Last10K.com

Amrep Corp. (AXR) SEC Filing 10-Q Quarterly Report for the period ending Saturday, July 31, 2021

Amrep Corp.

CIK: 6207 Ticker: AXR

Exhibit 99.1

 

FOR:AMREP Corporation

620 West Germantown Pike, Suite 175

Plymouth Meeting, Pennsylvania 19462

 

CONTACT:Adrienne M. Uleau

Vice President, Finance and Accounting

(610) 487-0907

 

AMREP REPORTS FISCAL 2021 RESULTS

 

Plymouth Meeting, Pennsylvania, July 27, 2021 – AMREP Corporation (NYSE: AXR) today reported net income of $7,392,000, or $0.95 per diluted share, for its 2021 fiscal year ended April 30, 2021 compared to a net loss of $5,903,000, or $0.73 per share, for the prior year. Revenues were $40,069,000 for fiscal 2021 and $18,783,000 for fiscal 2020.

 

More information about the Company’s financial performance in 2021 and 2020 may be found in AMREP Corporation’s financial statements on Form 10-K which have today been filed with the Securities and Exchange Commission and will be available on AMREP’s website (www.amrepcorp.com/sec-filings/).

 

AMREP Corporation, through its subsidiaries, is a major holder of land, leading developer of real estate and award-winning homebuilder in New Mexico.

 

FINANCIAL HIGHLIGHTS

 

   Twelve Months Ended April 30, 
   2021   2020 
         
Revenues  $40,069,000   $18,783,000 
           
Net income (loss)  $7,392,000   $(5,903,000)
           
Income (loss) per share – Basic  $0.95   $(0.73)
Income (loss) per share – Diluted  $0.95   $(0.73)
           
Weighted average number of common shares outstanding - basic   7,743,000    8,134,000 
Weighted average number of common shares outstanding - diluted   7,773,000    8,134,000 

 


The following information was filed by Amrep Corp. (AXR) on Tuesday, July 27, 2021 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

Commission File Number: 1-4702

AMREP Corporation

(Exact Name of Registrant as Specified in its Charter)

Oklahoma

 

59-0936128

State or Other Jurisdiction of

Incorporation or Organization

 

I.R.S. Employer Identification No.

 

 

 

850 West Chester Pike,

Suite 205, Havertown, PA

 

19083

Address of Principal Executive Offices

 

Zip Code

(610) 487-0905

Registrant’s Telephone Number, Including Area Code

620 West Germantown Pike, Suite 175, Plymouth Meeting, PA 19462

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $0.10 par value

AXR

New York Stock Exchange

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 (the “Exchange Act”) 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      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer  

Smaller reporting company 

Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 

Number of Shares of Common Stock, par value $.10 per share, outstanding at September 9, 2021 – 7,336,370.

AMREP CORPORATION AND SUBSIDIARIES

INDEX

PAGE NO.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets July 31, 2021 (Unaudited) and April 30, 2021

2

Consolidated Statements of Operations (Unaudited) Three Months Ended July 31, 2021 and 2020

3

Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended July 31, 2021 and 2020

4

Consolidated Statements of Shareholders’ Equity (Unaudited) Three Months Ended July 31, 2021 and 2020

5

Consolidated Statements of Cash Flows (Unaudited) Three Months Ended July 31, 2021 and 2020

6

Notes to Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 4.

Controls and Procedures

18

PART II. OTHER INFORMATION

Item 6.

