UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   JulyJanuary 31, 20162017  

OR

¨      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to ______________________

Commission File Number      1-4702      

Registrant’s telephone number, including area code:(609) 716-8200(610) 487-0905

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx       No¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yesx       No¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes¨       Nox

Number of Shares of Common Stock, par value $.10 per share, outstanding at September 9, 2016March 1, 2017 – 8,078,954.8,077,954.

AMREP CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in thousands, except par value and share amounts)

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings (Unaudited)

Three Months Ended JulyJanuary 31, 20162017 and 20152016

(Amounts in thousands, except per share amounts)

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations and Retained Earnings (Unaudited)

Nine Months Ended January 31, 2017 and 2016

(Amounts in thousands, except per share amounts)

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements 

AMREP CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows from Operations (Unaudited)

ThreeNine Months Ended JulyJanuary 31, 20162017 and 20152016

(Amounts in thousands)

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

AMREP CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

ThreeNine Months Ended JulyJanuary 31, 20162017 and 20152016

The accompanying unaudited consolidated financial statements have been prepared by AMREP Corporation (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, and do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The Company, through its subsidiaries, is primarily engaged in two business segments: the real estate business operated by AMREP Southwest Inc. (“AMREP Southwest”) and its subsidiaries and the Fulfillment Services business operated by Palm Coast Data LLC (“Palm Coast”) and its affiliates. The Company’s foreign sales are insignificant. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited consolidated financial statements include all adjustments, which are of a normal recurring nature, considered necessary to reflect a fair presentation of the results for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of what may occur in future periods. Unless otherwise qualified, all references to 2017 and 2016 are to the fiscal years ending April 30, 2017 and 2016 and all references to the firstthird quarter and first threenine months of 2017 and 2016 mean the fiscal three and nine month periods ended JulyJanuary 31, 20162017 and 2015.2016.

The unaudited consolidated financial statements herein should be read in conjunction with the Company’s annual report on Form 10-K for the year ended April 30, 2016, which was filed with the SEC on July 29, 2016 (the “2016 Form 10-K”). Certain 2016 balances in these financial statements have been reclassified to conform to the current year presentation with no effect on the net income or loss or shareholders’ equity.

Recently Issued Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09,Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The updateASU 2016-09 simplifies several aspects of accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The adoption of ASU 2016-09 by the Company is not expected to have a material effect on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02,Leases. ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 will be effective for the Company for fiscal year 2020 beginning on May 1, 2019. The Company has not determined the transition approach that will be utilized or estimated the impact of adopting ASU 2016-02.

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers. This guidanceASU 2014-09 defines how companies report revenues from contracts with customers and also requires enhanced disclosures. In July 2015, the FASB voted to defer the effective date by one year, with early adoption on the original effective date permitted. The Company will be required to adopt ASU 2014-09 as of May 1, 2018 and early adoption is permitted as of May 1, 2017.2018. The Company has not determined when it will adopt ASU 2014-09 and the transition approach that will be utilized or estimated the impact of adopting ASU 2014-09.

Receivables, net consist of the following (in thousands):

During the first quarternine months of 2017 and 2016, revenues from one major customer of the Company’s Fulfillment Services business totaled $1,284,000$3,590,000, or 10.5%10.7%, and $4,084,000, or 12.4%, of total revenues for the Company. As of AugustJanuary 31, 2016,2017, the Company’s Fulfillment Services business had $416,000$745,000 of outstanding accounts receivable from this customer. This major customer has given the Company’s Fulfillment Services business notice that a significant portion of its business will be transferred to another provider during 2017.fiscal 2018.

Investment assets, net consist of the following (in thousands):

Land held for long-term investment represents property located in areas that are not planned to be developed in the near term and thus has not been offered for sale. As of JulyJanuary 31, 2016,2017, the Company held approximately 12,000 acres of land in New Mexico classified as land held for long-term investment.

