INTRODUCTION

The Company, through its subsidiaries, is primarily engaged in four business segments: the Real Estate business operated by AMREP Southwest Inc. and its subsidiaries (collectively, "AMREP Southwest") and the Subscription Fulfillment Services, Newsstand Distribution Services and Product Fulfillment Services businesses operated by Kable Media Services, Inc. and its subsidiaries (collectively, "Kable" or "Media Services"). 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 discussion should be read in conjunction with the April 30, 2008 consolidated financial statements and accompanying notes. All references in this Item 2 to the third quarter or first nine months of 2009 and 2008 mean the fiscal three and nine month periods ended January 31, 2009 and 2008.

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 April 30, 2008 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 Company's annual report on Form 10-K for the year ended April 30, 2008 (the "2008 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 significant accounting policies of the Company are described in Note 1 to the April 30, 2008 consolidated financial statements, and the critical accounting policies and estimates are described in Management's Discussion and Analysis included in Item 7 of the 2008 Form 10-K. There have been no changes in these critical accounting policies. Information concerning the implementation and the impact of new accounting standards issued by the Financial Accounting Standards Board ("FASB") is included in the notes to the April 30, 2008 consolidated financial statements.

The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements", effective May 1, 2008. The adoption of SFAS No. 157 did not have an impact on the Company's consolidated financial position or results of operations. The Company also adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115", effective May 1, 2008. The adoption of SFAS No. 159 did not have an impact on the Company's consolidated financial position or results of operations. The Company did not adopt any new accounting policies during the quarter ended January 31, 2009.

RESULTS OF OPERATIONS

For the third quarter of 2009, the Company had net loss of $100,000, or $0.02 per share, compared to net income of $3,446,000, or $0.57 per share, in the third quarter of 2008. For the first nine months of fiscal 2009, net income was $2,866,000, or $0.48 per share, compared to net income of $13,176,000, or $2.08 per share, for the same period of 2008. Revenues were $35,720,000 and $111,580,000 in the third quarter and first nine months of 2009 compared to $43,435,000 and $136,885,000 in the same periods last year.

Results for the first nine months of 2008 included a loss from discontinued operations of $57,000, net of tax, or $0.01 per share, that reflected costs incurred in the first quarter of 2008 in connection with the settlement of all litigation related to the Company's El Dorado, New Mexico former water utility subsidiary that were in addition to costs estimated and accrued for this matter in the fourth quarter of fiscal 2007.

Revenues from land sales at AMREP Southwest were $521,000 and $6,594,000 for the three and nine month periods ended January 31, 2009 compared to $6,302,000 and $27,613,000 for the same periods of the prior year. The decrease of $5,781,000 for the third quarter of 2009 compared to the same quarter of 2008 reflected the sale in last year's third quarter of two commercial lots totaling $5,731,000 with no comparable sales in 2009. AMREP Southwest continues to experience substantially lower land sales in its principal market of Rio Rancho, New Mexico due to the severe decline in the real estate market in the greater Albuquerque-metro and Rio Rancho areas that began in earlier periods. Third quarter 2009 land sales revenues were from the sale of 11 developed residential lots and 3 undeveloped residential lots to homebuilders, while in the same period of fiscal 2008 there were land sales of 26 undeveloped residential lots to homebuilders and the sale of approximately 25 acres of undeveloped land to commercial developers. The trend of declining permits for new home construction in the Rio Rancho area also continues, with 32% fewer single-family residential building permits issued during calendar year 2008 than in calendar year 2007. The Company believes that this decline has been consistent with the well-publicized problems of the national home building industry and credit markets, including fewer sales of both new and existing homes, an increasing number of mortgage delinquencies and foreclosures and a tightening of mortgage availability. Faced with these adverse conditions, builders have slowed the pace of building on developed lots previously purchased from the Company in Rio Rancho and delayed or cancelled the purchase of additional developed lots. These factors have also contributed to a steep decline in the sale of undeveloped land to both builders and investors.

