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, 2000
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 18, 2000, 669,446 common shares were outstanding, and the
aggregate market value of common shares held by nonaffiliates of Registrant was
approximately $2,031,300 (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
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PART I
Item 1. Business.......................................................... 1
Item 2. Properties........................................................ 5
Item 3. Legal Proceedings................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............... 9
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters........................................... 10
Item 6. Selected Financial Data........................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 12
Item 7a. Quantitative and Qualitative Disclosures about Market Risks....... 17
Item 8. Financial Statements and Supplementary Data....................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................... 49
PART III
Item 10. Directors and Executive Officers of the Registrant................ 50
Item 11. Executive Compensation............................................ 52
Item 12. Security Ownership of Certain Beneficial Owners and Management.... 54
Item 13. Certain Relationships and Related Transactions.................... 56
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K. 59
Signatures .................................................................. 64
<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, and textile businesses. See Item 1(c) for a description of the
businesses in which the Company and its subsidiaries are engaged.
On August 31, 1998, the Company obtained a $4,000,000 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. To date, $3,355,000 has been
borrowed, with $645,000 available to be borrowed as additional space is
rented. At August 31, 2000, 78% of the building was rented. The
construction loan which matured on August 31, 2000 has been extended to
October 2000, at which time the loan will be converted to a five year term
loan to mature on September 30, 2005. Interest on the construction loan
has been at the bank's prime rate from time to time, or at the London
Interbank Offered Rate ("LIBOR") plus 1.6% for one to twelve month
periods, as elected by the Company. Interest on the term loan will be
based upon the five year United States Treasury Bond Rate plus 1.75%.
On May 1, 2000, the Company sold the Colonial Bank (formerly known as
Jefferson National Bank) Building in Miami Beach, Florida for
approximately $5,972,000 and recognized a gain of approximately $81,000.
The net proceeds to the Company after expenses and repayment of the
existing mortgage were approximately $3,991,000.
On October 4, 2000, the Company sold its office building on West 39th
Street in New York City for $20,800,000. There is no existing mortgage
debt on this property. After expenses and adjustments of approximately
$750,000 the Company received net proceeds of approximately $20,050,000.
The Company recognized a gain of approximately $18,627,000.
On March 17, 2000 the Company entered into an agreement for the sale of
its vacant land in Melbourne, Florida for approximately $1,775,000
contingent upon the buyer obtaining certain permits and financing by
December 17, 2000. The contingencies have not yet been satisfied.
b. Financial Information about Industry Segments
The sales and operating profit from operations and the identifiable assets
attributable to each industry segment for the three years ended June 30,
2000 are set forth in Note
1
<PAGE>
2 (Industry Segments and Foreign Operations) 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, and 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 approximately 26%, 32% and 35% of
consolidated revenues from operations for the fiscal years ended June 30,
2000, 1999 and 1998, respectively.
Hotel
The Company owns and operates a 288 room hotel and convention center
located in Liverpool, New York, which it operates under a Holiday Inn
franchise agreement. 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 approximately 10%, 10% and 11% of
consolidated revenues from operations for the fiscal years ended June 30,
2000, 1999 and 1998, respectively.
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 decreased 35% in the fiscal year ended June 30, 2000 as
compared with the fiscal year ended June 30, 1999. The aggregate number of
bushels of clams harvested during the fiscal year ended June 30, 1999
increased 1% as compared with the prior fiscal year. For the period July
1, 2000 through August 31, 2000, the aggregate number of bushels of clams
harvested
2
<PAGE>
decreased 25% compared with the same period in the prior year. The
decrease in production was caused by smaller harvests of product.
Bluepoints discontinued using Company owned boats and laid off employees
at its claming operations in May 1998 in order to reduce expenses and
conserve clam populations. Bluepoints continues to maintain hatchery
facilities in an effort to increase inventory.
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,
New York State authorities have closed other portions of the Great South
Bay to claming operations because the coliform count exceeds Federal
standards.
In September 1998, Bluepoints began selling imported products, principally
lobster tails from Honduras and Oman. Sales of the foregoing products were
approximately $16,928,000 and $6,229,000 and profits were approximately
$495,000 and $281,000 for the fiscal years ended June 30, 2000 and 1999,
respectively. In fiscal 2000 Bluepoints entered into an arrangement with a
company to sell its clams and other seafood products at the Fulton Fish
Market in New York. This venture increased sales by approximately
$3,700,000 and profits by approximately $130,000.
Bluepoints, through foreign subsidiaries, operates a shrimp farm and is a
62.5% owner of a shrimp hatchery, both of which are located in Ecuador.
Sales of shrimp from the foregoing operations approximated $1,144,000 and
$2,620,000 for the fiscal years ended June 30, 2000 and 1999,
respectively. Bluepoints, through a foreign subsidiary, also owns a 38%
interest in another Ecuadorian shrimp farming operation. See Items 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 a scallop operation in Cape Canaveral, Florida. In
the current fiscal year, sales from this operation were approximately
$4,299,000 and there was a loss of $798,000. This compares to sales of
approximately $4,763,000 and a loss of $547,000 from operations during the
prior year. Scallop sales for July and August 2000 were insignificant and
there can be no assurance that extensive beds of scallops will be found in
the future.
Seafood revenues accounted for approximately 45%, 33%, and 20% of
consolidated revenues from operations for the fiscal years ended June 30,
2000, 1999 and 1998, 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
3
<PAGE>
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, 2000, Hanora purchased approximately $340,000 of additional
equipment. The backlog of yarn orders on August 31, 2000 was approximately
$7,500,000 as compared to $6,900,000 on August 31, 1999. Approximately 80%
of the current backlog is expected to be shipped in the fiscal year ending
June 30, 2001. One customer accounted for approximately 13% of Hanora's
total sales during the 2000 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 approximately 17%, 24%, and 33% of
consolidated revenues from operations for the fiscal years ended June 30,
2000, 1999 and 1998, respectively.
4
<PAGE>
ITEM 2. PROPERTIES
Location General Character(1)
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Real Estate Segment
Junior Coat Building 18-story office, showroom and manufacturing
250 West 39th Street facility; 182,000 rentable square feet; 98%
New York, New York rented. (Building sold October 4, 2000)
First Republic Office Park Two, two-story office buildings with 49,000
Thruway and Electronics Parkway and 35,000 rentable square feet;
Liverpool, New York approximately 14 acres of land; 100% rented.
Waltham Engineering Center 17 multi-story industrial buildings;
Waltham, Massachusetts in excess of 380,000 rentable square feet;
parking facilities; 100% 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.
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; 96% 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; 98% rented.
Shopping Center Approximately 13.5 acres of land and
Richmond, Virginia 130,000 square feet of space in buildings
located thereon; 100% rented.
5
<PAGE>
Location General Character(1)
--------------------------------------------------------------------------------
London Bridge Shopping Center Approximately 10.2 acres of land and 100,000
Virginia Beach, Virginia square feet of space in buildings located
thereon; 95% rented.
Shipps Corner Shopping Center Approximately 5.5 acres of land and 63,000
Virginia Beach, Virginia square feet of space in buildings located
thereon; 97% 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;
97% 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; 78% rented.
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
Hotel--Syracuse 288-room motor hotel and convention center;
Thruway and Electronics Parkway indoor pool; operated under a Holiday Inn
Liverpool, New York franchise agreement.
6
<PAGE>
Location General Character(1)
--------------------------------------------------------------------------------
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.
Mattituck, New York Approximately 1 acre of land on Long Island;
used as a grow out pond for the clam
hatchery.
Englishman Island Approximately 600 acres of land including
Guayaquil County, Ecuador approximately 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 company
Guayaquil, Ecuador that owns approximately 100,000 square feet
of riverfront land.
Ayangue Bluepoints has a 62.5% interest in a company
Guayas Province, Ecuador 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 Bluepoints
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.
7
<PAGE>
Location General Character(1)
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Pageland, South Carolina Approximately 10 acres of land and 36,125
square foot building located thereon;
pre-viously 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.
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.
Corporate Office
302 Fifth Avenue 5,400 square feet of executive offices;
New York, New York month-to-month tenant at a rent of $8,900
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.
8
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
9
<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 at prices
ranging from a low of $40 per share in August 1998 to a high of $42 in
June 2000.
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 18, 2000, there were 712 holders of record of the Company's
common stock.
c. No dividends have been paid during the two years ended June 30, 2000. The
Company has no intention of paying dividends in the foreseeable future.
d. The Company did not sell any securities during the past year.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal year ended June 30,
------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $ 64,969 $ 51,489 $ 50,061 $ 50,220 $ 45,612
======================================================
Gain on sale of real estate held for rental $ 81 NONE $ 12,922 NONE NONE
======================================================
Income before interest and income taxes $ 3,072 $ 2,792 $ 17,130 $ 4,814 $ 912
======================================================
Interest costs $ 3,205 $ 2,867 $ 2,927 $ 3,068 $ 3,115
======================================================
Net (loss) income $ (276) $ (124) $ 13,628 $ 1,170 $ (2,767)
======================================================
Net (loss) income per share of common
stock - basic and diluted $ (0.41) $ (0.19) $ 20.29 $ 1.74 $ (4.11)
======================================================
Total assets $ 99,729 $ 96,556 $ 87,966 $ 81,336 $ 79,239
======================================================
Long-term debt $ 27,318 $ 29,818 $ 21,625 $ 26,297 $ 23,810
======================================================
Stockholders' equity $ 54,498 $ 54,880 $ 55,170 $ 41,609 $ 40,446
======================================================
Cash dividends per common share NONE NONE NONE NONE NONE
======================================================
</TABLE>
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
Working capital at June 30, 2000 increased by approximately $1,890,000 to
$6,779,000.
