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 January 31, 1999
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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
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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)
Registrants 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 March
15, 1999 - 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
January 31, 1999 (Unaudited) and
April 30, 1998 (Audited) 1
Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended January 31, 1999 and 1998 2
Statements of Operations and Retained Earnings (Unaudited)
Nine Months Ended January 31, 1999 and 1998 3
Statements of Cash Flows (Unaudited)
Nine Months Ended January 31, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis 6 -9
PART II
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Other Information 9
Signatures 10
Exhibit Index 11
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1999 and April 30, 1998
(Dollar amounts in thousands, except par value)
January 31, 1999 April 30, 1998
------------------ ---------------
(Unaudited) (Audited)
ASSETS
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Cash and cash equivalents $ 11,617 $ 20,517
Receivables, net:
Real estate operations 10,424 11,107
Magazine circulation operations 57,747 57,408
Real estate inventory 103,043 99,904
Other real estate investments 2,774 2,251
Property, plant and equipment, at cost,
net of accumulated depreciation
and amortization of $14,491 at January 18,626 17,658
31, 1999, and $13,260 at April 30, 1998
Other assets 18,697 14,719
Excess of cost of subsidiary over net assets
acquired net of accumulated
amortization of $149 at January 31, 1999 6,123 6,204
and $68 at April 30, 1998 ----------- ------------
$ 229,051 $ 229,768
============ ============
LIABILITIES AND SHAREHOLDERS'EQUITY
- -----------------------------------
Accounts payable, deposits and accrued
expenses $ 32,980 $ 40,352
Notes payable:
Amounts due within one year 34,461 28,511
Amounts subsequently due 57,492 55,737
Taxes payable:
Amounts due within one year 790 4,616
Amounts subsequently due 13,023 13,923
Deferred income taxes 2,349 2,589
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141,095 145,728
========= =========
Shareholders'equity:
Common stock, $.10 par value;
shares authorized -- 20,000,000; shares
issued and outstanding
--7,398,677 at January 31, 1999,
and April 30, 1998 740 740
Capital contributed in excess of par value 44,928 44,928
Retained earnings 42,468 38,552
Treasury stock, at cost; 30,027 shares (180) (180)
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87,956 84,040
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$ 229,051 $ 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 January 31, 1999 and 1998
(Amounts in thousands, except per share amounts)
1999 1998
REVENUES ---------- ---------
- --------
Real estate operations:
Home and condominium sales $ 20,164 $ 19,964
Land sales 5,556 6,946
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25,720 26,910
Magazine circulation operations 14,610 14,516
Interest and other operations 1,457 5, 423
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41,787 46,849
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COSTS AND EXPENSES
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Real estate cost of sales:
Home and condominium sales 17,070 17,700
Land sales 4,017 3,625
Operating expenses:
Magazine circulation operations 13,445 11,049
Real estate commissions and selling 1,752 1,771
Other operations 881 884
General and administrative:
Real estate operations and corporate 2,119 2,140
Magazine circulation operations 1,705 1,680
Interest, net 1,144 1,096
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42,133 39,945
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INCOME (LOSS) BEFORE INCOME TAXES (346) 6,904
PROVISION (BENEFIT) FOR INCOME TAXES (1,039) 2,762
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NET INCOME 693 4,142
RETAINED EARNINGS, beginning of period 41,775 33,390
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RETAINED EARNINGS, end of period $ 42,468 $ 37,532
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EARNINGS PER SHARE - BASIC AND DILUTED $ 0.09 $ 0.56
========== =========
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)
Nine Months Ended January 31, 1999 and 1998
(Amounts in thousands, except per share amounts)
1999 1998
REVENUES -------- --------
- --------
Real estate operations:
Home and condominium sales $ 58,388 $ 58,332
Land sales 17,304 18,375
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75,692 76,707
Magazine circulation operations 43,790 42,710
Interest and other operations 4,458 8,767
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123,940 128,184
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COSTS AND EXPENSES
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Real estate cost of sales:
Home and condominium sales 50,320 51,286
Land sales 10,045 8,452
Operating expenses:
Magazine circulation operations 35,902 32,945
Real estate commissions and selling 5,319 5,370
Other operations 2,417 3,979
General and administrative:
Real estate operations and corporate 6,406 5,895
Magazine circulation operations 4,972 4,871
Interest, net 3,533 3,409
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118,914 116,207
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INCOME BEFORE INCOME TAXES 5,026 11,977
PROVISION FOR INCOME TAXES 1,110 4,791
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NET INCOME 3,916 7,186
RETAINED EARNINGS, beginning of period 38,552 30,346
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RETAINED EARNINGS, end of period $ 42,468 $ 37,532
======== =========
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.53 $ 0.98
======== =========
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)
Nine Months Ended January 31, 1999 and 1998
(Amounts in thousands)
