FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from.............. to..............
Commission file number 0-17713
SILVER SCREEN PARTNERS IV, L.P.
(A Delaware Limited Partnership)
(Exact name of registrant as specified in its
Certificate and Agreement of Limited Partnership)
Delaware 06-1236433
- ---------------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Chelsea Piers, Pier 62 - Suite 300
New York, New York 10011
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 336-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such requirements for the
past 90 days.
YES X NO
----- -----
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial information set forth below is set forth in the September 30,
1996 Third Quarter Report of Silver Screen Partners IV, L.P. (the "Partnership")
filed herewith as Exhibit 20 and is incorporated herein by reference.
Balance Sheets -- September 30, 1996 and December 31, 1995.
Statements of Operations -- For the Three and Nine Months ended
September 30, 1996 and 1995.
Statements of Partners' Equity -- For the Nine Months ended September
30, 1996 and the Year ended December 31, 1995.
Statements of Cash Flows -- For the Nine Months ended September 30,
1996 and 1995.
Notes to Financial Statements.
------------------------------
The financial statements included herein are unaudited. In the opinion of
the management of the Partnership, all adjustments necessary for a fair
presentation of the results of operations have been included and all adjustments
are of a normal recurring nature. The results of operations for the three and
nine months ended September 30, 1996 are not necessarily indicative of the
results of operations which may be expected for the entire year.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
---------------------
Revenues for the nine months and quarter ended September 30, 1996 were
approximately $78,573,000 and $25,240,000, respectively, as compared with
approximately $9,414,000 and $965,000, respectively, for the comparable periods
in 1995. Revenues for the first nine months and quarter of 1996 consisted of
income from the Joint Venture of approximately $76,425,000 and $24,446,000 and
interest income of approximately $2,148,000 and $795,000, while those for the
comparable periods in 1995 consisted of income from the Joint Venture of
approximately $7,456,000 and $331,000 and interest income of approximately
$1,958,000 and $634,000. Most of the films in which the Partnership has an
interest have been released in the theatrical, home video and pay cable markets.
However, income from the Joint Venture increased by approximately $68,696,000
due to Revenue Shortfall payments for "Scenes From A Mall," "V.I. Warshawski,"
2
<PAGE>
"One Good Cop," "The Marrying Man," "True Identity," "Oscar," "Run,"
"Rocketeer," "Wild Hearts Can't Be Broken," "The Doctor" and lesser film revenue
amounts from other films in the portfolio. Interest rates for the first nine
months of 1996 ranged from 4.7% to 5.79%, while those for the comparable period
in 1995 ranged from 5.1% to 5.9%. An increase in funds available for investment
offset by decreased interest rates resulted in an increase in interest income of
approximately $190,000.
Expenses for the nine months ended September 30, 1996 were approximately
$2,477,000 as compared with approximately $3,071,000 for the comparable period
in 1995. The decrease in expenses is due to a lower cost (a decrease of
$278,000) of the 10% per annum charged on the remaining overhead fee payable, a
decrease in expenses associated with the sale of the Partnership's interest in
the Joint Venture of approximately $248,000, a decrease in audit costs of
$48,000 and costs associated with reporting to partners and other miscellaneous
expense reductions.
The Partnership generated income before taxes of approximately $76,096,000
for the nine months ended September 30, 1996, as compared with net income of
approximately $6,343,000 for the comparable period in 1995.
The Partnership recorded $995,100 in unincorporated business tax in 1996
resulting in a net income of approximately $75,101,000. On September 30, 1996
the Partnership received an assessment from New York City regarding
unincorporated business tax covering all periods from inception through December
31, 1995 of $1,095,100 (including interest). This liability was paid on that
date. The Unincorporated Business Tax Expense reflects the excess of this
payment over an amount previously established as a contingency reserve.
