<PAGE>
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT TO REPORT
Filed pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
THE TODD-AO CORPORATION
(Exact name of registrant as specified in its charter)
File No. 0-1461
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items of its
Form 8-K, dated May 18, 1998 as set forth in the pages attached hereto.
7(a). Financial statements of Tele-Cine Cell Group plc.
7(b). Pro Forma financial information combining The Todd-AO Corporation and
Tele-Cine Cell Group plc.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 10, 1998
----------------
THE TODD-AO CORPORATION
------------------------
/s/ Silas R. Cross
------------------------
Silas R. Cross
Principal Accounting Officer
<PAGE>
THE TODD-AO CORPORATION
Item 7(a)
Financial Statements of Tele-Cine Cell Group plc
I. For the year ended December 31, 1997 (Audited)
(a) Directors' Report.
(b) Directors, Corporate Governance, and Report of the Remuneration
Committee.
(c) Report of the Auditors.
(d) Consolidated profit and loss account for the year ended December 31,
1997.
(e) Consolidated and Company balance sheet as at December 31, 1997.
(f) Consolidated cash flow statement for the year ended December 31, 1997.
(g) Notes to the Accounts.
II. As of and for the two months ended February 28, 1998 and 1997 (Unaudited)
(a) Balance Sheet as of February 28, 1998. (b) Profit and loss accounts
for the two months ended February 28, 1998 and 1997.
<PAGE>
DIRECTORS' REPORT
- -------------------
For the year ended 31 December 1997
[PICTURE]
[PICTURE]
SOUTH BANK SHOW
GARY OLDMAN
CLIENT: LWT SOUTH BANK SHOW
TAPE GRADE, ON-LINE EDIT AND DUBBING
HOTEL
10 PART SERIES
CLIENT: LION TELEVISION FOR BBC1
ON-LINE EDIT AND TAPE GRADE
THE DIRECTORS PRESENT THEIR ANNUAL REPORT TOGETHER WITH THE AUDITED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1997.
PRINCIPAL ACTIVITIES
The Group is principally engaged in the provision of production,
post-production and special effects facilities to the film, television and
video industry.
RESULTS AND DIVIDENDS
The results of the Group are as set out in the profit and loss account on
page 18. The Directors do not recommend a dividend in respect of the
ordinary shares for the year although the preference dividend of 5.75% has
been accrued in accordance with the Articles of the Company.
REVIEW OF THE GROUP'S ACTIVITIES
A review of the Group's business activities and prospects is set out in the
Chairman's Statement and the Operating Review on pages 2 to 5.
STATEMENT OF DIRECTORS' RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
Directors are required by the Companies Act 1985 to prepare financial
statements for each financial year which give a true and fair view of the
state of affairs of the Company and the Group at the end of the financial
period and of the profit or loss of the Group for that period. It is also
the Directors' responsibility to maintain adequate accounting records,
safeguard the assets of the Company and the Group and prevent and detect
fraud and other irregularities. The Directors confirm that suitable
accounting policies, consistently applied and supported by reasonable and
prudent judgements and estimates have been used in the preparation of the
financial statements on the going concern basis and that applicable
accounting standards have been followed.
GOING CONCERN
After making enquiries, the Directors have formed a judgement at the
time of approving the financial statements that there is a reasonable
expectation that the Company and Group have adequate resources to
continue in operational existence for the foreseeable future. For this
reason they continue to adopt the going concern basis in preparing the
financial statements.
SUBSTANTIAL INTERESTS
Except for the holdings of ordinary shares listed below, those of the
Directors set out below, and the interest of Todd-AO Europe Holding Company
Limited under the irrevocable undertakings granted by Arcadian Associates
Limited and Mr Kirsch described under the Directors and their Interests
below, the Directors are not aware of any material interests of 3% or more
in the issued ordinary share capital of the Company at 1 April 1998 being
the latest practicable date prior to the posting of the Annual Report.
<TABLE>
<CAPTION>
NUMBER OF
ORDINARY SHARES %
- ----------------------------------------------------------------------------
<S> <C> <C>
J W Graves Esq. 834,558 6.7
Commercial Union Asset Management Limited 875,000 7.0
Herald Investment Trust Limited 735,000 5.9
- ----------------------------------------------------------------------------
</TABLE>
1
<PAGE>
- -----------------------------
DIRECTORS' REPORT (CONTINUED)
DIRECTORS AND THEIR INTERESTS
The Directors who held office during the year and since the year end and
their beneficial interests in the shares of the Company are as follows:
<TABLE>
<CAPTION>
31 DECEMBER 1997 1 JANUARY 1997
(OR LATER DATE OF APPOINTMENT)
----------------------------------------------------------
CUMULATIVE CUMULATIVE
ORDINARY PREFERENCE ORDINARY PREFERENCE
SHARES SHARES SHARES SHARES
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J B Paul 170,000 - 170,000 -
J P Rowland 1,593,750 - 1,593,750 -
P A P O'Hagan (resigned 17 January 1998) 1,593,750 - 1,593,750 -
N Igoe (resigned 13 January 1998) 3,088 - 3,088 -
R Kirsch 3,044,340 245,635 3,044,340 245,635
J L Rowsell 18,000 - 18,000 -
G S Duncan - - - -
R A Cole (appointed 11 November 1997) 334,000 - 184,000 -
D G Brocksom (appointed 13 January 1998) - - - -
- -------------------------------------------------------------------------------------------------------
</TABLE>
On 13 January 1998, 85,106 ordinary shares in Tele-Cine Cell Group plc
were issued to Mr Cole as part of the consideration for the acquisition
of XTV Limited (note 19). Under the terms of the XTV Limited acquisition
agreement, Mr Cole is entitled to receive a further L40,000 payable in
Tele-Cine Cell Group plc ordinary shares on 1 July 1998. He is also
entitled to receive a further L40,000 also payable in shares on 1 April
1999 provided that XTV Cell Limited makes a profit in the year ended 31
December 1998.
On 12 November 1997, under the terms of the Company's share option schemes,
Mr Cole was granted options over 125,000 ordinary shares of the Company at
a price of 42 pence per share. Mr Igoe had options granted over 105,000
ordinary shares of the Company, exercisable between 1997 and 2005 at prices
between 170p and 53.5p. These options lapsed on his resignation.
Under the terms of Mr Brocksom's contract of employment, the Company has
undertaken to issue, at the first opportunity, options over 125,000
ordinary shares under the terms of the Company's share option schemes. The
Company has undertaken to compensate Mr Brocksom at the time of any
exercise of the options in the event that the share options cannot be
issued at, or less than, 47 pence per share, being the price prevailing at
the time his employment with the Company commenced.
On 12 March 1998, Arcadian Associates Limited, which holds 3,044,340
ordinary shares of 5p each in the Company to which Mr Kirsch is
beneficially entitled, entered into an irrevocable undertaking to sell
those shares to Todd-AO Europe Holding Company Limited ("Todd"), a
subsidiary of The Todd-AO Corporation, at a price of 80 pence per share in
the event that Todd were to make a general offer at 80 pence per share for
all the shares in issue within the 45 days following the signing of the
irrevocable undertaking. Mr Kirsch also entered into an irrevocable
undertaking to sell to Todd the L245,635 preference shares that he owns at
a price of L1 per share if such a general offer were to be made.
[PICTURE]
PULSAR WATCHES COMMERCIAL
CLIENT: SEIKO
PRODUCTION COMPANY: DARKSTAR
AGENCY: DELANEY DAVISON BOZELL
MOTION CONTROL, 3D COMPUTER GRAPHICS, HENRY
2
<PAGE>
- -----------------------------
DIRECTORS' REPORT (CONTINUED)
[PICTURE]
[PICTURE]
SEESAW
3 PART SERIAL
CLIENT: FILM & GENERAL PRODUCTIONS LIMITED AND SCOTTISH TELEVISION ENTERPRISES
CO-PRODUCTION
FILM GRADE
BBC 2 SPRING 1997
WEB IDENT
CLIENT: BBC 2
3D COMPUTER GRAPHICS AND HENRY
On 6 April 1998, pursuant to a general offer by Todd to acquire all the
issued share capital of the Company at a price per ordinary share of 80
pence, the other Directors holding registered shares entered into
irrevocable commitments to accept the general offer in respect of their
shareholdings.
The Directors had no interests in the shares of the Company's subsidiaries.
Other than as stated above there have been no changes in Directors' share
interests or share options in the period to 6 April 1998.
ANNUAL GENERAL MEETING
In accordance with the Articles of Association of the Company, Mr Paul and
Mr Rowsell retire by rotation at the next Annual General Meeting of the
Company and, being eligible, offer themselves for re-election.
Having been appointed as Directors after the last General Meeting, Messrs
Cole and Brocksom retire in accordance with the Articles of Association
and, being eligible, offer themselves for re-election at the next Annual
General Meeting.
Pending the outcome of the general offer by Todd refered to above, notice
of the Annual General Meeting has not been given at this date.
SHARE CAPITAL
The Company operates two share option schemes, the Inland Revenue approved
Tele-Cine Cell Group plc 1994 Executive Share Option Scheme and the
unapproved 1996 Tele-Cine Cell Group plc Share Option Scheme.
