UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October
31, 2014
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________
to ______________________
Commission File Number 1-4702
AMREP Corporation |
(Exact name of Registrant as specified in its charter) |
Oklahoma |
|
59-0936128 |
(State or other jurisdiction of |
|
(IRS Employer |
incorporation or organization) |
|
Identification No.) |
300 Alexander Park, Suite 204, Princeton, New Jersey |
08540 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including
area code: (609) 716-8200
Not Applicable |
(Former name or former address, if changed since last report) |
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.
Indicate by check mark whether the Registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted 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 and post such files).
Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of
“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer |
¨ |
|
Accelerated filer |
¨ |
|
|
|
|
|
Non-accelerated filer |
¨ |
|
Smaller reporting company |
x |
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Number of Shares of Common Stock, par value $.10 per share,
outstanding at December 5, 2014 – 8,056,454.
AMREP CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial
Statements
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except par
value and share amounts)
| |
October 31, 2014 | | |
April 30, 2014 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Cash and cash equivalents | |
$ | 22,054 | | |
$ | 12,929 | |
Receivables, net | |
| 14,026 | | |
| 43,497 | |
Real estate inventory | |
| 69,398 | | |
| 71,289 | |
Investment assets, net | |
| 10,234 | | |
| 10,234 | |
Property, plant and equipment, net | |
| 22,442 | | |
| 23,819 | |
Intangible and other assets, net | |
| 12,935 | | |
| 14,126 | |
Taxes receivable | |
| - | | |
| 12 | |
Deferred income taxes, net | |
| 5,561 | | |
| 9,042 | |
TOTAL ASSETS | |
$ | 156,650 | | |
$ | 184,948 | |
| |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
LIABILITIES: | |
| | | |
| | |
Accounts payable, net and accrued expenses | |
$ | 33,497 | | |
$ | 74,636 | |
Notes payable: | |
| | | |
| | |
Amounts due within one year | |
| 2,804 | | |
| 218 | |
Amounts due beyond one year | |
| 4,123 | | |
| 5,245 | |
Amounts due to related party | |
| 14,418 | | |
| 15,141 | |
| |
| 21,345 | | |
| 20,604 | |
| |
| | | |
| | |
Taxes payable | |
| 146 | | |
| - | |
Other liabilities and deferred revenue | |
| 3,930 | | |
| 3,058 | |
Accrued pension cost | |
| 7,556 | | |
| 7,349 | |
TOTAL LIABILITIES | |
| 66,474 | | |
| 105,647 | |
| |
| | | |
| | |
SHAREHOLDERS’ EQUITY: | |
| | | |
| | |
Common stock, $.10 par value; shares authorized – 20,000,000; shares issued – 8,281,704 at October 31, 2014 and 7,444,704 at April 30, 2014 | |
| 828 | | |
| 744 | |
Capital contributed in excess of par value | |
| 50,537 | | |
| 46,264 | |
Retained earnings | |
| 52,201 | | |
| 45,683 | |
Accumulated other comprehensive loss, net | |
| (9,175 | ) | |
| (9,175 | ) |
Treasury stock, at cost; 225,250 shares at October 31, 2014 and April 30, 2014 | |
| (4,215 | ) | |
| (4,215 | ) |
TOTAL SHAREHOLDERS’ EQUITY | |
| 90,176 | | |
| 79,301 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | |
$ | 156,650 | | |
$ | 184,948 | |
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and
Retained Earnings (Unaudited)
Three Months Ended October 31, 2014 and
2013
(Amounts in thousands, except per share
amounts)
| |
2014 | | |
2013 | |
REVENUES: | |
| | | |
| | |
Media Services operations | |
$ | 16,784 | | |
$ | 21,555 | |
Real estate land sales | |
| 2,513 | | |
| 1,196 | |
Other | |
| 41 | | |
| 12 | |
| |
| 19,338 | | |
| 22,763 | |
COSTS AND EXPENSES: | |
| | | |
| | |
Real estate land sales | |
| 2,188 | | |
| 999 | |
Operating expenses: | |
| | | |
| | |
Media Services operations | |
| 13,512 | | |
| 17,791 | |
Real estate selling expenses | |
| 67 | | |
| 61 | |
Other | |
| 328 | | |
| 574 | |
General and administrative: | |
| | | |
| | |
Media Services operations | |
| 1,637 | | |
| 1,840 | |
Real estate operations and corporate | |
| 818 | | |
| 899 | |
Interest expense | |
| 436 | | |
| 462 | |
| |
| 18,986 | | |
| 22,626 | |
INCOME BEFORE INCOME TAXES | |
| 352 | | |
| 137 | |
| |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| 98 | | |
| 85 | |
NET INCOME | |
| 254 | | |
| 52 | |
| |
| | | |
| | |
RETAINED EARNINGS, beginning of period | |
| 51,947 | | |
| 47,937 | |
Effect of the issuance of common stock from treasury shares | |
| - | | |
| (2 | ) |
RETAINED EARNINGS, end of period | |
$ | 52,201 | | |
$ | 47,987 | |
| |
| | | |
| | |
EARNINGS PER SHARE – BASIC AND DILUTED | |
$ | 0.03 | | |
$ | 0.01 | |
| |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |
| 8,026 | | |
| 7,195 | |
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and
Retained Earnings (Unaudited)
Six Months Ended October 31, 2014 and 2013
(Amounts in thousands, except per share
amounts)
| |
2014 | | |
2013 | |
REVENUES: | |
| | | |
| | |
Media Services operations | |
$ | 34,300 | | |
$ | 41,833 | |
Real estate land sales | |
| 2,897 | | |
| 1,424 | |
Other | |
| 69 | | |
| 15 | |
| |
| 37,266 | | |
| 43,272 | |
COSTS AND EXPENSES: | |
| | | |
| | |
Real estate land sales | |
| 2,410 | | |
| 1,189 | |
Operating expenses: | |
| | | |
| | |
Media Services operations | |
| 28,049 | | |
| 35,519 | |
Real estate selling expenses | |
| 127 | | |
| 119 | |
Other | |
| 769 | | |
| 1,071 | |
General and administrative: | |
| | | |
| | |
Media Services operations | |
| 3,365 | | |
| 3,649 | |
Real estate operations and corporate | |
| 1,646 | | |
| 1,750 | |
Impairment of assets | |
| 925 | | |
| - | |
Interest expense | |
| 855 | | |
| 927 | |
| |
| 38,146 | | |
| 44,224 | |
LOSS BEFORE OTHER INCOME | |
| (880 | ) | |
| (952 | ) |
Other – Gain from settlement (Note 11) | |
| 11,155 | | |
| - | |
INCOME (LOSS) BEFORE INCOME TAXES | |
| 10,275 | | |
| (952 | ) |
PROVISION (BENEFIT) FOR INCOME TAXES | |
| 3,757 | | |
| (317 | ) |
NET INCOME (LOSS) | |
| 6,518 | | |
| (635 | ) |
| |
| | | |
| | |
RETAINED EARNINGS, beginning of period | |
| 45,683 | | |
| 63,920 | |
Effect of the issuance of common stock from treasury shares | |
| - | | |
| (15,298 | ) |
RETAINED EARNINGS, end of period | |
$ | 52,201 | | |
$ | 47,987 | |
| |
| | | |
| | |
EARNINGS (LOSS) PER SHARE – BASIC AND DILUTED | |
$ | 0.83 | | |
$ | (0.09 | ) |
| |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |
| 7,813 | | |
| 6,785 | |
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended October 31, 2014 and 2013
(Amounts in thousands)
| |
2014 | | |
2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net income (loss) | |
$ | 6,518 | | |
$ | (635 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |
| | | |
| | |
Gain on settlement | |
| (11,155 | ) | |
| - | |
Impairment of assets | |
| 925 | | |
| - | |
Depreciation and amortization | |
| 1,844 | | |
| 1,837 | |
