-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EXKc20w/PeRH3JFTb4T7G0RgULSaAglqNrDvT6j4q2MrobuDxsNYKVw/V4+2BiRa TdbkPNVVGldZO7U4a0+g6w== 0000006207-00-000009.txt : 20001218 0000006207-00-000009.hdr.sgml : 20001218 ACCESSION NUMBER: 0000006207-00-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20001215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMREP CORP CENTRAL INDEX KEY: 0000006207 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590936128 STATE OF INCORPORATION: OK FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04702 FILM NUMBER: 790352 BUSINESS ADDRESS: STREET 1: 641 LEXINGTON AVENUE STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127054700 MAIL ADDRESS: STREET 1: 641 LEXINGTON AVE STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN REALTY & PETROLEUM CORP DATE OF NAME CHANGE: 19671019 10-Q 1 0001.txt 2ND 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 October 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 December 13, 2000 - 6,612,196. AMREP CORPORATION AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Consolidated Financial Statements: Balance Sheets October 31, 2000 (Unaudited) and April 30, 2000 (Audited) 1 Statements of Operations and Retained Earnings (Unaudited) Three Months Ended October 31, 2000 and 1999 2 Statements of Operations and Retained Earnings (Unaudited) Six Months Ended October 31, 2000 and 1999 3 Statements of Cash Flows (Unaudited) Six Months Ended October 31, 2000 and 1999 4 Notes to Consolidated Financial Statements 5-6 Item 2. Management's Discussion and Analysis 7-9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 4. Submission of Matters to Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 10-K 12 SIGNATURES 13 EXHIBIT INDEX 14 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements AMREP CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Thousands, except par value and number of shares) October 31, 2000 April 30, 2000 ---------------------- ------------------ (Unaudited) (Audited) ASSETS Cash and cash equivalents $ 11,825 $ 12,934 Receivables, net: Real estate operations 8,673 9,108 Magazine circulation operations 40,630 45,366 Real estate inventory 75,441 70,548 Property, plant and equipment, at cost, net of accumulated depreciation and amortization of $14,870 at October 31, 2000 and $14,032 at April 30, 2000. 17,376 17,852 Other assets 10,934 11,437 Excess of cost of subsidiary over net assets acquired 5,191 5,191 -------------- -------------- $ 170,070 $ 172,436 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 14,938 $ 17,783 Deposits and accrued expenses 8,669 8,137 Notes payable: Amounts due within one year 45,026 15,599 Amounts subsequently due 5,137 31,312 -------------- -------------- 50,163 46,911 Taxes payable: Amounts due (receivable) within one year (240) (1,002) Amounts subsequently due 5,999 5,999 ------------- -------------- 5,759 4,997 Deferred income taxes 2,705 2,627 ------------- -------------- 82,234 80,455 ------------- -------------- Commitments and Contingencies Shareholders' equity: Common stock, $.10 par value; shares authorized - 20,000,000; shares issued -7,399,677 at October 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 47,599 47,258 Treasury stock, at cost; 787,481 shares at October 31, 2000 and 158,327 shares at April 30, 2000 (5,439) (947) -------------- -------------- 87,836 91,981 -------------- -------------- $ 170,070 $ 172,436 ============== ============== See notes to consolidated financial statements. 1 AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Retained Earnings (Unaudited) Three Months Ended October 31, 2000 and 1999 (Thousands, except per share amounts) 2000 1999 ------------------ ------------------- REVENUES Real estate operations: Land sales $ 3,112 $ 12,118 Home and condominium sales 507 7,890 ------------------ ------------------- 3,619 20,008 Magazine circulation operations 12,740 13,863 Interest and other operations 1,032 442 ------------------ ------------------- 17,391 34,313 ------------------ ------------------- COSTS AND EXPENSES Real estate cost of sales: Land sales 1,165 8,473 Home and condominium sales 1,166 7,885 Operating expenses: Magazine circulation operations 9,917 10,732 Real estate commissions and selling 256 1,229 Other operations 577 971 General and administrative: Real estate operations and corporate 1,227 1,574 Magazine circulation operations 1,356 1,648 Interest, net 803 731 ------------------ ------------------- 16,467 33,243 ------------------ ------------------- Income before income taxes 924 1,070 PROVISION FOR INCOME TAXES 369 428 ------------------ ------------------- NET INCOME 555 642 RETAINED EARNINGS, beginning of period 47,044 47,402 ------------------ ------------------- RETAINED EARNINGS, end of period $ 47,599 $ 48,044 ================== =================== EARNINGS PER SHARE - BASIC AND DILUTED $ 0.08 $ 0.09 ================== =================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,629 7,297 ================== =================== See notes to consolidated financial statements. 