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 March 31, 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 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 April 29, 1994
Common Stock, $.01 par value 5,850,222
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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 - March 31, 1994
(unaudited) and June 30, 1993 3
Consolidated Statements of Earnings - Three months and nine months
ended March 31, 1994 and 1993 (unaudited) 4
Consolidated Statements of Cash Flows - Nine months
ended March 31, 1994 and 1993 (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 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)
March 31, June 30,
ASSETS 1994 1993
<S> <C> <C>
Cash and cash equivalents $ 4,111,000 $ 18,084,000
Short term investments, at cost which
approximates market -0- -0-
Net receivables 57,259,000 33,070,000
Inventories, primarily customer deliveries
in process 1,341,000 5,841,000
Net investment in capital leases 75,963,000 59,052,000
Net equipment on operating leases 52,000 64,000
Other assets 1,009,000 1,142,000
Discounted lease rentals assigned to lenders 233,538,000 233,408,000
$373,273,000 $350,661,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable secured by lease (Note 3) $ 10,000,000 $ -0-
Accounts payable 18,218,000 19,696,000
Accrued liabilities 3,155,000 4,192,000
Customer deposits 6,602,000 3,930,000
Nonrecourse debt 211,135,000 211,191,000
Deferred and net interest income 32,742,000 27,607,000
Income taxes payable, including deferred
taxes 13,613,000 14,273,000
295,465,000 280,889,000
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; 5,847,022 and 5,834,856
issued and outstanding, as of
March 31, 1994 and June 30, 1993,
respectively 58,000 58,000
Additional paid in capital 5,897,000 5,917,000
Retained earnings 71,853,000 63,797,000
77,808,000 69,772,000
$373,273,000 $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 Nine Months Ended
March 31, March 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Sales of equipment $ 43,426 $ 34,588 $127,091 $104,266
Interest income 5,646 5,745 17,978 18,073
Rental income 18 178 165 532
49,090 40,511 145,234 122,871
Costs:
Cost of equipment sold 38,610 30,948 115,168 94,906
Interest expense on nonrecourse
debt 2,686 2,848 8,526 8,643
Depreciation of equipment
on operating leases 45 4 53 17
41,341 33,800 123,747 103,566
Gross profit 7,749 6,711 21,487 19,305
Selling, general and administrative
expenses 2,945 2,783 8,639 7,787
Interest expense-other 81 8 162 76
Earnings before income taxes 4,723 3,920 12,686 11,442
Income taxes 1,724 1,431 4,630 4,176
Net earnings $ 2,999 $ 2,489 $ 8,056 $ 7,266
Net earnings per common share $ .51 $ .43 $ 1.38 $ 1.25
Weighted average number of common
shares outstanding 5,851 5,832 5,847 5,830
<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>
Nine Months Ended March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 8,056,000 $ 7,266,000
Adjustments to reconcile net earnings to cash
flows used for operating activities:
Depreciation 53,000 17,000
Sale or lease of equipment previously on
operating leases, net 12,000 19,000
Interest accretion of estimated unguaranteed
residual values ( 2,272,000) ( 2,118,000)
Estimated unguaranteed residual values
recorded on leases ( 5,769,000) ( 4,029,000)
Interest accretion of net deferred income ( 726,000) ( 1,010,000)
Increase in net deferred income 1,136,000 332,000
Net (decrease) increase in income taxes payable,
including deferred taxes ( 659,000) 2,112,000
Net increase in net receivables ( 26,991,000) ( 6,460,000)
Net decrease in inventories 4,500,000 1,658,000
Net (decrease) increase in accounts payable and
accrued liabilities ( 2,515,000) 1,433,000
Net cash used for by operating activities ( 25,175,000) ( 780,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments -0- 2,514,000
Net increase in minimum lease payments
receivable ( 12,692,000) ( 21,865,000)
Purchase of equipment on operating leases ( 53,000) ( 19,000)
Net decrease (increase) in other assets 133,000 ( 98,000)
Decrease in estimated unguaranteed residual
values 4,000,000 2,219,000
Net cash used for investing activities ( 8,612,000) ( 17,249,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals 7,162,000 19,080,000
Increase in note payable secured by lease 10,000,000 -0-
Payments to repurchase common stock ( 188,000) ( 32,000)
Payments to reduce nonrecourse debt, excluding
lease rentals assigned to lenders -0- ( 10,000)
Increase in customer deposits 2,672,000 435,000
Proceeds from exercise of stock options 168,000 38,000
Net cash provided by financing activities 19,814,000 19,511,000
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 13,973,000) 1,482,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,084,000 10,464,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,111,000 $ 11,946,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to lenders and related
nonrecourse debt $ 56,000 $ 2,824,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 162,000 $ 75,000
Income taxes $ 5,312,000 $ 2,064,000
<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 rec
alance sheet as of March 31, 1994 and the statements of earnings for the three
and nine month periods ended March 31, 1994 and 1993
March 31, 1994 and 1993. The results of operations for the nine month period
ended March 31, 1994 are not necessarily indicative of
cal year ending June 30, 1994.