At April 30, 2016, Other included an approximately 2,200 square foot, single tenant retail commercial building on property owned by thea subsidiary of AMREP Southwest in Rio Rancho, New Mexico. In the first quarter of 2017, the Company sold this property was sold (see Note 8).

Property, plant and equipment, net consist of the following (in thousands):

Other assets consist of the following (in thousands):

Deferred order entry costs represent costs incurred in connection with the data entry of customer subscription information to database files and are charged directly to operations generally over a twelve month period.

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

The JulyJanuary 31, 20162017 accounts payable and accrued expenses total included customer postage deposits of $3,702,000,$3,797,000, accrued expenses of $2,031,000,$1,448,000, trade payables of $707,000$530,000 and other of $1,173,000.$1,188,000. The April 30, 2016 accounts payable and accrued expenses total included customer postage deposits of $3,947,000, accrued expenses of $1,998,000, trade payables of $837,000 and other of $1,671,000.

Notes payable consist of the following (in thousands):

Real Estate LoanNote Payable to Related Party

At January 31, 2017, AMREP Southwest hashad a loan from a company owned by Nicholas G. Karabots, a significant shareholder of the Company and in which anothera director of the Company hashad a 20% participation. The loan had an outstanding principal amount of $6,483,000 at July 31, 2016, iswas scheduled to mature on December 1, 2017 bearsand bore interest payable monthly at 8.5% per annum and is secured by a mortgage on all real propertyannum. The outstanding balance of AMREP Southwestthis loan at January 31, 2017 was paid in Rio Rancho, New Mexico and by a pledge of the stock of its subsidiary, Outer Rim Investments, Inc. The total book value of the real property collateralizing the loan was approximately $57,413,000 as of July 31, 2016. The loan may be prepaid at any time without premium or penalty except if the prepayment isfull in connection with the disposition of AMREP Southwest or substantially all of its assets. No payments of principal are required until maturity, except that the following amounts are required to be applied to the payment of the loan: (a) 25% of the net cash proceeds from any sales of real property by AMREP Southwest and (b) 25% of any royalty payments received by AMREP Southwest under the oil and gas lease described in Note 8.February 2017.

Other NotesNote Payable

A subsidiary of AMREP Southwest had a loan agreement with U.S. Bank National Association for the construction of a 2,200 square foot, single tenant retail building in Rio Rancho, New Mexico. The loan was scheduled to mature on October 31, 2016, bore interest payable monthly on the outstanding principal amount at 0.5% plus the prime rate, was secured by a mortgage on the real property of approximately one acre where construction of the building had occurred, contained customary events of default, representations, warranties and covenants for a loan of this nature and was guaranteed by AMREP Southwest. As of April 30, 2016, the outstanding principal balance of the loan was $555,000.rate. In the first quarter of 2017, this property was sold and the outstanding loan balance was satisfied with proceeds from the sale.

During the first quarter ended July 31, 2016, the Companyof 2017, a subsidiary of AMREP Southwest sold a single tenant retail commercial building in Rio Rancho, New Mexico, which resulted in a pre-tax gain of $1,496,000.

In addition, refer to Note 11 to the consolidated financial statements contained in the 2016 Form 10-K for detail about the Oil and Gas Lease and the Addendum thereto with Thrust Energy, Inc. and Cebolla Roja, LLC. No royalties under the Lease were received during the first quarternine months of 2017. Revenue from this transaction is being recorded over the lease term and approximately $57,000 wasand $171,000 were recognized during the third quarter and first quartersnine months of each of 2017 and 2016. At JulyJanuary 31, 2016,2017, there was $474,000$360,000 of deferred revenue remaining to be recognized in future periods.

The Financial Instruments Topic of the Financial Accounting Standards Board 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. 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, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments.

The Company did not have any long-term, fixed-rate notes receivablesreceivable at JulyJanuary 31, 20162017 or April 30, 2016. The estimated fair value of the Company’s long-term, fixed-rate note payable was $5,875,000$1,408,000 and $11,102,000 compared with carrying amounts of $6,483,000$1,586,000 and $12,384,000 at JulyJanuary 31, 20162017 and April 30, 2016. The outstanding balance of this fixed-rate note payable was paid in full in February 2017.

