-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HTbrwRA5lzbZ9fYsxXoKbfaoZP3067CKk5ceXslC8NL4XD1kF7F+LPFqHieg+W3r tkb/Xt4tm4dGrI+wB4KeqQ== 0000006207-97-000003.txt : 19970730 0000006207-97-000003.hdr.sgml : 19970730 ACCESSION NUMBER: 0000006207-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970729 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMREP CORP CENTRAL INDEX KEY: 0000006207 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590936128 STATE OF INCORPORATION: OK FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04702 FILM NUMBER: 97647346 BUSINESS ADDRESS: STREET 1: 641 LEXINGTON AVENUE STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127054700 MAIL ADDRESS: STREET 1: 641 LEXINGTON AVE STREET 2: 6TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN REALTY & PETROLEUM CORP DATE OF NAME CHANGE: 19671019 10-K 1 ANNUAL REPORT 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, 1997 Commission File Number 1-4702 -------------- ------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to ___________________ AMREP CORPORATION - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its Charter) Oklahoma 59-0936128 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 641 Lexington Ave., 6th Floor New York, New York 10022 - ------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 705-4700 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - --------------------- -------------------- Common Stock $.10 par value New York Stock Exchange 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 25, 1997, on the New York Stock Exchange Composite Tape: $22,588,003. Number of shares of Common Stock, par value $.10 per share, outstanding at July 25, 1997 - 7,368,650. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents of Registrant are incorporated by reference into the indicated parts of this report: Definitive Proxy Statement for 1997 Annual Meeting Part III _____________________________________ PART I ------ Item 1. Business - ------- -------- GENERAL The Company* is a real estate developer and builder of housing, national distributor of magazines and provider of subscription fulfillment services for publishers. It is the developer and major builder of single-family homes at Rio Rancho, New Mexico and more recently has entered the Denver, Colorado home-building market. Data concerning Industry Segments is set forth in Note 13 of Notes to Consolidated Financial Statements. The Company's foreign sales and activities are not significant. REAL ESTATE OPERATIONS Real Estate Operations consist primarily of (i) the construction and sale of housing, (ii) the development and sale of housing sites, and (iii) the sale of tracts for residential, industrial and commercial uses. HOUSING OPERATIONS The Company builds and markets a broad spectrum of housing, principally low to medium priced single-family homes ranging in size from approximately 850 to 3,150 square feet. It presently is building at Rio Rancho, New Mexico and in the Denver, Colorado Metro area. The substantial majority of the Company's building is at Rio Rancho, where the base prices of the homes and condominiums presently being sold by the Company range from approximately $75,000 to $275,000, although most are in the $100,000 to $130,000 range. In fiscal l997, the Company delivered 445 housing units at Rio Rancho at an average price of $109,000. In fiscal l996, it delivered 580 housing units there at an average price of $112,000. The Company does the development work at Rio Rancho. See "DEVELOPMENT OPERATIONS - Rio Rancho" for information concerning Rio Rancho. The Company entered the suburban Denver Metro market in 1993 and as of April 30, 1997 it had built and delivered 383 homes in this market. Its major project in this market is Bradbury Ranch in Parker, in the southeastern part of the Denver Metro area, where in 1994 it acquired 484 acres of undeveloped residential property zoned for approximately 1,700 homes. Development work began in fiscal 1995, and the Company has closed 45 homes in the $125,000 to $150,000 price range in the first phase of the project as of April 30, 1997. _________________ * As used herein "Company" includes the Registrant and its subsidiaries unless the context indicates otherwise. In fiscal 1997, the Company also delivered 36 homes in several other smaller projects in the Denver Metro area, at an average price of $138,000, while in fiscal 1996, it delivered 126 homes at such projects at an average price of $133,000. The Company owns approximately 190 additional lots at such projects but presently intends to sell some of these lots to other builders. During 1984 and 1985, the Company built 104 of a projected total of 800 units of town houses and apartment condominiums at another project in the Denver Metro area, but stopped construction because of Denver's economic slow down. Construction of an additional 102 units at this project has recommenced, and the Company delivered 20 of the units in fiscal 1997 at an average price of $100,000. The Company is the general partner with a 50% interest in a limited partnership which in 1990 commenced construction of a townhouse project in Freehold, New Jersey. When completed, the project will have 380 units. Pursuant to New Jersey law, 20% of the units must be priced substantially below market, but the remaining units may be sold at market and are designed to sell in the $115,000 to $155,000 range. From inception through April 1997, 358 units were delivered, including all of the required below market units. The Company participates in a joint venture which builds single-family homes in the Eldorado at Santa Fe, New Mexico subdivision ("Eldorado"), although the Company is not the builder. In fiscal l997, the venture sold 4 homes. In addition, during fiscal 1995, a subsidiary of the Company entered into a joint venture arrangement for the development and construction of 42 two-family homes in Brooklyn, New York, which closed 41 units through April 30, 1997. Until January 1994, the Company was the general partner and majority owner of a limited partnership which owns a congregate living rental facility in West Palm Beach, Florida. In January l994, an unrelated third party became the general partner of the partnership and the Company became a limited partner, with a continuing equity interest in the partnership. When completed in fiscal 1991, the facility had 300 units. However, in fiscal 1995 and fiscal 1996, 60 of the original units were converted for operation as an Assisted Care Living Facility ("ACLF"). Currently, 222 of the 240 remaining housing units are rented for terms of up to twelve months, and 58 of the 70 available spaces in the ACLF operation are occupied under leases having terms of up to twelve months. Until fiscal 1994, AMREP and a subsidiary held all of the partnership interests in a limited partnership which owns 247 units of moderately-priced rental housing in Orlando, Florida. There then was a restructuring of that partnership in which an unrelated third party became the general partner and the Company became a 50% limited partner. The Company's management subsidiary continues to manage the project under a year-to-year contract. Substantially all of the units currently are leased for terms of from 6 to 12 months. The Company builds a number of different models of houses at its developments, which it changes periodically based on experience and market research. At Rio Rancho the houses are designed by the Company's own staff. The Company acts as general contractor, supervising all development and building activities, but employs subcontractors for most construction work. However, the Company performs some site preparation work with its own equipment and personnel and its employees do final preparation and cleaning work on housing units. At the Colorado developments the houses are designed by an outside architect. The Company acts as general contractor but employs subcontractors for all construction and site preparation work. The houses at the Freehold project are designed by an outside architect. A 75% owned subsidiary of the Company is the general contractor, but it employs subcontractors for all construction and site preparation work. The Company's housing is of frame construction, and the Company has no reason to anticipate difficulty in obtaining all necessary materials as needed. At Rio Rancho and the Colorado projects, the Company enters into contracts with subcontractors and suppliers of materials pursuant to which prices are established for a specific period, generally six months. Such contracts are generally used for all subcontractors and all suppliers. The Company generally uses more than one subcontractor for each trade and more than one supplier of each type of material. The Company's construction and development departments are headquartered at Rio Rancho, New Mexico, but it has local project managers for its building activities elsewhere. DEVELOPMENT OPERATIONS The Company develops housing sites which include those for sale at Rio Rancho, Eldorado and in its projects in Denver. The development activity includes the obtaining of necessary governmental approvals, installation of utilities and necessary storm drains, and building or improving the roads. The engineering work is performed by both outside firms and Company employees, but development work generally is performed by outside contractors. The Company sells developed residential lots to outside builders at Rio Rancho, Eldorado and at several of its projects in Denver and, in addition, sells undeveloped lots to outside builders and other commercial purchasers at Rio Rancho. In fiscal 1997, the Company sold 184 lots at Rio Rancho (of which the substantial majority were undeveloped) for an aggregate of $2,464,000, 57 developed lots at Eldorado for an aggregate of $1,538,000 and 101 developed lots at the Denver projects for an aggregate of $2,720,000. Rio Rancho This project consists of 91,049 contiguous acres in Sandoval County, New Mexico, near Albuquerque, of which some 72,200 acres have been platted into approximately 110,500 homesite and commercial lots and 16,100 acres are dedicated to community facilities, roads and drainage with the remainder consisting of bulk unplatted land. At April 30, 1997, a total of approximately 79,000 of the lots had been sold. The Company currently owns approximately 25,000 acres at Rio Rancho, of which some 8,400 acres are in contiguous blocks suitable for development. The balance is in scattered lots which require the purchase of a sufficient number of adjoining lots to create tracts suitable for development. Rio Rancho (most of the populated portion of which is in an incorporated city) has a population of over 50,000. Piped water is supplied to all homes by a city-owned water utility company while electricity and telephone service are supplied by independent public utility companies. Most homes are also serviced by piped gas and sewage utilities. Sewage disposal for lots not serviced by the utility system is by individual septic tank. The Company is required to make deposits with the electric, gas, water and sewage companies when their utility lines are extended to new sections. A substantial part of such deposits are returned as houses are built and utility services commence. Since early 1977, no lots have been sold except with houses on them or to outside builders. Over 50,000 lots were sold prior to 1977, and most of these are in areas where utilities have not yet been installed. However, under the contracts pursuant to which the lots were sold, if 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 an area then serviced by water, telephone and electric utilities for a lot of the purchaser, without cost to the purchaser. The Company has not incurred significant costs related to such exchanges. The commercial areas at Rio Rancho presently house in excess of 500 business and professional offices, 15 shopping centers with over 1,250,000 square feet of store and office space, and a 55,000 square foot office building largely occupied by the Company. In addition, a number of individual office buildings and stores are located throughout the community. Ten financial institutions have offices at Rio Rancho. The industrial areas presently have approximately 72 buildings with over 3,025,000 square feet, including a manufacturing facility containing approximately 2,100,000 square feet built and occupied by Intel Corporation. Eldorado at Santa Fe This subdivision, consisting of approximately 2,000 single-family homes on 6,000 acres platted into lots, is located 10 miles southeast of Santa Fe, New Mexico. Approximately 60 lots remain to be sold. Denver The Company is currently developing approximately 160 acres of the 484 acre Bradbury Ranch project into 582 lots. It intends to sell approximately half of the lots to other builders and build and sell its own houses on the remaining lots. The Company has sold 86 of these lots to other builders through April 30, 1997. From time to time, the Company may also sell developed lots from its other projects to builders; the Company sold an additional 41 lots to other builders from one other project during fiscal 1997. SALE OF NON-RESIDENTIAL TRACTS The Company sells developed and undeveloped tracts at Rio Rancho to commercial users and may sell tracts from its Bradbury Ranch property in Parker, Colorado. In fiscal 1997, 23 tracts were sold at Rio Rancho at prices ranging from approximately $15,000 to $1,244,000. MARKETING The Company's homes are generally purchased as principal residences. The designs of the various models built by the Company are based on market research, which is done principally by Company personnel. At Rio Rancho, the Company sells its housing almost entirely from on-site models, both directly and through brokers. At the Colorado developments, the Company sells its housing through brokers operating out of on-site sales offices. At Freehold, the Company sells directly from on-site models