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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
--------------
/ / 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, CA 90212
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(310) 281-4844
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of August 12, 1999, there were 9,430,163 shares of the registrant's
common stock outstanding.
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED TELEVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands)
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 59,126 $ 50,771
Marketable securities 169,687 166,056
Accrued interest receivable 609 890
Accounts receivable, net 43,122 38,853
Film contract rights 19,135 38,074
Deferred tax benefit 3,967 6,209
Prepaid expenses and other
current assets 2,384 1,935
----------- -----------
Total current assets 298,030 302,788
----------- -----------
Other Investments 26,385 26,385
----------- -----------
Film Contract Rights, noncurrent 4,445 5,113
----------- -----------
Property and Equipment, net 18,398 16,537
----------- -----------
Intangible Assets, net 85,084 86,359
----------- -----------
Other Assets 509 459
----------- -----------
$ 432,851 $ 437,641
=========== ===========
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Film contracts payable $ 23,069 $ 28,433
Accounts payable 2,197 1,902
Accrued expenses 25,988 30,313
Income taxes payable 10,023 13,158
----------- -----------
Total current liabilities 61,277 73,806
----------- -----------
Film Contracts Payable after One Year 16,709 23,756
----------- -----------
Deferred Tax Liabilities 335 2,632
----------- -----------
Shareholders' Investment:
Preferred stock $1.00 par value - -
Common stock $.10 par value 943 941
Additional paid-in capital 2,878 1,480
Retained earnings 348,006 331,409
Treasury stock, at cost (828) -
Accumulated other
comprehensive income 3,531 3,617
----------- -----------
354,530 337,447
----------- -----------
$ 432,851 $ 437,641
=========== ===========
<FN>
The accompanying notes to condensed consolidated financial statements are an
integral part of these balance sheets.
</TABLE>
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<TABLE>
UNITED TELEVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands except per share data)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Revenues $ 53,427 $ 48,503 $ 98,388 $ 87,796
-------- -------- -------- --------
Expenses:
Operating 18,267 14,840 36,807 30,795
Selling, general and
administrative 16,176 15,440 32,229 30,806
-------- -------- -------- --------
34,443 30,280 69,036 61,601
-------- -------- -------- --------
Operating income 18,984 18,223 29,352 26,195
-------- -------- -------- --------
Interest and Other Income:
Gain on sale of BHC
Communications, Inc.
common stock - 19,932 - 19,932
Interest and other income 2,903 2,167 5,878 5,155
-------- -------- -------- --------
2,903 22,099 5,878 25,087
-------- -------- -------- --------
Income before income taxes 21,887 40,322 35,230 51,282
Income Tax Provision (8,650) (15,450) (13,925) (19,800)
-------- -------- -------- --------
Net income $ 13,237 $ 24,872 $ 21,305 $ 31,482
======== ======== ======== ========
Earnings per Share:
Basic $ 1.41 $ 2.65 $ 2.26 $ 3.36
Diluted $ 1.40 $ 2.63 $ 2.26 $ 3.34
Average Number of Common and Common
Equivalent Shares Outstanding:
Basic 9,417 9,396 9,415 9,382
Diluted 9,437 9,444 9,436 9,433
<FN>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
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<TABLE>
UNITED TELEVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<CAPTION>
Six Months
Ended June 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 21,305 $ 31,482
Adjustment to reconcile net income to net
cash provided from operating activities:
Film contract payments (14,831) (13,621)
Film contract amortization 16,766 12,223
Depreciation and other amortization 3,362 3,358
Gain on sale of BHC common stock - (19,932)
Gain on dispositions of other investments (759) (499)
Changes in assets and liabilities:
Accounts receivable (4,269) (1,357)
Prepaid and other assets 5,028 2,985
Accounts payable and accrued expenses (4,030) (3,439)
Income taxes payable (3,135) 10,021
-------- --------
Net cash provided from
operating activities 19,437 21,221
-------- --------
Cash Flows from Investing Activities:
Sales of marketable securities 32,798 78,155
Purchases of marketable securities (35,796) (29,961)
Purchases of other investments - (8,854)
Station acquisition:
Fixed assets - (2,568)
Intangible assets - (77,668)
Capital expenditures (3,948) (1,565)
-------- --------
Net cash used in
investing activities (6,946) (42,461)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (4,708) (4,688)
Proceeds from exercise of employee stock options 1,400 3,259
Purchases of treasury stock (828) (7,010)
-------- --------
Net cash used in financing activities (4,136) (8,439)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 8,355 (29,679)
Cash and Cash Equivalents at Beginning of Period 50,771 98,075
-------- --------
Cash and Cash Equivalents at End of Period $ 59,126 $ 68,396
======== ========
<FN>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
</TABLE>
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UNITED TELEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. PRINCIPLES OF CONSOLIDATION:
The accompanying condensed consolidated financial statements
include the accounts of UTV and its subsidiaries after elimination
of all significant intercompany accounts and transactions. UTV is a
majority owned (58.5% at June 30, 1999) subsidiary of BHC
Communications, Inc. (BHC), a majority owned subsidiary of Chris-Craft
Industries, Inc.
