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AMREP CORP. - Quarter Report: 2021 October (Form 10-Q)

Table of Contents

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 October 31, 2021

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 December 3, 2021 – 7,336,370.

Table of Contents

AMREP CORPORATION AND SUBSIDIARIES

INDEX

PAGE
NO.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

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

2

Consolidated Statements of Operations (Unaudited) Three and Six Months Ended October 31, 2021 and 2020

3

Consolidated Statements of Comprehensive Income (Unaudited) Three and Six Months Ended October 31, 2021 and 2020

4

Consolidated Statements of Shareholders’ Equity (Unaudited) Three and Six Months Ended October 31, 2021 and 2020

5

Consolidated Statements of Cash Flows (Unaudited) Six Months Ended October 31, 2021 and 2020

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

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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

October 31,

April 30, 

2021

2021

    

(Unaudited)

    

ASSETS

 

  

 

  

Cash and cash equivalents

$

30,327

$

24,801

Real estate inventory

 

61,772

 

55,589

Investment assets, net

 

9,775

 

13,582

Other assets

 

1,870

 

645

Deferred income taxes, net

 

1,165

 

2,749

TOTAL ASSETS

$

104,909

$

97,366

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

Liabilities:

 

  

 

  

Accounts payable and accrued expenses

$

4,758

$

4,458

Notes payable, net

 

5,952

 

3,448

Taxes payable, net

 

29

 

95

Accrued pension costs

 

35

 

476

TOTAL LIABILITIES

 

10,774

 

8,477

Shareholders’ Equity:

 

  

 

  

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

 

731

730

Capital contributed in excess of par value

 

45,221

 

45,072

Retained earnings

 

52,673

 

47,710

Accumulated other comprehensive loss, net

 

(4,490)

 

(4,623)

TOTAL SHAREHOLDERS’ EQUITY

 

94,135

 

88,889

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

104,909

$

97,366

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

2

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AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three and Six Months ended October 31, 2021 and 2020

(Amounts in thousands, except per share amounts)

Three Months ended

Six Months ended

October 31,

October 31,

    

2021

    

2020

    

2021

    

2020

REVENUES:

 

  

 

  

 

  

 

  

Land sale revenues

$

8,466

$

8,526

$

15,656

$

12,013

Home sale revenues

819

202

3,230

202

Building sales and other revenues

 

6,951

 

528

 

7,857

 

1,247

Total revenues

 

16,236

 

9,256

 

26,743

 

13,462

COSTS AND EXPENSES:

 

  

 

 

  

 

Land sale cost of revenues

 

6,154

 

6,430

 

11,765

 

9,109

Home sale cost of revenues

629

174

2,543

174

Building sales and other cost of revenues

 

3,837

 

 

3,837

 

General and administrative expenses

 

1,257

 

1,523

 

2,443

 

2,967

Total costs and expenses

 

11,877

 

8,127

 

20,588

 

12,250

Operating income

4,359

1,129

6,155

1,212

Interest income (expense), net

 

2

 

(12)

 

1

 

(6)

Other income

 

30

 

 

260

 

650

Income before income taxes

4,391

1,117

6,416

1,856

Provision for income taxes

1,065

319

1,453

465

Net income

$

3,326

$

798

$

4,963

$

1,391

Basic earnings per share

$

0.45

$

0.10

$

0.67

$

0.17

Diluted earnings per share

$

0.45

$

0.10

$

0.67

$

0.17

Weighted average number of common shares outstanding – basic

 

7,361

 

8,122

 

7,354

 

8,136

Weighted average number of common shares outstanding – diluted

 

7,383

 

8,152

 

7,378

 

8,168

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

3

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AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three and Six Months ended October 31, 2021 and 2020

(Amounts in thousands)

Three Months ended

Six Months ended

October 31, 

October 31, 

    

2021

    

2020

    

2021

    

2020

Net income

$

3,326

$

798

$

4,963

$

1,391

Other comprehensive income, net of tax:

 

  

 

  

 

  

 

  

Decrease in pension liability

 

98

 

132

 

195

 

264

Income tax effect

(31)

(42)

(62)

(84)

Decrease in pension liability, net of tax

67

90

133

180

Other comprehensive income

 

67

 

90

 

133

 

180

Total comprehensive income

$

3,393

$

888

$

5,096

$

1,571

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

4

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AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

Three and Six Months ended October 31, 2021 and 2020

(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, August 1, 2021

 

7,336

$

731

$

45,221

$

49,347

$

(4,557)

$

$

90,742

Net income

3,326

3,326

Other comprehensive income

 

 

 

 

67

 

 

67

Balance, October 31, 2021

 

7,336

$

731

$

45,221

$

52,673

$

(4,490)

$

$

94,135

Balance, August 1, 2020

8,367

$

837

$

51,375

$

43,742

$

(6,377)

$

(4,215)

$

85,362

Issuance of common stock settled from deferred common share units

12

Repurchase of common stock

(687)

