-----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, soaZjsnjn6fndUV5owqqwbybLAfTe/pr5XzKTitYE3hxGzGL2fVe8hhdwt5xC2ta Msv8ylzVDVPGRvR4yH2y7g== 0000950123-95-001941.txt : 199507140000950123-95-001941.hdr.sgml : 19950714 ACCESSION NUMBER: 0000950123-95-001941 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950713 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KING WORLD PRODUCTIONS INC CENTRAL INDEX KEY: 0000756764 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [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: 95553539 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, 1995 / / 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, 36,734,751 shares outstanding as of July 6, 1995. 2 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands)
May 31, August 31, 1995 1994 ------------ ---------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . $438,806 $341,857 Accounts receivable (net of allowance for doubtful accounts of $4,283 and $4,412 at May 31, 1995 and August 31, 1994, respectively) . . . . . . . . . . . . . . . . 47,601 41,231 Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . . 21,810 21,314 Other current assets . . . . . . . . . . . . . . . . 734 419 -------- -------- Total current assets . . . . . . . . . . . . . . 508,951 404,821 -------- -------- LONG-TERM INVESTMENTS, at cost, which approximates market . . . . . . . . . . . . . 70,006 88,191 -------- -------- FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . 11,899 10,631 Less - accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . (9,589) (9,099) -------- -------- 2,310 1,532 -------- -------- OTHER ASSETS: Producer advances . . . . . . . . . . . . . . . . . . . 68,000 65,500 Other non-current assets . . . . . . . . . . . . . . . 9,748 9,518 -------- -------- 77,748 75,018 -------- -------- $659,015 $569,562 ======== ========
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, 1995 1994 ------------ ---------- (Unaudited) CURRENT LIABILITIES: Accounts payable and accrued liabilities . . . . . . . . . . . . . . $ 17,899 $ 14,780 Payable to producers and others . . . . . . . . . 74,407 69,647 Income taxes payable: Current . . . . . . . . . . . . . . . . . . . 20,852 23,506 Deferred . . . . . . . . . . . . . . . . . . 1,525 2,552 -------- -------- Total current liabilities . . . . . . . . 114,683 110,485 -------- -------- 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, 49,869,145 shares and 49,722,218 shares issued at May 31, 1995 and August 31, 1994, respectively . . . . . . . . . 499 497 Paid-in capital . . . . . . . . . . . . . . . . . 86,556 82,171 Retained earnings . . . . . . . . . . . . . . . . 752,318 665,339 Treasury stock, at cost; 13,141,394 shares and 12,960,894 shares at May 31, 1995 and August 31, 1994 respectively . . . . . . . . . (295,041) (288,930) -------- -------- 544,332 459,077 -------- -------- $659,015 $569,562 ======== ========
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, ------------------------- -------------------------- 1995(1) 1994 1995(1) 1994 -------- -------- -------- -------- (Dollars in thousands) REVENUES . . . . . . . . . . . . . . . . . . $142,632 $111,861 $433,448 $442,043 -------- -------- -------- -------- EXPENSES: Producers' fees, programming and other direct operating costs. . . . . . . . . . . . . . 84,264 65,664 258,036 258,804 Selling, general and administrative expenses . . . . . . . . . 18,265 18,264 54,068 60,974 -------- -------- -------- -------- 102,529 83,928 312,104 319,778 -------- -------- -------- -------- Income from operations . . . . . . . . . 40,103 27,933 121,344 122,265 INTEREST AND DIVIDEND INCOME . . . . . . . . . . . . . 5,497 3,398 14,526 9,766 -------- -------- -------- -------- Income before provision for income taxes . . . . . . . . . . . 45,600 31,331 135,870 132,031 PROVISION FOR INCOME TAXES . . . . . . . . . 16,379 11,820 48,891 49,511 -------- -------- -------- -------- Net income . . . . . . . . . . . . . . . $ 29,221 $ 19,511 $ 86,979 $ 82,520 ======== ======== ======== ======== PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . $ 0.78 $ 0.52 $ 2.33 $ 2.17 ======== ======== ======== ========
_____________________________ (1) The results of operations for the nine and three months ended May 31, 1995 reflect a change in accounting for revenue recognition adopted prospectively in the fourth quarter of fiscal 1994. On a basis of accounting comparable to that employed for the nine month period ended May 31, 1994, revenues, net income and earnings per share for the nine months ended May 31, 1995 would have been approximately $31.4 million, $7.6 million and $.20 higher, respectively, than that actually reported and, for the three months ended May 31, 1995, would have been approximately $25.3 million, $5.7 million and $.15 lower, respectively, than that actually reported. See Management's Discussion and Analysis of Results of Operations and Financial Condition. 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, ----------------------------- 1995 1994 -------- -------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,979 $ 82,520 Items not affecting cash: Depreciation and amortization . . . . . . . . . . . . . . . . . . . 