SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1998 Commission File Number 0-1437
- --------------------------------------------------------------------------------
THE FIRST REPUBLIC CORPORATION OF AMERICA
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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 February 10, 1999, there were 669,995 shares of common stock outstanding.
1
<PAGE>
PART I. FINANCIAL INFORMATION
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1998 1998
----------- -----------
(UNAUDITED) (SEE NOTE
BELOW)
Assets
Current Assets
Cash and Cash Equivalents $ 1,325,370 $ 8,590,167
Accounts Receivable 4,334,259 3,501,860
Inventories (Note 2) 5,870,427 5,415,534
Other Current Assets 2,951,578 1,697,870
----------- -----------
Total Current Assets 14,481,634 19,205,431
----------- -----------
Property, Plant and Equipment 86,123,751 78,538,620
Less: Accumulated Depreciation 35,534,558 34,758,123
----------- -----------
Net Properties 50,589,193 43,780,497
----------- -----------
Other Assets 27,517,390 24,979,826
----------- -----------
TOTAL ASSETS $92,588,217 $87,965,754
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities $ 6,778,745 $ 8,666,241
----------- -----------
Long Term Debt 28,325,529 21,625,350
----------- -----------
Other Liabilities and Deferred Credits 2,297,273 2,503,871
----------- -----------
Stockholders' Equity:
Common Stock 1,175,261 1,175,261
Other Stockholders' Equity 54,011,409 53,995,031
----------- -----------
Total Stockholders' Equity 55,186,670 55,170,292
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $92,588,217 $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)
<TABLE>
<CAPTION>
Six months ended Three months ended
December 31, December 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Net Sales-Products $11,826,425 $13,482,999 $ 7,047,841 $ 6,713,927
Real Estate and Hotel Operations 10,485,469 11,999,127 5,412,419 6,091,872
Other Income 851,751 413,213 421,187 262,101
----------- ----------- ----------- -----------
Total Revenues 23,163,645 25,895,339 12,881,447 13,067,900
----------- ----------- ----------- -----------
Expenses
Cost of Sales 10,948,705 11,928,925 6,492,640 6,186,454
Operating-real estate and hotel 4,321,028 4,877,633 2,232,788 2,517,489
Selling, general & administrative 3,276,928 3,275,148 1,628,711 1,576,799
Depreciation and amortization 1,828,166 1,800,164 926,387 846,099
Real estate taxes 1,037,946 1,299,005 528,311 659,761
Interest 1,535,304 1,667,289 737,916 866,357
----------- ----------- ----------- -----------
Total Expenses 22,948,077 24,848,164 12,546,753 12,652,959
----------- ----------- ----------- -----------
Equity in net loss of affiliated
entities (520,693) (199,200) (263,162) (90,986)
----------- ----------- ----------- -----------
(Loss) Income before income taxes
and minority interests (305,125) 847,975 71,532 323,955
Income taxes - Note 3 (197,000) (467,000) (94,000) (154,000)
Minority interests 519,703 485,121 241,657 200,973
----------- ----------- ----------- -----------
Net Income $ 17,578 $ 866,096 $ 219,189 $ 370,928
=========== =========== =========== ===========
Income per share:
Net Income - basic and diluted $ .03 $ 1.29 $ .33 $ .55
=========== =========== =========== ===========
Average shares outstanding
basic and diluted 670,215 671,873 670,210 671,694
</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>
Six Months Ended
December 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 17,578 $ 866,096
Adjustments to Reconcile Net Income to
Cash (Used) Provided by Operating Activities:
Depreciation and Amortization 1,828,166 1,800,164
Minority Interests' Share of Loss in Subsidiaries (519,703) (485,121)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts and Other Receivables (833,996) 492,784
Increase in Inventories (454,893) (1,523,565)
Increase in Other Assets (1,253,708) (824,946)
(Decrease) Increase in Accounts Payable (1,887,496) 208,957
Decrease in Other Liabilities (206,598) (48,340)
------------ ------------
CASH (USED) PROVIDED BY OPERATIONS (3,310,650) 486,029
------------ ------------
INVESTING ACTIVITIES
Purchase of Property Plant and Equipment (8,636,862) (3,489,483)
Investment in and Advances to Affiliated Entities-Net (2,017,861) 2,026,754
Payments Received on Mortgages Receivable 1,597 13,964
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (10,653,126) (1,448,765)
------------ ------------
FINANCING ACTIVITIES
Proceeds from Mortgages and Notes Payable to Banks 10,735,000 10,272,000
Payments on Mortgages and Notes Payable to Banks (4,034,821) (8,701,185)
Other Financing Activities (1,200) (28,776)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,698,979 1,542,039
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (7,264,797) 579,303
Cash and Cash Equivalents at Beginning of Period 8,590,167 1,932,075
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,325,370 $ 2,511,378
============ ============
</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 December 31, 1998 and the
consolidated statements of operations and cash flows for the six and three month
periods ended December 31, 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 December 31, 1998 and for all
periods presented, have been made.
