<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, 2000
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)
<TABLE>
<S> <C>
DELAWARE 59-3546446
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
3652 SOUTH THIRD STREET, SUITE 200, JACKSONVILLE BEACH, FLORIDA 32250
(Address of principal executive offices) (Zip Code)
(904) 246-3433
(Registrant's telephone number)
50 NORTH LAURA STREET, SUITE 3550, JACKSONVILLE, FLORIDA 32202
(Former address of principal executive offices) (Zip Code)
---------
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, 2000, 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, 2000
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets of Intrepid Capital Corporation and
Subsidiaries as of September 30, 2000 and December 31, 1999................................. 3
Consolidated Statements of Operations of Intrepid Capital Corporation and
Subsidiaries for the Three and Nine Month Periods
Ended September 30, 2000 and 1999........................................................... 4
Consolidated Statements of Cash Flows of Intrepid Capital
Corporation and Subsidiaries for the Nine Month Periods Ended
September 30, 2000 and 1999................................................................. 5
Notes to Consolidated Financial Statements.................................................. 6-8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources............................................................. 9
Results of Operations....................................................................... 10-13
PART II - OTHER INFORMATION
ITEM 1 AND ITEM 6 OTHER INFORMATION
Other Information........................................................................... 13
SIGNATURES....................................................................................... 14
</TABLE>
2
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INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(unaudited)
<TABLE>
<CAPTION>
ASSETS 2000 1999
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 625,968 1,094,700
Investments, at fair value 85,018 461,210
Accounts receivable 586,607 246,702
Inventories 122,461 107,860
Prepaid and other assets 254,084 142,848
----------- ----------
Total current assets 1,674,138 2,053,320
Property, plant, and equipment, net of accumulated
depreciation of $196,939 in 2000 and $111,122 in 1999 460,155 388,222
Goodwill, less accumulated amortization of $127,372
in 2000 and $71,622 in 1999 987,627 1,043,377
Other assets 2,122 45,973
----------- ----------
Total assets $ 3,124,042 3,530,892
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 356,351 149,442
Accrued expenses 328,364 388,956
Securities sold, not yet purchased 16,938 2,555
Current portion of notes payable 203,333 133,333
Other 144,165 123,978
----------- ----------
Total current liabilities 1,049,151 798,264
Notes payable, less current portion 846,667 916,667
Minority interest in consolidated subsidiary 91,495 --
----------- ----------
Total liabilities 1,987,313 1,714,931
----------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 15,000,000 shares;
issued 2,215,525 shares at September 30, 2000
and December 31, 1999 22,155 22,155
Treasury stock, at cost - 1,000 shares held (3,669) (3,669)
Additional paid-in capital 2,481,320 2,481,320
Accumulated deficit (1,363,077) (683,845)
----------- ----------
Total stockholders' equity 1,136,729 1,815,961
----------- ----------
$ 3,124,042 3,530,892
=========== ==========
</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, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Commissions $ 412,508 392,507 1,438,271 1,225,617
Asset management fees 165,473 228,279 513,599 662,319
Investment banking revenues 74,583 82,506 140,874 82,506
Net trading (losses) profits (6,528) (138,302) 102,695 (97,703)
Resinous material sales 857,380 302,921 1,342,646 1,432,048
Dividend and interest income 12,651 31,009 51,587 47,713
Other 2,294 10,003 26,760 35,451
----------- ---------- ---------- ----------
Total revenues 1,518,361 908,923 3,616,432 3,387,951
----------- ---------- ---------- ----------
Expenses:
Salaries and employee benefits 622,867 738,883 2,039,694 1,846,756
Brokerage and clearing 70,021 131,108 292,043 372,905
Cost of resinous material sales 458,042 154,717 709,638 708,186
Advertising and marketing 52,196 60,891 180,439 203,135
Professional and regulatory fees 117,708 80,609 300,757 239,533
