-----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, AC2qB5VPX5mKKjZPDDmjEmBt/KvvS+zFZobFfGjAQ46N8+vKCbXN+4Vv/YR25VC6 IDrTTa6mprYGY1Zo2/taeQ== 0000855433-99-000006.txt : 19991117 0000855433-99-000006.hdr.sgml : 19991117 ACCESSION NUMBER: 0000855433-99-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99754852 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 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 September 30, 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 October 31, 1999 there were 25,608,607 shares of the issuer's Common Stock outstanding and 8,025,893 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) ------------------------------------- September 30, December 31, 1999 1998 ----------- ----------- ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 149,839 $ 204,297 Marketable securities (substantially all U.S. Government securities) 1,203,667 1,211,246 Accounts receivable, net 91,210 88,382 Film contract rights 133,934 99,883 Prepaid expenses and other current assets 47,383 52,933 ----------- ----------- Total current assets 1,626,033 1,656,741 ----------- ----------- INVESTMENTS 88,285 69,881 ----------- ----------- FILM CONTRACT RIGHTS, less current portion 53,048 23,619 ----------- ----------- PROPERTY AND EQUIPMENT, net 60,583 51,579 ----------- ----------- INTANGIBLE ASSETS 475,977 428,254 ----------- ----------- OTHER ASSETS 19,489 15,349 ----------- ----------- $ 2,323,415 $ 2,245,423 =========== =========== LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- CURRENT LIABILITIES: Film contracts payable within one year $ 115,015 $ 96,595 Accounts payable and accrued expenses 142,481 130,515 Income taxes payable 36,046 41,653 ----------- ----------- Total current liabilities 293,542 268,763 ----------- ----------- FILM CONTRACTS PAYABLE AFTER ONE YEAR 95,032 62,050 ----------- ----------- OTHER LONG-TERM LIABILITIES 25,734 26,321 ----------- ----------- MINORITY INTEREST 492,966 479,820 ----------- ----------- 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 234,462 shares; outstanding 234,462 and 235,935 shares 4,103 4,129 Class B common stock - par value $.50 per share; currently authorized 50,000,000 shares; outstanding 8,077,696 and 8,127,937 shares 4,039 4,064 Common stock - par value $.50 per share; currently authorized 100,000,000 shares; outstanding 25,762,028 and 24,556,196 shares 13,672 13,069 Capital surplus 423,053 376,375 Retained earnings 964,197 993,184 Treasury stock, at cost (11,145) - Accumulated other comprehensive income 16,644 16,070 ----------- ----------- 1,416,141 1,408,469 ----------- ----------- $ 2,323,415 $ 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 Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- OPERATING REVENUES $ 119,804 $ 107,352 $ 355,089 $ 338,011 ---------- ---------- ---------- ---------- OPERATING EXPENSES: Expenses directly associated with revenues 56,747 55,143 168,398 165,293 Selling, general and administrative 38,706 27,570 115,087 104,251 ---------- ---------- ---------- ---------- 95,453 82,713 283,485 269,544 ---------- ---------- ---------- ---------- Operating income 24,351 24,639 71,604 68,467 ---------- ---------- ---------- ---------- OTHER INCOME (EXPENSE): Interest and other income, net 18,190 19,983 61,330 59,707 Equity in United Paramount Network loss (16,900) (10,438) (74,238) (52,819) ---------- ---------- ---------- ---------- 1,290 9,545 (12,908) 6,888 ---------- ---------- ---------- ---------- Income before income taxes and minority interest 25,641 34,184 58,696 75,355 INCOME TAX PROVISION 11,000 13,000 25,200 28,500 ---------- ---------- ---------- ---------- Income before minority interest 14,641 21,184 33,496 46,855 MINORITY INTEREST (6,880) (6,679) (18,265) (18,458) ---------- ---------- ---------- ---------- Net income $ 7,761 $ 14,505 $ 15,231 $ 28,397 ========== ========== ========== ========== Earnings per share: Basic $ .23 $ .43 $ .44 $ .84 ========== ========== ========== ========== Diluted $ .18 $ .34 $ .36 $ .67 ========== ========== ========== ========== 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) ----------------------------------------------- Nine Months Ended September 30, -------------------- 1999 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 15,231 $ 28,397 Adjustments to reconcile net income to net cash provided from operating activities: Film contract payments (76,212) (75,654) Film contract amortization 69,435 61,506 Depreciation and other amortization 17,873 16,356 Equity in United Paramount Network loss 74,238 52,819 Minority interest 18,265 18,458 Other (9,313) (2,292) Changes in assets and liabilities: Accounts receivable (1,531) 14,440 Other assets (4,979) 834 Accounts payable and other liabilities 6,976 (3,964) Income taxes (2,118) 9,300 --------- --------- Net cash provided from operating activities 107,865 120,200 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Disposition of marketable securities, net 20,315 128,648 Investment in United Paramount Network (75,950) (57,000) Station acquisitions (includes $57,521 and $77,668 of intangibles) (61,358) (80,280) Other investments (17,716) (21,663) Capital expenditures, net (13,165) (7,717) Other (1,170) (1,347) --------- --------- Net cash used in investing activities (149,044) (39,359) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital transactions of subsidiaries (4,997) (54,410) Purchase of treasury stock (11,145) (17,552) Proceeds from option exercises 3,247 4,713 Other (384) (395) --------- --------- Net cash used in financing activities (13,279) (67,644) --------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (54,458) 13,197 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 204,297 290,009 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 149,839 $ 303,206 ========= ========= 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 September 30, 1999) television broadcasting subsidiary, BHC Communications, Inc., and BHC's majority owned (58.4% at September 30, 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 September 30, 1999, Chris-Craft's marketable securities consisted of U.S. Government securities, which had a cost of $1,100,895,000 and a fair value of $1,100,086,000, and equity securities, which had a cost of $68,231,000 and a fair value of $103,581,000. The difference between aggregate cost and fair value of $34,541,000 ($16,644,000, 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 fifteen months. At December 31, 1998, Chris-Craft's marketable securities consisted of U.S. Government securities, which had a cost of $1,093,744,000 and a fair value of $1,095,373,000, and equity securities, which had a cost of $83,881,000 and a fair value of $115,873,000. The difference between aggregate cost and fair value 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 $2,327,000 at September 30, 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 Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Operating revenues $ 31,615 $ 19,012 $ 94,987 $ 66,808 Operating expenses 65,749 40,266 244,475 173,623 --------- --------- --------- --------- Operating loss (34,134) (21,254) (149,488) (106,815) Other income, net 335 379 1,012 1,177 --------- --------- --------- --------- Net loss $ (33,799) $ (20,875) $(148,476) $(105,638) ========= ========= ========= ========= 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 nine months ended September 30, 1999, 292,600 shares of Class B common stock were converted into 292,600 shares of common stock, and 1,473 shares of $1.40 convertible preferred stock were converted into 51,166 shares of common stock and 46 shares of Class B common stock. In addition, 163,293 shares of common stock, including 34,780 shares held in treasury, were issued upon exercise of stock options, and 34,780 shares of common stock were received in partial payment of option exercises. During the nine month period, 245,500 shares of common stock were purchased by Chris-Craft, all of which were held in treasury at September 30, 1999. As of September 30, 1999, 586,602 shares of common stock and 12,899 shares of $1.00 prior preferred stock remained authorized for purchase. As of September 30, 1999, shares of Chris-Craft's authorized but unissued common stock were reserved for issuance as follows: Shares ---------- Conversion of Class B common stock 8,077,696 Conversion of $1.40 convertible preferred stock 8,178,691* Stock options (including options outstanding for 3,888,580 shares) 5,258,234 ---------- 21,514,621 ========== *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 Nine Months Ended Ended September 30, September 30, ---------------- ---------------- 1999 1998 1999 1998 ------- ------- ------- ------- Net income $ 7,761 $14,505 $15,231 $28,397 Other comprehensive income (loss), net of taxes and minority interests (2,042) (2,235) 574 4,478 ------- ------- ------- ------- Comprehensive income $ 5,719 $12,270 $15,805 $32,875 ======= ======= ======= ======= 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 September 30, 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 $62.5 million in the first nine months of 1998. From January 1, 1997 through September 30, 1999, UTV purchased 107,500 of its common shares at an aggregate cost of $10.6 million, including $.8 million in the first nine months of 1999 and $7.0 million in the first nine months of 1998. Such purchases, together with proceeds from the exercise of UTV stock options and, in both periods, BHC's special $1.00 per share dividend and UTV's $.50 per share dividend are reflected in capital transactions of subsidiaries in the accompanying condensed consolidated statements of cash flows, net of intercompany eliminations and minority interests. 7. COMMITMENTS AND CONTINGENCIES: Commitments of Chris-Craft's television stations for film contracts entered into but not available for broadcasting at September 30, 1999 aggregated approximately $277.5 million, including $78.8 million applicable to UTV. BHC also has a remaining commitment to invest over time up to $16.2 million in investment limited partnerships, including $5.0 million applicable to UTV. BHC expects to make significant expenditures developing UPN. See Note 3. 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 (excluding interest and legal fees which are not expected to be material) 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. In July 1999, UTV completed the acquisition of the net assets of UHF television station WRBW-TV in Orlando, Florida. UTV remains obligated for possible future consideration relating to the purchase of up to $25,000,000. 