SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 0R 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number 0-1437
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THE FIRST REPUBLIC CORPORATION OF AMERICA
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(Exact name of registrant as specified in its charter)
DELAWARE 13-1938454
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 Fifth Avenue, New York, NY 10001
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 279-6100
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Former name, former address and former fiscal year, if changed since last
report:
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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 |_|
As of November 25, 1998, there were 670,221 shares of common stock outstanding.
1
<PAGE>
PART I. FINANCIAL INFORMATION
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1998 1998
------------- -----------
(UNAUDITED) (SEE NOTE
BELOW)
Assets
Current Assets
Cash and Cash Equivalents $ 7,777,304 $ 8,590,167
Accounts Receivable 3,823,144 3,501,860
Inventories (Note 2) 5,757,523 5,415,534
Other Current Assets 2,651,981 1,697,870
----------- -----------
Total Current Assets 20,009,952 19,205,431
----------- -----------
Property, Plant and Equipment 80,115,682 78,538,620
Less: Accumulated Depreciation 34,792,166 34,758,123
----------- -----------
Net Properties 45,323,516 43,780,497
----------- -----------
Other Assets 25,484,734 24,979,826
----------- -----------
TOTAL ASSETS $90,818,202 $87,965,754
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities $ 9,060,884 $ 8,666,241
----------- -----------
Long Term Debt 24,515,846 21,625,350
----------- -----------
Other Liabilities and Deferred Credits 2,273,191 2,503,871
----------- -----------
Stockholders' Equity:
Common Stock 1,175,261 1,175,261
Other Stockholders' Equity 53,793,020 53,995,031
----------- -----------
Total Stockholders' Equity 54,968,281 55,170,292
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $90,818,202 $87,965,754
=========== ===========
NOTE: The balance sheet at June 30, 1998 has been derived from the audited
financial statements at that date and condensed.
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three months ended
September 30,
1998 1997
------------ ------------
Revenues
Net Sales-Products $ 4,778,584 $ 6,769,072
Real Estate and Hotel Operations 5,073,050 5,907,255
Other (including equity in net
loss of affiliated entities) 173,033 42,898
------------ ------------
Total Revenues 10,024,667 12,719,225
------------ ------------
Expenses
Cost of Sales 4,456,065 5,742,471
Operating-real estate and hotel 2,088,240 2,360,144
Selling, general & administrative 1,648,217 1,698,349
Depreciation and amortization 901,779 954,065
Real estate taxes 509,635 639,244
Interest 797,388 800,932
------------ ------------
Total Expenses 10,401,324 12,195,205
------------ ------------
(Loss) Income before income
taxes and minority interests (376,657) 524,020
Income taxes - Note 3 (103,000) (313,000)
Minority interests 278,046 284,148
------------ ------------
Net (Loss) Income $ (201,611) $ 495,168
============ ============
(Loss) Income per share:
Net (Loss) Income - Basic and Diluted $ (.30) $ .74
============ ============
Average shares outstanding - Basic and Diluted 670,221 672,051
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net (Loss) Income $ (201,611) $ 495,168
Adjustments to Reconcile (Loss) Income to Net
Cash (Used) Provided by Operating Activities:
Depreciation and Amortization 901,779 954,065
Minority Interests' Share of Loss in
Subsidiaries (278,046) (284,148)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts and Other Receivables (321,284) 362,380
Increase in Inventories (341,989) (728,079)
(Increase) Decrease in Other Assets (954,111) 31,380
Increase in Accounts Payable 394,643 151,697
Decrease in Other Liabilities (230,680) (73,780)
----------- -----------
NET CASH (USED) PROVIDED BY OPERATIONS (1,031,299) 908,683
----------- -----------
INVESTING ACTIVITIES
Purchase of Property Plant and Equipment (2,444,798) (968,681)
Investment in and Advances to Affiliated Entities-Net (226,862) (1,553,543)
Payments Received on Mortgages Receivable -- 727
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (2,671,660) (2,521,497)
----------- -----------
FINANCING ACTIVITIES
Proceeds from Mortgages and Notes Payable to Banks 3,185,000 1,615,000
Payments on Mortgages and Notes Payable to Banks (294,504) (332,117)
Other Financing Activities (400) (1.320)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,890,096 1,281,563
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (812,863) (331,251)
Cash and Cash Equivalents at Beginning of Period 8,590,167 1,932,075
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,777,304 $ 1,600,824
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 30, 1998 and the
consolidated statements of operations and cash flows for the three month periods
ended September 30, 1998 and 1997, have been prepared by the Company, without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at September 30, 1998 and for all periods
presented, have been made.
2. INVENTORIES
September 30, June 30,
1998 1998
------------- ----------
Work-in process and
raw materials $2,643,850 $2,231,594
Finished goods 3,113,673 3,183,940
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$5,757,523 $5,415,534
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3. INCOME TAXES
Three Months Ended
September 30,
1998 1997
-------- --------
Federal $ 25,000 $ 50,000
State 78,000 263,000
-------- --------
$103,000 $313,000
-------- --------
4. EARNINGS PER SHARE
Statement No. 128 issued by the Financial Accounting Standards Board in February
1997 had no impact on the earnings per share calculation of the Company due to
the fact that the Company does not have any dilutive securities.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS)
Liquidity and Capital Resources
Working capital for the three months ended September 30, 1998 increased by
approximately $410. Net cash used by operating activities was approximately
$1,031. Net cash provided by financing activities was approximately $2,890. Net
cash of approximately $2,672 was used for investing activities.
On August 31, 1998, the Company obtained a $4,000 construction loan from a bank
for its property at 260 Merrimac Street in Newburyport, Massachusetts.