Occupancy and maintenance 109,827 65,101 332,627 157,066
Depreciation and amortization 52,015 32,784 153,769 91,359
Interest expense 26,165 17,641 64,406 31,231
Other 88,128 115,854 283,572 270,079
----------- ---------- ---------- ----------
Total expenses 1,596,969 1,397,588 4,356,945 3,920,250
----------- ---------- ---------- ----------
Loss before income taxes and minority interest (78,608) (488,665) (740,513) (532,299)
Income tax benefit -- (183,885) (152,776) (200,304)
----------- ---------- ---------- ----------
Loss before minority interest (78,608) (304,780) (587,737) (331,995)
Minority interest (91,495) -- (91,495) --
----------- ---------- ---------- ----------
Net loss $ (170,103) (304,780) (679,232) (331,995)
=========== ========== ========== ==========
Basic net loss per share $ (0.08) (0.14) (0.31) (0.15)
=========== ========== ========== ==========
Diluted net loss per share $ (0.08) (0.14) (0.31) (0.15)
=========== ========== ========== ==========
Basic weighted average shares outstanding 2,214,525 2,214,525 2,214,525 2,214,606
=========== ========== ========== ==========
Diluted weighted average shares outstanding 2,214,525 2,214,525 2,214,525 2,214,606
=========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine month periods ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (679,232) (331,995)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 153,769 91,359
Minority interest 91,495 --
Sales (purchases) of investments and securities 493,270 (128,087)
sold, not yet purchased, net
Net trading (profits) losses (102,695) 97,703
Deferred tax benefit -- (560,634)
Change in assets and liabilities:
Accounts receivable (339,905) (26,405)
Inventories (14,601) 40,872
Prepaid and other assets (67,385) (90,625)
Accounts payable and accrued expenses 146,317 (907,450)
Income taxes payable -- 48,154
Other liabilities 20,187 (13,938)
----------- ----------
Net cash used in operating activities (298,780) (1,781,046)
----------- ----------
Cash flows from investing activities:
Purchase of property, plant, and equipment (169,952) (58,983)
Proceeds from sale of land -- 1,800,000
Acquisition of ACEFS, net of cash acquired -- 43,294
----------- ----------
Net cash (used in) provided by investing activities (169,952) 1,784,311
----------- ----------
Cash flows from financing activities:
Proceeds from notes payable -- 1,000,000
Principal payments on notes payable -- (545,749)
Purchase of treasury stock -- (3,669)
----------- ----------
Net cash used in financing activities -- 450,582
----------- ----------
Net (decrease) increase in cash and cash equivalents (468,732) 453,847
Cash and cash equivalents at beginning of period 1,094,700 928,186
----------- ----------
Cash and cash equivalents at end of period $ 625,968 1,382,033
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 68,856 31,231
=========== ==========
Cash paid during the period for income taxes $ -- 312,176
=========== ==========
Supplemental disclosure of non-cash transactions:
Debt issued to finance acquisition of ACEFS $ -- 350,000
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(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 Company acquired all of the outstanding
shares 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. The Company is located in Jacksonville Beach, Florida
and conducts its business through its three 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 was a registered broker/dealer with the Securities and
Exchange Commission (the "SEC") and a member of the National
Association of Securities Dealers, Inc. (the "NASD") and the
Securities Investor Protection Corporation (the "SIPC"). In a
transaction effective on August 1, 1999, the Company acquired
all the outstanding shares of Allen C. Ewing Financial
Services, Inc. ("ACEFS"). Primarily all of ACEFS' operations
were conducted through its wholly owned subsidiary, Allen C.
Ewing & Co., a registered broker/dealer with the SEC and a
member of the NASD and the SIPC. Concurrent with that
transaction, the Company contributed all of the assets and
liabilities of ACEFS to CRC.
Subsequent to the acquisition, the operations of CRC and
ACEFS are conducted through the merged entity under the name
Allen C. Ewing & Co. ("Ewing"), which retained its
broker/dealer registration. Effective December 31, 1999, CRC
is no longer a registered broker/dealer. Ewing conducts 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 Ewing's
customers.
