SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 15, 2003
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AMREP CORPORATION
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(Exact name of registrant as specified in its Charter)
Oklahoma 1-4702 59-0936128
------------------------------- ------------ -------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
641 Lexington Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 705-4700
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Not Applicable
-----------------------------------
(Former Name or Former Address, if
Changed Since Last Report)
F-1
The undersigned Registrant hereby amends the following items: Financial
Statements and Exhibits of their Form 8-K dated April 15, 2003, as set forth in
the pages attached hereto.
Item 7 of the Current Report on Form 8-K dated April 15, 2003 filed by AMREP
Corporation is hereby amended to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of Business Acquired:
Financial Statements and Independent Auditor's Report on the
financial statements of the Subscription Fulfillment Business of
Electronic Data Systems Corporation as of December 31, 2002 and 2001
and for each of the three years in the period ending December 31,
2002
(b) Pro Forma Financial Information:
Unaudited Pro Forma Consolidated balance sheet as of January 31, 2003
Unaudited Pro Forma consolidated statements of income for the fiscal
year ended April 30, 2002 and for the nine month period ended January
31, 2003
Notes to unaudited Pro Forma financial statements
(c) The following Exhibits are filed with this Report:
Exhibit No. Exhibit
---------- -------
10.1 Asset Purchase Agreement dated as of March 31, 2003
by and among Kable Fulfillment Services, Inc. and
Electronic Data Systems Corporation, EDS Information
Services LLC and EDS Resource Management Corporation *
10.2 Amendment to Loan Agreement dated as of March 31,
2003 by and among Kable News Company, Inc.,
Kable Fulfillment Services of Ohio, Inc., Kable
Distribution Services, Inc. and Kable Fulfillment
Services, Inc., and U.S. Bank National Association *
23.1 Consent of McGladrey & Pullen LLP
------------
* Previously filed.
F-2
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 hereunto duly authorized.
AMREP Corporation
Date: July 18, 2003 By: /s/ Peter M. Pizza
-----------------------
Peter M. Pizza
Vice President and
Chief Financial Officer
F-3
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
AMREP Corporation
New York, New York
We have audited the accompanying special purpose statements of assets acquired
and liabilities assumed of the Subscription Fulfillment Business, a division of
Electronic Data Systems Corporation located in Louisville, Colorado (not a legal
entity, see Note 1) (the Business) as of December 31, 2002 and 2001, and the
related statements of revenues and direct operating expenses and certain cash
flows for the years ended December 31, 2002, 2001, and 2000. These financial
statements are the responsibility of the management of the Subscription
Fulfillment Business. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, these special purpose
financial statements are prepared to reflect the assets acquired and liabilities
assumed by AMREP Corporation in its acquisition of the Business, as well as the
Business' revenues and direct operating expenses and cash flows. The special
purpose financial statements are not intended to be a complete presentation of
Electronic Data Systems Corporation's assets and liabilities or results of its
operations, and accordingly, these special purpose financial statements are not
intended to be a presentation in accordance with generally accepted accounting
principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets of the Subscription Fulfillment Business
of Electronic Data Systems Corporation as of December 31, 2002 and 2001, and the
results of its operations and its cash flows for the years ended December 31,
2002, 2001, and 2000 in conformity with the basis of accounting described in
Note 1.
/s/ McGladrey & Pullen, LLP
---------------------------
Davenport, Iowa
June 13, 2003
F-4
SUBSCRIPTION FULFILLMENT BUSINESS
OF ELECTRONIC DATA SYSTEMS CORPORATION
STATEMENTS OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
December 31, 2002 and 2001
(In Thousands)
Assets 2002 2001
----------------------------------------------------------------------------------------------
Current Assets:
Cash ................................................................... $ 127 $ 33
Accounts receivable, less allowance for doubtful accounts .............. 18,629 32,020
2002 $995; 2001 $897
Prepaid expenses and other ............................................. 2,345 1,851
-----------------
Total current assets ............................................. 21,101 33,904
-----------------
Long-Term Assets:
Property and equipment, at historical cost, net of accumulated
depreciation and amortization ........................................ 2,866 5,575
Intangibles ............................................................ -- 33,900
-----------------
Total long-term assets ........................................... 2,866 39,475
-----------------
Total assets ..................................................... $23,967 $73,379
=================
Liabilities and Excess of Assets Acquired Over Liabilities Assumed
----------------------------------------------------------------------------------------------
Current Liabilities:
Accounts payable and accrued expenses .................................. $ 2,530 $ 3,980
Customer postage deposits .............................................. 6,291 8,370
-----------------
Total current liabilities ........................................ 8,821 12,350
-----------------
Excess of assets acquired over liabilities assumed ....................... 15,146 61,029
-----------------
$23,967 $73,379
=================
The accompanying notes to the financial statements are an integral part of these
statements.
