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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 December 31, 2003 Commission File Number 0-1437
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THE FIRST REPUBLIC CORPORATION OF AMERICA
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(Exact name of registrant as specified in its charter)
DELAWARE 13-1938454
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 Fifth Avenue, New York, NY 10001
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 279-6100
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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 No X
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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 May 20, 2004, there were 666,616 shares of common stock outstanding.
PART 1. FINANCIAL INFORMATION
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
2003 2003
---- ----
(UNAUDITED) (SEE NOTE BELOW)
ASSETS
- ------
Current Assets
Cash and Cash Equivalents $ 1,205,661 $ 2,178,558
Accounts Receivable 4,840,584 4,824,303
Inventories (Note 2) 4,563,234 7,489,233
Other Current Assets 6,264,159 7,216,028
------------- -------------
Total Current Assets 16,873,638 21,708,122
------------- -------------
Property, Plant and Equipment 74,096,324 74,582,041
Less: Accumulated Depreciation 34,902,681 34,958,205
------------- -------------
Net Property, Plant and Equipment 39,193,643 39,623,836
------------- -------------
Investments in and Advances to Affiliated Entities 18,311,496 18,462,166
Other Assets 20,737,658 20,579,552
------------- -------------
TOTAL ASSETS $ 95,116,435 $ 100,373,676
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 13,509,865 $ 11,880,431
Long-Term Debt 21,503,790 22,427,800
Other Liabilities 2,652,961 2,953,074
------------- -------------
TOTAL LIABILITIES 37,666,616 37,261,305
------------- -------------
Stockholders' Equity:
Common Stock 1,175,261 1,175,261
Accumulated Other Comprehensive Loss (Note 5) (1,237,476) (1,354,000)
Other Stockholders' Equity 57,512,034 63,291,110
------------- -------------
Total Stockholders' Equity 57,449,819 63,112,371
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 95,116,435 $ 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
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Six months ended Three months ended
December 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Sales-Textile and Seafood $ 11,268,927 $ 16,367,561 $ 6,130,179 $ 9,411,769
Real Estate and Hotel Operations 10,498,387 10,809,430 5,626,320 5,422,904
Other 792,434 942,343 314,281 523,617
------------ ------------ ------------ ------------
Total Revenues 22,559,748 28,119,334 12,070,780 15,358,290
------------ ------------ ------------ ------------
Expenses
Cost of Sales - textile and seafood 10,660,268 16,109,022 5,939,679 9,050,912
Operating-real estate and hotel 5,117,061 5,368,852 2,812,602 2,759,983
Selling, general & administrative 3,570,573 4,162,263 1,831,495 2,424,078
Depreciation and amortization 1,822,836 1,870,924 915,086 935,599
Real estate taxes 936,072 876,189 470,842 428,628
Interest 994,001 994,076 494,008 488,004
Write off of seafood assets - Note 7 5,005,266 -- 5,005,266 --
Write off of amount due from minority interest - Note 7 2,055,000 -- 2,055,000 --
Minority interest share of loss of subsidiaries (1,388,210) (924,668) (989,024) (435,199)
------------ ------------ ------------ ------------
Total Expenses 28,772,867 28,456,658 18,534,954 15,652,005
------------ ------------ ------------ ------------
Loss before income taxes and
equity in loss of affiliated entities (6,213,119) (337,324) (6,464,174) (293,715)
