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, 1995
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 1-2999
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
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:
Title of each class Name of each Exchange
on which registered
Prior Preferred Stock New York Stock Exchange, Inc.
$1.00 cumulative dividend Pacific Stock Exchange, Inc.
Convertible Preferred Stock New York Stock Exchange, Inc.
$1.40 cumulative dividend Pacific Stock Exchange, Inc.
Common Stock, $.50 par value New York Stock Exchange, Inc.
Pacific Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, $.50 par value
(Title of class)
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. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant, as of February 29, 1996, was approximately
$1,100,000,000.
As of February 29, 1996, there were 21,516,098 shares of the
registrant's Common Stock and 7,590,615 shares of the registrant's Class
B Common Stock outstanding.
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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 registrant's annual I, II
report to stockholders for the fiscal year
ended December 31, 1995 (the "Annual
Report") that are specifically identified
herein as incorporated by reference into this
Form 10-K.
Those portions of the registrant's proxy III
statement for the registrant's 1996 Annual
Meeting (the "Proxy Statement") that are
specifically identified herein as incorporated
by reference into this Form 10-K.
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PART I
ITEM 1. BUSINESS.
General
Chris-Craft Industries, Inc. ("Chris-Craft"), the registrant, was organized
in Delaware in 1928 and adopted its present name in 1962. Chris-Craft's
principal business is television broadcasting, conducted through its majority
owned (74.4% at February 29, 1996) subsidiary, BHC Communications, Inc.
("BHC"), which owns 100% of Chris-Craft Television, Inc. ("CCTV"), 100% of
Pinelands, Inc. ("Pinelands") and, as of February 29, 1996, 57.1% of United
Television, Inc. ("UTV").
At February 29, 1996, Chris-Craft (including UTV) had 1,137 full-time
employees and 109 part-time employees.
In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group
("Paramount"), formed the United Paramount Network ("UPN"), a fifth broadcast
television network which premiered in January 1995.
The information appearing in the Annual Report under the caption INDUSTRY
SEGMENT INFORMATION is incorporated herein by reference.
Television Division
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 conducted 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 major national networks (ABC, NBC and CBS); three more recently
established national networks (Fox Broadcasting Company ("Fox"), UPN, and The
WB Network ("WB")), which provide substantially fewer hours of programming;
or may be independent. UPN, formed by BHC, along with Paramount, began
broadcasting a total of four hours of original prime time programming over two
nights per week in January 1995 and expanded to a third night in March 1996.
UPN currently has 151 affiliates in markets reaching 91% of all U.S. house-
holds, including all of BHC's and Paramount's previously independent stations,
and UPN continues to seek additional affiliates to expand its household reach.
UPN is still in its infancy, and because of the intense competition that
characterizes the broadcast television network business, the cost of develop-
ing UPN is expected to remain significant for several years.
The following table sets forth certain information with respect to BHC
stations and their respective markets:
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<TABLE>
<CAPTION>
Total
Commercial
DMA TV Stations DMA
Station and House- DMA Operating in Cable TV
Location (a) Channel Holds (b) Rank (b) Market (c) Penetration (d)
- ------------ ------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
KCOP 13 4,917,550 2nd 7VHF 61%
Los Angeles 10UHF
WWOR (e) 9 6,695,140 1st 6VHF 68%
Secaucus 14UHF
KPTV 12 933,440 24th 4VHF 61%
Portland 2UHF
KMSP 9 1,412,030 14th 4VHF 50%
Minneapolis/ 3UHF
St. Paul
KTVX 4 656,060 36th 4VHF 54%
Salt Lake City 2UHF
KMOL 4 638,080 37th 3VHF 64%
San Antonio 3UHF
KBHK 44 2,257,210 5th 4VHF 70%
San Francisco 10UHF
KUTP 45 1,169,530 17th 4VHF 57%
Phoenix 4UHF
</TABLE>
_______________
(a) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the remaining
stations are owned by UTV. All stations are UPN affiliates, 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 uni-
verse 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.
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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,
"superstations" (i.e., broadcast stations carried by cable operators in areas
outside their broadcast coverage area), barter program syndicators, national
basic cable networks, or "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 advertising rates charged by competing stations
depend primarily on three factors: the stations' program ratings, 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 tuned to a particular station, and a share point represents one percent of
all television households within the DMA actually using at least one tele-
vision set at the time of measurement and tuned to the station in question.
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/
Pacific time), their affiliates generally (but do not always) achieve higher
audience shares, but have substantially less advertising time ("inventory") to
sell, during those hours, than affiliates of the newer networks or independent
stations, since the major networks use almost all of their affiliates' prime
time inventory for network shows. Although the newer networks generally use
the same amount of their affiliates' inventory during network broadcasts, the
newer networks provide less programming; accordingly, their affiliates,
as well as non-affiliated stations, generally have substantially more
inventory for sale than the major-network affiliates. The newer network
affiliates' and 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, as compared with major
affiliates' larger audiences and limited inventory, which generally allow the
major-network affiliates to charge higher advertising rates for prime time
programming. By selling more advertising time, the new-network or independent
station typically achieves a share of advertising revenues in its market
greater than its audience ratings. On the other hand, total programming
costs for such a station, because it broadcasts more syndicated programming
than a major-network affiliate, are generally higher than those of a major-
network affiliate in the same market. These differences have been reduced by
the growth of the Fox network, which currently provides 15 weekly hours of
programming during prime time and additional programming in other periods,
and would be reduced further if the other newer networks should be successful
in providing expanded schedules of programming.
In July 1995, the FCC repealed, effective August 30, 1996, its prime
time access rule, which limited broadcasts, by major-network affiliates in the
50 largest markets, of "off network" entertainment programming. Among other
effects, elimination of this rule is expected to increase the competition
faced by new-network affiliates and independent stations in bidding for the
rights to popular "off network" shows.
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Programming
BHC's UPN stations depend heavily on independent third parties for
programming, as do KTVX and KMOL for their non-network broadcasts. Recog-
nizing 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 joined in the formation
of UPN, and, additionally, has begun to invest directly in the development of
original programming. The aggregate amount invested in original programming
through December 31, 1995 was not significant to Chris-Craft's financial posi-
tion. BHC 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
major network, and syndicated feature films, which were either made for net-
work television or have been exhibited previously in motion picture theaters
(most of which films have been shown previously on network or cable tele-
vision). Syndicated programs are sold to individual stations to be broadcast
one or more times. Television stations not affiliated with a major network
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 series 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 program-
ming varies, depending 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). Barter programming is offered to stations for no cash
consideration, but comes with a greater number of commercials that must be
broadcast, and therefore, with less inventory.
In recent years, the amount of barter and cash plus barter program-
ming broadcast both industry-wide and by BHC stations has increased sub-
stantially. Barter and cash plus barter programming reduce both the amount
of cash required for program purchases and the amount of time available for
sale. Although the direct impact on broadcasters' operating income generally
is believed to be neutral, program distributors that acquire barter air time
compete with television stations and broadcasting networks for sales of air
time. Chris-Craft believes that the effect of barter on BHC television sta-
tions is not significantly different from its impact on the industry as a
whole.
BHC television stations are frequently required to make substantial
financial commitments to obtain syndicated programming while such programming
is still being broadcast by another network and before it is available for
broadcast by BHC stations or even 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 programming, there is no assur-
ance that a successful network program will continue to be successful or
profitable when broadcast after initial network airing. FCC rules limiting
the ability of major networks to acquire financial interests in independently
produced programming or prohibiting such networks from syndicating programs
terminated in 1995. Elimination of the restraints is expected to result in
increased competition by the major networks for production and syndication of
first-run programming.
Pursuant to generally accepted accounting principles, commitments for
programming not available for broadcast are not recorded as liabilities until
the programming becomes available for broadcast, at which time the related
contract right is also recorded as an asset. BHC television stations had
prepaid broadcast rights, unamortized film contract rights for programming
available for telecasting, and deposits on film contracts for programming not
available for telecasting aggregating $145,902,000 as of December 31, 1995.
The stations were committed for film and sports rights contracts aggregating
$166,200,000 for programming not available for broadcasting as of that date.
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License periods for particular programs or films generally run from one to
five years. Long-term contracts for the broadcast of syndicated television
series generally provide for an initial telecast and subsequent reruns for a
period of years, with full payment to be made by the station over a period of
time shorter than the rerun period. See Notes 1(C) and 10 of Notes to Con-
solidated Financial Statements.
KTVX and KMOL are primary affiliates of their respective networks.
Network programs are produced either by the networks themselves or by
independent production companies and are transmitted by the networks to their
affiliated stations for broadcast.
Generally, in the past, major network primary affiliation agreements
were automatically renewed for two-year periods (unless advance written
notice of termination was given by either the affiliate or the network). More
recently, however, most networks have begun to enter into affiliation agree-
ments for terms as long as ten years. Chris-Craft is discussing long-term
affiliation agreements for KTVX and KMOL. Current FCC rules do not limit
the duration of such agreements.
An affiliation agreement gives the affiliate the right to broadcast
all programs transmitted by the network. The affiliate must run in its
entirety, together with all network commercials, any network programming the
affiliate elects or is required to broadcast, and is allowed to broadcast a
limited number of commercials it has sold. For each hour of programming broad-
cast by the affiliate, the major networks generally have paid their affiliates
a fee, specified in the agreement (although subject to change by the network),
which varies in amount depending on the time of day during which the program is
broadcast and other factors. Prime time programming generally earns the highest
fee. A network may, and sometimes does, designate certain programs to be
broadcast with no compensation to the station.
Subject to certain limitations contained in the affiliation agreement,
an affiliate may accept or reject a program offered by the network and instead
broadcast programming from another source. Rejection of a program gives the
network the right to offer that program to another station in the area.
United Paramount Network
In January 1995, UPN began broadcasting four hours of original prime
time programming per week, of which one hour consists of Star Trek: Voyager,
a science fiction adventure. In March 1996, UPN increased its weekly prime
time programming to six hours. The network also broadcasts two hours of
previously exhibited movies on Saturday afternoons and one hour of original
children's programming on Sunday mornings, which it plans to increase to two
hours commencing in September 1996. UPN intends, over the next several years,
to expand its prime time programming to five nights per week, as well as to
begin broadcasting in other day parts.
UPN licenses most of its current programming on the same bases as are
customary in the industry. UPN seeks license or ownership rights for all other
programming from all available sources on arms-length terms.
UPN's primary affiliate station agreements have three year terms and
provide commercial time to the stations as consideration for broadcasting the
network's programming.
BHC currently owns 100% of UPN, and Paramount has an option exer-
cisable through January 15, 1997 to acquire an interest in the network 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
for UPN have been substantial, and UPN funding requirements are expected to
continue to be significant for the next several years. See Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 2 of Notes to Consolidated Financial Statements.
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Sources of Revenue
The principal source of revenues for BHC stations is the sale of
advertising time to national and local advertisers. Such time sales are
represented by spot announcements purchased to run between programs and program
segments and by program sponsorship. The relative contributions of national
and local advertising to BHC's gross cash advertising revenues vary from time
to time. During the year ended December 31, 1995, national advertising
contributed 37%, and local advertising contributed 63%, of total gross cash
advertising revenues. Most advertising contracts are short-term. Like that
of the television broadcasting business generally, BHC's television business
is seasonal. In terms of revenues, generally the fourth quarter is strongest,
followed by the second, third and first.
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 a
national sales representative, which also receives a commission, while local
advertising time is sold by each station's sales staff. In July 1995, UTV
established a national sales representative organization, United Television
Sales, Inc. ("UTS"), to represent, initially, all BHC stations. Practices with
respect to sale of advertising time do not differ markedly between BHC's major
network and UPN stations, although the major-network 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
locations 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 sub-
ject to a wide range of technical, reporting and operational requirements
imposed by the Communications Act or by FCC rules and policies. The Communi-
cations Act was recently and substantially amended by the Telecommunications
Act of 1996 (the "Telecom Act"), some provisions of which have been incorp-
orated into the FCC's rules and regulations during the past month, and other
provisions of which will be incorporated over the next several months.
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 have been issued for five-
year terms, but the Telecom Act permits the FCC to issue such licenses and
their renewals for up to eight years. Upon application, and in the absence of
adverse questions as to the licensee's qualifications or operations, tele-
vision 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. KUTP's license renewal was
granted on March 28, 1994, and is due to expire on October 1, 1998. KCOP's
license renewal was granted on April 18, 1994, and is due to expire on December
1, 1998. KBHK's license renewal was granted on October 2, 1995, and is due to
expire on December 1, 1998. KPTV's license renewal was granted on August 9,
1995, and is due to expire on February 1, 1999. KMOL's license renewal was
granted on August 18, 1995, and is due to expire on August 1, 1998. In
September 1995, an administrative appeal of the grant of KMOL's renewal was
filed, challenging the FCC staff's determination that KMOL had complied with
FCC requirements concerning equal employment opportunity. KMOL has vigorously
opposed this appeal, which Chris-Craft believes is without
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merit. WWOR's latest license renewal was granted on January 22, 1992. The
current license renewal of WWOR has been opposed by a petition challenging its
compliance with FCC requirements concerning equal employment opportunity. The
station has vigorously opposed the petition, and Chris-Craft believes that the
petition is without merit. WWOR's license remains in effect pending the
resolution of the petition.
Under existing FCC regulations governing multiple ownership of broad-
cast 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 ownership combinations in the top 25 television markets, in
which there will be at least 30 separately owned, operated and controlled
broadcast stations, and in certain other circumstances. The Telecom Act di-
rects the FCC to extend this waiver policy to the top 50 markets, consistent
with the public interest, and to conduct a rule-making proceeding to determine
whether to retain or modify the current restriction on same-market multiple
television station ownership.
