<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter ended Commission File Number
June 30, 1996 33-19038
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(Exact name of registrant as specified in its charter)
MISSOURI
(State or other jurisdiction of incorporation or organization)
43-1507816
(I.R.S. Employer Identification No.)
6300 LAMAR, P.O. BOX 29217, SHAWNEE MISSION KANSAS 66201-9217
(913) 236-2000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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 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
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Table of Contents
Part I - Financial Information
Financial Statements: Page
Balance Sheets - June 30, 1996 and
December 31, 1995 3
Statements of Income for the Quarters and Six
Months Ended June 30, 1996 and 1995 4
Statements of Cash Flow for the Six Months Ended
June 30, 1996 and 1995 5
Notes to Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 12
Item 2. Changes in Securities. 12
Item 3. Default Upon Senior Securities. 12
Item 4. Submission of Matters to a Vote of Security
Holders. 12
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 12
(b) Reports on Form 8-K 12
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
June 30, December 31,
1996 1995
Assets (Unaudited)
Investment Property:
Cost $ 4,484,134 $ 7,362,387
Less accumulated depreciation 2,534,898 4,376,718
Less allowance for loss on
investment property 650,000 650,000
Investment property, net 1,299,236 2,335,669
Cash and cash equivalents 775,437 386,282
Rents and other receivables 50,940 138,605
Account receivable Pershing Lease
Partnership 1,222 -
Total assets $ 2,126,835 $ 2,860,556
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 2,776 $ 6,527
Accounts payable 87,137 64,972
Unearned rental income 4,814 -
Deferred gain on sale of asset 185,278 218,413
Total liabilities 280,005 289,912
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 38,886 41,566
Cumulative cash distributions (377,241) (367,962)
(337,355) (325,396)
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income 469,842 735,163
Cumulative cash distributions (8,993,542) (8,547,008)
2,184,185 2,896,040
Total partners' equity accounts 1,846,830 2,570,644
Total liabilities and partners'
equity $ 2,126,835 $ 2,860,556
========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Income
(Unaudited)
Six Months Ended Quarter Ended
June 30 June 30
1996 1995 1996 1995
Revenue:
Rental income $ 66,813 $ 343,981 $ 16,682 $ 139,331
Interest income 14,642 46,634 10,407 19,020
Gain (loss) on sale
of investment
property 48,907 702,547 (249,743) 4,851
Provision for loss
on investment
property - (650,000) - -
Total revenue 130,362 443,162 (222,654) 163,202
Expenses:
Depreciation 226,745 373,856 94,814 185,685
General and
administrative 171,617 66,124 12,944 18,081
Total expenses 398,362 439,980 107,758 203,766
Net income (loss) $(268,000) $ 3,182 $(330,412) $ (40,564)
======== ======== ======== ========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Cash Flows
For the Six Months ended June 30,
1996 1995
Cash flows from operating activities:
Net income $ (268,000) $ 3,182
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 226,745 373,856
Gain on sale of investment property (48,907) (702,547)
Provision for loss on
investment property - 650,000
Changes in assets and liabilities:
Receivables 87,664 3,716
Accounts Receivable Pershing Lease Prtshp (1,222) -
Due to affiliates (3,751) 6,836
Accounts payable 22,165 (36,896)
Unearned rental income 4,814 (88,282)
Net cash provided by operating
activities 19,508 209,865
Cash flows from investing activities: - -
Disposition of investment property 825,460 1,448,443
Cash flows from financing activities:
Cash distribution to Partners (455,813) (2,104,492)
Net increase (decrease) in cash and
cash equivalents 389,155 (446,184)
Cash and cash equivalents at
beginning of period $ 386,282 $ 952,851
Cash and cash equivalents at end of
period $ 775,437 $ 506,667
========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Notes to Financial Statements
(Unaudited)
In the opinion of the General Partner, the accompanying unaudited
financial statements contain all adjustments necessary to present
fairly the financial position, results of operations and cash flows.
