TODD AO CORP, 10-K, 1995-11-17

TODD AO CORP
10-K, 1995-11-17
ALLIED TO MOTION PICTURE PRODUCTION

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended AUGUST 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from to

Commission file number: 0-1461

THE TODD-AO CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 13-1679856
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)

172 GOLDEN GATE AVENUE, SAN FRANCISCO, CALIFORNIA 94102
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (415) 928-3200

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class Name of each exchange on which registered
- -------------------------- -----------------------------------------
COMMON STOCK, CLASS A, NASDAQ
$ .25 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of voting stock held by non-affiliates at November 1,
1995 was approximately $32,000,000.

The number of shares of common stock outstanding at November 1, 1995 was:
6,362,877 Class A Shares and 1,747,181 Class B Shares.

DOCUMENTS INCORPORATED BY REFERENCE

None

<PAGE>

The Todd-AO Corporation
- -------------------------------------------------------------------------------
Annual Report on Form 10-K
August 31, 1995

Table of Contents
- -------------------------------------------------------------------------------
Part I Page

Item 1-Business 1
Item 2-Properties 3
Item 3-Legal Proceedings 3
Item 4-Submission of Matters to a Vote
of Security Holders 3

Part II

Item 5-Market for the Registrant's Common
Stock and Related Stockholder Matters 4
Item 6-Selected Financial Data 5
Item 7-Management's Discussion and Analysis
of Financial Condition and
Results of Operations 5
Item 8-Financial Statements and
Supplementary Data 7
Item 9-Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 7
Part III

Item 10-Directors and Executive Officers
of the Registrant 8
Item 11-Executive Compensation 10
Item 12-Security Ownership of Certain
Beneficial Owners and Management 12
Item 13-Certain Relationships and Related
Transactions 13
Part IV

Item 14-Exhibits, Financial Statement Schedules
and Reports on Form 8-K 14

Signatures 15
Exhibit Index 16

Index to Financial Statements
and Schedules 19

<PAGE>

PART I
Item 1. BUSINESS.

The Todd-AO Corporation and its subsidiaries (collectively "Todd-AO" or the
"Company") provide post production sound and video services and special video
effects for the film and television industries in Los Angeles, New York City and
London. During fiscal 1995 Todd-AO acquired a company which provides post
production video and satellite transmission services in London, England and
additional Los Angeles post production sound studios.

PRINCIPAL SHAREHOLDERS

Over 58% of the Company's outstanding shares (representing over 84% of the
voting power) are beneficially owned by Marshall Naify, Robert Naify, certain
members of their families and certain trusts for the benefit of family members
(the "Naify Interests").

SOUND STUDIO OPERATIONS

General

Todd-AO performs post-production sound services primarily for feature films,
television series, commercials and music videos. Services include music
recording, sound editing, mixing of music, sound effects, narration and dialogue
and enhancement and/or replacement of sound recorded during production.

The results of the Company's sound studio operations are subject to seasonal
fluctuations. Revenues for both television and feature film work are highest
during the period from September through May and typically decline during the
summer months and the Christmas holiday season.

On February 15, 1995, Todd-AO Studios West ("TSW")(a wholly owned subsidiary
of the Company) acquired substantially all of the property, equipment and
inventory of Kaytea Rose, Inc. (dba Skywalker Sound South)("SSS"). In
consideration of the purchase, TSW paid $6,966,000 in cash. TSW provides post
production sound services to the film and television industries and has provided
Todd-AO with a presence on the west side of Los Angeles where many of its
clients are located. See Note 3 to the Financial Statements.

Facilities

The Company has 27 sound stages equipped with modern and efficient sound
recording apparatus providing a broad range of sound services for both film and
videotape. One of the stages can accommodate over 150 musicians for music
recording. Eleven of the stages can provide premium services including stereo
sound in both 35mm and 70mm formats. All of the stages can mix (or dub) into
the final composite recording, in which the sound track is matched to the visual
portion for later optical printing on film or recording on striped film.

SPECIAL VISUAL EFFECTS

Todd-AO's wholly owned subsidiary, Todd-AO Digital Images ("TDI") provides
special visual effects for feature films and television. Computer generated
imagery is a vital element of film and television production and the overall
market is experiencing rapid growth. TDI's creative personnel use
state-of-the-art computer graphics equipment.

VIDEO AND TRANSMISSION SERVICES

Todd-AO Video Services ("TVS") (another Los Angeles subsidiary of the
Company), provides a variety of post production video services, principally in
connection with the conversion of feature films to videotape for the home video
market. See Note 3 to the Financial Statements.

<PAGE>

On March 16, 1995, Todd-AO Europe Holdings Ltd. ("TAO Europe")(a wholly owned
subsidiary of the Company) acquired all of the outstanding shares of
Chrysalis/Todd-AO Europe Ltd. ("Chrysalis")(formerly Chrysalis Television
Facilities, Ltd.) from Chrysalis Holdings Ltd. ("CHL"). TAO Europe, Chrysalis
and CHL are all corporations organized under the laws of the United Kingdom and
headquartered in London. The acquisition cost was $9,697,000, consisting of
$8,333,000 cash payments and a $1,364,000 note payable over three years.
Chrysalis specializes in the collation of television programming for satellite
broadcast and also provides post production video and other services to a
variety of clients. See Note 3 to the Financial Statements.

COMPETITION

The Company encounters intense competition in each of the markets that it
serves. Competitive factors include quality of service, timeliness of delivery
and price.

Sound Studios

In Los Angeles, the Company competes with over ten major sound studio
businesses, consisting of both independent operations and studios associated
with film production companies. The New York City market is smaller but also
competitive. The Company believes that its combined operations make it the
largest independent post production sound studio in the United States.

Other Post Production Services

A variety of operators offer special visual effects, post production video
and transmission services similar to those provided by Todd-AO. Many of these
competitors are larger and have greater financial resources than the Company.

EMPLOYEES

Todd-AO employs approximately 390 persons, some on a part-time basis.

JOINT VENTURE

During 1992, Todd-AO Productions, Inc., a wholly owned subsidiary of the
Company, entered into a Joint Venture Agreement with Trans-Atlantic Enterprises,
Inc. for the development of motion picture and television projects. Todd-AO
Productions and the Venture are each distinct from the Company's other
operations. The Joint Venture Agreement was extended and amended in October
1993 and in September 1994. In accordance with the amendments, the Development
Phase of the Venture expired on October 31, 1994 and the Venture's entertainment
projects (which consist primarily of rights to scripts and screenplays) were
divided between Todd-AO Productions and TAE, which are now each entitled to
independently exploit their respective projects (the "Todd-AO Projects" and the
"TAE Projects"). Dissolution of the Venture is being finalized. Todd-AO
Productions is entitled to recoup its capital contributions from 50% of any
compensation received by TAE or its affiliates from exploitation of the TAE
projects, and is deemed to have recouped its capital contributions to the extent
of 50% of any compensation received by Todd-AO Productions or its affiliates
from the Todd-AO projects. Todd-AO Productions and TAE also have a 25% interest
in the net profits of each other's designated projects.

Through August 31, 1995 Todd-AO Productions had contributed $2,565,000 in
cash and services to the Venture.

<PAGE>

Item 2. PROPERTIES.

Sound studio operations are conducted in various owned, leased and/or
licensed premises in the Los Angeles area, New York City and London. The
Company's facilities are adequate to support anticipated business.

The Company owns approximately 147,000 square feet of building space. In
addition, approximately 115,000 square feet of building space are subject to
lease or license agreements. In London, Todd-AO owns the underlying freehold of
17,600 square feet of building space. It leases this area to a third party
under a lease agreement which expires in December 2042 and subleases the same
area from its tenant under a lease agreement which expires in March 2008.
Todd-AO also leases an additional 3,500 square feet of its owned London property
to a third party under a lease agreement which expires in June 2009. The
Company also owns two undeveloped parcels of land in Killeen, Texas.

The Company's Los Angeles sound studio facilities include premises licensed
from CBS Studio Center under agreements expiring in 1999 and 2003. The
agreement which expires in 2003 can be extended for an additional 5 years at the
Company's option. The New York sound studio facilities operate under a lease
agreement which expires in December 2002 and which can be extended for an
additional 5 years at the Company's option. The New York lease agreement can be
terminated by the Company at any time upon at least six months' written notice
to the landlord.

The Company's Los Angeles post production video service facility operates
under a lease agreement which expires in August 1999 and which can be extended
for two additional five year terms or terminated on at least ninety (90) days
written notice at the Company's option. A portion of the London post production
video and transmission facility is subject to a lease agreement which expires in
March 2008.

Item 3. LEGAL PROCEEDINGS.

The Company is involved in litigation and similar claims incidental to the
conduct of its business. None of the pending actions is likely to have a
material adverse impact on the Company's financial condition.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

<PAGE>

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS.

The Company has two classes of Common Stock designated as Class A Stock
and Class B Stock, as described below and in Note 8 to the Financial Statements.
There were approximately 1,300 and 7 record holders of Class A and Class B
Stock, respectively, as of November 1, 1995.

Class A Stock

The Company's Class A Common Stock is traded Over-the-Counter in the NASDAQ
National Market System (NASDAQ symbol ToddA). Trading activity is not
substantial.

The Company paid a cash dividend of $.06 per Class A share for fiscal years
1994 and 1995.

On August 11, 1995 a 10% stock dividend was declared for holders of Class A
and Class B stock, payable on September 29, 1995 to shareholders of record on
September 8, 1995.

Closing stock prices for fiscal years 1994 and 1995 are set forth in the
following table and have not been retroactively adjusted to reflect the 10%
stock dividend paid on September 29, 1995.

Stock Price Ranges

FISCAL YEAR CLOSE
High Low

1994
First Quarter. . . . . . . . . 5 3/4 3 5/8
Second Quarter . . . . . . . . 5 1/2 4 1/4
Third Quarter. . . . . . . . . 4 1/4 3 1/2
Fourth Quarter . . . . . . . . 7 1/4 3 5/8

1995
First Quarter. . . . . . . . . 6 1/2 5
Second Quarter . . . . . . . . 6 4
Third Quarter. . . . . . . . . 6 3/8 5
Fourth Quarter . . . . . . . . 11 1/2 5 5/8

The Transfer Agent and Registrar for the Class A Common Stock is Continental
Stock Transfer and Trust Company, 2 Broadway, New York, NY 10004.

