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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1997.
-----------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to ____________.
Commission File Number 0-19075
Jones Programming Partners 1-A, Ltd.
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Exact name of registrant as specified in charter
Colorado #84-1088820
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State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
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Address of principal executive office
(303) 792-3111
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Registrant's telephone number
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 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
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
INDEX
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Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Statements of Financial Position as of
September 30, 1997 and December 31, 1996 3
Unaudited Statements of Operations for the
Three and Nine Months Ended September 30, 1997 and 1996 4
Unaudited Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 5
Notes to Unaudited Financial Statements as of
September 30, 1997 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
PART II. OTHER INFORMATION 14
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF FINANCIAL POSITION
------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------ ------------------- ------------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 272,777 $ 266,452
RECEIVABLES:
Foreign income receivable 110,348 141,602
Domestic income receivable 30,000 77,573
--------- ---------
Total receivables 140,348 219,175
--------- ---------
INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION,
net of accumulated amortization of $8,802,193 and $8,716,704
as of September 30, 1997 and December 31, 1996, respectively 85,013 170,502
OTHER ASSETS - 1,092
---------- ---------
Total assets $ 498,138 $ 657,221
========== =========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Accounts payable to affiliates $ 20,462 $ 15,600
Accrued distribution to partners - 160,897
Accrued liabilites 3,880 12,586
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Total liabilites 24,342 189,083
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UNEARNED REVENUE 23,445 -
---------- ---------
PARTNERS' CAPITAL (DEFICIT):
General partner-
Contributed capital 1,000 1,000
Distributions (40,831) (40,831)
Accumulated deficit (9,631) (9,453)
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Total general partner's deficit (49,462) (49,284)
---------- ---------
Limited partners-
Contributed capital, net of offering costs (12,743 units
outstanding as of September 30, 1997 and December 31, 1996) 5,459,327 5,459,327
Distributions (4,042,214) (4,042,214)
Accumulated deficit (917,300) (899,691)
---------- ---------
Total limited partners' capital 499,813 517,422
---------- ---------
Total partners' capital 450,351 468,138
---------- ---------
Total liabilities and partners' capital $ 498,138 $ 657,221
========== =========
</TABLE>
The accompanying notes to the unaudited financial statements are an integral
part of these unaudited financial statements.
3
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
GROSS REVENUES $ 146,264 $ 38,189 $ 225,271 $ 185,590
COSTS AND EXPENSES:
Costs of filmed entertainment 18,921 8,353 85,489 86,271
Distribution fees and expenses 53,572 10,401 91,252 52,033
Loss on write-down of film production (Note 3) - 656,744 - 656,744
Operating, general and administrative expenses 30,993 10,766 72,107 36,050
-------- -------- --------- ---------
Total costs and expenses 103,486 686,264 248,848 831,098
-------- -------- --------- ---------
OPERATING INCOME (LOSS) 42,778 (648,075) (23,577) (645,508)
-------- -------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 2,201 5,036 6,314 15,742
Other expense (311) (1,218) (524) (1,218)
-------- -------- --------- ---------
Other income, net 1,890 3,818 5,790 14,524
-------- -------- --------- ---------
NET INCOME (LOSS) $ 44,668 $ (644,257) $ (17,787) $ (630,984)
======== ======== ========= =========
ALLOCATION OF NET INCOME (LOSS):
General partner $ 447 $ (6,443) $ (178) $ (6,310)
======== ======== ========= =========
Limited partners $ 44,221 $ (637,814) $ (17,609) $ (624,674)
======== ======== ========= =========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 3.47 $ (50.05) $ (1.38) $ (49.02)
======== ======== ========= =========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 12,743 12,743
======== ======== ========= =========
</TABLE>
The accompanying notes to the unaudited financial statements are an integral
part of these unaudited financial statements.
4
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
------------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (17,787) $ (630,984)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of filmed entertainment costs 85,489 86,271
Loss from write-down of film production - 656,744
Net change in assets and liabilities:
Decrease in foreign income receivable 31,254 171,660
Decrease in domestic income receivable 47,573 46,923
Decrease (increase) in other assets 1,092 (726)
Net change in amounts due to/from affiliates 4,862 37,617
Increase (decrease) in accrued liabilities (8,706) 1,513
Increase in unearned revenue 23,445 -
--------- --------
Net cash provided by operating activities 167,222 369,018
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in production advances - -
--------- --------
Net cash provided by investing activities - -
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (160,897) (482,691)
--------- --------
Net cash used in financing activities (160,897) (482,691)
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 6,325 (113,673)
CASH AND CASH EQUIVALENTS, beginning of period 266,452 502,435
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 272,777 $ 388,762
========= =========
</TABLE>
The accompanying notes to the unaudited financial statements are an integral
part of these unaudited financial statements.
