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, 2001
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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
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Oklahoma 59-0936128
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Avenue, Sixth Floor, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 705-4700
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has subject to such filing requirements
for the past 90 days.
Yes X No ___________
Number of Shares of Common Stock, par value $.10 per share, outstanding at
September 14, 2001 - 6,573,586.
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
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Item 1. Consolidated Financial Statements:
Balance Sheets
July 31, 2001 (Unaudited) and
April 30, 2001 (Audited) 1
Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended July 31, 2001 and 2000 2
Statements of Cash Flows (Unaudited)
Three Months Ended July 31, 2001 and 2000 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis 5-7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 7
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 2001 and April 30, 2001
(Thousands, except par value and number of shares)
July 31, 2001 April 30,2001
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(Unaudited) (Audited)
ASSETS
$ 10,409 $ 15,941
Cash and cash equivalents
Receivables, net:
Real estate operations 6,318 7,070
Magazine circulation operations 43,239 37,533
Real estate inventory 69,537 73,347
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $15,707 at July 31, 2001
and $15,286 at April 30, 2001. 14,037 14,314
Other assets 11,563 11,448
Excess of cost of subsidiary over
net assets acquired 5,191 5,191
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$ 160,294 $ 164,844
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 21,677 $ 19,735
Deposits and accrued expenses 7,583 7,591
Notes payable:
Amounts due within one year 32,929 9,490
Amounts subsequently due 5,509 34,770
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38,438 44,260
Taxes payable 1,298 1,595
Deferred income taxes 1,882 1,882
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70,878 75,063
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Commitments and Contingencies
Shareholders' equity:
Common stock, $.10 par value;
shares authorized - 20,000,000;
shares issued -7,399,677
at July 31, 2001 and April 30, 2001 740 740
Capital contributed in excess of par value 44,935 44,935
Retained earnings 49,450 49,815
Treasury stock, at cost; 826,091
shares at July 31, 2001
and April 30, 2001 (5,709) (5,709)
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89,416 89,781
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$ 160,294 $ 164,844
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See notes to consolidated financial statements.
1
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended July 31, 2001 and 2000
(Thousands, except per share amounts)
2001 2000
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REVENUES
Real estate operations:
Land sales $ 7,266 $ 2,771
Home and condominium sales - 2,213
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7,266 4,984
Magazine circulation operations 11,598 12,329
Interest and other operations 786 897
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19,650 18,210
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COSTS AND EXPENSES
Real estate cost of sales:
Land sales 6,472 1,356
Home and condominium sales 23 2,207
Operating expenses:
Magazine circulation operations 9,722 10,206
Real estate commissions and selling 150 327
Other operations 619 549
General and administrative:
Real estate operations and corporate 986 1,250
Magazine circulation operations 1,770 1,853
Interest, net 516 818
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20,258 18,566
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Loss before income taxes (608) (356)
BENEFIT FROM INCOME TAXES (243) (142)
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NET LOSS (365) (214)
RETAINED EARNINGS, beginning of period 49,815 47,258
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RETAINED EARNINGS, end of period $ 49,450 $ 47,044
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NET LOSS PER SHARE - BASIC AND DILUTED $ (0.06) $ (0.03)
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,574 6,922
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See notes to consolidated financial statements.
2
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended July 31,2001 and 2000
(Thousands)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (365) $ (214)
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Adjustments to reconcile net income to net
cash provided (used)
by operating activities -
Depreciation and amortization 650 754
Non-cash credits and charges:
Pension benefit accrual (96) (185)
Bad debt expense 74 128
Changes in assets and liabilities -
Receivables (5,028) (890)
Real estate inventory 3,810 (1,497)
Other assets (248) 375
Accounts payable, deposits and
accrued expenses 1,934 (1,514)
Taxes payable (297) 592
Deferred income taxes - 39
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Total adjustments 799 (2,198)
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Net cash provided (used)
by operating activities 434 (2,412)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (144) (231)
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Net cash used by investing activities (144) (231)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 56,295 20,960
Principal debt payments (62,117) (15,599)
Proceeds from exercise of stock option - 6
Purchase of treasury stock - (4,261)
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Net cash (used) provided
by financing activities (5,822) 1,106
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Decrease in cash and cash equivalents (5,532) (1,537)
CASH AND CASH EQUIVALENTS,
beginning of period 15,941 12,934
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CASH AND CASH EQUIVALENTS, end of period $ 10,409 $ 11,397
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of
amounts capitalized $ 742 $ 1,013
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Income taxes paid (refunded ) $ 54 $ (771)
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See notes to consolidated financial statements.
