<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
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 333-66859
INTREPID CAPITAL CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 59-3546446
(State of Incorporation) (I.R.S. Employer Identification No.)
50 NORTH LAURA STREET, SUITE 3550, JACKSONVILLE, FLORIDA 32202
(Address of principal executive offices) (Zip Code)
(904) 350-9999
(Registrant's telephone number)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
----------------------------------------------
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
As of October 31, 1999, there were 2,214,525 shares of Common Stock,
$0.01 par value per share, outstanding, and 1,000 shares of Common Stock issued
and held in treasury.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<S> <C>
Consolidated Balance Sheets of Intrepid Capital Corporation and
Subsidiaries as of September 30, 1999 and December 31, 1998...................... 3
Consolidated Statements of Operations of Intrepid Capital
Corporation and Subsidiaries for the Three and Nine Month Periods
Ended September 30, 1999 and the Combined Statements of Operations
of Intrepid Capital Management, Inc. and Capital Research
Corporation for the Three and Nine Month Periods Ended September 30,
1998............................................................................. 4
Consolidated Statement of Cash Flows of Intrepid Capital Corporation
and Subsidiaries for the Nine Months Ended September 30, 1999 and
the Combined Statement of Cash Flows of Intrepid Capital Management,
Inc. and Capital Research Corporation for the Nine Months Ended
September 30, 1998............................................................... 5
Notes to Consolidated and Combined Financial Statements.......................... 6-10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Acquisition...................................................................... 11
Liquidity and Capital Resources.................................................. 11
Results of Operations............................................................ 11-14
Year 2000 Matters................................................................ 14-15
PART II - OTHER INFORMATION
ITEMS 1 AND ITEM 6 OTHER INFORMATION
Other Information................................................................ 16
SIGNATURES............................................................................ 17
</TABLE>
2
<PAGE> 3
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,382,033 928,186
Trading securities, at fair value 711,972 144,574
Accounts receivable 221,423 195,018
Inventories 99,416 140,288
Prepaid and other assets 125,643 14,243
----------- ----------
Total current assets 2,540,487 1,422,309
Land - 1,800,000
Property, plant, and equipment, net of accumulated
depreciation of $126,247 in 1999 and $85,579
in 1998 200,984 140,049
Goodwill, less accumulated amortization of $53,394
in 1999 and $2,703 in 1998 1,030,352 970,274
Other assets 63,078 76,467
----------- ----------
Total assets $ 3,834,901 4,409,099
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 93,867 696,757
Accrued expenses 341,655 271,803
Securities sold, but not yet purchased 16,671 -
Current portion of notes payable - 212,933
Income taxes payable 48,154 -
Other 136,816 150,754
----------- ----------
Total current liabilities 637,163 1,332,247
Notes payable, less current portion 1,050,000 32,816
Deferred tax liability - 560,634
----------- ----------
Total liabilities 1,687,163 1,925,697
----------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 15,000,000 shares;
issued 2,215,525 shares at September 30, 1999
and December 31, 1998 22,155 22,155
Treasury stock at cost, 1,000 shares at September 30, 1999 (3,669) -
Additional paid-in capital 2,481,320 2,481,320
Accumulated deficit (352,068) (20,073)
----------- ----------
Total stockholders' equity 2,147,738 2,483,402
----------- ----------
$ 3,834,901 4,409,099
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Nine month periods ended September 30, 1999
(unaudited)
INTREPID CAPITAL MANAGEMENT, INC.
