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 September 30, 1994
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 November 4, 1994
Common Stock, $.01 par value 5,857,022
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1994
(unaudited) and June 30, 1994 3
Consolidated Statements of Earnings - Three months
ended September 30, 1994 and 1993 (unaudited) 4
Consolidated Statements of Cash Flows - Three months
ended September 30, 1994 and 1993 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited). 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
September 30, June 30,
ASSETS 1994 1994
<S> <C> <C>
Cash and cash equivalents $ -0- $ 10,255,000
Investment securities 22,241,000 19,080,000
Net receivables 41,606,000 39,905,000
Inventories, primarily customer
deliveries in process 2,661,000 4,975,000
Net investment in capital leases 67,389,000 59,305,000
Net equipment on operating leases 47,000 51,000
Other assets 1,304,000 1,075,000
Discounted lease rentals assigned to lenders 247,236,000 249,938,000
$382,484,000 $384,584,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank overdraft $ 483,000 $ -0-
Notes payable to bank 10,000,000 10,000,000
Accounts payable 11,557,000 14,246,000
Accrued liabilities 3,129,000 3,149,000
Customer deposits 7,225,000 7,370,000
Nonrecourse debt 222,308,000 225,746,000
Deferred interest income 24,928,000 24,192,000
Net deferred income 3,884,000 3,744,000
Income taxes payable, including deferred
taxes 15,839,000 15,262,000
299,353,000 303,709,000
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;
5,857,022 issued and outstanding,
as of September 30, 1994 and June 30, 1994 59,000 59,000
Additional paid in capital 6,001,000 6,001,000
Retained earnings 77,033,000 74,815,000
Investment securities valuation adjustment 38,000 -0-
83,131,000 80,875,000
$382,484,000 $384,584,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30,
1994 1993
<S> <C> <C>
Revenues:
Sales of equipment $38,534,000 $39,503,000
Interest income 5,719,000 6,094,000
Investment income 375,000 68,000
Rental income 97,000 81,000
44,725,000 45,746,000
Costs:
Cost of equipment sold 34,061,000 36,230,000
Interest expense on nonrecourse debt 3,182,000 2,996,000
Depreciation of equipment on operating
leases 3,000 5,000
37,246,000 39,231,000
Gross profit 7,479,000 6,515,000
Selling, general and administrative
expenses 3,235,000 2,814,000
Interest expense-other 93,000 9,000
Earnings before income taxes 4,151,000 3,692,000
Income taxes 1,640,000 1,348,000
Net earnings $ 2,511,000 $ 2,344,000
Net earnings per common share $ .43 $ .40
Dividends declared per common share
outstanding $ .05 $ -0-
Weighted average number of common shares
outstanding 5,857,022 5,842,015
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 2,511,000 $ 2,344,000
Adjustments to reconcile net earnings to cash flows
(used for) provided by operating activities:
Depreciation 3,000 5,000
Sale or lease of equipment previously on operating
leases, net -0- 8,000
Interest accretion of estimated unguaranteed
residual values ( 794,000) ( 724,000)
Estimated unguaranteed residual values
recorded on leases ( 1,339,000) ( 1,906,000)
Interest accretion of net deferred income ( 85,000) ( 260,000)
Increase in net deferred income 225,000 416,000
Net increase in income taxes payable, including
deferred taxes 577,000 545,000
Net increase in net receivables ( 1,701,000) ( 8,468,000)
Net decrease in inventories 2,314,000 5,483,000
Net (decrease) increase in accounts payable and
accrued liabilities ( 3,003,000) 386,000
Net cash used for operating activities ( 1,292,000) ( 2,171,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in minimum lease payments receivable ( 7,516,000) ( 9,213,000)
Purchase of equipment on operating leases -0- ( 4,000)
Purchases of available-for-sale securities ( 67,434,000) (71,498,000)
Proceeds from sales of available-for-sale
investment securities 64,311,000 67,858,000
Net (increase) decrease in other assets ( 229,000) 71,000
Decrease in estimated unguaranteed residual values 1,567,000 990,000
Net cash used for investing activities ( 9,301,000) ( 8,156,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft 483,000 -0-
Decrease in customer deposits ( 145,000) ( 201,000)
Proceeds from exercise of stock options -0- 61,000
Net cash provided by (used for) financing activities 338,000 ( 140,000)
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 10,255,000) (10,467,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,255,000 18,084,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -0- $ 7,617,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Decrease in lease rentals assigned to lenders and related
nonrecourse debt ($ 3,438,000)($10,711,000)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 93,000 $ 9,000
Income taxes $ 1,066,000 $ 269,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
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
September 30, 1994 and the statements of earnings and cash flows for the
three month periods ended September 30, 1994 and 1993. The results of
operations for the three month period ended September 30, 1994 are not
necessarily indicative of the results of operations to be expected for
the entire fiscal year ending June 30, 1995.
NOTE 2- BALANCE SHEET
At September 30, 1994, deferred interest income of $24,928,000 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $24,928,000.
