FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from..............to..................
Commission file number 0-11949
SILVER SCREEN PARTNERS, L.P.
(a Delaware Limited Partnership)
(Exact name of registrant as specified in its
Certificate and Agreement of Limited Partnership)
Delaware 13-3163899
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Chelsea Piers - Pier 62, Ste. 300
New York, New York 10011
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 336-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
1
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PART I
ITEM 1. BUSINESS.
Silver Screen Partners, L.P. ("Silver Screen") was organized in June 1983
to provide full financing for, own and exploit feature-length theatrical motion
pictures. A public offering of units of limited partnership interests was
completed in June 1983, which raised $82.8 million. After payment of offering
costs and fees, approximately $74 million was available for investment in films
(the "Partnership Contribution").
Silver Screen financed seven films, all of which have been completed and
released in most media. As of December 31, 1997, total budgets amounted to
approximately $73,800,000, of which all has been expended. Accordingly, the
Partnership Contribution has been fully committed and Silver Screen will not
finance or purchase any additional motion pictures.
The seven Silver Screen films (the "Films") are: "Flashpoint," released on
August 31, 1984; "Heaven Help Us," released on February 8, 1985; "Volunteers,"
released on August 16, 1985; "Sweet Dreams," released on October 2, 1985; "Head
Office," released on January 3, 1986; "The Hitcher," released on February 21,
1986; and "Odd Jobs," released on March 7, 1986.
The business of Silver Screen is managed by Silver Screen Management, Inc.,
a Delaware corporation which is a general partner of Silver Screen (the
"Managing General Partner"). The Managing General Partner supervises Silver
Screen's investment in each film, monitors the flow of revenues and is
responsible for the preparation of reports and tax information to be provided to
the Limited Partners.
HBO License Agreement
- ---------------------
Silver Screen pre-licensed certain television rights in all of its films to
HBO Pictures, Inc. ("HBO"), a wholly-owned subsidiary of Home Box Office, Inc.,
which in turn is a wholly-owned subsidiary of Time Warner Inc., for a price
determined by a formula designed to assure Silver Screen a return of not less
than 100% of its investment in each completed film, on a film-by-film basis. The
License Agreement (the "License Agreement") dated as of April 29, 1983 between
Silver Screen and HBO granted to HBO (i) all U.S. pay and syndicated television
rights, (ii) all Canadian pay, network and syndicated television rights, and
(iii) worldwide English language pay television rights, including cable,
satellite and microwave rights. Silver Screen has retained U.S. broadcast
network rights, subject to the right of HBO to receive 25% of the network
license fee and under certain circumstances to acquire the ownership of such
rights. Such network rights have not been licensed. The Managing General Partner
does not believe that there is a market for these rights (see Liquidity and
Capital Resources).
2
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The license fee payable by HBO to Silver Screen is equal to 50% of the
"Film Cost" of each film, as defined in the License Agreement. Pursuant to the
License Agreement, if Silver Screen's revenues from a particular film, excluding
the license fee, do not equal or exceed 50% of the Film Cost, HBO will pay
Silver Screen a Revenue Shortfall Payment equal to the amount by which the Film
Cost exceeds the aggregate of the license fee, performance bonus payments and
other revenues received by Silver Screen with respect to such film. Home Box
Office, Inc. has guaranteed the payment obligations of its subsidiary to Silver
Screen under the License Agreement. All license fees have been received.
Other Distribution
- ------------------
The Managing General Partner oversees and directs the marketing and
distribution of those rights in Silver Screen films not licensed to HBO under
the License Agreement. Silver Screen has entered into two agreements with
respect to the theatrical distribution of motion pictures in the United States
and overseas.
Silver Screen's theatrical film distribution agreement with Tri-Star
Pictures ("Tri-Star") provided for the license by Silver Screen to Tri-Star of
the right to distribute Silver Screen's films theatrically and non-theatrically
in the United States and Canada. All of Silver Screen's films have been so
released and all revenues anticipated from Tri-Star's distribution agreement
have been received.
Silver Screen also entered into a film distribution agreement with THORN
EMI Screen Entertainment Ltd. The distribution rights were subsequently
purchased by unaffiliated distributors. The agreement provided for certain
minimum guarantees to be paid to Silver Screen within three months after the
first foreign release of each film, all of which have been paid. All revenues
anticipated from THORN EMI Screen Entertainment Ltd.'s distribution agreement
have been received.
Silver Screen has also entered into an agreement with HBO Video, Inc.
