SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For Fiscal Year Ended Commission File
December 31, 1995 Number 0-17469
CINEMA PLUS, L.P.
(Exact name of registrant as specified in its certificate
of limited partnership)
Delaware 13-3437795
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
No.)
1100 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 512-
1000
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 Interests
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of March 15, 1996, there were 43,286 units of limited
partnership interests outstanding, all held by non-affiliates.
The aggregate market value of those interests is not determinable
because there is no active public trading market for the units.
<PAGE>
PART I.
Item 1. Business.
Formation.
Cinema Plus, L.P. (the "Partnership") is a Delaware
limited partnership which was formed to finance, own and
exploit through various distribution arrangements English
language feature-length theatrical motion pictures ("Films"
or "Partnership Films"). The Partnership was organized
under the laws of the State of Delaware on September 10,
1987. HBO Film Management, Inc., a Delaware corporation
wholly owned by Time Warner Operations Inc. ("Time Warner"),
is the managing general partner (the "Managing General
Partner") of the Partnership. Entertainment Finance
Services, Inc., a Delaware corporation, is the
administrative general partner (the "Administrative General
Partner") of the Partnership. The Managing General Partner
and the Administrative General Partner are sometimes
collectively referred to as the "General Partners." A
public offering (the "Offering") of limited partnership
interests was completed over the course of two closings, the
first of which took place on August 5, 1988 and the second
of which took place on September 30, 1988. 36,028 units and
7,398 units, respectively, of limited partnership interests
were sold at the closings, at a price of $1,000 per unit.
Pursuant to section 6.4 of the limited partnership
agreement, 140 limited partnership units were redeemed in
October 1989. Accordingly, the Partnership received gross
proceeds in the amount of $43,286,000 (the "Gross Proceeds")
and net proceeds in the amount of $37,341,000 (the "Net
Proceeds") after adjusting for the 140 units that were
redeemed. Subscriptions were accepted by the Partnership
from taxable as well as tax-exempt investors and from United
States citizens and foreign investors. In the event that
the Partnership terminates or is dissolved prior to the time
that an Assured Return of Film Investment Payment is to be
made, provision will be made in accordance with the limited
partnership agreement for payment of such Assured Return of
Film Investment Payment at the time, and to the limited
partners to whom, it would otherwise become due. Such
provision may include the appointment of a liquidating
trustee to receive such payments and transmit them to the
former limited partners.
Business Plan.
The Partnership invested in the production of four Films
which had production costs (including contingency reserves, the
production and overhead fees payable to the General Partners,
and completion bond fees) ranging from approximately $11 million
to approximately $22 million per Film, with an average
production cost of approximately $16.5 million. The dollar
amounts set forth in the preceding sentence are higher than
those anticipated at the time of the Offering and included in
the Offering prospectus (the "Prospectus"); however, the
aggregate Partnership Investment (as defined below) and
ownership interest in Films has remained unchanged. As of
December 31, 1995, an aggregate of $98,530,000 (including the
HBO Commitment, as defined below) had been incurred toward the
production and theatrical release of Partnership Films. Each
Partnership Film was produced by an experienced independent
producer and was distributed theatrically by Warner Bros.
("Warner"), a division of Time Warner Entertainment Company,
L.P., as assignee of Warner Bros., Inc., in the United States
and Canada. In addition, Warner has the right to distribute the
Partnership's Films on network television in the United States
and Canada. Distribution rights in all other domestic
television and consumer video media have been licensed on an
exclusive basis in perpetuity to Home Box Office ("HBO"), a
division of Time Warner Entertainment Company, L.P., as assignee
of Home Box Office, Inc. All other distribution rights have
been licensed to distributors selected by the Managing General
Partner. See "Film Distribution." The Partnership will not
produce any additional Films.
Film Selection.
As of December 31, 1995, all of the Partnership's Films had
been released in domestic theatres.
The title and domestic theatrical release date for the Films
are set forth below:
Title Release Date
Switch May 1991
Don't Tell Mom The Babysitter's Dead
("Don't Tell Mom") June 1991
Ricochet October 1991
Mom and Dad Save The World July 1992
As of March l5, 1996, all of the Partnership Films had been
released in foreign markets and have been made available
domestically on video cassette. In addition, as of March 15,
1996 "Don't Tell Mom" and "Ricochet" have been exhibited on
network television; and "Switch" has been exhibited on
syndicated television.
Film Production.
The Partnership monitored all phases of production and
administered all Partnership funds invested in Films.
Negotiation of production agreements was undertaken by the
Managing General Partner. Subject to the Partnership's approval
rights exercised through the Managing General Partner, the
independent producer, in consultation with creative personnel,
made all determinations concerning creative and artistic matters
and conducted all day-to-day operations concerning the
production of a Film.
The agreement with each independent producer provided HBO,
the Partnership and the theatrical distributor the right of
approval regarding the subject matter, story-line and screenplay
of each Film. The Partnership also had certain approval rights
concerning artistic personnel (such as principal cast and
director). In addition, each agreement with an independent
producer provided a maximum budget for each Film, and the
Partnership also exercised certain approval rights over line
items in each budget. Furthermore, each such agreement provides
that the Partnership will control in perpetuity all rights
(including copyright) in the Films throughout the world.
Production Costs. The "Budgeted Negative Cost of a Film"
represents its budgeted production cost which includes the
following elements:
o the estimated direct production
costs of a
Film, including all costs
incurred in
connection with the acquisition
of rights,
the development of the project,
the anticipated costs of principal
photography and post-production
(including interest on development and
production expenditures advanced by
HBO prior to commitment of funds by
the Partnership, and all other costs
associated with delivering a Film and
complying with negotiated delivery
requirements), and a fee payable to
the independent producers of a Film
(the "Direct Costs");
o a net bonding fee paid to the
completion guarantor in an amount
which did not exceed 6% of the Direct
Costs;
o a production
contingency fund in an
amount equal to 10%
of the Direct Costs
(the "Contingency"); and
o a fee payable to the General Partners
(the "Production and Overhead
Fee") equal to 12.5% of the
total of the Direct Costs, the bonding fee and the
Contingency, as compensation to the General
Partners
for negotiating and administering
production, financing
and distribution agreements,
reviewing and
approving Film budgets,
monitoring expenditures of Partnership
funds, monitoring and auditing Film
revenues and accounting and reporting
to investors. See "Executive
Compensation."
The full amount actually paid by the Partnership
directly in connection with a Film's production and delivery
to the Partnership (including deferments, bonuses and
participations, if any, in gross receipts payable to creative
personnel before the Partnership has recouped its investment
in such Film), after taking into account any rebates provided
to the Partnership by the completion guarantor or any other
party and any portion of the Contingency which was not
expended, is the "Partnership Investment," which is the
amount upon which the Assured Return of Film Investment
Payment (as defined below) is based. See "Film Distribution
- - Domestic Cable and Other Non-Standard Television and Third-
Party Participations." The Partnership Investment does not
include the HBO Commitment, the Shortfall Production Advance
(as defined below), or certain interest which has been
capitalized for purposes of the financial statements that
accompany this report. See "HBO Commitment."
All costs and expenses relating to the production of a
Film to be paid by the Partnership were advanced in
accordance with budget, production and cash flow schedules
approved by the Partnership and HBO. The Administrative
General Partner monitored the compliance with such schedules.
Shortfall Production Advance.
HBO loaned to the Partnership, on a non-recourse basis
to the general and limited partners, the additional funds
necessary to complete the production of the Partnership's
last Film to commence principal photography, entitled
"Ricochet" (the "Shortfall Production Advance"). HBO is
entitled to recoup this loan with interest at the Prime Rate
from funds remitted to the Partnership (other than the
Foreign Distribution Advance used to repay the HBO
Commitment) from the exploitation of such Film. See Note
4(b) of the Financial Statements for financial information
relating to the Shortfall Production Advance.
HBO Commitment.
Pursuant to the terms of the HBO License Agreement,
HBO advanced to the Partnership, for investment in each
Partnership Film, approximately 30% of the aggregate
production costs of such Film (the "HBO Commitment"). On a
per Film basis, the amount so advanced approximated the
advance payable to the Partnership for foreign distribution
rights (the "Foreign Distribution Advance") discounted by an
amount attributable to interest at the Prime Rate. For each
Partnership Film, HBO is entitled to recoup the HBO
Commitment, plus interest, from the Foreign Distribution
Advance as it is paid. See Note 4(a) of the Financial
Statements for financial information relating to the HBO
Commitment.
Minimum Distribution Advances.
