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 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For Fiscal Year Ended
Commission File
December 31, 1996 Number 0-14408
DELPHI FILM ASSOCIATES IV
(Exact name of registrant as specified in its charter)
New York
13-3261814
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)
666 Third Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 983-
9040
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 Interests
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
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. [x]
As of March 15, 1997, there were 8,000 units of limited
partnership interests outstanding, all held by non-affiliates.
The aggregate market value of those interests is not determinable
because there is no active public trading market for the units.
See Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters.
<PAGE>
PART I.
Item 1. Business.
Introduction.
Delphi Film Associates IV (the "Partnership") is a
limited partnership which was organized under the law of the
State of New York in December 1984 to participate in the
production, acquisition, ownership and exploitation of
feature length motion pictures through a joint venture with
Columbia Pictures Industries, Inc. ("Columbia"), known as
Columbia-Delphi IV Productions (the "Columbia Joint
Venture"), and through a joint venture with TriStar Pictures,
Inc. ("TriStar"), known as Tri-Star-Delphi IV Productions
(the "Tri-Star Joint Venture"). The terms of the Tri-Star
Joint Venture and the Columbia Joint Venture are
substantially the same. Those two joint ventures are
referred to collectively as the "Joint Ventures" and
sometimes individually as a "Joint Venture," and the
Partnership's co-venturer in a joint venture is sometimes
referred to as the "Studio Venturer."
A public offering (the "Offering") of limited
partnership interests in the Partnership, at $5,000 per unit,
was completed in June 1985 with the sale of 8,000 units. Net
proceeds to the Partnership after deducting selling
commissions, organizational expenses and other expenses of
the offering were approximately $35,300,000. The general
partner of the Partnership, The Delphi Company (the "General
Partner"), contributed approximately $404,000 as its capital
contribution to the Partnership.
Production and Acquisition of Films.
The Partnership has an interest in 27 films through
the Joint Ventures (12 through the Columbia Joint Venture and
15 through the Tri-Star Joint Venture), all of which have
been released. See "Films in Release."
The Partnership's contributions for the production of, and
acquisition of interests in, films have aggregated
approximately $45,818,000 (including interest).
Approximately one-half of the Partnership's contributions
were made to each Joint Venture.
The Tri-Star Joint Venture acquired the right to
produce and exploit each film that met certain criteria for
which TriStar commenced production after the expiration of a
similar existing commitment to an earlier joint venture
between TriStar and Delphi Film Associates III ("Delphi III")
and prior to the time the funds that the Partnership agreed
to contribute to the Tri-Star Joint Venture were fully
committed. Until such time as the funds the Partnership
agreed to contribute to the Columbia Joint Venture were fully
committed, the Columbia Joint Venture acquired the right to
participate in completing the production of, and exploiting,
certain films being produced by Columbia which were either
designated or met certain criteria.
Each Joint Venture has acquired interests in or co-
produced films in which Delphi Film Associates V ("Delphi V")
has an interest through its own joint ventures with TriStar
and Columbia. Delphi III was a limited partnership organized
in 1983 to participate in the production, acquisition,
ownership and exploitation of films through Columbia-Delphi
III Productions and Tri-Star Delphi III Productions. Delphi
III was liquidated in December 1996. Delphi V is a limited
partnership that was organized in 1985 to participate in the
production, acquisition, ownership and exploitation of films
through joint ventures with Columbia and TriStar. Another
public limited partnership, ML Delphi Premier Partners, L.P.
("ML Delphi"), which was organized in 1986, participates in a
joint venture with TriStar ("Tri-Star-ML Delphi"). The Tri-
Star Joint Venture entered into agreements with Tri-Star-ML
Delphi pursuant to which Tri-Star-ML Delphi acquired
interests in four films in which the Tri-Star Joint Venture
has an interest ("Let's Get Harry," "Peggy Sue Got Married,"
"No Mercy" and "Nadine"). In addition, the Tri-Star Joint
Venture acquired interests in certain films produced by
independent producers that were distributed by TriStar.
The Partnership has an interest ranging from 5% to 25%
in each of the Joint Ventures' films. See "Films in
Release." The Partnership's ownership interest with respect
to each film generally is equal to the percentage the
Partnership's cash contribution for the production or
acquisition of a film bears to the total cash contributions
for production or acquisition of that film.
The Partnership, through the Tri-Star Joint Venture,
was granted a participation interest by TriStar in 1988 in
the motion pictures "Short Circuit 2" and "Rambo III." See
"Films In Release." The Partnership made no capital
contributions for its interest in these films but is entitled
to a share of any net proceeds from each of these films
beyond certain performance levels. Payments due with respect
to "Rambo III" were made to the Partnership in June 1996.
The Partnership does not anticipate receiving any revenues
with respect to "Short Circuit 2." However, as of December
31, 1996, the Partnership had accrued revenues of
approximately $118,000 in connection with "Rambo III."
"Short Circuit 2" and "Rambo III" are sometimes referred to
as the "Additional Films."
Future Sale of Interests in Films.
The Partnership has been evaluating the value of its
interest in its film assets for the purpose of possibly
selling that interest and liquidating the Partnership. The
General Partner anticipates that the Partnership may be
liquidated in 1997. No assurance can be provided that the
film assets will be sucessfully sold, or if sold, when such
sale would occur. Upon the ultimate sale of the film assets,
the Partnership will commence taking steps to dissolve and
liquidate. Cash distributions as a result of the liquidation
may be made to the partners to the extent, and only to the
extent, the proceeds from the sale of the Partnership's
interest in the film assets in connection with the
liquidation are in excess of the Distributors' entitlement
to the recoupment described below and a reserve for the
Partnership's remaining obligations and operating expenses.
Distribution of Films.
The films of the Columbia Joint Venture and the Tri-
Star Joint Venture are distributed pursuant to distribution
agreements between Columbia Pictures, a division of Columbia
("Columbia Pictures"), and the Columbia Joint Venture, and
between TriStar and the Tri-Star Joint Venture, respectively.
Columbia Pictures and TriStar, as distributors, are sometimes
referred to collectively as the "Distributors" and
individually as a "Distributor."
The Distributor has the ultimate authority for all
decisions with respect to the distribution of the films. For
each film, the Partnership, through a Joint Venture, is
generally entitled to receive an amount equal to the greater
of the product of the Partnership's percentage interest in a
film multiplied by (a) an amount equal to 100% of the net
proceeds from the distribution of the film and (b) an amount
equal to 32% of the gross receipts from the distribution of
the film. Distribution arrangements with respect to films in
which a Joint Venture has an interest that were produced by
independent producers may vary from those with respect to
films produced by a Joint Venture. The Partnership and the
Studio Venturer share in the amount to which the Joint
Ventures are entitled from the distribution of any film in
proportion to their respective interests in the film. The
distribution agreements provide, with certain exceptions,
that gross receipts consist of all sums received by the
Distributor from the exploitation of a film throughout the
world. Net proceeds with respect to each film generally are
determined by deducting from gross receipts:
(a) a distribution fee equal to 17-1/2% of
substantially all of the gross receipts of the film. The
Distributor's entitlement to this distribution fee is
deferred until the Joint Venture has received from the
distribution of that film an amount equal to the amounts
contributed by the Joint Venture to produce or acquire an
interest in the film, other than amounts paid in the nature
of interest;
(b) all expenses incurred in the distribution,
promotion and marketing of the film, including expenditures
for prints and advertising; and
(c) payments to third party participants who have
contingent shares in the film. The extent to which payments
to third party participants may be deducted from the gross
receipts of a film in determining net proceeds is limited by
the distribution agreements.
Many of the Columbia Joint Venture's and the Tri-Star
Joint Venture's films have been licensed to Home Box Office,
Inc. ("HBO") for exhibition on its pay television services.
The distribution agreements with each Joint Venture provide
that gross receipts of a film with respect to pay television
exhibition by HBO shall be an amount equal to specified
percentages of the first year's domestic theatrical gross
receipts of that film, regardless of the actual license fee
payable to Columbia or TriStar under their respective license
agreements with HBO. The amount initially included in gross
receipts may be less (and in some instances substantially
less) than the amount actually received by Columbia or
TriStar under their respective agreements with HBO. See the
"Additional Payments" provision described below for
information concerning additional amounts that gross receipts
may be credited with in connection with pay television
exhibition by HBO.
Columbia Pictures entered into an arrangement with CBS
Inc. ("CBS") for CBS to license for exhibition on the CBS
television network, a specified number of motion pictures
from among a specified number of groups of motion pictures.
The arrangement provides for CBS to pay a specified average
license fee for the motion pictures in each group licensed by
CBS. The Columbia Joint Venture and its Distributor have
agreed that, subject to adjustment in certain circumstances,
gross receipts for films licensed to CBS under this
arrangement include an amount equal to the higher of the
license fees paid by CBS and the comparable fair market value
for the license rights involved for the relevant license
period. Certain films in which the Partnership owns an
interest have been licensed for network television exhibition
under this arrangement. Certain of the Tri-Star Joint
Venture Films have been licensed for network television
exhibition on CBS or on other television networks on a film-
by-film basis.
The films in which the Partnership owns an interest
are subject to agreements between each Distributor and
Columbia TriStar Home Video (formerly known as RCA/Columbia
Pictures Home Video) and Columbia TriStar Home Video
(International) Inc. (formerly known as RCA/Columbia Pictures
International Video). The distribution agreements between
each Joint Venture and its Distributor provide for the
inclusion in gross receipts of a specified royalty for video
cassettes and video discs regardless of the amounts payable
to TriStar or Columbia under their respective agreements with
such joint ventures (which may exceed the amounts includable
in gross receipts).
Many films in which the Partnership has an interest
have been licensed by the Distributor for exhibition on other
cable television services, independent television stations in
the United States and on foreign television stations.
Generally, these films have been made available for foreign
television exhibition and domestic independent television
exhibition approximately three and five years, respectively,
after a film's domestic theatrical release.
Each Distributor reports gross receipts and net
proceeds for each film to the Joint Venture on behalf of
which it acts, on a quarterly basis, and makes payment to
that Joint Venture based on those reports when the reports
are delivered. In addition to distributing motion pictures
produced or acquired by the Joint Ventures, each Distributor
distributes films in which joint ventures between each of
Columbia and TriStar and certain other limited partnerships
(the "Delphi Partnerships") own an interest, as well as films
in which neither the Partnership nor any of the Delphi
Partnerships own an interest.
Additional Payments.