without brokers. Industrial and commercial tracts at Rio Rancho are marketed by a separate department, both directly and through brokers. There is no significant seasonality to either housing or tract sales. However, unusually severe winter weather can disrupt construction activities, and when this occurs, there can be a slow down in housing sales in the immediately ensuing months followed by a "bunching" as deliveries catch up. BACKLOG Almost all contracts for the sale of housing sold by the Company are subject to the buyer's ability to obtain financing. The Company thus does not consider any such contracts to be firm, although historically approximately 80% of the persons who signed contracts to purchase housing actually closed their purchase. At April 30, l997, the Company had signed contracts for the sale of 247 units of housing for an aggregate purchase price of approximately $29,347,000. At April 30, l996, it had signed contracts for 237 units with an aggregate purchase price of approximately $28,729,000. At April 30, l997, the Company also had contracts for the sale of 260 lots to builders for an aggregate purchase price of $6,220,000 and 5 contracts for the sale of commercial and industrial real estate for an aggregate purchase price of $5,499,126. At April 30, l996, it had contracts for the sale of 167 lots to builders for an aggregate purchase price of $5,183,964 and 5 contracts for the sale of commercial and industrial real estate for an aggregate purchase price of $4,885,560. COMPETITION The construction and sale of homes is a highly competitive business. Each of the Company's housing projects competes with other builders who offer similarly priced housing. To a limited extent, the Rio Rancho development competes with developments in other places having climates attractive to those who wish to escape the rigorous climates of the north, although a large majority of the housing there is purchased by New Mexico residents. Historically, the Company has generally concentrated on the construction of affordable housing with relatively few options, leaving custom house building and relatively expensive houses generally to other builders. During the past several years, the Company has been increasing the upper price level of its houses to accommodate a full spectrum of middle income buyers. The Company has recently entered the semi-custom market at its Rio Rancho development. MORTGAGE FINANCING The ability of the Company to sell houses is dependent upon the availability of adequate mortgage financing on terms prospective customers can afford. At Rio Rancho, the Company arranges mortgages principally with funds made available or guaranteed by State Housing Authorities and the Federal Housing Administration, and at all locations with various conventional mortgage lenders. MAGAZINE AND CIRCULATION OPERATIONS Through its wholly-owned subsidiary, Kable News Company, Inc. ("Kable"), the Company (i) performs subscription fulfillment and related services and (ii) distributes periodicals nationally and in Canada and, to a small degree, overseas. As of July 1, 1997, Kable employed approximately 1,340 persons, approximately 1,100 of whom were involved in its fulfillment activities and 240 in distribution activities. Kable maintains state of the art computer hardware and software in support of its fulfillment and distribution operations. FULFILLMENT SERVICES Kable's Fulfillment Services division performs a number of fulfillment and fulfillment related activities, principally magazine subscription fulfillment services, list services and product fulfillment services. This division had grown rapidly in the years preceding 1995, and the business was substantially increased with the acquisition in January 1995 of the business of Fulfillment Corporation of America, Inc. ("FCA"). Problems in converting FCA accounts to Kable's systems resulted in unexpected expenses and a loss of customers and revenue, but a major new customer was acquired during fiscal 1997 and division revenues were only slightly down in fiscal 1997 from fiscal 1996. The division accounted for 68% of Kable's total revenues in both fiscal 1996 and 1997. In the magazine subscription fulfillment service operation, Kable processes new orders, receives and accounts for payments, prepares labels for mailing each issue, handles subscriber telephone inquiries and correspondence, prepares renewal and statement notifications, maintains subscriber lists and database, generates marketing and statistical reports, and prints forms and promotional materials. Kable performs all of these services for many clients, but some clients utilized 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 utilizing the broad capabilities of its extensive database system. In August 1996, Kable commenced the processing of "sweepstakes" entries for a major publisher, opening the envelopes mailed in by contestants, furnishing the pertinent data electronically to the client and performing certain incidental functions. Although it performed these services for only two-thirds of the year, revenues from this activity represented over 17% of the division's total revenues for fiscal 1997. 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, it receives, warehouses, processes and ships merchandise. Kable now performs fulfillment services for approximately 340 different magazine titles for some 230 clients and maintains approximately 16,000,000 active subscriber names for its client publishers. In a typical month, Kable produces almost 16,400,000 mailing labels for its client publishers and also produces and mails approximately 5,000,000 billing and renewal statements. There are a large number of companies which perform fulfillment services and with which Kable competes, two of which are much larger than Kable. Since publishers utilize only a single fulfillment service for a particular publication, there is intensive competition to obtain fulfillment contracts with publishers. Kable has a staff whose primary duty is to solicit fulfillment business. DISTRIBUTION In its distribution operation, Kable annually distributes magazines for over 240 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 32,700,000 copies of the various titles. Kable purchases the publications from its publishers and sells them to approximately 230 independent wholesale distributors in the United States and Canada. The wholesale distributors in turn sell the publications to individual retail outlets. All parties generally have full return rights for unsold copies. In both fiscal 1997 and 1996, distribution activities accounted for 32% of Kable's revenues. While Kable does not handle all publications of all of its publisher clients, it usually is the exclusive distributor for the publications it distributes. Kable generally does not physically handle any product. It determines, in consultation with the wholesalers and publishers, the number of copies of each issue to be distributed, and generates and delivers to each publisher's printer shipping instructions with the addresses of the wholesalers and the number of copies of product to be shipped to each. All magazines have an "off sale" date (generally the on-sale date of the next issue) following which the retailers return unsold copies to the wholesalers, who destroy them after accounting for returned merchandise in a manner satisfactory to Kable. A realignment of industry relationships in the distribution of magazines started during fiscal 1996 and rapidly grew to major proportions. It was triggered by the decision of certain major retailers with multiple outlets to sharply reduce the number of wholesalers with whom the retailers would deal. This has led to a substantial reduction in the number of wholesalers through the merger of certain wholesalers, the formation by certain other wholesalers of cooperatives to bid for the business of such retailers, and the complete retirement from the business by a number of wholesalers. These changes contributed to a lower volume of magazine sales industry-wide which had a consequential negative effect on Kable's sales and profits. Management predicts that industry changes will continue with the potential for further adverse consequences for national distributors including Kable. Kable has a distribution sales and marketing force which works with wholesalers and retailers to promote product sales and to assist in determining the number of copies of product to be delivered to each retailer. The force presently is comprised of 90 full-time and 9 part-time workers. Kable generally makes substantial advances to publishers against future sales, which publishers may use for some printing, paper and production costs prior to the product going on sale, but it is usually not paid by wholesalers for product until some time after the product has gone on sale. Kable is therefore exposed to potential credit risks with both the publishers and the wholesalers. Its ability to make a profit is dependent in part on its skill in estimating the number of copies of an issue which should be printed and distributed and 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 intensive competition between distributors to obtain distribution rights from publishers. Each of these large competitors is owned by or affiliated with a magazine publishing company. Such companies publish a substantial portion of all magazines published in the United States, and the competition for the distribution rights to the remaining publications is intense. COMPANY OFFICES The Company's principal executive offices are in New York City in leased offices. Real estate operations are centralized in Rio Rancho in a modern office building owned by the Company, while the Denver, Colorado division is operated from a leased office. Kable News has an executive and sales office in New York City, and its operations are centered in owned and leased facilities in Mt. Morris, Illinois, and Marion, Ohio. EMPLOYEES The Company has approximately 1,580 employees (including Kable), none of whom is represented by a union. The Company provides retirement, health and other benefits for its employees and considers its employee relations to be good. Item 2. Properties. - ------- ----------- The information contained in Item 1 of this report with respect to properties owned by the Company is hereby incorporated herein by reference. Item 3. Legal Proceedings. - ------- ------------------ The Registrant and/or its subsidiaries are involved in various claims and legal actions incident to their operations, which in the opinion of management based upon advice of counsel, will not materially affect the consolidated financial position or results of operations of the Registrant and its subsidiaries. Item 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- Not Applicable. Executive Officers of Registrant - -------------------------------- Set forth below is certain information concerning persons who are executive officers of Registrant. Name Office Held Age - --------------- ----------------------------------------------- ---- Daniel Friedman Senior Vice President of Registrant since prior 62 to 1992; Chairman of the Board of Kable News Company, Inc., a wholly-owned subsidiary of the Registrant since prior to 1992. James Wall Senior Vice President of Registrant since September 60 1992; Chairman of the Board of AMREP Southwest, Inc., a wholly-owned subsidiary of Registrant, since February 1996; President of AMREP Southwest, Inc. since prior to 1992. Mohan Vachani Senior Vice President-Chief Financial Officer of 55 Registrant since June 1993; Consultant to Registrant from September 1992 to June 1993; Vice President-Chief Financial Officer of Bedford Properties, Inc., a real estate management and development firm, from prior to 1992 until June 1993. Valerie Asciutto Senior Vice President-General Counsel of Registrant 44 since April 1997; Vice President-General Counsel of Registrant since 1992. 