5
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
(1) BASIS OF PRESENTATION
---------------------
This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a fair presentation of the Statements of
Financial Position and Statements of Operations and Cash Flows in
conformity with generally accepted accounting principles. However, in the
opinion of management, this data includes all adjustments, consisting only
of normal recurring accruals, necessary to present fairly the financial
position of Jones Programming Partners 1-A, Ltd. (the "Partnership") as of
September 30, 1997 and December 31, 1996 and its results of operations and
its cash flows for the three and nine month periods ended September 30,
1997 and 1996. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
(2) TRANSACTIONS WITH AFFILIATED ENTITIES
-------------------------------------
The General Partner is entitled to reimbursement from the Partnership for
its direct and indirect expenses allocable to the operations of the
Partnership, which shall include, but not be limited to, rent, supplies,
telephone, travel, legal expenses, accounting expenses, preparation and
distribution of reports to investors and salaries of any full or part-time
employees. Because the indirect expenses incurred by the General Partner
on behalf of the Partnership are immaterial, the General Partner generally
does not charge indirect expenses to the Partnership. The General Partner
charged $16,233 and $2,299 to the Partnership for direct expenses for the
three month periods ended September 30, 1997 and 1996, respectively. For
the nine month periods ended September 30, 1997 and 1996, $43,378 and
$11,298, respectively, were charged to the Partnership for direct expenses.
(3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION
----------------------------------------------
"The Little Kidnappers"
---------------------
In January 1990, the General Partner, on behalf of the Partnership, entered
into an agreement with Jones Maple Leaf Productions ("Maple Leaf") to
produce a full-length feature film for television entitled "The Little
Kidnappers." The total film cost was approximately $3,200,000. Of this
amount, the Partnership invested approximately $2,794,000, which included a
production and overhead fee of $300,000 paid to the General Partner. As of
September 30, 1997, the Partnership's net investment in the film, after
consideration of amortization, was $21,198. From inception to September
30, 1997, the Partnership has recognized approximately $2,947,000 of gross
revenue from this film, which includes the initial license fees of
approximately $1,365,000 from The Disney Channel and the Canadian
Broadcasting Corporation, which were used to finance the film's production.
As of September 30, 1997, $6,487 in net receivables was outstanding from
the film's distributors and licensees. The Partnership anticipates payment
of these amounts over the next three to six months. The Partnership
anticipates that it will recover its remaining investment in this film from
net revenues to be generated in remaining domestic and international
television and home video markets or from sale of the Partnership's
interests in the film to an unaffiliated third party.
"The Story Lady"
--------------
In April 1991, the General Partner, on behalf of the Partnership, entered
into an agreement with NBC Productions, Inc. ("NBC") for the production of
a full-length made-for-television film entitled "The Story Lady." The
total cost of the film was approximately $4,300,000. Of this amount, the
Partnership invested approximately $1,183,000 in return for world-wide
distribution rights to this film, excluding United States and Canadian
broadcast television rights. Included in the total amount invested is a
production and overhead fee of $120,000 paid to the General Partner. The
Partnership has fully recovered its net investment in the film. From
inception to September 30, 1997, the Partnership has recognized
approximately $2,107,000 of revenue from this film. As of September 30,
1997,
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the Partnership had outstanding receivables from the film's domestic
and international distributors and licensees totaling $133,891. The
Partnership anticipates payment of these amounts over the next three to
twenty-four months as collected by distributors.
"Curacao"
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In October 1992, the General Partner, on behalf of the Partnership, entered
into an agreement with Showtime Networks, Inc. ("Showtime") for the
production of a full-length made-for-television film entitled "Curacao."
The total cost of the film was approximately $4,410,000. In addition to
the costs of production, the Partnership paid the General Partner $500,000
as a production and overhead fee for services rendered in connection with
arranging the Showtime pre-sale and supervising production of this picture.