The terms of the distribution agreements between each
Joint Venture and its respective Distributor provided that
the Partnership would be entitled to receive, through each
Joint Venture, a payment (an "Additional Payment") from that
Joint Venture's Distributor for each film (an "Unrecouped
Film"), if by March 1993, in the case of the Columbia Joint
Venture, and if by February l994, in the case of the Tri-Star
Joint Venture, for which the particular Joint Venture had not
received from the distribution of that film (or its sale) an
amount equal to the amount spent by the Joint Venture to
produce or acquire an interest in that film, other than
amounts spent for payments in the nature of interest ("Cost
Return"). Each Additional Payment was in the amount
necessary for the Partnership to be repaid (without interest)
its unrecouped contributions to the Joint Venture with
respect to the production or acquisition of an Unrecouped
Film (other than contributions for payments in the nature of
interest), but not more than the amount specified below. The
Additional Payment was first payable only to the extent of
(and attributable to) the distribution fees received by the
Distributor from the distribution of all of its Joint
Venture's films. The Additional Payments based on
distribution fees were allocated by the Joint Ventures first
to the Partnership to the extent necessary for the
Partnership to recoup its investment in such film; any excess
for such film was allocated to the respective Studio Venturer
until Cost Return. If these distribution fees were
insufficient to enable a Distributor to make the Additional
Payments with respect to all of its Joint Venture's
Unrecouped Films, then gross receipts and net proceeds of
each remaining Unrecouped Film distributed by that
Distributor were recalculated by including as gross receipts
the minimum license fees under its license agreement with HBO
and certain minimum amounts in respect of video cassette and
video disc exploitation with respect to that Unrecouped Film.
Each Distributor then made an Additional Payment to the
Partnership, through its Joint Venture, with respect to each
Unrecouped Film to the extent of the Partnership's share of
additional gross receipts or net proceeds payable as a result
of the recalculation but only up to the amount of the
unrecouped contributions (other than contributions for
payments in the nature of interest) by the Partnership for
the production or acquisition of that Unrecouped Film. Each
such Additional Payment made on the basis of such
recalculation was allocated between the Partnership and the
respective Studio Venturer in proportion to their respective
interest in the applicable Unrecouped Film.
The distribution agreements provided that each
Distributor would be entitled to recoup the Additional
Payment made to the Partnership in respect of each Unrecouped
Film, with interest calculated at 110% of the prime rate from
time to time, from the Partnership's share of subsequent
gross receipts or net proceeds of that Unrecouped Film and
from the proceeds of any sale of the Partnership's interest
in that Unrecouped Film or amounts allocable to that
Unrecouped Film upon a sale of the Partnership's interest in
the Joint Venture. Except for Unrecouped Films, the
Distributor does not have the right to recoup amounts from
the proceeds of any sale of a film. In calculating the
amount of distribution fees available for the Additional
Payments, no distribution fee has been deemed received by a
Distributor (and therefore no distribution fee will be deemed
available for the Additional Payment) from (i) a film with
respect to which the most recent payment was based on gross
receipts (ii) a film that did not reach Cost Return or (iii)
an Additional Film.
Based on the anticipated performance of one film in
release through the Tri-Star Joint Venture as of December 31,
1996, approximately $392,000 has been accrued by the Tri-Star
Joint Venture as an Additional Payment allocable to the
Partnership. In February 1997, the Partnership received
approximately $409,000 representing its share of the Tri-Star
Joint Venture's Additional Payment relating to one film. In
February, 1994 the Partnership received approximately
$7,886,000 representing its share of the Tri-Star Joint
Venture's Additional Payment relating to all but one film net
of the repayment of a $200,000 advance previously received
by the Partnership. The Partnership received approximately
$10,911,000 in May 1993 representing its share of the
Columbia Joint Venture's Additional Payment net of the
repayment of a $200,000 advance previously received by the
Partnership.
The Additional Payments from the Distributors are
expected to enable the Partnership, through each Joint
Venture, to achieve Cost Return for each Unrecouped Film and
are not intended to enable the Partnership to recoup any
amounts paid by the Partnership for management fees or other
expenses of the Partnership. The Columbia and TriStar
Distributors are not expected to fully recoup the Additional
Payments made.
Films in Release.
All 12 films in which the Columbia Joint Venture has
an interest have been released. Certain information
concerning these films is set forth below:
Initial Partnership's
Release Approximate
Title Date
Percentage Interest
St. Elmo's Fire June 1985
25%
Silverado July 1985
15.6%
Fright Night August 1985
20.2%
Agnes of God September 1985
11%
Jagged Edge October 1985 15%
Quicksilver February 1986
15%
Crossroads March 1986
15%
Violets Are Blue April 1986
15%
Desert Bloom April 1986
15%
One More Saturday Night June 1986
15%
Armed and Dangerous August 1986 5%
Happy New Year July 1987
6.3%
All 15 films in which the Tri-Star Joint Venture has
acquired an interest have been released. Certain information
concerning these films is set forth below:
Initial Partnership's
Release Approximate
Title Date
Percentage Interest
Rambo: First Blood
Part II May 1985
7.5%
Lifeforce June 1985
7.5%
Santa Claus: The Movie November 1985
5%
Band of the Hand April 1986
20%
Short Circuit May 1986
5%
Labyrinth June 1986
5%
About Last Night... July 1986 22.5%
Nothing In Common July 1986 17.8%
Night of the Creeps August 1986 20%
Peggy Sue Got Married October 1986
17.8%
Let's Get Harry October 1986
17%
No Mercy December 1986
9%
Nadine August 1987 5%
Rambo III May 1988 (See
Below)
Short Circuit 2 July 1988 (See
Below)
The Partnership, through the Tri-Star Joint Venture,
has participation interests in the films "Short Circuit 2"
and "Rambo III." The Partnership is entitled to a percentage
of net proceeds (3.2% in the case of "Short Circuit 2" and 6%
in the case of "Rambo III") after "Breakeven" has been
reached. "Breakeven" in this instance is defined as the
point at which 5.6% of net proceeds (after recoupment of
deferred distribution fees) in the case of "Short Circuit 2"
and 10% in the case of "Rambo III" equals 5% of the
production cost of the film (including an overhead charge of
12-1/2%). The Partnership does not anticipate receiving any
revenues with respect to "Short Circuit 2." However, as of
December 31, 1996, the Partnership had accrued revenues of
approximately $118,000 in connection with "Rambo III."
All of the Partnership's films have been theatrically
released both domestically and in foreign markets. In
addition, all of these films have been made available on
video cassettes and have been exhibited on pay television.
Many of these films have been exhibited on network television
and certain of these films are currently under license for
domestic syndicated television exhibition and foreign
television exhibition. See "Distribution of Films."
Competition.
Competition in the motion picture industry is intense,
both in theatrical distribution as well as in the ancillary
markets where the Partnership's films are now being
distributed. All of the "major" studios and independent
distribution companies are distributing films that compete for
the attention of purchasers of product for these ancillary
markets which include pay cable television, home video, network
television exhibition, and syndicated television exhibition
both foreign and domestic. The Partnership's films compete in
many of these markets not only with films that were released
contemporaneously, but also with many films that were released
in prior and subsequent years. The level of theatrical success
that a film enjoyed is often an important factor with respect
to results achieved in these ancillary markets.
Employees.
The Partnership has no employees. The General
Partner, however, retains the services of Magera Management
Corporation ("Magera") to provide operational and financial
services to it. See Item l0 "Directors and Executive
Officers of the Partnership-Operational and Financial
Services." Magera has seven employees who perform services
for the General Partner and for the general partners of other
private and public limited partnerships, including the other
Delphi Partnerships.
Item 2. Properties.
The executive offices of the Partnership and the
General Partner are located at 666 Third Avenue, New York,
New York 10017. The Partnership pays no rent.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security
Holders.
None.
<PAGE>
PART II.
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters.
An established public market for the Partnership's
Units does not now exist, and it is not anticipated that such
a market will develop in the future. Accordingly, accurate
information as to the market value of a Unit at any given
date is not available.
As of March 15, 1997, there were approximately 4,100
holders of record of Units of the Partnership.
Beginning with the December 1994 client account
statements, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") implemented new guidelines for
providing estimated values of limited partnerships and other
direct investments reported on client account statements. As
a result, Merrill Lynch no longer reports general partner
estimates of limited partnership net asset value on its
client account statements, although the Partnership may
continue to provide its estimate of net asset value to Unit
holders. Pursuant to the guidelines, estimated values for
limited partnership interests originally sold by Merrill
Lynch (such as the Partnership's Units) will be provided two
times per year to Merrill Lynch by independent valuation
services. The estimated values will be based on financial
and other information available to the independent services
on (1) the prior August l5th for reporting on December year-
end and subsequent client account statements through the
following May's month-end client account statements and on
(2) March 31st for reporting on June month-end and subsequent
client account statements through the November month-end
client account statements of the same year. Merrill Lynch
clients may contact their Merrill Lynch Financial Consultants
or telephone the number provided to them on their account
statements to obtain a general description of the methodology
used by the independent valuation services to determine their
estimates of value. The estimated values provided by the
independent services and the Partnership's current net asset
value are not market values and Unit holders may not be able
to sell Units or realize either amount upon a sale of their
Units. In addition, Unit holders may not realize the
independent estimated value or the Partnership's current net
asset value amount upon the liquidation of the Partnership's
assets over its remaining life.
Cash Distributions.
The Partnership commenced making cash distributions in
April 1987. The following chart sets forth the cash
distributions made by the Partnership through March 15, 1997:
Year Amount Per Unit
1987 $ 600
1988 300
1989 120
1990 100
1991 100
1992 240
1993 1,400
1994 875
1995 50
1996 60
1997 (through March 15) 0
Total $3,845
Accordingly, as of March 15, 1997, the partners have
received distributions aggregating 76.9% of their original
investment in the Partnership. The Partnership does not
currently anticipate that the partners will receive cash
distributions in an aggregate amount sufficient to recover
their capital contribution to the Partnership.
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data.
(000's omitted except for per unit
information)
Year Ended
December 31,
1996 1995 1994
1993 1992
<S> <C> <C> <C>
<C> <C>
Operating
revenues(1): $ 0 $ 0 $
0 $ 0 $ 0
Share of profit
in motion
picture ventures: $ 622 $ 338 $
312 $ 2,275 $ 3,039
Net proft (loss): $ 337 $ (32)
$ (17) $ 1,789 $ 2,583
Net profit (loss)
per unit: $ 42 $ (4) $
(2) $ 221 $ 320
Total assets: $ 2,687 $ 2,825 $ 3,303
$10,364 $l9,895
Total liabilities: $ 78 $ 68
$ 110 $ 83 $ 90
Cash distributions
per unit: $ 60 $ 50 $
875 $ 1,400 $ 240
(1)The Partnership's interests in the Joint Ventures are not
included in Operating Revenues as they are accounted for
by the equity method.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
1. Liquidity and Capital Resources.
The Partnership fully satisfied its commitment to
contribute funds to the Joint Ventures for the production of,
and acquisition of interests in, films. As of December 31,
1996, the Partnership held cash of approximately $57,000 and
short-term investments of approximately $991,000. Short-term
investments consist solely of U.S. government securities.
