Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 1996 Commission File Number 1-4702
-------------- ------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
AMREP CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its Charter)
Oklahoma 59-0936128
- ------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
641 Lexington Ave., 6th Floor
New York, New York 10022
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 705-4700
------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- ---------------------
Common Stock $.10 par value New York Stock Exchange
Pacific Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of Registrant,
computed by reference to the last sales price of such Common Stock on July
22, 1996, on the New York Stock Exchange Composite Tape: $19,787,845.
Number of shares of Common Stock, par value $.10 per share, outstanding at
July 22, 1996 - 7,398,650.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents of Registrant are
incorporated by reference into the indicated parts of this report:
Definitive Proxy Statement for 1996 Annual Meeting Part III
PART I
------
Item 1. Business
- ------- --------
GENERAL
The Company* is a real estate developer and builder of housing,
national distributor of magazines and a provider of subscription
fulfillment services for publishers. It is the developer and major
builder of single-family homes at Rio Rancho, New Mexico and more
recently has entered the Denver, Colorado home-building market.
Data concerning Industry Segments is set forth in Note 14 of Notes
to Consolidated Financial Statements. The Company's foreign sales
and activities are not significant.
REAL ESTATE OPERATIONS
Real Estate Operations consist of (i) the construction and sale of
housing, (ii) the development and sale of housing sites, and (iii)
the sale of tracts for residential, industrial and commercial uses.
HOUSING OPERATIONS
The Company builds and markets a broad spectrum of housing,
principally low to medium priced single-family homes ranging in
size from approximately 850 to 3,150 square feet. It presently is
building at Rio Rancho, New Mexico; in the Denver, Colorado area
and at Freehold, New Jersey.
A substantial majority of the Company's building is at Rio Rancho,
where the base prices of the homes and condominiums presently being
sold by the Company range from approximately $70,000 to $269,000,
although most are in the $100,000 to $130,000 range. In fiscal
l996, the Company delivered 580 housing units at Rio Rancho at an
average price of $112,000 whereas in fiscal l995 it delivered 658
housing units there at an average price of $95,000. The Company
does the development work at Rio Rancho. See "DEVELOPMENT
OPERATIONS - Rio Rancho" for information concerning Rio Rancho.
The Company entered the suburban Denver market in 1993 and has
since that time acquired five new projects, two of which have been
completed and three of which are ongoing. Its major project in
this market is Bradbury Ranch in Parker, in the Southeast part of
the Denver Metro area, where in 1994 it acquired 484 acres of
undeveloped residential property zoned for approximately 1,800
homes. Development work began in fiscal 1995, and sales activity
and home construction have commenced. The Company plans initially
to build houses designed to sell in the $125,000 to $150,000
range. The Company also intends to sell lots from the property and
closed 26 lots for an average price of $29,000 in fiscal 1996.
* As used herein "Company" includes the Registrant and its
subsidiaries unless the context indicates otherwise.
In fiscal years 1993 and 1994, the Company acquired 196 residential
lots in Broomfield, which is located in the Northwestern Denver
Metro area. It commenced building there in fiscal 1994, and in
fiscal 1995 delivered 82 homes at an average price of $128,000. In
fiscal 1996 it delivered 80 homes at an average price of $132,000.
The Company anticipates that the project will have its final
closings by the third quarter of fiscal 1997. In addition, in
fiscal 1994, the Company also acquired and commenced building at a
smaller project at Parker with 101 residential lots. It delivered
48 homes there in fiscal 1995 at an average price of $133,000 and
46 homes in fiscal 1996 at an average price of $137,000. Also
during fiscal 1996, it sold the remaining 7 lots at an average
price of $26,300.
The Company recently acquired a total of 257 lots in two other
projects in the Denver area, at which it intends to build homes in
the $125,000 to $150,000 price range. Development and sales have
commenced, and construction is expected to begin during the second
half of fiscal 1997.
The Company is the general partner in a limited partnership, with a
50% interest, which in 1990 commenced construction of a townhouse
project in Freehold, New Jersey. When completed, the reconfigured
project will have 380 units. Pursuant to New Jersey law, 20% of
the units must be priced substantially below market, but the
remaining units may be sold at market (the "Market Price Units")
and are designed to sell in the $115,000 to $155,000 range. From
inception through April 1996, 305 units were delivered, including
64 of the below market units.
Until January 1994, the Company was the general partner and
majority owner of a limited partnership which owns a congregate
living rental facility in West Palm Beach, Florida. In January
l994, an unrelated third party became the general partner of the
partnership and the Company became a limited partner, but as a
limited partner it continues to have an equity interest in the
partnership. Completed in fiscal 1991, the facility was designed
to provide alternative housing for active seniors and originally
had 300 units. However, in fiscal 1995 and fiscal 1996 a total of
60 of the original units were converted for operation as an
Assisted Care Living Facility ("ACLF"). Currently, 229 of the 240
alternative housing units are rented for terms of up to twelve
months, and 62 of the 70 available spaces in the ACLF operation are
occupied under leases having terms of up to twelve months.
Until fiscal 1994, AMREP and a subsidiary held all of the
partnership interests in a limited partnership which owns 247 units
of moderately-priced rental housing in Orlando, Florida. There
then was a restructuring of that partnership in which an unrelated
third party became the general partner and the Company became a 50%
limited partner. The Company's management subsidiary continues to
manage the project under a year-to-year contract. Substantially
all of the units currently are leased for terms of from 6 to 12
months.
The Company participates in a joint venture which builds
single-family homes in the Eldorado at Santa Fe, New Mexico
subdivision ("Eldorado"), although the Company is not the builder.
In fiscal l996 the venture sold 5 homes. In addition, during
fiscal 1995, a subsidiary of the Company entered into a joint
venture arrangement (Saratoga Square Homes Joint Venture) for the
development and construction of a 42 unit townhome project in
Brooklyn, New York.
The Company builds a number of different models of houses at its
developments, which it changes periodically based on experience and market
research. At Rio Rancho the houses are designed by the Company's own staff.
The Company acts as general contractor, supervising all development and
building activities, but employs subcontractors for most construction work.
However, the Company performs some site preparation work with its own
equipment and personnel and its employees do final preparation and cleaning
work on housing units.
At the Colorado developments the houses are designed by an outside
architect. The Company acts as general contractor but employs subcontractors
for all construction and site preparation work.
The houses at the Freehold project are designed by an outside architect. A
75% owned subsidiary of the Company is the general contractor, but it employs
subcontractors for all construction and site preparation work.
The Company's housing is of frame construction and the Company has no reason
to anticipate difficulty in obtaining all necessary materials as needed. At
Rio Rancho and the Colorado projects, the Company enters into contracts with
subcontractors and suppliers of materials pursuant to which prices are
established for a specific period, generally six months. Such contracts are
generally used for all subcontractors or all suppliers. The Company
generally uses more than one subcontractor for each trade and more than one
supplier of each type of material.
The Company's construction and development departments are headquartered at
Rio Rancho, New Mexico, but it has local project managers for its building
activities elsewhere.
DEVELOPMENT OPERATIONS
The Company develops housing sites which include those for sale at Rio
Rancho, Eldorado and, in the Denver area, at Bradbury Ranch. The development
activity includes the obtaining of necessary governmental approvals,
installation of utilities and necessary storm drains, and building or
improving the roads. The engineering work is performed by both outside firms
and Company employees, but development work generally is performed by outside
contractors.
The Company sells developed residential lots to outside builders at Rio
Rancho, Eldorado and Bradbury Ranch. In fiscal 1996, outside builders
purchased 207 lots at Rio Rancho for an aggregate of $2,582,000, 59 lots at
Eldorado for an aggregate of $1,657,000 and 26 lots at Bradbury Ranch for an
aggregate of $758,000.
Rio Rancho
This project consists of 91,049 contiguous acres in Sandoval County, New
Mexico, near Albuquerque, of which some 72,100 acres have been platted into
approximately 108,800 homesite and commercial lots and 16,200 acres are
dedicated to community facilities, roads and drainage with the remainder
consisting of bulk unplatted land. At April 30, 1996, a total of
approximately 78,000 of the lots had been sold. The Company currently owns
approximately 25,000 acres at Rio Rancho of which some 8,500 acres are in
contiguous blocks suitable for development. The balance is in scattered lots
which require the purchase of a sufficient number of adjoining lots to create
tracts suitable for development. Rio Rancho (most of the populated portion
of which is in an incorporated city) has a population of over 47,000.
Piped water is supplied to all homes by a city-owned water utility company
while electricity and telephone service are supplied by independent public
utility companies. Most homes are also serviced by piped gas and sewage
utilities. Sewage disposal for lots not serviced by the utility system is by
individual septic tank. The Company is required to make deposits with the
electric, gas, water and sewage companies when their utility lines are
extended to new sections. A substantial part of such deposits are returned
as houses are built and the utility service commences.
Since early 1977, no lots have been sold except with houses on them or to
outside builders. Over 50,000 lots were sold prior to 1977 and most of these
are in areas where utilities have not yet been installed. However, under the
contracts pursuant to which the lots were sold if, when the purchaser is
ready to build a home and utilities have not reached the site of the
respective lot, the Company is obligated to exchange a lot in an area then
serviced by water, telephone and electric utilities for a lot of the
purchaser, without cost to the purchaser. The Company has not incurred
significant costs related to such exchanges.
The commercial areas at Rio Rancho presently house in excess of 400 business
and professional offices, nine shopping centers with over 1,000,000 square
feet of store and office space, and a 55,000 square foot office building
largely occupied by the Company. In addition, a number of individual office
buildings and stores are located throughout the community. Nine financial
institutions have offices at Rio Rancho. The industrial areas presently have
approximately 72 buildings with over 3,025,000 square feet, including a
manufacturing facility containing approximately 2,100,000 square feet built
and used by Intel Corporation.
Eldorado at Santa Fe
This subdivision, consisting of approximately 6,000 acres platted into lots,
is located 10 miles southeast of Santa Fe, New Mexico. Approximately 1,650
single-family homes have been built and sold at this subdivision. If the
current rate of sales continues, the remaining inventory of approximately 127
lots at Eldorado will be sold during fiscal l998.
Bradbury Ranch
The Company is currently developing approximately 160 acres of the 484 acre
acquisition into 582 lots. It intends to sell approximately half of the lots
to outside builders and build and sell its own houses on the remaining lots.
The Company closed 26 lots in fiscal 1996.
SALE OF NON-RESIDENTIAL TRACTS
The Company sells developed and undeveloped tracts at Rio Rancho to
commercial users and may sell tracts from its Bradbury Ranch property in
Parker, Colorado. In fiscal 1996, 16 tracts were sold at Rio Rancho at
prices ranging from approximately $14,000 to over $533,000.
MARKETING
The Company's homes are generally purchased as principal residences. The
designs of the various models built by the Company are based on market
research, which is done principally by Company personnel. At Rio Rancho, the
Company sells its housing almost entirely from on-site models, both directly
and through brokers. At the Colorado developments, the Company sells its
housing through brokers operating out of on-site sales offices. At Freehold,
the Company sells directly from on-site models without brokers.
Industrial and commercial tracts at Rio Rancho are marketed by a separate
department, both directly and through brokers.
There is no significant seasonality to either housing or tract sales.
However, unusually severe winter weather can disrupt construction activities,
and when this occurs there can be a slow down in housing sales in the
immediately ensuing months followed by a "bunching" as deliveries catch up.
BACKLOG
Almost all contracts for the sale of housing sold by the Company
are subject to the buyer's ability to obtain financing. The
Company thus does not consider any such contracts to be firm,
although historically approximately 80% of persons who signed
contracts to purchase housing actually closed their purchase.