Net cash used in operating activities was approximately $2,967,000 during the
2000 fiscal year. Net cash provided by financing activities was approximately
$3,696,000. Net cash of approximately $68,000 was provided by investing
activities. The Company has a $9,000,000 term loan with its principal lender
bearing interest at 7.5% 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%. These loans are collateralized by a mortgage on the
East Newark Industrial Center. The term loan requires amortization payments of
approximately $359,000 per annum. The term loan matures on October 21, 2002 and
the revolving line of credit which was to expire October 2000 will be extended
to October 2001. At June 30, 2000 the term loan balance was $8,073,100 with
interest at 7.5% and $2,000,000 was outstanding on the revolving line of credit
with interest at 8.7%. On May 1, 2000 the Company sold the Colonial Bank
Building in Miami, Florida for approximately $5,972,000 and recognized a gain of
approximately $81,000. The net proceeds to the Company after expenses and
repayment of the existing mortgage was $3,991,000. On October 4, 2000 the
Company received net proceeds of approximately $20,050,000 from the sale of its
Junior Coat Building on West 39th Street in New York City.
During the three years ended June 30, 2000, the Company incurred capital
expenditures of approximately $22,569,000. In addition, approximately $4,490,000
was expended for tenant improvements during this three year period. At June 30,
2000 the Company had no significant commitments for capital expenditures and the
Company believes that its current cash position and borrowing capacity are
adequate to meet cash needs for the next twelve months.
The Company's equity share of losses from Ecuadorian shrimp operations was
approximately $1,300,000 in fiscal 2000 as compared to a loss of $1,119,000 in
fiscal 1999. Efforts are being made to increase shrimp production through the
use of the Company's patented Mariculture System, rehabilitation of the farms,
the development of a new product, Tolerine, designed to mitigate White Spot
Syndrome virus that is decimating Ecuador's shrimp production and improved
farming techniques. Although there can be no assurance that the shrimp
production will improve, the Company believes that operations will substantially
improve in the second half of fiscal 2001 as a result of cost reductions, the
efforts to increase production as discussed above, and the marketing of its
Mariculture System and Tolerine product to other shrimp farmers.
12
<PAGE>
Results of Operations
Real Estate
The Company's real estate operating profits decreased $1,582,000 in fiscal 2000
and revenues increased $876,000. The decrease in operating profits was due to
$1,251,000 of costs incurred at our Nyanza Building to clean up an oil spill
caused by a small break in an oil return line that had been leaking oil over an
extended period of time (the Company anticipates pursuing its remedies against
third parties who were responsible for the installation of a faulty pipe at the
Nyanza facility, which the Company believes caused the oil leak); increased
energy costs of $265,000 due to a substantial increase in fuel costs; increased
repairs and maintenance of $555,000 at our East Newark and Waltham properties;
increased mortgage interest of $85,000 and a $169,000 insurance recovery last
year at our Richmond Virginia Shopping Center. The decrease in operating profits
mentioned above were offset by increased revenues and operating profits at
substantially all our other properties. The revenue increases came principally
from our recently renovated Newburyport property ($553,000) and the Shipps
Corner Shopping Center which the Company purchased in November 1998 ($231,000).
In fiscal 1999 operating profits decreased $157,000 and revenues decreased
$1,272,000 compared to the prior fiscal year. This was due primarily to the sale
of the Video Film Center in fiscal 1998, which had revenues of $2,864,000 and
operating profit of $549,000. Revenues at the Shipps Corner Shopping Center
purchased November 17, 1998 were $294,000 and operating profit was $177,000.
Revenues at the Newburyport property, which the Company renovated, increased
$364,000 and operating profit decreased $310,000. Revenues and operating income
increased at substantially all the other properties. Mortgage interest was
reduced by $177,000 and proceeds of $169,000 was received at the Richmond
Virginia Shopping Center in the settlement of a lawsuit.
In fiscal 1998 operating profits increased $960,000 and revenue decreased by
$516,000. Profits increased at substantially all the properties. The revenue
decrease is attributable to the sale of the Video Film Center on which the
Company recognized a gain of $12,922,000. Repairs and maintenance and related
costs decreased $493,000 at the East Newark Industrial Center, and $301,000 at
the Waltham Engineering Center. As a result of the sale of the Video Film
Center, mortgage interest was reduced by $245,000 and utility and fuel expenses
decreased by $178,000.
Hotel
In fiscal 2000 revenues increased $1,256,000 and profits increased $529,000 as a
result of the completion, in January 1999, of a $4,000,000 renovation project
which allowed the hotel to operate as a Holiday Inn franchise. Depreciation
expense increased $307,000 as a result of the renovation.
In fiscal 1999 revenues decreased $287,000 and profits decreased $547,000 as a
result of the renovations being conducted at the hotel. Depreciation expense
increased $282,000 as result of the renovation.
13
<PAGE>
In fiscal 1998 revenues decreased $220,000 and profits decreased $84,000, due to
the commencement of renovations. In fiscal 1998 the hotel terminated its
franchise agreement with ITT Sheraton Corporation to become a Holiday Inn
facility.
Seafood
Overall revenues for the seafood division increased $12,287,000 in fiscal 2000
as compared to the prior year. Losses from operations (including equity share of
losses in affiliated entity and excluding minority interests' share of loss of
subsidiaries) in fiscal 2000 were $2,501,000 as compared to a loss of $2,428,000
in fiscal 1999. Losses from the Ecuadorian shrimp operations were $2,199,000 and
revenues decreased $1,389,000 due to continued poor shrimp yields caused by the
devastating outbreak last year of White Spot Virus that is decimating the
Ecuadorian shrimp industry. The Company is continuing its efforts to combat the
virus by constructing grow out ponds so that juvenile shrimp grow to a larger
size before they are placed into the shrimp ponds thereby making them less
susceptible to the virus. The Company is also developing a new product,
Tolerine, to help the shrimp fight off the White Spot Virus. The Company
believes that with the implementation of these two new procedures and the
continued use of its patented ozone system the shrimp operations will improve.
However, there can be no assurance that these treatments will be successful. The
Company's scallop operation incurred a loss of $798,000 in fiscal 2000 as
compared to a loss of $547,000 in fiscal 1999 on a $343,000 decrease in
revenues. Bluepoints Long Island operations had a profit of $497,000 as compared
to a profit of $66,000 in the prior year. Revenues increased $14,019,000
principally due to the sale of lobster tails, a new product introduced last
year, and other seafood products.
In fiscal 1999 revenues for the seafood division increased $7,078,000 as
compared to the prior year. Losses from operations (including equity share of
losses in affiliated entity and excluding minority interests' share of loss of
subsidiaries) in fiscal 1999 were $2,428,000 as compared to a loss of $3,576,000
in fiscal 1998. Losses from the Ecuadorian shrimp operations were $1,947,000 and
revenues decreased $2,826,000 due to problems at the shrimp hatchery earlier in
the year caused by colder water temperatures, the transition from the weather
phenomenon known as "El Nino" and the discontinuation of sales of shrimp
purchased from third parties. Shrimp yields in the latter part of the year were
adversely affected by the outbreak of White Spot Virus that reduced pounds
harvested. The Company's scallop operation incurred a loss of $547,000 in fiscal
1999 as compared to a loss of $1,163,000 in fiscal 1998 on a $3,608,000 increase
in revenues. Bluepoints' Long Island operations had a profit of $66,000 as
compared to a loss of $1,054,000 in the prior year. Revenues increased
$6,296,000 principally due to the sale of imported lobster tails.
In fiscal 1998 revenues for the seafood division increased $121,000 as compared
to the prior year. Losses from operations (including equity share of losses in
affiliated entity and excluding minority interests' share of loss of
subsidiaries) in fiscal 1998 were $3,576,000 as compared to a loss of $1,957,000
in fiscal 1997. Losses from the Ecuadorian shrimp operations of $1,359,000 were
about the same as the prior year. During fiscal 1998 Ecuadorian shrimp
operations include the sale of shrimp purchased
14
<PAGE>
from third parties. The Company's scallop operation incurred a loss of
$1,163,000 in fiscal 1998 as compared to a break even level in fiscal 1997.
There were no scallops harvested during most of fiscal 1998. The scallop
operation incurred a $350,000 charge for a real estate tax claim that the
Company had been disputing for several years. Bluepoints Long Island operations
had a loss of $1,054,000 as a result of the continuing smaller harvests of clams
as compared to a loss of $527,000 in the prior year.
Textile
Fiscal 2000 revenues for the textile division decreased $1,111,000 over the
prior year and operating loss decreased $383,000. Hanora Spinning's operating
profit decreased $77,000, to $306,000 and revenues decreased $661,000. Hanora
South and J&M Dyers ("J&M") incurred a combined loss of $416,000, as compared to
the prior years' loss of $593,000 and revenues decreased $450,000. The decrease
in revenues was due to the continuing downturn in the textile industry caused by
increased competition from foreign companies. Earnings increased principally due
to lower depreciation at Hanora South and J&M of $167,000 and last year's
write-off at Whitlock Combing Company Inc. ("Whitlock") of $300,000. Whitlock,
which owned a wool combing plant in South Carolina and which discontinued
operations in 1992, incurred a loss of $183,000 relating to its property in
South Carolina that is being offered for sale compared to a loss of $466,000
(including a write-down of its building by $300,000) last year. During the three
years ended June 30, 2000 the Company purchased approximately $2,500,000 of
machinery and equipment for the textile operations.
