-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J1/q0++835uK1S1Oglr1m4YuymqxZkEyTNRhymeH6BJK87i8GAL2YAYwoCMIKT2u 92S9h9moJcxkSIvVOGmtdg== 0000855433-99-000002.txt : 19990517 0000855433-99-000002.hdr.sgml : 19990517 ACCESSION NUMBER: 0000855433-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHRIS CRAFT INDUSTRIES INC CENTRAL INDEX KEY: 0000020067 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 941461226 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02999 FILM NUMBER: 99623050 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2124074898 MAIL ADDRESS: STREET 1: 5355 TOWN CENTER ROAD STREET 2: SUITE 200 CITY: BOCA RATON STATE: FL ZIP: 33486 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL AUTOMOTIVE FIBRES INC DATE OF NAME CHANGE: 19681112 10-Q 1 10-Q DOCUMENT . 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, 1999 -------------------------------- 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: 1-2999 ------------------------------ CHRIS-CRAFT INDUSTRIES, INC. ---------------------------- (Exact name of Registrant as specified in its charter) Delaware 94-1461226 - ---------------------------- ------------------------------- (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, 1999 there were 25,236,334 shares of the issuer's Common Stock outstanding and 8,305,863 shares of the issuer's Class B Common Stock outstanding. PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHRIS-CRAFT INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) (UNAUDITED) ------------------------------------- March 31, December 31, 1999 1998 ----------- ----------- ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 201,114 $ 204,297 Marketable securities (substantially all U.S. Government securities) 1,207,249 1,211,246 Accounts receivable, net 78,259 88,382 Film contract rights 74,324 99,883 Prepaid expenses and other current assets 49,317 52,933 ----------- ----------- Total current assets 1,610,263 1,656,741 ----------- ----------- INVESTMENTS 83,228 69,881 ----------- ----------- FILM CONTRACT RIGHTS, less current portion 20,323 23,619 ----------- ----------- PROPERTY AND EQUIPMENT, net 51,280 51,579 ----------- ----------- INTANGIBLE ASSETS 425,100 428,254 ----------- ----------- OTHER ASSETS 16,375 15,349 ----------- ----------- $ 2,206,569 $ 2,245,423 =========== =========== LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- CURRENT LIABILITIES: Film contracts payable within one year $ 87,024 $ 96,595 Accounts payable and accrued expenses 121,372 130,515 Income taxes payable 41,597 41,653 ----------- ----------- Total current liabilities 249,993 268,763 ----------- ----------- FILM CONTRACTS PAYABLE AFTER ONE YEAR 49,641 62,050 ----------- ----------- OTHER LONG-TERM LIABILITIES 26,133 26,321 ----------- ----------- MINORITY INTEREST 477,666 479,820 ----------- ----------- COMMITMENTS AND CONTINGENCIES (NOTE 7) SHAREHOLDERS' INVESTMENT: Prior preferred stock - $1.00 dividend; currently authorized 73,399 shares; outstanding 73,399 shares 1,578 1,578 Convertible preferred stock - $1.40 dividend; currently authorized 235,777 shares; outstanding 235,777 and 235,935 shares 4,126 4,129 Class B common stock - par value $.50 per share; authorized 50,000,000 shares; outstanding 8,316,041 and 8,127,937 shares 4,158 4,064 Common stock - par value $.50 per share; authorized 100,000,000 shares; outstanding 25,354,934 and 24,556,196 shares 13,468 13,069 Capital surplus 419,935 376,375 Retained earnings 949,932 993,184 Treasury stock, at cost (8,556) - Accumulated other comprehensive income 18,495 16,070 ----------- ----------- 1,403,136 1,408,469 ----------- ----------- $ 2,206,569 $ 2,245,423 =========== =========== The accompanying notes to condensed consolidated financial statements are an integral part of these statements. CHRIS-CRAFT INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars except per share data) (UNAUDITED) ----------------------------------------------- Three Months Ended March 31, ---------------------- 1999 1998 ---------- ---------- OPERATING REVENUES $ 111,460 $ 104,974 ---------- ---------- OPERATING EXPENSES: Expenses directly associated with revenues 54,772 54,611 Selling, general and administrative 37,122 41,023 ---------- ---------- 91,894 95,634 ---------- ---------- Operating income 19,566 9,340 ---------- ---------- OTHER INCOME (EXPENSE): Interest and other income, net 18,676 19,711 Equity in United Paramount Network loss (30,150) (19,910) ---------- ---------- (11,474) (199) ---------- ---------- Income before income taxes and minority interest 8,092 9,141 INCOME TAX PROVISION 3,600 3,500 ---------- ---------- Income before minority interest 4,492 5,641 MINORITY