UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1997
Commission File No. 0-1437
THE FIRST REPUBLIC CORPORATION OF AMERICA
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-1938454
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
302 Fifth Avenue
New York, New York 10001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 279-6100
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1 per share
------------------------------------
(Title of Class)
Indicate by check mark whether Registrant (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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of September 16, 1997, 672,024 common shares were outstanding, and the
aggregate market value of common shares held by nonaffiliates of Registrant was
approximately $1,700,000 (based upon the price paid by Registrant for shares).
Documents Incorporated by Reference
See Item 14(c)
<PAGE>
The First Republic Corporation of America
10-K Contents
Page
----
PART I
Item 1. Business...................................................... 1
Item 2. Properties.................................................... 6
Item 3. Legal Proceedings............................................. 10
Item 4. Submission of Matters to a Vote of Security Holders........... 10
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters.................................... 11
Item 6. Selected Financial Data....................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 13
Item 8. Financial Statements and Supplementary Data................... 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 45
PART III
Item 10. Directors and Executive Officers of the Registrant............... 46
Item 11. Executive Compensation........................................... 48
Item 12. Security Ownership of Certain Beneficial Owners and Management... 50
Item 13. Certain Relationships and Related Transactions................... 52
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K 55
Signatures ................................................................. 61
<PAGE>
PART I
ITEM 1. BUSINESS
a. General Development of Business
The First Republic Corporation of America (the "Company") was incorporated
in the State of Delaware in February 1961, and is presently engaged,
either directly or through its subsidiaries, in the real estate, hotel,
seafood, textile, and health care businesses. See Item 1(c) for a
description of the business engaged in by the Company and its
subsidiaries.
On October 21, 1996 the Company repaid its $6,000,000 mortgage loan on the
Video Film Center in New York that became due in October 1996 with a new
mortgage of $6,200,000. The new mortgage on the Video Film Center bears
interest at 9% per annum, provides for 60 monthly payments of $52,030
including principal and interest commencing December 1, 1996 and expiring
November 1, 2001 when the remaining balance of $5,774,232 will become due.
The Company has an option to renew the new mortgage as of August 1, 2001
for an additional five year term at an interest rate to be determined at
that time. A portion of the loan proceeds, $475,000 ($489,539 as of June
30, 1997) has been set aside in an escrow account to secure certain
building improvements which were required by the mortgagor.
In August 1996, the Company obtained a $4,000,000 mortgage loan on the
Greensboro North Shopping Center it owns in Greensboro North Carolina,
which loan bears interest at 8.35% per annum, provides for 120 payments of
$35,850 including principal and interest, commencing September 1, 1996 and
expiring August 1, 2006 when the remaining balance of $2,523,000 will
become due.
In December 1996, the Company purchased the remaining 50% of Lambert
International Fisheries Inc. it did not own for $265,000; $50,000 was paid
in cash and the balance through a promissory note for $215,000 payable in
December 1997, bearing interest at 8%.
In October 1997, the Company and its partners entered into an agreement
for the sale of the Jersey City Facility and the Rochelle Park Facility
referred to below under Business - Narrative Description of Business -
Health Care. The closing of this transaction is subject to several
conditions, including the purchaser's ability to obtain necessary
financing and the approval of the New Jersey Department of Health. Subject
to the timely satisfaction of these and certain other conditions, the
transaction is anticipated to close in December 1997. Although there is no
assurance that the transaction will close, if it does it should improve
the working capital of the Company.
1
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On October 21, 1997 the Company replaced its existing indebtedness with a
new lender. The existing indebtedness had an outstanding balance of
$6,777,810 at June 30, 1997, which was due on August 1, 1997 and extended
until October 31, 1997. The new agreement is a $9,000,000 term loan with
an interest rate equal to either (a) LIBOR plus 1.75%, (b) the Alternate
Base Rate (as defined) plus 0.25% or (c) the Fixed Rate (as defined) plus
1.75% and a $3,000,000 revolving line of credit with an interest rate
equal to either (a) LIBOR plus 2% or, (b) the Alternate Base Rate (as
defined) plus 0.50%. The term loan requires amortization payments of
$358,800 per annum. The term loan matures in five years and the revolving
line of credit matures in three years.
b. Financial Information about Industry Segments
The sales and operating profit (loss) from operations and the identifiable
assets attributable to each industry segment for the three years ended
June 30, 1997 are set forth in Note 2 (Industry Segments) of the Notes to
Consolidated Financial Statements, which are incorporated herein by
reference to Item 8. hereof.
c. Narrative Description of Business
Real Estate
The Company owns various loft buildings, office buildings, industrial
buildings, shopping centers, residential and other properties, situated
along the East Coast of the United States in Massachusetts, Rhode Island,
New York, New Jersey, Pennsylvania, Virginia, North Carolina and Florida.
A general description of these properties is provided in Item 2. below.
Real estate revenues accounted for 36%, 37%, and 34% of consolidated
revenues from operations for the fiscal years ended June 30, 1997, 1996
and 1995, respectively.
Hotel
The Company owns and operates a 288 room hotel and convention center known
as the Four Points Hotel, an ITT Sheraton franchise (formerly known as the
Sheraton Inn--Syracuse), located in Liverpool, New York. There are
approximately 20 facilities in the Liverpool/Syracuse area with which the
hotel competes. Currently, the Company believes it is the third largest
hotel in terms of revenues in the area.
Hotel revenues accounted for 11%, 12%, and 11% of consolidated revenues
from operations for the fiscal years ended June 30, 1997, 1996 and 1995,
respectively.
2
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Seafood
The Company's 80.2% owned subsidiary, Bluepoints Company Inc.
("Bluepoints"), holds title to approximately 13,000 acres of land under
the water of the Great South Bay between Fire Island and Long Island's
South Shore in New York State. Bluepoints harvests hard-shell clams on
this property. Bluepoints competes with others on the basis of quality of
product and reliability of delivery.
Although once a substantial factor in the market, a significant decrease
in clam production at Bluepoints over the past several years, combined
with some substantial new production by competitors harvesting clams in
other areas along the Eastern Seaboard, has resulted in a diminished role
for Bluepoints in the hard-shell clam market. The aggregate number of
bushels of clams harvested during the fiscal year ended June 30, 1996
decreased 36% as compared with the prior fiscal year. The aggregate number
of bushels of clams decreased 20% in the fiscal year ended June 30, 1997
as compared with the fiscal year ended June 30, 1996. For the period July
1, 1997 through August 31, 1997, the aggregate number of clams harvested
decreased 19% compared with the same period in the prior year. The
decrease in production for both years was caused by smaller harvests of
product.
Bluepoints has expanded its hatchery facilities in an effort to increase
inventory. However, climate and other environmental factors beyond the
control of Bluepoints affect the propagation and growth of clams. New York
State environmental authorities are continually monitoring the harvesting
area for pollution. From time to time, and at present, certain small areas
of Bluepoints' property exceed the maximum coliform count set by Federal
law, and shellfish located in such areas may not be harvested. At the
present time, State authorities have closed other portions of the Great
South Bay to clamming operations because the coliform count exceeds
Federal standards.
Bluepoints, through foreign subsidiaries, operates a shrimp farm and is a
62.5% owner of a shrimp hatchery, which are both located in Ecuador. Sales
of shrimp from the foregoing operations approximated $2,656,000 and
$1,780,000 for the fiscal years ended June 30, 1997 and 1996,
respectively. Bluepoints, through a foreign subsidiary, also owns a 38%
interest in another Ecuadorian shrimp farming operation. See Item 12 and
13 below for information relating to shares of stock of Bluepoints and
these foreign subsidiaries owned by certain affiliates of the Company.
The Company also owns Lambert International Fisheries, Inc., a scallop
operation in Cape Canaveral, Florida. In the current fiscal year, sales
for Lambert were approximately $1,242,000 and operations broke even. Sales
for July and August 1997 were approximately $500,000 but there can be no
assurance that extensive beds of scallops will be found in the future.
3
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Seafood revenues accounted for 20%, 16%, and 15% of consolidated revenues
from operations for the fiscal years ended June 30, 1997, 1996 and 1995,
respectively.
Textile
The Hanora Spinning division of the Company ("Hanora"), operates a yarn
spinning plant in Woonsocket, Rhode Island. Hanora, which is not a
significant factor in the market it serves, competes with a number of
other yarn spinning plants on the basis of quality of product and price.
During the fiscal year ended June 30, 1997, Hanora purchased approximately
$57,000 of additional equipment. The backlog of yarn sales on August 31,
1997 was approximately $6,700,000 as compared to $5,500,000 a year ago.
Approximately 80% of the current backlog is expected to be shipped in the
fiscal year ending June 30, 1998. One customer accounted for approximately
18% of Hanora's total sales during the 1997 fiscal year. The loss of this
customer would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
The Hanora South division of the Company ("Hanora South"), operates a yarn
spinning plant in Lake City, South Carolina which produces craft, sweater,
hosiery, upholstery and industrial yarns as a commission spinner for
Hanora. J&M Dyers, ("J & M"), another division of the Company, which
operates a yarn dyeing plant in Sumter, South Carolina, is a commission
dyer for rawstock, package, ombre and skein dyeing. Neither of these
divisions is a significant factor in the markets they serve and each
competes with a number of other firms that are substantially larger; at
the present time, neither has a significant backlog of orders.
Textile revenues accounted for 32% 33%, and 38% of consolidated revenues
from operations for the fiscal years ended June 30, 1997, 1996 and 1995,
respectively.
Health Care
The Company owns a 49.9% partnership interest in two nursing homes located
in Jersey City, New Jersey (the "Jersey City Facility") and Rochelle Park,
New Jersey (the "Rochelle Park Facility"). The Jersey City and Rochelle
Park Facilities (see Item 2--Health Care Segment below) contain 180 beds
and 240 beds, respectively, and each facility provides skilled and
intermediate nursing care to both private and Medicaid residents. The
Rochelle Park Facility also includes a 135-bed senior citizen residence
and an adult day care center. Skilled and intermediate care facilities
provide nursing services through the use of professional and
nonprofessional employees. The nursing homes attempt to obtain residents
through referrals from acute care hospitals, physicians, residential care
facilities, church groups and other service organizations in the
communities in which the facilities are located. There are competing
facilities in these communities. In competing for residents, the
reputation of the Company's facilities in the community and their physical
appearance are important factors, since members of the resident's family
generally participate to a greater extent in selecting skilled and
intermediate nursing facilities than in selecting an acute care hospital.
The Company's facilities also experience competition in
4
<PAGE>
employing and retaining high quality professionals and nonprofessional
employees, including nurses, technicians, aides and others. The Company
also owns a 49.9% partnership interest in a nursing home in Whiting, New
Jersey. This facility is net leased to the operator of the facility under
a lease which expires on December 31, 2011.
5
<PAGE>
ITEM 2. PROPERTIES
Location General Character (1)
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Real Estate Segment
Video Film Center 10-story office building; 165,000 rentable
315-329 W. 44th Street square feet; 95% rented.
New York, New York
Junior Coat Building 18-story office, showroom and
250 W. 39th Street manufacturing facility; 182,000 rentable
New York, New York square feet; 91% rented.
Jefferson National Bank Building 6-story office building; 39,300 rentable
4100 Pinetree Drive square feet; 100% rented.
Miami Beach, Florida
First Republic Office Park Two, two-story office buildings with
Thruway and Electronics Parkway 49,000 and 35,000 rentable square feet;
Liverpool, New York 14 acres of land; 78% rented.
Waltham Engineering Center 17 multi-story industrial buildings;
Waltham, Massachusetts in excess of 380,000 rentable square feet;
parking facilities; 99% rented.
East Newark Industrial Center 30 multi-story industrial buildings; in
East Newark, New Jersey excess of 1,000,000 rentable square feet;
parking facilities; 90%
rented; second mortgage
held by Bluepoints in the
amount of $105,396 at
September 1, 1997.
Nyanza Building Four-story and basement industrial
Woonsocket, Rhode Island building; 300,000 rentable square feet;
used by Company as spinning plant
(100,000 sq. ft.) and balance rented to
others; 81% rented.
Greensboro North Shopping Center Approximately 13.5 acres of land and
Greensboro, North Carolina 140,000 square feet of space in buildings
located thereon; 100% rented.
Greensboro South Shopping Center Approximately 12 acres of land and
Greensboro, North Carolina 134,250 square feet of space in buildings
located thereon; 100% rented.
6
<PAGE>
Location General Character (1)
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Shopping Center Approximately 13.5 acres of land and
Richmond, Virginia 130,000 square feet of space in buildings
located thereon; 100% rented.
London Bridge Shopping Center Approximately 10.2 acres of land and
Virginia Beach, Virginia 100,000 square feet of space in buildings
located thereon; 100% rented.
Vacant land Approximately 21 acres; suitable for
Melbourne, Florida development as a shopping center.
Sunscape Apartments 167-unit residential garden apartments
Orlando, Florida located on approximately 12 acres of land;
98% rented. (Company owns 50% of
Sunscape Associates, a partnership which
owns the apartments).
Shopping Center Approximately 22.7 acres of land and
Brookhaven, Pennsylvania 196,000 square feet of space in buildings
located thereon; 100% rented.
Newburyport, Massachusetts 4-story building; 100,000 rentable square
feet of space; presently vacant.
3-story building, 13,800 rentable square feet
of space; 100% rented.
Two-story building and warehouse; 5,000
square feet, presently vacant.
Hotel Segment
Four Points Hotel--Syracuse 288-room motor hotel and convention
Thruway and Electronics Parkway center; indoor pool; operated under ITT
Liverpool, New York Sheraton franchise.
Seafood Segment (2)
West Sayville, New York Approximately 13,000 acres of underwater
land in the Great South Bay of Long Island;
approximately 5 acres of upland and 22,500
square feet of space in two buildings
located thereon; used for unloading
product, storage, inspection, shipping,
shop maintenance, hatchery and
administration.
7
<PAGE>
Location General Character (1)
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Mattituck, New York Approximately 1 acre of land in Long
Island; used as a grow out pond for the clam
hatchery.
Englishman Island Approximately 600 acres of land including
Guayaquil County, Ecuador 288 acres owned and the balance held under
a 10-year concession, expiring April 2004,
containing shrimp ponds and drainage canals.
Vacant Land Bluepoints has a 62.5% interest in a
Guayaquil, Ecuador company that owns approximately 100,000
square feet of riverfront land.
Ayangue Bluepoints has a 62.5% interest in a
Guayas Province, Ecuador company that owns approximately 56
acres of land used for a shrimp hatchery.
Cape Canaveral, Florida Various leaseholds (approximately 11 acres)
used by scallop operation for offloading,
processing, packaging, warehouse and office.
(Company owns 100% of Lambert International
Fisheries Inc. and Cape King Associates which
hold leaseholds.)
Textile Segment
Allendale, South Carolina Approximately 195 acres of land, on which a
plant containing one building with
approximately 156,000 square feet is located,
presently vacant.
Pageland, South Carolina Approximately 10 acres of land and 36,125
square foot building located thereon;
previously used as bulking and twisting
plant, warehouse and office, presently being
rented.
Lake City, South Carolina Approximately 21.5 acres of land and 95,000
square feet in two buildings located thereon;
used for a yarn spinning plant and warehouse.
8
<PAGE>
Location General Character (1)
- --------------------------------------------------------------------------------
Sumter, South Carolina Approximately 10.5 acres of land and 61,000
square foot building located thereon; used as
yarn dyeing plant, warehouse and office.
Health Care Segment
Rochelle Park, New Jersey 240-bed nursing home; owned by partnership in
which the Company has a 49.9% partnership
interest.
