UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _____ to _____
Commission file number: 0-15514
AMERICAN ENTERTAINMENT PARTNERS L.P.
Exact name of registrant as specified in its charter
Delaware 06-1183659
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
3 World Financial Center, New York, New York
29th Floor Attn: Andre Anderson 10285-2900
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Depositary Units of Limited Partnership Interest
Title of Class
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 January 31, 1996, there were 63,793.25 depositary units of limited
partnership interests outstanding, of which all but 5 of such units were held
by non-affiliates. The aggregate market value of those interests is not
determinable because there is no active public market trading in the units.
Documents Incorporated by Reference: Portions of Parts II, III and IV are
incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995
PART I
Item 1. Business
(a) General
American Entertainment Partners L.P. (the "Partnership") was organized May 2,
1986 under the laws of the State of Delaware as a limited partnership. Through
its participation in Amercent Films (the "Joint Venture"), a joint venture with
Twentieth Century Fox Film Corporation ("Fox"), the Partnership produced,
financed, acquired interests in and continues to exploit feature length motion
picture films.
A public offering (the "Offering") of depositary units of limited partnership
interests (the "Units") was completed in July 1986 by the Partnership. A total
of 63,793.25 Units were sold at $1,000 per Unit, for aggregate offering
proceeds of $63,793,250.
The general partner of the Partnership is AEP Premiere Corporation, a Delaware
corporation (the "General Partner") (see Item 10). The Partnership has certain
consultation rights and, through a committee of the Joint Venture, may be
called upon to make certain determinations with respect to such films. Fox,
however, has day-to-day control of creative and artistic matters in connection
with films in which the Joint Venture invests.
Joint Venture Films, Participation Films and Additional Films
The films which the Partnership acquired interests or participations in can be
classified into three categories. First, the Joint Venture produced "Joint
Venture Films" pursuant to the product origination agreement with Fox (the
"Product Origination Agreement"). To produce a Joint Venture Film, the Joint
Venture engaged Fox under a production services agreement (the "Production
Services Agreement") to produce such film on behalf of the Joint Venture and to
provide all production services necessary to complete and deliver the film to
the Joint Venture. The second category of films in which the Joint Venture
invested were films in which the Joint Venture acquired participations
("Participation Films"). Participation Films are films acquired by another
joint venture in which Fox has an interest. The Joint Venture does not own any
of the rights in the Participation Films but instead the Partnership made
capital contributions to the Joint Venture which were used to acquire
participation s in such films. The third category of films, "Additional
Films," were films which did not meet the criteria as a Joint Venture Film but
which the Joint Venture could have, upon agreement of Fox and the Partnership,
acquired.
The Joint Venture has invested all the net proceeds of the Offering in films,
therefore, no additional investments in films will be made by the Joint
Venture.
Distribution Agreement and Revenues of the Joint Venture
The Joint Venture Films are distributed pursuant to a distribution agreement
between the Joint Venture and Fox (the "Distribution Agreement"), but Fox is
responsible for and makes all decisions with respect to distribution. A
distribution committee of the Joint Venture, consisting of one designee of Fox
and two designees of the Partnership (the "Distribution Committee"), has the
right to consult periodically with Fox concerning the distribution of Joint
Venture Films. Although the Distribution Committee supervises Fox's
performance as a distributor, the Distribution Agreement does not set forth any
objective standards to measure Fox's performance as a distributor and does not
impose minimum commitment obligations with respect to the distribution and
exploitation of Joint Venture Films. The Distribution Committee, however, is
responsible for certain decisions including, among others, the exercise by the
Joint Venture of the Joint Venture's right not to produce a film by reason of
certain interests of third party participants in the film.
The Joint Venture receives all of the net proceeds from the Joint Venture Films
in accordance with the terms of the Distribution Agreement. The terms of the
Distribution Agreement are disclosed in a Joint Venture agreement (the "Joint
Venture Agreement") which is incorporated by reference to the Partnership's
Registration Statement No. 33-5393 on Form S-1 as filed with the Securities and
Exchange Commission on July 2, 1986.