Pursuant to the Partnership Agreement, the Partnership
agreed to make minimum cash distributions on a quarterly
basis to its partners during the three-year period commencing
with the quarter in which the initial closing occurred (i.e.,
the quarter ended September 30, 1988). These distributions
were not to be less than a cumulative 33% of Gross Proceeds
for such three-year period (the "Minimum Levels of Cash
Distribution"). Since the Partnership received insufficient
cash generated from operations (including interest on funds
pending investment in Films less payments of certain
Partnership expenses and certain permitted reserve amounts)
to meet this obligation, HBO made advances (the "Minimum
Distribution Advances") on a quarterly basis to the
Partnership sufficient to enable the Partnership to make such
cash distributions to the partners.
The Minimum Distribution Advances, with interest
computed at the Prime Rate, were credited against amounts
otherwise payable to the Partnership by HBO with respect to
domestic consumer video revenues in which HBO acted as a
distributor for Partnership Films. As of December 31, l995
HBO has completely recouped the Minimum Distribution
Advances. In no circumstances did recovery of Minimum
Distribution Advances (including interest) by HBO result in
the Partnership receiving revenues with respect to a Film
(including the amount of those Minimum Distribution Advances
allocable to such Film) equal to less than 115% of the
Partnership Investment in that Film.
Film Distribution.
The Managing General Partner has negotiated and
entered into agreements on behalf of the Partnership for the
worldwide distribution of its Films in all media in which HBO
does not distribute directly. Each Partnership Film has been
distributed theatrically by Warner in the United States and
Canada. In addition, Warner has the right to distribute the
Partnership's Films on network television in the United
States and Canada. Distribution rights in all other domestic
television and consumer video media have been licensed on an
exclusive basis in perpetuity to HBO.
Domestic Theatrical Distribution. The Partnership was
party to an agreement with Metro-Goldwyn-Mayer Pictures, Inc.
("MGM") which granted MGM the exclusive right to distribute
certain of the Partnership's Mercury/Douglas Films in the
domestic theatrical and non-theatrical media and in the
foreign media. By its terms, the MGM agreement is no longer
in effect.
On October 2, 1989, the Partnership entered into an
agreement with Warner granting Warner the right to distribute
each of the Partnership's Films in the domestic theatrical
and network television media (hereinafter referred to as the
"Warner Agreement"). HBO agreed to provide for the
expenditure of not less than $5 million in print and
advertising costs in connection with each Film's domestic
theatrical release. HBO is entitled to recoup that portion
of such expenditure which is in excess of the HBO P&A Advance
(as defined below), plus interest at the Prime Rate, from
domestic theatrical revenues ("Rentals") and Non-Theatrical
Revenues (as defined below) remitted to the Partnership with
respect to such Film. "Non-Theatrical Revenues" has the
meaning commonly given to such term in the motion picture
industry, which does not include television or home video
revenues. HBO is entitled to recoup the lesser of $5,000,000
or 50% of such expenditures (the "HBO P&A Advance") for a
Film, plus interest at the Prime Rate, in a priority position
from all the funds remitted to the Partnership from the
exploitation of such Film (excluding the Foreign Distribution
Advance which will be used to repay the HBO Commitment).
Print and advertising costs incurred in connection with the
domestic theatrical distribution of each Film in excess of
those funded by HBO were paid by Warner; Warner is entitled
to recoup such amounts from Rentals and Non-Theatrical
Revenues. In addition, Warner received a distribution fee
equal to 15% of each Film's Rentals and Non-Theatrical
Revenues. Rentals and Non-Theatrical Revenue less Warner's
distribution fees and expenses and amounts recoupable by HBO
were remitted to the Partnership. Revenues from each Film
are accounted for separately. See Note 4(c) of the Financial
Statements for financial information relating to Print and
Advertising expenses.
Domestic Consumer Video. Domestic consumer video
distribution rights in the Films have been licensed to HBO.
The Partnership receives 100% of domestic consumer video
revenues (after the deduction of direct manufacturing,
marketing, advertising and distribution costs, and guild
residuals as well as any amounts recoupable by HBO) from each
Film until the Partnership has received sufficient funds from
domestic consumer video and all prior sources to recoup its
Investment in the Film. Thereafter, the Partnership receives
35% of domestic consumer video revenues (after deduction of
direct manufacturing, marketing, advertising and distribution
costs and guild residuals). See Note 3(c) of the Financial
Statements for financial information relating to the Net
Domestic Video Receivable.
Domestic Cable and Other Non-Standard Television. All
domestic cable and other non-standard television rights and
all English-language foreign cable and other non-standard
television rights in the Films have been licensed to HBO.
For each Film, the Partnership receives a license fee from
HBO for these rights based on a percentage of the Rentals
earned by a Film. License fees are payable within 90 days
after a Film first becomes available for non-standard
television exhibition on a subscription basis by HBO, which
has been generally six to thirteen months after a Film's
initial theatrical release. The Partnership receives an
amount equal to 20% of Rentals between $10 million and $20
million, plus 10% of Rentals between $20 million and $40
million, plus 5% of Rentals between $40 million and $60
million. HBO is entitled to retain amounts recoupable by it
from amounts otherwise payable to the Partnership with
respect to this source of revenue. In the aggregate, as of
December 31, 1995 the Partnership had recorded $ 29,000 for
non-standard television net revenues related to "Don't Tell
Mom." The Partnership does not anticipate any other
significant non-standard television revenue.
Under the HBO License Agreement, if net proceeds from
all sources to the Partnership are less than 115% of the
Partnership Investment in any Film, HBO will pay to the
Partnership on the seventh anniversary of the theatrical
release of that Film an additional license fee sufficient to
assure an aggregate return to the Partnership of 115% of the
Partnership Investment in that Film (the "Assured Return of
Film Investment Payment" or "ARFIP"). In return for HBO's
agreement to make the Assured Return of Film Investment
Payment, the Partnership has agreed to pay HBO 10% of the
Partnership's subsequent revenues from each Film after the
Partnership has received from all sources 115% of its
Investment in the Film. Based on the anticipated performance
of the Partnership's Films at December 31, 1995, it is
expected that HBO will be required to make an Assured Return
on Film Investment Payment with respect to each of these
Films. Accordingly, $21,355,000 (amount present valued) was
recorded by the Partnership as a receivable in the
accompanying financial statements as of December 31, 1995.
ARFIP payments will be payable to the Partnership in 1998 and
1999.
With respect to any Film for which an ARFIP is made,
HBO will thereafter be entitled to receive from the
Partnership any additional revenues received by the
Partnership with respect to that Film until the entire amount
of such ARFIP has been recouped by HBO. If HBO has not
recouped this ARFIP for a Film by July l999, the Partnership
will be
required to pay to HBO at that time an amount (the "HBO
Interest Recoupment") equal to the lesser of: (a) the sum of
the unrecouped ARFIP and the non-standard television
residuals for such Film or (b) the Per Film Interest. "Per
Film Interest" represents the interest income earned on
Partnership Funds awaiting investment in Films divided by the
four Partnership Films. $218,000, $246,000, and $242,000 was
recorded by the Partnership as an expense relating to Per
Film Interest for the years ended December 31, 1995, 1994 and
1993, respectively. $3,968,000 (amount present valued) has
been recorded by the Partnership and included in the Payable
to HBO in the accompanying financial statements as of
December 31, l995. This expense does not have any effect on
the Partnership's entitlement to receive 115% of the
Partnership Investment in Films.
Domestic Standard Broadcast Television-Network.
Pursuant to the Warner Agreement, the Partnership has granted
domestic network television rights in the Films to Warner.
HBO and Warner will receive a distribution fee aggregating no
more than 20% of the gross receipts from such license. The
remaining revenues, less distribution expenses and guild
residuals, are being remitted to the Partnership. HBO will
be entitled to retain amounts recoupable by it from amounts
otherwise payable to the Partnership with respect to this
source of revenue. "Don't Tell Mom" aired on network
television in the first quarter of 1993 and "Ricochet" aired
on network television during the first quarter of 1995. See
Note 3(a) of the Financial Statements for financial
information relating to the Network Receivable from HBO.
Domestic Standard Broadcast Television-Syndication.
Domestic syndicated television rights in the Films may be
licensed by HBO (or a subdistributor designated by HBO) on
behalf of the Partnership. HBO and its subdistributor, if
any, will receive distribution fees aggregating no more than
37.5% of the gross receipts from such license. Gross
receipts less distribution fees and expenses and guild
residuals will be remitted to the Partnership. HBO will be
entitled to retain amounts recoupable by it from amounts
otherwise payable to the Partnership with respect to this
source of revenue. Through an arrangement in which Warner
acted as subdistributor, "Switch" aired on syndicated
television during the third quarter of l994. See Note 3(b)
of the Financial Statements for financial information
relating to the Syndication Receivable from HBO.