135-bed senior citizen residence; owned by
partnership in which the Company has a 49.9%
partnership interest.
Jersey City, New Jersey 180-bed nursing home; owned by partnership in
which the Company has a 49.9% partnership
interest.
Whiting, New Jersey 180-bed nursing home; leased to tenant by
partnership in which the Company has a 49.9%
partnership interest.
Corporate Office
302 Fifth Avenue 5,400 square feet of executive offices;
New York, New York month-to-month tenant at a rent of $8,400
per month. See Item 13. below.
(1)--Reference is made to Schedule III for information with respect to mortgages
encumbering certain properties listed in the table.
(2)--Except as otherwise noted, the properties listed in the Seafood Segment are
owned by Bluepoints Company, Inc., an 80.2% owned subsidiary of the Company.
9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
a. The Company's common stock is traded in the over-the-counter market.
There have not been any quotations for the Company's common stock in the
National Daily Quotation Service for the past several years. During the
two most recent fiscal years, the Company has purchased shares for $33.00
per share.
Due to the absence of quotations it may be deemed that there is no
established public trading market for the Company's common stock.
b. As of September 16, 1997, there were 731 holders of record of the
Company's common stock.
c. No dividends have been paid during the two years ended June 30, 1997. The
Company has no intention of paying dividends in the foreseeable future.
d. The Company did not sell any securities during the past year.
11
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal year ended June 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $50,220 $45,612 $48,216 $48,119 $47,036
=====================================================================
Income before interest and income taxes $ 4,814 $ 912 $ 4,450 $ 3,308 $ 743
=====================================================================
Interest costs $ 3,068 $ 3,115 $ 2,993 $ 2,166 $ 2,239
=====================================================================
Income (loss) from continuing operations
before extraordinary income and
cumulative effect of accounting change $ 1,170 $(2,767) $ 1,010 $ 88 $(1,369)
=====================================================================
Net income (loss) per share of common stock
from continuing operations $ 1.74 $ (4.11) $ 1.50 $ .13 $ (2.00)
=====================================================================
Total assets $81,336 $79,239 $82,740 $80,164 $79,106
=====================================================================
Long-term debt $26,297 $23,810 $25,540 $23,870 $22,234
=====================================================================
Stockholders' equity $41,609 $40,446 $43,254 $42,264 $40,872
=====================================================================
Cash dividends per common share NONE NONE NONE NONE NONE
=====================================================================
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
Working capital at June 30, 1997 decreased by approximately $828,000 to
$2,172,000.
Net cash provided by operating activities was approximately $6,959,000 during
the 1997 fiscal year. Net cash provided by financing activities was
approximately $475,000. Net cash of approximately $6,511,000 was used for
investing activities. The Company has a $2,000,000 revolving line of credit with
its principal lender with interest at 1% over the lender's prime rate. At June
30, 1997, $700,000 was outstanding under the line. The Company has a term loan
with its principal lender which matured August 1, 1997. As of June 30, 1997,
$6,777,810 was outstanding under the term loan. The Company's loans with its
principal lender has been extended until October 31, 1997. The Company has
obtained financing from a new lender that provides for a $9,000,000 term loan
facility and a $3,000,000 revolving line of credit. Both facilities will be
collateralized by the East Newark Industrial Center and will have more favorable
interest, amortization terms, and less restrictive covenants than the current
loan agreement. As a result of the foregoing financing, the outstanding term
loan is included in the June 30, 1997 Balance Sheet as long term debt (exclusive
of the current portion of $462,000)
During the three years ended June 30, 1997, the Company incurred capital
expenditures of approximately $15,417,000. In addition, approximately $4,694,000
was expended for tenant improvements during this three year period.
Results of Operations
Real Estate
The Company's real estate operating profits increased $419,000 in fiscal 1997 on
a revenue increase of $953,000. Revenue increased at substantially all the
properties. Repairs and maintenance and related costs increased approximately
$365,000 at the East Newark Industrial Center as a result of increased work done
to space at that facility. Interest on a new mortgage obtained at the Greensboro
North Shopping Center increased overall mortgage interest by approximately
$194,000. In fiscal 1996, real estate operating profits decreased $100,000 on a
revenue increase of $667,000 as compared to the prior year. The increase in
revenues was primarily attributable to increased occupancy at substantially all
of the Company's real estate properties. A full year's expense on the mortgage
obtained in fiscal 1995 on the Jefferson Bank Building in Miami Beach, Florida,
increased interest expense by $102,000. Due to the unusually cold winter,
utility and snow removal costs increased $461,000.
13
<PAGE>
Hotel
Operating profits for the Four Points Hotel for fiscal 1997 increased
approximately $172,000 on an approximately $357,000 increase in revenues.
Operating profits for fiscal 1996 increased approximately $206,000 on an
approximately $124,000 increase in revenues from the prior year and lower
operating costs.
Seafood
Overall revenues for the seafood division increased approximately $2,507,000 as
compared to the prior year. Losses from operations (including equity share of
losses in affiliated entities and excluding minority interests' share of loss of
subsidiaries) in fiscal 1997 were $1,957,000 as compared to a loss of $4,169,000
last year. Ecuadorian operations reduced their losses to $1,398,000 as compared
to last years loss of $2,043,000 as a result of higher shrimp sales due to more
product being harvested resulting from steps taken by the Company to increase
yields. The Company purchased the remaining 50% of the scallop operation in Cape
Canaveral, Florida and it operated at a break even level on revenues of
$1,242,000 for this fiscal year as compared to a loss last year of $1,033,000,
which represents 50% of last year's loss. Bluepoints Long Island operations had
a loss of $527,000 as a result of continuing smaller harvests of clams which
were offset somewhat by profits from sales of shrimp imported from Costa Rica.
This compares with a loss of $941,000 last year. The assets of the discontinued
soft shell crab operation were sold this fiscal year and the Company incurred a
loss of $34,000. The fiscal 1996 revenues for the seafood division increased by
2% as compared to the prior year. Losses from operations (including equity share
of losses in affiliated entities) in fiscal 1996 were $4,169,000 as compared to
a loss of $1,756,000 in the prior year. Ecuadorian operations sustained a loss
of $2,043,000 as compared to the prior years loss of $1,684,000 due to lower
than anticipated shrimp production in Ecuador and a substantial reduction in the
sales price of shrimp resulting from an oversupply of shrimp worldwide. The
Company incurred a $1,033,000 loss from its scallop operations (including a
$341,000 writedown of other assets) due to lack of availability of product as
compared to a $54,000 loss in the prior year. Bluepoints' Long Island operations
had a loss of $941,000 due to the presence of "brown tide" at its clam
operations during the summer months, and curtailed production during the
remainder of the year. This compares with income of $170,000 in the prior year.
There was a loss of $152,000 from the discontinued soft shell crab operation,
whose assets had been put up for sale.
Textile
Revenues for the textile division increased by 4% over last year, and earnings
increased $635,000. Hanora Spinning's earnings increased $156,000 to $839,000
due to higher operating margins. Hanora South and J & M incurred a combined loss
of $238,000 as compared to last year's loss of $530,000 due to higher revenues
and gross profits earned at J & M. Whitlock Combing Company Inc. ("Whitlock"),
which owned a wool combing
14
<PAGE>
Textile (continued)
plant in South Carolina and which discontinued operations in 1992, incurred
losses of $339,000 (including a writedown of its building of $250,000) relating
to its property in South Carolina which is being offered for sale, compared to a
loss of $526,000 in the prior year. During the three years ended June 30, 1997,
the Company purchased approximately $1,065,000 of machinery and equipment for
the textile operations. In fiscal 1996, revenues for the textile division
decreased by 17% over the prior year, and earnings decreased $1,442,000. Hanora
Spinning's earnings decreased $575,000 to $683,000 due to substantially higher
operating costs and lower revenues. Hanora South and J & M incurred a combined
loss of $530,000 as compared to the prior year's profit of $200,000 due to
higher revenues and gross profits earned at J & M in the prior year as a result
of a substantial contract received from a new customer that expired in December
1994. Whitlock incurred expenses of $526,000 (including depreciation and a
writedown of its building of $262,000) relating to its property in South
Carolina compared to a loss of $389,000 in the prior year.
Health Care
In fiscal 1997, the Company recognized income of $574,000 from this investment
as compared to income of $47,000 in fiscal 1996. The increase in income was
primarily caused by a increase in occupancy at one facility and decreased
operating costs. In fiscal 1995, the Company recognized income of $639,000 from
this investment.
Corporate/Other
Corporate interest and expenses for the last three years was $4,339,000,
$4,173,000 and $4,852,000, respectively. Corporate and other revenues for the
last three years was $587,000, $407,000 and $813,000, respectively. Corporate
and other revenues includes the operations of the Merrimac division other than
those related to the ownership of currently leased real estate which are
included in the real estate operations. Corporate expenses increased by $335,000
in the current year primarily as a result of $307,000 of clean-up expenses at
Merrimac's Newburyport property. The reduction in expenses in fiscal 1996 was
due to the closing of the Merrimac Ice Bucket division and a reduction in other
related costs of Merrimac of $336,000 and reduced professional fees of $73,000.
Except as referred to above, all corporate expenses, including interest on the
Company's term loan and revolving line of credit, have remained relatively
constant for the last three years.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
The First Republic Corporation of America
We have audited the accompanying consolidated balance sheets of The First
Republic Corporation of America (the "Company") and subsidiaries as of June 30,
1997 and 1996, and the related consolidated statements of operations, retained
earnings, and cash flows for each of three years in the period ended June 30,
1997. Our audits also included the financial statement schedules listed in the
accompanying index to financial statements (Item 14.a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits. We did not audit the financial statements of (a)
Marchelot S.A. and its subsidiaries and the hotel division, which statements
reflect total assets constituting 18% in 1997 and 17% in 1996, and total
revenues constituting 18% in 1997, 17% in 1996 and 15% in 1995, of the related
consolidated totals, (b) the Mondragon Companies, accounted for on the equity
method, and (c) certain health care entities (Bristol Manor Health Care Center,
Inc., The Whitehall Residence, Inc., Logan Manor Corp., Harbor View Health Care
Center, Inc.), accounted for on the equity method. Those statements were audited
by other auditors whose reports have been furnished to us, and our opinion,
insofar as it relates to the amounts included for such entities, is based solely
on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.
16
<PAGE>
In our opinion, based on our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of The First Republic Corporation of America
and subsidiaries at June 30, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
New York, New York
September 25, 1997
except for Note 5(5), as to which
the date is October 21, 1997
17
<PAGE>
[BDO Letterhead]
Independent Auditor's Report
To the Board of Directors
Marchelot S.A. and Subsidiaries
New York, U.S.A.
We have audited the consolidated balance sheet of Marchelot S.A. (a wholly-owned
subsidiary of Bluepoints of Bermuda), and its subsidiaries Emporsa, Empacadora y
Exportadora S.A., Larfico, Larvas del Pacifico S.A. and Comercorp S.A. as of
June 30, 1997 and 1996, and the related consolidated statements of operations
and deficit, and of cash flows, for each of the years ended June 30, 1997, 1996
and 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Marchelot S.A. and Subsidiaries
to June 30, 1997 and 1996, and the results of their operations and their cash
flows for each of the years ended June 30, 1997, 1996 and 1995, in conformity
with generally accepted accounting principles prevailing in the United States of
America.
/s/ BDO Stern
August 4, 1997
Guayaquil, Ecuador
<PAGE>
[Dermody, Burke & Brown Letterhead]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
FIRST REPUBLIC CORPORATION OF
AMERICA SHERATON INN - SYRACUSE
We have audited the accompanying balance sheets of FIRST REPUBLIC CORPORATION OF
AMERICA, SHERATON INN - SYRACUSE as of June 30, 1997 and 1996, and the related
statements of income and division control and cash flows for the years ended
June 30, 1997, 1996 and 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Sheraton Inn - Syracuse is owned and operated by First Republic Corporation
of America and its affiliated company, First Republic Building Corporation. The
accounting records maintained in Syracuse relate only to the transactions
incurred in the daily operation of the Hotel. Transactions involving debt
financing, tax escrow payments, corporate income taxes and property accounts are
not reflected on the Hotel's books but are the accounting responsibility of
First Republic and its affiliate. These financial statements are issued for
inclusion in the financial statements of First Republic Corporation of America
and should not be considered separately in determining the financial position
and results of operations of the Sheraton Inn - Syracuse.
<PAGE>
To the Board of Directors of
FIRST REPUBLIC CORPORATION OF
AMERICA SHERATON INN - SYRACUSE
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the operations of FIRST
REPUBLIC CORPORATION OF AMERICA, SHERATON INN - SYRACUSE at June 30, 1997 and
1996 and the results of its operations and its cash flows for the years ended
June 30, 1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
/s/ Dermody, Burke and Brown
DERMODY, BURKE AND BROWN
Certified Public Accountants, P.C.
Syracuse, NY
July 28, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
Bristol Manor Health Care Center, Inc.
We have audited the accompanying balance sheet of Bristol Manor Health
Care Center, Inc. as of June 30, 1997 and 1996, and the related statements of
operations and cash flows for the six months then ended. These financial
statements are the responsibility of the Center's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The balance sheet of Bristol Manor Health Care Center, Inc. includes an
amount due from affiliated entities of $3,349,578 as of June 30, 1997. It is
unlikely that these amounts will be recovered in the foreseeable future. No
allowance for doubtful accounts has been recorded. Generally accepted accounting
principles require that assets be stated at net realizable value.
In our opinion, except for the effects of not recording an allowance for
doubtful accounts as discussed in the previous paragraph, the financial
statements referred to above present fairly, in all material respects, the
financial position of Bristol Manor Health Care Center, Inc. as of June 30, 1997
and 1996, and the results of its operations and its cash flows for the six
months then ended in conformity with generally accepted accounting principles.
<PAGE>
2.
Bristol Manor Health Care Center, Inc. is a member of a group of
affiliated entities and, as disclosed in the financial statements, has
significant transactions with members of the group, including borrowings and the
rental of the facility. Because of these relationships, it is possible that the
terms of these transactions are not the same as those which would result from
transactions among wholly unrelated parties.
/s/ Loeb & Troper
August 27, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
Bristol Manor Health Care Center, Inc.
We have audited the accompanying balance sheet of Bristol Manor Health
Care Center, Inc. as of December 31, 1996 and 1995, and the related statements
of operations and cash flows for the years then ended. These financial
statements are the responsibility of the Center's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those Standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bristol Manor Health Care
Center, Inc. as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Bristol Manor Health Care Center, Inc. is a member of a group of
affiliated entities and, as disclosed in the financial statements, has
significant transactions with members of the group. including borrowings and the
rental of the facility. Because of these relationships, it is possible that the
terms of these transactions are not the same as those which would result from
transactions among wholly unrelated parties.
/s/ Loeb & Troper
March 13, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
The Whitehall Residence, Inc.
We have audited the accompanying balance sheet of The Whitehall Residence,
Inc. as of June 30, 1997 and 1996, and the related statements of operations and
cash flows for the six months then ended. These financial statements are the
responsibility of the corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Whitehall Residence,
Inc. as of June 30, 1997 and 1996, and the results of its operations and its
cash flows for the six months then ended in conformity with generally accepted
accounting principles.
The Whitehall Residence, Inc. is a member of a group of affiliated
entities and, as disclosed in the financial statements, has significant
transactions with members of the group, including borrowings and the rental of
the facility. Because of these relationships, it is possible that the terms of
these transactions we not the same as those which would result from transactions
among wholly unrelated parties.
<PAGE>
2.
The accompanying financial statements have been prepared assuming that The
Whitehall Residence, Inc. will continue as a going concern. As discussed in Note
F to the financial statements, the corporation has suffered recurring losses
from operations and has a retained earnings deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note F. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Loeb & Troper
August 27, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
The Whitehall Residence, Inc.
