-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JtmOQH958BoPwxriJsB4kUgeJFz301Bg8iJ1brU9rnsheA4DoftKuDUGsJTwX/ip Iy50gIBFCZzi+8daVZhRTQ== 0000950147-96-000139.txt : 19960426 0000950147-96-000139.hdr.sgml : 19960426 ACCESSION NUMBER: 0000950147-96-000139 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960425 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRONTIER ADJUSTERS OF AMERICA INC CENTRAL INDEX KEY: 0000735349 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 860477573 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12902 FILM NUMBER: 96550363 BUSINESS ADDRESS: STREET 1: 45 E MONTEREY WAY STREET 2: STE 202 CITY: PHOENIX STATE: AZ ZIP: 85012 BUSINESS PHONE: 6022641061 MAIL ADDRESS: STREET 1: P O BOX 7610 CITY: PHOENIX STATE: AZ ZIP: 85011 FORMER COMPANY: FORMER CONFORMED NAME: FRONTIER FINANCIAL CORP /AZ DATE OF NAME CHANGE: 19861114 10-Q 1 FORM 10-Q CONFORMED FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______________________ to _________________________ Commission File Number 1-12902 --------------- FRONTIER ADJUSTERS OF AMERICA, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Arizona 86-0477573 - ------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 45 East Monterey Way, Phoenix, AZ 85012 - -------------------------------------------------------------------------------- (Address of principal executive offices) (602) 264-1061 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of Common Stock outstanding on April 22, 1996 4,609,658 ---------- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements - ----------------------------- FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1996 June 30, 1995 -------------- ------------- (unaudited) (*) ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 809,266 $ 358,960 Investments 1,244,252 1,255,627 Receivables 1,375,512 1,632,406 Prepaid expenses 201,866 258,165 Other 131,534 115,334 ---------- ---------- TOTAL CURRENT ASSETS 3,762,430 3,620,492 ---------- ---------- PROPERTY AND EQUIPMENT 2,360,643 2,269,110 Less accumulated depreciation and amortization 852,870 784,565 ---------- ---------- 1,507,773 1,484,545 ---------- ---------- OTHER ASSETS Cost of subsidiary in excess of net tangible assets acquired 213,817 213,817 Less accumulated amortization 173,930 172,196 ---------- ---------- 39,887 41,621 Receivables (Long term) 333,000 302,000 Investments (Long term) 764,570 764,090 Other 404,827 384,302 ---------- ---------- 1,542,284 1,492,013 ---------- ---------- TOTAL ASSETS $6,812,487 $6,597,050 ========== ========== LIABILITIES ----------- CURRENT LIABILITIES Accounts payable $ 89,321 $ 12,669 Accrued expenses 327,846 362,693 Franchisee/licensee remittance payable 155,335 221,620 Current portion long term liability 24,230 22,951 Other 88,388 53,811 ---------- ---------- TOTAL CURRENT LIABILITIES 685,120 673,744 ---------- ---------- LONG TERM LIABILITY 66,319 84,655 ---------- ---------- STOCKHOLDERS' EQUITY Common stock 47,820 47,820 Additional paid in capital 2,148,470 2,148,470 Treasury stock (510,686) (414,869) Other (18,610) 14,642 Retained earnings 4,394,054 4,042,588 ---------- ---------- 6,061,048 5,838,651 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $6,812,487 $6,597,050 ========== ========== *Condensed from audited financial statements. The accompanying notes are an integral part of these condensed statements.
2 FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Nine Months Ended Three Months Ended March 31, March 31, ------------------------ ------------------------ 1996 1995 1996 1995 ----- ----- ----- ----- REVENUES Continuing licensee and franchisee fees $3,695,428 $3,426,854 $1,253,200 $1,112,164 Adjusting fees 462,202 334,222 143,434 120,771 ----------- ----------- ----------- ----------- 4,157,630 3,761,076 1,396,634 1,232,935 ----------- ----------- ----------- ----------- COST AND EXPENSES Compensation and fringe benefits 1,457,540 1,212,075 508,900 412,116 Office 286,646 218,931 81,816 74,622 Advertising and promotion 320,333 254,129 134,397 159,805 Depreciation and amortization 136,297 94,904 47,740 34,819 Provision for doubtful accounts 115,000 110,000 45,000 30,000 Other 588,100 856,244 157,786 322,903 ----------- ----------- ----------- ----------- 2,903,916 2,746,283 975,639 1,034,265 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS 1,253,714 1,014,793 420,995 198,670 ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Interest income 105,272 99,812 35,149 36,771 Other (Net) 20,570 51,005 4,272 7,450 ----------- ----------- ----------- ----------- TOTAL OTHER INCOME (EXPENSE) 125,842 150,817 39,421 44,221 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 1,379,556 1,165,610 460,416 242,891 INCOME TAXES 542,982 458,425 181,475 96,183 ----------- ----------- ----------- ---------- NET INCOME $ 836,574 $ 707,185 $ 278,941 $ 146,708 =========== =========== =========== ========== Weighted Average Shares outstanding 4,619,120 4,669,913 4,609,658 4,640,898 =========== =========== =========== =========== NET INCOME PER COMMON SHARE $ .18 $ .15 $ .06 $ .03 =========== =========== =========== =========== The accompanying notes are an integral part of these condensed statements.
