10-K
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FORM 10-K
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number: 0-20944
JONES PROGRAMMING PARTNERS 2-A, LTD.
(Exact name of registrant as specified in its charter)
Colorado 84-1088819
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone no. including area code)
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:Limited Partnership
Interests
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 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
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
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DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I.
ITEM 1. BUSINESS
Jones Programming Partners 2-A, Ltd. (the "Partnership") is a Colorado
limited partnership that was formed in March 1992 pursuant to the public
offering of limited partnership interests in the Jones Programming Partners
Limited Partnership Program. Jones Entertainment Group, Ltd., a Colorado
corporation, is the general partner of the Partnership (the "General Partner").
The Partnership engages primarily in the business of acquiring, developing,
producing and distributing original programming ("Programming") to be owned by
the Partnership. As of December 31, 1994, the Partnership had three
Programming projects: "Charlton Heston Presents: The Bible," "Household Saints"
and "The Whipping Boy." Following is a description of these Programming
projects.
Charlton Heston Presents: The Bible. In May 1992, the General Partner, on
behalf of the Partnership, entered into an agreement with Agamemnon Films, an
unaffiliated party, to produce four one-hour programs for television, entitled
"Charlton Heston Presents: The Bible" (the "Bible Programs"). The production
costs of the Bible Programs were approximately $2,370,000. In return for
agreeing to fund these production costs, the Partnership acquired all rights to
the Bible Programs in all markets and in all media in perpetuity. As described
in the following paragraph, the Partnership subsequently assigned half of its
ownership of the Bible Programs to an unaffiliated party for an investment of
$1,000,000 toward the production costs for the Bible Programs. After
consideration of this investment by the unaffiliated party, the Partnership's
net investment in the Bible Programs, after consideration of amortization, was
$664,617 at December 31, 1994. From inception to December 31, 1994, the
Partnership has recognized $782,402 of revenue from this film.
In order to reduce the Partnership's financial exposure, the General
Partner, on behalf of the Partnership, assigned one-half of the Partnership's
interest in the Bible Programs to GoodTimes Home Video Corporation
("GoodTimes), an unaffiliated entity directly involved in the specialty home
video and international television distribution business, for an investment by
GoodTimes of $1,000,000. The Partnership and GoodTimes funded Jones
Documentary Film Corporation ("JDFC"), which in turn contracted with Agamemnon
Films for the production of the Bible Programs. JDFC was formed to insulate
the Partnership and GoodTimes for certain risks and potential liabilities
associated with the production of programming in foreign countries because the
Bible Programs were filmed on location in the Holy Lands.
The Partnership and JDFC granted the General Partner the exclusive rights
to distribute the Bible Programs. To accomplish this, the General Partner, on
its own behalf, and GoodTimes entered into an agreement to form J/G
Distribution Company to distribute the Bible Programs. J/G Distribution
Company was formed effective as of June 24, 1992 and the Partnership granted it
the sole and exclusive right to exhibit and distribute, and to license others
to exhibit and distribute, the Bible Programs throughout the universe, in
perpetuity, in all languages and in all media. J/G Distribution Company holds
the copyright for the benefit of the Partnership (50 percent interest) and
GoodTimes (50 percent interest). J/G Distribution Company is currently
distributing the Bible Programs in the retail home video market. At December
31, 1994, gross sales made by J/G Distribution Company totaled $532,402, of
which $266,201 will be retained by J/G Distribution Company for its fees and
marketing costs, with the remaining $266,201 belonging to the Partnership. At
December 31, 1994, the Partnership had received $91,838 of such amounts. The
remaining $174,363 was received in the first quarter of 1995.
In October 1994, J/G Distribution Company, an affiliate of the General
Partner, and Jones Interactive, Inc. ("JII"), also an affiliate of the General
Partner, entered into an agreement to produce a CD-ROM version of the Bible
Programs. The total cost for production of the CD-ROM version will be funded
by J/G Distribution Company. No Partnership funds will be utilized in the
production of the CD-ROM version; however, after J/G Distribution Company has
recouped its production costs, distribution fees and costs associated with
distribution, remaining net revenues will flow to the Partnership in the same
manner as net video revenue. The production is being done on two separate
discs, one for the Old Testament, which is expected to be completed in the
second
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quarter of 1995, and a second disc for the New Testament, which is expected to
be completed in the fourth quarter of 1995. Distribution of the CD-ROM version
will be done in the United States and Canada by affiliates of J/G Distribution
Company.
Household Saints. In February 1993, the Partnership acquired a one-third
ownership interest in a film scheduled for worldwide theatrical release
entitled "Household Saints." The budgeted production costs of "Household
Saints" were approximately $5,000,000, and the final production costs were
approximately $5,300,000. For a one-third ownership interest in the film, the
Partnership has contributed one-third of the budgeted production costs, or
$1,666,667. Two unaffiliated entities contributed similar amounts. At
December 31, 1994, the Partnership had invested approximately $1,914,000 in the
film, which included a production and overhead fee of $100,000 paid to the
General Partner by the Partnership. Although under the terms of the
Partnership's limited partnership agreement the General Partner is entitled to
a fee of 12 percent of the lower of actual or budgeted production costs for
each Partnership film project, which fee would have been approximately $600,000
for "Household Saints," the General Partner only took $100,000 as its
production and overhead fee due to the limited involvement of the General
Partner in the film's production. At December 31, 1994, the Partnership's net
investment in the film, after consideration of amortization, was $1,389,166.
From inception to December 31, 1994, the Partnership has recognized $400,000 of
revenue from this film.
The other owners of the film, which are not affiliated with the Partnership
or the General Partner, are New Line Productions, Inc. ("New Line") and
Columbia Tristar Home Video ("Columbia Tristar"), each of which owns a
one-third interest in the film for contributing one-third of the film's
budgeted production costs and completion costs. As equal participants in the
film, the Partnership, New Line and Columbia Tristar will generally share
equally in the net revenues generated by the film's distribution in all markets
until they each have recouped their investment in the film plus 12 percent per
annum interest on their unrecouped investment, after which net revenues will
also be shared with the film's talent.
"Household Saints" was released in theaters in the United States and Canada
in September 1993 and the film performed to a disappointing box office of
approximately $600,000 in the United States. Fine Line, a subsidiary of New
Line, was the film's North American theatrical distributor. Fine Line earned a
distribution fee equal to 20 percent of gross revenues generated by the
distribution of the film in theaters in the United States and Canada and it was
entitled to reimbursement of its distribution costs. Net theatrical revenues
were split equally among the Partnership, New Line and Columbia Tristar. The
funds that the Partnership and New Line each contributed for prints and
advertising in connection with the film's North American theatrical release
have been reimbursed to the Partnership and New Line. As of December 31, 1994,
the Partnership's share of gross revenues totaled $603,198, of which $203,198
will be retained by the distributor for its fees and marketing costs. The
remaining $400,000 has been received by the Partnership.
The film's international distribution in all media is being undertaken by
New Line International, also a subsidiary of New Line. From the gross revenues
generated by the film's distribution in all international media, New Line
International will be entitled to a 20 percent distribution fee plus
reimbursement of its costs, which are not to exceed $50,000, incurred in
distributing the film internationally. Net international revenues will be
split equally among the Partnership, New Line and Columbia Tristar. As of
December 31, 1994, international sales of approximately $1,102,000 had been
made, of which approximately $946,000 was attributed to sales in Italy and
Spain. Distribution in the international media is continuing.
The film's domestic home video distribution was undertaken by Columbia
Tristar. The disappointing U.S. theatrical box office translated to a
disappointing unit volume of rental home video sales (under 10,000 units have
been sold). From the gross revenues generated by the distribution of the film
in U.S. home video markets, Columbia Tristar will be entitled to a 20 percent
distribution fee plus reimbursement of its distribution costs, which are not to
exceed 18 percent of home video gross revenues. Net revenues from home video
sales will be split equally among the Partnership, New Line and Columbia
Tristar. As of December 31, 1994, domestic home video sales of approximately
$26,000 had been made.
