Item 2 - Properties - -------------------
The Company owns the office building and property located at 45 East Monterey Way, Phoenix, Arizona, where it conducts its licensing and franchising operations and its Phoenix claims adjusting and risk management-related services business. The office building currently contains approximately 13,000 square feet of office space.
The Company also owns a parcel of real property across the street from the Company's principal executive office, which is utilized for employee parking.
Item 3
Item 3 - Legal Proceedings - --------------------------
A Declaratory Action was filed in May 1994 against the Company in the Superior Court of Los Angeles, California, regarding the interpretation of certain sections of the Company's license agreement with the plaintiff, a licensee. In June 1994, the Company removed the case to the U.S. District Court and raised certain counter claims for violation of the Company's license agreement. The Company terminated the licensee's agreement effective January 1, 1995. Subsequent to the termination, the plaintiff amended his complaint to include wrongful termination. On May 1, 1995, the U.S. District Court granted the Company's motion for Summary Judgement regarding all outstanding claims by the plaintiff. On June 19, 1995, the Court granted the Company's Summary Judgement motion regarding its claims against the former licensee including $204,144 in unpaid license fees and a yet to be determined amount for court costs. The Company does not believe that it is subject to any lawsuits or litigation or threatened lawsuits or litigation that will have a material adverse effect on the Company or its business.
Item 4
Item 4 - Submission of Matter to a Vote of Security Holders - -----------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5
Item 5 - Market for the Registrant's Common Stock and Related - ------------------------------------------------------------- Security Holders Matters ------------------------
The Company's Common Stock is listed on the American Stock Exchange (AMEX) under the symbol "FAJ". The Company's stock began trading on AMEX, March 24, 1994. Prior to being listed on AMEX, the Company's common stock was quoted on the National Association of Securities Dealers' Automated Quotations National Market System ("NASDAQ-NMS"). The following table sets forth the range of high and low prices, and the trading volume, during each quarterly period within the Company's two most recent fiscal years.
Price (1) Volume ----------------- -------- High Low ------ -------
Fiscal Year Ended June 30, 1994 First Quarter $3.125 $2.375 489,755 Second Quarter $3.625 $2.9375 634,200 Third Quarter $3.75 $3.00 600,803 Fourth Quarter $3.375 $2.5625 123,900
Fiscal Year Ended June 30, 1995 First Quarter $3.0625 $2.50 99,800 Second Quarter $3.125 $2.375 125,500 Third Quarter $2.875 $2.375 74,500 Fourth Quarter $3.125 $2.50 108,900
(1) Through March 23, 1994 represents high and low bid quotations on NASDAQ-NMS. The bid quotations set above represent quotations by dealers, do not reflect applicable markups, markdowns or commissions, and do not necessarily represent actual transactions.
The following shows per share cash dividends declared for each quarter during the Company's two most recent fiscal years.
Cash Dividends Declared -----------------------
Fiscal Year Ended June 30, 1994 First Quarter ....................................... $.025 Second Quarter ...................................... $.025 Third Quarter ....................................... $.025 Fourth Quarter ...................................... $.035
Fiscal Year Ended June 30, 1995 First Quarter ....................................... $.0275 Second Quarter ...................................... $.0275 Thirst Quarter ...................................... $.03 Fourth Quarter ...................................... $.03
As of August 2, 1995, there were 281 shareholders of record (approximately 900 including beneficial owners) of the Company's Common Stock.
Item 6
Item 6 - Selected Financial Data - --------------------------------
Item 7
Item 7 - Management's Discussion and Analysis of Financial - ---------------------------------------------------------- Condition and Results of Operations -----------------------------------
FINANCIAL CONDITION
The Company continues to finance its growth from funds generated by its current operations. The Company is also investing additional sums and increasing its cash dividends.
In 1995 the Company's continuing operations generated $537,831 in cash and this together with cash they had previously generated was used to pay $536,454 in cash dividends and acquire 50,000 shares of its common stock at a cost of $136,377. Additionally, the Company acquired approximately $129,000 in equipment and certain rights from two licensees for $92,000 in cash and monthly payments of $2,500 until August 1, 1999.
The Company intends to complete its authorized plan to purchase 100,000 shares of its common stock. As of June 30, 1995 the Company had purchased 91,112 of the authorized shares at a cost of $278,492. The Company intends to acquire the balance of 8,888 shares as market conditions permit. Based upon the market price of $2.38 on July 31, 1995 this would represent a cost of approximately $21,000. In addition to its authorized plan to acquire 100,000 shares, the Company acquired 50,000 shares at a cost of $136,377 in December 1994.
Effective with its September 10, 1994 dividend, the Company increased its cash dividend to eleven cents per share annually from ten cents per share. The Company followed up this increase in January 1995 by increasing the dividend to twelve cents per share annually effective with its March 10, 1995 dividend. The combined increases represent a 20% increase in the annual dividend rate.
The Company anticipates that during fiscal 1996 it will generate sufficient cash to fund its operations, dividend payments and equipment purchases. The Company anticipates that its expenditures for equipment and furnishings will be approximately $150,000 to $200,000 during fiscal 1996.
The Company has always maintained a solid financial position. This policy is evidenced by the Company's ratio of current assets to current liabilities of 5.37 to 1 as of June 30, 1995 and 3.74 to 1 as of June 30, 1994.
RESULTS OF OPERATIONS 1995 COMPARED TO 1994
REVENUES
The Company's revenues increased to $5,241,000 from $4,590,000 in fiscal 1994, compared to the prior fiscal year, a 14.2% increase.
The increase consists of a $72,000 increase in adjusting revenues and a $579,000 increase in continuing licensee and franchisee fees. Continuing licensee and franchisee fees increased to $4,784,000 from $4,205,000 an increase of 14% from the prior fiscal year. This increase reflects the fact that the Company continues to benefit from an increase in claims, as insurers and self-insureds use the Company's licensees and franchisees to handle claims and the increase in Company licensees and franchisees.
The Company-owned offices' revenues increased $71,859 from the prior year. This increase is partially due to an increase in the number of claims being assigned to the offices as a result of a change in staff.
The Company's revenues are affected by many matters such as the work loads of other companies and claims presented by their clients. Therefore, it is impossible to project the Company's future revenues. The Company, however, has seen growth in the franchisee and licensee's fees paid, the most significant of which are from offices established in the preceding fiscal year. Approximately $374,000 of the $579,000 increase in continuing licensee and franchisee fees in fiscal year 1995 as compared to fiscal 1994 is the result of growth in the number of licensees and franchisees. The balance of the increase or $204,000 is the result of the judgement rendered on June 19, 1995 in the Company's lawsuit with a former licensee for unpaid licensee fees. Management believes that the Company will continue to realize growth in continuing licensing and franchising fees in the future as it adds qualified licensees and franchisees.
