-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qjx6z0/udTZgrywOTt/mwaQVQnJR4z0C8zbYqY/UHg+S4cjq5VaJ/IL9VI3a8uqs +SXhqFQYOCINb+WUme2QdA== 0000732288-96-000004.txt : 19960329 0000732288-96-000004.hdr.sgml : 19960329 ACCESSION NUMBER: 0000732288-96-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELPHI FILM ASSOCIATES IV CENTRAL INDEX KEY: 0000764636 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 133261814 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14408 FILM NUMBER: 96540032 BUSINESS ADDRESS: STREET 1: 666 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129839040 MAIL ADDRESS: STREET 1: 666 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For Fiscal Year Ended Commission File December 31, 1995 Number 0- 14408 DELPHI FILM ASSOCIATES IV (Exact name of registrant as specified in its charter) New York 13-3261814 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 666 Third Avenue, New York, New York 10017 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 983 9040 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] As of March 15, 1996, there were 8,000 units of limited partnership interests outstanding, all held by non-affiliates. The aggregate market value of those interests is not determinable because there is no active public trading market for the units. See Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters. PART I. Item 1. Business. Introduction. Delphi Film Associates IV (the "Partnership") is a limited partnership which was organized under the law of the State of New York in December 1984 to participate in the production, acquisition, ownership and exploitation of feature length motion pictures through a joint venture with Columbia Pictures Industries, Inc. ("Columbia"), known as Columbia-Delphi IV Productions (the "Columbia Joint Venture"), and through a joint venture with TriStar Pictures, Inc. ("TriStar"), known as Tri-Star-Delphi IV Productions (the "Tri-Star Joint Venture"). The terms of the Tri-Star Joint Venture and the Columbia Joint Venture are substantially the same. Those two joint ventures are referred to collectively as the "Joint Ventures" and sometimes individually as a "Joint Venture," and the Partnership's co-venturer in a joint venture is sometimes referred to as the "Studio Venturer." A public offering (the "Offering") of limited partnership interests in the Partnership, at $5,000 per unit, was completed in June 1985 with the sale of 8,000 units. Net proceeds to the Partnership after deducting selling commissions, organizational expenses and other expenses of the offering were approximately $35,300,000. The general partner of the Partnership, The Delphi Company (the "General Partner"), contributed approximately $404,000 as its capital contribution to the Partnership. Production and Acquisition of Films. The Partnership has an interest in 27 films through the Joint Ventures (12 through the Columbia Joint Venture and 15 through the Tri-Star Joint Venture), all of which have been released. See "Films in Release." The Partnership's contributions for the production of, and acquisition of interests in, films have aggregated approximately $45,818,000 (including interest). Approximately one-half of the Partnership's contributions were made to each Joint Venture. The Tri-Star Joint Venture acquired the right to produce and exploit each film that met certain criteria for which TriStar commenced production after the expiration of a similar existing commitment to an earlier joint venture between TriStar and Delphi Film Associates III ("Delphi III") and prior to the time the funds that the Partnership agreed to contribute to the Tri-Star Joint Venture were fully committed. Until such time as the funds the Partnership agreed to contribute to the Columbia Joint Venture were fully committed, the Columbia Joint Venture acquired the right to participate in completing the production of, and exploiting, certain films being produced by Columbia which were either designated or met certain criteria. Each Joint Venture has acquired interests in or co produced films in which Delphi Film Associates V ("Delphi V") has an interest through its own joint ventures with TriStar and Columbia. Delphi III and Delphi V are limited partnerships that were organized in 1983 and 1985, respectively, to participate in the production, acquisition, ownership and exploitation of films through joint ventures with Columbia and TriStar. Another public limited partnership, ML Delphi Premier Partners, L.P. ("ML Delphi"), which was organized in 1986, participates in a joint venture with TriStar ("Tri-Star-ML Delphi"). The Tri- Star Joint Venture entered into agreements with Tri-Star-ML Delphi pursuant to which Tri-Star-ML Delphi acquired interests in four films in which the Tri-Star Joint Venture has an interest ("Let's Get Harry," "Peggy Sue Got Married," "No Mercy" and "Nadine"). In addition, the Tri- Star Joint Venture acquired interests in certain films produced by independent producers that were distributed by TriStar. The Partnership has an interest ranging from 5% to 25% in each of the Joint Ventures' films. See "Films in Release." The Partnership's ownership interest with respect to each film generally is equal to the percentage the Partnership's cash contribution for the production or acquisition of a film bears to the total cash contributions for production or acquisition of that film. The Partnership, through the Tri-Star Joint Venture, was granted a participation interest by TriStar in 1988 in the motion pictures "Short Circuit 2" and "Rambo III." See "Films In Release." The Partnership made no capital contributions for its interest in these films but is entitled to a share of any net proceeds from each of these films beyond certain performance levels. Any payments due with respect to these interests will be made to the Partnership in June 1996, subject to being paid earlier under certain circumstances. The Partnership does not anticipate receiving any revenues with respect to "Short Circuit 2." However, as of December 31, 1995, the Partnership had accrued revenues of approximately $166,000 in connection with "Rambo III." "Short Circuit 2" and Rambo III" are sometimes referred to as the "Additional Films." The Partnership has begun evaluating the value of its interest in the film assets for the purpose of possibly selling that interest and liquidating the Partnership. The General Partner presently anticipates that the Partnership may be liquidated by late 1996, or early 1997. However, cash distributions as a result of the liquidation may be made to the partners to the extent, and only to the extent, the proceeds from the sale of the Partnership's interest in the film assets in connection with the liquidation are in excess of the Distributors' entitlement to the recoupment described below net of a reserve for the Partnership's operating expenses. See "Additional Payments". Distribution of Films. The films of the Columbia Joint Venture and the Tri Star Joint Venture are distributed pursuant to distribution agreements between Columbia Pictures, a division of Columbia ("Columbia Pictures"), and the Columbia Joint Venture, and between TriStar and the Tri-Star Joint Venture, respectively. Columbia Pictures and TriStar, as distributors, are sometimes referred to collectively as the "Distributors" and individually as a "Distributor." The Distributor has the ultimate authority for all decisions with respect to the distribution of the films. For each film, the Partnership, through a Joint Venture, is generally entitled to receive an amount equal to the greater of the product of the Partnership's percentage interest in a film multiplied by (a) an amount equal to 100% of the net proceeds from the distribution of the film and (b) an amount equal to 32% of the gross receipts from the distribution of the film. Distribution arrangements with respect to films in which a Joint Venture has an interest that were produced by independent producers may vary from those with respect to films produced by a Joint Venture. The Partnership and the Studio Venturer share in the amount to which the Joint Ventures are entitled from the distribution of any film in proportion to their respective interests in the film. The distribution agreements provide, with certain exceptions, that gross receipts consist of all sums received by the Distributor from the exploitation of a film throughout the world. Net proceeds with respect to each film generally are determined by deducting from gross receipts: (a) a distribution fee equal to 17-1/2% of substantially all of the gross receipts of the film. The Distributor's entitlement to this distribution fee is deferred until the Joint Venture has received from the distribution of that film an amount equal to the amounts contributed by the Joint Venture to produce or acquire an interest in the film, other than amounts paid in the nature of interest; (b) all expenses incurred in the distribution, promotion and marketing of the film, including expenditures for prints and advertising; and (c) payments to third party participants who have contingent shares in the film. The extent to which payments to third party participants may be deducted from the gross receipts of a film in determining net proceeds is limited by the distribution agreements. Many of the Columbia Joint Venture's and the Tri- Star Joint Venture's films have been licensed to Home Box Office, Inc. ("HBO") for exhibition on its pay television services. The distribution agreements with each Joint Venture provide that gross receipts of a film with respect to pay television exhibition by HBO shall be an amount equal to specified percentages of the first year's domestic theatrical gross receipts of that film, regardless of the actual license fee payable to Columbia or TriStar under their respective license agreements with HBO. The amount initially included in gross receipts may be less (and in some instances substantially less) than the amount actually received by Columbia or TriStar under their agreements with HBO. See the "Additional Payments" provision described below for information concerning additional amounts that gross receipts may be credited with in connection with pay television exhibition by HBO. Columbia Pictures entered into an arrangement with CBS Inc. ("CBS") for CBS to license for exhibition on the CBS television network, a specified number of motion pictures from among a specified number of groups of motion pictures. The arrangement provides for CBS to pay a specified average license fee for the motion pictures in each group licensed by CBS. The Columbia Joint Venture and its Distributor have agreed that, subject to adjustment in certain circumstances, gross receipts for films licensed to CBS under this arrangement include an amount equal to the higher of the license fees paid by CBS and the comparable fair market value for the license rights involved for the relevant license period. Certain films in which the Partnership owns an interest have been licensed for network television exhibition under this arrangement. Certain of the Tri-Star Joint Venture Films have been licensed for network television exhibition on CBS or on other television networks on a filmby-film basis. The films in which the Partnership owns an interest are subject to agreements between each Distributor and Columbia TriStar Home Video (formerly known as RCA/Columbia Pictures Home Video) and Columbia TriStar Home Video (International) Inc. (formerly known as RCA/Columbia Pictures International Video). The distribution agreements between each Joint Venture and its Distributor provide for the inclusion in gross receipts of a specified royalty for video cassettes and video discs regardless of the amounts payable to TriStar or Columbia under their respective agreements with such joint ventures (which may exceed the amounts includable in gross receipts). Many films in which the Partnership has an interest have been licensed by the Distributor for exhibition on other cable television services, independent television stations in the United States and on foreign television stations. Generally, these films have been made available for foreign television exhibition and domestic independent television exhibition approximately three and five years, respectively, after a film's domestic theatrical release. Each Distributor reports gross receipts and net proceeds for each film to the Joint Venture on behalf of which it acts, on a quarterly basis, and makes payment to that Joint Venture based on those reports when the reports are delivered. In addition to distributing motion pictures produced or acquired by the Joint Ventures, each Distributor distributes films in which joint ventures between each of Columbia and TriStar and certain other limited partnerships (the "Delphi Partnerships") own an interest, as well as films in which neither the Partnership nor any of the Delphi Partnerships