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The film's distribution on television in the United States is being
undertaken jointly by New Line and the General Partner. From gross revenues
generated by the distribution of the film in U.S. television markets, New Line
and the General Partner will split a 20 percent distribution fee and will be
entitled to reimbursement of their costs incurred in distributing the film in
such markets. Net revenues from the distribution of the film in U.S.
television markets will be split equally among the Partnership, New Line and
Columbia Tristar.
All of the foregoing net revenue splits will govern until the Partnership,
New Line and Columbia Tristar recoup their original investments plus interest
on any unrecouped funds. Thereafter, a portion of net revenues will be shared
with the production unit, which includes the producers, writers, director and
actors. Such net post-recoupment revenues will be split 35 percent to the
production unit, 25 percent to the Partnership, 20 percent to New Line and 20
percent to Columbia Tristar until the production unit has received $1,000,000
in net revenues. After the production unit has received $1,000,000 in net
revenues and until it has received $2,000,000 in net revenues, the split will
be 25 percent to the production unit, 35 percent to the Partnership, 20 percent
to New Line and 20 percent to Columbia Tristar. After the production unit has
received $2,000,000 in net revenues, and thereafter, in perpetuity, net
revenues will be split 10 percent to the production unit, 50 percent to the
Partnership, 20 percent to New Line and 20 percent to Columbia Tristar.
The terms of the distribution agreements with each of New Line and Columbia
Tristar are 15 years, and can be renewed by New Line and Columbia Tristar at
their option subject to the Partnership's right, at five-year intervals
thereafter, to acquire New Line's and/or Columbia Tristar's distribution rights
if the Partnership has not yet recouped its investment in the film and if the
Partnership has another bona fide distribution plan in place.
The General Partner's Board of Directors has agreed in principal to
purchase the Partnership's interest in "Household Saints" from the Partnership.
The General Partner is in the process of obtaining the required three separate
independent appraisals of the fair market value of the Partnership's interest
in "Household Saints." As soon as the appraisals are obtained, an agreement
between the General Partner and the Partnership will be signed and the purchase
price of the film will be no less than the average of the three appraisals.
Closing of this sale is expected in 1995.
The General Partner has not yet determined how the proceeds from the sale
of "Household Saints" will be used by the Partnership. It is possible that the
Partnership will use a portion of the sale proceeds to invest in an additional
programming project. The General Partner has also not yet determined what
portion of the sale proceeds from "Household Saints" will be distributed to the
limited partners. At a minimum, however, the Partnership will distribute
enough of the sale proceeds to the limited partners to cover the limited
partners' federal income tax liability, if any, resulting from the sale.
The Whipping Boy. In August 1993, the Partnership acquired the rights to
"The Whipping Boy." "The Whipping Boy" has been made into a two hour telefilm.
The film premiered in the North American television market on The Disney
Channel, which is one of the leading pay cable television services in the
United States and Canada, in July 1994. The film cost was approximately
$4,100,000. At December 31, 1994, the Partnership had invested approximately
$2,669,000 in the film, which includes a $468,000 production and overhead fee
paid to the General Partner. At December 31, 1994, the Partnership's net
investment in the film, after consideration of amortization, was $1,067,466.
The film was co-produced by the General Partner and Gemini Films, a German
company. Principal photography on the movie commenced in September 1993, and
post-production occurred in October 1993. The completed picture was delivered
to The Disney Channel in the second quarter of 1994. From inception to
December 31, 1994, the Partnership has recognized $2,100,000 of revenue from
this film.
The Partnership was responsible for approximately one-half of the
$4,100,000 production cost, with the balance of the production budget funded by
Gemini Films and other co-production partners and/or territorial advances from
the film's international distributors. The amount contributed to the
production budget by the Partnership was partially reimbursed by license
advances totaling $2,100,000 received from The Disney Channel.
Gemini Films will have, in perpetuity, the copyright and all exploitation
rights to the film in German language territories (defined as Germany, Austria,
German-speaking Switzerland and German-speaking
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Luxembourg). It is anticipated that the film will be released theatrically in
Germany in the fourth quarter. Although these exploitation rights will remain
the sole property of Gemini Films, Gemini Films will account to the Partnership
for any revenue therefrom.
The Partnership will own the worldwide copyright, excluding German language
territories, in perpetuity. Although the Partnership will own all exploitation
rights in all media in North America, which is defined as the United States,
Canada and their respective territories and possessions, the Partnership will
account to Gemini Films for any revenue generated therefrom.
From the movie's North American revenues, the Partnership will first be
entitled to recover its investment plus interest. Thereafter, the Partnership
will receive 90 percent of all North American revenues and Gemini Films will
receive 10 percent of such revenues. With respect to international revenues
from the movie's distribution, after Gemini Films recovers $250,000 of its
investment in the movie's production budget, any funded overages and interest
out of net international revenues, the Partnership will receive 20 percent of
net international revenues and Gemini Films will receive 80 percent of net
international revenues.
The General Partner and Gemini Films have selected Canal Plus Distribution
as the company that will distribute and exploit the movie outside of North
America. Canal Plus Distribution will earn distribution fees of 15 percent of
the film's gross receipts outside of North America, and it will be reimbursed
for its expenses capped at 10 percent of the film's gross receipts outside of
North America (excluding dubbing costs). Canal Plus Distribution will be
responsible for accounting and remitting to Gemini Films the net revenues from
the film's distribution in all markets and in all media outside of North
America. Gemini Films will be responsible for forwarding the Partnership's
share of such revenues within 10 days of receipt of such funds from Canal Plus.
During 1994, the Partnership declared distributions totaling $567,124. At
December 31, 1994, all of these distributions had been paid except for
$141,781, which was paid in February 1995. These distributions were made using
cash on hand, interest income and cash provided by operating activities.
Distributions are expected to continue, although no determination has been made
regarding any specific level of future distributions. Distributions reduce the
financial flexibility of the Partnership. See Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The General Partner, on behalf of the Partnership, continues to seek
additional licensing agreements for the distribution of the Partnership's
filmed entertainment. The Partnership will seek to recover its investment in
filmed entertainment by relicensing its assets through international sales,
domestic cable or syndication, home video and ancillary markets.
The Partnership is in competition with many other organizations that
acquire, develop, produce and exploit programming, many of which have far
greater financial and personnel resources. These include the major film
studios, independent production companies, cable television networks and
distributors. Also, there is substantial competition in the industry for a
limited number of writers, producers, directors, actors and properties that are
able to attract major distribution in the various media and markets throughout
the world. Television itself competes with many other forms of entertainment.
Many writers, performers, directors and technical personnel who may be involved
in the Programming are members of guilds or unions that bargain collectively
with producers on an industry-wide basis from time to time. Any work stoppages
or other labor difficulties could significantly delay or stop the production of
Programming, which may result in increased production costs and delayed or
reduced returns to investors.
There is intense competition within the television programming industry for
exhibition time on cable television networks, domestic broadcast networks,
independent television stations and foreign television. In addition to this
substantial competition, not all productions are licensed in all media. In
recent years, the number of television production companies and the volume of
programming have increased, thereby intensifying this competition. The
Programming will be based on ideas, scripts and screenplays approved for
production by the General Partner. Acceptance of the Programming in certain
distribution media may be limited and the Programming will compete with other
types of television programming in all distribution media.
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ITEM 2. PROPERTIES
See Item 1.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
While the Partnership is publicly held, there is no public market for the
limited partnership interests and it is not expected that such a market will
develop in the future. As of February 15, 1995, the approximate number of
equity security holders in the Partnership was 540.
