<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .................. to .....................
Commission file number 1-7210
REPUBLIC GROUP INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-1155922
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
811 East 30th Avenue, Hutchinson, Kansas 67502-4341
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Post Office Box 1307, Hutchinson, Kansas 67504-1307
---------------------------------------- ----------
(Mailing Address) (Zip code)
316-727-2700
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the 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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
On January 31, 1998, there were 11,711,414 shares of the registrant's Common
Stock, $1.00 par value outstanding.
<PAGE> 2
REPUBLIC GROUP INCORPORATED
FORM 10-Q
Quarterly Report
For The Three Months And Six Months Ended December 31, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Reference is made to pages 2 through 7 hereof which set forth
certain consolidated financial statements of Registrant in
accordance with Part I of Form 10-Q.
The consolidated financial statements include the accounts of
Republic Group Incorporated and is wholly owned subsidiaries
(collectively referred to as the "Company").
<PAGE> 3
REPUBLIC GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended December 31, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Gross sales ............................... $ 37,430,000 $ 36,286,000
Less freight and discounts ................ 5,001,000 5,317,000
------------ ------------
Net sales ................................. 32,429,000 30,969,000
Costs and expenses:
Cost of sales ........................ 22,054,000 19,239,000
Selling and administrative expenses .. 4,022,000 3,809,000
------------ ------------
26,076,000 23,048,000
------------ ------------
Operating profit .......................... 6,353,000 7,921,000
Other income (expense), net ............... 44,000 (100,000)
------------ ------------
Income before income taxes ................ 6,397,000 7,821,000
Provision for income taxes ................ 2,430,000 2,892,000
------------ ------------
NET INCOME ................................ $ 3,967,000 $ 4,929,000
============ ============
Basic earnings per share .................. $ 0.34 $ 0.42
============ ============
Basic weighted average shares outstanding.. 11,697,000 11,685,000
============ ============
Diluted earnings per share ................ $ 0.34 $ 0.42
============ ============
Diluted weighted average shares
outstanding........................... 11,803,000 11,782,000
============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 4
REPUBLIC GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended December 31, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Gross sales ............................... $ 74,432,000 $ 70,166,000
Less freight and discounts ................ 10,114,000 10,193,000
------------ ------------
Net sales ................................. 64,318,000 59,973,000
------------ ------------
Costs and expenses:
Cost of sales ........................ 43,437,000 36,850,000
Selling and administrative expenses .. 7,642,000 6,958,000
------------ ------------
51,079,000 43,808,000
------------ ------------
Operating profit .......................... 13,239,000 16,165,000
Other income (expense), net ............... 135,000 (429,000)
------------ ------------
Income before income taxes ................ 13,374,000 15,736,000
Provision for income taxes ................ 5,081,000 5,788,000
------------ ------------
NET INCOME ................................ $ 8,293,000 $ 9,948,000
============ ============
Basic earnings per share .................. $ 0.71 $ 0.85
============ ============
Basic weighted average shares outstanding.. 11,691,000 11,678,000
============ ============
Diluted earnings per share ................ $ 0.70 $ 0.85
============ ============
Diluted weighted average shares
outstanding........................... 11,798,000 11,764,000
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 5
REPUBLIC GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and June 30, 1997
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
----------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 1,534,000 $ 1,436,000
Investments and marketable securities, at
market...................................... 1,045,000 650,000
Accounts receivable, net ....................... 13,452,000 13,893,000
Income tax refunds receivable .................. 515,000 494,000
Inventories:
Finished goods ............................. 2,289,000 2,246,000
Raw materials and supplies ................. 5,830,000 5,095,000
------------- -------------
8,119,000 7,341,000
Prepaid expenses and other ..................... 470,000 660,000
Deferred income taxes .......................... 576,000 576,000
------------- -------------
TOTAL CURRENT ASSETS ....................... 25,711,000 25,050,000
Property, plant and equipment, at cost .............. 129,946,000 121,460,000
Less accumulated depreciation, amortization
and depletion .............................. 50,488,000 46,985,000
------------- -------------
79,458,000 74,475,000
Other assets ........................................ 879,000 875,000
------------- -------------
TOTAL ASSETS ........................................ $ 106,048,000 $ 100,400,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................... $ 6,350,000 $ 7,534,000
Accrued payroll and employee benefits .......... 3,043,000 2,986,000