At July 1, l996, the Company had signed contracts for the purchase
of 235 units of housing for an aggregate purchase price of
approximately $27,004,000 whereas at July l, l995 it had signed
contracts for 389 units with an aggregate purchase price of
approximately $44,545,000.
At July l, l996, the Company had contracts for the sale of 180 lots
to builders for an aggregate purchase price of $4,709,071 and 5
contracts for the sale of unimproved real estate for an aggregate
purchase price of $5,642,844. At July 1, l995 it had contracts for
the sale of 240 lots to builders for an aggregate purchase price of
$8,038,000 and three contracts for the sale of unimproved real
estate for an aggregate purchase price of $3,700,000.
COMPETITION
The construction and sale of homes is a highly competitive
business. Each of the Company's housing projects competes with
other builders who offer similarly priced housing. To a limited
extent, the Rio Rancho development competes with developments in
other places having climates attractive to those who wish to escape
the rigorous climates of the north, although a large majority of
the housing there is purchased by New Mexico residents.
Historically, the Company has generally concentrated on the
construction of affordable housing with relatively few options,
leaving custom house building and relatively expensive houses
generally to other builders. During the past several years, the
Company has been increasing the upper price level of its houses to
accommodate a full spectrum of middle income buyers. The Company
has recently entered the semi-custom market at its Rio Rancho
development.
MORTGAGE FINANCING
The ability of the Company to sell houses is dependent
upon the availability of adequate mortgage financing on terms
prospective customers can afford. At Rio Rancho, the Company
arranges mortgages principally with funds made available or
guaranteed by State Housing Authorities and the Federal Housing
Administration, and at all locations with various conventional
mortgage lenders.
MAGAZINE AND CIRCULATION OPERATIONS
Through its wholly-owned subsidiary, Kable News Company, Inc., the
Company (i) performs subscription fulfillment and related services and
(ii) distributes periodicals nationally and in Canada and, to a small
degree, overseas. As of July 1, 1996, Kable employed approximately
1,310 persons, approximately 1,070 of whom are involved in its
fulfillment activities and 240 in distribution activities. Kable
maintains state of the art computer hardware and software in support of
its fulfillment and distribution operations.
FULFILLMENT SERVICES
Kable's Fulfillment Services Division performs a number of fulfillment
and fulfillment related activities, principally magazine subscription
fulfillment services, list services and product fulfillment services.
This Division has been growing rapidly in recent years, and the
business was substantially increased with the acquisition by a
subsidiary of Kable in January 1995 of the business of Fulfillment
Corporation of America, Inc. ("FCA"), an Ohio-based fulfillment
company. The Division accounted for 59% of Kable's total revenues in
fiscal l995 (with revenues from FCA business beginning in January 1995)
and 68% of total revenues in fiscal 1996. Kable encountered unforeseen
problems in converting accounts from the FCA systems to its systems,
which resulted in unexpected expenses and some loss of customers and
revenues in fiscal 1996. However, management believes that these
problems have now been corrected.
For its magazine subscription fulfillment service clients, this
Division processes new orders, receives and accounts for payments,
prepares labels for mailing each issue, handles subscriber telephone
inquiries and correspondence, prepares renewal and statement
notifications, maintains subscriber lists and database, generates
marketing and statistical reports, and prints forms and promotional
materials. Although by far the largest number of magazine titles for
which Kable performs fulfillment services are consumer publications,
Kable also performs services for a number of trade (business)
publications utilizing the broad capabilities of its extensive database
system.
List services clients are primarily publishers. In this activity, the
Division maintains clients' customer lists, selects names for clients
who rent their lists, merges rented lists with the clients' lists to
eliminate duplication for clients' promotional mailings, and sorts and
sequences mailing labels to provide optimum postal discounts for
clients.
Product fulfillment services are provided primarily for Kable's
publisher clients. In this activity, it receives, warehouses,
processes and ships merchandise.
Kable now performs fulfillment services for approximately 370 different
magazine titles for some 260 clients and maintains approximately
20,000,000 active subscriber names for its client publishers. In a
typical month Kable produces almost 21,000,000 mailing labels for its
client publishers and also produces and mails approximately 7,000,000
billing and renewal statements.
There are a large number of companies which perform fulfillment
services and with which Kable competes, two of which are much larger
than Kable. Since publishers utilize only a single fulfillment service
for a particular publication, there is intensive competition to obtain
fulfillment contracts with publishers. Kable has a staff whose primary
duty is to solicit fulfillment business.
DISTRIBUTION
In its distribution operation, Kable annually distributes magazines for
over 255 publishers. Among the titles are many special interest
magazines, including automotive, crossword puzzles, men's
sophisticates, comics, romance and sports. In a typical month, Kable
distributes to wholesalers over 35,000,000 copies of the various
titles. Typical of the industry, Kable purchases the publications from
its publishers and sells them to approximately 300 independent
wholesale distributors in the United States and Canada. The wholesale
distributors in turn sell the publications to individual retail
outlets. All parties generally have full return rights for unsold
copies. In fiscal 1996, distribution activities accounted for 32% of
Kable's revenues.
While Kable does not handle all publications of all of its publisher
clients, it usually is the exclusive distributor for the publications
it distributes. Kable generally does not physically handle any
product. It determines in consultation with the wholesalers and
publishers the number of copies of each issue to be distributed, and
generates and delivers to each publisher's printer shipping
instructions with the addresses of the wholesalers and the number of
copies of product to be shipped to each. All magazines have an "off
sale" date (generally the on-sale date of the next issue) following
which the retailers return unsold copies to the wholesalers, who
destroy them after accounting for returned merchandise in a manner
satisfactory to Kable.
A realignment of industry relationships in the distribution of
magazines started during fiscal 1996 and rapidly grew to major
proportions. It was triggered by the decision of certain major
retailers with multiple outlets to sharply reduce the number of
wholesalers with whom the retailers would deal. This has led to a
substantial reduction in the number of wholesalers through the merger
of certain wholesalers, the formation by certain other wholesalers of
cooperatives to bid for the business of such retailers, and the
complete retirement from the business by a number of wholesalers. The
changes have resulted in inefficiencies which have reduced Kable's
sales and profits. Management is not able to predict whether these
changes will have a material impact on Kable's revenues and profits in
fiscal 1997.
Kable has a distribution sales and marketing force of over 100 persons,
the responsibility of which is to work with wholesalers and retailers
to promote product sales and to assist in determining the number of
copies of product to be delivered to each retailer.
Kable generally makes substantial advances to publishers against future
sales,which publishers may use for some printing, paper and production
costs prior to the product going on sale, but it is usually not paid by
wholesalers for product until some time after the product has gone on
sale. Kable is therefore exposed to potential credit risks with both
the publishers and the wholesalers. Its ability to make a profit is
dependent in part on its skill in estimating the number of copies of an
issue which should be printed and distributed and limiting its advances
to the publisher accordingly.
There are six national distributors with whom Kable competes. Since
publishers utilize only a single distributor to distribute a particular
line, there is intensive competition between distributors to obtain
distribution rights from publishers. Each of these large competitors
is owned by or affiliated with a magazine publishing company. Such
companies publish a substantial portion of all magazines published in
the United States, and the competition for the distribution rights to
the remaining publications thus has intensified.
COMPANY OFFICES
The Company's principal executive offices are in New York City in
leased offices. Real estate operations are centralized in Rio Rancho
in a modern office building owned by the Company, while the Denver,
Colorado division is operated from a leased office. Kable News has an
executive and sales office in New York City, and its operations are
centered in Mt. Morris, Illinois, and Marion, Ohio.
EMPLOYEES
The Company has approximately 1,570 employees (including Kable), none
of whom is represented by a union. The Company provides retirement,
health and other benefits for its employees and considers its employee
relations to be good.
Item 2. Properties.
- ------- -----------
The information contained in Item 1 of this report with respect to
properties owned by the Company is hereby incorporated herein by
reference.
Item 3. Legal Proceedings.
- ------- ------------------
The Registrant and/or its subsidiaries are involved in various claims
and legal actions incident to their operations, which in the opinion of
management based upon advice of counsel, will not materially affect the
consolidated financial position or results of operations of the
Registrant and its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
Not Applicable.
Executive Officers of Registrant
- --------------------------------
Set forth below is certain information concerning persons who are
executive officers of Registrant.
Name Office Held Age
- ------- ----------- -----
Daniel Friedman Senior Vice President of 61
Registrant since prior
to 1991; Chairman of the
Board of Kable News
Company, Inc., a wholly-owned
subsidiary of Registrant,
since prior to 1991.
James Wall Senior Vice President of 59
Registrant since September
1991; Chairman of the Board
of AMREP Southwest,
Inc., a wholly-owned subsidiary
of Registrant, since February
1996; President of AMREP
Southwest, Inc. since January
1991; General Manager of
Southwest Operations since
prior to 1991.
Harvey W. Schultz Senior Vice President of 55
Registrant since March
1992; President of AMREP
Solutions, Inc., a wholly-
owned subsidiary of the
Registrant, since March
1992; President of HWS
Solutions, Inc.,
environmental consultants
from 1991 to March 1992.
Name Office Held Age
- ------- ----------- -----
Mohan Vachani Senior Vice President - 54
Chief Financial Officer
of the Registrant since June
1993; Consultant to the
Registrant from September
1992 to June 1993;
Vice President-
Chief Financial Officer
of Bedford Properties,
Inc., real estate manage-
ment and development,
from prior to 1991 until
June 1993.
Valerie Asciutto Vice President-General 43
Counsel of Registrant since
July 1992; Vice President -
Real Estate Lending of
Community Capital Bank
(commercial bank) from
September 1991 to May
1992; attorney in private
practice from prior to
1991 to September 1991.
Each executive officer holds office until the first meeting of
directors following the annual meeting of stockholders and until
his/her successor is duly chosen and qualified.
PART II
-------
Item 5. Market for Registrant's Common Equity and
- ------- Related Stockholder Matters
-----------------------------
The Registrant's common stock is traded on the New York Stock Exchange, the
Chicago Stock Exchange and the Pacific Stock Exchange under the symbol AXR.
On July 22, 1996, there were approximately 2,700 holders of record of the
common stock. The Registrant has not paid any cash dividends, and it has
agreed in connection with certain long term borrowings not to pay cash
dividends in amounts exceeding one-half of the Registrants's net worth. The
range of high and low closing prices for the last two years by fiscal
quarter, is presented below:
FIRST SECOND THIRD FOURTH
------------ ------------ ------------ ------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
---- ---- ---- ---- ---- ---- ---- ----
1996 7 6 1/8 7 3/4 6 1/8 6 1/2 5 3/8 5 1/2 4 3/4
1995 8 6 7/8 8 1/8 7 1/8 8 1/4 5 1/2 8 1/4 6 1/8
Item 6. Selected Financial Data
- ------- -----------------------
(In thousands of dollars except per share amounts)
Year Ended April 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
Revenues $ 161,802 $ 152,525 $ 126,088 $ 93,660 $ 73,365
Net Income (Loss) $ 2,785 $ 4,015 $ 2,372 $ 41 $ (6,826)
Net Income (Loss) Per $ 0.38 $ 0.55 $ 0.33 $ 0.01 $ (1.03)
Share
Total Assets $ 181,796 $ 186,142 $ 178,857 $ 179,944 $ 168,390
Notes Payable 51,959 56,229 50,738 31,899 34,462
Project Financing 223 2,891 6,205 41,228 32,164
Collateralized Mortgage
Obligations 2,209 2,533 4,406 6,473 7,390
Shareholders' Equity 68,552 65,921 61,429 54,102 54,055
Cash Dividends - - - - -
Item 7. Management's Discussion and Analysis of Financial
- ------- Condition and Results of Operations.