Films in Release
The Partnership's percentage participation in the films in which the
Partnership has an interest through the Joint Venture, and certain other
information, is set forth below:
Amount Partnership's
Contributed Percentage
Release to Joint Participation in
Title Date Venture Net Proceeds
Joint Venture Films:
Black Widow February 1987 $ 4,405,428 34.79%
Project X April 1987 6,259,399 31.18
Predator June 1987 6,691,070 30.13
Revenge of the
Nerds II: Nerds in
Paradise July 1987 3,463,408 34.87
Wall Street December 1987 5,284,830 29.82
Broadcast News December 1987 7,000,000 26.11
Off Limits March 1988 3,874,389 32.61
36,978,524
Participation Films:
Aliens July 1986 3,500,000 12.65
The Fly August 1986 1,750,000 15.25
Jumpin' Jack Flash October 1986 6,471,363 30.66
11,721,363
Additional Film:
The Pick-Up Artist September 1987 5,417,693 33.10
$54,117,580
Competition
Distribution of motion pictures is a highly competitive business. Fox competes
with several other prominent motion picture distributors, some of which have
substantially greater financial and personnel resources, in licensing motion
pictures to theaters and other markets. The Partnership's films currently are
appearing primarily in ancillary markets such as domestic and foreign
syndication, basic cable and home video. In addition to distributing the
motion pictures of the Joint Venture in these markets, Fox is distributing
other motion pictures produced by or on behalf of Fox and motion pictures as to
which Fox has acquired distribution rights. These films, as well as films
released by other motion picture distributors, are competing with films which
the Joint Venture produced and films in which it has participations.
Relationship with Fox
Although Fox had substantial discretion with respect to other aspects of the
films, because all the films have been produced, Fox currently has substantial
discretion only in the distribution of films in which the Joint Venture has an
interest.
The Joint Venture's (and therefore the Partnership's) receipt of net proceeds
from the exploitation of the films is dependent upon the compliance by Fox with
its obligations under agreements entered into between it and the Joint Venture.
The term "net proceeds" is utilized solely as a measuring device to calculate
amounts payable to the Joint Venture by Fox and no specific funds will be
segregated for payment to the Joint Venture. Fox's payment obligations are not
secured, and the Joint Venture relies on the general credit of Fox to receive
any amounts due to it.
Fox Buy-Out Option
Pursuant to the terms of the Partnership Agreement, Fox's right to purchase the
Partnership's interest in the Joint Venture films at an appraised fair market
value determined by an independent, third-party appraisal commenced on June 30,
1995. To date, the Partnership has received no indication that Fox intends to
exercise this option. It is uncertain as of the filing of this report when or
if Fox might elect to exercise this option.
Changes in the Motion Picture Industry
The entertainment business in general, and the motion picture business in
particular, has undergone significant changes, primarily due to technological
developments such as the advent of home video equipment. While these
developments have resulted in the availability of alternative forms of leisure
time entertainment, which may have a negative impact on the Partnership's films
while in domestic theatrical release, the developments have also resulted in
additional sources of revenue for the Partnership's films. During the last
several years, revenues from domestic pay television have increased (although
the increases have moderated), and revenues from video cassettes and foreign
television have increased significantly. Other technologies continue to be
developed. The level of domestic theatrical success, however, remains a
critical factor in generating revenues in the ancillary markets where the
Partnership's films are currently distributed. Given the rapidity of
technological development and shifting consumer tastes, it is impossible to
predict what effect these technological and other changes will have on the
potential overall revenues for the Joint Venture's feature length motion
pictures in the future.
Employees
The Partnership has no employees.
ITEM 2. Properties
The principal offices of the Partnership and the General Partner are located at
3 World Financial Center, 29th Floor, New York, New York. The Partnership pays
no rent. All other charges for space and administrative facilities are borne
by an affiliate of the General Partner.
ITEM 3. Legal Proceedings
The Registrant is not a party to any material pending legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
PART II
ITEM 5. Market for the Partnership's Limited Partnership Interests and Related
Security Holder Matters
(a)(b) Market Information and Holders - The Partnership is a limited
partnership and there is no established public market for the Partnership's
Units. As of December 31, 1995 there were 8,825 holders of record
("Unitholders") of the Partnership's Units.
(c) Distributions - Incorporated by reference to the sections "Cash
Distributions", "Financial Highlights" and Note 3 of the Notes to Financial
Statements of the Partnership's Annual Report to Unitholders for the year ended
December 31, 1995, which is filed as an exhibit under Item 14 and incorporated
herein by reference.
