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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-K
(MARK ONE)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended January 31, 1995.
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the Transition Period From ___________ to __________.
Commission file number 0-12201.
NATIONAL AUTO CREDIT, INC.
(Exact name of registrant as specified in its charter)
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Delaware 34-1050582
(State of incorporation) (I.R.S. Employer Identification No.)
30000 Aurora Road, Solon, Ohio 44139
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code: (216) 349-1000.
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
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Name of each exchange
Title of each class on which registered
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Common Stock, par value $.05 per share . . . . . . . . . . . . . . NASDAQ Stock Market
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Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K ( ).
As of March 31, 1995, 25,684,845 shares of Common Stock of National Auto
Credit, Inc. were outstanding. Aggregate market value of the registrant's
Common Stock held by nonaffiliates at March 31, 1995, was approximately
$126,796,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held on June 21, 1995, are incorporated by reference into Part III.
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TABLE OF CONTENTS
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Part I Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 9
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Part II
Item 5. Market for the Registrant's Common
Stock and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 20
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . 40
Part III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 41
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 41
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 41
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . 42
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PART I
Item 1. Business
National Auto Credit, Inc. (the "Company"), began operations in 1969
and was incorporated in Delaware in 1971. The Company's name was changed by
stockholder approval to National Auto Credit, Inc. effective August 15, 1994,
and was formerly known as Agency Rent-A-Car, Inc. ("Agency"). The Company
operates through three segments: financial services, rental operations and
dealership operations.
The financial services business is conducted by NAC, Inc. ("NAC"), a
wholly-owned subsidiary of the Company. NAC operates as an alternative finance
company for automobile dealerships throughout the United States. Working with
over 1,600 dealers in its dealer network, NAC has established a receivables
portfolio of over $215 million as of April 1995 and plans continued growth
throughout fiscal 1996.
The primary business of rental operations is the rental of automobiles
on a short term basis, principally to the insurance replacement market. This
market consists of persons whose automobiles are out of service due to
accident, theft, damage or major repair. Vehicles are rented through two
divisions under the names Agency Rent-A-Car and Altra Auto Rental from a rental
office network of approximately 250 offices throughout the United States as of
April 1995.
The dealership operations segment supplies and sells front-line ready
vehicles to NAC member dealers. This business unit, known as National Motors,
Inc. ("NMI"), also controls the disposition of the retired rental units.
Dealership operations generated $64.7 million in revenue from the sale of
approximately 9,000 vehicles in fiscal 1995. Over 80% of these vehicles were
sold to NAC member dealers.
The financial services business has been increasingly more profitable
and has been growing significantly faster than the vehicle replacement rental
business. As a result, the Company has determined that it will focus its
resources on the financial services business as a means of enhancing the
long-term growth potential of the Company. For this reason, on March 1, 1995
the Company announced that it had retained the services of Brown Brothers
Harriman & Co. to assist and advise in the marketing and sale of the Company's
automobile rental operation. In the event automobile rental operations are not
sold within the first nine months of the current fiscal year, the Board of
Directors has approved a plan that would convert a substantial portion of the
rental fleet into cash for the planned purpose of a buyback of the Company's
stock.
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FINANCIAL SERVICES
GENERAL
National Auto Credit's wholly-owned financial services subsidiary,
NAC, Inc. ("NAC"), began operations in October 1992. NAC is a financial
services company specializing in providing funding, receivables management,
collection, sales training and other services to automobile dealers. The
primary business of NAC is to assist member dealers in providing financing to
their customers, many of whom have limited access to financing through
traditional sources of consumer credit. As of April 1995 NAC conducted
business with over 1,600 dealerships in 40 states, and has built an installment
receivable portfolio of over $215 million.
NAC enables member dealers to capture the sale that may have been lost
as a result of unavailable credit. NAC currently charges qualified dealers a
$3,500 fee for enrollment into the NAC Dealer Acceptance Program, which
provides a source of funds for the qualified buyer, as well as a means of
positive cash flow to the dealer on each and every sale. Annually thereafter,
a $500 maintenance fee is assessed. A prospective customer who is interested
in obtaining financing through NAC and its member dealers is required to
complete a financing application in addition to a retail installment contract.
The credit application is reviewed by seasoned credit underwriters
who, with the assistance of a risk rating system methodology, categorize the
borrower using traditional credit classifications of "A" through "D". Upon
receiving credit approval and the receipt of all requisite paperwork, the NAC
dealer is generally provided with a minimum cash advance, net of a $75
transaction fee, equal to a percentage of the amount financed or the National
Automobile Dealers Association (NADA) wholesale value of the vehicle, whichever
is less. The advance percentages increase proportionately as the credit risk
of the customer improves, but the advance never exceeds the wholesale value of
the car. The amount by which the customer net installment note exceeds the
advance is recorded as a dealer holdback. Risk of loss to NAC is mitigated by
the existence of the dealer holdback, as well as NAC's obtaining from the
dealer the security interest in every vehicle financed.
The installment notes generally have initial terms ranging from 12 to
42 months with an average initial term of 31 months. For the management and
collection of the outstanding debt, NAC receives 20% of all cash receipts
related to the installment notes. The balance remaining (80%) is next applied
against the dealer's advance. Once all advances have been repaid, the dealer
receives monthly payments in accordance with the terms of the dealer agreement.
The dealer is provided a monthly statement which details all transactions on
the dealer's contracts.
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SALES AND MARKETING
NAC employs experienced sales and marketing personnel at Corporate and
in the field for the purpose of enrolling new dealers and providing services to
existing dealers. It is the responsibility of inside sales personnel working
together with a field representative to identify qualified dealer leads and
promote the benefits of membership in the NAC financing program. NAC accepts
into the Dealer Acceptance Program only those dealers who meet specific
criteria which includes proper licensing and insurance coverage, favorable
trade references and demonstrated financial stability. Qualified applications
are submitted to NAC's credit department at the Corporate office for final
approval and execution of the dealer agreement.
NAC sponsors in-depth, interactive training workshops on a regular
basis as a service to its member dealers. These seminars help keep product
knowledge updated and consistent; the more a dealer knows about the
revenue-producing benefits of NAC, the more he will utilize the program.
NAC also utilizes national direct marketing campaigns, trade show
involvement and print advertising to build its image in an effort to stimulate
more enrollments and generate increased contract volume. A cooperative
advertising assistance program unique to NAC provides member dealers an
opportunity to fund a portion of their advertising expenses through credits
earned on the financing contracts. This has proven to be a very beneficial
means of increasing the loyalty of member dealers.
LOAN PROCESSING OPERATION
During fiscal 1995 NAC operated up to six branch locations which were
responsible for the review of loan applications, credit scoring and
disbursement of advances to member dealers on approved loans. In late fiscal
1995 NAC decided to consolidate this loan processing function into a single
location at its Corporate Headquarters in Solon, Ohio. At January 31, 1995
three of the six branches had been consolidated leaving branches in Albany, New
York; Baltimore, Maryland; and Atlanta, Georgia which were consolidated in the
first quarter of fiscal 1996. NAC expects to be able to realize significant
improvement in its ability to service its member dealers by providing more
consistent, timely and proactive service.
The loan files including the title to the financed vehicles,
application and loan documents are maintained centrally where they are
accessible on an as needed basis to respond to inquiries or for collection
purposes. NAC utilizes an automated tracking/locating system to readily
identify the physical location of the loan files at all times.
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COLLECTION
NAC employs an experienced collection staff dedicated to the
collection of its installment notes receivable. The collection function is
performed out of the Company's Corporate Headquarters in Solon, Ohio.
Collection personnel work staggered schedules generally from 8:00 a.m. to 9:00
p.m. depending on the region of the country to which they are assigned. The
collection efforts of the individuals are aided by a computerized on-line
receivables system and state of the art call management system with a
predictive dialing feature. The call management system which was installed in
June 1994 has greatly increased the productivity of the collection department
and enables NAC to contact delinquent accounts on the third day of delinquency.
Previously NAC had been contacting delinquent accounts after the fifth day of
delinquency. Experience has demonstrated that collections improve through
timely and frequent contact with customers.
NAC's collection policy, while aggressive, provides the opportunity
for a customer to catch-up past due balances and retain the vehicle. In those
cases where repossessions are necessary, NAC does pursue the collection of any
deficiencies. NAC utilizes "VSI" insurance in most states which insures
against a loss where the customer or car cannot be located or the customer's
insurance has lapsed.
Coupon payment books are sent to each customer and receipts are
directed to retail lockboxes in Denver, Colorado and Richmond, Virginia.
Customers who are delinquent are often directed to remit payments to NAC
through Western Union's "Quick Collect" service.
LOAN LOSS/CHARGE OFF PROCEDURES
When no customer payment is received for 60 days the recognition of
income is suspended. The installment notes receivable portfolio is reviewed
regularly to ensure that the allowance for loan losses is maintained at a level
considered adequate to cover potential losses. Loans are charged off on a loan
by loan basis generally when no material payment has been received for one
year. Principal balances are charged off against the related dealer holdback
first, and then against the allowance for loan losses, as necessary. An
additional allowance for credit losses is provided to protect NAC from advances
that are not expected to be recovered from dealerships.
Repossession proceedings are generally initiated when an account is
more than two months past due. The repossession process is accelerated for
loans becoming delinquent in the first or second month.
COMPETITION
It is estimated that over $100 billion in used car sales was financed
in 1994 nationwide with as many as 50% of these buyers not qualifying for
traditional financing with banks, credit unions or the auto manufacturers
themselves. This market is the primary focus of NAC.
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NAC's direct competition consists of a number of national and regional
automobile finance companies and other consumer finance businesses. NAC does
not consider itself in direct competition with commercial banks, thrifts and
automobile manufacturers' financing divisions since they do not typically
finance vehicle purchases for the nonprime credit customer. Some of these
entities have considered entering or have entered this market recently and the
increased competition will continue to be a challenge to NAC's aggressive
growth plans.
Management believes the most important competitive factors in this
industry are service to dealers and superior collection performance, and that
NAC competes favorably in both regards. The NAC Dealer Acceptance Program
includes a number of benefits that has made NAC a full- service financial
partner with its member dealers. These exclusive benefits provide several
additional revenue centers for both the member dealer and NAC as follows:
inventory with no up front costs to the dealer, aftermarket products including
auto warranty, credit life and health insurance, floor plan financing at the
prime rate, advertising assistance and ongoing training at no cost.
REGULATION
The financial services operations are subject to regulation under
various federal, state and local laws. These laws govern licensing;
limitations on the amount, duration and charges for loans; disclosure of credit
terms; and collection policies and procedures. Management believes that it is
in compliance with all applicable federal, state and local regulations.
AUTOMOBILE RENTALS
GENERAL
The primary business of automobile rentals is the rental of
automobiles on a short-term basis, principally to the insurance replacement
market. This market consists of persons whose automobiles are out of service
due to accident, theft, damage or major repair. Vehicles are rented through
two divisions under the names Agency Rent-A-Car and Altra Auto Rental from a
rental office network of approximately 250 offices throughout the United States
as of April 1995. Automobile insurance companies generally provide
reimbursement for a replacement automobile to their insured and to third party
claimants.
The automobile rental industry is divided into two categories:
business and vacation rentals, and insurance replacement rentals. The business
and vacation automobile rental companies charge substantially higher rates than
insurance replacement rental companies. These companies generally operate out
of more costly 24 hour-a-day airport or city locations and offer a wide variety
of immediately available vehicles. In contrast, insurance replacement rental
companies usually operate from less costly suburban locations and offer a
limited selection of standard, intermediate-size automobiles, which are
ordinarily used as family car replacements for routine, low-mileage, local
travel. Additionally, the utilization rate of the insurance replacement
industry is believed to be considerably higher than that of the business and
vacation rental industry.
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COMPETITION
Agency Rent-A-Car's ("Agency") principal competition consists of two
national and numerous regional and local companies engaged directly in the
insurance replacement rental market. Competition in the replacement market is
comprised of three primary factors: customer service, rental rates, and
geographic location. The level of a company's success is dependent upon its
ability to compete in these areas, and Agency is competitive in all three
areas.
PRICING
Agency's rental rates differ between insurance replacement rentals and
business and vacation rentals. Most insurance replacement rental rates
currently range from $21 to $27 per day, and the business and vacation rental
rate averages $30 per day. There is also a $5 to $10 refueling fee assessed on
insurance rentals in some states. No mileage charge is imposed on insurance
replacement rentals; however, if a rental vehicle is returned to a different
rental office, there may be a drop-off charge. Agency adjusts its rental rates
accordingly, depending on competitive market conditions and the region's
operating costs and expenses.
MARKETING
Agency advertises in Yellow Page directories in all of its markets.
It also participates in and exhibits displays at most major insurance
conventions and other trade shows. Agency employs a team sales approach
whereby every employee is sales oriented and responsible for soliciting
business from claims centers, insurance agents, adjusters, auto body shops,
automobile dealerships and travel agents. To support its relationship with the
collision/mechanical repair industry, Agency employs its Commissionable Agent
Program, which provides body shops and dealerships a commission on every paid
rental contract referral. Agency also utilizes direct mail campaigns.
FLEET ADMINISTRATION
Agency offers a selection of General Motors, Ford, Chrysler, Toyota
and Nissan products. Agency also maintains a fleet of light pick-up trucks
with tow dollies for the delivery and pickup of rental vehicles. Considerable
attention is given to the maintenance of vehicles. Maintenance histories of
all automobiles are kept on Agency's computer system. Maintenance and repairs
on all vehicles are performed by various national automotive repair chains, as
well as by independent garages and auto body shops. Maintenance spending is
controlled centrally by a team of experts who establish strict vehicle repair
cost and service standards in each region of the country.
Agency currently retires its rental vehicles from the fleet after
approximately 31 months of service. In contrast to the fleet vehicles owned by
the business and vacation rental companies, Agency's vehicles incur lower
mileage per rental since its vehicles generally replace family automobiles used
for routine local travel as opposed to high-mileage business or vacation
travel.
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FIELD OPERATIONS
The typical Agency rental office is approximately 600 square feet in
size and is generally located in a professional office building or small
shopping center. Rental offices do not require a large parking area as
Agency's vehicle utilization rate generally approximates 90%. Office locations
are designed to provide a centralized point of delivery within an area of
operations. The rental delivery area can extend up to 25 miles depending on
the particular market. Rental vehicles are delivered using a light pick-up
truck and a tow dolly. This enables one employee to deliver or pick up an
automobile unassisted.
Control over the network of nationwide offices is maintained by
management through a computerized system of financial controls, by fax
transmissions and daily telephone contact between field management and
corporate headquarters. Agency maintains a central computerized billing and
collection system. In addition, it utilizes credit card point-of-sale
terminals in all its offices.
Agency maintains strict controls over operating expenses through a
computerized monitoring system. Each rental office receives a monthly profit
and loss statement upon which employee bonus compensation is based.
Agency conducts most of its operations between the hours of 8:00 a.m.
and 5:30 p.m., with the exception of Fridays when rental offices are open until
6:00 p.m., and Saturdays when rental offices are open between 9:00 a.m. and
12:00 noon. Agency's rental offices are closed on Sundays and major holidays.
INSURANCE AND CLAIMS ADMINISTRATION
Agency maintains a staff of liability, physical damage and subrogation
adjusters centrally located at Corporate headquarters. Their efforts are
augmented by staff attorneys and an established network of independent claims
adjusters and law firms located throughout the United States. This insurance
and claims team, together with cooperation from Agency's field staff, is
responsible for the overall quality and success of the investigation, reserving
and litigation and/or settlement of claims against Agency.
DEALERSHIP OPERATIONS
The dealership operations segment supplies and sells front-line ready
vehicles to NAC member dealers. This business unit, known as National Motors,
Inc. ("NMI"), also controls the disposition of the retired rental units.
Dealership operations generated $64.7 million in revenue from the sale of
approximately 9,000 vehicles in fiscal 1995. Over 80% of these vehicles were
sold to NAC member dealers.
Disposition of Agency's retired vehicles is centrally controlled by
the dealership operations group. These vehicle sales professionals determine
the most efficient and profitable means of disposal, either through National
Auto Credit (NAC) member dealers, wholesale or auction. The dealership
operations group currently operates nine "Program Car Prep Centers" which
oversee the preparation and detailing of retired vehicles as well as less
expensive vehicles purchased
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from auctions for sale through NAC member dealers, referred to as "Econocars".
NAC has provided Agency with the most profitable method to date of fleet
disposal, and currently 80% of retired vehicles are sold through NAC member
dealers.
CORPORATE
The corporate staff includes executive management and various support
functions, which are centralized at the Company's corporate headquarters
located in Solon, Ohio, a southeast suburb of Cleveland. These functions
include accounting, payroll, benefits, legal, management information systems,
tax and treasury.
