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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
September 30, 1998 33-27782
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
Item 1. Financial Statements: Page
Balance Sheets - September 30, 1998 and
December 31, 1997 3
Statements of Income for the Quarters and Nine
Months Ended September 30, 1998 and 1997 4
Statements of Cash Flow for the Nine Months Ended
September 30, 1998 and 1997 5
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
Item 5. Other Information. 10
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 10
(b) Reports on Form 8-K 10
Signatures 11
2
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Part 1. Financial Information
Item 1. Financial Statements
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
Assets
Investment Property:
Cost $ - $ 140,365
Accumulated depreciation - (134,043)
------------ ------------
Investment property, net - 6,322
Cash and cash equivalents 92,519 22,453
------------ ------------
Total assets $ 92,519 $ 28,775
============ ============
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 1,502 $ 1,431
Accounts payable - 337
------------ ------------
Total liabilities 1,502 1,768
------------ ------------
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 124,900 42,776
Cumulative cash distributions (389,926) (389,926)
------------ ------------
(264,026) (346,150)
------------ ------------
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income (233,308) (215,194)
Cumulative cash distributions (10,119,534) (10,119,534)
------------ ------------
355,043 373,157
------------ ------------
Total partners' equity accounts 91,017 27,007
------------ ------------
Total liabilities and partners'
equity $ 92,519 $ 28,775
============ ============
See accompanying notes to financial statements.
3
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Income
(Unaudited)
For the Quarters and Nine Months
Ended September 30, 1998 and 1997
Nine Months Ended Quarter Ended
September 30 September 30
---------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenue:
Rental income $ 60,172 $ 2,625 $ - $ -
Interest income 755 1,387 709 759
Gain (loss) on sale of
investment property 21,197 (53,413) 21,197 (53,413)
-------- --------- --------- ---------
Total revenue 82,124 (49,401) 21,906 (52,654)
-------- --------- --------- ---------
Expenses:
Depreciation 5,019 229,335 325 46,980
General and
administrative 13,095 26,304 2,464 7,793
-------- --------- --------- ---------
Total expenses 18,114 255,639 2,789 54,773
-------- --------- --------- ---------
Net (loss) income $ 64,010 $(305,040) $ 19,117 $(107,427)
======== ========= ========= =========
See accompanying notes to financial statements.
4
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Cash Flows
(Unaudited)
For the Nine Months ended September 30, 1998 and 1997
1998 1997
---- ----
Cash flows from operating activities:
Net income (loss) $ 64,010 $ (305,040)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 5,019 229,335
(Gain) loss on sale of investment
property (21,197) 1,120,279
Provision for loss on
investment property - (900,000)
Deferred gain on sales of investment
property - (166,866)
Changes in assets and liabilities:
Receivables - (338)
Due to affiliates 71 (919)
Accounts payable (337) (368)
----------- ----------
Net cash provided by (used in)
operating activities 47,566 (23,917)
Cash flows from investing activities:
Disposition of investment property 22,500 375,267
Cash flows from financing activities:
Cash distribution to Partners - (98,175)
----------- ----------
Net increase in cash and cash
equivalents 70,066 253,175
Cash and cash equivalents at
beginning of period $ 22,453 $ 156,932
----------- ----------
Cash and cash equivalents at end of
period $ 92,519 $ 410,107
=========== ===========
See accompanying notes to financial statements.
5
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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. 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). In addition, special cost recovery
allocations may be required to reflect the differing initial capital
contributions of the General Partner and the Limited Partners. The
Partnership's books and records are in accordance with the terms of the
Amended Agreement of Limited 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.
6
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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
At September 30, 1998 the Partnership had sold it's remaining
equipment. At December 31, 1997, the Partnership owned mining equip-
ment, with a depreciable cost basis of $140,365. The depreciable cost
basis at December 31, 1997, includes acquisition fees of $6,365, which
were paid to the General Partner. Depreciation on investment property
is provided using an accelerated method.
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 September 30, 1998 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.
(2) 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 September 30, 1998 are as follows:
Reimbursable operating expenses $5,080
The following costs were due to affiliates as of September 30,
1998.
Reimbursable operating expenses $1,502
(3) Subsequent Event
Proceeds from the sale of the last piece of equipment that the
Partnership owned in the amount of $22,500 were received on July 31,
1998.
7
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Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Partnership Operations
There was no rental income for the third quarter of 1998 and 1997.
Rental income for the first nine months of 1998 was $60,172, an
increase of $57,547 over 1997.
Depreciation expense for the third quarter of 1998 was $325 a
decrease of $46,655 from the same period in 1997 due to the sale of
equipment. Depreciation for the first nine months of 1998 was $5,019,
a decrease of $224,316. General and administrative expense was $2,464
for the third quarter of 1998; a decrease of $5,329 from last year due
to lower accounting fees and aircraft maintenance expense. General
and administrative expense for the first nine months of 1998 was
$13,095, a decrease of $13,209 from the same period in 1997 due to
lower accounting fees and aircraft maintenance.
Proceeds from the sale of the Partnership's last piece of equipment
in the amount of $22,500 were received on July 31, 1998. As a result,
the Partnership plans to make its final distribution of cash and cease
operations by December 31, 1998.
Liquidity and Capital Resources
Management believes the Partnership has sufficient cash to fund
operations until it ceases operations and provide for a final cash
distribution to the partners.
8
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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 Distrib-
utable Cash from Operations for the quarter ended September 30, 1998
as defined by Section 17 of the Amended Agreement of Limited Partner-
ship:
Cash from sales 21,197
Interest income 709
-------
Total cash inflow 21,906
Operating expenses (2,464)
-------
Cash from operations 19,442
Reserve for distributions and operations 19,442
Partnership management fee -
-------
Distributable cash from operations $ -
=======
There were no distributions made to the Limited Partners of record
on June 30,1998.
9
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Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information.
The Partnership disposed of the last of its equipment on July
31, 1998. This equipment consisted of mining equipment for
which the Partnership received $22,500 from an unrelated third
party. The Partnership plans to make its final distribution of
cash and cease operations by December 31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule (electronic filing only).
(b) Form 8-K - There have been no reports on Form 8-K.
10
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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: November 12, 1998
By: /s/ Robert L. Hechler
---------------------------------------------
Robert L. Hechler, President, Treasurer
Director of the General Partner
(Principal Accounting and Financial
Officer)
Date: November 12, 1998
11
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS REPORTED ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 92,519
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92,519
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 92,519
<CURRENT-LIABILITIES> 1,502
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 91,017
<TOTAL-LIABILITY-AND-EQUITY> 92,519
<SALES> 0
<TOTAL-REVENUES> 82,124
<CGS> 0
<TOTAL-COSTS> 18,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 64,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 64,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,010
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
