SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 1994 Commission File Number 1-4702
-------------- ------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ -----------
AMREP CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its Charter)
Oklahoma 59-0936128
-------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Columbus Circle, New York, New York 10019
---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-541-7300
------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ----------------------
Common Stock $.10 par value New York Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates of Registrant,
computed by reference to the last sales price of such Common Stock on July 20,
1994, on the New York Stock Exchange Composite Tape: $40,263,477.
Number of shares of Common Stock, par value $.10 per share, outstanding at July
20, 1994 - 7,297,625.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents of Registrant are incorporated by
reference into the indicated parts of this report: Definitive Proxy Statement
for 1994 Annual Meeting Part III
PART I
Item 1. Business
- - ------------------
GENERAL
-------
The Company* is a real estate developer and builder of housing, a
national distributor of magazines and a provider of subscription fulfillment
services for publishers. It is the developer of, and major builder of
single-family homes at, Rio Rancho, New Mexico. Since February 1992, the
Company has been providing environmental consulting services.
Data concerning Industry Segments is set forth in Note 13 of Notes to
Consolidated Financial Statements. The Company's foreign sales and activities
are not significant.
REAL ESTATE OPERATIONS
----------------------
Real Estate Operations consist of (i) the construction and sale of
housing, (ii) the development and sale of housing sites, and (iii) the sale of
tracts for residential, industrial and commercial uses.
HOUSING OPERATIONS
- - ------------------
The Company builds and markets low to medium priced housing, principally
single-family homes ranging in size from approximately 750 to 2,600 square
feet. It presently is building at Rio Rancho, New Mexico; Broomfield,
Colorado; Parker, Colorado; and Freehold, New Jersey.
A substantial majority of the Company's building is at Rio Rancho, where
the prices of the homes presently being sold by the Company range from
approximately $58,000 to $190,000, although most are in the $70,000 to $90,000
range. In fiscal l994, the Company delivered 637 homes at Rio Rancho at an
average price of $81,600 whereas in fiscal l993 it delivered 543 homes there at
an average price of $74,600. The Company does the development work at Rio
Rancho. See "DEVELOPMENT OPERATIONS - Rio Rancho" for information concerning
Rio Rancho.
* As used herein "Company" includes the Registrant and its subsidiaries unless
the context indicates otherwise.
The Company recently entered and has three projects in the Colorado
market. One is in Broomfield (a suburb of Denver), and it has a total of 196
lots, 70 of which were acquired developed in February 1993 and the balance in
March l994. The Company is building homes there designed to sell at prices
ranging from $119,000 to $134,000. Construction at the project commenced in
July, 1993, and in fiscal l994 26 homes were delivered at an average price of
$116,000.
In November 1993, the Company acquired l0l partially developed lots in a
project at Parker (also a suburb of Denver) on which it has completed the
development work on 50 lots, and in March l994 commenced building. The homes
here are designed to sell for prices ranging from approximately $117,000 to
$140,000.
In March l994 the Company purchased 484 acres of undeveloped residential
property at a second location in Parker which has been zoned for approximately
1800 homes. The Company anticipates it will begin the development work during
the current fiscal year and plans to build homes there designed to sell in the
$110,000 to $180,000 range. It may sell lots or tracts from this property to
other builders or developers.
The Company was a limited partner with a one-third interest in a limited
partnership which in 1990 commenced construction of a 390-unit townhouse
project in Freehold, New Jersey. The project encountered financial
difficulties and in August 1992 the partnership was restructured with a
subsidiary of the Company becoming the sole general partner with a 50%
interest. Pursuant to New Jersey law, 20% of the units must be priced
substantially below market, but the remaining 312 units may be sold at market
(the "Market Price Units") and are designed to sell in the $115,000 to $155,000
range. From inception through April 1993, 70 units were delivered. In fiscal
l994, 67 Market Price Units were delivered for an average price of $149,600 and
25 of the below market units were delivered at an average price of $53,850.
Until January 1994, the Company was the general partner and majority
owner of a limited partnership which owns a 300 unit "congregate living" rental
facility in West Palm Beach, Florida. The facility, which was completed in
fiscal l99l, was designed to provide alternative housing for active seniors.
In January l994, an unrelated third party became the general partner of the
partnership and the Company became a limited partner, but as a limited partner
it continues to have a significant equity interest in the partnership. A
subsidiary of the Company is continuing to manage the facility for an extended
period. Approximately 250 units currently are rented for terms of up to twelve
months. An additional 30 units are being converted for operation as an
Assisted Care Living Facility, and it is anticipated that the facility will
commence operations in August.
A limited partnership of which, until recently, AMREP and a subsidiary
held all of the partnership interests, owns 247 units of moderately-priced
rental housing in Orlando, Florida. There has been a restructuring of that
partnership in which an unrelated third party became the general partner and
the Company became a limited partner with a 50% equity interest. A subsidiary
of the Company continues to manage the project under a year-to-year contract.
Substantially all of the units currently are leased for terms of from 7 to 12
months.
The Company participates in a joint venture which builds single-family
homes in Eldorado at Santa Fe, New Mexico ("Eldorado"), although the Company is
not the builder. In fiscal l994 the venture sold 22 homes. The Company
builds medium- priced condominiums at Rio Rancho, and in l994 sold 37 units at
an average price of $70,700.
The Company builds a number of different models of houses at each of its
developments, which it changes periodically based on experience and market
research. At Rio Rancho the houses are designed by the Company's own staff.
The Company acts as general contractor, supervising all development and
building activities, but employs subcontractors for most construction work.
However, the Company performs some site preparation work with its own equipment
and personnel and its employees do final preparation and cleaning work on
housing units.
At the Colorado developments the houses are designed by an outside
architect. The Company acts as general contractor but employs subcontractors
for all construction and site preparation work.
The houses at the Freehold project are designed by an outside architect.
An 75% owned subsidiary of the Company is the general contractor, but it
employs subcontractors for all construction and site preparation work.
The Company's housing is of frame construction and the Company has no
reason to anticipate difficulty in obtaining all necessary materials as needed.
At Rio Rancho and the Colorado projects, the Company enters into contracts with
subcontractors and suppliers of materials pursuant to which prices are
established for a specific period (generally not exceeding six months). Such
contracts are generally used for all subcontractors or all suppliers. The
Company generally uses more than one subcontractor for each trade and more than
one supplier of each type of material. However, at Rio Rancho particularly, a
substantial increase in orders and a shortage of subcontractors has caused
production problems during the past year. The Company is addressing the
situation with a number of measures. They include the adoption of a program of
metered construction starts and flow based on the availability of all trades to
complete a house once started.
The Company's construction and development departments are headquartered
at Rio Rancho, New Mexico, but it has local project managers for its building
activities elsewhere.
DEVELOPMENT OPERATIONS
- - ----------------------
The Company develops the housing sites at Rio Rancho and will develop the
sites at the 484 acre tract in Parker, Colorado. The development activity
includes the obtaining of necessary governmental approvals, installation of
utilities and necessary storm drains, and building or improving the roads. The
engineering work is performed by both outside firms and Company employees, but
development work generally is performed by outside contractors.
The Company sells developed residential lots to outside builders at both
Rio Rancho and Eldorado. In fiscal 1994, outside builders purchased
approximately 110 lots at Rio Rancho for an aggregate of $2,830,000 and 242
lots at Eldorado for an aggregate of $5,975,000.
Rio Rancho
----------
This project consists of 91,049 contiguous acres in Sandoval County, New
Mexico, near Albuquerque, of which some 71,800 acres have been platted into
approximately 107,400 homesite and commercial lots and 16,000 acres are
dedicated to community facilities, roads and drainage. At April 30, 1994, a
total of approximately 76,500 of the lots had been sold. The Company
currently owns approximately 25,000 acres at Rio Rancho of which some 9,000
acres are in contiguous blocks suitable for development. The balance is in
scattered lots which require the purchase of a sufficient number of adjoining
lots to create tracts suitable for development. Rio Rancho (most of the
populated portion of which is in an incorporated city) has a population of over
40,000.
Piped water, electricity and telephone service are supplied by
independent public utility companies to all homes, and most are also serviced
by piped gas and sewage utilities. Sewage disposal for lots not serviced by the
utility system is by individual septic tank.
The Company is required to make deposits with the electric, gas, water
and sewage companies when their utility lines are extended to new sections. A
substantial part of such deposits are returned as houses are built and the
utility service commences.
Since early 1977, no lots have been sold except with houses on them or to
outside builders. Over 50,000 lots were sold prior to 1977 and most of these
are in areas where utilities have not yet been installed. However, under the
contracts pursuant to which the lots were sold if, when the purchaser is ready
to build a home utilities have not reached the site of his lot, the Company is
obligated to exchange a lot in an area then serviced by water, telephone and
electric utilities for a lot of the purchaser, without cost to the purchaser.
The Company has not incurred significant costs related to such exchanges.
The commercial areas at Rio Rancho presently house in excess of 320
business and professional offices, seven shopping centers with over 900,000
square feet of store and office space, and a 55,000 square foot office building
largely occupied by the Company. In addition, a number of individual office
buildings and stores are located throughout the community. Six financial
institutions have offices at Rio Rancho. The industrial areas presently have
approximately 70 buildings with over 2,000,000 square feet, including a
manufacturing facility containing approximately 1,225,000 square feet built and
used by Intel Corporation. Intel currently is constructing an additional
1,300,000 square feet for the facility.
Eldorado at Santa Fe
--------------------
This subdivision, consisting of approximately 6,000 acres platted into
lots, is located 10 miles southeast of Santa Fe, New Mexico. Approximately
1,550 single-family homes have been built and sold at this subdivision. If the
current rate of sales continues, the remaining inventory of approximately 280
lots at Eldorado will be sold during fiscal l996.
SALE OF NON-RESIDENTIAL TRACTS
- - ------------------------------
The Company sells developed and undeveloped tracts at Rio Rancho and may
sell tracts from its 484 acre property in Parker, Colorado. In fiscal 1994 six
tracts were sold at Rio Rancho at prices ranging from approximately $60,000 to
over $1,000,000.
MARKETING
- - ---------
The Company's homes are generally purchased as principal residences. The
designs of the various models built by the Company are based on market
research, which is done principally by Company personnel. At Rio Rancho the
Company sells its housing almost entirely from models on-site, both directly
and through brokers. At Freehold, the Company sells directly from models
on-site without brokers. At the Colorado developments the Company sells its
housing through brokers operating out of on- site sales offices.
Industrial and commercial tracts at Rio Rancho are marketed by a separate
department, both directly and through brokers.
There is no significant seasonality to either housing or tract sales.
However, unusually severe winter weather can disrupt construction activities,
and when this occurs there can be a slow down in housing sales in the
immediately ensuing months followed by a "bunching" as deliveries catch up.
BACKLOG
- - -------
Almost all contracts for the sale of housing sold by the Company are
subject to the buyer's ability to obtain financing. The Company thus does not
consider any such contracts to be firm, although during the past year
approximately 80% of persons who signed contracts to purchase housing actually
closed their purchase.
