SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(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, 1999
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, 90212
Beverly Hills, California (Zip Code)
(Address of principal executive offices)
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. [X]
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of February 29, 2000, was approximately $493,642,000.
As of February 29, 2000, there were 9,499,573 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The documents incorporated by reference into this Form 10-K and the
Parts hereof into which such documents are incorporated are listed below:
Document Part
Those portions of the registrant's annual II
report to stockholders for the
fiscal year ended December 31, 1999
(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
2000 Annual Meeting (the "Proxy Statement")
that are specifically
identified herein as incorporated by reference
into this Form 10-K.
<PAGE> 3
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% at
February 29, 2000) subsidiary of BHC Communications, Inc. ("BHC"), which is a
majority owned (80% at February 29, 2000) subsidiary of Chris-Craft Industries,
Inc. ("Chris-Craft"). UTV owns and operates seven of BHC's ten television
stations that comprise Chris-Craft's Television Division.
At February 29, 2000, UTV had 635 full-time employees and 93 part-time
employees.
Television Broadcasting
UTV operates three very high frequency ("VHF") television stations and
four 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 households to receive.
This disadvantage is eliminated when a viewer receives the UHF station through a
cable system.
Commercial broadcast television stations may be 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:
<PAGE> 4
Total
Commercial
Network Af- DMA TV Stations DMA
Station and filiation/ House- DMA Operating in Cable TV
Location Channel holds(1) Rank(1) Market(2) Penetration(3)
- ----------- ----------- ---------- -------- ------------ --------------
KMSP UPN 9 1,481,050 14th 4 VHF 54%
Minne- 3 UHF
apolis/
St. Paul
KTVX ABC 4 720,860 36th 4 VHF 53%
Salt 2 UHF
Lake City
KMOL NBC 4 684,730 37th 3 VHF 66%
San 3 UHF
Antonio
KBHK UPN 44 2,423,120 5th 4 VHF 72%
San 10 UHF
Francisco
KUTP UPN 45 1,390,750 17th 4 VHF 59%
Phoenix 4 UHF
WRBW UPN 65 1,101,920 22nd 3 VHF 76%
Orlando 9 UHF
WUTB UPN 24 999,200 24th 3 VHF 68%
Baltimore 3 UHF
- ------------
(1) 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.
(2) Additional channels have been allocated by the FCC for activation as
commercial television stations in certain of these markets. Also, additional
stations may be located within the respective DMAs of UTV stations but outside
the greater metropolitan television markets in which UTV stations operate.
(3) Cable penetration refers to the percentage of DMA television viewing
households receiving cable television service, as estimated by Nielsen Media
Research.
<PAGE> 5
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 210 DMAs in the United States. DMAs are ranked annually
by the estimated number of households owning a television set within the DMA.
Advertising rates that a television station can command vary in part with the
size, in terms of television households, of the DMA served by the station.
Within a DMA, the advertising rates charged by competing stations
depend primarily on 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 television
households in the entire DMA tuned to a particular station, and a share point
represents one percent of all television households within the DMA actually
using at least one 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 stations, 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 station, because it broadcasts more syndicated programming than
a major-network affiliate, are generally higher than those of a major-network
affiliate in the same market. These differences have been reduced by the growth
of the Fox network, which currently provides 15 weekly hours of programming
during prime time and additional programming in other periods, and are being
reduced further as the other newer networks provide expanded schedules of
programming.
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 available
to its stations, and desiring to participate in potential profits through
national syndication of programming, UTV invests directly in the development of
original programming. The aggregate amount invested in original programming
through December 31, 1999 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.
Programs obtained from independent sources consist principally of
syndicated television shows, many of which have been shown previously on a major
network, and syndicated feature films, which were either made for network
television or have been exhibited previously in motion picture theaters (most of
which films have been shown previously on network or cable television).
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
<PAGE> 6
the same programming to other television stations in the same market. A single
syndication source may provide a number of different series or programs.
Licenses for syndicated programs are often offered for cash sale (i.e.,
without any barter element) to stations; however, some are offered on a barter
or cash plus barter basis. In the case of a cash sale, the station purchases the
right to broadcast the program, or a series of programs, and sells advertising
time during the broadcast. The cash price of such 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 therefore, with less
inventory.
Barter and cash plus barter programming reduce both the amount of cash
required for program purchases and the amount of time available for sale.
Although the direct impact on broadcasters' operating income generally is
believed to be neutral, program distributors that acquire barter air time
compete with television stations and broadcasting networks for sales of air
time. UTV believes that the effect of barter on its television stations is not
significantly different from its impact on the industry as a whole.
UTV television stations are frequently required to make substantial
financial commitments to obtain syndicated programming while such programming is
still being broadcast by another network and before it is available for
broadcast by UTV stations, or even before it has been produced. Generally,
syndication contracts require the station to acquire an entire program series,
before the number of episodes of original showings that will be produced has
been determined. While analyses of network audiences are used in estimating the
value and potential profitability of such programming, there is no 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
programming not available for broadcast are not recorded as liabilities until
the programming becomes available for broadcast, at which time the related
contract right is also recorded as an asset. 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 $56,487,000 as of December 31, 1999. The stations were committed for
film and sports rights contracts aggregating $78,322,000 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) and 9 of Notes to Consolidated Financial Statements.
KTVX and KMOL are primary affiliates of their respective networks. Most
networks have begun to enter into affiliation agreements for terms as long as
ten years. UTV has entered into 10-year affiliation agreements for KTVX and
KMOL. Current FCC rules do not limit the duration of affiliation agreements.
An affiliation agreement gives the affiliate the right to broadcast all
programs transmitted by the network. Network programs are produced either by the
networks themselves or by independent production companies and are transmitted
by the networks to their affiliated stations for broadcast. 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.
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 may give the
network the right to offer that program to another station in the area.
For each hour of programming broadcast by the affiliate, the major
networks generally have paid their affiliates a fee, specified in the agreement
(although subject to change by the network), which varies in amount depending on
the time of day during which the program is broadcast and other factors. Prime
time programming generally earns the highest fee. A network may, and sometimes
does, designate certain programs to be broadcast with no compensation to the
station.
<PAGE> 7
Sources of Revenue
The principal source of revenues for UTV stations is the sale of
advertising time to national and local advertisers. Such time sales are
represented by spot announcements purchased to run between programs and program
segments and by program sponsorship. Most advertising contracts are short-term.
The relative contributions of national and local advertising to UTV's gross cash
advertising revenues vary from time to time.
UTV's television business is seasonal, like that of the television
broadcasting business generally. In terms of revenues, generally the fourth
quarter is strongest, followed 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. UTV has established a national sales
representative organization, United Television Sales, Inc. ("UTS"), which
represents nine of the ten UTV and BHC stations.
Practices with respect to the 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 determine the
locations of stations, to regulate the broadcasting equipment used by stations,
to establish areas to be served, to adopt such regulations as may be necessary
to carry out the provisions of the Communications Act and to impose certain
penalties for violation of its regulations. 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 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. Prior to 1998, television licenses generally were issued for
five-year terms, but such licenses and their renewals are now normally issued
for 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.
KMSP UPN 9's license renewal was granted on February 11, 2000 and is
due to expire on April 1, 2006. KTVX's license renewal was granted on October 9,
1998 and is due to expire on October 1, 2006. KUTP UPN 45's license renewal was
granted on April 20, 1999 and is due to expire on October 1, 2006. KBHK UPN 44's
license renewal was granted on January 8, 1999 and is due to expire on December
1, 2006. KMOL's license renewal was granted on November 12, 1998 and is due to
expire on August 1, 2006. WUTB UPN 24's license was assigned to UTV of
Baltimore, Inc., a subsidiary of UTV, on January 20, 1998 and is due to expire
on October 1, 2001. WRBW UPN 65's license was assigned to UTV of Orlando, Inc.,
a subsidiary of UTV, on July 7, 1999 and is due to expire on February 1, 2005.
On August 5, 1999, the FCC adopted changes in several of its broadcast
ownership rules (collectively, the "FCC Ownership Rules"). These rule changes
became effective on November 16, 1999; however, several petitions have been
filed with the FCC seeking reconsideration of the new rules, so the rules may
change.
Among other changes, the FCC relaxed its "television duopoly" rule,
which barred any entity from having an attributable interest in more than one
television station with overlapping service areas. Under the new rules, one
entity may have attributable interests in two television stations in the same
DMA, provided that (1) one of the two stations is not among the top four in
audience share, and (2) at least eight independently owned and operated
commercial and noncommercial television stations will remain in the DMA, if the
proposed transaction is consummated. The new rules also permit common ownership
of television stations in the same DMA, if one of the stations to be commonly
owned has failed, is failing or is unbuilt, or if extraordinary public interest
factors are
<PAGE> 8
present. To transfer ownership in two commonly owned television
stations in the same DMA, it will be necessary to again demonstrate compliance
with the new rules. Lastly, the new rules authorize the common ownership of
television stations with overlapping signal contours as long as the stations to
be commonly owned are located in different DMAs.
Similarly, the FCC relaxed its "one-to-a-market" rule, which restricts
the common ownership of television and radio stations in the same market. One
entity now may own up to two television stations and six radio stations or one
television station and seven radio stations in the same market provided, that
(1) 20 independent media voices (including certain newspapers and a single cable
system) will remain in the relevant market following consummation of the
proposed transaction, and (2) the proposed combination is consistent with the
television duopoly and local radio ownership rules. If fewer than 20 but more
than 9 independent voices will remain in a market following a proposed
transaction, and the proposed combination is otherwise consistent with the FCC's
rules, a single entity may have attributable interests in up to two television
stations and four radio stations. If these various "independent voices" tests
are not met, a party generally may have an attributable interest in no more than
one television station and one radio station in a market.
The FCC made other changes to its rules that determine what constitutes
an "attributable interest" in applying the FCC Ownership Rules. Under the new
rules, a party will be deemed to have an attributable interest in a television
or radio station, cable system or daily newspaper that triggers the FCC's
cross-ownership restrictions, if (1) it is a non-passive investor, and it owns
5% or more of the voting stock in the media outlet or its controlling parent;
(2) it is a passive investor (i.e., bank trust department, insurance company or
mutual fund) and it owns 20% or more of the voting stock; or (3) its interests
(which may be in the form of debt or equity (even if non-voting), or both)
exceeds 33% of the total asset value of the media outlet, and it either (i)
supplies at least 15% of a station's weekly broadcast hours or (ii) has an
attributable interest in another media outlet in the same market.
