United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 02-72177
SEI II L.P.
Exact Name of Registrant as Specified in its Charter
New York 13-3064636
State or Other Jurisdiction of
Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Balance Sheets At September 30, At December 31,
1996 1995
Assets
Equipment, at cost $ 8,306,724 $8,306,724
Less: accumulated depreciation (4,928,649) (4,679,447)
Equipment, net 3,378,075 3,627,277
Cash and cash equivalents 5,374,605 4,238,441
Due from Equipment Manager 387,421 673,652
Total Assets $ 9,140,101 $ 8,539,370
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 27,512 $ 30,628
Accrued interest expense due to affiliate 9,148,181 8,657,814
Deferred interest payable to affiliate 512,854 512,854
Due to General Partner 689,556 671,201
Note payable to affiliate 7,839,000 7,839,000
Total Liabilities 18,217,103 17,711,497
Partners' Deficit:
General Partner (252,960) (253,911)
Limited Partners (3,614 units outstanding) (8,824,042) (8,918,216)
Total Partners' Deficit (9,077,002) (9,172,127)
Total Liabilities and Partners' Deficit $ 9,140,101 $ 8,539,370
Statement of Partners' Deficit
For the nine months ended
September 30, 1996 General Limited
Partner Partners Total
Balance at December 31, 1995 $(253,911) $(8,918,216) $(9,172,127)
Net income 951 94,174 95,125
Balance at September 30, 1996 $(252,960) $(8,824,042) $(9,077,002)
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Revenues
Operating revenues $539,652 $822,808 $1,835,464 $2,008,163
Operating Expenses
Operating costs 332,121 407,235 1,031,870 1,066,189
Depreciation 83,068 83,068 249,202 249,202
Professional and other expenses 13,915 10,719 44,176 34,193
Equipment management fee
Operators 28,442 35,529 90,414 94,638
General Partner 5,397 8,228 18,355 20,082
Insurance 4,211 4,211 12,633 12,633
Total operating expenses 467,154 548,990 1,446,650 1,476,937
Income from operations 72,498 273,818 388,814 531,226
Other Income (Expense)
Interest and miscellaneous income 70,019 57,025 196,678 159,411
Interest expense (163,008) (167,948) (490,367) (498,367)
Total Other Expense (92,989) (110,923) (293,689) (338,956)
Net Income (Loss) $(20,491) $162,895 $ 95,125 $ 192,270
Net Income (Loss) Allocated:
To the General Partner $ (205) $ 1,629 $ 951 $ 1,923
To the Limited Partners (20,286) 161,266 94,174 190,347
$(20,491) $162,895 $ 95,125 $ 192,270
Per limited partnership unit
(3,614 outstanding) ($5.61) $44.62 $26.06 $52.67
Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 95,125 $192,270
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense 249,202 249,202
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Due from Equipment Manager 286,231 (9,408)
Accounts payable and accrued expenses (3,116) (323)
Accrued interest expense due to affiliate 490,367 498,367
Due to general partner 18,355 20,082
Net cash provided by operating activities 1,136,164 950,190
Net increase in cash and cash equivalents 1,136,164 950,190
Cash and cash equivalents, beginning of period 4,238,441 2,931,466
Cash and cash equivalents, end of period $5,374,605 $3,881,656
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1996, the results of operations for the
three-month and nine-month periods ended September 30, 1996 and 1995, the
statement of partners' deficit for the nine-month period ended September 30,
1996 and the statements of cash flows for the nine-month periods ended
September 30, 1996 and 1995. Results of operations for the three- month and
nine-month periods ended September 30, 1996 are not necessarily indicative of
the results to be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1995,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Legal Proceedings
In March 1996, a purported class action suit on behalf of all limited partners
of the Partnership was brought against the Partnership, Lehman Brothers Inc.,
Smith Barney Holdings Inc., and a number of other limited partnerships in New
York State Supreme Court. The complaint alleges claims of common law fraud and
deceit, negligent misrepresentation, breach of fiduciary duty and breach of the
implied covenant of good faith and fair dealing. The defendants intend to
defend the action vigorously.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership's cash and cash equivalents balance totaled $5,374,605 at
September 30, 1996, which represents an increase from the balance of $4,238,441
at December 31, 1995. The increase is due to net cash flow from operating
activities.
At September 30, 1996, the amount due from the Partnership's equipment manager
was $387,421, compared to $673,652 at December 31, 1995. The decrease is due
to the timing of the receipt of net revenue from the equipment manager.
