SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-2999
------------------------------
CHRIS-CRAFT INDUSTRIES, INC.
----------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-1461226
- ---------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
767 Fifth Avenue, New York, New York 10153
- ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-0200
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
------- -------
As of April 30, 1995 there were 21,302,847 shares of the issuer's
Common Stock outstanding and 7,707,501 shares of the issuer's Class
B Common Stock outstanding.
<PAGE>
<TABLE>
PART I -- FINANCIAL INFORMATION
CHRIS-CRAFT INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
-------------------------------------
<CAPTION>
March 31, December 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 158,670 $ 226,183
Marketable securities (substantially
all U.S. Government securities) 1,352,059 1,294,278
Accounts receivable, net 78,387 99,775
Film contract and prepaid broadcast rights 82,709 89,245
Prepaid expenses and other current assets 55,710 59,478
----------- -----------
Total current assets 1,727,535 1,768,959
----------- -----------
FILM CONTRACT AND PREPAID BROADCAST RIGHTS,
less current portion 53,309 59,228
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, net 48,968 51,624
----------- -----------
INTANGIBLE ASSETS 326,260 329,517
----------- -----------
OTHER ASSETS 23,163 22,889
----------- -----------
$ 2,179,235 $ 2,232,217
=========== ===========
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
CURRENT LIABILITIES:
Film contracts payable within one year $ 75,932 $ 81,696
Accounts payable and other liabilities 96,199 100,984
Income taxes payable 56,127 60,877
----------- -----------
Total current liabilities 228,258 243,557
----------- -----------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 82,185 89,048
----------- -----------
OTHER LIABILITIES 9,202 9,192
----------- -----------
MINORITY INTEREST 563,401 584,202
----------- -----------
SHAREHOLDERS' INVESTMENT:
Prior preferred stock - $1.00 dividend; currently
authorized 73,399 shares; outstanding 73,399 shares 1,578 1,578
Convertible preferred stock - $1.40 dividend;
currently authorized 282,267 shares;
outstanding 282,267 and 282,826 shares 4,940 4,949
Class B common stock - par value $.50 per share;
authorized 50,000,000 shares; outstanding
7,742,358 and 7,567,821 shares 3,871 3,784
Common stock - par value $.50 per share; authorized
100,000,000 shares; outstanding 21,672,984 and
20,979,174 shares 11,627 11,280
Capital surplus 324,049 298,090
Retained earnings 967,781 996,331
Treasury stock, at cost (14,232) -
Reduction to reflect marketable
securities at market value (3,425) (9,794)
----------- -----------
1,296,189 1,306,218
----------- -----------
$ 2,179,235 $ 2,232,217
=========== ===========
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CHRIS-CRAFT INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars except per share data)
(UNAUDITED)
-----------------------------------------------
<CAPTION>
Three Months
Ended March 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATING REVENUES $ 108,709 $ 101,775
---------- ----------
OPERATING EXPENSES:
Expenses directly associated with revenues 53,989 56,388
Selling, general and administrative 30,940 28,008
---------- ----------
84,929 84,396
---------- ----------
Operating income 23,780 17,379
---------- ----------
OTHER INCOME (EXPENSE):
Interest and other income, net 20,820 13,899
Equity in United Paramount Network loss (38,403) -
---------- ----------
(17,583) 13,899
---------- ----------
Income before income taxes
and minority interest 6,197 31,278
INCOME TAX PROVISION 2,500 13,300
---------- ----------
Income before minority interest 3,697 17,978
MINORITY INTEREST (3,383) (6,802)
---------- ----------
Net income $ 314 $ 11,176
========== ==========
Net income per share:
Primary $ .01 $ .38
========== ==========
Fully diluted $ .01 $ .29
========== ==========
3% STOCK 3% STOCK
DIVIDENDS PER COMMON SHARE DIVIDEND DIVIDEND
========== ==========
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
CHRIS-CRAFT INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(UNAUDITED)
-----------------------------------------------
<CAPTION>
Three Months
Ended March 31,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 314 $ 11,176
Adjustments to reconcile net income to net cash
provided from operating activities:
Film contract payments (23,520) (36,893)
Film contract amortization 17,612 25,107
