Item 1A.Risk Factors
As a smaller reporting company, the Company has elected not to provide the disclosure under this item.
Item 1B.Unresolved Staff Comments
Not applicable.
Item 1C.Cybersecurity
The Company has cybersecurity risk management processes, including physical, technological and administrative controls, intended to protect the confidentiality, integrity and availability of the Company’s information technology infrastructure and systems or any information residing therein. The Company relies on third party service providers to operate, maintain and monitor its information technology infrastructure and systems and to assess, identify and manage material risks from cybersecurity threats with respect thereto. The Company’s management monitors its service providers. The Company’s service providers are tasked with notifying the Company’s management of any material cybersecurity incident that negatively impacts the Company’s information technology infrastructure and systems or any information residing therein. Material and potentially material cybersecurity incidents would be assessed by the Company’s executive officers for remediation and future prevention and detection.
Notwithstanding the Company’s processes for assessing, identifying and managing risks from cybersecurity threats, the Company may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on the Company. During 2024 and 2023, the Company is not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
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The Board of Directors of the Company oversees the Company’s risk management program as part of its general oversight function. The Board of Directors has delegated to the Audit Committee of the Board of Directors of the Company the responsibility for reviewing and discussing with management the Company’s policies with respect to risk assessment and risk management and for reviewing contingent risks that may be material to the Company, including cybersecurity risks. The Audit Committee engages in regular discussions with the Company’s executive officers regarding the Company’s significant risk exposures and the measures implemented to monitor and control these risks, including cybersecurity risks. The Audit Committee also reports relevant material information regarding any such risks to the Board of Directors. The Company’s executive officers are responsible for identifying and assessing material risks for the business on an ongoing basis, including cybersecurity risks. Although the Company’s executive officers do not have cybersecurity expertise, their experience managing the Company, which includes consulting and coordinating as necessary with its service providers, enables them to effectively assess and manage material risks from cybersecurity threats.
Item 2.Properties
The executive offices of the Company are located in approximately 1,400 square feet of leased space in an office building in Havertown, Pennsylvania. The offices utilized by the Company’s land development business segment and homebuilding business segment are located in approximately 7,000 square feet of space in an office building in Rio Rancho owned by the Company. The Company also leases approximately 2 acres of property in Rio Rancho for use as a storage facility. In addition, real estate inventory and investment properties are described in Item 1 of Part I of this annual report on Form 10-K with certain mortgages associated with such real estate described in Item 7 of Part II of this annual report on Form 10-K. The Company believes its facilities are adequate for its current requirements.
Item 3.Legal Proceedings
The Company and its subsidiaries are involved in various pending or threatened claims and legal actions arising in the ordinary course of business. While the ultimate results of these matters cannot be predicted with certainty, management believes that they will not have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations.
Item 4.Mine Safety Disclosures
Not applicable.
Information about the Company’s Executive Officers
Set forth below is certain information concerning persons who are the current executive officers of the Company.
Christopher V. Vitale, age 48, has been a director of the Company since July 2021 and has been President and Chief Executive Officer of the Company since 2017. From 2014 to 2017, Mr. Vitale was Executive Vice President, Chief Administrative Officer and General Counsel of the Company and, from 2013 to 2014, he was Vice President and General Counsel of the Company. Prior to joining the Company, Mr. Vitale held various legal positions at Franklin Square Holdings, L.P., a national sponsor and distributor of investment products, from 2011 to 2013 and at WorldGate Communications, Inc., a provider of digital voice and video phone services and video phones, from 2009 to 2011. Prior to joining WorldGate, Mr. Vitale was an attorney with the law firms of Morgan, Lewis & Bockius LLP and Sullivan & Cromwell LLP.
Adrienne M. Uleau, age 56, has been Vice President, Finance and Accounting of the Company since March 2020. From 2018 to March 2020, Ms. Uleau was Controller of the Company. Prior to joining the Company, Ms. Uleau had been Controller of United Tectonics Corp., a construction services company, from 2016 to 2018. From 2014 to 2016, Ms. Uleau was Financial Manager of Cushman and Wakefield. Prior to 2014, Ms. Uleau held various accounting positions.
The executive officers are elected or appointed by the Board of Directors of the Company or its appropriate subsidiary to serve until the appointment or election of their successors or their earlier death, resignation or removal.
PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is traded on the New York Stock Exchange under the symbol “AXR”. On July 19, 2024, there were 258 holders of record of the common stock.
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The Company’s common stock is often thinly traded. As a result, large transactions in the Company’s common stock may be difficult to execute in a short time frame and may cause significant fluctuations in the price of the Company’s common stock. Among other reasons, the stock is thinly traded due to the fact that four of the Company’s shareholders beneficially owned approximately 59% of the outstanding common stock as of July 19, 2024 according to available information. The average trading volume in the Company’s common stock on the New York Stock Exchange over the thirty-day trading period ending on April 30, 2024 was 7,948 shares per day.
The Company is an Oklahoma corporation and the anti-takeover provisions of its certificate of incorporation and of Oklahoma law generally prohibit the Company from engaging in “business combinations” with an “interested shareholder,” as those terms are defined therein, unless the holders of at least two-thirds of the Company’s then outstanding common stock approve the transaction. Consequently, the concurrence of the Company’s largest shareholders would generally be needed for any “interested shareholder” to acquire control of the Company, even if a change in control would be beneficial to the Company’s other shareholders.
Dividend Policy
The Company has paid no cash dividends on its common stock since fiscal year 2008. The Company may consider dividends from time-to-time in the future in light of conditions then existing, including earnings, financial condition, cash position, capital requirements and other needs. No assurance is given that there will be any such future dividends declared.
Equity Compensation Plan Information
See Item 12, which incorporates such information by reference from the Company’s Proxy Statement for its 2024 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.
Item 6.[Reserved]
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
For a description of the Company’s business, refer to Item 1 of Part I of this annual report on Form 10-K. As indicated in Item 1, the Company is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales. The following provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and accompanying notes.