Exhibits

19

SIGNATURE

20

EXHIBIT INDEX

21

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

July 31,

April 30, 

2021

2021

    

(Unaudited)

    

ASSETS

 

  

 

  

Cash and cash equivalents

$

23,274

$

24,801

Real estate inventory

 

61,298

 

55,589

Investment assets, net

 

13,479

 

13,582

Other assets

 

791

 

645

Deferred income taxes, net

 

2,261

 

2,749

TOTAL ASSETS

$

101,103

$

97,366

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

Liabilities:

 

  

 

  

Accounts payable and accrued expenses

$

3,700

$

4,458

Notes payable, net

 

6,377

 

3,448

Taxes payable, net

 

29

 

95

Accrued pension costs

 

255

 

476

TOTAL LIABILITIES

 

10,361

 

8,477

Shareholders’ Equity:

 

  

 

  

Common stock, $.10 par value; shares authorized – 20,000,000; shares issued – 7,336,370 at July 31, 2021 and 7,323,370 at April 30, 2021

 

731

730

Capital contributed in excess of par value

 

45,221

 

45,072

Retained earnings

 

49,347

 

47,710

Accumulated other comprehensive loss, net

 

(4,557)

 

(4,623)

TOTAL SHAREHOLDERS’ EQUITY

 

90,742

 

88,889

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

101,103

$

97,366

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

2

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months ended July 31, 2021 and 2020

(Amounts in thousands, except per share amounts)

Three Months ended July 31,

    

2021

    

2020

REVENUES:

 

  

 

  

Land sale revenues

$

7,190

$

3,487

Home sale revenues

2,411

Other revenues

 

906

 

719

Total revenues

 

10,507

 

4,206

COSTS AND EXPENSES:

 

  

 

Land sale cost of revenues

 

5,610

 

2,679

Home sale cost of revenues

1,914

General and administrative expenses

 

1,188

 

1,444

Total costs and expenses

 

8,712

 

4,123

Operating income

1,795

83

Interest income, net

 

1

 

6

Other income

 

230

 

650

Income before income taxes

2,026

739

Provision for income taxes

389

146

Net income

$

1,637

$

593

Basic earnings per share

$

0.22

$

0.07

Diluted earnings per share

$

0.22

$

0.07

Weighted average number of common shares outstanding – basic

 

7,346

 

8,151

Weighted average number of common shares outstanding – diluted

 

7,373

 

8,182

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

3

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three Months ended July 31, 2021 and 2020

(Amounts in thousands)

Three Months ended

July 31, 

    

2021

    

2020

Net income

$

1,637

$

593

Other comprehensive income, net of tax:

 

  

 

  

Decrease in pension liability, net of tax ($31 in 2022 and $42 in 2021)

 

66

 

90

Other comprehensive income

 

66

 

90

Total comprehensive income

$

1,703

$

683

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

4

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(Amounts in thousands)

Capital

Accumulated

Treasury

Contributed

Other

Stock,

Common Stock

in Excess of

Retained

Comprehensive

at

    

Shares

    

Amount

    

Par Value

    

Earnings

    

Loss

    

Cost

    

Total

Balance, May 1, 2021

 

7,323

$

730

$

45,072

$

47,710

$

(4,623)

$

$

88,889

Issuance of restricted common stock

 

13

 

1

 

149

 

 

 

 

150

Net income

 

 

 

 

1,637

 

 

 

1,637

Other comprehensive income

 

 

 

 

 

66

 

 

66

Balance, July 31, 2021

 

7,336

$

731

$

45,221

$

49,347

$

(4,557)

$

$

90,742

Balance, May 1, 2020

 

8,358

$

836

$

51,334

$

43,149

$

(6,467)

$

(4,215)

$

84,637

Issuance of restricted common stock

9

1

 

41

 

 

 

 

42

Net income

 

 

 

 

593

 

 

 

593

Other comprehensive income

 

 

 

 

 

90

 

 

90

Balance, July 31, 2020

 

8,367

$

837

$

51,375

$

43,742

$

(6,377)

$

(4,215)

$

85,362

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

5

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months ended July 31, 2021 and 2020

(Amounts in thousands)

Three Months ended July 31,

    

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net income

$

1,637

$

593

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Depreciation

 

104

 

129

Amortization of debt issuance costs

 

34

 

3

Non-cash credits and charges:

 

  

 

  

Stock-based compensation

 

16

 

40

Deferred income tax provision

 

456

 

187

Net periodic pension cost

 

(123)

 

