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, 1999 Commission File Number 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
incorporation or organization) Identification No.)
302 Fifth Avenue, New York, NY 10001
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 279-6100
- --------------------------------------------------------------------------------
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 29, 1999, there were 669,987 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,
1999 1999
----------- -----------
(UNAUDITED) (SEE NOTE
BELOW)
Assets
Current Assets
Cash and Cash Equivalents $ 1,863,279 $ 1,506,113
Accounts Receivable 5,199,171 4,467,651
Inventories (Note 2) 7,214,706 5,293,998
Other Current Assets 2,808,321 2,977,603
----------- -----------
Total Current Assets 17,085,477 14,245,365
----------- -----------
Property, Plant and Equipment 85,921,156 85,586,539
Less: Accumulated Depreciation 33,793,338 33,253,658
----------- -----------
Net Property, Plant and Equipment 52,127,818 52,332,881
----------- -----------
Other Assets 30,372,173 29,977,835
----------- -----------
TOTAL ASSETS $99,585,468 $96,556,081
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities - Note 6 $12,552,320 $ 9,355,949
----------- -----------
Long-Term Debt 30,192,773 29,818,421
----------- -----------
Other Liabilities 2,348,978 2,502,169
----------- -----------
Stockholders' Equity:
Common Stock 1,175,261 1,175,261
Other Stockholders' Equity 53,316,136 53,704,281
----------- -----------
Total Stockholders' Equity 54,491,397 54,879,542
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $99,585,468 $96,556,081
=========== ===========
NOTE: The balance sheet at June 30, 1999 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)
<TABLE>
<CAPTION>
Three months ended
September 30,
1999 1998
---- ----
<S> <C> <C>
Revenues
Sales-Textile and Seafood $ 7,128,561 $ 4,778,584
Real Estate and Hotel Operations 5,824,460 5,073,050
Other 369,170 444,957
------------ ------------
Total Revenues 13,322,191 10,296,591
------------ ------------
Expenses
Cost of Sales - textiles and seafood 6,966,938 4,456,065
Operating-real estate and hotel 2,371,625 2,088,240
Selling, general & administrative 1,858,371 1,648,217
Depreciation and amortization 1,165,799 901,779
Real estate taxes 520,602 509,635
Interest 744,482 797,388
Minority interests' share of loss of subsidiaries (366,625) (278,046)
------------ ------------
Total Expenses 13,261,192 10,123,278
------------ ------------
Income before income taxes and
equity in loss of affiliated entities 60,999 173,313
Equity in loss of affiliated entities (382,144) (271,924)
Income taxes - Note 3 (67,000) (103,000)
------------ ------------
Net Loss $ (388,145) $ (201,611)
============ ============
Loss per share:
Net Loss - Basic and Diluted $ (.58) $ (.30)
============ ============
Average shares outstanding - Basic and Diluted 669,991 670,221
</TABLE>
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,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (388,145) $ (201,611)
Adjustments to Reconcile Net Loss
Cash Used by Operating Activities:
Depreciation and Amortization 1,165,799 901,779
Minority Interests' Share of Loss in
Subsidiaries (366,625) (278,046)
Changes in Operating Assets and Liabilities:
Increase in Accounts and Other Receivables (562,238) (321,284)
Increase in Inventories (1,920,708) (341,989)
Increase (Decrease) in Other Assets 194,887 (954,111)
Increase in Accounts Payable 196,371 394,643
Decrease in Other Liabilities (153,191) (230,680)
----------- -----------
NET CASH USED IN OPERATIONS (1,833,850) (1,031,299)
----------- -----------
INVESTING ACTIVITIES
Purchase of Property, Plant and Equipment (960,736) (2,444,798)
Investment in and Advances to Affiliated Entities-Net (222,600) (226,862)
NET CASH USED IN INVESTING ACTIVITIES (1,183,336) (2,671,660)
----------- -----------
FINANCING ACTIVITIES
Proceeds from Mortgages and Notes Payable to Banks 670,000 3,185,000
Payments on Mortgages and Notes Payable to Banks (295,648) (294,504)
Other Financing Activities (Note 6) 3,000,000 (400)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,374,352 2,890,096
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 357,166 (812,863)
Cash and Cash Equivalents at Beginning of Period 1,506,113 8,590,167
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,863,279 $ 7,777,304
=========== ===========
</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, 1999 and the
consolidated statements of operations and cash flows for the three month periods
ended September 30, 1999 and 1998, 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, 1999 and for all periods
presented, have been made.