INTEREST (3,744) (3,871) ---------- ---------- Net income $ 748 $ 1,770 ========== ========== Earnings per share: Basic $ .02 $ .05 ========== ========== Diluted $ .02 $ .04 ========== ========== 3% Stock 3% Stock DIVIDENDS PER COMMON SHARE Dividend Dividend ========== ========== The accompanying notes to condensed consolidated financial statements are an integral part of these statements. CHRIS-CRAFT INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (UNAUDITED) ----------------------------------------------- Three Months Ended March 31, -------------------- 1999 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 748 $ 1,770 Adjustments to reconcile net income to net cash provided from operating activities: Film contract payments (24,808) (25,320) Film contract amortization 22,646 21,010 Depreciation and other amortization 5,776 5,417 Equity in United Paramount Network loss 30,150 19,910 Minority interest 3,744 3,871 Other (563) 236 Changes in assets and liabilities: Accounts receivable 10,123 16,781 Other assets (6,143) 340 Accounts payable and other liabilities (2,110) 2,118 Income taxes 3,509 2,909 --------- --------- Net cash provided from operating activities 43,072 49,042 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Disposition of marketable securities, net 12,665 56,573 Investment in United Paramount Network (33,125) (22,300) Station acquisition (includes $77,712 of intangibles) - (80,280) Other investments (10,708) (591) Capital expenditures, net (2,323) (1,611) Other (244) (1,228) --------- --------- Net cash used in investing activities (33,735) (49,437) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital transactions of subsidiaries (4,117) (44,417) Purchase of treasury stock (8,392) (7,495) Proceeds from option exercises 172 1,720 Other (183) (191) --------- --------- Net cash used in financing activities (12,520) (50,383) --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (3,183) (50,778) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 204,297 290,009 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 201,114 $ 239,231 ========= ========= The accompanying notes to condensed consolidated financial statements are an integral part of these statements. CHRIS-CRAFT INDUSTRIES, INC. ---------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- 1. PRINCIPLES OF CONSOLIDATION: The accompanying condensed consolidated financial statements include the accounts of Chris-Craft Industries, Inc. and its subsidiaries, including Chris-Craft's majority owned (79.96% at March 31, 1999) television broadcasting subsidiary, BHC Communications, Inc., and BHC's majority owned (58.5% at March 31, 1999) subsidiary, United Television, Inc. (UTV). The pro rata interests of BHC and UTV minority shareholders in the net income of the respective companies are reflected in minority interest in the accompanying condensed consolidated statements of income. The minority shareholders' interests in the net assets of BHC and UTV are reflected as minority interest in the accompanying condensed consolidated balance sheets. Intercompany accounts and transactions have been eliminated. The financial information included herein has been prepared by Chris-Craft, 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, Chris-Craft 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 Chris-Craft'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 Chris-Craft'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, 1999, Chris-Craft's marketable securities, which consisted substantially of U.S. Government securities, had a cost of $1,169,633,000 and a fair value of $1,207,249,000. The difference of $37,616,000 ($18,495,000, net of income taxes and minority interests) 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 one year. At December 31, 1998, Chris-Craft's marketable securities, which consisted substantially of U.S. Government securities, had a cost of $1,177,625,000 and a fair value of $1,211,246,000. The difference of $33,621,000 ($16,070,000, net of income taxes and minority interests) 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. BHC and Viacom now share equally in UPN funding requirements and in UPN losses. UPN has been organized as a partnership, and BHC's partnership interest is accounted for under the equity method. The carrying value of such interest totalled $3,590,000 at March 31, 1999 and $615,000 at December 31, 1998, and is included in Investments in the accompanying condensed consolidated balance sheets. UPN is still in its development and is expected to continue to incur significant start-up losses and to require significant funding for the next several years. UPN's condensed statements of operations