87

Gain on debt forgiveness

(45)

Changes in assets and liabilities:

 

  

 

  

Real estate inventory and investment assets

 

(5,709)

 

(4,050)

Other assets

 

(12)

 

(29)

Accounts payable and accrued expenses

 

(758)

 

980

Taxes payable

 

(66)

 

Net cash used in operating activities

 

(4,466)

 

(2,060)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Capital expenditures

 

(1)

 

(3)

Net cash used in investing activities

 

(1)

 

(3)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Proceeds from debt financing

 

6,857

 

2,293

Principal debt payments

 

(3,867)

 

(637)

Payments for debt issuance costs

 

(50)

 

(27)

Net cash provided by financing activities

 

2,940

 

1,629

Decrease in cash and cash equivalents

 

(1,527)

 

(434)

Cash and cash equivalents, beginning of year

 

24,801

 

17,502

Cash and cash equivalents, end of year

$

23,274

$

17,068

SUPPLEMENTAL CASH FLOW INFORMATION:

 

  

 

  

Income taxes refunded, net

$

(3)

$

Interest paid

$

40

$

30

Right-of-use assets obtained in exchange for operating lease liabilities

$

24

$

26

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

6

AMREP CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended July 31, 2021 and 2020

(1)           SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared by AMREP Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The Company, through its subsidiaries, is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales or activities outside the United States. All references to the Company in this quarterly report on Form 10-Q include the Registrant and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited consolidated financial statements include all adjustments, which are of a normal recurring nature, considered necessary to reflect a fair presentation of the results for the interim periods presented.  The results of operations for such interim periods are not necessarily indicative of what may occur in future periods.  Unless the context otherwise indicates, all references to 2022 and 2021 are to the fiscal years ending April 30, 2022 and 2021.

The unaudited consolidated financial statements herein should be read in conjunction with the Company’s annual report on Form 10-K for the year ended April 30, 2021, which was filed with the SEC on July 27, 2021 (the “2021 Form 10-K”).  Certain 2021 balances in these financial statements have been reclassified to conform to the current year presentation with no effect on net income or shareholders’ equity.

Summary of Significant Accounting Policies

The significant accounting policies used in preparing these consolidated financial statements are consistent with the accounting policies described in the 2021 Form 10-K, except for those adopted as described below.

New Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes, which removes certain exceptions for companies related to tax allocations and simplifies when companies recognize deferred tax liabilities in an interim period. ASU 2019-12 was effective for the Company’s fiscal year beginning May 1, 2021. The adoption of ASU 2019-12 by the Company did not have any effect on its consolidated financial statements.

There are no other new accounting standards or updates to be adopted that the Company currently believes might have a significant impact on its consolidated financial statements.

(2)         REAL ESTATE INVENTORY

Real estate inventory consists of (in thousands):

July 31,

April 30,

    

2021

    

2021

Land held for development or sale in New Mexico

$

55,640

$

49,918

Land held for development or sale in Colorado

 

3,997

 

3,975

Homebuilding finished inventory

214

417

Homebuilding construction in process

1,447

1,279

$

61,298

$

55,589

7

(3)          INVESTMENT ASSETS, NET

Investment assets, net consist of (in thousands):

    

July 31,

    

April 30,

2021

2021

Land held for long-term investment

$

9,775

$

9,775

Buildings

10,003

10,003

Less accumulated depreciation

 

(6,299)

 

(6,196)

Buildings, net

 

3,704

 

3,807

$

13,479

$

13,582

Depreciation associated with the buildings was $103,000 and $105,000 for the three months ended July 31, 2021 and July 31, 2020.