F-5
SUBSCRIPTION FULFILLMENT BUSINESS
OF ELECTRONIC DATA SYSTEMS CORPORATION
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
Years Ended December 31, 2002, 2001, and 2000
(In Thousands)
2002 2001 2000
-------------------------------------------------------------------------------------
Revenues ....................................... $ 123,711 $ 172,352 $ 192,054
----------------------------------
Cost and Expenses:
Operating expenses ........................... 106,537 145,311 160,812
General and administrative ................... 9,723 9,936 12,336
Amortization expense ......................... 5,400 7,300 7,300
Impairment of intangibles .................... 28,500 -- --
----------------------------------
150,160 162,547 180,448
----------------------------------
Excess (deficiency) of revenues over
direct operating expenses .............. $ (26,449) $ 9,805 $ 11,606
==================================
The accompanying notes to the financial statements are an integral part of these
statements.
F-6
SUBSCRIPTION FULFILLMENT BUSINESS
OF ELECTRONIC DATA SYSTEMS CORPORATION
STATEMENTS OF CERTAIN CASH FLOWS Years Ended December 31, 2002,
2001, and 2000
(In Thousands)
2002 2001 2000
----------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Excess (deficiency) of revenues over direct operating
expenses .............................................. $(26,449) $ 9,805 $ 11,606
Adjustments to reconcile net excess (deficiency) of
revenues over direct operating expenses to net cash
provided by operating activities:
Depreciation .......................................... 2,447 2,921 5,410
Loss on disposal of property and equipment, including
restructuring charges ............................... 245 1,037 251
Amortization of intangibles ........................... 5,400 7,300 7,300
Impairment of intangibles ............................. 28,500 -- --
Changes in assets and liabilities:
Receivables ........................................... 13,391 7,837 (2,655)
Prepaid and other assets .............................. (494) (175) 1,641
Accounts payable and accrued expenses ................. (1,450) 131 (2,731)
Customer postage deposits ............................. (2,079) (290) (558)
-------------------------------
Net cash provided by operating activities ......... 19,511 28,566 20,264
-------------------------------
Cash Flows from Investing Activities:
Proceeds from sale of property and equipment ............ 50 37 --
Purchase of property and equipment ...................... (33) (711) (1,081)
-------------------------------
Net cash provided by (used in) investing activities 17 (674) (1,081)
-------------------------------
Cash Flows used in Financing Activities,
transfers to parent company, net ........................ (19,434) (27,864) (19,178)
-------------------------------
Increase in cash .................................. 94 28 5
Cash, beginning of year ................................... 33 5 --
--------------------------------
Cash, end of year ......................................... $ 127 $ 33 $ 5
================================
The accompanying notes to financial statements are an integral part of these
statements.
F-7
SUBSCRIPTION FULFILLMENT BUSINESS
OF ELECTRONIC DATA SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Business:
The Subscription Fulfillment Business (the "Business") of Electronic Data
Systems Corporation (the "Parent") provides magazine subscription fulfillment
and related activities, including list services, data base management, and
lettershop activities for various publishers, trade and membership
organizations, and others. In the magazine subscription fulfillment services
operation, the Business processes new orders, receives and accounts for
payments, prepares and sends to publisher's printers labels or tapes containing
mailing information for each issue, handles subscriber telephone inquiries and
correspondence, prepares and mails renewal and statement notifications, and
maintains subscriber lists.
b. Basis of Presentation:
The accompanying statements of assets acquired and liabilities assumed as of
December 31, 2002 and 2001 and the related statements of revenue and direct
operating expenses and certain cash flows for each of the years in the three
year period ended December 31, 2002 have been prepared for the purpose of
complying with rules and regulations of the Securities and Exchange Commission.