3
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended July 31, 2001 and 2000
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission for interim financial information. The April 30, 2001
balance sheet amounts have been derived from the April 30, 2001 audited
financial statements of the Registrant. Since the accompanying consolidated
financial statements do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements,
it is suggested that they be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Registrant's 2001 Annual
Report on Form 10-K. In the opinion of management, the accompanying unaudited
financial statements include all adjustments, which are of a normal recurring
nature, 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 the results to be expected for the full fiscal year.
(2) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT
INDUSTRY SEGMENTS:
The following schedules set forth summarized data relative to the industry
segments in which the Company operates for the three month periods ended July
31, 2001 and 2000.
THREE MONTH Land Home Corporate
Operations Building Distribution Fulfillment and Other Consolidated
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July 2001 (Thousands):
Revenues $ 7,509 $ 16 $ 3,567 $ 8,031 $ 527 $ 19,650
Expenses(excluding interest) 7,322 111 3,283 8,209 817 19,742
Interest expense, net 45 - 351 83 37 516
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Pretax income (loss)
contribution $ 142 $ (95) $ (67) $ (261) $ (327) $ (608)
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Identifiable assets $ 79,595 $ 2,208 $ 39,758 $ 19,138 $19,595 $ 160,294
_______________________________________________________________________________________________________________________________
July 2000 (Thousands):
Revenues $ 3,055 $ 2,239 $ 3,833 $ 8,496 $ 587 $ 18,210
Expenses(excluding interest) 2,124 2,434 3,710 8,349 1,131 17,748
Interest expense, net 114 29 491 139 45 818
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Pretax income (loss)
contribution $ 817 $ (224) $ (368) $ 8 $ (589) $ (356)
========== ========== =========== =========== ========= ============
Identifiable assets $ 75,126 $ 7,128 $ 51,892 $ 18,470 $19,829 $ 172,445
_______________________________________________________________________________________________________________________________
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FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Results of Operations for the Three Months ended July 31, 2001
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Revenues from land sales increased from $2.8 million in the first quarter of
fiscal 2001 to $7.3 million in the same period this year as the result of a
large land sale in California made as part of the Company's program to dispose
of all real estate assets in markets outside of New Mexico. This sale
contributed substantial cash to the Company but only a very small profit. Gross
profits from land sales were lower in the current fiscal year because of a
decline in the sales volume of residential lots to other homebuilders as well as
in the number of commercial and industrial land sales made in the Company's core
New Mexico market. Land sale revenues and related gross profits can vary from
period to period as a result of the nature and timing of specific transactions,
and thus prior results are not necessarily an indication of amounts that may be
expected to occur in future periods. In addition, there were no revenues from
the sale of homes and condominiums in the first quarter of the current fiscal
year, as the Company has completed substantially all home sales activities as
part of its previously announced real estate restructuring. There was $2.2
million of revenues from the sale of 8 homes in the first quarter of the prior
year. As of July 31, 2001, the Company had 3 remaining homes completed and under
contract, all of which closed in August 2001.
First quarter revenues from magazine circulation operations of the Company's
Kable News Company ("Kable") subsidiary decreased from $12.3 million in fiscal
2001 to $11.6 million in the current year. Revenues from Fulfillment Services
decreased from $8.5 million last year to $8.0 million in the current year,
primarily as the result of the loss of sweepstakes processing business for
customers, while Newsstand Distribution Services' revenues decreased from $3.8
million last year to $3.6 million in the current year, primarily as the result
of decreased magazine sales for existing customers. Operating results for Kable
were comparable on a year to year basis, however, as reduced costs substantially
offset the revenue decrease.
