<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
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 July 31, 1995
------------------------------------
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 1-11513
----------------
NATIONAL AUTO CREDIT, 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
---------------------
_____________________________________________________________________________
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 BANKRUPTCY
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: 25,791,401 shares as of August 31, 1995.
<PAGE> 2
<TABLE>
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets -
July 31, 1995 and January 31, 1995 1 - 2
Consolidated Statements of Income - Three Months
and Six Months Ended July 31, 1995 and 1994 3
Consolidated Statements of Cash Flows -
Six Months Ended July 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 13
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE> 3
<TABLE>
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
(Unaudited)
<CAPTION>
July 31, January 31,
1995 1995
----------- -----------
<S> <C> <C>
Cash and Cash Equivalents $ 298 $ 398
Notes Receivable (Note B) 224,270 164,154
Prepaid Expenses 508 404
Dealership Inventory 14,327 23,406
Property and Equipment, net of
accumulated depreciation of
$5,013 and $4,314, respectively 9,598 10,228
Other Assets 11,995 12,273
Assets Related to Discontinued
Operations (Note E) 73,635 110,326
----------- -----------
$ 334,631 $ 321,189
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
-1-
<PAGE> 4
<TABLE>
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Per Share Amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
July 31, January 31,
1995 1995
---------- ----------
<S> <C> <C>
LIABILITIES
Dealer holdbacks, net (Note C) $ 45,717 $ 33,816
Self-insurance claims 13,940 24,475
Notes payable 13,254 12,469
Operating debt 10,315 10,192
Deferred income taxes 20,860 22,543
Other liabilities 21,970 18,466
---------- ----------
126,056 121,961
---------- ----------
CONTINGENCIES (Note D)
STOCKHOLDERS' EQUITY
Preferred stock - $.05 par value,
authorized 2,000,000 shares,
none issued -- --
Common stock - $.05 par value,
authorized 30,000,000 shares,
27,073,481 and 26,946,679
shares issued, respectively 1,354 1,348
Additional paid-in capital 126,894 125,695
Retained earnings, including cumulative
foreign currency translation loss
of $1,231 and $1,253, respectively 91,849 82,921
Treasury stock, at cost, 1,289,568 and
1,217,668 shares, respectively (11,522) (10,736)
---------- ----------
208,575 199,228
---------- ----------
$ 334,631 $ 321,189
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
-2-
<PAGE> 5
<TABLE>
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
----------------------- -----------------------
1995 1994 1995 1994
------- ------- -------- -------
<S> <C> <C> <C> <C>
REVENUE
Financial services $ 9,119 $ 5,314 $ 16,684 $ 9,506
Dealership operations 17,059 15,889 38,409 35,015
------- ------- -------- --------
Total 26,178 21,203 55,093 44,521
COSTS AND EXPENSES
Cost of goods sold and operating expenses:
Financial services 688 714 1,493 1,183
Dealership operations 15,637 14,990 35,414 33,472
Depreciation and amortization 370 345 736 700
Selling, general and administrative 1,564 796 2,909 2,169
Interest 253 157 497 309
------- ------- -------- --------
Total 18,512 17,002 41,049 37,833
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 7,666 4,201 14,044 6,688
PROVISION FOR INCOME TAXES 2,818 1,504 5,163 2,394
------- ------- -------- --------
NET INCOME FROM CONTINUING OPERATIONS 4,848 2,697 8,881 4,294
DISCONTINUED OPERATIONS
Net income (loss) (Note E) (587) 3,949 25 6,981
------- ------- -------- --------
NET INCOME $ 4,261 $ 6,646 $ 8,906 $ 11,275
======= ======= ======== ========
EARNINGS (LOSS) PER SHARE
Continuing operations $ .19 $ .11 $ .35 $ .17
Discontinued operations (.02) .15 -- .27
------- ------- -------- --------
Total $ .17 $ .26 $ .35 $ .44
======= ======= ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (000's) 25,755 25,839 25,729 25,786
======= ======= ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
-3-
<PAGE> 6
<TABLE>
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Six Months Ended
July 31,
----------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 8,906 $ 11,275
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,857 21,044
Provision for credit losses and loan discounts 2,772 1,395
Provision for deferred income taxes (5,069) (3,878)
Changes in operating assets and liabilities:
Accounts receivable 2,426 5,008
Current income taxes payable 3,386 (1,088)
Interest receivable on dealer advances (3,719) (1,156)
Accounts payable and accrued expenses 715 (691)
Self-insurance claims (10,535) (3,229)
Other 2,387 2,932
-------- --------
Net cash provided by operating activities 13,126 31,612
-------- --------
Cash Flows from Investing Activities:
Principal collected on installment notes receivable 38,049 17,997
Purchase of rental automobiles (61) (8,617)
Proceeds from sale of rental automobiles 4,486 15,907
Purchase of dealership inventory (9,147) (1,634)
Purchase of other property and equipment (292) (420)
Advances to dealers and payments of dealer holdbacks (48,780) (21,976)
Other investing activities, net 1,170 44
-------- --------
Net cash (used in) provided by investing activities (14,575) 1,301
-------- --------
Cash Flows from Financing Activities:
Net borrowings (principal payments) on
operating debt and notes payable 908 (34,607)
Payments to acquire treasury stock (786) --
Other financing activities, net 1,227 1,474
-------- --------
Net cash provided by (used in) financing activities 1,349 (33,133)
-------- --------
Decrease in cash and cash equivalents (100) (220)
Cash and cash equivalents at beginning of period 398 758
-------- --------
Cash and cash equivalents at end of period $ 298 $ 538
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 548 $ 1,392
======== ========
Income taxes paid $ 7,547 $ 11,732
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
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<PAGE> 7
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - Summary of Significant Accounting Policies
------------------------------------------
GENERAL:
The accompanying consolidated financial statements include the
accounts of National Auto Credit, Inc. and its subsidiaries
(the Company).