ITEM 6. Selected Financial Data
Incorporated by reference to the "Financial Highlights" table of the
Partnership's Annual Report to Unitholders for the year ended December 31,
1995.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership's principal source of funds is the proceeds received from Fox
pursuant to the Distribution Agreement, as defined in the Partnership's
prospectus. According to the terms set forth in the Partnership Agreement,
effective January 1993, the Partnership receives proceeds from Fox on an annual
basis. Accordingly, all future cash distributions from the Partnership's
investment in the Joint Venture films will be paid to Limited Partners on an
annual basis.
Pursuant to the terms of the Partnership Agreement, Fox's option to purchase
the Partnership's interests in the Joint Venture films at an appraised fair
market value determined by an independent third party appraisal commenced on
June 30, 1995. At present, the Partnership has received no indication that Fox
intends to exercise this option.
The Partnership's cash balance at December 31, 1995 was approximately
$3,454,000 as compared to approximately $2,142,000 at December 31, 1994. The
$1,312,000 increase is primarily attributable to the collection of prior year
receivables from Fox partially offset by the payment of the following: i) the
1994 cash distribution of approximately $1,538,000 in February 1995, ii) the
payment of the Partnership's 1994 annual management fee in 1995 and iii) the
payment of 1995 Partnership expenses. The Partnership's cash balance is
expected to provide sufficient liquidity to enable the Partnership to meet its
expenses.
In February 1996, the Partnership paid the 1995 annual distribution totaling
$2,740,174 of which $2,712,772 or $42.52 per Unit was paid to the Limited
Partners and $27,402 was paid to the General Partner.
During the third quarter of 1993, the General Partner engaged an independent
audit firm to perform a distribution audit to ensure that the Partnership is
receiving its allocable share of the revenues generated by the Joint Venture
films. The audit was completed during the second quarter of 1994, and the
results indicated that, overall, Fox has properly allocated revenues to the
Partnership. Nevertheless, it was determined that approximately $260,000 of
additional revenue was owed to the Partnership by Fox, of which approximately
$185,000 was received by the Partnership during 1994. In accordance with a
settlement agreement between Fox and the Partnership executed in January 1995,
the Partnership received the remaining $75,000 on February 2, 1995.
The Partnership's receivable from Fox balance totaled approximately $277,000 at
December 31, 1995 compared to approximately $2,351,000 at December 31, 1994.
The decrease is due to the collection in 1995 of motion picture revenue from
Fox and the collection of $75,000 from Fox on February 2, 1995 mentioned above,
partially offset by the Joint Venture's recognition of motion picture revenue
for 1995.
Results of Operations
1995 compared to 1994
For the year ended December 31, 1995, the Partnership reported net income of
approximately $730,000 as compared to approximately $1,750,000 for the same
period in 1994. The decrease in net income is primarily the result of
decreases in revenues from motion picture exploitation. Motion picture profits
are based on current estimates of ultimate film revenues and costs. These
estimates are subject to review periodically as more information about a film's
distribution becomes available. Such reviews can result in significant
adjustments to prior estimates.
For the year ended December 31, 1995, the Partnership recognized revenues from
motion picture exploitation and amortization of motion picture costs with
respect to its investment in the released films of approximately $1,046,000 and
$46,000, respectively, compared to $2,255,000 and $215,000 during 1994. The
decreases in revenues from motion picture exploitation and amortization of
motion picture costs are primarily attributable to the mature stage of the
films. The Partnership currently receives revenues from the distribution of
the films in ancillary markets.
Interest income for the year ended December 31, 1995 totaled $49,000 compared
to $26,000 during 1994. The increase is primarily due to higher interest rates
earned on the Partnership's cash balance.
1994 compared to 1993
For the year ended December 31, 1994, the Partnership recognized revenues from
motion picture exploitation and amortization of motion picture costs with
respect to its investment in the released films of approximately $2,255,000 and
$215,000, respectively, as compared to approximately $2,236,000 and $244,000,
for the year ended December 31, 1993. The Partnership currently receives
revenues from the distribution of the films in ancillary markets.
For the year ended December 31, 1994, the Partnership reported net income of
approximately $1,750,000, as compared to net income of approximately $1,643,000
for the year ended December 31, 1993. The increase in net income is primarily
the result of a decrease in professional fees, an increase in interest income
and an increase in revenues from motion picture exploitation. Motion picture
profits are based on current estimates of ultimate film revenues and costs.
These estimates are subject to review periodically as more information about a
film's distribution becomes available. Such reviews can result in significant
adjustments to prior estimates.
