0000950130-01-504682.txt : 20011019 0000950130-01-504682.hdr.sgml : 20011019 ACCESSION NUMBER: 0000950130-01-504682 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010731 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20011015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOX ENTERTAINMENT GROUP INC CENTRAL INDEX KEY: 0001068002 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 954066193 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14595 FILM NUMBER: 1759582 BUSINESS ADDRESS: STREET 1: 1211 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2128527000 MAIL ADDRESS: STREET 1: 1211 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 8-K/A 1 d8ka.txt AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A (Amendment No. 1) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 31, 2001 FOX ENTERTAINMENT GROUP, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) Delaware 1-14595 95-4066193 ----------------------------- ------------------------- ---------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 1211 Avenue of the Americas New York, New York 10036 -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code (212) 852-7111 -------------- -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2: Acquisition or Disposition of Assets. ------------------------------------- As previously reported in a Form 8-K filed on August 14, 2001 (the "August 14, 2001 Form 8-K"), on July 31, 2001, The News Corporation Limited ("News Corporation") completed its acquisition of Chris-Craft Industries, Inc. ("Chris-Craft") and its subsidiaries, BHC Communications, Inc. ("BHC") and United Television, Inc. ("United Television"). This amendment to the August 14, 2001 Form 8-K is being filed to include the financial information required by Item 7(a)(4) of Form 8-K. Item 7: Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------- (a) Financial Statements of Business Acquired. The required financial statements in connection with News Corporation's acquisitions of Chris-Craft, BHC and United Television are attached as Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5. (b) Pro Forma Financial Information. The required pro forma financial information in connection with News Corporation's acquisitions of Chris-Craft, BHC and United Television is attached as Exhibit 99.6. (c) Exhibits. -2- 99.1 Consolidated financial statements for Chris-Craft Industries, Inc. for the years ended December 31, 2000, 1999 and 1998. 99.2 Consolidated financial statements for BHC Communications, Inc. for the years ended December 31, 2000, 1999 and 1998. 99.3 Consolidated financial statements for United Television, Inc. for the years ended December 31, 2000, 1999 and 1998. 99.4 Unaudited Consolidating Balance Sheet for Chris-Craft Industries, Inc. as of June 30, 2001. 99.5 Unaudited Consolidating Statement of Operations for Chris-Craft Industries, Inc. for the twelve months ended June 30, 2001. 99.6 Pro forma financial information- Fox Entertainment Group, Inc. and Chris-Craft Industries, Inc., BHC Communications, Inc. and United Television, Inc. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FOX ENTERTAINMENT GROUP, INC. By: /s/ Lawrence A. Jacobs __________________________________ Lawrence A. Jacobs Secretary Dated: October 15, 2001 -4- EXHIBIT INDEX 99.1 Consolidated financial statements for Chris-Craft Industries, Inc. for the years ended December 31, 2000, 1999 and 1998. (1) 99.2 Consolidated financial statements for BHC Communications, Inc. for the years ended December 31, 2000, 1999 and 1998. (1) 99.3 Consolidated financial statements for United Television, Inc. for the years ended December 31, 2000, 1999 and 1998. (1) 99.4 Unaudited Consolidating Balance Sheet for Chris-Craft Industries, Inc. as of June 30, 2001. (1) 99.5 Unaudited Consolidating Statement of Operations for Chris-Craft Industries, Inc. for the twelve months ended June 30, 2001. (1) 99.6 Pro forma financial information- Fox Entertainment Group, Inc. and Chris-Craft Industries, Inc., BHC Communications, Inc. and United Television, Inc. (1) ____________________________ (1) Filed herewith. -5- EX-99.1 3 dex991.txt CONSOLIDATED FINANCIAL STATEMENTS FOR CHRIS CRAFT EXHIBIT 99.1 CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Accountants Consolidated Balance Sheets - December 31, 2000 and 1999 Consolidated Statements of Income - For the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows - For the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Shareholders' Investment - For the Years Ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements QUARTERLY FINANCIAL INFORMATION 1 Report of Independent Certified Public Accountants PricewaterhouseCoopers LLP 200 East Las Olas Blvd. Fort Lauderdale FL 33301 To the Board of Directors and Shareholders of Chris-Craft Industries, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' investment and cash flows present fairly, in all material respects, the financial position of Chris-Craft Industries, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP March 8, 2001, except as to Note 8 which is as of March 14, 2001 2 Consolidated Balance Sheets Chris-Craft Industries, Inc. and Subsidiaries December 31, (In thousands of dollars) 2000 1999 ---------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 252,514 $ 119,427 Marketable securities (substantially all U.S. Government securities) 1,192,603 1,240,241 Income tax refund receivable 129,649 - Accounts receivable, less allowance for doubtful accounts of $4,330 and $4,676 105,595 102,292 Film contract rights 121,135 111,819 Prepaid expenses and other current assets 57,312 71,316 ---------------------------------------------------------------------------- Total current assets 1,858,808 1,645,095 ---------------------------------------------------------------------------- Investments 89,662 104,176 ---------------------------------------------------------------------------- Film Contract Rights, including deposits, less estimated portion to be used within one year 43,978 39,550 ---------------------------------------------------------------------------- Property and Equipment, at cost: Land, buildings and improvements 52,219 49,559 Machinery and equipment 131,541 132,665 ---------------------------------------------------------------------------- 183,760 182,224 Less-Accumulated depreciation 116,569 117,185 ---------------------------------------------------------------------------- 67,191 65,039 ---------------------------------------------------------------------------- Intangible Assets 460,793 474,846 ---------------------------------------------------------------------------- Other Assets 31,777 17,279 ---------------------------------------------------------------------------- $ 2,552,209 $ 2,345,985 ============================================================================ 3 December 31, 2000 1999 ---------------------------------------------------------------------------- Liabilities and Shareholders' Investment Current Liabilities: Film contracts payable within one year $ 107,913 $ 102,737 Accounts payable and accrued expenses 145,976 153,509 Income taxes payable 24,512 34,907 ---------------------------------------------------------------------------- Total current liabilities 278,401 291,153 ---------------------------------------------------------------------------- Film Contracts Payable after One Year 101,471 84,372 ---------------------------------------------------------------------------- Other Long-Term Liabilities 16,741 25,210 ---------------------------------------------------------------------------- Minority Interest 553,394 503,447 ---------------------------------------------------------------------------- Commitments and Contingencies (Note 9) Shareholders' Investment: Cumulative preferred stock - Prior preferred stock - redeemed in 2000; $1.00 dividend; stated at liquidating value of $21.50 per share; outstanding 73,399 shares at December 31, 1999 - 1,578 Convertible preferred stock - $1.40 dividend; stated at $17.50 per share; currently authorized 232,809 shares; outstanding 232,809 and 234,374 shares (liquidating value $23.00 per share, aggregating $5,355) 4,075 4,102 Class B common stock - par value $.50 per share; currently authorized 50,000,000 shares; outstanding 7,832,694 and 7,997,292 shares 3,916 3,999 Common stock - par value $.50 per share; currently authorized 100,000,000 shares; outstanding 27,167,559 and 25,781,763 shares 14,375 13,682 Capital surplus 490,001 420,390 Retained earnings 1,087,149 991,398 Accumulated other comprehensive income 2,686 6,654 ---------------------------------------------------------------------------- 1,602,202 1,441,803 ---------------------------------------------------------------------------- $ 2,552,209 $ 2,345,985 ============================================================================ The accompanying notes to consolidated financial statements are an integral part of these statements. 4 Consolidated Statements of Income Chris-Craft Industries, Inc. and Subsidiaries Year ended December 31, (In thousands except per share data) 2000 1999 1998 ---------------------------------------------------------------------------- Operating Revenues: Television revenues $ 505,504 $ 469,347 $ 445,850 Sales of manufactured products 23,338 22,200 21,243 ---------------------------------------------------------------------------- 528,842 491,547 467,093 ---------------------------------------------------------------------------- Operating Expenses: Television expenses 239,763 219,936 210,947 Cost of manufactured products sold 14,408 13,833 13,754 Selling, general and administrative 159,439 163,581 147,722 ---------------------------------------------------------------------------- 413,610 397,350 372,423 ---------------------------------------------------------------------------- Operating income 115,232 94,197 94,670 ---------------------------------------------------------------------------- Other Income (Expense): Interest and other income, net 138,191 106,183 80,337 Equity loss and other related to United Paramount Network (35,696) (97,344) (88,597) ---------------------------------------------------------------------------- 102,495 8,839 (8,260) ---------------------------------------------------------------------------- Income before (benefit) provision for income taxes and minority interest 217,727 103,036 86,410 (Benefit) Provision for Income Taxes (1,100) 32,300 32,500 ---------------------------------------------------------------------------- Income before minority interest 218,827 70,736 53,910 Minority Interest 60,814 28,303 24,440 ---------------------------------------------------------------------------- Net income $ 158,013 $ 42,433 $ 29,470 ============================================================================ Weighted Average Common Shares Outstanding 34,913 34,599 34,545 ============================================================================ Earnings per Share: Basic $ 4.52 $ 1.21 $ .84 Diluted $ 3.58 $ .97 $ .67 ============================================================================ The accompanying notes to consolidated financial statements are an integral part of these statements. 5 Consolidated Statements of Cash Flows Chris-Craft Industries, Inc. and Subsidiaries
Year ended December 31, ------------------------------- (In thousands of dollars) 2000 1999 1998 ----------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income $ 158,013 $ 42,433 $ 29,470 Adjustments to reconcile net income to net cash provided from operating activities: Film contract amortization 107,851 99,735 88,507 Film contract payments (104,613) (100,834) (100,824) Programming write down 10,000 - - Depreciation and other amortization 26,259 24,378 22,088 Equity loss and other related to United Paramount Network 35,696 97,344 88,597 Net gain on disposition of marketable securities (17,541) (33,123) (5,316) Minority interest 60,814 28,303 24,440 Other 4,528 (3,482) 2,486 Changes in assets and liabilities: Accounts receivable (3,303) (12,613) 1,090 Interest receivable on tax refund (44,019) - - Other assets (3,072) (5,499) 7,271 Accounts payable and other liabilities (11,245) 23,479 1,198 Income taxes (94,600) (4,056) 8,900 ----------------------------------------------------------------------------------- Net cash provided from operating activities 124,768 156,065 167,907 ----------------------------------------------------------------------------------- Cash Flows from Investing Activities: Disposition of marketable securities 539,970 463,317 414,133 Purchase of marketable securities (484,361) (484,480) (391,963) Station acquisitions (includes $58,903 and $77,646 of intangible assets) - (61,269) (80,214) Investment in United Paramount Network (25,875) (106,550) (88,100) Other investments (5,871) (21,247) (22,153) Capital expenditures (14,353) (20,616) (12,260) Other 2,937 (3,118) (1,852) ----------------------------------------------------------------------------------- Net cash provided from (used in) investing activities 12,447 (233,963) (182,409) ----------------------------------------------------------------------------------- Cash Flows from Financing Activities: Capital transactions of subsidiaries (7,971) (2,445) (56,408) Purchase of treasury stock - (11,145) (20,171) Proceeds from exercise of employee stock options 6,060 7,020 5,783 Redemption of prior preferred stock (1,835) - - Dividends on preferred stock (382) (402) (414) ----------------------------------------------------------------------------------- Net cash used in financing activities (4,128) (6,972) (71,210) ----------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents 133,087 (84,870) (85,712) Cash and Cash Equivalents at Beginning of Year 119,427 204,297 290,009 ----------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 252,514 $ 119,427 $ 204,297 ===================================================================================
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 Consolidated Statements of Shareholders' Investment Chris-Craft Industries, Inc. and Subsidiaries
Treasury Outstanding Shares Shares -------------------------------------------- -------- Class B $1.00 $1.40 Common Common Preferred Preferred Common ------------------------------------------------------------------------------------------------------- Balance at December 31, 1997 23,652,015 7,930,384 73,399 246,601 - Comprehensive income: Net income - - - - - Other comprehensive income: Unrealized net gain on securities (net of tax of $8,954) - - - - - Reclassification adjustment (net of tax of $1,887) - - - - - Other comprehensive income, net of tax - - - - - Total comprehensive income - - - - - Capital transactions of subsidiaries - - - - - Dividends on preferred stock - - - - - Common stock dividend - 3% 708,435 237,302 - - - Conversion of preferred stock 151,109 209,566 - (10,666) - Conversion of Class B common stock 249,315 (249,315) - - - Stock options, including related tax benefits 190,722 - - - - Acquisition of treasury stock - - - - (395,400) Retirement of treasury stock (395,400) - - - 395,400 ------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 24,556,196 8,127,937 73,399 235,935 - Comprehensive income: Net income - - - - - Other comprehensive income: Unrealized net gain on securities (net of tax of $5,414) - - - - - Reclassification adjustment (net of tax of $11,624) - - - - - Other comprehensive income, net of tax - - - - - Total comprehensive income - - - - - Capital transactions of subsidiaries - - - - - Dividends on preferred stock - - - - - Common stock dividend - 3% 733,553 242,313 - - - Conversion of preferred stock 54,232 46 - (1,561) - Conversion of Class B common stock 373,004 (373,004) - - - Stock options, including related tax benefits 310,278 - - - - Acquisition of treasury stock - - - - (245,500) Retirement of treasury stock (245,500) - - - 245,500 ------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 25,781,763 7,997,292 73,399 234,374 - Comprehensive income: Net income - - - - - Other comprehensive income: Unrealized net gain on securities (net of tax of $1,760) - - - - - Reclassification adjustment (net of tax of $5,629) - - - - - Other comprehensive income, net of tax - - - - - Total comprehensive income - - - - - Capital transactions of subsidiaries - - - - - Dividends on preferred stock - - - - - Common stock dividend - 3% 776,123 238,632 - - - Conversion of preferred stock 56,127 - - (1,565) - Conversion of Class B common stock 403,230 (403,230) - - - Stock options, including related tax benefits 150,316 - - - - Redemption of prior preferred stock - - (73,399) - - ------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 27,167,559 7,832,694 - 232,809 - ======================================================================================================= Dollar Amount (In thousands) ------------------------------------------------------------------------------ Accumulated Other Common Preferred Capital Retained Treasury Comprehensive Comprehensive Stocks Stocks Surplus Earnings Stock Income Income ------------------------------------------------------------------------------ Balance at December 31, 1997 $16,582 $ 5,893 $ 343,956 $ 1,010,384 $ - $ 6,365 Comprehensive income: Net income - - - 29,470 - - $ 29,470 -------- Other comprehensive income: Unrealized net gain on securities (net of tax of $8,954) - - - - - - 12,199 Reclassification adjustment (net of tax of $1,887) - - - - - - (2,494) -------- Other comprehensive income, net of tax - - - - - 9,705 9,705 -------- Total comprehensive income - - - - - - $ 39,175 ======== Capital transactions of subsidiaries - - (924) - - - Dividends on preferred stock - - - (414) - - Common stock dividend - 3% 473 - 45,783 (46,256) - - Conversion of preferred stock 180 (186) 6 - - - Conversion of Class B common stock - - - - - - Stock options including related tax benefits 96 - 6,877 - - - Acquisition of treasury stock - - - - (19,521) - Retirement of treasury stock (198) - (19,323) - 19,521 - ----------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 17,133 5,707 376,375 993,184 - 16,070 Comprehensive income: Net income - - - 42,433 - - $ 42,433 -------- Other comprehensive income: Unrealized net gain on securities (net of tax of $5,414) - - - - - - 7,623 Reclassification adjustment (net of Tax of $11,624) - - - - - - (17,039) -------- Other comprehensive income, net of tax - - - - - (9,416) (9,416) -------- Total comprehensive income - - - - - - $ 33,017 ======== Capital transactions of subsidiaries - - 1,474 - - - Dividends on preferred stock - - - (402) - - Common stock dividend - 3% 488 - 43,328 (43,817) - - Conversion of preferred stock 27 (27) - - - - Conversion of Class B common stock - - - - - - Stock options, including related tax benefits 155 - 10,236 - - - Acquisition of treasury stock - - - - (11,145) - Retirement of treasury stock (122) - (11,023) - 11,145 - ----------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 17,681 5,680 420,390 991,398 - 6,654 Comprehensive income: Net income - - - 158,013 - - $158,013 -------- Other comprehensive income: Unrealized net gain on securities (net of tax of $1,760) - - - - - - 2,426 Reclassification adjustment (net of tax of $5,629) - - - - - - (6,394) -------- Other comprehensive income, net of tax - - - - - (3,968) (3,968) -------- Total comprehensive income - - - - - - $154,045 ======== Capital transactions of subsidiaries - - 1,055 - - - Dividends on preferred stock - - - (382) - - Common stock dividend - 3% 507 - 61,373 (61,880) - - Conversion of preferred stock 28 (27) (1) - - - Conversion of Class B common stock - - - - - - Stock options, including related tax benefits 75 - 7,441 - - - Redemption of prior preferred stock - (1,578) (257) - - - ----------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 $18,291 $ 4,075 $ 490,001 $ 1,087,149 $ - $ 2,686 =======================================================================================================================