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 Nine Months Ended September 30, Ended September 30, ---------------------- ---------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- BASIC: - ------ Weighted average common and Class B common shares outstanding 33,567,167 33,575,966 33,564,048 33,518,429 ========== ========== ========== ========== Net income $ 7,761 $ 14,505 $ 15,231 $ 28,397 Less: Preferred stock dividends (100) (103) (301) (310) ---------- ---------- ---------- ---------- Income available to common shareholders $ 7,661 $ 14,402 $ 14,930 $ 28,087 ========== ========== ========== ========== Basic earnings per share $ .23 $ .43 $ .44 $ .84 ========== ========== ========== ========== DILUTED: - -------- Weighted average common and Class B common shares outstanding 33,567,167 33,575,966 33,564,048 33,518,429 Assumed conversion of $1.40 preferred stock 8,182,458 8,391,406 8,202,481 8,504,078 Assumed exercise of stock options 411,876 218,305 298,143 311,084 ---------- ---------- ---------- ---------- Total shares used in computation 42,161,501 42,185,677 42,064,672 42,333,591 ========== ========== ========== ========== Income available to common shareholders $ 7,661 $ 14,402 $ 14,930 $ 28,087 Convertible preferred stock dividend 82 85 246 255 Dilution of UTV net income from UTV stock options (10) (20) (44) (60) ---------- ---------- ---------- ---------- Income available assuming dilution $ 7,733 $ 14,467 $ 15,132 $ 28,282 ========== ========== ========== ========== Diluted earnings per share $ .18 $ .34 $ .36 $ .67 ========== ========== ========== ========== 9. SEGMENT REPORTING: 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 relating to UPN is included in Note 3. Operating revenues and operating income for the third quarter and nine months ended September 30, 1999 and 1998 are as follows (in thousands): Operating Revenues Operating Income ------------------ ------------------ 1999 1998 1999 1998 -------- -------- -------- -------- Third Quarter Television Division $114,293 $102,794 $ 28,753 $ 23,825 Industrial Division 5,511 4,558 999 516 Corporate and other - - (5,401) 298 -------- -------- -------- -------- $119,804 $107,352 $ 24,351 $ 24,639 ======== ======== ======== ======== Nine Months Television Division $339,157 $322,869 $ 85,295 $ 77,866 Industrial Division 15,932 15,142 2,833 2,330 Corporate and other - - (16,524) (11,729) -------- -------- -------- -------- $355,089 $338,011 $ 71,604 $ 68,467 ======== ======== ======== ======== 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. Cash and marketable securities totalled $1.35 billion at September 30, 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 $6.8 million in the nine month period ended September 30, 1999 and by $14.1 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 nine months of 1999 increased 22%, while station earnings increased 11%, 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 cash flow additionally reflects earnings associated with its cash and marketable securities, most of which are held by BHC. Such balances declined slightly, to $1.35 billion at September 30, 1999, from $1.42 billion at December 31, 1998. Such $62 million decline was incurred despite nine month operating cash flow of $108 million, primarily due to the $61.4 million cash acquisition of television station WRBR, UPN funding totalling $76 million, capital expenditures totalling $13.2 million and Chris-Craft treasury stock purchases totalling $11.1 million. 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 245,500 common shares purchased during the first nine months of 1999 at an aggregate cost of $11,145,000. At September 30, 1999, 586,602 common shares remained authorized for purchase. 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, including 226,503 shares in 1998 from United Television, Inc., BHC's 58.4% owned subsidiary, for a total cost of $516.5 million. During the three year period ended December 31, 1998, UTV expended $42.6 million acquiring its own common shares, and 729,649 UTV shares remained authorized for purchase at that date. No additional such shares were acquired by BHC during the first nine months of 1999, and UTV expended $.8 million acquiring its own common shares during that period. In January 1998, UTV purchased the net 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. In July 1999, UTV purchased the assets of UHF television station WRBW, Channel 65, a UPN affiliate in Orlando, Florida, for $61.4 million in cash and possible future consideration. 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 $76 million in the first nine months of 1999. Chris-Craft's television stations make commitments for programming that will not be available for telecasting until future dates. At September 30, 1999, commitments for such programming totalled approximately $277.5 million, including $78.8 million applicable to UTV. BHC also has a remaining commitment to invest over time up to $16.2 million in investment limited partnerships, including $5.0 million applicable to UTV. Chris-Craft's capital expenditures generally have not been material in relation to its financial position, and the related capital expenditure commitments at September 30, 1999 (including any related to UPN) were not material. During 1998, Chris-Craft stations began converting to digital television (DTV). 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 has substantially completed all remediation efforts, including third party systems testing. 