2. INVENTORIES
September 30, June 30,
1999 1999
---------- ----------
Work-in process and
raw materials $1,705,758 $1,913,784
Finished goods 5,508,948 3,380,214
---------- ----------
$7,214,706 $5,293,998
---------- ----------
3. INCOME TAXES
Three Months Ended
September 30,
1999 1998
-------- --------
Federal $ 5,000 $ 25,000
State 62,000 78,000
-------- --------
$ 67,000 $103,000
-------- --------
4. EARNINGS PER SHARE
Statement No. 128 issued by the Financial Accounting Standards Board and adopted
by the Company in fiscal 1998, 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>
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5. INDUSTRY SEGMENTS
Three months ended
September 30,
1999 1998
---- ----
Revenues:
Real Estate $ 4,174,460 $ 3,952,050
Hotel 1,650,000 1,121,000
Seafood 4,671,561 1,460,584
Textile 2,457,000 3,318,000
Corporate and Other 369,170 444,957
----------- -----------
$13,322,191 $10,296,591
=========== ===========
September 30,
1999 1998
---- ----
Identifiable Assets:
Real Estate $41,815,361 $36,529,804
Hotel 6,374,594 4,822,806
Seafood 24,311,853 18,492,520
Textile 9,702,365 11,141,666
Corporate 17,381,295 19,831,406
----------- -----------
$99,585,468 $90,818,202
=========== ===========
Results of operations are shown in Management's Discussion and Analysis of
Financial Condition and Results of Operations.
6. RELATED PARTY TRANSACTION
On August 6, 1999 the Company borrowed $3,000,000 from a related party to
finance Bluepoint's expanded importation and sale of lobster tails. The loan
bears interest at 8% and has no fixed repayment terms or maturity date.
6
<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, 1999 decreased by
approximately $356. Net cash used by operating activities was approximately
$1,834. Net cash provided by financing activities was approximately $3,374. Net
cash of approximately $1,183 was used for investing activities.
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 on October 21,
2002 and the revolving line of credit matures in October 2000. At September 30,
1999 the term loan balance was $8,342 and $2,000 was outstanding under the
revolving line of credit.
On August 6, 1999 the Company borrowed $3,000 from a related party to finance
Bluepoint's expanded importation and sale of lobster tails. The loan bears
interest at 8% and has no fixed repayment terms or maturity date.
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. The loan
was obtained for the purpose of converting the vacant property, formerly
occupied by Towle Manufacturing Company, into commercial space suitable for
rental. Initially $2,685 was borrowed, with $1,315 available to be borrowed when
additional space is rented. An additional $670 was borrowed on August 25, 1999.
The construction loan matures on August 31, 2000. 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 1.6% 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.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
Results of Operations
Three months ended September 30, 1999 and 1998
Income from operations before income taxes and minority interests decreased
$311. The components are as follows:
(Decrease)
1999 1998 Increase
---- ---- --------
Real Estate $ 1,548 $ 1,653 $ (105)
Hotel 206 64 142
Seafood (1,438) (992) (446)
Textiles (193) (90) (103)
Corporate (811) (1,012) 201
------- ------- -------
$ (688) $ (377) $ (311)
------- ------- -------
REAL ESTATE
Revenues increased $222 and earnings decreased $105. The earnings decrease
was due to a $180 insurance recovery last year at our Richmond Virginia Shopping
Center which was offset in part by a pre-payment penalty of $100 paid last year
to refinance the mortgage at the Virginia Beach Shopping Center. Operating
profits were substantially the same at all of the other properties. There were
no significant variations in any expense category.
HOTEL
Revenues increased $529 over last year. A $4,000 renovation project, which
allowed the hotel to operate as a Holiday Inn franchise, was completed in
January 1999. Hotel earnings increased $142 as a result of the higher revenues.
SEAFOOD
Revenues increased $3,211 in the current period due primarily to the sale
of lobster tails, a new venture for the Company that started in October 1998.
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 $633 this
year as compared to last year's loss of $387 due principally to the onset of a
virus in Ecuador that has decimated that country's shrimp production. Scallop
operations in Florida lost $495 as compared to a loss last year of $451 due to
lack of availability of product.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
TEXTILES
Hanora Spinning's earnings decreased $72 to $19 for the quarter due to
lower revenues. Hanora South and J & M Dyers recognized a combined loss of $190
compared to last year's loss of $152 due to lower revenues. Whitlock Combing
incurred a loss of $22 in the current period as compared to a loss of $29 last
year relating to its property in South Carolina which is being offered for sale.
Overall, textile revenues decreased $861.
CORPORATE/OTHER
Corporate expenses including interest on the Company's term loan and
revolving line of credit decreased by $201 due substantially to higher
professional fees incurred last year.
YEAR 2000 COMPLIANCE
The year 2000 ("Y2K") issue refers generally to computer applications
using only the last two digits to refer to a year rather than all four digits.
As a result, these applications could fail or create erroneous results if they
recognize "00" as the year 1900 rather than the year 2000. The Company has taken
Y2K initiatives in three general areas which represent the areas that could have
an impact on the Company: information technology systems, non-information
technology systems and third party issues. The following is a summary of these
initiatives:
Information Technology: The Company has focused its efforts on the high-risk
areas of the corporate office computer hardware, operating systems and software
applications. The Company completed its assessment and has been advised by its
independent software provider that with the modifications it has made to its
existing software and conversions to new software and hardware, the Company's
network operating systems and software applications are Y2K compliant.
