10-Q 1 0001.txt 1ST QUARTER FILING 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, 2000 ______________________________________ 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 12, 2000 - 6,624,796. FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES INDEX PART I PAGE NO. Consolidated Financial Statements: Balance Sheets July 31, 2000 (Unaudited) and April 30, 2000 (Audited) 1 Statements of Operations and Retained Earnings (Unaudited) Three Months Ended July 31, 2000 and 1999 2 Statements of Cash Flows (Unaudited) Three Months Ended July 31, 2000 and 1999 3 Notes to Consolidated Financial Statements 4 Management's Discussion and Analysis 5-7 Quantitative and Qualitative Disclosures about Market Risk 7 PART II Other Information 8 Signatures 9 Exhibit Index 10 FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets July 31, 2000 and April 30, 2000 (Thousands, except par value and number of shares) July 31, 2000 April 30,2000 --------------- --------------- (Unaudited) (Audited) ASSETS Cash and cash equivalents $ 11,397 $ 12,934 Real estate operations 9,160 9,108 Magazine circulation operations 46,076 45,366 Real estate inventory 72,045 70,548 Property, plant and equipment, at cost, net of accumulated depreciation and amortization of $14,512 at July 31, 2000 and $14,032 at April 30, 2000. 17,602 17,852 Other assets 10,974 11,437 Excess of cost of subsidiary over net assets acquired 5,191 5,191 --------------- --------------- $ 172,445 $ 172,436 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 13,606 $ 17,783 Deposits and accrued expenses 10,800 8,137 Notes payable: Amounts due within one year 13,445 15,599 Amounts subsequently due 38,827 31,312 --------------- --------------- 52,272 46,911 Taxes payable: Amounts due (receivable) within one year (410) (1,002) Amounts subsequently due 5,999 5,999 --------------- --------------- 5,589 4,997 Deferred income taxes 2,666 2,627 --------------- --------------- 84,933 80,455 --------------- --------------- Shareholders' equity: Common stock, $.10 par value; shares authorized - 20,000,000; shares issued -7,399,677 at July 31, 2000 and 7,398,677 issued at April 30, 2000 740 740 Capital contributed in excess of par value 44,936 44,930 Retained earnings 47,044 47,258 Treasury stock, at cost; 745,981 shares at July 31, 2000 and 158,327 shares at April 30, 2000 (5,208) (947) --------------- --------------- 87,512 91,981 --------------- --------------- $ 172,445 $ 172,436 =============== =============== 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, 2000 and 1999 (Thousands, except per share amounts) 2000 1999 --------------- --------------- REVENUES Real estate operations: Land sales $ 2,771 $ 8,226 Home and condominium sales 2,213 18,711 --------------- --------------- 4,984 26,937 Magazine circulation operations 12,329 13,000 Interest and other operations 897 2,098 --------------- --------------- 18,210 42,035 --------------- --------------- COSTS AND EXPENSES Real estate cost of sales: Land sales 1,356 5,863 Home and condominium sales 2,207 16,493 Operating expenses: Magazine circulation operations 10,206 10,466 Real estate commissions and selling 327 1,590 Other operations 549 1,011 General and administrative: Real estate operations and corporate 930 1,942 Magazine circulation operations 2,173 1,569 Interest, net 818 913 --------------- --------------- 18,566 39,847 --------------- --------------- Income (loss) before income taxes (356) 2,188 PROVISION (BENEFIT ) FOR INCOME TAXES (142) 875 --------------- --------------- NET INCOME (LOSS) (214) 1,313 RETAINED EARNINGS, beginning of period 47,258 46,089 --------------- --------------- RETAINED EARNINGS, end of period $ 47,044 $ 47,402 =============== =============== EARNINGS (LOSS) PER SHARE-BASIC AND DILUTED $ (0.03) $ 0.18 =============== =============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,922 7,362 =============== =============== See notes to consolidated financial statements. 2 FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Three Months Ended July 31,2000 and 1999 (Thousands) 2000 1999 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (loss) $ (214) $ 1,313 --------------- --------------- Adjustments to reconcile net income to net cash provided (used) by operating activities - Depreciation and amortization 754 1,158 Non-cash credits and charges: Loss on disposition of fixed assets - 17 Pension benefit accrual (185) (35) Expense recorded on issuance of treasure stock - 92 Changes in assets and liabilities - Receivables (762) 684 Real estate inventory (1,497) 14,979 Other assets 375 (594) Accounts payable, deposits and accrued expenses (1,514) (7,870) Taxes payable 592 (1,158) Deferred income taxes 39 323 --------------- --------------- Total adjustments (2,198) 7,596 --------------- --------------- Net cash provided (used) by operating activities (2,412) 8,909 --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (231) (220) --------------- --------------- Net cash used by investing activities (231) (220) --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing 20,960 3,520 Principal debt payments (15,599) (23,213) Proceeds from exercise of stock option 6 - Purchase of Treasury stock (4,261) (257) --------------- --------------- Net cash provided (used) by financing activities 1,106 (19,950) --------------- --------------- Decrease in cash and cash equivalents (1,537) (11,261) CASH AND CASH EQUIVALENTS,beginning of period 12,934 23,553 --------------- --------------- CASH AND CASH EQUIVALENTS, end of period $ 11,397 $ 12,292 =============== =============== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid - net of amounts capitalized $ 1,013 $ 1,025 =============== =============== Income taxes paid (refunded) $ (771) $ 1,698 =============== =============== 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, 2000 and 1999 (1) BASIS OF PRESENTATION The accompanying unaudited financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. The April 30, 2000 balance sheet amounts have been derived from the April 30, 2000 audited financial statements of the Registrant. Since the accompanying consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements, it is suggested that they be read in conjunction with the financial statements and notes thereto included in the Registrant's April 30, 2000 Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited financial statements include all adjustments, which are of a normal recurring nature, necessary to reflect a fair presentation of the results for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full fiscal year. (2) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT INDUSTRY SEGMENTS: The following schedules set forth summarized data relative to the industry segments in which the Company operates for the three month periods ended July 31, 2000 and 1999. Land Home Corporate Sales Building Distribution Fulfillment and Other Consolidated THREE MONTHS: July 2000 (Thousands): Revenues $ 3,055 $ 2,239 $ 3,833 $ 8,496 $ 587 $ 18,210 Expenses (excluding interest) 2,124 2,434 3,710 8,349 1,131 17,748 Interest expense, net 114 29 491 139 45 818 --------- -------- -------- --------- -------- -------- Pretax income (loss) contribution $ 817 $ (224) $ (368) $ 8 $ (589) $ (356) ========= ========= ========= ========= ========= ========= Identifiable assets $ 75,126 7,128 51,892 18,470 19,829 172,445 -------------------------------------------------------------------------------------------------------------- July 1999 (Thousands): Revenues $ 8,339 $ 19,839 $ 4,655 $ 8,345 $ 857 $ 42,035 Expenses (excluding interest) 6,461 19,096 3,763 8,272 1,342 38,934 Interest expense, net 105 182 419 152 55 913 --------- -------- -------- --------- -------- -------- Pretax income (loss) contribution $ 1,773 $ 561 $ 473 $ (79) $ (540) $ 2,188 ========= ========= ========= ========= ========= ========= Identifiable assets $ 75,861 19,556 54,633 19,441 21,037 190,528 -------------------------------------------------------------------------------------------------------------- Certain amounts in July 1999 have been reclassified to conform to the current year presentation.
4 FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations July 31, 2000 RESULTS OF OPERATIONS Total revenues for the first quarter of fiscal 2001 decreased to $18.2 million from $42.0 million in the comparable period of the prior year, principally as a result of the restructuring of the Company's real estate operations, including the continuing wind-down of homebuilding activities. Revenues from land sales for the first quarter of fiscal 2001 decreased to $2.8 million from $8.2 million in the comparable period of the prior year, primarily due to a lower volume of sales of residential lots to builders. Revenues from residential lot sales decreased to $2.4 million in the first quarter of the current year from $6.8 million in the same period last year, primarily because the prior year period included sales to other homebuilders in Colorado with an aggregate sales value of over $3.0 million made as part of the Company's restructuring plan to sell its remaining real estate assets in Colorado, whereas there were no comparable sales in the current year period. In addition, revenues from the sale of commercial and industrial land decreased to $400,000 in the first quarter of the current year from $1.5 million in the same period last year. The average gross profit percentage on land sales increased from 29% in the first quarter of fiscal 2000 to 51% in the first quarter of fiscal 2001 mainly because the prior year had included a higher percentage of sales of residential lots, including those in Colorado discussed above, which have generally been at lower gross profit percentages than the commercial and industrial land sales have historically achieved. 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. Revenues from housing sales decreased to $2.2 million in the first quarter of fiscal 2001 from $18.7 million in the same period last year, as the Company delivered only 8 homes in the current year compared to 127 in the prior year. This decrease reflected the effects of the restructuring of the Company's real estate operations, as discussed above, and is expected to continue as homebuilding activities are completed. Revenues from magazine circulation operations decreased to $12.3 million in the first quarter of the current year compared to $13.0 million in the comparable period of the prior year, which reflected a decrease in the distribution segment of this business. Revenues from the Newsstand Distribution Services decreased approximately $800,000 (18%) in this year's first quarter compared to the prior year, resulting from customer losses and decreased sales percentages, which was 5 partially offset by a revenue increase of $150,000 (2%) in Fulfillment operations. Partially offsetting this revenue decrease was a decrease of $260,000 (2%) in magazines circulation operating expenses, due in part to payroll-related reductions and reduced bad debt expense. Revenues from "Interest and other operations" decreased by $1.2 million in the first