Non-cash credits and charges: | |
| | | |
| | |
Allowance for doubtful accounts | |
| (850 | ) | |
| (143 | ) |
Stock-based compensation | |
| 66 | | |
| - | |
Loss on disposal of assets, net | |
| - | | |
| 4 | |
Changes in assets and liabilities: | |
| | | |
| | |
Receivables | |
| 7,695 | | |
| 6,245 | |
Real estate inventory and investment assets | |
| 1,891 | | |
| 1,161 | |
Intangible and other assets | |
| 402 | | |
| 539 | |
Accounts payable and accrued expenses | |
| (3,084 | ) | |
| (3,732 | ) |
Taxes receivable and payable | |
| 158 | | |
| 126 | |
Deferred income taxes and other liabilities | |
| 4,353 | | |
| (348 | ) |
Accrued pension costs | |
| 207 | | |
| (2,833 | ) |
Total adjustments | |
| 2,452 | | |
| 2,856 | |
Net cash provided by operating activities | |
| 8,970 | | |
| 2,221 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Capital expenditures - property, plant and equipment | |
| (586 | ) | |
| (204 | ) |
Net cash used in investing activities | |
| (586 | ) | |
| (204 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from issuance of common stock, net | |
| - | | |
| 7,144 | |
Proceeds from debt financing | |
| 6,618 | | |
| 12,101 | |
Principal debt payments | |
| (5,877 | ) | |
| (7,272 | ) |
Net cash provided by financing activities | |
| 741 | | |
| 11,973 | |
INCREASE IN CASH AND CASH EQUIVALENTS | |
| 9,125 | | |
| 13,990 | |
CASH AND CASH EQUIVALENTS, beginning of period | |
| 12,929 | | |
| 13,714 | |
CASH AND CASH EQUIVALENTS, end of period | |
$ | 22,054 | | |
$ | 27,704 | |
| |
| | | |
| | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |
| | | |
| | |
Interest paid | |
$ | 851 | | |
$ | 913 | |
Income taxes paid (refunded), net | |
$ | 119 | | |
$ | (94 | ) |
Non-cash transactions: | |
| | | |
| | |
Reduction of accounts receivable due to settlement | |
$ | 22,626 | | |
$ | - | |
Reduction of accounts payable due to settlement | |
$ | 38,214 | | |
$ | - | |
Issuance of common stock in settlement | |
$ | 4,274 | | |
$ | - | |
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Six Months Ended October 31, 2014 and 2013
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 four business segments: the Subscription Fulfillment
Services business operated by Palm Coast Data LLC (“Palm Coast”) and its subsidiary, FulCircle Media, LLC (“FulCircle”),
the Newsstand Distribution Services business and the Product Packaging and Fulfillment Services and Staffing businesses operated
by Kable Media Services, Inc. and its subsidiaries (“Kable”) (the Subscription Fulfillment Services business, the Newsstand
Distribution Services business and the Product Packaging and Fulfillment Services and Staffing businesses are collectively referred
to as “Media Services”) and the real estate business operated by AMREP Southwest Inc. (“AMREP Southwest”)
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 otherwise qualified, all references to 2015 and 2014 are to
the fiscal years ending April 30, 2015 and 2014 and all references to the second quarter and first six months of 2015 and 2014
mean the fiscal three and six month periods ended October 31, 2014 and 2013.
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, 2014, which
was filed with the SEC on July 29, 2014.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting
Standards Board issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which
establishes a comprehensive revenue recognition standard under GAAP for virtually all industries. The new standard will apply for
annual periods beginning after December 15, 2016, including interim periods therein. Early adoption is prohibited. The Company
is currently evaluating the impact of ASU 2014-09 on its consolidated financial statements.
Receivables, net consist of the following accounts receivable
(in thousands):
| |
October 31, 2014 | | |
April 30, 2014 | |
Media Services operations: | |
| | | |
| | |
Subscription Fulfillment Services | |
$ | 8,379 | | |
$ | 11,406 | |
Newsstand Distribution Services, net of estimated returns | |
| 3,854 | | |
| 31,226 | |
Product Packaging and Fulfillment Services and Staffing | |
| 3,027 | | |
| 3,978 | |
| |
| 15,260 | | |
| 46,610 | |
Less allowance for doubtful accounts | |
| (1,235 | ) | |
| (3,113 | ) |
| |
| 14,025 | | |
$ | 43,497 | |
| |
| | | |
| | |
Real estate operations and corporate | |
| 1 | | |
| - | |
| |
$ | 14,026 | | |
$ | 43,497 | |
Newsstand Distribution Services accounts
receivable are net of estimated magazine returns of $45,231,000 and $70,437,000 at October 31, 2014 and April 30, 2014.
During the quarter ended July 31, 2014,
the Company and its indirect subsidiaries, Kable Distribution Services, Inc. (“Kable Distribution”) and Palm Coast,
entered into a settlement agreement (the “Settlement Agreement”) with a significant customer resulting in a substantial
reduction of accounts receivable, net of Newsstand Distribution Services. See further detail regarding the Settlement Agreement
in Note 11.
A significant wholesaler and a customer
of Kable Distribution announced at the end of May 2014 that it planned to discontinue operations and it filed for bankruptcy in
June 2014. Kable Distribution recorded $1,300,000 as bad debt expense in the fourth quarter of 2014. During the second quarter
of 2015, as a result of updated estimates of magazine returns and trade credits, Kable Distribution reversed $900,000 of this bad
debt expense.
| (3) | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment, net consist
of the following (in thousands):
| |
October 31, | | |
April 30, | |
| |
2014 | | |
2014 | |
| |
| | |
| |
Land, buildings and improvements | |
$ | 27,436 | | |
$ | 27,935 | |
Furniture and equipment | |
| 24,134 | | |
| 23,952 | |
| |
| 51,570 | | |
| 51,887 | |
Less accumulated depreciation | |
| (29,128 | ) | |
| (28,068 | ) |
| |
$ | 22,442 | | |
$ | 23,819 | |
The Company recorded an impairment charge of $925,000 related
to certain assets of the Fulfillment Services business during the quarter ended July 31, 2014. See Note 12 for further detail.
| (4) | INTANGIBLE AND OTHER ASSETS |
Intangible and other assets, net consist of the following (in
thousands):
| |
October 31, 2014 | | |
April 30, 2014 | |
| |
Cost | | |
Accumulated Amortization | | |
Cost | | |
Accumulated Amortization | |
| |
| | |
| | |
| | |
| |
Deferred order entry costs | |
$ | 1,019 | | |
$ | - | | |
$ | 1,168 | | |
$ | - | |
Prepaid expenses | |
| 4,123 | | |
| - | | |
| 4,365 | | |
| - | |
Customer contracts and relationships | |
| 16,986 | | |
| 10,049 | | |
| 16,986 | | |
| 9,342 | |
Other | |
| 963 | | |
| 107 | | |
| 1,183 | | |
| 234 | |
| |
$ | 23,091 | | |
$ | 10,156 | | |
$ | 23,702 | | |
$ | 9,576 | |
Deferred order entry costs represent costs
incurred in connection with the data entry of customer subscription information to database files and are charged directly to operations
generally over a twelve month period. Customer contracts and relationships are amortized on a straight line basis over twelve years.
