SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2000 Commission File Number 1-4702
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
AMREP CORPORATION
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(Exact name of registrant as specified in its Charter)
Oklahoma 59-0936128
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Ave., 6th Floor
New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 705-4700
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of Common Stock held by non-affiliates of the Registrant,
computed by reference to the last sales price of such Common Stock on July 24,
2000, on the New York Stock Exchange Composite Tape - $17,539,060.
Number of shares of Common Stock, par value $.10 per share, outstanding at July
24, 2000 - 6,653,696.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents of the Registrant are incorporated by
reference into the indicated parts of this report: Definitive Proxy Statement
for 2000 Annual Meeting - Part III.
<PAGE>
PART I
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Item 1. Business
------ -------- GENERAL
The Company* is primarily engaged in two unrelated businesses, each operated by
a wholly-owned subsidiary: the Real Estate business operated by AMREP Southwest
Inc., and the Fulfillment Services and Magazine Distribution business operated
by Kable News Company, Inc. ("Kable"). The Company's foreign sales and
activities are not significant.
REAL ESTATE OPERATIONS
Recent Developments
For many years, the Company was both a real estate developer and a builder of
single-family homes, originally in Rio Rancho, New Mexico and more recently in
the Denver, Colorado, Sacramento, California and Portland, Oregon metro areas.
In the early 1960s, the Company established the community that now is the City
of Rio Rancho, New Mexico, and it has been the predominant builder of housing
there. Rio Rancho, which adjoins Albuquerque, now has a population of over
50,000. The Company entered the Denver market in 1993, and in 1997 it purchased
the assets of a land developer and homebuilder with operations in the Sacramento
and Portland markets.
Beginning in the second half of fiscal 1999 and continuing throughout fiscal
2000, the Company restructured its real estate activities by winding-down its
homebuilding operations and selling and offering for sale its landholdings in
Colorado, California, and Oregon. The reason for this decision was that over the
past several years these homebuilding operations had not provided acceptable
returns. The restructuring has enabled the Company to significantly reduce its
debt and to concentrate its efforts on more rapidly developing its substantial
landholdings in Rio Rancho.
In furtherance of this plan, commencing in the second half of fiscal 1999 and
continuing through fiscal 2000, the Company sold to two national builders and
several local builders a total of approximately 1,400 lots in Rio Rancho for an
aggregate sales price of approximately $26 million. In addition, the Company has
entered into several conditional sales contracts for the sale of approximately
600 lots in Rio Rancho over the next several years, however, since each of the
contracts permits the purchaser to terminate its obligations by forfeiture of a
relatively modest deposit, there are no assurances that all, or even a
substantial portion, of the lots subject to the contracts will be sold pursuant
to the contracts. The Company believes that the extent to which builders
purchase lots in Rio Rancho in the future will be determined by the number of
houses they are able to sell which, to a large extent, will depend on the
strength of the housing markets in Rio Rancho and neighboring Albuquerque.
As discussed in more detail below, the Company has sold or entered into
agreements of sale for all of its landholdings and housing projects in Colorado.
To wind-down its California and Oregon operations, the Company decided to
discontinue certain projects and build-out others, and this process has now been
substantially completed.
_________________
* As used herein, "Company" includes the Registrant and its subsidiaries unless
the context requires or indicates otherwise.
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Commercial And Residential Land Development Operations
Prior to fiscal 1999, the Company developed both residential and commercial
sites at Rio Rancho and from time to time bought acreage in Colorado, California
and Oregon for its own homebuilding operations and to develop for sale to other
builders. As discussed above, the Company currently is performing development
work only at Rio Rancho. While it has no immediate plans to acquire additional
property, the Company may in the future explore business opportunities for land
acquisition and development in other locales inside and outside New Mexico.
Rio Rancho (including the City) consists of 91,049 contiguous acres in Sandoval
County, New Mexico, near Albuquerque, of which some 72,500 acres have been
platted into approximately 111,000 homesite and commercial lots and 16,300 acres
are dedicated to community facilities, roads and drainage with the remainder
consisting of unplatted land. At April 30, 2000, a total of approximately 81,300
of the lots had been sold. The Company currently owns approximately 22,400 acres
in Rio Rancho, of which approximately 7,000 acres are in contiguous blocks
suitable for development. The balance is in scattered lots which may require the
purchase of a sufficient number of adjoining lots to create tracts suitable for
development or which may be sold individually or in small groups.
The development activity includes the obtaining of necessary governmental
approvals ("entitlements"), installation of utilities and necessary storm
drains, and building or improving of roads. At Rio Rancho, the Company is
developing both residential lots and sites for commercial and industrial use as
the demand warrants, and also is securing entitlements for large development
tracts for sale to homebuilders. The engineering work at Rio Rancho is performed
by both Company employees and outside firms, but development work is performed
by outside contractors. Land at Rio Rancho is marketed by Company personnel,
both directly and through brokers. The Company competes with other owners of
land in the Albuquerque area who offer for sale developed residential lots and
sites for commercial and industrial use.
The commercial areas in Rio Rancho presently include more than 500 businesses
and professional offices, as well as 15 shopping centers with approximately 1.25
million square feet of retail space and office space, including a 55,000 square
foot office building owned by the Company. The industrial areas have
approximately 80 buildings with over 3.2 million square feet, including a
manufacturing facility containing approximately 2.1 million square feet which is
owned and occupied by Intel Corporation. During fiscal 2000, the Company sold
ten tracts of commercial and industrial property of varying sizes for a total of
approximately $6.7 million. Intel, Rio Rancho's largest employer, has recently
announced a 1 million square foot expansion of its plant which is expected to
create 2,000 construction jobs over the next several years, and employ an
additional 1,000 people after completion of the project.
Since early 1977, no individual lots without homes at Rio Rancho have been sold
by the Company to consumers. Over 50,000 lots were sold prior to 1977, and most
of these are in areas where utilities have not yet been installed. However,
under certain of the contracts pursuant to which the lots were sold, if
utilities have not reached the respective lot when the purchaser is ready to
build a home, the Company is obligated to exchange a lot in an area then
serviced by water, telephone and electric utilities for the lot of the
purchaser, without cost to the purchaser. The Company has not incurred
significant costs related to such exchanges.
In fiscal 2000, the Company sold approximately 625 lots in Colorado for a total
of $10.3 million, as well as one commercial tract for approximately $800,000.
The Company owns two tracts of land in Colorado, consisting of approximately 335
unplatted acres planned for approximately 900 homes, which are under conditional
contract for sale and are scheduled to close at varying times over the next two
years; however, since each of these contracts permits the purchaser to terminate
its obligations by forfeiture of a relatively modest deposit, there are no
assurances that all, or even a substantial portion, of the lots subject to the
contracts will be sold pursuant to the contracts. In California, the Company
completed, in a joint venture, a 164 unit multi-family housing project which it
sold in fiscal 2000 for approximately $15.7 million. It owns one tract of land
in the Sacramento area zoned for approximately 420 units of multi-family
residential housing, which is currently being offered for sale.
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Home Building Operations
In fiscal 2000, the Company substantially completed homebuilding activities in
all the markets in which it operates. The Company closed a total of 193 homes in
various geographic locations in fiscal 2000 at an average selling price of
approximately $156,000 per home.
At April 30, 2000, the Company owned 27 lots in the Portland area on which it
intends to build houses. Of this total, 21 homes were under construction, of
which 11 were under contract for sale. The Company anticipates completion of
construction of all of these houses during fiscal 2001, and, subject to market
conditions, expects all to be sold in that fiscal year. Although the Company has
no present plans to do any further homebuilding, the Company's decision to
change its real estate focus to emphasize land development operations in New
Mexico and wind-down homebuilding operations is not considered to be a permanent
change of strategy.
Other Real Estate Projects
The Company developed the Eldorado at Santa Fe, New Mexico subdivision which had
approximately 2,400 homes as of April 30, 2000. The Company sold 26 lots there
in fiscal 2000, and 50 lots remained to be sold at the end of fiscal 2000. The
Company also owns and operates a water utility company which serves the
subdivision.
The Company owns approximately 14 acres in the Orlando, Florida area which is
being offered for sale. In addition, the Company was a fifty-percent (50%)
limited partner in a 247 unit rental housing project in Orlando which was sold
in fiscal 2000.
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MAGAZINE DISTRIBUTION AND FULFILLMENT OPERATIONS
Through its wholly-owned subsidiary, Kable News Company, Inc., the Company (i)
performs fulfillment and related services for publishers and other customers and
(ii) distributes periodicals nationally and in Canada and, to a small degree, in
other foreign countries. As of July 1, 2000, Kable employed approximately 1,000
persons, of whom approximately 800 were involved in its fulfillment activities
and 200 in distribution activities.
Fulfillment Services
Kable's Fulfillment Services division performs a number of fulfillment and
fulfillment-related activities, principally magazine subscription fulfillment
services, list services and product fulfillment services. The division accounted
for 70% of Kable's total revenues in 2000 and 64% in 1999.
In the magazine subscription fulfillment service operation, Kable processes new
orders, receives and accounts for payments, prepares and sends to each
publisher's printer labels or tapes containing the names and addresses of
subscribers for mailing each issue, handles subscriber telephone inquiries and
correspondence, prepares and mails renewal and statement notifications,
maintains subscriber lists and databases, generates marketing and statistical
reports, processes Internet orders and prints forms and promotional materials.
Kable performs all of these services for many clients, but some clients utilize
only certain of them. Although by far the largest number of magazine titles for
which Kable performs fulfillment services are consumer publications, Kable also
performs services for a number of trade (business) publications, membership
organizations and government agencies which utilize the broad capabilities of
Kable's extensive database system.
List services clients are primarily publishers. In this activity, Kable
maintains clients' customer lists, selects names for clients who rent their
lists, merges rented lists with the clients' lists to eliminate duplication for
clients' promotional mailings, and sorts and sequences mailing labels to provide
optimum postal discounts for clients.
Product fulfillment services are provided for Kable's publisher clients and
other direct marketers. In this activity, the division receives, warehouses,
processes and ships merchandise.
Kable plans to expand these services, including lettershop, list services and
product fulfillment services, to other, non-publisher clients.
In fiscal 1997, Kable commenced the processing of "sweepstakes" entries for a
major publisher, which included opening the envelopes mailed in by contestants,
furnishing the pertinent data electronically to the publisher and performing
certain incidental functions. Revenues from this activity represented over 11%
of the division's total revenues for fiscal 2000. Kable has been informed that
this publisher has changed its operational strategies and will discontinue its
use of Kable's services during fiscal 2001. Kable recorded a charge of
approximately $735,000 during fiscal 2000 to recognize impairment for certain
assets dedicated to providing this service.
Kable now performs fulfillment services for approximately 520 different magazine
titles for approximately 215 clients and maintains over 14 million active
subscriber names for its client publishers. In a typical month, Kable produces
almost 15 million mailing labels for its client publishers and also produces and
mails approximately 4.1 million billing and renewal statements.
There are a large number of companies that perform fulfillment services for
publishers and with which Kable competes, two of which are much larger than
Kable. Since publishers often utilize only a single fulfillment company for a
particular publication, there is intense competition to obtain fulfillment
contracts with publishers. Competition for non-publisher clients is also
intense. Kable has a staff whose primary task is to solicit fulfillment
business.