Class B Stock

Class B shares have special voting rights (10 votes per share) and are
generally not transferable. Cash dividends are payable on the Class B shares at
a rate not to exceed 90% of the cash dividends paid on the Class A shares. The
two classes of stock participate on the same per share basis in other property
distributions. Class B Stock is convertible at the option of the holder into
Class A Stock and is automatically converted to Class A Stock under certain
circumstances. Conversion is on a share for share basis and once so converted
the Class B Stock is retired and cannot be reissued without a stockholder vote.
Except for issuances in connection with stock splits and stock dividends,
additional Class B shares cannot be issued without an affirmative vote of the
Class B stockholders. See also Note 8 to the Financial Statements.

As of August 31, 1995, 1,747,181 Class B shares were outstanding and owned by
7 shareholders, including 1,703,639 Class B shares owned by the Naify Interests.
Dividends in the amount of $.054 per Class B share were paid for fiscal years
1994 and 1995. The Company acts as Transfer Agent for the Class B common stock.
See also Note 8 to the Financial Statements.

<PAGE>

Item 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except amounts per share)

<TABLE>

. . . . . . . . Year Ended August 31 . . . . . . . .

1995 1994 1993 1992 1991

<S> <C> <C> <C> <C> <C>
Revenues $50,003 $32,982 $27,402 $28,150 $28,526
======= ======= ======= ======= =======
Net Income $ 3,375 $ 1,780 $ 1,137 $ 2,129 $ 2,645
======= ======= ======= ======= =======
Income
per Common
Share (1) $ .40 $ .22 $ .14 $ .25 $ .31
======= ======= ======= ======= =======

Total Assets $57,198 $36,728 $31,834 $31,892 $32,946
======= ======= ======= ======= =======
Total Long-Term Debt
Obligations $ 8,327 $ 1,467 $ 0 $ 1,750 $ 800
======= ======= ======= ======= =======

Cash Dividends
Class A shares $ .06 $ .06 $ .06 $ .0575 $ .05
======= ======= ======= ======= =======
Class B shares $ .054 $ .054 $ .054 $.05175 $ .045
======= ======= ======= ======= =======

</TABLE>

(1) Income per share computed using the average number of shares outstanding
and common stock equivalents of 8,399,462, 8,195,678, 8,278,932, 8,350,594
and 8,444,324 in 1995, 1994, 1993, 1992 and 1991, respectively (see Notes 1
and 8 to Financial Statements).

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(Dollars in thousands, except amounts per share).

Liquidity and Capital Resources

In December 1994 the Company signed agreements with its bank to implement a
lease intended as security (sale/leaseback of certain equipment) and a new
long-term revolving and term loan credit agreement in amounts of $15,000 and
$10,000 respectively. In March 1995 the Company signed an amendment to the
long-term revolving and term loan credit agreement increasing the amount by
$8,000. The sale/leaseback agreement terminates on December 30, 1999. An
aggregate of $11,218 was sold and leased back on December 30, 1994. Under the
new credit agreement, the Company may borrow up to $18,000 in revolving loans
until November 30, 1997 when all revolving loans become term loans for the
remainder of the agreement which expires November 30, 2000. These credit
facilities are available for general corporate purposes, capital expenditures
and acquisitions. Management believes that the proceeds from the sale/leaseback
and the borrowings available under the new credit facility will be sufficient to
meet the needs of the Company for the foreseeable future.

In February 1995 the Company used $6,878 of the proceeds from the
sale/leaseback agreement to acquire substantially all of the property, equipment
and inventory of Skywalker Sound South.

In March 1995 the Company used $7,726 under the credit agreement in
connection with the acquisition of Chrysalis Television Facilities Ltd.

As of August 31, 1995 the Company has $6,391 outstanding under the credit
agreement.

<PAGE>

The Company expects capital expenditures of approximately $4,524 for its Los
Angeles, New York City and London facilities in fiscal 1996. These capital
expenditures will be financed by bank leasing and credit facilities and by
internally generated funds.

Results of Operations
Fiscal Years 1995, 1994, and 1993

1995 Compared to 1994

Total revenues increased 52.0% ($17,111) and operating costs and expenses
increased 47.5% ($12,846).

Todd-AO's objectives include domestic and international expansion into all
significant segments of post production for film and television entertainment as
well as allied fields. By diversifying into new markets, the Company intends to
reduce reliance on its traditional post production sound business. During
fiscal 1994 and 1995 Todd-AO organized or acquired operations in visual effects,
video services and satellite television transmission. The Company continues to
evaluate potential new investment and acquisition opportunities with a view
towards providing a complete range of post production services and an increased
international presence.

SOUND SERVICES:

Sound studio revenues in California and New York increased $4,420. Revenue
increases due to the inclusion of the west side Los Angeles studios of Todd-AO
Studios West ("TSW")($7,703) beginning in February 1995 were offset by revenue
decreases at the Los Angeles and New York studios due primarily to decreases in
feature film dubbing bookings. A threatened strike in Los Angeles during 1994
accelerated major feature film product which resulted in scheduling
irregularities through December 1994. In addition, one feature film stage was
closed for remodelling through early January 1995.

Sound studio operating costs and expenses increased $4,217 due to the
inclusion of TSW beginning in February 1995. In addition, decreases in sound
studio operating costs and expenses related to the revenue decreases described
above were offset by union contract increases.

VIDEO SERVICES:

Revenues increased $12,691 due to the inclusion of Todd-AO Video Services
("TVS")($6,504), Todd-AO Digital Images ("TDI")($1,253) and Chrysalis/Todd-AO
Europe, Ltd. ("Chrysalis")($4,934) in the current year. TVS, which acquired
certain assets and liabilities of Film Video Masters, Inc. on August 31, 1994,
provides post production video services to the film and television industries.
TDI, which was formed in the latter half of fiscal 1994, provides visual effects
services to the same industries. Todd-AO Europe Holding Co., Ltd., a wholly
owned subsidiary of the Company, acquired all of the outstanding shares of
Chrysalis in March 1995. Both corporations are based in London and organized
under the laws of the United Kingdom. Chrysalis specializes in the collation of
television programming for satellite broadcast and also provides post production
video services.

Increases in operating costs and expenses attributable to TVS, TDI and
Chrysalis were $8,629.

CORPORATE:

Depreciation and amortization increased 50.5% ($1,314) due to the
acquisitions of TSW, TVS, TDI and Chrysalis.

Equipment lease expense net of gain on sale of equipment in connection with a
sale/leaseback agreement entered into in December 1994 with the Company's
institutional lender is $593 and interest expense primarily due to borrowings in
connection with the acquisition of Chrysalis is $581.

<PAGE>

A net decrease in other income of $483 is primarily due to the following: A
$329 increase in interest income primarily due to investing activities in
connection with the proceeds from the sale/leaseback agreement; current year
research and development costs ($317) and non-recurring severance costs ($131);
and a decrease of $349 due to greater gains on sales of investments in the prior
year.

Losses from the Company's entertainment project development joint venture
decreased $966 due to the termination of the development phase of the venture in
the current year.

As a result of the above, income before taxes increased $2,284 and net income
increased $1,595.

1994 Compared to 1993

Sound studio revenues increased 20.0% ($5,490) and operating costs and
expenses increased 19.35% ($4,380). Revenues increased $4,829 in Los Angeles
and $661 in New York. The revenue increases at the Los Angeles studios
primarily reflect more feature film, television and scoring work as a result of
an increase in films released by the major movie studios. In addition, all
other services experienced revenue increases. Feature film editing services
which were introduced in the current year as a new revenue source and increases
in feature film dubbing and dialogue replacement are responsible for the
increased revenue in New York.

Operating costs and expenses increased $3,936 in Los Angeles and $444 in New
York. The increases in operating costs and expenses at the Los Angeles studios
are due to the revenue increases described above and a stock appreciation rights
provision related to a net increase in the Company's stock price. These
increases were offset by a provision in the prior year for contested claims.
The New York increases are related to the increased revenue and include
additional labor costs in connection with feature film editing services.

Depreciation increased $191 primarily due to asset additions for the new
visual effects facility. Other income increased $290 primarily due to sales of
QSound stock and other short term investments. Losses from the Company's
entertainment project development joint venture increased $201 in the current
year.

As a result of the above, income before taxes increased $1,001 and net income
increased $643.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See Item 14 in Part IV of this 10-K report.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT.

Set forth below is certain information concerning the Company's executive
officers and directors. Messrs. A.C. Childhouse, Silas R. Cross, Richard
Hassanein, Salah M. Hassanein, Marshall Naify and Robert A. Naify were formerly
associated in various capacities with United Artists Communications, Inc.
("UACI", now known as United Artists Theatre Circuit, Inc.) a motion picture
theatre company. UACI owned approximately 85% of the Company's Common Stock
until 1986.

Business Experience
During Past Five Year
Years; Age and First
Name Position Other Information Elected
- ---- -------- ----------------- -------

<S> <C> <C> <C>
A.C. Director Mr. Childhouse, 85, is an 1964
Childhouse investor.

Silas R. Vice President, Mr. Cross, 56, previously 1988
Cross Treasurer and served as Vice President, Controller
Assistant of the Company.
Secretary

J.R. Senior Vice Mr. DeLang, 39, is Executive 1993
DeLang President and Vice President of the Company's
Director Todd-AO Studios division. He was
previously Todd-AO Studios' Vice
President of Sales and Marketing
(1988-90) and its Director of
Sales and Marketing (1987-88).

Coburn T. Vice President, Mr. Haskell, 43, previously served 1995
Haskell Controller as Controller of Todd-AO Studios.

Richard C. Vice President Mr. Hassanein, 44, is Executive 1993
Hassanein and Director Vice President of the Company's
Todd-AO Studios West subsidiary.
He was previously Executive Vice
President of the Company's Todd-AO
Studios East subsidiary. Mr. Hassanein
is the son of Salah M. Hassanein.

Salah M. President, Mr. Hassanein, 74, was the President 1962
Hassanein COO and Director of Warner Bros. International
Theatres Co. until June 30, 1994.
He is a principal in SMH Entertainment,
Inc. and a director of Laser Video Network.

Herbert L. Director Mr. Hutner, 86, is a 1987
Hutner Financial Consultant.

Christopher Senior Vice Mr. Jenkins, 40, is President of 1987
D. Jenkins President and of Todd-AO Studios (since 1990)
Director and was previously its Vice President.

</TABLE>

<PAGE>

Business Experience
During Past Five Year
Years; Age and First
Name Position Other Information Eeleted
- ---- -------- ----------------- -------

<S> <C> <C> <C>
Robert I. Director Mr. Knudson, 70, is a 1983
Knudson consultant to the Company.
He was previously an Executive
Vice President of the Company
and served as President of Todd-AO
Studios until 1990.

Dan Secretary Mr. Malstrom, 44, is an attorney 1987
Malstrom in private practice.

