Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
----------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-10342
-------------------------------
BHC COMMUNICATIONS, INC.
------------------------
(Exact name of Registrant as specified in its charter)
Delaware 59-2104168
- ------------------------------ --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 Fifth Avenue, New York, New York 10153
- ------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-0200
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-------- --------
As of April 30, 1997 there were 5,376,005 shares of the issuer's
Class A Common Stock outstanding and 18,000,000 shares of the
issuer's Class B Common Stock outstanding.
<PAGE>
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<TABLE>
PART I -- FINANCIAL INFORMATION
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
-------------------------------------
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 245,708 $ 146,751
Marketable securities (substantially
all U.S. Government securities) 1,276,127 1,245,241
Accounts receivable, net 74,073 87,459
Film contract and, in 1996, prepaid
broadcast rights 69,979 115,498
Prepaid expenses and other current assets 54,476 52,354
------------ ------------
Total current assets 1,720,363 1,647,303
------------ ------------
INVESTMENTS 73,873 46,944
------------ ------------
FILM CONTRACT RIGHTS, less current portion 25,867 28,536
------------ ------------
PROPERTY AND EQUIPMENT, net 46,998 48,077
------------ ------------
INTANGIBLE ASSETS 310,761 313,079
------------ ------------
OTHER ASSETS 13,714 13,324
------------ ------------
$ 2,191,576 $ 2,097,263
============ ============
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
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<TABLE>
PART I -- FINANCIAL INFORMATION
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
-------------------------------------
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
CURRENT LIABILITIES:
Film contracts payable within one year $ 91,985 $ 97,222
Accounts payable and accrued expenses 71,160 77,477
Income taxes payable 97,917 35,543
----------- ------------
Total current liabilities 261,062 210,242
----------- ------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 68,590 80,837
----------- ------------
OTHER LIABILITIES 4,719 5,424
----------- ------------
MINORITY INTEREST 96,549 95,227
----------- ------------
SHAREHOLDERS' INVESTMENT:
Class A common stock - par value $.01 per share;
authorized 200,000,000 shares; outstanding
5,839,508 shares 58 58
Class B common stock - par value $.01 per share;
authorized 200,000,000 shares; outstanding
18,000,000 shares 180 180
Retained earnings 1,785,572 1,710,323
Treasury stock, at cost (23,156) (6,677)
Adjustment to reflect marketable
securities at market value (1,998) 1,649
------------ ------------
1,760,656 1,705,533
------------ ------------
$ 2,191,576 $ 2,097,263
============ ============
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
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<TABLE>
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(UNAUDITED)
-----------------------------------------------
<CAPTION>
Three Months
Ended March 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING REVENUES $ 101,118 $ 101,045
--------- ---------
OPERATING EXPENSES:
Television expenses 50,971 51,817
Selling, general and administrative 32,655 30,035
--------- ---------
83,626 81,852
--------- ---------
Operating income 17,492 19,193
--------- ---------
OTHER INCOME (EXPENSE):
Gain on change of ownership in United
Paramount Network, net 152,224 -
Interest and other income 20,008 22,482
Equity in United Paramount Network loss (17,898) (32,754)
--------- ---------
154,334 (10,272)
--------- ---------
Income before income taxes
and minority interest 171,826 8,921
INCOME TAX PROVISION 68,700 4,300
--------- ---------
Income before minority interest 103,126 4,621
MINORITY INTEREST (3,636) (3,543)
--------- ---------
Net income $ 99,490 $ 1,078
========= =========
AVERAGE COMMON SHARES OUTSTANDING 23,660 24,188
========= =========
NET INCOME PER SHARE $ 4.21 $ .04
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE>
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<TABLE>
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(UNAUDITED)
-----------------------------------------------
<CAPTION>
Three Months
Ended March 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 99,490 $ 1,078
Adjustments to reconcile net income to net cash
provided from operating activities:
Film contract payments (23,151) (22,683)
Film contract amortization 24,574 22,249
Prepaid broadcast rights 17,051 123
Depreciation and other amortization 4,819 4,710
Equity in United Paramount Network loss 17,898 32,754
Gain on change of ownership in United
Paramount Network, net (152,224) -
Minority interest 3,636 3,543
Other 793 (2,228)
Changes in assets and liabilities:
Accounts receivable 13,386 18,163
Other assets (2,853) (3,521)
Accounts payable and other liabilities (2,121) (3,863)
Income taxes 62,622 2,769
----------- -----------
Net cash provided from operating activities 63,920 53,094
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distribution from United Paramount Network 116,261 -
Disposition (purchase) of marketable securities, net (31,307) 70,112
Investment in United Paramount Network (2,850) (33,610)
Increase in other investments (3,382) -
Capital expenditures (1,422) (3,668)
Other (30) (5)
----------- -----------
Net cash provided from investing activities 77,270 32,829
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of special dividend (23,599) -
Purchases of treasury stock (16,047) (29,291)
Capital transactions of subsidiary (2,587) (12,892)
----------- -----------
Net cash used in financing activities (42,233) (42,183)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 98,957 43,740
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 146,751 72,179
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 245,708 $ 115,919
=========== ===========
<FN>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
</TABLE>
<PAGE>
Page 6 BHC COMMUNICATIONS, INC.