| (5) | ACCOUNTS PAYABLE, NET AND ACCRUED EXPENSES |
Accounts payable, net and accrued expenses consist of the following
(in thousands):
| |
October 31, | | |
April 30, | |
| |
2014 | | |
2014 | |
Media Services operations: | |
| | | |
| | |
Subscription Fulfillment Services | |
$ | 9,890 | | |
$ | 10,692 | |
Newsstand Distribution Services, net of estimated returns | |
| 21,004 | | |
| 60,696 | |
Product Packaging and Fulfillment Services and Staffing | |
| 966 | | |
| 1,502 | |
| |
| 31,860 | | |
| 72,890 | |
| |
| | | |
| | |
Real estate operations and corporate | |
| 1,637 | | |
| 1,746 | |
| |
$ | 33,497 | | |
$ | 74,636 | |
The October 31, 2014 accounts payable,
net and accrued expenses total includes net publisher payables of $17,884,000, customer postage deposits of $5,821,000, accrued
expenses of $3,557,000, trade payables of $1,394,000 and other of $4,841,000. The April 30, 2014 accounts payable, net and accrued
expenses total includes net publisher payables of $53,506,000, customer postage deposits of $5,708,000, accrued expenses of $6,840,000,
trade payables of $3,242,000 and other of $5,340,000.
Accounts payable of Newsstand Distribution
Services, which is operated through Kable Distribution, are net of estimated magazine returns of $42,202,000 and $67,088,000 at
October 31, 2014 and April 30, 2014.
During the quarter ended July 31, 2014,
the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant
customer resulting in a substantial reduction of accounts payable, net of Newsstand Distribution Services. See further detail regarding
the Settlement Agreement in Note 11.
Kable Distribution had negative working
capital of approximately $12,672,000 at October 31, 2014, which included outstanding borrowings by Kable Distribution of $2,238,000
under a revolving credit facility between the Company’s Media Services businesses and a bank (the “Media Services Credit
Facility”). The negative working capital of Kable Distribution represents the net payment obligation due to publisher clients
and other third parties, which amount will vary from period to period based on the level of magazine distribution. The negative
working capital of Kable Distribution is calculated by deducting (a) the sum of the cash held by Kable Distribution plus the accounts
receivable (net of estimated magazine returns to Kable Distribution) owed to Kable Distribution from wholesalers, retailers and
other third parties from (b) the accounts payable (net of estimated magazine returns to publishers) and accrued expenses owed by
Kable Distribution to publisher clients and other third parties plus outstanding bank borrowings of Kable Distribution under the
Media Services Credit Facility.
Notes payable consist of the following
(in thousands):
| |
October 31, 2014 | | |
April 30, 2014 | |
Credit facilities: | |
| | | |
| | |
Media Services operations | |
$ | 2,582 | | |
$ | 1,059 | |
Real estate operations | |
| 14,418 | | |
| 15,141 | |
Other notes payable | |
| 4,345 | | |
| 4,404 | |
| |
$ | 21,345 | | |
$ | 20,604 | |
Media Services Credit Facility
The Media Services Credit Facility provides
the Media Services business with a revolving credit loan and letter of credit facility of up to $15,000,000 that matures on May
12, 2015. At October 31, 2014, the borrowing availability under the Media Services Credit Facility was $7,842,000, and there was
$2,582,000 outstanding against this availability. The highest amount borrowed during the first six months of 2015 was $6,569,000
and the interest rate at October 31, 2014 was 3.16%. The borrowers’ obligations under the Media Services Credit Facility
are secured by substantially all of their assets other than real property.
Real Estate Loan
AMREP Southwest has a loan with a company
owned by Nicholas G. Karabots, a significant shareholder of the Company and in which another director of the Company has a 20%
participation. The loan had an outstanding principal amount of $14,418,000 at October 31, 2014, is scheduled to mature on December
1, 2017, bears interest payable monthly at 8.5% per annum, and is secured by a mortgage on all real property of AMREP Southwest
in Rio Rancho and by a pledge of the stock of its subsidiary, Outer Rim Investments, Inc. The total book value of the real property
collateralizing the loan was approximately $66,954,000 as of October 31, 2014. No payments of principal are required until maturity,
except that the following amounts are required to be applied to the payment of the loan: (a) 25% of the net proceeds from any sales
of real property by AMREP Southwest and (b) 25% of any royalty payments received by AMREP Southwest under an oil and gas lease.
See further detail regarding the oil and gas lease in Note 7.
Other Notes Payable
Other notes payable consist of a mortgage
note payable with an outstanding principal balance of $4,148,000 on a warehouse with a maturity date of February 2018 and an interest
rate of 6.35%, and $197,000 of an asset financing loan with a maturity date of December 2015 and an interest rate of 9.0%. The
amount of Other notes payable due within one year totals $222,000.
During the second quarter of 2015, AMREP
Southwest and one of its subsidiaries (collectively, “ASW”) entered into an Oil and Gas Lease and the Addendum thereto
(collectively, the “Lease”) with Thrust Energy, Inc. and Cebolla Roja, LLC (collectively, the “Lessee”).
Pursuant to the Lease, ASW leased to Lessee all minerals and mineral rights owned by ASW or for which ASW has executive rights
in and under approximately 55,000 surface acres of land in Sandoval County, New Mexico (the “Leased Premises”) for
the purpose of exploring for, developing, producing and marketing oil and gas. As partial consideration for entering into the Lease,
the Lessee paid approximately $1,010,000 to ASW. The Lease will be in force for an initial term of four years and for as long thereafter
as oil or gas is produced and marketed in paying quantities from the Leased Premises or for additional limited periods of time
if Lessee undertakes certain operations or makes certain de minimis shut-in royalty payments. In addition, Lessee may extend the
initial term of the Lease for an additional four years by paying ASW another payment of approximately $1,010,000. The Lease does
not require Lessee to drill any oil or gas wells.
Lessee has agreed to pay ASW a royalty
on oil and gas produced from the Leased Premises of 1/7th of the gross proceeds received by Lessee from the sale of such oil and
gas to an unaffiliated third party of Lessee or 1/7th of the market value of the oil and gas if sold to an affiliate of Lessee.
ASW’s royalty will be charged with 1/7th of any expenses to place the oil and gas, if any, in marketable condition after
it is brought to the surface. Amounts payable under the Lease will not be reduced by any payments made to other holders of mineral
rights or other production royalty payment interests in the Leased Premises, other than payments pursuant to rights granted by
ASW in deeds transferring portions of the Leased Premises to third parties, primarily in the 1960s and 1970s. ASW and Lessee may
assign, in whole or in part, their interests in the Lease. The oil and gas from ASW’s mineral rights will not be pooled or
unitized with any other oil and gas except as required by law. Lessee has assumed all risks and liabilities in connection with
Lessee’s activities under the Lease and agreed to indemnify ASW with respect thereto. No royalties were received by ASW during
the second quarter of 2015.
In addition, on September 8, 2014, AMREP
Southwest entered into a Consent Agreement (the “Consent Agreement”) with the mortgage holder on certain portions of
the Leased Premises, pursuant to which the mortgage holder provided its consent to AMREP Southwest entering into the Lease and
agreed to enter into a subordination, non-disturbance and attornment agreement with Lessee. Pursuant to the Consent Agreement,
AMREP Southwest agreed to pay the mortgage holder (a) 25% of any royalty payments received by AMREP Southwest under the Lease with
respect to oil and gas produced from the Leased Premises, which will be credited against any outstanding loan amounts due to the
mortgage holder from AMREP Southwest, and such payments will cease upon payment in full of such outstanding loan amounts and (b)
a separate consent fee of $100,000, which will not be credited against the outstanding loan amounts due to the mortgage holder
from AMREP Southwest.