The consolidated balance sheet at July 31, 1995, the
consolidated statements of income and the consolidated
statements of cash flows for the three-month and six-month
periods ended July 31, 1995 and 1994, 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 July
31, 1995 and for all periods presented have been made.
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, 1995
Form 10-K Annual Report. The results of operations for the
three-month and six-month periods ended July 31, 1995 may not
necessarily be indicative of the operating results for the full
year.
PROPERTY AND EQUIPMENT:
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, included in discontinued operations (Note E), or are
included in dealership operations, depending on the method of
disposal. The net gain from the sale of automobiles totaled
$1,847,000 and $1,185,000 for the quarters ended July 31, 1995
and 1994, respectively. The gain for the six months ended July
31, 1995 and 1994 was $3,771,000 and $1,881,000, respectively.
The number of automobiles sold by the Company, either through
dealership operations or other methods, was 2,769 and 2,891 for
the quarters ended July 31, 1995 and 1994, respectively, and
5,995 and 5,907 for the six months ended July 31, 1995 and 1994,
respectively. Other property and equipment is depreciated using
the straight-line method over its estimated useful life.
RECLASSIFICATIONS:
Certain prior period amounts have been reclassified to conform
with the current period presentation.
-5-
<PAGE> 8
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE B - Notes Receivable
----------------
Components of notes receivable are as follows:
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
----------- -----------
(in thousands)
<S> <C> <C>
Installment notes receivable $ 266,992 $ 193,456
Unearned income (41,093) (28,195)
Allowance for loan losses (1,629) (1,107)
----------- -----------
Installment notes receivable, net $ 224,270 $ 164,154
=========== ===========
</TABLE>
A summary of changes in gross installment notes receivable is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
------------------- -----------------
1995 1994 1995 1994
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $220,078 $129,540 $193,456 $ 93,233
Contracts accepted 81,495 40,030 139,799 90,061
Cash collection (29,033) (14,911) (54,527) (26,583)
Charge-offs (5,548) (2,480) (11,736) (4,532)
-------- -------- -------- --------
Balance, end of period $266,992 $152,179 $266,992 $152,179
======== ======== ======== ========
</TABLE>
Installment notes receivable are loans made by the Company's
finance subsidiary which is principally engaged in the indirect
consumer 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. Installment
notes generally have initial terms ranging from 12 to 42 months
with an average initial term of 31 months and a gross amount of
$8,300. The notes are collateralized by the related vehicle
sold. Installment notes receivable are from customers residing
in all 50 states with no individual state accounting for more
than 10% except North Carolina with 15%. At July 31 and January
31, 1995, the accrual of interest income was suspended on
$39,124,000 and $27,509,000 of installment notes receivable,
respectively.