Retirement plan

The Company has a defined benefit retirement plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. The Company has secured $5,019,000 of accrued pension-related obligations with first lien mortgages on certain real property in favor of the Pension Benefit Guaranty Corporation (the “PBGC”). On an annual basis, the Company is required to provide updated appraisals on each mortgaged property and, if the appraised value of the mortgaged properties is less than two times the amount of the accrued pension-related obligations secured by the mortgages, the Company is required to make a payment to its pension plan in an amount equal to one-half of the amount of the shortfall. During the first quarternine months of 2017, there was no change in the appraised value of the mortgaged property that required the Company to make any additional payments to its pension plan.

Equity compensation plan

The Company issued 12,00019,500 shares of restricted common stock under the AMREP Corporation 2006 Equity Compensation Plan (the “Equity“2006 Equity Plan”)during the first quarternine months of 2017. During the first quarternine months of 2017, 5,00011,000 shares of common stock previously issued under the 2006 Equity Planvestedvested. In addition, 1,000 shares of restricted stock issued under the 2006 Equity Plan prior to 2017 were returned to the Company and will not vest due to the retirement of an employee, leaving 26,00026,500 shares issued under the 2006 Equity Plan that hadwere not vested as of JulyJanuary 31, 2016.2017.For the third quarter and first quarternine months of 2017, and 2016, the Company recognized $15,000$19,000 and $21,000$48,000 of compensation expense related to the restrictedshares of common stock issued.issued, and $16,000 and $53,000 for the same periods of 2016.As of JanuaryJuly 31, 20162017, there was $69$72,000of total unrecognized compensation expense related to shares of common stock issued under the 2006 Equity Plan which had not vested as of that date, whichand is expected to be recognized over the remaining vesting term not to exceed three years. The 2006 Equity Plan terminated on September 19, 2016 without affecting any existing awards under the plan made prior to that date, and no further awards may be granted under the 2006 Equity Plan.

During the second quarter of 2017, the shareholders of the Company, at the Company’s 2016 Annual Meeting of Shareholders, approved the AMREP Corporation 2016 Equity Compensation Plan (the “2016 Equity Plan”). The 2016 Equity Plan became effective on September 20, 2016 and authorizes the issuance of up to 500,000 shares of the Company’s common stock. The 2016 Equity Plan terminates on, and no award will be granted under the 2016 Equity Plan on or after, September 19, 2026; provided, however, that the Company’s Board of Directors may, at any time prior to that date, terminate the 2016 Equity Plan. Other than as described in the next paragraph, no awards were issued under the 2016 Equity Plan during the third quarter of 2017.

As previously disclosed, on the last trading day of calendar year 2016, and based upon days of service, each non-employee member of the Company’s Board of Directors was issued the number of deferred common share units of the Company under the 2016 Equity Plan equal to $15,000 divided by the closing price per share of common stock reported on the New York Stock Exchange on such date. Based on the closing price per share $7.42 on December 30, 2016, the Company issued a total of 6,873 deferred common share units to members of the Company’s Board of Directors. One former member of the Board of Directors who served as a director during part of calendar year 2016 received a cash payment in lieu of pro rata deferred common share units that would have been earned for services on the Company’s Board of Directors. On the last trading day of each calendar year after calendar year 2016, each non-employee member of the Company’s Board of Directors will be issued the number of deferred common share units of the Company under the 2016 Equity Plan equal to $20,000 divided by the closing price per share of Common Stock reported on the New York Stock Exchange on such date. Director compensation expense is recognized for the annual grant of deferred common share units ratably over the director’s service in office during the calendar year. Through January 31, 2017, the total non-cash director fee compensation related to the deferred common share units was $51,000.

