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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
AMREP Corporation
(Exact Name of Registrant as Specified in its Charter)
| ||
State or Other Jurisdiction of Incorporation or Organization | I.R.S. Employer Identification No. | |
|
| |
Address of Principal Executive Offices | Zip Code |
( |
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 |
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.
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).
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 ☐ |
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
Number of Shares of Common Stock, par value $.10 per share, outstanding at March 7, 2022 –
AMREP CORPORATION AND SUBSIDIARIES
INDEX
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 |
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Cash and cash equivalents | $ | | $ | | ||
Real estate inventory |
| |
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Investment assets, net |
| |
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Other assets |
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Taxes receivable, net |
| |
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Deferred income taxes, net | | | ||||
Prepaid pension costs |
| |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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LIABILITIES: |
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Accounts payable and accrued expenses | $ | | $ | | ||
Notes payable, net |
| |
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Taxes payable, net |
| |
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Accrued pension costs |
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TOTAL LIABILITIES |
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SHAREHOLDERS' EQUITY: |
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Common stock, $ |
| | | |||
Capital contributed in excess of par value |
| |
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Retained earnings |
| |
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Accumulated other comprehensive loss, net |
| ( |
| ( | ||
TOTAL SHAREHOLDERS’ EQUITY |
| |
| | ||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | | $ | | ||
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: |
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Land sale revenues | $ | | $ | | $ | | $ | | ||||
Home sale revenues | | | | | ||||||||
Building sales and other revenues |
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Total revenues |
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COSTS AND EXPENSES: |
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Land sale cost of revenues |
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Home sale cost of revenues | | | | | ||||||||
Building sales and other cost of revenues |
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| — | ||||
General and administrative expenses |
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Total costs and expenses |
| |
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Operating income | | | | | ||||||||
Interest income (expense), net |
| |
| ( |
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| ( | ||||
Other income |
| |
| |
| |
| | ||||
Income before income taxes | | | | | ||||||||
Provision for income taxes | | | | | ||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Basic earnings per share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per share | $ | | $ | | $ | | $ | | ||||
Weighted average number of common shares outstanding – basic |
| |
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| | ||||
Weighted average number of common shares outstanding – diluted |
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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 | $ | | $ | | $ | | $ | | ||||
Other comprehensive income, net of tax: |
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Decrease in pension liability |
| |
| |
| |
| | ||||
Income tax effect | ( | ( | ( | ( | ||||||||
Decrease in pension liability, net of tax | | | | | ||||||||
Other comprehensive income |
| |
| |
| |
| | ||||
Total comprehensive income | $ | | $ | | $ | | $ | | ||||
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 |
| | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||
Reclassification of common stock settled from deferred common share units | — | | ( | | | | | |||||||||||||
Issuance of option to purchase common stock | — | | | | | | | |||||||||||||
Issuance of deferred common share units | — | | | | | | | |||||||||||||
Net income | — | | | | | | | |||||||||||||