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Distribution Services
In its distribution operation, Kable distributes magazines for over 190
publishers. Among the titles are many special interest magazines, including
automotive, crossword puzzles, men's sophisticates, comics, romance and sports.
In a typical month, Kable distributes to wholesalers over 33 million copies of
various titles. Kable purchases the publications from its publishers and sells
them to approximately 45 independent wholesale distributors who own and operate
133 individual companies in the United States and Canada. The wholesale
distributors in turn sell the publications to individual retail outlets. All
parties generally have full return rights for unsold copies. Distribution
activities accounted for 30% of Kable's revenues in fiscal 2000 and 36% in
fiscal 1999.
While the Kable Distribution division does not handle all publications of all of
its publisher clients, it usually is the exclusive distributor for the
publications it distributes. Kable generally does not physically handle any
product. It determines, in consultation with the wholesalers and publishers, the
number of copies of each issue to be distributed, and generates and delivers to
each publisher's printer shipping instructions with the addresses of the
wholesalers and the number of copies of product to be shipped to each. All
magazines have an "off sale" date (generally the on-sale date of the next issue)
following which the retailers return unsold copies to the wholesalers, who
destroy them after accounting for returned merchandise in a manner satisfactory
to Kable.
Kable has a distribution sales and marketing force that works with wholesalers
and retailers to promote product sales and assist in determining the number of
copies of product to be delivered to each retailer.
A realignment of industry relationships in the distribution of magazines started
during fiscal 1996 and rapidly grew to major proportions. It was triggered by
the decision of certain major retailers with multiple outlets to sharply reduce
the number of wholesalers with whom the retailers would deal. This action has
led to the erosion of wholesaler profit margins and to a substantial continuing
reduction in the number of wholesalers through the merger of certain
wholesalers, the formation by certain other wholesalers of cooperatives to bid
for the business of such retailers, and the complete retirement from the
business by a number of wholesalers. The consolidation has reduced the number of
Kable's wholesale customers by approximately 60% since fiscal 1995, which has
increased the concentration of its revenue source and trade accounts receivable;
at April 30, 2000, approximately 60% of Kable's accounts receivable was due from
three customers. These changes also contributed to demands by most remaining
wholesalers to purchase magazines at lower prices which many publishers,
including some of Kable's, have accepted.
Financial pressures on wholesalers continued in fiscal 2000. Consequently, Kable
has increased its accounts receivable reserves in anticipation of uncollectible
balances from certain wholesaler customers. Management believes that industry
changes will continue with the potential for further adverse consequences for
publishers and their national distributors, including Kable.
Kable generally makes substantial cash advances to publishers against future
sales, which publishers may use to help pay for printing, paper and production
costs prior to the product going on sale. Kable is usually not paid by
wholesalers for product until some time after the product has gone on sale, and
is therefore exposed to potential credit risks with both the publishers and the
wholesalers. Its ability to make a profit is dependent in part on its skill in
estimating the number of copies of an issue which should be printed and
distributed and on limiting its advances to the publisher accordingly.
Kable competes primarily with four national distributors, all of whom are
substantially larger than Kable. Each of these large competitors is owned by or
affiliated with a magazine publishing company. Such companies publish a
substantial portion of all magazines published in the United States, and the
competition for the distribution rights to the remaining publications is
intense.
PENDING TRANSACTION
For a number of months, Kable has been in negotiations with a privately-owned
company ("Magazine Company") which is in the business of owning and operating
retails stores engaged principally in the business of selling magazines,
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newspapers and other periodicals. In the proposed transaction, (i) a Kable
subsidiary would enter into a joint venture with the Magazine Company to form a
new entity ("Supply Company") which, as its principal business, would supply the
publications inventory to the Magazine Company's retail stores, and (ii) the
Kable Subsidiary would be awarded equity in the Magazine Company and would have
the right to acquire additional equity for a total of as much as 10% of the
equity of the Magazine Company. Separately, Kable plans to expand its direct to
retail business and expects to be able to employ the processing capacity of the
Supply Company to service a portion of that business. The Magazine Company
presently has 11 stores, and it has advised Kable that during the next five
years it plans to open up to 700 stores throughout the United States.
The total cash which may be required from the Kable subsidiary for this new
venture is estimated to be approximately $2 million through the end of fiscal
year 2001 and approximately an additional $8 million during the ensuing three
fiscal years. It is anticipated that the Kable subsidiary would not receive any
return from the Supply Company or the Magazine Company for at least four years.
Management considers this to be an attractive longer-term opportunity because it
can aid Kable in the development of its direct to retail business and, if the
Magazine Company's operations are successful, Kable will also benefit from the
enhanced value of its equity investment in Magazine Company.
COMPANY OFFICES
The Company's principal executive offices are in New York City. Kable News has
an executive and sales office in New York City, and its operations are centered
in both owned and leased facilities in Mt. Morris, Illinois and Marion, Ohio.
Real estate operations are headquartered in Rio Rancho, New Mexico in a modern
office building owned by the Company.
EMPLOYEES
The Company has approximately 1,040 employees as of July 1, 2000. The Company
provides retirement, health and other benefits to its employees and considers
its employee relations to be good.
Item 2. Properties
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The information contained in Item 1 of this report with respect to properties
owned by the Company is hereby incorporated herein by reference.
Item 3. Legal Proceedings
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The Registrant and/or its subsidiaries are involved in various claims and legal
actions incident to their operations, which in the opinion of management, based
in part upon advice of counsel, will not materially affect the consolidated
financial position or results of operations of the Registrant and its
subsidiaries.
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Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
Not Applicable.
Executive Officers of Registrant
--------------------------------
Set forth below is certain information concerning persons who are executive
officers of the Company.
Name Office Held/Principal occupation for Past Five Years Age
---- ---------------------------------------------------- ---
Daniel Friedman Senior Vice President of the Company since 1980; 65
Chief Executive Officer of Kable News Company, Inc.,
a wholly-owned subsidiary of the Company, since 1978.
James Wall Senior Vice President of the Company since 1991; 63
Chief Executive Officer of AMREP Southwest Inc.,
a wholly-owned subsidiary of the Company, since 1991.
Mohan Vachani Senior Vice President-Chief Financial Officer of 58
the Company since 1993.
The executive officers are elected or appointed by the Board of Directors of the
Company or its appropriate subsidiary to serve until the appointment or election
and qualification of their successors or their earlier death, resignation or
removal.
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PART II
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Item 5. Market for Registrant's Common Equity and
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Related Stockholder Matters
---------------------------
The Company's common stock is traded on the New York Stock Exchange under the
symbol "AXR". On July 24, 2000, there were approximately 2,300 holders of record
of the common stock. The Company has historically not paid cash dividends. The
range of high and low closing prices for the last two fiscal years by quarter is
presented below:
FIRST SECOND THIRD FOURTH
---------------- ---------------- ----------------- ----------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
-------- ------ ------- ------- ------- -------- -------- ------
2000 $7 1/4 $5 3/8 $6 9/16 $4 7/16 $5 1/8 $3 11/16 $5 15/16 $4 1/2
1999 $9 15/16 $6 1/2 $8 1/16 $5 1/2 $7 13/16 $5 7/8 $8 $4 5/8
Item 6. Selected Financial Data
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The following selected consolidated financial data of the Company are qualified
by reference to and should be read in conjunction with the consolidated
financial statements, related notes thereto and other financial data elsewhere
herein. These historical results are not necessarily indicative of the results
to be expected in the future.
<TABLE>
<CAPTION>
(In thousands of dollars except per share amounts)
Year Ended April 30,
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2000 1999 (a) 1998 1997 (b) 1996
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 119,833 $ 190,291 $ 171,368 $ 146,389 $ 161,802
Net Income $ 1,169 $ 7,537 $ 8,206 $ 7,282 $ 2,785
Earnings Per Share -
Basic and Diluted $ 0.16 $ 1.02 $ 1.11 $ 0.99 $ 0.38
Total Assets $ 172,436 $ 217,777 $ 229,768 $ 205,311 $ 181,796
Notes Payable $ 46,911 $ 74,665 $ 84,248 $ 79,824 $ 54,391
Shareholders' Equity $ 91,981 $ 91,577 $ 84,040 $ 75,834 $ 68,552
Cash Dividends $ - $ - $ - $ - $ -
</TABLE>
(a) Includes a tax benefit in the amount of $2,400,000 (the equivalent of $.33
per share) to reflect the settlement of 1990 through 1992 IRS tax
examinations.
(b) Includes a tax benefit in the amount of $6,250,000 (the equivalent of $.85
per share) to reflect the settlement of 1984 through 1989 IRS tax
examinations.
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Item 7. Management's Discussion and Analysis of Financial
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Condition and Results of Operations
-----------------------------------
FORWARD-LOOKING STATEMENTS
--------------------------
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on behalf of the Company. The
Company and its representatives may from time to time make written or oral
statements that are "forward-looking," including statements contained in this
report and other filings with the Securities and Exchange Commission and in
reports to the Company's shareholders and news releases. All statements that
express expectations, estimates, forecasts and projections are forward-looking
statements within the meaning of the Act. In addition, other written or oral
statements which constitute forward-looking statements may be made by or on
behalf of the Company. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," "projects," "forecasts," "may,"
"should," variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in or suggested by such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
A wide range of factors could materially affect future developments and
performance of the Company, including the following: (i) the level of demand for
land in the markets in which the Company sells land; (ii) the possibility of
further adverse changes in the magazine distribution system for magazines which
the Company distributes; (iii) possible future litigation and governmental
proceedings; (iv) the availability of financing and financial resources in the
amounts, at the times and on the terms required to support the Company's future
business, including possible acquisitions; (v) changes in U.S. financial
markets, including significant interest rate fluctuations; (vi) the failure to
carry out marketing and sales plans; (vii) the failure to successfully integrate
acquired business, if any, into the Company without substantial costs, delays or
other operational or financial problems; and (viii) changes in economic or
business conditions, including general economic and business conditions that are
less favorable than expected.
This list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
RESULTS OF OPERATIONS
---------------------
Year Ended April 30, 2000 ("2000")Compared to Year Ended April 30, 1999 ("1999")
--------------------------------------------------------------------------------
Revenues
--------
Consolidated revenues for the year ended April 30, 2000 decreased to $119.8
million from $190.3 million in 1999, principally reflecting the effects of the
restructuring of real estate operations begun in the fourth quarter of 1999 and
continuing into 2000.
Revenues from real estate operations decreased to $62.7 million in 2000 from
$127.0 million in 1999, principally due to decreased housing sale revenues. This
revenue reduction reflected the decision made by the Company in 1999 and
implemented late in 1999 and throughout 2000 to wind-down homebuilding
operations in all of its markets, to sell its landholdings in Colorado and
California, and to concentrate on more rapidly developing its substantial land
holdings in Rio Rancho, New Mexico.
Revenues from housing sales decreased to $30.1 million in 2000 from $90.9
million in 1999. As described above, this decrease resulted from the decision to
wind-down homebuilding operations in all markets, as evidenced by the decrease
in the number of home deliveries from 711 in 1999 to 193 in 2000. In addition,
the gross profit margin realized on housing operations (before the effect of
certain reserves) decreased from 13% in 1999 to 5% in 2000, reflecting the
reduced level of operations.
