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 February 28, 1997
-----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ---------------------
Commission file number 1-8654
------
Unitel Video, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-1713238
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 West 57th Street--New York, New York 10019
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(212) 265-3600
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 twelve months and (2) has been subject to such
requirements for the past 90 days
. . . . . .
Yes . X . No . .
. . . . . .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2,674,665 Common shares outstanding as of April 7, 1997.
(Number of shares) (Date)
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED FEBRUARY 28, 1997
PAGE
INDEX NUMBER
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
February 28, 1997 (Unaudited) and
August 31, 1996 3-4
Consolidated Statements of Operations
February 28, 1997 (Unaudited) and
February 29, 1996 (Unaudited) 5
Consolidated Statements of Cash Flows
February 28, 1997 (Unaudited)
and February 29, 1996 (Unaudited) 6-7
Notes to Consolidated Financial
Statements (Unaudited) 8-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11-13
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security-Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
2
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED FEBRUARY 28, 1997
Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1997 AUGUST 31, 1996
----------------- ----------------
(UNAUDITED) (NOTE)
ASSETS
Current Assets:
Cash....................................................... $ 32,000 $ 192,000
Accounts receivable,
less allowance for doubtful accounts
of $435,000 and $712,000................................ 6,958,000 8,701,000
Other receivables......................................... 186,000 333,000
Prepaid income taxes...................................... 140,000 142,000
Prepaid expenses.......................................... 740,000 735,000
Net assets held for sale.................................. -- 1,587,000
Deferred tax asset........................................ 844,000 844,000
------------ ------------
Total current assets......................................... 8,900,000 12,534,000
Property and equipment--at cost
Land, buildings and improvements........................... 20,314,000 19,915,000
Video equipment............................................ 98,832,000 97,023,000
Furniture and fixtures..................................... 3,381,000 3,502,000
------------ ------------
122,527,000 120,440,000
Less accumulated depreciation................................ 73,496,000 69,974,000
------------ ------------
49,031,000 50,466,000
Deferred tax asset........................................... 1,625,000 1,625,000
Goodwill..................................................... 1,790,000 1,859,000
Other assets................................................. 1,148,000 1,134,000
------------ ------------
$ 62,494,000 $ 67,618,000
------------ ------------
Note: The balance sheet at August 31, 1996 has been taken from the audited
consolidated financial statements at that date.
See notes to consolidated financial statements.
3
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Continued)
February 28, 1997 August 31, 1996
----------------- ---------------
(Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 4,284,000 $ 4,967,000
Accrued expenses 967,000 1,450,000
Payroll, benefits and related taxes 1,719,000 2,947,000
Current maturities of long-term debt 6,485,000 8,362,000
Current maturities of subordinated debt 1,167,000 1,166,000
Current maturities of ESOP loan 75,000 166,000
Current maturities of capital lease obligations 1,870,000 1,832,000
------------ ------------
Total current liabilities 16,567,000 20,890,000
Deferred rent 110,000 325,000
Long-term debt, less current maturities 19,859,000 19,706,000
Subordinated debt, less current maturities 1,771,000 1,979,000
Long-term leases, less current maturities 4,657,000 5,604,000
Accrued retirement 1,240,000 1,304,000
Stockholders' equity:
Common stock, par value
$.01 per share
Authorized 5,000,000 shares
Issued 3,540,954 and 3,532,554 shares
respectively, and outstanding 2,674,665
and 2,666,265 shares respectively 27,000 26,000
Additional paid-in capital 27,552,000 27,545,000
Accumulated deficit (1,229,000) (1,592,000)
Common stock held in treasury,
at cost (866,289 shares) (7,974,000) (7,974,000)
------------ ------------
18,376,000 18,005,000
Unearned employee benefit expense (86,000) (195,000)
------------ ------------
Total stockholders' equity 18,290,000 17,810,000
------------ ------------
$ 62,494,000 $ 67,618,000
------------ ------------
Note: The balance sheet at August 31, 1996 has been taken from the audited
consolidated financial statements at that date.
See notes to consolidated financial statements.
4
UNITEL VIDEO, INC.
