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 May 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-8654
Unitel Video, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 23-1713238
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(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.
555 West 57th Street--New York, New York 10019
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(Address of principal executive offices)
(212) 265-3600
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(Registrant's telephone number, including area code)
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(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 July 8, 1997
(Number of shares) (Date)
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED May 31, 1997
Page
INDEX NUMBER
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets May 31,
1997 (Unaudited) and August 31, 1996 3-4
Consolidated Statements of
Operations May 31, 1997 (Unaudited)
and May 31, 1996 (Unaudited) 5
Consolidated Statements of Cash
Flows May 31, 1997 (Unaudited) and
May 31, 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 11-14
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
2
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED May 31, 1997
Part 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 31,
MAY 31, 1997 1996
------------- --------------
(UNAUDITED) (NOTE)
ASSETS
- ------
Current Assets:
Cash............................................ $ 75,000 $ 192,000
Accounts receivable, net........................ 7,417,000 8,701,000
Other receivables............................... 82,000 333,000
Prepaid income taxes............................ 186,000 142,000
Prepaid expenses................................ 500,000 735,000
Net assets held for sale........................ -- 1,587,000
Deferred tax asset.............................. 844,000 844,000
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Total current assets.............................. 9,104,000 12,534,000
Property and equipment--at cost
Land, buildings and improvements................ 20,287,000 19,915,000
Video equipment................................. 104,043,000 97,023,000
Furniture and fixtures.......................... 4,107,000 3,502,000
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128,437,000 120,440,000
Less accumulated depreciation..................... 75,550,000 69,974,000
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52,887,000 50,466,000
Deferred tax asset................................ 1,625,000 1,625,000
Goodwill.......................................... 1,755,000 1,859,000
Other assets...................................... 1,126,000 1,134,000
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$ 66,497,000 $ 67,618,000
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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)
AUGUST 31,
MAY 31, 1997 1996
(UNAUDITED) (NOTE)
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable................................ 6,471,000 $ 4,967,000
Accrued expenses................................ 573,000 1,450,000
Payroll, benefits and related taxes............. 1,538,000 2,947,000
Current maturities of long-term debt............ 7,090,000 8,362,000
Current maturities of subordinated debt......... 1,167,000 1,166,000
Current maturities of ESOP loan................. 30,000 166,000
Current maturities of capital
lease obligations............................. 2,120,000 1,832,000
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Total current liabilities....................... 18,989,000 20,890,000
Deferred rent..................................... 114,000 325,000
Long-term debt, less current maturities........... 21,786,000 19,706,000
Subordinated debt, less current maturities........ 1,667,000 1,979,000
Long-term leases, less current maturities......... 4,928,000 5,604,000
Accrued retirement................................ 1,208,000 1,304,000
Stockholders' equity:
Common stock, par value $.01 per share
Authorized 5,000,000 shares Issued
2,674,665 and 3,532,554 shares
respectively, and outstanding and
2,666,265 shares respectively................. 27,000 26,000
Additional paid-in capital........................ 27,538,000 27,545,000
Accumulated deficit............................... (1,754,000) (1,592,000)
Common stock held in treasury, at cost
(866,289 shares)................................ (7,974,000) (7,974,000)
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17,837,000 18,005,000
Unearned employee benefit expense................. (32,000) (195,000)
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Total stockholders' equity...................... 17,805,000 17,810,000
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$ 66,497,000 $ 67,618,000
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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 MAY 31, NINE MONTHS ENDED MAY 31,
---------------------------- ----------------------------
1997 1996 1997 1996
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Sales............................................... $ 15,840,000 $ 19,281,000 $ 47,210,000 $ 62,750,000
Cost of sales:
Production costs.................................. 10,993,000 13,910,000 31,937,000 44,897,000
Depreciation...................................... 2,101,000 2,205,000 6,410,000 5,711,000
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13,094,000 16,115,000 38,347,000 50,608,000
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Gross profit........................................ 2,746,000 3,166,000 8,863,000 12,142,000
Operating expenses:
Selling........................................... 413,000 496,000 1,407,000 1,832,000
General and administrative........................ 2,072,000 2,429,000 5,193,000 7,416,000
Interest.......................................... 900,000 984,000 2,674,000 2,755,000
Restructuring charge (Note 5)..................... -- 1,246,000 -- 1,246,000
Impairment charge................................. -- 261,000 -- 2,000,000
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3,385,000 5,416,000 9,274,000 15,249,000
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Earnings (loss) from operations.................... (639,000) (2,250,000) (411,000) (3,107,000)
Other income (loss)................................ 96,000 (37,000) 250,000 (37,000)
------------- ------------- ------------- -------------
Earnings (loss) before income taxes................ (543,000) (2,287,000) (161,000) (3,144,000)
Income taxes....................................... (18,000) 3,000 1,000 3,000
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Net earnings (loss) applicable for common stock.... $ (525,000) $ (2,290,000) $ (162,000) $ (3,147,000)
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Net earnings (loss) per common share............... $ (.20) $ (.88) $ (.06) $ (1.21)
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Weighted average of common and common equivalent
shares outstanding............................... 2,681,000 2,611,000 2,690,000 2,591,000
------------- ------------- ------------- -------------
See notes to consolidated financial statements.