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Revenues and related gross profit from land sales decreased by approximately
$3.4 million and $2.8 million, respectively, in 2000 from 1999, primarily due to
a decrease in commercial and investment property land sales. The average gross
profit percentage on land sales decreased from 39% in 1999 to 36% in 2000
because certain sales of residential land to builders in 2000 were from
different projects and at lower gross profit percentages than sales in the prior
year. 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 magazine circulation operations, consisting of both magazine
distribution and fulfillment operations, decreased approximately $4.8 million
(8%) from 1999 to 2000. Revenues from the Fulfillment Services division
decreased approximately $400,000 (1%) from 1999 due primarily to a lower volume
of business in sweepstakes processing for one large customer. Revenues from the
Newsstand Distribution Services division decreased approximately $4.4 million
(22%) in the same period as a result of decreased newsstand magazine sales as
well as a reduction in gross billings due to the loss of certain publisher
clients. In addition, Kable has continued to feel the effects of the realignment
of industry relationships in the distribution of magazines which started in 1996
and which has subsequently led to a substantial reduction in the number of
wholesalers. In many cases, this situation has adversely impacted wholesaler
profits and liquidity, which has resulted in wholesaler consolidations and
sometimes bankruptcies. Due to concerns about the financial strength of certain
customers, Kable increased its reserve for uncollectible accounts by
approximately $1.8 million in 2000 and $5.0 million in 1999. In addition,
Kable's operating expenses in 2000 included a charge of approximately $735,000
resulting from the impairment of assets no longer required due to the impending
loss of sweepstakes processing business for a large fulfillment client. As a
result of these factors, magazine circulation operating expenses decreased $4.0
million (8%) in fiscal 2000 compared to the prior year, primarily due to the
effect of the reduced bad debt reserve offset in part by the impairment charge
in the sweepstakes processing business. Consequently, operating income from
magazine circulation operations decreased by approximately $800,000 from 1999 to
2000.
Revenues from "Interest and other operations" decreased from 1999 to 2000
principally because the prior year included amounts recorded as management fees
and equity income from several joint ventures in which the Company participated.
Expenses
--------
Real estate commissions and selling expenses decreased by $4.0 million (52%) and
real estate and corporate general and administrative expenses decreased by $1.6
million (21%) from 1999 to 2000 principally as a result of the restructuring of
the real estate operations. General and administrative costs of magazine
circulation operations increased by approximately $300,000 (4%) in the same
period, reflecting increased legal costs associated with the investigation of
new business opportunities.
Interest expense - net decreased from approximately $4.7 million in 1999 to
approximately $2.9 million in 2000. Interest related to real estate operations
decreased as a result of the reduction of real estate debt through the use of
proceeds generated from land sales, while interest related to magazine
circulation operations decreased due to lower borrowing requirements associated
with lower revenues and related accounts receivable balances in the Newsstand
division.
As discussed in Note 11 to the consolidated financial statements, in 1999 the
Company incurred restructuring-related charges of approximately $2.1 million,
including severance and lease termination payments ($1.1 million), and the
write-off of unamortized goodwill and acquisition related costs ($1.0 million)
incurred in connection with its acquisition of certain real estate assets in
California. In addition, the Company wrote-off approximately $1.2 million
related to deposits and other project-related inventory costs associated with
projects which were abandoned or otherwise disposed of in connection with the
real estate restructuring. During 2000, the Company recorded additional charges
of approximately $3.8 million to provide for reserves and write-downs of joint
ventures related to the continuing wind-down of real estate operations in
California and Colorado. As of April 30, 2000, the restructuring of real estate
operations was substantially complete.
11
<PAGE>
As discussed in Note 9 to the consolidated financial statements, the Company has
been involved in an on-going process of audits of its federal tax returns by the
Internal Revenue Service ("IRS") for fiscal years 1984 through 1996. In prior
years, the Company has reached agreements with the IRS for the years 1984
through 1992. During the year ended April 30, 2000, the Company made a payment
of $4.3 million of federal taxes and interest in connection with an interim
resolution of certain matters related to the examination of the Company's
federal tax returns for the years 1993 through 1996. These tax years remain
open, however, and other matters for these years continue to be under review by
the IRS. In addition, the Company paid approximately $1.5 million of interest
during 2000 in final resolution of the IRS examination of the Company's federal
tax returns for the fiscal years 1990 through 1992. (Federal income taxes for
those years was paid in full during 1999, and these tax years are no longer
subject to audit). At April 30, 2000, the amount recorded as "Taxes Payable -
amount subsequently due" of approximately $6.0 million represents amounts that
have been accrued in prior years to cover federal and state taxes and related
interest estimated to be due upon the settlement of all open tax examinations.
If the interim resolution for the years 1993 through 1996 with the IRS becomes
final, however, the amount actually owed may be less than the recorded amount,
and a tax benefit would be recognized at that time. The amount of the potential
tax benefit is uncertain and dependent upon the ultimate resolution of other
matters under review by the IRS.
Year Ended April 30, 1999 ("1999")Compared to Year Ended April 30, 1998 ("1998")
--------------------------------------------------------------------------------
Revenues
--------
Total revenues for the year ended April 30, 1999 increased $18.9 million (11%)
from 1998, principally reflecting an increase in revenues from real estate
operations.
Revenues from real estate operations increased $22.1 million (21%) resulting
from increases in both housing and land sales, which partly reflected the
decision made by the Company to restructure its real estate operations, as
discussed above.
Revenues from housing sales increased $11.2 million (14%), reflecting an
increase in total housing deliveries from 677 to 711 as well as an increase in
the average selling price of homes from $117,800 to $127,900. The number of
homes closed increased as a result of various sales incentive programs developed
during the fourth quarter to accelerate the sale of the Company's remaining
housing inventory. The change in average selling price was due in large part to
a change in the mix of projects from which homes were sold. The gross margin on
housing sales increased by $1.9 million in 1999 over 1998, as a result of the
increase in the number of homes sold as well as an increase in the average gross
margin percentage to 13% in 1999 from 12% in 1998.
Revenues and related gross profit from land sales increased by approximately
$10.9 million (44%) and $1.6 million (12%), respectively, in 1999 from 1998,
primarily due to the increase in land sales to homebuilders resulting from the
change in the Company's business focus discussed above. The average gross profit
percentage on land sales decreased from 50% in 1998 to 39% in 1999 because the
sales of residential land to builders have generally been at lower gross profit
percentages than the sales of commercial and industrial land, which have
represented a much larger percentage of total land sale revenues in prior years.
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 magazine circulation operations, consisting of both magazine
distribution and fulfillment operations, increased approximately $400,000 (1%)
from 1998. Revenues from the Fulfillment Services division decreased
approximately $1.6 million (4%) due primarily to a lower volume of business in
sweepstakes processing for one large customer. Revenues from the Newsstand
Distribution Services division increased approximately $2.1 million (11%) from
1998, due to new business and a moderately higher volume of magazine sales.
During the third and fourth quarters of fiscal 1999, Kable increased its reserve
for uncollectible accounts by approximately $5.0 million due to concerns about
12
<PAGE>
certain newsstand wholesaler customers. As a result, magazine circulation
operating expenses increased $4.3 million (10%) compared to the prior year. As a
result of these factors, operating income from magazine circulation operations
decreased by approximately $3.9 million in 1999. Excluding the effects of the
increase in the reserve for uncollectible accounts, Kable's operating earnings
were modestly higher than in 1998.
Revenues from "Interest and other operations" decreased from 1998 to 1999,
principally because 1998 included a non-recurring gain of approximately $4.2
million on the sale of the Rio Rancho Golf and Country Club and the Company's
50% limited partnership interest in a congregate care facility in Florida.
Expenses
--------
Real estate commissions and selling expenses were generally comparable to the
prior year amounts, and approximated 8% of related revenues in 1999 and 9% in
1998. Real estate and corporate general and administrative expenses increased
approximately 1% in 1999 over 1998, due to additional costs of the Company's
California operation which had commenced activities during 1998, offset in part
by the effect of a benefit for pension expense resulting from the effect of an
amendment to the Company's pension plan during 1998. General and administrative
costs of the magazine circulation operations decreased by approximately 4% from
1998 to 1999.
As discussed in Note 11 to the consolidated financial statements, in 1999 the
Company incurred restructuring-related charges of approximately $2.1 million and
wrote-off approximately $1.2 million related to deposits and other
project-related inventory costs related to projects which were abandoned or
otherwise disposed of in connection with the restructuring of its real estate
operations. The Company's decision to change its real estate focus by
emphasizing its land development activities at Rio Rancho, New Mexico and
winding-down certain homebuilding activities was not considered to be a
permanent change in strategy. Accordingly, the Company presented the results of
operations of homebuilding in continuing operations.
In 1999, the Company's effective tax rate of 8% reflected a net benefit of
approximately $2.4 million to the provision for income taxes following the
conclusion of certain federal tax audits. See Note 9 to the consolidated
financial statements.
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 other loan
agreements.
Cash Flows From Financing Activities
------------------------------------
At April 30, 2000, the Company had line-of-credit arrangements with several
financial institutions collateralized by various assets which, subject to
collateral availability, amounted to an aggregate borrowing availability of
approximately $66.7 million. One of these lines (under which $40 million was
available for borrowing and against which approximately $27.7 million was
outstanding as of April 30, 2000) is available only for Kable News Company
operations. Borrowings under this line-of-credit, which expires in September
2001, must be collateralized 125% or more by certain Kable accounts receivable.
The Kable line-of-credit agreement also limits the payment of dividends by, and
loans from, Kable to the Company.
The other line-of-credit borrowings have been used principally to support land
development and real estate construction activities. These loans are
collateralized by certain real estate assets and are subject to available
collateral and various financial performance and other covenants. At April 30,
2000, the maximum available under real estate lines-of-credit totaled $10.2
million, of which borrowings of $10.0 million were outstanding. In addition to
the Company's borrowings, a subsidiary of the Company has guaranteed a $6
million line-of-credit to an unrelated entity for the ongoing development of a
project in which the subsidiary had been a joint venture participant, of which
$1.2 million was outstanding at April 30, 2000.
13
<PAGE>
Notes payable outstanding, including the lines-of-credit and other company
borrowings discussed above, were $46.9 million at April 30, 2000 compared to
$74.7 million at April 30, 1999. The decrease at April 30, 2000 compared to the
prior year was primarily the result of the change in focus of real estate
operations and the wind-down of homebuilding operations.
During 2000, the Company announced a stock repurchase program, and reacquired
143,000 of its common shares to be held as treasury stock at a cost of
approximately $857,000. In May 2000, the Board of Directors authorized an
additional repurchase of stock by means of a self-tender "Dutch Auction" for
725,000 of the Company's common shares at a price not to exceed $7.00 per share
and not lower than $5.25 per share. In June 2000, the Company accepted
tenders of 587,654 shares at a cost of $7.00 per share.