Income taxes payable ........................... -- 203,000
Other current liabilities ...................... 1,463,000 1,388,000
------------- -------------
TOTAL CURRENT LIABILITIES .................. 10,856,000 12,111,000
Deferred income taxes ............................... 10,379,000 9,838,000
Other long-term liabilities ......................... 607,000 606,000
Stockholders' equity:
Common stock, $1 par value ..................... 11,740,000 11,716,000
Additional paid-in capital ..................... 27,943,000 27,827,000
Retained earnings .............................. 45,177,000 38,995,000
Less: Treasury stock, at cost, 31,000 shares .. (654,000) (693,000)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY ................. 84,206,000 77,845,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 106,048,000 $ 100,400,000
============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 6
REPUBLIC GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 1997 and 1996 (Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 8,293,000 $ 9,948,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization and depletion ........ 3,685,000 3,372,000
Deferred income taxes ........................... 541,000 1,036,000
Loss on sale of assets .......................... 25,000 12,000
Changes in current assets and liabilities:
Accounts receivable .................... 441,000 (997,000)
Income tax refunds receivable .......... (21,000) 317,000
Inventories ............................ (778,000) (100,000)
Prepaid expenses ....................... 190,000 167,000
Accounts payable and accrued
liabilities.......................... (1,052,000) 789,000
Income taxes payable ................... (203,000) 107,000
Other assets and liabilities .................... (2,000) (134,000)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........... 11,119,000 14,517,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment .......... (8,710,000) (3,550,000)
Proceeds from sale of property, plant and equipment . 17,000 39,000
Purchases of investments ............................ (6,865,000) (14,890,000)
Proceeds from sale of investments ................... 6,470,000 7,905,000
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES ............... (9,088,000) (10,496,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ...................................... (2,105,000) (1,912,000)
Reduction of long-term debt ......................... -- (1,670,000)
Issuance of common treasury stock ................... 31,000 --
Proceeds from exercised stock options ............... 141,000 188,000
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES ............... (1,933,000) (3,394,000)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................ 98,000 627,000
Cash and cash equivalents at beginning of year ........... 1,436,000 2,243,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............... $ 1,534,000 $ 2,870,000
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 7
REPUBLIC GROUP INCORPORATED
Notes to Consolidated Financial Statements
December 31, 1997 and 1996 (Unaudited)
(1) In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements reflect all adjustments, of a normal
recurring nature, to fairly present the Company's financial position as of
December 31, 1997, and the results of operations and cash flows for the
periods ended December 31, 1997 and 1996. The operating results for the
interim periods are not necessarily indicative of the results to be
expected for a full year. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K as of June 30, 1997.
(2) Effective October 1, 1997 the Company adopted SFAS No. 128, "Earnings Per
Share".
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share are computed by dividing net income by the sum
of the weighted average number of shares and the number of equivalent
shares assumed outstanding under the Company's stock-based compensations
plans. Diluted earnings per share are computed as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
- ------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
- ------------------------------------------------------- -------------------------------------
(in thousands) (in thousands)
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share $3,967 11,697 $ .34 $4,929 11,685 $ .42
Effects of dilutive
securities-options -- 106 -- 97
-------------------------------- -------------------------------------
Diluted earnings
per share $3,967 11,803 $ .34 $4,929 11,782 $ .42
- ------------------------------------------------------- -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended
- -----------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
- ------------------------------------------------------- ------------------------------------
(in thousands) (in thousands)
Income Shares Per-Share Income Shares Per-Share
(Numerator)(Denominator) Amount (Numerator) (Denominator) Amount
- ------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share $8,293 11,691 $ .71 $9,948 11,678 $ .85
Effects of dilutive
securities-options -- 107 -- 86
-------------------------------- ------------------------------------
Diluted earnings
per share $8,293 11,798 $ .70 $9,948 11,764 $ .85
- ------------------------------------------------------- ------------------------------------
</TABLE>
All periods prior to October 1, 1997 have been restated to conform with the
requirements of SFAS No. 128. However, there was no impact on basic or
diluted earnings per share for the three months and six months ended
December 31, 1996.