The Partnership received approximately $409,000 in Febuary
1997 representing its share of the Tri-Star Joint Venture's
Additional Payment relating to one film. The Partnership
received approximately $7,886,000 in February 1994
representing its share of the Tri-Star Joint Venture's
Additional Payment relating to all but one film net of the
repayment of a $200,000 advance previously received by the
Partnership. These funds, less a reserve for Partnership
operating expenses, were distributed to partners in May 1994.
The Partnership received approximately $10,911,000 in May
1993 representing its share of the Columbia Joint Venture's
Additional Payment net of the repayment of a $200,000 advance
previously received by the Partnership. These funds, less a
reserve for Partnership operating expenses, were distributed
to partners in May 1993. The Columbia and TriStar
Distributors are not expected to fully recoup these
Additional Payments and it is therefore currently expected
that the Partnership will not receive any additional revenue
with respect to the Columbia and Tri-Star Joint Venture's
Unrecouped Films.
The Partnership has been evaluating the value of its
interest in its film assets for the purpose of possibly
selling that interest and liquidating the Partnership. The
General Partner anticipates that the Partnership may be
liquidated in 1997. No assurance can be provided that the
film assets will be sucessfully sold, or if sold, when such
sale would occur. Upon the ultimate sale of the film assets,
the Partnership will commence taking steps to dissolve and
liquidate. Cash distributions as a result of the liquidation
may be made to the partners to the extent, and only to the
extent, the proceeds from the sale of the Partnership's
interest in the film assets in connection with the
liquidation are in excess of the Distributors' entitlement to
the recoupment described above and a reserve for the
Partnership's remaining obligations and operating expenses.
Since the Partnership's obligations to make contributions
to the Joint Ventures for the production of, and acquisition
of interests in, films have been satisfied, all revenue
received by the Partnership (for other than Unrecouped Films)
is used to pay operating expenses of the Partnership and to
make cash distributions to partners. The Partnership does
not anticipate significant future revenues and accordingly,
the Partnership does not currently anticipate making cash
distributions to partners on a quarterly basis. However, the
Partnership may make future distributions if it realizes
proceeds from its interest in films other than Unrecouped
Films. The most recent cash distribution by the Partnership
was made in August 1996.
2. Results of Operations.
The Partnership's operating results are primarily
dependent upon the operating results of the Joint Ventures
and are significantly impacted by the Joint Ventures'
policies.
The performance of each film is based upon the amount
expended for production and other costs associated with a
film and the revenue generated by a film. The amount and
timing of revenue generated by each film is dependent upon
the degree of acceptance by the consumer public and the
particular ancillary market in which the film is then being
exhibited.
Amounts contributed toward each film are compared
periodically to the expected total revenue to be generated
for that film, and write-downs may occur to the extent the
amounts invested exceed the expected total revenue for that
film.
Additionally, each Joint Venture may record income
with respect to Additional Payments, to the extent available,
which may allow it to recover its investment in films.
For the year ended December 31, 1996, the Columbia
Joint Venture had a net profit of which the Partnership's
share was approximately $551,000, due primarily to the
profitable results of certain films. The Tri-Star Joint
Venture had a net profit of which the Partnership's share was
approximately $71,000, due primarily to the profitable
results of certain films. In addition, the Partnership
earned approximately $61,000 of interest income from short-
term investments and incurred approximately $346,000 in
expenses from operations, resulting in an overall net profit
reported by the Partnership of approximately $337,000.
For the year ended December 31, 1995, the Columbia Joint
Venture had a net profit of which the Partnership's share was
approximately $316,000, due primarily to the profitable
results of certain films. The Tri-Star Joint Venture had a
net profit of which the Partnership's share was approximately
$22,000, due primarily to the profitable results of certain
films. In addition, the Partnership earned approximately
$87,000 of interest income from short-term investments and
incurred approximately $457,000 in expenses from operations,
resulting in an overall net loss reported by the Partnership
of approximately $32,000.
For the year ended December 31, 1994, the Columbia Joint
Venture had a net profit of which the Partnership's share was
approximately $250,000, due primarily to the profitable
results of certain films offset, in part, by expenses related
to foreign exchange losses. The Tri-Star Joint Venture had a
net loss; however, the Partnership reported a net profit from
that Joint Venture of approximately $62,000, due primarily to
the profitable results of one film and interest income
related to the accrual of Additional Payments offset, in
part, by expenses related to foreign exchange losses. In
addition, the Partnership earned approximately $119,000 of
interest income from short-term investments and incurred
approximately $448,000 in expenses from operations, resulting
in an overall net loss reported by the Partnership of
approximately $17,000.
The decrease in interest income for the years ended
December 31, 1996 and 1995 as compared with the prior years
is due primarily to less funds available for short-term
investments.
The decrease in the Partnership's total expenses for the
year ended December 31, 1996 as compared with the prior year
is primarily attributable to the Management Fee incurred in
1995 but not in 1996 due to the expiration of the Management
Fee arrangement at the end of 1995 offset, in part, by an
increase in Operating Expenses. The increase in Operating
Expenses is primarily due to the reimbursement to the General
Partner for out-of-pocket expenses incurred in connection
with its management of the Partnership's business in lieu of
the Management Fee paid to the General Partner prior to 1996.
The increase in the Partnership's total expenses for the
year ended December 31, 1995 as compared with the prior year
is due primarily to an increase in Operating Expenses. The
increase in Operating Expenses is attributable to an increase
in professional fees related to film audits.
The Partnership does not believe that the impact of
inflation on the results of its operations has been material.
Item 8. Financial Statements and Supplementary Data.
See the financial statements set forth in Item 14 of
this annual report.
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the
Partnership.
The General Partner of the partnership is The Delphi
Company, a New York general partnership originally formed in
December 1984 by Lewis J. Korman, Richard M. Mason, and two
other individuals. In January 1987, ML Film Entertainment
Inc. ("ML Film"), a Delaware corporation, and a wholly-owned
subsidiary of ML Leasing Equipment Corp. (which is an
indirect wholly-owned subsidiary of Merrill Lynch & Co. Inc.,
and the successor in interest to Merrill Lynch Leasing Inc.
and Merlease Leasing Corp.) and an affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
was admitted as a partner in the General Partner and replaced
Mr. Korman as managing partner of the General Partner (the
"Managing Partner"). Set forth below is certain information
regarding the management of the General Partner.
ML Film.
The executive officers and directors of ML Film are:
Kevin K. Albert . . . . . . . .President, Director
Robert F. Aufenanger . . . Executive Vice President, Director
Steven N. Baumgarten . . .Vice President, Director
Michael E. Lurie . . . . . . . Vice President, Director
Diane T. Herte. . . . . . . . . Treasurer
Kevin K. Albert, 44, a Managing Director of
Merrill Lynch Investment Banking Group ("ML Investment
Banking"), joined Merrill Lynch in 1981. Mr. Albert
works in the Equity Private Placement Group and is
involved in structuring and placing a diversified array
of private equity financings including common stock,
preferred stock, limited partnership interests and other
equity related securities. Mr. Albert is also a director
of ML Media Management Inc. ("ML Media"), an affiliate
of ML Film and a joint venturer of Media Management
Partners, the general partner of ML Media Partners, L.P.;
a director of ML Opportunity Management Inc. ("ML
Opportunity"), an affiliate of ML Film and a joint
venturer in Media Opportunity Management Partners, the
general partner of ML Media Opportunity Partners, L.P.; a
director of ML Mezzanine II Inc. ("ML Mezzanine II"), an
affiliate of ML Film and the general partner of the
managing general partner of ML Lee Acquisition Fund II,
L.P. and ML Lee Acquisition Fund (Retirement Accounts)
II, L.P.; a director of ML Mezzanine Inc. ("ML
Mezzanine"), an affiliate of ML Film and the general
partner of the managing general partner of ML Lee
Acquisition Fund, L.P.; a director of Merrill Lynch
Venture Capital Inc. ("ML Venture"), an affiliate of ML
Film and the general partner of the Managing General
Partner of ML Venture Partners II, L.P. ("Venture II"),
and ML Oklahoma Venture Partners Limited Partnership
("Oklahoma"); and a director of Merrill Lynch R&D
Management Inc. ("ML R&D"), an affiliate of ML Film and
the general partner of the Managing General Partner of ML
Technology Ventures, L.P. Mr. Albert also serves as an
independent general partner of Venture II.
Robert F. Aufenanger, 43, a Vice President of
Merrill & Co. Corporate Credit and a Director of the
Partnership Management Department, joined Merrill Lynch
in 1980. Mr. Aufenanger is responsible for the ongoing
management of the operations of the equipment, real
estate and project related limited partnerships for which
subsidiaries of ML Leasing Equipment Corp. and Merrill
Lynch, Hubbard Inc., affiliates of Merrill Lynch, are
general partners. Mr. Aufenanger is also a director of
ML Media, ML Opportunity, MLH Real Estate, Inc., an
affiliate of ML Film and the general partner of the
Associate General Partner of ML/EQ Real Estate Portfolio,
L.P., MLH Property Managers Inc., an affiliate of ML Film
and the Managing General Partner of MLH Income Realty
Partnership VI, ML Venture, ML R&D, ML Mezzanine, and ML
Mezanine II.
Steven N. Baumgarten, 41, a Vice President of
Merrill Lynch & Co. Corporate Credit joined Merrill Lynch
in 1986. Mr. Baumgarten shares responsibility for the
ongoing management of the operations of the equipment and
project related limited partnerships for which
subsidiaries of ML Leasing Equipment Corp., an affiliate
of Merrill Lynch, are general partners.
Michael E. Lurie, 53, a First Vice President of
Merrill Lynch & Co. Corporate Credit and the Director of
the Asset Recovery Management Department, joined Merrill
Lynch in 1970. Prior to his present position, Mr. Lurie
was the Director of Debt and Equity Markets Credit
responsible for the global allocation of credit limits
and the approval and structuring of specific transactions
relating to debt and equity products. He also served as
Chairman of the Merrill Lynch International Bank Credit
Committee. Mr. Lurie is also a director of ML Media, ML
Opportunity, ML Venture and ML R&D.
Diane T. Herte, 36, a Vice President of Merrill
Lynch & Co. Investment Banking Group since 1996 and
previously an Assistant Vice President of Merrill Lynch &
Co. Corporate Credit Group since 1992, joined Merrill
Lynch in 1984. Ms. Herte's responsibilities include
controllership and financial management functions for
certain partnerships for which subsidiaries of Merrill
Lynch are the general partner.
