SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-10342
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:
Title of each class Name of each Exchange
on which registered
Class A Common Stock
$0.01 par value American Stock Exchange
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 29, 1996, was
approximately $563,500,000.
As of February 29, 1996, there were 6,101,505 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 registrant's annual II
report to stockholders for the fiscal year
ended December 31, 1995 (the "Annual
Report") that are specifically identified
herein as incorporated by reference into this
Form 10-K.
Those portions of the registrant's proxy III
statement for the registrant's 1996 Annual
Meeting (the "Proxy Statement") that are
specifically identified herein as incorporated
by reference into this Form 10-K.
2
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PART I
ITEM 1. BUSINESS.
General
BHC Communications, Inc. ("BHC"), the majority owned (74.4% at Feb-
ruary 29, 1996) 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 Pine-
lands, Inc. ("Pinelands"), and its majority owned (57.1% at February 29, 1996)
subsidiary, United Television, Inc. ("UTV").
At February 29, 1996, BHC, solely through subsidiaries, had 1,028
full-time employees and 108 part-time employees.
In July, 1994, BHC, along with Viacom Inc.'s Paramount Television
Group ("Paramount"), formed the United Paramount Network ("UPN"), a fifth
broadcast television network which premiered in January 1995.
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 conducted on 68 channels numbered 2 through 69. Channels 2
through 13 are in the VHF band, and channels 14 through 69 are in the UHF
band. In general, UHF stations are at a disadvantage relative to VHF
stations, because UHF frequencies are more difficult for households to
receive. This disadvantage is eliminated when a viewer receives the UHF
station through a cable system.
Commercial broadcast television stations may be either affiliated with one
of the three major national networks (ABC, NBC and CBS); three more recently
established national networks (Fox Broadcasting Company ("Fox"), UPN, and The
WB Network ("WB")), which provide substantially fewer hours of programming;
or may be independent. UPN, formed by BHC, along with Paramount, began
broadcasting a total of four hours of original prime time programming over two
nights per week in January 1995 and expanded to a third night in March 1996.
UPN currently has 151 affiliates in markets reaching 91% of all U.S. house-
holds, including all of BHC's and Paramount's previously independent stations,
and UPN continues to seek additional affiliates to expand its household reach.
UPN is still in its infancy, and because of the intense competition that
characterizes the broadcast television network business, the cost of develop-
ing UPN is expected to remain significant for several years.
The following table sets forth certain information with respect to BHC
stations and their respective markets:
3
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<TABLE>
<CAPTION>
Total
Commercial
DMA TV Stations DMA
Station and House- DMA Operating in Cable TV
Location (a) Channel Holds (b) Rank (b) Market (c) Penetration (d)
- ------------ ------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
KCOP 13 4,917,550 2nd 7VHF 61%
Los Angeles 10UHF
WWOR (e) 9 6,695,140 1st 6VHF 68%
Secaucus 14UHF
KPTV 12 933,440 24th 4VHF 61%
Portland 2UHF
KMSP 9 1,412,030 14th 4VHF 50%
Minneapolis/ 3UHF
St. Paul
KTVX 4 656,060 36th 4VHF 54%
Salt Lake City 2UHF
KMOL 4 638,080 37th 3VHF 64%
San Antonio 3UHF
KBHK 44 2,257,210 5th 4VHF 70%
San Francisco 10UHF
KUTP 45 1,169,530 17th 4VHF 57%
Phoenix 4UHF
</TABLE>
_______________
(a) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the remaining
stations are owned by UTV. All stations are UPN affiliates, except for
KTVX, an ABC affiliate, and KMOL, an NBC affiliate.
(b) Designated Market Area ("DMA") is an exclusive geographic area consisting
of all counties in which the home-market commercial stations received a
preponderance of total viewing hours. The ranking shown is the nationwide
rank, in terms of television households in DMA, of the market served by
the station. Source: Nielsen Media Research television households uni-
verse estimates.
(c) Additional channels have been allocated by the Federal Communications
Commission ("FCC") for activation as commercial television stations in
certain of these markets. Also, additional stations may be located within
the respective DMAs of BHC stations but outside the greater metropolitan
television markets in which BHC stations operate.
(d) Cable penetration refers to the percentage of DMA television viewing
households receiving cable television service, as estimated by Nielsen
Media Research.
(e) WWOR broadcasts across a tri-state area including the entire New York City
metropolitan area. Its broadcast signal is also carried as a
"superstation" on numerous cable television systems throughout the United
States.
4
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Television stations derive their revenues primarily from selling
advertising time. The television advertising sales market consists
primarily of national network advertising, national spot advertising and local
spot advertising. An advertiser wishing to reach a nationwide audience
usually purchases advertising time directly from the national networks,
"superstations" (i.e., broadcast stations carried by cable operators in areas
outside their broadcast coverage area), barter program syndicators, national
basic cable networks, or "unwired" networks (groups of otherwise unrelated
stations whose advertising time is combined for national sale). A national
advertiser wishing to reach a particular regional or local audience usually
buys advertising time from local stations through national advertising sales
representative firms having contractual arrangements with local stations to
solicit such advertising. Local businesses generally purchase advertising
from the stations' local sales staffs.
Television stations compete for television advertising revenue
primarily with other television stations serving the same DMA. There are 211
DMAs in the United States. DMAs are ranked annually by the estimated number
of households owning a television set within the DMA. Advertising rates that
a television station can command vary in part with the size, in terms of
television households, of the DMA served by the station.
Within a DMA, the advertising rates charged by competing stations
depend primarily on three factors: the stations' program ratings, the time of
day the advertising will run, and the demographic qualities of a program's
viewers (primarily age and sex). Ratings data for television markets are
measured by A.C. Nielsen Co. ("Nielsen"). This rating service uses two
terms to quantify a station's audience: rating points and share points. A
rating point represents one percent of all television households in the entire
DMA tuned to a particular station, and a share point represents one percent of
all television households within the DMA actually using at least one tele-
vision set at the time of measurement and tuned to the station in question.
Because the major networks regularly provide first-run programming
during prime time viewing hours (in general, 8:00 P.M. to 11:00 P.M. Eastern/
Pacific time), their affiliates generally (but do not always) achieve higher
audience shares, but have substantially less advertising time ("inventory") to
sell, during those hours, than affiliates of the newer networks or independent
stations, since the major networks use almost all of their affiliates' prime
time inventory for network shows. Although the newer networks generally use
the same amount of their affiliates' inventory during network broadcasts, the
newer networks provide less programming; accordingly, their affiliates,
as well as non-affiliated stations, generally have substantially more
inventory for sale than the major-network affiliates. The newer network
affiliates' and independent stations' smaller audiences and greater inventory
during prime time hours generally result in lower advertising rates charged
and more advertising time sold during those hours, as compared with major
affiliates' larger audiences and limited inventory, which generally allow the
major-network affiliates to charge higher advertising rates for prime time
programming. By selling more advertising time, the new-network or independent
station typically achieves a share of advertising revenues in its market
greater than its audience ratings. On the other hand, total programming
costs for such a station, because it broadcasts more syndicated programming
than a major-network affiliate, are generally higher than those of a major-
network affiliate in the same market. These differences have been reduced by
the growth of the Fox network, which currently provides 15 weekly hours of
programming during prime time and additional programming in other periods,
and would be reduced further if the other newer networks should be successful
in providing expanded schedules of programming.
In July 1995, the FCC repealed, effective August 30, 1996, its prime
time access rule, which limited broadcasts, by major-network affiliates in the
50 largest markets, of "off network" entertainment programming. Among other
effects, elimination of this rule is expected to increase the competition
faced by new-network affiliates and independent stations in bidding for the
rights to popular "off network" shows.
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Programming
BHC's UPN stations depend heavily on independent third parties for
programming, as do KTVX and KMOL for their non-network broadcasts. Recog-
nizing the need to have a more direct influence on the quality of programming
available to its stations, and desiring to participate in potential profits
through national syndication of programming, BHC has joined in the formation
of UPN, and, additionally, has begun to invest directly in the development of
original programming. The aggregate amount invested in original programming
through December 31, 1995 was not significant to BHC's financial posi-
tion. BHC television stations also produce programming directed to meet the
needs and interests of the area served, such as local news and events, public
affairs programming, children's programming and sports.
Programs obtained from independent sources consist principally of
syndicated television shows, many of which have been shown previously on a
major network, and syndicated feature films, which were either made for net-
work television or have been exhibited previously in motion picture theaters
(most of which films have been shown previously on network or cable tele-
vision). Syndicated programs are sold to individual stations to be broadcast
one or more times. Television stations not affiliated with a major network
generally have large numbers of syndication contracts; each contract is a
license for a particular series or program that usually prohibits licensing
the same programming to other television stations in the same market. A
single syndication source may provide a number of different series or programs.
Licenses for syndicated programs are often offered for cash sale
(i.e., without any barter element) to stations; however, some are offered on a
barter or cash plus barter basis. In the case of a cash sale, the station
purchases the right to broadcast the program, or a series of programs, and
sells advertising time during the broadcast. The cash price of such program-
ming varies, depending on the perceived desirability of the program and
whether it comes with commercials that must be broadcast (i.e., on a cash
plus barter basis). Barter programming is offered to stations for no cash
consideration, but comes with a greater number of commercials that must be
broadcast, and therefore, with less inventory.
In recent years, the amount of barter and cash plus barter program-
ming broadcast both industry-wide and by BHC stations has increased sub-
stantially. Barter and cash plus barter programming reduce both the amount
of cash required for program purchases and the amount of time available for
sale. Although the direct impact on broadcasters' operating income generally
is believed to be neutral, program distributors that acquire barter air time
compete with television stations and broadcasting networks for sales of air
time. BHC believes that the effect of barter on its television stations is
not significantly different from its impact on the industry as a whole.
BHC television stations are frequently required to make substantial
financial commitments to obtain syndicated programming while such programming
is still being broadcast by another network and before it is available for
broadcast by BHC stations or even before it has been produced. Generally,
syndication contracts require the station to acquire an entire program series,
before the number of episodes of original showings that will be produced has
been determined. While analyses of network audiences are used in estimating
the value and potential profitability of such programming, there is no assur-
ance that a successful network program will continue to be successful or
profitable when broadcast after initial network airing. FCC rules limiting
the ability of major networks to acquire financial interests in independently
produced programming or prohibiting such networks from syndicating programs
terminated in 1995. Elimination of the restraints is expected to result in
increased competition by the major networks for production and syndication of
first-run programming.
