FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[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, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Hutton Centre Dr., Ste. 500
Santa Ana, California 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 751-7551
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 8, 1994
Common Stock, $.01 par value 5,846,522
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AMPLICON, INC. AND SUBSIDIARIES
INDEX
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1993
(unaudited) and June 30, 1993 3
Consolidated Statements of Earnings - Three months and six months
ended December 31, 1993 and 1992 (unaudited) 4
Consolidated Statements of Cash Flows - Six months
ended December 31, 1993 and 1992 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
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AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(UNAUDITED) (AUDITED)
December 31, June 30,
ASSETS 1993 1993
<S> <C> <C>
Cash and cash equivalents $ 9,327,000 $ 18,084,000
Short term investments, at cost which
approximates market -0- -0-
Net receivables 44,814,000 33,070,000
Inventories, primarily customer deliveries
in process 3,774,000 5,841,000
Net investment in capital leases 74,716,000 59,052,000
Net equipment on operating leases 54,000 64,000
Other assets 1,099,000 1,142,000
Discounted lease rentals assigned to lenders 233,218,000 233,408,000
$367,002,000 $350,661,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable secured by leases (Note 3) $ 13,125,000 $ -0-
Accounts payable 17,697,000 19,696,000
Accrued liabilities 3,417,000 4,192,000
Customer deposits 2,629,000 3,930,000
Nonrecourse debt 210,832,000 211,191,000
Deferred and net interest income 30,228,000 27,607,000
Income taxes payable, including
deferred taxes 14,140,000 14,273,000
292,068,000 280,889,000
Commitments and contingencies
Stockholders' equity:
Preferred stock; 2,500,000 shares
authorized; none issued -0- -0-
Common stock; $.01 par value; 20,000,000 shares
authorized; 5,848,522 and 5,834,856 issued
and outstanding, as of December 31, 1993
and June 30, 1993, respectively 58,000 58,000
Additional paid in capital 6,023,000 5,917,000
Retained earnings 68,853,000 63,797,000
74,934,000 69,772,000
$367,002,000 $350,661,000
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
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AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Revenues:
Sales of equipment $44,163 $35,431 $83,665 $69,677
Interest income 6,169 6,228 12,332 12,329
Rental income 66 165 147 354
50,398 41,824 96,144 82,360
Costs:
Cost of equipment sold 40,327 32,517 76,558 63,958
Interest expense on
nonrecourse debt 2,844 2,783 5,839 5,795
Depreciation of equipment
on operating leases 3 6 8 13
43,174 35,306 82,405 69,766
Gross profit 7,224 6,518 13,739 12,594
Selling, general and
administrative expenses 2,880 2,516 5,694 5,004
Interest expense-other 73 27 82 68
Earnings before income taxes 4,271 3,975 7,963 7,522
Income taxes 1,559 1,451 2,907 2,745
Net earnings $ 2,712 $ 2,524 $ 5,056 $ 4,777
Net earnings per
common share $ .47 $ .43 $ .87 $ .82
Weighted average number of
common shares outstanding 5,847 5,831 5,845 5,829
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
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AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Six Months Ended December 31,
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 5,056,000 $ 4,777,000
Adjustments to reconcile net earnings to
cash flows provided by (used for)
operating activities:
Depreciation 8,000 13,000
Sale or lease of equipment previously on
operating leases, net 13,000 15,000
Interest accretion of estimated unguaranteed
residual values ( 1,480,000) ( 1,381,000)
Estimated unguaranteed residual values
recorded on leases ( 3,468,000) ( 2,827,000)
Interest accretion of net deferred income ( 801,000) ( 806,000)
Increase in net deferred income 982,000 840,000
Net (decrease) increase in income taxes
payable, including deferred taxes ( 133,000) 1,515,000
Net increase in net receivables ( 11,420,000) ( 4,118,000)
Net decrease (increase) in inventories 2,067,000 ( 282,000)
Net (decrease) increase in accounts payable
and accrued liabilities ( 2,774,000) 4,902,000
Net cash (used for) provided by operating
activities ( 11,950,000) 2,648,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments -0- 1,543,000
Net increase in minimum lease payments
receivable ( 17,995,000) ( 11,521,000)
Purchase of equipment on operating leases ( 11,000) ( 14,000)
Net decrease (increase) in other assets 43,000 ( 168,000)
Decrease in estimated unguaranteed
residual values 2,064,000 1,822,000
Net cash used for investing activities ( 15,899,000) ( 8,338,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals 7,162,000 19,080,000
Increase in notes payable secured by leases 13,125,000 -0-
Payments to reduce nonrecourse debt, excluding
lease rentals assigned to lenders -0- ( 9,000)
Payments to reduce notes payable to bank -0- -0-
(Decrease) increase in customer deposits ( 1,301,000) 718,000
Proceeds from exercise of stock options 106,000 24,000
Net cash provided by financing activities 19,092,000 19,813,000
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 8,757,000) 14,123,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,084,000 10,464,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,327,000 $ 24,587,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to lenders and related
nonrecourse debt $ 359,000 $ 12,251,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 82,000 $ 68,000
Income taxes $ 3,039,000 $ 1,230,000
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
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AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's latest Annual Report on Form 10-K.
