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 September 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
- ---------------------------------------- ------------------
(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 September 30,
1996 Third Quarter Report of Silver Screen Partners II, L.P. (the "Partnership")
filed herewith as Exhibit 20 and is incorporated herein by reference.
Balance Sheets -- September 30, 1996 and December 31, 1995.
Statements of Operations -- For the Three and Six Months ended
September 30, 1996 and 1995.
Statements of Partners' Equity -- For the Nine Months ended September
30, 1996 and the Year ended December 31, 1995.
Statements of Cash Flows -- For the Nine Months ended September 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 nine months
ended September 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 nine months and quarter ended September 30, 1996 were
approximately $43,921,000 and $147,000, respectively, as compared with
approximately $3,563,000 and $699,000 for the comparable periods in 1995. The
Partnership sold its interest in the Joint Venture (see Investment in Joint
Venture below) during the nine 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 $3,450,000.
Interest income for the nine months and quarter ended September 30, 1996 was
approximately $734,000 and $147,000, respectively, as compared to $113,000 and
$42,000 for the comparable periods in 1995. The increase of $621,000 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 nine months of
1996 ranged from 4.80% to 5.79%, while those for the comparable period in 1995
ranged from 5.1% to 6.04%.
2
<PAGE>
Expenses for the nine months and quarter ended September 30, 1996 were
approximately $483,000 and $82,000, respectively, as compared with approximately
$515,000 and $156,000, respectively, for the comparable periods in 1995. The
decrease of approximately $32,000 in expenses is attributable to a reduction of
audit expenses of approximately $19,000, reporting to the limited partner
expense of $13,000.
The Partnership generated income before taxes of approximately $43,438,000
for the nine months ended September 30, 1996, as compared with income of
approximately $3,048,000 for the comparable period in 1995. This increase is
primarily from the Sale of the Joint Venture's interest.
During the quarter ended September 30, 1996 the Partnership recorded
$320,300 in unincorporated business tax resulting in a net income of
approximately $43,118,000. On September 30, 1996 the Partnership received an
assessment from New York City regarding unincorporated business tax covering all
periods from inception through December 31, 1995 of $420,000 (including
interest). This liability was paid on that date. The Unincorporated Business Tax
Expense reflects the excess of this payment over an amount previously
established as a contingency reserve.
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 September 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 September 30, 1996, the General Partners' capital accounts reflect a
deficit of $116,195. 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.
4
<PAGE>
ITEM 3. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SILVER SCREEN PARTNERS II, L.P.
-------------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture ............ -- $43,186,462 $657,145 $3,450,089
Interest income ..................... $ 146,871 734,055 41,967 113,146
---------- ----------- -------- ----------
$ 146,871 $43,920,517 $699,112 $3,563,235
Cost and Expenses:
General and administrative expenses . 81,621 482,562 155,656 515,242
---------- ----------- -------- ----------
Income before tax ................... 65,250 43,437,955 543,456 3,047,993
Unincorporated business tax ......... 320,300 320,300 -- --
---------- ----------- -------- ----------
Net (loss) income ..................... $( 255,050) $43,117,655 $543,456 $3,047,993
========== =========== ======== ==========
Net (loss) income per
$500 limited
partnership unit
(based on 385,200
Units outstanding) ................. $ (0.56) $ 95.15 $ 1.20 $ 6.73
========== =========== ======== ==========
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
Total assets .......................... $10,402,787 $3,188,168
=========== ==========
</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 Third Quarter Report
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended September 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: November 13, 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
Third Quarter Report
1996o
9
<PAGE>
DEAR LIMITED PARTNER:
As you know, Silver Screen Partners II, L.P. has distributed the proceeds
of the sale of the Partnership's interest in the Joint Venture. From its
inception to date, the Partnership has distributed a total of $276 million, or
$717 per $500 unit for investors who were part of the first closing in June
1985.
At this time, we expect to dissolve the Partnership and have a final
distribution by year-end. The 1996 Annual Report and tax information are likely
to be the final mailings you will receive from the Partnership. These will be
mailed to you by March 15.
If you need any assistance in the meantime, please contact our Investor
Relations Department at our new telephone number and address listed on the back
of this report.
Once again, Tom Bernstein and I wish to thank you for the privilege of
serving each of you.
