0000898733-95-000693.txt : 19950821 0000898733-95-000693.hdr.sgml : 19950821 ACCESSION NUMBER: 0000898733-95-000693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORIMAR FILM PARTNERS L P CENTRAL INDEX KEY: 0000778923 STANDARD INDUSTRIAL CLASSIFICATION: 7812 IRS NUMBER: 953994360 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14844 FILM NUMBER: 95563813 BUSINESS ADDRESS: STREET 1: 4000 WARNER BLVD STREET 2: BLDG 3 CITY: BURBANK STATE: CA ZIP: 91522 BUSINESS PHONE: 818-954-6000 MAIL ADDRESS: STREET 1: 4000 WARNER BOULEVARD CITY: BURBANK STATE: CA ZIP: 91522 10-Q 1 LORIMAR FILM PARTNERS LP SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 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 0-14844 LORIMAR FILM PARTNERS L.P. (Exact name of registrant as specified in its charter) Delaware 95-3994360 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4000 Warner Blvd., Burbank, California 91522 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (818) 954-6000 N/A (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practicable date. Depositary Units of Limited Partnership Interest 33,854 Description of Class Units Outstanding as of July 31, 1995 LORIMAR FILM PARTNERS L.P. INDEX PART I. Financial Information PAGE NO. ITEM 1. FINANCIAL STATEMENTS (Unaudited) BALANCE SHEETS - June 30, 1995 and December 31, 1994 3 STATEMENTS OF OPERATIONS - Three and six months ended June 30, 1995 and 1994 4 STATEMENT OF PARTNERS' CAPITAL - December 31, 1994 through June 30, 1995 4 STATEMENTS OF CASH FLOWS - Six months ended June 30, 1995 and 1994 5 NOTES TO FINANCIAL STATEMENTS 6-15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 16-18 PART II. Other Information ITEM 1. LEGAL PROCEEDINGS 19-21 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22 PART I. FINANCIAL INFORMATION LORIMAR FILM PARTNERS L.P. BALANCE SHEETS (Unaudited)
June 30, December 31, 1995 1994 ASSETS: Cash and cash equivalents $ 1,247,316 $ 1,366,210 Total current assets 1,247,316 1,366,210 Film costs, net 10,514,348 10,555,228 Total Assets $ 11,761,664 $ 11,921,438 LIABILITIES AND PARTNERS' CAPITAL (DEFICIT): Current Liabilities: Amounts due Managing General Partner and affiliates $ 16,626,612 $ 15,993,325 Amounts due Co-General Partner 246,655 254,056 Accrued expenses 100,677 73,883 Total Current Liabilities 16,973,944 16,321,264 Total Liabilities 16,973,944 16,321,264 Commitments & Contingencies Partners' Capital (Deficit): Limited Partners (5,342,205) (4,936,006) Managing General Partner 404,914 811,169 Co-General Partner (274,989) (274,989) Total Partners' Capital (Deficit) (5,212,280) (4,399,826) Total Liabilities and Partners' Capital (Deficit) $ 11,761,664 $ 11,921,438
See accompanying notes to financial statements. 3 LORIMAR FILM PARTNERS L.P. STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 1995 1994 1995 1994 Revenues: Film revenues $ 21,377 $ 82,503 $ 45,335 $ 145,941 Interest income 18,295 12,370 36,166 23,445 Total revenues 39,672 94,873 81,501 169,386 Expenses: Amortization of film costs and other direct costs 19,816 60,759 41,643 116,829 Interest expense 362,506 258,422 706,951 479,312 General and administrative 57,000 54,730 144,000 129,367 Management fees 642 2,476 1,36 1 4,379 Total expenses 439,964 376,387 893,955 729,887 Net loss $(400,292) $(281,514) $(812,454) $(560,501) Allocation of Net Loss: Limited Partners $(200,135) $(140,786) $(406,199) $(280,339) General Partners $(200,157) $(140,728) $(406,255) $(280,162) Net loss per unit of limited partnership interest $ (5.91) $ (4.16) $ (12.00) $ (8.28)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT) (Unaudited)
LIMITED MANAGING PARTNERS' LIMITED GENERAL CO-GENERAL UNITS PARTNERS PARTNER PARTNER TOTAL Partners' capital (deficit) December 31, 1994 33,854 $(4,936,006) $ 811,169 $(274,989) $(4,399,826) Net loss 0 (406,199) (406,255) 0 (812,454) Partners' capital (deficit) June 30, 1995 33,854 $(5,342,205) $ 404,914 $(274,989) $(5,212,280)
See accompanying notes to financial statements. 4 LORIMAR FILM PARTNERS L.P. STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1995 1994 Cash flows from operating activities: Net loss $ (812,454) $ (560,501) Adjustments to reconcile net loss to cash (used in) provided by operations: Amortization of film costs 40,880 114,550 Changes in balance sheet accounts: Amounts due Managing General Partner and Affiliates 678,622 454,510 Accrued expenses 26,794 6,054 Amounts due to Co-General Partner (7,401) 20,920 Net cash (used in) provided by operations (73,559) 35,533 Cash flows from financing activities: Repayments of borrowings from Managing General Partner and affiliates (45,335) (145,941) Change in cash (118,894) (110,408) Cash and cash equivalents at beginning of period 1,366,210 1,500,901 Cash and cash equivalents at end of period $ 1,247,316 $ 1,390,493
See accompanying notes to financial statements. 