<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
[ ] OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to__________
Commission file number 1-10342
BHC COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2104168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 Fifth Avenue, New York, New York 10153
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-0200
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
Class A Common Stock, American Stock Exchange
$0.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
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]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of February 28, 1994, was approximately $553,000,000.
As of February 28, 1994, there were 7,694,128 shares of the
registrant's Class A Common Stock and 18,000,000 shares of the registrant's
Class B Common Stock outstanding.
<PAGE>
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 II
registrant's annual
report to stockholders
for the fiscal year ended
December 31, 1993 (the
"Annual Report") that are
specifically identified
herein as incorporated by
reference into this Form
10-K.
Those portions of the III
registrant's proxy
statement for the
registrant's 1994 Annual
Meeting (the "Proxy
Statement") that are
specifically identified
herein as incorporated by
reference into this Form
10-K.
<PAGE>
PART I
ITEM 1. BUSINESS.
General
BHC Communications, Inc. ("BHC"), the majority owned (71.8% at
February 28, 1994) television broadcasting subsidiary of Chris-
Craft Industries, Inc. ("Chris-Craft"), was organized in Delaware
in 1977 under the name "BHC, Inc." and changed its name to BHC
Communications, Inc. on August 4, 1989. BHC's principal business
is television broadcasting, conducted through its wholly owned
subsidiaries, Chris-Craft Television, Inc. ("CCTV") and Pinelands,
Inc. ("Pinelands"), and its majority owned (54.3% at February 28,
1994) subsidiary, United Television, Inc. ("UTV").
At February 28, 1994, BHC, solely through subsidiaries, had
979 full-time employees and 97 part-time employees.
Television Broadcasting
BHC operates six very high frequency ("VHF") television
stations and two ultra high frequency ("UHF") television stations,
together constituting Chris-Craft's Television Division.
Commercial television broadcasting in the United States is con-
ducted on 68 channels numbered 2 through 69. Channels 2 through 13
are in the VHF band, and channels 14 through 69 are in the UHF
band. In general, UHF stations are at a disadvantage relative to
VHF stations, because UHF frequencies are more difficult for
households to receive. This disadvantage is eliminated when a
viewer receives the UHF station through a cable system.
Commercial broadcast television stations may be either
affiliated with one of the three national networks (ABC, NBC and
CBS) or may be independent. In addition, Fox Broadcasting Company
("Fox") has established itself as a national network by entering
into affiliation agreements with independent stations in many
television markets. Chris-Craft, through BHC, is organizing, in
partnership with Paramount Communications, Inc., an additional
network, The Paramount Network, which currently plans to commence
broadcasting in January 1995. There can be no assurance that the
network will be viable. Moreover, BHC knows of one other effort to
establish a network, and it is considered unlikely that two
additional networks will be viable.
<PAGE>
The following table sets forth certain information with
respect to BHC's stations and their respective markets:
<TABLE>
<CAPTION>
Total
Commercial
DMA TV Stations Commercial
Station and House- DMA Operating in Cable
Location(a) Channel holds(b) Rank(b) Market(c) Penetration(d)
<S> <C> <C> <C> <C> <C>
KCOP
Los Angeles 13 5,006,380 2nd 7VHF 59%
10UHF
KPTV
Portland 12 890,120 27th 4VHF 57%
2UHF
WWOR(e)
Secaucus 9 6,692,370 1st 6VHF 64%
14UHF
KMSP
Minneapolis/
St. Paul 9 1,389,420 14th 4VHF 47%
3UHF
KTVX
Salt Lake City 4 616,720 38th 4VHF 51%
2UHF
KMOL
San Antonio 4 610,660 40th 3VHF 63%
3UHF
KBHK
San Francisco 44 2,253,220 5th 4VHF 67%
10UHF
KUTP
Phoenix 45 1,097,480 20th 4VHF 53%
4UHF
<FN>
___________________
(a) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the
remaining stations are owned by UTV. All stations are independent, except
for KTVX, an ABC affiliate, and KMOL, an NBC affiliate.
(b) Designated Market Area ("DMA") is an exclusive geographic area
consisting of all counties in which the home-market commercial stations
received a preponderance of total viewing hours. The ranking shown is the
nationwide rank, in terms of television households in DMA, of the market
served by the station. Source: Nielsen Media Research television
households universe estimates.
(c) Additional channels have been allocated by the Federal Communications
Commission ("FCC") for activation as commercial television stations in
certain of these markets. Also, additional stations may be located within
the respective DMAs of BHC stations but outside the greater metropolitan
television markets in which BHC stations operate.
(d) Cable penetration refers to the percentage of DMA television viewing
households receiving cable television service, as estimated by Nielsen
Media Research.
(e) WWOR broadcasts across a tri-state area including the entire New York
City metropolitan area. Its broadcast signal is also carried as
a"superstation" on numerous cable television systems throughout the United
States.
</TABLE>
<PAGE>
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, from "superstations" (i.e.,
broadcast stations carried by cable operators in areas outside
their broadcast coverage area) or from "unwired" networks (groups
of otherwise unrelated stations whose advertising time is combined
for national sale). A national advertiser wishing to reach a
particular regional or local audience usually buys advertising time
from local stations through national advertising sales
representative firms having contractual arrangements with local
stations to solicit such advertising. Local businesses generally
purchase advertising from the stations' local sales staffs.
Television stations compete for television advertising revenue
primarily with other television stations serving the same DMA.
There are 211 DMAs in the United States. DMAs are ranked annually
by the estimated number of households owning a television set
within the DMA. Advertising rates that a television station can
command vary in part with the size, in terms of television
households, of the DMA served by the station.
Within a DMA, the relative advertising rates charged by
competing stations depend primarily on three factors: the
stations' program ratings (number of television households or
persons within those households tuned to a program as a percentage
of total television households or persons within those households
in the viewing area); the time of day the advertising will run; and
the demographic qualities of a program's viewers (primarily age and
sex). Ratings data for television markets are measured by A.C.
Nielsen Co. ("Nielsen"). This rating service uses two terms to
quantify a station's audience: rating points and share points. A
rating point represents one percent of all television households in
the entire DMA, 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.
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 time), their affiliates generally (but do not
always) achieve higher audience shares during those hours than
independent stations. However, independent stations generally have
substantially more advertising time ("inventory") for sale than
network affiliates, because the networks use almost all of their
affiliates' inventory during network shows. 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, whereas affiliates'
larger audiences and limited inventory generally allow affiliates
to charge higher advertising rates for prime time programming. By
selling more advertising time, an independent station typically
achieves a share of advertising revenues in its market greater than
its audience ratings. On the other hand, because a nonaffiliated
station broadcasts more syndicated programming than a network-
affiliated station, total programming costs for an independent
station are generally higher than those of a network affiliate in
the same market.
Programming
BHC's independent stations depend heavily on independent third
parties for programming, as do BHC's network affiliates 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, BHC has begun to invest directly in the
development of original programming. The aggregate amount invested
through December 31, 1993 was not significant to BHC's financial
position. BHC's independent stations currently expect to
broadcast, as affiliates of The Paramount Network, four hours of
original prime time programming over two nights per week, beginning
in January 1995. BHC's television stations also produce
<PAGE>
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 network, and syndicated feature films, which were
either made for network television or have been exhibited
previously in motion picture theatres (most of which films have
been shown previously on network and cable television). Syndicated
programs are sold to individual stations to be broadcast one or
more times. Independent television stations generally have large
numbers of syndication contracts; each contract is a license for a
particular series or program that usually prohibits licensing the
same programming to other television stations in the same market.
A single syndication source may provide a number of different ser-
ies 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, de-
pending 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). Bartered programming is offered to stations without
charge, but comes with a greater number of commercials that must be
broadcast, and therefore with less time available for sale by the
station. Recently, the amount of bartered and cash plus barter
programming broadcast both industry-wide and by BHC's stations has
increased substantially.
BHC television stations are frequently required to make
substantial financial commitments to obtain syndicated programming
while such programming is still being broadcast by a network and
before it is available for broadcast by BHC stations or 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 pro-
gramming, there is no assurance that a successful network program
will continue to be successful or profitable when broadcast after
network airing.