are as follows (in thousands): Three Months Ended March 31, ------------------- 1999 1998 --------- --------- Operating revenues $ 30,454 $ 21,203 Operating expenses 91,064 61,370 --------- --------- Operating loss (60,610) (40,167) Other income, net 310 347 --------- --------- Net loss $ (60,300)$ (39,820) ========= ========= 4. SHAREHOLDERS' INVESTMENT: Chris-Craft paid 3% stock dividends on its common and Class B common stock in the respective shares of such classes on April 1, 1999. During the three months ended March 31, 1999, 54,209 shares of Class B common stock were converted into 54,209 shares of common stock, and 158 shares of $1.40 convertible preferred stock were converted into 5,350 shares of common stock. In addition, 5,626 shares of common stock were issued upon exercise of stock options. During the three month period, 191,200 shares of common stock were purchased by Chris-Craft, all of which were held in treasury at March 31, 1999. As of March 31, 1999, 640,902 shares of common stock and 12,899 shares of $1.00 prior preferred stock remained authorized for purchase. As of March 31, 1999, shares of Chris-Craft's authorized but unissued common stock were reserved for issuance as follows: Shares ---------- Conversion of Class B common stock 8,316,041 Conversion of $1.40 convertible preferred stock 8,224,561* Stock options (including options outstanding for 2,806,251 shares) 2,933,128 ---------- 19,473,730 ========== *Including Class B common shares. 5. COMPREHENSIVE INCOME: Effective January 1, 1998, Chris-Craft adopted Statement of Financial Accounting Standards No. 130, "Reporting 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, ---------------- 1999 1998 ------- ------- Net income $ 748 $ 1,770 Other comprehensive income, net of taxes and minority interests 2,425 7,430 ------- ------- Comprehensive income $ 3,173 $ 9,200 ======= ======= 6. CAPITAL TRANSACTIONS OF SUBSIDIARIES: Since April 1990, BHC's Board of Directors has authorized the purchase of up to 7,081,087 Class A common shares. Through March 31, 1999, 6,895,590, shares were purchased, including 226,503 shares from UTV in June 1998, for a total cost of $516.5 million, including 34.7 million in the first three months of 1998. From January 1, 1997 through March 31, 1999, UTV purchased 99,100 of its common shares at an aggregate cost of $9.8 million, including $7.0 million in the first three months of 1998. No BHC or UTV shares were purchased during the first quarter of 1999. Such purchases, together with proceeds from the exercise of UTV stock options and BHC's special $1.00 per share dividend, in both periods, are reflected in capital transactions of subsidiaries in the accompanying condensed consolidated statements of cash flows, net of intercompany eliminations. 7. COMMITMENTS AND CONTINGENCIES: Commitments of Chris-Craft's television stations for film contracts entered into but not available for broadcasting at March 31, 1999 aggregated approximately $352.1 million, including $94.9 million applicable to UTV. BHC also has a remaining commitment to invest over time up to $25.2 million, of which $14.8 million is to be invested in management buyout limited partnerships, including $11.0 million applicable to UTV. BHC expects to make significant expenditures developing UPN. See Note 3. In 1997, UTV signed a definitive agreement to purchase the assets of UHF television station WRBW in Orlando, Florida, for $60 million and possible future consideration. The acquisition is subject to Federal Communications Commission approval and other conditions in the agreement. As set forth in Note 9 of Notes to Consolidated Financial Statements in Chris-Craft's 1998 Annual Report, Chris-Craft has been named as a defendant (or a "potentially responsible party") in certain actions seeking recovery for environmental damage allegedly related to (i) the activities (discontinued since 1983) of 50% owned Montrose Chemical Corporation of California ("Montrose California") and (ii) the activities of Montrose Chemical Co., a predecessor company to Chris-Craft. Chris-Craft does not presently consider liability to be "probable" in any of the Montrose California related matters and is unable to determine at this stage if it could have any liability regarding Montrose Chemical Co. Accordingly, no amount has been reserved in Chris-Craft's financial statements relating to these matters. In April 1999, a jury awarded damages totalling $7.3 million 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 intend to appeal. The judgement is not yet final, and it is not possible to reasonably estimate the amount, if any, which ultimately will be paid. Accordingly, no amount has been reserved in Chris-Craft's financial statements relating to this matter. 