NOTE 2- BALANCE SHEET
At March 31, 1994, deferred and net interest income of $32,742,000 is offset by
deferred interest expense related to the discounted
gned to lenders of $22,402,000.
NOTE 3- NOTE PAYABLE SECURED BY LEASE
In December 1993, the Company entered into an agreement, as amended in
April 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 July 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.
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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 March 31, 1994 and 1993
REVENUES. Total revenues for the three months ended March 31, 1994 were
$49,090,000, an increase of $8,579,000 or 21.2% as compared to the three months
ended March 31, 1993. The increase from the prior year was primarily the result
of increases in sales of equipment. Sales of equipment increased by $8,837,000
or 25.6% to $43,426,000 in the quarter ended March 31, 1994 as compared to
$34,588,000 in the quarter ended March 31, 1993. 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 offset
somewhat by rising interest rates. Interest income for the quarter ended
March 31, 1994 decreased by $99,000 or 1.7% to $5,646,000 as compared to
$5,745,000 in the same quarter in the prior year. The three months ended
March 31, 1994 and 1993 included amounts of $2,687,000 and $2,848,000,
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 March 31, 1994, net of interest expense on discounted
lease rentals assigned to lenders, increased by $62,000 or 2.1% as compared to
the three months ended March 31, 1993. This increase is primarily the result of
modest increases in interest accretion due to the growth in the base of residual
values and deferred income offset by lower interest income on short term cash
investments. Rental income decreased by $160,000 or 89.8% to $18,000 in the
three months ended March 31, 1994 as compared to $178,000 for the three months
ended March 31, 1993.
GROSS PROFIT. Gross profit for the quarter ended March 31, 1994 of $7,749,000,
or 15.8% of total revenues, increased by $1,038,000 or 15.5% as compared to
$6,711,000, or 16.6% of total revenues, for the quarter ended March 31, 1993.
The principal factors which contributed to increased gross profit were higher
profits from lease extensions and upgrades, and to a small extent, greater
profits on new lease transactions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 6.0% and 6.9% for
the quarters ended March 31, 1994 and 1993, respectively. Selling, general and
administrative expenses increased by $162,000 or 5.8% primarily due to increases
in sales and other personnel levels and their related office costs.
TAXES. The Company's tax rate was 36.5% for the quarters ended March 31, 1994
and 1993 representing its estimated annual tax rate for the years ending
March 31, 1994 and 1993.
Nine months Ended March 31, 1994 and 1993
REVENUES. Total revenues for the nine months ended March 31, 1994 were
$145,234,000, an increase of $22,363,000 or 18.2% as compared to the nine months
ended March 31, 1993. The increase from the prior year was primarily the result
of increases in sales of equipment. Sales of equipment increased by $22,826,000
or 18.2% to $127,091,000 in the nine months ended March 31, 1994 as compared to
$104,266,000 in the same period ended March 31, 1993. 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 nine months ended March 31, 1994 decreased by $96,000 or 0.5% to
$17,978,000 as compared to $18,073,000 in the same period in the prior year. The
nine months ended March 31, 1994 and 1993 included amounts of $8,526,000 and
$8,643,000, respectively, of interest income on discounted lease rentals
assigned to lenders (which is offset by interest expense on nonrecourse debt).
Interest income for the nine months ended March 31, 1994, net of interest
expense on discounted lease rentals assigned to lenders, increased by $22,000
or 0.1% as compared to the nine months ended March 31, 1993. This modest
increase is primarily the result of higher interest accretion from growth in the
residual value and deferred income bases offset by lower interest income from
short term cash investments. Rental income decreased by $367,000 or 69.0% to
$165,000 in the nine months ended March 31, 1994 as compared to $532,000 for the
nine months ended March 31, 1993.
(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 nine months ended March 31, 1994 of
$21,487,000, or 14.8% of total revenues, increased by $2,183,000 or 11.3% as
compared to $19,305,000, or 15.7% of total revenues, for the nine months ended
March 31, 1993. The principal factors which contributed to increased gross
profit were higher proceeds from lease extensions and upgrades and to a lesser
extent, higher profits from new lease transactions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 6.0% and 6.3% for
the nine months ended March 31, 1994 and 1993, respectively. Selling, general
and administrative expenses increased by $852,000 or 10.9% primarily due to
increases in sales and other personnel levels and their related office costs.
TAXES. The Company's tax rate was 36.5% for the nine months ended
March 31, 1994 and 1993 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 March 31, 1994 the Company's financing of lease transactions in
process increased by $20,673,000 to $47,284,000 as compared to $26,611,000 at
June 30, 1993. At March 31, 1994, the Company had outstanding nonrecourse debt
aggregating $211,135,000 relating to equipment under capital and operating
leases. In the past, the Company has been able to obtain adequate nonrecourse
funding committments, 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 committment 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, respectively, at which time the note 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 nine
months ended March 31, 1994 the Company increased its net investment in leases
held in its own portfolio by $12,870,000. The increase reflects a higher volume
of lease transactions retained in the Company's portfolio, in line with the
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 March 31, 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. 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 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
March 31, 1994.
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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: May 5, 1994 BY: S. LESLIE JEWETT /s/
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
