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 July 31, 2009
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-4702
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AMREP Corporation
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(Exact name of registrant as specified in its charter)
Oklahoma 59-0936128
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
300 Alexander Park , Suite 204, Princeton, New Jersey 08540
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 716-8200
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Not Applicable
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(Former name,former address and former fiscal year,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.
Yes X No
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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 (paragraph
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).
Yes No
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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 X
--- ---
Non-accelerated filer Smaller reporting company
--- ---
(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).
Yes No X
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Number of Shares of Common Stock, par value $.10 per share, outstanding at
August 31, 2009 - 5,996,212.
AMREP CORPORATION AND SUBSIDIARIES
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
July 31, 2009 and April 30, 2009 1
Consolidated Statements of Operations and Retained Earnings
(Unaudited) Three Months Ended July 31, 2009 and 2008 2
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended July 31, 2009 and 2008 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Item 4. Controls and Procedures 17
PART II. OTHER INFORMATION
Item 6. Exhibits 18
SIGNATURE 19
EXHIBIT INDEX 20
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
------- --------------------
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(Thousands, except par value and number of shares)
July 31, April 30,
2009 2009
------------------ ------------------
ASSETS:
Cash and cash equivalents $ 31,619 $ 29,018
Receivables, net:
Real estate operations 3,400 3,367
Media services operations 37,066 34,614
------------------ ------------------
40,466 37,981
Income taxes receivable 3,442 3,009
Real estate inventory 82,091 81,561
Investment assets, net 11,370 11,389
Property, plant and equipment, net 33,690 34,656
Intangible and other assets, net 24,728 26,145
Goodwill 3,893 3,893
------------------ ------------------
TOTAL ASSETS $ 231,299 $ 227,652
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Accounts payable, net and accrued expenses $ 87,392 $ 81,699
Notes payable:
Amounts due within one year 28,977 25,770
Amounts subsequently due 4,669 12,166
------------------ ------------------
33,646 37,936
Deferred income taxes and other long-term liabilities 3,878 1,071
Accrued pension cost 11,158 10,665
------------------ ------------------
TOTAL LIABILITIES 136,074 131,371
------------------ ------------------
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
Shares authorized - 20,000,000; 7,420,704 shares issued 742 742
Capital contributed in excess of par value 46,100 46,100
Retained earnings 83,886 84,942
Accumulated other comprehensive loss, net (8,846) (8,846)
Treasury stock, at cost; 1,424,492 shares (26,657) (26,657)
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 95,225 96,281
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 231,299 $ 227,652
================== ==================
See notes to consolidated financial statements.
1
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings (Unaudited)
Three Months Ended July 31, 2009 and 2008
(Thousands, except per share amounts)
2009 2008
------------------ ------------------
REVENUES:
Real estate land sales $ 1,485 $ 1,263
Media services operations 30,768 34,023
Interest and other 204 284
------------------ ------------------
32,457 35,570
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COSTS AND EXPENSES:
Real estate land sales 642 366
Operating expenses:
Media services operations 27,946 30,161
Real estate commissions and selling 81 78
Restructuring and fire recovery costs 666 587
Other 439 255
General and administrative:
Media services operations 2,972 2,809
Real estate operations and corporate 1,121 1,090
Interest expense, net of capitalized amounts 202 112
------------------ ------------------
34,069 35,458
------------------ ------------------
INCOME (LOSS) BEFORE INCOME TAXES (1,612) 112
PROVISION (BENEFIT) FOR INCOME TAXES (556) 41
------------------ ------------------
NET INCOME (LOSS) (1,056) 71
RETAINED EARNINGS, beginning of period 84,942 128,408
------------------ ------------------
RETAINED EARNINGS, end of period $ 83,886 $ 128,479
================== ==================
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED $ (0.18) $ 0.01
================== ==================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,996 5,995
================== ===================
See notes to consolidated financial statements.
2
AMREP CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended July 31, 2009 and 2008
(Thousands)
2009 2008
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,056) $ 71
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 2,548 2,403
Non-cash credits and charges:
Pension accrual 493 68
Provision for doubtful accounts 56 74
(Gain) loss on disposition of assets, net 2 (3)
Changes in assets and liabilities:
Receivables (2,541) (2,866)
Income taxes receivable (433) (1,524)
Real estate inventory and investment assets (515) (2,580)
Intangible and other assets 423 (593)
Accounts payable and accrued expenses 5,693 (8,543)
Deferred income taxes and other long-term liabilities 2,807 398
------------------ ------------------
Total adjustments 8,533 (13,166)
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Net cash provided by (used in) operating activities 7,477 (13,095)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - property, plant and equipment (586) (185)
------------------ ------------------
Net cash used in investing activities (586) (185)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 4,600 10,356
Principal debt payments (8,890) (5,775)
------------------ ------------------
Net cash provided by (used in) financing activities (4,290) 4,581
------------------ ------------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,601 (8,699)
CASH AND CASH EQUIVALENTS, beginning of period 29,018 32,608
------------------ ------------------
CASH AND CASH EQUIVALENTS, end of period $ 31,619 $ 23,909
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts capitalized $ 242 $ 93
================== ==================
Income taxes paid - net of refunds $ 20 $ 1,167
================== ==================
See notes to consolidated financial statements.
