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, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission File Number 1-4702
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AMREP Corporation
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(Exact name of registrant as specified in its charter)
Oklahoma 59-0936128
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Avenue, Sixth Floor, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 705-4700
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has subject to such filing requirements
for the past 90 days.
Yes X No
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Number of Shares of Common Stock, par value $.10 per share, outstanding at
December 11, 1998 - 7,368,650.
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
INDEX
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PART I PAGE NO.
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Consolidated Financial Statements:
Balance Sheets
October 31, 1998 (Unaudited) and
April 30, 1998 (Audited) 1
Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended October 31, 1998 and 1997 2
Statements of Operations and Retained Earnings (Unaudited)
Six Months Ended October 31, 1998 and 1997 3
Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis 6 - 8
PART II
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Other Information 8
Signatures 9
Exhibit Index 10
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
October 31, 1998 and April 30, 1998
(Dollar amounts in thousands, except par value)
October 31, April 30,
1998 1998
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(Unaudited) (Audited)
ASSETS
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Cash and cash equivalents $ 12,121 $ 20,517
Receivables, net:
Real estate operations 12,146 11,107
Magazine circulation operations 61,040 57,408
Real estate inventory 105,282 99,904
Other real estate investments 2,565 2,251
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $14,179 at October 31, 1998 17,921 17,658
and $13,260 at April 30, 1998
Other assets 14,820 14,719
Excess of cost of subsidiary over net assets
acquired net of accumulated amortization of
$122 at October 31, 1998 and $68 at April 30,
1998 6,150 6,204
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Total Assets $ 232,045 $ 229,768
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable, deposits and accrued expenses $ 39,231 $ 40,352
Notes payable:
Amounts due within one year 35,180 28,511
Amounts subsequently due 52,643 55,737
Taxes payable:
Amounts due within one year 1,376 4,616
Amounts subsequently due 13,923 13,923
Deferred income taxes 2,429 2,589
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Total Liabilities 144,782 145,728
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Shareholders' equity:
Common stock, $.10 par value;
shares authorized -- 20,000,000; shares
issued and outstanding --7,398,677 at
October 31, 1998 and April 30, 1998 740 740
Capital contributed in excess of par value 44,928 44,928
Retained earnings 41,775 38,552
Treasury stock, at cost; 30,027 shares (180) (180)
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Total Shareholders' Equity 87,263 84,040
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Total Liabilities and Shareholders' Equity $ 232,045 $ 229,768
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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 October 31, 1998 and 1997
(Amounts in thousands, except per share amounts)
1998 1997
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REVENUES
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Real estate operations:
Home and condominium sales $ 17,376 $ 19,499
Land sales 2,075 7,123
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19,451 26,622
Magazine circulation operations 14,930 15,188
Interest and other operations 1,549 1,730
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35,930 43,540
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COSTS AND EXPENSES
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Real estate cost of sales
Home and condominium sales 15,103 17,365
Land sales 939 2,485
Operating expenses:
Magazine circulation operations 11,554 11,309
Real estate commissions and selling 1,791 1,871
Other operations 826 1,536
General and administrative:
Real estate operations and corporate 2,302 1,963
Magazine circulation operations 1,585 1,622
Interest, net 1,261 1,157
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35,361 39,308
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INCOME BEFORE INCOME TAXES 569 4,232
PROVISION FOR INCOME TAXES 228 1,693
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NET INCOME 341 2,539
RETAINED EARNINGS, beginning of period 41,434 30,851
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RETAINED EARNINGS, end of period $ 41,775 $ 33,390
========= ========
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.05 $ 0.34
========= ========
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 Operations and Retained Earnings (Unaudited)
Six Months Ended October 31, 1998 and 1997
(Amounts in thousands, except per share amounts)
1998 1997
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REVENUES
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Real estate operations:
Home and condominium sales $ 38,224 $ 38,368
Land sales 11,748 11,429
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49,972 49,797
Magazine circulation operations 29,180 28,194
Interest and other operations 3,001 3,344
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82,153 81,335
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COSTS AND EXPENSES