5 LORIMAR FILM PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS (Unaudited) Note 1. Organization: Lorimar Film Partners L.P., a Delaware limited partnership ("the Partnership"), was organized in October 1985. The Partnership is engaged in the exploitation of four full-length theatrical motion pictures that were acquired in 1986. The Partnership has not acquired the rights to any additional films and has no plans or commitments to do so at this time. Since June 26, 1992, Lorimar Motion Picture Management, Inc., the Managing General Partner, has been a wholly-owned subsidiary of Warner Communications Inc. ("WCI") as a result of the merger of Lorimar Telepictures Corporation ("Lorimar") into WCI. On June 30, 1992 WCI contributed certain of Lorimar's former assets (excluding the stock of the Managing General Partner) to Time Warner Entertainment Company, L.P., a limited partnership ("TWE"), of which WCI is a general partner. All references in this quarterly report to Lorimar for all periods prior to June 26, 1992 are intended to refer to Lorimar, for the period from June 26, 1992 through June 30, 1992 are intended to refer to WCI, and for all periods after June 30, 1992 are intended to refer to TWE. WCI is a wholly-owned subsidiary of Time Warner Inc. Prudential-Bache Properties, Inc., a wholly-owned subsidiary of Prudential Securities Group Inc., is the Co-General Partner. Any references made to Limited Partners within the financial statements means the same as Unitholders. Note 2. Summary of Significant Accounting Policies: Basis of Presentation: In the opinion of the Partnership's management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the Partnership's financial position as of June 30, 1995, the results of its operations for the three and six month periods ended June 30, 1995 and 1994, and its cash flows for the six month periods ended June 30, 1995 and 1994. The adjustments included in the accompanying unaudited financial statements are of a normal recurring nature. In recognition that the Partnership's assets were insufficient to satisfy payment of its liabilities, the report of the independent auditors issued in connection with the Partnership's financial statements for the year ended December 31, 1994 contained a qualifying paragraph regarding the substantial doubt of the ability of the Partnership to continue as a going concern. The 1995 and 1994 financial statements do not include any adjustments that might result from the outcome of this uncertainty. 6 The results of operations for the period ended June 30, 1995 are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. For further information, refer to the more detailed financial statements and related footnotes thereto filed with the Partnership's Form 10-K report for the year ended December 31, 1994. Revenues and Film Costs: The Partnership acquired four full-length, theatrical motion pictures in 1986 for initial exhibition in domestic theaters followed by distribution in the domestic home video, pay cable, basic cable, broadcast network and syndicated television markets, as well as applicable foreign markets. Generally, distribution to the theatrical, home video and pay cable markets was completed within eighteen months of initial release. Substantially all of the revenues recorded during the six month period ended June 30, 1995 resulted from domestic syndicated television license agreements, which are recognized as royalty statements are received from the distributor. Film costs, which included costs to acquire the films and deferred print and advertising costs, are stated at estimated net realizable value determined on an individual film forecast basis. The cost of each individual film is amortized based on the proportion that current revenues from the film bear to an estimate of total revenues anticipated from all markets. These estimates are revised periodically and losses, if any, are provided in full. Costs of the released feature films were allocated between current and non-current assets based on the estimated future revenue from their primary and secondary markets. The primary markets for feature films are the theatrical, video and pay cable television markets; the secondary markets are the network television, basic cable and domestic and foreign syndication markets. Based upon the Partnership's estimate of remaining ultimate revenue, including proceeds under the Power guarantee (see Note 3), the remaining unamortized balance of film costs will be completely amortized by March 31, 1996. As of June 30, 1995, the net carrying value of Power was $9,843,967, which is to be recouped by the end of January 1996 principally from receipt of the Power guarantee (See Note 3). 7 Cash Equivalents: The Partnership considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. Income Taxes: No provision has been made for federal income taxes in the accompanying financial statements since all income and losses will be allocated to the partners for inclusion in their respective tax returns. Unitholders' Capital: At June 30, 1995, the Unitholders had a deficit capital account balance of $5,342,205. Under the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act, the fact that the Limited Partners have a deficit capital account balance does not impose any liability upon the Unitholders. Net loss per Depositary Unit of Limited Partnership Interest ("Unit"): Net loss per Unit was computed by dividing the Limited Partners' share of net loss by the number of Units outstanding during the period. The number of Units was 33,854 for the periods ended June 30, 1995 and 1994. Note 3. Transactions with General Partners and Affiliates: The Partnership purchased the rights to four motion picture films by paying the budgeted production costs of each film. All Partnership films have been completed. The Partnership has reimbursed the Managing General Partner and its affiliates for the budgeted production costs of these films. Partnership funds were insufficient to pay the full budgeted cost of acquiring The Morning After; therefore, the Limited Partners' interest in that film was reduced in proportion to their contribution with the balance provided by an additional capital contribution by the Managing General Partner to the Partnership of approximately $2,675,000. The Limited and Managing General Partners' investment shares in The Morning After are 42.66% and 57.34%, respectively. The Partnership's capital contributions have been fully invested. Operating cash flows over the life of the Partnership's four films have been insufficient to repay liabilities. There is no intention to invest in additional films. 