<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ----- EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1994
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OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number 0-12201
AGENCY RENT-A-CAR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1050582
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30000 Aurora Road, Solon, Ohio 44139
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (216) 349-1000
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_________________________________________________________________________
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF CHANGED SINCE LAST
REPORT.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BAMKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the
latest practicable date: 25,786,988 shares as of May 31, 1994.
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<TABLE>
AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets -
April 30, 1994 and January 31, 1994 1 - 2
Consolidated Statements of Income - Three Months
Ended April 30, 1994 and 1993 3
Consolidated Statements of Cash Flows -
Three Months Ended April 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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<TABLE>
AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
<CAPTION>
APRIL 30, JANUARY 31,
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,897 $ 758
ACCOUNTS AND NOTES RECEIVABLE (Note B) 119,514 93,347
PREPAID EXPENSES 4,834 5,979
PROPERTY AND EQUIPMENT
Rental automobiles 216,026 247,272
Dealership inventory 26,471 26,428
Other property and equipment 29,860 31,615
-------- --------
272,357 305,315
Less: accumulated depreciation (70,579) (74,648)
-------- --------
201,778 230,667
OTHER ASSETS 18,518 19,370
-------- --------
$346,541 $350,121
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Per Share Amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
APRIL 30, JANUARY 31,
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES
Accounts payable and accrued expenses $ 15,972 $ 13,609
Dealer holdbacks, net 20,741 13,704
Self-insurance claims 33,036 34,425
Notes payable 9,590 9,590
Operating debt (Note C) 52,352 68,491
Deferred income taxes 32,749 33,045
-------- --------
164,440 172,864
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock - $.05 par value,
authorized 2,000,000 shares,
none issued -- --
Common stock - $.05 par value,
authorized 30,000,000 shares,
26,707,094 issued at April 30,
26,649,322 issued at January 31 1,336 1,333
Additional paid-in capital 123,463 122,905
Retained earnings (including cumulative
foreign currency translation loss
of $1,241 at April 30 and $895 at
January 31) 65,159 60,876
Treasury stock, at cost, 960,668 shares
at April 30 and January 31 (7,857) (7,857)
-------- --------
182,101 177,257
-------- --------
$346,541 $350,121
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
--------------------------
1994 1993
------- -------
<S> <C> <C>
REVENUE
Automobile rentals $39,139 $65,395
Dealership operations 19,126 16,218
Financial services 4,192 490
------- -------
Total 62,457 82,103
COSTS AND EXPENSES
Cost of goods sold and operating expenses:
Automobile rentals 17,332 29,040
Dealership operations 18,482 15,843
Financial services 469 98
Depreciation and amortization 11,443 19,043
Selling, general and administrative 6,566 11,141
Interest 638 1,408
------- -------
Total 54,930 76,573
------- -------
INCOME BEFORE INCOME TAXES 7,527 5,530
PROVISION FOR INCOME TAXES 2,898 2,046
------- -------
NET INCOME $ 4,629 $ 3,484
======= =======
EARNINGS PER SHARE $ .18 $ .14
======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (000's) 25,732 25,406
======= =======
<FN>
See notes to consolidated financial statements.
</TABLE>
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<TABLE>
AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
-----------------------------
1994 1993
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 4,629 $ 3,484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,443 19,043
Provision for credit losses 994 670
Deferred income taxes (3,587) (83)
Changes in operating assets and liabilities:
Accounts receivable 3,622 3,968
Accounts payable and accrued expenses 2,363 347
Self-insurance claims (1,389) (3,465)
Other operating assets and liabilities 6,266 2,880
-------- --------
Net cash provided by operating activities 24,341 26,844
-------- --------
Cash Flows from Investing Activities:
Principal collected on installment notes receivable 8,382 991
Purchase of rental automobiles (8,027) (36,781)
Proceeds from sale of rental automobiles 8,043 18,777
Purchase of other property and equipment (198) (2,808)
Advances to dealers and payments of dealer holdbacks (15,381) (588)
Other investing activities, net (96) (781)
-------- --------
Net cash used in investing activities (7,277) (21,190)
-------- --------
Cash Flows from Financing Activities:
Principal payments, net of new borrowings on
operating debt and notes payable (16,139) (5,707)
Other financing activities, net 214 78
-------- --------
Net cash used in financing activities (15,925) (5,629)
-------- --------
Increase in cash and cash equivalents 1,139 25
Cash and cash equivalents at beginning of period 758 1,383
-------- --------
Cash and cash equivalents at end of period $ 1,897 $ 1,408
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 680 $ 1,907
======== ========
Income taxes paid $ 3,059 $ 462
======== ========
Supplemental Schedule of Non-Cash Investing Activities:
Sale of rental automobiles and dealership inventory $ 17,342 $ 9,884
Additions to dealer holdback, net 22,418 1,537
-------- --------
Addition to installment notes receivable, net $ 39,760 $ 11,421
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet at April 30, 1994, the
consolidated statements of income and the consolidated
statements of cash flows for the three-month periods ended April
30, 1994 and 1993, have been prepared by the Company without
audit. In the opinion of management, all normal and recurring
adjustments necessary to present fairly the financial position,
results of operations and cash flows at April 30, 1994 and for
all periods presented have been made.
