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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 1-4702

AMREP Corporation

(Exact Name of Registrant as Specified in its Charter)

Oklahoma

    

59-0936128

State or Other Jurisdiction of

Incorporation or Organization

I.R.S. Employer Identification No.

 

 

850 West Chester Pike,

Suite 205, Havertown, PA

19083

Address of Principal Executive Offices

Zip Code

(610) 487-0905

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock $0.10 par value

AXR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer  

Smaller reporting company 

Emerging growth company   

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 

Number of Shares of Common Stock, par value $.10 per share, outstanding at March 7, 2022 – 7,336,370.

AMREP CORPORATION AND SUBSIDIARIES

INDEX

    

PAGE
NO.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets January 31, 2022 (Unaudited) and April 30, 2021

2

Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended January 31, 2022 and 2021

3

Consolidated Statements of Comprehensive Income (Unaudited) Three and Nine Months Ended January 31, 2022 and 2021

4

Consolidated Statements of Shareholders’ Equity (Unaudited) Three and Nine Months Ended January 31, 2022 and 2021

5

Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended January 31, 2022 and 2021

6

Notes to Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 4.

Controls and Procedures

22

PART II. OTHER INFORMATION

Item 6.

Exhibits

23

SIGNATURE

24

EXHIBIT INDEX

25

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

January 31, 

April 30, 

2022

2021

    

(Unaudited)

    

ASSETS

 

  

 

  

Cash and cash equivalents

$

27,300

$

24,801

Real estate inventory

 

64,786

 

55,589

Investment assets, net

 

9,775

 

13,582

Other assets

 

1,924

 

645

Taxes receivable, net

 

284

 

Deferred income taxes, net

885

2,749

Prepaid pension costs

 

186

 

TOTAL ASSETS

$

105,140

$

97,366

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

LIABILITIES:

 

  

 

  

Accounts payable and accrued expenses

$

4,196

$

4,458

Notes payable, net

 

5,726

 

3,448

Taxes payable, net

 

 

95

Accrued pension costs

 

 

476

TOTAL LIABILITIES

 

9,922

 

8,477

SHAREHOLDERS' EQUITY:

 

  

 

  

Common stock, $.10 par value; shares authorized – 20,000,000; shares issued – 7,336,370 at January 31, 2022 and 7,323,370 at April 30, 2021

 

733

730

Capital contributed in excess of par value

 

45,325

 

45,072

Retained earnings

 

53,583

 

47,710

Accumulated other comprehensive loss, net

 

(4,423)

 

(4,623)

TOTAL SHAREHOLDERS’ EQUITY

 

95,218

 

88,889

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

105,140

$

97,366

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

2

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three and Nine Months ended January 31, 2022 and 2021

(Amounts in thousands, except per share amounts)

Three Months ended

Nine Months ended

January 31, 

January 31, 

    

2022

    

2021

    

2022

    

2021

REVENUES:

 

  

 

  

 

  

 

  

Land sale revenues

$

5,879

$

5,957

$

21,535

$

17,970

Home sale revenues

3,376

1,261

6,606

1,463

Building sales and other revenues

 

561

 

646

 

8,418

 

1,893

Total revenues

 

9,816

 

7,864

 

36,559

 

21,326

COSTS AND EXPENSES:

 

  

 

 

  

 

Land sale cost of revenues

 

4,495

 

2,916

 

16,259

 

12,028

Home sale cost of revenues

2,623

1,082

5,167

1,256

Building sales and other cost of revenues

 

 

 

3,837

 

General and administrative expenses

 

1,540

 

1,342

 

3,983

 

4,306

Total costs and expenses

 

8,658

 

5,340

 

29,246

 

17,590

Operating income

1,158

2,524

7,313

3,736

Interest income (expense), net

 

 

(21)

 

1

 

(27)

Other income

 

 

300

 

260

 

950

Income before income taxes

1,158

2,803

7,574

4,659

Provision for income taxes

248

710

1,701

1,175

Net income

$

910

$

2,093

$

5,873

$

3,484

Basic earnings per share

$

0.12

$

0.29

$

0.80

$

0.44

Diluted earnings per share

$

0.12

$

0.28

$

0.80

$

0.44

Weighted average number of common shares outstanding – basic

 

7,363

 

7,343

 

7,357

 

7,872

Weighted average number of common shares outstanding – diluted

 

7,385

 

7,372

 

7,380

 

7,903

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

3

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three and Nine Months ended January 31, 2022 and 2021

(Amounts in thousands)

