-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L6NV8+66PA3ehu4oH7JAVgBgRM+XO/NrAS6+zrzR3S17XY+s2exTf0gyKexmtzbP DAgr3f/PBH0sNR04PPbFCA== 0000855433-00-000001.txt : 20000512 0000855433-00-000001.hdr.sgml : 20000512 ACCESSION NUMBER: 0000855433-00-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BHC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000855433 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 592104168 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10342 FILM NUMBER: 625947 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVE 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2124210200 MAIL ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10153 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 ---------------------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 1-10342 ------------------------------- BHC COMMUNICATIONS, INC. ------------------------ (Exact name of Registrant as specified in its charter) Delaware 59-2104168 - ------------------------------ -------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 767 Fifth Avenue, New York, New York 10153 - ------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-0200 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ As of April 30, 2000 there were 4,501,605 shares of the issuer's Class A Common Stock outstanding and 18,000,000 shares of the issuer's Class B Common Stock outstanding. PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BHC COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) (UNAUDITED) ------------------------------------- March 31, December 31, 2000 1999 ------------ ------------ ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 266,799 $ 117,184 Marketable securities (substantially all U.S. Government securities) 1,056,085 1,219,144 Accounts receivable, net 85,955 99,264 Film contract rights 90,117 111,819 Prepaid expenses and other current assets 47,465 49,429 ------------ ------------ Total current assets 1,546,421 1,596,840 ------------ ------------ INVESTMENTS 92,721 101,371 ------------ ------------ FILM CONTRACT RIGHTS, less current portion 29,581 39,550 ------------ ------------ PROPERTY AND EQUIPMENT, net 62,973 61,878 ------------ ------------ INTANGIBLE ASSETS 414,236 417,420 ------------ ------------ OTHER ASSETS 11,361 7,389 ------------ ------------ $ 2,157,293 $ 2,224,448 ============ ============ LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- CURRENT LIABILITIES: Film contracts payable within one year $ 88,673 $ 102,737 Accounts payable and accrued expenses 104,184 108,435 Income taxes payable 49,115 38,696 ------------ ------------ Total current liabilities 241,972 249,868 ------------ ------------ FILM CONTRACTS PAYABLE AFTER ONE YEAR 72,837 84,372 ------------ ------------ OTHER LONG-TERM LIABILITIES 2,436 15,176 ------------ ------------ MINORITY INTEREST 163,735 160,550 ------------ ------------ COMMITMENTS AND CONTINGENCIES (NOTE 6) 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 1,665,753 1,705,841 Accumulated other comprehensive income 10,335 8,416 ------------ ------------ 1,676,313 1,714,482 ------------ ------------ $ 2,157,293 $ 2,224,448 ============ ============ The accompanying notes to condensed consolidated financial statements are an integral part of these statements. BHC COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars except per share data) (UNAUDITED) ----------------------------------------------- Three Months Ended March 31, -------------------- 2000 1999 --------- --------- OPERATING REVENUES $ 121,966 $ 106,495 --------- --------- OPERATING EXPENSES: Television expenses 56,293 51,541 Selling, general and administrative 35,872 34,723 --------- --------- 92,165 86,264 --------- --------- Operating income 29,801 20,231 --------- --------- OTHER INCOME (EXPENSE): Interest and other income 20,571 18,746 Equity loss and other related to United Paramount Network (35,696) (30,150) --------- --------- (15,125) (11,404) --------- --------- Income before income taxes and minority interest 14,676 8,827 INCOME TAX PROVISION 6,400 3,500 --------- --------- Income before minority interest 8,276 5,327 MINORITY INTEREST (3,840) (3,347) --------- --------- Net income $ 4,436 $ 1,980 ========= ========= Earnings per share: Basic $ .20 $ .09 ========= ========= Diluted $ .20 $ .09 ========= ========= The accompanying notes to condensed consolidated financial statements are an integral part of these statements. BHC COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (UNAUDITED) ----------------------------------------------- Three Months Ended March 31, ----------------------- 2000 1999 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,436 $ 1,980 Adjustments to reconcile net income to net cash provided from operating activities: Film contract payments (27,092) (24,808) Film contract amortization 25,378 22,646 Depreciation and other amortization 5,827 5,296 Equity loss and other related to United Paramount Network 35,696 30,150 Minority interest 3,840 3,347 Other (2,607) (1,005) Changes in assets and liabilities: Accounts receivable 13,309 9,801 Other assets (5,980) (5,602) Accounts payable and other liabilities (567) (2,947) Income taxes (5,282) 3,456 ---------- ---------- Net