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    

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

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 ¨

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 ¨

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.

(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

Number of Shares of Common Stock, par value $.10 per share, outstanding at September 12, 201411, 2015 – 8,056,454.8,059,454.

AMREP CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

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

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)

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)

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

AMREP CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended July 31, 20142015 and 20132014

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.

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.

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):

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:

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:

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

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.

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

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.

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

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.

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

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.

Notes payable consist of the following (in thousands):

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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):.

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.

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:

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

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.