Enviroq conducts its operations through Sprayroq, Inc.
("Sprayroq"), a 50% owned subsidiary. Sprayroq is engaged in
the development, commercialization, manufacture and marketing
of spray-applied resinous materials and in the treatment of
municipal wastewater.
6
<PAGE> 7
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
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 March 28, 2000. 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
necessary for fair presentation of the unaudited information.
The results of operations for the three and nine month
periods ended September 30, 2000 and 1999 are not necessarily
indicative of the results that may be expected for the full
year.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include
the accounts of the Company and its subsidiaries ICM, Ewing,
and Enviroq.
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 prior to September 30, 2000, because of its
previous accumulated deficit position.
(C) EARNINGS PER SHARE
Net income per share of common stock is computed based upon
the weighted average number of common shares and share
equivalents outstanding during the period. Stock warrants and
convertible instruments, when dilutive, are included as share
equivalents. For the three and nine month periods ended
September 30, 2000 and 1999, the Company had no dilutive
common stock equivalents.
(D) COMPREHENSIVE INCOME
No differences between total comprehensive loss and net loss
existed in the financial statements reported for the three
and nine month periods ended September 30, 2000 and 1999.
(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 1.23% equity
interest owner as of September 30, 2000. For the nine months
ended September 30, 2000 and 1999, the Company received
$27,448 and $45,325, respectively, for such services.
7
<PAGE> 8
INTREPID CAPITAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(3) SEGMENTS
During 2000 and 1999, the Company operated in two principal
segments, investment advisory services and broker/dealer
services, which includes investment banking revenues. Enviroq
constitutes a separate segment. The Company assesses and
measures operating performance based upon the net (loss)
income derived from each of its operating segments exclusive
of the impact of corporate expenses. The revenues and net
(loss) income for each of the reportable segments are
summarized as follows for the three and nine months ended
September 30, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Investment advisory services segment $ 170,810 202,692 527,781 623,175
Broker/dealer services segment 488,972 639,087 1,724,799 1,487,386
Enviroq 858,015 305,971 1,345,975 1,447,913
Corporate (110,132) (152,518) 217,043 (237,445)
Intersegment revenues 110,696 (86,309) (199,166) 66,922
----------- ---------- ---------- ----------
$ 1,518,361 908,923 3,616,432 3,387,951
=========== ========== ========== ==========
Net (loss) income:
Investment advisory services segment $ (42,491) (129,481) (185,648) (194,309)
Broker/dealer services segment (31,865) 69,271 (68,994) 149,888
Enviroq 75,657 (26,099) (89,718) 111,342
Corporate (171,404) (218,471) (334,872) (398,916)
----------- ---------- ---------- ----------
$ (170,103) (304,780) (679,232) (331,995)
=========== ========== ========== ==========
</TABLE>
The total assets for each of the reportable segments are
summarized as follows as of September 30, 2000 and December
31, 1999. Non-segment assets consist primarily of cash,
investments and other assets, which are recorded at the
parent company level.
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
Assets:
Investment advisory services segment $ 130,509 256,129
Broker/dealer services segment 1,134,425 1,340,988
Enviroq 1,635,270 1,511,440
Other 223,838 422,335
---------- ---------
$3,124,042 3,530,892
========== =========
</TABLE>
8
<PAGE> 9
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
Liquidity and Capital Resources
The Company's current assets consist generally of cash, money market
funds and accounts receivable. The Company has financed its operations with
funds provided by stockholder capital and the sale of its trading securities.
The Company has developed a growth strategy plan that includes both internal
and external growth through acquisitions.