Interest income increased from approximately $16,000 for the year ended
December 31, 1993 to approximately $26,000 for the year ended December 31, 1994
primarily as a result of the Partnership maintaining a higher average invested
cash balance during 1994 and an increase in interest rates.
Professional fees for the years ended December 31, 1994 and 1993, were
approximately $35,000 and $85,000, respectively. The decrease is attributable
to consulting fees incurred in 1993 associated with the evaluation of a
potential buy-out by Fox of the Partnership's interests in the Joint Venture
films, a reduction in the Partnership's 1994 annual audit fee and a decrease
during 1994 in expenses associated with the film distribution audit.
ITEM 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995. For a listing of financial statements and
schedules, see Item 14a.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Partnership
The General Partner of the Partnership is AEP Premiere Corporation, a Delaware
corporation formed on May 20, 1985. It is an affiliate of Lehman Brothers Inc.
("Lehman Brothers").
Certain officers and directors of the General Partner are now serving (or in
the past have served) as officers or directors of entities which act as general
partners of a number of real estate limited partnerships which have sought
protection under the provisions of the federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been affected adversely by the economic conditions in the markets in which that
real estate is located and, consequently, the partnerships sought protection of
the bankruptcy laws to protect the partnerships' assets from loss through
foreclosure.
Name Office
Moshe Braver Director & President
Joseph Donaldson Vice President & Chief Financial Officer
Moshe Braver, 42, is currently a Managing Director of Lehman Brothers and has
held such position since October 1985. During this time, he has held positions
with the Business Analysis Group, International and Capital Markets
Administration and currently, with the Diversified Asset Group. Mr. Braver
joined Shearson Lehman Brothers in August 1983 as Senior Vice President. Prior
to joining Shearson, Mr. Braver was employed by the accounting firm of Coopers
& Lybrand from January 1975 through August 1983 as an Audit Manager. He
received a Bachelor of Business Administration degree from Bernard Baruch
College in January 1975 and is a Certified Public Accountant.
Joseph Donaldson, 32, serves as a Vice President of Lehman Brothers in its
Diversified Asset Group and has held such position since November 1990. From
October 1988 to October 1990, Mr. Donaldson held the position of Assistant
Manager with the Internal Audit Department of Citibank's Investment Bank.
Prior to that, Mr. Donaldson was employed with Price Waterhouse and Company.
Mr. Donaldson received a B.B.A. in accounting from the University of Georgia
and is a Certified Public Accountant.
ITEM 11. Executive Compensation
Neither the General Partner nor any of its officers or directors received any
compensation from the Partnership.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners - No person is known to
beneficially own in excess of 5% of the Units of the Partnership.
(b) Security Ownership of Management - No officers or directors of the
General Partner beneficially owned any Units of the Partnership as of
December 31, 1995.
(c) Changes in Control - None
ITEM 13. Certain Relationships and Related Transactions
The Partnership's operations relating to the production, acquisition of
interests and participations and exploitation of films through the Joint
Venture involves the following agreements with Fox: Joint Venture Agreement,
Product Origination Agreement, Production Services Agreement (with respect to
Joint Venture Films produced by Fox as the production services company),
Participation Agreement and Distribution Agreement. See the Joint Venture
Agreement which is incorporated by reference to the Partnership's Registration
Statement No. 33-5393 on Form S-1 as filed with the Securities and Exchange
Commission on July 2, 1986.
First Data Investor Services Group, formerly The Shareholder Services Group,
provides partnership accounting and investor relations services for the
Partnership. Prior to May 1993, those services were provided by an affiliate
of the General Partner. Transfer agent services and certain tax reporting
services are provided by Service Data Corporation. Both First Data Investor
Services Group and Service Data Corporation are unaffiliated companies.
For additional information on related transactions with affiliates, see notes
5, 6 and 7 of the Notes to the Financial Statements of the Partnership's Annual
Report to Unitholders for the year ended December 31, 1995, which is
incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
AMERICAN ENTERTAINMENT PARTNERS L.P.
(a Delaware limited partnership)
INDEX TO FINANCIAL STATEMENTS
Statements of Financial Condition
As of December 31, 1995 and 1994 (1)
Statements of Partners' Capital
For the years ended December 31, 1995, 1994 and 1993 (1)
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993 (1)
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993 (1)
Notes to the Financial Statements (1)
Report of Independent Auditors (1)
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1995.
2. Financial Statement Schedules
No financial statement schedules have been filed as part of
this report as none are required.