The FCC also declared that local marketing agreements, or "LMAs", now
will be attributable interests for purposes of the FCC Ownership Rules. The FCC
will grandfather LMAs that were in effect prior to November 5, 1996, until it
has completed the review of its attribution regulations in 2004. Parties may
seek the permanent grandfathering of such an LMA, on a non-transferable basis,
by demonstrating that the LMA is in the public interest and that it otherwise
complies with FCC Ownership Rules.
Finally, the FCC eliminated its "cross interest" policy, which had
prohibited common ownership of a cognizable interest in one media outlet and a
"meaningful" non-cognizable interest in another media outlet serving essentially
the same market.
It is difficult to assess how these changes in the FCC ownership
restrictions will affect UTV's broadcast business.
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 households considered within each
market. Because of certain limitations of the UHF signal, however, the FCC will
attribute only 50% of a market's DMA reach to owners of UHF stations for the
purpose of calculating the audience reach limits. Applying the 50% reach
attribution rule to UTV's four UHF stations, the 10 BHC stations are deemed to
reach approximately 19% of the nation's television households. The FCC is
considering whether to eliminate the 50% attribution reduction under this rule
for UHF stations.
FCC regulations also prohibit common ownership or control between two
of ABC, NBC, CBS, and Fox, or any one of those four networks and, under current
interpretation, either UPN or WB. The FCC is considering whether to modify or
eliminate this rule.
The Telecom Act directed 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 authorized 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
<PAGE> 9
satisfactory voluntary rating system of its own. On March 12,
1998, the FCC voted to accept an industry proposal providing for a voluntary
ratings system of "TV Parental Guidelines" under which all video programming
will be designated in one of six categories to permit the electronic blocking of
selected video programming. The FCC has begun a separate proceeding to address
technical issues related to the "V-Chip." The FCC has directed that all
television receiver models with picture screens 13 inches or greater be equipped
with "V-Chip" technology under a phased implementation beginning on July 1,
1999. UTV cannot predict how changes in the implementation of the ratings system
and "V-Chip" technology will affect UTV's business.
The FCC recently adopted regulations requiring increased
closed-captioning of video programming. Subject to various exemptions,
television stations will be required to begin broadcasting specified amounts or
a specified percentage of new programs with closed captioning in the year 2000
and specified percentages of pre-rule programming commencing in 2008.
FCC regulations prohibit the holder of an attributable interest in a
television station from having an attributable interest in a cable television
system located within the predicted coverage area of that station. FCC
regulations also prohibit the holder of an attributable interest in a television
station from having an attributable interest in a daily newspaper located within
the predicted coverage area of that station. The 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
broadcaster 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 June 1997, the U.S. Supreme Court upheld the
constitutionality of the must-carry provisions.
The FCC has taken a number of steps to implement digital television
service ("DTV") (including high definition) in the United States. In December
1996, the FCC adopted a DTV broadcast standard. On February 17, 1998, the FCC
affirmed an amended table of digital channel allotments and rules for the
implementation of DTV, initially adopted in 1997. The digital table of
allotments provides each existing television station licensee or permittee with
a second broadcast channel to be used during the transition to DTV, conditioned
upon the surrender of one of the channels at the end of the DTV transition
period. The DTV channels assigned to UTV television stations are as follows:
KBHK, channel 45; KMSP, channel 26; KMOL, channel 58; KTVX, channel 40; KUTP,
channel 26; WUTB, channel 41; and WRBW, channel 41. Implementation of DTV is
expected to improve the technical quality of television. Furthermore, the
implementing rules permit broadcasters to use their assigned digital spectrum
flexibly to provide either standard or high-definition video signals and
additional services, including, for example, data transfer, subscription video,
interactive materials, and audio signals, as long as they continue to provide at
least one free, over-the-air television service. However, the digital table of
allotments was devised on the basis of certain technical assumptions that have
not been subjected to extensive field testing and that, along with specific
digital channel assignments, may be subjected to further administrative and
judicial review. Conversion to DTV may reduce the geographic reach of the UTV
television stations or result in increased interference, with, in either case, a
corresponding loss of population coverage. DTV implementation will impose
additional costs on UTV, primarily due to the capital costs associated with
construction of DTV facilities, and increased operating costs, both during and
after the transition period. In addition, the Telecommunications Act requires
the FCC to assess and collect a fee for any use of a broadcaster's DTV channel
for which it receives subscription fees or other compensation other than
advertising revenue. The FCC has set a target date of 2006 for expiration of the
transition period, subject to biennial reviews to evaluate the progress of DTV,
including the rate of consumer acceptance. The FCC is also conducting a
rule-making proceeding to determine whether and the extent to which cable
television systems should be obligated to carry the signals of broadcast DTV
stations.
Some of UTV's television stations began broadcasting on their DTV
channels, in addition to their analog broadcasts, in 1999. UTV has filed
applications with the FCC for permits to construct DTV facilities for each of
its other stations, except WRBW, for which an extension of time has been
granted. Future capital expenditures by UTV will be compatible with the new
technology whenever possible.
The FCC is conducting a rulemaking proceeding to consider relaxing or
eliminating 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 relaxing its rule prohibiting network affiliated stations from
<PAGE> 10
preventing other stations from broadcasting the programming of their network.
UTV is unable to predict the outcome of these proceedings.
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
television station licensee or any corporation directly or indirectly
controlling such licensee. No more than 20% of a licensee's capital stock and,
if the FCC so determines, no more than 25% of the capital stock of a company
controlling a licensee, may be owned, 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.
On January 20, 2000, the FCC approved new equal employment opportunity
and outreach requirements that will apply to all broadcast licensees (and cable
operators). Although the FCC has not yet released the text of these rules, the
key elements are: (1) licensees will be required to implement a minority
outreach program; (2) licensees with five or more full-time employees must place
a report regarding their outreach efforts in their public inspection file
annually, and, if they have more than 10 full-time employees, they must submit
the last four years of these reports to the FCC at the halfway point and
endpoint of their license terms which will be subject to FCC review; (3)
licensees with five or more full-time employees also must file with the FCC a
"Statement of Compliance" with regard to their outreach efforts every two years;
and (4) licensees with five or more full-time employees also must file annual
employment reports, of the sort filed prior to 1998, which the FCC will use only
to monitor minority employment.
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 $28,450 per station.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or regulations and policies of the FCC
thereunder. Reference is made to the Communications Act, such regulations and
the public notices promulgated by the FCC for further information.
Other Federal agencies, including principally the Federal Trade
Commission, also impose a variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional or revised
requirements are considered by the FCC, other Federal agencies or Congress from
time to time. 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.
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
relation to competing entertainment, and the results of this competition affect
the advertising revenues earned by the station from the sale of advertising
time.
Audience ratings provided by Nielsen have a direct bearing on the
competitive position of television stations. In general, major network programs
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, has a viewing audience the same size as the Fox
UHF affiliate, and has a larger viewing audience than the other two stations,
both of which are UHF stations. In Salt Lake City, KTVX generally ranks second
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,
<PAGE> 11
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. WRBW UPN 65 generally ranks sixth in
terms of audience share, of the twelve commercial stations in the Orlando
market. In Baltimore, WUTB UPN 24 generally ranks sixth of the six commercial
stations in terms of audience share.
UTV stations may face increased competition in the future from
additional television stations that may enter their respective markets. See note
(2) to the table under Television Broadcasting.
Cable television is 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.
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. As of June 1999, there
were approximately 60,000 subscribers to OVS systems.
"Syndicated exclusivity" rules allow television stations to prevent
local cable operators from importing distant television programming that
duplicates syndicated programming in which local stations have acquired
exclusive rights. In conjunction with these rules, network nonduplication rules
protect the exclusivity of network broadcast programming within the local video
marketplace. The FCC is also reviewing its "territorial exclusivity" rule, which
limits the area in which a broadcaster can obtain exclusive rights to video
programming. 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.
The emergence of home satellite dish antennas has made it possible for
individuals to receive a host of video programming options via satellite
transmission. Four direct to home satellite systems ("DTH") currently provide
service. The number of subscribers to DTH services increased substantially
during the past five years, to approximately 13.1 million as of December 1999.
On November 29, 1999, the President signed the Satellite Home Viewer
Improvement Act ("SHVIA"). Among other things, SHVIA provides for a statutory
copyright license to enable satellite carriers to retransmit local television
broadcast stations' programming into the stations' respective local markets.
After May 27, 2000, satellite carriers will be prohibited from delivering a
local signal into their local markets - so called "local-into-local" service -
without the consent or must-carry election of such stations, but stations will
be obligated to engage in good faith retransmission consent negotiations with
the carriers. SHVIA does not require satellite carriers to, but provides that
carriers that choose to do so must, comply with certain mandatory signal
carriage requirements by a date certain, as defined by the Act, or as-yet to be
drafted FCC regulations. Further, the Act authorizes satellite carriers to
continue to provide certain network signals to unserved households, as defined
in SHVIA and FCC rules, except that carriers may not provide more than two
same-network stations to a household in a single day. Also, households that do
not receive a signal of Grade A intensity from any of a particular network's
affiliates may continue to receive distant station signals for that network
until December 31, 2004, under certain conditions. The FCC has initiated several
rule making proceedings, as required by SHVIA, to implement certain aspects of
the Act, such as standards for good faith retransmission consent negotiations,
must-carry procedures, exclusivity protection for local stations against certain
distant signals, and enforcement.
An additional challenge is now posed by wireless cable systems,
including multichannel distribution services ("MDS"). Two four-channel MDS
licenses have been granted in 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 purposes. The multichannel capacity of ITFS could be
combined with either an
<PAGE> 12
existing single channel MDS or a newer multichannel multi-point distribution
service to increase the number of available channels offered by an individual
operator. At the end of 1999, wireless cable systems served about 1.5 million
subscribers.