Initially, $2,685 was borrowed, with $1,315 available to be borrowed when
additional space is rented. The construction loan is for one year plus a one
year extension option. The loan can be converted to a five year term loan upon
completion of construction and the leasing of 75% of the rentable space in the
building. Interest on the construction loan will be at the bank's prime rate
from time to time, or at LIBOR plus 1.75% (at LIBOR plus 1.6% when the building
is 70% rented) for one to twelve month periods, as elected by the Company. The
Company will have the option to elect a fixed rate of interest during the term
loan period.
On September 3, 1998, the Company refinanced a mortgage on its London Bridge
Shopping Center in Virginia Beach, Virginia with a new lender and paid off the
old mortgage of approximately $2,520. The new $3,000 self liquidating mortgage
calls for monthly payments of $24 including principal and interest, bears
interest at 7.25% and matures October 2018. The old mortgage had monthly
payments of $24, bore interest at 9.5% and matured May 1, 2002. The Company
incurred an immaterial prepayment penalty of $100.
The Company's credit agreement with its principal lender provides for a $9,000
term loan with an interest rate of 7.5% per annum and a $3,000 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%. These loans are also collateralized
by a mortgage on the East Newark Industrial Center. The term loan requires
amortization payments of $359 per annum. The term loan matures in five years and
the revolving line of credit matures in three years. At September 30, 1998 the
term loan balance was $8,701 and nothing was outstanding under the revolving
line of credit.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
Results of Operations
Three months ended September 30, 1998 and 1997
Income from operations before income taxes and minority interests decreased
$901. The components are as follows
(Decrease)
1998 1997 Increase
------- ------- -------
Real Estate $ 1,653 $ 1,728 $ (75)
Hotel 64 108 (44)
Seafood (992) (555) (437)
Textiles (90) 259 (349)
Corporate (1,012) (1,016) 4
------- ------- -------
$ (377) $ 524 $ (901)
------- ------- -------
REAL ESTATE
Revenues decreased $612 and earnings decreased $75. This was due to the
sale of the Video Film Center in the last fiscal year, which had revenues of
$1,018 and earnings of $272 in the first quarter last year. Operating profits
increased at substantially all of the other properties. There were no
significant variations in any expense category.
HOTEL
Revenues decreased $222 over last year due to renovations being conducted
at the hotel. Hotel earnings decreased $44 as a result of the lower revenues.
SEAFOOD
Revenues decreased $1,124 in the current period. Losses are continuing in
the seafood division due primarily to curtailed production at the Company's clam
operation, and continuing losses in Ecuador due to lower than anticipated shrimp
production. Losses in Ecuador were $387 this year as compared to last years loss
of $424 due principally to continuing problems at our shrimp hatchery caused by
colder water temperatures and the transition from the weather phenomenon known
as "El Nino". Our scallop operation in Florida lost $451 as compared to a profit
last year of $33 due to lack of availability of product.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
TEXTILES
Hanora Spinning's earnings decreased $202 to $91 for the quarter due to
lower revenues. Hanora South and J & M Dyers recognized a combined loss of $152
compared to last years profit of $4 due to higher revenues at J & M last year.
Whitlock Combing incurred a loss of $29 in the current period as compared to a
loss of $38 last year relating to its property in South Carolina which is being
offered for sale. Overall, textile revenues decreased $868.
CORPORATE/OTHER
Corporate expenses including interest on the Company's term loan and
revolving line of credit decreased by $4.
YEAR 2000 COMPLIANCE
The Company has completed an assessment and has been advised by its
independent computer software provider that its accounting systems and programs
will be year 2000 compliant and that year 2000 compliant shall mean that neither
performance nor functionality will be affected by dates prior to, during and
after the year 2000. The total year 2000 cost is approximately $25 which is
being expensed as incurred and is expected to be completed by March 1999. The
Company believes that with modifications to existing software and conversions to
new software, the Year 2000 Issue will not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the company.
The Company has queried its significant suppliers and subcontractors that do not
share information systems with the Company (external agents). To date, the
Company is not aware of any external agent with a Year 2000 issue that would
materially impact the Company's results of operations, liquidity, or capital
resources. However, the Company has no means of ensuring that external agents
will be Year 2000 ready. The inability of external agents to complete their Year
2000 resolution process in a timely fashion could materially impact the Company.
The effect of non-compliance by external agents is not determinable.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibits: None
Reports: There were no reports on Form 8-K filed during the quarter ended
September 30 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FIRST REPUBLIC CORPORATION OF AMERICA
-----------------------------------------
Registrant
Date: December 2, 1998 /s/ Stephen L. Bernstein
-----------------------------------------
Stephen L. Bernstein
Vice President
Date: December 2, 1998 /s/ Harry Bergman
-----------------------------------------
Harry Bergman
Treasurer
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
At September 30, 1998 and for the three months then ended September 30, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 7,777,304
<SECURITIES> 0
<RECEIVABLES> 4,134,857
<ALLOWANCES> 311,713
<INVENTORY> 5,757,523
<CURRENT-ASSETS> 20,009,952
<PP&E> 80,115,682
<DEPRECIATION> 34,792,166
<TOTAL-ASSETS> 90,818,202
<CURRENT-LIABILITIES> 9,060,884
<BONDS> 24,515,846
0
0
<COMMON> 1,175,261
<OTHER-SE> 53,793,020
<TOTAL-LIABILITY-AND-EQUITY> 90,818,202
<SALES> 4,778,584
<TOTAL-REVENUES> 10,024,667
<CGS> 4,456,065
<TOTAL-COSTS> 5,147,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 797,388
<INCOME-PRETAX> (376,657)
<INCOME-TAX> 103,000
<INCOME-CONTINUING> (201,611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (201,611)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