Pursuant to generally accepted accounting principles, commitments for
programming not available for broadcast are not recorded as liabilities until
the programming becomes available for broadcast, at which time the related
contract right is also recorded as an asset. BHC television stations had
prepaid broadcast rights, unamortized film contract rights for programming
available for telecasting, and deposits on film contracts for programming not
available for telecasting aggregating $145,902,000 as of December 31, 1995.
The stations were committed for film and sports rights contracts aggregating
$166,200,000 for programming not available for broadcasting as of that date.
6
<PAGE>
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 8 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.
Generally, in the past, major network primary affiliation agreements
were automatically renewed for two-year periods (unless advance written
notice of termination was given by either the affiliate or the network). More
recently, however, most networks have begun to enter into affiliation agree-
ments for terms as long as ten years. BHC is discussing long-term
affiliation agreements for KTVX and KMOL. Current FCC rules do not limit
the duration of such agreements.
An affiliation agreement gives the affiliate the right to broadcast
all programs transmitted by the network. The affiliate must run in its
entirety, together with all network commercials, any network programming the
affiliate elects or is required to broadcast, and is allowed to broadcast a
limited number of commercials it has sold. For each hour of programming broad-
cast by the affiliate, the major networks generally have paid their affiliates
a fee, specified in the agreement (although subject to change by the network),
which varies in amount depending on the time of day during which the program is
broadcast and other factors. Prime time programming generally earns the highest
fee. A network may, and sometimes does, designate certain programs to be
broadcast with no compensation to the station.
Subject to certain limitations contained in the affiliation agreement,
an affiliate may accept or reject a program offered by the network and instead
broadcast programming from another source. Rejection of a program gives the
network the right to offer that program to another station in the area.
United Paramount Network
In January 1995, UPN began broadcasting four hours of original prime
time programming per week, of which one hour consists of Star Trek: Voyager,
a science fiction adventure. In March 1996, UPN increased its weekly prime
time programming to six hours. The network also broadcasts two hours of
previously exhibited movies on Saturday afternoons and one hour of original
children's programming on Sunday mornings, which it plans to increase to two
hours commencing in September 1996. UPN intends, over the next several years,
to expand its prime time programming to five nights per week, as well as to
begin broadcasting in other day parts.
UPN licenses most of its current programming on the same bases as are
customary in the industry. UPN seeks license or ownership rights for all other
programming from all available sources on arms-length terms.
UPN's primary affiliate station agreements have three year terms and
provide commercial time to the stations as consideration for broadcasting the
network's programming.
BHC currently owns 100% of UPN, and Paramount has an option exer-
cisable through January 15, 1997 to acquire an interest in the network equal to
that of BHC. The option price is equivalent to approximately one-half of BHC's
aggregate cash contributions to UPN through the exercise date, plus interest.
Payment may be deferred through the option expiration date. BHC expenditures
for UPN have been substantial, and UPN funding requirements are expected to
continue to be significant for the next several years. See Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 2 of Notes to Consolidated Financial Statements.
7
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Sources of Revenue
The principal source of revenues for BHC stations is the sale of
advertising time to national and local advertisers. Such time sales are
represented by spot announcements purchased to run between programs and program
segments and by program sponsorship. The relative contributions of national
and local advertising to BHC's gross cash advertising revenues vary from time
to time. During the year ended December 31, 1995, national advertising
contributed 37%, and local advertising contributed 63%, of total gross cash
advertising revenues. Most advertising contracts are short-term. Like that
of the television broadcasting business generally, BHC's television business
is seasonal. In terms of revenues, generally the fourth quarter is strongest,
followed by the second, third and first.
Advertising is generally placed with BHC stations through advertising
agencies, which are allowed a commission generally equal to 15% of the price of
advertising placed. National advertising time is usually sold through a
national sales representative, which also receives a commission, while local
advertising time is sold by each station's sales staff. In July 1995, UTV
established a national sales representative organization, United Television
Sales, Inc. ("UTS"), to represent, initially, all BHC stations. Practices with
respect to sale of advertising time do not differ markedly between BHC's major
network and UPN stations, although the major-network affiliated stations have
less inventory to sell.
Government Regulation
Television broadcasting operations are subject to the jurisdiction of
the FCC under the Communications Act of 1934, as amended (the "Communications
Act"). The Communications Act empowers the FCC, among other things, to issue,
revoke or modify broadcast licenses, to assign frequencies, to determine the
locations of stations, to regulate the broadcasting equipment used by stations,
to establish areas to be served, to adopt such regulations as may be necessary
to carry out the provisions of the Communications Act and to impose certain
penalties for violation of its regulations. BHC television stations are sub-
ject to a wide range of technical, reporting and operational requirements
imposed by the Communications Act or by FCC rules and policies. The Communi-
cations Act was recently and substantially amended by the Telecommunications
Act of 1996 (the "Telecom Act"), some provisions of which have been incorp-
orated into the FCC's rules and regulations during the past month, and other
provisions of which will be incorporated over the next several months.
The Communications Act provides that a license may be granted to any
applicant if the public interest, convenience and necessity will be served
thereby, subject to certain limitations, including the requirement that the FCC
allocate licenses, frequencies, hours of operation and power in a manner that
will provide a fair, efficient and equitable distribution of service throughout
the United States. Television licenses generally have been issued for five-
year terms, but the Telecom Act permits the FCC to issue such licenses and
their renewals for up to eight years. Upon application, and in the absence of
adverse questions as to the licensee's qualifications or operations, tele-
vision licenses have usually been renewed for additional terms without a
hearing by the FCC. An existing license automatically continues in effect
once a timely renewal application has been filed until a final FCC decision
is issued.
KMSP's license renewal was granted on April 15, 1993, and is due to
expire on April 1, 1998. KTVX's license renewal was granted on September 29,
1993, and is due to expire on October 1, 1998. KUTP's license renewal was
granted on March 28, 1994, and is due to expire on October 1, 1998. KCOP's
license renewal was granted on April 18, 1994, and is due to expire on December
1, 1998. KBHK's license renewal was granted on October 2, 1995, and is due to
expire on December 1, 1998. KPTV's license renewal was granted on August 9,
1995, and is due to expire on February 1, 1999. KMOL's license renewal was
granted on August 18, 1995, and is due to expire on August 1, 1998. In
September 1995, an administrative appeal of the grant of KMOL's renewal was
filed, challenging the FCC staff's determination that KMOL had complied with
FCC requirements concerning equal employment opportunity. KMOL has vigorously
opposed this appeal, which BHC believes is without merit.
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WWOR's latest license renewal was granted on January 22, 1992. The
current license renewal of WWOR has been opposed by a petition challenging its
compliance with FCC requirements concerning equal employment opportunity. The
station has vigorously opposed the petition, and BHC believes that the
petition is without merit. WWOR's license remains in effect pending the
resolution of the petition.
Under existing FCC regulations governing multiple ownership of broad-
cast stations, a license to operate a television station generally will not be
granted to any party (or parties under common control), if such party directly
or indirectly owns, operates, controls or has an attributable interest in
another television or radio station serving the same market or area. The FCC,
however, is favorably disposed to grant waivers of this rule for radio station-
television station ownership combinations in the top 25 television markets, in
which there will be at least 30 separately owned, operated and controlled
broadcast stations, and in certain other circumstances. The Telecom Act di-
rects the FCC to extend this waiver policy to the top 50 markets, consistent
with the public interest, and to conduct a rule-making proceeding to determine
whether to retain or modify the current restriction on same-market multiple
television station ownership.
FCC regulations further provide that a broadcast license will not be
granted if that grant would result in a concentration of control of radio and
television broadcasting in a manner inconsistent with the public interest,
convenience or necessity. Prior to adoption of the Telecom Act, FCC rules had
deemed such concentration of control to exist if any party, or any of its
officers, directors or stockholders, directly or indirectly, owned, operated,
controlled or had an attributable interest in more than 12 television stations,
or in television stations capable of reaching, in the aggregate, a maximum of
25% of the national audience. This percentage is determined by the DMA market
rankings of the percentage of the nation's television households considered
within each market. Because of certain limitations of the UHF signal, however,
the FCC will attribute only 50% of a market's DMA reach to owners of UHF sta-
tions for the purpose of calculating the audience reach limits. Applying the
50% reach attribution rule to UHF stations KBHK and KUTP, the eight BHC sta-
tions are deemed to reach approximately 18% of the nation's television house-
holds. The Telecom Act directed the FCC to eliminate the numerical limita-
tion on television station ownership and to increase the maximum national
audience reach limit to 35%, and the FCC has adopted such changes. The FCC
is also considering whether to eliminate the 50% attribution reduction under
this rule for UHF stations.
The FCC's multiple ownership rules require the attribution of the
licenses held by a broadcasting company to its officers, directors and certain
of its stockholders, so there would ordinarily be a violation of FCC regulations
where an officer, director or such a stockholder and a television broadcasting
company together hold interests in more than the permitted number of stations
or more than one station that serves the same area. In the case of a corpora-
tion controlling or operating television stations, such as 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 voting
stock without being subject to such attribution, provided that such entities
exercise no control over the management or policies of the broadcasting company.
The FCC has begun a proceeding to consider modification of the various
TV ownership restrictions described above, as well as changes in the rules for
attributing the licenses held by an enterprise to various parties. BHC
cannot predict the outcome of the FCC proceedings.
FCC regulations currently prevent a national sales representative
organization, such as UTS, which is commonly owned with a national network such
as UPN, from representing affiliates of that network other than affiliates that
are also under common ownership with the network. FCC regulations also place
restrictions on provisions of agreements between networks and their affiliates
relating to network exclusivity, territorial exclusivity, time optioning, and
pre-emption rights. The FCC is conducting rule-making proceedings to consider
whether to retain, modify, or eliminate these regulations. BHC is
unable to predict the outcome of these proceedings.