("HBOV"), a wholly-owned subsidiary of Home Box Office, Inc., pursuant to which
HBOV has manufactured and distributed home video software of all the Silver
Screen films in the United States and Canada. The agreement provided for a
minimum guarantee (calculated as a percentage of the final film cost) to be paid
to Silver Screen with respect to each film, all of which have been paid. The
guarantee is a non-refundable advance against a royalty for each film calculated
on the basis of the gross revenues received by HBOV in respect of such film. All
revenues anticipated to be received from HBOV have been received.
3
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Competition
- -----------
Silver Screen is in competition with other institutions which provide
financing for films, some of which have substantially greater financial and
personnel resources than the Managing General Partner and Silver Screen. These
institutions include the major film studios and television networks. There is
also intense competition within the industry for exhibition time at theaters.
Competition for distribution in other media is as intense as the competition for
theatrical distribution.
Employees
- ---------
Silver Screen has no employees. Silver Screen is administered by the staff
of the Managing General Partner.
ITEM 2. PROPERTIES.
Silver Screen neither owns nor leases any physical properties. The Managing
General Partner leases offices in New York, New York.
ITEM 3. LEGAL PROCEEDINGS.
Silver Screen was contesting an Unincorporated Business Tax obligation for
Silver Screen's fiscal years 1983 to 1986 asserted by the City of New York in
the principal amount of approximately $676,000 plus accrued interest. A
settlement was reached and Silver Screen paid $106,600 on September 30, 1996.
(See Note 4 to Financial Statements and Liquidity and Capital Resources).
Other than as set forth above, Silver Screen knows of no legal proceedings
of a material nature to which it is a party or of which any of its properties is
the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the quarter
ended December 31, 1997.
4
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP
INTEREST AND RELATED SECURITY HOLDER MATTERS.
As of February 17, 1998, there were 12,986 Limited Partners of
record holding an aggregate of 165,639 limited partnership units of
Silver Screen (the "Units"). The Units are not traded securities in
any established trading market.
The Certificate and Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement") provides for quarterly
distributions to Limited Partners out of receipts from operations, net
of certain expenses and reserves. No distributions were made to the
Limited Partners in 1997, 1996 and 1995 because revenues generated
were insufficient to warrant a distribution.
5
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
---------- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Film Revenues .......................... $ 8,560 $ 7,632 $ 7,534 $ 16,681 $ 188,388
Interest income ........................ 152,617 165,717 181,544 132,803 101,626
----------- ----------- ----------- ----------- -----------
161,177 173,349 189,078 149,484 290,014
COSTS AND EXPENSES:
General and
administrative expenses .............. 128,170 133,067 145,536 182,559 175,970
----------- ----------- ----------- ----------- -----------
Income (loss)
before tax ............................ 33,007 40,282 43,542 (33,075) 114,044
Unincorporated business
tax benefit (tax) ..................... -- 839,400 (746,000) -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) ...................... $ 33,007 $ 879,682 ($ 702,458) ($ 33,075) $ 114,044
=========== =========== =========== =========== ===========
Net income (loss)
per $500 limited
partnership unit
(based on 165,639 .....................
Units outstanding) .................... $ 0.20 $ 5.26 ($ 4.20) ($ 0.20) $ 0.68
=========== =========== =========== =========== ===========
Cash distribution
per $500 limited
partnership unit ...................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
=========== =========== =========== =========== ===========
Total assets ........................... $ 2,665,981 $ 3,020,050 $ 3,122,546 $ 3,077,147 $ 3,149,860
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
- ---------------------
The following is an analysis of the results of operations of Silver Screen
for the years ended 1997, 1996 and 1995.
Silver Screen is a partnership and therefore generally not subject to U.S.
federal taxes. No provision has been made for federal income taxes with respect
to Silver Screen's income since income or loss of Silver Screen is required to
be reported by the respective partners on their income tax returns.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
- ---------------------------------------------------------------------
Net income for the year ended December 31, 1997 was approximately $33,000
compared to net income of approximately $880,000 for the year ended December 31,
1996. Revenues for the year ended December 31, 1997 consisted of film revenues
of approximately $9,000 compared to $8,000 for the year ended December 31, 1996.
Film revenues continue to be infrequent and unpredictable.
Interest income generated by liquid investments for the year ended December
31, 1997 was approximately $153,000 compared to $166,000 for the year ended
December 31, 1996. Interest income decreased by approximately $13,000 as a
result of lower interest rates in 1997 and a slight decrease of funds available
for investment. Interest rates for 1997 ranged from 5.15% to 5.6%, while those
for 1996 ranged from 5.12% to 5.79%. General and administrative expenses
decreased by approximately $5,000. This decrease is due to a reduction of
expenses in general.
