ITEM 1. BUSINESS
GENERAL
Unitel Video, Inc. (the "COMPANY") provides a full range of services to the video communications industry for the recording, editing and duplication of television programs, commercials and corporate and other communications on videotape. The Company's services are provided primarily in the following areas: studio videotape recording, mobile videotape recording and live telecasting, film to videotape transfer, editing, computer graphics and videotape duplication. The Company also designs and produces custom CD-ROM, CD- I, videodisc and networked multimedia presentations.
The Company's services are provided at facilities located in New York City and Los Angeles and through the Company's Mobile division based in Pittsburgh. The Company's Mobile division provides "on-location" services, including technical personnel, for videotape recording and live telecasting of sports, entertainment, cultural and other events throughout North America.
As the Company is in a service industry, it does not use raw materials. It does, however, use videotape. Videotape is readily available from numerous sources and the Company has not experienced, nor does it anticipate experiencing, difficulty in obtaining videotape for its operations. In addition, the Company has service contracts with its customers, generally for facilities and personnel at specific times or on a project or job-by-job basis (as more fully described below under the caption "Marketing") and, accordingly, does not have backlog as such.
The Company's cost structure is such that depreciation, selling expenses and general and administrative expenses do not generally fluctuate from quarter to quarter during a fiscal year based on sales volume. Furthermore, a majority of production costs are fixed. Accordingly, relatively small variations in quarterly sales historically have resulted in disproportionately greater variations in net earnings. In part due to the foregoing, during fiscal years 1996, 1995 and 1994, the Company recognized a significantly greater proportion of net earnings in the first quarter as compared to the other quarters of the fiscal year. See Note K to Notes to Consolidated Financial Statements.
SERVICES
STUDIO VIDEOTAPE RECORDING. The Company provides the studios, equipment and skilled technical personnel needed to record television programs, commercials and corporate and other videotape communications. The equipment provided by the Company includes color television cameras, videotape recorders, sound monitoring and mixing equipment and lighting equipment. The Company does not generally provide program direction or other artistic or non-technical production services, such as the preparation of scripts, the hiring of performers or the supplying of special props or scenery. The Company operates eight studios in New York City.
Among the programs produced at the Company's studio facilities are "The Sally Jessy Raphael Show", "Inside Edition", "The Montel Williams Show", "The Rolonda Watts Show", "American Journal" and "The Gordon Elliot Show". Studio recording accounted for approximately 18%, 16% and 15% of the Company's revenues during the fiscal years ended August 31, 1996, 1995 and 1994, respectively.
MOBILE VIDEOTAPE RECORDING AND LIVE TELECASTING. The Company's Mobile division provides videotape recording and live telecasting services "on- location" by transporting videotape and other related equipment in its mobile vehicles. These vehicles have been designed to serve as the production control center for events in sports arenas, concert halls, theaters and other locations. The Company also arranges for the skilled technical personnel required to perform these services. The Company's ten mobile vehicles are equipped to travel on a continuous basis throughout North America and can be maintained in the field. The Company's Mobile division accounted for approximately 27%, 21% and 19% of the Company's revenues during the fiscal years ended August 31, 1996, 1995 and 1994, respectively. Some of the events handled by the Company's mobile production units include "Live from the Met", "Live from Lincoln Center", "The Grammy Awards", "The Emmy Awards", "The Academy Awards", major golf and tennis tournaments, broadcast of Pittsburgh Pirates, Montreal Expos and Toronto Blue Jays major league baseball games, Major League Baseball's Allstar game, the international broadcast of the "Super Bowl," the 1996 Summer Olympics and the 1996 Democratic and Republican National Conventions.
FILM TO VIDEOTAPE TRANSFER. The Company provides the facilities and technical personnel for transferring 16mm and 35mm motion picture positive and negative film and slides to videotape. Through the use of computers, the color of the picture may be corrected, altered or enhanced frame by frame to meet client needs. Film to videotape transfer accounted for approximately 10%, 9% and 9% of the Company's revenues during the fiscal years ended August 31, 1996, 1995 and 1994, respectively. The Company has performed this service for major theatrical motion pictures such as "The Ghost and the Darkness", "Heat", "Casino", and "City Hall", and television programs such as "Star Trek:Voyager", "Star Trek: Deep Space Nine", "Murder She Wrote", and "The Simpsons".
EDITING. The Company provides editing equipment and skilled personnel required to perform the editing, special optical and audio effects, titling and other technical work necessary to produce a master videotape suitable for broadcast, cablecast, duplication or other distribution. Using computer- controlled electronic editing equipment, video and audio tape recorders and special effects and titling equipment, videotape recorded by the Company or others is processed into a finished product. Additionally, the Company provides creative editorial and editorial supervision through the post production process and consultative storyboard services directly to production companies and advertising agencies. Editing accounted for approximately 30%, 35% and 37% of the Company's revenues during the fiscal years ended August 31, 1996, 1995 and 1994, respectively. Among the programs edited at the Company's facilities are "Star Trek:Voyager", "Star Trek: Deep Space Nine", "Cybill", and "The Nanny".
COMPUTER GRAPHICS. The Company offers creative consultation, technical assistance and full-service facilities for the creation of computer-generated graphics, special effects and animation in the digital format in both 2-D and 3- D. These services accounted for approximately 8%, 9% and 10% of the Company's revenues during the fiscal years ended August 31, 1996, 1995 and 1994, respectively. The Company's projects in this area include various commercials for Toyota, Sears and Nike.
VIDEOTAPE DUPLICATION. The Company furnishes videotape duplication services in all formats, including formats available for broadcast and cablecast in the United States as well as the multiple formats used abroad. Duplication services accounted for approximately 4%, 4% and 5% of the Company's revenues during the fiscal years ended August 31, 1996, 1995 and 1994, respectively.
INTERACTIVE MULTIMEDIA PRODUCTION. The Company designs and produces custom internet websites, CD-ROM, CD-I, videodisc and networked multimedia presentations for clients in the publishing, financial services, pharmaceutical, entertainment, advertising, retail, telecommunications and utility industries. Extensive use of other Company resources are integrated into these productions, including video compression, digital to video transfers, 3-D computer graphic creation and studio and location recording. The Company also provides MPEG services for Softkey, Sony Interactive, Grey Advertising and Muffinhead. Interactive multimedia production accounted for approximately 1% of the Company's revenues during each of the fiscal years ended August 31, 1996, 1995 and 1994.
MARKETING
The Company markets its services principally to cable television program suppliers, independent producers, national television networks, local television stations, motion picture studios, advertising agencies, and program syndicators and distributors through the direct efforts of its internal sales personnel and through advertising in certain trade publications. The Company has no material patents. The Company markets its services through the use of the Unitel, Editel and Windsor names.
Customers for editing services, film-to-tape transfer, computer graphics and videotape recording of television commercials generally make arrangements for the Company's services without significant advance notice, on a project or job-by-job basis. Customers for studio and "on-location" videotape recording or live telecasting of programs generally make arrangements longer in advance of the time when the facilities and services are required. The Company has entered into arrangements with several customers for periods ranging up to three years to provide editing, mobile videotape recording and/or studio videotape recording services. No customer accounted for more than 10% of the Company's total sales for the fiscal years ended August 31, 1996, 1995 and 1994.
COMPETITION
The video services industry is highly competitive. Certain videotape service businesses (both independent companies and divisions of diversified companies) provide most of the same services provided by the Company, while others specialize in one or several of these services. Editing and videotape recording services are also subject to competition from the film industry. While the Company does not perform any services directly on film it does provide services for the motion picture industry including film to videotape transfer, film in film out and special high resolution digital effects work on feature films.
Many competitors of the Company, some with greater financial resources, are located in the New York City and the Los Angeles areas, the principal markets for the Company's services other than "on-location" video services. "On- location" video services provided by the Company compete on a nationwide basis with companies located throughout North America.
The Company competes on the basis of the overall quality of the services it provides, state-of-the-art equipment, breadth of services, reputation in the industry and location. The Company also competes on the basis of its ability to attract and retain qualified, highly skilled personnel. The Company believes that prices for its services are competitive within its industry, although some competitors may offer certain of their services at lower rates than the Company. The video services industry has been and is likely to continue to be subject to technological change to which the Company must respond in order to remain competitive.
