-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o98fBI7O4vXrV9NNlDMQUOGEhKV4UORPZ8ztFC8XFKOtQ78zhvfC37cMQj2RbTgr sKpXznbS8NPWBADSxyzn1g== 0000895759-94-000010.txt : 19940404 0000895759-94-000010.hdr.sgml : 19940404 ACCESSION NUMBER: 0000895759-94-000010 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BHC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000855433 STANDARD INDUSTRIAL CLASSIFICATION: 4833 IRS NUMBER: 592104168 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-10342 FILM NUMBER: 94519419 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVE 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2124210200 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 [ ] OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 Securities registered pursuant to Section 12(b) of the Act: Name of each Exchange Title of each class on which registered Class A Common Stock, American Stock Exchange $0.01 par value Securities registered pursuant to Section 12(g) of the Act: None 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant, as of February 28, 1994, was approximately $553,000,000. As of February 28, 1994, there were 7,694,128 shares of the registrant's Class A Common Stock and 18,000,000 shares of the registrant's Class B Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE The documents incorporated by reference into this Form 10-K and the Parts hereof into which such documents are incorporated are listed below: Document Part Those portions of the II registrant's annual report to stockholders for the fiscal year ended December 31, 1993 (the "Annual Report") that are specifically identified herein as incorporated by reference into this Form 10-K. Those portions of the III registrant's proxy statement for the registrant's 1994 Annual Meeting (the "Proxy Statement") that are specifically identified herein as incorporated by reference into this Form 10-K. PART I ITEM 1. BUSINESS. General BHC Communications, Inc. ("BHC"), the majority owned (71.8% at February 28, 1994) television broadcasting subsidiary of Chris- Craft Industries, Inc. ("Chris-Craft"), was organized in Delaware in 1977 under the name "BHC, Inc." and changed its name to BHC Communications, Inc. on August 4, 1989. BHC's principal business is television broadcasting, conducted through its wholly owned subsidiaries, Chris-Craft Television, Inc. ("CCTV") and Pinelands, Inc. ("Pinelands"), and its majority owned (54.3% at February 28, 1994) subsidiary, United Television, Inc. ("UTV"). At February 28, 1994, BHC, solely through subsidiaries, had 979 full-time employees and 97 part-time employees. Television Broadcasting BHC operates six very high frequency ("VHF") television stations and two ultra high frequency ("UHF") television stations, together constituting Chris-Craft's Television Division. Commercial television broadcasting in the United States is con- ducted on 68 channels numbered 2 through 69. Channels 2 through 13 are in the VHF band, and channels 14 through 69 are in the UHF band. In general, UHF stations are at a disadvantage relative to VHF stations, because UHF frequencies are more difficult for households to receive. This disadvantage is eliminated when a viewer receives the UHF station through a cable system. Commercial broadcast television stations may be either affiliated with one of the three national networks (ABC, NBC and CBS) or may be independent. In addition, Fox Broadcasting Company ("Fox") has established itself as a national network by entering into affiliation agreements with independent stations in many television markets. Chris-Craft, through BHC, is organizing, in partnership with Paramount Communications, Inc., an additional network, The Paramount Network, which currently plans to commence broadcasting in January 1995. There can be no assurance that the network will be viable. Moreover, BHC knows of one other effort to establish a network, and it is considered unlikely that two additional networks will be viable. The following table sets forth certain information with respect to BHC's stations and their respective markets:
Total Commercial DMA TV Stations Commercial Station and House- DMA Operating in Cable Location(a) Channel holds(b) Rank(b) Market(c) Penetration(d) KCOP Los Angeles 13 5,006,380 2nd 7VHF 59% 10UHF KPTV Portland 12 890,120 27th 4VHF 57% 2UHF WWOR(e) Secaucus 9 6,692,370 1st 6VHF 64% 14UHF KMSP Minneapolis/ St. Paul 9 1,389,420 14th 4VHF 47% 3UHF KTVX Salt Lake City 4 616,720 38th 4VHF 51% 2UHF KMOL San Antonio 4 610,660 40th 3VHF 63% 3UHF KBHK San Francisco 44 2,253,220 5th 4VHF 67% 10UHF KUTP Phoenix 45 1,097,480 20th 4VHF 53% 4UHF ___________________ (a) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the remaining stations are owned by UTV. All stations are independent, except for KTVX, an ABC affiliate, and KMOL, an NBC affiliate. (b) Designated Market Area ("DMA") is an exclusive geographic area consisting of all counties in which the home-market commercial stations received a preponderance of total viewing hours. The ranking shown is the nationwide rank, in terms of television households in DMA, of the market served by the station. Source: Nielsen Media Research television households universe estimates. (c) Additional channels have been allocated by the Federal Communications Commission ("FCC") for activation as commercial television stations in certain of these markets. Also, additional stations may be located within the respective DMAs of BHC stations but outside the greater metropolitan television markets in which BHC stations operate. (d) Cable penetration refers to the percentage of DMA television viewing households receiving cable television service, as estimated by Nielsen Media Research. (e) WWOR broadcasts across a tri-state area including the entire New York City metropolitan area. Its broadcast signal is also carried as a"superstation" on numerous cable television systems throughout the United States.
Television stations derive their revenues primarily from selling advertising time. The television advertising sales market consists primarily of national network advertising, national spot advertising and local spot advertising. An advertiser wishing to reach a nationwide audience usually purchases advertising time directly from the national networks, from "superstations" (i.e., broadcast stations carried by cable operators in areas outside their broadcast coverage area) or from "unwired" networks (groups of otherwise unrelated stations whose advertising time is combined for national sale). A national advertiser wishing to reach a particular regional or local audience usually buys advertising time from local stations through national advertising sales representative firms having contractual arrangements with local stations to solicit such advertising. Local businesses generally purchase advertising from the stations' local sales staffs. Television stations compete for television advertising revenue primarily with other television stations serving the same DMA. There are 211 DMAs in the United States. DMAs are ranked annually by the estimated number of households owning a television set within the DMA. Advertising rates that a television station can command vary in part with the size, in terms of television households, of the DMA served by the station. Within a DMA, the relative advertising rates charged by competing stations depend primarily on three factors: the stations' program ratings (number of television households or persons within those households tuned to a program as a percentage of total television households or persons within those households in the viewing area); the time of day the advertising will run; and the demographic qualities of a program's viewers (primarily age and sex). Ratings data for television markets are measured by A.C. Nielsen Co. ("Nielsen"). This rating service uses two terms to quantify a station's audience: rating points and share points. A rating point represents one percent of all television households in the entire DMA, and a share point represents one percent of all television households within the DMA actually using at least one television set at the time of measurement. Because the major networks regularly provide first-run programming during prime time viewing hours (in general, 8:00 P.M. to 11:00 P.M. Eastern time), their affiliates generally (but do not always) achieve higher audience shares during those hours than independent stations. However, independent stations generally have substantially more advertising time ("inventory") for sale than network affiliates, because the networks use almost all of their affiliates' inventory during network shows. Independent stations' smaller audiences and greater inventory during prime time hours generally result in lower advertising rates charged and more advertising time sold during those hours, whereas affiliates' larger audiences and limited inventory generally allow affiliates to charge higher advertising rates for prime time programming. By selling more advertising time, an independent station typically achieves a share of advertising revenues in its market greater than its audience ratings. On the other hand, because a nonaffiliated station broadcasts more syndicated programming than a network- affiliated station, total programming costs for an independent station are generally higher than those of a network affiliate in the same market. Programming BHC's independent stations depend heavily on independent third parties for programming, as do BHC's network affiliates for their non-network broadcasts. Recognizing the need to have a more direct influence on the quality of programming available to its stations, and desiring to participate in potential profits through national syndication of programming, BHC has begun to invest directly in the development of original programming. The aggregate amount invested through December 31, 1993 was not significant to BHC's financial position. BHC's independent stations currently expect to broadcast, as affiliates of The Paramount Network, four hours of original prime time programming over two nights per week, beginning in January 1995. BHC's television stations also produce programming directed to meet the needs and interests of the area served, such as local news and events, public affairs programming, children's programming and sports. Programs obtained from independent sources consist principally of syndicated television shows, many of which have been shown previously on a network, and syndicated feature films, which were either made for network television or have been exhibited previously in motion picture theatres (most of which films have been shown previously on network and cable television). Syndicated programs are sold to individual stations to be broadcast one or more times. Independent television stations generally have large numbers of syndication contracts; each contract is a license for a particular series or program that usually prohibits licensing the same programming to other television stations in the same market. A single syndication source may provide a number of different ser- ies or programs. Licenses for syndicated programs are often