In Rio Rancho, the Company offers for sale both developed and undeveloped lots to national, regional and local home builders, commercial and industrial property developers and others. For the third quarter and first nine months of fiscal 2009 and 2008, the Company's land sales in Rio Rancho were as follows:

                                                              Fiscal Year
                          --------------------------------------------------------------------------------------
                                           2009                                          2008
                          ---------------------------------------      -----------------------------------------
                                                       Revenues                                       Revenues
                           Acres        Revenues       Per Acre         Acres         Revenues        Per Acre
                            Sold        (in 000s)      (in 000s)         Sold         (in 000s)       (in 000s)
                         ----------    -----------    -----------      --------      ------------    -----------

Three months ended
January 31:
 Developed
   Residential               1.5        $   361        $   241              -         $       -       $      -
   Commercial                  -              -              -           25.0             5,731            229
                         ----------    -----------    -----------      --------      ------------    -----------
 Total Developed             1.5            361            241           25.0             5,731            229
 Undeveloped                 2.5            160             64           24.3               571             24
                         ----------    -----------    -----------      --------      ------------    -----------
   Total                     4.0        $   521        $   130           49.3         $   6,302       $    128
                         ----------    -----------    -----------      --------      ------------    -----------

Nine months ended
January 31:
 Developed
   Residential               3.2        $   789        $   247           30.0         $   9,468       $    316
   Commercial                1.0            126            126           38.8             8,651            223
                         ----------    -----------    -----------      --------      ------------    -----------
 Total Developed             4.2            915            218           68.8            18,119            263
 Undeveloped               134.4          5,679             42          326.5             9,494             29
                         ----------    -----------    -----------      --------      ------------    -----------
   Total                   138.6        $ 6,594        $    48          395.3         $  27,613       $     70
                         ----------    -----------    -----------      --------      ------------    -----------

The average selling price of land sold by the Company in Rio Rancho in recent years has fluctuated, as the Company offers for sale both developed and undeveloped land from a number of different projects, and selling prices may vary from project to project and within projects depending on location, the stage of development and other factors. The revenue per acre of undeveloped land in the third quarter of 2009 was higher compared to the same period in the prior year due to the undeveloped land sold in the current year being from locations nearer developed areas and thus generally having higher average selling prices. The average gross profit percentage on land sales decreased from 63% in the third quarter 2008 to 36% for the same period in 2009, reflecting the fact that the 2008 third quarter land sales included approximately 25 acres of commercial property which carried a higher profit margin than was produced by the sale of developed residential lots in the third quarter of 2009. For the first nine months the average gross profit percentage increased from 65% in 2008 to 87% in 2009. This increase for the first nine months of 2009 was attributable to the mix of land sold, and principally was the result of a second quarter 2009 sale of 50 acres of undeveloped land to one purchaser for $3,849,000, which contributed a gross profit of $3,825,000 (99%). Revenues, gross profits, average sales prices and related gross profit percentages from land sales can vary significantly from period to period as a result of many factors, including the nature and timing of specific transactions, and prior results are not necessarily a good indication of what may occur in future periods.

Revenues from the Company's Media Services operations decreased from $36,458,000 for the third quarter of 2008 to $35,051,000 for the same period in 2009, a decline of 4%. For the first nine months of 2009, Kable Media's revenues of $104,328,000 were generally unchanged from $104,317,000 in the same period of 2008. The revenue decrease in the third quarter of 2009 reflected an 11% revenue decrease from reduced and lost business from Subscription Fulfillment Services. The well-publicized problems confronting the magazine publishing industry, including declining advertising revenues, lower