EMPLOYEES
At August 31, 1996, the Company had 355 full-time employees. The Company's Unitel New York division post-production personnel (23 employees) are members of the National Association of Broadcast Employees and Technicians, AFL-CIO, under a contract with the Company which expires in April 1997. The technical personnel of the Company's Editel Los Angeles division (47 employees) are represented by the International Alliance of Theatrical Stage Employees, under a contract which expires in November 1997. The technical personnel of the Company's Mobile division (39 employees) are represented by the International Brotherhood of Electrical Workers, under a contract which expires in August 1997.
The Company believes that its employee relations are generally satisfactory.
DEVELOPMENTS
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.
The Company has determined to focus its resources toward providing services to the entertainment and corporate communications areas, which represent the Company's strength. As part of this strategy, the Company 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, which after an impairment charge of $4,700,000 recorded as of August 31, 1995, had a carrying value of approximately $19,300,000 that it no longer needed for its current and future operations. During the fourth quarter of fiscal 1995, the Company committed to a plan to dispose of the Editel divisions and in the first quarter of fiscal 1996 began marketing these divisions to potential buyers.
Based on the Company's decision to sell the Editel divisions, the Company recorded an impairment charge of approximately $2,000,000 in fiscal 1996 relating to the assets at all three Editel divisions. The impairment charge recorded represents management's estimate of the decrease in value of these assets during the period such assets were held for sale based upon the depreciation method which the Company has used in the past and which management has found to be reasonable and appropriate.
On February 22, 1996, the Company announced the closure of its Editel Chicago division and subsequently distributed the majority of that division's assets throughout the Company. The balance of the Editel Chicago division equipment was sold in an auction which was held in May 1996. In March 1996, the Company terminated the lease for its Editel Chicago division by making a lump sum payment to the landlord of $1,600,000. The restructuring charge of $1,246,000 recorded in the quarter ended May 31, 1996, reflects this payment less the reversal of $354,000 of accrued rent which would have been due under the terms of the lease. Previously, 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.
During the months of March through May 1996, the editorial and computer graphics departments of the Editel New York division were closed. In May 1996, the Company reached an agreement in principle to sell the film-to-tape transfer business of Editel New York, which was the remaining operating department, to a group of employees backed by a private investor. The Company operated the film- to-tape transfer business through August 31, 1996, at which time discussions with the employee led group were terminated and the business was closed. During the negotiations, the majority of the editorial and computer graphics assets were distributed throughout the Company. At August 31, 1996, the Company estimated the revised value of the remaining assets held for sale to be approximately $1,587,000 and classified them on the balance sheet as short-term. In November 1996, the Company sold the majority of those assets to an unrelated third party for $1,400,000. The balance of the assets will be redeployed throughout the Company or disposed of through an auction. Proceeds from the sale of assets are used by the Company to repay outstanding debt.
Also in May 1996, after reevaluating the potential of the Editel Los Angeles division, the Company decided to retain and expand this division and, accordingly, discontinued seeking a buyer for this business.
ITEM 2.

ITEM 2. PROPERTIES.
The following table sets forth, as of August 31, 1996, certain information concerning the Company's facilities. The lease expiration dates exclude option extension periods which exist in certain leases.
All of the Company's facilities are well maintained structures, in good physical condition and are adequate to meet the Company's current and reasonably foreseeable needs.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
(a) There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
(b) No material pending legal proceeding was terminated during the fourth quarter of the Company's fiscal year ended August 31, 1996.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officer Name Age Since Positions with the Company - ----------------------------------------------------------------------------
Barry Knepper 46 1982 President, Chief Executive Officer and Director
Richard L. Clouser 56 1982 Senior Vice President - Corporate, President of the Mobile Division and Director
Karen Ceil Lapidus 37 1994 Vice President, General Counsel and Secretary
Mark Miller 48 1995 President of the Unitel Hollywood Division
Jill Debin Cohen 44 1995 President of the Unitel NY Post Division
Albert Walton 51 1995 President of the Editel Los Angeles Division
Tom Eyring 44 1995 Chief Technology Officer
Edwin Levine 57 1996 President of the Unitel NY Studios Division
George C. Horowitz 44 1996 Chief Financial Officer
CERTAIN INFORMATION CONCERNING THE EXECUTIVE OFFICERS OF THE COMPANY
Mr. Knepper has been President and CEO of the Company since April 1996. He was Senior Vice President-Finance and Administration and Director since May 1995, Chief Financial Officer of the Company since 1982 and has served as its Treasurer since 1983.
Mr. Clouser has been President of the Mobile division of the Company since 1982, Senior Vice President-Corporate since April 1996 and a Director since October 1996.
Ms. Lapidus has been General Counsel and Secretary of the Company since 1994 and a Vice President since 1996.
Mr. Miller has been President of the Unitel Hollywood division since April 1995. From 1990 through April 1995 he was Vice President of Engineering and Operations of the Unitel Hollywood division. From 1984 through 1990 he was Vice President of Engineering of the Unitel Hollywood division.
Ms. Debin Cohen has been President of the Unitel NY Post division since August 1996. From June 1995 to August 1996 she was President of the Windsor Video division which became a part of the Unitel NY Post division in August 1996. From November 1993 to June 1995 she was the Vice President/General Manager of the Windsor Video division. Ms. Debin Cohen was the Vice President of Operations for the Editel New York division from 1988 through November 1993.
Mr. Walton has been President of the Editel Los Angeles division since July 1995. From May 1994 through July 1995 he was the Director of New Business Development for the Editel Los Angeles division. He served as Vice President of CIS from 1988 through 1994, a Hollywood based specialized visual effects company.
Mr. Eyring has been Chief Technology Officer since June 1995. From 1991 to June 1995 he was Vice President of Engineering of the Editel New York division and from 1982 through 1991 he was Director of Engineering Services for the Editel New York division.
Mr. Levine has been President of the Unitel NY Studios division since August 1996. From June 1975 to August 1996, he was Vice President of Technical Operations for the Unitel NY division of the Company.
Mr. Horowitz has been Chief Financial Officer of the Company since April 1996. From May of 1993 through June of 1996 he was Director of Finance for the Company.
The term of office of each executive director of the Company expires as specified by the Board of Directors of the Company and when his or her respective successor is elected and has qualified.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the American Stock Exchange under the symbol UNV. The following table sets forth, for fiscal years 1996 and 1995, the high and low sales prices of the Common Stock as furnished by the American Stock Exchange:
Fiscal Year 1996: Low High --- ---- First Quarter....................... 4 7/8 6 13/16 Second Quarter...................... 5 1/8 8 Third Quarter....................... 4 7/8 7 3/8 Fourth Quarter...................... 5 1/4 6 1/4
Fiscal Year 1995: Low High --- ---- First Quarter....................... 4 7/8 6 1/2 Second Quarter...................... 4 7/8 7 3/4 Third Quarter....................... 5 7/8 7 1/2 Fourth Quarter...................... 5 3/4 8 1/2
As of November 22, 1996 there were approximately 382 holders of the Company's Common Stock.
Since its inception in 1969, the Company has not declared or paid cash dividends on its Common Stock, and it does not anticipate declaring or paying cash dividends in the foreseeable future. The declaration, payment and amount of future dividends will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial condition, capital requirements and other factors. In connection with its financing arrangements, the Company is subject to certain restrictions which prohibit the payment of cash dividends. (See Note B to Notes to Consolidated Financial Statements, and Management's Discussion and Analysis of Financial Condition and Results of Operations).
(a) Federal and state tax credits of approximately $15,000 in 1996, $28,000 in 1995, $58,000 in 1994, $30,000 in 1993 and $211,000 in 1992 have been applied as a reduction of the provision for income taxes.
(b) Includes the results of Editel-New York, Chicago and Los Angeles since March 1, 1992.
(c) Gain on sale or disposal of equipment and amortization of goodwill have been reclassified to depreciation expense to conform with fiscal 1994, 1995 and 1996 presentation. (See Note H to Notes to Consolidated Financial Statements).
(d) The revolving credit portion of the long-term debt which expired in May 1995, was included in current liabilities. In December 1995, the Company refinanced its revolving credit and term loans outstanding with its bank lenders.
(e) The working capital deficiency is primarily due to the inclusion of $3,750,000 in 1995 and $6,588,000 in 1996 of Term Loan B in current liabilities.
(f) The decrease in property and equipment is due to the reclassification of the Editel divisions' net assets to assets held for sale, a separate line in the long-term asset section of the balance sheet. In 1996 the Company decided to retain its Editel Los Angeles division and also redeployed the majority of the assets of the Editel New York and Editel Chicago divisions throughout the Company. These assets were no longer considered assets held for sale and were reclassified to property and equipment.