------------------
FORM 10-Q
---------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
Sales............................................... $ 15,000,000 $ 20,529,000 $ 31,370,000 $ 43,469,000
Cost of sales:
Production costs............................... 10,228,000 15,585,000 20,944,000 30,987,000
Depreciation................................... 2,258,000 1,773,000 4,309,000 3,506,000
------------- ------------- ------------- -------------
12,486,000 17,358,000 25,253,000 34,493,000
------------- ------------- ------------- -------------
Gross profit........................................ 2,514,000 3,171,000 6,117,000 8,976,000
Operating expenses:
Selling........................................ 509,000 660,000 994,000 1,336,000
General and administrative..................... 1,751,000 2,543,000 3,121,000 4,987,000
Interest....................................... 933,000 923,000 1,774,000 1,771,000
Impairment charge.............................. -- 886,000 -- 1,739,000
------------- ------------- ------------- -------------
3,193,000 5,012,000 5,889,000 9,833,000
------------- ------------- ------------- -------------
Earnings (loss) from operations..................... (679,000) (1,841,000) 228,000 (857,000)
Other income........................................ 76,000 -- 154,000 --
------------- ------------- ------------- -------------
Earnings (loss) before income taxes................. (603,000) (1,841,000) 382,000 (857,000)
Income taxes........................................ (31,000) (462,000) 19,000 --
------------- ------------- ------------- -------------
Net earnings (loss) applicable for common stock..... $ (572,000) $ (1,379,000) $ 363,000 $ (857,000)
------------- ------------- ------------- -------------
Earnings (loss) Per Common Share
Net earnings (loss)................................. $ (.21) $ (0.53) $ .13 $ (0.33)
------------- ------------- ------------- -------------
Weighted average of common and common equivalent
shares outstanding................................ 2,695,000 2,591,000 2,694,000 2,580,000
------------- ------------- ------------- -------------
See notes to consolidated financial statements.
5
UNITEL VIDEO, INC.
------------------
FORM 10-Q
---------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
SIX MONTHS ENDED
----------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996
------------------- -------------------
Cash Flows From Operating Activities:
Net income (loss)......................................... $ 363,000 $ (857,000)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization............................. 4,505,000 3,525,000
Net gain on disposal of equipment......................... (196,000) (19,000)
Deferred financing costs.................................. -- (570,000)
Amortization of deferred financing costs.................. 74,000 89,000
Deferred rent............................................. (215,000) 8,000
Accrued retirement expense................................ (64,000) 82,000
Deferred income taxes..................................... -- (79,000)
Impairment charge......................................... -- 1,739,000
Decrease (Increase) in:
Accounts receivable....................................... 2,020,000 1,875,000
Allowance for doubtful accounts............................ (277,000) (73,000)
Other receivables.......................................... 147,000 11,000
Prepaid expenses........................................... (5,000) 148,000
Prepaid taxes.............................................. 2,000 126,000
Other assets................................................ (88,000) (131,000)
Increase (Decrease) in
Accounts payable............................................ (683,000) (2,715,000)
Accrued expenses............................................ (483,000) (382,000)
Payroll and related taxes.................................. . (1,228,000) 470,000
---------------- ----------------
Total adjustments....................................... 3,509,000 4,104,000
----------------- ----------------
Net cash provided by operating activities.................... 3,872,000 3,247,000
Cash Flows From Investing Activities:
Capital expenditures....................................... (3,422,000) (4,464,000)
Proceeds from disposal of equipment........................ 2,204,000 23,000
----------------- ----------------
Net cash used in investing activities............................. (1,218,000) (4,441,000)
(Continued)
6
UNITEL VIDEO, INC.
------------------
FORM 10-Q
---------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
SIX MONTHS ENDED
----------------------------------
FEBRUARY 28, 1997 FEBRUARY 29, 1996
----------------- -----------------
Cash Flows From Financing Activities:
Proceeds from long-term financing.......................... 2,091,000 $ 22,520,000
Proceeds from issuance of common stock..................... 39,000 181,000
Repayment of loan to ESOP.................................. (91,000) (82,000)
Principal repayments....................................... (4,931,000) (21,130,000)
Release of ESOP quarterly shares........................... 78,000 97,000
---------------- ----------------
Net cash (used) provided by financing activities......... (2,814,000) 1,586,000
---------------- ----------------
Net (Decrease)/Increase in Cash.......................... (160,000) 392,000
Cash Beginning of Year........................................... 192,000 161,000
---------------- ----------------
Cash End of Six Months.......................................... $ 32,000 $ 553,000
---------------- ----------------
Schedule of income taxes and interest paid:
Income Taxes Paid........................................... $ 17,000 $ 68,000
Interest Paid............................................... 1,757,000 1,555,000
---------------- ----------------
$ 1,774,000 $ 1,623,000
---------------- ----------------
See notes to consolidated financial statements.