AND CAPITAL RESEARCH CORPORATION
Combined Statements of Operations
Three and Nine month periods ended September 30, 1998
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1999 1998 1999 1998
----------- --------- --------- ---------
Revenues:
<S> <C> <C> <C> <C> <C>
Commissions $ 392,507 413,433 1,225,617 1,340,373
Asset management fees 228,279 228,534 662,319 577,199
Investment banking revenues 82,506 - 82,506 -
Outside manager income - 7,122 - 22,771
Net trading (losses) profits (138,302) (20,090) (97,703) 37,759
Resinous material sales 302,921 - 1,432,048 -
Other 41,012 9,889 83,164 33,391
---------- --------- --------- ---------
Total revenues 908,923 638,888 3,387,951 2,011,493
---------- --------- --------- ---------
Expenses:
Salaries and employee benefits 738,883 383,566 1,846,756 1,128,066
Brokerage and clearing 131,108 136,138 372,905 464,602
Cost of resinous material sales 154,717 - 708,186 -
Outside manager expense - 7,122 - 22,771
Advertising and marketing 60,891 19,145 203,135 53,527
Professional and regulatory fees 80,609 13,006 239,533 52,694
Occupancy and maintenance 65,101 27,252 157,066 65,760
Depreciation and amortization 32,784 6,694 91,359 19,848
Interest expense 17,641 6,512 31,231 18,204
Other 115,854 34,969 270,079 94,177
---------- --------- --------- ---------
Total expenses 1,397,588 634,404 3,920,250 1,919,649
---------- --------- --------- ---------
(Loss) income before income taxes (488,665) 4,484 (532,299) 91,844
Income tax benefit 183,885 - 200,304 -
----------- --------- --------- ---------
Net (loss) income $ (304,780) 4,484 (331,995) 91,844
=========== ========= ========= =========
Basic net (loss) income per share $ (0.14) 0.00 (0.15) 0.08
=========== ========= ========= =========
Diluted net (loss) income per share $ (0.14) 0.00 (0.15) 0.08
=========== ========= ========= =========
Basic weighted average shares outstanding 2,214,525 1,206,148 2,214,606 1,206,148
=========== ========= ========= =========
Diluted weighted average shares outstanding 2,214,525 1,206,148 2,214,606 1,206,148
=========== ========= ========= =========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
4
<PAGE> 5
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Nine months ended September 30, 1999
(unaudited)
INTREPID CAPITAL MANAGEMENT, INC.
AND CAPITAL RESEARCH CORPORATION
Combined Statement of Cash Flows
Nine months ended September 30, 1998
(unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- --------
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (331,995) 91,844
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 91,359 19,848
Purchase of investments, net of sales (128,087) (30,000)
Realized and unrealized gains (losses) on investments 97,703 (37,759)
Deferred tax benefit (560,634) -
Distributions from investments - 33,225
Change in assets and liabilities:
Accounts receivable (26,405) (28,397)
Distributions receivable - 119,560
Inventories 40,872 -
Prepaid and other assets (90,625) 421
Accounts payable and accrued expenses (951,364) (4,293)
Income taxes payable 48,154 -
Other liabilities (13,938) (22,218)
----------- --------
Net cash (used in) provided by operating activities (1,824,960) 142,231
----------- --------
Cash flows from investing activities:
Purchase of property, plant, and equipment (58,983) (29,515)
Proceeds from sale of land 1,800,000 -
Acquisition of Ewing, net of cash acquired 1,087,208 -
----------- --------
Net cash provided by (used in) investing activities 2,828,225 (29,515)
----------- --------
Cash flows from financing activities:
Principal payments on notes payable (545,749) (42,802)
Distributions - (104,319)
Purchase of treasury stock (3,669) -
----------- --------
Net cash used in financing activities (549,418) (147,121)
----------- --------
Net increase (decrease) in cash and cash equivalents 453,847 (34,405)
Cash and cash equivalents at beginning of period 928,186 182,343
----------- --------
Cash and cash equivalents at end of period $ 1,382,033 147,938
=========== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest 31,231 18,205
Cash paid during the period for income taxes $ 312,176 -
=========== ========
Supplemental disclosure of non-cash transactions:
Debt issued to finance acquisition of Ewing 1,350,000 -
Distribution to stockholders through the assumption of note payable $ - 169,625
=========== ========
</TABLE>
See accompanying notes to consolidated and combined financial statements.