(69)

(4,159)

(4,228)

Net income

798

798

Other comprehensive income

90

90

Balance, October 31, 2020

 

7,692

$

768

$

47,216

$

44,540

$

(6,287)

$

(4,215)

$

82,022

Balance, May 1, 2021

 

7,323

$

730

$

45,072

$

47,710

$

(4,623)

$

$

88,889

Issuance of restricted common stock

13

1

 

149

 

 

 

 

150

Net income

4,963

4,963

Other comprehensive income

 

 

 

 

 

133

 

 

133

Balance, October 31, 2021

 

7,336

$

731

$

45,221

$

52,673

$

(4,490)

$

$

94,135

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 common stock settled from deferred common share units

12

Repurchase of common stock

(687)

(69)

(4,159)

(4,228)

Net income

1,391

1,391

Other comprehensive income

180

180

Balance, October 31, 2020

 

7,692

$

768

$

47,216

$

44,540

$

(6,287)

$

(4,215)

$

82,022

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

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AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months ended October 31, 2021 and 2020

(Amounts in thousands)

Six Months ended October 31,

    

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net income

$

4,963

$

1,391

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

 

  

 

  

Depreciation

 

204

 

270

Amortization of debt issuance costs

 

34

 

30

Non-cash credits and charges:

 

  

 

  

Stock-based compensation

 

47

 

42

Deferred income tax provision

 

1,522

 

548

Net periodic pension cost

 

(246)

 

208

Gain on debt forgiveness

(45)

Changes in assets and liabilities:

 

  

 

  

Real estate inventory and investment assets

 

(2,580)

 

(1,065)

Other assets

 

(1,203)

 

(614)

Accounts payable and accrued expenses

 

300

 

1,575

Accrued pension costs

(1,847)

Taxes payable

 

(66)

 

Net cash provided by (used in) operating activities

 

2,930

 

538

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Proceeds from corporate-owned life insurance policy

 

92

 

Capital expenditures

 

(11)

 

(3)

Net cash provided by (used in) investing activities

 

81

 

(3)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Proceeds from debt financing

 

6,857

 

5,415

Principal debt payments

 

(4,292)

 

(3,475)

Payments for debt issuance costs

 

(50)

 

(57)

Repurchase of common stock

(4,228)

Net cash provided by (used in) financing activities

 

2,515

 

(2,345)

Increase (decrease) in cash and cash equivalents

 

5,526

 

(1,810)

Cash and cash equivalents, beginning of period

 

24,801

 

17,502

Cash and cash equivalents, end of period

$

30,327

$

15,692

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

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AMREP CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Three and Six Months Ended October 31, 2021 and 2020

(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 for those adopted as described below.

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.

(2)         REAL ESTATE INVENTORY

Real estate inventory consists of (in thousands):

October 31,

April 30,

    

2021

    

2021

Land held for development or sale in New Mexico

$

54,148

$

49,918

Land held for development or sale in Colorado

 

4,009

 

3,975

Homebuilding finished inventory

214

417

Homebuilding construction in process

3,401

1,279

$

61,772

$

55,589

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(3)          INVESTMENT ASSETS, NET

Investment assets, net consist of (in thousands):

    

October 31,

    

April 30,

2021

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 $98,000 and $140,000 for the three months ended October 31, 2021 and October 31, 2020 and $201,000 and $262,000 for the six months ended October 31, 2021 and October 31, 2020.

(4)          OTHER ASSETS

Other assets consist of (in thousands):

    

October 31, 

    

April 30, 

2021

2021

Prepaid expenses

$

324

$

324

Receivables

58

37

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

 

129

 

84

Other assets

80

172

Property and equipment

1,476

222

Less accumulated depreciation

(197)

(194)

Property and equipment, net

1,279

28

$

1,870

$

645

Prepaid expenses as of October 31, 2021 primarily consisted of stock compensation, insurance and utility deposits. Amortized lease cost for right-of-use assets associated with the leases of office facilities was $24,000 and $26,000 for the three months ended October 31, 2021 and October 31, 2020 and $36,000 and $63,000 for the six months ended October 31, 2021 and October 31, 2020. 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 $2,000 for each of the three months ended October 31, 2021 and October 31, 2020 and $3,000 and $8,000 for the six months ended October 31, 2021 and October 31, 2020.

