-----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, QHJaTS+GieXz8GCWfCBN6tfON3nHspeQZgLtm4s1+m2DMlXNXXko91q3NWgbTgcu lcFnBiQagybYZFXyy7+fvA== 0000950147-98-000901.txt : 19981113 0000950147-98-000901.hdr.sgml : 19981113 ACCESSION NUMBER: 0000950147-98-000901 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: SEC FILE NUMBER: 001-12902 FILM NUMBER: 98743771 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 QUARTERLY REPORT F.T.Q.E 9/30/98 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 September 30, 1998 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 November 9, 1998 4,605,358 --------- PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1998 JUNE 30, 1998 ------------------ ------------- (unaudited) (*) ASSETS CURRENT ASSETS Cash and cash equivalents $ 933,416 $ 929,364 Investments 1,243,831 1,289,519 Receivables 1,570,145 1,582,020 Prepaid expenses 300,788 317,454 Other 289,905 439,638 ---------- ---------- TOTAL CURRENT ASSETS 4,338,085 4,557,995 ---------- ---------- PROPERTY AND EQUIPMENT 2,582,270 2,543,631 Less accumulated depreciation and amortization (835,502) (819,302) ---------- ---------- 1,746,768 1,724,329 ---------- ---------- OTHER ASSETS Cost of subsidiary in excess of net tangible assets acquired 213,817 213,817 Less accumulated amortization (179,707) (179,129) ---------- ---------- 34,110 34,688 Receivables (Long term) 376,000 431,000 Investments (Long term) 694,831 694,724 Other 336,090 357,964 ---------- ---------- 1,441,031 1,518,376 ---------- ---------- TOTAL ASSETS $7,525,884 $7,800,700 ========== ========== LIABILITIES CURRENT LIABILITIES Accounts payable $ 83,166 $ 62,118 Accrued expenses 173,400 513,365 Franchisee/licensee remittance payable 573,089 545,830 Current Portion Long Term Liability 26,527 28,509 Other 180,385 193,684 ---------- ---------- TOTAL CURRENT LIABILITIES 1,036,567 1,343,506 ---------- ---------- LONG TERM LIABILITY -- 4,953 ---------- ---------- STOCKHOLDERS' EQUITY Common stock 47,820 47,820 Additional paid in capital 2,148,470 2,148,470 Treasury stock (529,584) (529,584) Other 3,460 49,600 Retained earnings 4,819,151 4,735,935 ---------- ---------- 6,489,317 6,452,241 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $7,525,884 $7,800,700 ========== ========== *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) THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 1998 1997 ----------- ----------- REVENUE Continuing licensee and franchisee fees $ 1,273,123 $ 1,220,102 Adjusting and risk management fees 360,246 263,606 ----------- ----------- 1,633,369 1,483,708 ----------- ----------- COST AND EXPENSES Compensation and fringe benefits 717,766 645,048 Office 95,515 94,149 Advertising and promotion 40,587 60,001 Depreciation and amortization 62,475 61,357 Provision for doubtful accounts 48,000 48,000 Other 273,706 187,069 ----------- ----------- 1,238,049 1,095,624 ----------- ----------- INCOME FROM OPERATIONS 395,320 388,084 ----------- ----------- OTHER INCOME (EXPENSE) Interest income 29,434 36,466 Other (Net) (1,491) 1,679 ----------- ----------- TOTAL OTHER INCOME (EXPENSE) 27,943 38,145 ----------- ----------- INCOME BEFORE INCOME TAXES 423,263 426,229 INCOME TAXES 167,347 167,587 ----------- ----------- NET INCOME $ 255,916 $ 258,642 =========== =========== EARNINGS PER SHARE Basic $ .06 $ .06 =========== =========== Diluted $ .06 $ .06 =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING Basic 4,605,358 4,605,358 =========== =========== Diluted 4,609,163 4,605,358 =========== =========== 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) THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 1998 1997 ---- ---- NET INCOME $ 255,916 $ 258,642 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 63,021 61,903 (Gain) on disposition of property & equipment 4,979 (120) Allowance for doubtful accounts 48,000 49,038 Change in assets and liabilities: (Increase) decrease in: Receivables (26,000) (122,262) Prepaid expenses 16,666 (34,079) Other 137,271 (26,537) Increase (decrease) in: Accounts payable 21,048 (23,191) Accrued expenses (339,965) 150,629 Franchisee and licensee remittance payable 27,259 82,595 Other (13,299) (487,666) ----------- ----------- Total adjustments (61,020) (349,690) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 194,896 (91,048) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equipment 21,510 200 Capital expenditures (89,497) (16,308) Investment purchased (988,096) (989,627) Proceeds from sales of investments 1,000,000 1,000,000 Payments on License acquisition (6,935) (6,451) Advances to licensees and franchisees (1,092,284) (1,029,663) Collections of advances to licensees and franchisees 1,137,159 944,241 ----------- ----------- NET CASH (USED IN) INVESTING ACTIVITIES (18,143) (97,608) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends (172,701) (172,701) Common stock repurchased -- -- ----------- ----------- NET CASH PROVIDED BY(USED IN)FINANCING ACTIVITIES (172,701) (172,701) EFFECT OF EXCHANGE RATE CHANGES ON CASH -- 123 ----------- ----------- NET INCREASE (DECREASE) IN CASH 4,052 (361,234) Cash at beginning of the period 929,364 1,012,233 ----------- ----------- Cash at the end of the period $ 933,416 $ 650,999 =========== =========== Supplemental disclosures of Cash Flow information Cash paid during the period Income taxes $ 3,215 $ 86,910 Interest $ 565 $ 1,048 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 three month period ended September 30, 1998 are not necessarily indicative of the results to be expected for the full year. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The statements contained in this Report on Form 10-Q that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company's "expectations", "anticipation", "intentions", "beliefs", or "strategies" regarding the future. Forward looking statements include statements regarding revenue, margins, expenses, and earnings analysis with regard to the Company or with regard to the Company's licensees and franchisees for the remainder of fiscal 1999 and thereafter; improvement of, and growth in the number of, licensees and franchisees; future spending on marketing and product development strategy; the transaction with United Financial Adjusting Company described below; and liquidity and anticipated availability of cash for operations, acquisitions, or payment of dividends. All forward looking statements included in this document are based on information available to the Company on the date of this report, and the Company assumes no obligation to update any such forward looking statement. It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Among the factors that could cause actual results to differ materially are the factors discussed in this Report and in the Company's Form 10-K for the year ended June 30, 1998, including but not limited to the extent and nature of natural disasters in geographic areas serviced by the Company or by its licensees and franchisees; management decisions by insurance companies and self-insureds to increase or decrease the degree to which they contract for services offered by the Company, its licensees or franchisees; the Company's ability to identify and attract new qualified licensees and franchisees; the Company's ability to successfully manage offices reacquired from existing licensees and franchisees; and uninsured liability for acts or omissions of the Company's employees, licensees, or franchisees. In August 1998, the Company entered into a letter of intent (the "Letter of Intent") with United Financial Adjusting Company ("UFAC"), a wholly owned subsidiary of the Progressive Corporation ("Progressive"), whereby UFAC will purchase newly issued stock representing approximately 52% of the Company's voting securities. Following the purchase by UFAC, the Company's shareholders will be given the option to retain their shares and receive a cash distribution of $1.60 per share or to surrender their shares for a price of $2.90 per share. Up to an aggregate of 1,000,000 shares will be accepted for repurchase. UFAC will purchase the newly issued securities of the Company at a price of $1.30 per share and will not be entitled to receive the cash distribution of $1.60 per share. If the transaction contemplated by the Letter of Intent is consummated, UFAC, and therefore Progressive, will be able to elect a majority of the board of directors and therefore, will be able to control the business and affairs of the Company. Consummation of this transaction is subject to shareholder approval. The Company will provide its shareholders with a proxy statement containing a detailed description of the proposed transaction prior to the Company's next shareholder's meeting. FINANCIAL CONDITION The Company has historically financed its growth and on-going operations with cash generated from operations. In the quarter ended September 30, 1998, Company's operations generated $195,000 in cash. 5 Compared to the last fiscal year, the most significant item affecting cash used by the Company's operations is the $340,000 decrease in accrued expenses. This decrease results from the payout of employee benefits and bonuses in the first quarter of this fiscal year. Through its capital investment program, the Company replaces obsolete or outdated equipment and invests in new equipment and furnishings to maintain or increase the productivity of the Company and its employees. The Company anticipates investing $200,000 to $300,000 in fiscal 1999 for equipment and furnishings pursuant to its capital investment program. Without giving effect to any extraordinary dividend payable should the Company consummate the transaction with UFAC contemplated in the Letter of Intent, 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 4.19 to 1 as of September 30, 1998 and 3.39 to 1 as of June 30, 1998. RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO 1997 REVENUE The Company's revenue increased 10% or $149,000 to $1,633,000 in the current quarter from $1,484,000 in