Equity in loss of affiliated entities (689,756) (476,353) (174,866) (223,685)
Income taxes - Note 3 1,136,000 (250,000) 1,376,000 (150,000)
------------ ------------ ------------ ------------
Net Loss $ (5,766,875) $ (1,063,677) $ (5,263,040) $ (667,400)
============ ============ ============ ============
Net Loss per share:
Net Loss - basic and diluted $ (8.65) $ (1.59) $ (7.89) $ (1.00)
============ ============ ============ ============
Weighted Average shares outstanding:
Basic and diluted 666,671 667,552 666,616 667,534
============================================================
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six months ended
December 31,
2003 2002
----------- -----------
OPERATING ACTIVITIES
NET LOSS $(5,766,875) $(1,063,677)
Adjustments to Reconcile Net Loss to
Cash Used in Operating Activities:
Gain on Sale of Leasehold (175,000) --
Equity in Loss of Affiliated Entities 689,756 476,353
Depreciation and Amortization 1,822,836 1,870,924
Write off of seafood assets 5,005,266 --
Write off of amount due from minority interest 2,055,000 --
Deferred Income Taxes (1,336,000) --
Donation of Land -- 457,335
Minority Interests' Share of Loss in
Subsidiaries (1,388,210) (924,668)
Changes in Operating Assets and Liabilities:
Increase in Accounts Receivables and other Receivables (201,608) (1,361,218)
Decrease (Increase) in Inventories 219,180 (1,513,770)
Increase in Other Current Assets (941,258) (1,529,247)
(Decrease) Increase in Current Liabilities (90,559) 49,895
Decrease in Other Liabilities (183,589) (15,040)
----------- -----------
NET CASH USED IN OPERATIONS (291,061) (3,553,113)
----------- -----------
INVESTING ACTIVITIES
Purchase of Property, Plant and Equipment (1,392,644) (2,341,008)
Other (27,982) (1,688,340)
Proceeds from Sale of Leasehold 175,000 --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,245,626) (4,029,348)
----------- -----------
FINANCING ACTIVITIES
Proceeds from Notes Payable to Bank -- 2,750,000
Payments on Mortgages and Notes Payable to Bank (924,010) (839,446)
Proceeds from Related Party 1,500,000 3,500,000
Other Financing Activities (12,200) (5,217)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 563,790 5,405,337
----------- -----------
DECREASE IN CASH & CASH EQUIVALENTS (972,897) (2,177,124)
Cash and Cash Equivalents at Beginning of Period 2,178,558 3,401,100
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,205,661 $ 1,223,976
=========== ===========
SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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
six month period ended December 31, 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
DECEMBER 31, JUNE 30,
2003 2003
---- ----
Work-in process and
raw materials $ 1,244,209 $ 1,206,510
Finished goods 3,319,025 6,282,723
------------- -------------
$ 4,563,234 $ 7,489,233
------------ ------------
3. INCOME TAXES
SIX MONTHS ENDED
DECEMBER 31,
2003 2002
---- ----
Federal $(1,336,000) $ 50,000
State 200,000 200,000
------------ --------
$(1,136,000) $250,000
------------ --------
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 six months ended December 31, 2003 totaled $5,650,351
and was comprised of net loss of $5,766,875 and other comprehensive income of
$116,524 related to the changes in the fair value of a derivative swap
instrument the Company entered into as a cash flow hedge in connection with its
term loan. For the six months ended December 31, 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
SIX MONTHS ENDED
DECEMBER 31,
2003 2002
------------ ------------
REVENUES:
REAL ESTATE $ 7,182,164 $ 7,320,334
HOTEL 3,377,019 3,547,750
SEAFOOD 7,363,936 12,691,552
TEXTILE 4,632,752 4,549,727
CORPORATE AND OTHER 3,877 9,971
------------ ------------
