<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 November 30, 1995
-----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________________
Commission file number 1-8654
------
Unitel Video, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 23-1713238
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 West 57th Street - New York, New York 10019
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(212) 265-3600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months and (2) has been subject to such requirements
for the past 90 days.
. . . . . . . . . .
Yes . X . No . .
. . . . . . . . . .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2,626,565 common shares outstanding as of January 16, 1996.
(Number of shares) (Date)
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1995
Page
INDEX Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
November 30, 1995 (Unaudited) and 3-4
August 31, 1995
Consolidated Statements of Operations
November 30, 1995 (Unaudited) and 5
November 30, 1994 (Unaudited)
Consolidated Statements of Cash Flows
November 30, 1995 (Unaudited) 6-7
and November 30, 1994 (Unaudited)
Notes to Consolidated Financial 8-10
Statements (Unaudited)
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of 11-13
Operations
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1995
Part 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, 1995 August 31, 1995
----------------- ---------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash $ 336,000 $ 161,000
Accounts receivable,
less allowance for
doubtful accounts of
$677,000 and $686,000 13,033,000 12,700,000
Other receivables 233,000 362,000
Prepaid income taxes -- 567,000
Prepaid expenses 1,580,000 1,340,000
Deferred tax asset 760,000 760,000
------------- -------------
Total current assets 15,942,000 15,890,000
Property and equipment - at cost
Land, buildings
and improvements 13,609,000 13,541,000
Video equipment 78,503,000 78,145,000
Automobiles 50,000 50,000
Furniture and fixtures 2,774,000 2,736,000
------------- -------------
94,936,000 94,472,000
------------- -------------
Less accumulated depreciation 61,687,000 59,981,000
------------- -------------
33,249,000 34,491,000
Net assets held for sale 18,757,000 19,270,000
Deferred tax asset 1,745,000 1,745,000
Goodwill 1,962,000 1,997,000
Other assets 1,053,000 793,000
------------- -------------
$ 72,708,000 $ 74,186,000
------------- -------------
------------- -------------
</TABLE>
Note: The balance sheet at August 31, 1995 has been taken from the audited
consolidated financial statements at that date.
See notes to consolidated financial statements.
3
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
November 30, 1995 August 31, 1995
----------------- ---------------
(Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 5,476,000 $ 7,339,000
Accrued expenses 1,713,000 1,620,000
Accrued payroll, benefits
and related taxes 3,879,000 2,931,000
Income taxes payable 84,000 --
Current maturities of long-
term debt 5,499,000 5,492,000
Current maturities of
subordinated debt 208,000 104,000
Current maturities of ESOP
loan 181,000 186,000
Current maturities of
capital lease obligations 1,686,000 1,685,000
------------- -------------
Total current liabilities 18,726,000 19,357,000
Deferred rent 841,000 864,000
Long-term debt, less current
maturities 19,071,000 19,936,000
Subordinated debt, less current
maturities 3,042,000 3,146,000
ESOP loan, less current maturities 120,000 152,000
Long-term leases, less current
maturities 6,622,000 7,064,000
Accrued retirement 1,182,000 1,141,000
Stockholders' equity:
Common stock, par value
$.01 per share
Authorized 5,000,000 shares
Issued 3,492,854 and
3,491,454 shares
respectively, and
outstanding 2,626,565
and 2,625,165 shares
respectively 26,000 26,000
Additional paid-in capital 27,354,000 27,351,000
Retained earnings 4,054,000 3,532,000
Common stock held in treasury,
at cost (866,289 shares) (7,974,000) (7,974,000)
------------- -------------
23,460,000 22,935,000
Unearned employee benefit expense (356,000) (409,000)
------------- -------------
Total stockholders' equity 23,104,000 22,526,000
------------- -------------
$ 72,708,000 $ 74,186,000
------------- -------------
------------- -------------
</TABLE>
Note: The balance sheet at August 31, 1995 has been taken from the audited
consolidated financial statements at that date.