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ITEM 6. SELECTED FINANCIAL DATA
For the Year Ended
December 31, From Inception
----------------------------- (March 10, 1992) to
1994 1993 December 31, 1992
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Gross Revenues $2,673,557 $ 612,042 $ 200,000
Costs of Filmed Entertainment 2,123,181 534,611 173,309
Distribution Fees and Expenses 285,043 594,557 9,000
Operating, General and Administrative
Expenses 23,135 6,999 9,427
Operating Income (Loss) 242,198 (524,125) 8,264
Net Income (Loss) 247,628 (485,458) 61,799
Net Income (Loss) per Limited
Partnership Unit 21.83 (44.08) 10.40
Weighted Average Number of Limited
Partnership Units Outstanding 11,229 10,903 5,884
General Partner's Deficit (14,177) (10,982) (456)
Limited Partners' Capital 3,321,466 3,640,300 3,838,831
Total Assets 3,456,500 5,389,794 3,963,703
Debt - - -
General Partner Advances - 168,028 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
1994 Compared to 1993
Revenues of the Partnership increased $2,061,515, from $612,042 in
1993 to $2,673,557 in 1994. This increase was primarily the result of license
fee revenue received by the Partnership for "The Whipping Boy" totaling
$2,100,000 in 1994. No such license fee was received in 1993. The Partnership
also received revenues of $532,402 in 1994 as compared to $50,000 in 1993 for
"Charlton Heston Presents: The Bible" (the "Bible Programs"). These increases
in revenues were partially offset by a decrease in revenues from "Household
Saints," which totaled $41,155 in 1994 compared to $562,042 in 1993.
Filmed entertainment costs increased $1,588,570, from $534,611 in 1993
to $2,123,181 in 1994. This increase was the result of the increased revenues
as mentioned above. Filmed entertainment costs are amortized over the life of
each film in the ratio that current gross revenues bear to anticipated total
gross revenues.
Distribution fees and expenses decreased $309,514, from $594,557 in
1993 to $285,043 in 1994. This decrease was the result of the recognition of
prints and advertising costs of approximately $406,000 in 1993, compared to no
such costs in 1994, and also to a decrease in international sales of "Household
Saints" in 1994. Distribution fees and expenses relate to the compensation due
and costs incurred by distribution companies in licensing the Partnership's
film productions in the international theatrical, television and home video
markets. Although revenues increased in 1994 as compared to 1993, the primary
reason for the revenue increase in 1994 was due to the recognition of license
fee revenue for "The Whipping Boy," which fee did not have any associated
distribution costs because this telefilm was licensed to The Disney Channel.
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Interest income decreased $33,237, from $38,667 in 1993 to $5,430 in
1994. This decrease in interest income is the result of lower average cash
balances invested during 1994 as compared to average balances invested in 1993.
The Partnership recognized a net loss of $485,458 in 1993 compared to
net income of $247,628 in 1994. This change is primarily the result of an
increase in revenue relating to "The Whipping Boy," a decrease in distribution
fees and expenses relating to "Household Saints" and the fact that there were
no distribution fees and expenses for "The Whipping Boy."
1993 Compared to 1992
Revenues of the Partnership increased $412,042, from $200,000 in 1992
to $612,042 in 1993. This increase was primarily the result of international
sales of "Household Saints" during 1993.
Filmed entertainment costs increased $361,302, from $173,309 in 1992
to $534,611 in 1993. This increase was the result of increased revenues as
mentioned above. Filmed entertainment costs are amortized over the life of the
film in the ratio that current gross revenues bear to anticipated total gross
revenues.
Distribution fees and expenses increased $585,557, from $9,000 in 1992
to $594,557 in 1993. This increase was also the result of international sales
of "Household Saints." This increase was primarily the result of advertising
costs incurred for "Household Saints" of approximately $406,000. These
distribution fees and expenses relate to the compensation due and costs
incurred by unaffiliated parties in selling the Partnership's film productions
in the international theatrical, television and home video markets.
Operating, general and administrative expenses decreased $2,428, from
$9,427 in 1992 to $6,999 in 1993.
Interest income decreased $14,868, from $53,535 in 1992 to $38,667 in
1993. This decrease in interest income is the result of lower average cash
balances invested during 1993 as compared to average balances invested in 1992.
Financial Condition
Capital Resources
The Partnership's potential sources of capital are funds to be
received from the domestic and international distribution of the Partnership's
programming.
The Partnership received limited partner subscriptions totaling
$5,614,500, of which $4,842,506 was available for investment after payment of
sales commissions and other organizational and offering costs. The Partnership
has distributed $18,526 of interest earned on these subscriptions; $15,992 was
distributed to the limited partners in 1992 when the Partnership was formed and
an additional $2,534 was distributed to the limited partners in 1994 for
interest earned on subscriptions during the rescission period. The Partnership
has invested all of its net offering proceeds in film projects. At December
31, 1994, the Partnership had $160,888 in cash.
Liquidity
The Partnership's principal sources of liquidity are cash on hand and
amounts to be received from the domestic and international distribution of its
programming.
In May 1992, the General Partner, on behalf of the Partnership,
entered into an agreement with Agamemnon Films, an unaffiliated party, to
produce four one-hour programs for television, entitled "Charlton Heston
Presents: The Bible" (the "Bible Programs"). The production costs of the Bible
Programs were approximately $2,370,000. In return for agreeing to fund these
production costs, the Partnership acquired all
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rights to the Bible Programs in all markets and in all media in perpetuity. The
Partnership subsequently assigned half of its ownership of the Bible Programs
to an unaffiliated party, GoodTimes Home Video Corporation ("GoodTimes"), for
an investment of $1,000,000 toward the production costs for the Bible Programs.
The Partnership granted the General Partner the exclusive rights to
distribute the Bible Programs. To accomplish this, the General Partner, on its
own behalf, and GoodTimes entered into an agreement to form J/G Distribution
Company to distribute the Bible Programs. J/G Distribution Company was formed
as of June 24, 1992 and the Partnership granted it the sole and exclusive right
to exhibit and distribute, and to license others to exhibit and distribute, the
Bible Programs throughout the universe, in perpetuity, in all languages and in
all media. J/G Distribution Company holds the copyright for the benefit of the
Partnership (50 percent interest) and GoodTimes (50 percent interest). J/G
Distribution Company is currently distributing the Bible Programs in the retail
home video market. At December 31, 1994, gross sales made by J/G Distribution
Company totaled $532,402, of which $266,201 will be retained by J/G
Distribution Company for its fees and marketing costs, with the remaining
$266,201 belonging to the Partnership. At December 31, 1994, the Partnership
had received $91,838 of such amounts. The remaining $174,363 was received in
the first quarter of 1995.
In October 1994, J/G Distribution Company, an affiliate of the General
Partner, and Jones Interactive, Inc. ("JII"), also an affiliate of the General
Partner, entered into an agreement to produce a CD-ROM version of the Bible
Programs. The total cost for production of the CD-ROM version will be funded
by J/G Distribution Company. No Partnership funds will be utilized in the
production of the CD-ROM version; however, after J/G Distribution Company has
recouped its production costs, distribution fees and costs associated with
distribution, remaining net revenues will flow to the Partnership in the same
manner as net video revenue. The production is being done on two separate
discs, one for the Old Testament, which is expected to be completed in the
second quarter of 1995, and a second disc for the New Testament, which is
expected to be completed in the fourth quarter of 1995. Distribution of the
CD-ROM version will be done in the United States and Canada by affiliates of
J/G Distribution Company.
In February 1993, the Partnership acquired a one-third ownership
interest in a film scheduled for worldwide theatrical release entitled
"Household Saints." For a one-third ownership interest in the film, the
Partnership has contributed one-third of the budgeted production costs, or
$1,666,667, along with two other unaffiliated entities. At December 31, 1994,
the Partnership had invested approximately $1,914,000 in the film, which
included a production and overhead fee of $100,000 paid to the General Partner
by the Partnership. Although under the terms of the Partnership's limited
partnership agreement the General Partner is entitled to a fee of 12 percent of
the lower of actual or budgeted production costs for each Partnership film
project, which fee would have been approximately $600,000 for "Household
Saints," the General Partner only took $100,000 as its production and overhead
fee due to the limited involvement of the General Partner in the film's
production. In addition, the Partnership paid approximately $406,000 for
prints and advertising costs.
An unaffiliated entity began marketing the film in all international
media in March 1993, and in September 1993, the film was released in theaters
in the United States and Canada. The film performed to a disappointing box
office of approximately $600,000 in the United States. The disappointing U.S.
theatrical box office translated to a disappointing unit volume of rental home
video sales (under 10,000 units have been sold). The funds that the
Partnership and another one-third owner contributed for prints and advertising
in connection with the film's theatrical release will be reimbursed from
worldwide revenues in a senior position before the three owners begin
participating in the one-third revenue split. As of December 31, 1994, the
Partnership's share of gross revenues totaled $603,198, of which $203,198 has
been retained by the distributor for its fees and marketing costs. The
remaining $400,000 has been received by the Partnership and had been applied
toward recoupment of its prints and advertising costs.