In fiscal 1999 revenues for the textile division decreased $4,458,000 over the
prior year and operating profit decreased $998,000. Hanora Spinning's operating
profit decreased $493,000 to $383,000 and revenues decreased $3,372,000. Hanora
South and J&M incurred a combined loss of $593,000 as compared to the prior
year's loss of $167,000 and revenues decreased $1,086,000. The decrease in
earnings in the textile division was due to lower revenues caused by a downturn
in the textile industry, lower wool prices and increased competition from
foreign companies. Whitlock incurred losses of $466,000 (including a write-down
of its building by $300,000) compared to a loss of $387,000 (including an
additional write-down of its building by $250,000) in the prior year.
In fiscal 1998 revenues for the textile division increased $717,000 over the
prior year and operating profit increased $59,000. Hanora Spinning's operating
profit increased $37,000 to $876,000. Hanora South and J&M incurred a combined
loss of $167,000 as compared to the prior year's loss of $238,000 due to higher
revenues at J&M. Whitlock incurred losses of $387,000 (including a write-down of
its building by $250,000).
Health Care
In fiscal 1998 the Company sold its investment in its health care operations and
recognized income of $623,000 from this investment
15
<PAGE>
Corporate/Other
Corporate interest and expenses for the last three years was $4,175,000,
$4,367,000 and $4,036,000, respectively. Corporate and other revenues for the
last three years was $864,000, $692,000 and $324,000, respectively. Corporate
expenses 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 in fiscal 2000 decreased due to a
reduction of $280,000 in professional fees, offset by an increase in salaries of
$53,000.
Corporate expenses in fiscal 1999 increased due to increased professional fees
of $150,000 and increased salaries of $136,000. The professional fees relate to
the patent obtained on the Company's Mariculture System in Ecuador.
Corporate expenses decreased by $303,000 in fiscal 1998, primarily as a result
of $307,000 of clean-up expenses at Merrimac's Newburyport property in the prior
year. Starting in fiscal 1998, this property was included in real estate
operations. 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.
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, and to address the virus problem that is affecting shrimp
production in Ecuador, the clam inventory in the Great South Bay, the
availability of scallops in the area covered by the Company's Cape Canaveral,
Florida operations, the success of the Company's Mariculture System and Tolerine
product, demand for the Company's textile services, 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 the terms and
availability of financing; and adverse changes in the real estate markets,
including, among other things, competition with other companies, risks of real
estate development and acquisition, governmental actions and initiatives and
environmental safety requirements.
16
<PAGE>
ITEM 7A. 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 $34,000 effect on
income before taxes.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
18
<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,
2000 and 1999, and the related consolidated statements of operations and
comprehensive (loss) income, retained earnings, and cash flows for each of three
years in the period ended June 30, 2000. 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, Bluepoints
International Fisheries, Inc. and subsidiaries and the hotel division, which
statements reflect total assets constituting 23% in 2000 and 25% in 1999, and
total revenues constituting 20% in 2000, 27% in 1999, and 23% in 1998, of the
related consolidated totals, (b) Langomorro, Langostinera El Morro Cia. Ltda.
and Affiliated Companies (the "Mondragon Companies", a corporation in which the
Company has a 38% interest), accounted for on the equity method, and (c) for the
year ended June 30, 1998, 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 auditing standards generally accepted
in the United States. 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.
19
<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, 2000 and 1999, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended June 30, 2000, in conformity with principles generally accepted in the
United States. 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 26, 2000
20
<PAGE>
[Letterhead of BDO Stern]
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, 2000 and 1999, and the related consolidated statements of operations
and deficit, and of cash flows, for each of the years ended June 30, 2000, 1999
and 1998. 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
prevailing in the United States of America. 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, 2000 and 1999, and the results of their operations and their cash
flows for each of the years ended June 30, 2000, 1999 and 1998, in conformity
with generally accepted accounting principles prevailing in the United States of
America.
/s/ BDO Stern
August 28, 2000
Guayaquil, Ecuador
<PAGE>
[Letterhead of Hoyman, Dobson & Company, P.A.]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Bluepoints International Fisheries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Bluepoints
International Fisheries, Inc. (a Florida corporation) and Subsidiaries as of
June 30, 2000, and the related consolidated statements of operations and
accumulated deficit and cash flows for the year then ended. These consolidated
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
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 audit provides a reasonable basis for our opinion.
The Company's financial statements do not disclose deferred taxes. In our
opinion, disclosure of that information is required to conform with generally
accepted accounting principles.
In our opinion, except for the omission of the information discussed in the
preceding paragraph, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bluepoints
International Fisheries, Inc. and Subsidiaries as of June 30, 2000 and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Hoyman, Dobson & Company, P.A.
Hoyman Dobson & Company P.A.
July 27, 2000
1
<PAGE>
[Letterhead of Dermody, Burke & Brown]
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS
FIRST REPUBLIC CORPORATION
OF AMERICA, HOLIDAY INN
We have audited the accompanying balance sheets of FIRST REPUBLIC CORPORATION OF
AMERICA, HOLIDAY INN as of June 30, 2000 and 1999, and the related statements of
income and division control and cash flows for the years ended June 30, 2000,
1999 and 1998. 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 Holiday Inn 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 Holiday Inn.
1
<PAGE>
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, Holiday Inn at June 30, 2000 and 1999 and the
results of its operations and its cash flows for the years ended June 30, 2000,
1999 and 1998 in conformity with generally accepted accounting principles.
/s/ Dermody, Burke And Brown
DERMODY, BURKE AND BROWN
Certified Public Accountants, P. C.
Syracuse, NY
August 25, 2000
2
<PAGE>
[Letterhead of Loeb & Troper]
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, 1997, and the related statements of
operations and cash flows for the year 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 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
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 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 Bristol Manor Health Care
Center, Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year 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.
As described in Note D to the financial statements, Bristol Manor
discontinued operations of the facility and sold the lease on November 25, 1997.
/s/ Loeb & Troper
September 4, 1998
<PAGE>
[Letterhead of Loeb & Troper]
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, 1997, and the related statements of operations and cash
flows for the year 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 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
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 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 The Whitehall Residence,
Inc. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
<PAGE>
2.
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.
As described in Note C to the financial statements, Whitehall discontinued
operations of the facility and sold the lease on November 25, 1997.
/s/ Loeb & Troper
September 4, 1998
<PAGE>
[Letterhead of Loeb & Troper]
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, 1997 and the related statements of operations and cash flows for
the year 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 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
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 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 Logan Manor Corp. as of
December 31, 1997 and the results of its operations and its cash flows for the
year 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.
/s/ Loeb & Troper
September 4, 1998
<PAGE>
[Letterhead of Loeb & Troper]
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, 1997, and the related statements of operations
and cash flows for the year 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 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
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 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 Harbor View Health Care
Center, Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
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.
As described in Note D to the financial statements, Harbor View
discontinued operations of the facility and sold the lease on November 25, 1997.
