<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>dex991.txt
<DESCRIPTION>CONSOLIDATED FINANCIAL STATEMENTS FOR CHRIS CRAFT
<TEXT>
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
Consolidated Statements of Cash Flows
Chris-Craft Industries, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
(In thousands of dollars) 2000 1999 1998
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
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
===================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
6
<PAGE>
Consolidated Statements of Shareholders' Investment
Chris-Craft Industries, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Treasury
Outstanding Shares Shares
-------------------------------------------- --------
Class B $1.00 $1.40
Common Common Preferred Preferred Common
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 -
=======================================================================================================
<CAPTION>
Dollar Amount (In thousands)
------------------------------------------------------------------------------
Accumulated
Other
Common Preferred Capital Retained Treasury Comprehensive Comprehensive
Stocks Stocks Surplus Earnings Stock Income Income
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
=======================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
7
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Deferred
Operating Depreciation Investment Tax
Operating Income and Capital Segment in Assets
(In thousands) Revenues (Loss) Amortization Expenditures Assets UPN (Liabilities)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
========================================================================================================================
</TABLE>
(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
<PAGE>
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
<TABLE>
<CAPTION>
(In thousands of dollars First Second Third Fourth
except per share data) Quarter Quarter Quarter Quarter Year
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
23
</TEXT>
</DOCUMENT>