The Partnership has commitments to thirty-three films, all of which have
been completed and released, with total budgets amounting to approximately
$599,000,000, of which substantially all has been expended. The Joint Venture
Films are: "The Good Mother," released November 4, 1988; "Beaches," released
December 21, 1988; "Three Fugitives," released January 27, 1989; "Disorganized
Crime," released April 14, 1989; "The Dead Poets Society," released June 2,
1989; "Turner and Hooch," released July 28, 1989; "An Innocent Man," released
October 6, 1989; "Gross Anatomy," released October 20, 1989; "The Little
Mermaid," released November 15, 1989; "Blaze," released December 13, 1989;
"Where the Heart Is," released February 23, 1990; "Pretty Woman," released March
23, 1990; "Ernest Goes to Jail," released April 6, 1990; "Spaced Invaders,"
released April 27, 1990; "Dick Tracy," released June 15, 1990; "Betsy's
Wedding," released June 22, 1990; "Taking Care of Business," released August 17,
1990; "Mr. Destiny," released October 12, 1990; "Rescuers Down Under," released
November 16, 1990; "White Fang," released January 18, 1991; "Run," released
February 1, 1991; "Scenes From A Mall," released February 22, 1991; "The
Marrying Man," released April 5, 1991; "Oscar," released April 26, 1991; "One
Good Cop," released May 3, 1991; "Wild Hearts Can't Be Broken," released May 24,
1991; "The Rocketeer," released June 21, 1991; "The Doctor," released July 24,
1991; "V.I. Warshawski," released July 26, 1991; "True Identity," released
August 23, 1991; "Deceived," released September 27, 1991; "Beauty and the
Beast," released November 15, 1991; and "Blame it on the Bellboy," released
February 28, 1992.
3
<PAGE>
During the quarter ended September 30, 1996, the Partnership made cash
distributions to the Partners which amounted to $45,454,545 in the aggregate.
Although all of the Joint Venture Films have been released, the Partnership
anticipates that future revenues will be derived from the sale of its interest
in the Joint Venture (see Investment in Joint Venture below) and that it will
continue to receive revenues and make quarterly cash distributions in the
future. However, revenues in upcoming quarters may be insufficient to justify
making a cash distribution.
Investment in Joint Venture
---------------------------
The investment in the Joint Venture was accounted for using the equity
method of accounting. Under the equity method, the investment was initially
recorded at cost, and was thereafter increased by additional investments,
adjusted by the Partnership's share of the Joint Venture's results of operations
and reduced by distributions received from the Joint Venture. The Joint
Venture's fiscal year ends September 30, while the Partnership's fiscal year
ends December 31. The investment in the Joint Venture on January 1, 1996 totaled
$95,691,312.
The Partnership entered into a Letter Agreement (the "Buyout Agreement")
with Disney dated September 11, 1995 providing for the sale to Disney of all of
the Partnership's interest in the Joint Venture. The Buyout Agreement provides
for the payment of the purchase price of $330,000,000, in cash (subject to
certain adjustments with respect to revenues received from the exploitation of
animated films.) Closing is scheduled to occur on November 30, 1998 subject to
satisfaction of certain customary conditions. In addition to the purchase price,
the Buyout Agreement provides that Buena Vista Pictures Distribution, Inc.
("BV") will continue to account for and make payments to the Joint Venture, as
required by the Distribution Agreement for all revenues received by BV through
April 30, 1998.
As a result of the Buyout Agreement the Partnership is using the cost
method of accounting starting January 1, 1996. Under the cost method,
distributions received are recognized as income and investments will be reduced
in proportion that actual cash received bears to ultimate revenues expended.
Liquidity and Capital Resources
-------------------------------
Inasmuch as the funding obligations of the Partnership with respect to the
financing of the Joint Venture Films have been fully complied with or reserved
against, the Partnership has no material commitments for capital expenditures
and does not intend to enter into any such commitments. Receipts from temporary
investments and from the Joint Venture, less reserves established as determined
by the Managing General Partner, are the sources of liquidity for the
Partnership. The Partnership has no material requirements for liquidity other
than its general and administrative expenses and quarterly distributions to
holders of Units of limited partnership interests. Such sources are considered
adequate for such needs.
4
<PAGE>
ITEM 3. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
SILVER SCREEN PARTNERS IV, L.P.
