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 January 31, 2002
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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
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Commission File Number 1-4702
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AMREP Corporation
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(Exact name of registrant as specified in its charter)
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
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of Shares of Common Stock, par value $.10 per share, outstanding at March
11, 2002 - 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
January 31, 2002 (Unaudited) and
April 30, 2001 (Audited) 1
Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended January 31, 2002 and 2001 2
Statements of Operations and Retained Earnings (Unaudited)
Nine Months Ended January 31, 2002 and 2001 3
Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 2002 and 2001 4
Notes to Consolidated Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis 7 - 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 9
PART II. OTHER INFORMATION
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Item 4. Exhibits and Reports on Form 8K 10
SIGNATURES 11
EXHIBIT INDEX 12
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands, except par value and number of shares)
January 31, 2002 April 30, 2001
------------------ ------------------
(Unaudited) (Audited)
ASSETS
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Cash and cash equivalents $ 12,721 $ 15,941
Receivables, net:
Real estate operations 6,552 7,070
Magazine circulation operations 36,597 37,533
Real estate inventory 62,203 73,347
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $16,454 at
January 31, 2002 and $15,286 at
April 30, 2001 14,958 14,314
Other assets 9,249 11,448
Excess of cost of subsidiary
over net assets acquired 5,191 5,191
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$ 147,471 $ 164,844
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable $ 24,503 $ 19,735
Deposits and accrued expenses 7,379 7,591
Notes payable:
Amounts due within one year 14,535 9,490
Amounts subsequently due 5,441 34,770
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19,976 44,260
Taxes payable 1,918 1,595
Deferred income taxes 1,882 1,882
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55,658 75,063
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Commitments and contingencies
Shareholders' equity:
Common stock, $.10 par value;
shares authorized - 20,000,000;
shares issued -7,399,677
at January 31, 2002 and April 30, 2001 740 740
Capital contributed in excess of par value 44,935 44,935
Retained earnings 51,847 49,815
Treasury stock, at cost; 826,091 shares
at January 31, 2002 and April 30, 2001 ( 5,709) (5,709)
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91,813 89,781
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$ 147,471 $ 164,844
================== ==================
See notes to consolidated financial statements.
1
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended January 31, 2002 and 2001
(Thousands, except per share amounts)
2002 2001
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REVENUES
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Magazine circulation operations $ 12,178 $ 11,786
Real estate operations:
Land sales 3,267 2,921
Home and condominium sales - 466
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3,267 3,387
Interest and other operations 852 858
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16,297 16,031
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COSTS AND EXPENSES
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Operating expenses:
Magazine circulation operations 9,549 11,830
Real estate commissions and selling 143 270
Other operations 697 1,045
Real estate cost of sales:
Land sales 2,106 1,976
Home and condominium sales - 1,208
General and administrative:
Magazine circulation operations 1,674 1,674
Real estate operations and corporate 777 965
Interest, net 238 686
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15,184 19,654
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Income (loss) before income taxes 1,113 (3,623)
PROVISION (BENEFIT) FOR INCOME TAXES 445 (4,949)
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NET INCOME 668 1,326
RETAINED EARNINGS, beginning of period 51,179 47,597
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RETAINED EARNINGS, end of period $ 51,847 $ 48,923
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NET INCOME PER SHARE -
BASIC AND DILUTED $ 0.10 $ 0.20
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,574 6,600
================== ===================
See notes to consolidated financial statements.
2
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Nine Months Ended January 31, 2002 and 2001
(Thousands, except per share amounts)
2002 2001
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REVENUES
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Magazine circulation operations $ 36,888 $ 36,855
Real estate operations:
Land sales 24,070 8,804
Home and condominium sales 635 3,186
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24,705 11,990
Interest and other operations 2,572 2,787
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64,165 51,632
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COSTS AND EXPENSES
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Operating expenses:
Magazine circulation operations 28,983 31,953
Real estate commissions and selling 745 853
Other operations 1,937 2,171
Real estate cost of sales:
Land sales 19,519 4,501
Home and condominium sales 739 4,581
General and administrative:
Magazine circulation operations 5,074 5,203
Real estate operations and corporate 2,585 3,122
Interest, net 1,196 2,307
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60,778 54,691
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Income (loss) before income taxes 3,387 (3,059)
PROVISION (BENEFIT) FOR INCOME TAXES 1,355 (4,724)
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NET INCOME 2,032 1,665
RETAINED EARNINGS, beginning of period 49,815 47,258
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RETAINED EARNINGS, end of period $ 51,847 $ 48,923
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NET INCOME PER SHARE -
BASIC AND DILUTED $ .31 $ .25
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,574 6,717
================== ===================
See notes to consolidated financial statements.