ITEM 7.

ITEM 7. 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 $9,134,000 during fiscal 1996 as compared to $9,738,000 (exclusive of the acquisition of GC & Co.) and $15,002,000 during fiscal years 1995 and 1994, respectively. Expenditures made during fiscal 1996 were for equipment used in the production, post production and computer graphics service areas throughout the Company.
The net change in cash in the fiscal years ended August 31, 1996, 1995 and 1994 was $31,000, $(1,132,000) and $285,000, respectively. The net cash increase in fiscal 1996 was the result of net cash provided by operating activities of $7,130,000 and financing activities of $884,000 which was offset by $7,983,000 related to investing activities. For the year ended 1996, the large reduction in accounts receivables and payables was primarily due to the closing of the Company's Editel Chicago and Editel New York divisions. The increase in deferred financing costs and the majority of the net cash provided by financing activities are due to the refinancing of the Company's debt in December of 1995. The majority of the proceeds generated from the disposal of assets are related to the closure of the Editel Chicago and Editel New York divisions. The decrease in fiscal 1995 was the result of cash provided by operating activities of $8,134,000 and financing activities of $1,420,000 less cash used in investing activities of $10,686,000. The net cash decrease in fiscal 1995 was primarily due to the Company's fixed asset expenditures for the year exceeding the cash generated by operations. The increase in fiscal 1994 was the result of cash provided by operating activities of $11,116,000 and financing activities of $2,480,000 in excess of cash used in investing activities of $13,311,000. The net cash increase in fiscal 1994 is primarily due to the cash generated by the Company's operations and net loan proceeds exceeding the net cash used to purchase capital assets.
In December 1995, the Company entered into a $26 million revolving credit and term loan agreement with a financial institution, consisting of an $11 million revolving credit facility and two $7.5 million term loans. Term loan A is payable in 59 monthly principal payments of $89,000 through November 2000 and a payment of $2,249,000 at December 2000. Term loan B is repayable from the proceeds of sales of fixed assets. As of August 31, 1996 $912,000, has been repaid leaving a balance of $6,588,000 for term loan B. Subsequent to the fiscal year end, the Company repaid an additional $1,943,000 from asset sales, leaving a balance of $4,645,000 related to this portion of the term loan as of November 25, 1996. The remaining balance of term loan B is due in full on December 31, 1996.
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 $2.5 million drawn by the Company under the revolving credit facility were used to refinance the term loan ($8,577,000) and revolving credit facility ($9,975,000) and to repay the City of New York Industrial Revenue Bond obligation ($265,000) all then outstanding to the Company's bank lenders. The remaining $2,683,000 was used for closing costs and for payment of prior capital expenditures. 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. At August 31, 1996, $5,706,000 was outstanding under the revolving portion of the credit facility.
See Note B to Notes to Consolidated Financial Statements with respect to compliance with certain financial covenants.
In February 1995, the Company purchased 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, including the " The Academy Awards", the "The Grammy Awards" and "The American Music Awards". The purchase price was $6,750,000, consisting of $6,000,000 in cash and $750,000 of convertible subordinated promissory notes. The notes bear interest at 1% over prime and are due in full in August 1997 and are also convertible into the Company's common stock at $10.00 per share. The cash portion of the purchase price was financed by a $4,700,000 five year capital lease with a fixed rate of interest of 8.2%, payable in sixty equal monthly payments of principal and interest of $82,000 and a balloon payment at the end of the lease period of $940,000. Additionally, the Company obtained a $1,800,000 loan with a fixed interest rate of 9.3% payable in sixty equal monthly payments of principal and interest of $33,000 and a balloon payment at the end of the five year period of $360,000. The $500,000 available to the Company from these two financings after the payment of the cash portion of the GC & Co. acquisition price was used to repay a $500,000 note payable to Banta Corporation from the purchase of the Editel Los Angeles building.
In October 1993, the Company purchased a building located on West 53rd Street in New York City for a purchase price of $2,800,000. The Company is utilizing the building, which contains approximately 14,000 square feet, as a videotape recording studio. The Company also entered into a $2,700,000 equipment financing agreement with a leasing company in October 1993. The proceeds of this financing were used towards payment of the purchase price of the 53rd Street property. The equipment financing is repayable in 60 monthly installments of $53,000, including principal and interest, at a fixed rate of 7%. The Company obtained a $1,875,000 mortgage financing on this property in June 1994 with a fixed rate of interest of 8.6%. The mortgage principal is payable in equal monthly payments through June, 2004 with options to extend the maturity date through June, 2019.
In connection with certain of its financings, the Company must adhere to particular financial ratios and restrictions including restrictions on future payment of dividends. The Company anticipates that the restrictions will not impair its ability to keep pace with technological developments.
The enactment of the Tax Reform Act of 1986 has limited the Company's ability to defer the payment of taxes due to the imposition of an alternative minimum tax which effectively results in the treatment of certain timing differences as tax preference items.
RESULTS OF OPERATIONS
Sales were $79,287,000, $83,285,000 and $80,498,000 for the fiscal years ended August 31, 1996, 1995 and 1994, respectively. The sales decrease of $3,998,000 was primarily due to the closing of the Company's Editel Chicago division in February of 1996 and the restructuring during the year and subsequent closure of the Company's Editel New York division. Sales increased by approximately $4,000,000, in the aggregate, at the Company's other divisions, but was offset by a reduction in sales of $8,000,000 at the Editel Chicago and Editel New York divisions. The fiscal year 1995 sales increase of $2,787,000 was primarily due to revenues generated by the Company's studio production and mobile facilities as a result of the addition of a studio in New York City and the acquisition of the GC & Co. mobile units which was offset by declines in sales at the Company's Editel divisions. In fiscal year 1994, sales increased $1,108,000 which was primarily due to a higher demand for the Company's mobile services. Sales remained flat for the Company's Editel-Chicago and both Los Angeles divisions due to severe price competition in these markets.
The Company recorded net losses of $5,124,000 and $6,547,000 in the fiscal years ended August 31, 1996 and 1995 and net income of $859,000 in fiscal 1994. The net loss of $5,124,000 incurred in fiscal 1996 is attributable to costs relating to the closure of the Company's Editel New York and Editel Chicago divisions and the operating costs of running these divisions until they were closed. The net loss of $6,547,000 incurred in fiscal 1995 is due primarily to the pretax charge of $7,681,000 taken for the impairment of assets of the Editel New York, Editel Chicago, Editel Los Angeles and Windsor Video divisions and the pretax charge of $400,000 for the restructuring of the Editel Chicago division.
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 72.7%, 71.1% and 68.4%, for the fiscal years ended August 31, 1996, 1995 and 1994, respectively. The increase in production costs as a percent of sales in fiscal 1996 is due to the decrease in sales and incremental severance costs associated with the closure of the Company's Editel New York and Editel Chicago divisions. During 1996, the Company implemented a program to reduce production costs by closing unprofitable divisions and streamlining operations wherever possible. The increase in production costs for fiscal 1995 as compared with the prior years, is due primarily to an increase in studio and mobile production revenues which incur variable expenses at a higher rate than the Company's other services. Production costs increased as a percentage of sales in fiscal 1994 because production costs increased during that year while sales remained flat with the prior year. Since most of the Company's costs are fixed and a large portion of the costs are subject to price increases, flat sales from year to year result in production costs which are an increased percentage of sales. This same dynamic applies for both selling expenses and general and administrative expenses.
Depreciation, as a percentage of sales, was 9.9%, 12.1% and 11.5% in fiscal 1996, 1995 and 1994, respectively. Depreciation expense decreased in fiscal 1996 due to the reclassification of the net property and equipment of the 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 period such assets were held for sale in fiscal 1996 based upon the method of depreciation which the Company has used in the past and which management has found to be reasonable and appropriate.
The Editel Chicago division was closed in February 1996 and the Editel New York division was closed in August 1996. Depreciation expense increased in 1995 as a result of the $4,750,000 equipment portion of the GC & Co. acquisition and capital expenditures made during the year totaling $9,738,000. Depreciation expense increased as a percentage of sales in 1994 due to the purchase of $15,002,000 in fixed assets during the year. Depreciation expense, during fiscal 1996 included loss on disposal of assets of $58,000. Depreciation was offset by a gain on disposal of assets of $352,000 and $817,000 in fiscal 1995 and 1994 respectively. Had the gain on disposal of assets been excluded from depreciation expense, depreciation as a percentage of sales for 1995 and 1994 would have been 12.5%.
