0000910680-01-500488.txt : 20011009
0000910680-01-500488.hdr.sgml : 20011009
ACCESSION NUMBER: 0000910680-01-500488
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20010928
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CLARK DICK PRODUCTIONS INC
CENTRAL INDEX KEY: 0000805370
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812]
IRS NUMBER: 232038115
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-15192
FILM NUMBER: 1748077
BUSINESS ADDRESS:
STREET 1: 3003 W OLIVE AVE
CITY: BURBANK
STATE: CA
ZIP: 91510
BUSINESS PHONE: 818-841-3003
MAIL ADDRESS:
STREET 1: 3003 W. OLIVE AVENUE
CITY: BURBANK
STATE: CA
ZIP: 91505
10-K
1
f10k63001.txt
ANNUAL REPORT ON FORM 10K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
---------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2001
COMMISSION FILE NUMBER: 33-79356
DICK CLARK PRODUCTIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
23-2038115
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
3003 WEST OLIVE AVENUE, BURBANK, CALIFORNIA, 91505-4590
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(818) 841-3003
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
COMMON STOCK, PAR VALUE $.01
(Title of Class)
NAME OF EXCHANGE ON WHICH REGISTERED: NASDAQ
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes [X] No [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant computed by reference to the closing sales
price as quoted on NASDAQ on September 17, 2001, was approximately $18,116,000.
As of September 17, 2001, 9,284,016 shares of Registrant's $.01 par
value common stock and 909,563 shares of the Registrant's $.01 par value Class A
common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE REGISTRANT'S PROXY STATEMENT RELATING TO THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD NOVEMBER 8, 2001 ARE INCORPORATED BY REFERENCE INTO
PART III OF THIS FORM 10-K.
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. BUSINESS ......................................................................................... 3
ITEM 2. PROPERTIES ........................................................................................13
ITEM 3. LEGAL PROCEEDINGS .................................................................................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............................................13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS ............................14
ITEM 6. SELECTED FINANCIAL DATA ...........................................................................15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS ..............16
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK .........................................19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................................19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ..............38
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................................................38
ITEM 11. EXECUTIVE COMPENSATION ............................................................................38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ....................................38
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ....................................................38
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ...................................38
2
PART I
ITEM 1. BUSINESS
BACKGROUND
----------
dick clark productions, inc. was incorporated in California in 1977 and
was reincorporated in November 1986 as a Delaware corporation. As used in this
Annual Report on Form 10-K ("Form 10-K"), unless the context otherwise expressly
requires, the term "Company" refers to dick clark productions, inc., its
predecessors and their respective subsidiaries.
The Company develops and produces a wide range of television
programming for television networks, first-run domestic syndicators (which
provide programming for independent and network affiliated stations), cable
networks and advertisers. Since 1957, the Company has been a significant
supplier of television programming and has produced thousands of hours of
television entertainment, including series, annual, recurring and one-time
specials and movies for television. The Company also licenses the rebroadcast
rights to some of its programs, licenses certain segments of its programming to
third parties and, from time to time, produces home videos. In addition, the
Company, on a limited basis, develops and produces theatrical motion pictures,
which are generally produced in conjunction with third parties who provide the
financing for such motion pictures.
In January 1991, the Company established a subsidiary, dick clark
communications, inc. ("dcci"), in order to enter the corporate productions and
communications business. This subsidiary specializes in the development and
execution of non-traditional marketing communications programs, corporate
meetings and special events, new product introductions, trade shows and
exhibits, event marketing, film, video and leisure attractions. The Company's
strategy is to provide value to its corporate communications clients by
accessing the wide range of talent and production resources the Company utilizes
for television production and by providing a level of creativity, production
quality and efficiency that is uncommon in this market.
In fiscal 2000, the Company entered into a strategic alliance with
ARTISTdirect, Inc., a popular music, entertainment and e-commerce portal, in
order to expand the Company's Internet presence. At the end of fiscal 2001, the
Company terminated its alliance with ARTISTdirect, Inc. by declining the option
for another term, due to the lack of sufficient growth.
Since fiscal 1990, the Company has operated entertainment-themed
restaurants known as Dick Clark's American Bandstand Grill(R). In fiscal 1992,
the first restaurant developed by the Company was opened in Overland Park,
Kansas, a suburb of Kansas City, Missouri. Currently, the Company is operating
restaurants in eight locations. Additionally, the Company, through its
restaurant subsidiary, dick clark restaurants, inc. ("dcri"), licenses various
applications of the restaurant concept, and currently has three licensed units
operating. For its restaurant operations, the Company is concentrating on less
capital-intensive growth avenues, such as licensing, joint ventures, and
possibly, franchising, as opposed to Company-owned units.
Since its inception, the Company's principal stockholder has been
Richard ("Dick") W. Clark, who is one of the best-known personalities in the
entertainment industry. Many of the Company's television and communications
programs involve the executive producing services and creative input of Mr.
Clark. However, Mr. Clark's performance services are not exclusive to the
Company. In addition to Mr. Clark, the Company employs other experienced
producers who are actively involved in the Company's entertainment business.
The Company's two principal lines of business, according to industry
segments, are (1) television production and related activities (including,
without limitation, the aforementioned corporate productions and communications
activities) and (2) restaurant operations. For financial information about the
Company's industry segments with respect to each of the fiscal years in the
three-year period ended June 30, 2001, see Note 9 "Business Segment Information"
to Item 8 of this Report.
3
DESCRIPTION OF BUSINESS
TELEVISION PRODUCTION AND RELATED ACTIVITIES
--------------------------------------------
INTRODUCTION
------------
Historically, the Company has produced entertainment television
programming for daytime, primetime and late night telecast and has become one of
the most versatile independent production companies in the entertainment
industry. The Company's diverse programming has included awards shows,
entertainment and comedy specials and series, children's programming, talk and
game show series, movies-for-television and dramatic series. Many of the
established television specials are produced annually and have become
anticipated television events. This breadth of production, together with the
Company's reputation for developing high-quality, popular shows on budget,
distinguishes the Company as a unique and highly-regarded programming provider.
This is particularly significant with the growing demand for cost-efficient,
original programming from new cable networks, advertisers, syndicators, and
other new digitized platforms for the distribution of content.
The Company has generally been able to fund its production costs from
license fees paid by the recipients of the programming. However, increasing
consolidation in the entertainment industry has resulted in many of the
Company's traditional customers (such as the television networks) merging with
its competitors who provide entertainment production services similar to those
provided be the Company. As a result, the Company's ability to market its
programming expertise has been reduced. The proliferation of cable networks over
the last decade also has resulted in smaller license fees being paid by networks
and other broadcasters. Developing and producing situation comedies and dramatic
series can require substantial deficit financing because the license fees
payable for such programs typically do not cover production costs. Consequently,
the Company is selective in its development efforts of such series.
The Company owns the distribution rights to certain programming which
are not subject to restrictions associated with the initial license agreement.
Such programming may be marketed by the Company in ancillary markets which
include, among others, cable television, foreign and domestic rerun syndication
and home video. Successful television series and television movies can have
significant rerun syndication, cable and other ancillary value. However, a
television series must normally be broadcast for at least three or four
television seasons before rerun syndication is feasible. Consequently, a
relatively low percentage of television series are successful enough to be
syndicated.
Aside from the sagging economy, the Company's biggest challenge is the
impact of the changed dynamics of the television industry. To continue to be
competitive, the Company needs to find a way to compete with the television
networks, which are now able to own and produce their own product for broadcast,
making it less likely that they will license product from independent production
companies, such as the Company. The Company expects to capitalize on its
reputation as a niche player that can produce programming quickly, efficiently,
on time and on budget.
TELEVISION MARKET, PRODUCTION AND LICENSING
-------------------------------------------
MARKET. The market for television programming is composed primarily of
the broadcast television networks: ABC, CBS, NBC, Fox Broadcasting Company
(Fox), United Paramount Network (UPN) and the WB Network (WB), syndicators of
first-run programming (such as Columbia, Inc. and Buena Vista Television) which
license programs on a station-by-station basis, and basic and pay cable networks
(such as The Fox Family Channel, The National Network and VH-1).
PRODUCTION. The production of television programming involves the
development of a creative concept or literary property into a television script
or teleplay, the selection of talent and, in most cases, the filming or taping
and technical and post-production work necessary to create a finished product.
The Company is continuously engaged in developing and acquiring concepts and
literary properties. The most promising of these serve as the basis of a plot or
concept which may include a description of the principal characters or
performers and, in the case of a dramatic presentation, may contain sample
dialogue.
4
The development of a project often begins with a meeting of the
Company's development personnel, producers, directors and/or writers for the
purpose of reviewing a concept. Many of the Company's projects originate with
its own staff. However, due to the Company's reputation in the television
industry, some concepts for development are frequently presented to the Company
by unaffiliated parties. If a concept is attractive, the Company will present it
to a prospective licensee, such as one of the television networks, a first-run
syndicator, a cable network or an advertiser. Alternatively, a prospective
licensee, oftentimes an advertiser, will request that the Company develop a
concept for a particular time period or type of audience. If a concept is
accepted for further development, the prospective licensee will usually
commission and pay for a script prior to committing itself to the production of
a program. However, in the case of the Company's entertainment programming as
well as its awards specials, the licensee will generally order production of the
program based on the initial presentation. Only a small percentage of the
concepts and scripts presented each year are selected to be produced. Generally,
the network or other licensee retains the right to approve the principal
creative elements of a television production.
Once a script or a concept is approved by the licensee, a license fee
is negotiated and pre-production and production activities are undertaken. In
the case of a game show, a finished pilot episode is usually submitted for
acceptance before additional episodes are ordered. A production order for a
series is usually for a specified number of episodes, with the network or other
licensee retaining an option to renew the license. The production of additional
episodes for a series or additional versions of a special is usually dependent
on the ratings obtained by the initial run of episodes of the program or by the
original special, respectively.
TELEVISION LICENSING. A majority of the Company's revenue is derived
from the production and licensing of television programming. The Company's
television programming is licensed to the major television networks, cable
networks, domestic and foreign syndicators and advertisers. The Company also
receives production fees from programming buyers who retain ownership of the
programming. The Company has sold or licensed its programs to all of the major
networks and to a number of first-run syndicators, cable broadcasters and
advertisers. During fiscal 2001, revenue from one recurring annual special
represented approximately 11% of total revenue, and revenue from one television
series represented approximately 14% of total revenue. During fiscal 2000,
revenue from one recurring annual special represented approximately 11% of total
revenue and revenue from one television series represented approximately 17% of
total revenue. During fiscal 1999, revenue from one recurring annual special
represented approximately 14% of total revenue and revenue from one television
series represented approximately 13% of total revenue. See Note 2 "Summary of
Significant Accounting Policies" to Item 8 of this Report for additional
information. The Company is not committed exclusively to any one network,
syndicator, cable network or other licensee for the licensing of the initial
broadcast rights to all or any substantial part of the Company's programming.
The Company's strategy is to develop programming that does not require
deficit financing, such as reality and variety series and award and other event
specials (which have the potential to be profitable in the first year of release
as well as to be renewed annually). The typical license agreement for this type
of programming provides for a fixed license fee to be paid in installments by
the licensee to the Company for the right to broadcast a program or series in
the United States for a specified number of times during a limited period of
time. In some instances, the Company shares its percentage of net profits from
distribution with third parties who contributed to the production of the
program. In the case of license agreements involving specials, music, variety or
game show series, the fixed license fee is ordinarily in excess of production
and distribution costs. For selected projects, however, the Company may elect to
produce programming for which the initial license fees will not cover its
production and distribution costs in the first year of release. The Company does
not anticipate incurring any material deficit financing obligation with respect
to any programs which are currently in development.
During the term of a first-run broadcast license, the Company
occasionally retains all other distribution rights associated with the program,
including foreign distribution rights. In the case of television movies, the
Company often will pre-sell domestic, foreign and other rights in order to cover
all of the production and distribution costs for the television movie. From time
to time, the Company has entered into non-exclusive agreements with distribution
companies (such as Alfred Haber, Inc., TVA International, and World
International Network, LLC) for the foreign distribution of certain of its
series, specials and television movies. In addition, the Company occasionally
licenses its programming directly to foreign broadcasters.
5
After the expiration of a first-run broadcast license, the Company
makes the program available for other types of domestic distribution where the
Company has retained ownership and/or distribution rights to the program. In
fiscal 2000, the Company licensed 59 one-hour episodes of its "TV Bloopers and
Practical Jokes", 22 one-hour episodes of its "Super Bloopers and New Practical
Jokes" and 9 one-hour episodes of "TV Bloopers" (all of which had previously
been broadcast on network television as one hour shows) to The National Network.
The Company also retains the rights to the clips from its shows for use in its
own productions as well as the ability to continue to market the clips to media
archive customers. Additionally, the Company licenses the syndication rights to
television movies from its library, which the Company is able to syndicate a
number of times over a period of many years. For example, in fiscal 2001 the
Company renewed a license for the previously broadcast television movie, "A Cry
For Help: The Tracy Thurman Story"; and in fiscal 2000, the Company licensed the
previously broadcast television movie "The Good Doctor: the Paul Fleiss Story".
The Company has also used its library of entertainment and music
specials to create new programming.
TELEVISION PROGRAMMING
----------------------
The Company develops and produces numerous television projects for
broadcast on network television, first-run syndication and cable television. The
Company has an established reputation among the major networks, cable
broadcasters and other licensees as a premier producer of television awards
programming. The Company is also strongly committed to the ongoing development
of entertainment specials and series which include music, variety, dramatic and
comedy programming formats, as well as reality-based programming. The Company
employs experienced producers responsible for the development and production in
each of these varied programming formats. The Company's staff is supplemented on
a project basis by industry professionals utilized to expand the Company's own
production resources.
ANNUAL, RECURRING AND OTHER SPECIALS. The Company is a leading
television producer of award specials, which are a significant part of the
Company's television production business, and provide an ongoing foundation of
consistent revenue each fiscal year. Many of the Company's award specials have
enjoyed sustained growth, and certain of its specials have been produced by the
Company for as many as 28 years. Indeed, as a testament to the continued
popularity of "The Golden Globe Awards", the Company has received a 10-year
commitment from NBC to produce the annual prime time, three-hour special for
television through 2011. The event is produced in association with the Hollywood
Foreign Press Association. The renewal begins with the broadcast of "The 59th
Annual Golden Globe Awards" on January 20, 2002.
