-----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, HS7Bg935rzYar7SQlrDSDcboof+ppzjOQ2aLz5k7b9amBoPqL/qsQC2O+BCha2oj w/gCDz1sEpaxXDsmw5pZVQ== 0000855433-01-500004.txt : 20010516 0000855433-01-500004.hdr.sgml : 20010516 ACCESSION NUMBER: 0000855433-01-500004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1639565 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: SUITE 200 CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2124210200 MAIL ADDRESS: STREET 1: 5355 TOWN CENTER RD STREET 2: SUIE 200 CITY: BOCA RATON STATE: FL ZIP: 33486 10-Q 1 bhc.txt 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, 2001 ---------------------------------- 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, 2001 there were 4,511,605 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, 2001 2000 ------------ ------------ ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 545,798 $ 235,796 Marketable securities (substantially all U.S. Government securities) 1,018,371 1,136,103 Income tax refund receivable 5,271 129,649 Accounts receivable, net 79,115 102,056 Film contract rights 129,076 121,135 Prepaid expenses and other current assets 43,975 46,978 ------------ ------------ Total current assets 1,821,606 1,771,717 ------------ ------------ INVESTMENTS 87,141 87,162 ------------ ------------ FILM CONTRACT RIGHTS, less current portion 119,325 43,978 ------------ ------------ PROPERTY AND EQUIPMENT, net 60,139 61,819 ------------ ------------ INTANGIBLE ASSETS 401,663 404,802 ------------ ------------ OTHER ASSETS 21,993 21,483 ------------ ------------ $ 2,511,867 $ 2,390,961 ============ ============ LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- CURRENT LIABILITIES: Film contracts payable within one year $ 118,021 $ 107,913 Accounts payable and accrued expenses 105,875 101,234 Payable and deferred income taxes 47,548 32,006 ------------ ------------ Total current liabilities 271,444 241,153 ------------ ------------ FILM CONTRACTS PAYABLE AFTER ONE YEAR 171,282 101,471 ------------ ------------ OTHER LONG-TERM LIABILITIES 5,316 5,091 ------------ ------------ MINORITY INTEREST 184,781 180,930 ------------ ------------ 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 1,874,489 1,858,733 Accumulated other comprehensive income 4,330 3,358 ------------ ------------ 1,879,044 1,862,316 ------------ ------------ $ 2,511,867 $ 2,390,961 ============ ============ 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, -------------------- 2001 2000 --------- --------- OPERATING REVENUES $ 106,103 $ 121,966 --------- --------- OPERATING EXPENSES: Television expenses 59,817 56,293 Selling, general and administrative 37,353 35,872 --------- --------- 97,170 92,165 --------- --------- Operating income 8,933 29,801 --------- --------- OTHER INCOME (EXPENSE): Interest and other income 23,076 20,571 Equity loss and other related to United Paramount Network - (35,696) --------- --------- 23,076 (15,125) --------- --------- Income before income taxes and minority interest 32,009 14,676 INCOME TAX PROVISION 13,500 6,400 --------- --------- Income before minority interest 18,509 8,276 MINORITY INTEREST (2,959) (3,840) --------- --------- Net income $ 15,550 $ 4,436 ========= ========= Earnings per share: Basic $ .69 $ .20 ========= ========= Diluted $ .69 $ .20 ========= ========= 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, ----------------------- 2001 2000 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 15,550 $ 4,436 Adjustments to reconcile net income to net cash provided from operating activities: Film contract payments (26,244) (27,092) Film contract amortization 29,702 25,378 Depreciation and other amortization 5,942 5,827 Equity loss and other related to United Paramount Network - 35,696 Minority interest 2,959 3,840 Other (478) (2,607) Changes in assets and liabilities: Accounts receivable 22,941 13,309 Other assets (3,065) (5,980) Accounts payable and other liabilities (1,924) (567) Income taxes 134,832 (5,282) ---------- ---------- Net cash provided from operating activities 180,215 46,958 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Disposition of marketable securities, net 130,211 180,586 Investment in United Paramount Network - (29,293) Other investments (282) (1,608) Capital expenditures, net (1,123) (3,738) Other (3) (1) ---------- ---------- Net cash provided from investing activities 128,803 145,946 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of special dividend - (45,023) Capital transactions of subsidiary 984 1,734 ---------- ---------- Net cash provided from (used in) financing activities 984 (43,289) ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 310,002 149,615 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 235,796 117,184 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 545,798 $ 266,799 ========== ========== 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 (80.0% at March 31, 2001) subsidiary of Chris-Craft Industries, Inc., operates ten television stations, three wholly owned and seven owned by United Television, Inc. (UTV), 57.8% owned by BHC at March 31, 2001. 