5
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
---------------------------
MAY 31, 1997 MAY 31, 1996
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Cash Flows From Operating Activities:
Net loss......................................................... $ (162,000) $ (3,147,000)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 6,621,000 5,728,000
Net gain on disposal of equipment................................ (211,000) (17,000)
Amortization of deferred financing costs......................... 115,000 174,000
Deferred financing costs......................................... -- (585,000)
Deferred rent.................................................... (211,000) (457,000)
Accrued retirement expense....................................... (96,000) 123,000
Impairment charge................................................ -- 2,000,000
Decrease (Increase) in:
Accounts receivable.............................................. 1,284,000 3,291,000
Other receivables................................................ 251,000 54,000
Prepaid expenses................................................. 235,000 615,000
Prepaid taxes.................................................... (44,000) 116,000
Other assets..................................................... (104,000) (118,000)
Deferred tax asset............................................... -- (79,000)
Increase (Decrease) in:
Accounts payable................................................. 1,504,000 (3,244,000)
Accrued expenses................................................. (877,000) (30,000)
Payroll and related taxes........................................ (1,409,000) (716,000)
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Total adjustments................................................ 7,058,000 6,855,000
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Net cash provided by operating activities...................... 6,896,000 3,708,000
Cash Flows From Investing Activities:
Capital expenditures............................................. (9,373,000) (6,340,000)
Proceeds from disposal of equipment.............................. 2,230,000 898,000
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Net cash used in investing activities.......................... (7,143,000) (5,442,000)
6
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
NINE MONTHS ENDED
---------------------------
MAY 31, 1997 MAY 31, 1996
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Cash Flows From Financing Activities:
Proceeds from long-term financing.............................. $9,874,000 $ 24,503,000
Proceeds from issuance of common stock......................... 39,000 223,000
Repayment of loan to ESOP...................................... (136,000) (142,000)
Principal repayments........................................... (9,765,000) (22,950,000)
Release of ESOP quarterly shares............................... 118,000 146,000
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Net cash provided (used) by financing activities............... 130,000 1,780,000
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Net Increase (Decrease) in Cash................................. (117,000) 46,000
Cash Beginning of Year.......................................... 192,000 161,000
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Cash End of Nine Months......................................... $ 75,000 $ 207,000
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Schedule of income taxes and interest paid:
Income Taxes Paid............................................. $ 30,000 $ 77,000
Interest Paid................................................. 2,416,000 2,237,000
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$2,446,000 $ 2,314,000
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See notes to consolidated financial statements.
7
UNITEL VIDEO, INC.
FORM 10-Q
NINE MONTHS ENDED MAY 31, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of May 31, 1997, the
consolidated statements of operations for the nine months and quarters ended May
31, 1997 and 1996, and the consolidated statements of cash flows for the nine
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 May 31, 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
nine months ended May 31, 1997 are not necessarily indicative of the operating
results for the full year.
