AMREP CORP. — Interim / Quarterly Report 1995

Sep 14, 1995

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, 1995 ------------------------------------- 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 (I.R.S. 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 been 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 13, 1995 - 7,395,650. FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES INDEX ----- PART I PAGE NO. ------ -------- Consolidated Financial Statements: Balance Sheets July 31, 1995 (Unaudited) and April 30, 1995 (Audited) 1 Statements of Operations and Retained Earnings (Unaudited) Three Months Ended July 31, 1995 and 1994 2 Statements of Cash Flows (Unaudited) Three Months Ended July 31, 1995 and 1994 3-4 Notes to Consolidated Financial Statements 5 Management's Discussion and Analysis 6-7 PART II ------- Other Information 8 Signatures 9 Exhibit Index 10 FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets July 31, 1995 and April 30, 1995 (Thousands, except par value and number of shares) July 31, April 30, 1995 1995 ----------- --------- (Unaudited) (Audited) ASSETS ------ Cash and cash equivalents $ 9,845 $ 9,266 Receivables, net: Real estate operations 10,628 10,644 Magazine circulation operations 42,605 39,391 Real estate inventory 72,761 72,464 Rental and other real estate projects 10,727 11,622 Investment property 8,549 8,751 Property, plant and equipment-at cost- net of accumulated depreciation and amortization of $11,031 at July 31, 1995 and $10,706 at April 30, 1995 14,843 14,128 Other assets 14,068 14,671 Excess of cost of subsidiary over net assets acquired 5,205 5,205 -------- -------- $189,231 $186,142 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Accounts payable, deposits and accrued expenses $ 32,944 $ 32,048 Notes payable: Amounts due within one year 11,160 9,105 Amounts subsequently due 48,955 50,015 Collateralized mortgage obligations 2,443 2,533 Deferred income taxes 27,015 26,520 -------- -------- 122,517 120,221 -------- -------- Shareholders' equity: Common stock, $.10 par value; shares authorized--20,000,000; shares issued and outstanding-- 7,395,650 at July 31, 1995 and 7,393,650 at April 30, 1995 740 739 Capital contributed in excess of par value 44,914 44,903 Retained earnings 21,060 20,279 -------- -------- 66,714 65,921 -------- -------- $189,231 $186,142 ======== ======== 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, 1995 and 1994 (Thousands, except shares and per share amounts) 1995 1994 ------------ ------------ REVENUES -------- Real estate operations: Home and condominium sales $ 23,505 $ 21,498 Land sales 1,987 2,785 ------------ ------------ 25,492 24,283 Magazine circulation operations 13,917 9,604 Interest and other operations 1,513 1,868 ------------ ------------ 40,922 35,755 ------------ ------------ COSTS AND EXPENSES ------------------ Real estate cost of sales 20,377 19,925 Operating expenses: Magazine circulation operations 11,251 7,123 Real estate commissions and selling 1,582 1,335 Other 1,655 1,698 General and administrative: Real estate operations and corporate 2,054 1,902 Magazine circulation operations 1,692 1,286 Interest, net 1,010 809 ------------ ------------ 39,621 34,078 ------------ ------------ Income before provision for income taxes 1,301 1,677 PROVISION FOR INCOME TAXES 520 667 ------------ ------------ Net income 781 1,010 RETAINED EARNINGS, beginning of period 20,279 16,264 ------------ ------------ RETAINED EARNINGS, end of period $ 21,060 $ 17,274 ============ ============ NET INCOME PER SHARE $ 0.11 $ 0.14 ============ ============ Weighted average number of common shares outstanding 7,394,514 7,303,821 ============ ============ See notes to consolidated financial statements. -2- FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Statements of Cash Flows (Unaudited) (Page 1 of 2) Three Months Ended July 31, 1995 and 1994 (Thousands) 1995 1994 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 781 $ 1,010 ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,913 1,461 Changes in assets and liabilities - Receivables (3,198) 715 Real estate inventory (297) 2,026 Rental and other real estate projects 895 1,074 Investment property 202 33 Other assets (946) (751) Accounts payable, deposits and accrued expenses 946 (304) Deferred income taxes 495 629 ---------- ---------- Total adjustments 10 4,883 ---------- ---------- Net cash provided by operating activities 791 5,893 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,117) (506) Other, net - (43) ---------- ---------- Net cash used by investing activities (1,117) (549) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing 7,467 3,501 Principal debt payments (6,562) (8,976) Proceeds from exercise of stock options - 39 ---------- ---------- Net cash provided (used) by financing activities 905 (5,436) ---------- ---------- See notes to consolidated financial statements. -3- FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Statements of Cash Flows (Unaudited) (Page 2 of 2) Three Months Ended July 31, 1995 and 1994 (Thousands) 1995 1994 ---------- ---------- Increase (decrease) in cash and cash equivalents 579 (92) CASH AND CASH EQUIVALENTS, beginning of period 9,266 6,623 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ 9,845 $ 6,531 ========== ========== SUPPLEMENTAL CASH FLOW INFORMATION Interest paid - net of amounts capitalized $ 1,177 $ 1,555 ========== ========== Income taxes paid $ 25 $ - ========== ========== See notes to consolidated financial statements. -4- FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended July 31, 1995 and 1994 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 in the July 31, 1994 Statements of Operations have been reclassified to conform to the presentation used at July 31, 1995. -5- FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations July 31, 1995 FINANCIAL CONDITION ------------------- The Company has obtained a commitment to increase its line-of-credit which is generally available for its magazine circulation operations from $27.5 million to $32.5 million. This commitment would also extend the arrangement to August 31, 1998. There is $27.5 million outstanding under this arrangement at July 31, 1995. A substantial amount of the Company's lines-of-credit for real estate operations was originally due to mature in fiscal 1996, but renewals have been received on these credit arrangements, and, as a result, repayments are due at various dates during fiscal 1997. RESULTS OF OPERATIONS --------------------- Total revenues for the quarter ended July 31, 1995 increased approximately 14% over the similar period last year, reflecting higher revenues from both home and condominium sales and magazine circulation operations. Revenues from home and condominium sales increased approximately 9% resulting from an increase in the average revenues per housing unit closed. 215 housing units were delivered in the first quarter of both years. The average revenue per unit closed increased to $109,300 in the first quarter this year from $100,000 in the similar period last year, resulting primarily from price increases and a shift to the building of larger, more expensive houses in Rio Rancho. The gross margin on housing sales increased by approximately $1.2 million in the first quarter this year as compared to the similar period last year, resulting from price increases as well as the favorable effect of production strategies and efficiencies introduced last fiscal year. Revenues and gross profit from land sales decreased to a decrease in the level of commercial and industrial lot sales. 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 is not an indication of amounts that may be expected to occur in future periods. As a result of these factors, gross profit from housing and land sales increased by approximately $800,000 in the first quarter this year as compared to the similar period last year. -6- FORM 10-Q AMREP CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations July 31, 1995 Revenues from magazine circulation operations increased 45% in the first quarter this year as compared to the similar period last year. The increase is due primarily to the acquisition in January 1995 of the business of Fulfillment Corporation of America (FCA) and growth in fulfillment subscription services. At the same time expenses increased at a slightly greater pace than revenues primarily because efficiencies being introduced by Kable to FCA's former operations were not yet fully implemented. It is expected that the profit margin of the Fulfillment Division will improve upon completion of the transition period, and the profit margins of the Fulfillment and Newsstand Divisions will then generally be comparable. Primarily as a result of these factors, operating income from the magazine circulation operations decreased by approximately $200,000 in the first quarter this year from the similar period last year. The increase in real estate commissions and selling expenses was primarily the result of increased revenues from home and condominium sales as well as increased costs related to land sales. Real estate and corporate general and administrative expenses increased from $1.9 million in the first quarter last year to $2.1 million in the similar period this year due primarily to increases in payroll and various other general expenses. Interest expense increased in the first quarter this year due primarily to higher average borrowings for the magazine circulation operations and higher interest rates, since a large portion of the Company's borrowings are related to the prime rate. Interest and other operations' revenues decreased this year because the prior year included various nonrecurring matters. -7- PART II Other Information ----------------- Item 6. Exhibits and Reports on Form 8-K ------- -------------------------------- (a) Exhibits: 10 (a) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Daniel Friedman, Senior Vice President of Registrant. 10 (b) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Harvey W. Schultz, Senior Vice President of Registrant. 10 (c) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Mohan Vachani, Senior Vice President of Registrant. 10 (d) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and James Wall, Senior Vice President of Registrant. 27 Financial Data Schedule. (b) Reports on Form 8-K: During the quarter ended July 31, 1995, Registrant filed a Current Report on Form 8-K/A-2 dated July 10, 1995, reporting under Item 7. Financial Statements and Exhibits filing the following financial statements of Fulfillment Corporation of America: 1 Audited Financial Statements for the Twelve Months ended December 31, 1993 and 1992. 2 Unaudited Statements of Operations and Statements of Cash Flows for the Nine Months ended September 30, 1994 and 1993, Balance Sheet as of September 30, 1994, and Notes to Financial Statements. -8- 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 13, 1995 By: /s/ Mohan Vachani ----------------------- Senior Vice President, Chief Financial Officer Dated: September 13, 1995 By: /s/ Peter M. Pizza ----------------------- Controller -9- EXHIBIT INDEX ------------- 10 (a) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Daniel Friedman, Senior Vice President of Registrant. 10 (b) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Harvey M. Schultz, Senior Vice President of Registrant. 10 (c) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Mohan Vachani, Senior Vice President of Registrant. 10 (d) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and James Wall, Senior Vice President of Registrant. 27 Financial Data Schedule -10-