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
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-8411
UNITED TELEVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-0778377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
132 S. Rodeo Drive, Fourth Floor
Beverly Hills, California 90212
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 281-4844
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 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 28, 1997, was approximately $323,198,000.
As of February 28, 1997, there were 9,374,288 shares of the registrant's
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 II
report to stockholders for the fiscal year
ended December 31, 1996 (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 1997 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
United Television, Inc. ("UTV"), the registrant, was organized in 1956
under the laws of the State of Delaware. UTV is the majority owned (58.8% at
February 28, 1997) subsidiary of BHC Communications, Inc. ("BHC"), which is a
majority owned (76.1% at February 28, 1997) subsidiary of Chris-Craft
Industries, Inc. ("Chris-Craft"). UTV operates five of BHC's eight tele-
vision stations that comprise Chris-Craft's Television Division.
At February 28, 1997, UTV had 557 full-time employees and 84 part-time
employees.
Television Broadcasting
UTV operates three very high frequency ("VHF") television stations and
two ultra high frequency ("UHF") television stations. 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 house-
holds 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"),
United Paramount Network ("UPN"), and The WB Network ("WB")), which provide
substantially fewer hours of programming; or may be independent.
The following table sets forth certain information with respect to UTV
stations and their respective markets:
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<TABLE>
<CAPTION>
Total DMA
Network Commercial Cable
Affili- DMA TV Stations TV
Station and ation/ House- DMA Operating in Penetra-
Location(a) Channel Holds(b) Rank(b) Market(c) tion(d)
- ------------ ------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
KMSP
Minneapolis/
St. Paul UPN 9 1,428,100 14th 4VHF 51%
3UHF
KTVX
Salt Lake City ABC 4 670,650 36th 4VHF 56%
2UHF
KMOL
San Antonio NBC 4 641,740 38th 3VHF 65%
3UHF
KBHK
San Francisco UPN 44 2,278,480 5th 4VHF 71%
10UHF
KUTP
Phoenix UPN 45 1,212,850 17th 4VHF 57%
4UHF
_______________
(a) Designated Market Area ("DMA") is an exclusive geographic area consisting
of all counties in which the home-market commercial stations received a
preponderance of total viewing hours. The ranking shown is the nationwide
rank, in terms of television households in DMA, of the market served by
the station. Source: Nielsen Media Research television households
universe estimates.
(b) 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.
(c) Cable penetration refers to the percentage of DMA television viewing
households receiving cable television service, as estimated by Nielsen
Media Research.
</TABLE>
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 and cable television channels 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.
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Within a DMA, the advertising rates charged by competing stations depend
primarily on four factors: the stations' program ratings, the time of day the
advertising will run, the demographic qualities of a program's viewers
(primarily age and sex), and the amount of each station's inventory. Ratings
data for television markets are measured by A.C. Nielsen Company ("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 tele-
vision 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 television 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 sta-
tions, since the major networks use almost all of their affiliates' prime time
inventory for network programming. 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 sta-
tion, 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 are being reduced further
as the other newer networks provide 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.
Programming
UTV's UPN stations depend heavily on independent third parties for
programming, as do KTVX and KMOL for their non-network broadcasts. Recognizing
the need to have a more direct influence on the quality of programming avail-
able to its stations, and desiring to participate in potential profits through
national syndication of programming, UTV has begun to invest directly in the
development of original programming. The aggregate amount invested in
original programming through December 31, 1996 was not significant to UTV's
financial position. UTV 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.
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.
Programs obtained from independent sources consist principally of syndi-
cated television shows, many of which have been shown previously on a major
network, and syndicated feature films, which were either made for network
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
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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 adver-
tising time during the broadcast. The cash price of such programming 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 there-
fore, with less inventory.
In recent years, the amount of barter and cash plus barter programming
broadcast both industry-wide and by UTV stations has increased substantially.
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 tele-
vision stations and broadcasting networks for sales of air time. UTV
believes that the effect of barter on its television stations is not signifi-
cantly different from its impact on the industry as a whole.
UTV television stations are frequently required to make substantial finan-
cial commitments to obtain syndicated programming while such programming is
still being broadcast by another network and before it is available for broad-
cast by UTV stations or even before it has been produced. Generally, syndi-
cation 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
assurance that a successful network program will continue to be successful
or profitable when broadcast after initial network airing.
Pursuant to generally accepted accounting principles, commitments for pro-
gramming 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. UTV television stations had unamortized
film contract rights for programming available for telecasting and deposits
on film contracts for programming not available for telecasting aggregating
$25,736,000 as of December 31, 1996. The stations were committed for film and
sports rights contracts aggregating $59,002,000 for programming not available
for broadcasting as of that date. 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(E), 3 and 9 of Notes to Consolidated Financial Statements.
KTVX and KMOL are primary affiliates of their respective networks. Net-
work 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 agreements for
terms as long as ten years. UTV has entered into a 10-year affiliation
agreement for KTVX. 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 broadcast by
the affiliate, the major networks generally have paid their affiliates a fee,
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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.
Sources of Revenue
The principal source of revenues for UTV stations is the sale of adver-
tising time to national and local advertisers. Such time sales are repre-
sented by spot announcements purchased to run between programs and program
segments and by program sponsorship. The relative contributions of national
and local advertising to UTV's gross cash advertising revenues vary from time
to time. During the year ended December 31, 1996, national advertising contrib-
uted 48%, and local advertising contributed 52%, of total gross cash adver-
tising revenues. Most advertising contracts are short-term. Like that of the
television broadcasting business generally, UTV's television business is sea-
sonal. In terms of revenues, generally the fourth quarter is strongest, fol-
lowed by the second, third and first.
Advertising is generally placed with UTV 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 UTV and BHC stations.
Practices with respect to sale of advertising time do not differ markedly
between UTV'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 deter-
mine 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. UTV television
stations are subject to a wide range of technical, reporting and operational
requirements imposed by the Communications Act or by FCC rules and policies.
The Communications Act was recently and substantially amended by the Tele-
communications Act of 1996 (the "Telecom Act"), some provisions of which have
been incorporated into the FCC's rules and regulations during the past year,
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,
television licenses have usually been renewed for additional terms without a
hearing by the FCC. An existing license automatically continues in effect once
a timely renewal application has been filed until a final FCC decision is
issued.
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KMSP UPN 9'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 UPN 45's license renewal
was granted on March 28, 1994, and is due to expire on October 1, 1998. KBHK
UPN 44's license renewal was granted on October 2, 1995, and is due to expire
on December 1, 1998. KMOL's license renewal was granted on August 18, 1995,
and is due to expire on August 1, 1998.
Under existing FCC regulations governing multiple ownership of broadcast
stations, a license to operate a television station generally will not be
granted to any party (or parties under common control), if such party directly
or indirectly owns, operates, controls or has an attributable interest in
another television or radio station serving the same market or area. The FCC,
however, is favorably disposed to grant waivers of this rule for radio station-
television station 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
directs the FCC to extend this waiver policy to the top 50 markets, con-
sistent 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. FCC rules deem 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 television stations capable of reaching, in the aggregate, a
maximum of 35% of the national audience. This percentage is determined by
the DMA market rankings of the percentage of the nation's television house-
holds considered within each market. Because of certain limitations of the
UHF signal, however, the FCC will attribute only 50% of a market's DMA reach
to owners of UHF stations for the purpose of calculating the audience reach
limits. Applying the 50% reach attribution rule to UHF stations KBHK UPN
44 and KUTP UPN 45, the eight BHC stations are deemed to reach approximately
18% of the nation's television households. The FCC is 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 stations exceeding the maximum audience
reach or more than one station that serves the same area. In the case of
a corporation controlling or operating television stations, such as UTV,
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. UTV
cannot predict the outcome of the FCC proceedings.
FCC regulations currently prevent a national sales representative organi-
zation, 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. UTV is
unable to predict the outcome of these proceedings.
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.
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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 announced establishment of a voluntary rating
system in January 1997. The Telecom Act also directs the FCC to adopt regu-
lations requiring increased closed-captioning of video programming 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 tele-
vision 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.
FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") require each television broad-
caster to elect, at three-year intervals beginning June 17, 1993, either to (i)
require carriage of its signal by cable systems in the station's market ("must-
carry") or (ii) negotiate the terms on which such broadcast station would
permit transmission of its signal by the cable systems within its market
("retransmission consent"). In a 2-1 decision issued on December 13, 1995, a
special three-judge panel of the U.S. District Court for the District of
Columbia upheld the constitutionality of the must-carry provisions. The
District Court's decision has been appealed to the U.S. Supreme Court, which
has heard the appeal and is expected to issue a decision prior to June 30,
1997. In the meantime, the FCC's must-carry regulations implementing the 1992
Cable Act remain in effect. UTV cannot predict the outcome of the Supreme
Court review of the case.
On August 8, 1996, under the Children's Television Act of 1990 (the
"CTA"), the FCC amended its rules to establish a "processing guideline" for
broadcast television stations, of at least three hours per week, averaged over
a six-month period, of "programming that furthers the educational and inform-
ational needs of children 16 and under in any respect, including the child's
intellectual/cognitive or social/emotional needs." Children's "Core
Programming" has been defined as educational and informational programming
that, among other things (i) has serving the educational and informational
needs of children "as a significant purpose," (ii) has a specified educa-
tional and informational objective and a specified target child audience,
(iii) is regularly scheduled, weekly programming, (iv) is at least 30 minutes
in length, and (v) airs between 7:00 a.m. and 10:00 p.m. Any station that
satisfied the processing guideline by broadcasting at least three weekly
hours of Core Programming will receive FCC staff-level approval of the
portion of its license renewal application pertaining to the CTA. Alterna-
tively, a station may qualify for staff-level approval even if it broadcasts
"somewhat less" than three hours per week of Core Programming by demon-
strating that it has aired a weekly package of different types of educational
and informational programming that is "at least equivalent" to three hours of
Core Programming. Non-Core Programming that can qualify under this alterna-
tive includes specials, public service announcements, short-form programs
and regularly scheduled non-weekly programs, with "a significant purpose of
educating and informing children." A licensee that does not meet the pro-
cessing guidelines under either of these alternatives will be referred by
the FCC's staff to the Commissioners of the FCC, who will evaluate the licen-
see's compliance with the CTA on the basis of both its programming and its
other efforts related to children's educational and informational programming,
e.g., its sponsorship of Core Programming on other stations in the market, or
nonbroadcast activities "which enhance the value" of such programming. A
television station ultimately found not to have complied with the CTA could
face sanctions including monetary fines and the possible non-renewal of its
broadcast license.
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The FCC is conducting a rulemaking proceeding to devise a table of channel
allotments in connection with the introduction of digital television service
("DTV"). The FCC has preliminarily decided to assign a second broadcast
channel to each full-power commercial television station for DTV operation.
According to this preliminary decision, stations would be permitted to phase in
their DTV operations over a period of several years following adoption of a
final table of allotments, after which they would be required to surrender
their non-DTV channels. Meanwhile, Congress is considering proposals that
would require incumbent broadcasters to bid at auctions for the additional
spectrum required to effect a transition to DTV, or, alternatively, would
assign additional DTV spectrum to incumbent broadcasters and require the
early surrender of this non-DTV channel for sale by public auction. UTV
cannot predict if, or when, any of these proposals will be adopted or the
effect, if any, adoption of such proposals would have on UTV.
The FCC currently is reviewing certain of its rules governing the rela-
tionship between broadcast television networks, including UPN, and their
affiliated stations. In a rulemaking proceeding, the FCC is examining its
rules prohibiting broadcast television networks from representing their
affiliated stations for the sale of non-network advertising time and from
influencing or controlling the rates set by their affiliates for the sale of
such time. Separately, the FCC is conducting a rulemaking proceeding to
consider the relaxing or elimination of its rules prohibiting broadcast
networks from (i) restricting their affiliates' rights to reject network
programming, (ii) reserving an option to use specified amounts of their
affiliates' broadcast time, and (iii) forbidding their affiliates from
broadcasting the programming of another network; and to consider the relax-
ation of its rule prohibiting network affiliated stations from preventing
other stations from broadcasting the programming of their network.
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. UTV believes the ownership by aliens
of its stock 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 UTV stations, currently ranging as high as $19,925 per station.
The foregoing does not purport to be a complete summary of all the pro-
visions of the Communications Act or regulations and policies of the FCC there-
under. 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 Commis-
sion, also impose a variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional or revised
requirements are considered by the FCC, other Federal agencies or Congress
from time to time. UTV 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 UTV television stations.
Competition
UTV 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, technical
factors and television network affiliations are important in determining
competitive position. Competitive success of a television station depends
primarily on public response to the 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 other programs.
There are at least five other commercial television stations in each
market served by a UTV station. UTV believes that, in Minneapolis/St. Paul,
KMSP UPN 9 generally attracts a smaller viewing audience than the three major
network-affiliated VHF 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 television 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 commercial television stations in San
Francisco, KBHK UPN 44 generally ranks fifth in terms of audience share,
behind the three major network-affiliated VHF television stations, and the VHF
Fox affiliate. KUTP UPN 45 generally ranks sixth in terms of audience share,
of the eight commercial stations in the Phoenix market.
UTV stations may face increased competition in the future from additional
television stations that may enter their respective markets. See note (b) to
the table under Television Broadcasting.
Cable television has become a major competitor of television broadcasting
stations. Because cable television systems operate in each market served by a
UTV 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 or service tier position on the cable system
may adversely affect the station's audience ratings and, in some circumstances,
a television set's ability to receive the station being carried on an
unfavorable channel position. Some cable system operators may be inclined to
place broadcast stations in unfavorable channel locations. Similar competi-
tive effects may be expected from video delivery systems offered by local
telephone companies, as permitted by the provisions of the Telecom Act.
