UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended      July 31, 20142015     

 

OR

 

¨      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________________ to ______________________

 

Commission File Number      1-4702    

 

AMREP Corporation
(Exact name of Registrant as specified in its charter)

 

Oklahoma 59-0936128
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

 

300 Alexander Park, Suite 204, Princeton, New Jersey08540
(Address of principal executive offices)(Zip Code)

 

Registrant’s telephone number, including area code:(609) 716-8200

 

Not Applicable
(Former name or former address, if changed since last report)

 

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 (the “Exchange Act”) 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 x   No ¨

YesxNo¨

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

 

Yes x   No ¨

YesxNo¨

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filero¨Accelerated filero¨
    
Non-accelerated filero¨Smaller reporting companyx

(Do not check if a smaller reporting company)

 

Indicate by check mark whether the RegistrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ¨   No x

Yes¨Nox

 

Number of Shares of Common Stock, par value $.10 per share, outstanding at September 12, 201411, 20158,056,454.8,059,454.

 

 

AMREP CORPORATION AND SUBSIDIARIES

 

INDEX

 

 PAGE
NO.
PART I.  FINANCIAL INFORMATION 
  
Item 1.  Financial Statements 
  
Consolidated Balance Sheets July 31, 20142015 (Unaudited) and April 30, 201420151
  
Consolidated Statements of Operations and Retained Earnings (Unaudited) Three Months Ended July 31, 20142015 and 201320142
  
Consolidated Statements of Cash Flows from Continuing Operations (Unaudited) Three Months Ended July 31, 20142015 and 201320143
  
Notes to Consolidated Financial Statements (Unaudited)4
  
Item 2.  Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations1211
  
Item 4.  Controls and Procedures1715
  
PART II.  OTHER INFORMATION 
  
Item 5.  Other Information1816
  
Item 6.  Exhibits1917
  
SIGNATURE2018
  
EXHIBIT INDEX2119

 

 

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

Item 1.Financial Statements

 

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in thousands, except par value and share amounts)

 

 July 31,
2014
 April 30,
2014
  July 31,
2015
 April 30,
2015
 
 (Unaudited)    (Unaudited)   
ASSETS                
Cash and cash equivalents $9,879  $12,929  $9,697  $12,050 
Receivables, net  22,431   43,497   10,933   11,265 
Real estate inventory  71,563   71,289   66,388   66,321 
Investment assets, net  10,234   10,234   15,328   15,364 
Property, plant and equipment, net  22,789   23,819   15,467   15,763 
Intangible and other assets, net  13,479   14,126   9,670   10,440 
Taxes receivable  35   12   1,781   - 
Deferred income taxes, net  5,383   9,042   5,837   5,837 
Assets of discontinued operations  -   1,689 
TOTAL ASSETS $155,793  $184,948  $135,101  $138,729 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY                
        
LIABILITIES:                
Accounts payable, net and accrued expenses $33,308  $74,636 
Accounts payable and accrued expenses $8,826  $10,284 
Notes payable:                
Amounts due within one year  2,850   218   130   128 
Amounts due beyond one year  4,154   5,245   3,927   3,959 
Amounts due to related party – due beyond one year  15,099   15,141 
Amounts due to related party  13,782   14,003 
  22,103   20,604   17,839   18,090 
                
Other liabilities  3,058   3,058 
Taxes payable  -               653 
Other liabilities and deferred revenue  4,766   4,827 
Accrued pension cost  7,402   7,349   11,513   11,259 
Liabilities of discontinued operations  -   295 
TOTAL LIABILITIES  65,871   105,647   42,944   45,408 
                
SHAREHOLDERS’ EQUITY:                
Common stock, $.10 par value; shares authorized – 20,000,000; shares issued – 8,281,704 at July 31, 2014 and 7,444,704 at April 30, 2014  828   744 
Common stock, $.10 par value; shares authorized – 20,000,000; shares issued – 8,284,704 at July 31, 2015 and 8,281,704 at April 30, 2015  828   828 
Capital contributed in excess of par value  50,537   46,264   50,553   50,538 
Retained earnings  51,947   45,683   55,824   57,003 
Accumulated other comprehensive loss, net  (9,175)  (9,175)  (10,833)  (10,833)
Treasury stock, at cost; 225,250 shares at July 31, 2014 and April 30, 2014  (4,215)  (4,215)
Treasury stock, at cost; 225,250 shares at July 31, 2015 and April 30, 2015  (4,215)  (4,215)
TOTAL SHAREHOLDERS’ EQUITY  89,922   79,301   92,157   93,321 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $155,793  $184,948  $135,101  $138,729 

 

1

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings (Unaudited)

Three Months Ended July 31, 20142015 and 20132014

(Amounts in thousands, except per share amounts)

 

  2014  2013 
REVENUES:        
Media Services operations $17,516  $20,278 
Real estate land sales  384   228 
Other  28   3 
   17,928   20,509 
COSTS AND EXPENSES:        
Real estate land sales  222   190 
Operating expenses:        
Media Services operations  14,537   17,728 
Real estate selling expenses  60   58 
Other  441   497 
General and administrative:        
Media Services operations  1,728   1,809 
Real estate operations and corporate  828   851 
Impairment of assets  925   - 
Interest expense  419   465 
   19,160   21,598 
LOSS BEFORE OTHER INCOME  (1,232)  (1,089)
Other – Gain on settlement (Note 10)  11,155   - 
INCOME (LOSS) BEFORE INCOME TAXES  9,923   (1,089)
PROVISION (BENEFIT) FOR INCOME TAXES  3,659   (402)
NET INCOME (LOSS)  6,264   (687)
         
RETAINED EARNINGS, beginning of period  45,683   63,920 
Issuance of common stock from treasury shares  -   (15,296)
RETAINED EARNINGS, end of period $51,947  $47,937 
         
INCOME (LOSS) PER SHARE – BASIC AND DILUTED $0.82  $(0.11)
         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  7,599   6,374 
  2015  2014 
REVENUES:        
Fulfillment services $9,181  $11,909 
Real estate land sales  110   384 
Other  284   28 
   9,575   12,321 
COSTS AND EXPENSES:        
Real estate land sales  36   222 
Operating expenses:        
Fulfillment services  8,780   9,392 
Real estate selling expenses  53   60 
Other  347   441 
General and administrative expenses:        
Fulfillment services  865   1,107 
Real estate operations and corporate  1,019   827 
Impairment of assets  -   925 
Interest expense  379   392 
   11,479   13,366 
Loss from continuing operations before income taxes  (1,904)  (1,045)
         
Benefit for income taxes  (725)  (409)
Loss from continuing operations  (1,179)  (636)
         
Discontinued operations (Note 2)        
Income from discontinued operations before income taxes  -   10,968 
Provision for income taxes  -   4,068 
Income from discontinued operations  -   6,900 
         
Net income (loss)  (1,179)  6,264 
         
Retained earnings, beginning of period  57,003   45,683 
Retained earnings, end of period $55,824  $51,947 
         
Loss per share – continuing operations – basic and diluted $(0.15) $(0.08)
Earnings per share – discontinued operations – basic and diluted $-  $0.90 
Earnings (loss) per share, net - basic and diluted $(0.15) $0.82 
Weighted average number of common shares outstanding  8,029   7,599 

 

2

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

AMREP CORPORATION AND SUBSIDIARIES


Consolidated Statements of Cash Flows from Continuing Operations (Unaudited)


Three Months Ended July 31, 20142015 and 2013

2014
(Amounts in thousands)

 

  2014  2013 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income (loss) $6,264  $(687)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
Gain on settlement  (11,155)  - 
Impairment of assets  925   - 
Depreciation and amortization  932   922 
Non-cash credits and charges:        
Provision for (recoveries of) doubtful accounts  (89)  24 
Stock-based compensation  36   - 
Changes in assets and liabilities:        
Receivables  (1,471)  (4,412)
Real estate inventory and investment assets  (274)  173 
Intangible and other assets  275   604 
Accounts payable and accrued expenses  (3,273)  (3,243)
Taxes receivable and payable  (23)  97 
Deferred income taxes and other liabilities  3,659   (402)
Accrued pension costs  53   80 
Net cash used in operating activities  (4,141)  (6,844)
CASH FLOWS FROM INVESTING ACTIVITIES:        
Capital expenditures - property, plant and equipment  (408)  (54)
Net cash used in investing activities  (408)  (54)
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from issuance of common stock, net  -   7,146 
Proceeds from debt financing  2,678   7,959 
Principal debt payments  (1,179)  (54)
Net cash provided by financing activities  1,499   15,051 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  (3,050)  8,153 
CASH AND CASH EQUIVALENTS,beginning of period  12,929   13,714 
CASH AND CASH EQUIVALENTS,end of period $9,879  $21,867 
         