The broadcasting industry is continuously faced with technological
changes, competing entertainment and communications media and governmental
restrictions or actions of Federal regulatory bodies, including the FCC. These
technological changes may include the introduction of digital compression by
cable systems that would significantly increase the number and availability of
cable program services with which 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
Baltimore, Orlando, Salt Lake City and San Francisco. The Baltimore lease
expires in April 2005 and is renewable, at increased rental, for two five-year
periods. The Orlando lease expires in March 2004. The Salt Lake City lease
expired in August 1999, but has been extended on a month-to-month basis through
April 2000. UTV has acquired a 6.03 acre site in Salt Lake City, on which UTV is
completing construction of a new, approximately 48,000 square foot, studio
facility. The San Francisco lease expires in 2007. UTV also occupies leased
facilities in various cities throughout the country.
The Minneapolis facility includes approximately 49,700 square feet of
space on a 5.63-acre site. The current Salt Lake City facility is approximately
30,400 square feet on a 2.53-acre site. The San Antonio facility is
approximately 41,000 square feet on a .92-acre site. The San Francisco facility
is approximately 27,700 square feet in downtown San Francisco. The Phoenix
facility is approximately 26,400 square feet on a 3.03-acre site. The Orlando
facility is approximately 8,750 square feet and is located at Universal Studios
in Orlando. The Baltimore facility is approximately 11,700 square feet and is
located in an office park in a suburb of Baltimore. 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 July 2002 and is renewable, at no increase
in rental, for a 50-year period.
KMOL's transmitter facilities are located at a site near San Antonio on
land and on a tower owned by Texas Tall Tower Corporation, a corporation owned
in equal shares by UTV and another television station that also transmits from
the same tower.
KBHK's transmitter is located on Mt. Sutro, as part of the Sutro Tower
complex, which also houses equipment for other San Francisco television stations
and many of its FM radio stations. The lease for the Mt. Sutro facilities
expires in 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.
WRBW's transmitter facilities are located on a site near Orlando. The
building containing the transmitter, and the tower on which the antenna is
mounted are shared with another television station as well as several FM radio
stations. The lease for the tower and building expires in September 2001, and is
renewable for two five-year periods.
WUTB's transmitter facilities are located on a site near Baltimore. The
building containing the transmitter, and the tower on which the antenna is
mounted, are shared with another television station. The lease for the tower and
building expires in December 2004 and is renewable for a five-year period.
<PAGE> 13
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 29, 2000, are as follows:
Positions with UTV; Has served
principal occupation; as officer
Name and age as of February 29, 2000 since
---- ------------------------------- ----------
John C. Siegel Chairman of UTV and President, 1983
UTV of San Francisco, Inc.,
which owns KBHK; Executive Vice
President, Chris-Craft; 47
Evan C Thompson President and Chief Executive 1983
Officer; Executive Vice
President and President,
Television Division,
Chris-Craft; 57
Laurey J. Barnett Vice President and Director of 1987
Programming; 40
Garth S. Lindsey Executive Vice President, 1977
Chief Financial Officer and
Secretary; 55
Thomas L. Muir Treasurer and Controller; 51 1981
Chris-Craft, through its majority ownership of BHC, is principally
engaged in television broadcasting.
All officers hold office until the meeting of the Board following the
next annual meeting of stockholders or until removed by the Board.
PART II
<PAGE> 14
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 ("MD&A") is incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information appearing in the MD&A under the caption QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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.
<PAGE> 15
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.
<PAGE> 16
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
compensatory plans listed below:
* Benefit Equalization Plan
* 1988 Stock Option Plan
* 1999 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.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 2000
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 29, 2000
John C. Siegel
Chairman and Director
EVAN C THOMPSON March 29, 2000
Evan C Thompson
President, Chief Executive
Officer and Director
(principal executive
officer)
GARTH S. LINDSEY March 29, 2000
Garth S. Lindsey
Executive Vice President,
Chief Financial Officer
and Secretary (principal
financial and accounting
officer)
LAWRENCE R. BARNETT March 29, 2000
Lawrence R. Barnett
Vice Chairman and Director
JOHN L. EASTMAN March 29, 2000
John L. Eastman
Director
JAMES D. HODGSON March 29, 2000
James D. Hodgson
Director
NORMAN PERLMUTTER March 29, 2000
Norman Perlmutter
Director
<PAGE> 18
HOWARD F. ROYCROFT March 29, 2000
Howard F. Roycroft
Director
ROCCO C. SICILIANO March 29, 2000
Rocco C. Siciliano
Director
HERBERT J. SIEGEL March 29, 2000
Herbert J. Siegel
Director
<PAGE> 19
UNITED TELEVISION, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Income - For the Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Cash Flows - For the Years Ended December
31, 1999, 1998 and 1997
Consolidated Statements of Shareholders' Investment - For the Years
Ended December 31, 1999, 1998 and 1997
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.
<PAGE> 20
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 10, 2000 appearing on page 19 of the 1999 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.
PRICEWATERHOUSECOOPERS LLP
Century City, California
February 10, 2000
<PAGE> 21
Schedule II
UNITED TELEVISION, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
-------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful accounts $1,645 $344 $--- $(346)(a) $1,643
Year ended December 31, 1998:
Allowance for doubtful accounts $1,745 $315 $--- $(415)(a) $1,645
Year ended December 31, 1997:
Allowance for doubtful accounts $1,661 $342 $--- $(258)(a) $1,745
<FN>
(a)Accounts written off, net of recoveries.
</FN>
</TABLE>
<PAGE> 22
EXHIBIT INDEX
Incorporated by
Reference to: Exhibit No. Exhibit
- --------------- ----------- -------
Exhibit 3(a) [1] 3.1 Restated Certificate of
Incorporation
Exhibit 3.2 [5] 3.2 Restated By-Laws
Exhibit A to
registrant's Proxy 10.1 1988 Stock Option Plan
Statement dated March 23,
1988 (File No. 1-8411)
Exhibit 10(a)(1) [4] 10.2 Amendment No. 1 thereto
Exhibit 10(i) [2] 10.3 Employment Agreement, dated
January 1, 1981, between
registrant and
Garth S. Lindsey, as amended
Exhibit 10(m) [2] 10.4 Employment Agreement, dated
January 1, 1981, between
registrant and
Thomas L. Muir, as amended
Exhibit 10(s) [3] 10.5 Benefit Equalization Plan of
registrant
Exhibit 10.10 [5] 10.6 Tax Sharing Agreement,
between UTV and BHC dated
October 21, 1996,
effective January 1, 1995
Exhibit 10.1 [6] 10.7 Asset Purchase Agreement,
dated November 11, 1997,
between registrant, SKMD
Broadcasting Partnership
and Silver King
Broadcasting of Maryland,
Inc. and Amendment No. 1
thereto
Exhibit A to 10.8 1999 Stock Option Plan
registrant's Proxy
Statement dated
March 31, 1999 (File
No. 1-8411)
Exhibit 10.1 [7] 10.9 Asset Purchase Agreement,
dated October 7, 1997,
between registrant and
Rainbow Broadcasting Limited
Partnership
* 10.10 United Television, Inc.
Special Severance Plan
* 13 Portions of the Annual
Report incorporated by
reference
* 21 Subsidiaries of registrant
* 23 Consent of
PricewaterhouseCoopers LLP
<PAGE> 23
Incorporated by
Reference to: Exhibit No. Exhibit
- --------------- ----------- -------
* 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 27,
1981.
[3] Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.
[4] Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.
[5] Registrant's Annual Report on Form 10-K for the year ended December 31,
1996.
[6] Registrant's report on Form 8-K dated February 12, 1998
EXHIBIT 13
CONSOLIDATED STATEMENTS OF INCOME
UNITED TELEVISION, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------
NET REVENUES $209,746 $182,849 $170,963
--------------------------------
EXPENSES:
Operating 80,770 64,356 55,369
Selling, general and administrative 67,700 63,561 53,182
--------------------------------
148,470 127,917 108,551
--------------------------------
OPERATING INCOME 61,276 54,932 62,412
--------------------------------
INTEREST AND OTHER INCOME
Interest and other income 12,028 11,587 12,317
Gain on sale of BHC common stock -- 19,932 --
--------------------------------
12,028 31,519 12,317
--------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 73,304 86,451 74,729
Provision for income taxes 29,575 33,625 29,750
--------------------------------
NET INCOME $ 43,729 $ 52,826 $ 44,979
================================
EARNINGS PER SHARE:
Basic $ 4.64 $ 5.62 $ 4.80
Diluted $ 4.62 $ 5.59 $ 4.76
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic 9,429 9,395 9,379
Diluted 9,463 9,442 9,446
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
10
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNITED TELEVISION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43,729 $ 52,826 $ 44,979
Adjustments to reconcile net income to net cash
provided from operating activities:
Film contract payments (30,362) (28,001) (25,547)
Film contract amortization 38,564 28,102 22,077
Depreciation and other amortization 7,577 6,677 4,592
Gain on sale of BHC common stock -- (19,932) --
Gain on dispositions of other investments (2,193) (1,191) (448)
Changes in assets and liabilities:
Accounts receivable (7,537) (1,940) 643
Prepaid and other assets (2,359) (3,738) 97
Accounts payable and accrued expenses 6,398 6,697 1,990
Income taxes payable (3,094) 3,099 (636)
-------------------------------------
Net cash provided from operating activities 50,723 42,599 47,747
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of marketable securities 68,262 163,332 172,262
Sales of other investments 7,661 -- --
Purchases of marketable securities (55,590) (151,020) (137,501)
Purchases of other investments (15,448) (8,854) --
Station acquisitions:
Fixed assets (3,914) (2,568) --
Intangible assets (58,903) (77,646) --
Accounts receivable (1,297) -- --
Film contracts, net 2,693 -- --
Other, net 152 -- --
Capital expenditures (12,925) (5,028) (2,625)
-------------------------------------
Net cash (used in) provided from investing activities (69,309) (81,784) 32,136
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend paid (4,708) (4,688) (4,687)
Proceeds from exercise of employee stock options 4,849 3,579 3,939
Purchases of treasury stock (828) (7,010) (2,755)
-------------------------------------
Net cash used in financing activities (687) (8,119) (3,503)
-------------------------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (19,273) (47,304) 76,380
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 50,771 98,075 21,695
-------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31,498 $ 50,771 $ 98,075
=====================================
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
11
<PAGE>
CONSOLIDATED BALANCE SHEETS
UNITED TELEVISION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 31,498 $ 50,771
Marketable securities 154,699 166,056
Accrued interest receivable 829 890
Accounts receivable, less allowance for doubtful accounts
of $1,643 and $1,645, respectively 47,687 38,853
Film contract rights 44,474 38,074
Deferred tax assets 4,160 6,209
Prepaid expenses and other current assets 2,175 1,935
--------------------
Total current assets 285,522 302,788
--------------------
OTHER INVESTMENTS 35,594 26,385
--------------------
FILM CONTRACT RIGHTS, INCLUDING DEPOSITS, LESS
ESTIMATED PORTION TO BE USED WITHIN ONE YEAR 12,013 5,113
--------------------
PROPERTY AND EQUIPMENT, AT COST:
Land, buildings and improvements 18,417 14,364
Equipment 72,484 60,310
--------------------
90,901 74,674
Less -- Accumulated depreciation and amortization 61,859 58,137
--------------------
29,042 16,537
--------------------
INTANGIBLE ASSETS 158,530 99,627
Less -- Accumulated amortization 16,510 13,268
--------------------
142,020 86,359
--------------------
OTHER ASSETS 490 459
--------------------
$504,681 $437,641
====================
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Film contracts payable $ 38,240 $ 28,433
Accounts payable 2,890 1,902
Accrued expenses 35,723 30,313
Income taxes payable 8,772 13,158
--------------------
Total current liabilities 85,625 73,806
====================
FILM CONTRACTS PAYABLE AFTER ONE YEAR 36,117 23,756
--------------------
DEFERRED TAX LIABILITIES -- 2,632
--------------------
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 9,486,173 and 9,409,333 shares, respectively 949 941
Additional paid-in capital 7,594 1,480
Retained earnings 370,430 331,409
Accumulated other comprehensive income 3,966 3,617
--------------------
382,939 337,447
--------------------
$504,681 $437,641
====================
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE BALANCE SHEETS.
