10-Q 1 d02-36304.txt FORM 10-Q 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, 2001 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 February 18, 2002, there were 667,658 shares of common stock outstanding. -1- PART 1. FINANCIAL INFORMATION THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

NOTE: The balance sheet at June 30, 2001 has been derived from the audited financial statements at that date and condensed. SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -2- THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -3- THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

SEE NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -4- 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 six month period ended December 31, 2001 are not necessarily indicative of the results that may be expected for the year ended June 30, 2002. 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, 2001. 2. INVENTORIES December 31, June 30, 2001 2001 ---- ---- Work-in process and raw materials $ 1,857,232 $ 1,938,535 Finished goods 8,170,439 8,667,621 ----------- ----------- $10,027,671 $10,606,156 ----------- ----------- 3. INCOME TAXES Six Months Ended December 31, 2001 2000 ---- ---- Federal $ -- $400,000 State 200,000 308,000 -------- -------- $200,000 $708,000 -------- -------- 4. EARNINGS PER SHARE Earnings per share are based upon the weighted average shares outstanding and the Company does not have any dilutive securities. 5. INDUSTRY SEGMENTS Six months ended December 31, 2001 2000 ---- ---- Revenues: Real Estate $ 7,494,444 $ 8,259,036 Hotel 3,186,885 3,416,807 Seafood 14,577,216 17,076,897 Textile 4,977,455 6,010,711 Corporate and Other 1,014,255 878,578 ----------- ----------- $31,250,255 $35,642,029 =========== =========== -5- THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 2000 ---- ---- Identifiable Assets: Real Estate $ 32,293,209 $ 34,498,379 Hotel 4,734,623 6,202,045 Seafood 33,642,356 38,526,173 Textile 8,865,873 9,391,005 Corporate 22,628,229 19,647,977 ------------ ------------ $102,164,290 $108,265,579 ============ ============ Results of operations are shown in Management's Discussion and Analysis of Financial Condition and Results of Operations. 6. RECENT ACCOUNTING PRONOUNCEMENTS Business Combinations In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 141, Business Combinations. Statement No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method is no longer permitted. Statement No. 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination that is completed after June 30, 2001. Management does not anticipate that the adoption of this statement will have a significant effect on the results of operations or the financial position of the Company. Goodwill and Other Intangible Assets In June 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 142 no longer permits the amortization of goodwill and indefinite-lived intangible assets. Instead, these assets must be reviewed annually (or more frequently under certain conditions) for impairment in accordance with this statement. This impairment test uses a fair value approach rather than the undiscounted cash flows approach previously required by Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of (as amended by Statement No. 144). Amortization of goodwill will also no longer be recorded upon adoption of the new rules. Intangible assets that do not have indefinite lives will continue to be amortized over their useful lives and reviewed for impairment in accordance with Statement No. 121 (as amended by Statement No. 144). The Company is required to adopt Statement No. 142 on July 1, 2002. Management does not anticipate that the adoption of this statement will have a significant effect on the results of operations or the financial position of the Company. -6- THE FIRST REPUBLIC CORPORATION OF AMERICA AND SUBSIDIARIES NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Impairment of Long-Lived Assets In October 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets. Statement No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. Statement No. 144 supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. It also supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions related to the disposal of a segment of a business. Statement No. 144 is effective for fiscal years beginning December 15, 2001. Management does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Company. 7. GAIN ON SALE OF REAL ESTATE On October 31, 2001 the Company sold the land it owned in Melbourne, Florida for $1,775,000. The Company recognized a gain of approximately $178,000 and received net proceeds of approximately $1,621,000. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS) Liquidity and Capital Resources Working capital for the six months ended December 31, 2001 decreased by approximately $1,592 to $17,688. Net cash used in operating activities was approximately $2,935. Net cash provided by financing activities was approximately $436. Net cash of approximately $483 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 mature on October 21, 2002. At December 31, 2001 the term loan balance was $7,535 and $1,250 was outstanding under the revolving line of credit. The revolving line of credit of $1,250 was repaid January 18, 2002. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (IN THOUSANDS) Results of Operations Six months ended December 31, 2001 and 2000 Loss from operations before income taxes, gain on sale of real estate and minority interests increased $457. The components are as follows (Decrease) 2001 2000 Increase ---- ---- ----- Real Estate $ 2,273 $ 2,394 $(121) Hotel 148 362 (214) Seafood (2,262) (2,122) (140) Textiles (333) (53) (280) Corporate (1,649) (1,947) 298 ------- ------- ----- $(1,823) $(1,366) $(457) ------- ------- ----- REAL ESTATE Revenues decreased $765 primarily as a result of the sale of the Company's office building on West 39th Street in New York City on October 4, 2000. The decrease in earnings was caused by the sale of West 39th Street offset by small increases in profits at most of our other properties, and a reduction in repairs and maintenance of $445 at our Nyanza Building. HOTEL Revenues decreased $230 over last year. Hotel earnings decreased $214 as a result of the lower revenues. SEAFOOD Revenues decreased $2,500 in the current period primarily due to the declining economy and the terrorist attack on the World Trade Center which caused a disruption in sales. Losses continued in the seafood division due primarily to curtailed production at the Company's clam operation, continuing losses in Ecuador due to lower than anticipated shrimp production and losses on imported scallops at our Florida operation caused by a drop in domestic scallop prices. Losses in Ecuador were $1,419 this year