quarter of fiscal 2001 compared to the prior year due to the wind-down of ancillary operations related to homebuilding. In addition, the prior year included the recognition of management fee and equity income of approximately $700,000 from the sale of a project in California in which the Company was a joint venture participant. Other operations expenses decreased by approximately $500,000 which was commensurate with the decrease in ancillary revenues noted above. Real estate commissions and selling expenses decreased as a result of the wind-down of homebuilding operations. Real estate and corporate general and administrative expenses also decreased due to the effects of the Company's restructuring, including the wind-down of homebuilding activities. General and administrative costs of magazine circulation operations increased by approximately $600,000, due in part to the accrual of severance and related benefits associated with the previously announced October 31, 2000 retirement of Kable's chief executive officer. Interest expense decreased moderately due to lower borrowing requirements within the real estate segments, offset in part by increased interest in the magazine circulation operations resulting from slightly higher receivable balances. As previously reported, the Company has been involved for several years in an ongoing process of audits of its Federal tax returns by the Internal Revenue Service ("IRS") for fiscal years 1984 through 1996. The Company has previously resolved all issues and paid taxes and related interest due for the years 1984 through 1992, and reached an interim agreement and paid all amounts due on certain issues for the years 1993 through 1996. In September 2000, the IRS presented to the Company a proposal to settle all remaining federal tax matters for these years. Until a final settlement has been approved by the Company and the IRS, however, these examinations remain open. If the proposed settlement becomes final, the amount actually owed for taxes and interest would be less than the amount accrued for this liability, and a tax benefit would be recognized at that time. While the exact amount of the potential tax benefit is uncertain and requires, among other things, the approval of the final agreement by the IRS and the determination of related interest, as well as a determination of resulting state tax adjustments, it could approximate $3.5 million. LIQUIDITY AND CAPITAL RESOURCES During the past several years, the Company has financed its operations from internally generated funds from home and land sales and magazine circulation operations, and from borrowings under its various lines-of-credit and construction loan agreements. 6 Over the past eighteen months, the Company has restructured its real estate operations by winding-down homebuilding activities and selling a portion of its landholdings in Colorado, California and Oregon. During this period, both inventories and debt have been substantially reduced. At July 31, 2000, inventories amounted to $72.0 million compared to $70.5 million at April 30, 2000 and $92.1 million at April 30, 1999, while notes payable amounted to $52.3 million at July 31, 2000, $46.9 million at April 30, 2000 and $74.7 million at April 30, 1999. In connection with a previously announced self-tender "Dutch Auction", the Company reacquired 587,654 shares of its stock to be held as treasury stock at a cost of approximately $4.3 million, including expenses, during the quarter ended July 31, 2000. The Company also announced the resumption of a program which had commenced in April 1999 to purchase up to 300,000 shares of its common stock from time to time in the open market, under which 143,300 shares had been reacquired until the program was suspended in November 1999. The Company believes that cash provided from operations together with existing cash balances, its lines-of-credit and land development loans will be sufficient to maintain liquidity at a satisfactory level. Statement of Forward-Looking Information Certain information included herein and in other Company statements, reports and filings with the Securities and Exchange Commission is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Refer to Item 7 of the Annual Report on Form 10-K for a discussion of the assumptions and factors on which these statements are based. Any changes in the actual outcome of these assumptions and factors could produce significantly different results; accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the Company's market risk for the three-month period ended July 31, 2000. See Item 7(A) of the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2000 for additional information regarding quantitative and qualitative disclosures about market risk. 7 PART II Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10(a) Employment Termination and Consulting Agreement and General Release dated July 28, 2000 between the Registrant and Kable News Company, Inc. and Daniel Friedman 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, 2000. 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: September 14, 2000 By: /s/ Mohan Vachani Mohan Vachani Senior Vice President, Chief Financial Officer Dated: September 14, 2000 By: /s/ Peter M. Pizza Peter M. Pizza Vice President, Controller 9 FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES EXHIBIT INDEX 10(a) Employment Termination and Consulting Agreement and General Release dated July 28, 2000 between the Registrant and Kable News Company, Inc. and Daniel Friedman 27. Financial Data Schedule 10