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 0-13158 DELPHI FILM ASSOCIATES III (Exact name of registrant as specified in its charter) New York 13-3177344 (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 III (A New York Limited Partnership) BALANCE SHEETS (000's Omitted) Unaudited September December 30, 31, 1995 1994 ASSETS Cash $ $ 111 132 Short-Term Investments 1,210 1,033 Receivable from Columbia-Delphi III Productions, net 519 686 Receivable from Tri-Star-Delphi III Productions, net 197 118 Interest in Motion Picture Venture-Columbia- Delphi III Productions 152 182 Interest in Motion Picture Venture-Tri-Star- Delphi III Productions 1 102 Total $ $ Assets 2,190 2,253 LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accrued Expenses and Accounts $ $ Payable 17 30 Total Liabilities 17 30 Partners' Capital (Note 2): General Partner 64 64 Limited Partners 2,109 2,159 Total Partners' Capital 2,173 2,223 Total Liabilities and Partners' $ $ Capital 2,190 2,253 See accompanying notes to the financial statements. DELPHI FILM ASSOCIATES III (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 $ $ $ $ 16 10 50 29 Expenses: Management Fee 0 100 0 300 Operating Expenses 96 2 223 13 96 102 223 313 Loss before Share of Profit in Motion Picture (80) (92) (173) (284) Ventures Share of Profit in Motion Picture Venture--Columbia- Delphi III Productions 19 197 100 83 Share of Profit in Motion Picture Venture--Tri-Star- Delphi III Productions 27 48 383 311 Net (Loss) Profit $ $ $ $ (34) 56 293 224 Net (Loss) Profit Per Unit of Limited Partnership Interest (9,702 Units) $ $ $ $ (3) 6 30 23 See accompanying notes to the financial statements. DELPHI FILM ASSOCIATES III (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 Profit $ $ 293 224 Adjustments to reconcile Net Profit to net cash provided (used) by operating activities: Share of Profit in Motion Picture Ventures (466) (508) Distributions from Joint 597 632 Ventures Changes in Assets and Liabilities: Decrease (Increase) in Receivables from Joint Ventures, net 88 (599) Increase in Prepaid 0 (100) Expense Decrease in Accrued Expenses and Accounts Payable (13) (38) Net Cash Provided (Used) by Operating Activities 499 (389) Cash Flow From Investing Activities: Purchases of Short-Term (2,227) (1,180) Investments Redemptions of Short-Term Investments 2,050 1,421 Net Cash (Used) Provided by Investing Activities (177) 241 Cash Flow From Financing Activities: Distributions to Partners (343) (245) Net Cash Used by Financing Activities (343) (245) Decrease In Cash (21) (393) Cash at beginning of period 132 463 Cash at end of period $ $ 111 70 See accompanying notes to the financial statements. DELPHI FILM ASSOCIATES III (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 As of September 30, 1995, all thirty-four films in which the Partnership has an interest had been released. All of these films have completed their theatrical release and are being distributed in various ancillary markets. As of September 30, 1995, the Partnership received in the aggregate approximately $516,000 and $1,436,000 (excluding the advances described below) from the Columbia Joint Venture and the Tri-Star Joint Venture, respectively, which represents accrued distribution fees paid with respect to the Distribution Fee Reduction Payments. Since these Distribution Fee Reduction Payments were not sufficient to enable either Joint Venture to recoup amounts spent by the respective 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"), each Distributor is required to pay to each Joint Venture an amount equal to all subsequent distribution fees earned by it from the distribution of films on behalf of that Joint Venture up to that Joint Venture's unrecouped Expenditures. If the Joint Ventures are able to recoup their Expenditures, the Distributors would be entitled to recoup these payments, with interest, from amounts thereafter otherwise payable to the Partnership. Based on the anticipated performance of the Partnership's films, each Distributor is required to continue making Distribution Fee Reduction Payments with respect to its films. Accordingly, the Partnership's share of distribution fees earned and expected to be earned by the Distributors as of September 30, 1995 of approximately $21,000 and $180,000 have been accrued by the Partnership as a receivable from the Columbia Joint Venture and the Tri- Star Joint Venture, respectively. The Partnership received advances from the Columbia and TriStar Distributors in the amounts of $333,000 and $667,000, respectively. As of September 30, 1995, these advances have been fully recouped and, as such, all subsequent amounts payable to the Joint Venture are being allocated to the Partnership. 