For the six month period ended June 30, 2000 and, to a lesser extent,
for the three month period ended September 30, 2000, the Company incurred
significant operating losses and negative cash flows. The Company has evaluated
several options and, subsequent to September 30, 2000, the Company's board has
approved the pursuit of various strategic acquisitions that management believes
will significantly improve the Company's current financial position and improve
future operating results through economies of scale. Additionally, the Company
has entered into an agreement for the raising of additional capital through the
issuance of equity securities in private placements. If additional funds are
raised through the issuance of equity securities, the percentage of ownership
of the stockholders of the Company will be reduced. The Company is presently
evaluating several other options to raise capital which include enhancing the
operations, or the complete disposal of, Sprayroq, Inc. (Enviroq's 50% owned
subsidiary). The Company also believes that its broker/dealer services segment
will generate substantial high-margin investment banking revenues during the
upcoming quarter and into the following year. While management believes it will
be able to meet its capital needs through several of the above alternatives,
there can be no assurances that such transactions will take place on terms
favorable to the Company, if at all. If adequate funds are not available or
terms are not suitable, the Company's growth strategy would be significantly
limited and such limitation could have a material adverse effect on the
Company's business, results of operations and financial condition.
For the nine months ended September 30, 2000, net cash used in
operating activities of $298,780 was primarily attributable to the net loss,
offset by cash proceeds from sales of investments. Net cash used in investing
activities was $169,952 due to the purchase of property, plant, and equipment.
There were no financing activities for the period.
The Company, through its wholly-owned subsidiary, Ewing, is subject to
the net capital requirements of the SEC, the NASD and other regulatory
authorities. At September 30, 2000, Ewing's regulatory net capital was
$518,678, which is $268,678 in excess of its minimum net capital requirement of
$250,000.
Since its acquisition of Enviroq in December 1998, the Company has
been evaluating alternatives for the future of this business because of its
inconsistency with the Company's primary mission. The Company is currently
pursuing several alternatives for this business, including a possible sale of
Sprayroq, Enviroq's 50% owned subsidiary that conducts primarily all of
Enviroq's operations.
9
<PAGE> 10
Results of Operations
Three Months Ended September 30, 2000 Compared to the Three Months
Ended September 30, 1999
Total revenues were $1,518,361 for the three months ended September
30, 2000, compared to $908,923 for the three months ended September 30, 1999,
representing a 67.1% increase. The increase is primarily attributable to
increased resinous material sales.
Commissions increased $20,001, or 5.1%, to $412,508. Commissions
represent revenue earned from securities transactions conducted on behalf of
customers, including transactions with mutual funds and variable annuities. The
increase in commissions is primarily attributable to the consolidation of Ewing
for the entire three month period ended September 30, 2000 compared to only two
months in 1999 as Ewing was acquired in August 1999.
Asset management fees decreased $62,806, or 27.5%, to $165,473. 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 $76.8
million at June 30, 2000, compared to $101.4 million at June 30, 1999. The
decrease in asset management fees for the three months ended September 30, 2000
relates directly to the net decrease in AUM at the market close of the prior
quarter. The net decrease in AUM was the net result of investment performance
and the net change in client assets. The negative net change in client assets
is primarily attributable to the Company's "value investment style", which has
not performed at historical levels over the past two years, and has resulted in
client movement. Management believes that this trend reversed during the first
quarter of 2000 and may well be followed by an extended period more favorable
to the value investment style. AUM was $77.8 million at September 30, 2000,
compared to $98.0 million at September 30, 1999.
Investment banking revenues decreased $7,923, or 9.6% to $74,583.
Investment banking revenues represent fees earned by Ewing for providing
investment banking services to clients on corporate finance matters, including
mergers and acquisitions and the issuance of capital stock to the public. Such
revenues are dependent on the timing of services provided and are normally
received upon consummation of the transaction.
Net trading losses decreased $131,774, or 95.3%, to ($6,528). There
were $6,767 of realized losses and $239 of unrealized gains in the Company's
investment in trading securities and Intrepid Capital, L.P.
Resinous material sales increased $554,459, or 183.0%, to $857,380.
The increase is primarily attributable to the sale of two new licenses during
the three months ended September 30, 2000 and an increase in resin demand from
licensees.
