AMREP Corporation 2024 Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2024, compared with fiscal 2023 ended April 30, 2023. The filing is an annual report rather than a calendar-year 2023 Q4 filing. AMREP operates primarily in land development and homebuilding, with substantial concentration in Rio Rancho and Sandoval County, New Mexico.
Business Context
- Land development includes sales of developed and undeveloped residential, commercial and industrial property, infrastructure development, impact-fee credits and landscaping services.
- Homebuilding includes single-family detached and attached homes in New Mexico. The Company sold 36 homes in 2024 versus 32 in 2023; average selling price declined to $477,000 from $525,000.
- As of April 30, 2024, AMREP owned approximately 17,000 acres in Sandoval County, including approximately 16,000 acres of undeveloped property.
- The Company employed 42 full-time employees and had no foreign sales or activities.
Financial Performance and Key Metrics
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Total revenue | $51.369 million | $48.676 million | 6% |
| Land sale revenue | $26.825 million | $30.659 million | (13%) |
| Home sale revenue | $17.187 million | $16.706 million | 3% |
| Other revenue | $7.357 million | $1.311 million | Increase primarily from asset sales |
| Operating income | $7.602 million | $5.830 million | 30% |
| Net income | $6.690 million | $21.790 million | (69%) |
| Diluted EPS | $1.25 | $4.11 | (70%) |
| Net cash from operating activities | $10.714 million | $6.389 million | 68% |
| Cash, cash equivalents and restricted cash | $30.241 million | $19.993 million | 51% |
| Notes payable | $35,000 | $44,000 | Decrease |
- Operating margin was approximately 14.8% in 2024 versus 12.0% in 2023; net margin was approximately 13.0% versus 44.8%, respectively.
- Land sale gross margin declined to 36% from 42%. Home sale gross margin declined to 25% from 28%.
- General and administrative expense from ongoing operations increased 21% to $6.871 million, primarily due to higher land development, homebuilding and corporate costs. The 2023 period included a $7.597 million non-cash pension settlement charge that did not recur.
- Interest income increased to $823,000 from $8,000, primarily reflecting higher cash and investment balances and interest rates.
- Real estate inventory was $65.983 million, including $57.527 million of New Mexico land inventory, $4.138 million of completed and model homes, and $4.318 million of homes under construction.
- Total assets increased to $122.830 million from $115.895 million, while shareholders’ equity increased to $118.050 million from $111.000 million.
Cash Flow, Liquidity and Debt
- Operating cash flow increased to $10.714 million, supported by cash generated from operations, a net decrease in real estate inventory and investment assets, and lower other assets.
- Investing cash outflow was $457,000, consisting primarily of capital expenditures. Financing cash outflow was $9,000, primarily debt repayment.
- Cash and cash equivalents were $29.694 million, U.S. government securities were $19.229 million, and restricted cash was $547,000 at April 30, 2024.
- The Company had $35,000 of outstanding debt and a revolving credit facility with $5.328 million available for new borrowings. The facility matures in August 2025 and is secured by a 298-acre Paseo Gateway property.
- The revolving facility had an outstanding letter of credit of $172,000 and a $250,000 reserve for credit card usage. The Company was in compliance with its debt covenants at year-end.
- Management believes available cash, bank financing and operating cash flows are adequate for anticipated fiscal 2025 spending, although additional financing may be needed for future development, acquisitions, homebuilding or commercial projects.
- The Company has paid no cash dividends since fiscal 2008.
Material Changes Versus the Prior Period
- Revenue increased despite a 13% decline in land sale revenue because home sales and other revenue increased.
- The $7.200 million sale of a 147-acre Brighton, Colorado property contributed materially to 2024 land revenue; management does not expect this transaction to be indicative of future land sales.
- Other revenue included $5.701 million from the sale of two commercial buildings, also not expected to be recurring or indicative of future operating results.
- Net income declined substantially because 2023 benefited from a $16.071 million non-cash income tax benefit related to a worthless stock deduction. The 2023 results also included a $7.597 million non-cash pension settlement expense.
- The defined benefit pension plan was terminated in 2024. Residual plan assets of $547,000 were transferred to the Company’s 401(k) plan and recorded as restricted cash.
- Homebuilding inventory and construction in process increased as the Company completed more homes and started construction on additional homes. At year-end, 64 homes were in production, including 20 under contract representing $8.719 million of expected closing revenue, subject to cancellations and changes.
- The Company reduced the number and scope of active land development projects and delayed certain new projects because of market uncertainty, municipal approval delays and infrastructure delays.
Outlook, Risks and Unusual Items
- Management expects affordability pressures from elevated home prices, mortgage rates and inflation to continue affecting land development and homebuilding at least through the remainder of calendar year 2024.
- Management stated that reduced development activity may result in lower developed residential land revenue in fiscal 2025 compared with fiscal 2024.
- Key risks include mortgage-rate changes, housing affordability, inflation, elevated construction and labor costs, supply-chain constraints, municipal approval and inspection delays, utility response times, competition, weather and natural disasters, water availability, environmental and other regulatory requirements, and limited access to financing.
- Land sale cost allocations depend on estimates of project completion costs and relative parcel values. Changes in these estimates could materially affect gross profit and future impairment charges.
- No impairment charges were recorded on real estate inventory or investment assets in 2024 or 2023, but management identified continuing risk of future impairment because of market and development-cost volatility.
- The Company recognized a net deferred tax asset of $11.038 million, including federal and state net operating loss carryforwards. Realization depends on future taxable income; the filing states that the 2023 worthless stock deduction may be audited by the IRS and could be reduced or rejected.
- Two 2024 customers each contributed more than 10% of total revenue, with revenue of $11.554 million and $7.200 million. Substantial land sale revenue was concentrated among four customers.
- Management reported effective disclosure controls and internal control over financial reporting. The independent auditor issued an unqualified opinion; the critical audit matter concerned allocation of common land sale costs.
- The Company reported no material cybersecurity incidents, no off-balance-sheet arrangements and no legal proceedings expected by management to have a material adverse effect.
Investor Verification Checklist
- Verify the sustainability of 2024 results excluding the Brighton property sale, commercial building sales and the nonrecurring 2023 tax benefit.
- Review the timing, backlog and expected margins of homes under contract and the 64 homes in production.
- Assess whether mortgage rates, affordability pressures and municipal or utility delays could reduce fiscal 2025 land and home deliveries.
- Evaluate the carrying value and development assumptions for the $65.983 million real estate inventory and the potential for future impairment charges.
- Confirm the availability, covenant requirements and August 2025 maturity of the revolving credit facility, including the letter of credit and cash requirements.
- Assess the concentration of land revenue among a limited number of homebuilder customers.
- Review the recoverability of the $11.038 million deferred tax asset and the potential IRS or state tax consequences related to the worthless stock deduction.
- Consider the limited trading liquidity of the common stock: four shareholders beneficially owned approximately 59% of outstanding shares, and average daily trading volume was approximately 7,948 shares for the 30-day period ended April 30, 2024.