The accompanying notes to consolidated financial statements are an integral part of these statements. 7 Notes to Consolidated Financial Statements Chris-Craft Industries, Inc. and Subsidiaries NOTE 1 ----------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (A) BUSINESS AND BASIS OF PRESENTATION Chris-Craft's primary business is television broadcasting, conducted through its majority owned (80.0% at December 31, 2000 and 1999) television broadcasting subsidiary, BHC Communications, Inc. BHC wholly owned subsidiaries operate three television stations, and BHC's majority owned (57.9% at December 31, 2000 and 58.1% at December 31, 1999) subsidiary, United Television, Inc. (UTV), operates seven television stations. BHC accounted for its interest in the partnership that operated the United Paramount Network (UPN), a broadcast television network which premiered in January 1995, under the equity method. BHC recorded 100% of UPN's start-up losses from the network's 1994 inception through January 15, 1997, when Viacom Inc. completed its acquisition of a 50% interest in the partnership. Thereafter, BHC has recorded 50% of UPN's start-up losses. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom. As a result of the sale, BHC has no further ownership interest in the network or obligation to fund UPN's operations. The accompanying consolidated financial statements include the accounts of Chris-Craft and its subsidiaries, after elimination of all significant intercompany accounts and transactions. The pro rata interests of BHC and UTV minority shareholders in the net income and net assets of BHC and UTV are set forth as Minority Interest in the Consolidated Statements of Income and Consolidated Balance Sheets, respectively. Chris-Craft has elected to present Comprehensive Income in the Consolidated Statements of Shareholders' Investment. Such amounts have been presented net of income taxes and minority interests. Preparation of financial statements in accordance with generally accepted accounting principles requires the use of management estimates and assumptions. Actual results could differ. (B) FINANCIAL INSTRUMENTS Cash equivalents are securities having maturities at time of purchase not exceeding three months. The fair value of cash equivalents approximates carrying value, reflecting their short maturities. All of Chris-Craft's marketable securities have been categorized as available for sale and are carried at fair market value. Since marketable securities are available for current operations, all are included in current assets, as follows: Gross Unrealized ---------------- (In thousands) Cost Gains Losses Fair Value December 31, 2000: U.S. Government securities $ 1,091,231 $ 1,777 $ 33 $ 1,092,975 Other 95,909 5,275 1,556 99,628 -------------------------------------------------------------------------- $ 1,187,140 $ 7,052 $ 1,589 $ 1,192,603 ========================================================================== 8 Gross Unrealized ---------------- (In thousands) Cost Gains Losses Fair Value December 31, 1999: U.S. Government securities $ 1,149,089 $ 35 $ 2,520 $ 1,146,604 Other 75,342 21,090 2,795 93,637 -------------------------------------------------------------------------- $ 1,224,431 $21,125 $ 5,315 $ 1,240,241 ========================================================================== Of the U.S. Government securities held at December 31, 2000, 99% mature within one year and all within 17 months. Certain additional information related to Chris-Craft's marketable securities as of and for the years ended December 31, 2000, 1999 and 1998 is as follows: (In thousands) 2000 1999 1998 ------------------------------------------------------------------------- Sales proceeds $ 539,970 $ 463,317 $ 414,133 Realized gains 19,702 33,153 6,018 Realized losses 2,161 30 702 Net unrealized gain 5,463 15,810 33,621 Adjustment for unrealized gain, net of deferred income taxes and minority interests $ 2,686 $ 6,654 $ 16,070 ========================================================================= For purposes of computing realized gains and losses, cost was determined using the specific identification method. (C) FILM CONTRACTS Chris-Craft's television stations own film contract rights which allow generally for limited showings of films and syndicated programs. Film contract rights and related liabilities are recorded when the programming becomes available for telecasting. Contracts are amortized over the estimated number of showings, using primarily accelerated methods as films are used, based on management's estimates of the flow of revenue and the ultimate total cost for each contract. In the opinion of management, future revenue derived from airing programming will be sufficient to cover related unamortized rights balances at December 31, 2000. The estimated costs of recorded film contract rights to be charged to income within one year are included in current assets; payments on such contracts due within one year are included in current liabilities. The approximate future maturities of film contracts payable after one year at December 31, 2000 are $51,148,000, $36,644,000, $11,360,000 and $2,319,000 in 2002, 2003, 2004 and thereafter, respectively. The net present value at December 31, 2000 of such payments, based on a 9.5% discount rate, was approximately $79,900,000. See Note 9. In the 2000 second quarter, Chris-Craft recorded an impairment charge of $10 million related to one of its programs. (D) DEPRECIATION AND AMORTIZATION Depreciation of property and equipment is generally provided on the straight-line method over the estimated useful lives of the assets, ranging from three to 40 years, except that leasehold improvements are amortized over the lives of the respective leases, if shorter. (E) INTANGIBLE ASSETS Intangible assets reflect the excess of the purchase prices of businesses acquired over net tangible assets at dates of acquisition. The carrying values of such intangibles as of December 31, 2000 and 1999 are as follows: 9 (In thousands) 2000 1999 ------------------------------------------------------------------------- Television Division $ 460,019 $ 474,072 Industrial Division 774 774 ------------------------------------------------------------------------- $ 460,793 $ 474,846 ========================================================================= Television Division amounts primarily relate to television station WWOR, which was acquired in 1992, and television stations WRBW and WUTB, the assets of which were acquired in 1999 and 1998, respectively, and are being amortized on a straight-line basis over 40-year periods. Accumulated amortization of intangible assets totalled $104,709,000 at December 31, 2000 and $90,650,000 at December 31, 1999. Intangible assets at December 31, 2000 and 1999 include goodwill, net of amortization, totalling $55,217,000 and $56,652,000, respectively, resulting from purchases by BHC of its own shares at prices greater than net book value. Chris-Craft reviews its long-lived assets, identifiable intangibles and goodwill and reserves for their impairment based generally upon estimated future undiscounted cash flows whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. (F) REVENUE RECOGNITION AND BARTER TRANSACTIONS Revenue is recognized upon broadcast of television advertising and upon shipment of manufactured products. The estimated fair value of goods or services received by Chris-Craft's television stations in barter (nonmonetary) transactions, most of which relate to the acquisition of programming, is recognized as revenue when the air time is used by the advertiser. Barter revenue totalled $44,541,000 in 2000, $44,222,000 in 1999 and $47,654,000 in 1998. Barter expense in each year approximated barter revenue. (G) EARNINGS PER SHARE Earnings per share amounts have been computed as follows: Year ended December 31, (In thousands except per share data) 2000 1999 1998 ------------------------------------------------------------------------- BASIC - Net income $ 158,013 $ 42,433 $ 29,470 Less: Preferred stock dividends (381) (402) (410) ------------------------------------------------------------------------- Income available to common shareholders $ 157,632 $ 42,031 $ 29,060 ========================================================================= Weighted average common shares outstanding 34,913 34,599 34,545 ========================================================================= Basic per share amount $ 4.52 $ 1.21 $ .84 ========================================================================= 10 Year ended December 31, (In thousands except per share data) 2000 1999 1998 ------------------------------------------------------------------------- DILUTED - Income available to common shareholders $ 157,632 $ 42,031 $ 29,060 Effect of dilutive securities - Convertible preferred stock dividend 326 329 337 Dilution of UTV net income from UTV stock options (74) (76) (82) ------------------------------------------------------------------------- Income available assuming dilution $ 157,884 $ 42,284 $ 29,315 ========================================================================= Weighted average common shares outstanding 34,913 34,599 34,545 Effect of dilutive securities - Convertible preferred stock 8,396 8,442 8,707 Stock options 841 483 312 ------------------------------------------------------------------------- Weighted average shares outstanding assuming dilution 44,150 43,524 43,564 ========================================================================= Diluted per share amount $ 3.58 $ .97 $ .67 ========================================================================= All securities which could dilute per share amounts are included in the computation of diluted earnings per share. (H) STOCK-BASED COMPENSATION Chris-Craft has chosen to continue to account for stock-based compensation using the intrinsic value method. See Note 6. (I) SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NONCASH INVESTING ACTIVITIES Cash paid for income taxes totalled $93,700,000 in 2000, $36,100,000 in 1999 and $30,600,000 in 1998. NOTE 2 ------------------------------------------------------------------------------ UNITED PARAMOUNT NETWORK AND OTHER INVESTMENTS: In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group, formed the United Paramount Network, a broadcast television network which premiered in January 1995. BHC owned 100% of UPN from its inception through January 15, 1997, when Viacom completed the exercise of its option to acquire a 50% interest in UPN, and, accordingly, BHC and Viacom shared equally in UPN's losses and funding requirements. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom. As a result of the sale, BHC has no further ownership interest in the network or obligation to fund UPN's operations. UPN had been organized as a partnership, and BHC's partnership interest was accounted for under the equity method. At December 31, 1999, the carrying value of such interest totalled $9,821,000, and is included in Investments on the accompanying Consolidated Balance Sheets. Equity loss and other related to UPN in the accompanying Consolidated Statements of Income totalled $35,696,000 for 11 the year ended December 31, 2000 and includes equity loss in UPN of $22,574,000, loss on sale of BHC's interest in UPN of $11,347,000, and related expenses of $1,775,000. Condensed consolidated financial statements of UPN, insofar as reflected in Chris-Craft's financial statements, are as follows: BALANCE SHEET December 31, (In thousands) 1999 ------------------------------------------------------------------------- Current assets $ 85,531 Other assets 30,826 ------------------------------------------------------------------------- $ 116,357 ========================================================================= Current liabilities $ 96,715 Partners' capital 19,642 ------------------------------------------------------------------------- $ 116,357 ========================================================================= STATEMENTS OF OPERATIONS Year ended December 31, (In thousands) 2000* 1999 1998 ------------------------------------------------------------------------- Operating revenues $ 36,535 $ 134,127 $ 96,401 Operating expenses 81,964 325,845 275,165 ------------------------------------------------------------------------- Operating loss (45,429) (191,718) (178,764) Other income (expense), net 281 (2,970) 1,571 ------------------------------------------------------------------------- Net loss $ (45,148) $ (194,688) $ (177,193) ========================================================================= * Reflects UPN's results of operations through March 31, 2000, the date BHC sold its remaining interest. The following information as it relates to UPN is provided in accordance with Statement of Financial Accounting Standards (SFAS) 131. See Note 10. Year ended December 31, (In thousands) 1999 1998 ------------------------------------------------------------------------- Depreciation and amortization $ 751 $ 2,069 Capital expenditures $ 454 $ 1,565 Also included in Investments on the accompanying Consolidated Balance Sheets are Chris-Craft's other investments which it considers long-term. In December 2000, Chris-Craft recorded an impairment charge of $10 million related to these investments. 12 NOTE 3 ----------------------------------------------------------------------------- ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: December 31, (In thousands) 2000 1999 ------------------------------------------------------------------------- Accounts payable $ 10,723 $ 9,830 Accrued expenses - Payroll and compensation 64,777 76,189 Deferred barter revenue 41,978 39,754 Other 28,498 27,736 ------------------------------------------------------------------------- $ 145,976 $ 153,509 ========================================================================= NOTE 4 ----------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENT: In September 2000, Chris-Craft redeemed all 73,399 outstanding shares of its $1.00 prior preferred stock at a redemption price of $25.00 per share. Each share of $1.40 convertible preferred stock is redeemable by Chris-Craft at $40.00 and is convertible into common stock as set forth below. Chris-Craft has authorized 10,000,000 shares of preferred stock, $1.00 par value, that may be issued without further shareholder approval, in one or more series, the terms and provisions of which shall be set by the Board of Directors. Each share of Class B common stock entitles the holder to ten votes (common stock entitles the holder to one vote per share), is convertible at all times into common stock on a share-for-share basis, is not transferable except to specified persons ("Permitted Transferees") and, in general, carries the same per share dividend and liquidation rights as a share of common stock, except that the Board of Directors may in its discretion declare greater cash dividends per share on the common stock than on the Class B common stock. No additional Class B shares may be issued without further shareholder approval, except upon the conversion of $1.40 convertible preferred shares by holders of record on November 10, 1986 (the record date for the initial distribution of Class B common stock) or Permitted Transferees, or in payment of stock dividends or stock splits on outstanding shares of Class B common stock. So long as any Class B common stock is outstanding, each share of $1.40 convertible preferred stock will entitle the holder on November 10, 1986, or Permitted Transferees, to convert such share of $1.40 convertible preferred stock into 11.97643 shares of common stock and 23.95286 shares of Class B common stock, and to 252.0 votes. The foregoing special conversion and voting rights will be available to holders of $1.40 convertible preferred stock transferred after November 10, 1986 only under the same circumstances as those in which the Class B common stock is transferable. Each share of $1.40 convertible preferred stock transferred after November 10, 1986 entitles its holder (other than a Permitted Transferee) to convert such share into 35.92929 shares of common stock and 35.9 votes. Chris-Craft, from time to time, has purchased shares of its capital stock, including 1999 purchases of 245,500 shares of common stock. No shares were purchased in 2000, and, at December 31, 2000, 586,602 shares of common stock remained authorized for purchase. 13 As of December 31, 2000, shares of Chris-Craft's authorized but unissued common stock were reserved for issuance as follows: Shares ------------------------------------------------------------------------- Conversion of Class B common stock 7,832,694 Conversion of $1.40 convertible preferred stock* 8,364,662 Stock options (including options outstanding for 3,629,386 shares) 4,969,126 ------------------------------------------------------------------------- 21,166,482 ========================================================================= * Including Class B common shares. NOTE 5 ----------------------------------------------------------------------------- CAPITAL TRANSACTIONS OF SUBSIDIARIES: BHC had outstanding, at December 31, 2000, 4,511,605 shares of Class A common stock and 18,000,000 shares of Class B common stock. Chris-Craft owns all outstanding Class B common shares and 10,000 Class A common shares, which represented 80% of BHC's then outstanding equity and 97.6% of BHC's voting power. From January 1990, when BHC became a public company and was 60% owned by Chris-Craft, through December 31, 1998, BHC purchased 6,895,590 shares of its Class A common stock, including 226,503 from UTV in 1998, at an aggregate cost of $516,503,000. BHC treasury stock expenditures totalled $46,305,000 in 1998. Since December 31, 1998, no additional shares were acquired by BHC. At December 31, 2000, 185,497 Class A common shares remained authorized for purchase. UTV has also acquired its own shares, expending $828,000 in 1999 and $7,010,000 in 1998, and received proceeds of $3,049,000 in 2000, $4,849,000 in 1999 and $3,579,000 in 1998 from the exercise of stock options. There were no shares acquired by UTV in 2000. Such transactions, together with BHC special dividends of $2.00 per share in 2000, and $1.00 per share in 1999 and 1998, and UTV dividends of $.50 per share in 2000, 1999 and 1998, are reflected in the accompanying Consolidated Statements of Cash Flows and Consolidated Statements of Shareholders' Investment under the caption Capital transactions of subsidiaries, net of intercompany eliminations and minority interests. NOTE 6 ----------------------------------------------------------------------------- STOCK OPTIONS: Under the 1999 Management Incentive Plan, adopted by Chris-Craft shareholders in May 1999, options (including Incentive Stock Options) to purchase shares of common stock may be granted from time to time to employees of Chris-Craft and its subsidiaries, at prices not less than the fair market value at date of grant. The 1999 Plan replaced a similar plan, the 1994 Plan, which was terminated with respect to the grant of additional options when the 1999 Plan became effective. One grant of options under the 1999 Plan is exercisable in 50% installments commencing four years from date of grant. All other options are exercisable in cumulative annual installments of 33 1/3% commencing one year from date of grant. Options expire over a period determined by the Plan Committees, which may not exceed ten years from date of grant. Options currently outstanding expire either five or ten years from date of grant. Both the 1999 Plan and the 1994 Plan permit the Plan Committees to award stock appreciation rights to holders of options granted under the Plans. Such rights entitle the holders, in lieu of exercising their options, to receive payment from Chris-Craft in cash, stock or a combination thereof, equal to the greater of the appreciation in market value or book value of the shares covered by exercisable options. No stock appreciation rights have been awarded under either Plan. 14 Transactions under the two Plans during the three years ended December 31, 2000 were as follows: Weighted Average (In thousands of dollars except Shares under Exercise per share data) Option Price Total ----------------------------------------------------------------------------- Outstanding, December 31, 1997 1,050,511 $ 31.72 $ 33,321 Increase to reflect 3% stock dividend 30,333 - - Granted 122,500 $ 51.31 6,285 Exercised (174,571) $ 31.21 (5,449) ----------------------------------------------------------------------------- Outstanding, December 31, 1998 1,028,773 $ 33.20 34,157 Increase to reflect 3% stock dividend 76,300 - - Granted 2,716,800 $ 51.14 138,947 Exercised (364,618) $ 30.78 (11,222) Cancelled (7,897) $ 49.89 (394) ----------------------------------------------------------------------------- Outstanding, December 31, 1999 3,449,358 $ 46.82 161,488 Increase to reflect 3% stock dividend 103,156 - - Granted 40,000 $ 75.75 3,030 Exercised (114,514) $ 43.82 (5,018) Cancelled (57,459) $ 41.82 (2,403) ----------------------------------------------------------------------------- Outstanding December 31, 2000 3,420,541 $ 45.93 $ 157,097 ============================================================================= Of the 3,420,541 shares subject to options under the above plans at December 31, 2000, 1,089,051 shares are subject to options currently exercisable at $28.79 to $49.83 per share that expire from June 14, 2003 through January 7, 2009. The remaining 2,331,490 shares are subject to options exercisable at $40.89 to $73.54 per share that expire from June 14, 2003 to September 27, 2009. At December 31, 2000, options for 1,297,802 shares were available for grant under the 1999 Plan. Chris-Craft received 0 common shares in 2000, 83,310 common shares in 1999 and 7,396 common shares in 1998 as partial payment of exercised options. Under the 1994 Director Stock