-----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, FK9SYi9PH3ELoWNU7dUPOvm/d+GzlJGd+QbwkC/+zDiOJXDyRatCTbredbmXdtYh m4H+3Ncbeccrvu5v0UF4gw== 0000950147-98-000102.txt : 19980218 0000950147-98-000102.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950147-98-000102 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RENT A WRECK OF AMERICA INC CENTRAL INDEX KEY: 0000763567 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 953926056 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14819 FILM NUMBER: 98537779 BUSINESS ADDRESS: STREET 1: 11460 CRONRIDGE DRIVE SUITE 118 CITY: OWINGS MILLS STATE: MD ZIP: 21117 BUSINESS PHONE: 4105815755 MAIL ADDRESS: STREET 1: 11460 CRONRIDGE DRIVE STE 118 CITY: OWINGS MILLS STATE: MD ZIP: 21117 10QSB 1 FORM 10-QSB 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 December 31, 1997 [ ] 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 (I.R.S. Employer of incorporation or organization) Identification No.) 11460 Cronridge Drive, Suite 120, Owings Mills, MD 21117 - -------------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Issuer's telephone number: (410) 581-5755 - --------------------------------------------------------------------- (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: 4,268,692 shares as of February 4, 1998. Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X] RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES FORM 10-QSB - December 31, 1997 INDEX Part I. Financial Information Page - ------------------------------- ---- Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1997 and December 31, 1997 (Unaudited) 2-3 Consolidated Statements of Earnings for the Three and Nine Months ended December 31, 1996 and 1997 (Unaudited) 4 Consolidated Statements of Cash Flows for the Nine Months ended December 31, 1996 and 1997 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-15 Part II. Other Information - --------------------------- Item 1. Legal proceedings 16 Item 3. Defaults Upon Senior Securities 16 Item 5. Other Information-Retirement of Stock Information 16 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18 Part I - Financial Information Item 1 - Financial Statements RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS March 31, December 31, 1997 1997 ----------- ----------- (Unaudited) CURRENT ASSETS: Cash and Cash Equivalents ........................................... $ 531,035 $ 1,105,554 Restricted cash ..................................................... $ 546,543 $ 499,878 Accounts Receivable, net of allowance for doubtful accounts of $762,757 and $670,460 at March 31, 1997 and December 31, 1997, respectively: Continuing License Fees and Advertising Fees .............................................. 291,181 302,269 Current Portion of Notes Receivable ............................. 415,072 393,179 Current Portion of Direct Financing Leases ........................................................ 47,228 39,307 Insurance Premiums Receivable ................................... 25,784 17,861 Other ........................................................... 25,136 11,086 Prepaid Expenses .................................................... 117,566 180,163 ----------- ----------- TOTAL CURRENT ASSETS ............................................ 1,999,545 2,549,297 ----------- ----------- PROPERTY AND EQUIPMENT: Vehicles .......................................................... 53,025 19,590 Furniture, Equipment and Leasehold Improvements .................................................... 738,130 514,716 Less: Accumulated Depreciation and Amortization ............................................... (448,472) (240,639) ----------- ----------- NET PROPERTY AND EQUIPMENT .......................................... 342,683 293,667 ----------- ----------- OTHER ASSETS: Trademarks and other Intangible Assets, net of accumulated amortization of $88,729 and $100,971 at March 31, 1997 and December 31, 1997, respectively .................................................... 219,086 207,696 Long-term Portion of Notes and Direct Financing Lease Receivables, net of allowance of $16,278 and $0 at March 31, 1997 and December 31, 1997, respectively .................................................... 32,629 14,662 ----------- ----------- 251,715 222,358 ----------- ----------- TOTAL ASSETS .................................................... $ 2,593,943 $ 3,065,322 =========== ===========
The accompanying notes are an integral part of these financial statements. 2 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31, 1997 1997 ----------- ----------- (Unaudited) CURRENT LIABILITIES: Accounts Payable and Accrued Expenses .......................... $ 720,338 $ 705,314 Dividends Payable .............................................. 28,782 27,733 Insurance Premiums, Deposits, and Provision for Loss ......................................................... 50,828 258,510 Current Maturities of Capital Lease Obligations ................ 8,578 -- ----------- ----------- TOTAL CURRENT LIABILITIES .................................... 808,526 991,557 ----------- ----------- CAPITAL LEASE OBLIGATIONS, Less Current Maturities ............... 30,089 -- ----------- ----------- TOTAL LIABILITIES ............................................ 838,615 991,557 ----------- ----------- COMMITMENTS AND CONTINGENCIES .................................... -- -- SHAREHOLDERS' EQUITY: Convertible Cumulative Series A Preferred Stock, $.01 par value; authorized 10,000,000 shares; issued and outstanding 1,439,125 shares at March 31, 1997 and 1,386,625 shares at December 31, 1997 (aggregate liquidation preference $1,151,300 at March 31, 1997 and $1,109,300 at December 31, 1997) ........................................... 14,391 13,866 Common Stock, $.01 par value; authorized 25,000,000 shares; issued and outstanding 4,234,767 shares at March 31, 1997 and 4,268,692 shares at December 31, 1997 ........................ 42,347 42,687 Additional Paid-In Capital ..................................... 3,021,490 3,006,684 Accumulated Deficit ............................................ (1,322,900) (989,472) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY ................................... 1,755,328 2,073,765 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................................................... $ 2,593,943 $ 3,065,322 =========== ===========