On 6 May 1997 and 12 November 1997, options were granted under the 1994
Executive Share Option Scheme, in respect of 40,000 and 360,000
respectively of the Company's ordinary shares at subscription prices of 44p
and 42p per share, exercisable between three and ten years after the date
of grant.
Also on 12 November 1997, under the 1996 Share Option Scheme, options were
granted in respect of 160,000 of the Company's ordinary shares at a
subscription price of 42p per share, exercisable between three and seven
years after the date of grant.
Further details of the Company's share capital, including share options,
are set out in note 20.
SUPPLIER PAYMENT POLICY
Group companies do not follow any formal code or standard in paying their
suppliers. However, the companies generally seek to honour payment terms
stipulated by suppliers subject to the satisfactory resolution of queries
regarding amounts claimed. As at 31 December 1997 outstanding creditors
represented 79 days. (1996 - 74 days)
AUDITORS
A resolution for the reappointment of Deloitte & Touche as auditors of the
Company is to be proposed at the forthcoming Annual General Meeting.
By order of the Board
/s/ D G Brocksom
D G Brocksom
SECRETARY
3
<PAGE>
DIRECTORS
- ---------
JULIAN PAUL MA FCA *
Aged 52, he was appointed Chairman and non-executive Director in September
1994. A Chartered Accountant, he has a City background as a commercial and
merchant banker. From 1991 to 1997 he was Deputy Chairman of Castle
Communications plc and since 1997 he has been Deputy Chairman of Eagle Rock
Entertainment plc. He is also a non-executive Director of Tiger Books
International plc and Sleepy Kids plc.
JOHN ROWLAND
Aged 47, Mr Rowland became Group Managing Director in 1997. An engineer by
training, he worked for Rediffusion and Philips before joining IVS (UK)
Limited as systems engineer in 1973, subsequent to which he became chief
engineer and finally general manager. He was a founder shareholder and
director of Tele-Cine Limited in 1979.
ROBERT COLE FCA
Aged 60, Mr Cole, a Chartered Accountant, joined the Group in November
1997, on the acquisition of XTV Limited with whose business he had been
involved since 1994. Previously, Mr Cole has had a number of private
company appointments and previously was the Managing Partner of Chantry
Vellacott.
DAVID BROCKSOM MA FCA
Aged 37, Mr Brocksom joined the Group in January 1998 as Finance Director
and Company Secretary. Mr Brocksom qualified as a Chartered Accountant with
Price Waterhouse, and subsequently worked in a number of listed companies.
RAYMOND KIRSCH
Aged 68, he is a non-executive Director. He was a co-founder of Tele-Cine
Limited and Cell Animation Limited (now XTV Cell Limited). His background
is in publishing for the medical and pharmaceutical industry and he is a
Director of a number of private publishing companies in which he is also a
shareholder.
JAMES ROWSELL LLB *
Aged 41, he was appointed a non-executive Director in September 1994. He
qualified as a barrister and subsequently worked as a company lawyer with
General Electric Company plc. He joined Smith Keen Cutler in 1982 as an
investment analyst and moved to Paribas Capital Markets in 1984. He joined
James Capel & Co. Limited in 1988 and was appointed a Director in 1995.
GRANT DUNCAN MA *
Aged 39, he was appointed a non-executive Director in November 1996. He
entered the advertising industry with Collett Dickinson Pearce in 1982,
becoming Client Services Director before moving to Gold Greenless Trott
(now GGT Group) in 1993. He was appointed Managing Director of GGT
Advertising in 1995.
* Members of the Group's Audit and Remuneration Committees
4
<PAGE>
CORPORATE GOVERNANCE
- --------------------
STATEMENT OF COMPLIANCE WITH THE CODE OF BEST PRACTICE
Throughout the year the Company complied with all the applicable provisions
of the Code of Best Practice issued by the Committee on the Financial
Aspects of Corporate Governance ("The Cadbury Committee") and with Section
A and has given full consideration to Schedule B of the Best Practice
Provisions annexed to the Listing Rules. The Remuneration Committee's
report to shareholders can be found on pages 12 to 14. The Directors'
statements on other aspects of corporate governance are set out below.
BOARD COMPOSITION
The Board of Directors comprises three executive and four non-executive
Directors and meets regularly throughout the year. The Board is responsible
for Group strategy, acquisition and divestment policy, approval of major
capital expenditure projects and consideration of significant financing
matters. It reviews the strategic direction of individual trading
subsidiaries, their annual budgets, their progress towards achievement of
those budgets and their capital expenditure programmes.
BOARD COMMITTEES
The Board has established an Audit Committee and a Remuneration Committee,
both with defined terms of reference.
AUDIT COMMITTEE
The Audit Committee, comprising Mr Paul, Mr Rowsell and Mr Duncan meets at
least twice a year. It has been established to monitor the adequacy of
internal controls, accounting policies and financial reporting and provides
a forum through which the Group's external auditors report to the
non-executive Directors. Mr Paul is Chairman of the Audit Committee.
REMUNERATION COMMITTEE
The composition and duties of the Remuneration Committee are explained in
the Committee's report on pages 12 to 14.
5
<PAGE>
- --------------------------------
CORPORATE GOVERNANCE (CONTINUED)
INTERNAL FINANCIAL CONTROL
The Directors are responsible for ensuring that Tele-Cine Cell Group plc
maintains a system of internal financial controls. The system is designed
to ensure the maintenance of proper accounting records, the safeguarding of
the Group's assets and the reliability of the financial information used
within the business or for publication. Any such system can only provide
reasonable, and not absolute, protection against mis-statement or loss.
The Board has reviewed the effectiveness of the system of internal
financial controls which includes:
- clear responsibility on the part of all managers for the maintenance
of good financial controls and the production of detailed, timely and
accurate management information;
- monthly Board meetings to exercise control and direction over
strategic, financial, organisational and compliance issues for the
Group and receive reports on subsidiary Company performance by the
respective Managing Directors;
- monthly financial reporting to the Board including the monitoring of
performance targets and the identification of exceptional costs or
losses;
- due diligence appraisal and approval by the Board of significant
investment and capital expenditure projects;
- delegation of responsibility to operational management within an
appropriate organisation structure together with the definition of
authorisation limits for transactions and segregation of duties to
minimise exposure to loss or fraud; and
- procedures to ensure the reliability and security of data processing
systems.
By order of the Board
/s/ D G Brocksom
D G Brocksom
SECRETARY
6 April 1998
6
<PAGE>
REPORT OF THE REMUNERATION COMMITTEE
- ------------------------------------
STATEMENT OF COMPLIANCE
Throughout the year the Company complied with Section A and has given full
consideration to Section B of the Best Practice Provisions on remuneration
committees as annexed to the Listing Rules.
The Committee has minuted a decision that the members in Annual General
Meeting need not be invited to approve the remuneration policy set out in
this report. The Chairman of the Committee will, however, be available to
answer questions on any aspects of the remuneration policy at the Annual
General Meeting.
REMUNERATION COMMITTEE
The Committee consists solely of three non-executive directors: Mr Paul, Mr
Rowsell and Mr Duncan, under the chairmanship of Mr Paul. None of the
members of the Committee has any personal financial interests (other than
as shareholders and arms length trading relationships), conflicts of
interest arising from cross-directorships or day-to-day involvement in
running the business. The Committee consults the Group Managing Director
about its proposals and has access to professional advice from inside and
outside the Company.
REMUNERATION POLICY ON EXECUTIVE DIRECTORS' REMUNERATION
Executive remuneration packages are designed to attract, motivate and
retain Directors of the high calibre needed to maintain the Company's
position as a market leader and to reward them for enhancing value to
shareholders. The performance measurement of the executive directors and
the determination of their annual remuneration package is undertaken by the
Committee. No Director plays a part in any discussion about his own
remuneration.
MAIN COMPONENTS OF REMUNERATION PACKAGES
BASIC SALARY
Basic salaries for an executive Director are determined by the Committee
after taking into account the performance of the individual and the rates
of salary for similar jobs in comparable companies. Executive Directors may
also receive the benefit of health insurance and company cars.
ANNUAL BONUSES
The Board believes that any incentive compensation awarded should be tied
to the interests of the Company's shareholders and that the principal
measure of those interests is the financial performance of the Company.
Annual bonus payments for Messrs Rowland and Brocksom are determined in
accordance with the rules of the Tele-Cine Cell Group plc Executive
Directors' Bonus Scheme. The Remuneration Committee administers the scheme
and all payments are made at the discretion of the Committee. Under the
terms of the Scheme, Messrs Rowland and Brocksom are entitled to a bonus
payment based on the increase in the Group's earnings per share, compared
to the increase in the Retail Prices Index for the relevant period. Bonuses
under this scheme are capped at 33% of basic salary.
Under the terms of the acquisition agreement in respect of XTV Limited, Mr
Cole is entitled to participate in a bonus scheme, under which the payments
are determined by the results of XTV Cell Limited.
No bonus payments were made in respect of the results for the year ended 31
December 1997.