In the opinion of management, the unaudited consolidated financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the balance sheet as of December 31, 1993 and
the statements of earnings for the three and six month periods ended
December 31, 1993 and 1992 and the statements of cash flows for the six months
ended December 31, 1993 and 1992. The results of operations for the six month
period ended December 31, 1993 are not necessarily indicative of the results of
operations to be expected for the entire fiscal year ending June 30, 1994.
NOTE 2- BALANCE SHEET
At December 31, 1993, deferred and net interest income of $30,228,000 is offset
by deferred interest expense related to the discounted lease rentals assigned to
lenders of $22,378,000.
NOTE 3- NOTES PAYABLE SECURED BY LEASES
In December 1993, the Company entered into an agreement to borrow $10,000,000
(the "Note") at an interest rate equal to the prime rate. This Note is secured
by an in process lease transaction (the "Lease"). This Lease is secured by an
$11,000,000 letter of credit issued by a different financial institution.
Interest is payable monthly commencing January 15, 1994 and the Note is due on
April 15, 1994. The financial institution which issued the Note has agreed to
finance the Lease on a nonrecourse basis, which approval is extended to the due
date of the Note.
In December 1993, the Company borrowed $3,125,000 on a Non Recourse Promissory
Note (the "Assignment") which bears interest at 8.79% and is due in thirty six
consecutive monthly installments of $98,358.39 commencing April 1, 1994.
Interest is payable at 7.75% for the period January 1 through March 31, 1994.
This Assignment is secured by an in process lease transaction (the
"Transaction") and all the property covered by the Transaction. This Assignment
includes an addendum which requires an interim full recourse assignment until
several conditions are met on the Transaction. The conditions include the
complete installation and acceptance of all leased property covered by the
Transaction and completion of all documentation to the satisfaction of the
holder of the Assignment. The Transaction is secured by a $975,000 letter of
credit issued by a different financial institution and the Company has also
provided a guaranty to the holder of the Assignment for up to $448,000 related
to the indebtedness.
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AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended December 31, 1993 and 1992
REVENUES. Total revenues for the three months ended December 31, 1993 were
$50,398,000, an increase of $8,574,000 or 20.5% as compared to the three months
ended December 31, 1992. The increase from the prior year was primarily the
result of increases in sales of equipment. Sales of equipment increased by
$8,731,000 or 24.6% to $44,163,000 in the quarter ended December 31, 1993 as
compared to $35,431,000 in the quarter ended December 31, 1992. The Company
believes the increase in sales of equipment was primarily due to the increased
effectiveness of the Company's salesforce and overall improvements in the
economy. Interest income for the quarter ended December 31, 1993 decreased by
$59,000 or 0.9% to $6,169,000 as compared to $6,228,000 in the same quarter in
the prior year. The three months ended December 31, 1993 and 1992 included
amounts of $2,844,000 and $2,783,000, respectively, of interest income on
discounted lease rentals assigned to lenders (which is offset by interest
expense on nonrecourse debt). Interest income for the three months ended
December 31, 1993, net of interest income on discounted lease rentals assigned
to lenders, decreased by $120,000 or 3.5% as compared to the three months ended
December 31, 1992. This decrease is primarily the result of lower interest
income from the lease portfolio offset by modest increases in interest accretion
due to the growth in the base of residual values and deferred income. Rental
income decreased by $99,000 or 59.9% to $66,000 in the three months ended
December 31, 1993 as compared to $165,000 for the three months ended
December 31, 1992.
GROSS PROFIT. Gross profit for the quarter ended December 31, 1993 of
$7,224,000, or 14.3% of total revenues, increased by $706,000 or 10.8% as
compared to $6,518,000, or 15.6% of total revenues, for the quarter ended
December 31, 1992. The principal factors which contributed to increased gross
profit were higher profits from lease extensions and upgrades, and to a small
extent, higher profits on new lease transactions, offset by lower interest
income, net of interest expense on nonrecourse debt.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 5.7% and 6.0% for
the quarters ended December 31, 1993 and 1992, respectively. Selling, general
and administrative expenses increased by $365,000 or 14.5% primarily due to
increases in sales and other personnel levels and their related office costs.
TAXES. The Company's tax rate was 36.5% and 36.5% for the quarters ended
December 31, 1993 and 1992, respectively, representing its estimated annual tax
rate for the years ending June 30, 1994 and 1993.