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As required by the Telecom Act, the FCC recently amended another of
its regulations, the dual network rule, which generally had prohibited common
ownership or control of two television broadcast networks. Ownership and
control of two or more such networks will now be permitted, except for common
ownership or control between two of ABC, NBC, CBS, and Fox, or any one of those
four networks and either UPN or WB.
The Telecom Act directs the FCC to conduct a rule-making proceeding to
require the inclusion, in all television sets 13 inches or larger, of a
feature (commonly referred to as the V-chip) designed to enable viewers to
block display of programs carrying a common rating and authorizes the FCC to
establish an advisory committee to recommend a system for rating video
programming that contains sexual, violent, or other indecent material about
which parents should be informed, before it is displayed to children, if the
television industry does not establish a satisfactory voluntary rating system
of its own. Industry leaders have announced their intention to establish a
voluntary rating system by the end of 1996. The Telecom Act also directs the
FCC to adopt regulations requiring increased closed-captioning of video pro-
gramming and to conduct an inquiry into the use of audio-narrated descriptions
of video programming that could increase the accessibility of such programming
to persons with visual impairments.
FCC regulations prohibit the holder of an attributable interest in a
television station from having an attributable interest in a cable television
system located within the predicted coverage area of that station. FCC regu-
lations also prohibit the holder of an attributable interest in a television
station from having an attributable interest in a daily newspaper located
within the predicted coverage area of that station. The FCC intends to
conduct a rule-making proceeding to consider possible modification of this
latter regulation.
The Communications Act limits the amount of capital stock that aliens
(including their representatives, foreign governments, their representatives,
and entities organized under the laws of a foreign country) may own in a tele-
vision station licensee or any corporation directly or indirectly controlling
such licensee. No more than 20% of a licensee's capital stock and, if the FCC
so determines, no more than 25% of the capital stock of a company controlling
a licensee, may be owned, directly or indirectly, or voted by aliens or their
representatives. Should alien ownership exceed this limit, the FCC may revoke
or refuse to grant or renew a television station license or approve the
assignment or transfer of such license. BHC believes the ownership by
aliens of its stock and that of UTV to be below the applicable limit.
The Communications Act prohibits the assignment of a broadcast license
or the transfer of control of a licensee without the prior approval of the FCC.
Legislation was introduced in the past that would impose a transfer fee on
sales of broadcast properties. Although that legislation was not adopted,
similar proposals, or a general spectrum licensing fee, may be advanced and
adopted in the future. Recent legislation has imposed annual regulatory fees
applicable to BHC stations, currently ranging as high as $22,400 per station.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or regulations and policies of the FCC
thereunder. Reference is made to the Communications Act, such regulations and
the public notices promulgated by the FCC for further information.
Other Federal agencies, including principally the Federal Trade Com-
mission, also impose a variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional or revised require-
ments are considered by the FCC, other Federal agencies or Congress from time
to time. 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.
10
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Competition
BHC television stations compete for advertising revenue in their
respective markets, primarily with other broadcast television stations and
cable television channels, and compete with other advertising media as well.
Such competition is intense.
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<PAGE>
In addition to programming, management ability and experience, tech-
nical factors and television network affiliations are important in determining
competitive position. Competitive success of a television station depends
primarily on public response to the programs broadcast by the station in rela-
tion to competing entertainment, and the results of this competition affect the
advertising revenues earned by the station from the sale of advertising time.
Audience ratings provided by Nielsen have a direct bearing on the
competitive position of television stations. In general, major network pro-
grams achieve higher ratings than programs of other stations.
There are at least five other commercial television stations in each
market served by a BHC station. BHC believes that the three VHF major-
network affiliates and the two other VHF stations in New York City generally
attract a larger viewing audience than does WWOR, and that WWOR generally at-
tracts a viewing audience larger than the audiences attracted by the UHF sta-
tions in the New York City market. In Los Angeles, the three VHF major-
network affiliates and two other VHF stations generally attract a larger view-
ing audience than does KCOP, and KCOP generally attracts a viewing audience
larger than one other VHF station and the ten UHF stations in Los Angeles.
In Portland, the three VHF major-network affiliated stations generally attract
a larger audience than does KPTV, which generally attracts a larger audience
than the other independent stations, both of which are UHF stations. BHC
believes that, in Minneapolis/St. Paul, KMSP generally attracts a
smaller viewing audience than the three major VHF network-affiliated stations,
but a larger viewing audience than the other three stations, all of which are
UHF stations. In Salt Lake City, KTVX generally ranks first of the six tele-
vision stations in terms of audience share. In San Antonio, KMOL generally
ranks first of the six stations in terms of audience share. Of the 14 com-
mercial television stations in San Francisco, KBHK generally ranks fifth in
terms of audience share, behind the three major network-affiliated VHF
television stations, and the VHF Fox affiliate. KUTP generally ranks sixth
in terms of audience share, of the eight commercial stations in the Phoenix
market.
In late 1995, KCOP received two Civil Investigative Demands ( "CIDs")
from the Antitrust Division of the U.S. Department of Justice seeking
production of documents in connection with a civil investigation by the
Division of the television advertising business in the Los Angeles market.
KCOP has responded to both CIDs, and several KCOP employees have given
deposition testimony in the matter. All of the VHF television stations in
the Los Angeles market have received similar CIDs seeking document production
and deposition testimony. It is not known at this time what further pro-
ceedings, if any, may occur.
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.
Cable television has become a major competitor of television broad-
casting stations. Because cable television systems operate in each market
served by a BHC station, the stations are affected by rules governing cable
operations. If a station is not widely accessible by cable in those markets
having strong cable penetration, it may lose effective access to a significant
portion of the local audience. Even if a television station is carried on a
local cable system, an unfavorable channel position on the cable system may
adversely affect the station's audience ratings and, in some circumstances, a
television set's ability to receive the station being carried on an unfavorable
channel position. Some cable system operators may be inclined to place broad-
cast stations in unfavorable channel locations. Similar competitive effects
may be expected from video delivery systems offered by local telephone
companies, as permitted by the provisions of the Telecom Act.
FCC regulations requiring cable television stations to carry or re-
serve channels for retransmission of local broadcast signals have twice been
invalidated in Federal court. In October 1992, Congress enacted legislation
11
<PAGE>
designed to provide television broadcast stations the right to be carried on
cable television stations (and to be carried on specific cable channel
positions), or (at the broadcaster's election) to prohibit cable carriage of the
television broadcast station without its consent. This law is currently being
challenged in the Federal courts, and BHC cannot predict the outcome.
The Telecom Act extends the must-carry requirements to the video delivery
systems of local telephone companies, and these extended requirements may also
be affected by the pending court challenge. While Federal law has until re-
cently generally prohibited local telephone companies from providing video
programming to subscribers in their service areas, this restriction has been
held constitutionally invalid by eight federal district courts. Two such
rulings have been affirmed by the United States Court of Appeals, one by the
Fourth Circuit and one by the Ninth Circuit, and the Supreme Court has heard
oral argument with respect to the Fourth Circuit case. This prohibition has
been substantially eliminated by the Telecom Act, and the Supreme Court has
consequently remanded the case to the Circuit Court for further consideration.
The FCC has also initiated a rule-making proceeding to consider rules for
"Open Video Systems" -- a new structure of video delivery system authorized by
the Telecom Act for provision by local telephone companies and, if permitted
by the FCC, others. BHC is unable to predict the outcome or effect
of these developments.
"Syndicated exclusivity" rules allow television stations to prevent
local cable operators from importing distant television programming that
duplicates syndicated programming in which local stations have acquired ex-
clusive rights. In conjunction with these rules, network nonduplication rules
protect the exclusivity of major-network broadcast programming within the local
video marketplace. The FCC is also reviewing its "territorial exclusivity"
rule, which limits the area in which a broadcaster can obtain exclusive rights
to video programming. 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. Two direct broadcast satellite ("DBS") systems currently provide
service, and others are expected to begin service later in 1996. The number of
subscribers to DBS services more than doubled during 1995, from approximately
600,000 at the end of 1994, to approximately 1.7 million. An additional
challenge is now posed by wireless cable systems, including multichannel
distribution services ("MDS"). At the end of 1994, wireless cable systems
served about 800,000 subscribers. Two four-channel MDS licenses have been
granted in most television markets. MDS operation can provide commercial pro-
gramming on a paid basis. A similar service can also be offered using the
instructional television fixed service ("ITFS"). The FCC now allows the
educational entities that hold ITFS licenses to lease their "excess" capacity
for commercial purposes. The multichannel capacity of ITFS could be combined
with either an existing single channel MDS or a newer multichannel multi-point
distribution service to increase the number of available channels offered by an
individual operator. The emergence of home satellite dish antennas has also
made it possible for individuals to receive a host of video programming options
via satellite transmission.
Technological developments in television transmission have created
the possibility that one or more of the broadcast and nonbroadcast television
media will provide enhanced or "high definition" pictures and sound to the
public of a quality that is technically superior to that of the pictures and
sound currently available. It is not yet clear when and to what extent
technology of this kind will be available to the various television
media; whether and how television broadcast stations will be able to avail
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 sta-
tions to provide such services. Many segments of the television industry
are intensively studying enhanced and "high definition" television tech-
nology. A proceeding is under way at the FCC regarding policies concerning
advanced television service, including "high definition" service. The Tele-
com Act, as well as proposed federal legislation, addresses several of these
issues, and some members of Congress support auctioning or otherwise
charging broadcasters for use of spectrum designated for "high definition"
television use. The Telecom Act, in particular, authorizes the FCC, if
it chooses, to issue the initial licenses for new advanced television broad-
cast stations exclusively to existing television station licensees and per-
mittees, provided that they are required to surrender either their old or new
12
<PAGE>
licenses after a period of time to be specified by the FCC. The Telecom Act
also directs the FCC to adopt regulations regarding ancillary uses of such
new licenses and the collection of fees for certain ancillary uses. BHC
is unable to predict the outcome of these legislative proposals or rule-making
proceedings.
The broadcasting industry is continuously faced with technological
changes, competing entertainment and communications media and governmental
restrictions or actions of Federal regulatory bodies, including the FCC. These
technological changes may include the introduction of digital compression by
cable systems that would significantly increase the number and availability of
cable program services with which BHC stations compete for audience and
revenue, the establishment of interactive video services, and the offering of
multimedia services that include data networks and other computer technologies.