Marshall Co-Chairman of Mr. Naify, 75, is an investor. He 1964
Naify the Board of previously served as Chairman of the
Directors and Company's Board of Directors. Mr. Naify
Co-CEO is the brother of Robert A. Naify.

Michael S. Director Mr. Naify, 33, was previously Vice President 1993
Naify of the Company. Prior thereto, he was a
student and the owner of an import/export.
business. He is the son of Marshall Naify.

Robert A. Co-Chairman of Mr. Naify, 73, has a variety of business 1959
Naify the Board of interests and is a director of Tele-
Directors and Communications, Inc. He previously served
Co-CEO as President and CEO of the Company.

Robert J. Director Mr. Naify, 32, is a Vice President 1993
Naify of Excelsior Management Corporation,
which is owned by the Naify Interests
and administers certain of their
investments. From 1990-92, he was
involved in operations at Todd-AO
Studios and prior thereto participated
in the construction and operation of a
Spanish golf course. Mr. Naify is the
son of Robert A. Naify.

Zelbie Director Mr. Trogden, 59, has been a financial 1994
Trogden consultant and a director of Citadel Holding
Corporation and Fidelity Federal Bank since
1993. Prior thereto, he held various executive
positions with Bank of America and Security
Pacific National Bank.

</TABLE>

<PAGE>

Item 11. EXECUTIVE COMPENSATION.

All applicable share and per share data for periods included in the
compensation tables set forth below have been adjusted to retroactively reflect
a 10% stock dividend paid on September 29, 1995.

SUMMARY COMPENSATION TABLE

Directors receive no cash compensation for their services as directors. The
following table shows, for the years ended August 31, 1995, 1994 and 1993, all
forms of compensation for the Co-Chief Executive Officers and each of the most
highly compensated executive officers of the Company whose total annual salary
and bonus exceeded $100,000 for the year ended August 31, 1995.

Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------- ------------- -------
Other Restricted LTIP
Annual Stock Pay-
Bonus Comp. Awds. Options/ outs All Other
Name and Principal Position Year Salary($) ($) ($) ($) SARS(#) ($) Compensation ($)
- ---- --- --------- -------- ---- -------- --- --- --- -------- --- ----------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert A. Naify 1995 5,000 -- -- -- 66,000 -- --
Co-Chairman of the Board 1994 -- -- -- -- 110,000 -- --
and Co-CEO 1993 -- -- -- -- -- -- --
The Todd-AO Corporation

Marshall Naify 1995 5,000 -- -- -- 66,000 -- --
Co-Chairman of the Board 1994 -- -- -- -- 110,000 -- --
and Co-CEO 1993 -- -- -- -- -- -- --
The Todd-AO Corporation

Salah M. Hassanein 1995 100,001(3) -- -- -- 66,000 -- --
President and COO 1994 100,000(3) -- -- -- 110,000 -- --
The Todd-AO Corporation 1993 100,000(3) -- -- -- -- -- --

J.R. DeLang 1995 293,942 -- -- -- -- -- 19,168 (1)
Executive Vice-President 1994 203,876 -- -- -- -- -- 3,073 (1)
Todd-AO Studios 1993 192,347 -- -- -- -- -- 3,229 (1)

Christopher D. Jenkins 1995 465,981(2) -- -- -- -- -- 3,385 (2)
President 1994 471,920(2) -- -- -- -- -- 4,146 (2)
Todd-AO Studios 1993 296,506(2) -- -- -- -- -- 3,632 (2)

</TABLE>

Notes to Summary Compensation Table:

(1) Amounts shown as "All Other Compensation" represent contributions made by
the Company to its 401(k) Plan for 1995 and under a collective bargaining
agreement to the Motion Picture Industry Pension Plan for 1994 and 1993 on Mr.
DeLang's behalf.

(2) Amounts shown as salary include compensation of $365,981, $388,586 and
$246,506 for 1995, 1994 and 1993 respectively attributable to services as a
sound mixer. Amounts shown as "All Other Compensation" represent contributions
made by the Company under a collective bargaining agreement to the Motion
Picture Industry Pension Plan on Mr. Jenkin's behalf.

(3) Amounts shown as salary include professional fees of $80,000 for 1995, 1994
and 1993.

<PAGE>

OPTION/SAR GRANTS TABLE

The following table shows all individual grants of stock options and stock
appreciation rights ("SARs") during the fiscal year ended August 31, 1995 to
each of the executive officers named in the Summary Compensation Table:

OPTION/SAR GRANTS IN LAST FISCAL YEAR

POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ---------------------------------------------------------------------------- ----------------------
% of
Total
Options/
SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ------------------------- --------- --------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Naify 66,000 11.38% 4.95 4/18/2000 90,261 199,454
Marshall Naify 66,000 11.38% 4.95 4/18/2000 90,261 199,454
Salah M. Hassanein 66,000 11.38% 5.06 8/31/2004 193,787 482,831
J.R. DeLang 22,000 3.79% 4.73 8/31/2004 65,015 164,580
J.R. DeLang 22,000 3.79% 5.06 8/31/2004 64,596 160,944
Christopher D. Jenkins 11,000 1.90% 4.73 8/31/2004 32,508 82,290
Christopher D. Jenkins 33,000 5.69% 5.06 8/31/2004 96,894 241,415

</TABLE>

OPTION/SAR EXERCISES AND VALUE TABLE

The following table shows each exercise of stock options and SARs during the
fiscal year ended August 31, 1995 by each of the executive officers named in the
Summary Compensation Table, together with respective aggregate values of
unexercised options as at August 31, 1995. All SARs were exercised during the
year:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
FY-End (#) FY-End ($)

Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------------------- --------------- ------------------ -------------- ----------------

<S> <C> <C> <C> <C>
Robert A. Naify -- $ 75,000 28,050/147,950 $171,595/$866,916

Marshall Naify -- $ 75,000 28,050/147,950 $171,595/$866,916

Salah M. Hassanein -- $112,500 74,800/101,200 $408,962/$658,126

J.R. DeLang -- $ 35,000 44,000/22,000 $273,194/$114,567

Christopher D. Jenkins -- $ 53,750 50,600/15,400 $317,418/$79,011

</TABLE>

11
<PAGE>

EMPLOYMENT AGREEMENTS

The Company has Employment Agreements with Messrs. Jenkins and DeLang. Under
Mr. Jenkins' agreement (dated January 1, 1994 and expiring on December 31, 1996)
compensation for sound mixing services is paid on an hourly basis at 300% of the
minimum union rate. Mr. Jenkins receives an additional $100,000 per year for
management and administrative services. The agreement with Mr. DeLang (dated
October 1, 1994 and expiring September 30, 1997) provides for a salary of
$285,000 for the twelve months ending 09/30/95, $300,000 for the twelve months
ending 09/30/96 and $320,000 for the twelve months ending 09/30/97.

None of the foregoing agreements involve any termination or change-in-control
payments. The Company's Stock Option and SAR Plans provide that the unvested
portion of the awards will become vested and exercisable in connection with a
change-in-control.

Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.

SHAREHOLDERS WITH BENEFICIAL OWNERSHIP OF MORE THAN 5%

The following table sets forth certain information as of November 1, 1995
with respect to the beneficial ownership of the Company's Class A and Class B
Stock by each person who is known to the Company to own beneficially more than
5% of the outstanding shares of either class. The information was furnished by
the named owners.

Class A and B Stock Beneficially Owned
as of November 1, 1995:

Number of Shares Percent
Name and Address Class A Class B Class A Class B
- ---- --- ------- ----- - ----- - ----- - ----- -

<S> <C> <C> <C> <C>
Heine Securities (1) 652,442 -- 10.1% --
Corporation
51 JFK Parkway
Short Hills, NJ 07078

Naify Interests (2) 3,066,371 1,703,639 43.76% 97.51%
172 Golden Gate Avenue
San Francisco, CA 94102

Salah M. Hassanein 558,443 -- 7.97% --
514 Via De La Valle
Suite 300A
Solana Beach, CA 92075

</TABLE>

__________________________

(1) Schedule 13G filed on 2/10/95 by Heine Securities Corp. and Michael F.
Price indicates that Heine Securities Corporation has sole investment discretion
and voting authority with respect to the Class A shares, which are legally owned
by one or more of its investment advisory clients.

(2) The Naify Interests (consisting of Marshall Naify, Robert A. Naify,
various members of their families and trusts for the benefit of such members)
may be deemed to constitute a "group" for purposes of Sections 13(d) and 13(g)
of the Securities Exchange Act of 1934. Additional information concerning the
beneficial ownership of Marshall Naify and Robert Naify is set forth in the
table below.

<PAGE>

MANAGEMENT WITH BENEFICIAL OWNERSHIP

The following table sets forth certain information as of November 1, 1995 with
respect to the beneficial ownership of the Company's Class A and Class B Stock
by each director of the Company and as to all officers and directors as a group.

Class A and B Stock Beneficially Owned
as of November 1, 1995:

Number of Shares Percent
Name Class A Class B Class A Class B
- ---- ----- - ----- - ----- - ----- -
<S> <C> <C> <C> <C>
A.C. Childhouse 41,087 -- .59% --

J.R. DeLang 52,800 (1) -- .75% --

Richard Hassanein 15,400 (1) -- .22% --

Salah M. Hassanein 558,443 (1) -- 7.97% --

Herbert L. Hutner 26,386 -- .38% --

Christopher Jenkins 59,400 (1) -- .85% --

Robert I. Knudson 72,789 (1) -- 1.04% --

Marshall Naify 1,040,302 (1) 678,839 14.85% 38.85%
(2)
Michael S. Naify 216,123 (4) -- 3.08% --

Robert A. Naify 1,065,914 (1) 906,290 15.21% 51.87%
(3)
Robert J. Naify 100,053 (4) -- 1.43% --

Zelbie Trogden 4,400 (1) -- .06% --

All directors and current
officers as a group
(15 persons) 3,274,597 (1) 1,585,129 46.73% 90.72%

</TABLE>

____________________________
(1) Includes options exercisable within 60 days by Messrs. DeLang, R.
Hassanein, S.M. Hassanein, Jenkins, Knudson, M. Naify, R.A. Naify, Trogden, and
other officers and directors as a group to purchase, respectively, 52,800,
14,300, 176,000, 59,400, 40,700, 50,050, 50,050, 4,400 and 12,100
Class A Shares.

(2) Includes 30,166 Class A Shares held by a trust for which Mr. Naify is
both trustee and beneficiary. Excludes 106,092 Class A Shares held by an
independent trustee for the benefit of three of Mr. Naify's children. Mr. Naify
disclaims beneficial ownership of the shares held by the independent trustee.

(3) Excludes 461,212 Class A Shares held of record or beneficially by Mr.
Naify's adult children and grandchildren as to which he disclaims beneficial
ownership.