Cash Flows From Operating Activities
------------------------------------
Inventories amounted to $70.3 million at April 30, 2000 compared to $89.7
million at April 30, 1999. This reduction resulted from the restructuring of
real estate operations, and it contributed to the decrease in accounts payable,
deposits and accrued expenses at April 30, 2000 compared to the prior year.
Receivables from magazine circulation operations decreased to $45.4 million at
April 30, 2000 from $53.8 million at the end of the prior fiscal year, primarily
due to the decrease in revenues in 2000 as well as the additional reserve for
uncollectible accounts of approximately $1.8 million recorded in 2000 resulting
from concerns about the financial srength of certain wholesaler customers.
Cash Flows From Investing Activities
------------------------------------
Capital expenditures decreased in fiscal 2000 from fiscal 1999, due in part to
reduced requirements of the Company's water utility subsidiary. The Company
believes that its available funds will be adequate to provide for anticipated
capital expenditures.
As a result of the restructuring of its real estate operations, the borrowing
requirements of the Company have been reduced, commensurate with the reduction
in construction activity. 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.
For a number of months, Kable has been in negotiations with a privately-owned
company ("Magazine Company") which is in the business of owning and operating
retail stores engaged principally in the business of selling magazines,
newspapers and other periodicals. In the proposed transaction, (i) a Kable
subsidiary would enter into a joint venture with the Magazine Company to form a
new entity ("Supply Company") which, as its principal business, would supply the
publications inventory to the Magazine Company's retail stores, and (ii) the
Kable Subsidiary would be awarded equity in the Magazine Company and would have
the right to acquire additional equity for a total of as much as 10% of the
equity of the Magazine Company. Separately, Kable plans to expand its direct to
retail business and expects to be able to employ the processing capacity of the
Supply Company to service a portion of that business. The Magazine Company
presently has 11 stores, and it has advised Kable that during the next five
years it plans to open up to 700 stores throughout the United States.
The total cash which may be required from the Kable subsidiary for this new
venture is estimated to be approximately $2 million through the end of fiscal
year 2001 and approximately an additional $8 million during the ensuing three
fiscal years. It is anticipated that for its $10 million aggregate investment,
the Kable subsidiary would not receive any return from the Supply Company or the
Magazine Company for at least four years. Management considers this to be an
attractive longer-term opportunity because it can aid Kable in the development
of its direct to retail business and, if the Magazine Company's operations are
successful, Kable will also benefit from the enhanced value of its equity
investment in Magazine Company.
14
<PAGE>
Segment Information
-------------------
Information by industry segment is presented in Note 15 to the consolidated
financial statements. The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Disclosures" during 1999, which requires that industry segment
information be prepared in a manner consistent with the manner in which
financial information is prepared and evaluated by management for making
operating decisions. A number of assumptions and estimations are required to be
made in the determination of segment data, including the need to make certain
allocations of common costs and expenses among segments. On an annual basis,
management has evaluated the basis upon which costs are allocated, and has
periodically made revisions to these methods of allocation. Accordingly, the
determination of "pretax income (loss) contribution" of each segment as
summarized in Note 15 to the consolidated financial statements is presented for
informational purposes, and is not necessarily the amount that would be reported
if the segment were an independent company.
Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. The
Statement, as amended by SFAS No. 137, is effective for fiscal quarters
beginning after June 15, 2000. The Company will adopt SFAS No. 133 in fiscal
year 2001. The Company expects that the adoption of SFAS No. 133 will not have a
material impact on the consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, "Revenue Recognition," which outlines the basic criteria
that must be met to recognize revenue and provides guidance for presentation of
revenue and for disclosure related to revenue recognition policies in financial
statements filed with the Securities and Exchange Commission. The effective date
of this pronouncement, as revised by SAB 101B, is the fourth quarter of the
fiscal year beginning after December 15, 1999. The Company is currently in the
process of evaluating the impact, if any, SAB 101 will have on the financial
position or results of operations of the Company.
Impact of Inflation
-------------------
Operations of the Company can be impacted by inflation. Within the industries in
which the Company operates, inflation can cause increases in the cost of
materials, services, interest and labor. Unless such increased costs are
recovered through increased sale prices, operating margins will decrease. Within
the land development industry, the Company encounters particular risks. A large
part of the Company's real estate sales are to homebuilders who face their own
inflationary concerns that rising housing costs, including interest costs, may
substantially outpace increases in the income of potential purchasers and make
it difficult for them to finance the purchase of a new home or sell their
existing home. If this situation were to exist, the demand for the Company's
land by these homebuilder customers could decrease. In general, in prior years,
interest and price increases have been commensurate with the general rate of
inflation in the Company's markets, and the Company has not found the inflation
risk to be a significant problem in its real estate or magazine circulation
operations.
15
<PAGE>
Item 7(A). Quantitative and Qualitative Disclosures About Market Risk
---------- ----------------------------------------------------------
The primary market risk facing the Company is interest rate risk on its
long-term debt. The Company does not hedge interest rate risk using financial
instruments. The Company is also subject to foreign currency risk, but this risk
is not material. The following table sets forth as of April 30, 2000 the
Company's long term debt obligations by scheduled maturity, weighted average
interest rate and estimated Fair Market Value ("FMV") (amounts in thousands):
Year ended April 30,
There- FMV @
2001 2002 2003 2004 2005 after Total 4/30/00
------ ------ ------ ------ ------ -------- ------- -------
Fixed rate debt $4,372 $810 $349 $286 $120 $1,671 $7,608 $7,545
Weighted average
interest rate 9.0% 8.4% 8.0% 7.8% 7.9% 7.9% 8.6% -
Variable rate debt $11,227 $28,076 $ $ - $ - $ - $39,303 $39,303
Weighted average
interest rate 9.5% 9.5% - - - - 9.5% -
16
<PAGE>
Item 8. Financial Statements and Supplementary Data
------- -------------------------------------------
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of
AMREP Corporation:
We have audited the accompanying consolidated balance sheets of AMREP
Corporation (an Oklahoma corporation) and subsidiaries as of April 30, 2000 and
1999, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended April 30, 2000.
These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMREP Corporation and
subsidiaries as of April 30, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended April 30,
2000 in conformity with accounting principles generally accepted in the United
States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II accompanying the consolidated
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
June 30, 2000
17
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 1 of 2)
-----------------------------------------
APRIL 30, 2000 AND 1999
-----------------------
(Dollar amounts in thousands)
ASSETS 2000 1999
---------- ----------
CASH AND CASH EQUIVALENTS $ 12,934 $ 23,553
RECEIVABLES, net:
Real estate operations 9,108 10,846
Magazine circulation operations 45,366 53,822
---------- ----------
54,474 64,668
REAL ESTATE INVENTORY 70,265 89,723
OTHER REAL ESTATE INVESTMENTS 283 2,401
PROPERTY, PLANT AND EQUIPMENT,
at historical cost, net of accumulated
depreciation and amortization 17,852 18,360
OTHER ASSETS, net of accumulated amortization 11,437 13,881
EXCESS OF COST OF SUBSIDIARIES
OVER NET ASSETS ACQUIRED 5,191 5,191
---------- ----------
TOTAL ASSETS $ 172,436 $ 217,777
========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
18
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 2 of 2)
-----------------------------------------
APRIL 30, 2000 AND 1999
-----------------------
(Dollar amounts in thousands, except par value)
LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999
---------- ----------
ACCOUNTS PAYABLE, DEPOSITS AND
ACCRUED EXPENSES $ 25,920 $ 36,182
NOTES PAYABLE:
Amounts due within one year 15,599 26,769
Amounts subsequently due 31,312 47,896
---------- ----------
46,911 74,665
TAXES PAYABLE:
Amounts due (receivable) within one year (1,002) 2,513
Amounts subsequently due (including interest) 5,999 11,825
---------- ----------
4,997 14,338
DEFERRED INCOME TAXES 2,627 1,015
---------- ----------
TOTAL LIABILITIES 80,455 126,200
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 12 and 13)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
shares authorized--20,000,000;
shares issued - 7,398,677 in 2000 and 1999 740 740
Capital contributed in excess of par value 44,930 44,928
Retained earnings 47,258 46,089
Treasury stock, at cost; 158,327 shares
at April 30, 2000, and 30,027 shares
at April 30, 1999 (947) (180)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 91,981 91,577
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 172,436 $ 217,777
========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
19
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------------------
<S> <C> <C> <C>
2000 1999 1998
----------- ----------- -----------
Real estate operations-
Home and condominium sales $ 30,079 $ 90,947 $ 79,730
Land sales 32,637 36,033 25,102
----------- ----------- -----------
62,716 126,980 104,832
Magazine circulation operations 52,548 57,354 56,939
Interest and other operations 4,569 5,957 9,597
----------- ----------- -----------
119,833 190,291 171,368
----------- ----------- -----------
COSTS AND EXPENSES:
Real estate cost of sales-
Home and condominium sales 28,735 79,494 70,167
Land sales 21,084 21,869 12,493
Operating expenses-
Magazine circulation operations 44,184 48,181 43,835
Real estate commissions and selling 3,670 7,689 7,424
Other operations 4,560 3,960 5,150
General and administrative-
Real estate operations and corporate 6,026 7,643 7,561
Magazine circulation operations 6,680 6,408 6,657
Interest, net 2,946 4,743 4,404
Restructuring costs - 2,108 -
----------- ----------- -----------
117,885 182,095 157,691
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,948 8,196 13,677
PROVISION FOR INCOME TAXES 779 659 5,471
----------- ----------- -----------
NET INCOME $ 1,169 $ 7,537 $ 8,206
=========== =========== ===========
EARNINGS PER SHARE - BASIC AND DILUTED $ .16 $ 1.02 $ 1.11
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,285 7,369 7,369
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
20
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
Capital
Contributed
Common Stock In Excess Treasury
of Retained Stock at
Shares Amount Par Value Earnings Cost Total
------ ------ ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, April 30, 1997 7,399 $ 740 $ 44,928 $ 30,346 $ (180) $ 5,834
Net income - - - 8,206 - 8,206
------ ------ ------------ -------- ---------- --------
BALANCE, April 30, 1998 7,399 740 44,928 38,552 (180) 84,040
Net income - - - 7,537 - 7,537
------ ------ ------------ -------- ---------- --------
BALANCE, April 30, 1999 7,399 740 44,928 46,089 (180) 91,577
Net income - - - 1,169 - 1,169
Purchase of treasury stock - - - - (857) (857)
Issuance of treasury stock - - 2 - 90 92
------ ------ ------------ -------- ---------- --------
BALANCE, April 30, 2000 7,399 $ 740 $ 44,930 $ 47,258 $ (947) $ 91,981
====== ====== ============ ======== ========== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
21
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------
2000 1999 1998
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,169 $ 7,537 $ 8,206
Adjustments to reconcile net income
Depreciation and amortization 4,104 4,830 3,259
Non-cash credits and charges:
Loss (gain) on disposition of fixed assets 167 218 (1,298)
Inventory and joint venture valuation adjustment 3,808 1,213 -
Provision for doubtful accounts 1,806 5,025 363
Impairment of long-lived assets 735 - -
Pension benefit accrual (573) (487) -
Issuance of treasury stock charged to expense 92 - -
Changes in assets and liabilities,
excluding the effect of acquisition-
Receivables 8,388 (1,178) (15,116)
Real estate inventory 19,164 8,968 (7,389)
Other real estate investments 1,089 (150) 3,396
Other assets 1,145 (385) (1,777)
Accounts payable, deposits and accrued expenses (11,708) (3,019) 10,224
Taxes payable (9,341) (5.352) 4,104
Deferred income taxes 1,612 (1,573) (2,548)
---------- ----------- ----------
Net cash provided by operating activities 21,657 15,647 1,424
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,659) (3,305) (1,998)
Proceeds from disposition of property, plant
and equipment 227 277 2,691
Amount received (paid) for acquisition 873 - (2,202)
---------- ----------- ----------
Net cash used by investing activities (1,559) (3,028) (1,509)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 25,424 61,647 55,212
Principal debt payments (55,284) (71,230) (50,788)
Purchase of treasury stock (857) - -
---------- ----------- ----------
Net cash provided (used) by financing activities (30,717) (9,583) 4,424
---------- ----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,619) 3,036 4,339
CASH AND CASH EQUIVALENTS, beginning of year 23,553 20,517 16,178
---------- ----------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 12,934 $ 23,553 $ 20,517
========== =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts capitalized $ 3,759 $ 4,802 $ 4,093
========== =========== ==========
Income taxes paid $ 8,363 $ 7,656 $ 3,952
========== =========== ==========
Acquisition of real estate assets:
Identifiable assets acquired $ 1,408 $ - $ 1,168
Excess of cost over net assets acquired - - 1,081
Liabilities assumed 2,281 - (47)
---------- ----------- ----------
Net cash (received) paid for acquisition $ (873) $ - $ 2,202
========== =========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
22
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES:
-------------------------------------------------------------------
Organization and principles of consolidation
--------------------------------------------
The consolidated financial statements include the accounts of AMREP Corporation,
an Oklahoma corporation, and its subsidiaries (individually and collectively, as
the context requires, the "Company"). The Company, through its principal
subsidiaries, is engaged in two unrelated businesses. Kable News Company, Inc.