------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
1. PRINCIPLES OF CONSOLIDATION:
The accompanying condensed consolidated financial statements include
the accounts of BHC Communications, Inc. and its subsidiaries. BHC, a
majority owned (76% at March 31, 1997) subsidiary of Chris-Craft
Industries, Inc., operates eight television stations, three wholly owned
and five owned by United Television, Inc., 59% owned by BHC at March 31,
1997. The interest of UTV shareholders other than BHC in the net income
and net assets of UTV is set forth as minority interest in the accompanying
condensed consolidated statements of income and condensed consolidated
balance sheets, respectively. Intercompany accounts and transactions have
been eliminated.
The financial information included herein has been prepared by BHC,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. However, BHC believes that the disclosures
herein are adequate to make the information presented not misleading. It
is suggested that these condensed consolidated financial statements be read
in conjunction with the financial statements and the notes thereto included
in BHC's latest annual report on Form 10-K. The information furnished
reflects all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of
the results for the interim periods. The results for these interim periods
are not necessarily indicative of results to be expected for the full year,
due to seasonal factors, among others.
2. MARKETABLE SECURITIES:
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", BHC classifies its marketable securities as available-for-
sale.
At March 31, 1997, BHC's marketable securities, which consisted
substantially of U.S. Government securities, had a carrying value of
$1,280,352,000 and a fair value of $1,276,127,000. The difference of
$4,225,000 ($1,998,000 net of income taxes and minority interest) is
reflected as a reduction of shareholders' investment in the accompanying
condensed consolidated balance sheet. Of the investments in U.S.
Government securities, 87% mature within one year and all within two years.
At December 31, 1996, BHC's marketable securities, which consisted
substantially of U.S. Government securities, had a carrying value of
$1,243,205,000 and a fair value of $1,245,241,000. The difference of
<PAGE>
Page 7
$2,036,000 ($1,649,000 net of income taxes and minority interest) is
reflected as an increase to shareholders' investment in the accompanying
condensed consolidated balance sheet.
3. UNITED PARAMOUNT NETWORK:
In July 1994, BHC, along with Viacom Inc.'s Paramount Television
Group, formed the United Paramount Network, a fifth broadcast television
network which premiered in January 1995. BHC 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 purchase price included
$155 million in cash (an amount equal to one-half of BHC's aggregate cash
contributions to UPN through the exercise date, plus interest), additional
cash available for ongoing UPN expenditures, as well as a non-cash
contribution of UPN development costs previously incurred by Viacom. UPN
distributed $116,261,000 to BHC pursuant to the option exercise, and BHC
recorded a net pretax gain on the exercise of $152,224,000 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 totalled $25,308,000 at March 31, 1997 and $1,394,000 at December
31, 1996, and is included in Investments in the accompanying condensed
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.
UPN's condensed consolidated statements of operations are as follows
(in thousands):
Three Months
Ended March 31,
----------------------------
1997 1996
---------- ----------
Operating revenues* $ 15,681 $ 10,908
Operating expenses* 47,516 42,602
---------- ----------
Operating loss (31,835) (31,694)
Other income (expenses) 702 (1,060)
---------- ----------
Loss before interest on BHC advances (31,133) (32,754)
Interest on BHC advances
(eliminated in consolidation) - (2,523)
---------- ----------
Net loss $ (31,133) $ (35,277)
========== ==========
* With respect to certain of its programming, UPN derives no
revenue and incurs no programming expense.
<PAGE>
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4. SHAREHOLDERS' INVESTMENT:
As of March 31, 1997, there were outstanding 18,000,000 shares of
Class B common stock, all held by Chris-Craft, and 5,549,000 shares of
Class A common stock, after reflecting as treasury stock BHC's pro rata
interest in its Class A common shares held by UTV and 156,600 Class A
common shares purchased by BHC during 1997. At March 31, 1997, 1,075,713
shares of Class A common stock remain authorized for purchase. In January
1997, BHC Board of Directors declared a special cash dividend of $1.00 per
share on BHC's Class A and Class B common stock. The dividend, totalling
$23.6 million, was paid in February 1997.
Capital transactions of subsidiary, as set forth in the accompanying
condensed consolidated statements of cash flows, reflect purchases by UTV
of its common shares totalling $2,430,000 and $15,317,000 in the first
three months of 1997 and 1996, respectively, net of proceeds to UTV of
$1,776,000 and $2,425,000 in the first three months of 1997 and 1996,
respectively, from the exercise of stock options, all net of intercompany
eliminations.
5. COMMITMENTS:
Commitments of BHC's television stations for film contracts entered
into but not available for broadcasting at March 31, 1997 aggregated
approximately $182.2 million, including $60.9 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 expects to make significant expenditures developing UPN. See
Note 3.
<PAGE>
Page 9
BHC COMMUNICATIONS, INC.