own an interest. Additional Payments. The terms of the distribution agreements between each Joint Venture and its respective Distributor provided that the Partnership would be entitled to receive, through each Joint Venture, a payment (an "Additional Payment") from that Joint Venture's Distributor for each film (an "Unrecouped Film"), if by March 1993, in the case of the Columbia Joint Venture, and if by February l994, in the case of the Tri-Star Joint Venture, for which the particular Joint Venture had not received from the distribution of that film (or its sale) an amount equal to the amount spent by the Joint Venture to produce or acquire an interest in that film, other than amounts spent for payments in the nature of interest ("Cost Return"). Each Additional Payment was in the amount necessary for the Partnership to be repaid (without interest) its unrecouped contributions to the Joint Venture with respect to the production or acquisition of an Unrecouped Film (other than contributions for payments in the nature of interest), but not more than the amount specified below. The Additional Payment was first payable only to the extent of (and attributable to) the distribution fees received by the Distributor from the distribution of all of its Joint Venture's films. The Additional Payments based on distribution fees were allocated by the Joint Ventures first to the Partnership to the extent necessary for the Partnership to recoup its investment in such film; any excess for such film was allocated to the respective Studio Venturer until Cost Return. If these distribution fees were insufficient to enable a Distributor to make the Additional Payments with respect to all of its Joint Venture's Unrecouped Films, then gross receipts and net proceeds of each remaining Unrecouped Film distributed by that Distributor were recalculated by including as gross receipts the minimum license fees under its license agreement with HBO and certain minimum amounts in respect of video cassette and video disc exploitation with respect to that Unrecouped Film. Each Distributor then made an Additional Payment to the Partnership, through its Joint Venture, with respect to each Unrecouped Film to the extent of the Partnership's share of additional gross receipts or net proceeds payable as a result of the recalculation but only up to the amount of the unrecouped contributions (other than contributions for payments in the nature of interest) by the Partnership for the production or acquisition of that Unrecouped Film. Each such Additional Payment made on the basis of such recalculation was allocated between the Partnership and the respective Studio Venturer in proportion to their respective interest in the applicable Unrecouped Film. The distribution agreements provided that each Distributor would be entitled to recoup the Additional Payment made to the Partnership in respect of each Unrecouped Film, with interest calculated at 110% of the prime rate from time to time, from the Partnership's share of subsequent gross receipts or net proceeds of that Unrecouped Film and from the proceeds of any sale of the Partnership's interest in that Unrecouped Film or amounts allocable to that Unrecouped Film upon a sale of the Partnership's interest in the Joint Venture. Except for Unrecouped Films, the Distributor does not have the right to recoup amounts from the proceeds of any sale of a film. In calculating the amount of distribution fees available for the Additional Payments, no distribution fee has been deemed received by a Distributor (and therefore no distribution fee will be deemed available for the Additional Payment) from (i) a film with respect to which the most recent payment was based on gross receipts (ii) a film that did not reach Cost Return or (iii) an Additional Film. Based on the anticipated performance of one film in release through the Tri-Star Joint Venture as of December 31, 1995, approximately $392,000 has been accrued by the Tri-Star Joint Venture as an Additional Payment allocable to the Partnership. In February, 1994 the Partnership received approximately $7,886,000 representing its share of the TriStar Joint Venture's Additional Payment relating to all but one film net of the repayment of the $200,000 advance (see below) previously received by the Partnership. The Partnership received approximately $10,911,000 in May 1993 representing its share of the Columbia Joint Venture's Additional Payment net of the repayment of the $200,000 advance (see below) previously received by the Partnership. The Additional Payments from the Distributors are expected to enable the Partnership, through each Joint Venture, to achieve Cost Return for each Unrecouped Film and are not intended to enable the Partnership to recoup any amounts paid by the Partnership for management fees or other expenses of the Partnership. The Columbia and TriStar Distributors are not expected to fully recoup the Additional Payments made. During 1990, an interest-free advance from the Columbia and TriStar Distributors, respectively, was made to the Joint Venture and allocated to the Partnership each in the amount of $200,000 (hereinafter referred to as the "Advances"). In October 1992, the Distributors for the respective Joint Ventures modified the terms of the recoupment of the Advances to provide that the Distributors would be entitled to retain an amount equal to the Advances from any Additional Payments otherwise payable to the Joint Ventures on behalf of the Partnership. Prior to this modification, the Partnership was restricted in the amount of cash it could distribute to its partners and would have been required to repay these Advances in 1992. This modification permitted the Partnership to defer this repayment and to make distributions in excess of $100 per limited partnership unit during 1994, 1993 and 1992 without first repaying these Advances. The $200,000 Advances previously received by the Partnership from the Columbia and TriStar Distributors, respectively, were repaid as of December 31, 1994. Films in Release. All 12 films in which the Columbia Joint Venture has an interest have been released. Certain information concerning these films is set forth below: Initial Partnership's Release Approximate Title Date Percentage Interest St. Elmo's Fire June 1985 25% Silverado July 1985 15.6% Fright Night August 1985 20.2% Agnes of God September 1985 11% Jagged Edge October 1985 15% Quicksilver February 1986 15% Crossroads March 1986 15% Violets Are Blue April 1986 15% Desert Bloom April 1986 15% One More Saturday Night June 1986 15% Armed and Dangerous August 1986 5% Happy New Year July 1987 6.3% All 15 films in which the Tri-Star Joint Venture has acquired an interest have been released. Certain information concerning these films is set forth below: Initial Partnership's Release Approximate Title Date Percentage Interest Rambo: First Blood Part II May 1985 7.5% Lifeforce June 1985 7.5% Santa Claus: The Movie November 1985 5% Band of the Hand April 1986 20% Short Circuit May 1986 5% Labyrinth June 1986 5% About Last Night... July 1986 22.5% Nothing In Common July 1986 17.8% Night of the Creeps August 1986 20% Peggy Sue Got Married October 1986 17.8% Let's Get Harry October 1986 17% No Mercy December 1986 9% Nadine August 1987 5% Rambo III May 1988 (See Below) Short Circuit 2 July 1988 (See Below) The Partnership, through the Tri-Star Joint Venture, has participation interests in the films "Short Circuit 2" and "Rambo III." The Partnership is entitled to a percentage of net proceeds (3.2% in the case of "Short Circuit 2" and 6% in the case of "Rambo III") after "Breakeven" has been reached. "Breakeven" in this instance is defined as the point at which 5.6% of net proceeds (after recoupment of deferred distribution fees) in the case of "Short Circuit 2" and 10% in the case of "Rambo III" equals 5% of the production cost of the film (including an overhead charge of 12-1/2%). The Partnership does not anticipate receiving any revenues with respect to "Short Circuit 2." However, as of December 31, 1995, the Partnership had accrued revenues of approximately $166,000 in connection with "Rambo III." All of the Partnership's films have been theatrically released both domestically and in foreign markets. In addition, all of these films have been made available on video cassettes and have been exhibited on pay television. Many of these films have been exhibited on network television and certain of these films are currently under license for domestic syndicated television exhibition and foreign television exhibition. See "Distribution of Films." Competition. Competition in the motion picture industry is intense, both in theatrical distribution as well as in the ancillary markets where the Partnership's films are now being distributed. All of the "major" studios and independent distribution companies are distributing films that compete for the attention of purchasers of product for these ancillary markets which include pay cable television, home video, network television exhibition, and syndicated television exhibition both foreign and domestic. The Partnership's films compete in many of these markets not only with films that were released contemporaneously, but also with many films that were released in prior and subsequent years. The level of theatrical success that a film enjoyed is often an important factor with respect to results achieved in these ancillary markets. Employees. The Partnership has no employees. The General Partner, however, retains the services of Magera Management Corporation ("Magera") to provide operational and financial services to it. See Item l0 "Directors and Executive Officers of the Partnership-Operational and Financial Services." Magera has eight employees who perform services for the General Partner and for the general partners of other private and public limited partnerships, including the other Delphi Partnerships. Item 2. Properties. The executive offices of the Partnership and the General Partner are located at 666 Third Avenue, New York, New York 10017. The Partnership pays no rent. Item 3. Legal Proceedings. None. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II. Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters. The Partnership is a limited partnership; there is no established public market for limited partnership units of the Partnership. Effective November 9, 1992, the Partnership was advised that Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") introduced a new limited partnership secondary service available to its clients through Merrill Lynch's Limited Partnership Secondary Transaction Department. Beginning with the December 1994 client account statements, Merrill Lynch implemented new guidelines for providing estimated values of limited partnerships and other direct investments reported on client account statements. As a result, Merrill Lynch no longer reports general partner estimates of limited partnership net asset value on its client account statements. Pursuant to the guidelines, estimated values for limited partnership interests originally sold by Merrill Lynch (such as the Partnership's Units) will be provided two times per year to Merrill Lynch by independent valuation services. The estimated values will be based on financial and other information available to the independent services on the prior August l5th for reporting on December year-end client account statements, and on information available to the services on March 31st for reporting on June month-end Merrill Lynch client account statements. Merrill Lynch clients may contact their Merrill Lynch Financial Consultants or telephone the number provided to them on their account statements to obtain a general description of the methodology used by the independent valuation services to determine their estimates of value. The estimated values provided by the independent services are not market values and Unit holders may not be able to sell Units or realize the amount upon a sale. In addition, Unit holders may not realize the independent estimated value upon the liquidation of the Partnership over its remaining life. As of March 15, 1996, there were approximately 4,200 holders of record of limited partnership units of the Partnership. Cash Distributions. The Partnership commenced making cash distributions in April 1987. The following chart sets forth the cash distributions made by the Partnership through March 15, 1996: Year Amount Per Unit 1987 $ 600 1988 300 1989 120 1990 100 1991 100 1992 240 1993 1,400 1994 875 1995 50 1996 (through March 15) 0 Total $3,785 Accordingly, as of March 15, 1996, the partners have received distributions aggregating 75.7% of their original investment in the Partnership. The Partnership does not currently anticipate that the partners will receive cash distributions in an aggregate amount sufficient to recover their capital contribution to the Partnership.