subscription and newsstand sales and increasing costs, contributed to the decline in the revenues of Kable since publishing is the principal industry which Kable serves. Revenues from Subscription Fulfillment Services operations decreased from $32,645,000 and $92,111,000 for the three and nine month periods of 2008 to $28,998,000 and $90,175,000 for the comparable periods in 2009, primarily reflecting the net effect of the previously mentioned reduced and lost business from certain customers that was offset in part by revenue gains from new and existing clients. Revenues from Newsstand Distribution Services operations were generally unchanged for the third quarter of 2009 compared to the third quarter of 2008, totaling $2,923,000 this year compared to $2,944,000 for the same period in 2008. Newsstand Distribution Services revenues decreased from $9,811,000 for the first nine months of 2008 to $9,374,000 for the same period in 2009, primarily reflecting a softening of magazine newsstand demand. Revenues from Product Fulfillment Services and other increased from $892,000 and $2,449,000 for the three and nine month periods of the prior year to $3,130,000 and $4,779,000 for the comparable periods in the current year, primarily as a result of the inclusion of the results of operations of the Company's product repackaging business and temporary staffing services business from early November 2008 when the Company purchased certain assets of companies that had been in those businesses. Kable's operating expenses increased by $382,000 and $1,087,000 for the third quarter and first nine months of 2009 compared to the same periods in 2008, primarily attributable to higher consulting and computer systems integration costs of the Subscription Fulfillment Services business, which were partly offset by lower interest expense principally due to lower interest rates in both periods of 2009.

As a result of the significant disruption in the magazine distribution system that occurred in February 2009 (see Note 14), there has been an adverse effect on commission revenues in the Newsstand Distribution Services business that is continuing. Because uncertainties still remain in the distribution system, the Company is not yet able to predict the effect of this disruption on its financial condition and results of operations.

In January 2008, the Company announced a project to unify its magazine subscription, membership and direct mail fulfillment services from three locations into one location at Palm Coast, Florida, which is expected to streamline operations, improve service to clients and create cost efficiencies through reduced overhead costs and the elimination of operating redundancies. The Company is still evaluating various alternatives for this expansion, which could require capital expenditures in the range of $15,000,000 to $20,000,000. The project is scheduled to be implemented over a two-to-three year period, and over that period may involve approximately $6,000,000 of non-recurring cash costs for severance, training and transition, facility closings and equipment relocation. The State of Florida and the City of Palm Coast have agreed to provide incentives for the project, including cash and employee training grants and tax relief, which could amount to as much as $8,000,000, largely contingent on existing job retention, new job creation and capital investment. Previously during fiscal 2008, the Company announced (i) one significant workforce reduction in its Subscription Fulfillment Services business that occurred in the third quarter of fiscal 2008, (ii) a plan to redistribute the work performed at the Marion, Ohio facility of its Fulfillment Services business and the scheduled closing of that facility that was substantially completed in August 2008, and
(iii) the consolidation of fulfillment operations customer call centers. During the quarter ended January 31, 2009, the Company recognized $175,000 of income for certain incentives related to the unification project, which are netted with costs of $169,000. As a result, the Company reported a net gain of $6,000 related to the unification project in the third quarter of 2009 and incurred net costs of $567,000 for the first nine months of 2009 compared to net costs of $136,000 and $556,000 for the same periods of 2008, principally for severance and consulting costs. The items of income related to incentives and costs related to the unification project are included in Restructuring and fire recovery costs in the Company's consolidated statements of operations and retained earnings.

On December 5, 2007, a warehouse of approximately 38,000 square feet leased by the Company in Oregon, Illinois was totally destroyed by fire. The warehouse was

used principally to store back issues of magazines published by certain customers for whom the Company filled back-issue orders as part of its services. The Company was required to provide insurance for certain of those customers whose property was destroyed in the warehouse fire. Through February 28, 2009, the Company's insurance carrier had paid approximately $211,000 to customers for lost materials. The Company believes that the net effect of the outcome of other pending or unasserted claims related to materials of certain publishers for whom it was required to provide insurance, together with proceeds from its property claims, will not have a material effect on its financial position, results of operations or cash flows.

The Company has filed a preliminary claim with its insurance provider for its property loss as a result of the fire and has been advanced $500,000 for replacement of such property. During the quarter ended January 31, 2009, the Company replaced a portion of the fixed assets lost in the warehouse fire and recorded a $134,000 gain resulting from the recognition of insurance proceeds, which is netted against costs related to the fire. As a result, the Company reported a net gain of $77,000 for the third quarter and net charges to operations of $62,000 for the first nine months of 2009 related to fire recovery costs, principally for legal and other advisory costs that were not covered by insurance. The item of income related to insurance proceeds and the fire recovery costs are included in Restructuring and fire recovery costs in the Company's consolidated statements of operations and retained earnings. In addition, the Company recorded $173,000 of other income in the first quarter of 2009 for a business interruption claim resulting from the fire, and has approximately $140,000 of business interruption claims pending with but not approved by its insurance provider.

