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 June 30, 1998
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
Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3183
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 June 30, At December 31,
(000's Omitted) 1998 1997
Assets
Cash and cash equivalents $ 382 $ 937
Motion pictures released, net of
accumulated amortization of $20,512
in 1998 and $20,504 in 1997 40 48
Receivable from Twentieth Century Fox 227 _
Accounts receivable - other 1 _
Total Assets $ 650 $ 985
Liabilities and Partners' Capital
Liabilities:
Distribution payable $ _ $ 303
Accrued management fees 100 200
Accounts payable and accrued expenses 45 47
Unearned motion picture revenue _ 24
Total Liabilities 145 574
Partners' Capital:
General Partner 1 _
Limited Partners 504 411
Total Partners' Capital 505 411
Total Liabilities and Partners' Capital $ 650 $ 985
Statement of Partners' Capital
(000's Omitted) General Limited
For the six months ended June 30, 1998 Partner Partners Total
Balance at December 31, 1997 $ _ $ 411 $ 411
Net income 1 93 94
Balance at June 30, 1998 $ 1 $ 504 $ 505
Statements of Operations
(000's Omitted Except Unit Information)
Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
Net Revenues
Revenues from motion
picture exploitation $ 138 $ 168 $ 251 $ 318
Less: Amortization of motion
picture costs 3 6 8 12
Net Revenues 135 162 243 306
Other Income (Expenses)
Interest income 8 7 15 21
Management fees (50) (50) (100) (100)
General and administrative (34) (21) (53) (41)
Professional fees (6) (5) (11) (11)
Net Other Expenses (82) (69) (149) (131)
Net Income $ 53 $ 93 $ 94 $ 175
Net Income Allocated:
To the General Partner $ 1 $ 1 $ 1 $ 2
To the Limited Partners 52 92 93 173
$ 53 $ 93 $ 94 $ 175
Per limited partnership unit
(25,000 outstanding) $ 2.10 $ 3.68 $ 3.72 $ 6.93
Statements of Cash Flows
(000's Omitted)
For the six months ended June 30, 1998 1997
Cash Flows From Operating Activities
Net income $ 94 $ 175
Adjustments to reconcile net income to net cash
used for operating activities:
Amortization of motion picture costs 8 12
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Receivable from Twentieth Century Fox (227) (226)
Accounts receivable - other (1) _
Accrued management fees (100) (100)
Accounts payable and accrued expenses (2) 4
Unearned motion picture revenue (24) (92)
Net cash used for operating activities (252) (227)
Cash Flows From Financing Activities
Cash distributions (303) (697)
Net cash used for financing activities (303) (697)
Net decrease in cash and cash equivalents (555) (924)
Cash and cash equivalents, beginning of period 937 1,315
Cash and cash equivalents, end of period $ 382 $ 391
Notes to the Financial Statements
The unaudited interim financial statements should be read in
conjunction with the Partnership's annual 1997 audited financial
statements within Form 10-K.
The unaudited financial statements include all normal and
reoccurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
June 30, 1998 and the results of operations for the three and six
months ended June 30, 1998 and 1997, statements of cash flows for
the six months ended June 30, 1998 and 1997 and the statement of
partners' capital for the six months ended June 30, 1998.
Results of operations for the period are not necessarily
indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year
1997, and no material contingencies exist which would require
disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part I, 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 subsequent cash distributions from the
Partnership's investment in the Joint Venture films have been
paid to Limited Partners on an annual basis.
Pursuant to the terms of the Partnership Agreement, Fox's right
to purchase the Partnership's interest in the Joint Venture films
at an appraised fair market value determined by an independent,
third-party appraisal commenced on December 31, 1997. On
February 2, 1998 the Partnership received formal notice from Fox
that it is considering a potential buy out of the Partnership's
interest in the films and may exercise this option in the near
future. Subsequently, the Partnership and Fox engaged an
unaffiliated third-party appraiser to determine a fair market
value of the Partnership's interest in the Joint Venture.
Pursuant to the Joint Venture agreement, Fox has the option, but
not the obligation, to buy out the Partnership's interest at this
independently appraised value. If Fox exercises its option, the
Partnership will attempt to complete the sale of its interest in
the Joint Venture during the second half 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.
The Partnership's cash balance at June 30, 1998 was approximately
$382,000 compared to approximately $937,000 at December 31, 1997.
The decrease is primarily attributable to the payment of the 1997
cash distribution on February 20, 1998 totaling approximately
$303,000 and the payment of Partnership expenses during 1998.
The Partnership's cash balance is expected to provide sufficient
liquidity to enable the Partnership to fund cash distributions
and meet its operating expenses.
The Partnership's receivable from Fox totaled approximately
$227,000 at June 30, 1998 compared with $0 at December 31, 1997.
The June 30, 1998 balance represents 1998 motion picture revenues
due from Fox. As stated above, the Partnership receives proceeds
from Fox on an annual basis.
Accrued management fees totaled approximately $100,000 at June
30, 1998 compared with approximately $200,000 at December 31,
1997. The balance at December 31, 1997 represents the entire
1997 management fee, while the balance at June 30, 1998
represents one half of the 1998 management fee.
Results of Operations
For the three and six months ended June 30, 1998, the Partnership
reported net income of approximately $53,000 and $94,000,
respectively, compared with approximately $93,000 and $175,000
for the corresponding periods in 1997. The decreases in net
income are primarily due to decreases in revenue generated from
motion picture exploitation. 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 and six months ended June 30, 1998, the Partnership
recognized revenues from motion picture exploitation and
amortization of motion picture costs, net of amortization of
motion picture costs, of approximately $135,000 and $243,000,
respectively, compared to $162,000 and $306,000 in the
corresponding periods in 1997. The decreases are primarily due
to lower revenue from the foreign pay and U.S. free television
markets. The Partnership currently receives nearly all of its
revenues from the distribution of the films in ancillary markets.
General and administrative expenses for the three and six months
ended June 30, 1998 were approximately $34,000 and $53,000,
respectively, compared to approximately $21,000 and $41,000 in
the corresponding periods in 1997. The increases primarily
reflect an increase in Partnership administrative expenses.
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 June 30, 1998.
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: August 14, 1998 BY: /s/ Michael T. Marron
Michael T. Marron
President & Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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