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 $111,000 and short-term investments of approximately $1,210,000. The Partnership received advances from Columbia and TriStar Distributors (the "Advances") in the amount of $333,000 and $667,000, respectively. As of September 30, 1995, the Columbia and TriStar Distributors have fully recouped these Advances and, as such, all subsequent amounts payable to the Joint Venture are being allocated to the Partnership. Based on the performance of the films released through the Columbia Joint Venture and the Tri-Star Joint Venture, as of September 30, 1995, the Distributors made Distribution Fee Reduction Payments with respect to their films of which approximately $516,000 and $1,436,000, respectively, was allocated to the Partnership. Since these payments were not sufficient to enable either Joint Venture to recoup its Expenditures, each Distributor is required to pay its respective Joint Venture an amount equal to all subsequent distribution fees earned by it from the distribution of films on behalf of that Joint Venture up to its unrecouped Expenditures. If the Joint Ventures are able to recoup their Expenditures, the Distributors will be entitled to recoup these payments, with interest, from amounts thereafter otherwise payable to the Partnership. The Partnership is in the process of evaluating the value of its interest in the film assets for the purpose of possibly selling that interest and eventually liquidating the Partnership. The General Partner anticipates that the Partnership may be liquidated by the end of 1995 or early 1996. No assurance can be provided that the film assets will be successfully sold, or if sold, on such schedule. Upon the ultimate sale of the film assets, the Partnership will commence taking steps to liquidate and dissolve. Since the Partnership's obligation to make contributions to the Joint Ventures for the production of, and acquisition of interests in, films has been satisfied, all revenues received by the Partnership is used to establish a reserve for operating expenses of the Partnership and, to the extent possible, 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 or from the sale of its interest in films (should the sale occur) net of a reserve for the Partnership's operating expenses. The Partnership commenced cash distributions to its partners in February 1986. Distributions to limited partners through September 30, 1995 have aggregated $3,045 per unit (60.9% of the limited partners' original $5,000 investment in the Partnership). 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 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 records income with respect to the Distribution Fee Reduction Payments, to the extent available, which may allow 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 approximately $19,000, 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 $27,000, due primarily to the profitable results of certain films. In addition, the Partnership earned approximately $16,000 of interest income from its short-term investments and incurred approximately $96,000 of expenses from its operations, resulting in an overall net loss to the Partnership of approximately $34,000. For the three months ended September 30, 1994, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $100,000, 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 $48,000, due primarily to the profitable results of certain films. In addition, the Partnership earned approximately $10,000 of interest income from its short-term investments and incurred approximately $102,000 of expenses from its operations, resulting in an overall net profit to the Partnership of approximately $56,000. For the nine months ended September 30, 1995, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $83,000, 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 $383,000 due primarily to the profitable results of certain films and the accrual of Distribution Fee Reduction Payments. In addition, the Partnership earned approximately $50,000 of interest income from its short-term investments and incurred approximately $223,000 of expenses from its operations, resulting in an overall net profit to the Partnership of approximately $293,000. For the nine months ended September 30, 1994, the Columbia Joint Venture had a net profit of which the Partnership's share was approximately $197,000, 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 $311,000 due primarily to the profitable results of certain films and the accrual of Distribution Fee Reduction Payments. In addition, the Partnership earned approximately $29,000 of interest income from its short-term investments and incurred approximately $313,000 of expenses from its operations, resulting in an overall net profit to the Partnership of approximately $224,000. The increase in interest income for the three and nine month periods ended September 30, 1995 as compared with