Silver Screen generated net income before taxes of approximately $33,000
for the year ended December 31, 1997, as compared with the net income before
taxes of approximately $40,000 for the comparable period in 1996. The reduction
of approximately $7,000 was primarily attributable to lower interest income. As
of 1995, the Partnership had recorded a contingency reserve for unincorporated
business taxes of $946,000 which reserve, after a payment of $106,600, including
interest, resulted in income of approximately $880,000 in 1996. No uincorporated
business tax was incurred in 1996 and 1997.
7
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Year ended December 31, 1996 Compared to Year ended December 31, 1995
- ---------------------------------------------------------------------
Net income for the year ended December 31, 1996 was approximately $880,000
compared to net loss of approximately $702,000 for the year ended December 31,
1995. Revenues for the year ended December 31, 1996 consisted of film revenues
of approximately $8,000 compared to the same amount for the year ended December
31, 1995. Film revenues continue to be infrequent and unpredictable.
Interest income generated by liquid investments for the year ended December
31, 1996 was approximately $166,000 compared to $182,000 for the year ended
December 31, 1995. Interest income decreased by approximately $16,000 as a
result of lower interest rates in 1996 and a slight decrease of funds available
for investment. Interest rates for 1996 ranged from 5.12% to 5.79% while those
for 1995 ranged from 5.67% to 6.04%. General and administrative expenses
decreased by approximately $13,000. This decrease primarily is due to
approximately $12,000 of legal expenses incurred in connection with the tax
dispute (see Note 4 to the financial statements).
Net income for 1996 primarily is due to the reversal of the excess of a
previously established contingency reserve for unincorporated business taxes of
$946,000. Upon the settlement of the claims of New York City for unincorporated
business tax for $106,600, the balance of this reserve was reversed resulting in
net income of approximately $880,000 in 1996.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 1997, the General Partners' capital account reflects a
deficit of $719,600. In view of Silver Screen's limited requirements for
liquidity, short and long term evaluations do not anticipate any effect of
current capital account balances on Silver Screen's cash flow.
Inasmuch as the funding obligations of Silver Screen with respect to the
financing of the Films have been fully complied with or reserved against, Silver
Screen has no significant commitments for capital expenditures and does not
intend to enter into any such commitments. Receipts from liquid investments and
the licensing of the Films, less reserves established as determined by the
Managing General Partner, are the sources of liquidity for Silver Screen. Silver
Screen has no material requirements for liquidity.
Silver Screen's tax returns were audited by the City of New York and Silver
Screen had received assessments for unincorporated business tax of $675,887
covering the period from June 8, 1983(inception) through December 31, 1990. It
was anticipated that additional assessments, approximating $70,000, would be
issued for the years subsequent to December 31, 1990. All assessments were
subject to interest.
Silver Screen contested these assessments and on September 30, 1996, a
final settlement of $106,600 (including interest) was reached with the City of
New York and paid for all periods through December 31, 1995. Unincorporated
business tax for 1997 will be insignificant and has not been reserved for.
8
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By the end of 1993, the U.S. home video rights to Silver Screen's films
reverted back to Silver Screen. The Partnership plans to sell these rights,
along with any other residual rights to the Films, and distribute any net
proceeds, if any, to the partners. However, Silver Screen does not expect these
revenues to be significant. Negotiations regarding the sale of the U.S. home
video and ancillary rights to the Films were not able to be concluded in 1997,
and the Managing General Partner currently expects to finalize the sale during
1998. In order to conclude this sale, any contingent liabilities that Silver
Screen may have in respect of residual obligations relating to the Films must be
settled or assumed by the buyer of Silver Screen's rights. It is impossible to
predict the extent to which Silver Screen's remaining assets will be required to
be dedicated to these contingent liabilities. To the extent that Silver Screen
has assets remaining after such settlement or assumption, such assets will be
distributed to the partners of Silver Screen in accordance with the Partnership
Agreement.
Silver Screen has received all payments from HBO and has recovered at least
its full investment in each of its seven Films. All Film revenues (including
license fees) are substantially earned. Silver Screen currently expects to
dissolve by the end of 1998 upon final disposition of the remaining assets and
distribution of cash to the partners.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the financial statements referenced in Item 14 of this annual report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
9
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Silver Screen is a limited partnership managed by the Managing General
Partner and has no officers or directors. The Managing General Partner also
serves as managing general partner of Silver Screen Partners III, L.P., a
limited partnership formed to finance, own and exploit feature-length motion
pictures pursuant to joint venture agreements with Walt Disney Productions
("Disney"). The officers and directors of the Managing General Partner are also
officers and directors of Silver Screen Management Services, Inc. ("SSMS"),
which serves as managing general partner of Silver Screen Partners IV, L.P., a
limited partnership formed to finance, own and exploit feature-length motion
pictures pursuant to a joint venture agreement with Disney shortly after the
organization of SSMS in 1987. Neither the Limited Partners nor any general
partner of Silver Screen other than the Managing General Partner has the power
to participate in the management of, have any control over the business of or
act for, sign for or bind Silver Screen.