7
UNITEL VIDEO, INC.
------------------
FORM 10-O
---------
SIX MONTHS ENDED FEBRUARY 28, 1997
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------
The condensed consolidated balance sheet as of February 28, 1997, the
consolidated statements of operations for the six months and quarters ended
February 28, 1997 and February 29, 1996, and the consolidated statements of
cash flows for the six months then ended have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at February 28, 1997 and for
all periods presented have been made.
Certain information and footnote disclosure normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto in the Company's August 31, 1996
Form 10-K filed with the Securities and Exchange Commission. The results of
operations for the six months ended February 28, 1997 are not necessarily
indicative of the operating results for the full year.
2. STOCKHOLDERS' EQUITY
During the six months ended February 28, 1997, stockholders' equity
increased due to:
Net income........................................................ $ 363,000
Reduction in unearned employee benefit expense.................... 109,000
Reduction in additional paid in capital resulting from the
allocation of ESOP shares....................................... (31,000)
Purchase of stock under the Unitel Video, Inc. Employee Stock
Purchase Plan................................................... 39,000
---------
Total increase in stockholders' equity............................ $ 480,000
---------
3. PER SHARE DATA
Per share data for the quarter and six months ended February 28, 1997 and
February 29, 1996 is based on the weighted average number of common shares
outstanding. In the quarter and six months ended February 28, 1997 and
February 29, 1996 unreleased Employee Stock Ownership Plan shares are not
considered outstanding for earnings per share calculations. (See Note 4).
8
4. 401(k) Employee Savings and Stock Ownership Plan
- ----------------------------------------------------
The Company sponsors a 401(k) savings and stock ownership plan (the
"Plan") which requires the Company to match employee contributions to the
401(k) portion of the Plan in shares of the Company's Common Stock up to the
maximum amount set forth in the Plan. Effective September 1, 1994, the
Company has adopted the provisions of Statement of Position 93-6, "Employer's
Accounting for Employee Stock Ownership Plans" ("SOP 93-6").
In 1987, to purchase 115,849 shares of the Company's stock, the Plan
obtained financing from a bank amounting to $1,250,000. In 1991 the Plan
purchased 25,810 shares of the Company's stock financed by a $229,193 loan
from the Company. The Plan is funded by the Company as required to provide
the Plan with the funds necessary to meet its debt service requirements. The
loan obligations of the Plan are considered unearned employee benefit expense
and are recorded as a separate reduction of the Company's shareholders'
equity. The bank financing is guaranteed by the Company.
The Plan's shares are released and allocated to participant accounts
based upon Company contributions and certain payments made to reduce the Plan
debt. The Company reports compensation expense based on the dollar value of
the 401(k) match expense.
The Plan's compensation expense was $69,000 and $39,000 for the six
months and quarter ended February 28, 1997, respectively. A summary of the
Plan's shares as of February 28, 1997 is as follows:
Allocated shares.................................................. 96,666
Shares released for allocation.................................... 11,836
Unreleased shares................................................. 24,347
---------
132,849
---------
Fair value of unreleased shares at February 28, 1997.............. $ 158,000
---------
Prior to adoption of SOP 93-6, the unreleased shares were considered
outstanding for the earnings per share computation. Accordingly, for the six
months ended February 28, 1997, 24,347 shares were no longer considered
outstanding. The effect of adopting SOP 93-6 was not material on the net
income, and resulted in an increase of approximately 1% on the net income per
share for the six months ended February 28, 1997.
5. IMPAIRMENT AND RESTRUCTURING CHARGES
- ---------------------------------------
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FASB
Statement No. 121") which provides guidance on when to assess and how to
measure impairment of long-lived assets, certain intangibles and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. The Company adopted FASB
Statement No. 121 as of August 31, 1995.