Item 6. Selected Financial Data. (000's omitted except for per unit information) Year Ended December 31, 1995 1994 1993 1992 1991 Operating revenues(1): $ 0 $ 0 $ 0 $ 0 $ 0 Share of profit in motion picture ventures, net: $ 338 $ 312 $ 2,275 $ 3,039 $ 1,112 Net (loss) profit: $ (32) $ (17) $ 1,789 $ 2,583 $ 785 Net (loss) profit per unit: $ (4) $ (2) $ 221 $ 320 $ 97 Total assets: $ 2,825 $ 3,303 $10,364 $l9,895 $19,217 Total liabilities: $ 68 $ 110 $ 83 $ 90 $ 56 Cash distributions per unit: $ 50 $ 875 $ 1,400 $ 240 $ 100 (1)The Partnership's interests in the Joint Ventures are not included in Operating Revenues as they are accounted for by the equity method.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 1. Liquidity and Capital Resources. The Partnership fully satisfied its commitment to contribute funds to the Joint Ventures for the production of, and acquisition of interests in, films. As of December 31, 1995, the Partnership held cash of approximately $185,000 and short-term investments of approximately $1,227,000. Short- term investments consist solely of U.S. government securities. The Partnership received approximately $7,886,000 in February 1994 representing its share of the Tri-Star Joint Venture's Additional Payment relating to all but one film net of the repayment of the $200,000 Advance previously received by the Partnership. These funds, less a reserve for Partnership operating expenses, were distributed to partners in May 1994. The Partnership received approximately $10,911,000 in May 1993 representing its share of the Columbia Joint Venture's Additional Payment net of the repayment of the $200,000 Advance previously received by the Partnership. These funds, less a reserve for Partnership operating expenses, were distributed to partners in May 1993. The Columbia and TriStar Distributors are not expected to fully recoup these Additional Payments and it is therefore currently expected that the Partnership will not receive any additional revenue with respect to the Columbia and Tri-Star Joint Venture's Unrecouped Films. The Partnership has benefited from an arrangement between each Joint Venture and its related Distributor under which up to an aggregate of $400,000 had been made available, without interest, to the Joint Ventures on behalf of the Partnership as an advance against payments that would otherwise be made by the Distributors to the Joint Ventures at a later date. The Partnership has received the entire $400,000 available under these arrangements. In October 1992, each of the Distributors for the respective Joint Ventures modified the terms of the recoupment of the Advances to provide that the Distributor would be entitled to retain an amount equal to the Advances from any Additional Payments otherwise payable to the Joint Ventures on behalf of the Partnership. Prior to this modification, the Partnership was restricted in the amount of cash it could distribute to its partners and would have been required to repay these Advances in 1992. This modification permitted the Partnership to defer this repayment and to make distributions in excess of $100 per limited partnership unit during 1995, 1994 and 1993 without first repaying these Advances. As of December 31, 1994, the $400,000 Advance previously received by the Partnership from the Columbia and TriStar Distributors had been repaid. The Partnership has begun evaluating the value of its interest in the film assets for the purpose of possibly selling that interest and liquidating the Partnership. The General Partner presently anticipates that the Partnership may be liquidated by late 1996, or early 1997. However, cash distributions as a result of the liquidation may be made to the partners to the extent, and only to the extent, the proceeds from the sale of the Partnership's interest in the film assets in connection with the liquidation are in excess of the Distributors' entitlement to the recoupment described below net of a reserve for the Partnership's operating expenses. See "Additional Payments." Since the Partnership's obligations to make contributions to the Joint Ventures for the production of, and acquisition of interests in, films have been satisfied, all revenue received by the Partnership (for other than Unrecouped Films) is used to pay operating expenses of the Partnership and to make cash distributions to partners. The Partnership does not anticipate significant future revenues and accordingly, the Partnership does not currently anticipate making cash distributions to partners on a quarterly basis. However, the Partnership may make future distributions if it realizes proceeds from its interest in films other than Unrecouped Films. The most recent cash distribution by the Partnership was made in November 1995. 2. Results of Operations. The Partnership's operating results are primarily dependent upon the operating results of the Joint Ventures and are significantly impacted by the Joint Ventures' policies. The performance of each film is based upon the amount expended for production and other costs associated with a film and the revenue generated by a film. The amount and timing of revenue generated by each film is dependent upon the degree of acceptance by the consumer public and the particular ancillary market in which the film is then being exhibited. Amounts contributed toward each film are compared periodically to the expected total revenue to be generated for that film, and write-downs may occur to the extent the amounts invested exceed the expected total revenue for that film. Additionally, each Joint Venture may record income with respect to Additional Payments, to the extent available, which may allow it to recover its investment in films. For the year ended December 31, 1995, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $316,000, due primarily to the profitable results of certain films. The Tri-Star Joint Venture had a net profit of which the Partnership's share was approximately $22,000, due primarily to the profitable results of certain films. In addition, the Partnership earned approximately $87,000 of interest income from short term investments and incurred approximately $457,000 in expenses from operations, resulting in an overall net loss reported by the Partnership of approximately $32,000. For the year ended December 31, 1994, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $250,000, due primarily to the profitable results of certain films offset, in part, by expenses related to foreign exchange losses. The Tri-Star Joint Venture had a net loss; however, the Partnership reported a net profit from that Joint Venture of approximately $62,000, due primarily to the profitable results of one film and interest income related to the accrual of Additional Payments offset, in part, by expenses related to foreign exchange losses. In addition, the Partnership earned approximately $119,000 of interest income from short-term investments and incurred approximately $448,000 in expenses from operations, resulting in an overall net loss reported by the Partnership of approximately $17,000. For the year ended December 31, 1993, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $504,000, due primarily to the profitable results of certain films, interest income related to the accrual of Additional Payments and payments received with respect to the resolution of several outstanding issues with the Distributor. The Tri-Star Joint Venture had a net profit of which the Partnership's share was approximately $1,771,000, due primarily to the accrual of Additional Payments and related interest income and the profitable results of certain films. In addition, the Partnership earned approximately $40,000 of interest income from shortterm investments and incurred approximately $526,000 in expenses from operations, resulting in an overall net profit reported by the Partnership of approximately $1,789,000. The decrease in interest income for the year ended December 31, 1995 as compared with the prior year is due primarily to less funds available for short-term investments during 1995. The increase in interest income for the year ended December 31, 1994 as compared with the prior year is due primarily to the availability of more funds for short-term investments during 1994. The increase in the Partnership's total expenses for the year ended December 31, 1995 as compared with the prior is due primarily to an increase in Other Expenses. The increase in Other Expenses is attributable to an increase in professional fees related to film audits. The decrease in the Partnership's total expenses for the year ended December 31, 1994 as compared with the prior year is due primarily to a decrease in Other Expenses. The decrease in Other Expenses is attributable to a decrease in professional fees related to film audits. The Partnership does not believe that the impact of inflation on the results of its operations has been material. Item 8. Financial Statements and Supplementary Data. See the financial statements set forth in Item 14 of this annual report. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III. Item 10. Directors and Executive Officers of the Partnership. The General Partner of the partnership is The Delphi Company, a New York general partnership originally formed in December 1984 by Lewis J. Korman, Richard M. Mason, and two other individuals. In January 1987, ML Film Entertainment Inc. ("ML Film"), a Delaware corporation, and a wholly-owned subsidiary of ML Leasing Equipment Corp. (which is an indirect wholly-owned subsidiary of Merrill Lynch & Co. Inc., and the successor in interest to Merrill Lynch Leasing Inc. and Merlease Leasing Corp.) and an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), was admitted as a partner in the General Partner and replaced Mr. Korman as managing partner of the General Partner (the "Managing Partner"). Set forth below is certain information regarding the management of the General Partner. ML Film. The executive officers and directors of ML Film are: Kevin K. Albert . . . . . . . .President, Director Robert F. Aufenanger . . . Executive Vice President, Director Steven N. Baumgarten . . .Vice President, Director Michael E. Lurie . . . . . . . Vice President, Director Diane T. Herte. . . . . . . . . Treasurer Kevin K. Albert, 43, a Managing Director of Merrill Lynch Investment Banking Group ("ML Investment Banking"), joined Merrill Lynch in 1981. Mr. Albert works in the Equity Private Placement Group and is involved in structuring and placing a diversified array of private equity financings including common stock, preferred stock, limited partnership interests and other equity related securities. Mr. Albert is also a director of ML Media Management Inc. ("ML Media"), an affiliate of ML Film and a joint venturer of Media Management Partners, the general partner of ML Media Partners, L.P.; a director of ML Opportunity Management Inc. ("ML Opportunity"), an affiliate of ML Film and a joint venturer in Media Opportunity Management Partners, the general partner of ML Media Opportunity Partners, L.P.; a director of ML Mezzanine II Inc. ("ML Mezzanine II"), an affiliate of ML Film and the general partner of the managing general partner of ML Lee Acquisition Fund II, L.P. and ML Lee Acquisition Fund (Retirement Accounts) II, L.P.; a director of ML Mezzanine Inc. ("ML Mezzanine"), an affiliate of ML Film and the general partner of the managing general partner of ML Lee Acquisition Fund, L.P.; a director of Merrill Lynch Venture Capital Inc. ("ML Venture"), an affiliate of ML Film and the general partner of the Managing General Partner of ML Venture Partners I, L.P. ("Venture I"), ML Venture Partners II, L.P. ("Venture II"), and ML Oklahoma Venture Partners Limited Partnership ("Oklahoma"); and a director of Merrill Lynch R&D Management Inc. ("ML R&D"), an affiliate of ML Film and the general partner of the Managing General Partner of ML Technology Ventures, L.P. Mr. Albert also serves as an independent general partner of Venture I and Venture II. Robert F. Aufenanger, 42, a Vice President of Merrill & Co. Corporate Credit and a Director of the Partnership Management Department, joined Merrill Lynch in 1980. Mr. Aufenanger is responsible for the ongoing management of the operations of the equipment and project related limited partnerships for which affiliates of ML Film serve as general partners. Mr. Aufenanger is also a director of ML Media, ML Opportunity, ML Venture, ML R&D, ML Mezzanine, and ML Mezanine II. Steven N. Baumgarten, 40, a Vice President of Merrill Lynch & Co. Corporate Credit joined Merrill Lynch in 1986. Mr. Baumgarten shares responsibility for the ongoing management of the operations of the equipment and project related limited partnerships for which subsidiaries