8 The Partnership Agreement provides for allocations of net income and distributions of 49.5% to the Limited Partners and 50.5% to the General Partners, except with respect to The Morning After, for which such allocations are 42.66% to the Limited Partners and 57.34% to the Managing General Partner. Generally, net loss is allocated 50% to the Limited Partners and 50% to the Managing General Partner. In addition, the Partnership is obligated to the General Partners for the following: a. A management fee equal to 3% of the Partnership's share of gross receipts. b. Mandatory distributions that are payable to the partners to the extent minimum guarantees are received in excess of estimated general and administrative expenses and management fees. c. Reimbursement of other costs and expenses. With respect to Power, pursuant to a distribution agreement with Lorimar Distribution International, Inc. ("LDI") for domestic distribution rights (as amended, the "LDI Domestic Distribution Agreement"), an affiliate of the Managing General Partner has agreed to pay to the Partnership, on or before January 30, 1996, an amount generally equal to the amount by which as of January 30, 1996 (i) the sum of the Partnership's Acquisition Cost (as defined in said agreement) and the Partnership's share of the Distribution Expenses (as defined in said agreement) incurred in connection with the film exceeds (ii) the Partnership's Gross Receipts (as defined in said agreement) from the film (the "Power Guarantee"). For this purpose, Gross Receipts consists of all sums actually received with respect to Power by the Partnership pursuant to all applicable distribution agreements. Any payments received by the Partnership with respect to the Power Guarantee will be Partnership revenues to be used for Partnership purposes in accordance with the Partnership Agreement. Accordingly, all amounts received under the Power Guarantee will be used to satisfy obligations of the Partnership including those due to affiliates of the Managing General Partner. Foreign distribution in all media and domestic home video distribution of Partnership Films were originally licensed to LDI and Karl Lorimar Home Video, Inc., respectively, both affiliates of the Managing General Partner. The licenses were for minimum guaranteed payments equal to 30% and 20%, respectively, of the Partnership's contribution to each film's budget or cost of production, whichever is less. The foreign distribution and domestic home video distribution arrangements were assigned to other affiliates of the Managing General Partner in January 1989 and June 1988, respectively. As a result of various transactions, the foreign distribution and domestic home video distribution rights are now held by TWE. All minimum guarantees related to foreign distribution and domestic home video distribution have been recorded and received by the Partnership. Under the Partnership Agreement, these minimum guarantees were required to be distributed to the partners as mandatory distributions after deduction for management fees and general and administrative expenses. All mandatory distributions relating to minimum guarantees have been made and there will be no mandatory distributions attributable to minimum guarantees in the future. 9 The Managing General Partner, the Co-General Partner and their affiliates have charged to the Partnership the following Partnership expenses (excluding management fees) incurred by them:
Three months ended June 30, 1995 Managing General Co-General Partner Partner Total Interest $ 362,506 $ - $ 362,506 General and administrative 15,000 22,000 37,000 $ 377,506 $ 22,000 $ 399,506 Three months ended June 30, 1994 Managing General Co-General Partner Partner Total Interest $ 258,422 $ - $ 258,422 General and administrative 15,000 9,730 24,730 $ 273,422 $ 9,730 $ 283,152 Six months ended June 30, 1995 Managing General Co-General Partner Partner Total Interest $ 706,951 $ - $ 706,951 General and administrative 30,000 44,000 74,000 $ 736,951 $ 44,000 $ 780,951 Six months ended June 30, 1994 Managing General Co-General Partner Partner Total Interest $ 479,312 $ - $ 479,312 General and administrative 30,000 19,460 49,460 $ 509,312 $ 19,460 $ 528,772
Amounts due on demand (or past due) to the Managing General Partner and affiliates and to the Co-General Partner are comprised of the following: June 30, 1995 December 31, 1994 Managing Managing General Co-General General Co-General Partner Partner Partner Partner Notes and advances for prints & advertising, including interest $16,143,265 $ 0 $15,553,047 $ 0 Management fee and other 483,347 246,655 440,278 254,056 $16,626,612 $246,655 $15,993,325 $254,056
Interest paid to an affiliate of the Managing General Partner was:
Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 1995 1994 1995 1994 Interest paid $ 33,371 $ 81,448 $ 56,873 $143,661