At July 1, l994, the Company had signed contracts for the purchase of 623
units of housing for an aggregate purchase price of approximately $60,900,000
whereas at July l, l993 it had signed contracts for 522 units with an aggregate
purchase price of approximately $44,900,000.
At July l, l994, the Company had contracts for the sale of 238 lots to
builders for an aggregate purchase price of $7,200,000 and four contracts for
the sale of unimproved real estate for an aggregate purchase price of
$1,030,000. At July 1, l993 it had two contracts for the sale of unimproved
real estate for an aggregate purchase price of $l,500,000.
COMPETITION
- - -----------
The construction and sale of homes is a highly competitive business.
Each of the Company's housing projects competes with other builders who offer
similarly priced housing. To a limited extent the Rio Rancho development
competes with developments in other places having climates attractive to those
who wish to escape the rigorous climates of the north, although a large
majority of the housing there is purchased by New Mexico residents.
Historically, the Company has generally concentrated on the construction
of affordable housing with relatively few options, leaving custom house
building and relatively expensive houses generally to other builders. While it
has no plans to do custom building, the Company gradually has been increasing
the upper price level of its houses to accommodate a full spectrum of middle
income buyers.
MORTGAGE FINANCING
- - ------------------
The ability of the Company to sell houses is dependent upon the
availability of adequate mortgage financing on terms prospective customers can
afford. At Rio Rancho, the Company arranges mortgages principally with funds
made available or guaranteed by State Housing Authorities and the Federal
Housing Administration, and at all locations with various conventional mortgage
lenders.
DISTRIBUTION AND FULFILLMENT OPERATIONS
---------------------------------------
Through its wholly-owned subsidiary, Kable News Company, Inc., the
Company (i) distributes periodicals nationally and in Canada and, to a small
degree, overseas, and (ii) performs subscription fulfillment and related
services. Kable employs approximately 820 persons, approximately 220 of whom
are involved in its distribution activities and 600 in fulfillment activities.
Kable maintains state of the art computer hardware and software in support of
its distribution and fulfillment operations.
DISTRIBUTION
- - ------------
In its distribution operation, Kable annually distributes magazines for
over 240 publishers. No distribution client accounted for as much as 10% of
distribution revenues in fiscal 1994. Among the titles are many special
interest magazines, including automotive, crossword puzzles, men's
sophisticates, comics, romance and sports. In a typical month, Kable
distributes to wholesalers nearly 34,500,000 copies of the various titles.
Typical of the industry, Kable purchases the publications from its publishers
and sells them to approximately 365 independent wholesale distributors in the
United States and Canada. The wholesale distributors in turn sell the
publications to individual retail outlets. All parties generally have full
return rights for unsold copies. In fiscal 1994, distribution activities
accounted for 46% of Kable's revenues.
While Kable does not handle all publications of all of its publisher
clients, it usually is the exclusive distributor for the publications it
distributes. Kable generally does not physically handle any product. It
determines in consultation with the wholesalers and publishers the number of
copies of each issue to be distributed, and generates and delivers to each
publisher's printer shipping instructions with the addresses of the wholesalers
and the number of copies of product to be shipped to each. All magazines have
an "off sale" date (generally the on- sale date of the next issue) following
which the retailers return unsold copies to the wholesalers, who destroy them
after accounting for returned merchandise in a manner satisfactory to Kable.
Kable has a distribution sales and marketing force of about 100
persons, the responsibility of which is to work with wholesalers and retailers
to promote product sales and to assist in determining the number of copies of
product to be delivered to each retailer.
Kable generally makes substantial advances to publishers against future
sales, mostly for printing, paper and production costs prior to the product
going on sale, but is usually not paid by wholesalers for product until some
time after the product has gone on sale. Kable is therefore exposed to
potential credit risks with both the publishers and the wholesalers. Its
ability to make a profit is dependent in part on its skill in estimating the
number of copies of an issue which should be printed and distributed and
limiting its advance to the publisher accordingly.
There are six national distributors with whom Kable competes. Since
publishers utilize only a single distributor to distribute a particular line,
there is intensive competition between distributors to obtain distribution
rights from publishers. All six of these large competitors are owned by or
affiliated with a magazine publishing company. Such companies publish a
substantial portion of all magazines published in the United States, and the
competition for the distribution rights to the remaining publications thus has
intensified.
FULFILLMENT SERVICES
- - --------------------
Kable's Fulfillment Services Division performs a number of fulfillment
and fulfillment related activities, principally magazine subscription
fulfillment services for publishers, list services and product fulfillment
services. In fiscal 1994, this Division accounted for 54% of Kable's revenues.
In its magazine subscription fulfillment service, this Division
processes new orders, receives and accounts for payments, prepares labels for
mailing each issue, handles subscriber telephone inquiries and correspondence,
prepares renewal and statement notifications, maintains the client publisher's
subscriber list and database, generates marketing and statistical reports, and
prints forms and promotional materials for its client publishers. Although by
far the largest number of magazine titles for which Kable performs fulfillment
services are consumer publications, Kable also performs services for a number
of trade (business) publications utilizing the broad capabilities of its
extensive database system.
List services clients are primarily publishers. In this activity the
Division maintains clients' customer lists, selects names for clients who rent
their lists, merges rented lists with the client's lists to eliminate
duplication for clients' promotional mailings, and sorts and sequences mailing
labels to provide optimum postal discounts for clients.
This Division provides product fulfillment services primarily for its
publishers clients. In this activity it receives, warehouses, processes and
ships merchandise.
Kable now performs fulfillment services for approximately 315 different
magazine titles for some 225 clients. No fulfillment client accounted for as
much as 10% of fulfillment revenues in fiscal l994. Kable maintains more than
14,400,000 active subscriber names for its client publishers. In a typical
month Kable produces almost 12,350,000 mailing labels for its client
publishers' printers and also produces and mails approximately 4,150,000
billing and renewal statements.
There are a large number of companies which perform fulfillment
services and with which Kable competes, two of which are many times larger than
Kable. Since publishers utilize only a single fulfillment service for a
particular publication, there is intensive competition to obtain fulfillment
contracts with pub lishers. Kable has a staff whose primary duty is to solicit
fulfillment business.
CONSULTING SERVICES
-------------------
In February 1992 the Company began providing environmental consulting
services, and has expanded this operation to include economic development
consulting and project management services.
COMPANY OFFICES
---------------
Although the Company's principal executive offices are in New York
City, its operations (other than Kable News) are centralized in Rio Rancho in a
modern office building owned by the Company. Kable News has an executive and
sales office in New York City separate from AMREP's, but its operations are
centered in Mt. Morris, Illinois.
EMPLOYEES
---------
The Company has approximately 1,100 employees (including Kable), none
of whom is represented by a union. The Company provides retirement, health and
other benefits for its employees and considers its employee relations to be
good.
Item 2. Properties.
- - --------------------
The information contained in Item 1 of this report with respect to
properties owned by the Company is hereby incorporated herein by reference.
Item 3. Legal Proceedings.
- - ---------------------------
The Registrant and/or its subsidiaries are involved in various claims and
legal actions incident to their operations, which in the opinion of management
based upon advice of counsel, will not materially affect the consolidated
financial position or results of operations of the Registrant and its
subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders.
- - ------------------------------------------------------------
Not Applicable.
Executive Officers of Registrant
- - --------------------------------
Set forth below is certain information concerning persons who are
executive officers of Registrant.
Name Office Held Age
---- ----------- ---
Anthony B. Gliedman Chairman of the Board, 52
President and Chief
Executive Officer of the
Registrant since July
1991; Executive
Vice President of Regis-
trant from December
1990 until July 1991;
Executive Vice President
of the Trump Organization,
real estate development,
from prior to 1989 to
December 1990.
Daniel Friedman Chairman of the Board 59
of Kable News Company, Inc.,
a wholly owned subsidiary of
Registrant, since prior to
1989; Senior Vice President
of the Registrant since
prior to 1989.
James Wall President of AMREP Southwest 57
Inc. ("ASI"), and of AMREP
Southeast, Inc., wholly
owned subsidiaries of
Registrant, since January
1991; Vice President of
ASI from prior to 1989
to January 1991; General
Manager of Southwest
Operations since prior
to 1989; Senior Vice
President of Registrant
since September 1991.
Name Office Held Age
---- ----------- ---
Harvey W. Schultz Senior Vice President of 53
Registrant since March
1992; President of AMREP
Solutions, Inc., a wholly-
owned subsidiary of the
Registrant, since March
1992; President of HWS
Solutions, Inc.,
environmental consultants
from 1991 to March 1992;
President of Ocean View
Associates, real estate
development, and Senior
Vice President of Forest City
Ratner Companies, real estate
development, during 1990;
Commissioner of the Department
of Environmental Protection of
the City of New York from
prior to 1989 to December 1989.
Mohan Vachani Senior Vice President - 52
Chief Financial Officer
of the Registrant since June
1993; Consultant to the
Registrant from September
1992 to June 1993;
Vice President-
Chief Financial Officer
of Bedford Properties,
Inc., real estate manage-
ment and development,
from prior to 1989 until
June 1993.
Valerie Asciutto Vice President-General 41
Counsel of Registrant since
July 1992; Vice President -
Real Estate Lending of
Community Capital Bank
(commercial bank) from
September 1991 to May
1992; attorney in private
practice from prior to
1989 to September 1991.
Name Office Held Age
---- ----------- ---
Rudolph J. Skalka Vice President-Finance of 62
Registrant since
prior to 1989;
Treasurer of Registrant
since prior to 1989.
Each executive officer holds office until the first meeting of directors
following the annual meeting of stockholders and until his successor is duly
chosen and qualified.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- - ------------------------------------------------------------------------------
The Registrant's Common Stock is traded on the New York Stock Exchange,
the Chicago Stock Exchange and the Pacific Stock Exchange under the symbol AXR.
On July 19, 1994, there were approximately 2,835 holders of record of
Registrant's Common Stock. Registrant has not paid any cash dividends, and it
has agreed in connection with certain long term borrowings not to pay cash
dividends in amounts exceeding one-half of the Registrant's net worth. The
range of high and low closing prices for the last two years by fiscal quarter
is presented below:
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
High Low High Low High Low High Low
---------- ---------- ---------- ----------
1994 7 1/2 5 1/2 10 1/8 6 1/4 9 3/4 7 9 7 5/8
1993 7 5/8 5 1/2 5 5/8 4 1/2 6 4 1/2 6 5
Item 6. Selected Financial Data.