Options to purchase 10,541 shares of common stock at the price of $20.763
were outstanding for the three months ending and six months ending December
31, 1997. Options to purchase 110,550 shares of common stock at prices
ranging from $15.228 to $16.75 were outstanding for the three months ending
and six months ending December 31, 1996. These shares were not included in
the diluted earnings per share because the options exercise price was
greater than the average market price of the common shares for the above
periods.
6
<PAGE> 8
(3) Other Commitments and Contingent Liabilities: In connection with
its preparations for a warehouse addition to its paperboard mill located
in Commerce City, Colorado, a suburb of Denver, the Company discovered and
has been investigating the presence of subsurface petroleum hydrocarbons.
The Company retained an environmental consultant who concluded that fuel
oil, jet fuel, and gasoline additives had migrated in the subsurface of the
Company's property from an adjacent property. The Company has conducted
its own investigations, and the adjacent property owner has conducted its
own investigations. Additionally, the Company and the adjacent property
owner have jointly sponsored investigations. Discussions between the
parties continue. The Company has completed the construction of the
warehouse addition under approval of the Colorado Department of Health. At
this time, the Company has not ascertained the future liability, if any, of
the above matter.
On October 17, 1997, the West Virginia Division of Environmental Protection
("DEP") filed a complaint against Republic Paperboard Company of West
Virginia (the "West Virginia Subsidiary") in the Circuit Court of Jefferson
County, West Virginia. The complaint alleges that the West Virginia
Subsidiary has violated and continues to violate a previous order entered
into between the West Virginia Subsidiary and DEP on January 17, 1995 and
further alleges that the West Virginia Subsidiary has violated and
continues to violate certain provisions of its wastewater discharge permit.
The West Virginia Subsidiary discharges treated process wastewater into a
creek running through its Halltown, West Virginia facility (the "Facility")
pursuant to a permit issued to the West Virginia Subsidiary by DEP. The
permit requires that the quality of the water that may be discharged into
the creek under the permit comply with certain effluent limitations. The
complaint alleges that the West Virginia Subsidiary has violated this
permit by discharging wastewater into the creek that contained effluents in
excess of the permit limitations. The complaint alleges 33 violations over
a time period from October 1995 to March 1997. The complaint also alleges
that the earlier administrative order has been violated because of the
failure of the West Virginia Subsidiary to pay a stipulated penalty of
$1,000 for two alleged violations of the permit that occurred between
January 1995 and October 1995. DEP is seeking by virtue of the complaint
to require the West Virginia Subsidiary to enter into a consent agreement
that sets forth a compliance schedule for correcting the alleged
deficiencies in the wastewater treatment facilities of the West Virginia
Subsidiary that have led to the alleged effluent exceedances. DEP is also
requesting a civil monetary penalty of an unspecified amount but which,
according to the complaint, may not exceed $10,000 per day for each of the
alleged violations. DEP is also seeking to recover all of its costs of
court including attorneys fees. The West Virginia Subsidiary has responded
in a timely manner to the allegations of the complaint. At this time, the
Company has not ascertained the future liability, if any, of the above
matter.
(4) Reclassification: Certain prior year balances have been reclassified to
conform with current year presentation.