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
1996 versus 1995
- ----------------
Total revenues for the year ended April 30, 1996 increased 6% over
fiscal 1995, reflecting higher revenues from both housing sales and magazine
circulation operations, partially offset by lower revenues from land sales.
Revenues from housing sales increased approximately 2% in fiscal 1996 over
1995, resulting from an increase in the average selling price of homes closed
from $102,200 to $115,700, which offset a decrease in housing unit deliveries
from 862 to 775. The increases in the average selling prices on homes closed
from 1995 to 1996 results both from price increases and a shift to the
building of larger, more expensive houses in Rio Rancho. The gross margin on
housing sales increased by approximately $3.7 million over fiscal 1995,
resulting from price increases, as well as the favorable effect of production
strategies and efficiencies introduced in the last two fiscal years.
Revenues and related gross profit from land sales decreased from fiscal 1995,
primarily due to a decrease in the level of commercial and industrial lot
sales. Land sale revenues and related gross profits can vary from year to
year as a result of the nature and timing of specific transactions, and is
not an indication of amounts that may be expected to occur in future
periods. As a result of these factors, gross profit from combined housing
and land sales increased by approximately $1.8 million in fiscal 1996
compared to the prior year.
Revenues from magazine circulation operations increased approximately 23% in
fiscal 1996 from 1995, primarily due to the acquisition in January 1995 of
the business of Fulfillment Corporation of America (FCA) and the inclusion of
FCA's operations as part of Kable for a full year in 1996, as opposed to only
four months in 1995. As a result, Fulfillment Services revenues increased
40% in 1996 compared to 1995. Revenues from the Newsstand Distribution
services, however, decreased approximately 3% in fiscal 1996 due to decreased
magazine sales. This decrease resulted in part from paper cost increases in
the publishing industry which in turn caused increased magazine cover prices
or, in some cases, reduced print quantities and product qualities of
magazines thereby leading to some consumer resistance. In addition, a major
realignment of industry relationships in the distribution of magazines
developed rapidly during 1996, which led to a substantial reduction in the
number of wholesalers. These changes have resulted in inefficiencies which
have reduced Kable's sales and profits. Management is not able to predict
whether these changes will have a material impact on Kable's revenues and
profits in fiscal 1997. At the same time, operating expenses increased to
81% of magazine circulation revenues in 1996 from 74% in 1995. These
expenses increased in part due to unforeseen problems in converting accounts
from the FCA systems to its own, which resulted in unexpected expenses and
some loss of customers and revenues in fiscal 1996. However, management
believes that these problems have been corrected. Primarily as a result of
these factors, operating income from magazine circulation operations
decreased by approximately $2.3 million over the prior year.
Real estate commissions and selling expenses remained comparable in
fiscal 1996 and fiscal 1995, and were the same percentage of related revenues
in both years. Real estate and corporate general and administrative expenses
increased by approximately 19% in fiscal 1996 compared to 1995, primarily as
a result of the accrual of amounts due under the terms of an employment
contract to the Company's former Chief Executive Officer, who left office
during 1996 due to a disability, increased pension plan expense resulting
from lower than assumed investment performance in 1994 and additional
employees in the plan, and professional fees related to the Company's ongoing
dispute with the Internal Revenue Service.
Interest expense increased in fiscal 1996 due primarily to higher
average borrowings for the magazine circulation operations and higher average
interest rates, since a large portion of the Company's borrowings are related
to the prime rate. Revenues less costs and expenses from interest and other
operations decreased by approximately $350,000, due to various non-recurring
matters last year.
1995 versus 1994
- ----------------
Total revenues for the year ended April 30, 1995 increased 21% over
fiscal 1994, reflecting substantially higher revenues from both home and
condominium sales and magazine operations. Revenues from home and
condominium sales increased approximately 30% in fiscal 1995 over 1994,
resulting from an increase in both housing unit deliveries and the average
revenues per housing unit closed. 862 housing units were delivered in 1995
compared to 758 in 1994, which results in part from the continued growth of
the Company's Colorado operations, which were in the start-up phase during
fiscal 1994. In addition, the average revenue per unit closed increased to
$102,200 in 1995 from $89,100 in 1994, resulting from price increases and a
shift to the building of larger, more expensive houses in Rio Rancho, as well
as to the increased number of housing deliveries from the Company's Colorado
home-building division, where average home prices are generally higher than
those of Rio Rancho. The gross margin on housing sales increased by
approximately $2.9 million over fiscal 1994. Land sale revenues and related
gross profits can vary from year to year as a result of the nature and timing
of specific transactions, and is not an indication of amounts that may be
expected to occur in future periods. As a result of these factors, gross
profit from combined housing and land sales increased by approximately $1.7
million in fiscal 1995, compared to the prior year.
Revenues from magazine circulation operations increased 32% in fiscal 1995
from 1994. The increase is due, in part, to the acquisition in January 1995
of the business of FCA and from the inclusion of a full year's results for
certain Newsstand Distribution contracts acquired from Capital Distribution
Company in August 1993, as well as from general growth in both Fulfillment
Subscription and Newsstand Distribution services. Profit margins of the
Newsstand and Fulfillment Divisions have historically been comparable,
however, primarily as a result of the FCA acquisition, margins of the
Fulfillment Division, have been adversely impacted during the transition
period. Total operating expense as a percent of circulation revenues were
74% in 1995 and 73% in 1994, and general and administrative expense was 12%
and 13% of related revenues in fiscal 1995 and 1994, respectively. Primarily
as a result of these factors, operating income from the magazine operations
increased by approximately $1.8 million in fiscal 1995 over the prior year.
The increase in real estate commissions and selling expenses in fiscal
1995 over fiscal 1994 was commensurate with the increase in related real
estate revenues. Real estate and corporate general and administrative
expenses decreased by approximately 6% in fiscal 1995 compared to 1994, due
to lower consulting and legal expenses.
Revenues less costs and expenses from interest and other operations
increased by approximately $360,000, due to various non-recurring matters in
fiscal 1995. In addition, as the result of the restructuring of the
Company's equity interest in two rental projects in Florida in fiscal 1994,
which resulted in the deconsolidation of these operations (see Note 5), there
were no rental project revenues or gain on partnership restructuring in
fiscal 1995, compared to $3.7 million and $1.2 million, respectively, in the
prior year.
Interest expense increased in fiscal 1995 due to higher interest rates,
since a large portion of the Company's borrowings are related to the prime
rate, as well as higher average borrowings. In addition, costs associated
with rental projects decreased, as a result of the deconsolidation of these
operations, as discussed above, partially offset by costs incurred in fiscal
1995 related to the funding of, and the establishment of a reserve for,
certain continuing cash requirements of The Classic (see Note 5). Also, 1994
reflects a valuation provision of $1.1 million on Florida real estate not
under current development which did not occur in 1995.
Inflation
- ---------
During the past three years, revenues and costs have been affected to a
modest extent by inflation.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the past several years, the Company has financed its operations
from internally generated funds from home and land sales, magazine
circulation operations and borrowings under its various lines-of-credit and
construction loan agreements.
Cash Flows From Financing Activities
- ------------------------------------
At April 30, 1996, the Company had line-of-credit arrangements with
several financial institutions collateralized by various assets which
amounted to an aggregate borrowing availability of $56.9 million. One of
these lines (under which $32.5 million was available against which
approximately $23.6 million was outstanding as of April 30, 1996) is
available for Kable News Company (Kable) operations. Borrowings under this
line-of-credit, which expires August 31, 1998, must be collateralized 125% or
more by certain Kable accounts receivable. The line-of-credit agreement
limits the payment of dividends by, and loans from, Kable to the Company.
The other lines-of-credit are used principally to support real estate
construction in New Mexico and Colorado. At April 30, 1996, they totaled
$24.4 million against which approximately $13.8 million was drawn. These
lines-of-credit are collateralized by certain real estate assets and are
subject to available collateral and various financial performance and other
covenants. The Company also has borrowed in excess of $5.0 million in land
acquisition for its Colorado projects. The Company is also having
discussions with other lenders seeking additional working capital, although
there are no assurances these discussions will be fruitful.
Notes payable outstanding, including lines-of-credit discussed above,
were $51.9 million at April 30, 1996, compared to $56.2 million at April 30,
1995, and $50.7 million at April 30, 1994. The increase at April 30, 1995,
compared to the prior year, was due in part to the borrowing associated with
the Company's acquisition of FCA, as well as to increased construction
activity in Colorado. The decrease at April 30, 1996 is due primarily to a
lower balance under the Kable line-of-credit at April 30, 1996, and a payment
on the land acquisition note for a Colorado project.
The Company anticipates renewing, extending or replacing certain of these
loan agreements as they come due in fiscal 1997. The Company is also having
discussions with other lenders seeking additional working capital, although
there are no assurances these discussions will be fruitful.
Cash Flows From Operating Activities
- ------------------------------------
Inventories amounted to $71.9 million at April 30, 1996 compared to $72.5
million, $71.1 million and $48.0 million at April 30, 1995, 1994 and 1993,
respectively. The increase at April 30, 1996, 1995 and 1994, over April 30,
1993 is due to the acquisition and initial development of several real estate
projects in connection with the Company's expansion into the Colorado
market. This activity primarily resulted in the increase in accounts
payable, deposits and accrued expenses at April 30, 1996, 1995 and 1994
compared to fiscal 1993. Receivables increased by approximately $11.7
million at April 30, 1994 compared to April 30, 1993, by $2.6 million at
April 30, 1995 and decreased slightly at April 30, 1996, compared to the
prior year resulting, in part, from changes in related revenues.
Cash Flows From Investing Activities
- ------------------------------------
Capital expenditures increased in fiscal 1996 compared to prior years
as a result of the construction of a new reservoir and water line extensions
at the Company's water utility plant, as well as a major renovation of the
Kable headquarters building. The Company believes that its available funds
will be adequate to provide for anticipated capital expenditures.
The Company believes that cash provided from operations together with
existing cash balances, its lines-of-credit and development and construction
loans will be sufficient to maintain liquidity at a satisfactory level
subject to developments related to the dispute with the Internal Revenue
Service described below.
The Internal Revenue Service ("IRS") has completed a review of the Company's
tax returns for fiscal years 1984 through 1989, is in the process of
reviewing the tax returns for fiscal years 1990 through 1992, and is expected
in due course to review the returns for fiscal years 1993 through 1995. One
of the issues involved for all those years concerns the method by which the
Company has utilized Section 458 of the Internal Revenue Code (the "Code") to
adjust taxable income of Kable for an amount related to the return of
magazines within a specified period following the close of each tax year.
The IRS challenged the adjustments to taxable income made by two other
taxpayers in reliance on the same Code provision using the same method as
that used by the Company. The IRS regulations embodying its position were
upheld by the United States Tax Court in lawsuits brought by each of those
taxpayers. Both taxpayers appealed their Tax Court decisions. The United
States Court of Appeals for the Second Circuit now has affirmed the Tax Court
ruling in one of those two appeals; the other, in a different Circuit, is as
yet undecided.
The computation of the adjustments to the Company's taxable income which must
be made on the basis prescribed by the Section 458 regulations is exceedingly
complex, and, ultimately can only be finalized with the input of the IRS.
The IRS has provided the Company with preliminary computations reflecting its
adjustments for 1984 - 1989 which the Company believes are complete with
regard to Section 458. While the Company cannot be certain until it receives
the final report from the IRS for the 1984 - 1989 review period, the Company
now estimates that the portion of previously deferred taxes (plus related
interest which accrues from the date of deferral) that it will owe when the
IRS's reviews of all the audit periods are final will total substantially
less than previous estimates made by the Company. However, given the
complexity of the situation and the preliminary nature of the IRS
calculations, the Company recognizes the possibility that approximately $20
million of the deferred taxes (plus a significant increment for interest as
set forth in Note 11 to the Consolidated Financial Statements) could become
payable as a result of the IRS's reviews.
