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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
June 30, 1998 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, 1998 and
December 31, 1997 3
Statements of Income for the Three Months and Six
Months Ended June 30, 1998 and 1997 4
Statements of Cash Flow for the Six Months Ended
June 30, 1998 and 1997 5
Notes to Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 10
Item 2. Changes in Securities. 10
Item 3. Default Upon Senior Securities. 10
Item 4. Submission of Matters to a Vote of Security
Holders. 10
Item 5. Other Information. 10
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 10
(b) Reports on Form 8-K 10
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
June 30, December 31,
1998 1997
Assets (Unaudited)
Investment Property:
Cost $ 140,365 $ 140,365
Less accumulated depreciation 138,737 134,043
Investment property, net 1,628 6,322
Cash and cash equivalents 74,250 22,453
Total assets $ 75,878 $ 28,775
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 2,442 $ 1,431
Accounts payable 1,537 337
Total liabilities 3,979 1,768
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 102,994 42,776
Cumulative cash distributions (389,926) (389,926)
(285,932) (346,150)
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income (230,520) (215,194)
Cumulative cash distributions (10,119,534) (10,119,534)
357,831 373,157
Total partners' equity accounts 71,899 27,007
Total liabilities and partners'
equity $ 75,878 $ 28,775
========== ==========
See accompanying notes to financial statements.
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Income
(Unaudited)
Six Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
Revenue:
Rental income $ 60,172 $ 2,625 $ 60,172 $ -
Interest income 46 628 19 28
Total revenue 60,218 3,253 60,191 28
Expenses:
Depreciation 4,695 182,355 3,130 91,177
General and
administrative 10,631 18,511 6,736 8,953
Total expenses 15,326 200,866 9,866 100,130
Net (loss) income $ 44,892 $(197,613) $ 50,325 $(100,102)
======== ======== ======== ========
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 Six Months
Ended June 30,
1998 1997
Cash flows from operating activities:
Net income (loss) $ 44,892 $ (197,613)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 4,694 182,355
Changes in assets and liabilities:
Due to affiliates 1,011 (1,269)
Accounts payable 1,200 59
Net cash provided by (used in)
operating activities 51,797 (16,468)
Cash flows from financing activities:
Cash distribution to Partners - (98,175)
Net increase (decrease) in cash and
cash equivalents 51,797 (114,643)
Cash and cash equivalents at
beginning of period $ 22,453 $ 156,932
Cash and cash equivalents at end of
period $ 74,250 $ 42,289
========== ==========
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. 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.
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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 June 30, 1998 and December 31, 1997, the Partnership owned
mining equipment, with a depreciable cost basis of $140,365. The
depreciable cost basis at June 30, 1998 and 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. The equipment is being marketed for sale.
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, 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 June 30, 1998 are as follows:
Reimbursable operating expenses $4,007
The following costs were due to affiliates as of June 30, 1998.
Reimbursable operating expenses $2,442
(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.
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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
Partnership Operations
Rental income for the second quarter of 1998 was $60,172, as
compared to no rental income for the same period in 1997. The rental
income represents past due rents that were received as the result of
the Partnership's claim against the assets of a lessee that filed for
bankruptcy in 1993. Rental income for the first six months of 1998
was $60,172, an increase of $57,547 over 1997.
Depreciation expense for the second quarter of 1998 was $3,130, a
decrease of $88,047 from the same period in 1997 due to the sale of
equipment. Depreciation for the first six months of 1998 was $4,695, a
decrease of $177,660. General and administrative expense was $6,736
for the second quarter of 1998; a decrease of $2,217 from last year
due to lower aircraft maintenance expense and accounting fees. General
and administrative expense for the first six months of 1998 was
$10,631, a decrease of $7,880 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.
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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
Distributable Cash from Operations for the quarter ended June 30, 1998
as defined by Section 17 of the Amended Agreement of Limited
Partnership:
Rental income $ 60,172
Cash from sales -
Interest income 19
Total cash inflow 60,191
Operating expenses (6,736)
Cash from operations 53,455
Reserve for distributions and operations 53,455
Partnership management fee -
Distributable cash from operations $ -
=======
There were no distributions made to the Limited Partners of record
on March 31,1998.
Equipment Summary
Acquisition
Equipment Description Cost
Construction/Mining $140,365
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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.
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 - None.
(b) Form 8-K - There have been no reports on Form
8-K.
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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:
Michael D. Strohm, as Executive Vice
President, and Assistant Treasurer
of the General Partner
Date: August 13, 1998
By:
Robert L. Hechler, President, Treasurer
Director of the General Partner
(Principle Accounting and Financial
Officer)
Date: August 13, 1998