Revenue from this transaction is being
recorded over the lease term and approximately $38,000 was recognized during the second quarter of 2015, which is included in Other
revenues in the accompanying financial statements. At October 31, 2014, there remained $872,000 of deferred revenue.
| (8) | FAIR VALUE MEASUREMENTS |
The Financial Instruments Topic of the
Financial Accounting Standards Board Accounting Standards Codification requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Topic excludes
all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent
the underlying value of the Company. The following methods and assumptions are used in estimating fair value disclosure for financial
instruments. The carrying amounts of cash and cash equivalents, trade receivables 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 re-prices when market interest rates change.
At October 31, 2014 and April 30, 2014,
the estimated fair values of the Company’s long-term, fixed-rate notes payable were $17,226,000 and $17,739,000 compared
with carrying amounts of $18,763,000 and $19,545,000.
Retirement plan
The Company has a defined benefit retirement
plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. The Company has
secured $5,019,000 of accrued pension-related obligations with first lien mortgages on certain real property in favor of the Pension
Benefit Guaranty Corporation (the “PBGC”). On an annual basis, the Company is required to provide updated appraisals
on each mortgaged property and, if the appraised value of the mortgaged properties is less than two times the amount of the accrued
pension-related obligations secured by the mortgages, the Company is required to make a payment to its pension plan in an amount
equal to one-half of the amount of the shortfall. During the second quarter of 2015, there was no change in the appraised value
of the mortgaged property that required the Company to make any additional payments to its pension plan.
Equity compensation plan
In 2006, the board of directors of the
Company adopted and the shareholders approved the AMREP Corporation 2006 Equity Compensation Plan (the “Equity Plan”)
that provides for the issuance of up to 400,000 shares of common stock of the Company to employees of the Company and its subsidiaries
and non-employee members of the board of directors of the Company pursuant to incentive stock options, nonqualified stock options,
stock appreciation rights, stock awards, stock units and other stock-based awards.
Shares
of restricted common stock that are issued under the Equity Plan (“restricted shares”) are considered to be
issued and outstanding as of the grant date and have the same dividend and voting rights as other common stock. Compensation expense
related to the restricted shares is recognized over the vesting period of each grant based on the fair value of the shares as of
the date of grant. The fair value of each grant of restricted shares is determined based
on the trading price of the Company’s common stock on the date of such grant,
and this amount will be charged to expense over the vesting term of the grant.
During
the quarter ended October 31, 2014, 6,000 shares of common stock issued under the Equity Plan vested
leaving 30,000 shares issued under the Equity Plan that have not vested. For the second quarter and first six months of
2015, the Company recognized $30,000 and $66,000 of compensation expense related to all shares
of common stock issued under the Equity Plan. As of October 31, 2014,
there was $137,000 of total unrecognized compensation expense related to shares
of common stock issued under the Equity Plan, which is expected to be recognized over the
remaining vesting term not to exceed three years.
During the quarter ended July 31, 2014,
the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant
customer resulting in the issuance by the Company to that customer of 825,000 shares of its common stock. See further detail regarding
the Settlement Agreement in Note 11. As a result of the issuance of these shares, the Company increased its common stock account
by $83,000 and its contributed capital account by $4,191,000.
During the quarter ended July 31, 2014,
the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the Settlement Agreement with a significant
customer, Heinrich Bauer (USA) LLC (“Bauer”).
Kable Distribution and Bauer were parties
to an ordinary course of business contract pursuant to which Kable Distribution distributed certain magazines of Bauer in return
for a commission. Palm Coast and Bauer were parties to an ordinary course of business contract pursuant to which Palm Coast provided
certain fulfillment services to Bauer in return for service fees. During the first quarter of 2014, Kable Distribution received
notice that its ordinary course of business contract with Bauer, which provided Kable Distribution with a substantial amount of
negative working capital liquidity, would not be renewed upon its scheduled expiration in June 2014.
Pursuant to the Settlement Agreement, Kable
Distribution agreed to eliminate the commission paid by Bauer to Kable Distribution for distribution services through expiration
of the contract period at June 30, 2014 and to amend the payment procedures with respect to amounts received by Kable Distribution
from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers;
Palm Coast agreed to reduce certain fees charged to Bauer for fulfillment services, with Bauer agreeing to extend the term of its
fulfillment agreement to at least December 31, 2018; and the Company agreed to issue to Bauer 825,000 shares of common stock of
the Company, with a fair market value of $4,274,000 and which represented approximately 10.3% of the outstanding shares of common
stock of the Company following such issuance, with Bauer agreeing to not sell or transfer such shares for a period of six months.
In return for such consideration, Bauer released all claims it may have had against each of Kable Distribution, Palm Coast, the
Company and its related persons, other than the obligations of Kable Distribution, Palm Coast and the Company under the Settlement
Agreement, the future obligations of Kable Distribution under its distribution agreement as amended by the Settlement Agreement
and the future obligations of Palm Coast under its fulfillment agreement as amended by the Settlement Agreement. In particular,
the Settlement Agreement transferred to Bauer all amounts and accounts receivable owing from wholesalers to Kable Distribution
relating to the domestic sale by Kable Distribution of Bauer magazines ($22,626,000) and released Kable Distribution from having
to pay the accounts payable owed to Bauer relating to the domestic sale by Kable Distribution of Bauer magazines other than to
the extent amounts had been received by Kable Distribution or Bauer on or after May 14, 2014 from wholesalers or retailers relating
to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers ($38,214,000). After considering
the value of the various components of the Settlement Agreement, Kable Distribution recorded a gain of $11,155,000 during the first
quarter of 2015.
During the quarter ended July 31, 2014,
the Company’s Subscription Fulfillment Services business recognized a $925,000 impairment charge relating to the discontinuance
of the development of certain software. The impairment charge included previously capitalized software costs, internal labor costs
and third party consulting costs.