3 FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Six Months Ended March 31, 1996 and 1995
1996 1995 ---------- --------- NET INCOME $ 836,574 $ 707,185 ---------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 136,297 94,904 (Gain) on disposition of property and equipment (1,667) (19,416) Allowance for doubtful accounts 115,000 110,000 Change in assets and liabilities: (Increase) decrease in: Receivables 333,495 (13,591) Prepaid expenses 56,299 20,223 Other (58,833) (36,974) Increase (decrease) in: Accounts payable 59,425 14,005 Accrued expenses (34,847) 172,273 Franchisee and licensee remittance payable (66,285) (588,962) Other 34,577 (16,238) ----------- ---------- Total adjustments 573,461 (263,776) ---------- ---------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,410,035 443,409 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (74,306) (113,126) Investments purchased (1,982,602) (2,007,931) Proceeds from sales of investments 2,000,000 2,000,000 License acquisition (64,000) (92,000) Payments on License acquisition (17,057) (12,823) Advances to licensees and franchisees (2,951,987) (2,473,766) Collections of advances to licensees and franchisees 2,711,148 2,424,469 ---------- ---------- NET CASH PROVIDED (USED IN) BY INVESTING ACTIVITIES (378,804) (275,177) ------------ ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends (485,108) (397,227) Common stock repurchased (95,817) (136,377) ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (580,925) (533,604) ---------- ---------- NET INCREASE (DECREASE) IN CASH 450,306 (365,372) Cash at beginning of the period 358,960 804,780 ---------- ---------- Cash at the end of the period $ 809,266 $ 439,408 ========= ========= Supplemental disclosures of Cash Flow information Cash paid during the period Income taxes $ 577,767 $ 501,807 Interest $ 5,457 $ 4,707 The accompanying notes are an integral part of these condensed statements.
4 FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (1) Basis of Presentation --------------------- The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results of operations for the interim periods. The results of operations for the nine month period ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year. (2) Supplemental Cash Flow Information ---------------------------------- On August 1, 1995, the Company reacquired its Tucson, Arizona licensee. The purchase price was $139,807 gross or $116,081 net of the imputed interest. The purchase price was paid as follows: Purchase price $116,081 Outstanding loan to licensee (Net of imputed interest of $22,926) (57,626) Outstanding advance to licensee (22,455) -------- Net cash $ 36,000 ======== Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition ------------------- The Company has historically financed its growth and on going operations with cash generated from operations. In the nine months ended March 31, 1996, the Company's operations generated $1,410,000 in cash. In July 1993 the Company's Board of Directors authorized the purchase of shares of the Company's common stock. In September 1995 the Company acquired 31,240 shares of the Company's common stock at a cost of $95,817. This completed the repurchase plan with total purchase of 122,352 shares. The repurchases were instituted by the Board of Directors as they believed that the price level of the Company's common stock resulted in an excellent investment. The Company's Board of Directors in July 1995, approved an increase in the Company's annual dividend rate from 12 cents per share to 14 cents per share effective with the 3.5 cents per share cash dividend paid on September 8, 1995. Through its capital investment program, the Company replaces obsolete or outdated equipment and invests in new equipment to maintain or increase the productivity of the Company and its employees. The Company has invested $92,000 in computers and software in fiscal 1996 and anticipates investing an additional $15,000 to $25,000 in fiscal 1996 for new office equipment pursuant to its capital investment program. Management believes that the Company will be able to fund all of its cash requirements (i.e. current operations, capital asset acquisition and the payment of dividends) from its current available cash, as well as funds generated by its operations. The Company's ratio of current assets to current liabilities was 5.49 to 1 as of March 31, 1996 and 5.37 to 1 as of June 30, 1995. 5 Results of Operations - Nine Months Ended March 31, 1996 Compared to Nine Months - -------------------------------------------------------------------------------- Ended March 31, 1995 - -------------------- Revenues - -------- The Company's revenues increased 10.5% or $397,000 to $4,158,000 in the current period compared with $3,761,000 in the same period of the prior fiscal year. The increase is composed of a $128,000 increase in adjusting and other fees and a $269,000 increase in continuing licensee and franchisee fees. The increase of $128,000 in adjusting and other fees reflects an 38% increase to $462,000 in the current period compared to $334,000 in the comparable period of the prior year. The increase reflects an increase in the demand for claims services by the Company's clients as well as $90,000 in revenues as a result of the acquisition of the operations of the Company's former Tucson licensee on August 1, 1995. The Company's revenues from continuing licensee and franchisee fees increased 8% or $269,000 from $3,427,000 to $3,695,000 in the same period of the prior fiscal year. A significant factor affecting the Company's revenue from continuing licensee and franchisee fees is the termination of one of the