Option Plan, a fixed number of immediately exercisable options to purchase shares of common stock are granted annually to each nonemployee director of Chris-Craft, at prices equal to fair market value at date of grant. The 1994 Director Stock Option Plan replaced a similar plan which has been terminated with respect to the grant of additional options. Transactions under the two Plans during the three years ended December 31, 2000 were as follows: Weighted Average (In thousands of dollars Shares under Exercise except per share data) Option Price Total ----------------------------------------------------------------------- Outstanding, December 31, 1997 159,600 $ 36.87 $ 5,885 Increase to reflect 3% stock dividend 4,597 - - Granted 45,008 $ 56.50 2,542 Exercised (23,547) $ 31.46 (741) ----------------------------------------------------------------------- Outstanding, December 31, 1998 185,658 $ 41.40 7,686 Increase to reflect 3% stock dividend 5,544 - - Granted 46,352 $ 47.00 2,178 Exercised (28,970) $ 29.66 (859) ----------------------------------------------------------------------- Outstanding, December 31, 1999 208,584 $ 43.17 9,005 Increase to reflect 3% stock dividend 6,228 - - Granted 29,835 $ 63.00 1,880 Exercised (35,802) $ 29.16 (1,044) ----------------------------------------------------------------------- Outstanding, December 31, 2000 208,845 $ 47.12 $ 9,841 ======================================================================= 15 Of the 208,845 shares subject to options under the 1994 Director Stock Option Plan at December 31, 2000, 131,274 are subject to options currently exercisable at $38.21 to $53.26 per share that expire from April 24, 2001 through May 2, 2003. The remaining 77,571 shares are subject to options currently exercisable at $45.63 to $63.00 per share that expire from May 3, 2004 to May 15, 2005. At December 31, 2000, options for 41,938 shares were available for grant under this plan. UTV also maintains stock option plans, and has chosen, like Chris-Craft, to continue to account for stock-based compensation using the intrinsic value method. If Chris-Craft and UTV had elected to recognize compensation expense based upon the fair value at the grant date for awards under their plans using the methodology prescribed by SFAS 123, Chris-Craft net income and earnings per share would have been the pro forma amounts as follows: Year ended December 31, (In thousands except per share amounts) 2000 1999 1998 ----------------------------------------------------------------------------- Net income: As reported $ 158,013 $ 42,433 $ 29,470 Pro forma $ 152,058 $ 37,608 $ 28,975 Earnings per share: Basic - As reported $ 4.52 $ 1.21 $ .84 Pro forma $ 4.34 $ 1.08 $ .83 Diluted - As reported $ 3.58 $ .97 $ .67 Pro forma $ 3.44 $ .86 $ .66 These pro forma amounts may not be representative of the pro forma effect on net income in future years, since the estimated fair value of stock options is amortized over the vesting period, pro forma compensation expense related to grants made prior to 1995 is not considered and additional options may be granted in future years. The weighted average fair values of Chris-Craft options granted during 2000, 1999 and 1998 were $16.87, $11.10 and $12.24 per share, respectively, at dates of grant. The fair values of options were estimated using the Black-Scholes option pricing model with the following weighted average assumptions for the years ended December 31, 2000, 1999 and 1998, respectively: dividend yields of zero for all periods; expected volatility of 16.7%, 17.6% and 15.6%; risk free interest rates of 6.6%, 5.1% and 5.4%; and expected option life of 3.5, 3.5 and 3.9 years. NOTE 7 ----------------------------------------------------------------------------- RETIREMENT PLANS: Chris-Craft and UTV maintain noncontributory defined benefit pension plans covering substantially all their employees. Benefits accrue annually based on compensation paid to participants each year. The funding policy is to contribute annually to the plans amounts sufficient to fund current service costs and to amortize any unfunded accrued liability over periods not to exceed 30 years. The estimated funded status of the Chris-Craft and UTV plans, including amounts accrued in the nonqualified plans, was as follows: 16 December 31, (In thousands) 2000 1999 ----------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ 56,922 $ 59,181 Service cost 4,095 4,065 Interest cost 4,687 3,931 Actuarial loss/(gain) 12,580 (7,825) Benefits paid (1,939) (2,430) ----------------------------------------------------------------------------- Benefit obligation at end of year 76,345 56,922 ----------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year 42,010 37,219 Actual return on plan assets 975 3,082 Employer contributions 5,381 4,139 Benefits paid (1,939) (2,430) ----------------------------------------------------------------------------- Fair value of plan assets at end of year 46,427 42,010 ----------------------------------------------------------------------------- Plan assets less than projected benefit obligation (29,918) (14,912) Unrecognized initial net asset 16 (34) Unrecognized prior service cost 651 699 Unrecognized net actuarial loss/(gain) 5,628 (9,308) ----------------------------------------------------------------------------- Pension liability $ (23,623) $ (23,555) ============================================================================= Pension expense, including amounts accrued in Chris-Craft and UTV nonqualified plans for retirement benefits in excess of statutory limitations, was as follows: Year ended December 31, (In thousands) 2000 1999 1998 ----------------------------------------------------------------------------- Service cost $ 4,095 $ 4,065 $ 4,187 Interest cost 4,687 3,931 3,574 Expected return on plan assets (3,324) (2,912) (2,533) Amortization: Initial unrecognized net asset (50) (50) (50) Prior service cost 48 48 47 Actuarial gain (7) - (9) ----------------------------------------------------------------------------- Net periodic pension cost $ 5,449 $ 5,082 $ 5,216 ============================================================================= Assumptions used in accounting for pension plans for each year are as follows: 2000 1999 1998 ----------------------------------------------------------------------------- Discount rate 7.00% 7.50% 6.75% Rate of increase in future compensation levels 4.00% 4.00% 4.00% Expected long-term rate of return on assets 7.75% 7.75% 7.75% The accumulated benefit obligation, projected benefit obligation and fair value of plan assets for the above plans that had an accumulated benefit obligation in excess of the fair value of plan assets were $37,823,000, $47,410,000, and $20,437,000, respectively, at December 31, 2000 and $10,456,000, $13,972,000 and $0, respectively, at December 31, 1999. Chris-Craft and certain of its subsidiaries maintain other retirement plans, primarily stock purchase and profit sharing plans. The aggregate costs of such plans, including related amounts accrued in the nonqualified plans referred to above, were $4,193,000 in 2000, $18,263,000 in 1999 and $8,931,000 in 1998. 17 NOTE 8 ----------------------------------------------------------------------------- INCOME TAXES: Income taxes are provided in the accompanying Consolidated Statements of Income as follows: Year ended December 31, (In thousands) 2000 1999 1998 ----------------------------------------------------------------------------- Current: Federal $ (8,500) $ 29,300 $ 24,300 State 7,300 10,000 8,500 ----------------------------------------------------------------------------- (1,200) 39,300 32,800 ----------------------------------------------------------------------------- Deferred: Federal (200) (7,200) (800) State 300 200 500 ----------------------------------------------------------------------------- 100 (7,000) (300) ----------------------------------------------------------------------------- $ (1,100) $ 32,300 $ 32,500 ============================================================================= In December 2000, BHC and the Internal Revenue Service settled for $124.4 million, including $42.9 million in interest through December 31, 2000, BHC's previously denied claim for a refund for capital losses generated in 1993. In addition, BHC recorded a corresponding state tax refund of $9.6 million, including $800,000 of interest through December 31, 2000. The IRS paid BHC a total of $126.1 million, which was received on March 14, 2001. Differences between income taxes at the federal statutory income tax rate and total income taxes provided are as follows: Year ended December 31, (In thousands) 2000 1999 1998 ----------------------------------------------------------------------------- Taxes at federal statutory rate $ 76,204 $ 36,063 $ 30,244 State income taxes, net 4,941 6,630 5,850 Amortization of intangible assets 3,626 3,626 3,250 Dividend from BHC - 1,260 1,260 Reversal of valuation allowance - (8,973) - Realization of tax benefit (86,300) (6,500) (8,500) Other 429 194 396 ----------------------------------------------------------------------------- $ (1,100) $ 32,300 $ 32,500 ============================================================================= In 1999, the valuation allowance was reversed as the uncertainty regarding realization was removed when BHC became a member of the Chris-Craft affiliated group. Deferred tax assets and deferred tax liabilities reflect the tax effect of the following differences between financial statement carrying amounts and tax bases of assets and liabilities: 18 December 31, (In thousands) 2000 1999 ----------------------------------------------------------------------------- Accrued liabilities not deductible until paid $ 34,124 $ 36,759 Film contract rights 9,527 8,254 Tax credit and loss carryforwards - 2,947 Investments 8,898 - Other 291 205 ----------------------------------------------------------------------------- Deferred tax assets 52,840 48,165 ----------------------------------------------------------------------------- Investments - (12,402) Other intangibles (4,392) (3,324) Property and equipment (2,286) (2,259) Receivable not yet taxable (15,298) - SFAS 115 adjustment (1,940) (5,809) ----------------------------------------------------------------------------- Deferred tax liabilities (23,916) (23,794) ----------------------------------------------------------------------------- Net deferred tax assets $ 28,924 $ 24,371 ============================================================================= Tax benefits of $1,457,000, $3,371,000 and $1,189,000 arising from the exercise of employee stock options were credited to capital surplus in 2000, 1999 and 1998, respectively. NOTE 9 ----------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES: The aggregate amount payable by Chris-Craft's television stations under contracts for programming not currently available for telecasting and, accordingly, not included in film contracts payable and the related contract rights in the accompanying Consolidated Balance Sheets totalled $280,100,000 at December 31, 2000 (including $104,000,000 applicable to UTV). At December 31, 2000, UTV remains obligated for possible future consideration relating to the purchase of WRBW of up to $25,000,000. In April 1999, a jury awarded damages totalling $7.3 million (approximately $8.8 million including legal fees and interest through March 2001) to a former WWOR employee who filed suit alleging discrimination by the station. The station and its counsel believe the award to be unjustified and have filed an appeal which is scheduled to be heard in late March 2001. It is not possible to reasonably estimate the amount, if any, which ultimately will be paid. Accordingly, no amount has been reserved in Chris-Craft's financial statements relating to this matter. Montrose Chemical Corporation of California, whose stock is 50% owned by Chris-Craft and 50% by a subsidiary of AstraZeneca Inc., discontinued its manufacturing operations in 1983 and has since been defending claims for costs and damages relating to environmental matters. Chris-Craft is a defendant in certain of these actions. After insurance reimbursements totalling $11,105,000 in 2000, $1,174,000 in 1999 and $3,611,000 in 1998, Montrose-related net (recoveries) expenses of $(1,356,000) in 2000, $1,632,000 in 1999 and $1,279,000 in 1998, are included in the accompanying Consolidated Statements of Income under the caption Interest and other income, net. Montrose is one of numerous defendants in a suit relating to alleged environmental impairment at the Stringfellow Hazardous Waste Disposal Site in California, brought in 1983 by the Federal Government and the State of California, which claim Montrose generated approximately 19% of the waste placed at the site. In 1990, the U.S. Environmental Protection Agency issued a Record 19 of Decision for the site, which selected some of the interim remedial measures preferred by the EPA and the State, the present value of which was estimated by them to be $169 million, although the estimate is subject to potential variations of up to 50%. A ruling issued in 1995 allocated at least 65% of the liability (under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ["CERCLA"]) at the site to the State of California and approximately 25% of the liability to the generator defendants (including Montrose). A separate ruling under California law allocated 100% of the liability to the State. The State's appeal of the allocation rulings is pending. In December 1998, the State and the defendants, including Montrose, preliminarily agreed to a structure that, if certain conditions are satisfied, would resolve the Stringfellow suit. Chris-Craft is not a defendant. In May 1998, a group of approximately 750 current or former residents of the vicinity of the Stringfellow Site filed suit against Montrose, Chris-Craft and approximately 160 other defendants alleging personal injury and property damage from exposure to the site. In March 2000, the court dismissed the complaint as to all but approximately 125 plaintiffs on statute of limitations grounds. In February 2001, an individual plaintiff filed a similar action. In June 1990, the Federal Government and the State of California commenced an action against Montrose, Chris-Craft, affiliates of AstraZeneca and other defendants, alleging that Montrose and others released hazardous substances into Los Angeles Harbor and adjacent waters, and seeking to recover damages resulting from alleged injury to natural resources. In 1997, the Federal and State Governments stated they estimated the alleged damages at approximately $482 million. In December 2000, following a partial trial in October 2000, Montrose, Chris-Craft and the AstraZeneca affiliates entered into a partial consent decree that settled all claims against them respecting offshore areas for a collective total of $73 million, of which Montrose paid $50 million into escrow in January 2001, with the remaining $23 million to be paid by Montrose by May 1, 2001. The consent decree was entered by the court in March 2001. The action also seeks recovery for costs related to alleged hazardous substance contamination of the Montrose plant site in Torrance, California. Chris-Craft's potential liability for such costs was tried at the October 2000 trial, and a ruling is expected in June 2001 at the earliest. Chris-Craft contended that it is not liable and that it neither owned nor operated the facilities involved, nor did it arrange for the disposal of hazardous substances. Based on the available information, the status of the proceeding, and the applicable legal and accounting standards, Chris-Craft, in reliance among other things on the advice of counsel, believes that it should have no liability (under CERCLA or otherwise) for the operations of Montrose and does not presently consider liability to be "probable." Accordingly, under SFAS No. 5, "Accounting for Contingencies," no amount has been reserved for this action in Chris-Craft's financial statements. In September 1994, the EPA designated Chris-Craft as a "potentially responsible party" under CERCLA (a "PRP") in connection with the Diamond Alkali Superfund Site on the Passaic River in Newark, New Jersey. The EPA alleges that hazardous substances were released into the river from a facility operated by a Chris-Craft predecessor company. The facility was located near the Diamond Alkali property, but not on the river front, and was sold by Chris-Craft in 1972. Chris-Craft disputes that it is a responsible party. The former owner of the Diamond Alkali property is currently performing a study estimated to cost approximately $10 million to determine the extent of contamination in the area and to evaluate possible corrective actions. The Diamond Alkali Superfund Site matter does not involve Montrose, and based on the review to date by Chris-Craft and its counsel, they believe Chris-Craft has been erroneously identified as a PRP at the site; Chris-Craft is unable to determine at this stage if it could have any liability at the site. 20 If a court ultimately rejected Chris-Craft's defenses in one or more of the foregoing matters, under CERCLA, Chris-Craft could be held jointly and severally liable, without regard to fault, for response costs and natural resource damages. A party's ultimate liability at a site generally depends on its involvement at the site, the nature and extent of contamination, the remedy selected, the role of other parties in creating the alleged contamination and the availability of contribution from those parties, as well as any insurance or indemnification agreements which may apply. In most cases, both the resolution of the complex issues involved and any necessary remediation expenditures occur over a number of years. Future legal and technical developments in each of the foregoing matters will be periodically reviewed to determine if an accrual of reserves for possible liability would be appropriate. Between August 14 and 21, 2000, various purported stockholders of BHC filed complaints in the Delaware Court of Chancery entitled Gissen v. BHC, et al., Civil Action No. 18209; Piven v. BHC, et al., Civil Action No. 18211; Voege v. Siegel, et al., Civil Action No. 18210; Stubbe v. BHC, et al., Civil Action No. 18217; and Rand v. BHC, et al., Civil Action No. 18229 (which collectively are referred to as the "BHC lawsuits"). During the same period, various purported stockholders of UTV filed complaints in the Delaware Court of Chancery entitled Pyenson v. UTV, et al., Civil Action No. 18222; Malamud v. UTV, et al., Civil Action No. 18218; and Rand v. UTV, et al., Civil Action No. 18235 (which collectively are referred to as the "UTV lawsuits" and, together with the BHC actions, as the "Delaware actions"). The Delaware actions assert claims against Chris-Craft, UTV, BHC, and some of their officers and directors, alleging, among other things, that Chris-Craft and/or BHC and/or UTV and the individual defendants breached their fiduciary duties to stockholders, and that certain defendants engaged in self-dealing, with respect to the News Corp. acquisitions by merger of BHC and/or UTV. The Delaware actions seek class action certification and injunctive relief against Chris-Craft, BHC and UTV or, in the alternative, to obtain rescission of the mergers or rescissory damages, and other relief. On September 25, 2000, the court entered an order of consolidation, consolidating the BHC lawsuits as In re BHC Communications, Inc. Shareholders Litigation, Civil Action No. 18209 and directing the plaintiffs to file a consolidated amended complaint. On October 2, 2000, the court entered an order of consolidation, consolidating the UTV lawsuits as In re United Television, Inc. Shareholders Litigation, Civil Action No. 18218 and directing that the complaint filed in Malamud v. UTV, Civil Action No. 18218, shall be deemed the operative complaint in the consolidated action. Chris-Craft, BHC and United Television believe that the Delaware actions are without merit and intend to defend them vigorously. Chris-Craft is a party to various other pending legal proceedings arising in the ordinary course of business. In the opinion of management, after taking into account the opinion of counsel with respect thereto, the ultimate resolution of these other matters will not have a material effect on Chris-Craft's consolidated financial position or results of operations. 21 NOTE 10 -------------------------------------------------------------------------------- INDUSTRY SEGMENT INFORMATION: The following table presents Chris-Craft's two reportable segments, the Television Division and the Industrial Division. UPN, which was accounted for under the equity method, was also considered a reportable segment under SFAS 131. However, all required segment information is included in Note 2. The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies." See Note 1.