Roland W. Betts, 51, is the President, Treasurer, a Director, principal
shareholder and founder of the Managing General Partner. Mr. Betts is also the
President, Treasurer, a Director and principal shareholder of SSMS. He is the
Individual General Partner of Silver Screen Partners, L.P., Silver Screen
Partners III, L.P. and Silver Screen Partners IV, L.P. Mr. Betts has been
President and a Director of International Film Investors, Inc. ("IFI"), which is
the Managing General Partner of International Film Investors, L.P., since 1982
and has been an officer since 1980. Mr. Betts is also the individual General
Partner of that Partnership. Mr. Betts is also the largest shareholder of the
Texas Rangers Baseball Club; and the Chairman and largest shareholder of Chelsea
Piers Management, Inc. which is the General Partner of Chelsea Piers, L.P., a
limited partnership formed to develop and operate a major public recreation and
entertainment complex at the Chelsea Piers in New York City. Prior to joining
IFI in 1980, Mr. Betts was engaged in the practice of law as an attorney in the
Entertainment Department of the law firm of Paul, Weiss, Rifkind, Wharton &
Garrison in New York.
In addition to Mr. Betts, the executive officers and directors of the
Managing General Partner are as follows:
Name Positions Held
---- --------------
Paul Bagley Chairman of the Board, Director
Tom A. Bernstein Executive Vice President,
Secretary, Director
John A. Tommasini Director
William Turchyn, Jr. Director
10
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Paul Bagley, 55, is the founding partner of Stone Pine Capital LLC (1994),
and is Chairman of FCM Fiduciary Capital Managers, LLC (1989 to date), the
advisor to mezzanine and private equity funds. For more than twenty years prior
to 1988, Mr. Bagley was engaged in investment banking activities with Shearson
Lehman Hutton Inc. and its predecessor, E.F. Hutton & Company Inc. Mr. Bagley
serves as Chairman of the Board of Directors of Silver Screen Management, Inc.
and International Film Investors, Inc., which manage film portfolios with
aggregate assets of $1.0 billion. Mr. Bagley has served on the boards of a
number of public and private companies. Currently he is on the boards of
Fiduciary Capital, Hollis-Eden Pharmaceuticals, Consolidated Capital, Logan
Machinery Corp. and Pacific Consumer Funding. Mr. Bagley graduated from the
University of California at Berkeley in 1965 with a B.S. in Business and
Economics and from Harvard Business School in 1968 with an M.B.A. in Finance.
Tom A. Bernstein, 45, has been Executive Vice President of the Managing
General Partner since June 1983 and Secretary, a Director and a principal
shareholder since March 1985. He has also been Executive Vice President,
Secretary, a Director and a principal shareholder of SSMS since its
organization. Mr. Bernstein is also President and Treasurer of Chelsea Piers
Management, Inc. which is the general partner of Chelsea Piers, L.P.; and a
limited partner of the Texas Rangers Baseball Club. Prior to June 1983, Mr.
Bernstein was engaged in the practice of law as an attorney in the Entertainment
Department of the law firm of Paul, Weiss, Rifkind, Wharton & Garrison in New
York.
John A. Tommasini, 53, the President of Laidlaw Global Securities, Inc.,
has been a Director of the Managing General Partner since 1985 and a Director of
SSMS since its organization. He was Senior Vice President of Shearson Lehman
Hutton from January 1988 until March 30, 1990. He was associated with E.F.
Hutton & Company from 1972 until 1988 and served as First Vice President from
January 1985 to January 1988. He is also an Officer and a Director of American
National Security, Inc.
William Turchyn, Jr., 52, has been a Director of the Managing General
Partner and SSMS since their respective organizations. He was Executive Vice
President of Shearson from January 1988 until April 1989. He was associated with
E.F. Hutton & Company, Inc. from 1970 until 1988, was named First Vice President
in 1982 and served as Senior Vice President from 1983 until January 1988. Mr.
Turchyn is presently Chief Operating Officer of Furman Selz Capital Management.
11
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the fees, income, distributions and the
amounts payable to the General Partners of Silver Screen and their affiliates in
connection with the management of Silver Screen. The executive officers and
directors of the Managing General Partner serve without direct compensation from
Silver Screen. Except as set forth below, the General Partners and their
affiliates will receive no remuneration of any type whatsoever from Silver
Screen in connection with the administration of Silver Screen's affairs.