See notes to consolidated financial statements.
4
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NOVEMBER 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
Sales $22,940,000 $21,233,000
Cost of sales:
Production costs 15,402,000 14,431,000
Depreciation 1,733,000 2,254,000
----------- -----------
17,135,000 16,685,000
----------- -----------
Gross profit 5,805,000 4,548,000
Operating expenses:
Selling 676,000 745,000
General and administrative 2,444,000 2,273,000
Interest 848,000 715,000
Impairment charge 853,000 --
----------- -----------
4,821,000 3,733,000
----------- -----------
Earnings from operations 984,000 815,000
Other income -- 14,000
----------- -----------
Earnings before income taxes 984,000 829,000
Income taxes 462,000 390,000
----------- -----------
Net earnings applicable for
common stock $ 522,000 $ 439,000
----------- -----------
----------- -----------
Earnings Per Common Share
Net earnings $ .20 $ .17
----------- -----------
----------- -----------
Weighted average of common
and common equivalent
shares outstanding 2,570,000 2,567,000
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NOVEMBER 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 522,000 $ 439,000
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 1,735,000 2,465,000
Net gain on disposal of assets (2,000) (211,000)
Deferred financing costs (80,000) --
Recognition of deferred gain -- (50,000)
Amortization of deferred financing
costs 21,000 102,000
Deferred rent (23,000) (78,000)
Accrued retirement expenses 41,000 43,000
Deferred income taxes -- 79,000
Impairment charge 853,000 --
Decrease (Increase) in:
Accounts receivable (324,000) (1,502,000)
Allowance for doubtful accounts (9,000) 98,000
Other receivables 129,000 96,000
Prepaid expenses (240,000) (3,000)
Prepaid taxes 567,000 81,000
Other assets (198,000) 32,000
Increase (Decrease) in:
Accounts payable (1,863,000) (1,003,000)
Accrued expenses 93,000 (60,000)
Payroll and related taxes 948,000 465,000
Income taxes payable 84,000 144,000
----------- -----------
Total adjustments 1,732,000 698,000
----------- -----------
Net cash provided by
operating activities 2,254,000 1,137,000
Cash Flows from Investing
Activities:
Capital expenditures (807,000) (1,119,000)
Proceeds from disposal of assets 8,000 219,000
----------- -----------
Net cash (used) in
investing activities (799,000) (900,000)
(Continued)
6
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
THREE MONTHS ENDED NOVEMBER 30,
-------------------------------
1995 1994
---- ----
Cash Flows From Financing
Activities:
Proceeds from long term
financing $ -- $ 500,000
Proceeds from issuance of common
stock 7,000 1,000
Repayment of loan to ESOP (37,000) 3,000
Principal repayments (1,299,000) (1,054,000)
Release of ESOP quarterly shares 49,000 --
----------- -----------
Net cash provided by (used) in
financing activities (1,280,000) (550,000)
Net Increase (Decrease) in Cash 175,000 (313,000)
Cash Beginning of Year 161,000 1,293,000
----------- -----------
Cash End of Quarter $ 336,000 $ 980,000
----------- -----------
----------- -----------
Schedule of income taxes and
interest paid:
Income Taxes Paid $ 5,000 $ 80,000
Interest Paid 860,000 598,000
----------- -----------
$ 865,000 $ 678,000
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
UNITEL VIDEO, INC.
FORM 10-Q
THREE MONTHS ENDED NOVEMBER 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of November 30, 1995, the
consolidated statements of operations for the quarters ended November 30, 1995
and 1994, and the consolidated statements of cash flows for the three months
then ended have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations, and
cash flows at November 30, 1995 and for all periods presented have been made.
Certain information and footnote disclosure normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto in the Company's August 31, 1995 Form 10-K filed
with the Securities and Exchange Commission. The results of operations for the
quarter ended November 30, 1995 are not necessarily indicative of the operating
results for the full year.