2 AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations and Retained Earnings (Unaudited) Six Months Ended October 31, 2000 and 1999 (Thousands, except per share amounts) 2000 1999 ------------------ ------------------- REVENUES Real estate operations: Land sales $ 5,883 $ 20,344 Home and condominium sales 2,720 26,601 ------------------ ------------------- 8,603 46,945 Magazine circulation operations 25,069 26,863 Interest and other operations 1,929 2,540 ------------------ ------------------- 35,601 76,348 ------------------ ------------------- COSTS AND EXPENSES Real estate cost of sales: Land sales 2,521 14,336 Home and condominium sales 3,373 24,378 Operating expenses: Magazine circulation operations 20,123 21,198 Real estate commissions and selling 583 2,819 Other operations 1,126 1,982 General and administrative: Real estate operations and corporate 2,157 3,516 Magazine circulation operations 3,529 3,217 Interest, net 1,621 1,644 ------------------ ------------------- 35,033 73,090 ------------------ ------------------- Income before income taxes 568 3,258 PROVISION FOR INCOME TAXES 227 1,303 ------------------ ------------------- NET INCOME 341 1,955 RETAINED EARNINGS, beginning of period 47,258 46,089 ------------------ ------------------- RETAINED EARNINGS, end of period $ 47,599 $ 48,044 ================== =================== EARNINGS PER SHARE - BASIC AND DILUTED $ 0.05 $ 0.27 ================== =================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,775 7,329 ================== =================== See notes to consolidated financial statements. 3 AMREP CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Six Months Ended October 31, 2000 and 1999 (Thousands) 2000 1999 ----------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 341 $ 1,955 ----------------- ------------------ Adjustments to reconcile net income to net cash provided (used)by operating activities - Depreciation and amortization 1,536 2,372 Non-cash credits and charges: (Gain) loss on disposition of fixed assets (192) 169 Inventory and joint venture valuation adjustments and write-offs 283 1,223 Pension benefit accrual (369) (162) Expense recorded on issuance of treasury stock - 92 Changes in assets and liabilities - Receivables 5,171 3,209 Real estate inventory (5,176) 20,610 Other real estate investments - 652 Other assets 265 (1,091) Accounts payable, deposits and accrued expenses (2,313) (5,667) Taxes payable 762 (3,194) Deferred income taxes 78 646 ----------------- ------------------ Total adjustments 45 18,859 ----------------- ------------------ Net cash provided by operating activities 386 20,814 ----------------- ------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,251) (944) Proceeds from assets sold 990 - ----------------- ------------------ Net cash used by investing activities (261) (944) ----------------- ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing 13,125 11,410 Principal debt payments (9,873) (36,385) Proceeds from exercise of stock option 6 - Purchase of treasury stock (4,492) (840) ----------------- ------------------ Net cash used by financing activities (1,234) (25,815) ----------------- ------------------ cash equivalents (1,109) (5,945) CASH AND CASH EQUIVALENTS, beginning of period 12,934 23,553 ----------------- ------------------ CASH AND CASH EQUIVALENTS, end of period $ 11,825 $ 17,608 ================= ================== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid - net of amounts capitalized $ 1,621 $ 1,737 ================= ================== Income taxes paid (refunded) $ (771) $ 3,795 ================= ================== See notes to consolidated financial statements. 4 AMREP CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended October 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 and six month periods ended October 31, 2000 and 1999.
THREE MONTH Land Home Building Corporate Sales Distribution Fulfillment and Other Consolidated October 2000 (Thousands): Revenues $ 3,588 $ 530 $ 3,574 $ 9,166 $ 533 $ 17,391 Expenses(excluding interest) 1,954 1,323 3,488 8,105 794 15,664 Interest expense, net 81 5 524 151 42 803 -------------- -------------- --------------- ------------- ------------- --------------- Pretax income (loss) contribution $ 1,553 $ ( 798) $ (438) $ 910 $ (303) $ 924 ============== ============== =============== ============= ============= =============== - --------------------------------------------------------------------------------------------------------------------------- October 1999 (Thousands): Revenues $ 12,718 $ 7,179 $ 4,124 $ 9,739 $ 553 $ 34,313 Expenses(excluding intere 10,123 9,215 3,615 8,765 794 32,512 Interest expense, net 156 22 392 143 18 731 -------------- -------------- -------------- ------------- ------------- -------------- Pretax income (loss) contribution $ 2,439 $ (2,058) $ 117 $ 831 $ (259) $ 1,070 ============== ============= ============== ============= ============= ==============
5
Land Home Corporate Sales Building(a) Distribution Fulfillment and Other Consolidated SIX MONTHS: October 2000 (Thousands): Revenues $ 6,643 $ 2,769 $ 7,407 $ 17,662 $ 1,120 $ 35,601 Expenses (excluding interest) 4,078 3,757 7,198 16,454 1,925 33,412 Interest expense, net 195 34 1,015 290 87 1,621 ----------- ------------ ------------- ----------- ----------- ------------ Pretax income (loss) contribution $ 2,370 $ (1,022) $ (806) $ 918 $ (892) $ 568 =========== ============ ============= =========== =========== ============ Identifiable assets $ 82,068 $ 5,201 $ 51,892 $ 14,555 $ 16,354 $ 170,070 - ---------------------------------------------------------------------------------------------------------------------------- October 1999 (Thousands): Revenues $ 21,746 $ 26,500 $ 8,779 $ 18,084 $ 1,239 $ 76,348 Expenses (excluding interest) 16,722 28,133 7,378 17,037 2,176 71,446 Interest expense, net 285 218 811 295 35 1,644 ----------- ------------ ------------- ----------- ----------- ------------ Pretax income (loss) contribution $ 4,739 $ (1,851) $ 590 $ 752 $ (972) $ 3,258 =========== ============ ============= =========== =========== ============ Identifiable assets (b) $ 77,107 $ 15,020 $ 57,081 $ 19,687 $ 16,899 $ 185,794