("Kable") operates in the magazine distribution and fulfillment services
industries, and AMREP Southwest Inc. operates predominately in the real estate
industry, principally in New Mexico.
The Company's investments in partnerships (and similar entities), in which the
Company's interest is 50% or less, or in which the Company does not effectively
control the joint venture, are accounted for by the equity method. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The consolidated balance sheets are presented in an unclassified format, since
the Company has substantial operations in the real estate industry and its
operating cycle is greater than one year.
Revenue recognition
-------------------
Land sales are recognized when the parties are bound by the terms of the
contract, all consideration (including adequate cash) has been exchanged and
title and other attributes of ownership have been conveyed to the buyer by means
of a closing. Profit is recorded either in its entirety or on the installment
method depending upon, among other things, the ability to estimate the
collectibility of the unpaid sales price. In the event the buyer defaults on the
obligation, the property is taken back and recorded as inventory at the unpaid
receivable balance, net of any deferred profit, but not in excess of fair market
value less estimated costs to sell.
Sales of homes and condominiums are recognized when title and other attributes
of ownership have been conveyed to the buyer by means of a closing.
Revenues from magazine circulation operations include revenues from the
distribution of periodicals and subscription fulfillment activities.
Distribution revenues represent commissions earned from the distribution of
publications for client publishers which are recorded at the time the
publications go on sale. The publications generally are sold on a fully
returnable basis, which is in accordance with prevailing trade practice.
Accordingly, the Company provides for estimated returns by charges to income
which are based on experience. Revenues from subscription fulfillment activities
represent fees earned from the maintenance of computer files for customers,
which are billed and earned monthly, and other fulfillment activities including
sweepstakes mail processing, customer telephone support, product fulfillment,
and graphic arts and lettershop services, all of which are billed and earned as
the services are provided.
Cash and cash equivalents
-------------------------
Cash equivalents consist of short term, highly liquid investments which have an
original maturity of ninety days or less, and that are readily convertible into
cash.
23
<PAGE>
Real estate inventory
---------------------
Land and improvements for completed real estate projects, as well as those held
for future development or sale, are stated at the lower of accumulated cost
(except in certain instances where property is repossessed as discussed above
under "Revenue recognition") which includes the development cost, certain
amenities, capitalized interest and capitalized real estate taxes, or fair
market value less estimated costs to sell.
Homes and condominiums completed or under construction are stated at the lower
of accumulated cost, including interest costs capitalized during construction,
or fair market value less estimated costs to sell.
Property, plant and equipment
-----------------------------
Items capitalized as part of property, plant and equipment are recorded at cost.
Expenditures for maintenance and repair and minor renewals are charged to
expense as incurred, while those expenditures which improve or extend the useful
life of existing assets are capitalized. Upon sale or other disposition of
assets, their cost and the related accumulated depreciation or amortization are
removed from the accounts and the resulting gain or loss, if any, is reflected
in operations.
Depreciation and amortization of property, plant and equipment are provided
principally by the straight-line method at various rates calculated to amortize
the book values of the respective assets over their estimated useful lives which
range from 5 to 50 years for utility plant and equipment and 3 to 40 years for
all other property, plant and equipment.
Excess of cost of subsidiaries over net assets acquired
-------------------------------------------------------
The excess of amounts paid for business acquisitions over the net fair value of
the assets acquired and liabilities assumed ("goodwill") is carried as an asset.
Goodwill of $5,191,000 arose in connection with the acquisition of Kable during
1969 and is not being amortized to operations, since this acquisition was made
prior to the effective date of Accounting Principles Board Opinion ("APB") No.
17 and management is of the opinion that there has been no diminution of value.
An additional $1,149,000 of goodwill was recorded in connection with the
acquisition of certain real estate assets during 1998, and was being amortized
over ten years. Amortization expense was $86,000 in 1999 and $68,000 in 1998. As
discussed in Note 11, the Company wrote-off the remaining balance of this
portion of the goodwill during the fourth quarter of 1999 in connection with the
restructuring of its real estate operations.
Long-lived assets
-----------------
Long-lived assets, including goodwill, are evaluated when indicators of
impairment are present. Provisions for possible losses are recorded when
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. See Note 5.
Income taxes
------------
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured by
using currently enacted tax rates expected to apply to taxable income in the
years in which those differences are expected to reverse.
24
<PAGE>
Earnings per share
------------------
Basic earnings per share is based on the weighted average number of common
shares outstanding during each year. Diluted earnings per share is computed
assuming the issuance of common shares for all dilutive stock options
outstanding (using the treasury stock method) during the reporting period.
Stock options
-------------
The Company accounts for stock option grants in accordance with APB No. 25,
"Accounting for Stock Issued to Employees." The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation" (see Note 8).
Comprehensive income
--------------------
The Company is required to report components of comprehensive income in an
annual financial statement that is displayed with the same prominence as other
financial statements. The Company's comprehensive income and net income are the
same.
Management's estimates and assumptions
--------------------------------------
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. The significant estimates that
affect the financial statements include, but are not limited to, inventory
valuation, magazine returns, the recoverability of long-term assets and
amortization periods. Actual results could differ from those estimates.
New accounting pronouncements
-----------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"),
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. The
Statement, as amended by SFAS No. 137, is effective for fiscal quarters
beginning after June 15, 2000. The Company will adopt SFAS No. 133 in fiscal
2001. The Company expects the adoption of SFAS No. 133 will not have a material
impact on its consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, "Revenue Recognition," which outlines the basic criteria
that must be met to recognize revenue and provides guidance for presentation of
revenue and for disclosure related to revenue recognition policies in financial
statements filed with the Securities and Exchange Commission. The effective date
of this pronouncement, as revised by SAB 101B, is the fourth quarter of the
fiscal year beginning after December 15, 1999. The Company is currently in the
process of evaluating the impact, if any, SAB 101 will have on the financial
position or results of operations of the Company.
Financial statement presentation
--------------------------------
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform with the 2000 presentation.
25
<PAGE>
(2) RECEIVABLES:
------------
Receivables consist of: April 30,
---------------------------------
2000 1999
------------ --------------
(Thousands)
Real estate operations-
Mortgage and other receivables $ 9,469 $ 11,101
Allowance for doubtful accounts (361) (255)
------------ -----------
$ 9,108 $ 10,846
============ ===========
Magazine circulation operations-
Accounts receivable (maturing
within one year $ 109,994 $ 98,179
Allowances for-
Estimated returns (62,978) (37,958)
Doubtful accounts (1,650) (6,399)
------------ -----------
$ 45,366 $ 53,822
============ ===========
Mortgage and other receivables bear interest at rates ranging from 8.0% to 12.0%
and result primarily from land sales. Magazine circulation operations
receivables collateralize a general purpose line-of-credit utilized for the
magazine circulation operations (see Note 7).
The Company extends credit to various companies in the real estate and magazine
circulation industries which may be affected by changes in economic or other
external conditions. Financial instruments that may potentially subject the
Company to a significant concentration of risk primarily consist of trade
accounts receivable from wholesalers in the magazine distribution industry. As
industry practices allow, the Company's policy is to manage its exposure to
credit risk through credit approvals and limits and, where appropriate, to be
secured by collateral. The Company also provides an allowance for doubtful
accounts for potential losses based upon factors surrounding the credit risk of
specific customers, historical trends and other financial and non-financial
information. In recent years, as a result of changes within the magazine
distribution industry there has been a major consolidation and reduction in the
number of wholesalers to whom Kable distributes magazines and, as a result, at
April 30, 2000 approximately 60% of Kable's accounts receivable were due from
three customers. In addition, Kable determined that certain wholesaler customers
had been impacted by these changes and were encountering financial difficulties
and, accordingly, provided additional allowances for doubtful accounts of
approximately $1.8 million in 2000 and $5.0 million in 1999.
Maturities of principal on real estate receivables at April 30, 2000 are as
follows (in thousands): 2001 - $5,188; 2002 - $640; 2003 - $2,141; 2004 - $254;
2005 - $8; 2006 and thereafter - $1,238.
(3) REAL ESTATE INVENTORY:
----------------------
Real estate inventory consists of:
April 30,
---------------------------------
2000 1999
-------------- --------------
(Thousands)
Land and improvements held for sale or
development $ 64,571 $ 58,571
Homes and condominiums-
Land and improvements 1,621 15,678
Construction costs 4,073 15,474
-------------- --------------
$ 70,265 $ 89,723
============== ==============
26
<PAGE>
Accumulated capitalized interest costs included in real estate inventory at
April 30, 2000 and 1999 were $3,934,000 and $4,553,000, respectively. Interest
costs capitalized during 2000, 1999 and 1998 were $1,371,000, $3,348,000 and
$3,226,000, respectively. Accumulated capitalized real estate taxes included in
the inventory of land and improvements at April 30, 2000 and 1999 were
$5,264,000 and $5,467,000, respectively. Real estate taxes capitalized during
2000, 1999 and 1998 were $182,000, $217,000 and $165,000, respectively.
Previously capitalized interest costs and real estate taxes charged to real
estate cost of sales were $2,375,000, $4,903,000 and $2,726,000 in 2000, 1999
and 1998, respectively.
Substantially all of the Company's real estate assets are located in New Mexico.