The Business was acquired by a subsidiary of AMREP Corporation on April 15,
2003. The financial statements represent the acquired assets and liabilities as
specified in the Asset Purchase Agreement dated March 31, 2003 plus accounts
receivable, accounts payable and accrued expenses and associated revenues,
direct expenses, and certain cash flows of the Business, for all periods
presented. Even though the purchase agreement excluded the accounts receivable
and current liabilities other than customer deposits, they are being included in
order to be more reflective of the actual business acquired.
The statements of revenues and direct operating expenses and certain cash flows
include only those revenues and operating expenses directly related to the
Business. As more fully explained in Note 4, various non-direct expense
allocations have been excluded. Therefore, the financial information included
herein may not necessarily reflect the results of operations, financial
position, and cash flows that would have resulted had the Business been a
separate, stand-alone entity during the periods presented. The overall financial
statement presentation is not intended to be a complete presentation in
accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP); however, all amounts have been determined in accordance
with U.S. GAAP using the significant accounting policies of the parent.
c. Accounting Estimates:
The preparation of financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
d. Revenue Recognition:
Revenues from subscription fulfillment activities represent fees earned from the
maintenance of computer files for customers, which are billed and earned
monthly, and other fulfillment activities, all of which are billed and earned as
the services are provided.
e. Customer Postage Reimbursement:
The Business reflects billings related to reimbursed postage expenses in
revenue. Billings related to reimbursed postage expense were approximately
$41,218, $58,944 and $65,101 for the years ended December 31, 2002, 2001 and
2000, respectively.
F-8
f. Accounts Receivable:
Accounts receivable are carried at original invoice amount less an estimate made
for doubtful receivables based on a review of all outstanding amounts on an
annual basis. Management determines the allowance for doubtful accounts by
identifying troubled accounts and by using historical experience applied to an
aging of accounts. Accounts receivables are written off when deemed
uncollectible. Recoveries of accounts receivables previously written off are
recorded when received. The provision (recovery) for bad debts was approximately
$960, $(96), and $1,092 for the years ended December 1, 2002, 2001, and 2000,
respectively.
A receivable is considered to be past due if any portion of the receivable
balance is past due according to the customer's agreed upon terms. The
customers' sales terms vary from one customer to another. The Business charges
interest on trade receivables only under certain conditions.
g. Property and Equipment:
Property and equipment is recorded at cost. Depreciation is calculated under the
straight-line method over the estimated useful lives which range from 3 to 7
years.
h. Intangible Assets:
Intangibles consisted of acquired customer lists and are amortized by the
straight-line method over nine years, subject to review for impairment each year
based on undiscounted cash flows estimated to be generated by these lists.
i. Long-Lived Assets:
Long-lived assets and intangibles are evaluated when indicators of impairment
are present. Provisions for possible losses are recorded when undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.
j. Net Assets:
The Business participates in the Parent's cash management system. Under the
system, all cash generated by the Business is transferred to the Parent and all
cash requirements of the Business are funded by the Parent. These transfers of
funds are reflected in the net asset balance.
k. Income Taxes:
The Business represents a business unit of the Parent and as such does not file
separate income tax returns. All income taxes are reflected at the parent level
and not allocated to the Business.
NOTE 2. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows (in thousands):
December 31,
---------------------------
2002 2001
---------------------------
Land improvements .......................... $ 267 $ 267
Buildings improvements ..................... 1,034 821
Equipment .................................. 11,639 12,548
Other, primarily software .................. 10,505 11,012
--------------------------
23,445 24,648
Less accumulated depreciation .............. (20,579) (19,073)
--------------------------
$ 2,866 $ 5,575
==========================
NOTE 3. INTANGIBLE ASSETS
During the year ended December 31, 2002, based upon the Parent's decision to
sell the Business, it had been determined that the intangible assets had been
impaired resulting in an impairment charge of $28,500. The total accumulated
amortization at December 31, 2001 was $31,600.
F-9
NOTE 4. RELATED PARTY TRANSACTIONS
The Business has utilized various services provided by the Parent. These
services included, among others, certain investor relations, executive, human
resources, legal, finance, information management, tax preparation and treasury.
Many of these indirect services are included as corporate overhead and have not
been allocated to the Business. Allocated charges for direct expenses that are
included in the financial statements are operating expenses of $19,035, $23,384
and $22,614 for the years ended December 31, 2002, 2001 and 2000, respectively.
