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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, 1999 Commission File Number 1-4702
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to __________
AMREP CORPORATION
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(Exact name of registrant as specified in its Charter)
Oklahoma 59-0936128
- ------------------------------ ---------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
641 Lexington Ave., 6th Floor
New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 705-4700
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock $.10 par value New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of 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
23, 1999, on the New York Stock Exchange Composite Tape - $23,869,332.
Number of shares of Common Stock, par value $.10 per share, outstanding at
July 23, 1999 - 7,357,250.
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 1999 Annual Meeting - Part III
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PART I
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Item 1. Business
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GENERAL
The Company* is primarily engaged in two unrelated businesses, each operated
by a wholly-owned subsidiary: the Real Estate business operated by AMREP
Southwest Inc., and the Fulfillment Services and Magazine Distribution
business operated by Kable News Company, Inc. The Company's foreign sales
and activities are not significant.
REAL ESTATE OPERATIONS
Recent Developments
For the last two decades, the Company has been both a real estate developer
and a builder of single-family homes, originally in Rio Rancho, New Mexico
and more recently in the Denver, Colorado metro area, the Sacramento,
California metro area and Portland, Oregon. In the early 1960s, the Company
established the community that now is the City of Rio Rancho, New Mexico, and
it has been the predominant builder of housing there. Rio Rancho, which
adjoins Albuquerque, now has a population of over 50,000. The Company
entered the Denver market in 1993, and in 1997 it purchased the assets of a
homebuilder and land developer with operations in the Sacramento and Portland
markets.
During the second half of fiscal 1999, the Company implemented a plan to
restructure its real estate operations and to wind-down its homebuilding
operations everywhere except in Oregon. The reason for this decision was
that over the past several years these homebuilding operations have not
provided acceptable returns. This restructuring will enable the Company to
significantly reduce its debt and to concentrate its efforts on more rapidly
developing its land in Rio Rancho.
In furtherance of this plan, during the second half of fiscal 1999 the
Company contracted to sell to two national builders and several local
builders a total of approximately 2,100 lots in Rio Rancho. During fiscal
1999, a total of 646 lots were sold pursuant to such contracts for a total
sale price of $15.8 million. The contracts provide that the remaining 1,452
lots are to be sold over the next two fiscal years at a total sale price of
approximately $28.6 million. The contracts with the builders are in the
nature of options since each of the contracts permits the purchaser to
terminate its obligations by forfeiture of a relatively modest deposit. The
Company believes that the extent to which the builders purchase the lots will
be determined by the number of houses they are able to sell which, to a large
extent, will depend on the strength of the housing markets in Rio Rancho and
Albuquerque. There are, therefore, no assurances that all, or even a
substantial portion, of the lots subject to the contracts will be sold
pursuant to the contracts. Over the next two fiscal years, the Company
expects to incur substantial additional development costs to enable it to
deliver the above lots pursuant to these contracts.
As discussed in more detail below, in Colorado, the Company has sold or
offered for sale all of its land holdings and housing projects. To wind-down
its California operations, the Company has decided to discontinue certain
projects and to build-out others.
_________________
* As used herein, "Company" includes the Registrant and its subsidiaries
unless the context requires or indicates otherwise.
2
Home Building Operations
In fiscal 1999, the Company sold single-family houses as follows:
Homes Average Selling
Market Sold Price
---------- ----- -------------
Rio Rancho 428 $111,350
Colorado 208 $145,270
Sacramento* 130 $153,500
Portland* 33 $315,500
At April 30, 1999, the Company had single-family houses completed and unsold
or under construction as follows:
Number of Average Estimated
Market Houses Selling Price
----------- ------- ----------------
Rio Rancho 82 $118,000
Colorado 69 $138,800
Sacramento* 128 $172,700
Portland* 57 $275,900
At June 30, 1999, 64 of those houses at Rio Rancho were under contract for
sale. The Company anticipates that all construction and sales of houses in
Rio Rancho will be completed by September 1999. As of June 30, 1999, all of
the Company's completed or under-construction houses in the Denver market had
been sold or were under contract to sell either to consumers or to another
developer. At June 30, 1999, 100 of the houses in the Sacramento market had
been sold or were under contract of sale. The Company anticipates completion
of construction of all of those houses and an additional 28 houses in
Sacramento during fiscal 2000. Subject to market conditions, the Company
expects all its Sacramento area houses to be sold in that fiscal year. The
Company has no present plans to do any further homebuilding in the Rio
Rancho, Colorado or Sacramento markets.
In the Sacramento area, the Company has completed, in a joint venture, a 164
unit multi-family housing project which it sold in July 1999 for
approximately $15,700,000. During fiscal 1999, the Company purchased for
approximately $4,500,000 land with entitlements (i.e., appropriate zoning and
subdivision approvals) for another multi-family housing project which it
plans to resell.
The Company presently intends to continue building single-family houses in
Portland, Oregon. At April 30, 1999, in addition to the 57 houses completed
or under construction, the Company owned 56 lots on which the Company
presently intends to build houses. The houses will be designed to sell in
the $220,000 to $400,000 range. The Company may also acquire developed lots
for further home sales to builders and others in Portland.
The construction and sale of homes is a highly competitive business. The
Company's housing projects in Portland compete with other builders who offer
similarly priced housing. The Company sells housing in Portland directly
from on-site models and through brokers. Buyers at Portland utilize various
conventional mortgage lenders. The ability of the Company to sell houses is
dependent upon the availability of adequate mortgage financing on terms
prospective customers can afford.
______________
* Some of the houses in the Sacramento and Portland areas are being built
through joint ventures which are accounted for under the equity method.
3
Commercial And Residential Land Development Operations
In previous years and through fiscal year 1999, the Company developed both
residential and commercial sites at Rio Rancho and from time to time bought
acreage in Colorado, California and Oregon for home-building and to develop
as residential lots to be sold to builders. The Company plans to concentrate
its current land development activities at Rio Rancho. While it has no
immediate plans to acquire additional property in Colorado or California, the
Company may in the future explore business opportunities for land acquisition
and development in locales inside and outside New Mexico.
Rio Rancho (including the City) consists of 91,049 contiguous acres in
Sandoval County, New Mexico, near Albuquerque, of which some 72,500 acres
have been platted into approximately 111,000 homesite and commercial lots and
16,300 acres are dedicated to community facilities, roads and drainage with
the remainder consisting of unplatted land. At April 30, 1999, a total of
approximately 80,500 of the lots had been sold. The Company currently owns
approximately 23,300 acres at Rio Rancho, of which approximately 7,800 acres
are in contiguous blocks suitable for development. The balance is in
scattered lots which may require the purchase of a sufficient number of
adjoining lots to create tracts suitable for development.
At Rio Rancho, the Company plans to concentrate on securing entitlements and
selling large development tracts to homebuilders. In fiscal 1999, the
Company sold 1,065 lots to builders at Rio Rancho for a total of $19.6
million (including those described under "Recent Developments") .
In addition, the Company presently plans to develop building lots and sites
for commercial and industrial use at Rio Rancho as the demand warrants. The
commercial areas at Rio Rancho presently include in excess of 500 businesses
and professional offices, 15 shopping centers with over 1.25 million square
feet of store and office space, and a 55,000 square foot office building. In
addition, a number of individual office buildings and stores are located
throughout the community. Eleven financial institutions have offices in Rio
Rancho. The industrial areas presently have approximately 77 buildings with
over 3.2 million square feet, including a manufacturing facility containing
approximately 2.1 million square feet which is owned and occupied by Intel
Corporation. In fiscal 1999, the Company sold five tracts of commercial and
industrial property of varying size for a total of $7.3 million.
The development activity includes the obtaining of entitlements, installation
of utilities and necessary storm drains, and building or improving the
roads. The engineering work at Rio Rancho is performed by both Company
employees and outside firms, but development work is performed by outside
contractors. Land at Rio Rancho is marketed by Company personnel, both
directly and through brokers.
Since early 1977, no individual lots without homes at Rio Rancho have been
sold by the Company to consumers. Over 50,000 lots were sold prior to 1977,
and most of these are in areas where utilities have not yet been installed.
However, under certain of the contracts pursuant to which the lots were sold,
if utilities have not reached the respective lot when the purchaser is ready
to build a home, the Company is obligated to exchange a lot in the area then
serviced by water, telephone and electric utilities for the lot of the
purchaser, without cost to the purchaser. The Company has not incurred
significant costs related to such exchanges.
In fiscal 1999, the Company sold approximately 250 lots in Colorado for a
total of $3.7 million, and one multi-family tract in the Sacramento area for
a total of $3.0 million.
At June 30, 1999, the Company owned in Colorado 57 residential building lots
on which no construction had begun and 488 unplatted acres which are
presently being offered for sale. The Company also owned, in the Portland
area, 201 developed lots held for sale, in addition to the lots it held for
use as its
4
own homebuilding inventory. Some of the lots are owned through joint ventures
which are accounted for under the equity method.
Other Real Estate Projects
The Company developed the Eldorado at Santa Fe, New Mexico subdivision which
now has approximately 2,200 homes. The Company sold 23 lots there in fiscal
1999, and 20 lots remain to be sold. The Company owns and operates a water
utility company which serves the subdivision. The Company also participates
in a joint venture which develops lots for sale in this subdivision.; at
April 30, 1999, 76 lots remain in the joint venture.
The Company is a fifty-percent (50%) limited partner in a limited
partnership which owns 247 units of moderately-priced rental housing in
Orlando, Florida. The Company's management subsidiary manages 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 also owns other
properties in Florida, consisting of approximately 22 acres in the Ocala and
Orlando area. All of these properties are presently being offered for sale.
MAGAZINE DISTRIBUTION AND FULFILLMENT OPERATIONS
Through its wholly-owned subsidiary, Kable News Company, Inc. ("Kable"), the
Company (i) performs fulfillment and related services for publishers and
other customers and (ii) distributes periodicals nationally and in Canada
and, to a small degree, in other foreign countries. As of July 1, 1999,
Kable employed approximately 1,080 persons, approximately 860 of whom were
involved in its fulfillment activities and 220 in distribution activities.
Fulfillment Services
Kable's Fulfillment Services division performs a number of fulfillment and
fulfillment related activities, principally magazine subscription fulfillment
services, list services and product fulfillment services. The division
accounted for 64% of Kable's total revenues in 1999 and 68% in 1998.
In the magazine subscription fulfillment service operation, Kable processes
new orders, receives and accounts for payments, prepares and sends to each
publisher's printer labels or tapes containing the names and addresses of
subscribers for mailing each issue, handles subscriber telephone inquiries
and correspondence, prepares and mails renewal and statement notifications,
maintains subscriber lists and databases, generates marketing and statistical
reports, processes Internet orders and prints forms and promotional
materials. Kable performs all of these services for many clients, but some
clients utilize only certain of them. Although by far the largest number of
magazine titles for which Kable performs fulfillment services are consumer
publications, Kable also performs services for a number of trade (business)
publications, membership organizations and government agencies which utilize
the broad capabilities of Kable's extensive database system.