Depreciation and other amortization 5,104 5,233
Equity in United Paramount Network loss 38,403 -
Minority interest 3,383 6,802
Other 563 (102)
Changes in assets and liabilities:
Accounts receivable 21,388 15,748
Other assets 2,337 3,439
Accounts payable and other liabilities (7,678) (7,502)
Income taxes (3,813) 8,415
---------- ----------
Net cash provided from operating activities 54,093 31,423
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions (purchases) of marketable securities, net (48,838) 163,600
Investment in and advances to United Paramount Network (38,028) -
Capital expenditures, net (852) (3,240)
Other (249) 42
---------- ----------
Net cash provided from (used in) investing activities (87,967) 160,402
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital transactions of subsidiaries (20,505) (49,834)
Purchase of treasury stock (13,067) (2,930)
Proceeds from option exercises 149 7,483
Other (216) (219)
---------- ----------
Net cash used in financing activities (33,639) (45,500)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (67,513) 146,325
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 226,183 40,497
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 158,670 $ 186,822
========== ==========
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
----------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. PRINCIPLES OF CONSOLIDATION:
The accompanying condensed consolidated financial statements
include the accounts of Chris-Craft Industries, Inc. and its
subsidiaries, including Chris-Craft's majority owned (73% at March
31, 1995) television broadcasting subsidiary, BHC Communications,
Inc., and BHC's majority owned (56% at March 31, 1995) subsidiary,
United Television, Inc. (UTV). The pro rata interests of BHC and
UTV minority shareholders in the net income of the respective
companies are reflected in minority interest in the accompanying
condensed consolidated statements of income. The minority
shareholders' interests in the net assets of BHC and UTV are
reflected as minority interest in the accompanying condensed
consolidated balance sheets. Intercompany accounts and
transactions have been eliminated.
The financial information included herein has been prepared by
Chris-Craft, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations. However, Chris-Craft believes that the
disclosures herein are adequate to make the information presented
not misleading. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and the notes thereto included in Chris-Craft's latest
annual report on Form 10-K. The information furnished reflects all
adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary to a fair statement of
the results for the interim periods. Certain amounts for 1994 have
been reclassified to conform to the 1995 presentation. The results
for these interim periods are not necessarily indicative of results
to be expected for the full year, due to seasonal factors, among
others.
2. MARKETABLE SECURITIES:
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", Chris-Craft classifies its marketable
securities as available-for-sale.
At March 31, 1995, Chris-Craft's marketable securities, which
consisted substantially of U.S. Government securities, had a
carrying value of $1,361,818,000 and a fair value of
$1,352,059,000. The difference of $9,759,000 ($3,425,000 net of
income taxes and minority interests) is reflected as a reduction of
shareholders' investment in the accompanying condensed consolidated
balance sheet. Of the investments in U.S. Government securities,
73% mature within one year, 90% within two years and all within
five years.
At December 31, 1994, Chris-Craft's marketable securities,
which consisted substantially of U.S. Government securities, had a
carrying value of $1,319,763,000 and a fair value of
$1,294,278,000. The difference of $25,485,000 ($9,794,000 net of
income taxes and minority interests) is reflected as a reduction of
shareholders' investment in the accompanying condensed consolidated
balance sheet.
3. SHAREHOLDERS' INVESTMENT:
Chris-Craft paid 3% stock dividends on its common and Class B
common stock in the respective shares of such classes on April 4,
1995. During the three months ended March 31, 1995, 50,977 shares
of Class B common stock were converted into 50,977 shares of common
stock, and 559 shares of $1.40 convertible preferred stock were
converted into 16,819 shares of common stock. In addition, 5,463
shares of common stock were issued upon exercise of stock options.