While Federal law has until recently generally prohibited local telephone
companies from providing video programming to subscribers in their service
areas, this prohibition has been substantially eliminated by the Telecom Act.
The FCC has also recently adopted 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. UTV
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 exclusive 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. UTV believes that the competitive position of UTV
stations would likely be enhanced by an expansion of broadcasters' permitted
zones of exclusivity.
Alternative technologies could increase competition in the areas served
by UTV stations and, consequently, could adversely affect their profitability.
Five direct broadcast satellite ("DBS") systems currently provide service, and
others are expected to begin service during the next two years. The number of
subscribers to DBS services increased substantially during the past two years,
from approximately 600,000 at the end of 1994, to approximately 4.3 million at
the end of 1996. 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. 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
11
<PAGE>
most television markets. MDS operation can provide commercial programming on
a paid basis. A similar service can also be offered using the instructional
television fixed service ("ITFS"). The FCC now allows the educational entities
that hold ITFS licenses to lease their "excess" capacity for commercial pur-
poses. 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.
Technological developments in television transmission have created the
possibility that one or more of the broadcast and nonbroadcast television
media will provide enhanced or "high definition" pictures and sound to the
public of a quality that is technically superior to that of the pictures and
sound currently available. It is not yet clear when and to what extent
technology of this kind will be available to the various television media;
whether and how television broadcast stations will be able to avail themselves
of these improvements; whether all television broadcast stations will be
afforded sufficient spectrum to do so; what channels will be assigned to each
of them to permit them to do so; whether viewing audiences will make choices
among services upon the basis of such differences; or, if they would, whether
significant additional expense would be required for television stations to
provide such services. Many segments of the television industry are
intensively studying digital television technology. A proceeding is under way
at the FCC regarding digital television service policies, including "high
definition" television service. The Telecom Act, as well as proposed federal
legislation, addresses several of these issues. UTV is unable to
predict the outcome of these developments.
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 compres-
sion by cable systems that would significantly increase the number and
availability of cable program services with which UTV 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 UTV.
ITEM 2. PROPERTIES.
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 approxi-
mately 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.
12
<PAGE>
KBHK's transmitter is located on Mt. Sutro, as part of the Sutro Tower
complex, which also houses equipment for other San Francisco television
stations and many of its FM radio stations. The lease for the Mt. Sutro
facilities expires in February 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
stations in Phoenix as well as facilities for several FM radio stations. The
license for this space expires in 2012.
UTV believes its properties are adequate for their present uses.
ITEM 3. LEGAL PROCEEDINGS.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of UTV, as of February 28, 1997, are as follows:
Has served
Positions with UTV; principal occupation; as officer
Name and age as of February 28, 1997 since
---- ----------------------------------------- ----------
John C. Siegel Chairman of UTV and President, UTV of 1983
San Francisco, Inc., which owns KBHK;
Senior Vice President, Chris-Craft; 44
Evan C Thompson President and Chief Executive Officer;
Executive Vice President and President,
Television Division, Chris-Craft; 54 1983
Laurey J. Barnett Vice President and Director of 1987
Programming; 37
Garth S. Lindsey Executive Vice President, Chief Financial 1977
Officer and Secretary; 52
Thomas L. Muir Treasurer and Controller; 48 1981
Chris-Craft, through its majority ownership of BHC, is principally engaged
in television broadcasting. The principal occupation of each of the individ-
uals for the past five years is stated in the foregoing table.
All officers hold office until the meeting of the Board following the next
annual meeting of stockholders or until removed by the Board.
13
<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.
14
<PAGE>
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 -- Section 16(a) Beneficial Ownership Compliance is incorporated
herein by this reference. Information relating to UTV'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.
15
<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 schedule and report of independent accountants thereon,
listed in the Index to Consolidated Financial Statements and
Schedules.
3. Exhibits listed in the Exhibit Index, including the compensa-
tory plans listed below:
* Benefit Equalization Plan
* 1988 Stock Option Plan
(b) No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
16
<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 28, 1997
UNITED TELEVISION, INC.
(Registrant)
By: EVAN C THOMPSON
Evan C Thompson
President and Chief Executive Officer
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
JOHN C. SIEGEL March 28, 1997
John C. Siegel
Chairman and Director
EVAN C THOMPSON March 28, 1997
Evan C Thompson
President, Chief Executive
Officer and Director
(principal executive
officer)
GARTH S. LINDSEY March 28, 1997
Garth S. Lindsey
Executive Vice President,
Chief Financial Officer
and Secretary (principal
financial and accounting
officer)
LAWRENCE R. BARNETT March 28, 1997
Lawrence R. Barnett
Vice Chairman and Director
17
<PAGE>
JOHN L. EASTMAN March 28, 1997
John L. Eastman
Director
JAMES D. HODGSON March 28, 1997
James D. Hodgson
Director
NORMAN PERLMUTTER March 28, 1997
Norman Perlmutter
Director
ABRAHAM A. RIBICOFF March 28, 1997
Abraham A. Ribicoff
Director
HOWARD F. ROYCROFT March 28, 1997
Howard F. Roycroft
Director
ROCCO C. SICILIANO March 28, 1997
Rocco C. Siciliano
Director
HERBERT J. SIEGEL March 28, 1997
Herbert J. Siegel
Director
12
<PAGE>
UNITED TELEVISION, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - For the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - For the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Investment - For
the Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
SCHEDULES:
Report of Independent Accountants on Financial Statement Schedule
II. Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted since the
information is not applicable, not required, or is included in the respective
financial statements or notes thereto.
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
United Television, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 11, 1997 appearing on page 19 of the 1996 Annual Report to
Shareholders of United Television, Inc. (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, the Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
Century City, California
February 11, 1997
20
<PAGE>
Schedule II
UNITED TELEVISION, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
----------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End of
Description of Period Expenses Accounts Deductions Period
- ----------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
December 31,
1996:
Allowance for
doubtful
accounts $ 1,690 $ 272 $ --- $ (301)(a) $ 1,661
===== === === ===== =====
Year ended
December 31,
1995:
Allowance for
doubtful
accounts $ 1,994 $ 232 $ --- $ (536)(a) $ 1,690
===== === === ===== =====
Year ended
December 31,
1994:
Allowance for
doubtful
accounts $ 1,998 $ 275 $ --- $ (279)(a) $ 1,994
===== === === ===== =====
</TABLE>
(a) Accounts written off, net of recoveries.
21
<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
* 3.2 Restated By-Laws
Exhibit A to registrant's 10.1 1988 Stock Option Plan
Proxy Statement dated
March 23, 1988 (File
No. 0-9786)
Exhibit 10(a)(1) [7] 10.2 Amendment No. 1 thereto
Exhibit 10(i) [3] 10.3 Employment Agreement, dated
January 1, 1981, between
registrant and Garth S. Lindsey,
as amended
Exhibit 10(m) [3] 10.4 Employment Agreement, dated
January 1, 1981, between
registrant and Thomas L. Muir,
as amended
Exhibit 10(t) [4] 10.5 Note dated as of January 6, 1984
in the original principal amount
of $200,000 from Garth S.
Lindsey, as maker, to registrant,
as payee
Exhibit 10(n)(2) [5] 10.6 Revision and Extension Agreement
dated as of December 19, 1988
from Garth S. Lindsey, as maker,
to registrant, as payee
Exhibit 10(u) [4] 10.7 Note dated as of January 25, 1984
in the original principal amount
of $100,000 from Thomas L. Muir,
as maker, to registrant, as payee
Exhibit 10(o)(2) [5] 10.8 Revision and Extension Agreement
dated as of December 20, 1988
from Thomas L. Muir, as maker, to
registrant, as payee
Exhibit 10(s) [6] 10.9 Benefit Equalization Plan of
registrant
22
<PAGE>
10.10 UTV and BHC have entered into
a state tax sharing agreement,
relating to joint tax liabilities
for state income taxes due re-
specting tax returns filed on
a combined basis, pursuant to
which UTV's total payments to
a taxing authority or BHC will
will be equal to the tax UTV
would have paid had it filed
as a stand-alone entity.
* 13 Portions of the Annual Report
incorporated by reference
* 21 Subsidiaries of 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, 1987.
[2] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1984.
[3] Registrant's Annual Report on Form 10-K for the year ended
December 27, 1981.
[4] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1983.
[5] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.
[6] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989.
[7] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.
23
</TABLE>
Restated as of November 14, 1996
RESTATED BY-LAWS
OF
UNITED TELEVISION, INC.
(A Delaware Corporation)
---------------------------------
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise
requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary
of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer
of the Corporation.
1.3 "Board means the Board of Directors of the
Corporation.
1.4 "By-laws" means these Restated By-laws of the
Corporation, as restated and in effect on the Effective Date
and as amended from time to time thereafter.
1.5 "Certificate of Incorporation" means the restated
certificate of incorporation of the Corporation, as amended,
supplemented or restated from time to time.
1.6 "Chairman" means the Chairman of the Board of the
Corporation.
1.7 "Corporation" means UNITED TELEVISION, INC.
1.8 "Directors" means directors of the Corporation.
1.9 "Effective Date" means the date on which the out-
standing shares of capital stock of the Corporation become
payable to the holders of record of shares of capital stock
of Twentieth Century Fox Film Corporation, on which date
such holders shall become the holders of record of the out-
standing shares of the Corporation's capital stock.
1.10 "General Corporation Law" means the General
Corporation Law of the State of Delaware, as amended from
time to time.
<PAGE>
1.11 "Office of the Corporation" means the executive
office of the Corporation, anything in Section 131 of the
General Corporation Law to the contrary notwithstanding.
1.12 "President" means the President of the
Corporation.
1.13 "Secretary" means the Secretary of the
Corporation.
1.14 "Stockholders" means stockholders of the
Corporation.
1.15 "Total number of directors" means the total number
of directors determined in accordance with Section 141(b) of
the General Corporation Law and Section 3.2 of the By-laws.
1.16 "Treasurer" means the Treasurer of the
Corporation.
1.17 "Vice President" means a Vice President of the
Corporation.
1.18 "Whole Board" means the total number of directors
of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of stockholders
shall be held at the office of the Corporation or at such
other place within or without the State of Delaware as shall
be specified or fixed in the notice of such meeting or in
the waiver of notice thereof.
2.2 Annual Meeting. A meeting of stockholders shall be
held annually for the election of directors and the
transaction of other business at such hour and on such bus-
iness day in March, April, or May as may be determined by
the Board and designated in the notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc.
If the annual meeting of stockholders for the election of
directors and the transaction of other business is not held
within the months specified in Section 2.2, the Board shall
call a meeting of stockholders for the election of directors
and the transaction of other business as soon thereafter as
convenient.
2.4 Other Special Meetings. A special meeting of
stockholders (other than a deferred meeting for the election
of directors pursuant to Section 2.3), unless otherwise
2
<PAGE>
prescribed by statute, may be called at any time by the
Chairman or by the President and shall be called by the
Secretary on the written request of (a) the holder or hold-
ers of record of 20% or more of the shares of stock entitled
generally to vote for the election of directors of the
Corporation or (b) any two directors, which written request
shall state the purpose or purposes of such meeting. At any
special meeting of stockholders only such business may be
transacted as is related to the purpose or purposes of such
meeting set forth in the notice thereof given pursuant to
Section 2.6 of the By-laws or in any waiver of notice
thereof given pursuant to Section 2.7 of the By-laws.
2.5 Fixing Record Date. For the purpose of determining
the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a
meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other dis-
tribution or allotment of any rights, or entitled to exer-
cise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful
action, the Board may fix, in advance, a date as the record
date for any such determination of stockholders. Such date
shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to
any other action. If no such record date is fixed:
2.5.1 The record date for determining stock-
holders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on
the day next preceding the day on which notice is giv-
en, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting
is held;
2.5.2 The record date for determining
stockholders entitled to express consent to corporate
action in writing without a meeting when no prior
action by the Board is necessary, shall be the day on
which the first written consent is expressed;
2.5.3 The record date for determining stock-
holders for any purpose other than those specified in
Sections 2.5.1 and 2.5.2 shall be at the close of bus-
iness on the day on which the Board adopts the resolu-
tions relating thereto.
When a determination of stockholders entitled to notice of
or to vote at any meeting of stockholders has been made as
provided in this Section 2.5, such determination shall apply
3
<PAGE>
to any adjournment thereof, unless the Board fixes a new
record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as
otherwise provided in Sections 2.5 and 2.7 of the By-laws,
whenever under the General Corporation Law or the Certifi-
cate of Incorporation or the By-laws, stockholders are re-
quired or permitted to take any action at a meeting, written
notice shall be given stating the place, date and hour of
the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. A copy
of the notice of any meeting shall be given, personally or
by mail, not less than ten nor more than sixty days before
the date of the meeting, to each stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the United
States mail, with postage prepaid, directed to the
stockholder at his address as it appears on the records of
the Corporation. An affidavit of the Secretary or an
Assistant Secretary or of an authorized employee of the
transfer agent of the Corporation that the notice required
by this section has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any bus-
iness may be transacted that might have been transacted at
the meeting as originally called. If, however, the ad-
journment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever notice is required to
be given to any stockholder under any provision of the
General Corporation Law or the Certificate of Incorporation
or the By-laws, a written waiver thereof, signed by the
stockholder entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
Attendance of a stockholder at a meeting shall constitute a
waiver of notice of such meeting, except when the stock-
holder attends a meeting for the express purpose of object-
ing, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of
notice.
2.8 List of Stockholders. The Secretary shall prepare
and make, or cause to be prepared and made, at least ten
4
<PAGE>
days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.