Other comprehensive income |
| — | |
| |
| |
| |
| |
| | |||||||
Balance, January 31, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||
Balance, November 1, 2020 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Issuance of deferred common share units | — | — | | — | — | — | | |||||||||||||
Repurchase of common stock | ( | ( | ( | | | | ( | |||||||||||||
Retirement of treasury stock | ( | ( | ( | ( | | | | |||||||||||||
Net income | — | | | | | | | |||||||||||||
Other comprehensive income | — | | | | | | | |||||||||||||
Balance, January 31, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||
Balance, May 1, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||
Reclassification of common stock settled from deferred common share units | — | | ( | | | | | |||||||||||||
Issuance of option to purchase common stock | — | | | | | | | |||||||||||||
Issuance of deferred common share units | — | | | | | | | |||||||||||||
Issuance of restricted common stock | | |
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Net income | — | | | | | | | |||||||||||||
Other comprehensive income |
| — |
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Balance, January 31, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||
Balance, May 1, 2020 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||
Issuance of restricted common stock | | | | | | | | |||||||||||||
Issuance of deferred common share units | — | | | | | | | |||||||||||||
Issuance of common stock settled from deferred common share units | | — | — | — | — | — | — | |||||||||||||
Repurchase of common stock | ( | ( | ( | | | | ( | |||||||||||||
Retirement of treasury stock | ( | ( | ( | ( | | | | |||||||||||||
Net income | — | | | | | | | |||||||||||||
Other comprehensive income | — | | | | | | | |||||||||||||
Balance, January 31, 2021 |
| | $ | | $ | | $ | | $ | ( | $ | | $ | | ||||||
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: |
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|
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| ||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
| |
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Amortization of debt issuance costs |
| |
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Non-cash credits and charges: |
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Stock-based compensation |
| |
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Deferred income tax provision |
| |
| | ||
Net periodic pension cost |
| ( |
| | ||
Gain on debt forgiveness | ( | ( | ||||
Changes in assets and liabilities: |
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|
|
| ||
Real estate inventory and investment assets |
| ( |
| ( | ||
Other assets |
| ( |
| ( | ||
Accounts payable and accrued expenses |
| ( |
| | ||
Accrued pension costs | — | ( | ||||
Taxes receivable |
| ( |
| — | ||
Net cash provided by operating activities |
| |
| | ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
| ||||
Proceeds from corporate-owned life insurance policy |
| |
| — | ||
Capital expenditures |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
| ||||
Proceeds from debt financing |
| |
| | ||
Principal debt payments |
| ( |
| ( | ||
Payments for debt issuance costs |
| ( |
| ( | ||
Repurchase of common stock | — | ( | ||||
Net cash provided by (used in) financing activities |
| |
| ( | ||
Increase (decrease) in cash and cash equivalents |
| |
| ( | ||
Cash and cash equivalents, beginning of period |
| |
| | ||
Cash and cash equivalents, end of period | $ | | $ | | ||
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
| ||
Income taxes refunded, net | $ | | $ | — | ||
Interest paid, net of amount capitalized | $ | — | $ | | ||
Right-of-use assets obtained in exchange for operating lease liabilities | $ | | $ | — | ||
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 | $ | | $ | | ||
Land held for development or sale in Colorado |
| |
| | ||
Homebuilding finished inventory | | | ||||
Homebuilding construction in process | ||||||
$ | $ | |||||
(3) INVESTMENT ASSETS, NET
Investment assets, net consist of (in thousands):
| January 31, |
| April 30, | |||
2022 | 2021 | |||||
Land held for long-term investment | $ | | $ | | ||
Buildings | — | | ||||
Less accumulated depreciation |
| — |
| ( | ||
Buildings, net |
| — |
| | ||
$ | | $ | | |||
As of April 30, 2021, buildings were comprised of a
(4) OTHER ASSETS
Other assets consist of (in thousands):
| January 31, |
| April 30, | |||
2022 | 2021 | |||||
Prepaid expenses | $ | | $ | | ||
Receivables | | | ||||
Right-of-use assets associated with leases of office facilities |
| |
| | ||
Other assets | | | ||||