For many years, the FCC has restricted the ability of
television networks to acquire financial interests in the
production of television shows by independent sources, or to
participate in the syndication of television programs, either on a
first-run or an off-network basis. These rules were based in part
on concern that networks engaged in syndication would have economic
incentives to discriminate against independent stations (such as
those owned by BHC) in making programs available in the syndication
market, either by warehousing them or favoring the network's owned
or affiliated stations. Late in 1992, the United States Court of
Appeals for the Seventh Circuit remanded the rules to the FCC with
instructions to revisit the need for them. In 1993, the FCC
adopted new rules which allow networks to acquire financial
interests and passive syndication rights in off-network programs,
but bar them from actively syndicating such programs in the United
States or delaying the entry into syndication of any long-running
prime time network-owned series beyond the fourth year after its
network debut. The new rules also bar networks from acquiring
domestic financial interests or syndication rights in first-run
programs unless the network is the sole producer of the program and
prohibit networks from active domestic syndication of all first-run
programs. However, these rules are scheduled to expire in November
1995, unless the FCC issues an order to the contrary. A number of
petitions for review of these new regulations have been filed,
which have been consolidated and transferred to the Seventh
<Page
Circuit, where they remain pending. BHC cannot predict the outcome
of the proceedings in court or before the FCC.
Pursuant to generally accepted accounting principles,
commitments for programming not available for broadcast are not
recorded as liabilities until the programming becomes available for
broadcast, at which time the related contract right is also
recorded as an asset. BHC television stations had prepaid
broadcast rights, unamortized film contract rights for programming
available for telecasting and deposits on film contracts for
programming not available for telecasting aggregating $186,079,000
as of December 31, 1993. The stations were committed for film and
sports rights contracts aggregating $117,900,000 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(C) and 7 of Notes to Consolidated Financial
Statements.
KTVX and KMOL are primary affiliates of their respective
networks. Network programs are produced either by the networks
themselves or by independent production companies and are
transmitted by the networks to their affiliated stations for
broadcast.
In general, network primary affiliation agreements are
automatically renewed for two-year periods, unless advance written
notice of termination is given by either the affiliate or the
network. The agreement gives the affiliate the right to broadcast
all programs transmitted by the network. The affiliate must run in
its entirety, together with all network commercials, any network
programming the affiliate elects to broadcast and is allowed to
broadcast a limited number of commercials it has sold. For each
hour of programming broadcast by the affiliate, the network
generally pays the affiliate 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 provided with no compensation to the station.
An affiliate may accept or reject a program offered by a
network and instead broadcast programming from another source.
Rejection of a program gives the network the right to offer that
program to another station in the area.
Sources of Revenue
The principal source of revenues for BHC stations is the sale
of advertising time to national and local advertisers. Such time
sales are represented by spot announcements purchased to run
between programs and program segments and by program sponsorship.
The relative contributions of national and local advertising to
BHC's gross revenues vary from time to time. During the year ended
December 31, 1993, national advertising contributed 32%, and local
advertising contributed 57%, of total gross revenues. Most adver-
tising contracts are short-term. Like that of the television
broadcasting business, generally, BHC's business is seasonal. In
terms of revenues, generally the fourth quarter is strongest, fol-
lowed by the second, third and first.
<PAGE>
Advertising is generally placed with BHC stations through
advertising agencies, which are allowed a commission generally
equal to 15% of the price of advertising placed. National
advertising time is usually sold through an independent national
sales representative, which also receives a commission, while local
advertising time is sold by each station's sales staff. Practices
with respect to sale of advertising time do not differ markedly
between BHC's network and non-network stations, although the net-
work-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 loca-
tions of stations, to regulate the broadcasting equipment used by
stations, to establish areas to be served, to adopt such
regulations as may be necessary to carry out the provisions of the
Communications Act and to impose certain penalties for violation of
its regulations. BHC television stations are 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. Television licenses generally are issued for five-
year terms. Upon application, and in the absence of a conflicting
application that would require the FCC to hold a hearing, or
adverse questions as to the licensee's qualifications, 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's license renewal was granted on April 15, 1993, and is
due to expire on April 1, 1998. KTVX's license renewal was granted
on September 29, 1993, and is due to expire on October 1, 1998.
KMOL's license renewal application is currently pending, subject to
two petitions challenging the station's compliance with FCC
requirements concerning equal employment opportunity; UTV has
vigorously opposed the petitions, and believes that they are
without merit. KUTP, KCOP, KBHK, and KPTV have each filed timely
renewal applications, which are pending. No petitions to deny any
of those applications have been filed, no competing applications
have been filed, and the deadlines for filing such petitions and
competing applications have all expired. Pursuant to FCC
requirements, each station's application has reported instances in
which the station has exceeded the commercial limits applicable to
children's programs. In the case of KBHK, these instances have
been substantial, and the FCC has recently granted renewals, in
such cases, subject to forfeitures of as much as $80,000. WWOR's
license renewal was granted on January 22, 1992 and expires on June
1, 1994. A renewal application was timely filed on January 31,
1994. The deadline for filing petitions to deny or competing
applications against that application has not yet expired.
Under existing FCC regulations governing multiple ownership of
broadcast stations, a license to operate a television station
generally will not be granted to any party (or parties under common
control) if such party directly or indirectly owns, operates,
controls or has an attributable interest in another television or
radio station serving the same market or area. The FCC, however,
is favorably disposed to grant waivers of this rule for radio
station-television station combinations in the top 25 television
markets, in which there will be at least 30 separately owned,
<PAGE>
operated and controlled broadcast licenses, and in certain other
circumstances.
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 inconsis-
tent with the public interest, convenience or necessity. FCC rules
generally deem such concentration of control to exist if any party,
or any of its officers, directors or stockholders, directly or in-
directly, owns, operates, controls or has an attributable interest
in more than 12 television stations, or in television stations
capable of reaching, in the aggregate, a maximum of 25% of the
national audience. This percentage is determined by the DMA market
rankings of the percentage of the nation's television households
considered within each market. Because of certain limitations of
the UHF signal, however, the FCC will attribute only 50% of a
market's DMA reach to owners of UHF stations for the purpose of
calculating the audience reach limits. Applying the 50% reach
attribution rule to UHF stations KBHK and KUTP, the eight BHC
stations are deemed to reach approximately 18% of the nation's
television households. To facilitate minority group participation
in radio and television broadcasting, the FCC will allow entities
with attributable ownership interests in stations controlled by
minority group members to exceed the ownership limits.
The FCC's multiple ownership rules require the attribution of
the licenses held by a broadcasting company to its officers,
directors and certain of its stockholders, so there would
ordinarily be a violation of FCC regulations where an officer,
director or such a stockholder and a television broadcasting
company together hold interests in more than the permitted number
of stations or more than one station that serves the same area. In
the case of a corporation controlling or operating television
stations, such as BHC, there is attribution only to stockholders
who own 5% or more of the voting stock, except for institutional
investors, including mutual funds, insurance companies and banks
acting in a fiduciary capacity, which may own up to 10% of the vot-
ing stock without being subject to such attribution, provided that
such entities exercise no control over the management or policies
of the broadcasting company.
The Communications Act and 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 Communications Act limits the amount of capital stock that
aliens 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 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. BHC believes the
ownership of its stock by aliens to be below the applicable limit.
The Communications Act prohibits the assignment of a broadcast
license or the transfer of control of a licensee without the prior
approval of the FCC. Legislation was introduced in the past that
would impose a transfer fee on sales of broadcast properties.
Although that legislation was not adopted, similar proposals, or a
general spectrum licensing fee, may be advanced and adopted in the
future. Recent legislation has imposed annual regulatory fees
applicable to BHC's stations, currently ranging as high as $18,000
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. BHC cannot predict
what new or revised Federal requirements may result from such
consideration or what impact, if any, such requirements might have
upon the operation of BHC television stations.
Competition
BHC television stations compete for advertising revenue in
their respective markets, primarily with other broadcast television
stations and cable television channels, and compete with other
advertising media, as well. Such competition is intense.
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 pro-
grams 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,
network programs achieve higher ratings than independent station
programs.