(5)          ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

    

October 31, 

    

April 30, 

2021

2021

Real estate operations

Accrued expenses

$

866

$

658

Trade payables

 

2,117

 

1,377

Real estate customer deposits

1,378

1,769

4,361

3,804

Corporate operations

397

654

$

4,758

$

4,458

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(6)          NOTES PAYABLE

Notes payable, net consist of (in thousands):

    

October 31, 

    

April 30, 

2021

2021

Real estate notes payable

$

6,002

$

3,482

Unamortized debt issuance costs

 

(50)

 

(34)

$

5,952

$

3,448

The following tables present information on the Company’s notes payable in effect during the six months ended October 31, 2021 (dollars in thousands):

    

Principal Amount

    

    

    

    

Available for

Outstanding

Borrowing

Principal Amount

Principal Repayments

October 31,

October 31,

April 30,

Three Months ended

Six Months ended

Loan Identifier

2021

2021

2021

October 31, 2021

October 31, 2021

Revolving Line of Credit

 

$

3,750

 

$

 

$

$

$

Lomas Encantadas U2B P3

632

410

1,770

Hawk Site U37

 

 

 

 

 

Hawk Site U23 U40

 

1,678

 

 

30

 

30

 

30

Lavender Fields – acquisition

 

 

 

1,749

 

 

1,703

Lavender Fields – development

 

2,194

 

504

 

1,293

 

395

 

789

La Mirada

 

1,877

 

5,498

 

 

 

 

$

6,002

$

3,482

 

 

    

    

Mortgaged Property

    

    

Interest Rate

Book Value

Capitalized Interest and Fees

October 31,

October 31,

Three Months ended

Six Months ended

Loan Identifier

2021

2021

October 31, 2021

October 31, 2021

Revolving Line of Credit

 

3.75

%  

$

1,693

$

$

Lomas Encantadas U2B P3

 

3.75

%  

 

877

 

 

Hawk Site U23 U40

 

3.75

%  

 

1,359

 

 

Lavender Fields – development

 

3.75

%  

 

5,261

 

6

 

17

La Mirada

 

3.75

%  

 

8,041

 

40

 

61

As of October 31, 2021, 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.

The note payable identified as “Hawk Site U37” was terminated in October 2021. 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 six months ended October 31, 2021.

The following table summarizes the notes payable scheduled principal repayments subsequent to October 31, 2021 (in thousands):

Fiscal Year

    

Scheduled Payments

2022

$

2023

 

504

2024

 

5,498

Total

$

6,002

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(7)          REVENUES

Land sale revenues. Substantially all of the land sale revenues were received from three customers for the three and six months ended October 31, 2021 and four customers for the three and six months ended October 31, 2020. There were no outstanding receivables from these customers as of October 31, 2021 or October 31, 2020.

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

    

Three Months ended October 31,

    

Six Months ended October 31,

2021

2020

2021

2020

Sale of building

$

6,750

$

$

6,750

$

Oil and gas royalties

40

25

175

36

Public improvement district reimbursements

 

15

 

69

 

239

 

244

Private infrastructure reimbursement covenants

 

31

 

245

 

83

 

378

Miscellaneous other revenues

 

115

 

189

 

610

 

589

$

6,951

$

528

$

7,857

$

1,247

The Company owned a 143,000 square foot warehouse and office facility located in Palm Coast, Florida during the three and six months ended October 31, 2021, 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 three and six months ended October 31, 2021 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 six months ended October 31, 2021 primarily consisted of rent received from a tenant at a 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 revenue for the three and six months ended October 31, 2020 primarily consisted of rent received from a tenant at a building in Palm Coast, Florida, payments for impact fee credits and a land condemnation.

Major customers:

There were three customers with revenues in excess of 10% of the Company’s revenues during the three months ended October 31, 2021. The revenues for each such customer during the three months ended October 31, 2021 were as follows: $3,700,000, $2,400,000 and $1,700,000, 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 six months ended October 31, 2021. The revenues for each such customer during the six months ended October 31, 2021 were as follows: $6,700,000, $3,700,000 and $3,400,000, 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 three months ended October 31, 2020. The revenues for each such customer during the three months ended October 31, 2020 were as follows: $2,900,000, $2,600,000, $1,600,000 and $1,450,000, 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 six months ended October 31, 2020. The revenues for each such customer during the six months ended October 31, 2020 were as follows: $4,800,000, $2,600,000, $2,400,000 and $2,000,000, 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 three and six months ended October 31, 2021 consist of the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida.

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(9)          GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of (in thousands):

    

Three Months ended October 31,

    

Six Months ended October 31,

2021

2020

2021

2020

Land development

$

677

$

665

$

1,261

$

1,271

Homebuilding

 

212

 

118

 

399

 

231

Corporate

 

368

 

740

 

783

 

1,465

$

1,257

$

1,523

$

2,443

$

2,967

(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 October 31, 2021 and October 31, 2020 and $133,000 and $180,000 during the six months ended October 31, 2021 and October 31, 2020 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 and six months ended October 31, 2021. The Company made voluntary contributions to the pension plan of $1,847,000 during the three and six months ended October 31, 2020.