| (13) | 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 three and six month periods ended October 31, 2014
and 2013 (in thousands):
| |
Subscription Fulfillment Services | | |
Newsstand Distribution Services | | |
Product Services and Staffing | | |
Real Estate Operations | | |
Corporate and Other | | |
Consolidated | |
Three months ended October 31, 2014 (a): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 11,831 | | |
$ | 1,309 | | |
$ | 3,644 | | |
$ | 2,625 | | |
$ | (71 | ) | |
$ | 19,338 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| (40 | ) | |
| 361 | | |
| (24 | ) | |
| (543 | ) | |
| 500 | | |
| 254 | |
Provision (benefit) for income taxes | |
| 134 | | |
| 133 | | |
| (23 | ) | |
| (411 | ) | |
| 265 | | |
| 98 | |
Interest expense (income), net | |
| 177 | | |
| 62 | | |
| 5 | | |
| 693 | | |
| (501 | ) | |
| 436 | |
Depreciation and amortization | |
| 758 | | |
| 41 | | |
| 54 | | |
| 22 | | |
| 37 | | |
| 912 | |
EBITDA (b) | |
$ | 1,029 | | |
$ | 597 | | |
$ | 12 | | |
$ | (239 | ) | |
$ | 301 | | |
$ | 1,700 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital expenditures | |
$ | 178 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 178 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Three months ended October 31, 2013 (a): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 15,013 | | |
$ | 1,871 | | |
$ | 4,671 | | |
$ | 1,279 | | |
$ | (71 | ) | |
$ | 22,763 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| 483 | | |
| (142 | ) | |
| 254 | | |
| (982 | ) | |
| 439 | | |
| 52 | |
Provision (benefit) for income taxes | |
| 92 | | |
| 23 | | |
| 153 | | |
| (402 | ) | |
| 219 | | |
| 85 | |
Interest expense (income), net | |
| 184 | | |
| 25 | | |
| 4 | | |
| 682 | | |
| (433 | ) | |
| 462 | |
Depreciation and amortization | |
| 752 | | |
| 51 | | |
| 56 | | |
| 19 | | |
| 37 | | |
| 915 | |
EBITDA (b) | |
$ | 1,511 | | |
$ | (43 | ) | |
$ | 467 | | |
$ | (683 | ) | |
$ | 262 | | |
$ | 1,514 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Capital expenditures | |
$ | 117 | | |
$ | 5 | | |
$ | 28 | | |
$ | - | | |
$ | - | | |
$ | 150 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Six months ended October 31, 2014 (a): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 23,776 | | |
$ | 2,656 | | |
$ | 7,868 | | |
$ | 3,109 | | |
$ | (143 | ) | |
$ | 37,266 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| (390 | ) | |
| 7,098 | | |
| 148 | | |
| (1,297 | ) | |
| 959 | | |
| 6,518 | |
Provision (benefit) for income taxes | |
| (53 | ) | |
| 4,087 | | |
| 78 | | |
| (865 | ) | |
| 510 | | |
| 3,757 | |
Interest expense (income), net | |
| 352 | | |
| 88 | | |
| 6 | | |
| 1,388 | | |
| (979 | ) | |
| 855 | |
Depreciation and amortization | |
| 1,525 | | |
| 92 | | |
| 109 | | |
| 45 | | |
| 73 | | |
| 1,844 | |
Gain on settlement | |
| - | | |
| (11,155 | ) | |
| - | | |
| - | | |
| - | | |
| (11,155 | ) |
Impairment of assets | |
| 925 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 925 | |
EBITDA (b) | |
$ | 2,359 | | |
$ | 210 | | |
$ | 341 | | |
$ | (729 | ) | |
$ | 563 | | |
$ | 2,744 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 47,038 | | |
$ | 7,792 | | |
$ | 6,531 | | |
$ | 86,224 | | |
$ | 9,065 | | |
$ | 156,650 | |
Total liabilities | |
$ | 32,867 | | |
$ | 25,264 | | |
$ | 2,739 | | |
$ | 43,488 | | |
$ | (37,884 | ) | |
$ | 66,474 | |
Capital expenditures | |
$ | 555 | | |
$ | 6 | | |
$ | 25 | | |
$ | - | | |
$ | - | | |
$ | 586 | |
| |
Subscription Fulfillment Services | | |
Newsstand Distribution Services | | |
Product Services and Staffing | | |
Real Estate Operations | | |
Corporate and Other | | |
Consolidated | |
Six months ended October 31, 2013 (a): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 29,006 | | |
$ | 3,856 | | |
$ | 8,971 | | |
$ | 1,580 | | |
$ | (141 | ) | |
$ | 43,272 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| 137 | | |
| (206 | ) | |
| 447 | | |
| (1,893 | ) | |
| 879 | | |
| (635 | ) |
Provision (benefit) for income taxes | |
| (111 | ) | |
| 6 | | |
| 268 | | |
| (937 | ) | |
| 457 | | |
| (317 | ) |
Interest expense (income), net | |
| 371 | | |
| 51 | | |
| 2 | | |
| 1,360 | | |
| (857 | ) | |
| 927 | |
Depreciation and amortization | |
| 1,510 | | |
| 102 | | |
| 113 | | |
| 40 | | |
| 73 | | |
| 1,837 | |
EBITDA (b) | |
$ | 1,907 | | |
$ | (47 | ) | |
$ | 830 | | |
$ | (1,430 | ) | |
$ | 552 | | |
$ | 1,812 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 52,247 | | |
$ | 30,312 | | |
$ | 5,549 | | |
$ | 87,700 | | |
$ | 24,847 | | |
$ | 200,655 | |
Total liabilities | |
$ | 37,156 | | |
$ | 76,803 | | |
$ | 1,397 | | |
$ | 42,287 | | |
$ | (36,038 | ) | |
$ | 121,605 | |
Capital expenditures | |
$ | 152 | | |
$ | 18 | | |
$ | 34 | | |
$ | - | | |
$ | - | | |
$ | 204 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| (a) | Revenue information provided for each segment includes amounts grouped as Other in the accompanying
consolidated statements of operations. Corporate and Other is net of intercompany eliminations. |
| (b) | The Company uses EBITDA (which the Company defines as income before net interest expense, income
taxes, depreciation and amortization, and non-cash gain on settlement and impairment charges) in addition to net income (loss)
as a key measure of profit or loss for segment performance and evaluation purposes. |
During the third quarter of 2014, the Company
determined that, based on the characterization of certain transactions that occurred in prior periods, no intersegment interest
income or expense relating to such transactions would be appropriate. As a result, the intersegment interest income and expense
relating to such transactions has been removed from the presentation above for the second quarter and first six months of 2014
and there was no effect on the reported EBITDA, which the Company uses as a key measure for segment performance and evaluation
purposes.
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
INTRODUCTION
The Company, through its subsidiaries,
is primarily engaged in four business segments: the Subscription Fulfillment Services business operated by Palm Coast Data LLC
(“Palm Coast”) and its subsidiary, FulCircle Media, LLC (“FulCircle”), the Newsstand Distribution Services
business and the Product Packaging and Fulfillment Services and Staffing businesses operated by Kable Media Services, Inc. and
its subsidiaries (“Kable”) (the Subscription Fulfillment Services business, the Newsstand Distribution Services business
and the Product Packaging and Fulfillment Services and Staffing businesses are collectively referred to as “Media Services”)
and the real estate business operated by AMREP Southwest Inc. (“AMREP Southwest”) and its subsidiaries. The Company’s
foreign sales and activities are not significant.
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 unaudited consolidated financial
statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q and with the Company’s
annual report on Form 10-K for the year ended April 30, 2014, which was filed with the Securities and Exchange Commission on July
29, 2014 (the “2014 Form 10-K”). Many of the amounts and percentages presented in this section have been rounded for
convenience of presentation. Unless otherwise qualified, all references to 2015 and 2014 are to the fiscal years ending April 30,
2015 and 2014 and all references to the second quarter and first six months of 2015 and 2014 mean the fiscal three and six month
periods ended October 31, 2014 and 2013.
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 2014 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 2014 Form 10-K. 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.
The critical accounting policies, assumptions
and estimates are described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations, Critical Accounting Policies and Estimates” in the 2014 Form 10-K. There have been no changes
in these accounting policies.
The significant accounting policies of
the Company are described in Note 1 to the consolidated financial statements contained in the 2014 Form 10-K. Information concerning
the Company’s implementation and the impact of recent accounting standards issued by the Financial Accounting Standards Board
is included in the notes to the consolidated financial statements contained in the 2014 Form 10-K. The Company did not adopt any
accounting policy in the second quarter of 2015 that had a material impact on its consolidated financial statements.