of ML Leasing Equipment Corp., an affiliate of Merrill Lynch, are general partners. Michael E. Lurie, 52, a First Vice President of Merrill Lynch & Co. Corporate Credit and the Director of the Asset Recovery Management Department, joined Merrill Lynch in 1970. Prior to his present position, Mr. Lurie was the Director of Debt and Equity Markets Credit responsible for the global allocation of credit limits and the approval and structuring of specific transactions relating to debt and equity products. He also served as Chairman of the Merrill Lynch International Bank Credit Committee. Mr. Lurie is also a director of ML Media, ML Opportunity, ML Venture and ML R&D. Diane T. Herte, 35, an Assistant Vice President of Merrill Lynch & Co., Corporate Credit since 1992, joined Merrill Lynch in 1984. Ms. Herte's responsibilities include controllership and financial management functions for certain partnerships for which subsidiaries of ML Leasing Equipment Corp., an affiliate of Merrill Lynch, are general partners. Mr. Aufenanger is an executive officer of Mid Miami Diagnostics Inc. ("Mid-Miami Inc."). On October 28, 1994 both Mid-Miami Inc. and Mid-Miami Diagnostics, L.P. filed voluntary petitions for protection from creditors under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. Merrill Lynch was a co-managing underwriter of the initial public offering of Sony Pictures Entertainment Inc. (then known as "Tri-Star Pictures, Inc.") securities and of several subsequent public offerings of additional SPE securities. In addition, an affiliate of the Managing Partner serves as a manager for certain film financing transactions conducted on behalf of SPE in Japan. Therefore, ML Film and its affiliates could have interests that may conflict with those of the Partnership. Merrill Lynch, or an affiliate, has served as a selling agent for the public offerings of units in each of the Delphi Partnerships. Operational and Financial Services. To assist it in the performance of its duties, the General Partner has engaged Magera, subject to the direction and supervision of the General Partner, to provide operational and financial services which are provided at no additional cost to the Partnership for each year for which there is a management fee. Magera is owned by Richard M. Mason and Aaron German. Mr. Mason, a partner of the non-managing partner of the General Partner and the President of Magera, and Mr. German, the Executive Vice President of Magera, also previously acted as consultants to SPE. Magera also provides operational and financial services to the general partners of other private and public limited partnerships, including the other Delphi Partnerships, and serves as a consultant to others engaged in the entertainment industry. Item 11. Executive Compensation. The General Partner was paid a management fee of $400,000 for 1995. The General Partner is responsible for payments to all personnel employed by it, office and travel expenses, and the preparation and mailing of reports to partners and other matters relating to the administration of the Partnership. The General Partner does not, however, bear the expense of professional fees rendered on behalf of the Partnership, such as legal fees and fees to certified public accountants, which are paid directly by the Partnership. For years subsequent to 1995, there is no fixed management fee, but the General Partner will be reimbursed for out-of- pocket expenses with respect to administering the Partnership and reporting to partners. In that regard, the General Partner, on behalf of the Partnership, has retained Magera to provide those services to the Partnership for 1996. Until limited partners have received total cash distributions equal to their capital contributions (the "Capital Return"), they will receive 99% of, and the General Partner will receive 1% of, all cash distributions. The General Partner, in addition to receiving distributions in respect of the 1% interest for which it has paid, will be entitled to receive distributions in amounts equal to 20% of all cash distributions made after Capital Return. The payment to the General Partner of one-third of these additional amounts with respect to the 20% interest will be deferred until the limited partners have received total cash distributions equal to l50% of Capital Return and the amounts deferred will be payable from the next cash distributed after l50% of Capital Return is reached. If l50% of Capital Return is not reached, the General Partner will not receive any deferred amount. The foregoing describes the provisions of the partnership agreement concerning the General Partner's right to share in cash distributions, and is not intended to suggest that any particular level of cash distributions will be reached. Prior to reaching Capital Return, income will be allocated 99% to the limited partners and l% to the General Partner. After Capital Return is reached, allocations of income will be based on the aggregate prior allocations of income and losses, the aggregate prior cash distributions and cash available for distribution. Item 12. Security Ownership of Certain Beneficial Owners and Management To the best of the knowledge of the Partnership, no person beneficially owns in excess of 5% of the limited partnership units of the Partnership. To the best of the knowledge of the Managing Partner, as of March 1, 1996, no person is the beneficial owner of 5% or more of the outstanding common stock of Merrill Lynch. Item 13. Certain Relationships and Related Transactions. The Partnership's operations relating to the ownership and exploitation of films involve Columbia or TriStar. See Item 1 "Business." The General Partner is entitled to management fees and to a portion of cash distributions to partners. The General Partner of the Partnership is affiliated with the general partners of other Delphi Partnerships all of which are limited partnerships similar to the Partnership. PART IV. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)(1) Financial Statements: Delphi Film Associates IV Independent Auditors' Report Balance Sheets at December 31, 1995 and 1994 Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 Statements of Cash Flows for the Years Ended December 31, l995, 1994 and 1993 Statements of Changes in Partners' Capital for the Years Ended December 31, 1995, 1994 and 1993 Notes to Financial Statements Columbia- Delphi IV Productions Independent Auditors' Report Balance Sheets at December 31, 1995 and 1994 Statements of Operations for the Years ended December 31, 1995, 1994 and 1993 Statements of Cash Flows for the Years Ended December 31, l995, 1994 and 1993 Statements of Venturers' Capital for the Years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements Tri-Star- Delphi IV Productions Independent Auditors' Report Balance Sheets at December 31, l995 and 1994 Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 Statements of Cash Flows for the Years Ended December 31, l995 1994 and 1993 Statements of Venturers' Capital for the Years Ended December 31, 1995, 1994 and 1993 Notes to Financial Statements (a)(2) Financial Statement Schedules: No financial statement schedules have been filed as part of this report as none are required.
(a)(3) Exhibits Exhibit No. Amended Agreement of Limited Partnership (1) 4.l(a) Amendment to the Amended Agreement of Limited Partnership dated as of December 26, 1986 (2) 4.1(b) Joint Venture Agreements (1) 10.1 Product Origination Agreements (1) l0.2 Distribution Agreements (1) l0.4(a) Amendment to the Columbia Distribution Agreement dated May 14, 1987 (3) 10.4(b) Amendment to the Tri-Star Distribution Agreement dated June 9, 1987 (3) 10.4(c) Amendment to the Columbia Distribution Agreement dated as of October 14, 1987 (4) 10.4(d) Amendment to the Tri-Star Distribution Agreement dated as of October 14, 1987 (4) 10.4(e) Financial Data Schedule 27
(1) Incorporated by reference to the Partnership's registration statement No. 2-96426, as amended, on file with the Securities and Exchange Commission. (2) Incorporated by reference to the Partnership's Form 10-K for the year ended December 31, 1986 on file with the Securities and Exchange Commission. (3) Incorporated by reference to the Partnership's Form 10-Q for the quarter ended June 30, 1987 on file with the Securities and Exchange Commission. (4) Incorporated by reference to the Partnership's Form 10-Q for the quarter ended September 30, 1987 on file with the Securities and Exchange Commission. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the Partnership's fiscal year ended December 31, 1995. (c) Exhibits. The Exhibits required by Item 601 of Regulation S-K are submitted as a separate section following the Partnership's financial statements. (d) Financial Statement Schedules. No financial statement schedules have been filed as part of this report as none are required. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: March 26 , 1996 DELPHI FILM ASSOCIATES IV By: THE DELPHI COMPANY General Partner By: ML Film Entertainment Inc., Managing Partner /s/ Kevin K. Albert (Kevin K. Albert) President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date /s/ Kevin K. Albert Director and President of March 26, 1996 (Kevin K. Albert) the Managing Partner of the General Partner (principal executive officer of the Registrant) /s/ Robert F. Aufenanger Director and Executive Vice March 26, 1996 (Robert F. Aufenanger) President of the Managing Partner of the General Partner /s/ Steven N. Baumgarten Director and Vice President March 26, 1996 (Steven N. Baumgarten) of the Managing Partner of the General Partner Director and Vice President March 26, 1996 (Michael E. Lurie) of the Managing Partner of the General Partner /s/ Diane T. Herte Treasurer of the March 26, 1996 (Diane T. Herte) Managing Partner of the General Partner (principal financial officer and principal accounting officer of the Registrant) EXHIBIT INDEX Page Reference in Sequentially Numbered Copy 4.1(a) Amended Agreement of Limited Partnership* 4.1(b) Amendment to the Amended Agreement or Limited Partnership dated as of December 26, 1986* l0.l Joint Venture Agreements* l0.2 Product Origination Agreements* l0.4(a) Distribution Agreements* 10.4(b) Amendment to the Columbia Distribution Agreement dated May 14, 1987* 10.4(c) Amendment to the Tri-Star Distribution Agreement dated June 9, 1987* 10.4(d) Amendment to the Columbia Distribution Agreement dated as of October 14, 1987* 10.4(e) Amendment to the Tri-Star Distribution Agreement dated as of October 14, 1987* 27 Financial Data Schedule *Incorporated by reference INDEPENDENT AUDITORS' REPORT The Partners Delphi Film Associates IV: We have audited the accompanying balance sheets of Delphi Film Associates IV (a New York Limited Partnership) as of December 31, 1995 and 1994, and the related statements of operations, cash flows and changes in partners' capital for each of the years in the three-year period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Delphi Film Associates IV (a New York Limited Partnership) at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP New York, New York March 25, 1996 DELPHI FILM ASSOCIATES IV (A New York Limited Partnership) BALANCE SHEETS (000's Omitted)
December 31, 1995 1994 ASSETS Cash $ $ 185 473 Short-Term Investments (Note 2) 1,227 1,369 Receivable from Columbia-Delphi IV Productions, net (Notes 4 &5) 623 584 Receivable from Tri-Star-Delphi IV Productions, net (Notes 4 & 777 817 5) Interest in Motion Picture Venture-Columbia- Delphi IV Productions (Notes 13 25 2 & 4) Interest in Motion Picture Venture-Tri-Star- Delphi IV Productions (Notes 2 & 4) -- 35 Total $ $ Assets 2,825 3,303 LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accrued Expenses and Accounts $ $ Payable 68 110 Total Liabilities 68 110 Partners' Capital (Note 1): General Partner 73 77 Limited Partners 2,684 3,116 Total Partners' Capital 2,757 3,193 Total Liabilities and Partners' $ $ Capital 2,825 3,303 See accompanying notes to the financial statements.
DELPHI FILM ASSOCIATES IV (A New York Limited Partnership) STATEMENTS OF OPERATIONS (000's Omitted, except net (loss) profit per unit)
For the Year Ended December 31, 1995 1994 1993 Interest Income $ $ $ 87 119 40 Expenses: Management Fee 400 400 400 Other Expenses 57 48 126 457 448 526 Loss before Share of Profit in Motion Picture (370) (329) (486) Ventures Share of Profit in Motion Picture Venture--Columbia- Delphi IV Productions (Notes 2 316 250 504 & 4) Share of Profit in Motion Picture Venture--Tri-Star- Delphi IV Productions (Notes 2 & 4) 22 62 1,771 Net (Loss) Profit $ $ $ (32) (17) 1,789 Net (Loss) Profit Per Unit of Limited Partnership Interest ( 8,000 Units) $ $ $ (4) (2) 221 See accompanying notes to the financial statements.