Deferred Operating Depreciation Investment Tax Operating Income and Capital Segment in Assets (In thousands) Revenues (Loss) Amortization Expenditures Assets UPN (Liabilities) --------------------------------------------------------------------------------------------------------------------------- Year Ended December 31, 2000 Television Division $505,504 $131,346 $ 25,655 $ 11,595 $2,434,481(b) $ - $ 5,278 Industrial Division 23,338 4,607 567 2,811 13,118 - 214 Reconciling items (a) - (20,721) 37 3 104,610 - 23,432 ------------------------------------------------------------------------------------------------------------------------ $528,842 $115,232 $ 26,259 $ 14,409 $2,552,209 $ - $ 28,924 ======================================================================================================================== Year Ended December 31, 1999 Television Division $469,347 $114,726 $ 23,824 $ 19,636 $2,281,100(b) $ 9,821 $ (334) Industrial Division 22,200 4,204 520 945 10,943 - 211 Reconciling items (a) - (24,733) 34 45 53,942 - 24,494 ------------------------------------------------------------------------------------------------------------------------ $491,547 $ 94,197 $ 24,378 $ 20,626 $2,345,985 $ 9,821 $ 24,371 ======================================================================================================================== Year Ended December 31, 1998 Television Division $445,850 $109,299 $ 21,278 $ 11,347 $2,199,687(b) $ 615 $ (8,305) Industrial Division 21,243 3,642 424 1,119 8,738 - 234 Reconciling items (a) - (18,271) 386 67 36,998 - 19,512 ------------------------------------------------------------------------------------------------------------------------ $467,093 $ 94,670 $ 22,088 $ 12,533 $2,245,423 $ 615 $ 11,441 ========================================================================================================================
(a) Consists of Corporate Office and subsidiaries not included in Television Division or Industrial Division. Related operating loss consists solely of general and administrative expenses and, accordingly, excludes nonoperating income. Related assets consist primarily of cash and marketable securities. (b) Includes marketable securities having an aggregate carrying value of $1,136,103, at December 31, 2000, $1,219,144, at December 31, 1999 and $1,202,070 at December 31, 1998. NOTE 11 -------------------------------------------------------------------------------- PROPOSED MERGER: As reported in Chris-Craft's Current Report on Form 8-K, dated August 23, 2000, Chris-Craft, BHC, and UTV have each agreed to be acquired by The News Corporation Limited ("News Corp.") for consideration consisting of cash and News Corp. preferred American depositary shares. Subject to limitations set forth in 22 the respective merger agreements, Chris-Craft, BHC and UTV stockholders may elect to receive the consideration as all cash, all stock or a combination thereof. Consummation of each transaction is subject to stockholder approval, receipt of Federal Communications Commission and other regulatory approvals, and satisfaction of other customary conditions. Chris-Craft has agreed to vote its BHC stock in favor of the acquisition of BHC by News Corp., and BHC has agreed to vote its UTV stock in favor of the acquisition of UTV by News Corp. The parties anticipate that the transactions will be completed in the first half of 2001. Quarterly Financial Information (Unaudited) Chris-Craft Industries, Inc. and Subsidiaries
(In thousands of dollars First Second Third Fourth except per share data) Quarter Quarter Quarter Quarter Year ---------------------------------------------------------------------------------------- Year Ended December 31, 2000 Operating revenues $127,834 $138,040 $124,668 $138,300 $528,842 Operating income 28,825 32,296 22,924 31,187 115,232 Interest and other income, net 20,533 25,235 26,096 66,327 138,191 Equity loss and other related to United Paramount Network (35,696) - - - (35,696) Income before income taxes and minority interest 13,662 57,531 49,020 97,514 217,727 Net income 2,935 20,389 19,266 115,423 158,013 Earnings per share - Basic .08 .58 .55 3.30 4.52 Diluted $ .07 $ .46 $ .43 $ 2.62 $ 3.58 Year Ended December 31, 1999 Operating revenues $111,460 $123,825 $119,804 $136,458 $491,547 Operating income 19,566 27,687 24,351 22,593 94,197 Interest and other income, net 18,676 24,464 18,190 44,853 106,183 Equity loss and other related to United Paramount Network (30,150) (27,188) (16,900) (23,106) (97,344) Income before income taxes and minority interest 8,092 24,963 25,641 44,340 103,036 Net income 748 6,722 7,761 27,202 42,433 Earnings per share - Basic .02 .19 .22 .78 1.21 Diluted $ .02 $ .15 $ .18 $ .62 $ .97
23 EX-99.2 4 dex992.txt CONSOLIDATED FINANCIAL STATEMENTS FOR BHC Exhibit 99.2 BHC COMMUNICATIONS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Accountants Consolidated Balance Sheets - December 31, 2000 and 1999 Consolidated Statements of Income - For the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows - For the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Shareholders' Investment - For the Years Ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements QUARTERLY FINANCIAL INFORMATION 1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS BHC COMMUNICATIONS, INC. AND SUBSIDIARIES PricewaterhouseCoopers LLP 200 East Las Olas Blvd. Fort Lauderdale FL 33301 To the Board of Directors and Shareholders of BHC Communications, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' investment and cash flows present fairly, in all material respects, the financial position of BHC Communications, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP March 8, 2001, except as to Note 6 which is as of March 14, 2001 2 CONSOLIDATED BALANCE SHEETS BHC COMMUNICATIONS, INC. AND SUBSIDIARIES December 31, ---------------------------- (In Thousands of Dollars) 2000 1999 --------------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 235,796 $ 117,184 Marketable securities (substantially all U.S. Government securities) 1,136,103 1,219,144 Income tax refund receivable 129,649 - Accounts receivable, less allowance for doubtful accounts of $4,120 and $4,466 102,056 99,264 Film contract rights 121,135 111,819 Prepaid expenses and other current assets 46,978 49,429 --------------------------------------------------------------------------- Total current assets 1,771,717 1,596,840 --------------------------------------------------------------------------- Investments 87,162 101,371 --------------------------------------------------------------------------- Film Contract Rights, including deposits, less estimated portion to be used within one year 43,978 39,550 --------------------------------------------------------------------------- Property and Equipment, at cost: Land, buildings and improvements 50,860 48,247 Equipment 122,973 126,862 --------------------------------------------------------------------------- 173,833 175,109 Less - Accumulated depreciation 112,014 113,231 --------------------------------------------------------------------------- 61,819 61,878 --------------------------------------------------------------------------- Intangible Assets 404,802 417,420 --------------------------------------------------------------------------- Other Assets 21,483 7,389 --------------------------------------------------------------------------- $ 2,390,961 $ 2,224,448 =========================================================================== 3 December 31, ---------------------------- 2000 1999 --------------------------------------------------------------------------- Liabilities and Shareholders' Investment Current Liabilities: Film contracts payable within one year $ 107,913 $ 102,737 Accounts payable and accrued expenses 101,234 108,435 Payable and deferred income taxes 32,006 38,696 --------------------------------------------------------------------------- Total current liabilities 241,153 249,868 --------------------------------------------------------------------------- Film Contracts Payable after One Year 101,471 84,372 --------------------------------------------------------------------------- Other Long-Term Liabilities 5,091 15,176 --------------------------------------------------------------------------- Minority Interest 180,930 160,550 --------------------------------------------------------------------------- Commitments and Contingencies (Note 7) Shareholders' Investment: Class A common stock-par value $.01 per share; authorized 200,000,000 shares; outstanding 4,511,605 shares 45 45 Class B common stock-par value $.01 per share; authorized 200,000,000 shares; outstanding 18,000,000 shares 180 180 Retained earnings 1,858,733 1,705,841 Accumulated other comprehensive income 3,358 8,416 --------------------------------------------------------------------------- 1,862,316 1,714,482 --------------------------------------------------------------------------- $ 2,390,961 $ 2,224,448 =========================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements. 4 CONSOLIDATED STATEMENTS OF INCOME BHC COMMUNICATIONS, INC. AND SUBSIDIARIES Year ended December 31, ------------------------------------ (In Thousands Except per Share Data) 2000 1999 1998 ------------------------------------------------------------------------------- Operating Revenues $ 505,504 $ 469,347 $ 445,850 Operating Expenses: Television expenses 239,763 219,936 210,947 Selling, general and administrative 146,965 147,255 138,174 ------------------------------------------------------------------------------- 386,728 367,191 349,121 ------------------------------------------------------------------------------- Operating income 118,776 102,156 96,729 ------------------------------------------------------------------------------- Other Income (Expense): Interest and other income 132,310 105,805 79,366 Equity loss and other related to United Paramount Network (35,696) (97,344) (88,597) ------------------------------------------------------------------------------- 96,614 8,461 (9,231) ------------------------------------------------------------------------------- Income before (benefit) provision for income taxes and minority interest 215,390 110,617 87,498 (Benefit) Provision for Income Taxes (2,700) 41,900 31,500 ------------------------------------------------------------------------------- Income before minority interest 218,090 68,717 55,998 Minority Interest 21,495 18,184 16,425 ------------------------------------------------------------------------------- Net income $ 196,595 $ 50,533 $ 39,573 =============================================================================== Weighted Average Common Shares Outstanding 22,512 22,512 22,614 =============================================================================== Earnings per share - Basic $ 8.73 $ 2.24 $ 1.75 Diluted $ 8.73 $ 2.24 $ 1.75 =============================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements. 5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
Treasury Outstanding Shares Shares Dollar Amount (In Thousands) ------------------ -------- ------------------------------------------------------------------- Accumulated Other Class A Class B Class A Class A Class B Retained Treasury Comprehensive Comprehensive Common Common Common Common Common Earnings Stock Income Income ------------------------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1997 5,026,108 18,000,000 (132,504) $50 $180 $1,723,402 $ (6,627) $ 7,949 Comprehensive income: Net income - - - - - 39,573 - - $ 39,573 Other comprehensive income: ======== Unrealized net gain on securities (net of tax of $9,028) - - - - - - - - 15,296 -------- Reclassification adjustment (net of tax of $1,887) - - - - - - - - (3,119) -------- Other comprehensive income, net of tax - - - - - - - 12,177 12,177 -------- Total comprehensive income - - - - - - - - $ 51,750 ======== Dividend on common stock - $1.00 per share - - - - - (22,831) - - Acquisition of treasury stock - - (514,503) - - - (62,984) - Retirement of treasury stock (514,503) - 514,503 (5) - (62,979) 62,984 - Capital transactions of subsidiary - - 132,504 - - (1,189) 6,627 - ------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1998 4,511,605 18,000,000 - 45 180 1,675,976 - 20,126 Comprehensive income: Net income - - - - - 50,533 - - $ 50,533 -------- Other comprehensive income: Unrealized net gain on securities (net of tax of $5,444) - - - - - - - - 9,588 Reclassification adjustment (net of tax of $11,624) - - - - - - - - (21,298) -------- Other comprehensive loss, net of tax - - - - - - - (11,710) (11,710) -------- Total comprehensive income - - - - - - - - $ 38,823 ======== Dividend on common stock - $1.00 per share - - - - - (22,511) - - Capital transactions of subsidiary - - - - - 1,843 - - ------------------------------------------------------------------------------------------------------------------ Balance at December 31, 1999 4,511,605 18,000,000 - 45 180 1,705,841 - 8,416 Comprehensive income: Net income - - - - - 196,595 - - $196,595 -------- Other comprehensive income: Unrealized net gain on securities (net of tax of $1,770) - - - - - - - - 3,055 Reclassification adjustment (net of tax of $5,681) - - - - - - - - (8,113) -------- Other comprehensive loss, net of tax - - - - - - - (5,058) (5,058) -------- Total comprehensive income - - - - - - - - $191,537 ======== Dividend on common stock - $2.00 per share - - - - - (45,023) - - Capital transactions of subsidiary - - - - - 1,320 - - ------------------------------------------------------------------------------------------------------------------ Balance at December 31, 2000 4,511,605 18,000,000 - $45 $180 $1,858,733 $ - $ 3,358 ==================================================================================================================
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 CONSOLIDATED STATEMENTS OF CASH FLOWS BHC COMMUNICATIONS, INC. AND SUBSIDIARIES Year ended December 31, -------------------------------- (In Thousands of Dollars) 2000 1999 1998 ------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income $ 196,595 $ 50,533 $ 39,573 Adjustments to reconcile net income to net cash provided from operating activities: Film contract amortization 107,851 99,735 88,507 Film contract payments (104,613) (100,834) (100,824) Programming write down 10,000 - - Depreciation and other amortization 24,223 22,393 21,278 Equity loss and other related to United Paramount Network 35,696 97,344 88,597 Net gain on disposition of marketable securities (17,690) (33,123) (5,316) Minority interest 21,495 18,184 16,425 Other 5,884 (4,891) 1,207 Changes in assets and liabilities: Accounts receivable (2,792) (12,715) 946 Interest receivable on tax refund (44,019) - - Other assets (3,015) (2,651) 6,559 Accounts payable and other liabilities (10,962) 14,609 5,953 Income taxes (103,518) 5,739 7,503 ------------------------------------------------------------------------------ Net cash provided from operating activities 115,135 154,323 170,408 ------------------------------------------------------------------------------ Cash Flows from Investing Activities: Disposition of marketable securities 539,901 463,317 414,133 Purchase of marketable securities (448,861) (472,472) (389,720) Station acquisitions (includes $58,903 and $77,646 of intangible assets) - (61,269) (80,214) Investment in United Paramount Network (25,875) (106,550) (88,100) Other investments (6,176) (21,247) (22,107) Capital expenditures (11,538) (19,633) (11,298) Other (3) (15) (23) ------------------------------------------------------------------------------ Net cash provided from (used in) investing activities 47,448 (217,869) (177,329) ------------------------------------------------------------------------------ Cash Flows from Financing Activities: Payment of special dividend (45,023) (22,512) (22,738) Purchase of treasury stock - - (46,305) Capital transactions of subsidiary 1,052 2,067 (5,365) ------------------------------------------------------------------------------ Net cash used in financing activities (43,971) (20,445) (74,408) ------------------------------------------------------------------------------ Net Increase (Decrease) in Cash and Cash Equivalents 118,612 (83,991) (81,329) Cash and Cash Equivalents at Beginning of Year 117,184 201,175 282,504 ------------------------------------------------------------------------------ Cash and Cash Equivalents at End of Year $ 235,796 $ 117,184 $ 201,175 ============================================================================== The accompanying notes to consolidated financial statements are an integral part of these statements. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BHC COMMUNICATIONS, INC. AND SUBSIDIARIES NOTE 1 -------------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (A) BUSINESS AND BASIS OF PRESENTATION BHC Communications, Inc. is a majority owned (80.0% at December 31, 2000 and December 31, 1999) subsidiary of Chris-Craft Industries, Inc. BHC's primary business is television broadcasting, conducted through wholly owned subsidiaries, which operate three television stations, and through majority owned (57.9% at December 31, 2000 and 58.1% at December 31, 1999) United Television, Inc. (UTV), which operates seven television stations. BHC accounted for its interest in the partnership that operated the United Paramount Network (UPN), a broadcast television network which premiered in January 1995, under the equity method. BHC recorded 100% of UPN's start-up losses from the network's 1994 inception through January 15, 1997, when Viacom Inc. completed its acquisition of a 50% interest in the partnership. Thereafter, BHC recorded 50% of UPN's start-up losses. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom. As a result of the sale, BHC has no further ownership interest in the network or obligation to fund UPN's operations. The accompanying consolidated financial statements include the accounts of BHC and its subsidiaries, after elimination of all significant intercompany accounts and transactions. The interest of UTV shareholders other than BHC in the net income and net assets of UTV is set forth as Minority Interest in the Consolidated Statements of Income and Consolidated Balance Sheets, respectively. BHC has elected to present Comprehensive Income in the Consolidated Statements of Shareholders' Investment. Such amounts have been presented net of income taxes and minority interest. Preparation of financial statements in accordance with generally accepted accounting principles requires the use of management estimates and assumptions. Actual results could differ. (B) FINANCIAL INSTRUMENTS Cash equivalents are securities having maturities at time of purchase not exceeding three months. The fair value of cash equivalents approximates carrying value, reflecting their short maturities. All of BHC's marketable securities have been categorized as available for sale and are carried at fair market value. Since marketable securities are available for current operations, all are included in current assets, as follows: Gross Unrealized ---------------- (In Thousands) Cost Gains Losses Fair Value ------------------------------------------------------------------------ December 31, 2000: U.S. Government securities $ 1,091,231 $ 1,777 $ 33 $ 1,092,975 Other 39,409 5,275 1,556 43,128 ------------------------------------------------------------------------ $ 1,130,640 $ 7,052 $ 1,589 $ 1,136,103 ======================================================================== 8 Gross Unrealized ---------------- (In Thousands) Cost Gains Losses Fair Value ------------------------------------------------------------------------ December 31, 1999: U.S. Government securities $ 1,149,089 $ 35 $ 2,520 $ 1,146,604 Other 54,126 21,089 2,675 72,540 ------------------------------------------------------------------------ $ 1,203,215 $21,124 $ 5,195 $ 1,219,144 ======================================================================== Of the U.S. Government securities held at December 31, 2000, 99% mature within one year and all within 17 months. Certain additional information related to BHC's marketable securities as of and for the years ended December 31, 2000, 1999 and 1998 is as follows: (In Thousands) 2000 1999 1998 --------------------------------------------------------------------- Sales proceeds $ 539,901 $ 463,317 $ 414,133 Realized gains 19,702 33,153 6,018 Realized losses 2,012 30 702 Net unrealized gain 5,463 15,929 33,656 Adjustment for unrealized gain, net of deferred income taxes and minority interest $ 3,358 $ 8,416 $ 20,126 ===================================================================== For purposes of computing realized gains and losses, cost was determined using the specific identification method. (C) FILM CONTRACTS BHC's television stations own film contract rights which allow generally for limited showings of films and syndicated programs. Film contract rights and related liabilities are recorded when the programming becomes available for telecasting. Contracts are amortized over the estimated number of showings, using primarily accelerated methods as films are used, based on management's estimates of the flow of revenue and the ultimate total cost for each contract. In the opinion of management, future revenue derived from airing programming will be sufficient to cover related unamortized rights balances at December 31, 2000. The estimated costs of recorded film contract rights to be charged to income within one year are included in current assets; payments on such contracts due within one year are included in current liabilities. The approximate future maturities of film contracts payable after one year at December 31, 2000 are $51,148,000, $36,644,000, $11,360,000 and $2,319,000 in 2002, 2003, 2004 and thereafter, respectively. The net present value at December 31, 2000 of such payments, based on a 9.5% discount rate, was approximately $79,900,000. See Note 7. In the 2000 second quarter, BHC recorded an impairment charge of $10 million related to one of its programs. (D) DEPRECIATION AND AMORTIZATION Depreciation of property and equipment is generally provided on the straight-line method over the estimated useful lives of the assets, ranging from three to 40 years, except that leasehold improvements are amortized over the lives of the respective leases, if shorter. 9 (E) INTANGIBLE ASSETS Intangible assets reflect the excess of the purchase prices of businesses acquired over net tangible assets at dates of acquisition. Amounts primarily relate to television station WWOR, which was acquired in 1992, and television stations WRBW and WUTB, the assets of which were acquired in 1999 and 1998, respectively, and are being amortized on a straight-line basis over 40-year periods. Accumulated amortization of intangible assets totalled $101,488,000 at December 31, 2000 and $88,861,000 at December 31, 1999. BHC reviews its long-lived assets, identifiable intangibles and goodwill and reserves for their impairment based generally upon estimated future undiscounted cash flows whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. (F) REVENUE RECOGNITION AND BARTER TRANSACTIONS Revenue is recognized upon broadcast of television advertising. The estimated fair value of goods or services received in barter (nonmonetary) transactions, most of which relate to the acquisition of programming, is recognized as revenue when the air time is used by the advertiser. Barter revenue totalled $44,541,000 in 2000, $44,222,000 in 1999 and $47,654,000 in 1998. Barter expense in each year approximated barter revenue. (G) EARNINGS PER SHARE Basic per share amounts have been computed by dividing net income by the weighted average number of common shares outstanding during each year. Diluted per share amounts have been computed by dividing net income, less the adjustment for dilution of UTV net income ($92,000 in 2000, $94,000 in 1999 and $103,000 in 1998) resulting from the assumed exercise of UTV stock options, by the weighted average number of common shares outstanding each year. BHC has no securities outstanding other than its common shares. (H) STOCK-BASED COMPENSATION BHC itself has no stock-based employee compensation plan, but UTV has stock option plans under which options to purchase shares of UTV common stock may be granted to UTV and BHC employees and to UTV directors. UTV has chosen to continue to account for stock-based compensation using the intrinsic value method. If UTV had elected to recognize compensation expense based upon the fair value at the grant date for awards under its plans using the methodology prescribed by Statement of Financial Accounting Standards (SFAS) 123, BHC net income would have decreased by $519,000, or $.02 per share in 2000 ($.02 per share diluted), $545,000, or $.02 per share ($.02 per share diluted), in 1999 and increased by $290,000, or $.01 per share ($.01 per share diluted) in 1998. Such pro forma amounts are based on fair value estimates using the Black- Scholes option pricing model, and may not be representative of the pro forma effect on net income in future years, since the estimated fair value of stock options is amortized over the vesting period, pro forma compensation expense related to grants made prior to 1995 is not considered and additional options may be granted in future years. (I) SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NONCASH INVESTING ACTIVITIES Cash paid for income taxes totalled $101,000,000 in 2000, $35,900,000 in 1999 and $31,000,000 in 1998. 10 NOTE 2 -------------------------------------------------------------------------------- UNITED PARAMOUNT NETWORK AND OTHER INVESTMENTS: In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group, formed the United Paramount Network, a broadcast television network which premiered in January 1995. BHC owned 100% of UPN from its inception through January 15, 1997, when Viacom completed the exercise of its option to acquire a 50% interest in UPN, and, accordingly, BHC and Viacom shared equally in UPN's losses and funding requirements. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom. As a result of the sale, BHC has no further ownership interest in the network or obligation to fund UPN's operations. UPN had been organized as a partnership, and BHC accounted for its partnership interest under the equity method. At December 31, 1999, the carrying value of such interest totalled $9,821,000, and is included in Investments on the accompanying Consolidated Balance Sheets. Equity loss and other related to UPN in the accompanying Consolidated Statements of Income totalled $35,696,000 for the year ended December 31, 2000 and includes equity loss in UPN of $22,574,000, loss on sale of BHC's interest in UPN of $11,347,000, and related expenses of $1,775,000. Condensed consolidated financial statements of UPN, insofar as reflected in BHC's financial statements, are as follows: BALANCE SHEET December 31, (In Thousands) 1999 --------------------------------------------------------------------- Current assets $ 85,531 Other assets 30,826 --------------------------------------------------------------------- $ 116,357 ===================================================================== Current liabilities $ 96,715 Partners' capital 19,642 --------------------------------------------------------------------- $ 116,357 ===================================================================== STATEMENTS OF OPERATIONS Year ended December 31, (In Thousands) 2000 * 1999 1998 --------------------------------------------------------------------- Operating revenues $ 36,535 $ 134,127 $ 96,401 Operating expenses 81,964 325,845 275,165 --------------------------------------------------------------------- Operating loss (45,429) (191,718) (178,764) Other income (expense), net 281 (2,970) 1,571 --------------------------------------------------------------------- Net loss $ (45,148) $ (194,688) $ (177,193) ===================================================================== * Reflects UPN's results of operations through March 31, 2000, the date BHC sold its remaining interest. The following information as it relates to UPN is provided in accordance with SFAS 131. See Note 9. Year ended December 31, (In Thousands) 1999 1998 ---------------------------------------------------------------------- Depreciation and amortization $ 751 $ 2,069 Capital expenditures $ 454 $ 1,565 11 Also included in Investments on the accompanying Consolidated Balance Sheets are BHC's other investments which it considers long-term. In December 2000, BHC recorded an impairment charge of $10 million related to these investments. NOTE 3 ----------------------------------------------------------------------------- ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following: December 31, (In Thousands) 2000 1999 --------------------------------------------------------------------- Accounts payable $ 8,499 $ 6,485 Accrued expenses - Deferred barter revenue 41,978 39,754 Payroll and compensation 22,775 34,931 Other 27,982 27,265 --------------------------------------------------------------------- $ 101,234 $ 108,435 ===================================================================== NOTE 4 ----------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENT: Each share of Class B common stock, all of which is held by Chris-Craft, entitles the holder to ten votes (Class A common stock entitles the holder to one vote per share), is convertible at all times into Class A common stock on a share-for-share basis, is not transferable except to specified persons and, in general, carries the same per share dividend and liquidation rights as Class A common stock, except that the Board of Directors may in its discretion declare greater cash dividends per share on the Class A common stock than on the Class B common stock. From 1990, when BHC became a public company, through December 31, 1998, BHC purchased 6,895,590 shares of its Class A common stock, including 226,503 from UTV in 1998, at an aggregate cost of $516,503,000. Chris-Craft's ownership interest in BHC during that period increased to 80% (representing 97.6% of BHC's voting power) from 60%. Since December 31, 1998, no additional shares were acquired by BHC. At December 31, 2000, 185,497 Class A common shares remained authorized for purchase. Capital transactions of subsidiary, as set forth in the accompanying Consolidated Statements of Cash Flows and Consolidated Statements of Shareholders' Investment, reflect purchases by UTV of its common shares totalling $0 in 2000, $828,000 in 1999 and $7,010,000 in 1998, proceeds to UTV of $3,049,000 in 2000, $4,849,000 in 1999 and $3,579,000 in 1998 from the exercise of stock options, and UTV dividend payments of $4,751,000 in 2000, $4,708,000 in 1999 and $4,688,000 in 1998, adjusted for intercompany eliminations and minority interest. NOTE 5 ----------------------------------------------------------------------------- RETIREMENT PLANS: Chris-Craft and UTV maintain noncontributory defined benefit pension plans covering substantially all their employees. Benefits accrue annually based on compensation paid to participants each year. The funding policy is to contribute annually to the plans amounts sufficient to fund current service costs and to 12 amortize any unfunded accrued liability over periods not to exceed 30 years. BHC pension expense, including amounts accrued in Chris-Craft and UTV nonqualified plans for retirement benefits in excess of statutory limitations, totalled $4,347,000 in 2000, $3,999,000 in 1999 and $3,888,000 in 1998. It is not practical to determine which assets of the Chris-Craft pension plan relate to BHC. The estimated funded status of the Chris-Craft and UTV plans in which BHC participates, including amounts accrued in the nonqualified plans, was as follows: December 31, (In Thousands) 2000 1999 --------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ 56,922 $ 59,181 Service cost 4,095 4,065 Interest cost 4,687 3,931 Actuarial loss/(gain) 12,580 (7,825) Benefits paid (1,939) (2,430) --------------------------------------------------------------------- Benefit obligation at end of year 76,345 56,922 --------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year 42,010 37,219 Actual return on plan assets 975 3,082 Employer contributions 5,381 4,139 Benefits paid (1,939) (2,430) --------------------------------------------------------------------- Fair value of plan assets at end of year 46,427 42,010 --------------------------------------------------------------------- Plan assets less than projected benefit obligation (29,918) (14,912) Unrecognized initial net asset 16 (34) Unrecognized prior service cost 651 699 Unrecognized net actuarial loss (gain) 5,628 (9,308) --------------------------------------------------------------------- Pension liability $ (23,623) $ (23,555) ===================================================================== Assumptions used in accounting for pension plans for each year are as follows: 2000 1999 1998 --------------------------------------------------------------------- Discount rate 7.00% 7.50% 6.75% Rate of increase in future compensation levels 4.00% 4.00% 4.00% Expected long-term rate of return on assets 7.75% 7.75% 7.75% The accumulated benefit obligation, projected benefit obligation and fair value of plan assets for the above plans that had an accumulated benefit obligation in excess of the fair value of plan assets were $37,823,000, $47,410,000, and $20,437,000, respectively, at December 31, 2000, and $10,456,000, $13,972,000, and $0, respectively, at December 31, 1999. The aggregate BHC expense of other retirement plans in which its employees participate, primarily stock purchase and profit sharing plans of Chris-Craft and UTV and related accruals in the nonqualified retirement plans mentioned above, totalled $5,155,000 in 2000, $10,959,000 in 1999 and $5,212,000 in 1998. 13 NOTE 6 ----------------------------------------------------------------------------- INCOME TAXES: Income taxes are provided in the accompanying Consolidated Statements of Income as follows: Year ended December 31, (In Thousands) 2000 1999 1998 --------------------------------------------------------------------- Current: Federal $ (8,800) $ 34,300 $ 24,700 State 7,000 9,700 8,300 --------------------------------------------------------------------- (1,800) 44,000 33,000 --------------------------------------------------------------------- Deferred: Federal (1,200) (2,300) (2,000) State 300 200 500 --------------------------------------------------------------------- (900) (2,100) (1,500) ===================================================================== $ (2,700) $ 41,900 $ 31,500 ===================================================================== In December 2000, BHC and the Internal Revenue Service settled for $124.4 million, including $42.9 million in interest through December 31, 2000, BHC's previously denied claim for a refund for capital losses generated in 1993. In addition, BHC recorded a corresponding state tax refund of $9.6 million, including $800,000 of interest through December 31, 2000. The IRS paid BHC a total of $126.1 million, which was received on March 14, 2001. Differences between income taxes at the federal statutory income tax rate and total income taxes provided are as follows: Year ended December 31, (In Thousands) 2000 1999 1998 --------------------------------------------------------------------- Taxes at federal statutory rate $ 75,386 $ 38,716 $ 30,625 State income taxes, net 4,746 6,435 5,720 Amortization of intangible assets 3,125 3,125 3,125 Realization of tax benefit (86,300) (6,500) (8,500) Other 343 124 530 --------------------------------------------------------------------- $ (2,700) $ 41,900 $ 31,500 ===================================================================== Deferred tax assets and deferred tax liabilities reflect the tax effect of the following differences between financial statement carrying amounts and tax bases of assets and liabilities: 14 December 31, (In Thousands) 2000 1999 --------------------------------------------------------------------- Accrued liabilities not deductible until paid $ 15,747 $ 19,664 Film contract rights 9,527 8,254 Investments 4,523 - --------------------------------------------------------------------- Deferred tax assets 29,797 27,918 --------------------------------------------------------------------- Investments - (16,919) Other intangibles (5,134) (3,324) Property and equipment (2,147) (2,158) Receivable not yet taxable (15,298) - SFAS 115 adjustment (1,940) (5,851) --------------------------------------------------------------------- Deferred tax liabilities (24,519) (28,252) --------------------------------------------------------------------- Net deferred tax assets (liabilities) $ 5,278 $ (334) ===================================================================== During 1999, BHC became a member of the Chris-Craft affiliated group and, accordingly, is included in Chris-Craft's consolidated federal income tax return. Pursuant to the terms of a tax sharing agreement with Chris-Craft, BHC's federal income tax provision continues to be computed on a separate company basis. The related benefits or liabilities, which are ultimately realized through Chris-Craft, are included in the income tax accounts set forth in the accompanying Consolidated Balance Sheets. As of December 31, 2000, the federal obligation payable to Chris-Craft was approximately $1.3 million. NOTE 7 ----------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES: The aggregate amount payable by BHC's television stations under contracts for programming not currently available for telecasting and, accordingly, not included in film contracts payable and the related contract rights in the accompanying Consolidated Balance Sheets totalled $280,000,000 at December 31, 2000 (including $104,000,000 applicable to UTV). At December 31, 2000, UTV remains obligated for possible future consideration relating to the purchase of WRBW of up to $25,000,000. In April 1999, a jury awarded damages totalling $7.3 million (approximately $8.8 million including legal fees and interest through March 2001) to a former WWOR employee who filed suit alleging discrimination by the station. The station and its counsel believe the award to be unjustified and have filed an appeal which is scheduled to be heard in late March 2001. It is not possible to reasonably estimate the amount, if any, which ultimately will be paid. Accordingly, no amount has been reserved in BHC's financial statements relating to this matter. Between August 14 and 21, 