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The General Partner's Board of Directors has agreed in principal to
purchase the Partnership's interest in "Household Saints" from the Partnership.
The General Partner is in the process of obtaining the required three separate
independent appraisals of the fair market value of the Partnership's interest
in "Household Saints." As soon as the appraisals are obtained, an agreement
between the General Partner and the Partnership will be signed and the purchase
price of the film will be no less than the average of the three appraisals.
Closing of this sale is expected in 1995.
The General Partner has not yet determined how the proceeds from the
sale of "Household Saints" will be used by the Partnership. It is possible
that the Partnership will use a portion of the sale proceeds to invest in an
additional programming project. The General Partner has also not yet
determined what portion of the sale proceeds from "Household Saints" will be
distributed to the limited partners. At a minimum, however, the Partnership
will distribute enough of the sale proceeds to the limited partners to cover
the limited partners' federal income tax liability, if any, resulting from the
sale.
In August 1993, the Partnership acquired the rights to "The Whipping
Boy." "The Whipping Boy" has been made into a two-hour telefilm. At December
31, 1994, the Partnership had invested approximately $2,669,000 in the film,
which includes a $468,000 production and overhead fee paid to the General
Partner. The Partnership has received approximately $2,100,000 from The Disney
Channel for licensing certain rights to the film to The Disney Channel.
Depending on market conditions, the General Partner will pursue
distribution of "The Whipping Boy" in the domestic home video market in 1995.
The film will also be distributed internationally in the theatrical and home
video markets in 1995.
In December 1993, the Partnership declared a distribution of $141,781,
which was paid to the partners in February 1994. During 1994, the Partnership
declared distributions totaling $567,123, of which $141,781 had not been paid
to the partners as of December 31, 1994 and which was paid to the partners in
February 1995. These distributions were made using cash on hand, interest
income and cash provided by operating activities. Distributions are expected
to continue, although no determination has been made regarding any specific
level of future distributions. Distributions reduce the financial flexibility
of the Partnership.
The General Partner believes that the Partnership has, and will
continue to have, sufficient sources of capital available to conduct its
operations and to meet its future obligations.
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11
Item 8. Financial Statements
JONES PROGRAMMING PARTNERS 2-A, LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
INDEX
Page
----
Report of Independent Public Accountants 12
Balance Sheets 13
Statements of Operations 14
Statements of Partners' Capital (Deficit) 15
Statements of Cash Flows 16
Notes to Financial Statements 17
11
12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jones Programming Partners 2-A, Ltd.:
We have audited the accompanying balance sheets of Jones Programming
Partners 2-A, Ltd. (a Colorado limited partnership) as of December 31, 1994 and
1993, and the related statements of operations, partners' capital (deficit) and
cash flows for the years ended December 31, 1994 and 1993 and for the period
from inception (March 10, 1992) to December 31, 1992. These financial
statements are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jones Programming
Partners 2-A, Ltd. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years ended December 31, 1994 and 1993
and for the period from inception (March 10, 1992) to December 31, 1992, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 22, 1995.
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13
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
BALANCE SHEETS
December 31,
--------------------------
ASSETS 1994 1993
------ ----------- ----------
CASH AND CASH EQUIVALENTS $ 160,888 $ 253,758
ACCOUNTS RECEIVABLE 174,363 274,338
INVESTMENT/ADVANCES FOR FILM PRODUCTION,
net of accumulated amortization of $2,831,101 and $707,920
at December 31, 1994 and 1993, respectively 3,121,249 4,861,698
----------- ----------
Total assets $ 3,456,500 $5,389,794
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Accounts payable to affiliates $ - $ 168,028
Production and overhead fee payable to the General Partner - 468,000
Accrued distributions to partners 141,781 141,781
Accrued liabilities 7,430 2,500
----------- ----------
Total liabilities 149,211 780,309
----------- ----------
DEFERRED REVENUE - 980,167
----------- ----------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Distributions (13,416) (7,745)
Accumulated deficit (1,761) (4,237)
----------- ----------
(14,177) (10,982)
----------- ----------
Limited Partners -
Net contributed capital (11,229 units
outstanding at December 31, 1994
and 1993) 4,823,980 4,826,514
Distributions (1,328,244) (766,792)
Accumulated deficit (174,270) (419,422)
----------- ----------
3,321,466 3,640,300
----------- ----------
Total liabilities and partners' capital (deficit) $ 3,456,500 $5,389,794
=========== ==========
The accompanying notes to financial statements
are an integral part of these balance sheets.
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14
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Year Ended
December 31, For the Period from
-------------------------- Inception (March 10, 1992)
1994 1993 to December 31, 1992
---------- --------- --------------------------
GROSS REVENUES $2,673,557 $ 612,042 $200,000
COSTS AND EXPENSES:
Costs of filmed entertainment 2,123,181 534,611 173,309
Distribution fees and expenses 285,043 594,557 9,000
Operating, general and administrative expenses 23,135 6,999 9,427
---------- --------- --------
OPERATING INCOME (LOSS) 242,198 (524,125) 8,264
---------- --------- --------
INTEREST INCOME 5,430 38,667 53,535
---------- --------- --------
NET INCOME (LOSS) $ 247,628 $(485,458) $ 61,799
========== ========= ========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 2,476 $ (4,855) $ 618
========== ========= ========
Limited Partners $ 245,152 $(480,603) $ 61,181
========== ========= ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 21.83 $ (44.08) $ 10.40
========== ========= ========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP UNITS
OUTSTANDING 11,229 10,903 5,884
========== ========= ========
The accompanying notes to financial statements
are an integral part of these statements.
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15
JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the Year Ended
December 31, For the Period from
----------------------------- Inception (March 10, 1992)
1994 1993 to December 31, 1992
---------- ---------- --------------------------
GENERAL PARTNER:
Balance, beginning of period $ (10,982) $ (456) $ -
Capital contributed - - 1,000
Distributions (5,671) (5,671) (2,074)
Net income (loss) for period 2,476 (4,855) 618
---------- ---------- ----------
Balance, end of period $ (14,177) $ (10,982) $ (456)
========== ========== ==========
LIMITED PARTNERS:
Balance, beginning of period $3,640,300 $3,838,831 $ -
---------- ---------- ----------
Capital contributed - 978,000 4,636,500
Less-
Sales commissions - (97,800) (463,650)
Syndication costs - (36,675) (173,869)
Distribution of interest
income on escrowed funds (2,534) - (15,992)
---------- ---------- ----------
Net contributed capital (2,534) 843,525 3,982,989
Distributions (561,452) (561,453) (205,339)
Net income (loss) for period 245,152 (480,603) 61,181
---------- ---------- ----------
Balance, end of period $3,321,466 $3,640,300 $3,838,831
========== ========== ==========
The accompanying notes to financial statements
are an integral part of these statements.