COMPENSATION AND FRINGE BENEFITS
The most significant of the Company's expenses are those related to the compensation of its employees. The Company's compensation expense increased $110,000 in fiscal 1995 when compared to fiscal 1994. This represents a 7% increase in overall cost due to the inflation and merit raises given to employees as well as an additional employee hired to handle the increased work load.
EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS
The Company's expenses other than compensation and fringe benefits increased $549,000 from fiscal 1994 to fiscal 1995. The most significant items affecting these expenses were a $624,000 increase in legal fees, a $140,000 decrease in expenses related to the Company's London operations and a $50,000 advertising item that was not incurred in the current year. The $624,000 increase in legal fees is a result of the lawsuit filed by the now former licensee for which the Company received a Summary Judgement in it's favor on June 19, 1995. The $140,000 reduction in expenses related to the London franchise is a result of the expiration of the Company's agreement to subsidize the franchisee effective June 30, 1994. The $50,000 advertising item that was not incurred during 1995, is normally incurred in the fourth quarter of the fiscal year, however, the publisher of the Frontier Directory modified his scheduled printing date and the expenditure will be incurred in the second quarter of fiscal year ended June 30, 1996. No other item of expense had a significant affect on the increase in expenses other than compensation and fringe benefits.
OTHER INCOME
The Company's other income increased $67,000 or 62% from fiscal 1994 to fiscal 1995. The most significant items related to this increase were a $36,000 increase in interest income, an $8,000 dividend income related to the Company's investments and a $19,000 gain on the sale of fixed assets. These increases were largely the result of increased interest rates as well as increase in funds for investment generated by its current operations.
INCOME TAXES
Income taxes were 38.8% of the Company's income before taxes for the current fiscal year, an increase from 37.1% in fiscal 1994. The Company's income taxes have not been significantly affected by any changes in the federal or state tax laws. However, the Company could be affected by change in federal or state income tax rates at any time.
NET INCOME
The Company's net income increased $9,000 from $1,018,000 in fiscal 1994 to $1,027,000 in the current fiscal year, an increase of .9%.
RESULTS OF OPERATIONS 1994 COMPARED TO 1993
REVENUES
The Company's revenues increased to $4,590,000 from $4,487,000 in fiscal 1993, compared to the prior fiscal year, a 2% increase.
The increase consists of a $122,000 decline in adjusting revenues and a $225,000 increase in continuing licensee and franchisee fees. Continuing licensee and franchisee fees increased to $4,205,000 in fiscal 1995 from $3,980,000 in fiscal 1994, an increase of 6%. This increase reflects the fact that the Company continues to benefit from an increase in claims, as insurers and self-insureds use the Company's licensees and franchisees to handle claims and the increase in Company licensees and franchisees.
The Company-owned offices' revenues declined $122,000 from fiscal 1994 to fiscal 1995. This decline is a result of fewer claims being assigned by insurance companies to the Company-owned offices as well as fewer self-insured claims being processed.
The Company's revenues are affected by natural and man caused events as well as other companies' work loads. Therefore, it is not possible to project the Company's future revenues. The Company has, however, seen growth in the fees paid to it by its licensees and franchisees, the most significant of which are from offices established in the preceding fiscal year. Management believes that the Company will continue to realize growth in licensing and franchising fees in the future as it adds qualified licensees and franchisees.
COMPENSATION AND FRINGE BENEFITS
The most significant of the Company's expenses are those related to the compensation of its employees. The Company's compensation expense increased $75,000 in fiscal 1994 when compared to fiscal 1993. This represents a 5% increase in overall cost due to the inflation and merit raises given to employees.
EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS
The Company's expenses other than compensation and fringe benefits declined $123,000 from fiscal 1993 to fiscal 1994. The most significant item that affected these expenses was a $108,000 reduction in expenses related to its London franchisee. This is a result of the Company's effort to limit and reduce its annual expense related to London. The Company also has reduced its other expenses by being more selective in its advertising to obtain the most exposure for the least cost thereby reducing advertising costs by $44,000. No other item of expense had a significant affect on the decrease in expenses other than compensation and fringe benefits.
OTHER INCOME
The Company's other income increased $26,000 from fiscal 1993 to fiscal 1994 or 31%. The most significant items related to this increase were a $23,000 increase in interest income and $6,000 in dividend income related to the Company's investments. These increases were the result of increased interest rates as well as the increase in funds for investment generated by its current operations.
INCOME TAXES
Income taxes were 37.1% of the Company's income before taxes for the current fiscal year, an increase from 37% in fiscal 1993.
NET INCOME
The Company's net income increased $109,000 from $909,000 in fiscal 1993 to $1,018,000 in the current fiscal year, an increase of 12%. This is the first time the Company's net income has exceeded $1,000,000 and is a milestone in the Company's continued growth.
Item 8
Item 8 - Financial Statements and Supplementary Data - ----------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors Frontier Adjusters of America, Inc. Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of Frontier Adjusters of America, Inc. and Subsidiaries as of June 30, 1995 and 1994, and the related consolidated statements of income, cash flows, and stockholders' equity for each of the three years in the period ended June 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Frontier Adjusters of America, Inc. and Subsidiaries as of June 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement Schedules I, V, VI and X for the years ended June 30, 1995, 1994 and 1993 included in pages 35 through 40 of this form 10-K are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth herein in relation to the basic financial data taken as a whole.