SHARE OPTIONS
The Committee believes that share ownership by executive Directors and
senior executives strengthens the link between their personal interests and
those of shareholders. The Committee intends to continue to grant share
options to the executive directors (other than significant shareholders)
and senior executives in such a manner as to motivate and incentivise them
to produce long term benefits for the Group.
7
<PAGE>
- ------------------------------------------------
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
PENSION ARRANGEMENTS
The Company has contributed during the year to 31 December 1997 to defined
contribution plans for the executive Directors. Contributions are made,
based upon a percentage of basic salary, to defined contribution pension
schemes in respect of Messrs Rowland and Brocksom, but not Mr Cole.
Contributions were also made in respect of Messrs O'Hagan and Igoe during
the year.
CONTRACTS OF SERVICE
Details of the Directors' service contracts are set out below:
MR J P ROWLAND
Mr Rowland has a service contract determinable on six months' notice, under
which he is entitled to receive annual increases in his basic salary in
line with the increase in inflation.
MR D G BROCKSOM
Mr Brocksom has a service contract determinable on six months' notice,
except that such notice may not expire prior to 31 December 1998.
MR R A COLE
Mr Cole has a consultancy agreement with XTV Cell Limited determinable on
six months' notice.
NON-EXECUTIVE DIRECTORS
The non-executive Directors do not have service contracts with the Company,
but are entitled to receive six months' notice of termination of their
services. Non-executive Directors do not participate in the Company's bonus
scheme, or share option schemes, nor are they eligible to receive any
pension contributions.
DIRECTORS' REMUNERATION
Set out below are details of Directors' remuneration.
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------------------------------
BASIC PENSION BENEFITS
FEES SALARIES CONTRIBUTIONS IN KIND TOTAL TOTAL
L000 L000 L000 L000 L000 L000
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE DIRECTORS
J P Rowland - 103 19 7 129 119
P A P O'Hagan (resigned 17 January 1998) - 94 17 8 119 118
N Igoe (resigned 13 January 1998) - 59 11 8 78 77
R A Cole (appointed 11 November 1997) - 14 - - 14 -
D G Brocksom (appointed 13 January 1998) - - - - - -
NON-EXECUTIVE DIRECTORS
J B Paul (Chairman) 40 - - - 40 30
J L Rowsell 12 - - - 12 11
R Kirsch 12 - - - 12 13
G S Duncan (appointed 12 November 1996) 8 - - - 8 1
- -----------------------------------------------------------------------------------------------------------------------------------
Total 72 270 47 23 412 369
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
- ------------------------------------------------
REPORT OF THE REMUNERATION COMMITTEE (CONTINUED)
On 12 November 1997, Mr Cole was granted options at 42 pence per share over
a total of 125,000 ordinary shares under the terms of the 1994 and 1996
Share Option Schemes.
Under the terms of his contract of employment Mr Brocksom is entitled to be
granted options over 125,000 ordinary shares under the terms of the 1994 or
1996 Share Option Schemes. The Company has undertaken to compensate Mr
Brocksom at the time of any exercise of the options in the event that the
share options cannot be issued at 47 pence per share or less, being the
price prevailing at the time his employment with the Company commenced.
On 17 January 1998, Mr O'Hagan resigned as a Director and received a sum of
L34,000 together with the transfer of his car, which had a net book value
of L3,000, in settlement of the liabilities of the Company under his
service contract. Mr O'Hagan's expertise remains available to the Group
under a consultancy agreement for 12 months from the date of resignation at
a fee of L5,350 per month.
The market price of the Company's shares at 31 December 1997 was 47p and
the highest and lowest market prices were 54p and 29p respectively.
THE TODD-AO CORPORATION
This report coincides with the announcement that Todd-AO Europe Holding
Company Limited, a subsidiary of The Todd-AO Corporation ("Todd"), has made
a recommended offer of 80p per share for all of the issued share capital of
Tele-Cine Cell Group plc. If this offer becomes unconditional in all
respects, the Company will become a subsidiary of Todd, and a number of
changes to the directors and their terms of service, to be highlighted in
the offer document, will be made.
By order of the Remuneration Committee
/s/ J B Paul
J B Paul
CHAIRMAN
6 April 1998
9
<PAGE>
PROFESSIONAL ADVISERS
- ----------------------
COMPANY SECRETARY
D G Brocksom FCA
REGISTERED OFFICE & CORPORATE HEADQUARTERS
Video House
48 Charlotte Street
London W1P 1LX
REGISTERED NUMBER
1902408
AUDITORS
Deloitte & Touche
63 High Street
Crawley
West Sussex RH10 1BQ
SOLICITORS
Lawrence Graham
190 Strand
London WC2R 1JN
Blank Swerner Grant
4 Shakespeare Road
London N3 1XE
STOCKBROKERS
Beeson Gregory Limited
The Registry
Royal Mint Court
London EC3N 4EY
BANKERS
National Westminster Bank plc
112 Oxford Street
London W1N 0AH
REGISTRARS
Harford Registrars
Harford House
101-103 Great Portland Street
London W1N 6BH
10
<PAGE>
REPORT OF THE AUDITORS
- ----------------------
to the members of Tele-cine Cell Group plc
We have audited the financial statements on pages 18 to 35, which have been
prepared under the accounting policies set out on pages 22 and 23, and the
detailed information which is specified by the London Stock Exchange to be
audited in respect of Directors' remuneration and share options schemes set
out in the Directors' remuneration paragraph of the report to shareholders
by the Remuneration Committee on pages 12 to 14.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 6 the Company's Directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report
our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgements made by the Directors in the preparation of the financial
statements and of whether the accounting policies are appropriate to the
circumstances of the Company and the Group, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
OPINION
In our opinion the financial statements give a true and fair view of the
state of affairs of the Company and the Group as at 31 December 1997 and of
the loss of the Group for the year then ended and have been properly
prepared in accordance with the Companies Act 1985.
/s/ Deloitte & Touche
Deloitte & Touche
CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS
63 High Street
Crawley
West Sussex RH10 1BQ
6 April 1998
11
<PAGE>
REVIEW REPORT OF THE AUDITORS
- -----------------------------
to Tele-cine Cell Group plc by Deloitte & Touche on Corporate Governance Matters
In addition to our audit of the financial statements, we have reviewed the
Directors' statements on pages 10 and 11 on the Company's compliance with
the paragraphs of the Code of Best Practice specified for our review by the
London Stock Exchange and their adoption of the going concern basis in
preparing the financial statements. The objective of our review is to draw
attention to non-compliance with Listing Rules 12.43 (j) and 12.43 (v). We
have also reviewed the statement of compliance with Section A of the Best
Practice Provisions on remuneration committees and the report of the
Remuneration Committee to the shareholders set out on pages 12 to 14 to the
extent that they provide the disclosures specified by the Listing Rules.
BASIS OF OPINION
We carried out our review in accordance with guidance issued by the
Auditing Practices Board. That guidance does not require us to perform the
additional work necessary to, and we do not, express any opinion on the
effectiveness of either the Company's system of internal financial control
or its corporate governance procedures or on the appropriateness of the
bases used in determining Directors' remuneration or on the ability of the
Company to continue in operational existence.
OPINION
With respect to the Directors' statement on internal financial control on
page 11, and going concern on page 6, in our opinion the Directors have
provided the disclosures required by the Listing Rules referred to above
and such statements are not inconsistent with the information of which we
are aware from our audit work on the financial statements.
Based on enquiry of certain Directors and officers of the Company, and
examination of the relevant documents, in our opinion the Directors'
statement on page 10 appropriately reflects the Company's compliance with
the other paragraphs of the Code specified for our review by Listing Rule
12.43 (j). Also on this basis, in our opinion the Directors' statement of
compliance with Section A of the Best Practice Provisions on remuneration
committees and the report of the Remuneration Committee appropriately
provide the disclosures specified by the Listing Rules and are not
inconsistent with the information of which we have become aware from our
audit work on the financial statements.
/s/ Deloitte & Touche
Deloitte & Touche
CHARTERED ACCOUNTANTS
63 High Street
Crawley
West Sussex RH10 1BQ
6 April 1998
12
<PAGE>
CONSOLIDATED PROFIT & LOSS ACCOUNT
- ----------------------------------
for the year ended 31 December 1997
<TABLE>
<CAPTION>
NOTES
1997 1997 1996 1996
----------------------------------------------------------
L000 L000 L000 L000
----------------------------------------------------------
<S> <C> <C> <C> <C>
3 TURNOVER 13,823 13,264
Cost of sales (10,405) (9,501)
----------------------------------------------------------------------------------------------------------------
GROSS PROFIT 3,418 3,763
4 Exceptional administrative expenses (454) -
Other administrative expenses (3,988) (2,912)
----------------------------------------------------------------------------------------------------------------
Total administrative expenses (4,442) (2,912)
Other operating income 56 65
----------------------------------------------------------------------------------------------------------------
4 OPERATING (LOSS)/PROFIT (968) 916
Share of profits of associated company 55 -
Provision against liabilities in respect of
associated company (152) -
6 Net interest payable (132) (9)
----------------------------------------------------------------------------------------------------------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION (1,197) 907
7 Tax on (loss)/profit on ordinary activities 15 (368)
----------------------------------------------------------------------------------------------------------------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION (1,182) 539
Dividends paid and proposed, including
8 amounts in respect of non-equity shares (14) (438)
----------------------------------------------------------------------------------------------------------------
21 (LOSS)/PROFIT FOR THE FINANCIAL YEAR
TRANSFERRED (FROM)/TO RESERVES (1,196) 101
----------------------------------------------------------------------------------------------------------------
9 (LOSSES)/EARNINGS PER ORDINARY SHARE (10.1)p 4.5p
----------------------------------------------------------
</TABLE>
There are no recognised gains or losses other than as stated in the profit and
loss account above in both the current and prior years.