Property | | — | ||||
Equipment | | | ||||
Less accumulated depreciation | ( | ( | ||||
Property and equipment, net | | | ||||
$ | | $ | | |||
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 $
In August 2021, the Company acquired a
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 | $ | | $ | | ||
Trade payables |
| |
| | ||
Real estate customer deposits | | | ||||
| | |||||
Corporate operations | | | ||||
$ | | $ | | |||
(6) NOTES PAYABLE
Notes payable, net consist of (in thousands):
| January 31, |
| April 30, | |||
2022 | 2021 | |||||
Real estate notes payable | $ | | $ | | ||
Unamortized debt issuance costs |
| ( |
| ( | ||
$ | | $ | | |||
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 |
| $ | |
| $ | |
| $ | | $ | | $ | | ||
Lomas Encantadas U2B P3 | | | | | | ||||||||||
Hawk Site U37 |
| |
| |
| |
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Hawk Site U23 U40 |
| |
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| | |||||
Lavender Fields – acquisition |
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Lavender Fields – development |
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La Mirada |
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| |
| |
| |
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| $ | | $ | |
|
| |||||||||
|
| 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 |
| | % | $ | | $ | | $ | | ||
Hawk Site U23 U40 |
| | % |
| |
| |
| | ||
Lavender Fields – development |
| | % |
| |
| |
| | ||
La Mirada |
| | % |
| |
| |
| | ||
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 $
9
amount of $
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 $
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 $
The following table summarizes the notes payable scheduled principal repayments subsequent to January 31, 2022 (in thousands):
Fiscal Year |
| Scheduled Payments | |
2022 | $ | | |
2023 |
| | |
2024 |
| | |
Total | $ | | |
(7) REVENUES
Land sale revenues. Substantially all of the land sale revenues were received from
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 | $ | — | $ | — | $ | | $ | — | ||||
Oil and gas royalties | | | | | ||||||||
Public improvement district reimbursements |
| |
| |
| |
| | ||||
Private infrastructure reimbursement covenants |
| |
| |
| |
| | ||||
Miscellaneous other revenues |
| |
| |
| |
| | ||||
$ | | $ | | $ | | $ | | |||||
The Company owned a
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
10
Major customers:
| ● | There were |
| ● | There were |
| ● | There were |
| ● | There were |
(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
(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 | $ | | $ | | $ | | $ | | ||||
Homebuilding |
| |
| |
| |
| | ||||
Corporate |
| |
| |
| |
| | ||||
$ | | $ | | $ | | $ | | |||||
(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 and during the three months ended January 31, 2022 and January 31, 2021 and and 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 $
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 |
| |
Granted during the nine months ended January 31, 2022 |
| |
Vested during the nine months ended January 31, 2022 |
| ( |
Forfeited during the nine months ended January 31, 2022 |
| |
Non-vested as of January 31, 2022 |
| |
The Company recognized non-cash compensation expense related to the vesting of restricted shares of common stock net of forfeitures of $
In November 2021, the Company granted Christopher V. Vitale, the President and Chief Executive Officer of the Company, an option to purchase
In connection with the resignation of a director in September 2020, the Company (i) issued
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 $
12
(11) OTHER INCOME
There was
(12) STOCK REPURCHASES
In August 2020, the Company repurchased
In September 2020, the Board of Directors of the Company authorized the Company to purchase up to
In November 2020, the Company repurchased
In November 2020, the Company’s share repurchase program was terminated.
(13) TREASURY STOCK
During the three months ended January 31, 2021,
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) |
|
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| ||||
Revenues | $ | | $ | | $ | | $ | | ||||
Net income (loss) |
| |
| |
| ( |
| | ||||
Provision for income taxes |
| |
| |
| |
| | ||||
Depreciation |
| |
| |
| |
| | ||||
EBITDA (c) | $ | | $ | | $ | ( | $ | | ||||
Capital expenditures | $ | | $ | | $ | | $ | | ||||
Three months ended January 31, 2021 (a) |
|
|
|
|
|
|
|
| ||||
Revenues | $ | | $ | | $ | | $ | | ||||
Net income (loss) |
| |
| |
| ( |
| | ||||
Provision for income taxes |
| |
| |
| |
| | ||||