Foreign Distribution-All Media. The Partnership has
an agreement with The Odyssey/Regency Switch Company
("Odyssey"), a joint venture between Odyssey Distributors,
B.V. and Regency International Pictures, B.V., which grants
to Odyssey foreign distribution rights with respect to the
Partnership Film "Switch" in media other than foreign English-
language cable and other non-standard television which rights
are licensed to HBO. Pursuant to the terms of the Odyssey
agreement, during 1991 the Partnership received approximately
$7,925,000 representing 47% of the production cost of
"Switch." The advance was paid to HBO in reimbursement of
the HBO Commitment for "Switch" together with interest
thereon at the Prime Rate. With respect to the remaining
three Films, the Partnership has an agreement with The Summit
Group (MEV) N.V. ("Summit") which appoints Summit as the
Partnership's exclusive sales agent for these three Films in
foreign territories. As such, Summit is entitled to receive
distribution fees calculated upon, and recoup its
distribution expenses out of, the gross proceeds of these
Films from foreign territories. See Note 4(a) of the
Financial Statements for financial information relating to
the HBO Commitments.
Worldwide Music, Merchandising and Publication. To
the extent not otherwise acquired by the domestic or foreign
distributors of the Partnership Films, all music,
merchandising and publication rights in the Partnership Films
may be licensed by HBO on behalf of the Partnership. HBO will
be entitled to a fee not to exceed 20% of the revenues to the
Partnership from the exploitation of these rights.
Soundtrack album agreements have been entered into for
certain of the Partnership's Films. All revenues (other than
album advances offset by music production costs), less fees
payable to HBO and to third parties from the exploitation of
music, merchandising and publication rights, were paid to the
Partnership. HBO will be entitled to retain amounts
recoupable by it from amounts otherwise payable to the
Partnership with respect to this source of revenue. The
Partnership does not anticipate receiving any additional
revenue from this source of income.
Remakes, Sequels, Television Movies and Television
Series. The Partnership will receive fixed payments and, in
certain circumstances, revenue participations in the event
that a remake, sequel, television movie or television series
is produced based on a Partnership Film. HBO will be
entitled to retain amounts recoupable by it from amounts
otherwise payable to the Partnership with respect to this
source of revenue. The Partnership does not anticipate that
a remake, sequel, television movie or television series will
be produced based on any of the Partnership Films.
Third Party Participations. The Partnership's
agreements with independent producers generally provide that
third party profit participations (i) will not be payable
until after the Partnership recoups 110% of the Partnership
Investment in the relevant Film and (ii) will generally not
exceed 45% of Partnership revenues on that Film thereafter.
Based on estimates of ultimate net revenue as of December 31,
1995, additional profit participations will be paid only with
respect to "Don't Tell Mom."
Competition.
The Partnership must compete with other filmmakers for
the services of a limited number of distribution companies,
including distribution companies which engage in the
production of their own motion pictures. Competition for
distribution in other media is as intense as the competition
for theatrical distribution.
Employees.
The Partnership has no employees; its business is
conducted by the Managing General Partner and the
Administrative General Partner. The Administrative General
Partner has retained Magera Management Corporation ("Magera")
to provide operational and financial services as well as
certain supervisory services for the Partnership. See Item
l0 "Directors and Executive Officers of the Partnership."
Magera has eight employees who perform services for the
Administrative General Partner and for the general partners
of other private and public limited partnerships.
Item 2. Properties.
The executive offices of the Partnership and the
General Partners are located at 1100 Avenue of the Americas,
New York, New York 10036. The Partnership pays no rent; all
charges for leased space and administrative facilities are
borne by the General Partners.
Item 3. Legal Proceedings.
On August 14, 1995, a lawsuit styled as a class
action was filed by two holders of Cinema Plus limited
partnership units in the United States District Court of the
Western District of Pennsylvania against HBO Film Management,
Inc. and Entertainment Finance Services, Inc., the general
partners of Cinema Plus, Home Box Office, Inc., and Kidder,
Peabody & Co., Incorporated and Smith Barney Inc., two of the
underwriters of the original sale of limited partnership
units of Cinema Plus. Cinema Plus has not been named as a
defendant in the lawsuit. The lawsuit alleged various
violations of law by the defendants in connection with the
original sale of limited partnership units of Cinema Plus and
the subsequent operation of Cinema Plus. The action was
dismissed on March 4, 1996. On March 20, 1996, the
plaintiffs filed a Notice of Appeal in the Third Circuit
Court of Appeals. The defendants believe the lawsuit to be
without merit and are vigorously defending it.
Item 4. Submission of Matters to a Vote of Security
Holders.
None.
<PAGE>
PART II.
Item 5. Market for the Registrant's Common Equity and
Related Security Holder Matters.
The Partnership is a limited partnership; there is no
public market for limited partnership units of the
Partnership.
As of March 15, 1996, there were approximately 4,000
holders of record of limited partnership units of the
Partnership.
Cash Distributions.
The Partnership commenced making cash distributions in
November 1988. The following chart sets forth the cash
distributions made by the Partnership to the limited partners
through March 15, 1996:
Year Amount Per
Unit
1988 $ 22.50
1989 95.00
1990 130.15
1991 97.50
l992 20.00
1993 30.00
1994 0
1995 10.00
1996 (through March l5th)
0
Total $405.15
Accordingly, as of March 15, 1996, limited partners
had received distributions aggregating 40.5% of their
original investment in the Partnership. These distributions
were attributable primarily to Minimum Distribution Advances
received from HBO (which have been fully repaid from net
domestic consumer video revenues) and to interest received on
Partnership funds. See "Business - Minimum Distribution
Advances." Future cash distributions will be dependent upon
the revenue generated by the Partnership's Films once
advances and distribution expenses have been recouped. It is
not anticipated that significant cash distributions will be
made until the Partnership receives the Assured Return of
Film Interest Payments from HBO in l998 and l999.
Item 6. Selected Financial Data.
<TABLE> (000's omitted except for per unit
information)
<CAPTION>
Year
Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
<C>
Net revenues from
motion pictures: $ 2,023 $ 3,844 $ 8,045
$ 27,088 $ 38,333
Interest Income: $ 210 $
79 $ 88 $ 77 $ 293
Other Income
(Expense), net: $ 237 $
861 $ (130) $ 8,493 $ 5,247
Operating Expenses: $(1,377) $(3,281)$(6,892)
$(37,773) $(50,720)
Net income (loss): $ 1,093 $
l,503 $ 1,111 $ (2,115)$ ( 6,847)
Net income (loss) per
unit:
Average for all
Limited Partners $ 25.00 $ 34.38
$ 25.41 $ (48.36) $(156.62)
Total assets: $25,938 $26,778
$27,554 $ 33,732 $ 58,508
Total liabilities: $ 5,700 $
7,196 $ 9,475 $ 15,452 $ 37,239
Accrued and paid cash
distributions per
unit (l): $ 10.00 $
0 $ 30.00 $ 20.00 $ 65.00
(1) Attributable primarily to certain Minimum Distribution
Advances received from HBO and to interest received on Partnership
funds. See "Business-Minimum Distribution Advances." Amounts
included accrued, but unpaid, distributions in 1991.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
1. Liquidity and Capital Resources.
As of December 31, 1995, the Partnership held cash and
cash equivalents of $192,000 and short-term investments of
$2,306,000.
The Partnership invested in the production of four
Films. The production costs (including contingency reserves,
the production and overhead fee payable to the General
Partners and completion bond fees) of Partnership Films
ranged from approximately $11 million to approximately $22
million per Film, with an average production cost of
approximately $16.5 million. As of December 31, 1995, an
aggregate of $98,530,000
(including the HBO Commitments) had been incurred toward the
production and theatrical release of the Partnership's four
Films.
Prior to the receipt of the ARFIP receivable, no
significant cash outlays are expected to be made by the
Partnership other than its operating expenses and the
satisfaction of the Partnership's payables to HBO (except for
the HBO Interest Recoupment). Subsequent to the receipt of
the ARFIP in 1998 and 1999, additional cash outlays are
expected to be made to HBO for payment of the HBO Interest
Recoupment, as well as to pay the Partnership's operating
expenses and to make distributions to partners.
As of December 31, 1995, the Partnership's net payable
to HBO totaled $4,600,000. Of this amount $3,968,000 relates
to the HBO Interest Recoupment which is not payable until one
month after the last ARFIP proceeds are received from HBO.
Based on current estimates of ultimate net revenues, it is
anticipated that the remainder of the payable to HBO at
December 31, 1995 will be substantially repaid to HBO within
the next two years.
