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, 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 April 30, 2000 there were 4,501,605 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)
-------------------------------------
March 31, December 31,
2000 1999
------------ ------------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 266,799 $ 117,184
Marketable securities (substantially
all U.S. Government securities) 1,056,085 1,219,144
Accounts receivable, net 85,955 99,264
Film contract rights 90,117 111,819
Prepaid expenses and other current assets 47,465 49,429
------------ ------------
Total current assets 1,546,421 1,596,840
------------ ------------
INVESTMENTS 92,721 101,371
------------ ------------
FILM CONTRACT RIGHTS, less current portion 29,581 39,550
------------ ------------
PROPERTY AND EQUIPMENT, net 62,973 61,878
------------ ------------
INTANGIBLE ASSETS 414,236 417,420
------------ ------------
OTHER ASSETS 11,361 7,389
------------ ------------
$ 2,157,293 $ 2,224,448
============ ============
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
CURRENT LIABILITIES:
Film contracts payable within one year $ 88,673 $ 102,737
Accounts payable and accrued expenses 104,184 108,435
Income taxes payable 49,115 38,696
------------ ------------
Total current liabilities 241,972 249,868
------------ ------------
FILM CONTRACTS PAYABLE AFTER ONE YEAR 72,837 84,372
------------ ------------
OTHER LONG-TERM LIABILITIES 2,436 15,176
------------ ------------
MINORITY INTEREST 163,735 160,550
------------ ------------
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 1,665,753 1,705,841
Accumulated other comprehensive income 10,335 8,416
------------ ------------
1,676,313 1,714,482
------------ ------------
$ 2,157,293 $ 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
Ended March 31,
--------------------
2000 1999
--------- ---------
OPERATING REVENUES $ 121,966 $ 106,495
--------- ---------
OPERATING EXPENSES:
Television expenses 56,293 51,541
Selling, general and administrative 35,872 34,723
--------- ---------
92,165 86,264
--------- ---------
Operating income 29,801 20,231
--------- ---------
OTHER INCOME (EXPENSE):
Interest and other income 20,571 18,746
Equity loss and other related to
United Paramount Network (35,696) (30,150)
--------- ---------
(15,125) (11,404)
--------- ---------
Income before income taxes and
minority interest 14,676 8,827
INCOME TAX PROVISION 6,400 3,500
--------- ---------
Income before minority interest 8,276 5,327
MINORITY INTEREST (3,840) (3,347)
--------- ---------
Net income $ 4,436 $ 1,980
========= =========
Earnings per share:
Basic $ .20 $ .09
========= =========
Diluted $ .20 $ .09
========= =========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
<PAGE>
BHC COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(UNAUDITED)
-----------------------------------------------
Three Months
Ended March 31,
-----------------------
2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,436 $ 1,980
Adjustments to reconcile net income to net
cash provided from operating activities:
Film contract payments (27,092) (24,808)
Film contract amortization 25,378 22,646
Depreciation and other amortization 5,827 5,296
Equity loss and other related to United
Paramount Network 35,696 30,150
Minority interest 3,840 3,347
Other (2,607) (1,005)
Changes in assets and liabilities:
Accounts receivable 13,309 9,801
Other assets (5,980) (5,602)
Accounts payable and other liabilities (567) (2,947)
Income taxes (5,282) 3,456
---------- ----------
Net cash provided from
operating activities 46,958 42,314
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposition of marketable securities, net 180,586 21,309
Investment in United Paramount Network (29,293) (33,125)
Other investments (1,608) (10,790)
Capital expenditures, net (3,738) (1,820)
Other (1) (2)
---------- ----------
Net cash provided from (used in)
investing activities 145,946 (24,428)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of special dividend (45,023) (22,512)
Capital transactions of subsidiary 1,734 395
---------- ----------
Net cash used in financing activities (43,289) (22,117)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 149,615 (4,231)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 117,184 201,175
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 266,799 $ 196,944
========== ==========
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% at March 31, 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 March 31, 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 March 31, 2000, BHC's marketable securities consisted of U.S.
Government securities, which had a cost of $985,077,000 and a fair value of
$982,609,000, and equity securities, which had a cost of $51,934,000 and a
fair value of $73,476,000. The difference between aggregate cost and fair
value of $19,074,000 ($10,335,000, 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 seventeen 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 three months
ended March 31, 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
Ended March 31,
-------------------
2000 1999
-------- --------
Operating revenues $ 36,535 $ 30,454
Operating expenses 81,964 91,064
-------- --------
Operating loss (45,429) (60,610)
Other income, net 281 310
-------- --------
Net loss $(45,148) $(60,300)
======== ========
4. SHAREHOLDERS' INVESTMENT:
As of March 31, 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 which are held by Chris-Craft. At March 31,
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 proceeds to UTV of
$1,734,000 and $395,000 in the first three months of 2000 and 1999,
respectively, from the exercise of stock options.
