10 K Assignments
10 K Assignments: AMREP Corporation
Introduction: Description Of The Company
AMREP Corporation is headquartered in Princeton, New Jersey in the United States. The company was founded in 1961 as AMREP (American Realty and Petroleum Corporation). As a publicly traded firm, AMREP complies with SEC’s (Security Exchange Commission) requirements by submitting the required material and financial information. The company is listed on the NYSE (New York Stock Exchange), and it primarily engages in two major business segments, which include media services and real estate (Alexander, 2016). The company carries out its real estate business in Rio Rancho and some areas of Sandoval County in the New Mexico. The activities carried out by AMREP include the installation of necessary drains to ensure a reliable water supply, improving and building roads to promote land development, and obtaining the required government approvals (Clifford, 2016).
The performance of the firm can be evaluated by comparing some of its financials for the fiscal year 2015 and 2016. The main business activity of the firm involves land development and sale. In 2015, the company developed and sold 14 acres of residential land and 1 acre of commercial land. After the sale of the residential and commercial land, the company made total revenue of $ 4, 872,000 (Clifford, 2016).
The company also sold 171 acres of undeveloped land which earned it total revenue of $ 1,011,000 (Clifford, 2016). Thus, the sale of both developed and undeveloped land contributed total revenue of $ 5, 883,000. In 2016, AMREP sold 14 acres of developed residential land at $ 5,214,000 and 47 acres of undeveloped land at $ 483,000, resulting in total revenue of $ 5, 697,000 (Clifford, 2016). From the comparison of the two figures, it is apparent that the total sales revenue for the fiscal year 2015 was higher by $ 186, 000. According to the company’s current financial report, the second quarter of the fiscal year 2016 ended with a net income amounting to $ 112,000 while in the second quarter of the same year, AMREP reported a net loss of $ 676,000 (Clifford, 2016). This indicates that although the company may report some net profit at the end the fiscal year, the net income exhibits an alternating trend of increasing while falling in some periods within the year.
Fluctuations in the net income are influenced by variations in total cost since net profit is derived from the difference between the total revenue and total cost. The net income reported in the first quarter of the fiscal year 2016 indicates that the total cost incurred by the firm during that period was lower than the total revenue. The company incurs various costs, some of which decrease while others increase periodically. For example, the cost of obtaining licenses to operate in some regions and complying with some government regulations increase and decrease in some periods, resulting in the significant change in the overall net income for the company.
Rio Rancho city accredited the development of a PID (Public Improvement District) in July 2016 upon the request of AMREP (Clifford, 2016). This project is expected to cost the company a significant amount over a long period, which the company anticipates to get reimbursement later through the imposition of a levy on the owners of the real estate in the district. Additionally, in 216, the company began the development of some its different commercial properties for lease (Clifford, 2016). These activities entail significant increments in the total cost for the company.
Whether the firm has acquired or divested significantly holdings
The approval of the development of the public improvement district, the development of commercial properties, and other investment activities undertaken by the company indicate the company’s willingness to acquire more holdings despite the business challenges encountered in some periods. For example, in 2016, EMREP Southwest undertook a construction project of about 2,200 square foot of a tenant building, which was later sold at approximately $ 1,466,000 after the full payment of all expenses associated with this property development including the payment of the interests on loans (Clifford, 2016).
The company has realized that although its business in real estate has cycles of low activities that reduce its net income, the profitability of most of its activities such as land development in different cities has the potential to increase fundamentally in the future. As such, the company has acquired more portfolios in the anticipation of increasing its profits.
Whether the firm appears to enter or exit business
The current financial performance of the company indicates its capacity to achieve growth in real estate business. If AMREP pursues its growth objectives, it will be required to acquire more property in Rio Rancho and other cities in order to attain sufficient assets needed to facilitate meaningful business in the development of real estate. The company has demonstrated its ability to compete with other companies that undertake similar business. The continuous investment activities undertaken by the company indicate its willingness to get more into real estate business as opposed to withdrawal characteristics demonstrated by some of its competitors (Clifford, 2016). Thus, the company appears to enter more into the business by increasing the acquisition of more property as well as expanding its business activities.
References
Alexander, P. (2016) AMREP Corporation Company Profile. Retrieved January 13, 2017, from http://www.amrepcorp.com/amrep.asp
Clifford, R. (2016). United States Securities and Exchange Commission, Washington, D.C 20549. Form 10-k Annual Report Pursuant to Sections 13 or 15 (d) of the Security Exchange Act of 1934. Retrieved January 13, 2017, from http://www.amrepcorp.com/SECfiles.asp