/s/ Loeb & Troper
September 4, 1998
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
2000 1999
------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,302,713 $ 1,506,113
Accounts and rents receivable, net of allowances of $30,000 and
$85,007 7,074,613 4,415,546
Mortgages receivable (Notes 3 and 6) -- 52,105
Other receivables including $263,000 and $745,000 due from related
party 2,045,158 1,710,741
Inventories (Note 1) 9,315,724 5,293,998
Prepaid expenses and other assets 1,307,223 1,266,862
------------------------------------
Total current assets 22,045,431 14,245,365
Real estate held for rental and hotel, at cost (Note 5):
Land 6,586,581 8,630,990
Building and improvements 43,747,629 47,597,820
------------------------------------
50,334,210 56,228,810
Less accumulated depreciation 19,405,296 19,709,189
------------------------------------
30,928,914 36,519,621
Other property, plant and equipment, at cost:
Land 1,597,795 1,594,240
Buildings and improvements 9,864,417 9,524,587
Leaseholds and improvements 541,584 1,795,127
Machinery, equipment and vehicles 13,597,096 15,623,196
Furniture and furnishings 470,118 532,865
Construction-in-progress 307,291 287,714
------------------------------------
26,378,301 29,357,729
Less accumulated depreciation and amortization 11,421,482 13,544,469
------------------------------------
14,956,819 15,813,260
Deferred income tax (Note 7) 1,306,000 905,000
Restricted cash 414,108 440,287
Investments in and advances to affiliated entities (Note 4) 13,698,287 12,508,251
Tenant improvements, net of accumulated amortization of $4,610,411 and
$4,001,543 6,897,596 7,247,418
Unamortized leasing, financing and other deferred costs 1,502,460 1,764,078
Other assets:
Cash and securities in trust for tenants' security deposits 1,391,678 1,280,599
Mortgage escrow funds and security deposits 79,516 91,442
Assets held for sale (Note 11) 500,000 500,000
Due from related parties (Note 10) 5,991,065 4,989,680
Other 16,645 251,080
------------------------------------
7,978,904 7,112,801
------------------------------------
Total assets $ 99,728,519 $ 96,556,081
====================================
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
June 30,
2000 1999
------------------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Notes payable (Notes 5 and 6) $ 2,000,000 $ 1,000,000
Note payable, related party (Note 10) 640,000 640,000
Current portion of long-term debt (Notes 5 and 6) 1,596,912 2,179,641
Accounts payable 1,856,160 2,979,642
Accrued expenses and taxes payable 2,968,120 2,171,409
Due to related parties (Note 10) 6,111,943 292,000
Other liabilities 93,257 93,257
------------------------------------
Total current liabilities 15,266,392 9,355,949
Long-term debt (Notes 5 and 6) 27,318,488 29,818,421
Other liabilities:
Tenants' security deposits payable 1,391,678 1,280,599
Accrued pension (Note 8) 629,120 726,038
------------------------------------
2,020,798 2,006,637
Minority interests 624,795 495,532
------------------------------------
Total liabilities 45,230,473 41,676,539
Leases, commitments and contingencies (Notes 9 and 11) -- --
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 43,070,958 43,347,294
Other comprehensive loss (242,000) (157,000)
------------------------------------
59,004,972 59,366,308
Less treasury stock, at cost--505,750 and
505,270 shares (Note 11) 4,506,926 4,486,766
------------------------------------
Total stockholders' equity 54,498,046 54,879,542
------------------------------------
Total liabilities and stockholders' equity $ 99,728,519 $ 96,556,081
====================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Operations
and Comprehensive (Loss) Income
<TABLE>
<CAPTION>
Year ended June 30,
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales--textiles and seafood $ 38,740,593 $ 28,454,738 $ 25,873,482
Rents and other revenues--real estate and hotel
operations 23,606,539 21,282,828 23,207,992
Other (including interest income of approximately
$1,044,000, $824,000, and $492,000) 2,621,539 1,750,982 979,901
------------------------------------------------------
64,968,671 51,488,548 50,061,375
------------------------------------------------------
Costs and expenses:
Cost of sales--textiles and seafood 36,564,200 26,709,207 23,900,935
Operating costs--real estate and hotel operations 14,052,986 11,433,946 12,329,325
Depreciation and amortization 4,891,862 4,447,629 3,977,670
Interest (Note 5) 3,205,204 2,866,777 2,926,778
Selling, general and administrative 6,335,931 5,613,963 6,832,226
Write-down of property and equipment
(Notes 1 and 11) -- 300,000 250,000
Minority interests' share of loss of subsidiaries (1,070,479) (880,466) (1,116,844)
------------------------------------------------------
63,979,704 50,491,056 49,100,090
------------------------------------------------------
Income before income taxes, gain on sale and equity
in (loss) income of affiliated entities 988,967 997,492 961,285
Equity in (loss) income of affiliated entities
(Note 4) (1,203,710) (1,071,882) 319,932
Gain on sale of real estate held for rental 81,407 -- 12,922,106
------------------------------------------------------
(Loss) income before income taxes (133,336) (74,390) 14,203,323
Income tax expense (Note 7) 143,000 50,000 575,000
------------------------------------------------------
Net (loss) income (276,336) (124,390) 13,628,323
------------------------------------------------------
Other comprehensive (loss) income:
Additional minimum pension obligation (net of
deferred taxes of $56,000 and $105,000) (85,000) (157,000) --
------------------------------------------------------
Comprehensive (loss) income $ (361,336) $ (281,390) $ 13,628,323
======================================================
Per share of common stock (Note 1):
Net (loss) income- basic and diluted ($0.41) ($0.19) $20.29
======================================================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Retained Earnings
<TABLE>
<CAPTION>
Year ended June 30,
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 43,347,294 $ 43,471,684 $ 29,843,361
Net (loss) income for the year (276,336) (124,390) 13,628,323
------------------------------------------------------
Balance, end of year $ 43,070,958 $ 43,347,294 $ 43,471,684
======================================================
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended June 30,
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net (loss) income $ (276,336) $ (124,390) $ 13,628,323
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Gain on sale of real estate held for rental (81,407) -- (12,922,106)
Depreciation and amortization 4,891,862 4,447,629 3,977,670
Write-down of property and equipment -- 300,000 250,000
Deferred income taxes (345,000) (300,000) (992,926)
Equity in loss (income) of affiliated entities 1,203,710 1,071,882 (319,932)
Minority interests' share of loss in subsidiaries (1,070,479) (880,466) (1,116,844)
Changes in operating assets and liabilities:
Accounts, rents and other receivables (2,993,484) (2,158,860) 1,419,994
Inventories (4,021,726) 121,536 (1,913,884)
Prepaid expenses and other assets (40,361) (141,228) 173,826
Accounts payable (1,123,482) 1,181,655 (533,531)
Accrued expenses and other current liabilities 796,711 (754,188) 608,099
Due to related parties 219,943 (996,907) (85,128)
Other liabilities (126,839) (297,360) (532,319)
------------------------------------------------------
Cash (used in) provided by operating activities (2,966,888) 1,469,303 1,641,242
------------------------------------------------------
Investing activities
Purchases of real estate held for rental (1,930,408) (9,633,409) (5,239,516)
Purchases of other property plant and equipment (997,772) (2,332,811) (2,434,634)
Additions to tenant improvements (800,680) (794,672) (2,894,918)
Proceeds from sale of real estate held for rental 5,634,048 -- 16,097,352
Investment in affiliated entities (2,159,066) (4,844,787) (2,077,323)
Distribution in excess of equity in earnings
from affiliated entities -- -- 6,721,672
Payments received on mortgages receivable 52,105 54,564 3,001
Restricted cash 26,179 (440,287) --
Other investing activities 243,547 (4,815) 632,390
------------------------------------------------------
Net cash provided by (used in) investing activities 67,953 (17,996,217) 10,808,024
------------------------------------------------------
</TABLE>
25
<PAGE>
The First Republic Corporation of America and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended June 30,
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Financing activities
Proceeds from mortgages and notes payable to banks $ 8,370,000 $ 21,235,000 $ 13,100,000
Payments on mortgages and notes payable to banks (10,452,662) (11,782,780) (19,047,310)
Proceeds from related parties 8,775,000 -- --
Payments to related parties (3,175,000) -- --
Minority interests' additional paid-in capital 198,357 -- 223,262
Purchases of treasury stock (20,160) (9,360) (67,126)
------------------------------------------------------
Net cash provided by (used in) financing activities 3,695,535 9,442,860 (5,791,174)
------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 796,600 (7,084,054) 6,658,092
Cash and cash equivalents at the beginning of year 1,506,113 8,590,167 1,932,075
------------------------------------------------------
Cash and cash equivalents at the end of year $ 2,302,713 $ 1,506,113 $ 8,590,167
======================================================
Supplemental disclosure
Income taxes paid $ 459,600 $ 968,923 $ 1,000,307
Interest paid $ 3,089,004 $ 2,908,884 $ 2,955,080
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2000
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of The First Republic
Corporation of America and all majority owned or controlled subsidiaries ("FRCA"
or 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 or owned 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,
2000 1999
---------------------------------
Work-in-process and raw materials $ 1,511,915 $ 1,913,784
Finished goods 7,803,809 3,380,214
---------------------------------
$ 9,315,724 $ 5,293,998
=================================
27
<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
Tenant 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. Returns of textiles and seafood are not significant, therefore no
provision has been recorded. 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.
Gain from sales of properties is recognized when the buyer has demonstrated a
commitment to pay through adequate payments and no significant contingencies
remain.
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.
28
<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
Financial Accounting Standards Board Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
("Statement 121"), 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. Statement 121 also addresses the accounting for
long-lived assets to be disposed of. Write-down's of $300,000 and $250,000 were
recorded for Whitlock Combing Company Inc. ("Whitlock") for the year ended June
30, 1999 and 1998, respectively (see Note 11). No write-down was recorded for
the year ended June 30, 2000.
Earnings Per Share
Basic and diluted per share amounts are based on 669,922 (2000), 670,126 (1999)
and 671,518 (1998) weighted average shares of common stock outstanding.
Segments and Related Information
Effective July 1, 1998, the Company adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information ("Statement 131"). Statement 131
superseded Financial Accounting Standards Board Statement No. 14, Financial
Reporting for Segments of a Business Enterprise. Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports.
Statement 131 also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The adoption of Statement
131 did not affect the results of operations or the financial position of the
Company, but did affect the disclosure of segment information (see Note 2).
29
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Derivative Instruments and Hedging Activities
The FASB issued Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133.
The Statement deferred for one year the effective date of FASB Statement No.
133, Accounting for Derivatives Instruments and Hedging Activities. The rule
applies to fiscal years beginning after June 15, 2000. Because of the Company's
minimal use of derivatives, management does not anticipate that the adoption of
the new statement will have a significant effect on earnings or the financial
position of the Company.
Foreign Operations
A subsidiary, together with certain entities in which the subsidiary owns a 38%
interest, is engaged in shrimp farming operations in Ecuador. Financial
statements of such foreign entities are translated using the U.S. dollar as the
functional currency since Ecuador has a hyperinflationary currency. Operations
include exchange gains (included in selling, general and administrative
expenses) of $612,965 (2000), $985,032 (1999) and $501,499 (1998) resulting from
foreign currency transactions and from translation of the foreign entities'
financial statements.
Comprehensive (Loss) Income
In fiscal 1999, the Company adopted Statement of Financial Accounting Standard
No. 130, Reporting Comprehensive Income ("Statement 130"). Statement 130
establishes new rules for reporting and display of comprehensive income and its
components. Statement 130 requires unrealized gains or losses on the Company's
defined benefit plan, which prior to adoption were reported in shareholders'
equity, to be included in other comprehensive (loss) income.
Pensions
In February 1998, the Financial Accounting Standards Board issued Statement 132,
Employers' Disclosures about Pensions and Other Postretirement Benefits
("Statement 132") which amends Statements No. 87, 88, and 106. Statement 132 is
effective for fiscal years beginning after December 15, 1997. The Company
adopted Statement 132 in fiscal 1999. The Statement revises employers'
disclosures about pension and other post
30
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Pensions (continued)
retirement benefit plans. It does not change the measurement or recognition of
those plans.