SUPPLEMENTAL CASH FLOW INFORMATION:        
Interest paid $417  $452 
Income taxes paid (refunded), net $24  $(97)
Non-cash transactions:        
Reduction of accounts receivable due to settlement $22,626  $- 
Reduction of accounts payable due to settlement $38,214  $- 
Issuance of common stock in settlement $4,274  $- 

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

  2015  2014 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss from continuing operations $(1,179) $(636)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Impairment of assets  -   925 
Depreciation and amortization  746   826 
Non-cash credits and charges:        
Allowance for (recovery of) doubtful accounts  29   (111)
Stock-based compensation  21   36 
Changes in assets and liabilities, net of effects of discontinued operations:        
Receivables  303   2,146 
Real estate inventory and investment assets  (67)  (274)
Intangible and other assets  432   1,422 
Accounts payable and accrued expenses  (1,458)  (1,492)
Taxes receivable and payable  (2,434)  3 
Deferred income taxes and other liabilities  (61)  (408)
Accrued pension costs  254   53 
Total adjustments  (2,235)  3,126 
Net cash provided by (used in) operating activities  (3,414)  2,490 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Capital expenditures - property, plant and equipment  (82)  (377)
Net cash used in investing activities  (82)  (377)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Principal debt payments  (251)  (71)
Net transfers from (to) discontinued operations  1,394   (1,311)
Net cash provided by (used in) financing activities  1,143   (1,382)
         
Increase (decrease) in cash and cash equivalents  (2,353)  731 
Cash and cash equivalents,beginning of period  12,050   7,571 
Cash and cash equivalents,end of period $9,697  $8,302 
         
SUPPLEMENTAL CASH FLOW INFORMATION:        
Interest paid $324  $408 
Income taxes paid (refunded), net $1,854  $(3)
Non-cash transactions:        
Issuance of common stock in settlement $-  $4,274 

 

3

 

AMREP CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended July 31, 20142015 and 20132014

 

(1)BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared by AMREP Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The Company, through its subsidiaries, is primarily engaged in fourtwo business segments: the Subscription Fulfillment Services business operated by Palm Coast Data LLC (“Palm Coast”) and its subsidiary, FulCircle Media, LLC (“FulCircle”), the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services and Staffing businesses operated by Kable Media Services, Inc. and its subsidiaries (“Kable”) (the Subscription Fulfillment Services business, the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services and Staffing businesses are collectively referred to as “Media Services”) and the real estate business operated by AMREP Southwest Inc. (“AMREP Southwest”) and its subsidiaries. The Company’s foreign sales are insignificant. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

In the opinion of management, these unaudited consolidated financial statements include all adjustments, which are of a normal recurring nature, considered necessary to reflect a fair presentation of the results for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of what may occur in future periods. Unless otherwise qualified, all references to 20152016 and 20142015 are to the fiscal years ending April 30, 20152016 and 20142015 and all references to the first quarter and first three months of 20152016 and 20142015 mean the fiscal three month periods ended July 31, 20142015 and 2013.2014.

 

The unaudited consolidated financial statements herein should be read in conjunction with the Company’s annual report on Form 10-K for the year ended April 30, 2014,2015, which was filed with the SEC on July 29, 2014.2015 (the “2015 Form 10-K”).

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. This guidance defines how companies report revenues from contracts with customers and also requires enhanced disclosures. In July 2015, the Financial Accounting Standards Board voted to defer the effective date by one year, with early adoption on the original effective date permitted. The Company will be required to adopt the standard as of May 1, 2018 and early adoption is permitted as of May 1, 2017. The Company has not determined the transition approach that will be utilized nor has it estimated the impact of adopting the new accounting standard.

 

(2)DISCONTINUED OPERATIONS

Prior to February 9, 2015, the Company had been engaged in the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services business. On February 9, 2015, the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services business were sold. In addition, prior to April 10, 2015, the Company had also been engaged in the Staffing Services business. On April 10, 2015, the Staffing Services business was sold. The Newsstand Distribution Services business, the Product Packaging and Fulfillment Services business and the Staffing Services business have been classified as “discontinued operations” in the Company’s financial statements. Financial information from prior periods has been reclassified to conform to this presentation. Refer to Item 1 of Part I of the 2015 Form 10-K for more detail about the sale of the Newsstand Distribution Services business, the Product Packaging and Fulfillment Services business and the Staffing Services business.

4

The following table provides a reconciliation of the carrying amounts of the major classes of assets and liabilities of the discontinued operations in the accompanying balance sheets (in thousands):

  July 31,
2015
  April 30,
2015
 
       
Carrying amounts of major classes of assets included as part of discontinued operations:        
Cash and cash equivalents $-  $1,241 
Receivables, net  -   431 
Intangible and other assets, net  -   17 
Total assets classified as discontinued operations in the accompanying balance sheets $-  $1,689 
         
Carrying amounts of major classes of liabilities included as part of discontinued operations:        
Accounts payable, net and accrued expenses $-  $150 
Deferred and income taxes payable  -   145 
Total liabilities classified as discontinued operations in the accompanying balance sheets $-  $295 

The following table provides a reconciliation of the carrying amounts of components of pretax income or loss of the discontinued operations to the amounts reported in the accompanying statements of operations (in thousands):

For the three months ended:

  July 31,
2015
  July 31,
2014
 
       
Components of pretax income from discontinued operations:        
Revenues $-  $5,658 
Operating expenses  -   (5,196)
General and administrative expenses  -   (621)
Gain from settlement (Note 11)  -   11,155 
Interest expense  -   (28)
Income from discontinued operations before income taxes  -   10,968 
Provision for income taxes  -   4,068 
Net income from discontinued operations $-  $6,900 

5

The following table provides the total operating and investing cash flows of the discontinued operations for the periods in which the results of operations of the discontinued operations are presented in the accompanying statements of operations (in thousands):

For the three months ended:

  July 31,
2015
  July 31,
2014
 
       
Cash flows from discontinued operating activities:        
Net income $-  $6,900 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Gain on settlement  -   (11,155)
Depreciation and amortization  -   106 
Non-cash credits and charges:        
Allowance for doubtful accounts  -   22 
Changes in assets and liabilities:        
Receivables  431   (3,617)
Intangible and other assets  17   (1,147)
Accounts payable and accrued expenses  (150)  (1,781)
Other  (145)  4,041 
Total adjustments  153   (13,531)
Net cash provided by (used in) operating activities $153  $(6,631)
         
Cash flows from investing activities:        
Capital expenditures - property, plant and equipment $-  $(31)
Net cash used in investing activities $-  $(31)

(2)(3)RECEIVABLES

 

Receivables, net consist of the following accounts receivable (in thousands):

 

  July 31,
2014
  April 30,
2014
 
Media Services operations:        
Subscription Fulfillment Services $9,242  $11,406 
Newsstand Distribution Services, net of estimated returns  12,482   31,226 
Product Packaging and Fulfillment Services and Staffing  3,714   3,978 
   25,438   46,610 
Less allowance for doubtful accounts  (3,011)  (3,113)
  $22,427  $43,497 
         
Real estate operations and corporate $4  $- 
  July 31,
2015
  April 30,
2015
 
       
Fulfillment Services $8,157  $7,993 
Buyer promissory note  1,600   1,600 
Line of credit receivable  1,500   2,000 
Real estate operations and corporate  147   116 
   11,404   11,709 
Less allowance for doubtful accounts  (471)  (444)
  $10,933  $11,265 

 

Refer to Item 1 of Part I of the 2015 Form 10-K for detail about the buyer promissory note and line of credit issued in connection with the sale of the Newsstand Distribution Services accounts receivable are net of estimated magazine returns of $41,502,000business and $70,437,000 at July 31, 2014the Product Packaging and April 30, 2014.Fulfillment Services business.