As of September 30, 1997, the Partnership's net investment in the film,
after consideration of amortization, was $63,815. From inception to
September 30, 1997, the Partnership has recognized approximately $4,031,000
of gross revenue from this film, which includes the initial license fee and
home video advance from Showtime of $2,650,000, which was used to finance
the film's production. The Partnership plans to recover its remaining
investment in this film from net revenues generated from remaining
international and domestic television markets or from sale of the
Partnership's interests in the film to an unaffiliated third party.
7
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
----------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
FINANCIAL CONDITION
-------------------
Liquidity and Capital Resources
- -------------------------------
The Partnership's principal sources of liquidity are cash on hand and amounts
received from the domestic and international distribution of the Partnership's
programming. The Partnership had $272,777 in cash as of September 30, 1997.
The Partnership will not invest in any additional programming projects, but
instead will focus on the distribution or sale of its existing programming
projects. The Partnership had outstanding amounts receivable from unaffiliated
distributors totaling approximately $140,000 as of September 30, 1997. These
amounts will be paid to the Partnership over the next three to twenty-four
months as collected by the distributors.
In February 1997, limited partner distributions from operations for the quarter
ending December 31, 1996 totaling $160,897 were paid by the Partnership using
cash on hand. Given the near completion of the second cycle distribution of the
Partnership's programming, quarterly distributions from operations were
suspended beginning with the quarter ended March 31, 1997 and are not expected
to resume. The Partnership will retain a certain level of working capital,
including any necessary reserves, to fund its operating activities. It is
anticipated that any future distributions will only be made from proceeds
received from the sale of the Partnership's assets.
The General Partner, on behalf of the Partnership, is now completing the second
cycle distribution of the Partnership's programming. In addition, the General
Partner, on behalf of the Partnership, engaged an independent public accounting
firm during 1996 for purposes of performing distribution audits of the major
distributors of the Partnership's programming. The purpose of these audits was
to identify and facilitate payment of any excess film proceeds improperly
retained by the distributors that belong to the Partnership. Revenue proceeds
identified and collected by the Partnership in conjunction with these audits in
1997 were not material. There can also be no assurance that the continued
second cycle distribution of the Partnership's programming will generate
significant revenue for the Partnership.
The General Partner, on behalf of the Partnership, is currently engaged in
efforts to sell the Partnership's interests in its programming projects to one
or more unaffiliated third parties. In preparation for arranging the future
sale of the Partnership's programming, the General Partner engaged three
independent consulting firms in late 1996 and early 1997 for purposes of
obtaining informal appraisals of the programming projects' estimated net
realizable value, which are based on an estimate of anticipated revenues
remaining over the life of the films from international and domestic
distribution. These estimates of value will be used by the General Partner in
negotiating a definitive sales agreement with one or more unaffiliated third
parties. There can be no assurance that the ultimate negotiated sales price of
the programming projects will be at least equal to the films' estimated fair
market value based on the three estimates obtained. Any sale of all or
substantially all of the Partnership's assets will be subject to the approval of
the Partnership's limited partners prior to closing of the sale.
The General Partner cannot predict at this time when or at what price the
Partnership's interests in its programming projects ultimately will be sold.
However, any direct costs incurred by the General Partner on behalf of the
Partnership in soliciting and arranging for the sale of the Partnership's
programming projects will be charged to the Partnership. It is anticipated that
proceeds from the sale of the Partnership's interests in its programming will be
distributed to the partners in the future when the Partnership's interests in
the programming are sold. Based on the independent estimates of value obtained
for the Partnership's programming projects, it now appears likely that the
distributions of the proceeds from the sale of the Partnership's programming
projects together with all prior distributions paid to the limited partners will
not be sufficient to return to the limited partners 100% of their initial
capital contributions made to the Partnership.
8
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The General Partner believes that the Partnership has, and will continue to
have, sufficient liquidity to fund its operations and to meet its obligations so
long as the limited partners' quarterly distributions from operations are
suspended. Cash flow from operating activities will be generated primarily from
the Partnership's programming projects as follows:
"The Little Kidnappers"
---------------------
During 1990, the Partnership invested approximately $2,794,000 in a film
entitled "The Little Kidnappers." The Partnership advanced funds as production
advances to Maple Leaf to complete the film. In return for such production
advances, the Partnership received all distribution rights in perpetuity in all
markets except Canada. The General Partner, on behalf of the Partnership,
licensed the film to The Disney Channel and Maple Leaf licensed the film to the
Canadian Broadcasting Corporation. Aggregate license fees of approximately
$1,365,000 were received from these licensees. The original Disney Channel
license expired in September 1993. The General Partner has relicensed the film
to The Disney Channel for an additional license period of five years beginning
January 1, 1994. An additional fee of $300,000 was received from this licensee.