(1) Summary of Significant Accounting Policies
Organization
Pershing Lease Income Limited Partnership II (the "Partnership")
was organized under the Missouri Revised Uniform Limited Partnership
Act on February 24, 1989. The Partnership was formed to invest
primarily in equipment to be leased to third parties. The initial
capital of $1,500 represented capital contributions of $1,000 by
Waddell & Reed Leasing, Inc. (the General Partner) and $500 from the
initial Limited Partner. The Amended Agreement of Limited Partnership
authorized the issuance of up to 60,000 Limited Partnership units at a
price of $500 per unit and up to 20,000 additional units. The
Partnership had an initial closing and twelve subsequent closings. The
closings occurred on November 1, 1989, December 11, 1989, January 9,
1990, February 9, 1990, March 9, 1990, April 10, 1990, May 9, 1990,
June 11, 1990, July 11, 1990, August 9, 1990, September 12, 1990,
October 10, 1990 and November 1, 1990 with subscribers purchasing
6,887, 1,987, 2,264, 1,293, 904, 1,241, 1,071, 1,461, 1,114, 1,314,
2,050, 672 and 1,879 units, respectively.
Pursuant to the terms of the Amended Agreement of Limited
Partnership, distributable cash from operations and profits for federal
income tax purposes from normal operations, as defined, are to be
allocated 95% to the Limited Partners and 5% to the General Partner
until payout has occurred, and 85% to the Limited Partners and 15% to
the General Partner thereafter. "Payout" means the time when the
aggregate amount of all distributions to the Limited Partners of
distributable cash from operations and of distributable cash from sales
or refinancing equals the aggregate amount of the Limited Partners'
original invested capital plus a cumulative 8% annual return on their
aggregate unreturned invested capital (calculated from the beginning of
the first full fiscal quarter following each Limited Partner's
admission to the Partnership). Losses for federal income tax purposes
from the normal operations of the Partnership will be allocated 99% to
the Limited Partners and 1% to the General Partner.
The General Partner contributed $1,000 for its General Partnership
interest. The General Partner is not required to make any other
capital contributions except under certain limited circumstances upon
termination of the Partnership.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
(Unaudited)
Basis of Presentation
The Partnership financial statements are presented on the accrual
basis of accounting.
Cash and Cash Equivalents
Cash and cash equivalents in the accompanying statements of cash
flows include cash on hand and short-term investments with original
maturities of less than ninety days.
Investment Property
Investment property consists primarily of aircraft, construction
equipment, computer equipment, textile equipment, mining equipment and
forklifts. At June 30, 1996 and December 31, 1995, the Partnership
owned investment property, with a depreciable cost basis of $4,484,134
and $7,362,387, respectively. The depreciable cost basis at June 30,
1996 and December 31, 1995, includes acquisition fees of $203,338 and
$333,855 respectively, which were paid to the General Partner.
Depreciation on investment property is provided using straight-line and
accelerated methods over lives ranging from 5 to 12 years.
Organization Costs
Organization costs consist of legal and related costs to form the
Partnership and are being amortized over a five year period on a
straight-line basis.
Income Taxes
The Partnership is a pass-through entity and, accordingly, taxes on
income, if any, are the responsibility of the individual partners.
Partners' equity at June 30, 1996 as reported herein has been reduced
by sales commissions and other costs of the offering which will not be
deductible by the partners until the Partnership is liquidated or the
partners' units are otherwise disposed of.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
(Unaudited)
(2) Leases
The Partnership leases the investment property to unrelated third
parties under operating leases. Rental income is reported when earned.
Minimum lease payments scheduled to be received in the future under
existing noncancellable operating leases follow:
Year Amount
1996 $16,211
1997 1,750
$17,961
======
(3) Related Party Transactions
Fees, commissions and other expenses paid or payable by the
Partnership to the General Partner or affiliates of the General Partner
for the quarter ended June 30, 1996 are as follows:
Management fees $ 3,372
Reimbursable operating expenses 5,499
$ 8,871
=======
At June 30, 1996, the following costs were due to the General
Partner or affiliates:
Management fees $ 274
Reimbursable operating expenses 2,502
$ 2,776
=======
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At June 30, 1996 the Partnership had sufficient cash to satisfy
the current Partnership obligations and provide a working capital
reserve.