EMPLOYEES
The Company employs a total of 1,000 people, 750 of whom work in the
rental operations group. The financial services group has approximately 150
employees, and the remaining 100 people are involved in the dealership
operations and the corporate functions noted above. None of the employees are
covered by a collective bargaining agreement, and the Company believes it has
good relations with its employees.
SEGMENT REPORTING INFORMATION
Financial information about the Company's industry segments is provided in Note
M to the Company's consolidated financial statements on page 36 of this Form
10-K which is herein incorporated by reference.
Item 2. Properties
The Company's executive offices are located in two four-story, 55,000
square feet office buildings owned by the Company in Solon, Ohio. The Company
leases, under short-term lease agreements, office space for its automobile
rental operations and office and lot space for its automobile prep centers.
The Company owns facilities in Beach City, Ohio (9,000 square feet) and Delran,
New Jersey (12,000 square feet), which are used as automobile prep centers.
The Company believes that its operational facilities and other
properties are well maintained and adequate for its future operations.
Item 3. Legal Proceedings
The Company self-insures for insurance claims and is a defendant in
other legal proceedings as discussed in Notes D and O to the Company's
consolidated financial statements on pages 31 and 39 of this Form 10-K which is
herein incorporated by reference.
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Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
three months ended January 31, 1995.
Executive Officers of the Registrant
Executive officers hold office until the annual meeting of the Board of
Directors, subject to earlier removal by the Board of Directors.
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Name Age Position
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Sam J. Frankino 70 Chairman of the Board
Robert J. Bronchetti 47 President, Chief Executive Officer and Director
Edward A. Burkhart 35 Executive Vice President and Director
David R. Thomson 46 Executive Vice President, Sales and Marketing
Thomas J. Dostart 40 Vice President, General Counsel and Secretary
Davida S. Howard 48 Vice President-Finance and Controller
Gary J. Mooney 47 Vice President, Auto Sales and Service
James E. Smith, Jr. 40 Vice President, Operations
Richard A. Tomaszewski 45 Vice President, Credit and Collections
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Executive Officers of the Registrant (cont.)
Sam J. Frankino
Mr. Frankino, founder and majority stockholder of the Company, has
served as the Chairman of the Board of Directors of the Company since 1969.
Mr. Frankino has also served as Chief Executive Officer from 1969 to 1992 and
from December 1993 until December 1994.
Robert J. Bronchetti
Mr. Bronchetti, President and Chief Executive Officer, has been
employed by the Company since May 1991 and was elected a Director in September
1993. Mr. Bronchetti has held the position of President since March 1994 and
Chief Executive Officer since December 1994. Mr. Bronchetti previously held
the positions of Executive Vice President and Chief Financial Officer, Vice
President and Chief Financial Officer and Vice President of Finance and
Treasurer. Prior to 1991, Mr. Bronchetti held various financial management
positions with Engelhard Corporation and its wholly-owned subsidiary, The
Harshaw Chemical Company.
Edward A. Burkhart
Mr. Burkhart, Executive Vice President, has been employed by the
Company since 1982 and was appointed a Director in April 1994. Mr. Burkhart
has held numerous positions with the Company including Office Manager, District
Manager, Regional Director, Regional Vice President and Senior Vice President,
Rental Operations prior to assuming his present duties in March 1994.
David R. Thomson
Mr. Thomson, Executive Vice President, Sales and Marketing, has been
employed by the Company since February 1993. Mr. Thomson held the positions of
Vice President of Sales and National Sales Manager prior to assuming his
present duties in March 1994. For three years prior to 1993 he held the
position of General Manager and Finance Manager at Fairchild Acura.
Thomas J. Dostart
Mr. Dostart, Vice President, General Counsel and Secretary has been
employed by the Company since February 1995. From May 1992 until January 1995,
Mr. Dostart was General Counsel for Interactive Systems Corporation, a Kodak
company, and successor organizations. Prior to May 1992, Mr. Dostart was
employed by Amoco Corporation and Jones, Day, Reavis & Pogue as an attorney.
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Executive Officers of the Registrant (cont.)
Davida S. Howard
Ms. Howard, Vice President-Finance and Controller, has been employed
by the Company since July 1990. Ms. Howard held the position of Controller
prior to assuming her present duties in March 1994. Prior to 1990, Ms. Howard
was Vice President of Finance and Administration/Controller with SNS
Properties, Inc. and audit manager with Price Waterhouse & Co.
Gary J. Mooney
Mr. Mooney, Vice President, Auto Sales and Service has been employed
by the Company since January 1990. Mr. Mooney held the positions of Regional
Director and National Director, Vehicle Sales prior to assuming his present
position in May 1993.
James E. Smith, Jr.
Mr. Smith, Vice President of Operations has been employed by the
Company since May 1993. Mr. Smith held the positions of Regional Director and
Regional Vice President, Operations prior to assuming his present position in
July 1994. For six years prior to 1993, Mr. Smith was Branch Operations
Manager for Chrysler Credit Corporation.
Richard A. Tomaszewski
Mr. Tomaszewski, Vice President, Credit and Collections, has been
employed by the Company since December 1991. Mr. Tomaszewski held the
positions of Manager, Director of Operations and Director of Collections prior
to assuming his present duties in January 1995. From March 1991 until December
1991, Mr. Tomaszewski was Assistant Credit Manager with Ford Consumer Finance,
Inc. Prior to 1991, Mr. Tomaszewski held various positions with TransOhio
Savings Bank, including that of Consumer Loan Manager.
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PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
MARKET INFORMATION
The Company's common stock, $.05 par value, trades on the NASDAQ Stock
Market under the symbol: "NACC". The following table reflects the high and low
sales prices for the Company's common stock during the periods indicated as
reported on the NASDAQ Stock Market.
PRICE RANGE OF COMMON STOCK
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High Low
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Year ended January 31, 1995
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15 $ 11 7/8
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10 5/8
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3/4 11 1/8
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1/8 9 3/8
Year ended January 31, 1994
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $ 7 1/2
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7/8 7 5/8
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3/8 8
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1/2 10 1/8
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STOCKHOLDERS
There were 1,516 stockholders of record of the Company's common stock
as of March 31, 1995.
DIVIDENDS
It has been the Company's policy to retain earnings to finance the
growth of its business and reduce outstanding debt; accordingly the Company has
generally not issued a cash dividend. However, the Company does from time to
time reassess its cash dividend policy and may issue cash dividends in the
future if circumstances warrant. No cash dividends were declared for the
fiscal years ended January 31, 1995 and 1994.
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Item 6. Selected Financial Data - Set forth below is selected financial data
with respect to the income statements of the Company for the five years ended
January 31, 1995, and with respect to the balance sheets of the Company at
January 31 in each of those years (thousands of dollars, except per share
amounts).
<TABLE>
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Selected Income Statement Data: Years ended January 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
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REVENUE
Automobile rentals $132,111 $222,460 $282,421 $269,003 $278,953
Dealership operations 64,651 73,303 48,949 9,229 --
Financial services 22,401 7,419 342 -- --
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Total 219,163 303,182 331,712 278,232 278,953
COSTS AND EXPENSES
Cost of goods sold and
operating expenses:
Automobile rentals 57,310 95,378 121,186 121,431 129,865
Dealership operations 61,618 72,321 48,665 9,551 --
Financial services 2,829 875 299 -- --
Depreciation and amortization 36,660 61,338 75,521 68,725 86,003
Selling, general and administrative 22,168 38,137 48,556 42,713 43,122
Interest 2,150 4,565 7,051 7,642 10,024
Special charge -- -- 3,610 -- --
-------- -------- -------- -------- --------
Total 182,735 272,614 304,888 250,062 269,014
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES 36,428 30,568 26,824 28,170 9,939
Provision for income taxes 14,025 12,330 10,018 10,986 3,459
-------- -------- -------- -------- --------
NET INCOME $ 22,403 18,238 16,806 17,184 6,480
======== ======== ======== ======== ========
NET INCOME PER SHARE $ .87 $ .72 $ .66 $ .68 $ .25
======== ======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (000's) 25,814 25,468 25,443 25,401 26,115
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Selected Balance Sheet Data: January 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Accounts and notes receivable $175,071 $ 94,147 $ 32,730 $ 26,485 $ 27,409
Property and equipment, net 97,904 204,239 331,490 312,690 276,906
Total assets 320,941 350,921 406,076 372,397 326,268
Total operating debt 10,192 68,491 145,308 125,800 106,146
Stockholders' equity 199,228 177,257 157,054 141,574 128,320
Ratio of total liabilities
to stockholders' equity .6 1.0 1.6 1.6 1.5
Percent of operating debt to
total capital 4% 25% 44% 43% 41%
</TABLE>
Certain prior year amounts have been reclassified to conform with the current
year presentation.
13
<PAGE> 16
Item 7. 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 of $22.4
million or $.87 per share, an increase of $4.2 million or $.15 per share from
$18.2 million or $.72 per share for fiscal 1994. Of significant note is the
earnings contribution from the Company's financial services segment of $.46 per
share for fiscal 1995, a 188% increase over the $.16 per share in the prior
year.
The Company's earnings for the year were driven by the rapid expansion
of its automobile loan gross receivable portfolio which grew 108% from $93.2
million at January 31, 1994 to $193.5 million at January 31, 1995. The
expansion in the financial services segment and related profits was partially
offset by the decline in revenue in the Company's automobile rental business
segment due to the reduction in its rental fleet from 23,700 cars at January
31, 1994 to 11,700 cars at January 31, 1995. Revenues from the Company's
dealership operations decreased due to a reduction in the total number of units
sold from 12,200 in fiscal 1994 to 8,900 in fiscal 1995; however gross margins
increased due to higher average selling prices.
It is anticipated that the financial services segment will continue to
contribute, in increasing proportion, to the Company's net income consistent
with the ongoing expansion of its automobile loan portfolio. Revenue and
profit of the rental business will decline further due to the reduction in
fleet that has already occurred coupled with normal fleet retirements that will
not be replaced by new purchases. It is the Company's intention to sell its
rental business in fiscal 1996 or begin a final liquidation of its rental car
assets. The Company's dealership operations will continue to operate at
approximately the same level.
Financial Services
The Company's financial services subsidiary, NAC, Inc. ("NAC") had
revenue of $22.4 million, a 202% increase over the $7.4 million earned during
fiscal 1994. This revenue growth, which is predominately interest income, is
attributable to the growth in the automobile loan gross receivable portfolio
generated through enrolled member dealers.
This portfolio, which was $93.2 million at January 31, 1994, grew by
108% during fiscal 1995 to $193.5 million at January 31, 1995. This increase
was driven by the expansion of NAC's enrolled dealer network from 900 to 1400
members at the end of fiscal 1995, an increase of 500 dealer members from the
previous year.
14
<PAGE> 17
Also included in financial services revenue are net enrollment fees,
late fees and various commissions derived from the sale of credit related
products such as warranties and credit life insurance, of which NAC bears no
material contingent liability. Revenue derived from warranty sales during
fiscal 1995 totaled $1.2 million as compared to $.2 million in fiscal 1994.
Revenues from credit life insurance, which started late in fiscal 1995, were
immaterial but have the potential to expand considerably in fiscal 1996.
During fiscal 1995 NAC serviced its member dealers through six branch
locations. In the fourth quarter of fiscal 1995 NAC decided to consolidate its
loan processing operation to provide more consistent, timely and proactive
service to its expanding dealer network. By the end of fiscal 1995 three of
the six branch locations had been consolidated in available space at the
Company's corporate headquarters with the remaining branch locations already
consolidated in the first quarter of fiscal 1996.
Operating expenses of the financial services segment increased to $2.8
million in fiscal 1995 from $.9 million in fiscal 1994. This increase, which
is roughly proportional to the reported increase in revenues for the period, is
due to the staffing and related overhead needed to support the much larger
receivable portfolio and dealer network. The percentage breakdown of NAC's
operating expenses for fiscal 1995 and fiscal 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Salaries and Benefits 57.8% 60.3%
Office Supplies 10.1 9.3
Telephone 8.8 5.7
Travel 8.5 8.3
Advertising 6.0 7.8
Rent and Utilities 4.1 3.2
Other 4.7 5.4
----- -----
Total 100.0% 100.0%
===== =====
</TABLE>
Financial services revenue in fiscal 1994 was $7.4 million as compared
to $.3 million in fiscal 1993, the initial year of financial service
operations.
NAC's automobile loan gross receivable portfolio grew to $93.2 million
by fiscal 1994 year end from $5.1 million at January 31, 1993. The growth in
NAC's receivable portfolio was driven by an increase in enrolled dealers to 900
at January 31, 1994 from 100 the year before.
NAC continues to set new milestones monthly. By fiscal year end 1996
the gross receivable portfolio is expected to be at least $300 million as NAC
continues its pursuit of becoming the premier alternative financing source for
new and used car dealers throughout the country.
15
<PAGE> 18
Dealership Operations
Dealership operations represents the Company's used car sales
subsidiary operating under the name of National Motors, Inc. ("NMI"), formerly
Agency Auto Sales. Revenue decreased 11.8% to $64.7 million on the sale of
8,900 cars from $73.3 million on the sale of 12,200 cars during fiscal 1994.
This sales decrease resulted from a decrease in the number of available
vehicles for sale due to fewer rental car retirements. As rental car
retirements continue to decrease, the Company intends to purchase units at
auction or through other wholesale means to meet dealer demands.
The average selling price per car increased by 21% to $7,270. Cost of
sales decreased to $61.6 million from $72.3 million in fiscal 1994 as a result
of decreased sales volume, a decrease in salaries, rent and related operating
expenses, offset by an increased average cost per car.
As the Company's core business evolves from automobile rental to
financial services, NMI is taking on greater significance as a servicing
operation that processes and distributes cars to NAC member dealers for retail
sale. This strategy has enabled NMI to improve margins and control operating
costs. During fiscal 1994 up to twenty-one NMI locations were in operation.
At January 31, 1994 and for all of fiscal 1995 only nine locations were
utilized.
Automobile Rentals
Automobile rentals represents the Company's rental car division,
Agency Rent-A-Car ("Agency"). Rental revenue decreased in fiscal 1995 to
$132.1 million from $222.5 million in fiscal 1994. The average rental rate
increased 2.6% from $23.31 to $23.92 per car day in fiscal 1995 versus fiscal
1994 and utilization remained relatively consistent from year to year at
approximately 90%. Approximately 160 offices were closed or merged and the
average fleet decreased by 13,000 cars to 17,000, as Agency continued on its
course of consolidating its operations into the major metropolitan areas across
the country with the greatest profit potential. At January 31, 1995 there were
288 offices operating a rental fleet of approximately 11,700 cars.
Rental revenue decreased in fiscal 1994 as compared to fiscal 1993 due
to the closing of approximately 200 offices and a resulting decrease in the
average fleet size by 8,000 cars. Utilization during the periods averaged
approximately 90% and the average daily rental rate in fiscal 1994 was $23.31
versus $22.76 in fiscal 1993.
Operating expenses declined to $57.3 million in fiscal 1995 from $95.4
million in fiscal 1994. This 40% decrease is directly proportionate with the
decrease in the average rental fleet and is across all major expense categories
including salaries, claims and maintenance.
16
<PAGE> 19
Operating expenses decreased in fiscal 1994 to $95.4 million from
$121.2 million in fiscal 1993. The 21% overall decrease is reflective of major
expense reductions including a 41% decrease in claims expense. This
disproportionate reduction in claims expense was a direct result of office
closings in certain high-risk major metropolitan areas which reduced the
actuarially determined expense by $4.3 million due to the reduced risk level
over and above the $5.7 million reduction which resulted from the reduced fleet
size.
On March 1, 1995, the Company announced that automobile rental assets,
including the name, Agency Rent-A-Car, are being offered for sale. The Company
further stated that if a sale is not consummated in the first nine months of
fiscal 1996 it will complete a liquidation of its remaining rental car assets.
As a result of the decision the Company expects that during fiscal 1996 the
rental operations segment will be reflected as a discontinued operation.
During the interim period, revenues and net income will be below that of prior
periods due to the reduction in fleet that has already occurred and further
reductions that will occur due to normal attrition.
Since the manner in which the discontinuance of automobile rental
operations has not yet been determined, any gain or loss to be realized on the
disposal of the assets and any costs and expenses directly associated with that
disposal cannot be estimated with reasonable accuracy at the present time.
Depreciation and Amortization
Depreciation and amortization expense declined $24.6 million to $36.7
million in fiscal 1995 from $61.3 million in fiscal 1994 due to the significant
reduction in fleet size. Agency's composite monthly depreciation rate was
consistent in both fiscal 1995 and 1994 at approximately 1.5% of purchase cost.