the same period of the prior fiscal year. The increase is a combined $96,000 increase in adjusting and risk management fees and a $53,000 increase in continuing licensee and franchisee fees. The increase of $96,000 in adjusting and risk management fees from $264,000 in the quarter ended September 30, 1997 to $360,000 in the quarter ended September 30, 1998 represents a 36% increase. The Company experienced an increase of $120,000 in adjusting fees in its Phoenix office, and decreases of $17,000 and $7,000 in adjusting fees from the Las Vegas/Henderson and Tucson offices, respectively. The increase in fees from the Phoenix office primarily reflects fees generated from a new client. The Company's revenue from continuing licensee and franchisee fees increased 4% or $53,000 from $1,220,000 in the quarter ended September 30, 1997 to $1,273,000 in the quarter ended September 30, 1998. This increase reflects the benefit to the Company's licensees and franchisees due to an increase in the use of their services by insurance companies and self-insureds resulting from a larger volume of claims and from a greater demand for the Company's services. The Company's revenue is affected by numerous factors including the work loads of other companies and claims presented by their clients. Therefore, the Company is unable to project its future revenue. The Company has historically seen growth in licensee and franchisee fees paid. However, during the prior fiscal year the Company experienced a decrease in revenue due primarily to the phase out of its business relationship with its then major client. The Company has responded to this loss by continuing to develop and implement sales and marketing efforts to take advantage of its geographic diversity as well as the unique strengths of its individual licensees and franchisees. For the quarter ended September 30, 1998, the Company successfully completed negotiations for national/regional relationships with three new clients and with one existing client for additional services. In addition, the Company believes that it will continue to realize growth as it adds additional qualified licensees and franchisees. Furthermore, the Company expects to continue to reflect revenue from its Phoenix, Tucson, and Las Vegas/ Henderson operations. COMPENSATION AND FRINGE BENEFITS Compensation and fringe benefits represent approximately 58% of the Company's costs and expenses and represent the largest single item of expense. These expenses increased 11% or $73,000 from $645,000 in the three months ended September 30, 1997 to $718,000 in the current quarter. This increase is the result of the addition of a Marketing Director in the second quarter of the last fiscal year, additional employees hired including temporary employees to handle increased work loads in the Corporate and Phoenix office, and cost of living, and merit increases given to employees. 6 EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS The Company's expenses other than compensation and fringe benefits increased $70,000 during the three months ended September 30, 1998 as compared to the same quarter of the prior fiscal year. The principal items affecting these expenses are a $40,000 increase in audit and accounting fees, a $15,000 increase in computer consulting fees, a $14,000 increase in directors fees, a $12,000 increase in insurance costs, and a $19,000 decrease in advertising and promotional expenses. The increase in audit and accounting fees reflects the Company's decision to outsource certain accounting functions that were previously performed in-house. The Company believes that this will enable it to more efficiently monitor compliance of the constantly changing state and federal laws and regulations. Furthermore, the Company incurred increased auditing and accounting consulting fees in the current quarter. The increase in computer consulting fees relates to the Company's planning for and utilization of improved technology to provide better services to its franchisees/licensees and clients. The increase in insurance costs results from an increase in the cost of insurance as well as increased coverage. The increase in directors fees reflects the greater number of directors meetings in the first quarter of this fiscal year due to consideration by the Board of the UFAC transaction. The decrease in advertising and promotional expenses reflects the purchase of promotional items in the first quarter of the prior fiscal year. The Company anticipates similar purchases in the second quarter of the current fiscal year. The balance of the Company's costs and expenses have not significantly changed from the same period of the prior year. INCOME TAXES The Company's income taxes were 39.5% of its income before taxes, or approximately the same as they were in the prior fiscal year. Changes made in the tax laws by various states and by the federal government have not had a material affect on the Company's current overall tax rates, however, this could change at