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 six months ended October 31, 2021 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 six months ended October 31, 2021

 

13,000

Vested during the six months ended October 31, 2021

 

(20,500)

Forfeited during the six months ended October 31, 2021

 

Non-vested as of October 31, 2021

 

21,500

The Company recognized non-cash compensation expense related to the vesting of restricted shares of common stock net of forfeitures of $31,000 and $25,000 during the three months ended October 31, 2021 and October 31, 2020 and $47,000 and $54,000 during the six months ended October 31, 2021 and October 31, 2020. As of October 31, 2021 and October 31, 2020, there was $137,000 and $73,000 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 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 $22,000 and $21,000 during the three months ended October 31, 2021 and October 31, 2020 and $45,000 and $35,000 during the six months ended October 31, 2021 and October 31, 2020. As of October 31, 2021, there was $75,000 of accrued compensation expense

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related to the deferred stock units expected to be issued in December 2021. As of October 31, 2020, there was $82,000 of accrued compensation expense related to the deferred stock units issued in December 2020.

(11)          OTHER INCOME

Other income for the three months ended October 31, 2021 consisted of $30,000 received for a life insurance policy for a retired executive of the Company. Other income for the six months ended October 31, 2021 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 for a life insurance policy for a retired executive of the Company. Other income for the six months ended October 31, 2020 consisted of 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.

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(13)         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 October 31, 2021 (a)

 

  

 

  

 

  

 

  

Revenues

$

8,745

$

689

$

6,802

$

16,236

Net income

 

1,612

 

12

 

1,702

 

3,326

Provision for income taxes

 

263

 

1

 

801

 

1,065

Interest income, net (b)

 

1

 

 

1

 

2

Depreciation

 

 

 

100

 

100

EBITDA (c)

$

1,876

$

13

$

2,604

$

4,493

Capital expenditures

$

$

10

$

$

10

Three months ended October 31, 2020 (a)

 

  

 

  

 

  

 

  

Revenues

$

8,989

$

202

$

65

$

9,256

Net income (loss)

 

1,693

 

(66)

 

(829)

 

798

Provision (benefit) for income taxes

 

313

 

(24)

 

30

 

319

Interest income (expense), net (b)

 

(13)

 

 

1

 

(12)

Depreciation

 

8

 

 

124

 

132

EBITDA (c)

$

2,001

$

(90)

$

(674)

$

1,237

Capital expenditures

$

$

$

$

Six months ended October 31, 2021 (a)

Revenues

$

17,206

$

2,639

$

6,898

$

26,743

Net income

 

3,418

 

190

 

1,355

 

4,963

Provision for income taxes

 

589

 

37

 

827

 

1,453

Interest income, net (b)

 

 

 

1

 

1

Depreciation

 

 

 

204

 

204

EBITDA (c)

$

4,007

$

227

$

2,387

$

6,621

Capital expenditures

$

$

11

$

$

11

Total assets as of October 31, 2021

$

88,231

$

3,357

$

13,321

$

104,909

Six months ended October 31, 2020 (a)

Revenues

$

12,845

$

202

$

415

$

13,462

Net income (loss)

 

2,399

 

(152)

 

(856)

 

1,391

Provision (benefit) for income taxes

 

327

 

(51)

 

189

 

465

Interest income (expense), net (b)

 

(11)

 

 

5

 

(6)

Depreciation

 

22

 

 

248

 

270

EBITDA (c)

$

2,737

$

(203)

$

(414)

$

2,120

Capital expenditures

$

$

3

$

$

3

Total assets as of October 31, 2020

$

76,777

$

1,494

$

17,449

$

95,720

(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

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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)         SUBSEQUENT EVENTS

In November 2021, the Company entered into an employment agreement with Christopher V. Vitale. Mr. Vitale is the President and Chief Executive Officer of the Company. Pursuant to the employment agreement,

