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, 1997
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 300n
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
------ ------
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial information set forth below is set forth in the March 31,
1997 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, 1997 and December 31, 1996.
Statements of Operations -- For the Three Months ended March
31, 1997 and 1996.
Statements of Partners' Equity -- For the Three Months ended
March 31, 1997 and the Year ended December 31, 1996.
Statements of Cash Flows -- For the Three Months ended March
31, 1997 and 1996.
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, 1997 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, 1997 were approximately
$16,049,000, as compared with approximately $1,167,000 for the comparable three
months in 1996. Revenues for the first three months of 1997 consisted of income
from the Joint Venture of approximately $15,906,000 and interest income of
approximately $144,000, while those for the comparable period in 1996 consisted
of income from the Joint Venture of approximately $1,134,000 and interest income
of approximately $34,000. 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 $14,772,000 from the first quarter in 1996 to the first quarter in
1997 and were principally derived from "Oliver and Company" and to much lesser
amounts from several films in the portfolio. Interest rates for the first three
months of 1997 ranged from 4.9% to 5.32%, while those for the comparable period
in 1996 ranged from 4.8% to 5.79%. The increase in funds available for
investment resulted in an increase in interest income of approximately $110,000.
2
<PAGE>
Expenses for the three months ended March 31, 1997 were approximately
$79,000 as compared with approximately $330,000 for the comparable period in
1996. The decrease in expenses is due to the overall reduction of expenses and
to the reduction of extraordinary expenses relating to the preparations for
negotiation of the sale of the Partnership's interest in the Joint Venture.
The Partnership generated net income of approximately $15,971,000 for the
three months ended March 31, 1997, as compared with net income of approximately
$837,000 for the comparable period in 1996. The increase in net income is
predominantly due to the increase in film revenues and to a lesser amount, to a
reduction in expenses.
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
(except "Oliver & Company") in pay cable markets, and have made their way
through the remaining television markets. The Partnership anticipates that
future revenues will be derived from the sale of its interest in the Joint
Venture (see Investment in Joint Venture below) and from revenues of "Oliver &
Company". Between now and late 1997, the Partnership expects that "Roger Rabbit"
will be released on either basic cable (USA Network) or syndicated television.
3
<PAGE>
During the quarter ended March 31, 1997, the Partnership made cash
distributions to the Partners which amounted to approximately $3,937,500 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 sufficient revenues from certain film
markets to justify making cash distributions to the partners.
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 Partnership entered into 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.
Closing under the Buyout Agreement with Disney is scheduled to occur on
September 30, 1997. The Partnership currently expects to dissolve by the end of
1997 upon disposition of its remaining assets and distributions of cash to the
partners.
4
<PAGE>
ITEM 3. SELECTED FINANCIAL DATA
SILVER SCREEN PARTNERS III, L.P.
--------------------------------
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
-------------- --------------
Revenues
Income from Joint Venture ...................... $15,905,767 $1,133,568
Interest income ................................ 143,629 33,554
----------- ----------
16,049,396 1,167,122
Expenses
General and administrative
expenses ...................................... 78,606 330,489
----------- ----------
Net income ....................................... $15,970,790 $ 836,633
=========== ==========
Net income per $500 limited
partnership unit (based
on 600,000 Units outstanding) .................. $ 26.35 $ 1.38
=========== ==========
Cash distribution
per $500 limited
partnership unit ........................ $ 5.25 $ 3.25
=========== ==========
March 31, 1997 March 31, 1996
-------------- --------------
Total assets ..................................... $19,482,975 $4,799,139
=========== ==========
See notes to financial statements.
5
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 20 -- 1997 First Quarter Report
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended March 31, 1997.
6
<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: May 14, 1997 By: /s/ Roland W. Betts
--------------------------------
Roland W. Betts, President
7
<PAGE>
Silver Screen III
First Quarter Report
March 31, 1997
F-1
<PAGE>
Dear Limited Partner:
The 1997 first quarter cash distribution totals $13.2 million, bringing
total distributions since the Partnership's inception in 1987 to approximately
$444 million.
First quarter revenue was generated principally from the U.S. home video
release of "Oliver & Company."
In January, "Three Men and A Baby" became available to appear on basic
cable television (USA Network). "Roger Rabbit" is the only remaining Partnership
film that has yet to appear on either U.S. syndicated television or USA Network.
We anticipate that it will be released on U.S. syndicated television in late
1997.
Between now and the dissolution of the Partnership, current expectations
are that, after the current distribution and expenses, Silver Screen Partners
III will distribute an additional $113 to $143 per unit to investors (this
amount includes all anticipated future quarterly distributions and the buyout
proceeds from Disney). The closing of the purchase by Disney is scheduled to
occur on September 30, 1997. The final distribution and dissolution of the
Partnership is expected to take place by 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, and there may be other such offers in the future. Silver Screen Partners
III and Silver Screen Management Services, Inc. are not affiliated in any way
with these firms and can make no recommendation as to the merits of any past or
future tender offer. If and when you receive such solicitations, unless you are
interested in selling your units, no action by you is required. We hope the
above information will help you in evaluating the various bids from the tender
offer groups.