During the three month period, 411,100 shares of common stock were
purchased by Chris-Craft, all of which were held in treasury at
March 31, 1995. As of March 31, 1995, 1,295,202 shares of common
stock and 12,899 shares of $1.00 prior preferred stock remained
authorized for purchase.
As of March 31, 1995, shares of Chris-Craft's authorized but
unissued common stock were reserved for issuance as follows:
Shares
----------
Conversion of Class B common stock 7,742,358
Conversion of $1.40 convertible
preferred stock 8,748,279*
Stock options (including options
outstanding for 1,808,041 shares) 3,577,911
Stock purchase plan 20,000
----------
20,088,548
==========
*Including Class B common shares.
4. COMMITMENTS AND CONTINGENCIES:
Commitments of BHC's television stations for film contracts
entered into but not available for broadcasting at March 31, 1995
aggregated approximately $187.8 million, including $49.9 million
applicable to UTV.
In July 1994, BHC and Viacom Inc.'s Paramount Television Group
formed the United Paramount Network, a fifth broadcast television
network which premiered January 1995. BHC currently owns 100% of
UPN, and Paramount has an option exercisable through January 15,
1997 to acquire an interest in UPN equal to that of BHC. The
option price is equivalent to approximately one-half of BHC's
aggregate cash contributions to UPN through the exercise date, plus
interest; payment may be deferred through the option expiration
date. The cost of developing UPN will be significant, and BHC has
agreed to make minimum UPN expenditures of at least $150,000,000
through 1996. Network expenditures and related operating losses
are expected to significantly exceed such amount for that period,
and to remain substantial thereafter.
As set forth in Item 1 herein and Note 9 of Notes to
Consolidated Financial Statements in Chris-Craft's 1994 Annual
Report, Chris-Craft has been named as a defendant in certain
actions seeking recovery for environmental damage allegedly related
to the activities (discontinued since 1983) of 50% owned Montrose
Chemical Corporation of California. Chris-Craft does not presently
consider liability to be "probable" in any of the Montrose-related
matters, and no amount has been reserved in Chris-Craft's financial
statements.
5. INCOME PER SHARE:
Computations of income per share, all of which give
retroactive effect to the April 1995 3% stock dividend, are as
follows (in thousands of dollars except per share amounts):
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
PRIMARY:
- --------
Average outstanding common
and Class B common shares 29,273,909 29,165,462
Assumed exercise of stock options 162,504 222,670
------------ ------------
Total shares used in computation 29,436,413 29,388,132
============ ============
Net income $ 314 $ 11,176
Preferred stock dividend requirements (117) (119)
------------ ------------
$ 197 $ 11,057
============ ============
Primary income per share $ .01 $ .38
============ ============
FULLY DILUTED:
- --------------
Average outstanding common
and Class B common shares 29,273,909 29,165,462
Assumed conversion of
$1.40 preferred stock 8,750,851 9,114,865
Assumed exercise of stock options 162,504 222,670
------------ ------------
Total shares used in computation 38,187,264 38,502,997
============ ============
Net income $ 314 $ 11,176
Preferred stock dividend requirements (18) (18)
------------ ------------
$ 296 $ 11,158
============ ============
Fully diluted income per share $ .01 $ .29
============ ============
</TABLE>
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
Chris-Craft's core operating cash flow is generated primarily by
the Television Division's broadcasting business. Television
broadcasting cash flow generally parallels the earnings of Chris-
Craft'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 may vary greatly between periods
(payments exceeded amortization by $5.9 million and $11.8 million,
respectively, in the 1995 and 1994 first quarters), and is
dependent upon the mix of programs aired and payment terms of the
stations' contracts. Station earnings rose strongly in the 1995
first quarter, and station cash flow was nearly double the
corresponding 1994 amount.