CRITICAL ACCOUNTING ESTIMATES
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. The Company discloses its significant accounting policies in the notes to its audited consolidated financial statements.
The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of those financial statements as well as the amounts reported in the financial statements and accompanying notes. Areas that require significant judgments and estimates to be made include: (1) land sale cost of revenues, net calculations, which are based on land development budgets and estimates of costs to complete; (2) cash flows, asset groupings and valuation assumptions in performing asset impairment tests of long-lived assets and assets held for sale; (3) risk assessment of uncertain tax positions; and (4) the determination of the recoverability of net deferred tax assets. Actual results could differ from those estimates.
There are numerous critical assumptions that may influence accounting estimates in these and other areas. Management bases its critical assumptions on historical experience, third-party data and various other estimates that it believes to be reasonable under the circumstances. The most critical assumptions made in arriving at these accounting estimates include the following:
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RESULTS OF OPERATIONS
Year Ended April 30, 2024 Compared to Year Ended April 30, 2023
For 2024, the Company had net income of $6,690,000, or $1.25 per diluted share, compared to net income of $21,790,000, or $4.11 per diluted share, in 2023. As discussed in more detail below, during 2023, the Company recognized a non-cash income tax benefit of $16,071,000 as a result of a worthless stock deduction related to its former fulfillment services business and a non-cash pre-tax pension settlement general and administrative expense of $7,597,000 due to (a) the Company’s defined benefit pension plan paying certain lump sum payouts of pension benefits to former employees and (b) the transfer of nearly all remaining pension benefit liabilities to an insurance company through an annuity purchase.
During 2024 and 2023, the Company experienced delays in municipal approvals and inspections and utility response times in both the land development business segment and homebuilding business segment, which 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 2024 and 2023, which resulted in a significant increase in mortgage interest rates during 2024 and 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 increases in mortgage interest rates, coupled with general inflation in the U.S. economy and other macroeconomic factors, have placed pressure on overall housing affordability and have caused many potential homebuyers to pause and reconsider their housing choices. Given the affordability challenges described above and the resulting impact on demand, the Company has provided sales incentives on certain homes, reduced the size of lots and homes, opportunistically leased completed homes and slowed the pace of housing starts and land development projects. The Company believes these conditions will continue to impact the land development and homebuilding industries for at least the remainder of calendar year 2024. During 2024, the Company reduced the number and scope of its active land development projects and delayed proceeding with certain new land development projects due to market headwinds and uncertainty and an increase in entitlement and infrastructure delays as compared to 2023. This may result in reduced developed residential revenues in the Company’s land development business segment during the Company’s fiscal year ending April 30, 2025 as compared to 2024.
Future economic conditions and the demand for land and homes are subject to continued uncertainty due to many factors, including changes in mortgage interest rates, inflation, supplies of new and existing home inventory available for sale, labor shortages and other factors. While construction and land costs remain elevated, the Company has been able partially to offset these cost increases through land and home price increases in 2024 and 2023 due to a strong pricing environment, which may not continue. The Company’s past performance may not be indicative of future results.
Revenues. The following presents information on revenues (dollars in thousands):
Year Ended April 30,
(a) Percentage not meaningful.
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Acres Sold Revenue Revenue Per Acre1
Developed
Acres Sold Revenue Revenue Per Acre1
Developed
The changes in the revenue per acre of developed residential land, developed commercial land and undeveloped land for 2024 compared to 2023 were primarily due to the location and mix of land sold. Revenues from the sale of undeveloped land include the sale of a 147-acre property in Brighton, Colorado in 2024, representing $7,200,000 of revenue, to one purchaser. The Company does not expect the sale of the property located in Brighton, Colorado to be indicative of future land sale revenues.
Year Ended April 30,
Average selling price $ 477 $ 525
As of April 30, 2024, the Company had 64 homes in production, including 20 homes under contract, which homes under contract represented $8,719,000 of expected home sale revenues when closed, subject to customer cancellations and change orders. As of April 30, 2023, the Company had 18 homes in production, including 10 homes under contract, which homes under contract represented $5,640,000 of expected home sale revenues when closed, subject to customer cancellations and change orders.
● Other revenues consist of (in thousands):
Year Ended April 30,
Sale of investment assets $ 5,701 $ —
Oil and gas royalties — 146
Miscellaneous other revenues 470 580
1 Revenues per acre may not calculate precisely due to the rounding of revenues to the nearest thousand dollars.
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Sale of investment assets for 2024 consists of the sale of two buildings leased to commercial tenants. The Company does not expect the sale of the two buildings leased to commercial tenants to be indicative of future sales of investments assets.
Oil and gas royalties consist of amounts received from the lease of minerals and mineral rights in and under approximately 147 surface acres of land in Brighton, Colorado. In 2023, the Company sold such minerals and mineral rights.
Landscaping revenues consist of landscaping services provided by the Company primarily to homebuilders.
Miscellaneous other revenues for 2024 primarily consist of extension fees for purchase contracts and residential rental revenues. Miscellaneous other revenues for 2023 primarily consist of extension fees for purchase contracts, forfeited deposits from land sale contracts and residential rental revenues.
Cost of Revenues. The following presents information on cost of revenues (dollars in thousands):
Year Ended April 30,
(a) Percentage not meaningful.
● Land sale cost of revenues, net consist of (in thousands):
Year Ended April 30,
Less:
Public improvement district reimbursements (681) (759)
Private infrastructure covenant reimbursements (544) (626)
Payments for impact fee credits (1,966) (3,713)
Land sale cost of revenues, net $ 17,224 $ 17,379
Land sale gross margins were 36% for 2024 compared to 42% for 2023. The change in gross margin was primarily due to higher than estimated costs associated with certain completed projects and the location, size and mix of property sold (including the sale of a 147-acre property in Brighton, Colorado in 2024 with an associated land sale cost of revenues of $4,007,000).
As a result of many factors, including the nature and timing of specific transactions and the type and location of land or homes being sold, revenues, average selling prices and related gross margins from land sales or home sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.