Company's licensees in California in January 1995. During the nine months ended March 31, 1995 this licensee contributed $112,000 to the revenues of the Company. In addition, the Company granted nine new licenses during the quarter ended December 31,1995 within the territory of its prior licensee and received $19,000 in continuing licensee and franchisee fees from the new licensees. The Company anticipates growth in these revenues. The increase also reflects the fact that the Company's licensees and franchisees are benefiting from an increase in claims as insurance companies and self- insureds use them due to an increase in volume of claims and, to a greater degree, the indicated increase reflects the effect of new licensees and franchisees and rate increases as a result of inflation. The Company's revenues are affected by numerous matters including the work loads of other companies and claims presented by their clients. The Company, therefore, is unable to project its future revenues. The Company has, however, seen growth in licensee and franchisee fees paid and management believes that the Company will continue to realize growth in continuing licensing and franchising fees in the future as it adds qualified licensees and franchisees. Additionally, the Company will continue to reflect revenue from the recently purchased Tucson operation. Compensation and Employee Benefits - ---------------------------------- Compensation and employee benefits represent approximately 50% of the Company's costs and expenses and are its largest expense item. These expenses increased 20% or $245,000 to $1,458,000 in the current fiscal period from $1,212,000 in the prior fiscal period. This increase is the result of the Company hiring additional employees to staff the recently acquired Tucson location ($68,000) and to handle increased work load in the corporate office ($45,000) and for cost of living and merit raises for employees and incentive bonuses ($132,000). Expenses Other Than Compensation and Employee Benefits - ------------------------------------------------------ The Company's expenses other than compensation and employee benefits decreased $88,000 during the nine months ended March 31, 1996 as compared to the same period in 1995. The principal items affecting these expenses are a $334,000 decrease in legal expenses primarily related to the Company's litigation in California, a $66,000 increase in advertising and promotion, and a $68,000 increase in office expenses primarily related to the Tucson office. The most significant item in the $66,000 increase in advertising and promotion was $60,000 relative to listings in a publication directed at the claims industry. This expense was historically paid in the fourth quarter of the Company's fiscal year. However, due to changes in the publisher's printing and billing cycles this expense was incurred in the second quarter of the current fiscal year rather than in the fourth quarter of the fiscal year ended June 30, 1995. 6 Results of Operations - Nine Months Ended March 31, 1996 Compared to Nine Months - -------------------------------------------------------------------------------- Ended March 31, 1995 (continued) - -------------------------------- Expenses Other Than Compensation and Employee Benefits (continued) - ------------------------------------------------------------------ The balance of the Company's costs and expenses other than compensation and employee benefits have not significantly changed during the current period as compared to the same period of the prior fiscal year. Other Income - ------------ The Company's other income decreased $25,000 from $151,000 for the nine months ended March 31, 1995 to $126,000 for the nine months ended March 31, 1996. The most significant decreases in other income were a $6,000 decrease in the sales of computer software to the Company's licensee and a $18,000 decrease in the gain on the disposition of fixed assets from the prior year. Income Taxes - ------------ The Company's income taxes was 39% of its income before taxes, which is approximately the same as in the prior fiscal year. Changes made in the tax laws by various states and by the federal government have not affected the Company's overall tax rates, however, this could change at any time. Net Income - ---------- The Company's net income for the nine months ended March 31, 1996, increased from $707,000 in the prior comparable period to $837,000 in the current period an increase of $129,000 or 18%. The most significant items which affected net income are a $396,000 increase in revenues and $334,000 decrease in legal fees related to the litigation in California. Results of Operations - Three Months Ended March 31, 1996 Compared to Three - -------------------------------------------------------------------------------- Months Ended March 31, 1995 - --------------------------- Revenues - -------- During the three months ended March 31, 1996, the Company's revenues increased to $1,397,000 from $1,232,000, in the same period of 1995, representing an increase of $164,000 or 13%. The increase of $23,000 in adjusting and other fees of the Company owned offices from $121,000 to $143,000 in the comparable period of the prior year represents a 19% increase. The increase reflects an increase of $27,000 in revenues as a result of the acquisition of the operations of the Company's former Tucson license on August 1, 1995 as well as a reduction in claims being handled by the Company's Phoenix operations. The Company's revenues from continuing licensee and franchisee fees increased 13% or $141,000 from $1,112,000 in the three months ended March 31, 1995 to $1,253,000 in the