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 June 30, 2000
----------------------------------
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 July 31, 2000 there were 4,511,605 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>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
-------------------------------------
June 30, December 31,
2000 1999
------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 247,265 $ 117,184
Marketable securities (substantially
all U.S. Government securities) 1,063,989 1,219,144
Accounts receivable, net 102,064 99,264
Film contract rights 60,480 111,819
Prepaid expenses and other current assets 51,754 49,429
------------ ------------
Total current assets 1,525,552 1,596,840
------------ ------------
INVESTMENTS 95,552 101,371
------------ ------------
FILM CONTRACT RIGHTS, less current portion 24,658 39,550
------------ ------------
PROPERTY AND EQUIPMENT, net 64,337 61,878
------------ ------------
INTANGIBLE ASSETS 411,080 417,420
------------ ------------
OTHER ASSETS 12,001 7,389
------------ ------------
$ 2,133,180 $ 2,224,448
============ ============
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
Film contracts payable within one year $ 76,015 $ 102,737
Accounts payable and accrued expenses 96,359 108,435
Income taxes payable 24,676 38,696
------------ ------------
Total current liabilities 197,050 249,868
------------ ------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 62,422 84,372
------------ ------------
OTHER LONG-TERM LIABILITIES 2,686 15,176
------------ ------------
MINORITY INTEREST 169,724 160,550
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS' INVESTMENT:
Class A common stock - par value $.01
per share; authorized 200,000,000 shares;
outstanding 4,511,605 shares 45 45
Class B common stock - par value $.01
per share; authorized 200,000,000
shares; outstanding 18,000,000 shares 180 180
Retained earnings 1,692,964 1,705,841
Accumulated other comprehensive income 8,109 8,416
------------ ------------
1,701,298 1,714,482
------------ ------------
$ 2,133,180 $ 2,224,448
============ ============
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE>
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars except per share data)
(UNAUDITED)
-----------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
2000 1999 2000 1999
--------- --------- --------- ---------
OPERATING REVENUES $ 132,299 $ 118,369 $ 254,265 $ 224,864
--------- --------- --------- ---------
OPERATING EXPENSES:
Television expenses
(includes second quarter
2000 $10 million write
down of programming) 62,929 53,501 119,222 105,042
Selling, general and
administrative 36,344 34,842 72,216 69,565
--------- --------- --------- ---------
99,273 88,343 191,438 174,607
--------- --------- --------- ---------
Operating income 33,026 30,026 62,827 50,257
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest and other income 26,302 24,173 46,873 42,919
Equity loss and other
related to United
Paramount Network - (27,188) (35,696) (57,338)
--------- --------- --------- ---------
26,302 (3,015) 11,177 (14,419)
--------- --------- --------- ---------
Income before income
taxes and minority
interest 59,328 27,011 74,004 35,838
INCOME TAX PROVISION 25,800 10,800 32,200 14,300
--------- --------- --------- ---------
Income before minority
interest 33,528 16,211 41,804 21,538
MINORITY INTEREST (6,420) (5,493) (10,260) (8,840)
--------- --------- --------- ---------
Net income $ 27,108 $ 10,718 $ 31,544 $ 12,698
========= ========= ========= =========
Earnings per share:
Basic $ 1.20 $ .48 $ 1.40 $ .56
========= ========= ========= =========
Diluted $ 1.20 $ .47 $ 1.40 $ .56
========= ========= ========= =========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(UNAUDITED)
-----------------------------------------------
Six Months
Ended June 30,
-----------------------
2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,544 $ 12,698
Adjustments to reconcile net income to net
cash provided from operating activities:
Film contract payments (53,907) (50,302)
Film contract amortization 49,733 47,943
Programming write down 10,000 -
Depreciation and other amortization 11,953 10,665
Equity loss and other related to United
Paramount Network 35,696 57,338
Minority interest 10,260 8,840
Other (10,281) (8,294)
Changes in assets and liabilities:
Accounts receivable (2,800) (5,665)
Other assets (8,845) (6,912)
Accounts payable and other liabilities 123 (2,359)
Income taxes (29,944) 1,196
---------- ----------
Net cash provided from
operating activities 43,532 65,148
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of marketable securities, net 170,271 18,627
Investment in United Paramount Network (25,875) (59,950)
Other investments (4,774) (12,542)
Capital expenditures, net (8,064) (5,686)
Other (12) (7)
---------- ----------
Net cash provided from (used in)
investing activities 131,546 (59,558)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of special dividend (45,023) (22,512)
Capital transactions of subsidiary 26 (1,382)
---------- ----------
Net cash used in financing activities (44,997) (23,894)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 130,081 (18,304)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 117,184 201,175
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 247,265 $ 182,871
========== ==========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
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 (80.0% at June 30, 2000) subsidiary of Chris-Craft
Industries, Inc., operates ten television stations, three wholly owned and
seven owned by United Television, Inc. (UTV), 57.9% owned by BHC at June
30, 2000. 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:
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.
