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 June 30, 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.)
c/o 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 June 30, 1996
Second Quarter Report of Silver Screen Partners III, L.P. (the "Partnership")
filed herewith as Exhibit 20 and is incorporated herein by reference.
Balance Sheets -- June 30, 1996 and December 31, 1995.
Statements of Operations -- For the Three and Six Months ended June
30, 1996 and 1995.
Statements of Partners' Equity -- For the Six Months ended June 30,
1996 and the Year ended December 31, 1995.
Statements of Cash Flows -- For the Six Months ended June 30, 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 and
six months ended June 30, 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 six months and quarter ended June 30, 1996 were
approximately $3,244,000 and $2,076,000, respectively, as compared with
approximately $2,170,000 and $1,236,000, respectively, for the comparable
periods in 1995. Revenues for the six months and quarter of 1996 consisted of
income from the Joint Venture of approximately $3,173,000 and $2,039,000,
respectively, and interest income of approximately $71,000 and $37,000, while
those for the comparable periods in 1995 consisted of income from the Joint
Venture of approximately $2,041,000 and $1,169,000, respectively, and interest
income of approximately $130,000 and $66,000, respectively. 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 $1,132,000 from the first six months in 1995
to the first six
2
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months in 1996. Film revenues for the first six months of 1996 were derived from
"Honey, I Shrunk The Kids," "Good Morning Vietnam," "Cocktail," "Benji" and
lesser amounts from several other films. Interest rates for the first six 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 was partially offset
by the increase in funds available for investment, resulting in a decrease in
interest income of approximately $59,000.
Expenses for the six months ended June 30, 1996 were approximately $450,000
as compared with approximately $547,000 for the comparable period in 1995. The
decrease of expenses is due to a reduction of expense associated with the
negotiation of the sale of the Partnership's investment in the Joint Venture of
$40,000, a reduction of audit cost of $32,000, a reduction of payroll related
expense and in overall expenses.
The Partnership generated net income of approximately $2,793,000 for the
six months ended June 30, 1996, as compared with net income of approximately
$1,623,000 for the comparable period in 1995.
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 have been released in the theatrical, home video and
pay cable markets and are making their way through the remaining television
markets. Future revenues will be sporadic and unpredictable. The Partnership
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anticipated that future revenues will be principally derived from the sale of
its interest in the Joint Venture (see Investment in Joint Venture below).
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.
4
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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.
The Partnership has had discussions with the New York City Department of
Finance with respect to the Partnership's unincorporated business tax liability
for periods through December 31, 1995. The Partnership has recently reached an
agreement in principle with New York City in connection with its liability for
unincorporated business tax and a final agreement is expected before the close
of the current quarter. It is anticipated that the amount of liability under
this final agreement will have no material adverse effect on liquidity.
5
<PAGE>
ITEM 3. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SILVER SCREEN PARTNERS III, L.P.
--------------------------------
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Income from Joint Venture $ 2,039,091 $ 3,172,659 $ 1,169,252 $ 2,040,883
Interest income ......... 37,388 70,942 66,389 129,509
------------- ------------- ------------- -------------
2,076,479 3,243,601 1,235,641 2,170,392
Costs and Expenses:
General and
administrative
expenses ............... 119,715 450,204 262,899 547,365
------------- ------------- ------------- -------------
Net income ................ $ 1,956,764 $ 2,793,397 $ 972,742 $ 1,623,027
============= ============= ============= =============
Net income per $500
limited partnership
unit (based on 600,000
Units outstanding) ...... $ 3.23 $ 4.61 $ 1.61 $ 2.68
============= ============= ============= =============
Cash distribution
per $500 limited
partnership unit ........ $ 0.00 $ 3.25 $ 0.00 $ 2.30
============= ============= ============= =============
June 30, 1996 June 30, 1995
------------- -------------
Total assets .............. $ 6,689,244 $ 6,824,204
============= =============
</TABLE>
See notes to financial statements.
6
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 20 -- 1996 Second Quarter Report
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended June 30, 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: August, 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
Second Quarter Report
June 30, 1996
9
<PAGE>
Dear Limited Partner:
The 1996 second quarter cash distribution totals $1.8 million, bringing
total distributions since the Partnership's inception to approximately $429
million.
Second quarter revenue was generated principally from the U.S. syndicated
television market for "Benji the Hunted" and "Honey, I Shrunk the Kids."
Nearly all of the films in our portfolio have been released in existing
markets and territories. "Who Framed Roger Rabbit" and "Three Men and a Baby"
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 will be
released in these television markets by late 1997.
Revenues will continue to be distributed to investors until the closing of
the Disney buyout of the Partnership's interest in the Silver Screen III-Disney
Joint Venture. The receipt of the buyout payment from Disney is scheduled to
occur on September 30, 1997. We expect that the final distribution and
dissolution of the Partnership will take place by the end of 1997. In the
interim, however, revenue in upcoming quarters may again be insufficient to
justify making a cash distribution.