The financial information included herein has been prepared by
UTV, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
However, UTV believes that the disclosures herein are adequate to
make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in
conjunction with the financial statements and the notes thereto
included in UTV's latest annual report on Form 10-K. The information
furnished reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods.
The results for this interim period are not necessarily indicative of
results to be expected for the full fiscal year, due to seasonal
factors, among others.
2. MARKETABLE SECURITIES:
All of UTV's marketable securities have been categorized as
available for sale and as a result are carried at fair market value.
At June 30, 1999, all U.S. Government securities mature within one
year. Marketable securities classified by security type are as
follows (in thousands):
<TABLE>
<CAPTION>
Gross Unrealized
----------------
Cost Gains Losses Fair Value
-------- ------- ------ ----------
<S> <C> <C> <C> <C>
June 30, 1999
U.S. Government securities $146,285 $ 24 $ 141 $146,168
Equity securities 17,593 6,634 708 23,519
-------- ------- ------ --------
$163,878 $ 6,658 $ 849 $169,687
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Gross Unrealized
----------------
Cost Gains Losses Fair Value
-------- ------- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
U.S. Government securities $142,578 $ 209 $ 26 $142,761
Equity securities 17,526 6,236 467 23,295
-------- ------- ------ --------
$160,104 $ 6,445 $ 493 $166,056
======== ======= ====== ========
</TABLE>
The difference between cost and fair value, net of taxes, is
reflected as an increase to shareholders' investment in the
accompanying balance sheets.
For the six months ended June 30, 1999, UTV realized marketable
securities gains of $759,000. For purposes of computing realized gains
and losses, cost was determined using the specific identification method.
3. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes for the six months ended June 30, 1999
and 1998 totaled $17,060,000 and $9,779,000, respectively.
4. COMPREHENSIVE INCOME:
Other comprehensive income includes only unrealized gains and
losses on marketable securities classified as available for sale (see
Note 2), net of reclassification adjustments for gains included in net
income. Comprehensive income is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 13,237 $ 24,872 $ 21,305 $ 31,482
Other comprehensive income
(loss), net of taxes 809 (13,522) (86) (10,339)
-------- -------- -------- --------
Comprehensive income $ 14,046 $ 11,350 $ 21,219 $ 21,143
======== ======== ======== ========
</TABLE>
5. COMMITMENTS:
The aggregate amount payable by UTV under contracts for
programming not currently available for telecasting at June 30, 1999,
and, accordingly, not included in film contracts payable and the
related contract rights in the accompanying Condensed Consolidated
Balance Sheets, totaled $98,485,000. At June 30, 1999, UTV also has
a remaining commitment to invest over time up to $13,952,000 in
investment limited partnerships.
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In 1997, UTV signed a definitive agreement to purchase the assets
of UHF television station WRBW-TV in Orlando, Florida, for approximately
$60,000,000, possible future consideration, the purchase of accounts
receivable and the assumption of programming obligations. (See Note 6.)
6. SUBSEQUENT EVENT:
In July, 1999, UTV completed the acquisition of the assets of
UHF television station WRBW-TV in Orlando, Florida, for $60,000,000
plus a net amount of $8,174,000 related to the purchase of receivables,
assumption of programming obligations and other adjustments. The
purchase price was paid from working capital. UTV remains obligated
for possible future consideration relating to the purchase of up to
$25,000,000.