(4)          OTHER ASSETS

Other assets consist of (in thousands):

    

July 31, 

    

April 30, 

2021

2021

Prepaid expenses

$

501

$

324

Receivables

30

37

Right-of-use assets associated with leases of office facilities

 

60

 

84

Other assets

172

172

Property and equipment

222

222

Less accumulated depreciation

(194)

(194)

Property and equipment, net

28

28

$

791

$

645

Prepaid expenses as of July 31, 2021 primarily consist of stock compensation and prepayments for a public improvement district. Amortized lease cost for right-of-use assets associated with the leases of office facilities was $24,000 and $26,000 for three months ended July 31, 2021 and July 31, 2020. Depreciation expense associated with property and equipment was less than $1,000 and $7,000 for three months ended July 31, 2021 and July 31, 2020.

(5)          ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of (in thousands):

    

July 31, 

    

April 30, 

2021

2021

Real estate operations

Accrued expenses

$

536

$

658

Trade payables

 

1,100

 

1,377

Real estate customer deposits

1,595

1,769

3,231

3,804

Corporate operations

469

654

$

3,700

$

4,458

8

(6)          NOTES PAYABLE

Notes payable, net consist of (in thousands):

    

July 31, 

    

April 30, 

2021

2021

Real estate notes payable

$

6,427

$

3,482

Unamortized debt issuance costs

 

(50)

 

(34)

$

6,377

$

3,448

The following tables present information on the Company’s notes payable in effect during the three months ended July 31, 2021 (dollars in thousands):

    

Principal Amount

    

    

    

Available for

Outstanding

Principal

Borrowing

Principal Amount

Repayments

July 31,

July 31,

April 30,

Three Months ended

Loan Identifier

2021

2021

2021

July 31, 2021

Revolving Line of Credit

 

$

4,000

 

$

 

$

$

Lomas Encantadas U2B P3

410

1,770

Hawk Site U37

 

1,462

 

 

 

Hawk Site U23 U40

 

2,670

 

30

 

30

 

Lavender Fields – acquisition

 

 

 

1,749

 

1,703

Lavender Fields – development

 

2,194

 

899

 

1,293

 

394

La Mirada

 

1,877

 

5,498

 

 

 

$

6,427

$

3,482

 

    

    

    

Capitalized Interest

Mortgaged Property

and Fees

Interest Rate

Book Value

Three Months ended

Loan Identifier

July 31, 2021

July 31, 2021

July 31, 2021

Revolving Line of Credit

 

3.75

%  

$

1,690

$

Lomas Encantadas U2B P3

 

3.75

%  

 

3,363

 

10

Hawk Site U37

 

4.50

%  

 

2,982

 

Hawk Site U23 U40

 

3.75

%  

 

3,956

 

30

Lavender Fields – development

 

3.75

%  

 

6,530

 

11

La Mirada

 

3.75

%  

 

7,835

 

22

As of July 31, 2021, the Company and each of its subsidiaries were in compliance with the financial covenants contained in the loan documentation for the then outstanding notes payable. Refer to Notes 6 and 19 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about each of the above notes payable.

During the three months ended July 31, 2021, the outstanding principal amount of the note payable identified as “Lavender Fields – acquisition” was prepaid in full without penalty following the parties agreeing to reduce the outstanding principal amount by $45,000, which was recognized as Other income.

The following table summarizes the notes payable scheduled principal repayments subsequent to July 31, 2021 (in thousands):

Fiscal Year

    

Scheduled Payments

2022

$

2023

 

929

2024

 

5,498

Thereafter

 

Total

$

6,427

9

(7)          REVENUES

Land sale revenues. Substantially all of the land sale revenues were received from 3 customers for the three months ended July 31, 2021 and 4 customers for the three months ended July 31, 2020. There were no outstanding receivables from these customers as of July 31, 2021 or July 31, 2020.

Other revenues. Other revenues consist of (in thousands):

    

Three Months ended July 31,

    

2021

    

2020

Oil and gas royalties

$

135

$

11

Public improvement district reimbursements

 

309

 

175

Private infrastructure reimbursement covenants

 

52

 

133

Miscellaneous other revenues

 

410

 

400

$

906

$

719

Refer to Note 7 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about each category of Other revenues. Miscellaneous other revenues for the three months ended July 31, 2021 primarily consist of rent received from a tenant at a building in Palm Coast, Florida, payments for impact fee credits, a non-refundable option payment and sale of equipment. Miscellaneous other revenues for the three months ended July 31, 2020 primarily consist of payments for impact fee credits and rent received from a tenant at a building in Palm Coast, Florida.