Three Months ended

Nine Months ended

January 31, 

January 31, 

    

2022

    

2021

    

2022

    

2021

Net income

$

910

$

2,093

$

5,873

$

3,484

Other comprehensive income, net of tax:

 

  

 

  

 

  

 

  

Decrease in pension liability

 

98

 

132

 

293

 

396

Income tax effect

(31)

(42)

(93)

(126)

Decrease in pension liability, net of tax

67

90

200

270

Other comprehensive income

 

67

 

90

 

200

 

270

Total comprehensive income

$

977

$

2,183

$

6,073

$

3,754

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

4

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

Three and Nine Months ended January 31, 2022 and 2021

(Amounts in thousands)

Capital

Accumulated

Treasury

Contributed

Other

Stock,

Common Stock

in Excess of

Retained

Comprehensive

at

    

Shares

    

Amount

    

Par Value

    

Earnings

    

Loss

    

Cost

    

Total

Balance, November 1, 2021

 

7,336

$

731

$

45,221

$

52,673

$

(4,490)

$

$

94,135

Reclassification of common stock settled from deferred common share units

2

(2)

Issuance of option to purchase common stock

16

16

Issuance of deferred common share units

90

90

Net income

910

910

Other comprehensive income

 

 

 

 

67

 

 

67

Balance, January 31, 2022

 

7,336

$

733

$

45,325

$

53,583

$

(4,423)

$

$

95,218

Balance, November 1, 2020

7,692

$

768

$

47,216

$

44,540

$

(6,287)

$

(4,215)

$

82,022

Issuance of deferred common share units

90

90

Repurchase of common stock

(144)

(14)

(874)

(888)

Retirement of treasury stock

(225)

(24)

(1,360)

(2,831)

4,215

Net income

2,093

2,093

Other comprehensive income

90

90

Balance, January 31, 2021

 

7,323

$

730

$

45,072

$

43,802

$

(6,197)

$

$

83,407

Balance, May 1, 2021

 

7,323

$

730

$

45,072

$

47,710

$

(4,623)

$

$

88,889

Reclassification of common stock settled from deferred common share units

2

(2)

Issuance of option to purchase common stock

16

16

Issuance of deferred common share units

90

90

Issuance of restricted common stock

13

1

 

149

 

 

 

 

150

Net income

5,873

5,873

Other comprehensive income

 

 

 

 

 

200

 

 

200

Balance, January 31, 2022

 

7,336

$

733

$

45,325

$

53,583

$

(4,423)

$

$

95,218

Balance, May 1, 2020

8,358

$

836

$

51,334

$

43,149

$

(6,467)

$

(4,215)

$

84,637

Issuance of restricted common stock

9

1

41

42

Issuance of deferred common share units

90

90

Issuance of common stock settled from deferred common share units

12

Repurchase of common stock

(831)

(83)

(5,033)

(5,116)

Retirement of treasury stock

(225)

(24)

(1,360)

(2,831)

4,215

Net income

3,484

3,484

Other comprehensive income

270

270

Balance, January 31, 2021

 

7,323

$

730

$

45,072

$

43,802

$

(6,197)

$

$

83,407

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

5

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months ended January 31, 2022 and 2021

(Amounts in thousands)

Nine Months ended January 31,

    

2022

    

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net income

$

5,873

$

3,484

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Depreciation

 

217

 

424

Amortization of debt issuance costs

 

71

 

30

Non-cash credits and charges:

 

  

 

  

Stock-based compensation

 

178

 

132

Deferred income tax provision

 

1,771

 

1,301

Net periodic pension cost

 

(369)

 

298

Gain on debt forgiveness

(45)

(300)

Changes in assets and liabilities:

 

  

 

  

Real estate inventory and investment assets

 

(5,608)

 

(2,750)

Other assets

 

(34)

 

(297)

Accounts payable and accrued expenses

 

(262)

 

951

Accrued pension costs

(1,847)

Taxes receivable

 

(379)

 

Net cash provided by operating activities

 

1,413

 

1,426

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Proceeds from corporate-owned life insurance policy

 

92

 

Capital expenditures

 

(1,259)

 

(3)

Net cash used in investing activities

 

(1,167)

 

(3)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Proceeds from debt financing

 

6,857

 

5,466

Principal debt payments

 

(4,554)

 

(3,782)

Payments for debt issuance costs

 

(50)

 

(87)

Repurchase of common stock

(5,116)

Net cash provided by (used in) financing activities

 

2,253

 

(3,519)

Increase (decrease) in cash and cash equivalents

 