RESULTS OF OPERATIONS
For the second quarter of 2015, the Company
recorded net income of $254,000, or $0.03 per share, compared to net income of $52,000, or $0.01 per share, for the second quarter
of 2014. For the first six months of 2015, the Company had net income of $6,518,000, or $0.83 per share, compared to a net loss
of $635,000, or $0.09 per share, for the same period of 2014. The results for the second quarter of 2015 included an adjustment
reducing a reserve for doubtful accounts receivable from a magazine wholesaler as a result of updated estimates of magazine returns
and trade credits by $900,000 ($567,000 after tax, or $0.07 per share), and there was a similar $300,000 adjustment ($189,000 after
tax, or $0.03 per share) in 2014. The results for the first six months of 2015 included a non-cash pre-tax gain on a settlement
agreement with a significant customer of $11,155,000 ($7,028,000 after tax, or $0.90 per share) offset in part by a non-cash impairment
charge of $925,000 ($583,000 after tax, or $0.07 per share), reflecting the discontinuance of the development of certain software
in the Company’s Subscription Fulfillment Services business. Revenues were $19,338,000
and $37,266,000 for the second quarter and first six months of 2015 compared to $22,763,000 and $43,272,000 for the same periods
in the prior year.
Revenues from the Company’s Media
Services operations decreased from $21,555,000 and $41,833,000 for the second quarter and first six months of 2014 to $16,784,000
and $34,300,000 for the same periods in 2015. Magazine publishers are the principal customers of these operations, and these customers
have continued to be negatively impacted by increased competition from new media sources, alternative technologies for the distribution,
storage and consumption of media content, weakness in advertising revenues, increases in paper costs, printing costs and postal
rates and weakness in the U.S. economy. The result has been reduced subscription and newsstand magazine sales, which has caused
publishers to close some magazine titles, change subscription fulfillment providers or newsstand distribution providers and seek
more favorable terms from Palm Coast and Kable and their competitors when contracts are up for bid or renewal. As a consequence
of these and other factors, revenues from Subscription Fulfillment Services operations decreased from $15,013,000 and $29,006,000
for the second quarter and first six months of 2014 to $11,831,000 and $23,776,000 for the same periods of 2015, while revenues
from Newsstand Distribution Services operations decreased from $1,871,000 and $3,856,000 for the second quarter and first six months
of 2014 to $1,309,000 and $2,656,000 for the same periods of 2015. Revenues from Subscription Fulfillment Services operations are
expected to further decline beginning in the third fiscal quarter of 2015 as services cease to a limited number of significant
clients previously disclosed to be changing service providers. Revenues from Product Packaging and Fulfillment Services and Staffing
operations decreased from $4,671,000 and $8,971,000 for the second quarter and first six months of 2014 to $3,644,000 and $7,868,000
for the same periods in 2015, due primarily to a major customer moving certain business in-house. Media Services’ operating
expenses were $13,512,000 and $28,049,000 (80.5% and 81.8% of Media Services revenues) for the second quarter and first six months
of 2015 compared to $17,791,000 and $35,519,000 (82.5% and 84.9% of Media Services revenues) for the same periods of 2014. The
decrease in operating expenses in both periods was primarily attributable to lower payroll and benefits, the reversal of previously
established accounts receivable reserves (discussed above), as well as lower supplies expense, consulting costs, and facilities
and equipment expense.
Revenues from land sales at AMREP Southwest
and its subsidiaries were $2,513,000 and $2,897,000 for the second quarter and first six months of 2015 compared to $1,196,000
and $1,424,000 for the same periods of 2014. For the second quarter and first six months of 2015 and 2014, the Company’s
land sales in New Mexico were as follows:
| |
Fiscal 2015 | | |
Fiscal 2014 | |
| |
Acres Sold | | |
Revenues (in 000s) | | |
Revenues Per Acre (in 000s) | | |
Acres Sold | | |
Revenues (in 000s) | | |
Revenues Per Acre (in 000s) | |
Three months: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Developed | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Residential | |
| 7.6 | | |
$ | 2,502 | | |
$ | 329 | | |
| 3.9 | | |
$ | 1,140 | | |
$ | 292 | |
Commercial | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Total Developed | |
| 7.6 | | |
| 2,502 | | |
| 329 | | |
| 3.9 | | |
| 1,140 | | |
| 292 | |
Undeveloped | |
| 1.3 | | |
| 11 | | |
| 8 | | |
| 1.1 | | |
| 56 | | |
| 51 | |
Total | |
| 8.9 | | |
$ | 2,513 | | |
$ | 282 | | |
| 5.0 | | |
$ | 1,196 | | |
$ | 239 | |
Six months: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Developed | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Residential | |
| 8.2 | | |
$ | 2,674 | | |
$ | 326 | | |
| 4.6 | | |
$ | 1,320 | | |
$ | 287 | |
Commercial | |
| 0.8 | | |
| 212 | | |
| 265 | | |
| - | | |
| - | | |
| - | |
Total Developed | |
| 9.0 | | |
| 2,886 | | |
| 321 | | |
| 4.6 | | |
| 1,320 | | |
| 287 | |
Undeveloped | |
| 1.3 | | |
| 11 | | |
| 8 | | |
| 5.8 | | |
| 104 | | |
| 18 | |
Total | |
| 10.3 | | |
$ | 2,897 | | |
$ | 281 | | |
| 10.4 | | |
$ | 1,424 | | |
$ | 137 | |
The average gross profit percentage on
land sales was 12.9% and 16.8% for the second quarter and first six months of 2015 compared to 16.5% for each of the same two periods
of 2014. 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.
Other revenues were $41,000 and $69,000
for the second quarter and first six months of 2015 compared to $12,000 and $15,000 for the same periods of 2014, primarily as
a result of AMREP Southwest and one its subsidiaries entering into an oil and gas lease during the second quarter of 2015. For
further details regarding the oil and gas lease, see Note 7 in the footnotes that accompany the financial statements included in
this Form 10-Q. During the second quarter of 2015, deferred revenue increased by $872,000 in connection with the oil and gas lease.
The deferred revenue is being recognized as revenue over the initial lease term of four years and approximately $38,000 was recognized
during the second quarter of 2015.
General and administrative expenses of
Media Services operations declined to $1,637,000 and $3,365,000 (9.8% and 9.8% of Media Services revenues) for the second quarter
and first six months of 2015, compared to $1,840,000 and $3,649,000 (8.5% and 8.7% of Media Services revenues) for the same periods
of 2014, primarily due to reduced payroll and benefit costs due in part to lower volumes. Real estate operations and corporate
general and administrative expenses decreased $81,000 and $104,000 in the second quarter and first six months of 2015 compared
to the same periods in 2014.
Interest expense was $436,000 and $855,000
for the second quarter and first six months of 2015, compared to $462,000 and $927,000 for the same periods of 2014, primarily
due to a declining principal loan balance at AMREP Southwest.
The Company’s effective tax rate
was 27.8% and 36.6% for the second quarter and first six months of 2015 compared to 62.0% and 33.3% for the same periods of 2014.
The difference between the statutory tax rate and the effective rate of the tax provision or benefit for 2015 was primarily attributable
to an increase in certain deferred tax assets, and for 2014 was primarily attributable to state taxes and the accrual of interest
related to unrecognized tax positions, which the Company has elected to include in its income tax expense or benefit. The total
tax effect of gross unrecognized tax benefits in the accompanying financial statements at both October 31, 2014 and April 30, 2014
was $58,000, which, if recognized, would have an impact on the effective tax rate. The Company believes it is reasonably possible
that the liability for unrecognized tax benefits will not change in the next twelve months.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of
funding for working capital requirements are cash flow from operations, a revolving credit facility between the Company’s
Media Services businesses and a bank (the “Media Services Credit Facility”) and working capital made available to the
Company by the terms of customer contracts. The Company’s liquidity is affected by many factors, including some that are
based on normal operations and some that are related to the industries in which the Company operates and the economy generally.