5
<PAGE> 6
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
September 30, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OPERATIONS
(A) ORGANIZATION AND BASIS OF PRESENTATION
Intrepid Capital Corporation (the "Company") was formed on April
3, 1998 for the purpose of becoming a full service investment
management and consulting business. On December 16, 1998 as part
of a simultaneous merger and reorganization ("the Merger and
Reorganization"), the Company acquired all of the outstanding
shares of the capital stock of Enviroq Corporation ("Enviroq"),
Intrepid Capital Management, Inc. ("ICM") and Capital Research
Corporation ("CRC") through a series of stock-for-stock and
stock-for-cash exchanges with the former shareholders of each
entity. On August 4, 1999, the Company acquired all of the
outstanding capital stock of Allen C. Ewing Financial Services,
Inc., ("Ewing") (see note 4). The Company is located in
Jacksonville, Florida and conducts its business through its four
wholly owned subsidiaries.
ICM provides investment consulting and investment management
services to individuals and corporations. ICM has received
authority to act as an investment manager in several states to
meet the needs of its customers, the majority of which are located
in the southeastern United States.
CRC is a registered broker/dealer with the Securities and Exchange
Commission (the "SEC") and is a member of the National Association
of Securities Dealers, Inc. (the "NASD") and the Securities
Investor Protection Corporation (the "SIPC"). CRC is approved to
conduct a general securities business on a fully-disclosed basis
through a clearing broker/dealer that carries all accounts and
prepares and maintains all books and records for CRC's customers.
Ewing is a holding company with its only active subsidiary, Allen
C. Ewing & Co. ("ACE"), providing securities brokerage and
investment banking services. ACE is a registered broker/dealer
with the SEC and is a member of the NASD and the SIPC. ACE is
approved to conduct a general securities business on a fully
disclosed basis through a clearing broker/dealer that carries all
accounts and prepares and maintains all books and records for
ACE's customers. ACE is also involved in the underwriting and
selling of debt and equity securities on behalf of investment
banking clients.
Enviroq conducts its operations through Sprayroq, Inc.
("Sprayroq"), a 50% owned subsidiary of which Enviroq has voting
control. Sprayroq is engaged in the development,
commercialization, manufacture and marketing of spray-applied
resinous materials.
The interim financial information included herein is unaudited.
Certain information and footnote disclosures normally included in
the financial statements have been condensed or omitted pursuant
to the rules and regulations of the SEC. The Company believes that
the disclosures made herein are adequate to make the information
presented not misleading. These financial statements should be
read in conjunction with the financial statements and related
notes contained in the Company's Annual Report on Form 10-KSB
filed with the SEC on April 14, 1999. Except as indicated herein,
there have been no significant changes from the financial data
published in the Company's Annual Report. In the opinion of
management, such unaudited information reflects all adjustments,
consisting of normal recurring accruals
6
<PAGE> 7
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
September 30, 1999
necessary for fair presentation of the unaudited information. The
results of operations for three and nine month periods ended
September 30, 1999 and 1998 are not necessarily indicative of the
results that may be expected for the full year.
(B) PRINCIPLES OF CONSOLIDATION
In accordance with purchase accounting, in which ICM and CRC were
deemed to be the acquiring entities in the Merger and
Reorganization, the accounts of Enviroq have been included since
December 16, 1998 (the date of the consummation of the Merger and
Reorganization). The acquisition of Ewing has also been accounted
for under the purchase method of accounting and the accounts of
Ewing have been included since August 4, 1999 (the date of
acquisition).
The accompanying consolidated balance sheets as of September 30,
1999 and December 31, 1998 include the accounts of the Company and
its subsidiaries, ICM, CRC, Ewing and Enviroq.
The 1998 combined statements of operations and cash flows include
the accounts of ICM and CRC on a combined basis through September
30, 1998.
All significant intercompany balances and transactions have been
eliminated in consolidation. The Company, through its ownership in
Enviroq, controls the operations and activities of Sprayroq. There
is no recognition of minority interest in this subsidiary because
of its accumulated deficit position.