------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
BHC's financial position is strong and highly liquid. Cash and marketable
securities totalled $1.52 billion at March 31, 1997, 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 $1.4
million in the 1997 first quarter, and payments exceeded amortization by
$.4 million in the corresponding 1996 period), and is dependent upon the
mix of programs aired and payment terms of the stations' contracts.
Reflecting such $1.8 million variance between periods, broadcast cash flow
in the first quarter of 1997 declined only 4% from 1996's corresponding
amount, while station earnings declined 12%, 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 $1.52 billion at March 31, 1997,
compared to $1.39 billion at December 31, 1996. First quarter operating
cash flow increased to $63.9 million from last year's $53.1 million,
primarily reflecting a $17.1 million refund of prepaid broadcasting rights.
Cash balances were also augmented by the $116.3 million distribution from
UPN, as set forth below.
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 March 31, 1997, 5,724,287
shares were purchased for a total cost of $374.7 million, including $16.5
<PAGE>
Page 10
million in 1997. From 1993 through March 31, 1997, UTV purchased 1,382,876
of its common shares at an aggregate cost of $86.7 million, of which $2.4
million was expended in the first quarter of 1997, and at March 31, 1997,
801,149 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 purchase price included $155 million in cash (an amount equal
to one-half of BHC's aggregate cash contributions to UPN through the
exercise date, plus interest), additional cash available for ongoing UPN
expenditures, as well as a non-cash contribution of UPN development costs
previously incurred by Viacom. UPN distributed $116.3 million to BHC
following the closing, and BHC recorded a net pretax gain of $152.2 million
on the transaction. BHC and Viacom 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 March 31, 1997,
commitments for such programming totalled approximately $182.2 million,
including $60.9 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 March 31, 1997
(including any related to UPN) were not material. BHC expects that its
expenditures for UPN, future film contract commitments and capital
requirements for its present business will be satisfied primarily from
operations, marketable securities or cash balances.
Results of Operations
- ---------------------
BHC 1997 first quarter net income increased to $99,490,000, or $4.21 per
share, from net income of $1,078,000, or $.04 per share, in the first
quarter of 1996. The substantial increase in net income primarily reflects
a net pretax gain of $152,224,000 on the January 1997 acquisition by Viacom
Inc. of a 50% interest in United Paramount Network, which previously had
been 100% owned by BHC. The earnings gain also reflects a significant
<PAGE>
Page 11
reduction in the amount of UPN start-up losses included in BHC's operating
results, reflecting BHC's reduced ownership interest.
Demand for television advertising continued to be lackluster in several key
areas, and operating revenues at BHC's core television station group
totalled $99,243,000 in the first quarter, just above last year's
$98,985,000. Station operating expenses increased moderately, causing a
12% decline in station earnings, to $21,550,000 from $24,568,000. That
decline was almost fully offset by an increase in earnings at BHC's
television production subsidiaries. Operating income declined 9%, to
$17,492,000 from $19,193,000, as corporate office expenses rose $1.1
million, primarily due to the increase to $12 million from $8 million in
the annual management fee paid to Chris-Craft.
UPN's first quarter loss was slightly larger than in 1996, due primarily to
its expanded schedule, but the amount of UPN losses included in BHC's
financial statements, which are recorded under the equity method of
accounting, declined to $17,898,000 from $32,754,000, reflecting BHC's
reduced ownership interest.
Interest and other income, which consists mostly of amounts earned on BHC's
cash and marketable securities holdings, totalled $20,008,000 in the first
quarter, compared to $22,482,000 in 1996. The decline primarily reflects
smaller 1997 gains on sales of securities.
Minority interest reflects the interest of shareholders other than BHC in
the net income of UTV, 59% owned by BHC at March 31, 1997 and 58% owned by
BHC at March 31, 1996.
<PAGE>
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BHC COMMUNICATIONS, INC.
------------------------
PART II. OTHER INFORMATION
--------------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for which
this report is filed.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BHC COMMUNICATIONS, INC.
------------------------
(Registrant)
By: /s/ JOELEN K. MERKEL
-----------------------------
Joelen K. Merkel
Vice President and Treasurer
(Principal Accounting Officer)
Date: May 15, 1997
<PAGE>
Page 13
EXHIBIT INDEX
Incorporated by
Reference to: Exhibit No. Exhibit
- ------------- ----------- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM 10Q DATED
MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 245708
<SECURITIES> 1276127
<RECEIVABLES> 79769
<ALLOWANCES> 5696
<INVENTORY> 0
<CURRENT-ASSETS> 1720363
<PP&E> 140362
<DEPRECIATION> 93364
<TOTAL-ASSETS> 2191576
<CURRENT-LIABILITIES> 261062
<BONDS> 0
0
0
<COMMON> 238
<OTHER-SE> 1760418
<TOTAL-LIABILITY-AND-EQUITY> 2191576
<SALES> 0
<TOTAL-REVENUES> 101118
<CGS> 0
<TOTAL-COSTS> 83626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 171826
<INCOME-TAX> 68700
<INCOME-CONTINUING> 99490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99490
<EPS-PRIMARY> 4.21
<EPS-DILUTED> 0
</TABLE>