Major customers: There were two customers with revenues in excess of 10% of the Company’s revenues during the three months ended July 31, 2021. The revenues for each such customer during the three months ended July 31, 2021 are as follows: $4,200,000 and $1,700,000, with each of these revenues reported in the Company’s land development business segment. There were three customers with revenues in excess of 10% of the Company’s revenues during the three months ended July 31, 2020. The revenues for each such customer during the three months ended July 31, 2020 are as follows: $1,900,000, $1,000,000 and $433,000, with each of these revenues reported in the Company’s land development business segment.

(8)          GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of (in thousands):

    

Three Months ended July 31,

2021

2020

Land development

$

584

$

718

Homebuilding

 

187

 

Corporate

 

417

 

726

$

1,188

$

1,444

(9)          BENEFIT PLANS

Pension plan

Refer to Note 11 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the Company’s defined benefit pension plan. The Company recognizes the known changes in the funded status of the pension plan in the period in which the changes occur through other comprehensive income, net of the related deferred income tax effect. The Company recorded, net of tax, other comprehensive income of $66,000 and $90,000 during the three months ended July 31, 2021 and July 31, 2020 to account for the net effect of changes to the unfunded portion of pension liability. The Company funds the pension plan in compliance with IRS funding requirements. The Company did not make any contributions to the pension plan during the three months ended July 31, 2021 or July 31, 2020.

10

Equity compensation plan

Refer to Note 11 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the AMREP Corporation 2016 Equity Compensation Plan (the “Equity Plan”).  The summary of the restricted share award activity during the three months ended July 31, 2021 and July 31, 2020 presented below represents the maximum number of shares that could become vested after these dates:

    

Number of

Restricted share awards

Shares

Non-vested as of April 30, 2021

 

29,000

Granted during the three months ended July 31, 2021

 

13,000

Vested during the three months ended July 31, 2021

 

(20,500)

Forfeited during the three months ended July 31, 2021

 

Non-vested as of July 31, 2021

 

21,500

The Company recognized non-cash compensation expense related to the vesting of restricted shares of common stock net of forfeitures of $16,000 and $18,000 during the three months ended July 31, 2021 and July 31, 2020. As of July 31, 2021 and July 31, 2020, there was $167,000 and $94,000 of unrecognized compensation expense related to restricted shares of common stock previously issued under the Equity Plan which had not vested as of those dates, which is expected to be recognized over the remaining vesting term not to exceed three years.

Director compensation non-cash expense, which is recognized for the expected annual grant of deferred common share units to non-employee members of the Company’s Board of Directors ratably over the director’s service in office during the calendar year, was $23,000 and $22,000 during the three months ended July 31, 2021 and July 31, 2020.  As of July 31, 2021 and July 31, 2020, there was $53,000 and $62,000 of accrued compensation expense related to the deferred stock units expected to be issued in December 2021.

(10)          OTHER INCOME

Other income for the three months ended July 31, 2021 consisted of $185,000 received in connection with a bankruptcy of a warranty provider and $45,000 of debt forgiveness with respect to the note payable identified as “Lavender Fields – acquisition” in Note 6. Other income for the three months ended July 31, 2020 consisted of a settlement payment of $650,000 from a former business segment (refer to Note 3 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the settlement agreement).

