EXHIBIT 99.3
AMREP CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On January 16, 2007, AMREP Corporation (the "Company" or "AMREP"), through a
newly created subsidiary of its Kable Media Services, Inc. subsidiary, acquired
Palm Coast Data Holdco, Inc. ("PCD Inc."). PCD Inc. was organized in 2005 for
the purpose of acquiring controlling interest in Palm Coast Data Holdings L.L.C.
("Holdings"), the prior owner of Palm Coast Data LLC ("PCD LLC"), and on August
9, 2005 the acquisition was completed. The acquisition occurred by the merger of
this newly created subsidiary of Kable Media Services, Inc. with and into PCD
Inc., which thereupon became a wholly-owned subsidiary of Kable Media Services,
Inc. The following unaudited pro forma consolidated financial statements are
based on the historical consolidated financial statements of the Company and
reflect the effects of the January 16, 2007 acquisition on a pro forma basis.
The acquisition is being accounted for under the purchase method.
The unaudited pro forma consolidated balance sheet as of October 31, 2006 was
prepared as if the Company acquired PCD Inc. on that date. The unaudited pro
forma consolidated statements of income for the fiscal year ended April 30, 2006
and the six months ended October 31, 2006 give effect to the acquisition as if
it occurred as of the beginning of each period.
The unaudited pro forma balance sheet as of October 31, 2006 combines the
Company's unaudited consolidated balance sheet as of that date with the
unaudited consolidated balance sheet of PCD Inc. as of December 31, 2006. The
unaudited pro forma consolidated statement of income for the fiscal year ended
April 30, 2006 combines the Company's audited consolidated results for that year
with the unaudited consolidated results of Holdings for the period July 1, 2005
through August 9, 2005 and the audited consolidated results of PCD Inc. for the
period August 10, 2005 through June 30, 2006. The unaudited consolidated results
of Holdings and audited consolidated results of PCD Inc. are not comparable in
all material respects due to purchase price adjustments that were recorded as a
result of PCD Inc. acquiring controlling interest in Holdings on August 9, 2005.
The unaudited pro forma consolidated statement of income for the six months
ended October 31, 2006 combines the Company's unaudited consolidated results for
that period with the unaudited consolidated results of PCD Inc. for the six
months ended December 31, 2006.
For purposes of the pro forma consolidated financial statements, the purchase
price of PCD Inc. has been allocated to the acquired net assets based on
information currently available with regard to the values of such net assets.
Pro forma adjustments have been made only for those assets acquired and
liabilities assumed that, based solely on preliminary estimates, which in the
opinion of management are the best estimates presently available, may have fair
values significantly different from historical amounts. The Company has retained
the services of a third party valuation firm to assist in the valuation of the
assets acquired, and upon completion of the valuation, final adjustments to
recorded amounts may differ significantly from the pro forma adjustments
presented herein.
The pro forma information presented is for illustrative purposes only and is not
necessarily indicative of the financial position or the results of operations
that might have pertained had the acquisition of PCD Inc. taken place at the
beginning of the period, or to project the Company's results of operations at
any future date or for any future period. The pro forma consolidated statements
should be read in conjunction with the accompanying notes thereto, and in
conjunction with the historical consolidated financial statements and
accompanying notes of the Company included in its annual report on Form 10-K for
the fiscal year ended April 30, 2006 and subsequent quarterly reports on Form
10-Q and the financial statements and notes thereto of PCD Inc. and Holdings
included in this current report on Form 8-K/A.