We have audited the accompanying balance sheet of The Whitehall Residence,
Inc. as of December 31, 1996 and 1995, and the related statements of operations
and cash flows for the years then ended. These financial statements are the
responsibility of the corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Whitehall Residence,
Inc. as of December 31, 1996 and 1995, and the results of its, operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
The Whitehall Residence, Inc. is a member of a group of affiliated
entities and, as disclosed in the financial statements, has significant
transactions with members of the group, including borrowings and the rental of
the facility. Because of these relationships, it is possible that the terms of
these transactions are not the same as those which would result from
transactions among wholly unrelated parties.
<PAGE>
2.
The accompanying financial statements have been prepared assuming that The
Whitehall Residence, Inc. will continue as a going concern. As discussed in Note
H to the financial statements, the corporation has suffered recurring losses
from operations and has a retained earnings deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note H. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Loeb & Troper
March 13, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
Logan Manor Corp.
We have audited the accompanying balance sheet of Logan Manor Corp. as of
June 30, 1997 and 1996, and the related statements of operations and cash flows
for the six months then ended. These financial statements are the responsibility
of the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Logan Manor Corp. as of June
30, 1997 and 1996, and the results of its operations and its cash flows for the
six months then ended in conformity with generally accepted accounting
principles.
Logan Manor Corp. is a member of a group of affiliated entities and, as
disclosed in the financial statements, has significant transactions with members
of the group, including significant borrowings. Because of these relationships,
it is possible that the terms of these transactions are not the same as those
which would result from transactions among wholly unrelated parties.
The accompanying financial statements have been prepared assuming that
Logan Manor Corp. will continue as a going concern. As discussed in Note E to
the financial statements, the Corporation has suffered recurring losses from
operations and has a retained earnings deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note E. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Loeb & Troper
August 27, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
Logan Manor Corp.
We have audited the accompanying balance sheet of Logan Manor Corp. as of
December 31, 1996 and 1995, and the related statements of operations and cash
flows for the years then ended. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Logan Manor Corp. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Logan Manor Corp. is a member of a group of affiliated entities and, as
disclosed in the financial statements, has significant transactions with members
of the group, including significant borrowings. Because of these relationships,
it is possible that the terms of these transactions are not the same as those
which would result from transactions among wholly unrelated parties.
<PAGE>
2.
The accompanying financial statements have been prepared assuming that
Logan Manor Corp. will continue as a going concern. As discussed in Note E to
the financial statements, the Corporation has suffered recurring losses from
operations and has a retained earnings deficit that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note E. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Loeb & Troper
March 13, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
Harbor View Health Care Center, Inc.
We have audited the accompanying balance sheet of Harbor View Health Care
Center, Inc. as of June 30, 1997 and 1996, and the related statements of
operations and cash flows for the six months then ended. These financial
statements are the responsibility of the Center's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The balance sheet of Harbor View Health Care Center, Inc. includes an
amount due from affiliated entities of $582,022 as of June 30, 1997. It is
unlikely that these amounts will be recovered in the foreseeable future. No
allowance for doubtful accounts has been recorded. Generally accepted accounting
principles require that assets be stated at net realizable value.
In our opinion, except for the effects of not recording an allowance for
doubtful accounts as discussed in the previous paragraph, the financial
statements referred to above present fairly, in all material respects, the
financial position of Harbor View Health Care Center, Inc. as of June 30, 1997
and 1996, and the results of its operations and its cash flows for the six
months then ended in conformity with generally accepted accounting principles.
<PAGE>
2.
Harbor View Health Care Center, Inc. is a member of a group of affiliated
entities and, as disclosed in the financial statements, has significant
transactions with members of the group, including borrowings and the rental of
the facility. Because of these relationships, it is possible that the terms of
these transactions are not the same as those which would result from
transactions among wholly unrelated parties.
/s/ Loeb & Troper
August 27, 1997
<PAGE>
[LOEB & TROPER Letterhead]
Independent Auditor's Report
Board of Directors
Harbor View Health Care Center, Inc.
We have audited the accompanying balance sheet of Harbor View Health Care
Center, Inc. as of December 31, 1996 and 1995, and the related statements of
operations and cash flows for the years then ended. These financial statements
are the responsibility of the Center's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Harbor View Health Care
Center, Inc. as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Harbor View Health Cam Center, Inc. is a member of a group of affiliated
entities and, as disclosed in the financial statements, has significant
transactions with members of the group, including borrowings and the rental of
the facility. Because of these relationships, it is possible that the terms of
these transactions are not the same as those which would result from
transactions among wholly unrelated parties.
/s/ Loeb & Troper
March 13, 1997
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
1997 1996
---------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,442,536 $ 1,009,079
Restricted cash 489,539 --
Accounts and rents receivable, net of allowances of
$240,410 and $210,345 4,901,188 4,900,233
Mortgages receivable--current portion (Note 3 and 6) 3,001 620,546
Other receivables (including $20,000 in 1997 and $725,000 in 1996 due
from related party) 486,233 1,092,824
Inventories (Note 1) 3,501,650 4,921,283
Prepaid expenses and other assets 1,299,460 1,115,724
---------------------------------------
Total current assets 12,123,607 13,659,689
Real estate held for rental and hotel, at cost (Notes 5 and 9):
Land 8,399,740 8,399,740
Building and improvements 42,735,453 41,558,112
---------------------------------------
51,135,193 49,957,852
Less accumulated depreciation 24,553,722 23,455,743
---------------------------------------
26,581,471 26,502,109
Other property, plant and equipment, at cost (Note 1):
Land 1,530,849 1,530,849
Buildings and improvements 6,882,827 5,886,323
Leaseholds and improvements 1,785,939 1,167,759
Machinery, equipment, parts and vehicles 14,953,145 12,719,198
Furniture and furnishings 421,662 376,284
Construction-in-progress 1,535,923 438,212
---------------------------------------
27,110,345 22,118,625
Less accumulated depreciation and amortization 12,424,042 8,693,495
---------------------------------------
14,686,303 13,425,130
Mortgages receivable--net of current portion (Note 3 and 6) 106,669 109,680
Investments in and advances to affiliated entities (Notes 1 and 4) 13,059,763 12,247,909
Tenant improvements, net of accumulated amortization of $3,158,338 and
$2,323,024 6,580,337 5,852,223
Unamortized leasing, financing and other deferred costs 1,983,828 1,764,806
Other assets:
Cash and securities in trust for tenants' security deposits 1,642,868 1,569,383
Mortgage escrow funds and security deposits 89,649 149,813
Assets held for sale (Note 12) 1,050,000 1,300,001
Due from related parties (Note 11) 3,130,196 2,331,984
Other 301,202 326,263
---------------------------------------
6,213,915 5,677,444
---------------------------------------
Total assets $ 81,335,893 $ 79,238,990
=======================================
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
June 30,
1997 1996
---------------------------------------
<S> <C> <C>
Liabilities and stockholders' equity Current liabilities:
Notes payable (Notes 4, 5 and 6) $ 1,527,000 $ 3,472,000
Note payable, related party (Note 11) 640,000 640,000
Current portion of long-term debt (Notes 5 and 6) 1,668,654 1,729,997
Accounts payable 2,331,518 1,892,374
Accrued expenses and taxes payable 2,317,498 2,088,320
Due to related parties (Note 11) 1,374,035 743,792
Other liabilities 93,257 93,257
---------------------------------------
Total current liabilities 9,951,962 10,659,740
Long-term debt (Notes 5 and 6) 26,297,499 23,809,823
Deferred income tax (Note 7) 492,926 567,926
Other liabilities:
Tenants' security deposits payable 1,642,868 1,569,383
Accrued pension (Note 8) 931,448 1,215,840
---------------------------------------
2,574,316 2,785,223
Minority interests 410,095 608,266
Deferred income (Note 3) -- 362,323
---------------------------------------
Total liabilities 39,726,798 38,793,301
Stockholders' equity:
Common stock, $1 par value:
Authorized, 2,400,000 shares;
Issued, 1,175,261 shares 1,175,261 1,175,261
Additional paid-in capital 15,000,753 15,000,753
Retained earnings 29,843,361 28,673,150
---------------------------------------
46,019,375 44,849,164
Less treasury stock, at cost--503,197 and
502,992 shares (Note 12) 4,410,280 4,403,475
---------------------------------------
Total stockholders' equity 41,609,095 40,445,689
Leases, commitments and contingencies
(Notes 9 and 10)
---------------------------------------
Total liabilities and stockholders' equity $ 81,335,893 $ 79,238,990
=======================================
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales--textiles and seafood $ 24,949,212 $ 22,329,954 $ 25,391,537
Rents and other revenues--real estate and hotel operations
23,285,138 22,390,066 21,608,443
Other (including interest income of approximately
$261,000, $83,000 and $106,000, respectively) 1,986,069 891,536 1,215,623
Equity in income (loss) of affiliated entities (Note 4) 9,216 (2,065,609) (118,264)
-----------------------------------------------------
50,229,635 43,545,947 48,097,339
-----------------------------------------------------
Costs and expenses:
Cost of sales 22,205,567 20,460,983 21,674,192
Operating costs--real estate and hotel operations 14,153,958 13,495,292 12,631,176
Depreciation and amortization 4,052,848 3,817,390 4,182,079
Interest 3,068,457 3,115,460 2,993,065
Selling, general and administrative 5,750,101 5,575,769 5,642,437
Writedown of property and equipment
(Note 1 and 12) 249,875 418,110 265,189
Minority interests' share of loss of subsidiaries (996,382) (1,133,113) (748,233)
-----------------------------------------------------
48,484,424 45,749,891 46,639,905
-----------------------------------------------------
Income (loss) before income taxes 1,745,211 (2,203,944) 1,457,434
Income tax expense (Note 7) 575,000 563,000 447,000
-----------------------------------------------------
Net income (loss) $ 1,170,211 $ (2,766,944) $ 1,010,434
=====================================================
Per share of common stock (Note 1):
Net income (loss) $1.74 $(4.11) $1.50
=====================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Retained Earnings
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 28,673,150 $ 31,440,094 $ 30,429,660
Net income (loss) for the year 1,170,211 (2,766,944) 1,010,434
--------------------------------------------------------------
Balance, end of year $ 29,843,361 $ 28,673,150 $ 31,440,094
==============================================================
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 1,170,211 $ (2,766,944) $ 1,010,434
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,052,848 3,817,390 4,182,079
Writedown of property and equipment 249,875 418,110 265,189
Deferred income taxes (75,000) (70,000) (36,000)
Equity in net (income) loss of affiliated
entities (9,216) 2,065,609 118,264
Minority interests' share of loss in
subsidiaries (996,382) (1,133,113) (748,233)
Changes in operating assets and liabilities:
Accounts, rents and other receivables
605,636 (454,526) 381,909
Inventories 1,419,633 550,717 (740,455)
Prepaid and other assets (183,736) 43,104 110,427
Due from related parties - 217,250 (217,250)
Accounts payable 439,144 519,513 (739,032)
Accrued and other current liabilities 229,178 346,274 383,052
Due to related parties 630,243 (149,581) (434,627)
Other liabilities (573,107) 62,428 (82,924)
-------------------------------------------------------------
Cash provided by operating activities 6,959,327 3,466,231 3,452,833
-------------------------------------------------------------
Investing activities
Purchases of real estate held for rental (1,484,689) (546,167) (2,815,491)
Purchases of other property plant and equipment
(3,034,177) (1,502,017) (1,340,667)
Additions to tenant improvements (1,602,630) (861,659) (2,229,991)
Investment in affiliated entities (1,239,862) (993,338) (2,440,294)
Distribution in excess of equity in earnings
from affiliated entities 437,225 350,741 816,610
Payments received on mortgages receivable 620,556 1,002,273 1,907,516
Other investing activities (207,282) 78,205 21,020
-------------------------------------------------------------
Net cash used in investing activities (6,510,859) (2,471,962) (6,081,297)
-------------------------------------------------------------
</TABLE>
22
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
Financing activities
Proceeds from mortgage and notes payable to banks $ 13,800,000 $ 2,200,000 $ 11,209,241
Payments on mortgages and notes payable to banks (13,318,667) (3,520,859) (8,626,991)
Minority interests' additional paid-in capital -- 82,671 44,585
Purchases of treasury stock (6,805) (41,477) (20,040)
-----------------------------------------------------
Net cash provided by (used in) financing activities 474,528 (1,279,665) 2,606,795
-----------------------------------------------------
Net increase (decrease) in cash and cash equivalents 922,996 (285,396) (21,669)
Cash and cash equivalents at the beginning of year 1,009,079 1,294,475 1,316,144
-----------------------------------------------------
Cash and cash equivalents at the end of year $ 1,932,075 $ 1,009,079 $ 1,294,475
=====================================================
Supplemental disclosure
Income taxes paid $ 742,626 $ 503,095 $ 582,005
Interest paid $ 3,059,458 $ 3,127,523 $ 2,943,574
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1997
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of The First Republic
Corporation of America ("FRCA") and all majority owned or controlled
subsidiaries (the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company records its
investment in partnerships and corporations in which it owns interests ranging
from 38% to 50% in accordance with the equity method.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Inventories
Inventories are valued at the lower of cost or market with cost being determined
by specific identification.
Inventories are summarized as follows:
June 30,
1997 1996
---------------------------------
Work-in-process and raw materials $1,600,565 $1,655,147
Finished goods 1,901,085 3,266,136
---------------------------------
$3,501,650 $4,921,283
=================================
24
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Depreciation and Amortization
Depreciation and amortization are provided by the straight-line method over the
following estimated useful lives:
Estimated
Classification Useful Life
---------------------------------------------- -----------
Buildings and improvements 15 to 40 years
Leaseholds and improvements 3 to 31.5 years
Machinery, equipment, parts and vehicles 5 to 10 years
Furniture and furnishings 5 years
Tenants' improvements and leasing commissions are amortized over the term of the
respective tenants' leases.
Financing costs are amortized over the term of the related debt.
Revenues
Sales of textiles and seafood are recognized when shipments are made to
customers. Rental revenue is recognized on an accrual basis in accordance with
the terms of the lease except that leases with scheduled rent increases are
required to be recognized on a straight-line basis over the life of the lease.
Hotel revenues are recognized when the related services are rendered.
Per Share Data
Per share amounts are based on 672,165 (1997), 672,677 (1996) and 673,867 (1995)
weighted average shares of common stock outstanding.
Accounting for Income Taxes
The liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
25
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
In March 1995, the Financial Accounting Standards Board issued Statement No. 121
("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. SFAS 121 also addresses the accounting
for long-lived assets to be disposed of. The Company adopted SFAS 121 in fiscal
1997 which did not result in any change in the Company's method of recording for
impairment. A writedown of approximatley $250,000 was recorded for Whitlock for
the year ended June 30, 1997 (see Note 12).
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 ("SFAS 128"), Earnings per Share, which supersedes APB Opinion No. 15 and
replaces the presentation of primary EPS with a presentation of basic EPS. SFAS
128 also requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. The Company will
adopt SFAS 128 in fiscal 1998. It is anticipated that the statement will not
have an effect on the Company's financial statements due to the fact that the
Company does not have any convertible stock.
Foreign Operations
A subsidiary, together with certain entities in which the subsidiary owns a 38%
interest, is engaged in shrimp farming operations in Ecuador. Prior to the end
of December 1996, all of such entities sold their products solely to a domestic
subsidiary of the Company engaged in seafood operations. Beginning in January
1997 all sales were to third parties. Financial statements of such foreign
entities are translated using the U.S. dollar as the functional currency as
Ecuador has a hyperinflationary currency. Operations include exchange gains of
$395,202 (1997), $182,145 (1996) and $254,954 (1995) resulting from foreign
currency transactions and from translation of the foreign entities' financial
statements.