Dividend and interest income decreased $18,358, or 59.2%, to $12,651.
The decrease is primarily attributable to the sale of dividend and interest
bearing trading securities.
Total expenses were $1,596,969 for the three months ended September
30, 2000, compared to $1,397,588 for the three months ended September 30, 1999,
representing a 14.3% increase. The increase is primarily attributable to an
increase in cost of resinous material sales, which is directly related to the
increase in resinous material sales.
10
<PAGE> 11
Salaries and employee benefits decreased $116,016, or 15.7%, to
$622,867. The decrease is primarily attributable to cost savings as a result of
closing Ewing's operations in Tampa, Florida in July 2000.
Brokerage and clearing expenses decreased $61,087, or 46.6%, to
$70,021. Brokerage and clearing expenses represent the securities transaction
and other costs paid to the clearing broker/dealer, and are related to
commission revenue earned by Ewing. During the quarter ended March 31, 2000,
the Company re-negotiated its clearing agreement, resulting in reduced
transactional costs and decreased brokerage and clearing expenses per trade.
The net decrease reflects decreased costs as a result of the re-negotiated
clearing agreement.
Cost of resinous material sales increased $303,325, or 196.1%, to
$458,042. The increase is primarily attributable to the sale of two new
licenses during the three months ended September 30, 2000 and an increase in
resin demand from licensees.
Advertising and marketing expenses decreased $8,695, or 14.3%, to
$52,196. The decrease can be attributed to decreased travel and entertainment
costs.
Professional and regulatory expenses increased $37,099, or 46.0%, to
$117,708. The increase is primarily attributable to increased technology costs,
the relocation of Ewing's trading operations from Tampa, Florida to
Jacksonville, Florida and to a nonrecurring certification fee at Sprayroq.
Occupancy and maintenance expenses increased $44,726, or 68.7%, to
$109,827 as a result of the relocation of the Company's headquarters in January
2000.
Depreciation and amortization expenses increased $19,231, or 58.7%, to
$52,015 due to the amortization of goodwill incurred as a result of the
acquisition of Ewing in August 1999 and to depreciation of acquired assets.
Depreciation costs incurred on leasehold improvements for the Company's new
headquarters also contributed.
Interest expense increased $8,524, or 48.3%, to $26,165 due to
interest costs associated with the debt incurred as a result of the acquisition
of Ewing in August 1999 and to increased market interest rates on the Company's
variable rate bank note.
Nine Months Ended September 30, 2000 Compared to the Nine Months Ended
September 30, 1999
Total revenues were $3,616,432 for the nine months ended September 30,
2000, compared to $3,387,951 for the nine months ended September 30, 1999,
representing a 6.7% increase. The increase is primarily attributable to
increased commissions and net trading profits.
Commissions increased $212,654, or 17.4%, to $1,438,271. Commissions
represent revenue earned from securities transactions conducted on behalf of
customers, including transactions with mutual funds and variable annuities. The
increase primarily represents increased transaction volume as a result of the
acquisition of Ewing in August 1999.
Asset management fees decreased $148,720, or 22.5%, to $513,599. 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
11
<PAGE> 12
quarter. AUM was $92.5, $84.5, and $76.8 million at December 31, 1999, March
31, 2000, and June 30, 2000, respectively, compared to $101.0, $89.3, and
$101.4 million at December 31, 1998, March 31, 1999, and June 30, 1999,
respectively. The decrease in asset management fees for the nine months ended
September 30, 2000 relates directly to the net decreases in AUM at the market
close prior to each quarter in the nine month period. The net decrease in AUM
was the net result of investment performance and the net change in client
assets. The negative net change in client assets is primarily attributable to
the Company's "value investment style", which has not performed at historical
levels over the past two years, and has resulted in client movement. Management
believes that this trend reversed during the first quarter of 2000 and may well
be followed by an extended period more favorable to the value investment style.
AUM was $77.8 million at September 30, 2000, compared to $98.0 million at
September 30, 1999.