cash provided from operating activities 46,958 42,314 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Disposition of marketable securities, net 180,586 21,309 Investment in United Paramount Network (29,293) (33,125) Other investments (1,608) (10,790) Capital expenditures, net (3,738) (1,820) Other (1) (2) ---------- ---------- Net cash provided from (used in) investing activities 145,946 (24,428) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of special dividend (45,023) (22,512) Capital transactions of subsidiary 1,734 395 ---------- ---------- Net cash used in financing activities (43,289) (22,117) ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 149,615 (4,231) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 117,184 201,175 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 266,799 $ 196,944 ========== ========== The accompanying notes to condensed consolidated financial statements are an integral part of these statements. BHC COMMUNICATIONS, INC. ------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- 1. PRINCIPLES OF CONSOLIDATION: The accompanying condensed consolidated financial statements include the accounts of BHC Communications, Inc. and its subsidiaries. BHC, a majority owned (80% at March 31, 2000) subsidiary of Chris-Craft Industries, Inc., operates ten television stations, three wholly owned and seven owned by United Television, Inc. (UTV), 57.9% owned by BHC at March 31, 2000. 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 accompanying condensed consolidated statements of income and condensed consolidated balance sheets, respectively. Intercompany accounts and transactions have been eliminated. The financial information included herein has been prepared by BHC, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, BHC believes that the disclosures herein are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in BHC's latest annual report on Form 10-K. The information furnished reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The results for these interim periods are not necessarily indicative of results to be expected for the full year, due to seasonal factors, among others. 2. MARKETABLE SECURITIES: 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. At March 31, 2000, BHC's marketable securities consisted of U.S. Government securities, which had a cost of $985,077,000 and a fair value of $982,609,000, and equity securities, which had a cost of $51,934,000 and a fair value of $73,476,000. The difference between aggregate cost and fair value of $19,074,000 ($10,335,000, net of income taxes and minority interest)is reflected as an increase to shareholders' investment in the accompanying condensed consolidated balance sheet. Of the investments in U.S. Government securities, all mature within seventeen months. At December 31, 1999, BHC's marketable securities consisted of U.S. Government securities, which had a cost of $1,149,089,000 and a fair value of $1,146,604,000, and equity securities, which had a cost of $54,126,000 and a fair value of $72,540,000. The difference between aggregate cost and fair value of $15,929,000 ($8,416,000, net of income taxes and minority interest) is reflected as an increase to shareholders' investment in the accompanying condensed consolidated balance sheet. 3. UNITED PARAMOUNT NETWORK: 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. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom for $5 million, after Viacom triggered the "buy-sell" provision of the Companies' partnership agreement. 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. The carrying value of such interest totalled $9,821,000 at December 31, 1999, and is included in Investments in the accompanying condensed consolidated balance sheet. Equity loss and other related to United Paramount Network in the accompanying income statements totalled $35,696,000 for the three months ended March 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. UPN's condensed statements of operations are as follows (in thousands): Three Months Ended March 31, ------------------- 2000 1999 -------- -------- Operating revenues $ 36,535 $ 30,454 Operating expenses 81,964 91,064 -------- -------- Operating loss (45,429) (60,610) Other income, net 281 310 -------- -------- Net loss $(45,148) $(60,300) ======== ======== 4. SHAREHOLDERS' INVESTMENT: As of March 31, 2000, there were outstanding 18,000,000 shares of Class B common stock, all held by Chris-Craft, and 4,511,605 shares of Class A common stock, 10,000 shares which are held by Chris-Craft. At March 31, 2000, 185,497 shares of Class A common stock remain authorized for purchase. In January 2000, BHC's Board of Directors declared a special cash dividend of $2.00 per share on BHC's Class A and Class B common stock. The dividend, totalling $45.0 million, was paid in February 2000. Capital transactions of subsidiary, as set forth in the accompanying condensed consolidated statements of cash flows, reflect proceeds to UTV of $1,734,000 and $395,000 in the first three months of 2000 and 1999, respectively, from the exercise of stock options. 