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Real estate cost of sales
Home and condominium sales 33,250 33,586
Land sales 6,028 4,827
Operating expenses:
Magazine circulation operations 22,457 21,896
Real estate commissions and selling 3,567 3,599
Other operations 1,536 3,095
General and administrative:
Real estate operations and corporate 4,287 3,755
Magazine circulation operations 3,267 3,191
Interest, net 2,389 2,313
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76,781 76,262
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INCOME BEFORE INCOME TAXES 5,372 5,073
PROVISION FOR INCOME TAXES 2,149 2,029
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NET INCOME 3,223 3,044
RETAINED EARNINGS, beginning of period 38,552 30,346
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RETAINED EARNINGS, end of period $ 41,775 $ 33,390
========== =========
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.44 $ 0.41
========== =========
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)
Six Months Ended October 31, 1998 and 1997
(Amounts in thousands)
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,223 $ 3,044
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Adjustments to reconcile net income to net cash used
by operating activities -
Depreciation and amortization 1,528 1,686
Changes in assets and liabilities, net of effects
from purchase of assets of business:
Receivables, net (4,671) (17,793)
Real estate inventory (5,378) (1,256)
Other real estate investments (314) 1,526
Other assets (634) (842)
Accounts payable, deposits and accrued expenses (1,121) 12,092
Taxes payable (3,400) 1,341
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Total adjustments (13,990) (3,246)
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Net cash used by operating activities (10,767) (202)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,204) (1,598)
Purchase of assets of business, net of cash
acquired - (2,202)
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Net cash used by investing activities (1,204) (3,800)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 49,032 17,948
Principal debt payments (45,457) (26,410)
Net cash provided (used) by financing
activities 3,575 (8,462)
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DECREASE IN CASH AND CASH EQUIVALENTS (8,396) (12,464)
CASH AND CASH EQUIVALENTS, beginning of period 20,517 16,178
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CASH AND CASH EQUIVALENTS, end of period $ 12,121 $ 3,714
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts capitalized $ 5,706 $ 2,237
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Income taxes paid $ 2,544 $ 688
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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, 1998 and 1997
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, 1998 Balance Sheet and
October 31, 1997 Statements of Operations and Statements of Cash Flows have been
reclassified to conform to the presentation used at October 31, 1998.
5
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
October 31, 1998
RESULTS OF OPERATIONS
Total revenues decreased $7.6 million (17%) and increased $800,000 for the three
and six month periods ended October 31, 1998, respectively, compared to the
similar periods in the prior year.
Revenues from real estate operations decreased $7.2 million (27%) during the
three month period ended October 31, 1998, compared to the prior year, as a
result of decreases in both home and land sales and which, when combined with
first quarter revenues, resulted in generally comparable revenues for the six
month periods ended October 31, 1998 and 1997. Revenues from home sales
decreased $2.1 million (11%) and $100,000 (0.4%) in the three and six month
periods ended October 31, 1998, respectively, as compared to similar periods in
the prior year, resulting from a decrease in total unit deliveries from 169 to
146 in the second quarter and from 332 to 309 in the six month period due in
part to the impact of enhanced competition in the Rio Rancho housing market. The
average selling prices of homes increased to $119,000 and $123,700 in the three
and six month periods of the current year, respectively, compared to $115,400
and $115,600 in the comparable periods of the prior year. The gross profit
increased to 13% for both the three and six month periods of the current year
compared to 11% and 13% for comparable periods of the prior year resulting from
a number of factors, including certain cost reductions and a change in the mix
of homes delivered.
Revenues from land sales decreased by $5.0 million (71%) in the second quarter,
due to the absence of any commercial land sales in the current year period. As a
result of a large number of commercial land sales in the first quarter, however,
land sale revenues for the six month period ended October 31, 1998 were $300,000
(3%) greater than land sale revenues in the comparable period of the prior year.
The gross profit percentage on land sales was 55% in the second quarter compared
to 65% in the second quarter of the prior year, and 49% for the six month period
of the current year compared to 58% in the comparable period of the prior year.
Land sale revenues and related gross profits can vary from period to period as a
result of the nature and timing of specific transactions, and thus prior results
are not an indication of amounts that may be expected to occur in future
periods. As a result of these factors, gross profit from combined housing and
land sales decreased by approximately $3.4 million and $700,000 in the second
quarter and six month periods this year, respectively, as compared to the
similar periods last year.
