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
For the fiscal year ended December 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
Class A Common Stock American Stock Exchange
$0.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of February 28, 1997, was approximately $567,100,000.
As of February 28, 1997, there were 5,561,105 shares of the registrant's
Class A Common Stock and 18,000,000 shares of the registrant's Class B Common
Stock outstanding.
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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, 1996 (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 1997 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 (76.1% at February
28, 1997) 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. in 1989. BHC's principal
business is television broadcasting, conducted through its wholly owned sub-
sidiaries, Chris-Craft Television, Inc. ("CCTV") and Pinelands, Inc. ("Pine-
lands"), and its majority owned (58.8% at February 28, 1997) subsidiary,
United Television, Inc. ("UTV").
At February 28, 1997, BHC, solely through subsidiaries, had 1,065 full-
time employees and 134 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. In January 1997,
Paramount completed the exercise of its option to acquire an interest in UPN
equal to that of BHC, which had the effect of reimbursing BHC for one-half of
its aggregate investment in UPN, plus interest, and funding UPN with addi-
tional cash for ongoing expenditures.
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.
The following table sets forth certain information with respect to BHC
stations and their respective markets:
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<TABLE>
<CAPTION>
Total DMA
Network Commercial Cable
Affili- DMA TV Stations TV
Station and ation/ House- DMA Operating in Penetra-
Location(a) Channel Holds(b) Rank(b) Market(c) tion(d)
- ------------ ------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
KCOP
Los Angeles UPN 13 4,942,440 2nd 7VHF 62%
10UHF
WWOR (e)
Secaucus UPN 9 6,711,450 1st 6VHF 69%
14UHF
KPTV
Portland UPN 12 952,690 24th 4VHF 63%
2UHF
KMSP
Minneapolis/
St. Paul UPN 9 1,428,100 14th 4VHF 51%
3UHF
KTVX
Salt Lake City ABC 4 670,650 36th 4VHF 56%
2UHF
KMOL
San Antonio NBC 4 641,740 38th 3VHF 65%
3UHF
KBHK
San Francisco UPN 44 2,278,480 5th 4VHF 71%
10UHF
KUTP
Phoenix UPN 45 1,212,850 17th 4VHF 57%
4UHF
_______________
(a) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the
remaining stations are owned by UTV.
(b) Designated Market Area ("DMA") is an exclusive geographic area consisting
of all counties in which the home-market commercial stations received a
preponderance of total viewing hours. The ranking shown is the nationwide
rank, in terms of television households in DMA, of the market served by the
station. Source: Nielsen Media Research television households universe
estimates.
(c) Additional channels have been allocated by the Federal Communications
Commission ("FCC") for activation as commercial television stations in
certain of these markets. Also, additional stations may be located
within the respective DMAs of BHC stations but outside the greater
metropolitan television markets in which BHC stations operate.
(d) Cable penetration refers to the percentage of DMA television viewing
households receiving cable television service, as estimated by Nielsen
Media Research.
(e) WWOR UPN 9 broadcasts across a tri-state area including the entire New
York City metropolitan area.
</TABLE>
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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 and cable television channels 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 four factors: the stations' program ratings, the time of day the
advertising will run, the demographic qualities of a program's viewers
(primarily age and sex), and the amount of each station's inventory. Ratings
data for television markets are measured by A.C. Nielsen Company ("Nielsen").
This rating service uses two terms to quantify a station's audience: rating
points and share points. A rating point represents one percent of all tele-
vision households in the entire DMA tuned to a particular station, and a share
point represents one percent of all television households within the DMA
actually using at least one television set at the time of measurement and
tuned to the station in question.
Because the major networks regularly provide first-run programming during
prime time viewing hours (in general, 8:00 P.M. to 11:00 P.M. Eastern/Pacific
time), their affiliates generally (but do not always) achieve higher audience
shares, but have substantially less advertising time ("inventory") to sell,
during those hours than affiliates of the newer networks or independent sta-
tions, since the major networks use almost all of their affiliates' prime time
inventory for network programming. Although the newer networks generally use
the same amount of their affiliates' inventory during network broadcasts, the
newer networks provide less programming; accordingly, their affiliates, as well
as non-affiliated stations, generally have substantially more inventory for
sale than the major-network affiliates. The newer network affiliates' and
independent stations' smaller audiences and greater inventory during prime time
hours generally result in lower advertising rates charged and more advertising
time sold during those hours, as compared with major affiliates' larger
audiences and limited inventory, which generally allow the major-network
affiliates to charge higher advertising rates for prime time programming. By
selling more advertising time, the new-network or independent station typically
achieves a share of advertising revenues in its market greater than its
audience ratings. On the other hand, total programming costs for such a sta-
tion, because it broadcasts more syndicated programming than a major-network
affiliate, are generally higher than those of a major-network affiliate in the
same market. These differences have been reduced by the growth of the Fox
network, which currently provides 15 weekly hours of programming during prime
time and additional programming in other periods, and are being reduced further
as the other newer networks provide expanded schedules of programming.
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. Recognizing
the need to have a more direct influence on the quality of programming avail-
able 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, 1996 was not significant to BHC's financial position. 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 syndi-
cated television shows, many of which have been shown previously on a major
network, and syndicated feature films, which were either made for network tele-
vision or have been exhibited previously in motion picture theaters (most of
which films have been shown previously on network or cable television). Syndi-
cated 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 syndica-
tion 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 adver-
tising time during the broadcast. The cash price of such programming varies,
depending on the perceived desirability of the program and whether it comes
with commercials that must be broadcast (i.e., on a cash plus barter basis).
Barter programming is offered to stations for no cash consideration, but
comes with a greater number of commercials that must be broadcast, and there-
fore, with less inventory.
In recent years, the amount of barter and cash plus barter programming
broadcast both industry-wide and by BHC stations has increased substantially.
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 tele-
vision stations and broadcasting networks for sales of air time. BHC
believes that the effect of barter on its television stations is not signifi-
cantly different from its impact on the industry as a whole.
BHC television stations are frequently required to make substantial finan-
cial commitments to obtain syndicated programming while such programming is
still being broadcast by another network and before it is available for broad-
cast by BHC stations or even before it has been produced. Generally, syndi-
cation contracts require the station to acquire an entire program series,
before the number of episodes of original showings that will be produced has
been determined. While analyses of network audiences are used in estimating
the value and potential profitability of such programming, there is no
assurance that a successful network program will continue to be successful
or profitable when broadcast after initial network airing.
Pursuant to generally accepted accounting principles, commitments for pro-
gramming 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 broad-
cast rights, unamortized film contract rights for programming available for
telecasting, and deposits on film contracts for programming not available for
telecasting aggregating $144,034,000 as of December 31, 1996. The stations
were committed for film and sports rights contracts aggregating $177,800,000
for programming not available for broadcasting as of that date. License
periods for particular programs or films generally run from one to five
years. Long-term contracts for the broadcast of syndicated television series
generally provide for an initial telecast and subsequent reruns for a period
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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 9 of Notes to Consolidated
Financial Statements.
KTVX and KMOL are primary affiliates of their respective networks. Net-
work 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 agreements for
terms as long as ten years. UTV has entered into a 10-year affiliation
agreement for KTVX. 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 broadcast by
the affiliate, the major networks generally have paid their affiliates a fee,
specified in the agreement (although subject to change by the network), which
varies in amount depending on the time of day during which the program is
broadcast and other factors. Prime time programming generally earns the highest
fee. A network may, and sometimes does, designate certain programs to be
broadcast with no compensation to the station.