List services clients are primarily publishers. In this activity, Kable
maintains clients' customer lists, selects names for clients who rent their
lists, merges rented lists with the clients' lists to eliminate duplication
for clients' promotional mailings, and sorts and sequences mailing labels to
provide optimum postal discounts for clients.
Product fulfillment services are provided primarily for Kable's publisher
clients. In this activity, the division receives, warehouses, processes and
ships merchandise.
Kable plans to expand these services to other non-publisher clients.
5
In August 1996, Kable commenced the processing of "sweepstakes" entries for a
major publisher, which includes opening the envelopes mailed in by
contestants, furnishing the pertinent data electronically to the publisher
and performing certain incidental functions. Revenues from this activity
represented over 14% of the division's total revenues for fiscal 1999. Kable
has been informed that this publisher has changed its operational strategies
and will discontinue its use of Kable's services during fiscal 2000; Kable
does not expect a significant impact on earnings as a result of this change.
Kable now performs fulfillment services for approximately 490 different
magazine titles for some 210 clients and maintains approximately 13.4 million
active subscriber names for its client publishers. In a typical month, Kable
produces almost 14 million mailing labels for its client publishers and also
produces and mails approximately 4.2 million billing and renewal statements.
There are a large number of companies that perform fulfillment services for
publishers and with which Kable competes, two of which are much larger than
Kable. Since publishers utilize only a single fulfillment service for a
particular publication, there is intense competition to obtain fulfillment
contracts with publishers. Competition for non-publisher clients is also
intense. Kable has a staff whose primary duty is to solicit fulfillment
business.
Distribution Services
In its distribution operation, Kable annually distributes magazines for over
210 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 36.1
million copies of various titles. Kable purchases the publications from its
publishers and sells them to approximately 60 independent wholesale
distributors who own and operate 160 individual companies in the United
States and Canada. The wholesale distributors in turn sell the publications
to individual retail outlets. All parties generally have full return rights
for unsold copies. In 1999, distribution activities accounted for 36% of
Kable's revenues, and 32% in fiscal 1998.
While the Kable Distribution division does not handle all publications of all
of its publisher clients, it usually is the exclusive distributor for the
publications it distributes. Kable generally does not physically handle any
product. It determines, in consultation with the wholesalers and publishers,
the number of copies of each issue to be distributed, and generates and
delivers to each publisher's printer shipping instructions with the addresses
of the wholesalers and the number of copies of product to be shipped to
each. All magazines have an "off sale" date (generally the on-sale date of
the next issue) following which the retailers return unsold copies to the
wholesalers, who destroy them after accounting for returned merchandise in a
manner satisfactory to Kable.
A realignment of industry relationships in the distribution of magazines
started during fiscal 1996 and rapidly grew to major proportions. It was
triggered by the decision of certain major retailers with multiple outlets to
sharply reduce the number of wholesalers with whom the retailers would deal.
This action has led to the erosion of wholesaler profit margins and to a
substantial continuing reduction in the number of wholesalers through the
merger of certain wholesalers, the formation by certain other wholesalers of
cooperatives to bid for the business of such retailers, and the complete
retirement from the business by a number of wholesalers. The consolidation
has reduced the number of Kable's wholesale customers by approximately 55%
since 1995, which has increased the concentration of its revenue source and
trade accounts receivable. These changes contributed to demands by most
remaining wholesalers to purchase magazines at lower prices which many
publishers, including some of Kable's, have accepted.
6
Financial pressures on wholesalers continued in fiscal 1999. Consequently,
Kable has increased its accounts receivable reserves in anticipation of
possible uncollectible balances from certain newsstand wholesaler customers.
Management believes that industry changes will continue with the potential
for further adverse consequences for publishers and their national
distributors, including Kable.
Kable has a distribution sales and marketing force that works with
wholesalers and retailers to promote product sales and assist in determining
the number of copies of product to be delivered to each retailer.
Kable generally makes substantial cash advances to publishers against future
sales, which publishers may use to help pay for printing, paper and
production costs prior to the product going on sale. Kable is usually not
paid by wholesalers for product until some time after the product has gone on
sale, and is therefore exposed to potential credit risks with both the
publishers and the wholesalers. Its ability to make a profit is dependent in
part on its skill in estimating the number of copies of an issue which should
be printed and distributed and on limiting its advances to the publisher
accordingly.
There are five national distributors with whom Kable competes. Since
publishers utilize only a single distributor to distribute a particular line,
there is intense competition among 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 is intense.
COMPANY OFFICES
The Company's principal executive offices are in New York City. Kable News
has an executive and sales office in New York City, and its operations are
centered in both owned and leased facilities in Mt. Morris, Illinois and
Marion, Ohio. Real estate operations are headquartered in Rio Rancho, New
Mexico in a modern office building owned by the Company
EMPLOYEES
The Company has approximately 1,190 employees as of July 1, 1999, none of
whom is represented by a union. The Company provides retirement, health and
other benefits to 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
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The Registrant and/or its subsidiaries are involved in various claims and
legal actions incident to their operations, which in the opinion of
management, based in part upon advice of counsel, will not materially affect
the consolidated financial position or results of operations of the
Registrant and its subsidiaries.
7
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/Principal occupation for Past Five Years Age
- ---- ---------------------------------------------------- ---
Daniel Friedman Senior Vice President of Registrant since 1980; 64
Chief Executive Officer of Kable News Company, Inc.,
a wholly-owned subsidiary of the Registrant since 1978.
James Wall Senior Vice President of Registrant since 1991; 62
Chief Executive Officer of AMREP Southwest Inc.,
a wholly-owned subsidiary of Registrant, since 1991.
Mohan Vachani Senior Vice President-Chief Financial Officer of 57
Registrant since 1993.
Valerie Asciutto Senior Vice President-General Counsel of Registrant 46
since 1997; Vice President-General Counsel of
Registrant from 1992 to 1997.
David P. Maniatis President of various entities not affiliated 43
with the Company engaged in the real estate business
since prior to 1994 and continuing to the present;
Vice Chairman and Chief Operating Officer of AMREP
Southwest Inc. since April 1999*
The executive officers are elected or appointed by the Board of Directors of
the Company or its appropriate subsidiary to serve until the appointment or
election and qualification of their successors or their earlier death,
resignation or removal.
________________________
* Mr. Maniatis is a part time consultant to the Company, and not an employee.
8
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 under
the symbol AXR. On July 23, 1999, there were approximately 2,400 holders of
record of the common stock. The Registrant has historically not paid cash
dividends. 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
1999 $9 15/16 $6 1/2 $8 1/16 $5 1/2 $7 13/16 $5 7/8 $8 $4 5/8
1998 $4 5/8 $3 1/2 $7 1/4 $4 5/8 $6 7/8 $5 1/4 $10 1/2 $6 1/4
Item 6. Selected Financial Data
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The following selected consolidated financial data of the Company are
qualified by reference to and should be read in conjunction with the
consolidated financial statements, related notes thereto and other financial
data elsewhere herein. These historical results are not necessarily
indicative of the results to be expected in the future.
(In thousands of dollars except per share amounts)
Year Ended April 30,
-------------------------------------------------------
1999 (a) 1998 1997 (b) 1996 1995
-------------------------------------------------------
Revenues $ 190,291 $ 171,368 $ 146,389 $ 161,802 $ 152,525
Net Income $ 7,537 $ 8,206 $ 7,282 $ 2,785 $ 4,015
Earnings Per
Share -
Basic and Diluted $ 1.02 $ 1.11 $ 0.99 $ 0.38 $ 0.55
Total Assets $ 217,777 $ 229,768 $ 205,311 $ 181,796 $ 186,142
Notes Payable $ 74,665 $ 84,248 $ 79,824 $ 54,391 $ 61,653
Shareholders' $ 91,577 $ 84,040 $ 75,834 $ 68,552 $ 65,921
Equity
Cash Dividends $ - $ - $ - $ - $ -
(a) Includes a tax benefit in the amount of $2,400,000 (the equivalent of
$.33 per share) to reflect the settlement of 1990 through 1992 tax
examinations.
(b) Includes a tax benefit in the amount of $6,250,000 (the equivalent of
$.85 per share) to reflect the settlement of 1984 through 1989 tax
examinations.
9
Item 7. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
FORWARD-LOOKING STATEMENTS
- --------------------------
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on behalf of the
Company. The Company and its representatives may from time to time make
written or oral statements that are "forward-looking", including statements
contained in this report and other filings with the Securities and Exchange
Commission, any reports to the Company's shareholders and news releases. All
statements that express expectations, estimates, forecasts and projections
are forward-looking statements within the meaning of the Act. In addition,
other written or oral statements which constitute forward-looking statements
may be made by or on behalf of the Company. Words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates",
"projects", "forecasts", "may", "should", variations of such words and
similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which are difficult to
predict. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in or suggested by such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
A wide range of factors could materially affect future developments and
performance of the Company, including the following: (i) the level of demand
for land in the markets in which the Company sells land; (ii) the possibility
of further changes in the magazine distribution system for magazines which
the Company distributes; (iii) the outcome and impact of year 2000; (iv)
possible future litigation and governmental proceedings; (v) the availability
of financing and financial resources in the amounts, at the times and on the
terms required to support the Company's future business, including possible
acquisitions; (vi) the failure to carry out marketing and sales plans; (vii)
the failure successfully to integrate acquired business, if any, into the
Company without substantial costs, delays other operational or financial
problems; and (viii) economic, business conditions and changes including
general economic and business conditions that are less favorable than
expected.
This list of factors that may effect future performance and the accuracy of
forward looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
RESULTS OF OPERATIONS
- ---------------------
Year Ended April 30, 1999 Compared to Year Ended April 30, 1998
- ---------------------------------------------------------------
Revenues
- --------
Total revenues for the year ended April 30, 1999 increased $18.9 million
(11%) from 1998, principally reflecting an increase in revenues from the real
estate operations.
Revenues from real estate operations increased $22.1 million (21%) resulting
from increases in both housing and land sales. This increase reflects a
decision made by the Company to wind-down most of its homebuilding
operations, to sell its land holdings in Colorado and California, and to
concentrate on more rapidly developing its very substantial land holdings in
Rio Rancho, New Mexico. As part of this process, the Company has entered
into conditional contracts to sell homebuilding lots to several national and
local builders in Rio Rancho.
10
Revenues from housing sales increased $11.2 million (14%), reflecting an
increase in total housing deliveries from 677 to 711 as well as an increase
in the average selling price of homes from $117,800 to $127,900. The number
of homes closed increased as a result of various sales incentive programs
developed during the fourth quarter to accelerate the sale of the Company's
remaining housing inventory. The change in average selling price was due in
large part to a change in the mix of projects from which homes were sold.
The gross margin on housing sales increased by $1.9 million in 1999 over
1998, as a result of the increase in the number of homes sold as well as an
increase in the average gross margin percentage to 13% in 1999 from 12% in
1998.