During the first quarter of 2016, revenues from one major customer of the Company’s Fulfillment Services business totaled $1,230,000 or 12.8% of total revenues for the Company. As of August 31, 2015, the Company and its indirect subsidiaries, Kable DistributionCompany’s Fulfillment Services Inc. (“Kable Distribution”) and Palm Coast, entered into a settlement agreement (the “Settlement Agreement”) with a significant customer resulting in a significant reductionbusiness had $433,000 of outstanding accounts receivable of Newsstand Distribution Services. See further detail regarding the Settlement Agreement in Note 10.from this customer.

6

 

(3)(4)PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment, net consist of the following (in thousands):

 

  July 31,  April 30, 
  2014  2014 
Land, buildings and improvements $27,364  $27,935 
Furniture and equipment  24,028   23,952 
   51,392   51,887 
Less accumulated depreciation  (28,603)  (28,068)
  $22,789  $23,819 

The Company recorded an impairment charge of $925,000 related to certain assets of the Fulfillment Services business during the quarter ended July 31, 2014. See Note 11 for further detail.

  July 31,  April 30, 
  2015  2015 
       
Land, buildings and improvements $20,003  $20,000 
Furniture and equipment  18,797   19,098 
   38,800   39,098 
Less accumulated depreciation  (23,333)  (23,335)
  $15,467  $15,763 

 

(4)(5)INTANGIBLE AND OTHER ASSETS

 

Intangible and other assets, net consist of the following (in thousands):

 

 July 31, 2014 April 30, 2014  July 31, 2015 April 30, 2015 
 Cost Accumulated
Amortization
 Cost Accumulated
Amortization
  Cost Accumulated
Amortization
 Cost Accumulated
Amortization
 
                  
Customer contracts and relationships $16,986  $11,110  $16,986  $10,757 
Prepaid expenses  2,606   -   2,520   - 
Deferred order entry costs $1,089  $-  $1,168  $-   920   -   961   - 
Prepaid expenses  4,178   -   4,365   - 
Customer contracts and relationships  16,986   9,695   16,986   9,342 
Other  1,170   249   1,183   234   268   -   730   - 
 $23,423  $9,944  $23,702  $9,576  $20,780  $11,110  $21,197  $10,757 

 

Customer contracts and relationships are amortized on a straight line basis over twelve years. Deferred order entry costs represent costs incurred in connection with the data entry of customer subscription information to database files and are charged directly to operations generally over a twelve month period. Customer contracts and relationships are amortized on a straight line basis over twelve years.

5

 

(5)(6)ACCOUNTS PAYABLE NET AND ACCRUED EXPENSES

 

Accounts payable net and accrued expenses consist of the following (in thousands):

 

  July 31,  April 30, 
  2014  2014 
Media Services operations:        
Subscription Fulfillment Services $9,175  $10,692 
Newsstand Distribution Services, net of estimated returns  21,568   60,696 
Product Packaging and Fulfillment Services and Staffing  1,010   1,502 
   31,753   72,890 
         
Real estate operations and corporate  1,555   1,746 
  $33,308  $74,636 
  July 31,  April 30, 
  2015  2015 
       
Fulfillment Services $7,593  $8,910 
Real estate operations and corporate  1,233   1,374 
  $8,826  $10,284 
         

 

The July 31, 20142015 accounts payable, net and accrued expenses total includes net publisher payables of $19,744,000, customer postage deposits of $5,004,000,$4,140,000, accrued expenses of $2,588,000,$1,852,000, trade payables of $1,657,000$986,000 and other of $4,315,000.$1,848,000. The April 30, 20142015 accounts payable, net and accrued expenses total includes net publisher payables of $53,506,000, customer postage deposits of $5,708,000,$4,832,000, accrued expenses of $6,840,000,$1,142,000, trade payables of $3,242,000$1,641,000 and other of $5,340,000.

Accounts payable of Newsstand Distribution Services, which is operated through Kable Distribution, are net of estimated magazine returns of $38,545,000 and $67,088,000 at July 31, 2014 and April 30, 2014.

During the first quarter of 2015, the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant customer resulting in a significant reduction of accounts payable, net of Newsstand Distribution Services. See further detail regarding the Settlement Agreement in Note 10.

Kable Distribution had negative working capital of approximately $10,273,000 at July 31, 2014 and had outstanding borrowings of $2,115,000 at July 31, 2014 under a revolving credit facility between the Company’s Media Services businesses and a bank (the “Media Services Credit Facility”). The negative working capital of Kable Distribution represents the net payment obligation due to publisher clients and other third parties, which amount will vary from period to period based on the level of magazine distribution. The negative working capital of Kable Distribution is calculated by deducting (a) the sum of the cash held by Kable Distribution plus the accounts receivable (net of estimated magazine returns to Kable Distribution) owed to Kable Distribution from wholesalers, retailers and other third parties from (b) the accounts payable (net of estimated magazine returns to publishers) and accrued expenses owed by Kable Distribution to publisher clients and other third parties.$2,669,000.

 

67

 

(6)(7)NOTES PAYABLE

 

Notes payable consist of the following (in thousands):

 

  July 31,
2014
  April 30,
2014
 
Credit facilities:        
Media Services operations $2,629  $1,059 
Real estate operations  15,099   15,141 
Other notes payable  4,375   4,404 
  $22,103  $20,604 

Media Services Credit Facility

The Media Services Credit Facility provides the Media Services business with a revolving credit loan and letter of credit facility of up to $15,000,000 that matures on May 12, 2015. At July 31, 2014, the borrowing availability under the Media Services Credit Facility was $11,074,000, and there was $2,629,000 outstanding against this availability. The highest amount borrowed during the first quarter of 2015 was $3,198,000 and the interest rate at July 31, 2014 was 3.16%. The borrowers’ obligations under the Media Services Credit Facility are secured by substantially all of their assets other than real property.

  July 31,
2015
  April 30,
2015
 
Credit facilities:        
Real estate operations $13,782  $14,003 
PNC Credit Facility  -   - 
Other notes payable  4,057   4,087 
  $17,839  $18,090 

 

Real Estate Loan

 

AMREP Southwest has a loan withfrom a company owned by Nicholas G. Karabots, a significant shareholder of the Company and in which another director of the Company has a 20% participation. The loan had an outstanding principal amount of $15,099,000$13,782,000 at July 31, 2014,2015, is scheduled to mature on December 1, 2017, bears interest payable monthly at 8.5% per annum and is secured by a mortgage on all real property of AMREP Southwest in Rio Rancho, New Mexico and by a pledge of the stock of its subsidiary, Outer Rim Investments, Inc. The total book value of the real property collateralizing the loan was approximately $69,119,000$63,944,000 as of July 31, 2014.2015. No payments of principal are required until maturity, except that the following amounts are required to be applied to the payment of the loan: (a) 25% of the net cash proceeds from any sales of real property by AMREP Southwest and (b) 25% of any royalty payments received by AMREP Southwest under the Oiloil and Gas Lease discussedgas lease described in Note 12.8.

 

Other Notes Payable

 

Other notes payable consist of a mortgage note payable with an outstanding principal balance of $4,178,000$4,057,000 on a warehouse with a maturity date of February 2018 and an interest rate of 6.35%, and $197,000 of an asset financing loan with a maturity date of December 2015 and an interest rate of 9.0%. The amount of Other notes payable due within one year totals $221,000.$130,000.

PNC Credit Facility

The Company’s Fulfillment Services business had a revolving credit and security agreement with PNC Bank, N.A. (the “PNC Credit Facility”). The PNC Credit Facility expired by its terms on August 12, 2015. There were no borrowings during the quarter ended July 31, 2015 and no balance outstanding at the end of the quarter. At July 31, 2015, the borrowers were in compliance with the covenants of the PNC Credit Facility.

 

(7)(8)DEFERRED REVENUE

Refer to Item 8 of Part II of the 2015 Form 10-K for detail about the Oil and Gas Lease and the Addendum thereto with Thrust Energy, Inc. and Cebolla Roja, LLC. No royalties under the Lease were received during the first quarter of 2016. Revenue from this transaction is being recorded over the lease term and approximately $57,000 was recognized during the first quarter of 2016 and none for the same period of 2015, which is included in Other revenues in the accompanying financial statements. At July 31, 2015, there remained $701,000 of deferred revenue.

