AMREP Corp. 10-K Summary: Fiscal Year Ended April 30, 2010
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended April 30, 2010. AMREP Corporation operates through two primary subsidiaries: AMREP Southwest, engaged in real estate development and land sales primarily in Rio Rancho, New Mexico; and Kable Media Services, which provides subscription fulfillment, newsstand distribution, and product services to publishers. The Company is a "controlled company" with approximately 60% of its stock owned by Nicholas G. Karabots and affiliates.
Key Financial Metrics
| Metric | Fiscal 2010 | Fiscal 2009 |
|---|---|---|
| Total Revenues | $120.5 million | $145.9 million |
| Net Loss | $(9.5) million | $(43.5) million |
| Loss Per Share (Basic/Diluted) | $(1.58) | $(7.25) |
| Total Assets | $211.5 million | $227.7 million |
| Shareholders' Equity | $86.6 million | $96.3 million |
| Total Notes Payable | $28.7 million | $37.9 million |
| Cash and Cash Equivalents | $25.5 million | $29.0 million |
| Operating Cash Flow | $8.7 million | $(2.5) million |
Material Changes vs. Prior Period
- Profitability Improvement: The net loss narrowed significantly from $43.5 million in 2009 to $9.5 million in 2010. The 2009 loss was heavily impacted by a $50.2 million non-cash goodwill impairment charge and a $6.5 million write-off of a receivable from a defunct wholesaler. The 2010 loss included a smaller $2.1 million impairment charge related to Colorado real estate.
- Revenue Decline: Total revenues decreased 17% year-over-year.
- Real Estate: Land sales revenue dropped 42% to $5.2 million (56 acres sold) from $8.9 million (148 acres sold) due to the severe downturn in the Rio Rancho housing market.
- Media Services: Revenues declined 16% to $115.0 million, driven by reduced advertising revenue for publishers, leading to title cancellations and lower subscription volumes.
- Debt Reduction: Total notes payable decreased by $9.3 million as the Company paid down debt and refinanced facilities.
Guidance, Outlook, Risks, and Unusual Items
- Restructuring: The Company is consolidating its Subscription Fulfillment Services from three locations into one facility in Palm Coast, Florida. As of April 30, 2010, $8.0 million in non-recurring costs had been incurred, with approximately $300,000 in additional costs expected in 2011.
- Financing Risks: AMREP Southwest's primary loan facility of $22.5 million matures in December 2010. Renewal is not guaranteed, and failure to refinance could force asset sales or equity issuance.
- Legal Contingencies: Several lawsuits remain pending, including an employment discrimination case where a jury awarded $236,000 (expected to be covered by insurance) and antitrust claims involving a former wholesaler. The Company believes these will not have a material adverse effect.
- Pension Liability: The Company's frozen defined benefit pension plan is underfunded by approximately $12.1 million, requiring future cash contributions.
- Market Risks: The Company faces significant exposure to the cyclical real estate market in New Mexico and the declining print media industry. A major employer in Rio Rancho (Intel) reduced its workforce, further impacting local demand.
Investor Verification Checklist
- Debt Maturity: Verify the status of the $22.5 million AMREP Southwest loan maturing in December 2010 and the terms of any refinancing.
- Real Estate Inventory: Assess the valuation and liquidity of the remaining 17,340 acres in Rio Rancho, noting that a significant portion consists of scattered lots requiring further development or consolidation.
- Media Services Concentration: Review the concentration risk where three wholesalers accounted for 72% of gross billings in Newsstand Distribution Services.
- Restructuring Costs: Monitor the completion of the Florida consolidation project and the realization of projected cost savings versus the $8 million+ already spent.
- Legal Outcomes: Track the resolution of the pending antitrust lawsuit (Anderson News) and the employment discrimination settlement.