The accompanying notes are an integral part of these financial statements. 3 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Nine Months Ended December 31, Ended December 31, 1996 1997 1996 1997 ------------------------ ------------------------ REVENUES: Initial License Fees.......................... $ 157,500 $ 237,250 $ 620,000 $ 633,500 Advertising Fees ............................. 138,800 173,274 495,167 565,033 Continuing License Fees ...................... 436,424 525,425 1,528,091 1,827,426 Insurance Premiums ........................... 39,723 159,121 133,164 395,124 Direct Financing Leases to Franchisees ....... 225 225 5,723 2,300 Other ........................................ 24,441 36,928 75,067 118,629 ---------- ---------- ---------- ---------- 797,113 1,132,223 2,857,212 3,542,012 ---------- ---------- ---------- ---------- EXPENSES: Salaries, Consulting Fees and Employee Benefits .......................... 177,088 192,915 556,603 583,808 Sales and Marketing Expenses ................. 56,070 101,976 384,402 380,005 Advertising and Promotion .................... 189,035 274,178 680,169 845,401 Underwriting Expenses ........................ 1,398 158,486 18,041 341,120 General and Administrative Expenses .......... 209,174 226,197 598,269 713,256 Depreciation & Amortization .................. 27,911 29,295 83,466 90,091 ---------- ---------- ---------- ---------- 660,676 983,047 2,320,950 2,953,681 ---------- ---------- ---------- ---------- OPERATING INCOME ......................... 136,437 149,176 536,262 588,331 INTEREST INCOME, NET ........................... 18,048 13,418 48,802 45,985 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAX EXPENSE ......... 154,485 162,594 585,064 634,316 ---------- ---------- ---------- ---------- INCOME TAX EXPENSE ............................. 59,631 47,266 104,931 194,369 ---------- ---------- ---------- ---------- NET INCOME................................ $ 94,854 $ 115,328 $ 480,133 $ 439,947 DIVIDENDS ON CONVERTIBLE CUMULATIVE PREFERRED STOCK .............................. 29,975 27,733 90,865 84,111 ---------- ---------- ---------- ---------- NET INCOME AFTER DIVIDENDS ON CONVERTIBLE CUMULATIVE PREFERRED STOCK ....... $ 64,879 $ 87,595 $ 389,268 $ 355,836 ---------- ---------- ---------- ---------- EARNINGS PER COMMON SHARE Basic......................................... $ .02 $ .02 $ .10 $ .08 ========== ========== ========== ========== Diluted....................................... .02 $ .02 $ .08 $ .07 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 4 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended December 31, ------------------------------- 1996 1997 ----------- ----------- Increase (decrease) in cash and cash equivalents Cash flows from operating activities: Net income ................................................... $ 480,133 $ 439,947 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ............................ 83,466 90,091 Gain on disposal of property and equipment ............... (1,578) (4,152) Provision for doubtful accounts .......................... 115,696 (108,575) Changes in assets and liabilities: Accounts and notes receivable .......................... (191,974) 167,240 Prepaid expenses ....................................... (24,659) (62,597) Accounts payable and accrued expenses ............................................. 44,924 (16,074) Insurance premiums, deposits, and loss reserves ........................................ 43,247 207,682 ----------- ----------- Net cash provided by operating activities ................ 549,255 713,562 ----------- ----------- Cash flows from investing activities: Proceeds from sale of property and equipment ................. 28,250 29,160 Acquisition of property and equipment ........................ (119,436) (55,873) Additions to trademarks and other ............................ (70,646) (852) ----------- ----------- Net cash used in investing activities .................... (161,832) (27,565) ----------- ----------- Cash flow from financing activities: Repayments of long-term debt ................................. (11,022) (38,667) Issuance of common stock ..................................... 25,000 25,000 Retirement of common stock ................................... (66,748) (18,189) Retirement of preferred stock ................................ (85,300) -- Preferred dividends paid ..................................... (123,723) (126,287) ----------- ----------- Net cash used in financing activities .................... (261,793) (158,143) ----------- ----------- Net increase in cash and cash equivalents ........................................... 125,630 527,854 Cash and cash equivalents at beginning of period ............... 579,871 1,077,578 ----------- ----------- Cash and cash equivalents at end of period ..................... $ 705,501 $ 1,605,432 =========== =========== Supplemental disclosure of cash flow information: Interest paid ................................................ $ 5,440 $ 16,106 Taxes paid ................................................... $ 55,737 $ 87,044
The accompanying notes are an integral part of these financial statements. 5 RENT-A-WRECK OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 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 Operations, Inc. ("RAW OPS"), 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"), URM Corporation ("URM") and Central Life and Casualty Company, Limited ("CLC"). 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. The consolidated balance sheet as of December 31, 1997, the consolidated statements of earnings for the three and nine-month periods ended December 30, 1996 and 1997 and the consolidated statements of cash flows for the nine-month periods ended December 31, 1996 and 1997 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 financial statements 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 generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's March 31, 1997 audited financial statements. The results of operations for the interim periods are not necessarily indicative of the results for any future period or the full year. 2. PREFERRED STOCK As of March 31, 1997, preferred dividend arrearages were $274,180. The Company paid $41,127 of these arrearages during the quarter ended June 30, 1997. A quarterly preferred dividend of $28,645 was declared for the first quarter ended June 30, 1997 and it was paid on August 11, 1997. For the quarter ended September 30, 1997, the Company declared preferred dividends totaling $27,733 which were paid on November 10, 1997. For the quarter ended December 31, 1997, the Company declared dividends totaling $27,733 which are expected to be paid during the fourth quarter of the Company's fiscal year. As of December 31, 1997, preferred dividend arrearages were $224,909. 6 3. EARNINGS PER COMMON SHARE The computation of earnings per common share for the three and nine-month periods ended December 31, 1996 and 1997, respectively, is presented on a basic and diluted basis in accordance with Statement of Financial Accounting Standards 128, Earnings Per Share. In computing basic earnings per share for the three and nine-month periods ended December 31, 1996, cumulative preferred dividends in the amounts of $29,975 and $90,865 for each period were subtracted from net income to arrive at the earnings applicable to common shareholders. For the three and nine-month periods ended December 31, 1997, cumulative preferred dividends in the amounts of $27,733 and $84,111 for each period were subtracted from net income to arrive at the earnings applicable to common shareholders. In computing diluted earnings per share, the dilutive effect of stock options, warrants, and the conversion of cumulative preferred stock was considered in determining the weighted average number of common and common equivalent shares. A reconciliation of the numerators and denominators in the computation of basic and diluted earnings