AMREP CORP. [AXR] Filings

10-Q 1 axr-20230131x10q.htm 10-Q

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 January 31, 2023


☐	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 March 9, 2023 – 5,254,909.

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AMREP CORPORATION AND SUBSIDIARIES

INDEX


PART I. FINANCIAL INFORMATION		PAGE NO.

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets January 31, 2023 (Unaudited) and April 30, 2022	2

	Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended January 31, 2023 and 2022	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three and Nine Months Ended January 31, 2023 and 2022	4

	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) Three and Nine Months Ended January 31, 2023 and 2022	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended January 31, 2023 and 2022	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

Item 6.	Exhibits	22

SIGNATURE		23

EXHIBIT INDEX		24

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMREP CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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


	January 31,		April 30,
	2023		2022
	(Unaudited)
ASSETS
Cash and cash equivalents	$	12,403	$	15,721
Real estate inventory		70,730		67,249
Investment assets		11,729		9,017
Other assets		2,944		1,882
Deferred income taxes, net		14,688		958
Prepaid pension costs		646		90
TOTAL ASSETS	$	113,140	$	94,917

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable and accrued expenses	$	4,815	$	6,077
Notes payable		250		2,030
Taxes payable, net		694		3,648
TOTAL LIABILITIES		5,759		11,755

SHAREHOLDERS' EQUITY:
Common stock, $.10 par value; shares authorized – 20,000,000; shares issued – 5,254,909 at January 31, 2023 and 5,240,309 at April 30, 2022		526		524
Capital contributed in excess of par value		32,673		32,383
Retained earnings		76,935		54,828
Accumulated other comprehensive loss, net		(2,753)		(4,573)
TOTAL SHAREHOLDERS’ EQUITY		107,381		83,162
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	113,140	$	94,917

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

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AMREP CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three and Nine Months ended January 31, 2023 and 2022

(Amounts in thousands, except per share amounts)


	Three Months ended				Nine Months ended
	January 31,				January 31,
	2023		2022		2023		2022
REVENUES:
Land sale revenues	$	6,367	$	5,879	$	24,389	$	21,535
Home sale revenues		2,639		3,376		10,984		6,606
Building sales and other revenues		111		136		602		7,263
Total revenues		9,117		9,391		35,975		35,404

COSTS AND EXPENSES:
Land sale cost of revenues, net		3,636		4,070		15,415		15,104
Home sale cost of revenues		2,047		2,623		7,762		5,167
Building sales and other cost of revenues		—		—		—		3,837
General and administrative expenses
Operations		1,573		1,540		3,898		3,983
Pension settlement		2,336		—		2,336		—
Total costs and expenses		9,592		8,233		29,411		28,091
Operating (loss) income		(475)		1,158		6,564		7,313

Interest income, net		—		—		6		1
Other income		1,803		—		1,803		260
Income before income taxes		1,328		1,158		8,373		7,574

(Benefit) provision for income taxes		(15,246)		248		(13,734)		1,701
Net income	$	16,574	$	910	$	22,107	$	5,873

Basic earnings per share	$	3.14	$	0.12	$	4.19	$	0.80
Diluted earnings per share	$	3.12	$	0.12	$	4.17	$	0.80
Weighted average number of common shares outstanding – basic		5,284		7,363		5,280		7,357
Weighted average number of common shares outstanding – diluted		5,310		7,385		5,304		7,380

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

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AMREP CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three and Nine Months ended January 31, 2023 and 2022

(Amounts in thousands)


	Three Months ended				Nine Months ended
	January 31,				January 31,
	2023		2022		2023		2022
Net income	$	16,574	$	910	$	22,107	$	5,873
Other comprehensive income, net of tax:
Pension settlement expense		2,336		—		2,336		—
Income tax effect		(724)		—		(724)		—
Pension settlement expense, net of tax		1,612		—		1,612		—