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 September 30, 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 $ 1,100,895 $ 1,100,086 Equity securities $ 68,231 $ 103,581 Results of Operations - --------------------- Chris-Craft net income in the third quarter of 1999 totalled $7,761,000, or $.23 per share ($.18 per share diluted), compared to net income of $14,505,000, or $.43 per share ($.34 per share diluted), in last year's third quarter. Earnings at Chris-Craft's core television station group rose strongly, but net income declined primarily due to expense associated with stock price based retirement plans and higher start-up losses at United Paramount Network. For the first nine months of 1999, Chris-Craft net income totalled $15,231,000, or $.44 per share ($.36 per share diluted), compared to net income of $28,397,000, or $.84 per share ($.67 per share diluted), in last year's comparable period. The decline in year to date earnings mostly reflects higher UPN losses and expense associated with stock price based retirement plans, which factors were only partially offset by an increase in station group earnings. Operating revenues and operating income for the third quarter and nine month periods ended September 30, 1999 and 1998 are as follows (in thousands): Operating Revenues Operating Income ------------------ ------------------ 1999 1998 1999 1998 -------- -------- -------- -------- Third Quarter Television Division $114,293 $102,794 $ 28,753 $ 23,825 Industrial Division 5,511 4,558 999 516 Corporate and other - - (5,401) 298 -------- -------- -------- -------- $119,804 $107,352 $ 24,351 $ 24,639 ======== ======== ======== ======== Nine Months Television Division $339,157 $322,869 $ 85,295 $ 77,866 Industrial Division 15,932 15,142 2,833 2,330 Corporate and other - - (16,524) (11,729) -------- -------- -------- -------- $355,089 $338,011 $ 71,604 $ 68,467 ======== ======== ======== ======== Station operating revenues in the third quarter rose 11%, to $111,901,000 from $100,703,000, reflecting overall strong demand for television advertising and key programming successes. After a 6% increase in station operating expenses, station earnings rose 26%, to $33,243,000 from last year's $26,302,000. Station earnings excluding amounts associated with stock price based retirement plan expense rose 41%. The increase in station earnings produced a 21% increase in third quarter Television Division operating income, to $28,753,000 from $23,825,000 last year. WRBW results were not significant. For the first nine months of 1999, station group earnings increased 11%, to $96,314,000 from $86,543,000, mainly due to the strong third quarter results and approximately $4.8 million of mostly nonrecurring copyright royalties recorded in the first six months of 1999, which factors were only partially offset by a $2.1 million increase in station expense associated with stock price based retirement plans. Excluding such expense, television group earnings for the nine months increased 14%. Station operating revenues for the nine months, including the copyright royalty income, rose 5%, to $332,228,000 from $316,334,000. Reflecting the increase in station group earnings, Television Division operating income in the period increased 10%, to $85,295,000 from $77,866,000. Industrial Division operating income increased 94% in the third quarter, to $999,000 from $516,000, due mostly to growth at the Division's plastic flexible film unit. However, after an unfavorable swing of approximately $4.8 million in amounts recorded in corporate office expense for stock price based retirement plans, which primarily reflects the 19% increase during the third quarter in the market price of Chris-Craft common stock, consolidated operating income declined 1%, to $24,351,000 from $24,639,000. Industrial Division operating income for the nine month period rose 22%, to $2,833,000 from $2,330,000 and, after a $1.7 million increase in corporate office expense associated with stock price based retirement plans, consolidated operating income for the nine months rose 5%, to $71,604,000 from $68,467,000. Interest and other income, which consists mostly of amounts earned on Chris-Craft's consolidated cash and marketable securities holdings, declined to $18,190,000 in the third quarter from $19,983,000 last year, due mostly to marketable security gains realized last year's third quarter. Interest and other income in the nine month period increased to $61,330,000 from $59,707,000 last year, primarily due to marketable security gains realized in the first six months of 1999. BHC's 50% share of UPN's third quarter loss increased to $16,900,000 from $10,438,000, mainly reflecting the expansion of the network's prime time schedule to five weekday evenings this year from three last year. Nonetheless, UPN's competitive position has improved considerably this fall, generating significantly improved ratings for the network and its affiliates. BHC's share of UPN's nine month loss rose to $74,238,000 from last year's $52,819,000, additionally reflecting earlier in the year ratings declines and expenses related to cancelled programs. Chris-Craft's effective income tax rate rose to approximately 43% in the 1999 periods from approximately 38% in the 1998 periods, 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 September 30, 1999 and 79.95% owned by Chris-Craft at September 30, 1998, and the interest of shareholders other than BHC in the net income of UTV, 58.4% owned by BHC at September 30, 1999 and 58.6% owned by BHC at September 30, 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 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: November 15, 1999 EXHIBIT INDEX Incorporated by Reference to: Exhibit No. Exhibit - ------------- ----------- ------- 27 Financial Data Schedule EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q DATED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 9-MOS DEC-31-1999 SEP-30-1999 149839 1203667 96464 5254 2185 1626033 175831 115248 2323415 293542 0 0 5681 17711 1392749 2323415 15932 355089 10103 283485 0 0 0 58696 25200 15231 0 0 0 15231 .44 .36
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