At June 30, 2000, BHC's marketable securities consisted of U.S.
Government securities, which had a cost of $992,788,000 and a fair value
of $992,114,000, and equity securities, which had a cost of $56,657,000
and a fair value of $71,875,000. The difference between aggregate cost
and fair value of $14,544,000 ($8,109,000, net of income taxes and
minority interest)is reflected as an increase to shareholders' investment
in the accompanying condensed consolidated balance sheet. Of the
investments in U.S. Government securities, all mature within fourteen
months.
At December 31, 1999, BHC's marketable securities consisted of U.S.
Government securities, which had a cost of $1,149,089,000 and a fair value
of $1,146,604,000, and equity securities, which had a cost of $54,126,000
and a fair value of $72,540,000. The difference between aggregate cost
and fair value of $15,929,000 ($8,416,000, 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 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. On March 31, 2000, BHC sold its
remaining 50% interest in UPN to Viacom for $5 million, after Viacom
triggered the "buy-sell" provision of the Companies' partnership
agreement. As a result of the sale, BHC has no further ownership interest
in the network or obligation to fund UPN's operations.
UPN had been organized as a partnership, and BHC accounted for its
partnership interest under the equity method. The carrying value of such
interest totalled $9,821,000 at December 31, 1999, and is included in
Investments in the accompanying condensed consolidated balance sheet.
Equity loss and other related to United Paramount Network in the
accompanying income statements totalled $35,696,000 for the six months
ended June 30, 2000 and includes equity loss in UPN of $22,574,000, loss
on sale of BHC's interest in UPN of $11,347,000, and related expenses of
$1,775,000.
UPN's condensed statements of operations are as follows (in
thousands):
Three Months Six Months
Ended June 30, Ended June 30,
------------------- --------------------
2000 1999 2000 1999
-------- -------- --------- ---------
Operating revenues $ - $ 32,918 $ 36,535 $ 63,372
Operating expenses - 87,662 81,964 178,726
-------- -------- --------- ---------
Operating loss - (54,744) (45,429) (115,354)
Other income, net - 367 281 677
-------- -------- --------- ---------
Net loss $ - $(54,377) $ (45,148) $(114,677)
======== ======== ========= =========
4. SHAREHOLDERS' INVESTMENT:
As of June 30, 2000, there were outstanding 18,000,000 shares of
Class B common stock, all held by Chris-Craft, and 4,511,605 shares of
Class A common stock, 10,000 shares of which are held by Chris-Craft. At
June 30, 2000, 185,497 shares of Class A common stock remain authorized
for purchase. In January 2000, BHC's Board of Directors declared a
special cash dividend of $2.00 per share on BHC's Class A and Class B
common stock. The dividend, totalling $45.0 million, was paid in February
2000.
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 $828,000 in the first six months of 1999,
proceeds to UTV of $2,023,000 and $1,400,000 in the first six months of
2000 and 1999, respectively, from the exercise of stock options, and UTV's
$.50 per share dividend in both periods, adjusted for intercompany
eliminations and minority interest.
5. COMPREHENSIVE INCOME:
Other comprehensive income includes only unrealized gains and losses
on marketable securities classified as available-for-sale (see Note 2),
net of a reclassification adjustment for gains (losses) included in net
income. Comprehensive income is as follows (in thousands):
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Net income $ 27,108 $ 10,718 $ 31,544 $ 12,698
Other comprehensive income
(loss), net of taxes and
minority interest (2,226) 265 (307) 3,273
-------- -------- -------- --------
Comprehensive income $ 24,882 $ 10,983 $ 31,237 $ 15,971
======== ======== ======== ========
6. COMMITMENTS AND CONTINGENCIES:
Commitments of BHC's television stations for film contracts entered
into but not available for broadcasting at June 30, 2000 aggregated
approximately $352.3 million, including $120.0 million applicable to UTV.