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, Eastern Standard Time.
Sincerely,
/s/ Roland W. Betts /s/ Tom A. Bernstein
- ------------------- --------------------
Roland W. Betts Tom A. Bernstein
President Executive Vice President
F-2
<PAGE>
Balance Sheets (Unaudited)
- --------------------------
March 31, December 31,
1997 1996
---------- ----------
ASSETS
Current assets:
Cash ............................................. $ 233,950 $ 164,506
Temporary investments (at cost, plus accrued
interest, which approximates market) ........... 16,891,294 4,545,092
----------- -----------
Total current assets ............................. 17,125,244 4,709,598
Investment in Joint Venture ...................... 2,357,731 2,704,931
----------- -----------
19,482,975 7,414,529
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner .................. $ 39,037 $ 3,881
Accrued unincorporated business tax .............. 13,352 13,352
----------- -----------
Total liabilities ............................... 52,389 17,233
----------- -----------
Partners' equity:
General partners ................................. -- --
Limited partners ................................. 19,430,586 7,397,296
----------- -----------
Total partners' equity ........................... 19,430,586 7,397,296
----------- -----------
$19,482,975 $ 7,414,529
=========== ===========
See notes to financial statements.
F-3
<PAGE>
Statements of Operations (Unaudited)
- ------------------------------------
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
---------- ----------
REVENUES:
Income from Joint Venture .................... $15,905,767 $ 1,133,568
Interest income .............................. 143,629 33,554
----------- -----------
16,049,396 1,167,122
COSTS AND EXPENSES:
General and administrative expenses .......... 78,606 330,489
----------- -----------
Net income ................................... $15,970,790 $ 836,633
=========== ===========
NET INCOME ALLOCATED TO:
General partners ............................. $ 159,708 $ 8,366
Limited partners ............................. 15,811,082 828,267
----------- -----------
$15,970,790 $ 836,633
=========== ===========
Net income per a $500
limited partnership unit
(based on 600,000 units outstanding) ........ $ 26.35 $ 1.38
=========== ===========
See notes to financial statements.
Statements of Partners' Equity (Unaudited)
- ------------------------------------------
Year Ended December 31, 1996
and Three Months Ended March 31, 1997
-------------------------------------
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 ............. $ -- $ 6,199,923 $ 6,199,923
Net income, 1996 ..................... 58,849 5,826,024 5,884,873
Allocation under Treasury Regulation
Section 1.704 - 1(b) ............... 878,651 (878,651) --
Distributions, 1996 .................. (937,500) (3,750,000) (4,687,500)
------------ ------------ ------------
Balance, December 31, 1996 ........... -- 7,397,296 7,397,296
Net income, three months 1997 ........ 159,708 15,811,082 15,970,790
Allocation under Treasury Regulation
Section 1.704 - 1(b) ............... 627,792 (627,792) --
Distributions during three months 1997 (787,500) (3,150,000) (3,937,500)
------------ ------------ ------------
$ -- $ 19,430,586 $ 19,430,586
============ ============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
Statements of Cash Flows (Unaudited)
- ------------------------------------
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 15,970,790 $ 836,633
Adjustments to reconcile net income
to net cash provided by
operating activities:
(Increase) decrease in accrued
interest receivable .......................... (102,268) 6,319
Net change in operating assets and
liabilities:
Increase in due to managing general partner .. 35,156 52,933
(Decrease) in other liabilities .............. -- (6,790)
------------ ------------
Net cash provided by operating activities ...... 15,903,678 889,095
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in investment in Joint Venture ........ 347,200 24,744
(Purchase) sale of temporary investments, net .. (12,243,934) 1,342,926
------------ ------------
Net cash (used in) provided
by investing activities ....................... (11,896,734) 1,367,670
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners ...................... (3,937,500) (2,437,500)
------------ ------------
Net cash used in financing activities .......... (3,937,500) (2,437,500)
------------ ------------
Net increase (decrease) in cash ................ 69,444 (180,735)
Cash, beginning of year ........................ 164,506 247,033
------------ ------------
Cash at end of three months .................... $ 233,950 $ 66,298
============ ============
See notes to financial statements.
F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Temporary Investments
- ---------------------
Temporary investments represent investments in commercial paper.
Investment in Joint Venture
- ---------------------------
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.
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.
F-6
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF MARCH 31, 1997, AND THE STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1997, 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-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 234
<SECURITIES> 16,891
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,125
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,483
<CURRENT-LIABILITIES> 52
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 19,431
<TOTAL-LIABILITY-AND-EQUITY> 19,483
<SALES> 15,906
<TOTAL-REVENUES> 16,049
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 79
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,971
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,971
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,971
<EPS-PRIMARY> 26.35
<EPS-DILUTED> 0
</TABLE>