McGLADREY & PULLEN, LLP
Phoenix, Arizona August 3, 1995
CONSOLIDATED BALANCE SHEETS
Frontier Adjusters of America, Inc. and Subsidiaries
June 30, 1995 1994 - -------------------------------------------------------------------------------
ASSETS CURRENT ASSETS Cash and cash equivalents $ 358,960 $ 804,780 Short-term investments (Note 8) 1,255,627 1,275,223 Current portion of advances to licensees and franchisees (Note 4) 706,739 731,717 Receivables net (Note 3) 925,667 647,806 Unbilled adjusting fees 14,225 11,850 Prepaid expenses 258,165 227,057 Deferred income taxes (Note 11) 101,109 54,105 -------------------------- TOTAL CURRENT ASSETS 3,620,492 3,752,538 -------------------------- PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation and amortization (Note 6) 1,484,545 1,460,601 --------------------------
OTHER ASSETS Investments (Note 8) 764,090 742,224 Advances to licensees and franchisees, net of current portion (Note 4) 302,000 325,000 Licenses and franchises, net of accumulated amortization of $63,284 in 1995 and $19,750 in 1994 214,628 40,250 Cost of subsidiary in excess of net identifiable assets acquired, net of accumulated amortization of $172,196 in 1995 and $169,885 in 1994 41,621 43,932 Receivable from licensee (Note 5) 50,762 54,290 Other 118,912 72,171 -------------------------- 1,492,013 1,277,867 -------------------------- TOTAL ASSETS $ 6,597,050 $ 6,491,006 ==========================
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 12,669 $ 46,546 Accrued expenses 297,973 130,565 Income taxes payable 64,720 30,073 Licensees' and franchisees' remittance payable 221,620 719,355 Current portion of long term liability (Note 9) 22,951 -- Other 53,811 76,468 -------------------------- TOTAL CURRENT LIABILITIES 673,744 1,003,007 -------------------------- LONG TERM LIABILITY (Note 9) 84,655 -- -------------------------- COMMITMENTS (Note 15) -- -- STOCKHOLDERS' EQUITY Common stock, authorized 100,000,000 shares, par value $.01, issued 4,782,010 shares 47,820 47,820 Additional contributed capital 2,148,470 2,148,470 Retained earnings 4,042,588 3,552,194 -------------------------- 6,238,878 5,748,484 Add (deduct): Treasury stock 141,112 shares in 1995: 91,112 shares in 1994 (414,869) (278,492) Other 14,642 18,007 -------------------------- TOTAL STOCKHOLDERS' EQUITY 5,838,651 5,487,999 -------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,597,050 $ 6,491,006 ==========================
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF INCOME
Frontier Adjusters of America, Inc. and Subsidiaries
Years Ended June 30, 1995 1994 1993 - -------------------------------------------------------------------------------
REVENUES Continuing licensee and franchisee fees (Note 10) $4,783,941 $4,205,245 $3,979,794 Adjusting fees 456,884 385,025 507,297 -------------------------------------- 5,240,825 4,590,270 4,487,091 --------------------------------------
COST AND EXPENSES Compensation and fringe benefits 1,635,289 1,525,217 1,450,019 Office 308,783 266,030 289,923 Advertising and promotion 360,878 384,868 428,761 Depreciation and amortization 136,428 113,945 123,300 Provision for doubtful accounts 169,640 148,017 155,192 Other (Note 12 and 13) 1,127,138 641,434 679,704 -------------------------------------- 3,738,156 3,079,511 3,126,899 -------------------------------------- INCOME FROM OPERATIONS 1,502,669 1,510,759 1,360,192 --------------------------------------
OTHER INCOME Interest income 134,136 98,150 74,484 Disposition of investments -- 1,700 -- Gain on disposition of equipment 19,416 525 67 Other 22,867 8,706 8,416 -------------------------------------- TOTAL OTHER INCOME 176,419 109,081 82,967 -------------------------------------- INCOME BEFORE INCOME TAXES 1,679,088 1,619,840 1,443,159
INCOME TAXES (Note 11) 652,240 601,680 534,106 -------------------------------------- NET INCOME $1,026,848 $1,018,160 $ 909,053 ======================================
Earnings per common share $ .22 $ .22 $ .19 ====================================== Weighted average number of shares of common stock outstanding 4,662,679 4,730,597 4,780,980 ======================================
The accompanying notes are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Frontier Adjusters of America, Inc. and Subsidiaries
Years Ended June 30, 1995 1994 1993 - -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 1,026,848 $ 1,018,160 $ 909,053 ----------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 136,428 113,945 123,300 Gain on sale of investments -- (1,700) -- Gain on disposition of equipment (19,416) (525) (67) Allowance for doubtful accounts 168,222 (3,000) (205) Deferred income taxes (47,004) (11,120) (4,704) Change in assets and liabilities (Increase) decrease in: Receivables (282,028) (81,112) 85,442 Unbilled adjusting fees (2,375) 2,325 2,825 Prepaid expenses (31,108) 20,219 (48,663) Other (59,522) 139,750 (31,492) Increase (decrease) in: Accounts payable (33,877) 30,758 (1,726) Accrued expense 167,408 12,186 (149,511) Income taxes payable 34,647 (18,088) 105,765 Licensees' & franchisees' remittance payable (497,735) 233,387 193,241 Other (22,657) 13,604 (6,388) ----------------------------------------- Total adjustment (489,017) 450,629 267,817 ----------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 537,831 1,468,789 1,176,870 ----------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (127,195) (12,083) (96,307) Investments purchased (3,968,431) (3,543,038) (3,333,541) Collection on receivable from licensee 3,154 16,622 4,322 Proceeds from disposition of equipment -- 600 16,281 Proceeds from maturity of investments 4,000,000 3,106,824 3,000,000 License acquisition (92,000) -- -- Payments on license acquisition (18,306) -- -- Advances to licensees and franchisees (3,358,235) (2,772,088) (3,950,434) Collections of advances to licensees & franchisees 3,241,491 2,672,815 3,681,819 ----------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (319,522) (530,348) (677,860) ----------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends (536,454) (519,814) (418,166) Proceeds from issuance of common stock (net) -- -- 214,062 Common stock repurchased (136,377) (278,492) (76,424) ----------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (672,831) (798,306) (280,528) EFFECT OF EXCHANGE RATE CHANGES ON CASH 8,702 18,007 -- ----------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (445,820) 158,142 218,482 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 804,780 646,638 428,156 ----------------------------------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 358,960 $ 804,780 $ 646,638 =========================================
The accompanying notes are an integral part of these statements.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation -- These financial statements include the accounts of Frontier Adjusters of America, Inc. (Company) and its subsidiaries, all of which are wholly-owned. Intercompany accounts and transactions have been eliminated.
Business -- The Company's operations consist of the licensing and franchising of independent adjusters throughout the United States, Puerto Rico, Canada and London, England and the operation of an independent adjusting business in Arizona and a risk management division out of its Phoenix, Arizona office. The Company grants credit to its licensees and franchisees, all of whom operate within the insurance industry. Revenues from claims adjusted by employees of the Company are recognized as the services are performed; revenues from claims adjusted by independent licensees and franchisees are recognized when they become due under the terms of the license and franchise agreements (Note ). Included in the revenues are collections received from one customer which provided the Company with approximately $1,044,000 or 21.8%, $968,000 or 23% and $774,000 or 19.5% of the continuing licensee and franchisee fees during the years ended June 30, 1995, 1994 and 1993 respectively. Outstanding licensee and franchisee fees receivable related to this customer were approximately $95,000 at June 30, 1995 and $93,000 at June 30, 1994.
Consolidated statements of cash flow -- Short term investments which have original maturities of 90 days or less are considered cash equivalents.