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JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Year Ended
December 31, For the Period from
----------------------------- Inception (March 10, 1992)
1994 1993 to December 31, 1992
---------- ----------- --------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 247,628 $ (485,458) $ 61,799
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of filmed entertainment costs 2,123,181 534,611 173,309
Decrease (increase) in accounts receivable 99,975 (274,338) -
Decrease (increase) in interest receivable - 20,345 (20,345)
Decrease (increase) in other assets - 32,075 (32,075)
Increase (decrease) in accrued liabilities 4,930 (5,000) 7,500
Increase (decrease) in accounts payable to affiliates (168,028) 168,028 -
Increase (decrease) in deferred revenue (980,167) 980,167 -
---------- ----------- -----------
Net cash provided by operating activities 1,327,519 970,430 190,188
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Film production advances (382,732) (4,269,799) (2,299,819)
Increase (decrease) in production and overhead fee (468,000) 468,000 -
---------- ----------- -----------
Net cash used in investing activities (850,732) (3,801,799) (2,299,819)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital, net of commissions and
syndication costs - 843,525 3,999,981
Proceeds from investment in filmed entertainment - - 1,000,000
Increase in accrued distributions to partners - 23,953 117,828
Distributions to partners (567,123) (567,124) (223,405)
Interest distribution to limited partners (2,534) - -
---------- ----------- -----------
Net cash provided by (used in) financing activities (569,657) 300,354 4,894,404
---------- ----------- -----------
Increase (decrease) in cash and cash equivalents $ (92,870) $(2,531,015) $ 2,784,773
Cash and cash equivalents, beginning of period 253,758 2,784,773 -
---------- ----------- -----------
Cash and cash equivalents, end of period $ 160,888 $ 253,758 $ 2,784,773
========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
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JONES PROGRAMMING PARTNERS 2-A, LTD.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BUSINESS
Jones Programming Partners 2-A, Ltd. (the "Partnership"), organized in
March 1992, is a limited partnership formed under Colorado law to engage in the
business of acquiring, developing and owning rights to and arranging for the
production, licensing and distribution of original entertainment programming.
Jones Entertainment Group, Ltd. is the General Partner of the Partnership.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts in banks and
highly liquid investments purchased with an original maturity of three months
or less.
Film Revenue Recognition
The Partnership recognizes revenues in accordance with the provisions
of Statement of Financial Accounting Standards No. 53 ("SFAS No. 53").
Revenues from domestic and foreign licensing agreements for programming, which
may include the receipt by the Partnership of non-refundable guaranteed
amounts, are recognized when license fees or other revenues are known and the
film is available for exhibition or telecast, providing other conditions of
sale, as prescribed by SFAS No. 53, have been met. Advances received for
licensing or other purposes prior to exhibition or telecast are deferred and
recognized as revenue when the above conditions are achieved.
Investment/Advances in Film Productions
Investment in film costs consists of advances to production entities
for story rights, production, and film completion costs, and is stated at the
lower of cost or estimated net realizable value. In addition, production and
overhead fees payable to the General Partner are capitalized and included as
investment in film costs. The investment in film costs will be amortized in
the same ratio that current year gross revenues bear to total estimated
ultimate gross revenues on an individual film basis. Estimated losses, if any,
will be provided for in full when determined by the General Partner.
Distribution Costs
Commissions, distribution expenses and marketing costs incurred in
connection with film distribution in any market are recorded when the related
license fees are recorded as revenue in the Partnership's Statements of
Operations.
(3) CONTRIBUTED CAPITAL, COMMISSIONS AND OFFERING COSTS
The capitalization of the Partnership is set forth in the accompanying
Statements of Partners' Capital (Deficit). No existing limited partner is
obligated to make any additional contributions to Partnership capital.
The Partnership's initial public offering expired on March 15, 1993.
At December 31, 1994, the Partnership had gross limited partner subscriptions
totaling $5,614,500.
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18
The General Partner purchased its interest in the Partnership by
contributing $1,000 to Partnership capital.
An affiliate of the General Partner, Jones International Securities,
Ltd., received a commission of 10 percent of capital contributions of the
limited partners, from which the affiliate paid all commissions of
participating broker-dealers which sold the Partnership's interests. The
General Partner was reimbursed for all offering costs up to 3.75 percent of
gross offering proceeds. Commission costs and reimbursements to the General
Partner for costs for raising Partnership capital were charged to limited
partners' capital.
Profits, losses and distributions of the Partnership are allocated 99
percent to the limited partners and 1 percent to the General Partner until the
limited partners have received distributions equal to 100 percent of their
capital contributions plus an annual return thereon of 12 percent, cumulative
and non-compounded. Thereafter, profits and distributions will generally be
allocated 80 percent to the limited partners and 20 percent to the General
Partner. Interest income earned prior to the start of the Partnership's first
production was allocated 100 percent to the limited partners.
(4) TRANSACTIONS WITH THE PARTNERSHIP AND AFFILIATED ENTITIES
The General Partner receives a production and overhead fee for
administering the affairs of the Partnership equal to 12 percent of the lower
of direct costs or budgeted direct costs of each programming project. This fee
is calculated and payable at the time principal photography commences on each
particular project and, in the case of a series, is payable on a per episode
basis. The Partnership paid a $240,000 production and overhead fee in 1992 for
the production of "Charlton Heston Presents: The Bible." The Partnership also
paid a $100,000 production and overhead fee in March 1993 for the production of
"Household Saints." In addition, the Partnership paid a $468,000 production and
overhead fee to the General Partner in June 1994 for the production of "The
Whipping Boy."
The General Partner also is entitled to reimbursement from the
Partnership for its direct expenses allocable to the operations of the
Partnership, which shall include, but not be limited to, rent, supplies,
telephone, travel, legal expenses, accounting and auditing expenses,
preparation and distribution of reports to investors and salaries of any full
or part-time employees. Although the General Partner is entitled to
reimbursement for all direct and indirect expenses allocable to the
Partnership, for the years ended December 31, 1994 and 1993 and for the period
from inception (March 10, 1992) to December 31, 1992, only direct expenses of
$3,046, $1,182 and $519, respectively, were charged to the Partnership.
In October 1994, J/G Distribution Company, an affiliate of the General
Partner, and Jones Interactive, Inc. ("JII"), also an affiliate of the General
Partner, entered into an agreement to produce a CD-ROM version of the Bible
Programs. The total cost for production of the CD-ROM version will be funded
by J/G Distribution Company. No Partnership funds will be utilized in the
production of the CD-ROM version; however, after J/G Distribution Company has
recouped its production costs, distribution fees and costs associated with
distribution, remaining net revenues will flow to the Partnership in the same
manner as net video revenue. The production is being done on two separate
discs, one for the Old Testament, which is expected to be completed in the
second quarter of 1995, and a second disc for the New Testament, which is
expected to be completed in the fourth quarter of 1995. Distribution of the
CD-ROM version will be done in the United States and Canada by affiliates of
J/G Distribution Company.
(5) INVESTMENT/ADVANCES FOR FILM PRODUCTION
"Charlton Heston Presents: The Bible"
In May 1992, the General Partner, on behalf of the Partnership,
entered into an agreement with Agamemnon Films, an unaffiliated party, to
produce four one-hour programs for television, entitled "Charlton Heston
Presents: The Bible" (the "Bible Programs"). The production costs of the Bible
Programs were
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19
approximately $2,100,000. In addition, the Partnership paid a $240,000
production and overhead fee to the General Partner. In return for agreeing to
fund these production costs, the Partnership acquired all rights to the Bible
Programs in all markets and in all media in perpetuity. As described in the
following paragraph, the Partnership subsequently assigned half of its
ownership of the Bible Programs to an unaffiliated party for an investment of
$1,000,000 toward the production costs for the Bible Programs. After
consideration of this investment by the unaffiliated party, the Partnership's
net investment in the Bible Programs, after consideration of amortization, was
$664,617 at December 31, 1994. From inception to December 31, 1994, the
Partnership has recognized $782,401 of revenue from this film.
"Household Saints"
In February 1993, the Partnership acquired a one-third ownership
interest in a film scheduled for worldwide theatrical release entitled
"Household Saints." The budgeted production costs of "Household Saints" were
approximately $5,000,000, and the final production costs were approximately
$5,300,000. For a one-third ownership interest in the film, the Partnership
has contributed one-third of the budgeted production costs, or $1,666,667. Two
unaffiliated entities contributed similar amounts. At December 31, 1994, the
Partnership had invested approximately $1,914,000 in the film, which included a
production and overhead fee of $100,000 paid to the General Partner by the
Partnership. Although under the terms of the Partnership's limited partnership
agreement the General Partner is entitled to a fee of 12 percent of the lower
of actual or budgeted production costs for each Partnership film project, which
fee would have been approximately $600,000 for "Household Saints," the General
Partner only took $100,000 as its production and overhead fee due to the
limited involvement of the General Partner in the film's production. At
December 31, 1994, the Partnership's net investment in the film, after
consideration of amortization, was $1,389,166. From inception to December 31,
1994, the Partnership has recognized $603,198 of revenue from this film.