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 inconsistent with the public interest,
convenience or necessity. Prior to adoption of the Telecom Act, FCC rules had
deemed such concentration of control to exist if any party, or any of its
officers, directors or stockholders, directly or indirectly, owned, operated,
controlled or had 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 sta-
tions for the purpose of calculating the audience reach limits. Applying the
50% reach attribution rule to UHF stations KBHK and KUTP, the eight BHC sta-
tions are deemed to reach approximately 18% of the nation's television house-
holds. The Telecom Act directed the FCC to eliminate the numerical limita-
tion on television station ownership and to increase the maximum national
audience reach limit to 35%, and the FCC has adopted such changes. The FCC
is also considering whether to eliminate the 50% attribution reduction under
this rule for UHF stations.
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 corpora-
tion controlling or operating television stations, such as Chris-Craft, 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 voting
stock without being subject to such attribution, provided that such entities
exercise no control over the management or policies of the broadcasting company.
The FCC has begun a proceeding to consider modification of the various
TV ownership restrictions described above, as well as changes in the rules for
attributing the licenses held by an enterprise to various parties. Chris-Craft
cannot predict the outcome of the FCC proceedings.
FCC regulations currently prevent a national sales representative
organization, such as UTS, which is commonly owned with a national network such
as UPN, from representing affiliates of that network other than affiliates that
are also under common ownership with the network. FCC regulations also place
restrictions on provisions of agreements between networks and their affiliates
relating to network exclusivity, territorial exclusivity, time optioning, and
pre-emption rights. The FCC is conducting rule-making proceedings to consider
whether to retain, modify, or eliminate these regulations. Chris-Craft is
unable to predict the outcome of these proceedings.
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As required by the Telecom Act, the FCC recently amended another of
its regulations, the dual network rule, which generally had prohibited common
ownership or control of two television broadcast networks. Ownership and
control of two or more such networks will now be permitted, except for common
ownership or control between two of ABC, NBC, CBS, and Fox, or any one of those
four networks and either UPN or WB.
The Telecom Act directs the FCC to conduct a rule-making proceeding to
require the inclusion, in all television sets 13 inches or larger, of a
feature (commonly referred to as the V-chip) designed to enable viewers to
block display of programs carrying a common rating and authorizes the FCC to
establish an advisory committee to recommend a system for rating video
programming that contains sexual, violent, or other indecent material about
which parents should be informed, before it is displayed to children, if the
television industry does not establish a satisfactory voluntary rating system
of its own. Industry leaders have announced their intention to establish a
voluntary rating system by the end of 1996. The Telecom Act also directs the
FCC to adopt regulations requiring increased closed-captioning of video pro-
gramming and to conduct an inquiry into the use of audio-narrated descriptions
of video programming that could increase the accessibility of such programming
to persons with visual impairments.
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 regu-
lations 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 FCC intends to
conduct a rule-making proceeding to consider possible modification of this
latter regulation.
The Communications Act limits the amount of capital stock that aliens
(including their representatives, foreign governments, their representatives,
and entities organized under the laws of a foreign country) may own in a tele-
vision 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, directly or indirectly, 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. Chris-Craft believes the ownership by
aliens of its stock and that of BHC and UTV 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 stations, currently ranging as high as $22,400 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 Com-
mission, also impose a variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional or revised require-
ments are considered by the FCC, other Federal agencies or Congress from time
to time. Chris-Craft 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.
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In addition to programming, management ability and experience, tech-
nical factors and television network affiliations are important in determining
competitive position. Competitive success of a television station depends
primarily on public response to the programs broadcast by the station in rela-
tion 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, major network pro-
grams achieve higher ratings than programs of other stations.
There are at least five other commercial television stations in each
market served by a BHC station. Chris-Craft believes that the three VHF major-
network affiliates and the two other VHF stations in New York City generally
attract a larger viewing audience than does WWOR, and that WWOR generally at-
tracts a viewing audience larger than the audiences attracted by the UHF sta-
tions in the New York City market. In Los Angeles, the three VHF major-
network affiliates and two other VHF stations generally attract a larger view-
ing audience than does KCOP, and KCOP generally attracts a viewing audience
larger than one other VHF station and the ten UHF stations in Los Angeles.
In Portland, the three VHF major-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 stations. Chris-
Craft believes that, in Minneapolis/St. Paul, KMSP generally attracts a
smaller viewing audience than the three major VHF network-affiliated stations,
but a larger viewing audience than the other three stations, all of which are
UHF stations. In Salt Lake City, KTVX generally ranks first of the six tele-
vision stations in terms of audience share. In San Antonio, KMOL generally
ranks first of the six stations in terms of audience share. Of the 14 com-
mercial television stations in San Francisco, KBHK generally ranks fifth in
terms of audience share, behind the three major network-affiliated VHF
television stations, and the VHF Fox affiliate. KUTP generally ranks sixth
in terms of audience share, of the eight commercial stations in the Phoenix
market.
In February 1996, Chris-Craft received a Civil Investigative Demand
(a "CID") from the Antitrust Division of the U.S. Department of Justice seeking
production of documents in connection with a civil investigation by the
Division of the television advertising business in the Los Angeles market.
KCOP received two similar CIDs in late 1995 and has responded to both, and
several KCOP employees have given deposition testimony in the matter. All of
the VHF television stations in the Los Angeles market have received similar
CIDs seeking document production and deposition testimony. The Chris-Craft
CID also requires the preservation of advertising-related documents at the
Company's seven other television stations, but does not require production at
this time.
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 Division.
Cable television has become a major competitor of television broad-
casting 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 penetration, 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 broad-
cast stations in unfavorable channel locations. Similar competitive effects
may be expected from video delivery systems offered by local telephone
companies, as permitted by the provisions of the Telecom Act.
FCC regulations requiring cable television stations to carry or re-
serve 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 law is currently being
challenged in the Federal courts, and Chris-Craft cannot predict the outcome.
The Telecom Act extends the must-carry requirements to the video delivery
systems of local telephone companies, and these extended requirements may also
be affected by the pending court challenge.
11
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While Federal law has until recently generally prohibited local telephone
companies from providing video programming to subscribers in their service
areas, this restriction has been held constitutionally invalid by eight federal
district courts. Two such rulings have been affirmed by the United States
Court of Appeals, one by the Fourth Circuit and one by the Ninth Circuit, and
the Supreme Court has heard oral argument with respect to the Fourth Circuit
case. This prohibition has been substantially eliminated by the Telecom Act,
and the Supreme Court has consequently remanded the case to the Circuit Court
for further consideration. The FCC has also initiated a rule-making proceeding
to consider rules for "Open Video Systems" -- a new structure of video delivery
system authorized by the Telecom Act for provision by local telephone companies
and, if permitted by the FCC, others. Chris-Craft is unable to predict the
outcome or effect of these developments.
"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 ex-
clusive rights. In conjunction with these rules, network nonduplication rules
protect the exclusivity of major-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. Chris-Craft believes that the competitive position of
BHC stations would likely be enhanced by an expansion of broadcasters' per-
mitted zones of exclusivity.
Alternative technologies could increase competition in the areas
served by BHC stations and, consequently, could adversely affect their
profitability. Two direct broadcast satellite ("DBS") systems currently provide
service, and others are expected to begin service later in 1996. The number of
subscribers to DBS services more than doubled during 1995, from approximately
600,000 at the end of 1994, to approximately 1.7 million. An additional
challenge is now posed by wireless cable systems, including multichannel
distribution services ("MDS"). At the end of 1994, wireless cable systems
served about 800,000 subscribers. Two four-channel MDS licenses have been
granted in most television markets. MDS operation can provide commercial pro-
gramming 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 newer multichannel multi-point
distribution service 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 transmission.
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 them-
selves 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 sta-
tions to provide such services. Many segments of the television industry
are intensively studying enhanced and "high definition" television tech-
nology. A proceeding is under way at the FCC regarding policies concerning
advanced television service, including "high definition" service. The Tele-
com Act, as well as proposed federal legislation, addresses several of these
issues, and some members of Congress support auctioning or otherwise
charging broadcasters for use of spectrum designated for "high definition"
television use. The Telecom Act, in particular, authorizes the FCC, if it
chooses, to issue the initial licenses for new advanced television broadcast
stations exclusively to existing television station licensees and permittees,
provided that they are required to surrender either their old or new licenses
after a period of time to be specified by the FCC. The Telecom Act also
directs the FCC to adopt regulations regarding ancillary uses of such new
licenses and the collection of fees for certain ancillary uses. Chris-Craft
is unable to predict the outcome of these legislative proposals or rule-making
proceedings.
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<PAGE>
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 factors have affected, and will continue to affect, the revenue growth and
profitability of Chris-Craft.
Industrial Division
Chris-Craft Industrial Products, Inc., the wholly owned subsidiary of
Chris-Craft that constitutes its Industrial Division, is primarily engaged in
manufacturing plastic flexible films. These products are marketed as roll and
cut stock as well as proprietary and private-label end products. The end
products include plastic flexible films and water-soluble hospital laundry
bags.
Significant portions of the sales of the Industrial Division are to
the flexible film packaging industry and health care facilities. Sales of
particular items may vary widely from year to year as specifications, designs
and other conditions change. The products of the Industrial Division are sold
by it directly and by sales agents and distributors.
Sales of plastic film to two large chemical manufacturers equaled
12.3% and 5.2%, and to two health care customers equaled 7.9% and 7.4%, of 1995
Division revenues, respectively. Sales to these accounts are generally made on
the basis of competitive bidding on each item sold. Similar arrangements with
these customers have prevailed for a number of years. The loss of these
customers, unless their business was replaced by others, would have an adverse
effect on the Industrial Division. Manufacturing of fiber products for the
automotive industry at the Division's Waterford, New York facility was dis-
continued at the end of 1994, except for small quantities needed in early 1995
to complete customer orders. Employment of the facility's approximately 100
employees was terminated in 1995. All manufacturing assets of the Waterford
facility were sold in 1995, and Chris-Craft is currently offering the land and
building for sale.
Plastic Flexible Films
Chris-Craft's plastic flexible films are based primarily on polyvinyl
alcohol polymers; some of the film products are water-soluble in their end use
applications, while others are made water-insoluble. Chris-Craft's major use
for such film is in water-soluble packaging for pre-measured amounts of
chemical compounds. The film is also used in the manufacture of water-soluble
hospital laundry bags. Management is aware of competition from two other
domestic and several foreign producers of similar film.
Another series of polyvinyl alcohol film is used as a release agent in
connection with the fabrication of fiberglass-reinforced and other plastic
products. For certain of these applications, Chris-Craft's film competes
with those of a number of producers of other types of films.
M.D. Industries, Inc., a subsidiary of the Industrial Division,
markets health care products manufactured by the Division and by others,
including proprietary products made for M.D. Industries.
The Industrial Division is faced with keen competition in each of its
product lines from other companies that manufacture and sell these products.
13
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Raw Materials
Principal raw materials used by the Industrial Division include poly-
mers and chemical additives. These have generally been readily available
from many sources.
ITEM 2. PROPERTIES.
Television Division
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 45,252 square feet located on a site of approximately
2.0 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 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 approx-
imately 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 sta-
tions and many of its FM radio stations. The lease for the Mt. Sutro facili-
ties expires in February 2005 and is renewable for two five-year periods.
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 sta-
tions in Phoenix as well as facilities for several FM radio stations. The
license for this space expires in 2012.
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Industrial Division
As described below, the Industrial Division owns plants in Gary,
Indiana and Waterford, New York and leases facilities in Northbrook, Illinois
and in South Holland, Illinois, which leases expire on October 31, 1999 and
June 30, 1998, respectively.
Factory and
Office Space Site
Plant Location Principal Product (Square Feet) (Acres)
- -------------- ----------------- ------------ -------
Gary, Indiana Plastic flexible films and water- 48,000 5
disposable hospital bags
Northbrook, Health care products 5,166 --
Illinois
South Holland, Warehouse for healthcare products 33,000 --
Illinois distribution
Waterford, New (Ceased production in March 1995; 100,000 18
York land and building being offered for
sale.)
___________________
Chris-Craft believes its properties are adequate for their present
uses.
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ITEM 3. LEGAL PROCEEDINGS.
Montrose Chemical Corporation of California ("Montrose"), whose stock
is 50% owned by Chris-Craft and 50% by a subsidiary of Zeneca Inc. ("Zeneca"),
discontinued its manufacturing operations in 1983 and has since been defending
claims for costs and damages relating to environmental matters. Chris-Craft
has been named as a defendant in certain of these actions by plaintiffs seeking
to hold Chris-Craft liable for Montrose activities.
In April 1983, the United States of America and the State of Cal-
ifornia instituted an action in the Federal District Court for the Central
District of California, entitled United States of America et al. v. J.B.