Selling expenses, as a percentage of sales, during fiscal years 1996, 1995 and 1994 were 2.9%, 3.4% and 3.5%, respectively. The decrease in selling expenses during fiscal 1996 is primarily due to a decrease in the sales staff at the Editel Chicago and Editel New York divisions. In 1995 and 1994, selling expenses as a percentage of sales decreased due to significant cost reductions which became effective in 1993.
General and administrative expenses as a percentage of sales during fiscal years 1996, 1995 and 1994 were 12.2%, 10.6% and 11.8%, respectively. The increase in general and administrative costs in fiscal 1996 is due primarily to severance pay at the Editel Chicago and Editel New York divisions. Cost reductions put into effect in 1994, including the addition of in-house counsel and a resulting reduction in professional fee expense, were reflected in fiscal years 1995 and 1994 by a decrease of approximately 1% from each of the prior years.
Interest expense, as a percentage of sales, during fiscal years 1996, 1995, and 1994 was 4.6%, 4.4% and 3.0%, respectively. Although interest expense increased slightly in 1996, the percent to sales increase to 4.6% in 1996 versus 4.4% in 1995 is due to lower sales in the current fiscal year. The increase in interest expense in fiscal 1995 was due to additional interest incurred relating to the mortgage financings for the Editel Los Angeles building purchased by the Company in June 1994 and financing obtained for the acquisition of GC & Co. in February 1995. During fiscal 1995 the Company wrote off $214,000 of deferred financing costs related to its bank debt which was refinanced in December 1995. Additionally, interest rates were significantly higher in 1995 as compared with the prior year resulting in higher interest payments on the floating rate portion of the Company's debt. The decrease in interest expense in 1994 is due to the renegotiation of the rate payable on the Company's indebtedness to its primary bank lenders, a reduction in the amortization of deferred financing costs charged to interest expense and the capitalization of approximately $300,000 of interest relating to construction on the Editel Los Angeles and 53rd Street, New York City locations.
The Company's effective tax rates were (1%), (30%) and 43.4% in fiscal years 1996, 1995 and 1994, respectively. The 1996 effective tax rate reflects the current year net operating loss for which no tax benefit was provided. The effective tax rate in 1995 differs from prior years primarily due to the impact of the nondeductible goodwill write off and the impairment of assets charge. (See Note F to Notes to Consolidated Financial Statements.) During fiscal 1994, the effective rate exceeded the Federal statutory rate of 34.0% due to state and local income taxes, and the effect of certain non-deductible expenses.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
UNITEL VIDEO, INC.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE
REPORT OF GRANT THORNTON LLP INDEPENDENT ACCOUNTANTS.........18
CONSOLIDATED FINANCIAL STATEMENTS: BALANCE SHEETS - AUGUST 31, 1996 AND 1995............. 19-20 STATEMENTS OF OPERATIONS - YEARS ENDED AUGUST 31, 1996, 1995 AND 1994.................. 21 STATEMENT OF STOCKHOLDERS' EQUITY - YEARS ENDED AUGUST 31, 1996, 1995 AND 1994................... 22 STATEMENTS OF CASH FLOWS - YEARS ENDED AUGUST 31, 1996, 1995 AND 1994................... 23-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............ 26-37
SUPPLEMENTARY FINANCIAL SCHEDULE........................... 44
Selected Quarterly Financial Data is set forth in Note K to Notes to the Consolidated Financial Statements.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders Unitel Video, Inc.
We have audited the accompanying consolidated balance sheets of Unitel Video, Inc. (a Delaware corporation) at August 31, 1996 and 1995 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended August 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Unitel Video, Inc. as of August 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note J to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" during fiscal 1995.
We have also audited Schedule II of Unitel Video, Inc. for each of the three years in the period ended August 31, 1996. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein.
/s/GRANT THORNTON LLP - -----------------------------------
New York, New York November 19, 1996
UNITEL VIDEO, INC.
CONSOLIDATED BALANCE SHEETS
August 31,
ASSETS 1996 1995
Current assets: Cash $ 192,000 $ 161,000 Accounts receivable, less allowance for doubtful accounts of $712,000 in 1996 and $686,000 in 1995 8,701,000 12,700,000 Other receivables 333,000 362,000 Prepaid income taxes 142,000 567,000 Prepaid expenses 735,000 1,340,000 Net assets held for sale 1,587,000 -- Deferred tax asset 844,000 760,000 ---------- ---------- Total current assets 12,534,000 15,890,000
Property and equipment - at cost Land, buildings and improvements 19,915,000 13,541,000 Video equipment 97,023,000 78,145,000 Automobiles -- 50,000 Furniture and fixtures 3,502,000 2,736,000 ---------- ---------- 120,440,000 94,472,000
Less accumulated depreciation and amortization 69,974,000 59,981,000 ---------- ---------- 50,466,000 34,491,000
Net assets held for sale -- 19,270,000
Deferred tax asset 1,625,000 1,745,000 Goodwill 1,859,000 1,997,000 Other assets 1,134,000 793,000 ---------- ---------- $67,618,000 $74,186,000 ---------- ---------- ---------- ----------
See accompanying notes.
UNITEL VIDEO, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
August 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 - ------------------------------------ ---- ----
Current liabilities: Accounts payable $ 4,967,000 $ 7,339,000 Accrued expenses 1,450,000 1,620,000 Payroll and related taxes 2,947,000 2,931,000 Current maturities of long-term debt 8,362,000 5,492,000 Current maturities of subordinated debt 1,166,000 104,000 Current maturities of ESOP loan 166,000 186,000 Current maturities of capital lease obligations 1,832,000 1,685,000 ----------- ------------ Total current liabilities 20,890,000 19,357,000
Deferred rent 325,000 864,000 Long-term debt, less current maturities 19,706,000 19,936,000 Subordinated debt, less current maturities 1,979,000 3,146,000 ESOP loan, less current maturities -- 152,000 Long-term leases, less current maturities 5,604,000 7,064,000 Accrued retirement 1,304,000 1,141,000
Stockholders' equity: Common stock, par value $.01 per share: Authorized-5,000,000 shares Issued-3,532,554 shares in 1996 and 3,491,454 shares in 1995, and outstanding 2,666,265 shares in 1996 and 2,625,165 shares in 1995 26,000 26,000 Additional paid-in capital 27,545,000 27,351,000 Accumulated deficit/Retained earnings (1,592,000) 3,532,000 Common stock held in treasury, at cost (866,289 shares in 1996 and 1995) (7,974,000) (7,974,000) ------------ ------------ 18,005,000 22,935,000 Unearned employee benefit expense (195,000) (409,000) ------------ ------------ Total stockholders' equity 17,810,000 22,526,000 ------------ ------------ $ 67,618,000 $74,186,000 ------------ ------------ ------------ ------------
See accompanying notes.
UNITEL VIDEO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes.
See accompanying notes.
UNITEL VIDEO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended August 31,
1996 1995 1994 ---- ---- ---- Cash Flows From Operating Activities:
Net (loss) earnings $(5,124,000) $(6,547,000) $859,000 Adjustments to reconcile ------------ ------------ ------------ net (loss) earnings to net cash provided by operating activities: Depreciation and amortization 7,782,000 10,397,000 10,111,000 Net loss (gain) on disposal of assets 58,000 (352,000) (817,000) Impairment charge 2,000,000 7,681,000 -- Amortization of deferred financing costs 252,000 603,000 500,000 Accretion of subordinated debt -- -- 317,000 Recognition of deferred gain -- (117,000) (200,000) Royalties received in equipment -- -- (189,000) Payments made on accrued acquisition costs -- -- (75,000) Deferred rent (539,000) (123,000) (44,000) Accrued retirement expense 163,000 172,000 206,000 Accrued restructuring -- 273,000 -- Deferred income taxes 36,000 (2,520,000) 140,000 Decrease (increase), net of acquired assets and liabilities, in: Accounts receivable, net 3,999,000 (1,928,000) 720,000 Other receivables 29,000 20,000 (336,000) Prepaid expenses 605,000 213,000 (309,000) Prepaid taxes 425,000 (486,000) 438,000 Other assets (30,000) (222,000) 14,000 Increase (decrease), net of acquired assets and liabilities, in: Accounts payable (2,372,000) 835,000 (1,486,000) Accrued expenses (170,000) 559,000 533,000 Payroll and related taxes 16,000 (324,000) 734,000 ------------ ------------ ------------ 12,254,000 14,681,000 10,257,000 ------------ ------------ ------------
Net cash provided by operating activities 7,130,000 8,134,000 11,116,000 ------------ ------------ ------------
UNITEL VIDEO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year Ended August 31,
UNITEL VIDEO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
See accompanying notes.