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 25, 1997, there were approximately 2,600 holders of record of the common stock. The Registrant has not paid any cash dividends, and it has agreed in connection with certain long term borrowings not to pay cash dividends in amounts exceeding one-half of the Registrant's net worth. The range of high and low closing prices for the last two years by fiscal quarter, is presented below: FIRST SECOND THIRD FOURTH ------------ ------------ ------------ ------------ HIGH LOW HIGH LOW HIGH LOW HIGH LOW ---- ---- ---- ---- ---- ---- ---- ---- 1997 5 1/8 4 5 1/2 4 1/8 5 3 7/8 4 5/8 3 1/2 1996 7 6 1/8 7 3/4 6 1/8 6 1/2 5 3/8 5 1/2 4 3/4 Item 6. Selected Financial Data - ------- ----------------------- (In thousands of dollars except per share amounts) Year Ended April 30, ---------------------------------------------------- 1997 1996 1995 1994 1993 --------- --------- --------- --------- ---------- Revenues $ 146,389 $ 161,802 $ 152,525 $ 126,088 $ 93,660 Net Income $ 7,282 $ 2,785 $ 4,015 $ 2,372 $ 41 Net Income Per Share $ 0.99 $ 0.38 $ 0.55 $ 0.33 $ 0.01 Total Assets $ 205,311 $ 181,796 $ 186,142 $ 178,857 $ 179,944 Notes Payable $ 79,295 $ 51,959 $ 56,229 $ 50,738 $ 31,899 Project Financing $ - $ 223 $ 2,891 $ 6,205 $ 41,228 Collateralized Mortgage $ 529 $ 2,209 $ 2,533 $ 4,406 $ 6,473 Obligations Shareholders' Equity $ 75,834 $ 68,552 $ 65,921 $ 61,429 $ 54,102 Cash Dividends $ - $ - $ - $ - $ - Item 7. Management's Discussion and Analysis of Financial - ------- ------------------------------------------------- Condition and Results of Operations. ------------------------------------ RESULTS OF OPERATIONS - --------------------- 1997 versus 1996 - ---------------- Total revenues for the year ended April 30, 1997 decreased approximately 9.5% from fiscal 1996, reflecting a decrease in revenues from housing sales and magazine circulation operations which was partially offset by higher revenues from land sales. Revenues from housing sales decreased approximately 23.5% in fiscal 1997 from 1996, resulting from a corresponding decrease in housing unit deliveries from 775 to 599. This decrease resulted from several factors, including a lengthening of the regulatory approval process and delays in utility installations in Colorado and New Mexico with resultant delays in the opening of projects for sale during 1997, as well as a softer real estate market in New Mexico in 1997 compared to 1996. The average selling price of homes was comparable in both years ($114,600 in 1997 compared to $115,700 in 1996). The gross margin on housing sales decreased by approximately $6.6 million principally due to the decrease in both the number of homes closed and gross margin percentage. The gross margin percentage declined from 17% to 12% due to a shift in the mix of projects from which homes were sold in 1997 compared to 1996. Revenues and related gross profit from land sales increased by approximately $8.0 million and $2.4 million, respectively in 1997 from 1996, primarily due to an increase in the level of commercial and industrial lot sales. The gross profit percentage on land sales decreased from 53% in 1996 to 42% in 1997 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. As a result of these factors, gross profit from combined housing and land sales decreased by approximately $4.2 million in fiscal 1997 compared to the prior year. Revenue from magazine circulation operations declined approximately 5% from 1996 as a result of decreases in both Fulfillment Services and Newsstand Distribution Services. Revenues in Fulfillment Services decreased about 5% due to lower activity levels resulting from client losses in prior periods which were only partially offset by additional revenues associated with new contracts. Revenues from Newsstand Distribution Services decreased about 6% due to a lower volume of retail magazine sales in 1997, which resulted in part from a continuing trend of increasing magazine prices which began in 1996. In addition, a major realignment of industry relationships in the distribution of magazines developed during 1996 which led to a substantial reduction in the number of wholesalers which in some cases has allowed wholesalers to delay payments to Kable and which has adversely impacted sales and profits. Operating expenses of magazine circulation operations decreased by approximately $1.8 million (4%) in 1997 from 1996, which has been in response to and partially offset the revenue decrease discussed above. Operating expenses as a percentage of revenues amounted to 82% and 81% in 1997 and 1996, respectively. As a result of these factors, operating income of the magazine circulation operations decreased by approximately $900,000 from 1996. Real estate commissions and selling expenses increased by approximately 7% over 1996 because of marketing costs associated with the start up of additional projects in Colorado. Real estate and corporate general and administrative expenses decreased by approximately 26% as a result of ongoing cost reduction measures adopted in response to the lower volume of activity in 1997. In addition, 1996 amounts included the accrual of amounts due under the terms of an employment contract with the Company's former Chief Executive Officer who left office during 1996 due to a disability. Interest expense increased by about 3% due to higher average borrowings for the magazine circulation operations and higher average interest rates. In addition, in fiscal 1997 the financial statements reflect a net benefit for income taxes in the amount of $5.6 million as a result of an adjustment of $6.25 million to the provision for Deferred Income Taxes following the conclusion of certain federal tax audits. See Note 9 to the consolidated financial statements. 1996 versus 1995 - ---------------- Total revenues for the year ended April 30, 1996 increased 6% over fiscal 1995, reflecting higher revenues from both housing sales and magazine circulation operations, partially offset by lower revenues from land sales. Revenues from housing sales increased approximately 2% in fiscal 1996 over 1995, resulting from an increase in the average selling price of homes closed from $102,200 to $115,700, which offset a decrease in housing unit deliveries from 862 to 775. The increases in the average selling prices on homes closed from 1995 to 1996 results both from price increases and a shift to the building of larger, more expensive houses in Rio Rancho. The gross margin on housing sales increased by approximately $3.7 million over fiscal 1995, resulting from price increases, as well as the favorable effect of production strategies and efficiencies introduced in the prior two fiscal years. Revenues and related gross profit from land sales decreased from fiscal 1995, primarily due to a decrease in the level of commercial and industrial lot sales. As a result of these factors, gross profit from combined housing and land sales increased by approximately $1.8 million in fiscal 1996, compared to the prior year. Revenues from magazine circulation operations increased approximately 23% in fiscal 1996 from 1995, primarily due to the acquisition in January 1995 of the business of Fulfillment Corporation of America ("FCA") and the inclusion of FCA's operations as part of Kable for a full year in 1996, as opposed to only four months in 1995. As a result, Fulfillment Services revenues increased 40% in 1996 compared to 1995. Revenues from the Newsstand Distribution Services, however, decreased approximately 3% in fiscal 1996 due to decreased retail magazine sales. This decrease resulted in part from paper cost increases in the publishing industry which in turn caused increased magazine cover prices or, in some cases, reduced print quantities and product qualities of magazines thereby leading to some consumer resistance. In addition, a major realignment of industry relationships in the distribution of magazines developed rapidly during 1996, which led to a substantial reduction in the number of wholesalers. These changes adversely impacted Kable's sales and profits. At the same time, operating expenses increased to 81% of magazine circulation revenues in 1996 from 74% in 1995. These expenses increased in part due to unforeseen problems in converting accounts from the FCA systems to its own, which resulted in unexpected expenses and some loss of customers and revenues in fiscal 1996. However, management believes that these problems were corrected. Primarily as a result of these factors, operating income from magazine circulation operations decreased by approximately $2.3 million over the prior year. Real estate commissions and selling expenses remained comparable in fiscal 1996 and fiscal 1995, and were the same percentage of related revenues in both years. Real estate and corporate general and administrative expenses increased by approximately 19% in fiscal 1996 compared to 1995, primarily as a result of the accrual of amounts due under the terms of an employment contract with the Company's former Chief Executive Officer, who left office during 1996 due to a disability, increased pension plan expense resulting from lower than assumed investment performance in 1994 and additional employees in the plan, and professional fees related to the Company's contested tax examinations with the Internal Revenue Service ("IRS"). Interest expense increased in fiscal 1996 due primarily to higher average borrowings for the magazine circulation operations and higher average interest rates, since a large portion of the Company's borrowings are related to the prime rate. Revenues less costs and expenses from interest and other operations decreased by approximately $350,000, due to various non-recurring matters last year. Inflation - --------- During the past three years, revenues and costs have been affected to a modest extent by inflation. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the past several years, the Company has financed its operations from internally generated funds from home and land sales and magazine circulation operations, and from borrowings under its various lines-of-credit and construction loan agreements. Cash Flows From Financing Activities - ------------------------------------ At April 30, 1997, 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 $77.3 million. One of these lines (under which $35.0 million was available against which approximately $34.4 million was outstanding as of April 30, 1997) is available for Kable News Company operations. Borrowings under this line-of-credit, which expires August 31, 1998, must be collateralized 125% or more by certain Kable accounts receivable. The line-of-credit agreement limits the payment of dividends by, and loans from, Kable to the Company. The other borrowings are used principally to support real estate construction in New Mexico 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, 1997, the maximum available totaled $42.3 million for which collateral of $27.5 million was available and against which approximately $27.1 million was drawn. The Company also has borrowed approximately $4.0 million in connection with the acquisition of the land for one of its Colorado projects. Notes payable outstanding, including lines-of-credit discussed above, were $79.3 million at April 30, 1997, compared to $52.0 million at April 30, 1996, and $56.2 million at April 30, 1995. The increase at April 30, 1997, compared to 1996, results from additional development and expansion activity in Colorado, and the initial development on several sites in New Mexico, as well as additional borrowings under Kable's line-of-credit due to increased accounts receivable balances. The Company anticipates timely renewing, extending or replacing those loan agreements which become due in fiscal 1998. The Company is also having discussions with other lenders seeking additional working capital, although there are no assurances these discussions will be fruitful. At April 30, 1997, the Company has reclassified approximately $13.9 million from previously established deferred income taxes to taxes payable. As discussed more fully in Note 10 to the consolidated financial statements, the Company expects that these taxes, which includes interest thereon, will be payable in varying amounts in succeeding years as the result of tax examinations by the IRS which are either in various stages of completion or expected to be undertaken. Cash Flows From Operating Activities - ------------------------------------ Inventories amounted to $86.1 million at April 30, 1997, compared to $71.9 million and $72.5 million at April 30, 1996 and 1995, respectively. The increase at April 30, 1997 is due to the acquisition and initial development of several real estate projects in connection with the Company's expansion into the Colorado market as well as initial development on several new sites in New Mexico. This activity also caused the increase in accounts payable, deposits and accrued expenses at April 30, 1997 compared to prior periods. Receivables increased by approximately $3.9 million at April 30, 1997 compared to the prior year, primarily because of the delayed payments by Kables's wholesalers referred to above. Cash Flows From Investing Activities - ------------------------------------ Capital expenditures decreased in 1997 because the 1996 amounts had included the costs of a new reservoir and water line extensions at the Company's water utility plant at El Dorado, as well as a major renovation at the Kable headquarters building in Illinois. The Company believes that its available funds will be adequate to provide for anticipated capital expenditures. The Company believes that cash provided from operations together with existing cash balances, its lines-of-credit and development and construction loans will be sufficient to maintain liquidity at a satisfactory level. As discussed in Notes 9 and 10 to the consolidated financial statements, the Company has reached an agreement with the IRS to resolve all outstanding issues resulting from the IR's examination of tax years 1984 through 1989, and has paid all amounts due. In addition, the Company has reclassified a portion of the previously established deferred tax liability, and established an equivalent liability for Taxes Payable (including anticipated interest thereon through the expected date of payment ), in the amount of $13.9 million, which represents a tax treatment for amounts due in the tax years 1990 through 1995 consistent with the matters resolved in 1997. 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 such year. The Company believes that with cash on hand, anticipated earnings and bank lines, it will be able to pay the amounts reclassified as Taxes Payable when they become due. For tax years beginning in 1996, the Company's taxes have been calculated in a manner consistent with tax regulations, and the 1997 agreement with the IRS. Item 8. Financial Statements and Supplementary Data. - ------- -------------------------------------------- [See next page] Report of Independent Public Accountants To the Shareholders and Board of Directors of AMREP Corporation: We have audited the accompanying consolidated balance sheets of AMREP Corporation and subsidiaries as of April 30, 1997 and 1996, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended April 30, 1997. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AMREP Corporation and subsidiaries as of April 30, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1997 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. The schedule listed in the index of financial statements is presented for the purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic 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 June 11, 1997 AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED BALANCE SHEETS (Page 1 of 2) ----------------------------------------- APRIL 30, 1997 AND 1996 ----------------------- (Dollar amounts in thousands) ASSETS 1997 1996 ------- ------------ ---------- CASH AND CASH EQUIVALENTS $ 16,178 $ 7,607 RECEIVABLES, net: Real estate operations 10,486 11,371 Magazine circulation operations 43,015 38,234 REAL ESTATE INVENTORY 86,102 71,916 INVESTMENT PROPERTY 6,413 8,042 OTHER REAL ESTATE INVESTMENTS 4,893 8,211 PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated depreciation and amortization 18,974 16,995 OTHER ASSETS 14,059 14,215 EXCESS OF COST OF SUBSIDIARY OVER NET ASSETS ACQUIRED 5,191 5,205 ---------- ---------- TOTAL ASSETS $ 205,311 $ 181,796 ========== ========== The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED BALANCE SHEETS (Page 2 of 2) ----------------------------------------- APRIL 30, 1997 AND 1996 ----------------------- (Dollar amounts in thousands, except par value) LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996 ------------------------------------ ------------ ---------- ACCOUNTS PAYABLE, DEPOSITS AND ACCRUED EXPENSES $ 30,081 $ 30,713 NOTES PAYABLE: Amounts due within one year 24,833 16,923 Amounts subsequently due 54,462 35,036 TAXES PAYABLE: Amounts due within one year 512 2,300 Amounts subsequently due (including interest) 13,923 - COLLATERALIZED MORTGAGE OBLIGATIONS AND OTHER 529 2,432 DEFERRED INCOME TAXES 5,137 25,840 ---------- ---------- TOTAL LIABILITIES 129,477 113,244 ---------- ---------- COMMITMENTS AND CONTINGENCIES (Note 10) SHAREHOLDERS' EQUITY: Common stock, $.10 par value; shares authorized--20,000,000; shares issued --7,398,677 in 1997 and 1996 740 740 Capital contributed in excess of par value 44,928 44,928 Retained earnings 30,346 23,064 Treasury stock, at cost; 30,027 shares (180) (180) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 75,834 68,552 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 205,311 $ 181,796 ========== ========== The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets. AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (Amounts in thousands, except per share amounts) Year ended April 30, -------------------------------------- 1997 1996 1995 ---------- ----------- ------------ REVENUES: Real estate operations- Home and condominium sales $ 68,647 $ 89,697 $ 88,084 Land sales 16,891 8,901 11,734 --------- --------- --------- 85,538 98,598 99,818 Magazine circulation operations 53,827 56,693 46,186 Interest and other operations 7,024 6,511 6,521 --------- --------- --------- 146,389 161,802 152,525 --------- --------- --------- COSTS AND EXPENSES: Real estate cost of sales 70,057 78,891 81,939 Operating expenses- Magazine circulation operations 43,966 45,785 34,257 Real estate commissions and selling 6,850 6,373 6,492 Other operations 6,635 6,376 7,014 General and administrative- Real estate operations and corporate 6,683 9,083 7,621 Magazine circulation operations 6,428 6,728 5,388 Interest, net 4,050 3,925 3,086 --------- --------- --------- 144,669 157,161 145,797 --------- --------- --------- INCOME BEFORE INCOME TAXES 1,720 4,641 6,728 BENEFIT (PROVISION) FOR INCOME TAXES 5,562 (1,856) (2,713) --------- --------- --------- NET INCOME $ 7,282 $ 2,785 $ 4,015 ========= ========= ========= NET INCOME PER SHARE $ 0.99 $ 0.38 $ 0.55 ========= ========= ========= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 7,369 7,384 7,345 ========= ========= ========= The accompanying notes to consolidated financial statements are an integral part of these consolidated statements. AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ----------------------------------------------- (Amounts in thousands) Capital Contributed Treasury Common Stock In Excess Retained Stock Shares Amount of Par Value Earnings at Cost Total ------ ------ ------------ -------- ------- -------- BALANCE, April 30, 1994 7,298 $ 730 $ 44,435 $ 16,264 $ - $ 61,429 Net income - - - 4,015 - 4,015 Exercise of stock options 96 9 468 - - 477 ----- ----- -------- -------- ------ -------- BALANCE, April 30, 1995 7,394 739 $ 44,903 20,279 - 65,921 Net income - - - 2,785 - 2,785 Exercise of stock options 5 1 25 - - 26 Treasury stock purchased - - - - (180) (180) ----- ----- -------- -------- ------ -------- 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 ===== ===== ======== ======== ====== ======== The accompanying notes to consolidated financial statements are an integral part of these consolidated sheets. AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Amounts in thousands) Year ended April 30, ----------------------------------- 1997 1996 1995 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,282 $ 2,785 $ 4,015 Adjustments to reconcile net income to net cash (used) provided by operating activities- Depreciation and amortization 2,743 2,309 1,956 Changes in assets and liabilities- Receivables - net (3,896) 250 (188) Real estate inventory (14,302) 745 (1,362) Investment property 1,629 512 (147) Other real estate investments 3,318 3,411 2,552 Other assets (757) (223) (1,069) Accounts payable, deposits and accrued 168 (978) (2,199) expenses Taxes payable 12,135 1,943 357 Deferred income taxes (20,703) (680) 2,356 Gain from exchange of real estate inventory for accounts payable (579) - - -------- --------- -------- Net cash (used) provided by operating activities (12,962) 10,074 6,233 -------- --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,900) (5,358) (3,116) Proceeds from sale of property, plant and - 861 - equipment Payment for Fulfillment Corporation of - - (1,744) America - net Other - net - - 600 -------- --------- -------- Net cash used by investing activities (3,900) (4,497) (4,260) -------- --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from debt financing 66,225 28,226 35,996 Principal debt payments (40,792) (35,488) (35,803) Proceeds from the sale of stock and exercise of stock options - 26 477 -------- --------- -------- Net cash provided (used) by financing activities 25,433 (7,236) 670 -------- --------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,571 (1,659) 2,643 CASH AND CASH EQUIVALENTS, beginning of year 7,607 9,266 6,623 --------- --------- --------- CASH AND CASH EQUIVALENTS, end of year $ 16,178 $ 7,607 $ 9,266 ========= ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid - net of amounts capitalized $ 3,903 $ 3,634 $ 3,356 ========= ========= ========= Income taxes paid $ 2,673 $ 553 $ 233 ========= ========= ========= Purchase of treasury stock resulting in a decrease of receivable due from seller $ - $ 180 $ - ========= ========= ========= Transfer from property, plant and equipment to real estate inventor $ 105 $ - $ - ========= ========= ========= Exchange of real estate inventory for accounts payable: Real estate inventory $ 221 $ - $ - ========= ========= ========= Accounts payable $ 800 $ - $ - ========= ========= ========= The accompanying notes to consolidated financial statements are an integral part of these consolidated sheets. AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES: ------------------------------------------------------------------- Principles of consolidation --------------------------- The consolidated financial statements include the accounts of AMREP Corporation ("Company"), an Oklahoma corporation, and its subsidiaries. The Company's principal subsidiaries, which are wholly-owned, are AMREP Southwest, Inc. and Kable News Company, Inc.. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated balance sheets are presented in an unclassified format, since the Company operates in the real estate industry and its operating cycle is greater than one year. Home and condominium sales -------------------------- Sales of homes and condominiums and related costs and expenses are recorded when title and other attributes of ownership have been conveyed to the buyer by means of a closing. Payments received from buyers prior to closing are recorded as deposits. Land sales ---------- Land sales are recorded when the parties are bound by the terms of the contract, all consideration (including adequate cash) has been exchanged and all conditions precedent to closing have been performed. Profit is recorded either in its entirety or on the installment method depending upon, among other things, the ability to estimate the collectibility of the unpaid sales price. In the event the buyer defaults on his obligation, the property is taken back into inventory or investment property at its receivable balance, net of any deferred profit, but not in excess of fair market value less estimated costs to sell. Until a sale has been recorded, revenues are deferred and total customer payments are reflected as deposits. Magazine circulation operations ------------------------------- Revenues from distribution of periodicals and subscription fulfillment activities represent commissions earned from the distribution of publications for client publishers and fees earned from subscription fulfillment activities. Magazine distribution revenues are recorded at the time the publications go on sale and subscription revenues are recorded when earned. The publications generally are sold on a fully returnable basis, which is in accordance with prevailing trade practice. All publications are billed after shipment, however, since they are fully returnable if not ultimately sold to consumers, the Company provides for estimated returns by charges to income which are based on sales experience. Real estate inventory --------------------- Homes and condominiums completed or under construction are stated at the lower of net realizable value or cost, including interest costs capitalized during construction. Land and improvements are stated at the lower of net realizable value or cost (except in certain instances where property is repossessed as discussed above under "Land sales") which includes the development cost, certain amenities, capitalized interest and capitalized real estate taxes. These costs are allocated to individual homesites within each section of a community. Valuation reserves on real estate inventory are determined on a project by project basis. Investment property ------------------- Investment property represents vacant, undeveloped land not held for development in the normal course of business. Investment property is stated at the lower of net realizable value or cost, except in certain instances where property is repossessed as discussed above under "Land sales". Property, plant and equipment ----------------------------- Items capitalized as part of property, plant and equipment are recorded at cost. Expenditures for maintenance and repair and minor renewals are charged to expense as incurred, while those expenditures which improve or extend the useful life of existing assets are capitalized. Upon sale or other disposition of assets, their cost and the related accumulated depreciation or amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in operations. Depreciation and amortization of property, plant and equipment are provided principally by the straight-line method at various rates calculated to amortize the book values of the respective assets over their estimated useful lives which range from 5 to 50 years for utility plant and equipment and 3 to 40 years for all other property, plant and equipment. Excess of cost of subsidiary over net assets acquired ----------------------------------------------------- The excess of cost of subsidiary over assets acquired reflects a purchase made prior to October 31, 1970, the effective date of APB Opinion No. 17. Such excess of cost is not being amortized to operations as management is of the opinion that there has been no diminution of value. Federal income taxes -------------------- The Company and its subsidiaries file a consolidated federal income tax return. Deferred taxes are provided for the income tax effect of temporary differences in reporting transactions for financial and tax purposes. Net income per share -------------------- Net income per common share outstanding is based on the weighted average number of common shares outstanding during each year. Common share equivalents (stock options) were excluded from the income per share computations because of their insignificant effect for all years presented. Consolidated statements of cash flows ------------------------------------- Cash equivalents consist of short term, highly liquid investments which have an original maturity of ninety days or less, and that are readily convertible into cash. Management's estimates and assumptions -------------------------------------- The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Adoption of New Pronouncements ------------------------------ In March 1995, the Financial Accounting Standards Board("FASB") issued Statement of Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". The provisions of SFAS No. 121 were implemented by the Company in fiscal 1997, and there was no material effect on the Company's financial position or results of operations based on the adoption of this statement. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation". The Company has adopted the disclosure-only provisions of SFAS No. 123. 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 in fiscal 1997 and 1996. In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which is effective for periods ending after December 15, 1997, at which time it will require restatement of prior-period earnings per share calculations. Based upon a preliminary determination, the Company does not anticipate that there will be a material difference between net income per share as presented, and basic earnings per share calculated in accordance with SFAS No. 128. Financial statement presentation -------------------------------- Certain amounts in the 1996 and 1995 consolidated financial statements have been reclassified to conform with the 1997 presentation. (2) RECEIVABLES: ------------ Receivables consist of: April 30, -------------------------- 1997 1996 ------------ ------------ (Thousands) Real estate operations- Mortgage and other receivables $ 10,658 $ 9,647 Allowance for doubtful accounts (690) (598) --------- --------- 9,968 9,049 Mortgages securing collateralized mortgage obligations (see Note 7) 518 2,322 ------------ ------------ $ 10,486 $ 11,371 ============ ============ Magazine circulation operations- Accounts receivable (maturing within one year) $ 98,579 $ 96,174 Allowances for- Estimated returns (54,301) (56,020) Doubtful accounts (1,263) (1,920) ------------ ------------ $ 43,015 $ 38,234 ============ ============ Mortgage and other receivables bear interest at rates ranging from 7.0% 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 7). 