Revenues and related gross profit from land sales increased by approximately
$10.9 million (44%) and $1.6 million (12%), respectively, in 1999 from 1998,
primarily due to the increase in land sales to homebuilders resulting from
the change in the Company's business focus discussed above. The average
gross profit percentage on land sales decreased from 50% in 1998 to 39% in
1999 because the sales of residential land to builders have generally been
at lower gross profit percentages than the sales of commercial and industrial
land, which have represented a much larger percentage of total land sale
revenues in prior years. Land sale revenues and related gross profits can
vary from period to period as a result of the nature and timing of specific
transactions, and thus prior results are not an indication of amounts that
may be expected to occur in future periods.
Revenues from magazine circulation operations, consisting of both magazine
distribution and fulfillment operations, increased approximately $400,000
(1%) from 1998. Revenues from the Fulfillment Services division decreased
approximately $1.6 million (4%) due primarily to a lower volume of business
in sweepstakes processing for one large customer. Revenues from the
Newsstand Distribution Services division increased approximately $2.1 million
(11%) this year, due to new business and a moderately higher volume of
magazine sales. A major realignment of industry relationships in the
distribution of magazines which started in 1996 has led to a substantial
reduction in the number of Kable's wholesaler customers and, in many cases,
has adversely impacted wholesaler profits and liquidity and caused them to
delay payments to Kable. During the third and fourth quarters of fiscal
1999, Kable increased its reserve for uncollectible accounts by approximately
$5.0 million due to concerns about certain newsstand wholesaler customers.
As a result, magazine circulation operating expenses increased $4.3 million
(10%) compared to the prior year. As a result of these factors, operating
income from magazine circulation operations decreased by approximately $3.9
million this year. Excluding the effects of the increase in the reserve for
uncollectible accounts, Kable's operating earnings would have been modestly
higher than in fiscal 1998.
Revenues from "Interest and other operations" decreased from 1998 to 1999
principally because 1998 included a non-recurring gain of approximately $4.2
million on the sale of the Rio Rancho Golf and Country Club and the Company's
50% limited partnership interest in "The Classic at West Palm Beach", a
congregate care facility in Florida.
Expenses
- --------
Real estate commissions and selling expenses were generally comparable to the
prior year amounts, and approximated 8% of related revenues in 1999 and 9% in
1998. Real estate and corporate general and administrative expenses
increased approximately 2% in 1999 over 1998, due to additional costs of the
Company's California operation which had commenced activities in September
1997, and which were offset in part by the effect of a benefit for pension
expense resulting from the effect of an amendment to the Company's pension
plan during 1998. General and administrative costs of magazine circulation
operations decreased by approximately 4% over the comparable amounts of the
prior year.
11
Interest expense increased from approximately $4.4 million in 1998 to
approximately $4.7 million in 1999; interest related to magazine circulation
operations decreased slightly due to lower interest rates, while interest
related to real estate operations increased moderately due to lower amounts
of capitalized interest.
As discussed in Note 2 to the consolidated financial statements, the Company
has incurred restructuring-related charges of approximately $2.1 million,
including severance and lease termination payments ($1.1 million), and the
write-off of unamortized goodwill and acquisition related costs ($1.0
million) incurred in connection with its acquisition of certain real estate
assets in California. In addition, the Company wrote-off approximately $1.2
million related to deposits and other project-related inventory costs related
to projects which have been abandoned or otherwise disposed of in connection
with the business restructuring, which amount has been charged to real estate
cost of sales. The Company's decision to change its real estate focus by
emphasizing its land development activities at Rio Rancho, New Mexico and
winding-down certain homebuilding activities is not considered to be a
permanent change in strategy. Accordingly, because of these factors and
because the Company intends to continue homebuilding activities in Portland,
Oregon, the Company has presented the results of operations of homebuilding
in continuing operations.
In 1999, the Company's effective tax rate of approximately 8% reflects a net
benefit of approximately $2.4 million to the provision from income taxes
following the conclusion of certain federal tax audits. See Note 10 to the
consolidated financial statements.
Segment Information
- -------------------
Information by industry segment is presented in Note 14 to the consolidated
financial statements. The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Disclosures" during 1999, which requires that industry segment
information be prepared in a manner consistent with the manner in which
financial information is prepared and evaluated by management for making
operating decisions. A number of assumptions and estimations are required to
be made in the determination of segment data, including the need to make
certain allocations of common costs and expenses among segments. On an
annual basis, management has evaluated the basis upon which costs are
allocated, and has periodically made revisions to these methods of
allocation. Accordingly, the determination of "pretax income (loss)
contribution" of each segment as summarized in Note 14 to the consolidated
financial statements is presented for informational purposes, and is not
necessarily the amount that would be reported if the segment were an
independent company.
Year Ended April 30, 1998 Compared to Year Ended April 30, 1997
- ---------------------------------------------------------------
Revenues
- --------
Total revenues for the year ended April 30, 1998 increased approximately 17%
from 1997, reflecting increases in revenues from both real estate and
magazine circulation operations.
Revenues from real estate operations increased by 23% in 1998 resulting from
increases in both housing and land sales. Revenues from housing sales
increased 16% as a result of an increase in total housing deliveries from 599
to 677. This increase was due to increased home deliveries in Colorado
resulting from additional projects from which homes were delivered, as well
as from deliveries contributed by the Company's northern California
operations, which were acquired in September 1997, and was offset in part by
fewer home closings in Rio Rancho, which reflects an increase in competition
throughout the surrounding market region. The average selling price of homes
sold increased slightly, from $114,600 to $117,800. The gross margin on
housing sales increased by approximately $.5 million principally due
12
to the increase in the number of homes closed. The average gross margin
percentage was 13% in 1997 and 12% in 1998.
Revenues and related gross profit from land sales increased by approximately
$8.2 million and $5.5 million, respectively, in 1998 from 1997, primarily due
to an increase in the level of commercial and industrial land sales. The
average gross profit percentage on land sales increased from 42% in 1997 to
50% in 1998 because of the mix of land sales between Colorado, Florida and
New Mexico. 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
are not an indication of amounts that may be expected to occur in future
periods.
Revenues from magazine circulation operations increased by approximately 5%
in 1998, due to increases in both Fulfillment Services and Newsstand
Distribution Services divisions. Revenues from Fulfillment Services
increased approximately 5%, due primarily to increased volumes in product
fulfillment and sweepstakes processing services. Revenues from Distribution
Services increased approximately 6%, due to a modest increase in the volume
of magazine sales.
The major realignment and consolidation of relationships in the
distribution chain for magazines which developed during 1996 continues to affect
the industry, and the Company continues to address the situation. Magazine
circulation operating expenses have decreased from approximately 81% of related
revenues in 1997 to approximately 77% of related revenues in 1998, reflecting
the completed integration of the acquisition of Kable's Ohio operations and the
favorable impact of cost reduction initiatives. As a result of these factors,
operating income from magazine circulation operations increased by approximately
$2.9 million in 1998, as compared to 1997.
During 1998, the Company sold the Rio Rancho Golf and Country Club and its
50% limited partnership interest in The Classic at West Palm Beach, a
congregate care facility in Florida, and recognized an aggregate
non-recurring gain of approximately $4.2 million, which amount is included in
"Interest and other operations".
Expenses
- --------
Real estate commissions and selling expenses increased approximately 8%,
primarily as a result of the increased volume, as well as from an increase in
the number of projects open for sale. Real estate and corporate general and
administrative expenses increased 10%, principally as a result of the
Company's expansion into northern California commencing in September 1997.
General and administrative costs of the magazine circulation operations
increased by approximately 4%, moderately lower than the revenue increase.
Interest expense increased by approximately 9% in 1998, primarily due to
higher average borrowings related to increased levels of receivables and
inventories, partially offset by an increase in the amount of capitalized
real estate interest.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the past several years, the Company has financed its operations from
internally generated funds from home and land sales and magazine circulation
operations, and from borrowings under its various lines-of credit and
construction loan agreements.
13
Cash Flows From Financing Activities
- ------------------------------------
At April 30, 1999, the Company had line-of-credit arrangements with several
financial institutions collateralized by various assets which, subject to
collateral availability, amounted to an aggregate borrowing availability of
approximately $66.7 million. One of these lines (under which $40 million was
available and against which approximately $35.9 million was outstanding as of
April 30, 1999) is available for Kable News Company operations. Borrowings
under this line-of-credit, which expires August 31, 2000, 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 line-of-credit borrowings have been used principally to support
real estate construction in New Mexico, California and Colorado. These loans
are collateralized by certain real estate assets and are subject to available
collateral and various financial performance and other covenants. At April
30, 1999, the maximum available under real estate lines-of-credit totaled
$27.2 million of which borrowings of $20.5 million were outstanding. A
subsidiary of the Company has also guaranteed approximately $14.5 million of
mortgages and notes payable of joint ventures in which it is a participant.
Notes payable outstanding, including lines-of-credit discussed above, were
$74.7 million at April 30, 1999 compared to $84.2 million at April 30, 1998.
The decrease at April 30, 1999 compared to the prior year was primarily the
result of the change in focus of real estate operations and the wind-down of
homebuilding operations. The Company anticipates that as it completes
homebuilding operations, its real estate borrowing requirements will continue
to decline.
Cash Flows From Operating Activities
- ------------------------------------
Inventories amounted to $89.7 million at April 30, 1999 compared to $99.9
million at April 30, 1998. This decrease was related to the restructuring
of real estate operations, and also contributed to the decrease in accounts
payable, deposits and accrued expenses at April 30, 1999 compared to the
prior period.
Receivables from magazine circulation operations decreased by approximately
$3.6 million compared to the prior year, which is primarily due to the
increase in the reserve for uncollectible accounts of approximately $5.0
million resulting from concerns about certain newsstand wholesaler customers.
Cash Flows From Investing Activities
- ------------------------------------
Capital expenditures increased in 1999 from 1998, due in part to requirements
of the Company's utility subsidiary. The Company believes that its available
funds will be adequate to provide for anticipated capital expenditures.
As a result of the restructuring of its real estate operations, the Company
anticipates that its borrowing requirements will be reduced, commensurate
with the reduction in construction activity. The Company believes that cash
provided from operations together with existing cash balances, its
lines-of-credit and land development loans will be sufficient to maintain
liquidity at a satisfactory level.
As discussed in Note 10 to the consolidated financial statements, the Company
reached an agreement with the Internal Revenue Service ("IRS") during 1999 to
resolve all issues resulting from the IRS's examination of tax years 1990
through 1992, and paid all federal tax due for those years. In previous years,
the Company had established a liability for Taxes Payable-amounts subsequently
due (including anticipated interest thereon through the expected date of
payment) to cover the expected amounts due, including amounts due for
outstanding IRS examinaitons for tax years 1993 through 1996. Based upon the
result of the 1999 settlement, which resulted in an amount of tax payable less
than the Company had believed would be required, the Company has reduced the
amount of Taxes Payable - amounts subsequently due by approximately $2.4 million
in 1999. The examinations for the years 1993 through 1996
14
are in various stages of completion, and the exact amount of taxes and interest
attributable to any given tax year will only be known and payable after the IRS
completes its review and computes the amount of the adjustment for each year.