2.9 Quorum of Stockholders; Adjournment. The holders
of a majority of the shares of stock entitled to vote at any
meeting of stockholders, present in person or represented by
proxy, shall constitute a quorum for the transaction of any
business at such meeting. When a quorum is once present to
organize a meeting of stockholders, it is not broken by the
subsequent withdrawal of any stockholders. The holders of a
majority of the shares of stock present in person or
represented by proxy at any meeting of stockholders,
including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place.
2.10 Voting, Proxies. Unless otherwise provided in the
Certificate of Incorporation, every stockholder of record
shall be entitled at every meeting of stockholders to one
vote for each share of capital stock standing in his name on
the record of stockholders determined in accordance with
Section 2.5 of the By-laws. The provisions of Sections 212
and 217 of the General Corporation Law shall apply in
determining whether any shares of capital stock may be voted
and the persons, if any, entitled to vote such shares; but
the Corporation shall be protected in treating the persons
in whose names shares of capital stock stand on the record
of stockholders as owners thereof for all purposes. At any
meeting of stockholders (at which a quorum was present to
organize the meeting), all matters, except as otherwise
provided by law or by the Certificate of Incorporation or by
the By-laws, shall be decided by a majority of the votes
cast at such meeting by the holders of shares present in
person or represented by proxy and entitled to vote thereon,
whether or not a quorum is present when the vote is taken.
All elections of directors shall be by written ballot
unless otherwise provided in the Certificate of Incorpora-
tion. In voting on any other question on which a vote by
ballot is required by law or is demanded by any stockholder
entitled to vote, the voting shall be by ballot. Each ballot
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shall be signed by the stockholder voting or by his proxy,
and shall state the number of shares voted. On all other
questions, the voting may be viva voce.
Every stockholder entitled to vote at a meeting of
stockholders to express consent or dissent to corporate
action in writing without a meeting may authorize another
person or persons to act or him by proxy. The validity and
enforceability of any proxy shall be determined in accord-
ance with Section 212 of the General Corporation Law.
2.11 Selection and Duties of Inspectors at Meetings of
Stockholders. The Board, in advance of any meeting of
stockholders, may appoint one or more inspectors to act at
the meeting or any adjournment thereof. If inspectors are
not so appointed, the person presiding at such meeting may,
and on the request of any stockholder entitled to vote
thereat shall, appoint one or more inspectors. In case any
person appointed fails to appear or act, the vacancy may be
filled by appointment made by the Board in advance of the
meeting or at the meeting by the person presiding thereat.
Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impar-
tiality and according to the best of his ability. The in-
spector or inspectors shall determine the number of shares
outstanding and the voting power of each, the shares repre-
sented at the meeting, the existence of a quorum, the val-
idity and effect of proxies, and shall receive votes, bal-
lots or consents, hear and determine all challenges and
questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine
the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On
request of the person presiding at the meeting or any
stockholder entitled to vote thereat, the inspector or in-
spectors shall make a report in writing of any challenge,
question or matter determined by him or them and execute a
certificate of any fact found by him or them. Any report or
certificate made by the inspector or inspectors shall be
prima facie evidence of the facts stated and of the vote as
certified by him or them.
2.12 Organization. At every meeting of stockholders,
the person designated by resolution of the Board shall act
as chairman of such meeting. In the absence of such desig-
nation, the Chairman, or in the absence of the Chairman, the
Vice Chairman, or in the absence of the Vice Chairman, the
President, or in the absence of the President, a Vice
President, and in case more than one Vice President shall be
present, that Vice President designated by the Board (or in
the absence of any such designation, the most senior Vice
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President, based on age, present) shall act as chairman of
the meeting. The Secretary, or in his absence one of the
Assistant Secretaries, shall act as secretary of the
meeting. In case none of the officers so designated to act
as chairman or secretary of the meeting, respectively, shall
be present, a chairman or secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast
at such meeting by the holders of shares of capital stock
present in person or represented by proxy and entitled to
vote at the meeting.
2.13 Order of Business. The order of business at all
meetings of stockholders shall be as determined by the
chairman of the meeting, but the order of business to be
followed at any meeting at which a quorum is present may be
changed by a majority of the votes cast at such meeting by
the holders of shares of capital stock present in person or
represented by proxy and entitled to vote at the meeting.
2.14 Written Consent of Stockholders Without a Meeting.
Unless otherwise provided in the Certificate of
Incorporation, any action required by the General
Corporation Law to be taken at any annual or special meeting
of stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockhold-
ers, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of out-
standing stock having not less than the minimum number of
votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than
unanimous written consent shall be given to those stock-
holders who have not consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in
the Certificate of Incorporation, the business and affairs
of the Corporation shall be managed by or under the direc-
tion of the Board. The Board may adopt such rules and reg-
ulations, not inconsistent with the Certificate of
Incorporation or the By-laws or applicable laws, as it may
deem proper for the conduct of its meetings and the
management of the Corporation. In addition to the powers
expressly conferred by the By-laws, the Board may exercise
all powers and perform all acts which are not required, by
the By-laws or the Certificate of Incorporation or by law,
to be exercised and performed by the stockholders.
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3.2 Number; Qualification; Term of Office. The number
of directors of the Corporation shall not be less than three
nor more than fifteen, the exact number of directors to be
six or such other number as may be fixed from time to time
by vote of a majority of the entire Board. The directors
shall be divided into three classes: Class I, Class II, and
Class III. Each class shall consist, as nearly as may be
possible, of one-third of the whole number of the Board. At
the annual meeting of stockholders next following the
expiration of the fiscal year of the Corporation in 1981,
the Class I directors shall be elected to hold office for a
term to expire at the annual meeting of stockholders next
ensuing; the Class II directors shall be elected to hold
office for a term to expire one year thereafter; and the
Class III directors shall be elected to hold office for a
term to expire two years thereafter, and in each case, until
their respective successors are elected and qualified, or
until their death, or until they shall have resigned, or
have been removed, as hereinafter provided in these By-laws,
or as otherwise provided by law or the Certificate of
Incorporation. At each annual election held after the
initial election of directors according to classes, the
directors chosen to succeed those whose terms have expired
shall be identified as being of the same class as the
directors they succeed and shall be elected to hold office
for a term to expire at the third succeeding annual meeting
after their election and until their respective successors
are elected and qualified, or until their death, or until
they shall have resigned, or have been removed, as
hereinafter provided in these By-laws, or as otherwise
provided by law or the Certificate of Incorporation. If the
number of directors is changed, any increase or decrease in
directors shall be apportioned among the classes so as to
maintain all classes as equal in number as possible, and any
additional director elected to any class shall hold office
for a term which shall coincide with the terms of the other
directors in such class.
3.3 Election. Directors shall, except as otherwise
required by law or by the Certificate of Incorporation, be
elected in the manner provided in Section 2.10 of the Bylaws
by the votes cast at a meeting of stockholders by the
holders of shares entitled to vote in the election.
3.4 Vacancies and Newly Created Directorships.
Vacancies and newly created directorships resulting from an
increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next
election of the class for which such directors shall have
been chosen, and until their successors are duly elected and
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shall qualify, or until their death, or until they shall
have resigned, or have been removed, as hereinafter provided
in these By-laws, or as otherwise provided by law or the
Certificate of Incorporation. If there are no directors in
office, then an election of directors may be held in the
manner provided by law. If, at the time of filling any
vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the
Whole Board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of
any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order
an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by
the directors then in office. Except as otherwise provided
in the Certificate of Incorporation, when one or more
directors shall resign from the Board, effective at a future
date, a majority of the directors then in office, including
those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective and
each director so chosen shall hold office as provided in
this section in the filling of other vacancies.
3.5 Resignations. Any director may resign at any time
by written notice to the Corporation. Such resignation shall
take effect at the time therein specified, and, unless
otherwise specified, the acceptance of such resignation
shall not be necessary to make it effective.
3.6 Removal of Directors. A director may be removed
only for cause and by the affirmative vote of the holders of
shares of stock of the Corporation representing at least
two-thirds of the votes entitled to be cast thereon at a
meeting of the stockholders duly called for the considera-
tion of such removal, or by the written consent of the
holders of such shares; and the vacancy on the Board caused
by any such removal may be filled by such stockholders at
such meeting, or, if the stockholders shall fail to fill
such vacancy, as in these By-laws provided.
3.7 Compensation. Each director, in consideration of
his services as such, shall be entitled to receive from the
Corporation such amount per annum or such fees for
attendance at directors' meetings or both, as the Board may
from time to time determine, together with reimbursement for
the reasonable expenses incurred by him in connection with
the performance of his duties. Each director who shall serve
as a member of any committee of directors in consideration
of his serving as such shall be entitled to such additional
amount per annum or such fees for attendance at committee
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meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable
expenses incurred by him in the performance of his duties.
Nothing contained in this section shall preclude any
director from serving the Corporation or its subsidiaries in
any other capacity and receiving proper compensation
therefor.
3.8 Place and Time of Meetings of the Board. Meetings
of the Board, regular or special, may be held at any place
within or without the State of Delaware. The times and
places for holding meetings of the Board may be fixed from
time to time by resolution of the Board or (unless contrary
to resolution of the Board) in the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place
where the annual meeting of stockholders for the election of
directors is held, and as soon as practicable thereafter,
the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election
of officers and the transaction of other business. The
annual meeting of the Board may be held at any other time
and place specified in a notice given as provided in Section
3.11 of the By-laws for special meetings of the Board or in
a waiver of notice thereof.
3.10 Regular Meetings. Regular meetings of the Board
may be held at such times and places as may be fixed from
time to time by the Board. Unless otherwise required by the
Board, regular meetings of the Board may be held without
notice. If any day fixed for a regular meeting of the Board
shall be a Saturday or Sunday or a legal holiday at the
place where such meeting is to be held, then such meeting
shall be held at the same hour at the same place on the
first business day thereafter which is not a Saturday,
Sunday or legal holiday.
3.11 Special Meetings. Special meetings of the Board
shall be held whenever called by the Chairman or by the
President or by the Secretary or by any two or more
directors. Notice of each special meeting of the Board
shall, if mailed, be addressed to each director at the
address designated by him for that purpose or, if none is
designated, at his last known address at least two days
before the date on which the meeting is to be held; or such
notice shall be sent to each director at such address by
telegraph, cable, or wireless, or be delivered to him
personally, not later than the day before the date on which
such meeting is to be held. Every such notice shall state
the time and place of the meeting but need not state the
purposes of the meeting, except to the extent required by
law. If mailed, each notice shall be deemed given where
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deposited, with postage thereon prepaid, in a post office or
official depository under the exclusive care and custody of
the United States post office department. Such mailing shall
be by first class mail.
3.12 Adjourned Meetings. A majority of the directors
present at any meeting of the Board, including an adjourned
meeting, whether or not a quorum is present, may adjourn
such meeting to another time and place. Notice of any
adjourned meeting of the Board need not be given to any
director whether or not present at the time of the
adjournment. Any business may be transacted at any adjourned
meeting that might have been transacted at the meeting as
originally called.
3.13 Waiver of Notice. Whenever notice is required to
be given to any director or member of a committee of
directors under any provision of the General Corporation Law
or of the Certificate of Incorporation or By-laws, a written
waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special
meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of
notice.
3.14 Organization. At each meeting of the Board, the
Chairman, or in the absence of the Chairman, the President,
or in the absence of the President, a chairman chosen by a
majority of the directors present, shall preside. The
Secretary shall act as secretary at each meeting of the
Board. In case the Secretary shall be absent from any
meeting of the Board, an Assistant Secretary shall perform
the duties of secretary at such meeting; and in the absence
from any such meeting of the Secretary and all Assistant
Secretaries, the person presiding at the meeting may appoint
any person to act as secretary of the meeting.
3.15 Quorum of Directors. A majority of the total
number of directors shall constitute a quorum for the
transaction of business or of any specified item of business
at any meeting of the Board.
3.16 Action by the Board. All corporate action taken by
the Board or any committee thereof shall be taken at a
meeting of the Board, or of such committee, as the case may
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be, except that any action required or permitted to be taken
at any meeting of the Board, or of any committee thereof,
may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee. Members of
the Board, or any committee designated by the Board, may
participate in a meeting of the Board, or of such committee,
as the case may be, by means of conference telephone or
similar communications equipment by means of which all
persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.16
shall constitute presence in person at such meeting. Except
as otherwise provided by the Certificate of Incorporation or
by law, the vote of a majority of the directors present
(including those who participate by means of conference
telephone or similar communications equipment) at the time
of the vote, if a quorum is present at such time, shall be
the act of the Board.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of
the whole Board at any time or times following the first
meeting of stockholders for the election of directors held
after the Effective Date, designate one or more committees,
each committee to consist of one or more of the directors of
the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present
at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the
Board, shall have and may exercise all the powers and
authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of
the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or
authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-laws of the
Corporation; and, unless the resolution designating it
expressly so provides, no such committee shall have the
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power or authority to declare a dividend or to authorize the
issuance of stock.
ARTICLE 5
OFFICERS
5.1 Officers. The Board shall elect a Chairman, a
President, a Secretary and a Treasurer, and may elect or
appoint one or more Vice Presidents and such other officers
as it may determine. The Board may designate one or more
Vice Presidents as Executive Vice Presidents and may use
descriptive words or phrases to designate the standing,
seniority or area of special competence of the Vice
Presidents elected or appointed by it. Each officer shall
hold his office until his successor is elected and qualified
or until his earlier death, resignation or removal in the
manner provided in Section 5.2 of the By-laws. Any two or
more offices may be held by the same person. The Board may
require any officer to give a bond or other security for the
faithful performance of his duties, in such amount and with
such sureties as the Board may determine. All officers as
between themselves and the Corporation shall have such
authority and perform such duties in the management of the
Corporation as may be provided in the By-laws or as the
Board may from time to time determine.