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, which UPN increased to six hours, on three nights, in
March 1996. The network also broadcasts two hours of previously exhibited
movies on Saturday afternoons and two hours of original children's programming
on Sunday mornings. UPN has announced plans to program a one-hour Monday
through Friday block of teen programming, beginning in the fall of 1997, and to
expand to a fourth night in 1998. 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 currently has 165 affiliates in markets containing 92% of all U.S.
households, including all of BHC's and Paramount's previously independent sta-
tions, and UPN continues to seek additional affiliates to expand its household
reach. UPN's primary affiliate station agreements have three year terms and
provide commercial time for sale by the stations as consideration for broad-
casting the network's programming.
In January 1997, Paramount completed the exercise of its option to acquire
an interest in UPN equal to that of BHC, which, until then, owned 100% of the
network and bore all UPN costs. UPN funding requirements, to be shared equally
by BHC and Paramount, since Paramount exercised its option, are expected to
continue to be significant for the next several years. See Management's Dis-
cussion and Analysis of Financial Condition and Results of Operations and Note
2 of Notes to Consolidated Financial Statements.
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Sources of Revenue
The principal source of revenues for BHC stations is the sale of adver-
tising time to national and local advertisers. Such time sales are repre-
sented 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, 1996, national advertising contrib-
uted 37%, and local advertising contributed 63%, of total gross cash adver-
tising revenues. Most advertising contracts are short-term. Like that of the
television broadcasting business generally, BHC's television business is sea-
sonal. In terms of revenues, generally the fourth quarter is strongest, fol-
lowed 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 deter-
mine 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 subject to a wide range of technical, reporting and operational
requirements imposed by the Communications Act or by FCC rules and policies.
The Communications Act was recently and substantially amended by the Tele-
communications Act of 1996 (the "Telecom Act"), some provisions of which have
been incorporated into the FCC's rules and regulations during the past year,
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,
television licenses have usually been renewed for additional terms without a
hearing by the FCC. An existing license automatically continues in effect once
a timely renewal application has been filed until a final FCC decision is
issued.
KMSP UPN 9's license renewal was granted on 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 UPN 45's license renewal
was granted on March 28, 1994, and is due to expire on October 1, 1998. KCOP
UPN 13's license renewal was granted on April 18, 1994, and is due to expire on
December 1, 1998. KBHK UPN 44's license renewal was granted on October 2,
1995, and is due to expire on December 1, 1998. KPTV UPN 12'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. WWOR UPN 9's license renewal was granted July 16,
1996 and is due to expire June 1, 1999.
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Under existing FCC regulations governing multiple ownership of broadcast
stations, a license to operate a television station generally will not be
granted to any party (or parties under common control), if such party directly
or indirectly owns, operates, controls or has an attributable interest in
another television or radio station serving the same market or area. The FCC,
however, is favorably disposed to grant waivers of this rule for radio station-
television station 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
directs the FCC to extend this waiver policy to the top 50 markets, con-
sistent 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. FCC rules deem such concentration of control to
exist if any party, or any of its officers, directors or stockholders,
directly or indirectly, owned, operated, controlled or had an attributable
interest in television stations capable of reaching, in the aggregate, a
maximum of 35% of the national audience. This percentage is determined by
the DMA market rankings of the percentage of the nation's television house-
holds considered within each market. Because of certain limitations of the
UHF signal, however, the FCC will attribute only 50% of a market's DMA reach
to owners of UHF stations for the purpose of calculating the audience reach
limits. Applying the 50% reach attribution rule to UHF stations KBHK UPN
44 and KUTP UPN 45, the eight BHC stations are deemed to reach approximately
18% of the nation's television households. The FCC is 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 stations exceeding the maximum audience
reach or more than one station that serves the same area. In the case of
a corporation controlling or operating television stations, such as BHC,
there is attribution only to stockholders who own 5% or more of the
voting stock, except for institutional investors, including mutual funds,
insurance companies and banks acting in a fiduciary capacity, which may own
up to 10% of the 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 organi-
zation, 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.
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
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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 announced establishment of a voluntary rating
system in January 1997. The Telecom Act also directs the FCC to adopt regu-
lations requiring increased closed-captioning of video programming 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 tele-
vision 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.
FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") require each television broad-
caster to elect, at three-year intervals beginning June 17, 1993, either to (i)
require carriage of its signal by cable systems in the station's market ("must-
carry") or (ii) negotiate the terms on which such broadcast station would
permit transmission of its signal by the cable systems within its market
("retransmission consent"). In a 2-1 decision issued on December 13, 1995, a
special three-judge panel of the U.S. District Court for the District of
Columbia upheld the constitutionality of the must-carry provisions. The
District Court's decision has been appealed to the U.S. Supreme Court, which
has heard the appeal and is expected to issue a decision prior to June 30,
1997. In the meantime, the FCC's must-carry regulations implementing the 1992
Cable Act remain in effect. BHC cannot predict the outcome of the Supreme
Court review of the case.
On August 8, 1996, under the Children's Television Act of 1990 (the
"CTA"), the FCC amended its rules to establish a "processing guideline" for
broadcast television stations, of at least three hours per week, averaged over
a six-month period, of "programming that furthers the educational and inform-
ational needs of children 16 and under in any respect, including the child's
intellectual/cognitive or social/emotional needs." Children's "Core
Programming" has been defined as educational and informational programming
that, among other things (i) has serving the educational and informational
needs of children "as a significant purpose," (ii) has a specified educa-
tional and informational objective and a specified target child audience,
(iii) is regularly scheduled, weekly programming, (iv) is at least 30 minutes
in length, and (v) airs between 7:00 a.m. and 10:00 p.m. Any station that
satisfied the processing guideline by broadcasting at least three weekly
hours of Core Programming will receive FCC staff-level approval of the
portion of its license renewal application pertaining to the CTA. Alterna-
tively, a station may qualify for staff-level approval even if it broadcasts
"somewhat less" than three hours per week of Core Programming by demon-
strating that it has aired a weekly package of different types of educational
and informational programming that is "at least equivalent" to three hours of
Core Programming. Non-Core Programming that can qualify under this alterna-
tive includes specials, public service announcements, short-form programs
and regularly scheduled non-weekly programs, with "a significant purpose of
educating and informing children." A licensee that does not meet the pro-
cessing guidelines under either of these alternatives will be referred by
the FCC's staff to the Commissioners of the FCC, who will evaluate the
licensee's compliance with the CTA on the basis of both its programming and
its other efforts related to children's educational and informational pro-
gramming, e.g., its sponsorship of Core Programming on other stations in the
market, or nonbroadcast activities "which enhance the value" of such pro-
gramming. A television station ultimately found not to have complied with
the CTA could face sanctions including monetary fines and the possible non-
renewal of its broadcast license.
The FCC is conducting a rulemaking proceeding to devise a table of channel
allotments in connection with the introduction of digital television service
("DTV"). The FCC has preliminarily decided to assign a second broadcast
channel to each full-power commercial television station for DTV operation.
According to this preliminary decision, stations would be permitted to phase in
their DTV operations over a period of several years following adoption of a
final table of allotments, after which they would be required to surrender
their non-DTV channels. Meanwhile, Congress is considering proposals that
would require incumbent broadcasters to bid at auctions for the additional
spectrum required to effect a transition to DTV, or, alternatively, would
assign additional DTV spectrum to incumbent broadcasters and require the
early surrender of this non-DTV channel for sale by public
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auction. BHC cannot predict if, or when, any of these proposals will
be adopted or the effect, if any, adoption of such proposals would have on
BHC.
The FCC currently is reviewing certain of its rules governing the rela-
tionship between broadcast television networks, including UPN, and their
affiliated stations. In a rulemaking proceeding, the FCC is examining its rules
prohibiting broadcast television networks from representing their affiliated
stations for the sale of non-network advertising time and from influencing or
controlling the rates set by their affiliates for the sale of such time.