Decrease in pension liability		94		98		301		293
Income tax effect		(29)		(31)		(93)		(93)
Decrease in pension liability, net of tax		65		67		208		200
Other comprehensive income		1,677		67		1,820		200
Total comprehensive income	$	18,251	$	977	$	23,927	$	6,073

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

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AMREP CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

Three and Nine Months ended January 31, 2023 and 2022

(Amounts in thousands)


				Capital				Accumulated
				Contributed				Other
	Common Stock			in Excess of		Retained		Comprehensive
	Shares	Amount		Par Value		Earnings		Loss		Total
Balance, November 1, 2022	5,255	$	526	$	32,570	$	60,361	$	(4,430)	$	89,027
Compensation related to issuance of option to purchase common stock	—		—		13		—		—		13
Issuance of deferred common share units	—		—		90		—		—		90
Net income	—		—		—		16,574		—		16,574
Other comprehensive income	—		—		—		—		1,677		1,677
Balance, January 31, 2023	5,255	$	526	$	32,673	$	76,935	$	(2,753)	$	107,381

Balance, November 1, 2021	7,336	$	731	$	45,221	$	52,673	$	(4,490)	$	94,135
Reclassification of common stock settled from deferred common share units	—		2		(2)		—		—		—
Compensation related to issuance of option to purchase common stock	—		—		16		—		—		16
Issuance of deferred common share units	—		—		90		—		—		90
Net income	—		—		—		910		—		910
Other comprehensive income	—		—		—		—		67		67
Balance, January 31, 2022	7,336	$	733	$	45,325	$	53,583	$	(4,423)	$	95,218

Balance, May 1, 2022	5,240	$	524	$	32,383	$	54,828	$	(4,573)	$	83,162
Compensation related to issuance of option to purchase common stock	—		—		38		—		—		38
Issuance of deferred common share units	—		—		90		—		—		90
Issuance of restricted common stock	15		2		162		—		—		164
Net income	—		—		—		22,107		—		22,107
Other comprehensive income	—		—		—		—		1,820		1,820
Balance, January 31, 2023	5,255	$	526	$	32,673	$	76,935	$	(2,753)	$	107,381

Balance, May 1, 2021	7,323	$	730	$	45,072	$	47,710	$	(4,623)	$	88,889
Reclassification of common stock settled from deferred common share units	—		2		(2)		—		—		—
Compensation related to issuance of option to purchase common stock	—		—		16		—		—		16
Issuance of deferred common share units	—		—		90		—		—		90
Issuance of restricted common stock	13		1		149		—		—		150
Net income	—		—		—		5,873		—		5,873
Other comprehensive income	—		—		—		—		200		200
Balance, January 31, 2022	7,336	$	733	$	45,325	$	53,583	$	(4,423)	$	95,218

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

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AMREP CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months ended January 31, 2023 and 2022

(Amounts in thousands)


	Nine Months ended January 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	22,107	$	5,873
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		35		217
Amortization of debt issuance costs		—		71
Non-cash credits and charges:
Share-based compensation		198		178
Deferred income tax provision		(14,547)		1,771
Net periodic pension cost		(254)		(369)
Pension settlement expense		2,336		—
Gain on debt forgiveness		—		(45)
Changes in assets and liabilities:
Real estate inventory and investment assets		(6,193)		(5,608)
Other assets		(860)		(34)
Accounts payable and accrued expenses		(1,280)		(262)
Taxes payable, net		(2,955)		(379)
Net cash (used in) provided by operating activities		(1,413)		1,413

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from corporate-owned life insurance policy		—		92
Capital expenditures of property and equipment		(124)		(1,259)
Net cash (used in) provided by investing activities		(124)		(1,167)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing		50		6,857
Principal debt payments		(1,831)		(4,554)
Payments for debt issuance costs		—		(50)
Net cash (used in) provided by financing activities		(1,781)		2,253

(Decrease) increase in cash and cash equivalents		(3,318)		2,499
Cash and cash equivalents, beginning of period		15,721		24,801
Cash and cash equivalents, end of period	$	12,403	$	27,300

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes refunded, net	$	—	$	3
Interest paid	$	55	$	—

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

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AMREP CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended January 31, 2023 and 2022

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES

The accompanying unaudited condensed 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. Unless the context otherwise indicates, all references to the Company in this quarterly report on Form 10-Q include the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, considered necessary to reflect a fair statement 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 2023 and 2022 are to the fiscal years ending April 30, 2023 and 2022.

