FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-16823
SILVER SCREEN PARTNERS III, L.P.
(A Delaware Limited Partnership)
(Exact name of registrant as specified in its
Certificate and Agreement of Limited Partnership)
Delaware 13-3372004
- ---------------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Chelsea Piers, Pier 62 - Suite 300
New York, New York 10011
- ---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 336-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such requirements for the
past 90 days.
YES X NO
------ ------
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial information set forth below is set forth in the March 31,
1996 First Quarter Report of Silver Screen Partners III, L.P. (the
"Partnership") filed herewith as Exhibit 20 and is incorporated herein by
reference.
Balance Sheets -- March 31, 1996 and December 31, 1995.
Statements of Operations -- For the Three Months ended March
31, 1996 and 1995.
Statements of Partners' Equity -- For the Three Months ended
March 31, 1996 and the Year ended December 31, 1995.
Statements of Cash Flows -- For the Three Months ended March
31, 1996 and 1995.
Notes to Financial Statements.
The financial statements included herein are unaudited. In the opinion of
the management of the Partnership, all adjustments necessary for a fair
presentation of the results of operations have been included and all adjustments
are of a normal recurring nature. The results of operations for the three months
ended March 31, 1996 are not necessarily indicative of the results of operations
which may be expected for the entire year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
---------------------
Revenues for the three months ended March 31, 1996 were approximately
$1,167,000, as compared with approximately $935,000 for the comparable three
months in 1995. Revenues for the first three months of 1996 consisted of income
from the Joint Venture of approximately $1,134,000 and investment revenues of
approximately $34,000, while those for the comparable period in 1995 consisted
of income from the Joint Venture of approximately $872,000 and investment
revenues of approximately $63,000. At this time, nearly all of the films in
which the Partnership has an interest have been released in the theatrical, home
video and pay cable markets. They are now making their way through the remaining
television markets around the world. Income from the Joint Venture increased by
approximately $262,000 from the first quarter in 1995 to the first quarter in
1996 (see Investment in Joint Venture below). Film revenues for the first
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quarter of 1996 were principally derived from "Cocktail," "Honey, I Shrunk The
Kids," and several films at minor amounts. Interest rates for the first three
months of 1996 ranged from 4.8% to 5.79%, while those for the comparable period
in 1995 ranged from 5.0% to 6.02%. The decrease in interest rates resulted in a
decrease in interest income of approximately $29,000.
Expenses for the three months ended March 31, 1996 were approximately
$330,000 as compared with approximately $284,000 for the comparable period in
1995. The increase in expenses is due principally to additional costs of
approximately $79,000 associated with negotiations of the sale of the
Partnership's investment in the Joint Venture, and is offset by a reduction of
$18,000 of film audit costs and $15,000 in overall expenses.
The Partnership generated net income of approximately $837,000 for the
three months ended March 31, 1996, as compared with net income of approximately
$650,000 for the comparable period in 1995. The increase in net income is
predominantly due to the increase in film revenues.
The Partnership became committed to fund nineteen films, all of which have
been completed and released, with total budgets amounting to approximately
$266,000,000, of which substantially all has been expended. Accordingly, all
Partnership Funds have been committed and the Partnership will not finance or
purchase any additional motion pictures.
The Joint Venture Films are: "Benji the Hunted," released June 17, 1987;
"Adventures in Babysitting," released July 1, 1987; "Can't Buy Me Love,"
released August 14, 1987; "Hello Again," released November 6, 1987; "Three Men
and a Baby," released November 25, 1987; "Good Morning Vietnam," released
December 23, 1987; "Shoot to Kill," released February 12, 1988; "D.O.A.,"
released March 18, 1988; "Return to Snowy River, Part II," released April 15,
1988; "Big Business," released June 10, 1988; "Who Framed Roger Rabbit,"
released August 5, 1988; "Cocktail," released July 29, 1988; "The Rescue,"
released June 22, 1988; "Heartbreak Hotel," released September 30, 1988; "Ernest
Saves Christmas," released November 11, 1988; "Oliver & Company," released
November 18, 1988; "Honey, I Shrunk the Kids," released June 23, 1989; and
"Cheetah and Friends," released August 18, 1989. "Stakeout," which was financed
approximately 25% by the Partnership and 75% by Silver Screen Partners II, L.P.