NOTE 3- INVESTMENT SECURITIES
Effective with the beginning of fiscal year 1995, the Company adopted FAS
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (the "Statement"). The Statement requires certain
disclosures for investments in debt and equity securities regardless of
maturity. The Company had previously classified investments with original
maturities of three months or less as cash and cash equivalents. The
Statement requires that all investments be classified as trading
securities, available-for-sale securities and held-to-maturity
securities. Under the criteria established by the Statement, the Company
has classified all of its investments as available-for-sale securities.
The Statement requires that available-for-sale securities be reported at
fair value and that the unrealized gain or loss be reported as a separate
component of stockholders' equity (net of the effect of income taxes)
until the investments are sold. At the time of the sale, the respective
gain or loss, calculated by the specific identification method, will be
recognized as a component of operating results.
The following is a summary of investment securities as of June 30, 1994:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available-for-sale securities
Mortgage-backed
securities $22,203,000 $38,000 $ -0- $22,241,000
</TABLE>
The estimated fair value of the available-for-sale securities at June 30,
1994, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
Cost Fair Value
<S> <C> <C>
Available-for-sale securities
Due in 3 months or less $12,798,000 $12,835,000
Due after 3 months and less than
one year 9,405,000 9,406,000
$22,203,000 $22,241,000
</TABLE>
Investment income for the three months ended June 30, 1994 consisted of
the following:
<TABLE>
<S> <C>
Interest income $ 113,000
Gross realized gains 262,000
$ 375,000
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4- NOTES PAYABLE TO BANK
In December 1993, the Company entered into an agreement, as amended in
November 1994, 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
January 31, 1995. The financial institution which issued the Note has
agreed to finance the Lease on a nonrecourse basis through the due date
of the Note.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended September 30, 1994 and 1993
REVENUES. Total revenues for the three months ended September 30,
1994 were $44,725,000, a decrease of $1,021,000 or 2.2% as compared to
the three months ended September 30, 1993. The decrease from the prior
year was primarily the result of decreases in sales of equipment. Sales
of equipment decreased by $969,000 or 2.4% to $38,534,000 in the quarter
ended September 30, 1994 as compared to $39,503,000 in the quarter ended
September 30, 1993. The Company believes the decrease in sales of
equipment was primarily due to the continued effect of the low
productivity of the sales force during the last half of fiscal 1994.
Interest income for the quarter ended September 30, 1994 decreased by
$375,000 or 6.2% to $5,719,000 as compared to $6,094,000 in the same
quarter in the prior year. The three months ended September 30, 1994 and
1993 included amounts of $3,182,000 and $2,996,000, 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 September 30, 1994, net of interest income on
discounted lease rentals assigned to lenders, decreased by $561,000 or
18.1% as compared to the three months ended September 30, 1993. This
decrease is primarily the result of lower interest income from investment
in lease receivables. Investment income increased by $307,000 or 451.5%
to $375,000 as compared to $68,000 for the same period in the prior year.
This increase can be attributed to higher investment in securities during
the three months ended September 30, 1994. Rental income increased by
$16,000 or 19.8% to $97,000 in the three months ended September 30, 1994
as compared to $81,000 for the three months ended September 30, 1993 due
to a slight increase in the number of operating leases.
GROSS PROFIT. Gross profit for the quarter ended September 30, 1994
of $7,479,000, or 16.7% of total revenues, increased by $964,000 or 14.8%
as compared to $6,515,000, or 14.2% of total revenues, for the quarter
ended September 30, 1993. The principal factor which contributed to
increased gross profit were higher profits from lease extensions and
upgrades, which was somewhat offset by lower net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 7.2% and
6.1% for the quarters ended September 30, 1994 and 1993, respectively.
Selling, general and administrative expenses increased by $421,000 or 15%
primarily due to increases in sales and other personnel levels and their
related office costs.
TAXES. The Company's tax rate was 39.5% and 36.5% for the quarters
ended September 30, 1994 and 1993, respectively, representing its
estimated annual tax rate for the years ending June 30, 1995 and 1994.
The increased tax rate in the current period reflects changes in the
Federal statutory tax rate, various State tax rates and the expiration of
certain tax benefits.
(continued)
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
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. The Company generally 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. At
September 30, 1994, the Company had outstanding nonrecourse debt
aggregating $222,308,000 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 in December 1993 which is secured
by an in-process lease transaction. The Company has a nonrecourse debt
commitment from the same financial institution to finance the lease
transaction once the lease transaction is completed. The lease is
anticipated to be assigned on a nonrecourse basis prior to the due date
of the note and the commencement of the assignment, at which time the
recourse note will be paid in full.
From time to time, the Company retains equipment leases in its own
portfolio rather than assigning the leases to financial institutions.
During the three months ended September 30, 1994, the Company increased
its net investment in leases held in its own portfolio by $7,517,000 from
June 30, 1994. This increase was primarily due to an increased volume of
new lease transactions held by the Company in its own portfolio.
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 September 30, 1994 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. Under this authorization 100,678 shares remain available for
repurchase.
The need for cash used for operating activities will continue to
grow as the Company expands. The Company believes that existing cash
balances, cash flows from operations, cash flows from its financing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
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
September 30, 1994.
<PAGE>
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: November 08, 1994 BY: S. LESLIE JEWETT /s/
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