26
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
2. Industry Segments and Foreign Operations
Following is information about the Company's industry segments for each of the
three years ended June 30:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Real estate $ 18,057,022 $ 17,104,302 $ 16,436,969
Hotel 5,770,014 5,413,092 5,289,114
Seafood 9,965,316 7,458,512 7,296,381
Textile 15,841,319 15,229,106 18,379,894
Corporate 586,748 406,544 813,245
------------------------------------------------------------------
$ 50,220,419 $ 45,611,556 $ 48,215,603
==================================================================
Operating profit (loss):
Real estate (a) $ 4,931,831 $ 4,512,789 $ 4,612,379
Hotel 673,149 501,442 295,461
Seafood (1,375,272) (2,146,319) (1,111,286)
Textile (b) 262,494 (372,844) 1,069,602
------------------------------------------------------------------
Total operating profit 4,492,202 2,495,068 4,866,156
Corporate expenses (3,486,351) (3,151,081) (3,802,300)
Corporate interest expense (852,986) (1,021,979) (1,049,636)
Corporate revenue 586,748 406,544 813,245
Equity in income (loss) of
affiliated entities (c) 9,216 (2,065,609) (118,264)
Minority interests' share of loss
of subsidiaries 996,382 1,133,113 748,233
------------------------------------------------------------------
Income (loss) before income taxes
$ 1,745,211 $ (2,203,944) $ 1,457,434
==================================================================
</TABLE>
27
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Industry Segments and Foreign Operations (continued)
<TABLE>
<CAPTION>
1997 1996 (e) 1995 (e)
------------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Real estate $ 34,898,169 $ 33,719,375 $ 34,863,392
Hotel 2,805,387 2,938,507 3,026,711
Seafood 14,724,084 12,590,789 14,144,339
Textile 11,797,287 12,685,459 14,803,131
Corporate and other (d) 17,110,966 17,304,860 15,902,157
------------------------------------------------------------------
$ 81,335,893 $ 79,238,990 $ 82,739,730
==================================================================
Depreciation and amortization:
Real estate $ 1,891,940 $ 1,795,298 $ 2,035,785
Hotel 387,903 471,486 631,786
Seafood 665,192 286,959 218,794
Textile 1,045,591 1,179,043 1,181,073
Corporate and other 62,222 84,604 114,641
------------------------------------------------------------------
$ 4,052,848 $ 3,817,390 $ 4,182,079
==================================================================
Capital expenditures--net:
Real estate $ 2,941,453 $ 1,228,017 $ 4,531,561
Hotel 145,865 179,809 545,673
Seafood (f) 2,792,954 1,167,317 483,927
Textile 230,015 242,266 592,475
Corporate and other 10,939 92,434 232,513
------------------------------------------------------------------
$ 6,121,226 $ 2,909,843 $ 6,386,149
==================================================================
</TABLE>
(a) Includes mortgage interest expense of $1,817,120 (1997), $1,622,687
(1996) and $1,564,524 (1995).
(b) Includes losses from Whitlock (see Note 12a).
(c) See Note 4.
(d) Consists principally of investments in and advances to affiliated
entities.
(e) Certain amounts have been reclassified to conform with 1997
presentation.
(f) Includes assets of Lambert International Fisheries, Inc.
28
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Industry Segments and Foreign Operations (continued)
The Company's operations in the industry segments detailed above consist of:
Real Estate: Ownership of loft, office and industrial buildings, shopping
centers, residential property and vacant land located principally in New
York State, New Jersey, Florida, North Carolina, Massachusetts, Virginia
and Pennsylvania.
Hotel: Ownership and operation of a hotel in Liverpool, New York.
Seafood: Harvesting and sale of hard-shell clams on property owned by the
Company located underwater off Long Island's south shore in New York State,
harvesting and sale of scallops on property leased by the Company in Cape
Canaveral, Florida and sales of shrimp from Ecuador (both grown in Company
owned ponds and purchased from a 38% owned entity and other third-parties)
and from Costa Rica.
Textile: Operations of two yarn spinning plants and a dye house located in
South Carolina and Rhode Island.
Foreign operations, consisting of the operation of a shrimp farm and shrimp
hatchery, were conducted in Ecuador through Marchelot S.A. and its wholly-owned
and 62.5% owned subsidiaries. For the years ended June 30, 1997, 1996 and 1995,
respectively, such entities had sales of approximately $2,656,000, $1,780,000
and $1,495,000, all of which prior to the end of December 1996 were to the
Company and eliminated in consolidation, and net losses (including a share of
net losses from the Mondragon Companies accounted for by the equity method--see
Note 4) of $1,194,000, $1,875,000 and $1,549,000. Beginning in January 1997, all
sales were to third parties and therefore are not eliminated during
consolidation. As of June 30, 1997 and 1996, respectively, such subsidiaries had
total assets of approximately $11,980,166 and $10,302,473, liabilities
(excluding intercompany loans and advances) of $3,472,000, $3,102,000 and
minority interests of $410,000 and $608,000. In addition, Bluepoints Company
Inc., a domestic subsidiary, had outstanding advances to the Mondragon Companies
of $4,126,928 and $2,988,246 at June 30, 1997 and 1996, respectively.
29
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Mortgages Receivable
A summary of mortgages receivable is as follows:
<TABLE>
<CAPTION>
Interest June 30,
Description Rate Maturity Date 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First lien on motel 8.0% December 1, 1996 (1) $ -- $ 617,783
First lien on condominiums 7.9%-10.5% (2) 109,670 112,443
---------------------------------
109,670 730,226
Less payment due within one year
included in current assets 3,001 620,546
---------------------------------
$ 106,669 $ 109,680
=================================
</TABLE>
(1)--A gain of $786,230, which was realized on the sale of a motel during the
fiscal year ended June 30, 1977, had been treated in accordance with the
installment method which requires the recognition of gain as cash is collected.
The mortgage was paid in full in December 1996. The unrecognized portion of the
gain of $362,323 was classified in the accompanying balance sheets as deferred
income at June 30, 1996.
(2)--Payment terms of mortgages require monthly payments for seven years with
the remaining principal balance due at that time. The maturity dates range from
December 1, 1998 to June 1, 1999.
Maturities are as follows:
Amount
-------------------
Year ending June 30:
1998 $ 3,001
1999 106,669
===================
$ 109,670
===================
30
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Affiliated Entities
The following table summarizes information with respect to the Company's
affiliated entities:
<TABLE>
<CAPTION>
Company's Investments Company's
and Advances Equity in Income (Loss)
Company's --------------------- --------------------------------------
Ownership June 30, Year ended June 30,
Percentage 1997 1996 1997 1996 1995
-----------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Sunscape Associates 50% $ 490 $ 581 $ 17 $ (90) $ (112)
Lambert(3) 100% - 536 - (1,033) (1) (54)
Mondragon Companies 38% 6,501 5,306 (582) (990) (591)
Health Care Entities(2) 49.9% 6,029 5,822 574 47 639
Other Various 40 3 - - -
---------------------------------------------------------------
$ 13,060 $ 12,248 $ 9 $ (2,066) $ (118)
===============================================================
</TABLE>
(1)--Includes approximately $600,000 of loss related to write-off of the excess
of the Company's cost of investment over net assets acquired, as a result
of continuing net losses incurred by the affiliate.
(2)--Equity in income is net of amortization of the Company's cost of investment
which exceeded its underlying share of Partnerships' deficiency at date
of acquisition. Such excess, which amounted to approximately $3,400,000
and $3,500,000 at June 30, 1997 and 1996, respectively, is being
amortized over 40 years.
(3)--Prior to December 1996 the Company owned 50% of Lambert International
Fisheries Inc.
Real Estate
Sunscape Associates ("Sunscape") owns a 167 unit garden apartment complex
located in Orlando, Florida. The other 50% interest in Sunscape is owned by
corporate entities which in turn are owned by officers and directors of the
Company.
Seafood
Lambert International Fisheries, Inc. ("Lambert"): The Company owned a 50%
interest in Lambert which is located in Florida, and is engaged in the business
of collecting, processing, and selling scallops. In December 1996, the Company
purchased the remaining 50% of Lambert for $265,000; $50,000 was paid in cash
and the remaining sum with a promissory note bearing interest at 8% and payable
in December 1997.
31
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Affiliated Entities (continued)
Condensed financial information of Lambert is as follows:
June 30,
1996
--------------------
Assets
Cash $ 29,000
Other current assets 95,000
Property and equipment, net of accumulated depreciation 1,715,000
Other assets 9,000
--------------------
Total assets $ 1,848,000
====================
Liabilities
Notes payable and other current liabilities $ 854,000
Loans payable--stockholders 3,001,000
--------------------
Total liabilities 3,855,000
Stockholders' (deficit) equity (2,007,000)
--------------------
Total liabilities and equity $ 1,848,000
====================
<TABLE>
<CAPTION>
Year ended June 30,
1997(1) 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 23,000 $ 47,000 $ 4,217,000
Costs and expenses (301,000) (1,308,000) (4,326,000)
Loss on disposal and write-off of assets (805,000) -
------------------------------------------------------
Net loss $ (278,000) $ (2,066,000) $ (109,000)
======================================================
</TABLE>
(1) For the period prior to the acquisition of the remaining 50% interest
During the fiscal year ended June 30, 1996, no scallops were harvested and a
write-off of intangible assets aggregating $682,000 was recorded as a result of
recurring losses and the uncertainty as to the recoverability of the carrying
value of such assets.
32
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Affiliated Entities (continued)
Bluepoints Company Inc. ("Bluepoints"): Bluepoints, an 80.2% owned subsidiary of
the Company, owns Marchelot S.A. which in turn owns a 38% interest in two
Ecuadorian corporations, Isca C.A. and Langomorro CIA. Ltda. (collectively, the
"Mondragon Companies"), engaged in shrimp farming operations in Ecuador. The
remaining 19.8% of Bluepoints is owned by certain stockholders of the Company.
For the years ended June 30, 1997, 1996 and 1995, Bluepoints purchased
approximately $1,010,000, $1,594,000, and $775,000, respectively, of shrimp from
the Mondragon Companies.
Condensed combined financial information of the Mondragon Companies is as
follows:
June 30,
1997 1996
-----------------------------------
Assets
Current assets $ 4,294,000 $ 2,559,000
Property and equipment--net of accumulated
depreciation
8,869,000 8,056,000
Other assets 542,000 758,000
-----------------------------------
Total assets $ 13,705,000 $ 11,373,000
===================================
Liabilities
Notes payable--banks $ 2,676,000 $ 1,801,000
Due to Bluepoints and other affiliates 5,329,000 4,152,000
Other current liabilities 630,000 893,000
-----------------------------------
Total current liabilities 8,635,000 6,846,000
Long-term debt 307,000 307,000
-----------------------------------
Total liabilities 8,942,000 7,153,000
Stockholders' equity 4,763,000 4,220,000
-----------------------------------
Total liabilities and equity $ 13,705,000 $ 11,373,000
===================================
Year ended June 30,
1997 1996 1995
-----------------------------------------------------------
Revenues $ 2,790,000 $ 1,721,000 $ 794,000
Costs and expenses 4,254,000 (3,791,000) (2,281,000)
-----------------------------------------------------------
Net loss $ (1,464,000) $ (2,070,000) $ (1,487,000)
===========================================================
33
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Affiliated Entities (continued)
Health Care
The Company owns 49.9% interests in partnerships which own three nursing homes
and a senior citizen residence and adult day care center located in Rochelle
Park, Jersey City and Whiting, New Jersey.
Condensed combined financial information of the 49.9% owned partnerships is as
follows:
June 30,
1997 1996
-----------------------------------
Cash $ 1,167,000 $ 1,213,000
Accounts receivable, net 2,863,000 2,045,000
Other current assets 332,000 282,000
Other assets 518,000 822,000
Property and equipment, net of accumulated
depreciation 23,053,000 23,867,000
-----------------------------------
Total assets $ 27,933,000 $ 28,229,000
===================================
Accounts payable $ 2,401,000 $ 1,615,000
Other current liabilities 1,450,000 1,269,000
Mortgages payable, current 1,400,000 1,330,000
Mortgages payable, noncurrent 23,989,000 25,950,000
-----------------------------------
Total liabilities 29,240,000 30,164,000
Partners' capital deficiency (1,307,000) (1,935,000)
-----------------------------------
Total liabilities and capital deficiency $ 27,933,000 $ 28,229,000
===================================
Year ended June 30,
1997 1996 1995
----------------------------------------------------------
Revenues $ 22,339,000 $ 21,582,000 $ 21,927,000
Expenses 20,991,000 21,276,000 20,437,000
----------------------------------------------------------
Net income $ 1,348,000 $ 306,000 $ 1,490,000
==========================================================
34
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt and Credit Facilities
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
1997 1996
-------------------------------------
<S> <C> <C>
Mortgages payable due 1997-2009 bearing
interest at fixed rates of 8.5% to
11% and variable rates (8.5% at June 30,
1997) based on prime (1), (3) (4), and (5) $ 26,996,617 $ 24,248,991
Onondaga County Industrial Development
Agency Bonds (1) and (2) 900,000 1,200,000
5.5%-7.0% notes to development authorities
due 1995-2000 (1) 69,536 90,829
-------------------------------------
27,966,153 25,539,820
Less payments due within one year 1,668,654 1,729,997
=====================================
$ 26,297,499 $ 23,809,823
=====================================
</TABLE>
(1)--The net book value of real estate assets pledged as collateral is
approximately $21,000,000 and $20,500,000 at June 30, 1997 and 1996,
respectively.
(2)--The Company entered into an agreement with the Onondaga County Industrial
Development Agency (the "Agency") to finance the construction of two office
buildings in Liverpool, New York. Under the terms of the agreement, the Agency
issued $4,000,000 of industrial development revenue bonds. The financing was
structured in the form of a lease whereby the Company committed to pay $74,050
per quarter plus interest (payable monthly) through December 1999. Interest is
at a variable rate with a maximum of 9.5% per annum. At the completion of the
lease term, the property will be transferred to the Company for a nominal sum.
This transaction has been recorded as a purchase of the property.
The Company has provided a letter of credit in the amount of $900,000 at June
30, 1997 as collateral for the foregoing financing.
(3)--In fiscal 1997, the Company obtained a $4,000,000 mortgage loan
collateralized by the Greensboro North Shopping Center in Greensboro, North
Carolina. This loan bears interest at 8.35% per annum and provides for monthly
payments of $35,850 including principal and interest commencing September 1,
1996 through August 1, 2006 when the remaining unpaid balance of $2,523,000 will
become due.
35
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt and Credit Facilities (continued)
(4)--On October 21, 1996 the Company repaid its $6,000,000 mortgage loan on the
Video Film Center in New York that became due in October 1996 with the proceeds
of a new mortgage of $6,200,000. The new mortgage on the Video Film Center bears
interest at 9% per annum, provides for 60 monthly payments of $52,030 including
principal and interest commencing December 1, 1996 and expiring November 1, 2001
when the remaining balance of $5,774,232 will become due. The Company has an
option to renew the new mortgage as of August 1, 2001 for an additional five
year term at an interest rate to be determined at that time. A portion of the
loan proceeds, $475,000 ($489,539 as of June 30, 1997) has been set aside in an
escrow account to secure certain building improvements which were required by
the mortgagor.