In April 1999, a jury awarded damages totalling $7.3 million
(approximately $8.5 million including interest and legal fees through June
2000) to a former WWOR employee who filed suit alleging discrimination by
the station. The station and its counsel believe the award to be
unjustified and have filed an appeal, which is expected to be heard in
late 2000. It is not possible to reasonably estimate the amount, if any,
which ultimately will be paid. Accordingly, no amount has been reserved
in BHC's financial statements relating to this matter.
UTV remains obligated for possible future consideration relating to
the 1999 purchase of WRBW in Orlando, Florida, of up to $25 million.
7. EARNINGS PER SHARE:
Computations of earnings per share are as follows (in thousands of
dollars except per share amounts):
Three Months Six Months
Ended June 30, Ended June 30,
----------------------- ----------------------
BASIC: 2000 1999 2000 1999
------ ---------- ---------- ---------- ----------
Weighted average common
shares outstanding 22,511,605 22,511,605 22,511,605 22,511,605
========== ========== ========== ==========
Net income $ 27,108 $ 10,718 $ 31,544 $ 12,698
========== ========== ========== ==========
Basic earnings per share $ 1.20 $ .48 $ 1.40 $ .56
========== ========== ========== ==========
DILUTED:
--------
Weighted average
common shares outstanding 22,511,605 22,511,605 22,511,605 22,511,605
========== ========== ========== ==========
Net income $ 27,108 $ 10,718 $ 31,544 $ 12,698
Dilution of UTV net income
from UTV stock options (20) (32) (37) (42)
---------- ---------- ---------- ----------
$ 27,088 $ 10,686 $ 31,507 $ 12,656
========== ========== ========== ==========
Diluted earnings per share $ 1.20 $ .47 $ 1.40 $ .56
========== ========== ========== ==========
<PAGE>
BHC COMMUNICATIONS, INC.
------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Liquidity and Capital Resources
-------------------------------
BHC's financial position continues to be strong and highly liquid.
Cash and marketable securities totalled $1.31 billion at June 30, 2000,
and BHC has no debt outstanding. BHC invested significant funds in United
Paramount Network from UPN's inception in 1994 until March 31, 2000, when
BHC sold its remaining 50% interest in the network.
BHC's operating cash flow is generated primarily by its core
television station group. Broadcast cash flow reflects station operating
income plus depreciation and film contract amortization less film contract
payments. The relationship between film contract payments and related
amortization may vary greatly between periods (payments exceeded
amortization by $4.2 million in the six month period ended June 30, 2000
and by $2.4 million in the corresponding 1999 period), and is dependent
upon the mix of programs aired and payment terms of the stations'
contracts. Additionally, station operating income for the first six
months of 2000 included a non-cash $10 million programming write down.
Reflecting such amounts, broadcast cash flow in the first six months of
2000 increased 32%, while station earnings increased 19%, 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 balances declined to $1.31 billion
at June 30, 2000 from $1.34 billion at December 31, 1999. Such $25.0
million decline was incurred, despite six month operating cash flow of
$43.5 million, primarily due to final UPN net funding totalling $25.9
million and the payment by BHC of a special dividend totalling $45.0
million.
A $2.00 per share special cash dividend, aggregating $45.0 million,
was paid in February 2000. Special cash dividends of $1.00 per share were
paid in each of the previous three years. 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 7,081,087 Class A common shares. Through December 31,
1998, 6,895,590 shares were purchased for a total cost of $516.5 million.
No additional shares have been purchased by BHC since December 31, 1998
and at June 30, 2000, 185,497 Class A common shares remained authorized
for purchase. From January 1, 1998 through December 31, 1999, UTV
purchased 76,900 of its common shares for a total cost of $7.8 million.
No additional shares have been purchased by UTV during the first six
months of 2000, and 721,249 shares remain authorized for purchase.
BHC intends to further 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 broadcast television network that 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. Since then, BHC and Viacom shared equally in UPN
losses and funding requirements through March 31, 2000.
On March 31, 2000, BHC sold its remaining 50% interest in UPN to
Viacom for $5 million, after Viacom triggered the "buy-sell" provision of
the companies' partnership agreement. The $11.3 million pretax loss on
the sale, together with BHC's final share of UPN's losses, were reflected
in BHC's 2000 first quarter operating results. BHC has no remaining
financial obligation to UPN.