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, 2001, BHC's marketable securities consisted of U.S. Government securities, which had a cost of $970,973,000 and a fair value of $974,421,000, and equity securities, which had a cost of $40,297,000 and a fair value of $43,950,000. The difference between aggregate cost and fair value of $7,101,000 ($4,330,000, 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, 97% mature within one year and all within 18 months. At December 31, 2000, BHC's marketable securities consisted of U.S. Government securities, which had a cost of $1,091,231,000 and a fair value of $1,092,975,000, and equity securities, which had a cost of $39,409,000 and a fair value of $43,128,000. The difference between aggregate cost and fair value of $5,463,000 ($3,358,000, 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, and, accordingly, BHC and Viacom thereafter 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. Equity loss and other related to UPN 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. 4. SHAREHOLDERS' INVESTMENT: As of March 31, 2001, 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 of which are held by Chris-Craft. At March 31, 2001, 185,497 shares of Class A common stock remain authorized for purchase by BHC (see "Liquidity and Capital Resources"); however, BHC's merger agreement with News Corp. (see Note 8) prohibits any such purchases while the agreement is in effect. Capital transactions of subsidiary, as set forth in the accompanying condensed consolidated statements of cash flows, reflect proceeds to UTV of $984,000 and $1,734,000 in the first three months of 2001 and 2000, 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 included in net income. Comprehensive income is as follows (in thousands): Three Months Ended March 31, ------------------ 2001 2000 -------- -------- Net income $ 15,550 $ 4,436 Other comprehensive income, net of taxes and minority interest 972 1,919 -------- -------- Comprehensive income $ 16,522 $ 6,355 ======== ======== 6. COMMITMENTS AND CONTINGENCIES: Commitments of BHC's television stations for film contracts entered into but not available for broadcasting at March 31, 2001 aggregated approximately $189.6 million, including $89.6 million applicable to UTV. In April 1999, a jury awarded damages totalling $7.3 million (approximately $9 million including interest and legal fees through March 31, 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 was heard in March 2001. The appeal is pending. 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: 2001 2000 - ------ ---------- ---------- Weighted average common shares outstanding 22,511,605 22,511,605 ========== ========== Net income $ 15,550 $ 4,436 ========== ========== Basic earnings per share $ .69 $ .20 ========== ========== DILUTED: - -------- Weighted average common shares outstanding 22,511,605 22,511,605 ========== ========== Net income $ 15,550 $ 4,436 Dilution of UTV net income from UTV stock options (12) (17) ---------- ---------- $ 15,538 $ 4,419 ========== ========== Diluted earnings per share $ .69 $ .20 ========== ========== 8. PENDING 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 shareholders may elect to receive the consideration as all cash, all stock or a combination thereof. Shareholders of each of Chris- Craft, BHC and UTV approved the mergers at special meetings of shareholders held on April 24, 2001. The only matter considered at the BHC special meeting was the approval and adoption of the Agreement and Plan of Merger dated August 13, 2000, as amended, among BHC, News Corp., News Publishing Australia Limited and Fox Television Holdings, Inc. This matter was approved, with the following votes cast: For Against --- ------- 182,551,788 732,789 Consummation of each transaction is subject to receipt of Federal Communications Commission approval and satisfaction of other customary conditions. The parties anticipate that the transactions will be completed in the first half of 2001. 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 $1.56 billion at March 31, 2001, and BHC has no debt outstanding. 