(5)--On July 15, 1992, the Company replaced its existing indebtedness with its
principal lender with a $10,000,000 term loan and a $3,000,000 revolving line of
credit (the "Loan Agreement"), collateralized by a mortgage on the East Newark
Industrial Center. At June 30, 1997 and 1996, $700,000 and $2,800,000,
respectively, is outstanding under the line of credit and is included in "Notes
payable." The term loan, which had an outstanding balance of $6,777,810 at June
30, 1997 and $7,444,470 at June 30, 1996, required monthly principal payments of
$55,555 and matured on August 1, 1997 when the remaining unpaid principal
balance of $6,666,640 became due. The interest rate at June 30, 1997 on both
facilities is 1% in excess of the lender's prime rate. Both loans were extended
until October 31, 1997. On October 21, 1997 the Company replaced its existing
indebtedness with a new lender. The new agreement provides for a $9,000,000 term
loan with an interest rate equal to either (a) LIBOR plus 1.75%, (b) the
Alternate Base Rate (as defined) plus 0.25% or (c) the Fixed Rate (as defined)
plus 1.75% and a $3,000,000 revolving line of credit with an interest rate equal
to either (a) LIBOR plus 2% or, (b) the Alternate Base Rate (as defined) plus
0.50%. The term loan requires amortization payments of $358,800 per annum. The
term loan matures in five years and the revolving line of credit matures in
three years.
Aggregate principal payments on long-term debt are as follows:
Amount
--------------------
Year ending June 30:
1998 $ 1,668,654
1999 1,600,607
2000 1,638,504
2001 2,596,797
2002 3,356,280
Thereafter 17,105,311
--------------------
$ 27,966,153
====================
36
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Disclosures About Fair Value of Financial Instruments
FASB Statement No. 107 ("FAS 107"), "Disclosures about Fair Value of Financial
Instruments," requires disclosures about fair value for all financial
instruments, whether recognized or not recognized in the balance sheets, for
which it is practicable to estimate that value.
The following methods and assumptions were used by the Company in estimating
fair values for financial instruments:
Notes Payable and Long-Term Debt: The carrying amount of notes payable and
long-term debt with variable interest rates approximates fair value. For
fixed rate notes payable, fair value ($28,634,329) is estimated using
discounted cash flow analysis based on the Company's current incremental
borrowing rate for similar types of borrowing arrangements.
Mortgage Receivable: For fixed rate mortgage receivable, fair value is
estimated using discounted cash flow analysis based on current interest
rate for similar financial instruments and approximates its carrying
amount.
7. Income Taxes
At June 30, 1997, the Company has net operating loss carryforwards of
approximately $66,000,000 for income tax purposes that expire in years 2000
through 2002. Those carryforwards, which resulted from the merger of Merrimac
Corporation ("Merrimac") into the Company on June 30, 1993, are available to
reduce future taxable income, if any, of the Company but not the taxable income
of any other member of the Company's group. Deferred tax assets and liabilities
reflect the net tax effects of net operating loss carryforwards and temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
37
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Income Taxes (continued)
For financial reporting purposes, a valuation allowance has been recognized to
offset a portion of the deferred tax assets related to the carryforwards.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
June 30,
1997 1996
---------------------------------
Deferred tax liabilities:
Book basis of fixed assets over tax basis $ 250,000 $ 533,000
Book basis of carrying value of investee
over tax basis 491,000 344,000
---------------------------------
Total deferred tax liabilities 741,000 877,000
---------------------------------
Deferred tax assets:
Net operating loss carryforwards 22,440,000 23,222,000
Miscellaneous 231,000 180,000
---------------------------------
Total deferred tax assets 22,671,000 23,402,000
Valuation allowance 22,423,000 23,093,000
---------------------------------
Net deferred tax assets 248,000 309,000
---------------------------------
Net deferred tax liability $ 493,000 $ 568,000
=================================
The components of income (loss) before income taxes are as follow:
For the year ended June 30,
1997 1996 1995
------------------------------------------------------
Domestic $ 2,707,621 $ (695,770) $ 2,702,378
Foreign (962,410) (1,508,174) (1,244,944)
------------------------------------------------------
$ 1,745,211 $ (2,203,944) $ 1,457,434
======================================================
Significant components of the income tax expense (benefit) are as follows:
1997 1996 1995
-----------------------------------------------------
Current:
Federal $ 100,000 $ 100,000 $ 182,000
State 550,000 533,000 301,000
-----------------------------------------------------
Total current 650,000 633,000 483,000
-----------------------------------------------------
Deferred:
Federal (66,000) (62,000) (32,000)
State (9,000) (8,000) (4,000)
-----------------------------------------------------
Total deferred (75,000) (70,000) (36,000)
-----------------------------------------------------
$ 575,000 $ 563,000 $ 447,000
=====================================================
38
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Income Taxes (continued)
The reconciliation of income tax expense (benefit) computed at the U.S. federal
statutory tax rates to income tax expense follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates $ 593,000 34.0% $ (749,000) (34.0%) $ 496,000 34.0%
Increases (reductions) resulting from:
Alternative minimum tax 100,000 5.7 100,000 4.5 -- --
State taxes, net of federal
tax benefit 530,000 30.4 525,000 23.8 196,000 13.5
Adjustment of prior years
underaccrual (overaccrual) of
income tax (167,000) (9.6) 159,000 7.2 (76,000) (5.2)
Loss from foreign operations (not
subject to U.S. federal income
taxes) reduced by portion charged
to minority interest for which no
tax benefit is recognized 327,000 18.7 511,000 23.2 423,000 29.0
Minority interest in loss from
domestic operations (191,000) (10.9) (203,000) (9.2) (105,000) (7.2)
Equity in net loss of investees
for which no tax benefit is
recognized -- 351,000 15.9 18,000 1.2
Net operating loss carryforwards (763,000) (43.7) (253,000) (11.5) (441,000) (30.2)
Other items 146,000 8.4 122,000 5.6 (64,000) (4.4)
----------------------------------------------------------------------
$ 575,000 33.0% $ 563,000 25.5% $ 447,000 30.7%
======================================================================
</TABLE>
8. Benefit Plans
The Company and certain subsidiaries have profit-sharing plans covering
substantially all nonunion employees. Contributions to one of the plans is
discretionary. Total plan costs were approximately $215,000 for each of the
years ended June 30, 1997, 1996 and 1995.
Merrimac, which has been merged into the Company, had noncontributory pension
plans covering certain employees. All covered employees participated in the
basic pension plan with benefits based upon years of service. In addition,
Merrimac maintained a supplementary plan for salaried employees covered by the
basic pension plan. This supplementary plan provided benefits based upon salary
and years of credited service, with deductions for employees' primary social
security benefits and benefits received under the basic plan. The funding policy
is to contribute at least the minimum amounts required by the Employee
Retirement Income Security Act of 1974 or additional amounts to assure that plan
assets will be adequate to provide retirement benefits.
39
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Benefit Plans (continued)
The following table sets forth the funded status of the Merrimac pension plans
at June 30:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------
Accumulated Accumulated
Benefits Benefits
Exceed Assets Exceed Assets
-----------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested $ 4,802,000 $ 5,053,000
-----------------------------------------
Projected benefit obligation 4,802,000 5,053,000
Plan assets (primarily short-term money funds)
at fair market value 4,105,000 4,042,000
-----------------------------------------
Plan assets less than projected benefit obligation 697,000 1,011,000
Unrecognized net gain 234,000 205,000
-----------------------------------------
Net pension liability recognized in the
Consolidated Balance Sheet $ 931,000 $ 1,216,000
=========================================
</TABLE>
Since a significant part of Merrimac's operations have been discontinued,
substantially all employees included in the plan have been terminated and no
additional service benefits will accrue to such employees.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------------
<S> <C> <C> <C>
Interest cost on projected benefit obligation $ 349,000 $ 349,000 $ 358,000
Actual return on assets (323,000) (65,000) (390,000)
Net amortization and deferral 10,000 (300,000) 58,000
-------------------------------------------------
Total pension expense (benefit) $ 36,000 $ (16,000) $ 26,000
=================================================
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7-3/4% at June 30, 1997 and 7-1/4% at June 30,
1996. The expected long-term rate of return on plan assets was 8% in 1997 and
1996 and 7% in 1995.
40
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Leases
The Company is the lessee under a noncancellable operating ground lease which
expires in 2065. The lease provides for rentals of $11,404 per year and requires
future minimum rental payments aggregating $764,000 at June 30, 1997. Rent
expense includes real estate taxes, and in certain instances utilities and
maintenance costs, and rent for the corporate home office under a month-to-month
lease from a related party (see Note 11). Total rent expense for all operating
leases amounted to approximately $127,000, $126,000, and $124,000 for the years
ended June 30, 1997, 1996 and 1995, respectively.
The Company owns various office buildings, industrial buildings and shopping
centers from which it earns rental income under leases with various tenants.
Generally leases provide for tenants to pay additional amounts based on real
estate taxes and operating expenses incurred to maintain and operate these
properties in excess of base year amounts. Lease terms for these properties
range from 1 to 20 years.
Future minimum rentals (excluding operating expenses and other items billable to
tenants which aggregated approximately $3,200,000, $3,100,000 and $2,900,000 in
the years ended June 30, 1997, 1996 and 1995, respectively) to be received under
the above-mentioned leases, all of which are classified and accounted for as
operating leases, are as follows:
Amount
--------------------
Year ending June 30:
1998 $ 14,700,000
1999 12,200,000
2000 9,200,000
2001 8,100,000
2002 5,500,000
Thereafter 23,100,000
--------------------
$ 72,800,000
====================
41
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Commitments and Contingencies
a. The Company, together with the other partners of the health care
partnerships (see Note 4), have issued joint and several guarantees on
approximately $4,300,000 of the health care partnerships' mortgage loans
which are payable in monthly installments through June 1999.
b. A foreign subsidiary has issued a mortgage on its real estate to
collateralize bank debt of the Mondragon Companies (see Note 4) of which
$1,671,000 is outstanding at June 30, 1997.
11. Related Party Transactions
Certain stockholders, directors, officers or their relatives ("related parties")
own interests in certain investments of the Company as follows:
Percent Ownership by
Investment The Company Related Party
- ------------------------------------------------------------------------------
Bluepoints Company Inc. ("Bluepoints") 80.2% 19.8% (1)
Sunscape Associates 50.0 50.0
The Mondragon Companies 38.0 50.0 (2)
Larfico Larvas Del Pacifico S.A. 62.5 25.0
Comercorp S.A. 62.5 25.0
(1)--At June 30, 1997 and 1996, the minority share of stockholders' deficiency
of Bluepoints amounted to $3,130,196 and $2,331,984, respectively. Such
deficiency results from losses which were funded by loans from the Company on
behalf of the minority shareholders. Repayment of the minority interest
deficiency has been jointly guaranteed by a major stockholder and the Estate of
A.A. Rosen. Accordingly, the minority interest share in the deficiency of the
subsidiary is shown as a receivable due from related parties in the consolidated
balance sheets.
(2)--Bluepoints has made advances to the Mondragon Companies amounting to
$4,126,928 and $2,988,246 at June 30, 1997 and 1996, respectively (see Note 4).
Repayment of 56.8% of any advances to the Mondragon Companies has been
guaranteed by the Estate of A.A. Rosen which owns 50% of the Mondragon
Companies.
42
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Related Party Transactions (continued)
Certain transactions were entered into with the above-mentioned related parties
and companies in which they have an ownership interest as follows:
<TABLE>
<CAPTION>
Amount
------------------------------------------ Related Party
Transactions 1997 1996 1995 Ownership
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insurance purchased in participation with the
Rosen Group Properties:
Premiums incurred $ 242,000 $ 264,000 $ 312,000 -%
Administrative fee received 75,000 75,000 75,000 -
Payable at June 30, to Rosen Group
Properties for premiums above 144,000 264,000 312,000 -
Home office rent 99,000 98,000 95,000 100
Interest on $640,000 note to the Estate of
A.A. Rosen 60,000 61,000 59,000 -
Interest from the Estate of A.A. Rosen loans 50,000 45,000 - -
Loans receivable from the Estate of A.A. Rosen 20,000 725,000 - -
Note payable to the Estate of A.A. Rosen 640,000 640,000 640,000 -
</TABLE>
See Note 4 for other related party information.
12. Other Matters
a. In June 1992, Whitlock, which was in the wool-combining business, sold
substantially all of its assets and substantially terminated all its
remaining operations. The remaining assets of Whitlock, consisting of land
and building which are being held for sale, are recorded at their estimated
net realizable value of $1,050,000 at June 30, 1997 ($1,150,000 at June 30,
1996). Losses of $389,000, $526,000 and $339,000 incurred in connection
with the land and building held for sale were charged to operations during
the years ended June 30, 1995, 1996, and 1997, respectively.
b. Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash
equivalents, mortgages receivable and accounts and rents receivable. The
Company maintains operating cash accounts at financial institutions in many
states along the Eastern seaboard and, for its foreign subsidiaries, in
Ecuador. Such accounts are subject to risk to the extent that the balances
exceed the institutions' insurable limits. The Company's policy is designed
to limit exposure to any one institution. Mortgages receivable are
collateralized by real estate in Florida. The Company's management has
attempted to mitigate the risk of such mortgages by evaluating the
creditworthiness of the prospective borrowers prior to acceptance.
Concentrations of credit risk with regard to accounts and rents receivable
are limited due to the large
43
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Other Matters (continued)
number of entities comprising the Company's customer base and such base
being dispersed over the industries in which the Company operates.
Based on an analysis of the financial instruments which potentially subject
the Company to significant concentrations of credit risk, the Company's
management believes that there are no significant concentrations of credit
risk at June 30, 1997.
c. During the years ended June 30, 1997, 1996 and 1995, there were 205, 1,248
and 590 shares of stock purchased for treasury at a cost of $6,805, $41,477
and $20,040, respectively.
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
45
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. and b. Identification of directors and executive officers:
All Positions
and Offices with
Name Age Registrant Served Since
- --------------------------------------------------------------------------------
Irving S. Bobrow 83 Director April 1983
Harry Bergman 55 Director October 1991
Treasurer June 1988
Secretary June 1988
Norman A. Halper 78 Director October 1969
President April 1983
Miriam N. Rosen 77 Director December 1994
Jonathan P. Rosen 53 Director February 1972
Vice President September 1978
Chairman of the Board December 1994
William M. Silverman 55 Director December 1981
Louis H. Nimkoff 35 Vice President June 1988
Robert Nimkoff 36 Director April 1991
Vice President June 1988
Jane G. Weiman 53 Director December 1991
The term of office for all directors and executive officers will expire at the
next annual meeting of stockholders, which is anticipated to be held in December
1997, upon the election and qualification of their successors.
c. Not applicable.
46
<PAGE>
d. Family Relationships
Jonathan P. Rosen is the son of Miriam N. Rosen.
Louis H. Nimkoff and Robert Nimkoff are brothers and are cousins of
Jonathan P. Rosen.
Jane G. Weiman is the sister-in-law of William M. Silverman and a cousin
of Jonathan P. Rosen.
e. Business Experience
Irving S. Bobrow is a member of the New York Bar. For more than the past
five years, Mr. Bobrow has been a member of the law firm of Bobrow & Rosen
in New York City and has engaged in real estate investments for his own
account.
Miriam N. Rosen is a member of the New York Bar. For more than the past
five years, Mrs. Rosen has been counsel to the law firm of Bobrow & Rosen
in New York City and has engaged in real estate investments for her own
account. Mrs. Rosen became a director of the Company in December 1994.
William M. Silverman is a member of the New York Bar. For more than the
past five years, Mr. Silverman has been a member of the law firm of
Otterbourg, Steindler, Houston and Rosen P.C. in New York City.