There are at least five other commercial television stations
in each market served by a BHC station. BHC believes that the
three VHF network-affiliated stations and the two other independent
VHF stations in New York City generally attract a larger viewing
audience than does WWOR, and that WWOR generally attracts a viewing
audience larger than the audience attracted by the UHF stations in
the New York City market. In Los Angeles, the three VHF network-
affiliated stations and two independent VHF stations generally
attract a larger viewing audience than does KCOP, and KCOP
generally attracts a viewing audience approximately the same size
as the audiences attracted by the other independent VHF station but
larger than the ten UHF stations in Los Angeles. In Portland, the
three VHF network-affiliated stations generally attract a larger
audience than does KPTV, which generally attracts a larger audience
than the other independent stations, both of which are UHF sta-
tions. BHC believes that, in Minneapolis/St. Paul, KMSP generally
attracts a smaller viewing audience than the three VHF network-
affiliated stations, but a larger viewing audience than the other
independent stations, all of which are UHF stations. In Salt Lake
City, KTVX generally ranks first of the six television stations in
terms of audience share. In San Antonio, KMOL ranks third of the
six stations in terms of audience share. KBHK generally ranks
fifth in terms of audience share, behind the one independent and
three network-affiliated VHF television stations, of the 14 commer-
cial television stations in San Francisco. KUTP ranks sixth in
terms of audience share, of the eight commercial stations in the
Phoenix market.
BHC stations may face increased competition in the future from
additional television stations that may enter their respective
markets. See note (c) to the table under Television Broadcasting.
<PAGE>
Cable television has become a major competitor of television
broadcasting stations. Because cable television systems operate in
each market served by a BHC station, the stations are affected by
rules governing cable operations. If a station is not widely
accessible by cable in those markets having strong cable pene-
tration, it may lose effective access to a significant portion of
the local audience. Even if a television station is carried on a
local cable system, an unfavorable channel position on the cable
system may adversely affect the station's audience ratings and, in
some circumstances, a television set's ability to receive the
station being carried on an unfavorable channel position. Some
cable system operators may be inclined to place broadcast stations
in unfavorable channel locations.
FCC regulations requiring cable television stations to carry
or reserve channels for retransmission of local broadcast signals
have twice been invalidated in Federal court. In October 1992,
Congress enacted legislation designed to provide television
broadcast stations the right to be carried on cable television
stations (and to be carried on specific cable channel positions),
or (at the broadcaster's election) to prohibit cable carriage of
the television broadcast station without its consent. This
legislation is currently being challenged in the United States
Supreme Court, and BHC cannot predict the outcome. While Federal
law now generally prohibits local telephone companies from
providing video programming to subscribers in their service areas,
this restriction has been invalidated by one federal district court
and is currently being challenged in other federal courts;
legislation eliminating or relaxing the law has been proposed.
"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. BHC believes that the competitive position
of BHC stations would likely be enhanced by an expansion of
broadcasters' permitted zones of exclusivity.
Alternative technologies could increase competition in the
areas served by BHC stations and, consequently, could adversely
affect their profitability. Direct broadcast satellite ("DBS")
systems and subscription television ("STV"), recognized as
potential competitors a few years ago, have thus far failed to
materialize as such. However, at least two DBS operators are
scheduled to begin service in 1994. An additional challenge is now
posed by multichannel multipoint distribution services ("MMDS").
Two four-channel MMDS licenses have been granted in most television
markets. MMDS 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 existing single
channel MDS or a new MMDS to increase the number of available
channels offered by an individual operator. The emergence of home
satellite dish antennas has also made it possible for individuals
to receive a host of video programming options via satellite trans-
mission.
Technological developments in television transmission have
created the possibility that one or more of the broadcast and
nonbroadcast television media will provide enhanced or "high
definition" pictures and sound to the public of a quality that is
technically superior to that of the pictures and sound currently
available. It is not yet clear when and to what extent technology
of this kind will be available to the various television media;
whether and how television broadcast stations will be able to avail
themselves of these improvements; whether all television broadcast
stations will be afforded sufficient spectrum to do so; what
channels will be assigned to each of them to permit them to do so;
whether viewing audiences will make choices among services upon the
basis of such differences; or, if they would, whether significant
additional expense would be required for television stations to
<PAGE>
provide such services. Many segments of the television industry
are intensively studying enhanced and "high definition" television
technology, and both Congress and the FCC have initiated
proceedings and studies on its potential and its application to
television service in the United States.
The broadcasting industry is continuously faced with
technological changes, competing entertainment and communications
media and governmental restrictions or actions of Federal
regulatory bodies, including the FCC. These technological changes
may include the introduction of digital compression by cable
systems that would significantly increase the number and
availability of cable program services with which BHC stations
compete for audience and revenue, the establishment of interactive
video services, and the offering of multimedia services that
include data networks and other computer technologies. Such fac-
tors have affected, and will continue to affect, the revenue growth
and profitability of BHC.
ITEM 2. PROPERTIES.
KCOP owns its studios and offices in two buildings in Los
Angeles containing a total of approximately 54,000 square feet
located on adjacent sites having a total area of approximately 1.93
acres. KCOP's transmitter is located atop Mt. Wilson on property
utilized pursuant to a permit issued by the United States Forest
Service.
KPTV owns its studios and offices in a building in Portland,
Oregon, containing approximately 33,520 square feet located on a
site of approximately 1.09 acres. Its transmitter is located on
its own property at a separate site containing approximately 16.18
acres.
WWOR owns office and studio facilities in Secaucus, New
Jersey, containing approximately 110,000 square feet on
approximately 3.5 acres and leases additional office space in New
York City. Along with almost all of the television stations
licensed to the New York market, WWOR's transmitter is located on
top of the World Trade Center in New York City pursuant to a lease
agreement which expires in 2004, unless terminated by WWOR in 1994
or 1999.
Physical facilities consisting of offices and studio
facilities are owned by UTV in Minneapolis, San Antonio and Phoenix
and are leased in Salt Lake City and San Francisco. The Salt Lake
City lease agreement expires in 1999 and is renewable, at an
increased rental, for two five-year periods. The San Francisco
lease expires in 2007.
The Minneapolis facility includes approximately 49,700 square
feet of space on a 5.63-acre site. The Salt Lake City facility is
approximately 30,400 square feet on a 2.53-acre site. The San
Antonio facility is 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. 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.
<PAGE>
KTVX's transmitter facilities and tower are located at a site
on Mt. Nelson, close to Salt Lake City, under a lease that expires
in 2004. KTVX also maintains back-up transmitter facilities and
tower at a site on nearby Mt. Vision under a lease that expires in
2002 and is renewable, at no increase in rental, for a 50-year
period.
KMOL's transmitter facilities are located at a site near San
Antonio on land and on a tower owned by Texas Tall Tower
Corporation, a corporation owned in equal shares by UTV and another
television station that also transmits from the same tower.
KBHK's transmitter is located on Mt. Sutro, as part of the
Sutro Tower complex, which also houses equipment for other San
Francisco television stations and many of its FM radio stations.
The lease for the Mt. Sutro facilities expires in February 1995.
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.
BHC 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.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of BHC, as of February 28, 1994, are as
follows:
<TABLE>
<CAPTION>
Positions with BHC; principal Has served
occupation; and age as of as officer
Name February 28, 1994 since
<S> <C> <C>
Herbert J. Siegel Chairman of the Board 1977
and President; Chairman
of the Board and President,
Chris-Craft; 65
John C. Siegel Senior Vice President; Senior Vice 1981
President, Chris-Craft; 41
William D. Siegel Senior Vice President; Senior Vice 1981
President, Chris-Craft; 39
Joelen K. Merkel Vice President and Controller; 1980
Vice President and Treasurer,
Chris-Craft; 42
Brian C. Kelly General Counsel and 1992
Secretary; 42
</TABLE>
Chris-Craft, through its majority ownership of BHC, is
principally engaged in television broadcasting. The principal
occupation of each of the individuals for the past five years is
stated in the foregoing table, except that prior to being elected
General Counsel and Secretary of BHC on December 14, 1992, Brian C.
Kelly served as President of Finevest Foods, Inc. ("Finevest") from
July 1992 through December 13, 1992, served as Executive Vice
President, General Counsel and Secretary of Finevest from March
1992 until July 1992 and served as Vice President, General Counsel
and Secretary of Finevest from January 1989 through February 1992.
Finevest filed a Chapter 11 bankruptcy petition on February 11,
1991, and emerged from bankruptcy on July 9, 1992 pursuant to a
confirmed reorganization plan. All officers hold office until the
meeting of the Board following the next annual meeting of
stockholders or until removed by the Board.