--------------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Income from Joint Venture
Interest income ......... $24,445,771 $76,425,463 $ 330,902 $ 7,456,008
794,533 2,147,965 633,755 1,958,454
----------- ----------- ----------- -------------
$24,240,304 $78,573,428 $ 964,657 $ 9,414,462
Costs and Expenses:
General and
administrative
expenses ............... 780,408 2,477,084 974,408 3,071,088
----------- ----------- ----------- -------------
Income before taxes ..... 24,459,899 76,096,344 (9,751) 6,343,374
Unincorporated
business tax ........... 995,100 995,100 -- --
----------- ----------- ----------- -------------
Net income (loss) ......... $23,464,799 $75,101,244 $(9,751) $ 6,343,374
=========== =========== =========== =============
Net income (loss) per
$500 limited partnership
unit (based on 800,000
Units outstanding) ...... $ 26.40 $ 90.30 $ (0.01) $ 7.85
=========== =========== =========== =============
Cash distribution
per $500 limited
partnership unit ........ $ 15.00 $ 97.50 $ 15.00 $ 60.00
=========== =========== =========== =============
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
Total assets .............. $129,373,174 $149,744,019
============= =============
</TABLE>
See notes to financial statements.
5
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 20 -- 1996 Third Quarter Report
(b) The Partnership did not file any reports on Form 8-K during
the quarter ended September 30, 1996.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SILVER SCREEN PARTNERS IV, L.P.,
a Delaware limited partnership
By: Silver Screen Management Services, Inc.,
Managing General Partner
Date: November 13, 1996 By: /s/ Roland W. Betts
--------------------------------
Roland W. Betts, President
7
<PAGE>
Silver Screen Management Services, Inc.
Chelsea Piers-Pier 62
Suite 300
New York, NY 10011
(212) 336-6700
Recorded News Update:
(800) 444-SILV
SILVER SCREEN IV
Third
Quarter
Report
September 30, 1996
C 1996 Silver Screen Management Services, Inc.
8
<PAGE>
D E A R L I M I T E D P A R T N E R:
The 1996 third quarter cash distribution totals $27.2 million, bringing
total distributions since the Partnership's inception in 1988 to $578 million.
Third quarter revenue was generated principally from Revenue Shortfall
Payments from Buena Vista for "The Doctor," "V.I. Warshawski," "True Identity"
and "Deceived." Our three animated films, "The Little Mermaid," "Beauty and the
Beast" and "The Rescuers Down Under", also produced Partnership revenue this
quarter from sales of film-related merchandise, foreign pay television, and the
foreign home video market, respectively.
Partnership revenue in the future is expected to be generated from the 33
films in the portfolio as they continue to travel through the U.S. and foreign
television markets, from the only remaining Revenue Shortfall Payment ("Blame It
on the Bellboy"), and from the Disney buyout of the Silver Screen IV-Disney
Joint Venture.
As you may be aware, a number of private investment groups have sent out
correspondence relating to a tender offer for units in Silver Screen Partners
IV. These tender offers are NOT associated with the Disney buyout, and Silver
Screen IV is NOT affiliated in any way with these firms. If you are not
interested in selling your units, no action by you is required.
The 1996 Annual Report and tax information will be mailed to you by March
15. If you need any assistance in the meantime, please contact our Investor
Relations Department at our new telephone number and address listed on the back
of this report.