Mr. Vitale will serve as the President and Chief Executive Officer of the Company for a base salary of not less than the rate in effect immediately before the date of such agreement, which results in a base salary of $335,000 per year.
The parties agreed to provisions relating to vacation, paid-time-off, office location, confidentiality, invention assignment, non-competition and non-solicitation.
Upon any termination of Mr. Vitale’s employment, the Company will pay and issue to Mr. Vitale any earned but unpaid base salary, the dollar value equivalent of the number of days of vacation and paid-time-off earned but not used, unreimbursed business expenses, unpaid bonus previously awarded by the Company and vested benefits, equity awards or payments (excluding any severance benefits or payments) payable or issuable under any policy or plan of the Company or under any equity award agreement or other arrangement between the Company and Mr. Vitale.
Upon any termination of Mr. Vitale’s employment due to the death of Mr. Vitale, the Company will pay to Mr. Vitale’s executors, administrators or personal representatives, an amount equal to his then-annual base salary which he would otherwise have earned for the month in which he dies and for three months thereafter.
Upon any termination of Mr. Vitale’s employment by Mr. Vitale for Good Reason or the Company without Cause and delivery by Mr. Vitale of a release of claims to the Company, the Company will pay or provide to Mr. Vitale (a) a lump sum amount equal to 200% of the highest of (i) Mr. Vitale’s annual base salary in effect immediately prior to the termination date, (ii) Mr. Vitale’s annual base salary in effect on the date 210 days prior to the termination date or (iii) in the event the termination of Mr. Vitale’s employment was for Good Reason, Mr. Vitale’s annual base salary in effect prior to the event constituting Good Reason; and (b) all restricted stock, stock options and other outstanding equity grants with respect to the Company that are held by Mr. Vitale immediately prior to the termination date will become fully vested and, as applicable, fully exercisable as of the termination date.
For purposes of the employment agreement, the term “Good Reason” means any of the following actions taken by the Company without Mr. Vitale’s consent: a diminution in base salary of more than five percent; the removal of Mr. Vitale as the President and Chief Executive Officer of the Company; a material diminution in Mr. Vitale’s authority, duties or responsibilities as the President and Chief Executive Officer of the Company; assigning any material new duties or responsibilities to Mr. Vitale in addition to those normally associated with his role as President and Chief Executive Officer of the Company; the Company ceasing to be a company subject to the periodic and current reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or ceasing to have its common stock traded on an exchange registered as a national securities exchange under Section 6 of the Securities Exchange Act of 1934, as amended; a requirement that Mr. Vitale relocate his office other than as permitted by the employment agreement; or the failure of the Company to observe or perform any of its obligations to Mr. Vitale under the employment agreement.
For purposes of the employment agreement, the term “Cause” means the failure of Mr. Vitale to observe or perform (other than by reason of illness, injury, disability or incapacity) any of the material terms or provisions of the employment agreement, conviction of a felony or other crime involving moral turpitude, misappropriation of funds of the Company, the commission of an act of dishonesty by Mr. Vitale resulting in or intended to result in wrongful personal gain or enrichment at the expense of the Company or a material breach (other than by reason of illness, injury, disability or incapacity) of any written employment or other policy of the Company.
Upon any termination of Mr. Vitale’s employment in connection with a long-term disability, by Mr. Vitale for Good Reason or by the Company without Cause, the Company will pay to Mr. Vitale a lump sum cash payment equal to 200% of the annual

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cost of medical and other health care benefits for Mr. Vitale, his spouse and his other dependents and an amount equal to the estimated federal, state and local income and FICA taxes related thereto.
Payments under the employment agreement may be adjusted as a result of section 409A and section 280G of the Internal Revenue Code of 1986, as amended.
In the event Mr. Vitale is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, including any governmental or regulatory proceeding or investigation, by reason of the fact that Mr. Vitale is or was a director or senior officer of the Company, the Company will defend, indemnify and hold harmless Mr. Vitale, and the Company will promptly pay or reimburse Mr. Vitale’s related expenses to the fullest extent contemplated or permitted from time to time by applicable law and required by the Company’s Certificate of Incorporation. During Mr. Vitale’s employment with the Company and after termination of any such employment for any reason, the Company will cover Mr. Vitale under the Company’s directors’ and officers’ insurance policy applicable to other officers and directors according to the terms of such policy, but in no event for a period of time to exceed six years after the termination date.

In November 2021, the Company granted Mr. Vitale 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.

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

INTRODUCTION

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.

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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 six months ended October 31, 2021 that had a material effect on its consolidated financial statements.

RESULTS OF OPERATIONS

For the three months ended October 31, 2021, the Company had net income of $3,326,000, or $0.45 per diluted share, compared to net income of $798,000, or $0.10 per diluted share, for the three months ended October 31, 2020. For the six months ended October 31, 2021, the Company had net income of $4,963,000, or $0.67 per diluted share, compared to net income of $1,391,000, or $0.17 per diluted share, for the six months ended October 31, 2020.

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

    

Three Months ended October 31,

    

Six Months ended October 31,

    

% Increase

% Increase

    

2021

    

2020

    

(Decrease)

2021

    

2020

    

(Decrease)

Land sale revenues

$

8,466

$

8,526

 

(1)

%  

$

15,656

$

12,013

 

30

%  

Home sale revenues

 

819

 

202

 

(a)

 

3,230

 

202

 

(a)

Building sales and other revenues

 

6,951

 

528

 

(a)

 

7,857

 

1,247

 

(a)

Total

$

16,236

$

9,256

 

76

%

$

26,743

$

13,462

 

99

%

(a)      Percentage not meaningful.

Land sale revenues for the three months ended October 31, 2021 were lower than the prior period by $60,000. Land sale revenues for the six months ended October 31, 2021 were higher than the prior period by $3,643,000 primarily due to increased demand for lots by builders. The Company’s land sale revenues were as follows (dollars in thousands):

Three Months ended October 31, 2021

Three Months ended October 31, 2020

    

Acres Sold

    

Revenue

    

Revenue Per Acre1

    

Acres Sold

    

Revenue

    

Revenue Per Acre1

Developed

  

  

  

  

  

  

Residential

 

14.6

$

8,466

$

580

 

17.4

$

8,376

$

481

Commercial

 

 

 

 

0.4

 

134

 

335

Total Developed

 

14.6

$

8,466

$

580

 

17.8

 

8,510

 