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General and Administrative Expenses. The following presents information on general and administrative expenses (dollars in thousands):
Year Ended April 30,
Operations
Pension settlement $ — $ 7,597 (7,597) (a)
(a) Percentage not meaningful.
The Company did not record any non-cash impairment charges on real estate inventory or investment assets in 2024 or 2023. Due to volatility in market conditions and development costs, the Company may experience future impairment charges.
Interest Income, net. Interest income, net was $823,000 for 2024 and $8,000 for 2023. Interest and loan costs of $2,000 were capitalized in real estate inventory for the year ended April 30, 2024. Interest and loan costs of $57,000 were capitalized in real estate inventory for the year ended April 30, 2023.
Other Income. There was no other income in 2024. Other income of $1,803,000 for 2023 primarily consists of the sale of all of the Company’s minerals and mineral rights in and under approximately 147 surface acres of land in Brighton, Colorado.
Income Taxes. The Company had a provision for income taxes of $1,735,000 for 2024 and a benefit for income taxes of $14,149,000 for 2023. The provision for income taxes for 2024 correlated to the amount of income before income taxes during the year. The benefit for income taxes for 2023 was primarily due to the income tax benefit related to the Company’s worthless stock deduction offset in part by income taxes for the amount of income before income taxes during the year. Refer to Note 13 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding the Company’s worthless stock deduction.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2024, the Company had cash, cash equivalents and restricted cash as follows (in thousands):
Cash, Cash
Equivalents and
Restricted Cash
U.S. Government Securities 19,229
Restricted Cash 547
As of April 30, 2023, the Company had cash of $19,993,000, no cash equivalents and no restricted cash.
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AMREP Corporation is a holding company that conducts substantially all of its operations through subsidiaries. As a holding company, AMREP Corporation is dependent on its available cash and cash equivalents and on cash and cash equivalents from subsidiaries to pay expenses and fund operations. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the real estate industry and the economy generally.
The Company’s primary sources of funding for working capital requirements are cash flows from operations, bank financing for specific real estate projects, a revolving line of credit, interest income and existing balances of cash and cash equivalents. Land and homebuilding properties generally cannot be sold quickly, and the ability of the Company to sell properties has been and will continue to be affected by market conditions. The ability of the Company to generate cash flow from operations is primarily dependent upon its ability to sell the properties it has selected for disposition at the prices and within the timeframes the Company has established for each property. The development of additional lots for sale, construction of homes or commercial buildings for sale or lease or pursuing other real estate projects may require financing or other sources of funding, which may not be available on acceptable terms (or at all). If the Company is unable to obtain such financing, the Company’s results of operations could be adversely affected.
The Company expects the primary demand for funds in the future will be for the development and acquisition of land, construction of home and commercial projects and general and administrative expenses. In many instances, the development of land and construction of home and commercial projects is required to satisfy delivery obligations of developed land or finished homes to customers. Further, the Company regularly evaluates property available for purchase from third parties for possible acquisition and development by the Company. To the extent the sources of capital described above are insufficient to meet its needs, the Company may conduct public or private offerings of securities, dispose of certain assets or draw on existing or new debt facilities. The Company believes that it has adequate cash and cash equivalents, bank financing and cash flows from operations to provide for its anticipated spending in its fiscal year ending April 30, 2025.
Any epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it (including quarantines, shelter-in-place orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations), could significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period, including disruptions to the Company’s supply chain and shortages in labor and certain building components and materials. As a result, the impact of such public health issues and the related governmental actions could materially impact the Company’s financial position, results of operations and cash flows.
Pension Plan. The Company’s defined benefit pension plan was terminated in 2024. The Company did not make any contributions to the pension plan during 2024 or 2023. The Company recognized a non-cash pre-tax pension settlement general and administrative expense of $7,597,000 during 2023 due to (a) the Company’s defined benefit pension plan paying certain lump sum payouts of pension benefits to former employees and (b) the transfer of nearly all remaining pension benefit liabilities to an insurance company through an annuity purchase. There were no such charges in 2024. During 2024, the Company transferred $547,000, which was the amount of residual assets (after satisfying any pension plan liabilities) following termination of the defined benefit pension plan, from the defined benefit pension plan to a 401(k) retirement plan available to eligible employees of the Company. This amount is recognized as restricted cash on the Company’s balance sheet and is available for future awards to eligible employees.
Cash Flow. The following presents information on the cash flows (dollars in thousands):
Year Ended April 30, Increase
Net cash provided by operating activities $ 10,714 $ 6,389 $ 4,325 68 %
Net cash used in investing activities (457) (131) (326) (a)
Net cash used in financing activities (9) (1,986) 1,977 (a)
Increase in cash and cash equivalents $ 10,250 $ 4,272 5,978 (a)
(a)Percentage not meaningful.
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Asset and Liability Levels. The following presents information on certain assets and liabilities (dollars in thousands):
April 30, Increase
Prepaid pension costs — 747 (747) (a)
Accounts payable and accrued expenses 4,745 4,851 (106) (2) %
Income taxes receivable, net 27 41 (14) (34) %
(a) Percentage not meaningful.
● Real estate inventory consists of (dollars in thousands):
April 30, Increase
Land inventory in Colorado — 3,445 (3,445) (a)
Homebuilding model and completed inventory 4,138 1,171 2,967 (a)
Homebuilding construction in process 4,318 1,648 2,670 (a)
(a) Percentage not meaningful.
Refer to Note 2 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding real estate inventory. From April 30, 2023 to April 30, 2024, the change in land inventory in New Mexico was primarily due to land development activity and the acquisition and sale of land, the change in land inventory in Colorado was primarily due to the sale of an approximately 147-acre property in Brighton, Colorado, the change in homebuilding model and completed inventory was primarily due to the completion of homes not yet sold offset in part by the sale of homes and the change in homebuilding construction in process was primarily due to an increase in the number of homes that started construction.