As a result of this geographic concentration, the Company could be affected by
economic conditions in this region.
(4) OTHER REAL ESTATE INVESTMENTS:
------------------------------
The Company participates in a number of joint ventures in which it does not have
management control. These joint ventures are primarily engaged in the
development, construction and sale of single-family or multi-family residential
properties. Combined condensed financial information concerning the Company's
unconsolidated joint venture activities follows:
April 30,
--------------------------------
2000 1999
-------------- ---------------
(Thousands)
Cash $ 146 $ 612
Receivables and other assets 283 700
Inventories - 21,892
-------------- --------------
Total Assets $ 429 $ 23,204
============== ==============
Mortgages and notes payable $ - $ 13,859
Other liabilities 146 3,122
Equity of:
The Company 283 2,401
Others - 3,822
-------------- --------------
Total Liabilities and Equity $ 429 $ 23,204
============== ==============
As part of the restructuring of its real estate operations, the Company has
substantially completed development, construction and sales for those joint
ventures in which it participated. In addition, during 2000 the net assets of a
joint venture which had been accounted for under the equity method were
consolidated based upon a change in the Company's percentage ownership and
managerial control.
Year Ended April 30,
--------------------------------
2000 1999
--------------- -------------
(Thousands)
Revenues $ 27,661 $ 12,346
Cost of sales 26,114 12,532
Other expenses - net 665 1,120
-------------- --------------
Total pretax income (loss) $ 882 $ (1,306)
============== ==============
The Company's share of pretax income (loss) $ 353 $ (220)
============== ==============
27
<PAGE>
The Company's share of pretax income (loss) includes management fees earned from
unconsolidated joint ventures. Also, as discussed in Note 11, in 2000 the
Company recorded reserves and write-downs related to the continuing wind-down of
real estate operations in California, including approximately $2.0 million of
charges related to these joint ventures. In 1999, the Company wrote-off
approximately $1.0 million of goodwill related to these and other real estate
projects in California, which amount was included in "Restructuring costs" in
the accompanying consolidated statements of income.
(5) PROPERTY, PLANT AND EQUIPMENT:
------------------------------
Property, plant and equipment consists of:
April 30,
---------------------------------
2000 1999
-------------- --------------
(Thousands)
Land, buildings and improvements $ 10,907 $ 10,753
Furniture and fixtures 11,140 12,309
Utility plant and equipment 9,020 9,061
Other 817 680
-------------- --------------
31,884 32,803
Accumulated depreciation and
amortization (14,032) (14,443)
-------------- --------------
$ 17,852 $ 18,360
============== ==============
During 2000, the Company determined that certain property and specialized
equipment utilized in its fulfillment operations would no longer be utilized due
to the impending loss of a large customer in 2001. The Company recognized an
impairment for long-lived assets of approximately $735,000 during 2000 based
upon an estimate of the future cash flows to be generated by those assets
compared to the remaining carrying value of those assets.
Depreciation charged to operations amounted to $2,230,000, $2,109,000 and
$1,940,000 in 2000, 1999, and 1998, respectively.
(6) OTHER ASSETS:
-------------
Other assets consist of:
April 30,
---------------------------------
2000 1999
-------------- ---------------
(Thousands)
Prepaid expenses and other deferred charges, net$ 5,274 $ 7,230
Purchased magazine distribution contracts,
net accumulated amortization of $2,889 and
$2,461 in 2000 and 1999, respectively 1,390 1,818
Security and other deposits 2,492 2,445
Prepaid pension 2,020 1,459
Other 261 929
-------------- ---------------
$ 11,437 $ 13,881
============== ===============
Amortization related to deferred charges and distribution contracts was
$1,874,000, $1,622,000, and $1,251,000 for the years ended April 30, 2000, 1999
and 1998, respectively.
28
<PAGE>
(7) DEBT FINANCING:
---------------
Debt financing consists of:
April 30,
-------------------------------
2000 1999
------------ ------------
(Thousands)
Notes payable -
Line-of-credit borrowings -
Real estate operations and other $ 9,991 $ 20,490
Magazine circulation operations 27,713 35,873
Mortgages and other notes 8,686 17,560
Other 521 742
------------ ------------
$ 46,911 $ 74,665
============ ============
Maturities of principal on notes outstanding at April 30, 2000 are as follows
(in thousands): 2001 - $15,599; 2002 - $28,886; 2003 - $349; 2004 - $286; 2005 -
$120; 2006 and thereafter - $1,671.
Line-of-credit borrowings
-------------------------
The Company has loan arrangements with several financial institutions to support
real estate operations. These loans have a total maximum amount available of
approximately $10.2 million, of which borrowings of approximately $10.0 million
were outstanding as of April 30, 2000. These borrowings, which have maturities
ranging from 2000 through 2002, bear interest ranging from the prime rate (9.0%
at April 30, 2000) to 1.0% over prime (with a weighted average effective rate of
interest of approximately 9.5% at April 30, 2000), are collateralized by certain
real estate assets and are subject to certain financial performance and other
covenants. The Company was not in compliance with a performance covenant on one
loan at April 30, 2000, for which it has received a waiver. The Chief Executive
Officer of the real estate subsidiary, who is also a member of the Board of
Directors of the Company, serves as a member of the board of directors of the
financial institution from which approximately $4.5 million of the total maximum
amount available was obtained.
At April 30, 2000, the Company had drawn approximately $27.7 million against an
additional $40.0 million line-of-credit arrangement which is generally
restricted to magazine circulation operations. Borrowings under this
line-of-credit agreement bear interest at the prime rate plus .5% or, at the
Company's option, at LIBOR (6.19% at April 30, 2000) plus 2.75%, and are
collateralized by accounts receivable arising from magazine circulation
operations. This agreement also contains various financial performance and other
restrictive covenants which, among other things, limit the payment of dividends,
annual capital expenditures and loans from the magazine circulation subsidiary
to the Company. The Company was not in compliance with a performance covenant on
this loan at March 31, 2000, for which it has received a waiver.
In connection with the restructuring of its real estate operations and to
facilitate the wind-down of its California operation, a subsidiary of the
Company has guaranteed a $6 million line-of-credit for an unrelated entity for
the ongoing development of a project in which the subsidiary had been a joint
venture participant, of which $1.2 million was outstanding at April 30, 2000.
The Company anticipates the ability to renew, extend or replace any of these
loan agreements as needed.
Mortgages and other notes payable
---------------------------------
Mortgages and other notes payable had interest rates ranging from 6.4% to 11.5%
at April 30, 2000, and are primarily collateralized by property, plant and
equipment and certain land inventory. These borrowings mature through fiscal
2013.
29
<PAGE>
(8) BENEFIT PLANS:
--------------
Stock option plans
------------------
Under the Company's 1992 Stock Option Plan, 311,750 shares are reserved for
issuance to officers and other key employees. Options may be granted in such
amounts, at such times, and with such exercise prices as the stock option
committee may determine. The Non-Employee Directors Option Plan has 38,000
shares reserved for issuance and provides for an automatic issuance of options
to purchase 500 shares of common stock to each non-employee director annually at
the fair market value at the date of grant. The options are exercisable in one
year and expire five years after the date of grant.
A summary of activity in the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
Year Ended April 30,
------------------------------------------------------------------------------
2000 1999 1998
------------------------------- ---------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
---------- --------- ---------- -------- ---------- ---------
Options outstanding at
beginning of year 43,500 $ 6.20 50,500 $ 6.18 85,500 $ 7.40
Granted 2,500 $ 5.84 2,500 $ 7.75 42,500 $ 6.09
Expired or canceled (34,000) $ 7.50 (9,500) $ 6.50 (77,500) $ .48
---------- ---------- ----------
Options outstanding at
end of year 12,000 $ 6.27 43,500 $ 6.20 50,500 $ 6.18
========== ========== ==========
Available for grant at
end of year 337,750 308,750 303,250
=========== ========== ==========
Options exercisable at
end of year 8,250 18,417 8,000
=========== ========== ==========
Range of exercise prices
for options exercisable
at end of year
$5.19 to $7.75 $5.19 to $7.50 $5.19 to $8.88
================= =============== ==============
</TABLE>
Options outstanding at April 30, 2000 are exercisable over a three to four year
period beginning one year from date of grant. The weighted average remaining
contractual life of options outstanding at April 30, 2000, 1999, and 1998 is
3.1, 2.4 and 3.2 years, respectively. The weighted average fair value of options
granted during the year was $.97 in 2000, $1.48 in 1999, and $.44 in 1998. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1999, and 2000, respectively: expected
volatility of 21%, 38%, and 41%, risk-free interest rates of 5.4%, 5.5%, and
6.6%, and expected lives of 1.5, 3, and 3 years.
Stock options granted have been issued with an exercise price at the fair market
value of the Company's stock at the date of grant. Accordingly, no compensation
expense has been recognized with respect to the stock option plans. Further, the
amount of additional compensation disclosable under the disclosure-only
provisions of SFAS No. 123 is immaterial for all periods presented.
30
<PAGE>
Savings plan
------------
The Company has a savings plan to which the Company makes contributions. The
plan provides for standard contributions of 33.3% of eligible employees' defined
contributions up to a maximum of 2% of such employees' compensation. Additional
amounts may be contributed with the approval of the Company's Board of
Directors. The Company's contribution to the plan amounted to approximately
$254,000, $216,000 and $268,000 in 2000, 1999 and 1998, respectively.
Retirement plan
---------------
The Company has a retirement plan which covers substantially all full-time
employees and which provides benefits based upon a percentage of the employee's
annual salary. In 1999 and 1998, the Company contributed $12,000 and $231,000,
respectively, to the plan. No contribution was required in 2000. Assets are
invested primarily in United States Treasury obligations, equity and debt
securities and money market funds.
