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     July 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) 487-0901

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

Yes     x     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).

Yes     x     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, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

(Do not check if a smaller reporting company)Emerging growth company¨

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

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

Yes     ¨     No     x

Number of Shares of Common Stock, par value $.10 per share, outstanding at September 9, 20168, 2017 – 8,078,954.8,089,204.

AMREP CORPORATION AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

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 July 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 Cash Flows from Operations (Unaudited)

Three Months Ended July 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)

Three Months Ended July 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 Servicesfulfillment 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 20172018 and 20162017 are to the fiscal years ending April 30, 20172018 and 20162017 and all references to the first quarter and first three months of 20172018 and 20162017 mean the fiscal three month periods ended July 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, 2016,2017, which was filed with the SEC on July 29, 201618, 2017 (the “2016“2017 Form 10-K”). Certain 2017 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,May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09,2014-09,Compensation - Stock Compensation: ImprovementsRevenue from Contracts with Customers. Since that date, the FASB has issued additional ASUs providing further revenue recognition guidance (collectively, “Topic 606”). Topic 606 clarifies the principles for recognizing revenues and costs related to Employee Share-Based Payment Accounting.obtaining and fulfilling customer contracts, with the objective of improving financial reporting. The update simplifies several aspectscore principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Topic 606 defines a five-step process to achieve this core principle, and more judgment and estimates may be required under Topic 606 than are currently required under generally accepted accounting for employee share-based payment transactions, includingprinciples. The two permitted transition methods under Topic 606 are (i) the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or (ii) the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of adoption. In August 2015, the FASB issued ASU No. 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the required adoption date until May 1, 2018, although an earlier adoption is permitted. The Company does not intend to early adopt Topic 606. The Company is currently evaluating the impact of Topic 606 on the Company’s accounting for income taxes, forfeitures,policies, processes and statutory tax withholdingsystem requirements, as well as classificationits consolidated financial statements. The Company is also evaluating the transition method it will select upon adoption. Depending on the results of the evaluation, there could be changes to the timing of recognition of revenues and related costs. As the Company considers itself to be in the statementinitial stages 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 adoptionevaluation of ASU 2016-09 bythe impact of Topic 606, the Company isdoes not expectedknow and cannot reasonably estimate quantitative information related to have a material effectthe impact of these new ASUs on its consolidated financial statements.statements, including the effect on the Company’s operating results.

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. This ASU 2016-02 will be effective for the Company for fiscal year 2020 beginning on May 1, 2019. The Company has not determinedyet concluded how the transition approach thatnew standard will be utilized or estimated the impact of adopting ASU 2016-02.its consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09,Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. ASU 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 the Company’s fiscal year 2018 beginning May 1, 2017, including interim periods within that fiscal year. The adoption of ASU 2016-09 by the Company did not have a material effect on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the Company’s fiscal year 2019 beginning May 1, 2018. Early adoption is permitted, but the Company does not expect to early adopt ASU 2016-15. A retrospective transition method is to be used in the application of this amendment. The adoption of ASU 2016-15 by the Company is not expected to have a material effect on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09,Stock Compensation – Scope of Modification Accounting, guidance that clarifies that all changes to share-based payment awards are not necessarily accounted for as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award changes as a result of the change in terms or conditions. ASU 2017-09 is effective for the Company’s fiscal year 2019 beginning May 1, 2018, including interim periods within those periods, with early adoption permitted. Since inception of the Company’s share-based payment awards, there have been no modifications of the awards issued, including for the quarter ended July 31, 2017. The Company will account for future modifications, if any, on a prospective basis. As such, the Company has early adopted ASU 2017-09 without a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers. This guidance 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. 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):of:

During the first quarter of 2017,2018, revenues from one major customer of the Company’s Fulfillment Servicesfulfillment services business totaled $1,284,000$1,081,000 or 10.5%approximately 10% of total revenues for the Company. As of AugustJuly 31, 2016,2017, the Company’s Fulfillment Servicesfulfillment services business had $416,000$713,000 of outstanding accounts receivable from this customer.customer, which was reduced by collections to $360,000 by September 11, 2017. This major customer has given the Company’s Fulfillment Servicesfulfillment services business notice that a significant portion of its business will be transferred to another providerfrom Palm Coast during 2017.2018.

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 July 31, 2016, 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 the AMREP Southwest in Rio Rancho, New Mexico. In the first quarter of 2017, the Company sold this property (see Note 8).

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

Depreciation of property, plant and equipment charged to operations was $321,000 and $360,000 for the three month periods ended July 31, 2017 and 2016.

