FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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..............
Commission file number 0-14421
SILVER SCREEN PARTNERS II, L.P.
(A Delaware Limited Partnership)
(Exact name of registrant as specified in its
Certificate and Agreement of Limited Partnership)
Delaware 13-3276962
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Chelsea Piers, Pier 62 - Suite 300
New York, New York 10011 10011
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 336-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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, and (2) has been subject to such requirements for the
past 90 days.
YES X NO
------ ------
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial information set forth below is set forth in the June 30, 1996
Second Quarter Report of Silver Screen Partners II, L.P. (the "Partnership")
filed herewith as Exhibit 20 and is incorporated herein by reference.
Balance Sheets -- June 30, 1996 and December 31, 1995.
Statements of Operations -- For the Three and Six Months ended June
30, 1996 and 1995.
Statements of Partners' Equity -- For the Six Months ended June 30,
1996 and the Year ended December 31, 1995.
Statements of Cash Flows -- For the Six Months ended June 30, 1996 and
1995.
Notes to Financial Statements.
The financial statements included herein are unaudited. In the opinion of
the management of the Partnership, all adjustments necessary for a fair
presentation of the results of operations have been included and all adjustments
are of a normal recurring nature. The results of operations for the six months
ended June 30, 1996 are not necessarily indicative of the results of operations
which may be expected for the entire year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
---------------------
Revenues for the six months and quarter ended June 30, 1996 were
approximately $43,774,000 and $145,000, respectively, as compared with
approximately $2,864,000 and $2,027,000 for the comparable periods in 1995. The
Partnership sold its interest in the Joint Venture (see Investment in Joint
Venture below) during the six months of 1996 resulting in a gain of
approximately $43,186,000. Revenues for the comparable period and quarter in
1995 consisted of income from the Joint Venture of approximately $2,793,000.
Interest income for the six months and quarter ended June 30, 1996 was
approximately $587,000 and $145,000, respectively, as compared to $71,000 and
$26,000 for the comparable periods in 1995. The increase of $516,000 is the
result of an increase in funds available for investment due to the sale of the
investment in the Joint Venture. Interest rates for the first six months of 1996
ranged from 4.80% to 5.79%, while those for the comparable period in 1995 ranged
from 5.67% to 6.04%.
2
<PAGE>
Expenses for the six months and quarter ended June 30, 1996 were
approximately $401,000 and $82,000, respectively, as compared with approximately
$360,000 and $174,000, respectively, for the comparable period in 1995. The
increase of approximately $41,000 in expenses is attributable to the increased
cost of the sale of the Partnership's interest in the Joint Venture of
approximately $57,000 which was offset by a reduction of approximately $17,000
in payroll related expenses and $1,000 in miscellaneous expenses.
The Partnership generated net income of approximately $43,373,000 for the
six months ended June 30, 1996, as compared with net income of approximately
$2,505,000 for the comparable period in 1995. This increase is primarily the
result of an increase in film revenues.
The Partnership committed approximately $22,000,000 toward the Completed
Films pursuant to the Loan Agreement. In addition, the Partnership became
committed to fund ten films and part of one additional film with total budgets
amounting to approximately $150,690,000, of which substantially all has been
expended. Accordingly, all Partnership Funds have been committed and the
Partnership will not finance or purchase any additional motion pictures.
The four Completed Films are: "Return to Oz," released June 21, 1985; "The
Black Cauldron," released July 19, 1985; "My Science Project," released August
9, 1985; and "The Journey of Natty Gann," released September 27, 1985. The Joint
Venture Films are: "One Magic Christmas," released November 22, 1985; "Down and
Out in Beverly Hills," released January 31, 1986; "Offbeat," released April 11,
1986; "Ruthless People," released June 27, 1986; "The Great Mouse Detective,"
released July 2, 1986 and re-released February 14, 1992 under the title "The
Adventures of the Great Mouse Detective;" "Tough Guys," released October 3,
1986; "The Color of Money," released October 17, 1986; "Outrageous Fortune,"
released January 30, 1987; "Tin Men," released March 6, 1987 and "Ernest Goes to
Camp," released May 22, 1987. "Stakeout," which was financed approximately 75%
by the Partnership and 25% by Silver Screen Partners III, L.P. (a separate
limited partnership with the same Managing General Partner formed to finance
subsequent Disney films), was released August 5, 1987.
During the quarter ended June 30, 1996, the Partnership made no cash
distributions to the Partners because revenues generated during the quarter were
insufficient to warrant a distribution.
3
<PAGE>
Investment in Joint Venture
---------------------------
The Investment in the Joint Venture was accounted for using the equity
method of accounting. Under the equity method, the investment was initially
recorded at cost, and was thereafter increased by additional investments,
adjusted by the Partnership's share of the Joint Venture's results of
operations, and reduced by distributions received from the Joint Venture. The
Joint Venture's fiscal year ended September 30, while the Partnership's fiscal
year ends December 31. On January 1, 1996 the investment in the Joint Venture
was $591,842.