492 417 Change in assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . (6,347) (35,747) Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . (2,996) (48,413) Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,119 7,841 Payable to producers and others . . . . . . . . . . . . . . . . . . 4,760 8,283 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . (3,681) 16,623 Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (530) 735 -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . 81,796 32,259 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . 18,185 7,148 Additions to fixed assets . . . . . . . . . . . . . . . . . . . . . . . (1,275) (251) -------- -------- Net cash provided by investing activities . . . . . . . . . . . . . . 16,910 6,897 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . . . . . . . . . . . . . . . 4,354 2,174 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (6,111) (21,315) -------- -------- Net cash used in financing activities . . . . . . . . . . . . . . . . (1,757) (19,141) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 96,949 20,015 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,857 300,219 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $438,806 $320,234 ======== ========
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 nine months and three months ended May 31, 1995 have been prepared in accordance with the instructions to Form 10-Q and 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. They do not, however, 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 year ended August 31, 1994 and the footnotes related thereto included in the Company's Annual Report on Form 10-K from which the August 31, 1994 balances presented herein have been derived. The results of operations for the nine months and three months ended May 31, 1995 are not necessarily indicative of the results of operations for the full year. Revenue recognition Historically, King World followed a practice of recognizing license fees from the distribution of first-run syndicated television properties at the commencement of the license period and as each show was produced (even though the particular show may not have been broadcast by television stations for several months). In the fourth quarter of the 1994 fiscal year, the Company adopted a change in accounting for revenue recognition which was applied prospectively as a change in estimate as opposed to a change in principle. Under the modified practice, license fees from first-run syndicated television properties are recognized at the commencement of the license period pursuant to noncancelable agreements and as each show is made available to the licensee via satellite transmission, rather than at the time 6 7 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) the show is produced. Because transmission to the satellite takes place, on the average, no more than two to three days prior to the broadcast of the programming and in some cases up to several months after the programming is produced, the effect of adopting the modified practice is to cause revenues to be recognized closer to the air date than under the prior practice. In addition, the accounting change will eliminate the quarterly revenue and earnings fluctuations that were attributable to variations in production schedules. The impact of adopting the change was to cause revenues, net income and earnings per share for the nine month period ended May 31, 1995 to be approximately $31.4 million, $7.6 million and $.20 lower, respectively, than they would have been under the prior practice, with no impact on cash flow. Such revenues will be recognized in the fourth quarter of fiscal 1995 under the modified practice. The following pro forma financial information assumes the Company's prior revenue recognition practice had been in effect for the first, second and third quarters of fiscal 1995:
Nine Months Ended May 31, ------------------------------------- 1995 Pro forma 1994 -------------- -------- (Dollars in thousands except per share data) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $464,824 $442,043 Income from operations . . . . . . . . . . . . . . . . . . . 133,277 122,265 Income before provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . 147,804 132,031 Net income . . . . . . . . . . . . . . . . . . . . . . . . . 94,594 82,520 ======== ======== Primary earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.53 $ 2.17 ======== ========