(5) Subsequent Event: On January 27, 1998, the Board of Directors of the
Company declared a quarterly cash dividend of $.09 per share of common
stock to be paid on March 16, 1998 to stockholders of record on February
27, 1998. Dividend payments will total approximately $1,054,000.
(6) Income Taxes: The provisions for income taxes are based on estimated
annual effective tax rates, which differ from the federal statutory rates
principally due to state income taxes and certain non-deductible expenses.
These estimates are updated quarterly.
(7) All references to share amounts, per share amounts and stock prices reflect
a 10% stock dividend distributed in March 1997.
7
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Quarters ended December 31, 1997 and 1996. Consolidated net income for the
second quarter ended December 31, 1997 was $3,967,000 and diluted earnings per
share was $.34 on net sales of $32,429,000. This compares with consolidated
net income of $4,929,000 and diluted earnings per share of $.42 on net sales of
$30,969,000 for the same quarter one year ago.
Consolidated net sales increased 5% in the December 1997 quarter when
compared to the December 1996 quarter. The increase in consolidated net sales
during the quarter can be attributed to the continued strong demand for the
Company's gypsum wallboard products. The gypsum wallboard division experienced
a 2% increase in shipments and a 9% increase in net selling prices.
Consolidated net income was adversely affected in the December quarter by
reduced operating margins at the Company's recycled paperboard operations. The
primary factors which negatively affected the operating margins at the
Company's recycled paperboard mills and for the Company in total were a
significant increase in utility costs (mainly natural gas spot prices), ten
days of unscheduled downtime taken for boiler maintenance at the Hutchinson,
Kansas recycled paperboard mill and a 21% increase in the cost of raw
materials, (principally reclaimed paper fiber). Recently, the Company has seen
a significant downward movement in natural gas spot prices. The reduction in
natural gas prices should have a positive influence on the March 1998 quarterly
results.
Six Months Ended December 31, 1997 and 1996. Consolidated net income for
the six months ended December 31, 1997 was $8,293,000 and diluted earnings per
share was $.70 on net sales of $64,318,000. This compares with consolidated
net income of $9,948,000 and diluted earnings per share of $.85 on net sales of
$59,973,000 for the same period one year ago.
Consolidated net sales increased 7% for the six months ended December 31,
1997 when compared to the same period one year ago. The increase in
consolidated net sales was primarily attributable to a 10% increase in net
selling prices of gypsum wallboard and a 1% increase in shipments for both the
gypsum wallboard and recycled paperboard divisions. Consolidated operating
profits decreased 18% for the period when compared with the prior year.
Contributing to the operating profit decline were essentially those same
factors which affected the quarter's decline. These include a 33% increase in
raw material costs, again principally reclaimed paper fiber, as well as a 13%
increase in utility costs for the recycled paperboard division. Additionally,
the Company's recycled paperboard division experienced a 3% decrease in net
selling prices during the period when compared to last year.
Environmental Matters
On October 17, 1997, the West Virginia Division of Environmental Protection
("DEP") filed a complaint against Republic Paperboard Company of West Virginia
(the "West Virginia Subsidiary") in the Circuit Court of Jefferson County, West
Virginia. The complaint alleges that the West Virginia Subsidiary has violated
and continues to violate a previous order entered into between the West
Virginia Subsidiary and DEP on January 17, 1995 and further alleges that the
West Virginia Subsidiary has violated and continues to violate certain
provisions of its wastewater discharge permit. The West Virginia Subsidiary
discharges treated process wastewater into a creek running through its
Halltown, West Virginia facility (the "Facility") pursuant to a permit issued
to the West Virginia Subsidiary by DEP. The permit requires that the quality
of the water that may be discharged into the creek under the permit comply with
certain effluent limitations. The complaint alleges that the West Virginia
Subsidiary has violated this permit by discharging wastewater into the creek
that contained effluents in excess of the permit limitations. The complaint
alleges 33 violations over a time period from October 1995 to March 1997. The
complaint also
8
<PAGE> 10
alleges that the earlier administrative order has been violated because of the
failure of the West Virginia Subsidiary to pay a stipulated penalty of $1,000
for two alleged violations of the permit that occurred between January 1995 and
October 1995. DEP is seeking by virtue of the complaint to require the West
Virginia Subsidiary to enter into a consent agreement that sets forth a
compliance schedule for correcting the alleged deficiencies in the wastewater
treatment facilities of the West Virginia Subsidiary that have led to the
alleged effluent exceedances. DEP is also requesting a civil monetary penalty
of an unspecified amount but which, according to the complaint, may not exceed
$10,000 per day for each of the alleged violations. DEP is also seeking to
recover all of its costs of court including attorneys fees. The West Virginia
Subsidiary has responded in a timely manner to the allegations of the
complaint. At this time, the Company has not ascertained the future liability,
if any, of the above matter.