It is expected that the review for the years 1984 through 1989 will be final
shortly. The Company presently does not intend to contest the position of
the IRS and estimates federal and state taxes of $650,000 and interest of
$200,000 for those years will then be due. The reviews for the years 1990
through 1992 are expected to be completed in fiscal 1998. The Company does
not know when the review for the years 1993 through 1995 will be completed,
but does not believe it will be prior to fiscal year 1999. The exact amount
of taxes and interest attributable to any given tax year will only be known
and will be payable after the IRS completes its review for such year and
computes the amount of the adjustment. The Company's taxes for fiscal 1996
were calculated in accordance with the regulations and as if the audit for
1984 through 1989 were final.
If the taxes payable as a result of the IRS reviews of the twelve years in
question are in the amount it now estimates, the Company believes that with
cash on hand, anticipated earnings and bank lines, it will be able to pay
those taxes plus interest (which will continue to accrue to the date of
payment) when they become due. Since there remains a possibility that the
higher total amount of taxes and interest will have to be paid, with the
increment due in fiscal year 1998, the Company continues to pursue sources of
funds for its payment which would probably include the request for an
installment payment arrangement with the IRS, the sale of certain assets, and
perhaps alternatives in the public markets. However, no specific sources
have been identified.
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
[See next page]
Report of Independent Public Accountants
----------------------------------------
To the
Shareholders and
Board of
Directors of
AMREP Corporation
We have audited the accompanying consolidated balance sheets of AMREP
Corporation and subsidiaries as of April 30, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended April 30, 1996. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMREP Corporation and
subsidiaries as of April 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended April 30, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in
the index of financial statements is presented for the purpose of complying
with the Securities and Exchange Commission's rules and is not part of the
basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 28, 1996
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 1 of 2)
-----------------------------------------
APRIL 30, 1996 AND 1995
-----------------------
(Dollar amounts in thousands)
ASSETS 1996 1995
------ ----------- ------------
CASH AND CASH EQUIVALENTS $ 7,607 $ 9,266
RECEIVABLES, net:
Real estate operations 11,371 10,644
Magazine circulation operations 38,234 39,391
REAL ESTATE INVENTORY 71,916 72,464
RENTAL AND OTHER REAL ESTATE INVESTMENTS 8,211 11,622
INVESTMENT PROPERTY 8,042 8,751
PROPERTY, PLANT AND EQUIPMENT,
at cost, net of accumulated
depreciation and amortization 16,995 14,128
OTHER ASSETS 14,215 14,671
EXCESS OF COST OF SUBSIDIARY
OVER NET ASSETS ACQUIRED 5,205 5,205
---------- ----------
TOTAL ASSETS $ 181,796 $ 186,142
========== ==========
The accompanying notes to consolidated financial
statements are an integral part of these consolidated balance sheets.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 2 of 2)
-----------------------------------------
APRIL 30, 1996 AND 1995
-----------------------
(Dollar amounts in thousands except par value)
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
------------------------------------ ------------ -----------
ACCOUNTS PAYABLE, DEPOSITS AND
ACCRUED EXPENSES $ 33,013 $ 32,048
NOTES PAYABLE:
Amounts due within one year 16,923 6,214
Amounts subsequently due 35,036 50,015
RENTAL AND OTHER REAL ESTATE INVESTMENT FINANCING 223 2,891
COLLATERALIZED MORTGAGE OBLIGATIONS 2,209 2,533
DEFERRED INCOME TAXES 25,840 26,520
---------- -----------
TOTAL LIABILITIES 113,244 120,221
---------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
shares authorized--20,000,000;
shares issued and outstanding--
7,398,650 in 1996, and 7,393,650 in 1995 740 739
Capital contributed in excess of par value 44,928 44,903
Retained earnings 23,064 20,279
Treasury stock, at cost; 30,000 shares in 1996 (180) -
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 68,552 65,921
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 181,796 $ 186,142
========== ==========
The accompanying notes to consolidated financial
statements are an integral part of these consolidated balance sheets.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Amounts in thousands, except per share amounts)
Year ended April 30,
--------------------------------------
1996 1995 1994
----------- ----------- -----------
REVENUES:
Real estate operations-
Home and condominium sales $ 89,697 $ 88,084 $ 67,501
Land sales 8,901 11,734 13,126
Rental projects - - 3,741
Gain on partnership restructuring - - 1,245
--------- --------- ---------
98,598 99,818 85,613
Magazine circulation operations 56,693 46,186 35,029
Interest and other operations 6,511 6,521 5,446
--------- --------- ---------
161,802 152,525 126,088
--------- --------- ---------
COSTS AND EXPENSES:
Real estate cost of sales 78,891 81,939 64,439
Operating expenses-
Magazine circulation operations 45,785 34,257 25,535
Rental operations - 980 5,525
Real estate commissions and selling 6,373 6,492 5,060
Other operations 6,376 6,034 5,319
General and administrative-
Real estate operations and 9,083 7,621 8,146
corporate
Magazine circulation operations 6,728 5,388 4,503
Interest, net 3,925 3,086 2,635
Real estate valuation provision - - 1,100
--------- --------- ---------
157,161 145,797 122,262
--------- --------- ---------
Income before income taxes 4,641 6,728 3,826
PROVISION FOR INCOME TAXES 1,856 2,713 1,454
--------- --------- ---------
NET INCOME $ 2,785 $ 4,015 $ 2,372
========= ========= =========
NET INCOME PER SHARE $ 0.38 $ 0.55 $ 0.33
========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,384 7,345 7,091
========= ========= =========
The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(Amounts in thousands)
Capital
Common Stock Contributed Treasury
---------------- In Excess of Retained Stock at
Shares Amount Par Value Earnings Cost Total
------ ------ ------------ -------- --------- -----
BALANCE, April 30, 1993 6,619 $ 662 $ 39,548 $ 13,892 $ - $ 54,102
Net income - - - 2,372 - 2,372
Stock issuance in
connection
with purchase of
magazine
circulation operations
assets 576 58 4,043 - - 4,101
Stock issuance in
connection
with restructuring of
general partnership
interest
in The Classic 66 7 589 - - 596
Exercise of stock
options and other
stock issuance 37 3 255 - - 258
----- -------- --------- --------- -------- --------
BALANCE, April 30, 1994 7,298 730 44,435 16,264 - 61,429
Net income - - - 4,015 - 4,015
Exercise of stock
options 96 9 468 - - 477
----- -------- --------- --------- -------- --------
BALANCE, April 30, 1995 7,394 739 44,903 20,279 - 65,921
Net income - - - 2,785 - 2,785
Exercise of stock 5 1 25 - - 26
options
Treasury stock purchased - - - - (180) (180)
BALANCE, April 30, 1996 7,399 $ 740 $ 44,928 $ 23,064 $ (180)$ 68,552
===== ======== ========= ======== ======== ========
The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Page 1 of 2)
---------------------------------------------------
(Amounts in thousands)
Year ended April 30,
----------------------------------
1996 1995 1994
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,785 $ 4,015 $ 2,372
Adjustments to reconcile net income
to net cash provided (used) by
operating activities-
Depreciation and amortization 2,309 1,956 2,228
Changes in assets and liabilities-
Receivables - net 250 131 (11,709)
Real estate inventory 745 (1,362) (20,107)
Rental and other real estate investments 3,411 2,552 2,710
Investment property 512 (147) 2,592
Other assets (223) (1,069) (1,887)
Accounts payable, deposits and
accrued expenses 965 (2,199) 8,785
Deferred income taxes (680) 2,356 1,773
Real estate valuation provision - - 1,100
Gain on restructuring of general
partnership interest - - (1,245)
Net cash provided (used) by --------- --------- ---------
operating activities 10,074 6,233 (13,388)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,358) (3,116) (1,852)
Proceeds from sale of property, plant
and equipment 861 - -
Payment for Fulfillment Corporation of
America - net - (1,744) -
Other - net - 600 400
--------- --------- ---------
Net cash used by investing activities (4,497) (4,260) (1,452)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 28,226 35,996 33,551
Principal debt payments (35,488) (35,803) (19,798)
Proceeds from the sale of stock and
exercise of stock options 26 477 854
Net cash provided (used) by --------- --------- ---------
financing activities (7,236) 670 14,607
--------- --------- ---------
Increase (decrease) in cash and
cash equivalents (1,659) 2,643 (233)
CASH AND CASH EQUIVALENTS,
beginning of year 9,266 6,623 6,856
--------- --------- ---------
CASH AND CASH EQUIVALENTS,
end of year $ 7,607 $ 9,266 $ 6,623
========= ========= =========
The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Page 2 of 2)
---------------------------------------------------
(Amounts in thousands)
Year ended April 30,
----------------------------------
1996 1995 1994
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts
capitalized $ 3,634 $ 3,356 $ 3,736
========= ========= =========
Income taxes paid $ 553 $ 233 $ 29
========= ========= =========
SUPPLEMENTAL INFORMATION REGARDING
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Stock issuance in connection with
purchase of magazine
circulation operations assets $ - $ - $ 4,101
========= ========= =========
Restructuring of general partnership
interests in The Classic
and Colonial Pointe resulting in
decreases in the following:
Rental and other real estate
investments $ - $ - $ 31,880
Accounts payable, deposits and
accrued expenses - - 721
Project financing - - 32,004
========= ========= =========
Purchase of treasury stock resulting in
a decrease of receivable
due from seller $ 180 $ - $ -
========= ========= =========
The accompanying notes to consolidated financial
statements are an integral part of these consolidated statements.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES:
-------------------------------------------------------------------
Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of AMREP
Corporation (Company), an Oklahoma corporation, and its subsidiaries.
The Company's principal subsidiaries, which are wholly-owned, are AMREP
Southwest, Inc. and Kable News Company, Inc.. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The consolidated balance sheets are presented in an
unclassified format, since the Company operates in the real estate
industry and its operating cycle is greater than one year.
Home and condominium sales
--------------------------
Sales of homes and condominiums and related costs and expenses are
recorded when title and other attributes of ownership have been
conveyed to the buyer by means of a closing. Payments received from
buyers prior to closing are recorded as deposits.
Land sales
----------
Land sales are recorded when the parties are bound by the terms of the
contract, all consideration (including adequate cash) has been
exchanged and all conditions precedent to closing have been performed.
Profit is recorded either in its entirety or on the installment method
depending upon, among other things, the ability to estimate the
collectibility of the unpaid sales price. In the event the buyer
defaults on his obligation, the property is taken back into inventory
or investment property at its receivable balance, net of any deferred
profit, but not in excess of fair market value less estimated costs to
sell. Until a sale has been recorded, revenues are deferred and total
customer payments are reflected as deposits.
Magazine circulation operations
-------------------------------
Revenues from distribution of periodicals and subscription fulfillment
activities represent commissions earned from the distribution of
publications for client publishers and fees earned from subscription
fulfillment activities. Magazine distribution revenues are recorded at
the time the publications go on sale and subscription revenues are
recorded when earned. The publications generally are sold on a fully
returnable basis, which is in accordance with prevailing trade
practice. All publications are billed after shipment, however, since
they are fully returnable if not ultimately sold to consumers, the
Company provides for estimated returns by charges to income which are
based on sales experience.
Environmental management and consulting
---------------------------------------
Revenue from environmental consulting, planning and project management
is generally recognized on a percentage of completion basis throughout
the completion of the related contract. Revenues associated with these
operations are included in "Interest and other operations" and the
associated expenses are included in "Operating expenses-Other
operations" in the accompanying consolidated statements of operations.
