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, 1996 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, 1996 and December 31, 1995......................3 Statements of Operations for the Three and Nine Months Ended September 30, 1996 and 1995...................................................... .. ..........4 Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995...................................................... .. ..........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, 19 1 96 995 ASSETS Cash and Cash Equivalents $97 192 Short-Term Investments 2,300 2,306 Receivable from HBO (Note 2) 1,340 1,334 Assured Return of Film Investment Payment Receivable (Note 4) 21,640 21,355 Motion Picture Production Costs, net ofaccumulated amortization of $98,017 and $97,780, respectively 406 751 Total $ $ Assets 25,783 25,938 LIABILITIES AND PARTNERS' CAPITAL Liabilities: Accrued Expenses and Accounts $ $ Payable 161 205 Payable to General Partners 478 718 (Note 5) Deferred Revenue 0 177 Payable to HBO (Notes 3 & 4) 4,757 4,600 Total $ $ Liabilities 5,396 5,700 Partners' Capital (Note 7): General Partners $ $ (172) (173) Limited Partners 20,559 20,411 Total $ $ Partners' Capital 20,387 20,238 Total Liabilities and Partners' $ $ Capital 25,783 25,938 See accompanying notes to the financial statements. CINEMA PLUS, L.P. (A Delaware Limited Partnership) STATEMENTS OF OPERATIONS Unaudited (000's Omitted, except net income per unit) For the Three Months For the Nine Months Ended September 30, Ended September 30, 1996 1995 1996 1995 Net Revenue from Motion Pictures (Note 7) $ $ $ $ 10 218 1,245 655 Expenses: Motion Picture (3) 122 237 412 Production Costs Professional and Other Fees 91 86 247 262 88 208 484 674 Income (Loss) from Operations 78) 10 761 (19) Assured Return of Film Investment Payment (Note 4) 365 324 285 1,168 HBO Interest Recoupment (80) (39) (210) (247) (Note 4) Interest Expense (Notes (42) (56) (127) (202) 3 & 6) Interest Income 30 28 96 85 Net Income $ $ $ $ 195 267 805 785 Net Income Attributable to General Partners $ $ $ $ 2 3 8 8 Net Income Attributable to Limited Partners $ $ $ $ 193 264 797 777 Net Income Per Unit of Limited Partnership Interest (43,286 units) $ $ $ $ 4.46 6.10 18.41 17.95 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, 1996 1995 Operating Activities: Net Income $ $ 805 785 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: (Increase) Decrease in (6) 962 Receivable from HBO Increase in Assured Return of Film Investment Payment (285) (1,168) Receivable Decrease in Motion Picture 108 163 Production Costs Amortization of Motion Picture Production Costs 237 412 Decrease in Accrued Expenses and Accounts Payable (44) (123) Decrease in Payable to (240) (221) General Partners (Decrease) Increase in Deferred Revenue (177) 23 Net Cash Provided by Operating Activities 398 833 Investing Activities: Purchase of Short-Term (4,241) (5,245) Investments Redemption of Short-Term Investments 4,247 5,658 Net Cash Provided by Investing Activities 6 413 Financing Activities: Increase (Decrease) in Payable to 157 HBO (1,081) Distributions Paid to Partners (656) (437) Net Cash Used by Financing Activities (499) (1,518) Decrease In Cash and Cash (95) (272) Equivalents Cash and Cash Equivalents at beginning of year 192 359 Cash and Cash Equivalents at end $ $ of period 97 87 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, 1996 and the results of its operations and changes in cash flows for the periods ended September 30, 1996 and 1995. Results of operations for the period ended September 30, 1996 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, 1996, a second network license between Warner Bros. and ABC was entered into with respect to the Film "Ricochet." Accordingly, during the nine month period ended September 30, 1996, the Partnership recognized net revenue of $887,000 with respect to "Ricochet." As of September 30, 1996, $1,340,000 is recorded as a network receivable from HBO with respect to the Film "Ricochet." (b) Foreign Receivable from HBO As the HBO Commitment with respect to "Ricochet" has been fully repaid, any additional foreign receipts for this Film are being remitted to the Partnership net of any guild residuals, distribution fees and expenses. During the nine month period ended September 30, 1996, the Partnership received $821,000 (including interest) from the foreign distribution of the Film "Ricochet." As of September 30, 1996, there is no foreign receivable from HBO. (c) Net Domestic Video During the nine month period ended September 30, 1996, the Partnership recognized revenue of $90,000 from net domestic home video distribution of all of its Films. During the nine month period ended September 30, 1996, the Partnership received $150,000 from the net domestic video distribution of all of its Films. As of September 30, 1996, there is no net domestic video receivable from HBO. 3. Payable to HBO The payable to HBO at September 30, 1996 and December 31, 1995 (including accrued interest) consists of the following amounts: 9/30/96 12/31/95 HBO Commitment $ $ 365,000 404,000 Print and Advertising 214,000 228,000 Expenditures HBO Interest Recoupment (See Note 4) 4,178,000 3,968,000 Total $ $ 4,757,000 4,600,000 (a) HBO Commitment During the nine month period ended September 30, 1996, an aggregate of $58,000 (including interest) of the HBO Commitments with respect to "Don't Tell Mom" and "Mom and Dad Save the World" was repaid from net Foreign Distribution Advances with respect to these Films. In addition, interest was accrued in the amount of $127,000 for the nine months ended September 30, 1996. Based upon current revised estimates of ultimate net foreign revenues as of September 30, 1996, it is anticipated that HBO will be unable to recoup the HBO Commitment in the amount of $2,564,000 with respect to "Mom and Dad Save the World." As a result, the Partnership's Payable to HBO has been reduced by $108,000 for "Mom and Dad Save the World" during the nine months ended September 30, 1996, with a corresponding reduction to the capitalized Motion Picture Production Costs of this Film. (b) Print and Advertising Expenditures During the nine month period ended September 30, 1996, the Partnership recognized $1,000 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. During the nine month period ended September 30, 1996, the Partnership repaid to HBO a portion of the print and advertising expenses incurred for the Film "Mom & Dad Save the World" in the amount of $23,000 from the net domestic video revenue received with respect to that Film. During the nine month period ended September 30, 1996, the Partnership increased its payable to HBO for print and advertising expenses incurred for the Film "Mom & Dad Save the World" in the amount of $10,000. 