U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number 0-14819
RENT-A-WRECK OF AMERICA, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its Charter)
Delaware 95-3926056
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10324 South Dolfield Drive, Owings Mills, MD 21117
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (410) 581-5755
11460 Cronridge Drive, Suite 120, Owings Mills, MD 21117
--------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,878,217 shares as of July
25, 2000.
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
FORM 10-QSB - JUNE 30, 2000
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and
June 30, 2000 (Unaudited) 2-3
Consolidated Statements of Earnings for the Three Months
ended June 30, 1999 and 2000 (Unaudited) 4
Consolidated Statements of Cash Flows for the Three
Months ended June 30, 1999 and 2000 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6-10
Item 2. Management's Discussion and Analysis or Plan of Operation 10-13
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
1
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
2000 2000
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents ............................ $ 701,808 $ 809,864
Restricted Cash ...................................... 745,514 772,905
Accounts Receivable, net of allowance for
doubtful accounts of $829,253 and $816,249 at
March 31, 2000 and June 30, 2000, respectively:
Continuing License Fees and Advertising Fees ....... 365,462 380,317
Current Portion of Notes Receivable ................ 416,002 425,183
Current Portion of Direct Financing Leases ......... 5,406 4,726
Other .............................................. 305,685 71,277
Prepaid Expenses and Other ........................... 184,045 177,447
Income Taxes Recoverable ............................. -- 170,079
Deferred Tax ......................................... 614,541 373,541
----------- -----------
TOTAL CURRENT ASSETS ............................ 3,338,463 3,185,339
----------- -----------
PROPERTY AND EQUIPMENT:
Furniture ............................................ 99,399 100,758
Computer Hardware and Software ....................... 431,918 514,863
Machinery and Equipment .............................. 98,172 98,172
Leasehold Improvements ............................... 54,321 54,321
Vehicles ............................................. 187,360 150,801
----------- -----------
871,170 918,915
Less: Accumulated Depreciation and Amortization ...... (493,612) (512,558)
----------- -----------
NET PROPERTY AND EQUIPMENT ...................... 377,558 406,357
----------- -----------
OTHER ASSETS:
Intangible Assets, net of accumulated amortization
of $132,035 and $136,976 at March 31, 2000 and
June 30, 2000, respectively ......................... 193,666 188,725
Long-term Portion of Notes and Direct Financing
Lease Receivables, net of allowance of $3,000
at March 31, 2000 and June 30, 2000, respectively.... 70,438 64,385
----------- -----------
264,104 253,110
----------- -----------
TOTAL ASSETS .................................... $ 3,980,125 $ 3,844,806
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, June 30,
2000 2000
---------- ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses ......................... $1,359,215 $ 826,887
Dividends Payable ............................................. 22,100 22,100
Insurance Financing Payable ................................... -- 436,425
Insurance Loss Reserves ....................................... 379,075 407,577
Income Taxes Payable .......................................... 338,550 --
---------- ----------
TOTAL CURRENT LIABILITIES ................................ 2,098,940 1,692,989
---------- ----------
LONG-TERM LIABILITIES:
Deferred Tax Liability ........................................ 45,681 45,681
---------- ----------
TOTAL LONG-TERM LIABILITIES .............................. 45,681 45,681
---------- ----------
TOTAL LIABILITIES ........................................... 2,144,621 1,738,670
---------- ----------
COMMITMENTS AND CONTINGENCIES ................................... -- --
SHAREHOLDERS' EQUITY:
Convertible Cumulative Series A Preferred Stock, $.01 par
value; authorized 10,000,000 shares; issued and
outstanding 1,105,000 shares at March 31, 2000 and at
June 30, 2000 (aggregate liquidation preference $884,000
at March 31, 2000 and June 30, 2000) ......................... 11,050 11,050
Common Stock, $.01 par value; authorized 25,000,000 shares;
issued and outstanding 3,568,217 shares at March 31, 2000
and June 30, 2000 ............................................ 35,682 35,682
Additional Paid-In Capital .................................... 1,423,181 1,423,181
Retained Earnings ............................................. 365,591 636,223
---------- ----------
TOTAL SHAREHOLDERS' EQUITY ............................... 1,835,504 2,106,136
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............... $3,980,125 $3,844,806
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------
1999 2000
----------- -----------
<S> <C> <C>
REVENUES:
Initial License Fees ........................................... $ 362,001 $ 368,500