per share for the three and nine-month periods ended December 31, 1997 is as follows: Basic EPS Computation Quarter Year-to-date ---------- ------------ Numerator: Net income applicable to common shares $ 87,595 $ 355,836 Denominator: Weighted average common shares 4,297,418 4,278,354 ---------- ---------- Basic EPS $ .02 $ .08 ========== ========== 7 Diluted EPS Computation Numerator: Net income applicable to common shares $ 87,595 $ 355,836 Dividends on convertible preferred stock 27,733 84,111 ---------- ---------- 115,328 439,947 ---------- ---------- Denominator Weighted average common shares 4,297,418 4,278,354 Convertible preferred stock 1,386,625 1,386,625 Weighted average options and warrants 54,675 270,018 ---------- ---------- 5,738,718 5,934,997 ---------- ---------- Diluted EPS $ .02 $ .07 ========== ========== 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 of Financial - --------------------------------------------------------- Condition and Results of Operations ----------------------------------- RESULTS OF OPERATIONS-THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1996 Revenue from franchising operations, which includes initial license fees, continuing license fees, advertising fees and direct financing leases increased by $203,225 (28%). This increase occurred primarily due to an increase in initial license fees, continuing license fees and advertising fees. Initial license fees increased by $79,750 (51%) due to the addition of new franchises. The timing of closings of new franchise sales, each of which is for a relatively large amount, varies, contributing to periodic increases 8 or decreases in reported results. Management does not believe these short-term variations are indicative of longer term trends. Continuing license fees increased by $89,001 (20%), and advertising fees increased by $34,474 (25%) due to the fleet growth at existing franchises and the Company's dedication of more resources to its collection efforts. Revenues from insurance premiums were $159,121 due to the new reinsurance program that started in March 1997, partially offset by a $19,801 (100%) reduction in premiums from the physical damage insurance program ("CLC") and by a $19,921 (100%) reduction in premiums from the national insurance program ("URM") due to their termination and replacement by the reinsurance program operated through CAR Insurance. Insurance premium revenue is recognized ratably over the life of the policies. Reserves are established for unearned premiums received. Other revenue increased by $12,487 (51%) due primarily to increased sales of promotional materials to the Company's franchisees. Such purchases can not be predicted in advance by the Company. Total operating expenses increased by $322,371 (49%) in this period compared to the same period in the prior year. Salary expense increased by $15,827 (9%) primarily as a result of additional hires in response to the growth of the Company. General and administrative expenses increased by $17,023 (8%), which resulted primarily from additional expenses such as management fees, audit fees and letter of credit(LOC)fees related to the reinsurance company established in March 1997. General and administrative expenses include a $5,500 additional reserve for legal expenses during the three-month period ended December 31, 1997 compared to the same period in the prior year due to a $22,466 award of legal fees and out of pocket expenses to a former franchisee in complete resolution of litigation, which award the Company began to accrue in the third quarter. The remaining $16,966 will be reserved during the fourth quarter of the Company's fiscal year. Sales and marketing expenses increased by $45,906 (82%). This increase resulted primarily from additional commission expenses due to the larger amount of franchise sales made in this period compared to the same period in the prior year. Sales and marketing expenses also increased due to an increase in bad debt expense in this period compared to the same period in the prior year which resulted from the collection on a note receivable in the prior year which had been 100% reserved. Underwriting expenses increased by $157,088 (11,237%), which resulted primarily from additional expenses such as paid losses and loss reserves related to the new reinsurance company. Net interest income decreased $4,630 (34%). This decrease was primarily due to interest paid to AICCO on the funds which CAR Insurance Company borrowed from AICCO to meet the capital requirements of the Bermuda Government in conjunction with the reinsurance program. Depreciation and amortization expense increased by $1,384 (5%) in this period compared to the same period in the prior year. This increase was primarily due to additional investment to update computer software and hardware. Vehicles, office furniture, equipment and leasehold improvements 9 are carried at cost. Depreciation has been provided by the straight-line method over the estimated useful lives of the assets ranging from 3 to 5 years. Amortization of leasehold improvements is calculated on the straight-line basis over the shorter of the estimated life of the improvements or the term of the lease. Betterments, renewals and extraordinary repairs that extend the life of the asset are capitalized; other repairs and maintenance are expensed. The Company realized operating income of $149,176, before taxes and interest, for the three-month period ended December 31, 1997 compared to operating income of $136,437 for the same period in the prior year, reflecting an increase of $12,739 (9%). This increase resulted primarily from the increase in initial license fees and continuing license fees due to the addition of new franchises, fleet growth at existing franchises and the Company's collection efforts. However, operating margins decreased from 17% for the three-month period ended December 31, 1996 to 13% for the same period in the current year. This decrease was primarily due to low operating margin for the Company's new reinsurance program. Income tax expense decreased $12,365 (21%) in this period compared to the same period in the prior year due to a reduction in the Company's deferred tax asset valuation allowance. In light of the Company's recent earnings, the valuation allowance is being reduced and re-assessed quarterly. YEAR TO DATE RESULTS OF OPERATIONS COMPARED TO SAME PERIOD IN PRIOR YEAR Net revenues increased by $684,800 (24%) for the nine-month period ended December 31, 1997 as compared to the same period in the prior year. This increase occurred due to a $299,335 (20%) increase in continuing license fees, $69,866 (14%)increase in advertising fees, $13,500 (2%) increase in initial license fees and a $261,960 (197%) increase in premiums in connection with the new reinsurance program. These increases occurred for the same reasons indicated above. The direct financing leases to franchisees decreased by 60% in the current nine-month period compared to the same period in the prior year. This decrease was due to fewer franchisees electing to participate in the Company's direct financing leasing program primarily because of increased attractiveness of competitive programs. Total operating expenses increased by $632,731 (27%) in this period due primarily to an increase in general and administrative expenses of $114,987 (19%) and an increase in underwriting expenses of $323,079 (1,791%). These increases resulted primarily from the new reinsurance program. Salary expense increased by $27,205 (5%) primarily as a result of additional hires in response to the growth of the Company. The Company realized operating income of $588,331, before taxes and interest, for the nine months compared to operating income of $536,262 for 10 1996, reflecting an increase of $52,069. This increase resulted primarily from the increase in continuing license fees and initial license fees. Income tax expense for the nine-month period ended December 31, 1997 increased by $89,438 (85%) compared to the nine-month period ended December 31, 1996 due to higher pre-tax earnings and the depletion of the Company's federal income tax net operating loss carryforward partially offset by a reduction in the deferred tax asset valuation allowance as described above. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company had working capital of $1,557,740 compared to $1,191,019 at March 31, 1997, an increase of $366,721. This increase primarily resulted from the net profit earned during the period and a reduction in allowance for doubtful accounts based on the Company's historical reserves experience, offset by reserves for the reinsurance program. Of the net increase, $108,575 is due to a reduction in the required allowance for doubtful accounts as a result of improved collection efforts. At December 31, 1997, the Company's allowance for doubtful accounts was $670,460 compared to $779,035 at March 31,1997. The Company did not write off any doubtful accounts during the three month period ended December 31, 1997. The Company generally requires officers and directors of franchisees to give personal guarantees of the franchisee's obligations under the franchise agreement. In January 1997, the Company's management improved its collection efforts from franchisees and guarantors by dedicating part of the time of one employee to coordinate collections from franchisees. During the three month period ended December 31, 1997, this new effort resulted in more accounts being kept current and yielded a collection of $15,898 of receivables from franchisees and $52,999 on a note receivable arising out of an asset sale at a franchise location. The Company had reserved against these receivables in a prior period, and, accordingly, this collection improved cash flow in the current period by the amount of the collection. The Company is planning to hire a part-time employee in the fourth quarter of the current fiscal year to dedicate more resources to collection efforts. The Company's collection effort is designed to increase liquidity through improved cash flow; however, there can be no assurance that the Company will be successful in these efforts. Cash and cash equivalents increased by $574,519 (108%). This increase resulted primarily from the increase in initial license fees and continuing license fees due to the addition of new franchises, fleet growth at existing franchises and the Company's collection efforts. Restricted cash decreased by $46,665 (9%) due to higher national advertising expenses. Restricted cash includes a deposit of $250,000 being held in the Bank of Butterfield (Bermuda) for securing the letter of credit with The Chase Manhattan Bank ("Chase") and funds being held on behalf of the Company's franchisees in the national advertising fund to be spent on different advertising programs. In March 1997 the Company deposited $250,000 under its CAR Insurance subsidiary in the Bank of Butterfield. This deposit is restricted by a $250,000 letter of credit with the Bank of Butterfield in connection with the Company's CAR Insurance subsidiary. This letter of credit is part of the agreement between the Company and Chase as security for the letter of credit issued to American International Group ("AIG") by Chase. Funds drawn against the letter of credit bear interest at The Bank of Butterfield's prime commercial lending rate plus 2% (which prime rate was 6.25% on January 28, 1998). For the quarter ended December 31, 1997, Chase has not drawn any funds from the letter of credit. This letter of credit expires on March 31, 1998 but will automatically extend without amendment for additional one year periods unless sixty days notice is given prior to the expiration date. As of February 9, 1998, no such notice had been received. 11 In June 1997 the Company finalized an $800,000 letter of credit with Chase in connection with the Company's new CAR Insurance subsidiary. This letter of credit is part of the reinsurance agreement with AIG to secure payment of claims. Funds drawn against the letter of credit bear interest at Chase's prime commercial lending rate plus 3% (which prime rate was 8.5% on January 28, 1998). For the quarter ended December 31, 1997, AIG has not drawn any funds from the letter of credit. This letter of credit is secured by all of the Company's assets. The Company was committed under capital lease agreements for various equipment, and it rents its office facilities under the terms of an operating lease. The capital lease obligations were $38,667 and $0 at March 31,1997 and December 31, 1997, respectively. The Company has utilized its working capital to pay for these obligations. During the quarter ended September 30, 1997, the Company fully paid its obligations under these capital leases. The monthly office facilities lease obligations were $5,200 and $5,400 at March 31, 1997 and December 31, 1997, respectively. The Company also rents additional space on a month to month basis for approximately $900 per month. Furniture, equipment and leasehold improvements decreased by $223,414 (30%) from March 31, 1997 to December 31, 1997. This decrease occurred primarily due to writing off the assets that were not in use or were fully depreciated. Vehicles decreased by $33,435 (63%) from March 31, 1997 to December 31, 1997 due to sales of a rental van and an executive vehicle which was partially offset by the purchase of a truck for the one way program. Cash provided by operations was $713,562 during the nine-months ended December 31, 1997, resulting from an increase in net income, an increase in reinsurance premiums, deposits, and loss reserves and an increase in accounts and notes receivable offset by a decrease in accounts payable and accrued expenses and an increase in prepaid expenses. Prepaid expenses increased primarily due to expenses related to the new reinsurance company such as LOC fees and legal and secretarial fees. Insurance premiums, deposits, and loss reserves increased due to the new reinsurance program. Accounts and notes receivable decreased primarily due to the Company's collection efforts. Cash used in investing activities of $27,565 related primarily to the acquisition of computer software and hardware and maintaining trademarks. Cash used in financing activities was $158,143, which was applied to payments of preferred dividends, long-term debt and buyback of common stock offset by issuance of common stock in connection with the acquisition of assets. The Company believes cash provided by operations and its letter of credit will provide sufficient working capital to support its business plan through fiscal 1998. 