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, 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.)
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
------ ------
1
<PAGE>
PART I. FINANCIAL INFORMATION
Legal Proceedings
- -----------------
On June 6, 1997, an action purporting to constitute a class action and a
Partnership derivative action was filed in the Superior Court of California for
Los Angeles County against the Partnership and certain other defendants by
individuals purporting to own an interest in the Partnership. This class action
litigation has now been dismissed with prejudice. The Partnership believes that
this dismissal concludes this matter.
ITEM 1. FINANCIAL STATEMENTS.
The financial information set forth below is set forth in the September 30,
1997 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, 1997 and
December 31, 1996.
Statements of Operations -- For the Three and
Nine Months ended September 30, 1997 and
1996.
Statements of Partners' Equity -- For the
Nine Months ended September 30, 1997 and the
Year ended December 31, 1996.
Statements of Cash Flows -- For the Nine
Months ended September 30, 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 and
nine months ended September 30, 1997 are not necessarily indicative of the
results of operations which may be expected for the entire year.
2
<PAGE>
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, 1997 were
approximately $123,234,000 and $105,147,000 respectively, as compared with
approximately $4,160,000 and $917,000, respectively, for the comparable periods
in 1996. Revenues for the first nine months and third quarter of 1997 consisted
of income from the Joint Venture of approximately $122,936,000 and $105,086,000,
respectively, and interest income of approximately $298,000 and $61,000, while
those for the comparable periods in 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, respectively. The Partnership sold
its interest in the Joint Venture (see Investment in Joint Venture below) during
the third quarter of 1997 resulting in an increase in income from the Joint
Venture of approximately $99,350,000. In addition, income from the Joint Venture
increased by approximately $19,540,000 from the nine months in 1996 to the nine
months in 1997 and were principally derived from "Oliver and Company" and to a
much lesser extent from several other films in the portfolio. Interest rates
applicable to the Partnership's temporary investments for the first nine months
of 1997 ranged from 4.9% to 5.57%, 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 $184,000.
Expenses for the nine months ended September 30, 1997 were approximately
$298,000 as compared with approximately $613,000 for the comparable period in
1996. The decrease of expenses is due to the overall reduction of expenses in
all expense categories and to the reduction of extraordinary expenses relating
to preparations for the negotiations of the sale of the Partnership's investment
in the Joint Venture.
The Partnership generated net income before taxes of approximately
$122,935,000 for the nine months ended September 30, 1997, as compared with net
income before taxes of approximately $3,547,000 for the comparable period in
1996. The increase is primarily derived from the sale of the Joint Venture's
interest and to a lesser extent from the increase in film revenues and the
reduction of expenses. The Partnership had recorded $778,000 in unincorporated
business tax resulting in a net income of approximately $2,769,000 in 1996.
Unincorporated business taxes for 1997 will be approximately $246,000 and have
not been reserved for as of September 30, 1997.
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.
3
<PAGE>
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.
During the quarter ended September 30, 1997, the Partnership made cash
distributions to the Partners which amounted to approximately $2,063,000 in the
aggregate.
Investment in Joint Venture
---------------------------
Until January 1, 1996, 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. In accordance with the Buyout Agreement, the
closing of the sale occured on September 30, 1997 and the purchase price paid to
Silver Screen III was $99,349,738 in cash after an adjustment for certain film
revenues received in 1996 and 1997, totaling $25,650,262 from the exploitation
of the film "Oliver and Company".
As a result of the Buyout Agreement, the Partnership began using the cost
method of accounting starting January 1, 1996. Under the cost method,
distributions received were recognized as income and the investment was reduced
in the proportion that actual cash received related to ultimate revenues
expected.
Liquidity and Capital Resources
-------------------------------
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. The Partnership's current sources of
liquidity, consisting primarily of proceeds from the sale of its Joint Venture
interest, are considered adequate for such needs.
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
<TABLE>
<CAPTION>
SILVER SCREEN PARTNERS III, L.P.
--------------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Income from Joint Venture $105,086,204 $122,935,830 $ 873,756 $ 4,046,415
Interest income ......... 60,533 297,783 42,816 113,758
------------- ------------- ------------- -------------
105,146,737 123,233,613 916,572 4,160,173
Costs and Expenses:
General and
administrative
expenses ............... 86,782 298,127 163,185 613,389
------------- ------------- ------------- -------------
Income before tax ......... 105,059,955 122,935,486 753,387 3,546,784
Unincorporated business tax - - 778,000 778,000
------------- ------------- ------------- -------------
Net income (loss) ......... $105,059,955 $122,935,486 $ (24,613) $ 2,768,784
============= ============= ============= =============
Net income (loss) per
a $500 limited partnership
unit (based on 600,000
Units outstanding) ...... $ $173.35 $ 202.84 $ (0.04) $ 4.57
============= ============= ============= =============
Cash distribution
per $500 limited
partnership unit ........ $ 2.75 $ 30.00 $ 3.00 $ 6.25
============= ============= ============= =============
Sept. 30, 1997 Sept. 30, 1996
------------- -------------
Total assets .............. $107,980,084 $ 4,315,422
============= =============
</TABLE>
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 Third Quarter Report
(b) The Partnership did not file any reports on Form
8-K during the quarter ended September 30, 1997.
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 __, 1997 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, 1997
F-1
<PAGE>
Dear Limited Partner:
The 1997 third quarter cash distribution totals $6.6 million, bringing
total distributions since the Partnership's inception in 1987 to approximately
$453 million.