3
AMREP CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Three Months Ended July 31, 2009 and 2008
(1) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been prepared
by AMREP Corporation (the "Registrant" or the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission ("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. 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 2010 and
2009 are to the fiscal years ending April 30, 2010 and 2009 and all references
to the first quarter or first three months of 2010 and 2009 mean the fiscal
three-month periods ended July 31, 2009 and 2008.
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, 2009, which was previously filed with the Securities and Exchange
Commission on July 14, 2009 (the "2009 Form 10-K").
New Accounting Pronouncements
-----------------------------
In December 2007, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141(R) (revised 2007),
"Business Combinations". SFAS No. 141(R) requires the acquiring entity in a
business combination to recognize, at full fair value, all the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquiring entity to disclose information needed to
evaluate and understand the nature and financial effect of the business
combination. SFAS No. 141(R) also changes the accounting for contingent
consideration, in process research and development, and restructuring costs. In
addition, after SFAS No. 141(R) is adopted, changes in uncertain tax positions
or valuation allowances for deferred tax assets acquired in a business
combination are recognized as adjustments to income tax expense or contributed
capital, as appropriate. SFAS No. 141(R) is effective for fiscal years beginning
after December 15, 2008 and is to be applied prospectively. The Company will
apply SFAS No.141(R) to all business combinations occurring after May 1, 2009.
The Company did not enter into any business combinations in the first quarter of
2010.
In April 2009, the FASB issued FSP SFAS 107-1 and APB No. 28-1, "Interim
Disclosures about Fair Value of Financial Instruments" ("FSP SFAS 107-1 and APB
28-1"), which requires disclosures about the fair value of financial instruments
for interim reporting periods of publicly traded companies as well as in annual
financial statements. The Company adopted the provisions of FSP SFAS 107-1 and
APB 28-1 on May 1, 2009. See Note 9 for fair value disclosure of the Company's
financial instruments.
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events", which is
effective for fiscal years and interim periods ended after June 15, 2009. SFAS
No. 165 incorporates into authoritative accounting literature certain guidance
that already existed within generally accepted auditing standards. SFAS No. 165
prescribes the period after the balance sheet date during which an entity should
evaluate transactions for potential recognition, the circumstances under which
an entity should recognize
4
events or transactions occurring after the balance sheet date and the related
disclosure requirements. The Company implemented SFAS No. 165 for the quarter
ended July 31, 2009 and has evaluated transactions through September 9, 2009,
the filing date of this quarterly report on Form 10-Q, for recognition as
subsequent events. The Company has disclosed in Note 7 the developments
regarding the status of certain potential bank refinancing that is deemed to be
a subsequent event.
In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles-a
Replacement of FASB Statement No. 162". SFAS No. 168 replaces SFAS No. 162 and
establishes the FASB Accounting Standards Codification (the "Codification") as
the single source of authoritative generally accepted accounting principles
("U.S. GAAP") recognized by the FASB to be applied by nongovernmental entities.
Rules and interpretive releases of the SEC under authority of the federal
securities laws are also sources of authoritative U.S. GAAP for SEC registrants.
The Codification, which modified structure hierarchy and referencing of
financial standards, is effective for financial statements issued for interim
and annual periods ending after September 15, 2009. When effective, the
Codification will supersede all existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification will become non-authoritative. The Codification is
not intended to change or alter existing U.S. GAAP and will not have a material
impact on the Company's results of operations or financial position.
(2) Receivables, Net
----------------
Receivables, net consist of the following accounts receivable (in thousands):
July 31, April 30,
2009 2009
----------------- ----------------
Real estate operations:
Mortgage notes and other receivables $ 3,490 $ 3,457
Less allowance for doubtful accounts (90) (90)
----------------- ----------------
$ 3,400 $ 3,367
================= ================
Media services operations:
Subscription Fulfillment Services $ 23,954 $ 24,711
Newsstand Distribution Services,
net of estimated returns 12,295 8,970
Product Fulfillment Services and other 1,803 1,863
----------------- ----------------
38,052 35,544
Less allowance for doubtful accounts (986) (930)
----------------- ----------------
$ 37,066 $ 34,614
================= ================
Newsstand Distribution Services accounts receivable are net of estimated
magazine returns of $48,880,000 at July 31, 2009 and $55,212,000 at April 30,
2009. In addition, pursuant to an arrangement with one publisher customer of the
Newsstand Distribution Services business, the publisher bears the ultimate
credit risk of non-collection of amounts due from the customers to which the
Company distributed the publisher's magazines under this arrangement. Accounts
receivable subject to this arrangement (of $16,097,000 at July 31, 2009 and
$28,565,000 at April 30, 2009) were netted against the related accounts payable
due the publisher on the accompanying consolidated balance sheets.
5
(3) Investment Assets, Net
----------------------
Investment assets, net consist of the following (in thousands):
July 31, April 30,
2009 2009
----------------- ----------------
Land held for long-term investment $ 10,864 $ 10,879
----------------- ----------------
Other 794 794
Less accumulated depreciation (288) (284)
----------------- ----------------
506 510
----------------- ----------------
$ 11,370 $ 11,389
================= ================
Land held for long-term investment represents property located in areas that are
not planned to be developed in the near term and thus has not been offered for
sale.