(a) Includes the effect of valuation adjustments and other write-offs on certain inventories and equity investments in joint ventures of approximately $500,000 and $1.9 million recorded in the quarters ended October 31, 2000 and 1999 respectively. (b) Certain amounts in the 1999 grouping of Identifiable assets have been reclasssified to conform to the current year presentation. 6 AMREP CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Three and Six Months ended October 31, 2000 and 1999 Total revenues were $17.4 million and $35.6 million for the three and six month periods ended October 31, 2000, respectively, compared to $34.3 million and $76.3 million in the comparable periods of the prior year. The reduction in revenues was principally due to the restructuring of the Company's real estate operations, including the continuing wind-down of homebuilding activities. Revenues from land sales were $3.1 million and $5.9 million in the three and six month periods ended October 31, 2000, respectively, compared to $12.1 million and $20.3 million in the comparable periods of the prior year, resulting from decreased sales of both residential lots to homebuilders as well as commercial and industrial properties. Revenues from residential lot sales decreased to $2.9 million in the second quarter and $5.2 million in the six month period ended October 31, 2000 from $8.2 million and $15.0 million in the comparable periods of the prior year, primarily because the prior year periods included bulk lot sales to other homebuilders in Colorado with an aggregate sales value of over $5.0 million and $8.0 million, respectively, 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 periods. In addition, revenues from the sale of commercial and industrial land were $200,000 and $600,000 in the three and six month periods ended October 31, 2000, respectively, compared to $3.9 million and $5.4 million in the comparable periods last year. The average gross profit percentage on land sales increased from 30% in both the second quarter and six month periods of fiscal 2000 to 63% in the second quarter and 57% in the six month period of fiscal 2001, mainly because the prior year included a higher percentage of sales of residential lots, including those bulk lot sales in Colorado discussed above, which was generally at lower gross profit percentages than 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 necessarily an indication of amounts that may be expected to occur in future periods. Revenues from housing sales decreased to $500,000 and $2.7 million in the three and six month periods of fiscal 2001, respectively, from $7.9 million and $26.6 million in the same periods of the prior year, which decrease reflected the effects of the restructuring of the Company's real estate operations, as discussed above, and is expected to continue as the Company's remaining homebuilding activities are completed. In addition, the second quarter results included charges of approximately $500,000 in fiscal 2001 and $1.9 million in fiscal 2000 for valuation adjustments and other reserves associated with the wind-down of certain real estate projects outside of the Company's core market in Rio Rancho, New Mexico. There was no other significant effect on net income resulting from the withdrawal from homebuilding between these periods, however, as the decline in homebuilding gross profits in the first half of fiscal 2001 was substantially offset by a comparable decrease in homebuilding-related commissions and selling and general and administrative expenses. 7 Revenues from magazine circulation operations decreased to $12.7 million and $25.1 million in the three and six month periods of the current year, respectively, compared to $13.9 million and $26.9 million in the comparable periods of the prior year, primarily due to a decrease in the magazine distribution segment of Kable News Company. Revenues from Newsstand Distribution Services decreased approximately 13% in this years second quarter and 16% for the six month period compared to last year, primarily due to customer losses and decreased sales for existing customers. Revenues from Fulfillment Services also decreased by 6% and 2% in the three and six month periods of fiscal 2001, respectively, compared to the prior year, primarily as a result of the loss of sweepstakes processing business for one customer, which was partly offset by increased revenues from core fulfillment and other services. Also partially offsetting this revenue decrease was a decrease in magazines circulation operating expenses of 8% in the second quarter and 5% in the six month period, due in part to payroll-related reductions and reduced bad debt expense. Revenues from "Interest and other operations" increased in the second quarter of fiscal 2001 compared to last year which included the effects of certain valuation adjustments and write-offs associated with equity investments in joint ventures, but decreased for the six month period due to the wind-down of ancillary operations related to homebuilding. Other operations expenses decreased in both the three and six month periods commensurate with the decrease in ancillary revenues noted above. Real estate commissions and selling expenses decreased in both the three and six month periods as a result of the wind-down of homebuilding operations and lower land sales. Real estate and corporate general and administrative expenses also decreased in both periods due to the effects of the Company's restructuring, including the wind-down of homebuilding activities. General and administrative costs of magazine circulation operations in the second quarter of fiscal 2001 were comparable to the prior year, and increased for the six month period as a result of an increase in certain insurance costs. Interest expense increased moderately in the second quarter and is comparable for the six month period of fiscal 2001 compared to the same periods of fiscal 2000, generally 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 and interest rates. As previously reported, the Company has been involved for several years in ongoing 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. 