10 Under a Credit, Guaranty and Security Agreement dated as of June 6, 1986 (the "Credit Agreement"), the Partnership obtained a revolving credit facility in the amount of up to $30,000,000 from a group of banks to finance print and advertising costs for the Partnership Films. The terms of the Credit Agreement provide for the payment of interest quarterly at a rate equal to 1 1/2% (2 1/2% in the case of default) over Chemical Bank's prime rate plus commitment fees and agency fees. Lorimar made a payment to the banks on July 31, 1987 of approximately $11,753,000, which was the then outstanding balance of the principal and interest plus fees under the Credit Agreement, and, pursuant to an agreement dated November 1, 1988, in consideration of such payment and certain indemnities by Lorimar, the banks assigned to Lorimar all of their interest in the Credit Agreement, the Partnership's notes made thereunder (collectively, the "P&A Note"), the related agreements and, with certain exceptions, the Collateral (as defined in the Credit Agreement). Lorimar has not charged the Partnership any commitment fees or agency fees and charges interest to the Partnership on the P&A Note at Chemical Bank's prime rate. The P & A Note and related accrued but unpaid interest became due and payable on December 31, 1990. As of June 30, 1995, the principal balance owed with respect to the P&A Note was approximately $4,985,000, and the related accrued but unpaid interest was approximately $674,000. To date, Lorimar has not made demand for payment in full for amounts due with respect to the P&A Note; however, Lorimar has the right to make such a demand at any time in the future. The Partnership does not have sufficient liquid assets to pay the principal of the P&A Note and interest thereon in full. In addition to the P&A Note, the Partnership is obligated to reimburse Lorimar for print and advertising costs and other distribution expenses advanced pursuant to the Partnership Agreement on behalf of the Partnership by LDI (the "P&A Advances"). As of June 30, 1995, the outstanding balance of the P&A Advances owed to Lorimar was approximately $7,328,000 and related accrued but unpaid interest, computed at Chemical Bank's prime rate, was approximately $3,156,000. Lorimar has the right to declare the P&A Advances, and related interest, to be immediately due and payable. To date, Lorimar has not made demand for payment of such amounts; however, Lorimar has the right to make such a demand at any time in the future. The Partnership does not have sufficient liquid assets to pay the principal of the P&A Advances and interest thereon in full. All amounts due to the Managing General Partner and its affiliates have been classified as current liabilities. Neither currently nor at any time over the remaining term of the Partnership is it anticipated that the Partnership will have sufficient assets to pay the principal plus interest on both the P&A Note and the P&A Advances. The Partnership maintains a checking account and an interest- earning mutual fund account. The interest-earning account is managed by an affiliate of the Co-General Partner. The interest rate earned on funds fluctuates daily and approximated 5.8% during the three months ended June 30, 1995. Interest earned on this account was $18,295 and $12,370 for the three months ended June 30, 1995 and 1994, respectively, and $36,166 and $23,445 for the six months ended June 30, 1995 and 1994, respectively. As of June 30, 1995, Prudential Securities Incorporated, an affiliate of the Co-General Partner, owned 113 Units. Note 4. Litigation: A purported class action lawsuit on behalf of a class of all persons who are or have been holders of limited partnership interests was filed on May 22, 1991 in the Superior Court of California for Los Angeles County. Named as defendants are Lorimar Motion Picture Management, Inc.; Lorimar Telepictures Corporation; Prudential Securities Incorporated; and Prudential-Bache Properties, Inc. (Tillman, et al. v. Lorimar Motion Picture Management, Inc., et al., Case No. BC 028964, L.A. Co. Sup. Ct.). The original complaint charged defendants with fraud, negligence, and breach of fiduciary duty in connection with the offering of the Units and breach of fiduciary duty in connection with the operation of the Partnership. The plaintiffs sought compensatory and punitive damages in an unspecified amount and an accounting. The General Partners had advised the Partnership that they intended to defend the case vigorously. Certain of the charges made in the complaint were similar to charges made in litigation entitled Galloway v. Lorimar Motion Picture Management, Inc., et al., filed in the courts of the State of Ohio. Certain of those charges were dismissed on the merits and the dismissal was affirmed on appeal. 11 A demurrer seeking dismissal of the complaint was filed by the defendants in 1991 and, on May 3, 1994, the Tillman court sustained this demurrer. The court ruled that the complaint was insufficient as a matter of law with respect to all claims arising from the public offering of the Units in 1985 and 1986. The court did not permit amendment of those claims. The court also sustained the demurrer challenging the sufficiency of plaintiffs' claims that the General Partners breached certain fiduciary duties under the Partnership Agreement in connection with their operation of the Partnership, but granted plaintiffs' counsel an opportunity to amend those claims to attempt to state a cause of action. An amended complaint for breach of fiduciary duty was filed on June 2, 1994, naming only the General Partners as defendants. The General Partners filed a demurrer to the amended complaint, together with a motion for summary adjudication that the specific conduct challenged in the amended complaint was undertaken by the General Partners in conformance with the terms and requirements of the Partnership Agreement. A hearing on these matters was held on August 3, 1994, and on November 1, 1994, the court sustained the General Partners' demurrer on the basis that the amended complaint failed to state a claim upon which relief may be granted. The court gave plaintiffs leave to file an amended complaint for breach of fiduciary duty and, for this reason, defendants' motion for summary judgment was denied without prejudice. On January 18, 1995, plaintiffs served their second amended complaint on the defendants. The second amended