Stringfellow, et al., Case No. 83-2501 JMI (MCX), against Montrose and
approximately 20 other defendants relating to alleged environmental impairment
at the Stringfellow Hazardous Waste Disposal Site in California. The complaint
alleges that Montrose generated toxic wastes containing DDT which were de-
posited at the Stringfellow Site between 1969 and 1972, allegedly constituting
approximately 19% by volume of all toxic wastes deposited at the site. During
this period, the Stringfellow Site was licensed as a hazardous waste disposal
facility by the State of California. The action seeks an injunction against
numerous generators of waste materials which were deposited at the Stringfellow
Site, including Montrose, the owners of the Stringfellow Site and others, to
abate the release of substances from the site and to remedy allegedly hazardous
conditions. The action seeks to impose joint and several liability against all
defendants for all costs of removal and remedial action incurred by the
Federal and state governments at the site. On September 30, 1990, the United
States Environmental Protection Agency ("EPA") issued a Record of Decision for
the site which selected some of the interim remedial measures preferred by the
EPA and the State, the estimated present value of the capital costs of which
was estimated by them to be $169 million although the estimate purports to be
subject to potential variations of up to 50%. Plaintiffs also seek recovery
for remedial expenditures. The action also seeks unspecified damages for
alleged harm to natural resources. On June 22, 1992, Montrose and other
defendants signed a consent decree with the United States regarding certain
remedial work at and near the Stringfellow Site, which decree was entered by
the District Court in October 1992. On November 30, 1993 Special Master Harry
V. Peetris entered a recommended ruling allocating liability at the site under
both the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA" or the "Superfund" statute) and state law. The
CERCLA allocation was 65% to the State of California, 10% to the owners of the
site and 25% to the generator defendants (including Montrose). The state law
allocation was 100% to the State and 0% to the Stringfellow entities. The
Special Master's recommended ruling will be reviewed by the District Court
before it enters a final allocation decision. The State is expected to appeal
when the final order is entered by the District Court. In addition, in 1986-7
the United States Department of Justice sought and received information regard-
ing the relationship between Montrose and its two 50% shareholders. The Depart-
ment's inquiry was directed to the issue whether Chris-Craft, as a shareholder
of Montrose, should be added as a party to the action. Chris-Craft is not
aware of any further action taken by the Department in this matter.
In June 1990, the United States of America and the State of California
commenced an action in the United States District Court for the Central
District of California, entitled United States of America et al. v. Montrose
Chemical Corporation of California et al., Civil Action No. 90-3122 AAH (JRX),
against, among others, Montrose and Chris-Craft. Certain United States af-
filiates of Zeneca (the "Zeneca Affiliates"), as well as Westinghouse Electric
Corporation, Potlatch Corporation and Simpson Paper Company, which have no con-
nection with Chris-Craft, were also named as defendants. Brought under CERCLA,
plaintiffs alleged with respect to Montrose, Chris-Craft, and the Zeneca Af-
filiates, in the first cause of action, that Montrose released hazardous sub-
stances, including DDT, into the environment in and around Los Angeles, Calif-
ornia, including the waters surrounding the Palos Verdes Peninsula, the Los
Angeles-Long Beach Harbor, and the Channel Islands. The first cause of action
also alleged that other of the defendants released PCBs into the same waters.
The complaint sought a declaration that defendants are jointly and severally
liable for damages (in amounts not specified) resulting from injury to natural
resources caused by the alleged releases, including loss of use and costs of
restoration, plus plaintiffs' costs in assessing such damages. In the second
cause of action, plaintiffs also sought to hold Montrose, Chris-Craft, and the
Zeneca Affiliates jointly and severally liable for all costs incurred and to
be incurred in connection with alleged hazardous substance contamination to
soil and ground water at the site of Montrose's former plant in Torrance,
16
<PAGE>
California. In October 1994, as required by a case management order (which
anticipates a trial in 1998 or later), the plaintiffs produced expert reports
to support the first cause of action describing both the alleged natural re-
sources damages and also possible restoration plans for dredging or capping the
allegedly contaminated ocean sediments. Although the plaintiffs have stated
that they have not completed their restoration analysis, they stated they would
seek to recover between approximately $300 million and $1.1 billion from the
defendants not participating in the purported settlement described below.
On March 21, 1995, after an appeal by Montrose, Chris-Craft, and the Zeneca Af-
filiates, the United States Court of Appeals for the Ninth Circuit reversed an
April 1993 District Court order approving a purported settlement between
plaintiffs, the Los Angeles County Sanitation District ("LACSD"), and numerous
municipalities and local government entities that had been sued by Montrose,
Chris-Craft, and other defendants as third-party defendants. The purported
settlement would have resolved all liability between the plaintiffs and the
LACSD and the government entities for approximately $42 million in cash and
in-kind services, and purported to immunize the settling defendants from the
cross-claims and third party claims of Montrose and Chris-Craft.
On March 22, 1995, the District Court in U.S. v. Montrose granted the
defendants' motion for summary judgment on the first cause of action, ruling
that the government's claim for natural resource damages was barred by the ap-
plicable statute of limitations. The effect of this ruling is to dismiss the
natural resources damages claims. In addition, the Court ruled on other mo-
tions that CERCLA would limit the collective maximum liability of Montrose,
Chris-Craft, and the Zeneca Affiliates for natural resource 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. On January 8, 1996, the U.S. Court of Appeals for the Ninth
Circuit heard argument on the plaintiffs' appeals of the District Courts'
rulings on the statute of limitations and the $50 million cap questions. It is
uncertain when the Court of Appeals will issue any ruling.
Since 1984 Montrose has been complying with a Consent Order entered
into with the Nevada Department of Conservation and Natural Resources Di-
vision of Environmental Protection ("DEP") requiring operation of a ground
water intercept treatment system near a production facility used by Montrose
until 1985 in Henderson, Nevada. The EPA and DEP are currently reconsidering
whether the complex that includes the Henderson facility should be included on
the National Priority List. In April 1991, Montrose entered into a second
consent order with DEP and other parties requiring investigation of environ-
mental conditions at the Henderson facility.
Montrose is a defendant in a case entitled Levin Metals Corporation,
et al. v. Parr-Richmond Terminal Company, et al., Case Nos. C-84-6273 BAC,
C-84-6234 BAC and C-85-4776 BAC in the United States District Court for the
Northern District of California, in which it is alleged that Montrose con-
tributed to the contamination of certain real property in Richmond, California,
and in which damages claimed exceed $15 million. In March 1990, the EPA added
the site to the "National Priority List", which covers sites eligible for reme-
diation under the Superfund program. In December 1992, two parties to the
Parr-Richmond action filed pleadings naming Chris-Craft as a defendant alleg-
ing among other things, that Chris-Craft is secondarily liable under corporate
liability theories for Montrose's liabilities, if any. Chris-Craft filed an
answer denying liability on June 11, 1993, asserting numerous affirmative de-
fenses and filing counterclaims. Since October 1994, proceedings in the Levin
case have been stayed while the parties have engaged in extensive settlement
negotiations. To date, although Montrose and Chris-Craft have reached an agree-
ment in principle with the EPA and the other Levin parties on key points of
a settlement, no final agreement has been reached. In January 1990, Montrose
and Chris-Craft were each notified by the United States National Oceanic and
Atmospheric Administration that the United States intends to name each of them
as a defendant in an action seeking recovery for alleged damage to natural re-
sources emanating from the Richmond site. Chris-Craft has received no further
correspondence about this possible claim.
In August 1992, Montrose was named one of approximately 18 defendants
in Alderman, et al. v. Cadillac Fairview/California, Inc., et al., Case No.
BC062039 in Los Angeles County (California) Superior Court, where approxi-
mately 100 individual plaintiffs seek to recover unspecified amounts for al-
leged personal injuries and property damage purportedly caused by contamination
at two neighboring properties in California, one of which
17
<PAGE>
formerly was used by Montrose for manufacturing operations. Chris-Craft was
added as a defendant in December 1992. In September 1993, Montrose and Chris-
Craft were named as defendants in a second action, Herrera, et al. v. Cadillac
Fairview/California, Inc., et al., Case No. 4C021847, which has been consol-
idated with the Alderman action and which effectively added 20 plaintiffs to
the Alderman action. No substantial discovery has yet occurred in the Alderman
action. A statement of damages filed by the plaintiffs alleges general damages
of $7 million. Settlement mediation under the auspices of a retired judge
began in February 1995.
In September 1994, the EPA notified Chris-Craft that it had been desig-
nated as a "potentially responsible party" under CERCLA (a "PRP") in connection
with the Diamond Alkali Superfund Site on the Passaic River in Newark, New Jer-
sey. The EPA alleges that hazardous substances were released into the river
from a facility operated by a predecessor company. The facility was located
near the Diamond Alkali property, but not on the riverfront, and was sold by
Chris-Craft in 1972. Chris-Craft disputes that it is a responsible party.
At the request of the EPA, Maxus Energy Corp., the former owner of the Diamond
Alkali property and a designated PRP at the site, is currently performing a
feasibility study estimated to cost approximately $10 million to determine the
extent of contamination in the area and to evaluate possible corrective
actions.
In November 1995, the EPA notified Chris-Craft that it is a po-
tentially responsible party with respect to the Spectron Superfund Site in
Elkton, Maryland. Preliminary communications with representatives of a
steering committee and other potentially responsible parties indicate that
approximately 1,300 other companies and individuals likewise have received or
will receive such notices from the EPA and that Chris-Craft's alleged
responsibility with respect to the site is based on a single invoice indicating
that a facility operated by Chris-Craft allegedly sent a quantity of acetone to
the site in 1970.
In each case involving Montrose where Chris-Craft has been named as a
defendant, Chris-Craft contends that it is not liable and that it neither owned
nor operated the facilities involved, nor did it arrange for the disposal of
hazardous substances. Chris-Craft and its predecessors were shareholders of
Montrose and provided certain management services to Montrose as it conducted
its operations. Based on the available information, the status of the pro-
ceedings, and the applicable legal and accounting standards, Chris-Craft, in
reliance, among other things, on the advice of counsel, believes that it should
have no liability (under CERCLA or otherwise) for the operations of Montrose
and does not presently consider liability to be "probable" in any of the
Montrose-related cases. Accordingly, under Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies," no amount has been reserved
in Chris-Craft's financial statements. The Diamond Alkali Superfund Site
matter does not include Montrose, and based on the review to date by Chris-
Craft and its counsel, they believe Chris-Craft has been erroneously identified
as a PRP at the site; Chris-Craft is unable to determine at this stage if it
could have any liability at the site.
If a court ultimately rejected Chris-Craft's defenses, under CERCLA
Chris-Craft could be held jointly and severally liable, without regard to
fault, for response costs and natural resource damages. A party's ultimate
liability at a site generally depends on its involvement at the site, the
nature and extent of contamination, the remedy selected, the role of other
parties in creating the alleged contamination and the availability of contri-
bution from those parties, as well as any insurance or indemnification agree-
ments which may apply. In most cases, both the resolution of the complex
issues involved and any necessary remediation expenditures occur over a number
of years. Future legal and technical developments in each of the foregoing
matters will be periodically reviewed to determine if the accrual of reserves
would be appropriate.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of Chris-Craft, as of February 29, 1996,
are as follows:
Has served
Positions with Chris-Craft and as officer
Name age as of February 29, 1996 since
---- ------------------------------- -----------
Herbert J. Siegel Chairman of the Board and 1968
President; 67
Evan C Thompson Executive Vice President and 1982
President, Television Division;
53
John C. Siegel Senior Vice President;43 1985
William D. Siegel Senior Vice President; 41 1985
Joelen K. Merkel Vice President and
Treasurer; 44 1980
Brian C. Kelly General Counsel and
Secretary; 44 1992
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 Chris-Craft 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 until 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.
19
<PAGE>
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 Accountants thereon and Quarterly Financial Information (unaudited)
appearing in the Annual Report are incorporated 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.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information appearing in the Proxy Statement under the captions
ELECTION OF DIRECTORS--Nominees of the Board of Directors and ELECTION OF
DIRECTORS--Compliance with Section 16(a) of the Securities Exchange Act of
1934 is incorporated herein by this reference. Information relating to Chris-
Craft'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.
21
<PAGE>
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 financial statements of UPN and report thereon listed
under the caption Schedules in the Index to Consolidated
Financial Statements and Schedules.
3. Exhibits listed in the Exhibit Index, including com-
pensatory plans or arrangements listed below:
Benefit Equalization Plan
1988 Management Incentive Plan
1989 Director Stock Option Plan
1994 Management Incentive Plan
1994 Director Stock Option Plan
Employment Agreement dated as of January 1, 1994 between
Herbert J. Siegel and Chris-Craft.
Employment Agreement dated as of January 1, 1994 between
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.
22
<PAGE>
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, thereunto duly authorized.