Such factors have affected, and will continue to affect, the revenue growth and
profitability of 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 45,252 square feet located on a site of approximately
2.0 acres. Its transmitter is located on its own property at a separate site
containing approximately 16.18 acres.
WWOR owns office and studio facilities in Secaucus, New Jersey,
containing approximately 110,000 square feet on approximately 3.5 acres and
leases additional office space in New York City. Along with almost all of the
television stations licensed to the New York market, WWOR's transmitter is
located on top of the World Trade Center in New York City pursuant to a lease
agreement which expires in 2004, unless terminated by WWOR in 1999.
Physical facilities consisting of offices and studio facilities are
owned by UTV in Minneapolis, San Antonio and Phoenix and are leased in Salt
Lake City and San Francisco. The Salt Lake City lease agreement expires in
1999 and is renewable, at an increased rental, for two five-year periods. The
San Francisco lease expires in 2007.
The Minneapolis facility includes approximately 49,700 square feet of
space on a 5.63-acre site. The Salt Lake City facility is approximately
30,400 square feet on a 2.53-acre site. The San Antonio facility is approx-
imately 41,000 square feet on a .92-acre site. The San Francisco facility is
approximately 27,700 square feet in downtown San Francisco. The Phoenix
facility is approximately 26,400 square feet on a 3.03-acre site. Smaller
buildings containing transmission equipment are owned by UTV at sites separate
from the studio facilities.
UTV owns a 55-acre tract in Shoreview, Minnesota, of which 40 acres
are used by KMSP for transmitter facilities and tower.
KTVX's transmitter facilities and tower are located at a site on Mt.
Nelson, close to Salt Lake City, under a lease that expires in 2004. KTVX
also maintains back-up transmitter facilities and tower at a site on nearby Mt.
Vision under a lease that expires in 2002 and is renewable, at no increase in
rental, for a 50-year period.
KMOL's transmitter facilities are located at a site near San Antonio
on land and on a tower owned by Texas Tall Tower Corporation, a corporation
owned in equal shares by UTV and another television station that also transmits
from the same tower.
KBHK's transmitter is located on Mt. Sutro, as part of the Sutro Tower
complex, which also houses equipment for other San Francisco television sta-
tions and many of its FM radio stations. The lease for the Mt. Sutro facili-
ties expires in February 2005 and is renewable for two five-year periods.
13
<PAGE>
KUTP's transmitter facilities and tower are located on a site within
South Mountain Park, a communications park owned by the City of Phoenix, which
also contains transmitter facilities and towers for the other television sta-
tions in Phoenix as well as facilities for several FM radio stations. The
license for this space expires in 2012.
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.
14
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of BHC, as of February 29, 1996, are as follows:
Has served
Positions with BHC; principal occupation; as officer
Name and age as of February 29, 1996 since
---- ----------------------------------------- ----------
Herbert J. Siegel Chairman of the Board and President;
Chairman of the Board and President, Chris-
Craft; 67 1977
John C. Siegel Senior Vice President; Senior Vice
President, Chris-Craft; 43 1981
William D. Siegel Senior Vice President; Senior Vice
President, Chris-Craft; 41 1981
Joelen K. Merkel Vice President and Treasurer; Vice
President and Treasurer, Chris-Craft;
44 1980
Brian C. Kelly General Counsel and Secretary; General
Counsel and Secretary, Chris-Craft; 44 1992
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 until February 1992. Finevest filed a Chapter 11 bankruptcy
petition on February 11, 1991, and emerged from bankruptcy on July 9, 1992
pursuant to a confirmed reorganization plan. All officers hold office
until the meeting of the Board following the next annual meeting of
stockholders or until removed by the Board.
Evan C Thompson, age 53, 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.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information appearing in the Annual Report under the caption STOCK
PRICE, DIVIDEND AND RELATED INFORMATION is incorporated herein by this
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information appearing in the Annual Report under the caption
SELECTED FINANCIAL DATA is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information appearing in the Annual Report under the caption
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements, Notes thereto, Report of
Independent Accountants thereon and Quarterly Financial Information (unaudited)
appearing in the Annual Report are incorporated herein by this reference.
Except as specifically set forth herein and elsewhere in this Form 10-K, no
information appearing in the Annual Report is incorporated by reference into
this report nor is the Annual Report deemed to be filed, as part of this report
or otherwise, pursuant to the Securities Exchange Act of 1934.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
16
<PAGE>
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.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The financial statements and quarterly financial
information incorporated by reference from the Annual
Report pursuant to Item 8.
2. The financial statements of UPN and report thereon listed
under the caption Schedules in the Index to Consolidated
Financial Statements and Schedules.
3. Exhibits listed in the Exhibit Index, including the com-
pensatory plans listed below:
Chris-Craft's Benefit Equalization Plan
Employment Agreement dated as of January 1, 1994
between Herbert J. Siegel and Chris-Craft
Employment Agreement dated as of January 1, 1994
between Evan C Thompson and Chris-Craft
(b) No reports on Form 8-K were filed by the registrant during the
last quarter of the period covered by this report.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 1996
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, 1996
-----------------
Herbert J. Siegel
Chairman, President and
Director (principal executive
officer)
WILLIAM D. SIEGEL March 29, 1996
-----------------
William D. Siegel
Senior Vice President and
Director (principal financial
officer)
JOELEN K. MERKEL March 29, 1996
----------------
Joelen K. Merkel
Vice President, Treasurer and
Director (principal accounting
officer)
19
<PAGE>
JOHN L. EASTMAN March 29, 1996
---------------
John L. Eastman
Director
BARRY S. GREENE March 29, 1996
---------------
Barry S. Greene
Director
LAURENCE M. KASHDIN March 29, 1996
-------------------
Laurence M. Kashdin
Director
MORGAN L. MILLER March 29, 1996
----------------
Morgan L. Miller
Director
JOHN C. SIEGEL March 29, 1996
--------------
John C. Siegel
Director
20
<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, 1995 and 1994
Consolidated Statements of Income - For the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - For the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Investment - For
the Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
SCHEDULES:
UPN Financial Statements --
Report of Independent Accountants
Balance Sheet - December 31, 1995
Statement of Operations and Statement of Changes
in Partners' Capital (Deficit) -
For the Year Ended December 31, 1995
Statement of Cash Flows - For the Year
Ended December 31, 1995
Notes to Financial Statements
21
<PAGE>
Report of Independent Accountants
February 14, 1996
To the Partners
of United Paramount Network
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in Partners' capital (deficit) and of cash flows
present fairly, in all material respects, the financial position of United
Paramount Network (a partnership between BHC Network Partner, Inc. and BHC
Network Partner II, Inc.) at December 31, 1995, and the results of its
operations and its cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of United Paramount Network's manage-
ment; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the ac-
counting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Century City
<PAGE>
United Paramount Network
Balance Sheet
December 31, 1995
- ---------------------------------------------------------------
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 74
Accounts receivable (net of allowance for
doubtful accounts of $178) 9,040
Program rights and development costs (net
of reserve for abandonment of $4,631) 12,893
Other current assets 609
------
Total current assets 22,616
Restricted cash 974
Property and equipment, at cost:
Furniture, fixtures and computer equipment 1,082
Leasehold improvements and other 341
------
1,423
Less accumulated depreciation 198
------
1,225
Intangible asset (net of accumulated
amortization of $54) 217
Investment in joint venture 2,750
-----
Total assets $ 27,782
========
Liabilities and Partners' Capital (Deficit)
Current liabilities:
Accounts payable $ 3,224
Accrued program costs 10,587
Accrued expenses and other liabilities 11,850
-------
Total current liabilities 25,661
Due to related party 109,935
--------
Total liabilities 135,596
Commitments and contingencies (Note 6)
Partners' capital (deficit):
Network Partner (8,942)
Network Partner II (98,872)
--------
Total partners' deficit (107,814)
Total liabilities and partners' capital $ 27,782
=========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
United Paramount Network
Statement of Operations and
Statement of Changes in Partners' Capital (Deficit)
For the Year Ended December 31, 1995
- ----------------------------------------------------------------
Statement of Operations
(in thousands)
Net revenues $ 30,376
Operating costs and expenses:
Operating expenses 99,940
Selling, general and
administrative expenses 58,924
Depreciation and amortization 252
--------
159,116
Operating loss (128,740)
Other income (expense):
Interest expense to
related parties (4,535)
Interest and other income 62
Net loss on investment
in joint venture (625)
---------
(5,098)
Net loss $(133,838)
=========
Statement of Changes in Partners' Capital (Deficit)
(in thousands)
Network Network
Partner Partner II Total
------- ---------- -----
Balance at December 31, 1994 $ 1,500 $ 1,338 $ 2,838
Capital contributions - 23,186 23,186
Capital transfers between partners (3,977) 3,977 -
Allocation of 1995 net loss (6,465) (127,373) (133,838)
-------- --------- ---------
Balance at December 31, 1995 $ (8,942) $ (98,872) $(107,814)
======= ======== =========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
United Paramount Network
Statement of Cash Flows
For the Year Ended December 31, 1995
- ----------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net loss $(133,838)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of program costs 91,744
Payments for programming (98,420)
Depreciation and amortization 252
Abandonment reserve 4,631
Changes in assets and liabilities:
Increase in accounts receivable, net (9,025)
Increase in accounts payable, accrued expenses
and other current liabilities 12,546
Decrease in other assets 3,052
--------
Net cash used in operating activities (129,058)
--------
Cash flows from investing activities:
Additions to property and equipment (1,113)
Cash placed in restricted account (974)
Increase in intangible asset (271)
Net investment in joint venture (2,750)
--------
Net cash used in investing activities (5,108)
--------
Cash flows from financing activities:
Advances from related party 109,935
Capital contributions 23,186
-------
Net cash provided by financing activities 133,121
-------
Net decrease in cash and cash equivalents (1,045)
Cash and cash equivalents:
Beginning of period 1,119
-------
End of period $ 74
========
Supplemental Cash Flow Information:
Cash paid for interest $ 4,530
========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
United Paramount Network
Notes to Financial Statements
For the Year Ended December 31, 1995
- ----------------------------------------------------------------
Note 1 - Organization
In July 1994, BHC Network Partner, Inc. ("Network Partner"), a wholly owned
subsidiary of Chris-Craft Industries, Inc.'s majority owned subsidiary, BHC
Communications, Inc. ("BHC"), along with PCI Network Partner, Inc. ("PCI/NP"),
a wholly owned indirect subsidiary of Viacom Inc.'s Paramount Television Group,
formed the United Paramount Network ("UPN" or the "Network"), a fifth broad-
cast television network.