DELPHI FILM ASSOCIATES IV (A New York Limited Partnership) STATEMENTS OF CASH FLOWS (000's Omitted)
For the Year Ended December 31, 1995 1994 1993 Cash Flow From Operating Activities: Net (Loss) Profit $ $ $ (32) (17) 1,789 Adjustments to reconcile Net (Loss) Profit to net cash (used) provided by operating activities: Share of Profit in Motion (338) (312) (2,275) Picture Ventures Distributions from Joint 385 341 2,429 Ventures Changes in Assets and Liabilities: Decrease in Receivables from Joint Ventures, net 1 7,864 9,267 (Decrease) Increase in Accrued Expenses and Accounts Payable (42) 27 (7) Net Cash (Used) Provided by Operating Activities (26) 7,903 11,203 Cash Flow From Investing Activities: Purchases of Short-Term (4,472) (35,792) (12,475) Investments Redemptions of Short-Term Investments 4,614 34,967 12,568 Net Cash Provided (Used) by Investing Activities 142 (825) 93 Cash Flow From Financing Activities: Distributions to Partners (404) (7,071) (11,313) Net Cash Used by Financing Activities (404) (7,071) (11,313) (Decrease) Increase In Cash (288) 7 (17) Cash at beginning of year 473 466 483 Cash at end of year $ $ $ 185 473 466 See accompanying notes to the financial statements.
DELPHI FILM ASSOCIATES IV (A New York Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 3l, 1995, 1994 AND 1993 (000's Omitted, except distributions per unit)
General Limited Total Balance January 1, 1993 $ $ $ 243 19,562 19,805 Net Profit for the Year Ended December 31, 1993 18 1,771 1,789 Distributions to Partners ($1,400 per unit) (113) (11,200) (11,313) Balance December 31, 1993 148 10,133 10,281 Net Profit for the Year Ended December 31, 1994 -- (17) (17) Distributions to Partners ($875 per unit) (71) (7,000) (7,071) Balance December 31, 1994 77 3,116 3,193 Net Loss for the Year Ended December 31, 1995 -- (32) (32) Distributions to Partners ($50 per unit) (4) (400) (404) Balance December 31, 1995 $ $ $ 73 2,684 2,757 See accompanying notes to the financial statements.
DELPHI FILM ASSOCIATES IV (A New York Limited Partnership) NOTES TO FINANCIAL STATEMENTS 1. General Delphi Film Associates IV (the "Partnership") is a limited partnership which was formed to participate in the production, acquisition, ownership, and exploitation of feature length motion pictures through Columbia-Delphi IV Productions, a joint venture with Columbia Pictures Industries, Inc. (the "Columbia Joint Venture"), and through Tri-Star-Delphi IV Productions, a joint venture with TriStar Pictures, Inc. (formerly Tri-Star Pictures, Inc.) ("TriStar") (the "Tri-Star Joint Venture") (the "Joint Ventures"). The Partnership was organized under the law of the State of New York in December 1984. The Delphi Company, a New York general partnership (the "General Partner"), is the general partner of the Partnership. The General Partner, which has the full responsibility for the management of the Partnership's business, received a fee for its management services of $400,000 in each of the years l995, 1994 and 1993. A public offering (the "Offering") of limited partnership interests was completed on June 27, l985. The Partnership had no substantial operations until June l985 when the Offering was completed. A total of 8,000 units at $5,000 per unit were sold. The General Partner contributed $404,000, an amount equal to l% of the total capital contributed to the Partnership. Profits and losses have been allocated l% to the General Partner and 99% to the Limited Partners. The principal business of the Partnership is the production, acquisition, ownership, and exploitation of motion pictures through its participation in the Joint Ventures. Accordingly, the Partnership's operating results are in large part dependent upon the operating results of the Joint Ventures, and are significantly impacted by the Joint Ventures' policies (see Note 4). 2. Summary of Significant Accounting Policies (a) Short-Term Investments Short-Term Investments consist solely of U.S. Government Securities which are stated at cost plus accrued interest, which approximates market value. (b) Accounting for Participation in Joint Ventures The Partnership records its investment in the Joint Ventures under the equity method of accounting. Columbia agreed to compensate the Partnership for the unavailability to the Columbia Joint Venture of investment tax credits with respect to one of the Columbia films by paying $288,000 to the Partnership in l986, an amount which is equal to approximately twice the Partnership's proportionate share of the investment tax credit relating to that film. This payment had been applied as a reduction of the Partnership's interest in the Columbia Joint Venture as of December 31, 1991. During the year ended December 31, 1992, the Partnership accrued distributions from the Columbia Joint Venture in excess of its interest in Motion Picture Venture. As a result, the Partnership included an additional $288,000 in its share of profit from the Columbia Joint Venture for the year ended December 31, 1992. (c) Accounting for Income Taxes No provision for income taxes has been made as Delphi Film Associates IV is treated as a partnership for income tax purposes, with all income tax consequences flowing directly to its partners. Effective January l, l993, the Partnership adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As of December 31, 1995 and 1994, the reported amounts of the Partnership's assets less liabilities were less than the tax bases by approximately $56,000 and $101,000, respectively. The adoption of the Statement had no impact on the Partnership's financial statements. 3. Supplemental Disclosure of Cash Flow Information No amounts for interest were paid in l995, l994 and l993. 4. Transactions with Joint Ventures (a) Interests in Motion Pictures The Partnership, through each Joint Venture, generally has interests ranging from 5% to 25% in (and has borne a corresponding percentage of the cost of) motion pictures in which a Joint Venture has an interest ("Joint Venture Films"). In addition, the Partnership, through the Tri- Star Joint Venture, has a participation interest in two films (the "Additional Films"). The Partnership made no capital contributions for its interest in these two films, and payments due, if any, with respect to these interests will be made to the Partnership in June l996, subject to being paid earlier under certain circumstances. As of December 31, 1995, the Columbia Joint Venture had twelve films in release for which the Partnership's cash contributions (including interest) aggregated $23,117,000, and the Tri-Star Joint Venture had fifteen films (including the Additional Films) in release for which the Partnership's cash contributions (including interest) aggregated $22,701,000. (b) Current Operations As of December 31, l995, all twenty-seven films in which the Partnership has an interest had been released. Based on the performance of the films during the year ended December 31, 1995, and after deducting the net operating expenses of the Partnership, the Partnership is reporting a net loss of $32,000 for the year ended December 31, 1995. (c) Transactions with Columbia and TriStar The films in which the Columbia Joint Venture has an interest are distributed pursuant to a distribution agreement between Columbia Pictures, a division of Columbia Pictures Industries, Inc. ("Columbia") (a "Distributor"), and the Columbia Joint Venture. The films in which the Tri- Star Joint Venture has an interest are distributed pursuant to a distribution agreement between TriStar Pictures, Inc. (a "Distributor") and the Tri-Star Joint Venture (see Note 6). The Distributors are entitled to receive a fee of l7.5% of substantially all gross receipts from each film, except that a Distributor's entitlement to this distribution fee is deferred until its Joint Venture has received from the distribution of a film an amount equal to that spent by the Joint Venture to produce or acquire an interest in the film, other than amounts spent for payments in the nature of interest. In light of the results of the Joint Venture films, net revenue as of December 31, 1995, 1994 and 1993 has been computed without deducting a distribution fee to the Distributor with the exception of five films in l995, l994 and l993 for which a portion of the fee was deducted and two films in l995, l994 and l993 for which the entire distribution fee has been deducted. (d) Joint Venture Revenue Recognition Each Joint Venture recognizes net revenues from the Distributor on an accrual basis. Net revenues consist of: (a) the portion of net proceeds (gross receipts less a distribution fee, unless deferred, and other distribution and releasing costs) or, if greater, the portion of gross receipts payable to the Joint Ventures under the distribution agreements, plus, (b) accrued gross receipts (not in excess of the Columbia and Tri-Star Joint Venture's advertising expenditures plus an amount intended to approximate the cost of funds incurred by the Partnership in connection with the Columbia and the Tri-Star Joint Ventures' advertising obligations). However, certain advances received by the Distributor which are includable in gross receipts under the distribution agreements are not reflected in the calculation of net revenues until those advances are earned. (e) Joint Venture Amortization Policies Advertising expenditures which benefit future periods were capitalized as incurred by the Joint Ventures. Advertising expenditures and unamortized production costs are amortized under the individual film forecast method based upon net revenues recognized in proportion to the Joint Venture's estimate of ultimate net revenues to be received without regard to any Additional Payments (see Note 6). Unamortized production costs are compared with net realizable value on a film by film basis, and losses are recognized to the extent of any excess of costs over net realizable value. Unamortized advertising expenditures are compared with net realizable value for all films in the aggregate for each Joint Venture and losses are recognized to the extent of any excess of expenditures over net realizable value. (f) Receivable from Columbia Joint Venture This asset represents the amounts receivable by the Partnership from the Columbia Joint Venture. The total receivable in l995 and l994 of $623,000 and $584,000, respectively, consists of amounts accrued with respect to net proceeds and gross receipts payments. (g) Receivable from Tri-Star Joint Venture, net This asset represents the net amounts receivable by the Partnership from the Tri-Star Joint Venture. The total receivable in l995 of $777,000 consists of $385,000 accrued with respect to net proceeds and gross receipts payments and $392,000 accrued as additional payments. The total receivable in l994 of $817,000 consisted of $423,000 accrued with respect to net proceeds and gross receipts payments and $394,000 accrued as additional payments. 