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
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 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
Attn: Andre Anderson
3 World Financial Center,
New York, New York 29th Floor 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, 1997, 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, 1996.
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 participations 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. 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, 1996 there were 8,830
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 the
Financial Statements of the Partnership's Annual Report to Unitholders
for the year ended December 31, 1996, 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,
1996.
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, 1996 was approximately
$2,479,000 as compared to approximately $3,454,000 at December 31, 1995.
The $975,000 decrease is primarily attributable to the payment of the 1995
cash distribution totaling approximately $2,740,000, the payment of the
Partnership's 1995 management fee and the payment of Partnership expenses
during 1996 and offset by the receipt of the annual distribution of
proceeds from Fox in the amount of $2,030,000. The Partnership's cash
balance is expected to provide sufficient liquidity to enable the
Partnership to fund cash distributions and meet its operating expenses.
On February 20, 1997, the Partnership paid the 1996 annual distribution
totaling $1,995,000 of which $1,976,000 or $30.97 per Unit was paid to the
Limited Partners and approximately $19,000 was paid to the General Partner.
The Partnership's receivable from Fox totaled approximately $44,000 at
December 31, 1996 compared to approximately $277,000 at December 31, 1995.
The decrease is due to the collection in 1996 of motion picture revenue
from Fox.
Results of Operations
1996 compared to 1995
For the year ended December 31, 1996, the Partnership reported net income
of approximately $1,451,000 as compared to approximately $730,000 in 1995.
The increase in net income is primarily due to an increase in revenues
generated from motion picture exploitation in foreign pay and free
television markets and the domestic syndicated market. 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, 1996, 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
$1,797,000 and $97,000, respectively, compared to $1,046,000 and $46,000
during 1995. The increases in revenues from motion picture exploitation
and amortization of motion picture costs are primarily attributable to
higher revenue from the home video sell-through market and from new sales
in the U.S. free television market. The Partnership currently receives
revenues from the distribution of the films in ancillary markets.
Professional fees decreased from approximately $38,000 at December 31, 1995
to $21,000 at December 31, 1996 primarily due to a decrease in legal fees
incurred by the Partnership.
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 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.
ITEM 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1996. 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 & Chief Financial
Officer
Moshe Braver, 43, 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.
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,
1996.
(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,
1996, 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
INDEX TO FINANCIAL STATEMENTS
Balance Sheets
At December 31, 1996 and 1995 (1)
Statements of Partners' Capital
For the years ended December 31, 1996, 1995 and 1994 (1)
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994 (1)
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994 (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, 1996.
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 (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, 1996 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, 1996.
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 14, 1997
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 14, 1997
BY: /s/ Moshe Braver
Moshe Braver
Director and President
American Entertainment Partners L.P.
EXHIBIT 13(a)
1996 Annual Report
American Entertainment Partners L.P.
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 net revenue generated by the films as they are distributed in
different markets. To date, cumulative cash distributions total
approximately $1,128 per $1,000 Unit, representing approximately 113% 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
6 Notes to the Financial Statements
8 Report of Independent Auditors
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 800-223-3464
Message to Investors
Presented for your review is the 1996 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,
1996.
The Partnership continued to collect revenues from its interests in the Joint
Venture films during 1996. Currently, the Joint Venture films generate
revenues predominantly in domestic and foreign television syndication markets,
which typically represent the final markets to be exploited in a film's life
cycle. Through October 31, 1996, the Partnership had received payments totaling
$74,248,158 as compared to an original contribution after expenses to the Joint
Venture of $54,117,580. As discussed in prior reports, due to the mature stage
of the films future revenues received by the Partnership will most likely
decline.
Cash Distributions
The Partnership's annual distribution for 1996, in the amount of $30.97 per
$1,000 Unit, was paid to Limited Partners in February 1997. Cumulative cash
distributions to date total $1,128.49 per $1,000 Unit, which represents
approximately 113% of an investor's original investment. Currently, cash
distributions are paid on an annual basis. The Partnership's next cash
distribution is expected to be paid to investors in early 1998.
Based upon current projections of future revenue, the General Partner estimates
that investors will recover approximately 115% 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 113% contained in the 1995
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.
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 14, 1997
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,
1996. Graph content follows.
Films in Release
Cumulative
Payments
received from
Amount contributed Fox through
to Joint Venture October 31, 1996
Aliens $ 3,500,000 $ 8,318,000
The Fly 1,750,000 4,447,000
Jumpin' Jack Flash 6,470,000 6,471,000
Black Widow 4,405,000 4,987,000
Project X 6,260,000 3,853,000
Predator 6,700,000 15,821,000
Revenge of the Nerds II 3,460,000 4,756,000
Wall Street 5,280,000 11,913,000
Broadcast News 7,000,000 7,269,000
Off Limits 3,900,000 3,239,000
The Pick-up Artist 5,420,000 3,173,000
Financial Highlights (in thousands except per Unit data)
Years Ended December 31,
1996 1995 1994 1993 1992
Revenues from
motion picture
exploitation $ 1,797 $ 1,046 $ 2,255 $ 2,236 $ 2,618
Net Income 1,451 730 1,750 1,643 2,013
Net Income per
Limited
Partnership Unit 22.45 11.05 27.16 25.50 31.09
Total Assets 2,629 3,934 4,742 4,615 4,100
Total Liabilities 2,229 2,990 1,788 1,871 1,396
Total Partners'
Capital 400 944 2,954 2,744 2,704
Cash Distributions
/Unit (1) (2) (3)
First Quarter - - - - -
Second Quarter - - - - 25.71
Third Quarter - - - - -
Fourth Quarter 30.97 42.52 23.89 24.88 20.70
Totals 30.97 42.52 23.89 24.88 46.41
(1) Cash distributions were paid to investors on an annual basis during
1993, 1994, 1995 and 1996. 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, 1990 and 1991 totaled $41.40, $184.71, $378.75, $197.57, $98.54 and
$58.85, 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.