Separately, the FCC is conducting a rulemaking proceeding to consider the
relaxing or elimination of its rules prohibiting broadcast networks from (i)
restricting their affiliates' rights to reject network programming, (ii)
reserving an option to use specified amounts of their affiliates' broadcast
time, and (iii) forbidding their affiliates from broadcasting the programming
of another network; and to consider the relaxation of its rule prohibiting
network affiliated stations from preventing other stations from broadcasting
the programming of their network.
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 BHC and 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 pro-
visions of the Communications Act or regulations and policies of the FCC there-
under. 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 Commis-
sion, also impose a variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional or revised
requirements are considered by the FCC, other Federal agencies or Congress
from time to time. BHC cannot predict what new or revised Federal
requirements may result from such consideration or what impact, if any, such
requirements might have upon the operation of BHC television stations.
Competition
BHC television stations compete for advertising revenue in their
respective markets, primarily with other broadcast television stations and
cable television channels, and compete with other advertising media as well.
Such competition is intense.
In addition to programming, management ability and experience, technical
factors and television network affiliations are important in determining
competitive position. Competitive success of a television station depends
primarily on public response to the 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 other programs.
11
<PAGE>
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 UPN 9, and that
WWOR UPN 9 generally attracts a viewing audience larger than the audiences
attracted by the UHF stations in the New York City market. In Los Angeles,
the three VHF major-network affiliates and three other VHF stations generally
attract a larger viewing audience than does KCOP UPN 13, and KCOP UPN 13
generally attracts a viewing audience larger than the ten UHF stations in Los
Angeles. In Portland, the three VHF major-network affiliated stations
generally attract a larger audience than does KPTV UPN 12, 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
UPN 9 generally attracts a smaller viewing audience than the three major
network-affiliated VHF 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 television stations in terms of audience
share. In San Antonio, KMOL generally ranks first of the six stations in
terms of audience share. Of the 14 commercial television stations in San
Francisco, KBHK UPN 44 generally ranks fifth in terms of audience share,
behind the three major network-affiliated VHF television stations, and the VHF
Fox affiliate. KUTP UPN 45 generally ranks sixth in terms of audience share,
of the eight commercial stations in the Phoenix market.
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 broadcasting
stations. Because cable television systems operate in each market served by a
BHC station, the stations are affected by rules governing cable operations.
If a station is not widely accessible by cable in those markets having strong
cable penetration, it may lose effective access to a significant portion of
the local audience. Even if a television station is carried on a local cable
system, an unfavorable channel or service tier position on the cable system
may adversely affect the station's audience ratings and, in some circumstances,
a television set's ability to receive the station being carried on an
unfavorable channel position. Some cable system operators may be inclined to
place broadcast stations in unfavorable channel locations. Similar competi-
tive effects may be expected from video delivery systems offered by local
telephone companies, as permitted by the provisions of the Telecom Act.
While Federal law has until recently generally prohibited local telephone
companies from providing video programming to subscribers in their service
areas, this prohibition has been substantially eliminated by the Telecom Act.
The FCC has also recently adopted rules for "Open Video Systems" -- a new
structure of video delivery system authorized by the Telecom Act for provision
by local telephone companies and, if permitted by the FCC, others. 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 exclusive 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.
Five direct broadcast satellite ("DBS") systems currently provide service, and
others are expected to begin service during the next two years. The number of
subscribers to DBS services increased substantially during the past two years,
from approximately 600,000 at the end of 1994, to approximately 4.3 million at
the end of 1996. 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. An additional challenge is now posed by wireless
cable systems, including multichannel distribution services ("MDS"). At the
end of 1994,
12
<PAGE>
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 programming on a paid basis. A similar service can also be
offered using the instructional television fixed service ("ITFS"). The FCC
now allows the educational entities that hold ITFS licenses to lease their
"excess" capacity for commercial purposes. The multichannel capacity of ITFS
could be combined with either an existing single channel MDS or a newer
multichannel multi-point distribution service to increase the number of
available channels offered by an individual operator.
Technological developments in television transmission have created the
possibility that one or more of the broadcast and nonbroadcast television
media will provide enhanced or "high definition" pictures and sound to the
public of a quality that is technically superior to that of the pictures and
sound currently available. It is not yet clear when and to what extent
technology of this kind will be available to the various television media;
whether and how television broadcast stations will be able to avail themselves
of these improvements; whether all television broadcast stations will be
afforded sufficient spectrum to do so; what channels will be assigned to each
of them to permit them to do so; whether viewing audiences will make choices
among services upon the basis of such differences; or, if they would, whether
significant additional expense would be required for television stations to
provide such services. Many segments of the television industry are
intensively studying digital television technology. A proceeding is under way
at the FCC regarding digital television service policies, including "high
definition" television service. The Telecom Act, as well as proposed federal
legislation, addresses several of these issues. BHC is unable to
predict the outcome of these developments.
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 compres-
sion 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 45,300 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.
13
<PAGE>
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 approxi-
mately 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
stations and many of its FM radio stations. The lease for the Mt. Sutro
facilities expires in February 2005 and is renewable for two five-year
periods.
KUTP's transmitter facilities and tower are located on a site within
South Mountain Park, a communications park owned by the City of Phoenix, which
also contains transmitter facilities and towers for the other television
stations in Phoenix as well as facilities for several FM radio stations. The
license for this space expires in 2012.
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 28, 1997, are as follows:
Has served
Positions with BHC; principal occupation; as officer
Name and age as of February 28, 1997 since
- ---- ----------------------------------------- ----------
Herbert J. Siegel Chairman of the Board; Chairman of the 1977
Board and President, Chris-Craft; 68
William D. Siegel President; Senior Vice President, Chris- 1981
Craft; 42
Joelen K. Merkel Vice President and Treasurer; Vice 1980
President and Treasurer, Chris-Craft; 45
Brian C. Kelly General Counsel and Secretary; General 1992
Counsel and Secretary, Chris-Craft; 45
Chris-Craft, through its majority ownership of BHC, is principally engaged
in television broadcasting. The principal occupation of each of the indi-
viduals 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 prior to
February 1992.
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 54, is Executive Vice President of Chris-Craft.
Although not an officer of BHC, as President of UTV and Chris-Craft's Tele-
vision 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 compensatory
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 28, 1997
BHC COMMUNICATIONS, INC.
(Registrant)
By: WILLIAM D. SIEGEL
William D. Siegel
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 28, 1997
Herbert J. Siegel
Chairman and
Director (principal executive
officer)
WILLIAM D. SIEGEL March 28, 1997
William D. Siegel
President and
Director (principal financial
officer)
JOELEN K. MERKEL March 28, 1997
Joelen K. Merkel
Vice President, Treasurer and
Director (principal accounting
officer)
19
<PAGE>
JOHN L. EASTMAN March 28, 1997
John L. Eastman
Director
BARRY S. GREENE March 28, 1997
Barry S. Greene
Director
LAURENCE M. KASHDIN March 28, 1997
Laurence M. Kashdin
Director
MORGAN L. MILLER March 28, 1997
Morgan L. Miller
Director
JOHN C. SIEGEL March 28, 1997
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, 1996 and 1995
Consolidated Statements of Income - For the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - For the Years
Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Investment - For
the Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
SCHEDULES:
UPN Financial Statements --
Report of Independent Accountants
Balance Sheets - December 31, 1996 and 1995
Statements of Operations - For the Years
Ended December 31, 1996 and 1995
Statements of Changes in Partners'
Capital (Deficit) - For the Years
Ended December 31, 1996 and 1995
Statements of Cash Flows - For the Years
Ended December 31, 1996 and 1995
Notes to Financial Statements
21
United Paramount Network
(a partnership between BHC Network
Partner, Inc., BHC Network Partner II, Inc.
and BHC Network Partner III, Inc.)