13
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
UNITED TELEVISION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
Common Stock
-------------------------- Additional Accumulated Other
Shares Dollar Paid-in Retained Comprehensive
Outstanding Amount Capital Earnings Income Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 9,343,488 $ 934 $ 133 $ 242,979 $ 6,395 $ 250,441
---------- ----------
Comprehensive income:
Net income -- -- -- 44,979 -- 44,979
Other comprehensive income:
Unrealized gain on securities
(net of tax of $4,373) -- -- -- -- 6,770 --
Reclassification adjustment
(net of tax of $176) -- -- -- -- (272) --
----------
Other comprehensive income,
net of tax -- -- -- -- 6,498 6,498
----------
Total comprehensive income -- -- -- -- -- 51,477
Cash dividend -- -- -- (4,687) -- (4,687)
Exercise of options, including
tax benefit 101,385 10 6,254 -- -- 6,264
Purchase/retirement of
treasury stock (30,600) (3) (2,752) -- -- (2,755)
-------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 9,414,273 941 3,635 283,271 12,893 300,740
---------- ----------
Comprehensive income:
Net income -- -- -- 52,826 -- 52,826
Other comprehensive income:
Unrealized gain on securities
(net of tax of $1,458) -- -- -- -- 4,404 --
Reclassification adjustment
(net of tax of $7,443) -- -- -- -- (13,680) --
----------
Other comprehensive income,
net of tax -- -- -- -- (9,276) (9,276)
----------
Total comprehensive income -- -- -- -- -- 43,550
Cash dividend -- -- -- (4,688) -- (4,688)
Exercise of options, including
tax benefit 63,560 7 4,848 -- -- 4,855
Purchase/retirement of
treasury stock (68,500) (7) (7,003) -- -- (7,010)
-------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 9,409,333 941 1,480 331,409 3,617 337,447
---------- ----------
Comprehensive income:
Net income -- -- -- 43,729 -- 43,729
Other comprehensive income:
Unrealized gain on securities
(net of tax of $527) -- -- -- -- 818 --
Reclassification adjustment
(net of tax of $302) -- -- -- -- (469) --
----------
Other comprehensive income,
net of tax -- -- -- -- 349 349
----------
Total comprehensive income -- -- -- -- -- 44,078
Cash dividend -- -- -- (4,708) -- (4,708)
Exercise of options, including
tax benefit 85,240 9 6,941 -- -- 6,950
Purchase/retirement of
treasury stock (8,400) (1) (827) -- -- (828)
-------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999 9,486,173 $ 949 $ 7,594 $ 370,430 $ 3,966 $ 382,939
=====================================================================================
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
14
<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 (58.1% at December
31, 1999) subsidiary of BHC Communications, Inc. (BHC), a majority owned
subsidiary of Chris-Craft Industries, Inc. (Chris-Craft). UTV owns and operates
seven television stations: KBHK in San Francisco, KMSP in Minneapolis/St. Paul,
KUTP in Phoenix, WRBW in Orlando (acquired in July 1999), WUTB in Baltimore
(acquired in January 1998), KTVX in Salt Lake City and KMOL in San Antonio. UTV
also owns and operates United Television Sales, Inc. (UTS), a national sales
representative organization, which currently represents six of UTV's seven
stations, and the three stations owned by BHC; and United Entertainment Group,
Inc., which, with BHC and others, produces first-run programming for national
distribution to television stations. UTV's revenues are derived entirely from
television broadcasting and are, therefore, subject to the vagaries of the
advertising industry.
UTV has 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 and assumptions. Actual results could differ
from those estimates.
(C) CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist primarily 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, reflecting 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 CONTRACTS. UTV owns film contract rights, which allow generally for
limited showings of films and syndicated programs. Film contract rights and
related liabilities are recorded when the programming becomes available for
telecasting.
Contract values are amortized over the estimated number of showings, using
primarily accelerated methods as films are used, based on management's estimates
of the flow of revenue and the ultimate total cost for each contract. In the
opinion of management, future revenue derived from airing programming will be
sufficient to cover related unamortized rights balances at December 31, 1999.
The estimated costs of recorded film contract rights to be charged to income
within one year are included in current assets; payments on such contracts due
within one year are included in current liabilities.
The approximate future maturities of film contracts payable after one year at
December 31, 1999 are $21,411,000, $11,449,000, $3,110,000, $113,000, and
$34,000 in 2001, 2002, 2003, 2004 and thereafter, respectively. The net present
value at December 31, 1999 of such payments, based on an 8.5% discount rate, was
approximately $33,170,000. See Note 8.
(F) LONG-LIVED ASSETS. Management periodically reviews the carrying value of
long-lived assets, primarily consisting of property and equipment and goodwill.
UTV also reviews the carrying value of long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable. Measurement of any impairment would include a comparison of
estimated future cash flows to be generated during the remaining life of the
long-lived asset to the net carrying value of the long-lived asset.
(G) 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.
Estimated useful lives for buildings and improvements range from 4 to 40
years, and for equipment range from 3 to 10 years. Depreciation expense was
$4,334,000, $4,234,000 and $3,983,000 for 1999, 1998 and 1997, respectively.
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.
(H) 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 $15,793,000, $13,220,000 and
$11,891,000 in 1999, 1998 and 1997, respectively, and barter expense was
$15,608,000, $13,486,000 and $11,863,000 in the three years, respectively.
15
<PAGE>
(I) EARNINGS PER SHARE. In accordance with Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share", adopted by UTV in 1997, basic
per share amounts are computed by dividing net income by the weighted average
number of common shares outstanding. Dilutive per share amounts are computed by
dividing net income by the weighted average common shares outstanding, adjusted
for the effect of dilutive stock options. The adjustments for 1999, 1998 and
1997 were 34,000 shares, 47,000 shares and 67,000 shares, respectively. Prior
period earnings per share amounts have been restated to conform to the standards
of SFAS No. 128.
(J) STOCK OPTIONS. UTV has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." 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 prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." See Note 4.
(K) SUPPLEMENTAL CASH FLOW INFORMATION. Cash paid for income taxes totaled
$32,669,000 in 1999, $30,526,000 in 1998 and $30,386,000 in 1997.
2. MARKETABLE SECURITIES.
Marketable securities classified by security type are as follows (in
thousands of dollars):
GROSS UNREALIZED
-------------------- FAIR
COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------
December 31, 1999:
U.S. Government securities $130,484 $ -- $ 238 $130,246
Other equity securities 17,689 7,739 975 24,453
--------------------------------------------
$148,173 $ 7,739 $ 1,213 $154,699
============================================
December 31, 1998:
U.S. Government securities $142,578 $ 209 $ 26 $142,761
Other equity securities 17,526 6,236 467 23,295
--------------------------------------------
$160,104 $ 6,445 $ 493 $166,056
============================================
At December 31, 1999, of the investments in U.S. Government securities, 85%
mature within one year and all within 16 months. The following table provides
certain additional information related to UTV's marketable securities as of and
for the three years ended December 31, 1999, 1998 and 1997 (in thousands of
dollars):
1999 1998 1997
- --------------------------------------------------------------------------------
Realized gains $ 772 $21,756 $ 448
Realized losses 1 633 --
Change in net unrealized gain 574 (15,261) 10,695
For purposes of computing realized gains and losses, cost was determined
using the specific identification method.
3. 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 1999, UTV purchased and retired 8,400 shares of its common stock at an
aggregate cost of $828,000. During 1998 and 1997, UTV purchased and retired
68,500 and 30,600 shares of its common stock, respectively. At December 31,
1999, the Board of Directors had authorized purchase of 721,249 additional
shares of common stock.
4. STOCK OPTIONS.
Under the UTV 1999 Stock Option Plan (the 1999 Plan), options (including
Incentive Stock Options) to purchase an aggregate of 500,000 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 1999
Plan Committee, which may not exceed ten years from date of grant. No options
have been granted under the 1999 Plan.
Under the UTV 1988 Stock Option Plan (the 1988 Plan), which has terminated
with respect to grant of new options, options to purchase shares of common stock
were granted from time to time to employees of UTV and its 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 five years from date of grant.
Both the 1999 Plan and the 1988 Plan permit the Plan Committees to award
stock appreciation rights to holders of options granted under the Plans. 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 either
Plan.