The unaudited condensed 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, 2022, which was filed with the SEC on July 21, 2022 (the “2022 Form 10-K”). To better align with industry practice, the Company reclassified public improvement district reimbursements, private infrastructure covenant reimbursements and a portion of miscellaneous other revenues representing payment for impact fee credits within building sales and other revenues in the Company’s quarterly report on Form 10-Q for the quarter ended January 31, 2022 as a reduction to land sale cost of revenues in these unaudited condensed consolidated financial statements to conform to the current period presentation with no effect on net income or shareholders’ equity.

Summary of Significant Accounting Policies

The significant accounting policies used in preparing these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the 2022 Form 10-K, except as follows:

●

Land sale cost of revenues, net includes all direct acquisition costs and other costs specifically identified with the property, including pre-acquisition costs and capitalized real estate taxes and interest, and an allocation of certain common development costs associated with the entire project. Common development costs include the installation of utilities and roads, and may be based upon estimates of cost to complete. The allocation of costs is based on the estimated relative sales value of the individual parcels of land being sold to the total expected sales value for the unsold parcels of land in the applicable portion of the subdivision. Estimates and cost allocations are reviewed on a regular basis until a project is substantially completed, and are revised and reallocated as necessary on the basis of current estimates. Amounts received from public improvement districts, private infrastructure covenants and payments for impact fee credits reduce the amount of land sale cost of revenues.

●

The Company offers homeowners a comprehensive third-party warranty on each home. Homes are generally covered by a ten-year warranty for qualified and defined structural defects, one year for defects and products used, and two years for electrical, plumbing, heating, ventilation and air conditioning parts and labor. Estimates of the Company’s exposure to warranty claims are included within accrued expenses at the time home sale revenues are recognized.

New Accounting Pronouncements

There are no new accounting standards or updates to be adopted that the Company currently believes might have a significant impact on its unaudited condensed consolidated financial statements.

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(2) REAL ESTATE INVENTORY

Real estate inventory consists of (in thousands):


	January 31,		April 30,
	2023		2022
Land held for development or sale in New Mexico	$	61,403	$	59,374
Land held for development or sale in Colorado		3,441		3,434
Homebuilding model inventory		3,138		1,135
Homebuilding construction in process		2,748		3,306
	$	70,730	$	67,249

(3) INVESTMENT ASSETS

Investment assets consist of (in thousands):


	January 31,		April 30,
	2023		2022
Land held for long-term investment	$	8,962	$	9,017
Owned real estate leased or intended to be leased		2,767		—
	$	11,729	$	9,017

Land held for long-term investment represents property located in areas that are not planned to be developed in the near term and that has not been offered for sale in the normal course of business.

Owned real estate leased or intended to be leased represents homes and buildings leased or intended to be leased to third parties. As of January 31, 2023, four homes are leased to residential tenants and two buildings under construction have been leased to commercial tenants.

(4) OTHER ASSETS

Other assets consist of (in thousands):


	January 31,		April 30,
	2023		2022
Prepaid expenses	$	1,285	$	366
Miscellaneous assets		302		249
Property		1,250		1,247
Equipment		361		240
Less accumulated depreciation		(254)		(220)
Property and equipment, net		1,357		1,267
	$	2,944	$	1,882

Prepaid expenses as of January 31, 2023 primarily consist of a land development cash collateralized performance guaranty, stock compensation, insurance and real estate taxes. Prepaid expenses as of April 30, 2022 primarily consist of insurance, stock compensation, real estate taxes and utility deposits. Amortized lease cost for right-of-use assets associated with the leases of office facilities was $6,000 and $8,000 for the three months ended January 31, 2023 and January 31, 2022 and $18,000 and $46,000 for the nine months ended January 31, 2023 and January 31, 2022. Depreciation expense associated with property and equipment was $12,000 and $14,000 for the three months ended January 31, 2023 and January 31, 2022 and $33,000 and $17,000 for the nine months ended January 31, 2023 and January 31, 2022.