Certain prior period amounts have been reclassified to conform
with the current year presentation.
Certain information and footnote disclosures, which are normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements
and notes thereto included in the Company's January 31, 1994
Form 10-K Annual Report. The results of operations for the
three-month period ended April 30, 1994 may not necessarily be
indicative of the operating results for the full year.
Earnings per share are computed on the basis of the weighted
average common shares outstanding during the period. Common
share equivalents have been excluded from this computation since
they have less than a 3% dilutive effect.
Management periodically reviews depreciation rates and revises,
where appropriate, based upon a variety of factors including the
strength of the used car market, general economic conditions and
estimated useful life. Gains and losses upon the sale of rental
automobiles are either recorded as an adjustment to depreciation
expense or are included in dealership operations, depending on
the method of disposal. The net gain from the sale of
automobiles totalled $696,000 and $513,000 for the quarters
ended April 30, 1994 and 1993, respectively. The number of
automobiles sold by the Company, either through dealership
operations or other methods, were 3,016 and 4,648 for the three
months ended April 30, 1994 and 1993, respectively.
Dealership inventory is stated at lower of cost or estimated
wholesale market.
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AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Dealer holdbacks are the amounts payable to member dealers from
the acceptance of retail installment contracts, net of cash
advanced. The cash advances are based upon certain criteria and
are interest-bearing at the prime rate less 3%. The dealer
holdbacks protect the Company from potential losses associated
with the installment contracts. The dealer holdbacks are not
paid until all advances related to a particular dealer have been
recovered. At April 30, 1994 and January 31, 1994 the
components of dealer holdbacks were payables of $92,323,000 and
$61,418,000 net of $71,582,000 and $47,714,000 of advances,
respectively.
NOTE B - ACCOUNTS AND NOTES RECEIVABLE
Components of accounts and notes receivable were as follows:
<TABLE>
<CAPTION>
April 30, January 31,
1994 1994
----------- -----------
(In thousands)
<S> <C> <C>
Trade accounts $ 16,596 $ 20,840
Less: allowance for doubtful accounts (4,384) (5,474)
-------- --------
Trade accounts, net 12,212 15,366
Installment notes receivable 129,540 93,233
Unearned income (21,685) (16,036)
Less: allowance for loan losses (2,583) (1,714)
-------- --------
Installment notes receivable, net 105,272 75,483
Other 2,030 2,498
-------- --------
$119,514 $ 93,347
======== ========
</TABLE>
Trade accounts are receivables generated when the Company rents
automobiles, principally to individuals whose automobiles are
out of service due to accident, theft, damage or major repair.
The Company extends credit to the customer's insurance company
when coverage is provided, or to their corporate employer, as
applicable, to cover the cost of the rental.
Installment notes receivable are loans made by the Company's
finance subsidiary which is principally engaged in the financing
of used automobiles. The Company records the gross amount of
the contract as an installment note receivable and the amount of
its discount as unearned income. For balance sheet
presentation, the unearned income is netted from the gross
amount of the note. Installment notes generally have initial
terms ranging from 12 to 42 months with an average initial term
of 30 months. The notes are collateralized by the related
vehicle.
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AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C- OPERATING DEBT
Operating debt consisted of the following:
<TABLE>
<CAPTION>
April 30, January 31,
1994 1994
----------- -----------
(In thousands)
<S> <C> <C>
Commercial paper $ 50,242 $ 66,981
Unsecured lines of credit 2,110 1,510
-------- --------
$ 52,352 $ 68,491
======== ========
</TABLE>
The Company has an unsecured short-term commercial paper
program in the aggregate of $200 million. Outstanding
commercial paper was borrowed at a weighted average interest
rate of 3.65% and 3.34% at April 30, 1994 and January 31, 1994,
respectively.
At April 30, 1994, the Company had short-term unsecured lines
of credit with banks totalling $144 million, net of outstanding
letters of credit. There are no fees or compensating balances
associated with these credit facilities which are provided on
an uncommitted basis.
Borrowings under these lines of credit were at a weighted
average interest rate of 3.85% and 3.40% at April 30, 1994 and
January 31, 1994, respectively.
The Company maintains a committed bank facility of $40 million.
There are no compensating balances associated with this
facility and, as of April 30, 1994, the Company is in full
compliance with all restrictive covenants. The agreement
expires March 12, 1995 and can be extended at the discretion of
the parties. As of April 30, 1994 there have been no
borrowings under this agreement.
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<PAGE> 10
AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Net income for the quarter ended April 30, 1994 was $4.6 million or $.18
per share as compared to $3.5 million or $.14 per share for the quarter ended
April 30, 1993. The growth in earnings is attributable to the increase in
earnings from National Auto Credit (NAC), the Company's financial services
subsidiary. NAC's contribution exceeded 40% of the earnings for the current
quarter. Also during the quarter the Company's Board of Directors approved
changing the Company's name to National Auto Credit. This change is expected
to be ratified by the shareholders at the June 22, 1994 Annual Meeting.