(4) Includes 40,062 and 21,439 Class A Shares held by trusts of which Michael
S. Naify and Robert J. Naify are the respective beneficiaries.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

<PAGE>

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) Financial Statements and Schedules are as listed in the "Index to
Financial Statements and Schedules" on page 19 of this 10-K report.

(b) No reports on Form 8-K were filed during the quarter ended August 31,
1995.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

The Todd-AO Corporation

November 1, 1995 By /s/ Silas R. Cross
-----------------------------
Vice President, Treasurer
and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

November 1, 1995 By /s/ Robert A. Naify
-----------------------------
Robert A. Naify
Co-Chairman of the Board
of Directors and Co-CEO

November 1, 1995 By /s/ Marshall Naify
---------------------------------------
Marshall Naify
Co-Chairman of the Board
of Directors and Co-CEO

November 1, 1995 By /s/ Salah M. Hassanein
---------------------------------------
Salah M. Hassanein
President, Director and
Chief Operating Officer

November 1, 1995 By /s/ Christopher D. Jenkins
---------------------------------------
Christopher D. Jenkins
Senior Vice President and
Director

November 1, 1995 By /s/ A. C. Childhouse
---------------------------------------
A. C. Childhouse
Director

November 1, 1995 By /s/ Robert I. Knudson
---------------------------------------
Robert I. Knudson
Director

November 1, 1995 By /s/ J.R. Delang
---------------------------------------
J.R. DeLang
Senior Vice President
and Director

November 1, 1995 By /s/ Michael S. Naify
---------------------------------------
Michael S. Naify
Director

November 1, 1995 By /s/ Richard Hassanein
---------------------------------------
Richard Hassanein
Vice President
and Director

November 1, 1995 By /s/ Robert J. Naify
---------------------------------------
Robert J. Naify
Director

November 1, 1995 By /s/ Zelbie Trogden
---------------------------------------
Zelbie Trogden
Director

November 1, 1995 By /s/ Herbert L. Hutner
---------------------------------------
Herbert L. Hutner
Director

<PAGE>

EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------

(3) Certificate of Incorporation and Bylaws.

(a) The Certificate of Incorporation, as amended, is incorporated by
reference from the Registrant's Form 10-K for the fiscal year
ended January 31, 1971.

(b) The Amendment to Article Twelfth of the Registrant's Certificate
of Incorporation is incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended August 31, 1986.

(c) A certified copy of a Certificate of Amendment of the Certificate
of Incorporation dated July 14, 1987, amending and restating
Article Fourth of the Certificate of Incorporation to: (i)
redesignate the existing Common Stock as Class A and create a new
Class B Common Stock with special voting rights (10 votes per
share); (ii) increase the authorized number of shares of Common
Stock from 2,000,000 shares to 10,000,000 shares; (iii) authorize
a new class of 2,000,000 shares of preferred stock; and (iv)
eliminate cumulative voting rights for the election of directors,
is incorporated by reference from the Registrant's Form 10-K for
the fiscal year ended August 31, 1987.

(d) Registrant's Bylaws are incorporated by reference from the
Registrant's Proxy Statement dated April 2, 1990.

(4) Instruments Defining the Rights of Security Holders.

Specimen copy of Class A Common Stock Certificate is incorporated
by reference from the Registrant's Registration Statement on Form
S-2, as filed on February 2, 1988 (Registration No. 33-19279).

(9) Voting Trust Agreements.

Not applicable.

(10) Material Agreements.

(a) Asset Purchase Agreement dated March 3, 1986 between the Todd-AO
Corporation and Republic Corporation is incorporated by reference
from the Registrant's Report on Form 8-K filed on March 14, 1986.

(b) License Agreement dated April 16, 1987 between the CBS/MTM Company
and the Todd-AO Corporation is incorporated by reference from the
Registrant's Report on Form 10-K for the fiscal year ended August
31, 1987.

(c) License Agreement dated September 27, 1991 between the CBS/MTM
Company and the Todd-AO Corporation is incorporated by reference
from the Registrant's Form 10-K for the fiscal year ended August
31, 1991.

(d) (1) Employment and Consulting Agreement dated as of September 5,
1991 by and between Shawn Murphy individually ("SM"), Murphy
Balance Engineering, a California corporation wholly owned by SM,
and Todd-AO/Glen Glenn Studios is incorporated by reference from
the Registrant's Form 10-K for the fiscal year ended August 31,
1993.

(2) Equipment lease dated as of September 5, 1991 by and between
Murphy Mandala (a joint venture) (lessor) and Todd-AO/Glen Glenn
Studios (lessee) is incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended August 31, 1993.

(e) Employment Agreement dated as of October 1, 1994 between The
Todd-AO Corporation and JR DeLang is filed herewith.

16
<PAGE>

Exhibit
Number Description
- ------ -----------

(f) Amended and restated lease dated as of June 18, 1992 between West
54th Street Partners L.P., successor in interest to Rita Silver,
(Landlord) and Todd-AO Studios East, Inc. (Tenant) with respect to
premises consisting of the 7th and 8th floors at 247-59 West 54th
Street, New York, NY is incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended August 31, 1993.

(g) (1) Joint Venture Agreement dated as of July 20, 1992 between
Trans-Atlantic Enterprises, Inc. and Todd-AO Productions, Inc. is
incorporated by reference from the Registrant's Form 10-K for the
fiscal year ended August 31, 1992.

(2) Extension and amendment to Joint Venture Agreement dated as
of October 20, 1993 between Trans-Atlantic Enterprises, Inc. and
Todd-AO Productions, Inc. is incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended August 31, 1993.

(3) Amendment No. 2 to Joint Venture Agreement dated as of
September 1, 1994 is incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended August 31, 1994.

(h) Employment Agreement dated as of January 1, 1994 between The
Todd-AO Corporation and Christopher D. Jenkins is incorporated by
reference from the Registrant's Form 10-Q filed on April 13, 1994.

(i) (1) Asset Purchase Agreement dated as of August 30, 1994 by and
among Todd-AO Video Services, Paskal Video and Joseph S. Paskal is
incorporated by reference from the Registrant's Form 8-K filed on
September 14, 1994.

(2) Lease Agreement dated as of August 31, 1994 between Joseph S.
Paskal, Trustee, and Todd-AO Video Services is incorporated by
reference from the Registrant's Form 8-K filed on September 14,
1994.

(j) (1) Credit Agreement dated as of December 2, 1994 between The
Todd-AO Corporation and Bank of America National Trust and Savings
Association is incorporated by reference from the Registrant's
Form 10-Q filed on January 13, 1995.

(2) First Amendment to Credit Agreement dated as of March 13,
1995 between The Todd-AO Corporation and Bank of America National
Trust and Savings Association is incorporated by reference from
the Registrant's Form 8-K filed on March 31, 1995.

(k) Lease Intended as a Security dated December 27, 1994 between
The Todd-AO Corporation and BA Leasing and Capital Corporation is
incorporated by reference from the Registrant's Form
10-Q filed on January 13, 1995.

(l) (1) Asset Purchase Agreement dated as of February 13, 1995
between Todd-AO Studios West and Kaytea Rose, Inc. (dba Skywalker
Sound South) is incorporated by reference from the Registrant's
Form 8-K filed on February 27, 1995.

(2) Real Property Purchase Agreement (including Exhibits) dated
as of February 13, 1995 between Todd-AO Studios West and Kaytea
Rose, Inc. is incorporated by reference from the Registrant's Form
8-K filed on February 27, 1995.

(m) (1) Assignment and Assumption Agreement dated as of February 3,
1995 by and among Todd-AO Studios West, The Todd-AO Corporation,
Lucasfilm Ltd., Lucas Holdings, Inc., Lucas Digital Ltd. and
Lantana Center is incorporated by reference from the Registrant's
Form 8-K filed on February 27, 1995.

(2) Lease dated as of May 21, 1989 between Lantana Center as
Landlord and Lucasfilm Ltd. as Tenant, as amended by documents
dated March 27, 1990 and November 8, 1990 is incorporated by
reference from the Registrant's Form 8-K filed on February 27,
1995.

<PAGE>

Exhibit
Number Description
- ------ -----------

(n) (1) Agreement for the acquisition of the entire issued share
capital of Chrysalis Television Facilities Ltd. dated as of March
16, 1995 between FCB 1120 Ltd. (subsequently Todd-AO Europe
Holdings Ltd.) and Chrysalis Holdings Ltd. is incorporated by
reference from the Registrant's Form 8-K filed on March 31, 1995.

(2) Tax Deed dated as of March 16, 1995 between FCB 1120 Ltd. and
Chrysalis Holdings Ltd. is incorporated by reference from the
Registrant's Form 8-K filed on March 31, 1995.

(3) Performance Guarantee dated March 16, 1995 between The
Todd-AO Corporation and Chrysalis Holdings Ltd. is incorporated by
reference from the Registrant's Form 8-K filed on March 31, 1995.

(11) Computation of Per Share Earnings.

See Note 1 of Notes to Financial Statements.

(12) Computation of Earnings to Fixed Charges

Not Applicable.

(13) Annual Report to Shareholders.

The Annual Report to Shareholders will consist of this Form 10-K
Report.

(18) Changes in Accounting Principles.

Not applicable.

(20) Previously Unfiled Documents.

Not applicable.

(21) List of Subsidiaries.

Todd-AO Productions, Inc., incorporated in California.
Todd-AO Studios East, Inc., incorporated in New York, (parent)
and Todd-AO East incorporated in New York (subsidiary).
Todd-AO Digital Images, incorporated in California.
Todd-AO Video Services, incorporated in California.
Todd-AO Studios West, incorporated in California.
Todd-AO Europe Holdings Ltd. (formerly FCB 1120 Ltd.)
incorporated in the U.K. (parent) and
Chrysalis/Todd-AO Europe Ltd. incorporated in the U.K.
(subsidiary).

(22) Published Reports Regarding Matters Submitted to a Vote of
Security Holders.

Not applicable.

(23), (24) and (25)

Not applicable.

(27) Financial Data Schedule

Filed herewith.

<PAGE>

THE TODD-AO CORPORATION

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Page
----
Independent Auditors' Report 20

Consolidated Balance Sheets, August 31, 1995 and 1994 21

Consolidated Statements of Income for the Years Ended
August 31, 1995, 1994 and 1993 23

Consolidated Statements of Shareowners' Equity for the
Years Ended August 31, 1995, 1994 and 1993 24

Consolidated Statements of Cash Flows for the Years Ended
August 31, 1995, 1994 and 1993 26

Notes to Consolidated Financial Statements 29

Supplemental Financial Statement Schedule:

II Valuation and Qualifying Accounts For the Years Ended
August 31, 1995, 1994 and 1993 37

Schedules other than those listed above have been omitted because of the
absence of the conditions under which they are required or because the required
information, where material, is shown in the financial statements or the notes
thereto.

