-----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, U9qN024crUadl1JcVEwg2F2Ng0ef6Wcd5L1QnOctolLQsFrJqmWcjP+EGF7Q0Sm3 0wdIWAYYTkwVHv9rKO7wSw== 0000912057-97-012111.txt : 19970409 0000912057-97-012111.hdr.sgml : 19970409 ACCESSION NUMBER: 0000912057-97-012111 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970407 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITEL VIDEO INC/DE CENTRAL INDEX KEY: 0000740103 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 231713238 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08654 FILM NUMBER: 97575699 BUSINESS ADDRESS: STREET 1: 555 WEST 57TH STREET STREET 2: 12TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125819411 MAIL ADDRESS: STREET 1: 555 WEST 57TH STREET STREET 2: 12FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 10-Q 1 10-Q 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 EX-10 2 EXH. 10 1992 STOCK OPTION PLAN As amended through November 1, 1996 1992 STOCK OPTION PLAN of UNITEL VIDEO, INC. 1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is designed to provide an incentive to key employees (including officers and directors who are key employees) and to directors who are not employees of Unitel Video, Inc., a Delaware corporation (the "Company"), and its present and future subsidiary corporations, as defined in Paragraph 18 ("Subsidiaries"), and to offer an additional inducement in obtaining the services of such individuals. The Plan provides for the grant of "incentive stock options" ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock options ("NQSOs"), but the Company makes no warranty as to the qualification of any option as an "incentive stock option" under the Code. 2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12, the aggregate number of shares of Common Stock, $.01 par value per share, of the Company ("Common Stock") for which options may be granted under the Plan shall not exceed 350,000. Such shares of Common Stock may, in the discretion of the Committee (as defined in Paragraph 3), consist either in whole or in part of authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Company. The Company shall at all times during the term of the Plan reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of the Plan. Subject to the provisions of Paragraph 13, any shares of Common Stock subject to an option which for any reason expires, is cancelled, is terminated unexercised or which ceases for any reason to be exercisable shall again become available for the granting of options under the Plan. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Company's Board of Directors which, to the extent that it may determine, may delegate its powers with respect to the administration of the Plan to a committee of the Board of Directors of the Company (the "Committee") consisting of not less than two directors, each of whom shall be a "Non-Employee Director" within the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). References in the Plan to determinations or actions by the Committee shall be deemed to include determinations and actions by the Board of Directors. Subject to the express provisions of the Plan, the Committee shall have the authority, in its sole discretion, with respect to Key Employee Options (as defined in Paragraph 18): to determine the key employees who shall receive options; the times when they shall receive options; whether an option shall be an ISO or a NQSO; the number of shares of Common Stock to be subject to each option; the term of each option; the date each option shall become exercisable; whether an option shall be exercisable in whole, in part or in installments, and, if in installments, the number of shares of Common Stock to be subject to each installment; whether the installments shall be cumulative; the date each installment shall become exercisable and the term of each installment; whether to accelerate the date of exercise of any installment; whether shares of Common Stock may be issued on exercise of an option as partly paid, and, if so, the dates when future installments of the exercise price shall become due and the amounts of such installments; the exercise price of each option; the form of payment of the exercise price; whether to restrict the sale or other disposition of the shares of Common Stock acquired upon the exercise of an option and to waive any such restriction; whether to subject the exercise of all or any portion of an option to the fulfillment of contingencies as specified in the contract referred to in Paragraph 11 (the "Contract"), including without limitation, contingencies relating to entering into a covenant not to compete with the Company and its Parent (as defined in Paragraph 18) and Subsidiaries, financial objectives for the Company, a Subsidiary, a division, a product line or other category, and/or the period of continued employment of the optionee with the Company or its Subsidiaries, and to determine whether such contingencies have been met; and with respect to Key Employee Options and Outside Director Options (as defined in Paragraph 18): to construe the respective Contracts and the Plan; to determine the amount, if any, necessary to satisfy the Company's obligation to withhold taxes; with the consent of the optionee, to cancel or modify an option, provided such option as modified would be permitted to be granted on such date under the terms of the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; and to make all other determinations necessary or advisable for administering the Plan. The determinations of the Committee on the matters referred to in this Paragraph 3 shall be conclusive. No member or former member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted hereunder. 