1
AMREP CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
AMREP Palm Coast
Corporation and Data
Subsidiaries Holdco, Inc. Pro Forma Pro
10/31/2006 12/31/2006 Adjustments Forma
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ASSETS
Cash and cash equivalents .................................. $ 110,167 $ 1,273 $ (96,282)(A) $ 54,170
39,180 (B)
(168)(B)
Restricted cash ............................................ 4,232 -- -- 4,232
Receivables, net:
Real estate operations ................................... 16,574 -- -- 16,574
Media services operations ................................ 42,510 10,102 -- 52,612
Real estate inventory ...................................... 40,583 -- -- 40,583
Investment assets, net ..................................... 11,992 -- -- 11,992
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $25,689 as of October 31, 2006
and $2,903 as of December 31, 2006 ....................... 9,790 15,594 7,292 (A) 32,676
Intangible assets and other, net ........................... 16,921 21,143 1,636 (A),(E) 35,100
168 (B)
(18,420)(A)
14,500 (A)
(848)(A)
Goodwill ................................................... 5,191 25,969 (25,969)(A) 55,041
49,850 (A)
---------------------------------------------------------------
$ 257,960 $ 74,081 $ (29,061) $ 302,980
===============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses ...................... $ 79,481 $ 11,651 $ (1,311)(A), (B) $ 87,388
(2,433)(A), (C)
Deferred revenue ........................................... 6,547 -- -- 6,547
Notes payable:
Amounts due within one year .............................. 1,644 2,831 (2,831)(A), (B) 1,644
Amounts subsequently due ................................. 2,827 43,200 (43,200)(A), (B) 42,007
39,180 (B)
---------------------------------------------------------------
4,471 46,031 (6,851) 43,651
Taxes payable .............................................. 5,108 -- -- 5,108
Deferred income taxes ...................................... 13,490 -- (2,067)(A), (M) 11,423
Accrued pension costs ...................................... 3,334 -- -- 3,334
---------------------------------------------------------------
112,431 57,682 (12,662) 157,451
Stockholders' equity:
Common stock, $.10 par value; shares
authorized - 20,000,000; 7,418,704
shares issued - as of October 31, 2006 ................... 741 -- -- 741
Common Stock, Class A, $.01 par value; shares
authorized - 3,031; 1,311 shares issued -
as of December 31, 2006 .................................. -- -- -- --
Common Stock, Class B, $.01 par value; shares
authorized - 23,664; 21,743 shares issued -
as of December 31, 2006 .................................. -- -- -- --
Capital contributed in excess of par value ................. 46,061 23,054 (23,054)(D) 46,061
Retained earnings (deficit) ................................ 108,093 (6,655) 6,655 (D) 108,093
Accumulated other comprehensive loss, net .................. (4,072) -- -- (4,072)
Treasury stock, at cost; 766,092
shares as of October 31, 2006 ............................ (5,294) -- -- (5,294)
---------------------------------------------------------------
145,529 16,399 (16,399) 145,529
---------------------------------------------------------------
$ 257,960 $ 74,081 $ (29,061) $ 302,980
===============================================================
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
2
AMREP CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Six Months Ended October 31, 2006
(In thousands, except per share data)
Palm Coast
AMREP Data
Corporation and Holdco, Inc.
Subsidiaries 7/1/2006- Pro Forma Pro
10/31/2006 12/31/2006 Adjustments Forma
-------------------------------------------------------------
Revenues:
Real estate operations-
Land sales ...................................... $ 64,197 $ -- $ -- $ 64,197
Media services operations ......................... 43,740 27,478 -- 71,218
Interest and other ................................ 6,387 -- (749)(L) 5,638
------------------------------------------------------------
114,324 27,478 (749) 141,053
------------------------------------------------------------
Costs and Expenses:
Real estate cost of sales - land sales ............ 19,484 -- -- 19,484
Operating expenses:
Media services operations ....................... 36,825 20,783 (956)(I) 57,937
1,285 (I)
Real estate commissions and selling ............. 914 -- -- 914
Other operations ................................ 552 -- -- 552
General and administrative:
Media services operations ......................... 3,317 4,852 (69)(I) 6,769
85 (I)
(413)(J)
(1,003)(K)
Real estate operations and corporate .............. 2,477 -- -- 2,477
Amortization expense ................................ -- 864 (864)(G) 604
604 (G)
Interest, net ....................................... 174 3,262 (3,262)(H) 1,582
1,408 (H)
------------------------------------------------------------
63,743 29,761 (3,185) 90,319
------------------------------------------------------------
Income before income taxes .......................... 50,581 (2,283) 2,436 50,734
Provision for income taxes .......................... 18,715 -- 57 (N) 18,772
------------------------------------------------------------
Net income .......................................... $ 31,866 $ (2,283) $ 2,379 $ 31,962
============================================================
Earnings per share from continuing
operations ........................................ $ 4.79 $ 4.81
----------- ---------
Earnings per share, basic and diluted ............... $ 4.79 $ 4.81
=========== =========
Weighted average number of common
shares outstanding ................................ 6,646 6,646
=========== =========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
3
AMREP CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended April 30, 2006
(In thousands, except per share data)
Palm Coast Palm Coast
AMREP Data Data
Corporation and Holdings, L.L.C Holdco, Inc.