Investment banking revenues increased $58,368, or 70.7% to $140,874.
Investment banking revenues represent fees earned by Ewing for providing
investment banking services to clients on corporate finance matters, including
mergers and acquisitions and the issuance of capital stock to the public. Such
revenues are dependent on the timing of services provided and are normally
received upon consummation of the transaction. The increase is primarily
attributable to the acquisition of Ewing in August 1999.
Net trading profits increased $200,398, or 205.1%, to $102,695. There
were $174,661 of realized gains and $71,966 of unrealized losses in the
Company's investment in trading securities, which includes securities obtained
through the acquisition of Ewing in August 1999 and the Company's investment in
Intrepid Capital, L.P.
Resinous material sales decreased $89,402, or 6.2%, to $1,342,646. The
decrease is attributable to a decline in resin demand and the timing of
purchases by existing licensees.
Dividend and interest income increased $3,874, or 8.1%, to $51,587.
The increase is primarily attributable to an increase in interest received from
the higher average cash balances invested in money markets and to increased
margin interest earned on customer margin accounts as a result of the
acquisition of Ewing in August 1999.
Total expenses were $4,356,945 for the nine months ended September 30,
2000, compared to $3,920,250 for the nine months ended September 30, 1999,
representing a 11.1% increase. The increase is primarily attributable to the
acquisition of Ewing in August 1999.
Salaries and employee benefits increased $192,938, or 10.4%, to
$2,039,694. The increase is due to annual increases in salaries and the
acquisition of Ewing in August 1999, which resulted in additional employees for
the Company.
Brokerage and clearing expenses decreased $80,862, or 21.7%, to
$292,043. Brokerage and clearing expenses represent securities transaction and
other costs paid to the clearing broker/dealer, and are related to commission
revenue earned by Ewing. During the quarter ended March 31, 2000, the Company
re-negotiated its clearing agreement, resulting in reduced transactional costs
and decreased brokerage and clearing expenses per trade. The net decrease
reflects decreased costs as a result of the re-negotiated clearing agreement.
Cost of resinous material sales increased $1,452, or 0.2%, to
$709,638, despite lower resinous material sales from the same period. The
increase is primarily attributable to a change in product mix and an increase
in the cost of components of equipment used in the resinous material business.
12
<PAGE> 13
Advertising and marketing expenses decreased $22,696, or 11.2%, to
$180,439. The decrease can be attributed to decreased travel and entertainment
costs and to decreased advertising costs resulting from a nonrecurring
advertising campaign for Sprayroq conducted during the nine months ended
September 30, 1999.
Professional and regulatory expenses increased $61,224, or 25.6%, to
$300,757. The increase is primarily attributable to increased technology costs
at Ewing and to a nonrecurring certification fee at Sprayroq.
Occupancy and maintenance expenses increased $175,561, or 111.8%, to
$332,627 as a result of the acquisition of Ewing in August 1999 and to the
relocation of the Company's headquarters in January 2000.
Depreciation and amortization expenses increased $62,410, or 68.3%, to
$153,769 due to the amortization of goodwill incurred as a result of the
acquisition of Ewing in August 1999 and to depreciation of acquired assets.
Depreciation costs incurred on leasehold improvements for the Company's new
headquarters also contributed.
Interest expense increased $33,175, or 106.2%, to $64,406 due to
interest costs associated with the debt incurred as a result of the acquisition
of Ewing in August 1999 and to increased market interest rates on the Company's
variable rate bank note.
Other expenses increased $13,493, or 5.0%, to $283,572 due to
increased general and administrative expenses as a result of the acquisition of
Ewing in August 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings pending, or to the Company's knowledge,
threatened against the Company or any of its subsidiaries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K:
None.
13
<PAGE> 14
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 13, 2000
By /s/ MICHAEL J. WALLACE
--------------------------------
Michael J. Wallace, Chief
Accounting Officer
Dated: November 13, 2000
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
15