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. 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. Management does not believe that the Company is exposed to concentrations of credit risk that are likely to have a material impact on the Company's financial position or results of operations. Maturities of principal on real estate receivables, exclusive of mortgages securing collateralized mortgage obligations, at April 30, 1997 are as follows (in thousands): 1998 - $5,825; 1999 - $1,235; 2000 - - $1,241; 2001 - $220; 2002 - $5 and thereafter - $2,132. (3) REAL ESTATE INVENTORY: ---------------------- Real estate inventory consists of: April 30, ----------------------- 1997 1996 ----------- ---------- (Thousands) Land and improvements held for sale or development, net of valuation allowance of $2,459 at April 30, 1997 and $2,580 at April 30, 1996 $ 63,025 $ 55,839 Homes and Condominiums- Land and improvements 7,930 5,028 Construction costs 15,147 11,049 ----------- ---------- $ 86,102 $ 71,916 =========== ========== Accumulated capitalized interest costs included in real estate inventory at April 30, 1997 and 1996 were $4,872,000 and $3,744,000, respectively. Interest costs capitalized during fiscal 1997, 1996 and 1995 were $2,543,000, $1,980,000 and $1,817,000, respectively. Accumulated capitalized real estate taxes included in the inventory of land and improvements at April 30, 1997 and 1996 were $4,853,000 and $5,023,000, respectively. Real estate taxes capitalized during fiscal 1997, 1996 and 1995 were $157,000, $166,000 and $133,000, respectively. Previously capitalized interest costs and real estate taxes charged to real estate cost of sales were $1,741,000, $1,272,000 and $906,000 in fiscal 1997, 1996 and 1995, respectively. (4) OTHER REAL ESTATE INVESTMENTS: ------------------------------ Investments in rental and other real estate projects consist of the following: April 30, ----------------------- 1997 1996 ---------- ----------- (Thousands) The Classic limited partnership interest $ 2,353 $ 2,353 PERMA (the Freehold Clark Limited Partnership) total assets 2,540 5,858 ---------- ----------- $ 4,893 $ 8,211 ========== =========== The Classic ----------- A subsidiary of the Company is a 50% limited partner in a 300 unit congregate living facility in West Palm Beach, Florida, which was completed in fiscal 1991. Pursuant to a reorganization agreement finalized in 1994 by which the Company converted its general partner interest in this project to a limited partnership interest, the Company may, at its option, fund cash requirements of the project in order to protect its investment. During fiscal 1995, the Company funded $680,000 of additional cash requirements; no amounts were funded in fiscal 1996 or 1997. PERMA (the Freehold Clark Limited Partnership) ---------------------------------------------- PERMA Corporation ("PERMA"), a wholly-owned subsidiary of the Company, has a 50% general partnership interest in a real estate project which was formed to develop and market a 380 unit condominium housing project in Freehold, New Jersey. PERMA also has a 75% ownership interest in a related construction company. As a result, the financial statements of these entities are included in the Company's consolidated financial statements. The investment in the PERMA Project and related project financing are as follows: April 30, ----------------------- 1997 1996 ----------- ---------- (Thousands) Land and improvements $ 9 $ 1,773 Homes inventory 2,198 3,083 ----------- ---------- 2,207 4,856 Other- Deposits in escrow and collateral 91 247 accounts Other assets 242 755 ----------- ---------- Total investment $ 2,540 $ 5,858 =========== ========== Project financing (see Note 7) $ - $ 223 =========== ========== As of April 30, 1997, 358 units have been completed and closed. The final 22 units are currently under construction, of which 7 units are sold but not yet closed. Accumulated capitalized interest costs included in this project at April 30, 1997 and 1996 were $509,000 and $964,000, respectively. Interest costs capitalized during fiscal 1997, 1996 and 1995 were $463,000, $442,000 and $863,000, respectively. Previously capitalized interest costs charged to real estate cost of sales were $918,000, $1,211,000 and $1,385,000 in fiscal 1997, 1996 and 1995, respectively. Saratoga Square Homes --------------------- During fiscal 1995, a subsidiary of the Company entered into a joint venture arrangement for the development and construction of 42 two-family homes in New York City. During fiscal 1997, 41 of these units were sold and closed, and the Company recognized revenue of $498,000 which is included in Interest and other operations in the accompanying consolidated statements of income. As of April 30, 1997 and 1996, the Company's investment in this project, which is accounted for on the equity method, was not significant. (5) PROPERTY, PLANT AND EQUIPMENT: ------------------------------ Property, plant and equipment consists of: April 30, ------------------------ 1997 1996 ----------- ----------- (Thousands) Land, buildings and improvements $ 11,461 $ 10,742 Furniture and fixtures 11,914 9,578 Utility plant and equipment 7,506 6,880 Other 1,625 1,591 ----------- ----------- 32,506 28,791 Accumulated depreciation and amortization (13,532) (11,796) ----------- ----------- $ 18,974 $ 16,995 =========== =========== Depreciation charged to operations amounted to $1,816,000, $1,630,000 and $1,356,000 in fiscal 1997, 1996 and 1995, respectively. (6) OTHER ASSETS: ------------- Other assets are comprised of: April 30, ------------------------ 1997 1996 ----------- ----------- (Thousands) Prepaid expenses and other deferred $ 6,325 $ 5,729 charges, net Purchased magazine distribution contracts, net of accumulated amortization of 2,674 3,102 $1,605 and $1,177 in 1997 and 1996, respectively Security deposits 2,480 3,405 Escrow monies and collateral deposits 930 568 Other 1,650 1,411 ----------- ----------- $ 14,059 $ 14,215 =========== =========== Amortization related to deferred charges and distribution contracts was $913,000, $679,000 and $600,000 for the fiscal years ended April 30, 1997, 1996 and 1995, respectively. (7) DEBT FINANCING: --------------- Debt financing consists of: April 30, ----------------------- 1997 1996 ---------- ---------- (Thousands) Notes payable - Line-of-credit borrowings - Real estate operations and other $ 27,146 $ 13,846 Magazine circulation operations 34,377 23,591 Mortgages and other notes payable 16,258 11,130 Fixed rate note 564 2,257 Utility note payable 950 1,135 ---------- ---------- 79,295 51,959 Collateralized mortgage obligations (see 529 2,209 Note 2) PERMA Project financing (see Note 4) - 223 ---------- ---------- $ 79,824 $ 54,391 ========== ========== Maturities of principal on notes payable at April 30, 1997 are as follows (in thousands): 1998 - $24,833; 1999 - $48,132; 2000 - $3,760; 2001 - $1,562; 2002 - $658 and thereafter - $879. 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 for borrowings of approximately $42.3 million, for which collateral of $27.5 million was available and against which approximately $27.1 million was drawn as of April 30, 1997. These borrowings, which have maturities ranging from fiscal 1998 through fiscal 2000, bear interest ranging from the prime rate (8.5% at April 30, 1997) plus 1.0% to 2.0% (with a weighted average effective rate of interest of approximately 9.7% at April 30, 1997), are collateralized by certain real estate assets and are subject to certain financial performance and other covenants. The Company was not in compliance with a performance covenant on one loan at April 30, 1997, for which it has obtained a waiver. 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 $12.3 million of these lines-of-credit were obtained. At April 30, 1997, the Company had drawn $34.4 million against an additional $35.0 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 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 financial performance covenant at one time in fiscal 1997, and obtained a waiver. Borrowings pursuant to this line-of-credit agreement are due August 31, 1998. The Company anticipates renewing, extending or replacing certain of these loan agreements as they become due in fiscal 1998. The Company is also having discussions with other lenders seeking additional working capital, although there are no assurances these discussions will be fruitful. Mortgages and other notes payable --------------------------------- Mortgages and other notes payable had interest rates ranging from 6.4% to 11.4% at April 30, 1997, and are primarily collateralized by property, plant and equipment and certain land inventory. These borrowings have maturities ranging from fiscal 1998 through fiscal 2011. Fixed rate note --------------- The fixed rate note balance as of April 30, 1997 was $564,000. The loan matures on August 1, 1997, and has an interest rate of 7.5%. Utility note payable -------------------- The Company has a note in the amount of $950,000 at April 30, 1997, maturing November 1, 2001 with monthly installments of principal and interest at 1.5% above the prime rate. This note is collateralized by certain utility plant and equipment and other utility assets. Collateralized mortgage obligations ----------------------------------- Collateralized mortgage obligations (CMO's), with original principal balances aggregating $13,750,000, were issued in fiscal year 1986 through 1988, through an unrelated financial intermediary. Interest rates range from 7.6% to 12.5% per annum, with stated maturities, assuming no prepayments, from January, 2015 to October, 2017. Actual maturities vary to the extent of principal prepayments on the mortgage loans collateralizing the CMO's. These CMO's are collateralized only by the principal and the accrued interest receivable (see Note 2) of the related mortgage loans. (8) BENEFIT PLANS: -------------- Stock option plans ------------------ A summary of activity in the Company's 1992 Stock Option Plan, the Non-Employee Directors Option Plan and the 1982 Incentive Stock Option Plan is presented below: Year Ended April 30, ------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Common stock options outstanding at beginning of year 121,000 225,600 249,325 Granted at $5.13 to $8.88 per share 3,500 3,000 96,500 Options exercised at $4.06 to $7.44 per share - (5,000) (96,025) Expired or cancelled (39,000) (102,600) (24,200) ----------- ----------- ----------- Common stock options outstanding at end of year 85,500 121,000 225,600 =========== =========== =========== Available for future grant at year end 272,250 201,750 186,750 =========== =========== =========== During fiscal 1993, the shareholders approved the 1992 Stock Option Plan as well as the Non-Employee Directors Option Plan for which 315,000 and 15,000 shares, respectively, were reserved. At April 30, 1997, options to purchase 73,500 shares under the Stock Option Plan and 12,000 shares under the Non-Employee Directors Option Plan were outstanding at exercise prices ranging from $5.13 to $8.88 per share and 238,250 and 34,000 shares were available for future grant, respectively. Outstanding options heretofore granted are exercisable over a two to four year period beginning one year from date of grant. As of April 30, 1997, 80,500 options were exercisable under the Company's stock option plans. Under the Company's 1992 Stock Option Plan shares are reserved for issuance to officers and other key employees. Options may be granted in such amounts, at such times, and with such exercise prices as the stock option committee may determine. The Non-Employee Directors Option Plan provides for an automatic issuance of options to purchase 500 shares of common stock to each non-employee director annually at the fair market value at the date of grant. The options are exercisable one year after the date of grant and expire five years after the date of grant. Savings plan ------------ The Company has a savings plan to which the Company makes contributions. The plan provides for Company contributions of 16 2/3% of eligible employees' defined contributions up to a maximum of 1% of such employees' compensation. The Company's contributions to the plan amounted to $129,000, $142,000 and $125,000, in fiscal 1997, 1996 and 1995, respectively. Retirement plans ---------------- The Company has two retirement plans which are non-contributory, defined benefit plans, and which together cover substantially all full-time employees. The plans provide retirement benefits based on length of service and a percentage of qualifying compensation during employment. In fiscal 1997, 1996 and 1995, the Company contributed $1,190,000, $1,077,000 and $952,000, respectively, to the plans. Assets are invested primarily in United States Treasury obligations, equity and debt securities and money market funds. Net periodic pension cost for fiscal 1997, 1996 and 1995 was comprised of the following components: Year Ended April 30, -------------------------------------- 1997 1996 1995 ------------ ----------- ---------- (Thousands) Service cost - benefits earned during the period $ 1,156 $ 1,045 $ 854 Interest cost on projected benefit obligation 1,720 1,593 1,283 Actual return on assets (1,817) (2,792) (962) Net amortization and deferral (187) 1,134 (449) ------------ ----------- ----------- Net periodic pension cost $ 872 $ 980 $ 726 ============ =========== =========== Assumptions used in the accounting