Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
----------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-10342
-------------------------------
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
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-------- --------
As of April 30, 1996 there were 5,928,205 shares of the issuer's
Class A Common Stock outstanding and 18,000,000 shares of the
issuer's Class B Common Stock outstanding.
<PAGE>
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<TABLE>
PART I -- FINANCIAL INFORMATION
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
-------------------------------------
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 115,919 $ 72,179
Marketable securities(substantially
all U.S. Government securities) 1,347,295 1,427,186
Accounts receivable, net 71,825 89,988
Film contract and prepaid broadcast rights 102,599 95,541
Prepaid expenses and other current assets 43,354 32,545
------------ ------------
Total current assets 1,680,992 1,717,439
------------ ------------
FILM CONTRACT AND, IN 1995, PREPAID BROADCAST
RIGHTS, less current portion 22,020 50,361
------------ ------------
PROPERTY AND EQUIPMENT, net 49,626 48,338
------------ ------------
INTANGIBLE ASSETS 321,423 323,752
------------ ------------
OTHER ASSETS 20,168 19,120
------------ ------------
$ 2,094,229 $ 2,159,010
============ ============
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
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<TABLE>
PART I -- FINANCIAL INFORMATION
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
-------------------------------------
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
CURRENT LIABILITIES:
Film contracts payable within one year $ 82,345 $ 87,634
Accounts payable and other liabilities 68,174 72,906
Income taxes payable 31,129 28,429
----------- ------------
Total current liabilities 181,648 188,969
----------- ------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 75,900 86,392
----------- ------------
OTHER LIABILITIES 6,139 6,504
----------- ------------
MINORITY INTEREST 89,342 95,252
----------- ------------
SHAREHOLDERS' INVESTMENT:
Class A common stock - par value $.01 per share;
authorized 200,000,000 shares; outstanding
6,492,808 shares 65 65
Class B common stock - par value $.01 per share;
authorized 200,000,000 shares; outstanding
18,000,000 shares 180 180
Retained earnings 1,774,693 1,779,560
Treasury stock, at cost (34,836) (6,493)
Increase to reflect marketable
securities at market value 1,098 8,581
------------ ------------
1,741,200 1,781,893
------------ ------------
$ 2,094,229 $ 2,159,010
============ ============
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
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<TABLE>
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(UNAUDITED)
-------------------------------------------
<CAPTION>
Three Months
Ended March 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING REVENUES $ 101,045 $ 104,475
--------- ---------
OPERATING EXPENSES:
Television expenses 51,817 51,072
Selling, general and administrative 30,035 29,298
--------- ---------
81,852 80,370
--------- ---------
Operating income 19,193 24,105
--------- ---------
OTHER INCOME (EXPENSE):
Interest and other income 22,482 20,597
Equity in United Paramount Network loss (32,754) (38,403)
--------- ---------
(10,272) (17,806)
--------- ---------
Income before income taxes
and minority interest 8,921 6,299
INCOME TAX PROVISION 4,300 2,600
--------- ---------
Income before minority interest 4,621 3,699
MINORITY INTEREST (3,543) (3,309)
--------- ---------
Net income $ 1,078 $ 390
========= =========
AVERAGE OUTSTANDING COMMON SHARES 24,188 24,683
========= =========
NET INCOME PER SHARE $ .04 $ .02
========= =========
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
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<TABLE>
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(UNAUDITED)
-----------------------------------------------
<CAPTION>
Three Months
Ended March 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,078 $ 390
Adjustments to reconcile net income to net cash
provided from operating activities:
Film contract payments (22,683) (23,520)
Film contract amortization 22,249 17,612
Depreciation and other amortization 4,710 5,027
Equity in United Paramount Network loss 32,754 38,403
Minority interest 3,543 3,309
Other (2,105) 206
Changes in assets and liabilities:
Accounts receivable 18,163 21,243
Other assets (3,521) 1,852
Accounts payable and other liabilities (3,863) (4,416)
Income taxes 2,769 (3,803)
----------- -----------
Net cash provided from operating activities 53,094 56,303
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition (purchase) of marketable securities, net 70,112 (61,831)
Investment in United Paramount Network (33,610) (38,028)
Capital expenditures (3,668) (1,026)
Other (5) (11)
----------- -----------
Net cash provided from (used in)
investing activities 32,829 (100,896)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (29,291) (11,143)
Capital transactions of subsidiary (12,892) (9,362)
----------- -----------
Net cash used in financing activities (42,183) (20,505)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 43,740 (65,098)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 72,179 222,201
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 115,919 $ 157,103
=========== ===========
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
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BHC COMMUNICATIONS, INC.