3
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 2002 and 2001
(Thousands)
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,032 $ 1,665
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Adjustments to reconcile net income
to net cash provided (used)
by operating activities -
Depreciation and amortization 1,892 2,287
Non-cash credits and charges:
Gain on disposition of fixed assets - ( 192)
Inventory and joint venture
valuation adjustments - 1,672
Pension benefit accrual ( 304) ( 489)
Bad debt reserve 436 2,107
Changes in assets and liabilities -
Receivables 1,018 7,915
Real estate inventory 11,144 ( 5,343)
Other assets 1,794 680
Accounts payable, deposits
and accrued expenses 4,556 ( 2,087)
Taxes payable 323 ( 3,338)
Deferred income taxes - ( 600)
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Total adjustments 20,859 2,612
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Net cash provided
by operating activities 22,891 4,277
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 1,827) ( 1,837)
Proceeds from assets sold - 988
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Net cash used
by investing activities ( 1,827) ( 849)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 15,386 16,990
Principal debt payments (39,670) (19,860)
Proceeds from exercise of stock option - 5
Purchase of treasury stock - ( 4,762)
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Net cash used
by financing activities (24,284) ( 7,627)
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Decrease in cash and cash equivalents ( 3,220) ( 4,199)
CASH AND CASH EQUIVALENTS,
beginning of period 15,941 12,934
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CASH AND CASH EQUIVALENTS,
end of period $ 12,721 $ 8,735
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid -
net of amounts capitalized $ 978 $ 1,621
================= ==================
Income taxes paid (refunded) $ 1,032 $ ( 771)
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See notes to consolidated financial statements.
4
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Nine Months Ended January 31, 2002 and 2001
(1) BASIS OF PRESENTATION
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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 accounting principles generally accepted in the United States 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
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INDUSTRY SEGMENTS
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The following schedules set forth summarized data relative to the industry
segments in which the Company operates for the three and nine month periods
ended January 31, 2002 and 2001. Certain amounts included in "Interest and other
operations" on the Consolidated Statements of Operations are classified below
within the land operations and homebuilding segments, depending upon the nature
of business activity.
<Table>
THREE MONTHS Land Home Corporate
Operations Building Distribution Fulfillment and Other Consolidated
(a) (b)
January 2002 (Thousands):
Revenues $ 3,559 $ 3 $ 3,543 $ 8,635 $ 557 $ 16,297
Expenses(excluding interest) 3,011 60 3,298 7,925 652 14,946
Interest expense, net 32 - 153 17 36 238
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Pretax income (loss)
contribution $ 516 $ (57) $ 92 $ 693 $ (131) $ 1,113
============ ============ ============ ============ ============ ============
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January 2001 (Thousands):
Revenues $ 3,275 $ 569 $ 3,146 $ 8,640 $ 401 $ 16,031
Expenses(excluding interest) 2,731 1,424 5,504 8,000 1,309 18,968
Interest expense, net 123 8 412 101 42 686
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Pretax income (loss)
contribution $ 421 $ (863) $ ( 2,770) $ 539 $ ( 950) $( 3,623)
============ ============= =========== ============ =========== ===========
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5
NINE MONTHS Land Home Corporate
Operations Building Distribution Fulfillment and Other Consolidated
(a) (b)
January 2002 (Thousands):
Revenues $ 24,920 $ 670 $ 11,301 $ 25,587 $ 1,687 $ 64,165
Expenses(excluding interest) 22,020 984 9,772 24,285 2,521 59,582
Interest expense, net 113 - 816 159 108 1,196
Pretax income (loss) ------------ ------------ ------------ ------------ ------------ ------------
contribution $ 2,787 $ (314) $ 713 $ 1,143 $( 942) $ 3,387
============ ============= =========== ============ =========== ===========
Identifiable assets $ 72,875 $ 1,277 $ 35,150 $ 18,607 $19,562 $ 147,471
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January 2001 (Thousands):
Revenues $ 9,918 $ 3,338 $ 10,553 $ 26,302 $ 1,521 $ 51,632
Expenses(excluding interest) 6,813 5,181 12,702 24,454 3,234 52,384
Interest expense, net 318 42 1,427 391 129 2,307
------------ ------------ ----------- ------------ ------------ ------------
Pretax income (loss)
contribution $ 2,787 $(1,885) $ (3,576) $ 1,457 $(1,842) $ (3,059)
============ ============= =========== ============ =========== ===========
Identifiable assets $ 83,077 $ 4,108 $ 42,445 $ 13,983 $16,836 $ 160,449
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<FN>
(a) Includes the effect of valuation adjustments and other charges related to
certain inventories and equity investments in joint ventures of
approximately $1.0 million and $1.4 million recorded in the three and nine
month periods ended January 31, 2001 respectively, compared to none in the
corresponding periods of the current year.
(b) Includes the effect of provisions for bad debt expense of approximately
$1.9 million and $2.1 million recorded in the three and nine month periods
ended January 31, 2001 respectively, compared to approximately $100,000 and
$400,000 in the corresponding periods of the current year.