The Company typically receives a portion of the fees derived from the licensing of syndicated television programming in the form of retained advertising time, which is sold to advertisers by Camelot Entertainment Sales, Inc. ("Camelot"), a wholly-owned subsidiary of the Company. Such revenues are 7 8 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) recognized at the same time as the cash portion of the license fees derived from such programming is recognized, in amounts adjusted for expected ratings. That portion of recognized revenue that is to be paid to the producers and owners of the licensed program material is accrued as the license fees are earned. License fees for non-first-run syndicated properties are recognized at the gross contract amount (net of discount to present value for license periods greater than one year) at the commencement of the license period. 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 37% and 40% of revenues for the nine months ended May 31, 1995 and 1994, respectively; Wheel of Fortune accounted for approximately 21% and 19% of revenues for the nine months ended May 31, 1995 and 1994, respectively; Jeopardy! accounted for approximately 18% and 16% of revenues for the nine months ended May 31, 1995 and 1994, respectively; and Inside Edition accounted for approximately 8% of revenues for each of the nine months ended May 31, 1995 and 1994. On a basis of accounting comparable to that employed for the nine months ended May 31, 1994, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy!, and Inside Edition would have accounted for approximately 41%, 19%, 16% and 8%, respectively, of the Company's revenues for the nine months ended May 31, 1995. Stockholders' equity Primary earnings per share has been computed using the weighted average number of common shares outstanding of 37,435,000 and 37,662,000 shares, respectively, for the three months ended May 31, 1995 and 1994, and 37,327,000 and 37,986,000 shares, respectively, for the nine months ended May 31, 1995 and 1994, 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 8 9 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) diluted earnings per share for both periods presented was not significant. (2) Buffalo Broadcasting Co. Inc. On May 25, 1995, the Company announced its agreement to sell WIVB-TV, the CBS-affiliated VHF television station in Buffalo, New York (the "Station") operated by Buffalo Broadcasting Co. Inc. ("Buffalo"), to LIN Television Corporation for $95 million in cash. The consummation of the transaction is subject to approval by the Federal Communications Commission. The Company acquired Buffalo in December 1988 in a highly leveraged transaction. In April 1992, the Company and Buffalo's lenders entered into an agreement providing for a financial restructuring of Buffalo effective August 4, 1992. As a result of such restructuring, Buffalo ceased to be a consolidated subsidiary of King World. The Company's investment in Buffalo subsequent to the restructuring was carried at cost. If the foregoing sale of WIVB-TV is consummated, the Company expects to recognize a $9 million pre-tax gain from such sale. 9 10 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS COMPARISON OF NINE MONTHS AND THREE MONTHS ENDED MAY 31, 1995 AND 1994 Revenues Revenues for the first nine months of fiscal 1995 decreased by approximately 2% compared to the first nine months of fiscal 1994 due to the adoption of a change in accounting for revenue recognition on a prospective basis in the fourth quarter of fiscal 1994. Had revenues in the first nine months of fiscal 1995 been recognized on a basis comparable to that of the first nine months of fiscal 1994, revenues in the fiscal 1995 period would have been approximately 5% higher than the prior period, due primarily to increased cash license fees from The Oprah Winfrey Show and, to a lesser extent, an increase in revenues derived from the sale of retained advertising time in Wheel of Fortune and Jeopardy! as a result of the retention of one additional 30-second advertising spot per episode commencing with the 1994-1995 television season. For the three months ended May 31, 1995, revenues were approximately 27% higher than the three months ended May 31, 1994, due to generally lower production levels in the third fiscal quarter under the Company's prior revenue recognition practice and would have been approximately 5% higher on a basis of accounting comparable to the earlier period, due primarily to increased cash license fees from The Oprah Winfrey Show and, to a lesser extent, an increase in revenues derived from the sale of retained advertising time in Wheel of Fortune. The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 37%, 21%, 18% and 8%, respectively, of the Company's revenues for the first nine months of fiscal 1995 compared to 40%, 19%, 16% and 8%, respectively, for the first nine months of fiscal 1994. American Journal accounted for approximately 4% of the Company's revenues for the nine months ended May 31, 1995 and 5% for the nine months ended May 31, 1994. Rolonda, which debuted in January 1994, accounted for approximately 3% of the Company's revenues for the first nine months of fiscal 1995 and 2% for the first nine months of fiscal 1994. The Les Brown Show accounted for approximately 2% of the Company's revenues for the first nine months of fiscal 1994, but was cancelled in January 1994. On a basis of accounting comparable to that employed for the first nine months of fiscal 1994, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition would have accounted for for approximately 41%, 19%, 16% and 8%, respectively, and American Journal and Rolonda would have ac- 10 11 counted for approximately 5% and 3%, respectively, of the Company's revenues for the first nine months of fiscal 1995. For