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Shareowners and Board of Directors of
The Todd-AO Corporation:

We have audited the accompanying consolidated balance sheets of The Todd-AO
Corporation and subsidiaries (the "Company") as of August 31, 1995 and 1994, and
the related consolidated statements of income, shareowners' equity and cash
flows for each of the three years in the period ended August 31, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14a. These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of August 31, 1995
and 1994, and the results of its operations and its cash flows for each of the
three years in the period ended August 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

By /s/ DELOITTE & TOUCHE LLP
---------------------------------------
DELOITTE & TOUCHE LLP
Los Angeles, California

October 27, 1995

<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------

AUGUST 31,
-------------------------
ASSETS NOTES 1995 1994
- ------ ----- ---- ----

<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents 1 $ 5,278 $ 606
Marketable securities 1 3,484 3,880
Trade receivables
(net of allowance for doubtful accounts of $828
and $408 at August 31, 1995 and 1994, respectively) 6,787 4,278
Inventories (first-in first-out basis) 484 374
Prepaid income taxes 727 148

Deferred income taxes 7 924 563
Other 565 195
--------- ---------
Total current assets 18,249 10,044
--------- ---------

INVESTMENTS 1 1,656 1,270
--------- ---------

PROPERTY AND EQUIPMENT - At Cost: 1, 6
Land 4,270 3,487
Buildings 10,762 8,201
Leasehold improvements 6,802 5,569
Lease acquisition costs 2,187 2,187
Equipment 30,734 27,031
Equipment under capital leases 3,163 886
Construction in progress 57
--------- ---------
Total 57,918 47,418

Accumulated depreciation and amortization (22,955) (22,083)
--------- ---------
Property and equipment - net 34,963 25,335
--------- ---------

GOODWILL
(net of accumulated amortization of $63) 1 1,832
---------

OTHER ASSETS 498 79
--------- ---------

TOTAL $ 57,198 $ 36,728
--------- ---------
--------- ---------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------

AUGUST 31,
---------------------
LIABILITIES AND SHAREOWNERS' EQUITY NOTES 1995 1994
- ----------------------------------- ----- ---- ----

<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,784 $ 684
Accrued liabilities:
Payroll and related taxes 1,975 2,518
Interest 179 10
Equipment lease 4 396
Other 515 452
Current maturities of long-term debt 5 759 150
Capitalized lease obligations - current 6 897 708
Deferred income 703 162
--------- ---------
Total current liabilities 7,208 4,684
--------- ---------

LONG-TERM DEBT 5 7,707 600

CAPITALIZED LEASE OBLIGATIONS 6 620 867

DEFERRED COMPENSATION 401 565

DEFERRED GAIN ON SALE OF EQUIPMENT 4 6,381

DEFERRED INCOME TAXES 7 3,683 2,064

SHAREOWNERS' EQUITY: 1, 8, 9
Common Stock:
Class A; authorized 20,000,000 shares of $0.25 par value;
issued and outstanding 6,403,021 at August 31, 1995 and
6,377,721 at August 31, 1994 1,600 1,594

Class B; authorized 4,000,000 shares of $0.25 par value;
issued and outstanding 1,747,181 at August 31, 1995 and 1994 437 437

Additional capital 21,048 20,953
Retained earnings 7,904 4,964
Unrealized gains on marketable securities
and long-term investments 473
Cumulative foreign currency translation adjustment (264)
--------- ---------

Total shareowners' equity 31,198 27,948
--------- ---------

TOTAL $ 57,198 $ 36,728
--------- ---------
--------- ---------

- --------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, except per share amounts)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
YEARS ENDED AUGUST 31,
-----------------------------------
NOTES 1995 1994 1993
----- ---- ---- ----

<S> <C> <C> <C> <C>
REVENUES $ 50,003 $ 32,892 $ 27,402
--------- --------- ---------
COSTS AND EXPENSES:
Operating costs and other expenses 39,867 27,021 22,641
Depreciation and amortization 1 3,917 2,603 2,412
Interest 581 24 17
Equipment lease expense - net 4 593
Other (income) expense - net (290) (773) (483)
--------- --------- ---------
Total 44,668 28,875 24,587
--------- --------- ---------

INCOME BEFORE LOSS FROM JOINT VENTURE
AND PROVISION FOR INCOME TAXES 5,335 4,017 2,815

LOSS FROM JOINT VENTURE 2 (249) (1,215) (1,014)
--------- --------- ---------

INCOME BEFORE PROVISION FOR
INCOME TAXES 5,086 2,802 1,801

PROVISION FOR INCOME TAXES 7 1,711 1,022 664
--------- --------- --------

NET INCOME $ 3,375 $ 1,780 $ 1,137
--------- --------- --------
--------- --------- --------

NET INCOME PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS 1 $ 0.40 $ 0.22 $ 0.14
--------- --------- --------
--------- --------- --------

WEIGHTED AVERAGE
SHARES OUTSTANDING 1 8,399,462 8,195,678 8,278,932
--------- --------- --------
--------- --------- --------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
(Dollars in Thousands)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------

Common Stock
---------------------------------------------------
Class A
------------------------------- Class B Additional
Shares Amount Amount capital
----------- -------------- ---------- ------------

<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1992 5,708,328 $ 1,431 $ 397 $ 14,925
Stock Dividend (10%)
in 1995 570,833 143 40 5,938

Purchase of treasury shares (61,600)
Treasury shares cancellation (20) (269)
Unrealized loss on investment securities
Exercise of stock options 213,950 54 610
Cash dividends:
Class A ($.06) per share
Class B ($.054) per share
Net income
--------- --------- --------- ---------

BALANCE AT AUGUST 31, 1993 6,431,511 1,608 437 21,204

Purchase of treasury shares (143,000)
Treasury shares cancellation (36) (476)
Exercise of stock options 89,210 22 225
Cash dividends:
Class A ($.06) per share
Class B ($.054) per share
Net income

--------- --------- --------- ---------

BALANCE AT AUGUST 31, 1994 6,377,721 $ 1,594 $ 437 $ 20,935
--------- --------- --------- ---------
<CAPTION>
Unrealized gain Foreign
Retained Treasury (loss) on invest- currency
earnings shares ment securities translation
-------- -------- ----------------- -----------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1992 $ 9,029 $ (64) $ (1,234)
Stock Dividend (10%)
in 1995 (6,123)

Purchase of treasury shares (223)
Treasury shares cancellation 287
Unrealized loss on investment securities 1,234
Exercise of stock options
Cash dividends:
Class A ($.06) per share (346)
Class B ($.054) per share (85)
Net income 1,137
--------- --------- --------- ---------

BALANCE AT AUGUST 31, 1993 3,612 0 0 0

Purchase of treasury shares (509)
Treasury shares cancellation 509
Exercise of stock options
Cash dividends:
Class A ($.06) per share (342)
Class B ($.054) per share (86)
Net income 1,780

--------- --------- --------- ---------

BALANCE AT AUGUST 31, 1994 $ 4,964 $ 0 $ 0 $ 0
--------- --------- --------- ---------
</TABLE>

Continued on page 25
- --------------------

24
<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
(Dollars in Thousands)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Common Stock
----------------------------------------------------
Class A
-------------------------------- Class B Additional
Shares Amount Amount capital
----------- --------- ----------- ------------

<S> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1994 6,377,721 $ 1,594 $ 437 $ 20,953
(from page 24)

Exercise of stock options 25,300 6 95
Unrealized gain on investment securities
Loss on foreign currency translation
Cash dividends:
Class A ($.06) per share
Class B ($.054) per share
Net income

--------- --------- --------- ---------
BALANCE AT AUGUST 31, 1995 6,403,021 $ 1,600 $ 437 $ 21,048
--------- --------- --------- ---------
--------- --------- --------- ---------

Unrealized gain Foreign
Retained Treasury (loss) on invest- currency
earnings shares ment securities translation
-------- -------- ----------------- -----------
<S> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1994 $ 4,964 $ 0 $ 0 $ 0
(from page 24)

Exercise of stock options
Unrealized gain on investment securities 473
Loss on foreign currency translation (264)
Cash dividends:
Class A ($.06) per share (349)
Class B ($.054) per share (86)
Net income 3,375

--------- --------- --------- ---------
BALANCE AT AUGUST 31, 1995 $ 7,904 $ 0 $ 473 $ (264)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See notes to consolidated financial statements.

<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------

YEARS ENDED AUGUST 31,
----------------------------------
1995 1994 1993
---- ---- ----

<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,375 $ 1,780 $ 1,137
Adjustments to reconcile net
income to net cash provided
by operating activities:

Depreciation and amortization 3,917 2,603 2,412
Deferred income taxes 1,258 (386) (186)
Loss from joint venture 249 1,215 1,014
Deferred compensation (164) (119) (27)
Amortization of deferred gain on
sale/leaseback transaction (964)
(Gain) on sale of marketable securities
and investments (127) (342) (325)
Changes in assets and liabilities:
Trade receivables (739) (894) 679
Income taxes receivable 268
Inventory and other current assets (266) 38 (24)
Accounts payable and accrued liabilities 534 1,249 (629)
Accrued equipment lease 396
Income taxes payable (670) (210) 62
Deferred income 560 (93) 146
-------- -------- --------

Net cash provided by operating
activities: 7,359 4,841 4,527
-------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities and investments (996) (3,050) (750)
Proceeds from sale of marketable securities and
investments 1,606 921 1,653
Capital expenditures (3,345) (1,404) (393)
Contributions to joint venture (249) (900) (985)
Purchase of Paskal Video (1,150)
Purchase of Skywalker Sound South (6,966)
Purchase of Chrysalis (8,333)
Other assets (1) (155) (74)
-------- -------- --------

Net cash (used in) investing
activities: $(18,284) $ (5,738) $ (549)
-------- -------- --------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

CONTINUED ON PAGE 27

<PAGE>

THE TODD-AO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------

Continued from page 26 YEARS ENDED AUGUST 31,
- ---------------------- -----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt $ 7,722 $ 1,000
Payments on long-term debt (1,467) (2,800)
Payments on capital lease obligations (1,108) $ (94)
Proceeds from sale/leaseback transaction 11,218
Proceeds from issuance of common stock 101 245 659
Treasury stock transactions (509) (223)
Dividends paid (435) (428) (431)
--------- --------- ---------

Net cash provided by (used in)
financing activities: 16,031 (786) (1,795)