Chris-Craft's cash flow additionally reflects earnings associated
with its cash and marketable securities, most of which are held by
73% owned television broadcasting subsidiary, BHC Communications,
Inc.
Consolidated cash and marketable securities totalled $1.51 billion
at March 31, 1995 compared to $1.52 billion at December 31, 1994.
First quarter operating cash flow of $54.1 million was more than
offset by United Paramount Network funding of $38 million, BHC and
UTV treasury stock purchases of $21 million and Chris-Craft
treasury stock purchases of $13.1 million.
BHC generates most of Chris-Craft's consolidated cash flow. Parent
company obligations consist solely of corporate office
expenditures, current and accrued. Parent company cash balances
were augmented in January 1993 upon the receipt of $36 million in
dividends from BHC, which paid a special cash dividend of $2.00 per
share. BHC paid a special cash dividend of $1.00 per share in
April 1995, but BHC has no plan to pay dividends on a regular
basis. Chris-Craft parent company cash balances are substantially
in excess of normal operating requirements.
Since April 1990, BHC's Board of Directors has authorized the
purchase of up to 5,500,000 Class A common shares. Through March
31, 1995, 4,676,837 shares were purchased for a total cost of
$276.1 million, including $10.9 million applicable to shares
purchased in the first three months of 1995. Chris-Craft ownership
interest in BHC accordingly increased to 73% at March 31, 1995 from
60% at December 31, 1989.
Chris-Craft intends to expand its operations in the media,
entertainment and communications industries and to explore business
opportunities in other industries. Chris-Craft currently has no
outstanding debt, and believes it is capable of raising significant
additional capital to augment its already substantial financial
resources, if desired, to fund such additional expansion.
In July 1994, BHC and Viacom Inc.'s Paramount Television Group
formed the United Paramount Network, a fifth broadcast television
network which premiered January 1995. BHC currently owns 100% of
UPN, and Paramount has an option through January 15, 1997 to
acquire an interest in UPN equal to that of BHC. The option price
is equivalent to approximately one-half of BHC's aggregate cash
contributions to UPN through the exercise date, plus interest;
payment may be deferred through the option expiration date. BHC
expenditures related to UPN totalled $38 million in the first
quarter of 1995. The cost of developing UPN will be significant,
and BHC has agreed to make minimum UPN expenditures of at least
$150 million through 1996. UPN expenditures and related operating
losses are expected to significantly exceed such amount for that
period, and to remain substantial thereafter.
Chris-Craft's television stations make commitments for programming
that will not be available for telecasting until future dates. At
March 31, 1995, commitments for such programming totalled
approximately $187.8 million, including $49.9 million applicable to
UTV. Chris-Craft capital expenditures generally have not been
material in relation to its financial position, and the related
capital expenditure commitments at March 31, 1995 (including any
related to UPN) were not material. Chris-Craft expects that its
expenditures for UPN, future film contract commitments and capital
requirements for its present business will be satisfied primarily
from operations, marketable securities or cash balances.
As set forth in Note 4, Chris-Craft has been named as a defendant
in certain actions seeking recovery for environmental damage
allegedly related to the activities (discontinued since 1983) of
50% owned Montrose Chemical Corporation of California. As further
set forth in Note 4, Chris-Craft does not presently consider
liability to be "probable" in any of the Montrose-related matters,
and no amount has been reserved in Chris-Craft's financial
statements.
Results of Operations
- ---------------------
Chris-Craft's core television station group achieved record first
quarter earnings. However, as expected, UPN start-up losses
significantly impacted Chris-Craft's first quarter operating
results. Net income declined to $314,000, or $.01 per share, from
$11,176,000, or $.38 per share, in last year's period. Excluding
the UPN loss, Chris-Craft first quarter income increased 53% to
$17,135,000, or $.58 per share.