Because all indirect Parent overhead expenses have not been allocated to the
Business, the financial information included herein may not necessarily reflect
the results of operations, financial position, and cash flows in the future or
what they would have been had it been a separate, stand-alone entity during the
periods presented.
The Business utilizes a facility that is subject to a lease between the Parent
and the lessor. Total rent expense included in operating expense related to this
facility was $3,106, $3,023 and $2,875 for the years ended December 31, 2002,
2001 and 2000, respectively. In connection with the purchase agreement, a new
lease was signed (see Note 7).
NOTE 5. RESTRUCTURING CHARGES
The Business relocated certain of its operations and closed various facilities.
Operating expenses include $1,027 and $222 in the years ended December 31, 2001
and 2000, respectively, of losses related to the abandonment of equipment and
leasehold improvements all of which had been incurred by December 31, 2001.
NOTE 6. MAJOR CUSTOMERS
Net sales to major customers (in excess of 10% of net sales) for the years ended
December 31, 2002, 2001 and 2000, along with the respective year-end accounts
receivable balances, are as follows:
Revenues for the Accounts Receivable
Year Ended December 31, at December 31,
------------------------------- -------------------
2002 2001 2002 2002 2001
------------------------------- -------------------
Customer A ......... $ -- $11,114 $15,263 $ -- $ 1,640
Customer B ......... 8,332 6,351 7,311 1,566 1,519
NOTE 7. SUBSEQUENT EVENT
On April 15, 2003, the Parent sold the Business to Kable Fulfillment Services,
Inc., a wholly-owned subsidiary of Kable News Company, Inc., a wholly-owned
subsidiary of AMREP Corporation. The purchase price was approximately $10
million, adjusted by certain working capital components, and excluded the
accounts receivable and current liabilities other than the customer deposits.
In connection with the purchase agreement, AMREP Corporation entered into a
three year lease agreement which provides for monthly rental payments of $193
plus taxes, maintenance, and insurance costs.
F-10
AMREP CORPORATION
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma financial statements presented on the following pages
are based on the historical financial statements of AMREP Corporation (the
Parent) and reflect the pro forma effects of the acquisition of the Subscription
Fulfillment Business (the "Business") of Electronic Data Systems Corporation.
The acquisition was accounted for under the purchase method.
For purposes of the pro forma statements, the purchase price of the assets of
the Business has been allocated to the acquired net assets based on information
currently available with regard to the values of such net assets. Pro forma
adjustments have been made only for those assets and liabilities, which based
solely on preliminary estimates, may have fair values significantly different
from historical amounts. As such, final adjustments to recorded amounts may
differ significantly from the pro forma adjustments presented herein.
The unaudited pro forma balance sheet as of January 31, 2003 and statements of
income for the year ended April 30, 2002 and the nine months ended January 31,
2003 were prepared as if the acquisition had occurred as of the beginning of the
respective periods for the purposes of the statements of income and as if such
acquisition had occurred at the end of the period for purposes of the
consolidated balance sheet.
These pro forma financial statements are not necessarily indicative of the
results of operations that might have occurred had the acquisition taken place
at the beginning of the period, or to project the Parent's results of operations
at any future date or for any future period. The pro forma statements should be
read in connection with the notes thereto. Because of significant lost accounts
of the Business that ocurred prior to the acquisition, it is anticipated that
the revenues from the acquired Business for the year ended April 30, 2004 will
be substantially reduced from historical levels.