● Investment assets, net consist of (dollars in thousands):
April 30, Increase
Land held for long-term investment $ 9,200 $ 8,961 $ 239 3 %
Less accumulated depreciation (98) (16) (82) (a)
(a) Percentage not meaningful.
Refer to Note 3 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding investment assets. As of April 30, 2024, ten homes were leased to residential tenants. As of April 30, 2023, eight homes were leased to residential tenants and two buildings under construction were leased to commercial tenants. Given the impact on
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demand as a result of affordability challenges, the Company has opportunistically leased completed homes. Depreciation associated with owned real estate leased or intended to be leased was $82,000 for 2024 and $16,000 for 2023.
Off-Balance Sheet Arrangements. As of April 30, 2024 and April 30, 2023, the Company did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).
Recent Accounting Pronouncements. Refer to Note 1 to the consolidated financial statements contained in this annual report on Form 10-K for a discussion of recently issued accounting pronouncements.
IMPACT OF INFLATION
The Company’s operations can be impacted by inflation. Inflation can cause increases in the cost of land, materials, services, interest rates and labor. Unless such increased costs are recovered through increased sales prices or improved operating efficiencies, operating margins will decrease. The Company’s homebuilding segment as well as homebuilders that are customers of the Company’s land development business segment face inflationary concerns that rising housing costs, including interest costs, may substantially outpace increases in the incomes of potential purchasers and make it difficult for them to purchase a new home or sell an owned home. If this situation were to exist, the demand for homes produced by the Company’s homebuilding segment could decrease and the demand for the Company’s land by homebuilder customers could decrease. Although the rate of inflation has been historically low in recent years, it increased significantly in 2024 and 2023. As a result of these inflationary pressures, the Company has experienced significant increases in the prices of labor and certain materials. Inflation may also increase the Company’s financing costs. While the Company attempts to pass on to its customers increases in costs through increased sales prices, market forces may limit the Company’s ability to do so. If the Company is unable to raise sales prices enough to compensate for higher costs, or if mortgage interest rates increase significantly, the Company’s revenues, gross margins and net income could be adversely affected.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this annual report on Form 10-K and other filings with the Securities and Exchange Commission, reports to the Company’s shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies that are difficult to predict. All forward-looking statements speak only as of the date of this annual report on Form 10-K or, in the case of any document incorporated by reference, the date of that
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document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.
The forward-looking statements contained in this annual report on Form 10-K include, but are not limited to, statements regarding (1) the Company’s ability to finance its future working capital, land development, acquisition of land, homebuilding, commercial projects, general and administrative expenses and capital expenditure needs, (2) the Company’s expected liquidity sources, including the availability of bank financing for projects and the utilization of existing bank financing, (3) anticipated development of the Company’s real estate holdings, (4) the development and construction of possible future commercial properties to be marketed to tenants, (5) the designs, pricing and levels of options and amenities with respect to the Company’s homebuilding operations, (6) the amount and timing of reimbursements under, and the general effectiveness of, the Company’s public improvement districts and private infrastructure reimbursement covenants, (7) the number of planned residential lots in the Company’s subdivisions, (8) estimates of the Company’s exposure to warranty claims, estimates of the cost to complete of common land development costs and the estimated relative sales value of individual parcels of land in connection with the allocation of common land development costs, (9) the sale of the property located in Brighton, Colorado and the sale of two buildings leased to commercial tenants not being indicative of future operating results, (10) estimates and assumptions used in determining future cash flows of real estate projects, (11) the conditions resulting in homebuyer affordability challenges persisting through calendar year 2024, (12) the backlog of homes under contract and in production, the dollar amount of expected sale revenues when such homes are closed and homes and buildings leased or intended to be leased to third parties, (13) the effect of recent accounting pronouncements, (14) the timing of recognizing unrecognized compensation expense related to shares of common stock issued under the AMREP Corporation 2016 Equity Compensation Plan, (15) the Company’s belief that its compensation package and benefits offered to employees are competitive with others in the industry, (16) the future issuance of deferred stock units to directors of the Company, (17) the future business conditions that may be experienced by the Company, including the pace of the Company’s housing starts and land development projects, (18) the dilution to earnings per share that outstanding options to purchase shares of common stock of the Company may cause in the future, (19) the adequacy of the Company’s facilities, (20) the materiality of claims and legal actions, (21) projections of future earnings for the future recoverability of deferred tax assets and state net operating losses that are not expected to be realizable, (22) the duration, effect and severity of any pandemic and (23) the measures that governmental authorities may take to address a pandemic which may precipitate or exacerbate one or more of the above-mentioned or other risks and significantly disrupt or prevent the Company from operating in the ordinary course for an extended period of time. The Company undertakes no obligation to update or publicly release any revisions to any forward-looking statement to reflect events, circumstances or changes in expectations after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
Not required.
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Item 8.Financial Statements and Supplementary Data
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.
Because of the inherent limitations of internal control over financial reporting, including the possibilities of human error and the circumvention or overriding of controls, material misstatements may not be prevented or detected on a timely basis. Accordingly, even internal controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Furthermore, projections of any evaluation of the effectiveness of internal controls to future periods are subject to the risk that such controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the effectiveness of internal control over financial reporting as of April 30, 2024 based upon the criteria set forth in a report entitled “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on its assessment, management has concluded that, as of April 30, 2024, internal control over financial reporting was effective.
This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to such attestation pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of AMREP Corporation and Subsidiaries:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AMREP Corporation and Subsidiaries (the “Company”) as of April 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the years ended April 30, 2024 and 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Common Land Sale Cost of Revenues
Critical Audit Matter Description
As described in Notes 1, 2, and 8 to the consolidated financial statements, the Company records common land sale cost of revenues based upon an allocation of certain common development costs associated with the entire project. Common development costs include the installation of utilities and roads and can be based upon estimates to complete. The allocation of these costs is based upon the estimates. These estimates and cost allocations are reviewed on a regular basis until a project is substantially completed, and may be revised and reallocated as necessary on the basis of current estimates.