(4) Property, Plant and Equipment, Net
----------------------------------
Property, plant and equipment, net consist of the following (in thousands):
July 31, April 30,
2009 2009
----------------- ----------------
Land, buildings and improvements $ 27,860 $ 27,397
Furniture and equipment and other 42,057 41,950
----------------- ----------------
69,917 69,347
Less accumulated depreciation (36,227) (34,691)
----------------- ----------------
$ 33,690 $ 34,656
================= ================
(5) Intangible and Other Assets, Net
--------------------------------
Intangible and other assets, net consist of the following (in thousands):
July 31, 2009 April 30, 2009
------------------------------------ -----------------------------------
Accumulated Accumulated
Cost Amortization Cost Amortization
-------------- ---------------- ------------- ----------------
Software development costs $ 10,056 $ 6,744 $ 10,056 $ 6,156
Deferred order entry costs 4,159 - 4,835 -
Prepaid expenses 3,961 - 3,681 -
Customer contracts and relationships 15,000 3,175 15,000 2,863
Other 2,765 1,294 2,775 1,183
-------------- ---------------- ------------- ----------------
$ 35,941 $ 11,213 $ 36,347 $ 10,202
============== ================ ============= ==================
Software development costs include internal and external costs of the
development of new or enhanced software programs and are generally amortized
over five years. 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 over a twelve-month period.
Customer contracts and relationships are amortized over twelve years.
6
(6) Accounts Payable, Net and Accrued Expenses
------------------------------------------
Accounts payable, net and accrued expenses consist of the following (in
thousands):
July 31, April 30,
2009 2009
----------------- ----------------
Publisher payables, net $ 70,605 $ 63,074
Accrued expenses 4,183 4,473
Trade payables 3,013 3,772
Other 9,591 10,380
----------------- ----------------
$ 87,392 $ 81,699
================= ================
Pursuant to an arrangement with a publisher customer of the Newsstand
Distribution Services business, the Company has netted $16,097,000 and
$28,565,000 of accounts receivable against the related accounts payable at July
31, 2009 and April 30, 2009 (see Note 2).
(7) Notes Payable
-------------
Notes payable consist of the following (in thousands):
July 31, April 30,
2009 2009
----------------- ----------------
Notes payable:
Line-of-credit borrowings:
Real estate operations and other $ 24,000 $ 24,000
Media services operations 4,659 8,866
Other notes payable 4,987 5,070
----------------- ----------------
$ 33,646 $ 37,936
================= ================
The Company's AMREP Southwest Inc. subsidiary ("AMREP Southwest") has a
revolving credit facility with a bank that matures on September 17, 2009 under
which $24,000,000 is presently outstanding. The conditional commitment of the
lender previously reported in the Company's 2009 Form 10-K, to replace the
expiring credit facility with a new revolving credit facility having a term
selected by AMREP Southwest of either two years or 364 days included a lender
imposed condition that it obtain a participant for 25% of the facility. On
September 2, 2009, the lender notified AMREP Southwest that the lender's
intended participant was requiring revised terms in the new facility that are
substantially less favorable to AMREP Southwest than those contained in the
lender's commitment. In the revised terms, the new facility is a 364 day term
loan of $22,500,000 under which a portion of the proceeds from AMREP Southwest's
land sales are required to be applied to the prepayment of the loan. On
September 9, 2009, in response to AMREP Southwest's request for an extension of
the existing facility in order to negotiate the proposed terms, the lender
issued its commitment to grant the extension for 90 days, subject to certain
changes in the existing facility's terms, which AMREP Southwest is considering.
The significant terms of the existing facility are described in Note 8 of the
Notes to the Company's consolidated financial statements included in the 2009
Form 10-K. The changes to the terms required by the lender to apply during the
extension period are that (i) the interest rate per annum on borrowings increase
to LIBOR plus 3.5%, but not less than 5%, (ii) the loan be secured by mortgages
on certain identified real property of AMREP Southwest and that the appraised
value of the collateral continue to be not less than 2.5 times the outstanding
amount of the loan, and (iii) AMREP Southwest make no distributions or other
payments to its parent.
On July 14, 2009, the Company's Kable Media Services subsidiary and certain of
its direct and indirect subsidiaries, entered into an Amended and Restated Loan
and Security Agreement (the "Present Credit Agreement") with a bank that further
amended and restated an earlier agreement with the bank's predecessor (the
latter agreement, the "Prior Credit Agreement").
The Present Credit Agreement provides for: (i) a revolving credit loan and
letter of credit facility of up to $20,000,000 ("Facility A") that may be used
7
for general business purposes, including the payment of expenses and other costs
associated with the consolidation of Kable's Subscription Fulfillment Services
business in Florida; and (ii) a second revolving credit loan facility of up to
$5,000,000 ("Facility D") that may be used exclusively for the payment of
accounts payable under a distribution agreement with a customer of Kable's
Distribution Services business. At the borrowers' option, up to $2,500,000 of
the bank's lending commitment for Facility D may be transferred to Facility A.
At July 31, 2009, $2,305,000 of Facility A loans and no Facility D loans were
outstanding. Additionally, term borrowings of approximately $2,354,000
("Facilities B and C") at July 31, 2009, bearing interest from 4.79% to 6.40%
per annum, that were incurred for capital expenditures under the Prior Credit
Agreement are now included in the borrowings under the Present Credit Agreement
in addition to Facilities A and D. Under the Present Credit Agreement, the
revolving credits mature on May 1, 2010 and the term borrowings are due in
installments through that date, as was the case under the Prior Credit
Agreement. The borrowers' obligations under the Present Credit Agreement are
secured by substantially all of their assets other than (i) real property and
(ii) any borrower's interest in the capital securities of any other borrower or
any subsidiary of any borrower, as were the borrowers' obligations under the
Prior Credit Agreement.