13
<PAGE>
CONSOLIDATED BALANCE SHEET
- --------------------------
for the year ended 31 December 1997
<TABLE>
<CAPTION>
NOTES
1997 1996
----------------------------------------------------------
L000 L000 L000 L000
----------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED ASSETS
10 Tangible assets 6,118 6,407
11 Investments 64 5
----------------------------------------------------------------------------------------------------------------
6,182 6,412
CURRENT ASSETS
12 Stocks 134 141
13 Investment in programming 365 304
14 Debtors 4,393 4,256
Cash at bank and in hand - 14
----------------------------------------------------------------------------------------------------------------
4,892 4,715
CREDITORS - AMOUNTS FALLING
15 DUE WITHIN ONE YEAR (3,621) (2,808)
----------------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS 1,271 1,907
----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 7,453 8,319
16 CREDITORS - AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR (237) -
17 PROVISIONS FOR LIABILITIES AND CHARGES (147) (55)
----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS 7,069 8,264
----------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
20 Called up share capital 857 834
Share premium account 3,563 3,563
Shares to be issued 300 -
Profit and loss account 2,349 3,867
----------------------------------------------------------------------------------------------------------------
21 TOTAL SHAREHOLDERS' FUNDS 7,069 8,264
----------------------------------------------------------------------------------------------------------------
Attributable to equity shareholders 6,823 8,018
Attributable to non-equity shareholders 246 246
----------------------------------------------------------
</TABLE>
These financial statements were approved by the Board of Directors on 6 April
1998.
Signed on behalf of the Board of Directors
/s/ J B Paul /s/ D G Brocksom
J B Paul D G Brocksom
DIRECTOR DIRECTOR
14
<PAGE>
COMPANY BALANCE SHEET
- ---------------------
as at 31 December 1997
<TABLE>
<CAPTION>
NOTES
1997 1996
----------------------------------------------------------
L000 L000 L000 L000
----------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED ASSETS
11 Investments 1,017 722
CURRENT ASSETS
14 Debtors 5,118 4,599
CREDITORS - AMOUNTS FALLING
15 DUE WITHIN ONE YEAR (1,193) (853)
----------------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS 3,925 3,746
----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 4,942 4,468
17 PROVISIONS FOR LIABILITIES AND CHARGES (147) -
----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS 4,795 4,468
----------------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
20 Called up share capital 857 834
Share premium account 3,563 3,563
Shares to be issued 300 -
21 Profit and loss account 75 71
----------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' FUNDS 4,795 4,468
----------------------------------------------------------------------------------------------------------------
Attributable to equity shareholders 4,549 4,222
Attributable to non-equity shareholders 246 246
----------------------------------------------------------
</TABLE>
These financial statements were approved by the Board of Directors on 6 April
1998.
Signed on behalf of the Board of Directors
/s/ J B Paul /s/ D G Brocksom
J B Paul D G Brocksom
DIRECTOR DIRECTOR
15
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT
- --------------------------------
for the year ended 31 December 1997
<TABLE>
<CAPTION>
NOTE
1997 1996
----------------------------------------------------------
L000 L000 L000 L000
----------------------------------------------------------
<S> <C> <C> <C> <C>
25 NET CASH INFLOW FROM OPERATING ACTIVITIES 2,522 2,575
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest paid (117) (9)
Dividends paid on non equity shares (14) (14)
----------------------------------------------------------------------------------------------------------------
(131) (23)
TAXATION (363) (727)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible fixed assets (2,582) (2,833)
Sale of tangible fixed assets 577 1,084
Purchase of investment (64) (5)
----------------------------------------------------------------------------------------------------------------
(2,069) (1,754)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking (25) -
Cash balances acquired with subsidiary 11 -
----------------------------------------------------------------------------------------------------------------
(14) -
EQUITY DIVIDENDS PAID (212) (629)
----------------------------------------------------------------------------------------------------------------
NET CASH (OUTFLOW) BEFORE FINANCING (267) (558)
FINANCING
Capital element of finance lease rentals (58) -
----------------------------------------------------------------------------------------------------------------
Net cash (outflow) from financing (58) -
----------------------------------------------------------------------------------------------------------------
26 DECREASE IN CASH IN THE YEAR (325) (558)
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------
</TABLE>
16
<PAGE>
NOTES TO THE ACCOUNTS
- ---------------------
1. ACCOUNTING POLICIES
The accounts have been prepared in accordance with applicable accounting
standards. The following are the accounting policies used by the Group.
ACCOUNTING CONVENTION
The accounts have been prepared under the historical cost convention.
BASIS OF CONSOLIDATION
The group accounts consolidate the accounts of the Company and all
subsidiaries for the financial year ended 31 December 1997. The accounts of
the Group's associated undertaking have been excluded from the
consolidation on the grounds that it would be immaterial for the purposes
of giving a true and fair view.
GOODWILL ARISING ON ACQUISITIONS
Goodwill arising on the acquisition of subsidiary companies is written off
to reserves in the year of acquisition. XTV Limited was acquistion
accounted upon the purchase of the balance of the issued share capital
[note 19].
TANGIBLE FIXED ASSETS
Depreciation in respect of all fixed assets is provided at the following
rates on a straight line basis. The rates used are expected to write off
the cost, less any estimated residual value, of each asset over its
expected useful life.
- Plant & equipment, improvements to premises and office furniture &
equipment are depreciated at rates of 15-33% per annum.
- Motor vehicles are depreciated at 20% per annum.
- The leasehold properties will be written off over the remaining years
of the leases, which expire in years 2000 to 2011.
STOCKS
Stocks are stated at the lower of cost and net realisable value.
DEFERRED TAXATION
Deferred taxation is provided on timing differences arising from the
different treatment of items for accounting and taxation purposes, which
are expected to reverse in the future, calculated at the rates at which it
is estimated that tax will arise.
TURNOVER
Turnover is the amount derived from the provision of goods and services
falling within the Group's ordinary activities. This includes the provision
of goods and services to clients on certain projects where the income
receivable is contingent on the timing of amounts receivable by the client.
Income is only recognised on such projects when, in the opinion of the
Directors, there is a justifiable expectation of such income being received
within the foreseeable future. These balances are classified as investment
in programming.
INVESTMENT IN PROGRAMMING
The investment in programming and copyright interest is stated at the lower
of cost and net realisable value. The investment is written down as income
is received until the investment is fully recouped. An assessment is made
at each balance sheet date by the Directors to determine whether provision
is required to reduce the carrying value of the investment in programming
to net realisable value. Balances as at 31 December 1996 to the value of
L304,000 in respect of such investments have been restated from trade
debtors.
PENSIONS
The Group operates a defined contribution scheme covering the majority of
its employees, the assets of which are held separately from those of the
Group, by an insurance company. The costs of providing pensions are charged
to the profit and loss account in the period in which they are incurred.
Contributions payable to the fund at 31 December 1997 amounted to L44,000
(1996 - L20,000).
LEASES
Rental costs under operating leases are charged to the profit and loss
account in equal annual amounts over the periods of the lease.
INVESTMENTS
Investments held as fixed assets are stated at cost less provision for any
permanent diminution in value.
17
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
1. ACCOUNTING POLICIES (continued)
FOREIGN CURRENCIES
Trading results and assets and liabilities of overseas associated
undertakings are translated into sterling at the rate of exchange
prevailing at the balance sheet date. Transactions denominated in foreign
currencies are translated into sterling at the rates ruling at the dates of
the transactions. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated at the rates at that
date. These translation differences are dealt with in the profit and loss
account.
2. COMPANY PROFIT AND LOSS ACCOUNT
In accordance with the provisions of section 230 Companies Act 1985, the
profit and loss account for the Company is not included in these accounts.
The retained profit after taxation but before dividends payable dealt with
in the accounts of the Company was L18,000 (1996 - profit L463,000) for the
year.
3. TURNOVER
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
------------------------
<S> <C> <C>
United Kingdom 13,386 12,460
Rest of Europe 362 447
Rest of World 75 357
--------------------------------------------------------------------------
13,823 13,264
--------------------------------------------------------------------------
------------------------
</TABLE>
Included above is turnover with related parties as follows:
<TABLE>
<CAPTION>
L000
------
<S> <C>
Cell Scandinavia ApS 34
Eagle Rock Entertainment plc 120
Castle Communications plc 17
XTV Limited (whilst an associated company) 251
------
</TABLE>
The Chairman, Mr Paul is a director and shareholder of Eagle Rock
Entertainment plc and, until May 1997, a director of Castle Communications
plc. Otherwise the Group has an interest in Cell Scandinavia ApS as a 33%
shareholder and had an interest in XTV Limited as a 50% shareholder until 7
November 1997. Turnover with Cell Scandinavia ApS represents the lease of
certain items of operating equipment. The turnover with other parties
represents the provision of services on normal third party terms.