Depreciation and amortization expense decreased to $61.3 million for
the year ended January 31, 1994 as compared to $75.5 million for the year ended
January 31, 1993. The decrease was predominantly a result of the reduced fleet
size, partially offset by a 5% increase in average vehicle cost.
Selling, General and Administrative
Selling, general and administrative expenses decreased to $22.2
million in fiscal 1995 from $38.1 million in fiscal 1994. This decrease of 42%
resulted from the downsizing of rental operations and across-the-board cost
cutting efforts. The reduction was primarily in the areas of support staffing
and related items such as postage, travel, telephone/utilities and supplies.
Selling, general and administrative expenses decreased to $38.1
million in fiscal 1994 from $48.6 million in fiscal 1993. The decrease of
$10.5 million was principally attributable to the successful completion of the
rental operations realignment which had started during the fourth quarter of
fiscal 1993.
17
<PAGE> 20
Interest
Interest expense declined to $2.2 million in fiscal 1995 as compared
to $4.6 million in the prior year due to a 64% decrease in average debt of
$79.3 million to $45.3 million, partially offset by an increase in the
Company's effective cost of borrowing to 4.1% for the year ended January 31,
1995 from 3.4% for the year ended January 31, 1994. The lower debt level
resulted from a reduction in vehicle purchases, from 6,000 to 1,500 cars,
necessary to sustain the reduced fleet size.
The decrease in interest expense from $7.1 million in fiscal 1993 to
$4.6 million in fiscal 1994 was due to lower effective interest rates and a
decrease in average debt outstanding by $36.7 million to $124.6 million for
fiscal 1994.
Income Taxes
The provision for income taxes in fiscal 1995 increased to $14 million
from $12.3 million in fiscal 1994 as a result of higher pre-tax income
partially offset by a decrease in the effective tax rate to 38.5% from 40.3%.
The decrease in the effective tax rate is due to the retroactive $714,000
adjustment to deferred taxes in fiscal 1994 reflective of the increased federal
tax rate from 34% to 35% enacted by the passage of the Omnibus Budget
Reconciliation Act of 1993.
The provision for income taxes in 1994 increased to $12.3 million from
$10 million in fiscal 1993 as a result of both higher pre-tax income and an
increase in the Company's effective tax rate to 40.3% from 37.4%. The increase
in the rate resulted from enactment of the tax act mentioned above and the
corresponding impact on the deferred tax liability as required under SFAS No.
109 "Accounting for Income Taxes".
IMPACT OF INFLATION
The Company is affected by inflation primarily through its impact on
operating cost and expenses, interest expense and automobile purchases.
The impact of inflationary pressures on operating cost and expenses
has been offset by the Company's continued emphasis on tight operating and cost
controls as well as its ability to generate and increase fees in its finance
business and its ability to raise rates in the rental car business. The impact
of higher vehicle prices is mitigated to a certain extent by a corresponding
increase in used automobile prices.
The impact of escalating interest rates is mitigated by the Company's
agreement with NAC member dealers which provides for the assessment of interest
charges to the dealer on outstanding advances at a variable rate that
fluctuates with the prime rate.
18
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of internally generated funds were as
follows:
<TABLE>
<CAPTION>
Year Ended January 31,:
---------------------------------
1995 1994 1993
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Operations $43,000 $80,335 $99,802
Collections on installment
notes - principal 45,527 10,032 631
Sale of used automobiles 29,544 68,963 73,897
</TABLE>
Cash flow from operating activities decreased primarily due to lower
revenue from automobile rentals. Sale of used automobiles generated less cash
due to the financing of more vehicles through the financial services business.
Cash collections on installment notes continued to increase due to the growth
in the receivable portfolio.
External sources of funds available to the Company at January 31, 1995
amounted to $200 million in commercial paper, $124 million in unsecured,
uncommitted, short-term bank lines of credit, $40 million in unsecured,
committed bank lines of credit and $15 million in lines of credit with
automobile manufacturers. Outstanding borrowings at January 31, 1995 amounted
to $9 million in commercial paper and $13.7 million in unsecured, uncommitted,
short-term lines of credit.
Management 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 primary use of internally generated funds in fiscal 1995 and 1994
was to reduce operating debt by $58.3 million and $76.8 million respectively.
The ratio of operating debt to total capital decreased to 4% at January 31,
1995 as 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 in
fiscal 1996 due to minimal fleet purchases required to sustain the Company's
rental operations. The Company may have excess cash should a sale of the
rental business be consummated.
During fiscal 1995 the Company's Board of Directors authorized the
buy-back of an additional one million shares of Company stock bringing its
total authorization to four million shares.
The Company's financial flexibility has been maintained through its
$200 million commercial paper program (rated "A-1" by Standard & Poor's and
"Prime-1" by Moody's Investors Service) and the related short-term committed
line of credit of $40 million. This agreement, which expires May 31, 1995, may
be renewed at the discretion of the parties.
19
<PAGE> 22
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
National Auto Credit, Inc. and Subsidiaries
Solon, Ohio
We have audited the accompanying consolidated balance sheets of National Auto
Credit, Inc. and Subsidiaries as of January 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended January 31, 1995. Our audits also
included the financial statement schedules listed in the Index at Item
14(a)(2). These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and
financial statement schedules. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of National Auto Credit, Inc. and
Subsidiaries as of January 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/Deloitte & Touche LLP
Cleveland, Ohio
March 23, 1995
20
<PAGE> 23
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
January 31,
--------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 398 $ 758
ACCOUNTS AND NOTES RECEIVABLE (Note B) 175,071 94,147
PREPAID EXPENSES 3,090 5,979
DEALERSHIP INVENTORY 23,406 26,428
PROPERTY AND EQUIPMENT
Rental automobiles 126,152 247,272
Other property and equipment 26,898 31,615
-------- --------
153,050 278,887
Less: accumulated depreciation (55,146) (74,648)
-------- --------
97,904 204,239
OTHER ASSETS (Note C) 21,072 19,370
-------- --------
$320,941 $350,921
======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Per Share Amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
January 31,
----------------------
1995 1994
------- -------
<S> <C> <C>
LIABILITIES
Dealer holdbacks, net $ 33,278 $ 14,504
Self-insurance claims (Note D) 24,475 34,425
Notes payable (Note F) 12,469 9,590
Operating debt (Note G) 10,192 68,491
Deferred income taxes (Note H) 22,543 33,045
Other liabilities (Note C) 18,756 13,609
-------- -------
121,713 173,664
-------- --------
COMMITMENTS AND CONTINGENCIES (Notes E and O)
STOCKHOLDERS' EQUITY (Note I)
Preferred stock - $.05 par value,
authorized 2,000,000 shares, none issued
Common stock - $.05 par value,
authorized 30,000,000 shares,
26,946,679 and 26,649,322
shares issued, respectively 1,348 1,333
Additional paid-in capital 125,695 122,905
Retained earnings, including cumulative
foreign currency translation loss
of $1,253 and $895, respectively 82,921 60,876
Treasury stock, at cost, 1,217,668 and
960,668 shares, respectively (10,736) (7,857)
-------- --------
199,228 177,257
-------- --------
$320,941 $350,921
======== ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
Years Ended January 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUE
Automobile rentals $132,111 $222,460 $282,421
Dealership operations 64,651 73,303 48,949
Financial services 22,401 7,419 342
-------- -------- --------
Total 219,163 303,182 331,712
COSTS AND EXPENSES
Cost of goods sold and operating
expenses:
Automobile rentals 57,310 95,378 121,186
Dealership operations 61,618 72,321 48,665
Financial services 2,829 875 299
Depreciation and amortization 36,660 61,338 75,521
Selling, general and administrative 22,168 38,137 48,556
Interest 2,150 4,565 7,051
Special charge (Note P) -- -- 3,610
-------- -------- --------
Total 182,735 272,614 304,888
-------- -------- --------
INCOME BEFORE INCOME TAXES 36,428 30,568 26,824
Provision for income taxes (Note H) 14,025 12,330 10,018
-------- -------- --------
NET INCOME $ 22,403 $ 18,238 $ 16,806
======== ======== ========
EARNINGS PER SHARE $ .87 $ .72 $ .66
======== ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (000's) 25,814 25,468 25,443
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
(Thousands of Dollars)
<TABLE>
<CAPTION>
Common Stock Foreign
------------------- Additional Currency
Shares Par Paid-In Retained Translation Treasury
(000's) Value Capital Earnings Adjustment Stock Total
------- ------ ---------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 31, 1992 26,280 $1,314 $119,734 $26,727 $ 821 $ (7,022) $141,574
Net income 16,806 16,806
Stock issued under
option and purchase
plans (Note J) 69 3 484 487
Treasury stock
purchases (Note I) (700) (700)
Foreign currency
translation (1,113) (1,113)
------ ------ -------- ------- ------- -------- --------
BALANCE,
JANUARY 31, 1993 26,349 1,317 120,218 43,533 (292) (7,722) 157,054
Net income 18,238 18,238
Stock bonuses (Note J) 18 1 217 218
Stock issued under
option and purchase
plans (Note J) 282 15 2,470 2,485
Treasury stock
purchases (Note I) (135) (135)
Foreign currency
translation (603) (603)
------ ------ -------- ------- ------- -------- --------
BALANCE,
JANUARY 31, 1994 26,649 1,333 122,905 61,771 (895) (7,857) 177,257
Net income 22,403 22,403
Stock bonuses (Note J) 23 1 248 249
Stock issued under
option and purchase
plans (Note J) 275 14 2,542 2,556
Treasury stock
purchases (Note I) (2,879) (2,879)
Foreign currency
translation (358) (358)
------ ------ -------- ------- ------- -------- --------
BALANCE,
JANUARY 31, 1995 26,947 $1,348 $125,695 $84,174 $(1,253) $(10,736) $199,228
====== ====== ======== ======= ======= ======== ========
See notes to consolidated financial statements.
</TABLE>
24
<PAGE> 27
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Years Ended January 31,
--------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 22,403 $ 18,238 $ 16,806
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 36,660 61,338 75,521
Provision for credit losses and loan discounts 1,924 1,710 160
Special charge -- -- 3,610
Deferred income taxes (6,382) 1,727 (1,358)
Changes in operating assets and liabilities:
Accounts receivable 6,947 10,773 (4,025)
Interest receivable on dealer advances (3,507) (405) --
Dealership inventory (5,226) (2,814) (3,334)
Other liabilities (977) (5,481) 1,468
Self-insurance claims (9,950) (12,375) 1,100
Other operating assets and liabilities 1,108 7,624 9,854
-------- -------- --------
Net cash provided by operating activities 43,000 80,335 99,802
-------- -------- --------
Cash Flows from Investing Activities:
Purchase of rental automobiles (16,882) (60,398) (183,755)
Proceeds from sale of rental automobiles 29,544 68,963 73,897
Purchase of other property and equipment (592) (3,634) (9,308)
Principal collected on installment notes receivable 45,527 10,032 631
Advances to dealers and payments of dealer holdbacks (44,513) (21,976) (120)
Other investing activities, net (592) 770 945
-------- -------- --------
Net cash provided by (used in) investing
activities 12,492 (6,243) (117,710)
-------- -------- --------
Cash Flows from Financing Activities:
Net borrowings (principal payments) on operating
debt and notes payable (55,420) (76,682) 20,208
Payments to acquire treasury stock (2,879) (135) (700)
Other financing activities, net 2,447 2,100 (1,827)
-------- -------- --------
Net cash (used in) provided by financing
activities (55,852) (74,717) 17,681
-------- -------- --------
Decrease in cash and cash equivalents (360) (625) (227)
Cash and cash equivalents at beginning of year 758 1,383 1,610
-------- -------- --------
Cash and cash equivalents at end of year $ 398 $ 758 $ 1,383
======== ======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 2,520 $ 5,929 $ 7,100
======== ======== ========
Income taxes paid $ 23,673 $ 7,109 $ 6,200
======== ======== ========
Supplemental Schedule of Non-Cash Investing Activities:
Sale of rental automobiles and dealership inventory $ 58,920 $ 47,497 $ 4,620
Addition to dealer holdbacks, net 76,366 35,536 264
-------- -------- --------
Addition to installment notes receivable, net $135,286 $ 83,033 $ 4,884
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 28
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE A - Summary of Significant Accounting Policies
GENERAL:
The Company commenced operations in 1969 principally renting
automobiles in the insurance replacement industry under the name of
Agency Rent-A-Car, Inc. In August 1994 the Company changed its name
to National Auto Credit, Inc., in recognition of the Company's
decision to focus its primary resources on its automobile financing
business.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of National
Auto Credit, Inc. and its subsidiaries ("the Company"). All material
intercompany accounts and transactions have been eliminated in
consolidation.
FINANCIAL SERVICES REVENUE:
Upon acceptance of retail installment contracts, gross installment
notes receivable are recorded net of unearned finance charges, which
are recognized as income using the interest method over the life of
the applicable contract. Accrual of finance charges is suspended when
a loan becomes sixty days or more past due, on a contractual basis.
When the loan becomes current, the accrual is resumed and past-due
income is recognized.
Also included in financial services revenue are dealer enrollment fees
and loan origination fees. The non-refundable enrollment fees are
charged to each dealer upon its acceptance as a member in the
financing program and are deferred and amortized on a straight-line
basis over twelve months, net of the related direct incremental costs
associated with the enrollment fee. The loan origination fees, net of
related direct costs, are deferred and amortized over the lives of the
loans.
CREDIT LOSSES:
The installment notes receivable portfolio is reviewed regularly to
ensure that the allowance for loan losses is maintained at a level
considered adequate to cover potential losses. Loans are charged-off
on a loan by loan basis generally when no material payment has been
received for one year. Principal balances are charged off against the
related dealer holdback first, and then against the allowance for loan
losses, as necessary.
26
<PAGE> 29
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE A - Summary of Significant Accounting Policies (cont.)
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. The
dealer holdbacks are not paid until all advances related to a
particular dealer have been recovered. At January 31, 1995 and 1994
the components of dealer holdbacks were:
<TABLE>
<CAPTION>
January 31,
------------------------------
1995 1994
--------- ---------
(in thousands)
<S> <C> <C>
Dealer holdbacks $ 140,312 $ 61,418
Advances (108,872) (47,714)
Allowance for credit losses 1,838 800
--------- --------
Dealer holdbacks, net $ 33,278 $ 14,504
========= ========
</TABLE>
An allowance for credit losses is provided to protect the Company from
advances that are not expected to be recovered as follows:
<TABLE>
<CAPTION>
January 31,
---------------------------
1995 1994
------ -------
(in thousands)
<S> <C> <C>
Balance, beginning of year $ 800 $ --
Provision for credit losses 1,044 800
Net charge-offs (6) --
------ -------
Balance, end of year $1,838 $ 800
</TABLE> ====== =======
DEALERSHIP INVENTORY:
Dealership inventory is stated at lower of depreciated cost or
estimated wholesale market.
PROPERTY AND EQUIPMENT:
Rental automobiles are stated at cost, less related purchase discounts
and incentives. Rental automobiles are depreciated, while in service,
using the straight-line method at rates which generally range from
1.0% to 1.9% of capitalized cost per month, depending on make, model
and time of year placed into service. The rate is calculated using an
estimated in-service life of 28 months and an anticipated residual
value at the end of this period, which is estimated using prior
disposition experience and independently published predicted used
automobile values.
27
<PAGE> 30
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE A - Summary of Significant Accounting Policies (cont.)
Management periodically reviews depreciation rates and revises, where
appropriate, based on 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 (loss) from the sale of automobiles totalled $3,874,000,
$2,431,000 and ($2,325,000) for the years ended January 31, 1995, 1994
and 1993, respectively. The number of automobiles sold by the Company
was 11,055, 16,538 and 12,871 in fiscal 1995, 1994 and 1993,
respectively. Other property and equipment is depreciated using the
straight-line method over its estimated useful life.
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED:
Cost in excess of the fair value of net assets acquired, which is
included in other assets, is amortized on the straight-line basis over
twenty-five years.
INCOME TAXES:
Deferred income taxes are provided for all temporary differences
between the book and tax basis of assets and liabilities. In addition,
as was the case in fiscal 1994, deferred income taxes are adjusted to
reflect new tax rates when they are enacted into law.
ADVERTISING:
Advertising costs consist predominantly of Yellow Page listings.
Yellow Page disbursements are capitalized as paid and amortized over
the average life expectancy of the directories, which is 12 months.
All other advertising costs are expensed as incurred. Statement of
Position 93-7 "Reporting on Advertising Costs", which will be adopted
in fiscal 1996, is not expected to have a material impact on the
financial statements.
FOREIGN CURRENCY TRANSLATION:
Canadian assets and liabilities are translated using the exchange rate
in effect at the balance sheet date, and results of operations are
translated using an average rate for the period. Translation
adjustments are accumulated as a separate component of stockholders'
equity.