Mr. Aufenanger is an executive officer of Mid-
Miami Diagnostics Inc. ("Mid-Miami Inc."). On October
28, 1994 both Mid-Miami Inc. and Mid-Miami Diagnostics,
L.P. filed voluntary petitions for protection from
creditors under Chapter 7 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the
Southern District of New York.
Merrill Lynch was a co-managing underwriter of the
initial public offering of Sony Pictures Entertainment
Inc. (then known as "Tri-Star Pictures, Inc.") securities
and of several subsequent public offerings of additional
SPE securities. In addition, an affiliate of the
Managing Partner serves as a manager for certain film
financing transactions conducted on behalf of SPE in
Japan. Therefore, ML Film and its affiliates could have
interests that may conflict with those of the
Partnership.
Merrill Lynch, or an affiliate, has served as a
selling agent for the public offerings of units in each
of the Delphi Partnerships.
Operational and Financial Services.
To assist it in the performance of its duties, the
General Partner engaged Magera, subject to the direction
and supervision of the General Partner, to provide
operational and financial services which were provided at
no additional cost to the Partnership for each year for
which there was a management fee (see Item 11 Executive
Compensation). Magera is owned by Richard M. Mason and
Aaron German. Mr. Mason, a partner of the non-managing
partner of the General Partner and the Chairman of
Magera, and Mr. German, the President of Magera, also
previously acted as consultants to SPE. Magera also
provides operational and financial services to the
general partners of other private and public limited
partnerships, including the other Delphi Partnerships,
and serves as a consultant to others engaged in the
entertainment industry.
Item 11. Executive Compensation.
The expense of professional fees rendered on
behalf of the Partnership, such as legal fees and fees to
certified public accountants are paid directly by the
Partnership. For 1996 and subsequent years, there is no
fixed management fee payable to the General Partner, but
the General Partner is reimbursed for out-of-pocket
expenses with respect to administering the Partnership
and reporting to partners. In that regard, the General
Partner, on behalf of the Partnership, retained Magera to
provide those services to the Partnership for 1996 and
1997.
Until limited partners have received total cash
distributions equal to their capital contributions (the
"Capital Return"), they will receive 99% of, and the General
Partner will receive 1% of, all cash distributions. The
General Partner, in addition to receiving distributions in
respect of the 1% interest for which it has paid, will be
entitled to receive distributions in amounts equal to 20% of
all cash distributions made after Capital Return. The
payment to the General Partner of one-third of these
additional amounts with respect to the 20% interest will be
deferred until the limited partners have received total cash
distributions equal to l50% of Capital Return and the amounts
deferred will be payable from the next cash distributed after
l50% of Capital Return is reached. If l50% of Capital Return
is not reached, the General Partner will not receive any
deferred amount.
The foregoing describes the provisions of the
partnership agreement concerning the General Partner's right
to share in cash distributions, and is not intended to
suggest that any particular level of cash distributions will
be reached.
Prior to reaching Capital Return, income will be
allocated 99% to the limited partners and l% to the General
Partner. After Capital Return is reached, allocations of
income will be based on the aggregate prior allocations of
income and losses, the aggregate prior cash distributions and
cash available for distribution.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
To the best of the knowledge of the Partnership, no
person beneficially owns in excess of 5% of the limited
partnership units of the Partnership.
To the best of the knowledge of the Managing Partner,
as of March 1, 1997, no
person is the beneficial owner of 5% or more of the
outstanding common stock of Merrill
Lynch.
Item 13. Certain Relationships and Related Transactions.
The Partnership's operations relating to the ownership
and exploitation of films involve Columbia or TriStar. See
Item 1 "Business."
The General Partner is entitled to a portion of cash
distributions to partners. The General Partner of the
Partnership is affiliated with the general partners of other
Delphi Partnerships all of which are limited partnerships
similar to the Partnership.
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a)(1) Financial Statements:
Delphi Film Associates IV
Independent Auditors' Report
Balance Sheets at December 31, 1996 and 1995
Statements of Operations for the Years
Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years
Ended December 31, l996, 1995 and 1994
Statements of Changes in Partners' Capital
for the Years Ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
Columbia-Delphi IV Productions
Report of Independent Accountants
Balance Sheets at December 31, 1996 and 1995
Statements of Operations for the Years ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years
Ended December 31, l996, 1995 and 1994
Statements of Venturers' Capital for the
Years ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
Tri-Star-Delphi IV Productions
Report of Independent Accountants
Balance Sheets at December 31, l996 and 1995
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years
Ended December 31, l996, 1995 and 1994
Statements of Venturers' Capital for the Years
Ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
(a)(2) Financial Statement Schedules:
No financial statement schedules have been filed
as part of this report as none are required.
<TABLE>
<CAPTION>
(a)(3) Exhibits
Exhibit No.
<S> <C>
Amended Agreement
of Limited Partnership (1)
4.l(a)
Amendment to the Amended Agreement
of Limited Partnership dated
as of December 26, 1986 (2)
4.1(b)
Joint Venture Agreements (1)
10.1
Product Origination
Agreements (1)
l0.2
Distribution Agreements (1)
l0.4(a)
Amendment to the Columbia Distribution
Agreement dated May 14, 1987 (3)
10.4(b)
Amendment to the Tri-Star Distribution
Agreement dated June 9, 1987 (3)
10.4(c)
Amendment to the Columbia Distribution
Agreement dated as of October 14, 1987 (4)
10.4(d)
Amendment to the Tri-Star Distribution
Agreement dated as of October 14, 1987 (4)
10.4(e)
Financial Data Schedule 27
</TABLE>
(1) Incorporated by reference to the Partnership's
registration statement No. 2-96426, as amended, on file
with the Securities and Exchange Commission.
(2) Incorporated by reference to the Partnership's Form 10-K
for the year ended December 31, 1986 on file with the
Securities and Exchange Commission.
(3) Incorporated by reference to the Partnership's Form 10-Q
for the quarter ended June 30, 1987 on file with the
Securities and Exchange Commission.
(4) Incorporated by reference to the Partnership's Form 10-Q
for the quarter ended September 30, 1987 on file with the
Securities and Exchange Commission.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last
quarter of the Partnership's fiscal year ended December 31,
1996.
(c) Exhibits.
The Exhibits required by Item 601 of Regulation S-K
are submitted as a separate section following the
Partnership's financial statements.
(d) Financial Statement Schedules.
No financial statement schedules have been filed
as part of this report as none are required.
<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.
Dated: March 26, 1997 DELPHI FILM ASSOCIATES
IV
By: THE DELPHI COMPANY
General Partner
By: ML Film
Entertainment Inc.,
Managing Partner
/s/ Kevin K. Albert
(Kevin K. Albert)
President
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 in the
capacities and on the dates indicated.
Signature Title Date
/s/ Kevin K. Albert Director and President of
March 26, 1997
(Kevin K. Albert) the Managing Partner
of the General Partner
(principal executive
officer of the Registrant)
/s/ Robert F. Aufenanger Director and Executive
Vice March 26, 1997
(Robert F. Aufenanger) President of the
Managing
Partner of the General Partner
/s/ Steven N. Baumgarten Director and Vice
President March 26 , 1997
(Steven N. Baumgarten) of the Managing Partner
of the General Partner
/s/ Michael E. Luire Director and Vice
President March 26, 1997
(Michael E. Lurie) of the Managing Partner
of the General Partner
/s/ Diane T. Herte Treasurer of the March 26,
1997
(Diane T. Herte) Managing Partner
of the General Partner
(principal financial officer
and principal accounting
officer of the Registrant)
<PAGE>
EXHIBIT INDEX
Page
Reference
in Sequentially
Numbered Copy
4.1(a) Amended Agreement
of Limited Partnership*
4.1(b) Amendment to the Amended
Agreement or Limited Partnership
dated as of December 26, 1986*
l0.l Joint Venture Agreements*
l0.2 Product Origination Agreements*
l0.4(a) Distribution Agreements*
10.4(b) Amendment to the Columbia Distribution
Agreement dated May 14, 1987*
10.4(c) Amendment to the Tri-Star Distribution
Agreement dated June 9, 1987*
10.4(d) Amendment to the Columbia Distribution
Agreement dated as of October 14, 1987*
10.4(e) Amendment to the Tri-Star Distribution Agreement
dated as of October 14, 1987*
27 Financial Data Schedule
*Incorporated by reference
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Delphi Film Associates IV:
We have audited the accompanying balance sheets of Delphi
Film Associates IV (a New York Limited Partnership) as of
December 31, 1996 and 1995, and the related statements of
operations, cash flows and changes in partners' capital for
each of the years in the three-year period ended December
31, 1996. 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 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 financial statements referred to above
present fairly, in all material respects, the financial
position of Delphi Film Associates IV (a New York Limited
Partnership) at December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the years
in the three-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
March 25, 1997
<PAGE>
DELPHI FILM ASSOCIATES IV
(A New York Limited Partnership)
BALANCE SHEETS
(000's Omitted)
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash $ $
57 185
Short-Term Investments (Note 2) 991 1,227
Receivable from Columbia-Delphi
IV
Productions, net (Note 4) 890 623
Receivable from Tri-Star-Delphi
IV
Productions, net (Note 4) 736 777
Interest in Motion Picture
Venture-Columbia-
Delphi IV Productions (Notes
2 & 4) 13 13
Total $ $
Assets 2,687 2,825
LIABILITIES AND PARTNERS'
CAPITAL
Liabilities:
Accrued Expenses and Accounts $ $
Payable 78 68
Total
Liabilities 78 68
Partners' Capital (Note 1):
General Partner 71 73
Limited Partners
2,538 2,684
Total
Partners' Capital 2,609 2,757
Total
Liabilities and Partners'
$ $
Capital 2,687 2,825
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
DELPHI FILM ASSOCIATES IV
(A New York Limited Partnership)
STATEMENTS OF OPERATIONS
(000's Omitted, except net profit (loss) per unit)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Interest Income $ $ $
61 87 119
Expenses:
Management Fee -- 400 400
Operating Expenses
346 57 48
346 457 448
Loss before Share of
Profit
in Motion Picture (285) (370) (329)
Ventures
Share of Profit in
Motion Picture
Venture--Columbia-
Delphi IV
Productions (Notes 2 551 316 250
& 4)
Share of Profit in
Motion Picture
Venture--Tri-Star-
Delphi IV
Productions (Notes
2 & 4) 71 22 62
Net Profit (Loss) $ $ $
337 (32) (17)
Net Profit (Loss) Per
Unit of
Limited Partnership
Interest
( 8,000 Units) $ $ $
42 (4) (2)
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
DELPHI FILM ASSOCIATES IV
(A New York Limited Partnership)
STATEMENTS OF CASH FLOWS
(000's Omitted)
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996
1995 1994
<S>
<C> <C> <C>
Cash Flow From Operating
Activities:
Net Profit (Loss) $ $ $
337 (32) (17)
Adjustments to reconcile Net
Profit (Loss) to net
cash provided (used) by
operating activities:
Share of Profit in Motion (622) (338) (312)
Picture Ventures
Distributions from Joint 622 385 341
Ventures
Changes in Assets and
Liabilities:
(Increase) Decrease in
Receivables from
Joint Ventures, net (226) 1 7,864
Increase (Decrease) in
Accrued Expenses
and Accounts Payable
10 (42) 27
Net Cash Provided (Used)
by Operating
Activities
121 (26) 7,903
Cash Flow From Investing
Activities:
Purchases of Short-Term (5,044) (4,472) (35,792)
Investments
Redemptions of Short-Term
Investments 5,280 4,614 34,967
Net Cash Provided (Used) by
Investing
Activities
236 142 (825)
Cash Flow From Financing
Activities:
Distributions to Partners
(485) (404) (7,071)
Net Cash Used by Financing
Activities (485) (404) (7,071)
(Decrease) Increase In Cash (128) (288) 7
Cash at beginning of year
185 473 466
Cash at end of year $ $ $
57 185 473
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
DELPHI FILM ASSOCIATES IV
(A New York Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 3l, 1996, 1995 AND 1994
(000's Omitted, except distributions per unit)
<TABLE>
<CAPTION>
General Limited
Total
<S> <C> <C>
<C>
Balance January 1, 1994 $ $ $
148 10,133 10,281
Net Loss for the Year Ended
December 31, 1994 -- (17) (17)
Distributions to Partners
($875 per unit) (71) (7,000) (7,071)
Balance December 31, 1994 77 3,116 3,193
Net Loss for the Year Ended
December 31, 1995 -- (32) (32)
Distributions to Partners
($50 per unit) (4) (400) (404)
Balance December 31, 1995 73 2,684 2,757
Net Profit for the Year
Ended
December 31, 1996 3 334 337
Distributions to Partners
($60 per unit) (5) (480) (485)
Balance December 31, 1996 $ $ $
71 2,538 2,609
See accompanying notes to the financial statements.