- - ---------------------------------
(In thousands of dollars except per share amounts)
Year Ended April 30,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ----------- ----------- ----------- ------------
Revenues $ 126,088 $ 93,660 $ 73,365 $ 69,567 $ 84,588
Income (Loss)
Continuing operations $ 2,372 $ 41 $ (6,826) $ (6,161) $ (2,448)
Discontinued operations - - - - 104
Gain on sale of
discontinued operations - - - 1,873 -
----------- ----------- ----------- ----------- -----------
Net Income (Loss) $ 2,372 $ 41 $ (6,826) $ (4,288) $ (2,344)
=========== =========== =========== =========== ===========
Income (Loss) Per Share
Continuing operations $ 0.33 $ 0.01 $ (1.03) $ (0.93) $ (0.37)
Discontinued operations - - - - 0.02
Gain on sale of
discontinued operations - - - 0.28 -
----------- ----------- ----------- ----------- -----------
Net Income (Loss) Per Share $ 0.33 $ 0.01 $ (1.03) $ (0.65) $ (0.35)
=========== =========== =========== =========== ===========
Total Assets $ 178,857 $ 179,944 $ 168,390 $ 181,361 $ 196,755
Notes Payable 50,738 31,899 34,462 37,914 47,276
Project Financing 6,205 41,228 32,164 32,251 31,361
Collateralized Mortgage
Obligations (A) 4,406 6,473 7,390 8,407 8,873
Shareholders' Equity 61,429 54,102 54,055 60,881 65,169
Cash Dividends - - - - -
<FN>
(A) As discussed in Note 1 to Notes to Consolidated Financial Statements
certain amounts have been reclassified to conform with fiscal year 1994
presentation.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
- - ------------------------------------------------------------
Liquidity and Capital Resources.
- - -------------------------------
At April 30, 1994, the Company had line-of-credit arrangements with
several financial institutions collateralized by various assets. One of
these lines was $25,000,000 (against which approximately $22,500,000 was
drawn) which is restricted to Kable News Company (Kable) operations, must
be collateralized 125% or more by certain Kable accounts receivable and is
due August 31, 1995. The line-of-credit agreement restricts the payment of
dividends by, and loans from, Kable to the Company.
The other lines-of-credit are used principally to support real estate
construction in New Mexico. At April 30, 1994, they totalled $15,250,000
against which approximately $8,600,000 was drawn. These lines-of-credit are
collateralized by certain real estate assets and are subject to certain
financial performance and other covenants. A large majority of the loans
mature in late 1994, but based on management's discussions with the lenders,
the Company believes these lines-of-credit will be renewed as they mature.
The Company also has borrowed in excess of $15,000,000 in land acquisition,
development and construction loans for its New Jersey and Colorado projects.
The Company believes that cash provided from operations together with
existing cash, its lines-of-credit and development and construction loans
will be sufficient to maintain liquidity at a satisfactory level.
The Company believes that its available funds also will be adequate to
provide for capital expenditures, which are not expected to exceed
$1,600,000 in fiscal 1995.
The Company was out of compliance during the year with certain of its
debt convenants for which waivers have been obtained.
As discussed in Note 10 of Notes to Consolidated Financial Statements
("Note 10"), in fiscal 1992 the Internal Revenue Service ("IRS") completed a
Revenue agent Review of the Company's tax returns for fiscal years 1984
through 1989. The Company believes it has reached agreement with the IRS on
all but one adjustment and does not expect significant additional tax
liability or payments from those issues. The remaining issue concerns the
method by which the Company utilizes a provision of the Internal Revenue
Code pursuant to which it excludes from income the amount related to the
return of magazines to Kable within a specified period following the close
of the tax year. The Company, its outside accountants and its outside
counsel believe the Company's method is correct and if it is ultimately
necessary the Company will defend its position in litigation. The matter is
now being reviewed by the appellate division of the IRS. The Company has
been informed that the IRS has issued a notice of deficiency to at least one
other taxpayer in which the IRS contests that taxpayer's exclusions from
income which rely on the same Code provision and use the same method as that
used by the Company and that the taxpayer is planning to commence litigation
on the issue against the IRS. That litigation will likely not be resolved
for two or three years or more. To date, the appellate review of the Company
remains open although the Company's representative reports that there is no
likelihood of imminent attention to the Review by the IRS agent assigned.
As set forth in Note 10, substantial amounts of taxes and interest could be
payable should the IRS ultimately prevail in all respects. However, the
Company has decided not to identify a source of funds because the Company,
its outside accountants and its outside counsel are of the view both that
the Company's method is correct under the Code and that it is more likely
than not that the Company will prevail and because the matter is years from
resolution.
RESULTS OF OPERATIONS
- - ---------------------
The improvement in the results for fiscal 1994, as compared to 1993,
reflects an increase in gross profit from housing and land sales of
approximately $4,000,000; an improvement in pretax income from Kable News
operations of approximately $1,900,000; and a gain of $1,245,000 recorded in
connection with the sale of the Company's general partnership interest in
the Colonial Pointe Apartments Limited Partnership on April 29, 1994 (see
Note 4 of Notes to Consolidated Financial Statements).
These operating improvements were offset by a decrease of approximately
$1,300,000 in income from interest and other operations due primarily to a
$440,000 decrease in interest income from land sales receivables and
mortgages securing collateralized mortgage obligations, a nonrecurring
$200,000 gain from the sale of a commercial building in fiscal 1993, and
lower earnings from the Rio Rancho Country Club; a $1,170,000 increase in
general and administrative expenses related to real estate operations and
corporate, primarily because last year included a refund of general
insurance premiums and other nonrecurring cost reductions and this year
reflects increases in legal and certain other nonrecurring expenses; and a
valuation provision of $1,100,000 on Florida real estate inventory not under
current development.
The improvement in the results for fiscal 1993, as compared to 1992,
reflects an increase in gross profit from housing and land sales of
approximately $2,700,000; an improvement in the results from Kable News
operations of approximately $900,000; a decrease in general and
administrative expenses related to real estate operations and corporate of
$1,449,000 primarily from payroll and related benefit reductions, reduced
group insurance, a refund of general insurance premiums and other cost
reductions. Also, the fiscal 1993 results include a loss of $1,837,000 from
rental projects, principally The Classic at West Palm Beach, which was an
improvement of $1,160,000 from the loss in fiscal 1992. In addition, fiscal
1992 reflects a decision to reduce the carrying value of Denver and Florida
real estate inventory and a Florida rental project by a total of $4,425,000.
The increases in gross profit from housing and land sales were due to
increased volume and increases in housing prices, although the price
increases were offset by increased costs. The Company closed 758 housing
units in fiscal 1994, compared to 570 units in 1993, and 420 units in 1992.
The increase in pretax income from Kable News operations in fiscal
1994, as compared to 1993, (approximately $4,300,000 in 1994 and $2,400,000
in 1993) primarily reflects substantially improved results from newsstand
revenues primarily related to the acquisition of newsstand distribution
contracts of Capital Distributing Company in August 1993.
The increase in pretax income from Kable News operations in fiscal
1993, as compared to 1992, (approximately $2,400,000 in 1993 and $1,500,000
in 1992) primarily reflects an increase in subscription fulfillment revenues
resulting from increased volume.
The decrease in interest expense in fiscal 1994, as compared to 1993,
is primarily due to capitalization of interest on construction projects
partially offset by increased interest on larger borrowings. The decrease
in interest expense in fiscal 1993, as compared to 1992, primarily reflects
a decrease in general purpose borrowing and a reduction in the prime
interest rate.
During the past three years, revenues and costs have been affected to a
modest extent by inflation.
Item 8. Financial Statements and Supplementary Data.
- - -------------------------------------------------------
[See Next Page]
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and
Board of Directors of
AMREP Corporation
We have audited the accompanying consolidated balance sheets of AMREP
CORPORATION and subsidiaries as of April 30, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended April 30, 1994. These
consolidated financial statements and the schedules referred to below are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made my management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMREP Corporation and
subsidiaries as of April 30, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended April 30, 1994, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
New York, New York ARTHUR ANDERSEN & CO.
June 22, 1994
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 1 of 2)
------------------------------------------
APRIL 30, 1994 AND 1993
-----------------------
(Dollar amounts in thousands)
-----------------------------
ASSETS 1994 1993
------ ----------- ----------
CASH AND TEMPORARY CASH INVESTMENTS $ 6,623 $ 6,856
RECEIVABLES, net:
Real estate operations 13,122 14,809
Magazine circulation operations 34,281 20,885
REAL ESTATE INVENTORY 71,102 48,010
RENTAL AND OTHER REAL ESTATE PROJECTS 14,174 49,266
INVESTMENT PROPERTY 8,604 14,670
PROPERTY, PLANT AND EQUIPMENT,
at cost, net of accumulated
depreciation and amortization 12,103 11,518
OTHER ASSETS 13,643 8,725
EXCESS OF COST OF SUBSIDIARY
OVER NET ASSETS ACQUIRED 5,205 5,205
--------- ---------
TOTAL ASSETS $ 178,857 $ 179,944
========= =========
The accompaning notes to consolidated financial statements are an integral
part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 2 of 2)
------------------------------------------
APRIL 30, 1994 AND 1993
-----------------------
(Dollar amounts in thousands except par value)
----------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
------------------------------------ ----------- -----------
ACCOUNTS PAYABLE, DEPOSITS AND
ACCRUED EXPENSES $ 31,915 $ 23,851
NOTES PAYABLE:
Amounts due within one year 12,725 8,044
Amounts subsequently due 38,013 23,855
RENTAL AND OTHER REAL ESTATE PROJECT
FINANCING 6,205 41,228
COLLATERALIZED MORTGAGE OBLIGATIONS 4,406 6,473
DEFERRED INCOME TAXES 24,164 22,391
---------- ----------
TOTAL LIABILITIES 117,428 125,842
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
shares authorized--20,000,000;
shares issued and outstanding--
7,297,625 in 1994 and 6,619,292 in 1993 730 662
Capital contributed in excess of par value 44,435 39,548
Retained earnings 16,264 13,892
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 61,429 54,102
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 178,857 $ 179,944
========== ==========
The accompaning notes to consolidated financial statements are an integral
part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Amounts in thousands, except per share amounts)
Year ended April 30,
--------------------------------
1994 1993 1992
---------- ---------- ----------
REVENUES:
Real estate operations-
Home and condominium sales $ 67,501 $ 43,944 $ 30,347
Land sales 13,126 8,004 5,843
Rental projects 3,741 5,845 4,569
Gain on partnership restructuring 1,245 - -
--------- --------- ---------
85,613 57,793 40,759
Magazine circulation operations 35,029 29,529 27,034
Interest and other operations 5,446 6,338 5,572
--------- --------- ---------
126,088 93,660 73,365
--------- --------- ---------
COSTS AND EXPENSES:
Real estate cost of sales 64,439 39,800 26,756
Operating expenses-
Magazine circulation operations 24,859 21,532 20,049
Rental projects 5,525 7,682 7,566
Real estate commissions and selling 5,475 5,008 4,672
Other operations 4,340 3,880 3,228
General and administrative-
Real estate operations and corporate 8,710 7,536 8,989
Magazine circulation operations 5,179 5,128 4,847
Interest, net 2,635 3,028 3,843
Real estate valuation provision 1,100 - 4,425
--------- --------- ---------
122,262 93,594 84,375
--------- --------- ---------
Income (loss) before income taxes 3,826 66 (11,010)
PROVISION (BENEFIT) FOR INCOME
TAXES 1,454 25 (4,184)
--------- --------- ---------
NET INCOME (LOSS) $ 2,372 $ 41 $ (6,826)
========= ========= =========