EARNINGS PER SHARE:
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.
28
<PAGE> 31
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE A - Summary of Significant Accounting Policies (cont.)
CASH EQUIVALENTS:
All highly liquid investments with an original maturity of three
months or less are considered to be cash equivalents.
RECLASSIFICATION:
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE B - Accounts and Notes Receivable
Components of accounts and notes receivable were as follows:
<TABLE>
<CAPTION>
January 31,
-------------------------
1995 1994
-------- --------
(in thousands)
<S> <C> <C>
Installment notes receivable $193,456 $ 93,233
Unearned income (28,195) (16,036)
Allowance for loan losses (1,107) (914)
-------- --------
Installment notes receivable, net 164,154 76,283
-------- --------
Trade accounts 13,220 20,840
Allowance for doubtful accounts (3,720) (5,474)
-------- --------
Trade accounts, net 9,500 15,366
-------- --------
Other 1,417 2,498
-------- --------
$175,071 $ 94,147
======== ========
</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. The notes are collateralized by the related
vehicles sold. Installment notes receivable are from customers
residing in all 50 states with no individual state accounting for more
than 20%. At January 31, 1995 and 1994, the accrual of interest
income was suspended on $27,509,000 and $6,860,000 of installment
notes receivable, respectively.
29
<PAGE> 32
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE B - Accounts and Notes Receivable (cont.)
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
January 31,
----------------
1995 1994
------ -----
(in thousands)
<S> <C> <C>
Balance, beginning of year $ 914 $ 158
Provision for credit losses
and loan discounts 880 910
Net charge-offs (687) (154)
------ -----
Balance, end of year $1,107 $ 914
====== =====
</TABLE>
Trade accounts are receivables generated from the rental of
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.
NOTE C - Other Liabilities
Other liabilities were as follows:
<TABLE>
<CAPTION>
January 31,
----------------------
1995 1994
-------- -------
(in thousands)
<S> <C> <C>
Accounts payable $ 5,355 $ 3,996
Accrued payroll and payroll taxes 907 1,342
Other accrued expenses 8,451 8,271
Deferred capital contributions 4,043 --
------- -------
$18,756 $13,609
======= =======
</TABLE>
The Company is a limited partner in certain affordable housing
investments that generate benefits in the form of tax credits. In
connection with its investments in affordable housing limited
partnerships, which are included as other assets in the balance sheet,
the Company is required as of January 31, 1995 to make future
contributions of $4,043,000 plus interest at an average rate of 8.9%
per annum in varying amounts over the next eight years as follows:
<TABLE>
<S> <C>
1996 $ 407,000
1997 390,000
1998 508,000
1999 533,000
2000 566,000
Thereafter 1,639,000
</TABLE>
Management anticipates that the cash flow from the tax benefits
generated by these investments will exceed the additional contribution
requirements.
30
<PAGE> 33
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE D - Self-Insurance Claims
The Company is primarily self-insured for bodily injury and property
damage up to its retained limits relating to its fleet of vehicles.
This self-insurance program affords protection to the Company, to its
employees operating Company vehicles within the scope of their
employment, and to renters of Company vehicles to the extent required
by applicable state laws and/or afforded under the terms of the
rental agreement.
The Company estimates its liability for self-insurance claims based
upon a comprehensive actuarial analysis of reported and incurred but
not reported claims. Changes in estimates of claim costs resulting
from this analysis are recognized in income in the period in which the
estimates are changed. The Company carries excess automobile liability
insurance for bodily injury and property damage of $5,000,000 per
occurrence, of which the Company self-insures the first $500,000 of
loss, with a secondary loss fund of $500,000. In connection with this
program, at January 31, 1995 the Company had $7,424,000 of outstanding
irrevocable standby letters of credit, as required by various state
insurance regulatory authorities. The self-insurance claims expense,
included in operating expenses for automobile rentals for fiscal 1995,
1994 and 1993, was $8,604,000, $14,417,000 and $24,410,000,
respectively.
NOTE E - Lease Commitments
The Company operates from numerous locations under operating lease
agreements. Most leases call for fixed monthly rental payments and
provide options for renewal. At January 31, 1995, future minimum
rental commitments under all non-cancellable leases having initial or
remaining terms of more than one year were: 1996-$645,000;
1997-$199,000 and 1998-$53,000. Total rent expense, which is included
in cost of goods sold and operating expenses amounted to $4,264,000,
$6,357,000 and $7,585,000 for the years ended January 31, 1995, 1994
and 1993, respectively.
NOTE F - Notes Payable
At January 31, 1995 and 1994, the Company had utilized $12,469,000 and
$9,590,000, respectively, of its unsecured bank lines of credit to
finance the repurchase of the Company's common stock. Interest rates
on the outstanding borrowings were 6.12% and 3.40% at January 31, 1995
and 1994, respectively.
31
<PAGE> 34
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE G - Operating Debt
Operating debt consisted of the following:
<TABLE>
<CAPTION>
January 31,
-----------------------
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Commercial paper $ 8,961 $66,981
Unsecured lines of credit 1,231 1,510
------- -------
$10,192 $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 5.85% and 3.34% at
January 31, 1995 and 1994, respectively.
At January 31, 1995, the Company had short-term unsecured lines of
credit with banks totalling $124 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.
Interest rates on the outstanding borrowings under these lines of
credit were 6.12% and 3.40% at January 31, 1995 and 1994,
respectively.
The Company maintains a committed bank facility of $40 million. There
are no compensating balances associated with this facility. The
agreement expires May 31, 1995 and may be renewed at the discretion of
the parties. There have been no borrowings under this agreement.
NOTE H - Income Taxes
The provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
Years Ended January 31,
------------------------------
1995 1994 1993
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Current
Federal $16,617 $ 8,976 $ 8,926
State 3,790 1,627 2,450
------- ------- -------
20,407 10,603 11,376
------- ------- -------
Deferred
Federal (5,551) 966 (1,105)
State (831) 761 (253)
------- ------- -------
(6,382) 1,727 (1,358)
------- ------- -------
$14,025 $12,330 $10,018
======= ======= =======
</TABLE>
32
<PAGE> 35
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE H - Income Taxes (cont.)
Reconciliations of the Federal statutory tax rate to the
effective tax rate are as follows:
<TABLE>
<CAPTION>
Years Ended January 31,
-----------------------
1995 1994 1993
---- ---- -----
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
State and local income taxes
(net of federal income tax) 5.3 5.1 5.4
Tax credits (2.2) (2.6) (3.3)
Impact of change in federal rate -- 2.3 --
Other .4 .5 1.3
---- ---- ----
38.5% 40.3% 37.4%
==== ==== ====
</TABLE>
Deferred income taxes on the balance sheet include current income
taxes payable (refundable) of ($229,000) and $3,581,000 at January 31,
1995 and 1994, respectively. Deferred tax assets, on which no
valuation allowance is considered necessary, and deferred tax
liabilities, consist of the following:
<TABLE>
<CAPTION>
January 31,
---------------------------
1995 1994
-------- -------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Self-insurance claims $ 8,446 $11,921
Liabilities and other reserves 2,543 2,697
Tax loss carryforward 955 1,433
Other 734 365
------- -------
Total deferred tax assets 12,678 16,416
------- -------
Deferred tax liabilities:
Depreciation 28,192 37,429
State income taxes 3,020 3,865
Other 4,238 4,586
------- -------
Total deferred tax liabilities 35,450 45,880
------- -------
$22,772 $29,464
======= =======
</TABLE>
NOTE I - Stockholders' Equity
The Company's Board of Directors has authorized the repurchase of up
to four million shares of the Company's outstanding stock. Shares
repurchased amounted to 257,000, 12,100 and 100,000 in fiscal 1995,
1994 and 1993, respectively.
33
<PAGE> 36
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE J - Employee Benefit Plans
1983 STOCK OPTION PLAN:
The Company's 1983 Stock Option Plan provided for the granting of
both incentive and non-qualified stock options to key employees for
the purchase of the Company's common stock. The 1983 Plan terminated
on April 17, 1993 and no further options may be granted, although
options still remain outstanding. Options previously granted under
the Plan extend for ten years and become exercisable in installments
over the first five years.
A summary of changes in stock options is as follows:
<TABLE>
<CAPTION>
Number of Price Range
Options Per Share
--------- -----------
<S> <C> <C>
Balance January 31, 1992 1,309,208 $6.33-9.88
Granted 540,915 6.56-9.00
Exercised (54,744) 6.56-9.88
Cancelled (133,266) 6.56-9.88
---------
Balance January 31, 1993 1,662,113 6.33-9.88
Granted 4,000 7.56
Exercised (270,591) 6.33-9.88
Cancelled (350,984) 6.56-9.88
---------
Balance January 31, 1994 1,044,538 6.56-9.88
Exercised (271,837) 6.56-9.88
Cancelled (223,659) 6.56-9.88
---------
Balance January 31, 1995 549,042 $6.56-9.88
=========
</TABLE>
The outstanding options expire at various dates through 2003. Options
for 370,392 shares, 531,818 shares and 551,739 shares were exercisable
at January 31, 1995, 1994 and 1993, respectively.
1993 EQUITY INCENTIVE PLAN:
The Company's 1993 Equity Incentive Plan provides for the granting of
incentive and non-qualified stock options, stock appreciation rights,
common stock and restricted common stock. The total number of shares
which may be granted under this Plan are 2,000,000. There were 23,000
shares and 18,000 shares of restricted stock granted under this Plan
during the years ended January 31, 1995 and 1994, respectively. A
total of 60,000 stock options with a price range of $6.56 - 11.00 were
granted during the year ended January 31, 1995. No options were
granted during the year ended January 31, 1994. Options for 7,500
shares were exercisable at January 31, 1995. No options have been
exercised or cancelled under this Plan.
34
<PAGE> 37
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE J - Employee Benefit Plans (cont.)
EMPLOYEE STOCK PURCHASE PLAN:
Under the 1986 Employee Stock Purchase Plan, eligible employees may
purchase shares of the Company's common stock through payroll
deductions at the month-end market price. The total number of shares
available under this Plan is 510,513. The Company contributes an
amount equal to 20% of the employee's payroll deduction, subject to a
two-year vesting period from the date of such contribution. There
were 2,520, 12,133 and 13,428 shares purchased under this Plan during
the years ended January 31, 1995, 1994 and 1993, respectively.
EMPLOYEE 401(K) SAVINGS AND PROFIT-SHARING PLAN:
The Company has a 401(k) Savings and Profit-Sharing Plan covering
substantially all employees who have completed one year of service
with the Company. Company contributions to this Plan are
discretionary and are determined annually by the Board of Directors.
The Plan also allows employees the option of purchasing common stock
of the Company. The total number of shares which may be purchased
under this Plan are 500,000. There were 14,774 shares and 222 shares
purchased during the years ended January 31, 1995 and 1994,
respectively. Contributions to the Plan were $51,000, $5,000 and
$200,000 for the years ended January 31, 1995, 1994 and 1993,
respectively.
The Company does not provide post-retirement or post-employment
benefits to its employees.
NOTE K - Related Party Transactions
Adverama, Inc. provided the Company with placement of Yellow Pages
directory advertising, printing services and promotional items
amounting to $3,401,000, $6,221,000 and $7,354,000 during the years
ended January 31, 1995, 1994 and 1993, respectively. Adverama, Inc.
is beneficially owned by the daughter of the Company's Chairman of the
Board of Directors and majority stockholder. The amount payable to
Adverama, Inc. was $373,000 and $918,000 at January 31, 1995 and 1994,
respectively.
In February 1995, the Company engaged the investment banking firm of
Brown Brothers Harriman & Co. ("BBH") as financial advisor in
connection with the possible sale of any or all of the automobile
rental segment's assets. Depending upon the services rendered,
various fees may be incurred including a fee contingent on the
consideration received for a consummated sale. A director of the
Company is a partner of BBH. Another director of the Company will
receive from BBH a percent of any fees paid by the Company for his
participation in the transaction.
35
<PAGE> 38
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE L - Financial Instruments
The Company has various financial instruments including cash and cash
equivalents, installment notes receivable, investments in affordable
housing limited partnerships, notes payable, operating debt and
miscellaneous other assets. Many of these instruments are short-term
in nature. The Company has determined that the estimated fair value
of its financial instruments approximates carrying value. At January
31, 1995 the Company held no derivative financial instruments.
NOTE M - Industry Segment Information
The Company operates in three principal industry segments: automobile
rentals (the rental of fleet automobiles in the insurance replacement
market), financial services (the management of assigned retail
automobile installment contracts in the non-traditional financial
market), and dealership operations (the sale of used automobiles
either retired from the rental fleet or purchased wholesale for sale
to member dealers of the financial services segment).
Operating income by segment is total revenue less cost of sales and
operating expenses. Income and expense not allocated to business
segments include interest expense and portions of certain Corporate
administrative costs. Consistent with industry practice, selling,
general and administrative expenses directly incurred in the operation
of the financial services segment are included in operating expenses.
Identifiable assets by business segment are those assets employed in
each segment's operation and are reflected after elimination of
intercompany balances. Corporate identifiable assets are principally
cash, administrative facilities, corporate receivables, investments
and certain other assets.
No material amounts of the Company's sales are dependent upon a single
customer.
36
<PAGE> 39
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE M - Industry Segment Information (cont.)
The following outlines amounts by segments for fiscal 1995 and 1994:
<TABLE>
<CAPTION>
Year Ended January 31, 1995
---------------------------------------------------------
(in thousands)
Automobile Financial Dealership
Rentals Services Operations Corporate Total
---------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenue $132,111 $ 22,401 $64,651 $219,163
Cost of sales and
operating expenses 57,310 2,829 61,618 121,757
-------- -------- ------- --------
Operating income 74,801 19,572 3,033 97,406
Depreciation and
amortization 35,972 160 193 $ 335 36,660
Selling, general and
administrative 18,016 209 206 3,737 22,168
Interest expense -- -- -- 2,150 2,150
-------- -------- ------- ------- --------
Income before income
taxes $ 20,813 $ 19,203 $ 2,634 $(6,222) $ 36,428
======== ======== ======= ======= ========
Identifiable assets $112,059 $165,180 $23,715 $19,987 $320,941
======== ======== ======= ======= ========
Capital expenditures $ 16,897 $ 398 $ -- $ 179 $ 17,474
======== ======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31, 1994
---------------------------------------------------------
Restated
(in thousands)
Automobile Financial Dealership
Rentals Services Operations Corporate Total
---------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenue $222,460 $7,419 $73,303 $303,182
Cost of sales and
operating expenses 95,378 875 72,321 168,574
-------- ------ ------- --------
Operating income 127,082 6,544 982 134,608
Depreciation and
amortization 60,639 76 166 $ 457 61,338
Selling, general and
administrative 32,254 34 939 4,910 38,137
Interest expense -- -- -- 4,565 4,565
-------- ------ ------- ------- --------
Income before income
taxes $ 34,189 $ 6,434 $ (123) $(9,932) $ 30,568
======== ======= ======= ======= ========
Identifiable assets $229,154 $77,180 $26,989 $17,598 $350,921
======== ======= ======= ======= ========
Capital expenditures $ 62,831 $ 506 $ 28 $ 667 $ 64,032
======== ======= ======= ======= ========
</TABLE>
37
<PAGE> 40
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE M - Industry Segment Information (cont.)
Segment information for the Dealership Operations segment was
previously included with the Automobile Rentals reporting segment. As
the Company's principal business is evolving, so is the nature of the
Dealership Operations segment. In addition, the Company revised its
allocation process to allocate certain Corporate Selling, General and
Administrative expenses to the segment they are most closely
associated with. As a result, fiscal 1994 has been restated to
reflect a third core business and certain additional allocations. For
fiscal 1993 the only material segment was automobile rentals.
NOTE N - Quarterly Financial Data (Unaudited)
The following tables set forth certain quarterly financial information
(in thousands, except per share information).
Year ended January 31, 1995:
<TABLE>
<CAPTION>
Income Before Net Earnings
Quarter Revenue Income Taxes Income Per Share
------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
1st $ 62,457 $ 7,527 $ 4,629 $ .18
2nd 57,322 10,807 6,646 .26
3rd 51,359 9,909 6,094 .24
4th 48,025 8,185 5,034 .20
</TABLE>
Year ended January 31, 1994:
<TABLE>
<CAPTION>
Income Before Net Earnings
Quarter Revenue Income Taxes Income Per Share
------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
1st $ 82,103 $ 5,530 $ 3,484 $ .14
2nd 83,510 8,027 5,057 .20
3rd 75,660 8,336 4,318 .17
4th 61,909 8,675 5,379 .21
</TABLE>
38
<PAGE> 41
NATIONAL AUTO CREDIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1995, 1994 AND 1993
NOTE O - Contingencies
In the normal course of its business, the Company is named as
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 alleges 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. Closing briefs were submitted by both sides in January 1995.