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UNITED TELEVISION, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
Liquidity and Capital Resources
- -------------------------------
UTV's operating cash flow is generated primarily by its
television broadcasting operations and generally parallels the
earnings of UTV's 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 periods (amortization exceeded
payments by $1,935,000 in the first six months of 1999, while
payments exceeded amortization by $1,398,000 in the first six months
of 1998) and is dependent upon the mix of programs aired and payment
terms of the stations' contracts. UTV stations generated substantial
cash flow in the first six months of 1999, and are expected to do the
same for the full year. With its considerable cash and marketable
securities balances, UTV continues to be well positioned to pursue
new opportunities and deal effectively with uncertainties that may
arise in the television broadcasting industry or economic environment.
UTV's cash flow is augmented by interest and dividend income
associated with its cash and marketable securities. UTV's cash flow
from operations for the first six months of 1999 totaled $19,437,000,
and cash and marketable securities increased $11,986,000 to
$228,813,000 at June 30, 1999. At June 30, 1999, UTV has a remaining
commitment to invest over time up to $13,952,000 in investment
limited partnerships.
Working capital increased $7,771,000 during the first six months
of 1999 to $236,753,000 at June 30, 1999. Working capital at June 30,
1999 remains substantially in excess of UTV's normal operating
requirements.
In 1997, UTV signed a definitive agreement to purchase the assets
of UHF television station WRBW-TV in Orlando, Florida. The
acquisition was completed in July, 1999 for $60,000,000 plus a net
amount of $8,174,000 related to the purchase of receivables, assumption
of programming obligations and other adjustments. The purchase price
was paid from working capital. UTV remains obligated for possible
future consideration relating to the purchase of up to $25,000,000.
UTV continues to be 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 additional capital to augment its
already substantial liquid assets, if desired, to fund any resulting
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 $98,485,000
at June 30, 1999. UTV expects to continue to satisfy these
commitments in the ordinary course of business.
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UTV's Board of Directors has from time to time authorized the
purchase of UTV common shares. At June 30, 1999, 721,249 shares were
authorized for purchase. From January 1, 1997, through June 30, 1999,
107,500 shares were purchased for an aggregate cost of $10,592,000, of
which 8,400 shares were purchased during the first six months of 1999
for an aggregate cost of $828,000.
UTV's commitments for capital expenditures at June 30, 1999 were
not material in relation to UTV's financial position. During 1998,
UTV's stations began converting to digital television (DTV). This
conversion will require the purchase of digital transmitting equipment
to telecast over a newly assigned frequency. In April, 1999, KBHK-TV
in San Francisco became the first of the UTV stations to make the
initial conversion to DTV signal transmission. This conversion rollout
is expected to take a number of years and will be subject to competitive
market conditions. Funds for capital expenditures have generally been
provided from operations. UTV expects that future capital expenditures
for its present business, including the cost to convert to DTV, will be
funded from operations or current cash balances. UTV has no present
requirement for additional capital.
UTV, which completed an assessment of its year 2000 issues in 1998,
believes that the total estimated compliance cost is immaterial. UTV
expects to have completed all remediation efforts, including third party
systems testing, by September 30, 1999. UTV continues to believe that
such issues will not have a material effect on its business, results of
operations or financial condition.
Quantitative and Qualitative Disclosures about Market Risk
- ----------------------------------------------------------
UTV is subject to certain market risk related to its marketable
securities holdings, which are all held for other than trading purposes.
The table below provides information as of June 30, 1999 about the
U.S. Government securities which are subject to interest rate
sensitivity and the equity securities which are subject to equity
market sensitivity (in thousands):
Cost Fair Value
-------- ----------
U.S. Government securities $146,285 $146,168
Equity securities 17,593 23,519
All of UTV's marketable securities have been categorized as
available for sale and are comprised substantially of U.S. Government
securities, all of which mature within one year. (See Note 2 to
Condensed Consolidated Financial Statements.)
Results of Operations
- ---------------------
UTV's primary source of revenue is the sale to advertisers of time
on its six television stations (seven stations effective July, 1999).