any time. OTHER INCOME The Company's other income decreased $10,000 or 26% from $38,000 in the quarter ended September 30, 1997 to $28,000 in the current quarter. The most significant items affecting other income include a $7,000 decrease in interest income, and a loss on the sale of fixed assets of $5,000. NET INCOME The Company's net income for the quarter ended September 30, 1998, decreased $3,000 or 1% from $259,000 in the quarter ended September 30, 1997 to $256,000 in the current quarter. The most significant items affecting net income were a $149,000 increase in revenue, a $73,000 increase in compensation and fringe benefits, a $70,000 increase in expenses other than compensation and fringe benefits. RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO 1996 REVENUE The Company's revenue decreased 10.8% or $180,000 to $1,484,000 in the current quarter from $1,664,000 in the same period of the prior fiscal year. The decrease is a combined $12,000 decrease in adjusting and risk management fees and a $168,000 decrease in continuing licensee and franchisee fees. The decrease of $12,000 in adjusting and risk management fees from $275,000 in the quarter ended September 30, 1996 to $263,000 in the quarter ended September 30, 1997 represents a 4.4% decrease. A substantial portion of this decrease is related to a major storm that occurred in mid August 1996 in the Phoenix, Arizona metropolitan area where the Company's main offices are located. Claims resulting from this storm provided the Company with $80,000 in adjusting services revenue in the quarter ended September 30, 1996. The Company did however, experience a $5,000 increase in fees in its Tucson office as compared to the same period in the previous fiscal year. 7 Furthermore, the Company's Las Vegas/Henderson office, which was acquired in the last quarter of the prior fiscal year from a former licensee, provided $87,000 in adjusting fees during the current quarter. The Company's revenue from continuing licensee and franchisee fees decreased 12% or $168,000 from $1,388,000 in the quarter ended September 30, 1996 to $1,220,000 in the quarter ended September 30, 1997. This decrease reflects the loss of revenue attributed to a client that contributed 18.8% to the continuing licensee and franchisee fees in fiscal 1997. In June 1997, this client elected to place its adjusting service needs with other vendors. This will be reflected in the Company's 1998 fiscal year. The Company's revenue is affected by numerous factors including the work loads of other companies and claims presented by their clients. Therefore, the Company is unable to project its future revenue. The Company has historically seen growth in licensee and franchisee fees paid. However, during the current fiscal year the Company has seen a decrease in revenue due primarily to the phase out of its business relationship with its major client. The Company has responded to this loss of revenue by developing and implementing sales and marketing efforts to take advantage of its geographic diversity as well as the unique strengths of its individual licensees and franchisees, and anticipates that over time the lost business will be replaced. In addition, the Company believes that it will continue to realize growth as it adds additional qualified licensees and franchisees. Furthermore, the Company expects to continue to reflect revenue from its Tucson and Las Vegas operations. COMPENSATION AND FRINGE BENEFITS Compensation and fringe benefits represented approximately 59% of the Company's costs and expenses and represent the largest single item of expense. These expenses decreased 1% or $6,000 from $651,000 in the three months ended September 30, 1996 to $645,000 in the current quarter. EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS The Company's expenses other than compensation and fringe benefits decreased $41,000 during the three months ended September 30, 1997 as compared to the same quarter of the prior fiscal year. The principal items affecting these expenses are a $28,000 decrease in legal expenses and a $21,000 decrease in advertising and promotional expenses. The balance of the Company's costs and expenses did not significantly change from the same period of the prior year. INCOME TAXES The Company's income taxes were 39% of its income before taxes, or approximately the same as they were in the prior fiscal year. Changes made in the tax laws by various states and by the federal government have not had a material affect on the Company's current overall tax rates, however, this could change at any time. OTHER INCOME The Company's other income decreased $6,000 or 14% from $44,000 in the quarter ended September 30, 1996 to $38,000 in the current quarter. The most significant items affecting other income include a $3,000 decrease in the sales of computer software to the Company's licensees and franchisees and a $1,000 increase in expenses related to rental property. NET INCOME The Company's net income for the quarter ended September 30, 1997, decreased $83,000 or 24% from $342,000 in the quarter ended September 30, 1996 to $259,000 in the current quarter. The most significant items affecting net income were the $180,000 decrease in revenue, the $41,000 decrease in expenses other than compensation and fringe benefits and the $54,000 decrease in income. 