Operating revenues and operating income for the 1995 and 1994 first
quarters are as follows (in thousands):
Operating Revenues Operating Income
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
First Quarter
Television Division $104,475 $ 95,968 $ 26,247 $ 20,276
Industrial Division 4,234 5,807 355 452
Corporate and other - - (2,822) (3,349)
-------- -------- -------- --------
$108,709 $101,775 $ 23,780 $ 17,379
======== ======== ======== ========
Television Division operating revenues rose 9%, to a first quarter
record of $104,475,000 from $95,968,000 last year. Station
earnings, further bolstered by a 6% reduction in programming
expense, rose 33%, surpassing the corresponding prior period amount
for the twelfth consecutive quarter. After an increase in program
development expense, Television Division operating income increased
29%, to $26,247,000 from $20,276,000.
Industrial Division operating revenue declined 27% in the first
quarter, reflecting the discontinuance of operations at the
Division's unprofitable fiber products facility. While operating
revenues at the Division's continuing businesses rose 7%, first
quarter operating income declined to $355,000 from $452,000, due to
lower sales of a high margin product.
After a modest reduction in corporate office expense, consolidated
operating income increased 37% to $23,780,000 from $17,379,000 last
year.
UPN's first quarter pre-tax loss of $38,403,000 is reflected in
Chris-Craft's financial statements under the equity method. UPN is
still in its infancy, and will incur substantial start-up losses for
the next several years.
First quarter interest and other income increased to $20,820,000
from $13,899,000, primarily reflecting higher interest rates on
Chris-Craft's substantial money market holdings.
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
----------------------------
PART II. OTHER INFORMATION AND SIGNATURE
----------------------------------------
Item 1. Legal Proceedings.
-----------------
On March 22, 1995, the U.S. District Court in United
States of America, et al. v. Montrose Chemical Corporation of
California, et al. granted the defendants' motion for summary
judgment on the first cause of action in the case, ruling that the
government's claim for natural resource damages exceeding $1.1
billion was barred by the applicable statute of limitations. The
effect of this ruling is to dismiss the natural resources damages
claims in the action, while the second cause of action seeking
recovery for alleged contamination at the former Montrose plant
site in Torrance, California will continue to be litigated. In
addition, the Court ruled on other motions that the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA") would limit the collective maximum liability of
Montrose, Chris-Craft and the Zeneca Affiliates defendants for
natural resources damages to $50 million and further that the
government would have the burden of proving that any alleged
damages are the result of releases occurring after enactment of
CERCLA in 1980. The District Court has issued an order certifying
its rulings for appeal, and the U.S. Department of Justice has
filed a petition on behalf of the government plaintiffs with the
U.S. Court of Appeals for the Ninth Circuit, seeking permission to
appeal the District Court's rulings. Montrose and the other
defendants have filed in opposition to the petition, and at this
time it is uncertain what action the Court of Appeals will take.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter
for which this report is filed.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
CHRIS-CRAFT INDUSTRIES, INC.
----------------------------
(Registrant)
By: /s/ JOELEN K. MERKEL
----------------------------
Joelen K. Merkel
Vice President and Treasurer
(Principal Accounting Officer)
Date: May 12, 1995
EXHIBIT INDEX
Incorporated by
Reference to: Exhibit No. Exhibit
- ------------- ----------- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 158670
<SECURITIES> 1352059
<RECEIVABLES> 86050
<ALLOWANCES> 7663
<INVENTORY> 2610
<CURRENT-ASSETS> 1727535
<PP&E> 133447
<DEPRECIATION> 84479
<TOTAL-ASSETS> 2179235
<CURRENT-LIABILITIES> 228258
<BONDS> 0
0
6518
<COMMON> 15498
<OTHER-SE> 1274173
<TOTAL-LIABILITY-AND-EQUITY> 2179235
<SALES> 4234
<TOTAL-REVENUES> 108709
<CGS> 2917
<TOTAL-COSTS> 84929
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6197
<INCOME-TAX> 2500
<INCOME-CONTINUING> 314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 314
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