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(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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


	January 31,		April 30,
	2023		2022
Land development and homebuilding operations
Accrued expenses	$	1,039	$	1,238
Trade payables		1,744		3,026
Customer deposits		1,511		1,357
		4,294		5,621
Corporate operations		521		456
	$	4,815	$	6,077

(6) NOTES PAYABLE

The following tables present information on the Company’s notes payable during the nine months ended January 31, 2023 (dollars in thousands):


		Principal Amount
		Available for		Outstanding
		New Borrowings		Principal Amount
		January 31,		January 31,		April 30,
Loan Identifier	Lender	2023		2023		2022
Revolving Line of Credit	BOKF	$	4,177	$	—	$	—
La Mirada	BOKF		1,877		204		2,030
Equipment Financing	DC		—		46		—
				$	250	$	2,030


(data as of January 31, 2023)			Mortgaged Property
Loan Identifier	Interest Rate		Book Value		Scheduled Maturity
Revolving Line of Credit	7.72	%	$	1,693	August 2025
La Mirada	7.72	%		9,937	June 2024
Equipment Financing	2.35	%		45	June 2028


(data for periods ended January 31, 2023)	Principal Repayments				Capitalized Interest and Fees
Loan Identifier	Three Months		Nine Months		Three Months		Nine Months
Revolving Line of Credit	$	—	$	—	$	—	$	—
La Mirada		—		5,294		11		55
Equipment Financing		2		5		—		—
	$	2	$	5,299	$	11	$	55

As of January 31, 2023, the Company was in compliance with the financial covenants contained in the loan documentation for the then outstanding notes payable. Except as described below, refer to Note 6 to the consolidated financial statements contained in the 2022 Form 10-K for additional detail about each of the above notes payable.

Revolving Line of Credit. Refer to Note 6 to the consolidated financial statements contained in the 2022 Form 10-K for detail regarding the Loan Agreement (the “Loan Agreement”) entered into between BOKF, NA dba Bank of Albuquerque (“BOKF”) and AMREP Southwest Inc. (“ASW”), a subsidiary of AMREP Corporation, in which BOKF agrees to lend up to $4,000,000 to ASW on a revolving line of credit basis for general corporate purposes. In August 2022, ASW and BOKF entered into the Third Modification Agreement to the Loan Agreement and ASW entered into the First Amended and Restated Revolving Line of Credit Promissory Note in favor of BOKF. These documents resulted in the following changes to the revolving line of credit financing facility: (a) the maximum amount available for borrowing increased by $1,750,000 to a new total maximum amount of $5,750,000, (b) the interest rate on borrowed amounts is equal to the one-month secured overnight financing rate as administered by the CME Group Benchmark Administration Limited plus a spread of 3.15%, adjusted monthly, and (c) the scheduled maturity date of the loan is August 15, 2025. ASW incurred customary costs and expenses and paid certain fees to BOKF in connection with this modification.