BHC's television stations make commitments for programming that will
not be available for telecasting until future dates. At June 30, 2000,
commitments for such programming totalled approximately $352.3 million,
including $120.0 million applicable to UTV. BHC capital expenditures
generally have not been material in relation to its financial position,
and the related capital expenditure commitments at June 30, 2000 were not
material. BHC stations are continuing the process of converting to
digital television (DTV). The conversion requires the purchase of digital
transmitting equipment to telecast over newly assigned frequencies. This
conversion is expected to take a number of years and will be subject to
competitive market conditions. BHC expects that its expenditures for
future film contract commitments and capital requirements for its present
business, including the cost to convert to DTV, will be satisfied
primarily from operations, marketable securities or cash balances.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
BHC is subject to certain market risk relating to its marketable
securities holdings, which are all held for other than trading purposes.
The table below provides information as of June 30, 2000 about the U.S.
Government securities which are subject to interest rate sensitivity and
the equity securities which are subject to equity market sensitivity.
(in thousands)
Cost Fair Value
---- ----------
U.S. Government securities $ 992,788 $ 992,114
Equity securities $ 56,657 $ 71,875
Results of Operations
---------------------
BHC net income in the second quarter of 2000 totalled $27,108,000, or
$1.20 per share ($1.20 per share diluted), compared to net income in last
year's second quarter of $10,718,000, or $.48 per share ($.47 per share
diluted). The current year results include a $10 million programming
write down. The increase in net income reflects higher operating income
and the elimination of losses attributable to BHC's former interest in
United Paramount Network, which was sold in the first quarter of 2000.
For the first six months of 2000, BHC net income totalled
$31,544,000, or $1.40 per share ($1.40 per share diluted), compared to net
income of $12,698,000, or $.56 per share ($.56 per share diluted), in last
year's comparable period. The increase in year to date earnings reflects
higher operating income and the positive impact of the UPN sale.
Operating revenues at BHC's television station group rose 12%, to a
second quarter record $129,603,000 from the prior year's $115,904,000, and
same station revenues rose 9%. Stations operating in the group's largest
markets, New York, Los Angeles and San Francisco, again, as in the first
quarter, led the strong revenue growth. Station earnings excluding the
write down also set a record for the period, increasing 33%, to
$48,420,000, from last year's $36,372,000. Excluding the write down,
operating income, which additionally reflects non-broadcasting operations
and corporate office expenses of BHC and UTV, rose 43%, to $43,026,000, a
second quarter high, and with the write down, increased 10%, to
$33,026,000 from $30,026,000.
The $10 million write down adjusted to net carrying value certain
programming rights uniquely acquired in 1994 in connection with the start-
up of UPN. Unlike typical syndicated programming commitments, the
commitment to purchase this program was made before the initial airing of
the program on UPN, and the write down followed our initial telecasts of
the syndicated program in its ultimate time period during the second
quarter.
Station operating revenues for the first six months of 2000 rose 13%,
to a record $249,257,000 from $220,327,000 in 1999, and same station
revenues rose 11%. Station group earnings increased 19%, to $75,235,000
from $63,071,000, and rose 35%, to a six month record $85,235,000
excluding the write down. Operating income in the period excluding the
write down increased 45% to a six month record $72,827,000 and with the
write down, rose 25%, to $62,827,000 from 1999's $50,257,000.
Interest and other income, which consists mostly of amounts earned on
cash and marketable securities holdings, rose to $26,302,000 in the second
quarter from $24,173,000 last year. Interest and other income totalled
$46,873,000 in the six month period, compared to $42,919,000 last year.
Minority interest reflects the interest of shareholders other than
BHC in the net income of UTV, 57.9% and 58.5% owned by BHC at June 30,
2000 and 1999, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The information appearing in Management's Discussion and Analysis
under the caption "Quantitative and Qualitative Disclosures about Market
Risk" is incorporated herein by this reference.
BHC COMMUNICATIONS, INC.
------------------------
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
The following matters were submitted to a vote of security holders at
the Registrant's annual meeting of stockholders which was held on May 15,
2000.
The following were elected directors, each receiving the number of
votes set opposite his name:
Broker
For Withheld Non-votes
--- -------- ---------
John L. Eastman 183,746,920 151,386 -0-
William D. Siegel 183,736,934 161,372 -0-
The selection of PricewaterhouseCoopers LLP as BHC's auditors for the
current year was ratified by the following vote:
Broker
For Against Abstain Non-votes
--- ------- ------- ---------
183,793,876 3,951 100,479 -0-
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
Senior Vice President and Treasurer
(Principal Accounting Officer)
Date: August 10, 2000
EXHIBIT INDEX
Incorporated by
Reference to: Exhibit No. Exhibit
------------- ----------- -------
27 Financial Data Schedule