</TABLE>
<PAGE> DELPHI FILM
ASSOCIATES IV
(A New York Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. General
Delphi Film Associates IV (the "Partnership") is a limited
partnership which was formed to participate in the
production, acquisition, ownership, and exploitation of
feature length motion pictures through Columbia-Delphi IV
Productions, a joint venture with Columbia Pictures
Industries, Inc. (the "Columbia Joint Venture"), and through
Tri-Star-Delphi IV Productions, a joint venture with TriStar
Pictures, Inc. (formerly Tri-Star Pictures, Inc.) ("TriStar")
(the "Tri-Star Joint Venture") (the "Joint Ventures").
The Partnership was organized under the law of the State
of New York in December 1984. The Delphi Company, a New York
general partnership (the "General Partner"), is the general
partner of the Partnership. The General Partner, which has
the full responsibility for the management of the
Partnership's business, received a fee for its management
services of $400,000 in each of the years l995 and 1994. For
1996, the General Partner was reimbursed approximately
$259,000 for out-of-pocket expenses incurred in connection
with its management of the Partnership's business. A public
offering (the "Offering") of limited partnership interests
was completed on June 27, l985. The Partnership had no
substantial operations until June l985 when the Offering was
completed. A total of 8,000 units at $5,000 per unit were
sold. The General Partner contributed $404,000, an amount
equal to l% of the total capital contributed to the
Partnership. Profits and losses have been allocated l% to
the General Partner and 99% to the Limited Partners.
The principal business of the Partnership is the
production, acquisition, ownership, and exploitation of
motion pictures through its participation in the Joint
Ventures. Accordingly, the Partnership's operating results
are in large part dependent upon the operating results of the
Joint Ventures, and are significantly impacted by the Joint
Ventures' policies (see Note 4).
2. Summary of Significant Accounting Policies
(a) Short-Term Investments
Short-Term Investments consist solely of U.S. Government
Securities which are stated at cost plus accrued interest,
which approximates market value.
(b) Accounting for Participation in Joint Ventures
The Partnership records its investment in the Joint
Ventures under the equity method of accounting.
(c) Accounting for Income Taxes
No provision for income taxes has been made as Delphi Film
Associates IV is treated as a partnership for income tax
purposes, with all income tax consequences flowing directly
to its partners.
As of December 31, 1996 and 1995, the reported amounts of
the Partnership's assets less liabilities were greater (less)
than the tax bases by approximately $192,000 and ($56,000),
respectively.
(d) Use of Estimates
Management of the Partnership has made a number of
estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent liabilities
to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results
could differ from those estimates.
3. Supplemental Disclosure of Cash Flow Information
No amounts for interest were paid in l996, l995 and l994.
4. Transactions with Joint Ventures
(a) Interests in Motion Pictures
The Partnership, through each Joint Venture, generally has
interests ranging from 5% to 25% in (and has borne a
corresponding percentage of the cost of) motion pictures in
which a Joint Venture has an interest ("Joint Venture
Films"). In addition, the Partnership, through the Tri-Star
Joint Venture, has a participation interest in two films (the
"Additional Films"). The Partnership made no capital
contributions for its interest in these two films, and
payments due with respect to one of these interests was made
to the Partnership in June 1996.
As of December 31, 1996, the Columbia Joint Venture had
twelve films in release for which the Partnership's cash
contributions (including interest) aggregated $23,117,000,
and the Tri-Star Joint Venture had fifteen films (including
the Additional Films) in release for which the Partnership's
cash contributions (including interest) aggregated
$22,701,000.
(b) Current Operations
As of December 31, l996, all twenty-seven films in which
the Partnership has an interest had been released. Based on
the performance of the films during the year ended
December 31, 1996, and after deducting the net operating
expenses of the Partnership, the Partnership is reporting a
net profit of $337,000 for the year ended December 31, 1996.
(c) Transactions with Columbia and TriStar
The films in which the Columbia Joint Venture has an
interest are distributed pursuant to a distribution agreement
between Columbia Pictures, a division of Columbia Pictures
Industries, Inc. ("Columbia") (a "Distributor"), and the
Columbia Joint Venture. The films in which the Tri-Star
Joint Venture has an interest are distributed pursuant to a
distribution agreement between TriStar Pictures, Inc. (a
"Distributor") and the Tri-Star Joint Venture (see Note 6).
The Distributors are entitled to receive a fee of l7.5% of
substantially all gross receipts from each film, except that
a Distributor's entitlement to its distribution fee is
deferred until its Joint Venture has received from the
distribution of a film an amount equal to that spent by the
Joint Venture to produce or acquire an interest in the film,
other than amounts spent for payments in the nature of
interest. In light of the results of the Joint Venture
films, net revenue as of December 31, 1996, 1995 and 1994 has
been computed without deducting a distribution fee to the
Distributor with the exception of six films in l996 and seven
films in l995 and l994 for which a portion of the fee was
deducted and one film in l996 for which the entire
distribution fee has been deducted.
(d) Joint Venture Revenue Recognition
Each Joint Venture recognizes net revenues from the
Distributor on an accrual basis. Net revenues consist of:
(a) the portion of net proceeds (gross receipts less a
distribution fee, unless deferred, and other distribution and
releasing costs) or, if greater, the portion of gross
receipts payable to the Joint Ventures under the distribution
agreements, plus, (b) accrued gross receipts (not in excess
of the Columbia and Tri-Star Joint Venture's advertising
expenditures plus an amount intended to approximate the cost
of funds incurred by the Partnership in connection with the
Columbia and the Tri-Star Joint Ventures' advertising
obligations). However, certain advances received by the
Distributor which are includable in gross receipts under the
distribution agreements are not reflected in the calculation
of net revenues until those advances are earned.
(e) Joint Venture Amortization Policies
Advertising expenditures which benefit future periods were
capitalized as incurred by the Joint Ventures. Advertising
expenditures and unamortized production costs are amortized
under the individual film forecast method based upon net
revenues recognized in proportion to the Joint Venture's
estimate of ultimate net revenues to be received without
regard to any Additional Payments (see Note 5). Unamortized
production costs are compared with net realizable value on a
film by film basis, and losses are recognized to the extent
of any excess of costs over net realizable value.
Unamortized advertising expenditures are compared with net
realizable value for all films in the aggregate for each
Joint Venture and losses are recognized to the extent of any
excess of expenditures over net realizable value.
(f) Receivable from Columbia Joint Venture
This asset represents the amounts receivable by the
Partnership from the Columbia Joint Venture. The total
receivable in l996 and l995 of $890,000 and $623,000,
respectively, consists of amounts accrued with respect to net
proceeds and gross receipts payments.
(g) Receivable from Tri-Star Joint Venture, net
This asset represents the net amounts receivable by the
Partnership from the Tri-Star Joint Venture. The total
receivable in l996 of $736,000 consists of $344,000 accrued
with respect to net proceeds and gross receipts payments and
$392,000 accrued as Additional Payments (as defined below).
The total receivable in l995 of $777,000 consisted of
$385,000 accrued with respect to net proceeds and gross
receipts payments and $392,000 accrued as Additional Payments
(as defined below).
5. Additional Payments
The terms of the distribution agreements between each
Joint Venture and its respective Distributor provided that
the Partnership would be entitled to receive, through the
Joint Venture, a payment (an "Additional Payment") from that
Joint Venture's Distributor for each film (an "Unrecouped
Film"), if by March l993, in the case of the Columbia Joint
Venture, and if by February l994, in the case of the Tri-Star
Joint Venture, for which the Joint Venture had not received
from the distribution of that film (or its sale) an amount
equal to the amount spent by the Joint Venture to produce or
acquire an interest in that film, other than amounts spent
for payments in the nature of interest ("Cost Return"). Each
Additional Payment was in the amount necessary for the
Partnership to be repaid (without interest) its unrecouped
contributions to the Joint Venture with respect to the
production or acquisition of an Unrecouped Film (other than
contributions for payments in the nature of interest), but
not more than the amount specified below. The Additional
Payment was first payable only to the extent of the
distribution fees received by the Distributor from the
distribution of all of its Joint Venture's films. The
Additional Payments based on distribution fees were allocated
by the Joint Venture first to the Partnership to the extent
necessary for the Partnership to recoup its investment in
such film; any excess for such film was allocated to the
respective co-venturer of the Partnership in a Joint Venture
("Studio Venturer") until Cost Return. If these distribution
fees were insufficient to enable a Distributor to make the
Additional Payments with respect to all of its Joint
Venture's Unrecouped Films, then gross receipts and net
proceeds of each remaining Unrecouped Film distributed by
that Distributor were recalculated by including as gross
receipts the minimum license fees under its license agreement
with Home Box Office, Inc. and certain minimum amounts in
respect of video cassette and video disc exploitation with
respect to that Unrecouped Film. Each Distributor then made
an Additional Payment to the Partnership, through its Joint
Venture, with respect to each Unrecouped Film to the extent
of the Partnership's share of additional gross receipts or
net proceeds payable as a result of the recalculation but
only up to the amount of the unrecouped contributions (other
than contributions for payments in the nature of interest) by
the Partnership for the production or acquisition of that
Unrecouped Film. Each such Additional Payment made on the
basis of such recalculation was allocated between the
Partnership and the respective Studio Venturer in proportion
to their respective interest in the applicable Unrecouped
Film.