Non-Information Technology: Non-information technology consists mainly of
facilities management systems such as telephone, utility and security systems
for the corporate office and its real estate properties. The Company has
reviewed the corporate facility management systems and concluded that the
systems of its corporate office and real estate properties, including telephone,
utilities, fire and security systems are Y2K compliant.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
Third Parties: The Company has third-party relationships with tenants,
suppliers, contractors and service providers. The Company has queried its key
suppliers, subcontractors and service providers. The majority of the Company's
vendors are all small suppliers that the Company believes can manually execute
their business and are readily replaceable. Management also believes there is no
material risk of being unable to procure the necessary supplies and services. 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.
Costs: The accounting software upgrade and conversion was executed under
maintenance and support agreements with software vendors. The total cost of the
accounting conversion which the Company had previously commenced during fiscal
1998 was approximately $60,000 including the Y2K portion of the conversion that
cannot be readily identified and is not material to the operating results or
financial position of the Company. The identification and remediation of systems
was accomplished by in-house personnel. The assessment of third-party readiness
was also conducted by in-house personnel whose costs are recorded as normal
operating expenses.
Risks: The principal risks to the Company relating to its accounting software
conversion is failure to correctly bill tenants after December 31, 1999 and to
pay invoices when due. Management believes it has adequate resources, or could
obtain the needed resources, to manually bill tenants and pay bills if the
systems were not operational.
The principal risks to the Company relating to non-information systems at the
corporate office are failure to identify time-sensitive systems and inability to
find a suitable replacement system. The Company believes that adequate
replacement components or new systems are available at reasonable prices and are
in good supply. The Company also believes that adequate time and resources are
available to remediate these areas as needed.
The principal risks to the Company in its relationships with third parties are
the failure of third-party systems used to conduct business such as tenants
being unable to pay invoices; banks being unable to process receipts and
disbursements; vendors being unable to supply needed materials and services; and
processing of outsourced employee payroll. Based on Y2K compliance work done to
date, the Company has no reason to believe that key tenants, banks and suppliers
will not be Y2K compliant in all material respects or cannot be replaced within
an acceptable timeframe.
Contingency Plan: The conversion to the new software is completed. The Company
believes that with the 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 do not work
as expected, the Year 2000 Issue could have a material impact on the operations
of the Company.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
The Company's description of its Y2K compliance issue is based upon information
obtained by management through evaluations of internal business systems and from
tenant and vendor compliance efforts. No assurance can be given that the Company
will not encounter unexpected difficulties or significant expenses relating to
adequately addressing the Y2K Issue. If the Company or the major tenants or
vendors with whom the Company does business fail to address their major Y2K
Issues, the Company's operating results or financial position could be
materially adversely affected.
Forward-Looking Statements
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21B of the Securities Act of 1934, as amended. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: the ability of the Company to increase production at its Ecuadorian
shrimp farms, the clam inventory in the Great South Bay, the availability of
scallops in the area covered by the Company's Cape Canaveral, Florida
operations, demand for the Company's textile services, and general economic and
business conditions, which will, among other things, affect the demand for space
and rooms at the Company's real estate and hotel properties, the availability
and creditworthiness of prospective tenants, lease rents and terms and
availability of financing; and adverse changes in the real estate markets,
including, among other things, competition with other companies, risk of real
estate development and acquisition, governmental actions and initiatives and
environmental safety requirements.
11
<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 1999.
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: November 30, 1999 /s/ Norman A. Halper
----------------------------------------
Norman A. Halper
President
Date: November 30, 1999 /s/ Harry Bergman
----------------------------------------
Harry Bergman
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,863,279
<SECURITIES> 0
<RECEIVABLES> 5,303,480
<ALLOWANCES> 104,309
<INVENTORY> 7,214,706
<CURRENT-ASSETS> 17,085,477
<PP&E> 85,921,156
<DEPRECIATION> 33,793,338
<TOTAL-ASSETS> 99,585,468
<CURRENT-LIABILITIES> 12,552,320
<BONDS> 30,192,773
0
0
<COMMON> 1,175,261
<OTHER-SE> 53,316,136
<TOTAL-LIABILITY-AND-EQUITY> 99,585,468
<SALES> 7,128,561
<TOTAL-REVENUES> 13,322,191
<CGS> 6,966,938
<TOTAL-COSTS> 5,549,722
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744,482
<INCOME-PRETAX> 60,999
<INCOME-TAX> 67,000
<INCOME-CONTINUING> (388,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (388,145)
<EPS-BASIC> (.58)
<EPS-DILUTED> (.58)
</TABLE>