Real estate inventory
---------------------
Homes and condominiums completed or under construction are stated at
the lower of net realizable value or cost, including interest costs
capitalized during construction.
Land and improvements are stated at the lower of net realizable value
or cost (except in certain instances where property is repossessed as
discussed under "Land sales") which includes the development cost,
certain amenities, capitalized interest and capitalized real estate
taxes. These costs are allocated to individual homesites within each
section of a community.
Valuation reserves on real estate inventory are determined on a project
by project basis.
Investment property
-------------------
Investment property represents vacant, undeveloped land not held for
sale in the normal course of business. Investment property is stated
at the lower of net realizable value or cost, except in certain
instances where property is repossessed as discussed under"Land sales".
Property, plant and equipment
-----------------------------
Items capitalized as part of property, plant and equipment are recorded
at cost. Expenditures for maintenance and repair and minor renewals are
charged to expense as incurred, while those expenditures which improve
or extend the useful life of existing assets are capitalized.
Upon sale or other disposition of assets, their cost and the related
accumulated depreciation or amortization are removed from the accounts
and the resulting gain or loss, if any, is reflected in operations.
Depreciation and amortization of property, plant and equipment are
provided principally by the straight-line method at various rates
calculated to amortize the book values of the respective assets over
their estimated useful lives which range from 5 to 50 years for utility
plant and equipment and 3 to 40 years for all other property, plant and
equipment.
Excess of cost of subsidiary over net assets acquired
-----------------------------------------------------
The excess of cost of subsidiary over assets acquired reflects a
purchase made prior to October 31, 1970, the effective date of APB
Opinion No. 17. Such excess of cost is not being amortized to
operations as management is of the opinion that there has been no
diminution of value.
Federal income taxes
--------------------
The Company and its subsidiaries file a consolidated Federal income tax
return. Deferred taxes are provided for the income tax effect of
temporary differences in reporting transactions for financial and tax
purposes.
Net income per share
--------------------
Net income per common share outstanding is based on the weighted
average number of common shares outstanding during each year. Common
share equivalents (stock options) were excluded from the income per
share computations because of their insignificant effect for all years
presented.
Consolidated statements of cash flows
-------------------------------------
Cash equivalents consist of short term, highly liquid investments which
have an original maturity of ninety days or less.
Management's estimates and assumptions
--------------------------------------
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Adoption of New Pronouncements
------------------------------
In March 1995, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS No. 121). The provisions of SFAS No. 121 must be
implemented by the Company in fiscal 1997. The Company believes that
its current impairment policy is substantially similar to SFAS No. 121
and, accordingly, the adoption of SFAS No. 121 is not currently
expected to have a significant effect on the Company's financial
position or results of operations when adopted.
In October 1995, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS No. 123). The provisions of SFAS No. 123 must be
implemented by the Company in fiscal 1997. This statement requires
that the Company's financial statements include certain disclosures
about stock-based employee compensation arrangements, regardless of the
method used to account for them. This statement establishes a fair
value based method of accounting for stock-based compensation. The
Company believes that the adoption of SFAS No. 123 is not currently
expected to have a significant effect on the Company's disclosures when
adopted.
Financial statement presentation
--------------------------------
Certain amounts in the 1995 and 1994 consolidated financial statements
have been reclassified to conform with the 1996 presentation.
(2) ACQUISITION:
------------
In January 1995, Kable Fulfillment Services of Ohio, Inc. (a
wholly-owned affiliate of the Company) acquired certain assets and
liabilities of Fulfillment Corporation of America (FCA), an Ohio-based
subscription service operation. The purchase price of FCA was
$2,070,000 plus the assumption of certain liabilities, and the Company
accounted for the acquisition using the purchase method of accounting.
(3) RECEIVABLES:
------------
Receivables consist of:
April 30,
--------------------------
1996 1995
------------ ------------
(Thousands)
Real estate operations-
Mortgage and other receivables $ 9,647 $ 8,596
Allowance for doubtful accounts (598) (608)
------------ ------------
9,049 7,988
Mortgages securing collateralized
mortgage obligations (see Note 8) 2,322 2,656
------------ ------------
$ 11,371 $ 10,644
============ ============
Magazine circulation operations-
Accounts receivable (maturing within
one year) $ 96,174 $ 96,362
Allowances for-
Estimated returns (56,020) (55,565)
Doubtful accounts (1,920) (1,406)
------------ ------------
$ 38,234 $ 39,391
============ ============
Mortgage and other receivables bear interest at rates ranging from
5.75% to 12% and result primarily from land sales. Magazine
circulation operations receivables collateralize a general purpose
line-of-credit utilized for the magazine circulation operations (See
Note 8).
Receivables from real estate operations consist of amounts due from
various parties primarily in the state of New Mexico active in real
estate development and are generally collateralized by the related
land. Receivables from magazine circulation operations consist of
amounts due from a large number of payors involved in diverse
activities and subject to differing economic conditions, which do not
represent any concentrated credit risk to the Company.
Maturities of principal on real estate receivables, exclusive of
mortgages securing collateralized mortgage obligations, at April 30,
1996 are as follows (in thousands): 1997 - $5,921; 1998 - $1,303; 1999
- - $902; 2000 - $62; 2001 - $477; and thereafter - $982.
(4) REAL ESTATE INVENTORY:
----------------------
Real estate inventory consists of:
April 30,
--------------------------
1996 1995
------------- ------------
(Thousands)
Land and improvements held for sale or
development, net of valuation reserves of
$2,580 at April 30, 1996 and 199 $ 55,839 $ 46,753
Homes and Condominiums-
Land and improvements 5,028 8,828
Construction costs 11,049 16,883
------------- ------------
$ 71,916 $ 72,464
============= ============
Accumulated capitalized interest costs included in real estate
inventory at April 30, 1996 and 1995 were $3,744,000 and $2,894,000,
respectively. Interest costs capitalized during fiscal 1996, 1995 and
1994 were $1,980,000, $1,817,000, and $940,000, respectively.
Accumulated capitalized real estate taxes included in the inventory of
land and improvements at April 30, 1996 and 1995 were $5,023,000 and
$5,001,000, respectively. Real estate taxes capitalized during fiscal
1996, 1995, and 1994 were $166,000, $133,000 and $63,000,
respectively. Previously capitalized interest costs and real estate
taxes charged to real estate cost of sales were $1,272,000, $906,000
and $509,000 in fiscal 1996, 1995 and 1994, respectively.
During fiscal 1994, the Company charged off certain real estate
development costs totaling $1,700,000 on projects not under current
development. This charge-off resulted from a 1994 provision of
$1,100,000 and utilization of $600,000 of existing valuation reserves
recorded in prior years.
(5) RENTAL AND OTHER REAL ESTATE INVESTMENTS:
-----------------------------------------
Investments in rental and other real estate projects consist of the
following:
April 30,
------------------------
1996 1995
----------- ------------
(Thousands)
The Classic limited partnership interest $ 2,353 $ 2,353
PERMA (the Freehold Clark Limited
Partnership) total assets 5,858 9,269
----------- ------------
$ 8,211 $ 11,622
=========== ============
The Classic
-----------
The Classic in West Palm Beach, Florida, a 300 unit congregate living
facility was completed in fiscal 1991. In fiscal 1994, the Company
converted its general partner interest in The Classic at West Palm
Beach Limited Partnership (The Classic) to a 50% limited partner
interest for consideration of $400,000 paid by the new general
partner. In addition, the project financing of The Classic was
restructured whereby the Company paid $387,000 cash and issued 66,193
shares of the Company's common stock valued at $596,000 to the holder
of The Classic obligation primarily for accrued interest and was
released from its obligations under the financing arrangement.
Accordingly, the Company discontinued consolidating The Classic into
the accompanying consolidated financial statements and carries its net
investment (which is expected to be realized through excess cash flows,
as defined) on the cost recovery basis. In order to protect its net
investment, the Company, thus far, is funding the cash requirements of
The Classic, and in this regard, the Company provided reserves of
$300,000 and $275,000 in fiscal 1995 and 1994, respectively, against
which cash funded was applied. During fiscal 1995, the Company funded
additional cash requirements of The Classic totaling $680,000.
PERMA (the Freehold Clark Limited Partnership)
----------------------------------------------
During fiscal 1990, the Company became a 33 1/3% limited partner of the
Freehold Clark Associates Limited Partnership (Partnership) which was
formed to develop and market a 380 unit condominium housing project in
Freehold, New Jersey. During fiscal 1992, PERMA Corporation (PERMA), a
wholly-owned subsidiary of the Company, became the general partner of
the Partnership with a 50% ownership interest. In connection therewith,
PERMA obtained a 75% ownership interest in a related construction
company. As a result, the financial statements of these entities
(collectively, the PERMA Project) are included in the Company's
consolidated financial statements.
The investment in the PERMA Project and related project financing are
as follows:
April 30,
---------------------------
1996 1995
------------ ------------
(Thousands)
Land and improvements $ 1,773 $ 3,907
Homes inventory 3,083 4,213
------------ ------------
4,856 8,120
Other-
Deposits in escrow and collateral
accounts 247 342
Other assets 755 807
------------ ------------
Total investment $ 5,858 $ 9,269
============ ============
Project financing (see Note 8) $ 223 $ 2,891
============ ============
As of April 30, 1996, 305 units have been completed and closed. An
additional 43 units are currently under construction, of which 24 units
are sold but not yet closed. A total of 32 units remain to be
constructed.
Accumulated capitalized interest costs included in this project at
April 30, 1996 and 1995 were $964,000 and $1,732,000, respectively.
Interest costs capitalized during fiscal 1996, 1995 and 1994 were
$442,000, $863,000 and $716,000, respectively. There were no
accumulated capitalized real estate taxes included in this project at
April 30, 1996 and 1995. Real estate taxes capitalized during fiscal
1996, 1995 and 1994 have been fully amortized and were $72,000,
$124,000 and $95,000, respectively. Previously capitalized interest
costs charged to real estate cost of sales were $1,283,000, $1,509,000
and $1,330,000 in fiscal 1996, 1995 and 1994, respectively.
Colonial Pointe
---------------
In fiscal 1994, the Company entered into an agreement to sell its
general partner interest in the Colonial Pointe Apartments Limited
Partnership (Colonial Pointe) for a purchase price of $100,000 and
became a 50% limited partner. In addition, the Company was relieved
from its obligations under the Colonial Pointe project financing
arrangements. Accordingly, the Company discontinued consolidating
Colonial Pointe into the accompanying consolidated financial
statements, recognized a gain of $1,245,000 and no longer carries an
investment in Colonial Pointe.
Saratoga Square Homes
---------------------
During fiscal 1995, a subsidiary of the Company entered into a joint
venture arrangement for the development and construction of a 42 unit
townhome project in New York. As of April 30, 1996, the Company's
investment in this project, which entitles it to a 50% general
partnership interest and is accounted for on the equity method, as well
as the total assets and liabilities of the joint venture, was not
significant. In connection with this joint venture, the Company has
guaranteed a construction loan, which expires December 1996. The
maximum amount the joint venture may borrow under this arrangement is
approximately $4.7 million, of which approximately $3 million was
outstanding as of April 30, 1996 and which is not included in the
accompanying consolidated balance sheets.