were: Year Ended April 30, ------------------------------------------ 1997 1996 1995 ------------- ------------ ------------- Discount rates 8.00% 8.00% 8.00% Rates of increase in compensation 4.50-5.00% 4.50-5.00% 4.50-5.00% levels Expected long-term rate of return 8.00-9.00% 8.00-9.00% 8.00-9.00% on assets The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheets: April 30, ---------------------- 1997 1996 ---------- ---------- (Thousands) Actuarial present value of benefit obligations: Vested benefit obligation $ 18,312 $ 17,043 ========== ========== Accumulated benefit obligation $ 19,504 $ 18,087 ========== ========== Projected benefit obligation $ 23,729 $ 21,955 Assets at fair value 23,283 21,505 ---------- ---------- Excess of projected benefit obligation over (446) (450) assets Unrecognized net loss 1,744 1,623 Unrecognized prior service cost benefit (48) (50) Unrecognized net transition liability (asset) 52 (139) ---------- ---------- Prepaid pension cost $ 1,302 $ 984 ========== ========== (9) INCOME TAXES: The Company adopted SFAS No. 109, "Accounting for Income Taxes", in fiscal 1994. Adoption of SFAS No. 109 had no impact on the tax liability recorded by the Company as of the date of adoption, pending resolution of various matters then subject to tax examinations in process by the Internal Revenue Service ("IRS"). During fiscal 1997, the Company reached an agreement with the IRS which resolved all outstanding issues resulting from the IRS' audit of the years 1984 through 1989. As a result, the Company has paid an assessment of approximately $200,000 for federal taxes, and anticipates no significant further payments for either state or federal taxes (including interest) for those years. Furthermore, the Company has adjusted Deferred Income Taxes, pursuant to SFAS No. 109, to reflect several items related to the settlement: a reduction in taxes ultimately expected to be payable, a reflection of the reduction in federal income tax rates for deferred taxes established at rates in effect prior to 1987, and the accrual and reclassification to a current payable for the estimated amount of interest expected to be payable on tax deficiencies. The benefit (provision) for income taxes consists of the following: Year Ended April 30, ------------------------------------- 1997 1996 1995 ---------- ----------- ----------- (Thousands) Current: Federal $ (13,187) $ (2,414) $ (232) State and local (1,954) (123) (125) ---------- ----------- ----------- (15,141) (2,537) (357) ---------- ----------- ----------- Deferred: Federal 18,753 582 (2,105) State and local 1,950 99 (363) Net change in valuation allowance - - 112 ---------- ----------- ----------- 20,703 681 (2,356) ---------- ----------- ----------- Total benefit (provision) for income taxes $ 5,562 $ (1,856) $ (2,713) ========== =========== =========== Components of net deferred income tax liability are as follows: April 30, -------------------------- 1997 1996 ----------- ----------- (Thousands) Deferred income tax assets- Tax loss carryforwards (federal and state) $ 4,061 $ 7,264 Real estate inventory valuation 1,426 1,446 Interest payable on tax settlements 2,233 - Real estate basis differences 531 (1,680) ----------- ----------- Total deferred income tax assets 8,251 7,030 ----------- ----------- Deferred income tax liabilities- Reserve for periodicals and paperbacks (228) (19,295) Gain on partnership restructuring (473) (473) Depreciable assets (1,513) (1,010) Expenses capitalized for financial reporting (2,234) (2,345) purposes, expensed for tax Differences related to timing of (1,819) (1,494) partnership income Other (3,998) (5,130) ----------- ----------- Total deferred income tax liability (10,265) (29,747) ----------- ----------- Valuation allowance for realization of state tax loss carryforwards (3,123) (3,123) ----------- ----------- Net deferred income tax liability $ (5,137) $ (25,840) =========== =========== The following table reconciles taxes computed at the U.S. federal statutory income tax rate to the Company's actual tax benefit (provision): Year ended April 30, --------------------------------------- 1997 1996 1995 ------------ ----------- ----------- (Thousands) Computed tax provision at statutory rate $ (585) $ (1,578) $ (2,288) Increase (reduction) in tax resulting from: State income taxes, net of federal (117) (269) (442) income tax effect Net reduction in deferred tax liability as a result of IRS settlement 6,250 - - Reduction in valuation allowance - - 112 Other 14 (9) (95) ------------ ----------- ---------- Actual tax benefit (provision) $ 5,562 $ (1,856) $ (2,713) ============ =========== ========== As discussed in Note 10, the Company has determined the amount of additional taxes that would be due pursuant to IRS examinations for the years 1990 through 1995 in order to achieve a tax treatment consistent with the 1997 agreement with the IRS with respect to the years 1984 through 1989. Accordingly, the Company has reclassified a portion of the deferred tax liability which had been established in prior years with regard to the reserve for periodicals and paperbacks in the amount of $13.9 million, by establishing an equivalent liability for income taxes (including anticipated interest thereon through the expected date of payment) which are expected to be paid at varying times over the next several years. (10) COMMITMENTS AND CONTINGENCIES: ------------------------------ Revenue agent review -------------------- The IRS is in the process of reviewing the Company's tax returns for the years 1990 through 1994, and in due course is expected to review the 1995 return. While the Company cannot be totally certain of the results of these audits, it has made certain reclassifications between Deferred Income Taxes and Taxes Payable 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. Noncancellable leases --------------------- The Company is obligated under long-term noncancellable leases for equipment and various real estate properties. Certain real estate leases provide that the Company will pay for taxes, maintenance and insurance costs and include renewal options. Rental expense for fiscal 1997, 1996 and 1995 was approximately $5,215,000, $5,195,000 and $3,737,000, respectively. The approximate minimum rental commitments for years subsequent to April 30, 1997, are as follows (in thousands): 1998 - $3,836; 1999 - $3,199; 2000 - $2,093; 2001 - $1,709; 2002 - $1,236; thereafter - $1,717; and the total future minimum rental payments - $13,790. 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. (11) 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. (12) FAIR VALUE OF FINANCIAL INSTRUMENTS: ------------------------------------ SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", requires the Company to disclose the estimated fair value of its financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which the fair value differs from the carrying value. Mortgage receivables -------------------- The fair value of the Company's long-term fixed-rate mortgage receivables is estimated to be $5.7 million versus a carrying amount of $6.3 million as of April 30, 1997, and $6.0 million which equals the carrying amount as of April 30, 1996; based on the discounted value of future cash flows using the current rates at which similar loans would be made. Notes payable ------------- The fair value of the Company's long-term fixed-rate notes payable is estimated to be $8.0 million versus a carrying amount of $8.1 million as of April 30, 1997 and $9.7 million versus a carrying amount of $9.8 million as of April 30, 1996, based on the discounted value of future cash flows using the current rates at which the Company believes it could obtain similar financing. (13) INFORMATION ABOUT THE COMPANY'S OPERATIONS IN DIFFERENT ------------------------------------------------------- INDUSTRY SEGMENTS: ------------------ The Company operates principally in two industries, real estate and magazine circulation operations. Real estate operations involve the construction and sale of single-family homes, condominiums and other projects, as well as the subdivision of large tracts of land for sale to individuals, builders and others. Magazine circulation operations involve national and international distribution of periodicals and paperback books, and subscription fulfillment and related activities on behalf of various client publishers. Total revenue by industry includes revenues from unaffiliated customers as reported in the accompanying consolidated statements of income. Operating income represents total revenue less operating expenses. In computing operating income, general corporate expenses, interest expense and income taxes are excluded. Selling expense is allocated between industry segments based on the Company's evaluation of the work performed for each segment. Identifiable assets by industry are those assets that are used in the Company's operations in each industry segment. The following schedules set forth summarized data relative to the industry segments: Magazine Real Estate Circulation Other Operations Operations Operations Corporate Eliminations Consolidated 1997 (Thousands): Net revenues from unaffiliated customers $ 91,250 $ 54,152 $ 987 $ - $ - $ 146,389 Intersegment revenues - - 72 - (72) - --------- --------- --------- --------- --------- --------- Total revenue $ 91,250 $ 54,152 $ 1,059 $ - $ (72) $ 146,389 ========= ========= ========= ========= ========= ========= Operating income $ 4,548 $ 3,758 $ 133 $ - $ (72) $ 8,367 ========= ========= ========= ========= ========= Corporate expenses (2,597) Interest (4,050) --------- Income before provision for income taxes $ 1,720 ========= Identifiable assets at April 30, 1997 $ 132,544 $ 71,384 $ 172 $ 1,211 $ - $ 205,311 ========= ========= ========= ========= ========= ========= Identifiable depreciation $ 741 $ 1,045 $ 3 $ 27 $ - $ 1,816 ========== ========= ========= ========= ========= ========= Identifiable capital expenditures $ 1,730 $ 2,170 $ - $ - $ - $ 3,900 ========= ========= ========= ========= ========= ========= 1996 (Thousands): Net revenues from unaffiliated customers $ 103,747 $ 57,149 $ 906 $ - $ - $ 161,802 Intersegment revenues - - 72 - (72) - --------- --------- --------- --------- --------- --------- Total revenue $ 103,747 $ 57,149 $ 978 $ - $ (72) $ 161,802 ========= ========= ========= ========= ========= ========= Operating income $ 8,313 $ 4,635 $ 119 $ - $ (72) $ 12,995 ========= ========= ========= ========= ========= Corporate expenses (4,429) Interest (3,925) Income before provision for income taxes $ 4,641 ========= Identifiable assets at April 30, 1996 $ 121,646 $ 57,937 $ 342 $ 1,871 $ - $ 181,796 ========= ========= ========= ========= ========= ========= Identifiable depreciation $ 694 $ 890 $ 3 $ 43 $ - $ 1,630 ========= ========= ========= ========= ========= ========= Identifiable capital expenditures $ 2,713 $ 2,624 $ - $ 21 $ - $ 5,358 ========= ========= ========= ========= ========= =========
Magazine Real Estate Circulation Other Operations Operations Operations Corporate Eliminations Consolidated 1995 (Thousands): Net revenues from unaffiliated customers $ 105,060 $ 46,595 $ 870 $ - $ - $ 152,525 Intersegment revenues - - 72 - (72) - --------- --------- --------- --------- --------- --------- Total revenue $ 105,060 $ 46,595 $ 942 $ - $ (72) $ 152,525 ========= ========= ========= ========= ========= ========= Operating income $ 6,199 $ 6,951 $ 140 $ - $ (72) $ 13,218 ========= ========= ========= ========= ========= Corporate expenses (3,404) Interest (3,086) --------- Income before provisionfor income taxes $ 6,728 ========== Identifiable assets at April 30, 1995 $ 122,654 $ 60,957 $ 551 $ 1,980 $ - $ 186,142 ========= ========= ========= ========== ======== ========== Identifiable depreciation $ 679 $ 654 $ 2 $ 21 $ - $ 1,356 ========= ========= ========= ========== ======== ========== Identifiable capital expenditures $ 814 $ 2,150 $ 29 $ 123 $ - $ 3,116 ========= ========= ========= ========== ======== ==========