(C) EARNINGS PER SHARE
The Company applies the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." This
statement governs the computation, presentation and disclosure
requirements of earnings per share (EPS) for entities with
publicly held common stock.
Net income per share of common stock is computed based upon the
weighted average number of common shares and share equivalents
outstanding during the year. Stock warrants and convertible
instruments, when dilutive, are included as share equivalents. For
the three and nine month periods ended September 30, 1999 and
1998, the Company had no dilutive common stock equivalents.
The weighted average shares outstanding for the three and nine
month periods ended September 30, 1998 represent the shares issued
to ICM and CRC as part of the Merger and Reorganization as if such
shares had been outstanding since January 1, 1998.
7
<PAGE> 8
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
September 30, 1999
(D) COMPREHENSIVE INCOME
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (FAS 130), which is effective for fiscal years beginning
after December 15, 1997. FAS 130 established standards for
reporting total comprehensive income in financial statements and
requires that companies explain the differences between total
comprehensive income and net income. Management has adopted this
statement in 1998. No differences between total comprehensive
income (loss) and net income (loss) existed in the financial
statements reported for the three and nine month periods ended
September 30, 1999 and 1998.
(2) RELATED PARTY TRANSACTION
The Company performs certain asset management functions for
Intrepid Capital, L.P., an investment limited partnership of which
the Company is general partner and a 3.14% equity interest owner
as of September 30, 1999. For the nine months ended September 30,
1999 and 1998, the Company received $45,325 and $53,008,
respectively, for such services.
(3) NOTES PAYABLE
The Company financed the purchase of Ewing by borrowing $1,000,000
from a bank and issuing $350,000 in subordinated convertible
promissory notes to the former Ewing shareholders.
The note payable to a bank has a LIBOR rate plus 1.5% with a
maturity of August 4, 2005. The note requires a principal payment
of $300,000 within the first 30 days, which was paid, interest
only payments for the first twelve months and principal, and
interest payments for the remaining sixty months.
The three promissory notes payable to the former Ewing
shareholders were issued at an interest rate of 8.0% with $150,000
maturing on December 31, 2001 and $200,000 maturing on
December 31, 2003. The outstanding balances of the notes are
convertible, at the option of the holders, to common shares of the
Company at $4.00 per share anytime after August 4, 2000.
(4) ACQUISITION
On August 4, 1999, the Company consummated the acquisition of all
the outstanding capital stock of Allen C. Ewing Financial
Services, Inc., ("Ewing"), a Jacksonville, Florida based provider
of securities brokerage and investment banking services. The
Company acquired the Ewing capital stock in exchange for cash of
$950,000 and three promissory notes in the principal amount of
$350,000. The Company financed the cash with funds borrowed from a
bank. The acquisition has been accounted for under the purchase
method of accounting. Goodwill of $59,793 was recorded and is
being amortized on a straight-line basis over 15 years.
8
<PAGE> 9
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
September 30, 1999
The operating results of Ewing are included in the Company's
consolidated financial statements from the date of acquisition.
The following unaudited pro forma information presents the
consolidated results of operations as if the Ewing acquisition had
occurred on January 1, 1998. Such pro forma information includes
adjustments to 1) increase interest expense to reflect the
financing of the acquisition with the notes payable to a bank and
the former Ewing shareholders, 2) amortize the goodwill incurred
on a straight-line basis over 15 years, and 3) include income tax
expense at a blended statutory rate of 37.63%. Pro forma revenues
would have been $4,647,702 and $3,210,801 for the nine months
ended September 30, 1999 and 1998, respectively. Pro forma net
loss would have been $324,687 and $39,523 for the nine months
ended September 30, 1999 and 1998, respectively. Pro forma basic
and diluted net loss per share would have been $0.16 and $0.03 for
the nine months ended September 30, 1999 and 1998, respectively.