"The Whipping Boy"
In August 1993, the Partnership acquired the rights to "The Whipping
Boy." "The Whipping Boy" has been made into a two-hour telefilm. The film
premiered in the North American television market on The Disney Channel, which
is one of the leading pay cable television services in the United States and
Canada, in July 1994. The film cost was approximately $4,100,000. At December
31, 1994, the Partnership had invested approximately $2,669,000 in the film,
which includes a $468,000 production and overhead fee paid to the General
Partner. At December 31, 1994, the Partnership's net investment in the film,
after consideration of amortization, was $1,067,466. The film was co-produced
by the General Partner and Gemini Films, a German company. Principal
photography on the movie commenced in September 1993, and post-production
occurred in October 1993. The completed picture was delivered to The Disney
Channel in the second quarter of 1994. From inception to December 31, 1994,
the Partnership has recognized $2,100,000 of revenue from this film.
(6) DISTRIBUTION OF FILM PROJECTS
"Charlton Heston Presents: The Bible"
In order to reduce the Partnership's financial exposure, the General
Partner, on behalf of the Partnership, assigned one-half of the Partnership's
interest in the Bible Programs to GoodTimes Home Video Corporation
("GoodTimes"), an unaffiliated entity directly involved in the specialty home
video and international television distribution business, for an investment by
GoodTimes of $1,000,000. The Partnership and GoodTimes funded Jones
Documentary Film Corporation ("JDFC"), which in turn contracted with Agamemnon
Films for the production of the Bible Programs. JDFC was formed to insulate
the Partnership and GoodTimes from certain risks and potential liabilities
associated with the production of programming in foreign countries because the
Bible Programs were filmed on location in the Holy Lands.
The Partnership and JDFC granted the General Partner the exclusive
rights to distribute the Bible Programs. To accomplish this, the General
Partner, on its own behalf, and GoodTimes entered into an agreement to form J/G
Distribution Company to distribute the Bible Programs. J/G Distribution
Company was formed
19
20
effective as of June 24, 1992 and the Partnership granted it the sole and
exclusive right to exhibit and distribute, and to license others to exhibit and
distribute, the Bible Programs throughout the universe, in perpetuity, in all
languages and in all media. J/G Distribution Company holds the copyright for
the benefit of the Partnership (50 percent interest) and GoodTimes (50 percent
interest). J/G Distribution Company is currently distributing the Bible
Programs in the retail home video market. At December 31, 1994, gross sales
made by J/G Distribution Company totaled $532,402, of which $266,201 will be
retained by J/G Distribution Company for its fees and marketing costs, with the
remaining $266,201 belonging to the Partnership. At December 31, 1994, the
Partnership had received $91,838 of such amounts. The remaining $174,363 was
received in the first quarter of 1995.
In October 1994, J/G Distribution Company, an affiliate of the General
Partner, and Jones Interactive, Inc. ("JII"), also an affiliate of the General
Partner, entered into an agreement to produce a CD-ROM version of the Bible
Programs. The total cost for production of the CD-ROM version will be funded by
J/G Distribution Company. No Partnership funds will be utilized in the
production of the CD-ROM version; however, after J/G Distribution Company has
recouped its production costs, distribution fees and costs associated with
distribution, remaining net revenues will flow to the Partnership in the same
manner as net video revenue. The production is being done on two separate
discs, one for the Old Testament, which is expected to be completed in the
second quarter of 1995, and a second disc for the New Testament, which is
expected to be completed in the fourth quarter of 1995. Distribution of the
CD-ROM version will be done in the United States and Canada by affiliates of
J/G Distribution Company.
"Household Saints"
The other owners of the film, which are not affiliated with the
Partnership or the General Partner, are New Line Productions, Inc. ("New Line")
and Columbia Tristar Home Video ("Columbia Tristar"), each of which owns a
one-third interest in the film for contributing one-third of the film's
budgeted production costs and completion costs. As equal participants in the
film, the Partnership, New Line and Columbia Tristar will generally share
equally in the net revenues generated by the film's distribution in all markets
until they each have recouped their investment in the film plus 12 percent per
annum interest on their unrecouped investment, after which net revenues will
also be shared with the film's talent.
"Household Saints" was released in theatres in the United States and
Canada in September 1993 and the film performed to a disappointing box office
of approximately $600,000 in the United States. Fine Line, a subsidiary of New
Line, was the film's North American theatrical distributor. Fine Line earned a
distribution fee equal to 20 percent of gross revenues generated by the
distribution of the film in theatres in the United States and Canada and it was
entitled to reimbursement of its distribution costs. Net theatrical revenues
were split equally among the Partnership, New Line and Columbia Tristar. The
funds that the Partnership and New Line each contributed for prints and
advertising in connection with the film's North American theatrical release
have been reimbursed to the Partnership and New Line. As of December 31, 1994,
the Partnership's share of gross revenues totaled $603,198, of which $203,198
will be retained by the distributor for its fees and marketing costs. The
remaining $400,000 has been received by the Partnership and was recorded as
revenue in 1993.
The film's international distribution in all media is being undertaken
by New Line International, also a subsidiary of New Line. From the gross
revenues generated by the film's distribution in all international media, New
Line International will be entitled to a 20 percent distribution fee plus
reimbursement of its costs, which are not to exceed $50,000, incurred in
distributing the film internationally. Net international revenues will be
split equally among the Partnership, New Line and Columbia Tristar. As of
December 31, 1994, international sales of approximately $1,102,000 had been
made, of which approximately $946,000 was attributed to sales in Italy and
Spain. Distribution in the international media is continuing.
The film's domestic home video distribution was undertaken by Columbia
Tristar. The disappointing U.S. theatrical box office translated to a
disappointing unit volume of rental home video sales (under 10,000 units have
been sold). From the gross revenues generated by the distribution of the film
in U.S. home video markets, Columbia Tristar will be entitled to a 20 percent
distribution fee plus reimbursement of its distribution costs,
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21
which are not to exceed 18 percent of home video gross revenues. Net revenues
from home video sales will be split equally among the Partnership, New Line and
Columbia Tristar. As of December 31, 1994, domestic home video sales of
approximately $26,000 had been made.
The film's distribution on television in the United States is being
undertaken jointly by New Line and the General Partner. From gross revenues
generated by the distribution of the film in U.S. television markets, New Line
and the General Partner will split a 20 percent distribution fee and will be
entitled to reimbursement of their costs incurred in distributing the film in
such markets. Net revenues from the distribution of the film in U.S.
television markets will be split equally among the Partnership, New Line and
Columbia Tristar.
All of the foregoing net revenue splits will govern until the
Partnership, New Line and Columbia Tristar recoup their original investments
plus interest on any unrecouped funds. Thereafter, a portion of net revenues
will be shared with the production unit, which includes the producers, writers,
director and actors. Such net post-recoupment revenues will be split 35
percent to the production unit, 25 percent to the Partnership, 20 percent to
New Line and 20 percent to Columbia Tristar until the production unit has
received $1,000,000 in net revenues. After the production unit has received
$1,000,000 in net revenues and until it has received $2,000,000 in net
revenues, the split will be 25 percent to the production unit, 35 percent to
the Partnership, 20 percent to New Line and 20 percent to Columbia Tristar.
After the production unit has received $2,000,000 in net revenues, and
thereafter, in perpetuity, net revenues will be split 10 percent to the
production unit, 50 percent to the Partnership, 20 percent to New Line and 20
percent to Columbia Tristar.
The terms of the distribution agreements with each of New Line and
Columbia Tristar are 15 years, and can be renewed by New Line and Columbia
Tristar at their option subject to the Partnership's right, at five-year
intervals thereafter, to acquire New Line's and/or Columbia Tristar's
distribution rights if the Partnership has not yet recouped its investment in
the film and if the Partnership has another bona fide distribution plan in
place.
The General Partner's Board of Directors has agreed in principal to
purchase the Partnership's interest in "Household Saints" from the Partnership.