Effect of exchange rate changes on cash (38)
--------- --------- ---------

NET INCREASE (DECREASE) IN CASH 5,068 (1,683) 2,183

CASH AT BEGINNING OF YEAR 606 2,289 106
--------- --------- ---------

CASH AT END OF YEAR $ 5,674 $ 606 $ 2,289
--------- --------- ---------
--------- --------- ---------

Supplemental disclosures of cash flow information -

Cash paid during the year for:
Interest $ 408 $ 19 $ 80
--------- --------- ---------
--------- --------- ---------
Income taxes $ 1,413 $ 1,563 $ 553
--------- --------- ---------
--------- --------- ---------
</TABLE>

Supplemental disclosures of non cash investing and financing activities:

1995:

a) On February 15, 1995, the Company acquired substantially all of the
property, equipment and inventory of Skywalker Sound South (See Note 3).
In connection with this acquisition, the Company paid cash as follows:

Assets acquired:
<S> <C>
Land $ 783
Buildings and improvements 844
Equipment 5,032
Other assets 307
---------

Cash paid in acquisition $ 6,966
---------
---------
</TABLE>

<PAGE>

b) On March 16, 1995, the Company acquired all of the outstanding shares
of Chrysalis Television Facilities, Ltd. (See Note 3). In connection
with this acquisition, the Company paid cash as follows:
<TABLE>
<CAPTION>

Assets acquired:
<S> <C>
Property and equipment $ 7,599
Goodwill 1,963
Accounts receivable 1,815
Other assets 339

Liabilities assumed:

Accounts payable and accrued expenses (798)
Capitalized lease obligations (1,072)
Real estate mortgage payable (149)

Long-term debt issued to seller (1,364)
---------

Cash paid in acquisition $ 8,333
---------
---------
</TABLE>

1994:

a) On August 31, 1994, the Company acquired substantially of all the
assets and certain of the liabilities of Paskal Video (See Note 3).
In connection with this acquisition, the Company paid cash as
follows:
<TABLE>
<CAPTION>

Assets acquired:

<S> <C>
Property and equipment $ 2,030
Accounts receivable 860
Other assets 121

Liabilities assumed:

Accounts payable and accrued expenses (329)
Capitalized lease obligations (782)

Long-term debt issued to seller (750)
---------
Cash paid in acquisition $ 1,150
---------
---------

</TABLE>

b) During the year ended August 31, 1994, TDI entered into a capital
lease obligation in the amount of $886.

See notes to consolidated financial statements.

- --------------------------------------------------------------------------

<PAGE>

THE TODD-AO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share and option data)
--------------------------------------------------------------------
- ------------
1. SIGNIFICANT ACCOUNTING POLICIES

OWNERSHIP AND BUSINESS - At August 31, 1995 Robert Naify, Marshall
Naify, and certain members of their families and various trusts for
the benefit of family members (the "Naify Interests") owned over 58%
of the outstanding shares of the Company, representing approximately
84% of the total voting power.

BASIS OF PRESENTATION - The consolidated financial statements include
the Company and its wholly owned subsidiaries Todd-AO Studios East,
Inc. ("Todd-AO East"), Todd-AO Productions, Inc., Todd-AO Digital
Images, Inc. ("TDI"), Todd-AO Video Services, Inc. ("TVS"), Todd-AO
Studios West ("TSW") and Todd-AO Europe Holding Ltd. ("TAO
Europe")(See Note 3). All significant intercompany balances and
transactions have been eliminated.

CASH AND CASH EQUIVALENTS - The Company considers investments with
original maturities of three months or less to be cash equivalents.

MARKETABLE SECURITIES AND INVESTMENTS - Marketable securities consist
primarily of corporate preferred stocks and bonds. The Company
adopted Financial of Accounting Standard (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", effective
September 1, 1994 and classified all investment securities as
available-for-sale. As a result, securities are reported at fair
value with net unrealized holding gains and losses excluded from
earnings and reported in shareowners' equity. Fair value is based
upon quoted market prices using the specific identification method.
The impact of the adoption of this statement on shareowners' equity
was insignificant. The long-term portion of investments includes
stock and other investments which management intends to hold for more
than one year.

DEPRECIATION AND AMORTIZATION - Depreciation and amortization are
computed at straight line rates based upon the estimated useful lives
of the various classes of assets. The principal rates are as follows:
buildings, 3-5% per annum; equipment, 10-20% per annum; leaseholds,
leasehold improvements, and lease acquisition costs over the term of
the lease.

GOODWILL - Goodwill represents the excess purchase price paid over the
net asset value of Chrysalis (See Note 3) and is being amortized on a
straight-line basis over 15 years.

The Company assesses the recoverability of its intangible assets by
determining whether the amortization of the intangible asset balance
over its remaining life can be recovered through projected non-
discounted future cash flows over the remaining amortization period.
If projected future cash flows indicate that the unamortized
intangible asset balances will not be recovered, an adjustment is made
to redue the net intangible asset to an amount consistent with
projected future cash flows discounted at the Company's incremental
borrowing rate.

FOREIGN CURRENCY TRANSLATION - The Company's foreign subsidiary's
functional currency is its local currency. Assets and liabilities of
foreign operations are translated into U.S. dollars using current
exchange rates, and revenues and expenses are translated into U.S.
dollars using average exchange rates. The effects of the foreign
currency translation adjustments are deferred and are included as a
component of shareowners' equity.

NET INCOME PER COMMON SHARE - Net income per common share is computed
based on the weighted average number of common and common equivalent
shares outstanding for each of the years presented including common
share equivalents arising from the assumed conversion of any
outstanding dilutive stock options.

FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107 requires
disclosures of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is
practicable to estimate fair value. Management believes that the book
value approximates fair value of the Company's financial instruments.

RECLASSIFICATIONS - Certain 1994 financial statement captions have
been reclassified in order to conform to 1995 presentation.

<PAGE>

2. INVESTMENT IN TODD-AO/TAE JOINT VENTURE

During 1992, Todd-AO Productions, Inc., a wholly owned subsidiary of
the Company, entered into a Joint Venture Agreement with Trans-
Atlantic Enterprises, Inc., for the development of motion picture and
television projects. Todd-AO Productions and the Venture are each
distinct from the Company's other operations. The Joint Venture
Agreement was extended and amended in October 1993 and in September
1994. In accordance with the amendments, the Development Phase of the
Venture expired on October 31, 1994 and the Venture's entertainment
projects (which consist primarily of rights to scripts and
screenplays) were divided between Todd-AO Productions and TAE, which
are now each entitled to independently exploit their respective
projects (the "Todd-AO Projects" and the "TAE Projects"). Dissolution
of the Venture is being finalized.

Todd-AO Productions is entitled to recoup its capital contributions
from 50% of any compensation received by TAE or its affiliates from
exploitation of the TAE projects, and is deemed to have recouped its
capital contributions to the extent of 50% of any compensation
received by Todd-AO Productions or its affiliates from the Todd-AO
projects. Todd-AO Productions and TAE also have a 25% interest in the
net profits of each other's designated projects. Through August 31,
1995 Todd-AO Productions had contributed $2,565 in cash and services
to the Venture. The Company is accounting for this investment under
the equity method of accounting as they do not control either voting
or financial rights.

3. ACQUISITIONS

On August 31, 1994, TVS (a wholly owned subsidiary of the Company)
acquired certain of the assets and liabilities of Film Video Masters
("Paskal"). TVS provides post production video services to the film
and television industries. In consideration of the purchase, TVS paid
Paskal $1,150 in cash and issued a note in the amount of $750.

On February 15, 1995, TSW (a wholly owned subsidiary of the Company)
acquired substantially all of the property, equipment and inventory of
Kaytea Rose, Inc. (dba Skywalker Sound South)("SSS"). TSW provides
post production sound services to the film and television industries.
In consideration of the purchase, TSW paid $6,966 in cash. TSW is
included in the Company's results of operations from February 1995.

On March 16, 1995 TAO Europe (formerly FCB 1120, Ltd.)(a wholly owned
subsidiary of the Company) acquired all of the outstanding shares of
Chrysalis/Todd-AO Europe Ltd. ("Chrysalis")(formerly Chrysalis
Television Facilities, Ltd.) from Chrysalis Holdings Ltd. ("CHL").
TAO Europe, Chrysalis and CHL are all corporations organized under the
laws of the United Kingdom and headquartered in London. Chrysalis
specializes in the collation of television programming for satellite
broadcast and also provides post production video and other services
to a variety of clients. In consideration of the purchase, TAO Europe
paid CHL $1,966 in cash at closing and issued a note in the amount of
$1,364. An additional cash settlement of $220 was paid in June 1995.
Concurrently with the acquisition, TAO Europe advanced and paid on
behalf of Chrysalis its intercompany debt to CHL in the amount of
$4,585. Subsequent to the acquisition, TAO Europe advanced and paid
on behalf of Chrysalis other debt in the amount of $1,562. TAO Europe
and Chrysalis consolidated are included in the Company's results of
operations from March 1995.

The acquisitions are being accounted for under the purchase method of
accounting. The following unaudited pro forma consolidated financial
information is presented as if the acquisitions had occurred on
September 1, 1993. Pro forma adjustments for TVS for 1994 are
primarily to depreciation expense relating to the acquisition of
assets, interest expense on issued debt and income taxes. Pro forma
adjustments for TSW for 1995 and 1994 are primarily to operating
expenses related to nonapplicable allocations made by the parent
corporation of SSS, depreciation expense relating to the acquisition
of assets, interest expense on borrowings in connection with the
acquisition and income taxes. Pro forma adjustments for TAO Europe
for 1995 and 1994 are primarily to amortization expense relating to
allocation of the purchase price, interest expense on borrowings in
connection with the acquisition and income taxes.
<TABLE>
<CAPTION>

1995 1994
<S> <C> <C>
Revenues $ 59,102 $ 59,515
---------- ----------
---------- ----------
Net income $ 3,480 $ 2,469
---------- ----------
---------- ----------
Net income per common share $ 0.41 $ 0.30
---------- ----------
---------- ----------
</TABLE>

<PAGE>

4. SALE/LEASEBACK

In December 1994 the Company signed an agreement with its bank to
implement the sale/leaseback of certain equipment for up to $15,000.
The agreement terminates on December 30, 1999 and is being treated
as an operating lease for financial statement purposes. On December
30, 1994 an aggregate of $11,218 in equipment was sold and leased
back. The total deferred gain on the transaction to be amortized
over five years is $7,345. The annual lease cost, payable on a
quarterly basis, is expected to be approximately $2,400.