5.2 Removal of Officers. Any officer elected or
appointed by the Board may be removed by the Board with or
without cause. The removal of an officer without cause shall
be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself
create contract rights.
5.3 Resignations. Any officer may resign at any time
by so notifying the Board or the Chairman or the President
or the Secretary in writing. Such resignation shall take
effect at the date of receipt of such notice or at such
later time as is therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be
necessary to make it effective. The resignation of an
officer shall be without prejudice to the contract rights of
the Corporation, if any.
5.4 Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or any other
cause shall be filled for the unexpired portion of the term
in the manner prescribed in the By-laws for the regular
election or appointment to such office.
5.5 Compensation. Salaries or other compensation of
the officers may be fixed from time to time by the Board. No
officer shall be prevented from receiving a salary or other
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compensation by reason of the fact that he is also a
director.
5.6 Chairman. The Chairman shall, if present, preside
at all meetings of the stockholders and at all meetings of
the Board. He may, with the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, sign
certificates for shares of capital stock of the Corporation.
The Chairman shall perform such other duties as may from
time to time be assigned to him by the Board.
5.7 President. The President shall have general
supervision over the business of the Corporation, subject,
however, to the control of the Board and of any duly
authorized committee of directors. In the absence of the
Chairman, the President shall, if present, preside at all
meetings of the stockholders and at all meetings of the
Board. He may, with the Secretary or the Treasurer or an
Assistant Secretary or an Assistant Treasurer, sign
certificates for shares of capital stock of the Corporation.
He may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments,
except in cases where the signing and execution thereof
shall be expressly delegated by the Board or by the By-laws
to some other officer or agent of the Corporation or shall
be required by law otherwise to be signed or executed, and,
in general, he shall perform all duties incident to the
office of President and such other duties as from time to
time may be assigned to him by the Board.
5.8 Vice Presidents. At the request of the President,
or, in his absence, at the request of the Board, the Vice
Presidents shall in such order as may be designated by the
Board or, in the absence of any such designation, in order
of seniority based on age, perform all of the duties of the
President and shall have all the powers of and be subject to
all restrictions upon the President. Any Vice President may
also, with the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer, sign certificates for
shares of capital stock of the Corporation; may sign and
execute in the name of the Corporation deeds, mortgages,
bonds, contracts or other instruments authorized by the
Board, except in cases where the signing and execution
thereof shall be expressly delegated by the Board or by the
By-laws to some other officer or agent of the Corporation,
or shall be required by law otherwise to be signed or
executed; and shall perform such other duties as from time
to time may be assigned to him by the Board or by the
President.
5.9 Secretary. The Secretary, if present, shall act as
secretary of all meetings of the stockholders and of the
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Board, and shall keep the minutes thereof in the proper book
or books to be provided for that purpose; he shall see that
all notices required to be given by the Corporation are duly
given and served; he may, with the Chairman or the President
or a Vice President, sign certificates for shares of capital
stock of the Corporation; he shall be custodian of the seal
of the Corporation and may seal with the seal of the
Corporation, or a facsimile thereof, all certificates for
shares of capital stock of the Corporation and all documents
the execution of which on behalf of the Corporation under
its corporate seal is authorized in accordance with the
provisions of the By-laws; he shall have charge of the stock
ledger and also of the other books, records and papers of
the Corporation relating to its organization and management
as a Corporation, and shall see that the reports, statements
and other documents required by law are properly kept and
filed; and shall, in general, perform all the duties
incident to the office of Secretary and such other duties as
from time to time may be assigned to him by the Board or by
the President.
5.10 Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds, securities
and notes of the Corporation; receive and give receipts for
monies due and payable to the Corporation from any sources
whatsoever; deposit all such monies in the name of the
Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with these
Bylaws, against proper vouchers; cause such funds to be
disbursed by checks or drafts on the authorized depositories
of the Corporation signed in such manner as shall be
determined in accordance with any provisions of the By-laws,
and be responsible for the accuracy of the amounts of all
monies so disbursed; regularly enter or cause to be entered
in books to be kept by him or under his direction full and
adequate account of all monies received or paid by him for
the account of the Corporation; have the right to require,
from time to time, reports or statements giving such
information as he may desire with respect to any and all
financial transactions of the Corporation from the officers
or agents transacting the same; render to the President or
the Board, whenever the President or the Board,
respectively, shall require him so to do, an account of the
financial condition of the Corporation and of all his
transactions as Treasurer; exhibit at all reasonable times
his books of account and other records to any of the
directors upon application at the office of the Corporation
where such books and records are kept; and, in general,
perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned
to him by the Board or by the President; and he may sign
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with the Chairman or the President or a Vice President
certificates for shares of capital stock of the Corporation.
5.11 Assistant Secretaries and Assistant Treasurers.
Assistant Secretaries and Assistant Treasurers shall perform
such duties as shall be assigned to them by the Secretary or
by the Treasurer, respectively, or by the Board or by the
President. Assistant Secretaries and Assistant Treasurers
may, with the Chairman or with the President or a Vice
President, sign certificates for shares of capital stock of
the Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize
any officer, employee or agent, in the name and on behalf of
the Corporation, to enter into any contract or execute and
satisfy any instrument, and any such authority may be
general or confined to specific instances, or otherwise
limited.
6.2 Loans. The President or any other officer,
employee or agent authorized by the By-laws or by the Board
may effect loans and advances at any time for the
Corporation from any bank, trust company or other
institutions or from any firm, corporation or individual and
for such loans and advances may make, execute and deliver
promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, and, when authorized by
the Board so to do, may pledge and hypothecate or transfer
any securities or other property of the Corporation as
security for any such loans or advances. Such authority
conferred by the Board may be general or confined to
specific instances or otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other
orders for the payment of money out of the funds of the
Corporation and all notes or other evidences of indebtedness
of the Corporation shall be signed on behalf of the
Corporation in such manner as shall from time to time be
determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not
otherwise employed shall be deposited from time to time to
the order of the Corporation in such banks, trust companies
or other depositories as the Board may select or as may be
selected by an officer, employee or agent of the Corporation
to whom such power may from time to time be delegated by the
Board.
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ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of
capital stock of the Corporation shall be represented by
certificates in such form (consistent with the provisions of
Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by
the Chairman or the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles, if the
certificate is countersigned by a transfer agent or
registrar other than the Corporation itself or its employee.
In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon any
certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such
certificates may, unless otherwise ordered by the Board, be
issued by the Corporation with the same effect as if such
persons were such officer, transfer agent or registrar at
the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital
stock of the Corporation shall be made only on the books of
the Corporation by the holder thereof or by his duly
authorized attorney appointed by his power of attorney duly
executed and filed with the Secretary or a transfer agent of
the Corporation, and on surrender of the certificate or
certificates representing such shares of capital stock
properly endorsed for transfer and upon payment of all
necessary transfer taxes. Every certificate exchanged,
returned or surrendered to the Corporation shall be marked
"Cancelled," with the date of cancellation, by the Secretary
or an Assistant Secretary or the transfer agent of the
Corporation. A person in whose name shares of capital stock
shall stand on the books of the Corporation shall be deemed
the owner thereof to receive dividends, to vote as such
owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be
valid as against the Corporation, its stockholders and
creditors for any purpose until such transfer shall have
been entered on the books of the Corporation by an entry
showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may
from time to time maintain one or more transfer offices or
agents and registry offices or agents at such place or
places as may be determined from time to time by the Board.
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7.4 Lost, Destroyed, Stolen and Mutilated
Certificates. The holder of any shares of capital stock of
the Corporation shall immediately notify the Corporation of
any loss, destruction, theft or mutilation of the
certificate representing such shares, and the Corporation
may issue a new certificate to replace the certificate
alleged to have been lost, destroyed, stolen or mutilated.
The Board may, in its discretion, as a condition to the
issue of any such new certificate, require the owner of the
lost, destroyed, stolen or mutilated certificate, or his
legal representatives, to make proof satisfactory to the
Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require,
and to give the Corporation and its transfer agents and
registrars, or such of them as the Board may require, a bond
in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and
its transfer agents and registrars against any claim that
may be made against any of them on account of the continued
existence of any such certificate so alleged to have been
lost, destroyed, stolen or mutilated and against any expense
in connection with such claim.
7.5 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with
the By-laws or with the Certificate of Incorporation,
concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written
restriction on the transfer or registration of transfer of
capital stock of the Corporation, if permitted by Section
202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be
enforced against the holder of the restricted capital stock
or any successor or transferee of the holder including an
executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person
or estate of the holder. Unless noted conspicuously on the
certificate representing such capital stock, a restriction,
even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a
person with actual knowledge of the restriction. A
restriction on the transfer or registration of transfer of
capital stock of the Corporation may be imposed either by
the Certificate of Incorporation or by an agreement among
any number of stockholders or among such stockholders and
the Corporation. No restrictions so imposed shall be binding
with respect to capital stock issued prior to the adoption
of the restriction unless the holders of such capital stock
are parties to an agreement or voted in favor of the
restriction.
18
<PAGE>
7.7 Dividends, Surplus, Etc. Subject to the provisions
of the Certificate of Incorporation and of law, the Board
may from time to time following the first meeting of
stockholders for the election of directors held after the
Effective Date:
7.7.1 Declare and pay dividends or make other
distributions on the outstanding shares of capital
stock in such amounts and at such time or times as, in
its discretion, the condition of the affairs of the
Corporation shall render advisable;
7.7.2 Use and apply, in its discretion, any or
the surplus of the Corporation in purchasing or
acquiring any shares of capital stock of the
Corporation, or purchase warrants therefor, in
accordance with law, or any of its bonds, debentures,
notes, scrip or other securities or evidences of
indebtedness; or
7.7.3 Set aside from time to time out of such
surplus or net profits such sum or sums as, in its
discretion, it may think proper, as a reserve fund to
meet contingencies, or for equalizing dividends or for
the purpose of maintaining or increasing the property
or business of the Corporation, or for any purpose it
may think conducive to the best interests of the
Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Officers and Directors. The
Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason
of the fact that at any time after the Effective Date he is
or was a director or an officer of the Corporation, against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding to
the fullest extent and in the manner set forth in and
permitted by the General Corporation Law, and any other
applicable law, as from time to time in effect. Such right
of indemnification shall not be deemed exclusive of any
other rights to which such director or officer may be
entitled apart from the foregoing provisions. The foregoing
provisions of this Section 8.1 shall be deemed to be a
contract between the Corporation and each director and
officer/who serves in such capacity at any time while this
Article 8 and the relevant provisions of the General
19
<PAGE>
Corporation Law and other applicable law, if any, are in
effect. Any repeal or modification thereof shall not affect
any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of
facts.
8.2 Indemnification of Other Persons. The Corporation
may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the
fact that at any time after the Effective Date he is or was
an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding to the extent and in the manner set forth in and
permitted by the General Corporation Law, and any other
applicable law, as from time to time in effect. Such right
of indemnification shall not be deemed exclusive of any
other rights to which any such person may be entitled apart
from the foregoing provisions.
8.3 Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would
have the power to indemnify him against such liability under
the provisions of Section 8.1 and 8.2 of the By-laws or
under Section 145 of the General Corporation Law or any
other provision of law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep
correct and complete books and records of account and shall
keep minutes of the proceedings of the stockholders, the
Board and any committee of the Board. The Corporation shall
keep at the office designated in the Certificate of
Incorporation or at the office of the transfer agent or
registrar of the Corporation, a record containing the names
20
<PAGE>
and addresses of all stockholders, the number and class of
shares held by each and the dates when they respectively
became the owners of record thereof.
9.2 Form of Records. Any records maintained by the
Corporation in the regular course of its business, including
its stock ledger, books of account, and minute books, may be
kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs, or any other information
storage device, provided that the records so kept can be
converted into clearly legible written form within a
reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to
inspect the same.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in
the form of a circle and shall bear the full name of the
Corporation, the year of its incorporation and the word
"Delaware."
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be determined,
and may be changed, by resolution of the Board.
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board,
the Chairman, the Vice Chairman, the President or the
Executive Vice President may, from time to time, appoint one
or more attorneys or agents of the Corporation, in the name
and on behalf of the Corporation, to cast the votes which
the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of
the holders of stock or other securities of such other
corporation, or to consent in writing to any action by any
such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes
or giving such consent, and may execute or cause to be
executed on behalf of the Corporation and under its
corporate seal, or otherwise, such written proxies,
consents, waivers or other instruments as he may deem
necessary or proper in the premises; or any such officer may
himself attend any meeting of the holders of the stock or
other securities of any such other corporation and thereat
vote or exercise any or all other powers of the Corporation
2
<PAGE>
as the holder of such stock or other securities of such
other corporation.
ARTICLE 13
AMENDMENTS
The By-laws may be altered, amended, supplemented or
repealed, or new By-laws may be adopted, by vote of the
holders of the shares entitled to vote in the election of
directors. The By-laws may be altered, amended, supplemented
or repealed, or new By-laws may be adopted, by the Board
following the first meeting of stockholders for the election
of directors held after the Effective Date. Any By-laws
adopted, altered, amended, or supplemented by the Board may
be altered, amended, or supplemented or repealed by the
stockholders entitled to vote thereon.
ARTICLE 14
INTERIM PROVISIONS
Notwithstanding any other provisions of the By-laws,
the Board will not take any of the following actions except
by unanimous consent of the whole Board (excluding any
member who abstains because of a personal interest in such
action), until after the first meeting of stockholders for
the election of directors held after the Effective Date.
14.1 Approve any agreement or resolution required to be
submitted to stockholders for their approval;
14.2 Approve any agreement with an officer or director
of the Corporation; or
14.3 Approve any agreement or commitment for the
issuance of any equity securities of the Corporation or
equity interest in the Corporation.