Real estate commissions and selling expenses decreased by more than 50% in the
first quarter of fiscal 2002 compared to the same period last year as a result
of the continuing wind-down of homebuilding operations and elimination of
related costs. Real estate and corporate general and administrative expenses
also decreased by approximately 21%, due in part to the effects of the Company's
real estate restructuring and related downsizing of administrative functions. In
addition, the prior year included an accrual of approximately $350,000 for
severance and related benefits of Kable's CEO and other corporate personnel.
General and administrative costs of magazine circulation operations decreased
approximately 4% from the prior year, which is the net effect of savings
5
resulting from a cost reduction program implemented throughout Kable,
particularly within the Distribution Services segment, partly offset by
additional costs incurred in connection with the start-up of the Company's
internet-related activities and other new business opportunities. Net interest
expense decreased approximately 37% due to lower borrowing levels in both real
estate and magazine circulation operations and also lower interest rates.
LIQUIDITY AND CAPITAL RESOURCES
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During the past several years, the Company has financed its operations from
internally generated funds from home and land sales and magazine circulation
operations, and from borrowings under its various lines-of-credit and
construction loan agreements.
Cash Flows From Financing Activities
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The Company's subsidiaries have two line of credit arrangements, both of which
are collateralized by various assets. Based upon collateral availability, the
Company had an aggregate borrowing availability of $33.4 million at July 31,
2001 against which $32.3 million had been borrowed.
Kable News Company has a line-of-credit agreement with a group of banks under
which, as a result of a modification of the agreement entered into in June 2001,
the commitment amount was reduced to $25.6 million as of July 31, 2001. This
line, under which $24.8 million was outstanding at July 31, 2001, bears interest
at the prime rate plus 1%, matures on May 1, 2002, is secured by substantially
all of Kable's assets and is guaranteed by the Company. In accordance with the
June 2001 modification, the commitment amount will be reduced to $23.5 million
at December 31, 2001.
The Company has initiated discussions with the lead bank to explore a
modification and/or reformulation of the lending group, and is also in
discussions with other potential lenders; while no agreements have been reached
at this time and there are no assurances that the Company will be able to
renegotiate or extend the terms of the credit agreement beyond May 1, 2002 or
find replacement lenders, management believes that Kable will be able to replace
this line of credit before May 1, 2002.
The other line-of-credit borrowings by the Company's principal real estate
subsidiary are used to support real estate development in New Mexico. These
loans are collateralized by certain real estate assets, are subject to available
collateral and various financial performance and other covenants and certain of
them are guaranteed by the Company. At July 31, 2001 the maximum available under
real estate line-of-credit arrangements totaled $7.8 million of which borrowings
of $7.5 million were outstanding.
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Cash Flows From Operating Activities
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Inventories amounted to $69.5 million at July 31, 2001 compared to $73.3 million
at April 30, 2001. This change includes a $4.7 million decrease in inventories
outside of New Mexico, principally as a result of the sale of property in
California mentioned above, offset by an approximate $.9 million increase in New
Mexico, where several sites are presently under development.
Receivables from magazine circulation operations increased by approximately $5.7
million at July 31, 2001 compared to April 30, 2001 primarily as the result of
the timing of distribution billings.
Statement of Forward-Looking Information
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Certain information included herein, including management's belief that Kable
will be able to replace its existing line of credit beyond May 1, 2002 if
required to do so, and in other Company statements, reports and filings with the
Securities and Exchange Commission is forward-looking within the meaning of the
Private Securities Litigation Reform Act of 1995. Refer to Item 7 of the Annual
Report on Form 10-K for a discussion of the assumptions and factors on which
these statements are based. Any changes in the actual outcome of these
assumptions and factors could produce significantly different results;
accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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There have been no material changes to the Company's market risk for the
three-month period ended July 31, 2001. See Item 7(A) of the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 2001 for additional
information regarding quantitative and qualitative disclosures about market
risk.
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PART II OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Registrant during the quarter ended
July 31, 2001.
8
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMREP Corporation
(Registrant)
Dated: September 14, 2001 By: /s/ Peter M. Pizza
Peter M. Pizza
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
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