4. OPERATING (LOSS)/PROFIT
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
------------------------
<S> <C> <C>
OPERATING (LOSS)/PROFIT IS STATED AFTER
CHARGING/(CREDITING)
Depreciation of owned assets 2,739 2,426
Depreciation of assets under finance leases 40 -
Staff costs, including Directors'
remuneration (note 5) 6,806 5,262
Rentals under operating leases:
Hire of plant and machinery 319 204
Other operating leases 573 487
------------------------
</TABLE>
18
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
4. OPERATING (LOSS)/PROFIT (continued)
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
------------------------
<S> <C> <C>
Auditors' remuneration:
- Group audit fees 25 21
- Company audit fees 3 3
- other work 2 -
Exceptional administrative expenses 454 -
Profit on disposal of fixed assets (78) (50)
------------------------
</TABLE>
Exceptional administrative expenses represent costs of redundancies, asset
write downs and abortive marketing costs resulting from the reorganisation
of the Cell business.
5. STAFF COSTS AND EMPLOYEES
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
------------------------
<S> <C> <C>
Wages and salaries 5,985 4,594
Fees 64 55
Social security costs 523 378
Other pension contributions 234 235
--------------------------------------------------------------------------
6,806 5,262
--------------------------------------------------------------------------
------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER NUMBER
------------------------
<S> <C> <C>
AVERAGE NUMBER EMPLOYED
Operating 106 95
Engineering 18 15
Sales/bookings 53 49
Administration 63 49
--------------------------------------------------------------------------
240 208
--------------------------------------------------------------------------
------------------------
</TABLE>
The emoluments of the Directors during the year are disclosed in the Report of
the Remuneration Committee on pages 12 to 14.
19
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
6. NET INTEREST PAYABLE
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
------------------------
<S> <C> <C>
Bank interest received - 5
Bank overdraft interest paid (102) (14)
Interest payable on finance lease and hire
purchase commitments (20) -
Other interest paid (10) -
--------------------------------------------------------------------------
(132) (9)
--------------------------------------------------------------------------
------------------------
</TABLE>
All interest paid relates to borrowings repayable within five years.
7. TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
------------------------
<S> <C> <C>
UNITED KINGDOM CORPORATION TAX (CREDIT)/CHARGE
Current year at 31% 82 549
Prior year at 33% (13) 10
Share of associated company's taxation 26 -
DEFERRED TAXATION
Current year (110) (198)
Prior year - 7
--------------------------------------------------------------------------
(15) 368
--------------------------------------------------------------------------
------------------------
</TABLE>
The disproportionate tax charge arises because of the level of disallowable
expenditure for tax purposes and non recognition of deferred tax assets.
8. DIVIDENDS
<TABLE>
<CAPTION>
GROUP
------------------------
1997 1996
L000 L000
<S> <C> <C>
ORDINARY DIVIDENDS ON EQUITY SHARES
Interim paid - nil (1996 - 1.8p) - 212
Final paid - nil (1996 - 1.8p per share) - 212
--------------------------------------------------------------------------
- 424
PREFERENCE DIVIDENDS ON NON-EQUITY SHARES
Final accrued - 5.75% (1996 - 5.75%) 14 14
--------------------------------------------------------------------------
14 438
--------------------------------------------------------------------------
------------------------
</TABLE>
Dividends have been accrued in respect of the preference shares. However,
it is not intended to pay these dividends until such time as dividends on
the ordinary shares recommence.
20
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
9. (LOSSES)/EARNINGS PER ORDINARY SHARE
The calculation of (losses)/earnings per ordinary share is based on the
weighted average number of ordinary shares in issue throughout the year of
11,849,000 (1996 - 11,772,000) and on losses attributable to ordinary
shareholders (after deduction of preference dividends) of L1,196,000 (1996
- profit of L525,000). No material dilution of (losses)/earnings per share
would arise if all share options were exercised and shares to be issued
were issued.
10. GROUP TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT OFFICE
PLANT & LEASEHOLD IMPROVEMENTS FURNITURE & MOTOR
EQUIPMENT PREMISES TO PREMISES EQUIPMENT VEHICLES TOTAL
L000 L000 L000 L000 L000 L000
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COST
1 January 1997 13,836 113 1,399 975 200 16,523
Additions 2,212 - 306238 171 2,927
Acquisition of
subsidiary 49 - - 30 - 79
Disposals (896) - (6) (4) (74) (980)
------------------------------------------------------------------------------------------------------------
31 December 1997 15,201 113 1,699 1,239 297 18,549
------------------------------------------------------------------------------------------------------------
DEPRECIATION
1 January 1997 8,640 70 705 609 92 10,116
Charge 2,283 8 241 193 54 2,779
Acquisition of
subsidiary 7 - - 10 - 17
Disposals (419) - - (1) (61) (481)
------------------------------------------------------------------------------------------------------------
31 December 1997 10,511 78 946 811 85 12,431
------------------------------------------------------------------------------------------------------------
NET BOOK VALUE
31 December 1997 4,690 35 753 428 212 6,118
------------------------------------------------------------------------------------------------------------
1 January 1997 5,196 43 694 366 108 6,407
------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
Included above are plant and equipment held under finance leases and hire
purchase contracts with a net book value at 31 December 1997 of L317,000
(1996 Lnil).
11. INVESTMENTS
This represents ordinary shares in subsidiary undertakings and associated
undertakings at cost less provision for permanent diminution in value.
<TABLE>
<CAPTION>
ASSOCIATED OTHER
UNDERTAKINGS INVESTMENTS TOTAL
L000 L000 L000
-----------------------------------------------
<S> <C> <C> <C>
GROUP
1 January 1997 5 - 5
Additions - 64 64
Provision for loss in value (5) - (5)
---------------------------------------------------------------------------
31 December 1997 - 64 64
---------------------------------------------------------------------------
</TABLE>
21
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
11. INVESTMENTS (continued)
<TABLE>
<CAPTION>
-----------------------------------------------
SUBSIDIARY ASSOCIATED
UNDERTAKING UNDERTAKING TOTAL
L000 L000 L000
<S> <C> <C> <C>
COMPANY
1 January 1997 717 5 722
Additions 525 - 525
Provision for loss in value (225) (5) (230)
---------------------------------------------------------------------------
31 December 1997 1,017 - 1,017
---------------------------------------------------------------------------
-----------------------------------------------
</TABLE>
Subsidiary undertakings, associated undertakings and other investments
comprise the following.
<TABLE>
<CAPTION>
PERCENTAGE COUNTRY OF
HOLDING OF INCORPORATION/
ORDINARY SHARES REGISTRATION PRINCIPAL
% AND OPERATION ACTIVITIES
-------------------------------------------------------------------------
<S> <C> <C> <C>
SUBSIDIARY UNDERTAKINGS
Tele-Cine Limited 100 England Broadcast & Media facilities
XTV Cell Limited 100 England Design, production and
film & video animation
Silver Digital Limited
(formerly Palm Tree Video Limited) 100 England Dormant
XTV Limited 100 England Dormant
File Exchange Limited 100 England Dormant
------------------------------------------------------------------------------------------------------------
ASSOCIATED UNDERTAKINGS
Cell Scandinavia ApS 33.33 Denmark FILM ANIMATION
------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
2010 Media Group Limited 16 England Programme production
-------------------------------------------------------------------------
</TABLE>
XTV Limited commenced trading on 1 January 1997 with an issued share
capital of L100 and the Group had a 50% interest at that time. The other
50% of the issued share capital was acquired in November 1997 (note 19).
Following the acquisition of the balance of the shares, the business of XTV
Limited was transfered to XTV Cell Limited (formerly called Cell Animation
Limited).
Cell Scandinavia ApS commenced trading in October 1996 and its first
accounting period ended on 31 December 1997. Its unaudited accounts to 31
December 1997 disclose a loss of L171,000 for the period then ended. The
group guarantees the bank loans and overdraft and a finance lease of Cell
Scandinavia ApS jointly and severally with the other shareholders and has
an obligation to repurchase certain plant used in the business bought on a
finance lease. Provision has been made for the estimated liability that
would occur if the business ceased to trade (note 17). The Group intends to
exit from its involvement with Cell Scandinavia ApS.
The Group guaranteed during the year ended 31 December 1997 the bank
overdraft of 2010 Media Group Limited up to a value of L60,000. This
guarantee ceased on 17 February 1998. In the opinion of the Directors, 2010
Media Group Limited should not be equity accounted as there is one
shareholder in that company who holds 64% of the voting rights and the
Group is not involved in the financial and operating policy decisions of
the company.
The proportion of voting rights held in respect of Cell Scandinavia ApS and
2010 Media Group Limited is the same as the proportion of ordinary shares
held.