(6) PROPERTY, PLANT AND EQUIPMENT:
------------------------------
Property, plant and equipment consists of:
April 30,
---------------------------
1996 1995
------------- ------------
(Thousands)
Land, buildings and improvements $ 10,742 $ 10,973
Furniture and fixtures 9,578 7,390
Utility plant and equipment 6,880 4,886
Other 1,591 1,585
------------- ------------
28,791 24,834
Accumulated depreciation and
amortization (11,796) (10,706)
------------- ------------
$ 16,995 $ 14,128
============= ============
Depreciation and amortization (including amounts for rental and other
real estate investments - see Note 5) charged to operations amounted to
$1,630,000, $1,356,000 and $1,671,000 in fiscal 1996, 1995 and 1994,
respectively.
(7) OTHER ASSETS:
-------------
Other assets are comprised of:
April 30,
---------------------------
1996 1995
------------- ------------
(Thousands)
Prepaid expenses and other deferred
charges $ 5,729 $ 5,522
Purchased magazine distribution
contracts, net of accumulated
amortization of $1,177 and $749
for fiscal years 1996 and 1995,
respectively 3,102 3,530
Security deposits 3,405 2,655
Escrow monies and collateral deposits 568 1,325
Other 1,411 1,639
------------- ------------
$ 14,215 $ 14,671
============= ============
During fiscal 1994, the Company purchased certain magazine distribution
contracts from an unrelated party for 575,595 shares of the Company's
common stock valued at $4,101,000. The total costs incurred in the
purchase of the magazine distribution contracts including $178,100 of
legal fees have been capitalized and are being amortized on the
straight-line basis over the related contracts term of ten years. The
total amount amortized related to deferred charges and distribution
contracts was $679,000, $600,000 and $557,000 for the fiscal years
ended April 30, 1996, 1995, and 1994, respectively.
(8) DEBT FINANCING:
---------------
Debt financing consists of:
April 30,
--------------------------
1996 1995
------------ ------------
(Thousands)
Notes payable -
Line-of-credit borrowings -
Real estate operations and other $ 13,846 $ 13,485
Magazine circulation operations 23,591 25,200
Mortgages and other notes payable 11,130 12,838
Fixed rate long-term note 2,257 3,386
Utility note payable 1,135 1,320
------------ ------------
51,959 56,229
PERMA Project financing (see Note 5) 223 2,891
Collateralized mortgage obligations (see
Note 3) 2,209 2,533
------------ ------------
$ 54,391 $ 61,653
============ ============
The aggregate amount of debt maturities (after giving effect to
extensions and renewals finalized subsequent to April 30, 1996) is as
follows:
PERMA
and
Collateralized
Mortgage
Year Ending April 30, Notes Payable Obligations Total
- --------------------- -------------- ------------- -------------
(Thousands)
1997 $ 16,923 $ 223 $ 17,146
1998 6,902 - 6,902
1999 25,895 - 25,895
2000 1,594 - 1,594
2001 400 - 400
Thereafter 245 2,209 2,454
-------------- ------------- -------------
$ 51,959 $ 2,432 $ 54,391
============== ============= =============
Line-of-credit borrowings
-------------------------
The Company has several line-of-credit arrangements with various
financial institutions to support general corporate and real estate
operations. These lines have a total maximum amount available for
borrowings of approximately $24.4 million, limited to available
collateral, against which approximately $13.8 million was drawn as of
April 30, 1996. These lines-of-credit bear interest ranging from prime
(8.25% at April 30, 1996) plus 1% to 1.75% (with a weighted average
effective rate of interest of approximately 9.4% at April 30, 1996),
are collateralized by certain real estate assets and are subject to
certain financial performance and other covenants. The president of
one of the Company's subsidiaries, who is also a member of the Board of
Directors of the Company, serves as a member of the board of directors
of the financial institution from which $11.8 million of these
lines-of-credit were obtained.
At April 30, 1996, the Company had drawn $23.6 million against a $32.5
million line-of-credit arrangement which is generally restricted to
magazine circulation operations. This line-of-credit agreement bears
interest at prime plus .5% and is collateralized by accounts receivable
arising from magazine circulation operations and contains various
restrictive covenants which, among other things, limits the payments of
dividends, annual capital expenditures and loans from the magazine
circulation subsidiary to the Company. The Company exceeded the
limitation on the amount of annual capital expenditures in fiscal 1996,
and has obtained a waiver. Borrowings pursuant to this line-of-credit
agreement are due August 31, 1998.
The Company anticipates renewing, extending or replacing certain of
these loan agreements as they become due in fiscal 1997. The Company
is also having discussions with other lenders seeking additional
working capital, although there are no assurances these discussions
will be fruitful.
Mortgages and other notes payable
---------------------------------
Mortgages and other notes payable had interest rates ranging from 6. 4%
to 10.5% at April 30, 1996, and are primarily collateralized by
property, plant and equipment and certain land inventory.
Fixed rate long-term note
-------------------------
During fiscal 1993, the Company exercised its option to exchange a
$5,644,000 variable rate note maturing August 1, 1992 for a five-year,
7.464% fixed rate note with quarterly interest payments beginning
November 1, 1992 and annual principal payments beginning August 1,
1993. As of April 30, 1996, the outstanding balance on this note was
$2,257,600. This borrowing imposes restrictions on, among other
things, consolidated debt, the sale of assets and properties other than
in the ordinary course of business, mergers and liens, and the payment
of cash dividends in amounts exceeding one-half of the Company's net
worth. The Company was out of compliance with maintenance of one
financial ratio covenant at April 30, 1996, and has obtained a waiver.
Utility note payable
--------------------
The Company has a note in the amount of $1,135,000 at April 30, 1996,
maturing September 1, 1996 with monthly installments of principal and
interest at 1.5% above the prime rate (8.25% at April 30, 1996). This
note is collateralized by certain utility plant and equipment and other
utility assets.
PERMA project financing
-----------------------
The Company has an outstanding borrowing related to the PERMA project
totaling approximately $223,000 at April 30, 1996. Payments are due as
closings occur, including principal and interest at prime plus 1%,
until maturity on December 31, 1996.
Collateralized mortgage obligations
-----------------------------------
In fiscal years 1986 through 1988, AMREP Financial Corporation, a
subsidiary of the Company, participated in the issuance of
collateralized mortgage obligations (CMO's), with original principal
balances aggregating $13,750,000, through an unrelated financial
intermediary. Each series (12 in total) was issued in three to five
classes bearing interest at rates ranging from 7.6% to 12.5% per annum,
with stated maturities, assuming no prepayments, from January, 2015 to
October, 2017. CMO payment schedules vary with each series, and
payments are due quarterly, semi-annually and annually. Actual
maturities vary to the extent of principal prepayments on the mortgage
loans collateralizing the CMO's. These CMO's are collateralized only
by the principal and the accrued interest receivable (see Note 3) of
the related mortgage loans.
(9) BENEFIT PLANS:
--------------
Stock option plans
------------------
A summary of activity in the Company's 1992 Stock Option Plan, the
Non-Employee Directors Option Plan and the 1982 Incentive Stock Option
Plan is presented below:
Year Ended April 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
Common stock options outstanding
at beginning of year 225,600 249,325 248,000
Granted at $5.13 to $8.88 per
share 3,000 96,500 43,000
Options exercised at $4.06 to
$7.44 per share (5,000) (96,025) (16,547)
Expired or cancelled (102,600) (24,200) (25,128)
------------ ------------ ------------
Common stock options
outstanding at end of year 121,000 225,600 249,325
============ ============ ============
Available for future grant at
year end 201,750 186,750 282,000
============ ============ ============
During fiscal 1993, the shareholders approved the 1992 Stock Option
Plan as well as the Non-Employee Directors Option Plan for which
315,000 and 15,000 shares, respectively, were reserved. At April 30,
1996, options to purchase 112,500 shares under the Stock Option Plan
and 8,500 shares under the Non-Employee Directors Option Plan were
outstanding at prices ranging from $5.13 to $8.88 per share and 199,250
and 2,500 shares were available for future grant, respectively.
Outstanding options heretofore granted are exercisable over a two to
four year period beginning one year from date of grant. As of April
30, 1996, 80,500 options were exercisable under the Company's stock
option plans.
Under the Company's 1992 Stock Option Plan shares are reserved for
issuance to officers and other key employees. Options may be granted
in such amounts, at such times, and with such exercise prices as the
stock option committee may determine. The Non-Employee Directors
Option Plan provides for an automatic issuance of options to purchase
500 shares of common stock to each non-employee director annually at
the fair market value at the date of grant. The options are
exercisable one year after the date of grant and expire five years
after the date of grant.
The 1982 Incentive Stock Option Plan expired on June 30, 1992, and all
options previously issued thereunder have either been exercised or
expired.
Savings plan
------------
The Company has a savings plan to which the Company makes
contributions. The plan provides for Company contributions of 16 2/3%
of eligible employees' defined contributions up to a maximum of 1% of
such employees' compensation. The Company's contributions to the plan
amounted to $142,000, $125,000 and $113,000, in fiscal 1996, 1995 and
1994, respectively.
Retirement plans
----------------
The Company has two retirement plans which are non-contributory,
defined benefit plans, and which together cover substantially all
full-time employees. The plans provide retirement benefits based on
length of service and a percentage of qualifying compensation during
employment. In fiscal 1996, 1995 and 1994, the Company contributed
$1,077,000, $952,000 and $693,000, respectively, to the plans. Assets
are invested primarily in United States Treasury obligations, equity
and debt securities and money market funds.
Net periodic pension cost for fiscal 1996, 1995 and 1994 was comprised of the
following components:
Year Ended April 30,
----------------------------------------
1996 1995 1994
------------ ------------- -----------
(Thousands)
Service cost - benefits
earned during the period $ 1,045 $ 854 $ 762
Interest cost on projected
benefit obligation 1,593 1,283 1,122
Actual return on assets (2,792) (962) (673)
Net amortization and deferral 1,134 (449) (599)
------------ ------------ ------------
Net periodic pension cost $ 980 $ 726 $ 612
============ ============ ============
Assumptions used in the accounting were:
Year Ended April 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
Discount rates 8.00% 8.00% 8.00%
Rates of increase in
compensation levels 4.50-5.00% 4.50-5.00% 5.00%
Expected long-term rate of
return on assets 8.00-9.00% 8.00-9.00% 9.00%
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets:
April 30,
--------------------------
1996 1995
------------ ------------
(Thousands)
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 17,043 $ 15,741
============ ============
Accumulated benefit obligation $ 18,087 $ 16,712
============ ============
Projected benefit obligation $ 21,955 $ 20,188
Assets at fair value 21,505 18,693
------------ ------------
Excess of projected benefit obligation over
assets (450) (1,495)
Unrecognized net loss 1,623 2,658
Unrecognized prior service cost (benefit) (50) (51)
Unrecognized net transition asset (139) (278)
------------ ------------
Prepaid pension cost $ 984 $ 834
============ ============
(10) INCOME TAXES:
-------------
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" in fiscal 1994. Adoption of
SFAS No. 109 had no impact on the tax liability recorded by the Company
as of the date of adoption.