The Company's award specials during fiscal 2001 included: "The 28th
Annual American Music Awards" (broadcast on ABC), the Company's most enduring
award special, which again was rated number one in its time period; "The 58th
Annual Golden Globe Awards" (broadcast on NBC); the Company's eighteenth annual
production for the Hollywood Foreign Press Association, acknowledging excellence
in television and motion pictures; "The 36th Annual Academy of Country Music
Awards" (broadcast on CBS), another popular, long running awards production,
produced for the twenty-third consecutive year; "The 28th Annual Daytime Emmy
Awards" (broadcast on NBC), the ninth year of production of this special
presented by the National Academy of Television Arts & Sciences; and "The Family
Television Awards" (broadcast on CBS), which the Company produced for the first
time. The Company has several long-term license agreements for recurring and
annual specials, three of which expire in 2005 and one as stated above in 2011.
In addition to producing award specials for television, the Company
develops new concepts for television specials. Two important aspects of the
Company's production of specials are that the specials may serve as pilots for
the development of series programming and that specials may be produced on an
annual or recurring basis. For example, the Bloopers programs evolved from an
entertainment special to a series and are still in production as television
specials for ABC.
The Company produced the following entertainment specials in fiscal
2001: "Who is the Smartest Kid in America #2" (broadcast on Fox); four
"Bloopers" specials (broadcast on ABC); "Dick Clark's New Year's Rockin' Eve(R)
2001" (broadcast on ABC), which was the Company's 28th year of production; and
pre and post shows in conjunction with Dick Clark's "New Years Rockin' Eve(R)
2001" special (broadcast on ABC).
6
SERIES. The Company actively develops programs and ideas for potential
series production, which represents the most important area of development in
terms of potential revenue and profit growth for the Company. Series programming
presents many opportunities for long-term commitments and, in some cases, rerun
potential.
In fiscal 2001, the Company produced and delivered 13 episodes of
"Beyond Belief", hosted by "Star Trek's" Jonathan Frakes, for Fox. This series
was first produced by the Company in fiscal 1997 with the initial six episodes
hosted by James Brolin and in both fiscal 1998 and 1999, wherein 13 episodes,
hosted by Jonathan Frakes were produced and delivered each fiscal year.
In fiscal 2001, 22 one-hour episodes of the series "Your Big Break"
were produced and delivered in conjunction with Endemol Entertainment, Inc., for
broadcast syndication by Buena Vista Television. In fiscal 2000, 24 one-hour
episodes of this series were produced and delivered. This series was syndicated
to more than 90 percent of the United States, including the top 10 television
markets.
In fiscal 2000, the Company produced 43.5 hours of the game show
"Greed", hosted by Chuck Woolery (broadcast on Fox). Also in fiscal 2000,
production completed on TNN's "Prime Time Country", a live one-hour, weeknight
country music entertainment and variety series, which premiered in January 1996.
The syndicated talk show "Donny and Marie", for which the Company served as
executive producer, also wrapped up in fiscal 2000.
MOVIES. Television movies are continually under development and can be
a source of profitability and cash flow over the life of their distribution.
OTHER LICENSING
---------------
MEDIA ARCHIVES AND HOME VIDEO. The Company believes that it owns one of
the largest collections of musical performance footage from the 1950s to the
present, including 16mm films that have been enhanced and transferred to video
tape. The Company keeps an updated, computerized index of available material in
order to easily access the performance footage. The Company also occasionally
acquires the rights to license classic performances by popular recording
artists. These rights are acquired from the copyright holders and then licensed
for television, film, cable and home video. Although the Company's archives are
used as source material for the Company's productions, the Company also actively
licenses footage from its archives to third parties. In fiscal 2001, the Company
licensed footage from its library to Time-Life Music, MTV, CNN, ABC and NBC,
among many others.
LIVE SHOWS. Certain Company concepts and trade names have been licensed
for use by third parties in live shows. For example, in fiscal 2000, the concept
of the Dick Clark's "New Year's Rockin' Eve(R)" annual television special was
licensed to Holland America Cruise Line for a theatrical show on its ships which
ran through December 31, 2000.
TRADEMARK LICENSING. In fiscal 2000, the Company licensed to
International Game Technology, the largest slot machine manufacturer in the
United States of America, the rights to develop three slot machines based on the
Company's entertainment concepts for sale to gaming casinos. The slot machines
are designed around the "New Year's Rockin' Eve(R)," "American Bandstand(R),"
and "Bloopers(TM)" concepts. Additionally, the Company licensed rights to Media
Drop In to create a "scratch-off" lottery game centered around the legendary
television show, "American Bandstand."
OTHER BUSINESSES
----------------
CORPORATE PRODUCTION AND COMMUNICATIONS BUSINESS. dcci, part of the
Company's entertainment division, offers significant operating efficiencies and
capitalizes on the Company's internal resources, particularly, in the area of
television production. These resources help dcci provide solutions to businesses
seeking alternatives to the traditional forms of communication to reach their
intended audiences.
7
dcci uses its "strategic entertainment" approach to create
award-winning communications experiences, from live events and meetings to
integrated marketing communications programs for major corporations. The dcci
roster of talent includes experts in marketing, entertainment, events, public
relations, promotions, advertising and production. Through this unique blend of
skills, dcci has created corporate "experiences" for a variety of clients during
fiscal 2001. Among them, dcci produced the Century City Towers annual holiday
event, produced a "Dick Clark's Good Ol' Rock n' Roll Show" at the original
"American Bandstand" sound stage in Philadelphia, and produced a weekend-long
50th Anniversary event for a prominent worldwide law firm. In collaboration with
the CMJ Network and Coca-Cola, dcci announced a new category for "The 29th
Annual American Music Awards" to recognize unsigned emerging talent and will
present the first "New Music Award" at this show's January 2002 airing.
RECORD BUSINESS. In fiscal 1994, the Company established the CLICK
Records(R) Inc. ("CLICK") label. During fiscal 1999, the Company entered into an
agreement with Anderson Merchandisers to produce and distribute compilation
albums under the CLICK label. The first such album, "The American Music Awards
Present: Only The Hits", was produced and distributed during fiscal 1999,
exclusively at Wal-Mart stores nationwide.
In early fiscal 2000, the Company entered into an agreement with Q
Records, the record label of QVC, to create and sell a compact disc collectible
box set covering four decades of "American Bandstand" music. In late fiscal
2000, the Company extended its arrangement with Q Records to include a new
compact disc collection entitled "Dick Clark's Favorite Hits."
8
RESTAURANT OPERATIONS
INTRODUCTION
------------
The Company's restaurant operations are conducted by dick clark
restaurants, inc. ("dcri"), a wholly-owned subsidiary of the Company, and dcri's
wholly-owned subsidiaries. The restaurant operations include food and beverage
service as well as music, dancing and merchandising activities. Capitalizing on
the popularity of the American Bandstand(R) television show and over 40 years of
contemporary music, "Dick Clark's American Bandstand Grill(R)" ("Grill")
entertainment theme restaurants are an extension of the Company's entertainment
business. Elements of the theme include: the "Great American Food
Experience(R)", a unique menu concept featuring a variety of delicious regional
specialties from around the country; a design featuring a one-of-a-kind
entertainment atmosphere based on the American Bandstand(R) television show and
the music industry over the last four decades; a dance club area within some of
the restaurants with state-of-the-art audio-visual entertainment systems; and
signature "American Bandstand Grill" merchandise for customers to purchase. Each
Grill also features memorabilia and other items generally associated with rock
n' roll and the Company's activities throughout the years, including vintage
photos, gold and platinum albums, original stage costumes, concert programs,
rock stars' musical instruments and rare posters. In fiscal 2000, dcri opened
the initial "Dick Clark's AB Diner(TM)", an extension of the restaurant brand.
Currently, dcri has operations in eight locations: Overland Park,
Kansas, a suburb of Kansas City, Missouri which opened in August 1992;
Indianapolis, Indiana and Columbus, Ohio, which opened in April/May 1994;
Cincinnati, Ohio, which opened in March 1996; King of Prussia, Pennsylvania,
which opened in June 1997; Grapevine Mills, Texas, which opened in January 1998;
Auburn Hills, Michigan, which opened in November 1999, and Schaumburg, Illinois,
which opened in December 1999. The St. Louis, Missouri location closed in
December 2000.
dcri also licenses various applications of the restaurant concept. The
first three restaurants were licensed to HMSHost Corporation ("HMS Host") in
fiscal 2000 and opened in the Indianapolis Airport in December 1999, the Salt
Lake City Airport in August 2000, and the Newark Airport in April 2001. During
fiscal 2001, dcri licensed a fourth restaurant to the HMSHost. The fourth unit
is expected to open in the third quarter of fiscal 2002 at Phoenix Sky Harbor
International Airport in Arizona.
dcri and Harmon Entertainment Corporation, a New Jersey corporation
("Harmon"), were originally partners in Entertainment Restaurants, a New York
partnership (the "Partnership"), which was created to own, operate and manage
Grill restaurants and which developed the first restaurant in Miami, Florida.
The Company subsequently agreed to reimburse Harmon for capital expenditures
made in connection with the Miami restaurant and to pay Harmon a royalty over
time of 1.5% of gross revenues from restaurant operations, up to an aggregate of
$10,000,000, for its interest in the Partnership.
dcri has numerous memorabilia displayed in its restaurants and such
memorabilia are an integral part of the restaurant's theme. Some of the
memorabilia is owned by Olive Enterprises, Inc. ("Olive") and is loaned to dcri
without charge. Olive is controlled 100% by Mr. Clark, see Note 6 "Related Party
Transactions" to Item 8 of this Form 10-K. dcri also acquires memorabilia for
its own use and has invested $429,000 to date for current and future
restaurants.
OPERATIONS
----------
The Company prides itself on the fact that all of its restaurants offer
the highest quality food and service. Through its managerial personnel, the
Company standardizes specifications for the preparation and service of its food,
the maintenance and repair of its premises and the appearance and conduct of its
employees. Operating specifications and procedures are documented in a series of
manuals. Emphasis is placed on ensuring that quality ingredients are delivered
to the restaurants, continuously developing and improving restaurant food
production systems, and ensuring that all employees are dedicated to
consistently delivering high-quality food and service.
9
The primary commodities purchased by the Company's restaurants are
beef, poultry, seafood and produce. The Company monitors the current and future
prices and availability of the primary commodities purchased by the Company to
minimize the impact of fluctuations in price and availability and to make
advance purchases of commodities when considered to be advantageous. However,
purchasing remains subject to price fluctuations in certain commodities,
particularly produce. All essential food and beverage products are available, or
can be made available upon short notice, from qualified substitute suppliers.
In an effort to streamline the administration and management of dcri
and substantially reduce the overhead costs of restaurant operations, the
Company retained Lincoln Restaurant Group ("Lincoln") of Dallas, Texas to
provide such services in December 2000. Lincoln, founded in 1984, provides
management and ancillary support services to 420 restaurants - ranging from
fast-food to fine dining - and 185 restaurant owners nationwide. Services
provided by Lincoln include purchasing, accounting, human resources, culinary
service and standards.
The Company will continue to concentrate on less capital-intensive
growth avenues, including licensing, joint ventures, and possibly, franchising
opportunities. Expansion can occur through extension of the current HMSHost
license or by agreement with other major food-service operators. The Company
does not believe that opportunities for additional restaurant growth are limited
to airport locations. The Company is also evaluating the viability of joint
ventures and franchising "Dick Clark's AB Diner(TM)." This classic concept -
with its rock `n roll ambiance and All-American fare - seems well suited for
licensing.
10
GENERAL INFORMATION
-------------------
JOINT VENTURES
--------------
The Company from time to time enters into joint ventures with parties
not otherwise affiliated with the Company whose purpose is the production of
entertainment programming and other entertainment related activities associated
with the Company's business.
The C&C Joint Venture was organized to develop and produce the various
Bloopers and Practical Jokes series. The Company has a controlling interest in
the C&C Joint Venture, and the Company's share of net profits and losses in that
venture is now 51%.
In fiscal 2001, the Company teamed with three other parties to launch a
new record label for emerging talent, known as Access Records, LLC. The Russian
pop supergroup NA-NA! is the first act that has signed with the new label. The
Company has a 25% membership interest in Access Records, LLC.
TRADEMARKS
----------
The Company utilizes the service marks and trademarks American
Bandstand Grill(R), Dick Clark's American Bandstand Grill(R), and AB(R)
(Stylized). The Company also owns many other trademarks and service marks,
including federal registration for trademarks and service marks related to its
television programming and other businesses. Certain of the Company's trademarks
and service marks may be considered to be material to the Company, such as the
trademarks and service marks used in connection with the Company's restaurant
operations.
BACKLOG AND DEFERRED REVENUE
----------------------------
The Company's backlog consists of orders by networks, first-run
syndicators and cable networks for television programming to be delivered for
the 2001/2002 television season, as well as contractual arrangements for
corporate productions and communications services. At June 30, 2001, the Company
had received orders for 8 specials and 2 corporate communications production
events, which are expected to result in aggregate revenue of $28,245,000. At
June 30, 2000, the Company had received orders for 2 series, 13 specials, and 4
corporate communications production events, which were expected to result in
aggregate revenue of $43,477,000. At June 30, 1999, the Company had received
orders for 2 series, 13 specials and 5 communications production events which
were expected to result in aggregate revenue of $36,892,000.
The Company receives payment installments in advance of and during
production of its television programs and corporate productions and
communications projects. These payments are included in deferred revenue in the
Company's consolidated balance sheets and are recognized as revenue when the
program is delivered to the licensee. At June 30, 2001, 2000 and 1999, such
deferred revenue totaled $496,000, $2,075,000, and $695,000, respectively.
COMPETITION
-----------
Competition in the television industry is intense. The most important
competitive factors include quality, variety of product and marketing. Many
companies compete to obtain the literary properties, production personnel and
financing, which are essential to market acceptance of the Company's products.
Competition for viewers of the Company's programs has been heightened by the
proliferation of cable networks, which has resulted in the fragmentation of the
viewing audience. The Company also competes for distribution and pre-sale
arrangements, as well as the public's interest in, and acceptance of its
programs. The Company's success is highly dependent upon such unpredictable
factors as the viewing public's taste. Public taste changes, and a shift in
demand could cause the Company's present programming to lose its appeal.
Therefore, acceptance of future programming cannot be assured. Television and
feature films compete with many other forms of entertainment and leisure time
activities, some of which involve new areas of technology, including the
proliferation of Internet services and new media games.
11
The Company's principal competitors in television production are the
television production divisions of the major television networks, motion picture
companies (which are also engaged in the television and feature film
distribution business) and many independent producers. Many of the Company's
principal competitors have greater financial resources and more personnel
engaged in the acquisition, development, production and distribution of
television programming. Presently, there is substantial competition in the
first-run syndication marketplace, resulting in fragmentation of ratings and
advertising revenues.