Transactions under the 1988 Plan during the three years ended December 31,
1999 were as follows (dollars in thousands, except per share amounts):
OPTION PRICE
SHARES --------------------------
UNDER OPTION PER SHARE TOTAL
- -------------------------------------------------------------------------------
Outstanding,
December 31, 1996 256,885 $27.25-$89.00 $ 13,386
Exercised (100,385) $27.25-$53.50 (3,877)
Canceled (1,000) $53.50 (54)
-------- --------
Outstanding,
December 31, 1997 155,500 $53.50-$89.00 9,455
Exercised (52,060) $53.50 (2,785)
Canceled (1,200) $53.50 (64)
-------- --------
Outstanding,
December 31, 1998 102,240 $53.50-$89.00 6,606
Exercised (75,240) $53.50-$89.00 (4,203)
-------- --------
Outstanding,
December 31, 1999 27,000 $89.00 $ 2,403
======== ========
16
<PAGE>
Of the options to purchase 27,000 shares under the 1988 Plan at December 31,
1999, all are currently exercisable and expire on April 24, 2001. At December
31, 1998 and 1997, options to purchase 91,573 shares and 132,966 shares,
respectively, were exercisable at weighted average exercise prices of $61.77 and
$56.35, respectively.
In addition to options granted under the 1988 Plan, UTV has granted other
options. During 1995, UTV granted a stock option to purchase 100,000 shares at
$88.75 per share. The 1995 option was terminated in 1998 upon payment to the
optionee of the net market value of the option. In 1998 and 1999, UTV granted
five-year options to purchase 3,000 shares at $103.75 per share (of which 1,000
are currently exercisable) and 219,480 shares at $101.50 (of which 10,800 have
been canceled), respectively. The option price of these grants was the fair
market value at date of grant, and the terms of each grant were essentially the
same as those of the 1988 Plan.
Under the 1995 Director Stock Option Plan (the Director Plan), a fixed number
of immediately exercisable five-year options to purchase shares of common stock
are granted annually to each nonemployee director of UTV at a price equal to
fair market value at date of grant. At December 31, 1999, options to purchase
18,500 shares were available for grant. Transactions under the Director Plan
during the three years ended December 31, 1999 were as follows (dollars in
thousands, except per share amounts):
OPTION PRICE
SHARES --------------------------
UNDER OPTION PER SHARE TOTAL
- -------------------------------------------------------------------------------
Outstanding,
December 31, 1996 34,000 $58.00-$89.00 $ 2,215
Granted 7,000 $87.25 610
Exercised (1,000) $62.25 (62)
-------- --------
Outstanding,
December 31, 1997 40,000 $58.00-$89.00 2,763
Granted 6,000 $112.375 674
Exercised (11,500) $58.00-$89.00 (794)
-------- --------
Outstanding,
December 31, 1998 34,500 $58.00-$112.375 2,643
Granted 6,000 $100.25 601
Exercised (10,000) $58.00-$89.00 (646)
-------- --------
Outstanding,
December 31, 1999 30,500 $58.00-$112.375 $ 2,598
======== ========
Options outstanding under the Director Plan at December 31, 1999 to purchase
the specified number of shares (30,500 in total), at specified exercise prices
per share, expire as follows - 8,500 at $58.00, February 22, 2000; 2,000 at
$62.50, April 26, 2000; 4,000 at $89.00, April 24, 2001; 4,000 at $87.25, May 5,
2002; 6,000 at $112.375, May 4, 2003; and 6,000 at $100.50, May 2, 2004.
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. Related income tax benefits, which accrue to UTV, are credited to
additional paid-in capital.
At December 31, 1999, options outstanding under all plans and grants were
exercisable for 58,500 shares at prices ranging from $58.00 to $112.375 per
share, and options for 518,500 shares were available for grant.
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 the pro forma amounts indicated below (in thousands of dollars, except
per share amounts):
YEAR ENDED DECEMBER 31, 1999 1998 1997
- --------------------------------------------------------------------------------
Net Income:
As reported $43,729 $52,826 $44,979
Pro forma $42,795 $53,321 $44,300
Earnings per Share:
As reported: Basic $ 4.64 $ 5.62 $ 4.80
Diluted $ 4.62 $ 5.59 $ 4.76
Pro forma: Basic $ 4.54 $ 5.68 $ 4.72
Diluted $ 4.52 $ 5.65 $ 4.69
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 1999, 1998 and
1997 were $21.35, $23.49 and $22.86, 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,
1999, 1998 and 1997, respectively: dividend yields of .49% for 1999, .46% for
1998 and zero for 1997; expected volatility of 15.49%, 15.13% and 16.09%,
respectively; risk free interest rates of 5.03%, 5.24% and 6.49%, respectively;
and expected life of four years for all periods.
5. INCOME TAXES.
Income taxes are provided in the accompanying Consolidated Statements of
Income as follows (in thousands of dollars):
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------
Federal:
Current $ 24,825 $ 29,600 $ 24,350
Deferred (975) (975) (125)
------------------------------------------
23,850 28,625 24,225
------------------------------------------
State:
Current 5,850 5,175 5,550
Deferred (125) (175) (25)
------------------------------------------
5,725 5,000 5,525
------------------------------------------
Total $ 29,575 $ 33,625 $ 29,750
==========================================
17
<PAGE>
Differences between income taxes at the federal statutory income tax rate and
total income taxes provided are as follows (in thousands of dollars):
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------
Statutory federal income
taxes $ 25,656 $ 30,258 $ 26,155
State income taxes, net
of federal income tax
benefit 3,721 3,239 3,587
Dividend exclusion (123) (159) (179)
Goodwill amortization 102 102 102
Other, net 219 185 85
----------------------------------------
Total $ 29,575 $ 33,625 $ 29,750
========================================
Deferred tax assets and deferred tax liabilities reflect the tax effect of
the following differences between financial statement carrying amounts and tax
bases of assets and liabilities (in thousands of dollars):
DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------
Deferred tax assets:
State taxes $ 1,994 $ 1,964
Bad debt reserve 682 683
Vacation accrual 559 517
Benefits program 3,184 3,083
Film contract rights amortization 4,875 2,359
------------------------
11,294 8,606
------------------------
Deferred tax liabilities:
Depreciation (1,250) (1,102)
Intangible assets amortization (3,324) (1,589)
SFAS 115 adjustment (2,560) (2,334)
Other -- (4)
------------------------
(7,134) (5,029)
------------------------
Net deferred tax assets $ 4,160 $ 3,577
========================
6. PENSION PLANS.
UTV maintains noncontributory defined benefit plans covering substantially
all employees. The funding policy is to contribute annually an amount sufficient
to fund current service costs and to amortize the unfunded accrued liability
over 25 years. The unrecognized net obligation is being amortized over a 15-year
period.
The estimated funded status of the plans, including amounts accrued in a
nonqualified plan for retirement benefits in excess of statutory limitations,
was as follows (in thousands of dollars):
DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning
of year $ 25,846 $ 22,120
Service cost 1,477 1,446
Interest cost 1,693 1,621
Actuarial (gain) loss (3,817) 817
Amendments -- 471
Benefits paid (562) (629)
------------------------
Benefit obligation at end of year 24,637 25,846
------------------------
Change in plan assets:
Fair value of plan assets at beginning
of year 22,246 20,786
Actual return on plan assets 1,367 2,089
Benefits paid (562) (629)
------------------------
Fair value of plan assets at end
of year 23,051 22,246
------------------------
Plan assets less than projected
benefit obligation (1,586) (3,600)
Unrecognized initial net obligation 32 47
Unrecognized prior service cost 360 366
Unrecognized net actuarial gain (3,599) (116)
------------------------
Accrued pension liability $ (4,793) $ (3,303)
========================
The accumulated benefit obligation, projected benefit obligation and fair
value of plan assets of the plan that has an accumulated benefit obligation in
excess of the fair value of the plan's assets are $1,244,000, $2,287,000 and
zero, respectively, at December 31, 1999, and $1,141,000, $2,548,000 and zero,
respectively, at December 31, 1998.
Pension expense, including amounts accrued in the nonqualified plan, was as
follows (in thousands of dollars):
YEAR ENDED DECEMBER 31, 1999 1998 1997
- -------------------------------------------------------------------------------
Service cost $ 1,477 $ 1,446 $ 1,310
Interest cost 1,693 1,621 1,424
Expected return on
plan assets (1,701) (1,591) (1,512)
Amortizations:
Initial unrecognized
net obligation 16 16 16
Prior service cost 6 6 (29)
Actuarial loss -- 17 31
-------------------------------------
Net periodic pension cost $ 1,491 $ 1,515 $ 1,240
=====================================
Assumptions used in accounting for pension plans for each year are as
follows:
1999 1998 1997
- --------------------------------------------------------------------------------
Discount rate at end of year 7.50% 6.75% 7.25%
Rate of increase in future
compensation levels 4.00% 4.00% 4.50%
Expected long-term
rate of return on assets 7.75% 7.75% 7.75%
18
<PAGE>
UTV also maintains defined contribution retirement plans for its employees--a
contributory stock purchase plan (merged with a Chris-Craft stock purchase plan
effective January 1, 1999) and a noncontributory profit sharing plan. The
aggregate costs of such plans, including related amounts accrued in the
nonqualified plan, were $4,636,000 in 1999, $3,590,000 in 1998 and $3,877,000 in
1997.
7. RELATED PARTY TRANSACTIONS.
Included in net revenues for 1999, 1998 and 1997 are commissions earned by
UTS for the sale of national advertising on BHC's three television stations of
$3,902,000, $4,467,000 and $4,217,000, respectively.
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, 1999, and a management fee UTV paid BHC of $1,750,000 in
1999, $1,950,000 in 1998 and $1,750,000 in 1997.
UTV and BHC together participate in the joint production and distribution
with third parties of original programming. In 1999, 1998 and 1997,
reimbursements from third parties were sufficient to cover production costs.
8. ACQUISITIONS.
In July 1999, UTV completed the purchase of the net assets of UHF station
WRBW in Orlando, Florida for $61,269,000. UTV remains obligated for possible
future consideration relating to the purchase of up to $25,000,000. The
acquisition, accounted for under the purchase method, was funded with cash
payments. UTV recorded approximately $58,903,000 in goodwill related to this
acquisition.
In January 1998, UTV completed the purchase of the net assets of UHF station
WUTB in Baltimore, Maryland for $80,214,000. The acquisition, accounted for
under the purchase method, was funded with cash payments. UTV recorded
approximately $77,646,000 in goodwill related to this acquisition.
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 $78,322,000 at December 31, 1999.
At December 31, 1999, UTV was obligated under several noncancelable leases on
real property and equipment that expire between 2000 and 2012. Rental expense
was $3,221,000, $2,850,000 and $2,300,000 for 1999, 1998 and 1997, respectively.