5. Advances The Partnership benefited from an arrangement between each Joint Venture and its related Distributor under which an aggregate of $400,000 (the "Advances") had been made available, without interest, to the Joint Ventures, for the benefit of the Partnership, as an advance against payments that would otherwise be made to the Joint Ventures at a later date. During 1990, the Partnership had received the entire $400,000 available under these arrangements. In October l992, the Distributors for the respective Joint Ventures modified the terms of the recoupment of the Advances to provide that the Distributors will be entitled to retain an amount equal to the Advances from any Additional Payments (See Note 6) otherwise payable to the Joint Ventures on behalf of the Partnership. Prior to this modification, the Partnership was restricted in the amount of cash it could distribute to its partners and would have been required to repay these Advances in l992. This modification permitted the Partnership to defer this repayment and to make distributions in excess of $l00 per limited partnership unit during l994, 1993 and 1992 without first repaying these Advances. As of December 31, 1994, each $200,000 Advance previously received by the Partnership from each of Columbia and TriStar Distributors had been repaid. 6. Additional Payments The terms of the distribution agreements between each Joint Venture and its respective Distributor provided that the Partnership would be entitled to receive, through the Joint Venture, a payment (an "Additional Payment") from that Joint Venture's Distributor for each film (an "Unrecouped Film"), if by March l993, in the case of the Columbia Joint Venture, and if by February l994, in the case of the Tri- Star Joint Venture, for which the Joint Venture had not received from the distribution of that film (or its sale) an amount equal to the amount spent by the Joint Venture to produce or acquire an interest in that film, other than amounts spent for payments in the nature of interest ("Cost Return"). Each Additional Payment was in the amount necessary for the Partnership to be repaid (without interest) its unrecouped contributions to the Joint Venture with respect to the production or acquisition of an Unrecouped Film (other than contributions for payments in the nature of interest), but not more than the amount specified below. The Additional Payment was first payable only to the extent of the distribution fees received by the Distributor from the distribution of all of its Joint Venture's films. The Additional Payments based on distribution fees were allocated by the Joint Venture first to the Partnership to the extent necessary for the Partnership to recoup its investment in such film; any excess for such film was allocated to the respective co-venturer of the Partnership in a Joint Venture ("Studio Venturer") until Cost Return. If these distribution fees were insufficient to enable a Distributor to make the Additional Payments with respect to all of its Joint Venture's Unrecouped Films, then gross receipts and net proceeds of each remaining Unrecouped Film distributed by that Distributor were recalculated by including as gross receipts the minimum license fees under its license agreement with Home Box Office, Inc. and certain minimum amounts in respect of video cassette and video disc exploitation with respect to that Unrecouped Film. Each Distributor then made an Additional Payment to the Partnership, through its Joint Venture, with respect to each Unrecouped Film to the extent of the Partnership's share of additional gross receipts or net proceeds payable as a result of the recalculation but only up to the amount of the unrecouped contributions (other than contributions for payments in the nature of interest) by the Partnership for the production or acquisition of that Unrecouped Film. Each such Additional Payment made on the basis of such recalculation was allocated between the Partnership and the respective Studio Venturer in proportion to their respective interest in the applicable Unrecouped Film. The Distribution Agreements provided that each Distributor would be entitled to recoup the Additional Payments made to the Partnership in respect of each Unrecouped Film, with an amount in the nature of interest calculated at ll0% of the prime rate from time to time, from the Partnership's share of subsequent gross receipts or net proceeds of that Unrecouped Film and from the proceeds of any sale of the Partnership's interest in that Unrecouped Film or amounts allocable to that Unrecouped Film upon a sale of the Partnership's interest in the Joint Venture. In no event will the Distributor be able to recoup amounts from the proceeds of any sale from a film that is not an Unrecouped Film. In calculating the amount of distribution fees available for the Additional Payments, no distribution fee will be deemed received by a Distributor (and therefore no distribution fee is deemed available for the Additional Payment) from (i) a film with respect to which the most recent payment was based on gross receipts, (ii) a film that did not reach Cost Return or (iii) an Additional Film. Based on the anticipated performance of one film in release at December 31, l995 and 1994, $392,000 and $394,000, respectively, were accrued by the Tri-Star Joint Venture as an Additional Payment allocable to the Partnership. The Additional Payments were due and payable to the Partnership, net of the Advances through the respective Joint Ventures, promptly after the dates set forth above following certain certifications. The Partnership received approximately $7,886,000 in February l994 representing its share of the TriStar Joint Venture's Additional Payment, relating to all but one film net of the $200,000 advances previously received by the Partnership and approximately $l0,911,000 in May l993 representing its share of the Columbia Joint Venture's Additional Payment net of the $200,000 advance previously received by the Partnership. The Additional Payments from the Distributors are expected to enable the Partnership, through each Joint Venture, to achieve Cost Return for each Unrecouped Film and are not intended to enable the Partnership to recoup any amounts paid by the Partnership for management fees or other expenses of the Partnership. Until the recoupment as referred to is complete, the Partnership will not receive any additional revenue from the distribution of any Unrecouped Film. The Columbia and TriStar Distributors are not expected to fully recoup these Additional Payments and it is therefore currently expected that the Partnership will not receive any additional revenue with respect to the Columbia and Tri-Star Joint Venture's Unrecouped Films. The Partnership has begun evaluating the value of its interest in the film assets for the purpose of possibly selling that interest and liquidating the Partnership. The General Partner presently anticipates that the Partnership may be liquidated by late 1996, or early 1997. However, cash distributions as a result of the liquidation may be made to the partners to the extent, and only to the extent, the proceeds from the sale of the Partnership's interest in the film assets in connection with the liquidation are in excess of the Distributors' entitlement to the recoupment described below net of a reserve for the Partnership's operating expenses. REPORT OF INDEPENDENT ACCOUNTANTS Venturers Columbia - Delphi IV Productions In our opinion, the accompanying balance sheets and the related statements of operations, of cash flows and of venturers' capital present fairly, in all material respects, the financial position of Columbia - Delphi IV Productions at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Venture's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Century City, California March 22, l996 COLUMBIA - DELPHI IV PRODUCTIONS (A Joint Venture) BALANCE SHEETS (000's Omitted)
December 31, 1995 1994 ASSETS Motion Picture Production and Advertising Costs, net of accumulated amortization of $164,104 and $163,408, $ $ respectively 82 778 (Notes 1, 2 & 5) Motion Picture Costs Recoverable from Additional Payments (Notes -- 1,482 3, 5 & 6) Receivable from Columbia Pictures (Distributor) (Note 6) 6,278 5,049 Total $ 6,360 $ Assets 7,309 LIABILITIES AND VENTURERS' CAPITAL Liabilities: Payable to Columbia Pictures Industries, Inc. (Note 6) $ 5,655 $ 5,947 Payable to Delphi Film Associates IV (Note 6) 623 584 Total Liabilities 6,278 6,531 Venturers' Capital (Notes 1 & 3): Columbia Pictures Industries, 69 753 Inc. Delphi Film Associates IV 13 25 Total Venturers' Capital 82 778 Total Liabilities and Venturers' $ $ Capital 6,360 7,309 See accompanying notes to the financial statements.
COLUMBIA - DELPHI IV PRODUCTIONS (A Joint Venture) STATEMENTS OF OPERATIONS (000's Omitted)
For the Year Ended December 31, 1995 1994 1993 Net Revenues From Motion Picture Exploitation (Note $ $ $ 2) 3,021 3,055 3,133 Less: Amortization of Motion Picture Production and Advertising Costs (Notes 2 & 5) 696 652 559 Income from Operations 2,325 2,403 2,574 Additional Payment Accrual (Recapture) (Notes 3 -- 158 (443) & 5) Interest Income -- -- 1,428 Other (Expense) Income (Note 7) -- (146) 28 Net Income $ $ $ 2,325 2,415 3,587 See accompanying notes to the financial statements.
COLUMBIA - DELPHI IV PRODUCTIONS (A Joint Venture) STATEMENTS OF CASH FLOWS (000's Omitted) For the Year Ended December 31, 1995 1994 1993 Cash Flow From Operating Activities: Net Income $ $ $ 2,325 2,415 3,587 Adjustments to reconcile Net Income to net cash provided by operating activities: Amortization of Motion Picture Production and Advertising Costs 696 652 559 Accrued Distributions to 253 (237) 70,023 Venturers Changes in Assets and Liabilities: (Decrease) Increase in Payable to Columbia Pictures Industries, (292) 269 (59,120) Inc. Increase in Receivable from Columbia Pictures (Distributor) (1,229) (79) (458) Decrease in Investment in Motion Picture Production and -- -- 97 Advertising Costs Decrease (Increase) in Motion Picture Costs Recoverable from 1,482 (158) 70,481 Additional Payments Increase (Decrease) in Payable to Delphi Film Associates IV, net 39 (32) (10,703) Decrease in Advance from Columbia Pictures Industries, Inc. (Distributor) -- -- (200) Net Cash Provided by Operating Activities 3,274 2,830 74,266 Cash Flow from Financing Activities: Distributions to Venturers (3,274) (2,830) (74,266) Net Cash Used by Financing Activities (3,274) (2,830) (74,266) Net Change in Cash -- -- - -- Cash at beginning of year -- -- - -Cash at end of year $ $ $ -- -- - -- See accompanying notes to the financial statements.
COLUMBIA - DELPHI IV PRODUCTIONS (A Joint Venture) STATEMENTS OF VENTURERS' CAPITAL FOR THE YEARS ENDED DECEMBER 3l, 1995, 1994 AND 1993 (000's Omitted)
Columbia Delphi Pictures Film Total Industries, Associates Venturers' Inc. IV Capital Venturers' Capital as of $ $ $ January 1, 1993 1,973 113 2,086 Net Income for the Year Ended December 31, 1993 3,083 504 3,587 Accrued Distributions to Venturers (3,680) (563) (4,243) Venturers' Capital as of December 31, 1993 1,376 54 1,430 Net Income for the Year Ended December 31, 1994 2,165 250 2,415 Accrued Distributions to Venturers (2,788) (279) (3,067) Venturers' Capital as of December 31, 1994 753 25 778 Net Income for the Year Ended December 31, 1995 2,009 316 2,325 Accrued Distributions to Venturers (2,693) (328) (3,021) Venturers' Capital as of December 31, 1995 $ $ $ 69 13 82 See accompanying notes to the financial statements.