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
Ended March 31,
------------------
2000 1999
-------- --------
Net income $ 4,436 $ 1,980
Other comprehensive income, net of taxes
and minority interest 1,919 3,008
-------- --------
Comprehensive income $ 6,355 $ 4,988
======== ========
6. COMMITMENTS AND CONTINGENCIES:
Commitments of BHC's television stations for film contracts entered
into but not available for broadcasting at March 31, 2000 aggregated
approximately $282.5 million, including $79.0 million applicable to UTV.
In April 1999, a jury awarded damages totalling $7.3 million
(approximately $8.4 million including interest and legal fees through March
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
Ended March 31,
-----------------------
BASIC: 2000 1999
- ------ ---------- ----------
Weighted average common shares outstanding 22,511,605 22,511,605
========== ==========
Net income $ 4,436 $ 1,980
========== ==========
Basic earnings per share $ .20 $ .09
========== ==========
DILUTED:
- --------
Weighted average common shares outstanding 22,511,605 22,511,605
========== ==========
Net income $ 4,436 $ 1,980
Dilution of UTV net income from UTV
stock options (17) (10)
---------- ----------
$ 4,419 $ 1,970
========== ==========
Diluted earnings per share $ .20 $ .09
========== ==========
<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 $1.32 billion at March 31, 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 $1.7 million
in the three month period ended March 31, 2000 and by $2.2 million in the
corresponding 1999 period), and is dependent upon the mix of programs aired
and payment terms of the stations' contracts. Reflecting such amounts,
broadcast cash flow in the first three months of 2000 increased 40%, while
station earnings increased 38%, 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 $1.32 billion at March
31, 2000 from $1.34 billion at December 31, 1999. Such $13.4 million
decline was incurred despite first quarter operating cash flow of $47.0
million, primarily due to final UPN funding totalling $29.3 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
March 31, 2000, 185,497 Class A common shares remained authorized for
purchase. From January 1, 1998 through March 31, 2000, 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 three 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, are 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 March 31, 2000,
commitments for such programming totalled approximately $282.5 million,
including $79.0 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 March 31, 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 March 31, 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 $ 985,077 $ 982,609
Equity securities $ 51,934 $ 73,476
Results of Operations
- ---------------------
BHC net income in the first quarter of 2000 totalled $4,436,000, or
$.20 per share ($.20 per share diluted), compared to net income in last
year's first quarter of $1,980,000, or $.09 per share ($.09 per share
diluted). The increase in net income reflects record first quarter
operating income, which more than offset the increase in losses attributable
to BHC's former interest in United Paramount Network.
Operating revenues at BHC's television station group rose 15%, to a
first quarter record $119,654,000 from the prior year's $104,423,000, and
same station revenues rose 12%. Stations operating in the group's largest
markets, New York, Los Angeles and San Francisco, led the strong revenue
growth. Station earnings in the quarter accordingly increased 38%, to a
first quarter record of $36,815,000, from last year's $26,699,000.
Operating income, which additionally reflects non-broadcasting operations
and corporate office expenses of BHC and UTV, also established a first
quarter record, increasing 47%, to $29,801,000 from $20,231,000.
Interest and other income, which primarily includes earnings on BHC's
$1.3 billion cash and marketable securities holdings, totalled $20,571,000
compared to $18,746,000 in last years first quarter.
BHC's first quarter loss associated with its former interest in UPN
totalled $35,696,000, compared to $30,150,000 in the corresponding 1999
period. This year's amount includes an $11,347,000 pretax loss realized on
the March 31, 2000 sale to Viacom of BHC's 50% interest in UPN, as well as
BHC's final share of UPN's losses. BHC has no remaining financial
obligation to UPN.
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 March 31, 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 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) During the quarter for which this report is filed, the Registrant
filed a Form 8-K dated February 8, 2000, which reported Item 5. Other Events
regarding the Registrant's commencement of a legal action.
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: May 11, 2000
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, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 266799
<SECURITIES> 1056085
<RECEIVABLES> 90500
<ALLOWANCES> 4545
<INVENTORY> 0
<CURRENT-ASSETS> 1546421
<PP&E> 177664
<DEPRECIATION> 114691
<TOTAL-ASSETS> 2157293
<CURRENT-LIABILITIES> 241972
<BONDS> 0
0
0
<COMMON> 225
<OTHER-SE> 1676088
<TOTAL-LIABILITY-AND-EQUITY> 2157293
<SALES> 0
<TOTAL-REVENUES> 121966
<CGS> 0
<TOTAL-COSTS> 92165
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14676
<INCOME-TAX> 6400
<INCOME-CONTINUING> 4436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4436
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