2. STOCKHOLDERS' EQUITY
During the nine months ended May 31, 1997, stockholders' equity decreased
due to:
Net loss......................................................... $(162,000)
Reduction in unearned employee benefit expense................... 163,000
Reduction in additional paid in capital resulting from the
allocation of ESOP shares...................................... (45,000)
Purchase of stock under the Unitel Video Inc. Employee Stock
Purchase Plan.................................................. 39,000
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Total decrease in stockholders' equity........................... $ (5,000)
---------
3. PER SHARE DATA
Per share data for the quarter and nine months ended May 31, 1997 and 1996
is based on the weighted average number of common shares outstanding. In the
quarter and nine months ended May 31, 1997, 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 $117,000 and $39,000 for the nine months
and quarter ended May 31, 1997, respectively. A summary of the Plan's shares as
of May 31, 1997 is as follows:
Allocated shares............................... 96,666
Shares released for allocation................. 15,064
Unreleased shares.............................. 21,119
---------
132,849
---------
Fair value of unreleased shares at
May 31, 1997................................. $ 127,000
---------
Prior to adoption of SOP 93-6, the unreleased shares were considered
outstanding for the earnings per share computation. Accordingly, for the nine
months ended May 31, 1997, 21,119 shares were no longer considered outstanding.
The effect of adopting SOP 93-6 was not material on the net loss, and resulted
in a decrease of approximately 1% on the net loss per share for the nine months
ended May 31, 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 nine months of fiscal 1996 the Company recorded an
impairment charge of $2,000,000 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. In the third quarter of
1996 the Company recorded a restructuring charge of $1,246,000 related to the
real estate lease buy out for the Editel Chicago division. Also in May 1996,
after reevaluating the potential of the Editel Los Angeles division, the Company
decided to retain and expand this division, based on its improving business
trend, new lines of business, new management and increased cash flow. 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 an auction or
redeployed throughout the Company. In April 1997 the Company announced the
merger of its Unitel Hollywood and Editel Los Angeles divisions under one roof
at the Editel Los Angeles facility. A majority of the equipment previously in
use at Unitel Hollywood is being used at either the new combined facility or at
the Company's facilities in New York City. The balance of the equipment has
either already been sold in private sales or will be sold at an auction to be
held in July 1997. 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 $9,373,000 during the nine
months ended May 31, 1997, and consisted of the purchase of production, post
production and graphics equipment for use throughout the Company including
approximately $4,700,000 for the construction of a new digital mobile production
unit.
Net cash provided by operating activities during the nine months ended May
31, 1997 was $6,896,000 and during the nine months ended May 31, 1996 was
$3,708,000. Net cash provided by operating activities for the nine months ended
May 31, 1997 was offset by $7,143,000 of cash used in investing activities,
which consisted primarily of capital expenditures (net of proceeds from asset
dispositions of $2,230,000) and was supplemented by net cash provided by
financing activities of $130,000, resulting in a net decrease in cash available
of $117,000.
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 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. In May 1997
the loan agreement was renegotiated with $2.5 million of Term loan B rescheduled
to become part of Term loan A. The lender also made available an additional
$500,000 as part of Term loan A. Term loan A was then rescheduled to be payable
in monthly principal payments of $100,000 through December 2001 with the balance
of $4,700,000 due on December 12, 2001. Term loan B is repayable from the
proceeds of sales of fixed assets. As of May 31, 1997 Term Loan B had a balance
of $2,142,000 outstanding, of which $642,000 has been repaid as of June 29, 1997
with the remainder due by September 30, 1997. In addition, the lender has
provided the Company with a $3.5 million bridge loan to be repaid from the
proceeds of an $8.5 million industrial revenue bond financing, scheduled to
close in July 1997. The industrial revenue bonds will be issued by the Allegeny
County (Pennsylvania) Industrial Development Authority in an initial principal
amount of $5 million and the proceeds of the bonds will be used by the Company
to finance expenses incurred in connection with the construction of up to two
digital mobile production units. At May 31, 1997 there was $3,000,000
outstanding on the bridge loan and $6,174,000 outstanding under the revolving
credit portion of the facility.
11
In May 1997 the Company announced the establishment of a Canadian mobile
television operation in Montreal, Canada. The expansion of the Company's mobile
operations includes sales and marketing personnel and a maintenance facility
which serves as the Company's Canadian hub allowing the Company to better serve
its North American clients while also developing business and market share.
