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, 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

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)

SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 2 THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED

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

FIRST REPUBLIC CORP OF AMERICA 10-Q