Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 0R 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2003 Commission File Number 0-1437
- --------------------------------------------------------------------------------
THE FIRST REPUBLIC CORPORATION OF AMERICA
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-1938454
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 Fifth Avenue, New York, NY 10001
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 279-6100
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report:
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934).
Yes No X
----- -----
As of November 12, 2003, there were 666,616 shares of common stock outstanding.
PART I. FINANCIAL INFORMATION
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
2003 2003
------------- -------------
(UNAUDITED) (SEE NOTE
BELOW)
ASSETS
Current Assets
Cash and Cash Equivalents $ 1,664,080 $ 2,178,558
Accounts Receivable, net 5,150,172 4,824,303
Inventories (Note 2) 6,795,003 7,489,233
Other Current Assets 8,284,184 7,216,028
------------- -------------
Total Current Assets 21,893,439 21,708,122
------------- -------------
Property, Plant and Equipment 75,141,395 74,582,041
Less: Accumulated Depreciation- 35,470,883 34,958,205
------------- -------------
Net Property, Plant and Equipment 39,670,512 39,623,836
------------- -------------
Investment in and Advances to Affiliated Entities 18,238,141 18,462,166
Other Assets 20,682,492 20,579,552
------------- -------------
TOTAL ASSETS $ 100,484,584 $ 100,373,676
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities $ 12,890,076 $ 11,880,431
Long Term Debt 22,106,308 22,427,800
Other Liabilities 2,825,251 2,953,074
------------- -------------
TOTAL LIABILITIES $ 37,821,635 $ 37,261,305
------------- -------------
Stockholders' Equity:
Common Stock 1,175,261 1,175,261
Accumulated Other Comprehensive Loss (Note 5) (1,287,386) (1,354,000)
Other Stockholders' Equity 62,775,074 63,291,110
------------- -------------
Total Stockholders' Equity 62,662,949 63,112,371
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 100,484,584 $ 100,373,676
============= =============
NOTE: The balance sheet at June 30, 2003 has been derived from the audited
financial statements at that date and condensed.
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
2003 2002
---- ----
REVENUES
SALES-TEXTILE AND SEAFOOD $ 5,138,748 $ 6,955,792
REAL ESTATE AND HOTEL OPERATIONS 4,872,067 5,386,526
OTHER 478,153 418,726
------------ ------------
TOTAL REVENUES 10,488,968 12,761,044
------------ ------------
EXPENSES
COST OF SALES - TEXTILE AND SEAFOOD 4,720,589 7,058,110
OPERATING-REAL ESTATE AND HOTEL 2,304,459 2,608,869
SELLING, GENERAL & ADMINISTRATIVE 1,739,078 1,738,185
DEPRECIATION AND AMORTIZATION 907,750 935,325
REAL ESTATE TAXES 465,230 447,561
INTEREST 499,993 506,072
MINORITY INTERESTS' SHARE OF LOSS OF SUBSIDIARIES (399,186) (489,469)
------------ ------------
TOTAL EXPENSES 10,237,913 12,804,653
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EQUITY IN LOSS OF AFFILIATED ENTITIES 251,055 (43,609)
EQUITY IN LOSS OF AFFILIATED ENTITIES (514,890) (252,668)
INCOME TAXES - NOTE 3 (240,000) (100,000)
------------ ------------
NET LOSS $ (503,835) $ (396,277)
============ ============
LOSS PER SHARE:
NET LOSS - BASIC AND DILUTED ($0.76) ($0.59)
====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED 666,727 667,571
------------ ------------
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
THREE MONTHS ENDED
SEPTEMBER 30,
2003 2002
---- ----
OPERATING ACTIVITIES
Net Loss $ (503,835) $ (396,277)
Adjustments to Reconcile Net Loss to
Cash Used in Operating Activities:
Depreciation and Amortization 907,750 935,325
Gain on Sale of Leasehold (175,000) -
Equity in Loss of Affiliated Entities 514,890 252,668
Minority Interests' Share of Loss in
Subsidiaries (399,186) (489,469)
Changes in Operating Assets and Liabilities:
Increase in Accounts and Other Receivables (325,869) (163,090)
Decrease (Increase) in Inventories 694,230 (1,375,630)
Increase in Other Current Assets (1,068,156) (1,773,234)
Decrease in Current Liabilities (49,677) (247,063)
Decrease in Other Liabilities (61,210) (19,061)
----------- -----------
NET CASH USED IN OPERATIONS (466,063) (3,275,831)
----------- -----------
INVESTING ACTIVITIES
Purchase of Property Plant and Equipment (954,426) (728,486)
Other 5,381 (206,792)
Proceeds from Sale of Leasehold 175,000 -
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (774,045) (935,278)
----------- -----------
FINANCING ACTIVITIES
Proceeds from Related party 1,000,000 -
Proceeds from Notes Payable to Banks - 2,000,000
Payments on Mortgages and Notes Payable to Banks (262,170) (249,550)
Other Financing Activities (12,200) (5,217)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 725,630 1,745,233
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (514,478) (2,465,876)
Cash and Cash Equivalents at Beginning of Period 2,178,558 3,401,100
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,664,080 $ 935,224
=========== ===========
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended September 30, 2003 are not necessarily indicative of
the results that may be expected for the year ended June 30, 2004. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
June 30, 2003. Certain 2002 amounts have been reclassified to conform with the
2003 presentation.