The balance of the Taxes Payable - amounts subsequently due at April 30, 1999 is
approximately $11.8 million; the Company believes that with cash on hand,
anticipated earnings and credit available under lines of credit, it will be able
to pay the amounts classified as Taxes Payable - amounts subsequently due when
they become due. For tax years beginning in 1996, the Company believes its taxes
have been calculated in a manner consistent with IRS regulations and in the
manner in which tax examinations for all the years 1984 through 1992 have been
completed.
Recent Accounting Pronouncements
- --------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities. The Statement is
effective for fiscal years beginning after June 15, 2000. The Company will
adopt SFAS No. 133 in fiscal year 2001. The Company expects the adoption of
SFAS No. 133 will not have a material impact on the consolidated financial
statements.
Impact of Inflation
- -------------------
Operations of the Company can be impacted by inflation. Within the
industries in which the Company operates, inflation can cause increases in
the cost of materials, construction and other services, interest and labor.
Unless such increased costs are recovered through increased sale prices,
operating margins will decrease. Within the land development industry, the
Company encounters particular risks. A large part of the Company's sales are
to homebuilders who face their own inflationary concerns that rising housing
costs, including interest costs, may substantially outpace increases in the
income of potential purchasers and make it difficult for them to finance the
purchase of a new home or sell their existing home. If this situation were
to exist, the demand for the Company's land by these homebuilder customers
might decrease. In general, in prior years, interest and price increases
have been commensurate with the general rate of inflation in the Company's
markets, and the Company has not found the inflation risk to be a significant
problem either in its land development or homebuilding operations.
Year 2000 Readiness Disclosure (Y2K)
- ------------------------------------
Historically, most computer programs were written using two digits rather
than four to define the applicable year. This could cause a problem whereby
computer applications would fail to recognize the year 2000 and beyond. Such
computer failures could have a material adverse effect on an enterprise's
business operations, its transaction recording and, ultimately, its financial
condition.
Since 1996, the Company has been addressing these Y2K compliance issues. The
Company's program consists of four phases; (1.) Identify and rank material Y2K
sensitive equipment and software, (2.) Assess the identified components, (3.)
Remediate (including repair, upgrade, replacement), and (4.) Test system
components. This program has involved all levels of management under the
overall direction of the Senior Vice President and General Counsel ("GC") who
has further directed the Director of Internal Audit ("DIA") to coordinate
tasks and report progress.
For organizational purposes, Y2K committees were established at the Company's
three operating centers - one for real estate operations and two for magazine
circulation operations. Each committee has a chairman and the members
include information technology, operating and financial management
personnel. The committees report the status of compliance tasks on a
quarterly basis which is then
15
communicated to the Board of Directors by the GC and DIA. As the year 2000
approaches, it is anticipated that the task updates will be prepared on a
more frequent basis.
Program Progress -- The identification and assessment phases (1 & 2) have
been completed. The remediation phase (3) is substantially complete for all
major systems. The systems addressed can be summarized under the following
broad categories; (i.) operating, (ii.) accounting and financial reporting,
(iii.) facility (fire protection, security and utility supply) and, (iv.)
communications. The Company estimates the overall completion percentage of
the remediation phase to exceed 90% at April 30, 1999. With minor
exceptions, it is estimated that this phase will be fully completed by
October 31, 1999.
The testing phase (4) consists of component testing and comprehensive system
testing. Component testing has been undertaken as specific remediation is
completed. To date, the component test results have been favorable. The
comprehensive testing of all systems is scheduled for completion by October
31, 1999.
Cost -- The Company has not specifically budgeted the costs related to Y2K.
A substantial portion of the program has been completed by in-house
personnel. Most system application software acquired from others has been
upgraded in accordance with applicable maintenance contracts. In situations
where entire systems were replaced, there were business reasons to do so in
addition to Y2K compliance. Examples would include: (i.) the installation in
1997 of an integrated builder/accounting and financial reporting system for
real estate operations and, (ii.) a new accounting and financial reporting
system for magazine circulation operations (due for completion in August,
1999). Both new systems replaced inefficient and non-compliant in-house
systems.
Vendor compliance -- As part of the remediation phase, the Company has had
direct and continuous contact with critical vendors who supply software and
hardware products for major systems. These products have been upgraded or
replaced where necessary and have been considered in the Company's estimate
of remediation completion indicated above. In addition, the Company has
mailed inquiries to other significant vendors (critical computer products as
well as other goods and services) as to their Y2K compliance. The vast
majority of the responses received to date have been positive in that the
vendor has indicated that it is compliant or expects to be so by the end of
the year. The Company will follow up with the non-responders and assess
potential exposure on an individual basis.
Customer/client compliance -- The Company is in the process of querying its
critical customers and clients in regards to their Y2K compliance.
Worst Case Scenario -- It is very difficult to assess "the most reasonably
likely worst case scenario". The exposure related to real estate operations
is widely distributed. The vendor universe is composed of numerous small
local businesses and consequently, the Company can quickly select alternative
vendors. Customers tend to be one time home and/or land buyers. This
division's systems are primarily centered on a vendor supplied, integrated
builder/financial reporting software package which is Y2K certified.
For magazine circulation operations, the risk potential is greater. This
division's systems are complex and involve many in-house and vendor supplied
software packages. In addition, the computer hardware and software inventory
is substantial. The most likely "worst case" would be a general failure in
comprehensive systems testing. However, because the Company is conducting
full testing well in advance of December 31, 1999, there is expected to be
time to amend programs in the event of this unlikely occurrence. There is
also some "worst case" potential should major magazine clients and wholesaler
customers fail to be Y2K compliant. The Company has begun to contact this
segment in order to better evaluate risk.
16
In general, the Company considers third parties to have the greatest
potential for "worst case" scenarios because of the Company's inability to
test and/or inquire beyond second parties. For example; the utility company
which supplies one of the Company's facilities cannot provide power because
its fuel distributor is not Y2K compliant or the publisher can't produce
magazines because its printer is unable to get ink or paper.
Contingency Plans -- The Company has begun to develop contingency plans as a
consequence of testing and/or direct inquiries. These plans have and will be
formulated on a risk by risk basis. However, no contingency plans are being
developed which will compensate for the loss of key public services such as
utilities, mail delivery, governmental authority, transportation and other
commercial infrastructure services. Although the Company does not anticipate
any material business interruptions due to Y2K, in cannot be ruled out that
some unforeseen second or third party disruption might occur. The Company is
heavily dependent upon the continued normal operations of clients,
customers, key vendors, lenders and the aforementioned public services.
Item 7(A). Quantitative and Qualitative Disclosures About Market Risk
- ---------- ----------------------------------------------------------
The primary market risk facing the Company is interest rate risk on its long
term debt. The Company does not hedge interest rate risk using financial
instruments. The Company is also subject to foreign currency risk, but this
risk is not material. The following table sets forth as of April 30, 1999
the Company's long term debt obligations, principal cash flows by scheduled
maturity, weighted interest rate and estimated Fair Market Value ("FMV")
(amounts in thousands):
Year ended April 30,
There- FMV @
2000 2001 2002 2003 2004 after Total 4/30/99
Fixed rate debt $10,389 $1,452 $918 $353 $135 $1,789 $15,036 $15,100
Weighted average
interest rate 8.2% 8.1% 8.7% 8.1% 8.0% 7.1% 8.1% -
Variable rate
debt $16,380 $38,351 $4,898 $ - $ - $ - $59,629 $59,629
Weighted average
interest rate 8.6% 8.6% 8.7% - - - 8.6% -
17
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
Report of Independent Public Accountants
----------------------------------------
To the
Shareholders and
Board of
Directors of
AMREP Corporation:
We have audited the accompanying consolidated balance sheets of AMREP
Corporation (an Oklahoma corporation) and subsidiaries as of April 30, 1999
and 1998, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended April
30, 1999. These financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMREP Corporation and
subsidiaries as of April 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended April 30, 1999 in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II accompanying the
financial statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
July 1, 1999
18
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 1 of 2)
-----------------------------------------
APRIL 30, 1999 AND 1998
-----------------------
(Dollar amounts in thousands)
ASSETS 1999 1998
------ ---------- ----------
CASH AND CASH EQUIVALENTS $ 23,553 $ 20,517
RECEIVABLES, net:
Real estate operations 10,846 11,107
Magazine circulation operations 53,822 57,408
REAL ESTATE INVENTORY 89,723 99,904
OTHER REAL ESTATE INVESTMENTS 2,401 2,251
PROPERTY, PLANT AND EQUIPMENT,
at cost, net of accumulated
depreciation and amortization 18,360 17,658
OTHER ASSETS 13,881 14,719
EXCESS OF COST OF SUBSIDIARIES
OVER NET ASSETS ACQUIRED, net 5,191 6,204
---------- ----------
TOTAL ASSETS $ 217,777 $ 229,768
========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
19
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED BALANCE SHEETS (Page 2 of 2)
-----------------------------------------
APRIL 30, 1999 AND 1998
-----------------------
(Dollar amounts in thousands, except par value)
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
------------------------------------ ---------- ----------
ACCOUNTS PAYABLE, DEPOSITS AND
ACCRUED EXPENSES $ 36,182 $ 39,201
NOTES PAYABLE:
Amounts due within one year 26,769 28,511
Amounts subsequently due 47,896 55,737
TAXES PAYABLE:
Amounts due within one year 2,513 4,616
Amounts subsequently due (including interest) 11,825 15,074
DEFERRED INCOME TAXES 1,015 2,589
---------- ----------
TOTAL LIABILITIES 126,200 145,728
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
shares authorized--20,000,000;
shares issued -- 7,398,677 in 1999 and 1998 740 740
Capital contributed in excess of par value 44,928 44,928
Retained earnings 46,089 38,552
Treasury stock, at cost; 30,027 shares (180) (180)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 91,577 84,040
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 217,777 $ 229,768
========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated balance sheets.