In connection with the Company's preparation for a warehouse addition to
its paperboard mill located in Commerce City, Colorado, a suburb of Denver, the
Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations, and the adjacent property owner has conducted
its own investigations. Additionally, the Company and the adjacent owner have
jointly sponsored investigations. Discussions between the parties continue. The
Company has completed the construction of the warehouse addition under approval
of the Colorado Department of Health. At this time, the Company has not
ascertained the future liability, if any, of the above matter.
Liquidity and Capital Resources
The following is a summary of certain financial statistics related to the
liquidity of the Company at December 31, 1997, and at June 30, 1997.
December 31, 1997 June 30, 1997
----------------- -------------
Cash, cash equivalents and investments $ 2,579,000 $ 2,086,000
Working capital $ 14,855,000 $ 12,939,000
Ratio of current assets to current liabilities 2.4:1 2.1:1
On June 30, 1995, the Company purchased substantially all the assets of
Halltown Paperboard Company, Halltown, West Virginia and financed the
acquisition by securing $28.0 million in long-term bank financing, which was
scheduled to mature in the year 2002. However, all interest-bearing debt was
repaid during June 1997. On June 30, 1995, the Company entered into a $7.0
million revolving line of credit. Through December 31, 1997, no amounts were
borrowed against the credit facility which expires June 30, 1998. Outstanding
principal amounts on the revolving credit facility bear interest at a variable
rate equal to (i) the London Interbank Offered Rate, plus an agreed margin
(ranging from 50 to 150 points), which is to be established annually based upon
the Company's coverage of fixed charges or (ii) the bank's corporate prime
rate, less 0.75%. Under the revolving credit facility, the Company is required
to adhere to several financial covenants some of which involve working capital,
current ratio, net worth and fixed charge coverage minimums. The Company plans
to increase its revolving line of credit limit primarily due to the ongoing
expansion at the Company's wallboard production facilities. This project will
double the productive capacity of the facility at an estimated cost of
$26,000,000. Management believes that cash and investments, internally
generated funds, supplemented as needed by advances under a revolving credit
facility, will be sufficient to meet the Company's short-term working capital
requirements.
The Board of Directors of the Company approved budgeted capital
expenditures of $8.0 million, not including the expansion project at the Duke,
Oklahoma wallboard facility, for fiscal 1998. There have been approximately
$3.3 million in fixed asset additions, not including the Duke, Oklahoma
facility,
9
<PAGE> 11
through December 31, 1997. This amount includes some capital projects
carried over from fiscal 1997. Cash provided by operations, existing cash
balances and the Company's line of credit facility should be sufficient to fund
all planned capital expenditures.
On January 27, 1998, the Board of Directors of the Company declared a
quarterly cash dividend of $.09 per share of common stock to be paid on March
16, 1998 to stockholders of record on February 27, 1998. Dividend payments
will total approximately $1,054,000.