Certain of the Company's customers and the television networks are
considered competitors of the Company in that they produce programming for
themselves. In 1995, the Federal Communications Commission ("FCC") allowed the
Financial Interest and Syndication Rule ("FinSyn Rule") to expire, thereby
permitting the major networks to produce and syndicate, in-house, all of their
primetime entertainment schedule. With the elimination of such restrictions, the
major networks have substantially increased the amount of programming they
produce through their own production companies. Numerous consolidations have
also occurred within the industry, further restricting the Company's ability to
sell or license its entertainment programming.
As a result of the elimination of the FinSyn Rule, the Company has
encountered increased competition in the domestic and foreign syndication of
future television programming which could adversely impact the Company's rerun
syndication revenues. In addition, the Company has encountered increased
competition from emerging networks, which were previously exempt from any
restrictions under the FinSyn Rule. To continue to be competitive, the Company
needs to find a way to compete with the television networks. The Company
believes, however, that it can continue to compete successfully in this
highly-competitive market for television programming. This belief is based on
management's extensive experience in the industry, the Company's reputation for
prompt, cost-efficient completion of production commitments and the Company's
ability to attract creative talents.
The market for corporate communications services is large, but highly
competitive, with many companies vying for market share. Most customers require
bids on a competitive basis and some of the Company's competitors have larger
staffs and a greater global reach for information. Some principle competitors
have been in business longer and are more established. The Company believes that
it can compete successfully in this market by utilizing the Company's experience
in producing live events for television and its existing talent and business
relationships.
The restaurant industry is highly-competitive and is affected by many
factors including changes in the economy, changes in socio-demographic
characteristics of areas in which restaurants are located, changes in customer
tastes and preferences and increases in competition in the geographic area in
which the Company's restaurants are located. The degree to which such factors
may affect the Company's restaurant operations, however, are not generally
predictable.
Competition in the restaurant industry can be divided into three main
categories: fast food, casual dining and fine dining. The casual dining segment
(which includes the Company's restaurant operations) includes a much smaller
number of national chains than the fast-food segment but does include many local
and regional chains as well as thousands of independent operators. The fine
dining segment consists primarily of small independent operations in addition to
several regional chains.
EMPLOYEES - TELEVISION PRODUCTION AND RELATED ACTIVITIES
--------------------------------------------------------
At June 30, 2001, the Company had approximately 60 full-time employees
in its television production, corporate communications production and related
activities. The Company meets a substantial part of its personnel needs in this
business segment by retaining directors, actors, technicians and other
specialized personnel on a per production, weekly or per diem basis. Such
persons frequently are members of unions or guilds and generally are retained
pursuant to the rules of such organizations.
The Company is a signatory to numerous collective bargaining agreements
relating to various types of employees such as directors, actors, writers and
musicians. The Company's union wage scales and fringe benefits follow prevailing
industry standards. The Company is a party to one contract with the American
Federation of Television and Radio Artists, which expires in November 2001, one
contract with the American Federation of Musicians which will expire in May
2002, two contracts with the Directors Guild of America, which expire in June
2002, one contract with the Writers Guild of America which expires in May 2004
12
and one contract with the Screen Actors Guild which expires in June 2004. The
renewal of these union contracts does not depend on the Company's activities or
decisions alone. If the relevant union and the industry are unable to come to
new agreements on a timely basis, any resulting work stoppage could adversely
affect the Company.
EMPLOYEES - RESTAURANTS
-----------------------
At June 30, 2001, the Company had approximately 650 employees in its
restaurant operations. A majority of the employees are employed on a part-time,
hourly basis to provide services necessary during peak periods of restaurant
operations. The Company's restaurant operations have not experienced any
significant work stoppages and the Company believes its labor relations are
good.
ITEM 2. PROPERTIES.
The Company leases from Olive under a triple net lease approximately
30,000 square feet of office space and equipment in two buildings located in
Burbank, California, for its principal executive offices. The current annual
rent is $682,000 and the lease expires on December 31, 2005. The lease provides
for rent increases on January 1, 2003 and January 1, 2005 based on increases in
the Consumer Price Index after December 2000. The Company subleases
approximately 10,000 square feet of space to third parties and affiliated
companies on a month-to-month basis. The Company believes that the subleases to
affiliated companies are no less favorable to the Company than could be obtained
from unaffiliated third parties on an arms-length basis, see Note 6 "Related
Party Transactions" to Item 8 of this Form 10-K.
The Company is also party to an agreement with Olive, wherein Olive
provides records management services, including storage, retrieval and inventory
of customer records, files and other personal property. The term of the
agreement extends through September 2005. See Note 6, "Related Party
Transactions," to Item 8 of this Form 10-K for further details.
The Company has entered into lease agreements with respect to numerous
restaurant sites that terminate at varying dates through December 31, 2012.
The Company believes the properties and facilities it leases are
suitable and adequate for the Company's present business and operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in certain litigation in the ordinary course of
its business, none of which, in the opinion of management, is material to the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is quoted on the National Association of
Securities Dealers' Automated Quotation ("NASDAQ") National Market under the
symbol "DCPI". The following table sets forth the high and low bid prices for
the common stock during each quarter of fiscal 2001, 2000 and 1999 as reported
by NASDAQ. The prices reported reflect inter-dealer quotations, may not
represent actual transactions and do not include retail mark-ups, mark-downs or
commissions.
PRICE RANGE
FISCAL 2001 FISCAL 2000 FISCAL 1999
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
First Quarter $ 12.75 $ 9.00 $ 13.86 $ 10.28 $ 19.91 $ 11.69
Second Quarter 13.38 8.63 20.91 9.66 15.15 11.47
Third Quarter 14.00 9.50 13.86 11.36 13.42 8.98
Fourth Quarter 10.85 9.62 13.25 11.02 12.96 7.79
As of September 17, 2001, there were 9,284,016 shares of common stock
outstanding held by approximately 500 holders of record and 909,563 shares of
Class A common stock outstanding.
On April 25, 2000, the Company declared a ten percent (10%) stock
dividend of the common stock and Class A common stock to all holders of record
as of the close of business on May 25, 2000, which was distributed on June 23,
2000. On May 11, 1999, the Board of Directors of the Company declared a five
percent (5%) stock dividend of the common stock and Class A common stock to all
holders of record as of the close of business on May 21, 1999, which was
distributed on June 11, 1999. Accordingly, share data have been retroactively
adjusted to include the effect of the stock dividends.
The declaration of dividends in the future will be at the election of
the Board of Directors and will depend upon the earnings, capital requirements
and financial position of the Company, general economic conditions, state law
requirements and other relevant factors.
14
ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT 2001 2000 1999 1998 1997
---------------- --------- --------- --------- --------- -------
Revenue $ 70,772 $ 92,243 $ 72,334 $ 86,251 $ 66,129
Gross profit 10,248 18,719 11,644 17,174 14,217
General and administrative expense 5,808 5,326 5,505 5,821 4,975
Impairment of long lived assets -- -- 4,092 -- --
Operating income 4,440 13,393 2,047 11,353 9,242
Minority interest expense (income) 85 506 (10) 97 672
Interest and other income 3,515 3,157 2,209 2,079 1,937
Income before provision for income taxes 7,870 16,044 4,266 13,335 10,507
Provision for income taxes 2,715 5,535 1,514 5,101 3,993
Cumulative effect of accounting change, net of tax -- (111) -- -- --
Net income 5,155 10,398 2,752 8,234 6,514
BALANCE SHEET 2001 2000 1999 1998 1997
------------- --------- --------- --------- --------- -------
Working capital(1) $ 60,945 $ 56,938 $ 45,269 $ 39,115 $ 30,017
Program costs, net 5,288 5,073 5,067 5,963 4,615
Total assets 85,368 83,397 69,918 73,215 63,298
Stockholders' equity 77,396 72,209 61,811 58,953 50,319
Weighted average number of shares
outstanding 10,192 10,188 10,179 10,171 10,100
Weighted average number of shares
and equivalents outstanding 10,335 10,346 10,311 10,296 10,215
Number of shares outstanding at
year end 10,194 10,190 10,186 10,174 10,105
Per share data:
Basic earnings per share $ .51 $ 1.02 $ .27 $ .81 $ .65
Diluted earnings per share .50 1.01 .27 .80 .64
Net book value 7.59 7.09 6.07 5.80 4.95
OTHER OPERATING DATA 2001 2000 1999 1998 1997
--------- --------- --------- --------- -------
EBITDA(2) $ 6,289 $ 15,412 $ 8,769 $ 14,502 $ 10,565
------------------
1 Represents the sum of cash, marketable securities and accounts receivable less accounts
payable.
2 EBITDA is earnings before interest and other income, taxes, depreciation, amortization and
other non-cash items. EBITDA is presented supplementally because management believes it allows
for a more complete analysis of results of operations. This information should not be
considered as an alternative to any measure of performance or liquidity as promulgated under
accounting principles generally accepted in the United States (such as net income or cash
provided by or used in operating, investing and financing activities) nor should it be
considered as an indicator of the overall financial performance of the Company. The Company's
calculation of EBITDA may be different from the calculation used by other companies and
therefore comparability may be limited.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of the following discussion and analysis is to explain the
major factors and variances between periods of the Company's financial condition
and results of operations. This analysis should be read in conjunction with the
financial statements, the accompanying notes thereto, and other financial
information contained elsewhere in this Form 10-K.
INTRODUCTION
------------
A majority of the Company's revenue is derived from the production and
licensing of television programming. The Company's television programming is
licensed to the major television networks, cable networks, program distributors,
domestic and foreign syndicators and advertisers. The Company also receives
production fees from program buyers who retain ownership of the programming. In
addition, the Company derives revenue from the rerun broadcast of its programs
on network and cable television and in foreign markets as well as the licensing
of its media and film archives to third parties for use in theatrical films,
television movies, specials and commercials. The Company, on a limited basis,
also develops theatrical films in association with established studios that
generally provide the financing necessary for production.
The Company also derives substantial revenue from its restaurant
business. This business segment contributed approximately 26%, 22% and 29% to
the Company's consolidated revenue for fiscal 2001, 2000 and 1999, respectively.
Revenue from restaurant operations is recognized upon provision of goods and
services to customers. dcri also licenses the restaurant concept to HMSHost for
use in their airport locations. Up-front franchise fees from licenses are
recognized upon entering into agreements. License royalties are recognized as
reported to the Company by the licensees.
License fees for the production of television programming are generally
paid to the Company pursuant to license agreements during production and upon
availability and delivery of the completed program or shortly thereafter. In
fiscal 2001, the Company entered into a ten-year license agreement with NBC to
produce "The Golden Globe Awards" through 2011. The Company has revenue from
network and cable television license agreements is recognized for financial
statement purposes upon availability and delivery of each program or episode in
the case of a series. Revenue from rerun broadcast (both domestic and foreign)
is recognized for each program when it becomes contractually available for
broadcast.
Production costs of television programs are capitalized and charged to
operations on an individual program basis in the ratio that the current year's
gross revenue bears to management's estimate of the total revenue for each
program from all sources. Substantially all television production costs are
amortized in the initial year of delivery, except for those successful
television series and television movies where there is likely to be future
revenue earned in domestic and foreign syndication and other markets. Successful
television series and television movies can achieve substantial revenue from
rerun broadcasts in both foreign and domestic markets after their initial
broadcast, thereby allowing a portion of the production costs to be amortized
against future revenue. Distribution costs of television programs are expensed
in the period incurred.
Depending upon the type of contract, revenue for corporate production
and communications activities is recognized when the services are completed for
a live event, when a tape or film is delivered to a customer, when services are
completed pursuant to a particular phase of a contract which provides for
periodic payments, or as may be otherwise provided in a particular contract.
Costs of individual productions are capitalized and expensed as revenue is
recognized.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's capital resources are adequate to meet its current
working capital requirements. The Company had cash and marketable securities of
approximately $64,118,000 as of June 30, 2001 compared to
16
$58,472,000 as of June 30, 2000. The Company has no outstanding bank borrowings
or other indebtedness for borrowed money.
Marketable securities consist primarily of investments in United States
Treasury Bills and Treasury Notes. The Company classifies investments in
marketable securities as "held-to-maturity", and carries these investments at
amortized cost in accordance with Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
This statement requires investments in debt and equity securities, other than
debt securities classified as "held-to-maturity", to be reported at fair value.
Historically, the Company has funded its investment in television
program costs primarily through installment payments of license fees and minimum
guaranteed license payments from program buyers. To the extent the Company
produces television movies and television series, the Company may be required to
finance the portion of its program costs for these programs not covered by
guaranteed license payments from program buyers (known in the television
industry as "deficit financing"). None of the Company's television productions
in fiscal 2001, 2000 or 1999 required material deficit financing by the Company.
No programs currently in development are anticipated to require material deficit
financing.
Net cash provided by operating activities was approximately $6,041,000,
$15,025,000, and $6,204,000, in fiscal 2001, 2000 and 1999, respectively. Net
cash used in investing activities was approximately $6,341,000, $15,750,000 and
$7,382,000 in fiscal 2001, 2000 and 1999, respectively. Net cash provided by
financing activities was approximately $32,000 in fiscal 2001 and $109,000 in
fiscal 1999; there was no net cash provided by financing activities in fiscal
2000. The fluctuations in cash provided by operations and cash used for
investing activities for the years noted primarily reflect changes in production
activity, the construction of two and the sale of one "Dick Clark's American
Bandstand Grill" restaurants in fiscal 2000, and changes in the Company's
investment in marketable securities. The fluctuations in cash provided by
financing activities are the result of differing numbers of stock options
exercised in a particular year.
The Company expects to accomplish future growth of the restaurant
division through a focus on licensing agreements requiring little or no capital
outlay. However, the Company expects that the opening of any additional owned
and operated American Bandstand Grill restaurants would be financed from
available capital and/or alternative financing methods such as joint ventures
and limited recourse borrowings. Capital requirements for the Company's
corporate events and communications business, are anticipated to be immaterial
to the Company's overall capital position in fiscal 2002.
The Company expects that its available capital base and cash generated
from operations will be more than sufficient to meet its cash requirements for
the foreseeable future.