UNITEL VIDEO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Business -- The Company provides facilities for studio production, videotape editing, mobile production, computer graphics, film-to-tape transfer and duplication of videotape in all formats, to the entire video communications industry. The Company's facilities are used to produce television programs, corporate communications and commercials on videotape. The Company's mobile division provides "on-location" services for the videotape recording and live telecasting of sports, cultural and other events throughout the United States. The Company also designs and produces custom CD-ROM, CD-I, videodisc and networked multimedia presentations. Customers for the Company's services include cable television program suppliers, independent producers, national television networks, local television stations and advertising agencies.
(2) Consolidation -- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Significant intercompany accounts and transactions have been eliminated.
(3) Depreciation -- Depreciation is provided on a straight-line basis over the estimated useful lives of assets which are: 30-40 years for buildings; 15-30 years for building improvements; length of lease for leasehold improvements; 5-7 years for video equipment; 5-7 years for furniture and fixtures; and 3 years for automobiles. Gain on disposal of assets is included in depreciation and amortization expense for all years reported. (See Note H to Notes to Consolidated Financial Statements).
(4) Goodwill -- Goodwill relating to acquisitions represents the excess of cost over the fair value of net assets acquired and is amortized over 15 years. Accumulated amortization at August 31, 1996, 1995 and 1994 totaled $207,000, $69,000 and $266,000, respectively. (See Note J to Notes to Consolidated Financial Statements).
(5) Deferred Financing Costs -- Costs incurred in obtaining long-term debt financing are included in other assets. These costs are being amortized using the interest method over the term of the related obligations.
(6) Interest Cost -- The Company had capitalized construction period interest costs of $303,000 in 1994.
(7) Income Taxes -- Deferred income taxes arise primarily from the use of different depreciation methods and lives for tax and financial statement purposes, differences in the timing of the deduction for the impairment charge and net operating loss and alternative minimum tax credit carryforwards.
(8) Receivables -- The Company grants credit to customers, substantially all of whom are in the entertainment, advertising or corporate communications industries.
(9) Earnings per common share were determined by dividing net earnings by the weighted average of common and common equivalent shares outstanding.
(10) Revenue Recognition -- Revenue is recorded when services are provided.
(11) Financial Instruments -- The Company's principal financial instruments consist of accounts receivable, accounts payable and long-term debt. The Company believes that the carrying amount of such instruments approximates fair value.
(12) Use of Estimates -- In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(13) Stock-Based Compensation -- Statement of Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for Stock Based Compensation," provided companies a choice in the method of accounting used to determine stock-based compensation. Companies may account for such compensation either by using the intrinsic value-based method provided by APB Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees," or the fair market value-based method provided in SFAS No. 123. This statement is required to be adopted by the Company during its fiscal year ending August 31, 1997. The Company intends to use the intrinsic value-based method provided in APB No. 25 to determine stock-based compensation. The sole effect of the adoption of SFAS No. 123 is the obligation imposed on the Company to comply with the new disclosure requirements provided thereunder.
B. LONG-TERM DEBT AUGUST 31,
1996 1995 ---- ----
Notes payable to financial institution: Term portion A payable in monthly installments of $89,000 through November 2000 plus interest on the declining balance at Prime plus 1.00% or LIBOR plus 2.75% and final payment of $2,249,000 due December 2000. $6,787,000 $7,500,000
Term portion B payable from the sale of assets with interest payable monthly at Prime plus 1.25% or LIBOR plus 3.00% due December 1996. 6,588,000 7,500,000
Revolving portion payable in full in December 2000 with interest payable monthly at Prime plus .75% or LIBOR plus 2.50%. 5,706,000 860,000
Mortgage payable to a bank, due in monthly installments of principal of $22,000 through November 2002, plus interest on the declining balance at Prime plus .75% or LIBOR plus 2.50% with a final payment of $2,152,000 due December 2002. 3,822,000 4,000,000
Mortgage payable to a bank, at a fixed interest rate of 8.6%, due in monthly installments of principal of $6,250, plus interest on the declining balance, through June 2019. 1,719,000 1,794,000
Mortgage payable to an insurance company, at a fixed interest rate of 8.9%, due in monthly installments of $22,000 through July 2009. 2,010,000 2,090,000
Note payable to an insurance company, at a fixed rate of 9.3%, due in monthly installments of $33,000 through February 2000. 1,436,000 1,684,000
Subordinated debt consisting of convertible subordinated promissory notes payable to prior owners of GC & Co. at an interest rate of Prime plus 1% due in full August 1997 and a subordinated promissory note payable to Scanline Communications at an interest rate of Prime plus 2% due in monthly installments of principal of $35,000 with a final payment of $1,250,000 due May 1999. 3,145,000 3,250,000 ------------ ------------ 31,213,000 28,678,000
Less current maturities 9,528,000 5,596,000 ------------ ------------ $21,685,000 $23,082,000 ------------ ------------ ------------ ------------
In December 1995, the Company entered into a $26 million revolving credit and term loan agreement with a financial institution, consisting of an $11 million revolving credit facility and two $7.5 million term loans. Term loan A is payable in 59 monthly principal payments of $89,000 through November 2000 and a payment of $2,249,000 at December 2000. Term loan B is repayable from the proceeds of sales of fixed assets. As of August 31, 1996 $912,000 has been repaid, leaving a current balance of $6,588,000 for term loan B. Subsequent to the fiscal year-end, the Company repaid an additional $1,943,000 from asset sales, leaving a balance of $4,645,000 related to this portion of the term loan as of November 25, 1996. The terms of the agreement provide that the lender receive a first lien on all property and equipment and accounts receivable that are not encumbered by another lender.
Additionally, in December 1995, the Company obtained a $4,000,000 mortgage on its property located on West 57th Street in New York City, from the Company's bank lender. 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 closure of the Company's Editel Chicago and Editel New York divisions and the sale of related assets necessitated the waiver at August 31, 1996 of compliance with certain financial covenants, and amendment of those covenants, by the Company's lenders of its $26,000,000 revolving credit and term loan facility and its $4,000,000 mortgage on the Company's property on West 57th Street, New York City.
In June 1994, the Company purchased for $3,500,000 from Scanline the building occupied by the Editel Los Angeles division. Financing for the purchase consisted of a $2,175,000, 15-year mortgage payable to an insurance company lender, a $500,000 note payable to the seller, Scanline Communications, and the balance from working capital. The note was paid in full in February 1995.
In October 1993, the Company purchased for $2,800,000 land and a building located on West 53rd Street, New York City, which has been converted into a videotape recording studio. In June 1994, the Company obtained a mortgage on the West 53rd Street property in the amount of $1,875,000 from a bank. The mortgage loan is payable in equal monthly principal payments through June 2004 with options to extend the maturity date through June 2019. Proceeds from this mortgage were used for working capital purposes.
In February 1995, the Company purchased the business and assets of GC & Co. The purchase price was $6,750,000, consisting of $6,000,000 in cash and $750,000 of convertible subordinated promissory notes. The cash portion of the purchase price was financed by a $4,700,000, five-year capital lease and a $1,800,000 loan with a fixed interest rate of 9.3% payable in sixty equal monthly payments of principal and interest of $33,000 and a balloon payment at the end of the five-year period of $360,000.
Property, equipment and accounts receivable with a carrying value of $60,754,000 at August 31, 1996 are pledged as collateral for all long-term debt outstanding.
The agreements relating to certain of these long-term obligations include covenants which, among other terms, place restrictions on the Company's capital expenditures, the maintenance of certain financial ratios (including minimum levels of net worth and debt-to-equity restrictions, all as defined in the agreements) and the payment of dividends.
At August 31, 1996, maturities of long-term debt for the next five years are as follows:
Year Ended August 31, ----------------------
1997 $ 9,528,000 1998 2,224,000 1999 3,408,000 2000 7,770,000 2001 2,968,000 2002 and thereafter 5,315,000 ---------- $31,213,000 ----------- -----------
C. OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS
The Company has entered into various capital lease agreements for video equipment. The leases expire at various times through 2000.
