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 0-17469 CINEMA PLUS, L.P. (Exact name of registrant as specified in its certificate of Limited Partnership) Delaware 13-3437795 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1100 Avenue of the Americas, New York, New York 10036 (Address of principal executive offices) (Zip Code) (212) 512-1000 (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____ PART I - FINANCIAL INFORMATION Item 1. Financial Statements INDEX PAGE Balance Sheets at September 30, 1995 and December 31, 1994............3 Statements of Operations for the Three and Nine Months Ended September 30, 1995 and 1994........................................................ ...4 Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994........................................................ ...5 Notes to Financial Statements.................................................. ...............6 CINEMA PLUS, L.P (A Delaware Limited Partnership) BALANCE SHEETS Unaudited (000's Omitted) Unaudited September December 30, 31, 1 1 995 994 ASSETS Cash and Cash Equivalents $ $ 87 359 Short-Term Investments 2,333 2,746 Receivable from HBO (Note 2) 418 1,380 Assured Return of Film Investment Payment Receivable (Note 4) 21,852 20,684 Motion Picture Production Costs, net of accumulated amortization of $97,226 and $96,814, respectively 1,034 1,609 Total $ $ Assets 25,724 26,778 LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accrued Expenses and Accounts $ $ Payable 84 207 Payable to General Partners 708 929 (Note 5) Deferred Revenue 83 60 Payable to HBO (Notes 3 & 4) 4,919 6,000 Total $ $ Liabilities 5,794 7,196 Partners' Capital (Note 7): General Partners $ $ (176) (180) Limited Partners 20,106 19,762 Total $ $ Partners' Capital 19,930 19,582 Total Liabilities and Partners' $ $ Capital 25,724 26,778 See accompanying notes to the financial statements. CINEMA PLUS, L.P. (A Delaware Limited Partnership) STATEMENTS OF OPERATIONS (000's Omitted, except net income per unit) Unaudited For the Three Months For the Nine Months Ended September 30, Ended September 30, 1995 1994 1995 1994 Net Revenue from Motion Pictures (Note 7) $ $ $ $ 218 1,072 655 2,285 Expenses: Motion Picture 122 852 412 1,796 Production Costs Professional and Other Fees 86 85 262 273 208 937 674 2,069 Income (Loss) from Operations 10 135 (19) 216 Assured Return of Film Investment Payment (Note 4) 324 205 1,168 1,060 HBO Interest Recoupment (39) (138) (247) (182) (Note 4) Interest Expense (Notes (56) (79) (202) (232) 3 & 6) Interest Income 28 20 85 54 Net Income $ $ $ $ 267 143 785 916 Net Income Attributable to General Partners $ $ $ $ 3 1 8 9 Net Income Attributable to Limited Partners $ $ $ $ 264 142 777 907 Net Income Per Unit of Limited Partnership Interest $ $ $ $ (43,286 units) 6.10 3.27 17.95 20.96 See accompanying notes to the financial statements. CINEMA PLUS, L.P. (A Delaware Limited Partnership) STATEMENTS OF CASH FLOWS Unaudited (000's Omitted) For the Nine Months Ended September 30, 1995 1994 Operating Activities: Net Income $ $ 785 916 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Decrease in Receivable from 962 76 HBO Increase in Assured Return of Film Investment Payment Receivable (1,168) (1,060) Decrease in Motion Picture 163 199 Production Costs Amortization of Motion Picture Production Costs 412 1,796 Decrease in Accrued Expenses and Accounts Payable (123) (129) Decrease in Payable to (221) (227) General Partners Increase (Decrease) in Deferred Revenue 23 (804) Net Cash Provided by Operating Activities 833 767 Investing Activities: Purchase of Short-Term (5,245) (4,636) Investments Redemption of Short-Term Investments 5,658 4,601 Net Cash Provided (Used) by Investing Activities 413 (35) Financing Activities: Decrease in Payable to HBO (1,081) (1,106) Distributions Paid to Partners (437) -- Net Cash Used by Financing Activities (1,518) (1,106) Decrease In Cash and Cash (272) (374) Equivalents Cash and Cash Equivalents at beginning of year 359 403 Cash and Cash Equivalents at end $ $ of period 87 29 See accompanying notes to the financial statements. CINEMA PLUS, L.P. (A Delaware 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 reporting. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The information furnished includes all adjustments of a normal recurring nature which are, in the opinion of management, necessary to present fairly the Partnership's financial position as of September 30, 1995 and the results of its operations and changes in 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 year. 2. Receivable from HBO (a) Network Receivable from HBO Pursuant to the HBO License Agreement, the Partnership has granted domestic network television distribution rights in the Films to HBO, and HBO has caused such rights to be licensed to Warner Bros. HBO and Warner Bros. receive in the aggregate a distribution fee of no more than 20% of the gross proceeds received from the exploitation of their network television distribution rights in each Film. The remaining revenues, less distribution expenses and guild residuals, are remitted to the Partnership. During the nine month period ended September 30, 1995, the Partnership received $848,000 with respect to "Ricochet." As of September 30, 1995, $403,000 is recorded as a network receivable from HBO with respect to the Film "Ricochet." (b) Syndication Receivable from HBO Domestic syndication television rights in the Films are licensed by HBO (or a subdistributor designated by HBO) on behalf of the Partnership. HBO and its subdistributor, if any, receive distribution fees aggregating no more than 37.5% of the gross receipts from such license. Gross receipts less distribution fees and expenses and guild residuals are remitted to the Partnership. During the nine month period ended September 30, 1995, the Partnership received $l49,000 with respect to "Switch." During the nine month period ended September 30, 1995, the Partnership recognized net revenue from syndicated television of $27,000. As of September 30, 1995, $7,000 is recorded as a syndication receivable from HBO. (c) Foreign Receivable from HBO As the HBO Commitment with respect to "Richochet" has been fully repaid, any future foreign receipts for this Film shall be remitted to the Partnership net of any guild residuals, distribution fees and expenses. As of September 30, 1995, $8,000 is recorded as a foreign receivable from HBO. 3. Payable to HBO The payable to HBO at September 30, 1995 and December 31, 1994 (including accrued interest) consists of the following amounts: 9/30/95 12/31/94 HBO Commitment $ $ 638,000 1,276,000 Shortfall Production Advance 0 728,000 Print and Advertising 238,000 236,000 Expenditures HBO Interest Recoupment (See 3,997,000 3,750,000 Note 4) Net Domestic Video 46,000 10,000 Total $ $ 4,919,000 6,000,000 (a) HBO Commitment During the nine month period ended September 30, 1995, an aggregate of $662,000 (including interest) of the HBO Commitments with respect to "Don't Tell Mom," "Mom and Dad Save the World" and "Ricochet" was repaid from net Foreign Distribution Advances with respect to these Films. The HBO Commitment with respect to "Ricochet" has been fully repaid as of September 30, 1995. In addition, interest was accrued in the amount of $182,000 for the nine months ended September 30, 1995. Based upon current revised estimates of ultimate net foreign revenues, the Partnership's Payable to HBO has been (reduced) by an additional ($174,000) for "Mom and Dad Save the World" and increased by an additional $16,000 for "Don't Tell Mom" during the nine months ended September 30, 1995, with a corresponding (reduction) increase to the capitalized Motion Picture Production Costs of these Films. (b) Shortfall Production Advance During the nine month period ended September 30, 1995, the Partnership repaid $753,000 (including interest) of the Shortfall Production Advance to HBO from the net domestic video and network revenue received with respect to the Film "Ricochet." As of September 30, 1995 HBO has fully recouped this loan. (c) Print and Advertising Expenditures During the nine month period ended September 30, 1995, the Partnership recognized $9,000 from the domestic theatrical distribution of its Films, all of which has been applied to the payable of print and advertising expenditures incurred to date. In addition, during the nine months ended September 30, 1995, the Partnership increased its payable for print and advertising expenses incurred for the Film "Mom & Dad Save the World" in the amount of $11,000 (including interest) to HBO primarily due to net domestic video returns with respect to that Film. (d) Net Domestic Video During the nine month period ended September 30, 1995, the Partnership received $40,000 from the net domestic video distribution of all of its Films and recognized net expenses of $16,000 from the net domestic video distribution of all of its Films. In addition, during the nine months ended September 30, 1995, the Partnership reduced its payable to HBO by $20,000 due to net domestic video returns. 