Aggregate future minimum rental payments under such leases at December 31, 1999
are $15,797,000, with amounts of $2,932,000, $2,792,000, $2,571,000, $2,124,000
and $1,969,000 due in 2000, 2001, 2002, 2003 and 2004, respectively.
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 operations.
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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Century City, California
February 10, 2000
19
<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
$8,202,000 in 1999 and by $101,000 in 1998), and is dependent upon the mix of
programs aired and payment terms of the stations' contracts. UTV stations
generated substantial cash flow in 1999 and are expected to do the same in 2000.
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 1999 cash flow from operations totaled
$50,723,000. In July 1999, UTV completed the purchase of the net assets of UHF
television station WRBW in Orlando, Florida for $61,269,000. As a result of cash
used to acquire WRBW and to make other investments, cash and marketable
securities decreased $30,630,000 to $186,197,000 at December 31, 1999. UTV
remains obligated for possible future consideration relating to the purchase of
WRBW of up to $25,000,000.
Reflecting the WRBW acquisition and other investments, working capital
decreased $29,085,000 during 1999 to $199,897,000 at December 31, 1999. Working
capital at December 31, 1999 remains substantially in excess of UTV's normal
operating requirements.
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 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 $78,322,000 at December 31, 1999. 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, 1999, purchase of 721,249 additional shares was
so authorized. From January 1, 1997 through December 31, 1999, 107,500 shares
were purchased for an aggregate cost of $10,593,000, of which 8,400 shares were
purchased during 1999 for an aggregate cost of $828,000.
UTV's commitments for capital expenditures at December 31, 1999 were not
material in relation to UTV's financial position. During 1999, UTV's stations
continued the process of converting to digital television (DTV). This conversion
requires the purchase of digital transmitting equipment to telecast over a newly
assigned frequency. KBHK in San Francisco and KTVX in Salt Lake City made the
initial conversion to DTV signal transmission during 1999. 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 remaining DTV conversion cost, will be funded from
operations or current cash balances. UTV has no present requirement for
additional capital.
Year 2000 issues had no material effect on UTV business, results of
operations, or financial condition and the compliance cost was immaterial.
20
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
UTV is subject to certain market risk as it relates to its marketable
securities holdings, which are all held for other than trading purposes. The
table below provides information as of December 31, 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
of dollars):
Cost Fair Value
- --------------------------------------------------------------------------------
U.S. Government securities $130,484 $130,246
Equity securities 17,689 24,453
All of UTV's marketable securities have been categorized as available for
sale and are comprised substantially of U.S. Government securities, 85% of which
mature in one year and all within 16 months. See Notes 1(D) and 2 of Notes to
Consolidated Financial Statements.
RESULTS OF OPERATIONS
1999 VERSUS 1998. UTV's primary source of revenue is the sale to advertisers
of time on its seven television stations. UTV's 1999 net income decreased to
$43,729,000, or $4.64 per basic share ($4.62 per diluted share), from
$52,826,000, or $5.62 per basic share ($5.59 per diluted share), in 1998. The
1998 results reflected a net gain from the sale to BHC of UTV's holding of BHC
Class A Common Stock (BHC holding sale) of $12,932,000, or $1.38 per basic share
($1.37 per diluted share). On a comparable basis, excluding the 1998 BHC holding
sale gain, net income rose 10% for the year.
Consolidated net revenues for the year rose 15% to a record $209,746,000,
from $182,849,000 last year. The increase reflected a 15% increase in same
station local and national advertising revenues and revenue at WRBW, which was
acquired during 1999. Same station sales increases primarily resulted from a
general increase in demand for advertising time and improved ratings related to
successful syndicated series. Network affiliation compensation declined from
that recorded in 1998. (In 1998, UTV's NBC affiliate completed negotiations and
entered into a new long-term network affiliation agreement, effective April
1995, and recorded as 1998 revenue the resulting retroactive revenue.)
Operating income rose 12% in 1999 to $61,276,000, from $54,932,000 in 1998.
Consolidated expenses increased 16%, reflecting a 13% increase in same station
operating expenses, including a 22% increase in same station program costs, and
operating expenses at WRBW, which incurred a small operating loss. Interest and
other income for 1999 increased 4% to $12,028,000, from $11,587,000 in 1998.
1998 VERSUS 1997. UTV's 1998 net income increased 17% to $52,826,000, or
$5.62 per basic share ($5.59 per diluted share), from $44,979,000, or $4.80 per
basic share ($4.76 per diluted share), in 1997. On a comparable basis, excluding
the BHC holding sale gain, net income decreased 11% for the year.
Consolidated net revenues for the year rose 7% to $182,849,000, from
$170,963,000 in 1997. The increase reflected revenue at WUTB, UTV's Baltimore
station, which was acquired early in the first quarter of 1998 and immediately
thereafter began operating for the first time as a traditional commercial
broadcasting station; increased 1998 and retroactive revenue resulting from the
new long-term NBC affiliation agreement; and a slight increase in other same
station revenues.
This revenue increase and increased operating income associated with UTV's
production company were more than offset by an 18% increase in consolidated
expenses. The expense increase resulted from operating expenses at WUTB-TV
(which incurred a small operating loss), a non-recurring severance expense and a
9% increase in same station operating expenses, including a 14% increase in
programming costs. Operating income fell 12% in 1998 to $54,932,000, from
$62,412,000 in 1997. Interest and other income for 1998 decreased 6% to
$11,587,000, from $12,317,000 in 1997, reflecting a decrease in cash and
marketable securities resulting from the acquisition of WUTB.
21
<PAGE>
SELECTED FINANCIAL DATA
UNITED TELEVISION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 209,746 $ 182,849 $ 170,963 $ 174,339 $ 165,559
=================================================================
Operating income $ 61,276 $ 54,932 $ 62,412 $ 59,076 $ 50,882
Gain on sale of BHC common stock -- 19,932 -- -- --
Interest and other income 12,028 11,587 12,317 10,163 10,290
Income taxes (29,575) (33,625) (29,750) (27,500) (24,300)
-----------------------------------------------------------------
Net income $ 43,729 $ 52,826 $ 44,979 $ 41,739 $ 36,872
=================================================================
Earnings per share:
Basic $ 4.64 $ 5.62 $ 4.80 $ 4.40 $ 3.78
Diluted $ 4.62 $ 5.59 $ 4.76 $ 4.36 $ 3.74
Cash dividend per share $ .50 $ .50 $ .50 $ .50 $ .50
Cash and current marketable securities $ 186,197 $ 216,827 $ 270,581 $ 194,866 $ 199,500
Total assets $ 504,681 $ 437,641 $ 387,986 $ 335,598 $ 330,987
Working capital $ 199,897 $ 228,982 $ 280,828 $ 205,170 $ 216,198
Long-term debt $ -- $ -- $ -- $ -- $ --
Shareholders' investment $ 382,939 $ 337,447 $ 300,740 $ 250,441 $ 240,469
</TABLE>
QUARTERLY FINANCIAL INFORMATION (unaudited)
UNITED TELEVISION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
YEAR ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 44,961 $ 53,427 $ 51,390 $ 59,968 $209,746
Operating income 10,368 18,984 14,340 17,584 61,276
Net income 8,068 13,237 10,882 11,542 43,729
Earnings per share:
Basic $ .86 $ 1.41 $ 1.16 $ 1.22 $ 4.64
Diluted $ .86 $ 1.40 $ 1.15 $ 1.21 $ 4.62
YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------
Net revenues $ 39,293 $ 48,503 $ 40,111 $ 54,942 $182,849
Operating income 7,972 18,223 10,593 18,144 54,932
Net income 6,610 24,872 8,456 12,888 52,826
Earnings per share:
Basic $ .71 $ 2.65 $ .90 $ 1.37 $ 5.62
Diluted $ .70 $ 2.63 $ .89 $ 1.36 $ 5.59
</TABLE>
22
<PAGE>
STOCK PRICE, DIVIDEND AND RELATED INFORMATION
United Television, Inc. common stock trades on the Nasdaq Stock Market(R)
under the symbol: UTVI.
The high and low sales prices as reported by Nasdaq for the periods indicated
were:
1999 1998
----------------------------------------------------
Quarter High Low High Low
- -------------------------------------------------------------------------------
First $115.000 $ 99.000 $111.375 $100.250
Second 107.125 95.750 116.125 107.500
Third 117.000 103.875 121.000 105.000
Fourth 144.000 113.000 115.000 100.000
In 1999 and 1998, UTV paid a cash dividend of $.50 per share. In February
2000, UTV declared a dividend of $.50 per share payable on April 11, 2000 to
shareholders of record on March 10, 2000.
As of February 29, 2000, there were approximately 2,400 holders of record of
common stock.
EXHIBIT 21
The following are the registrant's subsidiaries, other than subsidiaries that,
if considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary:
Name Jurisdiction
of of
Subsidiary Incorporation
---------- -------------
UTV of San Francisco, Inc. California
UTV of San Antonio, Inc. Texas
UTV of Baltimore, Inc. Delaware
United Television Sales, Inc. Delaware
UTV of Orlando, Inc. Delaware
UNITED TELEVISION, INC.
SPECIAL SEVERANCE PLAN
United Television, Inc. (the "Company") hereby adopts the United
Television, Inc. Special Severance Plan (the "Plan") for the benefit of certain
employees of the Company (as defined herein), on the terms and conditions
hereinafter stated.
The Plan, as set forth herein, is intended to help retain qualified
employees, maintain a stable work environment and provide economic security to
certain employees of the Company in the event of a Qualifying Termination (as
defined herein). The Plan, as a "severance pay arrangement" within the meaning
of Section 3(2)(B)(i) of ERISA, is intended to be excepted from the definitions
of "employee pension benefit plan" and "pension plan" set forth under Section
3(2) of ERISA, and is intended to meet the descriptive requirements of a plan
constituting a "severance pay plan" within the meaning of regulations published
by the Secretary of Labor at Title 29, Code of Federal Regulations, 2510.3-2(b).
SECTION 1. DEFINITIONS. As hereinafter used:
1.1 "Affiliate" shall mean any corporation, directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with the Company.
