<PAGE>
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 June 30, 1997.
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to .
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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
June 30, 1997 and December 31, 1996 3
Unaudited Statements of Operations for the
Three and Six Months Ended June 30, 1997 and 1996 4
Unaudited Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 5
Notes to Unaudited Financial Statements as of
June 30, 1997 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
PART II. OTHER INFORMATION 13
2
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JONES PROGRAMMING PARTNERS 1-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF FINANCIAL POSITION
------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
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ASSETS
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<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 217,085 $ 266,452
RECEIVABLES:
Foreign income receivable 148,307 141,602
Domestic income receivable 8,462 77,573
INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION,
net of accumulated amortization of $8,783,272
and $8,716,704 as of June 30, 1997 and
December 31, 1996, respectively 103,934 170,502
OTHER ASSETS - 1,092
----------- ----------
Total assets $ 477,788 $ 657,221
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Accounts payable to affiliates $ 4,615 $ 15,600
Accrued distributions payable to partners - 160,897
Accrued liabilities 8,046 12,586
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Total liabilities 12,661 189,083
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UNEARNED REVENUE 59,444 -
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PARTNERS' CAPITAL (DEFICIT):
General partner -
Contributed capital 1,000 1,000
Distributions (40,831) (40,831)
Accumulated deficit (10,077) (9,453)
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Total general partner's deficit (49,908) (49,284)
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Limited partners -
Contributed capital, net of offering costs
(12,743 units outstanding as of
June 30, 1997 and December 31, 1996) 5,459,327 5,459,327
Distributions (4,042,214) (4,042,214)
Accumulated deficit (961,522) (899,691)
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Total limited partners' capital 455,591 517,422
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Total partners' capital 405,683 468,138
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Total liabilities and partners' capital $ 477,788 $ 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
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<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
GROSS REVENUES $ 61,089 $66,283 $ 79,007 $147,401
COSTS AND EXPENSES:
Costs of filmed entertainment 48,997 16,113 66,568 77,918
Distribution fees and expenses 28,527 19,599 37,680 41,632
Operating, general and administrative expenses 20,663 14,427 41,114 25,284
-------- ------- -------- --------
Total costs and expenses 98,187 50,139 145,362 144,834
-------- ------- -------- --------
OPERATING INCOME (LOSS) (37,098) 16,144 (66,355) 2,567
-------- ------- -------- --------
OTHER INCOME (EXPENSE):
Interest income 1,428 5,349 4,113 10,706
Other income (expense) 644 - (213) -
-------- ------- -------- --------
Other income, net 2,072 5,349 3,900 10,706
-------- ------- -------- --------
NET INCOME (LOSS) $(35,026) $21,493 $(62,455) $ 13,273
======== ======= ======== ========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (350) $ 215 $ (624) $ 133
======== ======= ======== ========
Limited Partners $(34,676) $21,278 $(61,831) $ 13,140
======== ======= ======== ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (2.72) $ 1.67 $ (4.85) $ 1.03
======== ======= ======== ========
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 Six Months Ended
June 30,
------------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (62,455) $ 13,273
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Amortization of filmed entertainment costs 66,568 77,918
Net change in assets and liabilities:
Decrease (increase) in foreign income receivable (6,705) 147,533
Decrease in domestic income receivable 69,111 30,000
Decrease in other assets 1,092 474
Net change in amounts due to/from affiliates (10,985) 29,936
Decrease in accrued liabilities (4,540) (3,000)
Increase in unearned revenue 59,444 -
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Net cash provided by operating activities 111,530 296,134
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in production advances - -
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Net cash provided by investing activities - -
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (160,897) (321,794)
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Net cash used in financing activities (160,897) (321,794)
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DECREASE IN CASH AND CASH EQUIVALENTS (49,367) (25,660)
CASH AND CASH EQUIVALENTS, beginning of period 266,452 502,435
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CASH AND CASH EQUIVALENTS, end of period $ 217,085 $ 476,775
========= =========
</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
June 30, 1997 and December 31, 1996 and its results of operations and its
cash flows for the three and six month periods ended June 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 $13,417 and $3,093 to the Partnership for direct expenses for the
three month periods ended June 30, 1997 and 1996, respectively. For the six
month periods ended June 30, 1997 and 1996, $27,145 and $9,629,
respectively, were charged to the Partnership for direct expenses.