The net equipment lease expense for the period ended August 31, 1995
is as follows:

<TABLE>
<CAPTION>
<S> <C>
Equipment lease costs $ 1,557
Amortization of deferred gain on sale of equipment $ (964)
----------

Equipment lease expense, net $ 593
----------
----------
</TABLE>

5. LONG-TERM DEBT

Long-term debt outstanding as of August 31, 1995 and 1994 was as
follows:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revolving credit facility -
pound sterling credit line $ 6,391
Note payable - Paskal Video acquisition 613 $ 750
Note payable - Chrysalis acquisition 1,318
Chrysalis mortgage note 144
-------- -------

Total 8,466 750
Less: current maturities (759) (150)
-------- -------

Total long-term debt $ 7,707 $ 600
-------- -------
-------- -------
</TABLE>

In December 1994 the Company signed a long-term revolving and term
loan credit agreement which was amended in March 1995. Under the
agreement the Company may borrow up to $18,000 in revolving loans
until November 30, 1997, when all revolving loans become term loans
for the remainder of the agreement which expires November 30, 2000.
$8,000 of the available credit is restricted to pound sterling
borrowings. The agreement provides for interest
options at 1/2% plus reference rate (minimum borrowing $250); 1 1/2%
plus offshore rates ("Libor") and 1 5/8% plus certificate of deposit
rates ("CD")(Libor and CD minimum borrowings $1,000 or $500). These
rates increase by 1/2% if certain financial ratios are exceeded.
The pound sterling borrowings are restricted to Libor and CD
options. The agreement contains various restrictive provisions,
including investment, capital expenditure, cash dividends and
borrowing limitations. As of August 31, 1995 the Company has not
exceeded the interest rate financial ratios and is in compliance
with the various restrictive provisions of the agreement.

In connection with the acquisition of Paskal Video (See Note 3), the
Company issued a promissory note. The note
is payable in 60 monthly installments of $13 plus interest at the
prime rate.

In connection with the acquisition of Chrysalis (See Note 3), TAO
Europe issued a note. The note is payable over a three year period
in two installments of $465 and one installment of $388. Each
installment bears interest at 1 1/2% above the prime rate of the
National Westminster Bank in London. A mortgage note in the amount
of $144 with interest at 10 3/4% was also assumed at the
acquisition. In accordance with the provisions of the mortgage
note, the Company has elected to pay off the entire balance in
November 1995.

6. CAPITALIZED LEASE OBLIGATIONS

In 1994, the Company entered into lease obligations for equipment
which have been capitalized. In addition, the Company acquired
leases on certain other equipment with the Paskal and Chrysalis
acquisitions (See Note 3). The leases have implicit interest rates
ranging from 7 1/2% to 11 1/2% and are secured by the related
equipment.

<PAGE>

Capitalized lease obligations at August 31, 1995 mature as follows:

<TABLE>
<CAPTION>
<S> <C>
1996 $ 966
1997 655
1998 12
---------
1,633
Less amounts representing interest 116
---------
$ 1,517
---------
---------
</TABLE>

7. INCOME TAXES

The Company's effective income tax rate differs from the federal
statutory income tax rate due to the following:
<TABLE>
<CAPTION>

Years Ended August 31, 1995 1994 1993
---------------------- ---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Adjust to actual Company rate (1.0) (1.0) (1.0)
----- ----- -----
Adjusted federal statutory income tax rate 34.0 34.0 34.0
State taxes, net of federal benefit 0.8 6.6 4.6
Other, net (1.2) (4.1) (1.7)
----- ----- -----
Total 33.6% 36.5% 36.9%
----- ----- -----
----- ----- -----
</TABLE>

Deferred income taxes are included in the income tax provision for
temporary differences between accounting for financial statement purposes
and accounting for income tax purposes. Deferred taxes are comprised of
the following:

<TABLE>
<CAPTION>
Years Ended August 31, 1995 1994 1993
---------------------- ---- ---- ----
<S> <C> <C> <C>
Depreciation $ 794 $ 4 $ 65
Alternative minimum tax 0 67 (67)
Bad debt allowance (157) 60
Deferred compensation 77 51 14
State income taxes (20) (87) 27
Joint venture differences 331 (92) (287)
Vacation accrual (100) (37) 1
Stock appreciation rights 335 (347)
Other, net (2) 55 1
-------- -------- --------
Total $ 1,258 $ (386) $ (186)
-------- -------- --------
-------- -------- --------

</TABLE>

Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future. Such deferred income tax asset and liability computations are
based on enacted tax laws and rates applicable to periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.

Deferred income tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current Asset:
Accounts receivable reserves $ 329 $ 172
Vacation pay accruals 359 260
State income taxes 151 131
Other 85 0
------- -------
TOTAL CURRENT ASSET $ 924 $ 563
------- -------
------- -------

<PAGE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Long-Term Asset:
Deferred compensation $ 160 $ 238
Stock appreciation rights 12 347
Equity in loss of Venture 85 415
California depreciation adjustment 6 277
------- -------
Total long-term asset 263 1,277
------- -------

Long-Term Liabilities:
Depreciation (1,986) (1,464)
Deferred gains on property (1,843) (1,762)
Other (117) (115)
------- -------
Total long-term liability (3,946) (3,341)
------- -------
NET LONG-TERM LIABILITY $(3,683) $(2,064)
------- -------
------- -------
</TABLE>

Components of the income tax provisions are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current provisions - domestic $ 274 $ 1,408 $ 850
Current provisions - foreign 180 0 0
Deferred provisions - domestic 1,231 (386) (186)
Deferred provisions - foreign 26 0 0
-------- -------- --------
Total $ 1,711 $ 1,022 $ 664
-------- -------- --------
-------- -------- --------
</TABLE>
Components of pre-tax income are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Domestic $ 4,347 $ 2,802 $ 1,801
Foreign 739 0 0
-------- -------- --------
Total $ 5,086 $ 2,802 $ 1,801
-------- -------- --------
-------- -------- --------
</TABLE>

8. SHAREOWNERS' EQUITY

The Company has 1,000,000 shares of $.25 par value preferred stock
authorized. As of August 31, 1995 no shares of preferred stock have been
issued or were outstanding.

The Class B stock is convertible at the option of the holder into
Class A stock and is automatically converted to Class A stock under
certain circumstances; holders have ten votes per share;
transferability is restricted; and dividends are limited to 90% of any
dividends paid on Class A stock.

On August 11, 1995 a 10% stock dividend was declared for holders of Class A
and Class B stock, payable on September 29, 1995 to shareholders of record
on September 8, 1995.

The financial statements set forth herein, and applicable share and per
share data for periods and dates included in the accompanying financial
statements and notes, have been adjusted to retroactively reflect the stock
dividend.

The Company has a stock repurchase program under which 1,300,000 shares may
be purchased from time to time in the open market or in private
transactions. As of August 31, 1995, 726,954 shares had been repurchased.
All of these shares have been cancelled and returned to authorized but
unissued status.

9. STOCK OPTION AND STOCK APPRECIATION RIGHTS PLANS

STOCK OPTION PLANS

The Company has three stock option plans: The 1986, 1994 and the 1995 Stock
Option Plans. A fourth plan (The 1987 Plan) terminated in 1994 upon the
exercise of all outstanding options. These plans provide for the granting
of either non-qualified or incentive stock options at not less than 85% and
100% of the market value of the stock on the date of the grant,
respectively. Options generally become exercisable in installments
commencing as of the beginning of a fiscal year near the date of grant.

<PAGE>

The following summarizes stock option activity for the three years ended
August 31, 1995:

<TABLE>
<CAPTION>
Option Price
Shares per share
-------- --------------
<S> <C> <C>
Options outstanding, September 1, 1992 538,120 $2.03 - $4.50
Exercised (213,950) 2.03 - 2.93
Forfeited (5,500) 2.93
-------- --------------
Options outstanding, August 31, 1993 318,670 2.03 - 4.50

Awarded 330,000 3.26
Exercised (89,210) 2.03 - 2.93
-------- --------------
Options outstanding, August 31, 1994 559,460 2.03 - 4.50

Awarded 638,165 4.50 - 5.29
Exercised (25,300) 2.03 - 5.06
Forfeited (11,000) 4.50
-------- --------------
Options outstanding, August 31, 1995 1,161,325 $2.03 - $5.29
-------- --------------
-------- --------------
</TABLE>

As of August 31, 1995, 62,645 shares and 345,510 shares were available for
grant under the 1986 and 1995 plans respectively. All authorized options
under the 1994 Plan have been granted. As of August 31, 1995, 588,665
options were exercisable.

STOCK APPRECIATION RIGHTS PLAN

The 1991 Stock Appreciation Rights Plan (the "SAR Plan") was adopted by the
Company effective February 6, 1991. The SAR Plan provided for the granting
of stock appreciation rights which entitled the grantee to receive cash
equal to the difference between the fair market value and the appreciation
base of the Class A common stock when the rights were exercised.

During 1995 the Company implemented a program to encourage the holders
under the 1991 SAR Plan to exchange their SARs for stock options.

Under the program, each SAR holder who exercised the vested portion of a
SAR award during the April-May window period was entitled to exchange the
entire SAR award for a replacement stock option under the 1995 Stock Option
Plan. The replacement options were issued at exercise prices equal to the
fair market value of the Class A stock on the respective dates of the SAR
exercises, with an expiration date of August 31, 2004 (instead of the
August 31, 2000 expiration date applicable to SAR awards) and with vesting
restrictions no more favorable to the holder than those applicable to the
exchanged SAR.

Of the SARs outstanding under the 1991 Plan, all but 10,000 were exercised,
resulting in a cash payment of $579. An aggregate of 303,367 incentive
stock options and 82,623 nonqualified stock options were issued at exercise
prices ranging from $4.50 to $5.06.

As of August 31, 1995, 8,800 rights were exercisable and 239,250 rights
were available for grant under the SAR Plan.

10. COMMITMENTS

OPERATING LEASES - Rent expense for noncancellable operating leases for
real property and equipment was $4,045, $1,034, and $915 for the years
ended August 31, 1995, 1994, and 1993, respectively. Minimum rentals for
operating leases for years ending after August 31, 1995 are as follows:
1996, $4,549; 1997, $4,379; 1998, $4,104; 1999, $4,048; 2000, $8,308; and
$19,327, thereafter. Some of the leases have options to extend terms and
are subject to escalation clauses and one lease is subject to additional
rent based on revenue.

EMPLOYMENT AGREEMENTS - At August 31, 1995, the Company is committed to
compensation under long-term employment agreements with certain of its
officers and key employees as follows: $1,680 in 1996, $1,208 in 1997 and
$95 in 1998.

<PAGE>

11. PENSION PLAN

Certain officers and employees of the Company are eligible for
participation in the "Motion Picture Industry Pension Plan", a multi-
employer defined benefit pension plan. The Plan is funded by employer and
employee contributions. Total pension plan expense was $446, $395, and
$364 for the years ended August 31, 1995, 1994, and 1993 respectively.