The Court has not yet issued a finding as to liability. Subsequent to
the Court issuing a finding on liability and dependent upon the
specifics of that ruling, the case will proceed into the damages
phase. The Company estimates that claims for damages, penalties,
interest and attorneys fees could range from $300,000, which has been
accrued, to $7,000,000. The Company believes, however, it has
meritorious defenses for many of the claims and intends to vigorously
proceed both at trial and on any appeal, as appropriate. The amount
of the ultimate liability or damages which might finally exist cannot
be reasonably estimated.
NOTE P - Special Charge
During the fourth quarter of fiscal 1993 the Company formulated a
major plan which included the strategic realignment of its field
operations and the closing of rental offices in certain high-risk,
major metropolitan areas. This plan resulted in a special charge of
$3,610,000 for the year ended January 31, 1993. This special charge
included fleet disposition expenses, employee termination costs, lease
commitments and other related closing expenses.
39
<PAGE> 42
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
NONE
40
<PAGE> 43
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item concerning the Company's directors is
incorporated by reference from the section captioned "Election of Directors"
contained in the Company's Proxy Statement related to the Annual Meeting of
Stockholders to be held June 21, 1995, to be filed by the Company with the
Securities and Exchange Commission within 120 days of the end of the Company's
fiscal year pursuant to General Instruction G(3) of Form 10-K (the "Proxy
Statement"). The information required by this item concerning executive
officers is set forth in Part I of this Report. The information required by
this item concerning compliance with Section 16(a) of the Exchange Act is
incorporated by reference from the section captioned "Compliance with Section
16(a) of the Exchange Act" contained in the Proxy Statement.
Item 11. Executive Compensation
The section entitled "Executive Compensation" of the 1995 Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The section entitled "Security Ownership of Certain Beneficial Owners and
Management" of the 1995 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The section entitled "Certain Transactions" of the 1995 Proxy Statement is
incorporated herein by reference.
41
<PAGE> 44
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following financial statements are included in Part II,
Item 8:
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets -
January 31, 1995 and 1994
Consolidated Statements of Income -
Years Ended January 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity -
Years Ended January 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows
Years Ended January 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Years Ended January 31, 1995, 1994 and 1993
(a)(2) The following financial statement schedules for the fiscal years 1995,
1994 and 1993 are submitted herewith:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable.
42
<PAGE> 45
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(cont.)
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(a)(3) Exhibits
(3)(a) Restated Certificate of Incorporation of
National Auto Credit, Inc. 47
(b) By-Laws of National Auto Credit, Inc. 78
(4)(a) Specimen Stock Certificate - Agency
Rent-A-Car, Inc. (incorporated by
reference to Exhibit 4(a) of the Company's
Annual Report on Form 10-K for the fiscal
year ended January 31, 1989, File No. 0-12201). N/A
(b) Specimen Stock Certificate - National Auto
Credit, Inc. 108
(10)(a) Chrysler Dealership Agreements and Ford
Dealership Agreements (incorporated by reference
from Exhibits 10(c) and (d) of the Company's Form
S-1 Registration Statement as filed on
June 8, 1983, File No. 2-83408). N/A
(b) National Auto Credit, Inc. 1983 Incentive Stock
Option Plan (incorporated by reference from
Exhibit 10(a) of the Company's Form S-1
Registration Statement as filed on June 8, 1983,
File No. 2-83408). N/A
(c) Mortgage Assistance Plan (incorporated by
reference to Exhibit 10(g) of the Company's
Annual Report on Form 10-K for fiscal year
ended January 31, 1985, File No. 0-12201). N/A
(d) National Auto Credit, Inc. 1986 Employees Stock
Purchase Plan (incorporated by reference from
the Company's Form S-8 Registration Statement
as filed on December 12, 1985, File No. 33-2117). N/A
(e) Form of Directors' Indemnification Agreement
dated July 2, 1986 (incorporated by reference
to Exhibit 10(f) of the Company's Annual
Report on Form 10-K for fiscal year ended
January 31, 1988, File No. 0-12201). N/A
(f) National Auto Credit, Inc. 1993 Equity Incentive
Plan (incorporated by reference from the
Company's Form S-8 Registration Statement as filed
on December 28, 1993, File No. 33-51727). N/A
</TABLE>
43
<PAGE> 46
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(cont.)
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
(a)(3) Exhibits (cont.)
(10)(g) National Auto Credit, Inc. 401(k) Savings and
Retirement Plan and Trust (incorporated by
reference from the Company's Form S-8
Registration Statement as filed on December
28, 1993, File No. 33-51729). N/A
(h) National Auto Credit, Inc. 1995 Stock Option
Plan for Member Dealers (incorporated by
reference from the Company's Form S-3
Registration Statement as filed on April 13,
1995, File No. 33-58579), effective date pending. N/A
(12) Computation of Ratios. 110
(21) Subsidiaries of National Auto Credit, Inc.
at January 31, 1995. 111
(23) Independent Auditors' Consent. 112
(27) Financial Data Schedules. 113
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the
Registrant during the last quarter of the period
covered by this report.
</TABLE>
44
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, National Auto Credit, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
National Auto Credit, Inc.
Registrant
<TABLE>
<S> <C>
Date April 24, 1995 By: /s/ Sam J. Frankino
----------------------------
Sam J. Frankino
Chairman of the Board
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities as indicated on April 24, 1995.
<TABLE>
<CAPTION>
Principal Executive Officer: Principal Financial
and Accounting Officer:
<S> <C>
/s/ Robert J. Bronchetti /s/ Davida S. Howard
- ----------------------------------- -------------------------------
Robert J. Bronchetti Davida S. Howard
President, Chief Executive Officer Vice President-Finance and
and Director Controller
Other Directors:
/s/ Edward A. Burkhart /s/ Joseph P. Henley
- ----------------------------------- -------------------------------
Edward A. Burkhart, Executive Joseph P. Henley, Director
Vice President and Director
/s/ Noah T. Herndon /s/ Per E. Hoel
- ----------------------------------- -------------------------------
Noah T. Herndon, Director Per E. Hoel, Director
/s/ Edward N. Leszczynski
- -----------------------------------
Edward N. Leszczynski, Director
</TABLE>
45
<PAGE> 48
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------- ---------- ------------------- ---------- ---------
Balance at Additions Balance
beginning Charged to: at end
Description of period Expenses Other Deductions of period
- ------------------- ---------- --------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended
January 31, 1995
Allowance for doubtful accounts $ 5,474 $ 2,781 -- $ 4,535(a) $ 3,720
Self-insurance claims $34,425 $ 8,604 -- $18,554(b) $24,475
Allowance for loan losses $ 914 $ 880 -- $ 687(a) $ 1,107
Allowance for credit losses $ 800 $ 1,044 -- $ 6(a) $ 1,838
Year ended
January 31, 1994
Allowance for doubtful accounts $ 5,317 $ 4,441 -- $ 4,284(a) $ 5,474
Self-insurance claims $46,800 $14,417 -- $26,792(b) $34,425
Allowance for loan losses $ 158 $ 910 -- $ 154(a) $ 914
Allowance for credit losses $ -- $ 800 -- $ -- $ 800
Year ended
January 31, 1993
Allowance for doubtful accounts $ 5,315 $ 5,281 -- $ 5,279(a) $ 5,317
Self-insurance claims $45,700 $24,410 -- $23,310(b) $46,800
Allowance for loan losses $ -- $ 160 -- $ 2(a) $ 158
Allowance for credit losses $ -- $ -- $ -- $ --
</TABLE>
(a) Uncollected receivables written off, net of recoveries.
(b) Cash disbursements related to self-insured claims.
46
<PAGE> 1
EXHIBIT 3(a)
State of Delaware
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "AGENCY RENT-A-CAR, INC.", CHANGING ITS NAME FROM "AGENCY RENT-A-CAR, INC."
TO "NATIONAL AUTO CREDIT, INC.", FILED IN THIS OFFICE ON THE FOURTH DAY OF
AUGUST, A.D. 1994, AT 2:01 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SECRETARY'S OFFICE SEAL]
Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
0775644 8100 AUTHENTICATION: 7201914
944145393 DATE: 08-04-94
47
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
******
Agency Rent-A-Car, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY;
FIRST: That at a meeting of the Board of Directors of Agency
Rent-A-Car, Inc., resolutions were duly adopted setting forth a proposed
amendment to the Restated Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Restated Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered one (1) so
that, as amended, said Article shall be and read as follows:
"(1) The name of the corporation is National Auto Credit, Inc."
SECOND: That thereafter, pursuit to the resolution of its Board of
Directors, an annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
48
<PAGE> 3
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of The General Corporation Law of the State of
Delaware.
FOURTH: That said amendment shall become effective 12:01 a.m., August
15, 1994.
IN WITNESS WHEREOF, said Agency Rent-A-Car, Inc. has caused this
certificate to be signed by Robert J. Bronchetti, its President, and attested
by Pete T. Zackaroff, its Secretary, this 1st day of August, 1994.
AGENCY RENT-A-CAR, INC.
By Robert J. Bronchetti
----------------------------------
Robert J. Bronchetti
President
ATTEST:
By Peter T. Zackaroff
---------------------------------
Peter T. Zackaroff
Secretary
49
<PAGE> 4
STATE OF DELAWARE
[LOGO]
OFFICE OF SECRETARY OF STATE
------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF AGENCY RENT-A-CAR, INC. FILED IN THIS OFFICE ON THE TWENTY-FIFTH
DAY OF APRIL, A.D. 1989, AT 10 O'CLOCK A.M.
Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
[DEPARTMENT OF STATE SEAL]
AUTHENTICATION: 2158037
739115010 DATE: 04/25/1989
50
<PAGE> 5
CERTIFICATE OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
Agency Rent-A-Car, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Agency Rent-A-Car, Inc.,
by the unanimous written consent of its members, filed with the
minutes of the Board, duly adopted resolutions setting forth a
proposed amendment to the Restated Certificate of Incorporation
of said Corporation, declaring said amendment to be advisable and
calling a meeting of the stockholders of said Corporation for
consideration thereof or for a written consent of the holders of
the majority of the issued and outstanding shares of the
Corporation, if such consent could be procured prior to the
special meeting of stockholders. The resolution setting forth a
proposed amendment is as follows:
RESOLVED, that the Restated Certificate Of Incorporation of
this Corporation be amended by changing Article Fourth
thereof so that, as amended, said Article shall be and read
as follows:
"FOURTH: The Corporation is authorized to issue two classes
of stock to be designated respectively 'preferred' and
'common'. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
thirty-two million (32,000,000) shares consisting of thirty
million (30,000,000) shares of common stock, having a par
value of five cents ($.05) per share, and two million
(2,000,000) shares of preferred stock, having a par value of
five cents ($.05) per share. The shares of preferred stock
may be issued as a class without series, or if so determined
from time to time by the board of directors, either in whole
or in part in one or more series, each series to be
expressly designated by distinguishing number, letter or
title prior to the issue of any shares thereof. The shares
of preferred stock, and each series thereof, may have such
voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating,
liquidation, optional, or other special rights and
qualifications, limitations, or restrictions thereof, as
shall be stated and expressed in the resolution or or
resolutions
51
<PAGE> 6
providing for the issue of such stock adopted by the Board
of Directors of the Corporation pursuant to the provisions
of this Article FOURTH.
There is hereby expressly granted to the board of Directors
of the Corporation authority to fix or alter the dividend
rights, dividend rate, dividend preferences and
participations, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions),
the redemption price or prices, the rights and preferences
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation or upon any
distribution of assets by the Corporation and any other
special rights, qualifications limitations on and
restrictions of, any wholly unissued class or series of
shares of preferred stock and the number of shares
constituting any such series and the designation thereof, or
any of them, and to increase or decrease the number of
shares of any series subsequent to the issue of shares of
that of shares of any series be so decreased, the shares
constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
Except to the extent otherwise provided in the resolution or
resolutions of the board of directors of the Corporation
providing for the initial issue of shares of a particular
preferred series, any series shall be entitled to vote
for each shares thereof so held, shall vote share for share
with the holders of the common stock without distinction as
to class, and shall not be entitled to vote separately as a
class or series of a class.
The number of shares of preferred stock authorized to be
issued may be increased or decreased from time to time by
the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote, and the holders
of the preferred stock shall not be entitled to vote
separately as a class or series of a class on any such
increase or decrease.
Subject to the prior and superior rights of the preferred
stock set forth in any resolution or resolutions of the
board of directors of the Corporation providing for the
initial issuance of any particular series of preferred
stock, such
52
<PAGE> 7
dividends (payable in cash, stock, or otherwise) as may be
determined by the board of directors of the Corporation may
be declared and paid on the common stock from time to time
out of any funds legally available therefor, and the
preferred stock shall not be entitled to participate in any
such dividend".
SECOND: Thereafter, pursuant to resolution of its Board of
Directors, the majority stockholder of the Corpration by written
consent in accordance with Section 228 of the General Corporation
Law of the State of Delaware, voted the necessary number of
shares as required by statute in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Sections 228 and 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said Agency Rent-A-Car, Inc. has caused this
certificate to be signed by Kenneth J. Lorek, its President and attested by
Peter T. Zackaroff, its Secretary, this 11th day of April, 1989.
AGENCY RENT-A-CAR, INC.
By: Kenneth J. Lorek
------------------------------
President
ATTEST
By: Peter T. Zackaroff
-------------------------
Secretary
53
<PAGE> 8
STATE OF DELAWARE
[LOGO]
OFFICE OF SECRETARY OF STATE
------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF AGENCY RENT-A-CAR, INC. FILED IN THIS OFFICE ON THE SIXTEENETH DAY
OF JUNE, A.D. 1987, AT 10 O'CLOCK A.M.
Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
[DEPARTMENT OF STATE SEAL]
AUTHENTICATION: 1278895
737167025 DATE: 06/16/1987
54
<PAGE> 9
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
Agency Rent-A-Car, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Agency
Rent-A-Car, Inc., resolutions were duly adopted setting forth a proposed
amendment to the Restated Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said Corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Restated Certificate of Incorporation of this
corporation be amended by adding Article Fifteenth to read in its
entirety as follows:
FIFTEENTH: No Director shall be personally liable to the Corporation
or any stockholder for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of
whom he or she is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capactity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the
55
<PAGE> 10
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorney's fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided hereinafter, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred herein shall be a
contract right and shall include the right to be paid by the Corporation for
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified hereunder or otherwise.
The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
If a claim under this Article Fifteenth is not paid in full by the Corporation
within thirty (30) days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissable under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such
56
<PAGE> 11
action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not
met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in
this Article Fifteenth shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision
of the Restated Certificate of Incorporation, by-law, agreement, vote
of stockholders or disinterested directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation
Law.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, an annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Agency Rent-A-Car, Inc. has caused this certificate to
be signed by Vincent T. Garrenton, Jr., its Executive Vice President and
attested by Louis H. Rice, its Secretary this 10th day of June, 1987.
AGENCY RENT-A-CAR, INC.
By: Vincent T. Garrenton, Jr.
-----------------------------
Vincent T. Garrenton, Jr.
Executive Vice President
ATTEST:
By: Louis H. Rice
------------------------
Louis H. Rice
Secretary
57
<PAGE> 12
STATE OF DELAWARE
[LOGO]
OFFICE OF SECRETARY OF STATE
------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF AGENCY RENT-A-CAR, INC. FILED IN THIS OFFICE ON THE SEVENTH DAY OF
JULY, A.D. 1986, AT 10 O'CLOCK A.M.
Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
[DEPARTMENT OF STATE SEAL]
AUTHENTICATION: 0875925
736188017 DATE: 07/07/1986
58
<PAGE> 13
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
Agency Rent-A-Car, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Agency Rent-A-Car,
Inc., by the unanimous written consent of its members, filed with
the minutes of the Board, duly adopted resolutions setting forth
a proposed amendment to the Restated Certificate Of Incorporation
of said Corporation, declaring said amendment to be advisable and
calling a meeting of the stockholders of said Corporation for
consideration thereof or for a written consent of the holders of
the majority of the issued and outstanding shares of the
Corporation, if such consent could be procured prior to the
special meeting of stockholders. The resolution setting
forth a proposed amendment is as follows:
RESOLVED, that the Restated Certificate Of Incorporation of
this Corporation be amended by changing Article Fourth
thereof so that, as amended, said Article shall be and read
as follows:
"FOURTH: The Corporation is authorized to issue two classes
of stock to be designated respectively 'preferred' and
'common'. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
twenty-seven million (27,000,000) shares consisting of
twenty-five million (25,000,000) shares of common stock,
having a par value of five cents ($.05) per share, and two
million (2,000,000) shares of preferred stock, having a par
value of five cents ($.05) per share. The shares of
preferred stock may be issued as a class without series. or
if so determined from time to time by the board of
directors, either in whole or in part in one or more series,
each series to be expressly designated by distinguishing
number, letter or title prior to the issue of any shares
thereof. The shares of preferred stock, and each series
thereof, may have such voting powers, full or limited, or no
voting powers, and such designations, preferences
59
<PAGE> 14
and relative, participating, liquidation, optional, or other special
rights and qualifications, limitations, or restriction thereof, as
shall be stated and expressed in the resolution or resolutions
providing for the issue of such s tock adopted by the Board of
Directors of the Corporation pursuant to the provisions of this
Article FOURTH.