The revolving loans under the Present Credit Agreement bear interest at the
borrowers' option at fluctuating rates that are either (i) a LIBOR-based rate
(0.285% at July 31, 2009) plus 3.25%, or (ii) the bank's prime rate (3.25% at
July 31, 2009) plus 1.75%.
The Present Credit Agreement requires the borrowers to maintain certain
financial ratios, which are changed in a number of respects from those contained
in the Prior Credit Agreement. The Present Credit Agreement also contains other
customary covenants and restrictions, the most significant of which limit the
ability of the borrowers to declare or pay dividends or make other distributions
to the Company, limit the annual amount borrowers may incur for capital
expenditures and other purposes and impose certain minimum EBITDA requirements
on the borrowers.
Each of the Company's financing facilities requires the borrowers to meet
certain covenants. The borrowers were in compliance with these covenants at July
31, 2009.
(8) Taxes
-----
Unrecognized tax benefits were $1,585,000 at July 31, 2009 and April 30, 2009.
As a result of either the expiration of statutes of limitations or the
recognition and measurement considerations under FIN 48, the Company believes
that it is reasonably possible that the amount of unrecognized tax benefits will
decrease within the next twelve months.
(9) Fair Value Measurements
-----------------------
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 establishes a common definition for fair value to
be applied to U.S. GAAP requiring use of fair value, establishes a framework for
measuring fair value, and expands disclosure about such fair value measurements.
SFAS No. 157 is effective for financial assets and financial liabilities for
fiscal years beginning after November 15, 2007. The adoption of SFAS No. 157 for
financial assets and financial liabilities, effective May 1, 2008, did not have
an impact on the Company's consolidated financial position or results of
operations.
The estimated fair value of financial instruments is determined by reference to
various market data and other valuation techniques as appropriate. The carrying
amounts of cash and cash equivalents, media services trade receivables and trade
payables approximate fair value because of the short maturity of these financial
8
instruments. Debt that bears variable interest rates indexed to prime or LIBOR
also approximates fair value as it reprices when market interest rates change.
The estimated fair value of the Company's long-term, fixed-rate mortgage
receivables was $3,163,000 and $2,914,000 versus carrying amounts of $3,173,000
and $3,176,000 at July 31, 2009 and April 30, 2009. The estimated fair value of
the Company's long-term, fixed-rate notes payable was $7,896,000 and $8,524,000
versus carrying amounts of $7,341,000 and $7,869,000 at July 31, 2009 and April
30, 2009.
(10) Restructuring and Fire Recovery Costs
-------------------------------------
In January 2008, the Company announced a project to consolidate its Subscription
Fulfillment Services business operations from three locations in Colorado,
Florida and Illinois into one existing location at Palm Coast, Florida, which is
expected to streamline operations, improve service to clients and create cost
efficiencies through reduced overhead costs and the elimination of operating
redundancies. This project, which is now well underway, is expected to require
capital expenditures in the range of $9,000,000 to $12,000,000. It is scheduled
to be substantially completed by the end of fiscal year 2011 (April 30, 2011)
and may involve approximately $6,000,000 of non-recurring cash costs for
severance, training and transition, facility closings and equipment relocation.
The State of Florida and the City of Palm Coast have agreed to provide
incentives for the project, including cash and employee training grants and tax
relief, which could amount to as much as $8,000,000, and which are largely
contingent on existing job retention, new job creation and capital investment.
For the three months ended July 31, 2009, the Company recognized $60,000 of
income for certain incentives related to the consolidation project, which are
netted with costs of $888,000, principally for severance. As a result, the
Company reported a net charge to operations of $828,000 related to the
consolidation project for the first quarter of 2010 compared to a net charge of
$498,000, principally for severance, for the same period in 2009. The items of
income for incentives and costs related to the consolidation project are
included in Restructuring and fire recovery costs in the Company's consolidated
statements of operations and retained earnings.
In December 2007, a warehouse leased by a Kable subsidiary in Oregon, Illinois
and its contents were totally destroyed by fire. The warehouse was used
principally to store back issues of magazines published by certain customers for
whom the Company filled back-issue orders as part of its services. The Company
was required to provide insurance for that property of certain of those
customers. Through July 31, 2009, the Company's insurance carrier had paid
approximately $263,000 to customers for lost materials. The Company believes
that the resolution of other pending or unasserted claims related to materials
of certain publishers for whom it was required to provide insurance after taking
into account the proceeds from its property insurance claims, will not have a
material effect on its consolidated financial position, results of operations or
cash flows.
The Company has filed various claims with its insurance provider related to the
fire. As of August 31, 2009, the Company had been reimbursed approximately
$1,236,000 for assets lost in the fire, as well as for certain business
interruption insurance claims made by the Company and other expenses of
relocation and professional fees. As a result of reimbursements received during
the three months ended July 31, 2009, the Company reported a net gain of
$162,000 for the first quarter of 2010 related to fire recovery costs. For the
same period in 2009, the Company recorded a net charge of $89,000. The items of
income and expense related to insurance proceeds and the fire recovery costs are
included in Restructuring and fire recovery costs in the Company's consolidated
statements of operations and retained earnings. In addition, the Company
recorded other income for a business interruption claim resulting from the fire
for the first quarter of 2009 that totaled $173,000. No business interruption
claims were recorded in the first quarter of 2010.