In June 2009, Palm Coast received $3,000,000 pursuant to an agreement with the State of Florida (the “Award Agreement”) as part of the incentives made available in connection with the Company’s project, completed in the second quarter of fiscal year 2011, to consolidate its Fulfillment Services operations at its Palm Coast, Florida location. The Award Agreement includes certain performance requirements in terms of job retention, job creation and capital investment which, if not met by Palm Coast, entitle the State of Florida to obtain the return of a portion, or all, of the $3,000,000. Accordingly, the $3,000,000 has been recorded as a liability in the accompanying balance sheet. The award monies, if any, to which Palm Coast becomes irrevocably entitled will be amortized into income through a reduction of depreciation over the life of the assets acquired with those funds. Palm Coast has not met certain of the performance requirements in the Award Agreement, in large part due to the adverse economic conditions experienced by the magazine publishing industry since the Award Agreement was executed. On December 30, 2016, the State of Florida filed a complaint in the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida against Palm Coast seeking repayment of amounts under the Award Agreement. Palm Coast is continuing to have discussions with the State of Florida regarding the amount and timing of such repayment, but the amount and timing of any such repayment have not been resolved.

The following tables set forth summarized data relative to the industry segments in which the Company operated for the three and nine month periods ended JulyJanuary 31, 20162017 and 20152016 (in thousands):

INTRODUCTION

AMREP Corporation (the “Company”), through its subsidiaries, is primarily engaged in two business segments: the real estate business operated by AMREP Southwest Inc. (“AMREP Southwest”) and its subsidiaries and the Fulfillment Services business operated by Palm Coast Data LLC (“Palm Coast”) and its affiliates. Information concerning industry segments is set forth in Note 11 of the notes12 to the consolidated financial statements included in this report on Form 10-Q. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company’s foreign sales and activities are not significant.

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 information contained in this section should be read in conjunction with the unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q and with the 2016 Form 10-K. Many of the amounts and percentages presented in this section have been rounded for convenience of presentation. Unless otherwise qualified, all references to 2017 and 2016 are to the fiscal years ending April 30, 2017 and 2016 and all references to the firstthird quarter and first threenine months of 2017 and 2016 mean the fiscal three and nine month periods ended JulyJanuary 31, 20162017 and 2015.2016.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations is based on the accounting policies used and disclosed in the 2016 consolidated financial statements and accompanying notes that were prepared in accordance with accounting principles generally accepted in the United States of America and included as part of the 2016 Form 10-K. The preparation of those consolidated financial statements required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual amounts or results could differ from those estimates.

The critical accounting policies, assumptions and estimates are described in Item 7 of Part II of the 2016 Form 10-K. There have been no changes in these accounting policies.

The significant accounting policies of the Company are described in Note 1 to the consolidated financial statements contained in the 2016 Form 10-K. Information concerning the Company’s implementation and the impact of recent accounting standards issued by the Financial Accounting Standards Board is included in the notes to the consolidated financial statements contained in the 2016 Form 10-K and the unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. The Company did not adopt any accounting policy in the first quarternine months of 2017 that had a material impact on its consolidated financial statements.

RESULTS OF OPERATIONS

For the firstthird quarter of 2017, the Company recorded net income of $630,000,$174,000, or $0.08$0.02 per share, compared to a net loss of $1,179,000,$569,000, or $0.15$0.07 per share, for the firstthird quarter of 2016. Revenues were$12,208,000 forFor the first quarternine months of 2017, the Company recorded net income of $916,000, or $0.11 per share, compared to $9,575,000 for the same period in the prior year.

Revenues from land sales at AMREP Southwest were $2,720,000 for the first quartera net loss of 2017 compared to $110,000$2,424,000, or $0.30 per share, for the same period of 2016. Revenues were$9,777,000 and $33,450,000 for the third quarter and first nine months of 2017 compared to $12,198,000 and $32,994,000 for the same periods of the prior year.