There is hereby expressly granted to the board of directors of the
Corporation authority to fix or alter the dividend rights, dividend
rates, dividend preferences and participations, conversion rights,
voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, the rights and preferences
in the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation or upon any distribution of assets by the
Corporation and any other special rights, qualifications, limitations
on and restrictions of, any wholly unissued class or series of shares
of preferred stock and the number of shares constituting any such
series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of
shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series be
so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
Except to the extent otherwise provided in the resolution or
resolutions of the board of directors of the Corporation providing for
the initial issue of shares of a particular preferred series, any
series shall be entitled to vote for each share thereof so held, shall
vote share for share with the holders of the common stock without
distinction as to class, and shall not be entitled to vote separately
as a class or series of a class.
The number of shares of preferred stock authorized to be issued may be
increased or decreased from time to time by the affirmative vote of
the holders of a majority of the stock of the Corporation entitled to
vote, and the holders of the preferred stock shall not be entitled to
vote separately as a class or series of a class on any such increase or
decrease.
60
<PAGE> 15
Subject to the prior and superior rights of the preferred stock
set forth in any resolution or resolutions of the board of
directors of the
Corporation providing for the initial issuance of any particular
series of preferred stock, such dividends (payable in cash,
stock, or otherwise) as may be determined by the board of
directors of the Corporation may be declared and paid on the
common stock from time to time out of any funds legally available
therefor, and the preferred stock shall not be entitled to
participate in any such dividend".
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the majority stockholder of the Corporation by written
consent in accordance with Section 228 of the General Corporation Law
of the State of Delaware, voted the necessary number of shares as
required by statute in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF said Agency Rent-A-Car, Inc. has caused this certificate
to be signed by Vincent T. Garrenton, Jr., its Executive Vice President and
attested by Louis H. Rice, its Secretary, this 18th day of June 1986.
AGENCY RENT-A-CAR, NC.
By: Vincent T. Garrenton, Jr.
----------------------------
Executive Vice President
ATTEST
By: Louis H. Rice
------------------------
Secretary
61
<PAGE> 16
STATE OF DELAWARE
[LOGO]
OFFICE OF SECRETARY OF STATE
------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF AGENCY RENT-A-CAR, INC. FILED IN THIS OFFICE ON THE THIRD DAY OF
JULY, A.D. 1985, AT 10 O'CLOCK A.M.
Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 0554833
735184041 DATE: 07/03/1985
62
<PAGE> 17
CERTIFICATE OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
Agency Rent-A-Car, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Agency
Rent-A-Car, Inc., resolutions were duly adopted setting forth a proposed
amendment to the Restated Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, That the Restated Certificate of Incorporation of this
corporation be amended by changing Article Fourth thereof so that, as amended,
said Article shall be and read as follows:
"FOURTH: The Corporation is authorized to issue two classes of stock to
be designated respectively 'preferred' and 'common'. The total number
of shares of all classes of stock which the Corporation shall have
authority to issue is eighteen million (18,000,000) shares consisting
of sixteen million (16,000,000) shares of common stock, having a par
value of five cents ($.05) per share, and two million (2,000,000)
shares of preferred stock, having a par value of five cents ($.05) per
share. The shares of preferred stock may be issued as a class
without series, or if so determined from time to time by the board of
directors, either in whole or in part in one or more series, each
series to be expressly designated by distinguishing number, letter, or
title prior to the issue of any shares thereof. The shares of
preferred stock, and each series thereof, may have such voting powers,
full or limited, or no voting powers, and such designations,
preferences and relative, participating, liquidation, optional, or
other special rights and qualifications. limitations, or restrictions
thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by the board
of directors of the Corporation pursuant to the provisions of this
Article FOURTH.
There is hereby expressly granted to the board of directors of the
Corporation authority to fix or alter the dividend rights, dividend
rates, dividend
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<PAGE> 18
Page 2
preferences and participations, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, the rights and preferences in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation or upon any distribution of assets by the Corporation and
any other special rights, qualifications, limitations on and
restrictions of, any wholly unissued class or series of shares of
preferred stock and the number of shares constituting any such series
and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of
shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series be
so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
Except to the extent otherwise provided in the resolution or
resolutions of the board of directors of the Corporation providing for
the initial issue of shares of a particular preferred series, any
series shall be entitled to vote for each share thereof so held, shall
vote share for share with the holders of the common stock without
distinction as to class, and shall not be entitled to vote separately
as a class or series of a class.
The number of shares of preferred stock authorized to be issued may be
increased or decreased from time to time by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote,
and the holders of the preferred stock shall not be entitled to vote
separately as a class or series of a class on any such increase or
decrease.
Subject to the prior and superior rights of the preferred stock set
forth in any resolution or resolutions of the board of directors of the
Corporation providing for the initial issuance of any particular series
of preferred stock, such dividends (payable in cash. stock, or
otherwise) as may be determined by the board of directors of the
Corporation may be declared and paid on the common stock from time to
time out of any funds legally available therefor, and the preferred
stock shall not be entitled to participate in any such dividend".
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<PAGE> 19
Page 3
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, an annual meeting of the stockholders of said corporation
was duly called and held, upon notice in accordance with Section 222 of
the General Corporation Law of the State of Delaware at which meeting
the necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said Agency Rent-A-Car, Inc. has caused this
certificate to be signed by Vincent T. Garrenton, Jr., its Executive
Vice-President and attested by Louis H. Rice, its Secretary this 26th day of
June, 1985.
AGENCY RENT-A-CAR, INC.
By : Vincent T. Garrenton, Jr.
--------------------------
Executive Vice-President
ATTEST:
By: Louis H. Rice
- -------------------------
Secretary
65
<PAGE> 20
STATE OF DELAWARE
[LOGO]
OFFICE OF SECRETARY OF STATE
------------------------
I, GLENN C. KENTON, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
RESTATED INCORPORATION OF AGENCY RENT-A-CAR, INC. FILED IN THIS OFFICE ON THE
SIXTH DAY OF JUNE, A.D. 1983, AT 10 O'CLOCK A.M.
Glenn C. Kenton
-----------------------------------
Glenn C. Kenton, Secretary of State
AUTHENTICATION: 0002299
831570364 DATE: 06/14/1983
66
<PAGE> 21
RESTATED
CERTIFICATE OF INCORPORATION
OF
AGENCY RENT-A-CAR, INC.
Agency Rent-A-Car, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1) The name of the Corporation is Agency Rent-A-Car, Inc.
The date of filing its original Certificate of Incorporation with the
Secretary of State was October 12, 1971.
2) This Restated Certificate of Incorporation amends the Certificate of
Incorporation by amending Article FOURTH and adding a new Article SIXTH to read
in their entirety, as set forth in the text below, and restates and integrates
the Certificate of Incorporation as so amended, pursuant to Sections 242 and
245 of the Delaware Corporation Law.
3) The text of the Certificate of Incorporation is amended hereby and
restated to read as herein set forth in full:
FIRST: The name of the Corporation is AGENCY RENT-A-CAR, INC.
SECOND: The registered office of the Corporation in the State of
Delaware is located at 100 West Tenth Street, in the City of Wilmington, County
of New Castle and the registered agent at such address is The Corporation Trust
Company.
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<PAGE> 22
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the purpose or purposes for which the
Corporation is formed are to engage in the business of purchasing, acquiring,
owning, leasing, selling, transferring, encumbering, generally dealing in,
repairing, renovating, and servicing all types of new and used automobiles,
trucks, and other motor vehicles and any parts or accessories used in
connection therewith; and the purchasing, acquiring, owning, selling, and
generally dealing in all types of supplies used by all types of motor vehicles.
In general, to do everything incidental or conducive to the full
accomplishment of the foregoing objects; and to do any and everything necessary
and proper to carry on any business authorized hereby, and to any other
legitimate business not expressly mentioned herein which is not prohibited by
the laws of the State of Delaware or the laws of any other state or
jurisdiction in which the Corporation does or may do business; and to exercise
all the powers conferred upon a corporation by the laws of the State of
Delaware, the above enumerated powers being merely descriptive and not limiting
as to any and all powers which the corporation may be authorized to do and
perform under the laws of the State of Delaware.
FOURTH: The Corporation is authorized to issue two classes of stock to
be designated respectively "preferred" and "common." The total number of shares
of all classes of stock which the Corporation shall have authority to issue is
ten million (10,000,000) shares consisting of eight million (8,000,000) shares
of common stock, having a par value of five cents ($.05) per share, and two
million (2,000,000) shares of preferred stock, having a par value of five cents
($.05) per share. The shares of preferred stock may be issued as a class
without series, or if so determined from time to time by the board of
directors, either in whole or in part in one or more series, each series to be
expressly designated by distinguishing number, letter, or title prior to the
issue of any shares thereof. The shares of preferred stock, and each series
thereof, may have such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, liquidation,
optional, or other special rights and qualifications, limitations, or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by the board of
directors of the Corporation pursuant to the provisions of this Article FOURTH.
68
<PAGE> 23
There is hereby expressly granted to the board of directors of the Corporation
authority to fix or alter the dividend rights, dividend rates, dividend
preferences and participations, conversion rights, voting rights, rights, and
terms of redemption (including sinking fund provisions), the redemption price
or prices, the rights and preferences in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or upon any
distribution of assets by the Corporation and any other special rights,
qualifications, limitations on and restrictions of, any wholly unissued class
or series of shares of preferred stock and the number of shares constituting
any such series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
Except to the extent otherwise provided in the resolution or resolutions of the
board of directors of the Corporation providing for the initial issue of shares
of a particular preferred series, any series shall be entitled to vote for each
share thereof so held, shall vote share for share with the holders of the
common stock without distinction as to class, and shall not be entitled to vote
separately as a class or series of a class. The number of shares of preferred
stock authorized to be issued may be increased or decreased from time to
time by the affirmative vote of the holders of a majority of the stock of the
corporation entitled to vote, and the holders of the preferred stock shall not
be entitled to vote separately as a class or series of a class on any such
increase or decrease.
Subject to the prior and superior rights of the preferred stock set forth in
any resolution or resolutions of the board of directors of the Corporation
providing for the initial issuance of any particular series of preferred stock,
such dividends (payable in cash, stock, or otherwise) as may be determined by
the board of directors of the Corporation may be declared and paid on the
common stock from time to time out of any funds legally available therefor, and
the preferred stock shall not be entitled to participate in any such dividend.
69
<PAGE> 24
FIFTH: No holder of stock of the Corporation of any class shall have
any preferential, preemptive or other right to subscribe for or to purchase
from the Corporation any stock of the Corporation of any class, whether or not
now authorized, or to purchase any bonds, certificates of indebtedness,
debentures, notes, obligations or other issue whether or not the same shall be
convertible into stock of the Corporation of any class, or shall entitle the
owner or holder to purchase stock of the Corporation of any class.
SIXTH: Any merger or consolidation of the Corporation with or into
any other corporation, or any sale, lease, exchange or other disposition of all
or substantially all of the property and assets of the Corporation to or with
any other corporation, person or other entity, shall require the affirmative
vote of the holders of at least two-thirds of each class of stock outstanding
and entitled to vote at any meeting of the stockholders. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or
that some lesser percentage may be specified by Law or otherwise. This Article
SIXTH may not be altered, added to, amended or repealed except by the
affirmative vote of two-thirds in interest of each class of stock outstanding
entitled to vote at a meeting called for said purpose, provided notice of the
proposed alteration, addition, amendment or repeal shall have been given in
the notice of such meeting of stockholders.
In addition to any approval of the board of directors or any
stockholder vote or consent required by the Laws of the State of Delaware or
any other provisions of the Corporation's Certificate of Incorporation or
By-Laws or otherwise, whether now or hereafter in effect, there shall be
required for the approval, adoption or authorization of any Business
Combination (as defined herein) with an Interested person (as defined herein),
or an affiliate or associate of an Interested Person, the affirmative vote of
the holders of at least two-thirds of each class of shares of stock of the
Corporation entitled to vote in elections of directors, considered separately,
which are not owned, directly or indirectly, by such Interested Person, unless
such Business Combination has been approved by a majority of the Continuing
Directors (as defined herein) or unless all of the following conditions are
satisfied:
(1) The consideration to be received per share in such Business
Combination by holders of the stock of the Corporation is payable in cash in
an amount not less than the highest price per share (including the highest per
share
70
<PAGE> 25
brokerage commission, transfer tax and soliciting dealers' fees) paid by such
Interested Person in acquiring any shares of each respective class or series of
the Corporation's stock, plus an amount per share equal to the per share
equivalent of the Corporation's Excess Current Assets. As used herein, "Excess
Current Assets" shall mean the total current assets of the Corporation reduced
by two times the total current liabilities of the Corporation. For purposes of
the foregoing, Excess Current Assets shall be the highest amount shown on the
audited balance sheets of the Corporation as of the close of all fiscal years
ending during the period commencing on the date such Interested Person first
acquired any shares of stock of the Corporation and terminating on the
fifteenth day prior to the date on which the proxy statement referred to in
subparagraph 6 below is mailed to all stockholders of the Corporation;
provided, however, that if no such fiscal year ends during said period, the
date for determination of Excess Current Assets shall be the end of the fiscal
year immediately preceding the date of the initial purchase by such Interested
Person of shares of stock of the Corporation. For purposes of this provision,
current assets and current liabilities of the Corporation shall be determined
on a consolidated basis as shown on the audited financial statement of the
Corporation and all of its subsidiaries for the applicable fiscal year; and
(2) The consideration to be received per share in such Business
Combination by holders of the stock of the Corporation is payable in cash in
an amount not less than the aggregate of the earnings per share of Common Stock
of the Corporation for the four full consecutive fiscal quarters, or the last
fiscal year reported, whichever is higher, immediately preceding the record
date for solicitation of votes with respect to such Business Combination,
multiplied by the then price/earnings ratio (if any) of such Interested Person
as customarily computed and reported to the financial community; and
(3) The consideration to be received per share in such Business
Combination by holders of the stock of the Corporation bears at least the
same or a greater percentage relationship to the market price of the
Corporation's Common Stock immediately prior to the announcement of such
Business Combination as the highest per share price (including the highest per
share brokerage commission, transfer tax and soliciting dealers' fees) which
such Interested Person has theretofore paid for any of the shares of stock of
the Corporation already owned by it bears to the market price of
71
<PAGE> 26
the Corporation's Common Stock immediately preceding the first acquisition of
any stock of the Corporation by such Interested Person; and
(4) From and after the time such Interested Person became the beneficial
owner of twenty percent (20%) or more of the stock of the Corporation entitled
to vote in the election of drrectors and prior to the conummation of such
Business Combination (i) such Interested Person shall have taken all steps
within its power, including without limitation the voting of its stock in the
Corporation, to insure that the Corporation's board of directors includes at
all times representation by Continuing Director(s) (as defined herein) at least
proportionate to the stock holdings of the Corporation's stockholders not
affiliated with such Interested Person (with a Continuing Director to occupy
any resulting fractional board position); (ii) such Interested Person shall not
have acquired any newly issued shares of stock or treasury stock, directly or
indirectly, from the Corporation (except upon conversion of convertible
securities acquired by it prior to obtaining a 20% interest in the stock of the
Corporation or as a result of a pro rata stock dividend or stock split); (iii)
such Interested Person shall not have acquired any additional shares of the
Corporation's outstanding stock or securities convertible into stock of the
Corporation except as part of the transaction which results in such Interested
Person acquiring its 20% interest; and (iv) there shall have been no
reduction in the dividends paid on the Corporation's stock which would result
in a quarterly dividend per share which is less than the most recent quarterly
dividend per share which has been declared by the board of directors of the
Corporation and approved by a majority of the Continuing Directors. For
purposes of this subparagraph 4, the term "dividend" shall not include extra
dividends; the most recently quarterly dividend per share shall be adjusted for
any subsequent increase or decrease in the outstanding stock of the
Corporation; and if the board of directors shall fail to authorize any quarterly
dividend, the dividend per share shall be considered zero; and
(5) At any time prior to the consummation of such Business Combination,
such Interested Person shall not have (i) made any major change in the
Corporation's equity capital structure or business without the approval of a
majority of the Continuing Directors and/or (ii) received the benefit, directly
or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance or tax credits
provided by the Corporation;
72
<PAGE> 27
(6) A proxy statement complying with the requirements of the Securities
Exchange Act of 1934, as amended, shall be mailed to all stockholders of the
Corporation for the purpose of soliciting stockholder approval of such
Business Combination and shall contain at the front thereof, in a prominent
place, any recommendations as to the advisability (or inadvisability) of such
Business Combination which the Continuing Directors, or any of them, may choose
to state and, if deemed necessary or desirable by a majority of the Continuing
Directors, an opinion of a reputable investment banking firm as to the fairness
(or lack thereof) of the terms of such Business Combination from the point of
view of stockholders of the Corporation who are not affiliated with such
Interested Person (such investment banking firm to be selected by a majority of
the Continuing Directors and to be paid a reasonable fee for its services by
the Corporation upon receipt of such opinion).