4. Assured Return of Film Investment Payment and the HBO Interest Recoupment Based on the anticipated performance of each of the four Films in release at September 30, 1995, it is expected that HBO will be required to make an Assured Return of Film Investment Payment ("ARFIP") with respect to each of these Films. Accordingly, $21,852,000 (amount present valued) was recorded by the Partnership as a receivable from HBO in the accompanying financial statements as of September 30, 1995. With respect to any Film for which an ARFIP is made, HBO will be thereafter entitled to receive from the Partnership any additional revenues received by the Partnership with respect to that Film until the entire amount of such ARFIP has been recouped by HBO. If HBO has not recouped this ARFIP for a Film by July 1999, the Partnership will be required to pay to HBO at that time an amount (the "HBO Interest Recoupment") equal to the lesser of: (a) the sum of the unrecouped ARFIP and the non-standard television residuals for such Film or (b) the Per Film Interest (as defined below). "Per Film Interest" represents the interest income earned on Partnership funds awaiting investment in Films divided by the four Partnership Films. Accordingly, an HBO Interest recoupment in the amount of $3,997,000 (amount present valued) has been recorded by the Partnership and included in the Payable to HBO in the accompanying financial statements as of September 30, 1995. 5. Payable to General Partners A portion of the Production and Overhead Fee is paid to the General Partners in accordance with a set schedule. Interest accrues on the balance at a rate equal to the interest rate earned by the Partnership on the short-term investment of its funds. Accordingly, as of September 30, 1995, $708,000 is recorded as a Payable to General Partners in the accompanying financial statements. 6. Supplemental Disclosure of Cash Flow Information The Partnership paid $323,000 and $266,000 of interest in the nine months ended September 30, 1995 and 1994, respectively. 7. Current Operations The Partnership has financed four Films. All of these Films have completed their domestic theatrical and initial video releases and are being distributed in various ancillary media. No other films will be financed by the Partnership. During the nine months ended September 30, 1995, the Partnership recognized net revenue (expense) in the amounts of $9,000, $648,000, $27,000 and ($16,000) with respect to the domestic theatrical, foreign, syndication and net domestic video markets, respectively, of its Films. During the nine months ended September 30, 1995, the third party participation expense for "Don't Tell Mom" was increased by $13,000 thereby decreasing the Partnership's net revenue for the period. For the purpose of computing net income per unit, the income has been allocated 99% to the limited partners and 1% to the Administrative General Partner. 8. Additional Information Additional information, including the audited 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. 9. Legal Proceedings On August 14, 1995 a lawsuit styled as a class action was filed by two holders of Cinema Plus limited partnership units in the United States District Court of the Western District of Pennsylvania against HBO Film Management, Inc. and Entertainment Finance Services, Inc., the general partners of Cinema Plus, Home Box Office, [Inc.], and Kidder, Peabody & Co., Incorporated and Smith Barney Inc., two of the underwriters of the original sale of limited partnership units of Cinema Plus. Cinema Plus has not been named as a defendant in the lawsuit. The lawsuit alleges various violations of law by the defendants in connection with the original sale of limited partnership units of Cinema Plus and the subsequent operation of Cinema Plus. The defendants believe the lawsuit to be without merit and are vigorously defending it. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations a. Financial Condition As of September 30, 1995, the Partnership held cash and cash equivalents of $87,000 and short-term investments of $2,333,000. The Partnership invested in the production of four Films. As of September 30, 1995, an aggregate of $98,260,000 (including the HBO Commitments) had been incurred toward the production and theatrical release of these Films. Prior to the receipt of the ARFIP receivable, no significant cash outlays are expected to be made by the Partnership other than its operating expenses and the satisfaction of the Partnership's payables to HBO (except for the HBO Interest Recoupment). Subsequent to the receipt of the ARFIP in 1998 and 1999, additional cash outlays are expected to be made to HBO for payment of the HBO Interest Recoupment, as well as to pay the Partnership's operating expenses and to make distributions to partners. As of September 30, 1995, the Partnership's net payable to HBO totaled $4,919,000. Of this amount, $3,997,000 relates to the HBO