The Distribution Agreements provided that each Distributor
would be entitled to recoup the Additional Payments made to
the Partnership in respect of each Unrecouped Film, with an
amount in the nature of interest calculated at ll0% of the
prime rate from time to time, from the Partnership's share of
subsequent gross receipts or net proceeds of that Unrecouped
Film and from the proceeds of any sale of the Partnership's
interest in that Unrecouped Film or amounts allocable to that
Unrecouped Film upon a sale of the Partnership's interest in
the Joint Venture. In no event will the Distributor be able
to recoup amounts from the proceeds of any sale from a film
that is not an Unrecouped Film. In calculating the amount of
distribution fees available for the Additional Payments, no
distribution fee will be deemed received by a Distributor
(and therefore no distribution fee is deemed available for
the Additional Payment) from (i) a film with respect to which
the most recent payment was based on gross receipts, (ii) a
film that did not reach Cost Return or (iii) an Additional
Film.
Based on the anticipated performance of one film in
release at December 31, l996 and 1995, $392,000 was accrued
by the Tri-Star Joint Venture as an Additional Payment
allocable to the Partnership for each respective year. The
Additional Payments were due and payable to the Partnership,
net of the Advances through the respective Joint Ventures,
promptly after the dates set forth above following certain
certifications. The Partnership received approximately
$409,000 in February 1997 representing its share of the Tri-
Star Joint Venture's Additional Payment relating to one film.
The Partnership received approximately $7,886,000 in February
l994 representing its share of the Tri-Star Joint Venture's
Additional Payment, relating to all but one film net of the
$200,000 advances previously received by the Partnership, and
approximately $l0,911,000 in May l993 representing its share
of the Columbia Joint Venture's Additional Payment net of the
$200,000 advance previously received by the Partnership. The
Additional Payments from the Distributors are expected to
enable the Partnership, through each Joint Venture, to
achieve Cost Return for each Unrecouped Film and are not
intended to enable the Partnership to recoup any amounts paid
by the Partnership for management fees or other expenses of
the Partnership.
Until the recoupment as referred to is complete, the
Partnership will not receive any additional revenue from the
distribution of any Unrecouped Film. The Columbia and
TriStar Distributors are not expected to fully recoup these
Additional Payments and it is therefore currently expected
that the Partnership will not receive any additional revenue
with respect to the Columbia and Tri-Star Joint Venture's
Unrecouped Films.
6. Future Sale of Interests in Films
The Partnership has been evaluating the value of its
interest in its film assets for the purpose of possibly
selling that interest and liquidating the Partnership. The
General Partner anticipates that the Partnership may be
liquidated in 1997. No assurance can be provided that the
film assets will be sucessfully sold, or if sold, when such
sale would occur. Upon the ultimate sale of the film assets,
the Partnership will commence taking steps to dissolve and
liquidate. Cash distributions as a result of the liquidation
may be made to the partners to the extent, and only to the
extent, the proceeds from the sale of the Partnership's
interest in the film assets in connection with the
liquidation are in excess of the Distributors' entitlement
to the recoupment described above and a reserve for the
Partnership's remaining obligations and operating expenses.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Venturers
Columbia - Delphi IV Productions
In our opinion, the accompanying balance sheets and the
related statements of operations, of cash flows and of
venturers' capital present fairly, in all material respects,
the financial position of Columbia - Delphi IV Productions
at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Venture's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
Century City, California
March 14, l997
<PAGE>
COLUMBIA - DELPHI IV PRODUCTIONS
(A Joint Venture)
BALANCE SHEETS
(000's Omitted)
<TABLE>
<CAPTION>
December 31,
1996
1995
<S>
<C> <C>
ASSETS
Motion Picture Production and
Advertising
Costs, net of accumulated
amortization
of $164,114 and $164,104, $ $
respectively 72 82
(Notes 1, 2 & 5)
Receivable from Columbia
Pictures
(Distributor) (Note 6)
5,974 6,278
Total $ 6,046 $
Assets 6,360
LIABILITIES AND VENTURERS'
CAPITAL
Liabilities:
Payable to Columbia Pictures
Industries, Inc.
(Note 6) $ 5,084 $
5,655
Payable to Delphi Film
Associates IV
(Note 6)
890 623
Total
Liabilities 5,974 6,278
Venturers' Capital (Notes 1 &
3):
Columbia Pictures Industries, 59 69
Inc.
Delphi Film Associates IV
13 13
Total
Venturers' Capital 72 82
Total
Liabilities and Venturers'
$ $
Capital 6,046 6,360
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
COLUMBIA - DELPHI IV PRODUCTIONS
(A Joint Venture)
STATEMENTS OF OPERATIONS
(000's Omitted)
<TABLE>
<CAPTION>
For the
Year Ended December 31,
1996
1995 1994
<S> <C> <C> <C>
Net Revenues From Motion
Picture
Exploitation (Note $ $ $
2) 2,470 3,021 3,055
Less: Amortization of
Motion
Picture
Production and
Advertising
Costs
(Notes 2 & 5)
10 696 652
Income from Operations 2,460 2,325 2,403
Additional Payment
Accrual
(Notes 3 & 5) -- -- 158
Other Expense (Note 7)
-- -- (146)
Net Income $ $ $
2,460 2,325 2,415
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
COLUMBIA - DELPHI IV PRODUCTIONS
(A Joint Venture)
STATEMENTS OF CASH FLOWS
(000's Omitted)
<TABLE>
For the Year
Ended December 31,
1996
1995 1994
<S>
<C> <C> <C>
Cash Flow From Operating
Activities:
Net Income $ $ $
2,460 2,325 2,415
Adjustments to reconcile Net
Income to net cash
provided by operating
activities:
Amortization of Motion Picture
Production and
Advertising Costs 10 696 652
Accrued Distributions to 304 253 (237)
Venturers
Changes in Assets and
Liabilities:
(Decrease) Increase in
Payable to Columbia
Pictures Industries, (571) (292) 269
Inc.
Decrease (Increase) in
Receivable from
Columbia Pictures 304 (1,229) (79)
(Distributor)
Decrease (Increase) in
Motion Picture Costs
Recoverable from -- 1,482 (158)
Additional Payments
Increase (Decrease) in
Payable to Delphi
Film Associates IV, net
267 39 (32)
Net Cash Provided by
Operating Activities 2,774 3,274 2,830
Cash Flow from Financing
Activities:
Distributions to Venturers
(2,774) (3,274) (2,830)
Net Cash Used by
Financing Activities (2,774) (3,274) (2,830)
Net Change in Cash -- -- --
Cash at beginning of year
-- -- --
Cash at end of year $ $ $
-- -- --
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
COLUMBIA - DELPHI IV PRODUCTIONS
(A Joint Venture)
STATEMENTS OF VENTURERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 3l, 1996, 1995 AND 1994
(000's Omitted)
<TABLE>
<CAPTION>
Columbia Delphi
Pictures Film
Total
Industries, Associates
Venturers'
Inc. IV
Capital
<S> <C> <C>
<C>
Venturers' Capital as of $ $ $
January 1, 1994 1,376 54 1,430
Net Income for the Year
Ended
December 31, 1994 2,165 250 2,415
Accrued Distributions to
Venturers (2,788) (279) (3,067)
Venturers' Capital as of
December 31,
1994 753 25 778
Net Income for the Year
Ended
December 31, 1995 2,009 316 2,325
Accrued Distributions to
Venturers (2,693) (328) (3,021)
Venturers' Capital as of
December 31,
1995 69 13 82
Net Income for the Year
Ended
December 31, 1996 1,909 551 2,460
Accrued Distributions to
Venturers (1,919) (551) (2,470)
Venturers' Capital as of
December 31,
1996 $ $ $
59 13 72
See accompanying notes to the financial statements.
</TABLE>
<PAGE> COLUMBIA - DELPHI IV
PRODUCTIONS
(A Joint Venture)
NOTES TO FINANCIAL STATEMENTS
1. General
Columbia-Delphi IV Productions (the "Joint Venture") is a
joint venture between Columbia Pictures Industries, Inc.
("Columbia") and Delphi Film Associates IV, a New York
limited partnership (the "Partnership") formed on April l8,
l985 to engage in the business of producing, acquiring,
owning and exploiting feature length motion pictures.
Through the Joint Venture, Columbia has interests in ten
films ranging from approximately 75-94% and the Partnership
has interests ranging from approximately 6-25% in these same
films and Columbia has a 65% interest and the Partnership has
a 15% interest in one film in which Columbia-Delphi V
Productions, a joint venture between Columbia and Delphi Film
Associates V, a New York limited partnership ("Delphi V"),
holds the remaining 20% interest (collectively the "Joint
Venture Films"). Columbia and the Partnership were each
responsible for these respective percentages of the
production cost of the Joint Venture Films. In addition, the
Joint Venture acquired a 10% interest in one film during 1986
which was previously l00% owned by Columbia-Delphi V
Productions. This l0% interest was acquired from Columbia,
which derived its ownership interest through Columbia-Delphi
V Productions. The general partner of Delphi V is affiliated
with the general partner of the Partnership.
As of December 31, 1996, all twelve Joint Venture Films
had been released (see Note 5).
All of the Joint Venture's films are being distributed
pursuant to a distribution agreement between Columbia
Pictures (the "Distributor"), a division of Columbia, and the
Joint Venture (see Note 2). The Joint Venture does not
anticipate the production of, or acquisition of interests in,
any additional films.
The Partnership participates in a Joint Venture (the
"Other Venture") with TriStar Pictures, Inc. (formerly Tri-
Star Pictures, Inc.) ("TriStar") similar to the Joint
Venture.
Sony Pictures Entertainment Inc., the parent company of
Columbia and TriStar, is an indirect wholly-owned subsidiary
of Sony Corporation.
2. Summary of Significant Accounting Policies
Recognition of Revenue
The Joint Venture recognizes net revenues from the
Distributor on the accrual basis. Net revenues consist of:
a) the portion of net proceeds (gross receipts less a
distribution fee, unless deferred, and other distribution and
releasing costs) or, if greater, the portion of gross
receipts payable to the Joint Venture under the distribution
agreement, plus b) accrued gross receipts (not in excess of
the amount of the advertising and promotion charge paid by
the Joint Venture plus an amount intended to approximate the
cost of funds incurred by the Partnership in connection with
the payment of that charge). However, certain advances
received by the Distributor which are includable in gross
receipts under the distribution agreement are not reflected
in the calculation of net revenues until those advances are
earned. The Joint Venture's advertising and promotion charge
expenditures are recovered (subject to certain limitations)
from gross receipts from all films in which the Joint Venture
has an interest.