RESULTS OF OPERATIONS
Sales were $15,840,000 and $19,281,000 for the quarters ended May 31,
1997 and 1996, respectively. Sales were $47,210,000, and $62,750,000 for the
nine months ended May 31, 1997 and 1996, respectively. The decrease in sales
in the nine month period ending May 31, 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 unavailability of one of the
Mobile division's most 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 nine 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 May 31, 1997 was $525,000,
compared to a net loss of $2,290,000 for the comparable quarter of fiscal year
1996. The Company's net loss was $162,000 for the nine months ended May 31,
1997, compared with a net loss of $3,147,000 for the same period of the prior
fiscal year. The Company's 1997 third quarter net loss of $525,000 was due
substantially to the Company's decision to merge its West coast Unitel Hollywood
and Editel Los Angeles facilities resulting in a loss of $900,000 from the
Unitel Hollywood operations during the third quarter. The losses incurred in
merging the West coast facilities were attributable to a loss of business
related to the transition, severance costs and other costs which the Company
incurred in its efforts to maintain client relationships and employee morale
during the transition.
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 69% for the quarter ended May
31, 1997, as compared to 72% for the quarter ended May 31, 1996 and were 68% and
72% for the first nine months of fiscal years 1997 and 1996, respectively. The
decrease in production expenses as a percentage of sales in the quarter and nine
months ended May 31, 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.
12
Depreciation, as a percentage of sales, was 13% and 11% for the quarters
ended May 31, 1997 and 1996, respectively, and 14% and 9% for the first nine
months of the 1997 and 1996 fiscal years, respectively. The increase in the
quarter and nine months ended May 31, 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 nine
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 $2,000,000 impairment charge recorded in the first nine
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 10% as compared to 9% in the first
nine months of fiscal 1996. In addition, the majority of the assets of the
Editel Chicago and Editel New York divisions were redistributed throughout
the Company which contributed to the increase in depreciation expense in
fiscal 1997.
Selling expenses for both quarters ended May 31, 1997 and 1996 were 2.6% of
sales, and 3.0% and 2.9% for the nine months ended May 31, 1997 and 1996,
respectively. The increase in the nine months ended May 31, 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 May 31, 1997 and 1996 were 13.1% and 12.6%, respectively, and
11.0% and 11.8% for the nine months ended May 31, 1997 and 1996, respectively.
The increase in general and administrative expenses as a percentage of sales
during the third quarter of fiscal 1997 when compared with the same period of
the prior year is primarily due to costs incurred related to the merger of the
Company's West coast divisions. The decrease in general and administrative
expenses as a percentage of sales for the nine months ended May 31, 1997 when
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 percentage 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 May 31,
1997 and 1996 was 5.7% and 5.1%, respectively, and 5.7% and 4.4% for the nine
months ended May 31, 1997 and 1996. Since the level of outstanding debt in the
first nine months of fiscal 1997 remained constant with the same period of the
prior year and sales decreased in the first nine 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.
13
The Company's effective tax rate was 5% and 47% for the first nine months of
fiscal years 1997 and 1996, respectively. The effective tax rate for the first
nine 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.
14
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
1. Exhibit 4(A). Second Amendment to Loan and Security Agreement and Limited
Waiver dated as of February 24, 1997.
2. Exhibit 4(B). Third Amendment and Limited Waiver to Amended and Restated
Loan and Security Agreement dated as of March 21, 1997.
3. Exhibit 4(C). Fourth Amendment to Amended and Restated Loan and Security
Agreement dated as of May 7, 1997.
4. Exhibit 10(A). Employment Agreement between Editel Los Angeles and Albert
Walton dated as of March 20, 1997.
5. Exhibit 10(B). Employment Agreement between Unitel Video, Inc. and Mark
Miller dated as of March 20, 1997.
6. Exhibit 27. Financial Data Schedule.
(b) There were no reports filed on Form 8-K during the nine month period
ended May 31, 1997.
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
CHIEF EXECUTIVE OFFICER
BY: /S/ GEORGE HOROWITZ
------------------------------
George Horowitz
CHIEF FINANCIAL OFFICER
DATED: JULY 8, 1997
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