8 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. Over the past twenty-one 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. At October 31, 2000, inventories increased to $75.4 million compared to $70.5 million at April 30, 2000 as a result of additional development of land in Rio Rancho, while notes payable increased to $50.2 million at October 31, 2000 compared to $46.9 million at April 30, 2000 due to increased borrowings in the magazine circulation operations. At October 31, 2000, the Company was not in compliance with a financial covenant of the $40 million credit arrangement for its magazine circulation operations, under which $31.8 million was outstanding. A waiver has been granted. This line of credit arrangement expires in September 2001. Accordingly, the amount outstanding has been classified as "Amount due within one year". The Company has been in negotiations with the lenders for an extension of the arrangement, however, no agreement has yet been reached. 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 reacquired an additional 41,500 shares of its common stock from time to time in the open market at an approximate cost of $230,000 under a previously announced program. 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. 9 Item 3. 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 October 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. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings A civil action entitled United Magazine Company, Inc. et al. v. Murdoch Magazines Distribution, Inc., el al was commenced in the United States District Court for the Southern District of New York in May, 2000 by United Magazine Company and five affiliated companies ("Unimag" or "plaintiffs"). The plaintiffs were for many years in the business of wholesale distribution of magazines and other periodicals in Ohio, Michigan and parts of other states, with alleged annual sales in 1998 of $324 million. They originally sued Murdoch Magazines Distribution, Inc., a national distributor of magazines and other periodicals ("Murdoch"), and Chas. Levy Circulating Co., a large wholesaler ("Levy"), complaining that Murdoch and Levy destroyed Unimag's business through various improper acts. Murdoch moved to dismiss the complaint. In response, on August 31, 2000, Unimag filed an Amended Complaint correcting to some extent certain deficiencies in the original Complaint and adding as defendants the other national distributors including Kable News Company, Inc., ("Kable"), a wholly-owned subsidiary of the Registrant. The Amended Complaint contains 15 causes of action, some of which are solely against Murdoch or Levy. The main allegation of the Amended Complaint is that the defendants destroyed plaintiff's business through violations of the antitrust laws, breaches of contracts and other improper acts. Plaintiffs allege that for many years wholesalers occupied exclusive territories pursuant to agreements with the national distributors, and that the right of exclusivity was enforced by the national distributors through their control of allotments of national publications containing local content and local advertising and their refusal to increase allotments to wholesalers who sought to invade the territories of other wholesalers. Plaintiffs further allege that commencing in 1995, the national distributors began permitting some wholesalers to supply magazines to major retails chains without regard to geographic location, in breach of the alleged exclusivity agreements. Plaintiffs also allege that the national distributors sold magazines to defendant Chas. Levy at prices lower than those charged to plaintiffs, placing plaintiffs at a competitive disadvantage. They seek damages in the amount of $275 million, trebled, plus pre-judgment interest and attorneys' fees. The action is in the preliminary stage but Kable believes that there are substantial defenses available to it, and these will be vigorously pursued. 11 Item 4. Submission of Matters to Vote of Security Holders The Annual Meeting of Shareholders was held on September 20, 2000. At the meeting, Edward B. Cloues II and James Wall were elected as directors. Shareholders cast votes for the election as follows: Nominee "For" "Withheld" Edward B. Cloues II 5,953,235 296,150 James Wall 5,953,238 296,147 The terms of office as directors of Jerome Belson, Daniel Friedman*, Nicholas G. Karabots, Albert V. Russo, Samuel Seidman and Mohan Vachani continued. ___________ *Mr. Friedman resigned effective October 31, 2000. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 4(a) Second Modification Agreement dated as of June 29, 2000 to the Loan Agreement dated as of September 15, 1998 between Kable News Company, Inc. and American National Bank and Trust Company of Chicago as Agent to all Lenders defined herein. 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 October 31, 2000. 12 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: December 15, 2000 By: /s/ Mohan Vachani Mohan Vachani Senior Vice President, Chief Financial Officer Dated: December 15, 2000 By: /s/ Peter M. Pizza Peter M. Pizza Vice President, Controller 13 AMREP CORPORATION AND SUBSIDIARIES EXHIBIT INDEX 4(a) Second Modification Agreement dated as of June 29, 2000 to the Loan Agreement dated as of September 15, 1998 between Kable News Company, Inc. and American National Bank and Trust Company of Chicago as Agent to all Lenders defined herein. 