Depreciation and amortization -- Depreciation is computed using straight-line and accelerated methods over estimated useful lives, which range from three to ten years for all property and equipment except the building. The building is depreciated using the straight-line method over 30 years. The cost of a subsidiary in excess of net tangible assets acquired is being amortized over 40 years.
Licenses and franchises -- Licenses and franchises are amortized on the straight-line basis over the period of the contract.
Income taxes -- Deferred income taxes result from temporary differences between book and tax bases of assets and liabilities. The principal sources of these differences are different depreciation rates for property and equipment, the difference between the book provision for doubtful accounts and the specific charge-off method used for income tax purposes, and the recognition of gain on sale of the Company's Tucson operations.
Investments in debt and marketable equity securities and accounting change -- The Company has investments in debt and marketable equity securities. Debt securities consist primarily of obligations of the U.S. and state governments. Marketable equity securities consist of mutual funds and preferred stocks that are traded or listed on national exchanges.
The Company adopted the provisions of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, as of July 1, 1994. Statement 115 requires that management determine the appropriate classification of securities at the date of adoption, and thereafter at the date individual investment securities are acquired, and that the appropriateness of such classification be reassessed at each balance sheet date. Since the Company does not buy investment securities in anticipation of short-term fluctuations in market price, none of its investments are considered trading securities. The Company purchases local government debt securities with the intent on holding them to maturity. All other securities are considered available-for-sale securities in accordance with Statement 115. Held to maturity securities are carried at amortized cost. Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity.
Prior to the adoption of Statement 115, the Company stated its debt securities at the lower of amortized cost or fair value. Under both the newly adopted accounting standard and the Company's former accounting practices, premiums and discounts on investments in debt securities are amortized over their contractual lives. The method of amortization results in a constant effective yield on those securities (the interest method). Interest on debt securities is recognized in income as earned, and dividends on marketable equity losses, including losses from declines in value of specific securities determined by management to be other-than-temporary, are included in income. Realized gains and losses are determined on the basis of the specific securities sold.
Note 7 to the financial statements provides further information about the effect of adopting Statement 115.
Earnings per common share -- Earnings per common share are based on the weighted average number of shares outstanding during the year. The effect of stock options (Note 14) as common stock equivalents is less than 3% dilutive and, therefore, is not included in the computation.
Foreign currency translation -- The functional currency of the Company's foreign operations is the applicable local currency. The foreign currencies are translated to U.S. dollars using applicable exchange rates. The gains or losses resulting from such translations are included in Stockholders' Equity.
Reclassification -- Certain items on the financial statements for the years ended June 30, 1994 and 1993 have been reclassified, with no effect on net income, to be consistent with the classifications adopted for the year ended June 30, 1995.
NOTE 2: SUPPLEMENTAL CASH FLOW INFORMATION
1995 1994 1993 ---------------------------------------- Cash paid during the year: Interest $ 6,745 $ 458 $ -- Income taxes $668,427 $ 631,141 $ 435,149
NOTE 3: RECEIVABLES
Receivables consist of: 1995 1994 --------------------------
Accounts receivable trade $ 51,955 $ 38,472 Licensee and franchisee fees receivable 722,122 470,636 Errors and omissions insurance premium advanced 138,544 112,563 Other 40,546 50,135 -------------------------- Total receivables 953,167 671,806 Less allowance for doubtful accounts 27,500 24,000 -------------------------- $ 925,667 $ 647,806 ==========================
NOTE 4: LONG-TERM RECEIVABLES
Long-term receivables consist of advances to licensees and franchisees which are repayable in the amount equal to a percentage of the monthly licensee and franchisee revenue. Estimated current and long-term maturities are as follows:
1995 1994 --------------------------
Advances to licensees and franchisees $1,204,239 $1,148,717 Less allowance for doubtful advances 195,000 92,000 -------------------------- 1,008,739 1,056,717 Less current portion 706,739 823,717 -------------------------- Long term portion $ 302,000 $ 325,000 ==========================
NOTE 5: RECEIVABLE FROM LICENSEE
The Company sold its Tucson operation and related personal property in December, 1990 for $160,000. The Licensee has agreed to pay the Company 10% (in addition to the contractual license fee) of his gross collections until the balance is paid. This receivable is secured by the license rights. The balance is as follows:
1995 1994 --------------------------
Balance Due $ 80,552 $ 87,083 Imputed Interest 11.25% 22,926 26,303 -------------------------- 57,626 60,780 Current Portion 6,864 6,490 -------------------------- $ 50,762 $ 54,290 ==========================
The current portion of the receivable from Licensee is included in current receivables.
On August 1, 1995, the Company entered into an agreement with its Tucson licensee to acquire the Tucson operation. The agreed purchase price was $116,081 including the $57,626 outstanding receivable.
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment consist of: 1995 1994 --------------------------
Building and improvements $1,127,852 $1,121,926 Computers and software 300,380 282,726 Furniture and fixtures 251,933 237,795 Automobiles 88,802 66,335 -------------------------- 1,768,967 1,708,782 Less accumulated depreciation and amortization 784,565 748,324 -------------------------- 984,402 960,458 Land 500,143 500,143 -------------------------- $1,484,545 $1,460,601 ==========================
NOTE 7: ACCOUNTING CHANGE
As discussed in Note 1, the Company adopted FASB Statement 115 as of July 1, 1994. In accordance with Statement 115, the 1994 comparative financial statements have not been restated for the change in accounting principle. The July 1, 1994 cumulative effect of adopting Statement 115 decreased the balance of stockholders' equity by $8,181 to recognize the net unrealized holding loss of securities at that date.
NOTE 8: INVESTMENTS IN DEBT AND MARKETABLE EQUITY SECURITIES
The following is a summary of the Company's investment in debt and marketable equity securities as of June 30, 1995 and 1994:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ------------------------------------------------- ------------------------------------------------- U.S. government securities $ 981,197 $ -- $ -- $ 981,197 Local government securities 726,918 11,794 23,994 714,718 ------------------------------------------------- Total debt securities 1,708,115 11,794 23,994 1,695,915 Equity securities 286,496 10,967 23,033 274,430 ------------------------------------------------- $1,994,611 $ 22,761 $ 47,027 $1,970,345 =================================================
------------------------------------------------- U.S. government securities $ 998,449 $ -- $ -- $ 998,449 Local government securities 742,224 8,204 58,424 692,004 ------------------------------------------------- Total debt securities 1,740,673 8,204 58,424 1,690,453 Equity securities 276,774 -- 13,285 263,489 ------------------------------------------------- $2,017,447 $ 8,204 $ 71,709 $1,953,942 =================================================
The Company's investment in local government securities is concentrated in Salt River Project Agricultural Improvement and Power District Municipal Bonds which mature between 2006 and 2031.