as compared to last years loss of $1,426 due principally to the continuation of the White Spot Virus in Ecuador that has decimated that country's shrimp production. The Company is continuing to attempt to combat White Spot Virus with its Tolerine product, and by micro-screening the water, purchasing hardier larvae and using its patented ozone system. While there has been some improvement in productivity, substantial losses are continuing. Scallop operations in Florida lost $754 as compared to a loss last year of $573. Bluepoints Long Island operations had a loss of $89 as compared to a loss of $123 last year. -9- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (IN THOUSANDS) TEXTILES Hanora Spinning's earnings decreased $3 to $244. Hanora South and J & M Dyers recognized a combined loss of $503 compared to last years loss of $226 due to costs incurred in closing down our yarn spinning plant in Lake City, South Carolina in September 2001. The plant discontinued operations and was sold in January 2002 for $615,000, the approximate book value of the land and building. The company received $150 in cash and the balance of $465 pursuant to a mortgage note payable in 59 equal monthly installments of $4 with a balloon payment of $369 due on February 10, 2007 and bears interest at the rate of 7 3/4% per annum. Whitlock Combing incurred a loss of $74 in the current period as compared to a loss of $74 last year relating to its property in South Carolina which is being offered for sale. Overall, textile revenues decreased $1,033. CORPORATE/OTHER Corporate expenses, including interest on the Company's term loan and revolving line of credit, decreased by $298 due substantially to reduced salary and fringe costs of $132 and lower interest costs of $144. RECENT ACCOUNTING PRONOUNCEMENTS Business Combinations In June 2001, the FASB issued Statement No. 141, Business Combinations. Statement No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method is no longer permitted. Statement No. 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination that is completed after June 30, 2001. Management does not anticipate that the adoption of this statement will have a significant effect on the results of operations or the financial position of the Company. Goodwill and Other Intangible Assets In June 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 142 no longer permits the amortization of goodwill and indefinite-lived intangible assets. Instead, these assets must be reviewed annually (or more frequently under certain conditions) for impairment in accordance with this statement. This impairment test uses a fair value approach rather than the undiscounted cash flows approach previously required by Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of (as amended by Statement No. 144). Amortization of goodwill will also no longer be recorded upon adoption of the new rules. Intangible assets that do not have indefinite lives will continue to be amortized over their useful lives and reviewed for impairment in accordance with Statement No. 121 (as amended by Statement No. 144). The Company is required to adopt Statement No. 142 on July 1, 2002. Management does not anticipate that the adoption of this statement will have a significant effect on the results of operations or the financial position of the Company. -10- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (IN THOUSANDS) Impairment of Long-Lived Assets In October 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Statement No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. Statement No. 144 supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. It also supersedes the accounting and reporting of APB Opinion No. 50 "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" related to the disposal of a segment of a business. Statement No. 144 is effective for fiscal years beginning after December 15, 2001. Management does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Company. -11- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (IN THOUSANDS) Results of Operations Three months ended December 31, 2001 and 2000 Loss from operations before income taxes and minority interests decreased $16. The components are as follows (Decrease) 2001 2000 Increase ---- ---- -------- Real Estate $ 1,090 $ 938 $ 152 Hotel 45 128 (83) Seafood (981) (1,114) 133 Textiles (113) 50 (163) Corporate (935) (912) (23) ------- ------- ----- $ (894) $ (910) $ 16 ------- ------- ----- REAL ESTATE Revenues decreased $376 primarily as a result of the sale of the West 39th Street office building. However, earnings increased as a result of lower repairs and maintenance at the Nyanza Building of $433. There were no significant variations in any other category. HOTEL Revenues decreased $128 over last year. Hotel earnings decreased $83 as a result of the lower revenues. SEAFOOD Revenues decreased $1,576 in the current period primarily due to the declining economy. Losses are continuing in the seafood division due primarily to curtailed production at the Company's clam operation, the lack of scallops in Florida and continuing losses in Ecuador due to lower than anticipated shrimp production. Losses in Ecuador were $693 this quarter as compared to last years loss of $843. Scallop operations in Florida lost $425 as compared to a loss last year of $396. Bluepoints Long Island operations had a profit of $137 as compared to a profit last year of $125. TEXTILES Hanora Spinning's earnings decreased $8 to $150 for the quarter. Hanora South and J & M Dyers recognized a combined loss of $226 compared to last years combined loss of $81 due to ongoing costs associated with the closing of the spinning plant in Lake City, South Carolina. Whitlock Combing incurred a loss of $37 in the current period as compared to a loss of $27 last year relating to its property in South Carolina which is being offered for sale. Overall, textile revenues decreased $407. CORPORATE/OTHER Corporate expenses, including interest on the Company's term loan and revolving line of credit, increased by $23. -12- 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 clam inventory in the Great South Bay, the availability of scallops in the area covered by the Company's Cape Canaveral, Florida operations, the success of the Company's 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. In addition, the recent catastrophe involving the World Trade Center continued to impact the operations of the Company's seafood, textile and hotel operations during the most recent quarter. -13- PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K. None 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: February 25, 2002 /s/ Harry Bergman -------------------------- Harry Bergman President and Treasurer -14-

FIRST REPUBLIC CORP OF AMERICA 10-Q