27. Financial Data Schedule 14 EX-4 2 0002.txt MODIFICATION AGREEMENT SECOND MODIFICATION AGREEMENT SECOND MODIFICATION AGREEMENT ("SECOND MODIFICATION AGREEMENT") ENTERED INTO AS OF THE 29th OF JUNE, 2000 BY AND BETWEEN KABLE NEWS COMPANY, INC., AN ILLINOIS CORPORATION ("BORROWER"), AMREP CORPORATION, AN OKLAHOMA CORPORATION ("PARENT"), KABLE NEWS EXPORT, LTD, A DELAWARE CORPORATION, KABLE NEWS COMPANY OF CANADA LTD, AN ONTARIO, CANADA CORPORATION, KABLE NEWS INTERNATIONAL, INC., A DELAWARE CORPORATION, KABLE FULFILLMENT SERVICES OF OHIO, INC., A DELAWARE CORPORATION (COLLECTIVELY REFERRED TO HEREIN AS "ORIGINAL SUBSIDIARIES") AND DISTRIBUNET INC., A DELAWARE CORPORATION ("DISTRIBUNET") AND MAGAZINE CONNECTION INC., A DELAWARE CORPORATION ("CONNECTION") (DISTRIBUNET AND CONNECTION COLLECTIVELY, "NEW SUBSIDIARIES" AND ORIGINAL SUBSIDIARIES AND NEW SUBSIDIARIES COLLECTIVELY REFERRED TO AS "SUBSIDIARIES") (BORROWER, PARENT AND SUBSIDIARIES COLLECTIVELY REFERRED TO HEREIN AS "BORROWING PARTIES"), AND AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("AGENT"), HELLER FINANCIAL, INC. ("HELLER"), MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. ("MERRILL") AND FIRST BANK ("FIRST BANK") (AGENT, HELLER, MERRILL AND FIRST BANK COLLECTIVELY REFERRED TO HEREIN AS "LENDERS") W I T N E S S E T H WHEREAS, Borrower and Lenders have executed that certain Loan Agreement dated September 15, 1998 ("Loan Agreement") relating to certain Loans ("Loans") made by Lenders to Borrower, to wit, a certain Forty Million and No/100 ($40,000,000.00) Dollar Secured Revolving Credit Facility, a certain One Million Two Hundred Thousand and No/100 ($1,200,000.00) Dollar Secured Term Loan and a certain One Million Five Hundred Thousand and No/100 ($1,500,000.00) Dollar Secured Term Loan; and WHEREAS, the Loans are evidenced by Notes (the "Notes") all dated September 15, 1998 executed by Borrower and delivered to the Lenders; and WHEREAS, in connection with the Loans, Borrower and each Original Subsidiary have executed and delivered those certain Security Agreements ("Security Agreements") all dated September 15, 1998; and WHEREAS, in connection with the Loans, Borrower has executed and delivered that certain Trademark Collateral Assignment and Security Agreement ("Trademark Assignment") dated September 15, 1998; and WHEREAS, in connection with the Loans, Parent and each Original Subsidiary have executed and delivered those certain Guaranties ("Guaranties") all dated September 15, 1998; and WHEREAS, in connection with the Loans, Parent has executed and delivered that certain Stock Pledge Agreement ("Stock Pledge") dated September 15, 1998; and WHEREAS, Borrower, Original Subsidiaries and Lenders have executed that certain Modification Agreement relating to the Loans (the "Modification Agreement") dated July 7, 1999 (the Loan Agreement, Notes, Security Agreements, Guaranties, Stock Pledge, all as modified by the Modification Agreement and this Second Modification Agreement, and the hereafter defined New Subsidiarys' Security Agreements and New Subsidiarys' Guaranties are collectively referred to herein as the "Loan Documents"); and WHEREAS, Borrower has formed Distribunet and is desirous of amending the Loan Documents in order to allow Distribunet (a)to become a limited partner of and to invest in two certain Limited Partnerships, to wit Magazinet, L.P. ("Magazinet"), a Delaware limited partnership and Senequier Holdings, L.P., a Texas limited Partnership ("Senequier") (Magazinet and Senequier collectively referred to as the "Partnerships"), and (b)invest in and become a member of Magazinet Management, L.L.C., a Delaware limited liability company ("Management"), the general partner of Magazinet; and WHEREAS, Borrower has also formed Connection in order to engage in the sale of magazines directly to retail sellers of same. WHEREAS, Lenders have agreed to permit the investments and to modify the Loan Documents in accordance with the terms of this Second Modification Agreement conditioned on the terms contained herein including but not limited to the delivery to Lenders of Security Agreements executed by the New Subsidiaries (the "New Subsidiarys' Security Agreements") and Guaranties executed by the New Subsidiaries (the "New Subsidiarys' Guaranties"). NOW, THEREFORE, in consideration of the mutual premises of the parties hereto, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, 2 IT IS AGREED: 1. Preambles. The preambles to this Agreement are fully incorporated herein by this reference thereto with the same force and effect as though restated herein. 2. Defined Terms. To the extent not otherwise defined herein to the contrary, all capitalized terms and/or phrases used in this Agreement shall have the respective meanings assigned to them in the Loan Documents. 3. Modification of Loan Agreement. Borrowing Parties and Lenders hereby agree that the Loan Agreement be and hereby is modified as follows: (a) Distribunet, Inc., a Delaware corporation ("Distribunet"), and Magazine Connection, Inc., a Delaware corporation ("Connection") are hereby added to the definition of "Borrower Entities"; (b) The Security Agreement of even date with this Second Modification Agreement executed by Distribunet in favor of Agent for the ratable benefit of the Lenders as amended from time to time (the "Distribunet Security Agreement") and the Security Agreement of even date with this Second Modification Agreement executed by Connection in favor of Agent for the ratable benefit of the Lenders as amended from time to time (the "Connection Security Agreement") are hereby added to the definition of the "Collateral Documents"; (c) Distribunet and Connection are hereby added to the definition of "Guarantors"; (d) The