The allowance for loan losses is provided for installment notes
receivable with no related dealer holdbacks and earned but
unpaid finance charges. Beginning in fiscal 1995, the Company
ceased entering into these types of receivables, which were 1.4%
and 3.5% of total gross installment notes receivable at July 31
and January 31, 1995, respectively. Changes in the allowance
for loan losses are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
----------------- -----------------
1995 1994 1995 1994
------ ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of periods $1,307 $ 1,315 $ 1,107 $ 914
Provision for credit losses
and loan discounts 432 201 825 727
Net charge-offs (110) (192) (303) (317)
------ ------- ------- -------
Balance, end of period $1,629 $ 1,324 $ 1,629 $ 1,324
====== ======= ======= =======
</TABLE>
-6-
<PAGE> 9
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE C - Dealer Holdbacks
----------------
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 and are not paid until
substantially all advances related to a particular dealer have
been recovered. The components of dealer holdbacks are as
follows:
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
--------- -----------
(in thousands)
<S> <C>
Dealer holdbacks $ 205,903 $ 140,850
Advances (163,895) (108,872)
Allowance for credit losses 3,709 1,838
--------- ----------
Dealer holdbacks, net $ 45,717 $ 33,816
========= ==========
An allowance for credit losses is provided to protect the Company from advances
that are not expected to be recovered as follows:
Three Months Ended Six Months Ended
July 31, July 31,
--------------------- -----------------
1995 1994 1995 1994
------- ------- ------- -------
(in thousands)
Balance, beginning of period $ 2,942 $ 1,268 $ 1,838 $ 800
Provision for credit losses 837 200 1,947 668
Net charge-offs (70) -- (76) --
------- ------- ------- -------
Balance, end of period $ 3,709 $ 1,468 $ 3,709 $ 1,468
======= ======= ======= =======
</TABLE>
NOTE D - Contingencies
-------------
In the normal course of its business, the Company is named as a
defendant in legal proceedings. It is the policy of the Company
to vigorously defend litigation and/or enter into settlements of
claims where management deems appropriate.
On June 15, 1992, former employees of the Company filed a class
action lawsuit which is currently in the United States District
Court for the Northern District of California. The complaint
alleged that the Company violated certain sections of the
California Labor Law, including those relating to the payment of
overtime. In November 1994 the liability phase of this case was
tried to the Court without a jury.
-7-
<PAGE> 10
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE D - Contingencies (continued)
-------------
On June 16, 1995, the Court issued a finding as to partial
liability against the Company. The case is now proceeding into
the damages phase. The Company estimates that claims for
damages, penalties, interest and attorneys fees could range from
$2 million, which has been accrued, to $5 million. The amount
of the ultimate liability or damages which might finally exist
is subject to numerous variables and cannot be more precisely
estimated.
NOTE E - Discontinued Operations
-----------------------
During the second quarter of fiscal 1996, the Company made the
determination that the rental car segment, operating under the
name of Agency Rent-A-Car, would be sold and therefore has
accounted for this segment as discontinued operations.
Accordingly, the assets and operating results of the rental
car segment, for all periods presented, have been restated to
reflect discontinuation.
On August 23, 1995, the Company entered into an agreement with a
subsidiary of Avis, Inc., principally selling certain assets for
cash, (delivery cars, field furniture and
-8-
<PAGE> 11
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE E - Discontinued Operations (continued)
-----------------------
fixtures, prepaid assets and tradename rights), leasing the
rental fleet for a term of up to twelve months and providing
certain support services (predominantly computer related) during
an interim transition period.
All liabilities related to the segment, principally
self-insurance claims and deferred taxes, are being retained by the
Company.
At closing, which is anticipated to occur in late September
1995, cash is to be received for the assets sold. The related
operating results between August 1, 1995 and close and the gain
(loss) on the sale at close are estimated to be approximately
break-even.
Summarized asset data related to discontinued operations is as
follows:
<TABLE>
July 31, January 31,
1995 1995
---------- ---------
(in thousands)
<S> <C> <C>
Accounts receivable, net of
allowance for doubtful accounts
of $2,579 and $3,720, respectively $ 7,434 $ 9,500
Rental automobiles, net of
accumulated depreciation of
$36,105 and $44,572, respectively 51,102 81,580
Other property and equipment, net 4,486 6,096
Other assets 10,613 13,150
---------- ---------
Total assets $ 73,635 $ 110,326
========== =========
</TABLE>
Summarized results of discontinued operations are as follows:
<TABLE>
Three Months Ended Six Months Ended
July 31, July 31,
------------------ ----------------
1995 1994 1995 1994
-------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Revenue $ 17,833 $36,119 $37,980 $75,258
Direct operating expenses 9,103 15,121 18,907 32,453
Depreciation and amortization 5,158 9,256 11,121 20,344
Other expenses 4,310 5,136 7,514 10,815
-------- ------- ------- -------
18,571 29,513 37,542 63,612
-------- ------- ------- -------
Income (loss) before
income taxes (738) 6,606 438 11,646
Provision (benefit) for
income taxes (151) 2,657 413 4,665
-------- ------- ------- -------
Net income (loss) $ (587) $ 3,949 $ 25 $ 6,981
======== ======= ======= =======
</TABLE>
-9-
<PAGE> 12
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Overview
--------
National Auto Credit, Inc. (the Company), had net income from continuing
operations of $4.8 million or $.19 per share for the quarter ended July 31,
1995 as compared to $2.7 million or $.11 per share for the quarter ended July
31, 1994.