Selected Quarterly Financial Data (Unaudited) (In thousands of dollars, except per share amounts) Quarter Ended --------------------------------------------- July 31, October 31, January 31, April 30, 1996 1996 1997 1997 --------- ----------- --------- ---------- Revenues $ 34,408 $ 33,230 $ 36,761 $ 41,990 Gross Profit 6,246 6,305 6,703 6,477 Net Income (A) $ 403 $ 262 $ 267 $ 6,350 ========= ========= ========= ========= Net Income Per Share (A) $ 0.05 $ 0.04 $ 0.04 $ 0.86 ========= ========= ========= ========= Quarter Ended --------------------------------------------- July 31, October 31, January 31, April 30, 1996 1996 1997 1997 --------- ----------- --------- ---------- Revenues $ 40,922 $ 42,410 $ 37,944 $ 40,526 Gross Profit 7,639 8,733 7,382 6,996 Net Income $ 781 $ 1,279 $ 494 $ 231 ========= ========= ========= ========= Net Income Per Share $ 0.11 $ 0.17 $ 0.07 $ 0.03 ========= ========= ========= ========= (A) The quarter ended April 30, 1997 reflects an adjustment to Deferred Income Taxes for settlement of 1984 through 1989 tax examinations (see Note 9). Item 9. Changes in and Disagreements with Accountants on - ------- ------------------------------------------------ Accounting and Financial Disclosure. ------------------------------------ Not Applicable. PART III -------- The information called for by Part III is hereby incorporated by reference from the information set forth and under the headings "Voting Securities", "Security Ownership of Management", "Election of Directors", and "Executive Compensation" in Registrant's definitive proxy statement for the 1997 Annual Meeting of Shareholders, which meeting involves the election of directors, such definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. In addition, information on Registrant's executive officers has been included in Part I above under the caption "Executive Officers of the Registrant". PART IV ------- Item 14. Exhibits, Financial Statement Schedules, - ------- ---------------------------------------- and Reports on Form 8-K. ------------------------ (a) 1. The following financial statements and supplementary financial information are filed as part of this report: AMREP Corporation and Subsidiaries: Report of Independent Public Accountants - Arthur Andersen LLP Consolidated Balance Sheets - April 30, 1997 and 1996 Consolidated Statements of Operations for the Three Years Ended April 30, 1997 Consolidated Statements of Shareholders'Equity for the Three Years Ended April 30, 1997 Consolidated Statements of Cash Flows for the Three Years Ended April 30, 1997 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, 1997, Registrant filed no Current Report on Form 8-K. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMREP CORPORATION (Registrant) Dated: July 25, 1997 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/Daniel Friedman - ---------------- ------------------ Mohan Vachani DanielFriedman Director, Senior Vice President, Director Principal Financial Officer and Dated: July 25, 1997 Principal Accounting Officer * Dated: July 25, 1997 /s/Jerome Belson /s/Nicholas G. Karabots - ---------------- ----------------------- Jerome Belson Nicholas G.Karabots Director Director Dated: July 25, 1997 Dated: July 25, 1997 /s/Edward B. Cloues, II /s/Albert V. Russo - ----------------------- ------------------- Edward B. Cloues, II Albert V. Russo Director Director Dated: July 25, 1997 Dated: July 25, 1997 /s/Samuel N. Seidman - -------------------- -------------------- David N. Dinkins Samuel N.Seidman Director Director Dated: Dated: July 25, 1997 /s/Harvey I. Freeman /s/James Wall - -------------------- ------------- Harvey I. Freeman James Wall Director Director Dated: July 25, 1997 Dated: July 25, 1997 *Also acting as Principal Executive Officer in the absence of a Chief Executive Officer, solely for the purpose of signing this Annual Report. AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 1 of 2) ------------------------------------------------------------- (Thousands) Additions --------------------- Charges Balance at (Credits)to Charged Balance at Beginning Costs and to Other End of Period Expenses Accounts Deductions of Period ---------- --------- -------- ---------- --------- Description ----------- 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 $ 690 ----------- --------- --------- ---------- ---------- Allowance for estimated returns and doubtful accounts (included in receivables - magazine circulation operations on the consolidated balance sheet)$ 57,940 $ (1,252) $ - $ 1,124 $ 55,564 ----------- --------- --------- ----------- ---------- Real estate valuation allowance $ 2,580 $ - $ - $ 121 $ 2,459 ----------- --------- --------- ---------- ---------- FOR THE YEAR ENDED APRIL 30, 1996: Allowance for doubtful accounts (included in receivables - real estate operations on the consolidated balance sheet)$ 608 $ 24 $ - $ 34(A) $ 598 ----------- --------- --------- -------- ---------- Allowance for estimated returns and doubtful accounts (included in receivables - magazine circulation operations on the consolidated balance sheet)$ 56,971 $ 1,365 $ - $ 396(A) $ 57,940 ----------- --------- --------- -------- ---------- Real estate valuation allowance $ 2,580 $ - $ - $ - $ 2,580 ----------- --------- --------- -------- ---------- AMREP CORPORATION AND SUBSIDIARIES ---------------------------------- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Page 2 of 2) ------------------------------------------------------------- (Thousands) Additions Charges Balance at (Credits)to Charged Balance at Beginning Costs and to Other End of Period Expenses Accounts Deductions of Period ---------- --------- -------- ---------- --------- FOR THE YEAR ENDED APRIL 30, 1995: Allowance for doubtful accounts (included in receivables - real estate operations on the consolidated balance sheet) $ 693 $ 2 $ - $ 87(A) $ 608 ----------- --------- --------- -------- ---------- Allowance for estimated returns and doubtful accounts (included in receivables - magazine circulation operations on the consolidated balance sheet) $ 54,355 $ 2,984 $ - $ 368(A) $ 56,971 ----------- --------- --------- -------- ---------- Real estate valuation allowance $ 2,580 $ - $ - $ - $ 2,580 ----------- --------- --------- -------- ---------- NOTE: (A) Uncollectible accounts written off. (B) Allowances utilized to reduce inventory valuation. EXHIBIT INDEX ------------- (2) Assets Purchase and Sale Agreement dated as of December 22, 1994 by and among Kable Fulfillment Services of Ohio, Inc. and Fulfillment Corporation of America - Incorporated by reference to Exhibit 1 of Registrant's Current Report on Form 8-K, dated January 24, 1995. (3)(a)(i) Articles of Incorporation, as amended - Incorporated by reference to Exhibit (3)(i)(a) to Registrant's Annual Report on Form 10-K of for the fiscal year ended April 30, 1993. (3)(a)(ii) Certificate of Merger - Incorporated by reference to Exhibit (3)(i)(b) to Registrant's Annual Report on Form 10-K for the fiscal year ended April 30, 1993. (3)(b) By-Laws as restated January 18, 1996 - Incorporated by reference to Exhibit 3(b) to Registrant's Current Report on Form 8-K dated January 31, 1996. (4)(a) Amended and Restated Loan Agreement between American National Bank and Trust Company of Chicago and Kable News Company, Inc. dated as of October 6, 1995 - Incorporated by reference to Exhibit 4 to Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 1995. (4)(b) Amendment No. 1, dated September 26, 1996, to the Amended and Restated Loan Agreement, between American National Bank and Trust Company of Chicago, and Kable News Company, Inc. - Incorporated by reference to Exhibit 4 to Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 1996. (10)(a) Agreement and Plan of Reorganization between Registrant and Capital Distributing Company, Kappa Publishing Group, Inc. and Nick G. Karabots dated August 4, 1993 - Incorporated by reference to Exhibit 10 to Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 1993. (10)(b) Employment Agreement dated as of October 1, 1993 between Registrant and Daniel Friedman, Senior Vice President of Registrant - Incorporated by reference to Exhibit 10(b) to Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 1994.* (10)(c) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Daniel Friedman, Senior Vice President of Registrant - Incorporated by reference to Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1995.* (10)(d) Employment Agreement dated as of October 1, 1993 between Registrant and James Wall, Senior Vice President of Registrant - Incorporated by reference to Exhibit 10(c) to Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 1994.* (10)(e) Letter Agreement dated May 23, 1993 amending the Employment Agreement between Registrant and James Wall, Senior Vice President of Registrant - Incorporated by reference to Exhibit 10(d) to Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1995.* (10)(f) Employment Agreement dated as of October 1, 1993 between Registrant and Mohan Vachani, Senior Vice President - Chief Financial Officer of Registrant - Incorporated by reference to Exhibit 10(e) to Registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 1994.* ___________________________ * Management contract or compensatory plan or arrangement in which directors or officers participate. (10)(g) Letter Agreement dated May 23, 1995 amending the Employment Agreement between Registrant and Mohan Vachani, Senior Vice President - Chief Financial Officer of Registrant - Incorporated by reference to Exhibit 10(c) to Registrant's Quarterly Report on Form 10-Q for the quarter ended July 31, 1995.* (10)(h) 1992 Stock Option Plan, filed herewith.* (10)(i) Non-Employee Directors Option Plan, as amended, filed herewith.* (10)(j) Bonus Plan for Executives and Key Employees of Registrant - Incorporated by reference to Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended April 30, 1994.* (21) Subsidiaries of Registrant, filed herewith. (23) Consent of Arthur Andersen LLP, filed herewith. (27) Financial Data Schedule ___________________________ * Management contract or compensatory plan or arrangement in which directors or officers participate. EX-10 2 MATERIAL CONTRACTS Exhibit 10(n) AMREP CORPORATION 1992 STOCK OPTION PLAN 1. PURPOSE ------- The Plan is intended to expand and improve the profitability and prosperity of AMREP Corporation for the benefit of its stockholders by permitting the Corporation to grant, to officers and other key employees of, and consultants and advisers to, the Corporation and its Subsidiaries, options to purchase shares of the Corporation's Common Stock. These grants are intended to provide additional incentive to such persons by offering them a greater stake in the Corporation's continued success. The Plan is also intended as a means of reinforcing the commonality of interest between the Corporation's stockholders and such persons, and as an aid in attracting and retaining the services of individuals of outstanding abilities and specialized skills. 1. DEFINITIONS ----------- For Plan purposes, except where the context otherwise indicates, the following terms shall have the meanings which follow: (a) "Agreement" shall mean a written instrument executed and delivered on behalf of the Corporation which specifies the terms and conditions of a Stock Option granted to a Participant. (b) "Beneficiary" shall mean the person or persons who may be designated by a Participant from time to time in writing to the Committee, to receive, if the Participant dies, any Option exercise rights held by the Participant. (c) "Board" shall mean the Board of Directors of the Corporation. (d) "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time, and the rules and regulations promulgated thereunder. (e) "Committee" shall mean a Committee of the Board composed of three or more persons which shall be designated by the Board to administer the Plan. Each member of the Committee, while serving as such, shall be a member of the Board and shall be a disinterested person within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934. (f) "Common Stock" shall mean the Common Stock of the Corporation having a par value of $0.10 per share. (g) "Corporation" shall mean AMREP Corporation, an Oklahoma corporation. (h) "Employee" shall mean any person who is employed by the Corporation or any Subsidiary corporation. (i) "Exercise Price" shall mean the per share price for which a Participant upon exercise of a Stock Option may purchase a share of Common Stock. (j) "Fair Market Value" shall mean the value of a share of Common Stock to be determined by, and in accordance with procedures established by, the Committee. Such fair market value shall be deemed conclusive upon the determination of the Committee made in good faith. The preceding notwithstanding, so long as the Common Stock is listed on a national stock exchange, the "Fair Market Value" shall mean with respect to any given day, the mean between the highest and lowest reported sales prices of the Common Stock on the principal national stock exchange on which the Common Stock is listed, or if such exchange was closed on such day or if it was open but the Common Stock was not traded on such day, then on the next preceding day that the Common Stock was traded on such exchange, as reported by a responsible reporting service. (k) "Incentive Stock Option" shall mean an Stock Option which is intended to meet and comply with the terms and conditions for an "incentive stock option" as set forth in Section 422 of the Code, or any other form of tax qualified stock option which may be incorporated and defined in the Code as it may from time to time be amended. (l) "Non-Qualified Option" shall mean a Stock Option which does not meet the requirements of Section 422 of the Code, or the terms of which provide that it will not be treated as an Incentive Stock Option. (m) "Participant" shall mean any person who is granted a Stock Option under the Plan. (n) "Plan" shall mean the AMREP Corporation 1992 Stock Option Plan as set forth herein and as amended from time to time. (o) "Stock Option" or "Option" shall mean a right to purchase a stated number of shares of Common Stock subject to such terms and conditions as are set forth in the Plan and an Agreement. (p) "Subsidiary corporation" or "Subsidiary" shall mean any corporation which is a subsidiary corporation of the Corporation as defined in Section 424(f) of the Code. 3. ADMINISTRATION -------------- (a) The Committee shall administer the Plan and, accordingly, it shall have full power to grant Stock Options under the Plan, to construe and interpret the Plan, and to establish rules and regulations and perform all other acts it believes reasonable and proper, including the authority to delegate responsibilities to others to assist in administering the Plan. (b) The determination of those eligible to receive Stock Options, and the amount, type and terms and conditions of each Stock Option shall rest in the sole discretions of the Committee, subject to the provisions of the Plan. (c) The Committee may permit the voluntary surrender of all or a portion of any Option granted under the Plan to be conditioned upon the granting to the Participant of a new Option for the same or a different number of shares as the Option surrendered, or may require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at the price, during the period and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the price, period of exercise, or any other terms or conditions of the Option surrendered. 4. COMMON STOCK LIMITS ------------------- The total number of shares of Common Stock which may be issued on exercise of Stock Options shall not exceed 315,000 shares, subject to adjustment in accordance with Paragraph 9 of the Plan. Shares issued under the Plan may be, in whole or in part, as determined by the Committee, authorized but unissued or treasury shares of Common Stock. If any Options granted under the Plan shall expire or terminate without having been exercised, the shares subject to such Options shall be added back to the number of shares of Common Stock which may be issued on exercise of Stock Options. 