Jane G. Weiman has been a private investor for more than the past five
years. For the past several years, Mrs. Weiman has also been an officer of
the Board of the Washington, D.C. Urban League.
All directors and executive officers have served as such for more than the
past five years.
f. Not applicable.
g. Not applicable.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes, based on written representations received by it, that for
the year ended June 30, 1997, all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934 applicable to beneficial owners of the Company's
securities and the Company's officers and directors were complied with.
47
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The Chairman of the Company's Board of Directors has annually reviewed and set
the compensation of the Chief Executive Officer of the Company who, in turn, has
reviewed and set the compensation of the other officers of the Company. All such
compensation is reviewed on or about April 1 of each year taking into
consideration (i) the Company's financial performance during the preceding year,
(ii) the performance of the employee during that year, and (iii) the need to
retain competent executive officers dedicated to the enhancement of the
Company's performance in future years by paying salaries comparable to those
being paid to such executive officers by other companies involved in similar
lines of business.
The following table sets forth all compensation paid or accrued by the Company
during the last three fiscal years for services in all capacities to the Chief
Executive Officer and each executive officer of the Company whose cash
compensation exceeds $100,000.
<TABLE>
<CAPTION>
(a) (b) (c) (d)
Name and Annual Other Annual
Principal Position Year Compensation Compensation (1)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jonathan P. Rosen 6-30-97 $ 260,955 $ 9,645
Chairman 6-30-96 238,425 8,315
6-30-95 123,108 --
A.A. Rosen 6-30-95 115,763 --
Chairman (deceased 11-9-94)
Norman A. Halper 6-30-97 260,955 9,645
President and Chief Executive Officer 6-30-96 238,425 12,704
6-30-95 238,871 13,690
Harry Bergman 6-30-97 152,052 9,645
Secretary--Treasurer 6-30-96 133,996 9,062
6-30-95 143,955 10,661
Stephen L. Bernstein 6-30-97 195,784 9,645
Corporate Counsel 6-30-96 179,177 10,897
6-30-95 177,662 --
</TABLE>
(1) The Company maintains two profit-sharing plans which cover a significant
number of their employees. Vesting begins at 20% after two years of
service with 100% vesting being reached after six years of service.
Company contributions to one such plan are at the discretion of the Board
of Directors. The Company is required to make minimum contributions to
the second plan and, at the discretion of the Board of Directors, may
make additional contributions. The executive officers listed above are
covered under the second plan and the amount contributed by the Company
to such plan on behalf of each executive officer is set forth under the
heading "Other Compensation" in the Executive Compensation Summary.
48
<PAGE>
Compensation of Directors
Each director who is not an officer of the Company is paid $3,000 per quarter.
The following performance graph is a line graph comparing the yearly change in
the cumulative stockholder return on the Company's Common Stock against the
cumulative return of the Dow Jones Equity Market Index and the Dow Jones
Conglomerates Index for the five fiscal years ended June 30, 1997. The
stockholder return on the Company's Common Stock has been determined solely
based on the price of the Common Stock since there have been no dividends
declared on the Common Stock. Since there has been only limited or sporadic
quotations for the Common Stock during the five year period, the price of the
Common Stock at the relevant dates has been determined by utilizing the price at
which the Company purchased shares of Common Stock on the dates closest to each
measuring date.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among The First Republic Corporation Of America, Dow Jones Equity
Market Index and Dow Jones Independent - Conglomerates Index
Fiscal Year Ending June 30
[The following table appeared as a line graph in the printed material]
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
The first Republic Corporation of America 100 84 62 49 59 55
- --------------------------------------------------------------------------------
Dow Jones Equity Market index 100 115 116 146 186 248
- --------------------------------------------------------------------------------
Dow Jones Independent - Conglomerates 100 129 129 163 248 381
- --------------------------------------------------------------------------------
49
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a. Security Ownership of Certain Beneficial Owners
The following table sets forth certain information with respect to all
persons who are known to the Company to be the beneficial owner of more
than 5% of its common stock as of September 16, 1997:
Amount and Nature
Title of Name and Address of Beneficial Percent
Class of Beneficial Owner Ownership (1) of Class
- --------------------------------------------------------------------------------
Common Mary Nimkoff 101,171 (2) 15.05%
26 Buttonball Lane
Weston, Connecticut
Common Jonathan P. Rosen 227,726 (3) 33.89
40 East 69th St.
New York, New York
Common Lynn M. Silverman 113,350 16.87
911 Park Avenue
New York, New York
Common Jane G. Weiman 113,290 16.86
5610 Wisconsin Avenue
Chevy Chase, Maryland
(1)--Except as noted below in Notes (2) and (3), all shares are owned
directly by the parties listed in the table.
(2)--Includes 5,756 shares representing her proportionate interest in
19,188 shares owned by Tranel, Inc. Tranel, Inc. is a corporation of which
30%, 15.2%, 34.8%, 10% and 10% of the shares of which are owned by Mary
Nimkoff, Jonathan P. Rosen, Miriam N. Rosen, Louis H. Nimkoff and Robert
Nimkoff, respectively.
(3)--Includes 2,917 shares representing his proportionate interest in
19,188 shares owned by Tranel, Inc.
50
<PAGE>
b. Security Ownership of Management
The following table sets forth as of September 16, 1997 certain
information with respect to security holdings in the Company and
Bluepoints, an 80.2% owned subsidiary of the Company, by directors of the
Company and all officers and directors as a group:
<TABLE>
<CAPTION>
Common Stock
Common Stock of Bluepoints
--------------------------------------------------------------------
Amount Percent Amount Percent
Name of Officer Beneficially of Beneficially of
or Director Owned (1) Class Owned Class
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Irving S. Bobrow 200 .03%
Robert Nimkoff 4,335 (2) .65
Lou Nimkoff 6,110 (2) .91
Norman A. Halper 400 .06
Jonathan P. Rosen 227,726 33.89 500 (3) 4.95%
Miriam N. Rosen 7,677 1.13 500 (3) 4.95
William M. Silverman 200 (4) .03 (4)
Jane G. Weiman 113,290 16.86 500 4.95
All officers and directors
as a group (8 persons) 359,938 53.56 1,500 14.85
</TABLE>
(1)--Messrs. Bobrow, Halper, Silverman and Mrs. Weiman own their shares
directly. Jonathan P. Rosen owns 224,809 shares directly. See Notes (2)
and (3) of the preceding table.
(2)--Includes 1,919 shares representing his proportionate interest in
19,188 shares owned by Tranel, Inc.
(3)--Owned directly.
(4)--Does not include 113,350 shares of common stock and 500 shares of
Bluepoints owned by his wife (Lynn M. Silverman) directly. Mr. Silverman
disclaims beneficial ownership of such shares.
c. Changes in Control
The Company knows of no contractual arrangements which may at a subsequent
date result in a change in control of the Company.
51
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
a. Transactions with Management and Others
Lynn M. Silverman, a principal stockholder of the Company, Jane G. Weiman,
a director and principal stockholder of the Company, Jonathan P. Rosen, a
director, vice president and principal stockholder of the Company, and
Miriam N. Rosen, a director of the Company, own in the aggregate 19.8% of
the outstanding shares of Bluepoints. The remainder of the shares of
Bluepoints is owned by the Company. Lynn M. Silverman is the wife of
William M. Silverman, a director of the Company.
Bluepoints holds a second mortgage loan on the industrial center owned by
the Company in East Newark, New Jersey. From July 1996 through September
1997, the Company made payments of $149,850 with respect to such loan,
$26,104 of which was applied to the payment of interest and $123,746 to
amortization of principal. As of September 1, 1997, the outstanding
principal balance of the loan was $105,396. The loan bears interest at the
rate of 8% per annum, provides for monthly payments of $9,990 and is
self-liquidating over a period which expires in July 1998.
The Company's corporate office is located in a building owned by 302 Fifth
Ave. Associates, a partnership owned 100% by The Estate of A.A. Rosen,
Miriam Rosen and Jonathan Rosen. The Company is a month-to-month tenant,
paying rent of $8,400 per month as of June 30, 1997, which the Company
believes is comparable to other rentals in the areas. Jonathan P. Rosen is
the executor of the Estate of A.A. Rosen and Miriam Rosen is the primary
beneficiary of the Estate of A.A. Rosen.
The Estate of A.A. Rosen owns 50% of Isca C.A. and Langomorro CIA, Ltda.
(collectively referred to as "Mondragon"), two Ecuadorian corporations
engaged in shrimp farming operations. In the current fiscal year from July
through December all of Mondragon shrimp production, approximately
$1,010,000, was sold to Bluepoints. The Estate of A.A. Rosen also holds a
$640,000 note payable by Bluepoints which note was originally issued in
May 1991 in connection with the acquisition by Bluepoints of a 38%
interest in Mondragon and an additional 12-1/2% interest in Larfico Larvas
Del Pacifico S.A., an Ecuadorian corporation which owns and operates a
shrimp hatchery and Comercorp S.A. which owns certain real property in
Ecuador. The note is a demand note and bears interest at 1% above the
prime rate in effect at European American Bank. From July 1, 1996 through
August 21, 1997, the Estate of A.A. Rosen received $60,000 in interest on
the $640,000 note. The Company has advanced money on behalf of the Estate
of A.A. Rosen to Mondragon; the balance owed at June 30, 1997 is $20,000.
The amount advanced is payable upon demand by the Estate of A.A. Rosen and
bears interest at 1% above the prime rate in effect at European American
Bank. The Estate of A.A. Rosen has paid $50,000 in interest during the
year.
52
<PAGE>
b. Certain Business Relationships
The Company and its subsidiaries purchase substantially all of their
property, casualty and liability insurance through participation with a
group of other entities controlled by The Estate of A.A. Rosen and
Jonathan P. Rosen (the "Rosen Group Properties"). This procedure enables
the group to obtain negotiated insurance rates. During the fiscal years
ended June 30, 1997, 1996 and 1995, total premiums incurred by the Company
and its subsidiaries under this arrangement amounted to approximately
$242,000, $264,000 and $312,000, respectively. The Company received fees
of $75,000 in fiscal 1997, 1996 and 1995, representing charges to the
group for administrative services performed by Company personnel in
connection with the foregoing. At June 30, 1997, approximately $144,000
was payable to Rosen Group Properties.
Tranel Inc. and Statecourt Enterprises, Inc. each owns a 25% interest in a
167-unit garden complex located in Orlando, Florida in which the Company
owns the remaining 50%. Tranel Inc. is owned by Mary Nimkoff, Jonathan P.
Rosen, Miriam N. Rosen, Robert Nimkoff and Louis H. Nimkoff (see Item 12)
and Statecourt Enterprises, Inc. is owned 48% by The Estate of A.A. Rosen,
20% by Jonathan P. Rosen and 32% by a trust for Miriam N. Rosen.
c. Indebtedness of Management
The Estate of A.A. Rosen owns 25% of the outstanding stock of Larfico, an
Ecuadorian corporation that owns a hatchery that produces post-larval
shrimp and 50% of the outstanding stock of Mondragon, an Ecuadorian
company engaged in shrimp farming operations. Bluepoints beneficially owns
62.5% of the outstanding stock of Larfico and all of the outstanding stock
of Emporsa, an Ecuadorian corporation engaged in shrimp farming
operations. As of August 31, 1997, Larfico was indebted to Bluepoints for
$196,667 of loans made by Bluepoints to Larfico at various dates between
November 8, 1985 and August 5, 1988 (the "Larfico Indebtedness.") Such
loans bear interest at 1% over the prime rate in effect at European
American Bank and are due August 1998. Since July 1, 1996, the largest
aggregate amount of outstanding indebtedness from Larfico to Bluepoints
was $196,667.
In addition, as of August 31, 1997, Mondragon was indebted to Bluepoints
for $4,126,928 of loans made by Bluepoints to Mondragon on various dates
between August 28, 1991 and June 11, 1997 (the "Mondragon Indebtedness").
Such loans bear interest at 1% over the prime rate in effect at European
American Bank and have no fixed maturity. Since July 1, 1996, the largest
aggregate amount of outstanding indebtedness from Mondragon to Bluepoints
was $4,126,928. The Estate of A.A. Rosen has guaranteed the repayment of
25% of the Larfico Indebtedness and 56.8% of the Mondragon Indebtedness.
53
<PAGE>
Since July 1, 1996, the largest amount of outstanding indebtedness from
Emporsa and Larfico to Mondragon was $1,170,000, which was the balance at
June 30, 1997. Such loans bear no interest and have no fixed maturity.
Since July 1, 1996, the largest amount of outstanding indebtedness from
Mondragon to Larfico and Emporsa was $493,000. Said indebtedness has no
fixed maturity and is noninterest bearing.
As of August 31, 1997, Bluepoints was indebted to the Company for
$26,751,000 of loans made by the Company to Bluepoints at various dates
between November 8, 1985 and August 31, 1997. Such loans bear interest at
the rate of 1% over the prime rate in effect at European American Bank and
are due on demand. Since July 1, 1996, the largest aggregate amount of
outstanding indebtedness from Bluepoints to the Company was $26,751,000. A
substantial portion of the foregoing loans was used by Bluepoints to
acquire and fund the Ecuadorian shrimp operations.
The Estate of A.A. Rosen and Jonathan P. Rosen have jointly provided a
limited guarantee with respect to the repayment of loans made by the
Company to Bluepoints. Such guarantee is limited to 19.8% of the
deficiency in the shareholders equity of Bluepoints. As of June 30, 1997,
the amount of the guarantee was $3,130,196.
d. Not applicable.
54
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES,
AND REPORTS ON FORM 8-K
Page
a. 1. Financial Statements
The following financial statements of The First Republic Corporation of
America and Subsidiaries are included in Part II, Item 8:
Reports of Independent Auditors......................................16
Consolidated Balance Sheets--June 30, 1997 and 1996
Consolidated Statements of Operations--Years Ended
June 30, 1997, 1996 and 1995
Consolidated Statements of Retained Earnings--Years Ended
June 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows--Years Ended
June 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
a. 2. Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts.......................56
Schedule III--Real Estate and Accumulated Depreciation...............57
Schedule IV--Mortgage Loans on Real Estate...........................60
All other schedules have been omitted because they are not
applicable or the required information is shown in the financial
statements or the notes thereto.
b. Reports on Form 8-K
None
c. Exhibits
3. Articles of Incorporation and bylaws
(i) Articles of Incorporation are incorporated by reference to Form
10-K for the fiscal year ended June 30, 1981.
(ii) Bylaws are incorporated by reference to Form 10-K for the fiscal
year ended June 30, 1992.
21. Subsidiaries of the Company............................................62
27. Financial Data Schedule................................................63
55
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
- --------------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other Accounts-- Deductions-- End of
Description Period Expenses Describe Describe Period
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended June 30, 1997:
Allowance for doubtful accounts $ 210,345 $ 30,065 $ $ 240,410
===================================== ===================================
Year ended June 30, 1996:
Allowance for doubtful accounts $ 253,679 $ 35,534 $ 78,868 (a) $ 210,345
===================================== ===================================
Year ended June 30, 1995:
Allowance for doubtful accounts $ 153,180 $ 100,499 $ - $ 253,679
===================================== ===================================
</TABLE>
(a) Amounts charged off and credits issued, net of recoveries on accounts
previously written off.