$ 22,559,748 $ 28,119,334
============ ============
OPERATING (LOSS) PROFIT:
REAL ESTATE $ 2,050,636 $ 2,140,823
HOTEL 295,854 319,287
SEAFOOD (5,772,221) (1,624,145)
TEXTILE 25,621 25,064
------------ ------------
TOTAL OPERATING (LOSS) PROFIT (3,400,110) 861,029
CORPORATE EXPENSES (1,903,967) (1,872,852)
CORPORATE INTEREST EXPENSE (245,639) (260,140)
CORPORATE REVENUE 3,387 9,971
WRITE OFF OF AMOUNT DUE FROM MINORITY INTEREST (2,055,000) --
EQUITY IN LOSS OF AFFILIATED
ENTITIES (689,756) (476,353)
MINORITY INTERESTS' SHARE OF
LOSS OF SUBSIDIARIES 1,388,210 924,668
------------ ------------
LOSS BEFORE INCOME TAXES $ (6,902,875) $ (813,677)
============ ============
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
SIX MONTHS ENDED
DECEMBER 31,
2003 2002
------------ ------------
IDENTIFIABLE ASSETS:
REAL ESTATE $ 31,345,013 $ 32,327,579
HOTEL 3,218,657 4,011,376
SEAFOOD 29,875,037 34,815,190
TEXTILE 6,887,798 7,886,357
CORPORATE 23,789,930 24,317,829
------------ ------------
$ 95,116,435 $103,358,331
============ ============
DEPRECIATION AND AMORTIZATION:
REAL ESTATE $ 909,564 $ 921,918
HOTEL 407,652 403,788
SEAFOOD 260,967 270,671
TEXTILE 225,913 238,485
CORPORATE AND OTHER . 18,740 36,062
------------ ------------
$ 1,822,836 $ 1,870,924
============ ============
CAPITAL EXPENDITURES - NET:
REAL ESTATE $ 302,212 $ 1,544,771
HOTEL 65,828 31,593
SEAFOOD 969,326 595,548
TEXTILE 53,292 158,752
CORPORATE AND OTHER . 1,986 10,344
------------ ------------
$ 1,392,644 $ 2,341,008
============ ============
GEOGRAPHIC INFORMATION:
REVENUES
UNITED STATES $ 22,036,318 $ 27,795,982
ECUADOR 523,430 323,352
------------ ------------
$ 22,559,748 $ 28,119,334
============ ============
IDENTIFIABLE ASSETS:
UNITED STATES $ 67,318,435 $ 76,046,331
ECUADOR 27,798,000 27,312,000
------------ ------------
$ 95,116,435 $103,358,331
============ ============
Results of operations are shown in Managements Discussion and Analysis of
Financial Condition and Results of Operations.
THE FIRST REPUBLIC CORPORATION OF AMERICA
AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
7. OTHER MATTERS
The Company has recorded a $5,005,000 loss for the apparent theft of inventory,
advances due from inventory suppliers and other receivables, relating to the
domestic seafood operations of Bluepoints Company, Inc. ("Bluepoints"), its
80.2% subsidiary. Of the total loss provision (i) $2,340,000 relates to the
apparent theft of approximately 160,000 lbs. of lobster tails which were in the
possession and control of a joint venture partner/sales agent of Bluepoints,
(ii) $1,607,000 relates to advances made by Bluepoints to this joint venture
partner/sales agent for new lobster tails and shrimp inventory, (iii) $630,000
relates to other receivables due from this joint venture partner/sales agent
and, (iv) $428,000 relates to a markdown of Bluepoints' remaining lobster tail
inventory. Bluepoints has terminated its relationship with the joint venture
partner/sales agent and has referred the matter to law enforcement authorities.
Bluepoints has filed a notice of a claim with its insurer with respect to its
loss but has not yet filed a proof of loss. Bluepoints presently expects to file
a proof of loss for approximately $3,697,000. Bluepoints' insurance carrier has
reserved all of its rights with respect to the claim. Any recovery of such
amount will be recognized in earnings upon receipt.
After giving effect to current and deferred tax benefits related to the loss and
the additional amount payable under the Bluepoints Guaranty described below, the
Company's net loss in the quarter attributable to the events described in the
preceding paragraph is $2,609,000.