F-11
AMREP CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
(In Thousands, except per share data)
Amrep Subscription
Corporation and Fulfillment
Subsidiaries Business Pro Forma Adjusted Pro
1/31/03 12/31/02 Adjustments Forma
-------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents ................ $ 16,688 $ 127 $ (127) (a) $ 16,688
Receivables, net:
Real estate operations ................. 5,898 -- -- 5,898
Magazine circulation operations ........ 32,524 18,629 (i) -- 51,153
Real estate inventory .................... 63,434 -- -- 63,434
Property, plant and equipment, at
cost, net of accumulated depreciation
and amortization of $15,895 as of
January 31, 2003 and $20,579 as of
December 31, 2002 ...................... 9,680 2,866 4,620 (a) 17,166
Assets held-for-sale, net ................ 5,984 -- -- 5,984
Prepaid and other assets ................. 9,712 2,345 2,376 (a) 14,433
Excess of cost of subsidiary over net
assets acquired ........................ 5,191 -- -- 5,191
---------------------------------------------------------
$ 149,111 $ 23,967 $ 6,869 $ 179,947
=========================================================
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable ......................... $ 24,362 $ 2,530 $ -- $ 26,892
Accrued expenses ......................... 7,896 -- -- 7,896
Customer postage deposits ................ -- 6,291 -- 6,291
Notes payable:
Amounts due within one year ............ 4,902 -- -- 4,902
Amounts subsequently due ............... 6,843 -- 22,015 (b)(i) 28,858
---------------------------------------------------------
11,745 -- 22,015 33,760
Taxes payable .......................... 2,265 -- -- 2,265
Deferred income taxes .................. 4,596 -- -- 4,596
---------------------------------------------------------
50,864 8,821 22,015 81,700
---------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock, $.10 par value; shares
authorized - 20,000,000; 7,406,704
shares issued - as of 1/31/03 .......... 740 -- -- 740
Capital contributed in excess of par value 44,982 -- -- 44,982
Retained earnings ........................ 58,234 -- -- 58,234
Treasury stock, at cost; 826,092
shares as of 1/31/03 ................... (5,709) -- -- (5,709)
Excess assets acquired over liabilities
assumed ................................ -- 15,146 (15,146) (c) --
---------------------------------------------------------
98,247 15,146 (15,146) 98,247
---------------------------------------------------------
$ 149,111 $ 23,967 $ 6,869 $ 179,947
=========================================================
See Notes to Unaudited Pro Forma Financial Statements.
F-12
AMREP CORPORATION
UNAUDITED PRO FORMA STATEMENTS OF INCOME
Year Ended April 30, 2002
(In Thousands, except per share data)
Amrep Subscription
Corporation and Fulfillment
Subsidiaries Business Pro Forma Adjusted Pro
4/30/02 3/31/02 Adjustments Forma
-------------------------------------------------------------------------------------------------------
Revenues:
Magazine circulation operations .... $ 49,248 $ 158,791 $ (54,836) (h) $ 153,203
Real estate operations:
Land sales ....................... 30,228 -- -- 30,228
Home sales ....................... 635 -- -- 635
----------------------------------------------------------
30,863 -- -- 30,863
Interest and other operations ...... 3,294 -- -- 3,294
----------------------------------------------------------
83,405 158,791 (54,836) 187,360
----------------------------------------------------------
Costs and Expenses:
Operating expenses:
Magazine circulation operations .. 38,643 133,917 (1,424) (d)
(54,836) (h) 116,300
Real estate commissions and
selling ......................... 978 -- -- 978
Other operations ................. 2,635 -- -- 2,635
Real estate cost of sales:
Land sales ....................... 22,894 -- -- 22,894
Home sales ....................... 704 -- -- 704
General and administrative: ........
Magazine circulation operations .. 6,914 10,284 -- 17,198
Real estate operations and
corporate ...................... 3,209 -- -- 3,209
Amortization expense ............... -- 7,300 (7,300) (d) --
Interest, net ...................... 1,265 -- 1,101 (f) 2,366
-----------------------------------------------------------
77,242 151,501 (62,459) 166,284
-----------------------------------------------------------
Income before
income taxes ................. 6,163 7,290 7,623 21,076
Provision for income taxes ........... 2,465 -- 5,667 (g) 8,132
-------------------------------------------------------------
Net income ................... $ 3,698 $ 7,290 $ 1,956 $ 12,944
=============================================================
Earnings per share, basic and diluted $ 0.56 $ -- $ -- $ 1.97 (i)
=============================================================
Weighted average number of common
shares outstanding ................ 6,574 -- -- 6,574
=============================================================
See Notes to Unaudited Pro Forma Financial Statements.