56
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule III--Real Estate and Accumulated Depreciation
Year ended June 30, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------------------------------------
Initial Cost to Cost Capitalized Gross Amount at Which
Company Subsequent to Carried at Close of Period (a)
------------------------ Acquisition ---------------------------------
Buildings -------------------- Buildings
and Related Carrying and Related
Description Encumbrances Land Assets Additions Costs Land Assets Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
250 W. 39th
Street $ 437,559 $1,155,129 $(639,223) $437,559 $515,906 $ 953,465
Building,
New York, New
York--
Eighteen story
office
building
Waltham
Engineering
Center,
Waltham,
Massachusetts--
Seventeen
multi-story 188,573 2,163,945 143,825 188,573 2,307,770 2,496,343
industrial
buildings
Four Points Hotel--
Syracuse,
Liverpool, New 1,651,923 4,588,388 6,240,311 6,240,311
York--Hotel
operations
Video Film
Center,
New York, New
York--
Ten story $ 6,160,407 625,000 3,439,061 971,396 625,000 4,410,457 5,035,457
office
building
East Newark, New
Jersey--
Thirty
multi-story 7,477,810(b) 605,089 4,068,693 (2,407,508) 605,089 1,661,635 2,266,724
industrial
buildings
Greensboro Plaza,
Greensboro,
North Carolina-- 3,917,273 379,947 1,696,953 (676,652) 379,947 2,373,605 2,753,552
Shopping center
Greensboro South,
Greensboro,
North Carolina-- 2,628,988 419,739 1,350,376 (1,262,422) 706,906 2,325,631 3,032,537
Shopping center
Nyanza Building,
Woonsocket,
Rhode Island-- 60,000 1,288,139 (1,110,650) 60,000 177,489 237,489
Four story
industrial
building
</TABLE>
Column A Column F Column G Column H Column I
- -----------------------------------------------------------------------------
Life on Which
Depreciation in
Latest Income
Accumulated Date of Date Statements
Description Depreciation Construction Acquired is Computed
- -----------------------------------------------------------------------------
250 W. 39th
Street $ 94,443 5/19/67 5-15 years
Building,
New York, New
York--
Eighteen story
office
building
Waltham
Engineering
Center,
Waltham,
Massachusetts--
Seventeen
multi-story 538,549 7/01/62 10-20 years
industrial
buildings
Four Points Hotel--
Syracuse,
Liverpool, New 4,848,040 3/17/69 5-15 years
York--Hotel
operations
Video Film
Center,
New York, New
York--
Ten story 3,108,533 10/04/68 33-1/3 years
office
building
East Newark, New
Jersey--
Thirty
multi-story 297,321 3/11/63 21-1/3 years
industrial
buildings
Greensboro Plaza,
Greensboro,
North Carolina-- 1,830,031 12/01/74 21-1/3 years
Shopping center
Greensboro South,
Greensboro,
North Carolina-- 1,555,647 12/01/74 21-1/3 years
Shopping center
Nyanza Building,
Woonsocket,
Rhode Island-- 54,840 11/01/68 10-20 years
Four story
industrial
building
57
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule III--Real Estate and Accumulated Depreciation (continued)
Year ended June 30, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------------------------------------------------------
Initial Cost to Cost Capitalized Gross Amount at Which
Company Subsequent to Carried at Close of Period (a)
------------------------ Acquisition ----------------------------------
Buildings -------------------- Buildings
and Related Carrying and Related
Description Encumbrances Land Assets Additions Costs Land Assets Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richmond Shopping
Center,
Richmond, Virginia-- $ 293,814 $ 758,886 $ 217,955 $ 360,507 $ 910,148 $ 1,270,655
Shopping center
First Republic Office
Park,
Liverpool, New York-- $ 900,000 (c) 351,600 4,124,526 1,190,599 351,600 5,315,125 5,666,725
Two, two-story
office buildings
Virginia Beach Shopping
Center,
Virginia Beach, 2,577,540 250,241 772,113 248,199 397,338 873,215 1,270,553
Virginia--
Shopping center
The First Republic
Building Corp.,
Liverpool, New York-- 413,779 5,681,562 413,779 5,681,562 6,095,341
Motor hotel (c)
Jefferson National Bank
Building--Miami,
Florida-- 2,625,000 2,044,409 5,643,015 2,044,409 5,643,015 7,687,424
Six story office
building
Brookhaven Shopping
Center,
Brookhaven, 1,543,181 521,798 3,632,019 (656,336) 149,456 3,348,025 3,497,481
Pennsylvania--
Shopping Center
Merrimac Street,
Newburyport,
Massachusetts--
Three story office
building & 195,213 377,317 615,742 236,713 951,559 1,188,272
new construction at
222 Merrimac St.
Melbourne, Florida,
Vacant land 1,439,714 3,150 1,442,864 1,442,864
--------------------------------------------------------- --------------------------------------
Totals $27,830,199(d) $8,226,475 $37,803,657 $5,104,611 $8,399,740 $42,735,453 $51,135,193
========================================================= ======================================
</TABLE>
Column A Column F Column G Column H Column I
- --------------------------------------------------------------------------------
Life on Which
Depreciation in
Latest Income
Accumulated Date of Date Statements
Description Depreciation Construction Acquired is Computed
- --------------------------------------------------------------------------------
Richmond Shopping
Center,
Richmond, Virginia-- $ 574,946 3/15/76 25 years
Shopping center
First Republic Office
Park,
Liverpool, New York-- 1,301,330 10/01/85 5-40 years
Two, two-story
office buildings
Virginia Beach Shopping
Center,
Virginia Beach, 632,349 3/30/76 25-31.5 years
Virginia--
Shopping center
The First Republic
Building Corp.,
Liverpool, New York-- 5,648,327 9/21/62 10-25 years
Motor hotel (c)
Jefferson National Bank
Building--Miami,
Florida-- 1,642,142 4/27/88 31-1/2 years
Six story office
building
Brookhaven Shopping
Center,
Brookhaven, 2,207,424 12/16/76 5-33 years
Pennsylvania--
Shopping Center
Merrimac Street,
Newburyport,
Massachusetts--
Three story office
building & 219,800 10/25/87 10-25 years
new construction at
222 Merrimac St.
Melbourne, Florida,
Vacant land
--------------
Totals $24,553,722
==============
(a) Cost for Federal income tax purposes approximates amounts reflected in
Column E.
(b) A mortgage is held by the bank who provides a line of credit to the
Company. (See Note 5 to the consolidated financial statements.)
(c) Assets of the First Republic Building Corp. are also pledged as collateral
for the Onondaga County Industrial Development Agency Bonds. (See Note 5
to the consolidated financial statements.)
(d) Excludes $836,000 of mortgages on real estate used in the textile
operations.
58
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule III--Real Estate and Accumulated Depreciation (continued)
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------------------------------------------
1995 1996
-------------------------------------------------------------------------
Real Estate Owned Accumulated Real Estate Owned Accumulated
Depreciation Depreciation
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The following is a reconciliation of the
real estate owned and accumulated
depreciation, beginning and end of
the year:
Balance, beginning of year $ 48,476,664 $ 21,969,591 $ 50,250,400 $ 22,675,090
Additions 2,815,491 1,747,254 546,167 1,619,368
Deductions:
Write-offs of fully depreciated
assets
(1,041,755) (1,041,755) (838,715) (838,715)
-------------------------------------------------------------------------
Balance, end of year $ 50,250,400 $ 22,675,090 $ 49,957,852 $ 23,455,743
=========================================================================
</TABLE>
Year ended June 30,
-----------------------------------
1997
-----------------------------------
Real Estate Owned Accumulated
Depreciation
-----------------------------------
The following is a reconciliation of the
real estate owned and accumulated
depreciation, beginning and end of
the year:
Balance, beginning of year $ 49,957,852 $ 23,455,743
Additions 1,484,689 1,405,327
Deductions:
Write-offs of fully depreciated
assets
(307,348) (307,348)
-----------------------------------
Balance, end of year $ 51,135,193 $ 24,553,722
===================================
Note: Includes assets used in the real estate and hotel operations.
59
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule IV -Mortgage Loans on Real Estate
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E Col. F Col. G
- ----------------------------------------------------------------------------------------------------------------------------------
Final Maturity Periodic Payment Face Amount of Carrying Amount of
Description Interest Rate Date Terms Prior Liens Mortgages Mortgages (b)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Two first liens on
condominiums - Orlando, December 1, 1998 to
Florida 8.0% - 8.4% June 1, 1999 1,000(a) None $ 109,607 $ 109,670
</TABLE>
- -----------------------------------------------------
Col. A Col. H
- -----------------------------------------------------
Principal Amount of Loans
Subject to Delinquent
Description Principal or Interest
- -----------------------------------------------------
Two first liens on
condominiums - Orlando,
Florida None
(a) Represents monthly payment amounts with balance due at maturity.
(b) Cost for Federal income tax purposes approximates amounts reflected in
Column F.
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
THE FIRST REPUBLIC CORPORATION OF AMERICA
By /s/ Norman A. Halper
---------------------------------------
Norman A. Halper, Chief Executive
and Chief Operating Officer
By /s/ Harry Bergman
---------------------------------------
Harry Bergman, Chief Financial and
Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date ____________________
/s/ Harry Bergman
- ---------------------------------------------
Harry Bergman, Director
/s/ Irving S. Bobrow
- ---------------------------------------------
Irving S. Bobrow, Director
/s/ Norman A. Halper
- ---------------------------------------------
Norman A. Halper, Director
/s/ Robert Nimkoff
- ---------------------------------------------
Robert Nimkoff, Director
/s/ Miriam N. Rosen
- ---------------------------------------------
Miriam N. Rosen, Director
/s/ Jonathan P. Rosen
- ---------------------------------------------
Jonathan P. Rosen, Director
61
<PAGE>
LANGOMORRO, LANGOSTINERA
EL MORRO CIA. LTDA.
AND AFFILIATED COMPANIES
====================================
Audit Report of the Consolidated and
Combined Financial Statements
On June 30, 1997 and 1996
<PAGE>
[BDO Stern Letterhead]
Independent Auditor's Report
To the Board of Directors
Langomorro, Langostinera El Morro Cia. Ltda. and Affiliated Companies
New York, U.S.A.
We have audited the consolidated and combined balance sheet of Langomorro,
Langostinera El Morro Cia. Ltda. and Affiliated Companies as of June 30, 1997
and 1996 and the related consolidated and combined statements of operations and
deficit, and of cash flows, for each of the years ended June 30, 1997, 1996 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements'
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Langomorro, Langostinera El
Morro, Cia. Ltda. and Affiliated companies to June 30, 1997, and 1996, and the
results of their operations and their cash flows for the each of the years ended
June 30, 1997, 1996 and 1995, in conformity with generally accepted accounting
principles prevailing in the United States of America.
/s/ BDO Stern
August 4, 1997
Guayaquil, Ecuador
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Consolidated and Combined Balance Sheets
================================================================================
As of June 30, 1997 1996
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash in banks US$ 3,998 US$ 984
Accounts receivable (Note B) 353,832 43,769
Due from related parties (Note C) 2,690,604 1,553,757
Inventories (Note D) 1,230,474 936,115
Prepaid expenses 13,359 23,489
Temporary investments 1,381 1,730
- --------------------------------------------------------------------------------
Total current assets 4,293,648 2,559,844
Property, machinery and equipment (Note E) 8,868,506 8,055,866
Permanent investments (Note F) 3,066 3,066
Other assets (Note G) 538,955 754,538
- --------------------------------------------------------------------------------
US$ 13,704,175 US$ 11,373,314
- --------------------------------------------------------------------------------
Liabilities and stockholders' equity
Current liabilities:
Bank loans payable (Note H) US$ 2,679,920 US$ 2,241,404
Notes and accounts payable (Note I) 554,465 530,748
Due to related parties (Note J) 4,893,458 3,746,649
Interest payable 500,974 316,258
Accrued expenses 9,144 10,932
- --------------------------------------------------------------------------------
Total current liabilities 8,633,961 6,845,991
Long term debt (Note K) 307,355 307,355
Stockholders' equity:
Common stock, S/. 10,000 and S/. 5,000
par value per share, 1,000 and
S/. 73.118 shares authorized, issued,
and outstanding (Note L) 1,041,546 1,041,546
Additional paid-in capital (Note M) 11,550,709 9,543,967
Accumulated deficit (Note N) (7,829,396) (6,365,545)
- --------------------------------------------------------------------------------
Total stockholders' equity 4,762,859 4,219,968
- --------------------------------------------------------------------------------
US$ 13,704,175 US$ 11,373,314
================================================================================
See notes to consolidated and combined financial statements
2
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Consolidated and Combined Statements of Operations and Deficit
================================================================================
For the years ended June 30, 1997 1996 1995
- --------------------------------------------------------------------------------
Income:
Net sales (Note P) US$ 2,734,905 US$ 1,594,053 US$ 775,404
Other income 46,247 49,408 18,150
Gain in translation 8,789 77,114
- --------------------------------------------------------------------------------
2,789,941 1,720,575 793,554
Cost and operating expenses:
Cost of products sold 2,674,544 2,001,964 800,488
Administrative expenses 279,085 355,599 311,667
Loss on translation 93,410
Amortization of facilities costs 215,583 215,581 107,791
Interest expenses 1,066,251 1,211,873 950,308
Other expenses 18,329 5,438 16,786
- --------------------------------------------------------------------------------
4,253,792 3,790,455 2,280,450
- --------------------------------------------------------------------------------
Net loss (1,463,851) (2,069,880) (1,486,896)
Prior year deficit as of June 30, (6,365,545) (4,295,665) (2,808,769)
- --------------------------------------------------------------------------------
Accumulated deficit to June
30, (Note N) US$(7,829,396) US$(6,365,545) US$(4,295,665)
================================================================================
See notes to consolidated and combined financial statements.
3
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Statements of Cash Flows - Direct Method
================================================================================
For the years ended June 30, 1997 1996 1995
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Cash paid to suppliers and employees US$ (928,248) US$(1,865,211) (201,642)
Financial expenses (783,365) (926,899) (293,508)
Other income 29,793 45,115 2,639
- --------------------------------------------------------------------------------
Net cash used in operating activities (1,681,820) (2,746,995) (492,511)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Additions and purchase of property (946,494) (939,607) (4,018,932)
Decrease to facilities cost 13,113
- --------------------------------------------------------------------------------
Net cash used in investing activities (946,494) (939,607) (4,005,819)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowing under line-of-credit
agreements-net payments 673,256 587,434 943,169
Additional paid-in capital 2,006,742 3,116,871 3,547,738
- --------------------------------------------------------------------------------
Net cash provided by financing
activities 2,679,998 3,704,305 4,490,907
- --------------------------------------------------------------------------------
Effect due to variation in cash
exchange rate (48,670) (18,876) (18,888)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash 3,014 (1,173) (26,311)
Cash at beginning of the period 984 2,157 28,468
- --------------------------------------------------------------------------------
Cash at end of the period US$ 3,998 US$ 984 US$ 2,157
================================================================================
See notes to consolidated and combined financial statements
4
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Reconciliation of Net Loss to Net Cash Used in Operating Activities
================================================================================
For the years ended June 30, 1997 1996 1995
- --------------------------------------------------------------------------------
Net loss US$(1,463,851) US$(2,069,880) US$(1,486,896)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 133,854 140,377 82,368
Amortization of facilities costs 215,583 215,581 107,791
(Gain) loss in translation (8,789) (77,114) 93,410
Changes in operating assets
and liabilities:
Increase in accounts receivable
and related parties (1,751,704) (595,993) (20,487)
Increase in inventories (292,205) (449,554) (157,059)
(Decrease) increase in prepaid
expenses 5,643 (12,004) (7,958)
Increase in accrued expenses 247,005 300,323 176,932
Increase in accounts payable
and due to related parties 1,232,644 (198,731) 719,388
- --------------------------------------------------------------------------------
Net cash used in operating
activities US$(1,681,820) US$(2,746,995) US$(492,511)
================================================================================
See notes to consolidated and combined financial statements
5
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
For the years ended June 30. 1997 and 1996
================================================================================
A. Summary of significant
accounting practices:
Business description Langomorro, Langostinera El Morro Cia. Ltda. was
founded on November 11, 1981 in Guayaquil, Ecuador,
for the purpose of carrying out fishing activities.