NOTE 9: LONG TERM DEBT
On August 1, 1994, the Company acquired, from a licensee, certain rights under his license agreement. Those rights were acquired for $25,000 cash and sixty monthly payments of $2,500. The balance is as follows:
---------- Balance Due $ 125,000 Imputed interest @ 7.25 17,394 ---------- 107,606 Less Current Portion 22,951 ---------- Long Term Portion $ 84,655 ==========
Interest paid on outstanding debt amounted to $6,694. Aggregate payments for the next five years are as follows:
Year Ending June 30, 1996 $ 22,951 1997 24,672 1998 26,521 1999 28,509 2000 4,953 --------- $ 107,606 =========
NOTE 10: LICENSING AND FRANCHISING
The Company has entered into 437 license and franchise agreements with 390 entities, operating 590 offices with advertised locations, as of June 30, 1995, whereby the Company grants exclusive ten year licenses or franchises for the right to use the name "Frontier Adjusters" in a particular area. There is no initial license or franchise fee. The Company performs advertising, collection and remittance services, and provides the licensees and franchisees with supplies. As compensation for the above, the Company receives a fee based on a percentage of the licensees' or franchisees' gross billings. Gross billings by licensees and franchisees for the years ended June 30, 1995, 1994 and 1993 were approximately $42,690,000, $39,710,000 and $37,870,000, respectively.
The Company's main line of business is providing services to the insurance industry. The revenue and cost components along with identifiable assets and number of advertised locations are as follows:
Licensing Corporate and and Franchising Adjusting Other Consolidated -------------------------------------------------------- - ---- Revenues $ 4,783,941 $ 456,884 $ -- $ 5,240,825 Costs and expenses 3,043,680 485,739 208,737 3,738,156 -------------------------------------------------------- Income (loss) from operations $ 1,740,261 $ (28,855) $ (208,737) $ 1,502,669 ========================================================
Identifiable assets $ 3,638,623 $ 457,380 $ 2,501,047 $ 6,597,050 ======================================================== Number of advertised locations Beginning of year 569 4 -- 573 Opened 47 -- -- 47 Closed (9) -- -- (9) Ownership changes (17) 17 -- -- -------------------------------------------------------- 590 21 -- 611 ======================================================== - ---- Revenues $ 4,205,245 $ 385,025 $ -- $ 4,590,270 Cost and expenses 2,359,352 492,512 227,647 3,079,511 -------------------------------------------------------- Income (loss) from operations $ 1,845,893 $ (107,487) $ (227,647) $ 1,510,759 ========================================================
Identifiable assets $ 3,831,994 $ 262,838 $ 2,396,174 $ 6,491,006 ======================================================== Number of advertised locations Beginning of year 541 4 -- 545 Opened 41 -- -- 41 Closed (13) -- -- (13) -------------------------------------------------------- 569 4 -- 573 ======================================================== - ---- Revenues $ 3,979,794 $ 507,297 $ -- $ 4,487,091 Costs and expenses 2,440,099 518,956 167,844 3,126,899 -------------------------------------------------------- Income (loss) from operations $ 1,539,695 $ (11,659) $ (167,844) $ 1,360,192 ======================================================== Identifiable assets $ 3,469,374 $ 405,476 $ 2,106,448 $ 5,981,298 ======================================================== Number of advertised locations Beginning of year 517 3 -- 520 Opened 45 -- -- 45 Closed (20) -- -- (20) Ownership changes (1) 1 -- -- -------------------------------------------------------- 541 4 -- 545 ========================================================
NOTE 11: INCOME TAXES
The components of the provision for income taxes are as follows:
1995 1994 1993 ------------------------------------------- Federal Current $ 544,580 $ 499,307 $ 455,810 Deferred (36,491) (9,195) (3,544) State Current $ 154,664 113,492 83,000 Deferred (10,513) (1,924) (1,160) ------------------------------------------- Income taxes $ 652,240 $ 601,680 $ 534,106 ===========================================
A reconciliation of the statutory Federal income tax rate to the Company's effective tax rate follows:
1995 1994 1993 ------------------------------------------- Statutory rate 35.0% 35.0% 34.0% Increase (decrease) resulting from: State income taxes, net 5.7 4.5 3.7 Non-deductible items 1.1 .7 .4 Non-taxable revenues (1.0) (.9) (.5) Other (1.9) (2.2) (.6) ------------------------------------------- Effective rate 38.9% 37.1% 37.0% ===========================================
Net deferred tax assets consist of the following components at June 30, 1995 and 1994:
1995 1994 -------------------------- Deferred tax assets Allowance for doubtful accounts $ 87,104 $ 43,797 Property and equipment 21,301 22,983 Other 12,735 8,105 Deferred tax liabilities Installment sale (20,031) (20,780) -------------------------- $ 101,109 $ 54,105 ==========================
The deferred tax amounts mentioned above have been classified as current assets in the accompanying balance sheets as of June 30, 1995 and 1994.
NOTE 12: RELATED PARTY TRANSACTIONS
A director/officer of the Company is a partner in a law firm that renders legal services to the Company. The Company paid the law firm approximately $88,500 in fiscal 1995, $84,600 in fiscal 1994 and $82,200 in fiscal 1993 for legal services and reimbursement of expenses.
NOTE 13: PROFIT SHARING PLAN
On June 14, 1984, the Company adopted a Profit Sharing Plan (Plan) covering substantially all employees of the Company who have completed one year of service and have reached age 20. The Plan provides for contributions at the discretion of management not to exceed the amount permitted under the Internal Revenue Code as a deductible expense. Participants' benefits vest at the rate of 20% per year. Contributions to the Plan are made to trust accounts for investment at the discretion of the individual participants. Profit sharing expense was $160,717, $165,980 and $155,504 for the years ended June 30, 1995, 1994 and 1993 respectively.
NOTE 14: STOCK OPTIONS
On October 9, 1987, the shareholders approved an Incentive Stock Option Plan (Plan) which provides for the granting of options to acquire up to 300,000 shares of common stock to certain officers and key employees of the Company at no less than 100% of the fair market value of the stock on the date of the grant. Options under the Plan are intended to be Incentive Stock Options (ISOs) pursuant to Section 422A of the Internal Revenue Code. Such options may have a maximum term of ten years and are exercisable one year after they are granted.
Options become exercisable in varying amounts beginning one year after grant. Information regarding these option plans are as follows:
Number of Shares -------------------------------------------- 1995 1994 1993 -------------------------------------------- Outstanding July 1 113,130 -- 96,296 Granted 86,870 113,130 -- Exercised -- -- (96,296) --------------------------------------------
Outstanding June 30 200,000 113,130 -- ============================================
Options were granted in fiscal 1995 at an average of $2.625 per share. Options were exercised in fiscal 1993 at an average of $2.223 per share. Options were outstanding at June 30, 1995 and 1994 at average prices per share of $3.1401 and $3.5357, respectively. At June 30, 1995, there are no remaining options available for issuance under the Plan.