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,916 $ 7,186
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Adjustments to reconcile net income
to net cash used by operating activities -
Depreciation and amortization 2,717 2,505
Changes in assets and liabilities,
net of effects from purchase
of assets of business:
Receivables, net 344 (15,987)
Real estate inventory (3,139) (5,779)
Other real estate investments (523) 3,368
Other assets (5,167) (1,347)
Accounts payable, deposits and
accrued expenses (7,372) 4,061
Taxes payable (4,966) 1,032
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Total adjustments (18,106) (12,147)
Net cash used by operating ----------- ---------
activities (14,190) (4,961)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,415) (1,783)
Purchase of assets of business, net
of cash acquired - (2,202)
Book value of fixed assets sold - 1,305
Net cash used by investing
activities (2,415) (2,680)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 65,479 30,242
Principal debt payments (57,774) (34,048)
Net cash provided (used) ---------- ---------
by financing
activities 7,705 (3,806)
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DECREASE IN CASH AND CASH EQUIVALENTS (8,900) (11,447)
CASH AND CASH EQUIVALENTS, beginning of
period 20,517 16,178
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CASH AND CASH EQUIVALENTS, end of
period $ 11,617 $ 4,731
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts
capitalized $ 3,491 $ 3,016
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Income taxes paid $ 6,147 $ 3,759
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See notes to consolidated financial statements
4
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Nine Months Ended January 31, 1999 and 1998
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, as previously reported in the April 30, 1998
- ------- Balance Sheet and January 31, 1998 Statements of Operations and
Statements of CashFlows, have been reclassified to conform to the
presentation used at January 31,1999.
5
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Managements Discussion and Analysis of
Financial Condition and Results of Operations (Page 1 of 4)
January 31, 1999
RESULTS OF OPERATIONS
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Total revenues decreased $5.1 million (11%) and $4.2 million (3%) for the three
and nine month periods ended January 31, 1999, respectively, compared to the
similar periods in the prior year. Revenues from real estate operationsdecreased
$1.2 million (4%) during the three month period ended January 31, 1999, compared
to the prior year, principally as a result of a decrease in land sales during
the period and which, when combined with revenues from the first half of the
year, has resulted in a $1.0 million decrease (1%) for the nine month period
ended January 31, 1999. Revenues from home sales increased $200,000 (1%) in the
third quarter of fiscal 1999 compared to fiscal 1998, and are comparable to the
prior year for the nine month period ended January 31, 1999. Total unit
deliveries decreased from 165 to 155 in the third quarter and from 497 to 464 in
the nine 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
$130,100 and $125,800 in the three and nine month periods of the current year,
respectively, compared to $121,000 and $117,400 in the comparable periods of the
prior year. This increase in the average selling price of homes is principally
due to a change in the product mix of homes closed in the Colorado division, as
well as the effect of initial home deliveries from two higher-priced projects in
the California division during the third quarter of fiscal 1999. The gross
profit increased to 15% and 14% for the three and nine month periods of the
current year, respectively, compared to 11% and 12% 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 $1.4 million (20%) in the third quarter,
due to the absence of any commercial and industrial land sales in the current
year period, and were $1.1 million (6%) less than land sale revenues in the
comparable nine month period of the prior year. The absence of any commercial
and industrial land sales in the third quarter of fiscal 1999 was partially
offset by an increase in the level of land sales to other homebuilders, which
increased from $1.5 million to $5.6 million in the three month period ended
January 31, 1999, and from $4.6 million to $10.1 million in the nine month
period ended January 31, 1999. The gross profit percentage on land sales was 28%
in the third quarter of fiscal 1999 compared to 48% in the third quarter of the
prior year, and 42% for the nine month period of the current year compared to
54% in the comparable period of the prior year. The gross profit percentage on
land sales has decreased in the three and nine month periods ended January 31,
1999 compared to the prior year because of the relative increase in the sale of
land to other builders, which have been at lower gross profits than the
commercial and industrial sales have achieved. Land sale revenues and related
gross profits can very 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 $950,000 and $1.6 million in the three and nine month periods this
year, respectively, as compared to the similar periods last year.
6
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Managements Discussion and Analysis of
Financial Condition and Results of Operations (Page 2 of 4)
January 31, 1999
The increase in the level of land sales to other homebuilders discussed above
reflects a decision by the Company to expand its land development operations by
selling more of its land to homebuilders in the Company's New Mexico marketplace
because of dissatisfaction with the net returns from its New Mexico homebuilding
operations and in order to maximize its return on real estate assets. During the
quarter, the Company announced the closing of 123 lots in one of the first of a
series of builder lot sales to one large national builder in New Mexico.