Interest income, net (b) |
| |
| |
| |
| | ||||
Depreciation |
| |
| |
| |
| | ||||
EBITDA (c) | $ | | $ | | $ | | $ | | ||||
Capital expenditures | $ | | $ | | $ | | $ | | ||||
Nine months ended January 31, 2022 (a) | ||||||||||||
Revenues | $ | | $ | | $ | | $ | | ||||
Net income |
| |
| |
| |
| | ||||
Provision for income taxes |
| |
| |
| |
| | ||||
Interest income, net (b) |
| |
| |
| |
| | ||||
Depreciation |
| |
| |
| |
| | ||||
EBITDA (c) | $ | | $ | | $ | | $ | | ||||
Capital expenditures | $ | | $ | | $ | | $ | | ||||
Total assets as of January 31, 2022 | $ | | $ | | $ | | $ | | ||||
Nine months ended January 31, 2021 (a) | ||||||||||||
Revenues | $ | | $ | | $ | | $ | | ||||
Net income (loss) |
| |
| ( |
| ( |
| | ||||
Provision (benefit) for income taxes |
| |
| ( |
| |
| | ||||
Interest income (expense), net (b) |
| |
| |
| ( |
| | ||||
Depreciation |
| |
| |
| |
| | ||||
EBITDA (c) | $ | | $ | ( | $ | ( | $ | | ||||
Capital expenditures | $ | | $ | | $ | | $ | | ||||
Total assets as of January 31, 2021 | $ | | $ | | $ | | $ | | ||||
| (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 | Three Months ended January 31, 2021 | |||||||||||||||
| Acres Sold |
| Revenue |
| Revenue Per Acre1 |
| Acres Sold |
| Revenue |
| Revenue Per Acre1 | |||||
Developed |
|
|
|
|
|
| ||||||||||
Residential |
| 11.4 | $ | 5,879 | $ | 516 |
| 10.8 | $ | 5,615 | $ | 520 | ||||
Commercial |
| — |
| — |
| — |
| — |
| — |
| — | ||||
Total Developed |
| 11.4 | $ | 5,879 | $ | 516 |
| 10.8 |
| 5,615 |
| 520 | ||||
Undeveloped |
| — |
| — |
| — |
| 62 |
| 342 |
| 6 | ||||
Total |
| 11.4 | $ | 5,879 | $ | 516 |
| 72.8 | $ | 5,957 | $ | 82 | ||||
| Nine Months ended January 31, 2022 |
| Nine Months ended January 31, 2021 | |||||||||||||
| Acres |
|
| Revenue |
|
|
| Revenue | ||||||||
| Sold |
| Revenue |
| Per Acre1 |
| Acres Sold |
| Revenue |
| Per Acre1 | |||||
Developed |
|
|
|
|
|
|
|
|
|
| ||||||
Residential | 44.7 | $ | 21,535 | $ | 482 | 35.9 | $ | 17,478 | $ | 486 | ||||||
Commercial | — |
| — |
| — | 0.4 |
| 134 |
| 335 | ||||||
Total Developed | 44.7 | $ | 21,535 | $ | 482 | 36.3 |
| 17,612 |
| 485 | ||||||
Undeveloped | — |
| — |
| — | 64 |
| 358 |
| 6 | ||||||
Total | 44.7 | $ | 21,535 | $ | 482 | 100.3 | $ | 17,970 | $ | 179 | ||||||
1 Revenue per acre may not calculate precisely due to the rounding of revenues to the nearest thousand dollars.
The change in the average selling price per acre of developed residential land for the three months ended January 31, 2022 compared to the three months ended January 31, 2021 and for the nine months ended January 31, 2022 compared to the nine months ended January 31, 2021 was primarily due to the location and mix of lots sold.
| ● | Home sale revenues for the three and nine months ended January 31, 2022 were higher than the prior periods by $2,115,000 and $5,143,000 due to the expansion of the Company’s homebuilding operations. The Company’s home sale revenues consist of: |
Three Months ended January 31, | Nine Months ended January 31, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Homes sold |
| 11 |
| 6 |
| 22 |
| 7 | ||||
Average selling price | $ | 307,000 | $ | 210,000 | $ | 300,000 | $ | 209,000 | ||||
As of January 31, 2022, the Company had 40 homes in production, including 28 homes under contract, which homes under contract represented $11,236,000 of expected home sale revenues when closed, subject to customer cancellations and change orders.
16
| ● | Building sales and other revenues for the three months ended January 31, 2022 were lower than the prior periods by $85,000. Building sales and other revenues for the nine months ended January 31, 2022 were higher than the prior periods by $6,525,000. Building sales and other revenues consist of (dollars in thousands): |
Three Months ended January 31, | Nine Months ended January 31, | ||||||||||||||||
|
| % Increase |
|
| % Increase | ||||||||||||
| 2022 |
| 2021 |
| (Decrease) |
| 2022 |
| 2021 |
| (Decrease) | ||||||
Sale of building | $ | — | $ | — | (a) | $ | 6,750 | $ | — | (a) | |||||||
Oil and gas royalties | 49 | 46 | 7 | % | 223 | 82 | (a) | ||||||||||
Public improvement district reimbursements |
| 292 |
| 110 | (a) |
| 530 |
| 354 | 50 | % | ||||||
Private infrastructure reimbursement covenants |
| 48 |
| 84 | (43) | % |
| 131 |
| 462 | (72) | % | |||||
Miscellaneous other revenues |
| 172 |
| 406 | (58) | % |
| 784 |
| 995 | (21) | % | |||||
Total | $ | 561 | $ | 646 | (13) | % | $ | 8,418 | $ | 1,893 | (a) | ||||||
| (a) | Percentage not meaningful. |
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.
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.
