued at September 30, 2000
and June 30, 2000 93,000 93,000
Treasury stock, at cost, 1,493 shares
at September 30, 2000 and June 30, 2000 (23,000) (23,000)
Additional paid-in capital 30,060,000 30,060,000
Retained earnings 42,240,000 42,070,000
------------------ ----------------
Total stockholders' equity 72,379,000 72,209,000
------------------ ----------------
Total liabilities & stockholders' equity $ 83,412,000 $ 83,923,000
================== ================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<TABLE>
<CAPTION>
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
September 30,
----------------------------
2000 1999
-------- ------
<S> <C> <C>
Revenue $ 10,449,000 $ 10,585,000
Costs related to revenue 9,626,000 9,531,000
------------------- ------------------
Gross profit 823,000 1,054,000
General and administrative expense 1,415,000 1,167,000
Minority interest expense 55,000 70,000
Interest and other income (906,000) (902,000)
------------------- ------------------
Income before provision for income taxes 259,000 719,000
Provision for income taxes 89,000 248,000
------------------- ------------------
Income before cumulative effect of accounting change 170,000 471,000
Cumulative effect of accounting change - (111,000)
------------------- ------------------
Net income $ 170,000 $ 360,000
=================== ==================
Per share data:
Basic earnings per share:
Before cumulative effect of accounting change $ 0.02 $ 0.05
Cumulative effect of accounting change - (0.01)
------------------- ------------------
Net income $ 0.02 $ 0.04
Diluted earnings per share:
Before cumulative effect of accounting change $ 0.02 $ 0.05
Cumulative effect of accounting change - (0.01)
------------------- ------------------
Net income $ 0.02 $ 0.03
=================== ==================
Weighted average number of shares outstanding, basic 10,190,000 10,186,000
Weighted average number of shares outstanding, diluted 10,336,000 10,318,000
=================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
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<PAGE>
<TABLE>
<CAPTION>
dick clark productions, inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months
ended September 30,
---------------------------
2000 1999
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Cash flows from operating activities:
<S> <C> <C>
Net income $ 170,000 $ 360,000
Adjustments to reconcile net income to net cash
used by operations:
Amortization expense 4,307,000 4,221,000
Depreciation expense 364,000 334,000
Investment in program costs (7,040,000) (6,650,000)
Minority interest, net 54,000 71,000
Changes in assets and liabilities:
Accounts receivable 1,490,000 300,000
Other assets (59,000) (110,000)
Accounts payable, accrued residuals and participations (2,600,000) (1,443,000)
Production advances and deferred revenue 1,865,000 2,425,000
Current and deferred income taxes payable 89,000 33,000
------------------- --------------------
Net cash used by operations (1,360,000) (459,000)
------------------- --------------------
Cash flows from investing activities:
Purchases of marketable securities (726,000) (4,292,000)
Sales of marketable securities 4,663,000 5,554,000
Expenditures on property, plant and equipment (198,000) (834,000)
Disposals of property, plant and equipment - 7,000
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Net cash provided by investing activities 3,739,000 435,000
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Net increase (decrease) in cash and cash equivalents 2,379,000 (24,000)
Cash and cash equivalents at beginning of the period 5,298,000 6,023,000
------------------- --------------------
Cash and cash equivalents at end of the period $ 7,677,000 $ 5,999,000
=================== ====================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for income taxes $ 20,000 $ 173,000
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
5
<PAGE>
dick clark productions, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
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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 accounting principles generally accepted in the United States for interim
financial information. Interim financial statements do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States 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, 2000, as included in the Company's 2000 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, 2000 financial statements
is included in 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, 2000, and the results of its
operations and cash flows for the periods ended September 30, 2000 and 1999,
respectively, have been made. Operating results for the three-month period ended
September 30, 2000 are not necessarily indicative of the operating results for
the entire fiscal year ending June 30, 2001.
The carrying values of the Company's assets are reviewed when events
and circumstances indicate that the carrying value of an asset may not be
recoverable. If it is determined that an impairment loss has occurred based on
undiscounted future cash flows, then a loss is recognized in the statement of
operations using a discounted cash flow or fair value model.
In April of 1998, the AICPA issued Statement of Position 98-5 ("SOP
98-5"), "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires that
all nongovernmental entities expense costs of start-up activities (pre-opening,
pre-operating and organizational costs) as those costs are incurred and requires
the write-off of any unamortized balances upon implementation. The Company
adopted SOP 98-5 in the first quarter of the fiscal year ending June 30, 2000.
The financial impact of SOP 98-5 was recorded as a cumulative effect of an
accounting change of $111,000, net of a tax benefit of $60,000.
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In June of 2000 the AICPA issued Statement of Position 00-2 ("SOP
00-2"), "Accounting by Producers or Distributors of Films". The primary changes
from the guidance of SFAS No. 53 relate to the accounting for advertising and
marketing costs in accordance with SOP 93-7, "Reporting on Advertising Costs",
limitations on certain ultimates that companies can use in their individual film
forecast method, and more specific guidance related to projects in development.
