-----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, AgkTnYDcbsd8rl3gb0Z1DBAyrV4i80EZpcB9SNebUiD2wvaA9jdICs5jP9cXJLnx D+vguVyzNH2whqTH5ua1GA== 0000950123-96-003606.txt : 19960716 0000950123-96-003606.hdr.sgml : 19960716 ACCESSION NUMBER: 0000950123-96-003606 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960715 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: 96594647 BUSINESS ADDRESS: STREET 1: 1700 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2123154000 10-Q 1 FORM 10-Q FOR PERIOD ENDING 5/31/96 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, 1996 / / 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, 37,589,845 shares outstanding as of July 2, 1996. 2 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in thousands)
May 31, August 31, 1996 1995 ----------- ---------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $483,117 $446,896 Accounts receivable (net of allowance for doubtful accounts of $4,196 at May 31, 1996 and August 31, 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . 66,947 51,356 Producer advances and deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,921 90,085 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1,974 506 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . . . 633,959 588,843 -------- -------- LONG-TERM INVESTMENTS, at cost, which approximates market . . . . . . . . . . . . . . . . . . . . . 124,855 82,129 -------- -------- FIXED ASSETS, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . 13,276 12,955 Less - accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . (10,295) (9,703) -------- -------- 2,981 3,252 -------- -------- PRODUCER ADVANCES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,712 12,562 -------- -------- $842,507 $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)
May 31, August 31, 1996 1995 ------------ ---------- (Unaudited) CURRENT LIABILITIES: Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,582 $ 11,070 Payable to producers and others . . . . . . . . . . . . . . . . . . . . 83,762 74,349 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 30,870 25,630 -------- -------- Total current liabilities . . . . . . . . . . . . . . . . . . 130,214 111,049 -------- -------- 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, 50,726,739 shares and 49,893,745 shares issued at May 31, 1996 and August 31, 1995, respectively . . . . . . . . . . . . . . . . . . . . 507 499 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,167 87,628 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 896,660 782,651 Treasury stock, at cost; 13,141,394 shares at May 31, 1996 and August 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . (295,041) (295,041) -------- -------- 712,293 575,737 -------- -------- $842,507 $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 Nine Months Ended May 31, May 31, ------------------------ ------------------------- 1996 1995 1996 1995 -------- -------- -------- -------- (Dollars in thousands except per share data) REVENUES....................... $165,763 $142,632 $504,687 $433,448 -------- -------- -------- -------- EXPENSES: Producers' fees, programming and other direct operating costs............ 98,648 84,264 304,779 258,036 Selling, general and administrative expenses.... 18,106 18,265 56,153 54,068 -------- -------- -------- -------- 116,754 102,529 360,932 312,104 -------- -------- -------- -------- Income from operations..... 49,009 40,103 143,755 121,344 INTEREST AND DIVIDEND INCOME.............. 6,218 5,497 19,124 14,526 NONRECURRING GAIN - Sale of Buffalo Broadcasting Co. Inc. -- -- 14,060 -- -------- -------- -------- -------- Income before provision for income taxes......... 55,227 45,600 176,939 135,870 PROVISION FOR INCOME TAXES..... 20,041 16,379 62,930 48,891 -------- -------- -------- -------- Net income................. $ 35,186 $ 29,221 $114,009 $ 86,979 ======== ======== ======== ======== PRIMARY EARNINGS PER SHARE........................ $ 0.92 $ 0.78 $ 3.03 $ 2.33 ======== ======== ======== ========
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, ------------------------------- 1996 1995 --------- --------- (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $114,009 $ 86,979 Items not affecting cash: Gain on sale of Buffalo Broadcasting Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,060) -- Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 592 492 Change in assets and liabilities: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,552) (6,347) Producer advances and deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,836) (2,996) Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,512 3,119 Payable to producers and others . . . . . . . . . . . . . . . . . . . . . . . . . 13,671 4,760 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,240 (3,681) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,657) (530) -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,919 81,796 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,726) 18,185 Proceeds from Sale of Buffalo Broadcasting Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,802 -- Additions to fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (321) (1,275) -------- -------- Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,245) 16,910 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 22,547 4,354 Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (6,111) -------- -------- Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,547 (1,757) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,221 96,949 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446,896 341,857 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $483,117 $438,806 ======== ========