Subsidiaries 7/1/2005- 8/10/2005- Pro Forma Pro
04/30/2006 08/09/2005 06/30/2006 Adjustments Forma
---------------------------------------------------------------------------
Revenues:
Real estate operations-
Land sales ...................................... $ 57,810 $ -- $ -- $ -- $ 57,810
Media services operations ......................... 88,463 5,591 45,513 -- 139,567
Interest and other ................................ 2,023 -- -- (737)(L) 1,286
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148,296 5,591 45,513 (737) 198,663
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Costs and Expenses:
Real estate cost of sales - land sales ............ 26,732 -- -- -- 26,732
Operating expenses:
Media services operations ....................... 73,956 4,116 34,886 (2,008)(I) 113,520
2,570 (I)
Real estate commissions and selling ............. 1,427 -- -- -- 1,427
Other operations ................................ 1,114 -- -- -- 1,114
General and administrative:
Media services operations ....................... 7,686 1,901 7,501 (132)(I) 13,901
170 (I)
(769)(J)
(2,456)(K)
Real estate operations and corporate ............ 4,310 -- -- -- 4,310
Organizational costs ................................ -- -- 349 -- 349
Amortization expense ................................ -- -- 1,543 (1,543)(G) 1,208
1,208 (G)
Interest, net ....................................... 344 30 5,606 (5,636)(H) 3,160
2,816 (H)
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115,569 6,047 49,885 (5,780) 165,721
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Income from continuing operations
before income taxes ............................... 32,727 (456) (4,372) 5,043 32,942
Provision for income taxes from
continuing operations ............................. 10,233 -- -- 80 (N) 10,313
---------------------------------------------------------------------------
Income from continuing operations ................... 22,494 (456) (4,372) 4,963 22,629
Income from operations of discontinued
business (net of income taxes) .................... 3,556 -- -- -- 3,556
---------------------------------------------------------------------------
Net income .......................................... $ 26,050 $ (456) $ (4,372) $ 4,963 $ 26,185
===========================================================================
Earnings per share from continuing
operations $ 3.39 $ 3.41
Earnings per share from discontinued
operations 0.54 0.54
----------- ---------
Earnings per share, basic and diluted $ 3.93 $ 3.95
=========== =========
Weighted average number of common
shares outstanding 6,633 6,633
=========== =========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The unaudited pro forma consolidated statement of income for the fiscal year
ended April 30, 2006 includes the unaudited consolidated results of Holdings for
the period July 1, 2005 through August 9, 2005 and the audited consolidated
results of PCD Inc. for the period August 10, 2005 through June 30, 2006.
(A) The preliminary allocation of the purchase price of PCD Inc. to net
tangible and identifiable intangible assets is based on their estimated
fair values as of January 16, 2007, determined using valuations and other
studies that are not yet complete. The excess of the purchase price, plus
estimated fees and expenses related to the acquisition, over the net
tangible and identifiable intangible assets is allocated to goodwill.
Base purchase price per contract ....................... $ 92,000
Working capital and other adjustments .................. 3,732
Related acquisition costs .............................. 550
--------
Total purchase price ........................... 96,282
Pay-off of debt and related interest ........... 47,342
Pay-off of deferred compensation ............... 2,433
--------
46,507
Book value per historical
financial statements ........................... 16,399
--------
Excess purchase price over net
book value acquired ............................ $ 30,108
========
The excess purchase price has been allocated as follows:
Property, plant and equipment ..................... $ 7,292
Deferred taxes .................................... 2,067
Deferred order entry costs ........................ 1,636
Customer contracts ................................ (3,920)
Deferred financing costs .......................... (848)
Goodwill .......................................... 23,881
--------
$ 30,108
========
(B) Reflects pay-off of $46,031 PCD Inc. debt and $1,311 of related interest
and the addition of $39,180 borrowings under AMREP's credit facilities and
$168 of deferred financing costs associated with acquisition.
(C) Reflects termination of PCD Inc. deferred compensation plan and pay-off of
liability.
(D) To eliminate PCD Inc. capital contributed in excess of par and retained
earnings (deficit).
(E) Increase in assets associated with acquisition including $1,636 for
capitalized deferred order entry costs.
(F) Not used.
(G) Eliminate PCD Inc. amortization of intangible assets and adjust expense for
new intangible asset values to be amortized over twelve years.
(H) Eliminate PCD Inc. and Holdings interest expense and add interest expense
for borrowings under AMREP's credit arrangement of $39,180 with an average
approximate interest rate of 7.2%. No interest expense adjustment was made
for prior years related to any additional debt that would have been
incurred to complete the transaction.
(I) Eliminate PCD Inc. and Holdings historical depreciation expense and adjust
for new depreciation.
(J) Eliminate fees from prior consulting services agreements that were
terminated concurrent with the acquisition.
(K) Eliminate expense associated with certain PCD Inc. and Holdings management
equity compensation plans under prior ownership that have terminated.
(L) To adjust interest income for cash used to acquire PCD Inc.
5
(M) Record deferred tax asset at an effective tax rate of 37% for a net
operating loss acquired and for the net difference between the book and tax
basis of tangible and intangible assets acquired.
(N) Adjust income taxes for net effect of the pro forma adjustments together
with the combined results of operations of PCD Inc. and Holdings for the
year ended June 30, 2006 and the results of operations of PCD Inc. for the
six months ended December 31, 2006. An estimated effective tax rate of 37%
was used.
6