complaint asserts claims for alleged breaches of the Partnership Agreement and breaches of fiduciary duty by defendants. Plaintiffs seek damages in an unspecified amount but in excess of $500,000. On March 24, 1995, defendants filed an answer to the second amended complaint, denying the allegations therein and asserting several affirmative defenses. Defendants filed a summary judgment motion on April 18, 1995, and a hearing took place on May 24, 1995. On June 12, 1995, the court granted defendants' motion for summary judgment insofar as it sought dismissal of all claims made as a class action on behalf of Unitholders individually. However, the court permitted the action to proceed as a derivative action by plaintiffs on behalf of the Partnership. Pursuant to the court's order, plaintiffs again amended their complaint to seek on behalf of the Partnership recovery from the General Partners of allegedly improperly high fees and interest paid to certain banks which provided P&A Financing to the Partnership. Plaintiffs allege that defendants breached their fiduciary duties by permitting payment of such excess fees and interest and, in the complaint, estimate the allegedly excess fees and interest to exceed $500,000. Defendants continue to assert that their actions were entirely proper under the law and the terms of the Limited Partnership Agreement and that the Partnership did not pay any excess or improper fees or interest to the banks. The Partnership has been advised that the General Partners intend to defend the action vigorously. Nevertheless, preliminary discussions have been conducted regarding the possibility of presenting to the court for its approval a settlement which would reflect the size of the claim, the relative positions of the parties, and the costs of continued litigation. Accordingly, the date by which defendants must respond to the newest amended complaint has been extended until September 7, 1995. Prudential Securities Incorporated ("PSI"), certain of its present and former employees, the Managing General Partner and the Co-General Partner, among others, have been named defendants in a putative class action filed in U.S. District Court for the Southern District of New York, entitled In re Prudential Securities Incorporated Limited Partnerships Litigation (MDL 1005). Two former officers and the parent company of the Managing General Partner were also named as defendants, and the Managing General Partner has undertaken their defense. (Hereinafter, these additional defendants and the Managing General Partner are sometimes referred to collectively as "the Lorimar Organization Defendants.") The consolidated complaint, which was filed on June 8, 1994, consolidates complaints previously filed in actions in several federal district courts around the country that were transferred to the Southern District of New York by order of the Judicial Panel on Multidistrict Litigation in April 1994. None of the Lorimar Organization Defendants were named as defendants in any of the transferred actions. The consolidated complaint alleges violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO Act"), fraud, negligent misrepresentation, breach of fiduciary duties, breach of third-party beneficiary contracts, breach of implied covenants and violations of New Jersey statutes in connection with the marketing and sales of limited partnership interests. Plaintiffs request relief in the nature of: rescission of the purchase of securities, and recovery of all consideration and expenses in connection therewith, as well as compensation for lost use of money invested, less cash distributions; compensatory damages; consequential damages; treble damages for defendants' alleged RICO violations (both federal and New Jersey); general damages for all alleged injuries resulting from negligence, fraud, breaches of contract, and breaches of duty in an amount to be determined at trial; disgorgement and restitution of all earnings, profits, benefits and compensation received by defendants as a result of their allegedly unlawful acts; costs and disbursements of the action; reasonable attorneys' fees; and such other and further relief as the court deems just and proper. The Partnership is listed in the consolidated complaint as being among the limited partnerships at issue in the case. The Lorimar Organization Defendants, the Co-General Partner, and PSI believe they have meritorious defenses to the consolidated complaint and intend to vigorously defend themselves against this action. On September 29, 1994, plaintiffs filed a motion to deem each of the constituent complaints (in which the Lorimar Organization Defendants were not named) amended to conform to the consolidated complaint. The Managing General Partner opposed the motion. A hearing was held on November 21, 1994 and on November 28, 1994, the court granted plaintiffs' motion. As a result, the Lorimar Organization Defendants are deemed to be defendants in each of the constituent actions, as well as in the consolidated action. On October 31, 1994, the Managing General Partner filed a motion to dismiss the consolidated complaint (and each of the constituent actions) with respect to the Lorimar Organization Defendants. The hearing on the motion, originally expected in January 1995, was postponed indefinitely by the court, and the parties are awaiting a new hearing date. On December 20, 1994, PSI, along with various other defendants, moved to dismiss the entire consolidated complaint. That motion is pending. The Partnership is not aware of any legal proceedings that name the Partnership as a defendant. Neither the Tillman nor the MDL litigation described above name the Partnership as a party. The Partnership Agreement provides for indemnification of the General Partners and their affiliates under certain circumstances. The indemnification excludes damages assessed against a General Partner for violation of securities laws, the RICO Act or fraud. 