UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 30, 1995 OR ___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________to__________ Commission File Number 0-11915 DELPHI FILM ASSOCIATES II (Exact name of registrant as specified in its charter) New York 13-3133772 (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) (212) 983-9040 (Registrant's telephone number, including area code) 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____ DELPHI FILM ASSOCIATES II (A New York Limited Partnership) BALANCE SHEETS (000's Omitted) Unaudited September December 30, 31, 1995 1994 ASSETS Cash $ $ 99 124 Short-Term Investments 333 545 Receivable from Columbia-Delphi Productions II 388 374 Receivable from Tri-Star-Delphi II Productions 4 4 Total $ $ Assets 824 1,047 LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accrued Expenses and Accounts $ $ Payable 37 57 Total Liabilities 37 57 Partners' Capital (Note 2): General Partner 73 75 Limited Partners 714 915 Total Partners' Capital 787 990 Total Liabilities and Partners' $ $ Capital 824 1,047 See accompanying notes to the financial statements. DELPHI FILM ASSOCIATES II (A New York Limited Partnership) STATEMENTS OF OPERATIONS (000's Omitted, except net (loss) profit per unit) Unaudited For the Three Months For the Nine Months Ended September 30, Ended September 30, 1995 1994 1995 1994 Interest Income $ $ $ $ 6 6 20 16 Expenses: Operating Expenses 75 27 237 95 75 27 237 95 Loss before Share of Profit in Motion Picture (69) (21) (217) (79) Venture Share of Profit in Motion Picture Venture-- Columbia- Delphi Productions II 3 59 14 45 Net (Loss) Profit $ $ $ $ (66) 38 (203) (34) Net (Loss) Profit Per Unit of Limited Partnership Interest (12,000 units) $ $ $ $ (6) 3 (17) (3) See accompanying notes to the financial statements. DELPHI FILM ASSOCIATES II (A New York Limited Partnership) STATEMENTS OF CASH FLOWS (000's Omitted) Unaudited For the Nine Months Ended September 30, 1995 1994 Cash Flow From Operating Activities: Net Loss $ $ (203) (34) Adjustments to reconcile Net Loss to net cash used by operating activities: Share of Profit in Motion (14) (45) Picture Venture Distributions from Joint 14 45 Venture Changes in Assets and Liabilities: Increase in Receivables (14) (44) from Joint Venture Increase in Prepaid 0 (19) Expenses Decrease in Accrued Expenses and Accounts Payable (20) (23) Net Cash Used by Operating Activities (237) (120) Cash Flow From Investing Activities: Purchases of Short-Term (998) (594) Investments Redemptions of Short-Term Investments 1,210 634 Net Cash Provided by Investing Activities 212 40 Decrease In Cash (25) (80) Cash at beginning of period 124 154 Cash at end of period $ $ 99 74 See accompanying notes to the financial statements. DELPHI FILM ASSOCIATES II (A New York Limited Partnership) NOTES TO FINANCIAL STATEMENTS Unaudited 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. There has been no material change in the information disclosed in the notes to financial statements of the Partnership included in the Annual Report on Form 10-K for the year ended December 31, 1994. The information furnished includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Partnership as of September 30, 1995 and the results of operations and cash flows for the periods ended September 30, 1995 and 1994. Results of operations for the period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the entire fiscal year. 2. Current Operations The Partnership owns an interest in thirty-five films. All of these films have completed their theatrical release and are being distributed in various ancillary markets. For the purpose of computing the net (loss) profit per unit, the net (loss) profit for the period is allocated 99% to the limited partners and 1% to the General Partner. 3. Additional Information Additional information, including the audited year end 1994 Financial Statements and the Summary of Significant Accounting Policies, is included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1994 on file with the Securities and Exchange Commission. Management's Discussion and Analysis of Financial Condition And Results of Operations a. Financial Condition The Partnership has fully satisfied its commitments to contribute funds to the Joint Ventures for the production of, and acquisition of interests in, films. At September 30, 1995, the Partnership held cash of approximately $99,000 and short-term investments of approximately $333,000. The Partnership commenced cash distributions to its partners in December 1984. Distributions through September 30, 1995 have aggregated $4,475 per unit (89.5% of the limited partners' original $5,000 investment in the Partnership). In July 1990, the Partnership received approximately $6,737,000 from the Columbia Joint Venture and approximately $3,857,000 from the Tri-Star Joint Venture as a