8. EARNINGS PER SHARE: Computations of earnings per share, all of which give retroactive effect to the April 1999 3% stock dividend, are as follows (in thousands of dollars except per share amounts): Three Months Ended March 31, ---------------------- 1999 1998 ---------- ---------- BASIC: - ------ Weighted average common and Class B common shares outstanding 33,602,774 33,474,800 ========== ========== Net income $ 748 $ 1,770 Less: Preferred stock dividend (101) (105) ---------- ---------- Income available to common shareholders $ 647 $ 1,665 ========== ========== Basic earnings per share $ .02 $ .05 ========== ========== DILUTED: - -------- Weighted average common and Class B common shares outstanding 33,602,774 33,474,800 Assumed conversion of $1.40 preferred stock 8,225,434 8,585,147 Assumed exercise of stock options 202,312 375,455 ---------- ---------- Total shares used in computation 42,030,520 42,435,402 ========== ========== Income available to common shareholders $ 647 $ 1,665 Convertible preferred stock dividend 83 86 Dilution of UTV net income from UTV stock options (8) (14) ----------- ---------- Income available assuming dilution $ 722 $ 1,737 ========== ========== Diluted earnings per share $ .02 $ .04 ========== ========== 9. INDUSTRY SEGMENT INFORMATION: Chris-Craft has two reportable segments, the Television Division and the Industrial Division. UPN, which is accounted for on the equity method, is also considered a reportable segment under SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." However, all required segment information is included in Note 3. Operating revenues and operating income for the first quarter of 1999 and 1998 are as follows (in thousands): Operating Revenues Operating Income ------------------ ------------------ 1999 1998 1999 1998 -------- -------- -------- -------- Television Division $106,495 $ 99,575 $ 23,373 $ 16,529 Industrial Division 4,965 5,399 785 949 Corporate and other - - (4,592) (8,138) -------- -------- -------- -------- $111,460 $104,974 $ 19,566 $ 9,340 ======== ======== ======== ======== CHRIS-CRAFT INDUSTRIES, INC. ---------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Liquidity and Capital Resources - ------------------------------- Chris-Craft's financial position continues to be strong and highly liquid. Consolidated cash and marketable securities totalled $1.41 billion at March 31, 1999, and Chris-Craft has no debt outstanding. Chris-Craft's 79.96% owned television broadcasting subsidiary, BHC Communications, Inc., has expended significant funds developing United Paramount Network since UPN's inception in 1994, but cash flow provided from BHC's operating activities has exceeded such BHC funding of UPN. Chris-Craft's operating cash flow is generated primarily by its Television Division's 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 $2.2 million in the first quarter of 1999 and by $4.3 million in the corresponding 1998 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 quarter of 1999 increased 47%, while station earnings increased 32%, 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. Chris-Craft's operating cash flow additionally reflects earnings associated with its cash and marketable securities, most of which are held by BHC. Consolidated cash and marketable securities declined just slightly, to $1.41 billion at March 31, 1999, from $1.42 billion at December 31, 1998. Such decline was incurred despite first quarter operating cash flow of $43.1 million, primarily due to UPN funding by BHC and Chris-Craft treasury stock purchases. BHC generates most of Chris-Craft's consolidated cash flow. Parent company obligations consist solely of corporate office expenditures, current and accrued. Most parent company cash flow in recent years has been provided from the receipt by Chris-Craft of its share of special dividends paid by BHC. BHC has paid $1.00 per share special cash dividends in February 1999, aggregating $22.5 million, February 1998, aggregating $22.7 million, and February 1997, aggregating $23.6 million, with Chris-Craft receiving $18 million of each such amount. BHC plans to consider annually the payment of a special dividend. Chris-Craft, from time to time, has purchased shares of its own capital stock, including 191,200 common shares purchased during the first quarter of 1999 at an aggregate cost of $8.6 million. At March 31, 1999, 640,902 common shares remained authorized for purchase. Since April 1990, BHC's Board of Directors has authorized the purchase of up to 7,081,087 of its Class A common shares. Through March 31, 1999, 6,895,590 shares were purchased, including 