For the purposes of this Article SIXTH:
(1) "Affiliate" and "associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
(2) A person shall be the "owner" and "owns" shares of stock of the
Corpration (other than shares of the Corporation's stock held in its treasury):
(i) which such person and its affiliates and associates own beneficially,
directly or indirectly, whether of record or not; (ii) which such person or any
of its affiliates or associates has the right to acquire, pursuant to any
agreement upon the exercise of conversion rights, warrants or options, or
otherwise; (iii) which such person or any of its affiliates or associates has
the right to sell or vote pursuant to any agreement, or (iv) which are owned,
directly or indirectly, by any other person with which such first mentioned
person, its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
securities of the Corporation.
(3) "Business Combination" means:
(a) Any merger or consolidation of the Corporation or any
subsidiary of the Corporation with or into any Interested Person
(regardless of the identity of the surviving corporation);
73
<PAGE> 28
(b) Any sale, lease, or other disposition of all or any
substantial part of the assets of the Corporation or any subsidiary
of the Corporation to any Interested Person for cash or securities
or both;
(c) Any issuance or delivery of securities of the Corporation
or a subsidiary of the Corporation (which the owner shall have the
right to vote, or to vote upon exercise, conversion or by contract) to
an Interested Person in consideration for or in exchange of any
securities or other property (including cash) or both.
(4) "Interested Person" is any person, together with its affiliates and
associates, which (i) as of the record date for the determination of
stockholders entitled to notice of any proposed Business Combination or any
amendment to this Article SIXTH, and to vote thereon or consent thereto, or
as of the date of any such vote or consent, or immediately prior to the
consummation of any Business Combination, owns, directly or indirectly,
twenty percent (20%) or more of the shares of stock of the Corporation entitled
to vote in elections of directors; or (ii) as of any of the dates specified in
clause (i) of this Paragraph (4) is an affiliate of the Corporation and at any
time prior thereto owned 20 percent or more of the shares of stock of the
Corporation entitled to vote in elections of directors.
(5) "Person" is an individual, partnership, corporation, trust or other
entity.
(6) "Subsidiary of the Corporation" is any corporation of which fifty
percent (50%) or more of any class of stock is beneficially owned, directly or
indirectly, by the Corporation.
(7) "Stock of the Corporation" shall mean shares of any class or series
of Capital Stock of the Corporation.
(8) "Continuing Director" shall mean a person (i) who is a member of
the board of directors of the Corporation elected prior to the time that an
Interested Person became the beneficial owner of fifteen percent of the stock
of the Corporation entitled to vote in the election of directors, or (ii) if
there is no Interested Person, a member of the board of directors, or (iii) a
member of the board of directors who was recommended or elected to succeed a
Continuing Director by a majority of the other Continuing Directors.
74
<PAGE> 29
A majority of the Continuing Directors shall have the sole and
exclusive power and duty to determine for the purposes of this Article SIXTH,
on the basis of information known to them, whether (i) any person beneficially
owns more than 20 percent of the shares of stock of the Corporation entitled to
vote in elections of directors, (ii) any person is an affiliate or associate of
another, and (iii) any person has an agreement arrangement or understanding
with another.
Nothing contained in this Article Sixth shall be construed to relieve
any Interested Person from any obligations or duties otherwise required by law.
No amendment to these Articles of Incorporation shall amend, alter,
change or repeal any of the provisions of this Article SIXTH, unless such
amendment, in addition to receiving any stockholder vote or consent required
by the laws of the State of Delaware or any other provision of the Articles of
Incorporation in effect at the time, shall receive the affirmative vote or
consent of the holders of at least two-thirds of the shares of stock of the
Corporation entitled to vote in elections of directors which are not owned,
directly or indirectly, by an Interested Person if the vote or consent on
such amendment were a vote or consent on a Business Combination.
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: The private property of the stockholders of the Corporation
shall not be subject to the payment of corporate debts to any extent whatever.
NINTH: At all elections of directors of the Corporation, each
stockholder shall be entitled to one vote for each share of the capital voting
stock of the Corporation held by such stockholder, and there shall be no right
to cumulate votes of said shares at an election of directors of the
Corporation.
TENTH: The board of directors shall have power without stockholder
action, to make, amend or repeal any or all By-Laws of the Corporation. In
addition to the powers and authorities herein or by statute expressly conferred
upon it, the board of directors may exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation, subject
nevertheless, to the provisions of the laws of the State of Delaware, of the
Certificate of Incorporation and of the By-Laws of the Corporation.
75
<PAGE> 30
ELEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the stock-
holders or class of stockholders, of this Corporation, as the case may be, and
also on this Corporation.
TWELFTH: The Corporation may purchase, from time to time, and to the
extent permitted by the Laws of Delaware, shares of any class of stock issued
by it. Such purchases may be made either in the open market or at private or
public sale, and in such manner and amounts, from such holder or holders of
outstanding shares of the Corporation and at such prices as the board of
directors of the Corporation shall from time to time determine, and the board
of directors is hereby empowered to authorize such purchases from time to time
without any vote of the holders of any class of shares now or hereafter
authorized and outstanding at the time of any such purchase.
THIRTEENTH: Any director or officer of the Corporation shall not be
disqualified by his office from dealing or contracting with the Corporation as
a vendor, purchaser, employee, agent, lessor, lessee or otherwise.
No transaction contract or other act of the Corporation shall be void
or voidable or in any way affected or invalidated by reason of the fact that
any director or officer, or any firm or corporation in which such director or
officer is
76
<PAGE> 31
a member or is a shareholder, director or officer, is in any way interested in
such transaction, contract or other act provided the fact that such director,
officer, firm or corporation is so interested shall be disclosed or shall be
known to the board of directors or such members thereof as shall be present at
any meeting of the board of directors at which action upon any such
transaction, contract or other act shall be taken; nor shall any such director
or officer be accountable or responsible to the Corporation for or in respect
of any such transaction, contract or other act of the Corporation or for any
gains or profits realized by him by reason of the fact that he or any firm of
which he is a member or any corporation of which is a shareholder, director or
officer is interested in such transaction, contract or other act; and any such
director may be counted in determining the existence of a quorum at any meeting
of the board of directors of the corporation which shall authorize or take
action in respect of any such transaction, contract or other act, and may vote
thereat to authorize, ratify or approve any such transaction, contract or other
act with like force and effect as if he or any firm of which he is a member or
any corporation of which is a shareholder, director or officer were not
interested in such transaction, contract or other act.
FOURTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, said Agency Rent-A-Car, Inc. has caused this
certificate to be signed by Samuel J. Frankino, its Chairman of the Board of
Directors and attested by Louis H. Rice, its Secretary, this 31st day of May,
1983.
SAMUEL J. FRANKINO
------------------------
SAMUEL J. FRANKINO,
Chairman of the Board of
Directors
ATTEST:
By Louis H. Rice
------------------------
Louis H. Rice, Secretary
77
<PAGE> 1
EXHIBIT 3b
NATIONAL AUTO CREDIT, INC.
BY-LAWS
TABLE OF CONTENTS
-----------------------
Page
ARTICLE I ----
Offices
- -------
Section 1. Registered office............................ 1
Section 2. Other offices................................ 1
ARTICLE II
Fiscal Year - Stockholders
- --------------------------
Section 1. Fiscal Year.................................. 1
Section 2. Annual Meeting................................ 1
Section 3. Special Meetings............................. 2
Section 4. Place of Meetings............................ 2
Section 5. Notice of Meetings and Adjourned
Meetings.................................... 3
Section 6. Stockholders' List........................... 3
Section 7. Quorum and Adjournments...................... 4
Section 8. Voting....................................... 5
Section 9. Proxies...................................... 5
Section 10. Action of Stockholders
Without a Meeting........................... 5
ARTICLE III
Board of Directors
- ------------------
Section 1. Number of Directors.......................... 6
Section 2. Election of Directors........................ 6
Section 3. Removal...................................... 8
Section 4. Vacancies.................................... 8
78
<PAGE> 2
Page
----
Section 5. Annual Meeting.............................. 9
Section 6. Regular Meetings............................ 10
Section 7. Special Meetings............................ 10
Section 8. Quorum...................................... 11
Section 9. Telephone Communications.................... 11
Section 10. Action of Directors Without a
Meeting.................................... 11
Section 11. Compensation................................ 12
Section 12. Committees.................................. 12
Section 13. Indemnification............................. 13
ARTICLE IV
Notices
- -------
Section 1. Notices..................................... 14
Section 2. Waiver of Notice............................ 14
ARTICLE V
Officers
- --------
Section 1. Officers.................................... 15
Section 2. Election of Officers........................ 15
Section 3. Other Officers.............................. 15
Section 4. Resignation................................. 15
Section 5. Removal..................................... 16
Section 6. Vacancy..................................... 16
Section 7. Chairman of the Board....................... 16
Section 8. President................................... 17
Section 9. Vice President.............................. 17
79
<PAGE> 3
Page
----
Section 10. Secretary.................................... 18
Section 11. Treasurer.................................... 18
Section 12. Controller................................... 19
Section 13. Salaries..................................... 19
ARTICLE VI
Loans, Checks, Deposits, etc.
- -----------------------------
Section 1. General...................................... 20
Section 2. Loans and Evidence of
Indebtedness................................ 20
Section 3. Banking....................................... 21
Section 4. Securities Held By the
Corporation................................. 21
ARTICLE VII
Shares and Their Transfer
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Section 1. Share Certificates........................... 22
Section 2. Lost, Stolen or Destroyed
Certificates................................ 23
Section 3. Transfers.................................... 24
Section 4. Record Dates................................. 24
Section 5. Protection of Corporation.................... 25
ARTICLE VIII
Corporate Seal 25
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ARTICLE IX
Miscellaneous 26
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BY-LAWS
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at
such other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
FISCAL YEAR - STOCKHOLDERS
Section 1. FISCAL YEAR. The first fiscal year of the corporation
shall end January 31, 1972 and thereafter commence on the first day of February
each year and end on the last day of January unless changed from time to time
by action of the board of directors.
Section 2. ANNUAL MEETING. The annual meeting of the stockholders for
the election of directors and for the transaction of any other proper business,
shall be held at such date and time during the first eight months of each
calendar year as shall be determined by the board of direc-
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tors. If no earlier date is determined by the board of directors, the annual
meeting shall be held on the fourth Tuesday in August of each year, if not a
legal holiday under the laws of the State where such meeting is to be held
and if a legal holiday under the laws of such State, then on the next
succeeding business day not a legal holiday under the laws of such State.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or Purposes, unless otherwise provided by statute or by the
certificate of incorporation, may be called at any time by the chairman of the
board, or the president, or any vice president, or secretary, and shall be
called by the president or secretary at the request in writing of a majority of
the directors, or at the request in writing of stockholders owning a majority
in amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Any such request shall state the purpose or purposes of
the proposed meeting.
Section 4. PLACE OF MEETINGS. All meetings of the stockholders for
the election of directors shall be held at such place either within or without
the State of Delaware as shall be designated from time to time by the board of
directors and stated in the notice of the meeting. Meetings of stockholders
for any other purpose may be held at such time
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and place, within or without the State of Delaware, as shall be stated in the
notice of such meeting.
Section 5. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written notice
of the annual meeting or a special meeting stating the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called shall
be given to each stockholder entitled to vote at such meeting not less than ten
(10) nor more than fifty (50) days before the date of the meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days or if the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. STOCKHOLDERS' LIST. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled
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to vote at the meeting, arranged in alphabetical order and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 7. QUORUM AND ADJOURNMENTS. At such meeting of the
stockholders, except as otherwise provided by statute or by the certificate of
incorporation, the holders of a majority of the issued and outstanding shares
of each class of stock entitled to vote thereat, present in person or
represented by proxy, shall be necessary and sufficient to constitute a quorum
for the transaction of business. If, however, such quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time,
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without notice other than announcement at the meeting, until a quorum shall be
present or represented.
Section 8. VOTING. When a quorum is present or represented at any
meeting, the vote of the holders of a majority of the shares of stock having
voting power present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of the statutes or of the certificate of incorporation or
of these by-laws a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 9. PROXIES. At each meeting of the stockholders, each
stockholder shall, unless otherwise provided by the certificate of
incorporation, be entitled to one vote in person or by proxy for each share of
stock held by him which has voting power upon the matter in question, but no
proxy shall be voted after three years from its date, unless the proxy provides
for a longer period.
Section 10. ACTION OF STOCKHOLDERS WITHOUT A MEETING. Whenever the
vote of stockholders at a meeting thereof is required or permitted to be taken
for or in connection with any corporate action, whether by any provision of
the statutes or of the certificate of incorporation or otherwise, such
corporate action may be taken without a meeting, without prior notice and
without a vote, if a
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consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. NUMBER OF DIRECTORS. The number of directors constituting
the board shall be fixed from time to time by vote of a majority of the entire
board of directors; and no vacancy shall be deemed to exist in the board unless
and until the number of directors in office falls below the number so fixed.
No decrease in the number of directors shall shorten the term of any incumbent
director. Directors may, but need not, be stockholders.
Section 2. ELECTION OF DIRECTORS. The directors shall be elected at
the annual meeting of stockholders, or if not so elected, at a special meeting
of stockholders called for that purpose. Directors shall hold office for a
term of three years and shall be divided into three classes
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so that approximately one-third of the board shall stand for election at each
annual meeting of stockholders. At the annual meeting in 1983 approximately
one-third of the number of persons to be elected directors shall be elected for
three year terms, approximately one-third for two year terms, and approximately
one-third for one year terms. At the annual meeting of stockholders in 1984,
and at each annual meeting thereafter, approximately one-third of the
membership of the board shall be elected for three year terms. If the number
of directors is changed, any increase or decrease in directors shall be
apportioned among the classes so as to maintain all classes as nearly equal in
number as possible and any individual director elected to any class shall hold
office for a term which shall coincide with the term of such class. At any
meeting of stockholders at which directors are to be elected, only persons
nominated as candidates shall be eligible for election, and the candidates
receiving the greatest number of votes shall be elected. Nominations for the
election of Directors may be made by the board of directors. Nominations for
election of Directors may also be made by any stockholder entitled to vote for
the election of directors, by notice in writing, delivered or mailed, postage
prepaid, to the Secretary of the Corporation not less than fourteen nor more
than fifty days prior to any meeting of the stockholders called for the
election of directors. Each such notice shall set forth the
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name, age, business address, residence address and principal occupation or
employment of each nominee proposed in such notice, and the number of shares of
stock of the corporation which are beneficially owned by each such nominee.
The chairman of the meeting at which directors are to be elected may, if the
facts warrant, determine that a nomination was not made in accordance with the
foregoing procedure and, if he should so determine, the defective nomination
shall be disregarded.
Section 3. REMOVAL. Subject to any provision in the certificate of
incorporation to the contrary, any director may be removed with or without
cause, at any time by the affirmative vote of the holders of record of a
majority of the outstanding shares of stock entitled to vote in the election of
directors, at a special meeting of the stockholders called for that purpose;
and the vacancy in the board of directors caused by such removal may be filled
by the stockholders, or if not so filled, by a majority of the board of
directors remaining in office or by the sole remaining director.
Section 4. VACANCIES. A resignation from the board of directors shall
be deemed to take effect immediately or at such other time as the director may
specify. When one or more directors shall resign from the board, effective at
a future date, a majority of the directors then in office, including those who
have resigned, although less than a
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quorum, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective. Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the board for any reason may be
filled by vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, at any meeting of the board. A
director elected to fill a vacancy shall be elected to hold office until the
expiration of the term of the class to which he has been elected and until his
successor shall be duly elected or qualified or until his earlier death,
resignation or removal.