NET INCOME (LOSS) PER SHARE $ 0.33 $ 0.01 $ (1.03)
========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,091 6,618 6,618
========= ========= =========
The accompaning notes to consolidated financial statements are an integral
part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(Amounts in thousands)
Capital
Contributed
In
Excess
Common Stock of
------------ Par Retained
Shares Amount Value Earnings Total
------ ------ ----- -------- ------
BALANCE, April 30, 1991 6,618 $ 662 $ 39,542 $ 20,677 $ 60,881
Net loss - - - (6,826) (6,826)
-------- -------- -------- -------- -------
BALANCE, April 30, 1992 6,618 662 39,542 13,851 54,055
Net income - - - 41 41
Stock issuance 1 - 6 - 6
-------- -------- -------- -------- --------
BALANCE, April 30, 1993 6,619 662 39,548 13,892 54,102
Net income - - - 2,372 2,372
Stock issuance in connection
with purchase of magazine
circulation operations assets 576 58 4,043 - 4,101
Stock issuance in connection
with restructuring of
general partnership interest
in The Classic 66 7 589 - 596
Exercise of stock options and
other stock issuance 37 3 255 - 258
-------- -------- -------- -------- --------
BALANCE, April 30, 1994 7,298 $ 730 $ 44,435 $ 16,264 $ 61,429
======== ======== ======== ======== ========
<FN>
The accompaning notes to consolidated financial statements are an integral
part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Page 1 of 2)
---------------------------------------------------
(Amounts in thousands)
Year ended April 30,
-----------------------------------
1994 1993 1992
---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from real estate operations and other $ 88,766 $ 66,730 $ 48,252
Cash received from magazine circulation operations,
net of publisher payments 25,912 27,755 27,179
Interest received 1,022 1,586 1,755
Cash paid to suppliers and employees (115,476) (84,942) (69,428)
Cash paid to acquire land (9,847) (743) (14)
Interest paid (3,736) (7,207) (7,984)
Income taxes (paid) refunded (29) 1,353 577
--------- --------- ---------
Net cash provided (used) by operating activities (13,388) 4,532 337
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,852) (1,591) (2,098)
Proceeds from sale of property, plant and equipment - 1,671 -
Other, net 400 319 (26)
--------- --------- ---------
Net cash provided (used) by investing activities (1,452) 399 (2,124)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 33,551 15,966 15,786
Principal debt payments (19,798) (18,744) (19,647)
Proceeds from the sale of stock and exercise of
stock options 854 - -
--------- --------- ---------
Net cash provided (used) by financing activities 14,607 (2,778) (3,861)
--------- --------- ---------
Increase (decrease) in cash and temporary
cash investments (233) 2,153 (5,648)
CASH AND TEMPORARY CASH INVESTMENTS,
beginning of year 6,856 4,703 10,351
--------- --------- ---------
CASH AND TEMPORARY CASH INVESTMENTS,
end of year $ 6,623 $ 6,856 $ 4,703
========= ========= =========
<FN>
The accompaning notes to consolidated financial statements are an integral
part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Page 2 of 2)
---------------------------------------------------
(Amounts in thousands)
Year ended April 30,
----------------------------------
1994 1993 1992
---------- ---------- ----------
RECONCILIATION OF NET INCOME (LOSS) TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss) $ 2,372 $ 41 $ (6,826)
--------- --------- ---------
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities-
Gain on restructuring of general partnership interest
in Colonial Pointe (1994) and sale of property,
plant and equipment (1993) (1,245) (201) -
Depreciation and amortization and other 5,478 4,507 4,842
Real estate valuation provision 1,100 - 4,425
Changes in assets and liabilities-
Receivables, net (11,709) 2,611 5,159
Real estate inventory (20,107) 2,102 (1,135)
Rental and other real estate projects 2,710 (1,233) 857
Investment property 2,592 320 (613)
Other assets (5,137) (4,408) (4,088)
Accounts payable, deposits and accrued expenses 8,785 (181) 1,276
Deferred income taxes 1,773 974 (3,560)
--------- --------- ---------
Total adjustments (15,760) 4,491 7,163
--------- --------- ---------
Net cash provided (used) by operating activities $ (13,388) $ 4,532 $ 337
========= ========= =========
SUPPLEMENTAL INFORMATION REGARDING NON-
CASH INVESTING AND FINANCING ACTIVITIES:
Assets and liabilities assumed upon
consolidation of PERMA $ - $ 14,290 $ -
========= ========= =========
Investment property received in
satisfaction of receivables $ - $ 4,430 $ -
========= ========= =========
Stock issuance in connection with purchase of
of magazine circulation operations assets $ 4,101 $ - $ -
========= ========= =========
Restructuring of general partnership interests in
The Classic and Colonial Pointe resulting in
decreases in the following:
Rental and other real estate projects $ 31,880 $ - $ -
Accounts payable, deposits and accrued expenses 721 - -
Project financing 32,004 - -
<FN>
The accompaning notes to consolidated financial statements are an integral
part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL
-----------------------------------------------
REPORTING POLICIES:
-------------------
Principles of consolidation-
---------------------------
The consolidated financial statements include the accounts of AMREP
Corporation (Company) an Oklahoma corporation, and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The consolidated balance sheets are presented in an
unclassified format, since the Company operates in the real estate industry
and its operating cycle is greater than one year.
Home and condominium sales-
--------------------------
Sales of homes and condominiums and related costs and expenses are recorded
using the accrual method at the time of closing. Payments received from
buyers prior to closing are recorded as deposits.
Land sales-
----------
Land sales are recorded when the parties are bound by the terms of the
contract, all consideration (including adequate cash) has been exchanged and
all conditions precedent to closing have been performed. Profit is recorded
either in its entirety or on the installment method depending upon, among
other things, the ability to estimate the collectibility of the unpaid sales
price. In the event the buyer defaults on his obligation, the property is
taken back into inventory or investment property at its receivable balance,
net of any deferred profit, but not in excess of fair market value. Until a
sale has been recorded, revenues are deferred and total customer payments
are reflected as deposits. Interest on contracts recorded on the
installment method is included in income when it is received.
Magazine circulation operations-
-------------------------------
Revenues from distribution of periodicals and subscription fulfillment
activities represent commissions earned from the distribution of
publications for client publishers and fees earned from subscription
fulfillment activities. Magazine distribution revenues are recorded at the
time the publications go on sale and subscription revenues are recorded when
earned. The publications generally are sold on a fully returnable basis,
which is in accordance with prevailing trade practice. All publications are
billed after shipment but, since they are fully returnable if not ultimately
sold to consumers, the Company provides for estimated returns by charges to
income which are based on sales experience.
Environmental management and consulting-
---------------------------------------
On February 1, 1992, the Company commenced operations to provide
environmental consulting, planning and project management. Revenues
associated with these operations are included in "Interest and other
operations" and the associated expenses are included in "Operating expenses-
Other operations" in the accompanying consolidated statements of operations.
Income from these services is recognized on a percentage completion basis
throughout the completion of the related contract.
Real estate inventory-
---------------------
Homes and condominiums completed or under construction are stated at cost,
including interest costs capitalized during construction.
Land and improvements are stated at the lower of net realizable value or
cost (except in certain instances where property is repossessed as discussed
under "Land sales") which includes the cost of certain amenities,
capitalized interest and real estate taxes. These costs are allocated to
individual homesites based upon the relative sales value of salable
homesites within each section of a community.
Investment property-
-------------------
Investment property represents vacant, undeveloped land not held for sale in
the normal course of business. Investment property is stated at cost,
except in certain instances where property is repossessed as discussed under
"Land sales".
Property, plant and equipment-
-----------------------------
Items capitalized as part of property, plant and equipment are recorded at
cost. Expenditures for maintenance and repair and minor renewals are charged
to expense as incurred, while those expenditures which improve or extend the
useful life of existing assets are capitalized.
Upon sale or other disposition of assets, their cost and the related
accumulated depreciation or amortization are removed from the accounts and
the resulting gain or loss, if any, is reflected in operations.
Depreciation and amortization of property, plant and equipment are provided
principally by the straight-line method at various rates calculated to
amortize the book values of the respective assets over their estimated
useful lives which range from 5 to 50 years for utility plant and equipment
and 3 to 40 years for all other property, plant and equipment.
Excess of cost of subsidiary over net assets acquired-
-----------------------------------------------------
The excess of cost of subsidiary over assets acquired reflects a purchase
made prior to October 31, 1970, the effective date of APB Opinion No. 17.
Such excess of cost is not being amortized to operations as management is of
the opinion that there has been no diminution of value.
Federal income taxes-
--------------------
The Company and its subsidiaries file a consolidated Federal income tax
return. Deferred taxes are provided for the income tax effect of temporary
differences in reporting transactions for financial and tax purposes.
Net income (loss) per share-
---------------------------
Net income (loss) per common share outstanding is based on the weighted
average number of common shares outstanding during each year. Common share
equivalents (stock options) were excluded from the income (loss) per share
computations because of their insignificant and/or anti-dilutive effect for
all years presented.
Consolidated statements of cash flows-
-------------------------------------
Temporary cash investments which have a maturity of ninety days or less are
considered cash equivalents for purposes of these statements.
Financial statement presentation-
--------------------------------
Certain amounts in the 1993 and 1992 consolidated financial statements have
been reclassified to conform with the 1994 presentation.
(2) RECEIVABLES:
-----------
Receivables consist of:
April 30,
---------------------------
1994 1993
------------ ------------
(Thousands)
Real estate operations-
Mortgage and other receivables $ 9,358 $ 9,201
Allowance for doubtful accounts (693) (1,000)
------------ ------------
8,665 8,201
Mortgages securing collateralized
mortgage obligations (see Note7) 4,457 6,608
------------ ------------
$ 13,122 $ 14,809
============ ============
Magazine circulation operations-
Accounts receivable (maturing within
one year) $ 88,636 $ 66,325
Allowances for-
Estimated returns (53,035) (44,165)
Doubtful accounts (1,320) (1,275)
------------ ------------
$ 34,281 $ 20,885
============ ============
Mortgage and other receivables bear interest at rates ranging from 5.5% to
12% and result primarily from land sales. Magazine circulation operations
receivables collateralize a general purpose line-of-credit utilized for the
magazine circulation operations (See Note 7).
Maturities of principal on the real estate receivables, exclusive of
mortgages securing collateralized mortgage obligations, at April 30, 1994,
are as follows:
Year Ending April 30,
- - ----------------------------------
(Thousands)
1995 $ 5,896
1996 1,135
1997 1,020
1998 141
1999 98
Thereafter 1,068
-----------
$ 9,358
===========
(3) REAL ESTATE INVENTORY:
---------------------
Real estate inventory consists of:
April 30,
------------------------
1994 1993
----------- ----------
(Thousands)
Land and improvements held for sale or
development, net of valuation reserves
of $2,580 and $2,825 at April 30, 1994
and 1993,respectively $ 45,895 $ 33,354
Homes-
Land and improvements 8,410 5,780
Construction costs 14,991 7,502
Condominiums-
Land improvements 448 455
Construction costs 1,358 919
---------- ----------
$ 71,102 $ 48,010
========== ==========
Accumulated capitalized interest costs included in real estate inventory at
April 30, 1994 and 1993 were $2,089,000 and $1,344,000, respectively.