2,499

 

(2,096)

Cash and cash equivalents, beginning of period

 

24,801

 

17,502

Cash and cash equivalents, end of period

$

27,300

$

15,406

SUPPLEMENTAL CASH FLOW INFORMATION:

 

  

 

  

Income taxes refunded, net

$

3

$

Interest paid, net of amount capitalized

$

$

52

Right-of-use assets obtained in exchange for operating lease liabilities

$

42

$

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

6

AMREP CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended January 31, 2022 and 2021

(1)           SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared by AMREP Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The Company, through its subsidiaries, is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales or activities outside the United States. All references to the Company in this quarterly report on Form 10-Q include the Registrant and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited consolidated financial statements include all adjustments, which are of a normal recurring nature, considered necessary to reflect a fair presentation of the results for the interim periods presented.  The results of operations for such interim periods are not necessarily indicative of what may occur in future periods.  Unless the context otherwise indicates, all references to 2022 and 2021 are to the fiscal years ending April 30, 2022 and 2021.

The unaudited consolidated financial statements herein should be read in conjunction with the Company’s annual report on Form 10-K for the year ended April 30, 2021, which was filed with the SEC on July 27, 2021 (the “2021 Form 10-K”).  Certain 2021 balances in these financial statements have been reclassified to conform to the current year presentation with no effect on net income or shareholders’ equity.

Summary of Significant Accounting Policies

The significant accounting policies used in preparing these consolidated financial statements are consistent with the accounting policies described in the 2021 Form 10-K, except as described below.

Share-based compensation: The Company accounts for awards of restricted stock, stock options and deferred stock units in accordance with Accounting Standards Codification 718-10, which requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). Compensation expense for awards of restricted stock, stock options and deferred stock units are based on the fair value of the awards at their grant dates. To estimate the grant-date fair value of stock options, the Company uses the Black-Scholes option-pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the option’s exercise price; the price of the underlying stock on the date of grant; the estimated dividend yield; a “risk-free” interest rate; the estimated option term; and the expected volatility. For the “risk-free” interest rate, the Company uses a U.S. Treasury bond due in a number of years equal to the option’s expected term. To estimate expected volatility, the Company analyzes the historic volatility of the Company’s common stock.

New Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes, which removes certain exceptions for companies related to tax allocations and simplifies when companies recognize deferred tax liabilities in an interim period. ASU 2019-12 was effective for the Company’s fiscal year beginning May 1, 2021. The adoption of ASU 2019-12 by the Company did not have any effect on its consolidated financial statements.

There are no other new accounting standards or updates to be adopted that the Company currently believes might have a significant impact on its consolidated financial statements.

7

(2)         REAL ESTATE INVENTORY

Real estate inventory consists of (in thousands):

January 31, 

April 30,

    

2022

    

2021

Land held for development or sale in New Mexico

$

55,773

$

49,918

Land held for development or sale in Colorado

 

4,022

 

3,975

Homebuilding finished inventory

1,410

417

Homebuilding construction in process

3,581

1,279

$

64,786

$

55,589

(3)          INVESTMENT ASSETS, NET

Investment assets, net consist of (in thousands):

    

January 31, 

    

April 30,

2022

2021

Land held for long-term investment

$

9,775

$

9,775

Buildings

10,003

Less accumulated depreciation

 

 

(6,196)

Buildings, net

 

 

3,807

$

9,775

$

13,582

As of April 30, 2021, buildings were comprised of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida. In October 2021, the Company sold this 143,000 square foot warehouse and office facility. Depreciation associated with buildings was $152,000 for the three months ended January 31, 2021 and $200,000 and $415,000 for the nine months ended January 31, 2022 and January 31, 2021.

(4)          OTHER ASSETS

Other assets consist of (in thousands):

    

January 31, 

    

April 30, 

2022

2021

Prepaid expenses

$

412

$

324

Receivables

39

37

Right-of-use assets associated with leases of office facilities

 

123

 

84

Other assets

80

172

Property

1,244

Equipment

235

222

Less accumulated depreciation

(209)

(194)

Property and equipment, net

1,270

28

$

1,924

$

645

Prepaid expenses as of January 31, 2022 primarily consisted of stock compensation, insurance, real estate taxes and utility deposits. Amortized lease cost for right-of-use assets associated with the leases of office facilities was $8,000 and $41,000 for the three months ended January 31, 2022 and January 31, 2021 and $46,000 and $83,000 for the nine months ended January 31, 2022 and January 31, 2021.