On May 30, 1986, the Partnership successfully restructured its long-term debt.
Buttonwood Leasing Corporation (the "Purchaser"), an affiliate of the General
Partner, purchased from the Partnership's lenders the Promissory Note (the
"Note") originally executed by the Partnership in favor of the lenders and
which was dated December 9, 1981. Subsequent to the Note purchase, the
Purchaser entered into an understanding with the Partnership on the following
terms and conditions. First, the principal amount of the loan would remain the
same. Second, interest would be charged on the outstanding principal amount of
the Note at a rate equal to the prime rate charged by Bank America Illinois,
formerly Continental Illinois National Bank, which was 8.25% at September 30,
1996. No interest was paid relating to the Note for the nine-month period
ended September 30, 1996 and, as a result, the Partnership's accrued interest
expense due to affiliate increased to $9,148,181 at September 30, 1996,
compared to $8,657,814 at December 31, 1995. The maturity date of the Note has
been extended to January 3, 1997, with all other terms and conditions of the
Note remaining unchanged.
Results of Operations
For the three-month and nine-month periods ended September 30, 1996, the
Partnership generated a net loss of $20,491 and net income of $95,125,
respectively, compared to net income of $162,895 and $192,270, for the
corresponding periods in 1995. The change from net income to net loss for the
three-month period in 1996 and the lower net income for the nine-month period
in 1996 are primarily attributable to a decline in operating revenue for the
three-month and nine-month periods ended September 30, 1996.
Operating revenues were $539,652 and $1,835,464, respectively, for the
three-month and nine-month periods ended September 30, 1996, compared to
$822,808 and $2,008,163 for the corresponding periods in 1995. The decrease in
operating revenues is primarily attributable to a decrease in the average barge
revenue rate during the three-month period ended September 30, 1996. For the
three-month period ended September 30, 1996, conditions for barge traffic
slowed due to a smaller 1995 harvest. In addition, larger exports of corn and
soybean in prior quarters reduced the quantity of goods available for transport
in the third quarter. The reduced demand depressed the average barge revenue
rate, and consequently, operating revenues were lower for the three-month
period ended September 30, 1996, when compared to the corresponding period in
1995.
Operating costs for the three-month and nine-month periods ended September 30,
1996 were $332,121 and $1,031,870, respectively, compared to $407,235 and
$1,066,189, respectively, in 1995. The decreases for both periods are mainly
due to lower towing rates during the three-month period in 1996. Total
operating expenses, as a percentage of total operating revenues, were higher in
1996 due to increased cleaning costs, which are incurred at the end of each
voyage, and higher harbor costs which include fleet and switching expenses.
Interest and miscellaneous income totaled $70,019 and $196,678, respectively,
for the three-month and nine-month periods ended September 30, 1996, as
compared to $57,025 and $159,411 for the corresponding periods in 1995. The
increase is primarily attributable to an increase in interest income as a
result of the Partnership maintaining a higher cash balance in 1996.
Part II Other Information
Item 1 Legal Proceedings
In March 1996, a purported class action suit on behalf
of all limited partners of the Partnership was brought
against the Partnership, Lehman Brothers Inc., Smith
Barney Holdings Inc., and a number of other limited
partnerships in the New York State Supreme Court. The
complaint alleges claims of common law fraud and
deceit, negligent misrepresentation, breach of
fiduciary duty and breach of the implied covenant of
good faith and fair dealing. The defendants intend to
defend the action vigorously.
Items 2-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended September 30, 1996
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.
SEI II L.P.
BY: SEI II EQUIPMENT INC.
General Partner
Date: November 13, 1996 BY: /s/ Rocco F. Andriola
President and Director
Date: November 13, 1996 BY: /s/ Regina Hertl
Vice President, Director and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sept-30-1996
<CASH> 5,374,605
<SECURITIES> 0
<RECEIVABLES> 387,421
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,762,026
<PP&E> 8,306,724
<DEPRECIATION> 4,928,649
<TOTAL-ASSETS> 9,140,101
<CURRENT-LIABILITIES> 27,512
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 9,077,002
<TOTAL-LIABILITY-AND-EQUITY> 9,140,101
<SALES> 0
<TOTAL-REVENUES> 1,835,464
<CGS> 0
<TOTAL-COSTS> 1,446,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 490,367
<INCOME-PRETAX> 95,125
<INCOME-TAX> 0
<INCOME-CONTINUING> 95,125
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,125
<EPS-PRIMARY> 26.06
<EPS-DILUTED> 0
</TABLE>