This data does not purport to be indicative of what would have
occurred had the Ewing acquisition been made on January 1, 1998,
or of results which may occur in the future.
(5) SEGMENTS
During 1998, the Company, ICM and CRC operated in two principal
segments, investment advisory services and broker/dealer services.
During 1999, since the acquisition of Ewing, the Company has
operated in two principal segments, investment advisory services
and broker/dealer services which includes investment banking
revenues. The Company's two broker/dealer subsidiaries are managed
as a single segment. Enviroq constitutes a separate segment. The
Company assesses and measures operating performance based upon the
net income derived from each of its operating segments exclusive
of the impact of corporate expenses. The revenues and net income
for each of the reportable segments are summarized as follows for
the nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
Revenues:
<S> <C> <C> <C>
Investment advisory services segment $ 623,175 800,225
Broker/dealer services segment 1,487,386 1,368,268
Enviroq 1,447,913 -
Corporate (170,523) -
Intersegment revenues 0 (157,000)
----------- ----------
$ 3,387,951 2,011,493
=========== ==========
Net income (loss):
Investment advisory services segment $ (194,309) 81,899
Broker/dealer services segment 149,888 9,945
Enviroq 111,342 -
Corporate (398,916) -
----------- ----------
$ (331,995) 91,844
=========== ==========
</TABLE>
9
<PAGE> 10
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated and Combined Financial Statements
September 30, 1999
The total assets for each of the reportable segments are
summarized as follows as of September 30, 1999 and December 31,
1998. Non-segment assets consist primarily of cash, investments
and other assets which are recorded at the parent company level.
<TABLE>
<CAPTION>
1999 1998
---------- ----------
Assets:
<S> <C> <C>
Investment advisory services segment $ 270,211 231,272
Broker/dealer services segment 1,606,697 192,831
Enviroq 1,466,172 3,325,224
Corporate 491,821 659,772
---------- ----------
$3,834,901 4,409,099
========== ==========
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained in this Quarterly Report on Form 10-QSB are
"forward-looking statements," within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective in nature. Such
forward-looking statements reflect management's beliefs and assumptions and are
based on information currently available to management. The forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of Intrepid Capital
Corporation to differ materially from those expressed or implied in such
statements. There can be no assurance that such factors or other factors will
not affect the accuracy of such forward-looking statements
Acquisition
On August 4, 1999, the Company consummated the acquisition of all of
the outstanding capital stock of Allen C. Ewing Financial Services, Inc.
("Ewing"). The Company acquired the Ewing capital stock in exchange for cash of
$950,000 and three promissory notes in the principal amount of $350,000. The
Company financed the cash with funds borrowed from a bank. The acquisition has
been accounted for under the purchase method of accounting.
Liquidity and Capital Resources
The Company's current assets consist generally of cash, money market
funds and trading securities. Trading securities represent a significant
portfolio of individual securities and an investment in Intrepid Capital, L.P.
The Company has financed its growth in operations with funds generated from
stockholder capital and long-term loans. The Company's management believes that
existing capital and funds generated from operations will provide the Company
with sufficient resources to meet present cash and capital needs.
For the nine months ended September 30, 1999, net cash used in
operating activities was $1,824,960, primarily attributable to payments on
accounts payable and accrued expenses, cash paid for taxes and the net loss. Net
cash provided by investing activities was $2,828,225 primarily due to the sale
of approximately 10.6 acres of unimproved land in Jacksonville, Florida, which
resulted in proceeds of approximately $1,800,000, and the acquisition of Ewing.
Net cash used in financing activities was $549,418 primarily due to the
repayment of corporate debt.
The Company, through its subsidiaries CRC and ACE, is subject to the
net capital requirements of the SEC, the NASD and other regulatory authorities.
At September 30, 1999, CRC's regulatory net capital was $215,929, which is
$165,929 in excess of its minimum net capital requirement of $50,000. At
September 30, 1999, ACE's regulatory net capital was $879,447, which is $629,447
in excess of its minimum net capital requirement of $250,000.