(a separate limited partnership with the same Managing General Partner formed to
finance previous Disney films), was released August 5, 1987.
All Partnership films (except "Oliver & Company") have been released in the
theatrical, home video and pay cable markets and are making their way through
the remaining television markets. The Partnership anticipates that future
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revenues will be derived from the sale of its interest in the Joint Venture (see
Investment in Joint Venture below) and from theatrical revenues of "Oliver &
Company" re-released on March 29, 1996. Between now and late 1997 the
Partnership expects that three of its films (other than "Oliver & Company") will
be released on either basic cable (USA Network) or syndicated television.
During the quarter ended March 31, 1996, the Partnership made cash
distributions to the Partners which amounted to approximately $2,438,000 in the
aggregate. Although the Joint Venture Films have been released in most film
markets around the world, the Managing General Partner anticipates that the
Partnership will continue to receive revenues from certain film markets.
Revenues in a particular quarter may not be sufficient to justify making a cash
distribution and therefore, future cash distributions may fluctuate and there
will be quarters when no distributions will be paid.
Investment in Joint Venture
---------------------------
The investment in the Joint Venture was accounted for using the equity
method of accounting. Under the equity method, the investment was initially
recorded at cost, and was thereafter increased by additional investments,
adjusted by the Partnership's share of the Joint Venture's results of operations
and reduced by distributions received from the Joint Venture. The Joint
Venture's fiscal year ends September 30, while the Partnership's fiscal year
ends December 31. The investment in the Joint Venture on January 1, 1996 totaled
$2,862,545.
The Partnership entered into a Letter Agreement (the "Buyout Agreement")
with Disney dated September 11, 1995 providing for the sale to Disney of all of
the Partnership's interest in the Joint Venture. The Buyout Agreement provides
for the payment of the purchase price of $125,000,000 in cash (subject to
certain adjustments with respect to revenues received by the Partnership from
exploitation of the film "Oliver & Co."). Closing is scheduled to occur on
September 30, 1997 subject to satisfaction of certain customary conditions. In
addition to the purchase price, the Buyout Agreement provides that Buena Vista
Pictures Distribution, Inc. ("BV") will continue to account for and make
payments to the Joint Venture as required by the Distribution Agreement for all
revenues received by BV through August 31, 1997.
As a result of the Buyout Agreement the Partnership is using the cost
method of accounting starting January 1, 1996. Under the cost method,
distributions received are recognized as income and the investment will be
reduced in proportion that actual cash received bears to ultimate revenues
expected.
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Liquidity and Capital Resources
-------------------------------
Inasmuch as the funding obligations of the Partnership with respect to the
financing of the Joint Venture Films have been fully complied with or reserved
against, the Partnership has no material commitments for capital expenditures
and does not intend to enter into any such commitments. Receipts from temporary
investments and from the Joint Venture, less reserves established as determined
by the Managing General Partner, are the sources of liquidity for the
Partnership. The Partnership has no material requirements for liquidity other
than its general and administrative expenses and quarterly distributions to
holders of Units of limited partnership interests. Such sources are considered
adequate for such needs.
5
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ITEM 3. SELECTED FINANCIAL DATA
SILVER SCREEN PARTNERS III, L.P.
--------------------------------
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
Revenues
Income from Joint Venture ...................... $1,133,568 $ 871,631
Interest income ................................ 33,554 63,120
---------- ----------
1,167,122 934,751
Expenses
General and administrative
expenses ...................................... 330,489 284,466
---------- ----------
Net income ....................................... $ 836,633 $ 650,285
========== ==========
Net income per $500 limited
partnership unit (based
on 600,000 Units outstanding) .................. $ 1.38 $ 1.07
========== ==========
Cash distribution
per $500 limited
partnership unit ........................ $ 3.25 $ 2.30
========== ==========
March 31, 1996 March 31, 1995
-------------- --------------
Total assets ..................................... $4,799,139 $5,910,559
========== ==========
See notes to financial statements.