Dated: March 29, 1996
CHRIS-CRAFT INDUSTRIES, 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, 1996
-----------------
Herbert J. Siegel
Chairman, President and
Director (principal executive
officer)
WILLIAM D. SIEGEL March 29, 1996
-----------------
William D. Siegel
Senior Vice President and
Director (principal
financial officer)
JOELEN K. MERKEL March 29, 1996
----------------
Joelen K. Merkel
Vice President and Treasurer
(principal accounting officer)
EVAN C THOMPSON March 29, 1996
---------------
Evan C Thompson
Executive Vice President and
Director
23
<PAGE>
HOWARD ARVEY March 29, 1996
------------
Howard Arvey
Director
LAWRENCE R. BARNETT March 29, 1996
-------------------
Lawrence R. Barnett
Director
T. CHANDLER HARDWICK, III March 29, 1996
-------------------------
T. Chandler Hardwick, III
Director
JEANE J. KIRKPATRICK March 29, 1996
--------------------
Jeane J. Kirkpatrick
Director
DAVID F. LINOWES March 29, 1996
----------------
David F. Linowes
Director
NORMAN PERLMUTTER March 29, 1996
-----------------
Norman Perlmutter
Director
JAMES J. ROCHLIS March 29, 1996
----------------
James J. Rochlis
Director
ALVIN R. ROZELLE March 29, 1996
----------------
Alvin R. Rozelle
Director
JOHN C. SIEGEL March 29, 1996
--------------
John C. Siegel
Director
24
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - For the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - For the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Investment - For
the Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
SCHEDULES:
UPN Financial Statements --
Report of Independent Accountants
Balance Sheet - December 31, 1995
Statement of Operations and Statement of Changes
in Partners' Capital (Deficit) -
For the Year Ended December 31, 1995
Statement of Cash Flows - For the Year
Ended December 31, 1995
Notes to Financial Statements
25
<PAGE>
Report of Independent Accountants
February 14, 1996
To the Partners
of United Paramount Network
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in Partners' capital (deficit) and of cash flows
present fairly, in all material respects, the financial position of United
Paramount Network (a partnership between BHC Network Partner, Inc. and BHC
Network Partner II, Inc.) at December 31, 1995, and the results of its
operations and its cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of United Paramount Network's manage-
ment; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
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 ac-
counting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Century City
<PAGE>
United Paramount Network
Balance Sheet
December 31, 1995
- ---------------------------------------------------------------
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 74
Accounts receivable (net of allowance for
doubtful accounts of $178) 9,040
Program rights and development costs (net
of reserve for abandonment of $4,631) 12,893
Other current assets 609
------
Total current assets 22,616
Restricted cash 974
Property and equipment, at cost:
Furniture, fixtures and computer equipment 1,082
Leasehold improvements and other 341
------
1,423
Less accumulated depreciation 198
------
1,225
Intangible asset (net of accumulated
amortization of $54) 217
Investment in joint venture 2,750
-----
Total assets $ 27,782
========
Liabilities and Partners' Capital (Deficit)
Current liabilities:
Accounts payable $ 3,224
Accrued program costs 10,587
Accrued expenses and other liabilities 11,850
-------
Total current liabilities 25,661
Due to related party 109,935
--------
Total liabilities 135,596
Commitments and contingencies (Note 6)
Partners' capital (deficit):
Network Partner (8,942)
Network Partner II (98,872)
--------
Total partners' deficit (107,814)
Total liabilities and partners' capital $ 27,782
=========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
United Paramount Network
Statement of Operations and
Statement of Changes in Partners' Capital (Deficit)
For the Year Ended December 31, 1995
- ----------------------------------------------------------------
Statement of Operations
(in thousands)
Net revenues $ 30,376
Operating costs and expenses:
Operating expenses 99,940
Selling, general and
administrative expenses 58,924
Depreciation and amortization 252
--------
159,116
Operating loss (128,740)
Other income (expense):
Interest expense to
related parties (4,535)
Interest and other income 62
Net loss on investment
in joint venture (625)
---------
(5,098)
Net loss $(133,838)
=========
Statement of Changes in Partners' Capital (Deficit)
(in thousands)
Network Network
Partner Partner II Total
------- ---------- -----
Balance at December 31, 1994 $ 1,500 $ 1,338 $ 2,838
Capital contributions - 23,186 23,186
Capital transfers between partners (3,977) 3,977 -
Allocation of 1995 net loss (6,465) (127,373) (133,838)
-------- --------- ---------
Balance at December 31, 1995 $ (8,942) $ (98,872) $(107,814)
======= ======== =========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
United Paramount Network
Statement of Cash Flows
For the Year Ended December 31, 1995
- ----------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net loss $(133,838)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of program costs 91,744
Payments for programming (98,420)
Depreciation and amortization 252
Abandonment reserve 4,631
Changes in assets and liabilities:
Increase in accounts receivable, net (9,025)
Increase in accounts payable, accrued expenses
and other current liabilities 12,546
Decrease in other assets 3,052
--------
Net cash used in operating activities (129,058)
--------
Cash flows from investing activities:
Additions to property and equipment (1,113)
Cash placed in restricted account (974)
Increase in intangible asset (271)
Net investment in joint venture (2,750)
--------
Net cash used in investing activities (5,108)
--------
Cash flows from financing activities:
Advances from related party 109,935
Capital contributions 23,186
-------
Net cash provided by financing activities 133,121
-------
Net decrease in cash and cash equivalents (1,045)
Cash and cash equivalents:
Beginning of period 1,119
-------
End of period $ 74
========
Supplemental Cash Flow Information:
Cash paid for interest $ 4,530
========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
United Paramount Network
Notes to Financial Statements
For the Year Ended December 31, 1995
- ----------------------------------------------------------------
Note 1 - Organization
In July 1994, BHC Network Partner, Inc. ("Network Partner"), a wholly owned
subsidiary of Chris-Craft Industries, Inc.'s majority owned subsidiary, BHC
Communications, Inc. ("BHC"), along with PCI Network Partner, Inc. ("PCI/NP"),
a wholly owned indirect subsidiary of Viacom Inc.'s Paramount Television Group,
formed the United Paramount Network ("UPN" or the "Network"), a fifth broad-
cast television network.
UPN was organized as a partnership in December 1994 between Network Partner
and BHC Network Partner II, Inc., a wholly owned indirect subsidiary of BHC,
("Network Partner II", collectively referred to as the "Partners"). PCI/NP
has an option exercisable through January 15, 1997 to acquire an interest in
UPN equal to that of the Partners. The option price is equivalent to approxi-
mately one-half of the Partners' aggregate cash contributions to UPN through
the exercise date, plus interest; payment may be deferred through the option
expiration date.
UPN began providing programming for broadcast in January 1995. At December 31,
1995, the Network had 150 affiliates reaching over 90% of U.S. television house-
holds. The Network's revenues are derived entirely from providing television
programming and are, therefore, subject to the vagaries of the advertising
industry.
Operating costs of the Network are funded through capital contributions and
loans made by the Partners. Profits or losses are allocated between the
Partners in accordance with the partnership agreement. During the year ended
December 31, 1995, UPN incurred operating losses of $128,740,000 and negative
cash flows from operations of $129,058,000. UPN is still in its infancy
and the cost of developing and expanding its programming is expected to remain
significant for several years. The Partners intend to continue funding UPN
through capital contributions and loans, as UPN incurs obligations arising
through the normal course of its business.
Note 2 - Accounting Policies
Financial Instruments
Restricted cash consists of cash and marketable securities having maturities
at time of purchase not exceeding one year, all of which are U.S. government
securities. In accordance with Statement of Financial Accounting Standards
No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity
Securities," marketable securities have been classified as held-to-maturity.
The fair value of restricted cash approximates its amortized cost, reflecting
the short maturities. Restricted cash has been placed in an account as a
security deposit, is not available for current operations of the Network and,
therefore, has been classified as non-current in the accompanying balance
sheet.
Property and Equipment
Property and equipment is recorded at cost. Depreciation of furniture, fix-
tures and computer equipment is computed on the straight-line method over the
estimated useful lives of the assets. Amortization of leasehold improvements
is computed on a straight-line basis over the life of the lease.
<PAGE>
NOTE 2 (continued)
Program Rights and Development Costs
Costs for program production are capitalized as incurred. Other Network
programming rights and related liabilities are recorded at the contractual
amounts when the programming becomes available for telecasting. Capitalized
program costs are amortized over the estimated number of showings, using
accelerated methods based on management's estimate of the flow of revenues.
The estimated costs of recorded program rights to be charged to income within
one year are included in current assets; payments on such program rights due
within one year are included in current liabilities.
Costs incurred for the development of programs are capitalized and included in
the accompanying balance sheet, net of reserves established for projects which
may be terminated prior to being placed into production.
Revenue Recognition
The Network sells advertising time for broadcast on UPN programs through
Premier Advertising Sales ("Premier") a wholly owned subsidiary of Paramount
Communications, Inc. (Note 6). Revenues are recognized substantially as adver-
tisements are aired, at contractual rates as reported to UPN by Premier.
With respect to certain of its programming, UPN derives no revenue and incurs
no programming expense.
Use of Estimates in Preparation of Financial Statements
Preparation of financial statements in accordance with generally accepted
accounting principles requires the use of management estimates.
Income Taxes
As a general partnership, the Network's losses are allocated to, and reported
by, the individual Partners. Therefore, no credit for income tax benefit is
included in the accompanying financial statements.
NOTE 3 - Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
(in thousands)
Accrued advertising cost $ 6,215
Accrued compensation 2,388
Accrued sales commission 1,395
Other accrued expenses 1,852
------
$11,850
======
NOTE 4 - Investment in Joint Venture
In January 1995, UPN entered into a joint venture (the "Venture") with Saban
Entertainment for the purpose of developing, producing and distributing
children's television programming. Under terms of the Venture agreement, UPN
funds certain programming costs in return for certain distribution rights to
such programming and a share of aggregate revenue. UPN accounts for its
interest in the Venture using the equity method.
NOTE 5 - Due to Related Party
During 1995 the Partners made loans to UPN totalling $109,935,000 at December
31, 1995. The loans bear interest at the prime rate (8.5% at December 31,
1995), payable annually. The loans are to be repaid from cash provided by the
Network's operations, as available.
NOTE 6 - Commitments and Contingencies
The aggregate amount payable by UPN under contracts for programming not cur-
rently available for telecasting and, accordingly, not included in accrued
program costs in the accompanying balance sheet totalled approximately
$62,000,000 at December 31, 1995.
At December 31, 1995 UPN was obligated under a five year lease for its office
space. The lease is noncancellable for three years and calls for certain
penalty payments upon cancellation thereafter. Rental expense for the year
ended December 31, 1995 was $427,000. Aggregate future minimum lease payments
at December 31, 1995 are $3,523,000, with amounts of $755,000 due in each of
the years 1996 through 1999 and $503,000 due in 2000. Additionally, as re-
quired by the lease agreement, UPN obtained an irrevocable letter of credit
in the amount of $1,220,000 on behalf of the lessor. The obligation under the
letter of credit is required to be reduced annually over the lease term.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated by
Reference to: Exhibit No. Exhibit
- --------------- ----------- -------
<S> <C> <C>
Exhibit 3(A) [1] 3.1 Restated Certificate
of Incorporation
Exhibit 3(B) [2] 3.2 By-Laws
Exhibit 11(H) [2] 10.1 Benefit Equalization Plan of
registrant
Exhibit 10(B)(1) [5] 10.2 Amendment No. 1 thereto
Exhibit 10.3[10] 10.3 Amendment No. 2 thereto
Exhibit 10(B) [8] 10.4 Employment Agreement dated
January 1, 1994 between
registrant and Herbert J. Siegel
Exhibit 10(C) [8] 10.5 Split-Dollar Agreement dated
January 6, 1994 between
registrant and William D. Siegel
Exhibit 10(D) [8] 10.6 Split-Dollar Agreement dated
January 6, 1994 between
registrant and John C. Siegel
Exhibit 10(E) [3] 10.7 Form of Agreement under Executive
Deferred Income Plan of
registrant
Exhibit 10(F) [8] 10.8 Employment Agreement dated
January 1, 1994 between
registrant and Evan C Thompson
Exhibit A to Proxy 10.9 1988 Management Incentive Plan
Statement of registrant
dated March 23, 1988 (File
No. 1-2999)
Exhibit 10(G)(1) [7] 10.10 Amendment No. 1 thereto
Exhibit 10(c) [4] 10.11 Management Agreement between
the registrant and BHC dated
July 21, 1989
Exhibit 19 [6] 10.12 Amendment No. 1 thereto dated
October 31, 1991
Exhibit 10(H)(2) [8] 10.13 Amendment No.2 thereto dated
March 24, 1994
Exhibit A to Proxy 10.14 1989 Director Stock Option Plan
Statement of registrant
dated April 26, 1990
(File No. 1-2999)
Exhibit 10(I)(1) [7] 10.15 Amendment No. 1 thereto
Exhibit A to registrant's 10.16 1994 Management Incentive Plan
proxy statement dated
March 25, 1994 (File
No. 1-2999)
Exhibit B to registrant's 10.17 1994 Director Stock Option Plan
proxy statement dated
March 25, 1994 (File
No. 1-2999)
Exhibit 10.10 [9] 10.18 Option Agreement dated July 19,
1994 between BHC Network Partner,
Inc. and PCI Network Partner,
Inc.
* 11 Computation of Primary and
Fully Diluted Income per Share
* 13 Portions of the Annual Report
incorporated by reference
* 21 Subsidiaries of the registrant
* 23 Consent of Price Waterhouse LLP
* 27 Financial Data Schedule
_________________________
* Filed herewith.
[1] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1986.
[2] Registrant's Registration Statement on Form S-1 (Regis. No. 2-
65906).
[3] Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1983.
[4] BHC's Registration Statement on Form S-1 (Regis. No. 33-31091).
[5] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989.
[6] Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1991.
[7] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.
[8] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.
[9] BHC's Annual Report on Form 10-K for the year ended December 31,
1994.
[10] Registrant's Annual Report on Form 10-K for the year ended December
31, 1994.
</TABLE>
Exhibit 11
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED INCOME PER SHARE*
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Number of shares of common stock:
Average outstanding during
the period 29,981,934 30,328,874 29,475,935
Assumed exercise of stock options 311,617 239,796 498,443
---------- ---------- ----------
Total shares used in computation
of primary income per share 30,293,551 30,568,670 29,974,378
========== ========== ==========
Average outstanding
during the period (as per above) 29,981,934 30,328,874 29,475,935
Assumed conversion of $1.40
convertible preferred stock into
common stock 8,949,882 9,142,793 9,619,496
Assumed exercise of stock options 499,833 239,796 526,762
--------- --------- ---------
Total shares used in computation
of fully diluted income per share 39,431,649 39,711,463 39,622,193
========== ========== ==========
Net income - computation of primary
income per share:
Net income $ 21,965 $ 64,741 $ 149,068
Less - Dividend requirements on
preferred stock (464) (471) (493)
---------- --------- ---------
$ 21,501 $ 64,270 $ 148,575
========== ========= ==========
Net income - computation of fully
diluted income per share:
Net income $ 21,965 $ 64,741 $ 149,068
Less - Dividend requirements on
preferred stock (73) (73) (73)
---------- --------- ----------
$ 21,892 $ 64,668 $ 148,995
========== ========== ==========
Net income per share:
Primary $ .71 $ 2.10 $ 4.96
========== ========== ==========
Fully diluted $ .56 $ 1.63 $ 3.76
========== ========== ==========
- ---------------------
* Computations give effect to all common stock dividends, including the
3% stock dividend declared in January, 1996.