Evan C Thompson, age 51, is Executive Vice President of Chris-
Craft. Although not an officer of BHC, as President of UTV and
Chris-Craft's Television Division for more than the past five
years, Mr. Thompson may be considered an executive officer of BHC,
within the Securities and Exchange Commission definition of the
term.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information appearing in the Annual Report under the
caption STOCK PRICE, DIVIDEND AND RELATED INFORMATION is incorporated
herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information appearing in the Annual Report under the
caption SELECTED FINANCIAL DATA is incorporated herein by this
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information appearing in the Annual Report under the
caption MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements, notes thereto, report
of independent public accountants thereon and quarterly financial
information (unaudited) appearing in the Annual Report are incor-
porated 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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information appearing in the Proxy Statement under
the caption ELECTION OF DIRECTORS -- Nominees of the Board of Directors
is incorporated herein by this reference. Information relating to
BHC'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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The financial statements and quarterly financial
information incorporated by reference from the
Annual Report pursuant to Item 8.
2. The report of predecessor independent public
accountants and the schedules 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
following compensatory plans listed below:
Chris-Craft's Benefit Equalization Plan
Employment Agreement dated as of January 1, 1994
between and Evan C Thompson and Chris-Craft
(b) No reports on Form 8-K were filed by the registrant during
the last quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, there-
unto duly authorized.
Date: March 29, 1994
BHC COMMUNICATIONS, INC.
(Registrant)
By: WILLIAM D. SIEGEL
William D. Siegel
Senior Vice President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature and Title Date
HERBERT J. SIEGEL March 29, 1994
Herbert J. Siegel
Chairman, President and
Director (principal exe-
cutive officer)
WILLIAM D. SIEGEL March 29, 1994
William D. Siegel
Director (principal
financial officer)
JOELEN K. MERKEL March 29, 1994
Joelen K. Merkel
Vice President, Controller
and Director (principal
accounting officer)
JOHN L. EASTMAN March 29, 1994
John L. Eastman
Director
BARRY S. GREENE March 29, 1994
Barry S. Greene
Director
LAURENCE M. KASHDIN March 29, 1994
Laurence M. Kashdin
Director
MORGAN L. MILLER March 29, 1994
Morgan L. Miller
Director
JOHN C. SIEGEL March 29, 1994
John C. Siegel
Director
VIN WEBER March 29, 1994
Vin Weber
Director
<PAGE>
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants
Consolidated Balance Sheets -- December 31, 1993 and 1992
Consolidated Statements of Income -- For the Years
Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows -- For the Years Ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Shareholders' Investment -- For
the Years Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
SCHEDULES:
Report of Predecessor Independent Public Accountants
Report of Independent Accountants on Financial Statement
Schedules
I. Marketable Securities - Other Investments
II. Amounts Receivable from Related Parties,
Underwriters,
Promoters and Employees other than Related Parties
X. Supplementary Income Statement Information
Schedules other than those 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>
REPORT OF PREDECESSOR INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of BHC Communications,
Inc.:
We have audited the consolidated statements of income,
shareholders' investment and cash flows of BHC Communications, Inc.
(a Delaware corporation and majority owned subsidiary of Chris-
Craft Industries, Inc.) and subsidiaries for the year ended
December 31, 1991. These financial statements and the schedules
referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards 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. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the results of
operations and cash flows of BHC Communications, Inc. and
subsidiaries for the year ended December 31, 1991, in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed
in the index to consolidated financial statements and schedules for
the year ended December 31, 1991 are presented for purposes of
complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state
in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken
as a whole.
ARTHUR ANDERSEN & CO.
New York, New York,
February 10, 1992.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of BHC Communications, Inc.
Our audits of the consolidated financial statements referred to in
our report dated February 8, 1994 appearing on page 11 of the 1993
Annual Report to Shareholders of BHC Communications, Inc. (which
report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included audits
of the Financial Statement Schedules as of December 31, 1993 and
1992, and the years then ended, listed in Item 14(a) of this Form
10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE
New York, New York
February 8, 1994
<PAGE>
Schedule I
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1993
(Columns C, D, and E in Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Amount at Which
Number of Shares or Each Portfolio of
Principal Amount of Market Value of Each Equity Security Issues
Name of Issuer and Bonds and Cost of Each Issue at Balance Sheet Carried in the
Title of Each Issue Notes Issue Date Balance Sheet
<S> <C> <C> <C> <C>
Current marketable securities:
United States Government direct
issue securities $1,225,240,000 $1,371,425 $1,373,396 $1,372,602
Other Various 100,552 98,726 98,556
$1,471,977 $1,472,122 $1,471,158
/TABLE
<PAGE>
<PAGE>
Schedule II
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES,
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Deductions Balance at
Beginning Amounts Amounts End of Period
Name of Debtor of Period Additions Collected Written Off Current Noncurrent
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Garth S. Lindsey (Officer of UTV) $100 $ - $ 20 $ - $ 20 $ 60
Year ended December 31, 1992:
Garth S. Lindsey (Officer of UTV) $120 $ - $ 20 $ - $ 20 $ 80
Year ended December 31, 1991:
Garth S. Lindsey (Officer of UTV) $140 $ - $ 20 $ - $ 20 $100
The loan was made for the purpose of assisting Mr. Lindsey in relocating his
home in connection with the relocation of UTV's executive offices from
Minneapolis to Los Angeles. The loan was represented by a non-interest bearing
five-year note, with no payment due before maturity. In December 1988,
the note was revised and extended. Under the Revision and Extension Agreement,
10% of the original balance is due and payable December 31 of each year through
December 31, 1997. Such installments will be forgiven on each such December 31
if the borrower is still employed by UTV on each such forgiveness date. The
note is secured by a deed of trust on the borrower's home and provides that at
the option of the holder the loan will become due and payable upon sale or
further encumbrance of the borrower's home without the consent of the holder or
upon the borrower's voluntary termination of employment with UTV.
</TABLE>
<PAGE>
<PAGE>
Schedule X
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In Thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Item December 31, 1993 December 31, 1992 December 31, 1991
<S> <C> <C> <C>
Maintenance and repairs $ 2,146 $ 1,621 $ 1,655
Depreciation and amortization of property
and equipment $ 11,160 $ 8,363 $ 6,028
Amoritization of intangible assets $ 9,270 $ 4,304 $ 1,611
Advertising costs $ 10,095 $ 7,046 $ 7,611
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated
by Reference to: Exhibit No. Exhibit
<S> <C> <C>
Exhibit 3(a)[1] 3(a) Restated Certificate of Incorporation
Exhibit 3(b)[1] (b) Restated By-laws
Exhibit 10(c)[1] 10(a) Management Agreement between registrant and
Chris-Craft dated July 21, 1989
Exhibit 19[4] 10(a)(1) Amendment No. 1 thereto dated October
31, 1994
Exhibit 10(h)(2)[6] (a)(2) Amendment No. 2 thereto dated March
24, 1994
Exhibit 10(E)[2] (b) Form of Agreement under Chris-Craft's
Executive Deferred Income Plan
Exhibit 10(B)[6] (c) Employment Agreement dated January 1,
1994 between registrant and Herbert
J. Siegel
Exhibit 10(C)[6] (d) Split-Dollar Agreement dated January 6,
1994 between registrant and William
D. Siegel
Exhibit 10(D)[6] (e) Split-Dollar Agreement dated January 6,
1994 between registrant and John C.
Siegel
Exhibit 10(F)[6] (f) Employment Agreement dated January 1,
1994 between registrant and Evan C
Thompson
Exhibit 11(h)[3] (f) Chris-Craft's Benefit Equalization Plan,
as amended
Exhibit 28[5] (g) Agreement and Plan of Merger among
registrant, BHC Acquisition corp., and
Pinelands, Inc. dated May 7, 1992
* 13 Portions of the Annual Report
incorporated by reference
* 22 Subsidiaries of registrant
<FN>
____________________
[1] Registrant's Registration Statement on Form S-1 (Regis. No. 33-31091).
[2] Chris-Craft's Annual Report on Form 10-K for the year ended August 31,
1983 (File No. 1-2999).
[3] Chris-Craft's Registration Statement on Form S-1 (Regis. No. 2-65906).
[4] Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1991.
[5] Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1992.
[6] Chris-Craft's Annual Report on Form 10-K for the year ended December
31, 1993.
</TABLE>
Exhibit 22
The following were the registrant's subsidiaries as of
December 31, 1993, other than subsidiaries that, if considered in
the aggregate as a single subsidiary, would not constitute a
significant subsidiary at such date:
Jurisdiction
of
Name of Subsidiary Incorporation
Chris-Craft Television, Inc. Delaware
KCOP Television, Inc. California
Oregon Television, Inc. Oregon
Pinelands, Inc. Delaware
United Television, Inc. Delaware
UTV of San Francisco, Inc. California
UTV of San Antonio, Inc. Texas
Stock Price, Dividend and Related Information
BHC Class A common stock is traded on the American Stock Exchange. The high
and low sales prices of these shares are shown below for the periods indicated.