In August 2021, the Company acquired a 7,000 square foot office building in Rio Rancho, New Mexico from which its real estate business now operates. Depreciation expense associated with property and equipment was $14,000 and $2,000 for the three months ended January 31, 2022 and January 31, 2021 and $17,000 and $9,000 for the nine months ended January 31, 2022 and January 31, 2021.

8

(5)          ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of (in thousands):

    

January 31, 

    

April 30, 

2022

2021

Real estate operations

Accrued expenses

$

970

$

658

Trade payables

 

1,486

 

1,377

Real estate customer deposits

1,373

1,769

3,829

3,804

Corporate operations

367

654

$

4,196

$

4,458

(6)          NOTES PAYABLE

Notes payable, net consist of (in thousands):

    

January 31, 

    

April 30, 

2022

2021

Real estate notes payable

$

5,739

$

3,482

Unamortized debt issuance costs

 

(13)

 

(34)

$

5,726

$

3,448

The following tables present information on the Company’s notes payable in effect during the nine months ended January 31, 2022 (dollars in thousands):

    

Principal Amount

    

    

    

    

Available for

Outstanding

Borrowing

Principal Amount

Principal Repayments

January 31,

January 31,

April 30,

Three Months ended

Nine Months ended

Loan Identifier

2022

2022

2021

January 31, 2022

January 31, 2022

Revolving Line of Credit

 

$

2,427

 

$

 

$

$

$

Lomas Encantadas U2B P3

410

1,770

Hawk Site U37

 

 

 

 

 

Hawk Site U23 U40

 

1,678

 

 

30

 

 

30

Lavender Fields – acquisition

 

 

 

1,749

 

 

1,704

Lavender Fields – development

 

2,194

 

241

 

1,293

 

263

 

1,052

La Mirada

 

1,877

 

5,498

 

 

 

 

$

5,739

$

3,482

 

 

    

    

Mortgaged Property

    

    

Interest Rate

Book Value

Capitalized Interest and Fees

January 31,

January 31,

Three Months ended

Nine Months ended

Loan Identifier

2022

2022

January 31, 2022

January 31, 2022

Revolving Line of Credit

 

3.75

%  

$

1,693

$

$

Hawk Site U23 U40

 

3.75

%  

 

4,709

 

 

Lavender Fields – development

 

3.75

%  

 

6,560

 

6

 

23

La Mirada

 

3.75

%  

 

8,851

 

90

 

151

As of January 31, 2022, the Company and each of its subsidiaries were in compliance with the financial covenants contained in the loan documentation for the then outstanding notes payable. Refer to Notes 6 and 19 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about each of the above notes payable.

As of January 31, 2022, the Company had a letter of credit outstanding under its Revolving Line of Credit in the principal amount of $1,323,000 in favor of a municipality guarantying the completion of improvements in a subdivision being constructed by the Company. As of January 31, 2022, the Company had loan reserves outstanding under its note payable for La Mirada in the aggregate principal

9

amount of $2,364,000 in favor of a municipality guarantying the completion of improvements in a subdivision being constructed by the Company.  The amounts under the letter of credit and loan reserves are not reflected as outstanding principal in notes payable.

The note payable identified as “Hawk Site U37” was terminated in October 2021. The note payable identified as “Lomas Encantadas U2B P3” was terminated in January 2022. The outstanding principal amount of the note payable identified as “Lavender Fields – acquisition” was prepaid in full without penalty in June 2021 following the parties agreeing to reduce the outstanding principal amount by $45,000, which was recognized as Other income during the nine months ended January 31, 2022.

In April 2020, BOKF, NA dba Bank of Albuquerque provided a loan to the Company pursuant to the Paycheck Protection Program administered by the U.S. Small Business Administration. The amount of the loan was $298,000. The Company made no principal repayments and accrued interest in the amount of $2,000 related to this loan during the nine months ended January 31, 2021. During the three months ended January 31, 2021, the Company received notice of forgiveness pursuant to the terms of the program of the entire principal amount of the loan and all accrued interest. The Company recognized this gain on debt forgiveness in Other income during the three and nine months ending January 31, 2021.

The following table summarizes the notes payable scheduled principal repayments subsequent to January 31, 2022 (in thousands):

Fiscal Year

    

Scheduled Payments

2022

$

2023

 

241

2024

 

5,498

Total

$

5,739

(7)          REVENUES

Land sale revenues. Substantially all of the land sale revenues were received from two and three customers for the three and nine months ended January 31, 2022 and two and four customers for the three and nine months ended January 31, 2021. There were no outstanding receivables from these customers as of January 31, 2022 or January 31, 2021.