Revenues from the Company’s real estate land sales were $1,461,000 and $7,710,000 for the third quarter and first nine months of 2017 compared to $3,197,000 and $5,487,000 for the same periods of 2016. For the third quarter and first quartersnine months of 2017 and 2016, the Company’s land sales in New Mexico were as follows:

The average gross profit percentage on land sales was 5%42.0% and 17.4% for the third quarter and first quarternine months of 2017 compared to 68%13.0% and 14.4% for the same periodperiods of 2016. The reduced profit percentage was attributable to the mix of lots sold, with 2017 sales being primarily developed lots with lower profit margins compared to 2016 where sales were primarily higher margin undeveloped lots. As a result of many factors, including the nature and timing of specific transactions and the type and location of land being sold, revenues, average selling prices and related average gross profits from land sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.

Revenues from the Company’s Fulfillment Services operations decreased from $9,181,000$8,759,000 and $26,666,000 for the third quarter and first quarternine months of 2016 to $7,828,000$8,222,000 and $23,908,000 for the same periodperiods in 2017. The lower revenues were attributable to reduced business volumes from existing customers, certain price concessions on renewed contracts and lost business. Magazine publishers are one of the principal customers of the Company’s Fulfillment Services operations, and these customers have continued to be negatively impacted by increased competition from new media sources, alternative technologies for the distribution, storage and consumption of media content, weakness in advertising revenues and increases in paper costs, printing costs and postal rates. The result has been reduced subscription sales, which has caused publishers to close some magazine titles, change subscription fulfillment providers and seek more favorable terms from Palm Coast and its competitors when contracts are up for bid or renewal. One customer of the Fulfillment Services business whose revenues were 10.5%10.7% of the total Company revenues for the first quarternine months of 2017 has given notice that a significant portion of its business will be transferred to another provider during 2017.fiscal 2018. Operating expenses for Fulfillment Services decreased from $8,780,000$7,888,000 and $24,535,000 for the third quarter and first quarternine months of 2016 to $6,673,000$6,855,000 and $20,235,000 for the same periodperiods in 2017,2017. The declines in both periods were primarily attributabledue to lower payroll, and benefits as well as lowerand supplies expense resulting from reduced business volumes.volumes, as well as reduced bad debt and consulting costs.

Other revenues increased from $284,000were $94,000 and $1,832,000 for the third quarter and first threenine months of 20162017 compared to $1,660,000$242,000 and $841,000 for the same periodperiods of 2016. The decrease in other revenues for the third quarter was attributable to the sale of a warehouse in February 2016 that was leased to a third party and therefore there was no rental income in 2017. The increase in other revenues for the first nine months was primarily due to the sale of a retail commercial property previously held for investment by a subsidiary of AMREP Southwest during 2017, which resulted in a pre-tax gain of $1,496,000.

Other operating expenses increased from $347,000were $359,000 and $1,119,000 for the third quarter and first nine months of 2017 compared to $360,000 and $1,040,000 for the same periods of 2016. The increase for the first quarter of 2016 to $370,000 for the same period of 2017,nine months was primarily due to increased land maintenance costs and professional and consultingfees offset in part by lower engineering costs at AMREP Southwest.Southwest and its subsidiaries.

General and administrative expenses of Fulfillment Services operations decreased from $865,000declined to $345,000 and $1,025,000 for the third quarter and first quarternine months of 2016 to $353,0002017 from $707,000 and $2,452,000 for the same periodperiods of 2017,2016, primarily due to reducedlower amortization, facilities costs and consulting fees. The lower amortization was a result of certain intangible assets which werebeing determined to be impaired at April 30, 2016 and their carrying value wasbeing written down at April 30, 2016, significantly reducing the amortization of these assets from 2016in 2017 compared to 2017. 2016.

Real estate operations and corporate general and administrative expenses decreased from $1,019,000were $130,000 and $433,000 for the third quarter and first nine months of 2017 compared to $135,000 and $445,000 for the same periods of 2016.