At February 28, 1994, there were 7,558 holders of record of Class A common
stock. All BHC Class B common shares, which in general are nontransferable, are
held by Chris-Craft Industries, Inc., and, accordingly, there is no trading
market for such shares.
- --------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------
1993
High ................. 69 3/8 74 80 82 3/4
Low .................. 59 1/4 67 3/8 70 3/8 75 3/4
1992
High ................. 59 1/8 60 1/2 62 1/8 62 3/4
Low .................. 53 7/8 56 7/8 57 1/2 58 3/4
BHC paid a special cash dividend of $2.00 per share in January 1993. This
was the only dividend paid by BHC since it became a public company in January
1990. BHC has no current plan to pay future cash dividends.
Quarterly Financial Information
(Unaudited)
BHC Communications, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands of Dollars except per Share Data)
---------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Operating revenues ......... $ 89,581 $ 113,199 $ 100,216 $ 109,003 $ 411,999
Operating income ........... 8,796 25,044 24,480 20,942 79,262
Income associated with Time
Warner Inc. securities . 108,413 132,986 12,340 2,883 256,622
Income before income taxes
and minority interest .. 124,965 168,207 48,816 49,236 391,224
Net income ................. 75,918 92,639 24,516 31,213 224,286
Net income per share ....... $2.92 $3.58 $.95 $1.21 $8.67
Year Ended December 31, 1992
Operating revenues ......... $ 55,662 $ 69,502 $ 78,358 $ 104,361 $ 307,883
Operating income (loss) .... (11,057) 9,494 10,701 13,224 22,362
Income associated with Time
Warner Inc. securities . 21,522 21,494 22,535 28,508 94,059
Income before income taxes
and minority interest .. 22,301 41,345 41,893 47,256 152,795
Net income ................. 17,925 28,990 28,650 33,730 109,295
Net income per share ....... $.65 $1.08 $1.08 $1.29 $4.09
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of BHC Communications, 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 BHC
Communications, Inc. and its subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. The financial statements of
BHC Communications, Inc. for the year ended December 31, 1991 were audited by
other independent accountants whose report dated February 10, 1992 expressed an
unqualified opinion on those statements.
/s/ Price Waterhouse
New York, New York
February 8, 1994
<PAGE>
Consolidated Balance Sheets
BHC Communications, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
(In Thousands of Dollars)
-------------------------
December 31,
-------------------------
1993 1992
-------------------------
Assets
Current Assets:
Cash and cash equivalents ................ $ 35,371 $ 172,882
Marketable securities (substantially
all U.S. Government and,
in 1992, securities redeemed) ........ 1,471,158 793,700
Accounts receivable, less allowance for
doubtful accounts of $5,944 and $4,572 85,376 77,963
Film contract and prepaid broadcast rights 98,882 104,128
Prepaid expenses and other current assets 54,518 47,683
Total current assets ................. 1,745,305 1,196,356
Noncurrent Marketable Securities ............... -- 450,022
Film Contract Rights,
including deposits, less estimated portion
to be used within one year ............... 87,197 83,390
Property and Equipment, at cost:
Land, buildings and improvements ......... 35,373 33,161
Equipment ................................ 86,429 81,904
121,802 115,065
Less-Accumulated depreciation ........ 69,767 62,938
52,035 52,127
Intangible Assets .............................. 342,395 349,098
Other Assets ................................... 14,606 4,045
$2,241,538 $2,135,038
<PAGE>
- --------------------------------------------------------------------------------
(In Thousands of Dollars)
-------------------------
December 31,
-------------------------
1993 1992
-------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Film contracts payable within one year ..... $ 112,798 $ 139,731
Dividend payable ........................... -- 51,893
Accounts payable and accrued expenses ...... 81,834 62,148
Income taxes payable ....................... 69,340 68,014
Total current liabilities .............. 263,972 321,786
Film Contracts Payable after One Year ............ 95,699 131,803
Other Long-Term Liabilities ...................... 15,563 17,402
Minority Interest ................................ 87,483 73,599
Commitments and Contingencies (Note 7)
Shareholders' Investment:
Class A common stock-par value $.01
per share; authorized 200,000,000
shares; outstanding 7,723,418 and
8,172,808 shares ....................... 77 82
Class B common stock-par value $.01
per share; authorized 200,000,000
shares; outstanding 18,000,000 shares .. 180 180
Capital surplus ............................ 98,182 133,934
Retained earnings .......................... 1,686,532 1,462,246
Treasury stock-122,991 and 119,820
Class A common shares, at cost ......... (6,150) (5,994)
1,778,821 1,590,448
$2,241,538 $2,135,038
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
Consolidated Statements of Income
BHC Communications, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
(In Thousands except per Share Data)
-------------------------------------
Year Ended December 31,
-------------------------------------
1993 1992 1991
-------------------------------------
Operating Revenues ....................... $ 411,999 $ 307,883 $ 262,568
--------- --------- ---------
Operating Expenses:
Television expenses .................. 230,088 208,031 199,056
Selling, general and administrative .. 102,649 77,490 62,995
332,737 285,521 262,051
Operating income ................. 79,262 22,362 517
Other Income:
Income associated with
Time Warner Inc. securities, net . 256,622 94,059 87,657
Interest and other income, net ....... 55,340 36,374 57,311
311,962 130,433 144,968
Income before provision for income
taxes and minority interest .. 391,224 152,795 145,485
Provision for Income Taxes ............... 146,900 36,100 34,900
Income before minority interest .. 244,324 116,695 110,585
Minority Interest ........................ (20,038) (7,400) (2,470)
Net income ....................... $ 224,286 $ 109,295 $ 108,115
Net Income per Share ..................... $ 8.67 $ 4.09 $ 3.89
Average Common Shares Outstanding ........ 25,882 26,734 27,790
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
Consolidated Statements of Cash Flows
BHC Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(In Thousands of Dollars)
---------------------------------
Year Ended December 31,
---------------------------------
1993 1992 1991
---------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income ............................................... $ 224,286 $ 109,295 $ 108,115
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Film contract amortization ....................... 102,768 117,659 134,756
Film contract payments ........................... (147,557) (103,174) (108,480)
Prepayment of broadcast rights ................... (34,426) -- --
Depreciation and other amortization .............. 20,430 12,667 7,639
Gain on disposition of Time Warner Inc. securities (219,373) (8,082) (5,471)
Minority interest ................................ 20,038 7,400 2,470
Other (primarily noncash Time Warner Inc.