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. The Company owned a 14,000 square foot, single tenant retail building in the Las Fuentes at Panorama Village subdivision in Rio Rancho, New Mexico, which was leased to a third party during 2021 and which was sold in March 2021. 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 the tenant at the 14,000 square foot, single tenant retail building in Rio Rancho, New Mexico, 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.
Cost of Revenues. The following presents information on cost of 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 cost of revenues | $ | 4,495 | $ | 2,916 |
| 54 | % | $ | 16,259 | $ | 12,028 |
| 35 | % | |||
Home sale cost of revenues |
| 2,623 |
| 1,082 |
| (a) |
| 5,167 |
| 1,256 |
| (a) | |||||
Building sales and other cost of revenues | — | — | (a) | 3,837 | — | (a) | |||||||||||
| (a) | Percentage not meaningful. |
| ● | Land sale cost of revenues for the three months ended January 31, 2022 was higher than the prior period by $1,579,000. Land sale gross margin was 24% for the three months ended January 31, 2022 compared to 51% for the three months ended January 31, 2021. Land sale cost of revenues for the nine months ended January 31, 2022 was higher than the prior period by $4,231,000. Land sale gross margin was 25% for the nine months ended January 31, 2022 compared to 33% for the nine months ended January 31, 2021. The changes in gross margin were primarily due to the location, size and mix of property 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. |
17
| ● | Home sale cost of revenues for the three and nine months ended January 31, 2022 were higher than the prior periods by $1,541,000 and $3,911,000 due to the expansion of the Company’s homebuilding operations. Home sale gross margins were 22% for each of the three and nine months ended January 31, 2022 compared to 14% for each of the three and nine months ended January 31, 2021. 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 nine months ended January 31, 2022 consisted of expenses associated with the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida. The Company owned a 14,000 square foot, single tenant retail building in the Las Fuentes at Panorama Village subdivision in Rio Rancho, New Mexico, which was sold in March 2021. Building sales and other cost of revenues during the three and nine months ended January 31, 2021 consisted of expenses associated with this 14,000 square foot building. |
General and Administrative Expenses. The following presents information on general and administrative expenses 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 development | $ | 1,098 | $ | 829 |
| 32 | % | $ | 2,359 | $ | 1,826 |
| 29 | % | |||
Homebuilding |
| 222 |
| 137 |
| 62 | % |
| 621 |
| 368 |
| 69 | % | |||
Corporate |
| 220 |
| 376 |
| (41) | % |
| 1,003 |
| 2,112 |
| (52) | % | |||
Total | $ | 1,540 | $ | 1,342 |
| 15 | % | $ | 3,983 | $ | 4,306 |
| (7) | % | |||
| ● | Land development general and administrative expenses for the three and nine months ended January 31, 2022 were higher than the prior periods by $269,000 and $533,000 primarily due to an increase in real estate taxes. |
| ● | Homebuilding general and administrative expenses for the three and nine months ended January 31, 2022 were higher than the prior periods by $85,000 and $253,000 primarily due to the expansion of the Company’s homebuilding operations. |
| ● | Corporate general and administrative expenses for the three and nine months ended January 31, 2022 were lower than the prior periods by $156,000 and $1,109,000 primarily due to reduced pension benefit expenses and professional fees. |
Interest income (expense), net. Interest income (expense), net was $0 and $1,000 for the three and nine months ended January 31, 2022 and $(21,000) and $(27,000) for the three and nine months ended January 31, 2021. The change in interest income (expense), net was primarily due to a reduction in bank fees.
Other income. Refer to Note 11 to the consolidated financial statements included in this report on Form 10-Q for detail regarding other income.
Provision for income taxes. The Company had a provision for income taxes of $248,000 and $1,701,000 for the three and nine months ended January 31, 2022 compared to a provision for income taxes of $710,000 and $1,175,000 for the three and nine months ended January 31, 2021. The provision for income taxes correlated to the amount of income before income taxes during each period.