Interest and other revenues decreased $527,000 and $4,297,000 for the third quarter and nine month periods ended January 31, 2009 compared to the same periods in the prior year, primarily due to a pre-tax gain from the sale of a commercial property ($1,873,000) and the forfeiture of a deposit for the purchase of land by a homebuilder who did not exercise a purchase option ($618,000) in the second quarter of 2008, with no similar transactions occurring in the first nine months of 2009. In addition, interest and other revenues were also lower in the third quarter and first nine months of 2009 compared to the same periods in 2008 due to lower cash balances.

Real estate commissions and selling expenses decreased $221,000 and $393,000 for the third quarter and nine month periods ended January 31, 2009 compared to the same periods in the prior year, principally due to the reduced land sales. Other operating expenses increased $770,000 and $379,000 for the three and nine month periods ended January 31, 2009 compared to the same periods last year, primarily due to a net favorable $558,000 adjustment to real estate tax expense in the third quarter of 2008 resulting from the finalization of a property tax valuation appeal by AMREP Southwest and a $184,000 adjustment to real estate tax expense in 2009 as a result of receiving the final calendar year 2008 tax bills.

General and administrative expenses of Media Services operations increased $317,000 and $257,000 in the third quarter and first nine months of 2009 compared to the same periods in 2008, primarily due to the aforementioned higher consulting fees and computer system integration costs associated with the unification project of the Subscription Fulfillment Services business. Real estate operations and corporate general and administrative expense decreased $77,000 and $190,000 for the third quarter and first nine months of 2009 compared to the same periods last year, primarily due to reduced professional fees.

LIQUIDITY AND CAPITAL RESOURCES

During the past several years, the Company has financed its operations from internally generated funds from real estate sales and Media Services operations, and from borrowings under its various lines-of-credit and development loan agreements.

Cash Flows From Operating Activities

Real estate receivables decreased from $13,124,000 at April 30, 2008 to $4,064,000 at January 31, 2009 reflecting the net effect of (i) the reclassification of approximately $6,530,000 to real estate inventory and $1,125,000 to investment assets from mortgage notes receivable resulting from the Company's acceptance of deeds in lieu of foreclosure related to delinquent mortgage note receivables and (ii) payments received on mortgage notes held by AMREP Southwest offset in part by mortgages notes received by AMREP Southwest in connection with real estate sales that closed during the first nine months of 2009.

Media Services operations accounts receivable increased from $45,701,000 at April 30, 2008 to $50,059,000 at January 31, 2009, primarily due to the effect of higher quarter-end billings at January 31, 2009 compared to April 30, 2008 and the timing of payments by customers. Media Services operations accounts receivable include approximately $7,500,000 from a distribution wholesaler customer that suspended normal business activities in February, which amount is subject to adjustment by magazine return activity subsequent to the end of the quarter that may differ from the Company's estimates. No payments of accounts receivable have been received by the Company from this customer after January 31, 2009. Because the potential loss on amounts due from this wholesaler is unable to be estimated, the Company has not provided an allowance for uncollectibility, but it continues to monitor the collectibility of the net receivable and will provide an appropriate allowance if and when deemed necessary (see Notes 3 and 14).

Real estate inventory was $81,817,000 at January 31, 2009 compared to $70,252,000 at April 30, 2008. Inventory in the Company's core real estate market of Rio Rancho increased from $63,215,000 at April 30, 2008 to $74,442,000 at January 31, 2009, primarily reflecting the reclassification of mortgage notes receivable to inventory discussed above and the net effect of development spending and land sales. The balance of real estate inventory consisted of properties in Colorado.