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Equipment Financing. In June 2022, Rioscapes LLC (“Rioscapes”), a subsidiary of the Company, entered into a Loan Contract-Security Agreement with Deere & Company (“DC”). The loan is secured by a security interest in certain construction equipment. DC lent $50,000 to Rioscapes on a non-revolving line of credit basis to fund the acquisition of the construction equipment. ASW guaranteed Rioscapes’s obligations under the loan. The principal is payable monthly based on a 72-month amortization and the outstanding principal amount of the loan may be prepaid at any time without penalty. Interest on the outstanding principal amount of the loan is payable monthly at the annual rate equal to 2.35%. Rioscapes made certain representations and warranties in connection with this loan and is required to comply with various covenants, reporting requirements and other customary requirements for similar loans. The loan documentation contains customary events of default for similar financing transactions, including: Rioscapes’s failure to make principal, interest or other payments when due; the failure of Rioscapes to observe or perform its covenants under the loan documentation; the representations and warranties of Rioscapes being false; the insolvency or bankruptcy of Rioscapes or ASW; the merger by Rioscapes or ASW into another entity; and the sale by Rioscapes or ASW of substantially all of their assets. Upon the occurrence and during the continuance of an event of default, DC may declare the outstanding principal amount and all other obligations under the loan immediately due and payable. Rioscapes incurred customary costs and expenses and paid certain fees to DC in connection with the loan.

As of January 31, 2023, the Company had (a) a letter of credit outstanding under its Revolving Line of Credit in the principal amount of $1,323,000 in favor of a municipality guarantying the completion of improvements in a subdivision being constructed by the Company and (b) $250,000 reserved under its Revolving Line of Credit for credit card usage. As of January 31, 2023, the Company had loan reserves outstanding under its note payable for La Mirada in the aggregate principal amount of $2,364,000 in favor of a municipality guarantying the completion of improvements in a subdivision being constructed by the Company. The amounts under the letter of credit and loan reserves are not reflected as outstanding principal in notes payable.

The following table summarizes the notes payable scheduled minimum principal repayments subsequent to January 31, 2023 (in thousands):


Fiscal Year	Scheduled Payments
2023	$	2
2024		8
2025		212
Thereafter		28
Total	$	250

(7) REVENUES

Land sale revenues. Substantially all of the land sale revenues were received from two customers and three customers for the three and nine months ended January 31, 2023 and two customers and three customers for the three and nine months ended January 31, 2022. There were no outstanding receivables from these customers as of January 31, 2023 or January 31, 2022.

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


	Three Months				Nine Months
	ended January 31,				ended January 31,
	2023		2022		2023		2022
Sale of building	$	—	$	—	$	—	$	6,750
Oil and gas royalties		34		48		140		223
Miscellaneous other revenues		77		88		462		290
	$	111	$	136	$	602	$	7,263

Refer to Note 7 to the consolidated financial statements contained in the 2022 Form 10-K for additional detail about the categories of building sales and other revenues.

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. Sale of building during the nine months ended January 31, 2022 consists of the sale of this 143,000 square foot warehouse and office facility.

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Miscellaneous other revenues for the three and nine months ended January 31, 2023 primarily consist of extension fees for purchase contracts and residential rental revenues. Miscellaneous other revenues for the three and nine months ended January 31, 2022 primarily consist of rent received from a tenant at a building in Palm Coast, Florida and tenants at a shopping center in Albuquerque, New Mexico, a non-refundable option payment and proceeds from the sale of equipment.

Major customers:

●

There were two customers with revenues in excess of 10% of the Company’s revenues during the three months ended January 31, 2023. The revenues for each such customer during the three months ended January 31, 2023 were as follows: $1,025,000 and $3,778,000, 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 nine months ended January 31, 2023. The revenues for each such customer during the nine months ended January 31, 2023 were as follows: $4,369,000, $5,246,000 and $7,763,000, with each of these revenues reported in the Company’s land development business segment.

●

There were two customers with revenues in excess of 10% of the Company’s revenues during the three months ended January 31, 2022. The revenues for each such customer during the three months ended January 31, 2022 were as follows: $1,458,000 and $4,068,000, 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 nine months ended January 31, 2022. The revenues for each such customer during the nine months ended January 31, 2022 were as follows: $3,699,000, $4,844,000 and $10,754,000, with each of these revenues reported in the Company’s land development business segment.