offered for cash sale (i.e., without any barter element) to stations; however, some are offered on a barter or cash plus barter basis. In the case of a cash sale, the station purchases the right to broadcast the program, or a series of programs, and sells advertising time during the broadcast. The cash price of such programming varies, de- pending on the perceived desirability of the program and whether it comes with commercials that must be broadcast (i.e., on a cash plus barter basis). Bartered programming is offered to stations without charge, but comes with a greater number of commercials that must be broadcast, and therefore with less time available for sale by the station. Recently, the amount of bartered and cash plus barter programming broadcast both industry-wide and by BHC's stations has increased substantially. BHC television stations are frequently required to make substantial financial commitments to obtain syndicated programming while such programming is still being broadcast by a network and before it is available for broadcast by BHC stations or before it has been produced. Generally, syndication contracts require the station to acquire an entire program series, before the number of episodes of original showings that will be produced has been determined. While analyses of network audiences are used in estimating the value and potential profitability of such pro- gramming, there is no assurance that a successful network program will continue to be successful or profitable when broadcast after network airing. For many years, the FCC has restricted the ability of television networks to acquire financial interests in the production of television shows by independent sources, or to participate in the syndication of television programs, either on a first-run or an off-network basis. These rules were based in part on concern that networks engaged in syndication would have economic incentives to discriminate against independent stations (such as those owned by BHC) in making programs available in the syndication market, either by warehousing them or favoring the network's owned or affiliated stations. Late in 1992, the United States Court of Appeals for the Seventh Circuit remanded the rules to the FCC with instructions to revisit the need for them. In 1993, the FCC adopted new rules which allow networks to acquire financial interests and passive syndication rights in off-network programs, but bar them from actively syndicating such programs in the United States or delaying the entry into syndication of any long-running prime time network-owned series beyond the fourth year after its network debut. The new rules also bar networks from acquiring domestic financial interests or syndication rights in first-run programs unless the network is the sole producer of the program and prohibit networks from active domestic syndication of all first-run programs. However, these rules are scheduled to expire in November 1995, unless the FCC issues an order to the contrary. A number of petitions for review of these new regulations have been filed, which have been consolidated and transferred to the Seventh Advertising is generally placed with BHC stations through advertising agencies, which are allowed a commission generally equal to 15% of the price of advertising placed. National advertising time is usually sold through an independent national sales representative, which also receives a commission, while local advertising time is sold by each station's sales staff. Practices with respect to sale of advertising time do not differ markedly between BHC's network and non-network stations, although the net- work-affiliated stations have less inventory to sell. Government Regulation Television broadcasting operations are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the "Communications Act"). The Communications Act empowers the FCC, among other things, to issue, revoke or modify broadcast licenses, to assign frequencies, to determine the loca- tions of stations, to regulate the broadcasting equipment used by stations, to establish areas to be served, to adopt such regulations as may be necessary to carry out the provisions of the Communications Act and to impose certain penalties for violation of its regulations. BHC television stations are subject to a wide range of technical, reporting and operational requirements imposed by the Communications Act or by FCC rules and policies. The Communications Act provides that a license may be granted to any applicant if the public interest, convenience and necessity will be served thereby, subject to certain limitations, including the requirement that the FCC allocate licenses, frequencies, hours of operation and power in a manner that will provide a fair, efficient and equitable distribution of service throughout the United States. Television licenses generally are issued for five- year terms. Upon application, and in the absence of a conflicting application that would require the FCC to hold a hearing, or adverse questions as to the licensee's qualifications, television licenses have usually been renewed for additional terms without a hearing by the FCC. An existing license automatically continues in effect once a timely renewal application has been filed until a final FCC decision is issued. KMSP's license renewal was granted on April 15, 1993, and is due to expire on April 1, 1998. KTVX's license renewal was granted on September 29, 1993, and is due to expire on October 1, 1998. KMOL's license renewal application is currently pending, subject to two petitions challenging the station's compliance with FCC requirements concerning equal employment opportunity; UTV has vigorously opposed the petitions, and believes that they are without merit. KUTP, KCOP, KBHK, and KPTV have each filed timely renewal applications, which are pending. No petitions to deny any of those applications have been filed, no competing applications have been filed, and the deadlines for filing such petitions and competing applications have all expired. Pursuant to FCC requirements, each station's application has reported instances in which the station has exceeded the commercial limits applicable to children's programs. In the case of KBHK, these instances have been substantial, and the FCC has recently granted renewals, in such cases, subject to forfeitures of as much as $80,000. WWOR's license renewal was granted on January 22, 1992 and expires on June 1, 1994. A renewal application was timely filed on January 31, 1994. The deadline for filing petitions to deny or competing applications against that application has not yet expired. Under existing FCC regulations governing multiple ownership of broadcast stations, a license to operate a television station generally will not be granted to any party (or parties under common control) if such party directly or indirectly owns, operates, controls or has an attributable interest in another television or radio station serving the same market or area. The FCC, however, is favorably disposed to grant waivers of this rule for radio station-television station combinations in the top 25 television markets, in which there will be at least 30 separately owned, operated and controlled broadcast licenses, and in certain other circumstances. FCC regulations further provide that a broadcast license will not be granted if that grant would result in a concentration of control of radio and television broadcasting in a manner inconsis- tent with the public interest, convenience or necessity. FCC rules generally deem such concentration of control to exist if any party, or any of its officers, directors or stockholders, directly or in- directly, owns, operates, controls or has an attributable interest in more than 12 television stations, or in television stations capable of reaching, in the aggregate, a maximum of 25% of the national audience. This percentage is determined by the DMA market rankings of the percentage of the nation's television households considered within each market. Because of certain limitations of the UHF signal, however, the FCC will attribute only 50% of a market's DMA reach to owners of UHF stations for the purpose of calculating the audience reach limits. Applying the 50% reach attribution rule to UHF stations KBHK and KUTP, the eight BHC stations are deemed to reach approximately 18% of the nation's television households. To facilitate minority group participation in radio and television broadcasting, the FCC will allow entities with attributable ownership interests in stations controlled by minority group members to exceed the ownership limits. The FCC's multiple ownership rules require the attribution of the licenses held by a broadcasting company to its officers, directors and certain of its stockholders, so there would ordinarily be a violation of FCC regulations where an officer, director or such a stockholder and a television broadcasting company together hold interests in more than the permitted number of stations or more than one station that serves the same area. In the case of a corporation controlling or operating television stations, such as BHC, there is attribution only to stockholders who own 5% or more of the voting stock, except for institutional investors, including mutual funds, insurance companies and banks acting in a fiduciary capacity, which may own up to 10% of the vot- ing stock without being subject to such attribution, provided that such entities exercise no control over the management or policies of the broadcasting company. The Communications Act and FCC regulations prohibit the holder of an attributable interest in a television station from having an attributable interest in a cable television system located within the predicted coverage area of that station. FCC regulations also prohibit the holder of an attributable interest in a television station from having an attributable interest in a daily newspaper located within the predicted coverage area of that station. The Communications Act limits the amount of capital stock that aliens may own in a television station licensee or any corporation directly or indirectly controlling such licensee. No more than 20% of a licensee's capital stock and, if the FCC so determines, no more than 25% of the capital stock of a company controlling a licensee, may be owned or voted by aliens or their representatives. Should alien ownership exceed this limit, the FCC may revoke or refuse to grant or renew a television station license or approve the assignment or transfer of such license. BHC believes the ownership of its stock by aliens to be below the applicable limit. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a licensee without the prior approval of the FCC. Legislation was introduced in the past that would impose a transfer fee on sales of broadcast properties. Although that legislation was not adopted, similar proposals, or a general spectrum licensing fee, may be advanced and adopted in the future. Recent legislation has imposed annual regulatory fees applicable to BHC's stations, currently ranging as high as $18,000 per station. The foregoing does not purport to be a complete summary of all the provisions of the Communications Act or regulations and policies of the FCC thereunder. Reference is made to the Communications Act, such regulations and the public notices promulgated by the FCC for further information. Other Federal agencies, including principally the Federal Trade Commission, also impose a variety of requirements that affect the business and operations of broadcast stations. Proposals for additional or revised requirements are considered by the FCC, other Federal agencies or Congress from time to time. BHC cannot predict what new or revised Federal requirements may result from such consideration or what impact, if any, such requirements might have upon the operation of BHC television stations. Competition BHC television stations compete for advertising revenue in their respective markets, primarily with other broadcast television stations and cable television channels, and compete with other advertising media, as well. Such competition is intense. In addition to programming, management ability and experience, technical factors and television network affiliations are important in determining competitive position. Competitive success of a television station depends primarily on public response to the pro- grams broadcast by the station in relation to competing entertainment, and the results of this competition affect the advertising revenues earned by the station from the sale of advertising time. Audience ratings provided by Nielsen have a direct bearing on the competitive position of television stations. In general, network programs achieve higher ratings than independent station programs. There are at least five other commercial television stations in each market served by a BHC station. BHC believes that the three VHF network-affiliated stations and the two other independent VHF stations in New York City generally attract a larger viewing audience than does WWOR, and that WWOR generally attracts a viewing audience larger than the audience attracted by the UHF stations in the New York City market. In Los Angeles, the three VHF network- affiliated stations and two independent VHF stations generally attract a larger viewing audience than does KCOP, and KCOP generally attracts a viewing audience approximately the same size as the audiences attracted by the other independent VHF station but larger than the ten UHF stations in Los Angeles. In Portland, the three VHF network-affiliated stations generally attract a larger audience than does KPTV, which generally attracts a larger audience than the other independent stations, both of which are UHF sta- tions. BHC believes that, in Minneapolis/St. Paul, KMSP generally attracts a smaller viewing audience than the three VHF network- affiliated stations, but a larger viewing audience than the other independent stations, all of which are UHF stations. In Salt Lake City, KTVX generally ranks first of the six television stations in terms of audience share. In San Antonio, KMOL ranks third of the six stations in terms of audience share. KBHK generally ranks fifth in terms of audience share, behind the one independent and three network-affiliated VHF television stations, of the 14 commer- cial television stations in San Francisco. KUTP ranks sixth in terms of audience share, of the eight commercial stations in the Phoenix market. BHC stations may face increased competition in the future from additional television stations that may enter their respective markets. See note (c) to the table under Television Broadcasting. Cable television has become a major competitor of television broadcasting stations. Because cable television systems operate in each market served by a BHC station, the stations are affected by rules governing cable operations. If a station is not widely accessible by cable in those markets having strong cable pene- tration, it may lose effective access to a significant portion of the local audience. Even if a television station is carried on a local cable system, an unfavorable channel position on the cable system may adversely affect the station's audience ratings and, in some circumstances, a television set's ability to receive the station being carried on an unfavorable channel position. Some cable system operators may be inclined to place broadcast stations in unfavorable channel locations. FCC regulations requiring cable television stations to carry or reserve channels for retransmission of local broadcast signals have twice been invalidated in Federal court. In October 1992, Congress enacted legislation designed to provide television broadcast stations the right to be carried on cable television stations (and to be carried on specific cable channel positions), or (at the broadcaster's election) to prohibit cable carriage of the television broadcast station without its consent. This legislation is currently being challenged in the United States Supreme Court, and BHC cannot predict the outcome. While Federal law now generally prohibits local telephone companies from providing video programming to subscribers in their service areas, this restriction has been invalidated by one federal district court and is currently being challenged in other federal courts; legislation eliminating or relaxing the law has been proposed. "Syndicated exclusivity" rules allow television stations to prevent local cable operators from importing distant television programming that duplicates syndicated programming in which local stations have acquired exclusive rights. In conjunction with these rules, network nonduplication rules protect the exclusivity of network broadcast programming within the local video marketplace. The FCC is also reviewing its "territorial exclusivity" rule, which limits the area in which a broadcaster can obtain exclusive rights to video programming. BHC believes that the competitive position of BHC stations would likely be enhanced by an expansion of broadcasters' permitted zones of exclusivity. Alternative technologies could increase competition in the areas served by BHC stations and, consequently, could adversely affect their profitability. Direct broadcast satellite ("DBS") systems and subscription television ("STV"), recognized as potential competitors a few years ago, have thus far failed to materialize as such. However, at least two DBS operators are scheduled to begin service in 1994. An additional challenge is now posed by multichannel multipoint distribution services ("MMDS"). Two four-channel MMDS licenses have been granted in most television markets. MMDS operation can provide commercial programming on a paid basis. A similar service can also be offered using the instructional television fixed service ("ITFS"). The FCC now allows the educational entities that hold ITFS licenses to lease their "excess" capacity for commercial purposes. The multichannel capacity of ITFS could be combined with either an existing single channel MDS or a new MMDS to increase the number of available channels offered by an individual operator. The emergence of home satellite dish antennas has also made it possible for individuals to receive a host of video programming options via satellite trans- mission. Technological developments in television transmission have created the possibility that one or more of the broadcast and nonbroadcast television media will provide enhanced or "high definition" pictures and sound to the public of a quality that is technically superior to that of the pictures and sound currently available. It is not yet clear when and to what extent technology of this kind will be available to the various television media; whether and how television broadcast stations will be able to avail themselves of these improvements; whether all television broadcast stations will be afforded sufficient spectrum to do so; what channels will be assigned to each of them to permit them to do so; whether viewing audiences will make choices among services upon the basis of such differences; or, if they would, whether significant additional expense would be required for television stations to provide such services. Many segments of the television industry are intensively studying enhanced and "high definition" television technology, and both Congress and the FCC have initiated proceedings and studies on its potential and its application to television service in the United States. The broadcasting industry is continuously faced with technological changes, competing entertainment and communications media and governmental restrictions or actions of Federal regulatory bodies, including the FCC. These technological changes may include the introduction of digital compression by cable systems that would significantly increase the number and availability of cable program services with which BHC stations compete for audience and revenue, the establishment of interactive video services, and the offering of multimedia services that include data networks and other computer technologies. Such fac- tors have affected, and will continue to affect, the revenue growth and profitability of BHC. ITEM 2. PROPERTIES. KCOP owns its studios and offices in two buildings in Los Angeles containing a total of approximately 54,000 square feet located on adjacent sites having a total area of approximately 1.93 acres. KCOP's transmitter is located atop Mt. Wilson on property utilized pursuant to a permit issued by the United States Forest Service. KPTV owns its studios and offices in a building in Portland, Oregon, containing approximately 33,520 square feet located on a site of approximately 1.09 acres. Its transmitter is located on its own property at a separate site containing approximately 16.18 acres. WWOR owns office and studio facilities in Secaucus, New Jersey, containing approximately 110,000 square feet on approximately 3.5 acres and leases additional office space in New York City. Along with almost all of the television stations licensed to the New York market, WWOR's transmitter is located on top of the World Trade Center in New York City pursuant to a lease agreement which expires in 2004, unless terminated by WWOR in 1994 or 1999. Physical facilities consisting of offices and studio facilities are owned by UTV in Minneapolis, San Antonio and Phoenix and are leased in Salt Lake City and San Francisco. The Salt Lake City lease agreement expires in 1999 and is renewable, at an increased rental, for two five-year periods. The San Francisco lease expires in 2007. The Minneapolis facility includes approximately 49,700 square feet of space on a 5.63-acre site. The Salt Lake City facility is approximately 30,400 square feet on a 2.53-acre site. The San Antonio facility is approximately 41,000 square feet on a .92-acre site. The San Francisco facility is approximately 27,700 square feet in downtown San Francisco. The Phoenix facility is approximately 26,400 square feet on a 3.03-acre site. Smaller buildings containing transmission equipment are owned by UTV at sites separate from the studio facilities. UTV owns a 55-acre tract in Shoreview, Minnesota, of which 40 acres are used by KMSP for transmitter facilities and tower. KTVX's transmitter facilities and tower are located at a site on Mt. Nelson, close to Salt Lake City, under a lease that expires in 2004. KTVX also maintains back-up transmitter facilities and tower at a site on nearby Mt. Vision under a lease that expires in 2002 and is renewable, at no increase in rental, for a 50-year period. KMOL's transmitter facilities are located at a site near San Antonio on land and on a tower owned by Texas Tall Tower Corporation, a corporation owned in equal shares by UTV and another television station that also transmits from the same tower. KBHK's transmitter is located on Mt. Sutro, as part of the Sutro Tower complex, which also houses equipment for other San Francisco television stations and many of its FM radio stations. The lease for the Mt. Sutro facilities expires in February 1995. KUTP's transmitter facilities and tower are located on a site within South Mountain Park, a communications park owned by the City of Phoenix, which also contains transmitter facilities and towers for the other television stations in Phoenix as well as facilities for several FM radio stations. The license for this space expires in 2012. BHC believes its properties are adequate for their present uses. ITEM 3. LEGAL PROCEEDINGS. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of BHC, as of February 28, 1994, are as follows:
Positions with BHC; principal Has served occupation; and age as of as officer Name February 28, 1994 since Herbert J. Siegel Chairman of the Board 1977 and President; Chairman of the Board and President, Chris-Craft; 65 John C. Siegel Senior Vice President; Senior Vice 1981 President, Chris-Craft; 41 William D. Siegel Senior Vice President; Senior Vice 1981 President, Chris-Craft; 39 Joelen K. Merkel Vice President and Controller; 1980 Vice President and Treasurer, Chris-Craft; 42 Brian C. Kelly General Counsel and 1992 Secretary; 42
Chris-Craft, through its majority ownership of BHC, is principally engaged in television broadcasting. The principal occupation of each of the individuals for the past five years is stated in the foregoing table, except that prior to being elected General Counsel and Secretary of BHC on December 14, 1992, Brian C. Kelly served as President of Finevest Foods, Inc. ("Finevest") from July 1992 through December 13, 1992, served as Executive Vice President, General Counsel and Secretary of Finevest from March 1992 until July 1992 and served as Vice President, General Counsel and Secretary of Finevest from January 1989 through February 1992. Finevest filed a Chapter 11 bankruptcy petition on February 11, 1991, and emerged from bankruptcy on July 9, 1992 pursuant to a confirmed reorganization plan. All officers hold office until the meeting of the Board following the next annual meeting of stockholders or until removed by the Board. Evan C Thompson, age 51, is Executive Vice President of Chris- Craft. Although not an officer of BHC, as President of UTV and Chris-Craft's Television Division for more than the past five years, Mr. Thompson may be considered an executive officer of BHC, within the Securities and Exchange Commission definition of the term. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information appearing in the Annual Report under the caption STOCK PRICE, DIVIDEND AND RELATED INFORMATION is incorporated herein by this reference. ITEM 6. SELECTED FINANCIAL DATA. The information appearing in the Annual Report under the caption SELECTED FINANCIAL DATA is incorporated herein by this reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information appearing in the Annual Report under the caption MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS is incorporated herein by this reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements, notes thereto, report of independent public accountants thereon and quarterly financial information (unaudited) appearing in the Annual Report are incor- porated herein by this reference. Except as specifically set forth herein and elsewhere in this Form 10-K, no information appearing in the Annual Report is incorporated by reference into this report nor is the Annual Report deemed to be filed, as part of this report or otherwise, pursuant to the Securities Exchange Act of 1934. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information appearing in the Proxy Statement under the caption ELECTION OF DIRECTORS -- Nominees of the Board of Directors is incorporated herein by this reference. Information relating to BHC's executive officers is set forth in Part I under the caption EXECUTIVE OFFICERS OF THE REGISTRANT. ITEM 11. EXECUTIVE COMPENSATION. The information appearing in the Proxy Statement under the caption ELECTION OF DIRECTORS -- Executive Compensation is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information appearing in the Proxy Statement under the caption ELECTION OF DIRECTORS -- Voting Securities of Certain Beneficial Owners and Management is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information appearing in the Proxy Statement under the caption ELECTION OF DIRECTORS -- Certain Relationships and Related Transactions is incorporated herein by this reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report: 1. The financial statements and quarterly financial information incorporated by reference from the Annual Report pursuant to Item 8. 2. The report of predecessor independent public accountants and the schedules and report of independent accountants thereon, listed in the Index to Consolidated Financial Statements and Schedules. 3. Exhibits listed in the Exhibit Index, including the following compensatory plans listed below: Chris-Craft's Benefit Equalization Plan Employment Agreement dated as of January 1, 1994 between and Evan C Thompson and Chris-Craft (b) No reports on Form 8-K were filed by the registrant during the last quarter of the period covered by this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there- unto duly authorized. Date: March 29, 1994 BHC COMMUNICATIONS, INC. (Registrant) By: WILLIAM D. SIEGEL William D. Siegel Senior Vice President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature and Title Date HERBERT J. SIEGEL March 29, 1994 Herbert J. Siegel Chairman, President and Director (principal exe- cutive officer) WILLIAM D. SIEGEL March 29, 1994 William D. Siegel Director (principal financial officer) JOELEN K. MERKEL March 29, 1994 Joelen K. Merkel Vice President, Controller and Director (principal accounting officer) JOHN L. EASTMAN March 29, 1994 John L. Eastman Director BARRY S. GREENE March 29, 1994 Barry S. Greene Director LAURENCE M. KASHDIN March 29, 1994 Laurence M. Kashdin Director MORGAN L. MILLER March 29, 1994 Morgan L. Miller Director JOHN C. SIEGEL March 29, 1994 John C. Siegel Director VIN WEBER March 29, 1994 Vin Weber Director BHC COMMUNICATIONS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES CONSOLIDATED FINANCIAL STATEMENTS: Report of Independent Accountants Consolidated Balance Sheets -- December 31, 1993 and 1992 Consolidated Statements of Income -- For the Years Ended December 31, 1993, 1992 and 1991 Consolidated Statements of Cash Flows -- For the Years Ended December 31, 1993, 1992 and 1991 Consolidated Statements of Shareholders' Investment -- For the Years Ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements SCHEDULES: Report of Predecessor Independent Public Accountants Report of Independent Accountants on Financial Statement Schedules I. Marketable Securities - Other Investments II. Amounts Receivable from Related Parties, Underwriters, Promoters and Employees other than Related Parties X. Supplementary Income Statement Information Schedules other than those listed above have been omitted since the information is not applicable, not required or is included in the respective financial statements or notes thereto. REPORT OF PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of BHC Communications, Inc.: We have audited the consolidated statements of income, shareholders' investment and cash flows of BHC Communications, Inc. (a Delaware corporation and majority owned subsidiary of Chris- Craft Industries, Inc.) and subsidiaries for the year ended December 31, 1991. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of BHC Communications, Inc. and subsidiaries for the year ended December 31, 1991, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to consolidated financial statements and schedules for the year ended December 31, 1991 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. New York, New York, February 10, 1992. REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of BHC Communications, Inc. Our audits of the consolidated financial statements referred to in our report dated February 8, 1994 appearing on page 11 of the 1993 Annual Report to Shareholders of BHC Communications, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included audits of the Financial Statement Schedules as of December 31, 1993 and 1992, and the years then ended, listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE New York, New York February 8, 1994 Schedule I BHC COMMUNICATIONS, INC. AND SUBSIDIARIES MARKETABLE SECURITIES - OTHER INVESTMENTS DECEMBER 31, 1993 (Columns C, D, and E in Thousands)
Column A Column B Column C Column D Column E Amount at Which Number of Shares or Each Portfolio of Principal Amount of Market Value of Each Equity Security Issues Name of Issuer and Bonds and Cost of Each Issue at Balance Sheet Carried in the Title of Each Issue Notes Issue Date Balance Sheet Current marketable securities: United States Government direct issue securities $1,225,240,000 $1,371,425 $1,373,396 $1,372,602 Other Various 100,552 98,726 98,556 $1,471,977 $1,472,122 $1,471,158 /TABLE Schedule II BHC COMMUNICATIONS, INC. AND SUBSIDIARIES AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (In Thousands)
Column A Column B Column C Column D Column E Balance at Deductions Balance at Beginning Amounts Amounts End of Period Name of Debtor of Period Additions Collected Written Off Current Noncurrent Year ended December 31, 1993: Garth S. Lindsey (Officer of UTV) $100 $ - $ 20 $ - $ 20 $ 60 Year ended December 31, 1992: Garth S. Lindsey (Officer of UTV) $120 $ - $ 20 $ - $ 20 $ 80 Year ended December 31, 1991: Garth S. Lindsey (Officer of UTV) $140 $ - $ 20 $ - $ 20 $100 The loan was made for the purpose of assisting Mr. Lindsey in relocating his home in connection with the relocation of UTV's executive offices from Minneapolis to Los Angeles. The loan was represented by a non-interest bearing five-year note, with no payment due before maturity. In December 1988, the note was revised and extended. Under the Revision and Extension Agreement, 10% of the original balance is due and payable December 31 of each year through December 31, 1997. Such installments will be forgiven on each such December 31 if the borrower is still employed by UTV on each such forgiveness date. The note is secured by a deed of trust on the borrower's home and provides that at the option of the holder the loan will become due and payable upon sale or further encumbrance of the borrower's home without the consent of the holder or upon the borrower's voluntary termination of employment with UTV.