Corporate general and administrative expenses were $787,000 and $2,364,000 for the third quarter and first nine months of 2017 compared to $737,000 and $2,392,000 for the same periods of 2016. The increase for the third quarter was primarily due to higher consulting costs offset in part by lower payroll and benefits. The decrease in the first quarternine months was primarily due to lower payroll and benefit costs and board of 2016 to $1,002,000 for the same period in 2017.director fees, partially offset by increased pension costs.

Interest expense was $224,000$22,000 and $328,000 for the third quarter and first quarternine months of 2017 compared to $379,000$342,000 and $1,085,000 for the same periodperiods of 2016, primarily due to a lower averagereduction of the principal loan balance at AMREP Southwest. Capitalized interest related to various land development activities for the third quarter and first quarternine months of 2017 was $18,000$45,000 and $83,000 compared to none for the same periodperiods of the prior year.

The Company’s effective tax rate was 34.9%35.5% and 32.5% for the third quarter and first quarternine months of 2017 compared to 38.1%29.4% and 36.5% for the same periodperiods of 2016. The difference between the federal statutory tax rate and the effective rate of the tax provision in 2017 and the tax benefit in 2016 was primarily due to state income taxes. The total tax effect of gross unrecognized tax benefits in the accompanying financial statements at both JulyJanuary 31, 20162017 and April 30, 2016 was $58,000, which, if recognized, would have an impact on the effective tax rate. The Company believes it is reasonably possible that the liability for unrecognized tax benefits will not change in the next twelve months.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of funding for working capital requirements are cash flow from operations and existing cash balances. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the industries in which the Company operates and the economy generally. Except as described below, there have been no material changes to the Company’s liquidity and capital resources as reflected in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2016 Form 10-K.

Operating Activities

Receivables, net increaseddecreased from $7,271,000 at April 30, 2016 to $7,404,000$7,190,000 at JulyJanuary 31, 20162017, primarily due to the timing of accounts receivable collections and offset by lower business volumes at Palm Coast.in the Company’s real estate business. Accounts payable and accrued expenses decreased from $8,453,000 at April 30, 2016 to $7,613,000$6,963,000 at JulyJanuary 31, 2016,2017, primarily due to lower business volumes and the timing of payments to vendors.

Real estate inventory decreased from $61,663,000 at April 30, 2016 to $59,715,000$57,165,000 at JulyJanuary 31, 2016, primarily2017, due to real estate land sales at AMREP Southwest.sales. Investment assets decreased from $10,326,000 at April 30, 2016 to $9,716,000$9,715,000 at JulyJanuary 31, 2016,2017, primarily due to the sale of a commercial retail property by a subsidiary of AMREP Southwest. Property, plant and equipment decreased from $11,997,000 at April 30, 2016 to $11,677,000$11,010,000 at JulyJanuary 31, 2016,2017, primarily due to normal depreciation of fixed assets. Other assets decreased from $3,478,000 at April 30, 2016 to $2,813,000 at January 31, 2017, primarily due to the timing of payments related to certain software maintenance contracts recognized in prepaid assets.

Investing Activities

Capital expenditures totaled $39,000$63,000 for the first threenine months of 2017 and $82,000$655,000 for the same period of 2016, all for the Fulfillment Services business.

Financing Activities

At January 31, 2017, AMREP Southwest hashad a loan from a company owned by Nicholas G. Karabots, a significant shareholder of the Company and in which anothera director of the Company hashad a 20% participation. The loan had an outstanding principal amount of $6,483,000 at July 31, 2016, iswas scheduled to mature on December 1, 2017 bearsand bore interest payable monthly at 8.5% per annum, and is secured by a mortgage on all real property of AMREP Southwest in Rio Rancho and by a pledge of the stock of its subsidiary, Outer Rim Investments, Inc. The total book value of the real property collateralizing the loan was approximately $57,413,000 as of July 31, 2016. The loan may be prepaid at any time without premium or penalty except if the prepayment is in connection with the disposition of AMREP Southwest or substantially all of its assets. No payments of principal are required until maturity, except that the following amounts are required to be applied to the payment of the loan: (a) 25% of the net cash proceeds from any sales of real property by AMREP Southwest and (b) 25% of any royalty payments received by AMREP Southwest under the oil and gas lease described in Note 8 in the notes to the consolidated financial statements included in this report on Form 10-Q. At July 31, 2016,annum. AMREP Southwest was in compliance with the covenants of the loan.loan at January 31, 2017. The outstanding balance of this loan at January 31, 2017 was paid in full in February 2017.