CASH COMPENSATION TABLE(1)
- --------------------------------------------------------------------------------
(A) (B) (C)
- --------------------------------------------------------------------------------
Name of Entity Capacities in which Cash compensation
served
Silver Screen Managing General Overhead fee calculated at four
Management, Inc. Partner percent of the Budgeted Film
Cost of each Film. Pursuant to
the Partnership Agreement, the
overhead fee was paid in full
on January 4, 1988. In
addition, until the holders of
Units have received cash
distributions sufficient to
reduce their Adjusted Capital
Contributions to zero, the
Managing General Partner will
be allocated 0.9% of the
profits, losses and Disbursable
Cash; thereafter, the Managing
General Partner will receive
14.9% of such items.
During 1997, no cash was
distributed from Disbursable
Cash to The Managing General
Partner.
12
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Roland W. Betts Individual General Mr. Betts is allocated 0.1% of
Partner of the profits, losses and
Disbursable Cash. Mr. Betts
received no cash therefrom in
1997.
- --------------------------------
(1) See definitions below.
DEFINITIONS USED IN CASH COMPENSATION TABLE
- -------------------------------------------
Initial Capital
Contribution .......... $500 per Unit
Adjusted Capital
Contribution .......... With respect to each Unit, the Initial Capital
Contribution reduced by all cash distributions
thereon, and increased, at the beginning of
each calendar year, by an amount equal to 10%
per annum of the balance of the outstanding
Initial Capital Contribution as so adjusted
from time to time during the preceding year.
The Adjusted Capital Contributions differ from
the limited partners' capital accounts for tax
and accounting purposes.
Disbursable Cash ...... Receipts from operations, after deducting cash
used to pay operating expenses (including
expenses reimbursable to the Managing General
Partner), debt service and amounts used for
the creation or restoration of reserves, but
without deduction for depreciation or
amortization of film investments. Receipts
from operations include all items of income,
whether ordinary or extraordinary, including
sale of Copyright Proceeds, but excluding
Production Co-Financing Proceeds (as defined
below) used to pay production costs of films.
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Production Co-Financing
Proceeds .............. Proceeds from the sale of an equity interest
in a film to a third-party investor, not
including the sale of the copyright.
Sale of Copyright
Proceeds .............. Proceeds from the sale of the copyright to a
third-party investor.
Budgeted Film Cost..... The estimated cost of a film, including
contingency reserves and completion bond fees.
For the purpose of calculating compensation, a
20% reserve will be assumed; this amount may
differ from contingency reserves permitted in
production contracts.
The Partnership Agreement provides that all Silver Screen expenses,
including, among other things, legal, auditing and accounting expenses, and the
expenses of preparing and distributing reports to the Limited Partners, will be
billed to and paid by Silver Screen. Subject to restrictions contained in the
Partnership Agreement, the Managing General Partner has been reimbursed for
certain administrative services. In addition, the Managing General Partner has
been reimbursed for expenses incurred in connection with the organization of
Silver Screen and the public offering of the Units.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
Neither of the General Partners own any Units. J. Paul Bagley, of 142 Hodge
Road, Princeton, New Jersey, 09540, Chairman of the Board and a Director of the
Managing General Partner, beneficially owns 100 Units. Other than Mr. Bagley, no
officer or Director of the Managing General Partner beneficially owns any equity
securities of Silver Screen. To the knowledge of Silver Screen, no unitholder
beneficially owns more than 5% of the Units of Silver Screen.
14
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Roland W. Betts and Tom A. Bernstein are controlling shareholders of the
Managing General Partner. 2,000,000 shares of the 3,750,000 issued and
outstanding shares of Common Stock of the Managing General Partner are owned by
Roland W. Betts and 1,250,000 shares are owned by Tom A. Bernstein. An
additional 500,000 shares have been issued to International Film Investors, L.P.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Items 10, 11 and 12 hereof.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a)1. Financial Statements
--------------------------
The following financial statements of Silver Screen Partners, L.P. (a
Limited Partnership) are included pursuant to Item 8 hereof:
Page
----
Independent auditors' reports ................. F-1
Balance sheets as of December 31, 1997 and
1996 ................................. F-2
Statement of operations for the years ended
December 31, 1997, 1996 and 1995 ..... F-3
Statement of partners' equity for the years
ended December 31, 1997, 1996 and 1995 F-4
Statement of cash flows for the years ended
December 31, 1997, 1996 and 1995 ..... F-5
Notes to Financial Statements ................. F6-8
15
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(a)2. Financial Statement Schedules
-----------------------------------
No schedules are listed because they are not applicable or the required
information is shown in the financial statements or notes thereto.