dividend income in 1992 and 1991) ............ (12,441) (38,184) (35,525)
Changes in assets and liabilities,
net of amounts acquired in 1992 acquisition:
Accounts receivable ...................... (7,996) 11,128 (429)
Other assets ............................. (7,628) 8,917 5,724
Accounts payable and other liabilities ... 1,384 (14,200) 2,607
Income taxes ............................. 4,688 877 (20,087)
Net cash provided from (used in)
operating activities ............. (55,827) 104,303 91,319
Cash Flows from Investing Activities:
Disposition of marketable securities ..................... 947,015 394,462 83,867
Purchase of marketable securities ........................ (927,268) -- (106,561)
Purchase of Pinelands, Inc., net of cash acquired ........ -- (279,422) (1,304)
Capital expenditures, net ................................ (10,835) (10,587) (10,612)
Other .................................................... (4,515) -- --
Net cash provided from (used in)
investing activities ............. 4,397 104,453 (34,610)
Cash Flows from Financing Activities:
Payment of special dividend .............................. (51,893) -- --
Purchase of treasury stock ............................... (25,428) (86,479) (32,623)
Capital transactions of subsidiary ....................... (8,760) (4,345) (3,353)
Net cash used in financing activities (86,081) (90,824) (35,976)
Net Increase (Decrease) in Cash and Cash Equivalents ........... (137,511) 117,932 20,733
Cash and Cash Equivalents at Beginning of Year ................. 172,882 54,950 34,217
Cash and Cash Equivalents at End of Year ....................... $ 35,371 $ 172,882 $ 54,950
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
Consolidated Statements of Shareholders' Investment
BHC Communications, Inc, and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury
Outstanding Shares Shares Dollar Amount (In Thousands)
----------------------- -------- ---------------------------------------------------------------
Class A Class B Class A Class A Class B Capital Retained Treasury Market
Common Common Common Common Common Surplus Earnings Stock Valuation
Account
----------------------- -------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1990 ........ 10,280,265 18,000,000 (116,876) $ 103 $180 $ 253,858 $ 1,296,942 $ (5,844) $(50,208)
Net income ............... -- -- -- -- -- -- 108,115 -- --
Noncurrent marketable
securities valuation
adjustment ............ -- -- -- -- -- -- -- -- 50,208
Acquisition of treasury
stock ................. -- -- (632,600) -- -- -- -- (31,545) --
Retirement of treasury
stock ................. (632,600) -- 632,600 (7) -- (31,538) -- 31,545 --
Capital transactions of
subsidiary ............ -- -- (1,132) -- -- (892) -- (57) --
Balance at
December 31, 1991 ........ 9,647,665 18,000,000 (118,008) 96 180 221,428 1,405,057 (5,901) --
Net income ............... -- -- -- -- -- -- 109,295 -- --
Dividend on common stock -
2.00 per share ....... -- -- -- -- -- -- (52,106) -- --
Acquisition of treasury
stock ................. -- -- (1,474,857) -- -- -- -- (86,479) --
Retirement of treasury
stock ................. (1,474,857) -- 1,474,857 (14) -- (86,465) -- 86,479 --
Capital transactions of
subsidiary ............ -- -- (1,812) -- -- (1,029) -- (93) --
Balance at
December 31, 1992 ........ 8,172,808 18,000,000 (119,820) 82 180 133,934 1,462,246 (5,994) --
Net income ............... -- -- -- -- -- -- 224,286 -- --
Acquisition of treasury
stock ................. -- -- (449,390) -- -- -- -- (33,307) --
Retirement of treasury
stock ................. (449,390) -- 449,390 (5) -- (33,302) -- 33,307 --
Capital transactions of
subsidiary ............ -- -- (3,171) -- -- (2,450) -- (156) --
Balance at
December 31, 1993 ........ 7,723,418 18,000,000 (122,991) $ 77 $180 $ 98,182 $ 1,686,532 $ (6,150) $ --
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
Notes to Consolidated Financial Statements
BHC Communications, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies:
(A) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
BHC Communications, Inc. and its subsidiaries. BHC is a majority owned (70.3% at
December 31, 1993 and 69.1% at December 31, 1992) subsidiary of Chris-Craft
Industries, Inc. (Chris-Craft). BHC's primary business is television
broadcasting, conducted through wholly owned subsidiaries, which operate three
television stations (including WWOR, acquired August 1992 in the transaction
described below), and through majority owned (54.3% at December 31, 1993 and
52.9% at December 31, 1992) United Television, Inc. (UTV), which operates five
television stations. The interest of UTV shareholders other than BHC in the net
income and net assets of UTV is set forth as minority interest in the
accompanying Consolidated Statements of Income and Consolidated Balance Sheets,
respectively. Intercompany accounts and transactions have been eliminated.
In August 1992, BHC acquired all outstanding shares of Pinelands, Inc.,
other than the 4.9% of such shares which BHC had previously acquired. Pinelands
owns and operates independent television station WWOR, which broadcasts into a
tri-state area including New York City. The total acquisition price, including
the cost of previously acquired Pinelands shares and expenses related to the
acquisition, was approximately $313 million. The acquisition, funded from BHC's
internal cash balances, has been accounted for as a purchase. Pinelands' assets
and liabilities at the acquisition date have been recorded at their estimated
fair values, and the excess of purchase price over the fair value of net assets
acquired, totalling $305,897,000, is being amortized on a straight-line basis
over 40 years. The following unaudited pro forma consolidated financial
information for 1992 and 1991 has been prepared as if the acquisition had
occurred at the beginning of each year. Such pro forma information does not
purport to be indicative of the results of operations that actually would have
been obtained if the acquisition had occurred on the dates indicated or that may
be obtained in the future (in thousands except per share amounts).
- --------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------
1992 1991
-----------------------------
Operating revenues ..................... $ 399,803 $ 425,473
Net income ............................. $ 97,714 $ 104,775
Net income per share ................... $ 3.66 $ 3.77
(B) Financial Instruments
Cash and cash equivalents totalled $35,371,000 at December 31, 1993 and
$172,882,000 at December 31, 1992. Cash equivalents are money market securities
having maturities at time of purchase not exceeding three months. The fair value
of cash equivalents approximates carrying value, reflecting their short
maturities.
Marketable securities are carried at cost, and related fair values are
based on quoted market prices. Current marketable securities consist primarily
of (i) U.S. Government securities totalling $1,372,602,000 at December 31, 1993
and $536,013,000 at December 31, 1992, and (ii) at December 31, 1992,
$255,649,000 of Time Warner Inc. convertible preferred stock which was redeemed
in February 1993. The fair value of current marketable securities totalled
$1,472,122,000 at December 31, 1993 and $886,046,000 at December 31, 1992.
Noncurrent marketable securities at December 31, 1992 totalled
$450,022,000 and had an aggregate fair value of $547,734,000. Those securities
consisted primarily of Time Warner convertible preferred stock other than the
stock mentioned in the preceding paragraph, all of which were disposed in 1993.
<PAGE>
(C) Film Contracts
BHC's television stations own film contract rights which allow generally
for limited showings of films and syndicated programs. Film contract rights and
related liabilities are recorded when the films become available for
telecasting.
Contracts are amortized over the estimated number of showings using
primarily accelerated methods as films are used, based on management's estimates
of the flow of revenue and ultimate total cost for each contract. 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, 1993 are $47,269,000,
$26,858,000, $12,576,000 and $8,996,000 in 1995, 1996, 1997 and thereafter,
respectively. The net present value at December 31, 1993 of such payments, based
on a 6% discount rate, was approximately $83,100,000. See Note 7.
(D) Depreciation and Amortization
Depreciation of property and equipment is generally provided for on the
straight-line method over the estimated useful lives of the assets, except that
leasehold improvements are amortized over the lives of the respective leases, if
shorter.
(E) Intangible Assets
Intangible assets reflect the excess of the purchase prices of businesses
acquired over net tangible assets at dates of acquisition. Amounts primarily
relate to WWOR and are being amortized on a straight-line basis over 40 year
periods. Accumulated amortization of intangible assets totalled $28,690,000 at
December 31, 1993 and $19,420,000 at December 31, 1992.
(F) Revenue Recognition and Barter Transactions
Revenue is recognized upon broadcast of television advertising. Barter
(nonmonetary) transactions are recorded at the time related agreements are
consummated. The estimated fair value of goods or services received is
recognized as revenue when the air time is used by the advertiser.
(G) Supplemental Cash Flow Information
Cash paid for income taxes totalled $142,074,000 in 1993, $34,033,000 in
1992, and $54,984,000 in 1991.
(H) Reclassifications
Certain prior period amounts have been reclassified to conform to current
year presentation.
2. Interests in Warner Communications Inc. and Time Warner Inc.:
From 1984 to 1989, BHC was the largest shareholder of Warner
Communications Inc., and Warner held a significant minority interest in BHC.
Pursuant to the merger of Warner and Time Warner, BHC in 1989 sold for cash 63%
of its interest in Warner, and in 1990 exchanged its remaining Warner shares
primarily for Time Warner convertible preferred stock. BHC recorded pretax gains
on such transactions totalling $1,894,188,000.
During 1993, Time Warner redeemed its convertible preferred shares held by
BHCfor cash and convertible subordinated debentures. Such debentures
subsequently were partially redeemed by Time Warner, and the balance was sold.
Proceeds from the Time Warner dispositions have been placed primarily in money
market instruments having significantly lower yields than the securities
disposed. Income associated with Time Warner securities is included in the
accompanying Consolidated Statements of Income as follows (in thousands):
- --------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------
1993 1992 1991
------------------------------------
Gain on disposition, after
expense of $2,905 in 1993 ........ $219,373 $ 8,082 $ 5,471
Dividend income ...................... 14,672 85,977 82,186
Interest income ...................... 22,577 -- --
$256,622 $ 94,059 $ 87,657
Expense deducted from the 1993 gain on disposition consists of Chris-Craft
compensation expense reimbursed by BHC pursuant to its management agreement with
Chris-Craft.