the three months ended May 31, 1995, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 38%, 21%, 18% and 8%, respectively, of the Company's revenues compared to 40%, 20%, 4% and 11%, respectively, for the three months ended May 31, 1994. American Journal accounted for approximately 4% of the Company's revenues for the three months ended May 31, 1995 compared to 8% for the three months ended May 31, 1994, and Rolonda accounted for approximately 3% of the Company's revenues for the three months ended May 31, 1995 and 5% of the Company's revenues for the three months ended May 31, 1994. The Les Brown Show accounted for approximately 1% of the Company's revenues for the three months ended May 31, 1994. On a basis of accounting comparable to that employed for the three months ended May 31, 1994, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition would have accounted for approximately 43%, 21%, 4% and 11%, respectively, and American Journal and Rolonda would have accounted for approximately 9% and 4%, respectively, of the Company's revenues for the three months ended May 31, 1995. Producers' fees, programming and other direct operating costs 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 decreased by less than 1% in the nine months ended May 31, 1995 compared to the nine months ended May 31, 1994. Because the recognition of these costs generally coincides with the recognition of the revenues with which they are associated, the adoption of the modified accounting practice in the fourth quarter of fiscal 1994 caused such costs to be substantially lower in the first quarter of fiscal 1995 than they would have been under the prior revenue recognition practice. For the three months ended May 31, 1995, producers' fees, programming and other direct operating costs increased by approximately 28% compared to the three months ended May 31, 1994. On a basis of accounting comparable to that employed in the comparable periods of fiscal 11 12 1994, producers' fees, programming and other direct operating costs would have increased by approximately 6% in the first nine months and 5% in the third quarter of fiscal 1995 over the corresponding periods of the prior fiscal year, primarily as a result of the higher level of revenues generated by The Oprah Winfrey Show, Wheel of Fortune and Jeopardy! (a portion of which is payable to the producers of such series) and, to a lesser extent, increased production costs associated with Inside Edition, American Journal and Rolonda. Selling, general and administrative expenses Selling, general and administrative expenses decreased by approximately 11% in the first nine months of fiscal 1995 over the corresponding period of the prior fiscal year primarily due to the accounting change. Selling, general and administrative expenses for the three months ended May 31, 1995 were comparable to the three months ended May 31, 1994. On a basis of accounting comparable to that employed in the first nine months of fiscal 1994, such expenses would have decreased by approximately 7% for the nine months ended May 31, 1995 and by approximately 3% for the three months ended May 31, 1995 due primarily to lower advertising and promotion costs. In December 1993, the Company entered into new employment agreements with four executive officers. The agreements provide, among other things, for new bonuses that are intended to qualify as "performance based compensation" (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended), including bonuses payable upon the introduction of new shows and bonuses contingent upon the Company's Common Stock achieving specified target prices during pre-established measurement periods. As of May 31, 1995, the performance targets associated with certain stock and stock appreciation units granted in December 1993 to Roger King, the Company's Chairman of the Board, and Michael King, the Company's President and Chief Executive Officer, were achieved, resulting in the payment by the Company subsequent to May 31 of a lump-sum pre-tax cash bonus to each of them of approximately $5 million. These units had become eligible for redemption on August 31, 1994 and each of the subsequent fiscal quarters through the third quarter of fiscal 1995, subject to the achievement of the specified performance goals. Additional cash bonuses in respect of units that will become eligible for redemption on August 31, 1995 will be payable if the performance goals specified for the fourth quarter of fiscal 1995 are achieved. 