</TABLE>
Exhibit 21
The following were the registrant's subsidiaries as of December 31,
1995, 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
- ------------------ -------------
BHC Communications, Inc. Delaware
BHC Network Partner, Inc. Delaware
Chris-Craft Television, Inc. Delaware
BHC Network Partner II, 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
Chris-Craft Industrial Products, Inc. Delaware
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 33-21900, 33-34205 and
33-59275, and 33-54817) of Chris-Craft Industries, Inc. of our report
dated February 14, 1996 which appears on page 15 of the 1995 Annual Report to
Shareholders of Chris-Craft Industries, Inc., which is incorporated by
reference in this Annual Report on Form 10-K for the year ended December
31, 1995 and our report dated February 14, 1996 on the financial statements
of United Paramount Network appearing in this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCORPORATED BY REFERENCE INTO
REGISTRANT'S ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED 31 DECEMBER 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 73840
<SECURITIES> 1449598
<RECEIVABLES> 98960
<ALLOWANCES> 5867
<INVENTORY> 2363
<CURRENT-ASSETS> 1757943
<PP&E> 137503
<DEPRECIATION> 87576
<TOTAL-ASSETS> 2203853
<CURRENT-LIABILITIES> 226527
<BONDS> 0
0
6404
<COMMON> 15356
<OTHER-SE> 1297260
<TOTAL-LIABILITY-AND-EQUITY> 2203853
<SALES> 17379
<TOTAL-REVENUES> 472081
<CGS> 11754
<TOTAL-COSTS> 361448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 65279
<INCOME-TAX> 17600
<INCOME-CONTINUING> 21965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21965
<EPS-PRIMARY> .71
<EPS-DILUTED> .56
</TABLE>
<PAGE> 1
EXHIBIT 13
<TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
<CAPTION>
First Second Third Fourth
(In thousands of dollars except per share data) Quarter Quarter Quarter Quarter Year
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C>
Operating revenues $ 108,709 $ 125,234 $ 115,584 $ 122,554 $ 472,081
Operating income 23,780 37,204 17,435 32,214 110,633
Equity in United
Paramount Network loss (38,403) (28,709) (28,722) (33,469) (129,303)
Income before income taxes
and minority interest 6,197 27,428 9,937 21,717 65,279
Net income 314 6,356 10,664 4,631 21,965
Primary net income per share .01 .21 .35 .15 .71
Fully diluted net income per share $ .01 $ .16 $ .27 $ .12 $ .56
YEAR ENDED DECEMBER 31, 1994
Operating Revenues $ 101,775 $ 126,130 $ 112,803 $ 140,656 $ 481,364
Operating income 17,379 33,648 20,176 36,629 107,832
Equity in United
Paramount Network loss - - (159) (3,818) (3,977)
Income before income taxes
and minority interest 31,278 49,051 37,012 46,442 163,783
Net income 11,176 17,122 22,422 14,021 64,741
Primary net income per share .37 .56 .73 .45 2.10
Fully diluted net income per share $ .28 $ .43 $ .56 $ .35 $ 1.63
</TABLE>
1
<PAGE> 2
INDUSTRY SEGMENT INFORMATION
- -------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
The following table sets forth information for the years indicated in
accordance with Statement No. 14 of the Financial Accounting Standards Board.
The business of each industry segment is described elsewhere in this Annual
Report.
<TABLE>
<CAPTION>
Operating Operating Depreciation and Capital Identifiable
(In thousands of dollars) Revenues Income (Loss)(b) Amortization Expenditures Assets
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C>
Television Division $ 454,702 $ 127,149 $ 19,833 $ 11,564 $2,156,429(c)
Industrial Division 17,379 1,960 236 537 8,096
Other (a) - (18,476) 24 8 39,328
- ---------------------------------------------------------------------------------------------------------------------------------
$ 472,081 $ 110,633 $ 20,093 $ 12,109 $2,203,853
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1994
Television Division $ 457,533 $ 124,552 $ 20,355 $ 8,049 $2,184,132(c)
Industrial Division 23,831 (3,557) 512 2,416 9,805
Other (a) - (13,163) 21 35 38,280
- ---------------------------------------------------------------------------------------------------------------------------------
$ 481,364 $ 107,832 $ 20,888 $ 10,500 $2,232,217
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1993
Television Division $ 411,999 $ 87,811 $ 20,430 $ 11,618 $2,232,294(c)
Industrial Division 27,734 602 524 355 11,124
Other (a) - (13,081) 26 7 39,760
- ---------------------------------------------------------------------------------------------------------------------------------
$ 439,733 $ 75,332 $ 20,980 $ 11,980 $2,283,178
=================================================================================================================================
</TABLE>
(a) Consists of Corporate Office and subsidiaries not included in Television
Division or Industrial Division. Related operating loss consists
solely of general and administrative expenses and, accordingly, excludes
nonoperating income. Related assets consist primarily of cash and
marketable securities.
(b) See Consolidated Statements of Income for the reconciliation of operating
income to net income.
(c) Includes marketable securities having an aggregate carrying value of
$1,427,186 at December 31, 1995, $1,274,244 at December 31, 1994 and
$1,471,158 at December 31, 1993.
2
<PAGE> 3
STOCK PRICE, DIVIDEND AND RELATED INFORMATION
- -------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
Chris-Craft common stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange. The high and low sales prices reported in the
consolidated transaction reporting system are shown below for the periods
indicated. Since Chris-Craft Class B common stock is ordinarily
nontransferable, there is no trading market for such class.
<TABLE>
<CAPTION>
1995 1994
High Low High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 37 3/8 33 38 1/8 33
Second Quarter 36 3/4 32 1/2 38 1/8 32
Third Quarter 46 1/4 34 3/4 41 1/2 35 3/8
Fourth Quarter 44 1/4 39 1/4 40 1/8 33 1/8
</TABLE>
Chris-Craft paid 3% stock dividends on its common stock in April 1995 and
April 1994. Chris-Craft has declared a 3% stock dividend payable in April
1996. The Board of Directors plans to continue to consider, on an annual
basis, the payment of dividends in common stock. As of February 21, 1996,
there were 2,885 holders of record of common stock and 1,822 holders of record
of Class B common stock.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
[Price Waterhouse LLP Logo]
Price Waterhouse LLP February 14, 1996
1177 Avenue of the Americas
New York, New York 10036
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF CHRIS-CRAFT INDUSTRIES, 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
Chris-Craft Industries, Inc. and its subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, 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.
/s/ Price Waterhouse LLP
3
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
(In thousands of dollars) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 73,840 $ 226,183
Marketable securities (substantially all U.S.
Government securities) 1,449,598 1,294,278
Accounts receivable, less allowance for doubtful
accounts of $5,867 and $7,640 93,093 99,775
Film contract and prepaid broadcast rights 95,541 89,245
Prepaid expenses and other current assets 45,871 66,655
- --------------------------------------------------------------------------------
Total current assets 1,757,943 1,776,136
- --------------------------------------------------------------------------------
FILM CONTRACT RIGHTS, including deposits,
less estimated portion to be used within one year 50,361 59,228
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, at cost:
Land, buildings and improvements 38,231 37,049
Machinery and equipment 99,272 97,237
- --------------------------------------------------------------------------------
137,503 134,286
Less-Accumulated depreciation 87,576 82,662
- --------------------------------------------------------------------------------
49,927 51,624
- --------------------------------------------------------------------------------
INTANGIBLE ASSETS 321,945 329,517
- --------------------------------------------------------------------------------
OTHER ASSETS 23,677 15,712
- --------------------------------------------------------------------------------
$2,203,853 $2,232,217
================================================================================
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Film contracts payable within one year $ 87,634 $ 81,696
Accounts payable and accrued expenses 105,682 100,984
Income taxes payable 33,211 60,877
- --------------------------------------------------------------------------------
Total current liabilities 226,527 243,557
- --------------------------------------------------------------------------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 86,392 89,048
- --------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 11,588 9,192
- --------------------------------------------------------------------------------
MINORITY INTEREST 560,326 584,202
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' INVESTMENT:
Cumulative preferred stock -
Prior preferred stock - $1.00 dividend; stated at
liquidating value of $21.50 per share; currently
authorized 73,399 shares; outstanding 73,399 shares 1,578 1,578
Convertible preferred stock - $1.40 dividend; stated
at $17.50 per share; currently authorized 275,758
shares; outstanding 275,758 and 282,826 shares
(liquidating value $23 per share, aggregating $6,342) 4,826 4,949
Class B common stock - par value $.50 per share;
currently authorized 50,000,000 shares; outstanding
7,652,273 and 7,567,821 shares 3,826 3,784
Common stock - par value $.50 per share; currently
authorized 100,000,000 shares; outstanding 21,478,079
and 20,979,174 shares 11,530 11,280
Capital surplus 301,351 298,090
Retained earnings 989,181 996,331
Adjustment to reflect marketable securities at market
value 6,728 (9,794)
- --------------------------------------------------------------------------------
1,319,020 1,306,218
- --------------------------------------------------------------------------------
$2,203,853 $2,232,217
================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands of dollars except per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Television revenues $ 454,702 $ 457,533 $ 411,999
Sales of manufactured products 17,379 23,831 27,734
- -----------------------------------------------------------------------------------------------------------------
472,081 481,364 439,733
- -----------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Television expenses 214,223 232,635 230,088
Cost of manufactured products sold 11,754 19,108 21,523
Selling, general and administrative 135,471 121,789 112,790
- -----------------------------------------------------------------------------------------------------------------
361,448 373,532 364,401
- -----------------------------------------------------------------------------------------------------------------
Operating income 110,633 107,832 75,332
- -----------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest and other income, net 83,949 59,928 52,661
Equity in United Paramount Network loss (129,303) (3,977) -
Income associated with Time Warner Inc. securities - - 256,622
- -----------------------------------------------------------------------------------------------------------------
(45,354) 55,951 309,283
- -----------------------------------------------------------------------------------------------------------------
Income before provision for income taxes
and minority interest 65,279 163,783 384,615
PROVISION FOR INCOME TAXES 17,600 57,300 147,200
- -----------------------------------------------------------------------------------------------------------------
Income before minority interest 47,679 106,483 237,415
MINORITY INTEREST 25,714 41,742 88,347
- -----------------------------------------------------------------------------------------------------------------
Net income $ 21,965 $ 64,741 $ 149,068
=================================================================================================================
NET INCOME PER SHARE:
Primary $ .71 $ 2.10 $ 4.96
=================================================================================================================
Fully diluted $ .56 $ 1.63 $ 3.76
=================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
6
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,965 $ 64,741 $ 149,068
Adjustments to reconcile net income to net cash provided from
(used in) operating activities:
Film contract amortization 89,321 101,869 102,768
Film contract payments (90,994) (117,928) (147,557)
Prepaid broadcast rights 4,249 8,166 (34,426)
Depreciation and other amortization 20,093 20,888 20,980
Equity in United Paramount Network loss 129,303 3,977 -
Gain on disposition of Time Warner Inc. securities - - (219,373)
Minority interest 25,714 41,742 88,347
Other 1,980 5,055 (7,813)
Changes in assets and liabilities:
Accounts receivable 6,682 (9,906) (9,108)
Other assets 1,268 640 (1,084)
Accounts payable and other liabilities 10,495 10,527 4,386
Income taxes (23,402) 3,952 6,230
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) operating activities 196,674 133,723 (47,582)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of marketable securities 697,232 1,097,750 947,015
Purchase of marketable securities (813,070) (937,730) (938,896)
Investment in United Paramount Network (128,585) (6,815) -
Capital expenditures, net (9,079) (10,676) (11,197)
Other (9,694) (449) (15,027)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) investing activities (263,196) 142,080 (18,105)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital transactions of subsidiaries (67,605) (82,353) (50,081)
Purchase of treasury stock (19,967) (20,386) (9,964)
Proceeds from exercise of employee stock options 2,218 13,095 5,336
Dividends on preferred stock (467) (473) (495)
Repayment of long-term debt - - (15,625)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (85,821) (90,117) (70,829)
- ----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (152,343) 185,686 (136,516)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 226,183 40,497 177,013
- ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 73,840 $ 226,183 $ 40,497
======================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
7
<PAGE> 8
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
- --------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Treasury
Outstanding Shares Shares
----------------------------------------------------------------------------------
Class B $1.00 $1.40 Common
Common Common Preferred Preferred Common Stocks
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992: 18,712,312 7,396,488 73,399 305,833 - $13,845
Net income - - - - - -
Capital transactions of subsidiaries - - - - - -
Dividends on preferred stock - - - - - -
Common stock dividend - 3% 559,637 221,799 - - - 391
Conversion of preferred stock 148,535 78,731 - (7,887) - 114
Conversion of Class B common stock 317,152 (317,152) - - - -
Stock options, including related tax benefits 439,700 - - - - 220
Acquisition of treasury stock - - - - (265,800) -
Retirement of treasury stock (265,800) - - - 265,800 (133)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993: 19,911,536 7,379,866 73,399 297,946 - 14,437
Net income - - - - - -
Marketable securities valuation adjustment - - - - - -
Capital transactions of subsidiaries - - - - - -
Dividends on preferred stock - - - - - -
Common stock dividend - 3% 608,418 226,571 - - - 417
Conversion of preferred stock 250,339 195,244 - (15,120) - 223
Conversion of Class B common stock 233,860 (233,860) - - - -
Stock options, including related tax benefits 537,221 - - - - 268
Acquisition of treasury stock - - - - (562,200) -
Retirement of treasury stock (562,200) - - - 562,200 (281)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994: 20,979,174 7,567,821 73,399 282,826 - 15,064
Net income - - - - - -
Marketable securities valuation adjustment - - - - - -
Capital transactions of subsidiaries - - - - - -
Dividends on preferred stock - - - - - -
Common stock dividend - 3% 620,551 225,514 - - - 423
Conversion of preferred stock 109,376 109,150 - (7,068) - 109
Conversion of Class B common stock 250,212 (250,212) - - - -
Stock options, including related tax benefits 77,166 - - - - 39
Acquisition of treasury stock - - - - (558,400) -
Retirement of treasury stock (558,400) - - - 588,400 (279)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995: 21,478,079 7,652,273 73,399 275,758 - $15,356
===================================================================================================================================
<CAPTION>
Treasury
Shares Dollar Amount (In thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
Market
Preferred Capital Retained Treasury Valuation
Stocks Surplus Earnings Stock Account
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992: $6,390 $253,242 $837,730 $ - $ -
Net income - - 149,068 - -
Capital transactions of subsidiaries - (1,701) - - -
Dividends on preferred stock - - (495) - -
Common stock dividend - 3% - 24,357 (24,748) - -
Conversion of preferred stock (138) 24 - - -
Conversion of Class B common stock - - - - -
Stock options, including related tax benefits - 8,517 - - -
Acquisition of treasury stock - - - (9,129) -
Retirement of treasury stock - (8,996) - 9,129 -
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993: 6,792 275,443 961,555 - -
- -
Net income - - 64,741 - (9,794)
Marketable securities valuation adjustment - - - - -
Capital transactions of subsidiaries - (1,991) - - -
Dividends on preferred stock - - (473) - -
Common stock dividend - 3% - 29,075 (29,492) - -
Conversion of preferred stock (265) 42 - - -
Conversion of Class B common stock - - - - -
Stock options, including related tax benefits - 15,340 - - -
Acquisition of treasury stock - - - (20,100) -
Retirement of treasury stock - (19,819) - 20,100 -
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994: 6,527 298,090 996,331 - (9,794)
Net income - - 21,965 - -
Marketable securities valuation adjustment - - - - 16,522
Capital transactions of subsidiaries - (7,809) - - -
Dividends on preferred stock - 28,225 (467) - -
Common stock dividend - 3% (123) 13 (28,648) - -
Conversion of preferred stock - - - - -
Conversion of Class B common stock - 2,401 - - -
Stock options, including related tax benefits - - - - -
Acquisition of treasury stock - - - (19,848) -
Retirement of treasury stock - (19,569) - 19,848 -
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995: $6,404 $301,351 $989,181 $ - $ 6,728
===================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
Note 1
- ------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) BUSINESS AND BASIS OF PRESENTATION
Chris-Craft's primary business is television broadcasting, conducted
through its majority owned (73.9% at December 31, 1995 and 72.7% at December 31,
1994) television broadcasting subsidiary, BHC Communications, Inc. BHC wholly
owned subsidiaries operate three television stations and BHC's majority owned
(57.3% at December 31, 1995 and 55.2% at December 31, 1994) subsidiary, United
Television, Inc. (UTV), operates five television stations.