20
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Amounts in thousands, except per share amounts)
Year Ended April 30,
-------------------------------------
1999 1998 1997
----------- ----------- ----------
REVENUES:
Real estate operations-
Home and condominium sales $ 90,947 $ 79,730 $ 68,647
Land sales 36,033 25,102 16,891
--------- --------- ---------
126,980 104,832 85,538
Magazine circulation operations 57,354 56,939 54,152
Interest and other operations 5,957 9,597 6,699
--------- --------- ---------
190,291 171,368 146,389
--------- --------- ---------
COSTS AND EXPENSES:
Real estate cost of sales-
Home and condominium sales 79,494 70,167 59,620
Land sales 21,869 12,493 9,798
Operating expenses-
Magazine circulation operations 48,181 43,835 43,966
Real estate commissions and selling 7,689 7,424 6,850
Other operations 3,412 4,680 6,635
General and administrative-
Real estate operations and corporate 8,191 8,031 7,322
Magazine circulation operations 6,408 6,657 6,428
Interest, net 4,743 4,404 4,050
Restructuring costs 2,108 - -
--------- --------- ---------
182,095 157,691 144,669
--------- --------- ---------
INCOME BEFORE INCOME TAXES 8,196 13,677 1,720
PROVISION (BENEFIT) FOR INCOME TAXES 659 5,471 (5,562)
--------- --------- ---------
NET INCOME $ 7,537 $ 8,206 $ 7,282
========= ========= =========
EARNINGS PER SHARE - BASIC AND DILUTED $ 1.02 $ 1.11 $ 0.99
========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 7,369 7,369 7,369
========= ========= =========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
21
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
(Amounts in thousands)
Capital
Contributed
Common Stock In Excess Treasury
------------ of Retained Stock at
Shares Amount Par Value Earnings Cost Total
------ -------- ------------ -------- --------- --------
BALANCE, April 30,
1996 7,399 $ 740 $ 44,928 $ 23,064 $ (180) $ 68,552
Net income - - - 7,282 - 7,282
----- --------- --------- --------- -------- --------
BALANCE, April 30,
1997 7,399 740 44,928 30,346 (180) 75,834
Net income - - - 8,206 - 8,206
----- --------- --------- --------- --------- --------
BALANCE, April 30,
1998 7,399 740 44,928 38,552 (180) 84,040
Net income - - - 7,537 - 7,537
----- --------- --------- --------- -------- --------
BALANCE, April 30,
1999 7,399 $ 740 $ 44,928 $ 46,089 $ (180) $ 91,577
===== ========= ========= ========= ======== ========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
22
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Amounts in thousands)
Year Ended April 30,
--------------------------------
1999 1998 1997
--------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,537 $ 8,206 $ 7,282
Adjustments to reconcile net income
to net cash provided (used) by operating
activities-
Depreciation and amortization 4,830 3,259 2,743
Loss (gain) on disposition of property, 218 (1,298) -
plant and equipment
Gain from exchange of real estate inventory - - (579)
for accounts payable
Changes in assets and liabilities,
excluding the effect of acquisition-
Receivables - net 3,847 (14,753) (3,896)
Real estate inventory 10,181 (7,389) (12,673)
Other real estate investments (150) 3,396 3,318
Other assets (871) (1,777) (757)
Accounts payable, deposits and accrued
expenses (3,019) 10,224 168
Taxes payable (5,352) 4,104 12,135
Deferred income taxes (1,574) (2,548) (20,703)
--------- --------- --------
Net cash provided (used) by operating
activities 15,647 1,424 (12,962)
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,305) (1,998) (3,900)
Proceeds from disposition of property, plant
and equipment 277 2,691 -
Amount paid for acquisition - (2,202) -
--------- --------- --------
Net cash used by investing activities (3,028) (1,509) (3,900)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 61,647 55,212 66,225
Principal debt payments (71,230) (50,788) (40,792)
Net cash provided (used) by financing
activities (9,583) 4,424 25,433
--------- --------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 3,036 4,339 8,571
CASH AND CASH EQUIVALENTS, beginning of year 20,517 16,178 7,607
--------- --------- --------
CASH AND CASH EQUIVALENTS, end of year $ 23,553 $ 20,517 $ 16,178
========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amounts capitalized $ 4,802 $ 4,093 $ 3,903
========= ========= ========
Income taxes paid $ 7,656 $ 3,952 $ 2,673
========= ========= ========
Acquisition of real estate assets:
Identifiable assets acquired $ - $ 1,168 $ -
Excess of cost over net assets acquired - 1,081 -
Liabilities assumed - (47) -
--------- --------- --------
Amount paid for acquisition $ - $ 2,202 $ -
========= ========= ========
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
23
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, through its principal subsidiaries, is engaged in two unrelated
businesses. Kable News Company, Inc. ("Kable") operates in the magazine
distribution and fulfillment services industries, and AMREP Southwest Inc.
operates predominately in the real estate industry, principally in New
Mexico. As more fully discussed in Note 2, the Company implemented a plan
during fiscal 1999 to wind-down a significant portion of its homebuilding
operations and close its real estate operations in Colorado and California,
and to concentrate its future real estate activities on developing and
marketing its land holdings at Rio Rancho, New Mexico.
The Company's investments in partnerships (and similar entities), in which
the Company's interest is 50% or less, or in which the Company does not
effectively control the joint venture, are accounted for by the equity
method. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The consolidated balance sheets are presented in an unclassified format,
since the Company has substantial operations in the real estate industry and
its operating cycle is greater than one year.
Land sales
----------
Land sales are recognized when the parties are bound by the terms of the
contract, all consideration (including adequate cash) has been exchanged and
title and other attributes of ownership have been conveyed to the buyer by
means of a closing. Profit is recorded either in its entirety or on the
installment method depending upon, among other things, the ability to
estimate the collectibility of the unpaid sales price. In the event the
buyer defaults on the obligation, the property is taken back and recorded as
inventory at the unpaid receivable balance, net of any deferred profit, but
not in excess of fair market value less estimated costs to sell.
Home and condominium sales
--------------------------
Sales of homes and condominiums and related costs and expenses are recognized
when title and other attributes of ownership have been conveyed to the buyer
by means of a closing.
Magazine circulation operations
-------------------------------
Revenues from magazine circulation operations include revenues from the
distribution of periodicals and subscription fulfillment activities.
Distribution revenues represent commissions earned from the distribution of
publications for client publishers which are recorded at the time the
publications go on sale. The publications generally are sold on a fully
returnable basis, which is in accordance with prevailing trade practice,
accordingly, the Company provides for estimated returns by charges to income
which are based on experience. Revenues from subscription fulfillment
activities represent fees earned from the maintenance of computer files for
customers, which are billed and earned monthly, and other fulfillment
activities including sweepstakes mail processing, customer telephone support,
product fulfillment, and graphic arts and lettershop services, all of which
are billed and earned as the services are provided.
24
Cash and cash equivalents
-------------------------
Cash equivalents consist of short term, highly liquid investments which have
an original maturity of ninety days or less, and that are readily convertible
into cash.
Real estate inventory
---------------------
Land and improvements for completed real estate projects, as well as those
held for future development or sale, are stated at the lower of accumulated
cost (except in certain instances where property is repossessed as discussed
above under "Land sales") which includes the development cost, certain
amenities, capitalized interest and capitalized real estate taxes, or fair
market value less estimated costs to sell.
Homes and condominiums completed or under construction are stated at the
lower of accumulated cost, including interest costs capitalized during
construction, or fair market value less estimated costs to sell.
Property, plant and equipment
-----------------------------
Items capitalized as part of property, plant and equipment are recorded at
cost. Expenditures for maintenance and repair and minor renewals are charged
to expense as incurred, while those expenditures which improve or extend the
useful life of existing assets are capitalized. Upon sale or other
disposition of assets, their cost and the related accumulated depreciation or
amortization are removed from the accounts and the resulting gain or loss, if
any, is reflected in operations.
Depreciation and amortization of property, plant and equipment are provided
principally by the straight-line method at various rates calculated to
amortize the book values of the respective assets over their estimated useful
lives which range from 5 to 50 years for utility plant and equipment and 3 to
40 years for all other property, plant and equipment.
Excess of cost of subsidiaries over net assets acquired
-------------------------------------------------------
The excess of amounts paid for business acquisitions over the net fair value
of the assets acquired and liabilities assumed ("goodwill") is carried as an
asset. Goodwill of $5,191,000 arose in connection with the acquisition of
Kable during 1969 and is not being amortized to operations, since this
acquisition was made prior to the effective date of APB Opinion No. 17 and
management is of the opinion that there has been no diminution of value. An
additional $1,149,000 of goodwill arose in connection with the acquisition of
certain real estate assets during 1998, and was being amortized over ten
years. Amortization expense was $86,000 in 1999 and $68,000 in 1998. As
discussed in Note 2, during the fourth quarter of 1999 the Company wrote-off
the remaining balance of this portion of the goodwill in connection with the
restructuring of its real estate operations.
Income taxes
------------
Income taxes are accounted for in accordance with SFAS No. 109, "Accounting
for Income Taxes". Under SFAS No. 109, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases
of assets and liabilities, and are measured by using enacted tax rates
expected to apply to taxable income in the years in which those differences
are expected to reverse.
Earnings per share
------------------
Basic earnings per share is based on the weighted average number of common
shares outstanding during each year. Diluted earnings per share is computed
assuming the issuance of common shares for all dilutive stock options
outstanding (using the treasury stock method) during the reporting period.
25
Stock options
-------------
The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
The Company has adopted the disclosure-only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation" (see Note 9).
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Accounting pronouncements adopted
---------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130"), which establishes standards for
reporting and presentation of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. The Company adopted SFAS No. 130 in fiscal year 1999.
The only component of comprehensive in income that applies to the Company for
1999, 1998, and 1997 is earnings as reported in the consolidated statements
of income.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Post-Retirement Benefits" ("SFAS No. 132"), which revises
employers' disclosures about pension and other post-retirement benefit
plans. The Statement is effective for fiscal years beginning after December
15, 1997. The Company adopted SFAS No. 132 in fiscal 1999. Prior period
disclosures have been presented in accordance with SFAS No. 132 (see Note 9).
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS No 131"), which changes the way
public companies report information about operating segments. SFAS No. 131,
which is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly, and to report
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues.
The Company adopted SFAS No. 131 in fiscal 1999. Prior periods have been
restated and presented in accordance with SFAS No. 131 (see Note 14).
New accounting pronouncements
-----------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. The Statement is
effective for fiscal years beginning after June 15, 2000. The Company will
adopt SFAS No. 133 in fiscal 2001. The Company expects the adoption of SFAS
No. 133 will not have a material impact on its consolidated financial
statements.
Financial statement presentation
--------------------------------
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform with the 1999 presentation.
26
(2) RESTRUCTURING COSTS:
--------------------
During the fourth quarter of fiscal 1999, the Company implemented a plan to
wind-down a significant portion of its homebuilding operations, to sell all
of its land holdings in Colorado and California, and to concentrate its real
estate activities on developing and marketing its land holdings at Rio
Rancho, New Mexico. As a result, the Company has incurred
restructuring-related charges of approximately $1.1 million, including
severance and lease termination payments, and has written-off unamortized
goodwill and acquisition-related costs of approximately $1.0 million incurred
in connection with its acquisition of certain real estate assets in
California, since, as a result of this decision, the Company's operations in
California will be substantially curtailed. The restructuring plan includes
the termination of approximately 130 employees with related severence costs
of $800,000; as of April 30, 1999, 44 employees had been terminated and
severence costs of $240,000 had been paid. In addition, the Company has
written-off approximately $1.2 million related to deposits and other
project-related inventory costs which have been abandoned or otherwise
disposed of in connection with this business restructuring, which has been
charged to cost of sales. The Company's decision to change its real estate
focus to emphasize land development operations in New Mexico and wind-down
homebuilding operations is not considered to be a permanent change of
strategy. Accordingly, because of these factors and because the Company
intends to continue homebuilding operations in Portland, Oregon, the Company
has presented the results of operations for homebuilding in continuing
operations.