Report and Financial Statements
December 31, 1996 and 1995
Report of Independent Accountants
January 31, 1997
To the Partners
of United Paramount Network
In our opinion, the accompanying balance sheets 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., BHC
Network Partner II, Inc. and BHC Network Partner III, Inc.) at December 31,
1996 and 1995, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of United Paramount Net-
work's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence sup-
porting 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.
<PAGE>
United Paramount Network
Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
December 31,
1996 1995
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 557 $ 74
Accounts receivable (net of allowance for
doubtful accounts of $430 and $178,
respectively) 25,057 9,040
Program rights and development costs (net
of reserve for abandonment of $5,613
and $4,631, respectively) 17,815 12,893
Other current assets 402 609
------- --------
Total current assets 43,831 22,616
------- --------
Restricted cash 1,157 974
Property and equipment, at cost: ------- --------
Furniture, fixtures and computer equipment 1,065 1,065
Leasehold improvements and other 358 358
------- --------
1,423 1,423
Less accumulated depreciation 508 198
------- --------
915 1,225
------- --------
Intangible asset (net of accumulated
amortization of $108 and $54, respectively) 163 217
Investment in joint venture (net of reserve of
$2,158 and $0, respectively) 2,827 2,750
------- --------
$48,893 $ 27,782
======= =========
Liabilities and Partners' Capital (Deficit)
Current liabilities:
Accounts payable $ 4,027 $ 3,224
Accrued program costs 18,168 10,587
Accrued expenses and other liabilities 25,304 11,844
------- --------
Total current liabilities 47,499 25,655
------- --------
Due to related party -- 109,941
------- --------_
Total liabilities 47,499 135,596
Commitments and contingencies (Note 6)
Partners' capital (deficit):
Network Partner (4,172) (8,942)
Network Partner II (3,703) (98,872)
Network Partner III 9,269 --
------- --------
Total partners' capital (deficit) 1,394 (107,814)
------- --------
$ 48,893 $ 27,782
======== =========
<?TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
United Paramount Network
Statement of Operations
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1996 1995
<S> <C> <C>
Net revenues $ 56,948 $ 30,376
Operating costs and expenses:
Operating expenses 132,593 99,940
Selling, general and administrative
expenses 67,359 58,924
Depreciation and amortization 364 252
--------- ---------
200,316 159,116
--------- ---------
Operating loss (143,368) (128,740)
--------- ---------
Other income (expense):
Interest expense to related parties (14,147) (4,535)
--------- ---------
Interest and other income 193 62
Net loss on investment in joint venture (3,138) (625)
--------- ---------
(17,092) (5,098)
--------- ---------
Net loss $(160,460) $(133,838)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
United Paramount Network
Statements of Changes in Partners' Capital (Deficit)
(in thousands)
<TABLE>
<CAPTION>
Network Network
Network Partner Partner
Partner II III Total
<S> <C> <C> <C> <C>
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)
Capital contributions -- -- 20,000 20,000
Conversion of debt to equity 8,398 164,101 63,016 235,515
Conversion of accrued interest
to equity 12 9,500 4,641 14,153
Allocation of 1996 net loss (3,640) (78,432) (78,388) (160,460)
-------- --------- -------- ---------
Balance at December 31, 1996 $(4,172) $ (3,703) $ 9,269 $ 1,394
======== ========== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
United Paramount Network
Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $(160,460) $(133,838)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of program costs 126,793 91,744
Payments for programming (121,822) (98,420)
Depreciation and amortization 364 252
Abandonment reserve 982 4,631
Changes in assets and liabilities:
Increase in accounts receivable, net (16,017) (9,025)
Increase in accounts payable, accrued
expenses and other current liabilities 25,116 12,546
Decrease in other assets 207 3,052
--------- ---------
Net cash used in operating activities (144,837) (129,058)
--------- ---------
Cash flows from investing activities:
Additions to property and equipment -- (1,113)
Cash placed in restricted account (183) (974)
Increase in intangible asset -- (271)
Net investment in joint venture (77) (2,750)
--------- ---------
Net cash used in investing activities (260) (5,108)
--------- ---------
Cash flows from financing activities:
Advances from related party 125,580 109,935
Capital contributions 20,000 23,186
--------- ---------
Net cash provided by financing activities 145,580 133,121
--------- ---------
Net increase (decrease) in cash
and cash equivalents 483 (1,045)
Cash and cash equivalents:
Beginning of year 74 1,119
--------- ---------
End of year $ 557 $ 74
========= =========
Supplemental Cash Flow Information:
Cash paid for interest $ -- $ 4,530
========= =========
Supplemental schedule of non-cash
financing activities:
Advances from related party
converted to equity $ 235,521 $ --
========= =========
Accrued interest converted
to equity $ 14,147 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
United Paramount Network
Notes to Financial Statements
For the Years Ended December 31, 1996 and 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 broad-
cast television network.
UPN was organized as a partnership in December 1994 between Network Partner
and BHC Network Partner II, Inc. ("Network Partner II"), a wholly owned
indirect subsidiary of BHC. BHC Network Partner III, Inc. ("Network Partner
III"), a wholly owned indirect subsidiary of BHC, became a partner in 1996.
PCI/NP had an option to acquire an interest in UPN equal to that of Network
Partner, Network Partner II, and Network Partner III (collectively referred
to as the "Partners"). The option price included approximately one-half of
the Partners' aggregate cash contributions to UPN through the exercise date,
plus interest, and additional cash available for ongoing UPN expenditures
(see Note 7).
UPN began providing programming for broadcast in January 1995. At December
31, 1996 and 1995, the Network had 164 affiliates reaching over 92% and 150
affiliates reaching over 90% of U.S. television households, respectively.
The Network's revenues are derived entirely from providing television program-
ming and are, therefore, subject to fluctuations in the advertising industry.
Operating costs of the Network have been funded through capital contributions
and loans made by the Partners and the sale of advertising. Profits or losses
are allocated between the Partners in accordance with the partnership agree-
ment. During the years ended December 31, 1996 and 1995, UPN incurred
operating losses of $143,368,000 and $128,740,000 and negative cash flows
from operations of $144,837,000 and $129,058,000, respectively. UPN is still
in its early development and the cost of developing and expanding its program-
ming is expected to remain significant for several years. The Partners
intend to continue funding UPN 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, "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, there-
fore, has been classified as non-current in the accompanying balance sheets.
<PAGE>
NOTE 2 (continued)
Property and Equipment
Property and equipment is recorded at cost. Depreciation of furniture,
fixtures and computer equipment is computed on the straight-line method over
the estimated useful lives of the assets which range from three to five years.
Amortization of leasehold improvements is computed on a straight-line basis
over the life of the lease.
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 sheets, 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., which is a subsidiary of Viacom Inc. (Note 1). Revenues
are recognized substantially as advertisements 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 income tax benefit is included in
the accompanying financial statements.
Reclassifications
Certain amounts for 1995 have been reclassified to conform to the 1996
presentation.
<PAGE>
NOTE 3 - Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
(in thousands)
December 31,
1996 1995
Accrued advertising costs $16,930 $ 6,215
Accrued compensation 3,453 2,388
Accrued sales commissions 1,807 1,395
Other accrued expenses 3,114 1,846
------- -------
$25,304 $11,844
======= =======
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 1996 and 1995, the Partners made loans to UPN totalling $125,580,000
and $109,935,000, respectively. The related party balance as of December 31,
1995 of $109,941,000 includes accrued interest. The loans bore interest at
the prime rate (8.25% and 8.50% at December 30, 1996 and December 31, 1995,
respectively), payable annually. On December 30, 1996, all loans and accrued
interest of $14,153,000 were converted to partnership equity.