226,503 shares in 1998 from United Television, Inc., BHC's 58.5% owned subsidiary, for a total cost of $516.5 million. From January 1, 1997 through March 31, 1999, UTV expended $9.8 million acquiring its own common shares, and 729,649 UTV shares remained authorized for purchase at that date. No such shares were acquired by BHC or UTV during the first quarter of 1999. In January 1998, UTV purchased the assets of UHF television station WHSW, Channel 24, in Baltimore, Maryland for $80.3 million in cash. The station's call letters were changed to WUTB and the station became a UPN affiliate. UTV has signed a definitive agreement to purchase the assets of WRBW in Orlando, Florida, for approximately $60 million and possible future consideration. UTV expects to use a portion of available cash and marketable securities balances to complete this transaction, which is subject to Federal Communications Commission approval, as well as satisfaction of certain conditions. Chris-Craft intends to further expand its operations in the media, entertainment and communications industries and to explore business opportunities in other industries. Chris-Craft 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 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. BHC and Viacom now share equally in UPN losses and funding requirements. UPN, still in its development, incurred start-up losses of $177.2 million in 1998, $170.2 million in 1997, $146.3 million in 1996 and $129.3 million in 1995, and is expected for the next several years to continue to incur substantial start-up losses and to require significant funding. BHC funding of UPN totalled $33.1 million in the first quarter of 1999. Chris-Craft's television stations make commitments for programming that will not be available for telecasting until future dates. At March 31, 1999, commitments for such programming totalled approximately $352.1 million, including $94.9 million applicable to UTV. BHC also has a remaining commitment to invest over time up to $25.2 million, of which $14.8 million is to be invested in management buyout limited partnerships, including $11.0 million applicable to UTV. Chris-Craft capital expenditures generally have not been material in relation to its financial position, and the related capital expenditure commitments at March 31, 1999 (including any related to UPN) were not material. During 1998, Chris-Craft stations began converting to digital television (DTV). In April 1999, KBHK in San Francisco became the first of the Chris-Craft stations to make the initial conversion to DTV signal transmission. The conversion will require 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. Chris-Craft expects that its expenditures for UPN, 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. As set forth in Note 7, Chris-Craft has been named as a defendant (or a "potentially responsible party") in certain actions seeking recovery for environmental damage allegedly related to (i) the activities (discontinued since 1983) of 50% owned Montrose Chemical Corporation of California ("Montrose California") and (ii) the activities of Montrose Chemical Co., a predecessor company to Chris-Craft. As further set forth in Note 7, Chris-Craft does not presently consider liability to be "probable" in any of the Montrose California related matters and believes it has been erroneously identified as a potentially responsible party and is unable to determine at this stage if it could have any liability regarding Montrose Chemical Co. Accordingly, no amount has been reserved in Chris-Craft's financial statements relating to these matters. Chris-Craft, which completed an assessment of its year 2000 issues in 1998, believes that the total estimated compliance cost is immaterial. Chris-Craft expects to have completed all remediation efforts, including third party systems testing, by September 30, 1999. Chris-Craft continues to believe that such issues will not have a material effect on its business, results of operations or financial condition. Quantitative and Qualitative Disclosures about Market Risk - ---------------------------------------------------------- Chris-Craft 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, 1999 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 $ 1,096,064 $ 1,096,606 Equity securities $ 73,569 $ 110,643 Results of Operations - --------------------- Chris-Craft net income in the first quarter of 1999 declined to $748,000, or $.02 per share ($.02 per share diluted), from net income in last year's first quarter of $1,770,000, or $.05 per share ($.04 per share diluted). The decline in net income primarily reflects an increase in BHC's 50% share of UPN's