4. ELIGIBILITY; GRANTS. The Committee may, consistent with the purposes of the Plan, grant Key Employee Options from time to time, to key employees of the Company or any of its Subsidiaries. Key Employee Options granted shall cover such number of shares of Common Stock as the Committee may determine; provided, however, that the aggregate fair market value (determined at the time the option is granted) of the shares of Common Stock for which any eligible person may be granted ISOs under the Plan or any other plan of the Company, or of a Parent or a Subsidiary of the Company, which are exercisable for the first time by such optionee during any calendar year shall not exceed $100,000. The $100,000 ISO limitation shall be applied by taking ISOs into account in the order in which they were granted. Any option (or the portion thereof) granted in excess of such amount shall be treated as a NQSO. On the date the Plan is adopted by the Board of Directors, each member of the Board of Directors who is not on such date an employee of the Company or any of its Subsidiaries shall be granted an Outside Director Option to purchase 1,000 shares of Common Stock. In addition, on each anniversary of the date the Plan is adopted by the Board of Directors, each member of the Board of Directors who is not on that anniversary date an employee of the Company or any of its Subsidiaries shall be granted an Outside Director Option to purchase 5,000 shares of Common Stock. -2- In the event the remaining shares available for grant under the Plan are not sufficient to grant the Outside Director Options to such non-employee directors in any year, the number of shares subject to each Outside Director Option for such year shall be reduced proportionately. The Committee shall have no discretion with respect to the selection of directors to receive Outside Director Options or the amount, the price or the timing with respect thereto. A director who is not an employee of the Company or any of its Subsidiaries shall not be entitled to receive any options other than Outside Director Options as provided herein. 5. EXERCISE PRICE. The exercise price of the shares of Common Stock under each Key Employee Option shall be determined by the Committee; provided, however, that the exercise price shall not be less than the fair market value of the Common Stock subject to such option on the date of grant; and further, provided, that if, at the time an ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the exercise price of such ISO shall not be less than 110% of the fair market value of the Common Stock subject to such ISO on the date of grant. The exercise price of the shares of Common Stock under each Outside Director Option shall be equal to the fair market value of the Common Stock subject to such option on the date of grant. The fair market value of the Common Stock on any day shall be (a) if the principal market for the Common Stock is a national securities exchange, the average of the highest and lowest sales prices of the Common Stock on such day as reported by such exchange or on a composite tape reflecting transactions on such exchange, (b) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), and (i) if actual sales price information is available with respect to the Common Stock, the average of the highest and lowest sales prices of the Common Stock on such day on NASDAQ, or (ii) if such information is not available, the average of the highest bid and lowest asked prices for the Common Stock on such day on NASDAQ, or (c) if the principal market for the Common Stock is not a national securities exchange and the Common Stock is not quoted on NASDAQ, the average of the highest bid and lowest asked prices for the Common Stock on such day as reported on the NASDAQ OTC Bulletin Board Service or by National Quotation Bureau, Incorporated or a comparable service; provided, however, that if clauses (a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have been made or no quotes are available for such day, the fair market value of the Common Stock shall be determined by the Committee by any method consistent with applicable regulations adopted by the Treasury Department relating to stock options. The determination of the Committee shall be conclusive in determining the fair market value of the stock. 6. TERM. The term of each Key Employee Option shall be such term as is established by the Committee, in its sole discretion, at or before the time such option is granted. Notwithstanding the foregoing, the term of each ISO granted pursuant to the Plan shall be for a period not exceeding 10 years from the date of grant thereof, and further provided, that if, at the time an ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of the Code) stock -3- possessing more than 10% of the total combined voting power of all classes of stock of the Company, of any of its Subsidiaries or of a Parent, the term of the ISO shall be for a period not exceeding five years from the date of grant. Each Outside Director Option shall have a term of ten years commencing on the date of grant. Options shall be subject to earlier termination as hereinafter provided. 7. EXERCISE. An option (or any part or installment thereof), to the extent then exercisable, shall be exercised by giving written notice to the Company at its principal office (at present 555 West 57th Street, New York, New York 10019, Attn: Barry Knepper, Executive Vice President), stating which ISO, NQSO or Outside Director Option is being exercised, specifying the number of shares of Common Stock as to which such option is being exercised and accompanied by payment in full of the aggregate exercise price therefor (or the amount due on exercise if the Contract permits installment payments) (a) in cash or by certified check, or (b) with the consent of the Committee (in the Contract or otherwise), with previously acquired shares of Common Stock having an aggregate fair market value, on the date of exercise, equal to the aggregate exercise price of all options being exercised, or