2. INVENTORIES
December 31 June 30,
1998 1998
---- ----
Work-in process and
raw materials $2,562,557 $2,231,594
Finished goods 3,307,870 3,183,940
---------- ----------
$5,870,427 $5,415,534
========== ==========
3. INCOME TAXES
Six Months Ended
December 31,
1998 1997
---- ----
Federal $ 25,000 $100,000
State 172,000 367,000
-------- --------
$197,000 $467,000
======== ========
4. EARNINGS PER SHARE
Statement No. 128 issued by the Financial Accounting Standards Board in February
1997 will have no impact on the earnings per share calculation of the Company
due to the fact that the Company does not have 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 six months ended December 31, 1998 decreased by
approximately $2,836. Net cash used by operating activities was approximately
$3,311. Net cash provided by financing activities was approximately $6,699. Net
cash of approximately $10,653 was used for investing activities.
On November 17, 1998 the Company purchased for cash the Shipps Corner Shopping
Center in Virginia Beach, Virginia for approximately $3,425. The Company is
presently in negotiations to obtain a mortgage for this property. The Company's
modernization and renovation at its Syracuse hotel property is expected to be
completed in February 1999. For the six months ended December 31, 1998 the
Company incurred expenditures at the hotel of approximately $2,753.
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 is 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 a prepayment penalty of $100 which was immaterial to the Company.
The Company closed a loan with the Overseas Private Investment Corporation in
December 1998 for $5,600. The loan bears interest at 7.3% per annum and provides
for 15 semi-annual payments of principal and interest. After the repayment of
$2,800 of loans in Ecuador with interest ranging from 13% to 51%, the repayment
of approximately $1,400 to the Company and $ 1,000 held in escrow reserve
accounts, $400 remained for working capital needs for the Ecuadorian shrimp
operations.
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 December 31, 1998 the
term loan balance was $8,611 and nothing was outstanding under the revolving
line of credit.
Management anticipates that cash generated from operating performances and the
above term loan and revolving line of credit will provide the necessary funds on
a short and long-term basis for its operating expenses, interest expense on
outstanding indebtedness and recurring and non-recurring capital expenditures.
The Company does not have any material commitments for capital expenditures and
tenant improvements.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
Results of Operations
Six months ended December 31, 1998 and 1997
Income from operations before income taxes and minority interests decreased
$1,153. The components are as follows:
(Decrease)
1998 1997 Increase
---- ---- --------
Real Estate $ 3,214 $ 3,446 $ (232)
Hotel 211 259 (48)
Seafood (1,720) (1,270) (450)
Textiles (176) 319 (495)
Corporate (1,834) (1,906) 72
------- ------- -------
$ (305) $ 848 $(1,153)
======= ======= =======
REAL ESTATE
Revenues decreased $1,196 and earnings decreased $232. This was due to the
sale of the Video Film Center in the last fiscal year, which had revenues of
$1,965 and earnings of $481 for the six months last year. Operating profits and
revenues increased at substantially all of the other properties. There were no
significant variations in any expense category.