COLUMBIA - DELPHI IV PRODUCTIONS (A Joint Venture) NOTES TO FINANCIAL STATEMENTS 1. General Columbia-Delphi IV Productions (the "Joint Venture") is a joint venture between Columbia Pictures Industries, Inc. ("Columbia") and Delphi Film Associates IV, a New York limited partnership (the "Partnership") formed on April l8, l985 to engage in the business of producing, acquiring, owning and exploiting feature length motion pictures. Through the Joint Venture, Columbia has interests in ten films ranging from approximately 75-94% and the Partnership has interests ranging from approximately 6-25% in these same films and Columbia has a 65% interest and the Partnership has a 15% interest in one film in which Columbia-Delphi V Productions, a joint venture between Columbia and Delphi Film Associates V, a New York limited partnership ("Delphi V"), holds the remaining 20% interest (collectively the "Joint Venture Films"). Columbia and the Partnership were each responsible for these respective percentages of the production cost of the Joint Venture Films. In addition, the Joint Venture acquired a 10% interest in one film during 1986 which was previously l00% owned by Columbia- Delphi V Productions. This l0% interest was acquired from Columbia, which derived its ownership interest through Columbia-Delphi V Productions. The general partner of Delphi V is affiliated with the general partner of the Partnership. As of December 31, 1995, all twelve Joint Venture Films had been released (see Note 5). All of the Joint Venture's films are being distributed pursuant to a distribution agreement between Columbia Pictures (the "Distributor"), a division of Columbia, and the Joint Venture (see Note 2). The Joint Venture does not anticipate the production of, or acquisition of interests in, any additional films. The Partnership participates in a Joint Venture (the "Other Venture") with TriStar Pictures, Inc. (formerly Tri Star Pictures, Inc.) ("TriStar") similar to the Joint Venture. Sony Pictures Entertainment Inc., the parent company of Columbia and TriStar, is an indirect wholly-owned subsidiary of Sony Corporation. 2. Summary of Significant Accounting Policies Recognition of Revenue The Joint Venture recognizes net revenues from the Distributor on the accrual basis. Net revenues consist of: a) the portion of net proceeds (gross receipts less a distribution fee, unless deferred, and other distribution and releasing costs) or, if greater, the portion of gross receipts payable to the Joint Venture under the distribution agreement, plus b) accrued gross receipts (not in excess of the amount of the advertising and promotion charge paid by the Joint Venture plus an amount intended to approximate the cost of funds incurred by the Partnership in connection with the payment of that charge). However, certain advances received by the Distributor which are includable in gross receipts under the distribution agreement are not reflected in the calculation of net revenues until those advances are earned. The Joint Venture's advertising and promotion charge expenditures are recovered (subject to certain limitations) from gross receipts from all films in which the Joint Venture has an interest. Distribution Fee The Distributor is entitled to receive a 17.5% distribution fee on substantially all gross receipts in calculating the net proceeds to which the Joint Venture is entitled from the distribution of a film; however, the Distributor's entitlement to this distribution fee will be deferred until the Joint Venture has received from the distribution of that film an amount equal to the amount spent by the Joint Venture to produce or acquire an interest in the film, other than amounts spent for payments in the nature of interest ("Cost Return"). After Cost Return for a film, for purposes of determining any additional payments based on net proceeds to which the Joint Venture is entitled in respect of that film, the Distributor will be entitled to receive a distribution fee equal to 17.5% of substantially all gross receipts of the film including gross receipts prior to Cost Return. Net revenues accrued at December 31, 1995, 1994 and 1993 have been computed without deducting a distribution fee to the Distributor in light of the results of the Joint Venture Films released through those respective dates, with the exception of four films for which a portion of the distribution fees were deducted. Motion Picture Production and Advertising Costs Motion picture production costs include the direct costs of production plus an overhead charge equivalent to 12.5% of the direct production costs; these costs were capitalized as incurred by the Joint Venture. Payments by the Joint Venture in respect of the advertising and promotion charge payable to the Distributor were capitalized as incurred by the Joint Venture to the extent that those charges benefit future periods. These costs are amortized under the individual film forecast method based upon net revenues recognized in proportion to the Joint Venture's estimate of ultimate net revenues to be received. Unamortized production costs are compared with net realizable value on a film by film basis and unamortized advertising costs are compared with net realizable value in the aggregate; losses are recognized to the extent of any excess of costs over net realizable value. If losses are indicated for films, the Additional Payments described in Note 3, to the extent available, are accrued as Motion Picture Costs Recoverable from Additional Payments. 3. Additional Payments (See Note 5) The Joint Venture was entitled to a payment from the Distributor if the Joint Venture had not received net proceeds and gross receipts (excluding amounts paid to the Joint Venture for the recovery of advertising and promotion charge payments) at least equal to the amount spent by the Joint Venture for the production of films and the acquisition of interests in films (excluding amounts spent for payments in the nature of interest) (the "Expenditures") by March l993. Consequently, a payment of approximately $7l,000,000 was made in May l993 representing the amount available to be repaid to the Joint Venture, without interest, for its unrecouped Expenditures. The payment to the Joint Venture was allocated first to the Partnership, to the extent necessary for the Partnership to recoup (without interest) the amount of its contribution to the Joint Venture for the production or acquisition of the Unrecouped Films (other than contributions for payments in the nature of interest); any excess was then allocated to Columbia. As a result, the Partnership has recouped all Expenditures, Columbia is still unrecouped. After Columbia recoups the outstanding Expenditures, the Distributor will be entitled to recoup these payments, with an amount in the nature of interest, from the Joint Venture's share of subsequent net proceeds and gross receipts and from the proceeds of any subsequent sale of the Joint Venture's interest in films which generated Additional Payments. If the gross receipts from a film do not exceed the costs of distributing the film, or if the most recent payment to the Joint Venture with respect to the film is based on gross receipts, no amounts from the distribution of that film will be available for payment to the Joint Venture for this purpose. 4. Income Taxes No provision for income taxes is made in the Joint Venture's financial statements since the venturers treat the Joint Venture as a partnership for income tax purposes, with all income tax consequences flowing directly to the venturers. Effective January l, l993, the Partnership adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As of October 31, 1995 and 1994 (the Joint Venture's tax year end is October 31), the tax bases of the Joint Venture's assets less liabilities exceeded amounts reported in the financial statements at December 31, 1995 and l994 by approximately $5,660,000 and $4,998,000, respectively. Management estimates that the tax bases of the Joint Venture's assets and liabilities did not differ significantly between October 31 and December 31 in l995 and l994. The adoption of the Statement had no impact on the Joint Venture's financial statements. 5. Current Operations As of December 31, 1995, the Distributor had released all twelve films in which the Joint Venture has an interest. The Joint Venture was not expected to recoup its investment in eight of these films out of the proceeds from their distribution. However, as a result of the Additional Payments referred to below, the Partnership recouped its investment in these films. For the years ended December 31, 1995, 1994 and 1993, motion picture production and advertising costs were reduced by amortization of $696,000, $652,000 and $531,000, respectively. In addition, for the year ended December 31, 1993 these costs have been written down by an additional $28,000 to current net realizable value. 6. Receivables and Payables An analysis of the Joint Venture's receivables and payables is as follows: AT DECEMBER 31, l995 Receivable Payable Payable to from to the Distributor Columbia Partnership (000's omitted) Net Proceeds and Gross Receipts $ 6,278 $ 5,655 $ 623 AT DECEMBER 31, 1994 Receivable Payable Payable to from to the Distributor Columbia Partnership (000's omitted) Net Proceeds and Gross Receipts $ 5,049 $ 4,465 $ 584 Accrued Additional Payments 1,482 1,482 0 Total $ 6,531 $ 5,947 $ 584 7. Foreign Exchange Gains and Losses The distribution agreement between the Joint Venture and the Distributor provides that revenues earned in foreign currencies be valued as of the date that monies are remitted or are "freely remittable" to the United States. Other Expense for the year ended December 31, l994 of $146,000 represents the cumulative difference between the monies remitted in U.S. dollars and the value previously recorded based on the exchange rate at the time of revenue recognition in the applicable international territory. No such revenue valuation adjustment was necessary in 1995. REPORT OF INDEPENDENT ACCOUNTANTS Venturers TriStar - Delphi IV Productions In our opinion, the accompanying balance sheets and the related statements of operations, of cash flows and of venturers' capital present fairly, in all material respects, the financial position of TriStar - Delphi IV Productions at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Venture's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Century City, California March 22, l996 TRI-STAR-DELPHI IV PRODUCTIONS (A Joint Venture) BALANCE SHEETS (000's Omitted)
December 31, 1995 1994 ASSETS Motion Picture Production and Advertising Costs, net of accumulated amortization of $108,473 and $108,268, respectively (Notes 1, 2 & 5) $ $ 102 307 Motion Picture Costs Recoverable from Additional Payments,(Notes 3, 5 1,835 1,006 & 6) Receivable from TriStar Pictures, Inc. (Distributor) (Note 6) 1,083 1,958 Total $ $ Assets 3,020 3,271 LIABILITIES AND VENTURERS' CAPITAL Liabilities: Payable to TriStar Pictures, $ $ Inc. (Note 6) 2,141 2,147 Payable to Delphi Film Associates IV (Note 6) 777 817 Total Liabilities 2,918 2,964 Venturers' Capital (Notes 1 & 3): TriStar Pictures, Inc. 102 272 Delphi Film Associates IV -- 35 Total Venturers' Capital 102 307 Total Liabilities and Venturers' $ $ Capital 3,020 3,271 See accompanying notes to the financial statements.
TRI-STAR-DELPHI IV PRODUCTIONS (A Joint Venture) STATEMENTS OF OPERATIONS (000's Omitted)
For the Year Ended December 31, 1995 1994 1993 Net Revenues From Motion Picture Exploitation (Note $ $ $ 2) 547 1,318 516 Less: Amortization of Motion Picture Production and Advertising Costs (Notes 2 & 5) 205 277 41 Income from Operations 342 1,041 475 Additional Payments Accrual (Recapture) (Notes 3 5 (3,010 4,717 & 5) ) Interest Income -- 571 2,694 Other Expense (Note 7) -- (508) - -- Net Income (Loss) $ $(1,90 $ 347 6) 7,886 See accompanying notes to the financial statements.
TRI-STAR-DELPHI IV PRODUCTIONS (A Joint Venture) STATEMENTS OF CASH FLOWS (000's Omitted)
For the Year Ended December 31, 1995 1994 1993 Cash Flow From Operating Activities: Net Income (Loss) $ $ $ 347 (1,906) 7,886 Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities: Amortization of Motion Picture Production and Advertising Costs 205 277 41 Accrued Distributions to 46 25,236 (6,546) Venturers Changes in Assets and Liabilities: (Decrease) Increase in Payable to TriStar Pictures, Inc. (6) (17,204) 5,110 Decrease (Increase) in Receivable from TriStar Pictures, Inc. 875 (405) 865 (Distributor) (Increase) Decrease in Motion Picture Costs Recoverable from (829) 25,641 (7,411) Additional Payments (Decrease) Increase in Payable to Delphi Film Associates IV, net (40) (7,832) 1,436 Decrease in Advance from TriStar Pictures, Inc. (Distributor) -- (200) - -- Net Cash Provided by Operating Activities 598 23,607 1,381 Cash Flow from Financing Activities: Distributions to Venturers (598) (23,607) (1,381) Net Cash Used by Financing Activities (598) (23,607) (1,381) Net Change in Cash -- -- - -- Cash at beginning of year -- -- - -Cash at end of year $ $ $ -- -- - -- See accompanying notes to the financial statements.
TRI-STAR-DELPHI IV PRODUCTIONS (A Joint Venture) STATEMENTS OF VENTURERS' CAPITAL FOR THE YEARS ENDED DECEMBER 3l, 1995, 1994 AND 1993 (000's Omitted)
Delphi TriStar Film Total Pictures, Associates Venturers' Inc. IV Capital Venturers' Capital as of $ $ $ January 1, 1993 495 130 625 Net Income for the Year Ended December 31, 1993 6,115 1,771 7,886 Accrued Distributions to Venturers (6,061) (1,866) (7,927) Venturers' Capital as of December 31, 1993 549 35 584 Net (Loss) Income for the Year Ended December 31, 1994 (1,968) 62 (1,906) Accrued Distributions to Venturers 1,691 (62) 1,629 Venturers' Capital as of December 31, 1994 272 35 307 Net Income for the Year Ended December 31, 1995 325 22 347 Accrued Distributions to Venturers (495) (57) (552) Venturers' Capital as of December 31, 1995 $ $ $ 102 -- 102 See accompanying notes to the financial statements.