The General Partner is in the process of obtaining the required three separate
independent appraisals of the fair market value of the Partnership's interest
in "Household Saints." As soon as the appraisals are obtained, an agreement
between the General Partner and the Partnership will be signed and the purchase
price of the film will be no less than the average of the three appraisals.
Closing of this sale is expected in 1995.
"The Whipping Boy"
The Partnership was responsible for approximately one-half of the
$4,100,000 production cost, with the balance of the production budget funded by
Gemini Films and other co-production partners and/or territorial advances from
the film's international distributors. The amount contributed to the
production budget by the Partnership was partially reimbursed by license
advances totaling $2,100,000 received from The Disney Channel.
Gemini Films will have, in perpetuity, the copyright and all
exploitation rights to the film in German language territories (defined as
Germany, Austria, German-speaking Switzerland and German-speaking Luxembourg).
It is anticipated that the film will be released theatrically in Germany in the
fourth quarter. Although these exploitation rights will remain the sole
property of Gemini Films, Gemini Films will account to the Partnership for any
revenue therefrom.
The Partnership will own the worldwide copyright, excluding German
language territories, in perpetuity. Although the Partnership will own all
exploitation rights in all media in North America, which is defined as the
United States, Canada and their respective territories and possessions, the
Partnership will account to Gemini Films for any revenue generated therefrom.
From the movie's North American revenues, the Partnership will first
be entitled to recover its investment plus interest. Thereafter, the
Partnership will receive 90 percent of all North American revenues and Gemini
Films will receive 10 percent of such revenues. With respect to international
revenues from the movie's
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22
distribution, after Gemini Films recovers $250,000 of its investment in the
movie's production budget, any funded overages and interest out of net
international revenues, the Partnership will receive 20 percent of net
international revenues and Gemini Films will receive 80 percent of net
international revenues.
The General Partner and Gemini Films have selected Canal Plus
Distribution as the company that will distribute and exploit the movie outside
of North America. Canal Plus Distribution will earn distribution fees of 15
percent of the film's gross receipts outside of North America, and it will be
reimbursed for its expenses capped at 10 percent of the film's gross receipts
outside of North America (excluding dubbing costs). Canal Plus Distribution
will be responsible for accounting and remitting to Gemini Films the net
revenues from the film's distribution in all markets and in all media outside
of North America. Gemini Films will be responsible for forwarding the
Partnership's share of such revenues within 10 days of receipt of such funds
from Canal Plus.
(7) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The Federal and state
income tax returns of the Partnership will be prepared and filed by the General
Partner.
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable Partnership income or
loss are subject to examination by Federal and state taxing authorities. If
such examinations result in changes with respect to the Partnership's
qualification as such, or in changes with respect to the Partnership's recorded
income or loss, the tax liability of the General and limited partners would
likely be changed accordingly.
The tax basis of assets is different from that reported on the Balance
Sheets due to the difference in depreciation recognized under generally
accepted accounting principles and the expense allowed for tax purposes under
the Modified Accelerated Costs Recovery System (MACRS). There are no other
significant differences between the tax basis assets and the assets reported
on the Balance Sheets. The net difference between the tax basis and the
reported amounts of the assets are immaterial.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership itself has no officers or directors. Certain information
concerning directors and executive officers of the General Partner of the
Registrant is set forth below.
Name Age Positions with the General Partner
---- --- ----------------------------------
Glenn R. Jones 65 Chairman of the Board and
Chief Executive Officer
Philip D. Fehrle 53 Executive Vice President
Theodore A. Henderson 37 Vice President, Treasurer and Director
Lani Daniels 41 Vice President
Elizabeth M. Steele 42 Secretary and Director
David K. Zonker 41 Director
Wilfred N. Cooper, Sr. 64 Director
J. Rodney Dyer 59 Director
Derek H. Burney 55 Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of the General Partner since its inception and he has
served as President of the General Partner since April 1994. Mr. Jones is also
the Chairman of the Board of Directors and Chief Executive Officer of the
General Partner's parent, Jones Digital Century, Inc. ("Digital Century"), a
subsidiary of Jones International, Ltd. Mr. Jones has served as Chairman of
the Board of Directors and Chief Executive Officer of Jones Intercable, Inc.,
one of the nation's largest cable television companies, since its formation in
1970, and he was President of that company from June 1984 until April 1988.
Mr. Jones is the sole shareholder, President and Chairman of the Board of
Directors of Jones International, Ltd. He is also Chairman of the Board of
Directors of other affiliates of the General Partner. He is a member of the
Board of Directors of the National Cable Television Association and a former
member of its Executive Committee. He also is a member of the Board of
Directors and Executive Committee of Cable in the Classroom and was formerly on
the Board of Directors and the Executive Committee of C-SPAN, the cable public
affairs network. In addition to his cable television affiliations, Mr. Jones
is a founding member of the James Madison Council of the Library of Congress,
is a member of the Board of Governors of the American Society for Training and
Development (ASTD) and he serves on the board of the National Alliance of
Business (NAB). Mr. Jones' many awards and honors include the Grand Tam Award
in 1989, the highest award from the Cable Television Administration and
Marketing Society, the Chairman's Award from the Investment Partnership
Association, which is an association of sponsors of public syndications; the
cable television industry's Public Affairs Association President's Award in
1990; the 1993 International Distance Learning Conference (IDLCON) Most
Outstanding Corporate Individual Achievement Award; 1994 inductee into
Broadcasting and Cable's Hall of Fame; the American Academy of Achievement's
Golden Plate Award, recognizing greatness in achievement; and the 1994 Man of
the Year Award for outstanding accomplishments in the area of education from
Achievement Rewards for College Scientists (ARCS). He is author of the Jones
Cable Television and Information Infrastructure Dictionary (and its three
predecessors), a global reference book for the cable television industry, and
Make All America a School, an overview of the role of distance learning in the
American educational environment.
Mr. Philip D. Fehrle joined the General Partner in January 1989. Mr.
Fehrle has over twenty-five years' experience in all phases of television and
motion picture production, development, budgeting, and
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24
negotiating agreements with both talent and exhibitors. Mr. Fehrle is
responsible for the management of all creative and actual production matters of
the General Partner, which includes the procurement of underlying material,
talent selection and supervision of all productions. He has extensive direct
experience in both traditional studio productions and independent productions.
Prior to joining the General Partner in January 1989, Mr. Fehrle was President
of Philip D. Fehrle Productions, a firm he created for the purposes of
developing and producing motion picture and television properties in December
1986. Mr. Fehrle's company has served as a consultant to Frank Fehmers
Productions (Amsterdam, Holland), and Noel Films and DIC Entertainment in Los
Angeles, California. From December 1986 to September 1987, Mr. Fehrle also
produced Dennis The Menace Returns, a two-hour movie for television. Mr.
Fehrle is a member of the Writers Guild of America; the Directors Guild of
America; the Producers Guild of America; the Caucus for Writers, Producers and
Directors; and the Academy of Television Arts and Sciences.
Mr. Theodore A. Henderson has been Vice President and a Director of the
General Partner since formation in 1988 and was named Treasurer of the General
Partner in 1993. Mr. Henderson is also a Vice President and a director of
Digital Century. Mr. Henderson is involved in all aspects of the negotiation,
documentation and implementation of business matters regarding talent,
distribution and co-production activities for the General Partner. He joined
Jones International Securities, Ltd., an affiliate of the General Partner, as a
Director of Field Support in 1984 and was elected Vice President in 1985 and
Senior Vice President in 1988.
Ms. Elizabeth M. Steele is Secretary and a Director of the General Partner.
She is also Vice President/General Counsel and Secretary of Jones Intercable,
Inc. and Jones Spacelink, Ltd. From August 1980 until joining Jones
Intercable, Inc., Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to the General
Partner.
Ms. Lani Daniels joined the General Partner in January 1989 as Director of
Development. Ms. Daniels has more than twelve years of experience in the
development and production of television, movie, mini-series and series
programming. She was previously employed as Development Executive for Procter
& Gamble Productions; Director of Development for Tomorrow Entertainment and
Director of Dramatic Development for Embassy Television. As an independent
contractor, she created three dramatic television series concepts for Motown
Productions in 1984, developed a television movie project for Indian Neck
Productions in 1986, and developed a feature film project for Georgio Moroder
in 1987-1988.