Net periodic pension cost for 2000, 1999 and 1998 was comprised of the following
components:
<TABLE>
<CAPTION>
Year Ended April 30,
-------------------------------------------------------
2000 1999 1998
--------------- ------------------ --------------
(Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the
period $ 656 $ 645 $ 994
Interest cost on projected
benefit obligation 1,611 1,617 1,717
Expected return on assets (2,464) (2,385) (2,006)
Amortization of prior service cost (352) (352) (121)
Recognized net actuarial loss (24) (12) -
--------------- ----------------- ---------------
Net periodic pension cost (income) $ (573) $ (487) $ 584
=============== ================= ===============
Assumptions used in determining net periodic pension cost were:
Year Ended April 30,
-----------------------------------------------------------
2000 1999 1998
----------------- ----------------- -----------------
Discount rates 7.25% 7.25% 7.25%
Rates of increase in compensation
levels 4.5% N/A N/A
Expected long-term rate of return
on assets 9.0% 8.0-9.0% 8.0-9.0%
</TABLE>
31
<PAGE>
The following table sets forth changes in the plans' benefit obligations and
assets, and summarizes components of amounts recognized in the Company's
consolidated balance sheets:
April 30,
-------------------------------
2000 1999
------------- --------------
(Thousands)
Change in benefit obligations:
Benefit obligation at beginning of year $ 23,641 $ 22,471
Service cost (excluding expense component) 485 495
Interest cost 1,611 1,617
Actuarial (gain) loss (2,891) 310
Benefits paid (1,409) (1,252)
------------- --------------
Benefit obligation at end of year $ 21,437 $ 23,641
============= ==============
Change in plan assets:
Fair value of plan assets at
beginning of year $ 28,068 $ 27,133
Actual return on plan assets 2,691 2,416
Employer contribution 12
Benefits paid (1,409) (1,252)
Expenses (110) (241)
------------- --------------
Fair value of plan assets at end of year $ 29,240 $ 28,068
============= ==============
Funded status $ 7,803 $ 4,427
Unrecognized net actuarial (gain) loss (2,748) 407
Unrecognized prior service cost (3,035) (3,375)
------------- --------------
Prepaid pension cost $ 2,020 $ 1,459
============= ==============
(9) INCOME TAXES:
-------------
The provision for income taxes consists of the following:
Year Ended April 30,
-----------------------------------------
2000 1999 1998
----------- ------------ ------------
(Thousands)
Current:
Federal $ (833) $ 1,946 $ 6,925
State and local - 286 1,094
----------- ------------ ------------
(833) 2,232 8,019
----------- ------------ ------------
Deferred:
Federal 1,341 (1,397) (2,177)
State and local 271 (176) (371)
----------- ------------ ------------
1,612 (1,573) (2,548)
----------- ------------ ------------
Total provision for income taxes 779 659 5,471
=========== ============ ============
32
<PAGE>
The components of the net deferred income tax liability are as follows:
April 30,
-----------------------
2000 1999
--------- ---------
(Thousands)
Deferred income tax assets-
State tax loss carryforwards $ 5,022 $ 4,433
Real estate inventory valuation 1,037 964
Interest payable on tax settlements 1,614 2,229
Real estate basis differences 448 1,528
Differences related to timing of partnership income 1,176 1,120
--------- ---------
Total deferred income tax assets 9,297 10,274
--------- ---------
Deferred income tax liabilities-
Reserve for periodicals and paperbacks (964) (1,329)
Gain on partnership restructuring (473) (473)
Depreciable assets (2,791) (2,684)
Expenses capitalized for financial reporting
purposes, expensed for tax (2,003) (2,399)
Other (1,034) (519)
--------- ---------
Total deferred income tax liabilities (7,265) (7,404)
--------- ---------
Valuation allowance for realization of state tax
loss carryforwards (4,659) (3,885)
--------- ---------
Net deferred income tax liability $(2,627) $(1,015)
========= =========
The following table reconciles taxes computed at the U.S. federal statutory
income tax rate to the Company's actual tax provision:
Year Ended April 30,
----------------------------------
2000 1999 1998
---------- ---------- ----------
(Thousands)
Computed tax provision at
statutory $ 662 $ 2,787 $ 4,787
Increase (reduction) in tax resulting from:
State income taxes, net of federal
income tax effect 126 491 809
Net reduction in tax liability as a
result of IRS settlement - (2,401) -
Nondeductible meals and entertainment 71 90 96
Other (80) (308) (221)
---------- ---------- ----------
Actual tax provision $ 779 $ 659 $ 5,471
========== ========== ==========
For many years, the Company has been involved in an ongoing process of audits of
its federal tax returns by the Internal Revenue Service ("IRS") for fiscal years
1984 through 1996. In prior years, the Company has reached various agreements
with the IRS for the years 1984 through 1992. During the year ended April 30,
1999, the Company recorded a tax benefit of approximately $2.4 million
representing the settlement of IRS examinations for the years 1990 through 1992
at an amount less than that which the Company believed would be required. During
the year ended April 30, 2000, the Company made a payment of $4.3 million of
taxes and interest in connection with the interim resolution of certain matters
related to the examination of the Company's tax returns for the years 1993
through 1996. These tax years remain open, however, and other matters for these
33
<PAGE>
years continue to be under review by the IRS. In addition, the Company paid
approximately $1.5 million of interest during 2000 in final resolution of the
IRS examinations of the tax returns for the years 1990 through 1992. (The
payment of federal income taxes for those years was paid in full during 1999,
and these tax years are no longer subject to audit). At April 30, 2000, the
amount recorded as "Taxes Payable-amounts subsequently due" of approximately
$6.0 million represents amounts that have been accrued in prior years to cover
federal and state taxes and related interest estimated to be due upon the
settlement of all open tax examinations. However, if the interim resolution for
the years 1993 through 1996 with the IRS becomes final, the amount actually owed
may be less than the recorded amount, and a tax benefit would be recognized at
that time. The amount of the potential tax benefit is uncertain and dependent
upon the ultimate resolution of other matters under review by the IRS.
(10) SHAREHOLDERS' EQUITY:
---------------------
During 1999, in connection with a previously announced stock repurchase program,
the Company reacquired by means of open-market purchases 143,300 shares of its
common stock to be held as treasury stock at a cost of approximately $857,000.
The Company also issued 15,000 shares of treasury stock during the year as
compensation for certain executive consulting services, and charged the fair
market value of the stock of approximately $92,000 to general and administrative
expense.
In May 2000, the Board of Directors authorized a self-tender "Dutch Auction" for
725,000 of the Company's common shares at a price not to exceed $7.00 per share
and not lower than $5.25 share. In June 2000, the Company accepted tenders of
587,654 shares at a cost of $7.00 per share.
(11) RESTRUCTURING COSTS:
--------------------
During the fourth quarter of 1999, the Company implemented a plan to wind-down
its homebuilding operations, to sell all of its landholdings in Colorado and
California, and to concentrate its real estate activities on developing and
marketing its landholdings at Rio Rancho, New Mexico. As a result, the Company
incurred restructuring-related charges of approximately $1.1 million, including
severance and lease termination payments, and wrote-off unamortized goodwill and
acquisition-related costs of approximately $1.0 million incurred in connection
with its acquisition of certain real estate assets in California. The
restructuring plan estimated that approximately 130 employees would be
terminated with related severance costs of $800,000; as of April 30, 2000, the
restructuring plan was substantially complete, and 125 employees had been
terminated and related severance costs of approximately $860,000 had been paid.
During 2000, the Company recorded charges of approximately $3.8 million to
provide for reserves and write-downs related to the continuing wind-down of real
estate projects in California and Colorado, which was charged to cost of sales
and other operations. In addition, in 1999 the Company wrote-off approximately
$1.2 million related to deposits and other project-related inventory costs which
had been abandoned or otherwise disposed of in connection with this business
restructuring, which was charged to cost of sales. The Company's decision to
change its real estate focus to emphasize land development operations in New
Mexico and wind-down homebuilding operations is not considered to be a permanent
change of strategy, and accordingly, the Company has presented the results of
operations for homebuilding activities in continuing operations.
(12) COMMITMENTS AND CONTINGENCIES:
------------------------------
Revenue agent review
--------------------
As discussed in Note 9, the IRS is in the process of reviewing the Company's tax
returns for the years 1993 through 1996. While the Company cannot be totally
certain of the results of these audits, it has an accrued liability of
approximately $6.0 million recorded as "Taxes Payable - amounts subsequently
due" which represents amounts accrued in prior years, net of payments and other
34
<PAGE>
adjustments for audits which have been settled, to cover taxes and related
interest estimated to be due upon the settlement of all open tax examinations.
If an interim resolution with the IRS for the years 1993 through 1996 as
described in Note 9 becomes final, however, the amount actually owed may be less
than the recorded amount, and a tax benefit would be recognized at that time.
The amount of the potential tax benefit is uncertain and dependent upon the
ultimate resolution of other matters under review by the IRS.
Land sale contracts
-------------------
In furtherance of the restructuring of real estate operations, commencing in the
second half of 1999 and through 2000 the Company has sold to two national
builders and several local builders approximately 1,400 lots in Rio Rancho for a
total sales price of $26 million. In addition, the Company has entered into
several conditional sales contracts for the sale of approximately 1,500 lots in
Rio Rancho and Colorado over the next several years; however, since each of the
contracts permits the purchaser to terminate its obligations by forfeiture of a
relatively modest deposit, there are no assurances that all, or even a
substantial portion, of the lots subject to the contracts will be sold pursuant
to the contracts.
Non-cancelable leases
---------------------
The Company is obligated under long-term non-cancelable leases for equipment and
various real estate properties. Certain real estate leases provide that the
Company will pay for taxes, maintenance and insurance costs and include renewal
options. Rental expense for 2000, 1999 and 1998 was approximately $4,667,000,
$5,477,000 and $5,195,000, respectively.
The approximate minimum rental commitments for years subsequent to April 30,
2000, are as follows (in thousands): 2001 - $2,645; 2002 - $2,250; 2003 -
$1,102; 2004 - $780; 2005 - $444; and the total future minimum rental payments -
$7,221.
Rio Rancho lot exchanges
------------------------
In connection with homesite sales at Rio Rancho, New Mexico, made prior to 1977,
if water, electric and telephone utilities have not reached the lot site when a
purchaser is ready to build a home, the Company is obligated to exchange a lot
in an area then serviced by such utilities for a lot of the purchaser, without
cost to the purchaser. The Company has not incurred significant costs related to
the exchange of lots.
(13) LITIGATION:
-----------
The Company and/or its subsidiaries are involved in various claims and legal
actions incident to their operations, which in the opinion of management, based
upon advice of counsel, will not materially affect the consolidated financial
position or results of operations of the Company and its subsidiaries.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS:
------------------------------------
The estimated fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. The carrying
amounts of cash and cash equivalents and trade payables approximate fair value
because of the short maturity of these financial instruments. Debt that bears
variable interest rates indexed to prime or LIBOR also approximates fair value
as it reprices when market interest rates changes. The estimated fair value of
the Company's long-term, fixed-rate mortgage receivables is $6.8 million, versus
a carrying amount of $6.9 million, and $8.7 million versus $8.8 million,
respectively, at April 30, 2000 and April 30, 1999. The estimated fair value of
the Company's long-term, fixed-rate notes payable is $7.5 million versus a
carrying amount of $7.6 million as of April 30, 2000 and $15.0 million versus
$15.1 million as of April 30, 1999.
35
<PAGE>
(15) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT
-------------------------------------------------------
INDUSTRY SEGMENTS:
------------------
The Company has identified four segments in which it operates under the
definition established by this standard. The Company's real estate subsidiary
has two identified segments, Land Sale operations and Homebuilding operations.
Land Sale operations involve the obtaining of approvals, and development of
large tracts of land for sale to builders, commercial users and others, and
Homebuilding operations involve the construction and sale of single-family homes
and other projects. Magazine circulation operations also has two identified
segments, Distribution and Fulfillment operations. Distribution operations
involve the national and international distribution and sale of periodicals and
paperbacks to wholesalers, and Fulfillment operations involve the performance of
subscription and product fulfillment and other related activities on behalf of
various publishers and other clients. Corporate and other miscellaneous revenues
and expenses not identifiable with a specific segment are grouped together in
this presentation. Certain expenses are allocated among industry segments based
upon management's estimate of each segment's absorption.
Identifiable assets by industry are those assets that are used in the Company's
operations in each industry segment, which also is based upon certain estimates
and allocations among segments.