UPN was organized as a partnership in December 1994 between Network Partner
and BHC Network Partner II, Inc., a wholly owned indirect subsidiary of BHC,
("Network Partner II", collectively referred to as the "Partners"). PCI/NP
has an option exercisable through January 15, 1997 to acquire an interest in
UPN equal to that of the Partners. The option price is equivalent to approxi-
mately one-half of the Partners' aggregate cash contributions to UPN through
the exercise date, plus interest; payment may be deferred through the option
expiration date.
UPN began providing programming for broadcast in January 1995. At December 31,
1995, the Network had 150 affiliates reaching over 90% of U.S. television house-
holds. The Network's revenues are derived entirely from providing television
programming and are, therefore, subject to the vagaries of the advertising
industry.
Operating costs of the Network are funded through capital contributions and
loans made by the Partners. Profits or losses are allocated between the
Partners in accordance with the partnership agreement. During the year ended
December 31, 1995, UPN incurred operating losses of $128,740,000 and negative
cash flows from operations of $129,058,000. UPN is still in its infancy
and the cost of developing and expanding its programming is expected to remain
significant for several years. The Partners intend to continue funding UPN
through capital contributions and loans, as UPN incurs obligations arising
through the normal course of its business.
Note 2 - Accounting Policies
Financial Instruments
Restricted cash consists of cash and marketable securities having maturities
at time of purchase not exceeding one year, all of which are U.S. government
securities. In accordance with Statement of Financial Accounting Standards
No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity
Securities," marketable securities have been classified as held-to-maturity.
The fair value of restricted cash approximates its amortized cost, reflecting
the short maturities. Restricted cash has been placed in an account as a
security deposit, is not available for current operations of the Network and,
therefore, has been classified as non-current in the accompanying balance
sheet.
Property and Equipment
Property and equipment is recorded at cost. Depreciation of furniture, fix-
tures and computer equipment is computed on the straight-line method over the
estimated useful lives of the assets. Amortization of leasehold improvements
is computed on a straight-line basis over the life of the lease.
<PAGE>
NOTE 2 (continued)
Program Rights and Development Costs
Costs for program production are capitalized as incurred. Other Network
programming rights and related liabilities are recorded at the contractual
amounts when the programming becomes available for telecasting. Capitalized
program costs are amortized over the estimated number of showings, using
accelerated methods based on management's estimate of the flow of revenues.
The estimated costs of recorded program rights to be charged to income within
one year are included in current assets; payments on such program rights due
within one year are included in current liabilities.
Costs incurred for the development of programs are capitalized and included in
the accompanying balance sheet, net of reserves established for projects which
may be terminated prior to being placed into production.
Revenue Recognition
The Network sells advertising time for broadcast on UPN programs through
Premier Advertising Sales ("Premier") a wholly owned subsidiary of Paramount
Communications, Inc. (Note 6). Revenues are recognized substantially as adver-
tisements are aired, at contractual rates as reported to UPN by Premier.
With respect to certain of its programming, UPN derives no revenue and incurs
no programming expense.
Use of Estimates in Preparation of Financial Statements
Preparation of financial statements in accordance with generally accepted
accounting principles requires the use of management estimates.
Income Taxes
As a general partnership, the Network's losses are allocated to, and reported
by, the individual Partners. Therefore, no credit for income tax benefit is
included in the accompanying financial statements.
NOTE 3 - Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
(in thousands)
Accrued advertising cost $ 6,215
Accrued compensation 2,388
Accrued sales commission 1,395
Other accrued expenses 1,852
------
$11,850
======
NOTE 4 - Investment in Joint Venture
In January 1995, UPN entered into a joint venture (the "Venture") with Saban
Entertainment for the purpose of developing, producing and distributing
children's television programming. Under terms of the Venture agreement, UPN
funds certain programming costs in return for certain distribution rights to
such programming and a share of aggregate revenue. UPN accounts for its
interest in the Venture using the equity method.
NOTE 5 - Due to Related Party
During 1995 the Partners made loans to UPN totalling $109,935,000 at December
31, 1995. The loans bear interest at the prime rate (8.5% at December 31,
1995), payable annually. The loans are to be repaid from cash provided by the
Network's operations, as available.
NOTE 6 - Commitments and Contingencies
The aggregate amount payable by UPN under contracts for programming not cur-
rently available for telecasting and, accordingly, not included in accrued
program costs in the accompanying balance sheet totalled approximately
$62,000,000 at December 31, 1995.
At December 31, 1995 UPN was obligated under a five year lease for its office
space. The lease is noncancellable for three years and calls for certain
penalty payments upon cancellation thereafter. Rental expense for the year
ended December 31, 1995 was $427,000. Aggregate future minimum lease payments
at December 31, 1995 are $3,523,000, with amounts of $755,000 due in each of
the years 1996 through 1999 and $503,000 due in 2000. Additionally, as re-
quired by the lease agreement, UPN obtained an irrevocable letter of credit
in the amount of $1,220,000 on behalf of the lessor. The obligation under the
letter of credit is required to be reduced annually over the lease term.
<PAGE>
EXHIBIT INDEX
Incorporated by Exhibit
Reference to: No. Exhibit
Exhibit 3(a) [1] 3.1 Restated Certificate
of Incorporation
Exhibit 3(b) [1] 3.2 Restated By-laws
Exhibit 10(c) [1] 10.1 Management Agreement
between registrant
and Chris-Craft
dated July 21, 1989
Exhibit 19 [4] 10.2 Amendment No. 1
thereto dated
October 31, 1991
Exhibit 10(H)(2) [5] 10.3 Amendment No. 2
thereto dated March
24, 1994
Exhibit 10(E) [2] 10.4 Form of Agreement
under Chris-Craft's
Executive Deferred
Income Plan
Exhibit 10(B) [5] 10.5 Employment Agreement
dated January 1,
1994 between Chris-
Craft and Herbert J.
Siegel
Exhibit 10(C) [5] 10.6 Split-Dollar
Agreement dated
January 6, 1994
between registrant
and William D.
Siegel
Exhibit 10(D) [5] 10.7 Split-Dollar
Agreement dated
January 6, 1994
between registrant
and John C. Siegel
Exhibit 10(F) [5] 10.8 Employment Agreement
dated January 1,
1994 between Chris-
Craft and Evan C
Thompson
Exhibit 11(H) [3] 10.9 Chris-Craft's
Exhibit 10(B)(1) [6] Benefit
Exhibit 10.3 [8] Equalization Plan,
as amended
Exhibit 10.10[7] 10.10 Option Agreement
dated July 19, 1994
between BHC Network
Partner, Inc. and
PCI Network Partner,
Inc.
* 13 Portions of the
Annual Report
incorporated by
reference
* 21 Subsidiaries of
registrant
* 27 Financial Data
Schedule
_______________________
* Filed herewith.
[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] Chris-Craft's Annual Report on Form 10-K for the year ended
December 31, 1993.
[6] Chris-Craft's Annual Report on Form 10-K for the year ended
December 31, 1989.
[7] Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.
[8] Chris-Craft's Annual Report on Form 10-K for the year ended
December 31, 1994.
Exhibit 21
The following were the registrant's subsidiaries as of December
31, 1995, other than subsidiaries that, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary
at such date:
Jurisdiction
of
Name of Subsidiary Incorporation
BHC Network Partner, Inc. Delaware
Chris-Craft Television, Inc. Delaware
BHC Network Partner II, Inc. Delaware
KCOP Television, Inc. California
Oregon Television, Inc. Oregon
Pinelands, Inc. Delaware
United Television, Inc. Delaware
UTV of San Francisco, Inc. California
UTV of San Antonio, Inc. Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCORPORATED BY REFERENCE INTO
REGISTRANT'S ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED 31 DECEMBER 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<CASH> 72179
<SECURITIES> 1427186
<RECEIVABLES> 95631
<ALLOWANCES> 5643
<INVENTORY> 0
<CURRENT-ASSETS> 1717439
<PP&E> 132366
<DEPRECIATION> 84028
<TOTAL-ASSETS> 2159010
<CURRENT-LIABILITIES> 188,969
<BONDS> 0
0
0
<COMMON> 245
<OTHER-SE> 1781648
<TOTAL-LIABILITY-AND-EQUITY> 2159010
<SALES> 0
<TOTAL-REVENUES> 454702
<CGS> 0
<TOTAL-COSTS> 336123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 71759
<INCOME-TAX> 18800
<INCOME-CONTINUING> 37057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37057
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 13
BHC Communications, Inc. and Subsidiaries
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 21, 1996, there were 6,935 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.
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
High 75 3/4 81 1/4 93 1/4 95
Low 71 7/8 71 3/4 80 88 1/2
- ----------------------------------------------------------------------------------
1994
High 81 3/4 78 1/4 81 3/4 80 1/4
Low 73 5/8 72 1/2 75 3/4 70 1/8
- ----------------------------------------------------------------------------------
</TABLE>
BHC paid a special cash dividend of $1.00 per share in April 1995. BHC has
no plan to pay regular dividends.