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 2014 Form 10-K.
Gain From Settlement
During the first quarter of 2015, the Company
and its indirect subsidiaries, Kable Distribution Services, Inc. (“Kable Distribution”) and Palm Coast, entered into
a settlement agreement (the “Settlement Agreement”) with a significant customer, Heinrich Bauer (USA) LLC (“Bauer”).
Kable Distribution and Bauer were parties
to an ordinary course of business contract pursuant to which Kable Distribution distributed certain magazines of Bauer in return
for a commission. Palm Coast and Bauer were parties to an ordinary course of business contract pursuant to which Palm Coast provided
certain fulfillment services to Bauer in return for service fees. During the first quarter of 2014, Kable Distribution received
notice that its ordinary course of business contract with Bauer, which provided Kable Distribution with a substantial amount of
negative working capital liquidity, would not be renewed upon its scheduled expiration in June 2014.
Pursuant to the Settlement Agreement, Kable
Distribution agreed to eliminate the commission paid by Bauer to Kable Distribution for distribution services through expiration
of the contract period at June 30, 2014 and to amend the payment procedures with respect to amounts received by Kable Distribution
from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such wholesalers or retailers;
Palm Coast agreed to reduce certain fees charged to Bauer for fulfillment services, with Bauer agreeing to extend the term of its
fulfillment agreement to at least December 31, 2018; and the Company agreed to issue to Bauer 825,000 shares of common stock of
the Company, which represented approximately 10.3% of the outstanding shares of common stock of the Company following such issuance,
with Bauer agreeing to not sell or transfer such shares for a period of six months. In return for such consideration, Bauer released
all claims it may have had against each of Kable Distribution, Palm Coast, the Company and its related persons, other than the
obligations of Kable Distribution, Palm Coast and the Company under the Settlement Agreement, the future obligations of Kable Distribution
under its distribution agreement as amended by the Settlement Agreement and the future obligations of Palm Coast under its fulfillment
agreement as amended by the Settlement Agreement. In particular, the Settlement Agreement transferred to Bauer all amounts and
accounts receivable owing from wholesalers to Kable Distribution relating to the domestic sale by Kable Distribution of Bauer magazines
($22,626,000) and released Kable Distribution from having to pay the accounts payable owed to Bauer relating to the domestic sale
by Kable Distribution of Bauer magazines other than to the extent amounts had been received by Kable Distribution or Bauer on or
after May 14, 2014 from wholesalers or retailers relating to the domestic sale by Kable Distribution of Bauer magazines to such
wholesalers or retailers ($38,214,000). After considering the value of the various components of the Settlement Agreement, Kable
Distribution recorded a gain of $11,155,000 during the first quarter of 2015.
Media Services
The Company’s Newsstand Distribution
Services business, which is operated through Kable Distribution, had negative working capital of approximately $12,672,000 at October
31, 2014, which included outstanding borrowings by Kable Distribution of $2,238,000 under the Media Services Credit Facility. The
negative working capital of Kable Distribution represents the net payment obligation due to publisher clients and other third parties,
which amount will vary from period to period based on the level of magazine distribution. The negative working capital of Kable
Distribution is calculated by deducting (a) the sum of the cash held by Kable Distribution plus the accounts receivable (net of
estimated magazine returns to Kable Distribution) owed to Kable Distribution from wholesalers, retailers and other third parties
from (b) the accounts payable (net of estimated magazine returns to publishers) and accrued expenses owed by Kable Distribution
to publisher clients and other third parties plus outstanding bank borrowings of Kable Distribution under the Media Services Credit
Facility. During the first quarter of 2015, the Company and its indirect subsidiaries, Kable Distribution and Palm Coast, entered
into the previously-described Settlement Agreement, which significantly contributed to the reduction of negative working capital
and outstanding borrowings at Kable Distribution from approximately $27,863,000 at April 30, 2014 to $12,672,000 at October 31,
2014.
Equity Issuance
During the first quarter of 2015, the Company
and its indirect subsidiaries, Kable Distribution and Palm Coast, entered into the previously-described Settlement Agreement with
a significant customer resulting in the issuance by the Company of 825,000 shares of its common stock. As a result of the issuance
of these shares, the Company increased its common stock account by $83,000 and its contributed capital account by $4,191,000.
Operating Activities
Receivables, net decreased from $43,497,000
at April 30, 2014 to $14,026,000 at October 31, 2014 and accounts payable, net and accrued expenses decreased from $74,636,000
at April 30, 2014 to $33,497,000 at October 31, 2014, primarily due to the previously-described Settlement Agreement.
Real estate inventory decreased from $71,289,000
at April 30, 2014 to $69,398,000 at October 31, 2014 as a result of land sales by AMREP Southwest. Property, plant and equipment
decreased from $23,819,000 at April 30, 2014 to $22,442,000 at October 31, 2014 due to a $925,000 impairment adjustment in the
first quarter of 2015 and normal depreciation of fixed assets.
Other liabilities and deferred revenue
increased from $3,058,000 at April 30, 2014 to $3,930,000 at October 31, 2014 as a result of deferred revenue related to an oil
and gas lease entered into by AMREP Southwest and one of its subsidiaries during the second quarter of 2015.
Investing Activities
Capital expenditures totaled $586,000 for
the first six months of 2015 and $204,000 for the same period of 2014, primarily for the Media Services business.
Financing Activities
The Media Services Credit Facility provides
the Media Services business with a revolving credit loan and letter of credit facility of up to $15,000,000 that matures on May
12, 2015. At October 31, 2014, the borrowing availability under the Media Services Credit Facility was $7,842,000, and there was
$2,582,000 outstanding against this availability. The highest amount borrowed during the first six months of 2015 was $6,569,000
and the interest rate at October 31, 2014 was 3.16%. The borrowers’ obligations under the Media Services Credit Facility
are secured by substantially all of their assets other than real property.
AMREP Southwest has a loan with a company
owned by Nicholas G. Karabots, a significant shareholder of the Company and in which another director of the Company has a 20%
participation. The loan had an outstanding principal amount of $14,418,000 at October 31, 2014, is scheduled to mature on December
1, 2017, bears interest payable monthly at 8.5% per annum, and is secured by a mortgage on all real property of AMREP Southwest
in Rio Rancho and by a pledge of the stock of its subsidiary, Outer Rim Investments, Inc. The total book value of the real property
collateralizing the loan was approximately $66,954,000 as of October 31, 2014. No payments of principal are required until maturity,
except that the following amounts are required to be applied to the payment of the loan: (a) 25% of the net proceeds from any sales
of real property by AMREP Southwest and (b) 25% of any royalty payments received by AMREP Southwest under an oil and gas lease
discussed in Note 7 in the footnotes that accompany the financial statements included in this Form 10-Q.
At October 31, 2014, the borrowers under
both the Media Services Credit Facility and the AMREP Southwest loan were in compliance with the covenants of each facility.
Other notes payable consist of a mortgage
note payable with an outstanding principal balance of $4,178,000 on a warehouse with a maturity date of February 2018 and an interest
rate of 6.35%, and $197,000 of an asset financing loan with a maturity date of December 2015 and an interest rate of 9.0%. The
amount of Other notes payable due within one year totals $221,000.