Other assets consist of the following (in thousands):of:

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):of:

The July 31, 20162017 accounts payable and accrued expenses total included customer postage deposits of $3,702,000,$3,112,000, accrued expenses of $2,031,000,$1,494,000, trade payables of $707,000$631,000 and other of $1,173,000.$1,252,000. The April 30, 20162017 accounts payable and accrued expenses total included customer postage deposits of $3,947,000,$3,178,000, accrued expenses of $1,998,000,$1,669,000, trade payables of $837,000$619,000 and other of $1,671,000.

Notes payable consist of the following (in thousands):

Real Estate Loan

AMREP Southwest has a loan from a company owned by Nicholas G. Karabots, a significant shareholder of the Company and in which another director of the Company has a 20% participation. The loan had an outstanding principal amount of $6,483,000 at July 31, 2016, is scheduled to mature on December 1, 2017, bears interest payable monthly at 8.5% per annum and is secured by a mortgage on all real property of AMREP Southwest 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 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.

Other Notes 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. In the first quarter of 2017, this property was sold and the outstanding loan balance was satisfied with proceeds from the sale.$1,569,000.

During the quarter ended July 31, 2016, the Company 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, referRefer to Note 119 to the consolidated financial statements contained in the 20162017 Form 10-K for detail about the settlement agreement entered into between Palm Coast and the State of Florida in the first quarter of 2018. As a result of the settlement agreement, in the first quarter of 2018, Palm Coast reduced its previously recorded liability of $3,000,000 and a related $26,000 interest accrual by $1,620,000 to $1,406,000 by recognizing a pre-tax gain of $1,318,000 and recording a deferred gain of $302,000. In connection with the settlement, Palm Coast made a payment of $163,000 to the State of Florida during the first quarter of 2018 thereby reducing its remaining liability to $1,243,000. The $1,318,000 pre-tax gain is included in Other revenues in the accompanying financial statements. The deferred gain of $302,000 was reduced to $282,000 during the first quarter of 2018 with the $20,000 reduction being a non-cash credit to operating expenses. The remaining deferred gain of $282,000 will be recognized over a period of approximately eight years from July 31, 2017.

In addition, refer to Note 10 to the consolidated financial statements contained in the 2017 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 quarter of 2017.2018. Revenue from this transaction is being recorded over the lease term and approximately $57,000 was recognized during the first quartersquarter of 2017each of 2018 and 2016.2017. At July 31, 2016,2017, there was $474,000$246,000 of deferred revenue remaining to be recognized in future periods.

During the first quarter of 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 that was included in Other revenues for that quarter.

The Financial Instruments TopicOther revenues for the first quarter 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 methods2018 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.2017 consist of:

The Company did not have any long-term, fixed-rate notes receivables at July 31, 2016 or April 30, 2016. The estimated fair value of the Company’s long-term, fixed-rate note payable was $5,875,000 and $11,102,000 compared with carrying amounts of $6,483,000 and $12,384,000 at July 31, 2016 and April 30, 2016.

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$4,535,000 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 quarter of 2017,2018, there was no change in the appraised value of the mortgaged propertyproperties that required the Company to make any additional payments to its pension plan.

Equity compensation plan

In September 2016, the AMREP Corporation 2016 Equity Compensation Plan (the “2016 Equity Plan”) replaced the AMREP Corporation 2006 Equity Compensation Plan (together with the 2016 Equity Plan, the “Equity Plans”). The Company issued 12,00011,250 shares of restricted common stock under the AMREP Corporation 20062016 Equity Compensation Plan (the “Equity Plan”)during the first quarter of 2017.2018. During the first quarter of 2017, 5,0002018, 8,000 shares of restricted common stock previously issued under the Equity PlanPlansvested leaving 26,00027,750 restricted shares issued under the Equity PlanPlans that had not vested as of July 31, 2016.2017.For the first quarterquarters of 20172018 and 2016,2017, the Company recognized $15,000$18,000 and $21,000$15,000 of compensation expense related to the restrictedshares of common stock issued.stock.As ofJuly 31, 20162017, there was $69$113,000of total unrecognized compensation expense related to restricted shares of common stock issued under the Equity PlanPlans which had not vested as of that date, which is expected to be recognized over the remaining vesting term not to exceed three years.

The following tables set forth summarized data relative to the industry segments in which the Company operated for the three month periods ended July 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 Servicesfulfillment services business operated by Palm Coast Data LLC (“Palm Coast”) and its affiliates. Information concerning industry segments is set forth in Note 118 of the notes 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 2016Company’s annual report on Form 10-K.10-K for the year ended April 30, 2017, which was filed with the Securities and Exchange Commission on July 18, 2017 (the “2017 Form 10-K”). Many of the amounts and percentages presented in this sectionItem 2 have been rounded for convenience of presentation. Unless otherwise qualified, all references to 20172018 and 20162017 are to the fiscal years ending April 30, 20172018 and 20162017 and all references to the first quarter and first three months of 20172018 and 20162017 mean the fiscal three month periods ended July 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 20162017 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 20162017 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 20162017 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 20162017 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 20162017 Form 10-K and in the notes to the unaudited consolidated financial statements and related notes thereto appearing elsewhereincluded in this quarterly report on Form 10-Q. The Company did not adopt any accounting policy in the first quarter of 20172018 that had a material impact on its consolidated financial statements.