Guaranty of even date with this Second Modification Agreement executed by Distribunet ("Distribunet Guaranty") and the Guaranty of even date with this Second Modification Agreement executed by Connection (the "Connection Guaranty") are hereby added to the definition of "Subsidiary Guaranties"; (e) Distribunet and Connection are hereby added to the definition of "Subsidiary Guarantors"); (f) Section 6.21 of the Loan Agreement is hereby restated to read: "6.21 Business Activities. The Borrower and its Subsidiaries will not engage in any type of business except (a) the businesses in which they were engaged on April 30, 1998, including, without limitation, the distribution of paperbacks, magazines and related products; product, order and subscription processing and fulfillment; customer service; telemarketing and related services; (b) distribution of magazines in connection with and as contemplated under that certain Investment Agreement between Borrower, Senequier Holdings, L.P., a Texas limited partnership, Distribunet and Mags2Go, L.L.C., a Delaware limited liability company and (c) supplying magazines and other periodicals to retail sellers. However, Borrower may become engaged in the publishing business if such business does not at any time account for greater than ten percent (10%) of Borrower's revenues on an annual basis." 3 Borrowing Parties further agree that the provisions of Section 6.22 of the Loan Agreement apply with equal force and effect to Distribunet and Connection and that in further consideration of Lenders executing this Second Modification Agreement Borrower shall also make available and loan to Distribunet and Connection portions of any Advances relating to the Revolving Loan to be used by Distribunet and Connection for working capital purposes. Distribunet and Connection by their execution of this Second Modification hereby join in the Certificate of Acknowledgment and Pledge attached to the Loan Agreement as if they were an original signatory thereto and hereby grants a security interest in favor of Borrower in and to all presently existing and hereafter arising accounts, inventory, equipment, general intangibles, instruments, investment securities and chattel paper of Distribunet and Connection and the proceeds of all of the foregoing to secure all amounts advanced and/or lent to them by Borrower pursuant to said Section 6.22. Borrower by its execution of this Second Modification Agreement hereby assigns all the foregoing together with all loans made in connection therewith to Distribunet and Connection to Agent for the ratable benefit of the Lenders to further secure the repayment of the Obligations. 4. Limited Waiver of Sections 6.14 and 6.17 of the Loan Agreement. Lenders by their execution hereof hereby waive the provisions of Sections 6.14, Investments and Acquisitions, of the Loan Agreement but only as it applies to Investments, as said term is hereafter defined, in the Partnerships and Management, and Section 6.17, Affiliates, of the Loan Agreement but only as it applies to the services provided by Distribunet and Borrower to the Partnerships and the services provided by Magazinet to Borrower or Borrower's Subsidiaries upon the following terms and conditions: (i) Provided there does not exist a Default or an event but which for the passage of time or giving of notice would be a Default and provided further that the making of any Investments would not cause a breach of any of the Financial Covenants contained in Section 6.24 of the Loan Agreement, Borrower and Borrower's Subsidiaries are hereby permitted to make Investments in the Partnerships and Management provided that the outstanding amounts of all Investments shall not exceed the following dollar limitations (the "Investment Caps") at any time during the following time periods (the "Investment Time Periods"). Investment Cap Investment Time Period -------------- ---------------------- $2,000,000 during the period from the date of this Second Modification Agreement to and including April 30, 2001 $5,000,000 from May 1, 2001 to and including April 30, 2002 $8,000,000 from May 1, 2002 to and including April 30, 2003 $10,000,000 from May 1, 2003 to and including April 30, 2004 4 As used in this paragraph, the term "Investments" means any and all (a)capital contributions made by Borrower or any of its Subsidiaries in the form of cash or property for any purpose to either of the Partnerships or Management, plus (b)loans made by Borrower or any of its Subsidiaries for any purpose to either of the Partnerships or Management, plus (c)any guaranty of any debt of either Partnership or Management, by Borrower or any of its Subsidiaries, plus (d)a pledge of any assets of Borrower or any of its Subsidiaries to secure any debt of either Partnership or Management, plus (e) cash paid or property transferred by Borrower or any of its Subsidiaries to acquire any ownership interest in or the right to acquire any ownership interest in either Partnership or Management, plus (f) cash advances made by Borrower or any of its Subsidiaries to Magazinet to fund operating losses of Magazinet plus (g) any liability incurred by Borrower under any Kable Sharing Agreement as said term is defined in the Senequier Partnership Agreement. The determination of the value of any property used in calculating the amount of the Investments shall be done by Agent in its sole discretion. Borrowing Parties further agree that (a) in connection with all other matters to be shown on the Monthly Compliance Certificate attached as Exhibit G to the Loan Agreement that there also shall be shown thereon in a form and detail acceptable to Lender the amounts of all outstanding Investments as of the date of each Compliance Certificate, and (b) if the applicable Investment Cap is exceeded by Borrower and Borrower's Subsidiaries same shall be considered a Default under the Loan Agreement. (ii) To the extent the prohibition contained in Section 6.17 of the Loan Agreement prohibits Borrower and Distribunet from providing services to the Partnerships or prevents Magazinet from providing services to Borrower or any Subsidiary of Borrower "upon fair and reasonable terms no less favorable to Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction" said prohibition is hereby waived in connection with the services to be supplied by Distribunet or Borrower to the Partnerships or the services to be supplied by Magazinet to Borrower or Borrower's Subsidiaries. 