FINANCIAL SERVICES
Financial services revenue, generated by National Auto Credit,
consisting primarily of interest and fee income, increased to $4.2 million for
the first quarter of fiscal 1995 up from $.5 million for the same quarter
during the prior year. Gross installment notes receivable were $129.5 million
at April 30, 1994 representing approximately 18,000 contracts financed from
over 1,100 enrolled dealers. At April 30, 1993, installment notes receivable
were $18.2 million on 2,700 contracts financed from 330 enrolled dealers.
Operating margin exceeds 85% as operating expenses increased by $371,000
from the year before to $469,000 for the quarter ended April 30, 1994. This
increase results from the considerable business expansion that has occurred
over the past year.
To service this growth, NAC opened its fifth branch location in the
first quarter of this fiscal year. During the first quarter of fiscal 1994,
NAC was operating one branch location. To keep pace with the significant
growth in member dealers and the related receivables portfolio, NAC expects to
open one additional branch prior to year end.
AUTOMOBILE RENTALS
Automobile rental revenue decreased to $39.1 million for the quarter
ended April 30, 1994, from $65.4 million the year before. This decline is
principally attributable to the reduction in average fleet from 36,000 cars for
the quarter ended April 30, 1993 to an average of 22,000 cars rented by an
average of 426 offices during the current quarter. Fleet utilization and
rental rates remained relatively constant in the first quarter of fiscal 1995
compared to the first quarter of fiscal 1994.
Operating expenses decreased 40% from $29.0 million for the three months
ended April 30, 1993 to $17.3 million for the same period ended April 30, 1994.
This reduction is reflective of office closings in high-risk major metropolitan
areas and other unprofitable offices and is directly proportionate with the
reduction in fleet size.
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AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As the Company continues to closely scrutinize operating margins, in an
effort to maximize profitability and return on investment, further
consolidations are anticipated. By year end the Company expects to be
operating approximately 300 offices geographically concentrated in the major
metropolitan areas across the country with the greatest potential for profit.
The Company's fleet will be reduced further, through these consolidations, by
several thousand units.
DEALERSHIP OPERATIONS
Dealership operations consists of used car sales generated by the
Company's subsidiary, Agency Auto Sales (AAS). Dealership revenue was $19.1
million for the quarter ended April 30, 1994 up from the $16.2 million the year
before. Increased revenues resulted mainly from higher average selling prices.
At April 30, 1993 fifteen retail locations were in operation. These
locations were either closed or converted to processing centers for the sale
and distribution of retired fleet vehicles to NAC member dealers for retail
sale. At April 30, 1994 there were nine of these centers in operation.
Improved margins have been realized through higher selling prices coupled with
lower operating expenses.
OTHER COSTS AND EXPENSES
DEPRECIATION AND AMORTIZATION EXPENSE declined 40% to $11.4 million in
the first quarter of fiscal 1995 compared to $19.0 for the same period one year
ago. This is directly proportionate with the significant reduction in fleet
size. The average depreciation rate, of approximately 1.5%, remained constant
between periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES decreased by $4.5 million
from $11.1 million last year to $6.6 million for the quarter ended April 30,
1994. This decline is directly attributable to strategically planned
across-the-board cost reductions associated with the downsizing of rental
operations.
INTEREST EXPENSE for the three months ended April 30, 1994 was $.6
million, a 55% decrease from the $1.4 million a year earlier. This decline is
largely due to the reduction in the average debt level from $154.5 million to
$66.8 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of internally generated funds are cash
flow from operations and principal collected on installment notes. Total cash
generated from these sources during the first three months of the year amounted
to $32.7 million compared to $27.8 million for the first three months of fiscal
1994.
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AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
External sources of funds available to the Company at April 30, 1994
amounted to $200 million in commercial paper, $144 million in unsecured
uncommitted short-term bank lines of credit, $40 million in unsecured committed
bank lines of credit and $75 million in lines of credit with automobile
manufacturers. The Company also maintains the flexibility to selectively
utilize alternative financing sources for the purchase of fleet vehicles.
Outstanding borrowings at April 30, 1994 amounted to $50.2 million in
commercial paper and $11.7 million in unsecured uncommitted short-term lines of
credit.
The Company believes it has sufficient internal and external sources of
funds available to meet its current obligations, to fund current operating and
capital requirements and to finance future growth.
The ratio of operating debt to total capital was 20% at April 30, 1994
compared to 25% at January 31, 1994. The decline reflects lower debt levels as
a result of a reduction in fleet purchases necessary to support the reduced
fleet size. It is anticipated that debt levels will decline further due to the
minimal number of fleet purchases planned.
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AGENCY RENT-A-CAR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
April 30, 1994.
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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.
AGENCY RENT-A-CAR, INC.
Date: June 9, 1994 By: /S/ Sam J. Frankino
--------------------- -------------------------
Sam J. Frankino
Chairman of the Board and
Chief Executive Officer
By: /S/ Robert J. Bronchetti
-------------------------
President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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