Quarterly Financial Information (Unaudited)
- -------------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
(In Thousands of Dollars Except per Share Data) Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Operating revenues $ 104,475 $ 120,953 $ 111,551 $ 117,723 $ 454,702
Operating income 24,105 39,188 22,269 33,017 118,579
Equity in United Paramount Network loss (38,403) (28,709) (28,722) (33,469) (129,303)
Income before income taxes and
minority interest 6,299 29,218 13,957 22,285 71,759
Net income 390 11,254 17,825 7,588 37,057
Net income per share $ .02 $ .46 $ .73 $ .31 $ 1.51
YEAR ENDED DECEMBER 31, 1994
Operating revenues $ 95,968 $ 119,832 $ 107,259 $ 134,474 $ 457,533
Operating income 15,134 34,647 23,020 40,181 112,982
Equity in United Paramount Network loss- - - (159) (3,818) (3,977)
Income before income taxes and
minority interest 28,582 49,506 39,160 49,401 166,649
Net income 13,668 24,691 32,609 21,909 92,877
Net income per share $ .54 $ .99 $ 1.31 $ .88 $ 3.71
</TABLE>
1
<PAGE> 2
BHC Communications, Inc. and Subsidiaries
Report of Independent Accountants
- ---------------------------------
[PRICE WATERHOUSE LLP LOGO] February 14, 1996
1177 Avenue of the Americas
New York, NY 10036
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, 1995 and 1994, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
2
<PAGE> 3
Consolidated Balance Sheets
- ---------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------
(In Thousands of Dollars) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 72,179 $ 222,201
Marketable securities (substantially all U.S.
Government securities) 1,427,186 1,274,244
Accounts receivable, less allowance for
doubtful accounts of $5,643 and $6,742 89,988 96,681
Film contract and prepaid broadcast rights 95,541 89,245
Prepaid expenses and other current assets 32,545 54,153
- -------------------------------------------------------------------------------
Total current assets 1,717,439 1,736,524
- -------------------------------------------------------------------------------
FILM CONTRACT RIGHTS,
including deposits, less estimated portion
to be used within one year 50,361 59,228
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, at cost:
Land, buildings and improvements 36,626 35,465
Equipment 95,740 91,467
- -------------------------------------------------------------------------------
132,366 126,932
Less-Accumulated depreciation 84,028 77,917
- -------------------------------------------------------------------------------
48,338 49,015
- -------------------------------------------------------------------------------
INTANGIBLE ASSETS 323,752 333,074
- -------------------------------------------------------------------------------
OTHER ASSETS 19,120 10,622
- -------------------------------------------------------------------------------
$2,159,010 $2,188,463
===============================================================================
</TABLE>
3
<PAGE> 4
BHC Communications, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Film contracts payable within one year $ 87,634 $ 81,696
Accounts payable and accrued expenses 72,906 70,834
Income taxes payable 28,429 55,782
- -------------------------------------------------------------------------------
Total current liabilities 188,969 208,312
- -------------------------------------------------------------------------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 86,392 89,048
- -------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 6,504 5,655
- -------------------------------------------------------------------------------
MINORITY INTEREST 95,252 95,564
- -------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
SHAREHOLDERS' INVESTMENT:
Class A common stock-par value $.01 per share;
authorized 200,000,000 shares; outstanding
6,492,808 and 6,877,518 shares 65 69
Class B common stock-par value $.01 per share;
authorized 200,000,000 shares; outstanding
18,000,000 shares 180 180
Capital surplus - 29,611
Retained earnings 1,779,560 1,779,409
Treasury stock-129,786 and 125,030 Class A
common shares, at cost (6,493) (6,254)
Adjustment to reflect marketable securities
at market value 8,581 (13,131)
- -------------------------------------------------------------------------------
1,781,893 1,789,884
- -------------------------------------------------------------------------------
$2,159,010 $2,188,463
===============================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
4
<PAGE> 5
BHC Communications, Inc. and Subsidiaries
Consolidated Statements of Income
- ---------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
(In Thousands Except per Share Data) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 454,702 $ 457,533 $ 411,999
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Television expenses 214,223 232,635 230,088
Selling, general and administrative 121,900 111,916 102,649
- ----------------------------------------------------------------------------------------------------------------------------
336,123 344,551 332,737
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 118,579 112,982 79,262
- ----------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest and other income 82,483 57,644 55,340
Equity in United Paramount Network loss (129,303) (3,977) -
Income associated with Time Warner Inc. securities - - 256,622
- ----------------------------------------------------------------------------------------------------------------------------
(46,820) 53,667 311,962
- ----------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes
and minority interest 71,759 166,649 391,224
PROVISION FOR INCOME TAXES 18,800 57,900 146,900
- ----------------------------------------------------------------------------------------------------------------------------
Income before minority interest 52,959 108,749 244,324
MINORITY INTEREST 15,902 15,872 20,038
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 37,057 $ 92,877 $ 224,286
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ 1.51 $ 3.71 $ 8.67
- ----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 24,549 25,007 25,882
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
5
<PAGE> 6
BHC Communications, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
- -------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------
(In Thousands Except per Share Data) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37,057 $ 92,877 $ 224,286
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Film contract amortization 89,321 101,869 102,768
Film contract payments (90,994) (117,928) (147,557)
Prepaid broadcast rights 4,249 8,166 (34,426)
Depreciation and other amortization 19,833 20,355 20,430
Equity in United Paramount Network loss 129,303 3,977 -
Gain on disposition of Time Warner Inc. securities - - (219,373)
Minority interest 15,902 15,872 20,038
Other 1,543 4,167 (12,441)
Changes in assets and liabilities:
Accounts receivable 6,693 (11,305) (7,996)
Other assets 643 682 (828)
Accounts payable and other liabilities 5,728 4,932 1,384
Income taxes (22,028) 4,996 4,688
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in)
operating activities 197,250 128,660 (49,027)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of marketable securities 697,079 1,097,409 947,015
Purchase of marketable securities (811,540) (941,400) (927,268)
Investment in United Paramount Network (128,585) (6,815) -
Capital expenditures, net (9,839) (8,242) (10,835)
Other (8,782) (429) (11,315)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) investing activities (261,667) 140,523 (2,403)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (30,504) (73,449) (25,428)
Capital transactions of subsidiary (30,597) (8,904) (8,760)
Payment of special dividend (24,504) - (51,893)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (85,605) (82,353) (86,081)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (150,022) 186,830 (137,511)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 222,201 35,371 172,882
- ----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 72,179 $ 222,201 $ 35,371
============================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
6
<PAGE> 7
BHC Communications, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Investment
- ---------------------------------------------------
<TABLE>
<CAPTION>
Treasury
Outstanding Shares Shares Dollar Amount (In Thousands)
------------------------------- ----------------------------------------------------------------
Market
Class A Class B Class A Class A Class B Capital Retained Treasury Valuation
Common Common Common Common Common Surplus Earnings Stock Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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) -
Net income - - - - - - 92,877 - -
Acquisition of
treasury stock - - (845,900) - - - - (65,818) -
Retirement of
treasury stock (845,900) - 845,900 (8) - (65,810) - 65,818 -
Capital transactions
of subsidiary - - (2,039) - - (2,761) - (104) -
Marketable securities
valuation adjustment - - - - - - - (13,131)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 6,877,518 18,000,000 (125,030) 69 180 29,611 1,779,409 (6,254) (13,131)
Net income - - - - - - 37,057 - -
Dividend on common
stock - $1.00 per share - - - - - - (24,604) - -
Acquisition of treasury stock - - (384,710) - - - - (31,279) -
Retirement of
treasury stock (384,710) - 384,710 (4) - (18,973) (12,302) 31,279 -
Capital transactions
of subsidiary - - (4,756) - - (10,638) - (239) -
Marketable securities
valuation adjustment - - - - - - - - 21,712
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1995 6,492,808 18,000,000 (129,786) $65 $180 $ - $1,779,560 $ (6,493) $ 8,581
====================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
7
<PAGE> 8
BHC Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------
NOTE 1
- -------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) BUSINESS AND BASIS OF PRESENTATION
BHC Communications, Inc. is a majority owned (73.9% at December 31, 1995 and
72.7% at December 31, 1994) subsidiary of Chris-Craft Industries, Inc. BHC's
primary business is television broadcasting, conducted through wholly owned
subsidiaries, which operate three television stations, and through majority
owned (57.3% at December 31, 1995 and 55.2% at December 31, 1994) United
Television, Inc. (UTV), which operates five television stations.
BHC, through subsidiaries, currently owns 100% of the partnership that
operates the United Paramount Network (UPN), a fifth broadcast network which
premiered in January 1995. Viacom Inc.'s Paramount Television Group has an
option to acquire an interest in UPN equal to that of BHC, and BHC accordingly
accounts for its UPN partnership interest under the equity method.
The accompanying consolidated financial statements include the accounts
of BHC and its subsidiaries, after elimination of all significant intercompany
accounts and transactions. 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
Consolidated Statements of Income and Consolidated Balance Sheets, respectively.
Preparation of financial statements in accordance with generally accepted
accounting principles requires the use of management estimates. Certain prior
year amounts have been restated to conform with the 1995 presentation.
(B) FINANCIAL INSTRUMENTS
Cash and cash equivalents totalled $72,179,000 at December 31, 1995 and
$222,201,000 at December 31, 1994. Cash equivalents are money market
securities having maturities at time of purchase not exceeding three months.
The fair value of cash equivalents approximates carrying value, reflecting
their short maturities.
Effective January 1, 1994, BHC adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities". Under SFAS 115, all of BHC's marketable securities have
been categorized as available for sale and are carried at fair market value.
Since marketable securities are available for current operations, all are
included in current assets as follows:
<TABLE>
<CAPTION>
Gross Unrealized
(In Thousands) Cost Gains Losses Fair Value
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1995:
U.S. Government
securities $1,328,855 $ 4,986 $ 925 $1,332,916
Other 84,610 9,870 210 94,270
- --------------------------------------------------------------------------
$1,413,465 $14,856 $ 1,135 $1,427,186
==========================================================================
December 31, 1994:
U.S. Government
securities $1,239,691 $ 87 $23,611 $1,216,167
Other 59,631 439 1,993 58,077
- --------------------------------------------------------------------------
$1,299,322 $ 526 $25,604 $1,274,244
==========================================================================
</TABLE>
Of the U.S. Government securities held at December 31, 1995, 83% mature
within one year, 96% within two years, and all within four years.