2000, various purported stockholders of BHC filed complaints in the Delaware Court of Chancery entitled Gissen v. BHC, et al., Civil Action No. 18209; Piven v. BHC, et al., Civil Action No. 18211; Voege v. Siegel, et al., Civil Action No. 18210; Stubbe v. BHC, et al., Civil Action No. 18217; and Rand v. BHC, et al., Civil Action No. 18229 (which collectively are referred to as the "BHC lawsuits"). During the same period, various purported stockholders of UTV filed complaints in the Delaware Court of Chancery entitled Pyenson v. UTV, et al., Civil Action No. 18222; Malamud v. UTV, et al., Civil Action No. 18218; and Rand v. UTV, et al., Civil Action No. 18235 (which 15 collectively are referred to as the "UTV lawsuits" and, together with the BHC actions, as the "Delaware actions"). The Delaware actions assert claims against Chris-Craft, UTV, BHC, and some of their officers and directors, alleging, among other things, that Chris-Craft and/or BHC and/or UTV and the individual defendants breached their fiduciary duties to stockholders, and that certain defendants engaged in self-dealing, with respect to the News Corp. acquisitions by merger of BHC and/or UTV. The Delaware actions seek class action certification and injunctive relief against Chris-Craft, BHC and UTV or, in the alternative, to obtain rescission of the mergers or rescissory damages, and other relief. On September 25, 2000, the court entered an order of consolidation, consolidating the BHC lawsuits as In re BHC Communications, Inc. Shareholders Litigation, Civil Action No. 18209 and directing the plaintiffs to file a consolidated amended complaint. On October 2, 2000, the court entered an order of consolidation, consolidating the UTV lawsuits as In re United Television, Inc. Shareholders Litigation, Civil Action No. 18218 and directing that the complaint filed in Malamud v. UTV, Civil Action No. 18218, shall be deemed the operative complaint in the consolidated action. Chris-Craft, BHC and UTV believe that the Delaware actions are without merit and intend to defend them vigorously. BHC is a party to various pending legal proceedings arising in the ordinary course of business. In the opinion of management, after taking into account the opinion of counsel with respect thereto, the ultimate resolution of these matters will not have a material effect on BHC's consolidated financial position or results of operations. NOTE 8 ----------------------------------------------------------------------------- RELATED PARTY TRANSACTIONS: Included in selling, general and administrative expenses are management fees BHC considered reasonable and paid Chris-Craft of $12,000,000 in 2000, 1999 and 1998, and management and directors' fees UTV paid Chris-Craft totalling $570,000 in each of the three years. NOTE 9 ----------------------------------------------------------------------------- SEGMENT REPORTING: BHC has one reportable segment, its television business, which is reported in the consolidated financial statements. UPN, which was accounted for under the equity method, was also considered a reportable segment under SFAS 131. However, all required segment information is included in Note 2. NOTE 10 ----------------------------------------------------------------------------- PROPOSED MERGER: As reported in BHC's Current Report on Form 8-K, dated August 23, 2000, Chris-Craft, BHC, and UTV have each agreed to be acquired by The News Corporation Limited ("News Corp.") for consideration consisting of cash and News Corp. preferred American depositary shares. Subject to limitations set forth in the respective merger agreements, Chris-Craft, BHC and UTV stockholders may elect to receive the consideration as all cash, all stock or a combination thereof. Consummation of each transaction is subject to stockholder approval, receipt of Federal Communications Commission and other regulatory approvals, and satisfaction of other customary conditions. Chris-Craft has agreed to vote its BHC stock in favor of the acquisition of BHC by News Corp., and BHC has agreed to vote its UTV stock in favor of the acquisition of UTV by News Corp. The parties anticipate that the transactions will be completed in the first half of 2001. 16 BHC COMMUNICATIONS, INC. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(In Thousands of Dollars First Second Third Fourth Except per Share Data) Quarter Quarter Quarter Quarter Year ----------------------------------------------------------------------------- Year Ended December 31, 2000 Operating revenues $ 121,966 $ 132,299 $ 119,090 $ 132,149 $ 505,504 Operating income 29,801 33,026 23,245 32,704 118,776 Interest and other income 20,571 26,302 18,513 66,924 132,310 Equity loss and other related to United Paramount Network (35,696) - - - (35,696) Income before income taxes and minority interest 14,676 59,328 41,758 99,628 215,390 Net income 4,436 27,108 19,254 145,797 196,595 Earnings per share - Basic .20 1.20 .86 6.48 8.73 Diluted $ .20 $ 1.20 $ .85 $ 6.48 $ 8.73 Year Ended December 31, 1999 Operating revenues $ 106,495 $ 118,369 $ 114,293 $ 130,190 $ 469,347 Operating income 20,231 30,026 25,611 26,288 102,156 Interest and other income 18,746 24,173 18,357 44,529 105,805 Equity loss and other related to United Paramount Network (30,150) (27,188) (16,900) (23,106) (97,344) Income before income taxes and minority interest 8,827 27,011 27,068 47,711 110,617 Net income 1,980 10,718 11,742 26,093 50,533 Earnings per share - Basic .09 .48 .52 1.16 2.24 Diluted $ .09 $ .47 $ .52 $ 1.16 $ 2.24
17 EX-99.3 5 dex993.txt CONSOLIDATED FINANCIAL STATEMENTS FOR UTV Exhibit 99.3 UNITED TELEVISION, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Certified Public Accountants Consolidated Balance Sheets - December 31, 2000 and 1999 Consolidated Statements of Income - For the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows - For the Years Ended December 31, 2000, 1999 and 1998 Consolidated Statements of Shareholders' Investment -- For the Years Ended December 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements SCHEDULE: II. Valuation and Qualifying Accounts Schedules other than that listed above have been omitted since the information is not applicable, not required, or is included in the respective financial statements or notes thereto. QUARTERLY FINANCIAL INFORMATION 1 Report of Independent Certified Public Accountants United Television, Inc. and Subsidiaries To the Board of Directors and Shareholders of United Television, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' investment and cash flows present fairly, in all material respects, the financial position of United Television, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein, when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Century City, California February 27, 2001 2 Consolidated Balance Sheets United Television, Inc. and Subsidiaries (in thousands of dollars)
December 31, 2000 1999 ---------- ---------- Assets Current Assets: Cash and cash equivalents $ 119,927 $ 31,498 Marketable securities 115,912 154,699 Accrued interest receivable 1,393 829 Accounts receivable, less allowance for doubtful accounts of $1,488 and $1,643, respectively 48,013 47,687 Film contract rights 39,482 44,474 Deferred tax assets 6,158 4,160 Prepaid expenses and other current assets 2,122 2,175 ---------- ---------- Total current assets 333,007 285,522 ---------- ---------- Other Investments 38,234 35,594 ---------- ---------- Film Contract Rights, including deposits, less estimated portion to be used within one year 9,912 12,013 ---------- ---------- Property and Equipment, at cost: Land, buildings and improvements 19,273 18,417 Equipment 74,766 72,484 ---------- ---------- 94,039 90,901 Less - Accumulated depreciation and amortization 61,822 61,859 ---------- ---------- 32,217 29,042 ---------- ---------- Intangible Assets 158,539 158,530 Less - Accumulated amortization 20,501 16,510 ---------- ---------- 138,038 142,020 ---------- ---------- Other Assets 2,240 490 ---------- ---------- $ 553,648 $ 504,681 ========== ==========
3
December 31, 2000 1999 ---------- ---------- Liabilities and Shareholders' Investment Current Liabilities: Film contracts payable $ 39,403 $ 38,240 Accounts payable 2,639 2,890 Accrued expenses 34,128 35,723 Income taxes payable 10,342 8,772 ---------- ---------- Total current liabilities 86,512 85,625 ---------- ---------- Film Contracts Payable after One Year 35,831 36,117 ---------- ---------- Deferred Tax Liabilities 1,918 - ---------- ---------- Commitments and Contingencies (Note 9) Shareholders' Investment: Preferred stock $1 par value; authorized 1,000,000 shares; none issued - - Common stock $.10 par value; authorized 25,000,000 shares; outstanding 9,520,753 and 9,486,173 shares, respectively 952 949 Additional paid-in capital 11,290 7,594 Retained earnings 416,750 370,430 Accumulated other comprehensive income 395 3,966 ---------- ---------- 429,387 382,939 ---------- ---------- $ 553,648 $ 504,681 ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 4 Consolidated Statements of Income United Television, Inc. and Subsidiaries (in thousands, except per share data)
Year ended December 31, 2000 1999 1998 ---------- ---------- ---------- Net Revenues $ 226,681 $ 209,746 $ 182,849 ---------- ---------- ---------- Expenses: Operating 90,984 80,770 64,356 Selling, general and administrative 71,807 67,700 63,561 ---------- ---------- ---------- 162,791 148,470 127,917 ---------- ---------- ---------- Operating Income 63,890 61,276 54,932 ---------- ---------- ---------- Interest and Other Income: Interest and other income 21,331 12,028 11,587 Gain on sale of BHC common stock - - 19,932 ---------- ---------- ---------- 21,331 12,028 31,519 ---------- ---------- ---------- Income before Provision for Income Taxes 85,221 73,304 86,451 Provision for income taxes 34,150 29,575 33,625 ---------- ---------- ---------- Net Income $ 51,071 $ 43,729 $ 52,826 ========== ========== ========== Net Income per Share: Basic $ 5.37 $ 4.64 $ 5.62 Diluted $ 5.35 $ 4.62 $ 5.59 Average Number of Common and Common Equivalent Shares Outstanding: Basic 9,510 9,429 9,395 Diluted 9,545 9,463 9,442
The accompanying notes to consolidated financial statements are an integral part of these statements. 5 Consolidated Statements of Cash Flows United Television, Inc. and Subsidiaries (in thousands of dollars)
Year ended December 31, 2000 1999 1998 ---------- ---------- ---------- Cash Flows from Operating Activities: Net income $ 51,071 $ 43,729 $ 52,826 Adjustments to reconcile net income to net cash provided from operating activities: Film contract payments (35,877) (30,362) (28,001) Film contract amortization 43,253 38,564 28,102 Depreciation and other amortization 9,552 7,577 6,677 Gain on sale of BHC common stock - - (19,932) Gain on dispositions of other investments (9,053) (2,193) (1,191) Changes in assets and liabilities: Accounts receivable (326) (7,537) (1,940) Prepaid and other assets (1,666) (2,359) (3,738) Accounts payable and accrued expenses (1,846) 6,398 6,697 Income taxes payable 4,445 (3,094) 3,099 ---------- ---------- ---------- Net cash provided from operating activities 59,553 50,723 42,599 ---------- ---------- ---------- Cash Flows from Investing Activities: Sales of marketable securities 149,146 68,262 163,332 Sales of other investments 3,457 7,661 - Purchases of marketable securities (109,389) (55,590) (151,020) Purchases of other investments (3,891) (15,448) (8,854) Station acquisitions: Fixed assets - (3,914) (2,568) Intangible assets (9) (58,903) (77,646) Accounts receivable - (1,297) - Film contracts, net - 2,693 - Other, net - 152 - Capital expenditures (8,736) (12,925) (5,028) ---------- ---------- ---------- Net cash provided from (used in) investing activities 30,578 (69,309) (81,784) ---------- ---------- ---------- Cash Flows from Financing Activities: Dividend paid (4,751) (4,708) (4,688) Proceeds from exercise of employee stock options 3,049 4,849 3,579 Purchases of treasury stock - (828) (7,010) ---------- ---------- ---------- Net cash used in financing activities (1,702) (687) (8,119) ---------- ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents 88,429 (19,273) (47,304) Cash and Cash Equivalents at Beginning of Year 31,498 50,771 98,075 ---------- ---------- ---------- Cash and Cash Equivalents at End of Year $ 119,927 $ 31,498 $ 50,771 ========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 Consolidated Statements of Shareholders' Investment United Television, Inc. and Subsidiaries (in thousands of dollars)
Common Stock Accumulated -------------------- Additional Other Shares Dollar Paid-in Retained Comprehensive Outstanding Amount Capital Earnings Income Total ----------- ------ ---------- -------- ------------- --------- Balance at December 31, 1997 9,414,273 $ 941 $ 3,635 $283,271 $ 12,893 $ 300,740 ------------- --------- Comprehensive income: Net income - - - 52,826 - 52,826 Other comprehensive income: Unrealized gain on securities (net of tax of $1,458) - - - - 4,404 - Reclassification adjustment (net of tax of $7,443) - - - - (13,680) - ------------- Other comprehensive income, net of tax - - - - (9,276) (9,276) --------- Total comprehensive income - - - - - 43,550 Cash dividend - - - (4,688) (4,688) Exercise of options, including tax benefit 63,560 7 4,848 - - 4,855 Purchase/retirement of treasury stock (68,500) (7) (7,003) - - (7,010) ----------- ------ ---------- -------- ------------- --------- Balance at December 31, 1998 9,409,333 941 1,480 331,409 3,617 337,447 ------------- --------- Comprehensive income: Net income - - - 43,729 - 43,729 Other comprehensive income: Unrealized gain on securities (net of tax of $527) - - - - 818 - Reclassification adjustment (net of tax of $302) - - - - (469) - ------------- Other comprehensive income, net of tax - - - - 349 349 --------- Total comprehensive income - - - - - 44,078 Cash dividend - - - (4,708) (4,708) Exercise of options, including tax benefit 85,240 9 6,941 - - 6,950 Purchase/retirement of treasury stock (8,400) (1) (827) - - (828) ----------- ------ ---------- -------- ------------- --------- Balance at December 31, 1999 9,486,173 949 7,594 370,430 3,966 382,939 ------------- --------- Comprehensive income: Net income - - - 51,071 - 51,071 Other comprehensive income: Unrealized gain on securities (net of tax of $380) - - - - 590 - Reclassification adjustment (net of tax of $2,686) - - - - (4,161) - ------------- Other comprehensive income, net of tax - - - - (3,571) (3,571) --------- Total comprehensive income - - - - - 47,500 Cash dividend - - - (4,751) - (4,751) Exercise of options, including tax benefit 34,580 3 3,696 - - 3,699 ----------- ------ ---------- -------- ------------- --------- Balance at December 31, 2000 9,520,753 $ 952 $ 11,290 $416,750 $ 395 $ 429,387 =========== ====== ========== ======== ============= =========
The accompanying notes to consolidated financial statements are an integral part of these statements. 7 Notes to Consolidated Financial Statements United Television, Inc. and Subsidiaries 1. Summary of Significant Accounting Policies. (A) Organization and Related Parties. UTV is a majority owned (57.9% at December 31, 2000) subsidiary of BHC Communications, Inc. (BHC), a majority owned subsidiary of Chris-Craft Industries, Inc. (Chris-Craft). UTV owns and operates seven television stations: KBHK in San Francisco, KMSP in Minneapolis/St. Paul, KUTP in Phoenix, WRBW in Orlando (acquired in July 1999), WUTB in Baltimore, KTVX in Salt Lake City and KMOL in San Antonio. UTV also owns and operates United Television Sales, Inc. (UTS), a national sales representative organization, which currently represents six of UTV's seven stations, and the three stations owned by BHC; and United Entertainment Group, Inc., which, with BHC and others, produces first-run programming for national distribution to television stations. UTV's revenues are derived entirely from television broadcasting and are, therefore, subject to the vagaries of the advertising industry. UTV has entered into a state tax sharing agreement with BHC under which agreement UTV continues to provide taxes on a separate company basis. The acquisition of programming from third parties is frequently negotiated for UTV and BHC stations simultaneously. (B) Basis of Presentation. The accompanying consolidated financial statements include the accounts of UTV and its subsidiaries, after elimination of all significant intercompany accounts and transactions. Preparation of financial statements in accordance with generally accepted accounting principles requires the use of management estimates and assumptions. Actual results could differ from those estimates. (C) Cash and Cash Equivalents. Cash and cash equivalents consist primarily of cash and U.S. Government securities having maturities at time of purchase not exceeding three months. The fair value of cash equivalents approximates carrying value, reflecting their short maturities. (D) Investments in Debt and Equity Securities. All of UTV's marketable securities have been categorized as available for sale and as a result are carried at fair market value. (E) Film Contract Rights and Film Contracts Payable. UTV owns film contract rights, which allow generally for limited showings of films and syndicated programs. Film contract rights and related liabilities are recorded when the programming becomes available for telecasting. Contract values are amortized over the estimated number of showings, using primarily accelerated methods, as films are used based on management's estimate of the flow of revenue and the ultimate cost for each contract. In the opinion of management, future revenue derived from airing programs will be sufficient to cover related unamortized rights balances at December 31, 2000. The estimated costs of recorded film contract rights to be charged to income within one year are included in 8 current assets; payments on such contracts due within one year are included in current liabilities. The approximate future maturities of film contracts payable classified as noncurrent liabilities at December 31, 2000 are $17,830,000, $11,532,000, $4,515,000, $1,935,000, and $19,000 in 2002, 2003, 2004, 2005 and thereafter, respectively. The net present value at December 31, 2000 of such payments, based on a 9.5% discount rate, was approximately $31,946,000. See Note 8. (F) Long-Lived Assets. Management periodically reviews the carrying value of long-lived assets, primarily consisting of property and equipment and goodwill. UTV also reviews the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Measurement of any impairment would include a comparison of estimated future cash flows to be generated during the remaining life of the long-lived asset to the net carrying value of the long-lived asset. (G) Depreciation and Amortization. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the assets, except that leasehold improvements are amortized over the term of the lease, if shorter. Estimated useful lives for buildings and improvements range from 4 to 40 years, and for equipment range from 3 to 10 years. Depreciation expense was $5,561,000, $4,334,000 and $4,234,000 for 2000, 1999 and 1998, respectively. Intangible assets represent the excess of cost over the net identifiable tangible assets at the respective dates of acquisition and are being amortized using the straight-line method over 17 to 40 years from acquisition. (H) Revenue Recognition and Barter Transactions. Revenue is recognized upon broadcast of television advertising. The estimated fair value of goods or services received in barter (nonmonetary) transactions, most of which relate to the acquisition of programming, is recognized as revenue when the air time is used by the advertiser. Barter revenue was $16,982,000, $15,793,000 and $13,220,000 in 2000, 1999 and 1998, respectively, and barter expense was $16,788,000, $15,608,000 and $13,486,000 in the three years, respectively. (I) Earnings per Share. In accordance with Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share," adopted by UTV in 1997, basic per share amounts are computed by dividing net income by the weighted average number of common shares outstanding. Dilutive per share amounts are computed by dividing net income by the weighted average common shares outstanding, adjusted for the effect of dilutive stock options. The adjustments for 2000, 1999 and 1998 were 35,000 shares, 34,000 shares and 47,000 shares, respectively. Prior period earnings per share amounts have been restated to conform to the standards of SFAS No. 128. (J) Stock Options. UTV has adopted SFAS No. 123, "Accounting for Stock-Based Compensation." This statement encourages but does not require the recording of compensation cost for stock-based employee compensation plans at fair value. UTV has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." (See Note 4.) (K) Supplemental Cash Flow Information. Cash paid for income taxes totaled $29,705,000 in 2000, $32,669,000 in 1999 and $30,526,000 in 1998. 9 2. Marketable Securities. Marketable securities classified by security type are as follows (in thousands of dollars):