The Canadian Broadcasting Corporation license expired in the second quarter of
1994 and was not renewed.
In April 1991, the General Partner, on behalf of the Partnership, entered into a
distribution agreement with an unaffiliated party granting rights to distribute
"The Little Kidnappers" in the non-theatrical domestic markets for a period not
to exceed seven years. Non-theatrical markets include 16mm sales and rentals,
in-flight, oil rigs, ships at sea, military installations, libraries,
restaurants, hotels, motels or other institutional or commercial enterprises.
As of September 30, 1997, gross sales made under this arrangement totaled
$94,190, of which $23,548 was retained by the distributor for its fees and the
remaining $70,642 was remitted to the Partnership.
In July 1991, the General Partner, on behalf of the Partnership, entered into an
agreement with an unaffiliated party granting the rights to distribute "The
Little Kidnappers" in the domestic home video market for a period not to exceed
five years. Under this agreement, the Partnership received a minimum guarantee
of $500,000, of which $100,000 was received upon delivery of the film in October
1991. The Partnership discounted the remaining $400,000 at an imputed interest
rate of 8%, which created a discount of $79,157. The Partnership received
$50,000 in October 1992, $75,000 in October 1993, $75,000 in October 1994 and
the remaining $200,000 in October 1995. The Partnership does not expect to
receive any additional proceeds under this agreement, which has now expired.
In the third quarter of 1990, the General Partner, on behalf of the Partnership,
entered into a distribution agreement with an unaffiliated party, granting the
rights to distribute "The Little Kidnappers" in international television and
home video markets for a period of five years. This agreement expired in
October 1995. As of September 30, 1997, international gross sales made under
the original distribution agreement totaled $1,165,850, of which $365,852 was
retained by the distributor for its fees and marketing costs and $799,998 was
remitted to the Partnership as of September 30, 1997. The Partnership does not
expect to receive any additional proceeds under this agreement.
The international distribution rights for "The Little Kidnappers" are now being
handled by the General Partner on behalf of the Partnership. In December 1996,
the General Partner, acting on behalf of the Partnership, entered into a
distribution agreement with an unaffiliated party, granting the rights to
distribute "The Little Kidnappers" in various international television markets,
including France, the United Kingdom, Scandinavia, Africa and the Middle East,
for license periods of five to six years. Under this agreement, the Partnership
was entitled to a license fee of $35,000 which had been remitted to the
Partnership as of September 30, 1997. The General Partner will not earn a
distribution fee relating to this agreement; however, the General Partner will
generally earn a distribution fee equal to 25 percent of gross international
sales and will recover its actual distribution and marketing costs incurred,
with remaining net revenues to be paid to the Partnership. As of September 30,
1997, the Partnership has recognized $15,556 in license fee revenue under this
agreement, with the remaining $19,444 to be recognized as revenue by the
Partnership periodically beginning in November 1997 through March 1999 as the
remaining license periods under this agreement commence.
In May 1997, the General Partner, acting on behalf of the Partnership, entered
into a five year licensing agreement with an unaffiliated party, granting the
rights to distribute "The Little Kidnappers" in the North American home video
market. Under this agreement, the Partnership is entitled to a $20,000 license
fee, of which $17,500 had been received by the Partnership as of September 30,
1997. The remaining $2,500 is expected to be received by the Partnership over
the next three to six months. In addition to the initial license fee, the
Partnership will also be entitled to a home video royalty of 10 to
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20 percent of net retail sale proceeds earned by the licensee, with the royalty
percentage dependent on the per video unit sales price obtained. As of September
30, 1997, the Partnership has recognized $20,000 in license fee revenue under
this agreement.
The Partnership anticipates that it will recover its remaining net investment in
this film of $21,198 from net revenues to be generated in remaining worldwide
television and home video markets by direct distribution efforts to be made on
behalf of the Partnership by the General Partner and other non-affiliated
distributors or from sale of the Partnership's interests in the film to an
unaffiliated third party.
