United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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
For the Transition period from ______ to ______
Commission File Number: 33-11101
AMERICAN ENTERTAINMENT PARTNERS II L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3388759
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor, 10285
New York, NY Attn: Andre Anderson Zip Code
Address of Principal Executive Offices
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Balance Sheets At September 30, At December 31,
(000's Omitted) 1997 1996
Assets
Cash and cash equivalents $ 377 $1,315
Motion pictures released, net of accumulated
amortization of $21,097 in 1997 and $21,081 in 1996 46 62
Receivable from Twentieth Century Fox 465 _
Total Assets $ 888 $1,377
Liabilities and Partners' Capital
Liabilities:
Distribution payable $ _ $ 697
Accrued management fees 150 200
Accounts payable and accrued expenses 37 26
Unearned motion picture revenue _ 92
Total Liabilities 187 1,015
Partners' Capital:
General Partner 3 _
Limited Partners 698 362
Total Partners' Capital 701 362
Total Liabilities and Partners' Capital $ 888 $1,377
Statement of Partners' Capital
For the nine months ended September 30, 1997
(000's Omitted) General Limited
Partner Partners Total
Balance at December 31, 1996 $ _ $ 362 $362
Net income 3 336 339
Balance at September 30, 1997 $ 3 $ 698 $701
Statements of Operations
(000's Omitted Except Unit Information)
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Net Revenues
Revenues from motion picture
exploitation $ 239 $ 55 $ 557 $ 525
Less: Amortization of motion
picture costs 4 6 16 41
Net Revenues 235 49 541 484
Other Income (Expenses)
Interest income 6 6 27 29
Management fees (50) (50) (150) (150)
General and administrative (21) (13) (62) (37)
Professional fees (6) (4) (17) (14)
Net Other Expenses (71) (61) (202) (172)
Net Income (Loss) $ 164 $ (12) $ 339 $ 312
Net Income (Loss) Allocated:
To the General Partner $ 1 $ - $ 3 $ 3
To the Limited Partners 163 (12) 336 309
$ 164 $ (12) $ 339 $ 312
Per limited partnership unit
(25,000 outstanding) $ 6.53 $ (.48) $13.46 $12.34
Statements of Cash Flows
For the nine months ended September 30,
(000's Omitted) 1997 1996
Cash Flows From Operating Activities
Net income $ 339 $ 312
Adjustments to reconcile net income to net cash
used for operating activities:
Amortization of motion picture costs 16 41
Decrease in cash arising from changes in
operating assets and liabilities:
Receivable from Twentieth Century Fox (465) (525)
Accrued management fees (50) (50)
Accounts payable and accrued expenses 11 (12)
Unearned motion picture revenue (92) _
Net cash used for operating activities (241) (234)
Cash Flows From Financing Activities
Cash distributions (697) (1,448)
Net cash used for financing activities (697) (1,448)
Net decrease in cash and cash equivalents (938) (1,682)
Cash and cash equivalents, beginning of period 1,315 2,085
Cash and cash equivalents, end of period $ 377 $ 403
Notes to the Financial Statements
The unaudited interim financial statements should be read in
conjunction with the Partnership's annual 1996 audited financial
statements within Form 10-K.
The unaudited financial statements include all normal and
recurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
September 30, 1997 and the results of operations for the three
and nine months ended September 30, 1997 and 1996 statements of
cash flows for the nine months ended September 30, 1997 and 1996
and the statement of partners' capital for the nine months ended
September 30, 1997. Results of operations for the period are not
necessarily indicative of the results to be expected for the full
year.
The following significant event occurred subsequent to fiscal
year 1996, and no material contingencies exist which would
require disclosure in this interim report per Regulation S-X,
Rule 10-01, Paragraph (a)(5).
Beginning with the first quarter of 1997, certain expenses
incurred by an unaffiliated third party service provider in
servicing the Partnership, which were voluntarily absorbed by
affiliates of the General Partner in prior periods, will now be
reimbursed to the General Partner and its affiliates.
Part 1. Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership's principal source of funds is the proceeds received from
Fox pursuant to the Distribution Agreement, as defined in the
Partnership's prospectus. According to the terms set forth in the
Partnership Agreement, effective January 1993, the Partnership receives
proceeds from Fox on an annual basis. Accordingly, all future cash
distributions from the Partnership's investment in the Joint Venture films
will be paid to limited partners on an annual basis.