------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
1. PRINCIPLES OF CONSOLIDATION:
The accompanying condensed consolidated financial statements
include the accounts of BHC Communications, Inc. and its subsidiaries.
BHC, a majority owned (75% at March 31, 1996) subsidiary of Chris-
Craft Industries, Inc., operates eight television stations, three
wholly owned and five owned by United Television, Inc., 58% owned by
BHC at March 31, 1996. The interest of UTV shareholders other than
BHC in the net income and net assets of UTV is set forth as minority
interest in the accompanying condensed consolidated statements of
income and condensed consolidated balance sheets, respectively.
Intercompany accounts and transactions have been eliminated.
The financial information included herein has been prepared by
BHC, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. However,
BHC believes that the disclosures herein are adequate to make the
information presented not misleading. It is suggested that these
condensed consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in BHC's
latest annual report on Form 10-K. The information furnished reflects
all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods. The results for these interim
periods are not necessarily indicative of results to be expected for
the full year, due to seasonal factors, among others.
2. MARKETABLE SECURITIES:
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", BHC classifies its marketable securities as available-
for-sale.
At March 31, 1996, BHC's marketable securities, which consisted
substantially of U.S. Government securities, had a carrying value of
$1,346,021,000 and a fair value of $1,347,295,000. The difference of
$1,274,000 ($1,098,000 net of income taxes and minority interest) is
reflected as an increase to shareholders' investment in the
accompanying condensed consolidated balance sheet. Of the investments
in U.S. Government securities, 78% mature within one year, 95% within
two years and all within three years.
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At December 31, 1995, BHC's marketable securities, which
consisted substantially of U.S. Government securities, had a carrying
value of $1,413,465,000 and a fair value of $1,427,186,000. The
difference of $13,721,000 ($8,581,000 net of income taxes and minority
interest) is reflected as an increase to shareholders' investment in
the accompanying condensed consolidated balance sheet.
3. 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's partnership
interest is accounted for under the equity method. The carrying value
of such interest totalled $2,983,000 at March 31, 1996 and $2,121,000
at December 31, 1995 and is included in other assets on the
accompanying condensed consolidated balance sheets. UPN is still in
its infancy, and the cost of developing UPN is expected to remain
significant for several years.
UPN's condensed consolidated statement of operations for the
three months ended March 31, 1996 is as follows (in thousands):
Operating revenues* $ 10,908
Operating expenses* 42,602
----------
Operating loss (31,694)
Other expenses (1,060)
----------
Loss before interest
on BHC advances (32,754)
Interest on BHC advances
(eliminated in consolidation) (2,523)
----------
Net loss $ (35,277)
==========
* With respect to certain of its programming, UPN
derives no revenue and incurs no programming expense.
4. SHAREHOLDERS' INVESTMENT:
As of March 31, 1996, there were outstanding 18,000,000 shares of
Class B common stock, all held by Chris-Craft, and 6,055,036 shares of
Class A common stock, after reflecting as treasury stock BHC's pro
<PAGE>
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rata interest in its Class A common shares held by UTV and 306,400
Class A common shares purchased by BHC during 1996. In January 1996,
BHC's Board of Directors authorized the purchase of up to an
additional 1,300,000 shares of Class A common stock. At March 31,
1996, 1,579,213 shares of Class A common stock remain authorized for
purchase.
5. COMMITMENTS:
Commitments of BHC's television stations for film contracts
entered into but not available for broadcasting at March 31, 1996
aggregated approximately $187.4 million, including $55.8 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 is expected to make significant expenditures developing UPN.