RESULTS OF OPERATIONS
---------------------
REVENUE
Revenue for the year ended June 30, 2001 was $70,772,000 compared to
$92,243,000 for the year ended June 30, 2000 and $72,334,000 for the year ended
June 30, 1999. The decrease in revenue in fiscal 2001 as compared to fiscal 2000
is primarily due to lower revenue from television series and communications
projects. The increase in revenue in fiscal 2000 as compared to fiscal 1999 is
primarily due to higher revenue from television series, specials programming,
and communications projects, offset in part by decreased revenue in same store
sales from restaurant operations.
During fiscal 2001, revenue from one recurring annual special
represented approximately 11% of total revenue, and revenue from one television
series represented approximately 14% of total revenue. During fiscal 2000,
revenue from one recurring annual special represented approximately 11% of total
revenue and revenue from one television series represented approximately 17% of
total revenue. During fiscal 1999, revenue from one recurring annual special
represented approximately 14% of total revenue and revenue from one television
series represented approximately 13% of total revenue. No other production or
project accounted for more than 10% of total revenue during fiscal 2001, 2000 or
1999.
17
GROSS PROFIT
Gross profit as a percentage of revenue was 14%, 20% and 16% for fiscal
2001, 2000 and 1999, respectively. The decrease in gross profit as a percentage
of revenue in fiscal 2001 as compared to fiscal 2000 is primarily a result of
decreased profitability in television series production, communications projects
and one recurring annual special. The increase in gross profit as a percentage
of revenue in fiscal 2000 as compared to fiscal 1999 is primarily a result of
increased profitability in television series production.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense increased in fiscal 2001 as compared
to fiscal 2000 primarily as a result of a decrease in capitalized production
overhead to television series production and corporate communications projects,
offset in part by a decrease in bonus compensation and restaurant overhead.
General and administrative expense decreased in fiscal 2000 as compared to
fiscal 1999 primarily as a result of an increase in capitalized production
overhead to television series production, offset in part by an increase in bonus
compensation.
OPERATING INCOME
Operating income decreased in fiscal 2001 as compared to fiscal 2000
primarily as a result of decreased gross profit and increased general and
administrative expense. Operating income increased in fiscal 2000 as compared to
fiscal 1999 primarily as a result of increased gross profit and decreased
general and administrative expense.
IMPAIRMENT OF LONG LIVED ASSETS
As a result of declining operating results in three of the restaurant
units during the fourth quarter of fiscal 1999, and the evaluation of projected
operating performance in these units, as required by the Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed of", in fiscal 1999, the
Company recorded a noncash impairment charge of $4,092,000, related to the
writedown of the Company's investment in these units. The Company considered
continued and projected underperformance in these units and changes in market
conditions to be the primary indicators of potential impairment. The impairment
charge was recognized as the future projected undiscounted cash flows for these
units were estimated to be insufficient to recover the related carrying value of
the long lived assets related to the units. As a result, the carrying values of
the assets for two of the restaurants were written down to their estimated fair
values based on the projected discounted cash flows. Assets of the third
restaurant unit were written down to their estimated disposal value, the
majority of which were disposed of in fiscal 2000.
OTHER
Minority interest expense decreased in fiscal 2001 as compared to
fiscal 2000 as a result of decreased sales of the Company's previously-produced
"Super Bloopers and New Practical Jokes." Minority interest expense increased in
fiscal 2000 as compared to fiscal 1999 as a result of a legal settlement
received related to the American Bandstand Club in Reno, Nevada; and as a result
of a major sale of the Company's previously-produced "Super Bloopers and New
Practical Jokes." The C & C Joint Venture, of which the Company has a 51%
interest, produced the "Super Bloopers and New Practical Jokes" television
specials. The Bloopers specials currently being produced by the Company do not
include the practical joke segments and are owned 100% by the Company and there
is, therefore, no minority interest expense associated with their production.
18
GENERAL
-------
OTHER OPERATING DATA
EBITDA is earnings before interest and other income, taxes,
depreciation, amortization, and other non-cash items. Non-cash items, such as
asset writedowns and impairment losses, are excluded from EBITDA as these items
do not impact operating results on a recurring basis. EBITDA is presented
supplementally because management believes it allows for a more complete
analysis of results of operations. This information should not be considered as
an alternative to any measure of performance or liquidity as promulgated under
accounting principles generally accepted in the United States (such as net
income or cash provided by or used in operating, investing and financing
activities) nor should it be considered as an indicator of the overall financial
performance of the Company. The Company's calculation of EBITDA may be different
from the calculation used by other companies and therefore comparability may be
limited.
FORWARD LOOKING STATEMENTS
Certain statements in the foregoing Management's Discussion and
Analysis (the "MD&A") are not historical facts or information and certain other
statements in the MD&A are forward looking statements that involve risks and
uncertainties, including, without limitation, the Company's ability to develop
and sell television programming, to implement its licensing and related strategy
for its restaurant operations, and to attract new corporate communications
clients and such competitive and other business risks as from time to time may
be detailed in the Company's reports to the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk in the normal course of its
investing activities. The Company does not have significant exposure to
fluctuations in interest rates because it invests primarily in United States
Treasury Notes and Treasury Bills and has no debt. The Company does not
undertake any specific actions to cover its exposure to interest rate risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in the Financial
Statements, commencing on page 21 included herein.
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO DICK CLARK PRODUCTIONS, INC.:
We have audited the accompanying consolidated balance sheets of dick
clark productions, inc. (a Delaware corporation) and subsidiaries (the
"Company") as of June 30, 2001 and 2000, and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended June 30, 2001. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of dick clark
productions, inc. and subsidiaries as of June 30, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 2001, in conformity with accounting principles generally
accepted in the United States.
As explained in Note 2 to the consolidated financial statements, during
the quarter ended September 30, 1999, the Company changed its method of
accounting for pre-opening costs to conform with Statement of Position 98-5.
ARTHUR ANDERSEN, LLP
Los Angeles, CA
August 30, 2001
20
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF JUNE 30,
ASSETS 2001 2000
--------------- ----------
Cash and cash equivalents $ 5,030,000 $ 5,298,000
Marketable securities 59,088,000 53,174,000
Accounts receivable 2,333,000 4,609,000
Program costs, net 5,288,000 5,073,000
Prepaid royalty, net 2,087,000 2,424,000
Current and deferred income taxes 75,000 373,000
Property and equipment, net 10,009,000 11,058,000
Goodwill and other assets, net 1,458,000 1,388,000
--------------- ---------------
TOTAL ASSETS $ 85,368,000 $ 83,397,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 5,506,000 $ 6,143,000
Accrued participations and residuals 1,472,000 2,211,000
Production advances and deferred revenue 496,000 2,075,000
--------------- ---------------
Total liabilities 7,474,000 10,429,000
Commitments and contingencies
Minority interest 498,000 759,000
Stockholders' equity:
Class A common stock, $.0l par value,
2,000,000 shares authorized,
910,000 shares issued 9,000 9,000
Common stock, $.01 par value,
20,000,000 shares authorized,
9,284,000 shares issued at June 30, 2001 and
9,282,000 shares issued at June 30, 2000 93,000 93,000
Treasury stock, at cost, 1,000 shares at June 30, 2000 -- (23,000)
Additional paid-in capital 30,078,000 30,060,000
Retained earnings 47,216,000 42,070,000
--------------- ---------------
Total stockholders' equity 77,396,000 72,209,000
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 85,368,000 $ 83,397,000
=============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
21
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
YEAR ENDED JUNE 30,
2001 2000 1999
--------------- --------------- ----------
Revenue $ 70,772,000 $ 92,243,000 $ 72,334,000
Costs related to revenue 60,524,000 73,524,000 60,690,000
--------------- --------------- ---------------
Gross profit 10,248,000 18,719,000 11,644,000
General and administrative expense 5,808,000 5,326,000 5,505,000
Impairment of long lived assets -- -- 4,092,000
--------------- --------------- ---------------
Operating income 4,440,000 13,393,000 2,047,000
Interest income (3,442,000) (2,727,000) (2,249,000)
Minority interest expense (income) 85,000 506,000 (10,000)
Other (income) expense (73,000) (430,000) 40,000
--------------- --------------- ---------------
Income before provision for income taxes 7,870,000 16,044,000 4,266,000
Provision for income taxes 2,715,000 5,535,000 1,514,000
--------------- --------------- ---------------
Income before cumulative effect of accounting change 5,155,000 10,509,000 2,752,000
Cumulative effect of accounting change, net of tax -- (111,000) --
--------------- --------------- ---------------
Net income $ 5,155,000 $ 10,398,000 $ 2,752,000
=============== =============== ===============
Per share data:
Basic earnings per share:
Before cumulative effect of accounting change $ 0.51 $ 1.03 $ 0.27
Cumulative effect of accounting change, net of tax -- (0.01) --
-------------- -------------- --------------
Net income $ 0.51 $ 1.02 $ 0.27
============== ============== ==============
Diluted earnings per share:
Before cumulative effect of accounting change $ 0.50 $ 1.02 $ 0.27
Cumulative effect of accounting change, net of tax -- (0.01) --
-------------- -------------- --------------
Net income $ 0.50 $ 1.01 $ 0.27
============== ============== ==============
Weighted average number of shares outstanding 10,192,000 10,188,000 10,179,000
============== =============== ===============
Weighted average number of shares and equivalents outstanding
10,335,000 10,346,000 10,311,000
=============== =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
22
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL TOTAL
CLASS A PAID-IN RETAINED STOCKHOLDERS'
COMMON STOCK COMMON STOCK TREASURY STOCK CAPITAL EARNINGS EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Balance, June 30, 1998 787,000 $ 8,000 8,021,000 $ 80,000 -- -- $ 13,831,000 $ 45,034,000 $ 58,953,000
Net income -- -- -- -- -- -- -- 2,752,000 2,752,000
Exercise of stock options -- -- 11,000 -- -- -- 109,000 -- 109,000
Stock dividend 40,000 -- 401,000 4,000 -- -- 4,843,000 (4,850,000) (3,000)
--------- --------- ---------- --------- ------- --------- ------------- ------------- -------------
Balance, June 30, 1999 827,000 8,000 8,433,000 84,000 -- -- 18,783,000 42,936,000 61,811,000
Net income -- -- -- -- -- -- -- 10,398,000 10,398,000
Treasury stock purchased -- -- -- -- 1,000 (23,000) 23,000 -- --
Exercise of stock options -- -- 6,000 -- -- -- -- -- --
Stock dividend 83,000 1,000 843,000 9,000 -- -- 11,254,000 (11,264,000) --
--------- --------- ---------- --------- ------- --------- ------------- ------------- -------------
Balance, June 30, 2000 910,000 9,000 9,282,000 93,000 1,000 (23,000) 30,060,000 42,070,000 72,209,000
Net income -- -- -- -- -- -- -- 5,155,000 5,155,000
Treasury stock sold -- -- -- -- (1,000) 23,000 -- -- 23,000
Exercise of stock options -- -- 2,000 -- -- -- 18,000 (9,000) 9,000
--------- --------- ---------- --------- ------- --------- ------------- ------------- -------------
Balance, June 30, 2001 910,000 $ 9,000 9,284,000 $ 93,000 -- -- $ 30,078,000 $ 47,216,000 $ 77,396,000
========= ========= ========= ========= ======= ========= ============= ============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
23
DICK CLARK PRODUCTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
YEAR ENDED JUNE 30,
2001 2000 1999
--------------- --------------- ----------
Cash flows from operating activities:
Net income $ 5,155,000 $ 10,398,000 $ 2,752,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization expense 39,606,000 47,128,000 38,551,000
Impairment of long lived assets -- -- 4,092,000
Depreciation expense 1,476,000 1,500,000 1,979,000
Investment in program costs (39,821,000) (46,331,000) (37,014,000)
Minority interest, net (261,000) 107,000 (77,000)
Changes in assets and liabilities:
Accounts receivable 2,276,000 (69,000) 2,133,000
Current and deferred income taxes 298,000 (689,000) (1,254,000)
Other assets 267,000 (835,000) (130,000)
Accounts payable (637,000) 1,774,000 (2,496,000)
Accrued participations and residuals (739,000) 662,000 (1,166,000)
Production advances and deferred revenue (1,579,000) 1,380,000 (1,166,000)
----------- --------- -----------
Net cash provided by operating activities 6,041,000 15,025,000 6,204,000
Cash flows from investing activities:
Purchases of marketable securities (35,559,000) (36,206,000) (28,374,000)
Maturities of marketable securities held to maturity 29,645,000 22,107,000 21,511,000
Purchases of property and equipment (427,000) (2,960,000) (871,000)
Disposals of property and equipment -- 1,309,000 352,000
--------------- --------------- ---------------
Net cash used for investing activities (6,341,000) (15,750,000) (7,382,000)
Cash flows from financing activities:
Exercise of stock options 32,000 -- 109,000
--------------- --------------- ---------------
Net cash provided by financing activities 32,000 -- 109,000
Net decrease in cash and cash equivalents (268,000) (725,000) (1,069,000)
Cash and cash equivalents, beginning of the year 5,298,000 6,023,000 7,092,000
--------------- --------------- ---------------
Cash and cash equivalents, end of the year $ 5,030,000 $ 5,298,000 $ 6,023,000
=============== =============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 2,487,000 $ 6,187,000 $ 2,900,000
=============== =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
24
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. DESCRIPTION OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements include the accounts of dick
clark productions, inc., its wholly-owned subsidiaries and majority-owned joint
ventures, collectively referred to as the "Company". All significant
inter-company balances and transactions have been eliminated in consolidation.
The Company is a corporation, incorporated in the state of Delaware in the
United States.
Established in 1957, the Company predominantly develops and produces a
wide range of television programming for television networks, first-run domestic
syndicators (which provide programming for independent and network affiliated
stations), cable networks and advertisers. Since 1990, the Company has also
operated entertainment-themed restaurants known as Dick Clark's American
Bandstand Grill(R) in eight locations, in six states, including Illinois,
Michigan, Missouri, Ohio, Pennsylvania, and Texas. Additionally, the Company,
through its restaurant subsidiary, licenses the restaurant concept, and
currently has three licensed units operating.
The common stock of the Company is entitled to one vote per share on
all of the matters submitted to a vote of stockholders, and the Class A common
stock of the Company is entitled to 10 votes per share. Holders of Class A
common stock are entitled to a dividend equal to 85% of any declared cash
dividends on the shares of common stock. On liquidation of the Company, holders
of the common stock are entitled to receive $2.00 per share before any payment
is made to the holders of Class A common stock, and thereafter the holders of
Class A common stock are entitled to share ratably with the holders of common
stock in the net assets available for distribution.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reported period. Actual results could differ from those
estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE
Revenue from television program licensing agreements is recognized when
each program becomes contractually available for broadcast and delivery. Revenue
earned currently which is to be received in future periods is discounted to
present value using the effective interest method. Depending on the type of
contract, revenue for corporate productions and communications projects is
recognized when services are completed for a live event or when a tape or film
is delivered to a customer or when services are completed pursuant to a phase of
a contract which provides for periodic payment. Revenue from restaurant
operations is recognized upon provision of goods and services to customers. The
Company also licenses the restaurant concept. Up-front franchise fees from
licenses are recognized upon entering in to agreements. Additional license
royalties are recognized as reported to the Company by the licensees.