Gross Unrealized ------------------------- Fair Cost Gains Losses Value ------------------------------------------------------------------------------ December 31, 2000: U.S. Government securities $ 104,542 $ 334 $ 8 $ 104,868 Other equity securities 10,721 591 268 11,044 ------------------------------------------- $ 115,263 $ 925 $ 276 $ 115,912 =========================================== December 31, 1999: U.S. Government securities $ 130,484 $ - $ 238 $ 130,246 Other equity securities 17,689 7,739 975 24,453 ------------------------------------------- $ 148,173 $ 7,739 $ 1,213 $ 154,699 ===========================================
At December 31, 2000, of the investments in U.S. Government securities, 90% mature within one year and all within 17 months. The following table provides certain additional information related to UTV's marketable securities as of and for the three years ended December 31, 2000, 1999 and 1998 (in thousands of dollars):
2000 1999 1998 ------------------------------------------------------------------------------- Realized gains $ 7,453 $ 772 $ 21,756 Realized losses 606 1 633 Change in net unrealized gain (5,877) 574 (15,261)
For purposes of computing realized gains and losses, cost was determined using the specific identification method. 3. Shareholders' Investment. UTV has authorized 1,000,000 shares of preferred stock, $1 par value, that may be issued without further shareholder approval, in one or more series, the terms and provisions of which shall be set by the Board of Directors. During 2000, UTV purchased no shares of its common stock. During 1999 and 1998, UTV purchased and retired 8,400 and 68,500 shares of its common stock, respectively. At December 31, 2000, the Board of Directors had authorized purchase of 721,249 additional shares of common stock. 4. Stock Options. Under the UTV 1999 Stock Option Plan (the 1999 Plan), options (including Incentive Stock Options) to purchase an aggregate of 500,000 shares of common stock may be granted from time to time to employees of UTV and its parents and subsidiaries, at prices not less than fair market value at date of grant. Options are exercisable in cumulative annual 10 installments of 33-1/3% commencing one year from date of grant, and expire over a period determined by the 1999 Plan Committee, which may not exceed ten years from date of grant. No options have been granted under the 1999 Plan. Under the UTV 1988 Stock Option Plan (the 1988 Plan), which has terminated with respect to grant of new options, options to purchase shares of common stock were granted from time to time to employees of UTV and its subsidiaries, at prices not less than fair market value at date of grant. Options are exercisable in cumulative annual installments of 33-1/3% commencing one year from date of grant, and expire five years from date of grant. Both the 1999 Plan and the 1998 Plan permit the Plan Committees to award stock appreciation rights to holders of options granted under the Plans. Such rights entitle the holders, in lieu of exercising their options, to receive payment from UTV in cash, stock or a combination thereof, equal to the greater of the appreciation in market value or book value of the shares covered by exercisable options. No stock appreciation rights have been awarded under either Plan. Transactions under the 1998 Plan during the three years ended December 31, 2000 were as follows (dollars in thousands, except per share data):
Option Price Shares ----------------------------- under Option per Share Total ----------------------------------------------- Outstanding, December 31, 1997 155,500 $53.50 - $89.00 $ 9,455 Exercised (52,060) $53.50 (2,785) Canceled (1,200) $53.50 (64) ------------- ----------- Outstanding, December 31, 1998 102,240 $53.50 - $89.00 6,606 Exercised (75,240) $53.50 - $89.00 (4,203) ------------- ----------- Outstanding, December 31, 1999 27,000 $89.00 2,403 Exercised - - - ------------- ----------- Outstanding, December 31, 2000 27,000 $89.00 $ 2,403 ============= ===========
Of the options to purchase 27,000 shares under the 1988 Plan at December 31, 2000, all are currently exercisable and expire on April 24, 2001. At December 31, 1999 and 1998, options to purchase 27,000 shares and 91,573 shares, respectively, were exercisable at weighted average exercise prices of $89.00 and $61.77, respectively. In addition to options granted under the 1988 Plan, UTV has granted other options. During 1995, UTV granted a stock option to purchase 100,000 shares at $88.75 per share. The 1995 option was terminated in 1998 upon payment to the optionee of the net market value of the option. In 1998 and 1999, UTV granted five-year options to purchase 3,000 shares at $103.75 per share (of which 2,000 are currently exercisable) and 219,480 shares at $101.50 (of which 23,080 have been exercised, 45,880 are currently exercisable and 30,160 have been cancelled), respectively. The option price of these grants was the fair market value at date of grant, and the terms of each grant were essentially the same as those of the 1988 Plan. Under the 1995 Director Stock Option Plan (the Director Plan), a fixed number of immediately exercisable five-year options to purchase shares of common stock are granted annually to each nonemployee director of UTV at a price equal to fair market value at date of grant. At 11 December 31, 2000, options to purchase 14,500 shares were available for grant. Transactions under the Director Plan during the three years ended December 31, 2000 were as follows (dollars in thousands, except per share data):
Option Price Shares ----------------------------- under Option per Share Total ----------------------------------------------- Outstanding, December 31, 1997 40,000 $58.00 - $89.00 $ 2,763 Granted 6,000 $112.375 674 Exercised (11,500) $58.00 - $89.00 (794) ------------ ----------- Outstanding, December 31, 1998 34,500 $58.00 - $112.375 2,643 Granted 6,000 $100.25 601 Exercised (10,000) $58.00 - $87.25 (646) ------------ ----------- Outstanding, December 31, 1999 30,500 $58.00 - $112.375 2,598 Granted 4,000 $129.50 518 Exercised (11,500) $58.00 - $89.00 (706) ------------ ----------- Outstanding, December 31, 2000 23,000 $87.25 - $129.50 $ 2,410 ============ ===========
Options outstanding under the Director Plan at December 31, 2000 to purchase the specified number of shares (23,000 in total), at specified exercise prices per share, expire as follows - 3,000 at $89.00, April 24, 2001; 4,000 at $87.25, May 5, 2002; 6,000 at $112.375, May 4, 2003; 6,000 at $100.25, May 2, 2004; and 4,000 at $129.50, May 14, 2005. Proceeds from the exercise of options are credited to common stock to the extent of par value, and the remainder is credited to additional paid-in capital. Related income tax benefits, which accrue to UTV, are credited to additional paid-in capital. At December 31, 2000, options outstanding under all plans and grants were exercisable for 97,880 shares at prices ranging from $87.25 to $129.50 per share, and options for 514,500 were available for grant. Options outstanding expire at various dates from April 2001 through May 2005. If UTV had elected to recognize compensation expense based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed by SFAS No. 123, UTV's net income and earnings per share would be reduced to the pro forma amounts indicated below (in thousands of dollars, except per share amounts):
Year Ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------- Net Income: As reported $ 51,071 $ 43,729 $ 52,826 Pro forma $ 50,176 $ 42,795 $ 53,321 Earnings per Share: As reported: Basic $ 5.37 $ 4.64 $ 5.62 Diluted $ 5.35 $ 4.62 $ 5.59 Pro forma: Basic $ 5.28 $ 4.54 $ 5.68 Diluted $ 5.26 $ 4.52 $ 5.65
12 These pro forma amounts may not be representative of the pro forma effect on net income in future years since the estimated fair value of stock options is amortized over the vesting period; pro forma compensation expense related to grants made prior to 1995 is not considered; and additional options may be granted in future years. The weighted average fair values of options granted during 2000, 1999 and 1998 were $33.18, $21.35 and $23.49, respectively. The fair values of options at dates of grant were estimated using the Black-Scholes option pricing model with the following weighted average assumptions for the years ended December 31, 2000, 1999 and 1998, respectively: dividend yields of .39% for 2000, .49% for 1999 and .46% for 1998; expected volatility of 16.18%, 15.49% and 15.13%, respectively; risk free interest rates of 6.78%, 5.03% and 5.24%, respectively; and expected life of four years for all periods. 5. Income Taxes. Income taxes are provided in the accompanying Consolidated Statements of Income, as follows (in thousands of dollars):
Year Ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------- Federal: Current $ 25,450 $ 24,825 $ 29,600 Deferred 2,550 (975) (975) --------------------------------- 28,000 23,850 28,625 --------------------------------- State: Current 5,650 5,850 5,175 Deferred 500 (125) (175) --------------------------------- 6,150 5,725 5,000 --------------------------------- Total $ 34,150 $ 29,575 $ 33,625 =================================
Differences between income taxes at the federal statutory income tax rate and total income taxes provided are as follows (in thousands of dollars):
Year Ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------- Statutory federal income taxes $ 29,827 $ 25,656 $ 30,258 State income taxes, net of federal income tax benefit 3,998 3,721 3,239 Dividend exclusion (65) (123) (159) Goodwill amortization 102 102 102 Other, net 288 219 185 --------------------------------- Total $ 34,150 $ 29,575 $ 33,625 =================================
Deferred tax assets and deferred tax liabilities reflect the tax effect of the following differences between financial statement carrying amounts and tax bases of assets and liabilities, as follows (in thousands of dollars): 13
December 31, 2000 1999 ---------------------------------------------------------------------------- Deferred tax assets: State taxes $ 2,143 $ 1,994 Bad debt reserve 622 682 Vacation accrual 580 559 Benefits program 3,088 3,184 Film contract rights amortization 5,122 4,875 -------------------- 11,555 11,294 -------------------- Deferred tax liabilities: Depreciation (1,469) (1,250) Intangible assets amortization (5,443) (3,324) SFAS 115 adjustment (255) (2,560) Other (148) - -------------------- (7,315) (7,134) -------------------- Net deferred tax assets $ 4,240 $ 4,160 ====================
6. Pension Plans. UTV maintains noncontributory defined benefit plans covering substantially all employees. The funding policy is to contribute annually an amount sufficient to fund current service costs and to amortize the unfunded accrued liability over 25 years. The unrecognized net obligation is being amortized over a 15-year period. The estimated funded status of the plans, including amounts accrued in a nonqualified plan for retirement benefits in excess of statutory limitations, was as follows (in thousands of dollars):
December 31, 2000 1999 ---------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $ 24,637 $ 25,846 Service cost 1,504 1,477 Interest cost 1,999 1,693 Actuarial loss (gain) 5,014 (3,817) Benefits paid (633) (562) --------------------- Benefit obligation at end of year 32,521 24,637 --------------------- Change in plan assets: Fair value of plan assets at beginning of year 23,051 22,246 Actual return on plan assets 1,051 1,367 Employer contributions 2,521 - Benefits paid (633) (562) --------------------- Fair value of plan assets at end of year 25,990 23,051 --------------------- Plan assets less than projected benefit obligation (6,531) (1,586) Unrecognized initial net obligation 16 32 Unrecognized prior service cost 354 360 Unrecognized net actuarial loss (gain) 2,148 (3,599) --------------------- Accrued pension liability $ (4,013) $ (4,793) =====================
14 The accumulated benefit obligation, projected benefit obligation and fair value of plan assets of the plan that has an accumulated benefit obligation in excess of the fair value of plan assets are $2,214,000, $3,586,000 and zero, respectively, at December 31, 2000, and $1,244,000, $2,287,000 and zero, respectively, at December 31, 1999. Pension expense, including amounts accrued in the nonqualified plan, was as follows (in thousands of dollars): Year Ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------- Service cost $ 1,504 $ 1,477 $ 1,446 Interest cost 1,999 1,693 1,621 Expected return on plan assets (1,808) (1,701) (1,591) Amortizations: Initial unrecognized net obligation 16 16 16 Prior service cost 6 6 6 Actuarial loss 24 - 17 ---------------------------------- Net periodic pension cost $ 1,741 $ 1,491 $ 1,515 ================================== Assumptions used in accounting for pension plans for each year are as follows: Year Ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------- Discount rate 7.00% 7.50% 6.75% Rate of increase in future compensation levels 4.00% 4.00% 4.00% Expected long-term rate of return on assets 7.75% 7.75% 7.75% UTV also maintains defined contribution retirement plans for its employees - a contributory stock purchase plan (merged with a Chris-Craft stock purchase plan effective January 1, 1999) and a noncontributory profit sharing plan. The aggregate costs of such plans, including related amounts accrued in the nonqualified plan, were $5,172,000 in 2000, $4,636,000 in 1999 and $3,590,000 in 1998. 7. Related Party Transactions. Included in net revenues for 2000, 1999 and 1998 are commissions earned by UTS for the sale of national advertising on BHC's three television stations of $4,213,000, $3,902,000 and $4,467,000, respectively. Included in selling, general and administrative expenses are management and directors' fees UTV paid Chris-Craft of $570,000 in each of the three years ended December 31, 2000, and a management fee UTV paid BHC of $1,750,000 in 2000, $1,750,000 in 1999 and $1,950,000 in 1998. UTV and BHC together participate in the joint production and distribution with third parties of original programming. In 2000, 1999 and 1998, reimbursements from third parties were sufficient to cover production costs. 15 8. Acquisitions. In July 1999, UTV completed the purchase of the net assets of UHF station WRBW in Orlando, Florida for $61,269,000. UTV remains obligated for possible future consideration relating to the purchase of up to $25,000,000. The acquisition, accounted for under the purchase method, was funded with cash payments. UTV recorded $58,912,000 in goodwill related to this acquisition. In January 1998, UTV completed the purchase of the net assets of UHF station WUTB in Baltimore, Maryland for $80,214,000. The acquisition, accounted for under the purchase method, was funded with cash payments. UTV recorded $77,646,000 in goodwill related to this acquisition. 9. Commitments and Contingencies. The aggregate amount payable by UTV under contracts for programming not currently available for telecasting and, accordingly, not included in film contracts payable and the related contract rights in the accompanying Consolidated Balance Sheets, totaled $104,024,000 at December 31, 2000. At December 31, 2000, UTV was obligated under several noncancelable leases on real property and equipment that expire between 2001 and 2016. Rental expense was $3,511,000, $3,221,000 and $2,850,000 for 2000, 1999 and 1998, respectively. Aggregate future minimum rental payments under such leases at December 31, 2000 are $17,898,000 with amounts of $3,355,000, $3,215,000, $2,783,000, $2,481,000 and $1,570,000 due in 2001, 2002, 2003, 2004 and 2005, respectively. In the opinion of management, after taking into account opinions of counsel with respect thereto, the ultimate resolution of pending legal proceedings against UTV, to the extent not covered by insurance, will not have a material effect on UTV's consolidated financial position or results of operations. 10. Pending Merger. As reported in UTV's Current Report on Form 8-K, dated August 23, 2000, UTV, BHC and Chris-Craft have each agreed to be acquired by The News Corporation Limited ("News Corp.") for consideration consisting of cash and News Corp. Preferred American Depositary Shares. Subject to limitations set forth in the respective merger agreements, UTV, BHC and Chris-Craft stockholders may elect to receive the consideration as all cash, all stock or a combination thereof. Consummation of each transaction is subject to stockholder approval, receipt of Federal Communications Commission and other regulatory approvals, and satisfaction of other customary conditions. Chris-Craft has agreed to vote its BHC stock in favor of the acquisition of BHC by News Corp., and BHC has agreed to vote its UTV stock in favor of the acquisition of UTV by News Corp. The parties anticipate that the transactions will be completed in the first half of 2001. 16 Schedule II UNITED TELEVISION, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 2000
Column A Column B Column C Column D Column E Additions Description Balance at Charged to Charged Balance at Beginning Costs and to Other End of of Period Expenses Accounts Deductions Period Year ended December 31, 2000: $1,643 $524 $ --- $(679)(a) $1,488 Allowance for doubtful accounts Year ended December 31, 1999: $1,645 $344 $ --- $(346)(a) $1,643 Allowance for doubtful accounts Year ended December 31, 1998: $1,745 $315 $ --- $(415)(a) $1,645 Allowance for doubtful accounts