NOTE 6 - Commitments and Contingencies
The aggregate amount payable by UPN under contracts for programming not
currently available for telecasting and, accordingly, not included in accrued
program costs in the accompanying balance sheets totalled approximately
$71,000,000 and $62,000,000 at December 31, 1996 and 1995, respectively.
During 1995, UPN entered into a five year lease obligation for its office
space. The lease is noncancellable for three years and calls for certain
penalty payments upon cancellation thereafter. Rental expense was $562,000
and $427,000 for the years ended December 31, 1996 and 1995, respectively.
Aggregate future minimum lease payments at December 31, 1996 are $2,768,000,
with amounts of $755,000 due in each of the years 1997 through 1999 and
$503,000 due in 2000. Additionally, as required 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>
NOTE 7 - Subsequent Events
On January 15, 1997, PCI/NP completed its exercise of its option in accordance
with the terms of the option agreement (Note 1) and became an equal partner
with BHC in UPN. The net result of the exercise was an increase of approxi-
mately $77 million of additional capital contributed to UPN by both the
Partners and PCI/NP. Certain of the amounts contributed by PCI/NP were
distributed to the Partners in accordance with the option agreement.
<PAGE>
<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.
<PAGE>
* 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.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
- ----------------------------------------------------------------------
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
(In Thousands Except per Share Data) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 446,292 $ 454,702 $ 457,533
- --------------------------------------------------------------------------------------
OPERATING EXPENSES:
Television expenses 217,928 214,223 232,635
Selling, general and administrative 121,216 121,900 111,916
- --------------------------------------------------------------------------------------
339,144 336,123 344,551
- --------------------------------------------------------------------------------------
Operating income 107,148 118,579 112,982
- --------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest and other income 81,849 82,483 57,644
Equity in United Paramount Network loss (146,313) (129,303) (3,977)
- --------------------------------------------------------------------------------------
(64,464) (46,820) 53,667
- --------------------------------------------------------------------------------------
Income before provision for income taxes
and minority interest 42,684 71,759 166,649
PROVISION FOR INCOME TAXES 21,000 18,800 57,900
- --------------------------------------------------------------------------------------
Income before minority interest 21,684 52,959 108,749
MINORITY INTEREST 17,448 15,902 15,872
- --------------------------------------------------------------------------------------
Net income $ 4,236 $ 37,057 $ 92,877
======================================================================================
NET INCOME PER SHARE $ .18 $ 1.51 $ 3.71
======================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 23,987 24,549 25,007
======================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
(In Thousands of Dollars) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 146,751 $ 72,179
Marketable securities (substantially all U.S.
Government securities) 1,245,241 1,427,186
Accounts receivable, less allowance for
doubtful accounts of $5,770 and $5,643 87,459 89,988
Film contract and prepaid broadcast rights 115,498 95,541
Prepaid expenses and other current assets 52,354 32,545
- ------------------------------------------------------------------------------
Total current assets 1,647,303 1,717,439
- ------------------------------------------------------------------------------
INVESTMENTS 45,550 7,938
- ------------------------------------------------------------------------------
FILM CONTRACT RIGHTS, including deposits, less
estimated portion to be used within one year 28,536 50,361
- ------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, at cost:
Land, buildings and improvements 41,289 36,626
Equipment 97,730 95,740
- ------------------------------------------------------------------------------
139,019 132,366
Less-Accumulated depreciation 90,942 84,028
- ------------------------------------------------------------------------------
48,077 48,338
- ------------------------------------------------------------------------------
INTANGIBLE ASSETS 313,079 323,752
- ------------------------------------------------------------------------------
OTHER ASSETS 14,718 11,182
- ------------------------------------------------------------------------------
$ 2,097,263 $ 2,159,010
==============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Film contracts payable within one year $ 97,222 $ 87,634
Accounts payable and accrued expenses 77,477 72,906
Income taxes payable 35,543 28,429
- ------------------------------------------------------------------------------
Total current liabilities 210,242 188,969
- ------------------------------------------------------------------------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 80,837 86,392
- ------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 5,424 6,504
- ------------------------------------------------------------------------------
MINORITY INTEREST 95,227 95,252
- ------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' INVESTMENT:
Class A common stock-par value $.01 per share;
authorized 200,000,000 shares; outstanding
5,839,508 and 6,492,808 shares 58 65
Class B common stock-par value $.01 per share;
authorized 200,000,000 shares; outstanding
18,000,000 shares 180 180
Retained earnings 1,710,323 1,779,560
Treasury stock-133,636 and 129,786 Class A
common shares, at cost (6,677) (6,493)
Increase to reflect marketable securities
at market value 1,649 8,581
- ------------------------------------------------------------------------------
1,705,533 1,781,893
- ------------------------------------------------------------------------------
$ 2,097,263 $ 2,159,010
==============================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
(In Thousands of Dollars) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,236 $ 37,057 $ 92,877
Adjustments to reconcile net income to net cash
provided from operating activities:
Film contract amortization 95,291 89,321 101,869
Film contract payments (90,802) (90,994) (117,928)
Prepaid broadcast rights 5,252 4,249 8,166
Depreciation and other amortization 19,451 19,833 20,355
Equity in United Paramount Network loss 146,313 129,303 3,977
Minority interest 17,448 15,902 15,872
Other (2,315) 1,543 4,167
Changes in assets and liabilities:
Accounts receivable 2,529 6,693 (11,305)
Other assets 178 643 682
Accounts payable and other liabilities 1,193 5,728 4,932
Income taxes (4,859) (22,028) 4,996
- --------------------------------------------------------------------------------------
Net cash provided from
operating activities 193,915 197,250 128,660
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of marketable securities 1,067,658 697,079 1,097,409
Purchase of marketable securities (898,897) (811,540) (941,400)
Investment in United Paramount Network (145,580) (128,585) (6,815)
Other investments (39,173) (8,748) (377)
Capital expenditures, net (9,870) (9,839) (8,242)
Other (44) (34) (52)
- --------------------------------------------------------------------------------------
Net cash provided from (used in)
investing activities (25,906) (261,667) 140,523
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (62,639) (30,504) (73,449)
Capital transactions of subsidiary (30,798) (30,597) (8,904)
Payment of special dividend - (24,504) -
- --------------------------------------------------------------------------------------
Net cash used in financing
activities (93,437) (85,605) (82,353)
- --------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 74,572 (150,022) 186,830
Cash and Cash Equivalents at
Beginning of Year 72,179 222,201 35,371
- --------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 146,751 $ 72,179 $ 222,201
======================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS INVESTMENT
- ----------------------------------------------------------------------
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Treasury
Outstanding Shares Shares
------------------------ -----------
Class A Class B Class A
Common Common Common
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1993 7,723,418 18,000,000 (122,991)
Net income - - -
Acquisition of treasury stock - - (845,900)
Retirement of treasury stock (845,900) - 845,900
Capital transactions of subsidiary - - (2,039)
Marketable securities valuation adjustment - - -
- --------------------------------------------------------------------------------------
Balance at December 31, 1994 6,877,518 18,000,000 (125,030)
Net income - - -
Dividend on common stock - $1.00 per share - - -
Acquisition of treasury stock - - (384,710)
Retirement of treasury stock (384,710) - 384,710
Capital transactions of subsidiary - - (4,756)
Marketable securities valuation adjustment - - -
- --------------------------------------------------------------------------------------
Balance at December 31, 1995 6,492,808 18,000,000 (129,786)
Net income - - -
Acquisition of treasury stock - - (653,300)
Retirement of treasury stock (653,300) - 653,300
Capital transactions of subsidiary - - (3,850)
Marketable securities valuation adjustment - - -
- --------------------------------------------------------------------------------------
Balance at December 31, 1996 5,839,508 18,000,000 (133,636)
======================================================================================
<PAGE>
<CAPTION>
Dollar Amount (In Thousands)
- --------------------------------------------------------------------------------------
Market
Class A Class B Capital Retained Treasury Valuation
Common Common Surplus Earnings Stock Account
- --------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 77 $ 180 $ 98,182 $1,686,532 $ (6,150) $ -
- - - 92,877 - -
- - - - (65,818) -
(8) - (65,810) - 65,818 -
- - (2,761) - (104) -
- - - - - (13,131)
- --------------------------------------------------------------------------------------
69 180 29,611 1,779,409 (6,254) (13,131)
- - - 37,057 - -
- - - (24,604) - -
- - - - (31,279) -
(4) - (18,973) (12,302) 31,279 -
- - (10,638) - (239) -
- - - - - 21,712
- -------------------------------------------------------------------------------------
65 180 - 1,779,560 (6,493) 8,581
- - - 4,236 - -
- - - - (61,717) -
(7) - - (61,710) 61,717 -
- - - (11,763) (184) -
- - - - - (6,932)
- --------------------------------------------------------------------------------------
$ 58 $ 180 $ - $1,710,323 $ (6,677) $ 1,649
======================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
Note 1
- ----------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) BUSINESS AND BASIS OF PRESENTATION
BHC Communications, Inc. is a majority owned (75.9% at December 31,
1996 and 73.9% at December 31, 1995) 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 (59.0% at December 31,
1996 and 57.3% at December 31, 1995) United Television, Inc. (UTV),
which operates five television stations.
