<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, 1997 33-19038
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
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Table of Contents
Part I - Financial Information
Financial Statements: Page
Balance Sheets - June 30, 1997 and
December 31, 1996 3
Statements of Income for the Quarters and Six
Months Ended June 30, 1997 and 1996 4
Statements of Cash Flow for the Six Months Ended
June 30, 1997 and 1996 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
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
June 30, December 31,
1997 1996
Assets (Unaudited)
Investment Property:
Cost $ 4,363,083 $ 4,363,083
Less accumulated depreciation 2,811,101 2,628,747
Less allowance for loss on
investment property 900,000 900,000
Investment property, net 651,982 834,336
Cash and cash equivalents 42,288 156,932
Total assets $ 694,270 $ 991,268
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 649 $ 1,918
Accounts payable 764 705
Deferred gain on sale of asset 166,866 166,866
Total liabilities 168,279 169,489
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 34,950 35,286
Cumulative cash distributions (386,163) (384,536)
(350,213) (348,250)
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income (83,857) 113,420
Cumulative cash distributions (9,747,824) (9,651,276)
876,204 1,170,029
Total partners' equity accounts 525,991 821,779
Total liabilities and partners'
equity $ 694,270 $ 991,268
========== ==========
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
1997 1996 1997 1996
Revenue:
Rental income $ 2,625 $ 66,813 $ - $ 16,682
Interest income 628 14,642 28 10,407
Gain (loss) on sale
of investment
property - 48,907 - (249,743)
Total revenue 3,253 130,362 28 (222,654)
Expenses:
Depreciation 182,355 226,745 91,177 94,814
General and
administrative 18,511 171,617 8,953 12,944
Total expenses 200,866 398,362 100,130 107,758
Net loss $(197,613) $(268,000) $(100,102) $(330,412)
======== ======== ======== ========
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, 1997 and 1996
1997 1996
Cash flows from operating activities:
Net income (loss) $ (197,613) $ (268,000)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 182,355 226,745
Gain on sale of investment property - (48,907)
Provision for loss on
investment property - -
Changes in assets and liabilities:
Receivables - 87,664
Due to affiliates (1,269) (3,751)
Accounts payable 59 20,943
Unearned rental income - 4,814
Net cash provided by operating
activities (16,468) 19,508
Cash flows from investing activities:
Disposition of investment property - 825,460
Cash flows from financing activities:
Cash distribution to Partners (98,175) (455,813)
Net increase (decrease) in cash and
cash equivalents (114,643) 389,155
Cash and cash equivalents at
beginning of period $ 156,932 $ 386,282
Cash and cash equivalents at end of
period $ 42,289 $ 775,437
========== ==========
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. 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. Special allocations
of taxable income may be required to reduce or eliminate the deficit
account balances of Partners according to Treasury Regulations and the
partnership agreement. "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).
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, and mining
equipment. At June 30, 1997 and December 31, 1996, the Partnership
owned investment property, with a depreciable cost basis of $4,363,083.
The depreciable cost basis at June 30, 1997 and December 31, 1996,
includes acquisition fees of $197,489, 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.
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, 1997 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.
There were no operating leases existing as of June 30, 1997.
(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, 1997 are as follows:
Reimbursable operating expenses $4,755
At June 30, 1997, the following costs were due to the General
Partner or affiliates:
Reimbursable operating expenses $649
<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
The Partnership believes it has sufficient liquidity to pay
operating expenses. As of June 30, 1997, there were no leases in
effect. The Partnership has $42,288 of cash available from which
future operating expenses may be funded. The Partnership believes that
it is more likely than not that the remaining equipment will be sold
rather than leased and the Partnership liquidated. Although the
Partnership does not know when this will occur, it is possible it may
occur during 1997.
Partnership Operations
Due to the sale of investment property and lease expirations there
was no rental income for the second quarter of 1997; a decrease of
$16,682 from the second quarter of 1996 . 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
$900,000. The Partnership's final lease for construction equipment
ended February 15, 1997 and it is being remarketed.
Depreciation expense for the quarter was $91,000, down $3,000 from
the second quarter of 1996 due to the sale of equipment. General and
administrative expense was $9,000 for the quarter; down $4,000 from
last year.
As of the end of the quarter, there were no leases in effect. The
Partnership believes it is more likely than not that the remaining
equipment will be sold rather than leased. When it is sold,
Partnership operations will cease and the remaining cash will be
distributed. Although it is not known when this will occur, it is
possible it may occur in 1997.
<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, 1997
as defined by Section 17 of the Amended Agreement of Limited
Partnership:
Rental income $ -
Cash from sales -
Interest income 28
Total cash inflow 28
Operating expenses (8,953)
Cash from operations (8,925)
Reserve for distributions and operations 8,925
Partnership management fee -
Distributable cash from operations $ -
=======
Allocation of Distributable Cash from Operations and Sales:
There is no distributable cash from operations and sales for the
second quarter of 1997.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Equipment Summary
(Unaudited)
Acquisition
Equipment Description Cost
Aircraft $ 4,222,717
Heavy Duty Equipment 140,365
$ 4,363,082
==========
<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 25, 1997
By: /s/ Robert L. Hechler
Robert L. Hechler, President, Treasurer
Director of the General Partner
(Principal Accounting and Financial
Officer)
Date: August 25, 1997
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<ARTICLE> 5
<CIK> 0000847582
<NAME> MARY KAYE COBB
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 42288
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<CURRENT-ASSETS> 42288
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<TOTAL-LIABILITY-AND-EQUITY> 694270
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<TOTAL-REVENUES> 3253
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