-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KDuszHibpqEznqvSwrbuuXGYR549MZXaV5NWKg6+Erf2eMEP50bzGBIh0YeG1sHH jEWgP18THYEGrGkBSt4Piw== 0000950123-94-001141.txt : 19940714 0000950123-94-001141.hdr.sgml : 19940714 ACCESSION NUMBER: 0000950123-94-001141 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940707 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KING WORLD PRODUCTIONS INC CENTRAL INDEX KEY: 0000756764 STANDARD INDUSTRIAL CLASSIFICATION: 7822 IRS NUMBER: 132565808 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09244 FILM NUMBER: 94537960 BUSINESS ADDRESS: STREET 1: 1700 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123154000 10-Q 1 KING WORLD PRODUCTIONS, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q / X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended May 31, 1994 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ------ to ------- Commission File Number 1-9244 KING WORLD PRODUCTIONS, INC. (Exact name of registrant as specified in its charter) Delaware 13-2565808 - - ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1700 Broadway New York, New York 10019 - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212 315-4000 ------------ 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 ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value, 36,957,069 shares outstanding as of July 1, 1994. 2 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands)
May 31, August 31, 1994 1993 ------------ ---------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $320,234 $300,219 Accounts receivable (net of allowance for doubtful accounts of $4,362 and $4,212 at May 31, 1994 and August 31, 1993, respectively) . . . . . . . . . . . . . . . . . . . . . . . . 137,492 101,667 Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,513 25,600 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 496 235 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . . 469,735 427,721 -------- -------- LONG-TERM INVESTMENTS, at cost, which approximates market . . . . . . . . . . . . . . . . . . . . 77,122 84,270 -------- -------- LONG-TERM ACCOUNTS RECEIVABLE (net of unamortized discount of $41 and $79 at May 31, 1994 and August 31, 1993, respectively) . . . . . . . . . . . . . . . . . . . . 395 576 -------- -------- FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,316 10,384 Less - accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . (8,940) (8,573) --------- -------- 1,376 1,811 --------- -------- OTHER ASSETS: Producer loans and advances . . . . . . . . . . . . . . . . . . . . . 74,125 11,625 Other non current assets . . . . . . . . . . . . . . . . . . . . . . . 9,006 9,543 -------- -------- 83,131 21,168 -------- -------- $631,759 $535,546 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 2 3 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars in thousands)
May 31, August 31, 1994 1993 ------------ ---------- (Unaudited) CURRENT LIABILITIES: Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . $ 15,673 $ 7,832 Payable to producers and others . . . . . . . . . . . . . . . . . 117,299 109,016 Income taxes payable: Current . . . . . . . . . . . . . . . . . . . . . . . 21,459 13,559 Deferred . . . . . . . . . . . . . . . . . . . . . . . 19,689 10,966 -------- -------- Total current liabilities . . . . . . . . . . . . . . 174,120 141,373 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued . . . . . . . . . . . . . . . . . . . . . . . -- -- Common stock, $.01 par value; 75,000,000 shares autho- rized, 49,556,963 shares and 49,505,363 shares issued at May 31, 1994 and August 31, 1993, respectively . . . . . . . . . . . . . . . . . 496 495 Paid in capital . . . . . . . . . . . . . . . . . . . . . . . 78,907 76,647 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 659,559 577,039 Treasury stock, at cost; 12,760,894 shares and 12,207,794 shares at May 31, 1994 and August 31, 1993 respectively . . . . . . . . . . . . . . . . . . . . . . . (281,323) (260,008) -------- -------- 457,639 394,173 -------- -------- $631,759 $535,546 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. 3 4 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended May 31, May 31, ----------------------------- --------------------------- 1994 1993 1994 1993 -------- -------- -------- -------- (Dollars in thousands) REVENUES . . . . . . . . . . . . . . . . . . . . . . . $111,861 $ 87,939 $442,043 $370,732 -------- -------- -------- -------- EXPENSES: Producers fees, programming and other direct operating costs . . . . . . . . . . . . . . . . . . 65,664 46,981 258,804 202,883 Selling, general and administrative expenses . . . . . . . . . . . . . . 18,264 14,092 60,974 46,620 -------- -------- -------- -------- 83,928 61,073 319,778 249,503 -------- -------- -------- -------- Income from operations . . . . . . . . . . . . . . 27,933 26,866 122,265 121,229 INTEREST AND DIVIDEND INCOME . . . . . . . . . . . . . . . . . . . 3,398 2,954 9,766 8,702 -------- -------- -------- -------- Income before provision for income taxes . . . . . . . . . . . . . . . . 