During the year ended December 31, 1995, the
Partnership recognized net revenue in the amounts of $9,000,
$1,912,000, $80,000, $50,000 and $39,000 with respect to the
domestic theatrical, foreign, domestic video, domestic
network television and domestic syndication markets,
respectively, for its Films. In addition, third party
participations expense related to "Don't Tell Mom," was
$67,000 thereby decreasing the Partnership's Net Revenue from
Motion Pictures for the year ended December 31, 1995.
Since the Partnership is not anticipating significant
future revenue (other than those used to repay HBO) until the
Assured Return of Film Investment Payments are received from
HBO in 1998 and 1999, the Partnership's future operating
expenses are expected to be met from current cash and short-
term investments. Management believes that the cash and
short-term investments held at December 31, 1995 are
sufficient to meet its liquidity needs without the need to
obtain external financing from a third party or its General
Partners. Cash distributions will be made only as
significant cash becomes available from the exploitation of
the Films in excess of the payables due to HBO or as the
Assured Return of Film Investment Payments are received from
HBO.
2. Results of Operations
For the year ended December 31, 1995, the Partnership
recorded net income of $1,093,000 due primarily to the
performance of its Films in the foreign markets, domestic
video and "Ricochet" in the domestic television network
market.
For the year ended December 31, 1994, the Partnership
recorded net income of $1,503,000 due primarily to the
performance of its Films in the foreign markets and "Don't
Tell Mom" in the domestic television network market.
For the year ended December 31, 1993, the Partnership
recorded net income of $1,111,000 due primarily to the
performance of its Films in the domestic video and foreign
markets and "Don't Tell Mom" in the domestic television
network market.
The decrease in operating expenses during the
period ended December 31, 1995 and 1994 as compared,
respectively, with the corresponding periods in 1994 and 1993
is due primarily to a decrease in amortization of Motion
Picture Production Costs. The decrease in amortization of
Motion Picture Production Costs is due primarily to a
decrease in Net Revenue from Motion Pictures.
The decrease in interest expense, included in Other
Income (Expense), during the periods ended December 31, l995
and 1994 as compared, respectively, with the corresponding
periods in l994 and l993. This decrease is due primarily to
the decline in outstanding payables to HBO.
Item 8. Financial Statements and Supplementary Data.
See the financial statements set forth in Item 14 of
this annual
report.
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the
Partnership.
The Partnership is managed by HBO Film Management,
Inc., the Managing General Partner, and by Entertainment
Finance Services, Inc., the Administrative General Partner.
Both of the General Partners were incorporated in Delaware in
September 1987. The Managing General Partner is primarily
responsible for negotiating production and distribution
agreements. The Administrative General Partner is primarily
responsible for reviewing Film budgets, monitoring
expenditures of Partnership funds, administering financing,
production and distribution agreements, monitoring and
auditing Partnership revenues, and accounting and reporting
to the limited partners.
The Managing General Partner
The executive officers and directors of the Managing
General Partner are set forth below. Each of these
individuals has served as an officer or director of the
Managing General Partner since the Managing General Partner
was incorporated, except that in March 1989 John B. Newton
resigned as Executive Vice President and Director of the
Managing General Partner and was replaced in such position by
Leslie H. Jacobson, and in November 1995, Michael J. Fuchs
left his position as Chairman. Mr. Fuchs was succeeded as
Chairman by Jeffrey L. Bewkes and Bill Nelson assumed the
position of Director, Executive Vice President and Chief
Financial Officer.
Name Age Positions
Held
Jeffrey L. Bewkes 43
Chairman
Stephen J. Scheffer 57
President, Director
Leslie H. Jacobson 48
Executive Vice President,
Director
Bill Nelson 47
Executive Vice President,
Chief Financial Officer,
Director
John S. Redpath, Jr. 51
Vice President, General
Counsel
Secretary,
Director
Perry L. Schneider 40
Vice President, Treasurer,
Director
George A. Cooke, Jr. 48
Vice President
Glenn Whitehead 41
Vice President
Jeffrey L. Bewkes, Chairman, has been Chairman,
President and Chief Executive Officer of HBO since November
1995. As such, he excerises authority for the overall
management, planning and administration of the nation's
oldest and largest pay television company. Mr. Bewkes joined
HBO in 1979 and since that time has held positions in the
areas of sales, marketing, finance and strategic planning as
well as served as its Treasurer, Chief Financial Officer,
Executive Vice President and Chief Operating Officer. He
serves on the boards of the National Cable Television
Association, E! Entertainment Television and Comedy Central.
A graduate of Yale University and Stanford Graduate School of
Business, Mr. Bewkes previously was employed as a lending
officer for Citibank, N.A. and as operations director for
Sonoma Vineyards.
Stephen J. Scheffer, President, has been President,
Film Programming, Home Video and Enterprises, for HBO since
June 1995, having been Executive Vice President, Film
Programming and Home Video since February 1983 and head of
its consumer video activities since May 1984. He is
responsible for overseeing the acquisition of all motion
pictures for HBO, is Chairman of HBO Video and heads HBO
Enterprises. A graduate of the U.S. Naval Academy and
recipient of an M.B.A. degree from Harvard Business School,
Mr. Scheffer joined HBO in 1980 after having held executive
positions with Time-Life Films, Allied Artists, Polydor
Records, MGM/UA and Columbia Pictures.
Leslie H. Jacobson, Executive Vice President, has
been Senior Vice President, Film Programming, for HBO since
March 1989. From October 1987 until March 1989, Ms. Jacobson
was Senior Vice President, Business Affairs and
Administration for HBO. Her responsibilities in her current
position include the selection and licensing of feature films
for exhibition on the HBO program services and for
distribution by HBO Video as well as the supervision of
relationships with independent filmmakers. A former general
counsel and executive vice president of Tri-Star Pictures,
Inc. from April 1983 to October 1987, Ms. Jacobson holds
degrees from Georgetown University and Cornell University Law
School.
Bill Nelson, Executive Vice President and Chief
Financial Officer, has been Executive Vice President and
Chief Financial Officer for HBO since April 1994. Mr. Nelson
holds responsibility for all of HBO's financial matters and
information and systems technology. He also oversees HBO's
business affairs department. Prior to joining HBO as Vice
President and Assistant Controller, in May 1984, Mr. Nelson
was an executive at Time Inc. A graduate of Pace University,
he also holds an M.B.A. from that institution.
John S. Redpath, Jr., Executive Vice President,
General Counsel and Secretary, is responsible for all legal
aspects of HBO's operations. Mr. Redpath became a member of
HBO's legal department in June 1978, initially specializing
in the film programming area. He became HBO's General
Counsel in January 1981. A graduate of Princeton University,
he holds a J.D. from the University of Michigan and an L.L.M.
in taxation from New York University.
Perry L. Schneider, Vice President and Treasurer, has
been Vice President, Film Programming for HBO since September
1988. Mr. Schneider's responsibilities include licensing
programming for exhibition on the HBO program services in the
United States and abroad, as well as overseeing HBO's
investment oriented film activities. Since joining HBO in
1983, he has held a series of programming and finance
positions. Prior to joining HBO, Mr. Schneider was a vice
president in the entertainment and media group at the
European American Bank in New York. He is a graduate of the
State University of New York at Stony Brook and holds an
M.B.A. from New York University.
George A. Cooke, Jr., Vice President, has been Vice
President and Chief Counsel, Film Programming for HBO since
September 1995. Mr. Cooke oversees the legal aspects of
HBO's film licensing and financing arrangements and is
responsible for matters in the areas of corporate and
securities law. Prior to joining HBO as associate counsel,
film programming, in April 1983, Mr. Cooke was an associate
at the law firm of Ropes & Gray. A graduate of Dartmouth
College, he holds an M.A. from Cambridge University and a law
degree from Harvard Law School.
Glenn Whitehead, Vice President, has been Vice
President, Business Affairs and Production for HBO since
January 1992. Based in Los Angeles, he is responsible for
all contract negotiations and physical production regarding
television motion pictures and West Coast original
programming. He joined HBO in September 1983 as an associate
counsel, shifting to business affairs in 1985. He is a
graduate of the University of California at Riverside and
holds a law degree from the University of California at Los
Angeles.
The Managing General Partner was incorporated under
the laws of the State of Delaware in September 1987. All of
the outstanding capital stock of the Managing General Partner
is owned by Time Warner.
The Administrative General Partner.
Bradley J. Wechsler, age 44, is the sole director and
officer of the Administrative General Partner. Mr. Wechsler
has served in these positions since the Administrative
General Partner was incorporated in 1987. Mr. Wechsler is
also the sole director and officer of Bedford Capital
Advisors, Inc., which provides financial and advisory
services in the entertainment and media industries. Mr.