2. STOCKHOLDERS' EQUITY
During the three months ended November 30, 1995, stockholders' equity increased
due to:
Net income $ 522,000
Reduction in unearned employee benefit expense 53,000
Reduction in additional paid in capital resulting
from the allocation of ESOP shares (4,000)
Purchase of stock under the Unitel Video, Inc.
Employee
Stock Purchase Plan 7,000
---------
Total increase in stockholders' equity $ 578,000
---------
---------
3. PER SHARE DATA
Per share data for the three months ended November 30, 1995 and 1994 is based on
the weighted average number of common shares outstanding. In the three months
ended November 30, 1995, unreleased Employee Stock Ownership Plan shares are not
considered outstanding for earnings per share calculations. (See Note 4).
8
<PAGE>
4. 401(K) EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Company sponsors a 401(k) savings and stock ownership plan (the "Plan")
which requires the Company to match employee contributions to the 401(k) portion
of the Plan in shares of the Company's Common Stock up to the maximum amount set
forth in the Plan. Effective September 1, 1994, the Company has adopted the
provisions of Statement of Position 93-6, "Employer's Accounting for Employee
Stock Ownership Plans" ("SOP 93-6").
In 1987, to purchase 115,849 shares of the Company's stock, the Plan obtained
financing from a bank amounting to $1,250,000. In 1991 the Plan purchased
25,810 shares of the Company stock which was financed by a $229,193 loan from
the Company. The Plan is funded by the Company as required to provide the Plan
with the funds necessary to meet its debt service requirements. The loan
obligations of the Plan are considered unearned employee benefit expense and are
recorded as a separate reduction of the Company's shareholders' equity. The
bank financing is guaranteed by the Company.
The Plan's shares are released and allocated to participant accounts based upon
Company contributions and certain payments made to reduce the Plan debt. The
Company reports compensation expense based on the dollar value of the 401(k)
match expense.
The Plan's compensation expense was $49,006 for the three months ended November
30, 1995. A summary of the Plan's shares as of November 30, 1995 is as follows:
Allocated shares 75,095
Shares released for allocation 13,277
Unreleased shares 48,896
-------
137,268
-------
Fair value of unreleased shares
at November 30, 1995 $254,000
-------
-------
Prior to adoption of SOP 93-6, the unreleased shares were considered outstanding
for the earnings per share computation. Accordingly, for the three months ended
November 30, 1995, 48,896 shares were no longer considered outstanding. The
effect of adopting SOP 93-6 was not material on the net income, and resulted in
an increase of less than 1% on the net income per share for the three months
ended November 30, 1995.
5. IMPAIRMENT AND RESTRUCTURING CHARGES
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" ("FASB Statement No.
121") which provides guidance on when to assess and how to measure impairment of
long-lived assets, certain intangibles and goodwill related to those assets to
be held and used, and for long-lived assets and certain identifiable intangibles
to be disposed of. The Company adopted FASB Statement No. 121 as of August 31,
1995.
9
<PAGE>
The Company has determined to focus its resources toward providing services to
the entertainment and corporate communications areas, which represents the
Company's strength. As part of this strategy, the Company has decided to sell
its Editel New York, Editel Chicago and Editel Los Angeles divisions, which
specialize in the highly competitive commercial advertising portion of the video
facilities industry. During the 1995 fiscal year, the three Editel divisions
incurred a pretax loss of $3,682,000. As a result, the Company identified
property, plant and equipment associated with these divisions with a carrying
value of approximately $24,000,000 that it no longer needed for its current and
future operations, and during the fourth quarter of fiscal 1995 committed to a
plan to dispose of them. Accordingly, the Company began marketing these
divisions to potential buyers and plans to sell them. Although the Company
intends to sell these assets within one year there is no assurance that it will
be able to do so, and, therefore, these assets are classified in the balance
sheet as long-term. At November 30, 1995 the Company estimated the revised
value of these assets to be approximately $18,757,000. Accordingly, the Company
recorded an impairment charge of approximately $853,000 in the first quarter of
fiscal 1996 relating to these assets. The impairment charge recorded represents
management's estimate of the decrease in value of these assets during the first
quarter of fiscal 1996 based upon the depreciation method which the Company has
used in the past and which management has found to be reasonable and
appropriate. The Company intends to operate the three Editel divisions until a
sale is consummated and to continue to monitor these assets held for sale on a
quarterly basis since FASB Statement No.121 requires that no further
depreciation expense be taken with respect to assets held for sale.