3. Exhibits
Exhibit No.
* Certificate of Limited Partnership 3 (b)
* Certificate of Limited Partnership 3 (a)
* Form of Agreement of Limited Partnership 3 (b)
* Form of Joint Venture Agreement 10 (b)
* Form of Distribution Rights Acquisition Agreement 10 (c)
* Form of Production Services Agreement 10 (d)
* Form of Product Origination Agreement 10 (e)
* Form of Participation Agreement 10 (f)
* Form of Guarantee 10 (g)
Annual Report to Unitholders for the year ended
December 31, 1995 13 (a)
Financial Data Schedule 27
* Incorporated by reference to the Partnership's Registration
Statement No. 33-5393 on Form S-1 as filed with the Securities
and Exchange Commission on July 2, 1986.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the year ended December 31, 1995.
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 22, 1996
AMERICAN ENTERTAINMENT PARTNERS L.P.
BY: AEP Premiere Corporation
General Partner
BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and 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.
AEP PREMIERE CORPORATION
General Partner
Date: March 22, 1996
BY: /s/ Moshe Braver
Moshe Braver
Director and President
Date: March 22, 1996
BY: /s/ Joseph Donaldson
Joseph Donaldson
Vice President and
Chief Financial Officer
American Entertainment Partners L.P.
EXHIBIT 13(a)
American Entertainment Partners L.P.
1995 Annual Report
American Entertainment Partners L.P. (the "Partnership") is a limited
partnership formed in 1986 for the purpose of contributing funds to a joint
venture (the "Joint Venture") with Twentieth Century Fox Film Corporation
("Fox"). The Joint Venture acquired interests in eleven feature-length
motion pictures. The Partnership receives a percentage of the revenue
generated by the films as they are distributed in different markets. To
date, cumulative cash distributions total approximately $1,098 per $1,000
Unit, representing approximately 110% of an investor's original investment.
Films in Release Release Date
Aliens July 1986
The Fly August 1986
Jumpin' Jack Flash October 1986
Black Widow February 1987
Project X April 1987
Predator June 1987
Revenge of the Nerds II July 1987
The Pick-Up Artist September 1987
Wall Street December 1987
Broadcast News December 1987
Off Limits March 1988
Contents
1 Message to Investors
2 Financial Overview
3 Financial Statements
5 Notes to the Financial Statements
7 Report of Independent Auditors
Message to Investors
Presented for your review is the 1995 Annual Report for American Entertainment
Partners L.P. This report provides an update on the status of the
Partnership's investment in the Joint Venture films, financial highlights and
the Partnership's audited financial statements for the year ended December 31,
1995.
The Partnership continued to collect revenues from its interests in the Joint
Venture films during 1995. Currently, the Joint Venture films generate
revenues predominantly in both domestic and foreign television syndication
markets, which typically represent the final markets to be exploited in a
film's life cycle. Through October 31, 1995, the Partnership had received
payments totaling $72,218,449 as compared to an original contribution after
expenses to the Joint Venture of $54,117,580. As discussed in prior reports,
the mature stage of the films will most likely result in declines in the amount
of future revenues received by the Partnership.
Cash Distributions
The Partnership's annual distribution for 1995, in the amount of $42.52 per
$1,000 Unit, was paid to Limited Partners in February 1996. Cumulative cash
distributions to date total $1,097.52 per $1,000 Unit, which represents
approximately 110% of an investor's original investment. Currently, cash
distributions are paid on an annual basis. The Partnership's next cash
distribution will be paid to investors in early 1997.
Based upon current projections of future revenue, the General Partner estimates
that investors will recover approximately 113% of their original investment in
the Partnership, including the distributions which have been paid to date.
This represents an upward revision from the estimate of 109% contained in the
1994 Annual Report. Please note that this projected return is based on
estimates which the General Partner believes to be reasonable. Such estimates,
however, are subject to change.
As we previously reported, the General Partner engaged a public accounting firm
to perform a distribution audit to ensure that the Partnership had received its
allocable share of the revenues generated by the Joint Venture films. The
audit was completed during the second quarter of 1994. The results of the
audit indicated that, overall, Fox properly allocated revenues to the
Partnership. Nevertheless, it was determined that approximately $260,000 of
additional revenue was owed to the Partnership by Fox. Approximately $185,000
of this amount was paid to the Partnership during 1994. In accordance with a
settlement agreement between Fox and the Partnership executed in January 1995,
the Partnership received the remaining $75,000 on February 2, 1995.