Wechsler is also a director of Imax Corporation.
All of the outstanding capital stock of the
Administrative General Partner is owned by Mr. Wechsler.
Operational and Financial Services.
To assist it in the performance of its duties, the
Administrative General Partner has engaged Magera Management
Corporation to provide operational and financial services to
the Partnership. Magera is owned by Richard M. Mason and
Aaron German. Magera also provides operational and financial
services to the general partners of other private and public
limited partnerships and serves as a consultant to others
engaged in the entertainment industry.
Item 11. Executive Compensation.
The following table sets forth the fees, income,
distributions and other amounts payable to the General
Partners in connection with the management of the
Partnership.
Except as set forth below, the General Partners will
receive no other remuneration of any type whatsoever from the
Partnership in connection with the administration of
Partnership affairs.
Type of Compensation
and Entity Receiving Method of Compensation Aggregate Amount
Production and Overhead Fee 5.0% of the Budgeted
$2,965,000
Payable to the Managing Negative Cost of each
General Partner Film (excluding the
Production and Overhead
Fee), payable at the time
principal photography
commences on the Film
Production and Overhead Fee 5.0% of the Budgeted
$2,965,000, plus
Payable to the Administrative Negative Cost of
each interest
General Partner Film (excluding
the
Production and Overhead
Fee), payable at the time
principal photography
commences on the Film, plus
interest to the extent
payment is deferred (1)
Production and Overhead Fee 2.5% of the
Budgeted $1,483,000, plus
Payable to the General Negative Cost of
each interest
Partners, to be allocated Film (excluding the
between the General Partners Production and
Overhead
based upon the deduction of Fee), payable at
the time
certain expenses incurred principal
photography
in operating the Partnership commences on the
Film, plus
interest to the extent
payment is deferred (1)
General Partners' Share of l% of all income,
profits Actual amounts depend
Cash Available for Distribu- losses and cash
distribu- upon the results of
tion and Profits and Losses tions will
generally be Partnership operations
allocated to the Adminis- and are not
determi-
trative General Partner nable at this
time.
until the Limited Partners
have received a return of
their Adjusted Capital
Contributions (as defined
in the partnership agree-
ment) plus a l2.5% cumula-
tive (but not compounded)
annual return on their
Adjusted Capital Contribu-
tion. Thereafter, 20% of all
income, profits, losses and
cash distributions will be
allocated to the General
Partners (l0% to the
Managing General Partner
and l0% to the Administra-
tive General Partner)
- -----------------------------------
(1) The Partnership has established a reserve in the amount
of the Production and Overhead Fee payable to the
Administrative General Partner as it accrues. Amounts
are being paid to the Administrative General Partner from
the reserve from time to time in accordance with a set
schedule. Interest is accruing on the amounts included
in the reserve at a rate equal to the interest rate
earned by the Partnership on the short-term investment of
its funds.
The partnership agreement provides that all Partnership
expenses, including, among other things, expenses for
financial statement preparation, tax preparation, auditing
and accounting fees, compliance with government regulations
and legal expenses, will be billed to and paid by the
Partnership. Subject to the restrictions set forth in the
partnership agreement, the Administrative General Partner may
be reimbursed by the Partnership for certain administrative
services including, among other things, the cost of goods,
materials and services obtained from entities unaffiliated
with the General Partners.
As of December 31, l995, the General Partners had
received $7,019,000 attributable to the Production and
Overhead Fee. A portion of the Production and Overhead Fee
to the Administrative General Partner is paid in accordance
with a set schedule and, as such, $718,000 (inclusive of
interest) remains payable to the Administrative General
Partner as of December 31, 1995. In addition, the
Administrative General Partner has received $4,000, $0, and
$13,000, representing its 1% share of cash distributed to
partners during 1995, 1994 and 1993, respectively. No
portion of such cash distributions was paid to the Managing
General Partner.
Item 12. Security Ownership of Certain Beneficial Owners
and
Management.
To the best knowledge of the General Partners, no
person beneficially owns in excess of 5% of the limited
partnership units of the Partnership.
Item 13. Certain Relationships and Related Transactions.
The Partnership's operations relating to the ownership
and exploitation of films involve HBO. See "Business." The
General Partners are entitled to receive a Production and
Overhead Fee and to an interest in cash distributions. See
"Executive Compensation."
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a)(1) Financial Statements:
Report of Independent Auditors
Balance Sheets at December 31, 1995 and 1994
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993
Statements of Cash Flows
for the years ended December 31, 1995,
1994 and 1993
Statements of Changes in Partners' Capital
for the years ended December 31, 1995,
1994 and 1993
Notes to Financial Statements
(a)(2) Financial Statement Schedules:
No financial statement schedules have been filed as
part of
this report as none are required.
<TABLE>
<CAPTION>
(a)(3) Exhibits Exhibit
No.
<S> <C>
Amended and Restated Agreement of Limited Partnership
dated as of December 9, 1987 (1) 4
Amendment to Amended and Restated Agreement of
Limited Partnership dated as of April 22, 1988 (1) 4.1
Amendment to Amended and Restated Agreement of
Limited Partnership dated as of June 2, 1988 (1) 4.2
Amendment to Amended and Restated Agreement of
Limited Partnership dated as of August 17, 1988 (1)
4.3
License, Co-financing and Distribution Agree-
ment between the Registrant and Home Box Office, Inc.
dated December 4, 1987 (1) 10(b)
Amendment to License, Co-financing and
Distribution Agreement dated April 22, 1988 (1) 10(b).1
Amendment to License, Co-financing and
Distribution Agreement dated August 17, 1988 (1) 10(b).2
Amendment to License, Co-financing and
Distribution Agreement dated as of June 28, 1991 (4)
10(b).3
Master Letter Agreement dated as of
September 8, 1987 between Mercury/Douglas Films
and Home Box Office, Inc. (1) 10(c)
Distribution Agreement dated November 13, 1987
between Metro-Goldwyn-Mayer Pictures, Inc., Home
Box Office, Inc. and Mercury/Douglas Films (1) 10(d)
Agreement dated October 2, 1989 between Home Box
Office, Inc. and Warner Bros., including the
letter dated March 27, 1990 from Warner Bros.
to Home Box Office, Inc. setting forth certain
clarifications (2) 10(e)
Distribution Agreement dated February 26, 1990
between Cinema Plus, L.P. and the Odyssey/Regency
Switch Company (3) 10(f)
Credit Agreement dated as of June 28, 1991
between Cinema Plus, Inc. and Home Box Office (4) 10(g)
Memorandum of Agreement dated February 1, 1991 10(h)
between Cinema Plus, L.P. and Summit Group (MEV)
N.V. (5)
Financial Data Schedule 27
</TABLE>
(1) Incorporated by reference to the Partnership's
registration statement No. 33-17318, as amended, on file with
the Securities and Exchange Commission.
(2) Incorporated by reference to the Partnership's
Form 10-K for the year ended December 31, 1989 on file with
the Securities and Exchange Commission.
(3) Incorporated by reference to the Partnership's
Form 10-K for the year ended December 31, 1990 on file with
the Securities and Exchange Commission.
(4) Incorporated by reference to the Partnership's
Form 10-Q for the quarter ended June 30, 1991 on file with
the Securities and Exchange Commission.
(5) Incorporated by reference to the Partnership's
Form 10-K for the year ended December 31, 1991 on file with
the Securities and Exchange Commission.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last
quarter of the Partnership's fiscal year ended December 31,
1995.
(c) Exhibits.
The Exhibits required by Item 601 of Regulation S-K
are submitted as a separate section following the
Partnership's financial statements.
(d) Financial Statement Schedules.
No financial statement schedules have been filed as
part of this report as none are required.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, Cinema Plus,
L.P., a Delaware limited partnership (the "Registrant"), has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CINEMA PLUS, L.P.
(a
Delaware limited
partnership)
Dated: March 28, 1996 By: Entertainment
Finance
Services, Inc.,
Administrative
General Partner
By: /s/ Bradley J.