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, 1996 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 fiscal 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 nine months and three months ended May 31, 1996 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 recognized at the same time as the cash portion of the license fees derived from such programming is recognized, in amounts 6 7 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Summary of significant accounting policies (continued) adjusted for expected ratings. 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 39% and 37% of revenues for the nine months ended May 31, 1996 and 1995, respectively; Wheel of Fortune accounted for approximately 19% and 21% of revenues for such periods; Jeopardy! accounted for approximately 17% and 18% of revenues for such periods; and Inside Edition accounted for approximately 8% of revenues for each such period. 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; production and distribution costs for first-run syndicated programming; and the direct operating costs of King World Direct. That portion of recognized revenue that is to be paid to producers and owners of programming is accrued as the license fees are earned. The share of license fees payable by the Company to such producers 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. Stockholders' equity Primary earnings per share has been computed using the weighted average number of common shares outstanding of 38,178,000 and 37,435,000, respectively, for the three months ended May 31, 1996 and 1995 and 37,646,000 and 37,327,000, 7 8 KING WORLD PRODUCTIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) respectively, for the nine months ended May, 1996 and 1995, which include 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 all periods presented was not significant. (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. (3) Producer advances On January 2, 1996, the Company paid Harpo, Inc. ("Harpo"), the producer of The Oprah Winfrey Show, two advances of $65 million each against its aggregate minimum participation payments for 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 such license agreements with Harpo due to Harpo's failure to deliver episodes of The Oprah Winfrey Show. 8 9 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, 1996 AND 1995 Revenues Revenues for the first nine months of fiscal 1996 increased by approximately 16% compared to the first nine months of the prior fiscal year. Such increase was primarily due to increased cash license fees from The Oprah Winfrey Show and a general increase in revenues derived from the sale of retained advertising time primarily 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 by the Company in each such series commencing with the 1995-1996 television season. In addition, revenues from King World Direct, the Company's direct response marketing subsidiary, increased substantially in the first nine months of fiscal 1996 compared with the first nine months of fiscal 1995, due primarily to the successful telemarketing campaigns for the Wild America video series and the Sears Craftsman Robogrip pliers. King World Direct operates in a seasonal business with revenues heavily reliant on the Christmas selling season. Consequently, King World Direct's revenues and earnings have historically been higher in the Company's second fiscal quarter than in the first, third and fourth fiscal quarters. For the three months ended May 31, 1996, the Company's revenues were approximately 16% higher than the three months ended May 31, 1995, due primarily to the same factors as those discussed above for the nine month period. The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 39%, 19%, 17% and 8%, respectively, of the Company's revenues for the first nine months of fiscal 1996 compared to 37%, 21%, 18% and 8%, respectively, for the first nine months of fiscal 1995. American Journal accounted for approximately 4% of the Company's revenues for the nine months in each of fiscal 1996 and fiscal 1995, and Rolonda accounted for approximately 2% of the Company's revenues for the first nine months of fiscal 1996 and 3% for the first nine months of fiscal 1995. King World Direct accounted for approximately 5% of the Company's revenues for the first nine months of fiscal 1996 and 1% for the first nine months of fiscal 1995. For the three months ended May 31, 1996, The Oprah Winfrey Show, Wheel of Fortune, Jeopardy! and Inside Edition accounted for approximately 40%, 20%, 17% and 8%, respectively, of the Company's revenues compared to 38%, 21%, 18% and 8%, respectively, for the three months ended May 31, 1995. American Journal accounted for approximately 4% of the Company's revenues 9 10 for each of the three months ended May 31, 1996 and 1995, and Rolonda accounted for approximately 2% of the Company's revenues for the three months ended May 31, 1996 and 3% for the three months ended May 31, 1995. King World Direct accounted for approximately 2% of the Company's revenues for the three months ended May 31, 1996 and 1% for the three months ended May 31, 1995. Producers' fees, programming and other direct operating costs Producers' fees, programming and other direct operating costs increased by approximately 18% in the first nine months of fiscal 1996 compared to the first nine months 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 producer), increased production fees associated with The Oprah Winfrey Show in the 1995-1996 television