8 YEAR 2000 COMPLIANCE The "Year 2000" issue creates risk for the Company from unforeseen problems in its own computer systems and from third parties with whom the Company deals. Many currently installed computer systems and software products are coded to accept two digit entries in the date code field. These date code fields will need to accept four digit entries to distinguish 21st century dates from 20th century dates. Left uncorrected, time sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000, resulting in a computer shutdown or incorrect calculations. Failures of the Company's and/or third parties' computer systems could have a material adverse effect on the Company's ability to conduct its business. To date, the Company has determined that certain of the software used by the Company is not Year 2000 compliant. The Company has identified upgraded software that is Year 2000 compliant. The Company expects to complete these upgrades by December 31, 1998. The Company is finalizing arrangements with a consulting firm to undertake a complete analysis of the Company's operations to identify the remaining Year 2000 issues embodied in its operations and facility, and to develop a plan to resolve such issues. The Company expects this analysis to begin during the second quarter of this fiscal year and to be completed by December 31, 1998. Thereafter, the Company will resolve such issue. Certain software products sold by the Company to certain of its licensees and franchisees in prior years are not Year 2000 compliant. The Company's computer staff is developing an upgrade of the software that will be Year 2000 compliant. The Company expects to complete development of the Year 2000 compliant version of its software by December 31, 1998. The Company will distribute this version to purchasers of the non-compliant version, free of charge. The Company does not anticipate that the cost of this upgrade will be material to the Company's operations. Members of the Company's computer staff are undertaking the task of contacting the Company's customers and vendors to determine the status of such customers' and vendors' software for Year 2000 compliance. As the Company identifies these issues, it will determine the steps necessary to avoid disruptions due to failures in Year 2000 compliance by its customers and/or vendors. The Company expects that the cost of analysis and development and implementation of a plan to address its Year 2000 issues will not exceed $175,000. The Company's estimate reflects assumptions regarding the extent of the Year 2000 issues embodied in the Company's operations and facilities, the availability and cost of personnel trained in this area, the compliance plans of third parties, and similar uncertainties. However, due to the complexity and pervasiveness of the Year 2000 issue, and in particular, the uncertainty regarding the compliance programs of third parties, no assurance can be given that these estimates will be achieved, and actual results could differ materially from those anticipated. If the Company is unable to address the Year 2000 issues successfully, or in a timely fashion, the Company may need to devote more resources to the process and additional costs may be incurred. This could have a material adverse effect on the Company's results of operations. The Company has purchased insurance that may offset certain losses to the Company for claims based upon non-compliance with Year 2000 issues. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS From time to time in the normal course of its business, the Company is named as a defendant in lawsuits. The Company does not believe that it is subject to any such lawsuits or litigation or threatened lawsuits or litigation that will have a material adverse effect on the Company or its business. 9 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: November 11, 1998 /s/ William J. Rocke ----------------------- ---------------------------------------- William J. Rocke, Chief Executive Officer/Chairman of the Board, Acting Chief Financial Officer, Director Date: November 11, 1998 /s/ Jean E. Ryberg ----------------------- ---------------------------------------- Jean E. Ryberg, President, Director 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 (UNAUDITED) AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS 1 U.S. DOLLARS 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 1 933,416 1,243,831 1,988,264 418,119 0 4,338,085 2,582,270 835,502 7,525,884 1,036,567 0 47,820 0 0 6,441,497 7,525,884 0 1,633,369 0 0 1,238,049 48,000 523 423,263 167,347 255,916 0 0 0 255,916 .06 .06
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