12 IMPACT OF INFLATION Inflation has had no material impact on the operations and financial condition of the Company during the periods presented. 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 in the Company's new reinsurance program, the effects of government regulation of the Company's franchise and reinsurance 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, 1997. All forward-looking statements should be considered in light of these risks and uncertainties. 13 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 three and nine-month periods ended December 31, 1996 and 1997 and with respect to the balance sheets thereof at December 31 in each of those years. Except as otherwise noted, 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 Nine Months Ended December 31, Ended December 31, 1996 1997 1996 1997 -------------------------------------------------------- (in thousands except per share and number of franchises) (Unaudited) Franchisees' Results (Unaudited) - -------------------------------- Franchisees' Revenue (1) $ 7,274 $ 8,757 $25,468 $30,457 Number of Franchises 469 485 469 485 Results of Operations - --------------------- Net Revenue $ 797 $ 1,132 $ 2,857 $ 3,542 Costs and expenses and Other 661 983 2,321 2,954 Income before income taxes 154 163 585 634 Net income 95 115 480 440 Earnings per share Basic (2) $ .02 $ .02 $ .10 $ .08 Weighted average common shares 4,063 4,297 4,094 4,278 Diluted (2) $ .02 .02 $ .08 .07 Weighted average common shares plus options and warrants 5,844 5,739 5,875 5,935
Nine Months Ended December 31, 1996 1997 ------------------- (Unaudited) Balance Sheet Data - ------------------ Working capital $ 1,026 $ 1,558 Total assets $ 2,471 $ 3,065 Long-term obligations $ 33 $ - Shareholders' equity $ 1,602 $ 2,074
(1) The franchisees' revenue data have been derived from unaudited reports provided by franchisees submitted when paying license fees and advertising fees to the Company. 14 (2) Basic earnings per share are after deducting a provision for preferred dividends of $29,975 and $90,865, for the three and nine-month periods ended December 31, 1996. For the three and nine-month periods ended December 31, 1997, basic earnings per share are after deducting a provision for preferred dividends of $27,733 and $84,111. Diluted earnings per share assumes a conversion of cumulative preferred stock into common shares and, accordingly, no deduction from earnings is made for preferred dividends. 15 Part II. Other Information ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- Information is incorporated by reference from the Company's Report Form 10-KSB for the year ended March 31, 1997 under the caption "Item 3 Legal Proceedings" and the Company's Report on 10-QSB for the quarter ended September 30, 1997 under the Caption "Part II, Item 1. Legal Proceedings". On October 1, 1997 suit was initiated in the District Court of Oklahoma County, State of Oklahoma against the Company and a Rent-A-Wreck franchisee by an automobile dealer in connection with the plaintiff's sale of cars to the franchisee for which plaintiff has allegedly not yet been paid. Plaintiff alleges that the Company fraudulently induced it to deal with the franchisee and seeks $241,000 in damages plus interest. The Company believes the claim against it is without merit and intends to defend it vigorously. Regarding the lawsuit that was initiated in August 1994 by Mongo, Inc. and John and Roberta Batcher and ultimately dismissed in April 1997, the Company is aware that Mongo, Inc. and John Batcher have filed another summons on August 21, 1997 in the Supreme Court, State of New York, County of Suffolk regarding a lawsuit against the Company, Bundy, K.A.B. Inc., officers of the Company and other defendants. The summons mentions relief sought of $7,000,000 plus interest. The summons is not accompanied by a complaint, and the Company is investigating the basis for this summons given that the plaintiffs' previous claims against the Company were dismissed. In November 1997, the Company removed the case to the U.S. District Court for the Eastern District of New York, and on February 4, 1998 the Company petitioned the court to dismiss the case. ITEM 3. DEFAULTS UPON SENIOR SECURITIES - ------- ------------------------------- The information disclosed in footnote 2 to the financial statements provided in Part I Item 1 of this Report on Form 10-QSB is incorporated herein by this reference. ITEM 5. OTHER INFORMATION-RETIREMENT OF STOCK INFORMATION - ------- ------------------------------------------------- On November 17, 1997 the Company bought back and retired 15,000 shares of its common stock. On December 23, 1997 the Company retired 6,700 shares of its common stock which were returned to the Company in partial satisfaction of a franchisee's debt. On December 31, 1997 the Company bought back and retired 10,000 shares of its common stock. 16 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. 17 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 Khosravi February 10, 1998 - ----------------------- ------------------------ Mitra Khosravi Chief Accounting Officer /s/Kenneth L. Blum, Sr. February 10, 1998 - ----------------------- ------------------------ Kenneth L. Blum, Sr. CEO and Chairman of the Board 18 EXHIBIT INDEX TO RENT-A-WRECK of AMERICA, INC. FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 1997 EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.1 Terms of $250,000 Letter of Filed herewith. Credit issued by the Bank of Butterfield, as contained in application dated June 20, 1997, with attached Letter of Set-off 27 Financial Data Schedule Filed herewith. 19 EX-4.1 2 APPLICATION FOR LETTER OF CREDIT The Bank of N.T. Butterfield & Son Ltd. Page 1 - -------------------------------------------------------------------------------- APPLICATION TO OPEN AN IRREVOCABLE STANDBY LETTER OF CREDIT - -------------------------------------------------------------------------------- Bank Reference Number: Please open by ( ) airmail ( ) telex (X) SWIFT an irrevocable Credit as follows: - -------------------------------------------------------------------------------- Beneficiary's name and full address: Applicant's name and full address: The Chase Manhattan Bank Consolidated American Rental Insurance 380 Madison Avenue Co., Ltd. Ground Floor F.B. Perry Building New York, NY 10017 40 Church Street U.S.A. P.O. Box HM 1995 Hamilton HM HX, Bermuda Attention: Craig W. Clausen J. Oliver Heyliger - -------------------------------------------------------------------------------- Expiry Date: Amount (in figures and words): March 31st, 1998 US$250,000 Two hundred and fifty thousand dollars - -------------------------------------------------------------------------------- Available by drafts at (X) sight, (X)____ days sight, ( )____ days from date of _____________________ accompanied by: ( ) Any documents required (should clearly reflect beneficiary's right or reason for