31,331 29,820 132,031 129,931 PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . 11,820 11,171 49,511 48,727 -------- -------- -------- -------- Net income . . . . . . . . . . . . . . . . . . . . $ 19,511 $ 18,649 $ 82,520 $ 81,204 ======== ======== ======== ======== PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . $ 0.52 $ 0.49 $ 2.17 $ 2.11 ======== ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4 5 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended May 31, ----------------------------- 1994 1993 -------- -------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,520 $ 81,204 Items not affecting cash: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 417 1,635 Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 150 375 Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,491 Amortization of deferred compensation . . . . . . . . . . . . . . . . . . . . . . . 87 2,077 Change in assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,747) (13,128) Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48,413) 11,780 Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,841 (270) Payable to producers and others . . . . . . . . . . . . . . . . . . . . . . . . . . 8,283 (3,281) Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,623 (8,003) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 718 -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . 32,259 74,598 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,148 (28,782) Additions to fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251) (1,375) -------- -------- Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,897 (30,157) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 2,174 39,049 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,315) (91,362) -------- -------- Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,141) (52,313) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,015 (7,872) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,219 311,082 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $320,234 $303,210 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 5 6 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Summary of significant accounting policies Principles of consolidation The accompanying consolidated financial statements include the accounts of King World Productions, Inc. ("King World") and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. Unless the context suggests otherwise, the "Company", as used herein, means King World and its subsidiaries. The unaudited consolidated financial statements for the three months and nine months ended May 31, 1994 have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. For further information, reference is made to the consolidated financial statements for the fiscal year ended August 31, 1993 and the footnotes related thereto included in the Company's Annual Report on Form 10-K from which the August 31, 1993 balances presented herein have been derived. The results of operations for the three months and nine months ended May 31, 1994 are not necessarily indicative of the results of operations for the full year. The unaudited consolidated financial statements presented herein include, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for such periods. Principal properties The Company's principal properties are licenses to distribute The Oprah Winfrey Show, Wheel of Fortune and Jeopardy!; and Inside Edition, a first-run syndicated series produced and distributed by the Company. The Oprah Winfrey Show accounted for approximately 40% and 42% of revenues for the nine months ended May 31, 1994 and 1993, respectively; Wheel of Fortune accounted for approximately 19% and 22% of revenues, respectively, for such periods; Jeopardy! accounted for approximately 16% and 18% of revenues, respectively, for such periods; and Inside Edition accounted for approximately 8% and 9% of revenues, respectively, for such periods. 6 7 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Stockholders' equity Primary earnings per share has been computed using the weighted average number of common shares outstanding of 37,662,000 and 38,113,000 shares, respectively, for the three months ended May 31, 1994 and 1993, and 37,986,000 and 38,426,000 shares, respectively, for the nine months ended May 31, 1994 and 1993, which includes the dilutive effect from the assumed exercise of vested and unvested stock options outstanding as of the end of the period. The difference between primary and fully diluted earnings per share for both periods presented was not significant. On December 18, 1992, the Company announced that the Board of Directors had approved a program to repurchase up to 2,000,000 shares of its Common Stock from time to time in the open market and in privately negotiated transactions. In the fiscal year ended August 31, 1993, an aggregate 765,200 shares of Common Stock were repurchased in open market