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 March 31, 1999 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 May 18, 1999, there were 669,991 shares of common stock outstanding.
1
<PAGE>
PART I. FINANCIAL INFORMATION
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1999 1998
----------- -----------
(UNAUDITED) (SEE NOTE
Assets BELOW)
Current Assets
Cash and Cash Equivalents $ 1,437,339 $ 8,590,167
Accounts Receivable 5,179,282 3,501,860
Inventories (Note 2) 5,947,519 5,415,534
Other Current Assets 2,612,156 1,697,870
----------- -----------
Total Current Assets 15,176,296 19,205,431
----------- -----------
Property, Plant and Equipment 88,084,715 78,538,620
Less: Accumulated Depreciation 36,203,402 34,758,123
----------- -----------
Net Properties 51,881,313 43,780,497
----------- -----------
Other Assets 25,945,530 24,979,826
----------- -----------
TOTAL ASSETS $93,003,139 $87,965,754
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities $ 6,862,032 $ 8,666,241
----------- -----------
Long Term Debt 28,041,288 21,625,350
----------- -----------
Other Liabilities and Deferred Credits 2,361,416 2,503,871
----------- -----------
Stockholders' Equity:
Common Stock 1,175,261 1,175,261
Other Stockholders' Equity 54,563,142 53,995,031
----------- -----------
Total Stockholders' Equity 55,738,403 55,170,292
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $93,003,139 $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>
Nine months ended Three months ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Net Sales-Products $ 21,159,789 $ 20,517,763 $ 9,333,364 $ 7,034,764
Real Estate and Hotel Operations 15,687,030 17,968,554 5,201,561 5,969,427
Other Income 1,188,359 918,987 336,608 505,774
------------ ------------ ------------ ------------
Total Revenues 38,035,178 39,405,304 14,871,533 13,509,965
------------ ------------ ------------ ------------
Expenses
Cost of Sales 19,060,884 18,381,990 8,112,179 6,453,065
Operating-real estate and hotel 6,861,254 7,696,235 2,540,226 2,818,602
Selling, general & administrative 4,567,844 4,717,062 1,290,916 1,441,914
Depreciation and amortization 2,719,117 2,898,422 890,951 1,098,258
Real estate taxes 1,559,935 1,976,801 521,989 677,796
Interest 2,392,857 2,522,929 857,553 855,640
------------ ------------ ------------ ------------
Total Expenses 37,161,891 38,193,439 14,213,814 13,345,275
------------ ------------ ------------ ------------
Equity in net
loss of affiliated entities 553,942 258,771 33,249 59,571
------------ ------------ ------------ ------------
Income before income
taxes and minority interests 319,345 953,094 624,470 105,119
Income taxes - Note 3 (320,000) (579,000) (123,000) (112,000)
Minority interests 577,966 668,081 58,263 182,960
------------ ------------ ------------ ------------
Net Income $ 577,311 $ 1,042,175 $ 559,733 $ 176,079
============ ============ ============ ============
Income per share:
Net Income - basic and diluted $ .86 $ 1.55 $ .83 $ .26
============ ============ ============ ============
Average shares outstanding
Basic and diluted 670,171 671,649 670,082 671,192
</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>
Nine Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 577,311 $ 1,042,175
Adjustment to Reconcile Net Income to
Cash (Used) Provided by Operating Activities:
Depreciation and Amortization 2,719,117 2,898,422
Minority Interests' Share of Loss in Subsidiaries (579,966) (668,081)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Accounts and Other Receivables (1,679,816) 249,742
Increase in Inventories (531,985) (2,033,399)
Increase in Other Assets (914,286) (1,150,702)
(Decrease) Increase in Accounts Payable (1,804,209) 1,310,412
(Decrease) Increase in Other Liabilities (142,455) 44,731
------------ ------------
CASH (USED) PROVIDED BY OPERATIONS (2,354,289) 1,693,300
------------ ------------
INVESTING ACTIVITIES
Purchase of Property Plant and Equipment (10,819,933) (6,425,215)
------------
Investment in and Advances to Affiliated Entities-Net (387,738) 1,138,829
Payment Received on Mortgages Receivable 2,394 14,722
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (11,205,277) (5,271,664)
------------ ------------
FINANCING ACTIVITIES
Proceeds from Mortgages and Notes Payable 10,735,000 12,272,000
Payments on Long Term Debt (4,319,062) (9,101,677)
Other Financing Activities (9,200) (28,776)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,406,738 3,141,547
------------ ------------
DECREASED IN CASH AND CASH EQUIVALENTS (7,152,828) (436,817)
Cash and Cash Equivalents at Beginning of Period 8,590,167 1,932,075
------------ ------------
CASH AND CASH EQUIALENTS AT END OF PERIOD $ 1,437,339 $ 1,495,258
============ ============
</TABLE>
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNADUITED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATMENTS
The condensed consolidated balance sheet as of March 31, 1999 and the
consolidated statements of operations and cash flows for the nine and three
month periods ended March 31, 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 March 31, 1999 and for all
periods presented, have been made.
2. INVENTORIES
March 31, June 30,
1999 1998
---- ----
Work-in process and $2,427,765 $2,231,594
Raw materials 3,519,754 3,183,940
---------- ----------
Finished goods $5,947,519 $5,415,534
---------- ----------
3. INCOME TAXES
Nine Months Ended
March 31,
1999 1998
---- ----
Federal $ 50,000 $100,000
State 270,000 479,000
-------- --------
$320,000 $579,000
-------- --------
4. EARNINGS PER SHARE
Statement No. 128 issued by the Financial Accounting Standards Board in February
1997 has 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>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(IN THOUSANDS)
Liquidity and Capital Resources
Working capital for the nine months ended March 31, 1999 decreased by
approximately $2,225. Net cash used by operating activities was approximately
$2,354. Net cash provided by financing activities was approximately $6,407. Net
cash of approximately $11,205 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 was completed in
February 1999. For the nine months ended March 31, 1999 the Company incurred
expenditures at the hotel of approximately $3,534.