Certain additional information related to BHC's marketable securities as
of and for the years ended December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(In Thousands) 1995 1994
---------------------------
<S> <C> <C>
Sales proceeds $697,079 $1,097,409
Realized gains 2,356 1,193
Realized losses 4,690 7,734
Net unrealized gain (loss) 13,721 (25,078)
Adjustment for unrealized gain (loss),
net of deferred income taxes and
minority interest $ 8,581 $ (13,131)
==========================================================================
</TABLE>
For purposes of computing gains and losses, cost was determined using
the specific identification method.
8
<PAGE> 9
BHC Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------
(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 programming becomes available
for telecasting.
Contracts are amortized over the estimated number of showings, using
primarily accelerated methods as films are used, based on management's
estimates of the flow of revenue and ultimate total cost for each contract. In
the opinion of management, future revenue derived from airing programming will
be sufficient to cover related unamortized rights balances at December 31,
1995. The estimated costs of recorded film contract rights to be charged to
income within one year are included in current assets; payments on such
contracts due within one year are included in current liabilities. The
approximate future maturities of film contracts payable after one year at
December 31, 1995, are $50,784,000, $24,272,000, $7,551,000 and $3,785,000 in
1997, 1998, 1999 and thereafter, respectively. The net present value at
December 31, 1995, of such payments, based on an 8.5% discount rate, was
approximately $72,330,000. See Note 8.
(D) DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is generally provided on the
straight-line method over the estimated useful lives of the assets, except that
leasehold improvements are amortized over the lives of the respective leases,
if shorter.
(E) INTANGIBLE ASSETS
Intangible assets reflect the excess of the purchase prices of businesses
acquired over net tangible assets at dates of acquisition. Amounts primarily
relate to television station WWOR, which was acquired in 1992, and are being
amortized on a straight-line basis over 40 year periods. Accumulated
amortization of intangible assets totalled $47,333,000 at December 31, 1995 and
$38,011,000 at December 31, 1994.
(F) REVENUE RECOGNITION AND
BARTER TRANSACTIONS
Revenue is recognized upon broadcast of television advertising. The
estimated fair value of goods or services received in barter (nonmonetary)
transactions, most of which relate to the acquisition of programming, is
recognized as revenue when the air time is used by the advertiser. Barter
revenue totalled $46,039,000 in 1995, $47,201,000 in 1994 and $43,231,000 in
1993. Barter expense in each year approximated barter revenue.
(G) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes totalled $46,300,000 in 1995, $52,900,000 in 1994
and $142,074,000 in 1993.
NOTE 2
- -------------------------------------------------------------------------------
UNITED PARAMOUNT NETWORK:
In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group, formed
the United Paramount Network, a fifth broadcast television network which
premiered in January 1995. BHC currently owns 100% of UPN, and Paramount has an
option exercisable through January 15, 1997 to acquire an interest in UPN equal
to that of BHC. The option price is equivalent to approximately one-half of
BHC's aggregate cash contributions to UPN through the exercise date, plus
interest; payment may be deferred through the option expiration date.
UPN has been organized as a partnership, and BHC accounts for its partner
interest under the equity method. The carrying value of such interest, which
reflects BHC fundings of $128,585,000 in 1995 and $6,815,000 in 1994, less UPN
losses, totalled $2,121,000 at December 31, 1995 and $2,838,000 at December 31,
1994, and is included in Other Assets on the accompanying Consolidated Balance
Sheets. UPN is still in its infancy, and the cost of developing UPN is expected
to remain significant for several years.
9
<PAGE> 10
BHC Communications, Inc. and Subsidiaries
Condensed consolidated financial statements of UPN as of and for the
year ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In Thousands)
- -------------------------------------------------------
<S> <C>
BALANCE SHEET
Current assets $ 22,616
Property and equipment, net 1,225
Other assets 3,941
- -------------------------------------------------------
$ 27,782
=======================================================
Current liabilities $ 25,661
Advances due BHC 109,935
Partners' deficit (107,814)
- -------------------------------------------------------
$ 27,782
=======================================================
- -------------------------------------------------------
STATEMENT OF OPERATIONS
Operating revenues* $ 30,376
Operating expenses* 159,116
- -------------------------------------------------------
Operating loss (128,740)
Other expenses (563)
- -------------------------------------------------------
Loss before interest on BHC advances (129,303)
Interest on BHC advances
(eliminated in consolidation) (4,535)
- -------------------------------------------------------
Net loss $(133,838)
=======================================================
</TABLE>
* With respect to certain of its programming, UPN derives no revenue and incurs
no programming expense.
NOTE 3
- -------------------------------------------------------------------------------
INTERESTS IN WARNER COMMUNICATIONS INC. AND
TIME WARNER INC.:
From 1984 to 1989, BHC was the largest shareholder of Warner
Communications Inc. Pursuant to the merger of Warner and Time Warner Inc., BHC
in 1989 and 1990 disposed of its Warner interest for cash and Time Warner
securities, and BHC recorded pretax gains totalling $1.9 billion on those
dispositions. In 1993, BHC disposed of its then remaining Time Warner
securities, and income associated with such securities is included in the
accompanying 1993 Consolidated Statement of Income as follows:
<TABLE>
<CAPTION>
(In Thousands)
- -------------------------------------------------------------
<S> <C>
Gain on disposition, after expense of $2,905 $219,373
Dividend income 14,672
Interest income 22,577
- -------------------------------------------------------------
$256,622
=============================================================
</TABLE>
Expense deducted from the gain on disposition consists of Chris-Craft
compensation expense reimbursed by BHC pursuant to its management agreement
with Chris-Craft.
NOTE 4
- -------------------------------------------------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
(In Thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable $ 9,114 $ 8,799
Payable for securities purchased 1,023 248
Accrued expenses-
Deferred barter revenue 29,660 32,601
Payroll and compensation 16,992 15,042
Other 16,117 14,144
- -------------------------------------------------------------------------------
$72,906 $70,834
===============================================================================
</TABLE>
NOTE 5
- -------------------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT:
Each share of Class B common stock, all of which is held by Chris-Craft,
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
10
<PAGE> 11
BHC Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------
and liquidation rights as 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.
From 1990, when BHC became a public company, through December 31, 1995,
BHC purchased 4,914,387 shares of its Class A common stock at an aggregate cost
of $296,496,000. Chris-Craft's ownership interest in BHC during that period
accordingly increased to 73.9% (representing 96.6% of BHC's voting power) from
60%. At December 31, 1995, 585,613 Class A common shares were authorized for
purchase, and an additional 1,300,000 shares subsequently have been authorized
for purchase.
Capital transactions of subsidiary, as set forth in the accompanying
Consolidated Statements of Cash Flows and Consolidated Statements of
Shareholders' Investment, reflect purchases by UTV of its common shares
totalling $28,440,000 in 1995, $8,904,000 in 1994 and $8,760,000 in 1993, net
of proceeds from the exercise of stock options, as well as UTV's 1995 dividend
of $.50 per share, all net of intercompany eliminations and minority interest.
NOTE 6
- -------------------------------------------------------------------------------
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 $3,096,000 in 1995, $2,021,000 in 1994, and $1,654,000 in 1993.
It is not practical 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:
<TABLE>
<CAPTION>
December 31,
-------------------------------
(In Thousands) 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(26,210) $(23,261)
Nonvested benefit obligation (1,932) (1,558)
- -----------------------------------------------------------------------------------------
Accumulated benefit obligation (28,142) (24,819)
Effect of projected compensation
increases (11,513) (7,655)
- -----------------------------------------------------------------------------------------
Projected benefit obligation (39,655) (32,474)
Fair value of plan assets
(primarily listed securities and
temporary investments) 24,366 19,774
- -----------------------------------------------------------------------------------------
Excess (15,289) (12,700)
Unrecognized net asset at date of
initial application of SFAS No. 87,
being amortized over 15 years (234) (283)
Unrecognized net loss from past
experience being amortized over
15 years 2,090 2,637
- -----------------------------------------------------------------------------------------
Pension liability $(13,433) $(10,346)
=========================================================================================
</TABLE>
Assumptions used in accounting for pension plans for each year presented
are as follows:
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C>
Discount rate at end of year 7.25%
Rate of increase in future compensation levels 4.50%
Expected long-term rate of return on assets 7.75%
</TABLE>
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 $6,307,000 in 1995, $4,877,000 in 1994 and $4,977,000 in 1993.
11
<PAGE> 12
BHC Communications, Inc. and Subsidiaries
NOTE 7
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
(In Thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current (including effect
of adoption in 1993):
Federal $ 23,300 $48,625 $127,450
State (13,700) (8,600) 15,975
- -----------------------------------------------------------------------------------------------
9,600 40,025 143,425
- -----------------------------------------------------------------------------------------------
Deferred:
Federal 8,200 16,275 1,450
State 1,000 1,600 2,025
- -----------------------------------------------------------------------------------------------
9,200 17,875 3,475
- -----------------------------------------------------------------------------------------------
$ 18,800 $57,900 $146,900
===============================================================================================
</TABLE>
Following the favorable resolution of routine audits in each year, state
income taxes in 1995 and 1994 reflect $20,000,000 reversals of amounts accrued
in 1989 and 1990.
Differences between income taxes at the federal statutory income tax
rate and total income taxes provided are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
(In Thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes at federal
statutory rate $25,115 $58,327 $136,928
State income taxes, net (8,223) (4,559) 11,692
Amortization of intangible
assets 3,151 3,151 3,198
Dividend exclusion (764) (447) (3,984)
Enacted rate change
(to 35% from 34%) - - (1,129)
Other (479) 1,428 195
- -----------------------------------------------------------------------------------------------
$18,800 $57,900 $146,900
===============================================================================================
</TABLE>
Deferred tax assets and deferred tax liabilities reflect the tax effect
of the following differences between financial statement carrying amounts and
tax bases of assets and liabilities:
<TABLE>
<CAPTION>
December 31,
-----------------------
(In Thousands) 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued liabilities not deductible
until paid $ 6,976 $14,400
Allowance for doubtful accounts 2,138 2,671
Film contract rights 3,974 6,870
Investments 4,117 1,652
SFAS 115 adjustment - 9,950
Other 616 396
- ----------------------------------------------------------------------------------------------
Deferred tax assets 17,821 35,939
- ----------------------------------------------------------------------------------------------
Property and equipment (3,143) (3,698)
SFAS 115 adjustment (9,044) -
Other (823) (653)
- ----------------------------------------------------------------------------------------------
Deferred tax liabilities (13,010) (4,351)
- ----------------------------------------------------------------------------------------------
Net deferred tax assets $ 4,811 $31,588
==============================================================================================
</TABLE>
12
<PAGE> 13
BHC Communciations, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------
NOTE 8
- --------------------------------------------------------------------------------
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 $166,200,000 at December 31,
1995 (including $40,400,000 applicable to UTV).