Wechsler
Bradley J. Wechsler
President and sole
Director
<PAGE>
EXHIBIT INDEX
Page Reference
in Sequentially
Numbered Copy
4 Amended and Restated Agreement of Limited
Partnership
dated as of
December 9, 1987
*
4.1 Amendment to Amended and Restated Agreement
of Limited Partnership dated as of
April 22, 1988 *
4.2 Amendment to Amended and Restated Agreement of
Limited Partnership dated as of June 2, 1988 *
4.3 Amendment to Amended and Restated Agreement of
Limited Partnership dated as of August 17, 1988 *
10(b) License, Co-financing and Distribution Agree-
ment between the Registrant and Home Box
Office, Inc.
dated December
4, 1987 *
10(b).1Amendment to License, Co-financing and
Distribution Agreement dated April 22, 1988 *
10(b).2Amendment to License, Co-financing and
Distribution Agreement dated August 17, 1988 *
10(b).3Amendment to License, Co-financing and
Distribution Agreement dated as of June 28, 1991 *
10(c) Master Letter Agreement dated as of
September 8, 1987 between Mercury/Douglas Films
and Home Box Office, Inc. *
10 (d) Distribution Agreement dated November 13, 1987
between Metro-Goldwyn-Mayer Pictures, Inc., Home
Box Office, Inc.
and
Mercury/Douglas
Films *
10 (e) Agreement dated October 2, 1989 between Home Box
Office, Inc. and Warner Bros., including the
letter dated March 27, 1990 from Warner Bros. to
Home Box Office, Inc. setting forth certain
clarifications *
10(f) Distribution Agreement dated February 26, 1990
between Cinema Plus, L.P. and the Odyssey/Regency
Switch Company *
10(g) Credit Agreement dated as of June 28, 1991 between
Cinema Plus, L.P. and Home Box Office *
10(h) Memorandum of Agreement dated February 1, 1991 between
Cinema Plus, L.P. and Summit Group (MEV), N.V.*
27 Financial Data Schedule
*Incorporated by reference
<PAGE>
Report of Independent Auditors
To the Partners of
Cinema Plus, L.P.
We have audited the accompanying balance sheets of Cinema
Plus, L.P. as of December 31, 1995 and 1994, and the related
statements of operations, cash flows and changes in
partners' capital for each of the three years in the period
ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Cinema Plus, L.P. at December 31, 1995 and 1994,
and the results of its operations and its cash flows for
each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
March 25, 1996
<PAGE>
CINEMA PLUS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
(000's omitted)
<TABLE>
<CAPTION>
December
31,
1 1
995 994
<S> <C> <C>
ASSETS
Cash and Cash Equivalents (Note $ $
2) 192 359
Short-Term Investments (Note 2) 2,306 2,746
Receivable from HBO (Note 3) 1,334 1,380
Assured Return of Film
Investment Payment
Receivable (Note 5) 21,355 20,684
Motion Picture Production
Costs, net of
accumulated amortization of
$97,780 and
$96,814, respectively
(Notes 2, 4 & 7) 751 1,609
Total $ $
Assets 25,938 26,778
LIABILITIES AND PARTNERS'
CAPITAL
Liabilities:
Accrued Expenses and Accounts $ $
Payable 205 207
Payable to General Partners 718 929
(Note 2)
Deferred Revenue (Note 2) 177 60
Payable to HBO (Notes 4, 5 &
7) 4,600 6,000
Total $ $
Liabilities 5,700 7,196
Partners' Capital (Note 7):
General Partners $ $
(173) (180)
Limited Partners
20,411 19,762
Total $ $
Partners' Capital 20,238 19,582
Total
Liabilities and Partners'
$ $
Capital 25,938 26,778
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
CINEMA PLUS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(000's omitted, except net income per unit)
<TABLE>
<CAPTION>
For
the Year Ended December 31,
1995 1994
1993
<S> <C> <C> <C>
Net Revenue from Motion Pictures $ $ $
(Notes 2 & 7) 2,023 3,844 8,045
Expenses:
Motion Picture Production 966 2,884 6,376
Costs (Notes 2 & 7)
Amortization of Organization
Expenses
(Note 2) 0 0 36
Professional and Other Fees
411 397 480
1,377 3,281 6,892
Income from Operations
646 563 1,153
Assured Return of Film Investment
Payment (Note 5) 671 1,413 478
HBO Interest Recoupment (Note 5) (218) (246) (242)
Interest Expense (Notes 4 & 6) (216) (306) (366)
Interest Income
210 79 88
Net Income $ $ $
1,093 1,503 1,111
Net Income Attributable to
General
Partners $ $ $
11 15 11
Net Income Attributable to $ $ $
Limited Partners 1,082 1,488 1,100
Net Income Per Unit of Limited
Partnership
Interest (43,286 units) $ $ $
25.00 34.38 25.41
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
CINEMA PLUS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1995
1994 1993
<S>
<C> <C> <C>
Operating Activities:
Net Income $ $ $
1,093 1,503 1,111
Adjustments to Reconcile Net
Income to Net
Cash Provided by Operating
Activities:
Decrease (Increase) in 46 (1,031) (349)
Receivable from HBO
Increase in Assured Return of
Film Investment
Payment Receivable (671) (1,413) (478)
(Increase) Decrease in Motion
Picture
Production Costs (108) 216 (454)
Amortization and Write-Down of
Motion
Picture Production Costs 966 2,884 6,376
Amortization of Organization -- -- 36
Expenses
(Decrease) Increase in Accrued
Expenses and
Accounts Payable (2) (86) 97
Decrease in Payable to (211) (216) (196)
General Partners
Increase (Decrease) in
Deferred Revenue 117 (808) (495)
Net Cash Provided by
Operating Activities 1,230 1,049 5,648
Investing Activities:
Purchase of Short-Term (5,610) (6,437) (2,805)
Investments
Redemption of Short-Term
Investments 6,050 6,513 4,201
Net Cash Provided by
Investing Activities 440 76 1,396
Financing Activities:
Decrease in Payable to HBO (5,383)
(1,400) (1,169)
Distributions Paid to Partners
(437) -- (1,312)
Net Cash Used in
Financing Activities (1,837) (1,169) (6,695)
(Decrease) Increase In Cash and (167) (44) 349
Cash
Equivalents
Cash and Cash Equivalents at
beginning of year 359 403 54
Cash and Cash Equivalents at end $ $ $
of year 192 359 403
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
CINEMA PLUS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(000's omitted)
<TABLE>
<CAPTION>
General Limited Total
<S>
<C> <C> <C>
Balance January 1, 1993 $ $ $
(193) 18,473 18,280
Net Income for the year
ended
December 3l, 1993 11 1,100 1,111
Distributions to Partners
($30 per limited
partnership unit) (13) (1,299) (1,312)
Balance December 31, 1993 $ $ $
(195) 18,274 18,079
Net Income for the year
ended
December 31, 1994
15 1,488 1,503
Balance December 31, 1994 $ $ $
(180) 19,762 19,582
Net Income for the year
ended
December 3l, 1995 11 1,082 1,093
Distributions to Partners
($10 per limited
partnership unit) (4) (433) (437)
Balance December 31, 1995 $ $ $
(173) 20,411 20,238
See accompanying notes to the financial statements.
</TABLE>
<PAGE>
CINEMA PLUS, L.P.
(A Delaware Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. General
Cinema Plus, L.P. (the "Partnership") is a Delaware
limited partnership which was formed to finance, own and
exploit through various distribution arrangements English
language feature-length theatrical motion pictures ("Films"
or "Partnership Films"). The Partnership was organized under
the laws of the State of Delaware on September l0, l987. HBO
Film Management, Inc., a Delaware corporation wholly-owned by
Time Warner Operations Inc., is the managing general partner
(the "Managing General Partner") of the Partnership.
Entertainment Finance Services, Inc., a Delaware corporation,
is the administrative general partner (the "Administrative
General Partner") of the Partnership. The Managing General
Partner and the Administrative General Partner are sometimes
collectively referred to as the "General Partners." The
total number of limited partnership units as of December 31,
1995, 1994 and 1993 was 43,286. The net income per unit of
limited partnership interests for the years ended December
31, l995, 1994 and 1993 was $25.00, $34.38 and $25.41,
respectively. All terms not otherwise defined herein shall
have the meanings set forth in the Partnership's prospectus
dated December 9, 1987, as amended.
2. Summary of Significant Accounting Policies
(a) General
The preparation of financial statements in conformity with
generally accepted accounting principles requires the
Partnership to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. The Partnership believes that the estimates utilized
in preparing the financial statements are reasonable and
prudent; however, actual results could differ from these
estimates.
(b) Cash Equivalents
Cash Equivalents consist of U.S. Government Securities
that are readily convertible into cash, and have original
maturities of three months or less. All Cash Equivalents are
stated at cost plus accrued interest, which approximates
market value.
(c) Short-Term Investments
Short-term Investments consist of U.S. Government
Securities which have original maturities of greater than
three months and are stated at amortized cost, which
approximates market value. The investments held as of
December 31, 1995 are due to mature within six months.
(d) Organization Expenses
Organization expenses were amortized on the straight-line
basis over 60 months. As of December 31, l993, organization
expenses were fully amortized.