Balance Sheets At December 31, At December 31,
(000's Omitted) 1996 1995
Assets
Cash and cash equivalents $ 2,479 $ 3,454
Motion pictures released, net of
accumulated amortization
of $54,634 in 1996 and $54,537
in 1995 106 203
Receivable from Twentieth Century Fox 44 277
Total Assets $ 2,629 $ 3,934
Liabilities and Partners' Capital
Liabilities:
Distribution payable $ 1,995 $ 2,740
Accrued management fees 200 200
Accounts payable and accrued expenses 34 50
Total Liabilities 2,229 2,990
Partners' Capital:
General Partner _ _
Limited Partners (63,793.25 outstanding) 400 944
Total Partners' Capital 400 944
Total Liabilities and Partners' Capital $ 2,629 $ 3,934
Statements of Partners' Capital
For the years ended December 31, 1996, 1995 and 1994
(000's Omitted) General Limited
Partner Partners Total
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
Net Income 19 1,432 1,451
Distributions (19) (1,976) (1,995)
Balance at December 31, 1996 $ _ $ 400 $ 400
Statements of Operations
(000's Omitted Except Unit Information)
For the years ended December 31, 1996 1995 1994
Net Revenues
Revenues from motion picture exploitation $ 1,797 $ 1,046 $ 2,255
Less: Amortization of motion picture costs 97 46 215
Net Revenues 1,700 1,000 2,040
Other Income (Expenses)
Interest and miscellaneous income 51 49 26
Professional fees (21) (38) (35)
General and administrative (79) (81) (81)
Management fees (200) (200) (200)
Net Other Expenses (249) (270) (290)
Net Income $ 1,451 $ 730 $ 1,750
Net Income Allocated:
To the General Partner $ 19 $ 25 $ 17
To the Limited Partners 1,432 705 1,733
$ 1,451 $ 730 $ 1,750
Per limited partnership unit
(63,793.25 outstanding) $ 22.45 $ 11.05 $ 27.16
Statements of Cash Flows
(000's Omitted)
For the years ended December 31, 1996 1995 1994
Cash Flows From Operating Activities
Net Income $ 1,451 $ 730 $ 1,750
Adjustments to reconcile net
income to net cash provided
by operating activities:
Amortization of motion picture costs 97 46 215
Increase (decrease) in cash arising
from changes in operating assets
and liabilities
Receivable Twentieth Century Fox 233 2,074 (548)
Accounts payable and accrued expenses (16) _ (19)
Net cash provided by operating activities 1,765 2,850 1,398
Cash Flows From Financing Activities
Cash distributions (2,740) (1,538) (1,604)
Net cash used for financing activities (2,740) (1,538) (1,604)
Net increase (decrease) in cash and
cash equivalents (975) 1,312 (206)
Cash and cash equivalents,
beginning of period 3,454 2,142 2,348
Cash and cash equivalents, end of period $ 2,479 $ 3,454 $ 2,142
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
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 affiliate 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 $63,793,250.
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 their adjusted capital
contribution, 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 1996 and 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 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, 1996 and 1995 represents
accrued net revenues of approximately $44,000 and $277,000, 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 an annual management fee of $200,000
from which the General Partner pays certain expenses incurred in connection
with the management of the Partnership. 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 1994 management
fee in 1995, and its 1995 management fee in 1996. The Partnership accrued
$200,000 in management fees payable to the General Partner as of December 31,
1996.
8. Reconciliation of Financial Statement Net Income to Tax Basis
Net Income
The Partnership has reported for the years ended December 31, 1996, 1995 and
1994 net income for federal income tax purposes (tax basis) of approximately
$1,448,000, $1,343,000 and $645,000 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 balance sheets of American Entertainment
Partners L.P. as of December 31, 1996 and 1995, and the related statements of
operations, partners' capital, and cash flows for each of the three years in
the 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 American Entertainment
Partners L.P. at December 31, 1996 and 1995, and the results of 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.
ERNST & YOUNG LLP
Boston, Massachusetts
February 10, 1997
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 2,479,000
<SECURITIES> 000
<RECEIVABLES> 44,000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 2,523,000
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 2,629,000
<CURRENT-LIABILITIES> 2,229,000
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 400,000
<TOTAL-LIABILITY-AND-EQUITY> 2,629,000
<SALES> 000
<TOTAL-REVENUES> 1,797,000
<CGS> 000
<TOTAL-COSTS> 97,000
<OTHER-EXPENSES> 249,000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 1,451,000
<INCOME-TAX> 000
<INCOME-CONTINUING> 1,451,000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 1,451,000
<EPS-PRIMARY> 22.45
<EPS-DILUTED> 22.45
</TABLE>