Continuing License Fees ........................................ 679,305 815,394
Advertising Fees ............................................... 220,784 241,478
Insurance Premiums ............................................. 175,849 257,369
Other .......................................................... 41,222 46,936
----------- -----------
1,479,161 1,729,677
----------- -----------
EXPENSES:
Salaries, Consulting Fees and Employee Benefits ................ 238,937 254,465
Advertising and Promotion ...................................... 322,019 366,158
Sales and Marketing ............................................ 178,364 94,059
Insurance Underwriting Expenses ................................ 144,954 286,090
General and Administrative Expenses ............................ 241,861 260,302
Depreciation & Amortization .................................... 32,135 28,326
----------- -----------
1,158,270 1,289,400
----------- -----------
OPERATING INCOME .......................................... 320,891 440,277
OTHER INCOME (EXPENSE)
Interest Income ................................................ 24,393 42,632
Interest Expense ............................................... (6,614) (6,927)
----------- -----------
17,779 35,705
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE .......................... 338,670 475,982
----------- -----------
INCOME TAX EXPENSE ............................................... 105,639 183,250
----------- -----------
NET INCOME ................................................ $ 233,031 $ 292,732
DIVIDENDS ON CONVERTIBLE CUMULATIVE PREFERRED STOCK .............. 22,600 22,100
----------- -----------
NET INCOME APPLICABLE TO COMMON AND COMMON EQUIVALENT SHARES...... $ 210,431 $ 270,632
----------- -----------
EARNINGS PER COMMON SHARE
Basic .......................................................... $ .05 $ .08
----------- -----------
Weighted average common shares ................................... 3,940,409 3,568,217
=========== ===========
Diluted ........................................................ $ .04 $ .05
----------- -----------
Weighted average common shares plus options and warrants.......... 5,893,288 5,420,523
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------
1999 2000
----------- -----------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income .................................................... $ 233,031 $ 292,732
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ............................... 32,135 28,326
Deferred income taxes ....................................... (28,665) 241,000
Gain on disposal of property and equipment .................. -- (8,208)
Provision for doubtful accounts ............................. 78,129 (13,004)
Changes in assets and liabilities:
Accounts and notes receivable ............................... 495,459 230,109
Prepaid expenses and other .................................. 6,128 6,598
Income taxes recoverable .................................... -- (170,079)
Accounts payable and accrued expenses ....................... (121,633) (532,328)
Income taxes payable ........................................ (171,678) (338,550)
Insurance loss reserves ..................................... 52,431 28,502
----------- -----------
Net cash provided by (used in) operating activities..... 575,337 (234,902)
----------- -----------
Cash flows from investing activities:
Increase in restricted cash ................................... (2,022) (27,391)
Proceeds from sale of property and equipment .................. -- 32,500
Acquisition of property and equipment ......................... (5,892) (76,476)
Additions to intangible assets ................................ (14,815) --
----------- -----------
Net cash used in investing activities .................. (22,729) (71,367)
----------- -----------
Cash flow from financing activities:
(Decrease) increase in insurance financing payable ............ (92,103) 436,425
Preferred dividends paid ...................................... (169,697) (22,100)
----------- -----------
Net cash (used in) provided by financing activities..... (261,800) 414,325
----------- -----------
Net increase in cash and cash equivalents .............. 290,808 108,056
Cash and cash equivalents at beginning of period ............... 861,794 701,808
----------- -----------
Cash and cash equivalents at end of period ..................... $ 1,152,602 $ 809,864
----------- -----------
Supplemental disclosure of cash flow information:
Interest paid ................................................ $ 6,614 6,927
Taxes paid ................................................... $ 301,700 $ 449,996
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements presented herein include the accounts
of Rent-A-Wreck of America, Inc. ("RAWA, Inc.") and its wholly-owned
subsidiaries, Rent-A-Wreck One Way, Inc. ("RAW One Way"), Consolidated American
Rental Insurance Company, LTD ("CAR Insurance") and Bundy American Corporation
("Bundy"), and Bundy's subsidiaries, Rent-A-Wreck Leasing, Inc. ("RAW Leasing")
and Priceless Rent-A-Car, Inc. ("PRICELESS").