Summary
Pursuant to the terms of the Joint Venture Agreement, Fox's right to purchase
the Partnership's interest in the Joint Venture films at an appraised fair
market value determined by an independent appraisal commenced on June 30, 1995.
To date, the Partnership has received no indication that Fox intends to
exercise this option. Consequently, the Partnership will focus its efforts on
maximizing the return on your investment and continue to make cash
distributions from available cash flow on an annual basis. We will update you
on the Partnership's status in future correspondence.
Very truly yours,
AEP Premiere Corporation
General Partner
/s/ Moshe Braver
Moshe Braver
President
March 22, 1996
Financial Overview
Graph detailing amounts contributed by the Partnership to the Joint Venture and
cumulative payments received by the Partnership from Fox through October 31,
1995. Graph content follows:
Films in Release
Cumulative
payments
received from
Amount contributed Fox through
to Joint Venture October 31, 1995
Aliens $ 3,500,000 $ 8,080,000
The Fly 1,750,000 4,410,000
Jumpin' Jack Flash 6,470,000 6,470,000
Black Widow 4,405,000 4,870,000
Project X 6,260,000 3,800,000
Predator 6,700,000 15,280,000
Revenge of the Nerds II 3,460,000 4,690,000
Wall Street 5,280,000 11,510,000
Broadcast News 7,000,000 7,090,000
Off Limits 3,900,000 3,030,000
The Pick-up Artist 5,420,000 2,990,000
Financial Highlights (in thousands except per Unit data)
Years Ended December 31,
1995 1994 1993 1992 1991
Revenues from
motion picture
exploitation $ 1,046 $ 2,255 $ 2,236 $ 2,618 $ 4,520
Net Income 730 1,750 1,643 2,013 3,580
Net Income per
Limited Partnership
Unit 11.05 27.16 25.50 31.09 55.52
Total Assets 3,934 4,742 4,615 4,100 4,733
Total Liabilities 2,990 1,788 1,871 1,396 1,051
Total Partners' Capital 944 2,954 2,744 2,704 3,682
Cash Distributions/Unit (1) (2) (3)
First Quarter ---- ---- ---- ---- 11.22
Second Quarter ---- ---- ---- 25.71 17.63
Third Quarter ---- ---- ---- ---- 15.25
Fourth Quarter 42.52 23.89 24.88 20.70 14.75
Totals 42.52 23.89 24.88 46.41 58.85
(1) Cash distributions were paid to investors on an annual basis
during 1993, 1994 and 1995. All future distributions will be
paid on an annual basis.
(2) Cash distributions were paid to investors on a semiannual basis
during 1992.
(3) Distributions paid to investors on a per Unit basis in 1986,
1987, 1988, 1989 and 1990 totaled $41.40, $184.71, $378.75,
$197.57 and $98.54, respectively.
The financial data set forth above reflects the Partnership's pro rata
share of all assets, liabilities, revenues and expenses of the Joint
Venture.
Statements of Financial Condition
December 31, 1995 and 1994
(000's Omitted)
Assets 1995 1994
Cash and cash equivalents $ 3,454 $ 2,142
Motion pictures released, net of accumulated amortization
of $54,537 in 1995 and $54,491 in 1994 203 249
Receivable from Twentieth Century Fox 277 2,351
Total Assets $ 3,934 $ 4,742
Liabilities and Partners' Capital
Liabilities:
Distribution payable $ 2,740 $ 1,538
Accrued management fees 200 200
Accounts payable and accrued expenses 50 50
Total Liabilities 2,990 1,788
Partners' Capital:
General Partner - 2
Limited Partners 944 2,952
Total Partners' Capital 944 2,954
Total Liabilities and Partners' Capital $ 3,934 $ 4,742
Statements of Partners' Capital
For the years ended December 31, 1995, 1994 and 1993
(000's Omitted)
General Limited
Partner Partners Total
Balance at December 31, 1992 $---- $ 2,704 $ 2,704
Net income 16 1,627 1,643
Distributions (16) (1,587) (1,603)
Balance at December 31, 1993 2,744 2,744
Net income 17 1,733 1,750
Distributions (15) (1,525) (1,540)
Balance at December 31, 1994 2 2,952 2,954
Net income 25 705 730
Distributions (27) (2,713) (2,740)
Balance at December 31, 1995 $---- $ 944 $ 944
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
(000's Omitted Except Unit Information)
Net Revenues 1995 1994 1993
Revenues from motion picture exploitation $ 1,046 $ 2,255 $ 2,236
Less: Amortization of motion picture costs 46 215 244
Net Revenues 1,000 2,040 1,992
Other Income (Expenses)
Interest income 49 26 16
Professional fees (38) (35) (85)
General and administrative (81) (81) (80)
Management fees (200) (200) (200)
Net Other Expenses (270) (290) (349)
Net Income $ 730 $ 1,750 $ 1,643
Net Income Allocated:
To the General Partner $ 25 $ 17 $ 16