with any combination of cash, certified check or shares of Common Stock. A person entitled to receive Common Stock upon the exercise of an option shall not have the rights of a stockholder with respect to such shares of Common Stock until the date of issuance of a stock certificate to him for such shares; provided, however, that until such stock certificate is issued, any option holder using previously acquired shares of Common Stock in payment of an option exercise price shall continue to have the rights of a stockholder with respect to such previously acquired shares. In no case may a fraction of a share of Common Stock be purchased or issued under the Plan. 8. TERMINATION OF RELATIONSHIP WITH COMPANY. Any holder of a Key Employee Option whose employment with the Company (and its Parent and Subsidiaries), and any holder of an Outside Director Option whose status as a director of the Company, has terminated for any reason other than his death or Disability (as defined in Paragraph 18) may exercise such option, to the extent exercisable on the date of such termination, at any time within three months after the date of termination, but not thereafter and in no event after the date the option would otherwise have expired; provided, however, that if his employment or status as a director shall be terminated either (a) for cause, or (b) without the consent of the Company, said option shall terminate immediately. Key Employee Options granted under the Plan shall not be affected by any change in the status of the holder so long as he continues to be a full-time employee of the Company, its Parent or any of the Subsidiaries (regardless of having been transferred from one corporation to another). Nothing in the Plan or in any option granted under the Plan shall confer on any individual any right to continue in the employ of the Company, its Parent or any of its Subsidiaries, or as a director of the Company, or interfere in any way with the right of the Company, its Parent or -4- any of its Subsidiaries to terminate the employee's employment at any time for any reason whatsoever without liability to the Company, its Parent or any of its Subsidiaries. 9. DEATH OR DISABILITY OF AN OPTIONEE. If an optionee dies (a) while he is employed by the Company, its Parent or any of its Subsidiaries, or while he is a director of the Company, (b) within three months after the termination of such relationship (unless such termination was for cause or without the consent of the Company) or (c) within one year following the termination of such relationship by reason of Disability, the Key Employee Options and Outside Director Options, respectively, may be exercised, to the extent exercisable on the date of his death, by his executor, administrator or other person at the time entitled by law to his rights under such option, at any time within one year after death, but not thereafter and in no event after the date the option would otherwise have expired. Any optionee whose employment or status as a director has terminated by reason of Disability may exercise his Key Employee Options and Outside Director Options, respectively, to the extent they are exercisable upon the effective date of such termination, at any time within one year after such date, but not thereafter and in no event after the date the option would otherwise have expired. 10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its discretion, among other things, as a condition to the exercise of any option that either (a) a Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Common Stock to be issued upon such exercise shall be effective and current at the time of exercise, or (b) there is an exemption from registration under the Securities Act for the issuance of shares of Common Stock upon such exercise. Nothing herein shall be construed as requiring the Company to register shares subject to any option under the Securities Act. The Committee may require the optionee to execute and deliver to the Company his representation and warranty, in form and substance satisfactory to it, that the shares of Common Stock to be issued upon the exercise of the option are being acquired by the optionee for his own account, for investment only and not with a view to the resale or distribution thereof. In addition, the Committee may require the optionee to represent and warrant in writing that any subsequent resale or distribution of shares of Common Stock by such optionee will be made only pursuant to (i) a Registration Statement under the Securities Act which is effective and current with respect to the shares of Common Stock being sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption, the optionee shall, at the request of the Committee and prior to any offer of sale or sale of such shares of Common Stock, provide the Company with a favorable written opinion of counsel, in form and substance satisfactory to the Company, as to the applicability of such exemption to the proposed sale or distribution. 11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an appropriate Contract which shall be duly executed by the Company and the optionee, and shall contain such terms and conditions not inconsistent herewith as may be determined by the Committee. -5- 12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other provisions of the Plan, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, merger or reorganization, split-up, combination or exchange of shares or the like, (a) the aggregate number and kind of shares subject to the Plan, (b) the aggregate number and kind of shares subject to each outstanding option and the exercise price thereof and (c) the aggregate number and kind of shares to be granted pursuant to Paragraph 4 to directors who are not employees of the Company shall each be appropriately adjusted by the Committee, whose determination shall be conclusive. 