first quarter loss, which was only partially offset by an increase in Television Division operating income. Operating revenues and operating income for the first quarters of 1999 and 1998 are as follows (in thousands): Operating Revenues Operating Income ------------------ ------------------ 1999 1998 1999 1998 -------- -------- -------- -------- Television Division $106,495 $ 99,575 $ 23,373 $ 16,529 Industrial Division 4,965 5,399 785 949 Corporate and other - - (4,592) (8,138) -------- -------- -------- -------- $111,460 $104,974 $ 19,566 $ 9,340 ======== ======== ======== ======== Television Division operating income increased 41%, to $23,373,000 from $16,529,000, as earnings at the Division's core television station group rose 32%, to $26,699,000 from last year's $20,224,000. Approximately $4.3 million of the station earnings increase reflects copyright royalties paid to the Division's New York station, WWOR, for prior years, when certain of its programming was carried on distant cable systems. In addition, station expense associated with stock price based retirement plans declined approximately $1.3 million from last year's first quarter. Adjusting for these two items, station earnings increased 4% from last year's period. Station operating revenues rose 7%, to $104,423,000 from $97,624,000. Excluding the royalty payment, station operating revenues rose 3%. Corporate office expense in the first quarter declined to $4,592,000 from $8,138,000 last year, primarily reflecting a $4.4 million decline in its expense associated with stock price based retirement plans. Consolidated operating income accordingly rose 109%, to $19,566,000 from $9,340,000. UPN's first quarter loss widened substantially from last year's, primarily reflecting the expansion of the network's prime time schedule to five weekday evenings from three in last year's first quarter. BHC's 50% share of such loss totalled $30,150,000, compared to last year's $19,910,000. UPN is still in its development and is expected for the next several years to continue to record substantial start-up losses. Interest and other income totalled $18,676,000, compared to $19,711,000 recorded in last year's first quarter. This income consists mostly of amounts earned on Chris-Craft's substantial cash and marketable securities holdings. Such earnings declined from last year's first quarter primarily due to lower interest rates. Chris-Craft's effective income tax rate rose to 44.5% from 38.3% in the first quarter of 1998, primarily reflecting the realization in 1998 of certain income tax benefits. Minority interest reflects the interest of shareholders other than Chris-Craft in the net income of BHC, 79.96% owned by Chris-Craft at March 31, 1999 and 79.5% owned by Chris-Craft at March 31, 1998, and the interest of shareholders other than BHC in the net income of UTV, 58.5% owned by BHC at March 31, 1999 and 58.7% owned by BHC at March 31, 1998. 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. CHRIS-CRAFT INDUSTRIES, INC. ---------------------------- PART II. OTHER INFORMATION -------------------------- Item 1. Legal Proceedings. ------------------ Chris-Craft reported that on April 6, 1999 a Superior Court jury in Bergen County, New Jersey returned a verdict in favor of a former employee at WWOR-TV in a lawsuit alleging discrimination by the station. WWOR-TV, Inc. is a wholly-owned subsidiary of BHC. The jury awarded a total of $7.3 million in compensatory and punitive damages. Pending post-trial motions, the jury award has not yet been entered as a final judgement by the trial judge. The station and its counsel believe the award was not justified by either the evidence or the law, and intend to appeal. As the judgement is not yet final, and the amount, if any, ultimately to be paid cannot be reasonably estimated, no provision for an amount in excess of insurance coverage has been made in the accompanying financial statements for the period ended March 31, 1999. 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. CHRIS-CRAFT INDUSTRIES, INC. ---------------------------- (Registrant) By: /s/ JOELEN K. MERKEL ---------------------------- Joelen K. Merkel Vice President and Treasurer (Principal Accounting Officer) Date: May 14, 1999 EXHIBIT INDEX Incorporated by Reference to: Exhibit No. Exhibit - ------------- ----------- ------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q DATED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 3-MOS DEC-31-1999 MAR-31-1999 201114 1207249 83333 5074 2314 1610263 161881 110601 2206569 249993 0 0 5704 17626 1379806 2206569 4965 111460 3231 91894 0 0 0 8092 3600 748 0 0 0 748 .02 .02
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