(3) RECEIVABLES:
-----------
Receivables consist of: April 30,
-----------------------
1999 1998
--------- ---------
(Thousands)
Real estate operations-
Mortgage and other receivables $ 11,101 $ 11,398
Allowance for doubtful accounts (255) (291)
--------- ---------
$ 10,846 $ 11,107
========= =========
Magazine circulation operations-
Accounts receivable (maturing within
one year) $ 98,179 $ 109,303
Allowances for-
Estimated returns (37,958) (50,392)
Doubtful accounts (6,399) (1,503)
--------- ---------
$ 53,822 $ 57,408
========= =========
Mortgage and other receivables bear interest at rates ranging from 8.0% to
12.0% and result primarily from land sales. Magazine circulation operations
receivables collateralize a general purpose line-of-credit utilized for the
magazine circulation operations (see Note 8).
The Company extends credit to various companies in the real estate and
magazine circulation industries which may be affected by changes in economic
or other external conditions. Financial instruments that may potentially
subject the Company to a significant concentration of risk primarily consist
of trade accounts receivable from wholesalers in the magazine distribution
industry. As industry practices allow, the Company's policy is to manage its
exposure to credit risk through credit approvals and limits and, where
appropriate, to be secured by collateral, and to provide an allowance for
doubtful accounts for potential losses based upon factors surrounding the
credit risk of specific customers, historical trends and other financial
information. During 1999, Kable determined that certain wholesaler customers
had been impacted by an industry consolidation and were encountering
financial difficulties and, accordingly, provided an additional allowance for
doubtful accounts of approximately $5.0 million.
Maturities of principal on real estate receivables, at April 30, 1999 are as
follows (in thousands): 2000 - $7,294; 2001 - $2,241; 2002 - $71; 2003 -
$103; 2004 - $480; 2005 and thereafter - $912.
27
(4) REAL ESTATE INVENTORY:
----------------------
Real estate inventory consists of:
April 30,
----------------------
1999 1998
--------- ---------
(Thousands)
Land and improvements held for sale or
development $ 58,571 $ 61,416
Homes and condominiums-
Land and improvements 15,678 17,460
Construction costs 15,474 21,028
--------- ---------
$ 89,723 $ 99,904
========= =========
Accumulated capitalized interest costs included in real estate inventory at
April 30, 1999 and 1998 were $4,553,000 and $5,732,000, respectively.
Interest costs capitalized during 1999, 1998 and 1997 were $3,348,000,
$3,226,000 and $2,543,000, respectively. Accumulated capitalized real estate
taxes included in the inventory of land and improvements at April 30, 1999
and 1998 were $5,467,000 and $5,635,000, respectively. Real estate taxes
capitalized during 1999, 1998 and 1997 were $217,000, $165,000 and $157,000,
respectively. Previously capitalized interest costs and real estate taxes
charged to real estate cost of sales were $4,903,000, $2,726,000 and
$1,741,000 in 1999, 1998 and 1997, respectively.
As a result of the restructuring discussed in Note 2, the Company's real
estate assets will be substantially all located in New Mexico.
Accordingly, as a result of this geographic concentration, the Company could
be affected by the economic conditions of this region.
(5) OTHER REAL ESTATE INVESTMENTS:
-----------------------------
Investments in other real estate projects principally consist of the
following:
April 30,
---------------------
1999 1998
--------- ---------
(Thousands)
Unconsolidated joint ventures $ 2,401 $ 1,520
Consolidated joint venture - 731
--------- ---------
$ 2,401 $ 2,251
========= =========
28
Unconsolidated Joint Ventures
-----------------------------
The Company participates in a number of joint ventures in which it does not
have management control. These joint ventures are primarily engaged in the
development, construction and sale of single-family or multi-family
residential properties. Combined condensed financial information concerning
the Company's unconsolidated joint venture activities follows (in thousands):
April 30,
---------------------
1999 1998
--------- ---------
(Thousands)
Cash $ 612 $ 83
Receivables and other assets 700 1,090
Inventories 21,892 9,260
--------- ---------
Total Assets $ 23,204 $ 10,433
========= =========
Mortgages and notes payable $ 13,859 $ 3,789
Other liabilities 3,122 755
Equity of:
The Company 2,401 1,520
Others 3,822 4,369
--------- ---------
Total Liabilities and Equity $ 23,204 $ 10,433
========= =========
The joint ventures finance land and inventory investments primarily through a
variety of borrowing arrangements. A subsidiary of the Company has
guaranteed these mortgages payable, as well as an additional $600,000 of
mortgage debt on a project where it is a non-equity participant.
Year Ended April 30,
----------------------
1999 1998
--------- ---------
(Thousands)
Revenues $ 12,346 $ 5,729
Cost of sales 12,532 5,680
Other expenses - net 1,120 472
--------- ---------
Total pretax loss $ (1,306) $ (423)
========= =========
The Company's share of pretax loss $ (220) $ (100)
========= =========
The Company's share of pretax loss includes management fees earned from
unconsolidated joint ventures. Also, as discussed in Note 2, the Company
wrote-off approximately $1.0 million of goodwill related to these and other
real estate projects in California.
29
(6) PROPERTY, PLANT AND EQUIPMENT:
------------------------------
Property, plant and equipment consists of:
April 30,
----------------------
1999 1998
--------- ---------
(Thousands)
Land, buildings and improvements $ 10,753 $ 9,705
Furniture and fixtures 12,309 11,594
Utility plant and equipment 9,061 8,645
Other 680 974
--------- ---------
32,803 30,918
Accumulated depreciation and
amortization (14,443) (13,260)
--------- ---------
$ 18,360 $ 17,658
========= =========
Depreciation charged to operations amounted to $2,109,000, $1,940,000 and
$1,816,000 in 1999, 1998 and 1997, respectively.
(7) OTHER ASSETS:
-------------
Other assets are comprised of:
April 30,
----------------------
1999 1998
--------- ---------
(Thousands)
Prepaid expenses and other deferred $ 7,230 $ 7,053
charges, net
Purchased magazine distribution
contracts,
net of accumulated amortization of 1,818 2,246
$2,461 and $2,033 in 1999 and 1998,
respectively
Security and other deposits 2,445 3,795
Prepaid pension 1,459 949
Other 929 676
--------- ---------
$ 13,881 $ 14,719
========= =========
Amortization related to deferred charges and distribution contracts was
$1,622,000, $1,251,000 and $913,000 for the years ended April 30, 1999, 1998
and 1997, respectively.
(8) DEBT FINANCING:
---------------
Debt financing consists of:
April 30,
---------------------
1999 1998
--------- --------
(Thousands)
Notes payable -
Line-of-credit borrowings -
Real estate operations and other $ 20,490 $ 24,659
Magazine circulation operations 35,873 35,552
Mortgages and other notes payable 17,560 22,923
Other 742 1,114
--------- ---------
$ 74,665 $ 84,248
========= =========
Maturities of principal on notes payable at April 30, 1999 are as follows (in
thousands): 2000 - $26,769; 2001 - $39,803; 2002 - $5,816; 2003 - $353; 2004
- - $135; 2005 and thereafter - $1,789.
30
Line-of-credit borrowings
-------------------------
The Company has several loan arrangements with various financial institutions
to support real estate operations. These loans have a total maximum amount
available of approximately $27.2 million of which borrowings of approximately
$20.5 million were outstanding as of April 30, 1999. These borrowings, which
have maturities ranging from fiscal 2000 through fiscal 2002, bear interest
ranging from the prime rate (7.75% at April 30, 1999) plus .75% to 1.75%
(with a weighted average effective rate of interest of approximately 8.6% at
April 30, 1999), 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 $18 million of these lines-of-credit were
obtained.
At April 30, 1999, the Company had drawn approximately $35.9 million against
an additional $40.0 million line-of-credit arrangement which is generally
restricted to magazine circulation operations. Borrowings under this
line-of-credit agreement bear interest at the prime rate plus .5% or, at the
Company's option, at LIBOR (5.0% at April 30, 1999) plus 2.75%, and are
collateralized by accounts receivable arising from magazine circulation
operations. This agreement also contains various financial performance and
other restrictive covenants which, among other things, limit the payment of
dividends, annual capital expenditures and loans from the magazine
circulation subsidiary to the Company. The Company was not in compliance with
a performance covenant on one loan at April 30, 1999, for which it has
obtained a waiver. Borrowings pursuant to this line-of-credit agreement are
due August 31, 2000.
As a result of the restructuring of real estate operations discussed in Note
2, the Company anticipates that its real estate borrowing requirements, which
had been used principally to support construction activities, will decline.
The Company anticipates the ability to renew, extend or replace any of these
loan agreements as needed.
Mortgages and other notes payable
---------------------------------
Mortgages and other notes payable had interest rates ranging from 6.4% to
11.5% at April 30, 1999, and are primarily collateralized by property, plant
and equipment and certain land inventory. These borrowings mature through
fiscal 2013.
(9) BENEFIT PLANS:
--------------
Stock option plans
------------------
Under the Company's 1992 Stock Option Plan, 311,750 shares are reserved for
issuance to officers and other key employees. Options may be granted in such
amounts, at such times, and with such exercise prices as the stock option
committee may determine. The Non-Employee Directors Option Plan has 40,500
shares reserved for issuance and provides for an automatic issuance of
options to purchase 500 shares of common stock to each non-employee director
annually at the fair market value at the date of grant. The options are
exercisable in one year and expire five years after the date of grant. A
summary of activity in the Company's stock option plans is as follows:
31
Year Ended April 30,
---------------------------------------------------------
1999 1998 1997
---------------------------------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
------- -------- -------- ------ ------- -------
Options outstanding
at beginning of year 50,500 $ 6.18 85,500 $ 7.40 121,000 $ 7.13
Granted 2,500 $ 7.75 42,500 $ 6.09 3,500 $ 5.19
Expired or canceled (9,500) $ 6.50 (77,500) $ 7.48 (39,000) $ 6.38
------- ------- -------
Options outstanding
at end of year 43,500 $ 6.20 50,500 $ 6.18 85,500 $7.40
======= ======= =======
Available for grant
at end of year 308,750 303,250 272,250
======= ======= =======
Options exercisable
at end of year 18,417 8,000 80,500
======= ======= =======
Range of exercise
prices for options
exercisable at end
of year $5.19 to $7.50 $5.19 to $8.88 $5.12 to $8.88
============== ============== ===============
Options outstanding at April 30, 1999 are exercisable over a three to four
year period beginning one year from date of grant. The weighted average fair
value of options granted during the year was $2.32 in 1999, $.79 in 1998 and
$.24 in 1997. The weighted average remaining contractual life of options
outstanding at April 30, 1999, 1998 and 1997 is 2.4, 3.2 and .4 years,
respectively.