Interest costs capitalized during fiscal 1994, 1993 and 1992 were $940,000,
$207,000 and $287,000, respectively. Accumulated capitalized real estate
taxes included in the inventory of land and improvements at April 30, 1994
and 1993 were $5,064,000 and $5,225,000, respectively. Real estate taxes
capitalized during fiscal 1994, 1993 and 1992 were $63,000, $485,000 and
$589,000, respectively. Previously capitalized interest costs and real
estate taxes charged to real estate cost of sales were $509,000, $417,000
and $432,000 in fiscal 1994, 1993 and 1992, respectively.
Due to weaknesses in several real estate markets in which the Company has
projects, the carrying value of inventory was reduced by $2,025,000 through
a net realizable value provision during fiscal 1992.
During fiscal 1994, the Company charged off certain real estate development
costs totaling $1,700,000 on projects not under current development. This
charge-off resulted from a 1994 provision of $1,100,000 and utilization of
$600,000 of existing valuation reserves recorded in fiscal 1992 and 1991.
(4) RENTAL AND OTHER REAL ESTATE PROJECTS:
-------------------------------------
Investments in rental and other real estate projects consist of the following:
April 30,
-------------------------
1994 1993
---------- -----------
(Thousands)
Rental projects -
The Classic $ 1,862 $ 25,140
Colonial Pointe - 8,842
PERMA, (the Freehold Clark
Limited Partnership) 12,312 15,284
---------- ----------
$ 14,174 $ 49,266
========== ==========
The Classic-
-----------
The Classic in West Palm Beach, Florida, a 300 unit congregate living
facility was completed in fiscal year 1991. In November 1993, the Company
converted its general partner interest in The Classic at West Palm Beach
Limited Partnership (The Classic) to a 50% limited partner interest for
consideration of $400,000 paid by the new general partner. In addition, the
project financing of The Classic was restructured as discussed in Note 7.
Accordingly, the Company discontinued consolidating The Classic into the
accompanying consolidated financial statements and carries its net
investment of $1,862,000 (which will be realized through excess cash flows,
as defined, of The Classic) on the cost recovery basis. In order to protect
its net investment, the Company, thus far, is funding the cash shortfalls of
The Classic, and in this regard, during fiscal year 1994, the Company
established a $275,000 accrual for estimated future cash shortfalls.
At April 30, 1993, the investment in The Classic and related project financing
were as follows (thousands):
Land and improvements, buildings and
amenities, net of accumulated depreciation
and amortization $ 22,536
Other assets 2,604
----------
Total investment $ 25,140
==========
Project financing (see Note 7) $ 22,504
==========
Colonial Pointe-
---------------
Colonial Pointe in Orlando, Florida, a 247 unit apartment complex was
completed in fiscal year 1990. On April 29, 1994, the Company entered into
an agreement to sell its general partner interest in the Colonial Pointe
Apartments Limited Partnership (Colonial Pointe) for a purchase price of
$100,000 and became a 50% limited partner. In addition, the Company was
relieved from its obligations under the Colonial Pointe project financing
arrangements (see Note 7). Accordingly, the Company discontinued
consolidating Colonial Pointe into the accompanying consolidated financial
statements and recognized a gain of $1,245,000.
At April 30, 1993, the investment in Colonial Pointe and related project
financing were as follows (thousands):
Land and improvements, buildings and
amenities, net of accumulated depreciation
and amortization $ 7,768
Other assets 1,074
---------
Total investment $ 8,842
=========
Project financing (see Note 7) $ 9,565
=========
PERMA, (the Freehold Clark Limited Partnership)-
-----------------------------------------------
During fiscal 1990, the Company became a 33 1/3% limited partner of the
Freehold Clark Associates Limited Partnership (Partnership). The
Partnership was formed to develop and market a 390 unit condominium housing
project in Freehold, New Jersey.
On August 24, 1992, PERMA Corporation (PERMA), a consolidated subsidiary of
the Company, became the general partner of the Partnership with a 50%
ownership interest. In connection therewith, PERMA obtained a 75% ownership
interest in a related construction company and formed a 100% owned sales
company. As a result, the financial statements of these entities
(collectively the PERMA Project) are included in the Company's consolidated
financial statements.
The investment in the PERMA Project and related project financing are as
follows:
April 30,
-------------------------
1994 1993
---------- -----------
(Thousands)
Land and improvements $ 6,618 $ 6,308
Homes inventory 3,769 6,941
---------- ----------
10,387 13,249
Other-
Deposits in escrow and
collateral accounts 1,012 1,324
Other assets 913 711
---------- ----------
Total investment $ 12,312 $ 15,284
========== ==========
Project financing (see Note 7) $ 6,205 $ 9,159
========== ==========
Initial home closings began in June, 1991. As of April 30, 1994, 162 units
had been completed and closed. An additional 228 units remain to be closed,
of which 58 are currently under construction. There is a backlog of 54
units sold but not yet closed.
Accumulated capitalized interest costs included in this project at April 30,
1994 and 1993 were $2,189,000 and $2,528,000, respectively. Interest costs
capitalized during fiscal years 1994 and 1993 were $716,000 and $418,000,
respectively. Accumulated capitalized real estate taxes included in this
project at April 30, 1994 and 1993 were $238,000 and $143,000, respectively.
Real estate taxes capitalized during fiscal years 1994 and 1993 were $95,000
and $21,000, respectively. Previously capitalized interest costs and real
estate taxes charged to real estate cost of sales were $1,055,000 and
$284,000 in fiscal years 1994 and 1993, respectively.
(5) PROPERTY, PLANT AND EQUIPMENT:
------------------------------
Property, plant and equipment consists of:
April 30,
-------------------------
1994 1993
---------- -----------
(Thousands)
Land, buildings and improvements $ 10,167 $ 9,692
Furniture and fixtures 6,830 6,394
Utility plant and equipment 4,017 3,983
Other 1,863 1,581
---------- ----------
22,877 21,650
Accumulated depreciation and
amortization (10,774) (10,132)
---------- ----------
$ 12,103 $ 11,518
========== ==========
Depreciation and amortization (including amounts for rental and other real
estate projects - see Note 4) charged to operations amounted to $1,671,000,
$1,859,000 and $1,835,000 in fiscal 1994, 1993 and 1992, respectively.
(6) OTHER ASSETS:
-------------
Other assets are comprised of:
April 30,
-------------------------
1994 1993
---------- -----------
(Thousands)
Prepaid and deferred expenses $ 3,837 $ 3,624
Purchased magazine distribution
contracts, net of accumulated
amortization of $321 3,958 -
Security deposits 2,010 1,608
Unamortized note and loan costs 151 105
Escrow monies and collateral deposits 2,166 2,483
Other 1,521 905
---------- -----------
$ 13,643 $ 8,725
========== ===========
During fiscal year 1994, the Company purchased certain magazine distribution
contracts from an unrelated party for 575,595 shares of the Company's common
stock valued at $4,101,000. The total costs incurred in the purchase of the
magazine distribution contracts including $178,100 of legal fees have been
capitalized and are being amortized over the related contract terms of ten
years.
(7) DEBT FINANCING:
---------------
Debt financing consists of:
April 30,
-------------------------
1994 1993
---------- -----------
(Thousands)
Notes payable -
Fixed rate long-term note $ 4,515 $ 6,000
Line-of-credit borrowings -
Real estate operations and other 8,557 3,825
Magazine circulation operations 22,530 14,623
Denver real estate operations 7,745 -
Utility note payable 1,496 1,686
Mortgages and other notes payable 5,895 5,765
--------- ----------
50,738 31,899
PERMA Project financing (see Note 4) 6,205 9,159
Rental project financing (see Note 4) - 32,069
Collateralized mortgage
obligations (see Note 2) 4,406 6,473
--------- ----------
$ 61,349 $ 79,600
========== ==========
The aggregate amounts of debt maturities (after giving effect to extensions
and renewals subsequent to April 30, 1994) are as follows:
PERMA
Project
Financing and
Collateralized
Year Ending Notes Mortgage
April 30, Payable Obligations Total
-------------- ----------- ----------- ----------
(Thousands)
1995 $ 12,725 $ - $ 12,725
1996 26,811 6,205 33,016
1997 4,310 - 4,310
1998 3,972 - 3,972
1999 1,437 - 1,437
Thereafter 1,483 4,406 5,889
----------- ---------- ---------
$ 50,738 $ 10,611 $ 61,349
=========== ========== =========
Fixed Rate Long Term Note-
-------------------------
During fiscal 1993, the Company exercised its option to exchange a
$5,644,000 variable rate note maturing August 1, 1992 for a five-year,
8.464% fixed rate note with quarterly interest payments beginning November
1, 1992 and annual principal payments beginning August 1, 1993. As of April
30, 1994, the outstanding balance on this note was $4,515,000. This
borrowing imposes restrictions on, among other things, consolidated debt,
the sale of assets and properties other than in the ordinary course of
business, mergers and liens, and the payment of cash dividends in amounts
exceeding one-half of the Company's net worth. In addition, the Company had
a 10% fixed rate long-term borrowing of $356,000 at April 30, 1993, which
was paid off during fiscal year 1994.
Line-of-Credit Borrowings-
-------------------------
The Company has several line-of-credit arrangements with various financial
institutions to support general corporate and real estate operations. These
lines have a maximum amount available for borrowings of approximately $15.25
million, against which approximately $8.56 million were drawn as of April
30, 1994. These lines-of-credit are collateralized by certain real estate
assets and are subject to certain financial performance and other covenants.
Borrowings pursuant to these line-of-credit agreements are due at various
dates during fiscal 1995. The president of one of the Company's
subsidiaries, who is also a member of the Board of Directors of the Company,
serves as a member of the board of directors of the financial institution
from which $8.8 million of these lines-of-credit were obtained.
The Company anticipates renewing, extending or replacing these
lines-of-credit as they become due in fiscal 1995. The Company is also
having discussions with other lenders seeking additional working capital,
although there are no assurances these discussions will be fruitful.
At April 30, 1994, the Company had drawn $22.53 million against a $25
million line-of-credit arrangement which is restricted to magazine
circulation operations. This line-of- credit agreement is collateralized by
accounts receivable arising from magazine circulation operations and
contains various restrictive covenants which, among other things, restrict
the payments of dividends and loans from the magazine circulation subsidiary
to the Company. Borrowings pursuant to this line-of-credit agreement are
due August 31, 1995.