22
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
12. STOCKS
<TABLE>
<CAPTION>
GROUP
-----------------------------------
1997 1996
L000 L000
-----------------------------------
<S> <C> <C>
Stock of goods for resale 134 141
---------------------------------------------------------------------------
-----------------------------------
</TABLE>
13. INVESTMENT IN PROGRAMMING
<TABLE>
<CAPTION>
GROUP
-----------------------------------
1997 1996
L000 L000
-----------------------------------
<S> <C> <C>
Work in progress 105 197
Completed programming 260 107
---------------------------------------------------------------------------
365 304
---------------------------------------------------------------------------
-----------------------------------
</TABLE>
Due to the nature of these assets, some of the balance may not be
recoverable until after more than one year, and recoverability depends upon
the ultimate success of the projects concerned.
14. DEBTORS
<TABLE>
<CAPTION>
GROUP COMPANY
-------------------------------------
1997 1996 1997 1996
L000 L000 L000 L000
-------------------------------------
<S> <C> <C> <C> <C>
Trade debtors 3,771 3,738 - -
Amounts owed by subsidiary
Undertakings - - 5,105 4,536
Amount owed by associated undertaking 17 49 - -
Corporation tax 261 - - -
Act recoverable after more than
One year - - - 55
Other debtors 45 212 13 4
Prepayments and accrued income 299 257 - 4
---------------------------------------------------------------------------
4,393 4,256 5,118 4,599
---------------------------------------------------------------------------
-------------------------------------
</TABLE>
Included above are amounts owing by related parties as follows
<TABLE>
<CAPTION>
L000
--------
<S> <C>
Cell Scandinavia ApS 17
Eagle Rock Entertainment plc 83
Castle Communications plc 1
--------
</TABLE>
23
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
15. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
------------------------------------
1997 1996 1997 1996
L000 L000 L000 L000
------------------------------------
<S> <C> <C> <C> <C>
Bank overdraft 938 627 1,143 509
Trade creditors 1,115 915 - -
Other creditors 80 55 17 9
Accruals and deferred income 236 125 10 -
Finance lease and hire purchase
Obligations 61 - - -
Corporation tax 459 494 9 109
Other taxes and social security costs 718 366 - -
Dividends payable 14 226 14 226
---------------------------------------------------------------------------
3,621 2,808 1,193 853
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
The bank overdraft is repayable on demand and secured by a fixed and
floating charge over the Group's assets.
16.CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
GROUP
-------------------
<S> <C> <C>
1997 1996
L000 L000
-------------------
Finance lease and hire purchase obligations 237 -
-------------------
</TABLE>
Of the finance lease and hire purchase obligations balance shown above,
L56,000 is payable in between one and two years and L181,000 is payable
between two and five years.
24
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
17. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
GROUP COMPANY
------------------------------------
1997 1996 1997 1996
L000 L000 L000 L000
------------------------------------
<S> <C> <C> <C> <C>
Deferred taxation (note 18) - 55 - -
Provision against guarantees over
associated company (note 11) 147 - 147 -
---------------------------------------------------------------------------
147 55 147 -
---------------------------------------------------------------------------
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PROVISIONS: MOVEMENT IN THE YEAR
GROUP & COMPANY
-------------------
1997 1996
L000 L000
-------------------
<S> <C> <C>
1 January 1997 - -
Charge for the year in respect of
liabilities under guarantees given
to Cell Scandinavia ApS 147 -
---------------------------------------------------------------------------
31 December 1997 147 -
---------------------------------------------------------------------------
-------------------
</TABLE>
18. DEFERRED TAXATION
<TABLE>
<CAPTION>
-------------------
GROUP
-------------------
1997 1996
L000 L000
-------------------
<S> <C> <C>
MOVEMENT IN THE YEAR
1 January 1997 55 193
Credit to profit and loss account for
the year (110) (191)
ACT on proposed dividend - (55)
ACT recoverable against mainstream
corporation tax liability for current
period 55 108
---------------------------------------------------------------------------
31 December 1997 - 55
---------------------------------------------------------------------------
FULL PROVISION AT YEAR END
Accelerated capital allowances - 95
Capital gains rolled over - 15
ACT on proposed dividend, recoverable
after more than one year - (55)
- 55
---------------------------------------------------------------------------
-------------------
</TABLE>
There are no unprovided deferred taxation liabilities (1996 - nil).
25
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
19. ACQUISITION OF XTV LIMITED
On 1 January 1997, the Group acquired a 50% interest for notional value
in XTV Limited, a newly formed company established by its management to
provide a production design facility. On 7 November 1997, the Group
purchased the 50% of the issued share capital of XTV Limited that it did
not hold. The consideration for the purchase of the remaining 50% was as
follows:
<TABLE>
<CAPTION>
L000
----------
<S> <C>
Paid on 7 November 1997 200
Paid on 13 January 1998 100
Payable on 1 July 1998 100
Payable on 1 April 1999 100
---------------------------------------------------------------------------
500
---------------------------------------------------------------------------
----------
</TABLE>
All consideration is payable in 5p ordinary shares of the Company at the
market price prevailing at the time of payment. The consideration payable
on 1 April 1999 is only payable in the event that XTV Cell Limited makes a
profit in the year ended 31 December 1998. The consideration payable at 31
December 1997 has been shown in the Balance Sheet as Shares to be Issued.
The assets acquired were as follows:
<TABLE>
<CAPTION>
FAIR
VALUE
OF NET
ASSETS
TO GROUP
L000 L000
-------------------
<S> <C> <C>
Fixed assets 62
Cash at bank and in hand 11
Debtors 255
Creditors
Amounts falling due within one year (264)
Amounts falling due after more than one year (9)
---------------------------------------------------------------------------
Net assets at 100% 55
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net assets of interest acquired of 50% 27
---------------------------------------------------------------------------
Goodwill arising on acquisition was as follows:
Consideration 500
Expenses 26
---------------------------------------------------------------------------
526
Interest in net assets acquired (27)
---------------------------------------------------------------------------
Total goodwill arising 499
---------------------------------------------------------------------------
Offset under S131 Companies Act 1985
against share premiums otherwise arising 177
Written off against profit and loss reserve 322
--------------------------------------------------------------------------
499
---------------------------------------------------------------------------
--------------------
</TABLE>
26
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
19. ACQUISITION OF XTV LIMITED (continued)
In the period from 1 January 1997 to 7 November 1997, XTV Limited had
turnover of L990,000 and profit before taxation of L110,000. Following the
acquisition of the remaining 50% interest, the business of XTV Limited was
merged together with that of Cell Animation Limited which changed its name
to XTV Cell Limited. As a consequence, separate profit and loss and
cashflow figures are not available for the period after acquisition. The
Directors do not consider this omission to be material.
No fair value adjustments were required to XTV Limited's net asset value.
20. SHARE CAPITAL
<TABLE>
<CAPTION>
GROUP & COMPANY
--------------------
1997 1996
L000 L000
--------------------
<S> <C> <C>
AUTHORISED
15,907,135 ordinary shares of 5p each 795 795
245,635 5.75% cumulative preference
shares of L1 each 246 246
---------------------------------------------------------------------------
1,041 1,041
---------------------------------------------------------------------------
CALLED UP, ALLOTTED AND FULLY PAID
12,232,282 (1996: 11,772,282) ordinary
shares of 5p each 611 588
245,635 5.75% cumulative preference shares
of L1 each 246 246
---------------------------------------------------------------------------
857 834
---------------------------------------------------------------------------
--------------------
</TABLE>
The ordinary shares are equity shares and the 5.75% cumulative preference
shares are non-equity shares.
The cumulative preference shares of L1 each confer on the holders the right
to receive a fixed cumulative preferential dividend of 5.75% on the paid up
capital and the right to rank ahead of the ordinary shares on a winding up
or return of capital. The shares carry no right to vote.
On 7 November 1997 460,000 ordinary shares of 5p each with an aggregate
nominal value of L23,000 and on 13 January 1998 212,766 ordinary shares of
5p each with an aggregate nominal value of L11,000 were issued in part
consideration of the purchase of the 50% interest in XTV Limited not
already owned by the Group (note 19).
The Company operates two share option schemes, the Inland Revenue approved
Tele-Cine Cell Group plc 1994 Executive Share Option Scheme and the
unapproved Tele-Cine Cell Group plc 1996 Share Option Scheme. At 31
December 1997 the following options to purchase 5p Ordinary shares were
outstanding:
<TABLE>
<CAPTION>
EXERCISE PERIOD
--------------------------------------- NUMBER OF OPTION
DATE OF GRANT FROM END DATE SHARES PRICE
---------------------------------------------------------
<S> <C> <C> <C> <C>
28 November 1994 28 November 1997 28 November 2004 82,000 170p
3 November 1995 3 November 1995 3 November 2005 15,000 125p
3 May 1996 3 May 1999 3 May 2006 9,000 63p
5 November 1996 5 November 1999 5 November 2006 141,000 53.5p
6 May 1997 6 May 2000 6 May 2007 40,000 44p
12 November 1997 12 November 2000 12 November 2007 360,000 42p
12 November 1997 12 November 2000 12 November 2004 160,000 42p
---------------------------------------------------------------------------
807,000
---------------------------------------------------------------------------
---------------------------------------------------------
</TABLE>
The market price of the Company's shares at 31 December 1997 was 47p.