Property, plant and equipment increased from $28,914,000 at April 30, 2008 to $32,500,000 at January 31, 2009, primarily due to a third quarter warehouse acquisition by the Company, offset in part by normal depreciation charges.

Accounts payable and accrued expenses decreased from $98,532,000 at April 30, 2008 to $77,850,000 at January 31, 2009, primarily as a result of the timing of payments due to publishers and vendors. In addition, under a distribution arrangement with one publisher customer of the Newsstand Distribution Services business, that publisher bears the ultimate credit risk of non-collection of related amounts due from the customers to which the Company distributes the publisher's magazines. Accounts receivable subject to this arrangement were netted ($29,662,000 was netted at January 31, 2009 and $22,703,000 was netted at April 30, 2008) against the related accounts payable due the publisher on the accompanying consolidated balance sheets.

Cash Flows From Investing Activities

Restricted cash of $3,856,000 reflects amounts held in escrow that were received in connection with the sale of investment assets that are identified as "1031 Exchange assets" and which are restricted pending the purchase of identified replacement assets.

On November 7, 2008, the Company, through a newly-formed subsidiary of Kable, acquired certain assets of a privately-held product repackaging and fulfillment industry company, including a warehouse. The aggregate purchase price of the assets purchased was approximately $8,500,000, and was financed from working capital, bank borrowings and the assumption of a $4,747,000 mortgage note on the warehouse (see Note 13).

Capital expenditures totaled $1,521,000 and $5,662,000 in the first nine months of 2009 and 2008. Capital expenditures in 2009 were primarily for computer hardware and software development expenditures related to the Subscription Fulfillment Services business. Capital expenditures in 2008 were also for computer hardware and software development expenditures related to the Subscription Fulfillment Services business, as well as for certain real estate investment assets. Based in part on discussions with existing lenders, the Company believes that it has adequate cash and financing capability to provide for its anticipated future capital expenditures, subject in all respects to the following discussion about cash flows from financing activities.

Cash Flows From Financing Activities

AMREP Southwest has a $25,000,000 revolving credit facility with a bank that matures in September 2009. The revolving credit facility had an outstanding balance of $25,000,000 at January 31, 2009 and $24,000,000 at February 28, 2009. At January 31, 2009, AMREP Southwest was in compliance with the facility's covenants. As a result of the extreme volatility in the financial markets, the cost of obtaining money has increased and many lenders have increased interest rates, imposed tighter lending standards, refused to refinance existing debt at maturity on terms similar to current terms and, in some cases, have ceased to provide funding to borrowers. The bank has recently initiated discussions with AMREP Southwest regarding a renewal of the arrangement; however, the bank has also indicated that, due to the credit markets and the real estate economy, it would expect different terms and conditions, including a higher interest rate, in order to extend the line.

Kable maintains a bank credit facility aggregating $52,536,000, including revolving credits of $45,000,000 maturing in May 2010 and term borrowings of $7,536,000 maturing in part in December 2009 and the balance in May 2010, which is described in greater detail in the 2008 Form 10-K. The total outstanding balance of the bank credit facility was $12,244,000 at January 31, 2009. The facility requires Kable to comply with a number of covenants, including some based upon its financial performance measured at the end of its fiscal quarters. At January 31, 2009, Kable was in compliance with these covenants. However, as reported in Note 14 to the financial statements, Kable has a net estimated account receivable of approximately $7,500,000 at January 31, 2009 from Anderson News, LLC, a major wholesaler customer of Kable's Newsstand Distribution Services business that has ceased operations and is liquidating, and at this time Kable is unable to estimate the collectibility of the account. The Company believes it is possible that a significant portion of the account will be determined to be uncollectible and that such determination could be made as early as during the Company's current fiscal quarter ending April 30, 2009. Depending on the amount of the reserve that Kable establishes for this or other uncollectible accounts receivable, Kable may become in default of one or more of the covenants under its credit facility, unless the non-compliance is waived by the lender. If Kable is unable to obtain a waiver for any event of default on satisfactory terms, Kable would not be able to borrow funds under the facility until the non-compliance is cured and the lender would be permitted to exercise . . .