Schedule X BHC COMMUNICATIONS, INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION (In Thousands)
Year Ended Year Ended Year Ended Item December 31, 1993 December 31, 1992 December 31, 1991 Maintenance and repairs $ 2,146 $ 1,621 $ 1,655 Depreciation and amortization of property and equipment $ 11,160 $ 8,363 $ 6,028 Amoritization of intangible assets $ 9,270 $ 4,304 $ 1,611 Advertising costs $ 10,095 $ 7,046 $ 7,611
EXHIBIT INDEX
Incorporated by Reference to: Exhibit No. Exhibit Exhibit 3(a)[1] 3(a) Restated Certificate of Incorporation Exhibit 3(b)[1] (b) Restated By-laws Exhibit 10(c)[1] 10(a) Management Agreement between registrant and Chris-Craft dated July 21, 1989 Exhibit 19[4] 10(a)(1) Amendment No. 1 thereto dated October 31, 1994 Exhibit 10(h)(2)[6] (a)(2) Amendment No. 2 thereto dated March 24, 1994 Exhibit 10(E)[2] (b) Form of Agreement under Chris-Craft's Executive Deferred Income Plan Exhibit 10(B)[6] (c) Employment Agreement dated January 1, 1994 between registrant and Herbert J. Siegel Exhibit 10(C)[6] (d) Split-Dollar Agreement dated January 6, 1994 between registrant and William D. Siegel Exhibit 10(D)[6] (e) Split-Dollar Agreement dated January 6, 1994 between registrant and John C. Siegel Exhibit 10(F)[6] (f) Employment Agreement dated January 1, 1994 between registrant and Evan C Thompson Exhibit 11(h)[3] (f) Chris-Craft's Benefit Equalization Plan, as amended Exhibit 28[5] (g) Agreement and Plan of Merger among registrant, BHC Acquisition corp., and Pinelands, Inc. dated May 7, 1992 * 13 Portions of the Annual Report incorporated by reference * 22 Subsidiaries of registrant ____________________ [1] Registrant's Registration Statement on Form S-1 (Regis. No. 33-31091). [2] Chris-Craft's Annual Report on Form 10-K for the year ended August 31, 1983 (File No. 1-2999). [3] Chris-Craft's Registration Statement on Form S-1 (Regis. No. 2-65906). [4] Registrant's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1991. [5] Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992. [6] Chris-Craft's Annual Report on Form 10-K for the year ended December 31, 1993.
EX-22 2 EX-22 Exhibit 22 The following were the registrant's subsidiaries as of December 31, 1993, other than subsidiaries that, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary at such date: Jurisdiction of Name of Subsidiary Incorporation Chris-Craft Television, Inc. Delaware KCOP Television, Inc. California Oregon Television, Inc. Oregon Pinelands, Inc. Delaware United Television, Inc. Delaware UTV of San Francisco, Inc. California UTV of San Antonio, Inc. Texas EX-13 3 ARS PORTIONS INCORPORATED BY REFERENCE Stock Price, Dividend and Related Information BHC Class A common stock is traded on the American Stock Exchange. The high and low sales prices of these shares are shown below for the periods indicated. At February 28, 1994, there were 7,558 holders of record of Class A common stock. All BHC Class B common shares, which in general are nontransferable, are held by Chris-Craft Industries, Inc., and, accordingly, there is no trading market for such shares. - -------------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------------------------------------------- 1993 High ................. 69 3/8 74 80 82 3/4 Low .................. 59 1/4 67 3/8 70 3/8 75 3/4 1992 High ................. 59 1/8 60 1/2 62 1/8 62 3/4 Low .................. 53 7/8 56 7/8 57 1/2 58 3/4 BHC paid a special cash dividend of $2.00 per share in January 1993. This was the only dividend paid by BHC since it became a public company in January 1990. BHC has no current plan to pay future cash dividends. Quarterly Financial Information (Unaudited) BHC Communications, Inc. and Subsidiaries - --------------------------------------------------------------------------------
(In Thousands of Dollars except per Share Data) --------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Year --------------------------------------------------------- Year Ended December 31, 1993 Operating revenues ......... $ 89,581 $ 113,199 $ 100,216 $ 109,003 $ 411,999 Operating income ........... 8,796 25,044 24,480 20,942 79,262 Income associated with Time Warner Inc. securities . 108,413 132,986 12,340 2,883 256,622 Income before income taxes and minority interest .. 124,965 168,207 48,816 49,236 391,224 Net income ................. 75,918 92,639 24,516 31,213 224,286 Net income per share ....... $2.92 $3.58 $.95 $1.21 $8.67 Year Ended December 31, 1992 Operating revenues ......... $ 55,662 $ 69,502 $ 78,358 $ 104,361 $ 307,883 Operating income (loss) .... (11,057) 9,494 10,701 13,224 22,362 Income associated with Time Warner Inc. securities . 21,522 21,494 22,535 28,508 94,059 Income before income taxes and minority interest .. 22,301 41,345 41,893 47,256 152,795 Net income ................. 17,925 28,990 28,650 33,730 109,295 Net income per share ....... $.65 $1.08 $1.08 $1.29 $4.09
Report of Independent Accountants 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, 1993 and 1992, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 the opinion expressed above. The financial statements of BHC Communications, Inc. for the year ended December 31, 1991 were audited by other independent accountants whose report dated February 10, 1992 expressed an unqualified opinion on those statements. /s/ Price Waterhouse New York, New York February 8, 1994 Consolidated Balance Sheets BHC Communications, Inc. and Subsidiaries - -------------------------------------------------------------------------------- (In Thousands of Dollars) ------------------------- December 31, ------------------------- 1993 1992 ------------------------- Assets Current Assets: Cash and cash equivalents ................ $ 35,371 $ 172,882 Marketable securities (substantially all U.S. Government and, in 1992, securities redeemed) ........ 1,471,158 793,700 Accounts receivable, less allowance for doubtful accounts of $5,944 and $4,572 85,376 77,963 Film contract and prepaid broadcast rights 98,882 104,128 Prepaid expenses and other current assets 54,518 47,683 Total current assets ................. 1,745,305 1,196,356 Noncurrent Marketable Securities ............... -- 450,022 Film Contract Rights, including deposits, less estimated portion to be used within one year ............... 87,197 83,390 Property and Equipment, at cost: Land, buildings and improvements ......... 35,373 33,161 Equipment ................................ 86,429 81,904 121,802 115,065 Less-Accumulated depreciation ........ 69,767 62,938 52,035 52,127 Intangible Assets .............................. 342,395 349,098 Other Assets ................................... 14,606 4,045 $2,241,538 $2,135,038 - -------------------------------------------------------------------------------- (In Thousands of Dollars) ------------------------- December 31, ------------------------- 1993 1992 ------------------------- Liabilities and Shareholders' Investment Current Liabilities: Film contracts payable within one year ..... $ 112,798 $ 139,731 Dividend payable ........................... -- 51,893 Accounts payable and accrued expenses ...... 81,834 62,148 Income taxes payable ....................... 69,340 68,014 Total current liabilities .............. 263,972 321,786 Film Contracts Payable after One Year ............ 95,699 131,803 Other Long-Term Liabilities ...................... 15,563 17,402 Minority Interest ................................ 87,483 73,599 Commitments and Contingencies (Note 7) Shareholders' Investment: Class A common stock-par value $.01 per share; authorized 200,000,000 shares; outstanding 7,723,418 and 8,172,808 shares ....................... 77 82 Class B common stock-par value $.01 per share; authorized 200,000,000 shares; outstanding 18,000,000 shares .. 180 180 Capital surplus ............................ 98,182 133,934 Retained earnings .......................... 1,686,532 1,462,246 Treasury stock-122,991 and 119,820 Class A common shares, at cost ......... (6,150) (5,994) 1,778,821 1,590,448 $2,241,538 $2,135,038 The accompanying notes to consolidated financial statements are an integral part of these balance sheets. Consolidated Statements of Income BHC Communications, Inc. and Subsidiaries - -------------------------------------------------------------------------------- (In Thousands except per Share Data) ------------------------------------- Year Ended December 31, ------------------------------------- 1993 1992 1991 ------------------------------------- Operating Revenues ....................... $ 411,999 $ 307,883 $ 262,568 --------- --------- --------- Operating Expenses: Television expenses .................. 230,088 208,031 199,056 Selling, general and administrative .. 102,649 77,490 62,995 332,737 285,521 262,051 Operating income ................. 79,262 22,362 517 Other Income: Income associated with Time Warner Inc. securities, net . 256,622 94,059 87,657 Interest and other income, net ....... 55,340 36,374 57,311 311,962 130,433 144,968 Income before provision for income taxes and minority interest .. 391,224 152,795 145,485 Provision for Income Taxes ............... 146,900 36,100 34,900 Income before minority interest .. 244,324 116,695 110,585 Minority Interest ........................ (20,038) (7,400) (2,470) Net income ....................... $ 224,286 $ 109,295 $ 108,115 Net Income per Share ..................... $ 8.67 $ 4.09 $ 3.89 Average Common Shares Outstanding ........ 25,882 26,734 27,790 The accompanying notes to consolidated financial statements are an integral part of these statements. Consolidated Statements of Cash Flows BHC Communications, Inc. and Subsidiaries