Results of Operations
Three Months Ended September 30, 1999 Compared to the Three Months
Ended September 30, 1998
Total revenues were $908,923 for the three months ended September 30,
1999, compared to $638,888 for the three months ended September 30, 1998,
representing a 42.3% increase. The increase is primarily attributable to the
acquisition of Enviroq in December 1998 and Ewing in August 1999.
11
<PAGE> 12
Commissions decreased $20,926, or 5.1%, to $392,507. Commissions
represent revenue earned from securities transactions through CRC and ACE. The
decrease primarily represents decreased transaction volume.
Asset management fees decreased $255, or 0.1%, to $228,279. Asset
management fees represent revenue earned by ICM for investment advisory
services. The fees earned are generally a function of the overall fee rate
charged to each account and the level of Assets Under Management ("AUM").
Quarterly management fees are billed on the first day of each quarter based on
each account value at the market close of the prior quarter. AUM was $101.4
million at June 30, 1999, compared to $111.0 million at June 30, 1998. The
decrease in asset management fees for the three months ended September 30, 1999
relates directly to the net decrease in AUM through investment performance, the
net change in client assets and the elimination of external portfolio managers.
AUM was $98.0 million at September 30, 1999, compared to $104.0 million at
September 30, 1998.
Outside manager income decreased $7,122, or 100.0%. Outside manager
income represents revenue earned by ICM for asset management accounts, whereby
ICM utilizes external portfolio management to provide professional management of
customer accounts. All outside manager income has been eliminated as a result of
management's decision to internally manage accounts that were previously managed
externally.
Net trading profits (losses) decreased $118,212, or 588.4%, to
($138,302). There were $33,623 of realized losses and $104,679 of unrealized
losses in the Company's investment in trading securities and Intrepid Capital,
L.P., primarily due to negative market conditions.
Resinous material sales of $302,921 are attributable to the acquisition
of Enviroq in December 1998.
Other income increased $31,123, or 314.7%, to $41,012. The increase is
primarily attributable to an increase in interest and dividends received from
the cash balances and trading securities.
Total expenses were $1,397,588 for the three months ended September 30,
1999, compared to $634,404 for the three months ended September 30, 1998,
representing a 120.3% increase. The increase is primarily attributable to the
acquisition of Enviroq in December 1998.
Salaries and employee benefits increased $355,317, or 92.6%, to
$738,883. The increases are due to the addition of new employees, annual
increases in salaries and the acquisition of Enviroq in December 1998. During
the three months ended September 30, 1999, a full quarter of Enviroq's salaries
and benefits were included.
Brokerage and clearing expenses decreased $5,030, or 3.7%, to $131,108.
Brokerage and clearing expenses represent the securities transaction costs
directly related to commission revenue earned by CRC. These costs, paid to the
clearing broker/dealers, increase at a declining rate because of volume
discounting. During the quarter ended March 31, 1999, The Company re-negotiated
its clearing agreement, resulting in reduced transactional costs and decreased
brokerage and clearing expenses.
Cost of resinous material sales of $154,717 is attributable to the
acquisition of Enviroq in December 1998.
Outside manager expense decreased $7,122, or 100.0%. Outside manager
expense directly offsets the outside manager income earned by ICM. All outside
manager expense has been eliminated as a result of management's decision to
internally manage accounts that were previously managed externally.
12
<PAGE> 13
Advertising and marketing expenses increased $41,746, or 218.1%, to
$60,891. The increase can be attributed to additional advertising and marketing
expenses ICM incurred to increase name recognition, produce marketing materials
and enhance client relationships, and to the acquisition of Enviroq in December
1998.
Professional and regulatory expenses increased $67,603, or 519.8%, to
$80,609 due to an increase in outside professional fees for additional
accounting, consulting, and legal services necessary to conduct business as a
public entity.