See Note 3.
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BHC COMMUNICATIONS, INC.
------------------------
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 March 31, 1996, 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 has substantially exceeded BHC's UPN
funding since the network's January 1995 launch.
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 $.4 million and $5.9 million,
respectively, in the 1996 and 1995 first quarters), and is dependent
upon the mix of programs aired and payment terms of the stations'
contracts. Reflecting such $5.5 million variance between the first
quarters of 1996 and 1995, broadcast cash flow declined only 10%, to
$26.2 million from $29.2 million in 1995, while station earnings
declined 25%, as explained below. 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 March 31, 1996, virtually unchanged from
December 31, 1995. First quarter operating cash flow of $53.1 million
was more than offset by UPN funding of $33.6 million and treasury
stock purchases by BHC and UTV totalling $44.6 million.
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 March 31, 1996,
5,220,787 shares were purchased for a total cost of $324.8 million,
including $28.3 million in 1996. From 1993 through March 31, 1996, UTV
purchased 1,160,676 of its common shares at an aggregate cost of $66.9
<PAGE>
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million, and at March 31, 1996, 1,023,349 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 and $33.6 million in the first quarter of 1996. 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 March 31,
1996, commitments for such programming totalled approximately $187.4
million, including $55.8 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 March 31, 1996 (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.
Results of Operations
- ---------------------
BHC first quarter net income rose to $1,078,000, or $.04 per share,
from last year's $390,000, or $.02 per share. Results for the quarter
reflect a smaller start-up loss at BHC's United Paramount Network and
an increase in income earned on BHC's substantial cash and marketable
securities holdings. These positive factors offset a decline in
earnings at BHC's core television station group.
The rather lackluster demand for television advertising on BHC's
stations which prevailed during the fourth quarter of 1995 continued
into the first quarter of 1996, especially in Los Angeles and San
Francisco. Station group revenues accordingly declined 5%, to
$98,985,000 from $104,475,000 and, after a 4% increase in operating
expenses, first quarter station earnings declined 25%, to $24,568,000
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from $32,703,000. Operating income declined only 20%, to $19,193,000
from $24,105,000, as BHC's television production subsidiaries recorded
improved results. There are preliminary signs of strengthening demand
for television advertising at BHC stations, and the upcoming Summer
Olympic Games and political contests should have a further positive
effect on advertising demand later in the year.
Interest and other income in the first quarter rose to $22,482,000
from last year's $20,597,000, primarily reflecting marketable
securities gains.
UPN's first quarter loss declined to $32,754,000 from $38,403,000, as
last year's amount included nonrecurring promotion expenses related to
the network's January 1995 launch. UPN, which is accounted for under
the equity method, is expected to incur substantial start-up losses
for several more years.
Minority interest reflects the interest of shareholders other than BHC
in the net income of UTV, 58% owned at March 31, 1996 and 56% owned at
March 31, 1995.
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BHC COMMUNICATIONS, INC.
------------------------
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for
which this report is filed.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BHC COMMUNICATIONS, INC.
------------------------
(Registrant)
By: /s/ JOELEN K. MERKEL
-----------------------------
Joelen K. Merkel
Vice President and Treasurer
(Principal Accounting Officer)
Date: May 15, 1996
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EXHIBIT INDEX
Incorporated by
Reference to: Exhibit No. Exhibit
- ------------- ----------- -------
27 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 115919
<SECURITIES> 1347295
<RECEIVABLES> 77559
<ALLOWANCES> 5734
<INVENTORY> 0
<CURRENT-ASSETS> 1680992
<PP&E> 135897
<DEPRECIATION> 86271
<TOTAL-ASSETS> 2094229
<CURRENT-LIABILITIES> 181648
<BONDS> 0
0
0
<COMMON> 245
<OTHER-SE> 1740955
<TOTAL-LIABILITY-AND-EQUITY> 2094229
<SALES> 0
<TOTAL-REVENUES> 101045
<CGS> 0
<TOTAL-COSTS> 81852
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8921
<INCOME-TAX> 4300
<INCOME-CONTINUING> 1078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1078
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