Mr. David K. Zonker became a director of the General Partner in December
1994. Mr. Zonker has been the President of Jones International Securities,
Ltd. since January 1984 and he has been its Chief Executive Officer since
January 1988. Mr. Zonker is a member of the Board of Directors of various
Jones companies. Mr. Zonker is licensed by the National Association of
Securities Dealers, Inc. and he is the immediate past chairman of the
Investment Program Association, a trade organization based in Washington, D.C.
that promotes direct investments.
Mr. Wilfred N. Cooper, Sr. became a director of the General Partner in
December 1994. Mr. Cooper has been the principal shareholder and a Director of
WNC & Associates, Inc. since its organization in 1971, of Shelter Resource
Corporation since its organization in 1981 and of WNC Resources, Inc. from its
organization in 1988 through its acquisition by WNC & Associates, Inc. in 1991,
serving as President of those companies through June 1992 and as Chief
Executive Officer since June 1992.
Mr. J. Rodney Dyer became a director of the General Partner in December
1994. Mr. Dyer has been the President and sole shareholder of Rod Dyer Group,
Inc. since its formation in 1967. Rod Dyer Group, Inc. specializes in
advertising, marketing and promotion. Rod Dyer Group, Inc. filed for
protection under Chapter 11 of the Federal Bankruptcy Act in December 1991 and
was released in March 1994.
Mr. Derek H. Burney was appointed a director of the General Partner in
December 1994. Mr. Burney is also a director and Vice Chairman of the Board of
Directors of Jones Intercable, Inc., an affiliate of the General Partner. Mr.
Burney joined BCE Inc., Canada's largest telecommunications company, in January
1993 as Executive Vice President, International. He has been the Chairman of
Bell Canada International Inc., a
24
25
subsidiary of BCE, since January 1993 and, in addition, has been Chief
Executive Officer of BCI since July 1993. Prior to joining BCE, Mr. Burney
served as Canada's ambassador to the United States from 1989 to 1992. Mr.
Burney also served as chief of staff to the Prime Minister of Canada from March
1987 to January 1989 where he was directly involved with the negotiation of the
U.S. - Canada Free Trade Agreement. In July 1993, he was named an Officer of
the Order of Canada. Mr. Burney is chairman of Bell Cablemedia plc. He is a
director of Mercury Communications Limited, Videotron Holdings plc, Tele-Direct
(Publications) Inc., Teleglobe Inc., Bimcor Inc., Maritime Telegraph and
Telephone Company, Limited, Moore Corporation Limited and Northbridge
Programming Inc.
Messrs. Burney, Cooper, Dyer and Zonker became directors of the General
Partner in December 1994. These new directors did not file on a timely basis
reports required by Section 16(a) of the Securities Exchange Act of 1934, as
amended, with respect to their ownership of limited partnership interests in
the Partnership. Messrs. Burney, Cooper, Dyer and Zonker have not owned and do
not own any limited partnership interests in the Partnership.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are required
to operate its business. Such personnel are employed by the General Partner
and, pursuant to the terms of the Partnership's limited partnership agreement,
the cost of such employment can be charged by the General Partner to the
Partnership as a reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
No person or entity owns more than 5 percent of the limited partnership
interests in the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions with
the Partnership as contemplated by the limited partnership agreement of the
Partnership. The General Partner believes that the terms of such transactions,
which are set forth in the Partnership's limited partnership agreement, are
generally as favorable as could be obtained by the Partnership from
unaffiliated parties. This determination has been made by the General Partner
in good faith, but none of the terms were or will be negotiated at arm's-length
and there can be no assurance that the terms of such transactions have been or
will be as favorable as those that could have been obtained by the Partnership
from unaffiliated parties.
The General Partner receives a production and overhead fee for
administering the affairs of the Partnership equal to 12 percent of the lower
of direct costs or budgeted direct costs of each programming project. This fee
is calculated and payable at the time principal photography commences on each
particular project and, in the case of a series, is payable on a per episode
basis. The Partnership paid a $468,000 production and overhead fee to the
General Partner in June 1994 for the production of "The Whipping Boy."
In connection with the distribution of "Charlton Heston Presents: The
Bible," J/G Distribution Company, an affiliate of the General Partner, is
entitled to certain distribution rights and fees. See Item 1. Business,
Charlton Heston Presents: The Bible for a description of these distribution
rights and fees. As of December 31, 1994, the Partnership's share of gross
revenues totaled $183,676, of which $91,838 was retained by J/G Distribution
Company for its fees and marketing costs, and the remaining $91,838 has been
received by the Partnership.
In October 1994, J/G Distribution Company, an affiliate of the General
Partner, and Jones Interactive, Inc. ("JII"), also an affiliate of the General
Partner, entered into an agreement to produce a CD-ROM version of
25
26
the Bible Programs. The total cost for production of the CD-ROM version will
be funded by J/G Distribution Company. No Partnership funds will be utilized
in the production of the CD-ROM version; however, after J/G Distribution
Company has recouped its production costs, distribution fees and costs
associated with distribution, remaining net revenues will flow to the
Partnership in the same manner as net video revenue. The production is being
done on two separate discs, one for the Old Testament, which is expected to be
completed in the second quarter of 1995, and a second disc for the New
Testament, which is expected to be completed in the fourth quarter of 1995.
Distribution of the CD-ROM version will be done in the United States and Canada
by affiliates of J/G Distribution Company.
The General Partner is entitled to reimbursement from the Partnership for
certain allocated overhead and administrative expenses in accordance with the
terms of the limited partnership agreement of the Partnership. These expenses
consist primarily of salaries and benefits paid to corporate personnel, rent,
data processing services and other facilities costs. Such personnel provide
administrative, accounting and legal services to the Partnership. Allocations
of personnel costs are based primarily on actual time spent by employees of the
General Partner with respect to the Partnership. In 1994, the General Partner
only charged the Partnership for direct expenses of the Partnership totaling
$3,046.
The General Partner may also advance funds and charge interest on the
balance payable from the Partnership. The interest rate charged the
Partnership approximates the General Partner's weighted average cost of
borrowing. No advances were made in 1994, and thus no interest was paid to the
General Partner by the Partnership in 1994.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial statements.
2. Schedules - None.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement. (1)
27. Financial Data Schedule.
----------
(1) Incorporated by reference from the Partnership's Annual Report on Form 10-K for
year ended December 31, 1989.
(b) Reports on Form 8-K.
None.
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27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JONES PROGRAMMING PARTNERS 2-A, LTD.,
a Colorado limited partnership
By Jones Entertainment Group, Ltd.,
its General Partner
By: /s/ Glenn R. Jones
Glenn R. Jones
Chairman of the Board and
Dated: March 27, 1995 Chief Executive Officer
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.
By: /s/ Glenn R. Jones
Glenn R. Jones
Chairman of the Board
and Chief Executive Officer
Dated: March 27, 1995 (Principal Executive Officer)
By: /s/ Theodore A. Henderson
Theodore A. Henderson
Vice President, Treasurer
and Director
(Principal Financial and
Dated: March 27, 1995 Accounting Officer)
By: /s/ Derek H. Burney
Derek H. Burney
Dated: March 27, 1995 Director
By:
-----------------------------
Wilfred N. Cooper, Sr.
Dated: Director
By:
-----------------------------
J. Rodney Dyer
Dated: Director
Dated: March 27, 1995 By: /s/ David K. Zonker
David K. Zonker
Director
27
28
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
4.1 Limited Partnership Agreement. (1)
27. Financial Data Schedule.
----------
(1) Incorporated by reference from the Partnership's Annual Report on Form 10-K for
year ended December 31, 1989.
EX-27
2
FINANCIAL DATA SCHEDULE
5
1
12-MOS
DEC-31-1994
JAN-01-1994
DEC-31-1994
160,888
0
174,363
0
0
0
0
0
3,456,500
149,211
0
0
0
0
3,307,289
3,456,500
2,673,557
2,673,557
0
2,431,359
5,430
0
0
247,628
0
247,628
0
0
0
247,628
21.83
21.83