<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MAY 31, 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
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
------- -------
The number of shares of common stock outstanding at July 7, 1995
was: 5,816,428 Class A Shares and 1,588,346 Class B Shares.
<PAGE>
THE TODD-AO CORPORATION
QUARTERLY REPORT ON FORM 10-Q
MAY 31, 1995
INDEX PART I - FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are filed herewith:
Consolidated Balance Sheets, May 31, 1995
and August 31, 1994. Page 3
Consolidated Statements of Income and Retained Earnings
for the Nine Months and Three Months Ended
May 31, 1995 and 1994. Page 5
Consolidated Statements of Cash Flows for the Nine Months
Ended May 31, 1995 and 1994. Page 6
Notes to Consolidated Financial Statements for the
Nine Months Ended May 31, 1995. Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page 12
PART II - OTHER INFORMATION
---------------------------
ITEM 1.
Legal Proceedings Page 15
ITEM 6.
Exhibits and Reports on Form 8-K Page 15
Signature Page 15
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
THE TODD-AO CORPORATION
- -----------------------
CONSOLIDATED BALANCE SHEETS
MAY 31, 1995 and AUGUST 31, 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MAY 31, AUGUST 31,
1995 1994
----------- ---------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 4,934 $ 606
Marketable securities 3,433 3,880
Trade receivables
(net of allowance for doubtful
accounts of $601 at May 31, 1995
and $408 at August 31, 1994) 10,535 4,278
Inventory (first-in first-out basis) 510 374
Income tax receivable 312
Prepaid income taxes 148
Deferred income taxes 563 563
Other 503 195
-------- --------
Total current assets 20,790 10,044
-------- --------
INVESTMENTS 1,353 1,270
-------- --------
PROPERTY AND EQUIPMENT - at cost:
Land 4,270 3,487
Buildings 10,911 8,201
Leasehold improvements 6,983 5,569
Lease acquisition costs 2,187 2,187
Equipment 30,161 26,171
Equipment under capitalized leases 5,302 1,746
Construction in progress 369 57
-------- --------
Total 60,183 47,418
Accumulated depreciation and
amortization (23,307) (22,083)
-------- --------
Property and equipment - net 36,876 25,335
-------- --------
OTHER ASSETS 497 79
-------- --------
TOTAL $ 59,516 $ 36,728
======== ========
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
THE TODD-AO CORPORATION
- -----------------------
CONSOLIDATED BALANCE SHEETS
MAY 31, 1995 and AUGUST 31, 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MAY 31, AUGUST 31,
1995 1994
---------- ---------
<S> <C> <C>
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
CURRENT LIABILITIES:
Accounts payable $ 2,654 $ 684
Accrued liabilities:
Payroll and related taxes 2,400 2,518
Interest 156 10
Equipment lease 394
Other 331 352
Income taxes payable 732 100
Current maturities of long-term debt 774 150
Capitalized lease obligations - current 901 708
Deferred income 507 162
-------- --------
Total current liabilities 8,849 4,684
-------- --------
LONG-TERM DEBT 9,099 600
CAPITALIZED LEASE OBLIGATIONS 917 867
DEFERRED COMPENSATION 458 565
DEFERRED GAIN ON SALE OF EQUIPMENT 6,733
DEFERRED INCOME TAXES 2,909 2,064
SHAREOWNERS' EQUITY:
Common Stock:
Class A authorized 20,000,000 shares
of $0.25 par value; issued 5,816,428
at May 31, 1995 and 5,797,928 at
August 31, 1994 1,454 1,449
Class B authorized 4,000,000
shares of $0.25 par value;
issued and outstanding 1,588,346 397 397
Additional capital 15,070 15,015
Retained earnings 13,380 11,087
Unrealized gains on marketable securities
and long-term investments 335
Cumulative foreign currency translation
adjustment (85)
-------- --------
Total shareowners' equity 30,551 27,948
-------- --------
TOTAL $ 59,516 $ 36,728
======== ========
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
THE TODD AO CORPORATION
- -----------------------
CONSOLIDATED-STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS AND THREE MONTHS ENDED MAY 31, 1995 AND 1994
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NINE MONTHS THREE MONTHS
---------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 37,125 $ 26,000 $ 18,290 $ 9,554
-------- -------- -------- --------
COSTS AND EXPENSES:
Operating costs and other expenses 29,405 20,087 12,872 7,060
Depreciation and amortization 3,014 1,888 1,444 655
Interest 320 7 220 7
Equipment lease expense - net 371 222
Other (income) - net (223) (670) (271) (87)
-------- -------- -------- --------
Total 32,887 21,312 14,487 7,635
-------- -------- -------- --------
INCOME BEFORE JOINT VENTURE
AND INCOME TAXES 4,238 4,688 3,803 1,919
LOSS FROM JOINT VENTURE 167 847 58 280
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 4,071 3,841 3,745 1,639
INCOME TAXES 1,452 1,588 1,416 651