To the Limited Partners 705 1,733 1,627
$ 730 $ 1,750 $ 1,643
Per limited partnership unit
(63,793.25 outstanding) $ 11.05 $ 27.16 $ 25.50
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
(000's Omitted)
Cash Flows from Operating Activities: 1995 1994 1993
Net income $ 730 $ 1,750 $ 1,643
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of motion picture costs 46 215 244
Increase (decrease) in cash arising
from changes in operating assets and
liabilities:
Receivable from Twentieth Century Fox 2,074 (548) (122)
Accrued management fees 200
Accounts payable and accrued expenses (19) 7
Net cash provided by operating activities 2,850 1,398 1,972
Cash Flows from Financing Activities:
Cash distributions (1,538) (1,604) (1,335)
Net cash used for financing activities (1,538) (1,604) (1,335)
Net increase (decrease) in cash and
cash equivalents 1,312 (206) 637
Cash and cash equivalents at beginning of period 2,142 2,348 1,711
Cash and cash equivalents at end of period $ 3,454 $ 2,142 $ 2,348
Notes to the Financial Statements
December 31, 1995, 1994 and 1993
1. Organization
American Entertainment Partners L.P. (the "Partnership") is a limited
partnership which was organized May 2, 1986 under the laws of the State of
Delaware to produce, finance, acquire interests in and exploit feature length
motion picture films through its participation in Amercent Films (the "Joint
Venture"), a Joint Venture with Twentieth Century Fox Film Corporation ("Fox").
AEP Premiere Corporation, formerly Shearson Premiere Corporation, is the
general partner (the "General Partner") of the Partnership and is an indirect
wholly-owned subsidiary of Lehman Brothers. On July 31, 1993, certain of
Shearson Lehman Brothers, Inc.'s domestic retail brokerage and management
businesses were sold to Smith Barney, Harris Upham & Co, Inc. Included in the
purchase was the name "Shearson." Consequently, the General Partner's name was
changed to AEP Premiere Corporation to delete any reference to "Shearson."
A public offering (the "Offering") of depositary units of limited partnership
interests (the "Units") was completed in July, 1986 by the Partnership. A
total of 63,793.25 Units were sold at $1,000 per Unit totaling approximately
$63,793,000.
2. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis
of accounting in accordance with generally accepted accounting principles.
Revenues are recognized as earned and expenses are recorded as obligations are
incurred.
Cash Equivalents
Cash equivalents consist of short-term highly liquid investments with
maturities of three months or less from the date of issuance. The carrying
amount approximates fair value because of the short maturity of these
instruments.
Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to a
concentration of credit risk principally consist of cash in excess of the
financial institutions' insurance limits. The Partnership invests available
cash with high credit quality financial institutions.
Revenue Recognition
Net revenues from motion picture exploitation consist of the Partnership's pro
rata share of revenues from the licensing of film exhibition rights, less
related expenses for prints and advertising, other distribution expenses,
participations to third parties and distribution fees, unless deferred (see
Note 6).
Amortization of Motion Picture Costs Costs, including production administration
fees, which benefit future periods are capitalized. Amortization is computed
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 costs are compared with net realizable value on a film
by film basis, and losses are recognized to the extent costs exceed estimated
net realizable value.
Income Taxes
No provision for income taxes has been made in the financial statements since
such taxes are the responsibility of the individual partners rather than that
of the Partnership.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Partnership Allocations
The Partnership Agreement ("Agreement") substantially provides the following:
Cash Distributions Cash distributions will be made at the discretion of the
General Partner and allocated 1% to the General Partner and 99% to the
Unitholders, until such time as the Unitholders have received a return of
capital, as defined in the Agreement. Thereafter, cash will be distributed 15%
to the General Partner and 85% to the Unitholders.