(a)3. Exhibits
--------------
4 Certificate and Agreement of Limited
Partnership(1)
10(a) License Agreement dated as of April 19, 1983
between Silver Screen and HBO Film Licensing,
Inc.(2)
10(b) Memorandum of Agreement dated November 2, 1983 by
and between Silver Screen and Tri-Star Pictures(3)
10(c) Memorandum of Agreement dated November 2, 1983 by
and between Silver Screen and Thorn EMI Films
Ltd.(4)
10(d) Mutual Release and Settlement Agreement, dated as
of December 18, 1996 between Silver Screen and
[XXXXXXXX](5)
(b) Reports on Form 8-K
-----------------------
No reports on Form 8-K have been filed by Silver Screen during the last
quarter of the period covered by this annual report.
- ----------
1 Incorporated by reference to exhibits filed with Silver Screen's
Registration Statement on Form S-1, Registration No. 2-81740.
2 See footnote one.
3 Incorporated by reference to exhibits filed with Silver Screen's Annual
Report on Form 10-K for the fiscal year ended December 31, 1983, File
No. 0-11949.
4 See footnote three.
5 Confidential treatment is being requested for portions of this document.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
SILVER SCREEN PARTNERS, L.P.
(a Delaware Limited Partnership)
By SILVER SCREEN MANAGEMENT, INC.
Managing General Partner
Dated: March 30, 1998 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 30, 1998 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
General Partner
SILVER SCREEN MANAGEMENT, INC.
Managing General Partner
Dated: March 30, 1998 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
President/Treasurer
Silver Screen Management, Inc.
Dated: March 30, 1998 By /s/ Roland W. Betts *
-------------------------------
Paul Bagley
Director,
Silver Screen Management, Inc.
Dated: March 30, 1998 By /s/ Roland W. Betts *
-------------------------------
Tom A. Bernstein
Director,
Silver Screen Management, Inc.
17
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Dated: March 30, 1998 By /s/ Roland W. Betts *
-------------------------------
John A. Tommasini
Director,
Silver Screen Management, Inc.
Dated: March 30, 1998 By /s/ Roland W. Betts *
------------------------------
William Turchyn, Jr.
Director,
Silver Screen Management, Inc.
- ----------
* By Roland W. Betts, Attorney-in-Fact
18
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..............................[Silver Screen logo].............................
Silver Screen Partners
Annual Report
1997
F-1
<PAGE>
TO OUR LIMITED PARTNERS
................................................................................
For some time, Silver Screen Partners has been seeking to dispose of
certain rights to the seven films in its portfolio. The Partnership cannot
dissolve until the rights to the films have been sold.
There are a number of reasons for this lengthy process including the
complexity of finalizing film rights, the limited nature of the rights to the
films (we hold only the U.S. video and ancillary rights), resolution of all
outstanding tax issues, resolution of all issues with the film industry guilds,
and the film portfolio itself, which did not perform well and has no single
title that can bring the lesser titles along.
We are striving to settle the sale of the film rights and dissolve the
Partnership by the second quarter of this year.
Tax information for preparing your 1997 income tax returns will be mailed
under separate cover by March 15. In the meantime, our Investor Relations
Department is available to assist you with any questions you may have.
Sincerely,
/s/ Roland W. Betts
--------------------
Roland W. Betts
President
January 23, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners
Silver Screen Partners, L.P.
We have audited the accompanying balance sheets of Silver Screen Partners,
L.P. (a limited partnership) as of December 31, 1997 and 1996, and the related
statements of operations, partners' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership'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 audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of Silver Screen Partners, L.P.
(a limited partnership) at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
January 20, 1998
F-3
<PAGE>
F I N A N C I A L S T A T E M E N T S
BALANCE SHEETS
December 31, 1997 and 1996 1997 1996
- -------------------------- ----------- -----------
ASSETS
Current assets:
Cash ........................................... $ 15,583 $ 27,424
Temporary investments (at cost, plus accrued
interest which approximates market) ......... 2,650,398 2,992,626
----------- -----------
$ 2,665,981 $ 3,020,050
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ................ $ 18,165 $ 351
----------- -----------
Total current liabilities ...................... 18,165 351
Other liabilities .............................. 598,273 1,003,163
----------- -----------
Total liabilities .............................. 616,438 1,003,514
----------- -----------
Partners' Equity:
General partners ............................... (719,600) (719,930)
Limited partners ............................... 2,769,143 2,736,466
----------- -----------
Total partners' equity ......................... 2,049,543 2,016,536
----------- -----------
$ 2,665,981 $ 3,020,050
=========== ===========
See notes to financial statements.