drawing). See attached draft. - -------------------------------------------------------------------------------- Special Conditions (Specify): The Bank of N.T. Butterfield & Son Ltd. Page 2 - -------------------------------------------------------------------------------- SUPPLEMENTARY INFORMATION TO ACCOMPANY APPLICATION - -------------------------------------------------------------------------------- 1. The name and telephone number of the person in your organization most familiar with this application. J. Oliver Heyliger Tel: (441) 295 1272 --------------------------------------------------------------------------- 2. The effective date of the Letter of Credit: As soon as possible -------------------------------- 3. Brief details of the transaction of which the Credit forms part (e.g. to secure reinsurance obligations to ceding insurer). LOC to be issued to Chase to back up their securing of Obligations of an --------------------------------------------------------------------------- AIG Group ceding insurer. --------------------------------------------------------------------------- 4. Is the Credit required in connection with the usual business operations of the Applicant? (e.g. insurance). Yes. --------------------------------------------------------------------------- 5. What is the name of the Applicant's parent company or the names of any person or company holding 10% or more of any class of stock in the company? Rent-A-Wreck of America, Inc. ---------------------------------------------------------------------------
Yes No 6. If the Applicant is a corporation, have you attached the following documents? (please check) a. Certified copy Resolution of the Board of Directors under seal authorizing named directors/officers or other persons to negotiate the Credit(s) and execute the security document(s) (X) ( ) b. Fully completed Application to open an irrevocable Standby Letter of Credit. (X) ( ) c. Letter of Set-Off, Collateral Deposit Agreement, or other security document(s) signed by those authorized under (a) above. (X) ( ) d. Attorney's opinion that these arrangements are within the powers and support a transaction valid pursuant to the business objects of the corporation. Alternatively, supply the Memorandum of Association. (X) ( ) 7. Please check the following: a. Must the Credit be confirmed by another bank? ( ) (X) b. Must the Credit be confirmed by a bank approved by the National Association of Insurance Commissioners (N.A.I.C.)? ( ) (X) c. Is an Evergreen Clause (Automatic Renewal Clause) requested? (X) ( ) d. Please check notice period for avoiding automatic renewal of the Credit. 30 days ( ) 60 days ( X ) 90 days ( )
Page 3 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Yes No 8. Is the Credit to be issued in conformity with: a. State of New York Department of Insurance Regulations on admissibility of Letters of Credit? ( ) (X) b. State of California Department of Insurance Regulations on admissibility of Letters of Credit? ( ) (X)
INSERT (please tick clause to be inserted): ( ) 1. Applies where Letter of Credit is to be issued in conformity with the State of New York Department of Insurance Regulations. "Draft(s) drawn by a party indicated as the domiciliary conservator, liquidator or statutory successor of the beneficiary shall also be honoured hereunder, provided said draft(s) is accompanied by a certification signed by the domiciliary conservator, liquidator, or statutory successor of the beneficiary stating he is the successor by operation of law of the named beneficiary". OR EITHER (1) or (2) below applies where Letter of Credit is to be issued in conformity with the State of California Department of Insurance Regulations. ( ) 1. "In the event of insolvency of the beneficiary, a drawing against this Letter of Credit shall be honoured upon presentation by the domiciliary conservator, liquidator or statutory successor of the beneficiary". ( ) 2. "If a court of law appoints a successor in interest to the named beneficiary then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator"). OR (3) below is the "compromise" wording agreed to by both the State of New York and State of California Department of Insurance Regulators. ( ) 3. "The term "beneficiary" includes any successor by operation of law of the named beneficiary including, without limitation, any liquidator, rehabilitator, receiver or conservator. Drawings by any liquidator, rehabilitator, receiver, or conservator shall be for the benefit of all of the beneficiary's policyholders". We request you to issue a letter of credit as shown on this Application. The Reimbursement Agreement on page 4 is hereby accepted and made applicable to this Application and the letter of credit. Date: 20th June, 1997 Signature(s) /s/ J. Oliver Heyliger ---------------------------- ---------------------------------- (as per certified resolution) ---------------------------------- (The applicant's attention is drawn to the overleaf, (REIMBURSEMENT AGREEMENT)) - -------------------------------------------------------------------------------- FOR BANK USE ONLY Credit Committee ( ) Rate:___________________________________ Credit Department ( ) Category:_______________________________ Other:_____________________________ - -------------------------------------------------------------------------------- The Bank of N.T. Butterfield & Son Ltd. Page 4 - -------------------------------------------------------------------------------- REIMBURSEMENT AGREEMENT - -------------------------------------------------------------------------------- To: The Bank of N.T. Butterfield & Son Limited In consideration of your issuing from time to time your letters of credit ("Credits") at our request, we agree with you as follows: 1. We will pay you on demand in the currency in which the Credits are payable, or in United States Dollars, at your option, in immediately available funds, all moneys paid by you under or pursuant to the Credits, together with your customary commissions and charges. We also authorize you to charge any of our accounts with you for all moneys so paid or owed by us for which you become liable under the Credits and we agree at least one business day before the same is due to provide you with funds to meet all disbursements of any kind under the Credits. If a time draft is drawn under the Credit, you will notify us of the amount and maturity date and we will make such payment, sufficiently in advance of such maturity, to enable you to arrange for cover in same day funds to reach the place where it is payable, no later than the date of its maturity. 2. If any sums payable hereunder are not paid when due, they shall bear interest from the due date until paid in full at a rate per annum 2% per annum above your interbank offered rate determined by you two business days before each successive period of three months commencing on the date such amounts become payable, but not in excess of the maximum rate permitted by applicable law. 3. If any amount payable hereunder in a currency other than United States dollars is not paid when due, such other currency amount may be converted, at your option, into United States dollars at the rate of exchange most favourable to you, measured by your offered rate of such foreign currency for United States dollars, prevailing on the due date, and repayment shall be hereafter made to you in United States dollars. 