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
The Company's operations in the industry segments detailed below consist of:
Real Estate: Ownership of loft, office and industrial buildings, shopping
centers, residential property and vacant land located principally in the
states of New York, New Jersey, Florida, North Carolina, Massachusetts,
Rhode Island, Virginia and Pennsylvania.
Hotel: Ownership and operation of a hotel and convention center 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, sales of shrimp from Ecuador (grown in Company
owned ponds or purchased from a 38% owned entity and other third-parties)
and sales of lobster tails, shrimp and other products purchased locally or
imported from various other countries.
Textile: Operations of two yarn spinning plants and a dye house located in
South Carolina and Rhode Island.
The Company and its subsidiaries operate in four segments, as noted above. The
segments are managed and reported separately because of the differences in
products they produce and markets they serve. The accounting policies of the
segments are the same as
31
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Industry Segments and Foreign Operations (continued)
those described in the summary of significant accounting policies. The Company
evaluates performance based on operating income, i.e., results of operations
before certain Corporate items and income taxes. There are no intersegment
sales.
Following is information about the Company's industry segments for each of the
three years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Real estate $ 17,144,909 $ 16,269,235 $ 17,541,502
Hotel 6,518,827 5,262,824 5,550,305
Seafood 29,451,921 17,164,814 10,086,562
Textile 10,989,479 12,100,073 16,558,529
Corporate 863,535 691,602 324,477
------------------------------------------------------
$ 64,968,671 $ 51,488,548 $ 50,061,375
======================================================
Operating profit (loss):
Real estate (a) $ 4,152,961 $ 5,735,400 $ 5,892,293
Hotel 571,369 42,238 589,592
Seafood (f) (1,200,537) (1,309,011) (3,248,239)
Textile (b) (293,400) (676,117) 321,931
------------------------------------------------------
Total operating profit 3,230,393 3,792,510 3,555,577
Corporate expenses (3,433,644) (3,590,326) (3,238,897)
Corporate interest expense (741,796) (776,760) (796,716)
Corporate revenue (e) 863,535 691,602 324,477
Gain on sale of real estate 81,407 -- 12,922,106
Equity in (loss) income of affiliated
entities (c) (1,203,710) (1,071,882) 319,932
Minority interests' share of loss of
subsidiaries 1,070,479 880,466 1,116,844
------------------------------------------------------
(Loss) income before income taxes $ (133,336) $ (74,390) $ 14,203,323
======================================================
</TABLE>
32
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Industry Segments and Foreign Operations (continued)
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Real estate $ 35,646,289 $ 41,004,974 $ 36,104,553
Hotel 5,915,137 6,405,362 3,203,609
Seafood 28,352,641 21,050,906 17,251,584
Textile 9,501,781 10,025,734 11,195,286
Corporate and other (d) 20,312,671 18,069,105 20,210,722
----------------------------------------------------
$ 99,728,519 $ 96,556,081 $ 87,965,754
====================================================
Depreciation and amortization:
Real estate $ 2,286,744 $ 2,055,065 $ 1,977,797
Hotel 832,232 524,928 275,800
Seafood 951,377 900,858 736,009
Textile 769,115 926,431 948,297
Corporate and other 52,394 40,347 39,767
----------------------------------------------------
$ 4,891,862 $ 4,447,629 $ 3,977,670
====================================================
Capital expenditures--net:
Real estate $ 2,308,232 $ 6,803,555 $ 7,426,669
Hotel 422,856 3,624,526 707,765
Seafood 543,748 982,469 1,561,186
Textile 430,167 1,231,342 838,335
Corporate and other 23,857 119,000 35,113
----------------------------------------------------
$ 3,728,860 $ 12,760,892 $ 10,569,068
====================================================
Geographic information:
Revenues
United States $ 63,594,010 $ 48,725,498 $ 44,479,893
Ecuador 1,374,661 2,763,050 5,581,482
----------------------------------------------------
$ 64,968,671 $ 51,488,548 $ 50,061,375
====================================================
Identifiable assets:
United States $ 75,496,519 $ 71,922,081 $ 66,781,754
Ecuador 24,232,000 24,634,000 21,184,000
----------------------------------------------------
$ 99,728,519 $ 96,556,081 $ 87,965,754
====================================================
</TABLE>
33
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Industry Segments and Foreign Operations (continued)
(a) Includes mortgage interest expense of $1,481,190 (2000), $1,395,541
(1999), and $1,572,280 (1998).
(b) Includes losses from Whitlock (see Note 11).
(c) See Note 4.
(d) Consists principally of investments in and advances to affiliated
entities.
(e) Includes interest income of $117,000 (2000), $275,000 (1999), and $196,000
(1998)
(f) Includes interest income of $927,000 (2000), $549,000 (1999), and $296,000
(1998)
3. Mortgages Receivable
The mortgages receivable which were due through June 1, 1999 have all been
repaid by August 1999.
4. Affiliated Entities
The following table summarizes information with respect to the Company's
affiliated entities:
<TABLE>
<CAPTION>
Company's
Company's Investments Equity in Income
and Advances (Loss)
------------------------------------------------------------
Company's
Ownership June 30, Year ended June 30,
Percentage 2000 1999 2000 1999 1998
-----------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Sunscape Associates 50% $ 415 $ 452 $ 35 $ 47 $ 25
Mondragon Companies(2) 38% 13,113 11,947 (1,300) (1,119) (328)
Health Care Entities(1) 49.9% -- -- -- -- 623
Other Various 170 109 61 -- --
----------------------------------------------------------
$ 13,698 $ 12,508 $ (1,204) $ (1,072) $ 320
==========================================================
</TABLE>
(1)-- 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 at June 30, 1997, was being amortized over 40 years. The
Company sold these interests during the year ended June 30, 1998.
(2)-- Advances to Mondragon from the Company were approximately $13,113,000 and
$11,314,000 at June 30, 2000 and 1999, respectively (see Note 10).
34
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Affiliated Entities (continued)
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
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.
Condensed combined financial information of the Mondragon Companies is as
follows:
<TABLE>
<CAPTION>
June 30,
2000 1999
------------------------------------
<S> <C> <C>
Assets
Current assets $ 2,254,000 $ 3,230,000
Property and equipment--net of accumulated
depreciation 11,157,000 10,566,000
Other assets 3,000 111,000
------------------------------------
Total assets $ 13,414,000 $ 13,907,000
====================================
Liabilities
Due to Bluepoints and other affiliates $ 5,017,000 $ 3,756,000
Other current liabilities 375,000 230,000
------------------------------------
Total current liabilities 5,392,000 3,986,000
Long-term debt--Bluepoints 8,928,000 8,808,000
------------------------------------
Total liabilities 14,320,000 12,794,000
Stockholders' equity (906,000) 1,113,000
------------------------------------
Total liabilities and equity $ 13,414,000 $ 13,907,000
====================================
</TABLE>
35
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Affiliated Entities (continued)
Seafood (continued)
Year ended June 30,
2000 1999 1998
----------------------------------------------
Revenues $ 1,575,000 $ 3,027,000 $ 4,038,000
Costs and expenses 4,995,000 5,973,000 4,836,000
----------------------------------------------
Net loss $(3,420,000) $(2,946,000) $ (798,000)
==============================================
5. Long-Term Debt and Credit Facilities
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30,
2000 1999
------------------------------------
<S> <C> <C>
Variable rate mortgage payable due 2000, maturity date
extended to September 2005 (1) and (5) $ 3,355,000 $ 2,685,000
Mortgages payable due 2002-2019 bearing interest
at fixed rates of 7.0% to 8.5% (1), (3), (4), (6), (7),
(8) and (9) 25,553,946 28,988,125
Onondaga County Industrial Development
Agency Bonds (1) and (2) - 300,000
7.0% note to development authority due
November 2000 (1) 6,454 24,937
------------------------------------
28,915,400 31,998,062
Less payments due within one year 1,596,912 2,179,641
------------------------------------
$ 27,318,488 $ 29,818,421
====================================
</TABLE>
(1)-- The net book value of real estate assets pledged as collateral is
approximately $18,600,000 and $28,400,000 at June 30, 2000 and 1999,
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
36
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt and Credit Facilities (continued)
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 was at a variable rate with a maximum of 9.5% per annum. At the
completion of the lease term in December 1999, the property was
transferred to the Company for a nominal sum. This transaction has been
recorded as a purchase of the property.
(3)-- In fiscal 1998, the Company refinanced a mortgage, collateralized by the
Brookhaven Shopping Center in Brookhaven Pennsylvania, which had an
outstanding balance of approximately $1,500,000 for $2,500,000. The new
loan bears interest at 7.8% per annum and provides for monthly payments of
$20,601 including principal and interest commencing February 1, 1998
through December 31, 2007 when the remaining unpaid balance of $1,722,000
will become due. The balance was $2,368,628 and $2,425,581at June 30, 2000
and 1999, respectively.
(4)-- The Company had a $10,000,000 term loan and a $2,000,000 revolving line of
credit with its principal lender, collateralized by a mortgage on the East
Newark Industrial Center. The term loan 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. 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 interest at 7.5% and a $3,000,000
revolving line of credit with an interest rate equal to either (a) LIBOR
plus 2.0% 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 on October 21, 2002 and the revolving line of credit
which was set to expire October 2000, will be extended to October 2001. At
June 30, 2000 and 1999, the term loan balance was $8,073,100 and
$8,431,900, respectively, with a fixed rate of interest of 7.5% and there
was $2,000,000 and $1,000,000, respectively, outstanding under the
revolving line of credit with interest at 8.7% and 7.0%, respectively.