Distribution Fee Reduction Payment in respect of each Joint Venture's films, other than sequels. The Distributors are entitled to recoup these Payments, with interest, from amounts otherwise payable to the Partnership for the films to which the Payments relate. The Distributors are not expected to fully recoup these Payments, and it is therefore currently expected that the Partnership will not receive any additional revenue with respect to the Joint Venture films (with the exception of "The Karate Kid: Part II", the Additional Films and possibly certain amounts related to film audits). The Partnership has been evaluating the continued ownership and operations of its film assets as well as the possible sale of such assets, and has determined to pursue opportunities for the possible sale of its assets. In furtherance of such, the Partnership has been engaging in negotiations with its joint venture partners for the possible sale to them of the Partnership's film assets currently being distributed by each of them, respectively, with the intention of consummating such sales in the fourth quarter of 1995. A sale of the film assets would include all films, whether or not the Distributor has fully recouped the Distribution Fee Reduction Payment. If such sales were to be consummated in the fourth quarter of 1995, it is possible that the Partnership would be liquidated by year- end 1995. No assurance can be given, however, that such sales will be consummated or of the timing for such sales or liquidation. Upon the ultimate sale of the film assets, the Partnership will commence taking steps to liquidate and dissolve. Since the Partnership is not anticipating significant future revenues, the Partnership's future operating expenses must be met from current cash and short- term investments. As a result, cash distributions to partners are no longer being made on a quarterly basis. Cash distributions as a result of the liquidation of the Partnership may be made to the Partners to the extent, if any, the proceeds from the sale of the Partnership's interest in its film assets in connection with the liquidation are in excess of the Distributor's entitlement to the recoupments described above net of a reserve for the Partnership's operating expenses. b. 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 revenues 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 currently being exhibited. Additionally, each Joint Venture has recorded income with respect to the reduction of distribution fees which has allowed it to recover its investment in films. For the three months ended September 30, 1995, the Columbia Joint Venture had a net profit of which the Partnership's share was $3,000 due primarily to the profitable results of one film. The Tri- Star Joint Venture had a net profit of which the Partnership's share was $0. In addition, the Partnership earned approximately $6,000 of interest income from its short-term investments and incurred approximately $75,000 of expenses from its operations, resulting in an overall net loss to the Partnership of approximately $66,000. For the three months ended September 30, 1994, the Columbia Joint Venture had a net loss; however, the Partnership reported a net profit from that Joint Venture of approximately $59,000 due primarily to the profitable results of one film. The Tri-Star Joint Venture had a net profit of which the Partnership's share was $0. In addition, the Partnership earned approximately $6,000 of interest income from its short-term investments and incurred approximately $27,000 of expenses from its operations, resulting in an overall net profit to the Partnership of approximately $38,000. For the nine months ended September 30, 1995, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $14,000 due primarily to the profitable results of one film. The Tri-Star Joint Venture had a net profit of which the Partnership's share was $0. In addition, the Partnership earned approximately $20,000 of interest income from its short-term investments and incurred approximately $237,000 of expenses from its operations, resulting in an overall net loss to the Partnership of approximately $203,000. For the nine months ended September 30, 1994, the Columbia Joint Venture had a net loss; however, the the Partnership reported a net profit from that Joint Venture of approximately $45,000 due primarily to the profitable results of one film. The Tri-Star Joint Venture had a net profit of which the Partnership's share was $0. In addition, the Partnership earned approximately $16,000 of interest income from its short-term investments and incurred approximately $95,000 of expenses from its operations, resulting in an overall net loss to the Partnership of approximately $34,000. Interest income for the three month period ended September 30, 1995 as compared with the corresponding period in 1994 was