9
In fiscal 1995 the Company determined to focus its resources toward
providing services to the entertainment and corporate communications areas,
which represent the Company's strength, and decided to sell its three Editel
divisions which did not specialize in these areas. The Company recorded the
carrying value of the assets related to these divisions as net assets held
for sale, and a corresponding impairment charge, since these assets were no
longer needed for the current and future operations of the Company.
In fiscal 1996 the Company began marketing these divisions to potential
buyers. In the first six months of fiscal 1996 the Company recorded an
impairment charge of $1,739,000 relating to the assets at all three Editel
divisions. The impairment charge recorded represented management's estimate
of the decrease in value of these assets during the period such assets were
held for sale based upon the depreciation method which the Company has found
to be reasonable and appropriate.
In February 1996 the Company closed its Editel Chicago division,
distributed the majority of its assets to other divisions throughout the
Company and sold the remaining assets at an auction held in May 1996. Also in
May 1996, after reevaluating the potential of the Editel Los Angeles
division, the Company decided to retain and expand this division.
Management's decision to retain and expand the Editel Los Angeles division
was based on several factors including an improving business trend, new lines
of business, new management, and increased cash flow. Based on these factors,
management believes this division has positive growth potential. As a result,
a determination was made to transfer to Editel Los Angeles equipment from the
Editel New York and Editel Chicago divisions and upgrade the creative and
technical staff at this facility. This was accomplished to enable the
division to provide additional services for customers and expand into new
areas of business. In August of 1996 the Company closed its Editel New York
division and distributed the majority of its editorial and computer graphics
assets throughout the Company. In November 1996 the Company sold the majority
of this division's remaining net assets held for sale of $1,587,000 to an
unrelated third party for $1,400,000. In February 1997 the remaining Editel
New York assets were sold at auction or redeployed throughout the Company.
Proceeds from the sale of assets are used by the Company to repay outstanding
debt.
6. STOCK BASED COMPENSATION
- ---------------------------
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock Based Compensation," provides companies a choice in the
method of accounting used to determine stock-based compensation. Companies
may account for such compensation either by using the intrinsic value-based
method provided by APB Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees," or the fair market value based method provided in SFAS
No. 123. This statement is required to be adopted by the Company during its
fiscal year ending August 31, 1997. The Company intends to use the intrinsic
value-based method provided in APB No. 25 to determine stock-based
compensation. The sole effect of the adoption of SFAS No. 123 is the
obligation imposed on the Company to comply with the new disclosure
requirements provided thereunder.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------ -----------------------------------------------------------------------
OF OPERATIONS.
-------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company is committed to keeping pace with technological developments
as well as taking advantage of new business opportunities in the video
communications industry. Capital expenditures were $3,422,000 during the six
months ended February 28, 1997, and consisted of the purchase of production,
post production and graphics equipment for use throughout the Company.
Net cash provided by operating activities during the six months ended
February 28, 1997 was $3,872,000 and during the six months ended February 29,
1996 was $3,247,000. Net cash provided by operating activities for the six
months ended February 28, 1997 was offset by $1,218,000 of cash used in
investing activities, which consisted primarily of capital expenditures (net
of proceeds from asset dispositions of $2,204,000), and by net cash used in
financing activities of $2,814,000 for debt repayment, resulting in a net
decrease in cash available of $160,000.
In August 1995 the Company recorded a deferred tax asset related to the
pre-tax losses and impairment charges incurred by the Company's Editel
divisions. During fiscal 1996, the Company incurred additional pre-tax losses
related to the operations and closure of the Editel New York and Editel
Chicago divisions. It is management's determination that the deferred tax
asset will be realized in future years based upon the Company's historical
record of pre-tax profits prior to the last two fiscal years of pre-tax
losses and based on the Company's current and projected pre-tax earnings.
In December 1995, the Company entered into a $26 million revolving credit
and term loan agreement with a financial institution, consisting of an $11
million revolving credit facility and two $7.5 million term loans. Term loan
A is payable in 59 monthly principal payments of $89,000 through November
2000 and a payment of $2,249,000 at December 2000. Term loan B is repayable
from the proceeds of sales of fixed assets. As of February 28, 1997,
$2,804,000 has been repaid leaving a balance of $4,696,000 for term loan B.