27
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
21. CAPITAL AND RESERVES
<TABLE>
<CAPTION>
SHAREHOLDERS' SHARE SHARE SHARES TO PROFIT AND MERGER
FUNDS CAPITAL PREMIUM BE ISSUED LOSS RESERVE RESERVE
THE GROUP L000 L000 L000 L000 L000 L000
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 January 1997 8,264 834 3,563 - 3,867 -
Purchase of XTV Limited 200 23 - - - 177
Shares to be issued 300 - - 300 - -
Retained (loss) for the year (1,196) - - - (1,196) -
Goodwill written off (499) - - - (322) (177)
----------------------------------------------------------------------------------------------------------------------------
31 December 1997 7,069 857 3,563 300 2,349 -
----------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
</TABLE>
At 31 December 1997 L499,000 (1996 - Lnil) of goodwill in respect of
subsidiaries owned at that date had been written off directly to reserves
or offset against balances under S131 Companies Act 1985.
Shares to be issued represent the balance of the acquisition consideration
for XTV Limited (note 19).
<TABLE>
<CAPTION>
SHAREHOLDERS' SHARE SHARE SHARES PROFIT AND
FUNDS CAPITAL PREMIUM TO BE ISSUED LOSS RESERVE
THE COMPANY L000 L000 L000 L000 L000
------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
1 January 1997 4,468 834 3,563 - 71
Purchase of XTV Limited 23 23 - - -
Shares to be issued 300 - - 300 -
Retained profit for the year 4 - - - 4
-------------------------------------------------------------------------------------------------------------
31 December 1997 4,795 857 3,563 300 75
-------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
22. CAPITAL COMMITMENTS
There were no capital commitments at 31 December 1997 contracted for but
not provided (1996: L309,000).
23. CONTINGENT LIABILITIES
Under a group banking facility, the Company has guaranteed the bank
overdrafts of other group companies. At 31 December 1997 an amount of
L5,000 (1996 - L118,000) was outstanding on these overdrafts.
In common with other group companies, the Company is party to a group VAT
registration whereby each member company guarantees the liability to VAT of
the other members.
Contingent liabilities are not expected to give rise to any material
losses.
28
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
24. OPERATING LEASE COMMITMENTS
At 31 December 1997, the Group and Company were committed to the following
payments during the forthcoming year.
<TABLE>
<CAPTION>
GROUP COMPANY
-----------------------------------
1997 1996 1997 1996
L000 L000 L000 L000
-----------------------------------
<S> <C> <C> <C> <C>
LAND AND BUILDINGS
Leases expiring within 2 - 5 years 53 53 53 53
Leases expiring after more than 5 years 521 476 521 469
---------------------------------------------------------------------------
574 529 574 522
---------------------------------------------------------------------------
PLANT AND EQUIPMENT
Leases expiring within 2 - 5 years 271 271 271 271
---------------------------------------------------------------------------
-----------------------------------
</TABLE>
25. RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1997 1996
--------------------
L000 L000
--------------------
<S> <C> <C>
Operating (loss)/profit (968) 916
Depreciation 2,779 2,426
Profit on disposal of tangible fixed assets (78) (50)
Decrease in stocks 7 133
Decrease/(increase) in debtors 379 (686)
Increase in investment in programming (61) (304)
Increase in creditors 464 140
---------------------------------------------------------------------------
Net cash inflow from operating activities 2,522 2,575
---------------------------------------------------------------------------
--------------------
</TABLE>
Following the acquisition of XTV Limited, the business of XTV Limited was
transferred into Cell Animation Limited, which changed its name to XTV Cell
Limited. It has therefore not been possible to identify cash flows of the
former XTV Limited business following acquisition. The Directors do not
consider this omission to be material.
Included within net cash inflow from operating activities is L143,000 paid
in respect of exceptional items.
29
<PAGE>
- -------------------------------
NOTES TO THE ACCOUNTS CONTINUED
26. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
1997 1996
L000 L000
--------------------
<S> <C> <C>
Decrease in cash in the year (325) (558)
Net cash outflow from financing 58 -
---------------------------------------------------------------------------
(267) (558)
New finance leases (345) -
Finance leases acquired with subsidiary (11) -
---------------------------------------------------------------------------
(623) (558)
Net debt at 1 January 1997 (613) (55)
---------------------------------------------------------------------------
Net debt at 31 December 1997 (1,236) (613)
---------------------------------------------------------------------------
--------------------
</TABLE>
27. ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
OTHER
31 DECEMBER NON-CASH EFFECT OF 1 JANUARY
1997 CASH FLOW MOVEMENTS ACQUISITION 1997
L000 L000 L000 L000 L000
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand - (14) 14
Bank overdrafts (938) (311) (627)
------------------------------------------------------------------------------------------------------------
(938) (325) (613)
Finance leases (298) 58 (345) (11) -
------------------------------------------------------------------------------------------------------------
Total (1,236) (267) (345) (11) (613)
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
During the year the Group entered into finance lease arrangements in
respect of assets with a total capital value at the inception of the leases
of L345,000.
30
<PAGE>
TELE-CINE CELL GROUP plc
BALANCE SHEET
at 28 February 1998
(amounts in thousands)
<TABLE>
<CAPTION>
L L
<S> <C> <C>
Fixed Assets
Tangible Fixed Assets 5,844
Current Assets
Stock 115
Debtors 4,788
Cash at Bank and in Hand 0
-------------
4,903
Creditors
Amounts falling due within one year (3,476)
-------------
Net Current Assets 1,427
--------------
Total Assets 7,271
Creditors
Amounts falling due after more than one year (293)
Provisions for liabilities and charges (138)
--------------
Net Asset Value 6,840
--------------
--------------
Capital and Reserves
Share Capital 857
Share Premium Account 3,563
Profit and Loss Reserve 2,420
--------------
Total Shareholders' Funds 6,840
--------------
--------------
</TABLE>
<PAGE>
TELE-CINE CELL GROUP plc
PROFIT AND LOSS ACCOUNT
for the two months ended
28 February 1998 and 1997
(amounts in thousands)
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
L L
Turnover 2,443 2,252
Cost of Sales (1,777) (1,698)
----------- ------------
Gross Profit 666 554
Administration Overheads 551 548
Finance Costs 33 10
----------- ------------
Total 584 558
----------- ------------
Trading Profit (Loss) 82 (4)
Other Income (Expense) (1) 3
Profit (Losses) of Associated Companies -- (22)
----------- ------------
Group Profit (Loss) before Taxation 81 (23)
Taxation - Group and Associated Companies (24) (13)
----------- ------------
Net Profit (Loss) 57 (36)
----------- ------------
----------- ------------
</TABLE>
<PAGE>
THE TODD-AO CORPORATION
Item 7(b)
Pro Forma Financial Information
THE TODD-AO CORPORATION AND
TELE-CINE CELL GROUP plc.
PRO FORMA CONDENSED FINANCIAL STATEMENTS (Unaudited)
I. Balance Sheet as of February 28, 1998.
II. Statements of income for the year ended August 31, 1997 and the six months
ended February 28, 1998.
III. Footnotes to Financial Statements.
Todd-AO Europe Holding Ltd. ("Buyer"), a wholly owned United Kingdom
subsidiary of Todd-AO Corporation ("Todd-AO") purchased substantially all of the
outstanding shares of Tele-Cine Cell Group plc. ("Tele-Cine")(a U.K.
Corporation) on May 8, 1998. The purchase price of the shares was L10,955
($17,857) of which L9,601 ($15,650) was paid in cash and L1,354 ($2,207) is
represented by loan notes. The following pro forma condensed financial
information and explanatory notes are presented to show the estimated pro forma
effect of the acquisition of Tele-Cine on Todd-AO's historical results of
operations. The acquisition is reflected in the pro forma condensed financial
information using the purchase method of accounting.
The Pro Forma Condensed Balance Sheet as of February 28, 1998 assumes the
acquisition was consummated on that date. The Pro Forma Condensed Income
Statements assume the acquisition was consummated on September 1, 1996 as to the
twelve months ended August 31, 1997 and on September 1, 1997 for the six months
ended February 28, 1998. Such Pro Forma Condensed Financial Information is not
necessarily indicative of the financial position or results of operations as
they may be in the future or as they might have been had the acquisition been
effected on the assumed dates.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that management of Todd-AO believes are reasonable.
The Tele-Cine acquisition will be recorded based upon the estimated fair market
value of the net assets acquired at the date of the acquisition. The adjustments
included in the unaudited pro forma condensed combining financial statements
represent the Company's preliminary estimates based upon available information.
Although Todd-AO does not believe that such preliminary estimates will differ
significantly from the actual adjustments, no assurance can be given.
<PAGE>
The unaudited pro forma condensed combining financial statements are based
on the historical financial statements of each of Todd-AO and Tele-Cine and the
assumptions and adjustments described in the accompanying notes. Todd-AO
believes that the assumptions on which the unaudited pro forma financial
statements are based are reasonable. The unaudited pro forma consolidated
financial statements are provided for informational purposes only and do not
purport to represent what the Company's financial position or results of
operations actually would have been if the foregoing transactions occurred as of
the dates indicated or what such results will be for any future periods.