TRI-STAR-DELPHI IV PRODUCTIONS (A Joint Venture) NOTES TO FINANCIAL STATEMENTS 1. General Tri-Star-Delphi IV Productions (the "Joint Venture") is a joint venture between TriStar Pictures, Inc. (formerly TriStar Pictures, Inc.) ("TSPI") ("TriStar") and Delphi Film Associates IV, a New York limited partnership (the "Partnership") formed in April 1985 to engage in the business of producing, owning and exploiting feature length motion pictures. Through the Joint Venture, TSPI has interests ranging from approximately 5-62% and the Partnership has interests ranging from approximately 5-23% in twelve films (the "Joint Venture Films"). In addition, the Joint Venture acquired a l0% participation interest in one film during l987 which is l00% owned by Delphi VI (as defined below). This interest was derived from TSPI's interest in the film through Delphi VI. The Partnership's interest in this film was obtained in exchange for a portion of the Partnership's interest in two other films which were conveyed to TSPI. In addition, the Partnership, through the Joint Venture, has a participation interest without cost to the Joint Venture in two additional films. Generally, the remaining interests in the Joint Venture Films are held by Tri-Star Delphi III Productions, a joint venture between Delphi Film Associates III ("DFA III"), a New York limited partnership, and TSPI, Tri-Star-Delphi V Productions, a joint venture between Delphi Film Associates V ("DFA V"), a New York limited partnership, and TSPI, or Tri-Star-ML Delphi Premier Productions ("Delphi VI"), a joint venture between ML Delphi Premier Partners, L.P. ("MLDP"), a Delaware limited partnership, and TSPI. As of December 31, 1995, the Joint Venture had released all fifteen films in which the Joint Venture has an interest. All of the Joint Venture's films are being distributed pursuant to a distribution agreement with TSPI (the "Distributor"). The general partner of the Partnership is affiliated with the general partner of DFA III, DFA V and MLDP. The Partnership participates in a similar joint venture (the "Other Venture") with Columbia Pictures Industries, Inc. ("Columbia"). Sony Pictures Entertainment Inc., the parent company of Columbia and TriStar, is an indirect wholly-owned subsidiary of Sony Corporation. 2. Summary of Significant Accounting Policies Recognition of Revenue The Joint Venture recognizes net revenues from the Distributor on an accrual basis. Net revenues consist of: a) the portion of net proceeds (gross receipts, less a distribution fee, unless deferred, and other distribution and releasing costs) or, if greater, gross receipts payable to the Joint Venture under the distribution agreement, plus b) accrued gross receipts (not in excess of the amount of the advertising and promotion charge paid by the Joint Venture plus an amount intended to approximate the cost of funds incurred by the Partnership in connection with payment of that charge). However, certain advances received by the Distributor which are includable in gross receipts under the distribution agreement are not reflected in the calculation of net revenues until those advances are earned. Distribution Fee The Distributor is entitled to receive a distribution fee equal to 17.5% on substantially all gross receipts of a film; however, the Distributor's entitlement to this distribution fee will be deferred until the Joint Venture has received from the distribution of that film an amount equal to the amount spent by the Joint Venture to produce or acquire an interest in the film, other than amounts spent for payments in the nature of interest ("Cost Return"). After Cost Return for a film, in calculating subsequent payments to the Joint Venture based on net proceeds, the Distributor will be entitled to receive a distribution fee equal to l7.5% on substantially all gross receipts of the film including gross receipts prior to Cost Return. Net revenues accrued at December 31, 1995, 1994, and 1993 have been computed without deducting a distribution fee to the Distributor in light of the results of the films released through those dates with the exception of two films in l995, l994 and l993 for which the entire distribution fee has been deducted and one film in 1995, 1994 and 1993 for which a portion of the distribution fee has been deducted. Motion Picture Production and Advertising Costs Motion picture production costs include the direct cost of production plus an overhead charge equivalent to 12.5% of the direct production costs; these costs were capitalized as incurred by the Joint Venture. Payments by the Joint Venture in respect of the advertising and promotion charge payable to the Distributor were capitalized as incurred by the Joint Venture to the extent that those charges benefit future periods. These costs are amortized under the individual film forecast method based upon net revenue recognized in proportion to the Joint Venture's estimate of ultimate net revenues to be received. Unamortized production costs are compared with net realizable value on a film by film basis and unamortized advertising costs are compared with net realizable value in the aggregate; losses are recognized to the extent of any excess of costs over net realizable value. If losses are indicated for films, the Additional Payments described in Note 3, to the extent available, are accrued as Motion Picture Costs Recoverable from Additional Payments. 3. Additional Payments (See Note 5) The Joint Venture was entitled to a payment (an "Additional Payment") from the Distributor with respect to each film for which the Joint Venture had not received from the film's distribution (or its sale) by February 1994 an amount equal to the amount spent by the Joint Venture to produce or acquire an interest in the film (other than amounts spent for payments in the nature of interest) (an "Unrecouped Film"). Each Additional Payment would be made in the amount necessary for the Joint Venture to be repaid (without interest) the amounts spent by it with respect to the production or acquisition of an Unrecouped Film, other than contributions for payments in the nature of interest, but not more than the amount specified below. The Additional Payment would be payable only to the extent of the distribution fees received by the Distributor from the distribution of all of the Joint Venture's films (reduced to the extent of the Additional Payments made with respect to other Unrecouped Films). The Additional Payments to the Joint Venture based on distribution fees would be allocated by the Joint Venture first to the Partnership, to the extent necessary for the Partnership to recoup (without interest) the amount of its contributions to the Joint Venture for the production or acquisition of the Unrecouped Films (other than contributions for payments in the nature of interest); any excess would then be allocated to TSPI. If those distribution fees were insufficient to enable the Distributor to make the Additional Payments with respect to all Unrecouped Films, gross receipts and net proceeds of each remaining Unrecouped Film would be recalculated by including as gross receipts in respect of that Unrecouped Film the excess, if any, of the minimum license fees under the Distributor's license agreement with Home Box Office, Inc. and certain minimum amounts in respect of video cassette and video disc exploitation over the amounts previously included in the gross receipts of that Unrecouped Film in respect of those arrangements. The Distributor would then make Additional Payments to the Joint Venture to the extent of the additional gross receipts or net proceeds payable to the Joint Venture as a result of the recalculation, but only up to the amount of the unrecouped contributions (other than contributions for payments in the nature of interest) for the production or acquisition of that Unrecouped Film; each Additional Payment made on the basis of such recalculation would be allocated between the Partnership and TSPI in proportion to their respective interests in the applicable Unrecouped Film. The Distributor is entitled to recoup the Additional Payments made on either basis in respect of each Unrecouped Film, with an amount in the nature of interest, from the Joint Venture's share of subsequent gross receipts or net proceeds of that Unrecouped Film and from the proceeds of any sale of the Partnership's interest in that Unrecouped Film or amounts allocable to that Unrecouped Film upon a sale of the Partnership's interest in the Joint Venture. In calculating the amount of distribution fees available for the Additional Payments, no distribution fee would be deemed received by the Distributor (and therefore no distribution fee would be deemed available for the Additional Payment) from a film with respect to which the most recent payment to the Joint Venture was based on gross receipts or from a film that did not reach Cost Return. 4. Income Taxes No provision for income taxes is made in the Joint Venture's financial statements since the venturers treat the Joint Venture as a partnership for income tax purposes, with all income tax consequences flowing directly to the venturers. Effective January l, l993, the Partnership adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As of October 31, 1995 and 1994 (the Joint Venture's tax year end is October 31), the tax bases of the Joint Venture's assets less liabilities exceeded amounts reported in the financial statements at December 31, 1995 and 1994 by approximately $2,602,000 and $2,356,000, respectively. Management estimates that the tax bases of the Joint Venture's assets and liabilities did not differ significantly between October 31 and December 31 in l995 and l994. The adoption of the Statement had no impact on the Joint Venture's financial statements. 5. Current Operations As of December 31, 1995 the Distributor had released all fifteen films in which the Joint Venture has an interest (see Note 1). The Joint Venture did not recoup its investment in ten of these films out of the proceeds from their distribution. However, as a result of the Additional Payments referred to below, and those required to be made in future periods, the Partnership is expected to recoup its investment in these films. For the years ended December 31, l995, 1994 and 1993 motion picture production and advertising costs have been reduced by amortization of $205,000, $277,000 and $41,000, respectively. For the year ended December 31, 1995 the Joint Venture has recorded an increase in the Additional Payment accrual of $5,000 due to an increase in the amount of minimuns available for recoupment. During 1990, an agreement was reached between the Joint Venture and the Distributor whereby the Distributor agreed to make non-interest bearing advances to the Joint Venture up to an aggregate amount of $200,000 against amounts to be due to the Joint Venture. This advance had been allocated to the Partnership in order for it to make cash distributions to its partners. As of December 31, 1993, the entire $200,000 had been advanced to the Partnership. The Joint Venture received approximately $23,202,000 in February l994, net of the $200,000 advance described above, representing the Joint Venture's Additional Payment. 6. Receivables and Payables An analysis of the Joint Venture's receivables and payables is as follows: AT DECEMBER 31, 1995 Receivable Payable Payable to from to the Distributor TriStar Partnership (000's omitted) Net Proceeds and Gross Receipts $ 1,083 $ 698 $ 385 Accrued Additional Payments 1,835 1,443 392 Total $ 2,918 $ 2,141 $ 777 AT DECEMBER 31, 1994 Receivable Payable Payable to from to the Distributor TriStar Partnership (000's omitted) Net Proceeds and Gross Receipts $ 1,958 $ 1,535 $ 423 Accrued Additional Payments 1,006 612 394 Total $ 2,964 $ 2,147 $ 817 7. Foreign Exchange Gains and Losses The distribution agreement between the Joint Venture and the Distributor provides that revenues earned in foreign currencies be valued as of the date that monies are remitted or are "freely remittable" to the United States. Other Expense for the year ended December 31, l994 of $508,000 represents the cumulative difference between the monies remitted in U.S. dollars and the value previously recorded based on the exchange rate at the time of revenue recognition in the applicable international territory. No such revenue valuation adjustment was necessary in 1995. EX-27 2 ART. 5 FDS FOR THE 1995 10-K
5 This schedule contains summary financial information extracted from Balance Sheets and Statement of Operations for the year ended December 31, 1995 Form 10K of Delphi Film Associates IV and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1995 DEC-31-1995 185,000 1,227,000 1,400,000 0 0 0 0 0 2,825,000 0 0 0 0 0 2,757,000 2,825,000 0 87,000 0 0 457,000 0 0 (32,000) 0 0 0 0 0 (32,000) (4.00) 0
-----END PRIVACY-ENHANCED MESSAGE-----