<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
March 31, 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 - March 31, 1997 and
December 31, 1996 3
Statements of Income for the Quarters Ended
March 31, 1997 and 1996 4
Statements of Cash Flow for the Quarters Ended
March 31, 1997 and 1996 5
Notes to Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
Equipment Summary 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
March 31, December 31,
1997 1996
Assets (Unaudited)
Investment Property:
Cost $ 4,363,083 $ 4,363,083
Less accumulated depreciation 2,719,924 2,628,747
Less allowance for loss on
investment property 900,000 900,000
Investment property, net 743,159 834,336
Cash and cash equivalents 52,393 156,932
Total assets $ 795,552 $ 991,268
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 1,828 $ 1,918
Accounts payable 765 705
Deferred gain on sale of asset 166,866 166,866
Total liabilities 169,459 169,489
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 34,937 35,286
Cumulative cash distributions (386,163) (384,536)
(350,226) (348,250)
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income 16,257 113,420
Cumulative cash distributions (9,747,823) (9,651,276)
976,319 1,170,029
Total partners' equity accounts 626,093 821,779
Total liabilities and partners'
equity $ 795,552 $ 991,268
========== ==========
See accompanying notes to financial statements.
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Income
(Unaudited)
For the Quarters Ended March 31, 1997 and 1996
1997 1996
Revenue:
Rental income $ 2,625 $ 50,130
Interest income 600 4,235
Gain on sale of
investment property - 298,650
Total revenue 3,225 353,015
Expenses:
Depreciation 91,176 131,931
General and administrative 9,560 158,672
Total expenses 100,736 290,603
Net income $ (97,511) $ 62,412
========= =========
See accompanying notes to financial statements.
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Cash Flows
(Unaudited)
For the Quarters ended March 31, 1996 and 1995
1997 1996
Cash flows from operating activities:
Net income $ (97,511) $ 62,412
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 91,176 131,931
Gain on sale of investment
property - (298,650)
Changes in assets and liabilities:
Receivables - 51,579
Due to affiliates (90) (2,850)
Accounts payable 60 4,735
Unearned rental revenue - 6,113
Net cash provided by operating
activities (6,365) (44,730)
Cash flows from investing activities:
Disposition of investment property - 314,260
Cash flows from financing activities:
Cash distribution to Partners (98,174) (126,045)
Net increase in cash and
cash equivalents (104,539) 143,485
Cash and cash equivalents at
beginning of period 156,932 386,282
Cash and cash equivalents at end of
period $ 52,393 $ 529,767
========= =========
See accompanying notes to financial statements.
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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. Any distributable cash from sales shall
be distributed 99% to the Limited Partners and 1% 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.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
(Unaudited)
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.
Basis of Presentation
The Partnership financial statements are presented on the accrual
basis of accounting.
Cash and Cash Equivalents
Cash and cash equivalents 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 March 31, 1997 and December 31, 1996, the Partnership
owned investment property, with a depreciable cost basis of $4,363,083.
The depreciable cost basis at March 31, 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 March 31, 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 March 31, 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 March 31, 1997 are as follows:
Management fees $ 81
Reimbursable operating expenses 4,755
$ 4,836
=======
At March 31, 1997, the following costs were due to the General
Partner or affiliates:
Management fees $ 44
Reimbursable operating expenses 1,784
$ 1,828
=======
<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 March 31, 1997, there were no leases in
effect. The Partnership has $52,393 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
Rental income for the quarter was $2,265; down $47,505 from the
first quarter of 1996 due to the sale of investment property and lease
expirations. A Fokker F-27 aircraft has been off lease since October,
1994. To reduce the net book value of the aircraft to its estimated
market value, the Partnership has 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 $91,176, down $40,755
from the first quarter of 1996 due to the sale of $1.8 million in
equipment since the first quarter of 1996. General and administrative
expense was $9,560 for the quarter; down $149,112 from last year due
to an decrease in aircraft maintenance expense.
As mentioned above, it is possible the Partnership may sell the
remaining equipment and cease operations during 1997.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 March 31,
1997 as defined by Section 17 of the Amended Agreement of Limited
Partnership:
Rental income $ 2,625
Cash from sales -
Interest income 600
Total cash inflow 3,225
Operating expenses (9,479)
Cash from operations (6,254)
Reserve for distributions and operations 6,335
Partnership management fee (81)
Distributable cash from operations $ -
=========
Allocation of Distributable Cash from Operations and Sales:
There is no distributable cash from operations and sales for the
first quarter of 1997.
On February 28, 1997, the cash distributions for the fourth
quarter of 1996 in the amount of $96,548 were made to the Limited
Partners of record on December 31, 1996.
<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 140,366
$ 4,363,083
==========
<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: May 27, 1997
By: /s/ Robert L. Hechler
Robert L. Hechler, as President,
Treasurer and Director of the General
Partner
(Principal Accounting and Financial
Officer)
Date: May 27, 1997
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