(8) COST OF REVENUES

Land sale cost of revenues, net consist of (in thousands):


	Three Months ended				Nine Months ended
	January 31,				January 31,
	2023		2022		2023		2022
Land sale cost of revenues	$	4,330	$	4,495	$	17,317	$	16,259
Less:
Public improvement district reimbursements		366		291		691		615
Private infrastructure covenant reimbursements		228		48		522		131
Payments for impact fee credits		100		86		689		409
Land sale cost of revenues, net	$	3,636	$	4,070	$	15,415	$	15,104

Building sales and other cost of revenues during the nine months ended January 31, 2022 consist of the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida.

(9) GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of (in thousands):


	Three Months ended January 31,				Nine Months ended January 31,
	2023		2022		2023		2022
Operations
Land development	$	907	$	1,098	$	2,156	$	2,359
Homebuilding		264		222		795		621
Corporate		402		220		947		1,003
Pension settlement		2,336		—		2,336		—
	$	3,909	$	1,540	$	6,234	$	3,983

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(10) BENEFIT PLANS

Pension plan

Refer to Note 11 to the consolidated financial statements contained in the 2022 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 income tax effect. The Company recorded, net of tax, other comprehensive income of $65,000 and $67,000 during the three months ended January 31, 2023 and January 31, 2022 and $208,000 and $200,000 during the nine months ended January 31, 2023 and January 31, 2022 to account for the net effect of changes to the 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 nine months ended January 31, 2023 or January 31, 2022. The Company recognized a non-cash pre-tax pension settlement expense of $2,336,000 during the three and nine months ended January 31, 2023 due to the Company’s defined benefit pension plan paying an aggregate of $4,653,000 in lump sum payouts of pension benefits to 96 former employees.

Equity compensation plan

Refer to Note 11 to the consolidated financial statements contained in the 2022 Form 10-K for detail regarding the AMREP Corporation 2016 Equity Compensation Plan (the “Equity Plan”), including restricted common stock and an option to purchase shares of common stock granted thereunder. The summary of the restricted share award activity during the nine months ended January 31, 2023 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, 2022		21,500
Granted during the nine months ended January 31, 2023		14,600
Vested during the nine months ended January 31, 2023		(9,833)
Forfeited during the nine months ended January 31, 2023		—
Non-vested as of January 31, 2023		26,267

The Company recognized non-cash compensation expense related to the vesting of restricted shares of common stock net of forfeitures of $39,000 and $25,000 during the three months ended January 31, 2023 and January 31, 2022 and $101,000 and $72,000 during the nine months ended January 31, 2023 and January 31, 2022. As of January 31, 2023 and January 31, 2022, there was $143,000 and $111,000 of unrecognized compensation expense related to restricted shares of common stock previously issued under the Equity Plan that had not vested as of those dates, which is expected to be recognized over the remaining vesting term not to exceed three years.

In November 2021, the Company granted Christopher V. Vitale, the President and Chief Executive Officer of the Company, 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. As of January 31, 2023, the option had not been exercised, cancelled or forfeited. The Company recognized non-cash compensation expense related to the option of $13,000 and $38,000 during the three and nine months ended January 31, 2023 and $16,000 during each of the three and nine months ended January 31, 2022. As of January 31, 2023, the option was out-of-the-money and therefore was not included in “weighted average number of common shares outstanding – diluted” when calculating diluted earnings per share. The option could be dilutive to earnings per share in the future.

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 $23,000 during each of the three months ended January 31, 2023 and January 31, 2022 and $68,000 during each of the nine months ended January 31, 2023 and January 31, 2022. As of January 31, 2023, there was $8,000 of accrued compensation expense related to the deferred stock units expected to be issued in December 2023. As of January 31, 2022, there was $8,000 of accrued compensation expense related to the deferred stock units issued in December 2022.