The provision for income taxes consists of the following:
Year Ended April 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(Thousands)
Current:
Federal $ 2,414 $ 232 $ (405)
State and local 123 125 86
------------ ------------ ------------
2,537 357 (319)
------------ ------------ ------------
Deferred:
Federal (582) 2,105 3,980
State and local (99) 363 384
Benefit for operating loss
carryforwards - - (5,826)
Net change in valuation allowance - (112) 3,235
------------ ------------ ------------
(681) 2,356 1,773
------------ ------------ ------------
Total provision for income taxes $ 1,856 $ 2,713 $ 1,454
============ ============ ============
Components of net deferred income tax liability are as follows:
April 30,
---------------------------
1996 1995
------------ ------------
(Thousands)
Deferred income tax assets-
Tax loss carryforwards (Federal and state) $ 7,264 $ 5,953
Real estate inventory valuation 1,446 1,454
Other 1,061 1,090
------------ ------------
Total deferred income tax assets 9,771 8,497
------------ ------------
Deferred income tax liabilities-
Installment sales (3,071) (1,998)
Reserve for periodicals and paperbacks (19,295) (20,032)
Gain on partnership restructuring (473) (473)
Depreciable assets (1,010) (956)
Expenses capitalized for financial
reporting purposes, expensed for tax (2,345) (2,127)
Differences related to timing of
partnership income (1,494) (1,545)
Other (4,800) (4,763)
------------ ------------
Total deferred income tax liability (32,488) (31,894)
------------ ------------
Valuation allowance for realization of
state taxloss carryforwards (3,123) (3,123)
------------ ------------
Net deferred income tax liability $ (25,840) $ (26,520)
============ ============
The following table reconciles taxes computed at the U.S. Federal
statutory income tax rate to the Company's actual tax provision:
Year ended April 30,
----------------------------------------
1996 1995 1994
------------ ------------- -----------
(Thousands)
Computed tax provision at
statutory rate $ 1,578 $ 2,288 $ 1,301
Increase (reduction) in tax
resulting from:
State income taxes, net of 269 442 153
Federal
income tax effect
Reduction in valuation allowance - (112) -
Other 9 95 -
------------ ------------ ------------
Actual tax provision $ 1,856 $ 2,713 $ 1,454
============ ============ ============
The tax provision for fiscal 1996 has been calculated in accordance
with Internal Revenue Service (IRS) regulations for Section 458 related
to an adjustment to taxable income for the return of magazines
following the close of a tax year, and differs from the procedure used
in prior periods. As a result, there has been an increase in the
provision for current taxes and an offsetting decrease in the provision
for deferred taxes in fiscal 1996 compared to prior years. As
discussed in Note 11, the IRS has challenged the Company's treatment of
the issue, however, the Company anticipates that there will be no
material effect on the financial statements as a result of the
finalization of these matters. Approximately $650,000 of taxes
deferred in prior years has been reclassified to current obligations to
reflect the Company's present estimate that a portion of the deferred
taxes will be due during the coming year as a result of the IRS audit
of 1984 - 1989. In addition, the Company has adequate reserves for the
anticipated amount of interest due thereon.
(11) COMMITMENTS AND CONTINGENCIES:
------------------------------
Revenue agent review
--------------------
The Internal Revenue Service ("IRS") has completed a review of the
Company's tax returns for fiscal years 1984 through 1989, is in the
process of reviewing the tax returns for fiscal years 1990 through
1992, and in due course will review the returns for fiscal years 1993
through 1995. One of the issues involved for all those years concerns
the method by which the Company has utilized a provision of the
Internal Revenue Code (the "Code") to adjust taxable income of Kable
for an amount related to the return of magazines within a specified
period following the close of each tax year. The IRS challenged the
adjustments to taxable income made by two other taxpayers in reliance
on the same Code provision using the same method as that used by the
Company. The IRS regulations embodying its position were upheld by the
United States Tax Court in lawsuits brought by each of those
taxpayers. Both taxpayers appealed their Tax Court decisions. The
United States Court of Appeals for the Second Circuit now has affirmed
the Tax Court ruling in one of those two appeals; the other is as yet
undecided.
The computation of the adjustments to the Company's taxable income
which must be made on the basis prescribed by the Section 458
regulations is exceedingly complex, and, ultimately can only be
finalized with the input of the IRS. The IRS has provided the Company
with preliminary computations reflecting its adjustments for 1984 -
1989 which the Company believes are complete with regard to Section
458. While the Company cannot be certain until it receives the final
report from the IRS for the 1984 - 1989 review period, the Company now
estimates that the portion of previously deferred taxes (plus related
interest which accrues from the date of deferral) that it will owe when
the IRS's reviews of all the audit periods are final will total
substantially less than previous estimates made by the Company. The
Company has previously recorded the amount of this tax liability in the
financial statements as a deferred tax liability, which includes
adequate reserves to cover the anticipated amount of interest so that,
as the result of this potential resolution of the matter with the IRS,
there would be no effect on reported earnings for fiscal 1996.
However, given the complexity of the situation and the preliminary
nature of the IRS calculations, the Company recognizes the possibility
that approximately $20 million of the deferred taxes (plus interest
that could approximate $22 million and which has not been recorded)
could become payable as a result of the IRS reviews.
Noncancellable leases
---------------------
The Company is obligated under long-term noncancellable leases for
equipment and various real estate properties. Certain real estate
leases provide that the Company will pay for taxes, maintenance and
insurance costs and include renewal options. Rental expense for fiscal
1996, 1995 and 1994 was approximately $5,195,000, $3,737,000 and
$3,144,000, respectively.
The approximate minimum rental commitments for years subsequent to
April 30, 1996, are as follows (in thousands): 1997 - $3,323; 1998 -
$2,875; 1999 - $2,299; 2000 - $1,276; 2001 - $827; thereafter - $2,337;
and the total future minimum rental payments - $12,937.
Rio Rancho lot exchanges
------------------------
In connection with homesite sales at Rio Rancho, New Mexico, if water,
electric and telephone utilities have not reached the lot site when a
purchaser is ready to build a home, the Company is obligated to
exchange a lot in an area then serviced by such utilities for a lot of
the purchaser, without cost to the purchaser. The Company does not
incur significant costs related to the exchange of lots.
(12) LITIGATION:
-----------
The Company and/or its subsidiaries are involved in various claims and
legal actions incident to their operations, which in the opinion of
management, based upon advice of counsel, will not materially affect
the consolidated financial position or results of operations of the
Company and its subsidiaries.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS:
------------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (SFAS 107), requires the Company
to disclose the estimated fair value of its financial instruments. The
following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which the fair value differs
from the carrying value.
Mortgage receivables
--------------------
The fair value of the Company's long-term fixed-rate mortgage
receivables is estimated to be $6.0 million which equals the carrying
amount as of April 30, 1996 and $5.4 million versus a carrying amount
of $5.5 million as of April 30, 1995, based on the discounted value of
future cash flows using the current rates at which similar loans would
be made.
Notes payable
-------------
The fair value of the Company's long-term fixed-rate notes payable is
estimated to be $9.7 million versus a carrying amount of $9.8 million
as of April 30, 1996 and $13.1 million versus a carrying amount of
$13.3 million as of April 30, 1995, based on the discounted value of
future cash flows using the current rates at which the Company believes
it could obtain similar financing.
CMO's (liabilities) and related mortgages securing CMO's (assets)
-----------------------------------------------------------------
The fair value of the Company's mortgages securing CMO's (assets) of
$2.4 million at April 30, 1996 and $2.7 million at April 30, 1995
(versus a carrying amount of $2.4 million at April 30, 1996 and $2.7
million at April 30, 1995) was estimated based on the present value of
residual cash flows plus the fair value of the CMO's. The fair value
of the CMO's (liabilities) was assumed to be equal to the outstanding
principal balance plus accrued interest totaling $2.4 million at April
30, 1996 and $2.7 million at April 30, 1995.
(14) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT
INDUSTRY SEGMENTS:
------------------
The Company operates principally in two industries, real estate and
magazine circulation operations. Real estate operations involve the
construction and sale of single-family homes, condominiums and other
projects, as well as the subdivision of large tracts of land for sale
to individuals, builders and others. Magazine circulation operations
involve national and international distribution of periodicals and
paperback books, and subscription fulfillment activities on behalf of
various client publishers. Total revenue by industry includes revenues
from unaffiliated customers as reported in the accompanying
consolidated statements of operations. Operating income represents
total revenue less operating expenses.
In computing operating income, general corporate expenses, interest
expense and income taxes are excluded. Selling expense is allocated
between industry segments based on the Company's evaluation of the work
performed for each segment.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry segment.
The following schedules set forth summarized data relative to the
industry segments:
Real Magazine
Estate Circulation Other
Operations Operations Operations Corporate Eliminations Consolidated
---------- ---------- ---------- --------- ------------ ------------
1996(Thousands):
Net revenues
from
unaffiliated
customers $ 103,747 $ 57,149 $ 906 $ - $ - $ 161,802
Intersegment
revenues - - 72 - (72) -
--------- --------- --------- --------- --------- ---------
Total revenue $ 103,747 $ 57,149 $ 978 $ - $ (72) $ 161,802
========= ========= ========= ========= ========= =========
Operating
income $ 8,313 $ 4,635 $ 119 $ - $ (72) $ 12,995
========= ========= ========= ========= =========
Corporate
expenses (4,429)
Interest (3,925)
Income
before
provision
for
income taxes $ 4,641
=========
Identifiable
assets at
April 30,
1996 $ 121,646 $ 57,937 $ 342 $ 1,871 $ - $ 181,796
========= ========= ========= ========= ========= =========
Identifiable
depreciation $ 694 $ 890 $ 3 $ 43 $ - $ 1,630
========= ========= ========= ========= ========= =========
Identifiable
capital
expenditures $ 2,713 $ 2,624 $ - $ 21 $ - $ 5,358
========= ========= ========= ========= ========= =========
Real Magazine
Estate Circulation Other
Operation Operations Operations Corporate Eliminations Consolidated
---------- ---------- ---------- --------- ------------ ------------
1995(Thousands):
Net revenues
from
unaffiliated
customers $ 105,060 $ 46,595 $ 870 $ - $ - $ 152,525
Intersegment
revenues - - 72 - (72) -
--------- --------- --------- --------- --------- ---------
Total revenue $ 105,060 $ 46,595 $ 942 $ - $ (72) $ 152,525
========= ========= ========= ========= ========= =========
Operating
income $ 6,199 $ 6,951 $ 140 $ - $ (72) $ 13,218
========= ========= ========= ========== =========
Corporate
expenses (3,404)
Interest (3,086)
---------
Income
before
provision
for
income taxes $ 6,728
==========
Identifiable
assets at
April 30,
1995 $ 122,654 $ 60,957 $ 551 $ 1,980 $ - $ 186,142
========= ========= ========= ========== ========= ==========
Identifiable
depreciation $ 679 $ 654 $ 2 $ 21 $ - $ 1,356
========= ========= ========= ========== ========= ==========
Identifiable
capital
expenditures $ 814 $ 2,150 $ 29 $ 123 $ - $ 3,116
========= ========= ========= ========== ========= ==========
1994(Thousands):
Net revenues
from
unaffiliated
customers $ 90,113 $ 35,128 $ 847 $ - $ - $ 126,088
Intersegment
revenues - 79 72 - (151) -
--------- --------- --------- -------- --------- ----------
Total
revenue $ 90,113 $ 35,207 $ 919 $ - $ (151) $ 126,088
========= ========= ========= ========= ========= ==========
Operating
income $ 7,013 $ 5,169 $ 169 $ - $ (151) $ 12,200
========= ========= ========= ========= =========
Corporate
expenses (3,684)
Interest
(including
$2,055 in
operating
expenses-rental
projects (4,690)
----------
Income
before
provision
for
income taxes $ 3,826
==========
Identifiable
assets at
April 30,
1994 $ 125,620 $ 51,135 $ 405 $ 1,697 $ - $ 178,857
========= ========= ========= ========== ========= ==========
Identifiable
depreciation $ 1,151 $ 482 $ - $ 38 $ - $ 1,671
========= ========= ========= ========== ========= ==========
Identifiable
capital
expenditures $ 996 $ 848 $ - $ 8 $ - $ 1,852
========= ========= ========= ========== ========= ==========
Selected Quarterly Financial Data (Unaudited)
(In thousands of dollars except per share
amounts)
Quarter Ended
---------------------------------------------
July 31, October 31, January 31, April 30,
1995 1995 1996 1996
--------- --------- --------- ---------
Revenues $ 40,922 $ 42,410 $ 37,944 $ 40,526
Gross Profit 7,639 8,733 7,382 6,996
Net Income $ 781 $ 1,279 $ 494 $ 231
========= ========= ========= =========
Net Income Per Share $ 0.11 $ 0.17 $ 0.07 $ 0.03
========= ========= ========= =========
Quarter Ended
---------------------------------------------
July 31, October 31, January 31, April 30,
1994 1994 1995 1995
--------- --------- --------- ---------
Revenues $ 35,755 $ 35,911 $ 37,960 $ 42,899
Gross Profit 7,009 6,381 7,627 8,298
Net Income $ 1,010 $ 715 $ 1,175 $ 1,115
========= ========= ========= =========
Net Income Per Share $ 0.14 $ 0.10 $ 0.16 $ 0.15
========= ========= ========= =========
Item 9. Changes in and Disagreements with Accountants on
------- Accounting and Financial Disclosure.