transactions for an aggregate consideration of approximately $24.8 million, or an average price of approximately $32.40 per share. Between March 22, 1994 and May 10, 1994, the Company purchased an aggregate 553,100 shares of Common Stock under such program in open market transactions for an aggregate consideration of approximately $21.3 million, which represented an average price of approximately $38.50 per share. As of July 1, 1994, there were 681,700 shares available for repurchase under such program. (2) Producer loans and advances On March 17, 1994, the Company and Harpo, Inc., the producer of The Oprah Winfrey Show ("Harpo"), announced that they had entered into an extension and modification of their existing distribution agreement relating to the distribution of The Oprah Winfrey Show in the 1995-1996 through the 1999-2000 television seasons. Under the terms of the modified agreement, the Company has been granted the exclusive right and has agreed to distribute The Oprah Winfrey Show in first-run syndication in domestic television markets and in international television markets, subject to Harpo's and Ms. Winfrey's right to decline to produce and host the show in any season after the 1995-1996 season. In connection with such extension, the Company paid Harpo a $60,000,000 advance against Harpo's profit participation for the 1995-1996 broadcast season. Such advance will be recouped from the share of adjusted profits payable to Harpo for such season. The Company believes, based on sales of The Oprah Winfrey Show to date, that revenues from the series for such season will be sufficient to cover the recoupment of such advance. 7 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition COMPARISON OF THREE MONTHS AND NINE MONTHS ENDED MAY 31, 1994 AND 1993 For the three months ended May 31, 1994, the Company's revenues increased by approximately 27% compared to the third quarter of fiscal 1993. The increase was primarily due to the introduction of two new shows produced and distributed by the Company: American Journal, which debuted in September 1993, and Rolonda, which debuted in January 1994. Such increase also reflected increased cash license fees from The Oprah Winfrey Show, reflecting both higher license fees per show for the 1993-1994 broadcast season and a greater number of shows produced in the period. The Oprah Winfrey Show, Wheel of Fortune, Inside Edition and Jeopardy! accounted for approximately 40%, 20%, 11% and 4%, respectively, of the Company's revenues for the three months ended May 31, 1994, compared to 43%, 26%, 13% and 7%, respectively, for the corresponding period of the prior year. American Journal and Rolonda accounted for approximately 8% and 5%, respectively, of the Company's revenues for the three months ended May 31, 1994. The Company's revenues for the nine months ended May 31, 1994 increased by approximately 19% from the corresponding period of the prior year. Such increase was primarily due to the introduction of new shows, as discussed above (including The Les Brown Show, which debuted in September 1993 and was cancelled in January 1994) and increased cash license fees from The Oprah Winfrey Show, reflecting higher license fees per show and a greater number of shows produced in the period. To a lesser extent, the increase was attributable to an increase in revenues derived from the sale of retained advertising time on Wheel of Fortune, Jeopardy! and Inside Edition. The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 40%, 19%, 16% and 8%, respectively, of the Company's revenues for the nine months ended May 31, 1994, compared to 42%, 22%, 18% and 9%, respectively, for the corresponding period of the prior year. American Journal, Rolonda and The Les Brown Show accounted for approximately 5%, 2% and 2%, respectively, of the Company's revenues for the nine months ended May 31, 1994. License fees for first-run syndicated television properties are recognized at the commencement of the license period pursuant to noncancelable agreements and as each show is produced and becomes available for its first broadcast (even though the particular show may not be broadcast by a television station for several months). The Company receives a portion of such license fees in the form of retained advertising time, which 8 9 is sold to advertisers by Camelot Entertainment Sales, Inc., a wholly-owned subsidiary of the Company. Such revenues are recognized when the time is sold pursuant to noncancelable agreements and as the shows on which the advertising is to be aired are produced and become available for broadcast, in amounts adjusted for expected ratings. Because quarterly variations in the production of first-run television programs distributed by the Company have an effect on the Company's revenues and related costs from quarter to quarter, comparisons of the quarterly results of operations are not necessarily indicative of longer term trends in the Company's business. For the 1993-1994 broadcast season, a