478

Undeveloped

 

 

 

 

2.0

 

16

 

8

Total

 

14.6

$

8,466

$

580

 

19.8

$

8,526

$

431

    

Six Months ended October 31, 2021

    

Six Months ended October 31, 2020

    

Acres 

   

    

Revenue

    

    

    

Revenue

Sold

Revenue

 Per Acre1

Acres Sold

Revenue

 Per Acre1

Developed

  

 

  

 

  

  

 

  

 

  

Residential

33.3

$

15,656

$

470

25.1

$

11,863

$

473

Commercial

 

 

0.4

 

134

 

335

Total Developed

33.3

$

15,656

$

470

25.5

 

11,997

 

470

Undeveloped

 

 

2

 

16

 

8

Total

33.3

$

15,656

$

470

27.5

$

12,013

$

437

1Revenues per acre may not calculate precisely due to the rounding of revenues to the nearest thousand dollars.

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The change in the average selling price per acre of developed residential land for the three months ended October 31, 2021 compared to the three months ended October 31, 2020 and for the six months ended October 31, 2021 compared to the six months ended October 31, 2020 was primarily due to the location and mix of lots sold.

Home sale revenues for the three and six months ended October 31, 2021 were higher than the prior periods by $617,000 and $3,028,000 due to the expansion of the Company’s homebuilding operations. The Company closed on 3 homes during the three months ended October 31, 2021 at an average selling price of $217,000. The Company closed on 11 homes during the six months ended October 31, 2021 at an average selling price of $236,000. As of October 31, 2021, the Company had 42 homes in production, including 26 homes under contract, which homes under contract represented $8,980,000 of expected home sale revenues when closed, subject to customer cancellations and change orders. The decrease in homes sales in the second quarter was due to material and labor shortages.
Building sales and other revenues for the three and six months ended October 31, 2021 were higher than the prior periods by $6,423,000 and $6,610,000. Building sales and other revenues consist of (in thousands):

Three Months ended October 31,

Six Months ended October 31,

    

 

% Increase

    

 

% Increase

    

2021

    

2020

(Decrease)

    

2021

    

2020

(Decrease)

Sale of building

$

6,750

$

(a)

$

6,750

$

(a)

Oil and gas royalties

40

25

60

%

175

36

(a)

Public improvement district reimbursements

 

15

 

69

(a)

 

239

 

244

(2)

%

Private infrastructure reimbursement covenants

 

31

 

245

(87)

%

 

83

 

378

(78)

%

Miscellaneous other revenues

 

115

 

189

(a)

 

610

 

589

(a)

Total

$

6,951

$

528

(a)

$

7,857

$

1,247

(a)

(a)     Percentage not meaningful.

The Company owned a 143,000 square foot warehouse and office facility located in Palm Coast, Florida during the three and six months ended October 31, 2021, 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 three and six months ended October 31, 2021 consisted of the sale of this 143,000 square foot warehouse and office facility in October 2021.

Miscellaneous other revenues for the three and six months ended October 31, 2021 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.

The Company owned a 61,000 square foot warehouse and office facility located in Palm Coast, Florida during 2021, which was leased to a third party through August 2020 and which was sold in April 2021. Miscellaneous other revenue for the three and six months ended October 31, 2020 primarily consisted of rent received from the tenant of the buildings in Palm Coast, Florida, payments for impact fee credits and a land condemnation.

Refer to Note 7 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about the categories of building sales and other revenues.

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

Three Months ended October 31,

Six Months ended October 31,

    

    

% Increase 

 

    

% Increase 

    

2021

    

2020

    

(Decrease)

 

2021

    

2020

    

(Decrease)

Land sale cost of revenues

$

6,154

$

6,430

 

(10)

%

$

11,765

$

9,109

 

29

%

Home sale cost of revenues

 

629

 

174

 

(a)

 

2,543

 

174

 

(a)

Building sales and other cost of revenues

3,837

(a)

3,837

(a)

(a)      Percentage not meaningful.

Land sale cost of revenues for the three months ended October 31, 2021 was lower than the prior period by $276,000. Land sale gross margin was 27% for the three months ended October 31, 2021 compared to 25% for the three months ended October 31, 2020. Land sale cost of revenues for the six months ended October 31, 2021 was higher than the prior period by $2,656,000. Land sale gross margin was 25% for the six months ended October 31, 2021 compared to 24% for the six months ended October 31, 2020. The changes in gross margin were primarily due to the location and mix of lots sold. As a result of many factors, including the nature and timing of specific transactions and the type and location of land being sold, revenues, average selling prices and related gross margin from land sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.
Home sale cost of revenues for the three and six months ended October 31, 2021 were higher than the prior periods by $455,000 and $2,369,000 due to the expansion of the Company’s homebuilding operations. Home sale gross margins were 23% and 21% for the three and six months ended October 31, 2021 compared to 14% for each of the three and six months ended October 31, 2020. The increase in gross margin was primarily due to the location and mix of homes sold and to efficiencies gained during the expansion of the Company’s homebuilding operations.
Building sales and other cost of revenues during the three and six months ended October 31, 2021 consisted of the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida.