Building sales and other revenues. Building sales and other revenues consist of (in thousands):

Three Months ended January 31,

Nine Months ended January 31,

    

2022

    

2021

    

2022

    

2021

Sale of building

$

$

$

6,750

$

Oil and gas royalties

48

46

223

82

Public improvement district reimbursements

 

291

 

110

 

530

 

354

Private infrastructure reimbursement covenants

 

48

 

84

 

131

 

462

Miscellaneous other revenues

 

174

 

406

 

784

 

995

$

561

$

646

$

8,418

$

1,893

The Company owned a 143,000 square foot warehouse and office facility located in Palm Coast, Florida during the nine months ended January 31, 2022, which was leased to a third party through August 2020 and a portion of which was leased to the same third party after August 2020. Sale of building during the nine months ended January 31, 2022 consisted of the sale of this 143,000 square foot warehouse and office facility in October 2021.

Refer to Note 7 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about each category of building sales and other revenues. Miscellaneous other revenues for the three and nine months ended January 31, 2022 primarily consisted of rent received from the tenant of the building in Palm Coast, Florida and tenants at a shopping center in Albuquerque,New Mexico, payments for impact fee credits, a non-refundable option payment and sale of equipment. Miscellaneous other revenues for the three and nine months ended January 31, 2021 primarily consisted of rent received from the tenant of the buildings in Palm Coast, Florida and a tenant at the 14,000 square foot, single tenant retail building in Rio Rancho, New Mexico, payments for impact fee credits, installation of telecommunications equipment in subdivisions and a land condemnation.

10

Major customers:

There were two customers with revenues in excess of 10% of the Company’s revenues during the three months ended January 31, 2022. The revenues for each such customer during the three months ended January 31, 2022 were as follows: $1,458,000 and $4,068,000, with each of these revenues reported in the Company’s land development business segment.
There were three customers with revenues in excess of 10% of the Company’s revenues during the nine months ended January 31, 2022. The revenues for each such customer during the nine months ended January 31, 2022 were as follows: $3,699,000, $4,844,000 and $10,754,000, with each of these revenues reported in the Company’s land development business segment.
There were two customers with revenues in excess of 10% of the Company’s revenues during the three months ended January 31, 2021. The revenues for each such customer during the three months ended January 31, 2021 were as follows: $2,034,000 and $2,427,000, with each of these revenues reported in the Company’s land development business segment.
There were four customers with revenues in excess of 10% of the Company’s revenues during the nine months ended January 31, 2021. The revenues for each such customer during the nine months ended January 31, 2021 were as follows: $2,490,000, $3,011,000, $4,596,000 and $7,244,000, with each of these revenues reported in the Company’s land development business segment.

(8)          COST OF REVENUES

Building sales and other cost of revenues during the nine months ended January 31, 2022 consist of the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida.

(9)          GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of (in thousands):

    

Three Months ended January 31,

    

Nine Months ended January 31,

2022

2021

2022

2021

Land development

$

1,098

$

829

$

2,359

$

1,826

Homebuilding

 

222

 

137

 

621

 

368

Corporate

 

220

 

376

 

1,003

 

2,112

$

1,540

$

1,342

$

3,983

$

4,306

(10)          BENEFIT PLANS

Pension plan

Refer to Note 11 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the Company’s defined benefit pension plan. The Company recognizes the known changes in the funded status of the pension plan in the period in which the changes occur through other comprehensive income, net of the related deferred income tax effect. The Company recorded, net of tax, other comprehensive income of $67,000 and $90,000 during the three months ended January 31, 2022 and January 31, 2021 and $200,000 and $270,000 during the nine months ended January 31, 2022 and January 31, 2021 to account for the net effect of changes to the unfunded portion of pension liability. The Company funds the pension plan in compliance with IRS funding requirements. The Company did not make any contributions to the pension plan during the three or nine months ended January 31, 2022 or during the three months ended January 31, 2021. The Company made voluntary contributions to the pension plan of $1,847,000 during the nine months ended January 31, 2021.