- ---------------------------------------------------------------------------------------------------- (In Thousands of Dollars) --------------------------------- Year Ended December 31, --------------------------------- 1993 1992 1991 --------------------------------- Cash Flows from Operating Activities: Net income ............................................... $ 224,286 $ 109,295 $ 108,115 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Film contract amortization ....................... 102,768 117,659 134,756 Film contract payments ........................... (147,557) (103,174) (108,480) Prepayment of broadcast rights ................... (34,426) -- -- Depreciation and other amortization .............. 20,430 12,667 7,639 Gain on disposition of Time Warner Inc. securities (219,373) (8,082) (5,471) Minority interest ................................ 20,038 7,400 2,470 Other (primarily noncash Time Warner Inc. dividend income in 1992 and 1991) ............ (12,441) (38,184) (35,525) Changes in assets and liabilities, net of amounts acquired in 1992 acquisition: Accounts receivable ...................... (7,996) 11,128 (429) Other assets ............................. (7,628) 8,917 5,724 Accounts payable and other liabilities ... 1,384 (14,200) 2,607 Income taxes ............................. 4,688 877 (20,087) Net cash provided from (used in) operating activities ............. (55,827) 104,303 91,319 Cash Flows from Investing Activities: Disposition of marketable securities ..................... 947,015 394,462 83,867 Purchase of marketable securities ........................ (927,268) -- (106,561) Purchase of Pinelands, Inc., net of cash acquired ........ -- (279,422) (1,304) Capital expenditures, net ................................ (10,835) (10,587) (10,612) Other .................................................... (4,515) -- -- Net cash provided from (used in) investing activities ............. 4,397 104,453 (34,610) Cash Flows from Financing Activities: Payment of special dividend .............................. (51,893) -- -- Purchase of treasury stock ............................... (25,428) (86,479) (32,623) Capital transactions of subsidiary ....................... (8,760) (4,345) (3,353) Net cash used in financing activities (86,081) (90,824) (35,976) Net Increase (Decrease) in Cash and Cash Equivalents ........... (137,511) 117,932 20,733 Cash and Cash Equivalents at Beginning of Year ................. 172,882 54,950 34,217 Cash and Cash Equivalents at End of Year ....................... $ 35,371 $ 172,882 $ 54,950 The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Shareholders' Investment BHC Communications, Inc, and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------ Treasury Outstanding Shares Shares Dollar Amount (In Thousands) ----------------------- -------- --------------------------------------------------------------- Class A Class B Class A Class A Class B Capital Retained Treasury Market Common Common Common Common Common Surplus Earnings Stock Valuation Account ----------------------- -------- --------------------------------------------------------------- Balance at December 31, 1990 ........ 10,280,265 18,000,000 (116,876) $ 103 $180 $ 253,858 $ 1,296,942 $ (5,844) $(50,208) Net income ............... -- -- -- -- -- -- 108,115 -- -- Noncurrent marketable securities valuation adjustment ............ -- -- -- -- -- -- -- -- 50,208 Acquisition of treasury stock ................. -- -- (632,600) -- -- -- -- (31,545) -- Retirement of treasury stock ................. (632,600) -- 632,600 (7) -- (31,538) -- 31,545 -- Capital transactions of subsidiary ............ -- -- (1,132) -- -- (892) -- (57) -- Balance at December 31, 1991 ........ 9,647,665 18,000,000 (118,008) 96 180 221,428 1,405,057 (5,901) -- Net income ............... -- -- -- -- -- -- 109,295 -- -- Dividend on common stock - 2.00 per share ....... -- -- -- -- -- -- (52,106) -- -- Acquisition of treasury stock ................. -- -- (1,474,857) -- -- -- -- (86,479) -- Retirement of treasury stock ................. (1,474,857) -- 1,474,857 (14) -- (86,465) -- 86,479 -- Capital transactions of subsidiary ............ -- -- (1,812) -- -- (1,029) -- (93) -- Balance at December 31, 1992 ........ 8,172,808 18,000,000 (119,820) 82 180 133,934 1,462,246 (5,994) -- Net income ............... -- -- -- -- -- -- 224,286 -- -- Acquisition of treasury stock ................. -- -- (449,390) -- -- -- -- (33,307) -- Retirement of treasury stock ................. (449,390) -- 449,390 (5) -- (33,302) -- 33,307 -- Capital transactions of subsidiary ............ -- -- (3,171) -- -- (2,450) -- (156) -- Balance at December 31, 1993 ........ 7,723,418 18,000,000 (122,991) $ 77 $180 $ 98,182 $ 1,686,532 $ (6,150) $ --
The accompanying notes to consolidated financial statements are an integral part of these statements. Notes to Consolidated Financial Statements BHC Communications, Inc. and Subsidiaries 1. Summary of Significant Accounting Policies: (A) Principles of Consolidation The accompanying consolidated financial statements include the accounts of BHC Communications, Inc. and its subsidiaries. BHC is a majority owned (70.3% at December 31, 1993 and 69.1% at December 31, 1992) subsidiary of Chris-Craft Industries, Inc. (Chris-Craft). BHC's primary business is television broadcasting, conducted through wholly owned subsidiaries, which operate three television stations (including WWOR, acquired August 1992 in the transaction described below), and through majority owned (54.3% at December 31, 1993 and 52.9% at December 31, 1992) United Television, Inc. (UTV), which operates five television stations. 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 Consolidated Statements of Income and Consolidated Balance Sheets, respectively. Intercompany accounts and transactions have been eliminated. In August 1992, BHC acquired all outstanding shares of Pinelands, Inc., other than the 4.9% of such shares which BHC had previously acquired. Pinelands owns and operates independent television station WWOR, which broadcasts into a tri-state area including New York City. The total acquisition price, including the cost of previously acquired Pinelands shares and expenses related to the acquisition, was approximately $313 million. The acquisition, funded from BHC's internal cash balances, has been accounted for as a purchase. Pinelands' assets and liabilities at the acquisition date have been recorded at their estimated fair values, and the excess of purchase price over the fair value of net assets acquired, totalling $305,897,000, is being amortized on a straight-line basis over 40 years. The following unaudited pro forma consolidated financial information for 1992 and 1991 has been prepared as if the acquisition had occurred at the beginning of each year. Such pro forma information does not purport to be indicative of the results of operations that actually would have been obtained if the acquisition had occurred on the dates indicated or that may be obtained in the future (in thousands except per share amounts). - -------------------------------------------------------------------------------- Year Ended December 31, ----------------------------- 1992 1991 ----------------------------- Operating revenues ..................... $ 399,803 $ 425,473 Net income ............................. $ 97,714 $ 104,775 Net income per share ................... $ 3.66 $ 3.77 (B) Financial Instruments Cash and cash equivalents totalled $35,371,000 at December 31, 1993 and $172,882,000 at December 31, 1992. Cash equivalents are money market securities having maturities at time of purchase not exceeding three months. The fair value of cash equivalents approximates carrying value, reflecting their short maturities. Marketable securities are carried at cost, and related fair values are based on quoted market prices. Current marketable securities consist primarily of (i) U.S. Government securities totalling $1,372,602,000 at December 31, 1993 and $536,013,000 at December 31, 1992, and (ii) at December 31, 1992, $255,649,000 of Time Warner Inc. convertible preferred stock which was redeemed in February 1993. The fair value of current marketable securities totalled $1,472,122,000 at December 31, 1993 and $886,046,000 at December 31, 1992. Noncurrent marketable securities at December 31, 1992 totalled $450,022,000 and had an aggregate fair value of $547,734,000. Those securities consisted primarily of Time Warner convertible preferred stock other than the stock mentioned in the preceding paragraph, all of which were disposed in 1993. (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 films become 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 ultimate total cost for each contract. 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, 1993 are $47,269,000, $26,858,000, $12,576,000 and $8,996,000 in 1995, 1996, 1997 and thereafter, respectively. The net present value at December 31, 1993 of such payments, based on a 6% discount rate, was approximately $83,100,000. See Note 7. (D) Depreciation and Amortization Depreciation of property and equipment is generally provided for on the straight-line method over the estimated useful lives of the assets, 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. Amounts primarily relate to WWOR and are being amortized on a straight-line basis over 40 year periods. Accumulated amortization of intangible assets totalled $28,690,000 at December 31, 1993 and $19,420,000 at December 31, 1992. (F) Revenue Recognition and Barter Transactions Revenue is recognized upon broadcast of television advertising. Barter (nonmonetary) transactions are recorded at the time related agreements are consummated. The estimated fair value of goods or services received is recognized as revenue when the air time is used by the advertiser. (G) Supplemental Cash Flow Information Cash paid for income taxes totalled $142,074,000 in 1993, $34,033,000 in 1992, and $54,984,000 in 1991. (H) Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. 