The Partnership entered into a Letter Agreement (The "Buyout Agreement")
with Disney dated September 11, 1995, providing for the sale to Disney of all of
the Partnership's interest in the Joint Venture. In accordance with the Buyout
Agreement the closing of the sale occurred on January 2, 1996 and the purchase
paid to the Partnership was $44,678,304 in cash after an adjustment for certain
film revenues totaling $321,696 received in 1995. The Partnership will continue
to operate until dissolution. The Partnership currently expects to dissolve by
year-end. Funds have been reserved for operational purposes, and remaining funds
in reserve at the time of dissolution will be distributed to investors.
Liquidity and Capital Resources
-------------------------------
As of June 30, 1996, the General Partners' capital accounts reflect a
deficit of $77,937. At or prior to dissolution this deficit will be reversed
through a special allocation to the limited partners. In view of the
Partnership's limited requirements for liquidity, short and long term
evaluations do not anticipate any effect of current capital account balances on
the Partnership's cash flow.
The Partnership has had discussions with the New York City Department of
Finance with respect to the Partnership's unincorporated business tax liability
for periods through December 31, 1995. The Partnership has recently reached an
agreement in principle with New York City in connection with its liability for
unincorporated business tax and a final agreement is expected before the close
of the current quarter. It is anticipated that the amount of liability under
this final agreement will have no material adverse effect on liquidity.
4
<PAGE>
ITEM 3. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SILVER SCREEN PARTNERS II, L.P.
-------------------------------
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Gain on Sale of Joint
Venture interest ................... $43,186,462
Income from Joint Venture ............ -- -- $ 2,001,083 $2,792,944
Interest income ..................... $ 144,807 587,184 26,386 71,179
-------------- ------------- ------------- -------------
$ 144,807 $43,773,646 $ 2,027,469 $2,864,123
Cost and Expenses:
General and administrative expenses . 81,539 400,941 174,078 359,586
-------------- ------------- ------------- -------------
Net income ............................ $ 63,268 $43,372,705 $ 1,853,391 $2,504,537
============== ============= ============= =============
Net income per
$500 limited
partnership unit
(based on 385,200
Units outstanding) ................. $ 0.14 $ 95.71 $ 4.09 $ 5.53
============== ============= ============= =============
June 30, 1996 June 30, 1995
------------- -------------
Total assets .......................... $10,767,417 $ 2,753,414
============= =============
</TABLE>
See notes to financial statements.
5
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 20 -- 1996 Second Quarter Report
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SILVER SCREEN PARTNERS II, L.P.,
a Delaware limited partnership
By: Silver Screen Management, Inc.,
Managing General Partner
Date: August, 1996 By: /s/ Roland W. Betts
--------------------------------
Roland W. Betts, President
7
<PAGE>
Silver Screen Management, Inc.
Chelsea Piers-Pier 62
Suite 300
New York, NY 10011
(212) 336-6700
8
<PAGE>
Silver Screen
Partners II
Second Quarter Report
1996
9
<PAGE>
DEAR LIMITED PARTNER:
As discussed in previous correspondence, Silver Screen Partners II, L.P.
and the Walt Disney Company agreed on the sale of the Partnership's interest in
the Joint Venture. Accordingly, on February 16th, the Partnership made a
distribution based on this sale. From inception to date, we have distributed a
total of $276 million, or a total of $717 per $500 unit for investors who were
part of the first closing in June 1985.
We will continue to operate the Partnership until dissolution, which we
hope will take place by year-end. Funds have been reserved for operational
purposes, and remaining funds in reserve at the time of dissolution will be
distributed to investors.
Our Third Quarter Report will be mailed in October. If you need any
assistance in the meantime, please contact our Investor Relations Department
between the hours of 10 A.M. and 2 P.M.
Sincerely,
/s/ Roland W. Betts
- -------------------
Roland W. Betts
President
10
<PAGE>
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash ................................................ $ 302 $ 818,642
Temporary investments (at cost plus accrued interest,
which approximates market) (Note 2) ................. 10,767,115 3,493,817
------------ ------------
Total current assets ................................ 10,767,417 4,312,459
Investment in Joint Venture (Note 3) ................ -- 591,842
------------ ------------
$ 10,767,417 $ 4,904,301
============ ============
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ..................... $ 21,607 $ 30,896
------------ ------------
Total current liabilities ........................... 21,607 30,896
Other liabilities ................................... 100,000 100,000
------------ ------------
Total liabilities ................................... 121,607 130,896
------------ ------------
Partners' equity:
General partners .................................... (77,937) (958,843)
Limited partners .................................... 10,723,747 5,732,248
------------ ------------
Total partners' equity .............................. 10,645,810 4,773,405
------------ ------------
$ 10,767,417 $ 4,904,301
============ ============
</TABLE>
See notes to financial statements.