4. Should any of the following events of default occur, your commitment to issue Credits shall immediately terminate, and if at the time of any such event there remains any portion of the Credits undisbursed, such undisbursed portion shall become immediately due and payable, without demand or further notice of any kind, all of which we hereby expressly waive, and we shall pay to you for application to drawings under such Credits the entire amount which has not been drawn; (i) we default in respect of any payment due you under this agreement or any individual Letter of Credit agreement, (ii) we default in the payment of any indebtedness which we may have for the repayment of borrowed moneys, (iii) we become insolvent, fail to pay our debts generally as they become due, make an assignment for the benefit of creditors, file or suffer the filing of any petition or action under bankruptcy laws for the relief of, or relating to, debtors, (iv) the voluntary of involuntary appointment of a receiver, trustee, custodian or similar official to take possession of any of our property, (v) the attachment of any material involuntary lien or charge of any kind to our property, (vi) any representation made in any financial statement or in any other statement of document presented to you by us or on our behalf is, in any material respect, false or misleading when made, (vii) there shall occur in our business, operations, property or financial or other condition a change that is, in your judgement, materially adverse to us, or (viii) should you deem yourself insecure in respect of any of our reimbursement obligations. Any amount which has not been drawn prior to the expiry date of the Credit to which it relates shall be repaid to us. 5. Where we are a corporation, our completion of this agreement shall be a representation and warranty to you that: (i) we are properly incorporated under the laws of our country of incorporation and have under those laws and under our own constitution the powers to enter this agreement in pursuance of a valid business object; (ii) all corporate action and all approvals from any government tax, monetary or other authorities to authorize and enable us to make this agreement have been obtained and are in full force and effect; (iii) the making of this agreement will not infringe any other agreement to which we are a party; and (iv) we are not the subject of any actual pending or threatened legal proceedings which has or may have a material effect on our financial condition or this agreement. Each application for a Credit hereunder shall constitute a certification by us that any representation or warranty made hereunder is true as of the date of each such application. 6. The authorization in Paragraph 1 above to charge our accounts shall apply notwithstanding that all or part of the moneys held to our credit may have been deposited for a fixed period which may not have expired. We acknowledge and agree that in the event of appropriation by you of any such deposit before its maturity date, the amount applied hereunder shall be net of the amount of early withdrawal penalty (if any) charged by you in the ordinary course of your deposit business. 7. Where we have requested that any Credits issued hereunder contain a provision whereby drawings by a person other than the named beneficiary against the Credit shall be honoured if such a person is a domiciliary conservator, liquidator, receiver, rehabilitator or statutory successor, then we confirm you may rely without independent investigation or verification of any criteria furnished by such drawer including, without limitation, a statement from such drawer as to his status as successor by operation of law to the named beneficiary. 8. If the costs to you or any confirming banks of issuing, confirming or maintaining the Credits increase because of any reserves, special deposits, assessments of similar requirements imposed on you, we agree to pay you on demand any additional amounts sufficient to compensate you or any confirming banks for the increased cost, as determined by you. 9. Where we have requested it in the Credits Article 17 of the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Publication No. 500 shall be amended so that notwithstanding the expiry of a Credit occurring during an interruption of your business or the business of any confirming bank, you are authorized to effect payment if such Credit is drawn against within thirty (30) days after the resumption of such business. We understand that our obligations hereunder, in that event, shall likewise be amended. 10. We agree that you and your correspondents are obliged only to verify that the drafts and any documents purport to comply with the terms and conditions of the Credits on their face, and that neither you nor your correspondents will be liable for any loss, damage or delay, however caused, except to the extent of any direct, as opposed to consequential, damages suffered by us which we prove were caused by you or your correspondents' willful misconduct or negligence, nor will you or your correspondents be in any way responsible for performance by any beneficiary of its obligations to us. 11. We agree to pay your out-of-pocket costs and expenses, including reasonable attorney's fees for independent and in-house counsel, paid or incurred by you in the performance of your obligations or enforcement of your rights and remedies hereunder, such costs and expenses to become part of the reimbursement obligations set out in paragraph 1 above. 12. We or a third party will obtain insurance on all goods described in the Credits. The insurance will cover fire and other usual risks and any additional risks you may request. We authorize you to receive the proceeds of the insurance and apply it against any of our obligations to you under the Credit. 13. The Credits shall be subject to, and performance by you, your correspondents and the beneficiaries of the Credits shall be governed by, the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Publication No. 500 or by subsequent Uniform Customs and Practice fixed by subsequent Congresses of the International Chamber of Commerce, unless otherwise indicated to the contrary. 