2. INVENTORIES
SEPTEMBER 30, JUNE 30,
2003 2003
---- ----
Work-in process and
raw materials $1,379,398 $1,206,510
Finished goods 5,415,605 6,282,723
---------- ----------
$6,795,003 $7,489,233
---------- ----------
3. INCOME TAXES
THREE MONTHS ENDED
SEPTEMBER 30,
2003 2002
---- ----
Federal $140,000 $ --
State 100,000 100,000
-------- --------
$240,000 $100,000
-------- --------
4. EARNINGS PER SHARE
Earnings per share are based upon the weighted average shares outstanding. The
Company does not have any dilutive securities.
5. COMPREHENSIVE LOSS
Comprehensive loss for the three months ended September 30, 2003 totaled
$437,221 and was comprised of net loss of $503,835 and other comprehensive
income of $66,614 related to the changes in the fair value of a derivative swap
instrument the Company entered into in connection with its term loan. For the
three months ended September 30, 2003, the Company had no items of other
comprehensive income or loss requiring additional disclosure.
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
6. INDUSTRY SEGMENTS
THREE MONTHS ENDED
SEPTEMBER 30,
2003 2002
---- ----
REVENUES:
REAL ESTATE $ 3,499,750 $ 3,641,535
HOTEL 1,693,024 1,775,119
SEAFOOD 3,112,013 5,131,008
TEXTILE 2,181,493 2,205,244
CORPORATE AND OTHER 2,688 8,138
----------- -----------
$10,488,968 $12,761,044
=========== ===========
SEPTEMBER 30,
2003 2002
---- ----
IDENTIFIABLE ASSETS:
REAL ESTATE $ 31,677,211 $ 31,590,819
HOTEL 3,583,628 4,350,052
SEAFOOD 32,443,080 33,080,299
TEXTILE 7,198,299 8,349,193
CORPORATE 25,582,366 22,694,286
------------ ------------
$100,484,584 $100,064,649
============ ============
Results of operations are shown in Managements Discussion and Analysis of
Financial Condition and Results of Operations.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES
Working capital for the three months ended September 30, 2003 decreased by
approximately $825 to $9,003. Net cash used in operating activities was
approximately $466. Net cash provided by financing activities was approximately
$726. Net cash of approximately $774 was used in investing activities.
The Company borrowed an additional $1,000 during the quarter from an entity
controlled by a major stockholder to finance the importation and sale of lobster
tails. The total amount of loans owed to this entity is $3,500. The loans bear
interest at prime plus 1% and have no fixed payment terms or maturity dates.
The Company's credit agreement with its principal lender provides for a $7,336
term loan with an interest rate of 5.53% per annum and a $3,000 revolving line
of credit with an interest rate equal to either (a) LIBOR plus 2% or, (b) the
Alternate Base Rate (as defined) plus 0.50%. These loans are also collateralized
by a mortgage on the East Newark Industrial Center. The term loan requires
amortization payments of $359 per annum. The term loan matures on October 21,
2007 and the revolving line of credit matures on October 21, 2005. The Company
entered into an interest rate swap agreement on January 13, 2003 which fixed the
all-in interest rate on the term loan at 5.53% per annum. At September 30, 2003
the term loan balance was $7,037 and $2,750 was outstanding under the revolving
line of credit which bore interest at 3.1875% at September 30, 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
Income from operations before income taxes and minority interests increased
$123. The components are as follows
(DECREASE)
2003 2002 INCREASE
---- ---- --------
Real Estate $ 1,172 $ 1,099 $ 73
Hotel 153 190 (37)
Seafood (892) (1,105) 213
Textiles 27 32 (5)
Corporate (1,123) (1,002) (121)
------- ------- -------
$ (663) $ (786) $ 123
------- ------- -------
REAL ESTATE
Revenues decreased $142 and earnings increased $73. The increase in
earnings was due to lower repair and maintenance costs of $219 incurred at
several of our properties offset by the decrease in revenues.
HOTEL
Revenues decreased $82 over last year and hotel earnings decreased $37 as a
result of the lower revenues.