Forward-Looking Statements
Certain matters discussed in this Securities and Exchange Commission Report
on Form 10-Q may constitute forward- looking statements within the meaning of
the federal securities laws. These forward-looking statements are based on
current expectations and entail various risks and uncertainties that could
cause actual results to differ materially from those contemplated by the
forward-looking statements due to a number of factors, including general
economic conditions, competition, market acceptance of selling price increases,
raw material costs, facility fuel costs and other risks detailed from time to
time in the Company's filings with the Securities and Exchange Commission,
including its annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K.
10
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 17, 1997, the West Virginia Division of Environmental
Protection ("DEP") filed a complaint against Republic Paperboard
Company of West Virginia (the "West Virginia Subsidiary") in the
Circuit Court of Jefferson County, West Virginia. The complaint
alleges that the West Virginia Subsidiary has violated and continues
to violate a previous order entered into between the West Virginia
Subsidiary and DEP on January 17, 1995 and further alleges that the
West Virginia Subsidiary has violated and continues to violate certain
provisions of its wastewater discharge permit. The West Virginia
Subsidiary discharges treated process wastewater into a creek running
through its Halltown, West Virginia facility (the "Facility") pursuant
to a permit issued to the West Virginia Subsidiary by DEP. The permit
requires that the quality of the water that may be discharged into the
creek under the permit comply with certain effluent limitations. The
complaint alleges that the West Virginia Subsidiary has violated this
permit by discharging wastewater into the creek that contained
effluents in excess of the permit limitations. The complaint alleges
33 violations over a time period from October 1995 to March 1997. The
complaint also alleges that the earlier administrative order has been
violated because of the failure of the West Virginia Subsidiary to pay
a stipulated penalty of $1,000 for two alleged violations of the
permit that occurred between January 1995 and October 1995. DEP is
seeking by virtue of the complaint to require the West Virginia
Subsidiary to enter into a consent agreement that sets forth a
compliance schedule for correcting the alleged deficiencies in the
wastewater treatment facilities of the West Virginia Subsidiary that
have led to the alleged effluent exceedances. DEP is also requesting
a civil monetary penalty of an unspecified amount but which, according
to the complaint, may not exceed $10,000 per day for each of the
alleged violations. DEP is also seeking to recover all of its costs
of court including attorneys fees. The West Virginia Subsidiary has
responded in a timely manner to the allegations of the complaint. At
this time, the Company has not ascertained the future liability, if
any, of the above matter.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Information regarding the submission of matters to a vote of security
holders is set forth in Item 4 of Part II of the Company's previously
filed Securities and Exchange Commission Report on 10-Q for the
quarterly period ended September 30, 1997 and is incorporated herein
by reference.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Article 5 of Regulation S-X-Financial Data Schedule.
(b) Reports on Form 8-K.
None.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REPUBLIC GROUP INCORPORATED
February 12, 1998 /s/ Doyle R. Ramsey
-------------------
Doyle R. Ramsey
Vice President and Chief
Financial Officer
February 12, 1998 /s/ Larry F. Huser
-------------------
Larry F. Huser
Controller and Principal
Accounting Officer
12
<PAGE> 14
INDEX TO EXHIBITS
Exhibit Description
- --------- -----------
27 Article 5 of Regulation S-X-Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,534,000
<SECURITIES> 1,045,000
<RECEIVABLES> 14,206,000
<ALLOWANCES> 754,000
<INVENTORY> 8,119,000
<CURRENT-ASSETS> 25,711,000
<PP&E> 129,946,000
<DEPRECIATION> 50,488,000
<TOTAL-ASSETS> 106,048,000
<CURRENT-LIABILITIES> 10,856,000
<BONDS> 0
0
0
<COMMON> 11,740,000
<OTHER-SE> 72,466,000
<TOTAL-LIABILITY-AND-EQUITY> 106,048,000
<SALES> 37,430,000
<TOTAL-REVENUES> 37,430,000
<CGS> 22,054,000
<TOTAL-COSTS> 22,054,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,397,000
<INCOME-TAX> 2,430,000
<INCOME-CONTINUING> 3,967,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,967,000
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
