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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 2004 Commission file number 2-90654
AMRECORP REALTY FUND II
(Exact name of registrant as specified in its charter)
TEXAS 75-1956009
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification
Number)
2800 N. Dallas Pkwy Suite 100
Plano, Texas 75093-5994
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 836-8000.
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 for 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: Y No:
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of June 30, 2004 and
December 31, 2003 Page 3
Consolidated Statements of Operations for the Three
and Six months Ended June 30, 2004 and 2003 Page 4
Consolidated Statements of Cash Flows for the Six
months Ended June 30, 2004 and 2003 Page 5
Item 2. Results of Operations and Management's Discussion and
Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 7
Other Information Page 9
Signatures Page 10
The statements, insofar as they relate to the period subsequent to
December 31, 2003 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Balance Sheets
June 30, December 31,
2004 2003
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $580,045 $580,045
Buildings and improvements 4,794,733 4,794,733
5,374,778 5,374,778
Less: Accumulated depreciation (3,778,782) (3,680,782)
Real estate, net 1,595,996 1,693,996
Investments in Real Estate Held for Sale
Cash including cash investments 306,549 240,219
Escrow deposits 75,388 202,842
Deferred Costs and Fees 4,562 7,983
Other assets 98,990 13,320
Total assets $2,081,485 $2,158,360
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES:
Mortgage and notes payable $2,103,775 $2,137,546
Payable to Affiliates 1,414 320
Interest payable 0 16,611
Real estate taxes payable 58,065 0
Security deposits 22,984 23,213
Accounts payable and accrued expenses 75,926 153,286
Total liabilities 2,262,164 2,330,976
PARTNERS CAPITAL (DEFICIT):
Limited Partners (107,778) (99,796)
General Partners (72,901) (72,820)
Total Partners Capital (Deficit) (180,679) (172,616)
Total Liability and Partners Equity $2,081,485 $2,158,360
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
March 31, June 30,
REVENUES 2004 2003 2004 2003
Rental income $223,117 $216,835 $435,971 $430,720
Other property 6,550 5,477 11,856 11,190
Total revenues 229,667 222,312 447,827 441,910
EXPENSES
Salaries & wages 18,378 19,490 40,298 39,672
Maintenance & repairs 24,398 8,016 46,437 13,106
Utilities 9,738 9,099 19,593 17,551
Real estate taxes 29,250 29,250 58,500 58,500
General administrative 8,907 10,801 14,707 16,529
Contract services 17,987 11,761 30,268 23,523
Insurance 7,835 9,784 23,391 19,684
Interest 49,273 50,952 98,884 101,837
Depreciation and amortization 49,000 48,000 98,000 96,000
Property management fees 11,483 11,025 22,391 22,091
Amortization of deferred costs & fees 1,710 1,711 3,421 3,422
Total expenses 227,959 209,889 455,890 411,915
NET INCOME (LOSS) $1,708 $12,423 ($8,063) $29,995
NET INCOME PER SHARE $0.12 $0.85 $(0.55) $2.06
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND II
Condensed Consolidated Statement of Cash Flows
Unaudited
Six Months Ended
June 30,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($8,063) $29,995
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 98,000 96,000
Net Effect of changes in operating accounts
Escrow deposits 127,454 134,676
Deferred Costs 3,421 (26,946)
Accrued real estate taxes 58,065 58,435
Security deposits (229) 1,298
Accounts payable (77,360) (91,159)
Other assets (85,670) 13,816
Net cash used by operating activities 115,618 216,115
CASH FLOWS FROM INVESTING ACTIVITIES
0 0
Net cash used by investing activities 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (33,771) (30,776)
Proceeds from amounts due affiliates 1,094 (22,594)
Increase in accrued interest (16,611) (17,028)
Net cash provided by financing activities (49,288) (70,398)
NET INCREASE (DECREASE) IN CASH AND CASH 66,330 145,717
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF 240,219 7,833
PERIOD
CASH AND CASH EQUIVALENT, END OF PERIOD $306,549 $153,550
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the
Partnership believes that the disclosures are adequate to make
the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the
Partnership's latest annual report on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At June 30, 2004 the Partnership owned one property, Chimney
Square Apartments located in Abilene Texas with approximately
126,554 net rentable square feet.
The occupancy of Chimney Square averaged 97.4% during the second
quarter of 2004 as compared to 94.3% for the second quarter of
2003.
SECOOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003
Revenue from property operations increased $7,355 or 3.31%, for
the second quarter of 2004, as compared to the 2003 second
quarter. Rental income increased $6,282 or 2.90% from decreased
vacancy. Other income increased $1,073 or 19.59% primarily due
to increased fees. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Rental income $6,282 2.90%
Other property 1,073 19.59%
$7,355 3.31%
Property operating expenses increased $18,071 or 8.61%, for the
second quarter of 2004, as compared to the same period in 2003.
This was primarily due from increased maintenance & repairs.
Maintenance and repairs increased $16,382 or 204.37% due to
higher turnover cost and exterior building maintenance on the
property. Contract Service increased $6,226 or 52.94% due to
pest control and cable television rates. Insurance decreased
$1,949 or 19.92% due to slightly lower property insurance rates.