F-4
<PAGE>
F I N A N C I A L S T A T E M E N T S
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
- -------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Film revenues ............................... $ 8,560 $ 7,632 $ 7,534
Interest income ............................. 152,617 165,717 181,544
--------- --------- ---------
161,177 173,349 189,078
Costs and expenses:
General and administrative .................. (128,170) (133,067) (145,536)
--------- --------- ---------
Income before income taxes .................. 33,007 40,282 43,542
Unincorporated business tax benefit, (tax) .. -- 839,400 (746,000)
--------- --------- ---------
Net income (loss) ........................... $ 33,007 $ 879,682 $(702,458)
========= ========= =========
Net income (loss) allocated to:
General partners ............................ $ 330 $ 8,797 $ (7,025)
Limited partners ............................ 32,677 870,885 (695,433)
--------- --------- ---------
$ 33,007 $ 879,682 $(702,458)
========= ========= =========
Net income (loss) per a $500
limited partnership unit
(based on 165,639 units outstanding) ...... $ 0.20 $ 5.26 $ (4.20)
========= ========= =========
Cash distribution per $500 limited
partnership unit .......................... $ -- $ -- $ --
========= ========= =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
F I N A N C I A L S T A T E M E N T S
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited
Years ended December 31, 1997, 1996 and 1995 Partners Partners Total
- -------------------------------------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Partners' (deficiency) equity, January 1, 1995 ............ $ (721,702) $ 2,561,014 $ 1,839,312
Net (loss), 1995 .......................................... (7,025) (695,433) (702,458)
----------- ----------- -----------
Partners' (deficiency) equity, December 31, 1995 .......... (728,727) 1,865,581 1,136,854
Net income, 1996 .......................................... 8,797 870,885 879,682
----------- ----------- -----------
Partners' (deficiency) equity, December 31, 1996 .......... (719,930) 2,736,466 2,016,536
Net income, 1997 .......................................... 330 32,677 33,007
----------- ----------- -----------
Partner's (deficiency) equity, December 31, 1997 .......... $ (719,600) $ 2,769,143 $ 2,049,543
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
F I N A N C I A L S T A T E M E N T S
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31, 1997, 1996 and 1995 1997 1996 1995
- -------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ........................................ $ 33,007 $ 879,682 $(702,458)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Net change in operating assets and liabilities:
Decrease in accrued interest receivable .............. 5,592 5,975 9,398
Increase (decrease) in due to managing
general partner .................................... 17,814 (6,618) (5,466)
(Decrease) increase in contingency liability ......... -- (946,000) 746,000
(Decrease) increase in other liabilities ............. (404,890) (29,559) 7,323
--------- --------- ---------
Net cash (used in) provided by operating activities ...... (348,477) (96,520) 54,797
--------- --------- ---------
Cash flows from investing activities:
Sales (purchases) of temporary investments, with
maturities of three months or less, net ............... 336,636 95,913 (69,740)
--------- --------- ---------
Net cash provided by (used in) investing activities ...... 336,636 95,913 (69,740)
--------- --------- ---------
Net decrease in cash ..................................... (11,841) (607) (14,943)
Cash, beginning of year .................................. 27,424 28,031 42,974
--------- --------- ---------
Cash, end of year ........................................ $ 15,583 $ 27,424 $ 28,031
========= ========= =========
</TABLE>
See notes to financial statements.
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Silver Screen Partners, L.P. ("the Partnership"), formed on June 8, 1983, is a
Delaware limited partnership which finances, owns and exploits feature-length
theatrical motion pictures. A total of 165,639 units were sold in 1983 for an
aggregate of $82,819,500.
Silver Screen Management, Inc., a Delaware corporation, is the managing
general partner ("MGP") of the Partnership and has exclusive responsibility for
the management of the business and the affairs of the Partnership. Roland W.
Betts, the President and a principal shareholder of the MGP, is the individual
general partner of the Partnership.
The Partnership Agreement provides that all Partnership profits, losses and
distributable cash ("Proceeds"), are distributed 99% to the limited partners and
1% to the general partners until the Partnership has satisfied certain tests.
The Proceeds to the limited partners are allocated pro rata according to the
capital accounts of the respective limited partners.
The Partnership expects to dissolve by or before the end of 1998 upon final
disposition of the remaining assets and distribution of cash to the partners.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income taxes:
- -------------
No provision has been made for income taxes except for the City of New York
unincorporated business tax since the income or loss of the Partnership is
required to be reported by the respective partners on their income tax returns
(see Note 4).
Accounting for motion picture film investments:
- -----------------------------------------------
The Partnership capitalizes all film investment costs.
Film revenues are recognized when earned as reported by each distributor.
The income forecast amortization method was used, whereby the costs were
amortized based upon the revenues recorded in proportion to management's
estimate of ultimate revenues to be earned. Substantially all film revenues were
earned prior to December 31, 1991. The film investments aggregated approximately
$73,000,000 and have been fully amortized.
License fees:
- -------------
Generally accepted accounting principles require recognizing license fees, at
their present value, on the dates the films were available for broadcast
provided certain conditions of sale have been met.