The following relate to the Company's line-of-credit borrowings:
Year ended April 30,
-------------------------------------
1994 1993 1992
---------- ---------- ----------
(Dollar amounts in thousands)
Balance at year end $ 31,087 $ 18,448 $ 19,496
Maximum amount outstanding at any
month end $ 31,087 $ 18,448 $ 19,500
Average monthly outstanding balance $ 18,273 $ 15,700 $ 17,800
Weighted average interest rate at
year end 7.47% 6.60% 7.10%
Weighted average interest rate
during the fiscal year 6.72% 6.68% 8.47%
Denver real estate operations-
-----------------------------
During fiscal 1994 the Company entered into several construction loan
agreements with financial institutions to finance certain of its real estate
construction operations in Denver, Colorado. As of April 30, 1994, the
outstanding balance on these construction loan agreements totaled
$1,102,000. These borrowings bear interest at prime plus 1.5% to 2.5% per
annum and are payable as related home sales close, with the entire remaining
balance due at various dates during fiscal 1995. These borrowings are
secured by the related real estate inventory.
During fiscal 1994 the Company entered into a note payable to a partnership
in connection with the acquisition of land in Denver, Colorado. As of April
30, 1994, the outstanding balance on this note was $6,643,000. This note
bears interest at prime (6.75% at April 30, 1994), not to exceed 8% or less
than 6% per annum and is payable in annual principal payments (ranging from
$1,200,000 to $1,400,000) and quarterly interest payments through maturity
on February 1, 2000. This note is secured by the related land.
Utility note payable-
--------------------
The Company has a ten year note in the amount of $1,496,000 at April 30,
1994, maturing September 1, 1996 with monthly installments of principal and
interest at 1.5% above the prime rate (6.75% at April 30, 1994). This note
is collateralized by certain utility plant and equipment and other utility
assets.
Mortgages and other notes payable-
---------------------------------
Mortgages and other notes payable had interest rates ranging from 6% to
11.5% at April 30, 1994, and are primarily collateralized by property, plant
and equipment and certain land inventory.
PERMA Project financing-
-----------------------
The Company had outstanding borrowings related to the PERMA Project totaling
$6,205,000 at April 30, 1994 and $9,159,000 at April 30, 1993. Payments are
due as sales occur, including principal and interest at prime plus 1%, until
maturity. Subsequent to April 30, 1994, the maturity dates were extended
from July 1, 1994 to December 31, 1995.
Rental project financing-
------------------------
The Company utilized financing arrangements for The Classic and Colonial
Pointe projects (see Note 4) which included certain non-recourse provisions.
The notes payable entered into pursuant to these arrangements are secured by
all real and personal property and all future rent receipts of The Classic
and Colonial Pointe.
The financing arrangements for The Classic and Colonial Pointe were amended
in connection with the restructuring of the partnership agreements (See Note
4) whereby the Company was released from its obligations under these
financing arrangements. In connection with the release from The Classic
obligation, the Company paid $387,000 cash and issued 66,193 shares of the
Company's common stock valued at $595,737 to the holder of The Classic
obligation primarily for accrued interest.
Collateralized mortgage obligations-
-----------------------------------
In fiscal years 1986 through 1988, AMREP Financial Corporation, a subsidiary
of the Company, participated in the issuance of collateralized mortgage
obligations (CMO's), with original principal balances aggregating
$13,750,000, through an unrelated financial intermediary. Each series, (12
in total) was issued in three to five classes bearing interest at rates
ranging from 7.6% to 12.5% per annum, with stated maturities, assuming no
prepayments, from January, 2015 to October, 2017. CMO payment schedules
vary with each series, and payments are due quarterly, semi-annually and
annually. Actual maturities vary to the extent of principal prepayments on
the mortgage loans collateralizing the CMO's. These CMO's are collateralized
only by the principal and the accrued interest receivable (see Note 2) of
the related mortgage loans.
The Company was out of compliance with certain of its debt covenants for
which waiver letters have been obtained.
(8) BENEFIT PLANS:
--------------
Stock option plans-
------------------
A summary of activity in the Company's 1992 Stock Option Plan, the
Non-Employee Directors Option Plan and the 1982 Incentive Stock Option Plan
is presented below:
Year Ended April 30,
-----------------------------------
1994 1993 1992
---------- ---------- -----------
Common stock options outstanding
at beginning of year 248,000 285,250 302,850
Granted at $4.06 to $8.88 per share 43,000 5,000 90,100
Options exercised at $4.06 to $7.44
per share (16,547) (1,500) -
Expired or cancelled (25,128) (40,750) (107,700)
---------- ---------- -----------
Common stock options outstanding
at end of year 249,325 248,000 285,250
========== ========== ===========
Available for future grant at
year end 282,500 325,000 151,747
========== ========== ===========
During fiscal 1993, the shareholders approved the 1992 Stock Option Plan as
well as the Non-Employee Directors Option Plan for which 315,000 and 15,000
shares, respectively, were reserved. At April 30, 1994, options to purchase
42,000 shares under the Stock Option Plan and 5,500 shares under the
Non-Employee Directors Option Plan were outstanding at prices ranging from
$5.13 to $8.88 per share and 273,000 and 9,500 shares were available for
future grant, respectively.
The 1982 Incentive Stock Option Plan expired on June 30, 1992. However,
options to purchase 201,825 shares remain outstanding at April 30, 1994 at
prices ranging from $4.06 to $6.88 per share.
Under the Company's 1992 Stock Option Plan shares are reserved for issuance
to key employees. Options may be granted in such amounts, at such times,
and with such exercise prices as the stock option committee may determine.
Options heretofore granted are exercisable over a two to four year period
beginning one year from date of grant and certain of them are immediately
exercisable under certain circumstances as stated in the respective plans.
The Non-Employee Directors Option Plan provides for an automatic issuance of
options to purchase 500 shares of common stock to each non-employee director
annually at the fair market value at the date of grant. The options are
exercisable one year after the date of grant and expire five years after the
date of grant.
Stock ownership plan-
--------------------
During the fiscal year, the Company's stock ownership plan was merged with
the Company's savings plan. The net assets available for stock ownership
plan benefits at July 29, 1993, were transferred to the savings plan.
Savings plan-
------------
The Company has a savings plan to which the Company makes contributions.
The plan provides for Company contributions of 16 2/3% of eligible
employees' defined contributions up to a maximum of 1% of such employees'
compensation. The Company's contributions to the plan amounted to $113,000,
$99,000 and $89,000, in fiscal 1994, 1993 and 1992, respectively.
Retirement plan-
---------------
The Company's retirement plan is a non-contributory, defined benefit plan
which covers substantially all full-time employees. The plan provides
retirement benefits based on length of service and a percentage of
qualifying compensation during employment. In fiscal 1994, 1993 and 1992,
the Company contributed $693,000, $806,000 and $270,000, respectively, to
the plan. Plan assets are invested primarily in United States Treasury
obligations, equity securities and money market funds. Net periodic pension
cost for fiscal 1994, 1993 and 1992 was comprised of the following
components:
Year Ended April 30,
---------------------------------
1994 1993 1992
---------- ---------- ---------
(Thousands)
Service cost - benefits
earned during the period $ 762 $ 709 $ 582
Interest cost on projected
benefit obligation 1,122 1,012 892
Actual return on assets (673) (1,022) (1,160)
Net amortization and deferral (599) (132) 71
-------- -------- --------
Net periodic pension cost $ 612 $ 567 $ 385
======== ======== ========
Assumptions used in the accounting were:
Year Ended April 30,
--------------------------------
1994 1993 1992
-------- -------- ---------
Discount rates 8.00% 8.25% 8.25%
Rates of increase in compensation
levels 5.00% 5.25% 5.25%
Expected long-term rate of return
on assets 9.00% 9.00% 9.00%
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheets:
April 30,
-------------------------
1994 1993
----------- -----------
(Thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $ 11,377 $ 10,093
=========== ===========
Accumulated benefit obligation $ 12,153 $ 10,732
=========== ===========
Projected benefit obligation $ 15,468 $ 13,671
Plan assets at fair value 13,736 13,042
----------- -----------
Excess of projected benefit obligation
over plan assets (1,732) (629)
Unrecognized net loss 2,472 1,416
Unrecognized prior service cost 99 110
Unrecognized net transition asset (417) (556)
----------- -----------
Prepaid pension cost $ 422 $ 341
=========== ===========
(9) INCOME TAXES:
------------
Effective May 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Adoption of SFAS
No. 109 had no impact on the tax liability recorded by the Company as of the
date of adoption. The Company accounted for income taxes under SFAS No. 96
during fiscal years 1993 and 1992.
The provision (benefit) for income taxes consists of the following:
Year Ended April 30,
----------------------------------
1994 1993 1992
---------- ---------- ----------
(Thousands)
Current:
Federal $ (405) $ (960) $ (647)
State 86 11 23
---------- ---------- ----------
(319) (949) (624)
---------- ---------- ----------
Deferred:
Federal 3,980 982 (2,773)
State 384 (8) (787)
Benefit for operating loss carry forwards (5,826) - -
Net change in valuation allowance 3,235 - -
---------- ---------- ----------
1,773 974 (3,560)
---------- ---------- ----------
Total provision (benefit) for income taxes $ 1,454 $ 25 $ (4,184)
========== ========== ==========
Components of net deferred income tax liability are as follows:
Year ended April 30,
--------------------------------
1994 1993
------------- -------------
(Thousands)
Deferred income tax assets-
Tax loss carryforwards (Federal and state) $ 5,826 $ -
Real estate inventory valuation 1,607 1,004
Other 708 -
------------ ------------
Total deferred income tax assets 8,141 1,004
------------ ------------
Deferred income tax liabilities-
Installment sales (2,843) (3,268)
Reserve for periodicals and paperbacks (16,853) (10,653)
Gain on partnership restructuring (473) -
Depreciable assets (1,138) (2,104)
Expenses capitalized for financial
reporting purposes, expensed for tax (1,967) (1,144)
Differences related to timing of
partnership income (1,033) (132)
Other (4,763) (6,094)
------------ ------------
Total deferred income tax liability (29,070) (23,395)
------------ ------------
Valuation allowance for realization of
state tax loss carryforwards (3,235) -
------------ ------------
Net deferred income tax liability $ (24,164) $ (22,391)
============ ============
The following table reconciles taxes at the U.S. Federal statutory income tax
rate to the Company's actual tax provision (benefit):
Year ended April 30,
----------------------------------
1994 1993 1992
---------- ---------- ----------
(Thousands)
Computed tax provision (benefit) at
statutory rate $ 1,301 $ 23 $ (3,743)
Increase (reduction) in tax resulting from:
State income taxes, net of Federal
income tax effect 153 2 (504)
Other - - 63
---------- ---------- ----------
Actual tax provision (benefit) $ 1,454 $ 25 $ (4,184)
========== ========== ==========
At April 30, 1994, the Company had Federal net operating loss carryforwards
totaling $5,347,189, of which $1,000,944 expire in fiscal year 2007 and
$4,346,245 in fiscal year 2009.