BHC accounts for its interest in the partnership that operates the
United Paramount Network (UPN), a fifth broadcast network which
premiered in January 1995, under the equity method. BHC recorded 100%
of UPN's start-up losses from the network's 1994 inception through
December 31, 1996, consistent with BHC's sole ownership of the
partnership during that period. In January 1997, Viacom Inc.
completed its acquisition of a 50% interest in the partnership, and
future BHC operating results will accordingly reflect BHC's then pro
rata interest in UPN.
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 1996
presentation.
(B) FINANCIAL INSTRUMENTS
Cash and cash equivalents totalled $146,751,000 at December 31,
1996 and $72,179,000 at December 31, 1995. 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.
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:
Gross Unrealized
----------------
(In Thousands) Cost Gains Losses Fair Value
- ----------------------------------------------------------------------
December 31, 1996:
U.S. Government
securities $1,151,818 $ 884 $ 868 $1,151,834
Other 91,387 7,413 5,393 93,407
- ----------------------------------------------------------------------
$1,243,205 $ 8,297 $ 6,261 $1,245,241
======================================================================
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
======================================================================
Of the U.S. Government securities held at December 31, 1996, 87%
mature within one year and all within two years.
Certain additional information related to BHC's marketable
securities as of and for the years ended December 31, 1996, 1995 and
1994 is as follows:
(In Thousands) 1996 1995 1994
- ----------------------------------------------------------------------
Sales proceeds $ 1,067,658 $ 697,079 $ 1,097,409
Realized gains 3,909 2,356 1,193
Realized losses 466 4,690 7,734
Net unrealized gain (loss) 2,036 13,721 (25,078)
Adjustment for unrealized gain
(loss), net of deferred income
taxes and minority interest $ 1,649 $ 8,581 $ (13,131)
For purposes of computing gains and losses, cost was determined
using the specific identification method.
(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, 1996. 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, 1996 are $48,755,000, $23,967,000, $5,869,000 and $2,246,000 in
1998, 1999, 2000 and thereafter, respectively. The net present value
at December 31, 1996 of such payments, based on an 8.5% discount rate,
was approximately $68,000,000. See Note 7.
(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 $56,653,000 at December 31, 1996 and $47,333,000 at December
31, 1995.
(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 $40,853,000 in 1996, $46,039,000
in 1995 and $47,201,000 in 1994. Barter expense in each year
approximated barter revenue.
(G) STOCK-BASED COMPENSATION
BHC itself has no stock-based employee compensation plan, but UTV
has stock option plans under which options to purchase shares of UTV
common stock may be granted to UTV and BHC employees and to UTV
directors. UTV has adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123). This statement encourages but does not require the recording of
compensation cost for stock-based employee compensation plans at fair
value. UTV has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees .
If UTV had elected to recognize compensation expense based upon the
fair value at the grant date for awards under its plans, using the
methodology prescribed by SFAS 123, BHC net income would have been
reduced by $369,000, or $.02 per share, in 1996 and by $281,000, or
$.01 per share, in 1995. Such pro forma amounts are based on fair
value estimates using the Black-Scholes option pricing model, and may
not be representative of the pro forma effect on net income in future
years, since the estimated fair value of stock options is amortized
over the vesting period, pro forma compensation expense related to
grants made prior to 1995 is not considered and additional options may
be granted in future years.
(H) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes totalled $29,000,000 in 1996,
$46,300,000 in 1995 and $52,900,000 in 1994.
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 owned 100% of
UPN from its inception through January 15, 1997, when Viacom completed
the exercise of its option to acquire a 50% interest in UPN. The
option price included approximately one-half of BHC's aggregate cash
contributions to UPN through the exercise date, plus interest, and
additional cash available for ongoing UPN expenditures. UPN
distributed approximately $116,000,000 to BHC pursuant to the option
exercise, and BHC realized a pretax gain on the exercise of
approximately $150,000,000, which will be recorded in the first
quarter of 1997. BHC and Viacom now share equally in UPN funding
requirements and in UPN losses.
UPN has been organized as a partnership, and BHC accounts for its
partnership interest under the equity method. The carrying value of
such interest, which reflects BHC funding of $145,580,000 in 1996 and
$128,585,000 in 1995, less BHC's then 100% interest in UPN losses in
those years, totalled $1,394,000 at December 31, 1996 and $2,127,000
at December 31, 1995, and is included in Other Assets on the
accompanying Consolidated Balance Sheets. UPN is still in its early
development and is expected to continue to incur significant start-up
losses and to require significant funding for the next several years.
However, BHC believes that the substantial portion of its share of
such funding requirements in 1997 and 1998 will be offset by the
proceeds of the Viacom option exercise. Condensed consolidated
financial statements of UPN as of and for the years ended December 31,
1996 and 1995 are as follows:
(In Thousands) 1996 1995
- ----------------------------------------------------------------------
BALANCE SHEETS
Current assets $ 43,831 $ 22,616
Property and equipment, net 915 1,225
Other assets 4,147 3,941
- ----------------------------------------------------------------------
$ 48,893 $ 27,782
======================================================================
Current liabilities $ 47,499 $ 25,655
Advances and interest due BHC - 109,941
Partners capital (deficit) 1,394 (107,814)
- ----------------------------------------------------------------------
$ 48,893 $ 27,782
======================================================================
- ----------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Operating revenues* $ 56,948 $ 30,376
Operating expenses* 200,316 159,116
- ----------------------------------------------------------------------
Operating loss (143,368) (128,740)
Other expenses, net (2,945) (563)
- ----------------------------------------------------------------------
Loss before interest on BHC advances (146,313) (129,303)
Interest on BHC advances
(eliminated in consolidation) (14,147) (4,535)
- ----------------------------------------------------------------------
Net loss $ (160,460) $ (133,838)
======================================================================
* With respect to certain of its programming, UPN derives no revenue
and incurs no programming expense.