11

Equity compensation plan

Refer to Note 11 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the AMREP Corporation 2016 Equity Compensation Plan (the “Equity Plan”).  The summary of the restricted share award activity during the nine months ended January 31, 2022 presented below represents the maximum number of shares that could become vested after these dates:

    

Number of

Restricted share awards

Shares

Non-vested as of April 30, 2021

 

29,000

Granted during the nine months ended January 31, 2022

 

13,000

Vested during the nine months ended January 31, 2022

 

(20,500)

Forfeited during the nine months ended January 31, 2022

 

Non-vested as of January 31, 2022

 

21,500

The Company recognized non-cash compensation expense related to the vesting of restricted shares of common stock net of forfeitures of $25,000 and $20,000 during the three months ended January 31, 2022 and January 31, 2021 and $72,000 and $27,000 during the nine months ended January 31, 2022 and January 31, 2021. As of January 31, 2022 and January 31, 2021, there was $111,000 and $53,000 of unrecognized compensation expense related to restricted shares of common stock previously issued under the Equity Plan which had not vested as of those dates, which is expected to be recognized over the remaining vesting term not to exceed three years.

In November 2021, the Company granted Christopher V. Vitale, the President and Chief Executive Officer of the Company, an option to purchase 50,000 shares of common stock of the Company under the Equity Plan with an exercise price of $14.24 per share, which was the closing price on the New York Stock Exchange on the date of grant. The option will become exercisable for 100% of the option shares on November 1, 2026 if Mr. Vitale is employed by, or providing service to, the Company on such date. Subject to the definitions in the Equity Plan, in the event (a) Mr. Vitale has a termination of employment with the Company on account of death or disability, (b) the Company terminates Mr. Vitale’s employment with the Company for any reason other than cause or (c) of a change in control, then the option will become immediately exercisable for 100% of the option shares. The option has a term of ten years from the date of grant and terminates at the expiration of that period. The option automatically terminates upon: (i) the expiration of the three month period after Mr. Vitale ceases to be employed by the Company, if the termination of his employment by Mr. Vitale or the Company is for any reason other than as hereinafter set forth in clauses (ii), (iii) or (iv); (ii) the expiration of the one year period after Mr. Vitale ceases to be employed by the Company on account of Mr. Vitale’s disability; (iii) the expiration of the one year period after Mr. Vitale ceases to be employed by the Company, if Mr. Vitale dies while employed by the Company; or (iv) the date on which Mr. Vitale ceases to be employed by the Company, if the termination is for cause. If Mr. Vitale engages in conduct that constitutes cause after Mr. Vitale’s employment terminates, the option immediately terminates. Notwithstanding the foregoing, in no event may the option be exercised after the date that is immediately before the tenth anniversary of the date of grant. Except as described above, any portion of the option that is not exercisable at the time Mr. Vitale has a termination of employment with the Company immediately terminates. The fair value of the option was $252,000 as of the date of grant using the Black-Scholes fair value option valuation model. The following assumptions were used for determining the fair value of the option: expected volatility of 38.04%; average risk-free interest rate of 1.46%; dividend yield of 0%; and expected life of 7.5 years. As of January 31, 2022, the option has not been exercised, cancelled or forfeited. The Company recognized non-cash compensation expense related to the option of $16,000 during each of the three and nine months ended January 31, 2022. As of January 31, 2022, the option was out-of-the-money and therefore was not included in “weighted average number of common shares outstanding – diluted” when calculating diluted earnings per share. The option could be dilutive to earnings per share in the future.

In connection with the resignation of a director in September 2020, the Company (i) issued 12,411 shares of common stock in October 2020 pursuant to an equivalent number of deferred common share units previously issued to such director and (ii) paid $20,000 in September 2020 to such director in lieu of issuance of deferred common share units earned for calendar year 2020.

Director compensation non-cash expense, which is recognized for the expected annual grant of deferred common share units to non-employee members of the Company’s Board of Directors ratably over the director’s service in office during the calendar year, was $23,000 and $15,000 during the three months ended January 31, 2022 and January 31, 2021 and $68,000 and $58,000 during the nine months ended January 31, 2022 and January 31, 2021. As of January 31, 2022, there was $8,000 of accrued compensation expense related to the deferred stock units expected to be issued in December 2022. As of January 31, 2021, there was $8,000 of accrued compensation expense related to the deferred stock units issued in December 2021.

12

(11)          OTHER INCOME

There was no other income for the three months ended January 31, 2022. Other income for the nine months ended January 31, 2022 consisted of $185,000 received in connection with a bankruptcy of a warranty provider, $45,000 of debt forgiveness with respect to the note payable identified as “Lavender Fields – acquisition” in Note 6 above and $30,000 received from a life insurance policy for a retired executive of the Company. Other income for the three months ended January 31, 2021 consisted of $300,000 of debt forgiveness with respect to the loan received by the Company pursuant to the Paycheck Protection Program administered by the U.S. Small Business Administration (refer to Note 6 of the notes to these consolidated financial statements for detail regarding this debt forgiveness). Other income for the nine months ended January 31, 2021 consisted of the $300,000 of debt forgiveness and a settlement payment of $650,000 from a former business segment (refer to Note 3 to the consolidated financial statements contained in the 2021 Form 10-K for detail regarding the settlement agreement).