8

Refer to Item 8 of Part II of the 2015 Form 10-K for detail about a lease agreement for a warehouse facility owned by El Dorado Utilities, Inc. in Fairfield, Ohio. The amount of deferred rent revenue in connection with the lease totaled $1,013,000 and $1,042,000 at July 31, 2015 and April 30, 2015. The credit related to the amortization of the deferred rent revenue is accounted for as a reduction of general and administrative expenses for real estate operations and corporate in the accompanying financial statements and totaled $29,000 for both quarters ending July 31, 2015 and 2014.

(9)FAIR VALUE MEASUREMENTS

 

The Financial Instruments Topic of the Financial Accounting Standards Board Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Topic excludes all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions are used in estimating fair value disclosure for financial instruments. The carrying amounts of cash and cash equivalents, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. Debt that bears variable interest rates indexed to prime or LIBOR also approximates fair value as it re-prices when market interest rates change.

 

AtThe Company did not have any long-term, fixed-rate notes receivables at July 31, 2014 and2015 or April 30, 2014, the2015. The estimated fair values of the Company’s long-term, fixed-rate notes payable were $17,758,000$16,236,000 and $17,739,000$16,365,000 compared with carrying amounts of $19,474,000$17,839,000 and $19,545,000.$18,090,000 at July 31, 2015 and April 30, 2015.

 

(8)(10)BENEFIT PLANS

 

Retirement plan

 

The Company has a defined benefit retirement plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. The Company has secured $5,019,000 of accrued pension-related obligations with first lien mortgages on certain real property in favor of the Pension Benefit Guaranty Corporation (the “PBGC”). On an annual basis, the Company is required to provide updated appraisals on each mortgaged property and, if the appraised value of the mortgaged properties is less than two times the amount of the accrued pension-related obligations secured by the mortgages, the Company is required to make a payment to its pension plan in an amount equal to one-half of the amount of the shortfall. During the first quarter of 2015,2016, the Company substituted certain real property subject to the first lien mortgage in favor of the PBGC. During the first quarter of 2016, there was no change in the appraised value of the mortgaged property that required the Company to make any additional payments to its pension plan.

 

Equity compensation plan

 

In 2006, the boardThe Company issued 3,000 shares of directors of the Company adopted and the shareholders approvedrestricted common stock under the AMREP Corporation 2006 Equity Compensation Plan (the “Equity Plan”) that provides forduring the issuancefirst quarter of up to 400,000 shares of common stock of the Company to employees of the Company and its subsidiaries and non-employee members of the board of directors of the Company pursuant to incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards.

2016. During the first quarter of 2015, the board of directors of the Company issued to employees 12,000shares of restricted common stock under the Equity Plan (“restricted shares”). The restricted shares vest in equal2016, 4,000 share installmentson July 8, 2015, 2016 and 2017 and are expected to vest assuming a zero forfeiture rate over the vesting term.Shares of restricted common stock that are issued under the Equity Planare considered to be issued and outstanding as of the grant date and have the same dividend and voting rights as other common stock. Compensation expense related to the restricted shares is recognized over the vesting period based on the fair value of the shares as of the date of grant. The fair value of the restricted sharesis determined based on the trading price of the shares of the Company’scommon stockon the date of grant, which was $6.90 per share for the 12,000 shares awarded, or an aggregate grant date fair value of $83,000 which will be charged to expense over the vesting term.

No shares of common stock previously issued under the Equity Planvested duringleaving 27,000 shares issued under the first quarterEquity Plan that have not vested as of 2015.July 31, 2015.For the first quarter of 2016 and 2015, the Company recognized $21,000 and $36,000 of compensation expense related to allthe restrictedshares of common stock issued under the Equity Plan.issued.As ofJuly 31, 20142015, there was$167,00076,000of total unrecognized compensation expense related to shares of common stock issued under the Equity Plan, which is expected to be recognized over the remaining vesting term.term not to exceed three years.

9

 

(9)SHAREHOLDERS’ EQUITY

During the first quarter of 2015, the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant customer resulting in the issuance by the Company to that customer of 825,000 shares of its common stock. See further detail regarding the Settlement Agreement in Note 10. As a result of the issuance of these shares, the Company increased its common stock account by $83,000 and its contributed capital account by $4,191,000.

(10)(11)GAIN FROM SETTLEMENT

 

During the first quarter of 2015, the Company and certain of its indirect subsidiaries Kable Distribution and Palm Coast, entered into the Settlement Agreementa settlement agreement with a significant customer, Heinrich Bauer (USA) LLC (“Bauer”).

Kable Distribution and Bauer were parties to an ordinary course of business contract pursuant to which Kable Distribution distributed certain magazines of Bauer in return forLLC. As a commission. Palm Coast and Bauer are parties to an ordinary course of business contract pursuant to which Palm Coast provides certain fulfillment services to Bauer in return for service fees. During the first quarter of 2014, Kable Distribution received notice that its ordinary course of business contract with Bauer, which provided Kable Distribution with a substantial amount of negative working capital liquidity, would not be renewed upon its scheduled expiration in June 2014. See further detail regarding the negative working capital of Kable Distribution in Note 5.

Pursuant to the Settlement Agreement, Kable Distribution agreed to eliminate the commission paid by Bauer to Kable Distribution for distribution services through expirationresult of the contract period at June 30, 2014 and to amend the payment procedures with respect to amounts received by Kable Distribution from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers; Palm Coast agreed to reduce certain fees charged to Bauer for fulfillment services, with Bauer agreeing to extend the term of its fulfillmentsettlement agreement, to at least December 31, 2018; and the Company agreed to issue to Bauer 825,000 shares of common stock of the Company, withrecognized a fair market value of $4,274,000 and which represented approximately 10.3% of the outstanding shares of common stock of the Company following such issuance, with Bauer agreeing to not sell or transfer such shares for a period of six months. In return for such consideration, Bauer released all claims it may have had against each of Kable Distribution, Palm Coast, the Company and its related persons, other than the obligations of Kable Distribution, Palm Coast and the Company under the Settlement Agreement, the future obligations of Kable Distribution under its distribution agreement as amended by the Settlement Agreement and the future obligations of Palm Coast under its fulfillment agreement as amended by the Settlement Agreement. In particular, the Settlement Agreement transferred to Bauer all amounts and accounts receivable owing from wholesalers to Kable Distribution relating to the domestic sale by Kable Distribution of Bauer magazines ($22,626,000) and released Kable Distribution from having to pay the accounts payable owed to Bauer relating to the domestic sale by Kable Distribution of Bauer magazines other than to the extent amounts had been received by Kable Distribution or Bauer on or after May 14, 2014 from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers ($38,214,000). After considering the value of the various components of the Settlement Agreement, Kable Distribution recorded apretax gain of $11,155,000, duringwhich is included in the first quarterresults of discontinued operations in the accompanying financial statements for 2015. Refer to Item 1 of Part I of the 2015 Form 10-K for additional detail about the settlement agreement.

 

(11)(12)IMPAIRMENT OF ASSETS

 

During the first quarter of 2015, the Company’s Subscription Fulfillment Services business recognized a $925,000 impairment charge relating to the discontinuance of the development of certain software. The impairment charge included previously capitalized software costs, internal labor costs and third party consulting costs.

(12)SUBSEQUENT EVENT

On September 8, 2014, AMREP Southwest and one of its subsidiaries (collectively, “ASW”) entered into an Oil and Gas Lease and the Addendum thereto (collectively, the “Lease”) with Thrust Energy, Inc. and Cebolla Roja, LLC (collectively, the “Lessee”).

Pursuant to the Lease, ASW leased to Lessee all minerals and mineral rights owned by ASW or for which ASW has executive rights in and under approximately 55,000 surface acres of land in Sandoval County, New Mexico (the “Leased Premises”) for the purpose of exploring for, developing, producing and marketing oil and gas. As partial consideration for entering into the Lease, the Lessee paid approximately $1,010,000 to ASW. The Lease will be in force for an initial term of four years and for as long thereafter as oil or gas is produced and marketed in paying quantities from the Leased Premises or for additional limited periods of time if Lessee undertakes certain operations or makes certain de minimis shut-in royalty payments. In addition, Lessee may extend the initial term of the Lease for an additional four years by paying ASW another payment of approximately $1,010,000. The Lease does not require Lessee to drill any oil or gas wells.