The following schedules set forth summarized data relative to the industry
segments (amounts in thousands):
<TABLE>
<CAPTION>
Land Home Corporate
Sales Building Distribution Fulfillment and Other Consolidated
--------- --------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Year ended April 30, 2000:
Revenues $ 34,093 $ 30,674 $ 15,927 $ 36,621 $ 2,518 $ 119,833
Operating expenses 25,300 34,218 15,858 35,006 4,557 114,939
Interest expense, net 523 241 1,558 553 71 2,946
--------- --------- ------------ ----------- --------- ------------
Pretax income (loss) contribution $ 8,270 $ (3,785) $ (1,489) $ 1,062 $ (2,110) $ 1,948
========= ========= ============ =========== ========= ============
Depreciation and amortization $ 361 $ 860 $ 1,076 $ 1,585 $ 222 $ 4,104
Identifiable assets $ 64,780 $ 26,526 $ 43,157 $ 16,778 $ 21,195 $ 172,436
Capital expenditures $ 905 $ - $ 592 $ 1,159 $ 3 $ 2,659
------------------------------------------------------------------------------------------------------------------------
Year ended April 30, 1999:
Revenues $ 37,182 $ 92,637 $ 20,377 $ 36,977 $ 3,118 $ 190,291
Operating expenses 25,292 91,151 19,103 35,486 4,212 175,244
Restructuring costs - 2,108 - - - 2,108
Interest expense, net 619 1,394 1,954 731 45 4,743
--------- --------- ------------ ----------- --------- ------------
Pretax income (loss) contribution $ 11,271 $ (2,016) $ (680) $ 760 $ (1,139) $ 8,196
========= ========= ============ =========== ========= ============
Depreciation and amortization $ 362 $ 1,857 $ 891 $ 1,512 $ 208 $ 4,830
Identifiable assets $ 64,814 $ 55,310 $ 61,791 $ 18,528 $ 17,334 $ 217,777
Capital expenditures $ 1,043 $ 679 $ 168 $ 970 $ 445 $ 3,305
------------------------------------------------------------------------------------------------------------------------
Year ended April 30, 1998:
Revenues $ 25,821 $ 80,461 $ 18,322 $ 38,617 $ 8,147 $ 171,368
Operating expenses 15,656 80,200 14,358 36,134 6,939 153,287
Interest expense, net 433 1,121 1,907 827 116 4,404
--------- --------- ------------ ----------- --------- ------------
Pretax income (loss) contribution $ 9,732 $ (860) $ 2,057 $ 1,656 $ 1,092 $ 13,677
========= ========= ============ =========== ========= ============
Depreciation and amortization $ 261 $ 610 $ 996 $ 1,051 $ 341 $ 3,259
Identifiable assets $ 75,373 $ 56,941 $ 62,478 $ 19,843 $ 15,133 $ 229,768
Capital expenditures $ 102 $ 396 $ 204 $ 540 $ 756 $ 1,998
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
36
<PAGE>
Selected Quarterly Financial Data (Unaudited):
----------------------------------------------
(In thousands of dollars, except per share amounts)
Quarter Ended
----------------------------------------------------------------
July 31, October 31, January 31, April 30,
1999 1999 2000 2000
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 42,035 $ 34,313 $ 21,154 $ 22,331
Gross Profit 8,202 6,252 2,265 4,551
Net Income (Loss) $ 1,313 $ 642 $ (1,145) $ 359
============== ============== =============== ==============
Earnings (Loss) Per Share -
Basic and Diluted $ 0.18 $ 0.09 $ (0.16) $ 0.05
============== ============== =============== ==============
Quarter Ended
----------------------------------------------------------------
July 31, October 31, January 31, April 30,
1998 1998 1999 1999
-------------- -------------- --------------- --------------
Revenues $ 46,223 $ 35,930 $ 41,787 $ 66,351
Gross Profit 11,220 7,364 6,250 11,953
Net Income $ 2,882 $ 341 $ 693 $ 3,621
============== ============== =============== ==============
Earnings (Loss) Per Share -
Basic and Diluted $ 0.39 $ 0.05 $ 0.09 $ 0.49
============== ============== =============== ==============
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting
------- -----------------------------------------------------------
and Financial Disclosure.
-------------------------
Not Applicable.
PART III
--------
The information called for by Part III is hereby incorporated by reference from
the information set forth and under the headings "Common Stock Ownership of
Certain Beneficial Owners and Management", "Election of Directors", and
"Executive Compensation" in Registrant's definitive proxy statement for the 2000
Annual Meeting of Shareholders, which meeting involves the election of
directors, such definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K. In addition,
information on Registrant's executive officers has been included in Part I above
under the caption "Executive Officers of the Registrant".
37
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and
-------- --------------------------------------------
Reports on Form 8-K
-------------------
(a) 1. The following financial statements and supplementary financial
information are filed as part of this report:
AMREP Corporation and Subsidiaries:
o Report of Independent Public Accountants - Arthur Andersen LLP
o Consolidated Balance Sheets - April 30, 2000 and 1999
o Consolidated Statements of Operations for the Three Years Ended
April 30, 2000
o Consolidated Statements of Shareholders' Equity for the Three Years
Ended April 30, 2000
o Consolidated Statements of Cash Flows for the Three Years
Ended April 30, 2000
o Notes to Consolidated Financial Statements
o Selected Quarterly Financial Data
2. The following financial statement schedules are filed as part of this
report:
AMREP Corporation and Subsidiaries:
o Schedule II - Valuation and Qualifying Accounts
Financial statement schedules not included in this Annual Report on Form
10-K have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits:
The exhibits filed in this report are listed in the Exhibit Index.
The Registrant agrees, upon request of the Securities and Exchange
Commission, to file as an exhibit each instrument defining the rights of holders
of long-term debt of the Registrant and its consolidated subsidiaries which has
not been filed for the reason that the total amount of securities authorized
thereunder does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis.
(b) During the quarter ended April 30, 2000, Registrant filed no Current Report
on Form 8-K.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMREP CORPORATION
(Registrant)
Dated: July 24, 2000 By /s/Mohan Vachani
---------------------
Mohan Vachani
Senior Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
/s/Mohan Vachani /s/Nicholas G. Karabots
---------------------------------- -----------------------
Mohan Vachani Nicholas G. Karabots
Director, Senior Vice President, Director
Principal Financial Officer and Dated: July 24, 2000
Principal Accounting Officer *
Dated: July 24, 2000
/s/Jerome Belson /s/Albert V. Russo
---------------------------------- -----------------------
Jerome Belson Albert V. Russo
Director Director
Dated: July 24, 2000 Dated: July 24, 2000
/s/Edward B. Cloues II /s/Samuel N. Seidman
---------------------------------- -----------------------
Edward B. Cloues II Samuel N. Seidman
Director Director
Dated: July 24, 2000 Dated: July 24, 2000
/s/Daniel Friedman /s/James Wall
---------------------------------- -----------------------
Daniel Friedman James Wall
Director Director
Dated: July 24, 2000 Dated: July 24, 2000
*Also acting as Principal Executive Officer in the absence of a Chief Executive
Officer, solely for the purpose of signing this Annual Report.
39
<PAGE>
<TABLE>
<CAPTION>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 1 of 2)
-------------------------------------------------------------
(Thousands)
Additions
-----------------------------
Charges Charged
Balance at (Credits) to (Credited) to
Beginning Costs and Other Balance at End
Description of Period Expenses Accounts Deductions of Period
----------- ----------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
APRIL 30, 2000:
Allowance for doubtful
accounts (included in
receivables - real estate
operations on the
consolidated balance sheet) $ 255 $ 106 $ - $ - $ 361
----------- ------------- -------------- ------------ --------------
Allowance for estimated
returns and doubtful accounts
(included in receivables -
magazine circulation
operations on the
consolidated balance sheet) $ 44,357 $ 41,387 $ - $ 21,116(A) $ 64,628
----------- ------------- -------------- ------------ --------------
FOR THE YEAR ENDED
APRIL 30, 1999:
Allowance for doubtful
accounts (included in
receivables - real estate
operations on the
consolidated balance sheet) $ 291 $ 74 $ - $ 110(A) $ 255
----------- ------------- -------------- ------------ --------------
Allowance for estimated
returns and doubtful accounts
(included in receivables -
magazine circulation
operations on the
consolidated balance sheet) $ 51,895 $ (3,528) $ - $ 4,010(A) $ 44,357
----------- ------------- -------------- ------------ --------------
40
<PAGE>
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 2 of 2)
-------------------------------------------------------------
(Thousands)
Additions
-----------------------------
Charges Charged
Balance at (Credits) to (Credited) to
Beginning Costs and Other Balance at End
Description of Period Expenses Accounts Deductions of Period
----------- ----------- ------------- -------------- ------------ --------------
FOR THE YEAR ENDED
APRIL 30, 1998:
Allowance for doubtful
accounts (included in
receivables - real estate
operations on the
consolidated balance sheet) $ 690 $ 143 $ - $ 542 (A) $ 291
----------- ------------- -------------- ------------ --------------
Allowance for estimated
returns and doubtful accounts
(included in receivables -
magazine circulation
operations on the
consolidated balance sheet) $ 48,976 $ 3,044 $ - $ 125 (A) $ 51,895
----------- ------------- -------------- ------------ --------------
Real estate valuation
allowance $ 2,459 $ - $ (1,880) $ 579 (B) $ -
----------- ------------- -------------- ------------ --------------
</TABLE>
NOTE: (A) Uncollectible accounts written off.
(B) Allowances utilized to reduce inventory valuation.
41
<PAGE>
EXHIBIT INDEX
-------------
(3) (a) (i) Articles of Incorporation, as amended - Incorporated by reference
to Exhibit (3) (a) (i) to Registrant's Annual Report on Form 10-K
for the year ended April 30, 1998.
(3) (a) (ii) Certificate of Merger - Incorporated by reference to Exhibit (3)(a)
(ii) to Registrant's Annual Report on Form 10-K for the year ended
April 30, 1998.
(3) (b) By-Laws as restated September 24, 1997 - Incorporated by reference
to Exhibit 3 (c) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1997.
(4) (a) Loan Agreement dated as of September 15, 1998 between Kable News
Company, Inc., and American National Bank and Trust Company of
Chicago as Agent and all the lenders as defined therein -
Incorporated by reference to Exhibit 4 (a) to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
October 31, 1998.
(4) (b) Modification Agreement dated as of July 7 1999 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 and all the lenders as defined therein,
filed herewith.
(4) (c) Commitment Agreement dated as of February 20, 1998 between AMREP
Southwest, Inc., and Residential Funding Corporation - Incorporated
by reference to Exhibit 4 (b) to Registrant's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1998
(10) (a) 1992 Stock Option Plan - Incorporated by reference to Exhibit
10 (h) to Registrant's Annual Report on Form 10-K for the year
ended April 30, 1997.*
(10) (b) Non-Employee Directors Option Plan, as amended - Incorporated by
reference to Exhibit 10 (i) to Registrant's Annual Report on
Form 10-K for the year ended April 30, 1997.*
(21) Subsidiaries of Registrant, filed herewith.
(23) Consent of Arthur Andersen LLP, filed herewith.
(27) Financial Data Schedule
_________________________________________
* Management contract or compensatory plan or arrangement in which directors or
officers participate.
42
<PAGE>