(12)         STOCK REPURCHASES

In August 2020, the Company repurchased 11,847 shares of common stock of the Company at a price of $4.48 per share in a privately negotiated transaction. As of the date of the repurchase, the repurchased shares were retired and returned to the status of authorized but unissued shares of common stock.

In September 2020, the Board of Directors of the Company authorized the Company to purchase up to 1,000,000 shares of common stock of the Company from time to time pursuant to a share repurchase program, subject to the total expenditure for the purchase of shares under the share repurchase program not exceeding $5,000,000, exclusive of any fees, commissions and other expenses related to such repurchases. Under the share repurchase program, the Company was authorized to repurchase its common stock from time to time, in amounts, at prices, and at such times as the Company deemed appropriate, subject to market conditions, legal requirements and other considerations. The Company’s repurchases could be executed using open market purchases, unsolicited or solicited privately negotiated transactions or other transactions, and could be effected pursuant to trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The share repurchase program did not obligate the Company to repurchase any specific number of shares and could be suspended, modified or terminated at any time without prior notice. The share repurchase program did not contain a time limitation during which repurchases were permitted to occur. In October 2020, the Company repurchased 675,616 shares of common stock of the Company at a price of $6.18 per share in a privately negotiated transaction pursuant to the share repurchase program. As of the date of the repurchase, the repurchased shares were retired and returned to the status of authorized but unissued shares of common stock.

In November 2020, the Company repurchased 143,482 shares of common stock of the Company at a price of $6.18 per share in a privately negotiated transaction. As of the date of the repurchase, the repurchased shares were retired and returned to the status of authorized but unissued shares of common stock. The share repurchase was not completed pursuant to the Company’s share repurchase program.

In November 2020, the Company’s share repurchase program was terminated.

(13)         TREASURY STOCK

During the three months ended January 31, 2021, 225,250 shares of common stock of the Company held as treasury stock were retired and returned to the status of authorized but unissued shares of common stock.

13

(14)         INFORMATION ABOUT THE COMPANY’S OPERATIONS IN DIFFERENT INDUSTRY SEGMENTS

The following tables set forth summarized data relative to the industry segments in which the Company operated for the periods indicated (in thousands):

    

Land 

    

    

    

Development

Homebuilding

Corporate

Consolidated

Three months ended January 31, 2022 (a)

 

  

 

  

 

  

 

  

Revenues

$

7,046

$

2,770

$

$

9,816

Net income (loss)

 

770

 

366

 

(226)

 

910

Provision for income taxes

 

22

 

95

 

131

 

248

Depreciation

 

12

 

 

2

 

14

EBITDA (c)

$

804

$

461

$

(93)

$

1,172

Capital expenditures

$

$

4

$

$

4

Three months ended January 31, 2021 (a)

 

  

 

  

 

  

 

  

Revenues

$

6,531

$

1,262

$

71

$

7,864

Net income (loss)

 

2,284

 

35

 

(226)

 

2,093

Provision for income taxes

 

483

 

7

 

220

 

710

Interest income, net (b)

 

20

 

 

1

 

21

Depreciation

 

17

 

 

137

 

154

EBITDA (c)

$

2,804

$

42

$

132

$

2,978

Capital expenditures

$

$

3

$

$

3

Nine months ended January 31, 2022 (a)

Revenues

$

24,251

$

5,410

$

6,898

$

36,559

Net income

 

4,187

 

556

 

1,130

 

5,873

Provision for income taxes

 

612

 

131

 

958

 

1,701

Interest income, net (b)

 

 

 

1

 

1

Depreciation

 

12

 

 

205

 

217

EBITDA (c)

$

4,811

$

687

$

2,294

$

7,792

Capital expenditures

$

1

$

15

$

$

16

Total assets as of January 31, 2022

$

87,205

$

5,491

$

12,444

$

105,140

Nine months ended January 31, 2021 (a)

Revenues

$

19,376

$

1,464

$

486

$

21,326

Net income (loss)

 

4,684

 

(116)

 

(1,084)

 

3,484

Provision (benefit) for income taxes

 

810

 

(44)

 

409

 