Lessee has agreed to pay ASW a royalty on oil and gas produced from the Leased Premises of 1/7th of the gross proceeds received by Lessee from the sale of such oil and gas to an unaffiliated third party of Lessee or 1/7th of the market value of the oil and gas if sold to an affiliate of Lessee. ASW’s royalty will be charged with 1/7th of any expenses to place the oil and gas, if any, in marketable condition after it is brought to the surface. Amounts payable under the Lease will not be reduced by any payments made to other holders of mineral rights or other production royalty payment interests in the Leased Premises, other than payments pursuant to rights granted by ASW in deeds transferring portions of the Leased Premises to third parties, primarily in the 1960s and 1970s. ASW and Lessee may assign, in whole or in part, their interests in the Lease. The oil and gas from ASW’s mineral rights will not be pooled or unitized with any other oil and gas except as required by law. Lessee has assumed all risks and liabilities in connection with Lessee’s activities under the Lease and agreed to indemnify ASW with respect thereto.

In addition, on September 8, 2014, AMREP Southwest entered into a Consent Agreement (the “Consent Agreement”) with the mortgage holder on certain portions of the Leased Premises, pursuant to which the mortgage holder provided its consent to AMREP Southwest entering into the Lease and agreed to enter into a subordination, non-disturbance and attornment agreement with Lessee. Pursuant to the Consent Agreement, AMREP Southwest agreed to pay the mortgage holder (a) 25% of any royalty payments received by AMREP Southwest under the Lease with respect to oil and gas produced from the Leased Premises, which will be credited against any outstanding loan amounts due to the mortgage holder from AMREP Southwest, and such payments will cease upon payment in full of such outstanding loan amounts and (b) a separate consent fee of $100,000, which will not be credited against the outstanding loan amounts due to the mortgage holder from AMREP Southwest.

10

 

(13)INFORMATION ABOUT THE COMPANY’S OPERATIONS IN DIFFERENTINDUSTRY SEGMENTS

 

The following tables set forth summarized data relative to the industry segments in which the Company operated (other than with respect to discontinued operations) for the three month periods ended July 31, 20142015 and 20132014 (in thousands):.

 

 Subscription
Fulfillment
Services
 Newsstand
Distribution
Services
 Product
Services and
Staffing
 Real Estate
Operations
 Corporate
and
Other
 Consolidated  Fulfillment
Services
 Real Estate
Operations
 Corporate
and
Other
 Consolidated 
Three months ended July 31, 2014 (a):                        
Three months ended July 31, 2015 (a):                
Revenues $11,945  $1,347  $4,224  $484  $(72) $17,928  $9,181  $168  $226  $9,575 
                                        
Net income (loss)  (350)  6,737   172   (754)  459   6,264 
Provision (benefit) for income taxes  (187)  3,954   101   (454)  245   3,659 
Interest expense (income), net  175   26   1   695   (478)  419 
Depreciation and amortization  767   51   55   23   36   932 
Gain on settlement  -   (11,155)  -   -   -   (11,155)
Impairment of assets  925   -   -   -   -   925 
EBITDA (b) $1,330  $(387) $329  $(490) $262  $1,044 
                        
Total assets $46,775  $10,900  $5,620  $87,358  $5,140  $155,793 
Total liabilities $33,574  $29,803  $1,244  $43,644  $(42,394) $65,871 
Capital expenditures $377  $6  $25  $-  $-  $408 
                        
Three months ended July 31, 2013 (a):                        
Revenues $13,993  $1,985  $4,300  $301  $(70) $20,509 
                        
Net income (loss)  (346)  (64)  194   (911)  440   (687)
Net income (loss) from continuing operations $(776) $(766) $363  $(1,179)
Provision (benefit) for income taxes  (202)  (17)  113   (535)  239   (402)  (456)  (454)  185   (725)
Interest expense (income), net  187   26   (1)  678   (425)  465   167   671   (459)  379 
Depreciation and amortization  757   51   57   21   36   922   716   23   7   746 
EBITDA (b) $396  $(4) $363  $(747) $290  $298  $(349) $(526) $96  $(779)
Capital expenditures $82  $-  $-  $82 
Three months ended July 31, 2014 (a):                
Revenues $11,909  $484  $(72) $12,321 
                                        
Total assets $52,477  $52,698  $4,563  $88,255  $9,077  $207,070 
Total liabilities $36,429  $80,718  $1,484  $41,927  $(32,487) $128,071 
Net income (loss) from continuing operations $(338) $(754) $456  $(636)
Provision (benefit) for income taxes  (198)  (454)  243   (409)
Interest expense (income), net  175   695   (478)  392 
Depreciation and amortization  794   23   9   826 
Impairment of assets  925   -   -   925 
EBITDA (b) $1,358  $(490) $230  $1,098 
Capital expenditures $35  $13  $6  $-  $-  $54  $377  $-  $-  $377 

 

(a)Revenue information provided for each segment includes amounts grouped as Other in the accompanying consolidated statements of operations. Corporate and Other is net of intercompany eliminations.

 

(b)The Company uses EBITDA (which the Company defines as income before net interest expense, income taxes, depreciation and amortization, and non-cash gain on settlement and impairment charges) in addition to net income (loss) as a key measure of profit or loss for segment performance and evaluation purposes.

 

10

During the third quarter of 2014, the Company determined that, based on the characterization of certain transactions that occurred in prior periods, no intersegment interest income or expense relating to such transactions would be appropriate. As a result, the intersegment interest income and expense relating to such transactions has been removed from the presentation above for the first quarter of 2014 and there was no effect on the reported EBITDA, which the Company uses as a key measure for segment performance and evaluation purposes.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

INTRODUCTION

 

The Company,AMREP Corporation (the “Company”), through its subsidiaries, is primarily engaged in fourtwo business segments: the Subscriptionreal estate business operated by AMREP Southwest Inc. (“AMREP Southwest”) and its subsidiaries and the Fulfillment Services business operated by Palm Coast Data LLC (“Palm Coast”) and its subsidiary, FulCircle Media, LLC (“FulCircle”),. Data concerning industry segments is set forth in Note 13 of the notes to the consolidated financial statements included in this report on Form 10-Q. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s foreign sales and activities are not significant.

Prior to February 9, 2015, the Company had been engaged in the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services and Staffing businesses operated by Kable Media Services, Inc. and its subsidiaries (“Kable”) (the Subscription Fulfillment Services business,business. On February 9, 2015, the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services business were sold. In addition, prior to April 10, 2015, the Company had also been engaged in the Staffing Services business. On April 10, 2015, the Staffing Services business was sold. The Newsstand Distribution Services business, the Product Packaging and Staffing businesses are collectively referred to as “Media Services”)Fulfillment Services business and the real estateStaffing Services business operated by AMREP Southwest Inc. (“AMREP Southwest”have been classified as “discontinued operations” in the Company’s financial statements. Financial information from prior periods has been reclassified to conform to this presentation. Refer to Item 1 of Part I of the Company’s annual report on Form 10-K for the year ended April 30, 2015, which was filed with the SEC on July 29, 2015 (the “2015 Form 10-K”), for more detail about the sale of the Newsstand Distribution Services business, the Product Packaging and its subsidiaries. The Company’s foreign salesFulfillment Services business and activities are not significant.the Staffing Services business.

 

The following provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q and with the Company’s annual report on2015 Form 10-K for the year ended April 30, 2014, which was filed with the Securities and Exchange Commission on July 29, 2014 (the “2014 Form 10-K”).10-K. Many of the amounts and percentages presented in this section have been rounded for convenience of presentation. Unless otherwise qualified, all references to 20152016 and 20142015 are to the fiscal years ending April 30, 20152016 and 20142015 and all references to the first quarter and first three months of 20152016 and 20142015 mean the fiscal three month periodsperiod ended July 31, 20142015 and 2013.2014.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Management’s discussion and analysis of financial condition and results of operations is based on the accounting policies used and disclosed in the 20142015 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of the 20142015 Form 10-K.The10-K. The preparation of those consolidated financial statements required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those estimates.