Sincerely,
/s/ Roland W. Betts /s/ Tom A. Bernstein
- ------------------- ------------------------
Roland W. Betts Tom A. Bernstein
President Executive Vice President
9
<PAGE>
B A L A N C E S H E E T S
(Unaudited)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................ $ 51,760 $ 392,505
Temporary investments (at cost plus accrued interest,
which approximates market) (Note 2) ............... 54,870,499 42,422,608
------------ ------------
Total current assets ................................ 54,922,259 42,815,113
Investment in Joint Venture (Note 3) ................ 74,450,915 95,691,312
------------ ------------
$129,373,174 $138,506,425
============ ============
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ..................... $ 41,793 $ 60,728
Overhead fees payable (Note 4) ...................... 23,245,371 25,542,750
------------ ------------
Total current liabilities ........................... 23,287,164 25,603,478
Other liabilities ................................... -- 100,000
------------ ------------
Total liabilities ................................... 23,287,164 25,703,478
------------ ------------
Partners' equity:
General partners .................................... -- --
Limited partners .................................... 106,086,010 112,802,947
------------ ------------
Total partners' equity .............................. 106,086,010 112,802,947
------------ ------------
$129,373,174 $138,506,425
============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture (Note 3) . $ 24,445,771 $ 76,425,463 $ 330,902 $ 7,456,008
Interest income .................... 794,533 2,147,965 633,755 1,958,454
------------ ------------ ------------ ------------
25,240,304 78,573,428 964,657 9,414,462
COSTS AND EXPENSES:
General and administrative expenses 780,405 2,477,084 974,408 3,071,088
------------ ------------ ------------ ------------
Income (loss) before tax ........... 24,459,899 76,096,344 (9,751) 6,343,374
Unincorporated business tax ........ 995,100 995,100 -- --
------------ ------------ ------------ ------------
Net income (loss) .................. $ 23,464,799 $ 75,101,244 $ (9,751) $ 6,343,374
============ ============ ============ ============
NET INCOME (LOSS) ALLOCATED TO:
General partners ................... $ 2,346,480 $ 2,862,844 $ (98) $ 63,434
Limited partners ................... 21,118,319 72,238,400 (9,653) 6,279,940
------------ ------------ ------------ ------------
$ 23,464,799 $ 75,101,244 $ (9,751) $ 6,343,374
============ ============ ============ ============
Net income (loss) per a $500 limited
partnership unit (based on 800,000
units outstanding) ............... $ 26.40 $ 90.30 $ (0.01) $ 7.85
============ ============ ============ ============
</TABLE>
See notes to financial statements.
S T A T E M E N T S OF P A R T N E R S ' E Q U I T Y
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
and Nine Months Ended Sept. 30, 1996
========================================================
General Partners Limited Partners Total
---------------- ---------------- -----
<S> <C> <C> <C>
Balance, January 1, 1995 .......................................... $ -- $ 165,350,987 $ 165,350,987
Net income, 1995 .................................................. 80,580 7,977,440 8,058,020
Distributions, 1995 ............................................... (606,060) (60,000,000) (60,606,060)
Allocation under Treasury Regulation Section 1.704-1(b) ........... 525,480 (525,480) --
------------- ------------- -------------
Balance, December 31, 1995 ........................................ -- 112,802,947 112,802,947
NET INCOME, NINE MONTHS 1996 ...................................... 2,862,844 72,238,400 75,101,244
DISTRIBUTIONS DURING NINE MONTHS 1996 ............................. (3,818,181) (78,000,000) (81,818,181)
ALLOCATION UNDER TREASURY REGULATION SECTION 1.704-1(b) ........... 955,337 (955,337) --
------------- ------------- -------------
$ -- $ 106,086,010 $ 106,086,010
============= ============= =============
</TABLE>
See notes to financial statements.
11
<PAGE>
S T A T E M E N T S O F C A S H F L O W S
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sept. 30, 1996 Sept. 30, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 75,101,244 $ 6,343,374
Adjustments to reconcile net income to
net cash provided by operating activities:
(Increase) decrease in accrued interest receivable ... (118,295) 266,966
Charge on overhead fees payable ...................... 1,702,621 1,980,574
Net change in operating assets and liabilities:
(Decrease) increase in due to managing general partner (18,935) 50,464
Decrease in other liabilities ........................ (100,000) --
------------ ------------
Net cash provided by operating activities .............. 76,566,635 8,641,378
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Joint Venture ........................... -- (78,566)
Distributions received from Joint Venture
in excess of equity in income ........................ -- 24,012,564
Decrease in investment in Joint Venture ................ 21,240,397 --
(Purchase) sale of temporary investments, net .......... (12,329,596) 16,458,664
------------ ------------
Net cash provided by investing activities .............. 8,910,801 40,392,662
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners .............................. (81,818,181) (48,484,848)
Decrease in overhead fee payable ....................... (4,000,000) (3,540,691)
------------ ------------
Net cash used in financing activities .................. (85,818,181) (52,025,539)
------------ ------------
Net decrease in cash ................................... (340,745) (2,991,499)
Cash, beginning of year ................................ 392,505 3,279,252
------------ ------------
Cash at end of nine months ............................. $ 51,760 $ 287,753
============ ============
</TABLE>
See notes to financial statements.