RESULTS OF OPERATIONS

For the first quarter of 2017,2018, the Company recorded net income of $1,448,000, or $0.18 per share, compared to net income of $630,000, or $0.08 per share, compared to a net loss of $1,179,000, or $0.15 per share, for the first quarter of 2016.2017. Revenues were$12,208,000were $11,326,000 for the first quarter of 20172018 compared to $9,575,000$12,208,000 for the same period in the prior year.

Revenues from land sales at AMREP Southwest and its subsidiaries were $2,720,000$2,677,000 for the first quarter of 20172018 compared to $110,000$2,720,000 for the same period of 2016. 2017. $2,044,000 of the $2,677,000 of revenues from land sales for the first quarter of 2018 was for an approximate five acre undeveloped commercial property in Colorado, which had a gross profit percentage of 65%.

For the first quarters of 20172018 and 2016,2017, the Company’s land sales in New Mexico were as follows:follows (dollars in thousands):

The average gross profit percentage on New Mexico land sales was 5%18% for the first quarter of 20172018 compared to 68%5% for the same period of 2016.2017. The reducedincreased profit percentage was attributable to the mix of lots sold with 2017 sales being primarily2018 reflecting favorable lot pricing relative to costs on developed lots with lower profit margins compared to 2016 where sales were primarily higher margin undeveloped lots.2017. 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 Servicesfulfillment services operations decreased from $9,181,000$7,828,000 for the first quarter of 20162017 to $7,828,000$7,243,000 for the same period in 2017.2018. 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 Servicesfulfillment 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 Servicesfulfillment services business whose revenues were 10.5%approximately 10% of the total Company revenues for the first quarter of 20172018 has given notice that a significant portion of its business will be transferred to another providerfrom Palm Coast during 2017.2018. Operating and selling expenses for Fulfillment Servicesfulfillment services decreased from $8,780,000$6,673,000 for the first quarter of 20162017 to $6,673,000$6,094,000 for the same period in 2017,2018, primarily attributable to lower payroll and benefits, as well as lower supplies expense, resulting from reduced business volumes.volumes, together with lower software and communication costs.

Other revenues increaseddecreased from $284,000$1,660,000 for the first three months of 20162017 to $1,660,000$1,406,000 for the same period of 2017. The increase2018. Other revenues in other revenues was2018 were primarily due to a pre-tax gain of $1,318,000 related to a settlement agreement with the State of Florida (refer to Note 6 of the notes to the consolidated financial statements included in this report on Form 10-Q). Other revenues in 2017 were primarily the result of the sale of a retail commercial property by AMREP Southwest, which resulted in a pre-tax gain of $1,496,000. Other operatingOperating and selling expenses for real estate increased from $347,000$411,000 for the first quarter of 20162017 to $370,000$511,000 for the same period of 2018, primarily due to increased employee costs, land maintenance and broker commissions on sales activity, offset in part by the capitalization of certain engineering department costs related to land development and lower consulting costs.

Fulfillment services general and administrative expenses decreased from $352,000 for the first quarter of 2017 to $349,000 for the same period of 2018, primarily due to reduced amortization of other assets. Real estate general and administrative expenses decreased from $169,000 in the first quarter of 2017 to $114,000 for the same period in 2018, primarily due to reduced costs related to payroll and benefits, rent, outside services and insurance. Corporate general and administrative expenses decreased from $834,000 in the first quarter of 2017 to $808,000 for the same period of 2018, primarily due to lower professional fees and pension costs, offset in part by increased payroll and benefits costs.

Imputed interest expense related to the settlement and remaining liability with the State of Florida noted above was $13,000 for the first quarter of 2018 compared to $224,000 of interest expense for the same period of 2017 primarily duerelated to increased professional and consulting costs attwo notes payable of AMREP Southwest.

General and administrative expenses of Fulfillment Services operations decreased from $865,000 for the first quarter of 2016 to $353,000 for the same period of 2017, primarily due to reduced amortization of intangible assets, whichSouthwest that were determined to be impaired at April 30, 2016 and their carrying valuepaid in full during 2017. There was written down at April 30, 2016, significantly reducing the amortization of these assets from 2016 to 2017. Real estate operations and corporate general and administrative expenses decreased from $1,019,000 in the first quarter of 2016 to $1,002,000 for the same period in 2017.