14. The obligations herein shall bind our heirs, executors, administrators, successors and assigns. LETTER OF SET-OFF OVER CREDIT BALANCES To: THE BANK OF N.T. BUTTERFIELD & SON LTD., THE BANK OF BUTTERFIELD EXECUTOR & TRUSTEE COMPANY LTD., BUTTERFIELD MORTGAGE & FINANCE LTD. (Delete and initial where necessary) In consideration of the Bank (which expression shall include all or any of the above named companies where applicable) giving time credit banking facilities or other accommodation to CONSOLIDATED AMERICAN RENTAL INSURANCE CO., LTD. (the Debtor) the Debtor agrees that the Bank's right of set-off shall extend to include a continuing right at any time without prior notice or demand to appropriate from all moneys from time to time held to the credit of the Debtor by the Bank on any Current Deposit or other Account or Accounts which the Debtor may now or hereafter have with the Bank towards payment to the Bank of all present or future actual or contingent liabilities of the Debtor (whether as principal agent trustee or guarantor) to the Bank whether on account of moneys advanced bills of exchange promissory notes guarantees indemnities interest commission banking charges securities trades and whether incurred solely severally or jointly and all legal fees commissions or other expenses (on a full indemnity basis) howsoever incurred by the Bank in connection therewith. Such amounts will include all costs, charges and expenses on a full indemnity basis which the Bank may incur in enforcing or obtaining payment of the sums of money due to the Bank under the offer agreement, set-off agreement, and any other security documentation held by the Bank. The Debtor irrevocably agrees and confirms as follows: 1. This authorization shall apply notwithstanding that all or part of the moneys held to the credit of the Debtor may have been deposited for a fixed period which may not have expired. The Debtor acknowledges and agrees that in the event of appropriation by the Bank of any such deposit before its maturity date the amount applied hereunder shall be net of the amount of early withdrawal penalty (if any) charged by the Bank in the ordinary course of its deposit business. 2. A certificate by an officer of the Bank as to the amount for the time being due from the Debtor to the Bank shall be conclusive evidence for all purposes against the Debtor. If any sums appropriated hereunder are not in the currency of the sums owed by the Debtor to the Bank the Bank shall convert such sums into the currency of the debt at a rate conclusively determined by the Bank acting in the ordinary course of its foreign exchange business. 3. The Debtor will not create nor agree to create nor allow to arise or be subsisting any security interest whatsoever in any moneys held to the credit of the Debtor by the Bank other than with the Bank's express prior written consent. 4. This authorization shall be continuing and shall remain in force and shall not be determined affected or prejudiced by the death or disability of the Debtor or by the Bank holding taking or releasing any other or further security or by the Bank renewing varying or determining any accommodation given to the Debtor or granting time or indulgence to or compounding with the Debtor or any other person. 5. Where the Debtor is a corporation its execution of this authorization shall be a representation and warranty to the Bank that the Debtor (i) is properly incorporated under the laws of its country of incorporation and has under those laws and under its own constitution the powers to enter this agreement in pursuance of a valid business object; (ii) all corporate action and all approvals from any government tax monetary or other authorities to authorize and enable the Debtor to make this agreement have been obtained and are in full force and effect; (iii) the making of this agreement will not infringe any other agreement to which the Debtor is a party; and (iv) the Debtor is not the subject of any actual pending or threatened legal proceedings which has or may have a material affect on its financial condition or this agreement. 6. Where there is more than one person comprised in the term "the Debtor" references to the Debtor shall where the context admits take effect as references to such persons or any of them and where the Debtor is a firm shall include the person or persons from time to time constituting the firm whether or not under the same style or firm name and generally where the context so admits the singular will include the plural. 7. Where this authorisation is signed by more than one person (otherwise than as agent for a named principal) the agreements on the part of the Debtor herein contained shall be binding on them jointly and severally and references to the Debtor shall take effect as references to the Debtor or any of them. 8. The construction validity and performance of this agreement shall be governed by Bermuda law. DATED this 20th day of June One thousand nine hundred and ninety-seven. Limited SIGNED BY Company (do not /s/ J. OLIVER HEYLIGER use seal) ------------------------------------------------ (Print Name) /s/ J. Oliver Heyliger ------------------------------------------------ ------------------------------------------------ (Print Name) (Signature Directors/Director and Secretary of -------- CONSOLIDATED AMERICAN RENTAL ------------------------------------------------ INSURANCE CO., LTD ------------------------------------------------ ------------------------------------------------ acting for an on behald of the Company by virtue Signature of a Resolution of the Directors passed on ------------------------------------------------ Individual(s) SIGNED by the above-named ------------------------------------------------ ------------------------------------------------ (Print Name) (Print Name) ------------------------------------------------ ------------------------------------------------ (Signature) (Signature) in the presence of: in the presence of: /s/ Sharon E. Swan /s/ P.M. Pereech ------------------------------------------------ ------------------------------------------------ (Signature of Witness) (Signature of Witness) SHARON E. SWAN PAUL M. PEREECH ------------------------------------------------ ------------------------------------------------ (Print Name) (Print Name) c/o Willis Carroon Management Co. c/o Willis Carroon Mgmt. (Bda) (Bda) Ltd., Church St., Hamilton Church Street, Hamilton ------------------------------------------------ ------------------------------------------------ (Address) (Address) Administrative Assistant CONTROLLER ------------------------------------------------ ------------------------------------------------ (Occupation) (Occupation) ---------------------- Stamp ----------------------
The Bank of N.T. Butterfield & Son Ltd. - -------------------------------------------------------------------------------- CREDIT DEPARTMENT LETTER OF SET-OFF - -------------------------------------------------------------------------------- Account_________________________________________________________________________ Date________________________________ 19________ CONSOLIDATED AMERICAN RENTAL INSURANCE CO., LTD. ________________________________________________________________________________ To: THE BANK OF N.T. BUTTERFIELD & SON LTD. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS IN THE COMPANY'S FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED DECEMBER 31,1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB. 1 U.S. Dollar 9-MOS MAR-31-1998 OCT-01-1997 DEC-31-1997 1 1,605,432 0 1,437,738 670,460 0 2,549,297 534,306 240,639 3,065,322 991,557 0 0 13,866 42,687 2,017,212 3,065,322 0 3,542,012 0 1,566,526 1,363,339 23,816 6,601 634,316 194,369 439,947 0 0 0 439,947 .08 .07 Earnings Per Share Primary represents Basic Earnings Per Share in accordance with Statement of Financial Accounting Standards 128
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