I.D. Systems Amends Agreement with Avis Budget Group to Convert Lease Financing Receivable to $5.4 Million in Cash
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Woodcliff Lake, NJ — I.D. Systems, Inc. (NASDAQ: IDSY), a leading provider of wireless M2M asset management solutions, has amended its Master Software License, Information Technology Services and Equipment Purchase Agreement with Avis Budget Group (NASDAQ: CAR) to convert Avis Budget's obligation to make monthly hardware lease payments to I.D. Systems into a one-time payment of approximately $5.4 million in cash.
"This agreement substantially improves our working capital position, continues our relationship with Avis, one of our long-time customers, and helps us focus on being a technology solution provider rather than a leasing company," said Kenneth Ehrman, I.D. Systems' chairman and CEO.
The monthly hardware lease payments were associated with I.D. Systems' deployment of approximately 30,000 rental car management systems for Avis Budget in North America. Under accounting rules, I.D. Systems recognized the full amount of hardware revenue when the hardware was shipped in 2012, and has carried the monthly lease payments on its balance sheet as a financing receivable. I.D. Systems expects to continue providing maintenance services for the hardware, as stipulated in the agreement, for the duration of the agreement, which runs through September, 2017.
"We believe this transaction makes good sense for both I.D. Systems and Avis Budget Group," said Ned Mavrommatis, I.D. Systems' CFO. "For us, it turns a long-term asset on our balance sheet into cash. For Avis Budget, the benefit is a cost savings on the interest they would have otherwise paid as part of their hardware lease payments."
The transaction will reduce the financing receivables and increase the cash on I.D. Systems' balance sheet by approximately $5.8 million and $5.4 million, respectively. As a result, the company expects to record a one-time charge of approximately $400,000 in the fourth quarter of 2014, reflecting a discount rate for Avis Budget's early payment of its remaining lease commitment.
About I.D. Systems
Headquartered in Woodcliff Lake, New Jersey, with subsidiaries in Texas, Germany, and the United Kingdom, I.D. Systems, Inc. is a leading global provider of wireless M2M solutions for securing, controlling, tracking, and managing high-value enterprise assets, including industrial vehicles, rental cars, trailers, containers, and cargo. The company's patented technologies address the needs of organizations to monitor and analyze their assets to increase efficiency and productivity, reduce costs, and improve profitability. For more information about I.D. Systems, please visit www.id-systems.com.
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