Although there are provisions for early termination of the agreement by the
buyer, if all sales do proceed as contemplated by this contract, the Company
would sell over 1000 lots in this subdivision during the next two years.
Revenues from magazine circulation operations increased approximately $100,000
(.6%) and $1.1 million (2.5%) in the three and nine month periods ended January
31, 1999, respectively, as compared to the similar periods of the prior year.
Revenues from Fulfillment Services decreased approximately $500,000 (5%) and
$1.2 million (4%) in the three and nine month periods this year, respectively,
compared to similar periods in the prior year due primarily to a lower volume of
business in sweepstakes processing for one major customer. Revenues from the
Newsstand Distribution Services increased approximately $600,000 (13%) and $2.2
million (17%) in the three and nine month periods this year, respectively,
compared to the prior year, due to new business and a moderately higher volume
of magazine sales. A major realignment of industry relationships in the
distribution of magazines started in 1996 which has led to a substantial
reduction in the number of wholesalers, which in some cases has adversely
impacted sales and profits and allowed wholesalers to delay payment to Kable.
During the third quarter of fiscal 1999, Kable increased its reserve for
uncollectible accounts by approximately $2.7 million due to concerns about
certain newsstand wholesaler customers. As a result of this, magazine
circulation operating expenses increased $2.4 million (22%) and $3.0 million
(9%) in the three and nine month periods ended January 31, 1999, respectively,
compared to the prior year. As a result of these factors, operating income from
magazine circulation operations decreased by approximately $2.3 million and $1.9
million in the third quarter and nine months this year, respectively, as
compared to similar periods last year. Excluding the effects of the increase in
reserve for uncollectible accounts Kable's operating earnings were modestly
higher for the three and nine month periods.
Revenues from "Interest and other operations" decreased in both the three and
nine month periods ended January 31, 1999 compared to the prior year, because
the prior year included a non-recurring gain of approximately $4.2 million on
the sale of the Rio Rancho Golf and Country Club and the Companys 50% limited
partnership interest in "The Classic at West Palm Beach", a congregate care
facility in Florida.
7
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Managements Discussion and Analysis of
Financial Condition and Results of Operations (Page 3 of 4)
January 31, 1999
Real estate commissions and selling expenses were generally comparable to the
prior year amounts in both the three and nine month periods ended January 31,
1999, and approximated 7% of related revenues in both periods. Real estate and
corporate general and administrative expenses were comparable in the three month
period ended January 31, 1999 compared to the prior year, and increased $500,000
(9%) in the nine month period 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 the three and nine month periods ended January 31, 1999, increasing by
approximately 2% over the comparable periods of the prior year, commensurate
with the related revenue increases.
Interest expense increased moderately in both real estate and magazine
operations in both the third quarter and nine 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.
During the quarter ended January 31, 1999, the Company reached an agreement with
the Internal Revenue Service (IRS) to resolve all outstanding issues resulting
from the IRS's examination of tax years 1990 through 1992. As a result, the
Company recorded an additional benefit for income taxes of $900,000 during the
third quarter of fiscal 1999 due to the reversal of amounts previously accrued.
FINANCIAL CONDITION
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Receivables from magazine circulation operations have increased from $57.4
million at April 30, 1998 to $57.7 million at January 31, 1999; the January
31,1999 balance is net of an increase in thereserve for uncollectible accounts
of approximately $2.7 million which wasrecorded in the quarter ended January 31,
1999 due to concerns about certainnewsstand wholesaler customers. In addition,
real estate inventory and notespayable increased by approximately $3.1 million
and $7.7 million, respectively,at January 31, 1999, compared to April 30, 1998,
primarily due to landacquisitions, increases in construction inventory and
related financing at the northern California operations. Also, accounts payable,
deposits and accrued expenses decreased by approximately $7.4 million at January
31, 1999 compared to April 30, 1998. As a result, cash decreased by $8.9 million
at January 31, 1999 as compared to April 30, 1998
8
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
Managements Discussion and Analysis of
Financial Condition and Results of Operations (Page 4 of 4)
January 31, 1999
YEAR 2000
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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 Companys financial position or results
of operations in a given year.
PART II
Other Information
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by
Registrant during the quarter ended January 31, 1999
9
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: March 15, 1999 By: /s/Mohan Vachani
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Mohan Vachani
Senior Vice President,
Chief Financial Officer
Dated: March 15, 1999 By: /s/ Peter M. Pizza
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Peter M. Pizza
Vice President, Controller
10
FORM 10-Q
AMREP CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
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27 Financial Data Schedule.
11