(3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION
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"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
June 30, 1997, the Partnership's net investment in the film, after
consideration of amortization, was $40,118. From inception to June 30,
1997, the Partnership has recognized approximately $2,957,000 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 June 30, 1997, $17,200 in net receivables was outstanding from the
film's distributors and licensees, which was received by the Partnership in
July 1997. 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. In
December 1995, the Partnership had fully recovered its remaining net
investment in the film. From inception to June 30, 1997, the Partnership
has recognized approximately $2,012,000 of revenue from this film. As of
June 30, 1997, the Partnership had outstanding receivables from the film's
domestic and international distributors and licensees totaling $135,786,
with $8,462 received by the Partnership in July 1997. The Partnership
anticipates payment of the remaining $127,324 over the next three to
twenty-four months as collected by distributors.
6
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"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 June 30, 1997, the Partnership's net investment in the film, after
consideration of amortization, was $63,816. From inception to June 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. As of June 30, 1997, the Partnership had outstanding
receivables from the film's international distributors totaling $3,783,
which were paid in July 1997. 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
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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 $217,085 in cash as of June 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 $157,000 as of June 30, 1997. Approximately $128,000 of
this amount will be paid to the Partnership over the next three to twenty-four
months as collected by the distributors, with the remaining $29,000 paid to the
Partnership in July 1997.
In February 1997, distributions from operations for the quarter ending December
31, 1996 were paid by the Partnership totaling $160,897. Such distributions were
made using cash on hand, interest income and cash provided by operating
activities. 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, will continue to manage and
arrange for the second cycle distribution of the Partnership's programming in
remaining unexploited territories and markets. 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 is to
identify and facilitate payment of any excess film proceeds improperly retained
by the distributors that belong to the Partnership. Based on the preliminary
results of these audits, it is anticipated that revenue proceeds identified and
collected by the Partnership in conjunction with these audits in 1997 will not
be 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 contribution 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 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 June 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.
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 June 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 June 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. 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. 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
is entitled to a license fee of $35,000, of which $21,000 had been received by
the Partnership as of June 30, 1997. The remaining $14,000 was received by the
Partnership in July 1997. The General Partner will not earn a distribution fee
relating to this agreement. As of June 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 $7,500 had been received by the Partnership as of June 30, 1997.
The remaining $12,500 is expected to be received in August 1997. 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. As the
9
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license period for this agreement did not commence until July 1997 when delivery
of the programming to the licensee was made, no revenue under this agreement has
been recognized by the Partnership as of June 30, 1997.
The Partnership anticipates that it will recover its remaining net investment in
this film of $40,118 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 June 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 June 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 $1,434,248, of which $379,145 was
retained by the distributor for its fees and marketing costs, with the remaining
$1,055,103 due to the Partnership. As of June 30, 1997, the Partnership had
received $927,779 of such amounts. The remaining $127,324 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 June
30, 1997, the Partnership had received license fee payments under this licensing
agreement totaling $141,538. The remaining $8,462 was paid to the Partnership in
July 1997.
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 is entitled to a
$75,000 license fee, of which $25,000 was received in January 1997, with the
remaining $50,000 due in two equal payments in July 1997 and July 1998. As the
license period of this agreement does not begin until July 1997, no revenue from
the agreement has been recognized by the Partnership as of June 30, 1997.
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 $7,500 had been received by the Partnership as of June 30, 1997.
The remaining $12,500 is expected to be received in August 1997. As the license
period for this agreement did not commence until July 1997 when delivery of the
programming to the licensee was made, no
10
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revenue under this agreement has been recognized by the Partnership as of June
30, 1997. 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. During 1995, the Partnership recovered its remaining
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 June 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 June 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. As of June 30, 1997, the Partnership
had received $887,896 of such amounts, with the remaining $3,783 received in
July 1997.