(e) Income Taxes
No provision for Federal and State income taxes has been
made in the accompanying financial statements as Cinema Plus,
L.P. is a partnership, with all income tax consequences
flowing directly to its partners. As of December 31, 1995
and 1994, reported amounts of the Partnership's assets less
liabilities were greater (less) than the tax bases by
$1,838,000 and ($418,000), respectively.
(f) Payable to General Partners
A portion of the Production and Overhead Fee to the
General Partners is paid in accordance with a set schedule.
Interest accrues on the balance at a rate equal to the
interest rate earned by the Partnership on the short-term
investment of its funds. Accordingly, as of December 31,
1995 and 1994, $718,000 and $929,000, respectively, is
recorded as a payable to the General Partners in the
accompanying financial statements.
(g) Recognition of Revenues
Net revenues from the distribution of the Partnership's
Films consist of gross receipts less distribution fees and
expenses. A distribution fee of 15% of gross domestic
theatrical revenues was paid to Warner Bros., an affiliate of
the Managing General Partner, with respect to all four
Partnership Films. Films are initially distributed in the
theatrical, videocassette and pay television media.
Subsequently, Films are made available for U.S. and foreign
television network exhibition and/or television syndication.
All foreign revenues are received by the Partnership in U.S.
dollars.
Revenues from the distribution of Films in the theatrical
market are recognized as the Films are exhibited. Home video
revenues, less a provision for returns, are recognized when
the video cassettes are shipped. Revenues from television
license agreements are recognized when the respective license
period begins pursuant to the terms of the license
agreements. Advances received prior to the Film's
availability are deferred.
(h) Motion Picture Production Costs and Amortization
Motion Picture Production Costs represent the amounts
expended by the Partnership in connection with the production
of the Partnership Films and are stated at the lower of
unamortized cost or net realizable value. In addition,
interest incurred during production as well as print and
advertising expenditures which benefit future periods have
been capitalized and included in Motion Picture Production
Costs. Motion Picture Production Costs are amortized under
the individual film forecast method based on net revenues
recognized in proportion to the Partnership's estimate of
ultimate net revenues to be received. Unamortized Motion
Picture Production Costs are compared quarterly with the net
realizable value on a film by film basis, and losses are
recognized to the extent of any excess of costs over net
realizable value with respect to each Film.
Based on estimates of net revenue as of December 31, 1995,
approximately 100% of unamortized Motion Picture Production
Costs applicable to the released Films will be amortized by
December 31, 1997.
(i) Deferred Revenue
Deferred Revenue represents Foreign Distribution Advances
for the Partnership Films "Don't Tell Mom the Babysitter's
Dead" ("Don't Tell Mom"), "Mom and Dad Save the World" ("Mom
and Dad") that were received during the years ended December
31, 1995 and 1994 for territories in which the theatrical
print or video cassette was not yet delivered or the pay
television license period for these Films had not begun at
that respective date. The revenue related to these advances
along with related costs will be recorded after the
theatrical print or video cassette is delivered or pay
television license period begins in each applicable foreign
territory.
3. Receivable from HBO
(a) Network Receivable from HBO
Pursuant to the HBO License Agreement, the Partnership has
granted domestic network television distribution rights in
the Films to HBO, and HBO has caused such rights to be
licensed to Warner Bros. HBO and Warner Bros. receive in the
aggregate a distribution fee of no more than 20% of the
gross proceeds received from the exploitation of their
network television distribution rights in each Film. The
remaining revenues, less distribution expenses and guild
residuals, are remitted to the Partnership. During the years
ended December 31, 1995 and l994, the Partnership recognized
net revenue of $50,000 and $1,247,000, respectively, for the
films "Ricochet" and "Don't Tell Mom" which were available
for airing on network television. The Partnership received
$848,000 and $27l,000 during 1995 and l994, respectively, for
the Films "Ricochet" and "Don't Tell Mom." A total of
$453,000 is recorded as a network receivable from HBO with
respect to the Film "Ricochet," and is included in the
Receivable from HBO in the accompanying financial statements
as of December 31, 1995. As of December 31, 1994, $1,251,000
was recorded as a network receivable from HBO and was
included in the Receivable from HBO in the accompanying
financial statements.
(b) Syndication Receivable from HBO
Domestic syndication television rights in the Films are
licensed by HBO (or a subdistributor designated by HBO) on
behalf of the Partnership. HBO and its subdistributor, if
any, receive distribution fees aggregating no more than
37.5% of the gross receipts from such license. Gross
receipts less distribution fees and expenses and guild
residuals are remitted to the Partnership. During the year
ended December 31, 1995, the Partnership received $l68,000
with respect to "Switch" and recognized net revenue from
syndicated television of $39,000. As of December 31, 1995,
$0 is recorded as a syndication receivable from HBO. As of
December 31, 1994, $129,000 was recorded as a syndication
receivable from HBO and was included in the Receivable from
HBO in the accompanying financial statements.
(c) Net Domestic Video Receivable From/Payable To HBO
Domestic consumer video distribution rights in the
Films have been licensed to HBO. The Partnership receives
l00% of domestic consumer video revenues (after the
deduction of direct manufacturing, marketing, advertising
and distribution costs, and guild residuals as well as any
amounts recoupable by HBO) from each Film until the
Partnership has received sufficient funds from domestic
consumer video and all prior sources to recoup its
Investment in the Film ("Video Breakeven"). Thereafter, the
Partnership receives 35% of domestic consumer video revenues
(after deduction of direct manufacturing, marketing,
advertising and distribution costs and guild residuals).
During the year ended December 31, l995, the Partnership
recognized revenues of $80,000 from net domestic home video
distribution. In addition, during the year ended December
31, l995 the Partnership paid HBO the amount of $10,000 due
to net domestic video returns for the Film "Mom and Dad."
Based upon estimates of ultimate net revenues as of December
31, 1995, the Partnership will not reach Video Breakeven for
any Film with the exception of "Don't Tell Mom."
During the year ended December 31, l995, the
Partnership received $20,000 from the net domestic home
video distribution of all of its Films. As of December 31,
l995, $60,000 is recorded as a net domestic video receivable
from HBO and has been included in the Receivable from HBO in
the accompanying financial statements. As of December 31,
1994, $10,000 was recorded as a net domestic video payable
to HBO and included in the Payable to HBO in the
accompanying financial statements.
(d) Foreign Receivable from HBO
As the HBO Commitment with respect to "Richochet" has
been fully repaid, any future foreign receipts for this Film
will be remitted to the Partnership net of any guild
residuals, distribution fees and expenses. As of December
31, 1995, $821,000 (including accrued interest) is recorded
as a foreign receivable from HBO.
4. Payable to HBO
The Payable to HBO at December 31, 1995 and l994
(including accrued interest) consists of the following
amounts:
1995 1994
HBO Commitment $ 404,000 $1,276,000
Shortfall Production Advance 0
728,000
Print and Advertising Expenditures 228,000
236,000
HBO Interest Recoupment 3,968,000 3,750,000
(See Note 5)
Net Domestic Video 0
10,000
(See Note 3 (b))
Total $4,600,000
$ 6,000,000
(a) HBO Commitment
Pursuant to the HBO License Agreement, HBO advanced to the
Partnership, for investment in each Partnership Film,
approximately 30% of the aggregate production costs of such
Film (the "HBO Commitment"). On a per Film basis, the amount
advanced approximated the advance payable to the Partnership
for foreign distribution rights (the "Foreign Distribution
Advance") discounted by an amount attributed to interest at
the Prime Rate. For each Partnership Film, HBO will
generally recoup the HBO Commitment, plus interest at the
Prime Rate, from the Foreign Distribution Advance as it is
paid. A Foreign Distribution Advance in the amount of
$7,925,000 for the Partnership Film entitled "Switch" was
received during 1991. The entire HBO Commitment related to
"Switch" was repaid out of these funds.
Through December 31, 1995, the Partnership has received
HBO Commitment funds in the amount of $15,816,000 in
connection with the production of "Mom and Dad," "Don't Tell
Mom" and "Ricochet." During l995 and l994, $1,175,000 and
$1,618,000, respectively, of the HBO Commitments (including
interest) were repaid from net Foreign Distribution Advances
received with respect to these Films. In addition, interest
was accrued in the amount of $195,000 and $263,000 in l995
and l994, respectively. The HBO Commitment with respect to
"Ricochet" has been fully repaid as of December 31, 1995.