unchanged. The increase in interest income for the nine month period ended September 30, 1995 as compared with the corresponding period in 1994 is due primarily to higher interest rates earned on short-term investments during 1995. The increase in the Partnership's Operating Expenses for the three and nine month periods ended September 30, 1995 as compared with the corresponding periods in 1994 is primarily due to an increase in the out-of-pocket expenses incurred in connection with the ongoing management of the Partnership including the evaluation of the film assets for a possible sale. COLUMBIA-DELPHI PRODUCTIONS II (A Joint Venture) BALANCE SHEETS (000's Omitted) Unaudited September December 30, 31, 1 1995 994 ASSETS Motion Picture Production and Advertising Costs, net of accumulated amortization of $285,918 and $285,9l8, $ $ respectively 0 0 Motion Picture Costs Recoverable from Distribution Fees 0 0 Receivable from Columbia Pictures (Distributor) 7,181 18,503 Total $ $ Assets 7,181 18,503 LIABILITIES AND VENTURERS' CAPITAL Liabilities: Payable to Columbia Pictures $ $ Industries, Inc. 6,793 18,129 Payable to Delphi Film Associates II 388 374 Total Liabilities 7,181 18,503 Venturers' Capital: Columbia Pictures Industries, 0 0 Inc. Delphi Film Associates II 0 0 Total Venturers' Capital 0 0 Total Liabilities and Venturers' $ $ Capital 7,181 18,503 See accompanying notes to the financial statements. COLUMBIA - DELPHI PRODUCTIONS II (A Joint Venture) STATEMENTS OF OPERATIONS (000's Omitted) Unaudited For the Three Months For the Nine Months Ended September 30, Ended September 30, 1995 1994 1995 1994 Net Revenues (Loss) From Motion Picture Exploitation $ $ $ $ 21 (2,101 3,308 (302) ) Accrued Distribution Fee Recapture 0 (394) 0 (497) Net Income (Loss) $ $ $ $ 21 (2,495 3,308 (799) ) See accompanying notes to the financial statements. COLUMBIA - DELPHI PRODUCTIONS II (A Joint Venture) STATEMENTS OF CASH FLOWS (000's Omitted) Unaudited For the Nine Months Ended September 30, 1995 1994 Cash Flow From Operating Activities: Net Income (Loss) $ $ 3,308 (799) Adjustments to reconcile Net Income (Loss) to net cash provided by operating activities: Accrued Distributions (3,308) 799 toVenturers Changes in Assets and Liabilities: Increase in Payable to Delphi Film Associates II 14 44 Decrease in Payable to Columbia Pictures Industries, Inc., net (11,336) (843) Decrease in Receivable from Columbia Pictures (Distributor) 11,322 302 Decrease in Motion Picture Costs Recoverable from Distribution Fees 0 497 Net Cash Provided by Operating Activities 0 0 Net Change in Cash 0 0 Cash at beginning of period 0 0 Cash at end of period $ $ 0 0 See accompanying notes to the financial statements. COLUMBIA - DELPHI PRODUCTIONS II (A Joint Venture) NOTES TO FINANCIAL STATEMENTS Unaudited 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. There has been no material change in the information disclosed in the notes to financial statements of the Joint Venture included in the Annual Report on Form 10-K of Delphi Film Associates II (the "Partnership") for the year ended December 31, 1994. The information furnished includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Joint Venture as of September 30, 1995 and the results of its operations and cash flows for the periods ended September 30, 1995 and 1994. Results of operations for the period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the entire fiscal year. 2. Current Operations All twenty-four films in which the Joint Venture has an interest have completed their theatrical release and are being distributed in various ancillary markets. For the three and nine month periods ended September 30, 1995 the Joint Venture is reporting net revenue of $21,000 and $3,308,000, respectively, due primarily to the "The Karate Kid: Part II" and the "The Karate Kid: Part III" in the pay television, worldwide free television and home video markets. For the three and nine month periods ended September 30, 1994, the Joint Venture reported a net loss from motion picture exploitation of $2,101,000 and $302,000, respectively, due primarily to the decline in the performance of "The Karate Kid: Part III" in the international theatrical market. 