All of the above entities are collectively referred to as the "Company"
unless the context provides or requires otherwise. All material intercompany
balances and transactions have been eliminated in the consolidated financial
statements.
The consolidated balance sheet as of June 30, 2000, and the consolidated
statements of earnings and cash flows for the three-month periods ended June 30,
1999 and 2000 have been prepared by the Company without audit. In the opinion of
management, all adjustments which are necessary to present a fair statement of
the results of operations for the interim periods have been made, and all such
adjustments are of a normal recurring nature. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's March
31, 2000 audited financial statements. The results of operations for the interim
periods are not necessarily indicative of the results for a full year.
2. PREFERRED STOCK
For the quarter ended June 30, 2000, the Company declared dividends on the
Preferred Stock totaling $22,100, which are expected to be paid during the
second quarter of the Company's fiscal year.
6
<PAGE>
3. EARNINGS PER SHARE
A reconciliation of the numerators and denominators utilized in the
computation of basic and diluted earnings per share for the three-month periods
ended June 30, 1999 and 2000 is as follows:
1999 2000
---------- ----------
BASIC EPS COMPUTATION
Numerator:
Net income applicable to common shares $ 210,431 $ 270,632
Denominator:
Weighted average common shares 3,940,409 3,568,217
---------- ----------
Basic EPS $ .05 $ .08
========== ==========
DILUTED EPS COMPUTATION
Numerator:
Net income applicable to common shares $ 210,431 $ 270,632
Dividends on convertible preferred stock 22,600 22,100
---------- ----------
233,031 292,732
---------- ----------
Denominator
Weighted average common shares 3,940,409 3,568,217
Weighted average convertible preferred stock 1,132,808 1,105,000
Weighted average options and warrants 820,071 747,306
---------- ----------
5,893,288 5,420,523
---------- ----------
Diluted EPS $ .04 $ .05
========== ==========
7
<PAGE>
GEOGRAPHIC AND INDUSTRY SEGMENTS
The Company currently operates in two principal segments: Vehicle Rental
Franchise Programs and Insurance Coverage for its franchisees. Corporate costs
are allocated to each segment's operations and are included in the measure of
each segment's profit or loss. The geographic data include revenues based upon
customer locations and assets based on physical locations.
The Company's foreign operations are presently conducted by CAR Insurance
in Bermuda.