A subsidiary of AMREP Southwest had a loan agreement with U.S. Bank National Association for the construction of a 2,200 square foot, single tenant retail building in Rio Rancho, New Mexico. The loan was scheduled to mature on October 31, 2016, bore interest payable monthly on the outstanding principal amount at 0.5% plus the prime rate, was secured by a mortgage on the real property of approximately one acre where construction of the building had occurred, contained customary events of default, representations, warranties and covenants for a loan of this nature and was guaranteed by AMREP Southwest. As of April 30, 2016, the outstanding principal balance of the loan was $555,000.rate. In the first quarter of 2017, this property was sold and the outstanding loan balance was satisfied with proceeds from the sale.

Fulfillment Services

Refer to Note 11 to the consolidated financial statements included in this report on Form 10-Q for detail about possible repayment to the State of Florida by Palm Coast of amounts under the Award Agreement.

Statement of Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 (the “Act”) 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 report 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 Act. 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 report or, in the case of any document incorporated by reference, the date of that 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 report include, but are not limited to, the expected loss of any material customer contract and the material adverse effect of any such loss, the effect of recent accounting pronouncements on the Company, the timing of recognizing unrecognized compensation expense related to shares of common stock issued under the 2006 Equity Plan or the 2016 Equity Plan, the timing of development of the Company’s land held for long-term investment, the liability for unrecognized tax benefits not changing in the next twelve months and the future business conditions that may be experienced by the Company. 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.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s chief financial officer and the other person whose certification accompanies this quarterly report, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. As a result of such evaluation, the chief financial officer and such other person have concluded that such disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its chief financial officer and such other person, as appropriate to allow timely decisions regarding disclosure. The Company believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

No change in the Company’s system of internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

The following disclosure would otherwise be filed on Form 8-K under Item 5.03:

On September 13, 2016, Section 1 of Article I of the By-Laws of AMREP Corporation (the “Company”) was amendedIn June 2009, Palm Coast received $3,000,000 pursuant to update the registered office of the Company inan agreement with the State of Oklahoma, Section 5 of Article IIIFlorida (the “Award Agreement”) as part of the By-Lawsincentives made available in connection with the Company’s project, completed in the second quarter of the Company was amendedfiscal year 2011, to eliminate the reference to the Cityconsolidate its Fulfillment Services operations at its Palm Coast, Florida location. The Award Agreement includes certain performance requirements in terms of New York with respect to the principal office of the Company,job retention, job creation and Section 1 of Article IV of the By-Laws of the Company was amended to eliminate the parenthetical that read “(one of whom may be designated Executive Vice-President)”.

The Company is also providing a complete copy of its latest Certificate of Incorporation, as amended,capital investment which, updates the registered office of the Company inif not met by Palm Coast, entitle the State of Oklahoma andFlorida to obtain the namereturn of a portion, or all, of the registered agent$3,000,000. Accordingly, the $3,000,000 has been recorded as a liability in the accompanying balance sheet. The award monies, if any, to which Palm Coast becomes irrevocably entitled will be amortized into income through a reduction of depreciation over the life of the Companyassets acquired with those funds. Palm Coast has not met certain of the performance requirements in the Award Agreement, in large part due to the adverse economic conditions experienced by the magazine publishing industry since the Award Agreement was executed. On December 30, 2016, the State of Oklahoma.Florida filed a complaint in the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida against Palm Coast seeking repayment of amounts under the Award Agreement. Palm Coast is continuing to have discussions with the State of Florida regarding the amount and timing of such repayment, but the amount and timing of any such repayment have not been resolved.

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 thereunto duly authorized.

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