11

(11) INFORMATION ABOUT THE COMPANY’S OPERATIONS IN DIFFERENT INDUSTRY SEGMENTS

The following tables set forth summarized data relative to the industry segments in which the Company operated for the periods indicated (in thousands):

    

Land 

    

    

    

Development

Homebuilding

Corporate

Consolidated

Three months ended July 31, 2021 (a)

 

  

 

  

 

  

 

  

Revenues

$

8,461

$

1,950

$

96

$

10,507

Net income (loss)

 

1,807

 

178

 

(348)

 

1,637

Provision for income taxes

 

318

 

44

 

27

 

389

Interest income, net (b)

 

 

 

1

 

1

Depreciation

 

 

 

104

 

104

EBITDA (c)

$

2,125

$

222

$

(216)

$

2,131

Capital expenditures

$

$

1

$

$

1

Total assets as of July 31, 2021

$

86,590

$

2,566

$

11,947

$

101,103

Three months ended July 31, 2020 (a)

 

  

 

  

 

  

 

  

Revenues

$

3,856

$

$

350

$

4,206

Net income (loss)

 

706

 

(86)

 

(27)

 

593

Provision (benefit) for income taxes

 

14

 

(27)

 

159

 

146

Interest income, net (b)

 

2

 

 

4

 

6

Depreciation

 

5

 

 

124

 

129

EBITDA (c)

$

727

$

(113)

$

260

$

874

Capital expenditures

$

$

$

$

Total assets as of July 31, 2020

$

76,232

$

$

23,759

$

99,991

(a)Revenue and net income information for the land development business segment include amounts classified as home sale revenues, home sale cost of revenues and other revenues in the accompanying consolidated statements of operations. For example, revenues and cost of revenues in the land development business segment include an allocation of home sales revenues and home sales cost of revenues attributable to the market value of land transferred from the land development business segment to the homebuilding business segment. Revenue and net income information for the homebuilding business segment include amounts classified as other revenues in the accompanying consolidated statements of operations. Corporate is net of intercompany eliminations.
(b)Interest expense (income), net excludes inter-segment interest expense (income) that is eliminated in consolidation.
(c)The Company uses EBITDA (which the Company defines as income (loss) before net interest income, income taxes, depreciation and amortization, and non-cash impairment charges) in addition to net income (loss) as a key measure of profit or loss for segment performance and evaluation purposes.

Prior to July 31, 2020, the Company operated in primarily one business segment: the real estate business.

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

AMREP Corporation (the “Company”), through its subsidiaries, is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales or activities outside the United States. All references to the Company in this quarterly report on Form 10-Q include the Registrant and its subsidiaries. The following provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The information contained in this section should be read in conjunction with the consolidated financial statements and related notes thereto included in this report on Form 10-Q and with the Company’s annual report on Form 10-K for the year ended April 30, 2021, which was filed with the Securities and Exchange Commission on July 27, 2021 (the “2021 Form 10-K”). Many of the amounts and percentages presented in this Item 2 have been rounded for convenience of presentation. Unless the context otherwise indicates, all references to 2022 and 2021 are to the fiscal years ending April 30, 2022 and 2021.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based on the accounting policies used and disclosed in the 2021 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of the 2021 Form 10-K and in Note 1 to the consolidated financial statements included in this report on Form 10-Q. The preparation of those consolidated financial statements required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those estimates and assumptions.

The Company’s critical accounting policies, assumptions and estimates are described in Item 7 of Part II of the 2021 Form 10-K. There have been no changes in these critical accounting policies.

Information concerning the Company’s implementation and the impact of recent accounting standards or updates issued by the Financial Accounting Standards Board is included in the notes to the consolidated financial statements contained in the 2021 Form 10-K and in the notes to the consolidated financial statements included in this report on Form 10-Q. The Company did not adopt any accounting policy in the three months ended July 31, 2021 that had a material effect on its consolidated financial statements.

RESULTS OF OPERATIONS

For the three months ended July 31, 2021, the Company had net income of $1,637,000, or $0.22 per diluted share, compared to net income of $593,000, or $0.07 per diluted share, for the three months ended July 31, 2020.

Revenues. The following presents information on revenues for the Company’s operations (dollars in thousands):

Three Months ended July 31,

% Increase

    

2021

    

2020

    

(Decrease)

Land sale revenues

$

7,190

$

3,487

 

106

%  

Home sale revenues

 

2,411

 

 

(a)

Other revenues

 

906

 

719

 

26

%  

Total revenues

$

10,507

$

4,206

 

150

%

(a)

Percentage not meaningful.