Section 5. ANNUAL MEETING. After each annual election of directors,
on the same day the board of directors may meet for the purpose of
organization, the election of officers and the transaction of other business at
the place where the annual meeting of the stockholders for the election of
directors is held. Notice of such meeting need not be given. Such meeting may
be held at any other time or place which shall be specified in a notice given
as hereinafter provided for special meetings of the board of directors or in a
consent and waiver of notice thereof signed by all the directors.
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Section 6. REGULAR MEETINGS. Regular meetings of the board of
directors may be held at such places (within or without the State of Delaware)
and at such times as the board shall by resolution determine. If any day fixed
for a regular meeting shall be a legal holiday at the place where the meeting
is to be held, then the meeting which would otherwise be held on that day shall
be held at such place at the same hour and on the next succeeding business day
not a legal holiday. Notice of regular meetings need not be given.
Section 7. SPECIAL MEETINGS. Special meetings of the board of
directors shall be held whenever called by the president, or by any vice
president, or by any two of the directors. Notice of each such meeting shall
be mailed to each director, addressed to him at his residence or usual place of
business, at least three (3) days before the day on which the meeting is to be
held, or shall be sent to him by telegraph, cable or wireless so addressed, or
shall be delivered personally or by telephone, at least 24 hours before the
time the meeting is to be held. Each such notice shall state the time and
place (within or without the State of Delaware) of the meeting but need not
state the purposes thereof, except as otherwise provided by statute or by these
by-laws. Notice of any meeting of the board need not be given to any director
who shall be present at such meeting;
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and any meeting of the board shall be a legal meeting without any notice
thereof having been given, if all of the directors then in office shall be
present thereat.
Section 8. QUORUM. Except as otherwise provided by statute or by
these by-laws, a majority of the total number of directors (or the closest
whole number thereto) shall be required to constitute a quorum for the
transaction of business at any meeting, and the affirmative vote of a majority
of the directors present at a meeting at which a quorum is present shall be
necessary for the adoption of any resolution or the taking of any other action.
In the absence of a quorum, the director or directors present may adjourn any
meeting from time to time until a quorum be had. Notice of any adjourned
meeting need not be given.
Section 9. TELEPHONE COMMUNICATIONS. Members of the board of
directors or any committee thereof may participate in a meeting of such board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this subsection shall
constitute presence in person at such meeting.
Section 10. ACTION OF DIRECTORS WITHOUT A MEETING. Any action required
or permitted to be taken at any meeting of the board of directors or of any
committee thereof may be
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taken without a meeting if all members of the board or of such committee, as
the case may be, consent thereto in writing and such written consent is
filed with the minutes or proceedings of the board or such committee.
Section 11. COMPENSATION. Directors, as such, shall not receive any
stated salary for their services, but by resolution of the board of directors a
fixed sum and expenses of attendance, if any, may be allowed for attendance
at such regular and special meeting of the board or of any committee thereof.
Nothing herein contained shall be construed so as to preclude any director
from serving the corporation in any other capacity, or from serving any of its
stockholders, subsidiaries or affiliated corporations in any capacity, and
receiving compensation therefor.
Section 12. COMMITTEES. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Any such committee, to the extent provided in the resolution,
shall have and may exercise the powers of the board of directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be
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affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors. Each committee shall keep resular minutes
of its meetings and report the same to the board of directors when required.
Section 13. INDEMNIFICATION. The corporation shall indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer, employee or agent of the corporation or served any
other enterprise at the request of the corporation, against any and all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him in connection with such
action, suit or proceeding, in any circumstances, and to the full extent,
permitted by Section 145 of the
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Delaware Corporation Law, any amendment thereto, or any law of similar import.
ARTICLE IV
NOTICES
Section 1. NOTICES. Whenever under the provisions of the statutes or
of the certificate of incorporation or of these by-laws, notice is required to
be given to any director or stockholder, it shall not be necessary that
personal notice be given, and such notice may be given in writing, by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation or at his residence or usual place of business, with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegraph, cable or wireless, and such notice
shall be deemed to be given when the same shall be filed, or in person or by
telephone, and such notice shall be deemed to be given when the same shall be
delivered.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the certificate of
incorporation or of these by-laws, a waiver thereof in writing, signed by the
person or persons
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entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. OFFICER'S. The officers of the corporation shall be a
chairman of the board, a president, one or more vice presidents, a secretary,
and a treasurer. Any two or more offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers shall be elected by the
board of directors and each shall hold office at the pleasure of the board of
directors until his successor shall have been duly elected and qualified, or
until his death, or until he shall resign or until he shall have been removed
in the manner hereinafter provided.
Section 3. OTHER OFFICERS. In addition to the officers named in
Section 1 of this Article, the corporation may have such other officers and
agents as may be deemed necessary by the board of directors. Such other
officers and agents shall be appointed in such manner, have such duties and
hold their offices for such terms, as may be determined by resolution of the
board of directors.
Section 4. RESIGNATION. Any officer may resign at any time by giving
written notice of his resignation to the board of directors, to the president
or to the secretary of
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the corporation. Any such resignation shall take effect at the time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. REMOVAL. Any officer may be removed, either with or
without cause, by action of the directors.
Section 6. VACANCY. A vacancy in any office because of death,
resignation, removal or any other cause shall be filled by the board of
directors.
Section 7. CHAIRMAN OF THE BOARD. The chairman of the board shall be
the chief executive officer of the corporation, shall preside at all meetings
of stockholders and of the board of directors, shall have general control and
management of the business affairs and policies of the corporation, and
shall see that all orders and resolutions of the board of directors are carried
into effect. Except where by law the signature of the president is required,
the chairman of the board shall possess the same power as the president to sign
all certificates, contracts, and other instruments of the corporation. During
the absence or disability of the president, he shall exercise all the powers
and discharge all of the duties of the president. He shall have such other
powers and perform such other duties as from time to time may be conferred or
imposed upon him by the board of directors.
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Section 8. PRESIDENT. The president of the corporation shall be the
chief operating officer of the corporation. During the absence or disability
of the chairman of the board, he shall exercise all of the powers and discharge
all of the duties of the chairman of the board. He shall possess power to sign
all certificates, contracts and other instruments of the corporation. He
shall, in the absence of the chairman of the board, preside at all meetings of
the stockholders and of the board of directors. He shall perform all such
other duties as are incident to his office or are properly required of him by
the board of directors.
Section 9. VICE PRESIDENT. In the event of the absence or disability
of the president, the vice president, or, in case there shall be more than one
vice president, the vice president designated by the board of directors, shall
perform all the duties of the president, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the president. Except
where by law the signature of the president is required, each of the vice
presidents shall possess the same power as the president to sign all
certificates, contracts, obligations and other instruments of the corporation.
Any vice president shall perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these by-laws or by the
board of directors or by the president.
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Section 10. SECRETARY. The secretary shall, if present, act as
secretary of, and keep the minutes of, all the proceedings of the meetings of
the stockholders and of the board of directors and of any committee of the
board of directors in one or more books to be kept for that purpose; shall
perform such other duties as shall be assigned to him by the president or the
board of directors; and, in general, shall perform all duties incident to the
office of secretary.
Section 11. TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties, in such
sum and with such surety or sureties as the board of directors shall determine.
The treasurer shall keep or cause to be kept full and accurate records of all
receipts and disbursements in the books of the corporation and shall have the
care and custody of all funds and securities of the corporation. He shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all of his transactions as treasurer and shall perform such
other duties as may be assigned to him by the chairman of the board or the
board of directors; and, in general, shall perform all duties incident to the
office of treasurer.
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Section 12. CONTROLLER. The controller, if such office is created by
the board, shall be the chief accounting officer of the corporation. He
shall keep or cause to be kept all books of account and accounting records of
the corporation and shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the corporation. He shall prepare or cause to be prepared
appropriate financial statements for the corporation and shall perform such
other duties as may be assigned to him by the chairman of the board or the
board of directors; and, in general, shall perform all duties incident to the
office of controller.
Section 13. SALARIES. The salaries of the officers shall be fixed
from time to time by the board of directors or by the chairman of the board.
Any such decision by the chairman of the board shall be final unless expressly
overruled or modified by action of the board of directors, in which event
such action of the board of directors shall be conclusive of the matter.
Nothing contained herein shall preclude any officer from serving the
corporation in any other capacity, including that of director, or from serving
any of its stockholders, subsidiaries or affiliated corporations in any
capacity, and receiving a proper compensation therefor.
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ARTICLE VI
LOANS, CHECKS, DEPOSITS, ETC.
Section 1. GENERAL. All checks, drafts, bill of exchange or other
orders for the payment of money, issued in the name of the corporation, shall
be signed by such person or persons and in such manner as may from time to time
be designated by the board of directors, which designation may be general or
confined to specific instances.
Section 2. LOANS AND EVIDENCES OF INDEBTEDNESS. No loan shall be
contracted on behalf of the corporation, and no evidence of indebtedness shall
be issued in its name, unless authorized by the board of directors. Such
authorization may be general or confined to specific instances. Loans so
authorized by the board of directors may be effected at any time for the
corporation from any bank, trust company or other institution, or from any
firm, corporation or individual. All bonds, debentures, notes and other
obligations or evidences of indebtedness of the corporation issued for such
loans shall be made, executed and delivered as the board of directors shall
authorize. When so authorized by the board of directors any part of or all the
properties, including contract rights, assets, business or good will of the
corporation, whether then owned or thereafter acquired, may be mortgaged,
pledged, hypothecated or conveyed or assigned in trust as security for the
payment of such
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bonds, debentures, notes and other obligations or evidences of indebtedness
of the corporation, and of the interest thereon, by instruments executed and
delivered in the name of the corporation.
Section 3. BANKING. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the board of directors
may authorize. The board of directors may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these by-laws, as it may deem expedient. For the purpose of
deposit and for the purpose of collection for the account of the corporation,
checks, drafts and other orders for the payment of money which are payable to
the order of the corporation shall be endorsed, assigned and delivered by such
person or persons and in such manner as may from time to time be authorized by
the board of directors.
Section 4. SECURITIES HELD BY THE CORPORATION. Unless otherwise
provided by resolution adopted by the board of directors, the chairman of the
board, the president or any vice president may from time to time appoint an
attorney or attorneys, or an agent or agents, to exercise in the name and on
behalf of the corporation the powers and rights which the corporation may have
as the holder of stock or other
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securities in any other corporation to vote or to consent in respect of such
stock or other securities; and the chairman of the board, the president, or any
vice president may instruct the person or persons so appointed as to the manner
of exercising such powers and rights and the chairman of the board, the
president, or any vice president may execute or cause to be executed in the
name and on behalf of the corporation and under its corporate seal, or
otherwise, all such written proxies, powers of attorney or other written
instruments as he may deem necessary in order that the corporation may
exercise such powers and rights.
ARTICLE VII
SHARES AND THEIR TRANSFER
Section 1. SHARE CERTIFICATES. Every stockholder shall be entitled to
have a certificate certifying the number of shares of stock of the corporation
owned by him, signed by, or in the name of the corporation by the chairman of
the board or the president or a vice president and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation (except that when any such certificate is countersigned by a
transfer agent other than the corporation or its employee or by a registrar
other than the corporation or its employee the signatures of any such officers
may be facsimiles). If the corporation shall
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be authorized to issue more than one class of stock or more than one series of
any class, the designations, preferences and relative, participating, optional
or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
provided that, except in the case of restrictions on transfers of securities
which are required to be noted on the certificate, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. LOST, STOLEN OR DESTROYED CERTIFICATES. The board of
directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the corporation alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certi-
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ficate of stock to be lost, stolen or destroyed. When authorizing such issue
of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 3. TRANSFERS. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. RECORD DATES. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any
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change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to such meeting or to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 5. PROTECTION OF CORPORATION. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VIII
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and
105
<PAGE> 29
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
MISCELLANEOUS
Except as otherwise provided herein, these By-Laws may be altered,
added to, amended or repealed as follows: (a) at any meeting of the
stockholders by affirmative vote of a majority in interest of each class of
stock outstanding and entitled to vote thereat, provided notice of the proposed
alteration, addition, amendment or repeal shall have been given in the notice
of such meeting; or (b) by the board of directors, except with respect to any
provision of which by law, the Certificate of Incorporation or By-Laws requires
action by the stockholders. Any amendments adopted by the Board shall be
reported to the stockholders at the next meeting of stockholders. Any By-Law
adopted by the board of directors may be amended or repealed by the
stockholders, as provided in this Section. The provisions contained in
Sections 1 through 13 of Article III of these By-Laws shall not be amended,
altered or repealed except (a) by the affirmative vote of the holders of at
least two-thirds of each class of stock outstanding and entitled to vote at any
meeting of the stockholders, provided notice of the proposed
106
<PAGE> 30
amendment, alteration or repeal shall have been given in the notice of such
meeting or (b) by the Board of Directors, provided a majority of the
Continuing Directors (as defined in Article SIXTH of the certificate of
incorporation) concur in the amendment, alteration or repeal.
107
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 4(b)
31937
<S> <C>
NUMBER SHARES
NA-
[NATIONAL AUTO CREDIT, INC. LOGO]
SEE REVERSE FOR
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 63252R 10 3
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF NATIONAL AUTO CREDIT, INC., WITHOUT PAR VALUE,
CERTIFICATE OF STOCK
transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
/s/ Peter T. Zackeroff /s/ Sam J. Frankino
SECRETARY CHAIRMAN OF THE BOARD
[NATIONAL AUTO CREDIT, INC. CORPORATE SEAL]
COUNTERSIGNED AND REGISTERED:
CHEMICAL BANK
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
</TABLE>
108
<PAGE> 2
<TABLE>
<CAPTION>
NATIONAL AUTO CREDIT, INC.
A full statement of the designations and any preferences, conversion and other rights, voting powers, limitations
as to dividends, qualifications and terms and conditions of redemption of the common stock represented by this
certificate and of each other class of stock authorized to be issued by the Corporation will be furnished by the
Corporation to any stockholder upon request and without charge.
-------------------------------------
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- __________________ Custodian ___________________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act ____________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ___________________ hereby sell, assign and tranfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________ shares
of the capital stock represented by the within Cetificate, and do hereby irrevocably constitute and appoint
___________________________________________________________________________________________________________________________ Attorney
to transfer the said stock on the books of the written named Corporation with full power of substitution in the premises.
Dated___________________________________________
SIGNATURE(S) GUARANTEED
By________________________________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
(Banks, Stockholders, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN AP-
PROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRIT-
TEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
</TABLE>
109
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIOS
Ratio of Total Liabilities to Stockholders' Equity
Total liabilities divided by total stockholders' equity
Percent of Operating Debt to Total Capital
Operating debt dividend by the sum of operating debt plus deferred income taxes
plus stockholders' equity
110
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Percent Owned
State of by National Auto
Corporate Name Organization Credit, Inc. (1)
- -------------- ------------ ----------------
Agency Chrysler Plymouth, Inc. Ohio 100%
Agency Ford, Inc. Ohio 100%
Agency Rent-A-Car, Ltd. Canada 100%
National Motors, Inc. (2) Delaware 100%
NAC, Inc. Delaware 100%
All of the subsidiaries listed above are included in the consolidated financial
statements of the Company. The Company also has various subsidiaries which,
when considered in the aggregate, do not constitute a significant subsidiary.
(1) The automobile rentals segment operates under the name of Agency Rent-A-Car
and Altra Auto Rental.
(2) Prior name was Agency Auto Sales, Inc.
111
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-51727, No. 33-51729, No. 2-93984 and No. 33-2117 of National Auto Credit,
Inc. on Form S-8 of our report dated March 23, 1995 appearing in this Annual
Report on Form 10-K of National Auto Credit, Inc. for the year ended
January 31, 1995.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
March 23, 1995
112
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND THE INCOME STATEMENT OF NATIONAL AUTO CREDIT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 398
<SECURITIES> 0
<RECEIVABLES> 208,093
<ALLOWANCES> (4,827)
<INVENTORY> 23,406
<CURRENT-ASSETS> 0
<PP&E> 153,050
<DEPRECIATION> (55,146)
<TOTAL-ASSETS> 320,941
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,348
0
0
<OTHER-SE> 197,880
<TOTAL-LIABILITY-AND-EQUITY> 320,941
<SALES> 64,651
<TOTAL-REVENUES> 219,163
<CGS> 61,618
<TOTAL-COSTS> 121,757
<OTHER-EXPENSES> 36,660
<LOSS-PROVISION> 4,705
<INTEREST-EXPENSE> 2,150
<INCOME-PRETAX> 36,428
<INCOME-TAX> 14,025
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,403
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
</TABLE>