Future Payments Under Contractual Obligations
The Company is obligated to make future
payments under various contracts, including its debt agreements and lease agreements, and is subject to certain other commitments
and contingencies. The table below summarizes significant contractual cash obligations as of October 31, 2014 for the items indicated
(in thousands):
Contractual Obligations | |
Total | | |
Less than 1 year | | |
1 – 3 years | | |
3 – 5 years | | |
More than 5 years | |
| |
| | |
| | |
| | |
| | |
| |
Notes payable | |
$ | 21,345 | | |
$ | 2,804 | | |
$ | 371 | | |
$ | 18,170 | | |
$ | - | |
Operating leases | |
| 1,566 | | |
| 1,073 | | |
| 493 | | |
| - | | |
| - | |
Other | |
| 2,585 | | |
| 2,527 | | |
| 58 | | |
| - | | |
| - | |
Total | |
$ | 25,496 | | |
$ | 6,404 | | |
$ | 922 | | |
$ | 18,170 | | |
$ | - | |
Other in the above table includes $2,527,000
for the possible required return of grant monies received from the State of Florida.
In addition to the items included in the
table, Kable Distribution had negative working capital of approximately $12,672,000 at October 31, 2014. For further details regarding
the negative working capital, see Note 5 in the footnotes that accompany the financial statements included in this Form 10-Q.
Any additional future defined benefit pension
plan contributions necessary to satisfy the minimum statutory funding requirements are not included in the table and are dependent
upon various factors, including actual plan asset investment returns and discount rates applied.
Refer to the notes to the consolidated
financial statements included in this quarterly report on Form 10-Q and in the 2014 Form 10-K for additional information on long-term
debt, other liabilities, pension contributions, taxes, commitments and contingencies.
Statement of Forward-Looking Information
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, reports to the Company’s
shareholders and news releases. All statements that express expectations, estimates, forecasts or 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 contingencies
that are difficult to predict. All forward-looking statements speak only as of the date of this report or, in the case of any document
incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to
the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the
factors that will determine the Company’s future results are beyond the ability of management to control or 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 or publicly release any revisions to any forward-looking statement to reflect events, circumstances or changes in expectations
after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information,
future events or otherwise.
Evaluation of Disclosure Controls and
Procedures
The Company’s management, with the
participation of the Company’s chief financial officer and the other persons whose certifications accompany this quarterly
report, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934) as of the end of the period covered by this report. As a result of such evaluation,
the chief financial officer and such other persons have concluded that such disclosure controls and procedures are effective to
provide reasonable assurance that the information required to be disclosed in the reports the Company files or submits under the
Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including
its chief financial officer and such other persons, as appropriate to allow timely decisions regarding disclosure. The Company
believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives
of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within a company have been detected.
Changes in Internal Control over Financial
Reporting
No change in the Company’s system
of internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, internal control over financial reporting.
PART II. OTHER INFORMATION
Exhibit No. |
|
Description |
10.1 |
|
Oil and Gas Lease and the Addendum thereto, each dated September 8, 2014, by and among AMREP Southwest Inc., Outer Rim Investments, Inc., Thrust Energy, Inc. and Cebolla Roja, LLC. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed September 9, 2014) |
10.2 |
|
Consent Agreement, dated September 8, 2014, by and between Kappa Lending Group, LLC and AMREP Southwest Inc. (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed September 9, 2014) |
31.1 |
|
Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
31.2 |
|
Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
31.3 |
|
Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
32 |
|
Certification required pursuant to 18 U.S.C. Section 1350 |
101.INS |
|
XBRL Instance Document |
101.SCH |
|
XBRL Taxonomy Extension Schema |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase |
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: December 12, 2014 |
AMREP CORPORATION |
|
(Registrant) |
|
|
|
By: |
/s/ Peter M. Pizza |
|
|
Peter M. Pizza |
|
|
Vice President and Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
EXHIBIT INDEX
Exhibit No. |
|
Description |
10.1 |
|
Oil and Gas Lease and the Addendum thereto, each dated September 8, 2014, by and among AMREP Southwest Inc., Outer Rim Investments, Inc., Thrust Energy, Inc. and Cebolla Roja, LLC. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed September 9, 2014) |
10.2 |
|
Consent Agreement, dated September 8, 2014, by and between Kappa Lending Group, LLC and AMREP Southwest Inc. (Incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed September 9, 2014) |
31.1 |
|
Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
31.2 |
|
Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
31.3 |
|
Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934 |
32 |
|
Certification required pursuant to 18 U.S.C. Section 1350 |
101.INS |
|
XBRL Instance Document |
101.SCH |
|
XBRL Taxonomy Extension Schema |
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase |
Exhibit 31.1
CERTIFICATION
I, Peter M. Pizza, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended October 31, 2014 of AMREP
Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant
as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| d) | disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
| 5. | The Registrant’s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s
board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and |
|
b) |
any
fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting. |
Dated: December
12, 2014
/s/ Peter
M. Pizza
Peter M. Pizza
Chief Financial Officer
(Principal Accounting Officer)
Exhibit 31.2
CERTIFICATION
I, Theodore J. Gaasche, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended October 31, 2014 of AMREP
Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant
as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| d) | disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
| 5. | The Registrant’s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s
board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and |
| b) | any
fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting. |
Dated: December
12, 2014
/s/ Theodore J. Gaasche
Theodore J. Gaasche*
______________
*The Registrant is a holding company which
does substantially all of its business through three indirect wholly-owned subsidiaries (and their subsidiaries). These indirect
wholly-owned subsidiaries are Palm Coast Data LLC, Kable Media Services, Inc. and AMREP Southwest Inc. (“ASW”). The
Registrant has no chief executive officer. Theodore J. Gaasche, in his capacity as Vice Chairman of the Executive Committee of
the Registrant’s Board of Directors, has oversight responsibility for the operations of ASW.
Exhibit 31.3
CERTIFICATION
I, Michael P. Duloc, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended October 31, 2014 of AMREP
Corporation; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant
as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| d) | disclosed in this report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and |
| 5. | The Registrant’s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s
board of directors (or persons performing the equivalent functions): |
| a) | all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize
and report financial information; and |
| b) | any
fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s
internal control over financial reporting. |
Dated: December
12, 2014
/s/ Michael
P. Duloc
Michael P. Duloc*
______________
*The Registrant is a holding company which
does substantially all of its business through three indirect wholly-owned subsidiaries (and their subsidiaries). These indirect
wholly-owned subsidiaries are Palm Coast Data LLC (“Palm Coast”), Kable Media Services, Inc. (“Kable”)
and AMREP Southwest Inc. The Registrant has no chief executive officer. Michael P. Duloc has oversight responsibility for the
operations of Palm Coast and Kable.
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report
of AMREP Corporation (the “Company”) on Form 10-Q for the period ended October 31, 2014 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), each of the undersigned does hereby certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
|
|
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: December 12, 2014
/s/ Peter M. Pizza |
|
Peter M. Pizza |
Chief Financial Officer |
(Principal Accounting Officer) |
|
|
|
|
/s/ Theodore J. Gaasche |
|
Theodore J. Gaasche* |
|
|
|
|
/s/ Michael P. Duloc |
|
Michael P. Duloc* |
______________
*The Registrant is a holding company which
does substantially all of its business through three indirect wholly-owned subsidiaries (and their subsidiaries). These indirect
wholly-owned subsidiaries are Palm Coast Data LLC (“Palm Coast”), Kable Media Services, Inc. (“Kable”)
and AMREP Southwest Inc. (“ASW”). The Registrant has no chief executive officer. Theodore J. Gaasche, in his capacity
as Vice Chairman of the Executive Committee of the Registrant’s Board of Directors, has oversight responsibility for the
operations of ASW. Michael P. Duloc has oversight responsibility for the operations of Palm Coast and Kable.
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