"The Story Lady"
--------------
In 1991, the General Partner, on behalf of the Partnership, entered into an
agreement with NBC Productions, Inc. ("NBC") for the production of a full-length
made-for-television film entitled "The Story Lady." The total cost of the film
was approximately $4,300,000, and the Partnership invested its share of
approximately $1,183,000 in return for all distribution rights to this film
after the contractual airings on the NBC television network, which have been
completed.
In 1992, the General Partner, on behalf of the Partnership, entered into a
distribution agreement with an unaffiliated party, granting rights to distribute
"The Story Lady" in the non-theatrical domestic markets. As of September 30,
1997, gross sales made under this arrangement totaled $300,969, of which $75,241
was retained by the distributor for its fees. The remaining $225,728 has been
received by the Partnership. The General Partner, on behalf of the Partnership,
entered into an agreement with The Disney Channel, granting The Disney Channel
exclusive domestic television rights to the film for one year, from September
1994 until September 1995, for a license fee of $40,000. Of this license fee,
$26,667 was received in July 1994, with the remaining balance of $13,333
received in April 1995. In addition, the film was distributed in the domestic
home video market by the General Partner and a third party consultant beginning
in the second quarter of 1994. As of September 30, 1997, net sale proceeds
under this arrangement totaled $99,312, which were applied towards the General
Partner's recoupment of its distribution costs. As the General Partner has
fully recovered its remaining distribution costs, any additional sales, net of
fees, will flow to the Partnership. However, the Partnership does not expect to
receive any additional proceeds under this agreement.
On behalf of the Partnership, the General Partner has sub-licensed under the NBC
agreement international television and home video distribution rights to a
distribution affiliate of NBC for approximately eight years. As of June 30,
1997, international gross sales totaled $1,465,199, of which $430,718 was
retained by the distributor for its fees and marketing costs, with the remaining
$1,034,481 due to the Partnership. As of September 30, 1997, the Partnership
had received $928,090 of such amounts. The remaining $106,391 will be paid to
the Partnership over the next three to twenty-four months as collected by the
distributor.
In October 1995, the General Partner, on behalf of the Partnership, entered into
a license agreement with an unaffiliated party, granting rights to distribute
"The Story Lady" in the domestic home video market through direct, non-retail
sales for a license fee of $200,000. Under the original terms of the three year
agreement, the Partnership was entitled to $50,000 upon execution of the
agreement, and $10,000 per month for fifteen consecutive months. Of this
license fee, $50,000 was received by the General Partner in November 1995, of
which $21,341 was retained by the General Partner to be applied towards
recoupment of its remaining distribution costs incurred on behalf of the
Partnership for "The Story Lady." The remaining $28,659 was remitted to the
Partnership. As of September 30, 1997, the Partnership had received the
remaining $150,000 in license fee payments under this licensing agreement.
In December 1996, the General Partner, on behalf of the Partnership, entered
into an agreement with Lifetime Television ("Lifetime"), granting rights to
distribute "The Story Lady" in the domestic cable and satellite television
markets for a period of one and a half years commencing in July 1997. In
accordance with the terms of the agreement, the Partnership was entitled to a
$75,000 license fee, of which a total of $50,000 was received in two equal
payments in January 1997 and August 1997. The remaining $25,000 is due to the
Partnershp in July 1998.
In May 1997, the General Partner, acting on behalf of the Partnership, entered
into a five year licensing agreement with an unaffiliated party, granting the
rights to distribute "The Story Lady" in the North American retail home video
market. Under this agreement, the Partnership is entitled to a $20,000 license
fee, of which $17,500 had been received by the
10
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Partnership as of September 30, 1997. The remaining $2,500 is expected to be
received by the Partnership over the next three to six months. As of September
30, 1997, the Partnership has recognized $20,000 in license fee revenue under
this agreement. In addition to the initial license fee, the Partnership will
also be entitled to a home video royalty of 10 to 20 percent of net retail sale
proceeds earned by the licensee, with the royalty percentage dependent on the
per video unit sales price obtained. The Partnership has fully recovered its net
investment in this film.