3. Additional Information Additional information, including the audited year end 1994 Financial Statements and the Summary of Significant Accounting Policies, is included in the Annual Report on Form 10-K of the Partnership for the year ended December 31, 1994. TRI-STAR -DELPHI II PRODUCTIONS (A Joint Venture) BALANCE SHEETS (000's Omitted) Unaudited September December 30, 31, 1 1 995 994 ASSETS Motion Picture Production Costs, net of accumulated amortization of $77,913 and $77,887, respectively $ $ 46 72 Motion Picture Costs Recoverable from Distribution Fees 4,607 4,353 Receivable from TriStar Pictures, Inc. (Distributor) 781 627 Total $ 5,434 $ Assets 5,052 LIABILITIES AND VENTURERS' CAPITAL Liabilities: Payable to TriStar Pictures, $ 5,384 $ Inc., net 4,976 Payable to Delphi Film Associates II 4 4 Total 5,388 Liabilities 4,980 Venturers' Capital: TriStar Pictures, Inc. 46 72 Delphi Film Associates II 0 0 Total Venturers' Capital 46 72 Total Liabilities and Venturers' $ $ Capital 5,434 5,052 See accompanying notes to the financial statements. TRI-STAR-DELPHI II PRODUCTIONS (A Joint Venture) STATEMENTS OF OPERATIONS (000's Omitted) Unaudited For the Three Months For the Nine Months Ended September 30, Ended September 30, 1995 1994 1995 1994 Net Revenue From Motion Picture Exploitation $ $ $ $ 189 419 1,146 1,047 Less: Amortization of Motion Picture Production Costs 0 143 26 216 Income from Operations 189 276 831 1,120 Accrued Distribution Fee Reduction 0 3 254 80 Net Income $ $ $ $ 189 279 1,374 911 See accompanying notes to the financial statements. TRI-STAR - DELPHI II PRODUCTIONS (A Joint Venture) STATEMENTS OF CASH FLOWS (000's Omitted) Unaudited For the Nine Months Ended September 30, 1995 1994 Cash Flow From Operating Activities: Net Income $ $ 1,374 911 Adjustments to reconcile Net Income to net cash provided by operating activities: Amortization of Motion Picture Production Costs 26 216 Accrued Distributions (408) 6,632 toVenturers Changes in Assets and Liabilities: Increase (Decrease) in Payable to TriStar Pictures, Inc., net 408 (6,632) (Increase) Decrease in Receivable from TriStar Pictures, Inc. (154) 6,712 (Distributor) Increase in Motion Picture Costs Recoverable from Distribution Fees (254) (80) Net Cash Provided by Operating Activities 992 7,759 Cash Flow From Financing Activities: Distribution to Venturers (992) (7,759) Net Cash Used by Financing Activities (992) (7,759) Net Change in Cash 0 0 Cash at beginning of period 0 0 Cash at end of period $ $ 0 0 See accompanying notes to the financial statements. TRI-STAR - DELPHI II PRODUCTIONS (A Joint Venture) NOTES TO FINANCIAL STATEMENTS Unaudited 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. There has been no material change in the information disclosed in the notes to financial statements of the Joint Venture included in the Annual Report on Form 10-K of Delphi Film Associates II (the "Partnership") for the year ended December 31, 1994. The information furnished includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Joint Venture as of September 30, 1995 and the results of its operations and cash flows for the periods ended September 30, 1995 and 1994. Results of operations for the period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the entire fiscal year. 2. Current Operations All eleven films in which the Joint Venture has an interest have completed their theatrical release and are being distributed in various ancillary markets. For the three and nine month periods ended September 30, 1995, the Joint Venture is reporting net revenue of $189,000 and $1,146,000, respectively, due primarily to the performance of its films in the pay television, home video and worldwide free television markets. For the nine month period ended September 30, 1995, the Joint Venture has recorded an increase in the accrued Distribution Fee Reduction Payment of $254,000 due to an increase in the estimated distribution fee to be earned by the Distributor. For the three and nine month periods ended September 30, 1994, the Joint Venture reported net revenue of $419,000 and $1,047,000, respectively, due primarily to the performance of films in the home video and pay television markets. For the nine month period ended September 30, 1994, the Joint Venture recorded an increase in the accrued Distribution Fee Reduction Payment of $80,000 due to an increase in the estimated distribution fee to be earned by the Distributor. 3. Additional Information Additional information, including the audited year end 1994 Financial Statements and the Summary of Significant Accounting Policies, is included in the Annual Report on Form 10-K of the Partnership for the year ended December 31, 1994. PART II Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3.Defaults Upon Senior Securities None Item 4.Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6.Exhibits and Reports on Form 8-K A). Exhibits EXHIBIT NUMBERDESCRIPTIONPAGE NUMBER 27 Financial Data Schedule B). Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DELPHI FILM ASSOCIATES II A New York Limited Partnership By: THE DELPHI ORGANIZATION, General Partner By: ML Film Entertainment, Inc., Managing Partner November 9, 1995 /s/ Diane T. Herte Date Diane T. Herte Treasurer of the Managing Partner of the General Partner (principal financial officer and principal accounting officer of the Registrant) November 9, 1995 /s/ Steven N. Baumgarten Date Steven N. Baumgarten Director and Vice President of the Managing Partner of the General Partner