Interest Recoupment which is not payable until one month after the last ARFIP proceeds are received from HBO. Based on current estimates of ultimate net revenues, it is anticipated that the remainder of the payable to HBO at September 30, 1995 will be substantially repaid to HBO within the next two years. Since the Partnership is not anticipating significant future revenues (other than those used to repay HBO) until the Assured Return of Film Investment Payments are received from HBO in 1998 and 1999, the Partnership's future operating expenses are expected to be met from current cash and short-term investments. Management believes that the cash and short-term investments held at September 30, 1995 are sufficient to meet its liquidity needs without the need to obtain external financing from a third party or its General Partners. Cash distributions will be made only as signficant cash becomes available from the exploitation of the Films in excess of the payables due to HBO or as the Assured Return of Film Investment Payments are received from HBO. b. Results of Operations For the three month period ended September 30, 1995, the Partnership recorded net revenue of $218,000 due primarily to the performance of its Films in the foreign markets offset by related Motion Picture Production Costs of $122,000. For the three months ended September 30, 1995, the Partnership recorded an increase in the Assured Return of Film Investment Payment of $324,000 primarily due to the decrease in the discount period. The Partnership recorded HBO Interest Recoupment expense of $39,000 due primarily to the decrease in the discount period. For the three month period ended September 30, 1994, the Partnership recorded net revenue of $1,072,000 due primarily to the performance of its Films in the foreign markets. These revenues were offset by related Motion Picture Production Costs of $852,000. In addition, the Partnership recorded an increase in the Assured Return of Film Investment Payment of $205,000 due primarily to the decrease in the discount period, offset, in part, by an increase in ultimate net expense projections with respect to "Ricochet." The Partnership recorded HBO Interest Recoupment expense of $138,000 due to the decrease in the discount period and to a decrease in ultimate net expense projections with respect to "Don't Tell Mom." For the nine month period ended September 30, 1995, the Partnership recorded net revenue of $655,000 due primarily to the performance of its Films in the foreign markets offset by related Motion Picture Production Costs of $412,000. For the nine months ended September 30, 1995, the Partnership recorded an increase in the Assured Return of Film Investment Payment of $1,168,000 primarily due to the decrease in the discount period. The Partnership recorded HBO Interest Recoupment expense of $247,000 due primarily to the decrease in the discount period. For the nine month period ended September 30, 1994, the Partnership recorded net revenue of $2,285,000 due primarily to the performance of its Films in the foreign markets. These revenues were offset by related Motion Picture Production Costs of $1,796,000. In addition, the Partnership recorded an increase in the Assured Return of Film Investment Payment of $1,060,000 and recorded HBO Interest Recoupment expense of $182,000, both due primarily to the decrease in the discount period. PART II-OTHER INFORMATION Item 1. Legal Proceedings On August 14, 1995 a lawsuit styled as a class action was filed by two holders of Cinema Plus limited partnership units in the United States District Court of the Western District of Pennsylvania against HBO Film Management, Inc. and Entertainment Finance Services, Inc., the general partners of Cinema Plus, Home Box Office, [Inc.], and Kidder, Peabody & Co., Incorporated and Smith Barney Inc., two of the underwriters of the original sale of limited partnership units of Cinema Plus. Cinema Plus has not been named as a defendant in the lawsuit. The lawsuit alleges various violations of law by the defendants in connection with the original sale of limited partnership units of Cinema Plus and the subsequent operation of Cinema Plus. The defendants believe the lawsuit to be without merit and are vigorously defending it. 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). The Partnership did not file any reports on Form 8- K during the quarter ended September 30, 1995. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CINEMA PLUS, L.P. a Delaware Limited Partnership By: Entertainment Finance Services, Inc., as Administrative General Partner November 10, 1995 By: /s/ Bradley J. Wechsler Date Bradley J. Wechsler President