Sincerely,
/s/ Roland W. Betts
- -------------------
Roland W. Betts
President
10
<PAGE>
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, 1996 December 31, 1995
-------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash ................................................ $ 13,762 $ 818,642
Temporary investments (at cost plus accrued interest,
which approximates market) (Note 2) ............... 10,389,025 3,493,817
----------- ----------
Total current assets ................................ 10,402,787 4,312,459
Investment in Joint Venture (Note 3) ................ -- 591,842
----------- ----------
$10,402,787 $4,904,301
=========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ..................... $ 12,027 $ 30,896
----------- ----------
Total current liabilities ........................... 12,027 30,896
Other liabilities ................................... -- 100,000
----------- ----------
Total liabilities ................................... 12,027 130,896
----------- ----------
Partners' equity:
General partners .................................... (116,195) (958,843)
Limited partners .................................... 10,506,955 5,732,248
----------- ----------
Total partners' equity .............................. 10,390,760 4,773,405
----------- ----------
$10,402,787 $4,904,301
=========== ==========
</TABLE>
See notes to financial statements.
11
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture (Note 3) ............. -- $43,186,462 $657,145 $3,450,089
Interest income ................................ $ 146,871 734,055 41,967 113,146
--------- ----------- -------- ----------
146,871 43,920,517 699,112 3,563,235
COSTS AND EXPENSES:
General and administrative expenses ............ 81,621 482,562 155,656 515,242
--------- ----------- -------- ----------
Income before tax .............................. 65,250 43,437,955 543,456 3,047,993
Unincorporated business tax (Note 4) ........... 320,300 320,300 -- --
--------- ----------- -------- ----------
Net (loss) income .............................. $(255,050) $43,117,655 $543,456 $3,047,993
========= =========== ======== ==========
NET (LOSS) INCOME ALLOCATED TO:
General partners ............................... $ (38,258) $ 6,467,648 $ 81,518 $ 457,199
Limited partners ............................... (216,792) 36,650,007 461,938 2,590,794
--------- ----------- -------- ----------
$(255,050) $43,117,655 $543,456 $3,047,993
========= =========== ======== ==========
Net (loss) income per a $500 limited partnership
unit (based on 385,200 units outstanding) ..... $ (0.56) $ 95.15 $ 1.20 $ 6.73
========= =========== ======== ==========
</TABLE>
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
and Nine Months Ended Sept. 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, NINE MONTHS 1996 ........ 6,467,648 36,650,007 43,117,655
DISTRIBUTIONS DURING NINE MONTHS 1996 (5,625,000) (31,875,300) (37,500,300)
------------ ------------ ------------
$ (116,195) $ 10,506,955 $ 10,390,760
============ ============ ============
</TABLE>
See notes to financial statements.
12
<PAGE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
Sept. 30, 1996 Sept. 30, 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................... $ 43,117,655 $ 3,047,993
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued interest receivable ..... (60,097) (8,173)
Net change in operating assets and liabilities:
Decrease in other liabilities ............... (100,000) --
Decrease in due to managing general partner . (18,869) (46,306)
------------ ------------
Net cash provided by operating activities ..... 42,938,689 2,993,514
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Income received from Joint Venture
in excess of distribution ................... -- (1,190,201)
Decrease in investment in Joint Venture ....... 591,842 --
Purchase of temporary investments, net ........ (6,835,111) (690,337)
------------ ------------
Net cash used in investing activities ......... (6,243,269) (1,880,538)
------------ ------------
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 .......................... (804,880) (19,965)
Cash, beginning of year ....................... 818,642 63,669
------------ ------------
Cash at end of nine months .................... $ 13,762 $ 43,704
============ ============
</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.
4. UNINCORPORATED BUSINESS TAX
On September 30, 1996 the Partnership received an assessment from New York City
regarding unincorporated business tax covering all periods from inception
through December 31, 1995 of $420,300 (including interest). This liability was
paid on that date. The Unincorporated Business Tax Expense reflects the excess
of this payment over an amount previously established as a contingency reserve.
After distribution of cash to the partners, the Partnership expects to terminate
by the end of 1996.
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1996, AND THE STATEMENT OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 14
<SECURITIES> 10,389
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,403
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,403
<CURRENT-LIABILITIES> 12
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 10,391
<TOTAL-LIABILITY-AND-EQUITY> 10,403
<SALES> 43,186
<TOTAL-REVENUES> 43,921
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 483
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43,438
<INCOME-TAX> 320
<INCOME-CONTINUING> 43,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,118
<EPS-PRIMARY> 95.15
<EPS-DILUTED> 0
</TABLE>