change in the production schedule of The Oprah Winfrey Show resulted in the Company recognizing a greater proportion of that season's revenues in the first nine months of its 1994 fiscal year compared with the prior year. Based on the current production schedule, it appears that fewer episodes will be produced in the fourth quarter of the 1994 fiscal year, which would result in the Company recognizing reduced revenues and earnings with respect to the series for such quarter as compared to the prior year. Producers fees, programming and other direct operating costs primarily include the producers' share of both cash license fees from the sale of programming to television stations and revenues derived from the sale of retained advertising time to advertisers with respect to programming distributed by the Company; participation fees payable by the Company to producers and talent; and production and distribution costs for first-run syndicated programming. The share of license fees payable by the Company to producers, talent and others is generally paid as cash license fees and revenues derived from the sale of retained advertising time are received from television stations and advertisers. Producers fees, programming and other direct operating costs increased by 40% and 28%, respectively, for the three months and nine months ended May 31, 1994, primarily as a result of production costs associated with the introduction of American Journal and Rolonda, and as a result of the higher level of revenue generated by The Oprah Winfrey Show (of which the producer is entitled to a greater percentage in the 1993-1994 broadcast season compared with the prior season). In the nine months ended May 31, 1994, producers fees, programming and other direct operating costs also included production costs associated with The Les Brown Show. In December 1993, the Company entered into new employment agreements with its four highest paid executive officers. The agreements provide, among other things, for bonuses that are 9 10 intended to qualify as "performance based compensation" (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended). The payment of such bonuses is contingent upon the Company's achieving specified performance goals, including, in certain cases, specified target prices for the Company's Common Stock during preestablished measurement periods. As a result, the Company's compensation expense will increase if the Common Stock price exceeds the specified target prices during the applicable measurement periods. The first measurement date for such bonuses is August 31, 1994. Selling, general and administrative expenses for the three and nine months ended May 31, 1994 increased by approximately 30% and 31%, respectively, compared with the corresponding periods of the prior year. The increase in selling, general and administrative expenses for the three month period is primarily attributable to payments and reserves for the executive bonuses referred to above (which are expected to be recorded in the fourth quarter as well) and, to a lesser extent, an increase in advertising and promotion costs associated with the introduction of American Journal and Rolonda. (During the corresponding period of fiscal 1993, no new shows were introduced.) The increase in selling, general and administrative expenses for the nine month period is primarily attributable to the increased advertising and promotion costs associated with such new shows and The Les Brown Show. The Company expects that continued marketing efforts for American Journal and Rolonda will result in additional advertising and promotion costs during the last quarter of fiscal 1994. Due to the factors discussed above, the Company's operating income for the three months ended May 31, 1994 increased by approximately 4% compared to the corresponding period of the prior year, and operating income for the nine months ended May 31, 1994 increased by 1% compared to the corresponding period of the prior year. Net income increased by approximately 5% and 2%, respectively, for the three months and nine months ended May 31, 1994, reflecting the increase in operating income and higher interest income earned on the Company's cash and investments due to moderate increases in interest rates. Primary earnings per share increased by approximately 6% and 3%, respectively, in the three months and nine months ended May 31, 1994 as a result of increased net income and a smaller number of shares outstanding as a result of the Company's ongoing stock repurchase program. Because quarterly variations in the production of first run television programs distributed by the Company have an effect on the Company's revenues and related costs from quarter to quarter, the Company believes that the twelve-month cumulative 10 11 results of its operations may be helpful in evaluating its ongoing financial performance. The following table sets forth selected financial data derived from the Company's consolidated statements of income for the twelve months ended May 31, 1994 and 1993, respectively (dollars in thousands, except per share data):