6
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 20 -- 1996 First Quarter Report
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended March 31, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SILVER SCREEN PARTNERS III, L.P.,
a Delaware limited partnership
By: Silver Screen Management, Inc.,
Managing General Partner
Date: May, 1996 By: /s/ Roland W. Betts
--------------------------------
Roland W. Betts, President
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Silver Screen Management, Inc.
Chelsea Piers-Pier 62
Suite 300
New York, NY 10011
(212) 336-6700
Recorded News Update:
(800) 333-SILV
Silver Screen III
First Quarter Report
March 31, 1996
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Our 31 previous quarterly cash distributions bring total Partnership
distributions to $426 million. Revenues in the first quarter of 1996, however,
are not sufficient to justify making a cash distribution.
Nearly all of the films in our portfolio have been released in existing
cycles and territories. Two films in the Silver Screen III portfolio have yet to
become available to appear on either U.S. syndicated television or basic cable
television (USA Network). We anticipate that these two films ("Who Framed Roger
Rabbit" and "Three Men and A Baby") will be released in these markets between
now and late 1997.
In addition to the Disney buyout of the Silver Screen III-Disney Joint
Venture, future Partnership revenue will be derived primarily from the
theatrical re-release of "Oliver & Company," which re-opened in U.S. theaters in
March, and the film's subsequent debut on home video. Revenue in upcoming
quarters may again be insufficient to justify making a cash distribution.
Our Second Quarter Report will be mailed in July. If you need any
assistance in the meantime, please contact our Investor Relations Department
between the hours of 10 A.M. and 2 P.M.
Sincerely,
Roland W. Betts Tom A. Bernstein
President Executive Vice President
10
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Balance Sheets (Unaudited)
- --------------------------
March 31, December 31,
1996 1995
---------- ----------
Assets
Current assets:
Cash ............................................... $ 66,298 $ 247,033
Temporary investments (at cost,
plus accrued interest, which
approximates market) (Note 1) .................... 1,895,040 3,244,285
---------- ----------
Total current assets ............................... 1,961,338 3,491,318
Investment in Joint Venture (Note 2) ............... 2,837,801 2,862,545
---------- ----------
$4,799,139 $6,353,863
---------- ----------
Liabilities and partners' equity
Current liabilities:
Due to managing general partner .................... $ 100,083 $ 47,150
---------- ----------
Total current liabilities .......................... 100,083 47,150
Other liabilities .................................. 100,000 106,790
---------- ----------
Total liabilities .................................. 200,083 153,940
---------- ----------
Partners' equity:
General partners ................................... -- --
Limited partners ................................... 4,599,056 6,199,923
---------- ----------
Total partners' equity ............................. 4,599,056 6,199,923
---------- ----------
$4,799,139 $6,353,863
---------- ----------
See notes to financial statements.
11
<PAGE>
Statements of Operations (Unaudited)
- ------------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
---------- ----------
Revenues:
Income from Joint Venture (Note 2) ............. $1,133,568 $ 871,631
Interest income ................................ 33,554 63,120
---------- ----------
1,167,122 934,751
Costs and expenses:
General and administrative expenses ............ 330,489 284,466
---------- ----------
Net income ..................................... $ 836,633 $ 650,285
---------- ----------
Net income allocated to:
General partners ............................... $ 8,366 $ 6,503
Limited partners ............................... 828,267 643,782
---------- ----------
$ 836,633 $ 650,285
---------- ----------
Net income per a $500 limited
partnership unit
(based on 600,000 units outstanding) ......... $ 1.38 $ 1.07
---------- ----------
See notes to financial statements.