SOP 00-2 is effective for fiscal years beginning after December 15, 2000. The
Company adopted SOP 00-2 during the first quarter of the fiscal year ending June
30, 2001. There was no material impact on the financial results of the Company
as a result of adoption.
On April 25, 2000, the Company declared a 10% stock dividend of the
common stock and Class A common stock to all holders of record as of the close
of business on May 25, 2000, which was distributed on June 23, 2000. On each of
May 15, 1998 and June 11, 1999, the Company distributed a 5% stock dividend of
the common stock and Class A common stock to all holders of record as of the
close of business on May 4, 1998 and May 21, 1999, respectively. Accordingly,
stock share data have been adjusted to include the effect of the stock
dividends.
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 50% of the Company's consolidated revenue for the
three-month period ended September 30, 2000. 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 revenue 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 also derives revenue from the development
and execution of non-traditional marketing communications programs, corporate
meetings and special events, new product introductions, trade shows and
exhibits, event marketing, film, video and leisure attractions. 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. Revenue from network and cable television
license agreements is recognized for financial statement purposes upon delivery
of each program or in the case of a series, each episode. Revenue from the rerun
broadcast of television programming (both domestic and foreign) is recognized
for each program when a particular program becomes contractually available for
broadcast. Depending on the type of contract, revenue for the Company's
communications projects is 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.
-7-
<PAGE>
Production costs of television programs are capitalized and charged to
operations on an individual basis in the ratio that the current year's gross
revenue bears to management's estimate of the total revenue 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 revenue earned from rerun and other exploitation.
Successful television movies and series can achieve substantial revenue 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 revenue. Distribution costs of television programs are expensed
in the period incurred. Costs for communications projects are capitalized and
expensed as revenue is recognized.
RESULTS OF OPERATIONS
---------------------
Revenue for the three-months ended September 30, 2000, was
$10,449,000, compared to $10,585,000 for the comparable period in the previous
fiscal year. This decrease in revenue was primarily due to a decrease in revenue
in the entertainment operations, offset in part by an increase in revenue in the
restaurant operations. In the entertainment operations, the decrease in revenue
for the three-months ended September 30, 2000, as compared to the same period in
the previous fiscal year, was primarily from communications projects, offset in
part by increased revenue from television series and specials production. In the
restaurant operations, the increase in revenue for the three-months ended
September 30, 2000, as compared to the same period in the previous fiscal year,
was primarily from new units, offset in part by decreased revenue from existing
units and lost revenue from one closed unit.
Gross profits or losses for the Company's productions for any period
is a function of the profitability of the individual programs and projects
delivered during that period. Overall, the Company's gross profits as a
percentage of revenue decreased for the three-month period ended September 30,
2000, as compared to the corresponding period in the previous fiscal year,
primarily as a result of decreased profitability recognized from communications
projects. This decrease in gross profits was offset in part by a reduction in
the gross losses in the restaurant operations during the three-month period
ended September 30, 2000, as compared to the corresponding period in the
previous fiscal year, as a result of increased profitability in several existing
units due to cost reductions and due to the closure of an unprofitable unit in
fiscal 2000.
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 revenue respectively, and has incurred no
significant capital expenditure commitments.
-8-
<PAGE>
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 $56,914,000 as of September 30, 2000.
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, to implement its licensing and related strategy
for its restaurant operations and to attract new corporate communications
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.
BUSINESS SEGMENT INFORMATION
----------------------------
The Company's business activities consist of two business segments:
entertainment operations and restaurant operations. The factors for determining
the reportable segments were based on the distinct nature of their operations.
They are managed as separate business units because each requires and is
responsible for executing a unique business strategy, as managed by the
respective chief operating decision makers. Summarized financial information
concerning the Company's reportable segments is shown in the following tables
(in thousands):
<TABLE>
<CAPTION>
Business Segments
(dollars in thousands) Entertainment Restaurant Total
---------------------------------------------------------------------------------------------------------------
Three-months ended September 30, 2000
<S> <C> <C> <C>
Revenue $5,263 $5,186 $10,449
Gross Profit (loss) (1) 888 (65) 823
Identifiable assets 68,041 15,371 83,412
---------------------------------------------------------------------------------------------------------------
Three-months ended September 30, 1999
Revenue $5,654 $4,931 $10,585
Gross Profit (loss) (1) 1,270 (216) 1,054
Identifiable assets 56,373 14,991 71,364
---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include corporate overhead of $825,000 and $558,000 for
entertainment, and $590,000 and $609,000 for the restaurant segment during the
three-months ended September 30, 2000 and 1999, respectively. Gross profit also
excludes minority interest expense and interest and other income.
-9-
<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
Number Description
------ -----------
27 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,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
dick clark productions, inc.
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By: /s/ William S. Simon
----------------------------------------------
William S. Simon
Chief Financial Officer and Treasurer
(Principal financial officer and authorized
to sign on behalf of the registrant)
Date: November 14, 2000
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