Distribution Fee
The Distributor is entitled to receive a 17.5%
distribution fee on substantially all gross receipts in
calculating the net proceeds to which the Joint Venture is
entitled from the distribution of a film; however, the
Distributor's entitlement to this distribution fee will be
deferred until the Joint Venture has received from the
distribution of that film an amount equal to the amount spent
by the Joint Venture to produce or acquire an interest in the
film, other than amounts spent for payments in the nature of
interest ("Cost Return"). After Cost Return for a film, for
purposes of determining any additional payments based on net
proceeds to which the Joint Venture is entitled in respect of
that film, the Distributor will be entitled to receive a
distribution fee equal to 17.5% of substantially all gross
receipts of the film including gross receipts prior to Cost
Return.
Net revenues accrued at December 31, 1996, 1995 and 1994
have been computed without deducting a distribution fee to
the Distributor in light of the results of the Joint Venture
Films released through those respective dates, with the
exception of four films for which a portion of the
distribution fees were deducted.
Motion Picture Production and Advertising Costs
Motion picture production costs include the direct costs
of production plus an overhead charge equivalent to 12.5% of
the direct production costs; these costs were capitalized as
incurred by the Joint Venture. Payments by the Joint Venture
in respect of the advertising and promotion charge payable to
the Distributor were capitalized as incurred by the Joint
Venture to the extent that those charges benefit future
periods. These costs are amortized under the individual film
forecast method based upon net revenues recognized in
proportion to the Joint Venture's estimate of ultimate net
revenues to be received. Unamortized production costs are
compared with net realizable value on a film by film basis
and unamortized advertising costs are compared with net
realizable value in the aggregate; losses are recognized to
the extent of any excess of costs over net realizable value.
If losses are indicated for films, the Additional Payments
described in Note 3, to the extent available, are accrued as
Motion Picture Costs Recoverable from Additional Payments.
3. Additional Payments (See Note 5)
The Joint Venture was entitled to a payment from the
Distributor if the Joint Venture had not received net
proceeds and gross receipts (excluding amounts paid to the
Joint Venture for the recovery of advertising and promotion
charge payments) at least equal to the amount spent by the
Joint Venture for the production of films and the acquisition
of interests in films (excluding amounts spent for payments
in the nature of interest) (the "Expenditures") by March
l993. Consequently, a payment of approximately $7l,000,000
was made in May l993 representing the amount available to be
repaid to the Joint Venture, without interest, for its
unrecouped Expenditures. The payment to the Joint Venture
was allocated first to the Partnership, to the extent
necessary for the Partnership to recoup (without interest)
the amount of its contribution to the Joint Venture for the
production or acquisition of the Unrecouped Films (other than
contributions for payments in the nature of interest); any
excess was then allocated to Columbia. As a result, the
Partnership has recouped all Expenditures, Columbia is still
unrecouped. After Columbia recoups the outstanding
Expenditures, the Distributor will be entitled to recoup
these payments, with an amount in the nature of interest,
from the Joint Venture's share of subsequent net proceeds and
gross receipts and from the proceeds of any subsequent sale
of the Joint Venture's interest in films which generated
Additional Payments.
If the gross receipts from a film do not exceed the costs
of distributing the film, or if the most recent payment to
the Joint Venture with respect to the film is based on gross
receipts, no amounts from the distribution of that film will
be available for payment to the Joint Venture for this
purpose.
4. Income Taxes
No provision for income taxes is made in the Joint
Venture's financial statements since the venturers treat the
Joint Venture as a partnership for income tax purposes, with
all income tax consequences flowing directly to the
venturers.
As of October 31, 1996 and 1995 (the Joint Venture's tax
year end is October 31), the tax bases of the Joint Venture's
assets less liabilities exceeded amounts reported in the
financial statements at December 31, 1996 and l995 by
approximately $5,298,000 and $5,660,000, respectively.
Management estimates that the tax bases of the Joint
Venture's assets and liabilities did not differ significantly
between October 31 and December 31 in l996 and l995.
5. Current Operations
As of December 31, 1996, the Distributor had released all
twelve films in which the Joint Venture has an interest. The
Joint Venture was not expected to recoup its investment in
eight of these films out of the proceeds from their
distribution. However, as a result of the Additional
Payments referred to below, the Partnership recouped its
investment in these films. For the years ended December 31,
1996, 1995 and 1994, motion picture production and
advertising costs were reduced by amortization of $10,000,
$696,000 and $652,000, respectively. In 1995, included in
amortization was a write-down of costs of $460,000 to current
net realizable value.
6. Receivables and Payables
An analysis of the Joint Venture's receivables and
payables is as follows:
AT DECEMBER 31, l996
Receivable Payable Payable
to
from to the
Distributor Columbia
Partnership
(000's omitted)
Net Proceeds and Gross
Receipts $ 5,974 $ 5,084 $ 890
AT DECEMBER 31,
1995
Receivable Payable
Payable to
from to the
Distributor Columbia
Partnership
(000's omitted)
Net Proceeds and Gross
Receipts $ 6,278 $ 5,655 $ 623
7. Foreign Exchange Gains and Losses
The distribution agreement between the Joint Venture and
the Distributor provides that revenues earned in foreign
currencies be valued as of the date that monies are remitted
or are "freely remittable" to the United States. Other
Expense for the year ended December 31, l994 of $146,000
represents the cumulative difference between the monies
remitted in U.S. dollars and the value previously recorded
based on the exchange rate at the time of revenue recognition
in the applicable international territory. No such revenue
valuation adjustment was necessary in 1996 or 1995.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Venturers
Tri-Star - Delphi IV Productions
In our opinion, the accompanying balance sheets and the
related statements of operations, of cash flows and of
venturers' capital present fairly, in all material respects,
the financial position of Tri-Star - Delphi IV Productions
at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Venture's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
Century City, California
March 14, l997
<PAGE>
TRI-STAR-DELPHI IV PRODUCTIONS
(A Joint Venture)
BALANCE SHEETS
(000's Omitted)
<TABLE>
<CAPTION>
December 31,
1996
1995
<S>
<C> <C>
ASSETS
Motion Picture Production and
Advertising
Costs, net of accumulated
amortization
of $108,490 and $108,473,
respectively
(Notes 1, 2 & 5) $ $
85 102
Motion Picture Costs Recoverable
from
Additional Payments (Notes 3, 5 1,853 1,835
& 6)
Receivable from TriStar
Pictures, Inc.
(Distributor) (Note 6)
913 1,083
Total $ $
Assets 2,851 3,020
LIABILITIES AND VENTURERS'
CAPITAL
Liabilities:
Payable to TriStar Pictures, $ $
Inc. (Note 6) 2,030 2,141
Payable to Delphi Film
Associates IV
(Note 6)
736 777
Total
Liabilities 2,766 2,918
Venturers' Capital (Notes 1 &
3):
TriStar Pictures, Inc. 85 102
Delphi Film Associates IV
-- --
Total
Venturers' Capital 85 102
Total
Liabilities and Venturers'
$ $
Capital 2,851 3,020
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
TRI-STAR-DELPHI IV PRODUCTIONS
(A Joint Venture)
STATEMENTS OF OPERATIONS
(000's Omitted)
<TABLE>
<CAPTION>
For the
Year Ended December 31,
1996
1995 1994
<S> <C> <C> <C>
Net Revenues From Motion
Picture
Exploitation (Note $ $ $
2) 380 547 1,318
Less: Amortization of
Motion
Picture
Production and
Advertising
Costs
(Notes 2 & 5)
17 205 277
Income from Operations 363 342 1,041
Additional Payments
Accrual
(Recapture) (Notes 3 18 5 (3,010
& 5) )
Interest Income -- -- 571
Other Expense (Note 7)
-- -- (508)
Net Income (Loss) $ $ $(1,90
381 347 6)
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
TRI-STAR-DELPHI IV PRODUCTIONS
(A Joint Venture)
STATEMENTS OF CASH FLOWS
(000's Omitted)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1996
1995 1994
<S>
<C> <C> <C>
Cash Flow From Operating
Activities:
Net Income (Loss) $ $ $
381 347 (1,906)
Adjustments to reconcile Net
Income (Loss)
to net cash provided by
operating activities:
Amortization of Motion Picture
Production and
Advertising Costs 17 205 277
Accrued Distributions to 152 46 25,236
Venturers
Changes in Assets and
Liabilities:
Decrease in Payable to (111) (6) (17,204)
TriStar Pictures, Inc.
Decrease (Increase) in
Receivable from
TriStar Pictures, Inc. 170 875 (405)
(Distributor)
(Increase) Decrease in
Motion Picture Costs
Recoverable from (18) (829) 25,641
Additional Payments
Decrease in Payable to
Delphi Film
Associates IV, net (41) (40) (7,832)
Decrease in Advance from
TriStar
Pictures, Inc.
(Distributor) -- -- (200)
Net Cash Provided by
Operating Activities 550 598 23,607
Cash Flow from Financing
Activities:
Distributions to Venturers
(550) (598) (23,607)
Net Cash Used by
Financing Activities (550) (598) (23,607)
Net Change in Cash -- -- --
Cash at beginning of year
-- -- --
Cash at end of year $ $ $
-- -- --
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
TRI-STAR-DELPHI IV PRODUCTIONS
(A Joint Venture)
STATEMENTS OF VENTURERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 3l, 1996, 1995 AND 1994
(000's Omitted)
<TABLE>
<CAPTION>
Delphi
TriStar Film
Total
Pictures, Associates
Venturers'
Inc. IV
Capital
<S> <C> <C>
<C>
Venturers' Capital as of $ $ $
January 1, 1994 549 35 584
Net (Loss) Income for the
Year Ended
December 31, 1994 (1,968) 62 (1,906)
Accrued Distributions to
Venturers 1,691 (62) 1,629
Venturers' Capital as of
December 31,
1994 272 35 307
Net Income for the Year
Ended
December 31, 1995 325 22 347
Accrued Distributions to
Venturers (495) (57) (552)
Venturers' Capital as of
December 31,
1995 102 -- 102
Net Income for the Year
Ended
December 31, 1996 310 71 381
Accrued Distributions to
Venturers (327) (71) (398)
Venturers' Capital as of
December 31,
1996 $ $ $
85 -- 85
See accompanying notes to the financial statements.