12 13 Net income and primary earnings per share The Company's operating income for the first nine months of fiscal 1995 decreased by approximately 1% compared to the corresponding period of the prior year, primarily due to the change in accounting for revenue recognition. Had the prior method of revenue recognition been employed in the first nine months of fiscal 1995, the Company's operating income for such period would have been approximately 9% higher than the comparable period of fiscal 1994. Reported net income for the first nine months of fiscal 1995 increased by 5% compared to the corresponding period of the prior year. Absent the accounting change, net income would have been approximately $12.1 million (or 15%) higher than the first nine months of fiscal 1994, reflecting higher operating income, higher interest income earned on the Company's cash and investments (due primarily to an increase in interest rates over the prior year), and a lower effective tax rate for the first nine months of fiscal 1995. Primary earnings per share, which were $.16 higher in the first nine months of fiscal 1995 compared to the first nine months of fiscal 1994, would have been $.36 (or 17%) higher in the first nine months of fiscal 1995 compared with the first nine months of fiscal 1994 had the prior method of revenue recognition been employed, due to the increase in net income and a smaller number of shares outstanding as a result of the Company's ongoing stock repurchase program. For the three months ended May 31, 1995, operating income increased by approximately 44% compared to the corresponding period of the prior year, while net income and earnings per share each increased by approximately 50%. On a basis of accounting comparable to that employed for the three months ended May 31, 1994, operating income, net income and earnings per share would have increased by approximately 10%, 21% and 22%, respectively, over the comparable period of fiscal 1994, due primarily to the factors discussed above for the nine month period. 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 in general and in the advertising business in particular. 13 14 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 as far into the future as the 1999-2000 broadcast season. In general, these licenses and renewals have been at rates as favorable or more favorable to the Company than the rates applicable to the 1993-1994 and 1994-1995 broadcast seasons. 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. The Company believes that the impact of inflation on its operations has not been significant. 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. As a result of this strategy 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. 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 new series. The introductions of American Journal and The Les Brown Show in the 1993-1994 broadcast season, and Rolonda, which premiered 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. 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 became obligated to pay Harpo certain minimum amounts against its participation fees for 14 15 such periods, irrespective of the amount of license fees generated by the series in such periods. Harpo's participation fees for the 1993-1994 broadcast season exceeded such minimum amounts for the 1993-1994 and 1994-1995 broadcast seasons. The loan was due to be repaid in two installments of $8,625,000 each, one of which was paid in July 1994 and the other of which was paid in June 1995. Under the terms of the Company's agreement with Harpo, the Company has the exclusive right, and has agreed, to distribute episodes of The Oprah Winfrey Show produced through the 1999-2000 television season, 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. Under the agreement, the Company has, among other things, agreed to pay Harpo production fees and 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. The Company has paid Harpo a $60,000,000 advance against its minimum participation fees for the 1995-1996 broadcast season. Based on the license agreements in place for the 1995-1996 broadcast season, the revenues from the series will be sufficient to recoup such amount. 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. 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 years ended August 31, 1994 and 1993, 753,100 and 765,200 shares, respectively, of Common Stock were repurchased in open market transactions, for aggregate consideration of approximately $28.9 million (or approximately $38.40 per share) and $24.8 million (or approximately $32.40 per share), respectively. In the first quarter of fiscal 1995, the Company repurchased an aggregate 40,000 shares for aggregate consideration of approximately $1.44 million (or approximately $36.00 per share), and in the second quarter of fiscal 1995, the Company repurchased an additional 140,500 shares for aggregate consideration of approximately $4.7 million (or approximately $33.25 per share). No repurchases were 15 16 made by the Company in the third quarter of fiscal 1995. As of July 6, 1995, there remained 301,200 shares available for repurchase under such program. 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. 16 17 PART II - OTHER INFORMATION None. 17 18 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/ Steven A. LoCascio --------------------------------- Steven A. LoCascio, Vice President and Controller As Chief Accounting Officer and on behalf of the Registrant July 13, 1995 18 19 EXHIBIT INDEX Exhibit 27 - Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS AUG-31-1995 MAR-01-1995 MAY-31-1995 438,806 0 51,884 4,283 0 508,951 11,899 (9,589) 659,015 114,683 0 499 0 0 543,833 659,015 0 142,632 0 84,264 18,265 0 0 45,600 16,379 29,221 0 0 0 29,221 0.78 0.78
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