12 Management's Discussion and Analysis of Financial Condition and Results of Operations Financial condition at June 30, 1995 The Partnership's ability to continue to operate at the present time is due exclusively to Lorimar's forbearance with respect to the Partnership's obligations which are currently due and owing to Lorimar and its affiliates, principally under the P&A Note and the P&A Advances. The Partnership has no assurance that Lorimar will not make demand at any time with respect to the P&A Note and/or the P&A Advances. The Partnership has neither sufficient liquid assets nor total assets to pay its current liabilities. As of June 30, 1995 the Partnership's current assets are $1,247,316 and its total assets are $11,761,664, while the Partnership's liabilities (all of which are current) are $16,973,944, of which $16,626,612 constitutes the amounts owed with respect to the P&A Note and the P&A Advances and other sums to Lorimar and its affiliates. In the event Lorimar demands payment of the P&A Note and/or the P&A Advances and the Partnership does not satisfy payment thereof in full, Lorimar will have all of its rights under applicable agreements and law, including the right ultimately to proceed against the Partnership's assets. In recognition of the Partnership's financial condition, the auditors' report issued in connection with the Partnership's financial statements for the year ended December 31, 1994 contains an explanatory paragraph regarding the substantial doubt of the ability of the Partnership to continue as a going concern. Even if Lorimar continues to forbear on the principal of the P&A Note and the P&A Advances and merely requires current satisfaction of interest, the Managing General Partner believes that the Partnership will continue to incur net operating losses on an annual basis through 1995. These losses are anticipated to result from the fact that the only significant source of Partnership revenue which is anticipated during this period is domestic syndication revenue under existing distribution agreements (which is estimated to aggregate approximately $167,000 through 1995, before deducting fees and expenses), and it is anticipated that this revenue will be less than the Partnership's aggregate annual interest expense (net of interest income) with respect to the P&A Note and P&A Advances during this period. Further, the general and administrative expenses of the Partnership will continue to increase such net losses. The Managing General Partner believes that the fair market value of the Partnership's assets will be less than the amount of the Partnership's current liabilities throughout the remaining term of the Partnership. Accordingly, the Managing General Partner believes that the Partnership will be unable to fully satisfy the P&A Note and the P&A Advances and that the Partnership will be unable to make any further distributions to the Unitholders. Discussion of the results of operations for the three months ended June 30, 1995 compared to the three months ended June 30, 1994. The results of operations are not necessarily comparable from quarter to quarter since the Partnership's income is determined by exploitation of its four films in the various media of the exploitation cycle (i.e. theatrical, home video, pay television, non-theatrical, network television and domestic syndication). The Partnership's film revenues for the three months ended June 30, 1995 were lower than the comparable period in 1994 due principally to a decrease in domestic syndication income. The Partnership had a net loss of $400,292 for the three months ended June 30, 1995. Film related revenues of $21,377 net of related costs of $19,816 resulted in a gross profit of $1,561, due largely to the syndication licensing of The Boy Who Could Fly, The Morning After, Power and American Anthem. However, this was offset by other operating expenses including interest expense of $362,506, general and administrative expenses of $57,000 and management fees of $642 less interest income of $18,295. Interest expense was higher for the three months ended June 30, 1995 than for the three months ended June 30, 1994 principally due to higher average interest rates and higher average borrowings. 13 The Partnership had a net loss of $281,514 for the three months ended June 30, 1994. Film related revenues of $82,503 net of related costs of $60,759 resulted in a gross profit of $21,744, due largely to the syndication licensing of The Morning After, The Boy Who Could Fly and Power. However, this was offset by other operating expenses including interest expense of $258,422, general and administrative expenses of $54,730 and management fees of $2,476 less interest income of $12,370. Discussion of the results of operations for the six months ended June 30, 1995 compared to the six months ended June 30, 1994. The Partnership's film revenues for the six months ended June 30, 1995 were lower than the comparable period in 1994 due principally to a decrease in domestic syndication income. The Partnership had a net loss of $812,454 for the six months ended June 30, 1995. Film related revenues of $45,335 net of related costs of $41,643 resulted in a gross profit of $3,692, due largely to the syndication licensing of American Anthem, The Morning After, The Boy Who Could Fly and Power. However, this gross profit was offset by other operating expenses including interest expense of $706,951, general and administrative