NOTE 15: COMMITMENTS
The Company entered into five-year employment agreements with three key executive officers which expire June 30, 2000. In addition to a base salary, the agreements provide for bonuses based upon the Company's pre-tax earnings and annual cost of living increases. Two of the key executive officers were covered by employment agreements which expired June 30, 1995. Total compensation under those employment agreements was $452,497, $435,711 and $412,144 for the years ended June 30, 1995, 1994 and 1993, respectively. The aggregate commitment for future salaries at June 30, 1995, excluding bonuses and cost of living increases, is $2,375,000 as follows:
Year ended June 30, ------------------ 1996 $475,000 1997 475,000 1998 475,000 1999 475,000 2000 475,000
The Company has entered into an agreement with a customer to share a suite in the America West Arena in Phoenix, Arizona for client development purposes. The agreement provides that the Company is responsible for 50% of the costs and expenses of the suite. The Company's commitment began in June, 1992. The Company's minimum required payments are as follows:
Year ended June 30, Amount ------------------------------------ 1996 $ 35,096 1997 36,500 1998 37,960 1999 39,477 ---------- $ 149,033 ==========
FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA ------------------
Selected Quarterly Financial Data
(Information for all periods shown below is unaudited)
------------------------------------------------- Three Months Ended ------------------------------------------------- Sept. 30 Dec. 31 Mar. 31 June 30 ---------- ---------- ---------- ---------- Revenues $1,270,785 $1,257,356 $1,232,935 $1,479,749 Income from operations 400,164 415,959 198,670 487,876 Income before income taxes 440,483 482,236 242,891 513,478 Net income 267,530 292,947 146,708 319,663 Net income per share .06 .06 .03 .07
Weighted average shares outstanding 4,690,898 4,677,311 4,640,898 4,640,898
------------------------------------------------- Three Months Ended ------------------------------------------------- Sept. 30 Dec. 31 Mar. 31 June 30 ---------- ---------- ---------- ---------- Revenues $1,155,528 $1,118,361 $1,146,805 $1,169,576 Income from operations 423,888 414,824 344,927 327,120 Income before income taxes 454,474 444,191 358,630 362,545 Net income 277,762 272,037 233,510 234,851 Net income per share .06 .06 .05 .05
Weighted average shares outstanding 4,763,280 4,719,310 4,719,310 4,708,249
------------------------------------------------- Three Months Ended ------------------------------------------------- Sept. 30 Dec. 31 Mar. 31 June 30 ---------- ---------- ---------- ---------- Revenues $1,125,701 $1,059,913 $1,131,167 $1,170,310 Income from operations 381,184 343,126 346,672 289,210 Income before income taxes 404,070 361,307 361,099 316,683 Net income 247,927 221,276 220,973 218,877 Net income per share .05 .05 .05 .04
Weighted average shares outstanding 4,726,210 4,803,606 4,805,140 4,789,082
Item 9
Item 9 - Changes in and Disagreements With Accountants on - --------------------------------------------------------- Accounting and Financial Disclosures ------------------------------------
Not applicable.
PART III
Item 10
Item 10 - Directors and Executive Officers of the Registrant - ------------------------------------------------------------
Item 11
Item 11 - Executive Compensation - --------------------------------
The following table sets forth certain information concerning the compensation paid by the Company during its year ended June 30, 1994 to each executive officer whose aggregate compensation exceeded $100,000.
Annual Compensation ---------------------------------------------------- a b c d e i - --------------------------- ---- ---------- -------- ------------ ------------ Other Annual All Other Compensation Compensation Name and Principal Position Year Salary ($) Bonus ($) ($) (2) ($) (3) - --------------------------------------------------------------------------------
William J. Rocke, CEO, 1995 206,636 50,000 -- 23,670 Chairman, Director 1994 196,796 50,000 -- 32,250 1993 187,425 46,210 -- 33,750
Jean E. Ryberg, 1995 145,861 50,000 -- 29,168 President, Director 1994 138,915 50,000 -- 32,250 1993 132,300 46,210 -- 33,064
(1) Columns f, g and h have been omitted as there has been no long term compensation awarded to, earned by or paid to any of the named executives in any fiscal year covered by these columns.
(2) No perquisites were received by any person named above greater than the lesser of $50,000 or 10% of salary plus bonus.
(3) "All Other Compensation" includes (i) directors fees of $3,000 in fiscal 1995, $2,250 in fiscal 1994 and $3,750 in fiscal 1993 for both Mr. Rocke and Mrs. Ryberg; (ii) profit sharing contributions of $20,670 for the year ended June 30, 1995 and $30,000 each year for the years ended June 30, 1994 and 1993 for Mr. Rocke and $26,168, $30,000 and $29,314 for Mrs. Ryberg for the years ended June 30, 1995, 1994 and 1993, respectively.
Option/SAR Exercises and Holdings - ---------------------------------
The following table is a summary of all Company stock options granted to the Named Executives during 1995. Individual grants are listed separately for each Named Executive. In addition, this table shows the potential gain that could be realized if the fair market value of the Company's common shares were to appreciate at either a 5% or 10% annual rate over the period of the option term (5 years for Mr. Rocke and 10 years of Mrs. Ryberg).
The following table shows Company stock options that were exercised during fiscal 1995 and the number of shares and value of grants outstanding as of June 30, 1995 for each Named Executive.
(a) stock ofunexercised, in-the-money Company options based on a fair market value of the Company's common $2.6875 per share as of June 30, 1995.
Directors Compensation - ----------------------
Each director, including employees of the Company, are paid $750 per Board meeting attended. During fiscal 1995, each director, except for Mr. Greer, received $3,000 for attendance at Board meetings. Mr. Greer was appointed to the Board of Directors on October 9, 1994 and received $2,250 for attendance at Board meetings during fiscal 1995.
Employment Agreements - ---------------------
The Company has entered into employment agreements with Mr. Rocke and Mrs. Ryberg, each for five-year terms, effective July 1, 1995 and expiring June 30, 2000.
Mr. Rocke's agreement provides for an annual salary of $225,000 with annual cost of living increases based upon the U.S. Department of Labor's cost of living index, plus a bonus of three percent (3%) of the Company's income before taxes and bonuses and 5% of the increase in the Company's income before taxes and bonuses from the prior year.