Note 3
- ----------------------------------------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
December 31,
(In Thousands) 1996 1995
- ----------------------------------------------------------------------
Accounts payable $ 9,530 $ 9,114
Payable for securities purchased 101 1,023
Accrued expenses-
Deferred barter revenue 33,896 29,660
Payroll and compensation 18,053 16,992
Other 15,897 16,117
- ----------------------------------------------------------------------
$ 77,477 $ 72,906
======================================================================
Note 4
- ----------------------------------------------------------------------
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 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,
1996, BHC purchased 5,567,687 shares of its Class A common stock at an
aggregate cost of $358,213,000. Chris-Craft's ownership interest in
BHC during that period accordingly increased to 75.9% (representing
97.0% of BHC's voting power) from 60%. At December 31, 1996, 1,232,313
Class A common shares were 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 $32,810,000 in 1996, $30,449,000 in 1995
and $9,901,000 in 1994, net of proceeds to UTV of $4,008,000 in 1996,
$2,009,000 in 1995 and $997,000 in 1994 from the exercise of stock
options and UTV dividend payments of $4,750,000 in 1996 and $4,911,000
in 1995, adjusted for intercompany eliminations and minority interest.
Note 5
- ----------------------------------------------------------------------
RETIREMENT PLANS:
Chris-Craft and UTV maintain noncontributory defined benefit
pension plans covering substantially all their employees. Benefits
accrue annually based on compensation paid to participants each year.
The funding policy is to contribute annually to the plans amounts
sufficient to fund current service costs and to amortize any unfunded
accrued liability over periods not to exceed 30 years. BHC pension
expense, including amounts accrued in Chris-Craft and UTV nonqualified
plans for retirement benefits in excess of statutory limitations,
totalled $3,094,000 in 1996, $3,096,000 in 1995, and $2,021,000 in
1994.
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, including
amounts accrued in the nonqualified plans, was as follows:
December 31,
(In Thousands) 1996 1995
- ----------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $ (30,376) $ (26,210)
Nonvested benefit obligation (1,789) (1,932)
- ----------------------------------------------------------------------
Accumulated benefit obligation (32,165) (28,142)
Effect of projected compensation increases (12,173) (11,513)
- ----------------------------------------------------------------------
Projected benefit obligation (44,338) (39,655)
Fair value of plan assets
(primarily listed securities and
temporary investments) 29,144 24,366
- ----------------------------------------------------------------------
Excess (15,194) (15,289)
Unrecognized net asset at date of
initial application of SFAS No. 87,
being amortized over 15 years (184) (234)
Unrecognized net (gain) loss from past
experience being amortized over
15 years (580) 2,090
- ----------------------------------------------------------------------
Pension liability $ (15,958) $ (13,433)
======================================================================
Assumptions used in accounting for pension plans for each year
presented are as follows:
- ----------------------------------------------------------------------
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%
The aggregate BHC expense of other retirement plans in which its
employees participate, primarily stock purchase and profit sharing
plans of Chris-Craft and UTV and related accruals in the nonqualified
retirement plans mentioned above, totalled $4,656,000 in 1996,
$6,307,000 in 1995 and $4,877,000 in 1994.
Note 6
- ----------------------------------------------------------------------
INCOME TAXES:
Income taxes are provided in the accompanying Consolidated
Statements of Income as follows:
Year ended December 31,
(In Thousands) 1996 1995 1994
- ----------------------------------------------------------------------
Current:
Federal $ 22,500 $ 23,300 $ 48,625
State 5,800 (13,700) (8,600)
- ----------------------------------------------------------------------
28,300 9,600 40,025
- ----------------------------------------------------------------------
Deferred:
Federal (7,500) 8,200 16,275
State 200 1,000 1,600
- ----------------------------------------------------------------------
(7,300) 9,200 17,875
- ----------------------------------------------------------------------
$ 21,000 $ 18,800 $ 57,900
======================================================================
Following the favorable resolution of routine audits in 1995 and
1994, state income taxes in those years 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:
Year ended December 31,
(In Thousands) 1996 1995 1994
- ----------------------------------------------------------------------
Taxes at federal
statutory rate $ 14,940 $ 25,115 $ 58,327
State income taxes, net 3,933 (8,223) (4,559)
Amortization of intangible
assets 3,151 3,151 3,151
Dividend exclusion (768) (764) (447)
Other (256) (479) 1,428
- ----------------------------------------------------------------------
$ 21,000 $ 18,800 $ 57,900
======================================================================
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:
December 31,
(In Thousands) 1996 1995
- ----------------------------------------------------------------------
Accrued liabilities not deductible until paid $ 10,238 $ 9,678
Film contract rights 6,407 3,974
Investments 7,243 4,117
Other 418 52
- ----------------------------------------------------------------------
Deferred tax assets 24,306 17,821
- ----------------------------------------------------------------------
Property and equipment (2,729) (3,143)
SFAS 115 adjustment (668) (4,871)
Other (689) (823)
- ----------------------------------------------------------------------
Deferred tax liabilities (4,086) (8,837)
- ----------------------------------------------------------------------
Net deferred tax assets $ 20,220 $ 8,984
======================================================================
Note 7
- ----------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES:
The aggregate amount payable by BHC's television stations under
contracts for programming not currently available for telecasting and,
accordingly, not included in film contracts payable and the related
contract rights in the accompanying Consolidated Balance Sheets,
totalled $177,800,000 at December 31, 1996 (including $59,000,000
applicable to UTV).
BHC expects 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 will not have a material effect
on BHC's consolidated financial position or results of operations.
Note 8
- ----------------------------------------------------------------------
RELATED PARTY TRANSACTIONS:
Included in selling, general and administrative expenses are
management fees BHC paid Chris-Craft of $8,000,000 in 1996, $8,000,000
in 1995 and $11,000,000 in 1994, and management and directors fees
UTV paid Chris-Craft totalling $570,000 in each of the three years.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------------------------------------------
February 13, 1997
PRICE WATERHOUSE LLP
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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1996, 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.
<PAGE>
SELECTED FINANCIAL DATA
- ----------------------------------------------------------------------
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
As of and for the Year Ended December 31,
(In Thousands of Dollars
Except per Share Data) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating revenues $ 446,292 $ 454,702 $ 457,533 $ 411,999 $ 307,883
Operating income $ 107,148 $ 118,579 $ 112,982 $ 79,262 $ 22,362
Interest and other
income 81,849 82,483 57,644 55,340 36,374
Equity in United
Paramount Network loss (146,313) (129,303) (3,977) - -
Income associated with
Time Warner Inc.
securities - - - 256,622 94,059
Income taxes (21,000) (18,800) (57,900) (146,900) (36,100)
Minority interest (17,448) (15,902) (15,872) (20,038) (7,400)
Net income $ 4,236 $ 37,057 $ 92,877 $ 224,286 $ 109,295
Net income per share $ .18 $ 1.51 $ 3.71 $ 8.67 $ 4.09
Cash dividends declared
per share - 1.00 - - 2.00
Cash and current
marketable securities 1,391,992 1,499,365 1,496,445 1,506,529 966,582
Film contract rights 144,034 145,902 148,473 186,079 187,518
Investments and
noncurrent marketable
securities 45,550 7,938 - - 450,022
Total assets 2,097,263 2,159,010 2,188,463 2,241,538 2,135,038
Long-term debt - - - - -
Shareholders investment 1,705,533 1,781,893 1,789,884 1,778,821 1,590,448
Book value per share $ 71.95 $ 73.14 $ 72.31 $ 69.49 $ 61.05
</TABLE>
<PAGE>
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, 1997, there were 6,607 holders of
record of Class A common stock. All BHC Class B common shares, which
in general are nontransferable, are held by Chris-Craft Industries,
Inc., and, accordingly, there is no trading market for such shares.