We identified common land sale cost of revenues as a critical audit matter because of the significant estimates and assumptions management makes in allocating common land costs to individual parcels of real estate once sold. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions requires a high degree of auditor judgment and an increased extent of effort.
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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the critical audit matter included, among other things, the following:
/s/ Baker Tilly US, LLP
Baker Tilly US, LLP
We have served as the Company’s auditor since 2022.
Philadelphia, Pennsylvania
July 23, 2024
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AMREP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2024 AND 2023
(Amounts in thousands, except share and per share amounts)
ASSETS
Restricted cash 547 —
Income taxes receivable 27 41
Prepaid pension costs — 747
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 4,745 $ 4,851
Notes payable 35 44
SHAREHOLDERS' EQUITY:
Capital contributed in excess of par value 32,986 32,686
Accumulated other comprehensive income, net 1,230 1,170
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 122,830 $ 115,895
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
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AMREP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands)
Year Ended April 30,
REVENUES:
COSTS AND EXPENSES:
Other cost of revenues 6,726 361
General and administrative expenses Operations 6,871 5,472
Pension settlement — 7,597
Interest income, net 823 8
Other income — 1,803
Income before income taxes 8,425 7,641
Provision (benefit) for income taxes 1,735 (14,149)
Earnings per share - basic $ 1.26 $ 4.13
Earnings per share - diluted $ 1.25 $ 4.11
Weighted average number of common shares outstanding – basic 5,300 5,282
Weighted average number of common shares outstanding – diluted 5,347 5,307
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
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AMREP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
Year Ended April 30,
Other comprehensive income, net of tax:
Pension settlement expense — 7,597
Income tax effect — (2,354)
Pension settlement expense, net of tax — 5,243
Decrease in pension liability 138 615
Income tax effect (78) (115)
Decrease in pension liability, net of tax 60 500
Other comprehensive income 60 5,743
Total comprehensive income $ 6,750 $ 27,533
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
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AMREP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands)
Capital Accumulated
Contributed Other
Common Stock in Excess of Retained Comprehensive
Shares Amount Par Value Earnings Income (Loss) Total
Issuance of restricted common stock 15 2 162 — — 164
Issuance of deferred common stock units — — 90 — — 90
Net income — — — 21,790 — 21,790
Other comprehensive income — — — — 5,743 5,743
Issuance of restricted common stock 16 — — — — —
Stock compensation expense 160 160
Issuance of deferred common stock units — — 90 — — 90
Net income — — — 6,690 — 6,690
Other comprehensive income — — — — 60 60
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
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AMREP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended April 30,
CASH FLOWS FROM OPERATING ACTIVITIES:
Non-cash credits and charges:
Stock-based compensation 317 238
Deferred income tax provision 1,455 (13,762)
Net periodic pension cost 260 (283)
Pension settlement expense — 7,597
Excess pension funds transfer 547 —
Changes in assets and liabilities:
Real estate inventory and investment assets 756 (3,122)
Accounts payable and accrued expenses (42) (1,251)
Taxes payable (receivable), net 15 (3,690)
Net cash provided by operating activities 10,714 6,389
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures of property and equipment (457) (131)
Net cash used in investing activities (457) (131)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing — 50
Principal debt payments (9) (2,036)
Net cash used in financing activities (9) (1,986)
Increase in cash, cash equivalents and restricted cash 10,248 4,272
Cash, cash equivalents and restricted cash, beginning of year 19,993 15,721
Cash, cash equivalents and restricted cash, end of year $ 30,241 $ 19,993
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes refunded, net $ 308 $ 134
Interest paid $ — $ 57
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
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AMREP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES
Organization and principles of consolidation
The consolidated financial statements include the accounts of AMREP Corporation, an Oklahoma corporation, and its subsidiaries (collectively, the “Company”). The Company is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated balance sheets are presented in an unclassified format since the Company has substantial operations in the real estate industry and its operating cycle is greater than one year.
Fiscal year
The Company’s fiscal year ends on April 30. All references to 2024 and 2023 mean the fiscal years ended April 30, 2024 and 2023, unless the context otherwise indicates.
Revenue recognition
The Company accounts for land sale revenues, home sale revenues and other revenues in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606).
Land sale revenues: Revenues and cost of revenues from land sales are recognized when the parties are bound by the terms of a contract, consideration has been exchanged, title and other attributes of ownership have been conveyed to the buyer by means of a closing and the Company is not obligated to perform further significant development of the specific property sold. In general, the Company’s performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty.
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 values 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.
Home sale revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. The Company’s performance obligation to deliver a home is generally satisfied in less than one year from the date a binding sale agreement is signed. In general, the Company’s performance obligation for each home sale is fulfilled upon the delivery of the completed home, which generally coincides with the receipt of cash consideration from the counterparty. If the Company’s performance obligations are not complete upon the home closing, the Company defers a portion of the home sale revenues related to the outstanding obligations and subsequently recognizes that revenue upon completion of such obligations. As of April 30, 2024 and April 30, 2023, deferred home sale revenues and costs related thereto were immaterial.
Forfeited customer deposits for homes are recognized in home sale revenues in the period in which the Company determines that the customer will not complete the purchase of the home and the Company has the right to retain the deposit. In order to promote sales of homes, the Company may offer sales incentives to homebuyers. These incentives vary by type and amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sale revenues.
Home construction and related costs are capitalized as incurred within real estate inventory under the specific identification method on the balance sheet and are charged to home sale cost of revenues on the consolidated statement of operations when the related home is sold.
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,
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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.
Other revenues: Other revenues and cost of other revenues consist of sale of certain investment assets, oil and gas royalties, landscaping revenues and miscellaneous other revenues.
Revenues from sale of investment assets (that were not otherwise classified as land sale revenues) are recognized when the parties are bound by the terms of a contract, consideration has been exchanged, title and other attributes of ownership have been conveyed to the buyer by means of a closing and the Company is not obligated to perform further significant development of the specific property sold. In general, the Company’s performance obligation for a sale of investment assets is fulfilled upon the delivery of the property, which generally coincides with the receipt of cash consideration from the counterparty. Other cost of revenues includes all direct acquisition costs and other costs specifically identified with the property, including pre-acquisition and acquisition costs, if applicable, closing and selling costs and construction costs.