SEAFOOD
Revenues decreased $2,019 in the current period. Losses continued in the
seafood division due primarily to continuing losses in Ecuador due to lower than
anticipated shrimp production. Losses in Ecuador were $885 this year as compared
to last years loss of $746 due principally to the continuation of the White Spot
Virus in Ecuador that has decimated that country's shrimp production. Scallop
operations in Florida earned $44 (including a $175 gain on the sale of a
leasehold no longer being used by the company) as compared to a loss last year
of $131. Bluepoints domestic operations had a loss of $51 as compared to a loss
of $228 last year as a result of the Company ceasing clamming activities and a
joint sales venture at the Fulton Fish Market in Fiscal 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
TEXTILES
Hanora Spinning's earnings decreased $58 to $67 for the quarter. Hanora
South and J & M Dyers recognized a combined loss of $40 compared to last year's
loss of $53. Whitlock Combing incurred a loss of $40 last year relating to its
property in South Carolina which was sold in April 2003. Overall, textile
revenues decreased $24.
CORPORATE/OTHER
Corporate expenses, including interest on the Company's term loan and
revolving line of credit, increased by $121 due substantially to increased
fringe benefits of $58 and professional fees of $36.
CRITICAL ACCOUNTING POLICIES
Management's discussion and analysis of financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. The Company
bases its estimates on historical experience and assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the
following critical accounting policies affect its significant judgments and
estimates used in the preparation of its consolidated financial statements.
VALUATION OF PROPERTY HELD FOR USE AND SALE
On a quarterly basis, the Company reviews the carrying value of both properties
held for use and for sale. The Company records impairment losses and reduces the
carrying value of properties when indicators of impairment are present and the
expected undiscounted cash flows related to those properties are less than their
carrying amounts. In cases where the Company does not expect to recover its
carrying costs on properties held for sale, the Company reduces its carrying
cost to fair value, and for properties held for sale, the Company reduces its
carrying value to fair value less costs to sell. Management does not believe
that the value of the properties held for sale or properties in use are impaired
as of September 30, 2003.
VALUATION OF INVESTMENTS IN AND ADVANCES TO AFFILIATED ENTITIES
On a quarterly basis, the Company reviews the carrying value of the investments
in and advances to affiliated entities. Although the seafood operations of the
Company (particularly the Ecuadorian seafood operations) continue to generate
operating losses management believes that the investments that it is currently
making will return the operations to profitability. If the Company is
unsuccessful in its efforts, an impairment write-down, which may be material,
will be required. Management does not believe that the carrying amount of the
investments in and advances to affiliated entities are impaired as of September
30, 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
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 availability of scallops in the area covered by the
Company's Cape Canaveral, Florida operations, the success of the Company's
Polyculture process, Mariculture System, Tolerine product and micro-screening
efforts, demand for the Company's textile services, and general economic and
business conditions, which will, among other things, affect the demand for space
and rooms at the Company's real estate and hotel properties, the availability
and creditworthiness of prospective tenants, lease rents and terms and
availability of financing; and adverse changes in the real estate markets,
including, among other things, competition with other companies, risk of real
estate development and acquisition, governmental actions and initiatives and
environmental safety requirements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company currently has a variable rate term loan and a variable rate
revolving line of credit which had outstanding balances of approximately $7,037
and $2,750 respectively, at September 30, 2003. The term loan bears interest at
the rate of LIBOR plus 1.75% And the revolving line of credit bears interest at
a rate of LIBOR plus 2.0%.
With respect to the term loan, the Company has managed its exposure to changes
in LIBOR through the use of an interest rate swap agreement which effectively
fixes the interest rate on the term loan at 5.53%.
With respect to the revolving line of credit, a 1% increase in LIBOR would
result in an increase in annual interest expense of approximately $28.
ITEM 4. CONTROLS AND PROCEDURES
a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company's Chief
Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Company's disclosure controls and procedures (as such
term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended ("Exchange Act") as of the end of the
period covered by this report. Based on such evaluation, the Company's
Chief Executive Officer and Chief Financial Officer have concluded that as
of the end of such period, the Company's disclosure controls and procedures
are effective.
b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes
in the Company's internal control over financial reporting during the
fiscal quarter to which this report relates that have materially affected,
or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material legal proceedings beyond those previously disclosed
in the Registrants filed Annual Report On Form 10-K for the year ended June 30,
2003.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
NO. DESCRIPTION
31.1 Certification of Chief Executive Officer pursuant to rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith)
31.2 Certification of Chief Financial Officer pursuant to rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith)
(b) FORM 8-K
No reports on Form 8-k were required to be filed during the period
covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FIRST REPUBLIC CORPORATION OF AMERICA
-----------------------------------------
Registrant
Date: November 14, 2003 /s/ Harry Bergman
---------------------------------------
Harry Bergman
President and Treasurer