"Curacao"
-------
In October 1992, the General Partner, on behalf of the Partnership, entered into
an agreement with Showtime Networks, Inc. ("Showtime") for the production of a
full-length made-for-television film entitled "Curacao." The total cost of the
film was approximately $4,410,000. In addition to the costs of production, the
Partnership paid the General Partner $500,000 as a production and overhead fee
for services rendered in connection with arranging the Showtime pre-sale and
supervising production of this picture.
The Partnership received license fees and a home video advance totaling
$2,650,000 from Showtime in return for granting Showtime a pay television
license through 1997 and the right to market domestic home video rights for
seven years. Home video revenues in excess of $875,000 will be shared 50/50
between the Partnership and Showtime until Showtime has received $1,875,000
after which the Partnership will receive all of the home video revenues. It is
unlikely that the Partnership will receive any additional revenues beyond the
original Showtime advance from the domestic home video distribution of
"Curacao."
In May 1993, the General Partner, on behalf of the Partnership, entered into a
distribution agreement with an unaffiliated party, granting rights to distribute
"Curacao" in the non-theatrical domestic markets. As of September 30, 1997,
gross sales made under this arrangement totaled $117,358, of which $29,340 was
retained by the distributor for its fees and $88,018 was received by the
Partnership. The Partnership does not expect to receive any additional proceeds
under this agreement.
The Partnership has contracted with an unaffiliated international sales agent to
market theatrical, home video, and television rights outside the United States
and Canada for a period of five years. The General Partner approved an
agreement negotiated by the international sales agent with an unaffiliated party
to market international theatrical and home video rights for a period of ten
years. The terms of such agreement provide for an advance payment of $950,000
against international theatrical and home video revenues. The payment has been
received by the Partnership net of distribution fees and expenses retained by
the distributor. No international theatrical or home video overages are
expected to be received for the remaining term of the agreement. International
television sales continue and are remitted to the Partnership, net of
distribution fees and expenses, as collected by the distributor. As of September
30, 1997, the Partnership had recorded international gross revenues of
$1,254,062, of which $362,383 was retained by the distributor for its fees and
marketing costs, with the remaining $891,679 due remitted to the Partnership.
During the third quarter of 1995, the General Partner reassessed the anticipated
total gross revenue remaining from the distribution of "Curacao" in available
international and domestic television markets. Based on revised television
sales projections by unexploited territory, a reduction was made to the
Partnership's estimate of total gross revenue to be recognized from the future
distribution of the film. Accordingly, based on the reduced revenue projections
for the film (primarily in international television revenues), a determination
was made by the General Partner that the Partnership's net investment in
"Curacao" of $1,076,664 exceeded the film's estimated net realizable value of
$832,500 as of September 30, 1995. As a result, a loss from write-down of film
production cost $244,164 was incurred to write-down the unamortized cost of the
film to its estimated net realizable value as of September 30, 1995.
Likewise, in the third quarter of 1996, the General Partner again reassessed the
anticipated gross revenue remaining from the distribution of "Curacao" based on
revised estimated television sales projections and actual results of the film's
distribution in comparison to the film's prior projections. A determination was
made by the General Partner that the Partnership's net investment in "Curacao"
of $756,744 exceeded the film's estimated net realizable value of $100,000 as of
September 30, 1996, resulting in a write-down of $656,744. The film's estimated
net realizable value was calculated based on an estimate of anticipated revenues
remaining over the life of the film from international and domestic television
distribution, net of estimated distribution fees and costs, as of September 30,
1996.
11
<PAGE>
These revenue projections were estimated by the General Partner and the film's
distributor based on the film's prior distribution history, the remaining
international and domestic territories available to the film for future
television distribution, and the General Partner's and the distributor's
previous distribution experience with other films. As of September 30, 1997,
the Partnership's net investment in the film, after consideration of
amortization and the write-downs discussed above, was $63,815. The Partnership
plans to recover its remaining net investment in this film of $63,815 from net
revenues generated from remaining international and domestic television markets
or from sale of the Partnership's interests in the film to an unaffiliated third
party.