-------- -------- -------- --------
NET INCOME 2,619 2,253 $ 2,329 $ 988
======== ========
RETAINED EARNINGS BEGINNING OF PERIOD 11,087 9,735
LESS: DIVIDENDS PAID (326) (320)
-------- --------
RETAINED EARNINGS END OF PERIOD $ 13,380 $ 11,668
======== ========
NET INCOME PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS $ .34 $ .30 $ .30 $ .13
======== ======== ======== ========
AVERAGE SHARES OUTSTANDING 7,592,353 7,445,090 7,605,040 7,409,901
========= ========= ========= =========
See notes to consolidated financial statements.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
THE TODD AO CORPORATION
- -----------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,619 $ 2,253
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Depreciation and amortization 3,014 1,888
Deferred income taxes 845 228
Loss from joint venture 167 847
Deferred compensation and other (107) (101)
Amortization of deferred (gain)
on sale/leaseback transaction (612)
(Gain) loss on sale of marketable
securities and investments 29 (342)
Changes in assets and liabilities:
Trade receivables (4,459) (2,268)
Inventory and other current assets (222) 11
Accounts payable and accrued
liabilities 1,233 918
Accrued equipment lease 394
Income taxes payable 433 368
Deferred income 347 (40)
-------- --------
Net cash flows provided by
operating activities: 3,681 3,762
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities
and investments (489) (2,750)
Proceeds from sale of marketable
securities and investments 1,159 921
Capital expenditures (2,638) (1,043)
Contributions to joint venture (167) (680)
Purchase of Skywalker Sound South (6,966)
Purchase of Chrysalis Television
Facilities Ltd. (8,002)
Other assets 1 (402)
-------- --------
Net cash flows (used in)
investing activities: (17,102) (3,954)
-------- --------
Continued on page 7
- -------------------
- -------------------------------------------------------------------------------------------
<PAGE>
THE TODD-AO CORPORATION
- -----------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 1995 AND 1994
(Dollars in Thousands)
- -------------------------------------------------------------------------------------------
1995 1994
---- ----
CONTINUED FROM PAGE 6
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 7,714
Payments of long-term debt (84)
Payments on capital lease obligation (820) (27)
Proceeds from sale/leaseback transaction 11,218
Proceeds from issuance of common stock 60 124
Treasury stock transactions (509)
Dividends paid (326) (320)
------- -------
Net cash flows provided by (used in)
financing activities: 17,762 (732)
Effect of exchange rate changes on cash (13)
------- -------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,328 (924)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 606 2,289
------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 4,934 $ 1,365
======= =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 117 $ 1
======= =======
Income taxes $ 675 $ 813
======= =======
See notes to consolidated financial statements.
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
THE TODD-AO CORPORATION
- -----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MAY 31, 1995
(Dollars in Thousands, except per share amounts)
- -------------------------------------------------------------------------------
If complete notes were to accompany these statements they would be substantially
in the same form as those to the Company's Financial Statements for the Year
Ended August 31, 1994. In addition the following notes are applicable:
1. In the opinion of management for the Company, all adjustments (which
comprise only normal recurring accruals) necessary for a fair
presentation of the results of operations have been included.
2. 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"),
Todd-AO Europe Holding Co., Ltd. ("TAO Europe") and Chrysalis/Todd-AO
Europe, Ltd. ("CTAO"). All significant intercompany balances and
transactions have been eliminated.
3. Net income per common share is computed based on the weighted average
number of common and common equivalent shares outstanding including
common share equivalents arising from the assumed conversion of any
outstanding dilutive stock options.
4. The Company is an investor in QSound Labs, Inc. ("QSound"), formerly
Archer Communications, Inc., which engages in the development and
licensing of a sound imaging audio technology known as QSound.
QSound's principal facilities are located in Calgary, Alberta (Canada)
and its shares are listed on the Vancouver and Toronto Stock Exchanges
and are traded over NASDAQ.
As of May 31, 1995, the Company owned 306,500 QSound shares. On May
31, 1995, the closing QSound NASDAQ stock price was $3.3125.
