SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ______________October 31, 1997__________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission File Number ___1-4702__
AMREP Corporation
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(Exact name of registrant as specified in its charter)
Oklahoma 59-0936128
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Avenue, Sixth Floor, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code _______(212) 705-4700_______
Indicate by check mark whether the Registrant (1) has filed all reports required
to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has subject to such filing requirements
for the past 90 days.
Yes _____X______ No ___________
Number of Shares of Common Stock, par value $.10 per share, outstanding at
December 12, 1997 - 7,368,650.
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
INDEX
PART I PAGE NO.
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Consolidated Financial Statements:
Balance Sheets
October 31, 1997 (Unaudited) and
April 30, 1997 (Audited) 1
Statements of Income and Retained Earnings (Unaudited)
Three Months Ended October 31, 1997 and 1996 2
Statements of Income and Retained Earnings (Unaudited)
Six Months Ended October 31, 1997 and 1996 3
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1997 and 1996 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis 6 - 7
PART II
Other Information 8
Signatures 9
Exhibit Index 10
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1997 and April 30, 1997
(Dollar amounts in thousands, except par value)
October 31, 1997 April 30, 1997
----------------- ---------------
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents $ 3,714 $ 16,178
Receivables, net:
Real estate operations 9,103 10,486
Magazine circulation operations 62,229 43,015
Real estate inventory 96,499 86,102
Other real estate investments 3,367 4,893
Investment property 5,371 6,413
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $14,394 at October 31,
1997 and $13,532 at April 30, 1997 19,541 18,974
Other assets 15,604 14,059
Excess of cost of subsidiaries over net
assets acquired 6,258 5,191
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$ 221,686 $ 205,311
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, deposits and accrued $ 42,525 $ 30,081
expenses
Notes payable:
Amounts due within one year 29,943 24,833
Amounts subsequently due 49,427 54,991
Taxes payable:
Amounts due within one year 1,853 512
Amounts subsequently due 13,923 13,923
Deferred income taxes 5,137 5,137
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142,808 129,477
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Shareholders' equity:
Common stock, $.10 par value;
shares authorized -- 20,000,000;
shares issued -- 7,398,677 at October
31, 1997 and April 30, 1997 740 740
Capital contributed in excess of par value 44,928 44,928
Retained earnings 33,390 30,346
Treasury stock, at cost; 30,027 shares (180) (180)
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78,878 75,834
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$ 221,686 $ 205,311
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See notes to consolidated financial statements.
1
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings (Unaudited)
Three Months Ended October 31, 1997 and 1996
(Amounts in thousands, except per share amounts)
1997 1996
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REVENUES
Real estate operations:
Home and condominium sales $ 19,499 $ 13,272
Land sales 7,123 3,838
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26,622 17,110
Magazine circulation operations 15,188 14,610
Interest and other operations 1,730 1,510
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43,540 33,230
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COSTS AND EXPENSES
Real estate cost of sales 19,850 13,783
Operating expenses:
Magazine circulation operations 11,309 11,337
Real estate commissions and selling 1,871 1,673
Other operations 1,536 1,642
General and administrative:
Real estate operations and corporate 1,963 1,861
Magazine circulation operations 1,622 1,481
Interest, net 1,157 1,017
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39,308 32,794
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INCOME BEFORE INCOME TAXES 4,232 436
PROVISION FOR INCOME TAXES 1,693 174
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NET INCOME 2,539 262
RETAINED EARNINGS, beginning of period 30,851 23,467
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RETAINED EARNINGS, end of period $ 33,390 $ 23,729
=========== =========
NET INCOME PER SHARE $ 0.34 $ 0.04
=========== =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,369 7,369
=========== =========
See notes to consolidated financial statements.
2
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income and Retained Earnings (Unaudited)
Six Months Ended October 31, 1997 and 1996
(Amounts in thousands, except per share amounts)
1997 1996
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REVENUES
Real estate operations:
Home and condominium sales $ 38,368 $ 30,325
Land sales 11,429 6,913
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49,797 37,238
Magazine circulation operations 28,194 27,088
Interest and other operations 3,344 3,312
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81,335 67,638
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COSTS AND EXPENSES
Real estate cost of sales 38,413 29,272
Operating expenses:
Magazine circulation operations 21,896 22,059
Real estate commissions and selling 3,599 3,071
Other operations 3,095 3,451
General and administrative:
Real estate operations and corporate 3,755 3,770
Magazine circulation operations 3,191 3,080
Interest, net 2,313 1,827
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76,262 66,530
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INCOME BEFORE INCOME TAXES 5,073 1,108
PROVISION FOR INCOME TAXES 2,029 443
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NET INCOME 3,044 665
RETAINED EARNINGS, beginning of period 30,346 23,064
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RETAINED EARNINGS, end of period $ 33,390 $ 23,729
=========== =========
NET INCOME PER SHARE $ 0.41 $ 0.09
=========== =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 7,369 7,369
=========== =========
See notes to consolidated financial statements.
