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 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 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 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 ITEM 3. SELECTED FINANCIAL DATA 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 -------------- -------------- -------------- -------------- 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 =========== ========== See notes to financial statements. 5 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 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