(5)-- On August 31, 1998, the Company obtained a $4,000,000 construction loan
from a bank for its property at 260 Merrimac Street in Newburyport,
Massachusetts.
37
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt and Credit Facilities (continued)
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 $2,685,000 was borrowed, with $1,315,000
available to be borrowed when additional space is rented. An additional
$670,000 was borrowed on August 25, 1999. The construction loan, which
matured on August 31, 2000 has been extended to October 2000, at which
time the loan will be converted to a five year term loan to mature on
September 30, 2005. Interest on the construction loan was at the bank's
prime rate from time to time, or at LIBOR plus 1.75% for one to twelve
month periods, as elected by the Company. Interest on the term loan will
be based upon the five year United States Treasury Bond Rate plus 1.75%.
(6)-- 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 $2,520,000. The new $3,000,000
mortgage calls for monthly payments of $23,711 including principal and
interest, bears interest at 7.25% and matures on September 1, 2018. The
old mortgage had monthly payments of $24,030, bore interest at 9.5% and
was scheduled to mature on May 1, 2002. In fiscal 1999, the Company
incurred a pre-payment penalty of $100,794 which was included in selling
general and administrative expenses in the accompanying consolidated
statements of operations. The balance was $2,881,623 and $2,954,353 at
June 30, 2000 and 1999, respectively.
(7)-- On December 18, 1998, the Company closed a loan with the Overseas Private
Investment Corporation for $5,600,000. Initially, $5,050,000 was borrowed,
with $550,000 remaining to be taken down. The loan is collateralized by a
mortgage on the Waltham Engineering Center, bears interest at 7.3% per
annum and provides for 15 semi-annual payments of principal and interest.
After the repayment of $2,800,000 of loans in Ecuador with interest
ranging from 13% to 51%, the repayment of approximately $1,400,000 to the
Company and $540,000 held in escrow reserve accounts, approximately
$860,000 remained for working capital needs for the Ecuadorian shrimp
operations. The balance was $4,040,000 and $4,713,334 at June 30, 2000 and
1999, respectively.
38
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt and Credit Facilities (continued)
(8)-- On March 30, 1999, the Company refinanced the $2,000,000 balance of a
mortgage loan on the Colonial Bank (formerly known as Jefferson National
Bank) Building in Miami Beach, Florida. The new loan bore interest at
7.65% per annum, payable monthly, and provided for monthly principal
payments of $29,167 commencing May 1, 1999 through December 1, 2004. The
balance was $1,925,000 at June 30, 1999. On May 1, 2000 this building was
sold and the loan was repaid.
(9)-- On May 20, 1999, the Company obtained a $2,500,000 loan, from a bank,
secured by a mortgage on the Shipps Corner Shopping Center, in Virginia
Beach, Virginia, which the Company acquired in November 1998. The self
liquidating loan calls for monthly payments of $19,000, including
principal and interest, bears interest at 7% per annum, and matures in
June 2019. The balance was $2,440,526 and $2,500,000 at June 30, 2000 and
1999, respectively.
Aggregate principal payments on debt outstanding as of June 30, 2000 are as
follows:
Amount
---------------
Year ending June 30:
2001 1,596,912
2002 1,644,570
2003 8,692,006
2004 1,391,466
2005 1,451,003
Thereafter 14,139,443
---------------
$28,915,400
===============
6. Disclosures About Fair Value of Financial Instruments
Financial Accounting Standards Board Statement No. 107 ("Statement 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.
39
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Disclosures About Fair Value of Financial Instruments (continued)
The following methods and assumptions were used by the Company in estimating
fair values for financial instruments at June 30, 2000:
Cash and Cash Equivalents, and Accounts and Rents Receivable: The carrying
amounts of these assets approximate their fair value due to their short
term nature.
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 is estimated using discounted cash
flow analysis based on the Company's current incremental borrowing rate
for similar types of borrowing arrangements. The fair value of the
Company's notes payable and long-term debt is approximately $30,843,000.
7. Income Taxes
At June 30, 2000, the Company has net operating loss carryforwards of
approximately $48,000,000 for income tax purposes that expire in years 2001 and
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 First Republic Corporation of
America but not the taxable income of any other member of the Company's group.
Deferred tax assets and liabilities reflected 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.
40
<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,
2000 1999
------------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 16,300,000 $ 17,000,000
Book basis provisions 1,306,000 905,000
------------------------------------
Total deferred tax assets 17,606,000 17,905,000
Valuation allowance 16,300,000 17,000,000
------------------------------------
Net deferred tax asset $ 1,306,000 $ 905,000
====================================
The components of (loss) income before income taxes are as follow:
For the year ended June 30,
2000 1999 1998
------------------------------------------------------
Domestic $ 1,800,608 $ 1,514,201 $ 15,155,460
Foreign (1,933,944) (1,588,591) (952,137)
------------------------------------------------------
$ (133,336) $ (74,390) $ 14,203,323
======================================================
Significant components of the income tax expense (benefit) are as follows:
For the year ended June 30,
2000 1999 1998
------------------------------------------------------
Current:
Federal $ 40,000 $ 20,000 $ 350,000
State 448,000 330,000 1,218,000
------------------------------------------------------
Total current 488,000 350,000 1,568,000
------------------------------------------------------
Deferred:
Federal (305,000) (267,000) (884,000)
State (40,000) (33,000) (109,000)
------------------------------------------------------
Total deferred (345,000) (300,000) (993,000)
------------------------------------------------------
$ 143,000 $ 50,000 $ 575,000
======================================================
41
<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 computed at the U.S. federal statutory
tax rates to income tax expense follows:
<TABLE>
<CAPTION>
2000 1999 1998
-----------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates $ (45,000) (34.0)% $ (25,000) (34.0)% $ 4,829,000 34.0%
Increases (reductions) resulting from:
Alternative minimum tax 40,000 30.0 20,000 26.9 350,000 2.5
State taxes, net of federal tax benefit 269,000 201.7 196,000 263.5 732,000 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 658,000 493.5 540,000 725.9 324,000 2.3
Minority interest in loss from
domestic operations (145,000) (108.7) (177,000) (237.9) (242,000) (1.7)
Net operating loss carryforwards (668,000) (501.0) (411,000) (552.2) (5,180,000) (36.5)
Other items 34,000 25.5 (93,000) (125.0) (238,000) (1.7)
----------------------------------------------------------------------------
$ 143,000 107.2% $ 50,000 67.2% $ 575,000 4.1%
============================================================================
</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, 2000, 1999 and 1998.
A former subsidiary, 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,
this subsidiary 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.
42
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Benefit Plans (continued)
Since a significant part of this subsidiary'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.
<TABLE>
<CAPTION>
2000 1999
----------------------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 4,745,000 $ 5,143,000
Interest cost 339,000 332,000
Actuarial gain (74,000) (284,000)
Benefit payments (469,000) (446,000)
----------------------------------
Benefits obligation at end of year $ 4,541,000 $ 4,745,000
==================================
Change in plan assets:
Fair value of plan assets at beginning of year $ 4,013,000 $ 4,187,000
Actual return on plan assets 88,000 (108,000)
Employer contributions 280,000 380,000
Benefit payments (469,000) (446,000)
----------------------------------
Fair value of plan assets at end of year $ 3,912,000 $ 4,013,000
==================================
</TABLE>
43
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Benefit Plans (continued)
<TABLE>
<CAPTION>
2000 1999
--------------------------
<S> <C> <C>
Funded status:
Funded status of the plan (underfunded) $(629,000) $(732,000)
Unrecognized net actuarial loss 403,000 262,000
--------------------------
Accrued benefit cost $(226,000) $(470,000)
==========================
Amounts recognized in the statement of financial
position consist of:
Accrued benefit liability $(629,000) $(732,000)
Accumulated other comprehensive loss 403,000 262,000
--------------------------
Net amount recognized $(226,000) $(470,000)
==========================
</TABLE>
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
2000 1999 1998
---------------------------------------
<S> <C> <C> <C>
Interest cost on projected benefit
obligation $ 339,000 $ 332,000 $ 353,000
Expected return on plan assets (315,000) (331,000) (314,000)
Recognized net actuarial gain (loss) 12,000 5,000 (11,000)
---------------------------------------
Total pension expense $ 36,000 $ 6,000 $ 28,000
=======================================
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 8.0% at June 30, 2000 and 7.5% at June 30,
1999. The expected long-term rate of return on plan assets was 8.0% in all three
years.
44
<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 $730,000 at June 30, 2000. 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 $119,000, $126,000 and $126,000 for the years
ended June 30, 2000, 1999 and 1998, 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 $2,200,000, $2,100,000 and $3,100,000 in
the years ended June 30, 2000, 1999 and 1998, 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:
2001 $13,700,000
2002 10,400,000
2003 8,100,000
2004 6,400,000
2005 5,300,000
Thereafter 22,100,000
--------------
$66,000,000
==============
45
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. 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, 2000 and 1999, the minority share of stockholders' deficiency
of Bluepoints amounted to $5,991,065 and $4,989,680, 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)-- Included in the investment balance of $13,113,000 are advances the Company
has made to the Mondragon Companies amounting to $13,113,000 and
$11,314,414 at June 30, 2000 and 1999, 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.