Other expenses increased $80,885, or 231.3%, to $115,854 due to an
increase of general and administrative expenses and to the acquisition of
Enviroq and Ewing.
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended
September 30, 1998
Total revenues were $3,387,951 for the nine months ended September 30,
1999, compared to $2,011,493 for the nine months ended September 30, 1998,
representing a 68.4% increase. The increase is primarily attributable to the
acquisition of Enviroq in December 1998.
Commissions decreased $114,756, or 8.6%, to $1,225,617. Commissions
represent revenue earned from securities transactions through CRC. A
correspondent firm moved to a different clearing firm in March 1998, resulting
in decreased transaction volumes and revenues for the nine months ended
September 30, 1999.
Asset management fees increased $85,120, or 14.7%, to $662,319. Asset
management fees represent revenue earned by ICM for investment advisory
services. The fees earned are generally a function of the overall fee rate
charged to each account and the level of AUM. Quarterly management fees are
billed on the first day of each quarter based on each account value at the
market close of the prior quarter. AUM was $101.0 million at December 31, 1998,
compared to $66.0 million at December 31, 1997. The increase in asset management
fees for the nine months ended September 30, 1999 relates directly to the net
increase in AUM through investment performance, the net change in client assets
and the elimination of external portfolio managers.
Outside manager income decreased $22,771, or 100.0%. Outside manager
income represents revenue earned by ICM for asset management accounts, whereby
ICM utilizes external portfolio management to provide professional management of
the accounts. All outside manager income has been eliminated as a result of
management's decision to internally manage accounts that were previously managed
externally.
Net trading profits (losses) decreased $135,462, or 358.8%, to
($97,703). There were $33,623 of realized losses and $64,080 of unrealized
losses in the Company's investment in trading securities and Intrepid Capital,
L.P., primarily due to negative market conditions.
Resinous material sales of $1,432,048 are attributable to the
acquisition of Enviroq in December 1998.
Other income increased $49,773, or 149.1%, to $83,164. The increase is
primarily attributable to an increase in interest and dividends received from
the cash balances and trading securities.
13
<PAGE> 14
Total expenses were $3,920,249 for the nine months ended September 30,
1999, compared to $1,919,649 for the nine months ended September 30, 1998,
representing a 104.2% increase. The increase is primarily attributable to the
acquisition of Enviroq in December 1998.
Salaries and employee benefits increased $718,690, or 63.7%, to
$1,846,756. The increases are due to the addition of new employees, annual
increases in salaries and the acquisition of Enviroq in December 1998. During
the nine months ended September 30, 1999, the Company hired three new employees
and added three full quarters of Enviroq's salaries and benefits.
Brokerage and clearing expenses decreased $91,697, or 19.7%, to
$372,905. Brokerage and clearing expenses represent the securities transaction
costs directly related to commission revenue earned by CRC and ACE. These costs,
paid to the clearing broker/dealers, increase at a declining rate because of
volume discounting. During the quarter ended March 31, 1999, the Company
re-negotiated its clearing agreement, resulting in reduced transactional costs
and decreased brokerage and clearing expenses.
Cost of resinous material sales of $708,186 is attributable to the
acquisition of Enviroq in December 1998.
Outside manager expense decreased $22,771, or 100.0%. Outside manager
expense directly offsets the outside manager income earned by ICM. All outside
manager expense has been eliminated as a result of management's decision to
internally manage accounts that were previously managed externally.
Advertising and marketing expenses increased $149,608, or 279.5%, to
$203,135. The increase can be attributed to additional advertising and marketing
expenses ICM incurred to increase name recognition, produce marketing materials
and enhance client relationships, and to the acquisition of Enviroq in December
1998.
Professional and regulatory expenses increased $186,829, or 354.6%, to
$239,533 due to an increase in outside professional fees for additional
accounting, consulting, and legal services necessary to conduct business as a
public entity.
Other expenses increased $175,901, or 186.8%, to $270,078 due to an
increase of general and administrative expenses and to the acquisition of
Enviroq and Ewing.