Pursuant to the terms of the Joint Venture, Fox will have the right and
option to purchase the Partnership's interest in the Joint Venture films
at an appraised fair market value determined by an independent appraisal
anytime after December 31, 1997. The Partnership recently received an
informal indication from Fox that it is considering a buyout of the
Partnership's interest in the Joint Venture and may exercise this option
shortly after year- end 1997. If Fox exercises its option, the
Partnership will attempt to complete the sale of its interest in the Joint
Venture by the end of the second quarter of 1998 and subsequently dissolve
the Partnership. However, there can be no assurance that a sale will take
place or that a sale will be completed within this time-frame. In the
event that Fox does not exercise its option, the General Partner will
explore other opportunities to dispose of the Partnership's interest and
dissolve the Partnership.
The Partnership's cash balance at September 30, 1997 was approximately $377,000
as compared to approximately $1,315,000 at December 31, 1996. The decrease is
primarily attributable to the payment of the 1996 cash distribution in February
1997 totaling approximately $697,000 and the payment of Partnership expenses
during the first nine months of 1997. The Partnership's cash balance is
expected to provide sufficient liquidity to enable the Partnership to fund cash
distributions and meet its operating expenses.
In February 1997, the Partnership paid the 1996 annual distribution totaling
$697,000 of which $690,000 or $27.60 per Unit was paid to the Limited Partners
and $7,000 was paid to the General Partner.
The Partnership's receivable from Fox increased to approximately $465,000 at
September 30, 1997 from $0 at December 31, 1996 while the Partnership's
unearned motion picture revenue decreased to $0 at September 30, 1997 from
approximately $92,000 at December 31, 1996. The increase in receivable from
Fox as well as the decrease in unearned motion picture revenue is due to the
recognition during the first nine months of 1997 of $557,000 of motion picture
revenue from Fox. The Partnership had recorded the unearned motion picture
revenue balance at December 31, 1996 due to cash receipts in excess of revenues
accrued through December 31, 1996.
Accrued management fees decreased from $200,000 at December 31, 1996 to
$150,000 at September 30, 1997. The balance at December 31, 1996 represents
the entire 1996 management fee, while the balance at September 30, 1997
represents a nine month accrual of the 1997 management fee.
Accounts payable and accrued expenses increase from approximately $26,000 at
December 31, 1996 to approximately $37,000 at September 30, 1997. The increase
is due to the accrual of certain expenses incurred by an unaffiliated third
party service provider in servicing the Partnership, which were voluntarily
absorbed by affiliates of the General Partner in prior periods, that will be
reimbursed to the General Partner and its affiliates.
Results of Operations
For the three and nine months ended September 30, 1997, the Partnership
reported net income of approximately $164,000 and $339,000, respectively,
as compared to a net loss of approximately $12,000 and net income of
$312,000, respectively, for the corresponding periods in 1996. The
increases in net income for the nine-month period and the change from net
loss to net income for the three-month period is primarily due to
increases in revenues from motion picture exploitation in foreign pay and
free television markets. Motion picture profits are based on current
estimates of ultimate film revenues and costs. These estimates are subject
to review periodically as more information about a film's distribution
becomes available. Such reviews can result in significant adjustments to
prior estimates.
For the three months ended September 30, 1997, the Partnership recognized
revenues from motion picture exploitation and amortization of motion picture
costs with respect to its investment in the released films of approximately
$239,000 and $4,000, respectively, compared to $55,000 and $6,000 during the
same period in 1996. For the nine months ended September 30, 1997, the
Partnership recognized revenues from motion picture exploitation and
amortization of motion picture costs with respect to its investment in the
released films of approximately $557,000 and $16,000, respectively, compared
to $525,000 and $41,000 during the same period in 1996. The increases in
revenues from motion picture exploitation are primarily due to an increase in
revenues from the foreign pay and free television markets, which entail lower
costs than other markets, and consequently also resulted in a decrease in the
amortization of motion picture costs. The Partnership currently receives
revenues from the distribution of the films in ancillary markets.
General and administrative expenses for the three and nine months ended
September 30, 1997 were approximately $21,000 and $62,000, respectively,
compared to $13,000 and $37,000 for the same periods in 1996. During the
1997 periods, certain expenses incurred by an unaffiliated third party
service provider in servicing the Partnership, which were voluntarily
absorbed by affiliates of the General Partner in prior periods, were
reimbursed to the General Partner and its affiliates.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN ENTERTAINMENT PARTNERS II L.P.
BY: AEP PREMIERE CORPORATION II
General Partner
Date: November 13, 1997 BY: /s/ Jeffrey C. Carter
President and Director
Date: November 13, 1997 BY: /s/ Michael T. Marron
Vice President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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