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 September 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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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial information set forth below is set forth in the September 30,
1996 Third Quarter Report of Silver Screen Partners III, L.P. (the
"Partnership") filed herewith as Exhibit 20 and is incorporated herein by
reference.
Balance Sheets -- September 30, 1996 and December 31, 1995.
Statements of Operations -- For the Three and Nine Months ended
September 30, 1996 and 1995.
Statements of Partners' Equity -- For the Nine Months ended September
30, 1996 and the Year ended December 31, 1995.
Statements of Cash Flows -- For the Nine Months ended September 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
nine months ended September 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 nine months and quarter ended September 30, 1996 were
approximately $4,160,000 and $917,000, respectively, as compared with
approximately $2,876,000 and $705,000, respectively, for the comparable periods
in 1995. Revenues for the nine months and quarter of 1996 consisted of income
from the Joint Venture of approximately $4,046,000 and $874,000, respectively,
and interest income of approximately $114,000 and $43,000, while those for the
comparable periods in 1995 consisted of income from the Joint Venture of
approximately $2,675,000 and $634,000, respectively, and interest income of
approximately $200,000 and $71,000, 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 $1,371,000 from the first nine months in 1995
2
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to the first nine months in 1996. Film revenues for the first nine months of
1996 were derived from "Oliver" and lesser amounts from "Adventures in
Babysitting" and several other films. Interest rates for the first nine 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 of $86,000 was due to the
decrease in funds available for investment.
Expenses for the nine months ended September 30, 1996 were approximately
$613,000 as compared with approximately $783,000 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 $122,000, a reduction of audit cost of $33,000, a reduction of payroll
related expense and in overall expenses.
The Partnership generated income before taxes of approximately $3,547,000
for the nine months ended September 30, 1996, as compared with net income of
approximately $2,092,000 for the comparable period in 1995.
The Partnership recorded $778,000 in unincorporated business tax resulting
in a net income of approximately $2,769,000. On September 30, 1996 the
Partnership received an assessment from New York City regarding unincorporated
business tax covering all periods from inception through December 31, 1995 of
$878,000 (including interest). This liability was paid on that date. The
Unincorporated Business Tax Expense reflects the excess of this payment over an
amount previously established as a contingency reserve.
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).
During the quarter ended September 30, 1996, the Partnership made cash
distributions to the Partners which amounted to approximately $2,250,000 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.
However, 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.
4
<PAGE>
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.
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
<PAGE>
ITEM 3. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SILVER SCREEN PARTNERS III, L.P.
--------------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Income from Joint Venture $ 873,756 $ 4,046,415 $ 634,384 $ 2,675,267
Interest income ......... 42,816 113,758 70,937 200,446
------------- ------------- ------------- -------------
916,572 4,160,173 705,321 2,875,713
Costs and Expenses:
General and
administrative
expenses ............... 163,185 613,389 235,863 783,228
------------- ------------- ------------- -------------
Income before tax ......... 753,387 3,546,784 469,458 2,092,485
Unincorporated business tax 778,000 778,000 -- --
------------- ------------- ------------- -------------
Net income ................ $ (24,613) $ 2,768,784 $ 469,458 $ 2,092,485
============= ============= ============= =============
Net income per $500
limited partnership
unit (based on 600,000
Units outstanding) ...... $ (0.04) $ 4.57 $ 0.77 $ 3.45
============= ============= ============= =============
Cash distribution
per $500 limited
partnership unit ........ $ 3.00 $ 6.25 $ 0.00 $ 2.30
============= ============= ============= =============
Sept. 30, 1996 Sept. 30, 1995
------------- -------------
Total assets .............. $ 4,315,422 $ 7,312,167
============= =============
</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 Third Quarter Report
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended September 30, 1996.
7
<PAGE>
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: November 13, 1996 By: /s/ Roland W. Betts
--------------------------------
Roland W. Betts, President
8
<PAGE>
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
Third Quarter Report
September 30, 1996
9
<PAGE>
Dear Limited Partner:
Our previous quarterly cash distributions bring total Partnership
distributions to $429 million. Revenues in the third quarter of 1996, however,
are not sufficient to justify making a cash distribution.
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. However, as indicated in previous reports, revenue in upcoming quarters
may be insufficient to justify making a cash distribution.
The Disney buyout of the Silver Screen III-Disney Joint Venture is
scheduled to close on September 30, 1997. Taking into account the buyout from
Disney, we expect to distribute between $140 to $170 per unit between now and
the dissolution of the Partnership. The Partnership is expected to dissolve at
the end of 1997. These figures and dates represent our best estimates as of
today.
As you may be aware, a number of private investment groups have sent out
correspondence relating to a tender offer for units in Silver Screen Partners
III. These tender offers are NOT associated with the Disney buyout, and Silver
Screen Partners III is NOT affiliated in any way with these firms. If you are
not interested in selling your units, no action by you is required.