season and increased operating expenses for King World Direct. For the three months ended May 31, 1996, producers' fees, programming and other direct operating costs increased by approximately 17% compared to the three months ended May 31, 1995, due primarily to the same factors as those discussed above for the nine month period. Selling, general and administrative expenses In December 1995, the Company entered into new employment agreements with its President and Chief Executive Officer and its Chairman of the Board. The agreements provide, among other things, for annual performance-based bonuses, including bonuses payable upon the introduction of new shows and bonuses which vary depending on the Company's net income and Common Stock price during preestablished measurement periods. As a result, the Company's compensation expense will increase if the Company introduces a new series in syndication, if the Company's net income increases or if the Common Stock price exceeds the specified levels during the applicable measurement periods. The Company has recognized the proportionate share of certain of these bonuses in its operating results for the first, second and third quarters of fiscal 1996. Selling, general and administrative expenses were comparable for the periods presented, increasing by approximately 4% and decreasing by approximately 1% for the first nine months and third quarter of fiscal 1996, respectively. Net income and primary earnings per share Due to the factors discussed above, the Company's operating income for the nine months and three months ended May 31, 1996 increased by approximately 18% and 22%, respectively, 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 10 11 the sale of Buffalo Broadcasting Co. Inc. ("Buffalo") to LIN Television Corporation. Net income increased by approximately $27.0 million, or 31%, for the nine months ended May 31, 1996, 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. In addition, the Company's effective tax rate for the first nine months of fiscal 1996 was slightly lower than in the first nine months of fiscal 1995, due principally to the nontaxability of a portion of the Buffalo gain. Primary earnings per share increased by $.70 per share, or approximately 30%, to $3.03 per share in the nine months ended May 31, 1996 as a result of the increase in net income. Excluding the nonrecurring gain on the sale of Buffalo, net income increased by approximately $16.7 million, or 19%, for the nine months ended May 31, 1996, and primary earnings per share increased by $.43 per share, or approximately 18%, for such period to $2.76 per share. For the three months ended May 31, 1996, net income increased by approximately $6.0 million, or 20%, reflecting the increase in operating income and higher interest income earned on the Company's cash and investments, offset by a slightly higher effective tax rate for the fiscal 1996 third quarter as compared to the fiscal 1995 third quarter. Primary earnings per share increased by $.14 per share, or approximately 18%, to $.92 in the three months ended May 31, 1996 as a result of the increase in net income. 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. 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 11 12 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, 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. 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, the 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. These ar- 12 13 rangements are less favorable to the Company than those contained in prior agreements between the Company and Harpo and, unless offset by significant increases in license fees paid by television stations for the series in forthcoming seasons, increased barter revenues from the series, or both, the Company's net profits and cash flow derived from The Oprah Winfrey Show will decline in the coming years. The Company has paid Harpo a $60 million advance against its minimum participation payments for the 1995-1996 broadcast season, which was fully recouped as of May 31, 1996. In addition, on January 2, 1996, the Company paid Harpo two advances of $65 million each against its aggregate minimum participation payments for 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. Over the past few years, the regulatory environment in which the Company operates has undergone significant changes and additional changes have been proposed. As a result, the Company anticipates that it will face increased competition from the networks and perhaps other telecommunications carriers, that it will have more difficulty licensing its programming to stations owned and operated by the three major television networks for all day parts and to network-owned and -affiliated stations in the top 50 markets for prime time access time periods and, even if it is able to so license its programming, the profitability of such programming to the Company may be reduced. These developments may have an adverse effect on the Company's future net profits and cash flow. 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 July 2, 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 13 14 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 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. 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 July 15, 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 MAR-01-1996 MAY-31-1996 483,117 0 71,143 4,196 0 633,959 13,276 10,295 842,507 130,214 0 0 0 507 711,786 842,507 0 165,763 0 98,648 18,106 0 0 55,227 20,041 35,186 0 0 0 35,186 0.92 0.92
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