13

Land sale revenues for the three months ended July 31, 2021 were higher than the three months ended July 31, 2020 by $3,703,000 primarily due to increased demand for lots by builders. The Company’s land sale revenues were as follows (dollars in thousands):

Three Months ended July 31, 2021

Three Months ended July 31, 2020

    

Acres Sold

    

Revenue

    

Revenue Per Acre1

    

Acres Sold

    

Revenue

    

Revenue Per Acre1

Developed

  

  

  

  

  

  

Residential

 

17.4

$

7,190

$

413

 

7.7

$

3,487

$

453

Commercial

 

 

 

 

 

 

Total Developed

 

17.4

$

7,190

$

413

 

7.7

 

3,487

 

453

Undeveloped

 

 

 

 

 

 

Total

 

17.4

$

7,190

$

413

 

7.7

$

3,487

$

453

1 Revenues per acre may not calculate precisely due to the rounding of revenues to the nearest thousand dollars.

The decrease in the average selling price per acre of developed residential land for the three months ended July 31, 2021 compared to the three months ended July 31, 2020 was primarily due to the location and mix of lots sold.

Home sale revenues for the three months ended July 31, 2021 were higher than the three months ended July 31, 2020 by $2,411,000 due to the Company completing its first home sales to customers after July 31, 2020. The Company closed on 8 homes during the three months ended July 31, 2021 at an average selling price of $301,000. As of July 31, 2021, the Company had 33 homes in production, including 21 homes under contract, which homes under contract represented $5,934,000 of expected home sale revenues when closed, subject to customer cancellations and change orders. The Company’s homebuilding operations did not generate revenue during the three months ended July 31, 2020.
Other revenues for the three months ended July 31, 2021 were higher than the three months ended July 31, 2020 by $187,000. Other revenues consists of (in thousands):

    

Three Months ended July 31,

    

2021

    

2020

Oil and gas royalties

$

135

$

11

Public improvement district reimbursements

 

309

 

175

Private infrastructure reimbursement covenants

 

52

 

133

Miscellaneous other revenues

 

410

 

400

$

906

$

719

Refer to Note 7 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about each category of Other revenues. Miscellaneous other revenues for the three months ended July 31, 2021 primarily consist of rent received from a tenant at a building in Palm Coast, Florida, payments for impact fee credits, a non-refundable option payment and sale of equipment. Miscellaneous other revenues for the three months ended July 31, 2020 primarily consist of payments for impact fee credits and rent received from a tenant at a building in Palm Coast, Florida.

As of July 31, 20201, the Company owns a 143,000 square foot warehouse and office facility located in Palm Coast, Florida, which was leased to a third party through August 2020 and a portion of which is leased to a third party after August 2020. The Company owned a 61,000 square foot warehouse and office facility located in Palm Coast, Florida in 2021, which was leased to a third party through August 2020 and which was sold in April 2021.

Cost of Revenues. The following presents information on cost of revenues for the Company’s operations (dollars in thousands):

    

Three Months ended July 31,

    

% Increase 

 

    

2021

    

2020

    

(Decrease)

 

Land sale cost of revenues

$

5,610

$

2,679

 

109

%

Home sale cost of revenues

 

1,914

 

 

(a)

(a) Percentage not meaningful.

14

Land sale cost of revenues for the three months ended July 31, 2021 were higher than the three months ended July 31, 2020 by $2,931,000. The average gross profit percentage on land sales in New Mexico before indirect costs was 22% for the three months ended July 31, 2021 compared to 23% for the three months ended July 31, 2020. The gross profit percentage decrease was primarily due to the location and mix of lots sold. As a result of many factors, including the nature and timing of specific transactions and the type and location of land being sold, revenues, average selling prices and related average gross profits from land sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.
Home sale cost of revenues for the three months ended July 31, 2021 were higher than the three months ended July 31, 2020 by $1,914,000 due to the Company completing its first home sales to customers after July 31, 2020. Home sale gross margin was 21% for the three months ended July 31, 2021.