General and Administrative Expenses. The following presents information on general and administrative expenses for the Company’s operations (dollars in thousands):

Three Months ended October 31,

Six Months ended October 31,

    

    

% Increase

 

    

% Increase

2021

2020

(Decrease)

 

2021

    

2020

(Decrease)

Land development

$

677

$

665

 

2

%

$

1,261

$

1,271

 

(1)

%

Homebuilding

 

212

 

118

 

80

%

 

399

 

231

 

73

%

Corporate

 

368

 

740

 

(50)

%

 

783

 

1,465

 

(47)

%

Total

$

1,257

$

1,523

 

(17)

%

$

2,443

$

2,967

 

(18)

%

Land development general and administrative expenses for the three and six months ended October 31, 2021 were higher than the three month prior period by $12,000 and lower than the six month prior period by $10,000 primarily due to the allocations of certain common costs to the new homebuilding business segment.
Homebuilding general and administrative expenses for the three and six months ended October 31, 2021 were higher than the prior periods by $94,000 and $168,000 primarily due to the expansion of the Company’s homebuilding operations.
Corporate general and administrative expenses for the three and six months ended October 31, 2021 were lower than the prior periods by $372,000 and $682,000 primarily due to reduced pension benefit expenses and professional fees.

Interest income (expense), net. Interest income (expense), net increased to $2,000 and $1,000 for the three and six months ended October 31, 2021 from $(12,000) and $(6,000) for the three and six months ended October 31, 2020 primarily due to a reduction in bank fees.

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Other income. Other income for the three months ended October 31, 2021 consisted of $30,000 received for a life insurance policy for a retired executive of the Company. Other income for the six months ended October 31, 2021 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 for a life insurance policy for a retired executive of the Company. There was no other income for the three months ended October 31, 2020. Other income for the six months ended October 31, 2020 consisted of 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).

Provision for income taxes. The Company had a provision for income taxes of $1,065,000 and $1,453,000 for the three and six months ended October 31, 2021 compared to a provision for income taxes of $319,000 and $465,000 for the three and six months ended October 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

AMREP Corporation is a holding company that conducts substantially all of its operations through subsidiaries. As a holding company, AMREP Corporation is dependent on its available cash and on cash from subsidiaries to pay expenses and fund operations. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the real estate industry and the economy generally.

The Company’s primary sources of funding for working capital requirements are cash flow from operations, bank financing for specific real estate projects, a revolving line of credit and existing cash balances. Land and homebuilding properties generally cannot be sold quickly, and the ability of the Company to sell properties has been and will continue to be affected by market conditions. The ability of the Company to generate cash flow from operations is primarily dependent upon its ability to sell the properties it has selected for disposition at the prices and within the timeframes the Company has established for each property. The development of additional lots for sale, construction of homes or pursuing other real estate projects will require financing or other sources of funding, which may not be available on acceptable terms (or at all). If the Company is unable to obtain such financing, the Company’s results of operations could be adversely affected. Except as described below, there have been no material changes to the Company’s liquidity and capital resources as reflected in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2021 Form 10-K.

Operating Activities

The following presents information on the Company’s operating activities (dollars in thousands):

    

October 31, 

    

April 30, 

    

% Increase 

 

2021

2021

(Decrease)

 

Real estate inventory

$

61,772

$

55,589

 

11

%

Investment assets, net

 

9,775

 

13,582

 

(28)

%

Other assets

 

1,870

 

645

 

190

%

Deferred income taxes, net

 

1,165

 

2,749

 

(58)

%

Accounts payable and accrued expenses

 

4,758

 

4,458

 

7

%

Taxes payable, net

 

29

 

95

 

(69)

%

Accrued pension costs

 

35

 

476

 

(93)

%

 

  

 

  

 

  

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Real estate inventory increased from April 30, 2021 to October 31, 2021 by $6,183,000. Real estate inventory consists of (in thousands):

    

October 31, 

    

April 30, 

    

% Increase 

 

2021

2021

(Decrease)

 

Land inventory in New Mexico

$

54,148

$

49,918

 

8

%

Land inventory in Colorado

 

4,009

 

3,975

 

1

%

Homebuilding finished inventory

 

214

 

417

 

(49)

%

Homebuilding construction in process

 

3,401

 

1,279

 

166

%

$

61,772

$

55,589

Land inventory in New Mexico increased from April 30, 2021 to October 31, 2021 by $4,230,000 primarily due to increased land development activity and the acquisition of land. Homebuilding finished inventory decreased from April 30, 2021 to October 31, 2021 by $203,000 primarily due to the sale of homes offset by the completion of construction of certain homes. Homebuilding construction in process increased from April 30, 2021 to October 31, 2021 by $2,122,000 due to increased homebuilding activity.