 

The critical accounting policies, assumptions and estimates are described in Item 7 of Part II “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies and Estimates” in the 20142015 Form 10-K. There have been no changes in these accounting policies.

11

 

The significant accounting policies of the Company are described in Note 1 to the consolidated financial statements contained in the 20142015 Form 10-K. Information concerning the Company’s implementation and the impact of recent accounting standards issued by the Financial Accounting Standards Board is included in the notes to the consolidated financial statements contained in the 20142015 Form 10-K. The Company did not adopt any accounting policy in the first quarter of 20152016 that had a material impact on its consolidated financial statements.

RESULTS OF OPERATIONS

Continuing Operations

 

For the first quarter of 2015,2016, the CompanyCompany’s continuing operations recorded a net incomeloss of $6,264,000,$1,179,000, or $0.82$0.15 per share, compared to a net loss of $687,000,$636,000 or $0.11$0.08 per share, in the first quarter of 2014. The results for the first quarter of 2015 included a non-cash pre-tax gain on a settlement agreement with a significant customer of $11,155,000 ($7,028,000 after tax, or $0.92 per share) offset in part by a non-cash impairment charge of $925,000 ($583,000 after tax, or $0.08 per share), reflecting the discontinuance of the development of certain software in the Company’s Subscription Fulfillment Services business.2015. Revenues were $17,928,000 infrom continuing operations were$9,575,000 for the first quarter of 20152016 compared to $20,509,000$12,321,000 for the same period in the prior year.

 

Revenues from the Company’s MediaFulfillment Services operations decreased from $20,278,000$11,909,000 for the first quarter of 20142015 to $17,516,000$9,181,000 for the same period in 2015.2016. The decrease in revenues was due in part to lower revenues in 2016 of $1,438,000 from a significant customer that changed fulfillment service providers, and which consisted largely of contract termination fees that had little or no operating expenses associated with them. Magazine publishers are the principal customers of thesethe Company’s Fulfillment Services operations, and these customers have continued to be negatively impacted by increased competition from new media sources, alternative technologies for the distribution, storage and consumption of media content, weakness in advertising revenues and increases in paper costs, printing costs and postal rates and weakness in the U.S. economy.rates. The result has been reduced subscription and newsstand magazine sales, which has caused publishers to close some magazine titles, change subscription fulfillment providers or newsstand distribution providers and seek more favorable terms from Palm Coast and Kable and theirits competitors when contracts are up for bid or renewal. As a consequence of these and other factors, revenues from SubscriptionOperating expenses for Fulfillment Services operations decreased from $13,993,000$9,392,000 for the first quarter of 20142015 to $11,945,000$8,780,000 for the same period in 2016, primarily attributable to lower payroll and benefits, as well as lower facilities and equipment expenses. In addition, during the first quarter of 2015, while revenuesthe Fulfillment Services business recorded a non-cash impairment charge of $925,000 due to the discontinuance of the development of certain software. This impairment charge included previously capitalized software costs, internal labor costs and third party consulting costs. Should the adverse Fulfillment Services business conditions continue, the Fulfillment Services business may experience future impairment charges related to its long-lived assets.

Revenues from Newsstand Distribution Services operations decreased from $1,985,000the Company’s Real Estate land sales were $110,000 for the first quarter of 20142016 compared to $1,347,000$384,000 for the same period of 2015. Revenues from Product Packaging and Fulfillment Services and Staffing operations decreased from $4,300,000 for the first quarter of 2014 to $4,224,000 for the same period in 2015, due primarily to decreased revenues in the temporary staffing business. Media Services operating expenses decreased by $3,191,000, from $17,728,000 for the first quarter of 2014 (87.4% of Media Services revenues) to $14,537,000 for the first quarter of 2015 (83.0% of Media Services revenues), primarily attributable to lower (i) payroll and benefits ($1,667,000), (ii) supplies expense ($639,000), (iii) facilities and equipment expense ($307,000) and (iv) consulting costs ($198,000).

Revenues from land sales at AMREP Southwest and its subsidiaries were $384,000 for the first quarter of 2015 compared to $228,000 for the same period of 2014. For the first quarterquarters of 20152016 and 2014,2015, the Company’s land sales in Rio RanchoNew Mexico were as follows:

 

 Three Months Ended July 31,  Ended July 31, 2015 Ended July 31, 2014 
 2014 2013  Acres
Sold
 Revenues
(in 000s)
 Revenues
Per Acre
(in 000s)
 Acres Sold Revenues
(in 000s)
 Revenues
Per Acre
(in 000s)
 
 Acres
Sold
 Revenues
(in 000s)
 Revenues
Per Acre
(in 000s)
 Acres
Sold
 Revenues
(in 000s)
 Revenues
Per Acre
(in 000s)
 
             
Three months:                        
Developed                                                
Residential  0.5  $172  $344   0.6  $180  $300   0.1  $35  $350   0.5  $172  $344 
Commercial  0.8   212   265   -   -   -   -   -   -   0.8   212   265 
Total Developed  1.3   384   295   0.6   180   300   0.1   35   350   1.3   384   295 
Undeveloped  -   -   -   4.6   48   10   10.1   75   7   -   -   - 
Total  1.3  $384  $295   5.2  $228  $44   10.2  $110  $11   1.3  $384  $295 

12

 

Results for the first quarter of 2015 and 2014 were substantially lower than the Company experienced prior to fiscal 2009 in its principal market of Rio Rancho, New Mexico, due to the severe decline in the real estate market in the greater Albuquerque-metro and Rio Rancho areas that began late in fiscal 2008. The average gross profit percentage on land sales was 42%68% for the first quarter of 2015 and 17%2016 compared to 42% for the first quartersame period of 2014.2015. As a result of many factors, including the nature and timing of specific transactions and the type and location of land being sold, revenues, average selling prices and related average gross profits from land sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.

 

GeneralOther revenues increased from $28,000 for the first three months of 2015 to $284,000 for the same period of 2016. Other revenues consist primarily of revenues from the rental of a warehouse in Fairfield, Ohio and administrativealso from an oil and gas lease entered into by AMREP Southwest and one its subsidiaries during the second quarter of 2015. Refer to Item 8 of Part II of the 2015 Form 10-K for further detail regarding the oil and gas lease.

Other operating expenses of Media Services operations were $1,728,000decreased from $441,000 for the first quarter of 2015 (9.9%to $347,000 for the same period of Media2016, primarily due to reduced real estate taxes and land maintenance costs at AMREP Southwest and its subsidiaries.

General and administrative expenses of Fulfillment Services revenues), or a decrease of $81,000 compared to $1,809,000operations decreased from $1,107,000 for the first quarter of 2014 (8.9%2015 to $865,000 for the same period of Media Services revenues),2016, primarily due to reducedlower payroll and benefit costs ($191,000) and consulting costs ($134,000), which were partially offset by increased legal expenses ($197,000) and equipment costs ($63,000).costs. Real estate operations and corporate general and administrative expenses decreased $23,000increased from $827,000 in the first quarter of 2015 compared to $1,019,000 for the same period in 2014.2016, primarily due to increased pension costs resulting from the Company’s corporate office having assumed responsibility in 2016 for the pension expense related to the discontinued operations.

Interest expense for continuing operations was $379,000 for the first quarter of 2016 compared to $392,000 for the same period of 2015, primarily due to a slightly lower principal loan balance at AMREP Southwest.

 

The Company’s effective tax rate for continuing operations was 36.9%38.1% for the first quarter of both 2015 and 2014.2016 compared to 41.8% for the same period of 2015. The total tax effect of gross unrecognized tax benefits in the accompanying financial statements at both July 31, 20142015 and April 30, 20142015 was $58,000, which, if recognized, would have an impact on the effective tax rate. The Company believes it is reasonably possible that the liability for unrecognized tax benefits will not change in the next twelve months. 

 

Discontinued Operations

Prior to fiscal 2016, the Company had been engaged in the Newsstand Distribution Services, Product Packaging and Fulfillment Services and Staffing Services businesses. During 2015, these businesses were sold and the operations of those businesses have been classified as “discontinued operations” in the Company’s financial statements. Financial information for prior periods has been reclassified to conform to this presentation. The net income from discontinued operations for the first quarter of 2015 included a pre-tax gain of $11,155,000 ($7,028,000 after tax, or $0.92 per share) from a settlement agreement in the Newsstand Distribution Services business with a major customer.