Stock options granted have been issued at the fair market value of the
Company's stock at the date of grant. Accordingly, no compensation expense
has been recognized with respect to the stock option plans. Further, the
amount of additional compensation disclosable under the disclosure-only
provisions of SFAS No. 123 is immaterial for all periods presented.
Savings plans
-------------
The Company has two savings plans to which the Company makes contributions.
The plans were amended during 1998 to provide for standard contributions of
33.3% of eligible employees' defined contributions up to a maximum of 2% of
such employees' compensation. Additional amounts may be contributed with the
approval of the Company' Board of Directors. The Company's contributions to
the plans amounted to approximately $216,000, $268,000 and $129,000, in 1999,
1998 and 1997, respectively.
Retirement plans
----------------
The Company has two retirement plans which cover substantially all full-time
employees. In 1999, 1998 and 1997, the Company contributed $12,000, $231,000
and $1,190,000, respectively, to the plans. During fiscal 1998, the
Company's pension plans were amended to revise the form of benefit payment
determination from that of a defined benefit plan formula based upon length
of service and a percentage of qualifying compensation to one based upon a
percentage of the employee's annual salary. Assets are invested primarily in
United States Treasury obligations, equity and debt securities and money
market funds. Net periodic pension cost for 1999, 1998 and 1997 was
comprised of the following components:
32
Year Ended April 30,
------------------------------------
1999 1998 1997
--------- --------- ---------
(Thousands)
Service cost - benefits
earned during the period $ 645 $ 994 $ 1,156
Interest cost on projected
benefit obligation 1,617 1,717 1,722
Expected return on assets (2,385) (2,006) (1,885)
Amortization of prior service
cost (352) (121) (121)
Recognized net actuarial gain
(loss) (12) - -
--------- --------- ---------
Net periodic pension cost
(income) $ (487) $ 584 $ 872
========= ========= =========
Assumptions used in determining net periodic pension cost were:
Year Ended April 30,
------------------------------------------
1999 1998 1997
------------- ------------ -------------
Discount rates 7.25% 7.25% 8.00%
Rates of increase in
compensation levels N/A N/A 4.50-5.00%
Expected long-term rate of
return on assets 8.00-9.00% 8.00-9.00% 8.00-9.00%
The following table sets forth changes in the plans' benefit obligations and
assets, and summarizes components of amounts recognized in the Company's
consolidated balance sheets:
April 30,
--------------------
1999 1998
------- --------
(Thousands)
Change in benefit obligations:
Benefit obligation at beginning of year $ 22,471 $ 23,729
Service cost 495 887
Interest cost 1,617 1,716
Amendments - (3,852)
Actuarial gain 310 1,147
Benefits paid (1,252) (1,156)
-------- --------
Benefit obligation at end of year $ 23,641 $ 22,471
======== ========
Change in plan assets:
Fair value of plan assets at
beginning of year $ 27,133 $ 23,283
Actual return on plan assets 2,416 5,094
Employer contribution 12 231
Benefits paid (1,252) (1,156)
Expenses (241) (319)
-------- --------
Fair value of plan assets at end of year $ 28,068 $ 27,133
======== ========
Funded status $ 4,427 $ 4,662
Unrecognized net actuarial loss 407 14
Unrecognized prior service cost (3,375) (3,727)
-------- --------
Prepaid pension cost $ 1,459 $ 949
======== ========
33
(10) INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
Year Ended April 30,
-----------------------------------
1999 1998 1997
-------- --------- ---------
(Thousands)
Current:
Federal $ 1,946 $ 6,925 $ 13,187
State and local 286 1,094 1,954
--------- --------- ---------
2,232 8,019 15,141
--------- --------- ---------
Deferred:
Federal (1,397) (2,177) (18,753)
State and local (176) (371) (1,950)
--------- --------- ---------
(1,573) (2,548) (20,703)
--------- --------- ---------
Total provision (benefit) for income
taxes $ 659 $ 5,471 $ (5,562)
========= ========= =========
The components of the net deferred income tax liability are as follows:
April 30,
------------------------
1999 1998
--------- ---------
(Thousands)
Deferred income tax assets-
State tax loss carryforwards $ 4,433 $ 4,716
Real estate inventory valuation 964 1,127
Interest payable on tax settlements 2,229 2,229
Real estate basis differences 1,528 508
Reserve for periodicals and paperbacks - 596
Differences related to timing of 1,120 871
partnership income
--------- ---------
Total deferred income tax assets 10,274 10,047
--------- ---------
Deferred income tax liabilities-
Reserve for periodicals and paperbacks (1,329) -
Gain on partnership restructuring (473) (473)
Depreciable assets (2,684) (2,563)
Expenses capitalized for financial
reporting purposes, expensed for tax (2,399) (2,518)
Other (519) (2,976)
--------- ---------
Total deferred income tax liabilities (7,404) (8,530)
--------- ---------
Valuation allowance for realization of
state tax loss carryforwards (3,885) (4,106)
--------- ---------
Net deferred income tax liability $ (1,015) $ (2,589)
========= =========
34
The following table reconciles taxes computed at the U.S. federal statutory
income tax rate to the Company's actual tax provision (benefit):
Year Ended April 30,
------------------------------------
1999 1998 1997
--------- --------- ---------
(Thousands)
Computed tax provision at
statutory rate $ 2,787 $ 4,787 $ 585
Increase (reduction) in tax
resulting from:
State income taxes, net of federal
income tax effect 491 809 117
Net reduction in tax liability
as a result of IRS settlement (2,401) - (6,250)
Other (218) (125) (14)
--------- --------- ---------
Actual tax provision (benefit) $ 659 $ 5,471 $ (5,562)
========= ========= =========
During 1997, the Company reached an agreement with the Internal Revenue
Service ("IRS") to resolve all outstanding issues related to the IRS's
examination of the Company's tax returns for the years 1984 through 1989. As
a result, the Company recorded a net reduction in its previously established
tax liability in the amount of $6.25 million to reflect a reduction in the
amount ultimately expected to be payable in order to achieve a tax treatment
consistent with the 1997 agreement for all subsequent tax years under
examination (1990 through 1996) and to reflect a reduction in federal income
tax rates for deferred taxes established at rates in effect prior to 1987.
During 1999, the Company reached an agreement with the IRS to resolve all
outstanding issues resulting from the examination of tax years 1990 through
1992, and paid all federal tax due for those years. Based upon the results
of this agreement, which resulted in an amount of tax payable less than the
Company had believed would be required, the Company reduced the amount of
Taxes Payable - Amounts subsequently due by an additional $2.4 million. The
examinations for the years 1993 through 1996 are in various stages of
completion, and the exact amount of taxes and interest attributable to any
given tax year will only be known and payable after the IRS completes its
review and computes the amount of the adjustment (including interest due) for
each year. For tax years beginning in 1996, the Company believes that its
taxes have been calculated in a manner consistent with IRS regulations and in
the manner in which tax examinations for all years 1984 through 1992 have
been completed, and accordingly, the Company believes that the balance of
Taxes Payable - amounts subsequently due at April 30, 1999 reflects all
amounts that will be due to the IRS upon settlement all open tax examinations.
(11) COMMITMENTS AND CONTINGENCIES:
------------------------------
Revenue agent review
--------------------
The IRS is in the process of reviewing the Company's tax returns for the
years 1993 through 1996. While the Company cannot be totally certain of the
results of these audits, in 1997 it adjusted Deferred Income Taxes and Taxes
Payable, as discussed in Note 10, to reflect adjustments similar to those
agreed upon with the IRS in reaching agreement on the 1984 through 1989 tax
returns with regard to the reserve for periodicals and paperbacks.
35
Land sale contracts
-------------------
During 1999, the Company entered into conditional sales contracts to sell to
several builders a total of approximately 2,100 lots in Rio Rancho, New
Mexico at an aggregate cost of approximately $44.4 million. A total of 646
of these lots were sold pursuant to such contracts at a total sales price of
$15.8 million during 1999. The remainder of the lots are anticipated to
close over the next two years, during which time the Company expects to incur
substantial additional development costs. Since each of the contracts
permits the purchaser to terminate its obligations by forfeiture of a
relatively modest deposit, there are no assurances that all, or even a
substantial portion, of the lots subject to the contracts will be sold
pursuant to the contracts.
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 1999, 1998 and 1997 was approximately
$5,477,000, $5,195,000 and $5,215,000, respectively.
The approximate minimum rental commitments for years subsequent to April 30,
1999, are as follows (in thousands): 2000 - $3,145; 2001 - $2,838; 2002 -
$2,197; 2003 - $1,696; 2004 - $1,004; thereafter - $463; and the total future
minimum rental payments - $11,343.
Rio Rancho lot exchanges
------------------------
In connection with homesite sales at Rio Rancho, New Mexico, made prior to
1977, if water, electric and telephone utilities have not reached the lot
site when a purchaser is ready to build a home, the Company is obligated to
exchange a lot in an area then serviced by such utilities for a lot of the
purchaser, without cost to the purchaser. The Company 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:
------------------------------------
The estimated fair value of financial instruments is determined by reference
to various market data and other valuation techniques as appropriate. The
carrying amounts of cash and cash equivalents and trade payables approximate
fair value because of the short maturity of these financial instruments.
Debt that bears variable interest rates indexed to prime or LIBOR also
approximates fair value as it reprices when market interest rates changes.
The estimated fair value of the Company's long-term, fixed-rate mortgage
receivables is $8.8 million, versus a carrying amount of $8.7 million, and
$7.4 million versus $7.5 million, respectively, at April 30, 1999 and April
30, 1998. The estimated fair value of the Company's long-term, fixed-rate
notes payable is $15.0 million versus a carrying amount of $15.1 million as
of April 30, 1999 and $15.8 million, which equals the carrying amount as of
April 30, 1998.
36
(14) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT
-------------------------------------------------------
INDUSTRY SEGMENTS:
------------------
The Company adopted SFAS No. 131 during 1999, which requires that industry
segment information be prepared on a manner consistent with the manner in
which financial information is prepared and evaluated by management for
making operating decisions in place of the "industry segment" approach used
previously. As a result, the Company has identified four segments in which
it operates under the definition established by this standard. The Company's
real estate subsidiary has two identified segments, Land Sale operations and
Homebuilding operations. Land Sale operations involve the obtaining of
approvals, and development of large tracts of land for sale to builders,
commercial users and others, and Homebuilding operations involve the
construction and sale of single-family homes and other projects. Magazine
circulation operations also has two identified segments, Distribution and
Fulfillment operations. Distribution operations involve the national and
international distribution and sale of periodicals and paperbacks to
wholesalers, and Fulfillment operations involve the performance of
subscription and product fulfillment and other related activities on behalf
of various publishers and other clients. Corporate and other miscellaneous
revenues and expenses not identifiable with a specific segment are grouped
together in this presentation. Certain expenses are allocated among industry
segments based upon management's estimate of each segment's absorption.