BHC, through certain of its subsidiaries, currently owns 100% of the
partnership which operates the United Paramount Network (UPN), a fifth broadcast
network which premiered in January 1995. Viacom Inc.'s Paramount Television
Group has an option to acquire an interest in UPN equal to that of BHC, and BHC
accordingly accounts for its UPN partnership interest under the equity method.
The accompanying consolidated financial statements include the accounts
of Chris-Craft and its subsidiaries, after elimination of all significant
intercompany accounts and transactions. The pro rata interests of BHC and UTV
minority shareholders in the net income and net assets of BHC and UTV are set
forth as minority interest in the Consolidated Statements of Income and
Consolidated Balance Sheets, respectively. Preparation of financial statements
in accordance with generally accepted accounting principles requires the use of
management estimates. Certain prior year amounts have been restated to conform
with the 1995 presentation.
(B) FINANCIAL INSTRUMENTS
Cash and cash equivalents totalled $73,840,000 at December 31, 1995 and
$226,183,000 at December 31, 1994. 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.
Effective January 1, 1994, Chris-Craft adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities". Under SFAS 115, all of Chris-Craft's marketable
securities have been categorized as available for sale and are carried at fair
market value. Since marketable securities are available for current operations,
all are included in current assets as follows:
<TABLE>
<CAPTION>
Gross Unrealized
(In thousands) Cost Gains Losses Fair Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1995:
U.S. Government
securities $1,328,855 $ 4,986 $ 925 $1,332,916
Other 106,427 10,474 219 116,682
- -------------------------------------------------------------------------------
$1,435,282 $15,460 $ 1,144 $1,449,598
===============================================================================
December 31, 1994:
U.S. Government
securities $1,239,691 $ 87 $23,611 $1,216,167
Other 80,072 439 2,400 78,111
- -------------------------------------------------------------------------------
$1,319,763 $ 526 $26,011 $1,294,278
===============================================================================
</TABLE>
Of the U.S. Government securities held at December 31, 1995, 83% mature
within one year, 96% within two years, and all within four years.
Certain additional information related to Chris-Craft's marketable
securities as of and for the years ended December 31, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales proceeds $697,232 $1,097,750
Realized gains 2,374 1,286
Realized losses 4,697 7,734
Net unrealized gain (loss) 14,316 (25,485)
Adjustment for unrealized
gain (loss), net of deferred
income taxes and minority
interests $ 6,728 $ (9,794)
===============================================================================
</TABLE>
For purposes of computing gains and losses, cost was determined using
the specific identification method.
(C) FILM CONTRACTS
Chris-Craft's television stations own film contract rights which allow
generally for limited showings of films and syndicated programs. Film contract
rights and related liabilities are recorded when the programming becomes
available for telecasting.
Contracts are amortized over the estimated number of showings, using
primarily accelerated methods as films are used, based on management's
estimates of the flow of revenue and ultimate total cost for each contract. In
the opinion
9
<PAGE> 10
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
of management, future revenue derived from airing programming will
be sufficient to cover related unamortized rights balances at December 31,
1995. 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, 1995 are $50,784,000, $24,272,000, $7,551,000 and $3,785,000 in
1997, 1998, 1999 and thereafter, respectively. The net present value at
December 31, 1995 of such payments, based on an 8.5% discount rate, was
approximately $72,330,000. See Note 10.
(D) DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is generally provided on the
straight-line method over the estimated useful lives of the assets, 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. The carrying values
of such intangibles as of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Television Division $321,171 $328,743
Industrial Division 774 774
- -------------------------------------------------------------------------------
$321,945 $329,517
===============================================================================
</TABLE>
Television Division amounts primarily relate to television station WWOR,
which was acquired in 1992, and are being amortized on a straight-line basis
over 40 year periods. Accumulated amortization of intangible assets totalled
$47,333,000 at December 31, 1995 and $38,011,000 at December 31, 1994.
Intangible assets at December 31, 1995 are net of negative goodwill totalling
$2,581,000 resulting from purchases by BHC of its own shares at prices less than
net book value.
(F) REVENUE RECOGNITION AND BARTER TRANSACTIONS
Revenue is recognized upon broadcast of television advertising and upon
shipment of manufactured products. The estimated fair value of goods or
services received by Chris-Craft's television stations in barter (nonmonetary)
transactions, most of which relate to the acquisition of programming, is
recognized as revenue when the air time is used by the advertiser. Barter
revenue totalled $46,039,000 in 1995, $47,201,000 in 1994
and $43,231,000 in 1993. Barter expense in each year
approximated barter revenue.
(G) INCOME PER SHARE
Income per share amounts for all periods presented give retroactive effect
to all common stock dividends declared through February 14, 1996. Primary per
share amounts were computed by dividing income, after preferred stock dividend
requirements of $464,000 in 1995, $471,000 in 1994, and $493,000 in 1993, by
the weighted average number of common and, when dilutive, common equivalent,
shares outstanding (30,294,000 in 1995, 30,569,000 in 1994 and 29,974,000 in
1993). Stock options are the only common share equivalents. Fully diluted per
share amounts further assume conversion of the average number of $1.40
convertible preferred shares outstanding.
(H) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes totalled $46,522,000 in 1995, $53,343,000 in
1994 and $142,465,000 in 1993.
NOTE 2
- --------------------------------------------------------------------------------
UNITED PARAMOUNT NETWORK:
In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group,
formed the United Paramount Network, a fifth broadcast television network which
premiered in 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.
UPN has been organized as a partnership, and BHC's partnership interest is
accounted for under the equity method. The carrying value of such interest,
which reflects BHC fundings of $128,585,000 in 1995 and $6,815,000 in 1994, less
UPN losses, totalled $2,121,000 at December 31, 1995 and $2,838,000 at December
31, 1994, and is included in other assets on the accompanying Consolidated
Balance Sheets. UPN is still in its infancy, and the cost of developing UPN is
expected to remain significant for several years.
10
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
Condensed consolidated financial statements of UPN as of and for the year ended
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------------------------------------
<S> <C>
BALANCE SHEET
Current assets $ 22,616
Property and equipment, net 1,225
Other assets 3,941
- -------------------------------------------------------------------------------
$ 27,782
===============================================================================
Current liabilities $ 25,661
Advances due BHC 109,935
Partners' deficit (107,814)
- -------------------------------------------------------------------------------
$ 27,782
===============================================================================
Statement of Operations
Operating revenues* $ 30,376
Operating expenses* 159,116
- -------------------------------------------------------------------------------
Operating loss (128,740)
Other expenses (563)
- -------------------------------------------------------------------------------
Loss before interest
on BHC advances (129,303)
Interest on BHC advances
(eliminated in consolidation) (4,535)
- -------------------------------------------------------------------------------
Net loss $(133,838)
===============================================================================
</TABLE>
* With respect to certain of its programming, UPN derives no revenue and incurs
no programming expense.
Note 3
- -------------------------------------------------------------------------------
INTERESTS IN WARNER COMMUNICATIONS INC.
AND TIME WARNER INC.:
From 1984 to 1989, BHC was the largest shareholder of Warner
Communications Inc. Pursuant to the merger of Warner and Time Warner Inc., BHC
in 1989 and 1990 disposed of its Warner interest for cash and Time Warner
securities, and BHC recorded pretax gains totalling $1.9 billion on those
dispositions. In 1993, BHC disposed of its then remaining Time Warner
securities, and income associated with such securities is included in the
accompanying 1993 Consolidated Statement of Income as follows:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
<S> <C>
Gain on disposition, after expense of $2,905 $219,373
Dividend income 14,672
Interest income 22,577
- --------------------------------------------------------------------------------
$256,622
================================================================================
</TABLE>
Expense deducted from the gain on disposition consists of Chris-Craft
compensation expense reimbursed by BHC pursuant to its management agreement
with Chris-Craft.
NOTE 4
- --------------------------------------------------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
(In thousands ) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 9,826 $10,124
Payable for securities purchased 1,318 662
Accrued expenses-
Payroll and compensation 47,937 39,832
Deferred barter revenue 29,660 32,601
Other 16,941 17,765
- --------------------------------------------------------------------------------
$105,682 $100,984
================================================================================
</TABLE>
NOTE 5
- --------------------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT:
Each share of $1.00 prior preferred stock is redeemable by Chris-Craft at
$25.00. Each share of $1.40 convertible preferred stock is redeemable by
Chris-Craft at $40.00 and is convertible into common stock as set forth below.
Chris-Craft has authorized 10,000,000 shares of preferred stock, $1.00 par
value, that may be issued without further shareholder approval, in one or more
series, the terms and provisions of which shall be set by the Board of
Directors.
Each share of Class B common stock entitles the holder to ten votes
(common stock entitles the holder to one vote per share), is convertible at all
times into common stock on a share-for-share basis, is not transferable except
to specified persons ("Permitted Transferees") and, in general, carries the
same per share dividend and liquidation rights as a share of common stock,
except that the Board of Directors may in its discretion declare greater cash
dividends per share on the common stock than on the Class B common stock. No
additional Class B shares may be issued without further shareholder approval,
except upon the conversion of $1.40 convertible preferred shares by holders of
record on November 10, 1986 (the record date for the initial distribution of
Class B common stock) or Permitted Transferees, or in payment of stock
dividends or stock splits on outstanding shares of Class B common stock.
So long as any Class B common stock is outstanding, each share of $1.40
convertible preferred stock will entitle the holder on November 10, 1986, or
Permitted Transferees, to convert such share of $1.40 convertible preferred
stock into 10.33098 shares of common stock and 20.66194 shares of Class B
common stock, and to 216.3 votes (10.64091, 21.28180 and 222.6, respectively,
as adjusted for the 1996 stock dividend described below). The foregoing special
conversion and voting rights will be available to holders of $1.40 convertible
preferred stock
11
<PAGE> 12
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
transferred after November 10, 1986 only under the same circumstances
as those in which the Class B common stock is transferable. Each share of $1.40
convertible preferred stock transferred after November 10, 1986 entitles its
holder (other than a Permitted Transferee) to convert such share into 30.99292
shares of common stock and 31.0 votes (31.92271 and 31.9, respectively, as
adjusted for the 1996 stock dividend described below).
Chris-Craft, from time to time, has purchased shares of its capital stock,
including 1995 purchases of 558,400 shares of common stock. At December 31,
1995, 1,147,902 shares of common stock and 12,899 shares of $1.00 prior
preferred stock remained authorized for purchase.
As of December 31, 1995, shares of Chris-Craft's authorized but unissued
common stock were reserved for issuance as follows:
<TABLE>
<CAPTION>
Shares
- --------------------------------------------------------------------------------
<S> <C>
Conversion of Class B common stock 7,652,273
Conversion of $1.40 convertible preferred stock 8,546,545*
Stock options (including options outstanding
for 1,771,029 shares) 3,501,759
- --------------------------------------------------------------------------------
19,700,577
================================================================================
</TABLE>
*Including Class B common shares.
