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 March 31, 1997
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 March 31, At December 31,
1997 1996
Assets
Property:
Equipment $ -- $8,306,724
Less accumulated depreciation -- (5,011,716)
Net equipment -- 3,295,008
Equipment held for sale 3,211,941
Cash and cash equivalents 352,631 5,703,859
Due from equipment manager 406,300 425,549
Other assets, net of accumulated
amortization of $7,596 in 1997 22,787 8,184
Total Assets $3,993,659 $9,432,600
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 41,596 $ 34,173
Accrued interest expense due to affiliate 9,875,450 9,824,043
Due to General Partner 701,950 696,999
Note payable to affiliate 2,339,000 7,839,000
Total Liabilities 12,957,996 18,394,215
Partners' Deficit:
General Partner (251,833) (251,806)
Limited Partners (3,614 units outstanding) (8,712,504) (8,709,809)
Total Partners' Deficit (8,964,337) (8,961,615)
Total Liabilities and Partners' Deficit $3,993,659 $9,432,600
Statement of Partners' Deficit
For the three months ended March 31, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(251,806) $(8,709,809) $(8,961,615)
Net Loss (27) (2,695) (2,722)
Balance at March 31, 1997 $(251,833) $(8,712,504) $(8,964,337)
Statements of Operations
For the three months ended March 31, 1997 1996
Revenues
Operating revenues $495,070 $627,740
Operating Expenses
Operating costs 295,606 325,690
Depreciation and amortization 90,663 83,067
Professional and other expenses 29,883 13,184
Equipment management fee -
Operators 27,002 30,489
General Partner 4,951 6,277
Insurance 4,211 4,211
Total Operating Expenses 452,316 462,918
Income from Operations 42,754 164,822
Other Income (Expense)
Interest and miscellaneous income 5,931 61,784
Interest expense (51,407) (166,122)
Total Other Expense (45,476) (104,338)
Net Income (Loss) $ (2,722) $60,484
Net Income (Loss) Allocated:
To the General Partner $ (27) $ 605
To the Limited Partners (2,695) 59,879
$ (2,722) $ 60,484
Per limited partnership unit
(3,614 outstanding) $(.75) $16.57
Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities
Net Income (Loss) $ (2,722) $ 60,484
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 83,067 83,067
Amortization 7,596 --
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Due from equipment manager 19,249 305,155
Accounts payable and accrued expenses 7,423 (2,125)
Accrued interest expense due to affiliate 51,407 166,122
Due to General Partner 4,951 6,277
Net cash provided by operating activities 170,971 618,980
Cash Flow From Financing Activities
Payment of principal on note payable to affiliate (5,500,000) --
Loan closing costs (22,199) --
Net cash used for financing activities (5,522,199) --
Net increase (decrease) in cash and cash equivalents (5,351,228) 618,980
Cash and cash equivalents, beginning of period 5,703,859 4,238,441
Cash and cash equivalents, end of period $ 352,631 $4,857,421
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1996 audited financial statements
within Form 10-K.
The unaudited financial statements include all normal and
reoccurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
March 31, 1997 and the results of operations and cash flows for
the three months ended March 31, 1997 and 1996 and the statement
of changes in partners' deficit for the three months ended March
31, 1997. Results of operations for the period are not
necessarily indicative of the results to be expected for the full
year.
Reclassification. Certain prior year amounts have been
reclassified in order to conform to the current year's
presentation.
No significant events have occurred subsequent to fiscal year
1996, and no material contingencies exist which would require
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 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.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On January 3, 1997, the Partnership entered into a First Amended
and Restated Credit Note ("Amended Note") with Buttonwood Leasing
Corporation. At that time, a principal payment of $5,500,000 was
made by the Partnership reducing the outstanding principal
balance from $7,839,000 to $2,339,000, and the maturity date of
the Note was extended until January 2, 1998, or the date on which
the Partnership sells the barges.
In accordance with the Amended Note, the Partnership is required
to pay quarterly installments of principal only on April 1, 1997,
July 1, 1997, and October 1, 1997 (each a "Payment Date") in an
amount equal to the amount of interest accrued on the unpaid
principal balance from the later of January 3, 1997 or the
immediately preceding Payment Date. In addition, the Partnership
is required to pay interest on the unpaid principal balance on
the Amended Note at maturity. Interest on the outstanding
principal balance of the Amended Note is computed using simple
interest at a rate equal to the Prime Rate as charged by Bank
America Illinois. At March 31, 1997, the interest rate was 8.50%
compared to 8.25% at December 31, 1996 and 8.25% at March 31,
1996.
In addition to the quarterly principal installments, the
Partnership is required to make quarterly cash sweep payments,
which are applied to principal, on or before the 60th day after
the end of each calendar quarter commencing March 31, 1997. The
amount of each cash sweep payment will be equal to 90% of Net
Operating Income (as defined in the Amended Note) minus the
scheduled principal installments paid on any debt for the
immediately preceding calendar quarter of the Partnership.