9
(11) Information About the Company's Operations in Different Industry Segments
-------------------------------------------------------------------------
As a result of the purchase of assets of certain businesses in November 2008,
the Company reclassified for 2009 certain revenues, expenses and capital
expenditures previously reported as part of its Subscription Fulfillment
Services segment and has reported them with revenues, expenses and capital
expenditures of those businesses since the date of purchase as a separate
segment, "Product Fulfillment Services and Other". The following tables set
forth summarized data relative to the industry segments in which the Company
operated for the three month periods ended July 31, 2009 and 2008 (in
thousands):
Product
Subscription Newsstand Fulfillment
Real Estate Fulfillment Distribution Services and
Operations Services Services Other Other Consolidated
----------------------------------------------------------------------------------------
Three months ended July 31, 2009:
Revenues $ 1,745 $ 25,127 $ 3,205 $ 2,436 $ (56) $ 32,457
Net income (loss) (80) (1,478) 259 4 239 (1,056)
Provision (benefit) for income taxes (13) (868) 190 2 133 (556)
Interest expense (income), net (a) 42 557 (229) 16 (184) 202
Depreciation and amortization 26 2,302 129 54 37 2,548
--------------- -------------- -------------- --------------- ------------ -----------
EBITDA (b) $ (25) 513 349 76 $ 225 $ 1,138
--------------- -------------- -------------- --------------- ------------ -----------
Capital expenditures $ - $ 479 $ 15 $ 11 $ 81 $ 586
------------------------------------------------------------------------------------------------------------------------------------
Three months ended July 31, 2008:
Revenues $ 1,529 $ 29,842 $ 3,355 $ 825 $ 19 $ 35,570
Net income (loss) 99 (756) 370 56 302 71
Provision (benefit) for income taxes 58 (444) 217 33 177 41
Interest expense (income), net (a) - 832 (305) - (415) 112
Depreciation and amortization 8 2,244 140 10 1 2,403
--------------- -------------- -------------- --------------- ------------ -----------
EBITDA (b) $ 165 $ 1,876 $ 422 $ 99 $ 65 $ 2,627
--------------- -------------- -------------- --------------- ------------ -----------
Capital expenditures $ 1 $ 178 $ 5 $ - $ 1 $ 185
------------------------------------------------------------------------------------------------------------------------------------
(a) Interest expense, net includes inter-segment interest income and
expense that is eliminated in consolidation.
(b) The Company uses EBITDA (which the Company defines as income before
interest expense, net, income taxes and depreciation and amortization)
in addition to net income (loss) as key measures of profit or loss for
segment performance and evaluation purposes.
10
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 Real Estate business operated by AMREP Southwest Inc. and its
subsidiaries (collectively, "AMREP Southwest") and the Subscription Fulfillment
Services, Newsstand Distribution Services and Product Fulfillment Services
businesses operated by Kable Media Services, Inc. and its subsidiaries
(collectively, "Kable" or "Media Services"). 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 discussion should be read in conjunction with the
April 30, 2009 consolidated financial statements and accompanying notes. Unless
otherwise qualified, all references to 2010 and 2009 are to the fiscal years
ending April 30, 2010 and 2009 and all references to the first quarter or first
three months of 2010 and 2009 mean the fiscal three-month periods ended July 31,
2009 and 2008.
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 2009
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 Company's annual report on Form 10-K for the
year ended April 30, 2009 (the "2009 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 Assumptions and Estimates" in the
Company's 2009 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 2009 consolidated financial statements contained in the Company's 2009 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 2009 consolidated financial statements and also
in Note 1 to the consolidated financial statements contained in this quarterly
report on Form 10-Q. The Company did not adopt any accounting policy in the
first quarter of 2010 that had a material impact on its consolidated financial
statements.
RESULTS OF OPERATIONS
---------------------
For the first quarter of 2010, the Company had a net loss of $1,056,000, or
$0.18 per share, compared to net income of $71,000, or $0.01 per share, in the
first quarter of 2009. Revenues were $32,457,000 in the first quarter of fiscal
2010 compared to $35,570,000 for the same period last year.
11
First quarter 2010 revenues from land sales at AMREP Southwest were $1,485,000
compared to $1,263,000 for the same period of 2009. In Rio Rancho, the Company
offers for sale both developed and undeveloped lots to national, regional and
local home builders, commercial and industrial property developers and others.
For the first quarter of 2010 and 2009, the Company's land sales in Rio Rancho
were as follows:
Three Months Ended July 31,
--------------------------------------------------------------------------------------
2009 2008
--------------------------------------- -----------------------------------------
Revenues Revenues
Acres Revenues Per Acre Acres Revenues Per Acre
Sold (in 000s) (in 000s) Sold (in 000s) (in 000s)
---------- ----------- ----------- -------- ------------ -----------
Developed
Residential 2.8 $ 670 $ 239 1.4 $ 342 $ 244
Commercial - - - 1.0 126 126
---------- ----------- ----------- -------- ------------ -----------
Total Developed 2.8 670 239 2.4 468 195
Undeveloped 26.0 815 31 44.8 795 18
---------- ----------- ----------- -------- ------------ -----------
Total 28.8 $ 1,485 $ 52 47.2 $ 1,263 $ 27
---------- ----------- ----------- -------- ------------ -----------
The average selling price of land sold by the Company in Rio Rancho in recent
years has fluctuated, as the Company offers for sale developed and undeveloped
land in Rio Rancho from a number of different projects, and selling prices may
vary from project to project and within projects depending on location, the
stage of development and other factors. The revenue per acre of developed
residential land was generally unchanged for the first quarter of 2010 compared
to the same period in 2009. The revenue per acre of undeveloped land in the
first quarter of 2010 was higher compared to the same period in the prior year
due to the undeveloped land sold in the current year being from locations nearer
developed areas and thus generally having higher selling prices. The average
gross profit percentage on land sales decreased from 71% for the first quarter
of 2009 to 57% for the first quarter of 2010. This decrease was primarily
attributable to the mix of undeveloped residential lots sold, with first quarter
2010 sales including land that was previously taken back by deeds in lieu of
foreclosure, thus generally having a higher cost basis and lower gross profit
percentage than sales that occurred in the first quarter of 2009. Revenues,
gross profits and related gross profit percentages from land sales can vary
significantly from period to period as a result of many factors, including the
nature and timing of specific transactions, and prior results are not
necessarily a good indication of what may occur in future periods.