In May of 1995, the Company adopted a plan to downsize the operations of its
Editel Chicago division and reorganize and reduce its corporate management which
resulted in recording a restructuring charge of $400,000 for severance and early
retirement expense. In fiscal 1996, the restructuring liability was reduced by
approximately $176,000 as a result of retirement and severance payments made
during the year. As of November 30, 1995, the balance of the restructuring
liability was approximately $97,000 and is included in accrued payroll.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
----------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company is committed to keeping pace with technological developments as well
as taking advantage of new business opportunities in the video communications
industry. Capital expenditures were $ 807,000 during the quarter ended November
30, 1995, and consisted of the purchase of post production and graphics
equipment for use throughout the Company.
Net cash provided by operating activities during the quarter ended November 30,
1995 was $2,254,000 and during the quarter ended November 30, 1994, was
$1,137,000. Net cash provided by operating activities for the quarter ended
November 30, 1995 was offset by net cash of $799,000 used in investing
activities, which consisted of capital expenditures, and by net cash used in
financing activities of $1,280,000, resulting in a net increase in cash
available of $175,000.
In December 1995, the Company entered into a $26 million revolving credit and
term loan agreement with a financial institution, consisting of a $15 million
term loan facility and an $11 million revolving credit facility. The $15
million dollar term loan portion of the facility is payable in 59 monthly
principal payments of $89,000 through November 2000 and in payments of
$3,750,000 at August 31, 1996, $3,750,000 at December 31, 1996 and $2,249,000 at
December 2000. The revolving credit portion of the facility is due in full in
December 2000.
Additionally, in December 1995, the Company obtained from a bank a $4,000,000
mortgage on its property located on West 57th Street in New York City. The
mortgage is payable in equal monthly installments of $22,000 through November
2002, with a final payment of $2,152,000 due in December 2002.
The proceeds of the $15 million term loan, the $4 million mortgage and $78,000
from the new revolving credit facility were used in December 1995 to refinance
the term loan ($8,826,000) and revolving credit facility ($9,975,000) and to
repay the City of New York Industrial Revenue Bond obligation ($277,000), all
then outstanding to the Company's bank lenders. As such, the $9,975,000
outstanding on the Company's revolving credit facility at November 30, 1995 has
been reclassified as long term debt on the accompanying balance sheet to reflect
the refinancing of this obligation. The terms of the Company's new revolving
credit and term loan agreement provide that the lender receive a first lien on
all property, equipment and accounts receivable that are not encumbered by
another lender.
11
<PAGE>
RESULTS OF OPERATIONS
Sales were $22,940,000 and $21,233,000 for the quarters ended November 30, 1995
and 1994, respectively, resulting in an 8% increase from the same period of the
prior year. The increase in sales is primarily due to the addition of three
mobile units to the Company's fleet of seven from the acquisition by the Company
in February 1995 of the business and assets of GC & Co. (formerly known as
Greene, Crowe & Company), a Burbank, California based supplier of "on-location"
services for the videotaping and live telecasting of concerts, cultural and
other events.
The Company's net income for the quarter ended November 30, 1995 was $522,000,
compared to net income of $439,000 for the comparable quarter of fiscal year
1995.