1,175

Interest income (expense), net (b)

 

30

 

 

(3)

 

27

Depreciation

 

40

 

 

384

 

424

EBITDA (c)

$

5,564

$

(160)

$

(294)

$

5,110

Capital expenditures

$

$

3

$

$

3

Total assets as of January 31, 2021

$

79,193

$

2,182

$

14,517

$

95,892

(a) Revenue and net income information for the land development business segment include certain amounts classified as home sale revenues, home sale cost of revenues and building sales and other revenues in the accompanying consolidated statements of operations. For example, revenues and cost of revenues in the land development business segment include an allocation of home sales revenues and home sales cost of revenues attributable to the market value of land transferred from the land development business segment to the homebuilding business segment. Revenue and net income information for the homebuilding business segment include amounts classified as building sales and other revenues in the accompanying consolidated statements of operations. Corporate is net of intercompany eliminations.
(b) Interest income, net excludes inter-segment interest expense (income) that is eliminated in consolidation.
(c) The Company uses EBITDA (which the Company defines as income (loss) before net interest income, income taxes, depreciation and amortization, and non-cash impairment charges) in addition to net income (loss) as a key measure of profit or loss for segment performance and evaluation purposes.

14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

AMREP Corporation (the “Company”), through its subsidiaries, is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales or activities outside the United States. All references to the Company in this quarterly report on Form 10-Q include the Registrant and its subsidiaries. The following provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The information contained in this Item 2 should be read in conjunction with the consolidated financial statements and related notes thereto included in this report on Form 10-Q and with the Company’s annual report on Form 10-K for the year ended April 30, 2021, which was filed with the Securities and Exchange Commission on July 27, 2021 (the “2021 Form 10-K”). Many of the amounts and percentages presented in this Item 2 have been rounded for convenience of presentation. Unless the context otherwise indicates, all references to 2022 and 2021 are to the fiscal years ending April 30, 2022 and 2021.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based on the accounting policies used and disclosed in the 2021 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of the 2021 Form 10-K and in Note 1 to the consolidated financial statements included in this report on Form 10-Q. The preparation of those consolidated financial statements required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those estimates and assumptions.

The Company’s critical accounting policies, assumptions and estimates are described in Item 7 of Part II of the 2021 Form 10-K. There have been no changes in these critical accounting policies.

Information concerning the Company’s implementation and the impact of recent accounting standards or updates issued by the Financial Accounting Standards Board is included in the notes to the consolidated financial statements contained in the 2021 Form 10-K and in the notes to the consolidated financial statements included in this report on Form 10-Q. The Company did not adopt any accounting policy in the nine months ended January 31, 2022 that had a material effect on its consolidated financial statements.

RESULTS OF OPERATIONS

For the three months ended January 31, 2022, the Company had net income of $910,000, or $0.12 per diluted share, compared to net income of $2,093,000, or $0.29 per diluted share, for the three months ended January 31, 2021. For the nine months ended January 31, 2022, the Company had net income of $5,873,000, or $0.80 per diluted share, compared to net income of $3,484,000, or $0.44 per diluted share, for the nine months ended January 31, 2021.

Revenues. The following presents information on revenues for the Company’s operations (dollars in thousands):

    

Three Months ended January 31,

    

Nine Months ended January 31,

% Increase

% Increase

    

2022

    

2021

    

(Decrease)

    

2022

    

2021

    

(Decrease)

Land sale revenues

$

5,879

$

5,957

 

(1)

%  

$

21,535

$

17,970

 

20

%  

Home sale revenues

 

3,376

 

1,261

 

(a)

 

6,606

 

1,463

 

(a)

Building sales and other revenues

 

561

 

646

 

(13)

%

 

8,418

 

1,893

 

(a)

Total

$

9,816

$

7,864

 

25

%

$

36,559

$

21,326

 

71

%

(a) Percentage not meaningful.

During the three and nine months ended January 31, 2022, the Company has experienced supply chain constraints, increases in the prices of building materials, shortages of skilled labor and delays in municipal approvals and inspections in both the land development business segment and homebuilding business segment, which have caused delays in construction and the realization of revenues and increases in cost of revenues.

15

Land sale revenues for the three months ended January 31, 2022 were lower than the prior period by $78,000 primarily due to the availability of developed residential lots for sale. Land sale revenues for the nine months ended January 31, 2022 were higher than the prior period by $3,565,000 primarily due to increased demand for developed residential lots by builders.  The Company’s land sale revenues were as follows (dollars in thousands):

Three Months ended January 31, 2022