<PAGE>
3. Accounts Payable and Accrued Expenses:
Accounts payable and accrued expenses consist of the following (in
thousands):
- --------------------------------------------------------------------------------
December 31,
-----------------------
1993 1992
-----------------------
Accounts payable ............................... $ 6,656 $10,915
Payable for securities purchased ............... 15,151 --
Accrued expenses -
Deferred barter revenue .................... 33,252 25,335
Payroll and compensation ................... 7,853 6,581
Other ...................................... 18,922 19,317
$81,834 $62,148
4. Shareholders' Investment:
In January 1990, immediately prior to BHC becoming a public company, BHC's
outstanding shares consisted of 12,000,000 shares of Class A common stock (all
held by Warner and representing 40% of BHC's then outstanding equity) and
18,000,000 shares of Class B common stock (all held by Chris-Craft and
representing 60% of BHC's then outstanding equity). Pursuant to the January 10,
1990 merger of Warner and Time Warner, the BHC Class A common shares held by
Warner were distributed to former Warner shareholders, including BHC
subsidiaries. Through December 31, 1993, BHC purchased 3,683,777 Class A common
shares at an aggregate cost of $199,400,000, so that BHC common shares
outstanding for accounting purposes totalled 25,600,427 at December 31, 1993,
after reflecting as treasury stock BHC's interest in its Class A common shares
held by UTV. At December 31, 1993, purchases of 316,223 shares of Class A common
stock were authorized and in January 1994, BHC's Board of Directors authorized
the purchase of an additional 1,500,000 shares.
Each share of Class B common stock entitles the holder to ten votes (Class
A common stock entitles the holder to one vote per share), is convertible at all
times into Class A common stock on a share-for-share basis, is not transferable
except to specified persons and in general carries the same per share dividend
and liquidation rights as a share of Class A common stock, except that the Board
of Directors may in its discretion declare greater cash dividends per share on
the Class A common stock than on the Class B common stock.
In November 1992, BHC's Board of Directors declared a special cash
dividend of $2.00 per share on BHC's Class A and Class B common stock. The
dividend was paid on January 5, 1993. BHC has no current plan to pay future cash
dividends.
5. Retirement Plans:
Chris-Craft and UTV maintain noncontributory defined benefit pension plans
covering substantially all their employees. Benefits accrue annually based on
compensation paid to participants each year. The funding policy is to contribute
annually to the plans amounts sufficient to fund current service costs and to
amortize any unfunded accrued liability over periods not to exceed 30 years. BHC
pension expense, including amounts accrued in Chris-Craft and UTV nonqualified
plans for retirement benefits in excess of statutory limitations, totalled
$1,654,000 in 1993, $1,528,000 in 1992 and $1,623,000 in 1991.
It is not practicable to determine which assets of the Chris-Craft pension
plan relate to BHC. The estimated funded status of the Chris-Craft and UTV plans
in which BHC participates was as follows (in thousands):
- --------------------------------------------------------------------------------
December 31,
------------------------
1993 1992
------------------------
Actuarial present value of:
Vested benefit obligation .................... $(20,366) $(16,434)
Nonvested benefit obligation ................. (1,412) (1,144)
Accumulated benefit obligation ............... (21,778) (17,578)
Effect of projected compensation
increases .................................. (7,709) (7,143)
Projected benefit obligation ............... (29,487) (24,721)
Fair value of plan assets (primarily
listed securities and temporary
investments) ................................. 18,779 15,796
Excess ........................................... (10,708) (8,925)
Unrecognized net asset at date of initial
application of SFAS No. 87,
being amortized over 15 years ................ (333) (382)
Unrecognized net loss from past
experience being amortized over
15 years ..................................... 2,621 1,838
Pension liability ............................ $ (8,420) $ (7,469)
<PAGE>
Assumptions used in accounting for pension plans are as follows (except
that the discount rate has been reduced to 7.25% and the future compensation
increase rate has been reduced to 4.50% effective with the computation of the
December 31, 1993 pension liability):
- --------------------------------------------------------------------------------
Discount rate .................................................. 7.75%
Rate of increase in future compensation levels ................. 5.00%
Expected long-term rate of return on assets .................... 7.75%
The aggregate BHC expense of other retirement plans in which its employees
participate, primarily stock purchase and profit sharing plans of Chris-Craft
and UTV and related accruals in the nonqualified retirement plans mentioned
above, totalled $4,977,000 in 1993, $3,373,000 in 1992 and $1,494,000 in 1991.
6. Income Taxes:
Effective January 1, 1993, BHC adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes", under which
deferred income tax amounts reflect the expected future tax consequences arising
from temporary differences in the bases of assets and liabilities for financial
accounting and income tax purposes. The cumulative effect of adoption of SFAS
109, the amount of which is immaterial, is included in the 1993 provision for
income taxes.
Income taxes are provided in the accompanying Consolidated Statements of
Income as follows:
- --------------------------------------------------------------------------------
In Thousands Year Ended December 31,
------------------------------------------
1993 1992 1991
------------------------------------------
Current (including 1993
effect of adoption):
Federal ............... $127,450 $ 26,568 $ 27,400
State ................. 15,975 7,650 6,250
143,425 34,218 33,650
Deferred:
Federal ............... 1,450 1,732 1,200
State ................. 2,025 150 50
3,475 1,882 1,250
$146,900 $ 36,100 $ 34,900
Differences between income taxes at the federal statutory income tax rate
and total income taxes provided are as follows:
- --------------------------------------------------------------------------------
In Thousands Year Ended December 31,
---------------------------------------
1993 1992 1991
---------------------------------------
Taxes at federal statutory
rate .......................... $ 136,928 $ 51,950 $ 49,465
State income taxes, net ........... 11,692 5,148 4,158
Amortization of intangible
assets ........................ 2,847 1,463 502
Dividend exclusion ................ (3,984) (20,574) (19,599)
Enacted rate change
(to 35% from 34%) ............. (1,129) -- --
Other ............................. 546 (1,887) 374
$ 146,900 $ 36,100 $ 34,900
Deferred tax assets and deferred tax liabilities at December 31, 1993
reflect the tax effect of the following differences between financial statement
carrying amounts and tax bases of assets and liabilities:
- --------------------------------------------------------------------------------
In Thousands
Accrued liabilities not deductible until paid ................. $ 25,786
Allowance for doubtful accounts ............................... 2,526
Film contract rights .......................................... 14,399
Other ......................................................... 1,115
Deferred tax assets ....................................... 43,826
Property and equipment ........................................ (3,840)
Other ......................................................... (335)
Deferred tax liabilities .................................. (4,175)
Net deferred tax asssets .................................. $ 39,651
Certain states have audited income tax returns filed with them by BHC and
its subsidiaries, and are considering to propose adjustments increasing the
amount of income taxable by such states. BHC believes that reserves previously
provided are adequate to cover any additional taxes and interest which might
ultimately become payable.
7. Commitments and Contingencies:
The aggregate amount payable by BHC's television stations under contracts
for programming not currently available for telecasting and, accordingly, not
included in film contracts payable and the related contract rights in the
accompanying Consolidated Balance Sheet, totalled $117,900,000 at December 31,
1993 (including $28,500,000 applicable to UTV).
<PAGE>
BHC is a party to various pending legal proceedings arising in the normal
course of business. In the opinion of management, after taking into account the
opinion of counsel with respect thereto, the ultimate resolution of these
matters will not have a material effect on BHC's consolidated financial position
or results of operations.
8. Related Party Transactions:
Included in selling, general and administrative expenses are management
fees BHC paid Chris-Craft of $8,000,000 in 1993, $5,000,000 in 1992 and
$3,000,000 in 1991, and management and directors' fees UTV paid Chris-Craft
totalling $549,000 in 1993, $534,000 in 1992 and $525,000 in 1991.
The management contract between BHC and Chris-Craft additionally provides
for the reimbursement by BHC to Chris-Craft of expenses incurred by Chris-Craft
specifically relating to BHC, including compensation payable by Chris-Craft to
its employees with respect to any extraordinary financial results of BHC. In
connection with the 1993 disposition of Time Warner securities, which resulted
in gains before income taxes and minority interest of approximately $219
million, BHC reimbursed Chris-Craft $2,905,000 for compensation expense payable
by Chris-Craft with respect to such disposition.