5. COMPREHENSIVE INCOME: Other comprehensive income includes only unrealized gains and losses on marketable securities classified as available-for-sale (see Note 2), net of a reclassification adjustment for gains (losses) included in net income. Comprehensive income is as follows (in thousands): Three Months Ended March 31, ------------------ 2000 1999 -------- -------- Net income $ 4,436 $ 1,980 Other comprehensive income, net of taxes and minority interest 1,919 3,008 -------- -------- Comprehensive income $ 6,355 $ 4,988 ======== ======== 6. COMMITMENTS AND CONTINGENCIES: Commitments of BHC's television stations for film contracts entered into but not available for broadcasting at March 31, 2000 aggregated approximately $282.5 million, including $79.0 million applicable to UTV. In April 1999, a jury awarded damages totalling $7.3 million (approximately $8.4 million including interest and legal fees through March 2000) 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 expected to be heard in late 2000. 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. UTV remains obligated for possible future consideration relating to the 1999 purchase of WRBW in Orlando, Florida, of up to $25 million. 7. EARNINGS PER SHARE: Computations of earnings per share are as follows (in thousands of dollars except per share amounts): Three Months Ended March 31, ----------------------- BASIC: 2000 1999 - ------ ---------- ---------- Weighted average common shares outstanding 22,511,605 22,511,605 ========== ========== Net income $ 4,436 $ 1,980 ========== ========== Basic earnings per share $ .20 $ .09 ========== ========== DILUTED: - -------- Weighted average common shares outstanding 22,511,605 22,511,605 ========== ========== Net income $ 4,436 $ 1,980 Dilution of UTV net income from UTV stock options (17) (10) ---------- ---------- $ 4,419 $ 1,970 ========== ========== Diluted earnings per share $ .20 $ .09 ========== ========== BHC COMMUNICATIONS, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Liquidity and Capital Resources - ------------------------------- BHC's financial position continues to be strong and highly liquid. Cash and marketable securities totalled $1.32 billion at March 31, 2000, and BHC has no debt outstanding. BHC invested significant funds in United Paramount Network from UPN's inception in 1994 until March 31, 2000, when BHC sold its remaining 50% interest in the network. BHC's operating cash flow is generated primarily by its core television station group. Broadcast cash flow reflects station operating income plus depreciation and film contract amortization less film contract payments. The relationship between film contract payments and related amortization may vary greatly between periods (payments exceeded amortization by $1.7 million in the three month period ended March 31, 2000 and by $2.2 million in the corresponding 1999 period), and is dependent upon the mix of programs aired and payment terms of the stations' contracts. Reflecting such amounts, broadcast cash flow in the first three months of 2000 increased 40%, while station earnings increased 38%, as explained below. Although broadcast cash flow is often used in the broadcast television industry as an ancillary measure, it is not synonymous with operating cash flow computed in accordance with generally accepted accounting principles, and should not be considered alone or as a substitute for measures of performance computed in accordance with generally accepted accounting principles. BHC's cash flow additionally reflects earnings associated with its cash and marketable securities, which balances declined to $1.32 billion at March 31, 2000 from $1.34 billion at December 31, 1999. Such $13.4 million decline was incurred despite first quarter operating cash flow of $47.0 million, primarily due to final UPN funding totalling $29.3 million and the payment by BHC of a special dividend totalling $45.0 million. A $2.00 per share special cash dividend, aggregating $45.0 million, was paid in February 2000. Special cash dividends of $1.00 per share were paid in each of the previous three years. BHC plans to consider annually the payment of a special dividend. Since April 1990, BHC's Board of Directors has authorized the purchase of up to 7,081,087 Class A common shares. Through December 31, 1998, 6,895,590 shares were purchased for a total cost of $516.5 million. No additional shares have been purchased by BHC since December 31, 1998 and at March 31, 2000, 185,497 Class A common shares remained authorized for purchase. From January 1, 1998 through March 31, 2000, UTV purchased 76,900 of its common shares for a total cost of $7.8 million. No additional shares have been purchased by UTV during the first three months of 2000, and 721,249 shares remain authorized for purchase. BHC intends to further expand its operations in the media, entertainment and communications industries and to explore business opportunities in other industries. BHC believes it is capable of raising significant additional capital to augment its already substantial financial resources, if desired, to fund such additional expansion. In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group, formed UPN, a broadcast television network that 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. Since then, BHC and Viacom shared equally in UPN losses and funding requirements through March 31, 2000. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom for $5 million, after Viacom triggered the "buy-sell" provision of the companies' partnership agreement. The $11.3 million pretax loss on the sale, together with BHC's final share of UPN's losses, are reflected in BHC's 2000 first quarter operating results. BHC has no remaining financial obligation to UPN. BHC's television stations make commitments for programming that will not be available for telecasting until future dates. At March 31, 2000, commitments for such programming totalled approximately $282.5 million, including $79.0 million applicable to UTV. BHC capital expenditures generally have not been material in relation to its financial position, and the related capital expenditure commitments at March 31, 2000 were not material. BHC stations are continuing the process of converting to digital television (DTV). The conversion requires the purchase of digital transmitting equipment to telecast over newly assigned frequencies. This conversion is expected to take a number of years and will be subject to competitive market conditions. BHC expects that its expenditures for future film contract commitments and capital requirements for its present business, including the cost to convert to DTV, will be satisfied primarily from operations, marketable securities or cash balances. Quantitative and Qualitative Disclosures about Market Risk - ---------------------------------------------------------- BHC is subject to certain market risk relating to its marketable securities holdings, which are all held for other than trading purposes. The table below provides information as of March 31, 2000 about the U.S. Government securities which are subject to interest rate sensitivity and the equity securities which are subject to equity market sensitivity. (in thousands) Cost Fair Value ---- ---------- U.S. Government securities $ 985,077 $ 982,609 Equity securities $ 51,934 $ 73,476 Results of Operations - --------------------- BHC net income in the first quarter of 2000 totalled $4,436,000, or $.20 per share ($.20 per share diluted), compared to net income in last year's first quarter of $1,980,000, or $.09 per share ($.09 per share diluted). The increase in net income reflects record first quarter operating income, which more than offset the increase in losses attributable to BHC's former interest in United Paramount Network. Operating revenues at BHC's television station group rose 15%, to a first quarter record $119,654,000 from the prior year's $104,423,000, and same station revenues rose 12%. Stations operating in the group's largest markets, New York, Los Angeles and San Francisco, led the strong revenue growth. Station earnings in the quarter accordingly increased 38%, to a first quarter record of $36,815,000, from last year's $26,699,000. Operating income, which additionally reflects non-broadcasting operations and corporate office expenses of BHC and UTV, also established a first quarter record, increasing 47%, to $29,801,000 from $20,231,000. Interest and other income, which primarily includes earnings on BHC's $1.3 billion cash and marketable securities holdings, totalled $20,571,000 compared to $18,746,000 in last years first quarter. BHC's first quarter loss associated with its former interest in UPN totalled $35,696,000, compared to $30,150,000 in the corresponding 1999 period. This year's amount includes an $11,347,000 pretax loss realized on the March 31, 2000 sale to Viacom of BHC's 50% interest in UPN, as well as BHC's final share of UPN's losses. BHC has no remaining financial obligation to UPN. Minority interest reflects the interest of shareholders other than BHC in the net income of UTV, 57.9% and 58.5% owned by BHC at March 31, 2000 and 1999, respectively. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- The information appearing in Management's Discussion and Analysis under the caption "Quantitative and Qualitative Disclosures about Market Risk" is incorporated herein by this reference. BHC COMMUNICATIONS, INC. ------------------------ PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) The following exhibits are filed herewith: Exhibit No. Description ----------- ----------- 27 Financial Data Schedule (b) During the quarter for which this report is filed, the Registrant filed a Form 8-K dated February 8, 2000, which reported Item 5. Other Events regarding the Registrant's commencement of a legal action. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BHC COMMUNICATIONS, INC. ------------------------ (Registrant) By: /s/ JOELEN K. MERKEL ----------------------------- Joelen K. Merkel Senior Vice President and Treasurer (Principal Accounting Officer) Date: May 11, 2000 EXHIBIT INDEX Incorporated by Reference to: Exhibit No. Exhibit - ------------- ----------- ------- 27 Financial Data Schedule EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q DATED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 3-MOS DEC-31-2000 MAR-31-2000 266799 1056085 90500 4545 0 1546421 177664 114691 2157293 241972 0 0 0 225 1676088 2157293 0 121966 0 92165 0 0 0 14676 6400 4436 0 0 0 4436 .20 .20
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