Allocation of Losses Losses in any fiscal year shall be allocated 15% to the
General Partner and 85% to the Unitholders, except that if the Unitholders have
an Unallocated Return, as defined in the Agreement, then 1% shall be allocated
to the General Partner and 99% to the Unitholders. In any event, losses will
not be allocated to Unitholders if such allocation would cause or increase a
deficit in the Unitholders' capital accounts.
Allocation of Profits Profits in any fiscal year shall be allocated 1% to the
General Partner and 99% to the Unitholders until the Unallocated Return, as
defined in the Agreement, is reduced to zero; thereafter, 15% shall be
allocated to the General Partner and 85% to the Unitholders.
Notwithstanding the foregoing provisions, the Agreement provides that to the
extent the General Partner has a negative capital account at any time, profits
shall be allocated to the General Partner until the capital account has been
increased to zero.
In 1995, pursuant to the provisions of the Partnership Agreement described
above, income was allocated to the General Partner to increase its negative
capital account to zero.
Dissolution of Partnership
If, upon dissolution of the Partnership, the General Partner has a negative
capital account, it shall contribute capital equal to the amount of the
deficit. In no event, however, shall the required capital contribution be more
than 1.01% of total capital contributed by the Unitholders.
4. Interests and Participations in Motion Pictures
As of December 31, 1987, the Partnership had invested approximately $54,740,000
in eleven films of which approximately $54,118,000 was contributed to the Joint
Venture, and approximately $622,000 of production administration fees were paid
by the Partnership to the General Partner. As this represents the total funds
available for investment in films, no further investment in films will be made
by the Partnership.
The Partnership has a participation interest in three films not produced by the
Joint Venture and an interest in eight films produced by the Joint Venture.
All of the eleven films invested in by the Partnership were released between
July 1986 and March 1988.
5. Transactions with Fox
Fox, as distributor of Joint Venture films, has entered into licensing
agreements with other Fox affiliated companies in the United States and United
Kingdom television markets. In the United States, Fox has licensed seven Joint
Venture and participation films to Fox Television Stations, Inc., a Fox
affiliate, and eight Joint Venture and participation films to Fox Broadcasting
Company, a Fox affiliate, for the free television market. In the United
Kingdom, Fox has licensed all of the Joint Venture films to British Sky
Broadcasting, a Fox affiliate, for the pay television market.
The receivable from Fox as distributor at December 31, 1995 and 1994 represents
accrued net revenues of approximately $277,000 and $2,351,000, respectively.
No interest is charged on amounts receivable from or payable to Fox.
6. Deferred Distribution Fee
Fox, as distributor, retains a distribution fee of 17-1/2% from substantially
all gross receipts of the films. The fee is deferred for a film until the
Joint Venture receives, from the distribution of that film, an amount equal to
its investment in the film. The distribution fees for six films have been
earned since the Joint Venture has received distributions from such films
greater than its investment. A portion of the distribution fee for one of the
remaining five films released has been earned since the Joint Venture has
received distributions from such films equal to its investment. No
distribution fees are expected to be earned by Fox for the other four films.
7. Transactions with Related Parties
The General Partner is entitled to receive (i) an annual management fee of
$200,000 from which the General Partner pays certain expenses incurred in
connection with the management of the Partnership, and (ii) a production
administration fee equal to 1.15% of the Partnership's aggregate capital
contributions to the Joint Venture. The General Partner waived its right to
management fees from January 1, 1989 through December 31, 1992, which totaled
$800,000. The Partnership paid the General Partner its 1993 management fee in
1994, and its 1994 management fee in 1995. The Partnership accrued $200,000 in
management fees payable to the General Partner as of December 31, 1995.
8. Reconciliation of Financial Statement Net Income to Tax Basis Net Income
The Partnership has reported for the years ended December 31, 1995, 1994 and
1993 net income for federal income tax purposes (tax basis) of approximately
$1,343,000, $645,000 and $1,706,000, respectively. Differences between
financial statement net income and tax basis net income are due to the timing
of revenue recognition and related amortization of motion picture costs.
Report of Independent Auditors
To Partners
American Entertainment Partners L.P.
We have audited the accompanying statements of financial condition of American
Entertainment Partners L.P. as of December 31, 1995 and 1994, and the related
statements of operations, partners' capital, and cash flows for each of the
three years in the period ended December 31, 1995. 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 American Entertainment
Partners L.P. at December 31, 1995 and 1994, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 6, 1996
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