(11) OTHER INCOME

Other income during the three and nine months ended January 31, 2023 consists of $1,803,000 in connection with the sale of all of the Company’s minerals and mineral rights in and under approximately 147 surface acres of land in Brighton, Colorado. There was no other

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income for the three months ended January 31, 2022. Other income during the nine months ended January 31, 2022 consists of $185,000 received in connection with a bankruptcy of a warranty provider, $45,000 of debt forgiveness with respect to a note payable and $30,000 received for a life insurance policy for a retired executive of the Company.

(12) INCOME TAXES

Palm Coast Data Holdco, Inc., a subsidiary of the Company, had previously been the owner of the Company’s fulfillment services business. During the three months ended January 31, 2023, the Company converted Palm Coast Data Holdco, Inc. to a limited liability company and made an election to treat the limited liability company as a disregarded entity for U.S. federal income tax purposes. This resulted in a worthless stock deduction for tax purposes. As a result of the worthless stock deduction, the Company incurred an operating tax loss of $62,180,000, yielding an income tax benefit of $13,058,000 for U.S. federal corporate income taxes and an income tax benefit of $3,013,000 for New Mexico state corporate income taxes. The Company expects its operations to generate sufficient taxable income to fully utilize the tax benefit of this tax loss. The full tax benefit expected from the Company’s worthless stock deduction was accrued during the three months ended January 31, 2023 and reflected as a reduction to the Company’s (benefit) provision for income taxes and an increase in deferred income taxes, net without any valuation allowance.

The Company did not provide a valuation allowance against deferred tax assets, net with respect to the worthless stock deduction due to the Company’s belief that it is more likely than not based upon the available evidence that such deferred tax assets will be realized. In making this determination, the Company projected its future earnings (including currently unrealized gains on real estate inventory) for the future recoverability of such deferred tax assets. While the Company believes that it has utilized a reasonable method to make this valuation allowance determination, should factors and conditions differ materially from those used by the Company in making such determination (including if the Company does not generate sufficient future taxable income to fully utilize the tax benefit of the tax loss included in deferred income taxes, net), the actual realization of deferred tax assets could differ materially from the reported amounts.

This tax loss may be subject to audit and possible adjustment by the U.S. Internal Revenue Service (“IRS”), which could result in a reversal of none, part or all of the income tax benefit or could result in a benefit higher than the amount recorded. If the IRS rejects or reduces the amount of the income tax benefit related to the worthless stock deduction, the Company may have to pay additional cash income taxes, which could adversely affect the Company’s results of operations, financial condition and cash flows. The Company cannot guarantee what the ultimate outcome or amount of the tax benefit the Company will receive, if any. Under federal income tax law, net operating losses have an unlimited carryforward period and the deductibility of such federal net operating losses is limited to 80% of taxable income in any year during the carryforward period.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, the Company’s ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if the Company experiences an “ownership change.” A Section 382 “ownership change” generally occurs if one or more shareholders or groups of shareholders who own at least 5% of the Company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws in the United States. It is possible that any future ownership changes could have a material effect on the use of the Company’s net operating loss carryforwards or other tax attributes.

(13) RISKS AND UNCERTAINTIES

During the three and nine months ended January 31, 2023, 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. In addition, in response to inflation, the Federal Reserve increased benchmark interest rates during 2023 and has signaled it expects additional future interest rate increases, which has resulted in a significant increase in mortgage interest rates during 2023, impacting home affordability and consumer sentiment and tempering demand for new homes and finished residential lots. The rising cost of housing due to increases in average sales prices in recent years and the recent increases in mortgage interest rates, coupled with general inflation in the U.S. economy and other macroeconomic factors, have placed additional pressure on overall housing affordability and have caused many potential home buyers to pause and reconsider their housing choices. Given the affordability challenges described above and the resulting impact on demand, the Company has increased sales incentives on certain homes classified as homebuilding model inventory or homebuilding construction in process, opportunistically leased completed homes and slowed the pace of housing starts and land development projects.

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(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, 2023 (a)
Revenues	$	6,829	$	2,288	$	—	$	9,117
Net income