Mrs. Ryberg's agreement provides for an annual salary of $160,000 with annual cost of living increases based upon the U.S. Department of Labor's cost of living index, plus a bonus of three percent (3%) of the Company's income before taxes and bonuses and 5% of the increase in the Company's income before taxes and bonuses from the prior year.
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------
Name and Address Amount of Beneficial Ownership - --------------------------- ------------------------------ Common Stock $.01 Par Value ------------------------------ Number of Shares (1) Percent (2) -------------------- -----------
William W. Strawther, Jr. and Marjorie A. Strawther, his wife (3) 442,138 9.52% 7108 North 15th Street Phoenix, Arizona 85020
William J. Rocke and Garnet Rocke, his wife (4) 440,550 9.44% P. O. Box 7641 Phoenix, Arizona 85011
George M. Hill (5) 173,390 3.74%
Jean E. Ryberg (6) 138,871 2.97%
Louis T. Mastos and Eva B. Mastos, his wife (7) 208,703 4.50%
Merlin J. Schumann and Donna L. Schumann, his wife 20,114 *
James S. Rocke (8) 440,086 9.42%
R. Scott Younker and Sandra L. Younker, his wife 93,469 2.01%
Patric R. Greer and Nancy S. Greer, his wife (9) 44,599 *
All officers and directors as a group (nine persons) (10) 1,711,920 36.00% - ----------------------------------------- *Less than 1%
(1) The number of shares shown in the table, including the notes thereto, have been rounded to the nearest whole share. Includes, when applicable, shares owned of record by such person's minor children and spouse and by other related individuals and entitiies over whose shares of Common Stock such person has custody, voting control or power of disposition. Also includes shares of Common Stock that the identified person had the right to acquire within 60 days of August 1, 1995 by the exercise of stock options.
(2) The percentages shown include the shares of Common Stock which the person will have the right to acquire within 60 days of August 1, 1995. In calculating the percentage of ownership, all shares of Common Stock which the identified person will have the right to acquire within 60 days of August 1, 1995 upon the exercise of stock options are deemed to be outstanding for the purpose of computing the percentage of the shares of Common Stock owned by any other person.
(3) Held as trustees under Trust Agreement, dated June 7, 1989, establishing the William W. Strawther, Jr. and Marjorie A. Strawther Living Trust, of which Mr. and Mrs. Strawther are beneficiaries. Excludes an aggregate of 200,000 shares beneficially owned by Mr. and Mrs. Strawther's son, in which shares Mr. and Mrs. Strawther disclaim any beneficial interest.
(4) Includes 290,000 shares held by Old Frontier Investment, Inc., of Arizona, of which Mr. Rocke holds 51% of the outstanding stock. Includes 26,936 shares subject to a currently exercisable stock option at $3.7125 per share.
(5) Excludes 50,000 shares held by Nell S. Hill, Mr. Hill's wife, and 112,243 shares held by Mr. Hill's children and grandchildren, in which shares he disclaims any beneficial interest.
(6) Includes 29,629 shares subject to a currently exercisable stock option at $3.375 per share.
(7) Includes 180,180 shares which are held in a trust under an agreement dated February 10, 1981, in which Mr. and Mrs. Mastos hold equal beneficial interests, and 25,523 shares which are held by the Louis T. Mastos & Associates, Profit Sharing Plan, of which he is a trustee and the majority beneficial owner.
(8) Includes 290,000 shares held by Old Frontier Investment, Inc. of Arizona of which Mr. Rocke holds 49% of the outstanding stock. Includes 26,936 shares subject to a currently exercisable stock option at $3.7125 per share.
(9) Includes 29,629 shares subject to a currently exercisable stock option at $3.375 per share.
(10) Excludes all duplicate reporting of holdings.
To the best of knowledge of the Company, no person or groups of persons, other than officers and directors, beneficially own more than five percent of the Frontier Adjusters of America, Inc. Common Stock (based upon present records of the transfer agent).
Based solely on a review of the copies of such forms received by the Company during the fiscal year ended June 30, 1995, and written representations that no other reports were required, the Company believes that each person who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of the Company's Common Stock complied with all Section 16(a) filing requirements during such fiscal year, except that (i) each of William J. Rocke, Jean E. Ryberg, James S. Rocke and Patric R. Greer filed late reports on Form 5 covering one grant of stock options to each person pursuant to the Company's 1987 Incentive Stock Option Plan and (ii) R. Scott Younker filed late one report on Form 5 covering one transaction.
Item 13
Item 13 - Certain Relationships and Related Transactions - --------------------------------------------------------
Old Frontier Investment, Inc. of Arizona, of which William J. Rocke and Garnet Rocke, his wife, are owners of 51% of the issued and outstanding stock of said corporation and James S. Rocke owns the remaining 49%, has entered into a license agreement with the Company pursuant to which it operates, under standard terms and conditions, an insurance adjusting business located in Scottsdale, Arizona, and is paid a 5% royalty on gross revenues derived from services provided by others in certain other Arizona towns. The Company paid that corporation $20,255 during fiscal year 1995 in connection with such 5% royalty agreement.
George M. Hill, Vice President and Director of the Company, is a senior partner in the law firm which acts as General Counsel to the Company. During the fiscal year 1995, the Company paid such firm $88,544 for services rendered and disbursements. Such fees will continue to accrue, pursuant to a retainer agreement, at the rate of $6,650 per month effective September 1, 1995.
The Company paid its Vice Chairman, William W. Strawther, Jr., $20,000 during fiscal year 1995 for business and financial consulting services.
The Company believes that the cost to the Company for all of the foregoing were and are competitive with charges for similar services and facilities available from third parties.
PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K - -------------------------------------------------------------------------
(a) (1) Financial Statements
The following Financial Statements are included in Part II, Item 8:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - June 30, 1995 and 1994
Consolidated Statements of Income for the Years Ended June 30, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements - June 30, 1995, 1994 and 1993
(a) (2) Financial Statement Schedules
Schedule Number
I Marketable Securities and Other Security Investments June 30, 1995 and 1994
V Property and Equipment for the Years Ended June 30, 1995, 1994 and 1993
VI Accumulated Depreciation and Amortization of Property and Equipment for the Years Ended June 30, 1995, 1994 and 1993
X Supplementary Income Statement Information for the Years Ended June 30, 1995, 1994 and 1993
Schedules I through XIV not listed above have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.
(a) (3) Exhibits filed with this report.