2. Interests in Warner Communications Inc. and Time Warner Inc.: From 1984 to 1989, BHC was the largest shareholder of Warner Communications Inc., and Warner held a significant minority interest in BHC. Pursuant to the merger of Warner and Time Warner, BHC in 1989 sold for cash 63% of its interest in Warner, and in 1990 exchanged its remaining Warner shares primarily for Time Warner convertible preferred stock. BHC recorded pretax gains on such transactions totalling $1,894,188,000. During 1993, Time Warner redeemed its convertible preferred shares held by BHCfor cash and convertible subordinated debentures. Such debentures subsequently were partially redeemed by Time Warner, and the balance was sold. Proceeds from the Time Warner dispositions have been placed primarily in money market instruments having significantly lower yields than the securities disposed. Income associated with Time Warner securities is included in the accompanying Consolidated Statements of Income as follows (in thousands): - -------------------------------------------------------------------------------- Year Ended December 31, ------------------------------------ 1993 1992 1991 ------------------------------------ Gain on disposition, after expense of $2,905 in 1993 ........ $219,373 $ 8,082 $ 5,471 Dividend income ...................... 14,672 85,977 82,186 Interest income ...................... 22,577 -- -- $256,622 $ 94,059 $ 87,657 Expense deducted from the 1993 gain on disposition consists of Chris-Craft compensation expense reimbursed by BHC pursuant to its management agreement with Chris-Craft. 3. Accounts Payable and Accrued Expenses: Accounts payable and accrued expenses consist of the following (in thousands): - -------------------------------------------------------------------------------- December 31, ----------------------- 1993 1992 ----------------------- Accounts payable ............................... $ 6,656 $10,915 Payable for securities purchased ............... 15,151 -- Accrued expenses - Deferred barter revenue .................... 33,252 25,335 Payroll and compensation ................... 7,853 6,581 Other ...................................... 18,922 19,317 $81,834 $62,148 4. Shareholders' Investment: In January 1990, immediately prior to BHC becoming a public company, BHC's outstanding shares consisted of 12,000,000 shares of Class A common stock (all held by Warner and representing 40% of BHC's then outstanding equity) and 18,000,000 shares of Class B common stock (all held by Chris-Craft and representing 60% of BHC's then outstanding equity). Pursuant to the January 10, 1990 merger of Warner and Time Warner, the BHC Class A common shares held by Warner were distributed to former Warner shareholders, including BHC subsidiaries. Through December 31, 1993, BHC purchased 3,683,777 Class A common shares at an aggregate cost of $199,400,000, so that BHC common shares outstanding for accounting purposes totalled 25,600,427 at December 31, 1993, after reflecting as treasury stock BHC's interest in its Class A common shares held by UTV. At December 31, 1993, purchases of 316,223 shares of Class A common stock were authorized and in January 1994, BHC's Board of Directors authorized the purchase of an additional 1,500,000 shares. Each share of Class B common stock 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 a share of 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. In November 1992, 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 was paid on January 5, 1993. BHC has no current plan to pay future cash dividends. 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 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 $1,654,000 in 1993, $1,528,000 in 1992 and $1,623,000 in 1991. It is not practicable 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 was as follows (in thousands): - -------------------------------------------------------------------------------- December 31, ------------------------ 1993 1992 ------------------------ Actuarial present value of: Vested benefit obligation .................... $(20,366) $(16,434) Nonvested benefit obligation ................. (1,412) (1,144) Accumulated benefit obligation ............... (21,778) (17,578) Effect of projected compensation increases .................................. (7,709) (7,143) Projected benefit obligation ............... (29,487) (24,721) Fair value of plan assets (primarily listed securities and temporary investments) ................................. 18,779 15,796 Excess ........................................... (10,708) (8,925) Unrecognized net asset at date of initial application of SFAS No. 87, being amortized over 15 years ................ (333) (382) Unrecognized net loss from past experience being amortized over 15 years ..................................... 2,621 1,838 Pension liability ............................ $ (8,420) $ (7,469) Assumptions used in accounting for pension plans are as follows (except that the discount rate has been reduced to 7.25% and the future compensation increase rate has been reduced to 4.50% effective with the computation of the December 31, 1993 pension liability): - -------------------------------------------------------------------------------- Discount rate .................................................. 7.75% Rate of increase in future compensation levels ................. 5.00% Expected long-term rate of return on assets .................... 7.75% 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 $4,977,000 in 1993, $3,373,000 in 1992 and $1,494,000 in 1991. 6. Income Taxes: Effective January 1, 1993, BHC adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes", under which deferred income tax amounts reflect the expected future tax consequences arising from temporary differences in the bases of assets and liabilities for financial accounting and income tax purposes. The cumulative effect of adoption of SFAS 109, the amount of which is immaterial, is included in the 1993 provision for income taxes. Income taxes are provided in the accompanying Consolidated Statements of Income as follows: - -------------------------------------------------------------------------------- In Thousands Year Ended December 31, ------------------------------------------ 1993 1992 1991 ------------------------------------------ Current (including 1993 effect of adoption): Federal ............... $127,450 $ 26,568 $ 27,400 State ................. 15,975 7,650 6,250 143,425 34,218 33,650 Deferred: Federal ............... 1,450 1,732 1,200 State ................. 2,025 150 50 3,475 1,882 1,250 $146,900 $ 36,100 $ 34,900 Differences between income taxes at the federal statutory income tax rate and total income taxes provided are as follows: - -------------------------------------------------------------------------------- In Thousands Year Ended December 31, --------------------------------------- 1993 1992 1991 --------------------------------------- Taxes at federal statutory rate .......................... $ 136,928 $ 51,950 $ 49,465 State income taxes, net ........... 11,692 5,148 4,158 Amortization of intangible assets ........................ 2,847 1,463 502 Dividend exclusion ................ (3,984) (20,574) (19,599) Enacted rate change (to 35% from 34%) ............. (1,129) -- -- Other ............................. 546 (1,887) 374 $ 146,900 $ 36,100 $ 34,900 Deferred tax assets and deferred tax liabilities at December 31, 1993 reflect the tax effect of the following differences between financial statement carrying amounts and tax bases of assets and liabilities: - -------------------------------------------------------------------------------- In Thousands Accrued liabilities not deductible until paid ................. $ 25,786 Allowance for doubtful accounts ............................... 2,526 Film contract rights .......................................... 14,399 Other ......................................................... 1,115 Deferred tax assets ....................................... 43,826 Property and equipment ........................................ (3,840) Other ......................................................... (335) Deferred tax liabilities .................................. (4,175) Net deferred tax asssets .................................. $ 39,651 Certain states have audited income tax returns filed with them by BHC and its subsidiaries, and are considering to propose adjustments increasing the amount of income taxable by such states. BHC believes that reserves previously provided are adequate to cover any additional taxes and interest which might ultimately become payable. 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 Sheet, totalled $117,900,000 at December 31, 1993 (including $28,500,000 applicable to UTV). BHC is a party to various pending legal proceedings arising in the normal 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. 8. Related Party Transactions: Included in selling, general and administrative expenses are management fees BHC paid Chris-Craft of $8,000,000 in 1993, $5,000,000 in 1992 and $3,000,000 in 1991, and management and directors' fees UTV paid Chris-Craft totalling $549,000 in 1993, $534,000 in 1992 and $525,000 in 1991. The management contract between BHC and Chris-Craft additionally provides for the reimbursement by BHC to Chris-Craft of expenses incurred by Chris-Craft specifically relating to BHC, including compensation payable by Chris-Craft to its employees with respect to any extraordinary financial results of BHC. In connection with the 1993 disposition of Time Warner securities, which resulted in gains before income taxes and minority interest of approximately $219 million, BHC reimbursed Chris-Craft $2,905,000 for compensation expense payable by Chris-Craft with respect to such disposition. Selected Financial Data BHC Communications, Inc. and Subsidiaries