3
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) (Page 1 of 2)
Six Months Ended October 31, 1997 and 1996
(Amounts in thousands)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: --------- ---------
Net Income $ 3,044 $ 665
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Adjustments to reconcile net income to net cash used
by operating activities -
Depreciation and amortization 1,686 1,239
Changes in assets and liabilities, net of effects
from purchase of assets of business:
Receivables, net (17,793) (7,226)
Real estate inventory (2,298) (12,139)
Other real estate investments 1,526 1,524
Investment property 1,042 768
Other assets (842) (2,190)
Accounts payable, deposits and accrued expenses 12,092 2,001
Taxes payable 1,341 (1,505)
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Total adjustments (3,246) (17,528)
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Net cash used by operating activities (202) (16,863)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,598) (793)
Purchase of assets of business, net of cash
acquired (2,202) -
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Net cash used by investing activities (3,800) (793)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 17,948 35,670
Principal debt payments (26,410) (19,959)
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Net cash provided (used) by financing
activities (8,462) 15,711
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DECREASE IN CASH AND CASH EQUIVALENTS (12,464) (1,945)
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CASH AND CASH EQUIVALENTS, beginning of period 16,178 7,607
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CASH AND CASH EQUIVALENTS, end of period $ 3,714 $ 5,662
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts capitalized $ 2,237 $ 1,683
========= =========
Income taxes paid $ 688 $ 1,543
========= =========
See notes to consolidated financial statements.
4
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Six Months Ended October 31, 1997 and 1996
Note 1:
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The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The consolidated financial
statements reflect all adjustments which are, in the opinion of
management, necessary to reflect a fair presentation of the results for
the interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K.
Note 2:
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Certain amounts as previously reported in the April 30, 1997 Balance Sheet
and October 31, 1996 Statements of Income and Statements of Cash Flows
have been reclassified to conform to the presentation used at October 31,
1997.
5
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Page 1 of 2)
October 31, 1997
RESULTS OF OPERATIONS
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Total revenues for the three and six month periods ended October 31, 1997
increased 31% and 20%, respectively, from the similar periods last year,
reflecting higher revenues from both real estate and magazine circulation
operations.
Revenues from real estate operations increased 56% and 34% during the three and
six month periods ended October 31, 1997, respectively, compared to the prior
year, resulting from increases in both home and condominium and land sales.
Revenues from home and condominium sales increased 47% and 27% in the three and
six month periods, respectively, resulting from an increase in total unit
deliveries from 106 to 169 in the second quarter and from 249 to 332 in the six
month period as compared to the similar periods last year, which increase is due
in part to the number and timing of projects open and available for sale in the
current year as compared to the prior year. Last year's results had been
adversely impacted from delays in receiving certain governmental or utility
company approvals. The increase in housing revenues was offset partly by a
decrease in the gross profit percentage, which resulted from a number of
factors, including a change in the mix of homes delivered and higher lot
development costs. In addition, the Company closed a number of large commercial
land sales in New Mexico in the second quarter, which resulted in increased
revenues of 86% from land sales for the quarter and 65% for the six month
period. Land sale revenues and related gross profits can vary from year to year
as a result of the nature and timing of specific transactions, and thus prior
results are not an indication of amounts that may be expected to occur in future
periods. As a result of these factors, gross profit from combined housing and
land sales increased by approximately $3.4 million in both the second quarter
and six months this year, respectively, as compared to the similar periods last
year.
Revenues from magazine circulation operations increased approximately 4% in both
the three and six months periods ended October 31, 1997, as compared to the
similar periods last year, due to increases in both the Fulfillment Services and
Newsstand Distribution Services. Revenues from Fulfillment Services increased
approximately 4% and 5% in the three and six month periods this year,
respectively, due primarily to increased volume resulting from a new contract
with a major publisher, which was partially offset by decreased volumes in other
areas of the business. Revenues from the Newsstand Distribution Services also
increased approximately 3% and 2% in the three and six month periods this year,
respectively, compared to the prior year, due to a generally higher volume of
magazine sales. This sales increase has reversed the trend of lower sales over
the last two years which had related to residuary consumer resistance to retail
cover price increases imposed in 1996. In addition, a major
6
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Page 2 of 2)
October 31, 1997
realignment of industry relationships in the distribution of magazines developed
rapidly during 1996, which has led to a substantial reduction in the number of
wholesalers. These changes have adversely impacted Kable's sales and profits.