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, 1996, 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, $21,640,000 (amount present valued) was recorded by the Partnership as a receivable from HBO in the accompanying financial statements as of September 30, 1996. 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 the ARFIP for a Film by July 1999, the Partnership will be required to pay to HBO within one month thereafter 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 $4,178,000 (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, 1996. 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, 1996, $478,000 is recorded as a Payable to General Partners in the accompanying financial statements. 6. Supplemental Disclosure of Cash Flow Information The Partnership paid $16,000 and $323,000 of interest in the nine months ended September 30, 1996 and 1995, 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, 1996, the Partnership recognized net revenue in the amounts of $1,000, $280,000, $887,000 and $90,000 with respect to the domestic theatrical, foreign, network television and net domestic video markets, respectively, of its Films. During the nine months ended September 30, 1996, 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 1995 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, 1995 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 action was dismissed on March 4, 1996. On March 20, 1996 the plaintiffs filed a Notice of Appeal in the Third Circuit Court of Appeals. Oral argument before the Third Circuit Court of Appeals was heard on October 3, 1996. 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, 1996, the Partnership held cash and cash equivalents of $97,000 and short-term investments of $2,300,000. The Partnership invested in the production of four Films. As of September 30, 1996, an aggregate of $98,423,000 (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. In the event that the Partnership terminates or is dissolved prior to the time that an Assured Return of Film Investment Payment is to be made, provision will be made in accordance with the limited partnership agreement for payment of such Assured Return of Film Investment Payment at the time, and to the limited partners to whom, it would otherwise become due. Such provision may include the appointment of a liquidating trustee to receive such payments and transmit them to the former limited partners. As of September 30, 1996, the Partnership's net payable to HBO totaled $4,757,000. Of this amount, $4,178,000 relates to the HBO Interest Recoupment which is payable within 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, 1996 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, 1996 are sufficient to meet its liquidity needs without the need to obtain external financing from a third party or its General Partners. During the nine month period ended September 30, 1996, the Partnership made a distribution to the partners in the amount of $656,000 ($15 per unit). However, future cash distributions will be made only as significant 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, 1996, the Partnership recorded net revenue of $10,000 due primarily to the performance of its Films in the network television and foreign markets. For the three months ended September 30, 1996, the Partnership recorded an increase in the Assured Return of Film Investment Payment of $365,000 primarily due to the decrease in the discount period. The Partnership recorded HBO Interest Recoupment expense of $80,000 due primarily to the decrease in the discount period. 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 amortization of 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 due primarily 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 nine month period ended September 30, 1996, the Partnership recorded net revenue of $1,245,000 due primarily to the performance of its Films in the network television and foreign markets offset by amortization of related Motion Picture Production Costs of $237,000. For the nine months ended September 30, 1996, the Partnership recorded an increase in the Assured Return of Film Investment Payment of $285,000 primarily due to the decrease in the discount period offset in part by an increase in the ultimate net revenue projections with respect to "Ricochet." The Partnership recorded HBO Interest Recoupment expense of $210,000 due primarily to the decrease in the discount period. 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 amortization of 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. 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 action was dismissed on March 4, 1996. On March 20, 1996 the plaintiffs filed a Notice of Appeal in the Third Circuit Court of Appeals. Oral argument before the Third Circuit Court of Appeals was heard on October 3, 1996. 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 8K during the quarter ended September 30, 1996. 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 12, 1996 By: /s/ Bradley J. Wechsler Date Bradley J. Wechsler President