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, 2002 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 75093-4707 (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, 2002 and December 31, 2001 Page 3 Consolidated Statements of Operations for the Three and Six months Ended June 30, 2002 and 2001 Page 4 Consolidated Statements of Cash Flows for the Six months Ended June 30, 2002 and 2001 Page 5 Item 2. Results of Operations and Managements Discussion and Analysis of Financial Condition Page 6 Liquidity and Capital Resources Page 7 Other Information Page 8 Signatures Page 9 The statements, insofar as they relate to the period subsequent to December 31, 2001 are Unaudited. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements AMRECORP REALTY FUND II Condensed Consolidated Balance Sheets June 30, December 31, 2002 2001 (Unaudited) ASSETS Real Estate assets, at cost Land $580,045 $580,045 Buildings and improvements 4,678,271 4,678,271 5,258,316 5,258,316 Less: Accumulated depreciation (3,398,996) (3,302,996) Real estate, net 1,859,320 1,955,320 Cash including cash investments 203,439 142,797 Escrow deposits 198,967 208,514 Deferred Costs and Fees 50,073 21,667 Other assets 1,150 10,444 Total assets $2,312,949 $2,338,742 LIABILITIES AND PARTNERS' EQUITY: LIABILITIES: Mortgage and notes payable $2,212,331 $2,240,377 Payable to Affiliates 1,126 1,242 Interest payable 0 17,410 Real estate taxes payable 57,498 0 Security deposits 20,856 19,501 Accounts payable and accrued 87,063 158,274 expenses Total liabilities 2,378,874 2,436,804 PARTNERS CAPITAL (DEFICIT): Limited Partners 8,010 (23,806) General Partners (73,935) (74,256) Total Partners Capital (65,925) (98,062) (Deficit) Total Liability and Partners Equity $2,312,949 $2,338,742 See notes to Condensed Consolidated Financial Statements AMRECORP REALTY FUND II Condensed Consolidated Statement of Operations (Unaudited) Three Months Six Months Ended June 30, Ended June 30, 2002 2001 2002 2001 Rental income $215,722 $214,907 $435,300 $420,658 Other property 5,567 8,930 9,910 15,615 Total revenues 221,289 223,837 445,210 436,273 Salaries & wages 18,478 16,868 39,928 36,191 Maintenance & repairs 6,724 14,474 11,760 28,013 Utilities 6,978 7,844 16,118 16,270 Real estate taxes 28,749 25,500 57,498 51,000 General administrative 19,803 8,831 26,414 15,046 Contract services 10,429 10,528 20,484 20,949 Insurance 8,869 5,285 15,433 9,899 Interest 51,766 52,848 103,811 105,951 Depreciation and amortization 48,000 48,000 96,000 96,000 Property management fees 10,907 10,957 22,206 21,467 Amortization of deferred costs and fees 1,710 1,710 3,421 3,421 Total expenses 212,413 202,845 413,073 404,207 NET INCOME (LOSS) $8,876 $20,992 $32,137 $32,066 NET INCOME PER SHARE $0.61 $1.44 $2.21 $2.20 See Notes to Condensed Consolidated Financial Statements AMRECORP REALTY FUND II Condensed Consolidated Statement of Cash Flows Unaudited Six Months Ended June 30, 2002 2001 CASH FLOWS FROM OPERATING ACTIVITY Net income (loss) $32,137 $32,066 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 96,000 96,000 Net Effect of changes in operating accounts Escrow deposits 9,547 46,142 Deferred Costs (28,406) (19,744) Accrued real estate taxes 57,498 51,015 Security deposits 1,355 1,050 Accounts payable (71,211) (70,751) Other assets 9,294 6,811 Net cash used by operating activities 106,214 142,589 CASH FLOWS FROM INVESTING ACTIVITIES Net cash used by operating activities 0 0 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of mortgage notes payable (28,046) (25,558) Proceeds from amounts due affiliates (116) 3,310 Increase in accrued interest (17,410) (17,757) Net cash provided by investing activities (45,572) (40,005) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 60,642 102,584 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 142,797 210,193 CASH AND CASH EQUIVALENT, END OF PERIOD $203,439 $312,777 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 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Results of Operations At June 30, 2002 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 96.9% during the second quarter of 2002 as compared to 98.4% for the second quarter of 2001. SECOND QUARTER 2002 COMPARED TO SECOND QUARTER 2001 Revenue from property operations decreased $2,548 or 1.14%, for the second quarter of 2002, as compared to the 2001 second quarter. Rental income increased $815 or 0.38% from higher rental rates. Other income decreased $3,363 or 37.66% primarily due to decreased late charges and other fees. The following table illustrates the components: Increase Percent (Decrease) Change Rental income $815 0.38% Other property (3,363) 37.66% ($2,548) 1.14% Property operating expenses increased $9,568 or 4.72%, for the second quarter of 2002, as compared to the same period in 2001. This was primarily due from increased general and administrative costs. General & administrative costs increased primarily due to partnership mailings. Insurance costs increased $3,584 or 67.81% from increased premiums. Maintenance and repairs decreased $7,750 or 53.54% due to lower preventive maintenance repairs needed on the property. Real estate taxes increased due to higher assessments on the property. The following table illustrates the components by category: Increase Percent (Decrease) Change Salaries & wages $1,610 9.54% Maintenance & repairs (7,750) 53.54% Utilities (866) 11.04% Real estate taxes 3,249 12.74% General administrative 10,972 124.24% Contract services (99) 0.94% Insurance 3,584 67.81% Interest (1,082) 2.05% Depreciation and amortization 0 0.00% Property management fees (50) 0.46% Net Increase $9,568 4.72% (Decrease) SECOND QUARTER 2001 COMPARED TO SECOND QUARTER 2000 Revenue from property operations decreased $1,067 or 0.47%, for the second quarter of 2001, as compared to the 2000 second quarter. The increase in rental income of $3,186 or 1.50% is primarily due to higher rental rates. Other income decreased $4,253 or 32.26% primarily due to decreased late charges and other fees. The following table illustrates the components: Increase Percent (Decrease) Change Rental income $3,186 1.50% Other property (4,253) 32.26% ($1,067) 0.47% Property operating expenses decreased $6,099 or 2.92%, for the second quarter of 2001, as compared to the same period in 2000. This was primarily due to a decrease in general & administrative due to decrease postage from partner mailings. Insurance costs increased $1,215 or 29.85% from increased premiums. Utilities increased $1,303 or 19.92% due to higher gas costs. The following table illustrates the components by category: Increase Percent (Decrease) Change Salaries & wages $300 1.81% Maintenance & repairs (3,040) 17.36% Utilities 1,303 19.92% Real estate taxes 1,749 7.36% General administrative (5,231) 37.20% Contract services 734 7.49% Insurance 1,215 29.85% Interest (1,176) 2.18% Depreciation and amortization (2,000) 4.00% Property management fees 47 0.43% Net Increase ($6,099) 2.92% (Decrease) 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, 2002, the Partnership had $203,439 in cash and cash equivalents as compared to $142,797 as of December 31 2001. The net increase in cash of $60,642 is principally due to cash flow from operations. The property is encumbered by non-recourse mortgage as of June 30, 2002, with an interest rate of 9.325%. Required principal payments on this mortgage note for the three years ended December 31, 2004, are $49,029 $53,082 and $59,039 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 Amrecorps financial difficulties might have on the partnership. Management of the Partnerships 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. Managements 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 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: August 1, 2002