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 (amortization exceeded payments by $3.5 million, in the three month period ended March 31, 2001 and payments exceeded amortization by $1.7 million in the corresponding 2000 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 2001 decreased 41%, while station earnings decreased 57%, 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 increased to $1.56 billion at March 31, 2001 from $1.37 billion at December 31, 2000. Such $192.3 million increase reflects three months operating cash flow of $180.2 million, including the receipt of $126.1 million from the settlement with the Internal Revenue Service of a previously denied refund claim. A $2.00 per share special cash dividend, aggregating $45.0 million, was paid in February 2000, and a $1.00 per share special cash dividend in each of the previous three years. 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, 2001, 185,497 Class A common shares remained authorized for purchase. From January 1, 1999 through March 31, 2001, UTV purchased 8,400 of its common shares for a total cost of $828,000. No shares were purchased by UTV during the first three months of 2001, and 721,249 shares remain authorized for purchase. BHC's and UTV's merger agreements with News Corp. (see Note 8) prohibit any such purchases while the agreements are in effect. 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, and, accordingly, BHC and Viacom thereafter shared equally in UPN losses and funding requirements. On March 31, 2000, BHC sold its remaining 50% interest in UPN to Viacom for $5 million. The $11.3 million pretax loss on the sale, together with BHC's final share of UPN's losses, were reflected in BHC's 2001 first quarter operating results. As a result of the sale, 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, 2001, commitments for such programming totalled approximately $189.6 million, including $89.6 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, 2001 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. Six of BHC's 10 stations have made the initial conversion to DTV signal transmission. This conversion rollout 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. 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 shareholders may elect to receive the consideration as all cash, all stock or a combination thereof. Shareholders of each of Chris- Craft, BHC and UTV approved the mergers at special meetings of shareholders held on April 24, 2001. Consummation of each transaction is subject to receipt of Federal Communications Commission approval and satisfaction of other customary conditions. The parties anticipate that the transactions will be completed in the first half of 2001. 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, 2001 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 $ 970,973 $ 974,421 Equity securities $ 40,297 $ 43,950 Results of Operations - --------------------- BHC net income in the first quarter of 2001 totalled $15,550,000, or $.69 per share ($.69 per share diluted), compared to net income in last year's first quarter of $4,436,000, or $.20 per share ($.20 per share diluted). The increase in net income primarily reflects the elimination of losses attributable to BHC's former interest in United Paramount Network. BHC sold its UPN interest in the first quarter of 2000. Operating revenues at BHC's television station group fell 13%, to $104,135,000 from the prior year's $119,654,000. The revenue decrease reflected a general weakness in advertiser expenditures throughout the television industry. Station earnings declined to $15,996,000, from last year's $36,815,000, reflecting the weak revenues and a 7% increase in programming expenses. Operating income, which additionally reflects non- broadcasting operations and corporate office expenses of BHC and UTV, declined to $8,933,000, from $29,801,000. Interest and other income, which consists mostly of amounts earned on cash and marketable securities holdings, rose to $23,076,000 in the first quarter from $20,571,000 last year. Minority interest reflects the interest of shareholders other than BHC in the net income of UTV, 57.8% and 57.9% owned by BHC at March 31, 2001 and 2000, 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 registrant filed a report on Form 8-K on March 21, 2001, reporting on item numbers 5 and 7. (b) The registrant filed a report on Form 8-K on April 12, 2001, reporting on item numbers 5 and 7. (c) The registrant filed a report on Form 8-K on April 24, 2001, reporting on item numbers 5 and 7. 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 15, 2001 -----END PRIVACY-ENHANCED MESSAGE-----