</FN>
6
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 and Nine Month Periods ended January 31,
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2002 and 2001
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Revenues from magazine circulation operations increased to $12.2 million in the
third quarter ended January 31, 2002 from $11.8 million in the prior year, and
were approximately $36.9 million for the nine month periods in both fiscal 2001
and 2002. Revenues from Newsstand Distribution Services increased approximately
13% and 7% for the three and nine month periods ended January 31, 2002,
respectively, compared to the corresponding periods of the prior year primarily
due to improved magazine sales and an increase in the Company's average
commission due to a changed mix of sales. Revenues from Fulfillment Services
were comparable for fiscal 2002's third quarter compared to the prior year, and
decreased by 3% in the nine month period of fiscal 2002 compared to the prior
year due to the loss in the prior year of sweepstakes processing business for
one customer. Magazine circulation operating expenses decreased by 19% and 9% in
the three and nine month periods ended January 31, 2002, respectively, as
compared to the same periods last year due to decreases in payroll-related and
other cost reductions principally in the Newsstand Distribution Services
division as well as reduced bad debt expense in the current year.
Revenues from real estate operations were $3.3 million and $24.7 million for the
three and nine month periods ended January 31, 2002, respectively, compared to
$3.4 million and $12.0 million in the comparable periods of the prior year. The
majority of real estate revenues were derived from land sale operations in both
years, and increased in the nine month period of the current fiscal year due to
two large land sales in California and Colorado which were made as part of the
Company's restructuring of its real estate operations, including a program to
dispose of all real estate assets in markets outside of New Mexico. Although
these two large land sales generated a substantial amount of cash, the gross
profits realized were marginal and, as a result, the average gross profit
percentage on all land sales decreased from 49% in the first nine months of
fiscal 2001 to 19% in the current year. For the quarter ended January 31, 2002,
the consolidated gross profit margin was 36% compared to 32% in the prior year.
Gross profits on land sales in the Company's major market of Rio Rancho, New
Mexico were 37% and 41% in the three and nine month periods of fiscal 2002,
respectively, compared to 51% and 57% in the prior year's comparable quarters,
and decreased because the current year activity includes proportionately more
sales from certain projects that contribute a lower average gross profit. 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 an indication of amounts that may be expected to occur in future
periods.
Real estate commissions and selling expenses decreased in both the three and
nine month periods ended January 31, 2002 and have not varied in proportion to
sales because the commissions and other costs associated with the California and
7
Colorado land sales discussed above had minimal variable costs. Real estate and
corporate general and administrative expenses decreased in both the three and
nine month periods versus the same periods last year due to the effects of the
Company' cost reduction and other budgetary control measures. General and
administrative costs of magazine circulation operations in the third quarter of
fiscal 2002 were comparable to the prior year, and decreased by 2% for the nine
month period ended January 31, 2002 as a result of cost reduction measures
instituted. Interest expense decreased in both the three and nine month periods
ended January 31, 2002 due to the effects of both lower borrowing levels and
reduced interest rates.
The Company recognized a tax benefit of $3.5 million during the quarter ended
January 31, 2001 from the reversal of an income tax accrual as the result of the
completion of an Internal Revenue Service audit for the years 1993 and 1994.
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.
Kable News Company has a line-of-credit with a group of banks. As a result of a
modification of the agreement entered into in June 2001, the commitment amount
was reduced to $23.5 million as of January 31, 2002, at which time $10.9 million
was outstanding. This line bears interest at the prime rate plus 1% and matures
on May 1, 2002. In accordance with the June 2001 modification, the commitment
amount will be further reduced to $20 million at April 30, 2002.
Certain of Kable's current lenders have advised that they do not intend to renew
their lending commitments beyond May 1, 2002. Kable has reached preliminary
agreement with another lender for a $20 million credit arrangement which would
extend through fiscal 2005 at financial terms substantially comparable to those
of its present arrangement, subject to negotiation of the loan documentation.
Management of Kable anticipates that it will be able to finalize this new loan
arrangement prior to May 1, 2002.
The other line-of-credit borrowings are used principally to support real estate
development in New Mexico. These loans are collateralized by certain real estate
assets and are subject to available collateral and various financial performance
and other covenants. At January 31, 2002, the maximum available under real
estate lines-of-credit totaled $9.8 million of which borrowings of $6.2 million
were outstanding.
During the past several years, the Company has restructured its real estate
operations by winding-down homebuilding activities and selling a substantial
portion of its landholdings in Colorado, and all of its landholdings in
California and Oregon. At January 31, 2002, inventories had decreased to $62.2
8
million compared to $73.3 million at April 30, 2001 principally as a result of
the two sales of property in California and Colorado discussed above, while
notes payable for real estate operations had decreased to $8.6 million at
January 31, 2002 from $13.2 million at April 30, 2001, in connection with
repayment of debt principally provided by proceeds on land sales.
The Company will be requuired to adopt Statement of Financial Accounting
Standards ("SFAS") No. 142. "Goodwill and Other Intangible Assets" on May 1,
2002. The Company has not yet evaluated the effect of SFAS No. 142 on its
consolidated financial statements.
Statement of Forward-Looking Information
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Certain information included herein 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 nine
month period ended January 31, 2002. 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.
9
PART II
Other Information
Item 4. 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 Registrant during the quarter
ended January 31, 2002.
10
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMREP CORPORATION
(Registrant)
Dated: March 12, 2002 By: /s/ Peter M. Pizza
Peter M. Pizza
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer
11
AMREP CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
None
12