the corresponding periods in 1994 is due primarily to higher interest rates earned on short-term investments during 1995. The decrease in the Partnership's total expenses for the three and nine month periods ended September 30, 1995 as compared with the corresponding periods in 1994 is attributable to the Management Fee incurred in 1994 but not in 1995 offset, in part, by an increase in Operating Expenses. The increase in Operating Expenses is primarily due to the reimbursement to the General Partner for out-of- pocket expenses incurred in connection with its management of the Partnership's business in lieu of the management fee paid to the General Partner prior to 1995. COLUMBIA-DELPHI III PRODUCTIONS (A Joint Venture) BALANCE SHEETS (000's Omitted) Unaudited September December 30, 31, 1995 1994 ASSETS Motion Picture Production and Advertising Costs, net of accumulated amortization of $76,639 and $76,532, $ $ respectively 847 954 Motion Picture Costs Recoverable from Distribution Fees 81 262 Receivable from Columbia Pictures (Distributor) 1,623 2,263 Total $ 2,551 $ Assets 3,479 LIABILITIES AND VENTURERS' CAPITAL Liabilities: Payable to Columbia Pictures $ $ Industries, Inc. 1,185 1,812 Payable to Delphi Film 519 Associates III, net 686 Advance from Columbia Pictures Industries, Inc. (Distributor) 0 27 Total Liabilities 1,704 2,525 Venturers' Capital: Columbia Pictures Industries, 680 757 Inc. Delphi Film Associates III 167 197 Total Venturers' Capital 847 954 Total Liabilities and Venturers' $ $ 3,479 Capital 2,551 See accompanying notes to the financial statements. COLUMBIA - DELPHI III 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 $ $ $ $ 93 336 378 983 Less: Amortization of Motion Picture Production and Advertising Costs 32 130 107 358 Net Income $ $ $ $ 61 206 271 625 See accompanying notes to the financial statements. COLUMBIA - DELPHI III 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 $ $ 271 625 Adjustments to reconcile Net Income to net cash provided by operating activities: Amortization of Motion Picture Production and Advertising Costs 107 358 Accrued Distributions to 821 (452) Venturers Changes in Assets and Liabilities: (Decrease) Increase in Payable to Columbia Pictures Industries, (627) 328 Inc. Decrease (Increase) in Receivable from Columbia Pictures 640 (543) (Distributor) Decrease in Motion Picture Costs Recoverable from 181 Distribution Fees 91 (Decrease) Increase in Payable to Delphi Film Associates III, net (167) 276 Decrease in Advance from Columbia Pictures Industries, Inc. (Distributor) (27) (152) Net Cash Provided by Operating Activities 1,199 531 Cash Flow from Financing Activities: Distributions to Venturers (1,199) (531) Net Cash Used by Financing Activities (1,199) (531) 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 III 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 III (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 seven 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 $93,000 and $378,000, respectively, due primarily to the performance of its films in the worldwide free television, pay television and worldwide home video markets. For the three and nine month periods ended September 30, 1994, the Joint Venture reported net revenue of $336,000 and $983,000, respectively, due primarily to the performance of the films in the worldwide free television market. 3. Distribution Fee Reduction The Joint Venture was entitled to a payment from its Distributor in reduction of the Distributor's aggregate distribution fee if, by June 30, 1991, the Joint Venture had not received, in the aggregate, from net proceeds and gross receipts (excluding amounts paid to the Joint Venture for the recovery of advertising and promotion charge payments) an amount at least equal to the amounts spent by the Joint Venture for the production of films and the acquisition of interests in films (excluding certain amounts spent for payments in the nature of interest) (the "Expenditures"). Payments totaling $2,287,000 were made to the Joint Venture representing the aggregate distribution fee previously received by its Distributor. The payment to the Joint Venture was allocated to the Partnership and Columbia based on their respective percentage interest in a film for which a distribution fee was received. In addition, the Distributor is required to pay to the Joint Venture an amount equal to all subsequent distribution fees earned by it until the Joint Venture has recouped an amount equal to its Expenditures. Accordingly, $81,000 has been accrued as Motion Picture Costs Recoverable from Distribution Fees as of September 30, 1995, in the accompanying financial statements. During 1989 and 1990 the Joint Venture received a total $333,000 as an advance from the Distributor. As of September 30, 1995, the Distributor has recouped the entire advance. 