Revenue by significant customer as a percentage of total revenue is as
follows for the year ended June 30:
2001 2000 1999
---- ---- ----
ABC 27% 15% 18%
Fox 19% 22% 12%
NBC 9% 6% 5%
The Company produces television programming in relation to several
awards shows subject to long-term license agreements, three of which expire in
2005 and one in 2011. While the existence of each long-term agreement
25
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
enhances the future financial performance of the Company, the non-renewal of
certain such agreements at their respective expiration dates could have a
material adverse impact on the Company's financial performance.
PROGRAM COSTS
Program costs, which include acquired rights, indirect production
costs (production overhead), residuals and third-party participations, are
charged to operations on an individual program basis in the ratio that the
current year's revenue for each program bears to management's estimate of total
ultimate revenue for the current and future years for that program from all
sources. This method of accounting is commonly referred to as the individual
film forecast method.
Upon distribution of acquired film rights, the Company uses the
individual film forecast method set forth in The American Institute of Certified
Public Accountants ("AICPA") Statement of Position ("SOP") 00-2, "Accounting by
Producers or Distributors of Film" to amortize these program costs, together
with the participants' share and residuals costs, based upon the ratio of
revenue earned in the current period to the Company's estimate of total revenue
to be realized. Management periodically reviews its estimates on a
program-by-program basis and, when unamortized costs exceed net realizable value
for a program, that program's unamortized costs are written down to net
realizable value. When estimates of total revenue indicate that a program will
result in an ultimate loss, the entire loss is recognized.
The Company periodically reviews the status of projects in development.
If, in the opinion of the Company's management, any such projects are not
planned for production, the costs and any reimbursements and earned advances
related thereto are charged to the appropriate profit and loss accounts.
Substantially all production and distribution costs are amortized in the initial
year of availability, except with respect to successful television series and
television movies which have the capacity for significant future revenue.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes",
which requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", which took effect in the
Company's fiscal year ending June 30, 1999. This statement established standards
for the reporting and display of comprehensive income and its components in
financial statements and thereby reports a measure of all changes in equity of
an enterprise that result from transactions and other economic events other than
transactions with owners. The Company does not have any components of
comprehensive income other than net income.
EARNINGS PER SHARE
The Company computes earnings per share in accordance with SFAS No.
128, "Earnings Per Share". Basic earnings per share are computed by dividing net
income by the weighted average number of shares of stock outstanding during the
year. Diluted earnings per share are determined by applying the treasury stock
method to compute dilution for common stock equivalents.
26
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
On April 25, 2000, the Company declared a 10% stock dividend of common
stock and Class A common stock to holders of record as of the close of business
on May 25, 2000. The Company previously paid a 5% stock dividend of common stock
and Class A common stock to holders of record as of the close of business on May
21, 1999. Accordingly, share data have been retroactively adjusted to include
the effect of the stock dividends.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of investments in interest bearing instruments
issued by banks and other financial institutions with original maturities of 90
days or less. Such investments are stated at cost, which approximates market
value.
ACCOUNTS RECEIVABLE
Accounts receivable represent unsecured balances due from the Company's
various customers and the Company is at risk to the extent such amounts become
uncollectible. The Company performs credit evaluations of each of its customers
and maintains allowances for potential credit losses, if deemed necessary. There
was no allowance for doubtful accounts as of June 30, 2001 and 2000.
MARKETABLE SECURITIES
Marketable securities consist primarily of investments in United States
Treasury Bills and Treasury Notes. The Company classifies its investments in
marketable securities as "held-to-maturity ", and carries the investments at
amortized cost in accordance with SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." This statement requires investments
in debt and equity securities, other than debt securities classified as
"held-to-maturity", to be reported at fair value. The cost of these investments
as of June 30, 2001 and 2000 was $59,088,000 and $53,174,000, respectively, and
the market value as of June 30, 2001 and 2000 was $59,313,000 and $52,353,000,
respectively. As of June 30, 2001, the recorded costs of marketable securities
maturing in fiscal 2002, 2003, 2004, and 2005 thereafter were $20,210,000,
$14,514,000, $17,112,000 and $7,252,000 respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at historical cost. Depreciation and
amortization of property and equipment is included in general and administrative
expense and computed under the straight-line method over the expected useful
lives of applicable assets. Useful lives range from 3 to 30 years for buildings
and leasehold improvements and 5 to 7 years for furniture, fixtures and other
equipment. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or the terms of the related leases. When
property is sold or otherwise disposed of, the cost and related accumulated
depreciation is removed from the accounts, and any resulting gain or loss is
included in income. The costs of normal maintenance, repairs and minor
replacements are charged to expense when incurred.
27
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Property and equipment is summarized as follows as of June 30:
2001 2000
--------------- ---------------
Land $ 1,322,000 $ 1,322,000
Buildings 3,386,000 3,363,000
Leasehold improvements 6,841,000 6,914,000
Furniture and fixtures 7,085,000 7,555,000
Production and other equipment 2,918,000 3,433,000
--------------- ---------------
21,552,000 22,587,000
Less: accumulated depreciation and amortization (11,543,000) (11,529,000)
--------------- ---------------
Property and equipment, net $ 10,009,000 $ 11,058,000
=============== ===============
GOODWILL AND OTHER ASSETS
Goodwill of $1,044,000 resulting from the Company's acquisition of
Harmon Entertainment Restaurants (see Note 4) in fiscal 1990 is being amortized
on a straight-line basis over 20 years. In the first quarter of the fiscal year
ending June 30, 2000, the Company adopted SOP 98-5, "Reporting on the Costs of
Start-Up Activities". This SOP requires that all non-governmental entities
expense costs of start-up activities (pre-opening, pre-operating and
organizational costs) as those costs are incurred and required the write-off of
any unamortized balances upon implementation. The financial impact of SOP 98-5
was recorded in the first quarter of fiscal year 2000 as a cumulative effect of
an accounting change of $111,000, net of a tax benefit of $60,000. Liquor
license costs of $209,000 and $199,000, which are included in other assets as of
June 30, 2001 and 2000, respectively, are not being amortized. Accumulated
amortization of goodwill and other assets at June 30, 2001 and 2000 was
$3,273,000 and $3,221,000, respectively. Amortization expense related to
goodwill was $52,000 per year during the years ending June 30, 2001, 2000 and
1999.
LONG LIVED ASSETS
The Company has adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used for long-lived assets. The carrying values of the Company's assets
are reviewed when events and circumstances indicate that the carrying value of
an asset may not be recoverable. If it is determined that an impairment loss has
occurred based on undiscounted future cash flows, then a loss is recognized in
the statement of operations using a discounted cash flow or fair value model. As
a result of declining operating results in three of the restaurant units during
the fourth quarter of fiscal 1999, the Company recorded an impairment charge of
$4,092,000.
UNCLASSIFIED BALANCE SHEET
In accordance with the provisions of SOP 00-2, the Company has elected
to present an unclassified balance sheet.
JOINT VENTURES
The Company has a controlling interest in several joint venture
arrangements in which the Company's share of profits and losses exceed 50%. As a
result, the assets, liabilities, revenues and expenses of such joint ventures
are included in the consolidated balance sheets and statements of operations of
the Company with the amounts due to others shown as minority interest. The
Company has a 25% minority interest in Access Records, LLC. This interest is
accounted for using the equity method.
28
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
RECLASSIFICATIONS
The consolidated financial statements of prior years reflect certain
reclassifications to conform with classifications adopted in the current year
NEW ACCOUNTING PRONOUNCEMENTS
In June 2000, the FASB issued SFAS No. 139, which, effective for
financial statements for fiscal years beginning after December 15, 2000,
rescinds FASB No. 53. The companies that were previously subject to the
requirements of SFAS No. 53 are now required to follow the guidance in the AICPA
issued SOP 00-2, "Accounting by Producers or Distributors of Films," issued June
2000. The primary changes from the guidance of SFAS No. 53 relate to the
accounting for advertising and marketing costs in accordance with SOP 93-7,
"Reporting on Advertising Costs," limitations on certain ultimate revenues that
companies can use in their individual film forecast method, and more specific
guidance related to projects in development. The Company adopted SOP 00-2 during
the first quarter of the fiscal year ending June 30, 2001. The impact of such
adoption was not material to the financial results of the Company.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
This statement has eliminated the flexibility to account for some mergers and
acquisitions as pooling of interests, and effective as of July 1, 2001, all
business combinations are to be accounted for using the purchase method. The
Company will adopt SFAS No. 141 as of July 1, 2001, and the impact of such
adoption is not anticipated to have a material impact on the company's financial
statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." Under this statement goodwill and intangible assets with
indefinite lives are no longer subject to amortization, but rather an annual
assessment of impairment by applying a fair-value-based test. The Company will
implement SFAS No. 142 on July 1, 2002. The impact of such adoption has not been
determined.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The purpose of this statement
is to develop consistent accounting of asset retirement obligations and related
costs in the financial statements and provide more information about future cash
outflows, leverage and liquidity regarding retirement obligations and the gross
investment in long-lived assets. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
will implement SFAS No. 143 on July 1, 2002. The impact of such adoption has not
been determined.
3. PROGRAM COSTS
The Company is engaged, as one of its principal activities, in the
development and production of a wide range of television and corporate
programming.
Management's estimate of forecasted revenue related to released
programs exceeds the unamortized costs on an individual program basis. Such
forecasted revenue is subject to revision in future periods if warranted by
changing conditions such as market appeal and availability of new markets. The
Company currently anticipates that all of such revenue and related amortization
will be recognized under the individual film forecast method where programs are
available for broadcast in certain secondary markets in years ranging from 2002
through 2011. While management can forecast ultimate revenue based on experience
and current market conditions, specific annual amortization charges to
operations are not predictable because revenue recognition is dependent upon
various external factors including expiration of network license agreements and
availability for broadcasting in certain secondary markets.
Program costs associated with corporate production and communication
are amortized as projects, or identifiable elements pursuant to a contract, are
delivered.
29
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The Company capitalized $5,790,000, $4,362,000 and $4,777,000 of
general and administrative expenses during the years ended June 30, 2001, 2000
and 1999, respectively.
Based on management's estimates of gross revenue as of June 30, 2001,
approximately 82% of the $5,118,000 of unamortized program costs applicable to
released programs will be amortized during the three fiscal years ending June
30, 2004. During the fiscal year ending June 30, 2002, management expects that
approximately $900,000 of the $5,118,000 of unamortized program costs will be
amortized.
Accrued participation expense included in the balance sheet caption
"Accrued residuals and participations" amounted to $768,000 at June 30, 2001.
Management expects to pay substantially all of the accrued participation expense
during the fiscal year ending June 30, 2002.
Capitalized program costs consist of the following as of June 30:
2001 2000
--------------- ---------------
Released, since inception:
Television programs $ 334,646,000 $ 295,580,000
Communications projects 65,013,000 63,266,000
Movies for television 25,855,000 25,818,000
--------------- ---------------
425,514,000 384,664,000
Less: accumulated amortization (420,931,000) (381,325,000)
--------------- ---------------
4,583,000 3,339,000
--------------- ---------------
In process:
Television programs -- 939,000
Communications projects 311,000 153,000
--------------- ---------------
311,000 1,092,000
--------------- ---------------
Project development costs:
Television programs 311,000 483,000
Communications projects 83,000 157,000
Movies for television -- 2,000
--------------- --------------
394,000 642,000
--------------- ---------------
Program costs, net $ 5,288,000 $ 5,073,000
=============== ===============
30
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
4. PREPAID ROYALTY
Under a redemption and settlement agreement dated June 14, 1990 (the
"Redemption Agreement"), between the Company and Harmon Entertainment
Corporation ("Harmon"), a previous co-venturer with the Company in its
restaurant business, the Company had an obligation to pay Harmon a royalty of up
to $10,000,000 at a rate of 1.5% of all restaurant revenue of which $1,000,000
was advanced to Harmon at the time the Redemption Agreement was signed. This
agreement was modified on December 31, 1994, and the Company paid Harmon
$3,128,000 as a pre-payment of the remaining portion of this obligation. The
Company is amortizing the prepaid royalty of $3,128,000 at the rate of 1.5% of
total gross restaurant revenue from owned and licensed restaurants. Accumulated
amortization of the royalty at June 30, 2001 and 2000 was $1,041,000 and
$704,000, respectively.
5. INCOME TAXES
The provision for income taxes consists of the following for the year ended June 30:
2001 2000 1999
--------------- --------------- ---------------
Current:
Federal $ 2,098,000 $ 4,966,000 $ 2,229,000
State 283,000 512,000 257,000
Foreign 172,000 195,000 190,000
--------------- --------------- ---------------
2,553,000 5,673,000 2,676,000
--------------- --------------- ---------------
Deferred:
Federal 156,000 (130,000) (1,057,000)
State 6,000 (8,000) (105,000)
--------------- --------------- ---------------
162,000 (138,000) (1,162,000)
--------------- --------------- ---------------
$ 2,715,000 $ 5,535,000 $ 1,514,000
=============== =============== ===============
A reconciliation of the difference between the statutory federal tax
rate and the Company's effective tax rate is as follows for the year ended June 30:
2001 2000 1999
------- ------- ------
Statutory federal rate 34% 34% 34%
State taxes, net of federal income tax benefit 1% 1% 2%
------- ------- -------
35% 35% 36%
======= ====== =======
31
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
The components of current and deferred income taxes are as follows as
of June 30:
2001 2000
--------------- ----------------
Deferred tax assets:
Accrued participations and residuals $ 715,000 $ 628,000
Pre-opening costs 256,000 239,000
Depreciation 512,000 846,000
Bonus accrual 149,000 228,000
Other 80,000 60,000
--------------- ---------------
1,712,000 2,001,000
--------------- ---------------
Deferred tax liabilities:
Program costs (240,000) (232,000)
Prepaid royalty (720,000) (837,000)
Tax deductible goodwill (161,000) (179,000)
---------------- ---------------
(1,121,000) (1,248,000)
--------------- ---------------
Net deferred tax asset 591,000 753,000
Current taxes payable (516,000) (380,000)
--------------- ---------------
Total current and deferred tax asset $ 75,000 $ 373,000
================ ===============
6. RELATED PARTY TRANSACTIONS
The Company is a tenant under a triple net lease (the "Burbank Lease")
with Olive Enterprises, Inc. ("Olive"), a company owned by the Company's
principal stockholder, covering the premises occupied by the Company in Burbank,
California (see Note 7 for a summary of the terms of the Burbank Lease). The
Company subleases a portion of the space covered by the Burbank Lease to Olive
and to unrelated third parties on a month-to-month basis. In fiscal 2001, 2000
and 1999 the sublease income paid by Olive was $12,000 per year. The Company
believes that the terms of the Burbank Lease and sublease to Olive are no less
favorable to the Company than could have been obtained from unaffiliated third
parties on an arms-length basis. No significant leasehold improvements were made
in fiscal 2001 or 2000. The Company also paid Olive $169,000, $155,000 and
$154,000 for storage services during fiscal 2001, 2000 and 1999, respectively;
the fees for the services were no less favorable than could have been obtained
by an unaffiliated third party on an arms-length basis.