The Partnership pre-licensed certain television rights (which became
available one year after theatrical release) on all of its films to a subsidiary
of Home Box Office, Inc. ("HBO") for a price determined by a formula designed to
assure the Partnership a return of 100% of its investment in each completed
film. As part of this arrangement, HBO agreed to pay a minimum license fee of
50% of the Partnership's investment in each film without regard to other film
revenues earned. Amounts payable to the Partnership from HBO were payable five
years after the United States theatrical release of each film, but not later
than August 31, 1991.
The Partnership entered into a theatrical film distribution agreement with
Tri-Star Pictures ("Tri-Star"). The agreement, as amended, provided that the
Partnership license to Tri-Star the right to distribute the Partnership's films
F-8
<PAGE>
F I N A N C I A L S T A T E M E N T S
theatrically and non-theatrically in the United States and Canada. Pursuant to
its license agreement with Tri-Star, the Partnership was assured that certain
minimum advertising and promotion costs would be expended by Tri-Star in the
marketing of each of the Partnership's films. The agreement also provided that
the Partnership was entitled to an escalating percentage of the gross proceeds
generated by each picture.
The Partnership also entered into a film distribution agreement in foreign
territories with Thorn EMI Screen Entertainment Ltd.
Essentially all revenues pursuant to these agreements have been received.
3. TEMPORARY INVESTMENTS
Temporary investments consisted of the following:
1997 1996
---------- ----------
Commercial paper ........ $2,650,398 $2,992,627
---------- ----------
All commercial paper is rated by Standard & Poor's A1 or A1+.
1997 commercial paper matured on January 14, 1998 and had an interest rate of
5.4%.
1996 commercial paper matured on January 16, 1997 and had an interest rate of
5.53%.
4. UNINCORPORATED BUSINESS TAX
The Partnership's tax returns were audited by the City of New York and the
Partnership had received assessments for unincorporated business tax of $675,887
covering the period from June 8, 1983 (inception) through December 31, 1990. It
was anticipated that additional assessments, approximating $70,000, would be
issued for the years subsequent to December 31, 1990. All assessments were
subject to interest. Accordingly, as of December 31, 1995 the Partnership had
recorded a reserve of $946,000.
The Partnership contested these assessments and on September 30, 1996, a
final settlement of $106,600 (including interest) was reached with the City of
New York and paid for all periods through December 31, 1995. As a result of the
settlement, the Partnership recognized income of $839,400 in 1996, which
represents the difference between the settlement amount of $106,600 and the
contingency liability for unincorporated business tax of $946,000. No
unincorporated business tax was incurred in 1996 and 1997.
- --------------------------------------------------------------------------------
(unaudited)
Value per unit based on annual appraisal
- ----------------------------------------
As of December 31, 1997, the appraised value per unit approximates the book
value per unit. The book value per unit is $12.
Cash distributions
- ------------------
The Partnership made no cash distributions in 1997. Cumulative distributions
through December 31, 1997 totaled $534 or 107% per unit.
Availability of Form 10-K
- -------------------------
A copy of the Partnership's Annual report to the SEC on Form 10-K may be
obtained without charge by writing to the Partnership, c/o Silver Screen
Management, Inc., Chelsea Piers-Pier 62, Suite 300, New York, N.Y., 10011
F-9
<PAGE>
SILVER SCREEN MANAGEMENT
(c)1997 Silver Screen Management, Inc. Design: Pentagram
Officers: Directors:
- --------- ----------
Roland W. Betts Paul Bagley
President and Chief Executive Officer New York, New York
Tom A. Bernstein Tom A. Bernstein
Executive Vice President New York, New York
Barbara Stubenrauch Roland W. Betts
Senior Vice President New York, New York
Richard S. Kasof John Tommasini
First Vice President New York, New York
Dana Thayer William Turchyn, Jr.
First Vice President New York, New York
Liz A. Brevetti
Vice President
Keith C. Champagne
Vice President
Evelyn Halley
Vice President
Stuart A. Sheinbaum
Director of Investor Relations
Conchetta S. Mayfield
Director of Operations
Paul Rindone
Director of Operations
F-10
<PAGE>
Silver Screen Management, Inc.
Chelsea Piers-Pier 62
Suite 300
New York, NY 10011
(212) 336-6700
Bulk Rate
U. S. Postage
PAID
Permit #1665
Brooklyn, NY
F-11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 16
<SECURITIES> 2,650
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,666
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,666
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,050
<TOTAL-LIABILITY-AND-EQUITY> 2,666
<SALES> 9
<TOTAL-REVENUES> 161
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33
<INCOME-TAX> 0
<INCOME-CONTINUING> 33
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0
</TABLE>