4. 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 III PRODUCTIONS (A Joint Venture) BALANCE SHEETS (000's Omitted) Unaudited September December 30, 31, 1995 1994 ASSETS Motion Picture Production and Advertising Costs, net of accumulated amortization of $194,497 and $194,137, $ 2,833 $ respectively 3,193 Motion Picture Costs Recoverable from Distribution Fees 1,013 964 Receivable from TriStar Pictures, Inc. (Distributor) 115 (287) Total $ 3,961 $ Assets 3,870 LIABILITIES AND VENTURERS' CAPITAL Liabilities: Payable to TriStar Pictures, $ $ Inc. 931 559 Payable to Delphi Film Associates III, net 197 118 Total Liabilities 1,128 677 Venturers' Capital: TriStar Pictures, Inc. 2,335 2,594 Delphi Film Associates III 498 599 Total Venturers' Capital 2,833 3,193 Total Liabilities and Venturers' $ $ Capital 3,961 3,870 See accompanying notes to the financial statements. TRI-STAR-DELPHI III 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 $ $ $ $ 121 0 1,131 943 Less: Amortization (Recapture) of Motion Picture Production and Advertising Costs 23 (103) 360 302 Income from Operations 98 103 771 641 Accrued Distribution Fee (Recapture) Reduction (2) 0 459 318 Net Income $ $ $ $ 96 103 1,230 959 See accompanying notes to the financial statements. TRI-STAR - DELPHI III 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 $ $ 1,230 959 Adjustments to reconcile Net Income to net cash provided by operating activities: Amortization of Motion Picture Production and Advertising Costs 360 302 Accrued Distributions to (451) 701 Venturers Changes in Assets and Liabilities: Increase in Payable to Delphi Film Associates III, net 79 323 Increase (Decrease) in Payable to TriStar Pictures, Inc. 372 (357) Increase in Receivable from TriStar Pictures, Inc. (402) (82) (Distributor) Decrease in Advance from TriStar Pictures, Inc. 0 (667) (Distributor) (Increase) Decrease in Motion Picture Costs Recoverable from Distribution Fees (49) 783 Net Cash Provided by Operating Activities 1,139 1,962 Cash Flow From Financing Activities: Distributions to Venturers (1,139) (1,962) Net Cash Used by Financing Activities (1,139) (1,962) 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. TRISTAR - DELPHI III 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 III (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-seven 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 $121,000 and $1,131,000, respectively, due primarily to the performance of its films in the worldwide free and pay television markets. For the nine month period ended September 30, 1995, the Joint Venture has recorded an increase of $459,000 in Motion Picture Costs Recoverable from Distribution Fees due to a change in the estimated distribution fee to be earned by the Distributor. For the nine month period ended September 30, 1994, the Joint Venture reported net revenue of $943,000 due primarily to the performance of films in the worldwide free television market. For the nine month period ended September 30, 1994, the Joint Venture recorded an increase of $318,000 in Motion Picture Costs Recoverable from Distribution Fees due to a change in the estimated distribution fee to be earned by the Distributor. 3. Distribution Fee Reduction The Joint Venture was entitled to a payment from its Distributor in reduction of the Distributor's aggregate distribution fee if, by June 30, 1991, the Joint Venture had not received, in the aggregate, from net proceeds and gross receipts (excluding amounts paid to the Joint Venture for the recovery of advertising and promotion charge payments) an amount at least equal to the amounts spent by the Joint Venture for the production of films and the acquisition of interests in films (excluding certain amounts spent for payments in the nature of interest) (the "Expenditures"). Payments totaling $4,504,000 were made to the Joint Venture representing the aggregate distribution fee previously received by its Distributor. The payment to the Joint Venture was allocated to the Partnership and TriStar based on their respective percentage interest in the films for which a distribution fee was received. The Distributor is required to pay to the Joint Venture an amount equal to all subsequent distribution fees earned by it until the Joint Venture has recouped an amount equal to its Expenditures. Accordingly, $1,013,000 has been accrued as Motion Picture Costs Recoverable from Distribution Fees as of September 30, 1995, in the accompanying financial statements. During 1989 and 1990 the Joint Venture received a total $667,000 as an advance from the Distributor. As of September 30, 1995, the Distributor has recouped the entire advance. 4. 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 III A New York Limited Partnership By: THE DELPHI GROUP, 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