The Pro Forma Condensed Financial Information should be read in conjunction
with the historical financial statements and notes thereto of Todd-AO, the
audited historical financial statements and notes thereto of Tele-Cine filed
with this amendment to report, and the notes to the Pro Forma Condensed
Financial Information.
<PAGE>
THE TODD-AO CORPORATION
PRO FORMA CONDENSED BALANCE SHEET (Unaudited)
as of February 28, 1998
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
TELE-CINE TODD-AO
TODD-AO CELL ADJUSTMENTS CONSOLIDATED
CORP (1) GROUP (3) DEBIT CREDIT PRO FORMA
-------------- ------------- ------------ ---- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,779 $0 $496 (5) $2,283
Marketable securities - at cost 1,344 0 1,344
Trade receivables - net 16,487 7,126 334 (4) 23,279
Intercompany receivables $16,146 (5) 16,146 (6) 0
Inventories 556 187 743
Other 3,162 679 3,841
-------------- ------------- ------------ ------------- ---------------
Total current assets 24,328 7,992 16,146 16,976 31,490
INVESTMENTS 730 (225) 6,773 (2) 6,773 (6) 849
344 (4)
PROPERTY AND EQUIPMENT - NET 62,598 9,526 1,148 (4) 70,976
GOODWILL - NET 18,691 11,580 (2) 35,071
4,800 (10)
OTHER ASSETS 1,834 0 1,834
-------------- ------------- ------------ ------------- ---------------
TOTAL $108,181 $17,293 $21,290 $24,897 $140,220
============== ============= ============ ============= ===============
</TABLE>
<PAGE>
THE TODD-AO CORPORATION
PRO FORMA CONDENSED BALANCE SHEET (Unaudited)
as of February 28, 1998
(Dollars in thousands, except amounts per share)
<TABLE>
<CAPTION>
TELE-CINE TODD-AO
TODD-AO CELL ADJUSTMENTS CONSOLIDATED
CORP (1) GROUP (3) DEBIT CREDIT PRO FORMA
-------------- ------------ ------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $11,020 $3,459 $14,479
Current maturities of long-term debt 578 2,207 2,785
Current portion of deferred gain 1,400 0 1,400
-------------- ------------ ------------- ------------ ------------
Total current liabilities 12,998 5,666 0 0 18,664
INTERCOMPANY DEBT 0 16,146 (12)(6) 16,146 (2) 0
LONG-TERM DEBT 22,960 0 2,207 (2) 40,817
15,650 (5)
PROVISON FOR LIABILITIES
AND CHARGES 0 3,239 (4) 3,239
DEFERRED COMPENSATION & OTHER 188 477 665
DEFERRED GAIN ON EQUIPMENT SALE 7,313 0 7,313
DEFERRED INCOME TAXES 4,637 0 4,800 (10) 9,437
-------------- ------------ ------------- ------------ ------------
Total liabilities 48,096 6,143 16,146 23,689 80,135
SHAREHOLDERS' EQUITY:
Common stock 101 1,397 1,560 (6) 163 (4) 101
Additional capital 40,446 5,808 16,134 (6) 10,326 (12)(4) 40,446
Treasury stock (1,180) 0 (1,180)
Retained earnings 20,505 3,945 4,866 (4) 921 (6) 20,505
Unrealized gains on marketable
securities and long-term
investments 86 0 86
Cumulative foreign currency
translation adjustments 127 0 127
-------------- ------------ ------------- ------------ ------------
Total shareholders' equity 60,085 11,149 22,560 11,410 60,085
-------------- ------------ ------------- ------------ ------------
TOTAL $108,181 $17,293 $38,706 $35,099 $140,220
============== ============ ============= ============ ===========
</TABLE>
<PAGE>
THE TODD-AO CORPORATION
PRO FORMA CONDENSED STATEMENT OF INCOME
For the twelve months ended
August 31, 1997 (Unaudited)
(Dollars in thousands except amounts per share)
<TABLE>
<CAPTION>
TODD-AO TELE-CINE ADJUSTMENTS CONSOLIDATED
CORP (1) CELL (3) DEBIT CREDIT PRO FORMA
------------- ------------- ------------ ----- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $78,971 $21,831 $4,315 (7) $96,487
COST AND EXPENSES
Operating costs and other expenses 61,755 19,043 $6,161 (7) 74,637
Depreciation and amortization 7,128 4,434 289 (9) 2,700 (9) 9,151
Interest 920 181 1,340 (8) 5 (7) 2,436
Other 215 155 41 (7) 411
------------- ------------- ------------ ---------- ---------------
Total costs and expenses 70,018 23,813 1,670 8,866 86,635
------------- ------------- ------------ ---------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 8,953 (1,982) (5,985) 8,866 9,852
INCOME TAXES 2,948 (24) 328 (11) 3,251
------------- ------------- ------------ ---------- ---------------
Net income available to common stockholders $6,005 ($1,958) ($6,313) $8,866 $6,601
----------- ------------ ----------
Effect of dilutive 5% convertible debentures 49 49
------------- ---------------
Net income available to common stockholders
plus assumed conversions $6,054 $6,650
------------- ---------------
AVERAGE SHARES OUTSTANDING - BASIC 9,539,312 9,539,312
------------- ---------------
AVERAGE SHARES OUTSTANDING - DILUTED 10,800,050 10,800,050
------------- ---------------
NET INCOME PER COMMON SHARE - BASIC $0.63 $0.69
============= ===============
NET INCOME PER COMMON SHARE - DILUTED $0.56 $0.62
============= ===============
</TABLE>
<PAGE>
THE TODD-AO CORPORATION
PRO FORMA CONDENSED STATEMENT OF INCOME
For the six months ended
February 28, 1998 (Unaudited)
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
TODD-AO TELE-CINE ADJUSTMENTS CONSOLIDATED
CORP (1) CELL (3) DEBIT CREDIT PRO FORMA
----------- -------------- ------------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $47,606 $12,126 $2,412 (7) $57,320
COST AND EXPENSES
Operating costs and other expenses 37,528 9,315 $2,434 (7) 44,409
Depreciation and amortization 4,714 2,272 145 (9) 1,350 (9) 5,781
Interest 589 318 670 (8) 98 (7) 1,479
Other (12) (31) 112 (7) 69
----------- -------------- ------------ ------------ ------------
Total cost and expenses 42,819 11,874 927 3,882 51,738
----------- -------------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 4,787 252 (3,339) 3,882 5,582
INCOME TAXES 1,698 0 256 (11) 1,954
----------- -------------- ------------ ------------ ------------
Net income available to common stockholders $3,089 $252 ($3,595) $3,882 $3,628
-------------- ------------ ------------
Effect of dilutive 5% convertible debentures 159 159
----------- ------------
Net income available to common stockholders
plus assumed conversions $3,248 $3,787
----------- ------------
AVERAGE SHARES OUTSTANDING - BASIC 10,004,781 10,004,781
----------- ------------
AVERAGE SHARES OUTSTANDING - DILUTED 11,226,673 11,226,673
----------- ------------
NET INCOME PER COMMON SHARE - BASIC $0.31 $0.36
=========== ============
NET INCOME PER COMMON SHARE - DILUTED $0.29 $0.34
============ ============
</TABLE>
<PAGE>
THE TODD-AO CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (Unaudited)
[1] Condensed from audited financial statements included in the Todd-AO
Corporation Annual Report on Form 10-K for the year ended August 31, 1997.
[2] Acquisition entries for Todd-AO Europe Holding Co Ltd, a wholly owned
subsidiary of Todd-AO Corporation, previously formed for the purpose of
acquiring European acquisitions as if the transaction were effected on
February 28, 1998. Recognition of the excess purchase price arising for the
acquisition and the Long Term Debt for Notes issued to Sellers electing
same.
[3] Condensed from unaudited Balance Sheet as of February 28, 1998, unaudited
income statements for the six months ended February 28, 1998 and from
unaudited income statements for the twelve months ended September 30, 1997
for Tele-Cine Cell Ltd. (English pounds sterling converted to dollars using
exchange rate of $1.63).
[4] To record provisions for (a) the closure of the Cell division and Slide
department in July and August 1998, including reducing fixed assets to net
realizable value (b) sellers' expenses in connection with the acquisition
(c) other costs anticipated with the acquisition.
[5] To record cash and bank borrowings used to acquire the entire issued share
capital of Tele-Cine Cell as if the transaction were effected on February
28, 1998.
[6] Elimination of intercompany receivables and payables and investment of
Tele-Cine Cell arising from acquisition.
[7] To eliminate operations of Cell division of Tele-Cine Cell.
[8] To adjust interest on borrowings from Company's institutional lender for
purchase Tele-Cine Cell ($15,650 @ 1 1/2% above Libor - est 8%) and for
notes due to sellers ($2,207 @ 4%).
[9] To adjust depreciation to estimated useful lives of depreciable assets
acquired and to record amortization of goodwill based on 40 year life.
[10] To set up deferred income tax liability as a result of no tax benefit
arising from Excess Purchase Price.
[11] To record current and deferred income tax expense on adjustments described
above.
[12] To record contribution of portion of new intercompany debt to capital.