At June 30, 1996, the Partnership had $4.5 million of equipment on
an original cost basis. Of this equipment, $121 thousand was leased
on a month to month basis, $140 thousand was on a lease scheduled to
expire January 31, 1997 and $4.2 million was in inventory. Because
the amount of equipment on lease has declined, the cash generated from
rental income will be limited. Most of the cash needed to fund future
distributions and expenses will most likely be the proceeds from sales
of equipment.
A Fokker F-27 aircraft with an original cost basis of $4.2 million
accounts for the equipment in inventory. It has been off lease since
October 1994 and we believe it will most likely be sold rather than
leased again. When it is sold, we plan to begin the process of
closing the Partnership will be initiated.
Partnership Operations
Rental income for the quarter was $17,000; down $122,000 from the
second quarter of 1995 due to the sale of investment property and
lease expirations. A Fokker F-27 aircraft with an original cost basis
of $4.2 million has been off lease since October, 1994. To reduce the
net book value of the aircraft to its estimated market value, the
Partnership recorded an allowance of $650,000 in the first quarter of
1995.
Net loss for the quarter was $330,412 due primarily to the sale of
a Fairchild Metro III aircraft, Serial Number AC429, Registration
C-FJLF, with an original cost basis of $1,666,857, to North American
Airlines Limited for $500,000. The net book value of the airplane was
$764,000 which resulted in a book loss of $264,000. This loss was
partially offset by the gain on sales of other equipment.
Depreciation expense for the quarter was $95,000, down $91,000 from
the second quarter of 1995 due to the sale of $3.4 million in
equipment. General and administrative expense was $13,000 for the
quarter; down $5,000 from last year.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Cash from Operations and Distributable Cash from Operations
Shown below is the calculation of Cash from Operations and
Distributable Cash from Operations for the quarter ended June 30, 1996
as defined by Section 17 of the Amended Agreement of Limited
Partnership:
Rental income $ 16,682
Cash from sales 550,718
Interest income 10,407
Total cash inflow 577,807
Operating expenses (9,572)
Cash from operations 568,235
Reserve for distributions and operations (3,682)
Partnership management fee (3,372)
Distributable cash from operations $561,181
=======
Cash from Operations and Distributable Cash from Operations (cont.)
Allocation of Distributable Cash from Operations and Sales:
Operations Sales Total
Limited Partners $ 9,940 $545,211 $555,151
General Partner 523 5,507 6,030
$ 10,463 $550,718 $561,181
======= ======= =======
On May 30, 1996, the cash distributions for the first quarter of
1996 in the amount of $325,850 were paid to the Limited Partners of
record on March 31, 1996.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Equipment Summary
(Unaudited)
Lessee
Container Corporation of America
Eveleth Expansion Co.
Jefferson Smurfit Corporation
Acquisition
Equipment Description Cost
Aircraft $ 4,222,717
Heavy Duty Equipment 140,365
Forklifts 121,052
$ 4,484,134
==========
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Default Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Form 8-K - There have been no reports on Form 8-K.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
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.
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(Registrant)
By: /s/ Michael D. Strohm
Michael D. Strohm, as Executive Vice
President, and Assistant Treasurer
of the General Partner
Date: August 26, 1996
By: /s/ Robert L. Hechler
Robert L. Hechler, President, Treasurer
Director of the General Partner
(Principal Accounting and Financial
Officer)
Date: August 26, 1996
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<CIK> 0000847582
<NAME> P210Q696
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 775437
<SECURITIES> 0
<RECEIVABLES> 50940
<ALLOWANCES> 0
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<CURRENT-ASSETS> 1222
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<OTHER-SE> 1846830
<TOTAL-LIABILITY-AND-EQUITY> 2126835
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<TOTAL-REVENUES> 130362
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<OTHER-EXPENSES> 0
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<INCOME-PRETAX> (268000)
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