SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
-------------------------
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
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 59-0936128
- ------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Avenue, Sixth Floor, New York, New York 10022
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 705-4700
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
Number of Shares of Common Stock, par value $.10 per share, outstanding
at September 11, 1998 - 7,368,650.
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
INDEX
-----
PART I PAGE NO.
- ------
Consolidated Financial Statements:
Balance Sheets
July 31, 1998 (Unaudited) and
April 30, 1998 (Audited) 1
Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended July 31, 1998 and 1997 2
Statements of Cash Flows (Unaudited)
Three Months Ended July 31, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis 5-6
PART II
- -------
Other Information 7
Signatures 8
Exhibit Index 9
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, 1998 and April 30, 1998
(Thousands, except par value and number of shares)
July 31, 1998 April 30, 1998
---------------- -----------------
(Unaudited) (Audited)
ASSETS
- ------
Cash and cash equivalents $ 15,189 $ 20,517
Receivables, net:
Real estate operations 12,620 11,107
Magazine circulation operations 61,290 57,408
Real estate inventory 106,380 99,904
Other real estate investments 766 1,497
Property, plant and equipment, at cost,
net of accumulated depreciation
and amortization of $13,708 at
July 31, 1998 and $13,260 at
April 30, 1998 17,658 17,658
Other assets 14,619 15,473
Excess of cost of subsidiary over net
assets acquired net of accumulated
amortization of $95 at July 31, 1998
and $68 at April 30, 1998. 6,177 6,204
------------- -----------------
$ 234,699 $ 229,768
============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Accounts payable, deposits and accrued
expenses $ 38,420 $ 40,352
Notes payable:
Amounts due within one year 29,700 28,511
Amounts subsequently due 60,505 55,737
Taxes payable:
Amounts due within one year 2,720 4,616
Amounts subsequently due 13,923 13,923
Deferred income taxes 2,509 2,589
------------- ----------------
147,777 145,728
------------- ----------------
Shareholders' equity:
Common stock, $.10 par value;
shares authorized -- 20,000,000
shares issued and outstanding
-- 7,398,677 at July 31, 1998
and April 30, 1998 740 740
Capital contributed in excess of par value 44,928 44,928
Retained earnings 41,434 38,552
Treasury stock, at cost; 30,027 shares (180) (180)
------------- ----------------
86,922 84,040
------------- ----------------
$ 234,699 $ 229,768
============= ================
See notes to consolidated financial statements.
1
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended July 31, 1998 and 1997
(Thousands, except per share amounts)
1998 1997
------------- ----------------
REVENUES
- --------
Real estate operations:
Home and condominium sales $ 20,848 $ 18,869
Land sales 9,673 4,306
------------- ----------------
30,521 23,175
Magazine circulation operations 14,250 13,006
Interest and other operations 1,452 1,614
------------- ----------------
46,223 37,795
------------- ----------------
COST AND EXPENSES
- -----------------
Real estate cost of sales:
Home and condominium sales 18,147 16,221
Land sales 5,089 2,342
Operating expenses:
Magazine circulation operations 10,903 10,587
Real estate commissions and selling 1,776 1,728
Other operations 710 1,559
General and administrative:
Real estate operations and corporate 1,985 1,792
Magazine circulation operations 1,682 1,569
Interest, net 1,128 1,156
------------- ----------------
41,420 36,954
------------- ----------------
Income before income taxes 4,803 841
PROVISION FOR INCOME TAXES 1,921 336
------------- ----------------
NET INCOME 2,882 505
RETAINED EARNINGS, beginning of period 38,552 30,346
------------- ----------------
RETAINED EARNINGS, end of period $ 41,434 $ 30,851
============= ================
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.39 $ 0.07
============= ================
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 Cash Flows (Unaudited)
Three Months Ended July 31, 1998 and 1997
(Thousands)
1998 1997
------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,882 $ 505
------------- ----------------
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation and amortization 775 825
Changes in assets and liabilities -
Receivables (5,395) (10,799)
Real estate inventory (6,476) 935
Other real estate projects 731 874
Other assets 570 (738)
Accounts payable, deposits
and accrued expenses (1,932) 4,208
Taxes payable (1,896) (326)
Deferred income tax (80) -
------------- ----------------
Total adjustments (13,703) (5,021)
------------- ----------------
Net cash used by
operating activities (10,821) (4,516)
------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (464) (575)
------------- ----------------
Net cash used by
investing activities (464) (575)
------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 21,930 13,390
Principal debt payments (15,973) (15,195)
------------- ----------------
Net cash (used) provided
by financing activities 5,957 (1,805)
------------- ----------------
Increase (decrease) in cash and cash
equivalents (5,328) (6,896)
CASH AND CASH EQUIVALENTS,
beginning of period 20,517 16,178
------------- ----------------
CASH AND CASH EQUIVALENTS,
end of period $ 15,189 $ 9,282
============= ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts
capitalized $ 1,096 $ 1,118
============= ================
Income taxes paid $ 3,969 $ 654
============= ================
See notes to consolidated financial statements.
3
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended July 31, 1998 and 1997
Note 1: 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: Certain amounts in the July 31, 1997 Statement of Cash Flows have been
- ------- reclassified to conform to the presentation used at July 31, 1998.