Oil and gas royalties are recognized at the time of receipt of cash by the Company as such amounts are unknown with any degree of certainty prior to receipt.
Landscaping revenues consist of landscaping services provided by the Company primarily to homebuilders.
Miscellaneous other revenues primarily include extension fees for purchase contracts, forfeited deposits from land sale contracts and rental payments and additional rent from tenants pursuant to leases with respect to property or buildings of the Company. Base rental payments are recognized as revenue monthly over the term of the lease. Additional rent related to the reimbursement of real estate taxes, insurance, repairs, maintenance and other operating expenses is recognized as revenue in the period the expenses are incurred.
Cash, cash equivalents and restricted cash
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value because of changes in interest rates. A debt security is classified as a cash equivalent if it meets these criteria and has an original maturity of ninety days or less when purchased. Restricted cash consists of cash deposits with the Company’s 401(k) retirement plan representing the amount of residual assets (after satisfying any pension plan liabilities) following termination of the defined benefit pension plan. Interest payments on cash, cash equivalents and restricted cash are recorded as income on the statement of operations.
Short-Term Investments
Short-term investments are held-to-maturity debt investments that have original maturities of greater than ninety days when purchased and remaining maturities of less than one year. Held-to-maturity debt investments are debt investments, such as certificates of deposit and U.S. government securities, that the Company has the positive intent and ability to hold to maturity. Held-to-maturity debt investments are recorded at their original purchase amount (and are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable) with interest payments recorded as income on the statement of operations.
Long-lived assets
Long-lived assets consist of real estate inventory and investment assets and are accounted for in accordance with Accounting Standards Codification (“ASC”) 360-10. A substantial majority of the Company's real estate assets are located in Rio Rancho, New Mexico ("Rio Rancho") and certain adjoining areas of Sandoval County, New Mexico. As a result of this geographic concentration, the Company has been and will be affected by changes in economic conditions in that region.
Real estate inventory: Real estate inventory includes land and improvements on land held for development or sale. The cost basis of the land and improvements includes all direct acquisition costs including development costs, certain amenities, capitalized interest, capitalized real estate taxes and other costs. Interest and real estate taxes are not capitalized unless active development is underway. Real estate inventory is stated at accumulated cost.
Investment assets, net: Investment assets, net consist of (i) land held for long-term investment, which 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, and (ii) owned real estate leased or intended to be leased, which represents homes and buildings leased or intended to be leased to third parties. Investment assets are stated at the lower of cost or net realizable value. Depreciation of investment assets (other than
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land) is provided principally by the straight-line method at various rates calculated to amortize the book values of the respective assets over their estimated useful lives, which generally are 10 to 40 years for buildings and improvements. Land is not subject to depreciation.
Impairment of long-lived assets: Long-lived assets are evaluated and tested for impairment when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Asset impairment tests are based upon the intended use of assets, expected future cash flows and estimates of fair value of assets. The evaluation of long-lived assets includes an estimate of future cash flows on an undiscounted basis using estimated revenue streams, operating margins and general and administrative expenses. The estimation process involved in determining if assets have been impaired and in the determination of estimated future cash flows is inherently uncertain because it requires estimates of future revenues and costs, as well as future events and conditions. If the excess of undiscounted cash flows over the carrying value of a project is small, there is a greater risk of future impairment and any resulting impairment charges could be material. Due to the subjective nature of the estimates and assumptions used in determining future cash flows, actual results could differ materially from current estimates and the Company may be required to recognize impairment charges in the future.
Leases
Right-of-use assets and lease liabilities are recorded on the balance sheet for all leases with an initial term over one year. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Right-of-use assets are classified within other assets and the corresponding lease liability is included in accounts payable and accrued expenses in the balance sheet.
Share-based compensation
Awards of restricted stock, stock options and deferred stock units are accounted for in accordance with ASC 718-10, which requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). Compensation expense for awards of restricted stock, stock options and deferred stock units are based on the fair value of the awards at their grant dates. The grant-date fair value of restricted stock is the price of the stock on the date of grant. The grant-date fair value of deferred stock units is the price of the underlying stock on the date of grant. To estimate the grant-date fair value of stock options, the Company uses the Black-Scholes option-pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the option’s exercise price; the price of the underlying stock on the date of grant; the estimated dividend yield; a “risk-free” interest rate; the estimated option term; and the expected volatility. For the “risk-free” interest rate, the Company uses a U.S. Treasury bond due in a number of years equal to the option’s expected term. To estimate expected volatility, the Company analyzes the historic volatility of the Company’s common stock.
Income taxes
Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured by using currently enacted tax rates expected to apply to taxable income in the years in which those differences are expected to reverse. The Company provides a valuation allowance against deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.
Earnings per share
Basic earnings per share is based on the weighted average number of common shares outstanding during each year. Unvested restricted shares of common stock are not included in the computation of basic earnings per share, as they are considered contingently returnable shares. Unvested restricted shares of common stock are included in diluted earnings per share if they are dilutive. Deferred stock units are included in both basic and diluted earnings per share computations. Stock options are not included in the computation of basic earnings per share. Stock options are included in diluted earnings per share if they are not anti-dilutive and are in-the-money.
Pension plan
The Company recognizes the over-funded or under-funded status of its defined benefit pension plan as an asset or liability as of the date of the plan’s year-end statement of financial position and recognizes changes in that funded status in the year in which the changes occur through comprehensive income.
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Comprehensive income
Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Total comprehensive income is the total of net income or loss and other comprehensive income or loss that, for the Company, consists of the minimum pension liability net of the related deferred income tax effect.