12
<PAGE>
N O T E S T O F I N A N C I A L S T A T E M E N T S
1. PARTNERSHIP PROCEEDS
The Partnership Agreement provides that all profits, losses and distributable
cash ("Proceeds"), are allocated 99% to the limited partners and 1% to the
general partners until the Partnership has satisfied certain tests. Thereafter,
all Proceeds will be allocated 90% to the limited partners and 10% to the
general partners. These tests were satisfied in the second quarter of 1996.
Therefore, all proceeds beginning with the third quarter have been allocated 90%
to the limited partners and 10% to the general partners. After additional tests
have been satisfied, Proceeds will be allocated 80% to the limited partners and
20% to the general partners. Cash generated by net gain from sale, as defined,
will be allocated 85% to the limited partners and 15% to the general partners.
2. TEMPORARY INVESTMENTS
Temporary investments represent investments in commercial paper.
3. INVESTMENT IN JOINT VENTURE
The investment in the Joint Venture was accounted for using the equity method of
accounting. Under the equity method, the investment was initially recorded at
cost, and was thereafter increased by additional investments, adjusted by the
Partnership's share of the Joint Venture's results of operations and reduced by
distributions received from the Joint Venture. The Joint Venture's fiscal year
ends September 30, while the Partnership's fiscal year ends December 31. The
investment in the Joint Venture on January 1, 1996 totaled $95,691,312.
The Partnership entered into a Letter Agreement (the "Buyout Agreement") with
Disney dated September 11, 1995 providing for the sale to Disney of all of the
Partnership's interest in the Joint Venture. The Buyout Agreement provides for
the payment of the purchase price of $330,000,000, in cash (subject to certain
adjustments with respect to revenues received from the exploitation of animated
films). Closing is scheduled to occur on November 30, 1998 subject to
satisfaction of certain customary conditions. In addition to the purchase price,
the Buyout Agreement provides that Buena Vista Pictures Distribution, Inc.
("BV") will continue to account for and make payments to the Joint Venture, as
required by the Distribution Agreement for all revenues received by BV through
April 30, 1998.
As a result of the Buyout Agreement, the Partnership is using the cost method of
accounting starting January 1, 1996. Under the cost method, distributions
received are recognized as income and investments will be reduced in proportion
that actual cash received bears to ultimate revenues expected.
4. OVERHEAD FEES PAYABLE
The Partnership Agreement provides that overhead fees received by the
Partnership for the benefit of the Managing General Partner ("MGP") will remain
on account with the Partnership with the understanding that the MGP may draw
from such account from time to time, in order to cover its actual operating
expenses not reimbursed from other sources. Such amounts are included in the
temporary investments and earn interest which accrues to the Partnership. The
fees remaining on account will earn 10% per annum (compounded quarterly) for the
MGP. The amount included in general and administrative expenses for the nine
months is $1,702,621. Any amount remaining in such account on January 2, 1997
will be paid to the MGP on such date. As of September 30, 1996, the balance of
such overhead fee account was $23,245,371.
5. UNINCORPORATED BUSINESS TAX
On September 30, 1996 the Partnership received an assessment from New York City
regarding unincorporated business tax covering all periods from inception
through December 31, 1995 of $1,095,100 (including interest). This liability was
paid on that date. The Unincorporated Business Tax Expense reflects the excess
of this payment over an amount previously established as a contingency reserve.
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1996, AND THE STATEMENT OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 52
<SECURITIES> 54,870
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 54,922
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 129,373
<CURRENT-LIABILITIES> 23,287
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 106,086
<TOTAL-LIABILITY-AND-EQUITY> 139,373
<SALES> 76,425
<TOTAL-REVENUES> 78,573
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,477
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 76,096
<INCOME-TAX> 995
<INCOME-CONTINUING> 75,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,101
<EPS-PRIMARY> 90.30
<EPS-DILUTED> 0
</TABLE>