The Company provided management and other services to Olive and other
companies owned by the Company's principal stockholder for which the Company
received $242,000, $200,000 and $191,000 for fiscal 2001, 2000 and 1999,
respectively. Management believes that the fees received for these services are
no less than it would have received from an unaffiliated third party on an
arms-length basis.
The Company retained the services of Mr. Dick Clark, the Company's
majority stockholder, as host for certain of its television programs and other
talent services during fiscal 2001, 2000 and 1999 for which the Company paid him
fees of $1,207,000, $762,000 and $730,000, respectively. These fees increased in
fiscal 2001 as compared to fiscal 2000 primarily as a result of an increase in
television specials he was contracted to host and appear on. Management believes
that the fees paid by the Company are no more than it would have paid to an
unaffiliated third party on an arms-length basis.
32
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with certain key
employees requiring payment of annual compensation of $3,071,000, $2,353,000,
$1,628,000, $1,578,000, and $1,578,000 for the years ending June 30, 2002
through 2006, respectively. Several agreements also provide for the payment by
the Company of certain profit participations based upon the profits from
specific programs, and/or individual subsidiaries or the Company as a
consolidated entity, as provided in the applicable employment agreements.
Several agreements have renewal options of up to two additional years.
In December 2000 the Company entered into an agreement with Lincoln
Restaurant Group in order to outsource restaurant management functions.
Remaining payments for the initial period under this agreement, which expires in
November 2001, are $423,000.
The Company renegotiated its Burbank Lease with Olive extending the
lease term from December 31, 2000 to December 31, 2005. The Burbank Lease
expense for the years ended June 30, 2001, 2000 and 1999 was $671,000, $649,000
and $638,000, respectively. The Burbank Lease provides for rent increases on
January 1, 2003 and January 1, 2005 based on increases in the Consumer Price
Index after December 2000. The Company has entered into lease agreements with
respect to restaurants that terminate at varying dates through December 31,
2012.
Total lease expense for the Company for the years ended June 30, 2001,
2000 and 1999 was $2,011,000, $1,824,000 and $1,570,000, respectively. The
various operating leases to which the Company is presently subject require
minimum lease payments as follows for the years ended June 30:
2002 $ 1,750,000
2003 1,772,000
2004 1,729,000
2005 1,674,000
2006 1,050,000
Thereafter 3,388,000
8. STOCK OPTIONS
Prior to 1996, the Company granted stock options under the 1987
Employee Stock Option Plan of dick clark productions, inc., which plan expired
in 1997. In August 1996, the Company's Board of Directors approved a new
employee stock option plan ("the 1996 plan"). The 1996 plan was ratified by the
stockholders in November 1996. The 1996 plan provides for issuance of up to
1,000,000 shares of the Company's common stock. Options granted under the plan
may be either incentive stock options or non-qualified stock options, with a
maximum limit of 250,000 shares to any employee during any calendar year. The
exercise price of the incentive and non-qualified stock options must be equal to
at least 100 percent of the fair market value of the underlying shares as of the
date of grant. During fiscal years 2001, 2000, and 1999, respectively, 20,000,
35,000, and 37,000 incentive stock options were granted to certain employees of
the Company to purchase shares at prices ranging from $9.00 to $14.50.
As of June 30, 2001, 240,854 of all stock options granted, vested and
outstanding are exercisable at prices ranging from $3.20 to $13.92. As of June
30, 2000 and 1999, 227,217 options and 194,869 options, respectively, were
exercisable. In fiscal year 2002, 27,967 additional options will become
exercisable in fiscal year 2002. During fiscal 2001, 2000 and 1999, 3,639, 5,513
and 10,500 options, respectively, were exercised. These were no equity
instruments other than options granted during 2001.
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock-based compensation plans. Accordingly, compensation
expense recognized was different than what would have otherwise been recognized
under the fair value based method defined in SFAS No. 123, "Accounting for
Stock-Based Compensation." Had compensation cost for the Company's stock-based
compensation plans been determined based
33
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
on the fair value at the grant dates for awards under those plans consistent
with the method of SFAS No. 123, the Company's net income and net income per
share would have been reduced to the pro forma amounts indicated as follows for
the years ended June 30:
2001 2000 1999
--------------- --------------- -----------------
Net income
As reported $ 5,155,000 $ 10,398,000 $ 2,752,000
Pro forma 5,041,000 10,371,000 2,730,000
Earnings per share
As reported
Basic $ 0.51 $ 1.02 $ 0.27
Diluted 0.50 1.01 0.27
Pro forma
Basic $ 0.49 $ 1.02 $ 0.27
Diluted 0.49 1.00 0.26
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999: expected volatility of 46
percent, 44 percent and 42 to 47 percent, respectively; assumed risk-free
interest rates of 5.8 percent, 7.0 percent and 4.9 to 5.1 percent, respectively;
expected lives of 5 years; and a dividend yield of zero percent. For each year
the weighted-average fair value of options granted during 2001 was $4.36.
34
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
A summary of the status of the Company's stock option plans as of June
30, 2001, 2000 and 1999, and changes during the years ending on those dates is
presented below:
OPTIONS PRICE RANGE WEIGHTED OPTIONS AVAILABLE
(PER SHARE) AVERAGE PRICE OUTSTANDING FOR GRANT
Balance at June 30, 1998 $ 3.69 - 13.33 $ 4.58 202,388 668,612
Granted 10.00 - 14.50 12.96 37,000 (37,000)
Exercised 9.05 - 10.48 10.33 (10,500) --
Canceled 13.33 - 14.50 13.71 (3,100) --
Stock dividend 3.51 - 12.86 5.30 11,291 (11,291)
-------------------- ----------------- ------------ ------------
Balance at June 30, 1999 3.51 - 12.86 5.29 237,079 620,321
Granted 13.92 - 14.00 13.97 35,000 (35,000)
Exercised 4.08 - 4.08 4.08 (5,513) --
Canceled 9.52 - 9.52 9.52 (6,300) --
Stock dividend 3.20 - 13.92 6.01 24,027 (24,027)
-------------------- ----------------- ------------ ------------
Balance at June 30, 2000 3.20 - 13.92 5.92 284,293 561,295
Granted 9.00 - 9.00 9.00 20,000 (20,000)
Exercised 8.56 - 8.56 8.56 (3,639) --
-------------------- ----------------- ------------ ------------
Balance at June 30, 2001 $ 3.20 - 13.92 $ 6.01 300,654 541,295
==================== ================= ============ ============
The following table summarizes information about stock options
outstanding at June 30, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ------------- --------------
$ 3.20 - 3.20 200,650 1.17 $ 3.20 200,650 $ 3.20
9.00 - 11.69 63,504 4.16 10.72 31,954 11.44
12.73 - 13.92 36,500 3.69 13.27 8,250 13.92
-------------- ----------- ---- ------------- ------------- --------------
$ 3.20 - 13.92 300,654 2.11 $ 6.01 240,854 $ 4.66
=============== =========== ==== ============= ============= ==============
9. BUSINESS SEGMENT INFORMATION
The Company applies the disclosure provisions of SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." The
Company's business activities consist of two business segments: entertainment
operations and restaurant operations. The factors for determining the reportable
segments were based on the distinct nature of their operations. They are managed
as separate business units because each requires and is responsible for
executing a unique business strategy, as managed by the respective chief
operating decision makers. Identifiable assets are those assets used in the
operations of the segments.
35
Summarized financial information concerning the Company's reportable
segments is shown in the following table:
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
BUSINESS SEGMENTS
-----------------
ENTERTAINMENT RESTAURANT TOTAL
------------- ---------- -----
2001
Revenue $ 52,105,000 $ 18,667,000 $ 70,772,000
Gross profit (loss) 11,343,000 (1,095,000) 10,248,000
Operating income (loss) 7,854,000 (3,414,000) 4,440,000
Interest income (3,388,000) (54,000) (3,442,000)
Other (income) expense 22,000 (95,000) (73,000)
Identifiable assets 72,248,000 13,120,000 85,368,000
Depreciation and amortization 188,000 1,746,000 1,934,000
Capital expenditures 206,000 221,000 427,000
2000
Revenue $ 72,173,000 $ 20,070,000 $ 92,243,000
Gross profit (loss) 20,130,000 (1,411,000) 18,719,000
Operating income (loss) 16,245,000 (2,852,000) 13,393,000
Interest (income) (2,697,000) (30,000) (2,727,000)
Other (income) expense (3,000) (427,000) (430,000)
Identifiable assets 68,585,000 15,812,000 83,397,000
Depreciation and amortization 233,000 2,292,000 2,525,000
Capital expenditures 108,000 2,852,000 2,960,000
1999
Revenue $ 51,324,000 $ 21,010,000 $ 72,334,000
Gross profit (loss) 11,963,000 (319,000) 11,644,000
Impairment of long lived assets -- 4,092,000 4,092,000
Operating income (loss) 4,884,000 (2,837,000) 2,047,000
Interest (income) (2,179,000) (70,000) (2,249,000)
Other (income) expense 101,000 (61,000) 40,000
Identifiable assets 53,926,000 15,992,000 69,918,000
Depreciation and amortization 249,000 2,371,000 2,620,000
Capital expenditures 455,000 416,000 871,000
36
DICK CLARK PRODUCTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Revenue by significant customer as a percentage of total entertainment
revenue is as follows for the year ended June 30:
2001 2000 1999
---- ---- ----
ABC 37% 19% 25%
Fox 26% 28% 17%
NBC 12% 8% 7%
There were no customers in the restaurant segment with revenue in
excess of ten percent of total restaurant revenue.
10. RESULTS OF OPERATIONS BY QUARTER (UNAUDITED)
The following table shows the Company's results of its operations by
quarter.
DILUTED
OPERATING BASIC EARNINGS/
GROSS INCOME NET INCOME EARNINGS/(LOSS) (LOSS) PER
REVENUE PROFIT (LOSS) (LOSS) PER SHARE (1) SHARE (1)
------------- ------------ ------------- ------------ ------------ -----------
1st Quarter
(ending September 30)
2000 $ 10,449,000 $ 823,000 $ (592,000) $ 170,000 $ .02 $ .02
1999 10,585,000 1,054,000 (113,000) 360,000 .04 .03
2nd Quarter
(ending December 31)
2000 $ 16,518,000 $ 151,000 $ (1,307,000) $ (338,000) $ (.03) $ (.03)
1999 22,646,000 2,288,000 1,109,000 998,000 .10 .10
3rd Quarter
(ending March 31)
2001 $ 22,251,000 $ 6,355,000 $ 4,724,000 $ 3,718,000 $ .36 $ .36
2000 31,507,000 9,784,000 8,356,000 5,774,000 .57 .56
4th Quarter
(ending June 30)
2001 $ 21,554,000 $ 2,919,000 $ 1,615,000 $ 1,605,000 $ .16 $ .16
2000 27,505,000 5,593,000 4,041,000 3,266,000 .32 .32
(1) The sum of the quarterly earnings per share may differ from the earnings per
share for the year due to the required method of computing dilution and the
weighted average number of shares.
37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by each of the items of Part III is omitted
from this Report. Pursuant to the General Instruction G(3) to Form 10-K, the
information is included in the Company's Proxy Statement for its 2001 Annual
Meeting of Stockholders to be held on November 8, 2001, and is incorporated
herein by reference. The Company intends to file such Proxy Statement with the
Securities and Exchange Commission not later than 120 days subsequent to June
30, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following represents a listing of all financial statements, financial
statement schedules exhibits filed as part of this Report.
(1) Financial Statements (see index to the consolidated financial
statements).
(2) Financial Statement Schedules (see index to the consolidated financial
statements).
(3) Exhibits
NUMBER DESCRIPTION OF DOCUMENT
3.1 Certificate of Incorporation of the Registrant dated October
31, 1986 and Certificate of Correction dated November 3, 1986,
(incorporated by reference to Exhibit 3.1 of the Registrant's
Registration Statement No. 33-9955 on Form S-1 (the
"Registration Statement").
3.2 By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Registration Statement).
4.1 Form of Warrant issued to Allen & Company Incorporated and
L.F. Rothschild, Towbin, Inc. (incorporated by reference to
Exhibit 4.1 of the Registration Statement).
9.1 Agreement dated October 31, 1986, between Richard W. Clark and
Karen W. Clark with form of voting trust agreement attached
(incorporated by reference to Exhibit 9.1 of the Registration
Statement).
10.1 Lease dated November 1, 1986, between the Registrant and Olive
(incorporated by reference to Exhibit 10.5 of the Registration
Statement).
38
10.2 Shareholders' Agreement dated as of December 23, 1986, among
Richard W. Clark, Karen W. Clark and Francis C. La Maina
(incorporated by reference to Exhibit 10.14 of the
Registration Statement).
10.3 Lease Amendment No. 1 dated June 30, 1989, between Olive
Enterprises, Inc. and the Registrant amending Lease referred
to as Exhibit 10.5 (incorporated by reference to Registrant's
Annual Report on Form 10-K for 1989).
10.4 Employment Agreement dated as of July 1, 1997, between the
Registrant and Richard W. Clark (incorporated by reference to
Exhibit 10.9 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997).
10.5 Employment Agreement dated as of July 1, 1997, between the
Registrant and Karen W. Clark (incorporated by reference to
Exhibit 10.10 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997).
10.6 Joint Venture Agreement dated as of June 22, 1993, between
Reno Entertainment, Inc. and RLWH, Inc. (incorporated by to
Registrants Annual Report on Form 10-K for 1994).