1.2 "Annual Compensation" shall mean (i) the Severed Employee's current
rate of base salary (determined immediately prior to the Qualifying Termination
and without regard to any decrease in such salary constituting Good Reason),
plus (ii) the average of the Severed Employee's annual bonuses earned in respect
of the three full fiscal years (or the number of full years worked with the
Company, if fewer than three) immediately preceding the year in which the Change
in Control occurs or, if higher, in which the Qualifying Termination occurs.
1.3 "Board" shall mean the Board of Directors of the Company, or any
successor thereto.
1.4 "Cause" shall mean, with respect to a termination of the Employee's
employment with the Company, (i) the willful and continued failure by the
Employee to substantially perform the Employee's duties with the Company (other
than by reason of physical or mental incapacity) or (ii) the conviction of the
Employee for the commission of a felony involving moral turpitude.
1.5 "Change in Control" shall mean the occurrence of any of the following
events: (i) individuals who, as of the Effective Date, constitute the board of
directors of Chris-Craft (the "Incumbent Board") cease for any reason to
constitute at least a majority of the board of directors of Chris-Craft;
provided, however, that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the stockholders of
Chris-Craft, shall be approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or
other actual or threatened solicitation of proxies or consents by or on behalf
of any Person, other than the board of directors of Chris-Craft;
(ii) consummation of a reorganization, merger or
consolidation, in each case, unless, following such reorganization, merger or
consolidation: (a) more than 50% of the combined voting power of the then
outstanding voting securities ("Outstanding Voting Securities") of the
corporation resulting from such reorganization, merger, or consolidation, which
may be Chris-Craft (the "Resulting Corporation"), entitled to vote generally in
the election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation; and (b) at least 50% of the members of the board of directors of
the Resulting Corporation shall have been members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(iii) approval by the stockholders of Chris-Craft of (a) a
complete liquidation or dissolution of Chris-Craft or (b) the sale or other
disposition of all or substantially all of the assets of Chris-Craft, other than
to a corporation (the "Buyer") with respect to which (i) following such sale or
other disposition, more than 50% of the combined voting power of securities of
Buyer entitled to vote generally in the election of directors, shall be owned
beneficially, directly or indirectly, by all or substantially all of the Persons
who were the beneficial owners of the Outstanding Voting Securities immediately
prior to such sale or other disposition, in substantially the same proportion as
their respective ownerships of Outstanding Voting Securities immediately prior
to such sale or other disposition; and (ii) at least 50% of the members of the
board of directors of Buyer shall have been members of the Incumbent Board at
the time of the execution of the initial agreement or action of the board of
directors of Chris-Craft providing for such sale or other disposition of assets
of Chris-Craft.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
1.7 "Chris-Craft" shall mean Chris-Craft Industries, Inc., a Delaware
corporation, or any successor thereto.
1.8 "Disability" shall mean a physical or mental condition causing the
Employee to be unable to substantially perform his or her duties with the
Company, including, without limitation, such condition entitling him or her to
benefits under any sick pay or disability income policy or program of the
Company.
1.9 "Effective Date" shall mean December 14, 1999.
1.10 "Employee" shall mean any person who is employed by the Company on a
full-time basis; provided, however, that no person with respect to whom an
individual severance arrangement or employment agreement is in effect as of the
Change in Control (unless waived by such person) or whose employment is covered
by a collective bargaining agreement shall be considered an Employee under the
Plan; provided, further, that during the pendency of a Potential Change in
Control and following a Change in Control, new participants may be added, but no
adverse change can be made with respect to persons already designated as
participants in the Plan.
1.11 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
1.12 "Exchange Act" the Securities Exchange Act of 1934, as amended.
1.13 "Good Reason" shall mean any of the following acts or omissions that
take place on or after the occurrence of a Change in Control: (i) the material
diminution in the Employee's duties or authority; (ii) a change of the
Employee's place of employment by more than fifty (50) miles; or (iii) a
reduction in the Employee's salary or bonus opportunity; provided, however, that
clause (i) above shall only be applicable to an Employee who is designated as a
Level I Employee and any determination made in good faith by a Level I Employee
under clause (i) above shall be conclusive.
1.14 "Level I Employee" shall mean an Employee whose name is set forth on
Exhibit A attached hereto.
1.15 "Level II Employee" shall mean an Employee (i) with at
least one Year of Service and (ii) who is not a Level I Employee.
1.16 "Level III Employee" shall mean an Employee (i) with less
than one Year of Service and (ii) who is not a Level I Employee.
1.17 "Person" shall mean any individual, entity or group, within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
1.18 "Plan Administrator" shall mean the committee appointed to administer
the Plan. Such committee shall be selected by the Board.
1.19 "Potential Change in Control" shall be deemed to occur in the event
that, after the Effective Date, Chris-Craft or the Company enters into an
agreement, the consummation of which would result in a Change in Control or
Chris-Craft, the Company or any person publicly announces an intention to take
or to consider taking action which, if consummated would constitute a Change in
Control.
1.20 "Qualifying Termination" shall mean a termination of an
Employee's employment, following a Change in Control and on or before such
Employee's Qualifying Termination Date, either (i) by the Company without Cause
or (ii) by the Employee for Good Reason. Severance Benefits will not be paid in
the event of termination of an Employee's employment by reason of death, by the
Company for Cause or Disability or by the Employee without Good Reason. A
termination of employment will not be deemed to have occurred upon (1) the
transfer of the Employee to employment with an Affiliate of the Company if the
Affiliate assumes the Company's responsibilities under the Plan with respect to
the Employee or (2) the divestiture of a business with which the Employee is
primarily associated if the Employee is offered comparable employment by the
successor company and such successor company assumes the Company's
responsibilities under the Plan with respect to such Employee.
1.21 "Qualifying Termination Date" shall mean the date occurring:
(i) with respect to Level I Employees with at least twenty
(20) Years of Service, thirty-six (36) months following a Change in Control;
(ii) with respect to Level I Employees with at least fifteen
(15) and not greater than nineteen (19) Years of Service, thirty (30) months
following a Change in Control;
(iii) with respect to (a) Level I Employees with at least ten
and not greater than fourteen (14) Years of Service and (b) Level II Employees
with at least ten Years of Service, twenty-four (24) months following a Change
in Control;
(iv) with respect to Level I Employees with at least two and
not greater than nine Years of Service, eighteen (18) months following a Change
in Control;
(v) with respect to Level II Employees with less than ten
Years of Service, twelve (12) months following a Change in Control; and
(vi) with respect to Level III Employees, six months
following a Change in Control.
1.22 "Severance Benefits" shall mean the payments and benefits provided to
Severed Employees pursuant to Section 2.1 and 2.2 hereof.
1.23 "Severance Date" shall mean the date on which an Employee incurs a
Qualifying Termination.
1.24 "Severance Multiple" shall mean:
(i) with respect to Level I Employees with at least twenty
(20) Years of Service, three;
(ii) with respect to Level I Employees with at least fifteen
(15) and not greater than nineteen (19) Years of Service, two and one-half;
(iii) with respect to Level I Employees with at least ten and
not greater than fourteen (14) Years of Service, two;
(iv) with respect to Level I Employees with at least two and
not greater than nine Years of Service, one and one-half;
(v) with respect to Level II Employees with at least ten Years
of Service, the product of (a) three fifty-seconds (3/52) and (b) such
Employee's Years of Service;
(vi) with respect to Level II Employees with less than ten
Years of Service, the greater of (a) the product of (1) one twenty-sixth (1/26)
and (2) Years of Service and (b) one-thirteenth (1/13); and
(v) with respect to Level III Employees, one twenty-sixth
(1/26).
1.25 "Severed Employee" shall mean an Employee who has incurred a
Qualifying Termination.
1.26 "Year of Service," with respect to a Severed Employee, shall mean each
full twelve month period that such Severed Employee was an employee of the
Company, an Affiliate or a predecessor to the Company's or Affiliate's business
or assets during the period (the "Service Period") beginning on such Severed
Employee's original date of hire with the Company, Affiliate or such predecessor
(or any earlier date set forth on Exhibit A hereto that the Company deems to be
the Severed Employee's original date of hire for the purpose of this Section
1.26) and ending on the Severance Date with respect to such Severed Employee,
provided that service with such predecessor(s) shall be recognized for this
purpose (i) only to the extent such service was continuous to the date of the
Company's or Affiliate's acquisition of such business or assets and (ii) then
only if such Severed Employee was employed by the Company or Affiliate
immediately following the Company's or Affiliate's acquisition of such business
or assets.
Additional definitions are set forth within the Plan and shall
have the meanings ascribed to them in the Plan.
SECTION 2. BENEFITS.
2.1 Subject to Section 2.5 hereof, each Severed Employee shall
be entitled to receive from the Company an amount equal the product of (i) the
Severed Employee's Annual Compensation and (ii) the Severed Employee's Severance
Multiple (the "Severance Amount"). The Severance Amount shall be paid to such
Severed Employee in a lump sum as soon as practicable but no later than ten days
following the first date on which the release referred to in Section 2.5 hereof
is no longer revocable. The Severance Amount that a Severed Employee receives
under this Plan shall not be taken into account for purposes of determining
benefits under any other qualified or nonqualified plans of the Company.
2.2 Subject to Section 2.5 hereof, commencing on the date
immediately following the Severed Employee's Severance Date and continuing for
the period set forth below (the "Welfare Benefit Continuation Period"), the
Company shall provide each Severed Employee and anyone entitled to claim under
or through such Severed Employee with all Company-paid benefits under any group
health plan and life insurance plan of the Company (as in effect immediately
prior to the such Severed Employee's Severance Date or, if more favorable to the
Severed Employee, immediately prior to the Change in Control) for which
employees of the Company are eligible, to the same extent as if such Severed
Employee had continued to be an employee of the Company during the Welfare
Benefit Continuation Period. To the extent that the Severed Employee's
participation in Company benefit plans is not practicable, the Company shall
arrange to provide, at the Company's sole expense, the Severed Employee and
anyone entitled to claim under or through such Severed Employee with equivalent
health and life insurance benefits under an alternative arrangement during the
Welfare Benefit Continuation Period. The coverage period for purposes of the
group health continuation requirements of Section 4980B of the Code shall
commence at the expiration of the Welfare Benefit Continuation Period. For
purposes of this Section 2.2, the Welfare Benefit Continuation Period shall be
the greater of (i) the product of (a) the Severed Employee's Severance Multiple
and (b) twelve months and (ii) one month.