Twelve Months Ended May 31, ------------------------------ 1994 1993 -------- -------- (Unaudited) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $545,623 $468,775 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,252 101,810 Primary earnings per share . . . . . . . . . . . . . . . . . . . . . . . . 2.71 2.64
As a result of a financial restructuring effected in August 1992, Buffalo Broadcasting Co. Inc., formerly a wholly-owned subsidiary of the Company ("Buffalo"), was deconsolidated from the financial statements of the Company as of August 4, 1992. The results of operations of Buffalo through August 4, 1992 are included in net income for the twelve months ended May 31, 1993, which had the effect of decreasing primary earnings per share by $.04 for the period. Revenues for the twelve months ended May 31, 1993 have been restated to give effect to the deconsolidation of Buffalo from King World, and therefore exclude the revenues of Buffalo. The Company's results of operations are highly dependent upon the viewing preferences of television audiences and the Company's ability to acquire distribution rights to, or itself produce, television programming that achieves broad and enduring audience acceptance. The success of the Company's programming could be significantly affected by changes in viewer preferences or the unavailability of new programming or talent. Moreover, the amount of revenue derived from the sale of retained advertising time is dependent upon a large number of factors, such as household ratings, the demographic composition of the viewing audience, and economic conditions generally and in the advertising business in particular. In the recent past, the advertising market has been somewhat depressed, although conditions generally improved in fiscal 1993 compared to fiscal 1992 and the improvement has continued into fiscal 1994. Due to the success of the shows distributed by the Company and in order to mitigate the influence of some of the factors referred to above, the Company has been obtaining multi-year licenses and license renewals from television stations for its principal distribution properties, extending in some cases through the 1999-2000 broadcast season. In general, these 11 12 licenses and renewals have been at rates as favorable or more favorable to the Company than the rates applicable to the current broadcast season. All such licenses and renewals are contingent upon the continued production of the series by their respective producers through the broadcast seasons for which the licenses run. LIQUIDITY AND CAPITAL RESOURCES The Company requires capital resources to fund development, production and promotion costs of independently produced programming, including, in some instances, advances to producers and talent, to produce its own programs and to acquire distribution rights to new programming. In acquiring distribution rights from independent producers, King World has tried to avoid making significant capital commitments to such producers until it has obtained broadcast commitments from a substantial number of television stations. In the past, King World has attempted in many instances to reduce its capital commitment to new programming by developing new programs and series through partnerships and joint ventures and by test marketing newly developed programs prior to making significant commitments to the funding of production costs. As a result of these strategies and the success of its existing syndication properties, to date, King World has funded substantially all programming acquisition, development and production costs and advances from its operations. Notwithstanding the Company's efforts to limit its risk, the distribution of television programming is highly competitive and the Company may be obliged to offer, among other things, guarantees and cash advances to acquire, renew or extend distribution rights. In connection with the extension for the 1993-1994 and 1994-1995 broadcast seasons of the commitment by Harpo, Inc. ("Harpo"), the producer of The Oprah Winfrey Show, to produce The Oprah Winfrey Show for those seasons, the Company made an interest-free loan to Harpo and is obligated to pay Harpo certain minimum amounts against its participation fees for such periods, irrespective of the amount of license fees generated by the series in such periods. The loan is due in two installments of $8,625,000 each, which are due in July 1994 and July 1995. The Company believes, based on sales of The Oprah Winfrey Show to date, that revenues from the series will be sufficient to cover such minimum amounts and to enable Harpo to repay the loan. In addition, Harpo is entitled to greater participation fees in the 1993-1994 broadcast season as compared to past seasons. 