10.7 Agreement dated December 31, 1994 to amend the Redemption
Agreement dated June 30, 1990 between Harmon Entertainment
Corporation, a New Jersey corporation, and dick clark
restaurants, inc. (incorporated by reference to Exhibit 10.19
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995).
10.8 Employment Agreement dated as of July 1, 1997, between the
Registrant and Francis C. La Maina (incorporated by reference
to Exhibit 10.13 to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1997).
10.9 1996 Employee Stock Option.
10.10 Assignment dated March 31, 1998 between dick clark
productions, inc. and Olive Enterprises, Inc.
*10.11 Employment Agreement dated as of September 1, 2000, between
the Registrant and William S. Simon
*10.12 Lease Amendment No. 2 dated December 31, 2000, between Olive
Enterprises, Inc. and the Registrant amending Lease referred
to in Exhibit 10.1 and Exhibit 10.3 above.
*21.1 List of subsidiaries and affiliates.
-----------------
* Filed herewith
(4) Reports on Form 8-K
(NONE)
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
dick clark productions, inc.
By: /S/ RICHARD W. CLARK
-------------------------------------
Richard W. Clark
Chairman and Chief Executive Officer
September 21, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been executed below by the following persons on behalf of the
Registrant and in the Capacities and on the date indicated.
Signature Title Date
========================================================================================================
Chairman September 21, 2001
Chief Executive Officer and
/s/ RICHARD W. CLARK Director (Principal Executive Officer)
---------------------------------------
Richard W. Clark
President, Chief Operating Officer September 21, 2001
/s/ FRANCIS C. LA MAINA and Director
---------------------------------------
Francis C. La Maina
/s/ KAREN W. CLARK Director September 21, 2001
---------------------------------------
Karen W. Clark
/s/ LEWIS KLEIN Director September 21, 2001
---------------------------------------
Lewis Klein
/s/ ENRIQUE F. SENIOR Director September 21, 2001
---------------------------------------
Enrique F. Senior
/s/ ROBERT A. CHUCK Director September 21, 2001
---------------------------------------
Robert A. Chuck
/s/ WILLIAM S. SIMON Chief Financial Officer, September 21, 2001
--------------------------------------- Vice President of Finance and Treasurer
William S. Simon (Principal Financial Officer and
Principal Accounting Officer)
EX-10
3
f10kex10_11.txt
EXHIBIT 10.11
10.11 EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of September 1, 2000 (as from
time to time amended, this "Agreement"), by and between dick clark productions,
inc., a Delaware corporation (the "Company"), and Mr. William S. Simon (the
"Executive").
The Executive is currently the Vice President of Finance,
Treasurer and Chief Financial Officer of the Company and has served in that
capacity since August 12, 1998. In order for the Company to secure the continued
employment services of the Executive, and in order for the Executive to have the
security of continued employment with the Company, the Company and the Executive
desire to continue the Executive's employment with the Company subject to the
terms, provisions and conditions set forth in this Agreement.
Therefore, upon the mutual promises set forth herein, and
other good and valuable consideration, the receipt and legal sufficiency of
which is hereby acknowledged, the Company and the Executive hereby agree as
follows:
1. Employment.
-----------
(a) The Company hereby employs the Executive for the
Employment Term (as such term is hereinafter defined) of this Agreement, subject
to earlier termination as provided for herein, as the Company's Vice President
of Finance, Treasurer and Chief Financial Officer, and the Executive hereby
accepts such employment and agrees to serve the Company in that capacity. As the
Company's Vice President of Finance, Treasurer and Chief Financial Officer, the
Executive shall have such duties and responsibilities as are normally associated
with those positions and such other duties as may from time to time be assigned
to the Executive by the President and Chief Operating Officer of the Company or
the Board of Directors of the Company. The Executive shall devote his best
efforts and substantially all of his business time to the performance of his
duties and obligations under this Agreement and shall perform them faithfully,
diligently, competently and to the best of his ability. The Executive shall
report directly to the President and Chief Operating Officer of the Company. At
the request of the Audit Committee of the Board of Directors of the Company, the
Executive shall meet with, and respond to the inquires of, the Audit Committee
of the Board of Directors and furnish the Audit Committee of the Board of
Directors with such financial information as it may require.
(b) The Executive shall not, directly or indirectly, engage in
any business, civil or charitable enterprise, whether or not during regular
business hours, other than for the benefit of the Company or, in the case of
civil or charitable enterprises, if doing so would interfere with performance of
any of the Executive's duties or obligations under this Agreement.
Notwithstanding anything to the contrary contained in the immediately preceding
sentence, the Executive may devote a portion of his business time to serving as
an officer of companies a majority of whose equity is owned by Mr. Richard W.
Clark (collectively, the "Clark Affiliates") and to Mr. Clark directly; provided
however, that providing services to the Clark Affiliates or Mr. Clark's directly
does not compete with any business or activity conducted by the Company (unless
such activities were presented to the Company and the Board of Directors of the
Company determined not to engage in such activities); and provided further, that
such activities do not interfere with the Executive's performance of any of his
duties or obligations under this Agreement. The Executive shall comply with all
written policies and procedures of the Company, as from time to time in effect.
2. Term of Employment.
-------------------
The Executive's employment by the Company pursuant to this
Agreement shall commence as of the date of this Agreement and shall terminate on
August 31, 2003, unless earlier terminated pursuant to Sections 6 or 9 hereof
(the "Employment Term").
3. Compensation.
-------------
(a) As full compensation for all services rendered by the
Executive to the Company under this Agreement during the Employment Term, the
Company shall pay to the Executive a base salary as follows: (i) at an annual
rate of $190,000 for the period September 1, 2000 through August 31, 2001; (ii)
at an annual rate of
$200,000 for the period September 1, 2001 through August 31, 2002; and (iii) at
an annual rate of $210,000 for the period September 1, 2002 through August 31,
2003. The base salary payable to the Executive pursuant to this Section 3(a)
shall be payable in equal installments (once every two weeks or as is otherwise
consistent with the Company's regular payroll practices) in accordance with the
Company's customary payroll practices for its senior executives. The Company
shall be entitled to make and deduct from any amounts payable to the Executive
hereunder all withholdings for federal, state and local taxes and any other
withholdings that are required pursuant to applicable law or regulation or are
otherwise consistent with the Company's practices for its senior executives.
(b) The Company shall pay the Executive a bonus of $35,000 for
the Company's fiscal year ended June 30, 2000.
4. Fringe Benefits; Expenses, etc.
-------------------------------
(a) The Executive shall be entitled to receive all health and
pension benefits provided by the Company to its senior executives as a group and
shall also be entitled to participate in all other benefit plans provided by the
Company to its senior executives as a group.
(b) The Company shall reimburse the Executive for all
reasonable, necessary and ordinary out-of-pocket expenses incurred by him in
connection with the performance of his services for the Company pursuant to this
Agreement; provided, however, that any such reimbursement shall be upon
submission of vouchers and receipts in accordance with the Company's customary
policies and procedures from time to time in effect. The Executive shall be
entitled to travel "Business Class" on all transcontinental and international
airplane travel taken at the request of the Company, all other airplane travel
shall be economy class.
(c) The Executive shall be entitled to four (4) weeks vacation
time annually, to be taken at times selected by him, subject to the concurrence
of the President and Chief Operating Officer of the Company, which are
consistent with the proper performance of the Executive's duties under this
Agreement. Subject to Company policy, vacation shall accrue and any unused
vacation shall be able to be utilized in accordance with the Company's policy.
5. Options.
--------
(a) The Company shall grant to the Executive, as of the date
of this Agreement, options to purchase 20,000 shares of the Company's common
stock, par value of $0.01 per share (the "Common Stock"), of the Company (the
"Options"). The Options shall vest and be exercisable equally as to 6,667 shares
of Common Stock on September 1, 2001 and September 1, 2002 and as to 6,666
shares of Common Stock on September 1, 2003; provided that on such date, the
Executive remains in the employ of the Company. The Options shall be "incentive
stock options" and shall be issued pursuant to, and governed by, the terms and
provisions of the Company's 1996 Stock Option Plan (the "Plan"). The Options
shall have an exercise price on the date this grant is ratified and approved by
the Stock Option Committee of the Company's Board of Directors.
(b) The Options and all other stock options with respect to
Company Common Stock previously granted to the Executive shall automatically
vest and be exercisable upon a Change of Control (as such term is hereinafter
defined).
(c) For purposes of this Agreement the term "Change of
Control" shall mean Mr. Richard W. Clark and/or Mr. Francis C. La Maina either
together or alone, directly or indirectly, do not control, either through direct
or beneficial ownership or by contract or otherwise shares of capital stock of
the Company, which in the aggregate are sufficient to elect a majority of the
Board of Directors of the Company.
(d) The Options shall be subject to the terms and provisions
of the Plan.
6. Disability or Death.
--------------------
(a) If, as the result of any physical or mental disability,
the Executive shall have failed or been unable to perform his material duties or
responsibilities to the Company for a period of one hundred twenty (120)
consecutive days or for more than one hundred eighty (180) days during any
twelve (12) month period during the Employment Term, the Company may, by written
notice to the Executive subsequent thereto, terminate the Executive's employment
under this Agreement, effective as of the date of the notice, and the Company
shall not be required to make any further payment or to furnish any benefit to
the Executive under this Agreement (other than accrued and unpaid base salary
pursuant to Section 3(a) hereof and expenses pursuant to Section 4(b) hereof and
the benefits which have accrued as of the effective date of termination pursuant
to any plan pursuant to Section 4(a) hereof or by applicable law).
(b) The Executive's employment under this Agreement shall
automatically terminate upon his death and the Company shall not be required to
make any further payment or the furnish any benefit to the Executive under this
Agreement (other than accrued and unpaid salary pursuant to Section 3(a) hereof
and expenses pursuant to Section 4(b) hereof and benefits which have accrued
pursuant to any plan pursuant to Section 4(a) hereof or by applicable law).
7. Non-Competition; Confidential Agreement.
----------------------------------------
(a) The Executive acknowledges that by virtue of the
Executive's position and involvement with the business and affairs of the
Company and its subsidiaries, the Executive will develop substantial expertise
and knowledge with respect to all aspects of their business, affairs and
operations and will have access to all significant aspects of the business and
operations of the Company and its subsidiaries and to their confidential and
proprietary information. The Executive acknowledges that the Company will be
irreparably damaged if the Executive were to enter into, or be involved with any
business or activity which competes with any business or activity engaged in by
the Company or any of its subsidiaries in contravention of this Agreement or if
the Executive were to disclose or make unauthorized use of any of the Company's
confidential and proprietary information. Accordingly, the Executive expressly
acknowledges and agrees that the Executive is voluntarily entering into this
Agreement and that the terms, provisions and conditions of this Section 7 are
fair and reasonable and necessary to protect the Company and its business
interests.
(b) The Executive acknowledges and agrees that by virtue of
the Executive's position and involvement with the business and affairs of the
Company, the Executive will develop substantial expertise and knowledge with
respect to all aspects of the Company's business, affairs and operations and
will have access to all significant aspects of the business and operations of
the Company and to Confidential and Proprietary Information. Accordingly, the
Executive agrees as follows:
(i) The Executive hereby covenants and agrees that,
during the Employment Term and thereafter the Executive shall not, directly or
indirectly, under any circumstance: (A) disclose to any other Person (other than
in the regular course of business of the Company) any Confidential and
Proprietary Information, other than pursuant to applicable law, regulation or
subpoena or with the prior written consent of the Company; provided that the
Executive will give the Company prompt written notice of any intended disclosure
pursuant to such law, regulation or subpoena; provided, further, that if the
Company intends to seek a protective order in connection with any such permitted
disclosure, the Executive will cooperate with the Company; (B) act or fail to
act so as to impair the confidential or proprietary nature of any Confidential
and Proprietary Information; (C) use any Confidential and Proprietary
Information other than for the sole and exclusive benefit of the Company; or (D)
offer or agree to, or cause or assist in the inception or continuation of, any
such disclosure, impairment or use of any Confidential and Proprietary
Information.
(ii) The Executive will deliver promptly to the
Company or its designee at the termination of the Executive's employment, or at
any other time the Company may so request, all memoranda, notes, records,
reports, and other documents (including, without limitation, drafts, whole or
partial copies, and information stored or maintained electronically,
magnetically, in a computer, or through any other medium invented in the future)
relating
to the Company's business, which the Executive obtained while employed by, or
otherwise serving or acting on behalf of, the Company and which the Executive
may then possess or have under the Executive's control.
(iii) During the Employment Term, the Executive may
adopt or implement additional policies, procedures, or requirements connected
with the Company's business, and any such policies, procedures, or requirements
will supplement this Section 7(b).
(c) During the period of the Executive's employment under this
Agreement, the Executive shall not, directly or indirectly, engage or be
interested in (as a stockholder, director, officer, employee, agent, broker,
partner, individual proprietor, joint venturer, lender or otherwise),
individually or in any representative capacity, in any other business which is
competitive with any business conducted by or contemplated to be conducted by
the Company or any of its subsidiaries or any Clark Affiliate; provided that the
Executive may own not more than 5% of the outstanding securities of any class of
securities of any publicly held company.
(d) The Executive shall not, directly or indirectly, either
during the period of the Executive's employment under this Agreement or
thereafter, disclose to any person or entity (except in the regular course of
the Company's business during the period of the Executive's employment hereunder
or as required by applicable law), or use in competition with the Company or any
of its subsidiaries or any Clark Affiliate, any information of any nature
whatsoever acquired by the Executive during his employment by the Company or
during the period that the Executive provides services to such Clark Affiliate,
with respect to any confidential, secret, non-public or proprietary aspect of
the operations, business affairs, financial condition, customers, clients, trade
secrets, business strategies or plans or other confidential information of the
Company or any of its subsidiaries or any Clark Affiliate, as applicable, unless
such information has become known to the general public, other than by reason of
any action, directly or indirectly, on the part of the Executive.
(e) The Executive shall not, directly or indirectly, either
during the period of the Executive's employment under this Agreement or for a
period of one (1) year thereafter, solicit the services of any person who was a
full-time employee of the Company or any of its subsidiaries or any Clark
Affiliate (other than employees employed for limited periods of time in
connection with the production of particular television or motion picture
programming and the Executive's executive assistant) during the last twelve (12)
months of the period of the Executive's employment with the Company.
(f) Following the termination of the Executive's employment
with the Company, the Executive shall return to the Company (i) all documents,
records and other items containing any information regarding the Company or any
of its subsidiaries or any of their respective businesses or operations
(regardless of the medium in which maintained or stored), without retaining any
copies, notes or excerpts thereof, or at the request of the Company, shall
destroy such documents, records and items (any such destruction to be certified
by the Executive to the Company in writing); and (ii) any and all Company
property which is in the Executive's possession or was previously given to the
Executive.