46
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. 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 2000 1999 1998 Ownership
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insurance purchased in participation with the
Rosen Group Properties:
Premiums incurred $ 548,000 $ 292,000 $ 254,000 --%
Administrative fee received 75,000 75,000 75,000 --
Payable at June 30, to Rosen Group
Properties for premiums above 512,000 292,000 84,000 --
Due from Rosen Group Properties -- 150,000 -- --
Home office rent 105,000 104,000 101,000 100
Interest on $640,000 note to the Estate of
A.A. Rosen 51,000 57,000 61,000 --
Interest from the Estate of A.A. Rosen loans -- -- 3,000 --
Note payable to the Estate of A.A. Rosen 640,000 640,000 640,000 --
Due from the Estate of A.A. Rosen -- 468,000 -- --
Due from others 263,000 127,000 20,000 --
Due to the Tranel Group (defined below) 5,600,000 -- -- Various
</TABLE>
See Note 4 for other related party information.
Beginning August 6, 1999 the Company has borrowed funds from a group of entities
(the "Tranel Group"), either owned or controlled by a major stockholder, to
finance Bluepoints expanded importation and sale of lobster tails. The loans
bear interest at 8% per annum and have no fixed repayment terms or maturity
dates.
11. Other Matters
The Company is not presently involved in any material litigation nor, to its
knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business. Management believes the costs, if any, incurred by the Company related
to any of this litigation will not materially affect the financial position,
operating results or liquidity of the Company.
47
<PAGE>
The First Republic Corporation of America and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Other Matters (continued)
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
are being held for sale and recorded at their estimated net realizable value of
$500,000 at June 30, 2000. Write-downs of $300,000 and $250,000 were taken in
1999 and 1998, respectively. No write-down was taken in 2000. Losses incurred to
maintain the property such as real estate taxes and insurance amounted to
approximately $183,000, $161,000 and $137,000 in 2000, 1999 and 1998,
respectively.
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 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,
2000.
During the years ended June 30, 2000, 1999 and 1998, there were 480, 234 and
1,839 shares of stock purchased for treasury at a cost of $20,160, $9,360 and
$67,126, respectively.
12. Subsequent Event
On October 4, 2000 the Company sold its office building on West 39th Street in
New York City for $20,800,000. The Company recognized a gain of approximately
$18,627,000 and received net proceeds of approximately $20,050,000.
48
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
49
<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
Name Age with Registrant Served Since
--------------------------------------------------------------------------
Irving S. Bobrow 86 Director April 1983
Harry Bergman 58 Director October 1991
Treasurer June 1988
Secretary June 1988
Norman A. Halper 81 Director October 1969
President April 1983
Miriam N. Rosen 80 Director December 1995
Jonathan P. Rosen 56 Director February 1972
Vice President September 1978
Chairman of the Board December 1995
William M. Silverman 58 Director December 1981
Robert Nimkoff 39 Director April 1991
Vice President June 1988
Jane G. Weiman 56 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
2000, upon the election and qualification of their successors.
c. Not applicable.
50
<PAGE>
d. Family Relationships
Jonathan P. Rosen is the son of Miriam N. Rosen.
Robert Nimkoff is a cousin 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 1995.
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 a member 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, 2000, 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.
51
<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 6-30-00 $ 298,924 $ 9,934
Chairman 6-30-99 290,360 10,692
6-30-98 271,104 10,239
Norman A. Halper 6-30-00 298,924 9,934
President and Chief Executive Officer 6-30-99 290,360 10,692
6-30-98 271,104 10,239
Robert Nimkoff 6-30-00 135,878 8,487
Vice President 6-30-99 124,397 8,556
6-30-98 104,461 6,639
Harry Bergman 6-30-00 187,673 9,934
Secretary--Treasurer 6-30-99 171,200 10,692
6-30-98 169,710 10,239
Stephen L. Bernstein 6-30-00 223,136 9,934
VP & Corporate Counsel 6-30-99 217,443 10,692
6-30-98 202,826 10,239
</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.
52
<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, 2000. 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. In prior years the Company had compared the performance of the
Company's Common Stock with the Dow Jones Conglomerate Index. That index is no
longer prepared and the Company does not believe it can reasonably identify a
published industry or line of business index with respect to comparable
companies. Accordingly, the Company has substituted for the Dow Jones
Conglomerate Index the S&P SmallCap Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among The First Republic Corporation of America,
S&P SmallCap 600 Index and Dow Jones US Total
Market Index,
Fiscal Year Ending June 30
[LINE GRAPH OMITTED]
--------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------
The First Republic Corporation of America 100 125 107 143 154 186
--------------------------------------------------------------------------------
S&P SmallCap 600 Index 100 126 153 183 179 205
--------------------------------------------------------------------------------
Dow Jones US Total Market Index 100 180 236 304 367 402
--------------------------------------------------------------------------------
53
<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 18, 2000:
Amount and Nature
Title of Name and Address of Beneficial Percent
Class of Beneficial Owner Ownership (1) of Class
------------------------------------------------------------------
Common Mary Nimkoff 94,843 (2) 14.17%
26 Buttonball Lane
Weston, Connecticut
Common Jonathan P. Rosen 227,726 (3) 34.02
40 East 69th St.
New York, New York
Common Lynn M. Silverman 113,350 16.93
911 Park Avenue
New York, New York
Common Jane G. Weiman 113,290 16.92
5630 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.
54
<PAGE>
b. Security Ownership of Management
The following table sets forth, as of September 18, 2000, 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 7,499 (2) 1.12
Norman A. Halper 400 .06
Jonathan P. Rosen 227,726 34.02 500 (3) 4.95%
Miriam N. Rosen 7,677 1.15 500 (3) 4.95
William M. Silverman 200 (4) .03 (4)
Jane G. Weiman 113,290 16.92 500 4.95
All officers and directors
as a group (7 persons) 356,992 53.33 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.
55
<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, chairman of the board 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.
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 $8,900 per month as of June 30, 2000, 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. 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 the Bank of New York. Interest expense for the
current fiscal year was $51,000.
Since August 1999, the Company has borrowed funds from Tranel, Inc. (see
Note 10) to finance its lobster tail operations. As of June 30, 2000 the
principal amount of such loans, which bore interest at 8% and had no fixed
repayment terms or due dates, was $5,600,000. Since August 1999, the
largest amount of outstanding indebtedness to the Tranel, Inc. was
$9,550,000. As of October 4, 2000 all of the indebtedness had been repaid.
The Company paid an aggregate of $522,000 of interest on these loans.
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, 2000, 1999 and 1998, total premiums incurred by the Company
and its subsidiaries under this arrangement amounted to approximately
56
<PAGE>
$548,000, $292,000 and $254,000, respectively. The Company received fees
of $75,000 in fiscal 2000, 1999 and 1998, representing charges to the
group for administrative services performed by Company personnel in
connection with the foregoing. At June 30, 2000, approximately $512,000
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, 2000, 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, 1989 (the "Larfico Indebtedness.") Such
loans bear interest at 1% over the prime rate in effect at The Bank of New
York and are due August 2001. Since July 1, 1999, the largest aggregate
amount of outstanding indebtedness from Larfico to Bluepoints was
$196,667.
In addition, as of June 30, 2000, Mondragon was indebted to the Company
for $13,112,874 of loans made by the Company to Mondragon on various dates
between August 28, 1991 and June 29, 2000 (the "Mondragon Indebtedness").
Such loans bear interest at 1% over the prime rate in effect at the Bank
of New York and have no fixed maturity. Since July 1, 1999, the largest
aggregate amount of outstanding indebtedness from Mondragon to the Company
was $13,112,874. The Estate of A.A. Rosen has guaranteed the repayment of
25% of the Larfico Indebtedness and 56.8% of the Mondragon Indebtedness.
Since July 1, 1999, the largest amount of outstanding indebtedness from
Emporsa and Larfico to Mondragon was $582,000. The balance at June 30,
2000 was $195,000. Such loans bear no interest and have no fixed maturity.
Since July 1, 1999, the largest amount of outstanding indebtedness from
Mondragon to Larfico and Emporsa was $3,591,000, which was the balance at
June 30, 2000. Said indebtedness has no fixed maturity and bears interest
at 7.3%.
As of August 31, 2000, Bluepoints was indebted to the Company for
$39,657,000 of loans made by the Company to Bluepoints at various dates
between November 8,
57
<PAGE>
1985 and August 31, 2000. Such loans bear interest at the rate of 1% over
the prime rate in effect at the Bank of New York and are due on demand.
Since July 1, 1999, the largest aggregate amount of outstanding
indebtedness from Bluepoints to the Company was $39,657,000. 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, 2000,
the amount of the guarantee was $5,991,065.
d. Not applicable.
58
<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......................................19
Consolidated Balance Sheets--June 30, 2000 and 1999
Consolidated Statements of Operations and Comprehensive (Loss)
Income--Years Ended June 30, 2000, 1999 and 1998
Consolidated Statements of Retained Earnings--Years Ended
June 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows--Years Ended
June 30, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
a. 2. Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts.......................60
Schedule III--Real Estate and Accumulated Depreciation...............61
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.............................................65
27. Financial Data Schedule.................................................66
59
<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, 2000:
Allowance for doubtful accounts $ 85,007 $ 12,439 $ 67,446 (a) $ 30,000
======================================== ======================================
Year ended June 30, 1999:
Allowance for doubtful accounts $ 303,813 $ 30,000 $ 248,806 (a) $ 85,007
======================================== ======================================
Year ended June 30, 1998:
Allowance for doubtful accounts $ 240,410 $ 63,403 $ -- $ 303,813
======================================== ======================================
</TABLE>
(a) Amounts charged off and credits issued, net of recoveries on accounts
previously written off.