11
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Gain on Sale of Joint Venture's interest ........... $43,186,462
Income from Joint Venture (Note 3) ................. -- $ 2,001,083 $ 2,792,944
Interest income .................................... $ 144,807 587,184 26,386 71,179
----------- ----------- ----------- -----------
144,807 43,773,646 2,027,469 2,864,123
COSTS AND EXPENSES:
General and administrative expenses ................ 81,539 400,941 174,078 359,586
----------- ----------- ----------- -----------
Net income ......................................... $ 63,268 $43,372,705 $ 1,853,391 $ 2,504,537
=========== =========== =========== ===========
NET INCOME ALLOCATED TO:
General partners ................................... $ 9,490 $ 6,505,906 $ 278,009 $ 375,681
Limited partners ................................... 53,778 36,866,799 1,575,382 2,128,856
----------- ----------- ----------- -----------
$ 63,268 $43,372,705 $ 1,853,391 $ 2,504,537
=========== =========== =========== ===========
Net income per a $500 limited partnership unit
(based on 385,200 units outstanding) ............. $ 0.14 $ 95.71 $ 4.09 $ 5.53
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
and Six Months Ended June 30, 1996
======================================================
General Partners Limited Partners Total
---------------- ---------------- -----
<S> <C> <C> <C>
Balance, January 1, 1995 ................................ $ (1,513,056) $ 2,591,712 $ 1,078,656
Net income, 1995 ........................................ 724,154 4,103,536 4,827,690
Distributions, 1995 ..................................... (169,941) (963,000) (1,132,941)
------------ ------------ ------------
Balance, December 31, 1995 .............................. (958,843) 5,732,248 4,773,405
NET INCOME, SIX MONTHS 1996 ............................. 6,505,906 36,866,799 43,372,705
DISTRIBUTIONS DURING SIX MONTHS 1996 .................... (5,625,000) (31,875,300) (37,500,300)
------------ ------------ ------------
$ (77,937) $ 10,723,747 $ 10,645,810
============ ============ ============
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 43,372,705 $ 2,504,537
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) decrease in accrued interest receivable ...... (70,551) 5,248
Net change in operating assets and liabilities:
Decrease in due to managing general partner ............. (9,289) (58,120)
------------ ------------
Net cash provided by operating activities ............... 43,292,865 2,451,665
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from Joint Venture
less than equity in income -- (1,069,685)
Decrease in investment in Joint Venture ................. 591,842 --
Purchase of temporary investments, net .................. (7,202,747) (298,828)
------------ ------------
Net cash used in investing activities ................... (6,610,905) (1,368,513)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners ............................... (37,500,300) (1,132,941)
------------ ------------
Net cash used in financing activities ................... (37,500,300) (1,132,941)
------------ ------------
Net decrease in cash .................................... (818,340) (49,789)
Cash, beginning of year ................................. 818,642 63,669
------------ ------------
Cash at end of six months ............................... $ 302 $ 13,880
============ ============
</TABLE>
See notes to financial statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. PARTNERSHIP PROCEEDS
The Partnership Agreement provides that all Partnership income, losses and
distributable cash ("Proceeds") are distributed 99% to the limited partners and
1% to the general partners until the Partnership has satisfied certain tests.
Thereafter, all Proceeds will be allocated 85% to the limited partners and 15%
to the general partners. These tests were satisfied in the first quarter of
1994. Therefore, all proceeds beginning with the second quarter have been
allocated 85% to the limited partners and 15% to the general partners.
2. TEMPORARY INVESTMENTS
Temporary investments represent investments in commercial paper.
3. INVESTMENT IN JOINT VENTURE
The investment in the Joint Venture was accounted for using the equity method of
accounting. Under the equity method, the investment was initially recorded at
cost, and was thereafter increased by additional investments, adjusted by the
Partnership's share of the Joint Venture's results of operations, and reduced by
distributions received from the Joint Venture. The Joint Venture's fiscal year
ends September 30, while the Partnership's fiscal year ends December 31. On
January 1, 1996 the investment in the Joint Venture was $591,842.
The Partnership entered into a Letter Agreement (the "Buyout Agreement") with
Disney dated September 11, 1995, providing for the sale to Disney of all of the
Partnership's interest in the Joint Venture. In accordance with the Buyout
Agreement the closing of the sale occurred on January 2, 1996 and the purchase
price paid to the Partnership was $44,678,304 in cash after an adjustment for
certain film revenues totaling $321,696 received in 1995.
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF JUNE 30, 1996, AND THE STATEMENT OF OPERATIONS FOR
THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 0
<SECURITIES> 10,767
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,767
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,767
<CURRENT-LIABILITIES> 22
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 10,646
<TOTAL-LIABILITY-AND-EQUITY> 10,767
<SALES> 43,186
<TOTAL-REVENUES> 43,774
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43,373
<INCOME-TAX> 0
<INCOME-CONTINUING> 43,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,373
<EPS-PRIMARY> 95.71
<EPS-DILUTED> 0
</TABLE>