Partnership revenue for the quarter was generated primarily from the
foreign home video release of "Oliver & Company" and the closing of the Disney
buyout on September 30, 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 $100 to $130 per unit to investors (this
amount includes all anticipated future quarterly distributions and the buyout
proceeds from Disney). 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 indicated in our previous quarterly report, the Partnership stopped
accepting transfers after August 15, 1997, and all incomplete transfers or
transfer documents received after that date are not being processed.
The 1997 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 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)
<TABLE>
<CAPTION>
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash ........................................... $ -- $ 164,506
Temporary investments (at cost, plus accrued
interest, which approximates market) ......... 107,980,084 4,545,092
------------ ------------
Total current assets ........................... 107,980,084 4,709,598
Investment in Joint Venture .................... -- 2,704,931
------------ ------------
$107,980,084 $ 7,414,529
------------ ------------
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ................ $ 26,544 $ 3,881
Cash Overdraft ................................. 120,758 --
Accrued unincorporated business tax ............ -- 13,352
------------ ------------
Total liabilities ............................. 147,302 17,233
------------ ------------
Partners' equity:
General partners ............................... -- --
Limited partners ............................... 107,832,782 7,397,296
------------ ------------
Total partners' equity ......................... 107,832,782 7,397,296
------------ ------------
$107,980,084 $ 7,414,529
============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1997 Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture ........................... $ 105,086,204 $ 122,935,830 $ 873,756 $ 4,046,415
Interest income ..................................... 60,533 297,783 42,816 113,758
------------- ------------- ------------- -------------
105,146,737 123,233,613 916,572 4,160,173
COSTS AND EXPENSES:
General and administrative expenses ................. 86,782 298,127 163,185 613,389
------------- ------------- ------------- -------------
Income before tax ................................... 105,059,955 122,935,486 753,387 3,546,784
Unincorporated Business tax ......................... -- -- 778,000 778,000
------------- ------------- ------------- -------------
Net income (loss) ................................... $ 105,059,955 $ 122,935,486 $ (24,613) $ 2,768,784
============= ============= ============= =============
NET INCOME (LOSS) ALLOCATED TO:
General partners .................................... $ 1,050,600 $ 1,229,355 $ (246) $ 27,688
Limited partners .................................... 104,009,355 121,706,131 (24,367) 2,741,096
------------- ------------- ------------- -------------
$ 105,059,955 $ 122,935,486 $ (24,613) $ 2,768,784
============= ============= ============= =============
Net income (loss) per a $500 limited partnership
unit (based on 600,000 units outstanding) ......... $ 173.35 $ 202.84 $ (0.04) $ 4.57
============= ============= ============= =============
</TABLE>
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
and Nine Months Ended Sept. 30, 1997
======================================================
General Partners Limited Partners Total
---------------- ---------------- -----
<S> <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, NINE MONTHS 1997 .......................... 1,229,355 121,706,131 122,935,486
ALLOCATION UNDER TREASURY REGULATION SECTION 1.704-1(b) 3,270,645 (3,270,645) --
DISTRIBUTIONS DURING NINE MONTHS 1997 ................. (4,500,000) (18,000,000) (22,500,000)
------------- ------------- -------------
$ -- $ 107,832,782 $ 107,832,782
============= ============= =============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
----------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 122,935,486 $ 2,768,784
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase) decrease in accrued interest receivable ... (36,667) 4,235
Net change in operating assets and liabilities:
Increase (decrease) in due to managing general partner 22,663 (12,935)
Decrease in accrued unincorporated business tax ...... (13,352) --
Increase in cash overdraft ........................... 120,758 --
Decrease in other liabilities ........................ -- (106,790)
------------- -------------
Net cash provided by operating activities .............. 123,028,888 2,653,294
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in investment in Joint Venture ................ 2,704,931 88,328
(Purchase) Sale of temporary investments, net .......... (103,398,325) 1,746,638
------------- -------------
Net cash (used in) provided by investing activities .... (100,693,394) 1,834,966
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners .............................. (22,500,000) (4,687,500)
------------- -------------
Net cash used in financing activities .................. (22,500,000) (4,687,500)
------------- -------------
Net decrease in cash ................................... (164,506) (199,240)
Cash, beginning of year ................................ 164,506 247,033
------------- -------------
Cash at end of nine months ............................. $ -- $ 47,793
============= =============
</TABLE>
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. In accordance with the Buyout
agreement, the closing of the sale occured on September 30, 1997 and the net
proceeds received by the Partnership were $99,349,738 in cash after an
adjustment for certain film revenues totaling $25,650,262 from the exploitation
of the film "Oliver & Co." received in 1996 and 1997 prior to the sale.
As a result of the Buyout Agreement, the Partnership began using the cost method
of accounting starting January 1, 1996. Under the cost method, distributions
received were recognized as income and the investment was reduced in proportion
that actual cash received related to ultimate revenues expected.
The Joint Venture's fiscal year ends September 30, while the Partnership's
fiscal year ends December 31. The Partnership expects to dissolve by the end of
1997.
F-6
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1997, AND THE STATEMENT OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1997, 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-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 0
<SECURITIES> 107,980
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 107,980
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 107,980
<CURRENT-LIABILITIES> 147
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 107,833
<TOTAL-LIABILITY-AND-EQUITY> 107,980
<SALES> 122,936
<TOTAL-REVENUES> 123,234
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 298
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 122,935
<INCOME-TAX> 0
<INCOME-CONTINUING> 122,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,935
<EPS-PRIMARY> 202.84
<EPS-DILUTED> 0
</TABLE>