Production costs, the main component of cost of sales, consist primarily of
direct labor, equipment maintenance expenses and occupancy costs. The Company's
production costs, as a percentage of sales, were 67 % for the quarter ended
November 30, 1995, as compared to 68% for the quarter ended November 30, 1994.
The Company experienced a decrease in production expenses as a percentage of
sales due to a significant increase in revenues from its mobile division, which
incurs lower production costs than the Company's other divisions.
Depreciation, as a percentage of sales, was 7.6% and 10.6% for the quarters
ended November 30, 1995 and 1994, respectively. The decrease in the quarter
ended November 30, 1995 compared to the same period in the prior year was a
result of the reclassification of the net property and equipment of the
Company's three Editel divisions to net assets held for sale at August 31, 1995.
The impairment charge recorded represents management's estimate of the decrease
in value of these assets during the first quarter of fiscal 1996 based upon the
depreciation method which the Company has used in the past and which management
has found to be reasonable and appropriate. The Company intends to operate the
three Editel divisions until a sale is consummated and to continue to monitor
these assets held for sale on a quarterly basis since FASB Statement No. 121
requires that no further depreciation expense be taken with respect to assets
held for sale.
Selling expenses, as a percentage of sales, for the quarters ended November 30,
1995 and 1994 were 2.9% and 3.5%, respectively. The decrease in the first
quarter of fiscal 1996 as compared to the same quarter in 1995 is mainly due to
a decrease in the sales staff at the three Editel divisions.
General and administrative expenses, as a percentage of sales, for both quarters
ended November 30, 1995 and 1994 were 10.7%. These expenses, as a percentage of
sales, in the first quarter of fiscal 1996 remained constant with the same
quarter of the prior year due primarily to an ongoing company wide effort to
contain administrative costs.
12
<PAGE>
Interest expense, as a percentage of sales, for the quarters ended November 30,
1995 and 1994 were 3.7% and 3.4%, respectively. The increase in interest
expense during the first quarter of fiscal 1996 as compared with the same
quarter of the prior year is due primarily to the financing obtained as a result
of the GC & Co. acquisition in February 1995. Additionally, the Company
incurred interest at a higher rate on its term and revolving portion of its
long-term debt due to the increase in the prime rate from the prior year.
The Company's effective tax rate was 47% for both of the first quarters of
fiscal years 1996 and 1995. The effective tax rate exceeded the federal
statutory rate of 34% due to state and local taxes.
13
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
1. Exhibit 27. Financial Data Schedule.
(b) There were no reports filed on Form 8-K during the three month period
ended November 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITEL VIDEO, INC.
By: /s/ David Micciulla
-------------------------------
David Micciulla
President and Chief Executive Officer
By: /s/ Barry Knepper
-------------------------------
Barry Knepper
Senior Vice President-Finance and Administration, Treasurer
Dated: January 16 , 1996
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNITEL
VIDEO, INC.'S FORM 10Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 336
<SECURITIES> 0
<RECEIVABLES> 13,710
<ALLOWANCES> 677
<INVENTORY> 0
<CURRENT-ASSETS> 15,942
<PP&E> 94,936
<DEPRECIATION> 61,687
<TOTAL-ASSETS> 72,708
<CURRENT-LIABILITIES> 18,726
<BONDS> 28,855
0
0
<COMMON> 26
<OTHER-SE> 23,078
<TOTAL-LIABILITY-AND-EQUITY> 72,708
<SALES> 22,940
<TOTAL-REVENUES> 22,940
<CGS> 17,135
<TOTAL-COSTS> 17,135
<OTHER-EXPENSES> 3,867
<LOSS-PROVISION> 106
<INTEREST-EXPENSE> 848
<INCOME-PRETAX> 984
<INCOME-TAX> 462
<INCOME-CONTINUING> 522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 522
<EPS-PRIMARY> .20
<EPS-DILUTED> 0
</TABLE>
