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
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