EXHIBIT LIST
Exhibit No. Description of Exhibit - ----------- ----------------------
3(a) Articles of Incorporation of Frontier Adjusters of America, Inc.*
3(b) By-Laws of Frontier Adjusters of America, Inc.**
10(a) Frontier Adjusters of America, Inc. Incentive Stock Option Plan*
10(b) Profit Sharing Plan, as amended
10(c) Employment Agreement, dated August 10, 1995 between the Registrant and William J. Rocke
10(d) Employment Agreement, dated August 10, 1995 between the Registrant and Jean E. Ryberg
10(e) Incentive Stock Option Plan, dated October 10, 1987*
10(f) Form of Franchise Agreement between the Registrant and franchisees*
10(g) Form of License Agreement between the Registrant and licensees*
10(h) Agreement, dated June 1, 1990, between the Registrant and Scottsdale Insurance Company*
10(i) Form of Software Purchase Agreement and Order Form*
10(j) Software Products License Agreements between the Registrant and MAI Systems, Inc. (formerly, MAI Basic Four, Inc.), each dated September 29, 1989*
21 List of Subsidiaries of Frontier Adjusters of America, Inc.
24 Consent of McGladrey & Pullen
*Incorporated by reference to the Registrant's Form S-2 filed July 9, 1991
**Incorporated by reference to the Registrant's Form 10-K for the year ended June 30, 1993
(b) The Company filed no reports on Form 8-K with the Securities and Exchange Commission during the last quarter of the fiscal year June 30, 1995
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ William J. Rocke /s/ Jean E. Ryberg - ----------------------------------- ----------------------------------- William J. Rocke (Chief Executive Jean E. Ryberg, (President) Officer, Chairman of the Board, Principal Financial Officer)
August 21, 1995 August 21, 1995 - ----------------------------------- -----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates included:
/s/ George M. Hill August 21, 1995 - ----------------------------------- ----------------------------------- George M. Hill, Director
/s/ James S. Rocke August 21, 1995 - ----------------------------------- ----------------------------------- James S. Rocke, Secretary/ Treasurer, Director
/s/ William J. Rocke August 21, 1995 - ----------------------------------- ----------------------------------- William J. Rocke, Director
/s/ Jean E. Ryberg August 21, 1995 - ----------------------------------- ----------------------------------- Jean E. Ryberg, Director
/s/ Merlin J. Schumann August 21, 1995 - ----------------------------------- ----------------------------------- Merlin J. Schumann, Director
- ----------------------------------- ----------------------------------- William W. Strawther, Jr., Director
- ----------------------------------- ----------------------------------- Lou Mastos, Director
- ----------------------------------- ----------------------------------- R. Scott Younker, Director
/s/ Patric R. Greer August 21, 1995 - ----------------------------------- ----------------------------------- Patric R. Greer, Controller
FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES
SCHEDULE I
MARKETABLE SECURITIES AND OTHER SECURITY INVESTMENTS
For Years Ended June 30, 1995 and 1994
FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES
SCHEDULE V
PROPERTY AND EQUIPMENT
For Years Ended June 30, 1995, 1994 and 1993
Balance Beginning Additions Retirement at End Classification of Period at Costs (1) or Sales or Period - -------------- ----------- ------------ ---------- ----------
- ---- Computer $ 282,726 $ 18,829 $ (1,175) $ 300,380 Furniture and Fixtures 237,795 14,638 (500) 251,933 Building and Improvements 1,121,926 5,926 -- 1,127,933 Land (2) 500,143 -- -- 500,143 Automobiles 66,335 88,802 (66,335) 88,802 ----------- ----------- -------- ----------- $ 2,208,925 $ 128,195 $ 68,010 $ 2,269,110 =========== =========== ======== ===========
- ----
Computer $ 303,831 $ 5,280 $(26,385) $ 282,726 Furniture and Fixtures 236,670 1,125 -- 237,795 Building and Improvements 1,118,291 5,678 (2,043) 1,121,926 Land (2) 500,143 -- -- 500,143 Automobiles 66,335 -- -- 66,335 ----------- ----------- -------- ----------- $ 2,225,270 $ 12,083 $(28,428) $ 2,208,925 =========== =========== ======== ===========
- ----
Computer $ 304,159 $ 3,533 $ (3,861) $ 303,831 Furniture and Fixtures 236,445 4,818 (4,593) 236,670 Building and Improvements 1,095,861 25,456 (3,026) 1,118,291 Land 500,143 -- -- 500,143 Automobiles 66,335 -- -- 66,335 ----------- ----------- -------- ----------- $ 2,202,943 $ 33,807 $(11,480) $ 2,225,270 =========== =========== ======== ===========
(1) Additions in 1994, 1993 and 1992 represent the purchase of computer equipment, furniture and fixtures, automobiles, and building improvements.
FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
For Years Ended June 30, 1995, 1994 and 1993
Additions Balance at Charged to Balance Beginning Costs and Retirements at End Classification of Period Expenses (1) or Sales or Period - -------------- ----------- ------------ ------------ ---------- - ----
Computer $ 268,375 $ 13,013 $ (1,176) $ 280,212 Furniture and Fixtures 199,754 14,973 (500) 214,227 Building and Improvements 235,972 39,354 -- 275,326 Automobiles 44,223 20,328 (49,751) 14,800 ---------- ---------- ---------- ---------- $ 748,234 $ 87,668 $ (51,427) $ 784,565 ========== ========== ========== ==========
- ----
Computer $ 275,218 $ 19,468 $ (26,311) $ 268,375 Furniture and Fixtures 177,534 22,220 -- 199,754 Building and Improvements 195,652 42,362 (2,042) 235,972 Automobiles 27,639 16,584 -- 44,223 ---------- ---------- ---------- ---------- $ 676,043 $ 100,634 $ (28,353) $ 748,324 ========== ========== ========== ==========
- ----
Computer $ 253,165 $ 22,928 $ (875) $ 275,218 Furniture and Fixtures 149,579 31,319 (3,364) 177,534 Building and Improvements 153,153 45,526 (3,027) 195,652 Automobiles 11,055 16,584 -- 27,639 ---------- ---------- ---------- ---------- $ 566,952 $ 116,357 $ (7,266) $ 676,043 ========== ========== ========== ==========
1995 1994 1993(1) -------- -------- -------- Depreciation per above $ 87,668 $100,634 $116,357 Amortization of intangible assets 48,760 13,311 6,943 -------- -------- --------
Total depreciation and amortization charged to expense $136,428 $113,945 $123,300 ======== ======== ========
(2) Depreciation is computed using straight-line and accelerated methods over estimated useful lives, which range from 3 to 10 years for all assets except the building. The building is depreciated using the straight-line method over 30 years.
FRONTIER ADJUSTERS OF AMERICA, INC. AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For Years Ended June 30, 1995, 1994 and 1993
Charged to Costs Item and Expenses ------------------------ ---------------- 5. Advertising Costs
1995 $360,878
1994 $384,868
1993 $428,761