Selected Financial Data
BHC Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
(In Thousands of Dollars except per Share Data)
-------------------------------------------------------------------
As of and for the Years Ended December 31,
-------------------------------------------------------------------
1993 1992 1991 1990 1989
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues ........... $ 411,999 $ 307,883 $ 262,568 $ 278,080 $ 246,741
Operating income ............. $ 79,262 $ 22,362 $ 517 $ 25,690 $ 885
Interest and other income, net 55,340 36,374 57,311 71,867 46,183
Interest expense ............. -- -- -- -- (9,342)
Income associated with Time
Warner and, in 1990 and
1989, Warner securities 256,622 94,059 87,657 685,215 1,299,602
Income taxes ................. (146,900) (36,100) (34,900) (277,600) (495,400)
Minority interest ............ (20,038) (7,400) (2,470) (23,981) (31,168)
Net income ............. $ 224,286 $ 109,295 $ 108,115 $ 481,191 $ 810,760
Net income per share ......... $ 8.67 $ 4.09 $ 3.89 $ 16.56 $ 27.03
Cash and current marketable
securities ............. 1,506,529 966,582 931,350 814,748 990,272
Film contract rights ......... 186,079 187,518 165,029 161,634 196,965
Noncurrent marketable
securities ............. -- 450,022 732,740 690,898 178,302
Total assets ................. 2,241,538 2,135,038 2,012,203 1,872,967 1,530,568
Long-term debt ............... -- -- -- -- --
Shareholders' investment ..... $ 1,778,821 $ 1,590,448 $ 1,620,860 $ 1,495,031 $ 1,149,874
</TABLE>
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
BHC's core operating cash flow is generated primarily by its television
broadcasting business. Television broadcasting cash flow generally parallels the
earnings of BHC's television stations, adjusted to reflect (i) the difference
between film contract payments and related film contract amortization and (ii)
the effect of significant prepayments for other broadcast rights. The
relationship between film contract payments and related amortization varies
greatly between periods (payments exceeded amortization by $44.8 million in
1993, but amortization exceeded payments by $14.5 million in 1992 and $26.3
million in 1991), and is dependent upon the mix of programs aired and payment
terms of the stations' contracts. In 1993, a BHC station made a $34.4 million
broadcast right prepayment, which will be amortized from 1994 through 1996. Such
factors, despite a 126% increase in station earnings, resulted in a 39% decline
in 1993 station cash flow (9% excluding the broadcast right prepayment). BHC
expects that 1994 station cash flow will be strong, and will parallel more
closely station earnings.
BHC's cash flow additionally reflects earnings associated with its cash
and marketable securities. Prior to their disposition in 1993, substantial
dividend income was realized on BHC's large holdings of Time Warner Inc.
convertible preferred shares received in the January 1990 merger of Time Warner
and Warner Communications Inc., in which BHC had been a major shareholder.
During 1993, Time Warner redeemed its convertible preferred shares held by BHC
for cash and convertible subordinated debentures. Such debentures subsequently
were partially redeemed by Time Warner, and the balance was sold. Proceeds from
the Time Warner dispositions, which produced 1993 pretax gains of $219.4
million, have been placed primarily in money market instruments, mainly U.S.
Government obligations, having significantly lower yields than the securities
disposed.
Total cash and marketable securities increased to $1.51 billion at
December 31, 1993 from $1.42 billion at December 31, 1992, despite a deficit in
operating cash flow. Such deficit and nonoperating cash expenditures, primarily
the special cash dividend and the treasury stock purchases described below, were
more than offset by the Time Warner dispositions. The operating cash flow
deficit primarily reflects (i) income taxes on the disposition of BHC's Time
Warner convertible preferred stock, the related gain on which is excluded from
operating cash flow, (ii) the $44.8 million excess of film payments over related
amortization and (iii) the $34.4 million broadcast right prepayment.
In November 1992, BHC's Board of Directors declared a special cash
dividend of $2.00 per share on BHC's Class A and Class B common stock. The
dividend, totalling $51.9 million, was paid in January 1993. This is the only
dividend paid by BHC since it became a public company in January 1990, and BHC
has no current plan to pay future cash dividends.
Since April 1990, BHC's Board of Directors has authorized the purchase of
up to 5,500,000 Class A common shares. Through December 31, 1993, 3,683,777
shares have been purchased for a total cost of $199.4 million, including $33.3
million applicable to shares purchased in 1993.
BHC intends to expand its operations in the media, entertainment and
communications industries and to explore business opportunities in other
industries. BHC currently has no outstanding debt, and believes it is capable of
raising significant additional capital to augment its already substantial cash
balances, if desired, to fund such additional expansion.
BHC's television stations make current commitments for programming that
will not be available for telecasting until future dates. At December 31, 1993,
commitments for such programming totalled approximately $117.9 million,
including $28.5 million applicable to UTV. BHC capital expenditures
<PAGE>
generally have not been material in relation to its financial position and the
related commitments at December 31, 1993 were not material. BHC expects that
future film contract commitments and capital expenditure requirements for its
present business will be satisfied primarily from operations or from current
cash balances.
Results of Operations
1993 versus 1992
BHC 1993 net income increased 105% to $224,286,000, or $8.67 per share,
from $109,295,000, or $4.09 per share, in 1992. The significant earnings
increase includes record results at BHC's television broadcasting business and
substantial gains on disposition of BHC's remaining Time Warner securities.
Reflecting a full year's operations at WWOR and generally improved demand
for television advertising at BHC's other seven stations, operating revenues
rose 34% in 1993, to $411,999,000 from $307,883,000. Station earnings rose 126%,
surpassing $100,000,000 for the first time, as BHC stations other than WWOR
achieved a 104% increase in their aggregate earnings. Those stations recorded an
8% increase in their operating revenues and a 10% reduction in their programming
expenses. After goodwill amortization, (mostly relating to the acquisition of
WWOR), program development expense (reduced $3.1 million from 1992), and
corporate office expenses of BHC and UTV (increased $4.1 million from 1992,
primarily reflecting a $3 million increase in the management fee paid
Chris-Craft), operating income totalled $79,262,000, more than triple 1992's
$22,362,000.
The 1993 reduction in programming expenses primarily reflects a
significant decline in program amortization. Such decline is attributable to (i)
airing certain syndicated programs for periods longer than originally estimated,
reflecting their sustained success, (ii) the acquisition of fewer replacement
programs, (iii) final determination that certain contract costs would be less
than previously estimated, and (iv) generally lower costs of programming. These
favorable factors are expected to moderate, and it is anticipated that program
amortization will increase modestly in 1994.
Income associated with BHC's former holdings of Time Warner Inc.
securities increased to $256,622,000 in 1993, from $94,059,000 in 1992, as 1993
gains on disposition aggregated $219.4 million versus $8.1 million in 1992.
Other nonoperating income totalled $55,340,000, up from $36,374,000 in 1992,
primarily reflecting other marketable securities gains and the placement of Time
Warner proceeds in money market instruments.
BHC's effective income tax rate rose to 38% in 1993 from 24% in 1992,
primarily due to a reduction in the proportion of not fully taxable dividend
income included in pretax income.
1992 versus 1991
BHC net income in 1992 increased to $109,295,000, or $4.09 per share, from
$108,115,000, or $3.89 per share, in 1991. The dollar amount of net income rose
only 1%, as a substantial increase in television station earnings was offset by
a reduction in interest and other income. However, per share earnings for the
year increased 5%, as purchases of Class A common stock under BHC's stock
repurchase program reduced the average number of common shares outstanding to
26,734,000 from 27,790,000 in 1991.
Except for Olympics and political advertising, which did not significantly
benefit BHC's television station group, demand for television advertising was
generally sluggish throughout 1992. Operating revenues at BHC stations other
than WWOR declined 2% in 1992, but the addition of WWOR brought operating
revenues for the year to a record $307,883,000, up 17% from 1991's $262,568,000.
Despite the modest decline in their revenues, earnings at stations other than
WWOR more than doubled, due to a 12% decline in their programming expenses and a
3% decline in their nonprogramming expenses. Including WWOR, station earnings
rose 170%. After reflecting program development expense (no significant change
from 1991), corporate office expenses of BHC and UTV (including a $2 million
increase in the management fee paid Chris-Craft), and goodwill amortization, BHC
operating income increased to $22,362,000 from $517,000 in 1991.
The 1992 reduction in programming expenses described above primarily
reflects a decline in program amortization attributable to the factors which
similarly affected 1993 amortization.
Income associated with Time Warner securities increased to $94,059,000 in
1992 from $87,657,000 in 1991, reflecting increased dividend income and gains on
sale of convertible preferred shares. Other nonoperating income declined to
$36,374,000 from $57,311,000, as the utilization of funds to acquire WWOR and
lower short-term interest rates resulted in a decrease in interest income.