5. Modification of Security Agreement executed by Borrower. Borrowing Parties and Lenders hereby agree that the Security Agreement executed by Borrower be and hereby is modified to add to Item G of Schedule I contained therein the following: 5 Issuer Class of Stock # of Shares Certificate Number % of Outstanding Shares Par Value - ------ -------------- ----------- ------------------ ----------------------- --------- Distribunet Inc., a Delaware corporation Common 1000 1 100% .01 Magazine Connection Inc., a Delaware corporation Common 1000 1 100% .01
6. Conditions Precedent. Lenders' execution of the present Second Modification Agreement and its agreement to the terms and conditions hereof is expressly conditioned on the delivery to Agent of the following documents in a form and content acceptable to Agent and its counsel: (a) The executed New Subsidiarys' Security Agreements. (b) The executed New Subsidiarys' Guaranties. (c) UCC-1 Financing Statements executed by Distribunet in favor of Agent for filing in New York. (d) UCC-1 Financing Statement executed by Distribunet in favor of Borrower and assigned to Agent for filing in New York. (e) UCC-1 Financing Statement executed by Connection in favor of Agent for filing in New York. (f) UCC-1 Financing Statement executed by Connection in favor of Borrower and assigned to Agent for filing in New York. (g) UCC-3 Financing Statement executed by Borrower in favor of Agent for filing in Illinois. (h) Executed copy of the amended and restated limited partnership agreement of Senequier (The "Senequier Partnership Agreement"). (i) Executed copy of the limited partnership agreement of Magazinet. (j) Original stock certificate representing all the issued and outstanding stock of Distribunet together with stock power executed by Borrower. (k) Original stock certificate representing all the issued and outstanding stock of Connection together with stock power executed by Borrower. (l) Certificate of Goodstanding for Distribunet issued by the Delaware Secretary of State. 6 (m) Certificate of Goodstanding for Connection issued by the Delaware Secretary of State. (n) Certificate of Existence for Senequier executed by the Texas Secretary of State. (o) Certificate of Goodstanding issued by the Delaware Secretary of State for Management. (p) Certificate of Existence issued by the Secretary of State of Delaware for Magazinet. (q) Secretary's Certificate for Distribunet certifying as to (i) attached certified copy of Articles of Incorporation, (ii) attached By-Laws, (iii) authorized incumbent officers, and (iv) attached resolutions of Board of Directors. (r) Secretary's Certificate for Connection certifying as to (i) attached certified copy of Articles of Incorporation, (ii) attached By-Laws, (iii) authorized incumbent officers, and (iv) attached resolutions of Board of Directors. (s) Secretary's Certificate for Borrower, Parent and each Subsidiary certifying as to (i) authorized incumbent officers and (ii) attached resolution of Board of Directors. (t) Notice, Acknowledgment and Consent executed by Distribunet and Senequier. (u) Notice, Acknowledgment and Consent executed by Distribunet and Magazinet. (v) Notice, Acknowledgment and Consent executed by Distribunet and Mags2Go, L.L.C., a Delaware limited liability company. (w) Copy of executed Retail Supply Agreement between Magazinet and Senequier. (x) Copy of executed Interim Services Agreement between Borrower and Magazinet. (y) Copies of all Supply Agreements executed by any Subsidiary of Borrower with Magazinet. (z) Copy of executed Limited Liability Company Agreement of Management. (aa) Copy of executed Investment Agreement between Senequier, Borrower, Distribunet and Mags2Go, L.L.C., a Delaware limited liability company. (bb) Copy of executed Registration Rights Agreement between Senequier and Distribunet. (cc) Opinion letter of counsel to Borrowing Parties. 7 7. Other Loan Document Modifications. All Loan Documents are hereby deemed amended and modified to provide that any and all references to any Loan Documents therein are hereby deemed to be references to said Loan Documents as modified by this Agreement. 8. Other Documents. At Agent's request, the Borrowing Parties hereby agree to execute and deliver promptly to Agent such other documents as Agent, in its reasonable discretion, shall deem necessary or appropriate to evidence the transactions contemplated herein. 9. Reaffirmation. The Borrowing Parties do hereby reaffirm each and every covenant, condition, obligation and provision set forth in the Loan Documents, as modified hereby. The Borrowing Parties hereby restate and reaffirm all of the warranties and representations contained in the Loan Documents, as modified hereby, as being true and correct as of the date hereof. 10. References. All references herein to any of the Loan Documents shall be understood to be to the Loan Documents as modified hereby. All references in any of the Loan Documents to any other one or more of the Loan Documents shall hereafter be deemed to be to such document(s) as modified hereby. 