On January 25, 1996, the Board of Directors declared a 3% common stock
dividend, payable in April 1996, which will increase by 3% Chris-Craft's
common and Class B common shares outstanding and will also increase by 3% the
number of common shares issuable upon conversion of Chris-Craft's $1.40
convertible preferred stock and upon exercise of stock options. Applicable
conversion rates and exercise prices will be adjusted accordingly.
NOTE 6
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS OF SUBSIDIARIES:
BHC had outstanding, at December 31, 1995, 6,363,022 shares of Class A
common stock and 18,000,000 shares of Class B common stock. Chris-Craft owns
all outstanding Class B common shares, which represented 73.9% of BHC's then
outstanding equity and 96.6% of BHC's voting power. From January 1990, when
BHC became a public company and was 60% owned by Chris-Craft, through December
31, 1995, BHC purchased 4,914,387 shares of its Class A common stock at an
aggregate cost of $296,496,000. BHC treasury stock expenditures totalled
$30,504,000 in 1995, $73,449,000 in 1994 and $25,428,000 in 1993. At December
31, 1995, 585,613 Class A common shares were authorized for purchase, and an
additional 1,300,000 shares subsequently were authorized for purchase.
UTV has also acquired its own shares, expending $28,440,000 in 1995,
$8,904,000 in 1994 and $8,760,000 in 1993, net of proceeds from the exercise of
stock options. BHC's ownership in UTV has accordingly increased to 57.3% at
December 31, 1995 from 52.9% at December 31, 1992.
Such transactions, together with BHC's special dividends, $1.00 per
share in 1995 and $2.00 per share in 1993, and UTV's dividend, $.50 per share
in 1995, are reflected in the accompanying Consolidated Statements of Cash Flow
and Consolidated Statements of Shareholders' Investment under the caption
Capital transactions of subsidiaries, net of intercompany eliminations and
minority interests.
NOTE 7
- --------------------------------------------------------------------------------
STOCK OPTIONS:
Under the 1994 Management Incentive Plan, adopted by Chris-Craft
shareholders in April 1994, options (including Incentive Stock Options) to
purchase shares of common stock may be granted from time to time to employees
of Chris-Craft and its subsidiaries, at prices not less than the fair market
value at date of grant. Options are exercisable in cumulative annual
installments of 33 1/3% commencing one year from date of grant and expire over
a period determined by the Plan Committee, which may not exceed ten years from
date of grant. Options currently outstanding expire either five or ten years
from date of grant. The Plan replaced a similar plan which was terminated with
respect to the grant of additional options when the 1994 Plan became effective.
The Plan permits the Plan Committee to award stock appreciation rights to
holders of options granted under the Plan. Such rights entitle the holders, in
lieu of exercising their options, to receive payment from Chris-Craft in cash,
stock or a combination thereof, equal to the greater of the appreciation in
market value or book value of the shares covered by exercisable options. No
stock appreciation rights have been awarded under the Plan.
Transactions under the two plans during the two years ended December 31,
1995 were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars Shares under Option Price
except per share data) Option per Share Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding,
December 31, 1993 1,278,326 $18.73-$37.25 $ 38,100
Increase to reflect
3% stock dividend 27,044 - -
Granted 1,041,700 $34.38-$38.36 36,118
Exercised (668,391) $18.73-$31.06 (19,586)
Cancelled (5,150) $36.17 (186)
- --------------------------------------------------------------------------------
Outstanding,
December 31, 1994 1,673,529 $28.16-$38.36 54,446
Increase to reflect
3% stock dividend 50,088 - -
Exercised (54,773) $27.34-$35.11 (1,543)
Cancelled (12,330) $27.34-$36.17 (375)
- --------------------------------------------------------------------------------
Outstanding,
December 31, 1995 1,656,514 $27.34-$37.25 $52,528
================================================================================
</TABLE>
12
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
Chris-Craft received 2,217 common shares in 1995, 278,958 common shares
in 1994 and 146,457 common shares in 1993 as partial payment of exercised
options.
Under the 1994 Director Stock Option Plan, adopted by Chris-Craft
shareholders in April 1994, a fixed number of immediately exercisable options
to purchase shares of common stock are granted annually to each nonemployee
director of Chris-Craft, at prices equal to fair market value at date of grant.
The 1994 Director Stock Option Plan replaced a similar plan which has been
terminated with respect to the grant of additional options. Transactions under
the two plans during the two years ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars Shares under Option Price
except per share data) Option per Share Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding,
December 31, 1993 210,372 $25.73-$31.88 $6,576
Increase to reflect
3% stock dividend 6,297 - -
Granted 40,000 $34.38 1,375
Exercised (161,585) $30.95-$34.38 (5,004)
- --------------------------------------------------------------------------------
Outstanding,
December 31, 1994 95,084 $24.98-$34.38 2,947
Increase to reflect
3% stock dividend 2,841 - -
Granted 41,200 $33.75 1,390
Exercised (24,610) $29.91-$33.75 (774)
- --------------------------------------------------------------------------------
Outstanding,
December 31, 1995 114,515 $24.25-$33.75 $3,563
================================================================================
</TABLE>
At December 31, 1995, options outstanding under all plans were
exercisable for 1,034,925 shares, at prices ranging from $24.25 to $37.25 per
share, and options for 1,730,730 shares were available for grant. Options
outstanding expire at various dates from April 1996 through April 2004.
Proceeds from the exercise of options are credited to common stock to
the extent of par value, and the remainder is credited to capital surplus except
that, when treasury stock is issued, the treasury stock account is reduced by
the average cost of the treasury stock, and any difference between such cost and
the exercise price is charged or credited to capital surplus. Related income tax
benefits which accrue to Chris-Craft are credited to capital surplus.
Chris-Craft expects to adopt Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," in 1996 and intends to
retain the intrinsic value method of accounting for stock-based compensation
which it currently uses.
NOTE 8
- --------------------------------------------------------------------------------
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.
Pension expense, including amounts accrued in Chris-Craft and UTV
nonqualified plans for retirement benefits in excess of statutory limitations,
was as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 3,259 $2,380 $ 2,358
Interest cost on projected
benefits obligation 2,480 2,052 1,861
Actual return on plan assets (4,185) (537) (1,516)
Amortization of deferred items 2,762 (951) 250
- -------------------------------------------------------------------------------
$ 4,316 $2,944 $ 2,953
===============================================================================
</TABLE>
The estimated funded status of the Chris-Craft and UTV plans, including
amounts accrued in the nonqualified plans, was as follows:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(26,210) $(23,261)
Nonvested benefit obligation (1,932) (1,558)
- -------------------------------------------------------------------------------
Accumulated benefit obligation (28,142) (24,819)
Effect of projected compensation increases (11,513) (7,655)
- -------------------------------------------------------------------------------
Projected benefit obligation (39,655) (32,474)
Fair value of plan assets (primarily listed
securities and temporary investments) 24,366 19,774
- -------------------------------------------------------------------------------
Excess (15,289) (12,700)
Unrecognized net asset at date of initial
application of SFAS No. 87, being amortized
over 15 years (234) (283)
Unrecognized net loss from past experience,
being amortized over 15 years 2,090 2,637
- -------------------------------------------------------------------------------
Pension liability $(13,433) $(10,346)
===============================================================================
Assumptions used in accounting for pension plans for each year presented are
as follows:
- -------------------------------------------------------------------------------
Discount rate at end of year 7.25%
Rate of increase in future compensation levels 4.50%
Expected long-term rate of return on assets 7.75%
</TABLE>
13
<PAGE> 14
Chris-Craft and certain of its subsidiaries maintain other retirement
plans, primarily stock purchase and profit sharing plans. The aggregate costs of
such plans, including related amounts accrued in the nonqualified plans referred
to above, were $11,670,000 in 1995, $5,707,000 in 1994 and $8,395,000 in 1993.
Note 9
- --------------------------------------------------------------------------------
Income Taxes:
Effective January 1, 1993, Chris-Craft 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:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current (including effect
of adoption in 1993):
Federal $ 23,300 $ 49,300 $131,167
State (14,000) (8,400) 16,475
- --------------------------------------------------------------------------------
9,300 40,900 147,642
Deferred:
Federal 7,300 14,800 (2,467)
State 1,000 1,600 2,025
- --------------------------------------------------------------------------------
8,300 16,400 (442)
- --------------------------------------------------------------------------------
$ 17,600 $ 57,300 $147,200
================================================================================
</TABLE>
Following the favorable resolution of routine audits in each year, state
income taxes in 1995 and 1994 reflect $20,000,000 reversals of amounts accrued
in 1989 and 1990.
Differences between income taxes at the federal statutory income tax rate
and total income taxes provided are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes at federal statutory rate $22,847 $57,324 $134,615
State income taxes, net (8,418) (4,429) 12,017
Amortization of intangible assets 3,151 3,151 3,198
Dividend from BHC 1,260 - -
Dividend exclusion (764) (447) (3,984)
Enacted rate change
(to 35% from 34%) - - (1,241)
Other (476) 1,701 2,595
- --------------------------------------------------------------------------------
$17,600 $57,300 $147,200
================================================================================
</TABLE>
Deferred tax assets and deferred tax liabilities reflect the tax effect of
the following differences between financial statement carrying amounts and tax
bases of assets and liabilities:
<TABLE>
<CAPTION>
December 31,
(In thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accrued liabilities not deductible until paid $ 20,668 $27,562
Investments 9,415 7,125
Film contract rights 3,974 6,870
Tax credit and operating loss carry forwards 5,601 5,822
SFAS 115 adjustment - 10,109
Other 952 745
- --------------------------------------------------------------------------------
40,610 58,233
Valuation allowance (9,114) (9,381)
- --------------------------------------------------------------------------------
Deferred tax assets, net 31,496 48,852
- --------------------------------------------------------------------------------
Property and equipment (3,147) (3,876)
SFAS 115 adjustment (9,252) -
Other (823) (653)
- -------------------------------------------------------------------------------
Deferred tax liabilities (13,222) (4,529)
- -------------------------------------------------------------------------------
Net deferred tax assets $ 18,274 $44,323
===============================================================================
</TABLE>
The Valuation allowance reflects the inability to predict the realization of
future tax benefits relating to tax credit carryforwards and future
dispositions of certain investments having tax bases greater than related
financial statement carrying amounts.
At December 31, 1995, net operating loss carryforwards in the amount of
$6,675,000 are available for tax purposes and expire in various years through
2010.
Tax benefits of $222,000, $2,514,000 and $3,402,000 arising from the
exercise of employee stock options were credited to capital surplus in 1995,
1994 and 1993, respectively.
NOTE 10
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES:
The aggregate amount payable by Chris-Craft's television stations under
contracts for programming not currently available for telecasting and,
accordingly, not included in film contracts payable and the related contract
rights in the accompanying Consolidated Balance Sheets, totalled $166,200,000
at December 31, 1995 (including $40,400,000 applicable to UTV).
BHC is expected to make significant expenditures developing UPN.
See Note 2.
Montrose Chemical Corporation of California, whose stock is 50% owned by
Chris-Craft and 50% by a subsidiary of Zeneca Inc. (formerly ICI Americas,
Inc.), discontinued its manufacturing operations in 1983 and has since been
defending claims for costs and damages relating to environmental matters.
Chris-Craft has been named as a defendant in certain of these actions by
plaintiffs seeking to hold Chris-Craft liable for Montrose activities. After
insurance reimbursements totalling $1,001,000 in 1995,
14
<PAGE> 15
$1,022,000 in 1994 and $873,000 in 1993, Montrose-related net expenses
(recoveries) of $437,000 in 1995, $(280,000) in 1994 and $4,337,000 in 1993, are
included in the accompanying Consolidated Statements of Income under the caption
Interest and other income, net.
Montrose is one of numerous defendants in a suit relating to alleged
environmental impairment at the Stringfellow Hazardous Waste Disposal Site in
California, brought in 1983 by the Federal government and the State of
California, which claim Montrose generated approximately 19% of the waste placed
at the site. In 1990, the U.S. Environmental Protection Agency issued a Record
of Decision for the site, which selected some of the interim remedial measures
preferred by the EPA and the State, the present value of which was estimated by
them to be $169 million, although the estimate is subject to potential
variations of up to 50%. A ruling issued in 1993 by the Special Master in the
suit allocated at least 65% of the liability (under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA")) at the site to the State of California, and approximately 25% of the
liability to the generator defendants (including Montrose). In a separate ruling
under California law, the Special Master allocated 100% of the liability to the
State. The State is expected to appeal the decision. The U.S. Department of
Justice has sought and received information regarding the relationship between
Montrose and its two shareholders in an inquiry directed to the issue of whether
Chris-Craft, as a shareholder of Montrose, should be added as a party to the
Government's Stringfellow suit.