Revenues from Media Services decreased from $34,023,000 for the first quarter of
2009 to $30,768,000 for the same period in 2010. Magazine publishers, who are
the principal customers of the Company's Media Services operations, suffered
generally from lower advertising revenues and lower subscription and newsstand
sales during the quarter, which led to reduced business for the Company's Media
Services operations. Revenues from Kable's Subscription Fulfillment Services
operations decreased from $29,842,000 for the first quarter of 2009 to
$25,127,000 for the same period of 2010, primarily as a result of lower
publisher customer volumes and higher attrition of magazine titles offset, in
part, by revenue gains from new and some existing clients. Revenues from Kable's
Newsstand Distribution Services operations decreased from $3,355,000 for the
first quarter 2009 to $3,205,000 for the same period of 2010 as a result of
lower distribution volumes. These decreases in revenues from Subscription
Fulfillment Services and Newsstand Distribution Services were partly offset by
increased revenues from Kable's Product Fulfillment Services and Other business
segment, which increased from $825,000 for the first quarter of 2009 to
$2,436,000 for the same period in 2010, primarily from the inclusion of the
revenues of a product repackaging and fulfillment business and a temporary
staffing business, which were acquired in the third quarter of 2009. Kable's
operating expenses decreased by $2,215,000 for the first quarter of 2010
compared to the same period in 2009, primarily attributable lower payroll and
benefits costs
12
and, to a lesser extent, efficiencies related to the ongoing project to
consolidate the Subscription Fulfillment Services business from three locations
in Colorado, Florida and Illinois into one existing location at Palm Coast,
Florida.
In January 2008, the Company announced a project to consolidate its Subscription
Fulfillment Services business operations from three locations in Colorado,
Florida and Illinois into one existing location at Palm Coast, Florida, which is
expected to streamline operations, improve service to clients and create cost
efficiencies through reduced overhead costs and the elimination of operating
redundancies. This project, which is now well underway, is expected to require
capital expenditures in the range of $9,000,000 to $12,000,000. It is scheduled
to be substantially completed by the end of fiscal year 2011 (April 30, 2011)
and may involve approximately $6,000,000 of non-recurring cash costs for
severance, training and transition, facility closings and equipment relocation.
The State of Florida and the City of Palm Coast have agreed to provide
incentives for the project, including cash and employee training grants and tax
relief, which could amount to as much as $8,000,000, and which are largely
contingent on existing job retention, new job creation and capital investment.
For the three months ended July 31, 2009, the Company recognized $60,000 of
income for certain incentives related to the consolidation project, which are
netted with costs of $888,000, principally for severance. As a result, the
Company reported a net charge to operations of $828,000 related to the
consolidation project for the first quarter of 2010 compared to a net charge of
$498,000, principally for severance, for the same period in 2009. The items of
income for incentives and costs related to the consolidation project are
included in Restructuring and fire recovery costs in the Company's consolidated
statements of operations and retained earnings.
In December 2007, a warehouse leased by a Kable subsidiary in Oregon, Illinois
and its contents were totally destroyed by fire. The warehouse was used
principally to store back issues of magazines published by certain customers for
whom the Company filled back-issue orders as part of its services. The Company
was required to provide insurance for that property of certain of those
customers. Through July 31, 2009, the Company's insurance carrier had paid
approximately $263,000 to customers for lost materials. The Company believes
that the resolution of other pending or unasserted claims related to materials
of certain publishers for whom it was required to provide insurance after taking
into account the proceeds from its property insurance claims, will not have a
material effect on its consolidated financial position, results of operations or
cash flows.
The Company has filed various claims with its insurance provider related to the
fire. As of August 31, 2009, the Company had been reimbursed approximately
$1,236,000 for assets lost in the fire, as well as for certain business
interruption insurance claims made by the Company and other expenses of
relocation and professional fees. As a result of reimbursements received during
the three months ended July 31, 2009, the Company reported a net gain of
$162,000 for the first quarter of 2010 related to fire recovery costs. For the
same period in 2009, the Company recorded a net charge of $89,000. The items of
income and expense related to insurance proceeds and the fire recovery costs are
included in Restructuring and fire recovery costs in the Company's consolidated
statements of operations and retained earnings. In addition, the Company
recorded other income for a business interruption claim resulting from the fire
for the first quarter of 2009 that totaled $173,000. No business interruption
claims were recorded in the first quarter of 2010.