expenses of $144,000 and management fees of $1,361 less interest income of $36,166. Interest expense was higher for the six months ended June 30, 1995 than for the six months ended June 30, 1994 principally due to higher average interest rates and higher average borrowings. General and administrative expenses were higher for the six months ended June 30, 1995 than for the comparable period in 1994 principally due to a net increase in legal fees. The Partnership had a net loss of $560,501 for the six months ended June 30, 1994. Film related revenues of $145,941 net of related costs of $116,829 resulted in a gross profit of $29,112, due largely to the syndication licensing of The Morning After, American Anthem, The Boy Who Could Fly and Power. However, this gross profit was offset by other operating expenses including interest expense of $479,312, general and administrative expenses of $129,367 and management fees of $4,379 less interest income of $23,445. 14 PAGE PART II. OTHER INFORMATION Item 1. Legal Proceedings. A purported class action lawsuit on behalf of a class of all persons who are or have been holders of limited partnership interests was filed on May 22, 1991 in the Superior Court of California for Los Angeles County. Named as defendants are Lorimar Motion Picture Management, Inc.; Lorimar Telepictures Corporation; Prudential Securities Incorporated; and Prudential-Bache Properties, Inc. (Tillman, et al. v. Lorimar Motion Picture Management, Inc., et al., Case No. BC 028964, L.A. Co. Sup. Ct.). The original complaint charged defendants with fraud, negligence, and breach of fiduciary duty in connection with the offering of the Units and breach of fiduciary duty in connection with the operation of the Partnership. The plaintiffs sought compensatory and punitive damages in an unspecified amount and an accounting. The General Partners had advised the Partnership that they intended to defend the case vigorously. Certain of the charges made in the complaint were similar to charges made in litigation entitled Galloway v. Lorimar Motion Picture Management, Inc., et al., filed in the courts of the State of Ohio. Certain of those charges were dismissed on the merits and the dismissal was affirmed on appeal. A demurrer seeking dismissal of the complaint was filed by the defendants in 1991 and, on May 3, 1994, the Tillman court sustained this demurrer. The court ruled that the complaint was insufficient as a matter of law with respect to all claims arising from the public offering of the Units in 1985 and 1986. The court did not permit amendment of those claims. The court also sustained the demurrer challenging the sufficiency of plaintiffs' claims that the General Partners breached certain fiduciary duties under the Partnership Agreement in connection with their operation of the Partnership, but granted plaintiffs' counsel an opportunity to amend those claims to attempt to state a cause of action. An amended complaint for breach of fiduciary duty was filed on June 2, 1994, naming only the General Partners as defendants. The General Partners filed a demurrer to the amended complaint, together with a motion for summary adjudication that the specific conduct challenged in the amended complaint was undertaken by the General Partners in conformance with the terms and requirements of the Partnership Agreement. A hearing on these matters was held on August 3, 1994, and on November 1, 1994, the court sustained the General Partners' demurrer on the basis that the amended complaint failed to state a claim upon which relief may be granted. The court gave plaintiffs leave to file an amended complaint for breach of fiduciary duty and, for this reason, defendants' motion for summary judgment was denied without prejudice. On January 18, 1995, plaintiffs served their second amended complaint on the defendants. The second amended complaint asserts claims for alleged breaches of the Partnership Agreement and breaches of fiduciary duty by defendants. Plaintiffs seek damages in an unspecified amount but in excess of $500,000. On March 24, 1995, defendants filed an answer to the second amended complaint, denying the allegations therein and asserting several affirmative defenses. Defendants filed a summary judgment motion on April 18, 1995, and a hearing took place on May 24, 1995. On June 12, 1995, the court granted defendants' motion for summary judgment insofar as it sought dismissal of all claims made as a class action on behalf of Unitholders individually. However, the court permitted the action to proceed as a derivative action by plaintiffs on behalf of the Partnership. Pursuant to the court's order, plaintiffs again amended their complaint to seek on behalf of the Partnership recovery from the General Partners of allegedly improperly high fees and interest paid to certain banks which provided P&A Financing to the Partnership. Plaintiffs allege that defendants breached their fiduciary duties by permitting payment of such excess fees and interest and, in the complaint, estimate the allegedly excess fees and interest to exceed $500,000. Defendants continue to assert that their actions were entirely proper under the law and the terms of the Limited Partnership Agreement and that the Partnership did not pay any excess or improper fees or interest to the banks. The Partnership has been advised that the General Partners intend to defend the action vigorously. Nevertheless, preliminary discussions have been conducted regarding the possibility of presenting to the court for its approval a settlement which would reflect the size of the claim, the relative positions of the parties, and the costs of continued litigation. Accordingly, the date by