(a) Accounts written off, net of recoveries. 17 Quarterly Financial Information (Unaudited) United Television, Inc. and Subsidiaries (in thousands of dollars, except per share data)
First Second Third Fourth Quarter Quarter Quarter Quarter Year --------- --------- --------- --------- --------- Year Ended December 31, 2000 Net Revenues $ 53,939 $ 60,011 $ 54,230 $ 58,501 $ 226,681 Operating income 12,617 20,487 13,726 17,060 63,890 Net income 9,134 15,250 10,225 16,462 51,071 Net income per share: Basic $ .96 $ 1.60 $ 1.07 $ 1.73 $ 5.37 Diluted $ .96 $ 1.60 $ 1.07 $ 1.73 $ 5.35 Year Ended December 31, 1999 Net Revenues $ 44,961 $ 53,427 $ 51,390 $ 59,968 $ 209,746 Operating income 10,368 18,984 14,340 17,584 61,276 Net income 8,068 13,237 10,882 11,542 43,729 Net income per share: Basic $ .86 $ 1.41 $ 1.16 $ 1.22 $ 4.64 Diluted $ .86 $ 1.40 $ 1.15 $ 1.21 $ 4.62
18 EX-99.4 6 dex994.txt UNAUDITED CONSOLIDATING BALANCE SHEET Exhibit 99.4 CHRIS-CRAFT INDUSTRIES, INC UNAUDITED CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2001 (in millions)
Consolidated Combined Consolidated Chris- United BHC BHC Industrial Head Craft Television TV Division Eliminations Communications Division Office Eliminations Consolidated ----------- ------------ ------------- -------------- --------- ------ ------------- ------------- ASSETS Cash and cash equivalents $ 154 $ 884 $ - $ 1,038 $ - $ 88 $ 1,126 Marketable securities 113 413 526 526 Federal and state income tax refund 11 5 16 16 Accounts receivable 46 51 (1) 96 4 100 Interest receivable 2 3 5 5 Film contract rights 30 78 108 108 Deferred income tax benefits 5 6 11 15 26 Inventories - - - 3 3 Other current assets 3 20 23 1 24 ----------------------------------------------------------------------------------------------------- Total current assets 364 1,460 (1) 1,823 7 104 - 1,934 Non-current portion of film contract rights 15 81 96 96 Property and equipment, net 31 27 58 8 66 Investments 37 49 86 3 89 Intangible assets 136 244 18 398 1 55 454 Other assets 4 305 (285) 24 1,607 (1,587) 44 ----------------------------------------------------------------------------------------------------- Total assets $ 587 $ 2,166 $ (268) $ 2,485 $ 16 $ 1,714 $ (1,532) $ 2,683 ===================================================================================================== LIABILITIES AND SHAREHOLDERS' INVESTMENTS Film contracts payable $ 36 $ 73 $ - $ 109 $ - $ - - $ 109 Accounts payable 1 3 (1) 3 1 4 Accrued expenses 29 55 84 1 40 125 Deferred revenue 2 7 9 9 Federal income taxes payable 9 2 11 13 24 State income taxes payable - 8 8 3 11 ----------------------------------------------------------------------------------------------------- Total current liabilities 77 148 (1) 224 2 56 - 282 Film contracts payable-LT 44 111 155 155 Deferred federal income taxes 2 - 2 2 Due to affiliates - - - - Other liabilities - 4 4 13 17 Minority interest - - 197 197 381 578 ----------------------------------------------------------------------------------------------------- 123 263 196 582 2 69 381 1,034 ----------------------------------------------------------------------------------------------------- SHAREHOLDERS' INVESTMENTS Convertible preferred stock - - - 4 4 Class B common stock - - - 4 4 Common stock - - - 14 14 Capital surplus 16 - (16) - 5 503 (5) 503 Retained earnings 448 1,899 (448) 1,899 9 1,120 (1,908) 1,120 ----------------------------------------------------------------------------------------------------- 464 1,899 (464) 1,899 14 1,645 (1,913) 1,645 Accumulated other comprehensive income - 4 4 4 ----------------------------------------------------------------------------------------------------- 464 1,903 (464) 1,903 14 1,645 (1,913) 1,649 ----------------------------------------------------------------------------------------------------- Total liabilities and shareholders' investments $ 587 $ 2,166 $ (268) $ 2,485 $ 16 $ 1,714 $ (1,532) $ 2,683 =====================================================================================================
EX-99.5 7 dex995.txt UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS Exhibit 99.5 CHRIS-CRAFT INDUSTRIES, INC. UNAUDITED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 2001 (in millions)
Consolidated Combined Consolidated United BHC BHC Industrial Head Chris-Craft Television TV Division Eliminations Communications Division Office Eliminations Consolidated ----------- ------------ ------------- --------------- --------- ------- ------------- ------------ Net revenues $ 219 $ 259 $ - $ 478 $ 25 $ - $ - $ 503 Operating Expenses Television expenses 93 154 - 247 - - - 247 Cost of goods sold - - - - 16 - - 16 Selling, general & administrative 72 52 1 125 4 8 - 137 Depreciation and amortization 2 24 - 26 - 2 - 28 ---------------------------------------------------------------------------------------------------- Total costs & expenses 167 230 1 398 20 10 - 428 Operating income (loss) 52 29 (1) 80 5 (10) - 75 Interest and other income 23 108 - 131 - 15 - 146 Equity in associated companies - 32 (32) - - - - - ---------------------------------------------------------------------------------------------------- 23 140 (32) 131 - 15 - 146 ---------------------------------------------------------------------------------------------------- Income (loss) before income taxes & minority interest 75 169 (33) 211 5 5 - 221 Income tax provision (benefit) 19 (36) - (17) 2 - 2 (13) ---------------------------------------------------------------------------------------------------- Income (loss) before minority interest 56 205 (33) 228 3 5 (2) 234 Minority interest - - 24 24 - - 41 65 ---------------------------------------------------------------------------------------------------- Net income (loss) $ 56 $ 205 $ (57) $ 204 $ 3 $ 5 $ (43) $ 169 ====================================================================================================
EX-99.6 8 dex996.txt PRO FORMA FINANCIAL INFORMATION - FOX ENTERTAINMENT Exhibit 99.6 UNAUDITED PRO FROMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The following unaudited pro forma consolidated condensed balance sheet as of June 30, 2001 and the unaudited pro forma consolidated condensed statement of operations for the fiscal year ended June 30, 2001 of Fox Entertainment Group, Inc. ("FEG") are presented to reflect the impact of the following transactions: o the July 31, 2001 transfer from The News Corporation Limited ("News Corporation") of certain net assets constituting the television broadcasting business of Chris-Craft Industries and its subsidiaries "Chris-Craft"), BHC Communications, Inc. ("BHC") and United Television, Inc. ("UTV," together the "Chris-Craft Acquisition") in exchange for 122,244,272 shares of FEG's Class A common stock, thereby increasing News Corporation's ownership in FEG from 82.76% to 85.25%. Immediately prior to the transfer, News Corporation, through a wholly-owned subsidiary, acquired all of the outstanding common stock of Chris-Craft, BHC and UTV for approximately $5.2 billion in cash and News Corporation preferred American Depositary Receipts ("ADRs"). News Corporation retained the cash and cash equivalents, marketable securities, the Chris-Craft Industrial Division and certain other non-broadcasting assets of the Chris-Craft Acquisition; o the announced sale of television stations KTVX-TV (Salt Lake City) and KMOL-TV (San Antonio) to Clear Channel Communications, Inc. ("Clear Channel") for WFTC-TV (Minneapolis) in a non-monetary exchange and the announced sale of KBHK-TV (Houston) to Viacom, Inc. ("Viacom") for WDCA-TV (Washington DC) and KTXH-TV (Houston), also in a non-monetary exchange. Both transactions are hereafter defined as the "Station Swaps". All of the stations to be sold were acquired as part of the Chris-Craft Acquisition. The Clear Channel swap closed during October 2001 and the Viacom swap is expected to close in the second quarter of fiscal 2002; Since the Chris-Craft Acquisition was completed after June 30, 2001, the accompanying unaudited pro forma consolidated condensed financial statements have been prepared in accordance with the rules established by the Statement of Financial Accounting Standards Nos. 141, "Business Combinations" and 142, "Goodwill and Other Intangible Assets". FEG has not yet determined the impact of the new accounting standards. Accordingly, the excess purchase price over net assets acquired, for pro forma purposes, has been allocated to intangible assets with indefinite lives. In accordance with the new accounting standards, these intangible assets have not been amortized in the accompanying unaudited pro forma consolidated condensed financial statements. The unaudited pro forma consolidated condensed financial statements have been derived from and should be read in conjunction with the audited consolidated financial statements of FEG for the fiscal year ended June 30, 2001 included in FEG's Annual Report on Form 10-K filed on September 28, 2001 with the Securities and Exchange Commission ("SEC"). The unaudited pro forma consolidated condensed balance sheet was prepared as if the transactions listed above occurred as of June 30, 2001. The unaudited pro forma consolidated condensed statement of operations was prepared as if the transactions listed above occurred at July 1, 2000. The unaudited pro forma consolidated condensed financial statements are presented for informational purposes only and are not necessarily indicative of the financial position or results of operations of FEG that would have occurred had the transactions referred to above been consummated as of the dates indicated. In addition, the unaudited pro forma consolidated condensed financial statements are not necessarily indicative of the future financial condition or results of FEG. FOX ENTERTAINMENT GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET As of June 30, 2001 (in millions)
Chris- Chris-Craft FEG Craft Pro Forma FEG Historical (a) Historical (b) Adjustments (c) As Adjusted -------------- -------------------------------------------- Assets Cash and cash equivalents $ 66 $ - $ (23) $ 43 Accounts receivable, net 2,504 117 - 2,621 Filmed entertainment and television programming costs, net 3,703 204 (112) 3,795 Investments in equity affiliates 1,493 - - 1,493 Property and equipment, net 1,454 58 - 1,512 Intangible assets, net 7,647 470 4,408 12,525 Other assets and investments 989 183 6 1,178 ------- ------- ------- ------- Total Assets $17,856 $ 1,032 $ 4,279 $23,167 ======= ======= ======= ======= Liabilities and Shareholders' Equity Accounts payable and accrued liabilities $ 1,705 $ 162 $ (10) $ 1,857 Participations, residuals and royalties payable 890 - - 890 Television programming rights payable 1,133 264 15 1,412 Deferred revenue 553 9 (1) 561 Borrowings 1,032 - - 1,032 Deferred income taxes 706 2 1,424 2,132 Other liabilities 142 17 2 161 ------- ------- ------- ------- 6,161 454 1,430 8,045 Due to affiliates of News Corporation 2,866 - - 2,866 ------- ------- ------- ------- Total liabilities 9,027 454 1,430 10,911 Minority interest in subsidiaries 861 578 (578) 861 Total Shareholders' Equity 7,968 - 3,427 11,395 ------- ------- ------- ------- Total Liabilities and Shareholders' Equity $17,856 $ 1,032 $ 4,279 $23,167 ======= ======= ======= =======
FOX ENTERTAINMENT GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS For the Year Ended June 30, 2001 (in millions, except share and per share data)
Chris- Chris-Craft FEG Craft Pro Forma FEG Historical (a) Historical (d) Adjustments (e) As Adjusted -------------- -------------------------------------------- Revenues $ 8,504 $ 478 $ (9) $ 8,973 Expenses: Operating 6,274 247 (117) 6,404 Selling, general and administrative 1,101 133 (11) 1,223 Depreciation and amortization 477 28 - 505 Merger-related expenses - - 10 10 ------- ------- ------- ------- Operating income 652 70 109 831 Other Expense Interest expense, net and other income (155) 146 (146) (155) Equity losses of affiliates (92) - - (92) Minority interest in subsidiaries (14) (65) - (79) ------- ------- ------- ------- Income (loss) before income taxes and cumulative effect of accounting change 391 151 (37) 505 Income tax (expense) benefit on a standalone basis (185) 15 29 (141) ------- ------- ------- ------- Income (loss) before cumulative effect of accounting change $ 206 $ 166 $ (8) $ 364 ======= ======= ======= ======= Income (loss) per common share before cumulative effect of accounting change: Basic $ 0.28 $ 0.43 Diluted 0.28 0.43 Average common shares: Basic 724 846 Diluted 724 846
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (a) Reflects the audited historical operating results of FEG as of and for the fiscal year ended June 30, 2001. (b) Reflects the historical unaudited consolidated financial position of Chris-Craft, BHC and UTV as of June 30, 2001, reduced by net assets from the Chris-Craft Acquisition retained by News Corporation, primarily cash and cash equivalents, marketable securities and the Chris-Craft Industrial Division. (c) Pro forma adjustments to record the Chris-Craft Acquisition as of June 30, 2001: o an increase in equity of $3.427 billion, representing the portion of the purchase price paid by News Corporation for the outstanding stock and outstanding stock options of Chris-Craft, BHC and UTV that is attributable to the net assets of Chris-Craft's television broadcasting business transferred to FEG. FEG issued 122,247,272 shares of its Class A common stock in News Corporation in exchange for these assets, thereby increasing News Corporation's ownership interest in FEG from 82.76% to 85.25%; o the elimination of $470 million of Chris-Craft's pre-existing intangible assets as of June 30, 2001; o the elimination of $578 million of Chris-Craft's pre-existing minority interest liability as of June 30, 2001; o the writedown of $139 million of Chris-Craft's pre-existing filmed entertainment and television programming costs, net to fair value; o the preliminary allocation of the $4.878 billion excess purchase price over the book value of the net assets acquired is allocated to intangible assets as of June 30, 2001; o the recording of a liability representing the fair value of options over News Corporation preferred ADRs (the "News Options") issued to employees of Chris-Craft and UTV in replacement of such employees' existing vested and unvested options over Chris-Craft and UTV common stock (the "Target Options"); o the recording of prepaid compensation expense representing the intrinsic value of options over News Corporation preferred ADRs issued to employees of Chris-Craft and UTV in replacement of such employees' existing unvested options over Chris-Craft and UTV common stock; o deferred income tax liability in the amount of $1.424 billion established for the book-tax basis difference related to the acquired intangible assets; and o the Station Swaps. The final allocation of the purchase price will be determined based on a comprehensive final evaluation of the fair value of Chris-Craft's tangible and identifiable intangible assets acquired and liabilities assumed at the time of the acquisition. The preliminary allocation is summarized in the following table:
June 30, 2001 ---- ($'s in millions) Total Purchase Price: ............................................ $ 3,427 ======= Allocation of Purchase Price: Assets: Chris-Craft's historical tangible assets ............... 562 Filmed entertainment and television programming costs, net ............................... (139) Intangible assets ...................................... 4,878 Liabilities: Chris-Craft's historical liabilities ................... (454) Deferred income taxes .................................. (1,424) ------- Total Purchase Price: ............................................ $ 3,427 =======
Detail of the above adjustments to reflect the Chris-Craft Acquisition as of June 30, 2001 is set forth below:
Elimination of Allocation Elimination of Chris-Craft's of Excess Chris-Craft's Total Pro Issuance of Historical Purchase Historical Station Forma Common Shares Intangible Assets Price Minority Interest Swaps Adjustments ------------- ----------------- ----- ----------------- ----- ----------- ($'s in millions) Cash .............................. (23) (23) Filmed entertainment and television programming costs, net ......... -- -- (139) -- 27 (112) Other intangible assets ........... -- (470) 4,878 -- -- 4,408 Other assets and investments ...... 4 2 6 Accounts payable and accrued liabilities .................... -- -- -- -- 7 7 Deferred revenue .................. -- -- -- -- (1) (1) Deferred income taxes ............. -- -- 1,424 -- -- 1,424 Minority interest ................. -- -- -- (578) -- (578) Shareholders' equity .............. 3,427 -- -- -- -- 3,427
(d) Reflects the historical unaudited consolidated operating results of Chris-Craft, BHC and UTV for the fiscal year ended June 30, 2001. Because Chris-Craft, BHC and UTV each reported on a calendar year basis, their respective historical unaudited consolidated operating results for the twelve months ended June 30, 2001 were derived by adding their respective operating results for the six months ended June 30, 2001 with their respective operating results for the year ended December 31, 2000 and subtracting their respective operating results for the six months ended June 30, 2000. These statements were adjusted for the following: o decreases in revenues of $25 million, operating expenses of $16 million and selling general and administrative expenses of $4 million and an increase in income tax benefit of $2 million for the year ended June 30, 2001, due to the exclusion of the net assets of the Chris-Craft Industrial Division, which were retained by News Corporation in connection with the Chris-Craft Acquisition. (e) Pro forma adjustments to record the effect of the transactions in Item (c) above on the Unaudited Pro Forma Consolidated Condensed Statement of Operations as if they were consummated on July 1, 2000: o the Station Swaps; o decrease of operating expenses of $112 million and related income taxes of $45 million due to the writedown of Chris-Craft's pre-existing filmed entertainment and television programming costs, net to fair value; o increase in interest expense, net and other income of $141 million reflecting the exclusion of cash, cash equivalents and marketable securities retained by News Corporation; o compensation expense representing (i) the excess fair value of News Options over the fair value of the Target Options as of the date of acquisition and (ii) amortization of the prepaid compensation expense set up in purchase accounting for the intrinsic value of News Options issued to employees of Chris-Craft and UTV in replacement of such employees' existing unvested Target Options; and o the related income tax benefit of $29 million on the above adjustments. Detail of the above adjustments as if they were consummated on July 1, 2000 is set forth below:
Programming Writedown, Compensation Expense Total Pro and Cash Forma Swaps Adjustment Adjustments ----- ---------- ----------- ($'s in millions) Revenues ............................. (9) -- (9) Expenses: Operating ......................... (5) (112) (117) Selling, general and administrative (11) -- (11) Merger-related expenses ........... -- 10 10 Interest expense and other income .... (5) (141) (146) Income tax benefit ................... 13 16 29