ARTICLE 15
EFFECTIVENESS OF BY-LAWS
Upon the Effective Date, the By-laws, as initially
adopted, shall become effective and shall replace and
supersede the by-laws of the Corporation theretofore in
effect.
22
Report of Independent
Accountants
United Television, Inc.
and Subsidiaries
To the Board of Directors and
Shareholders of United Television, 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
United Television, Inc. and its subsidiaries at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, 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 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 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.
Price Waterhouse LLP
Century City, California
February 11, 1997
<PAGE>
CONSOLIDATED BALANCE SHEETS
United Television, Inc. and Subsidiaries
(in thousands of dollars)
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 21,695 $ 16,888
Marketable securities 159,257 174,478
Accrued interest receivable 2,336 2,147
Accounts receivable, less allowance for doubtful
accounts of $1,661 and $1,690, respectively 37,556 38,934
Film contract rights 21,045 27,343
Deferred tax benefit 4,536 3,679
Prepaid expenses and other current assets 3,370 1,773
-------- -------
Total current assets 249,795 265,242
-------- -------
Noncurrent Marketable Securities 36,876 29,538
-------- -------
Other Investments 17,531 --
-------- -------
Film Contract Rights, including deposits, less
estimated portion to be used within one year 4,691 7,943
-------- -------
Property and Equipment, at cost:
Land, buildings and improvements 12,669 12,339
Equipment 53,782 51,720
-------- -------
66,451 64,059
Less - Accumulated depreciation and amortization 51,918 48,634
-------- -------
14,533 15,425
-------- -------
Intangible Assets 21,981 21,981
Less - Accumulated amortization 10,216 9,607
-------- -------
11,765 12,374
-------- -------
Other Assets 407 465
-------- -------
$335,598 $330,987
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
Liabilities and Shareholders' Investment
Current Liabilities:
Film contracts payable $ 25,402 $ 25,617
Accounts payable 3,645 3,199
Accrued expenses 18,524 19,477
Income taxes payable 10,968 8,885
-------- --------
Total current liabilities 58,539 57,178
-------- --------
Film Contracts Payable after One Year 19,177 25,489
-------- --------
Other Liabilities 7,441 7,851
-------- --------
Commitments and Contingencies (Note 9)
Shareholders' Investment:
Preferred stock $1 par value; authorized
1,000,000 shares; none issued -- --
Common stock $.10 par value; authorized
25,000,000 shares; outstanding 9,343,488
and 9,609,037 shares, respectively 934 961
Additional paid-in capital 133 133
Retained earnings 242,979 232,839
Increase to reflect marketable securities
at fair value 6,395 6,536
------- -------
250,441 240,469
------- -------
$335,598 $330,987
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
United Television, Inc. and Subsidiaries
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Net Revenues $174,339 $165,559 $150,980
-------- -------- --------
Expenses:
Operating 62,424 62,865 59,809
Selling, general and
administrative 52,839 51,812 38,934
-------- -------- --------
115,263 114,677 98,743
-------- -------- --------
Operating Income 59,076 50,882 52,237
Interest and Other Income 10,163 10,290 7,084
-------- -------- --------
Income before Provision for
Income Taxes 69,239 61,172 59,321
Provision for income taxes 27,500 24,300 24,150
-------- -------- --------
Net Income $ 41,739 $ 36,872 $ 35,171
======== ======== ========
Net Income per Share $ 4.40 $ 3.78 $ 3.50
======== ======== ========
Average Common Shares Outstanding 9,485 9,757 10,058
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
United Television, Inc. and Subsidiaries
(in thousands of dollars)
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 41,739 $ 36,872 $ 35,171
Adjustments to reconcile net income to
net cash provided from operating activities:
Film contract payments (25,512) (25,023) (33,744)
Film contract amortization 27,716 27,732 25,179
Depreciation and other amortization 4,611 4,655 4,776
(Gain) loss on dispositions of investments (59) (738) 230
Changes in assets and liabilities:
Accounts receivable 1,378 (2,913) (5,205)
Prepaid and other assets (906) (1,491) 15
Accounts payable and accrued expenses (507) 5,051 3,311
Income taxes payable 3,233 (3,463) 3,348
-------- -------- -------
Net cash provided from operating activities 51,693 40,682 33,081
-------- -------- -------
Cash Flows from Investing Activities:
Sales of marketable securities 215,047 49,874 80,224
Sales of other investments 2,599 -- --
Purchases of marketable securities (207,677) (82,004) (68,244)
Purchases of other investments (20,193) -- --
Capital expenditures (3,110) (2,807) (3,615)
--------- -------- --------
Net cash (used in) provided from
investing activities (13,334) (34,937) 8,365
--------- -------- --------
Cash Flows from Financing Activities:
Dividend paid (4,750) (4,911) --
Proceeds from exercise of employee stock options 4,008 2,009 997
Purchases of treasury stock (32,810) (30,449) (9,901)
-------- -------- -------
Net cash used in financing activities (33,552) (33,351) (8,904)
-------- -------- -------
Net Increase (Decrease) in Cash and
Cash Equivalents 4,807 (27,606) 32,542
Cash and Cash Equivalents at Beginning of Year 16,888 44,494 11,952
-------- ------- -------
Cash and Cash Equivalents at End of Year $ 21,695 $ 16,888 $ 44,494
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' INVESTMENT
United Television, Inc. and Subsidiaries
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Market
Shares Dollar Paid-in Retained Valuation
Outstanding Amount Capital Earnings Account Total
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 10,145,163 $1,015 $ 133 $201,613 $ -- $202,761
Net income -- -- -- 35,171 -- 35,171
Adjustment to reflect marketable
securities at fair value -- -- -- -- (1,391) (1,391)
Exercise of options, including
tax benefit 36,597 4 1,277 -- -- 1,281
Purchase/retirement of
treasury stock (206,422) (21) (1,277) (8,603) -- (9,901)
----------- ------- -------- --------- ------- ---------
Balance at December 31, 1994 9,975,338 998 133 228,181 (1,391) 227,921
Net income -- -- -- 36,872 -- 36,872
Cash dividend -- -- -- (4,911) -- (4,911)
Adjustment to reflect marketable
securities at fair value -- -- -- -- 7,927 7,927
Exercise of options, including
tax benefit 66,867 6 3,103 -- -- 3,109
Purchase/retirement of
treasury stock (433,168) (43) (3,103) (27,303) -- (30,449)
----------- ------- -------- --------- ------- ---------
Balance at December 31, 1995 9,609,037 961 133 232,839 6,536 240,469
Net income -- -- -- 41,739 -- 41,739
Cash dividend -- -- -- (4,750) -- (4,750)
Adjustment to reflect marketable
securities at fair value -- -- -- -- (141) (141)
Exercise of options, including
tax benefit 97,951 10 5,924 -- -- 5,934
Purchase/retirement of
treasury stock (363,500) (37) (5,924) (26,849) -- (32,810)
----------- ------- -------- --------- ------- ---------
Balance at December 31, 1996 9,343,488 $ 934 $ 133 $242,979 $ 6,395 $250,441
========== ====== ======= ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
United Television, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies.
(A) Organization and Related Parties. UTV is a majority owned (59.0% at
December 31, 1996) subsidiary of BHC Communications, Inc. (BHC), a majority
owned subsidiary of Chris-Craft Industries, Inc. (Chris-Craft). UTV owns and
operates five television stations: KBHK in San Francisco, KMSP in Minneapolis/
St. Paul, KUTP in Phoenix, KTVX in Salt Lake City and KMOL in San Antonio;
United Television Sales, Inc. (UTS), a national sales representative organiza-
tion which currently represents UTV's five stations and the three stations
owned by BHC; and United Entertainment Group, Inc., which with BHC jointly
produces first-run programming for national distribution to television sta-
tions. UTV's revenues are derived entirely from television broadcasting and
are, therefore, subject to the vagaries of the advertising industry.
Effective January 1, 1995, UTV entered into a state tax sharing agreement
with BHC under which agreement UTV continues to provide taxes on a separate
company basis.
The acquisition of programming from third parties is frequently negotiated
for UTV and BHC stations simultaneously.
(B) Basis of Presentation. The accompanying consolidated financial statements
include the accounts of UTV and its subsidiaries, after elimination of all
significant intercompany accounts and transactions. Preparation of financial
statements in accordance with generally accepted accounting principles requires
the use of management estimates.
(C) Cash and Cash Equivalents. Cash and cash equivalents consist of cash and
U.S. Government securities having maturities at time of purchase not exceeding
three months. The fair value of cash equivalents approximates carrying value,
respecting their short maturities.
(D) Investments in Debt and Equity Securities. All of UTV's marketable
securities have been categorized as available for sale and as a result are
carried at fair market value.
(E) Film Contract Rights and Film Contracts Payable. UTV owns film contract
rights which allow limited showings of films and syndicated programs. Film
contract rights and related liabilities are recorded at the contractual
amounts when the programming becomes available for telecasting.
Contract values are amortized over management's estimate of the number of
showings, using primarily an accelerated method, which considers total
anticipated costs of the programming and management's estimate of the flow of
revenues. In the opinion of management, future revenue related to the airing
of remaining film contract rights will be sufficient to recover unamortized
costs at December 31, 1996. 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.
(F) Depreciation and Amortization. Depreciation of property and equipment is
provided using the straight-line method over the estimated useful lives of the
assets, except that leasehold improvements are amortized over the term of the
lease, if shorter.
Intangible assets represent the excess of cost over the net
identifiable tangible assets at the respective dates of acquisition and are
being amortized using the straight-line method over 17 to 40 years from
acquisition.
(G) Revenue Recognition and Barter Transactions. Revenue is recognized upon
broadcast of television advertising. The estimated fair value of goods or
services received 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 was $11,791,000, $12,114,000 and
$11,155,000 in 1996, 1995 and 1994, respectively, and barter expense was
$11,683,000, $12,025,000 and $11,328,000 in the three years, respectively.
(H) Net Income per Share. Per share amounts were computed by dividing income
by the weighted average number of common shares outstanding, taking into
consideration, when dilutive, common stock equivalents (stock options).
(I) Stock Options. UTV has adopted Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). This statement
encourages but does not require the recording of compensation cost for stock-
based employee compensation plans at fair value. UTV has chosen to continue to
account for stock-based compensation using the intrinsic value method pre-
scribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees".
(J) Supplemental Cash Flow Information. Cash paid for income taxes totaled
$24,267,000 in 1996, $27,763,000 in 1995 and $20,802,000 in 1994.
2. Marketable Securities.
Marketable securities classified by security type are as follows
(in thousands):
Gross Unrealized
Cost Gains Losses Fair Value
December 31, 1996:
U.S. Government securities $149,908 $ 87 $ 555 $149,440
BHC Class A common stock 11,325 11,637 -- 22,962
Other equity securities 24,382 1,004 1,655 23,731
-------- ------- ------ --------
$185,615 $12,728 $2,210 $196,133
======== ======= ====== ========
December 31, 1995:
U.S. Government securities $164,701 $ 476 $ 707 $164,470
BHC Class A common stock 11,325 10,079 -- 21,404
Other equity securities 16,836 1,371 65 18,142
-------- ------- ------ --------
$192,862 $11,926 $ 772 $204,016
======== ======= ====== ========
At December 31, 1996, all U.S. Government securities mature within two years.
The following table provides certain additional information related to UTV's
marketable securities as of and for the three years ended December 31, 1996,
1995 and 1994 (in thousands):
1996 1995 1994
Sales proceeds $215,047 $49,874 $80,224
Realized gains 329 760 76
Realized losses 207 22 306
Net unrealized gain (loss) 10,518 11,154 (2,345)
Pretax adjustment to equity (636) 13,499 (2,345)
For purposes of computing realized gains and losses, cost was determined using
the specific identification method.
3. Film Contracts Payable.
The approximate future maturities of film contracts payable classified as
noncurrent liabilities at December 31, 1996 are $11,475,000, $4,860,000,
$2,172,000, $333,000 and $337,000 in 1998, 1999, 2000, 2001 and thereafter,
respectively. The net present value at December 31, 1996 of such payments,
discounted at 8.5%, was approximately $16,150,000.
4. Shareholders' Investment.
UTV has authorized 1,000,000 shares of preferred stock, $1 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.
During 1996, UTV purchased and retired 363,500 shares of its common stock
at an aggregate cost of $32,810,000. During 1995 and 1994, UTV purchased and
retired 433,168 and 206,422 shares of its common stock, respectively. At
December 31, 1996, purchase of 828,749 additional shares of common stock had
been authorized by the Board of Directors.
5. Stock Options.
Under the UTV 1988 Stock Option Plan, options (including Incentive Stock
Options) to purchase shares of common stock may be granted from time to time
to employees of UTV and its parents and subsidiaries, at prices not less than
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 five years
from date of grant.
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 UTV 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.
The Plan permits grants to purchase an aggregate of 800,000 shares.
Transactions under the Plan during the two years ended December 31, 1996 were
as follows (dollars in thousands, except per share data):
Shares
under Option Price
Option per Share Total
Outstanding,
December 31, 1994 386,403 $27.25-$53.50 $16,283
Exercised (66,867) $27.25-$53.50 (2,009)
------- -------
Outstanding,
December 31, 1995 319,536 $27.25-$53.50 14,274
Granted 32,000 $89.00 2,848
Exercised (77,451) $27.25-$53.50 (2,816)
Canceled (17,200) $53.50 (920)
------- -------
Outstanding,
December 31, 1996 256,885 $27.25-$89.00 $13,386
======= =======
In addition to options granted under the Plan, during 1995 UTV granted a
stock option to purchase 100,000 shares at $88.75 per share (the fair market
value at date of grant), on terms essentially the same as those of the 1988
stock option plan. Under the 1995 Director Stock Option Plan, adopted by UTV
shareholders in April 1995, a fixed number of immediately exercisable options
to purchase shares of common stock are granted annually to each nonemployee
director of UTV at prices equal to fair market value at date of grant.