HOTEL
Revenues decreased $318 over last year due to renovations being conducted
at the hotel. Hotel earnings decreased $48 as a result of the lower revenues.
SEAFOOD
Revenues decreased $100 in the current period. Losses are continuing in
the seafood division due primarily to curtailed production at the Company's clam
operations, and continuing losses in Ecuador due to lower than anticipated
shrimp production. Losses in Ecuador were $878 this year as compared to last
year's loss of $539 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". Scallop operations in Florida lost $552 as
compared to a loss last year of $296 due to the lack of availability of product
in the first quarter of the year.
TEXTILES
Hanora Spinning's earnings decreased $210 to $216 for the six months due
to lower revenues. Hanora South and J & M Dyers recognized a combined loss of
$316 compared to last year's loss of $25
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
due to lower revenues at J & M this year. Whitlock Combing incurred a loss of
$76 in the current year as compared to a loss of $82 last year relating to its
property in South Carolina which is being offered for sale. Overall, textile
revenues decreased $1,556.
CORPORATE/OTHER
Corporate expenses including interest on the Company's term loan and
revolving line of credit decreased by $72.
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, subcontractors and service
providers 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.
Three months ended December 31, 1998 and 1997
Income from operations before income taxes and minority interests decreased
$252. The components are as follows:
(Decrease)
1998 1997 Increase
---- ---- --------
Real Estate $1,561 $1,718 $(157)
Hotel 147 151 (4)
Seafood (728) (715) (13)
Textiles (86) 60 (146)
Corporate (822) (890) 68
------ ------ -----
$ 72 $ 324 $(252)
====== ====== =====
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
REAL ESTATE
Revenues decreased $584 and earnings decreased $157. This was due to the
sale of the Video Film Center which had revenues of $947 and earnings of $209 in
the second quarter of last year. There were no other significant variations in
any expense category.
HOTEL
Hotel earnings decreased $4. There were no significant variations in any
expense category.
SEAFOOD
Losses increased $13. Ecuador incurred a loss of $491 for the quarter but
rehabilitation of the shrimp ponds and lower interest costs may substantially
improve operations in the second half of fiscal 1999. Our scallop operation
incurred a loss of $101 for the quarter but scallop operations re-started in
October and results are improving. Clam operations incurred a loss of $136 for
the quarter.
TEXTILES
Earnings decreased $146. Hanora Spinning's earnings decreased $8. Hanora
South and J & M Dyers recognized combined losses of $164 as compared to last
year's loss of $29. Whitlock Combing had a $3 increase in losses.
CORPORATE/OTHER
Corporate expenses decreased $68. There were no other significant
variations in any expense.
9
<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
December 31, 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: February 16, 1999 /s/ Norman A. Halper
-------------------------------
Norman A. Halper
President
Date: February 16, 1999 /s/ Harry Bergman
-------------------------------
Harry Bergman
Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,325,370
<SECURITIES> 0
<RECEIVABLES> 4,391,853
<ALLOWANCES> 57,594
<INVENTORY> 5,870,427
<CURRENT-ASSETS> 14,481,634
<PP&E> 86,123,751
<DEPRECIATION> 35,534,558
<TOTAL-ASSETS> 92,588,217
<CURRENT-LIABILITIES> 6,778,745
<BONDS> 28,325,529
0
0
<COMMON> 1,175,261
<OTHER-SE> 54,011,409
<TOTAL-LIABILITY-AND-EQUITY> 92,588,217
<SALES> 11,826,425
<TOTAL-REVENUES> 23,163,645
<CGS> 10,948,705
<TOTAL-COSTS> 10,464,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,535,304
<INCOME-PRETAX> (305,125)
<INCOME-TAX> 197,000
<INCOME-CONTINUING> 17,578
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,578
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