Information by geographic area and industry segment is as follows:
June 30,
--------------------------
1999 2000
----------- -----------
Net revenues from external customers
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 1,202,261 $ 1,334,024
Vehicle Rental Franchises-Pricele$$-(U.S.) 96,462 134,065
Corporate-(U.S.) 4,589 1,500
Insurance-(U.S.) 175,849 260,088
Insurance-(Bermuda) -- --
----------- -----------
$ 1,479,161 $ 1,729,677
Segment operating income
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 340,669 $ 516,753
Vehicle Rental Franchises-Pricele$$-(U.S.) 16,194 21,814
Corporate-(U.S.) (18,920) (19,101)
Insurance-(U.S.) (17,052) (79,189)
Insurance-(Bermuda) -- --
----------- -----------
$ 320,891 $ 440,277
Segment assets
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 1,460,563 $ 1,676,745
Vehicle Rental Franchises-Pricele$$-(U.S.) 170,519 347,160
Corporate-(U.S.) 666,816 449,651
Insurance-(U.S.) 666,970 1,363,351
Insurance-(Bermuda) 651,611 7,899
----------- -----------
$ 3,616,479 $ 3,844,806
Expenditures for segment assets
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ -- $ --
Vehicle Rental Franchises-Pricele$$-(U.S.) -- 750
Corporate-(U.S.) 5,892 75,726
Insurance-(U.S.) -- --
Insurance-(Bermuda) -- --
----------- -----------
$ 5,892 $ 76,476
=========== ===========
8
<PAGE>
June 30,
--------------------------
1999 2000
----------- -----------
Depreciation and amortization
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 4,298 $ 4,472
Vehicle Rental Franchise-Pricele$$-(U.S.) 1,319 468
Corporate-(U.S.) 26,518 23,386
Insurance-(U.S.) -- --
Insurance-(Bermuda) -- --
----------- -----------
$ 32,135 $ 28,326
=========== ===========
Interest income
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 6,903 $ 20,925
Vehicle Rental Franchises-Pricele$$-(U.S.) 823 1,871
Corporate-(U.S.) 5,909 1,942
Insurance-(U.S.) -- 17,894
Insurance-(Bermuda) 10,758 --
----------- -----------
$ 24,393 $ 42,632
=========== ===========
Interest expense
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 377 $ --
Vehicle rental Franchise-Pricele$$-(U.S.) -- 6
Corporate-(U.S.) 1 --
Insurance-(U.S.) 6,236 6,921
Insurance- (Bermuda) -- --
----------- -----------
$ 6,614 $ 6,927
=========== ===========
Income taxes
Vehicle Rental Franchises-Rent-A-Wreck-(U.S.) $ 105,639 $ 183,250
Vehicle rental Franchises-Pricele$$-(U.S.) -- --
Corporate-(U.S.) -- --
Insurance-(U.S.) -- --
Insurance-(Bermuda) -- --
----------- -----------
$ 105,639 $ 183,250
=========== ===========
9
<PAGE>
4. LITIGATION
The Company is party to legal proceedings incidental to its business from
time to time. Certain claims, suits and complaints arise in the ordinary course
of business and may be filed against the Company. Based on facts now known to
the Company, management believes all such matters are adequately provided for,
covered by insurance or, if not so covered or provided for, are without merit,
or involve such amounts that would not materially adversely affect the
consolidated results of operations or financial position of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO JUNE 30, 1999
The Company operates in two principal segments: Vehicle Rental Franchise
Programs (franchising) and Insurance Coverage (insurance). Franchising consists
of operations under the Rent-A-Wreck and Priceless lines of business. For the
quarter ended June 30, 2000, franchising operations comprised 85% of
consolidated net revenues (88% in 1999) and 122% of consolidated operating
income (111% in 1999).
Revenue from franchising operations, which includes initial license fees,
continuing license fees and advertising fees, increased by $163,282 (13%).
Initial license fees increased by $6,499 (2%), continuing license fees increased
by $136,089 (20%), and advertising fees increased by $20,694 (9%). These
increases resulted primarily from the addition of new franchises and fleet
growth at existing franchises. The timing of closings of new franchise sales,
each of which is for a relatively large amount of revenue, varies over the year,
contributing to periodic increases or decreases in reported results. Management
does not believe these short-term variations are indicative of longer term
trends.
Revenues from insurance premiums increased by $81,520 (46%) due to higher
participation by the Company's franchisees in the Company's CAR Insurance
program.