(10) COMMITMENTS AND CONTINGENCIES:
-----------------------------
Noncancellable leases-
---------------------
The Company is obligated under long-term noncancellable leases for equipment
and various real estate properties. Certain real estate leases provide that
the Company will pay for taxes, maintenance and insurance costs and include
renewal options. Rental expense for fiscal 1994, 1993 and 1992 was
approximately $3,144,000, $3,216,000 and $3,500,000, respectively. The
approximate minimum rental commitments for years subsequent to April 30,
1994, are as follows:
Year Ending April 30,
---------------------
(Thousands)
1995 $ 1,117
1996 689
1997 389
1998 175
1999 55
----------
Total future minimum $ 2,425
rental payments ==========
Revenue agent review-
--------------------
During fiscal year 1992, the Internal Revenue Service completed reviewing
tax returns for fiscal years 1984 through 1989, and issued a report thereon
on January 23, 1992. Management vigorously objected to all the significant
proposed adjustments and believes it was successful in reaching an agreement
with the IRS on all but one of those adjustments. No significant additional
tax liability or payments are expected from the adjustments to which the
Company believes the IRS has agreed. Were the remaining contested
adjustment to be decided in favor of the IRS in every respect, an obligation
for taxes, which has already been recorded in the Company's financial
statements as a deferred tax liability, at an estimated amount for all tax
years from 1984 through 1994 of approximately $16 million plus interest
thereon, which has not been recorded but has been estimated through fiscal
1994, of approximately $15 million could result. Management continues to
vigorously object to this entire proposed adjustment. Management plans to
continue using the methods of reporting transactions for income tax purposes
which it has used in prior years. Management, its tax advisors and its
outside counsel believe the Company's methods are and have been correct
under the Internal Revenue Code. In addition, no amount is expected to be
payable to the IRS as a result of the review within the coming year.
The Company has been notified by the IRS that an audit of fiscal years 1990
through 1992 will commence soon.
Rio Rancho lot exchanges-
------------------------
In connection with homesite sales at Rio Rancho, New Mexico, if water,
electric and telephone utilities have not reached the lot site when a
purchaser is ready to build a home, the Company is obligated to exchange a
lot in an area then serviced by such utilities for a lot of the purchaser,
without cost to the purchaser. The Company does not incur significant costs
related to the exchange of lots.
(11) LITIGATION:
----------
The Company and/or its subsidiaries are involved in various claims and legal
actions incident to their operations, which in the opinion of management,
based upon advice of counsel, will not materially affect the consolidated
financial position or results of operations of the Company and its
subsidiaries.
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS:
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" (SFAS 107), requires the Company to disclose
the estimated fair value of its financial instruments. The following
methods and assumptions were used to estimate the fair value of each class
of financial instruments for which the fair value differs from the carrying
value.
Mortgage receivables-
--------------------
The fair value of the Company's long-term fixed-rate mortgage receivables is
estimated to be $6.4 million versus a carrying amount of $6.2 million as of
April 30, 1994 and $5.8 million versus a carrying amount of $5.7 million as
of April 30, 1993, based on the discounted value of future cash flows using
the current rates at which similar loans would be made.
Notes payable and rental and other real estate project financing-
----------------------------------------------------------------
The fair value of the Company's long-term fixed-rate notes payable and
rental and other real estate project financing, is estimated to be $8.9
million versus a carrying amount of $9.0 million as of April 30, 1994 and
$43.6 million versus $41.3 million as of April 30, 1993, based on the
discounted value of future cash flows using the current rates at which the
Company believes it could obtain similar financing.
CMO's (liabilities) and related mortgages securing CMO's (assets)-
-----------------------------------------------------------------
The fair value of the Company's mortgages securing CMO's (assets) of $4.6
million at April 30, 1994 and $6.7 million at April 30, 1993 (versus a
carrying amount of $4.5 million at April 30, 1994 and $6.6 million at April
30, 1993) was estimated based on the present value of residual cash flows
plus the fair value of the CMO's. The fair value of the CMO's (liabilities)
was assumed to be equal to the outstanding principal balance plus accrued
interest totaling $4.5 million at April 30, 1994 and $6.6 million at April
30, 1993.
Futures Contracts-
-----------------
During fiscal 1994, the Company entered into futures contracts to hedge
price fluctuations associated with lumber costs incurred by the Company's
construction subsidiaries. The gains and losses resulting from the futures
contracts transactions are accounted for as real estate cost of sales. Open
futures contracts at April 30, 1994, totaling $361,000, are reflected at
their fair market values.
(13) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT INDUSTRY SEGMENTS:
-------------------------------------------------------------------------
The Company operates principally in two industries, real estate and magazine
circulation operations. Real estate operations involve the construction and
sale of single- family homes, condominiums and other projects, as well as
the subdivision of large tracts of land for sale to individuals, builders
and others. Magazine circulation operations involve national and
international distribution of periodicals and paperback books, and
subscription fulfillment activities on behalf of various client publishers.
Total revenue by industry includes revenues from unaffiliated customers as
reported in the accompanying consolidated statements of operations.
Operating income represents total revenue less operating expenses.
In computing operating income, general corporate expenses, interest expense
and income taxes are excluded. Selling expense is allocated between
industry segments based on the Company's evaluation of the work performed
for each segment.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry segment.
The following schedules set forth summarized data relative to the industry
segments:
Magazine
Real Estate Circulation Other
Operations Operations Operations Corporate Eliminations Consolidated
---------- ---------- ---------- --------- ------------ ------------
1994 (Thousands):
Net revenues from
unaffiliated customers $ 90,113 $ 35,128 $ 847 $ - $ - $ 126,088
Intersegment revenues - 79 72 - (151) -
---------- ---------- ---------- --------- ------------ ------------
Total revenue $ 90,113 $ 35,207 $ 919 $ - $ (151) $ 126,088
========== ========== ========== ========= ============ ============
Operating income $ 7,013 $ 5,169 $ 169 $ - $ (151) $ 12,200
========== ========== ========== ========= ============
Corporate expenses (3,684)
Interest (including
$2,055 in operating
expenses-rental projects) (4,690)
-------------
Income before
provision for income
taxes $ 3,826
============
Identifiable assets at
April 30, 1994 $ 125,620 $ 51,135 $ 405 $ 1,697 $ - $ 178,857
========== ========== ========== ========= ============ ============
Identifiable depreciation $ 1,151 $ 482 $ - $ 38 $ - $ 1,671
========== ========== ========== ========= ============ ============
Identifiable capital
expenditures $ 996 $ 848 $ - $ 8 $ - $ 1,852
========== ========== ========== ========= ============ ============
Magazine
Real Estate Circulation Other
Operations Operations Operations Corporate Eliminations Consolidated
---------- ---------- ---------- --------- ------------ ------------
1993 (Thousands):
Net revenues from
unaffiliated customers $ 63,244 $ 29,627 $ 789 $ - $ - $ 93,660
Intersegment revenues - 230 90 - (320) -
---------- ---------- ---------- --------- ------------ ------------
Total revenue $ 63,244 $ 29,857 $ 879 $ - $ (320) $ 93,660
========== ========== ========== ========= ============ ============
Operating income $ 6,952 $ 3,197 $ 218 $ - $ (320) $ 10,047
========== ========== ========== ========= ============
Corporate expenses (3,730)
Interest (including
$3,223 in operating
expenses-rental projects) (6,251)
------------
Income before
provision for income
taxes $ 66
============
Identifiable assets at
April 30, 1993 $ 142,593 $ 35,093 $ 277 $ 1,981 $ - $ 179,944
========== ========== ========== ========= ============ ============
Identifiable depreciation $ 1,387 $ 435 $ - $ 37 $ - $ 1,859
========== ========== ========== ========= ============ ============
Identifiable capital
expenditures $ 1,315 $ 255 $ - $ 21 $ - $ 1,591
========== ========== ========== ========= ============ ============
Magazine
Real Estate Circulation Other
Operations Operations Operations Corporate Eliminations Consolidated
---------- ---------- ---------- --------- ------------ ------------
1992 (Thousands):
Net revenues from
unaffiliated customers $ 45,967 $ 27,260 $ 138 $ - $ - $ 73,365
Intersegment revenues - 283 - - (283) -
---------- ---------- ---------- --------- ------------ ------------
Total revenue $ 45,967 $ 27,543 $ 138 $ - $ (283) $ 73,365
========== ========== ========== ========= ============ ============
Operating income $ (2,720) $ 2,648 $ 50 $ - $ (283) $ (305)
========== ========== ========== ========= ============
Corporate expenses (3,779)
Interest (including
$3,083 in operating
expenses-rental projects) (6,926)
-------------
Loss before
benefit for income
taxes $ (11,010)
============
Identifiable assets at
April 30, 1992 $ 135,218 $ 31,483 $ 52 $ 1,637 $ - $ 168,390
========== ========== ========== ========= ============ ============
Identifiable depreciation $ 1,332 $ 466 $ - $ 37 $ - $ 1,835
========== ========== ========== ========= ============ ============
Identifiable capital
expenditures $ 1,915 $ 176 $ - $ 7 $ - $ 2,098
========== ========== ========== ========= ============ ============
Selected Quarterly Financial Data (Unaudited)
- - ---------------------------------------------
(In thousands of dollars except per share amounts)
Quarter Ended
--------------------------------------------------
July 31, October 31, January 31, April 30,
1993 1993 1994 1994
------------- ---------- ---------- -----------
Revenues $ 31,012 $ 29,092 $ 31,382 $ 34,602
Real estate cost of sales 15,782 14,150 16,305 18,202
Operating expenses 10,360 9,514 10,746 9,579
Net Income (A) $ 634 $ 164 $ 664 $ 910
========== ========== ========== ===========
Net Income Per Share (A) $ 0.10 $ 0.02 $ 0.09 $ 0.12
========== ========== ========== ===========
Quarter Ended
--------------------------------------------------
July 31, October 31, January 31, April 30,
1992 1992 1993 1993
------------- ---------- ---------- -----------
Revenues $ 21,979 $ 23,529 $ 22,431 $ 25,721
Real estate cost of sales 8,879 10,175 9,360 11,386
Operating expenses (B) 8,972 9,292 9,632 10,206
Net Income (Loss) $ 237 $ 61 $ (393) $ 136
========== ========== ========== ===========
Net Income (Loss) Per Share $ 0.04 $ 0.01 $ (0.06) $ 0.02
========== ========== ========== ===========
(A) As discussed in Note 3 of Notes to Consolidated Financial Statements,
during the fourth quarter of fiscal year 1994, the Company reduced the carrying
value of real estate inventory by $1,100,000.
(B) As discussed in Note 1 of Notes to Consolidated Financial Statements
certain amounts have been reclassified to conform with fiscal year 1994
presentation.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- - ------------------------------------------------------------------------
Not Applicable.
PART III
The information called for by Part III is hereby incorporated by
reference from the information set forth and under the headings "Voting
Securities", "Security Ownership of Management", "Election of Directors", and
"Executive Compensation" in Registrant's definitive proxy statement for the
1994 Annual Meeting of Shareholders, which meeting involves the election of
directors, such definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K. In addition,
information on Registrant's executive officers has been included in Part I
above under the caption "Executive Officers of the Registrant".
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- - ------------------------------------------------------------------------------
(a) 1. The following financial statements and supplementary
financial information are filed as part of this report:
AMREP Corporation and Subsidiaries:
Report of Independent Public
Accountants -
Arthur Andersen & Co.