BHC is expected to make significant expenditures developing UPN. See
Note 2.
BHC is a party to various pending legal proceedings arising in the
ordinary course of business. In the opinion of management, after taking into
account the opinion of counsel with respect thereto, the ultimate resolution of
these matters should not have a material effect on BHC's consolidated financial
position or results of operations.
NOTE 9
- --------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS:
Included in selling, general and administrative expenses are management fees
BHC paid Chris-Craft of $8,000,000 in 1995, $11,000,000 in 1994 and $8,000,000
in 1993, and management and directors' fees UTV paid Chris-Craft totalling
$570,000 in 1995, $570,000 in 1994 and $549,000 in 1993.
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.
13
<PAGE> 14
BHC Communications, Inc. and Subsidiaries
Selected Financial Data
- -----------------------
<TABLE>
<CAPTION>
As of and for the Year Ended December 31,
---------------------------------------------------------------------
(In Thousands of Dollars Except per Share Data) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 454,702 $ 457,533 $ 411,999 $ 307,883 $ 262,568
================================================================================================================================
Operating income $ 118,579 $ 112,982 $ 79,262 $ 22,362 $ 517
Interest and other income 82,483 57,644 55,340 36,374 57,311
Equity in United Paramount Network loss (129,303) (3,977) - - -
Income associated with Time Warner securities - - 256,622 94,059 87,657
Income taxes (18,800) (57,900) (146,900) (36,100) (34,900)
Minority interest (15,902) (15,872) (20,038) (7,400) (2,470)
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 37,057 $ 92,877 $ 224,286 $ 109,295 $ 108,115
================================================================================================================================
Net income per share $ 1.51 $ 3.71 $ 8.67 $ 4.09 $ 3.89
Cash dividends declared per share 1.00 - - 2.00 -
Cash and current marketable securities 1,499,365 1,496,445 1,506,529 966,582 931,350
Film contract rights 145,902 148,473 186,079 187,518 165,029
Noncurrent marketable securities - - - 450,022 732,740
Total assets 2,159,010 2,188,463 2,241,538 2,135,038 2,012,203
Long-term debt - - - - -
Shareholders' investment 1,781,893 1,789,884 1,778,821 1,590,448 1,620,860
Book value per share $ 73.14 $ 72.31 $ 69.49 $ 61.05 $ 58.88
</TABLE>
14
<PAGE> 15
BHC Communications, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
BHC's financial position is strong and highly liquid. Cash and marketable
securities totalled $1.5 billion at December 31, 1995, and BHC has no debt
outstanding. BHC is currently expending significant funds to develop the United
Paramount Network, but cash flow provided from BHC's operating activities,
$197.3 million in 1995, substantially exceeded BHC's 1995 UPN funding of $128.6
million.
BHC's operating cash flow is generated primarily by its core television
station group. Broadcast cash flow reflects station operating income plus
depreciation and film contract amortization less film contract payments. The
relationship between film contract payments and related amortization may vary
greatly between periods (payments exceeded amortization by $1.7 million and
$16.1 million, respectively, in 1995 and 1994), and is dependent upon the mix
of programs aired and payment terms of the stations' contracts. Reflecting such
$14.4 million variance between 1995 and 1994, broadcast cash flow increased
10%, to $159.3 million from $144.7 million in 1994, while station earnings rose
less than 1%. Although broadcast cash flow is often used in the broadcast
television industry as an ancillary measure, it is not synonymous with
operating cash flow computed in accordance with generally accepted accounting
principles, and should not be considered alone or as a substitute for measures
of performance computed in accordance with generally accepted accounting
principles.
BHC's cash flow additionally reflects earnings associated with its cash
and marketable securities. Cash and marketable securities totalled $1.5 billion
at December 31, 1995, virtually unchanged from December 31, 1994. BHC operating
cash flow of $197.3 million in 1995 was offset by UPN funding of $128.6
million, treasury stock purchases by BHC and UTV totalling $61.0 million and
payment of the 1995 special dividend described below.
Special cash dividends of $2.00 per share, totalling $51.9 million, and
$1.00 per share, totalling $24.5 million, were paid on BHC's Class A and Class
B common stock, in January 1993 and April 1995, respectively. BHC has no plan
to pay regular dividends.
Since April 1990, BHC's Board of Directors has authorized the purchase
of up to 6,800,000 Class A common shares. Through December 31, 1995, 4,914,387
shares were purchased for a total cost of $296.5 million, including $31.3
million in 1995. From 1993 through 1995, UTV purchased 991,776 of its common
shares at an aggregate cost of $51.5 million, and at December 31, 1995,
1,192,249 UTV shares remained authorized for purchase.
BHC intends to expand its operations in the media, entertainment and
communications industries and to explore business opportunities in other
industries. BHC believes it is capable of raising significant additional
capital to augment its already substantial financial resources, if desired, to
fund such additional expansion.
In July 1994, BHC, along with Viacom Inc.'s Paramount Television Group,
formed UPN, a fifth broadcast television network which premiered in January
1995. BHC currently owns 100% of UPN, and accounts for UPN under the equity
method, since Paramount has an option through January 15, 1997 to acquire an
interest in UPN equal to that of BHC. The option price is equivalent to
approximately one-half of BHC's aggregate cash contributions to UPN through the
exercise date, plus interest. BHC expenditures related to UPN totalled $128.6
million in 1995. UPN is still in its infancy, and the cost of developing UPN is
expected to remain significant for several years.
BHC's television stations make commitments for programming that will
not be available for telecasting until future dates. At December 31, 1995,
commitments for such programming totalled approximately $166.2 million,
including $40.4 million applicable to UTV. BHC also has a commitment to invest
over time up to $65 million, including $40 million applicable to UTV, in
management buyout limited partnerships. BHC capital expenditures generally have
not been material in relation to its financial position, and the related
capital expenditure commitments at December 31, 1995 (including any related to
UPN) were not material. BHC expects that its expenditures for UPN, future film
contract commitments and capital requirements for its present business will be
satisfied primarily from operations, marketable securities or cash balances.
15
<PAGE> 16
BHC Communications, Inc. and Subsidiaries
RESULTS OF OPERATIONS
1995 VERSUS 1994
BHC 1995 operating results reflect record station group earnings and a
substantial increase in interest income. However, as expected, start-up losses
at BHC's United Paramount Network lowered net income to $37,057,000, or $1.51
per share, compared to $92,877,000, or $3.71 per share, in 1994. Net income
excluding UPN rose 22%, to $116,660,000, or $4.75 per share, from $95,354,000,
or $3.81 per share.
Television station earnings rose to $151,382,000, just above 1994's record
earnings of $150,647,000. A 6% reduction in station programming expenses more
than offset a 2% decline in station operating revenues. The decline in full
year station operating revenues, to $450,239,000 from $457,533,000 in 1994,
reflects disappointing softness in the 1995 fourth quarter television
advertising market, which contributed to a 14% decline in BHC stations'
operating revenues in that period. While early 1996 demand for television
advertising time remains sluggish, the Olympic Games and political contests in
1996 should have a positive impact on rates later in the year.
BHC operating income rose 5% in 1995, to a record $118,579,000 from
$112,982,000 in 1994, as the modest increase in station earnings was augmented
by decreases totalling $8.5 million in program development expenses
and Chris-Craft management fee expense. Operating income would have risen even
further except for one-time expenses of approximately $3.7 million incurred
establishing BHC's national sales representative subsidiary, United Television
Sales, Inc.
Interest and other income increased to $82,483,000 in 1995 from
$57,644,000 in 1994, primarily reflecting higher interest rates earned on BHC's
money market portfolio.
UPN incurred start-up losses of $129,303,000 in 1995, about as
expected, compared to the network's 1994 pre-launch loss of $3,977,000. BHC
accounts for its interest in UPN under the equity method. UPN is expected to
incur substantial start-up losses for several more years.
Income tax provisions for 1995 and 1994 are net of $20,000,000
reversals of state income taxes accrued in 1989 and 1990, following the
favorable resolution in each year of routine audits. Excluding the effect of
such reversals, BHC's effective income tax rate would have been 44% in 1995 and
43% in 1994, compared with the respective actual rates of 26% and 35%.
Minority interest reflects the interest of shareholders other than BHC
in the net income of UTV, 57% owned at December 31, 1995 and 55% owned at
December 31, 1994.
Earnings per share amounts vary favorably to related dollar amounts,
reflecting the reduction in average common shares outstanding, from 25,882,000
in 1993 to 25,007,000 in 1994 and 24,549,000 in 1995, resulting from open
market purchases by BHC of its Class A common shares.
1994 VERSUS 1993
BHC's television station group achieved record operating results in
1994. The substantial increase in station earnings, together with a reversal of
previously accrued income taxes, brought 1994 net income to $92,877,000, or
$3.71 per share, 32% greater than 1993 income of $70,299,000, or $2.72 per
share, excluding income associated with BHC's former holdings of Time Warner
securities. Net income in 1993, including Time Warner income, was $224,286,000,
or $8.67 per share.
A strong national economy and heavy political spending fueled demand for
television advertising in 1994. BHC's television station group posted a strong
11% increase in operating revenues, to a record $457,533,000 from $411,999,000
in 1993. After a 2% decline in their programming expenses, television station
earnings increased 44%, easily surpassing 1993's record. Operating income in
1994 rose 43%, to a record $112,982,000 from 1993's $79,262,000, even after
increases of approximately $12,000,000 in other operating expenses, primarily
the management fee paid Chris-Craft and program development expense.
Interest and other income, excluding amounts associated with Time Warner
securities, rose to $57,644,000 from $55,340,000 in 1993. A significant
increase in interest income, reflecting the placement of Time Warner proceeds
in money market instruments, was partially offset by 1993 marketable securities
gains.
16