Total operating expenses for both segments increased by $131,130 (11%)
compared to the prior period. Salary expense for both segments increased by
$15,528 (6%) primarily as a result of hiring additional employees in response to
the growth of the Company's franchising operations. Advertising and promotion
expenses increased by $44,139 (14%), which resulted primarily from an increase
in national advertising expense to promote the Company. Sales and marketing
expenses decreased by $84,305 (47%), which resulted primarily from a reduction
in bad debt expense due to the Company's collection efforts. Insurance
underwriting expenses increased by $141,136 (97%) due to an increase in paid
losses and loss reserves for unsettled claims in connection with higher
participation of the Company's franchisees in its CAR Insurance program. General
and administrative expenses for both segments increased by $18,441 (8%), which
resulted primarily from increased rent expense in connection with the Company's
new location.
10
<PAGE>
The Company realized operating income of $440,277, before taxes and
interest, for the three-month period ended June 30, 2000 compared to operating
income of $320,891 for the same period in the prior year, reflecting an increase
of $119,386 (37%). This increase resulted primarily from continuing license fees
due to fleet growth at existing franchises.
Net interest income increased by $17,926 (101%). This increase was
primarily due to improved cash management.
Income tax expense for the quarter ended June 30, 2000 increased by $77,611
(73%) compared to the three-month period ended June 30, 1999 due to higher
pre-tax earnings.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had working capital of $1,492,350 compared to
$1,239,523 at March 31, 2000. This increase of $252,827 resulted primarily from
the net profit earned during the three-month period ended June 30, 2000.
In March 2000, the Company obtained a $1,000,000 letter of credit from Bank
of America in connection with the Company's CAR Insurance subsidiary, and
replaced its letters of credit with The Chase Manhattan Bank and the Bank of
Butterfield. This letter of credit is part of the agreement between the Company
and Bank of America as security for the letter of credit issued to American
International Group ("AIG") by Bank of America. This letter of credit is secured
by a certificate of deposit of $600,000 held by Bank of America plus 50% of all
the Company's eligible accounts receivable. Funds drawn against the letter of
credit bear interest at Bank of America's prime commercial lending rate plus
1.5% (which prime rate was 9.50% on July 27, 2000). For the quarter ended June
30, 2000, AIG has not drawn any funds from the letter of credit and all $1
million is available.
The Company rents its office facilities under the terms of an operating
lease with a related party. The monthly office facilities lease commitment was
$9,290 at June 30, 2000.
Property and equipment increased by $47,745 (5%) from March 31, 2000 to
June 30, 2000. This increase occurred primarily due to additional investment in
computer software and hardware, partially offset by the sale of a vehicle in
connection with the wheelchair van program.
Cash used in operations was $234,902, resulting from the decrease in
accounts payable and accrued expenses, a decrease in income taxes payable (which
resulted in an increase in income taxes recoverable), partially offset by net
income before depreciation plus the decrease in accounts and notes receivable
and prepaid expenses and the increase in insurance loss reserves. Accounts
payable and accrued expenses decreased primarily due to payment being made for
the Company's repurchase of 500,000 options for $625,000. The net change in the
liability (which is now a recoverable income tax refund) is a result of taxes
currently payable, offset by taxes paid for the year ended March 31, 2001.
Accounts and notes receivable decreased primarily due to funds received from AIG
in connection with the reinsurance program and funds recovered from settlement
of a lawsuit. Prepaid expense decreased primarily due to the normal timing of
the expiration of certain prepaid items. Insurance loss reserves increased
primarily due to an increase in unsettled claims associated with the increase in
participation in the CAR Insurance program.
11
<PAGE>
Cash used in investing activities of $71,367 related primarily to the
acquisition of computer software, hardware, and an increase in restricted cash
due to the Company's additional liability to the national advertising fund due
to an increase in advertising fees, partially offset by the proceeds from the
sale of one vehicle.
Cash provided by financing activities during the same period was $414,325,
resulting from an increase in insurance financing payable in connection with the
CAR Insurance program, offset by the payment of preferred dividends.
The Company believes it has sufficient working capital to support its business
plan through fiscal 2001.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current
year presentation.
IMPACT OF INFLATION
Inflation has had no material impact on the operations and financial
condition of the Company.