General and Administrative Expenses. The following presents information on general and administrative expenses for the Company’s operations (dollars in thousands):

    

Three Months ended July 31,

    

% Increase

 

2021

2020

(Decrease)

 

Land development

$

584

$

718

 

(19)

%

Homebuilding

 

187

 

 

(a)

Corporate

 

417

 

726

 

(43)

%

$

1,188

$

1,444

 

(18)

%

(a) Percentage not meaningful.

 

  

 

  

 

  

Land development general and administrative expenses for the three months ended July 31, 2021 were lower than the three months ended July 31, 2020 by $134,000 primarily due to the allocation of certain common costs to the new homebuilding business segment. - Due to volatility in market conditions and development costs, the Company may experience future impairment charges.
Homebuilding general and administrative expenses for the three months ended July 31, 2021 were higher than the three months ended July 31, 2020 by $187,000 due to homebuilding being a new business segment.
Corporate general and administrative expenses for the three months ended July 31, 2021 were lower than the three months ended July 31, 2020 by $309,000 primarily due to reduction of pension benefit expenses.

Interest income, net decreased to $1,000 for the three months ended July 31, 2021 from $6,000 for the three months ended July 31, 2020, primarily due to lower interest rates on cash balances.

Other income for the three months ended July 31, 2021 consisted of $185,000 received in connection with a bankruptcy of a warranty provider and $45,000 of debt forgiveness with respect to the note payable identified as “Lavender Fields – acquisition” in Note 6 to the consolidated financial statements included in this report on Form 10-Q. Other income for the three months ended July 31, 2020 consisted of a settlement payment of $650,000 from a former business segment (refer to Note 3 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the settlement agreement).

The Company had a provision for income taxes of $389,000 for the three months ended July 31, 2021 compared to a provision for income taxes of $146,000 for the three months ended July 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

AMREP Corporation is a holding company that conducts substantially all of its operations through subsidiaries. As a holding company, AMREP Corporation is dependent on its available cash and on cash from subsidiaries to pay expenses and fund operations. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the real estate industry and the economy generally.

The Company’s primary sources of funding for working capital requirements are cash flow from operations, bank financing for specific real estate projects, a revolving line of credit and existing cash balances. Land and homebuilding properties generally cannot

15

be sold quickly, and the ability of the Company to sell properties has been and will continue to be affected by market conditions. The ability of the Company to generate cash flow from operations is primarily dependent upon its ability to sell the properties it has selected for disposition at the prices and within the timeframes the Company has established for each property. The development of additional lots for sale, construction of homes or pursuing other real estate projects will require financing or other sources of funding, which may not be available on acceptable terms (or at all). If the Company is unable to obtain such financing, the Company’s results of operations could be adversely affected. Except as described below, there have been no material changes to the Company’s liquidity and capital resources as reflected in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2021 Form 10-K.

Operating Activities

The following presents information on the Company’s operating activities (dollars in thousands):

    

July 31, 

    

April 30, 

    

% Increase 

 

2021

2021

(Decrease)

 

Real estate inventory

$

61,298

$

55,589

 

10

%

Investment assets, net

 

13,479

 

13,582

 

(1)

%

Other assets

 

791

 

645

 

23

%

Deferred income taxes, net

 

2,261

 

2,749

 

(18)

%

Accounts payable and accrued expenses

 

3,700

 

4,458

 

(17)

%

Taxes payable, net

 

29

 

95

 

(69)

%

Accrued pension costs

 

255

 

476

 

(46)

%

 

  

 

  

 

  

Real estate inventory increased from April 30, 2021 to July 31, 2021 by $5,709,000. Real estate inventory consists of (in thousands):

    

July 31, 

    

April 30, 

    

% Increase