Interest and other revenues were $204,000 for the three-month period ended July
31, 2009 compared to $284,000 for the same period in the prior year. The
decrease in the 2010 first quarter was the result of reduced interest income due
to lower cash balances to invest.
Real estate commissions and selling expenses were generally unchanged from the
prior year, $81,000 in the first quarter of 2010 compared to $78,000 in the same
period of 2009. Other operating expenses increased $184,000 for the three-month
13
period ended July 31, 2009 compared to the same period in 2008 primarily due to
an increase in real estate taxes.
General and administrative costs of Media Services operations increased $163,000
in the first quarter of 2010 compared to the same period in 2009. Real estate
operations and corporate general and administrative expense increased $31,000 in
the first quarter of 2010 compared to the same period in 2009.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
During the past several years, the Company has financed its operations from
internally generated funds from real estate sales and Media Services operations,
and from borrowings under its various lines-of-credit.
Cash Flows From Operating Activities
------------------------------------
Real estate receivables increased from $3,367,000 at April 30, 2009 to
$3,400,000 at July 31, 2009. Real estate receivables of approximately $3,100,000
were delinquent at July 31, 2009, and AMREP Southwest sent foreclosure notices
to buyers from whom receivables exist totaling approximately $2,100,000 and
deeds in lieu of foreclosure are expected to be returned from buyers from whom
receivables exist totaling approximately $1,000,000. The Company believes that
the ultimate resolution of these matters will not have a material impact on the
Company's results of operations or financial position. Receivables from Media
Services operations increased from $34,614,000 at April 30, 2009 to $37,066,000
at July 31, 2009, primarily due to the effect of higher quarter-end billings at
July 31, 2009 compared to April 30, 2009.
Real estate inventory was $82,091,000 at July 31, 2009 compared to $81,561,000
at April 30, 2009. Inventory in the Company's core real estate market of Rio
Rancho increased from $74,121,000 at April 30, 2009 to $74,610,000 at July 31,
2009, primarily reflecting the net effect of development spending and land
sales. The balance of real estate inventory consisted of properties in Colorado.
Accounts payable and accrued expenses increased from $81,699,000 at April 30,
2009 to $87,392,000 at July 31, 2009, primarily as a result of the timing of
payments due to publishers and vendors.
Deferred income taxes and other long-term liabilities increased from $1,071,000
at April 30, 2009 to $3,878,000 at July 31, 2009, primarily as a result of Media
Services having received a $3,000,000 award pursuant to an agreement with the
State of Florida as part of certain incentives made available to the Company
with the announced project to consolidate its magazine subscription, membership
and direct mail fulfillment locations into one location at Palm Coast, Florida
(the "Award Agreement"). The Award Agreement requires the Company to achieve
certain objectives in terms of existing job retention, new job creation and
capital investment through December 31, 2011; however, if the objectives are not
met, the Company may need to return a portion, or all, of the $3,000,000. As
such, the $3,000,000 has been recorded as a liability until the Company is
irrevocably entitled to retain the award.
Cash Flows From Investing Activities
------------------------------------
Capital expenditures totaled $586,000 and $185,000 for the first three months of
2010 and 2009, primarily for expenditures related to the consolidation of the
Subscription Fulfillment Services operations in 2010 and for computer hardware
14
and software development expenditures in 2009. The Company believes that it has
adequate cash and financing capability to provide for its anticipated future
capital expenditures.
Cash Flows From Financing Activities
------------------------------------
AMREP Southwest has a revolving credit facility with a bank that matures on
September 17, 2009 under which $24,000,000 is presently outstanding. The
conditional commitment of the lender previously reported in the Company's 2009
Form 10-K, to replace the expiring credit facility with a new revolving credit
facility having a term selected by AMREP Southwest of either two years or 364
days included a lender imposed condition that it obtain a participant for 25% of
the facility. On September 2, 2009, the lender notified AMREP Southwest that the
lender's intended participant was requiring revised terms in the new facility
that are substantially less favorable to AMREP Southwest than those contained in
the lender's commitment. In the revised terms, the new facility is a 364 day
term loan of $22,500,000 under which a portion of the proceeds from AMREP
Southwest's land sales are required to be applied to the prepayment of the loan.
On September 9, 2009, in response to AMREP Southwest's request for an extension
of the existing facility in order to negotiate the proposed terms, the lender
issued its commitment to grant the extension for 90 days, subject to certain
changes in the existing facility's terms, which AMREP Southwest is considering.
The significant terms of the existing facility are described in Note 8 of the
Notes to the Company's consolidated financial statements included in the 2009
Form 10-K. The changes to the terms required by the lender to apply during the
extension period are that (i) the interest rate per annum on borrowings increase
to LIBOR plus 3.5%, but not less than 5%, (ii) the loan be secured by mortgages
on certain identified real property of AMREP Southwest and that the appraised
value of the collateral continue to be not less than 2.5 times the outstanding
amount of the loan, and (iii) AMREP Southwest make no distributions or other
payments to its parent.
On July 14, 2009, Kable and certain of its direct and indirect subsidiaries
entered into an Amended and Restated Loan and Security Agreement (the "Present
Credit Agreement") with a bank that further amended and restated an earlier
agreement with the bank's predecessor (the latter agreement, the "Prior Credit
Agreement").