5. ELIGIBILITY FOR PARTICIPATION ----------------------------- (a) Consistent with Plan objectives, the following persons hall be eligible to become Participants in the Plan: officers and other key Employees and consultants and advisers to the Corporation or any Subsidiary corporation, provided that members of the Board who are not Employees shall not be eligible. (b) The foregoing subparagraph (a) notwithstanding, Incentive Stock Options shall be granted only to officers and other key Employees, and no Incentive Stock Options shall be granted to an Employee who owns more than 10% of the Common Stock determined in accordance with the provisions of Section 422(b)(6) of the Code, unless the Option meets the requirements of Section 422(c)(5) of the Code. (c) Options shall be granted to consultants and advisers only for bona fide services rendered other than in connection with the offer or sale of securities. 6. STOCK OPTIONS - TERMS AND CONDITIONS ------------------------------------ All Stock Options granted under the Plan shall be evidenced by Agreements which shall contain such provisions as shall be required by the Plan together with such other provisions as the Committee may prescribe, including the following provisions: (a) Price: The Committee shall establish the Exercise Price, provided, however, that in the case of an Incentive Stock Option the Exercise Price shall not be less than the Fair Market Value of a share of Common Stock on the date of the grant of the Option. (b) Period: The Committee shall establish the term of any Option awarded under the Plan, provided, however, that no Option shall be exercisable after the expiration of 10 years from the date of the grant of the Option. (c) Time of Exercise: The Committee shall establish the time or times at which any Option, or portion thereof, shall be exercisable. The Committee, subsequent to the grant of an Option, may accelerate the date or dates on which the Option may be exercisable. (d) Exercise: An Option, or portion thereof, shall be exercised by delivery of a written notice of exercise to the Corporation together with payment of the full purchase price of the shares as to which the Option is exercised ("Purchase Price"). Payment may be made: (i) in United States dollars by good check, bank draft or money order payable to the order of the Corporation, or (ii) at the discretion of the Committee, by the transfer to the Corporation of shares of Common Stock owned by the Participant having an aggregate Fair Market Value on the date of exercise equal to the Purchase Price or the portion thereof being so paid, or (iii) at the discretion of the Committee and subject to any restrictions or conditions as it deems appropriate (including any restrictions as may be set forth in Rule 16b-3 of the Securities Exchange Act of 1934), by electing to have the Corporation withhold from the shares issuable upon exercise of the Option such number of shares of Common Stock as shall have an aggregate Fair Market Value on the date of exercise equal to the Purchase Price or the portion thereof being so paid, or (iv) at the discretion of the Committee by a combination of (i) and (ii) or (i) and (iii) above. The Committee shall determine the procedures for the use of Common Stock in payment of the purchase price and may impose such limitations and prohibitions on such use as it deems appropriate. (e) Special Rules for Incentive Stock Options: Notwithstanding any other provisions of the Plan, with respect to Incentive Stock Options granted under the Plan, the following provision will apply: (i) To the extent that the aggregate Fair Market Value (determined at the time of grant) of the shares of Common Stock with respect to which Incentive Stock Options (whether granted hereunder or pursuant to any other plan of the Corporation or a Subsidiary) are first exercisable by a Participant during any calendar year exceeds $100,000 (or such other limit as may be in effect from time to time under the Code), such Options shall be treated as Non-Qualified Options. (ii) Any Participant who disposes of shares of Common Stock acquired on the exercise of an Incentive Stock Option by sale or exchange either (a) within two years after the date of grant of the Option under which such shares were acquired or (b) within one year after the acquisition of such shares, shall notify the Corporation in writing of such disposition, and of the amount realized upon disposition promptly after the disposition. 7. TERMINATION OF EMPLOYMENT ------------------------- If a Participant holding an Option shall cease to be employed (or in the case of a Participant who is not an Employee, shall cease to be engaged) by the Corporation or any Subsidiary corporation by reason of death or any other reason other than voluntary quitting, discharge for cause or permanent and total disability as defined in Section 22(e)(3) of the Code (hereinafter call a "Disability"), as determined by the Committee, such Participant (or, if applicable, such Participant's Beneficiary) may, but only within the three months next succeeding such cessation of employment, exercise such Option to the extent that such Participant would have been entitled to do so on the date of such cessation of employment. If a Participant holding an Option voluntarily quits or is discharged for cause, such Option shall terminate on the date of cessation of employment. 8. DISABILITY ---------- If a Participant holding an Option shall cease to be employed (or in the case of a Participant who is not an Employee, shall cease to be engaged) by the Corporation or any Subsidiary corporation by reason of Disability, the Option shall be exercisable by such Participant or such Participant's duly appointed guardian or other legal representative, to the extent that such Participant would have been entitled to do so on the date of such cessation of employment, but only within one year following such cessation of employment due to said Disability. 9. ADJUSTMENTS ----------- In the event of a recapitalization, stock split, stock combination, stock dividend, exchange of shares, or a change in the corporate structure or shares of the Corporation, or similar event, the Board of Directors upon recommendation of the Committee shall make appropriate adjustments in the kind or number of shares which may be issued upon exercise of Options and in the kind or number of shares issuable upon exercise of Options theretofore granted and in the exercise price of such Options. 10. MERGER, CONSOLIDATION OR SALE OF ASSETS --------------------------------------- If the Corporation shall be a party to a merger or consolidation or shall sell substantially all its assets, each outstanding Option shall pertain and apply to the securities and/or property which a holder of the number of shares of Common Stock subject to the Option immediately prior to such merger, consolidation, or sale of assets would be entitled to receive in such merger, consolidation or sale of assets. 11. AMENDMENT AND TERMINATION OF PLAN --------------------------------- (a) The Board, without further approval of the stockholders, may at any time, and from time to time, suspend or terminate the Plan in whole or in part or amend it from time to time in such respects as the Board may deem appropriate and in the best interests of the Corporation; provided, however, that no such amendment shall be made, without approval of the stockholders, which would: (i) modify the eligibility requirements for participation in the Plan; (ii) increase the total number of shares of Common Stock which may be issued pursuant to Stock Options, except as is provided for in accordance with Paragraph 9 of the Plan; or (iii) materially increase benefits accruing to Participants. (b) No amendment, suspension or termination of this Plan shall, without the Participant's consent, alter or impair any of the rights or obligations under any Stock Option theretofore granted to the Participant under the Plan. (c) The Board may amend the Plan, subject to the limitations cited above, in such manner as it deems necessary to permit the granting of Stock Options meeting the requirements of future amendments to the Code. 12. GOVERNMENT AND OTHER REGULATIONS -------------------------------- The granting of Stock Options under the Plan and the obligation of the Corporation to issue, or transfer and deliver shares for Stock Options exercised under the Plan shall be subject to all applicable laws, regulations, rules and orders which shall then be in effect. 13. MISCELLANEOUS PROVISIONS ------------------------ (a) Rights to Continued Employment: No person shall have any claim or right to be granted a Stock Option under the Plan, and the grant of an Option under the Plan shall not be construed as giving any Participant the right to be retained in the employ of the Corporation or any Subsidiary corporation (or to be otherwise retained in the case of a Participant who is not an Employee) and the Corporation expressly reserves the right at any time to dismiss a Participant with or without cause, free from any liability or any claim under the Plan, except as provided herein or in an Agreement. (b) Who Shall Exercise: Except as provided by the Plan, an Incentive Stock Option shall be exercisable during the lifetime of the Participant to whom it is granted only by such Participant, and it may be exercised only if such Participant has been in the continuous employ of the Corporation or any Subsidiary corporation from the date of grant of the Option to the date of its exercise. (c) Non-Transferability: No right or interest of any Participant in the Plan shall be assignable or transferable except by will or the laws of descent and distribution, and no right or interest of any Participant shall be liable for, or subject to, any lien, obligation or liability of such Participant. (d) Withholding Taxes: The Corporation may require a payment to cover applicable withholding for income and employment taxes in connection with a Stock Option. (e) Rights as Shareholder: A Participant as such shall not have any of the rights or privileges of a holder of Common Stock until such time as shares of Common Stock are issued or are transferred to the Participant upon exercise of an Option. (f) Plan Expenses: Any expenses of administering this Plan shall be borne by the Corporation. (g) Legal Considerations: The Corporation shall not be required to issue, transfer or deliver shares of Common Stock upon exercise of Options until all applicable legal, listing or registration requirements, as determined by legal counsel, have been satisfied, and any necessary or appropriate written representations have been given by the Participant. (h) Other Plans: Nothing contained herein shall prevent the Corporation from establishing other incentive and benefit plans in which Participants in Plan may also participate. (i) No Warranty of Tax Effect: Except as may be contained in any Agreement, no opinion shall be deemed to be expressed or warranties made as to the effect for federal, state or local tax purposes of any grants hereunder. (j) Construction of Plan: The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined in accordance with the laws of the State of New York. 14. STOCKHOLDER APPROVAL - TERM OF PLAN Upon approval by the stockholders of the Corporation, the Plan shall become unconditionally effective as of July 1, 1992. No Option shall be granted after June 30, 2002, provided, however, that the Plan and all outstanding Options granted under the Plan prior to such date shall remain in effect until the applicable Options have expired. If the stockholders shall not approve the Plan, the Plan shall not be effective and any and all actions taken prior thereto shall be null and void or shall, if necessary, be deemed to have been fully rescinded. EX-21 3 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 State of Subsidiary Incorporation AMREP Metro Services, Inc. New York AMREP Saratoga Construction, Inc. New York AMREP Solutions, Inc. New York AMREP Southwest Inc. New Mexico Advance Financial Corp. New Mexico AMREP Construction Corporation New Mexico AMREP Financial Corp. New Mexico AMREP Metro Works, Inc. New York PERMA Corp. New York Strickland Construction Corp. New Jersey AMREP Southeast, Inc. Florida AMREP Saratoga Square Homes, Inc. Florida AMREPCO Inc. Colorado Carity-Hoffman Associates, Inc. New York Double R Realty, Inc. New Mexico Eldorado at Sante Fe, Inc. New Mexico M.F.G. Realty Corp. New York New Mexico Foreign Trade Zone Corp. New Mexico Panorama Inn of Florida, Inc. Florida Rancho Homes, Inc. New Mexico Rio Rancho Golf & Country Club, Inc. New Mexico S.G.R. Realty Corp. New Jersey Shasta Real Estate Company California Sun Oaks Realty Corp. Florida Rio Venture Corp. New Mexico Rio Venture XV, Inc. New Mexico El Dorado Utilities, Inc. New Mexico Florida Ridge Utilities Corp. Florida Kable News Company, Inc. Illinois Kable Fulfillment Services of Ohio, Inc. Delaware Kable News Company of Canada, Ltd. Ontario, Canada Kable News Export, Ltd. Delaware Kable News International, Inc. Delaware EX-23 4 CONSENTS OF EXPERTS AND COUNSEL Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors AMREP Corporation: As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into AMREP Corporation's previously filed Registration Statements on Form S-8 Nos. 33-67114, 33-67116, and 333-17695. ARTHUR ANDERSEN LLP Albuquerque, New Mexico July 25, 1997 EX-27 5 ART.5 FDS FOR 4TH QUARTER 10-K
5 0000006207 AMREP CORP. 1,000 U.S.DOLLARS 12-MOS APR-30-1997 MAY-01-1996 APR-30-1997 1 16,178 0 53,501 0 97,408 0 32,506 (13,532) 205,311 55,426 54,991 0 0 740 75,094 205,311 85,538 146,389 70,057 120,658 0 0 4,050 1,720 (5,562) 7,282 0 0 0 7,282 0.99 0
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