Identifiable assets by industry are those assets that are used in the
Company's operations in each industry segment, which also is based upon
certain estimates and allocations among segments.
Segment information from prior years prepared in conformity with SFAS No. 14
has been restated to conform to the provisions of SFAS no. 131.
37
The following schedules set forth summarized data relative to the industry
segments:
Land Home Corporate
Sales Building Distribution Fulfillment and Other Consolidated
--------- --------- ------------ ----------- --------- -------------
1999 (Thousands):
Revenues $ 37,182 $ 92,637 $ 20,377 $ 36,977 $ 3,118 $ 190,291
Operating expenses 25,292 91,151 19,103 35,486 4,212 175,244
Restructuring costs - 2,108 - - - 2,108
Interest expense, net 619 1,394 1,954 731 45 4,743
--------- --------- --------- -------- -------- ---------
Pretax income(loss)
contribution $ 11,271 $ (2,016) $ (680) $ 760 $ (1,139) $ 8,196
========= ========= ========= ======== ======== =========
Depreciation and
amortization $ 362 $ 1,857 $ 891 $ 1,512 $ 208 $ 4,830
Identifiable assets $ 64,814 $ 55,310 $ 61,791 $ 18,528 $ 17,334 $ 217,777
Capital expenditures $ 1,043 $ 679 $ 168 $ 970 $ 445 $ 3,305
- -----------------------------------------------------------------------------------------------------
1998 (Thousands):
Revenues $ 25,821 $ 80,461 $ 18,322 $ 38,617 $ 8,147 $ 171,368
Operating expenses 15,656 80,200 14,358 36,134 6,939 153,287
Interest expense, net 433 1,121 1,907 827 116 4,404
--------- --------- --------- -------- -------- ---------
Pretax income (loss)
contribution $ 9,732 $ (860) $ 2,057 $ 1,656 $ 1,092 $ 13,677
========= ========= ========= ======== ======== =========
Depreciation and
amortization $ 261 $ 610 $ 996 $ 1,051 $ 341 $ 3,259
Identifiable assets $ 75,373 $ 56,941 $ 62,478 $ 19,843 $ 15,133 $ 229,768
Capital expenditures $ 102 $ 396 $ 204 $ 540 $ 756 $ 1,998
- -----------------------------------------------------------------------------------------------------
1997 (Thousands):
Revenues $ 17,761 $ 68,793 $ 17,213 $ 36,939 $ 5,683 $ 146,389
Operating expenses 12,133 69,478 14,239 36,155 8,614 140,619
Interest expense, net 272 1,268 1,548 810 152 4,050
--------- --------- --------- -------- -------- ---------
Pretax income (loss)
contribution $ 5,356 $ (1,953) $ 1,426 $ (26) $ (3,083) $ 1,720
========= ========= ========= ======== ======== =========
Depreciation and
amortization $ 246 $ 333 $ 1,360 $ 313 $ 491 $ 2,743
Identifiable assets $ 81,990 $ 42,506 $ 58,300 $ 13,084 $ 9,431 $ 205,311
Capital expenditures $ 152 $ 511 $ 292 $ 1,878 $ 1,067 $ 3,900
- -----------------------------------------------------------------------------------------------------
38
Selected Quarterly Financial Data (Unaudited)
(In thousands of dollars, except per share
amounts)
Quarter Ended
-------------------------------------------------
July 31, October 31, January 31, April 30,
1998 1998 1999 1999
-------------------------------------------------
Revenues $ 46,223 $ 35,930 $ 41,787 $ 66,351
Gross Profit 11,374 7,508 6,374 12,079
Net Income (a) $ 2,882 $ 341 $ 693 $ 3,621
========= ========= ========= =========
Earnings Per Share -
Basic and Diluted (a) $ 0.39 $ 0.05 $ 0.09 $ 0.49
========= ========= ========= =========
Quarter Ended
--------------------------------------------------
July 31, October 31, January 31, April 30,
1997 1997 1998 1998
--------------------------------------------------
Revenues $ 37,795 $ 43,540 $ 46,849 $ 43,184
Gross Profit 7,086 10,845 13,591 8,671
Net Income $ 505 $ 2,539 $ 4,142 $ 1,020
========= ========= ========= =========
Earnings Per Share -
Basic and Diluted $ 0.07 $ 0.34 $ 0.56 $ 0.14
========= ========= ========= =========
a) The quarters ended January 31, 1999 and April 30, 1999 reflect an
adjustment to Taxes Payable - amounts subsequently due of $900,000 and
$1,500,000 respectively, for the settlement of the 1990 through 1992 tax
examinations (see Note 10).
Item 9. Changes in and Disagreements with Accountants on Accounting
- -------- -----------------------------------------------------------
and Financial Disclosure.
-------------------------
Not Applicable.
PART III
--------
The information called for by Part III is hereby incorporated by reference
from the information set forth and under the headings "Common Stock Ownership
of Certain Beneficial Owners and Management", "Election of Directors", and
"Executive Compensation" in Registrant's definitive proxy statement for the
1999 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".
39
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, 1999 and 1998
Consolidated Statements of Operations for the Three Years
Ended April 30, 1999
Consolidated Statements of Shareholders' Equity for the
Three Years Ended April 30, 1999
Consolidated Statements of Cash Flows for the Three Years
Ended April 30, 1999
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, 1999, Registrant filed no
Current Report on Form 8-K.
40
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 27, 1999 By /s/Mohan Vachani
----------------
Mohan Vachani
Senior Vice President
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of Registrant and in the capacities and on the
dates indicated.
/s/Mohan Vachani /s/Nicholas G. Karabots
- ----------------------------------- ------------------------
Mohan Vachani Nicholas G. Karabots
Director, Senior Vice President, Director
Principal Financial Officer and Dated: July 27, 1999
Principal Accounting Officer *
Dated: July 27, 1999
/s/Jerome Belson /s/Albert V. Russo
- ------------------------------------ -------------------------
Jerome Belson Albert V. Russo
Director Director
Dated: July 27, 1999 Dated: July 27, 1999
/s/Edward B. Cloues, II /s/Samuel N. Seidman
- ------------------------------------ --------------------------
Edward B. Cloues, II Samuel N. Seidman
Director Director
Dated: July 27, 1999 Dated: July 27, 1999
/s/Daniel Friedman /s/James Wall
- ------------------------------------ ---------------------------
Daniel Friedman James Wall
Director Director
Dated: July 27, 1999 Dated: July 27, 1999
*Also acting as Principal Executive Officer in the absence of a Chief
Executive Officer, solely for the purpose of signing this Annual Report.
41
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 1 of 2)
-------------------------------------------------------------
(Thousands)
Additions
-----------------------
Charges
(Credits) Charged
Balance at to Costs (Credited) Balance
Beginning and to Other at End
of Period Expenses Accounts Deductions of Period
--------- --------- --------- ---------- ---------
FOR THE YEAR ENDED
APRIL 30, 1999:
Allowance for
doubtful
accounts
(included in
receivables -
real estate
operations on
the
consolidated
balance sheet) $ 291 $ 74 $ - $ 110(A) $ 255
-------- -------- -------- ---------- --------
Allowance for
estimated
returns and
doubtful
accounts
(included in
receivables -
magazine
circulation
operations on
the
consolidated
balance sheet) $ 51,895 $ (3,528) $ - $ 4,010(A) $ 44,357
-------- -------- -------- ---------- --------
FOR THE YEAR ENDED
APRIL 30, 1998:
Allowance for
doubtful
accounts
(included in
receivables -
real estate
operations on
the
consolidated
balance sheet)
$ 690 $ 143 $ - $ 542(A) $ 291
-------- -------- -------- ---------- --------
Allowance for
estimated
returns and
doubtful
accounts
(included in
receivables -
magazine
circulation
operations on
the
consolidated
balance sheet) $ 48,976 $ 3,044 $ - $ 125(A) $ 51,895
-------- -------- -------- ---------- --------
Real estate
valuation
allowance $ 2,459 $ - $ (1,880) $ 579(B) $ -
-------- -------- -------- ---------- --------
42
AMREP CORPORATION AND SUBSIDIARIES
----------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 2 of 2)
-------------------------------------------------------------
(Thousands)
Additions
-----------------------
Charges
(Credits) Charged
Balance at to Costs (Credited) Balance
Beginning and to Other at End
of Period Expenses Accounts Deductions of Period
--------- --------- --------- ---------- ---------
FOR THE YEAR ENDED
APRIL 30, 1997:
Allowance for
doubtful
accounts
(included in
receivables -
real estate
operations on
the
consolidated
balance sheet)
$ 598 $ 135 $ - $ 43(A) $ 690
-------- -------- -------- ---------- --------
Allowance for
estimated
returns and
doubtful
accounts
(included in
receivables -
magazine
circulation
operations on
the
consolidated
balance sheet) $ 49,394 $ 706 $ - $ 1,124(A) $ 48,976
-------- -------- -------- ---------- --------
Real estate
valuation
allowance $ 2,580 $ - $ - $ 121(B) $ 2,459
-------- -------- -------- ---------- --------
NOTE:(A) Uncollectible accounts written off.
(B) Allowances utilized to reduce inventory valuation.
43
EXHIBIT INDEX
(3)(a)(i) Articles of Incorporation, as
amended - Incorporated by
reference to Exhibit (3) (a) (i)
to Registrant's Annual Report on
Form 10-K for the year ended April
30, 1998.
(3)(a)(ii) Certificate of Merger -
Incorporated by reference to
Exhibit (3) (a) (ii) to
Registrant's Annual Report on Form
10-K for the year ended April 30,
1998.
(3) (b) By-Laws as restated September 24,
1997 - Incorporated by reference
to Exhibit 3 (c) to Registrant's
Quarterly Report on Form 10-Q for
the quarter ended October 31, 1997.
(4) (a) Loan Agreement dated as of
September 15, 1998 between Kable
News Company, Inc., and American
National Bank and Trust Company of
Chicago as Agent and all the
lenders as defined therein -
Incorporated by reference to
Exhibit 4 (a) to Registrant's
Quarterly Report on Form 10-Q for
the quarter ended October 31, 1998.
(4) (b) Commitment Agreement dated as of
February 20, 1998 between AMREP
Southwest, Inc., and Residential
Funding Corporation - Incorporated
by reference to Exhibit 4 (b) to
Registrant's Quarterly Report on
Form 10-Q for the quarter ended
October 31, 1998.
(10) (a) 1992 Stock Option Plan -
Incorporated by reference to
Exhibit 10 (h) to Registrant's
Annual Report on Form 10-K for the
year ended April 30, 1997.*
(10) (b) Non-Employee Directors Option
Plan, as amended - Incorporated by
reference to Exhibit 10 (i) to
Registrant's Annual Report on Form
10-K for the year ended April 30,
1997.*
(21) Subsidiaries of Registrant, filed
herewith.
(23) Consent of Arthur Andersen LLP,
filed herewith.
(27) Financial Data Schedule
_________________________________
* Management contract or compensatory plan or arrangement in
which directors or officers participate.
44