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.
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 June
11
<PAGE>
30, 1997, the Partnership's net investment in the film, after consideration of
amortization and the write-downs discussed above, was $63,816. The Partnership
plans to recover its remaining net investment in this film of $63,816 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 decreased $5,194, from $66,283 to $61,089 for the
three months ended June 30, 1996 and 1997, respectively. For the six month
periods ended June 30, 1996 and June 30, 1997, revenues of the Partnership
decreased $68,394, from $147,401 to $79,007, respectively. These decreases were
partially due to a decrease in international sales of "The Story Lady," which
were $44,800 for the three and six month periods ended June 30, 1996 as compared
to $8,950 for the three and six month periods ended June 30, 1997. International
sales of "Curacao" decreased $15,180 and $71,566, respectively, for the three
and six month periods ended June 30, 1997 as compared to the same periods in
1996. These decreases in sales for "The Story Lady" and "Curacao" were partially
offset by increases in international sales of "The Little Kidnappers" of $45,836
and $39,022, respectively, for the three and six months ended June 30, 1997 as
compared to the same periods in 1996.
Filmed entertainment costs increased $32,884, from $16,113 to $48,997 for the
three months ended June 30, 1996 and 1997, respectively. For the six month
periods ended June 30, 1996 and 1997, filmed entertainment costs decreased
$11,350, from $77,918 to $66,568, respectively. The increase for the three month
period ended June 30, 1997 as compared to 1996 was mainly the result of the
increase in revenues from "The Little Kidnappers" as partially offset by the
decrease in sales of "Curacao" as discussed above. In addition, the increase in
filmed entertainment costs relative to the overall decrease in film revenues for
the three month period comparison was also due to the Partnership's net
investment in "The Story Lady" being fully amortized in 1995, which resulted in
no filmed entertainment costs being recognized in the current or prior year. The
decrease for the six months ended June 30, 1997 in comparison to the same period
in 1996 was the result of the overall decrease in film revenues as discussed
above. 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 $8,928, from $19,599 to $28,527 for the
three months ended June 30, 1996 and 1997, respectively, and decreased $3,952,
from $41,632 to $37,680 for the six months ended June 30, 1996 and 1997,
respectively. The increase for the three months ended was primarily the result
of increased international sales of "The Little Kidnappers" during the three
month period ended June 30, 1997 as compared to 1996 as discussed above, which
had more distribution-related fees, expenses and royalties associated with the
film's sales in comparison to sales of the Partnership's other programming
during 1996. The decrease for the six months ended was mainly due to the overall
decrease in film revenues as discussed above. 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.
Operating, general and administrative expenses increased $6,236, from $14,427 to
$20,663 for the three months ended June 30, 1996 and 1997, respectively, and
increased $15,830, from $25,284 to $41,114 for the six month periods ended June
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
six months ended June 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 $3,921, from $5,349 to $1,428 for the three months
ended June 30, 1996 and 1997, respectively, and decreased $6,593, from $10,706
to $4,113 for the six months ended June 30, 1996 and 1997, respectively. These
decreases in interest income were the result of lower average levels of invested
cash balances existing during the first six months of 1997 as compared to the
same period in 1996.
12
<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
13
<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: August 13, 1997
14
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 217,085
<SECURITIES> 0
<RECEIVABLES> 156,769
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 477,788
<CURRENT-LIABILITIES> 12,661
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 405,683
<TOTAL-LIABILITY-AND-EQUITY> 477,788
<SALES> 0
<TOTAL-REVENUES> 79,007
<CGS> 0
<TOTAL-COSTS> 145,362
<OTHER-EXPENSES> 213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,113)
<INCOME-PRETAX> (62,455)
<INCOME-TAX> 0
<INCOME-CONTINUING> (62,455)
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<EXTRAORDINARY> 0
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