LIQUIDITY AND CAPITAL RESOURCES

 

The Company’s primary sourcessource of funding for working capital requirements areis cash flow from operations, a revolving credit facility between the Company’s Media Services businesses and a bank (the “Media Services Credit Facility”) and working capital made available to the Company by the terms of customer contracts.operations. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the industries in which the Company operates and the economy generally. Except as described below, there have been no material changes to the Company’s liquidity and capital resources as reflected in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 20142015 Form 10-K.

 

Gain From Settlement

13

 

During the first quarter of 2015, the Company and its indirect subsidiaries, Kable Distribution Services, Inc. (“Kable Distribution”) and Palm Coast, entered into a settlement agreement (the “Settlement Agreement”) with a significant customer, Heinrich Bauer (USA) LLC (“Bauer”).

Kable Distribution and Bauer were parties to an ordinary course of business contract pursuant to which Kable Distribution distributed certain magazines of Bauer in return for a commission. Palm Coast and Bauer are parties to an ordinary course of business contract pursuant to which Palm Coast provides certain fulfillment services to Bauer in return for service fees. During the first quarter of 2014, Kable Distribution received notice that its ordinary course of business contract with Bauer, which provided Kable Distribution with a substantial amount of negative working capital liquidity, would not be renewed upon its scheduled expiration in June 2014. See further detail regarding the negative working capital of Kable Distribution in Note 5 in the accompanying financial statements included in this Form 10-Q.

Pursuant to the Settlement Agreement, Kable Distribution agreed to eliminate the commission paid by Bauer to Kable Distribution for distribution services through expiration of the contract period at June 30, 2014 and to amend the payment procedures with respect to amounts received by Kable Distribution from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers; Palm Coast agreed to reduce certain fees charged to Bauer for fulfillment services, with Bauer agreeing to extend the term of its fulfillment agreement to at least December 31, 2018; and the Company agreed to issue to Bauer 825,000 shares of common stock of the Company, which represented approximately 10.3% of the outstanding shares of common stock of the Company following such issuance, with Bauer agreeing to not sell or transfer such shares for a period of six months. In return for such consideration, Bauer released all claims it may have had against each of Kable Distribution, Palm Coast, the Company and its related persons, other than the obligations of Kable Distribution, Palm Coast and the Company under the Settlement Agreement, the future obligations of Kable Distribution under its distribution agreement as amended by the Settlement Agreement and the future obligations of Palm Coast under its fulfillment agreement as amended by the Settlement Agreement. In particular, the Settlement Agreement transferred to Bauer all amounts and accounts receivable owing from wholesalers to Kable Distribution relating to the domestic sale by Kable Distribution of Bauer magazines ($22,626,000) and released Kable Distribution from having to pay the accounts payable owed to Bauer relating to the domestic sale by Kable Distribution of Bauer magazines other than to the extent amounts had been received by Kable Distribution or Bauer on or after May 14, 2014 from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers ($38,214,000). After considering the value of the various components of the Settlement Agreement, Kable Distribution recorded a gain of $11,155,000 during the first quarter of 2015.

Media Services

The Company’s Newsstand Distribution Services business, which is operated through Kable Distribution, had negative working capital of approximately $10,273,000 at July 31, 2014 and had outstanding borrowings of $2,115,000 at July 31, 2014 under the Media Services Credit Facility. The negative working capital of Kable Distribution represents the net payment obligation due to publisher clients and other third parties, which amount will vary from period to period based on the level of magazine distribution. The negative working capital of Kable Distribution is calculated by deducting (a) the sum of the cash held by Kable Distribution plus the accounts receivable (net of estimated magazine returns to Kable Distribution) owed to Kable Distribution from wholesalers, retailers and other third parties from (b) the accounts payable (net of estimated magazine returns to publishers) and accrued expenses owed by Kable Distribution to publisher clients and other third parties. During the first quarter of 2015, the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant customer, which significantly contributed to the reduction of negative working capital and outstanding borrowings at Kable Distribution from approximately $27,863,000 at April 30, 2014 to approximately $12,388,000 at July 31, 2014.

Equity Issuance

During the first quarter of 2015, the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant customer resulting in the issuance by the Company of 825,000 shares of its common stock. As a result of the issuance of these shares, the Company increased its common stock account by $83,000 and its contributed capital account by $4,191,000.

 

Operating Activities

 

Receivables, net decreased from $43,497,000$11,265,000 at April 30, 20142015 to $22,431,000$10,933,000 at July 31, 20142015 due to reduced borrowings by the buyers of the Company’s former Newsstand Distribution Services and accountsProduct Packaging and Fulfillment Services businesses. Accounts payable net and accrued expenses decreased from $74,636,000$10,284,000 at April 30, 20142015 to $33,308,000$8,826,000 at July 31, 2014,2015, primarily due to lower business volumes and the Settlement Agreement.timing of payments to vendors.

 

Real estate inventory increased from $71,289,000$66,321,000 at April 30, 20142015 to $71,563,000$66,388,000 at July 31, 2014.2015. Property, plant and equipment decreased from $15,763,000 at April 30, 2015 to $15,467,000 at July 31, 2015, primarily due to normal depreciation of fixed assets.

Other liabilities and deferred revenue decreased from $4,827,000 at April 30, 2015 to $4,766,000 at July 31, 2015, primarily reflecting the amortization of deferred revenue related to the oil and gas lease entered into by AMREP Southwest and one of its subsidiaries during the second quarter of 2015.

Investing Activities

 

Capital expenditures increased from $54,000for continuing operations totaled $82,000 for the first quarterthree months of 2014 to $408,0002016 and $377,000 for the same period inof 2015, primarily for the MediaFulfillment Services business.

 

Financing Activities

 

The Media Services Credit Facility provides the Media Services businesses with a revolving credit loan and letter of credit facility of up to $15,000,000 that matures on May 12, 2015. At July 31, 2014, the borrowing availability under the Media Services Credit Facility was $11,074,000, and there was $2,629,000 outstanding against this availability. The highest amount borrowed during the first quarter of 2015 was $3,198,000 and the interest rate at July 31, 2014 was 3.16%. The borrowers’ obligations under the Media Services Credit Facility are secured by substantially all of their assets other than real property.

AMREP Southwest has a loan withfrom a company owned by Nicholas G. Karabots, a significant shareholder of the Company and in which another director of the Company has a 20% participation. The loan had an outstanding principal amount of $15,099,000$13,782,000 at July 31, 2014,2015, is scheduled to mature on December 1, 2017, bears interest payable monthly at 8.5% per annum, and is secured by a mortgage on all real property of AMREP Southwest in Rio Rancho and by a pledge of the stock of its subsidiary, Outer Rim Investments, Inc. The total book value of the real property collateralizing the loan was approximately $69,119,000$63,944,000 as of July 31, 2014.2015. No payments of principal are required until maturity, except that the following amounts are required to be applied to the payment of the loan: (a) 25% of the net cash proceeds from any sales of real property by AMREP Southwest and (b) 25% of any royalty payments received by AMREP Southwest under the Oiloil and Gas Lease discussed in Note 12 ingas lease entered into by AMREP Southwest and one of its subsidiaries during the footnotes that accompany the financial statements included in this Form 10-Q.

second quarter of 2015. At July 31, 2014, the borrowers under both the Media Services Credit Facility and the2015, AMREP Southwest loan werewas in compliance with the covenants of eachthe loan facility.

 

Other notes payable consist of a mortgage note payable with an outstanding principal balance of $4,178,000$4,057,000 on a warehouse with a maturity date of February 2018 and an interest rate of 6.35%, and $197,000 of an asset financing loan with a maturity date of December 2015 and an interest rate of 9.0%. The amount of Other notes payable due within one year totals $221,000.

Future Payments Under Contractual Obligations$130,000.