5. 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 sound studio 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
8
<PAGE>
of each other's designated projects. Through May 31, 1995 Todd-AO
Productions had contributed $2,426 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. Although negotiations continue there are no binding
agreements in effect with respect to the commercial exploitation
of any Todd-AO Project or, to the Company's best knowledge, any
TAE Project.
The following represents condensed financial information of the
Todd-AO/TAE joint venture as of and for the nine months ended May 31,
1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
<C> <C>
Cash and other assets $ 0 $ 218
Development costs, net 0 0
------- -------
Total assets $ 0 $ 218
======= =======
Liabilities $ 0 $ 180
Partner's capital - Todd-AO Productions, Inc. 0 38
Partner's capital - TAE 0 0
------- -------
Total liabilities and partner's capital $ 0 $ 218
======= =======
Revenues $ 0 $ 0
Expenses 167 847
------- -------
Net loss $ (167) $ (847)
======= =======
</TABLE>
6. 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 $6,878 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
CTAO (formerly Chrysalis Television Facilities, Ltd.) from Chrysalis
Holdings Ltd. ("CHL"). TAO Europe, CTAO and CHL are all corporations
organized under the laws of the United Kingdom and headquartered in
London. CTAO 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 $1,360. An additional cash settlement of
approximately $211 was paid in June 1995. Concurrently with the
acquisition, TAO Europe advanced and paid on behalf of CTAO its
intercompany debt to CHL in the amount of $4,585. Subsequent to the
acquisition, TAO Europe advanced and paid on behalf of CTAO other debt
in the amount of $1,336. TAO Europe and CTAO consolidated are
included in the Company's results of operations from March 1995.
9
<PAGE>
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 1994 and 1995 are primarily to operating
expenses related to non-applicable 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
1994 and 1995 are primarily to depreciation expense relating to
allocation of the purchase price, interest expense on borrowings in
connection with the acquisition and income taxes.
<TABLE>
<CAPTION>
Nine Months ended Nine Months ended
May 31, 1995 May 31, 1994
----------------- -----------------
<S> <C> <C>
Revenues $ 46,224 $ 45,440
========= =========
Net income $ 2,761 $ 2,614
========= =========
Net income per
common share $ 0.36 $ 0.35
========= =========
</TABLE>
7. In December 1994 the Company signed an agreement with its bank to
implement a lease intended as security (sale/leaseback of certain
equipment) in the amount of $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 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 is expected to be approximately $2,400.
The net equipment lease expense for the period ended May 31, 1995 is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Equipment lease costs $ 983
Amortization of deferred gain
on sale of equipment $ (612)
-------
Equipment lease expense, net $ 371
=======
</TABLE>
8. 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 May 31, 1995, 726,954 shares had been repurchased.
All of these shares have been cancelled and returned to authorized but
unissued status.
9. The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 115 which must be applied for fiscal years beginning after
December 15, 1993. SFAS No. 115 addresses the accounting and reporting
for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Management has
classified these investments as available for sale.
10
<PAGE>
10. During April and May 1995 the Company, with the approval of the Stock
Option/SAR Committee, implemented a program to encourage the holders of
Stock Appreciation Rights ("SARs") under the 1991 Stock Appreciation
Rights Plan (the "1991 SAR Plan") to exchange their SARs for stock
options. Under accounting rules applicable to SAR Plans, the potential
cash liability for the unexercised portion of SAR awards must be taken
into account in determining earnings, which accordingly are affected by
fluctuations in the market value of the Class A Stock. Stock option
plans do not involve a cash liability to the Company and changes in the
market value of the underlying stock do not affect earnings.
Of the 373,400 SARs outstanding under the 1991 Plan, all but 10,000
were exercised, resulting in a cash payment of $579. An aggregate of
275,788 incentive stock options and 75,112 nonqualified stock options
were issued at exercise prices ranging from $5.00 to $5.625. The total
number of options issued is less than the number of SARs exercised
because of employee terminations.
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.
The effect of the exchange was to preserve the appreciation potential
of the SAR award but with a longer exercise period and, in the case of
incentive stock options, potentially more favorable income tax
treatment to the holder.
11
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
1. Material Changes in Financial Condition
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.
In addition to the above, the Company expects capital expenditures of
approximately $2,511 for its Los Angeles, New York City and London
facilities in fiscal 1995. These capital expenditures will be financed
by bank leasing and credit facilities and by internally generated
funds.
As of May 31, 1995 the Company has $7,726 outstanding under the credit
agreement.
2. Material Changes in Results of Operations
YEAR-TO-DATE
Total revenues increased 42.8% ($11,125) and operating costs and
expenses increased 46.4% ($9,318).
SOUND SERVICES:
Sound studio revenues in California and New York increased $2,935.
