AMREP Corporation — Form 10-Q Summary
Business context and reporting period
This filing covers the three and nine months ended January 31, 2021, AMREP’s fiscal third quarter and year-to-date period. The company operates primarily through land development and homebuilding segments, with properties concentrated in New Mexico and rental assets in Florida and New Mexico. The financial statements are unaudited.
Key financial metrics
| Metric | Three months ended Jan. 31, 2021 | Three months ended Jan. 31, 2020 | Nine months ended Jan. 31, 2021 | Nine months ended Jan. 31, 2020 |
|---|---|---|---|---|
| Total revenue | $7.864 million | $5.287 million | $21.326 million | $14.014 million |
| Operating income (loss) | $2.524 million | $0.676 million | $3.736 million | $(2.710) million |
| Net income (loss) | $2.093 million | $0.338 million | $3.484 million | $(2.027) million |
| Diluted EPS | $0.28 | $0.04 | $0.44 | $(0.25) |
| Net cash provided by operating activities | Not separately provided for the quarter | Not separately provided for the quarter | $1.426 million | $0.652 million |
- Quarterly revenue increased 49%; nine-month revenue increased 52%.
- Operating margin was approximately 32.1% for the quarter and 17.5% year to date, compared with 12.8% and negative 19.3%, respectively, in the prior-year periods.
- Net margin was approximately 26.6% for the quarter and 16.3% year to date, compared with 6.4% and negative 14.5%, respectively, in the prior-year periods.
- Land sale revenue was $5.957 million for the quarter and $17.970 million year to date. New Mexico land sale revenue increased 56% and 55%, respectively, primarily from stronger builder demand.
- Home sale revenue was $1.261 million for the quarter and $1.463 million year to date, reflecting the company’s first home sales. Home sale gross margin was 14% in both periods.
- New Mexico land-sale gross profit percentages before indirect costs were 51% for the quarter and 33% year to date, versus 19% and 18% in the prior-year periods.
- Cash and cash equivalents were $15.406 million at January 31, 2021, compared with $17.502 million at April 30, 2020. Total assets were $95.892 million and shareholders’ equity was $83.407 million.
- Notes payable, net increased to $5.200 million from $3.890 million at April 30, 2020. Accrued pension costs declined to $3.209 million from $5.014 million following a $1.847 million voluntary pension contribution.
- Real estate inventory increased to $55.607 million from $53.449 million, including approximately 6,000 acres held for development or sale and new homebuilding inventory.
Material changes versus the prior comparable period
- Profitability improved substantially because of higher New Mexico land sales, better land-sale margins, lower corporate general and administrative expenses, and the absence of the $2.929 million non-cash pension settlement charge recorded in the prior-year nine-month period.
- Homebuilding became a new operating segment, with six homes closed in the quarter and seven homes closed year to date. At January 31, 2021, 21 homes were in production, including six under contract representing approximately $1.370 million of expected sales revenue, subject to cancellations and change orders.
- Other income included $0.650 million from a settlement with affiliates of a former business segment and $0.300 million of Paycheck Protection Program debt forgiveness.
- The company repurchased and retired 831,? shares during the nine months? The filing reports 11,847 shares repurchased in August, 675,616 in October, and 143,482 in November, for total repurchases of 830,945 shares costing approximately $5.116 million. The September repurchase program was terminated in November 2020.
- The weighted-average basic share count declined to 7.872 million for the nine months from 8.129 million, primarily reflecting share repurchases.
Liquidity, debt, outlook, and risks
- Year-to-date operating cash flow was $1.426 million. Financing activities used $3.519 million, including $5.116 million for share repurchases; cash declined by $2.096 million during the period.
- Scheduled principal payments after January 31, 2021 totaled $5.261 million, including $0.936 million in fiscal 2021 and $1.866 million in fiscal 2022.
- In February 2021, a subsidiary entered into a secured revolving credit facility providing up to $4.0 million for general corporate purposes, maturing in February 2024. Advances are subject to covenants, including maintenance of at least $3.0 million of unencumbered and unrestricted cash, cash equivalents, and marketable securities, and a minimum net worth requirement of $32 million.
- At January 31, 2021, the company reported compliance with applicable financial covenants on its outstanding project loans. Loan agreements contain customary default provisions, guarantees, collateral requirements, and acceleration rights.
- Management identifies demand for developed lots, homebuilding execution, project financing availability, inventory development timing, customer cancellations, sales incentives, weather and natural disasters, labor and material costs, environmental regulation, and broader economic conditions as significant uncertainties.
- The filing provides no quantitative earnings or revenue guidance. Management states that interim results are not necessarily indicative of future results and that land-sale timing and margins can vary significantly from period to period.
Important facts for investors to verify
- Confirm the sustainability of elevated New Mexico land-sale volumes and margins, given concentration in a limited number of customers and the variability of land transactions.
- Track conversion of the 21 homes in production and the six homes under contract into completed closings and cash receipts.
- Assess liquidity after scheduled debt maturities, continued land development spending, pension obligations, and any future share repurchases.
- Review the terms and covenant compliance of the new $4.0 million revolving facility and all secured project-level borrowings.
- Separate recurring operating performance from the $0.950 million of year-to-date other income, including settlement proceeds and PPP debt forgiveness.
- Evaluate exposure to New Mexico real estate demand, customer concentration, construction costs, regulatory restrictions, environmental matters, and severe weather.