- ---------------------------------------------------------------------------------------------------- (In Thousands of Dollars except per Share Data) ------------------------------------------------------------------- As of and for the Years Ended December 31, ------------------------------------------------------------------- 1993 1992 1991 1990 1989 ------------------------------------------------------------------- Operating revenues ........... $ 411,999 $ 307,883 $ 262,568 $ 278,080 $ 246,741 Operating income ............. $ 79,262 $ 22,362 $ 517 $ 25,690 $ 885 Interest and other income, net 55,340 36,374 57,311 71,867 46,183 Interest expense ............. -- -- -- -- (9,342) Income associated with Time Warner and, in 1990 and 1989, Warner securities 256,622 94,059 87,657 685,215 1,299,602 Income taxes ................. (146,900) (36,100) (34,900) (277,600) (495,400) Minority interest ............ (20,038) (7,400) (2,470) (23,981) (31,168) Net income ............. $ 224,286 $ 109,295 $ 108,115 $ 481,191 $ 810,760 Net income per share ......... $ 8.67 $ 4.09 $ 3.89 $ 16.56 $ 27.03 Cash and current marketable securities ............. 1,506,529 966,582 931,350 814,748 990,272 Film contract rights ......... 186,079 187,518 165,029 161,634 196,965 Noncurrent marketable securities ............. -- 450,022 732,740 690,898 178,302 Total assets ................. 2,241,538 2,135,038 2,012,203 1,872,967 1,530,568 Long-term debt ............... -- -- -- -- -- Shareholders' investment ..... $ 1,778,821 $ 1,590,448 $ 1,620,860 $ 1,495,031 $ 1,149,874
Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources BHC's core operating cash flow is generated primarily by its television broadcasting business. Television broadcasting cash flow generally parallels the earnings of BHC's television stations, adjusted to reflect (i) the difference between film contract payments and related film contract amortization and (ii) the effect of significant prepayments for other broadcast rights. The relationship between film contract payments and related amortization varies greatly between periods (payments exceeded amortization by $44.8 million in 1993, but amortization exceeded payments by $14.5 million in 1992 and $26.3 million in 1991), and is dependent upon the mix of programs aired and payment terms of the stations' contracts. In 1993, a BHC station made a $34.4 million broadcast right prepayment, which will be amortized from 1994 through 1996. Such factors, despite a 126% increase in station earnings, resulted in a 39% decline in 1993 station cash flow (9% excluding the broadcast right prepayment). BHC expects that 1994 station cash flow will be strong, and will parallel more closely station earnings. BHC's cash flow additionally reflects earnings associated with its cash and marketable securities. Prior to their disposition in 1993, substantial dividend income was realized on BHC's large holdings of Time Warner Inc. convertible preferred shares received in the January 1990 merger of Time Warner and Warner Communications Inc., in which BHC had been a major shareholder. During 1993, Time Warner redeemed its convertible preferred shares held by BHC for cash and convertible subordinated debentures. Such debentures subsequently were partially redeemed by Time Warner, and the balance was sold. Proceeds from the Time Warner dispositions, which produced 1993 pretax gains of $219.4 million, have been placed primarily in money market instruments, mainly U.S. Government obligations, having significantly lower yields than the securities disposed. Total cash and marketable securities increased to $1.51 billion at December 31, 1993 from $1.42 billion at December 31, 1992, despite a deficit in operating cash flow. Such deficit and nonoperating cash expenditures, primarily the special cash dividend and the treasury stock purchases described below, were more than offset by the Time Warner dispositions. The operating cash flow deficit primarily reflects (i) income taxes on the disposition of BHC's Time Warner convertible preferred stock, the related gain on which is excluded from operating cash flow, (ii) the $44.8 million excess of film payments over related amortization and (iii) the $34.4 million broadcast right prepayment. In November 1992, 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 $51.9 million, was paid in January 1993. This is the only dividend paid by BHC since it became a public company in January 1990, and BHC has no current plan to pay future cash dividends. Since April 1990, BHC's Board of Directors has authorized the purchase of up to 5,500,000 Class A common shares. Through December 31, 1993, 3,683,777 shares have been purchased for a total cost of $199.4 million, including $33.3 million applicable to shares purchased in 1993. BHC intends to expand its operations in the media, entertainment and communications industries and to explore business opportunities in other industries. BHC currently has no outstanding debt, and believes it is capable of raising significant additional capital to augment its already substantial cash balances, if desired, to fund such additional expansion. BHC's television stations make current commitments for programming that will not be available for telecasting until future dates. At December 31, 1993, commitments for such programming totalled approximately $117.9 million, including $28.5 million applicable to UTV. BHC capital expenditures generally have not been material in relation to its financial position and the related commitments at December 31, 1993 were not material. BHC expects that future film contract commitments and capital expenditure requirements for its present business will be satisfied primarily from operations or from current cash balances. Results of Operations 1993 versus 1992 BHC 1993 net income increased 105% to $224,286,000, or $8.67 per share, from $109,295,000, or $4.09 per share, in 1992. The significant earnings increase includes record results at BHC's television broadcasting business and substantial gains on disposition of BHC's remaining Time Warner securities. Reflecting a full year's operations at WWOR and generally improved demand for television advertising at BHC's other seven stations, operating revenues rose 34% in 1993, to $411,999,000 from $307,883,000. Station earnings rose 126%, surpassing $100,000,000 for the first time, as BHC stations other than WWOR achieved a 104% increase in their aggregate earnings. Those stations recorded an 8% increase in their operating revenues and a 10% reduction in their programming expenses. After goodwill amortization, (mostly relating to the acquisition of WWOR), program development expense (reduced $3.1 million from 1992), and corporate office expenses of BHC and UTV (increased $4.1 million from 1992, primarily reflecting a $3 million increase in the management fee paid Chris-Craft), operating income totalled $79,262,000, more than triple 1992's $22,362,000. The 1993 reduction in programming expenses primarily reflects a significant decline in program amortization. Such decline is attributable to (i) airing certain syndicated programs for periods longer than originally estimated, reflecting their sustained success, (ii) the acquisition of fewer replacement programs, (iii) final determination that certain contract costs would be less than previously estimated, and (iv) generally lower costs of programming. These favorable factors are expected to moderate, and it is anticipated that program amortization will increase modestly in 1994. Income associated with BHC's former holdings of Time Warner Inc. securities increased to $256,622,000 in 1993, from $94,059,000 in 1992, as 1993 gains on disposition aggregated $219.4 million versus $8.1 million in 1992. Other nonoperating income totalled $55,340,000, up from $36,374,000 in 1992, primarily reflecting other marketable securities gains and the placement of Time Warner proceeds in money market instruments. BHC's effective income tax rate rose to 38% in 1993 from 24% in 1992, primarily due to a reduction in the proportion of not fully taxable dividend income included in pretax income. 1992 versus 1991 BHC net income in 1992 increased to $109,295,000, or $4.09 per share, from $108,115,000, or $3.89 per share, in 1991. The dollar amount of net income rose only 1%, as a substantial increase in television station earnings was offset by a reduction in interest and other income. However, per share earnings for the year increased 5%, as purchases of Class A common stock under BHC's stock repurchase program reduced the average number of common shares outstanding to 26,734,000 from 27,790,000 in 1991. Except for Olympics and political advertising, which did not significantly benefit BHC's television station group, demand for television advertising was generally sluggish throughout 1992. Operating revenues at BHC stations other than WWOR declined 2% in 1992, but the addition of WWOR brought operating revenues for the year to a record $307,883,000, up 17% from 1991's $262,568,000. Despite the modest decline in their revenues, earnings at stations other than WWOR more than doubled, due to a 12% decline in their programming expenses and a 3% decline in their nonprogramming expenses. Including WWOR, station earnings rose 170%. After reflecting program development expense (no significant change from 1991), corporate office expenses of BHC and UTV (including a $2 million increase in the management fee paid Chris-Craft), and goodwill amortization, BHC operating income increased to $22,362,000 from $517,000 in 1991. The 1992 reduction in programming expenses described above primarily reflects a decline in program amortization attributable to the factors which similarly affected 1993 amortization. Income associated with Time Warner securities increased to $94,059,000 in 1992 from $87,657,000 in 1991, reflecting increased dividend income and gains on sale of convertible preferred shares. Other nonoperating income declined to $36,374,000 from $57,311,000, as the utilization of funds to acquire WWOR and lower short-term interest rates resulted in a decrease in interest income. -----END PRIVACY-ENHANCED MESSAGE-----