Jonathan P. Rosen and the Estate of A.A. Rosen (the "Guarantors") had guaranteed
(the "Bluepoints Guaranty") to the Company payment of 19.8% of a series of
loans and investments in Bluepoints not funded by the minority owners of
Bluepoints. The Estate of A.A. Rosen had also guaranteed (the "Additional
Guarantees") repayment of (i) 56.8% of advances, including interest thereon,
made by the Company to two Ecuadoran companies engaged in shrimp farming
operations in which Bluepoints owns a 38% interest and (ii) 25% of advances,
including interest, made by the Company to an Ecuadoran corporation that owns a
hatchery that produces post-larval shrimp in which Bluepoints owns a 62.5%
interest. The Bluepoints Guaranty , while still in effect with respect to
amounts receivable through December 31, 2003, was terminated by the Guarantors
effective as of January 1, 2004 with respect to any minority interest amounts
originating subsequent to December 31, 2003. The Additional Guarantees remain in
effect. The minority owners of Bluepoints have agreed to convey to the Company
their interests in Bluepoints for the purpose of partially satisfying
obligations due under the Bluepoints Guaranty. As of December 31, 2003 (i) the
minority owners share (e.g. 19.8%) of the deficit in Bluepoints' shareholders
equity was $11,066,000, $4,110,000 of which represented the minority interests'
share of interest that the Company had accrued on its loans to Bluepoints and
(ii) approximately $9,597,000, inclusive of interest, was outstanding under the
Additional Guarantees. The Guarantors have questioned whether the Bluepoints
Guaranty covered the payment of interest. In order to deal with this matter and
other issues relating to both guarantees, the Board of Directors established a
special committee of the Board for the purpose of (i) determining the value of
the minority interests of Bluepoints and the amount of the obligations due under
the Bluepoints Guaranty in excess of the value of the minority interests and
(ii) negotiating and approving the terms of the consideration to be received by
the Company from the Guarantors. After consulting with legal counsel, the
committee has concluded that the Bluepoints Guaranty was ambiguous with respect
to the payment of interest and has agreed to accept $2,055,000 in settlement of
the accrued interest under the Bluepoints Guaranty. The remaining $2,055,000 of
accrued interest has been forgiven and written off to expense for the quarter
ended December 31, 2003. The Estate of A.A. Rosen has also agreed to satisfy all
obligations, including interest, due under the Additional Guarantees promptly
after the committee completes its work. The committee has also retained an
investment banking firm to render a fairness opinion.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS)
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements of the Company and the notes
thereto.
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 products and 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
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 use, 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 any of its properties are impaired as of December 31, 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 December
31, 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 2003 AND 2002
Income from operations before income taxes and minority interests decreased
$6,553. The components are as follows
(DECREASE)
2003 2002 INCREASE
------- ------- -------
Real Estate $ 2,051 $ 2,141 $ (90)
Hotel 296 319 (23)
Seafood (6,463) (2,100) (4,363)
Textiles 26 25 1
Corporate (4,201) (2,123) (2,078)
------- ------- -------
$(8,291) $(1,738) $(6,553)
------- ------- -------
REAL ESTATE
Revenues decreased $138 and earnings decreased $90. The decrease in
earnings was due to lower revenues offset by lower repair and maintenance costs.
HOTEL
Revenues decreased $170 over last year and hotel earnings decreased $23 as
a result of the lower revenues.
SEAFOOD
Revenues decreased $5,328 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 $1,383 this year as
compared to last years loss of $1,157 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 $47 (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 $160. Bluepoints domestic operations had a loss of $5,127 as compared to a
loss of $783 last year as a result of the seafood inventory related loss
discussed in Note 7 of the notes to the condensed consolidated financial
statements.
TEXTILES
As a result of lower operating margins due to increased competition, Hanora
Spinning's earnings decreased $133 to $113 for the period. Hanora South and J &
M Dyers recognized a combined loss of $87 compared to last year's loss of $141.
Whitlock Combing incurred a loss of $80 last year relating to its property in
South Carolina which was sold in April 2003. Overall, textile revenues increased
$83.
CORPORATE/OTHER
Corporate expenses, including interest on the Company's term loan and
revolving line of credit, increased by $2,078. As discussed in Note 7 of the
notes to the condensed consolidated financial statements, $2,055 of accrued
interest due from minority owners of Bluepoints Company Inc.has been forgiven
and written off to expense.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
Results of Operations
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
Income from operations before income taxes, and minority interests decreased
$6,676. The components are as follows
(DECREASE)
2003 2002 INCREASE
------- ------- -------
Real Estate $ 879 $ 1,042 $ (163)
Hotel 143 129 14
Seafood (5,571) (995) (4,576)
Textiles (1) (7) 6
Corporate (3,078) (1,121) (1,957)
------- ------- -------
$(7,628) $ (952) $(6,676)
------- ------- -------
REAL ESTATE
Revenues increased $4 and earnings decreased $163, due to higher repairs
and maintenance at several properties totaling $147.
HOTEL
Revenues decreased $88 over last year and hotel earnings increased $14 due
to lower operating costs.
