10-Q 1 file001.txt QUARTERLY REPORT 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, 2002 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 ------- ------- As of November 12, 2002, there were 667,534 shares of common stock outstanding. PART 1. FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

NOTE: THE BALANCE SHEET AT JUNE 30, 2002 HAS BEEN DERIVED FROM 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)

SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS THE FIRST REPUBLIC CORPORATION OF AMERICA ----------------------------------------- AND SUBSIDIARIES ---------------- NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------- 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, 2002 are not necessarily indicative of the results that may be expected for the year ended June 30, 2003. 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, 2002. 2. INVENTORIES ----------- SEPTEMBER 30, JUNE 30, 2002 2002 ---- ---- Work-in process and raw materials $ 1,594,337 $ 1,458,175 Finished goods 7,187,019 5,947,551 ------------ ------------ $ 8,781,356 $ 7,405,726 ------------ ------------ 3. INCOME TAXES ------------ THREE MONTHS ENDED SEPTEMBER 30, 2002 2001 ---- ---- Federal $ -- $ -- State 100,000 100,000 ---------- ---------- $ 100,000 $ 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. INDUSTRY SEGMENTS ----------------- THREE MONTHS ENDED SEPTEMBER 30, 2002 2001 ----- ---- REVENUES: REAL ESTATE $ 3,641,535 $ 3,737,006 HOTEL 1,775,119 1,638,830 SEAFOOD 5,131,008 5,470,085 TEXTILE 2,205,244 2,339,268 CORPORATE AND OTHER 8,138 522,865 ------------ ------------ $ 12,761,044 $ 13,708,054 ============ ============ THE FIRST REPUBLIC CORPORATION OF AMERICA ----------------------------------------- AND SUBSIDIARIES ---------------- NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -------------------------------------------------------------- CONTINUED --------- SEPTEMBER 30, 2002 2001 ----- ---- IDENTIFIABLE ASSETS: REAL ESTATE $ 31,590,819 $ 33,680,610 HOTEL 4,350,052 5,004,564 SEAFOOD 33,080,299 30,913,938 TEXTILE 8,349,193 9,034,826 CORPORATE 22,694,286 22,768,043 -------------- ------------- $ 100,064,649 $ 101,401,981 ============== ============= Results of operations are shown in Management's 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, 2002 decreased by approximately $907 to $15,227. Net cash used in operating activities was approximately $3,528. Net cash provided by financing activities was approximately $1,745. Net cash of approximately $683 was used in investing activities. The Company's credit agreement with its principal lender provides for a $9,000 term loan with an interest rate of 7.5% per annum and a $3,000 revolving line of credit with an interest rate equal to either (a) LIBOR plus 2% or, (b) the Alternate Base Rate (as defined) plus 0.50%. These loans are also collateralized by a mortgage on the East Newark Industrial Center. The term loan requires amortization payments of $359 per annum. Both loans matured on October 21, 2002 and were extended to December 21, 2002. The lender has agreed, subject to completion of due diligence and documentation to extend the loans for an additional five years. At September 30, 2002 the term loan balance was $7,266 and $2,000 was outstanding under the revolving line of credit. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS - CONTINUED ------------------------------------- (IN THOUSANDS) -------------- RESULTS OF OPERATIONS --------------------- THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 ---------------------------------------------- Income from operations before income taxes and minority interests increased $143. The components are as follows (DECREASE) 2002 2001 INCREASE ---- ---- -------- Real Estate $ 1,099 $ 1,183 $ (84) Hotel 190 103 87 Seafood (1,105) (1,281) 176 Textiles 32 (220) 252 Corporate (1,002) (714) (288) -------- -------- ------- $ (786) $ (929) $ 143 -------- -------- ------- REAL ESTATE ----------- REVENUES DECREASED $95 AND EARNINGS DECREASED $84. HOTEL ----- REVENUES INCREASED $136 OVER LAST YEAR DUE TO HIGHER ROOM RENTAL RATES. HOTEL EARNINGS INCREASED $87 AS A RESULT OF THE HIGHER REVENUES. SEAFOOD ------- REVENUES DECREASED $339 IN THE CURRENT PERIOD. LOSSES CONTINUED IN THE SEAFOOD DIVISION DUE PRIMARILY TO COSTS ASSOCIATED WITH THE CLOSING OF THE COMPANY'S CLAM OPERATION IN JULY 2002, CONTINUING LOSSES IN ECUADOR DUE TO LOWER THAN ANTICIPATED SHRIMP PRODUCTION AND LOSSES AT OUR FLORIDA OPERATION, CAUSED BY A LACK OF DOMESTIC SCALLOPS. LOSSES IN ECUADOR WERE $746 THIS YEAR AS COMPARED TO LAST YEARS LOSS OF $726 DUE PRINCIPALLY TO THE CONTINUATION OF THE WHITE SPOT VIRUS IN ECUADOR THAT HAS DECIMATED THAT COUNTRY'S SHRIMP PRODUCTION. SCALLOP OPERATIONS IN FLORIDA LOST $131 AS COMPARED TO A LOSS LAST YEAR OF $329. BLUEPOINTS DOMESTIC OPERATIONS HAD A LOSS OF $228 AS COMPARED TO A LOSS OF $226 LAST YEAR. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS - CONTINUED ------------------------------------- (IN THOUSANDS) -------------- TEXTILES -------- Hanora Spinning's earnings increased $31 to $125 for the quarter. Hanora South and J & M Dyers recognized a combined loss of $53 compared to last year's loss of $277. Losses were reduced as a result of the closing and subsequent sale of the Hanora South plant last year. Whitlock Combing incurred a loss of $40 in the current period as compared to a loss of $37 last year relating to its property in South Carolina which is being offered for sale. Overall, textile revenues decreased $134. CORPORATE/OTHER --------------- Corporate expenses, including interest on the Company's term loan and revolving line of credit, increased by $288 due substantially to a reduction in interest income of $90 and in miscellaneous income received last year. 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 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, 2002. 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 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, 2002. 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 NOT APPLICABLE ITEM 4. CONTROLS AND PROCEDURES WITHIN 90 DAYS OF THE FILING OF THIS REPORT THE CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCIAL OFFICER OF THE COMPANY HAVE EVALUATED THE DISCLOSURE CONTROLS AND PROCEDURES OF THE COMPANY AS DEFINED IN EXCHANGE ACT RULE 13 A-14(C) AND HAVE DETERMINED THAT SUCH CONTROLS AND PROCEDURES ARE ADEQUATE AND EFFECTIVE. SINCE THE MOST RECENT EVALUATION, THERE HAVE BEEN NO SIGNIFICANT CHANGES IN THE COMPANY'S INTERNAL CONTROLS OR OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT THOSE CONTROLS. 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, 2002. 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: --------- 99.1 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 99.2 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 (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, 2002 /s/ HARRY BERGMAN ---------------------------------- HARRY BERGMAN PRESIDENT AND TREASURER CERTIFICATION I, Harry Bergman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The First Republic Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: 11/14/02 /s/ HARRY BERGMAN --------------------------------------------- Harry Bergman Chief Financial and Chief Accounting Officer CERTIFICATION I, Jonathan P. Rosen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The First Republic Corporation of America; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: 11/14/02 /s/ Jonathan P. Rosen --------------------------------- Jonathan P. Rosen Chief Executive Officer

FIRST REPUBLIC CORP OF AMERICA 10-Q