 

The Company is obligated to make future payments under various contracts, includingCompany’s Fulfillment Services business had a revolving credit and security agreement with PNC Bank, N.A. (the “PNC Credit Facility”). The PNC Credit Facility expired by its debt agreements and lease agreements, and is subject to certain other commitments and contingencies. The table below summarizes significant contractual cash obligations as ofterms on August 12, 2015. There were no borrowings during the quarter ended July 31, 2014 for2015 and no balance outstanding at the items indicated (in thousands):end of the quarter. At July 31, 2015, the borrowers were in compliance with the covenants of the PNC Credit Facility.

 

Contractual Obligations Total  Less than
1 year
  1 – 3
years
  3 – 5
years
  More than
5 years
 
                
Notes payable $22,103  $2,849  $366  $18,888  $- 
Operating leases  1,767   1,025   742   -   - 
Other  2,745   2,687   58   -   - 
Total $26,615  $6,561  $1,166  $18,888  $- 
14

 

Other in the above table includes $2,527,000 for the possible required return of grant monies received from the State of Florida.

In addition to the items included in the table, Kable Distribution had negative working capital of approximately $10,273,000 at July 31, 2014. For further details regarding the negative working capital, see Note 5 in the footnotes that accompany the financial statements included in this Form 10-Q.

Any additional future defined benefit pension plan contributions necessary to satisfy the minimum statutory funding requirements are not included in the table and are dependent upon various factors, including actual plan asset investment returns and discount rates applied.

Refer to the notes to the consolidated financial statements included in this quarterly report on Form 10-Q and in the 2014 Form 10-K for additional information on long-term debt, other liabilities, pension contributions, taxes, commitments and contingencies.

 

Statement of Forward-Looking Information

 

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this report and other filings with the Securities and Exchange Commission, reports to the Company’s shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Act. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies that are difficult to predict. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.

 

The forward-looking statements contained in this report include, but are not limited to, statements regarding whether the liability for unrecognized tax benefits will change in the next twelve months, the future business conditions that may be experienced by the Company and future impairment charges that may be incurred related to the Company’s long-lived assets. The Company undertakes no obligation to update or publicly release any revisions to any forward-looking statementsstatement to reflect events, circumstances or changes in expectations after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 4.Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Company’s management, with the participation of the Company’s chief financial officer and the other personsperson whose certifications accompanycertification accompanies this quarterly report, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. As a result of such evaluation, the chief financial officer and such other personsperson have concluded that such disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its chief financial officer and such other persons,person, as appropriate to allow timely decisions regarding disclosure. The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

17
 15

 

Changes in Internal Control over Financial Reporting

 

No change in the Company’s system of internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

 

Material Weakness Previously Identified

Refer to Item 9A of Part II of the 2015 Form 10-K for detail about a previously identified material weakness in the Company’s internal control over financial reporting over complex and non-routine transactions. The Company has implemented the following remediation steps to address this material weakness: (i) continual evaluation and enhancement of internal technical accounting capabilities, supported by the use of third-party advisors and consultants to assist with areas requiring specialized technical accounting expertise and (ii) enhanced awareness to identify complex technical accounting topics and early identification of situations which might require the use of third-party advisors and consultants. The material weakness will not be considered remediated until the controls are in operation for a sufficient period of time for the Company’s management to conclude that the material weaknesses have been remediated. Management will continue to assess the effectiveness of the Company’s remediation efforts in connection with management’s evaluations of internal control over financial reporting.

PART II. OTHER INFORMATION

 

Item 5.Other Information

 

The following disclosure would otherwise be filed on Form 8-K under Item 5.02:5.03:

 

Effective as ofOn September 10, 2014, Christopher V. Vitale was appointed as Executive Vice President, Chief Administrative Officer and General Counsel2015, Section 1(a) of Article III of the Company. In connection with his appointment, Mr. Vitale’s annual base salaryBy-Laws of AMREP Corporation (the “Company”) was increasedamended to $235,000.

Prior to being appointed Executive Vice President, Chief Administrative Officer and General Counselprovide that the Board of Directors of the Company Mr. Vitale, age 38, had been Vice President and General Counselconsists of the Company since March 2013. From April 2012 to March 2013, he was Vice President, Legal at Franklin Square Holdings, L.P. and from August 2011 to March 2012, he was Assistant Vice President, Legal at Franklin Square Holdings, L.P., a national sponsor and distributor of investment products, where he was responsible for securities matters, corporate governance and general corporate matters. From March 2011 to July 2011, Mr. Vitale was the Chief Administrative Officer at WorldGate Communications, Inc. (“WorldGate”), and from April 2009 to July 2011 he was Senior Vice President, General Counsel and Secretary at WorldGate, a provider of digital voice and video phone services and video phones. In 2012, WorldGate filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Prior to joining WorldGate, Mr. Vitale was an attorney with the law firms of Morgan, Lewis & Bockius LLP and Sullivan & Cromwell LLP.four directors.

 

The following disclosure would otherwise be filed on Form 8-K under Item 5.07:

 

The 20142015 Annual Meeting of Shareholders of the Company was held on September 10, 2014.2015. At the meeting, shareholders holding an aggregate of 5,171,7466,113,746 shares of common stock, par value $.10, of the Company out of a total of 8,056,454 shares outstanding and entitled to vote, were present in person or represented by proxy.

 

At the meeting, Theodore J. Gaasche and Albert V. Russo wereEdward B. Cloues, II was reelected directorsas a director of the Company in Class IIII by the final votes set forth opposite their names,his name, to hold office until the 20172018 Annual Meeting of Shareholders and until their successors arehis successor is elected and qualified:

 

  Votes For  Votes
Withheld
  Broker Non-
Votes
 
Theodore J. Gaasche  4,751,697   420,049   0 
Albert V. Russo  3,738,636   1,433,110   0 
  Votes For  Votes Withheld  Broker Non-Votes 
Edward B. Cloues, II  5,468,548   645,198   0 

In addition, the following proposal was voted on and approved at the meeting:

 

Proposal Votes For Votes
Against
 Abstentions Broker Non-
Votes
  Votes For Votes
Against
 Abstentions Broker Non-
Votes
 
Advisory vote on the compensation paid to the Company’s named executive officers  2,659,313   2,135,935   376,498   0   3,320,978   2,778,662   14,106   0 

16

Item 6.Exhibits

Item 6.Exhibits

 

Exhibit No.Number Description
3.1By-Laws, as amended
10.1 SecondFirst Amendment dated as of June 27, 2014, to Amended and Restated DistributionSettlement Agreement, dated as of June 27, 2014,July 15, 2015, between Kappa Publishing Group, Inc.the Pension Benefit Guaranty Corporation and Kable Distribution Services, Inc. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed July 1, 2014).
10.2(b)Incentive compensation plan for Michael P. Duloc for fiscal 2014.
10.3(a)(c)Settlement Agreement, dated June 11, 2014, by and among Heinrich Bauer (USA) LLC, Kable Distribution Services, Inc., Palm Coast Data LLC and AMREP Corporation.  
Registrant
31.1 Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
1934
31.2 Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.3Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
1934
32 Certification required pursuant to 18 U.S.C. Section 1350.
1350
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase

17

(a) Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934.

(b) Management contract or compensatory plan or arrangement in which directors or officers participate.

(c) Filed herewith.

SIGNATURE

 

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.

 

Date:  September 15, 201414, 2015AMREP CORPORATION
 (Registrant)
  
 By:/s/  Peter M. Pizza
  Peter M. Pizza
  Vice President and Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

20
18 

 

EXHIBIT INDEX

 

Exhibit No.Number Description
3.1By-Laws, as amended
10.1 SecondFirst Amendment dated as of June 27, 2014, to Amended and Restated DistributionSettlement Agreement, dated as of June 27, 2014,July 15, 2015, between Kappa Publishing Group, Inc.the Pension Benefit Guaranty Corporation and Kable Distribution Services, Inc. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed July 1, 2014).
10.2(b)Incentive compensation plan for Michael P. Duloc for fiscal 2014.
10.3(a)(c)Settlement Agreement, dated June 11, 2014, by and among Heinrich Bauer (USA) LLC, Kable Distribution Services, Inc., Palm Coast Data LLC and AMREP Corporation.  
Registrant
31.1 Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
1934
31.2 Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.3Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934.
1934
32 Certification required pursuant to 18 U.S.C. Section 1350.
1350
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase

 ______________________________

(a) Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934.

(b) Management contract or compensatory plan or arrangement in which directors or officers participate.

(c) Filed herewith.

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