Second quarter 1999 net income decreased to $13,237,000, or $1.41
per share ($1.40 per share diluted), compared to net income of
$24,872,000, or $2.65 per share ($2.63 per share diluted) last year.
The 1998 results reflected a second quarter net gain from the sale of
marketable securities of $12,932,000, or $1.38 per share ($1.37 per
share diluted). On a comparable basis excluding the 1998 gain on sale
of securities, net income rose 11% for the quarter.
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Consolidated net revenue rose 10% for the quarter to a record
$53,427,000, from $48,503,000 last year. The increase reflects
strong local and national advertising sales gains at most of UTV's
stations. The sales gains resulted primarily from strong audience
ratings and advertiser demand for newer syndicated off-network series
and continued acceptance by viewers and advertisers of WUTB, UTV's
Baltimore station, which was acquired in January, 1998 and then began
operating for the first time as a traditional commercial broadcasting
station.
Notwithstanding a 14% increase in operating expenses, resulting
primarily from a 27% increase in station programming costs, operating
income rose 4% to a second quarter record of $18,984,000, from
$18,223,000 last year. Interest and other income for the quarter
increased 34% to $2,903,000, from $2,167,000 in 1998.
Reflecting the 1998 gain on the sale of securities, net income
for the first six months of 1999 decreased to $21,305,000, or $2.26 per
basic and diluted share, from last year's net income of $31,482,000,
or $3.36 per share ($3.34 per share diluted). On a comparable basis
excluding the 1998 gain on the sale of securities, net income rose
15% for the six-month period.
Year to date consolidated net revenues rose 12% to $98,388,000,
from $87,796,000 in 1998. The increase reflects a 12% increase in
local and national advertising revenues, primarily resulting from
successful syndicated series and increased acceptance by viewers and
advertisers of WUTB.
The revenue increase more than offset a 12% increase in operating
expenses, primarily related to a 22% increase in station programming
costs. Operating income for the six-month period increased 12% to
$29,352,000, from last year's $26,195,000. Interest and other income
for the period increased 14% to $5,878,000, from $5,155,000 in 1998.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
-----------------------------------------------------------
The information appearing in the Management's Discussion and
Analysis under the caption "Quantitative and Qualitative Disclosures
about Market Risk" is incorporated herein by this reference.
UNITED TELEVISION, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
UTV held its annual meeting of stockholders on May 3, 1999.
At the meeting, the following were elected directors, by the
number of votes set forth opposite their respective names:
Broker
For Withheld Non-votes
--------- -------- ---------
John C. Siegel 8,560,140 16,131 - 0 -
Evan C Thompson 8,560,309 15,962 - 0 -
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At the meeting, the 1999 Stock Option Plan was adopted by the
following vote:
Broker
For Against Abstain Non-votes
--------- ------- ------- ---------
7,538,994 473,539 16,663 547,075
At the meeting, the selection of PricewaterhouseCoopers LLP
as UTV's auditors for the current year was ratified by the
following vote:
Broker
For Against Abstain Non-votes
--------- ------- ------- ---------
8,572,657 781 2,833 - 0 -
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit 27 - Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for which
this report is being filed.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNITED TELEVISION, INC.
(Registrant)
Date: August 13, 1999 By: /s/ Garth S. Lindsey
--------------- -------------------------
Garth S. Lindsey
Executive Vice President
and Chief Financial
Officer (Principal
Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM 10Q DATED
JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 59,126
<SECURITIES> 169,687
<RECEIVABLES> 43,122
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 298,030
<PP&E> 78,527
<DEPRECIATION> 60,129
<TOTAL-ASSETS> 432,851
<CURRENT-LIABILITIES> 61,277
<BONDS> 0
<COMMON> 943
0
0
<OTHER-SE> 353,587
<TOTAL-LIABILITY-AND-EQUITY> 432,851
<SALES> 98,388
<TOTAL-REVENUES> 98,388
<CGS> 69,036
<TOTAL-COSTS> 69,036
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,230
<INCOME-TAX> 13,925
<INCOME-CONTINUING> 21,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,305
<EPS-BASIC> 2.26
<EPS-DILUTED> 2.26
</TABLE>