60
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule III--Real Estate and Accumulated Depreciation
Year ended June 30, 2000
<TABLE>
<CAPTION>
Column A Column B Column C Column D
----------------------------------------------------------------------------------------------------------------
Initial Cost to Cost Capitalized
Company Subsequent to
------------------------------- Acquisition
Buildings ----------------------------
and Related Carrying
Description Encumbrances Land Assets Additions Costs
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
250 W. 39th Street Building, $ 437,559 $ 1,155,129 $ (502,964)
New York, New York--Eighteen
story office building
Waltham Engineering Center,
Waltham, Massachusetts--
Seventeen multi-story
industrial buildings $ 4,040,000 188,573 2,163,945 697,888
Four Points Hotel--
Syracuse, Liverpool, New
York--Hotel operations -- 1,651,923 5,256,675
East Newark, New Jersey--Thirty
multi-story
industrial buildings 8,073,100 605,089 4,068,693 (2,300,579)
Greensboro Plaza,
Greensboro, North Carolina--
Shopping center 3,567,124 379,947 1,696,953 1,210,202
Greensboro South,
Greensboro, North Carolina--
Shopping center 2,182,945 419,739 1,350,376 1,656,334
Nyanza Building,
Woonsocket, Rhode Island--
Four story industrial building 60,000 1,288,139 (842,868)
Richmond Shopping Center,
Richmond, Virginia--
Shopping center 293,814 758,886 217,955
<CAPTION>
Column A Column E Column F Column G
--------------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Carried at Close of Period (a)
--------------------------------------------
Buildings
and Related Accumulated Date of
Description Land Assets Total Depreciation Construction
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
250 W. 39th Street Building, $ 437,559 $ 652,165 $ 1,089,724 $ 172,257
New York, New York--Eighteen
story office building
Waltham Engineering Center,
Waltham, Massachusetts--
Seventeen multi-story
industrial buildings 188,573 2,861,833 3,050,406 693,683
Four Points Hotel--
Syracuse, Liverpool, New
York--Hotel operations -- 6,908,598 6,908,598 2,358,134
East Newark, New Jersey--Thirty
multi-story
industrial buildings 605,089 1,768,114 2,373,203 456,675
Greensboro Plaza,
Greensboro, North Carolina--
Shopping center 379,947 2,907,155 3,287,102 2,036,683
Greensboro South,
Greensboro, North Carolina--
Shopping center 706,906 2,719,543 3,426,449 1,660,426
Nyanza Building,
Woonsocket, Rhode Island--
Four story industrial building 60,000 445,271 505,271 59,732
Richmond Shopping Center,
Richmond, Virginia--
Shopping center 360,507 910,148 1,270,655 744,503
<CAPTION>
Column A Column H Column I
------------------------------------------------------------------
Life on Which
Depreciation in
Latest Income
Date Statements
Description Acquired is Computed
------------------------------------------------------------------
<S> <C> <C>
250 W. 39th Street Building, 5/19/67 5-15 years
New York, New York--Eighteen
story office building
Waltham Engineering Center,
Waltham, Massachusetts--
Seventeen multi-story
industrial buildings 7/01/62 10-20 years
Four Points Hotel--
Syracuse, Liverpool, New
York--Hotel operations 3/17/69 5-15 years
East Newark, New Jersey--Thirty
multi-story
industrial buildings 3/11/63 21-1/3 years
Greensboro Plaza,
Greensboro, North Carolina--
Shopping center 12/01/74 21-1/3 years
Greensboro South,
Greensboro, North Carolina--
Shopping center 12/01/74 21-1/3 years
Nyanza Building,
Woonsocket, Rhode Island--
Four story industrial building 11/01/68 10-20 years
Richmond Shopping Center,
Richmond, Virginia--
Shopping center 3/15/76 25 years
</TABLE>
61
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule III--Real Estate and Accumulated Depreciation (continued)
<TABLE>
<CAPTION>
Column A Column B Column C Column D
---------------------------------------------------------------------------------------------------------------------
Initial Cost to Cost Capitalized
Company Subsequent to
------------------------------- Acquisition
Buildings ----------------------------
and Related Carrying
Description Encumbrances Land Assets Additions Costs
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Republic Office Park,
Liverpool, New York--
Two, two-story office buildings $ 351,600 $4,124,526 $1,190,599
Virginia Beach Shopping Center,
Virginia Beach, Virginia--
Shopping center $ 2,881,623 250,241 772,113 452,979
The First Republic Building Corp.,
Liverpool, New York--
Motor hotel 413,779 5,681,562
Brookhaven Shopping Center,
Brookhaven, Pennsylvania--
Shopping Center 2,368,628 521,798 3,632,019 (527,644)
Virginia Beach Shopping Center--
Virginia Beach, Virginia 2,440,526 856,250 2,568,750
Merrimac Street,
Newburyport, Massachusetts--
Three story office building &
new construction at
222 Merrimac St. (b) 3,355,000 195,213 377,317 6,118,836
Melbourne, Florida,
Vacant land 1,439,714 3,150
--------------------------------------------------------------------
Totals $ 28,908,946(c) $ 6,413,316 $31,290,331 $12,630,563
====================================================================
<CAPTION>
Column A Column E Column F Column G
----------------------------------------------------------------------------------------------------------------------
Gross Amount at Which
Carried at Close of Period (a)
--------------------------------------------
Buildings
and Related Accumulated Date of
Description Land Assets Total Depreciation Construction
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Republic Office Park,
Liverpool, New York--
Two, two-story office buildings $ 351,600 $5,315,125 $5,666,725 $1,692,475
Virginia Beach Shopping Center,
Virginia Beach, Virginia--
Shopping center 397,338 1,077,995 1,475,333 753,846
The First Republic Building Corp.,
Liverpool, New York--
Motor hotel 413,779 5,681,562 6,095,341 5,681,562
Brookhaven Shopping Center,
Brookhaven, Pennsylvania--
Shopping Center 149,456 3,476,717 3,626,173 2,570,482
Virginia Beach Shopping Center--
Virginia Beach, Virginia 856,250 2,568,750 3,425,000 122,322
Merrimac Street,
Newburyport, Massachusetts--
Three story office building &
new construction at
222 Merrimac St. (b) 236,713 6,454,653 6,691,366 402,516
Melbourne, Florida,
Vacant land 1,442,864 1,442,864
----------------------------------------------------------------
Totals $ 6,586,581 $43,747,629 $50,334,210 $19,405,296
================================================================
<CAPTION>
Column A Column H Column I
----------------------------------------------------------------
Life on Which
Depreciation in
Latest Income
Date Statements
Description Acquired is Computed
----------------------------------------------------------------
<S> <C> <C>
First Republic Office Park,
Liverpool, New York--
Two, two-story office buildings 10/01/85 5-40 years
Virginia Beach Shopping Center,
Virginia Beach, Virginia--
Shopping center 3/30/76 25-31.5 years
The First Republic Building Corp.,
Liverpool, New York--
Motor hotel 9/21/62 10-25 years
Brookhaven Shopping Center,
Brookhaven, Pennsylvania--
Shopping Center 12/16/76 5-33 years
Virginia Beach Shopping Center--
Virginia Beach, Virginia 11/17/98 31.5 years
Merrimac Street,
Newburyport, Massachusetts--
Three story office building &
new construction at
222 Merrimac St. (b) 10/25/87 10-25 years
Melbourne, Florida,
Vacant land
Totals
</TABLE>
(a) Cost for Federal income tax purposes approximates amounts 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) Excludes $6,454 of mortgages on real estate used in the textile
operations.
62
<PAGE>
The First Republic Corporation of America and Subsidiaries
Schedule III--Real Estate and Accumulated Depreciation (continued)
<TABLE>
<CAPTION>
Year ended June 30,
--------------------------------------------------------------
1998 1999
--------------------------------------------------------------
Real Estate Accumulated Real Estate Accumulated
Owned Depreciation Owned 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 $51,135,193 $24,553,722 $50,748,387 $22,315,975
Additions 5,239,516 1,230,651 9,633,409 1,546,200
Deductions:
Write-offs of fully depreciated assets (229,445) (229,445) (4,152,986) (4,152,986)
Sale of assets (5,396,877) (3,238,953) -- --
--------------------------------------------------------------
Balance, end of year $50,748,387 $22,315,975 $56,228,810 $19,709,189
==============================================================
<CAPTION>
Year ended June 30,
------------------------------
2000
------------------------------
Real Estate Accumulated
Owned Depreciation
------------------------------
<S> <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 $56,228,810 $19,709,189
Additions 1,930,408 1,968,474
Deductions:
Write-offs of fully depreciated assets (137,584) (137,584)
Sale of assets (7,687,424) (2,134,783)
------------------------------
Balance, end of year $50,334,210 $19,405,296
==============================
</TABLE>
Note: Includes assets used in the real estate and hotel operations.
63
<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.
/s/ Harry Bergman Date October 12, 2000
---------------------------------------------- ------------------------
Harry Bergman, Director
/s/ Irving S. Bobrow Date October 12, 2000
---------------------------------------------- ------------------------
Irving S. Bobrow, Director
/s/ Norman A. Halper Date October 12, 2000
---------------------------------------------- ------------------------
Norman A. Halper, Director
/s/ Robert Nimkoff Date October 12, 2000
---------------------------------------------- ------------------------
Robert Nimkoff, Director
/s/ Miriam N. Rosen Date October 12, 2000
---------------------------------------------- ------------------------
Miriam N. Rosen, Director
/s/ Jonathan P. Rosen Date October 12, 2000
---------------------------------------------- ------------------------
Jonathan P. Rosen, Director
64