The Present Credit Agreement provides for: (i) a revolving credit loan and
letter of credit facility of up to $20,000,000 ("Facility A") that may be used
for general business purposes, including the payment of expenses and other costs
associated with the consolidation of Kable's Subscription Fulfillment Services
business in Florida; and (ii) a second revolving credit loan facility of up to
$5,000,000 ("Facility D") that may be used exclusively for the payment of
accounts payable under a distribution agreement with a customer of Kable's
Distribution Services business. At the borrowers' option, up to $2,500,000 of
the bank's lending commitment for Facility D may be transferred to Facility A.
At July 31, 2009, $2,305,000 of Facility A loans and no Facility D loans were
outstanding. Additionally, term borrowings of approximately $2,354,000
("Facilities B and C") at July 31, 2009, bearing interest from 4.79% to 6.40%
per annum, that were incurred for capital expenditures under the Prior Credit
Agreement are now included in the borrowings under the Present Credit Agreement
in addition to Facilities A and D. Under the Present Credit Agreement, the
revolving credits mature on May 1, 2010 and the term borrowings are due in
installments through that date, as was the case under the Prior Credit
Agreement. The borrowers' obligations under the Present Credit Agreement are
secured by substantially all of their assets other than (i) real property and
(ii) any borrower's interest in the capital securities of any other borrower or
any subsidiary of any borrower, as were the borrowers' obligations under the
Prior Credit Agreement.
The revolving loans under the Present Credit Agreement bear interest at the
borrowers' option at fluctuating rates that are either (i) a LIBOR-based rate
(0.285% at July 31, 2009) plus 3.25%, or (ii) the bank's prime rate (3.25% at
July 31, 2009) plus 1.75%.
The Present Credit Agreement requires the borrowers to maintain certain
financial ratios, which are changed in a number of respects from those contained
in the Prior Credit Agreement. The Present Credit Agreement also contains other
15
customary covenants and restrictions, the most significant of which limit the
ability of the borrowers to declare or pay dividends or make other distributions
to the Company, limit the annual amount borrowers may incur for capital
expenditures and other purposes and impose certain minimum EBITDA requirements
on the borrowers.
Each of the Company's financing facilities requires the borrowers to meet
certain covenants. The borrowers were in compliance with these covenants at July
31, 2009.
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 obligations as of July 31, 2009 for the items indicated (in
thousands):
Less than 1 - 3 3 - 5 More than
Contractual Obligations Total 1 year years years 5 years
----------------------- ----- --------- ----- ----- ---------
Notes payable $ 33,646 $ 28,977 $ 269 $ 222 $ 4,178
Operating leases and other 24,271 5,083 10,989 5,377 2,822
----------- -------------- ------------- ------------- --------------
Total $ 57,917 $ 34,060 $ 11,258 $ 5,599 $ 7,000
=========== ============== ============= ============= ==============
The decrease in notes payable from April 30, 2009 was due to reduced borrowings
by Kable. Operating leases and other includes $2,321,000 of uncertain tax
positions and related accrued interest recorded in accordance with FIN 48. Refer
to Notes 8, 12, 16 and 17 to the consolidated financial statements included in
the 2009 Form 10-K for additional information on long-term debt, taxes and
commitments and contingencies.
Risk Factors
------------
In addition to the other information set forth in this report, the factors
discussed in Part I, "Item 1A. Risk Factors" in the 2009 Form 10-K, which could
materially affect the Company's business, financial condition or future results,
should be carefully considered. The risks described in the 2009 Form 10-K are
not the only risks facing the Company. Additional risks and uncertainties not
currently known to the Company or that currently are deemed to be immaterial
also may materially adversely affect the Company's business, financial condition
or operating results.
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. These risks and uncertainties include, but are not limited to, the
risks described above under the heading "Risk Factors". Many of the factors that
16
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 forward-looking statements contained in this
report include, but are not limited to, statements regarding the consolidation
project of the Subscription Fulfillment Services business (including the
Company's estimated related capital expenditures and incentives anticipated to
be received from the State of Florida and the City of Palm Coast), future
financing requirements and the status of negotiations with the Company's
existing real estate lenders. The Company undertakes no obligation to revise or
update any forward-looking statements, or to make any other forward-looking
statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
------- ----------------------------------------------------------
The Company has two credit facilities that require the Company to pay interest
at a rate that may change periodically. These variable rate obligations expose
the Company to the risk of increased interest expense in the event of increases
in short-term interest rates. At July 31, 2009, borrowings of $26,305,000 were
subject to variable interest rates. Refer to Item 7(A) of the 2009 Form 10-K for
additional information regarding quantitative and qualitative disclosures about
market risk.
Item 4. Controls and Procedures
------- -----------------------
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's chief
financial officer and the other executive officers 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 executive officers 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 principal executive and principal financial
officers, or persons performing similar functions, 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.
17
PART II. OTHER INFORMATION
Item 6. Exhibits
------- --------
Exhibit No. Description
----------- -----------
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.
18
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: September 9, 2008 AMREP CORPORATION
(Registrant)
By: /s/ Peter M.Pizza
----------------------------------------------
Peter M. Pizza
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
19
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
31.1 Certification required by Rule 13a-14(a) under the Securities Exchange
Act of 1934 - Filed herewith.
31.2 Certification required by Rule 13a-14(a) under the Securities Exchange
Act of 1934 - Filed herewith.
31.3 Certification required by Rule 13a-14(a) under the Securities Exchange
Act of 1934 - Filed herewith.
32 Certification required pursuant to 18 U.S.C. Section 1350 - Filed
herewith.
20