Management’s estimates and assumptions
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant judgments and estimates that affect the financial statements include, but are not limited to, (i) land sale cost of revenues, net calculations, which are based on land development budgets and estimates of costs to complete; (ii) cash flows, asset groupings and valuation assumptions in performing asset impairment tests of long-lived assets and assets held for sale; (iii) risk assessment of uncertain tax positions; and (iv) the determination of the recoverability of net deferred tax assets. The Company bases its significant estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Actual results could differ from these estimates.
Recent accounting pronouncements
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting, which provides for enhanced disclosures about significant segment expenses. ASU 2023-07 will be effective for the Company’s fiscal year beginning May 1, 2024. The adoption of ASU 2023-07 by the Company is not expected to have a material effect on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes, which provides for enhanced transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for the Company’s fiscal year beginning May 1, 2025. The adoption of ASU 2023-09 by the Company is not expected to have a material effect on its consolidated financial statements.
Other than as described above, there are no new accounting standards or updates to be adopted that the Company currently believes might have a significant impact on its consolidated financial statements.
(2) REAL ESTATE INVENTORY
Real estate inventory consists of (in thousands):
April 30,
Land inventory in Colorado — 3,445
Homebuilding model and completed inventory 4,138 1,171
Homebuilding construction in process 4,318 1,648
Land inventory in New Mexico represents costs for land and improvements on land in New Mexico held for development or sale. Homebuilding model and completed inventory represents costs for residential homes that are completed and ready for sale. Homebuilding construction in process represents costs for residential homes being built.
Interest and loan costs of $2,000 and real estate taxes of $74,000 were capitalized in real estate inventory for the year ended April 30, 2024. Interest and loan costs of $57,000 and real estate taxes of $79,000 were capitalized in real estate inventory for the year ended April 30, 2023.
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(3) INVESTMENT ASSETS, NET
Investment assets, net consist of (in thousands):
April 30,
Land held for long-term investment $ 9,200 $ 8,961
Owned real estate leased or intended to be leased 3,449 4,802
Less accumulated depreciation (98) (16)
Owned real estate leased or intended to be leased, net 3,351 4,786
Land held for long-term investment represents costs for 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 costs for homes and buildings leased or intended to be leased to third parties. As of April 30, 2024, ten homes were leased to residential tenants. As of April 30, 2023, eight homes were leased to residential tenants and two buildings under construction were leased to commercial tenants. Depreciation associated with owned real estate leased or intended to be leased was $82,000 for 2024 and $16,000 for 2023.
(4) OTHER ASSETS
Other assets consist of (in thousands):
April 30,
Miscellaneous assets 307 362
Less accumulated depreciation of property and equipment (333) (266)
Property and equipment, net 1,741 1,351
Prepaid expenses as of April 30, 2024 primarily consist of land development cash collateralized performance guaranties, insurance and income taxes. Prepaid expenses as of April 30, 2023 primarily consist of a land development cash collateralized performance guaranty, stock compensation, insurance and income and real estate taxes. Amortized lease cost for right-of-use assets associated with the leases of office facilities was $26,000 and $25,000 for 2024 and 2023. Depreciation expense associated with property and equipment was $67,000 and $46,000 for 2024 and 2023.
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of (in thousands):
April 30,
Land development and homebuilding operations
Corporate operations 513 634
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(6) NOTES PAYABLE
The following tables present information on the Company’s notes payable in effect as of April 30, 2024 (dollars in thousands):
Principal Amount Available Outstanding
for New Borrowings Principal Amount
April 30, April 30,
Revolving Line of Credit BOKF $ 5,328 $ — $ —
Equipment Financing DC — 35 44
Mortgaged Property
Loan Identifier Interest Rate Book Value Scheduled Maturity
Principal Repayments Capitalized Interest and Fees
Year ended April 30, Year ended April 30,
Revolving Line of Credit $ — $ — $ — $ —
Equipment Financing 9 7 — —
Total $ 9 $ 7 $ — $ —
As of April 30, 2024, the Company and each of its subsidiaries were in compliance with the financial covenants contained in the loan documentation for the then outstanding notes payable. Additional information regarding each of the above notes payable is provided below.
ASW 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, including ASW and its subsidiaries having at least $3.0 million of unencumbered and unrestricted cash, cash equivalents and marketable securities in order to be entitled to advances under the loan. The loan documentation contains customary events of default for similar financing transactions, including: ASW’s failure to make principal, interest or other payments when due; the failure of ASW to observe or perform its covenants under the loan documentation; the representations and warranties of ASW being false; the insolvency or bankruptcy of ASW; and the failure of ASW to maintain a net worth of at least $32 million. Upon the occurrence and during the continuance of an event of default, BOKF may declare the outstanding principal amount and all other obligations under the loan immediately due and payable. ASW incurred customary costs and expenses and paid certain fees to BOKF in connection with the loan.
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The following table summarizes the notes payable scheduled principal repayments subsequent to April 30, 2024 (in thousands):
Fiscal Year Scheduled Payments
Thereafter 2
Total $ 35
The following table presents information on the Company’s notes payable in effect during 2024 or 2023 and terminated prior to April 30, 2024 (in thousands):
Outstanding Principal
Original Maximum Amount
Available Principal April 30,
Loan Identifier Lender Amount 2024 2023
La Mirada BOKF $ 7,375 $ — $ —
Additional information regarding the above terminated notes payable is provided below:
(7) REVENUES
Land sale revenues. Land sale revenues are sales of developed residential land, developed commercial land and undeveloped land.
Home sale revenues. Home sale revenues are sales of homes constructed and sold by the Company.
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Other revenues. Other revenues consist of (in thousands):
Year Ended April 30,
Sale of investment assets $ 5,701 $ —
Oil and gas royalties — 146
Landscaping revenues 1,186 585
Miscellaneous other revenues 470 580
Sale of investment assets for 2024 consist of the sale of two buildings leased to commercial tenants.
Oil and gas royalties consist of amounts received from the lease of minerals and mineral rights in and under approximately 147 surface acres of land in Brighton, Colorado. In 2023, the Company sold such minerals and mineral rights. The Company owns certain minerals and mineral rights in and under approximately 55,000 surface acres of land in Sandoval County, New Mexico.