2.3 Subject to Section 2.5 hereof, to the extent a Severed
Employee has outstanding unvested stock options under any stock option plans of
Chris-Craft or the Company following the consummation of a transaction resulting
in a Change in Control, such Severed Employee's unvested stock options shall
become fully vested and exercisable at the time of such Severed Employee's
Qualifying Termination.
2.4 In the event of a claim by an Employee as to the amount or
timing of any payment or benefit under the Plan, such Employee shall present the
reason for his or her claim in writing to the Plan Administrator. The Plan
Administrator shall, within thirty (30) days after receipt of such written
claim, send a written notification to the Employee as to its disposition. In the
event the claim is wholly or partially denied, such written notification shall
(i) state the specific reason or reasons for the denial, (ii) make specific
reference to pertinent Plan provisions on which the denial is based, (iii)
provide a description of any additional material or information necessary for
the Employee to perfect the claim and an explanation of why such material or
information is necessary, and (iv) set forth the procedure by which the Employee
may appeal the denial of his or her claim. In the event an Employee wishes to
appeal the denial of his or her claim, he or she may request a review of such
denial by making application in writing to the Plan Administrator within fifteen
(15) days after receipt of such denial. Such Employee (or his or her duly
authorized legal representative) may, upon written request to the Plan
Administrator, review any documents pertinent to his or her claim, and submit in
writing issues and comments in support of his or her position. Within thirty
(30) days after receipt of a written appeal (unless special circumstances, such
as the need to hold a hearing, require an extension of time, but in no event
more than thirty (30) days after such receipt), the Plan Administrator shall
notify the Employee of the final decision. The final decision shall be in
writing and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific references to the
pertinent Plan provisions on which the decision is based.
2.5 No Employee shall be eligible to receive Severance
Benefits unless he or she first executes a release (substantially in the form of
Exhibit B hereto) in favor of the Company and others set forth on said Exhibit
B, relating to all claims or liabilities of any kind relating to his or her
employment with the Company and the termination of the Employee's employment.
2.6 The Company shall pay to each Employee all reasonable
legal fees and expenses incurred by such Employee in seeking in good faith to
obtain or enforce any right or benefit provided under this Plan (other than any
such fees and expenses incurred in pursuing any claim determined to be frivolous
by an arbitrator or by a court of competent jurisdiction).
SECTION 3. PLAN ADMINISTRATION.
3.1 The Plan shall be interpreted, administered and operated
by the Plan Administrator, which shall have complete authority, in its sole
discretion subject to the express provisions of the Plan, to determine who shall
be eligible for Severance Benefits, to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable for the administration of the Plan.
3.2 All questions of any character whatsoever arising in
connection with the interpretation of the Plan or its administration or
operation shall be submitted to and settled and determined by the Plan
Administrator in an equitable and fair manner in accordance with the procedure
for claims and appeals described in Section 2.3 hereof.
3.3 The Plan Administrator may delegate any of its duties
hereunder to such person or persons from time to time as it may designate.
3.4 The Plan Administrator is empowered, on behalf of the
Plan, to engage accountants, legal counsel and such other personnel as he deems
necessary or advisable to assist it in the performance of its duties under the
Plan. The functions of any such persons engaged by the Plan Administrator shall
be limited to the specified services and duties for which they are engaged, and
such persons shall have no other duties, obligations or responsibilities under
the Plan. Such persons shall exercise no discretionary authority or
discretionary control respecting the management of the Plan. All reasonable
expenses thereof shall be borne by the Company.
SECTION 4. PLAN MODIFICATION OR TERMINATION.
The Plan may be amended or terminated by the Board at any
time; provided, however, that (i) no termination or amendment of the Plan may
reduce the Severance Benefits payable under the Plan to an Employee if the
Employee's termination of employment with the Company has occurred prior to such
termination of the Plan or amendment of its provisions and (ii) during the
pendency of a Potential Change in Control and following a Change in Control, the
Plan may not be terminated or amended, if such amendment would be adverse to the
interests of any Employee, without the consent of such Employee.
SECTION 5. GENERAL PROVISIONS.
5.1 Except as otherwise provided herein or by law, none of the
payments, benefits or rights of any Employee shall be subject to any claim of
any creditor, and, in particular, to the fullest extent permitted by law, all
such payments, benefits and rights shall be free from attachment, garnishment,
trustee's process, or any other legal or equitable process available to any
creditor of such Employee. No Employee shall have the right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or payments
which he or she may expect to receive, contingently or otherwise, under this
Plan.
5.2 Neither the establishment of the Plan, nor any
modification thereof, nor the creation of any fund, trust or account, nor the
payment of any benefits shall be construed as giving any Employee, or any person
whomsoever, the right to be retained in the service of the Company, and all
Employees shall remain subject to discharge to the same extent as if the Plan
had never been adopted.
5.3 If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.
5.4 This Plan shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties, including each Employee,
present and future, and any successor to the Company.
5.5 The headings and captions herein are provided for
reference and convenience only, shall not be considered part of the Plan, and
shall not be employed in the construction of the Plan.
5.6 The Plan shall not be funded. No Employee shall have any
right to, or interest in, any assets of the Company which may be applied by the
Company to the payment of benefits or other rights under this Plan.
5.7 Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of giving a receipt therefor shall
be deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Company, the Plan Administrator and all other parties
with respect thereto. If a Severed Employee dies prior to the payment of all
benefits due such Severed Employee, such unpaid amounts shall be paid to the
executor, personal representative or estate of such Employee.
5.8 Any notice or other communication required or permitted
pursuant to the terms hereof shall have been duly given when delivered or mailed
by United States mail, first class, postage prepaid, addressed to the intended
recipient at his, her or its last known address.
5.9 This Plan shall be construed and enforced according to the
laws of the State of Delaware, without giving effect to its principles of
conflicts of law, to the extent not preempted by federal law, which shall
otherwise control.
EXHIBIT A
LEVEL I EMPLOYEES
United Television, Inc.
Name of
Employee
Employment
Date
1999
Salary
1999
Bonus
1999
Total
Barnett, Laurey
12-17-84
$185,000
$180,000
$365,000
Braet, Jerry
1-4-84
$227,000
$243,000
$470,000
Furlong, Bob
5-1-93
$185,000
$160,000
$345,000
Lindsey, Garth
6-14-71
$185,000
$197,000
$382,000
Muir, Tom
12-20-76
$124,000
$114,000
$238,000
Perry, Don
1-15-96
$185,000
$230,000
$415,000
Swartz, Stu
2-11-63
$228,000
$170,000
$398,000
Weiss, Jeff
1-30-89
$206,000
$90,000
$296,000
Winter, Seth
1-4-82
$225,000
$40,000
$265,000
EXHIBIT B
RELEASE AGREEMENT
In consideration of the payments and benefits provided for in
the annexed United Television, Inc. Special Severance Plan (the "Plan"), and the
release from [employee's name] (the "Employee") set forth herein, United
Television, Inc. (the "Company") and the Employee agree to the terms of this
Release Agreement.
1. The Employee acknowledges and agrees that the Company is
under no obligation to offer the Employee the payments and benefits set forth in
the annexed Plan, unless the Employee consents to the terms of this Release
Agreement. The Employee further acknowledges that he/she is under no obligation
to consent to the terms of this Release Agreement and that the Employee has
entered into this agreement freely and voluntarily.
2. The Employee voluntarily, knowingly and willingly releases
and forever discharges the Company and its Affiliates, together with their
respective officers, directors, partners, shareholders, employees and agents,
and each of their predecessors, successors and assigns (collectively,
"Releasees"), from any and all charges, complaints, claims, promises,
agreements, controversies, causes of action and demands of any nature whatsoever
that the Employee or his/her executors, administrators, successors or assigns
ever had, now have or hereafter can, shall or may have against Releasees by
reason of any matter, cause or thing whatsoever arising prior to the time of
signing of this Release Agreement by the Employee. The release being provided by
the Employee in this Release Agreement includes, but is not limited to, any
rights or claims relating in any way to the Employee's employment relationship
with the Company, or the termination thereof, or under any statute, including
the federal Age Discrimination in Employment Act of 1967, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1990, the Americans with
Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974,
the Family and Medical Leave Act of 1993, each as amended, and any other
federal, state or local law or judicial decision.
3. The Employee acknowledges and agrees that he/she shall not,
directly or indirectly, seek or further be entitled to any personal recovery in
any lawsuit or other claim against the Company or any other Releasee based on
any event arising out of the matters released in paragraph 2.
4. Nothing herein shall be deemed to release (i) any of the
Employee's rights under the Plan or (ii) any of the benefits that the Employee
has accrued prior to the date this Release Agreement is executed by the Employee
under the Company's employee benefit plans and arrangements.
5. In consideration of the Employee's release set forth in
paragraph 2, the Company knowingly and willingly releases and forever discharges
the Employee from any and all charges, complaints, claims, promises, agreements,
controversies, causes of action and demands of any nature whatsoever that the
Company now has or hereafter can, shall or may have against him/her by reason of
any matter, cause or thing whatsoever arising prior to the time of signing of
this Release Agreement by the Company, provided, however, that nothing herein is
intended to release any claim the Company may have against the Employee for any
illegal conduct.
6. The Employee acknowledges that the Company has advised
him/her to consult with an attorney of his/her choice prior to signing this
Release Agreement. The Employee represents that, to the extent he/she desires,
he/she has had the opportunity to review this Release Agreement with an attorney
of his/her choice.
7. The Employee acknowledges that he/she has been offered the
opportunity to consider the terms of this Release Agreement for a period of at
least forty-five (45) days, although he/she may sign it sooner should he/she
desire. The Employee further shall have seven additional days from the date of
signing this Release Agreement to revoke his/her consent hereto by notifying, in
writing, the General Counsel of the Company. This Release Agreement will not
become effective until seven days after the date on which the Employee has
signed it without revocation.
-------------------------------
[Employee Name]
UNITED TELEVISION, INC.
By:_______________________
Title:
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 333-91213, 33-59277, and 33-21903) of United
Television, Inc. of our report dated February 10, 2000 relating to the financial
statements, which appears in the Annual Report to Shareholders, which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated February 10, 2000 relating to the
financial statement schedules, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Century City, California
March 29, 2000
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INFORMATION EXTRACTED FROM THE REGISTRANT'S
FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
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