In June 1990, the Federal Government and the State of California
commenced an action against Montrose, Chris-Craft, and other defendants,
alleging that Montrose and others released hazardous substances into Los Angeles
Harbor and adjacent waters, and seeking to recover damages resulting from
alleged injury to natural resources. In 1994, the Federal and State governments
produced reports stating the alleged damages may range between $300 million and
approximately $1.1 billion. In March 1995, the District Court granted the
defendants' motion for summary judgment, ruling that the Government's claim for
natural resource damages was barred by the statute of limitations. The effect of
this ruling is to dismiss the natural resources damages claims, and the Court
also ruled that CERCLA would in any event limit the collective maximum liability
of Montrose, Chris-Craft, and the Zeneca-related defendants for natural resource
damages to $50 million. In January 1996, a U.S. Court of Appeals heard argument
on the Government's appeal of the District Court's rulings. The action also
seeks recovery for costs related to alleged hazardous substance contamination of
the Montrose plant site in Torrance, California. Since 1992, Montrose and
Chris-Craft were named defendants in two additional private party actions
brought by approximately 110 plaintiffs claiming over $7 million in damages for
alleged personal injuries and diminution in property value in an area near
Montrose's former Torrance plant. A third private party action alleging similar
claims relating to the former Torrance plant is pending against Montrose, but
Chris-Craft is not a defendant. Montrose is also a defendant in an action
brought in 1984 by private parties seeking damages in excess of $15 million,
which alleges that Montrose contributed to the contamination of certain property
in Richmond, California. Chris-Craft was added as a defendant in 1992. During
1990, Montrose and Chris-Craft were notified by the Federal Government of its
intention to name each of them as a defendant in an action seeking recovery for
alleged damage to natural resources emanating from the Richmond site, and in
1991 the EPA notified Chris-Craft it may seek to include Chris-Craft as one of
the parties responsible for remediation at this site.
In September 1994, the EPA designated Chris-Craft as a "potentially
responsible party" under CERCLA (a "PRP") in connection with the Diamond Alkali
Superfund Site on the Passaic River in Newark, New Jersey. The EPA alleges that
hazardous substances were released into the river from a facility operated by a
Chris-Craft predecessor company. The facility was located near the Diamond
Alkali property, but not on the river front, and was sold by Chris-Craft in
1972. Chris-Craft disputes that it is a responsible party. The former owner of
the Diamond Alkali property is currently performing a study estimated to cost
approximately $10 million to determine the extent of contamination in the area
and to evaluate possible corrective actions.
Chris-Craft intends vigorously to defend itself in Montrose-related
actions in which it is a defendant. In each case involving Montrose where
Chris-Craft has been named as a defendant, Chris-Craft contends that it is not
liable and that it neither owned nor operated the facilities involved, nor did
it arrange for the disposal of hazardous substances. Chris-Craft and its
predecessors were shareholders of Montrose and provided certain management
services to Montrose, as it conducted its operations. Based on the available
information, the status of the proceedings, and the applicable legal and
accounting standards, Chris-Craft, in reliance among other things on the advice
of counsel, believes that it should have no liability (under CERCLA or
otherwise) for the operations of Montrose and does not presently consider
liability to be "probable" in any of the Montrose-related cases. Accordingly,
under Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies", no amount has been reserved in the Company's financial
statements. The Diamond Alkali Superfund Site matter does not involve Montrose,
and based on the review to date by Chris-Craft and its counsel, they believe
Chris-Craft has been erroneously identified as a PRP at the site; Chris-Craft is
unable to determine at this stage if it could have any liability at the site.
15
<PAGE> 16
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
If a court ultimately rejected Chris-Craft's defenses, under CERCLA
Chris-Craft could be held jointly and severally liable, without regard to fault,
for response costs and natural resource damages. A party's ultimate liability at
a site generally depends on its involvement at the site, the nature and extent
of contamination, the remedy selected, the role of other parties in creating the
alleged contamination and the availability of contribution from those parties,
as well as any insurance or indemnification agreements which may apply. In most
cases, both the resolution of the complex issues involved and any necessary
remediation expenditures occur over a number of years. Future legal and
technical developments in each of the foregoing matters will be periodically
reviewed to determine if the accrual of reserves for possible liability would be
appropriate.
Chris-Craft is a party to various other pending legal proceedings
arising in the ordinary course of business. In the opinion of management, after
taking into account the opinion of counsel with respect thereto, the ultimate
resolution of these other matters will not have a material effect on
Chris-Craft's consolidated financial position or results of operations.
NOTE 11
- --------------------------------------------------------------------------------
SEGMENT REPORTING:
Industry segment data is set forth in the table on page 14.
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of and for the years ended December 31,
(In thousands of dollars except per share data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 472,081 $ 481,364 $ 439,733 $ 331,535 $ 283,835
====================================================================================================================================
Operating income (loss) $ 110,633 $ 107,832 $ 75,332 $ 16,805 $ (3,815)
Interest and other income, net 83,949 59,928 52,661 36,790 51,507
Equity in United Paramount Network loss (129,303) (3,977) - - -
Income associated with Time Warner securities - - 256,622 94,059 87,657
Interest expense - - - (2,283) (2,350)
Income taxes (17,600) (57,300) (147,200) (37,800) (34,300)
Minority interest (25,714) (41,742) (88,347) (42,421) (40,441)
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 21,965 $ 64,741 $ 149,068 $ 65,150 $ 58,258
====================================================================================================================================
Net income per share -
Primary $ .71 $ 2.10 $ 4.96 $ 2.18 $ 1.94
Fully diluted .56 1.63 3.76 1.64 1.47
Cash and current marketable securities 1,523,438 1,520,461 1,536,107 983,537 961,749
Working capital 1,531,416 1,532,579 1,502,671 899,640 939,664
Film contract rights 145,902 148,473 186,079 187,518 165,029
Noncurrent marketable securities - - - 450,022 732,740
Total assets 2,203,853 2,232,217 2,283,178 2,160,694 2,049,775
Long-term debt - - - - 15,625
Minority interest 560,326 584,202 615,615 565,206 630,047
Shareholders' investment $ 1,319,020 $ 1,306,218 $ 1,258,227 $ 1,111,747 $ 1,052,713
</TABLE>
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Chris-Craft's financial position is strong and highly liquid. Cash and
marketable securities totalled $1.5 billion at December 31, 1995, and
Chris-Craft has no debt outstanding. Chris-Craft's 74% owned television
broadcasting subsidiary, BHC Communications, Inc., is currently expending
significant funds to develop the United Paramount Network, but cash flow
provided from BHC's operating activities, $197.3 million in 1995, substantially
exceeded BHC's 1995 UPN funding of $128.6 million.
Chris-Craft's operating cash flow is generated primarily by the Television
Division's core television station group. Broadcast cash flow reflects station
operating income plus depreciation and film contract amortization less film
contract payments. The relationship between film contract payments and related
amortization may vary greatly between periods (payments exceeded amortization by
$1.7 million and $16.1 million, respectively, in 1995 and 1994), and is
dependent upon the mix of programs aired and payment terms of the stations'
contracts. Reflecting such $14.4 million variance between 1995 and 1994,
broadcast cash flow increased 10%, to $159.3 million from $144.7 million in
1994, while station earnings rose less than 1%. Although broadcast cash flow is
often used in the broadcast television industry as an ancillary measure, it is
not synonymous with operating cash flow computed in accordance with generally
accepted accounting principles, and should not be considered alone or as a
substitute for measures of performance computed in accordance with generally
accepted accounting principles.
Chris-Craft's cash flow additionally reflects earnings associated with
its cash and marketable securities, most of which are held by BHC. Cash and
marketable securities totalled $1.5 billion at December 31, 1995, virtually
unchanged from December 31, 1994. Consolidated operating cash flow of $196.7
million in 1995 was offset by BHC UPN funding of $128.6 million, Chris-Craft
treasury stock purchases of $20.0 million, treasury stock purchases by BHC and
UTV totalling $61.0 million and payment by BHC of the 1995 special dividend
described below.
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, and were again augmented in April 1995 upon the receipt of
$18 million in dividends from BHC, which paid a special cash dividend of $1.00
per share. BHC has no plan to pay regular dividends. 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 6,800,000 Class A common shares. Through December 31, 1995, 4,914,387
shares were purchased for a total cost of $296.5 million, including $31.3
million in 1995. From 1993 to 1995, UTV purchased 991,776 of its common shares
at an aggregate cost of $51.5 million. At December 31, 1995, 1,192,249 UTV
shares remained authorized for purchase.
Chris-Craft intends to expand its operations in the media, entertainment
and communications industries and to explore business opportunities in other
industries. Chris-Craft believes it is capable of raising significant
additional capital to augment its already substantial financial resources, if
desired, to fund such additional expansion.
In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group,
formed the United Paramount Network, a fifth broadcast television network which
premiered in January 1995. BHC currently owns 100% of UPN, and accounts for UPN
under the equity method, since 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. BHC expenditures related to UPN
totalled $128.6 million in 1995. UPN is still in its infancy, and the cost of
developing UPN is expected to remain significant for several years.
Chris-Craft's television stations make commitments for programming that
will not be available for telecasting until future dates. At December 31, 1995,
commitments for such programming totalled approximately $166.2 million,
including $40.4 million applicable to UTV. BHC also has a commitment to invest
over time up to $65 million, including $40 million applicable to UTV, in
management buyout limited partnerships. Chris-Craft capital expenditures
generally have not been material in relation to its financial position, and the
related capital expenditure commitments at December 31, 1995 (including any
related to UPN) were not material. Chris-Craft expects that 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 10, Chris-Craft has been named as a defendant (or a
"potentially responsible party") in certain actions seeking recovery for
environmental damage allegedly related to (i) the activities (discontinued since
1983) of 50% owned Montrose Chemical Corporation of California and (ii) the
activities of Montrose Chemical Co., a predecessor company to Chris-Craft. As
further set forth in Note 10, 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.
17
<PAGE> 18
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
1995 VERSUS 1994
Chris-Craft 1995 operating results reflect record station group earnings
and a substantial increase in interest income. However, as expected, start-up
losses at United Paramount Network lowered net income to $21,965,000, or $.71
per share, compared to $64,741,000, or $2.10 per share, in 1994. Net income
excluding UPN rose 21%, to $80,491,000, or $2.64 per share, from $66,536,000, or
$2.16 per share.
Television station earnings rose to $151,382,000, just above 1994's
record earnings of $150,647,000. A 6% reduction in station programming expenses
more than offset a 2% decline in station operating revenues. The decline in
full year station operating revenues, to $450,239,000 from $457,533,000 in 1994,
reflects disappointing softness in the 1995 fourth quarter television
advertising market, which contributed to a 14% decline in station operating
revenues in that period. While early 1996 demand for television advertising
time remains sluggish, the Olympic Games and political contests in 1996 should
have a positive impact on rates later in the year. Television Division
operating income rose 2% in 1995, to a record $127,149,000 from $124,552,000 in
1994, as the modest increase in station earnings was augmented by a $5.5 million
reduction in program development expense. Operating income would have risen
even further except for one-time expenses of approximately $3.7 million incurred
establishing a national sales representative subsidiary, United Television
Sales, Inc.
Industrial Division operating results improved in 1995 following the
discontinuance of operations at its unprofitable fiber products plant. While
the elimination of that business resulted in a decline in 1995 Industrial
Division operating revenues, to $17,379,000 from $23,831,000 in 1994, revenues
of the Division's continuing businesses increased 10% in 1995. Industrial
Division operating income totalled $1,960,000 in 1995, reversing 1994's
operating loss of $3,557,000. The Division's continuing businesses recorded
operating income of $1,569,000 in 1994.
After Chris-Craft corporate office expense, which increased in 1995,
primarily due to a $4.9 million rise in retirement plan expense resulting from
the 1995 increase in the market value of Chris-Craft common stock, consolidated
operating income rose to a record $110,633,000 from $107,832,000 in 1994.
Interest and other income, net increased to $83,949,000 in 1995 from
$59,928,000 in 1994, primarily reflecting higher interest rates earned on
Chris-Craft's money market portfolio.
UPN incurred start-up losses of $129,303,000 in 1995, about as expected,
compared to the network's 1994 pre-launch loss of $3,977,000. UPN results are
reflected in Chris-Craft's consolidated financial statements under the equity
method. UPN is expected to incur substantial start-up losses for several more
years.
Income tax provisions for 1995 and 1994 are net of $20,000,000 reversals
by BHC of state income taxes accrued in 1989 and 1990, following the favorable
resolution in each year of routine audits. Excluding the effect of such
reversals, Chris-Craft's effective income tax rate would have been 47% in 1995
and 43% in 1994, compared with the respective actual rates of 27% and 35%.
Minority interest reflects the interest of shareholders other than
Chris-Craft in the net income of BHC, 74% owned by Chris-Craft at December 31,
1995 and 73% owned at December 31, 1994, and the interest of shareholders other
than BHC in the net income of UTV, 57% owned by BHC at December 31, 1995 and 55%
owned at December 31, 1994.
RESULTS OF OPERATIONS
1994 VERSUS 1993
Chris-Craft's television station business achieved record operating
results in 1994. The substantial increase in Television Division earnings,
together with a reversal of previously accrued income taxes, brought 1994 net
income to $64,741,000 or $2.10 per share, 54% greater than 1993 income of
$42,101,000, or $1.39 per share, excluding income associated with BHC's former
holdings of Time Warner securities. Net income in 1993, including Time Warner
income, was $149,068,000, or $4.96 per share.
A strong national economy and heavy political spending fueled demand for
television advertising in 1994. The Television Division's station group posted a
strong 11% increase in operating revenues, to a record $457,533,000 from
$411,999,000 in 1993. After a 2% decline in programming expenses, television
station earnings increased 44%, easily surpassing 1993's record. Television
Division operating income in 1994 rose 42% to a record $124,552,000 from 1993's
$87,811,000, even after increases of approximately $9,000,000 in other operating
expenses, primarily program development expense.
Consolidated operating income, which additionally reflects Industrial
Division results and Chris-Craft corporate office expense, increased 43%, to an
all-time high of $107,832,000 from $75,332,000 in 1993. The Industrial Division
incurred a $3,557,000 operating loss, compared to operating income of $602,000
in 1993. Industrial Division 1994 results reflect a $3,500,000 provision for
discontinuing a product line, and related losses incurred before the
discontinuance.
Interest and other income, excluding amounts associated with Time Warner
securities, rose to $59,928,000 from $52,661,000 in 1993. A significant increase
in interest income, reflecting the placement of Time Warner proceeds in money
market instruments, was partially offset by 1993 marketable securities gains.
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