The 1996 Annual Report and tax information will be mailed to you by March
15. If you need any assistance in the meantime, please contact our Investor
Relations Department at our new telephone number and address listed on the back
of this report.
Sincerely,
/s/ Roland W. Betts /s/ Tom A. Bernstein
- ------------------- ------------------------
Roland W. Betts Tom A. Bernstein
President Executive Vice President
10
<PAGE>
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................ $ 47,793 $ 247,033
Temporary investments (at cost plus accrued interest,
which approximates market) (Note 1) ............... 1,493,411 3,244,285
---------- ----------
Total current assets ................................ 1,541,204 3,491,318
Investment in Joint Venture (Note 2) ................ 2,774,218 2,862,545
---------- ----------
$4,315,422 $6,353,863
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ..................... $ 34,215 $ 47,150
---------- ----------
Total current liabilities ........................... 34,215 47,150
Other liabilities ................................... -- 106,790
---------- ----------
Total liabilities ................................... 34,215 153,940
---------- ----------
Partners' equity:
General partners .................................... -- --
Limited partners .................................... 4,281,207 6,199,923
---------- ----------
Total partners' equity .............................. 4,281,207 6,199,923
---------- ----------
$4,315,422 $6,353,863
========== ==========
</TABLE>
See notes to financial statements.
11
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture (Note 2) .................. $ 873,756 $ 4,046,415 $ 634,384 $ 2,675,267
Interest income ..................................... 42,816 113,758 70,937 200,446
----------- ----------- ----------- -----------
916,572 4,160,173 705,321 2,875,713
COSTS AND EXPENSES:
General and administrative expenses ................. 163,185 613,389 235,863 783,228
----------- ----------- ----------- -----------
Income before tax ................................... 753,387 3,546,784 469,458 2,092,485
Unincorporated Business tax (Note 3) ................ 778,000 778,000 -- --
----------- ----------- ----------- -----------
Net (loss) income ................................... $ (24,613) $ 2,768,784 $ 469,458 $ 2,092,485
=========== =========== =========== ===========
NET (LOSS) INCOME ALLOCATED TO:
General partners .................................... $ (246) $ 27,688 $ 4,695 $ 20,925
Limited partners .................................... (24,367) 2,741,096 464,763 2,071,560
----------- ----------- ----------- -----------
$ (24,613) $ 2,768,784 $ 469,458 $ 2,092,485
=========== =========== =========== ===========
Net (loss) income per a $500 limited partnership unit
(based on 600,000 units outstanding) .............. $ (0.04) $ 4.57 $ 0.77 $ 3.45
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
and Nine Months Ended Sept. 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, NINE MONTHS 1996 ................................. 27,688 2,741,096 2,768,784
DISTRIBUTIONS DURING NINE MONTHS 1996 ........................ (937,500) (3,750,000) (4,687,500)
ALLOCATION UNDER TREASURY REGULATION SECTION 1.704-1(b) ...... 909,812 (909,812) --
-------- ----------- -----------
$ -- $ 4,281,207 $ 4,281,207
======== =========== ===========
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sept. 30, 1996 Sept. 30, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 2,768,784 $ 2,092,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease in accrued interest receivable .............. 4,235 17,980
Net change in operating assets and liabilities:
Decrease in other liabilities ........................ (106,790) --
(Decrease) increase in due to managing general partner (12,935) 8,420
----------- -----------
Net cash provided by operating activities .............. 2,653,294 2,118,885
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from Joint Venture
less than equity in income ........................... -- (1,365,533)
Decrease in investment in Joint Venture ................ 88,328 --
Sale of temporary investments, net ..................... 1,746,638 925,786
----------- -----------
Net cash provided by (used in) investing activities .... 1,834,966 (439,747)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners .............................. (4,687,500) (1,725,000)
----------- -----------
Net cash used in financing activities .................. (4,687,500) (1,725,000)
----------- -----------
Net decrease in cash ................................... (199,240) (45,862)
Cash, beginning of year ................................ 247,033 103,007
----------- -----------
Cash at end of nine months ............................. $ 47,793 $ 57,145
=========== ===========
</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.
3. UNINCORPORATED BUSINESS TAX
On September 30, 1996 the Partnership received an assessment from New York City
regarding unincorporated business tax covering all periods from inception
through December 31, 1995 of $878,000 (including interest). This liability was
paid on that date. The Unincorporated Business Tax Expense reflects the excess
of this payment over an amount previously established as a contingency reserve.
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1996, AND THE STATEMENT OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 48
<SECURITIES> 1,493
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,541
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,315
<CURRENT-LIABILITIES> 34
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4,281
<TOTAL-LIABILITY-AND-EQUITY> 4,315
<SALES> 4,046
<TOTAL-REVENUES> 4,160
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 613
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,547
<INCOME-TAX> 778
<INCOME-CONTINUING> 2,769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,769
<EPS-PRIMARY> 4.57
<EPS-DILUTED> 0
</TABLE>
