March 25, 2008
Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0404
Attention: Kevin Woody, Branch Chief
Re: AMREP Corporation
File Number 1-4702
Dear Mr. Woody:
The following comments are in response to the comments contained in your letter
dated March 11, 2008 regarding the review of the Annual Report on Form 10-K of
AMREP Corporation (the "Company") for the fiscal year ended April 30, 2007
("2007 Form 10-K"). As requested, the responses below are keyed to the three
comments contained in the March 11, 2008 letter.
Comment Number 1 re: Item 3. Legal Proceedings (page 18):
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A subsidiary of AMREP Corporation did receive a favorable judgment in the amount
of $4,159,770, plus interest, in April 2006. The Company believes that it is
highly unlikely that any amount will be collected under this judgment since, as
stated in Item 3 of Part I of the 2007 Form 10-K, the judgment debtor is no
longer in business and does not appear to have the assets to pay that judgment.
The Company recognizes the standards established by paragraph 17 of SFAS 5
regarding the disclosure of gain contingencies. However, because the likelihood
of realization of any amount under this judgment is deemed to be remote, the
Company believed it prudent not to discuss this matter in the footnotes to the
financial statements in order to avoid any implication that any such amount
might be recoverable.
Comment Number 2 re: Note (2) Acquisitions (page 43):
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In order to determine the appropriate amortization method and period of
amortization for the value assigned to customer contracts and relationships, the
Company performed a study of the customer base of the acquired company ("Palm
Coast"). Palm Coast has contracts in place with its core customers that
generally have terms of from 3 to 5 years, which would tend to suggest a useful
life based on the contract terms, however, the past renewal rates of customer
contracts tend to suggest otherwise. There is only one sizable active competitor
in the industry, and it is a time consuming process for a customer to change
subscription fulfillment service providers. Typically, the contracts are renewed
with no material modifications to the terms and conditions. As a result, with
only a small number of industry providers from which to choose in combination
with long lead times required to implement a provider change, the customer base
in the subscription fulfillment industry has generally had a tendency to remain
with their current providers for periods far in excess of initial contract
terms. For these reasons, both the Company and Palm Coast have many long-time
customers.
As part of its exercise to value intangibles, the Company in conjunction with an
independent valuation firm analyzed a 20-year revenue stream as the method of
valuing the customer contracts and relationships. The analysis indicates that
the net present value of the estimated after-tax future cash flows for the first
12 years represents 92% of the total value indications, with subsequent
after-tax cash flows representing a minor component. Based on this analysis, the
Company deemed a 12-year life to be the appropriate period for amortization.
In determining the method of amortization of the customer contracts, the Company
considered paragraph 12 of SFAS No. 142 that states, among other things, "The
method of amortization shall reflect the pattern in which the economic benefits
of the intangible asset are consumed or otherwise used up. If that pattern
cannot be reliably determined, a straight-line amortization method shall be
used."
In the Company's analysis to determine a pattern in which the economic benefits
would be recognized, it was noted that some attrition of the acquired company's
customer contracts occurred in prior years, but that the range of the attrition
rates varied widely on a year-to-year basis. As a result, the Company concluded
that a reliable pattern of economic benefits could not be determined.
Accordingly, the straight-line amortization method was deemed to be appropriate.
In addition, the Company will review the unamortized value of customer contracts
and relationships for impairment in accordance with SFAS 144 whenever a
significant customer contract is terminated or not renewed, and whenever other
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable.
Comment Number 3 re: Exhibits 31.2 and 31.3 (pages 64 and 65):
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Please be advised that Company will incorporate the revisions required by this
comment into its future filings.
***
The Company hereby acknowledges:
- The Company is responsible for the adequacy and accuracy of the disclosure
in its filings;
- Comments made by the SEC staff or changes to disclosure in response to
staff comments do not foreclose the Securities and Exchange Commission from
taking any action with respect to the Company's filings; and
- The Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities laws
of the United States.
I trust that this letter is responsive to your comments. If you have additional
comments or need to contact the Company further, you may contact me at (609)
716-8210 (fax number (609) 716 - 8255).
Yours truly,
/s/ Peter M. Pizza_
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Peter M. Pizza
Vice President - Chief Financial Officer
cc: Roger Smith - McGladrey & Pullen, LLP
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