Interest expense was $224,000 for the first quarter of 2017 compared to $379,000 for the same period of 2016, due to a lower average principal loan balance at AMREP Southwest. Capitalizedno capitalized interest for the first quarter of 2017 was $18,0002018 compared to none$18,000 for the same period of the prior year.

The Company’s effective tax rate was 34.9%34.6% for the first quarter of 20172018 compared to 38.1%34.9% for the same period of 2016.2017. The difference between the statutory tax rate and the effective rate of the tax provision in 20172018 and the tax benefit in 20162017 was primarily due to state income taxes. The total tax effect of gross unrecognized tax benefits in the accompanying financial statements at both July 31, 20162017 and April 30, 20162017 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 may also seek bank financing on specific real estate projects. 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 20162017 Form 10-K.

Refer to Note 9 to the consolidated financial statements contained in the 2017 Form 10-K for detail about the settlement agreement entered into between Palm Coast and the State of Florida in the first quarter of 2018. As a result of the settlement agreement, in the first quarter of 2018, Palm Coast reduced its previously recorded liability of $3,000,000 and a related $26,000 interest accrual by $1,620,000 to $1,406,000 by recognizing a pre-tax gain of $1,318,000 and recording a deferred gain of $302,000. In connection with the settlement, Palm Coast made a payment of $163,000 to the State of Florida during the first quarter of 2018 thereby reducing its remaining liability to $1,243,000. The $1,318,000 pre-tax gain is included in Other revenues in the accompanying financial statements included in this quarterly report on Form 10-Q. The deferred gain of $302,000 was reduced to $282,000 during the first quarter of 2018 with the $20,000 reduction being a non-cash credit to operating expenses in the accompanying consolidated financial statements included in this quarterly report on Form 10-Q. The remaining deferred gain of $282,000 will be recognized over a period of approximately eight years from July 31, 2017.

Operating Activities

Receivables, net increaseddecreased from $7,271,000$6,379,000 at April 30, 20162017 to $7,404,000$5,948,000 at July 31, 20162017, primarily due to the timing of accounts receivable collections and offset by lower business volumes at Palm Coast.collections. Accounts payable and accrued expenses decreased from $8,453,000$7,035,000 at April 30, 20162017 to $7,613,000$6,489,000 at July 31, 2016,2017, primarily due to lower business volumes and the timing of payments to vendors.

Real estate inventory decreased from $61,663,000$56,090,000 at April 30, 20162017 to $59,715,000$55,358,000 at July 31, 2016, primarily2017, due to real estate land sales at AMREP Southwest. Investment assets decreased from $10,326,000 at April 30, 2016 to $9,716,000 at July 31, 2016, primarily due to the sale of a commercial retail property by AMREP Southwest. Property, plant and equipment decreased from $11,997,000$10,852,000 at April 30, 20162017 to $11,677,000$10,541,000 at July 31, 2016, primarily2017 due to normal depreciation of fixed assets.

Other liabilities and deferred revenue decreased from $3,376,000 at April 30, 2017 to $1,843,000 at July 31, 2017, primarily due to the previously described settlement agreement between Palm Coast and the State of Florida.

Investing Activities

Capital expenditures totaled $39,000$10,000 for the first three months of 20172018 and $82,000$39,000 for the same period of 2016,2017, all for the Fulfillment Servicesfulfillment services business.

Financing Activities

AMREP Southwest has a loan from a company owned by Nicholas G. Karabots, a significant shareholder of the Company and in which another director of the Company has a 20% participation. The loan had an outstanding principal amount of $6,483,000 at July 31, 2016, is scheduled to mature on December 1, 2017, bears 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, AMREP Southwest was in compliance with the covenants of the loan.

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. In the first quarter of 2017, this property was sold and the outstanding loan balance was satisfied with proceeds from the sale.

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 anya 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 restricted common stock issued under the Equity Plan,Plans, the liability for unrecognized tax benefits not changing in the next twelve months, the seeking of bank financing for real estate projects 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 underRefer to Item 5.03:

On September 13, 2016, Section 13 of ArticlePart I of the By-Laws of AMREP Corporation (the “Company”)Company’s annual report on Form 10-K for the year ended April 30, 2017, which was amended to updatefiled with the registered office ofSecurities and Exchange Commission on July 18, 2017, for detail about the Company insettlement agreement entered into between Palm Coast Data LLC and the State of Oklahoma, Section 5Florida in the first quarter of Article III of the By-Laws of the Company was amended to eliminate the reference to the City of New York with respect to the principal office of the Company, 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)”.2018.

The Company is also providing a complete copy of its latest Certificate of Incorporation, as amended, which updates the registered office of the Company in the State of Oklahoma and the name of the registered agent of the Company in the State of Oklahoma.

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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