The remaining balance of term loan B is due in full on June 30, 1997. The
Company anticipates that any remaining balance of term loan B which has not
been repaid by the sale of fixed assets will be rescheduled to amortize over
a period of time equal to the remaining term of term loan A. At February 28,
1997 $6,697,000 was outstanding under the revolving portion of the credit
facility.
RESULTS OF OPERATIONS
- ---------------------
Sales were $15,000,000 and $20,529,000 for the quarters ended February
28, 1997 and February 29, 1996, respectively. Sales were $31,370,000, and
$43,469,000 for the six months ended February 28, 1997 and February 29, 1996,
respectively. The decrease in sales in the six month period ending February
28, 1997 was due primarily to the closure of the Company's Editel Chicago and
Editel New York divisions in fiscal 1996. Also contributing to lower sales
was the cancellation of the "Rush Limbaugh" and "Mark Walberg" talk shows,
which had been produced at Unitel studios during the majority of fiscal 1996,
and the out of service status of one of the Mobile division's most
11
sophisticated units during a substantial portion of the first quarter of
fiscal 1997 while being digitally retrofitted by Company engineers. The sales
decrease in the first six months of fiscal 1997 was partially offset by a
significant increase in sales at the Company's Editel Los Angeles division.
The Company's net loss for the quarter ended February 28, 1997 was
$(572,000), compared to the net loss of $(1,379,000) for the comparable
quarter of fiscal year 1996. The Company's net income was $363,000 for the
six months ended February 28, 1997, compared with a net loss of $(857,000)
for the same period of the prior fiscal year. The second quarter of the
fiscal year has historically resulted in a loss which was minimized in fiscal
1997 by the closure of the Editel New York and Editel Chicago divisions
during fiscal 1996. The loss in the second quarter of fiscal 1996 included
severance costs associated with the closure of the Editel Chicago division
and the restructuring of the Editel New York division. The effective tax rate
for the first six months of fiscal 1997 was 5% as compared with 47% for the
same period in the prior fiscal year. The effective rate for the first six
months of fiscal 1997 was less than the prior period tax rate due to the
utilization of net operating loss carryforwards generated by the losses
incurred in fiscal 1995 and 1996.
Production costs, the main component of cost of sales, consist primarily
of direct labor, equipment maintenance expenses and occupancy costs. The
Company's production costs, as a percentage of sales, were 68% for the
quarter ended February 28, 1997, as compared to 76% for the quarter ended
February 29, 1996 and were 67% and 71% for the first six months of fiscal
years 1997 and 1996, respectively. The decrease in production expenses as a
percentage of sales in the quarter and six months ended February 28, 1997 as
compared with the same period in the prior year, is primarily due to the
closure of the Company's Editel Chicago and Editel New York divisions which
had been incurring these expenses at a higher percent of sales compared with
the Company's other divisions. Also included in the decrease in production
expenses from the comparable period in the prior year is the impact of the
reduction of certain cost estimates related to the closure of the Editel New
York and Editel Chicago divisions.
Depreciation, as a percentage of sales, was 15% and 9% for the quarters
ended February 28, 1997 and February 29, 1996, respectively, and 14% and 8%
for the first six months of the 1997 and 1996 fiscal years, respectively. The
increase in the quarter and six months ended February 28, 1997 as compared
with the same period in the prior year, was a result of the reclassification
of the net property and equipment of the Company's three Editel divisions to
net assets held for sale at August 31, 1995 with the corresponding
depreciation expense recorded as impairment charges. In May 1996, the Company
determined to retain its Editel Los Angeles division and, accordingly,
resumed recording depreciation expense for this division. The impairment
charge recorded in the first six months of fiscal 1996 represents
management's estimate of the decrease in value of these assets based upon the
depreciation method which the Company has used in the past and which
management has found to be reasonable and appropriate. Of the $1,739,000
impairment charge recorded in the first six months of fiscal 1996, $777,000
related to the Editel Los Angeles division, which if recorded as depreciation
expense in 1996 would have resulted in depreciation as a percentage of sales
of 12% as compared to 8% in the first six months of fiscal 1996. In addition,
the majority of the assets of the Editel Chicago
12
and Editel New York divisions were redistributed throughout the Company which
contributed to the increase in depreciation expense in fiscal 1997.