Investment assets, net decreased from April 30, 2021 to October 31, 2021 by $3,807,000. Investment assets, net consist of (in thousands):

    

October 31, 

    

April 30, 

    

% Increase 

 

2021

2021

(Decrease)

 

Land held for long-term investment

$

9,775

$

9,775

 

0

%

Building

 

 

10,003

 

(a)

Less accumulated depreciation

 

 

(6,196)

 

(a)

Building, net

 

 

3,807

 

(a)

$

9,775

$

13,582

(a) Percentage not meaningful.

As of April 30, 2021, the building was 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 the building was $98,000 and $140,000 for the three months ended October 31, 2021 and October 31, 2020 and $201,000 and $262,000 for the six months ended October 31, 2021 and October 31, 2020.

Other assets increased from April 30, 2021 to October 31, 2021 by $1,225,000 primarily due to an increase in property and equipment as a result of the acquisition of a 7,000 square foot office building in Rio Rancho, New Mexico from which the Company’s real estate business operates.
Deferred income taxes, net decreased from April 30, 2021 to October 31, 2021 by $1,584,000 primarily due to use of federal net operating loss carry forwards.
Accounts payable and accrued expenses increased from April 30, 2021 to October 31, 2021 by $300,000 primarily due to an increase of accounts payable partially offset by a reduction in customer deposits.
Taxes payable, net decreased from April 30, 2021 to October 31, 2021 by $66,000 in connection with finalization of the Company’s tax return filings.
Accrued pension costs of the Company’s frozen defined benefit pension plan (representing the Company’s unfunded pension liability) decreased from April 30, 2021 to October 31, 2021 by $441,000 primarily due to favorable investment results of plan assets. The Company recorded, net of tax, other comprehensive income of $67,000 and $133,000 for the three and six months ended October 31, 2021 and $90,000 and $180,000 for the three and six months ended October 31, 2020 reflecting the change in accrued pension costs during each period net of the related deferred tax and unrecognized prepaid pension amounts.

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Table of Contents

Financing Activities

Notes payable, net increased from $3,448,000 as of April 30, 2021 to $5,952,000 as of October 31, 2021 primarily due to additional borrowings to fund land acquisition and development activities partially offset by repayments made on outstanding borrowings. Refer to Note 6 to the consolidated financial statements included in this report on Form 10-Q and Notes 6 and 19 to the consolidated financial statements contained in the 2021 Form 10-K for additional detail about notes payable.

Investing Activities

Capital expenditures were $10,000 and $11,000 for the three and six months ended October 31, 2021 and $3,000 for each of the three and six months ended October 31, 2020 primarily for technology upgrades during each period.

Statement of Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this report and other filings with the Securities and Exchange Commission, reports to the Company’s shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies that are difficult to predict. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.

The forward-looking statements contained in this report include, but are not limited to, statements regarding (1) the Company’s ability to finance its future working capital, land development, homebuilding and capital expenditure needs, (2) the Company’s expected liquidity sources, including the amount of principal available for borrowing under the Company’s financing arrangements, (3) anticipated future development of the Company’s real estate holdings, (4) the timing of reimbursements under, and the general effectiveness of, the Company’s public improvement districts and private infrastructure reimbursement covenants, (5) the availability of bank financing for projects, (6) the utilization of existing bank financing, (7) the backlog of homes under contract and in production and the dollar amount of expected sales revenue when such homes are closed, (8) the effect of recent accounting pronouncements, (9) the timing of recognizing unrecognized compensation expense related to shares of common stock issued under the AMREP Corporation 2016 Equity Compensation Plan, (10) the future issuance of deferred stock units to directors of the Company and (11) the future business conditions that may be experienced by the Company.

The Company undertakes no obligation to update or publicly release any revisions to any forward-looking statement to reflect events, circumstances or changes in expectations after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Vice President, Finance and Accounting, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. As a result of such evaluation, the Company’s Chief Executive Officer and Vice President, Finance and Accounting have concluded that such disclosure controls and procedures were effective as of October 31, 2021 to provide reasonable assurance that the information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Vice President, Finance and Accounting, as appropriate, to allow timely decisions regarding disclosure. The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

No change in the Company’s system of internal control over “financial reporting” (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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Table of Contents

PART II. OTHER INFORMATION

Item 6. Exhibits

Exhibit
Number

   

Description

31.1

Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2

Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934

32

Certification required pursuant to 18 U.S.C. Section 1350

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

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Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: December 8, 2021

AMREP CORPORATION (Registrant)

By:

/s/ Adrienne M. Uleau

Name: Adrienne M. Uleau

Title: Vice President, Finance and Accounting

(Principal Accounting Officer)

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Table of Contents

EXHIBIT INDEX

Exhibit
Number

    

Description

31.1

Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934

31.2

Certification required by Rule 13a-14(a) under the Securities Exchange Act of 1934

32

Certification required pursuant to 18 U.S.C. Section 1350

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

25