Statements of Partners' Equity (Unaudited)
- ------------------------------------------
Year Ended December 31, 1995
and Three Months Ended March 31, 1996
-------------------------------------
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
----------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 ........................ $ -- $ 6,790,976 $ 6,790,976
Net income, 1995 ................................ 37,589 3,721,358 3,758,947
Allocation under Treasury
Regulation Section 1.704 832,411 (832,411) --
Distributions, 1995 ............................. (870,000) (3,480,000) (4,350,000)
----------- ---------- ----------
Balance, December 31, 1995 ...................... -- 6,199,923 6,199,923
Net income, three months 1996 ................... 8,366 828,267 836,633
Allocation under Treasury
Regulation Section 1.704 479,134 (479,134) --
Distributions during three months 1996 .......... $ (487,500) (1,950,000) (2,437,500)
----------- ---------- ----------
$ -- $ 4,599,056 $ 4,599,056
----------- ---------- ----------
</TABLE>
See notes to financial statements.
12
<PAGE>
Statements of Cash Flows (Unaudited)
- ------------------------------------
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
----------- -----------
Cash flows from operating activities:
Net income ................................... $ 836,633 $ 650,285
Adjustments to reconcile net income
to net cash provided by
operating activities:
Decrease in accrued interest receivable ..... 6,319 37,444
Net change in operating assets and
liabilities: .............................. 52,933 49,012
Increase in due to managing general partner
(Decrease) in other liabilities ............. (6,790) --
Net cash provided by operating activities .... 889,095 736,741
----------- -----------
Cash flows from investing activities:
Distributions received from Joint Venture
in excess of equity in income .............. -- (580,828)
Decrease in investment in Joint Venture ...... 24,744 --
Sales of temporary investments, net .......... 1,342,926 1,571,130
----------- -----------
Net cash provided by investing activities .... 1,367,670 990,302
----------- -----------
Cash flows from financing activities:
Distributions to partners .................... (2,437,500) (1,725,000)
----------- -----------
Net cash used in financing activities ........ (2,437,500) (1,725,000)
----------- -----------
Net (decrease) increase in cash .............. (180,735) 2,043
Cash, beginning of year ...................... 247,033 103,007
----------- -----------
Cash at end of three months .................. $ 66,298 $ 105,050
----------- -----------
See notes to financial statements.
13
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1. Temporary Investments
Temporary investments represent investments in commercial paper.
2. Investment in Joint Venture
The investment in the Joint Venture was accounted for using the equity
method of accounting. Under the equity method, the investment was initially
recorded at cost, and was thereafter increased by additional investments,
adjusted by the Partnership's share of the Joint Venture's results of
operations and reduced by distributions received from the Joint Venture.
The Joint Venture's fiscal year ends September 30, while the Partnership's
fiscal year ends December 31. The investment in the Joint Venture on
January 1, 1996 totaled $2,862,545.
The Partnership entered into a Letter Agreement (the "Buyout Agreement") with
Disney dated September 11, 1995 providing for the sale to Disney of all of the
Partnership's interest in the Joint Venture. The Buyout Agreement provides for
the payment of the purchase price of $125,000,000 in cash (subject to certain
adjustments with respect to revenues received by the Partnership from the
exploitation of the film "Oliver & Co."). Closing is scheduled to occur on
September 30, 1997 subject to satisfaction of certain customary conditions. In
addition to the purchase price, the Buyout Agreement provides that Buena Vista
Pictures Distribution, Inc. ("BV") will continue to account for and make
payments to the Joint Venture as required by the Distribution Agreement for all
revenues received by BV through August 31, 1997.
As a result of the Buyout Agreement the Partnership is using the cost
method of accounting starting January 1, 1996. Under the cost method,
distributions received are recognized as income and the investment will be
reduced in proportion that actual cash received bears to ultimate revenues
expected.
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF MARCH 31, 1996, AND THE STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 66
<SECURITIES> 1,895
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,961
<PP&E> 0
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<TOTAL-ASSETS> 4,799
<CURRENT-LIABILITIES> 100
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,599
<TOTAL-LIABILITY-AND-EQUITY> 4,799
<SALES> 1,134
<TOTAL-REVENUES> 1,167
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 330
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 837
<INCOME-TAX> 0
<INCOME-CONTINUING> 837
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</TABLE>