13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the Board of Directors of the Company on May 1, 1992. No option may be granted under the Plan after April 30, 2002. The Board of Directors, without further approval of the Company's stockholders, may at any time and from time to time suspend or terminate the Plan, in whole or in part, or amend it from time to time in such respects as it may deem advisable, including without limitation, in order that ISOs granted hereunder meet the requirements for "incentive stock options" under the Code, to comply with applicable requirements of the Securities Act and the Exchange Act, or to conform to any change in applicable law or to regulations or rulings of administrative agencies; provided, however, that no amendment shall be effective without the requisite prior or subsequent stockholder approval which would (a) except as contemplated in Paragraph 12, increase the maximum number of shares of Common Stock for which options may be granted under the Plan, (b) materially increase the benefits to participants under the Plan or (c) change the eligibility requirements for individuals entitled to receive options hereunder. Notwithstanding the foregoing, the provisions regarding the selection of directors for participation in, and the amount, the price or the timing of, Outside Director Options shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act or the rules thereunder. No termination, suspension or amendment of the Plan shall, without the consent of the holder of an existing option affected thereby, adversely affect his rights under such option. The power of the Committee to construe and administer any options granted under the Plan prior to the termination or suspension of the Plan nevertheless shall continue after such termination or during such suspension. 14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution, and options may be exercised, during the lifetime of the holder thereof, only by him or his legal representatives. Except to the extent provided above, options may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. 15. WITHHOLDING TAXES. The Company may withhold cash and/or shares of Common Stock to be issued to the optionee having an aggregate fair market value equal to the amount which it determines is necessary to satisfy its obligation to withhold Federal, state and local income taxes or other taxes incurred by reason of the grant or exercise of an option, its disposition, or the disposition of the underlying shares of Common Stock. Alternatively, the Company may -6- require the holder to pay to the Company such amount, in cash, promptly upon demand. The Company shall not be required to issue any shares of Common Stock pursuant to any such option until all required payments have been made. Fair market value of the shares of Common Stock shall be determined in accordance with Paragraph 5. 16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or legends upon the certificates for shares of Common Stock issued upon exercise of an option under the Plan and may issue such "stop transfer" instructions to its transfer agent in respect of such shares as it determines, in its discretion, to be necessary or appropriate to (a) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, (b) implement the provisions of the Plan or any agreement between the Company and the optionee with respect to such shares of Common Stock, or (c) permit the Company to determine the occurrence of a "disqualifying disposition," as described in Section 421(b) of the Code, of the shares of Common Stock transferred upon the exercise of an ISO granted under the Plan. 17. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Committee may, without further approval by the stockholders, substitute new options for prior options of a Constituent Corporation (as defined in Paragraph 18) or assume the prior options of such Constituent Corporation. 18. DEFINITIONS. a. Subsidiary. The term "Subsidiary" shall have the same definition as "subsidiary corporation" in Section 424(f) of the Code. b. Parent. The term "Parent" shall have the same definition as "parent corporation" in Section 424(e) of the Code. c. Constituent Corporation. The term "Constituent Corporation" shall mean any corporation which engages with the Company, its Parent or any Subsidiary in a transaction to which Section 424(a) of the Code applies (or would apply if the option assumed or substituted were an ISO), or any Parent or any Subsidiary of such corporation. d. Disability. The term "Disability" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code. e. Key Employee Option. The term "Key Employee Option" shall mean an option granted pursuant to the Plan to a person who, at the time of grant, is a key employee of the Company or a Subsidiary of the Company. -7- f. Outside Director Option. The term "Outside Director Option" shall mean a NQSO granted pursuant to the Plan to a person who, at the time of grant, is a director of the Company but is not an employee of the Company or any of its Subsidiaries. 19. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a majority of the votes present in person or by proxy at the next meeting of its stockholders at which a quorum is present. No options granted hereunder may be exercised prior to such approval, provided that the date of grant of any options granted hereunder shall be determined as if the Plan had not been subject to such approval. Notwithstanding the foregoing, if the Plan is not approved by a vote of the stockholders of the Company on or before May 1, 1993, the Plan and any options granted hereunder shall terminate. -8- EX-27 3 EX-27
5 6-MOS AUG-31-1997 SEP-01-1996 FEB-28-1997 32 0 7,393 435 0 8,900 122,527 73,496 62,494 16,567 35,884 0 0 27 18,263 62,494 31,370 31,370 25,253 25,253 5,889 (118) 1,774 382 19 363 0 0 0 363 .13 0
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