Transactions under the Plan during the two years ended December 31, 1996 were
as follows (dollars in thousands, except per share data):
Shares
under Option Price
Option per Share Total
Outstanding,
December 31, 1994 -- -- $ --
Granted 47,500 $58.00-$62.25 2,785
------- -------
Outstanding,
December 31, 1995 47,500 $58.00-$62.25 2,785
Granted 7,000 $89.00 623
Exercised (20,500) $58.00-$62.25 (1,193)
------- -------
Outstanding,
December 31, 1996 34,000 $58.00-$89.00 $ 2,215
======= =======
Proceeds from the exercise of options are credited to common stock to the
extent of par value, and the remainder is credited to additional paid-in
capital. Income tax benefits which accrue to UTV are credited to additional
paid-in capital.
At December 31, 1996, options outstanding under all plans and grants were
exercisable for 228,318 shares at prices ranging from $27.25 to $89.00 per
share, and options for 292,967 were available for grant. Options outstanding
expire at various dates from December 1997 through April 2001.
If UTV had elected to recognize compensation expense based upon the fair
value at the grant date for awards under these plans consistent with the
methodology prescribed by SFAS 123, UTV's net income and earnings per share
would be reduced to the pro forma amounts indicated below (in thousands,
except per share amounts):
Year Ended December 31, 1996 1995
Net Income:
As reported $41,739 $36,872
Pro forma $41,104 $36,373
Earnings per Share:
As reported $ 4.40 $ 3.78
Pro forma $ 4.33 $ 3.73
These pro forma amounts may not be representative of the pro forma effect
on net income in future years since the estimated fair value of stock options
is amortized over the vesting period; pro forma compensation expense related
to grants made prior to 1995 is not considered; and additional options may be
granted in future years.
The weighted average fair values of options granted during 1996 and 1995
were $22.88 and $20.08 per share, respectively. The fair values of options at
dates of grant were estimated using the Black-Scholes option pricing model
with the following weighted average assumptions for the years ended December
31, 1996 and 1995, respectively: dividend yields of zero for both periods;
expected volatility of 16.21% and 17.23%; risk free interest rates of 6.25%
and 6.03%; and expected life of four years for both periods.
6. Income Taxes.
Income tax expense consists of the following (in thousands):
Year Ended December 31, 1996 1995 1994
Federal:
Current $23,268 $19,425 $17,702
Deferred (918) 375 1,623
-------- ------- -------
22,350 19,800 19,325
-------- ------- -------
State:
Current 5,332 4,450 4,868
Deferred (182) 50 (43)
-------- ------- -------
5,150 4,500 4,825
-------- ------- -------
Total $27,500 $24,300 $24,150
======= ======= =======
The provisions for income taxes differed from the amounts computed by
applying the federal income tax rate to income before income taxes. The
elements of these differences were as follows (in thousands):
Year Ended December 31, 1996 1995 1994
Statutory federal
income taxes $24,234 $21,410 $20,762
State income taxes, net ------- ------- -------
of federal income tax
benefit 3,493 2,957 3,127
Dividend exclusion (113) (108) (36)
Goodwill amortization 102 102 102
Other, net (216) (61) 195
------- ------- -------
Total $27,500 $24,300 $24,150
======= ======= =======
Deferred taxes reflect timing differences in the recognition of certain
income and expense items for financial accounting and income tax purposes.
The components of deferred tax assets and liabilities were as follows (in
thousands):
December 31, 1996 1995
Deferred tax assets:
State taxes $ 1,873 $ 1,644
Bad debt reserve 689 699
Vacation accrual 469 416
Benefits program 1,179 950
Other 655 616
------- -------
4,865 4,325
------- -------
Deferred tax liabilities:
Depreciation (1,598) (1,758)
Intangibles amortization (667) (583)
SFAS 115 adjustment (4,126) (4,618)
Other (20) (179)
------- -------
(6,411) (7,138)
------- -------
$(1,546) $(2,813)
======= =======
7. Pension Plans.
UTV maintains noncontributory defined benefit plans covering substantially
all employees. Benefits under the plans are based upon years of service and
compensation, as defined. UTV's funding policy is to contribute annually an
amount sufficient to fund current service costs and to amortize the unfunded
accrued liability over 25 years. Contributions are intended to provide not
only for benefits attributed to service to date but also for benefits expected
to be earned in the future.
The following table sets forth the funded status of the plans (in
thousands):
December 31, 1996 1995
Actuarial present value of:
Vested benefit obligation $(13,507) $(11,989)
Nonvested benefit obligation (757) (832)
-------- --------
Accumulated benefit obligation (14,264) (12,821)
Effect of projected compensation
increases (4,909) (4,314)
-------- --------
Projected benefit obligation (19,173) (17,135)
Plan assets at fair value, primarily
listed securities and U.S.
Government securities 19,752 17,707
-------- --------
Surplus 579 572
Unrecognized gain (1,079) (172)
Unrecognized prior service cost (127) (187)
Unrecognized net obligation
remaining from initial
application, January 1, 1987 79 95
-------- --------
(Accrued) prepaid pension obligation $ (548) $ 308
======== ========
The unrecognized net obligation is being amortized over a 15-year period.
Pension expense, including amounts accrued in a UTV nonqualified retire-
ment plan for pension benefits in excess of statutory limitations, is as fol-
lows (in thousands):
Year Ended December 31, 1996 1995 1994
Service cost $ 1,001 $ 913 $ 805
Interest cost on projected
benefit obligation 1,243 1,111 979
Actual return on plan assets (2,574) (3,417) (450)
Net amortization and
deferral 1,227 2,414 (606)
------- ------- ------
Net periodic pension cost $ 897 $ 1,021 $ 728
======= ======= =====
Assumptions used in determining the actuarial present value of the
projected benefit obligation were as follows:
1996 1995 1994
Discount rate 7.25% 7.25% 7.25%
Rate of increase in future
compensation levels 4.50% 4.50% 4.50%
Expected long-term rate of
return on assets 7.75% 7.75% 7.75%
UTV also maintains defined contribution retirement plans for its
employees: a contributory stock purchase plan and a noncontributory profit
sharing plan. The aggregate costs of such plans for 1996, 1995 and 1994 were
$2,961,000, $3,876,000 and $2,538,000, respectively, including accruals in
the nonqualified plan referenced above.
8. Related Party Transactions.
Included in net revenues are commissions earned by UTS for the sale of
national advertising on BHC's three television stations of $4,286,000 in 1996
and $2,074,000 in 1995.
Included in selling, general and administrative expenses are management
and directors' fees UTV paid Chris-Craft of $570,000 in each of the three
years ended December 31, 1996, and a management fee UTV paid BHC of $1,750,000
in 1996, $2,200,000 in 1995 and $1,750,000 in 1994.
UTV and BHC each incurred costs of $571,000 and $3,312,000 in 1995 and
1994, respectively, for the joint production and distribution with third
parties of original programming. In 1996, reimbursements from third parties
were sufficient to cover production costs.
9. Commitments and Contingencies.
The aggregate amount payable by UTV 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, totaled $59,002,000 at December 31, 1996.
At December 31, 1996, UTV was obligated under several noncancelable
leases on real property and equipment that expire between 1997 and 2010.
Rental expense was $2,271,000, $1,928,000 and $1,546,000 for 1996, 1995 and
1994, respectively. Aggregate future minimum rental payments under such leases
at December 31, 1996 are $10,579,000 with amounts of $1,286,000, $1,341,000,
$1,271,000, $1,003,000 and $871,000 due in 1997, 1998, 1999, 2000 and 2001,
respectively.
At December 31, 1996, UTV has a remaining commitment to invest over time
up to $19,807,000 in a management buyout limited partnership.
In the opinion of management, after taking into account opinions of
counsel with respect thereto, the ultimate resolution of pending legal
proceedings against UTV, to the extent not covered by insurance, will not have
a material effect on UTV's consolidated financial position or results of oper-
ations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
United Television, Inc. and Subsidiaries
Liquidity and Capital Resources
UTV's operating cash flow is generated primarily by its television
broadcasting operations and generally parallels the earnings of UTV television
stations, adjusted to reflect the difference between film contract payments
and film contract amortization. The relationship between such payments and
amortization may vary greatly between years (amortization exceeded payments
by $2,204,000 and $2,709,000 in 1996 and 1995, respectively), and is dependent
upon the mix of programs aired and payment terms of the stations' contracts.
UTV stations generated substantial cash flow in 1996 and are expected to do
the same in 1997. With its considerable cash and marketable securities
balances, UTV continues to be well positioned to pursue new opportunities or
deal effectively with uncertainties that may arise in the television broad-
casting industry or economic environment.
UTV's cash flow is augmented by interest and dividend income
associated with its cash and marketable securities. UTV's 1996 cash flow from
operations totaled $51,693,000, but cash and marketable securities decreased
$3,076,000 to $217,828,000 at December 31, 1996. This decrease reflects the
sale of marketable securities to diversify UTV holdings by investing in a
management buyout limited partnership. UTV has a remaining commitment to
invest over time up to $19,807,000 in this partnership.
Working capital decreased $16,808,000 during 1996 to $191,256,000 at
December 31, 1996, primarily reflecting cash from operations offset by
treasury stock repurchases and the limited partnership investment. Working
capital at December 31, 1996 remains substantially in excess of UTV's normal
operating requirements.
UTV is engaged in an ongoing review of business opportunities in
media, entertainment, communications and other industries. UTV currently has
no outstanding debt and believes it is capable of raising significant addi-
tional capital to augment its already substantial liquid assets, if desired,
to fund any expansion.
UTV regularly makes current commitments for programming that will not
be available for telecasting until future dates and had commitments for
payments for such programming totaling $59,002,000 at December 31, 1996. UTV
expects to continue to satisfy these commitments in the ordinary course of
business.
UTV's Board of Directors has from time to time authorized the purchase
of UTV common shares. At December 31, 1996, purchase of an additional 828,749
shares was so authorized. From January 1, 1994 through December 31, 1996,
1,003,090 shares were purchased for an aggregate cost of $73,160,000, of which
363,500 shares were purchased during 1996 for an aggregate cost of $32,810,000.
UTV's commitments for capital expenditures at December 31, 1996 were
not material in relation to UTV's financial position. Funds for capital expend-
itures have generally been provided from operations. UTV expects that future
capital expenditures for its present business will be funded from operations
or current cash balances. UTV has no present requirement for additional
capital.
Results of Operations
1996 versus 1995. UTV's primary source of revenue is the sale to advertisers
of time on its five television stations. UTV's 1996 net in-
<PAGE>
come increased 13% to $41,739,000, or $4.40 per share, from $36,872,000, or
$3.78 per share, in 1995. Per share earnings for the year increased 16%, as
purchases of common stock under UTV's stock repurchase program reduced the
average number of common shares outstanding.
The earnings increase reflects record operating results. Station group
net revenues rose 3% for the year. Consolidated net revenues rose 5% to a
record $174,339,000, from $165,559,000 last year. The increase in station
revenues reflects improved demand for television advertising at UTV stations
during the first nine months of 1996, followed by a slowing in demand for the
fourth quarter.
Consolidated expenses rose less than 1% over the prior year. Program-
ming expense rose 1% and total station expenses rose 3% over last year.
Operating earnings rose 16% to $59,076,000, from $50,882,000 in 1995. The
prior year results include one-time costs of approximately $3,700,000
associated with the start-up of UTV's national sales representative sub-
sidiary, which began operations in the third quarter of 1995.
1995 versus 1994. UTV's 1995 net income increased 5% to $36,872,000,
or $3.78 per share, from $35,171,000, or $3.50 per share, in 1994. Per share
earnings for the year increased 8%, as purchases of common stock under UTV's
stock repurchase program reduced the average number of common shares out-
standing.
The earnings increase reflects record operating results at the tele-
vision station group offset by the sales representative subsidiary start-up
costs of approximately $3,700,000. Station group net revenues rose 7% for
the year. Consolidated net revenues rose 10% to a record $165,559,000, from
$150,980,000 in 1994, after giving effect to the sales representative sub-
sidiary. The increase in station revenues reflects improved demand for tele-
vision advertising at UTV stations during the first nine months of 1995, fol-
lowed by a slowing in demand for the fourth quarter.
The increase in station revenues was in large measure offset by an
increase in station operating expenses which rose 7%, reflecting a 6%
increase in programming costs and increased selling and administrative
expenses. While television station operating earnings increased slightly in
1995, the one-time start-up costs of $3,700,000 resulted in a decline in
operating income to $50,882,000, from $52,237,000 in 1994.