The statements regarding anticipated future performance of the Company
contained in this report are forward-looking statements which are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve risks and uncertainties that
could cause the Company's actual results to differ materially from the
forward-looking statements. Factors which could cause or contribute to such
differences include, but are not limited to, the Company's limited experience in
the reinsurance business and the potential for negative claims experience, the
effects of government regulation of the Company's franchise and insurance
programs including maintaining properly registered franchise documents and
making any required alterations in the Company's franchise program to comply
with changes in the laws, competitive pressures from other motor vehicle rental
companies which have greater marketing and financial resources than the Company,
protection of the Company's trademarks, and the dependence on the Company's
relationships with its franchisees. These risks and uncertainties are more fully
described under the caption, "Item 6 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Important Factors" in the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 2000.
All forward-looking statements should be considered in light of these risks and
uncertainties.
12
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected financial data with respect to the consolidated
statements of earnings of the Company and its subsidiaries for the fiscal
quarters ended June 30, 2000 and 1999 and with respect to the balance sheets
thereof at June 30 in each of those years.
The selected financial data have been derived from the Company's
unaudited consolidated financial statements and should be read in conjunction
with the financial statements and related notes thereto and other financial
information appearing elsewhere herein.
Three Months ended June 30,
-----------------------------
1999 2000
-------- --------
(in thousands except per share
amounts and number of franchises)
(Unaudited)
FRANCHISEES' RESULTS
Franchisees' revenue (1) $11,322 $ 13,590
Number of franchised locations 655 663
RESULTS OF OPERATIONS
Total revenue $ 1,479 $ 1,730
Total expense 1,158 1,298
Income before income taxes 339 476
Net income 233 293
Earnings per common share
Basic $ .05 $ .08
Weighted average common shares 3,940 3,568
Diluted $ .04 $ .05
Weighted average common shares plus
convertible preferred stock, and options
and warrants 5,893 5,421
EBITDA (2) 378 511
BALANCE SHEET DATA
Working capital $ 1,578 $ 1,492
Total assets $ 3,616 $ 3,845
Shareholders' Equity $ 2,105 $ 2,106
----------
(1) The franchisees' revenue data have been derived from unaudited reports
provided by franchisees in paying license fees.
(2) "EBITDA" is earnings before interest expense, depreciation, amortization,
taxes and repurchase of options. EBITDA should not be interpreted as a
measure of operating results, cash flow provided by operating activities, a
measure of liquidity, or as an alternative to any generally accepted
accounting principle measure of performance. The Company is reporting
EBITDA because it is a widely used financial measure of the potential
capacity of a company to incur and service debt. Rent-A-Wreck's reported
EBITDA may not be comparable to similarly titled measures used by other
companies.
SUBSEQUENT EVENTS
On July 24, 2000, Kenneth A. Blum, Jr., President, exercised 100,000 options
expiring June 30, 2003 to buy common stock at $1.00 per share. On the same day,
William L. Richter, Vice Chairman, exercised 30,000 options and 54,000 warrants
expiring June 30, 2003 to buy common stock at $1.00 and $1.15, respectively, per
share, and Richter Investment Corp., an affiliate of Mr. Richter's, exercised
45,000 options and 81,000 warrants expiring June 30, 2003 to buy common stock at
$1.00 and $1.15, respectively, per share.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index following the Signatures page, which is incorporated
herein by reference.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Rent-A-Wreck of America, Inc.
(Registrant)
By: Date:
/s/ Mitra Ghahramanlou August 7, 2000
--------------------------------
Mitra Ghahramanlou
Chief Accounting Officer
/s/ Kenneth L. Blum, Sr. August 7, 2000
--------------------------------
Kenneth L. Blum, Sr.
CEO and Chairman of
the Board
15
<PAGE>
EXHIBIT INDEX
TO
RENT-A-WRECK of AMERICA, INC.
FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2000
Exhibit No. Description
----------- -----------
27 Financial Data Schedule Filed herewith.