three months ended March 31, 1996. A significant factor affecting the Company's revenue from continuing licensee and franchisee fees is the termination of one of the Company's licensees in California in January 1995. During the three months ended March 31, 1995 this licensee contributed $14,000 to the revenues of the Company which reflects post termination billing of licensed activity. In addition, the Company granted nine new licenses during the quarter ended December 31, 1995 within the territory of its prior licensee and in the current quarter ended March 31, 1996, received $15,000 in continuing licensee and franchisee fees from the new licensees. The Company anticipates growth in these revenues. The increase also reflects the facts that the Company's licensees and franchisees are benefiting from an increase in claim services as insurance companies and self-insureds use the Company's licensees and franchisees for increased volumes of claims, as well as the increase in the number of licensees and franchisees that were established in the preceding fiscal year. 7 Results of Operations - Three Months Ended March 31, 1996 Compared to Three - -------------------------------------------------------------------------------- Months Ended March 31, 1995 (continued) - --------------------------------------- Compensation and Employee Benefits - ---------------------------------- Compensation and employee benefits represent approximately 50% of the Company's costs and expenses and are its largest expense item. These expenses increased 23% or $97,000 in the quarter ended March 31, 1996 from $412,000 in the three months ended March 31, 1995 to $509,000. The increase is principally the result of additional employees to staff the recently acquired Tucson location and to handle increased work load in the corporate office. Expenses Other Than Compensation and Employee Benefits - ------------------------------------------------------ The Company's expenses other than compensation and employee benefits decreased $155,000 in the current fiscal quarter as compared to the same quarter in 1995. The principal items affecting these expenses are an $181,000 decrease in legal expense primarily related to the Company's litigation in California, and a $7,000 increase in office expense primarily related to integration of the Tucson office. The balance of the Company's costs and expenses other than compensation and employee benefits have not significantly changed during the current period as compared to the same period of the prior fiscal year. Other Income - ------------ The Company's other income was substantially unchanged from $39,000 in the current quarter as compared to $44,000 in the same quarter of the prior year. Income Taxes - ------------ Income taxes was 39% of the Company's income before taxes for the quarter ended March 31, 1995 which is substantially the same as it was in the prior year. The Company was not affected by any significant changes in the federal or state income tax laws increasing the rates. Net Income - ---------- The Company's net income increased from $147,000 to $279,000, a increase of $132,000 or 90% during the three months ended March 31, 1996 as compared to the same period in 1995, primarily due to the increase in licensee and franchisee fees of $141,000, and the $181,000 decrease in legal fees. 8 PART II: OTHER INFORMATION Item 1 - Legal Proceedings A Declaratory Action was filed in May 1994 against the Company in the Superior Court of Los Angeles, California, regarding the interpretation of certain sections of the Company's license agreement with the plaintiff, a licensee. In June 1994, the Company removed the case to U.S. District Court and raised certain counterclaims for violation of the Company's license agreement. The Company terminated the licensee's agreement effective January 1, 1995. Subsequent to the termination, the plaintiff amended his complaint to include wrongful termination. On May 1, 1995, the U.S. District Court granted the Company's motion for Summary Judgment regarding all outstanding claims by the plaintiff. On June 19, 1995, the Court granted the Company's Summary Judgment motion regarding its claims against the former licensee including $204,144 in unpaid licensee fees and approximately $24,000 for court costs. In July 1995, the plaintiff appealed this judgment. The Company from time to time in its normal course of business is named as a defendant in lawsuits. The Company does not believe that it is subject to any lawsuits or litigation or threatened lawsuits or litigation that will have a material adverse effect on the Company or its business. Response to items one through five not listed above are omitted since these items are either inapplicable or the response thereto would be negative. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FRONTIER ADJUSTERS OF AMERICA, INC. Date: 4/24/96 /s/ William J. Rocke -------------- --------------------------------------------------- William J. Rocke, Chief Executive Officer/Chairman of the Board, Director, Principal Financial Officer Date: 4/24/96 /s/ Jean E. Ryberg --------------- --------------------------------------------------- Jean E. Ryberg, President, Director 9 EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1996 (Unaudited) AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS 1 DOLLARS 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 1 809,266 1,244,252 1,623,338 247,826 0 3,762,430 2,360,643 852,870 6,812,487 685,120 66,319 0 0 47,820 6,013,228 6,812,487 0 4,157,630 0 0 2,788,916 115,000 5,354 1,379,556 542,982 836,574 0 0 0 836,574 .18 .18
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