</TABLE>
<PAGE> TRI-STAR-DELPHI IV
PRODUCTIONS
(A Joint Venture)
NOTES TO FINANCIAL STATEMENTS
1. General
Tri-Star-Delphi IV Productions (the "Joint Venture") is a
joint venture between TriStar Pictures, Inc. (formerly Tri-
Star Pictures, Inc.) ("TSPI") ("TriStar") and Delphi Film
Associates IV, a New York limited partnership (the
"Partnership") formed in April 1985 to engage in the business
of producing, owning and exploiting feature length motion
pictures. Through the Joint Venture, TSPI has interests
ranging from approximately 5-62% and the Partnership has
interests ranging from approximately 5-23% in twelve films
(the "Joint Venture Films"). In addition, the Joint Venture
acquired a l0% participation interest in one film during l987
which is l00% owned by Delphi VI (as defined below). This
interest was derived from TSPI's interest in the film through
Delphi VI. The Partnership's interest in this film was
obtained in exchange for a portion of the Partnership's
interest in two other films which were conveyed to TSPI.
In addition, the Partnership, through the Joint Venture,
has a participation interest without cost to the Joint
Venture in two additional films. Generally, the remaining
interests in the Joint Venture Films are held by Tri-Star-
Delphi III Productions (a joint venture between Delphi Film
Associates III ("DFA III"), a New York limited partnership,
and TSPI), which was liquidated in December 1996, Tri-Star-
Delphi V Productions, a joint venture between Delphi Film
Associates V ("DFA V"), a New York limited partnership, and
TSPI, or Tri-Star-ML Delphi Premier Productions ("Delphi
VI"), a joint venture between ML Delphi Premier Partners,
L.P. ("MLDP"), a Delaware limited partnership, and TSPI.
As of December 31, 1996, the Joint Venture had released
all fifteen films in which the Joint Venture has an interest.
All of the Joint Venture's films are being distributed
pursuant to a distribution agreement with TSPI (the
"Distributor"). The general partner of the Partnership is
affiliated with the general partner of DFA V and MLDP.
The Partnership participates in a similar joint venture
(the "Other Venture") with Columbia Pictures Industries, Inc.
("Columbia").
Sony Pictures Entertainment Inc., the parent company of
Columbia and TriStar, is an indirect wholly-owned subsidiary
of Sony Corporation.
2. Summary of Significant Accounting Policies
Recognition of Revenue
The Joint Venture recognizes net revenues from the
Distributor on an accrual basis. Net revenues consist of: a)
the portion of net proceeds (gross receipts, less a
distribution fee, unless deferred, and other distribution and
releasing costs) or, if greater, gross receipts payable to
the Joint Venture under the distribution agreement, plus b)
accrued gross receipts (not in excess of the amount of the
advertising and promotion charge paid by the Joint Venture
plus an amount intended to approximate the cost of funds
incurred by the Partnership in connection with payment of
that charge). However, certain advances received by the
Distributor which are includable in gross receipts under the
distribution agreement are not reflected in the calculation
of net revenues until those advances are earned.
Distribution Fee
The Distributor is entitled to receive a distribution fee
equal to 17.5% on substantially all gross receipts of a film;
however, the Distributor's entitlement to this distribution
fee will be deferred until the Joint Venture has received
from the distribution of that film an amount equal to the
amount spent by the Joint Venture to produce or acquire an
interest in the film, other than amounts spent for payments
in the nature of interest ("Cost Return"). After Cost Return
for a film, in calculating subsequent payments to the Joint
Venture based on net proceeds, the Distributor will be
entitled to receive a distribution fee equal to l7.5% on
substantially all gross receipts of the film including gross
receipts prior to Cost Return.
Net revenues accrued at December 31, 1996, 1995, and 1994
have been computed without deducting a distribution fee to
the Distributor in light of the results of the films released
through those dates with the exception of three films. In
l996, the full distribution fee was deducted for one film and
a portion of the distribution fees has been deducted for two
other films. In 1995 and 1994, a portion of the distribution
fees was deducted for three films.
Motion Picture Production and Advertising Costs
Motion picture production costs include the direct cost of
production plus an overhead charge equivalent to 12.5% of the
direct production costs; these costs were capitalized as
incurred by the Joint Venture. Payments by the Joint Venture
in respect of the advertising and promotion charge payable to
the Distributor were capitalized as incurred by the Joint
Venture to the extent that those charges benefit future
periods. These costs are amortized under the individual film
forecast method based upon net revenue recognized in
proportion to the Joint Venture's estimate of ultimate net
revenues to be received. Unamortized production costs are
compared with net realizable value on a film by film basis
and unamortized advertising costs are compared with net
realizable value in the aggregate; losses are recognized to
the extent of any excess of costs over net realizable value.
If losses are indicated for films, the Additional Payments
described in Note 3, to the extent available, are accrued as
Motion Picture Costs Recoverable from Additional Payments.
3. Additional Payments (See Note 5)
The Joint Venture was entitled to a payment (an
"Additional Payment") from the Distributor with respect to
each film for which the Joint Venture had not received from
the film's distribution (or its sale) by February 1994 an
amount equal to the amount spent by the Joint Venture to
produce or acquire an interest in the film (other than
amounts spent for payments in the nature of interest) (an
"Unrecouped Film"). Each Additional Payment would be made in
the amount necessary for the Joint Venture to be repaid
(without interest) the amounts spent by it with respect to
the production or acquisition of an Unrecouped Film, other
than contributions for payments in the nature of interest,
but not more than the amount specified below. The Additional
Payment would be payable only to the extent of the
distribution fees received by the Distributor from the
distribution of all of the Joint Venture's films (reduced to
the extent of the Additional Payments made with respect to
other Unrecouped Films). The Additional Payments to the
Joint Venture based on distribution fees would be allocated
by the Joint Venture first to the Partnership, to the extent
necessary for the Partnership to recoup (without interest)
the amount of its contributions to the Joint Venture for the
production or acquisition of the Unrecouped Films (other than
contributions for payments in the nature of interest); any
excess would then be allocated to TSPI. If those
distribution fees were insufficient to enable the Distributor
to make the Additional Payments with respect to all
Unrecouped Films, gross receipts and net proceeds of each
remaining Unrecouped Film would be recalculated by including
as gross receipts in respect of that Unrecouped Film the
excess, if any, of the minimum license fees under the
Distributor's license agreement with Home Box Office, Inc.
and certain minimum amounts in respect of video cassette and
video disc exploitation over the amounts previously included
in the gross receipts of that Unrecouped Film in respect of
those arrangements. The Distributor would then make
Additional Payments to the Joint Venture to the extent of the
additional gross receipts or net proceeds payable to the
Joint Venture as a result of the recalculation, but only up
to the amount of the unrecouped contributions (other than
contributions for payments in the nature of interest) for the
production or acquisition of that Unrecouped Film; each
Additional Payment made on the basis of such recalculation
would be allocated between the Partnership and TSPI in
proportion to their respective interests in the applicable
Unrecouped Film. The Distributor is entitled to recoup the
Additional Payments made on either basis in respect of each
Unrecouped Film, with an amount in the nature of interest,
from the Joint Venture's share of subsequent gross receipts
or net proceeds of that Unrecouped Film and from the proceeds
of any sale of the Partnership's interest in that Unrecouped
Film or amounts allocable to that Unrecouped Film upon a sale
of the Partnership's interest in the Joint Venture. In
calculating the amount of distribution fees available for the
Additional Payments, no distribution fee would be deemed
received by the Distributor (and therefore no distribution
fee would be deemed available for the Additional Payment)
from a film with respect to which the most recent payment to
the Joint Venture was based on gross receipts or from a film
that did not reach Cost Return.
4. Income Taxes
No provision for income taxes is made in the Joint
Venture's financial statements since the venturers treat the
Joint Venture as a partnership for income tax purposes, with
all income tax consequences flowing directly to the
venturers.
As of October 31, 1996 and 1995 (the Joint Venture's tax
year end is October 31), the tax bases of the Joint Venture's
assets less liabilities exceeded amounts reported in the
financial statements at December 31, 1996 and 1995 by
approximately $2,731,000 and $2,602,000, respectively.
Management estimates that the tax bases of the Joint
Venture's assets and liabilities did not differ significantly
between October 31 and December 31 in l996 and l995.
5. Current Operations
As of December 31, 1996 the Distributor had released all
fifteen films in which the Joint Venture has an interest (see
Note 1). The Joint Venture did not recoup its investment in
ten of these films out of the proceeds from their
distribution. However, as a result of the Additional
Payments referred to below, and those required to be made in
future periods, the Partnership is expected to recoup its
investment in these films. For the years ended December 31,
l996, 1995 and 1994 motion picture production and advertising
costs have been reduced by amortization of $17,000, $205,000
and $277,000, respectively.
For the year ended December 31, 1996 the Joint Venture has
recorded an increase in the Additional Payment accrual of
$18,000 due to an increase in the amount of minimums
available for recoupment.
The Joint Venture received approximately $23,202,000 in
February l994, net of a $200,000 advance previously received
from the Distributor, representing the Joint Venture's
Additional Payment.
6. Receivables and Payables
An analysis of the Joint Venture's receivables and
payables is as follows:
AT DECEMBER 31, 1996
Receivable Payable Payable
to
from to the
Distributor TriStar
Partnership
(000's omitted)
Net Proceeds and Gross
Receipts $ 913
$ 569 $ 344
Accrued Additional
Payments 1,853 1,461 392
Total $ 2,766 $ 2,030 $ 736
AT DECEMBER 31, 1995
Receivable Payable Payable
to
from to the
Distributor TriStar
Partnership
(000's omitted)
Net Proceeds and Gross
Receipts $ 1,083
$ 698 $ 385
Accrued Additional
Payments 1,835
1,443 392
Total $ 2,918
$ 2,141 $ 777
7. Foreign Exchange Gains and Losses
The distribution agreement between the Joint Venture and the
Distributor provides that revenues earned in foreign currencies
be valued as of the date that monies are remitted or are "freely
remittable" to the United States. Other Expense for the year
ended December 31, l994 of $508,000 represents the cumulative
difference between the monies remitted in U.S. dollars and the
value previously recorded based on the exchange rate at the time
of revenue recognition in the applicable international territory.
No such revenue valuation adjustment was necessary in 1996 or
1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Balance Sheets and Statement of
Operations for the year ended December 31, 1996 Form 10K of
Delphi Film Associates IV and is qualified in its entirety
by reference to such financial statements.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 57,000
<SECURITIES> 991,000
<RECEIVABLES> 1,626,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,687,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 2,609,000
<TOTAL-LIABILITY-AND-EQUITY> 2,687,000
<SALES> 0
<TOTAL-REVENUES> 61,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 346,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 337,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 337,000
<EPS-PRIMARY> 42.00
<EPS-DILUTED> 0
</TABLE>