Six Months Ended December 31, 1993 and 1992
REVENUES. Total revenues for the six months ended December 31, 1993 were
$96,144,000, an increase of $13,784,000 or 16.7% as compared to the six months
ended December 31, 1992. The increase from the prior year was primarily the
result of increases in sales of equipment. Sales of equipment increased by
$13,988,000 or 20.1% to $83,665,000 in the six months ended December 31, 1993 as
compared to $69,677,000 in the same period ended December 31, 1992. The Company
believes the increase in sales of equipment was primarily due to the increased
effectiveness of the Company's salesforce and overall improvements in the
economy resulting in capital acquisition growth. Interest income for the six
months ended December 31, 1993 increased by $3,000 or 0.1% to $12,332,000 as
compared to $12,329,000 in the same period in the prior year. The six months
ended December 31, 1993 and 1992 included amounts of $5,839,000 and $5,795,000,
respectively, of interest income on discounted lease rentals assigned to lenders
(which is offset by interest expense on nonrecourse debt). Interest income for
the six months ended December 31, 1993, net of interest income on discounted
lease rentals assigned to lenders, decreased by $41,000 or 0.1% as compared to
the six months ended December 31, 1992. This decrease is primarily the result of
lower interest income from the lease portfolio, offset by higher interest
accretion from growth in the residual value and deferred income bases. Rental
income decreased by $207,000 or 58.5% to $147,000 in the six months ended
December 31, 1993 as compared to $354,000 for the six months ended
December 31, 1992.
(continued)
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AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
GROSS PROFIT. Gross profit for the six months ended December 31, 1993 of
$13,739,000, or 14.3% of total revenues, increased by $1,145,000 or 9.1% as
compared to $12,594,000, or 15.3% of total revenues, for the six months ended
December 31, 1992. The principal factors which contributed to increased gross
profit were higher profits from lease extensions and upgrades.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 5.9% and 6.1% for
the six months ended December 31, 1993 and 1992, respectively. Selling, general
and administrative expenses increased by $690,000 or 13.8% primarily due to
increases in sales and other personnel levels and their related office costs.
TAXES. The Company's tax rate was 36.5% and 36.5% for the six months ended
December 31, 1993 and 1992, respectively, representing its estimated annual tax
rate for the years ending June 30, 1994 and 1993.
Financial and Capital Resources
The Company funds its operating activities through nonrecourse debt and
internally generated funds. Capital expenditures for equipment purchases are
primarily financed by assigning the lease payments to banks or other financial
institutions which are discounted at fixed rates such that the lease payments
are sufficient to fully amortize the aggregate outstanding debt. For many
transactions which require staged equipment installations, the Company funds
the transactions with internal resources prior to placing the lease rentals on
a nonrecourse basis with a financial institution. The Company does not purchase
equipment until it has received a noncancelable lease from its customer and has
determined that the lease can be discounted on a nonrecourse basis or the
Company's credit committee has approved the transaction for the Company's
portfolio. At December 31, 1993, the Company had outstanding nonrecourse debt
aggregating $210,832,000 relating to equipment under capital and operating
leases. In the past, the Company has been able to obtain adequate nonrecourse
funding commitments, and the Company believes it will be able to do so in the
future.
The Company borrowed $10,000,000 and $3,125,000 in December 1993 which are
secured by in process lease transactions. The Company has nonrecourse debt
commitments from the same financial institutions to finance the lease
transactions once the lease transactions are completed. The leases are
anticipated to be assigned on a nonrecourse basis prior to the due date of the
Note and the commencement of the Assignment, respectively, at which time the
notes will be paid in full (see Note 3 in the Notes to Consolidated Financial
Statements).
From time to time, the Company retains equipment leases in its own portfolio
rather than assigning the leases to financial institutions. During the six
months ended December 31, 1993, the Company increased its net investment in
leases held in its own portfolio by $10,210,000. The increase reflects a higher
volume of lease transactions retained in the Company's portfolio, in line with
growth in the Company's business volume, and a higher volume of lease
extensions.
The Company generally funds its equity investments in leased equipment and
interim equipment purchases with internally generated funds, and if necessary,
borrowings under a $20,000,000 general line of credit. At December 31, 1993 the
Company did not have any borrowings outstanding on this line of credit.
In November 1990, the Board of Directors authorized management, at its
discretion to repurchase up to 300,000 shares of the Company's Common Stock. The
Company purchased 10,000 shares on January 4, 1994 and 103,000 shares remain
available for repurchase under this authorization.
(continued)
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AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
As the Company's volume of lease transactions continues to grow, the amount of
working capital required to fund transactions will continue to expand. The
Company believes that existing cash balances, cash flows from its activities,
available borrowings under its existing credit facility, and assignments (on a
nonrecourse basis) of anticipated lease payments will be sufficient to fund
anticipated future growth and operating requirements.
Inflation has not had a significant impact upon the operations of the Company.
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AMPLICON, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 5. Other Information
In a Board of Directors meeting held on February 7, 1994, Harris Ravine was
elected to be an outside director to the Company. Mr. Ravine brings over ten
years of senior management experience in the high technology equipment industry,
most recently as Executive Vice President and Chief Administrative Officer with
Storage Technology Corporation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) 8-K Reports
There were no reports on Form 8-K for the three months ended
December 31, 1993.
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AMPLICON, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMPLICON, INC.
Registrant
DATE: February 11, 1994 BY: S. LESLIE JEWETT /s/
S. LESLIE JEWETT
Vice President - Finance
(Principal Financial and
Accounting Officer)