For the six months ended July 31, 1995, net income from continuing
operations was $8.9 million or $.35 per share, a 107% increase from the $4.3
million or $.17 per share earned in the prior year.
The Company has accounted for the automobile rental segment of its
business, operating under the name of Agency Rent-A-Car, as discontinued
operations since a definitive plan of disposal was formulated during June 1995.
This follows the previously announced decision to exit this industry segment as
part of the strategic plan to concentrate and grow the core finance company
business. It is anticipated that the Company's earnings from its continuing
operations, the financing business, will continue to show significant increases
due to the planned growth of its installment notes receivable portfolio.
On August 1, 1995, the Company began trading on the New York Stock
Exchange, Inc. under the symbol, NAK.
Financial Services
------------------
Financial services revenue, generated by NAC, Inc., consisting primarily
of interest and fee income, increased to $9.1 million during the quarter ended
July 31, 1995 from $5.3 million for the quarter ended July 31, 1994 and
increased to $16.7 million from the $9.5 million for the six months then ended.
This revenue growth is attributable to the growth in the gross installment
notes receivable portfolio and in enrolled dealers as follows:
<TABLE>
Gross Installment Number
Notes Receivable Number of of Enrolled
Balance as of: (in millions) Contracts Dealers
-------------- ----------------- --------- -----------
<S> <C> <C> <C>
January 31, 1993 $ 5.1 1,000 100
July 31, 1993 40.8 5,600 500
January 31, 1994 93.2 12,900 900
July 31, 1994 152.2 21,500 1,200
January 31, 1995 193.5 28,400 1,400
July 31, 1995 267.0 40,700 1,900
</TABLE>
-10-
<PAGE> 13
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Services (continued)
------------------
Delinquencies and the rate of charge-offs in the second quarter were
consistent with the experience for preceding periods.
Operating margins continue to remain strong exceeding 90% for both the
current quarter as well as the six months ended July 31, 1995. Operating
expenses remained relatively consistent between the second quarter of this year
compared to last year due to operating efficiencies gained by the consolidation
of the branch offices and the benefit of additional fee income which offsets
certain operating expenses.
Management expects the gross installment notes receivable balance to be
$350 million with an enrolled member dealer population of 2,400 by fiscal year
end. To accomplish these goals the Company is constantly looking to improve
and expand the privileges of membership it offers and provide unique programs.
During the second quarter, the dealer advance calculation was changed to factor
in the model year of the car being purchased. In addition, the Company
introduced the "NAC 100" stock option program for member dealers. Each dealer
can qualify for stock options based upon the number of contracts generated.
Dealership Operations
---------------------
Dealership operations represents the Company's used car sales subsidiary,
National Motors, Inc. (NMI). Revenue was $17.1 million for the quarter ended
July 31, 1995 as compared to $15.9 million for the quarter ended July 31, 1994
and increased to $38.4 million from $35.0 million for the six month periods
then ended.
The 2,489 units sold during the quarter ended July 31, 1995 brought the
six month total to 5,505 cars, an increase of 341 and 752 cars respectively
over the prior year. Gross margins improved during both the second quarter and
year to date versus fiscal 1995 due largely to the introduction of vehicles
purchased at affordable prices through auction and a reduction in the number of
vehicles sold at wholesale. This trend is expected to continue as more cars
are purchased at auction or through other wholesale means as rental car
retirements continue to decrease.
NMI continues to be a significant servicing operation that processes and
distributes cars to NAC member dealers for retail sale. At July 31, 1995 and
1994 there were nine servicing centers.
-11-
<PAGE> 14
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Costs and Expenses
------------------------
Depreciation and amortization expense, relating primarily to corporate
facilities, computer equipment and furniture and fixtures, remained consistent
for the three months and six months ended July 31, 1995 as compared to the
prior year.
Selling, general and administrative expenses increased $740,000 for the
six months ended July 31, 1995 compared to the same period ended July 31, 1994.
The increase is due to additional costs associated with the growth in financial
services.
Interest expense increased from last year, both for the quarter and six
month periods ended July 31, 1995 as notes payable, which are used to purchase
treasury stock, increased $3.7 million from July 31, 1994 to July 31, 1995. In
addition the effective interest rate increased from approximately 4.0% in
fiscal 1995 to 6.1% for both the quarter and six month periods ended July 31,
1995.