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
18
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):
| January 31, |
| April 30, |
| % Increase |
| |||
2022 | 2021 | (Decrease) |
| ||||||
Real estate inventory | $ | 64,786 | $ | 55,589 |
| 17 | % | ||
Investment assets, net |
| 9,775 |
| 13,582 |
| (28) | % | ||
Other assets |
| 1,924 |
| 645 |
| (a) | |||
Deferred income taxes, net |
| 885 |
| 2,749 |
| (68) | % | ||
Accounts payable and accrued expenses |
| 4,196 |
| 4,458 |
| (6) | % | ||
Taxes receivable (payable), net |
| 284 |
| (95) |
| (a) | |||
Prepaid (accrued) pension costs |
| 186 |
| (476) |
| (a) | |||
|
|
|
|
|
| ||||
| (a) | Percentage not meaningful. |
| ● | Real estate inventory increased from April 30, 2021 to January 31, 2022 by $9,197,000. Real estate inventory consists of (dollars in thousands): |
| January 31, |
| April 30, |
| % Increase |
| |||
2022 | 2021 | (Decrease) |
| ||||||
Land inventory in New Mexico | $ | 55,773 | $ | 49,918 |
| 12 | % | ||
Land inventory in Colorado |
| 4,022 |
| 3,975 |
| 1 | % | ||
Homebuilding finished inventory |
| 1,410 |
| 417 |
| (a) | |||
Homebuilding construction in process |
| 3,581 |
| 1,279 |
| (a) | |||
$ | 64,786 | $ | 55,589 | ||||||
| (a) | Percentage not meaningful. |
Land inventory in New Mexico increased from April 30, 2021 to January 31, 2022 by $5,855,000 primarily due to increased land development activity and the acquisition of land. Homebuilding finished inventory increased from April 30, 2021 to January 31, 2022 by $993,000 primarily due to the completion of construction of model homes and homes not yet sold. Homebuilding construction in process increased from April 30, 2021 to January 31, 2022 by $2,302,000 due to increased homebuilding activity.
| ● | Investment assets, net decreased from April 30, 2021 to January 31, 2022 by $3,807,000. Investment assets, net consist of (dollars in thousands): |
| January 31, |
| April 30, |
| % Increase |
| |||
2022 | 2021 | (Decrease) |
| ||||||
Land held for long-term investment | $ | 9,775 | $ | 9,775 |
| 0 | % | ||
Buildings |
| — |
| 10,003 |
| (a) | |||
Less accumulated depreciation |
| — |
| (6,196) |
| (a) | |||
Buildings, net |
| — |
| 3,807 |
| (a) | |||
$ | 9,775 | $ | 13,582 | ||||||
| (a) | Percentage not meaningful. |
19
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.
| ● | Other assets increased from April 30, 2021 to January 31, 2022 by $1,279,000 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 January 31, 2022 by $1,864,000 primarily due to use of federal net operating loss carry forwards. |
| ● | Accounts payable and accrued expenses decreased from April 30, 2021 to January 31, 2022 by $262,000 primarily due to a reduction in customer deposits. |
| ● | Taxes payable, net decreased from April 30, 2021 to January 31, 2022 by $379,000 in connection with finalization of certain Company’s tax return filings. |
| ● | Accrued pension costs of the Company’s frozen defined benefit pension plan (representing the Company’s pension liability) decreased from April 30, 2021 to January 31, 2022 by $662,000 primarily due to favorable investment results of plan assets. The Company recorded, net of tax, other comprehensive income of $67,000 and $200,000 for the three and nine months ended January 31, 2022 and $90,000 and $270,000 for the three and nine months ended January 31, 2021 reflecting the change in accrued pension costs during each period net of the related deferred tax and unrecognized prepaid pension amounts. |
Financing Activities
Notes payable, net increased from $3,448,000 as of April 30, 2021 to $5,726,000 as of January 31, 2022 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 $4,000 and $16,000 for the three and nine months ended January 31, 2022 and $3,000 for each of the three and nine months ended January 31, 2021 primarily for technology upgrades during each period.
OTHER
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. |
20
| ● | 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 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. Refer to Note 10 to the consolidated financial statements included in this report on Form 10-Q for additional detail about this option.
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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 revenues 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, (11) the future business conditions that may be experienced by the Company and (12) the dilution to earnings per share that outstanding options to purchase shares of common stock of the Company may cause in the future.
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.
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 January 31, 2022 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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PART II. OTHER INFORMATION
Item 6. Exhibits
Exhibit |
| Description |
10.1 | ||
10.2 | ||
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 | ||
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) |
23
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: March 10, 2022 | 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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EXHIBIT INDEX
Exhibit |
| Description |
10.1 | ||
10.2 | ||
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 | ||
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