The Partnership's fleet of 25 covered hopper river barges
continue to operate primarily on the Mississippi and Illinois
Rivers. The barges haul various types of agricultural products,
primarily corn and soybean, in a southbound direction, and steel,
fertilizers and animal feed in a northbound direction. Operating
revenues declined in the first quarter of 1997 as compared with
the corresponding period last year since there were less crops
available for shipment. The decreased demand for barges resulted
in lower barge rental rates during the first quarter. Although
the 1996 harvest was relatively strong, it is anticipated that it
will not likely be transported until mid-to-late 1997, after
farmers have replenished their depleted crop inventories.
In the first quarter of 1997, the General Partner began efforts
to sell the Partnership's barge fleet. Consequently, at March
31, 1997, the barges were reclassified on the balance sheet as
equipment held for sale. The Partnership's ability to sell the
barges, however, will be dictated by market conditions and there
can be no assurance that a sale will occur. Furthermore, it is
highly unlikely that the barges will be sold for an amount which
is equal to or in excess of the Partnership's existing
indebtedness. In view of the foregoing, the Partnership
initiated negotiations with its lender, Buttonwood Leasing
Corporation, which have resulted in an agreement in principle
whereby the Partnership, as an inducement for it to proceed with
the marketing of the barges for sale, will receive a disposition
fee equal to 5% of the gross sales proceeds.
The Partnership's cash and cash equivalents balance totaled
$352,631 at March 31, 1997, compared to $5,703,859 at December
31, 1996. The decrease is due to the $5.5 million principal
payment on the Partnership's note payable obligation paid on
January 3, 1997.
At March 31, 1997, other assets were $22,787, compared to $8,184
at December 31, 1996. The increase is mainly due to legal costs
related to the January 3, 1997 restructuring of the Partnership's
note payable obligation which will be amortized over one year.
Accounts payable and accrued expenses were $41,596 at March 31,
1997, compared to $34,173 at December 31, 1996. The increase is
the result of higher professional and other expenses discussed
below.
Results of Operations
For the three months ended March 31, 1997, the Partnership
generated a net loss of $2,722, compared to net income of $60,484
for the corresponding period in 1996. The change from net income
to net loss is primarily attributable to lower operating revenues
and lower interest and miscellaneous income, which were partially
offset by lower total operating expenses and interest expense.
Operating revenues were $495,070 and $627,740 for the three-month
periods ended March 31, 1997 and 1996, respectively. The
decrease in operating revenues is primarily attributable to a
lower average barge revenue rate during the first quarter of 1997
due to the decreased demand for barge shipping.
For the three months ended March 31, 1997, operating costs were
$295,606, compared to $325,690 for the comparable 1996 period.
Professional and other expenses were $29,883 and $13,184, for the
three-month periods ended March 31, 1997 and 1996, respectively.
During the 1997 period, certain expenses incurred by an
unaffiliated third party service provider in servicing the
Partnership, which were voluntarily absorbed by affiliates of the
General Partner in prior periods, were reimbursed to the General
Partner and its affiliates. Equipment management fee was $31,953
for the three-month period ended March 31, 1997 compared to
$36,766 for the same period in 1996. Management fees are a
function of net revenue. The decrease is the result of lower net
revenues in the 1997 period.
Interest and miscellaneous income totaled $5,931 for the three
months ended March 31, 1997, compared to $61,784 for the
corresponding period in 1996. The decrease is primarily
attributable to lower interest income as a result of a lower cash
balance in 1997.
Interest expense declined from $166,122 for the three months
ended March 31, 1996 to $51,407 for the same period in 1997 due
to a lower outstanding principal balance on the Amended Note as a
result of the $5,500,000 principal payment made on January 3, 1997.
Part II Other Information
Item 1 Legal Proceedings
In March 1996, a purported class action suit on behalf
of all Limited Partners 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 three month period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SEI II L.P.
BY: SEI II EQUIPMENT INC.
General Partner
Date: May 14, 1997 BY: /s/ Rocco F. Andriola
President and Director
Date: May 14, 1997 BY: /s/ Regina Hertl
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 352,631
<SECURITIES> 000
<RECEIVABLES> 406,300
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 758,931
<PP&E> 3,211,941
<DEPRECIATION> 000
<TOTAL-ASSETS> 3,993,659
<CURRENT-LIABILITIES> 12,256,046
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> (8,964,337)
<TOTAL-LIABILITY-AND-EQUITY> 3,993,659
<SALES> 000
<TOTAL-REVENUES> 501001
<CGS> 000
<TOTAL-COSTS> 295,606
<OTHER-EXPENSES> 156,710
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 51,407
<INCOME-PRETAX> (2,722)
<INCOME-TAX> 000
<INCOME-CONTINUING> (2,722)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (2,722)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> (.75)
</TABLE>