Property recorded under capital leases includes the following:
August 31, 1996 1995 ---- ---- Video equipment $10,447,000 $10,012,000 Accumulated depreciation (2,496,000) (1,240,000) ------------ ------------ $ 7,951,000 $ 8,772,000 ------------ ------------ ------------ ------------
Future minimum lease payments, as of August 31, 1996 are as follows:
Year Ended Capital August 31, leases - ---------- ----------
1997 $ 2,382,000 1998 2,344,000 1999 1,815,000 2000 2,157,000 2001 18,000 ---------
Net minimum lease payments 8,716,000 Amount representing interest (1,280,000) ------------
Obligation under capital lease agreements $ 7,436,000 ------------ ------------
Current portion $ 1,832,000
Long-term portion 5,604,000 ------------ $ 7,436,000 ------------ ------------
D. STOCK OPTION PLANS
In January 1986, the Company's Board of Directors approved a Non-Statutory Stock Option Plan (the "Non-Statutory Plan") to grant as many as 50,000 shares to the Company's non-employee directors. Under the Non-Statutory Plan options to purchase 10,000 shares were outstanding at August 31, 1996.
In July 1988, the Company's Board of Directors approved a Non-Qualified Stock Option Plan (the "Non-Qualified Plan") to grant as many as 125,000 shares primarily to key employees. Options to purchase 10,000 shares granted to several officers under the Non-Qualified Plan were outstanding at August 31, 1996.
In July 1992, the Company's shareholders approved adoption of the 1992 Stock Option Plan (the "1992 Plan") to grant as many as 350,000 shares primarily to key employees and non-employee directors. Prior to July 1992, the Company granted options under the plans described above. All future grants will be granted under the 1992 Plan. Options to purchase 195,500 shares were outstanding to key employees and non-employee directors under the 1992 Plan at August 31, 1996.
Under all plans, options have generally been granted to purchase stock at the fair market value of the shares at the date of grant as determined by the Board of Directors. Under the Non-Qualified Plan, the options expire five years after the date of grant and under the Incentive Plan and Non-Statutory Plan, options expire ten years after the date of grant.
The status of stock options under the Company's stock option plans is summarized below:
At August 31, 1996, a total of 309,500 shares were reserved for future option grants for all plans and options to purchase 215,500 shares were outstanding.
E. EMPLOYEE STOCK OWNERSHIP PLAN
In June 1987, the Employee Stock Ownership Plan (the "ESOP") obtained financing from a bank amounting to $1,250,000, which was used in acquiring 115,849 shares of newly issued Company stock. The bank loan bears interest at a fixed rate of 10% and is guaranteed by the Company. The ESOP is funded by Company contributions as required to provide the ESOP with the funds necessary to meet its debt service requirements.
The loan obligation of the ESOP is considered unearned employee benefit expense and is recorded as a separate reduction of the Company's shareholders' equity. Both the loan obligation and the unearned benefit expense are reduced by the amount of any loan repayments made by the ESOP. The loan requires monthly payments of principal of $15,000 and interest at a fixed rate of 10% through June 1997. The aggregate principal maturities of the ESOP obligation subsequent to August 31, 1996 are as follows:
1997.............................. $166,000
In fiscal 1991, the ESOP purchased 25,810 shares of the Company's Common Stock. These purchases have been financed by a ten-year loan from the Company for $229,193. The loan requires monthly payments of principal and interest at 10%. The Company's related receivable from the ESOP has been classified as a reduction of shareholders' equity.
401(K) EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Effective July 1, 1992, the ESOP merged into the Unitel Video, Inc. Retirement Investment Plan (a 401(k) Plan), which became the Unitel Video, Inc. 401(k) Employee Savings and Stock Ownership Plan (the "Plan"). The Plan 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. The minimum contribution required to be made each year by the Company is the amount necessary to meet its debt service requirements. The Plan combines a 401(k) plan with certain features of an employee stock ownership plan.
Total contributions to the ESOP and the Plan for each of the years ended August 31 are as follows:
1996 ............................. $248,000 1995 ............................. $336,000 1994 ............................. $253,000
The Company adopted Statement of Position 93-6 (SOP 93-6), "Employers' Accounting for Employee Stock Ownership Plans" during 1995. In accordance with SOP 93-6, compensation cost and liabilities associated with providing the employer's 401(k) match are recognized the way they would be if an ESOP had not been used to fund the benefit.
The Plan's compensation expense was $158,000 and $191,000 for the years ended August 31, 1996 and 1995, respectively. A summary of the Plan's shares is as follows: 1996 1995 ------ ------ Allocated shares 96,666 75,095 Shares released for allocation 8,608 19,234 Unreleased shares 27,575 42,939 -------- -------- 132,849 137,268 -------- --------
Fair value of unreleased shares at August 31 $155,000 $274,000 -------- -------- -------- --------
Prior to adoption of SOP 93-6, the unreleased shares were considered outstanding for the earnings per share computation. Accordingly, for the years ended August 31, 1996 and 1995, shares were no longer considered outstanding. The effect of adopting SOP 93-6 was not material on the net loss, and resulted in a decrease of approximately 1% on the net loss per share for years ended August 31, 1996 and 1995.
F. INCOME TAXES
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
August 31,
1996 1995 ---- ----
Current portion of deferred tax assets (liabilities)
Employee medical benefits $ 449,000 $ 308,000 Bad debt reserves 395,000 452,000 ---------- ---------- 844,000 760,000 ---------- ----------
Long-term portion of deferred tax assets (liabilities)
Accrued rent 139,000 371,000 Accrued retirement 560,000 491,000 Net assets held for sale 1,646,000 2,534,000 Net operating loss carryforwards 997,000 330,000 ITC carryforwards-Federal and State (net of valuation allowance) 467,000 386,000 AMT credit carryforwards 2,540,000 2,570,000 Other - net 362,000 211,000 Tax over book depreciation (5,086,000) (5,148,000) --------- --------- 1,625,000 1,745,000 --------- --------- Net deferred tax asset (liability) $2,469,000 $2,505,000 ---------- ---------- ---------- ----------
The provision for income taxes is comprised of the following:
Year Ended August 31,
1996 1995 1994 ---- ---- ----
Current: Federal $ -0- $(270,000) $454,000 State 40,000 36,000 215,000 --------- --------- -------- 40,000 (234,000) 669,000 Deferred: Federal -0- (1,610,000) 3,000 State -0- (950,000) (12,000) --------- ----------- --------- -0- (2,560,000) (9,000) --------- --------- -------- $ 40,000 $(2,794,000) $660,000 --------- ----------- --------- --------- ----------- ---------
The Company's effective tax rate was (1%) in 1996, (30%) in 1995 and 43.4% in 1994. The components of the reconciliation of the Company's effective tax rate to the U.S. statutory rate of 34% are as follows:
Year Ended August 31,
1996 1995 1994 ------- ------- ------- Tax expense computed at statutory rate $(1,729,000) $(3,176,000) $ 516,000
State income tax, net of Federal income tax benefit 26,000 (607,000) 157,000
Loss without benefit 1,634,000 -0- -0- Goodwill 47,000 649,000 17,000 Other 62,000 340,000 (30,000) ----------- ----------- ----------
Actual tax expense $ 40,000 $(2,794,000) $ 660,000 ----------- ------------ ---------- ----------- ----------- ----------
The Company's total alternative minimum tax credit carryforward is approximately $2,400,000, which can be used against the Company's future regular tax liability.
At August 31, 1996, the Company had available for tax purposes in excess of $2,000,000 of State of New York tax credits that will expire from August 31, 1996 through August 31, 2002. The State of New York limits the use of these credits on an annual basis. For financial reporting purposes, a valuation allowance of $1,900,000 has been recognized to offset the deferred tax assets related to those carryforwards for the fiscal year ended August 31, 1995.
The deferred tax asset relating to the net operating loss carryforward is attributable to the unused portions of Federal net operating losses generated in fiscal 1996 and 1993 of $665,000 and $515,000, respectively, which are scheduled to expire in 2011 and 2008, respectively, as well as state net operating losses generated in fiscal 1995 of various amounts scheduled to expire at various times through 2008. A valuation allowance of $2,065,000 has been recognized to offset the deferred tax asset related to the remaining net operating loss carryforward for the fiscal year ending August 31, 1996.