Selling expenses for the quarters ended February 28, 1997 and February
29, 1996 were 3.4% and 3.2% of sales, respectively, and 3.2% and 3.1% for the
six months ended February 28, 1997 and February 29, 1996, respectively. The
increase in the quarter and six months ended February 28, 1997 as compared
with the same period in the prior year, is mainly due to an increase in the
sales staff at the New York divisions and at Editel Los Angeles.
General and administrative expenses, as a percentage of sales, for the
quarters ended February 28, 1997 and February 29, 1996 were 11.7% and 12.4%,
respectively, and 9.9% and 11.5% for the six months ended February 28, 1997
and February 29, 1996, respectively. The decrease in general and
administrative expenses as a percentage of sales is primarily due to the
closure of the Company's Editel Chicago and Editel New York divisions which
had been incurring these expenses at a higher percent of sales compared with
the Company's other divisions. Also included in the decrease in general and
administrative expenses from the comparable period in the prior year is the
impact of the reduction of certain cost estimates related to the closure of
the Editel New York and Editel Chicago divisions.
Interest expense, as a percentage of sales, for the quarters ended
February 28, 1997 and February 29, 1996 was 6.2% and 4.5%, respectively, and
5.7% and 4.1% for the six months ended February 28, 1997 and February 29,
1996. Since the level of outstanding debt in the first six months of fiscal
1997 remained constant with the same period of the prior year and sales
decreased in the first six months of fiscal 1997, interest expense as a
percentage of sales increased in fiscal 1997 when compared with the same
period of the prior year.
The Company's effective tax rate was 5% and 47% for the first six months
of fiscal years 1997 and 1996, respectively. The effective tax rate for the
first six months of fiscal 1997 is less than the federal statutory rate of
34% due to the utilization of net operating loss carryforwards generated by
the losses incurred in fiscal 1995 and 1996. The effective tax rate exceeded
the federal statutory rate of 34% in fiscal 1996 due to state and local taxes.
13
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on February
5, 1997.
(b) At the Annual Meeting, Herbert Bass and Alex Geisler were elected as
Directors for terms expiring in 2000. The term of office as a Director of
Walter G. Arader, Philip S. Birsh, Barry Knepper and Richard Clouser
continued after the meeting.
(c) The total votes cast for, withheld or against, as well as the number
of abstentions and broker non-votes, as to the election of Directors, were as
follows:
TOTAL VOTES TOTAL VOTES
NOMINEE FOR WITHHELD
- --------------------------------------------------------- -------------- -------------------
Herbert Bass............................................. 2,234,712 184,242
Alex Geisler............................................. 2,234,712 184,242
There were no abstentions or broker non-votes for the election of Directors.
(d) In addition, at the Annual Meeting an amendment (the "Amendment") to
the Company's 1992 Stock Option Plan (the "Plan") was approved providing for
each non-employee Director to receive an automatic grant on each May 1st
during the term of the Plan of an option to purchase 3,000 shares of the
Company's stock, increased from the 1,000 shares of stock subject to the
automatic grant prior to approval of the Amendment.
(e) The total votes cast for, withheld or against, as well as the number
of abstentions and broker non-votes, as to the approval of the Amendment,
were as follows:
TOTAL VOTES FOR TOTAL VOTES AGAINST ABSTENTIONS
- --------------- -------------------- -----------
2,003,072 239,692 10,146
There were 166,044 broker non-votes for the approval of the Amendment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by item 601 of Regulation S-K.
(1) Exhibit 10. Amended 1992 Stock Option Plan.
(2) Exhibit 27. Financial Data Schedule.
(b) There were no reports filed on Form 8-K during the six month period
ended February 28, 1997.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITEL VIDEO, INC.
By: /s/ Barry Knepper
-----------------------------------------
Barry Knepper
President and Chief Executive Officer
By: /s/ George Horowitz
------------------------------------------
George Horowitz
Chief Financial Officer
Dated: April 7, 1997
15