Provision for Income Taxes
--------------------------
The effective income tax rate for continuing operations increased from
35.8% to 36.8% for both the quarter and year-to-date from the prior year. This
increase is attributable to the diminishing effect of the tax credits
generated from the Company's investment in certain affordable housing limited
partnerships applied to a higher income base.
Discontinued Operations
-----------------------
The Company entered into an agreement with a subsidiary of Avis, Inc. to
dispose of its automobile rental operations as disclosed in Note E to the
Consolidated Financial Statements. The transaction is expected to close by the
end of September 1995.
Revenue from discontinued operations decreased approximately 50% from the
prior year in both the quarter and six-month periods ended July 31, 1995. The
average fleet decreased to 8,700 units and 9,700 units for the quarter and six
month periods, down from 19,000 and 20,000 units the year before. The decrease
in revenue was partially offset by the increase in average rental rates and
utilization.
Operating and other expenses for the quarter ended July 31, 1995 include a
$1.7 million charge to reflect the estimated additional expense to the Company
as a result of the June 16, 1995 liability finding in the California Labor
lawsuit, as disclosed in Note D to the Consolidated Financial Statements.
Excluding this adjustment, expenses consisting of operating, depreciation and
selling, general and administrative expenses decreased proportionately with the
decrease in fleet size partially offset by costs related to closing rental
offices.
-12-
<PAGE> 15
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's primary sources of internally generated funds are as
follows:
<TABLE>
Six Months Ended July 31,
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Net cash provided by
operating activities $ 13,126 $ 31,612
Principal collected on
installment notes receivable 38,049 17,997
Proceeds from sale of rental automobiles 4,486 15,907
</TABLE>
External sources of funds available to the Company at July 31, 1995
amounted to $200 million in unsecured short-term commercial paper, $114 million
in unsecured uncommitted short-term bank lines of credit and $40 million in
unsecured committed bank lines of credit. The committed bank facility has no
compensating balance requirement and has been renewed to June 28, 1996.
Outstanding borrowings at July 31, 1995 amounted to $8.0 million in commercial
paper and $15.6 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. In addition, as a result of
discontinued rental operations, additional funds will be available to fund the
continued growth of the financial services business.
The ratio of operating debt to total capital was 4% at both July 31 and
January 31, 1995. It is anticipated that debt levels will remain minimal
through the end of this year.
-13-
<PAGE> 16
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Annual Meeting of Stockholders was held on June 21, 1995.
The election of two directors was voted upon. Below are the results of
the election:
<TABLE>
Votes
Votes Against Broker
in Favor or Withheld Abstentions Non-Votes
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Election of Directors
Sam J. Frankino 24,146,477 465,049 -- --
Noah T. Herndon 24,146,477 465,049 -- --
</TABLE>
Each other director whose term of office as a director continued
after the meeting are as follows: Joseph P. Henley, Robert J.
Bronchetti, Edward A. Burkhart, Per E. Hoel and Edward N.
Leszczynski.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
--------
Exhibit 27 - Financial Data Schedule
------------------------------------
Electronically filed with the Securities and Exchange
Commission pursuant to Item 601(c) of Regulation S-K
b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended July
31, 1995.
-14-
<PAGE> 17
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.
NATIONAL AUTO CREDIT, INC.
Date: September 12, 1995 By: /s/ Robert J. Bronchetti
--------------------- -------------------------
Robert J. Bronchetti
President and
Chief Executive Officer
and Director
By: /s/ Davida S. Howard
-------------------------
Davida S. Howard
Vice President-Finance and
Controller (Principal Financial
and Accounting Officer)
-15-
<PAGE> 18
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
BALANCE SHEET
INCOME STATEMENT
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 298
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 14,327
<CURRENT-ASSETS> 0
<PP&E> 14,611
<DEPRECIATION> 5,013
<TOTAL-ASSETS> 334,631
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,354
0
0
<OTHER-SE> 207,221
<TOTAL-LIABILITY-AND-EQUITY> 334,631
<SALES> 38,409
<TOTAL-REVENUES> 55,093
<CGS> 35,414
<TOTAL-COSTS> 36,907
<OTHER-EXPENSES> 736
<LOSS-PROVISION> 2,772
<INTEREST-EXPENSE> 497
<INCOME-PRETAX> 14,044
<INCOME-TAX> 5,163
<INCOME-CONTINUING> 8,881
<DISCONTINUED> 25
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,906
<EPS-PRIMARY> .35
<EPS-DILUTED> 0
</TABLE>