Our Third Quarter Report will be mailed in October. 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,
/s/ Roland W. Betts /s/ Tom A. Bernstein
- ------------------- ------------------------
Roland W. Betts Tom A. Bernstein
President Executive Vice President
10
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BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................. $ 134,798 $ 247,033
Temporary investments (at cost plus accrued interest,
which approximates market) (Note 1) ................ 3,761,156 3,244,285
---------- ----------
Total current assets ................................. 3,895,954 3,491,318
Investment in Joint Venture (Note 2) ................. 2,793,290 2,862,545
---------- ----------
$6,689,244 $6,353,863
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ...................... $ 33,424 $ 47,150
---------- ----------
Total current liabilities ............................ 33,424 47,150
Other liabilities .................................... 100,000 106,790
---------- ----------
Total liabilities .................................... 133,424 153,940
---------- ----------
Partners' equity:
General partners ..................................... -- --
Limited partners ..................................... 6,555,820 6,199,923
---------- ----------
Total partners' equity ............................... 6,555,820 6,199,923
---------- ----------
$6,689,244 $6,353,863
========== ==========
</TABLE>
See notes to financial statements.
11
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture (Note 2) ................ $2,039,091 $3,172,659 $1,169,252 $2,040,883
Interest income ................................... 37,388 70,942 66,389 129,509
- ---------- ---------- ---------- ----------
2,076,479 3,243,601 1,235,641 2,170,392
COSTS AND EXPENSES:
General and administrative expenses ............... 119,715 450,204 262,899 547,365
- ---------- ---------- ---------- ----------
Net income ........................................ $1,956,764 $2,793,397 $ 972,742 $1,623,027
========== ========== ========== ==========
NET INCOME ALLOCATED TO:
General partners .................................. $ 19,568 $ 27,934 $ 9,727 $ 16,230
Limited partners .................................. 1,937,196 2,765,463 963,015 1,606,797
- ---------- ---------- ---------- ----------
$1,956,764 $2,793,397 $ 972,742 $1,623,027
========== ========== ========== ==========
Net income per a $500 limited partnership unit
(based on 600,000 units outstanding) ............. $ 3.23 $ 4.61 $ 1.61 $ 2.68
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
and Six Months Ended June 30, 1996
======================================================
General Partners Limited Partners Total
---------------- ---------------- -----
<S> <C> <C> <C>
Balance, January 1, 1995 .................................... $ -- $ 6,790,976 $ 6,790,976
Net income, 1995 ............................................ 37,589 3,721,358 3,758,947
Distributions, 1995 ......................................... (870,000) (3,480,000) (4,350,000)
Allocation under Treasury Regulation Section 1.704-1(b) ..... 832,411 (832,411) --
------------ ----------- -----------
Balance, December 31, 1995 .................................. -- 6,199,923 6,199,923
NET INCOME, SIX MONTHS 1996 ................................. 27,934 2,765,463 2,793,397
DISTRIBUTIONS DURING SIX MONTHS 1996 ........................ (487,500) (1,950,000) (2,437,500)
ALLOCATION UNDER TREASURY REGULATION SECTION 1.704-1(b) ..... 459,566 (459,566) --
------------ ----------- -----------
$ -- $ 6,555,820 $ 6,555,820
============ =========== ===========
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................ $ 2,793,397 $ 1,623,027
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) decrease in accrued interest receivable (10,393) 23,372
Net change in operating assets and liabilities:
Decrease in other liabilities ................... (6,790) --
Decrease in due to managing general partner ..... (13,726) (10,085)
----------- -----------
Net cash provided by operating activities ......... 2,762,488 1,636,314
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from Joint Venture
less than equity in income ....................... -- (989,474)
Decrease in investment in Joint Venture ........... 69,255 --
(Purchase) sale of temporary investments, net ..... (506,478) 1,182,342
----------- -----------
Net cash (used in) provided by investing activities (437,223) 192,868
----------- -----------
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 ................... (112,235) 104,182
Cash, beginning of year ........................... 247,033 103,007
----------- -----------
Cash at end of six months ......................... $ 134,798 $ 207,189
=========== ===========
</TABLE>
See notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 JUNE 30, 1996, AND THE STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 135
<SECURITIES> 3,761
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,896
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,689
<CURRENT-LIABILITIES> 33
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 6,556
<TOTAL-LIABILITY-AND-EQUITY> 6,689
<SALES> 3,173
<TOTAL-REVENUES> 3,244
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,793
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,793
<EPS-PRIMARY> 4.61
<EPS-DILUTED> 0
</TABLE>