F-13
AMREP CORPORATION
UNAUDITED PRO FORMA STATEMENTS OF INCOME
Nine Months Ended January 31, 2003
(In Thousands, except per share data)
Amrep Subscription
Corporation and Fulfillment
Subsidiaries Business Pro Forma Adjusted Pro
1/31/03 12/31/02 Adjustments Forma
-------------------------------------------------------------------------------------------------------
Revenues:
Magazine circulation operations ..... $ 38,657 $ 90,542 $ (29,767) (h) $ 99,432
Real estate operations .............. 11,483 -- -- 11,483
Interest and other operations ....... 3,064 -- -- 3,064
----------------------------------------------------------
53,204 90,542 (29,767) 113,979
----------------------------------------------------------
Costs and Expenses:
Operating expenses:
Magazine circulation operations ... 29,871 77,690 (712) (c)
(29,767) (h) 77,082
Real estate commissions and ....... --
selling ......................... 617 -- -- 617
Other operations .................. 1,888 -- -- 1,888
Real estate cost of sales ........... 5,134 -- -- 5,134
General and administrative: ......... --
Magazine circulation operations ... 5,086 6,179 -- 11,265
Real estate operations and
corporate ....................... 2,290 -- -- 2,290
Amortization of customer list
intangible ...................... -- 3,600 (3,600) (d) --
Impairment of customer list
intangible ...................... -- 28,500 (28,500) (e) --
Interest and amortization, net ...... 450 -- 826 (f) 1,276
---------------------------------------------------------
45,336 115,969 (61,753) 99,552
---------------------------------------------------------
Income (loss) before income
taxes ......................... 7,868 (25,427) 31,986 14,427
Provision for income taxes ............ 3,147 -- 2,492 (g) 5,639
---------------------------------------------------------
Net income (loss) ............. $ 4,721 $(25,427) $ 29,494 $ 8,788
=========================================================
Net income per share, basic and diluted $ 0.72 $ -- $ -- $ 1.34 (i)
=========================================================
Weighted average number of common
shares outstanding .................. 6,579 -- -- 6,579
=========================================================
See Notes to Unaudited Pro Forma Financial Statements.
F-14
AMREP CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(a) The purchase price will be allocated to acquired assets and liabilities
based on their relative fair values as of the closing date, determined
using valuations and other studies which are not yet complete. The purchase
price and preliminary allocation of such cost is as follows, assuming the
acquisition occurred on January 31, 2003:
Base purchase price per contract ........................ $ 9,700
Working capital adjustment .............................. (4,222)
Related acquisition costs ............................... 438
--------
Total purchase price ............................ 5,916
Working capital necessary to fund the replenishing
of accounts receivable and accounts payable which
were not part of the purchase agreement ............... 16,099
--------
Total financing requirement ..................... 22,015
Book value per historical financial statements .......... 15,146
--------
Excess of purchase price over net book value
of assets acquired .................................... $ 6,869
========
Allocated to:
Cash retained by seller ............................... $ (127)
Other assets .......................................... 2,376
Equipment (1) ......................................... 4,620
--------
$ 6,869
========
(1) The recorded value of acquired equipment will be ... $ 7,486
========
(b) Reflect the financing plan after the accounts receivable and accounts
payable return to their historical levels.
(c) Eliminate the historical net asset balance.
Nine-Month
Period
Year Ended Ended
April 30, January 31,
2002 2003
-----------------------
(d) Adjust depreciation as follows:
Record depreciation upon fair values assigned to
acquired assets .............................. $ 1,497 $ 1,123
Less previous depreciation ..................... 2,803 1,835
---------------------
$ (1,306) $ (712)
======================
Remove previous intangible amortization ........ $ (7,300) $ (3,600)
======================
(e) Remove intangible impairment charge ............ $ -- $(28,500)
======================
(f) Adjust interest expense related to the $22,015
of additional borrowings at an average rate
of 5% ........................................ $ 1,101 $ 826
======================
(g) Adjust income taxes as follows:
Pro forma adjustment to taxable income ....... $ 14,913 $ 6,559
Effective tax rate ........................... 38% 38%
----------------------
$ 5,667 $ 2,492
======================
F-15
(h) In accordance with EITF Issue No. 99-19, Reporting Revenue Gross as a
Principal Versus Net as an Agent, AMREP Corporation has the accounting
policy of netting reimbursed postage against the related postage expense.
The pro forma adjustment is being made to reduce revenue and the related
operating expense for the reimbursed postage.
(i) Due to the substantial reduction in revenues from historical levels
expected for the year ended April 30, 2004 for the acquired Business,
earnings per share, receivables and corresponding debt will be
proportionately reduced.
F-16