4
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Page 1 of 2)
July 31, 1998
RESULTS OF OPERATIONS
- ---------------------
Total revenues for the first quarter of fiscal 1999 increased 22% from the same
period last year, reflecting higher revenues from both real estate operations
and magazine circulation operations.
Revenues from real estate operations increased 32% during the three months ended
July 31, 1998 compared to the prior year, resulting from increases in both
housing and land sales. Revenues from housing sales increased 10% principally
due to revenues from deliveries contributed by the Company's northern California
operations, which were acquired in September 1997. Total unit deliveries
remained at 163 in both periods while the average selling price of homes closed
increased 10% from $115,800 to $127,900, reflecting the additional deliveries
from California, where average selling prices are higher than those in New
Mexico and Colorado. In addition, the average gross profit percentage on housing
sales declined slightly from 14% to 13% which was primarily the result of a
lower gross profit percentage from the northern California operations than those
from the New Mexico and Colorado operations.
Revenues and related gross profit from land sales increased by approximately
$5.4 million and $2.6 million, respectively, in the first quarter of fiscal 1999
as compared to the similar period last year, primarily due to an increase in the
level of commercial and industrial lot sales in New Mexico as well as a large
land sale at the Company's northern California operation. The gross profit
percentage on land sales was 47% in fiscal year 1999 and 46% in fiscal year
1998. 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 are not an
indication of amounts that may be expected to occur in future periods. As a
result of these factors, gross profit from real estate operations increased by
approximately $2.7 million in the first quarter of fiscal 1999 as compared to
the similar period last year, predominately from the increased land sales.
Revenues from magazine circulation operations increased by approximately 10% in
the first quarter of fiscal 1999, principally due to increases in Newsstand
Distribution Services. Revenues from Distribution Services increased
approximately 29% due to an increase in the volume of magazine sales and new
business. Revenues in Fulfillment Services remained comparable from year to
year. The major realignment and consolidation of relationships in the
distribution chain for magazines which developed during 1996 continues to affect
the industry, and the Company continues to address the situation. Magazine
circulation operating expenses have decreased from approximately 81% of related
revenues in the first quarter last year to approximately 77% of related revenues
in the current year, reflecting the favorable impact of cost reduction and
efficiency initiatives. As a result of these factors, operating income from
magazine circulation operations increased by approximately $900,000 in the first
quarter this year as compared to the similar period last year.
5
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Page 2 of 2)
July 31, 1998
Interest and other operations revenue decreased by approximately $162,000 in the
first quarter this year as compared to the similar period last year primarily
due to the absence of revenues from the Rio Rancho Golf and Country Club which
was sold during the third quarter of fiscal 1998, partially offset by management
fees and equity income in partnerships from the northern California operations
which were acquired in the second quarter of fiscal year 1998. The decrease in
other operations expenses of $849,000 is primarily due to the sale discussed
above.
Real estate commissions and selling expenses remained approximately the same in
the first quarter of fiscal 1999 as compared to the similar period last year.
Selling cost related to housing sales increased in proportion to the increase in
revenues, and was offset by reductions in fixed costs related to commercial and
industrial land sales. Real estate and corporate general and administrative
expenses increased 11%, principally as a result of the Company's expansion into
northern California commencing in September 1997. General and administrative
costs of the magazine circulation operations increased by approximately 7%,
moderately lower than the revenue increase.
Interest expense decreased by approximately 2% in the first quarter of fiscal
1999, primarily due to an increase in the amount of capitalized real estate
interest related to the higher inventory levels in northern California and
Colorado, partially offset by higher average borrowings related to increased
levels of receivables and inventories.
FINANCIAL CONDITION
- -------------------
Receivables from magazine circulation operations increased from $57.4 million at
April 30, 1998 to $61.3 million at July 31, 1998, resulting from the revenue
increase in magazine circulation operations and 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
referenced to above. In addition, real estate inventory and notes payable
increased by approximately $6.5 million and $6.0 million, respectively, at July
31, 1998, compared to April 30, 1998, primarily due to land acquisitions,
increases in construction inventory and related financing at the northern
California operations. Also, accounts payable, deposits and accrued expenses
decreased by approximately $1.9 million at July 31, 1998, compared to April 30,
1998. As a result, cash decreased by $5.3 million.
YEAR 2000
- ---------
The Company utilizes a number of software systems in conjunction with its real
estate and magazine circulation operations. The Company has and will continue to
make certain investments in its software systems and applications to ensure the
Company is Year 2000 compliant. The Company is also in the process of
ascertaining the impact of Year 2000 compliance in its relationship with vendors
and suppliers. The financial impact of becoming Year 2000 compliant has not been
and is not expected to be material to the Company's financial position or
results of operations in a given year.
6
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
PART II
Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Registrant during the quarter ended
July 31, 1998.
7
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMREP Corporation
(Registrant)
Dated: September 11, 1998 By: /s/ Mohan Vachani
-----------------
Mohan Vachani
Senior Vice President,
Chief Financial Officer
Dated: September 11, 1998 By: /s/ Peter M. Pizza
------------------
Peter M. Pizza
Controller
8
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
-------------
27 Financial Data Schedule