------------------------------------
Not Applicable.
PART III
--------
The information called for by Part III is
hereby incorporated by reference from the information set
forth and under the headings "Voting Securities", "Security
Ownership of Management", "Election of Directors", and
"Executive Compensation" in Registrant's definitive proxy
statement for the 1996 Annual Meeting of Shareholders, which
meeting involves the election of directors, such definitive
proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after
the end of the fiscal year covered by this Annual Report on
Form 10-K. In addition, information on Registrant's
executive officers has been included in Part I above under
the caption "Executive Officers of the Registrant".
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules,
- -------- and Reports on Form 8-K.
----------------------------------------
(a) 1. The following financial statements and
supplementary financial information are filed as part of this report:
AMREP Corporation and Subsidiaries:
Report of Independent Public Accountants - Arthur Andersen LLP
Consolidated Balance Sheets - April 30, 1996 and 1995
Consolidated Statements of Operations for the Three Years Ended
April 30, 1996
Consolidated Statements of Shareholders' Equity for the Three
Years Ended April 30, 1996
Consolidated Statements of Cash Flows for the Three Years
Ended April 30, 1996
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data
2. The following financial statement schedules are filed as part
of this report:
AMREP Corporation and Subsidiaries:
Schedule II - Valuation and Qualifying Accounts
Financial statement schedules not included in this Annual Report
on Form 10-K have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits:
The exhibits filed in this report are listed in the Exhibit Index.
The Registrant agrees, upon request of the Securities and Exchange
Commission, to file as an exhibit each instrument defining the rights of
holders of long-term debt of the Registrant and its consolidated subsidiaries
which has not been filed for the reason that the total amount of securities
authorized thereunder does not exceed 10% of the total assets of the Registrant
and its subsidiaries on a consolidated basis.
(b) During the quarter ended April 30, 1996, Registrant filed no
Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMREP CORPORATION
(Registrant)
Dated: July 26, 1996 By /s/Mohan Vachani
----------------
Mohan Vachani
Senior Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
/s/Mohan Vachani /s/Peter M. Pizza
---------------- -----------------
Mohan Vachani Peter M. Pizza
Senior Vice President - Chief Controller
Financial Officer and Director, Dated: July 26, 1996
Principal Financial Officer*
Dated: July 26, 1996
/s/Jerome Belson /s/Daniel Friedman
---------------- ------------------
Jerome Belson Daniel Friedman
Director Director
Dated: July 26, 1996 Dated: July 26, 1996
/s/Edward B. Cloues, II /s/Nicholas G. Karabots
----------------------- -----------------------
Edward B. Cloues, II Nicholas G.Karabots
Director Director
Dated: July 26, 1996 Dated: July 26, 1996
/s/David N. Dinkins /s/Samuel N. Seidman
------------------- --------------------
David N. Dinkins Samuel N. Seidman
Director Director
Dated: July 26, 1996 Dated: July 26, 1996
/s/Harvey I. Freeman /s/James Wall
-------------------- -------------
Harvey I. Freeman James Wall
Director Director
Dated: July 26, 1996 Dated: July 26, 1996
*Also acting as Principal Executive Officer in the absence of a Chief Executive
Officer, solely for the purpose of signing this Annual Report.
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 1 of 2)
-------------------------------------------------------------
(Thousands)
Additions
-------------------
Charges
(Credits)
Balance at to Costs Charged Balance at
Beginning and to Other End
of Period Expenses Accounts Deductions of Period
--------- -------- -------- ---------- ----------
Description
-----------
FOR THE YEAR ENDED
APRIL 30, 1996:
Allowance for
doubtful
accounts
(included in
receivables -
real estate
operations on
the
consolidated
balance sheet $ 608 $ 24 $ - $ 34(A) $ 598
----------- --------- --------- ----------- ----------
Allowance for
estimated
returns and
doubtful
accounts
(included in
receivables -
magazine
circulation
operations on
the
consolidated
balance sheet) $ 56,971 $ 1,365 $ - $ 396(A) $ 57,940
----------- --------- --------- ----------- ----------
Real estate
valuation
reserve $ 2,580 $ - $ - $ - $ 2,580
----------- --------- --------- ----------- ----------
FOR THE YEAR ENDED
APRIL 30, 1995:
Allowance for
doubtful
accounts
(included in
receivables -
real estate
operations on
the
consolidated
balance sheet) $ 693 $ 2 $ - $ 87(A) $ 608
----------- --------- --------- ---------- ----------
Allowance for
estimated
returns and
doubtful
accounts
(included in
receivables -
magazine
circulation
operations on
the
consolidated
balance sheet) $ 54,355 $ 2,984 $ - $ 368(A) $ 56,971
----------- --------- --------- ---------- ----------
Real estate
valuation
reserve $ 2,580 $ - $ - $ - $ 2,580
----------- --------- --------- --------- ----------
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 2 of 2)
-------------------------------------------------------------
(Thousands)
Additions
-------------------
Charges
(Credits)
Balance at to Costs Charged Balance at
Beginning and to Other End
of Period Expenses Accounts Deductions of Period
--------- -------- -------- ---------- ----------
FOR THE YEAR ENDED
APRIL 30, 1994:
Allowance for
doubtful
accounts
(included in
receivables -
real estate
operations on
the
consolidated
balance sheet) $ 1,000 $ 116 $ - $ 423(A) $ 693
--------- -------- --------- ---------- ---------
Allowance for
estimated
returns and
doubtful
accounts
(included in
receivables -
magazine
circulation
operations on
the
consolidated
balance sheet) $ 45,440 $ 9,230 $ - $ 315(A) $ 54,355
----------- --------- --------- ---------- ---------
Real estate
valuation
reserve $ 3,180 $ 1,100 $ - $ 1,700(B) $ 2,580
----------- --------- --------- ---------- ----------
NOTE: (A) Uncollectible accounts written off.
(B) Reserves utilized to reduce inventory valuation.
EXHIBIT INDEX
(2) Assets Purchase and Sale
Agreement dated as of
December 22, 1994 by and
among Kable Fulfillment
Services of Ohio, Inc. and
Fulfillment Corporation of
America - Incorporated by
reference to Exhibit 1 of
Registrant's Current Report on
Form 8-K, dated January 24,
1995.
(3)(i)(a) Articles of Incorporation,
as amended - Incorporated by
reference to Exhibit
(3)(i)(a) to Registrant's
Annual Report on Form 10-K
of for the fiscal year ended
April 30, 1993.
(3)(i)(b) Certificate of Merger -
Incorporated by reference to
Exhibit (3)(i)(b) to
Registrant's Annual Report
on Form 10-K for the fiscal
year ended April 30, 1993.
(3)(ii) By-Laws as restated January
18, 1996 - Incorporated by
reference to Exhibit 3(b) to
Registrant's Current Report
on Form 8-K dated January
31, 1996.
(4) Amended and Restated Loan
Agreement between American
National Bank and Trust
Company of Chicago and Kable
News Company, Inc. dated as
of October 6, 1995 -
Incorporated by reference to
Exhibit 4 to Registrant's
Quarterly Report on Form
10-Q for the quarter ended
October 31, 1995.
(10)(a) Agreement and Plan of
Reorganization between
Registrant and Capital
Distributing Company, Kappa
Publishing Group, Inc. and
Nick G. Karabots dated
August 4, 1993 -
Incorporated by reference to
Exhibit 10 to Registrant's
Quarterly Report on Form
10-Q for the quarter ended
October 31, 1993.
(10)(b) Employment Agreement dated
as of October 1, 1993
between Registrant and
Anthony B. Gliedman, Chief
Executive Officer, Chairman
and President of Registrant
until February 1, 1996 -
Incorporated by reference to
Exhibit 10(a) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended January 31,
1994.
(10)(c) Employment Agreement dated
as of October 1, 1993
between Registrant and
Daniel Friedman, Senior Vice
President of Registrant -
Incorporated by reference to
Exhibit 10(b) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended January 31,
1994.
(10)(d) Letter Agreement dated May
23, 1995 amending the
Employment Agreement between
Registrant and Daniel
Friedman, Senior Vice
President of Registrant -
Incorporated by reference to
Exhibit 10(a) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended July 31, 1995.
(10)(e) Employment Agreement dated
as of October 1, 1993
between Registrant and James
Wall, Senior Vice President
of Registrant - Incorporated
by reference to Exhibit
10(c) to Registrant's
Quarterly Report on Form
10-Q for the quarter ended
January 31, 1994.
(10)(f) Letter Agreement dated May
23, 1993 amending the
Employment Agreement between
Registrant and James Wall,
Senior Vice President of
Registrant - Incorporated by
reference to Exhibit 10(d)
to Registrant's Quarterly
Report on Form 10-Q for the
quarter ended July 31, 1995.
(10)(g) Employment Agreement dated
as of October 1, 1993
between Registrant and
Harvey W. Schultz, Senior
Vice President of Registrant
- Incorporated by reference
to Exhibit 10(d) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended January 31,
1994.
(10)(h) Letter Agreement dated May
23, 1995 amending the
Employment Agreement between
Registrant and Harvey W.
Schultz, Senior Vice
President of Registrant -
Incorporated by reference to
Exhibit 10(b) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended July 31, 1995.
(10)(i) Employment Agreement dated
as of October 1, 1993
between Registrant and Mohan
Vachani, Senior Vice
President - Chief Financial
Officer of Registrant -
Incorporated by reference to
Exhibit 10(e) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended January 31,
1994.
(10)(j) Letter Agreement dated May
23, 1995 amending the
Employment Agreement between
Registrant and Mohan
Vachani, Senior Vice
President - Chief Financial
Officer of Registrant -
Incorporated by reference to
Exhibit 10(c) to
Registrant's Quarterly
Report on Form 10-Q for the
quarter ended July 31, 1995.
(10)(k) 1982 Incentive Stock Option
Plan - Incorporated by
reference to Exhibit (10)(s)
to Annual Report on Form
10-K of Registrant for the
fiscal year ended April 30,
1993.
(10)(l) 1992 Stock Option Plan -
Incorporated by reference to
Exhibit A to the Proxy
Statement of Registrant for
the Annual Meeting of
Shareholders held on
September 24, 1992.
(10)(m) Non-Employee Directors
Option Plan - Incorporated
by reference to Exhibit B to
the Proxy Statement of
Registrant for the Annual
Meeting of Shareholders held
on September 24, 1992.
(10)(n) Bonus Plan for Executives
and Key Employees of
Registrant - Incorporated
by reference to Exhibit
10(l) to Registrant's Annual
Report on Form 10-K for the
fiscal year ended April 30,
1994.
(21) Subsidiaries of Registrant,
filed herewith.
(23) Consent of Arthur Andersen
LLP, filed herewith.
(27) Financial Data Schedule