<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, 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 - March 31, 1998 and
December 31, 1997 3
Statements of Income for the Quarters Ended
March 31, 1998 and 1997 4
Statements of Cash Flow for the Quarters Ended
March 31, 1998 and 1997 5
Notes to Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Equipment Summary 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 9
Item 2. Changes in Securities. 9
Item 3. Default Upon Senior Securities. 9
Item 4. Submission of Matters to a Vote of Security
Holders. 9
Item 5. Other Information. 9
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits 9
(b) Reports on Form 8-K 9
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PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
March 31, December 31,
1998 1997
Assets (Unaudited)
Investment Property:
Cost $ 140,365 $ 140,365
Less accumulated depreciation 135,608 134,043
Investment property, net 4,757 6,322
Cash and cash equivalents 18,717 22,453
Total assets $ 23,474 $ 28,775
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates $ 1,503 $ 1,431
Accounts payable 397 337
Total liabilities 1,900 1,768
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 42,802 42,776
Cumulative cash distributions (389,926) (389,926)
(346,124) (346,150)
Limited Partners (24,137 units):
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income (220,653) (215,194)
Cumulative cash distributions (10,119,534) (10,119,534)
367,698 373,157
Total partners' equity accounts 21,574 27,007
Total liabilities and partners'
equity $ 23,474 $ 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)
For the Quarters Ended March 31, 1998 and 1997
1998 1997
Revenue:
Rental income $ - $ 2,625
Interest income 27 600
Total revenue 27 3,225
Expenses:
Depreciation 1,565 91,176
General and administrative 3,895 9,560
Total expenses 5,460 100,736
Net income $ (5,433) $ (97,511)
========= =========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Cash Flows
(Unaudited)
For the Quarters ended March 31, 1998 and 1997
1998 1997
Cash flows from operating activities:
Net income $ (5,433) $ (97,511)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 1,565 91,176
Changes in assets and liabilities:
Due to affiliates 72 (90)
Accounts payable 60 60
Net cash provided by operating
activities (3,736) (6,365)
Cash flows from investing activities:
Disposition of investment property - -
Cash flows from financing activities:
Cash distribution to Partners - (98,174)
Net increase in cash and
cash equivalents (3,736) (104,539)
Cash and cash equivalents at
beginning of period 22,453 156,932
Cash and cash equivalents at end of
period $ 18,717 $ 52,393
========= =========
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. 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. In addition, spe-
cial 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.
<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 of mining equipment. At March 31, 1998
and December 31, 1997, the Partnership owned investment property, with
a depreciable cost basis of $140,365. The depreciable cost basis at
March 31, 1998 and December 31, 1997, includes acquisition fees of
$6,365 which were paid to the General Partner. Depreciation on invest-
ment property is provided using an accelerated method over a 7 year
life.
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, 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 March 31, 1998 are as follows:
Reimbursable operating expenses $2,705
At March 31, 1998, the following costs were due to the General
Partner or affiliates:
Reimbursable operating expenses $1,504
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Partnership Operations
Due to the sale of investment property and lease expirations
there was no rental income for the first quarter of 1998; a decrease
of $2,625 from the of 1997. The Partnership's final lease for mining
equipment ended February 15, 1997 and it is being remarketed.
Depreciation expense for the quarter was $1,565, down $89,611
from the first quarter of 1997 due to the sale of $4.2 million in
equipment in 1997. General and administrative expense was $3,895 for
the quarter; down $5,665 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 1998.
Cash from Operations and Distributable Cash from Operations
Shown below is the calculation of Cash from Operations and Dis-
tributable Cash from Operations for the quarter ended March 31, 1998
as defined by Section 17 of the Amended Agreement of Limited Partner-
ship:
Rental income $ -
Cash from sales -
Interest income 27
Total cash inflow 27
Operating expenses (3,895)
Cash from operations (3,868)
Reserve for distributions and operations 3,868
Partnership management fee -
Distributable cash from operations $ -
=========
Allocation of Distributable Cash from Operations and Sales:
There was no first quarter distribution made to the Limited Part-
ners of record on December 31, 1997.
Acquisition
Equipment Description Cost
Heavy Duty Equipment 140,366
<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 26, 1998
By: /s/ Robert L. Hechler
Robert L. Hechler, as President,
Treasurer and Director of the General
Partner
(Principal Accounting and Financial
Officer)
Date: May 26, 1998
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 18717
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<ALLOWANCES> 0
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<CURRENT-ASSETS> 18717
<PP&E> 140365
<DEPRECIATION> 135608
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0
0
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<INCOME-PRETAX> (5433)
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