Internal Revenue Code Section 382 places a limitation on the utilization of Federal net operating loss and other credit carryforwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percentage point change in ownership occurs. Accordingly, the actual utilization of the alternative minimum tax credit carryforwards and other deferred tax assets for tax purposes may be limited annually to the percentage (about 6%) of the fair market value of the Company at the time of any such ownership changes.
G. COMMITMENTS AND CONTINGENCIES
Operating Leases -- The following is a schedule by years of future minimum rental payments under operating leases that have an initial non-cancelable lease term in excess of one year:
1997 $ 4,275,000 1998 4,230,000 1999 3,030,000 2000 1,739,000 2001 956,000 2002 and thereafter $ 1,000,000 ------------ $ 15,230,000 ------------ ------------
The aggregate rental expense for the years ended August 31, 1996, 1995, and 1994 was $3,874,000, $3,867,000 and $3,381,000, respectively.
The Company maintains cash balances at financial institutions located in New York, New York, Pittsburgh, Pennsylvania, and Los Angeles, California. These balances are insured by the Federal Deposit Insurance Corporation up to $100,000. At August 31, 1996, uninsured amounts held at these financial institutions were approximately $19,000.
The Company has contracts with several unions that expire in April, August and November 1997.
There are various lawsuits claiming amounts against the Company. It is the opinion of the Company's management that the ultimate liabilities, if any, in these cases will not have a material effect on the Company's financial statements.
H. NET GAIN ON DISPOSITION OF FIXED ASSETS
In June 1990, the Company sold to CBS Inc. a building it owned at 508-510 West 57th Street, New York, New York. The sale price of the property was $4,650,000 payable in cash at the closing. As part of the transaction, the Company entered into an Indenture of Lease with CBS, pursuant to which the Company, as tenant, leased back the premises. The Company recognized a net gain on the disposition of $2,277,000. In addition, under the provisions of Statement of Financial Accounting Standards No. 98, the Company deferred $922,000 of additional gain from the sale, representing the present value of the future minimum rental payment under the portion of the lease which was not subject to early termination. The remaining balance of the deferred gain of $117,000 was recognized in the year ended August 31, 1995 as a reduction of rent expense.
The Company has accelerated its efforts to sell equipment which is not fully utilized. In order to properly reflect the sale of equipment as part of the Company's operations, in 1996, 1995 and 1994, $(58,000), $352,000 and $817,000, respectively, of (loss)/gain on disposal of assets was included in depreciation expense.
I. ACCRUED RETIREMENT
Under the terms of employment agreements with two former officers of the Company, retirement payments are due commencing September 1, 1996. At August 31, 1996, a liability of approximately $1,304,000 has been recorded, based upon the present value of these payments. Approximately $163,000, $172,000 and $206,000 has been charged to operations for the years ended August 31, 1996, 1995 and 1994, respectively.
J. 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.
The Company has determined to focus its resources toward providing services to the entertainment and corporate communications areas, which represent the Company's strength. As part of this strategy, the Company 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, which after an impairment charge of $4,700,000 recorded as of August 31, 1995, had a carrying value of approximately $19,300,000 that it no longer needed for its current and future operations. During the fourth quarter of fiscal 1995, the Company committed to a plan to dispose of the Editel divisions and in the first quarter of fiscal 1996 began marketing these divisions to potential buyers. Additionally, the Company reevaluated its investment in the Windsor division in the fourth quarter of fiscal 1995 and determined that, based upon this division's operating results, the goodwill associated with the purchase of this division and certain property, plant and equipment that will not provide any future benefits to the Company were impaired. The Company recognized an impairment charge of approximately $3,000,000 included in impairment charges during the fourth quarter of fiscal 1995 which represents the remaining balances of these assets.
Based on the Company's decision to sell the Editel divisions, the Company recorded an impairment charge of approximately $2,000,000 in fiscal 1996 relating to the assets at all three Editel divisions. The impairment charge recorded represents management's estimate of the decrease in value of these assets during the period such assets were held for sale based upon the depreciation method which the Company has used in the past and which management has found to be reasonable and appropriate.
On February 22, 1996, the Company announced the closure of its Editel Chicago division and subsequently distributed the majority of that division's assets throughout the Company. The balance of the Editel Chicago division equipment was sold in an auction which was held in May 1996. In March 1996, the Company terminated the lease for its Editel Chicago division by making a lump- sum payment to the landlord of $1,600,000. The restructuring charge of $1,246,000 recorded in the quarter ended May 31, 1996, reflects this payment less the reversal of $354,000 of accrued rent which would have been due under
the terms of the lease. Previously, 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.
During the months of March through May 1996, the editorial and computer graphics departments of the Editel New York division were closed. In May 1996, the Company reached an agreement in principle to sell the film-to-tape transfer business of Editel New York, which was the remaining operating department, to a group of employees backed by a private investor. The Company operated the film- to-tape transfer business through August 31, 1996, at which time discussions with the employee-led group were terminated and the business was closed. During the negotiations, the majority of the editorial and computer graphics assets were distributed throughout the Company. At August 31, 1996, the Company estimated the revised value of the remaining assets held for sale to be approximately $1,587,000 and classified them on the balance sheet as short-term. In November 1996, the Company sold the majority of those assets to an unrelated third party for $1,400,000. The balance of the assets will be redeployed throughout the Company or disposed of through an auction. Proceeds from the sale of assets are used by the Company to repay outstanding debt.
Also in May 1996, after reevaluating the potential of the Editel Los Angeles division, the Company decided to retain and expand this division and, accordingly, discontinued seeking a buyer for this business.
K. QUARTERLY FINANCIAL DATA (UNAUDITED)
Year Ended Primary Net August 31, Gross Net Earnings Loss 1996 Sales Profit Earnings(Loss) Per Share ------------------------------------------------------------------------
1st quarter $22,940,000 $5,805,000 $ 522,000 $ .20 2nd quarter 20,529,000 3,171,000 (1,379,000) (.53) 3rd quarter 19,281,000 3,166,000 (2,290,000) (.88) 4th quarter 16,537,000 1,644,000 (1,977,000) (.75)
Year Ended Primary Net August 31, Gross Net Earnings(Loss) 1995 Sales Profit Earnings(Loss) Per Share ----------------------------------------------------------------------
1st quarter $21,233,000 $4,548,000 $439,000 $ .17 2nd quarter 20,581,000 3,560,000 50,000 .02 3rd quarter 20,831,000 3,345,000 (798,000) (.31) 4th quarter 20,640,000 2,613,000 (6,238,000) (2.41)
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement relating to the Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement relating to the Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement relating to the Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement relating to the Registrant's 1996 Annual Meeting of Stockholders to by filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The following financial statements of the Company are included in Part II, Item 8:
Page ----
Report of Grant Thornton LLP Independent Accountants....................18 Consolidated Balance Sheets - August 31, 1996 and 1995...............19-20 Consolidated Statements of Operations - Years Ended August 31, 1996, 1995, and 1994.......................................21 Consolidated Statement of Stockholders' Equity - Years Ended August 31, 1996, 1995 and 1994..................................22 Consolidated Statements of Cash Flows - Years Ended August 31, 1996, 1995 and 1994.........................23-25 Notes to Consolidated Financial Statements...........................26-37
2. The following schedule is included in Part IV:
Consolidated Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves...44
All other schedules are omitted because they are not applicable, not required or the required information is included in the consolidated financial statements or notes thereto.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the three months ended August 31, 1996.
(c) Exhibits required to be filed by Item 601 of Regulation S-K:
1. Exhibit 3(A). Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(A) of the Registrant's Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
2. Exhibit 3(B). Amended and Restated By-laws (incorporated by reference to Exhibit 3(ii) of the Registrant's Quarterly Report on form 10-Q filed April 15, 1996 (file No. 1-8654)).
3. Exhibit 4(A). Specimen of Stock Certificate (incorporated by reference to Exhibit 4 of the Registrant's Annual Report on form 10-K filed November 29, 1984 (File No. 1-8654)).
4. Exhibit 4(B). Amended and Restated Loan and Security Agreement dated as of December 12, 1995 among Unitel Video, Inc., R Squared, Inc., and Heller Financial, Inc. as agent and lender (incorporated by reference to Exhibit 4(B) of the Registrant's Annual Report on form 10-K filed December 14, 1995 (File No. 1-8654)).
5. Exhibit 4(C). Second Amended and Restated Credit Agreement dated as of December 12, 1995 between Unitel Video, Inc. and The Chase Manhattan Bank, N.A. (incorporated by reference to Exhibit 4(C) of the Registrant's Annual Report on form 10-K filed December 14, 1995 (File No. 1-8654)).