Revenue increases due to the inclusion of the Santa Monica and West Los
Angeles studios of Todd-AO Studios West ("TSW")($5,282) 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 $3,208 due to the
inclusion of TSW beginning in February 1995. In addition, sound studio
12
<PAGE>
operating costs and expenses related to the revenue decreases described
above increased $490 due to union contract increases.
VIDEO SERVICES:
Revenues increased $8,211 due to the inclusion of Todd-AO Video
Services ("TVS")($4,716), Todd-AO Digital Images ("TDI")($1,002) and
Chrysalis/Todd-AO Europe, Ltd. ("CTAO")($2,493) 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 computer graphics 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 CTAO in March 1995. Both corporations are based in London and
organized under the laws of the United Kingdom. CTAO 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
CTAO were $5,641.
CORPORATE:
Depreciation and amortization increased 59.6% ($1,126) due to the
inclusion of TSW, TVS, TDI and CTAO in the current year.
Equipment lease expense net of gain on sale of equipment in connection
with a sale/leaseback agreement entered into on December 30 with the
Company's institutional lender is $371 and interest expense primarily
due to borrowings in connection with the acquisition of CTAO is $320.
A net decrease in other income of $447 is primarily due to the
following: A $214 increase due to the Company's stock appreciation
rights exchange program; a $228 increase in dividend and investment
income primarily due to investing activities in connection with the
proceeds from the sale/leaseback agreement; current year research and
development costs ($281) and non-recurring severance costs ($122); and
a decrease of $486 due to gains on sales of investments in the prior
year.
Losses from the Company's entertainment project development joint
venture decreased $680 primarily 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 $230. Net
income increased $366 which includes the reversal of a $100 provision
made for contested 1983-86 California Franchise Taxes for which, in the
Company's judgement, there is no ongoing liability.
CURRENT QUARTER
Total revenues increased 91.4% ($8,736) and operating costs and
expenses increased 82.3% ($5,812).
SOUND SERVICES:
Sound studio revenues in California and New York increased $4,383.
Revenue increases due to the inclusion of the Santa Monica and West Los
13
<PAGE>
Angeles studios of Todd-AO Studios West ("TSW")($4,214) were augmented
by revenue increases at the Los Angeles and New York studios.
Sound studio operating costs and expenses increased $2,875 primarily
due to the inclusion of TSW.
VIDEO SERVICES:
Revenues increased $4,663 due to the inclusion of Todd-AO Video
Services ("TVS")($1,674), Todd-AO Digital Images ("TDI")($496) and
Chrysalis/Todd-AO Europe, Ltd. ("CTAO")($2,493) in the current year.
Todd-AO Europe Holding Co., Ltd., a wholly owned subsidiary of the
Company, acquired all of the outstanding shares of CTAO in March 1995.
Both corporations are based in London and organized under the laws of
the United Kingdom. CTAO 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
CTAO were $2,823.
CORPORATE:
Depreciation and amortization increased 120.5% ($789) due to the
inclusion of TSW, TVS, TDI and CTAO in the current year.
Equipment lease expense net of gain on sale of equipment in connection
with a sale/leaseback agreement entered into on December 30 with the
Company's institutional lender is $222 and interest expense primarily
due to borrowings in connection with the acquisition of CTAO is $220.
A net increase in other income of $184 is due primarily to an increase
in dividend and investment income from investing activities in
connection with the proceeds from the sale/leaseback agreement and a
$40 increase due to the Company's stock appreciation rights exchange
program.
Losses from the Company's entertainment project development joint
venture decreased $222 primarily 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 $2,106 and net
income increased $1,341.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in litigation and similar claims incidental to
the conduct of its business. None of the pending actions is considered
material.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). (1) Exhibit 27 Financial Data Schedule
(b). (1) On May 26, 1995 the Company filed a report on Form 8-K/A
which amended a report on Form 8-K filed on March 31, 1995.
In these filings, the Company reported the acquisition of
the entire issued share capital of Chrysalis Television
Facilities Ltd.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TODD-AO CORPORATION
July 12, 1995 /s/ Silas R. Cross
- ---------------- ----------------------------
Date Silas R. Cross
Chief Accounting Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> MAY-31-1995
<CASH> 4,934
<SECURITIES> 3,433
<RECEIVABLES> 11,136
<ALLOWANCES> 601
<INVENTORY> 510
<CURRENT-ASSETS> 20,790
<PP&E> 60,183
<DEPRECIATION> 23,307
<TOTAL-ASSETS> 59,516
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0
0
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</TABLE>