Consolidated Balance Sheets - April 30,
1994 and 1993
Consolidated Statements of Operations for
the Three Years Ended April 30,
1994
Consolidated Statements of Shareholders'
Equity for the Three Years Ended
Apri1 30, 1994
Consolidated Statements of Cash Flows
for the Three Years Ended
April 30, 1994
Notes to Consolidated Financial
Statements
Selected Quarterly Financial Data
2. The following financial statement schedules are filed as part
of this report:
AMREP Corporation and Subsidiaries:
Schedule II Amounts Receivable
from Related Parties
and Underwriters,
Promoters, and
Employees other than
Related Parties
Schedule VIII Valuation and Qualifying
Accounts
Schedule X Supplementary Income
Statement Information
Financial statement schedules not included in this Annual Report on Form
10-K have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits:
The exhibits filed in this report are listed in the
Exhibit Index.
The Registrant agrees, upon request of the
Securities and Exchange Commission, to file as an exhibit
each instrument defining the rights of holders of
long-term debt of the Registrant and its consolidated
subsidiaries which has not been filed for the reason that
the total amount of securities authorized thereunder does
not exceed 10% of the total assets of the Registrant and
its subsidiaries on a consolidated basis.
(b) During the quarter ended April 30, 1994, Registrant filed: (i) a
Current Report on Form 8-K (Date of earliest event reported: January 13, 1994)
reporting under Item 5. Other Events and (ii) a Current Report on Form 8-K
(Date of earliest event reported: March 1, 1994) reporting under Item 1. -
Changes in Control of Registrant and Item 5. Other Events.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMREP CORPORATION
(Registrant)
Dated: July 28, 1994 By /s/ Anthony B. Gliedman
------------------------
Anthony B. Gliedman
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Registrant
and in the capacities and on the dates indicated.
/s/ Anthony B. Gliedman /s/ Mohan Vachani
----------------------- -----------------
Anthony B. Gliedman Mohan Vachani
Chairman of the Board, Senior Vice President - Chief
President and Director Financial Officer and Director
Principal Executive Officer Principal Financial
Officer
Dated: July 28, 1994 Dated: July 28, 1994
/s/ Rudolph J. Skalka
--------------------- -------------------
Rudolph J. Skalka Mitchell Roberts
Vice President-Finance Director
Principal Accounting Officer
Dated: July 28, 1994 Dated: July , 1994
/s/ Jerome Belson /s/ Samuel N. Seidman
----------------- ---------------------
Jerome Belson Samuel N. Seidman
Director Director
Dated: July 28, 1994 Dated: July 28, 1994
/s/ Joseph Cohen
---------------- ------------------
Joseph Cohen S. Fred Singer
Director Director
Dated: July 28, 1994 Dated: July , 1994
/s/ Daniel Friedman /s/ James Wall
------------------- --------------
Daniel Friedman James Wall
Director Director
Dated: July 28, 1994 Dated: July 28, 1994
----------------
Nick G. Karabots
Director
Dated: July , 1994
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
-----------------------------------------------------
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES
------------------------------------------
OTHER THAN RELATED PARTIES
--------------------------
Balance at
beginning Balance at end
Name of debtor of period Additions Deductions of period
- - ---------------------- ---------- ----------- ------------ --------------
Anthony Gliedman, CEO,
loan to acquire AMREP
Corporation stock, due
12/17/98, interest
payments due annually
at 6.896% $ - $ 150,500 $ - $ 150,500
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (Page 1 of 2)
- - ---------------------------------------------------------------
(Thousands)
Additions
------------------------
Charges
Balance at (Credits) to Charged Balance
Beginning Costs and to Other at End
of Period Expenses Accounts Deductions(A) of Period
--------- -------- -------- ------------- ---------
Description
-----------
FOR THE YEAR ENDED
APRIL 30, 1994:
Allowance for doubtful
accounts (included in
receivables - real
estate operations on
the consolidated
balance sheet) $ 1,000 $ 116 $ - $ 423 $ 693
--------- -------- -------- ---------- ---------
Allowance for estimated
returns and doubtful
accounts (included in
receivables - magazine
circulation operations
on the consolidated
balance sheet) $ 45,440 $ 9,230 $ - $ 315 $ 54,355
--------- -------- -------- ---------- ---------
FOR THE YEAR ENDED
APRIL 30, 1993:
Allowance for doubtful
accounts (included in
receivables - real
estate operations on
the consolidated
balance sheet) $ 878 $ 158 $ - $ 36 $ 1,000
--------- -------- -------- ---------- ---------
Allowance for estimated
returns and doubtful
accounts (included in
receivables - magazine
circulation operations
on the consolidated
balance sheet) $ 46,483 $ (76) $ - $ 967 $ 45,440
--------- -------- -------- ---------- ---------
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (Page 2 of 2)
- - ---------------------------------------------------------------
(Thousands)
Additions
------------------------
Charges
Balance at (Credits) to Charged Balance
Beginning Costs and to Other at End
of Period Expenses Accounts Deductions(A) of Period
--------- -------- -------- ------------- ---------
Description
-----------
FOR THE YEAR ENDED
APRIL 30, 1992:
Allowance for doubtful
accounts (included in
receivables - real
estate operations on
the consolidated
balance sheet) $ 681 $ 210 $ - $ 13 $ 878
--------- -------- -------- ---------- ---------
Allowance for doubtful
accounts (included in
receivables - magazine
circulation operations
on the consolidated
balance sheet) $ 43,654 $ 3,102 $ - $ 273 $ 46,483
--------- -------- -------- ---------- ---------
<FN>
NOTE: (A) Uncollectible accounts written off and cancellations elated to
installment sales.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT
-------------------------------------------
INFORMATION
-----------
Amount
Charged
To Costs and
Expenses
(Thousands)
Description ---------------
-----------
FOR THE YEAR ENDED APRIL 30, 1994:
Amortization of deferred costs $ 3,709
FOR THE YEAR ENDED APRIL 30, 1993:
Maintenance and repairs $ 1,020
Amortization of deferred costs $ 2,617
Taxes, other than payroll and income taxes $ 916
FOR THE YEAR ENDED APRIL 30, 1992:
Maintenance and repairs $ 949
Amortization of deferred costs $ 2,962
Taxes, other than payroll and income taxes $ 758
Note: The above schedule includes only those costs for each fiscal year which
exceeds one percent of total sales and revenues as required by Regulation S-X
Rule 12-11.
EXHIBIT INDEX
(3)(i)(a) Articles of Incorporation, as amended - Incorporated
by reference to Exhibit (3)(i)(a) to Annual
Report on Form 10-K of Registrant for the
fiscal year ended April 30, 1993.
(3)(i)(b) Certificate of Merger - Incorporated by
reference to Exhibit (3)(i)(b) to Annual
Report on Form 10-K of Registrant for the
fiscal year ended April 30, 1993.
(3)(ii) By-Laws as restated July 2, 1991 -
Incorporated by reference to Exhibit (3)(d)
to Annual Report on Form 10-K of Registrant
for the fiscal year ended April 30, 1991.
(4)(a) Loan Agreement between American National
Bank and Trust Company of Chicago and Kable
News Company, Inc. dated as of September 30,
1992 - Incorporated by reference to Exhibit
4(a) to Registrant's Quarterly Report on
Form 10-Q for the quarter ended October 31,
1992.
(4)(b) First Amendment to Loan Agreement between
American National Bank and Trust Company of
Chicago and Kable News Company, Inc. dated
as of July 12, 1993 - Incorporated by
reference to Exhibit 4(a) to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended July 31, 1993.
(4)(c) Second Amendment to Loan Agreement between
American National Bank and Trust Company of
Chicago and Kable News Company, Inc. dated
as of November 15, 1993 - Incorporated by
reference to Exhibit 4 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended October 31, 1993.
(10)(a) Agreement and Plan of Reorganization between
Registrant and Capital Distributing Company,
Kappa Publishing Group, Inc. and Nick G.
Karabots dated August 4, 1993 - Incorporated
by reference to Exhibit 10 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended October 31, 1993.
(10)(b) Employment Agreement
dated as of October 1, 1993 between
Registrant and Anthony B. Gliedman, Chief
Executive Officer, Chairman and President of
Registrant - Incorporated by reference to
Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended
January 31, 1994.
(10)(c) Employment Agreement dated as of October 1,
1993 between Registrant and Daniel Friedman,
Senior Vice President of Registrant -
Incorporated by reference to Exhibit 10(b)
to Registrant's Quarterly Report on Form 10-Q
for the quarter ended January 31, 1994.
(10)(d) Employment Agreement dated as of October 1,
1993 between Registrant and James Wall,
Senior Vice President of Registrant -
Incorporated by reference to Exhibit 10(c)
to Registrant's Quarterly Report on Form 10-Q
for the quarter ended January 31, 1994.
(10)(e) Employment Agreement dated as of October 1,
1993 between Registrant and Harvey W.
Schultz, Senior Vice President of Registrant
- Incorporated by reference to Exhibit 10(d)
to Registrant's Quarterly Report on Form 10-Q
for the quarter ended January 31, 1994.
(10)(f) Employment Agreement dated as of October 1,
1993 between Registrant and Mohan Vachani,
Senior Vice President - Chief Financial
Officer of Registrant - Incorporated by
reference to Exhibit 10(e) to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended January 31, 1994.
(10)(g) Employment Agreement dated as of October 1,
1993 between Registrant and Rudolph J.
Skalka, Vice President-Finance of Registrant
- Incorporated by reference to Exhibit 10(f)
to Registrant's Quarterly Report on Form 10-Q
for the quarter ended January 31, 1994.
(10)(h) 1982 Incentive Stock Option Plan -
Incorporated by reference to Exhibit (10)(s)
to Annual Report on Form 10-K of Registrant
for the fiscal year ended April 30, 1993.
(10)(i) 1992 Stock Option Plan -
Incorporated by reference to Exhibit A to
the Proxy Statement of Registrant for the
Annual Meeting of Shareholders held on
September 24, 1992.
(10)(j) Non-Employee Directors Option Plan -
Incorporated by reference to Exhibit B to
the Proxy Statement of Registrant for the
Annual Meeting of Shareholders held on
September 24, 1992.
(10)(k) Loan Agreement dated December 17, 1993
between Registrant and Anthony B. Gliedman,
filed herewith.
(10)(l) Bonus Plan for Executives and Key Employees
of Registrant, filed herewith.
(21) Subsidiaries of Registrant, filed herewith.
(23) Consent of Arthur Andersen & Co., filed
herewith.
EXHIBIT A
[Date]
AMREP Corporation
10 Columbus Circle
Suite l300
New York, NY 10019
Dear Sirs:
Reference is made to the Loan Agreement dated ___________ , 1993 between
you and the undersigned. I hereby request you lend me the sum of $ __________
pursuant to that Agreement on ______________, 199_ .
I hereby certify that the entire amount of such sum will be used by me to
pay for shares of Common Stock of AMREP Corporation I intend to purchase.
Very truly yours,
-------------------
Anthony B. Gliedman