The Company purchased 99.98% of the capital stock
of Camazul Cia. Ltda. and both maintain production
relationships with Isca, Isla Camaronera C.A. The
affiliated companies' activities, taken as a whole
(the Company), are the nursery and grow-out,
harvest and export of shrimp.
On May 23, 1991, 38% of the total shares issued by
Langomorro and Camazul was acquired by Marchelot
S.A., a wholly-owned Subsidiary of Bluepoints of
Bermuda.
Operations Since the beginning of operations in 1981 and until
June 30, 1997, the Company has had recurring losses
totaling US$7,829,396. The origins of these
recurrent losses are principally the deficiencies
in the effective exploitation and productivity in
prior years of the 542 hectares of land available
in the ponds and grow-out pools.
Principles of
consolidation and
combination The consolidated and combined financial statements
include the accounts of Camazul Cia. Ltda., and
Isca, Isla Camaronera C.A. in conformity with
accounting principles generally accepted in the
United States of America (USA-GAAP). Investments
and all transactions and balances between
consolidated parties have been eliminated.
Accounting
principles The Company maintains its accounting records in
Sucres (S/.). Financial statements are translated
using the U.S. Dollar as the functional currency,
in accordance with generally accepted accounting
principles prevailing in the United States of
America.
6
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
For the years ended June 30. 1997 and 1996
================================================================================
Inventories Finished goods and products in process (shrimp) are
stated at the lower of cost or market, and include
the value of larvae purchases plus transport, feed,
fertilizer, fringe benefits, and depreciation.
Permanent
investments Are stated at cost, adjusted for the equity method.
Property, machinery
and equipment Are recorded at cost. Expenditures for maintenance
and repairs are charged to expense as incurred,
whereas major improvements are capitalized. The
depreciation was calculated using the straight-line
method, based on the following estimated useful
lives of the related assets: 40 years for pools and
structures, machinery and equipment, 20 years for
boats, 10 years for furniture, laboratory
equipment, various; and 5 years for vehicles.
Changes in the
purchasing power
of the local currency The Sucre financial statements have been prepared
using the traditional historical cost basis, in
accordance with generally accepted accounting
principles and, accordingly, do not attempt to
reflect changes in the purchasing power of the
Sucre.
The loss in the purchasing power of the Sucre may
have a significant effect on the comparability of
the financial statements of different periods and
the results of any period.
The purchasing power of the local currency measured
by the Consumer Price Index, calculated by the
National Institute of Statistics and Census, is as
follows:
Year ended Annual
December 31 inflation
---------------------------------------------------
1993 31%
1994 25%
1995 23%
1996 26%
1997 June 30, 31%
7
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
Translation of foreign
currency and exchange
rates The financial position, the results of operations
and the cash flows of the Company are expressed in
Ecuadorian Sucres and translated into U.S. Dollars
as follows:
o Current assets and current liabilities are
translated at the free market exchange rate in
effect at the close of the period, except for:
inventories and prepaid expenses, which are
translated at the exchange rates in effect
when acquired or originally recorded.
o Property, machinery and equipment (and their
related accumulated depreciation),
investments, other assets (genetic project and
red fish), and stockholders' equity accounts,
are translated at the exchange rates in effect
when acquired or originally recorded.
o Revenue and expense accounts are translated at
the average monthly free exchange rate in
effect during the period, except for
depreciation of fixed assets referred to
above.
The translation into U.S. Dollars should not be
assumed as representation that Sucres have been,
could have been, or could in the future be
converted into U.S. Dollars at these or any other
exchange rates.
B. Accounts receivable
June 30,
-------------------------------------------------------------------------
1997 1996
-------------------------------------------------------------------------
Clients (1) US$ 275,723 US$
Suppliers from abroad 26,638 26,638
Employees 3,362 2,278
Others 48,109 14,853
-------------------------------------------------------------------------
US$ 353,832 US$ 43,769
=========================================================================
(1) Corresponds to No. 11 shrimp delivery not
liquidated by Emporsa, Isca, Camazul with
Promariscos.
8
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
C. Due from related parties
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Larfico, Larvas del Pacifico S.A. US$ 2,263,104 US$ 1,371,603
Comercial Inmobiliaria
Golconsa S.A. 10,613 44,926
Comercorp 341,299 60,660
Neneta S.A. 36,629 38,749
Bunsen 24,388 15,261
Inmobiliaria Ma. Luciana 9,334
Ing. Carlos Pirez 14,571 13,172
Others companies, individually
immaterial 52
--------------------------------------------------------------------------
US$ 2,690,604 US$ 1,553,757
==========================================================================
The accounts with related parties correspond to
monies given as loans by current accounts
maintained with the Company, non-interest bearing
and without fixed maturity.
D. Inventories
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Products in process US$ 1,174,760 US$ 694,364
Finished goods 196,449
Materials and supplies 55,714 45,302
--------------------------------------------------------------------------
US$ 1,230,474 US$ 936,115
==========================================================================
9
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
E. Property, machinery
and equipment
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
At acquisition cost:
Vehicles US$ 223,151 US$ 191,418
Fishing boats 256,431 251,964
Machinery and equipment 701,020 743,818
Construction in progress 81,059 40,183
Furniture and office equipment 66,475 67,482
Various 77,921 44,526
Installations 6,511 6,511
Land 4,184 4,184
Pools and reservoirs 1,485,807 1,485,807
Recirculation of water (1) 6,821,030 5,975,657
Sluices for channels 188,863 187,329
Tools and fishing tackle 3,232 2,586
Pumping station 503,381 495,099
Laboratory equipment 6,775 10,076
Housing for personnel 78,896 59,901
Other properties 20,643 20,502
Wall repairs 59,333 51,175
Wharf 1,760 1,760
Offices in Guayaquil 76,840 76,840
--------------------------------------------------------------------------
10,663,312 9,716,818
Less accumulated depreciation 1,794,806 1,660,952
--------------------------------------------------------------------------
US$ 8,868,506 US$ 8,055,866
==========================================================================
(1) This accounts was incorporated in June 1996
and started its depreciation on July 1996.
F. Permanent investments
June 30,
- --------------------------------------------------------------------------------
Percentage of
stock owned 1997 1996
- --------------------------------------------------------------------------------
Larvas del Pacifico S.A. 0,06 US$ 307 US$ 307
Isca, Isla Camaronera C.A. 0,06 2,759 2,759
- --------------------------------------------------------------------------------
US$ 3,066 US$ 3,066
================================================================================
10
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
G. Other assets
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Langomorro and Camazul:
Facilities costs US$ 721,471 US$ 721,471
Isca:
Facilities costs 356,439 356,439
--------------------------------------------------------------------------
Total 1,077,910 1,077,910
Amortization (538,955) (323,372)
--------------------------------------------------------------------------
US$ 538,955 US$ 754,538
==========================================================================
This account is amortized in five years, starting
on January 1995.
H. Bank loans payable
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Pacific Bank:
Obligation in dollars due in July,
and August 1997 with interest, 13% US$ 660,000 US$ 778,500
Advances on future export-loans at the
free market exchange rate 334,000 204,700
Lloyds Bank:
Obligation in dollars due in July,
1997 with interest, 14% 150,000 817,610
Obligation in Sucres, due in July, 1997
with interest at 35% 527,373
--------------------------------------------------------------------------
1,671,373 1,800,810
Bank overdraft 1,004,547 440,594
--------------------------------------------------------------------------
US$ 2,679,920 US$ 2,241,404
==========================================================================
11
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
The obligations are guaranteed with the personal
signature of the Company President.
On July 17, 1992 an open mortgage was subscribed,
covering Larfico's land, buildings and
construction, laboratory equipment and machinery,
for the amount of US$ 1.8 million with Banco del
Pacifico of Ecuador and/or Panama. This open
mortgage will cover the current and future
obligations of Emporsa S.A., Larfico S.A.,
Langomorro Cia. Ltda., Isca C.A. and Camazul Cia.
Ltda..
I. Notes and accounts payable
June 30,
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Suppliers:
Promariscos, Proveedores de Mariscos S.A. (1) US$ 87,109 US$
Expalsa, Exportadora de Alimentos S.A. (2) 34 18,965
Statecourt Enterprises (3) 405,000 405,000
- --------------------------------------------------------------------------------
492,143 423,965
Tax returns 16,276 70,025
Others 46,046 36,758
- --------------------------------------------------------------------------------
US$ 554,465 US$ 530,748
================================================================================
(1) Starting January 1997 the Company changed the
shrimp commercialization. It no longer exports
but sells locally to Empacadora Promariscos
and the reflected balance corresponds to an
advance received, that will be settled against
shrimp delivery.
12
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
(2) Expalsa, corresponds to co-packing services
(packing and packaging in the export of shrimp
of US$ 0,34 per pound exported) made until
December 31, 1996.
(3) The accounts with related parties correspond
to loans by current accounts maintained with
the Company, non-interest bearing and without
fixed maturity.
J. Due to related parties
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Emporsa US$ 1,052,193 US$ 605,315
Camarecsa 56,255 81,010
Marchelot 76,390 106,038
Bluepoints 3,700,388 2,950,308
Others 8,232 3,978
--------------------------------------------------------------------------
US$ 4,893,458 US$ 3,746,649
==========================================================================
The accounts with related companies correspond to
monies received as loans by current accounts
maintained with these companies, non-interest
bearing and without fixed maturity.
As of June 30, 1997 and 1996, Bluepoints includes
US$ 1,017,596 and US$ 265.385 advances on future
export-loans respectively and US$ 1,577,000 for
obligations due in December 1990, generating a
prime interest rate of 9,25% per year with a 3
years maturity; recorded at the free market rate
of exchange.
K. Long-term debt
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Marchelot US$ 307,355 US$ 307,355
--------------------------------------------------------------------------
US$ 307,355 US$ 307,355
==========================================================================
13
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
L. Common stock
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Langomorro, Langostinera
El Morro Cia. Ltda. US$ 171,573 US$ 171,573
Isca, Isla Camaronera C.A. 869,973 869,973
--------------------------------------------------------------------------
US$ 1,041,546 US$ 1,041,546
==========================================================================
M. Additional paid-in capital
June 30,
--------------------------------------------------------------------------
1997 1996
--------------------------------------------------------------------------
Balance June 30 US$ 9,543,967 US$ 6,427,096
Additions from July 1, 1996 to
June 30, 1997, 2,006,742 3,116,871
--------------------------------------------------------------------------
US$ 11,550,709 US$ 9,543,967
==========================================================================
N. Accumulated deficit As of June 30, 1997 and 1996 the Company maintains
an accumulated deficit of US$ 7,829,396 and US$
6,365,545 respectively, the current liabilities
exceeded total current assets by US$ 4,340,313 in
1997 and US$ 4,286,147 in 1996. The origins of
these recurrent losses are principally the
deficiencies in the effective exploitation and
productivity in prior years of the 716 hectares of
land available, of which 542 correspond to ponds
and grow-out pools, another 71 are used as service
areas and 103 hectares are unused.
These elements show that the Company may be unable
to continue as a going concern. However, the
continuity of the Company as a going concern will
depend, as much on additional financing funds that
could be obtained as well as on having profitable
operations. The financial statements do not include
any adjustments that might result from the outcome
of this uncertainty.
14
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
According to article 211 of the Ecuadorian
Companies' Law, when losses reach 50% or more of
the capital stock and reserves of each individual
Company (Langomorro, Isca, Camazul), they must be
placed into liquidation if the stockholders do not
increase capital by means of fresh capital
additions, capitalizing or compensating credits,
and/or capitalizing fixed assets' reevaluations
surplus. The Management of the Company estimates
the causes for liquidation will be solved and
overcome, and both the Company and the companies
will continue to operate normally.
The current Internal Tax Law permits compensating
the operational losses against the results of
operations of each individual company during the
following five years, not exceeding 25% of the
earnings generated in each of these years.
0. Exchange rates The free market exchange rate in effect on June 30,
1997 and 1996 was S/.3.982 to US$ 1.00 (S/. 4,057
to US$ 1.00 on August 4, 1997) and S/.3.180 to
US$1.00 (S/.3.118 to US$1.00 on August 1, 1996
respectively).
P. Sales The volumes of shrimp sold by the individual
companies were as follows:
Volume Year ended June 30
- --------------------------------------------------------------------------------
Company 1997 1996 1997 1996
- --------------------------------------------------------------------------------
Langomorro, Langostinera
El Morro Cia. Ltda. &
Camazul Cia. Ltda. 568,957 199,557 US$ 1,775,719 US$ 1,056,255
Isca, Isla Camaronera C.A. 322,602 110,428 959,186 537,798
- --------------------------------------------------------------------------------
Total 891,559 309,985 US$ 2,734,905 US$ 1,594,053
================================================================================
In 1997 and 1996 the 568,957 and 199,557 pounds of
shrimp sold by Langomorro Cia. Ltda. were produced
utilizing 393 hectares, resulting in a productivity
of 1.448 and 508 pounds per hectare respectively in
these years. The 322,602 and 110,428 pounds of
shrimp sold by Isca C.A. were produced utilizing
149 hectares, resulting in a productivity of 2,165
and 741 pounds per hectare respectively in them
years.
15
<PAGE>
Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies
Notes to Consolidated and Combined Financial Statements
================================================================================
Q. Related companies'
transactions The Company has bought US$ 613,009 of shrimp larvae
from Larfico, Larvas del Pacifico S.A. during the
year ended June 30, 1997.
The Company has paid Romozzi for technical
services, generating expenses of US$ 42,985 to June
30, 1997.
R. Income tax return The income tax returns of the Companies have been
reviewed up to different periods, without important
observations from the tax authorities, as shown
below:
Companies Period Reviewed
--------------------------------------------------------------------
Langostinera del Morro (Langomorro) 1994
Isla, Camaronera (Isca) 1994
Camazul 1994
S. Subsequent events
o Between June 30, 1997 and August 4, 1997, date
of issue of this report, no subsequent events
have accrued that, in the opinion of the
Company's management, could have an important
effect on these financial statements.
o Long term liabilities were reclassified to
short term in the financial statements of June
30, 1996, in order to make them comparable
with those of 1997.
- --------------------------------------------------------------------------------
16
Exhibit 21
The First Republic Corporation of America
List of Subsidiaries
The First Republic Building Corp.
Bluepoints Company Inc.
Bluepoints Company Inc. of Maryland
Quality Yarns Inc.
Whitlock Combing Company, Inc.
FRC of Delaware Inc.
FRCA Sunscape Corp.
Marchelot S.A.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,442,536
<SECURITIES> 0
<RECEIVABLES> 5,141,598
<ALLOWANCES> 240,410
<INVENTORY> 3,501,650
<CURRENT-ASSETS> 12,123,607
<PP&E> 78,245,538
<DEPRECIATION> 36,977,764
<TOTAL-ASSETS> 81,335,893
<CURRENT-LIABILITIES> 9,951,962
<BONDS> 26,297,499
0
0
<COMMON> 1,175,261
<OTHER-SE> 40,433,834
<TOTAL-LIABILITY-AND-EQUITY> 81,335,893
<SALES> 24,949,212
<TOTAL-REVENUES> 50,229,635
<CGS> 22,205,567
<TOTAL-COSTS> 23,180,335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30,065
<INTEREST-EXPENSE> 3,068,457
<INCOME-PRETAX> 1,745,211
<INCOME-TAX> 575,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,170,211
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.74
</TABLE>