RESULTS OF OPERATIONS
---------------------
Revenues of the Partnership increased $108,075, from $38,189 to $146,264 for the
three months ended September 30, 1996 and 1997, respectively. For the nine
month periods ended September 30, 1996 and 1997, revenues of the Partnership
increased $39,681, from $185,590 to $225,271, respectively. These increases
were partially due to an increase in the domestic home video and television
sales of "The Story Lady," which were $71,950 and $134,901 for the nine month
periods ended September 30, 1996 and 1997, respectively. In addition, domestic
and international sales of "The Little Kidnappers" increased $58,432, from
$12,781 to $71,213 for the nine month periods ended September 30, 1996 and 1997,
respectively. These increases were partially offset by a decrease in the
international sales of "Curacao" from $100,859 to $19,157 for the nine month
periods ended September 30, 1996 and 1997, respectively.
Filmed entertainment costs increased $10,568, from $8,353 to $18,921 for the
three months ended September 30, 1996 and 1997, respectively. For the nine
month periods ended September 30, 1996 and 1997, filmed entertainment costs
decreased $782, from $86,271 to $85,489, respectively. The increase for the
three month period ended September 30, 1997 as compared to 1996 was mainly the
result of the increase in revenues from "The Little Kidnappers" and was
partially offset by the decrease in sales of "Curacao" as discussed above. The
decrease in filmed entertainment costs for the nine month period ended September
30, 1997 as compared to the similar period in 1996 was due to the decrease in
"Curacao" revenue as compared to revenue recognized for "The Story Lady" which
was fully amortized in 1995, resulting in no filmed entertainment costs being
recognized in the current or prior year for this film. Filmed entertainment
costs are amortized over the life of the film in the ratio that current gross
revenues bear to anticipated total gross revenues.
Distribution fees and expenses increased $43,171, from $10,401 to $53,572 for
the three months ended September 30, 1996 and 1997, respectively, and increased
$39,219, from $52,033 to $91,252 for the nine months ended September 30, 1996
and 1997, respectively. These increases were primarily the result of increased
costs associated with the international sales of "The Little Kidnappers" and
international distribution of "The Story Lady" during the three and nine month
periods ended September 30, 1997 as compared to 1996. These distribution fees
and expenses relate to the compensation due and costs incurred by distributors
in selling the Partnership's programming in the domestic and international
markets. The timing and amount of distribution fees and expenses vary depending
upon the individual market in which programming is distributed.
Loss from write-down of film production decreased $656,744, from $656,744 to $0
for the three and nine month periods ended September 30, 1996 and 1997,
respectively. This decrease was the result of a write-down of the Partnership's
net investment in "Curacao" to the film's net realizable value of $100,000 as of
September 30, 1996. A write-down was not deemed necessary by the General
Partner during the nine month period ended September 30, 1997.
Operating, general and administrative expenses increased $20,227, from $10,766
to $30,993 for the three months ended September 30, 1996 and 1997, respectively,
and increased $36,057, from $36,050 to $72,107 for the nine month periods ended
September 30, 1996 and 1997, respectively. These increases are mainly due to an
increase in consulting fees relating to film revenue projections for the
Partnership's films and increased direct costs allocable to the operations of
the Partnership that were charged to the Partnership by the General Partner
during the three and nine months ended September 30, 1997 as compared to the
same periods in 1996. The increase in direct costs allocable to the
Partnership's operations resulted mainly from the increased involvement of
General Partner personnel required to properly administer the second cycle
distribution of the Partnership's programming.
Interest income decreased $2,835, from $5,036 to $2,201 for the three months
ended September 30, 1996 and 1997, respectively, and decreased $9,428, from
$15,742 to $6,314 for the nine months ended September 30, 1996 and 1997,
12
<PAGE>
respectively. These decreases in interest income were the result of lower
average levels of invested cash balances existing during the first nine months
of 1997 as compared to the same period in 1996.
13
<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JONES PROGRAMMING PARTNERS 1-A, LTD.
BY: JONES ENTERTAINMENT GROUP, LTD.
General Partner
By: /s/ STEVEN W. GAMPP
---------------------------------------
Steven W. Gampp
Vice President/Finance and Treasurer
(Principal Financial Officer)
Dated: November 14, 1997
15
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 272,777
<SECURITIES> 0
<RECEIVABLES> 140,348
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 498,138
<CURRENT-LIABILITIES> 24,342
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0
<COMMON> 0
<OTHER-SE> 450,351
<TOTAL-LIABILITY-AND-EQUITY> 498,138
<SALES> 0
<TOTAL-REVENUES> 225,271
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<TOTAL-COSTS> 248,848
<OTHER-EXPENSES> 524
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<INCOME-PRETAX> (17,787)
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