12. CONTINGENCIES

The Company is involved in litigation and similar claims incidental to the
conduct of its business. In management's opinion, none of the pending
actions is likely to have a material adverse impact on the Company's
financial statements.

13. BUSINESS SEGMENT INFORMATION

The Company does business in one industry segment. Information as to the
Company's operations in different geographic areas is as follows:

<TABLE>
<CAPTION>
1995
<S> <C>
REVENUES:

United States $ 45,069
Europe 4,934
---------

Total $ 50,003
---------
---------
NET INCOME:

United States $ 2,842
Europe 533
---------

Total $ 3,375
---------
---------

ASSETS:

United States $ 45,074
Europe 12,124
---------

Total $ 57,198
---------
---------
</TABLE>

There were no foreign operations in 1994 and 1993.

<PAGE>

14. QUARTERLY FINANCIAL DATA (unaudited)

Earnings (Loss) Per
Total Gross Net Common Share
1995 Revenues Profit (Loss) Income (Loss) Outstanding
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $ 8,778 $ (188) $ 176 $ .02
Second Quarter 10,057 627 114 .01
Third Quarter 18,290 3,752 2,329 .28
Fourth Quarter 12,878 1,435 756 .09

- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 50,003 $ 5,626 $ 3,375 $ .40 (a)

- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per
Total Gross Net Common Share
1994 Revenues Profit (Loss) Income (Loss) Outstanding
- ---------------------------------------------------------------------------------------------------------------------------------

First Quarter $ 8,975 $ 1,501 $ 924 $ .11
Second Quarter 7,471 685 341 .04
Third Quarter 9,554 1,839 988 .12
Fourth Quarter 6,892 (757) (473) (.05)

- ---------------------------------------------------------------------------------------------------------------------------------

TOTAL $ 32,892 $ 3,268 $ 1,780 $ .22 (a)

- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Aggregate per share amounts for each quarter may differ from annual totals
as each is independently calculated.

<PAGE>

THE TODD-AO CORPORATION SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS (Dollars in thousands)
YEARS ENDED AUGUST 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>

COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E
--------------- --------------- --------------- --------------- ---------------

Additions
Charged
Balance at (Credited) to Balance
Beginning of Costs and at End
Description Period Expenses Deductions of Period
- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Allowance for
doubtful
accounts:

Year ended
August 31, 1995 $ 408 $ 649 $ (229) $ 828
-------- -------- -------- --------

Year ended
August 31, 1994 $ 408 $ 31 $ (31) $ 408
-------- -------- -------- --------
-------- -------- -------- --------

Year ended
August 31, 1993 $ 551 $ (101) $ (42) $ 408
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>

<PAGE>

THE TODD-AO CORPORATION

SALAH M. HASSANEIN As of October 1, 1994
PRESIDENT

Joseph R. DeLang
277 Goldenwood Circle
Simi Valley, CA 93065

Re: Employment Agreement

Dear Mr. DeLang:

This letter will constitute your employment agreement with The Todd-AO
Corporation (the "Company"):

1. EMPLOYMENT. The Company hereby employs you as a Senior Vice President
and as the Executive Vice President of Todd-AO/Glen Glenn Studios. You
agree to perform all duties as may be from time to time assigned you by the
Company's President or Chief Executive Officer and to devote your full
business time, skill and attention to such services on an exclusive basis.
You will be based primarily in Los Angeles but may from time to time be
asked to take temporary assignments in other cities, in which event the
Company will pay your reasonable travel and living expenses in accordance
with its normal policies.

2. COMMENCEMENT DATE AND TERM.

2.1. COMMENCEMENT DATE. The Commencement Date of this agreement
shall be October 1, 1994 or such earlier date as may be mutually agreed.

2.2. TERM. The term of your employment will begin as of the
Commencement Date and will continue for a period of 36 months thereafter.
Notwithstanding the foregoing, the Company may terminate your employment
without liability on at least 10 days prior written notice to you if you
are unable to render substantially all of the services required hereunder
for a period of 6 months or more because of physical or mental disability.

900 NORTH SEWARD STREET 1021 NORTH SEWARD STREET
HOLLYWOOD, CALIFORNIA 90038 HOLLYWOOD, CALIFORNIA 90038
(213) 962-4000-FAX (213) 466-2327 (213) 962-4000-FAX (213) 466-7903

<PAGE>

J. R. DeLang
As of October 1, 1994
Page 2

2.3. CONSEQUENCES OF TERMINATION. Upon any termination of your employment
for any reason (including the expiration of the term of this agreement) you will
not, on behalf of yourself or others, directly or indirectly for a period of 12
months following the effective date of termination: (i) solicit or otherwise
attempt to induce any of the Company's customers to acquire any product or use
any service (including without limitation any production or postproduction
service) then sold or provided by the Company; or (ii) solicit or induce any
employee of the Company to leave such employment.

3. COMPENSATION AND BENEFITS. For the indicated weeks following the
Commencement Date your compensation will be as follows:

Weeks Gross Weekly Compensation
----- ----- ------ ------------

1-52 $5,480.77
53-104 5,769.23
105-156 6,153.85

You will be entitled to three weeks paid vacation per year and a $500/month
car allowance. You are eligible to participate in the Company's 401(k) Plan and
to receive group medical coverage on the same basis as other Company employees
who are not participants in the Motion Picture Industry Health Plan, together
with additional benefits (if any) to the extent generally offered to employees
who are not union members. Further benefits are at the Company's discretion.
To the extent (if any) that the Company is required to offer you participation
in the Motion Picture Industry Health, Pension or other benefit Plan, you
acknowledge that you have been offered such participation and specifically waive
it.

Prior to the execution of this Agreement you have received a $25,000
advance, which you agree to repay in substantially equal installments over the
52 weeks following the execution of this agreement, together with interest on
the unpaid balance at the Company's borrowing rate. You irrevocably authorize a
payroll deduction or offset against any amounts otherwise due you from the
Company (as compensation or otherwise) to repay the advance.

4. DEFERRED COMPENSATION. You may elect at any time during a calendar year to
defer a portion of your compensation for that year (the "deferred portion") by
giving written notice to the Company. Your election will be deemed to
constitute your deferred compensation arrangement for that year and must relate
to compensation to be earned after the election is made.

<PAGE>

J. R. DeLang
As of October 1, 1994
Page 3

4.1. INTEREST. Interest on the deferred portion will accrue at the Bank
of America prime rate, determined and compounded semi-annually.

4.2. PAYMENT. Within 90 days after the termination of your employment
with the Company, you may elect to have the deferred portion and accrued
interest paid in a lump sum or in monthly installments over a period not to
exceed 60 months.

4.3. BENEFICIARIES. In the event of your death, the deferred portion and
accrued interest will be paid to your estate or to such beneficiaries as you may
designate in writing, either in a lump sum or in installments, as such
beneficiaries may elect within 90 days after your death.

4.4. NO ASSIGNMENT OR ACCELERATION. Except as otherwise set forth above
or as otherwise consented to by the Company in its reasonable discretion, your
rights to the deferred portion are not assignable and are not payable before the
termination of your employment.

4.5. TERMINATION. The Company may discontinue the deferral arrangement at
any time if it would present a reasonable likelihood of adverse tax or other
consequences to the Company. In this regard the Company's judgment shall be
conclusive.

5. INTELLECTUAL PROPERTY.

5.1. INCLUDED INVENTIONS. For purposes of this agreement, "Included
Inventions" shall mean all developments, designs, creations, improvements,
original works of authorship, copyrights, formulas, processes, know how,
techniques and/or inventions made or conceived or reduced to practice during
the term of this agreement or reduced to practice within 12 months after
termination of this agreement, that relate in any way to computer graphics,
visual effects, audio and visual production and post production, film,
television, cable, CD ROM, multi-media, or any other business now or hereafter
conducted by the Company.

Excluded from the foregoing definitions of "Included Inventions" are any
inventions exempt under the provisions of Section 2870 of the California Labor
Code, which provides as follows:

<PAGE>

J. R. DeLang
As of October 1, 1994
Page 4

"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in
an invention to his or her employer shall not apply to an invention
that the employee developed entirely on his or her own time without
using the employer's equipment, supplies, facilities or trade secret
information except for those inventions that either: (1) relate at the
time of conception or reduction to practice of the invention to the
employer's business, or actual or demonstrably anticipated research or
development of the employer; or (2) result from any work performed by
the employee for the employer.

(b) To the extent that a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from
being required to be assigned under subdivision (a), the provision is
against the public policy of this state and is unenforceable."

5.2. DISCLOSURE AND OWNERSHIP. You agree to promptly disclose all
Included Inventions to the Company. All Included Inventions shall be the sole
and exclusive property of the Company and you hereby assign to the Company all
of your right, title and interest in such Included Inventions.

5.3. FURTHER ASSURANCES. You will assist the Company in applying for and
obtaining patents, copyrights and/or other protection for the Included
Inventions (during the term of this Agreement and thereafter) provided that you
will be reasonably compensated if the Company's requests your assistance after
termination of this agreement. You will sign such additional documents as the
Company may request in order to confirm the Company's rights to Included
Inventions. In the event the Company is unable to obtain your signature on any
document needed to apply for, obtain or enforce any intellectual property rights
relating to any Included Invention for any reason whatsoever (including without
limitation your refusal, unavailability or incapacity), you hereby irrevocably
appoint Christopher D. Jenkins or Silas R. Cross, or either of them acting
alone, with full power of substitution, as your agent and attorney in fact to
act for and on your behalf in connection with the execution and filing of any
such document with the same legal force and effect as if such acts were
performed by you.

6. CONFIDENTIAL INFORMATION. You agree to keep secret and confidential all
information previously or subsequently acquired by you concerning the business
and affairs of the Company and will not use such information in a manner adverse
to the Company's interests.

<PAGE>

J. R. DeLang
As of October 1, 1994
Page 5

7. EQUITABLE RELIEF. You acknowledge and agree that because of the unique and
extraordinary nature of your services, any breach or threatened breach by you of
this agreement (including without limitation the non-solicitation provisions of
Section 2.3) will cause irreparable injury and incalculable harm to the Company
and that the Company shall be entitled to any remedy at law or in equity,
including injunctive relief.

8. MISCELLANEOUS. This agreement constitutes the entire understanding relating
to your employment and no waiver or modification shall be valid unless in
writing and signed by the party to be charged.

If this sets forth our agreement, please sign and return a copy of this
letter.

Very truly yours,

Salah M. Hassanein
President

Accepted and Agreed:

J. R. DeLang

<PAGE>
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</TABLE>