<PAGE>
SELECTED FINANCIAL DATA
United Television, Inc. and Subsidiaries
(in thousands, except per share data)
<TABLE>
<CAPTION>
As of and for the
year ended December 31, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net revenues $174,339 $165,559 $150,980 $130,338 $115,127
======== ======== ======== ======== ========
Operating income $ 59,076 $ 50,882 $ 52,237 $ 36,373 $ 7,853
Income associated with
Time Warner securities -- -- -- 31,125 10,828
Interest and other income 10,163 10,290 7,084 6,126 4,274
Income taxes (27,500) (24,300) (24,150) (29,800) (6,800)
--------- --------- --------- --------- ---------
Net income $ 41,739 $ 36,872 $ 35,171 $ 43,824 $ 16,155
======== ======== ======== ======== ========
Net income per share $ 4.40 $ 3.78 $ 3.50 $ 4.31 $ 1.54
======== ======== ======== ======== ========
Cash and current marketable
securities 180,952 191,366 182,043 171,243 108,395
Total assets 335,598 330,987 305,676 285,905 259,721
Working capital 191,256 208,064 193,505 172,815 98,749
Shareholders' investment $250,441 $240,469 $227,921 $202,761 $167,697
</TABLE>
QUARTERLY FINANCIAL INFORMATION (unaudited)
United Television, Inc. and Subsidiaries
(in thousands, except per share data)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
Year Ended
December 31, 1996
<S> <C> <C> <C> <C> <C>
Net revenues $40,234 $45,816 $40,835 $47,454 $174,339
Operating income 11,345 17,176 14,060 16,495 59,076
Net income 8,366 11,874 10,184 11,315 41,739
Net income per share $ .87 $ 1.25 $ 1.08 $ 1.20 $ 4.40
Year Ended
December 31, 1995
Net revenues $36,932 $42,113 $39,075 $47,439 $165,559
Operating income 10,859 16,241 8,333 15,449 50,882
Net income 7,726 11,314 6,334 11,498 36,872
Net income per share $ .78 $ 1.15 $ .65 $ 1.20 $ 3.78
</TABLE>
<PAGE>
STOCK PRICE, DIVIDEND AND RELATED INFORMATION
United Television, Inc. common stock trades on the Nasdaq National
Market tier of the Nasdaq Stock Market under the symbol UTVI.
The high and low sales prices as reported by Nasdaq for the periods
indicated were:
1996 1995
------------------- ------------------
Quarter High Low High Low
First $ 92.125 $86.500 $62.000 $51.875
Second 100.250 87.000 72.000 61.000
Third 97.500 91.750 89.250 72.000
Fourth 99.750 86.125 90.250 84.500
In 1996 and 1995, UTV paid a cash dividend of $.50 per share. In
February 1997, UTV declared a dividend of $.50 per share, payable on April 8,
1997 to shareholders of record on March 14, 1997. The Board of Directors
intends each year to consider declaration of a cash dividend.
As of February 28, 1997, there were approximately 3,000 holders of
record of common stock.
STATE TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") is
made this 21st day of October, 1996, effective for
taxable periods beginning on or after January 1, 1995 (the
"Effective Date"), between (i) BHC Communications, Inc., a
Delaware corporation having offices at 767 Fifth Avenue, New
York, New York (the "BHC Representative"), (ii) the
"Affiliates" (as defined below) of the BHC Representative
that are listed on Exhibit A hereto (collectively with the
BHC Representative, the "BHC Group"), (iii) United
Television, Inc., a Delaware corporation having offices at
132 S. Rodeo Drive, Beverly Hills, California (the "UTV
Representative"), and (iv) the Affiliates of the UTV
Representative that are listed on Exhibit B hereto
(collectively with the UTV Representative, the "UTV Group").
Each of the corporations described in clauses (i)-(iv) above
is hereinafter sometimes referred to as a "Member," and
collectively as the "Members"; and each of the corporations
described i and (iii) above is hereinafter sometimes
referred to as a "Representative," and collectively as the
"Representatives."
WHEREAS, by reason of recent additions to and
changes in the business activities conducted by the Members
of the BHC Group and the UTV Group (each a "Group" and
collectively the "Combined Group"), it is believed that the
Members constitute a single unitary group for purposes of
the state income and
<PAGE>
franchise taxes (each a "Tax" and collectively the "Taxes")
imposed on corporations by one or more of (i) the states of the United
States of America, (ii) the District of Columbia, add (iii) the
possessions of the United States (hereinafter each a "State"
and collectively the "States") in which the Members now conduct business
activities;
WHEREAS, the Members therefore believe it
appropriate that specified Members commence filing single
combined returns or reports for Taxes (each a "Combined
Report") on behalf of Members of both Groups; and
WHEREAS, the parties hereto wish to set forth
their agreement regarding the manner in which Combined
Reports shall be filed and certain related matters.
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants and agreements herein set forth,
the BHC Group and the UTV Group hereby agree as follows:
1. Intention to File Combined Reports.
a. General. It is the intention of the Members
to file Combined Reports, for taxable periods beginning on
or after the Effective Date, in each State in which Combined
Reports may properly be filed. The States where Combined
Reports are to be filed, and the Members to be included in
Combined Reports for each such State, are listed on Exhibit
C hereto, which shall be amended from time to time by
agreement between the BHC Representative and the UTV
Representative to reflect changes in
2
<PAGE>
the Members filing
Combined Reports in each State; provided, however, that the
addition or withdrawal of a Member or Affiliate thereof to
or from the Combined Group may be effected by a writing
executed by such Member or Affiliate and its Representative
(a copy of which shall be provided promptly to the other
Representative).
Except as indicated by the following sentence,
nothing herein shall impose any obligation on any Member to
file, join in the filing of, or apply for permission to file
a Combined Report with respect to any State not listed on
Exhibit C. This Agreement shall also apply to the greatest
extent practicable with respect to Taxes imposed by any
State in which a Combined Report (i) is not filed by the
Members or (ii) is filed by Members of the Combined Group
but does not include any Member or Affiliate thereof for a
taxable period beginning on or after the Effective Date, if
a "Final Determination" (as defined in the following
sentence) is made to the effect that the Members of the BHC
Group and UTV Group (or any Member(s) of the Combined Group
or Affiliate(s) thereof not previously included in a
Combined Report for such State) are required to file Tax
returns or reports in such State on a combined basis. A
"Final Determination" shall mean (x) a judgment, decree, or
other order by any court of competent jurisdiction which has
become final and unappealable; (y) a closing agreement or
similar agreement with the taxing authority of a State; or
(z) any other final
3
<PAGE>
disposition by reason of the
expiration of the applicable statute of limitations.
b. Cooperation. The Members mutually agree
to cooperate fully in providing to each other the
necessary information for the preparation of the
Combined Reports and the calculation of tax payments and
agree to use their best efforts to ensure that all
Combined Reports are timely filed and required tax
payments are timely made. Each Member responsible for
the preparation of a Combined Report under this
Agreement agrees to provide draft copies of such reports
to the other Members to be included in such Combined
Report (or the Representatives of such Members) for
their review a reasonable time before the required date
of filing.
c. Treatment of Items on Return: Cooperation
in Audits. The appropriate treatment on each Combined
Report of items of income, gain, loss, deduction or
credit (each an "Item") concerning which there is
disagreement between the Members shall ultimately be
determined by the BHC Representative, which
determination may be made in its sole discretion,
provided that the treatment of each such Item is
reasonable and adopted in good faith. Each Member
agrees to cooperate fully with the other Members in
resolving any issue that may arise in connection with
any audit, claim, investigation, litigation or other
dispute by or with a taxing authority, including a claim
for refund (each a "Contest"), with respect to a
Combined Report.
4
<PAGE>
d. Agency. Each Member of the BHC Group
hereby appoints the BHC Representative as its agent, and
each Member of the UTV Group hereby appoints the UTV
Representative as its agent, for purposes of asserting
its rights and performing its obligations under this
Agreement, including, without limitation, the right and
power to receive and transmit information, to make and
receive payments, and to execute Combined Reports and
other documents as provided for in this Agreement (to
the extent permitted by applicable law), and for
purposes of the amendment of this Agreement and the
exhibits thereto.
2. Responsibility for Filings and Payments.
a. Entity Filing Combined Report. The BHC
Representative and the UTV Representative shall jointly
determine the Member of the Combined Group responsible
for the preparation and filing of each Combined Report
to be filed by the Members, subject to the requirements
of applicable law and the provisions of this Agreement.
It is anticipated that, except as may otherwise be
agreed upon by the BHC Representative and the UTV
Representative or as may be required by applicable law:
(i) the BHC Representative, or another Member of the BHC
Group, will file any Combined Report which includes the
BHC Representative in California and in any other State
in which the BHC Representative is permitted by law to
do so; and (ii) the UTV Representative will file any
Combined Report, not described in clause (i), which
includes the UTV Representative in Arizona, Minnesota,
Utah, and
5
<PAGE>
any other State in which the UTV
Representative is permitted by law to do so. It is also
anticipated that KCOP Television, Inc. will be
designated the "key corporation" for purposes of the
filing of Combined Reports in California.
b. Responsibilities of Member Filing Combined
Report. Except as may otherwise be agreed upon, each
Member designated hereunder as responsible for filing a
Combined Report shall: file such Combined Report and
any related form or other document (including, without
limitation, any form required in connection with the
payment of estimated taxes, and any request for
extension of time to file); pay any Tax and any
interest, addition to tax or penalty relating thereto
(collectively "Related Amounts") shown on such Combined
Report, any estimated Tax payment relating to the
taxable period covered by such Combined Report, and any
additional Tax and Related Amounts required to be paid
with respect to such period following the filing of a
Combined Report; and file any amended return or claim
for refund with respect to such period and pay or
receive any resulting additional Tax or refund of Tax
and Related Amounts. The Member responsible for filing a
Combined Report for a taxable period shall also respond
to any notice or inquiry from a taxing authority
regarding such report and represent the Combined Group
in any Contest regarding such period or report. Each
Representative shall provide promptly (or shall cause a
Member of its Group to provide promptly) copies of any
notice of deficiency
6
<PAGE>
or other significant communication
from a taxing authority regarding Taxes that is received
by the Representative or any Member of its Group to the
other Representative, together with the attachments
thereto, and shall keep the other Representative fully
apprised of developments in any Contest. If the Member
representing the Combined Group in a Contest is other
than the BHC Representative, such Member shall cooperate
with the BHC Representative in such manner as the BHC
Representative may reasonably request in determining the
positions to be adopted and filings to be made in such
Contest.
3. Apportionment of Tax Obligations.
a. General. With respect to the Tax imposed
for a taxable period by each State in which a Combined
Report will be filed, the amount to be paid by the UTV
Group under this Agreement shall be the amount of Tax
and Related Amounts that would have been shown on a
Combined Report for the Members of the UTV Group for
such period for each such State (each, a "UTV Pro Forma
Return"), prepared on the basis of a unitary group
comprised solely of members of the UTV Group. Each UTV
Pro Forma Return shall be prepared by the UTV
Representative on a basis consistent, to the extent
feasible, with the tax accounting principles and
positions heretofore applied by Members of the UTV Group
in the preparation of tax returns, and with the
principles and positions applied in the preparation of
Combined Reports including such Members; and any
inconsistency with such
7
<PAGE>
principles and positions as
previously reflected shall be identified as such before
or upon the transmittal of a UTV Pro Forma Return to the
BHC Representative, which transmittal shall occur a
reasonable time before the Combined Report for such
period is due.
Each UTV Pro Forma Return shall be subject to
review by the BHC Representative, and the
Representatives shall use reasonable best efforts to
resolve any differences between them regarding the
treatment of any item. If the BHC Representative
concludes that (i) there is not "substantial authority"
for such treatment (as determined by reference to the
principles of the definition of substantial authority in
Section 6662 of the Internal Revenue Code of 1986, as
amended (the "Code") and the Regulations thereunder), or
(ii) that such treatment, if reflected on a Combined
Report, may conflict with (in a manner contrary to
applicable law) or otherwise undermine positions
reflected or to be reflected on Combined Reports
previously filed or to be filed by the Combined Group
for the current period, the UTV Pro Forma Return shall
be revised accordingly, with such assistance from the
UTV Representative as the BHC Representative may
reasonably request. However, such revision shall not
affect the amounts to be paid by the UTV Group under
this Agreement with respect to such UTV Pro Forma
Return, which shall be based on the return as initially
prepared by the UTV Representative, provided that each
position reflected in such return has a reasonable
8
<PAGE>
basis and is adopted in good faith.
b. Costs. The costs incurred by Members to
provide information required for the preparation of
Combined Reports, and all employee compensation and
other overhead costs incurred by Members relating to the
preparation of Combined Reports and other matters
addressed herein, shall be borne by the Member providing
such information or incurring such compensation or other
overhead costs, and shall not be reimbursable by any
other Member. All other costs and expenses incurred by
Members in connection with the preparation and filing of
a Combined Report or in any Contest relating thereto,
including, without limitation, all fees and
disbursements of attorneys, accountants and expert
witnesses (collectively, "Costs"), shall be paid or
reimbursed by the Member responsible for filing such
Combined Report, subject to the following two sentences.
Any Costs incurred in a Contest to defend the position
that the Members that filed the Combined Report at issue
constitute a unitary group eligible to file a Combined
Report shall be paid or reimbursed by the BHC
Representative. In addition, if the Member that filed a
Combined Report does not desire to defend at its cost a
position reflected on a Combined Report that is
challenged by a taxing authority, any other Member may
request that such position be defended by the filing
Member, provided that such other Member undertakes to
bear all Costs relating thereto.
9
<PAGE>
4. Payment. In the case of California or any
other State in which the BHC Representative or another
Member of the BHC Group is responsible for filing the
Combined Report, the UTV Representative will remit to
the BHC Representative or its designee the amount of Tax
and Related Amounts for which the UTV Group is
responsible under Section 3.
If, as a result of the settlement or other
conclusion of a Contest (including a claim for refund),
an amount of Tax is required to be paid or is refunded,
a corresponding adjustment shall be made between the UTV
Representative and the BHC Representative to restore the
BHC Group and the UTV Group, to the extent possible, to
the same position (disregarding the time value of money)
as if the treatment of an Item or Items on the basis of
which Tax is being paid or refunded had been reflected
on the relevant UTV Pro Forma Return and Combined
Report. If the Contest is resolved on the basis of the
payment of Tax or a refund in an amount less than the
amount originally claimed to be due or refundable, the
resulting payment or refund will be apportioned to the
UTV Representative and BHC Representative on a pro rata
basis between the two Groups as determined by reference
to the manner in which an amount equal to the original
proposed assessment or refund would have been
apportioned. Any Related Amount with respect to an
amount of Tax apportioned under this Section will be
determined in a manner that reasonably approximates the
method used by the taxing authority. Remittance
10
<PAGE>
of any audit settlement payment or refund will be in accordance
with Sections 2 and 3 as applicable.