Landscaping revenues consist of landscaping services provided by the Company primarily to homebuilders.
Miscellaneous other revenues for 2024 primarily consist of extension fees for purchase contracts and residential rental revenues. Miscellaneous other revenues for 2023 primarily consist of extension fees for purchase contracts, forfeited deposits from land sale contracts and residential rental revenues.
Major customers. A substantial majority of the land sale revenues were received from four customers during 2024 and substantially all of the land sale revenues were received from four customers during 2023. Other than receivables for immaterial amounts (if any), there were no outstanding receivables from these customers as of April 30, 2024 or April 30, 2023. There were two customers that each contributed in excess of 10% of the Company’s revenues for 2024. The revenues from each such customer for 2024 are as follows: $11,554,000 and $7,200,000, with each of these revenues reported in the Company’s land development business segment. There were three customers that each contributed in excess of 10% of the Company’s revenues for 2023. The revenues from each such customer for 2023 are as follows: $7,763,000, $6,810,000 and $6,182,000, 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):
Year Ended April 30,
Less:
Public improvement district reimbursements (681) (759)
Private infrastructure covenant reimbursements (544) (626)
Payments for impact fee credits (1,966) (3,713)
Land sale cost of revenues, net $ 17,224 $ 17,379
A portion of the Lomas Encantadas subdivision and a portion of the Enchanted Hills subdivision in Rio Rancho are subject to a public improvement district. The public improvement district reimburses the Company for certain on-site and off-site costs of developing the subdivisions by imposing a special levy on the real property owners within the district. The Company has accepted discounted prepayments of amounts due under the public improvement district. The Company instituted private infrastructure reimbursement covenants on various land development projects. Similar to a public improvement district, the covenants are expected to reimburse the Company for certain on-site and off-site costs of developing the subject property by imposing a special levy on the real property owners subject to the covenants. The Company has accepted discounted prepayments of amounts due under the private infrastructure reimbursement covenants. Impact fees are charges or assessments payable by homebuilders to local governing authorities in order to generate revenue for funding or recouping the costs of capital improvements or facility expansions necessitated by and attributable to the new development. The Company receives credits, allowances and offsets applicable to impact fees in connection with certain costs incurred by the Company in developing subdivisions, which the Company generally sells to homebuilders.
Home sale cost of revenues includes costs for residential homes that were sold.
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Other cost of revenues for 2024 consist of the costs associated with the sale of investment assets and cost of goods sold for landscaping services. Other cost of revenues for 2023 consist of cost of goods sold for landscaping services.
(9) GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist of (in thousands):
Year Ended April 30,
Pension settlement $ — $ 7,597
(10) FAIR VALUE MEASUREMENTS
The FASB’s accounting guidance defines fair value and establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The FASB’s guidance classifies the inputs to measure fair value into the following hierarchy:
Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 Inputs for the asset or liability are unobservable and reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques need to maximize the use of observable inputs and minimize the use of unobservable inputs. There were no transfers between Levels 1, 2 or 3 during 2024 or 2023.
The Financial Instruments Topic of the FASB Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Topic excludes all nonfinancial instruments from its disclosure requirements. Fair value is determined under the hierarchy discussed above. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions are used in estimating fair value disclosure for financial instruments: the carrying amounts of cash and cash equivalents and trade payables approximate fair value because of the short maturity of these financial instruments; and debt that bears variable interest rates indexed to secured overnight financing rate as administered by the CME Group Benchmark Administration Limited also approximates fair value as it reprices when market interest rates change.
(11) BENEFIT PLANS
Pension plan
The Company had a defined benefit pension plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. The Company’s defined benefit pension plan was terminated in 2024. During 2024, the Company transferred $547,000, which was the amount of residual assets (after satisfying any pension plan liabilities) following termination of the defined benefit pension plan, from the defined benefit pension plan to a 401(k) retirement plan available to eligible employees of the Company. This amount is recognized as restricted cash on the Company’s balance sheet and is available for future awards to eligible employees.
Given below is information regarding the Company’s defined pension plan prior to its termination:
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Net periodic pension cost for 2024 and 2023 was comprised of the following components (in thousands):
Year Ended April 30,
Interest cost on projected benefit obligation $ 6 $ 603
Expected return on assets (69) (1,123)
Recognized net actuarial loss 2 372
Net periodic pension cost $ (91) $ (42)
Settlement and related expenses 247 7,597
Net periodic pension cost after settlement 338 7,555
Assumptions used in determining net periodic pension cost and the pension benefit obligation were:
Year Ended April 30,
Discount rate used to determine net periodic pension cost 4.51 % 3.97 %
Discount rate used to determine pension benefit obligation N/A N/A
The expected return on assets for the pension plan was based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolio. In establishing this assumption, management considered historical and expected returns for the asset classes in which the pension plan was invested, as well as current economic and market conditions.
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The actuarial gains of $126,000 and $1,667,000 for 2024 and 2023 were plan experience gains. The following table sets forth changes in the pension plan’s benefit obligation and assets, and summarizes components of amounts recognized in the Company’s balance sheet (in thousands):
April 30,
Change in benefit obligation:
Benefit obligation at beginning of year $ 283 $ 17,964
Interest cost 6 603
Settlement — (15,357)
Benefit obligation at end of year $ — $ 283
Change in plan assets:
Fair value of plan assets at beginning of year $ 1,030 $ 18,054
Actual return on plan assets (8) (103)
Plan transfer (547) —
Settlement — (15,357)
Fair value of plan assets at end of year $ — $ 1,030
Overfunded status $ — $ 747
The funded status of the pension plan was equal to the net liability recognized in the balance sheets. The following table summarizes the amounts recorded in accumulated other comprehensive income (loss), which have not yet been recognized as a component of net periodic pension costs (in thousands):
Year Ended April 30,
Pretax accumulated comprehensive income (loss) $ — $ 138
The following table summarizes the changes in accumulated other comprehensive income (loss) related to the pension plan for the years ended April 30, 2024 and 2023 (in thousands):