11. No Defense, Counterclaims. Each Borrowing Party hereby represents and warrants to, and covenants with, Lenders that as of the date hereof, (a) each Borrowing Party has no defenses, offsets or counterclaims of any kind or nature whatsoever against any Lender with respect to the Loans or any of the Loan Documents, or any action previously taken or not taken by any Lender with respect thereto or with respect to any security interest, encumbrance, lien or collateral in connection therewith to secure the liabilities of each Borrowing Party, and (b) that the Lenders have fully performed all obligations to each Borrowing Party which it may have had or has on and of the date hereof. 12. Release. Without limiting the generality of the foregoing, each Borrowing Party, on its own behalf and on the behalf of its representatives, partners, shareholders, subsidiaries, affiliated and related entities, successors and assigns (hereinafter collectively referred to as the "Borrowing Group" and as to the Borrowing Group, each Borrowing Party represents and warrants that it has the right, power and authority to waive, release and forever discharge on behalf of the Borrowing Group, the "Bank Group" as hereinafter defined) waives, releases and forever discharges each Lender, and their respective officers, directors, subsidiaries, affiliated and related companies or entities, agents, servants, employees, shareholders, representatives, successors, assigns, attorneys, accountants, assets and properties, as the case may be (together hereinafter referred to as the "Bank Group") from and against all manner of actions, cause and causes of action, suits, debts, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, obligations, liabilities, costs, expenses, losses, damages, judgments, executions, claims and demands, of whatsoever kind or nature, in law or in equity, whether known or unknown, whether or not concealed or hidden, arising out of or relating to any matter, cause or thing whatsoever, that any of the Borrowing Group, jointly or severally, may have had, or now have or that may subsequently accrue against the Bank Group by reason of any matter or thing whatsoever arising out of or in way connected to, directly, or indirectly, the Loans and/or any of the Loan Documents through the date hereof, Each Borrowing Party acknowledges and agrees that Lenders are specifically relying upon the representations, warranties, covenants and agreements contained herein and that such representations, warranties, covenants and agreements constitute a material inducement to enter into this Agreement. 8 13. No Custom. This Agreement shall not establish a custom or waive, limit or condition the rights and remedies of Lenders under the Loan Documents, all of which rights and remedies are expressly reserved. 14. Reaffirmation of Loan Documents, No Novation. Except as may be expressly set forth herein to the contrary, the Loan Documents remain unmodified, and all other terms and conditions thereof remain in full force and effect. Notwithstanding anything to the contrary contained herein, Borrowing Parties and Lenders expressly state, declare and acknowledge that this Agreement is intended only to modify each Borrowing Party's continuing obligations in the manner set forth herein, and is not intended as a novation of any and all amounts presently due and owing from any Borrowing Party to Lenders. 15. Captions; Counterparts. The captions used herein are for convenience of reference only and shall not be deemed to limit or affect the construction and interpretation of the terms of this Agreement. This Agreement may be signed in counterparts, each of which shall be deemed an original and all of which shall be deemed one Agreement. 16. Choice of Law and Severability. This Agreement shall be governed and construed under the laws of the State of Illinois. If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement will not be affected thereby and the provisions of this Agreement shall be severable in any such instance. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BORROWER: KABLE NEWS COMPANY, INC., an Illinois corporation By: /s/ Daniel Friedman Title: Chairman President & CEO 9 LENDERS: AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Individually and as Agent By: /s/ Robin Winer Title: V.P. HELLER FINANCIAL, INC. By: /s/ Dennis Graham Title: Assistant Vice President MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. By: /s/ Michael J. Wiers Title: VP FIRST BANK By: /s/ Thomas J. Huffman Title: Regional President PARENT: AMREP CORPORATION, an Oklahoma corporation By: /s/ Daniel Friedman Title: Senior Vice President SUBSIDIARIES: KABLE NEWS EXPORT, LTD, a Delaware corporation By: /s/ Daniel Friedman Title: Chairman President & CEO KABLE NEWS COMPANY OF CANADA LTD, an Ontario, Canada corporation By: /s/ Daniel Friedman Title: President & CEO KABLE NEWS INTERNATIONAL, INC., a Delaware corporation By: /s/ Daniel Friedman Title: President KABLE FULFILLMENT SERVICES OF OHIO, INC., a Delaware corporation By: Daniel Friedman Title: Chairman & CEO NEW SUBSIDIARIES: DISTRIBUNET INC., a Delaware corporation By: /s/ Michael Duloc Title: President MAGAZINE CONNECTION INC., a Delaware corporation By: /s/ Michael Duloc Title: President 10 EX-27 3 0003.txt FDS -- FOR THE 2ND QUARTER ENDED OCTOBER 31, 2000
5 FDS - 2ND QUARTER 0000006207 AMREP CORPORATION 1,000 U.S. DOLLARS 6-MOS APR-30-2001 MAY-01-2000 OCT-31-2000 1 11,825 0 49,303 0 75,441 0 32,246 14,870 170,070 0 36,941 0 0 740 87,096 170,070 8,603 35,601 5,894 27,726 0 0 1,621 568 227 341 0 0 0 341 .05 .05
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