Year 2000 Matters
The Company is working to ensure that its operating and processing
systems will, along with those of its service providers and vendors, continue to
function when the Year 2000 ("Y2K") arrives. The Company has developed and
implemented a comprehensive plan to prepare its computer systems and
applications for Y2K, as well as to identify and address any other Y2K
operational issues that may affect operations.
Due to the potential impact of Y2K on the financial services industry,
the SEC, the NASD and other regulatory and self-regulatory securities
organizations have monitored and required reports from their members concerning
Y2K and encouraged planning for system wide function tests. Y2K problems arise
because of concern that widely distributed information technology systems and
imbedded microprocessors date recognition and processing functions which
designate and recognize a year by the year's last two digits will not be able to
distinguish a year in the twenty-first century from one in the twentieth
century.
14
<PAGE> 15
Management has determined that Y2K will not pose significant
operational problems for its internal computer systems. Management believes the
internal modification and upgrade costs associated with the Company's operations
will not be material and will be expensed as incurred. Mission critical systems
and third party vendors have been identified, and computer hardware and software
have been upgraded or replaced as necessary.
Due to the enormous task facing the securities industry and the
interdependent nature of securities transactions, there can be no assurances
with respect to Y2K's impact on the Company. Disruptions in the economy
generally and in the United States investment markets as a result of Y2K could
have a materially adverse effect on the Company and its subsidiaries.
Specifically, unexpected volatilities within and possible suspension of trading
in the securities industry could adversely impact the Company's revenues and its
ability to do business because a significant portion of the Company's revenues
are based upon its ability to make investments and securities trades for its
customers and the net asset value of funds under management. The amount of
potential lost revenue cannot be reasonably estimated at this time.
Management believes that it has an effective program in place to manage
any contingencies arising out of Y2K. This contingency plan involves, among
other actions, manual workarounds and adjusting staffing strategies.
The Company's subsidiaries that are registered with the SEC as
investment advisors or broker/dealers are required to disclose their Y2K
readiness in Forms ADV-Y2K or BD-Y2K which have been filed with the SEC and made
available to clients.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
Exhibit No. Description
----------- -----------
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
On August 18, 1999, the Company filed a Current Report on Form 8-K
reporting the acquisition of all of the outstanding capital stock of
Allen C. Ewing Financial Services, Inc. An amendment to such Current
Report was filed on October 18, 1999 to amend Item 7 of such Current
Report and to attach the financial statements required by Item 7 of
Form 8-K.
16
<PAGE> 17
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTREPID CAPITAL CORPORATION
By /s/ Forrest Travis
--------------------------------------
Forrest Travis, President and
Chief Executive Officer
Dated: November 12, 1999
By /s/ Michael J. Wallace
--------------------------------------
Michael J. Wallace, Principal
Accounting Officer
Dated: November 12, 1999
17
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
27 Financial Data Schedule (for SEC use only)
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF INTREPID CAPITAL CORPORATION AS OF
SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS THEN ENDED. THIS INFORMATION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,382,033
<SECURITIES> 711,972
<RECEIVABLES> 221,423
<ALLOWANCES> 0
<INVENTORY> 99,416
<CURRENT-ASSETS> 2,540,487
<PP&E> 200,984
<DEPRECIATION> (126,247)
<TOTAL-ASSETS> 3,834,901
<CURRENT-LIABILITIES> 637,163
<BONDS> 0
0
0
<COMMON> 22,155
<OTHER-SE> 2,125,583
<TOTAL-LIABILITY-AND-EQUITY> 3,834,901
<SALES> 1,432,048
<TOTAL-REVENUES> 3,387,951
<CGS> 708,186
<TOTAL-COSTS> 3,920,250
<OTHER-EXPENSES> 270,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,231
<INCOME-PRETAX> (532,299)
<INCOME-TAX> 200,304
<INCOME-CONTINUING> (331,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (331,995)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