The following table illustrates the components by category:
Increase Percent
(Decrease) Change
Salaries & wages ($1,112) 5.71%
Maintenance & repairs 16,382 204.37%
Utilities 639 7.02%
General administrative (1,894) 17.54%
Contract services 6,226 52.94%
Insurance (1,949) 19.92%
Interest (1,679) 3.30%
Depreciation and amortization 1,000 2.08%
Property management fees 458 4.15%
Net Increase (Decrease) $18,071 8.61%
SECOND QUARTER 2003 COMPARED TO SECOND QUARTER 2002
Revenue from property operations increased $1,023 or 0.46%, for
the second quarter of 2003, as compared to the 2002 second
quarter. Rental income increased $1,113 or 0.52% from higher
rental rates. Other income decreased $90 or 1.62% primarily due
to decreased fees. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Rental income $1,113 0.52%
Other property (90) 1.62%
$1,023 0.46%
Property operating expenses decreased $2,525 or 1.19%, for the
second quarter of 2003, as compared to the same period in 2002.
This was primarily due from decreased general & administrative
costs. General & administrative costs decreased $9,002 or 45.46%
primarily due to decreased mailing costs. Utility costs
increased $2,121 or 30.4% as a result of increased gas costs.
Contract services increased $1,332 or 12.77% due to higher cable
television costs. The following table illustrates the components
by category:
Increase Percent
(Decrease) Change
Salaries & wages $1,012 5.48%
Maintenance & repairs 1,292 19.21%
Utilities 2,121 30.40%
Real estate taxes 501 1.74%
General administrative (9,002) 45.46%
Contract services 1,332 12.77%
Insurance 915 10.32%
Interest (814) 1.57%
Depreciation and amortization 0 0.00%
Property management fees 118 1.08%
Net Increase (Decrease) ($2,525) 1.19%
LIQUIDITY AND CAPITAL RESOURCES
While it is the General Partners primary intention to operate and
manage the existing real estate investments, the General Partner
also continually evaluates this investment in light of current
economic conditions and trends to determine if these assets
should be considered for disposal. Accordingly, in 1996 the
Partnership sold its investment in the shopping center located in
Lancaster, Texas, recognizing a loss of $10,177. Shorewood
Apartments, an apartment complex located in Charlotte, North
Carolina was sold in January 1997. Net proceeds from the sale
were 1.3 million dollars resulting in cash distribution of
$100.00 per unit.
As of June 30, 2004, the Partnership had $306,549 in cash and
cash equivalents as compared to $240,219 as of December 31 2003.
The net increase in cash of $66,630 is principally due to cash
flow from operations.
On September 30, 2002 the partnership distributed $15.00 per
limited partnership unit to units of record September 30, 2002.
This distribution was made from excess cash on hand from cash
flow from operations.
The property is encumbered by non-recourse mortgage as of June
30, 2004, with an interest rate of 9.325%. Required principal
payments on this mortgage note for the two years ended December
31, 2005, are $59,039 and $2,079,227 respectively.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage
payments), improvements and capital expenditures will be funded
by net cash from operations. The primary source of capital to
fund future Partnership acquisitions and balloon mortgage
payments will be proceeds from the sale, financing or refinancing
of the properties.
On February 7, 1995 the Partnership refinanced the loan on
Chimney Square Apartments. The original loan matured and a new
$2,475,000 loan bearing interest at 9.325% per year was secured
from Newport Mortgage Company L.P. The loan matures on March 1,
2005. In connection with this loan, the lender required, and the
Partnership provided, a new single asset partnership known as
Chimney Square Apartments, owned 99% by the Fund.
In February 1991, Amrecorp Realty Inc., resigned as the Managing
General Partner of the Partnership. As was communicated to all
limited partners, this step was taken in order to minimize any
effect that Amrecorp's financial difficulties might have on the
partnership. Management of the Partnership's assets is performed
by Univesco, Inc., a Texas corporation, Robert J. Werra, CEO.
Management intends to continue operating the Partnership in its
present form while investigating options to improve operations of
the Partnership.
Part II
Other Information
Item 1. Legal Proceedings
See Part I Item 2. Management's Discussion
and Analysis of Financial Conditions and
Results of Operations.
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matter to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None.
(A) The following documents are filed herewith or
incorporated herein by reference as indicated
as Exhibits:
Exhibit Designation Document Description
Limited Partnership Agreement
incorporated by reference to
Registration Statement No. 2-90654
effective July 6, 1984.
Limited Partnership Agreement
incorporated by reference to
Registration Statement No. 2-90654
effective July 6, 1984.
11 Not Applicable
15 Not Applicable
18 Not Applicable
19 Not Applicable
20 Not Applicable
23 Not Applicable
31.1 Certification Pursuant to
Rules 13a-14 and 15d-14 Under
the Securities Exchange Act of
1934, as Adopted Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002, filed
herewith.
32.1 Certification Pursuant to 18
U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
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.
AMRECORP REALTY FUND II
a Texas limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: July 29, 2004
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Robert J. Werra, Acting Principal Executive Officer and Chief
Financial Amrecorp Realty Fund II ("the Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Company;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented
in this quarterly report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material
information relating to the company and its consolidated
subsidiaries is made known to me by others within those
entities, particularly for the periods presented in this
quarterly report;
b. designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under my supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles.
c. evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued
d. disclosed in this report any change in the Company's internal
control over financial reporting that occurred during the
Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting; and
5. I have disclosed based on my most recent evaluation of
internal control over financial reporting, to the Company's
auditors and Audit Committee of the Board of Directors (or
persons fulfilling the equivalent function):
a. all significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize, and report
financial data; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Company's internal control over financial reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
July 29, 2004
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Amrecorp Realty Fund II
("the Company") on Form 10-Q for the period ending June 30, 2004
as filed with the Securities and Exchange Commission on the date
hereof ("the Report"), I, Robert J. Werra, Acting Principal
Executive Officer and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Company.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
July 29, 2004