which defendants must respond to the newest amended complaint has been extended until September 7, 1995. Prudential Securities Incorporated ("PSI"), certain of its present and former employees, the Managing General Partner and the Co-General Partner, among others, have been named defendants in a putative class action filed in U.S. District Court for the Southern District of New York, entitled In re Prudential Securities Incorporated Limited Partnerships Litigation (MDL 1005). Two former officers and the parent company of the Managing General Partner were also named as defendants, and the Managing General Partner has undertaken their defense. (Hereinafter, these additional defendants and the Managing General Partner are sometimes referred to collectively as "the Lorimar Organization Defendants.") The consolidated complaint, which was filed on June 8, 1994, consolidates complaints previously filed in actions in several federal district courts around the country that were transferred to the Southern District of New York by order of the Judicial Panel on Multidistrict Litigation in April 1994. None of the Lorimar Organization Defendants were named as defendants in any of the transferred actions. The consolidated complaint alleges violations of the federal Racketeer Influenced and Corrupt Organizations Act ("RICO Act"), fraud, negligent misrepresentation, breach of fiduciary duties, breach of third-party beneficiary contracts, breach of implied covenants and violations of New Jersey statutes in connection with the marketing and sales of limited partnership interests. Plaintiffs request relief in the nature of: rescission of the purchase of securities, and recovery of all consideration and expenses in connection therewith, as well as compensation for lost use of money invested, less cash distributions; compensatory damages; consequential damages; treble damages for defendants' alleged RICO violations (both federal and New Jersey); general damages for all alleged injuries resulting from negligence, fraud, breaches of contract, and breaches of duty in an amount to be determined at trial; disgorgement and restitution of all earnings, profits, benefits and compensation received by defendants as a result of their allegedly unlawful acts; costs and disbursements of the action; reasonable attorneys' fees; and such other and further relief as the court deems just and proper. The Partnership is listed in the consolidated complaint as being among the limited partnerships at issue in the case. The Lorimar Organization Defendants, the Co-General Partner, and PSI believe they have meritorious defenses to the consolidated complaint and intend to vigorously defend themselves against this action. On September 29, 1994, plaintiffs filed a motion to deem each of the constituent complaints (in which the Lorimar Organization Defendants were not named) amended to conform to the consolidated complaint. The Managing General Partner opposed the motion. A hearing was held on November 21, 1994 and on November 28, 1994, the court granted plaintiffs' motion. As a result, the Lorimar Organization Defendants are deemed to be defendants in each of the constituent actions, as well as in the consolidated action. On October 31, 1994, the Managing General Partner filed a motion to dismiss the consolidated complaint (and each of the constituent actions) with respect to the Lorimar Organization Defendants. The hearing on the motion, originally expected in January 1995, was postponed indefinitely by the court, and the parties are awaiting a new hearing date. On December 20, 1994, PSI, along with various other defendants, moved to dismiss the entire consolidated complaint. That motion is pending. The Partnership is not aware of any legal proceedings that name the Partnership as a defendant. Neither the Tillman nor the MDL litigation described above name the Partnership as a party. The Partnership Agreement provides for indemnification of the General Partners and their affiliates under certain circumstances. The indemnification excludes damages assessed against a General Partner for violation of securities laws, the RICO Act or fraud. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant during the period covered by this report. 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. Lorimar Film Partners L.P. By: Lorimar Motion Picture Management, Inc. A California Corporation, Managing General Partner By: Date: Edward A. Romano Vice President, Treasurer (Principal Accounting Officer) By: Prudential-Bache Properties, Inc. A Delaware Corporation, Co-General Partner By: Date: Barbara J. Brooks Vice President - Finance and Chief Financial Officer (Principal Financial Officer) PAGE 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. Lorimar Film Partners L.P. By: Lorimar Motion Picture Management, Inc. A California Corporation, Managing General Partner By: /s/Edward A. Romano Date: August 14, 1995 Edward A. Romano Vice President, Treasurer (Principal Accounting Officer) By: Prudential-Bache Properties, Inc. A Delaware Corporation, Co-General Partner By: /s/Barbara J. Brooks Date: August 14, 1995 Barbara J. Brooks Vice President - Finance and Chief Financial Officer (Principal Financial Officer) EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 The Schedule contains summary financial information extracted from the financial statements for Lorimar Film Partners LP and is qualified in its entirety by reference to such financial statements 0000778923 Lorimar Film Partners LP 1 Dec-31-1995 Apr-01-1995 Jun-30-1995 6-MOS 1,247,316 0 0 0 10,514,348 0 0 0 11,761,664 16,973,944 0 0 0 0 5,212,280 11,761,664 21,377 39,672 0 0 77,458 0 362,506 (400,292) 0 0 0 0 0 (400,292) 0 0