(g) The parties agree that nothing in this Agreement shall be
construed to limit or negate the common law of torts, confidentiality, trade
secrets, fiduciary duty and obligations where such laws provide the Company with
any broader, further or other remedy or protection than those provided herein.
(h) The Executive acknowledges that the remedy at law for any
breach of any of his covenants or obligations under this Section 7 will be
inadequate and, accordingly, in the event of any breach or threatened breach by
the Executive of any of the provisions of this Section 7, the Company shall be
entitled, in addition to all other rights and remedies at law or otherwise, to
obtain an injunction or other equitable relief restraining any such breach or
threatened breach (without the Company being required to post a bond or other
security and without the necessity of the Company being required to demonstrate
any actual damages). The equitable remedies described in this Section 7(h) shall
not be the exclusive remedy available to the Company and shall be cumulative
with all other rights and remedies available to the Company at law, in equity or
otherwise.
8. Work for Hire.
--------------
Any inventions, ideas, concepts or copyrightable works
originated or conceived by the Executive as part of his employment by the
Company or with the use or assistance of the facilities, materials or personnel
of the Company or any of its subsidiaries, either solely or jointly with others,
during the period of the Executive's employment with the Company shall be the
sole and exclusive property of the Company and shall be deemed to be "work for
hire". The Executive hereby irrevocably assigns, conveys and transfers to the
Company and agrees to transfer and assign to the Company all of his right, title
and interest in and to all inventions, ideas, concepts or copyrightable works,
and to applications for patents, copyrights, trademarks, service marks, trade
names and service names and patents granted upon such inventions, ideas,
concepts or copyrightable works. The Executive agrees for himself an his heirs
and personal representatives, upon the request of the Company and at the
Company's expense, to take such actions, to execute such documents and
instruments and to participate in such legal proceedings as from time to time
may be necessary, required or useful in the Company's sole opinion to apply for,
secure, maintain, reissue, extend or defend the worldwide rights of the Company
in such inventions, ideas, concepts or copyrightable works. The Executive hereby
designates and appoints the Company as the agent and attorney-in-fact of the
Executive for purposes of taking such actions to execute such documents and to
participate in such proceedings. Such designation and appointment is irrevocable
and coupled with an interest.
9. Termination.
-----------
(a) The Company shall have the right to terminate the
Executive's employment with the Company (i) "for cause" or (ii) "without cause".
For purposes of this Agreement, termination "for cause" shall mean termination
of the Executive's employment based upon (i) any material breach of the
Executive's covenants or obligations under this Agreement, which breach is not
cured within thirty (30) days after written notice to the Executive by the
Company; (ii) conviction of an act of fraud or theft or gross malfeasance on the
part of the Executive, including, without limitation, conduct of a felonious or
criminal nature, embezzlement or misappropriation of the assets of the Company
or any of its subsidiaries; (iii) the usurpation of any corporate opportunity
belonging to the Company or any of its subsidiaries; (iv) the chronic addiction
of the Executive to drugs or alcohol; (v) violation by the Executive of his
duties or obligations to the Company or any of its subsidiaries or any Clark
Affiliate, including, without limitation, conduct which is inconsistent with the
Executive's position and which results or is reasonably likely to result (in the
opinion of the President and Chief Operating Officer of the Company) in an
adverse effect (financial or otherwise) on the business of the Company or any of
its subsidiaries or any Clark Affiliate, as the case may be, and such violation
is not cured within fifteen (15) days after written notice to the Executive by
the Company; (vi) the Executive's failure, refusal or neglect to perform his
duties hereunder within a reasonable period, under the circumstances, or the
Executive's failure to comply with the written policies of the Company after
written notice from the Board of Directors or the President and Chief Operating
Officer of the Company (which notice shall specifically identifying the manner
in which the Board of Directors or the President and Chief Operating Officer of
the Company believes that the Executive has failed, refused or neglected his
duties or failed to comply with such policies). A termination of the Executive's
employment with the Company for any reason other than those enumerated in the
immediately preceding sentence or as provided in Section 6 hereof shall be, for
purposes of this Agreement, deemed to be a termination of the Executive's
employment with the Company "without cause". If the employment of the Executive
is terminated "for cause", the Company shall not be obligated to make any
further payment to the Executive (other than accrued and unpaid base salary
pursuant to Section 3(a) hereof and expenses pursuant to Section 4(b) hereof
incurred prior to the date of termination), or continue to provide any benefit
(other the benefits which have accrued under any plan pursuant to Section 4(a)
hereof or by applicable law) to the Executive under this Agreement prior to the
date of termination.
(b) If the employment of the Executive is terminated "without
cause", the Company shall pay to the Executive all of his base salary pursuant
to Section 3(a) hereof for a period equal to the longer of (x) twelve (12)
months from the date of termination "without cause" and (y) the remaining
portion of the Employment Term; provided that the Company shall not be obligated
to continue to provide any other benefits under this Agreement, other than
health and medical benefits pursuant to Section 4(a) hereof. In addition, all
unvested Options previously granted to the Executive shall automatically vest if
the Executive's employment with the Company is terminated "without cause".
(c) The Executive acknowledges and agrees that each of the
factors which comprise the definition of the term "cause" constitutes, on an
individual basis, adequate and sufficient grounds for termination of the
Executive's employment with the Company.
(d) If the Executive's employment is terminated prior to the
end of the Employment Term, to the extent permitted by applicable law, the
Company shall be entitled to deduct any amounts owing to the Company or any
Clark Affiliate by the Executive from the amounts payable to the Executive, if
any.
10. Miscellaneous.
-------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN CALIFORNIA WITHOUT REGARD TO ITS CONFLICTS OF LAW
PRINCIPLES. THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED WITHOUT ANY
PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED. EACH OF THE
PARTIES UNCONDITIONALLY AND IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF CALIFORNIA LOCATED IN LOS ANGELES COUNTY AND THE
FEDERAL DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA WITH RESPECT TO
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH OF THE PARTIES UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY RIGHT TO CONTEST
THE VENUE OF SAID COURTS OR TO CLAIM THAT SAID COURTS CONSTITUTE AN INCONVENIENT
FORUM. EACH OF THE PARTIES UNCONDITIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
(b) This Agreement contains a complete statement of all the
agreements and understandings between the Company and the Executive with respect
to its subject matter, supersedes all previous and/or contemporaneous agreements
and understandings among them relating such subject matter (whether written or
oral) all of which are merged herein (including, without limitation, that
certain Employment Agreement dated as of September 1, 1998, between the
Executive and the Company). This Agreement cannot be modified, amended or
terminated orally and may only be modified or amended by an instrument in
writing signed by each of the parties hereto. There are no representations,
warranties or promises between the parties with respect to the subject matter
hereof, except as expressly set forth herein.
(c) Any notice, consent or other communication under or
relating to this Agreement shall be in writing and shall be considered given
when received by the intended recipient and shall be delivered personally or
mailed by certified mail, return receipt requested (all postage prepaid) or by
an overnight courier service (if such courier service has a recognized
reputation and all costs have been prepaid), to the parties at their respective
addresses set forth below (or at such other address as a party may specify by
notice to the other in accordance with this Section 10(c)):
If to the Company, to it at:
3003 West Olive Avenue
Burbank, California 91505
Attn: President and Chief Operating Officer
with a copy to:
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: Martin Eric Weisberg, Esq.
If to the Executive to him at:
3003 West Olive Avenue
Burbank, California 91505
(d) The failure of a party to insist upon strict adherence to
any term or provision of this Agreement on any one occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or provision or any other term or provision of
this Agreement on any other occasion. Any waiver of any term or provision hereof
in order to be effective must be in writing and signed by each of the parties.
All rights and remedies of the parties hereunder are cumulative and may be
exercised separately or concurrently. Any waiver of any term or provision hereof
shall be effective only for the specific instance in which given and it shall
not be construed as a waiver of any other term or provision of this Agreement.
(e) The invalidity, illegality or unenforceability of any term
or provision of this Agreement shall not affect the validity, legality or
enforceability of the remaining terms or provisions of this Agreement which
shall remain in full force and effect and any such invalid or unenforceable term
or provision shall be modified and amended so that it is given full effect as
far as possible pursuant to applicable law. If any term or provision of this
Agreement is invalid, illegal or unenforceable in any one jurisdiction, it shall
not affect the validity, legality or enforceability of that term or provision in
any other jurisdiction. It is the intention of the parties that this Agreement
be enforced by any court of competent jurisdiction to the fullest extent
permitted by applicable law and that the Agreement may be reformed and amended
by any court of competent jurisdiction in connection with its enforcement to the
extent contemplated by this Section 10(e).
(f) This Agreement is not assignable by either party, except
that the Company may assign this Agreement to any successor to the Company by
merger, purchase of stock, consolidation, recapitalization or other similar
transaction or any assignee of the Company upon the acquisition of all or
substantially all of the Company's assets by such assignee; provided such
successor or assignee assumes all of the obligations of the Company hereunder,
whereupon this Agreement shall be binding upon and inure to the benefit of any
such successor or assignee. This Agreement shall inure to the benefit of the
heirs, estate and legal representatives of the Executive. The Executive may not
delegate any of the Executive's duties or obligations hereunder. Except as
expressly provided by this Section 10(f), there are not third party
beneficiaries of this Agreement.
(g) The section headings contained herein are inserted herein
for convenience of reference only and shall not be taken into account in the
interpretation or construction of this Agreement.
dick clark productions, inc.
By: /s/ FRANCIS C. LA MAINA
-------------------------
Name: Francis C. La Maina
Title: President
/s/ WILLIAM S. SIMON
-------------------------
William S. Simon
EX-10
4
f10kex10_12.txt
EXHIBIT 10.12
10.12 LEASE AMENDMENT NO. 2
---------------------
DATE: As of December 31, 2000
PARTIES: OLIVE ENTERPRISES, INC., a Pennsylvania corporation ("Landlord")
dick clark productions, inc., a Delaware
corporation ("Tenant")
BACKGROUND:
Landlord leased to Tenant by written lease dated November 1, 1986 and amended
June 30, 1989 (the "Lease") the Premises (as that term is defined in the Lease).
The term of the Lease presently expires on December 31, 2000. Landlord and
Tenant are willing to amend the Lease in the manner hereinafter set forth.
Accordingly, the parties hereby agree as follows:
1. Term. The lease term is hereby extended from December 31, 2000 to
December 31, 2005.
2. Rent.
(a) Commencing on January 1, 2001 through December 31, 2002, the
Monthly Base Rent shall be $56,800.00 per month, which rental shall continue to
be paid monthly in advance on the first day of each month of the lease term.
(b) The Monthly Base Rent shall be subject to increase on January 1,
2003 and January 1, 2005 (the "Adjustment Dates") in accordance with increases
in the Consumer Price Index, Los Angeles-Anaheim-Riverside All Urban Wage
Earners, 1982-84=100 (the "Index").
Each Consumer Price Index adjustment shall be adjusted upward only. The
adjustments shall be calculated by referring to the Index. On each Adjustment
Date, the Monthly Base Rent payable until the next Adjustment Date shall be
calculated by multiplying $56,800 by a fraction the numerator of which shall be
the Index for the adjustment month and the denominator of which shall be the
Index for the base month. The base month for all adjustments shall be December
2000. The adjustment month for each adjustment shall be the December immediately
preceding the Adjustment Date on which the adjustment is to be made.
If the Index is no longer is use at any Adjustment Date, then such
replacement index which is most comparable to the Index and as to which the
parties shall agree shall be utilized to make the adjustment in rent. In the
absence of agreement of the parties, then upon request of either party, the
index which shall be used to make the adjustment shall be such index as may be
designated by the then chief officer of the Los Angeles Regional Office of the
Bureau of Labor Statistics as the index which is most comparable to the Index.
Further, if the base of the Index is changed, the new base shall be converted to
the 1982-1984 base in accordance with tables issued by said Bureau.
All adjustments shall be upward only, and if there is a decrease in the
Index at any time, the Monthly Base Rent shall not be decreased.
3. Personal Property. If Tenant hereafter exercises its option to purchase
personal property as provided in Section 1.4 of the Lease, such purchase shall
not result in any decrease in Monthly Base Rent as originally provided in
Section 4.1 of the Lease, and the rent provided in this Lease Amendment No. 2
shall be the rent whether or not Tenant concludes a purchase of such personal
property.
4. Area. Section 1.1 of the Lease is amended to reflect that the
three-story building located at 3003 West Olive Avenue contains approximately
21,279 square feet, and the two-story building at 2920 West Olive Avenue
contains approximately 10,270 square feet.
5. Except as herein provided, the Lease remains unamended and in full force and
effect.
OLIVE ENTERPRISES, INC.
By: /s/ FRANCIS C. LA MAINA
-----------------------------
dick clark productions, inc.
By: /s/ WILLIAM S. SIMON
-----------------------------
EX-21
5
f10kex21_1.txt
EXHIBIT 21.1
EXHIBIT 21.1
DICK CLARK PRODUCTIONS, INC.
SUBSIDIARIES & AFFILIATES
-------------------------
ABG Operating (Austin), Inc.
ABG Operating (Grapevine), Inc.
Access Records, LLC
American Bandstand Records, Inc.
Auburn Hills Entertainment, Inc.
Austin ABG Partners, Inc.
Austin ABG, Ltd.
Austin Concessions, Inc.
Bandstand Holdings, Inc.
Buckeye Restaurants, Inc.
C & C Joint Venture
CLC Productions, Inc.
Click Records, Inc.
CPI Productions, Inc.
dc entertainment, inc.
Destroyers Productions II, inc.
dick clark communications, inc.
dick clark company - nashville, inc.
dick clark digital media, inc.
dick clark film group, inc.
dick clark media archives, inc.
dick clark presentations, inc.
dick clark restaurants, inc.
Dick Clark's American Bandstand Club-Reno
dickclark.com, inc.
Family Secrets Productions, Inc.
Ft. Worth ABG, Ltd
Grapevine ABG, Ltd.
Hoosier Entertainment, Inc.
Kenwood Entertainment, Inc.
King of Prussia Entertainment, Inc.
Match Productions, Inc.
Maybe Productions, Inc.
Metcalf Restaurants, Inc.
Reno Entertainment, Inc.
Schaumburg Entertainment, Inc.
St. Ann Entertainment, Inc.
Static Productions, Inc.
UTL Productions