Revenues from magazine circulation operations decreased approximately $300,000
(2%) and increased $1 million (3%) in the three and six months period ended
October 31, 1998, respectively, as compared to the similar periods last year.
Revenues from Fulfillment Services decreased approximately $700,000 (7%) and
$600,000 (3%) in three and six month periods this year, respectively, compared
to similar periods in the prior year due primarily to a lower
6
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
October 31, 1998
volume of business. Revenues from the Newsstand Distribution Services increased
approximately $400,000 (9%) and $1.6 million (18%) in the three and six month
periods this year, respectively, compared to the prior year, due to a generally
higher volume of magazine sales. 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 decreased by approximately
$500,000 and increased $400,000 in the second quarter and six months this year,
respectively, as compared to similar periods last year. Real estate commissions
and selling expenses were generally comparable to the prior year amounts in both
periods. Real estate and corporate general and administrative expenses increased
$300,000 and $500,000 in three and six month periods due in part to the costs of
the Company's California operation, which commenced operations in September
1997, as well as from higher legal expenses. General and administrative costs of
the magazine circulation operations were generally comparable to the prior year
amounts in both periods.
Revenues and expenses included in "Interest and other operations" decreased as a
result of the sale of the Rio Rancho Golf Course and Country Club during the
third quarter of the prior year. The revenue decrease was offset by the
inclusion of equity income from other real estate investments.
Interest expense increased moderately in both real estate and magazine
operations in both the second quarter and six month period this year as
compared to similar periods last year primarily due to higher average borrowings
and relatively lower interest capitalization, partially offset by reduced
interest rates.
FINANCIAL CONDITION
Receivables from magazine circulation operations increased from $57.4 million at
April 30, 1998 to $61.0 million at October 31, 1998, resulting from the higher
volume of magazine sales and the timing of monthly billings as well as from
delays in payments experienced by Kable from wholesalers. In addition, real
estate inventory and notes payable increased by approximately $5.4 million and
$3.6 million, respectively, at October 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 $1.1 million at October
31, 1998 compared to April 30, 1998. As a result, cash decreased by $8.4 million
at October 31, 1998, as compared to April 30, 1998.
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 it software systems and applications to ensure the
Company is year 2000
7
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued) and Part II
October 31, 1998
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 2000compliant has not been and is not expected to be
material to the Company's financial position or results of operations in a given
year.
PART II
Other Information
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Item 4. Submission of Matters to Vote of Security Holders
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The Annual Meeting of Shareholders was held on September 24, 1998.
At the meeting, Daniel Friedman, Samuel N. Seidman and Mohan Vachani
were elected as directors. The terms of office as directors of Jerome Belson,
Edward B. Cloues, II, Nicholas G. Karabots, Albert Russo, and James Wall
continue.
Shareholders cast votes for the election of directors as follows:
Nominee "For" "Withheld"
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Daniel Friedman 6,769,702 21,890
Samuel N. Seidman 6,769,530 22,062
Mohan Vachani 6,770,311 21,281
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
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4(a) Loan Agreement dated as of September 15, 1998 between
Kable News Company, Inc., and American National Bank and
Trust Company of Chicago as Agent and all the Lenders as
defined therein.
4(b) Commitment Agreement dated as of February 20, 1998 between
AMREP Southwest, Inc., and Residential Funding Corporation
27 Financial Data Schedule.
(b) Reports on Form 8-K.
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No reports on Form 8-K were filed by Registrant during the
quarter ended October 31, 1998.
8
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
SIGNATURES
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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 11, 1998 By: /s/ Mohan Vachani
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Mohan Vachani
Senior Vice President,
Chief Financial Officer
Dated: December 11, 1998 By: /s/ Peter M. Pizza
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Peter M. Pizza
Vice President, Controller
9
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
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4(a) Loan Agreement dated as of September 15, 1998 between
Kable News Company, Inc., and American National Bank and
Trust Company of Chicago as Agent and all the Lenders as
defined therein.
4(b) Commitment Agreement dated as of February 20, 1998 between
AMREP Southwest, Inc., and Residential Funding Corporation.
27 Financial Data Schedule.
10