Based upon current revised estimates of ultimate net foreign
revenues as of December 31, 1995, it is anticipated that HBO
will fully recoup the HBO Commitment with respect to "Don't
Tell Mom." As a result, the Partnership's Payable to HBO has
been increased by $145,000 during the year ended December 31,
1995 with a corresponding increase to the capitalized Motion
Picture Production Costs of this Film. Based upon current
revised estimates of ultimate net foreign revenues as of
December 31, 1995, it is anticipated that HBO will be unable
to recoup the HBO Commitment in the amount of $2,456,000 with
respect to "Mom and Dad Save the World." As a result, the
Partnership's Payable to HBO has been reduced by $37,000 for
"Mom and Dad Save the World" during the year ended December
31, 1995 with a corresponding reduction to the capitalized
Motion Picture Production Costs of this Film.
(b) Shortfall Production Advance
HBO loaned to the Partnership, on a non-recourse basis to
the general and limited partners, the additional funds
necessary to complete the production of the Partnership's
last Film to commence principal photography, entitled
"Ricochet" (the "Shortfall Production Advance"). HBO is
entitled to recoup this loan with interest at the Prime Rate
from funds remitted to the Partnership (other than the
Foreign Distribution Advance used to repay the HBO
Commitment) from the exploitation of such Film. Through
December 31, 1995, the Partnership had received Shortfall
Production Advances aggregating $8,019,000.
During the years ended December 31, l995 and l994, the
Partnership repaid $753,000 and $63,000, respectively
(including accrued interest of $25,000 and $44,000,
respectively) of the Shortfall Production Advance to HBO from
the net domestic video and network revenue received with
respect to the Film "Ricochet." As of December 31, 1995, HBO
has fully recouped this loan.
(c) Print and Advertising Expenditures
As of December 31, 1995, $43,262,000 of domestic print and
advertising expenditures and related interest were incurred
in connection with the Partnership's four Films. All of
these expenditures were advanced by Warner Bros. on behalf of
HBO and HBO will reimburse Warner Bros. for all amounts not
recouped from domestic theatrical and non-theatrical
distribution. Pursuant to the HBO License Agreement, and
based upon estimates of ultimate net revenues and ultimate
print and advertising expenditures as of December 31, 1995,
$31,829,000 of the $43,262,000 is reimbursable (and most of
which has been repaid) by the Partnership to HBO with HBO
being responsible for the remaining $11,433,000. $32,004,000
of print and advertising expenditures had been capitalized as
Motion Picture Production Costs as of December 31, l993.
However, based upon estimates of ultimate net revenues of the
Film "Mom and Dad Save the World" as of December 31, 1995, it
is anticipated that HBO will be unable to recoup Print and
Advertising Expenditures in the amount of $175,000 with
respect to this Film and, as a result, as of December 31,
l995, the Partnership's Payable to HBO has been reduced by an
additional $l75,000 with a corresponding reduction to the
Motion Picture Production Costs of such Film.
During the years ended December 31, 1995 and l994, the
Partnership recognized revenues, net of distribution fees, of
$9,000, and $17,000, respectively, from the domestic
theatrical distribution of its released Films. All of these
revenues were applied toward the recoupment of the print and
advertising expenditures described above.
During the year ended December 31, 1995, the Partnership
increased its payable to HBO for print and advertising
expenses incurred for the Film "Mom and Dad Save the World"
in the amount of $10,000 (including interest) primarily due
to net domestic video returns with respect to that Film.
During the years ended December 31, 1995 and l994, the
Partnership repaid to HBO a portion of the print and
advertising expenses incurred for the Film "Mom and Dad Save
the World" in the amount of $9,000 and $11,000, respectively
(including accrued interest), from the net domestic video
revenue received with respect to that Film.
5. Assured Return of Film Investment and the HBO Interest
Recoupment
Under the HBO License Agreement, if net proceeds from all
sources to the Partnership are less than 115% of the
Partnership Investment in any Film, HBO will pay to the
Partnership on the seventh anniversary of the initial
theatrical release of that Film an additional license fee
sufficient to assure an aggregate return to the Partnership
of ll5% of the Partnership Investment in that Film (the
"Assured Return of Film Investment Payment" or "ARFIP").
Based on the anticipated performance of each of the four
Films in release at December 31, 1995, it is expected that
HBO will be required to make an Assured Return on Film
Investment Payment with respect to each of these Films.
Accordingly, $21,355,000 and $20,684,000 (amounts present
valued at the Prime Rate as of the initial theatrical release
of each film) were recorded by the Partnership as a
receivable in the accompanying financial statements as of
December 31, 1995 and l994, respectively.
With respect to any Film for which an ARFIP is made, HBO
will be thereafter entitled to receive from the Partnership
any additional revenues received by the Partnership with
respect to that Film until the entire amount of such ARFIP
has been recouped by HBO. If HBO has not recouped this ARFIP
for a Film by July l999, the Partnership will be required to
pay to HBO at that time an amount (the "HBO Interest
Recoupment") equal to the lesser of: (a) the sum of the
unrecouped ARFIP and the non-standard television residuals
for such Film or (b) the Per Film Interest (as defined
below). "Per Film Interest" represents the interest income
earned on Partnership Funds awaiting investment in Films
divided by the four Partnership Films. $218,000, and
$246,000 was recorded by the Partnership as an expense for
the years ended December 31, 1995 and l994, respectively.
Accordingly, $3,968,000 and $3,750,000 (amounts present
valued) was recorded by the Partnership and included in the
Payable to HBO in the accompanying financial statements as of
December 31, l995 and l994, respectively. This expense does
not have any effect on the Partnership's entitlement to
receive 115% of the Partnership Investment in Films.
6. Supplemental Disclosure of Cash Flow Information
The Partnership paid $432,000 and $297,000 of interest to
HBO in the years ended December 31, 1995 and 1994,
respectively. All payables to HBO earned interest at the
Prime Rate, which was 8.5% at December 31, l995 and l994.
7. Current Operations
The Partnership has financed four Films. All of these Films
have completed their domestic theatrical and initial video
releases and are currently being distributed in various ancillary
media. Future revenue is expected to be recorded from
distribution in the domestic syndication and the remaining
foreign markets. No other films will be financed by the
Partnership.
During the year ended December 31, 1995, the Partnership
recognized net revenue in the amounts of $9,000, $1,912,000,
$80,000, $50,000 and $39,000 with respect to the domestic
theatrical, foreign, domestic video, network television and
domestic syndication markets, respectively, for its Films.
During the year ended December 31, l995, third party
participations expense for "Don't Tell Mom" was $67,000 thereby
decreasing the Partnership's net revenue by a corresponding
amount.
Through December 31, 1995, $25,559,000, $22,135,000,
$18,871,000 and $31,966,000 (including the HBO Commitment, the
Shortfall Production Advance and capitalized Print and
Advertising Expenditures which benefit future periods) had been
incurred toward the production of "Switch," "Don't Tell Mom,"
"Mom and Dad" and "Ricochet," respectively.
For the years ended December 31, l995, 1994 and l993, Motion
Picture Production Costs have been reduced by amortization of
$966,000, $2,884,000 and $6,376,000, respectively.
For the purposes of computing the net income per unit and
the paid and accrued distributions to partners, income and
distributions have been allocated 1% to the Administrative
General Partner and 99% to the limited partners.
8. Legal Proceedings
On August 14, 1995, a lawsuit styled as a class action
was filed by two holders of
Cinema Plus limited partnership units in the United States
District Court of the Western District of Pennsylvania against
HBO Film Management, Inc. and Entertainment Finance Services,
Inc., the general partners of Cinema Plus, Home Box Office, Inc.,
and Kidder, Peabody & Co., Incorporated and Smith Barney Inc.,
two of the underwriters of the original sale of limited
partnership units of Cinema Plus. Cinema Plus has not been named
as a defendant in the lawsuit. The lawsuit alleged various
violations of law by the defendants in connection with the
original sale of limited partnership units of Cinema Plus and the
subsequent operation of Cinema Plus. The action was dismissed on
March 4, 1996. On March 20, 1996 the plaintiffs filed a Notice
of Appeal in the Third Circuit Court of Appeals. The defendants
believe the lawsuit to be without merit and are vigorously
defending it.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Balance Sheets and Statements of
Operations for the year ended December 31, 1995 Form 10K of
Cinema Plus, L.P. and is qualified in its entirety by
reference to such financial statements.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 192,000
<SECURITIES> 2,306,000
<RECEIVABLES> 22,689,000
<ALLOWANCES> 0
<INVENTORY> 751,000
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,938,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 20,238,000
<TOTAL-LIABILITY-AND-EQUITY> 25,938,000
<SALES> 0
<TOTAL-REVENUES> 2,904,000
<CGS> 0
<TOTAL-COSTS> 1,377,000
<OTHER-EXPENSES> 218,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,000
<INCOME-PRETAX> 1,093,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,093,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,093,000
<EPS-PRIMARY> 25.00
<EPS-DILUTED> 0
</TABLE>