5. Time and Form of Payment.
a. Time. In general, each Representative
shall make any payment due hereunder to the other
Representative at least one business day prior to the
date on which payment of the Tax obligation (including
an estimated Tax payment, payment made with an
application for extension of time to file, or audit
settlement payment) to which such intercompany payment
relates is required to be made to the taxing authority.
The preceding sentence shall not apply, however, with
respect to any payment of a Tax obligation that
accompanies the filing of a Combined Report. The
difference, if any, between the aggregate amount of the
estimated and other interim payments made on behalf of a
Group with respect to a Tax for a taxable period and the
Group's share thereof as determined under Section 3,
will be paid or refunded by and to the appropriate
Representatives within 15 business days after the filing
of the Combined Report. Refunds with respect to audit
settlements will be remitted to the respective
Representatives within 10 business days after receipt
from the taxing authority.
b. Form. All payments to be made hereunder
shall be made in U.S. Dollars in immediately available
funds.
6. Interpretation: Amendments. The Members agree
to negotiate in good faith to attempt to resolve any
differences between them regarding the interpretation of
this Agreement, and
11
<PAGE>
to consider such amendment or
amendments of this Agreement as may prove appropriate
over time. Any such amendment shall be in writing,
shall become effective and binding upon the parties
hereto upon the execution thereof by the BHC
Representative and the UTV Representative, and shall
apply with respect to taxable periods ending after the
date of such Amendment or as otherwise set forth in such
Amendment.
7. Delegation of Duties; Change in
Representative. Each Representative may cause an
obligation of such Representative under this Agreement
to be assumed and discharged by another member of the
Group of which the Representative is a Member, if such
other Member is reasonably believed by such
Representative to be capable of discharging such
obligation; provided, however, that except under the
circumstances stated below in this Section such
assumption shall not relieve the Representative of any
of its obligations hereunder. A Representative may at
any time designate another Member of the Group of which
the Representative is a Member as the successor
Representative for that Group, by 30 days' advance
written notice to the other Representative. Such change
shall be effective for all purposes under this Agreement
on the 3Oth day following the date on which notice is
given.
8. Joint and Several Liability: Indemnification.
a. Liability. The Members of the BHC Group
shall have joint and several liability for all
obligations of each Member of the BHC Group under this
Agreement, and the Members of
12
<PAGE>
the UTV Group shall have
joint and several liability for all obligations of each
Member of the UTV Group under this Agreement.
b. Indemnification. The BHC Group hereby
agrees to indemnify and hold harmless the UTV Group with
respect to any claim for collection of any amount of Tax
or Related Amount required to be paid by the BHC Group
under this Agreement; and the UTV Group hereby agrees to
indemnify and hold harmless the BHC Group with respect
to any claim for collection of any amount of Tax or
Related Amount required to be paid by the UTV Group
under this Agreement.
9. Applicable Law; Assignment; No Third Party
Beneficiary. This Agreement and its validity,
construction and performance will be governed by the
laws of the State of Delaware, without regard to the
principles thereof regarding conflicts of law, and shall
be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and
permitted assigns. The Agreement may not be assigned by
any party thereto (other than to an Affiliate of such
party) except with the prior consent of the
Representative of the Group of which the assignor is a
Member, and any purported assignment without such
consent shall be null and void and of no force or
effect. Notice of any such assignment shall be provided
promptly by such Representative to the Other
Representative. Nothing herein shall confer or is
intended to confer on any person which is not a party to
this Agreement any rights under this Agreement.
13
<PAGE>
10. Term of Agreement; Termination.
a. Term of Agreement. This Agreement shall
be effective as of the Effective Date and shall apply
with respect to all Tax returns and reports filed or
required to be filed and payments required to be made
for taxable periods beginning on or after that date and
before the fifth anniversary of such date (the "Initial
Term"), subject to termination as provided below in this
Section. On the fourth anniversary of the Effective
Date and on each succeeding anniversary of such date,
the Initial Term shall be extended by one year, unless
notice of termination is given prior to such date.
b. Termination. Either Representative may
terminate this Agreement by notice to the other
Representative, such termination to be effective as to
all members of the Combined Group as of the date (the
"Termination Date") specified in such notice, which
shall be not less than 90 days after the date of such
notice. Such termination shall be effective with
respect to taxable periods beginning on or after the
Termination Date, but shall not affect the rights and
obligations of the Members of the Combined Group for
periods beginning before such date. If the parties
hereto do not enter into a new tax sharing agreement
with respect to Taxes for taxable periods beginning on
and after the Termination Date, then the BHC Group and
UTV Group will endeavor, to the greatest extent
possible, to file Tax reports and returns separately.
If combined filings are required by a state taxing
14
<PAGE>
authority with respect to a Tax, the parties hereto will
use their reasonable best efforts to agree upon an
equitable allocation of the obligations of each Member
in relation to such Tax, including without limitation
(i) the responsibility to file returns and reports and
(ii) payments to be made to a Member for the use of tax
attributes of the Member to offset income of other
Members. If the parties are unable to agree upon an
allocation of such obligations, the issues in
controversy shall be submitted to arbitration in the
City of New York, New York before a panel of three
arbitrators in accordance with the rules of the American
Arbitration Association then pertaining in the City of
New York. In any such arbitration, one arbitrator shall
be selected by each Representative and the third
arbitrator shall be selected by the first two
arbitrators. The arbitration award shall be final and
binding upon the parties and judgment thereon may be
entered in any court having jurisdiction thereof. The
arbitrators shall be deemed to possess the power to
issue mandatory orders and restraining orders in
connection with such arbitration.
11. Notices. Any notice, demand, claim or
communication under this Agreement shall be in writing
and shall be deemed to have been given (i) upon the
delivery thereof, if delivered by messenger; (ii) when
received, if sent by telecopier (acknowledged by
customary electronic means); (iii) on the first business
day after being sent by nationally recognized commercial
courier service; (iv) three business days after being mailed
15
<PAGE>
through the United States Postal Service by
registered or certified mail, postage prepaid; or (v)
upon receipt, if mailed through the United States Postal
Service by ordinary first class mail, postage prepaid,
to the other Representative at the following address (or
at such other address as one Representative may specify
by notice to the other):
If to the BHC Representative, to:
BHC Communications, Inc.
Attention: Joelen K. Merkel, Vice
President and Treasurer
5355 Town Center Road, Suite 200
Boca Raton, FL 33486-1001
Telecopier: (561) 394-6004
If to the UTV Representative, to:
United Television, Inc.
Attention: Garth S. Lindsey, Executive
Vice President, Chief Financial
Officer and Secretary
132 S. Rodeo Drive, 4th Floor
Beverly Hills, CA 90212-2425
Telecopier: (310) 281-5870
12. Severability. If any provision in this
Agreement is held to be invalid, void or unenforceable,
(i) the remainder of the provisions in this Agreement
shall remain in full force and effect and shall in no
way be affected, impaired or invalidated, and (ii) to
the fullest extent possible, the provisions of this
Agreement (including, without limitation, all portions
of any section of this Agreement containing any such
provision held to be invalid, void or unenforceable that
are not themselves invalid, void or unenforceable) shall
be construed so as to give effect to the intent
manifested by the provisions held invalid,
16
<PAGE>
void or unenforceable.
13. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be
deemed an original.
14. Complete Agreement. This Agreement (including
the exhibits thereto) sets forth the entire agreement
and understanding of the parties relating to the subject
matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral,
between the parties.
15. Construction. The headings of the sections,
paragraphs and exhibits of this Agreement are inserted
for convenience of reference only and shall not
constitute a part hereof.
16. Consent to Jurisdiction. Each party hereto
hereby irrevocably submits to the jurisdiction of, and
agrees that any suit shall be brought only in the state
and federal courts located in the County of New Castle,
State of Delaware for the purpose of any suit, action or
other proceeding arising out of or based upon this
Agreement.
17. Affiliates. For purposes of this Agreement,
an "Affiliate" of a Member means any corporation that is
a member of the "affiliated group," as defined in
Section 1504 of the Code, of which such Member is a
member.
IN WITNESS WHEREOF, the parties have duly
executed this Agreement on the date first written above.
BHC COMMUNICATIONS, INC.
By:_________________________
Joelen K. Merkel
Vice President and
Treasurer
BHC NETWORK PARTNER, INC.
By:_________________________
Name:____________________
Title:___________________
BHC NETWORK PARTNER II, INC.
By:_________________________
Name:____________________
Title:___________________
BHC NETWORK PARTNER III, INC.
By:_________________________
Name:____________________
Title:___________________
CHRIS-CRAFT BROADCASTING, INC.
By:_________________________
Name:____________________
Title:___________________
CHRIS-CRAFT TELEVISION, INC.
By:_________________________
Name:____________________
Title:___________________
CHRIS-CRAFT TELEVISION
PRODUCTIONS, INC.
By:_________________________
Name:____________________
Title:___________________
GORGEN, INC.
By:_________________________
Name:____________________
Title:___________________
JUST U PRODUCTIONS, INC.
By:_________________________
Name:____________________
Title:___________________
KCOP TELEVISION, INC.
By:_________________________
Name:____________________
Title:___________________
MAGIC MOLEHILL PRODUCTIONS,
INC.
By:_________________________
Name:____________________
Title:___________________
OREGON TELEVISION, INC.
By:_________________________
Name:____________________
Title:___________________
PINELANDS, INC.
By:_________________________
Name:____________________
Title:___________________
PINELANDS BROADCASTING, INC.
By:_________________________
Name:____________________
Title:___________________
POTTLE PRODUCTIONS, INC.
By:_________________________
Name:____________________
Title:___________________
U JUST U PUBLISHING, INC.
By:_________________________
Name:____________________
Title:___________________
U MUSIC, INC.
By:_________________________
Name:____________________
Title:___________________
WWOR-TV, INC.
By:_________________________
Name:____________________
Title:___________________
UNITED TELEVISION, INC.
By:_________________________
Name:____________________
Title:___________________
UEG PRODUCTIONS, INC.
By:_________________________
Name:____________________
Title:___________________
UTV OF SAN ANTONIO, INC.
By:_________________________
Name:____________________
Title:___________________
UTV OF SAN FRANCISCO, INC.
By:_________________________
Name:____________________
Title:___________________
UNITED ENTERTAINMENT GROUP,
INC.
By:_________________________
Name:____________________
Title:___________________
UNITED TELEVISION SALES, INC.
By:_________________________
Name:____________________
Title:___________________
<PAGE>
SECTION 1. Intention to File Combined Reports.. . . . . 2
SECTION 2. Responsibility for Filings and Payments. . . 5
SECTION 3. Apportionment of Tax Obligations . . . . . . 7
SECTION 4. Payment. . . . . . . . . . . . . . . . . . . 10
SECTION 5. Time and Form of Payment . . . . . . . . . . 11
SECTION 6. Interpretation: Amendments . . . . . . . . . 12
SECTION 7. Delegation of Duties; Change in
Representative. . . . . . . . . . . . . . . . . . . . . . 12
SECTION 8. Joint and Several Liability:
Indemnification . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9. Applicable Law; Assignment; No Third Party
Beneficiary. . . . . . . . . . . . . . . . . . 13
SECTION 10. Term of Agreement; Termination . . . . . . . 14
SECTION 11. Notices. . . . . . . . . . . . . . . . . . . 16
SECTION 12. Severability . . . . . . . . . . . . . . . . 17
SECTION 13. Counterparts . . . . . . . . . . . . . . . . 17
SECTION 14. Complete Agreement . . . . . . . . . . . . . 17
SECTION 15. Construction . . . . . . . . . . . . . . . . 18
SECTION 16. Consent to Jurisdiction. . . . . . . . . . . 18
SECTION 17. Affiliates . . . . . . . . . . . . . . . . . 18
Exhibit 21
The following were the registrant's subsidiaries as of December 31,
1996, other than subsidiaries that, if considered in the aggregate
as a single subsidiary, would not constitute a significant
subsidiary at such date:
Name Jurisdiction
of of
Subsidiary Incorporation
---------- -------------
UTV of San Francisco, Inc. California
UTV of San Antonio, Inc. Texas
United Sales, Inc. Delaware
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-59277 and 33-21903) of United Television, Inc.
of our report dated February 11, 1997 which appears on page 19 of the 1996
Annual Report to Shareholders of United Television, Inc., which is incorpo-
rated by reference in this Annual Report on Form 10-K for the year ended
December 31, 1996. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page 20 of such
Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Century City, California
March 28, 1997
<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 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 21,695
<SECURITIES> 159,257
<RECEIVABLES> 37,556
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 249,795
<PP&E> 66,451
<DEPRECIATION> 51,918
<TOTAL-ASSETS> 335,598
<CURRENT-LIABILITIES> 58,539
<BONDS> 0
<COMMON> 934
0
0
<OTHER-SE> 249,507
<TOTAL-LIABILITY-AND-EQUITY> 335,598
<SALES> 174,339
<TOTAL-REVENUES> 174,339
<CGS> 115,263
<TOTAL-COSTS> 115,263
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 69,239
<INCOME-TAX> 27,500
<INCOME-CONTINUING> 41,739
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,739
<EPS-PRIMARY> 4.40
<EPS-DILUTED> 4.40
</TABLE>
