-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IUdniV3QUGQmBEe+HBal/kUtYR9TKqN0fgUF0COGGWg7+MDgJLVbDcZ40qExFsNl Mcn9cj2FXwmG2/O2pjdH9A== 0000950123-96-000116.txt : 19960117 0000950123-96-000116.hdr.sgml : 19960117 ACCESSION NUMBER: 0000950123-96-000116 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960116 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: 96503332 BUSINESS ADDRESS: STREET 1: 1700 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123154000 10-Q 1 FORM 10-Q 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 November 30, 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, 36,936,817 shares outstanding as of January 9, 1996. 2 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands)
November 30, August 31, 1995 1995 ----------- ---------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . $517,559 $446,896 Accounts receivable (net of allowance for doubtful accounts of $4,196 at November 30, 1995 and August 31, 1995) . . . . . . . . . . . . . . . . . . . . . 68,496 51,356 Producer loans, advances and deferred costs . . . . . . . . . 51,306 90,085 Other current assets . . . . . . . . . . . . . . . . . . . . 864 506 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . 638,225 588,843 -------- -------- LONG-TERM INVESTMENTS, at cost, which approximates market . . . . . . . . . . . . . . . . . . . 82,951 82,129 -------- -------- FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . . . . . 13,227 12,955 Less - accumulated depreciation and amortization . . . . . . . . . . . . . . .. . . . . . . (9,899) (9,703) -------- -------- 3,328 3,252 -------- -------- PRODUCER ADVANCES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . 13,636 12,562 -------- -------- $738,140 $686,786 ======== ========
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)
November 30, August 31, 1995 1995 ------------ ---------- (Unaudited) CURRENT LIABILITIES: Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . $ 10,375 $ 11,070 Payable to producers and others . . . . . . . . . . . . . . . 58,986 74,349 Income taxes payable: Current . . . . . . . . . . . . . . . . . . . . . . . . . 44,274 23,986 Deferred . . . . . . . . . . . . . . . . . . . . . . . . 1,458 1,644 -------- -------- Total current liabilities . . . . . . . . . . . . . . 115,093 111,049 -------- -------- 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, 50,024,711 shares and 49,893,745 shares issued at November 30, 1995 and August 31, 1995, respectively . . . . . . . . . . . . . . . 500 499 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 91,275 87,628 Retained earnings . . . . . . . . . . . . . . . . . . . . . . 826,313 782,651 Treasury stock, at cost; 13,141,394 shares at November 30, 1995 and August 31, 1995 . . . . . . . . . . . . . . . . . . . . . . (295,041) (295,041) -------- -------- 623,047 575,737 -------- -------- $738,140 $686,786 ======== ========
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 November 30, --------------------------------- 1995 1994 -------- -------- (Dollars in thousands except per share data) REVENUES . . . . . . . . . . . . . . . . . . . . . . . $162,139 $147,084 -------- -------- EXPENSES: Producers' fees, programming and other direct operating costs . . . . . . . . . . . . . . . . . 98,091 88,438 Selling, general and administrative expenses . . . . . . . . . . . . . 18,471 18,069 -------- -------- 116,562 106,507 -------- -------- Income from operations . . . . . . . . . . . . . . 45,577 40,577 INTEREST AND DIVIDEND INCOME . . . . . . . . . . . . . . 6,683 3,978 NONRECURRING GAIN - Sale of Buffalo Broadcasting Co. Inc. . . . . . . . . . . . . . . . . 14,060 -- -------- -------- Income before provision for income taxes . . . . . . . . . . . . . . . 66,320 44,555 PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . 22,658 16,687 -------- -------- Net income . . . . . . . . . . . . . . . . . . . . $ 43,662 $ 27,868 ======== ======== PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . $ 1.17 $ .75 ======== ========
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)
Three Months Ended November 30, ----------------------- 1995 1994 -------- -------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . $ 43,662 $ 27,868 Items not affecting cash: Depreciation and amortization . . . . . . . . . . . 196 140 Change in assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . (17,128) (12,780) Producer loans, advances and deferred costs . . . . . . . . . . . . . . . . . 38,779 (1,616) Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . (695) (1,433) Payable to producers and others . . . . . . . . . . (15,363) 4,580 Income taxes payable . . . . . . . . . . . . . . . 20,102 11,471 Other, net . . . . . . . . . . . . . . . . . . . . (1,444) (395) -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 68,109 27,835 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in investments . . . . . . . . . . (822) 3,487 Additions to fixed assets . . . . . . . . . . . . . . . (272) (646) -------- -------- Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . (1,094) 2,841 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . 3,648 1,351 Purchase of treasury stock . . . . . . . . . . . . . . -- (1,437) -------- -------- Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . 3,648 (86) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . 70,663 30,590 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . 446,896 341,857 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $517,559 $372,447 ======== ========
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 ended November 30, 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 period. 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, 1995 and the footnotes related thereto included in the Company's Annual Report on Form 10-K from which the August 31, 1995 balances presented herein have been derived. The results of operations for the three months ended November 30, 1995 are not necessarily indicative of the results of operations for the full year. Revenue recognition 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. Because transmission to the satellite takes place, on the average, no more than two to three days prior to the broadcast of the programming, revenues are recognized on or about the air date. 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 6 7 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 40% and 36% of revenues for the three months ended November 30, 1995 and 1994, respectively; Wheel of Fortune accounted for approximately 19% and 21% of revenues for the three months ended November 30, 1995 and 1994, respectively; Jeopardy! accounted for approximately 17% and 18% of revenues for the three months ended November 30, 1995 and 1994, respectively; and Inside Edition accounted for approximately 9% and 7% of revenues for the three months ended November 30, 1995 and 1994, respectively. Stockholders' equity Primary earnings per share has been computed using the weighted average number of common shares outstanding of 37,425,000 and 37,372,000, respectively, for the three months ended November 30, 1995 and 1994, which includes the dilutive effect from the assumed exercise of vested and unvested stock options outstanding as of the end of each such period. The difference between primary and fully diluted earnings per share for both periods presented was not significant. 