12 13 On March 17, 1994, the Company and Harpo announced that they had entered into an extension and modification of their existing distribution agreement relating to the distribution of The Oprah Winfrey Show in the 1995-1996 through the 1999- 2000 television seasons. Under the terms of the modified agreement, the Company has been granted the exclusive right and has agreed to distribute The Oprah Winfrey Show in first-run syndication in domestic television markets and in international television markets, subject to Harpo's and Ms. Winfrey's right to decline to produce and host the show in any season after the 1995-1996 season. The modified agreement, among other things, establishes the production fees payable to Harpo in the first two subject seasons and commits the Company to guaranty payments to Harpo at levels which, commencing with the 1995-1996 season, will be substantially higher than those currently in effect. In addition, in the 1997-1998 season and thereafter, profit sharing arrangements between Harpo and the Company currently in effect will terminate and the Company will instead receive distribution fees based on a percentage of gross revenues derived from the series. In connection with the extension of its agreement with Harpo, the Company paid Harpo a $60,000,000 advance against Harpo's profit participation for the 1995-1996 broadcast season. For more information regarding the extension of the Company's contract with Harpo, reference is made to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 1994. As King World has developed and produced its own programming for syndication, it has assumed a greater portion of the risk associated with the introduction of a new series. The introductions of American Journal and The Les Brown Show in the 1993-1994 broadcast season, and Rolonda, which premiered in first-run syndication in January 1994, have necessitated the expenditure by King World of substantial amounts to fund development, production and promotion costs. The Company has funded and intends to continue to fund such costs out of its internal cash resources. From time to time, the Company has used cash reserves and/or borrowed funds to make acquisitions of and investments in broadcast and related properties in the entertainment field, to repurchase shares of its Common Stock and to fund development and production of new programming. The Company continues to evaluate opportunities in these areas, and may seek to raise capital in public or private securities markets to finance such activities if it considers it advantageous to do so. 13 14 In December 1992, the Company announced that the Board of Directors had approved a program to repurchase up to 2,000,000 shares of its Common Stock from time to time in the open market and in privately negotiated transactions. In the fiscal year ended August 31, 1993, an aggregate 765,200 shares of Common Stock were repurchased in open market transactions for an aggregate consideration of approximately $24.8 million, or an average price of approximately $32.40 per share. Between March 22, 1994 and May 10, 1994, the Company purchased an aggregate 553,100 shares of Common Stock under such program in open market transactions for an aggregate consideration of approximately $21.3 million, which represented an average price of $38.50 per share. Such purchases were financed, and any additional purchases under the stock repurchase program are to be financed, out of the Company's available cash and liquid investments. The Company intends to continue to repurchase shares of Common Stock in the open market and in privately negotiated transactions if and when it deems it advantageous to do so. As of July 1, 1994, there were 681,700 shares available for repurchase under such program. As of May 31, 1994, the Company's accounts receivable amounted to approximately $137.9 million (net of allowance for doubtful accounts and unamortized discount to present value), substantially all of which was due within one year. Based on its past experience and current expectations, the Company maintains an allowance for doubtful accounts which was approximately $4.4 million at May 31, 1994. 14 15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits -------- (10.1) Letter Agreement dated March 17, 1994 between Harpo, Inc. and the Company incorporated by reference to the Company's Current Report on Form 8-K, dated March 18, 1994, as amended by Form 8-K/A, dated May 18, 1994. (b) Reports on Form 8-K ------------------- The Company filed a Current Report on Form 8-K, dated March 18, 1994, reporting the amendment dated March 17, 1994 of the Company's agreement with Harpo, Inc. relating to the distribution of The Oprah Winfrey Show. The Company filed an amendment on Form 8-K/A relating to the Company's Current Report, dated March 18, 1994 on May 18, 1994.
15 16 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. KING WORLD PRODUCTIONS, INC. By: /s/ Anthony E. Hull -------------------------------- Anthony E. Hull As Chief Financial Officer and on behalf of the Registrant July 7, 1994
16 -----END PRIVACY-ENHANCED MESSAGE-----