6. Exhibit 4(D). First Amendment and Limited Waiver to Loan and Security Agreement.
7. Exhibit 4(E). Waiver and Agreement to Amend Financial Covenants dated November 27, 1996.
8. Exhibit 10. Material Contracts:
10(A) Amended Non-Qualified Stock Option Plan of Unitel Video, Inc.
10(B) Lease Agreement between Unitel Video, Inc. and Educational Broadcasting Corporation dated July 16, 1993 (incorporated by reference to Exhibit 10(B) of the Registrant's Annual Report on Form 10-K filed November 26, 1993 (File No. 1-8654)).
10(C) Amended Non-Statutory Stock Option Plan of Unitel Video, Inc.
10(D) Amended Employee Stock Purchase Plan of Unitel Video, Inc.
10(E) Employment & Consulting Agreement between Unitel Video, Inc. and Herbert Bass dated as of May 26, 1988 (incorporated by reference to Exhibit 10(R) of the Registrant's Annual Report on Form 10-K filed December 13, 1989 (File No. 1-8654)).*
10(F) Employment & Consulting Agreement between Unitel Video, Inc. and Alex Geisler dated as of May 26, 1988 (incorporated by reference to Item 14(C)4(S) of the Registrant's Annual Report on form 10K filed December 13, 1989 (File No. 1-8654)).*
10(G) Amendment to Employment and Consulting Agreement dated as of February 14, 1996 between Unitel Video, Inc. and Alex Geisler.*
10(H) Lease Agreement between UNV, Inc. and HBWC Limited Partnership dated as of August 12, 1988 (incorporated by reference to Exhibit 10(U) of the Registrant's Annual Report on Form 10-K filed December 13, 1989 (File No. 1-8654)).
10(I) Lease Agreements between Windsor Video, Inc. and Time Equities Inc. dated as of September 4, 1986 (incorporated by reference to Exhibit 10(V) of the Registrant's Annual Report on form 10-K filed December 13, 1989 (File No. 1-8654)).
10(J) Amendment to each Lease Agreement between Windsor Video, Inc. and Time Equities Inc. dated as of July 13, 1994 and July 18, 1994 (incorporated by reference to Exhibit 10(K) of the Registrant's Annual Report on form 10-K filed November 28, 1994 (File No. 1-8654)).
10(K) Lease Agreement between Unitel Video, Inc. and CBS, Inc. dated as of June 15, 1990 (incorporated by reference to Exhibit 10(Y) of the Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No. 1- 8654)).
10(L) Amendment to Lease Agreement dated July 11, 1996 between Unitel Video, Inc. and CBS, Inc.
10(M) Assumption and Assignment of Lease between Unitel Video, Inc. and VCA/Teletronics Inc. dated May 19, 1990 (incorporated by reference to Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No. 1-8654)).
10(N) Amendment to Lease between Unitel Video, Inc. and Stage 57 Co. dated May 14, 1990 (incorporated by reference to Exhibit 10(BB) of the Registrant's Annual Report on Form 10-K filed November 26, 1990 (File No. 1- 8654)).
10(O) Second Amendment to Lease between Unitel Video, Inc. and Stage 57 Co. dated as of May 1, 1994 (incorporated by reference to Exhibit 10(O) of the Registrant's Annual Report on Form 10-K filed November 28, 1994 (File No. 1-8654)).
10(P) Amended 1992 Stock Option Plan.*
10(Q) Lease Termination and Release Agreement dated as of March 13, 1996 between Unitel Video, Inc. and Putman Publishing Company.
10(R) Assignment, Assumption and Acceptance of Lease between Scanline Communications and Unitel Video, Inc. (incorporated by reference to Exhibit 10(V) of the Registrant's Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
10(S) Asset Purchase Agreement dated as of May 5, 1992 between Unitel Video, Inc. and Scanline Communications (incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K dated May 15, 1992 (File No. 1-8654)).
10(T) Amendment dated as of October 29, 1992 to Asset Purchase Agreement dated as of May 5, 1992 between Unitel Video, Inc. and Scanline Communications (incorporated by reference to Exhibit 10(X) of the Registrant's Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
10(U) Lease Agreement between First East Associates and Unitel Video, Inc. dated May 26, 1993 and Sublease dated May 26, 1993 between Unitel Video, Inc. and KingWorld Productions, Inc.(incorporated by reference to Exhibit 10(U) of the Registrant's Annual Report on Form 10-K filed November 26, 1993 (File No. 1-8654)).
10(V) Sublease Agreement dated April 1, 1987 between R.E. Graphics, Inc. (f/k/a Micor, Inc.) and Scanline Communications, together with Modification dated February 1989 of Sublease Agreement (incorporated by reference to Exhibit 10(AA) of the Registrant's Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
10(W) Sublease Agreement dated January 1, 1982 between Columbia Pictures Industries, Inc. and Bell & Howell/Columbia Pictures Video Services, together with letter dated April 3, 1989 from Columbia Pictures to Scanline Communications and undated Letter from Columbia Pictures to 43rd Street Estates Corp. (incorporated by reference to Exhibit 10(BB) of the Registrant's Annual Report on Form 10-K filed November 24, 1992 (File No. 1-8654)).
10(X) Third Tier Sublease, dated May 14, 1996, between Unitel Video, Inc. and Photo-Magnetic Sound Studios Inc.
10(Y) Sublease Agreement dated as of July 3, 1996 between Unitel Video, Inc. and Henry Dreyfuss Associates and Second Tier Sublease dated as of July 3, 1996 between Unitel Video, Inc. and Paramount Pictures Corporation.
10(Z) 401K Employee Savings and Stock Ownership Plan of Unitel Video, Inc. effective July 1, 1992 (incorporated by reference to Exhibit 10(X) of the Registrant's Annual Report on Form 10-K filed November 26, 1993 (File No. 1-8654)).*
10(AA) Asset Purchase Agreement dated as of February 24, 1995 between Jee See & Co., Inc. and Unitel Video, Inc. (incorporated by reference to Exhibit 2-1 of the Registrant's Current Report on Form 8-K dated February 24, 1995 (File No. 1-8654)).
10(BB) Two Third Tier Sublease agreements dated November 22, 1996 between Unitel Video, Inc. and Digital Universe II, Inc.
9. Exhibit 23. Accountant's consent.
10. Exhibit 24. Power of Attorney from officers and directors to Barry Knepper (included on signature page).
11. Exhibit 27. Financial Data Schedule.
* Management contract or compensatory plan or arrangement required to be noted as provided in Item 14(a)(3).
UNDERTAKING
The Company hereby undertakes to furnish to the Securities and Exchange Commission, upon request, all constituent instruments defining the rights of holders of long-term debt of the Company and its consolidated subsidiaries not filed herewith. Such instruments have not been filed since none are, nor are being, registered under Section 12 of the Securities and Exchange Act of 1934 and the total amount of securities authorized under any of such instruments does not exceed 10% of the total assets of the Company and its subsidiary on a consolidated basis.
COLUMN D
Uncollectible accounts written off.
COLUMN E
Deducted in balance sheet from accounts receivable.
For the purposes of complying with the amendments to the rules governing Form S- 8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statement on form S-8 Nos. 33-7306 (filed July 15, 1986), 33-13660 (filed April 20, 1987), 33-14654 (filed May 28, 1987) and 33-00613 (filed February 8, 1996).
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such directors, officers or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1993 and will be governed by the final adjudication of such issue.
SIGNATURE AND POWER OF ATTORNEY
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UNITEL VIDEO, INC.
November 26, 1996 By: /s/ Barry Knepper - ------------ ------------------------- Barry Knepper Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Barry Knepper, his true and lawful attorney-in- fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes he might or could do in person, hereby ratifying and confirming all that said attorney-in fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Barry Knepper Chief Executive Officer; November 26, 1996 - ------------------------- President and Director Barry Knepper
/s/ Richard L. Clouser Senior Vice President - November 26, 1996 - ------------------------- Corporate, President Richard L. Clouser of the Mobile Division and Director
/s/ Herbert Bass - ------------------------- Director November 26, 1996 Herbert Bass
/s/ Alex Geisler - ------------------------- Director November 26, 1996 Alex Geisler
/s/ Walter G. Arader - ------------------------- Director November 26, 1996 Walter G. Arader
/s/ Philip Birsh - ------------------------- Director November 26, 1996 Philip Birsh