7 8 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (2) Nonrecurring gain - sale of Buffalo Broadcasting Co. Inc. In October 1995, the Company closed its agreement to sell WIVB-TV, the CBS-affiliated VHF television station in Buffalo, New York, to LIN Television Corporation for $95 million in cash. As a result of this transaction, the Company recorded a nonrecurring gain of approximately $14.1 million, of which approximately $9.8 million represents cash proceeds to the Company from the sale. The remaining $4.3 million of such gain represents the reversal of previously recognized accounting losses (with no associated income tax effect) in excess of the Company's original investment. 8 9 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED NOVEMBER 30, 1995 AND 1994 Revenues Revenues for the first quarter of fiscal 1996 increased by approximately 10% compared to the first quarter of the prior year. Such increase was primarily due to increased cash license fees from The Oprah Winfrey Show and an increase in revenues derived from the sale of retained advertising time on The Oprah Winfrey Show, Inside Edition and American Journal as a result of a 50% increase in the number of 30-second advertising spots retained in each such series commencing with the 1995-1996 television season. The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 40%, 19%, 17% and 9%, respectively, of the Company's revenues for the first quarter of fiscal 1996 compared to 36%, 21%, 18% and 7%, respectively, for the first quarter of fiscal 1995. American Journal accounted for approximately 5% of the Company's revenues for the first quarter of fiscal 1996 compared to 4% for the first quarter of fiscal 1995, and Rolonda accounted for approximately 2% of the Company's revenues for the first quarter of fiscal 1996 compared to 3% for the first quarter of fiscal 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 increased by approximately 11% in the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995, primarily as a result of the higher level of revenues generated by The Oprah Winfrey Show (a portion of which is payable to the produc- 9 10 er) and increased production fees associated with The Oprah Winfrey Show in the 1995-1996 television season. Selling, general and administrative expenses Selling, general and administrative expenses for the first quarter of fiscal 1996 were comparable to those for the first quarter of fiscal 1995, increasing by approximately 2% for the period. Net income and primary earnings per share Due to the factors discussed above, the Company's operating income for the three months ended November 30, 1995 increased by approximately 12% compared to the corresponding period of the prior year. In addition, during the first quarter of fiscal 1996, the Company recorded a nonrecurring gain of approximately $14.1 million on the sale of Buffalo Broadcasting Co. Inc. ("Buffalo") to LIN Television Corporation. Net income increased by approximately 57% for the three months ended November 30, 1995, reflecting the increase in operating income, the nonrecurring gain on the sale of Buffalo and higher interest income earned on the Company's cash and investments (due to moderately higher interest rates in the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995). In addition, the Company's effective tax rate for the first quarter of fiscal 1996 was lower than in the first quarter of fiscal 1995, due in part to the Buffalo gain. Primary earnings per share increased by approximately 56% in the three months ended November 30, 1995 as a result of the increase in net income. Absent the nonrecurring gain on the sale of Buffalo, net income increased by approximately $5.5 million, or 20%, and primary earnings per share increased by approximately 19% for the period to $.89 per share. 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. 10 11 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 1994-1995 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. 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 at the commencement of 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. Under the terms of the Company's agreement with Harpo, Inc. ("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 11 12 Harpo's and Ms. Winfrey's right to decline to produce and host the show in any season after the 1995-1996 season. To date, Harpo and Ms. Winfrey have committed to produce and host the show through the 1997-1998 broadcast season. Under the agreement, the Company has, among other things, agreed to pay Harpo production fees and to guarantee participation payments to Harpo at levels which, commencing with the 1995-1996 season, are substantially higher than those previously 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 million advance against its minimum participation payments for the 1995-1996 broadcast season. As of November 30, 1995, approximately $33.1 million of such advance remained outstanding. In addition, subsequent to November 30, 1995 the Company paid Harpo advances of $65 million against its minimum participation payments for each of the 1996-1997 and 1997-1998 broadcast seasons. Based on the license agreements in place for the seasons covered by such advances, the Company believes that revenues from the series will be sufficient to enable the Company to recoup such advances. Such advances are refundable to the Company by Harpo and Ms. Winfrey if King World terminates the agreement due to Harpo's failure to deliver episodes of the series. 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. Through January 9, 1996, 1,698,800 shares of Common Stock were repurchased in open market transactions, for aggregate consideration of approximately $59.8 million (or approximately $35.20 per share), leaving 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. In October 1995, the Company closed its agreement to sell WIVB-TV, the CBS-affiliated VHF television station in Buffalo, New York, to LIN Television Corporation for $95 million in 12 13 cash. As a result of this transaction, the Company recorded a nonrecurring gain of approximately $14.1 million, of which approximately $9.8 million represents cash proceeds to the Company from the sale. The remaining $4.3 million of such gain represents the reversal of previously recognized accounting losses (with no associated income tax effect) in excess of the Company's original investment. PART II - OTHER INFORMATION None. 13 14 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 As Interim Chief Financial Officer and on behalf of the Registrant January 16, 1996 14 15 EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION - ------- ----------- 27 FINANCIAL DATA SCHEDULE EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS AUG-31-1996 SEP-01-1995 NOV-30-1995 517559 0 72692 4196 0 638225 13227 (9899) 738140 115093 0 0 0 500 622547 738140 0 162139 0 98091 18471 0 0 66320 22658 43662 0 0 0 43662 1.17 1.17
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