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 in October 2018. The old mortgage had monthly
payments of $24, bore interest at 9.5% and matured May 1, 2002.
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%.
6
<PAGE>
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 March 31, 1999 the term loan balance was $8,522 and $2,500 was
outstanding under the revolving line of credit.
Management anticipates that cash generated from operations and the amount
available under the term loan and revolving fine of credit will provide the
necessary funds on a short and long-term basis to cover 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.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
Results of Operations
Nine months ended March 31, 1999 and 1998
Income from operations before income taxes and minority interests decreased
$634. The components are as follows:
(Decrease)
1999 1998 Increase
---- ---- --------
Real Estate $ 4,470 $ 4,854 $ (384)
Hotel 214 406 (192)
Seafood (1,310) (2,005) 695
Textiles (200) 498 (698)
Corporate (2,855) (2,800) (55)
------- ------- -------
$ 319 $ 953 $ (634)
------- ------- -------
REAL ESTATE
Revenues decreased $1,782 and earnings decreased $384. This was due to the
sale of the Video Film Center in the last fiscal year, which had revenues of
$2,917 and earnings of $753 for the nine 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 $499 over last year due to renovations that were
conducted at the hotel. Hotel earnings decreased $192 as a result of the lower
revenues.
SEAFOOD
Revenues increased $3,910 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 $980 this year as compared to last
year's loss of $630 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 $131 as
compared to a loss last year of $602 due to increased revenues. Revenues
increased $2,178 at our scallop operation and $4,130 at Bluepoints substantially
due to the sale of a new product imported lobster tails. There was a reduction
of revenues of $2,398 in Ecuador due to a reduction of sales of shrimp purchased
from third parties. Losses were reduced in our Bluepoints clam operation by $370
and we earned $204 in a new division that imports lobster tails.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
TEXTILES
Hanora Spinning's earnings decreased $296 to $380 for the nine months due
to lower revenues. Hanora South and J & M Dyers recognized a combined loss of
$464 compared to last year's loss of $79 due to lower revenues at J & M this
year. Whitlock Combing incurred a loss of $116 in the current year as compared
to a loss of $99 last year relating to its property in South Carolina which is
being offered for sale. Overall, textile revenues decreased $3,269.
CORPORATE/OTHER
Corporate expenses including interest on the Company's term loan and
revolving line of credit increased by $55.
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 $40 which is
being expensed as incurred and is expected to be completed by June 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 in a timely fashion, 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.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION - CONTINUED
(IN THOUANDS)
Three months ended March 31, 1999 and 1998
Income from operations before income taxes and minority interests increased
$519. The components are as follows:
(Decrease)
1999 1998 Increase
---- ---- --------
Real Estate $ 1,256 $ 1,408 $ (152)
Hotel 3 147 (144)
Seafood 410 (735) 1,145
Textiles (24) 179 (203)
Corporate (1,021) (894) (127)
------- ------- -------
$ 624 $ 105 $ 519
------- ------- -------
REAL ESTATE
Revenues decreased $586 and earnings decreased $152. This was due to the
sale of the Video Film Center which had revenues of $952 and earnings of $272 in
the third quarter of last year. Operating profits and revenues increased at
substantially all of the other properties. There were no other significant
variations in any expense category.
HOTEL
Hotel earnings decreased $144 over last year due to the renovations at the
hotel. Hotel revenues decreased $181.
SEAFOOD
Losses decreased $1145. Ecuador incurred a loss of $102 for the quarter as
compared to a loss of $91 last year. Scallop operations re-started in October
and earnings for the quarter were $421 as compared to a loss last year of $306.
Bluepoints started selling imported lobster tails and had earnings of $150 in
the quarter. Cost reductions at our clam operations helped to reduce losses over
last year by $429.
TEXTILES
Earnings decreased $203. Hanora Spinning's earnings decreased $86. Hanora
South and J & M Dyers recognized combined losses of $148 as compared to last
year's loss of $54. Whitlock Combing had a $23 increase in losses.
CORPORATE/OTHER
Corporate expenses increased $127. There were no other significant
variations in any expense.
10
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company has assessed its exposure to market risk for its variable rate debt
and believes that a 1% change in interest rates would have a $25,000 effect on
income before taxes.
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 March 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duty caused this report to be signed on its behalf by the
undersigned thereunto duty authorized.
THE FIRST REPUBLIC CORPORATION OF AMERICA
Registrant
Date: May 20, 1999 /s/ Norman A. Halper
----------------------------------
Norman A. Halper
President
Date: May 20, 1999 /s/ Harry Bergman
----------------------------------
Harry Bergman
Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,437,339
<SECURITIES> 0
<RECEIVABLES> 5,236,579
<ALLOWANCES> 57,297
<INVENTORY> 5,947,519
<CURRENT-ASSETS> 15,176,296
<PP&E> 88,084,715
<DEPRECIATION> 36,203,402
<TOTAL-ASSETS> 93,003,139
<CURRENT-LIABILITIES> 6,862,032
<BONDS> 28,041,288
0
0
<COMMON> 1,175,261
<OTHER-SE> 54,563,142
<TOTAL-LIABILITY-AND-EQUITY> 93,003,139
<SALES> 21,159,789
<TOTAL-REVENUES> 38,035,178
<CGS> 19,060,884
<TOTAL-COSTS> 15,708,150
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,392,857
<INCOME-PRETAX> 319,345
<INCOME-TAX> 320,000
<INCOME-CONTINUING> 577,311
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 577,311
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