Magazine circulation operating expenses are comparable to the prior year in both
periods. As a result of these factors, operating income from magazine
circulation operations increased by approximately $600,000 and $1,300,000 in the
second quarter and six months this year, respectively, as compared to last year.
Real estate commissions and selling expenses increased approximately $198,000 in
the three months and by $528,000 in the six months, primarily as a result
of the increased volume, as well as from an increase in the number of projects
open for sale. Real estate and corporate general and administrative expenses
increased $102,000 in the three month period due to the costs of the Company's
California operation, which commenced operations in September 1997, as well as
from higher legal expenses. Real estate and corporate general and
administrative expenses were comparable for the six month period. General and
administrative costs of the magazine circulation operations increased by
$141,000 and $111,000 for the three and six month periods, respectively, as a
result of several factors, none of which were individually significant.
Interest expense increased in both real estate and magazine operations in both
the second quarter and six months period this year primarily due to higher
average borrowings partially offset by an increase in the amount of capitalized
real estate interest.
FINANCIAL CONDITION
- -------------------
Receivables from magazine circulation operations increased from $43.0 million at
April 30, 1997, to $62.2 million at October 31, 1997, resulting partially from
the timing of monthly billings as well as from delays in payments experienced by
Kable from wholesalers which Kable believes is partially a result of the
industry consolidation issue as discussed above. As a result, cash decreased by
$12.5 million and accounts payable, deposits and accrued expenses increased by
approximately $12.4 million at October 31, 1997 compared to April 30, 1997.
During the three month period ended October 31, 1997, a subsidiary of the
Company acquired the assets and operations of a residential real estate company
based in Sacramento, California with operations in northern California,
Portland, Oregon and Reno, Nevada. The purchase price consisted of cash in the
amount of $2.2 million and the assumption of debt of approximately $8.4 million.
The increases in inventory, other assets, excess of cost over net assets
acquired and notes payable result principally from the effect of this purchase.
7
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
PART II
Other Information
-----------------
Item 4. Submission of Matters to Vote of Security Holders
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The Annual Meeting of Shareholders was held on September 24, 1997.
At the meeting, Edward B. Cloues, II and James Wall were elected as
directors. The terms of office as directors of Jerome Belson, Daniel Friedman,
Nicholas G. Karabots, Albert Russo, Samuel N. Seidman and Mohan Vachani
continue.
Shareholders cast votes for the election of directors as follows:
Nominee "For" "Withheld"
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Edward B. Cloues, II 6,781,513 40,000
James Wall 6,780,937 40,576
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
---------
3(a) Amendment to Section 3 of Article III of the By-laws.
3(b) Amendment to Section 1 of Article IV of the By-laws.
3(c) By-laws as restated September 24, 1997.
4(a) Amendment No. 2 dated December 13, 1996, to Amended and
Restated Loan Agreement between American National Bank and
Trust Company of Chicago and Kable News Company, Inc.
4(b) Amendment No. 3 dated September 18, 1997, to Amended and
Restated Loan Agreement between American National Bank and
Trust Company of Chicago and Kable News Company, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed by Registrant during the
quarter ended October 31, 1997.
8
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMREP Corporation
(Registrant)
Dated: December 12, 1997 By: /s/ Mohan Vachani
-----------------
Mohan Vachani
Senior Vice President,
Chief Financial Officer
Dated: December 12, 1997 By: /s/ Peter M. Pizza
------------------
Peter M. Pizza
Vice President, Controller
9
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
-------------
3(a) Amendment to Section 3 of Article III of the By-laws.
3(b) Amendment to Section 1 of Article IV of the By-laws.
3(c) By-laws as restated September 24, 1997.
4(a) Amendment No. 2 dated December 13, 1996, to Amended and
Restated Loan Agreement between American National Bank and
Trust Company of Chicago and Kable News Company, Inc.
4(b) Amendment No. 3 dated September 18, 1997, to Amended and
Restated Loan Agreement between American National Bank and
Trust Company of Chicago and Kable News Company, Inc.
27 Financial Data Schedule.
10