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------
1996
High 95 1/2 100 98 1/4 103 3/8
Low 89 93 1/8 91 1/2 97
- ----------------------------------------------------------------------
1995
High 75 3/4 81 1/4 93 1/4 95
Low 71 7/8 71 3/4 80 88 1/2
- ----------------------------------------------------------------------
BHC paid special cash dividends of $1.00 per share in February 1997
and in April 1995. BHC plans to consider annually the payment of a
special dividend.
<PAGE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- ----------------------------------------------------------------------
BHC COMMUNICATIONS, INC. & SUBSIDIARIES
<TABLE>
<CAPTION>
(In Thousands of Dollars First Second Third Fourth
Except per Share Data) Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Operating revenues $101,045 $120,920 $107,125 $117,202 $446,292
Operating income 19,193 36,601 26,695 24,659 107,148
Equity in United Paramount
Network loss (32,754) (34,990) (38,909) (39,660) (146,313)
Income before income taxes and
minority interest 8,921 21,632 6,698 5,433 42,684
Net income (loss) 1,078 5,669 (1,444) (1,067) 4,236
Net income (loss) per share $ .04 $ .24 $ (.06) $ (.04) $ .18
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
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ----------------------------------------------------------------------
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
Liquidity and Capital Resources
BHC's financial position is strong and highly liquid. Cash and
marketable securities totalled $1.39 billion at December 31, 1996, and
BHC has no debt outstanding. BHC expended significant funds in 1996
and 1995 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
believes that the substantial portion of its share of such funding
requirements for 1997 and 1998 will be offset by the proceeds of the
Viacom option exercise, described below.
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
(amortization exceeded payments by $4.5 million in 1996, and payments
exceeded amortization by $1.7 million in 1995), and is dependent upon
the mix of programs aired and payment terms of the stations
contracts. Reflecting such $6.2 million variance between 1996 and
1995, broadcast cash flow in 1996 declined only 10% from 1995's record
amount, while station earnings declined 14%, 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, which totalled $1.39 billion at
December 31, 1996, compared to $1.50 billion at December 31, 1995.
While operating cash flow totalled $193.9 million in 1996, only
slightly below 1995's $197.3 million, cash and marketable securities
declined $107.4 million, primarily reflecting UPN funding of $145.6
million, treasury stock purchases of $62.6 million by BHC and $32.8
million by UTV, and other investment funding of $39.2 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. In January 1997, BHC declared a special cash dividend of
$1.00 per share, aggregating $23.6 million, which was paid in February
1997. BHC plans to consider annually the payment of a special
dividend.
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, 1996, 5,567,687 shares were purchased for a total cost of $358.2
million, including $61.7 million in 1996. From 1993 through December
31, 1996, UTV purchased 1,355,276 of its common shares at an aggregate
cost of $84.3 million, and at December 31, 1996, 828,749 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 owned 100% of UPN from its inception
through January 15, 1997, when Viacom completed the exercise of its
option to acquire a 50% interest in UPN. The option price included
approximately one-half of BHC's aggregate cash contributions to UPN
through the exercise date, plus interest, and additional cash
available for ongoing UPN expenditures. UPN distributed approximately
$116 million to BHC following the closing, and BHC realized a pretax
gain of approximately $150 million on the transaction, which will be
recorded in the first quarter of 1997. BHC and Viacom will now share
equally in UPN losses and funding requirements. BHC funding of UPN
totalled $145.6 million in 1996 and $128.6 million in 1995. UPN is
still in its early development, and is expected for the next several
years to continue to incur substantial start-up losses and to require
significant funding. However, BHC believes that the substantial
portion of its share of such funding requirements for 1997 and 1998
will be offset by the proceeds of the Viacom option exercise.
BHC's television stations make commitments for programming that
will not be available for telecasting until future dates. At
December 31, 1996, commitments for such programming totalled
approximately $177.8 million, including $59.0 million applicable to
UTV. BHC also has a remaining commitment to invest over time up to
$30.6 million, including $19.8 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, 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 1996 VERSUS 1995
BHC 1996 net income declined to $4,236,000, or $.18 per share, from
1995 net income of $37,057,000, or $1.51 per share. UPN start-up
losses increased, as expected, and earnings at BHC's core television
station group declined from 1995's record level.
Television station revenues declined 3% in 1996, to $437,287,000
from $450,239,000 in 1995, reflecting lackluster advertising demand
and lower share in several key markets. BHC in recent years
determined not to acquire certain expensive and popular syndicated
programs at several stations because their high prices appear to make
acceptable profit unlikely. Accordingly, certain revenues have been
foregone, reducing market share at those stations, but BHC believes
those decisions promote the overall profitability of its station
group.
Station programming expenses rose only 5% in 1996, and all other
station expenses declined 1%. Total station income was the third
highest in BHC history, but declined 14% to $130,450,000 from 1995 s
record $151,382,000. BHC operating income declined only 10% in 1996,
to $107,148,000 from $118,579,000, reflecting improved results at
BHC's television production subsidiaries, as well as the recording in
1995 of one-time expenses totalling approximately $3,700,000 incurred
in establishing a national sales representation subsidiary.
Interest and other income totalled $81,849,000 in 1996, compared to
$82,483,000 in 1995. This income consists mostly of amounts earned on
BHC's cash and marketable securities holdings.
BHC's equity in UPN start-up losses increased, as expected, to
$146,313,000 in 1996 from $129,303,000 in 1995. The increase
primarily reflects the expansion in 1996 of the network's prime time
schedule from two to three weekday evenings. BHC recorded 100% of
UPN's losses in 1996 and 1995, consistent with its sole ownership of
the network during those years. As described above, Viacom has
completed its acquisition of a 50% interest in UPN, and BHC will
record its then pro rata interest in future BHC losses. UPN is still
in its early development and is expected for the next several years to
continue to incur substantial start-up losses.
Minority interest reflects the interest of shareholders other than
BHC in the net income of UTV, 59.0% owned at December 31, 1996 and
57.3% owned at December 31, 1995.
Earnings per share amounts vary favorably to related dollar
amounts, reflecting the reduction in average common shares
outstanding, resulting from open market purchases by BHC of its Class
A common shares.
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.
Television station earnings rose to $151,382,000, just above 1994 s
then 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.
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 $8,500,000 in program development
expenses and Chris-Craft management fee expense. Operating income
would have risen even further except for one-time expenses of
approximately $3,700,000 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.
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 an increase in BHC's ownership of UTV
from 55.2% at December 31, 1994 to 57.3% at December 31, 1995.
Exhibit 21
The following were the registrant's subsidiaries as of December 31, 1996,
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
BHC Network Partner III, 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
United Television Sales, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM 10K DATED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 146751
<SECURITIES> 1245241
<RECEIVABLES> 93229
<ALLOWANCES> 5770
<INVENTORY> 0
<CURRENT-ASSETS> 1647303
<PP&E> 139019
<DEPRECIATION> 90942
<TOTAL-ASSETS> 2097263
<CURRENT-LIABILITIES> 210242
<BONDS> 0
0
0
<COMMON> 238
<OTHER-SE> 1705295
<TOTAL-LIABILITY-AND-EQUITY> 2097263
<SALES> 0
<TOTAL-REVENUES> 446292
<CGS> 0
<TOTAL-COSTS> 339144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 42684
<INCOME-TAX> 21000
<INCOME-CONTINUING> 4236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4236
<EPS-PRIMARY> .18
<EPS-DILUTED> 0
</TABLE>