SEAFOOD
Revenues decreased $3,309 in the current period. The high level of loss in
the seafood division was principally due to the seafood inventory related loss
discussed in Note 7 to the condensed consolidated financial statements and
continuing losses in Ecuador due to lower than anticipated shrimp production.
Losses in Ecuador were $498 this year as compared to last years loss of $411.
Scallop operations in Florida earned $3 as compared to a loss last year of $29.
As a result of the aforementioned seafood inventory related losses, Bluepoints
domestic operations had a loss of $5,076 as compared to a loss of $555 last
year, when the company donated its underwater clam beds to a non-profit
corporation in December 2002.
TEXTILES
Hanora Spinning's earnings decreased $75 to $46. Hanora South and J & M
Dyers recognized a combined loss of $47 compared to last years loss of $88.
Whitlock Combing incurred a loss of $40 last year relating to its property in
South Carolina which was sold in April 2003. Overall, textiles revenues
increased $107.
CORPORATE/OTHER
Corporate expenses, including interest on the Company's term loan and
revolving line of credit, increased by $1,957 due to decreased salaries and
fringe costs of $70, offset by the write off of $2,055 of accrued interest due
from the minority owners of Bluepoints Company Inc. as discussed in Note 7 of
the notes to the condensed consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES
Working capital for the six months ended December 31, 2003 decreased by
approximately $6,464 to $3,364. Net cash used in operating activities was
approximately $291. Net cash provided by financing activities was approximately
$564. Net cash of approximately $1,246 was used in investing activities.
The Company borrowed an additional $1,500 during the period 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 $4,000. 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 Company and its lender,
are currently negotiating a modification to the credit agreement whereby the
Company will provide as additional collateral its Liverpool office buildings to
facilitate the ongoing compliance with certain financial covenants under the
credit agreement. 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 December 31, 2003 the term loan balance was
$6,947 and $2,750 was outstanding under the revolving line of credit which bore
interest at 3.1875% at December 31, 2003.
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 $6,947
AND $2,750 RESPECTIVELY, AT DECEMBER 31, 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
THE COMPANY'S ANNUAL MEETING OF THE STOCKHOLDERS (THE "MEETING") WAS HELD
AT 2:00 P.M. ON DECEMBER 9, 2003. IN CONNECTION WITH THE MEETING, THE COMPANY
SOLICITED PROXIES FROM ITS STOCKHOLDERS PURSUANT TO REGULATION 14 OF THE
SECURITIES EXCHANGE ACT OF 1934.
AT THE MEETING, HARRY BERGMAN, IRVING S. BOBROW, NORMAN A. HALPER, LOUIS
NIMKOFF, MIRIAM N. ROSEN, JONATHAN P. ROSEN, WILLIAM M. SILVERMAN AND JANE G.
WEIMAN WERE ELECTED TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE NEXT ANNUAL
MEETING OF STOCKHOLDERS IN 2004.
IN ADDITION, THE APPOINTMENT OF ERNST & YOUNG AS AUDITORS OF THE COMPANY
FOR THE FISCAL YEAR ENDING JUNE 30, 2004 WAS RATIFIED BY THE COMPANY'S
STOCKHOLDERS.
THE FOLLOWING TABLES SUMMARIZE THE VOTES CAST AT THE MEETING ON THE MATTERS
BROUGHT BEFORE THE SHAREHOLDERS:
1. ELECTION OF DIRECTORS
NOMINEE NAME VOTES FOR VOTES WITHHELD
HARRY BERGMAN 607,832 6,535
IRVING S. BOBROW 607,819 6,548
NORMAN A. HALPER 607,829 6,538
LOUIS NIMKOFF 607,832 6,535
MIRIAM N. ROSEN 607,821 6,546
JONATHAN P. ROSEN 607,829 6,538
WILLIAM M. SILVERMAN 600,061 14,306
JANE G. WEIMAN 607,832 6,535
2. RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS OF THE COMPANY FOR FISCAL YEAR 2004.
VOTES FOR VOTES AGAINST VOTES WITHHELD
608,035 5 6,324
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: MAY 25, 2004 /s/ Harry Bergman
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HARRY BERGMAN
PRESIDENT AND TREASURER