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, 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 January 20, 1995
Common Stock, $.01 par value 5,859,722
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1994
(unaudited) and June 30, 1994 3
Consolidated Statements of Earnings - Three months and six months
ended December 31, 1994 and 1993 (unaudited) 4
Consolidated Statements of Cash Flows - Six months
ended December 31, 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 8-10
PART II. OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
December 31, June 30,
ASSETS 1994 1994
<S> <C> <C>
Cash and cash equivalents $ 10,875,000 $ 10,255,000
Investment securities 8,741,000 19,080,000
Net receivables 46,622,000 39,905,000
Inventories, primarily customer deliveries
in process 3,346,000 4,975,000
Net investment in capital leases 64,112,000 59,305,000
Net equipment on operating leases 54,000 51,000
Other assets 1,392,000 1,075,000
Discounted lease rentals assigned to lenders 250,778,000 249,938,000
$385,920,000 $384,584,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable to bank $ 10,000,000 $ 10,000,000
Accounts payable 8,070,000 14,246,000
Accrued liabilities 3,379,000 3,149,000
Customer deposits 6,555,000 7,370,000
Nonrecourse debt 225,092,000 225,746,000
Deferred interest income 25,686,000 24,192,000
Net deferred income 4,471,000 3,744,000
Income taxes payable, including
deferred taxes 16,835,000 15,262,000
300,088,000 303,709,000
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;
5,857,522 and 5,857,022 issued and
outstanding, as of December 31, 1994 and
June 30, 1994, respectively 59,000 59,000
Additional paid in capital 6,007,000 6,001,000
Retained earnings 79,742,000 74,815,000
Investment securities valuation adjustment 24,000 -0-
85,832,000 80,875,000
$385,920,000 $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)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Sales of equipment $44,896 $44,163 $83,430 $83,665
Interest income 6,069 6,060 11,788 12,155
Investment income 224 109 599 177
Rental income 448 66 544 147
51,637 50,398 96,361 96,144
Cost of equipment sold 40,368 40,327 74,430 76,558
Interest expense on
nonrecourse debt 3,198 2,844 6,380 5,839
Depreciation of equipment
on operating leases 3 3 5 8
43,569 43,174 80,815 82,405
Gross profit 8,068 7,224 15,546 13,739
Selling, general and
administrative expenses 3,087 2,880 6,321 5,694
Interest expense-other 21 73 114 82
Earnings before income taxes 4,960 4,271 9,111 7,963
Income taxes 1,959 1,559 3,599 2,907
Net earnings $ 3,001 $ 2,712 $ 5,512 $ 5,056
Net earnings per common share $ .51 $ .47 $ .94 $ .87
Dividends declared per common
share outstanding $ .05 $ -0- $ .10 $ -0-
Weighted average number of common
shares outstanding 5,857 5,847 5,857 5,845
</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>
Six Months Ended December 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,512,000 $ 5,056,000
Adjustments to reconcile net earnings to cash flows
provided by (used for) operating activities:
Depreciation 5,000 8,000
Sale or lease of equipment previously on
operating leases, net 21,000 13,000
Interest accretion of estimated unguaranteed
residual values ( 1,595,000) ( 1,480,000)
Estimated unguaranteed residual values recorded
on leases ( 2,471,000) ( 3,468,000)
Interest accretion of net deferred income ( 330,000) ( 801,000)
Increase in net deferred income 1,057,000 982,000
Net increase (decrease) in income taxes payable,
including deferred taxes 1,573,000 ( 133,000)
Net increase in net receivables ( 6,717,000) ( 11,420,000)
Net decrease in inventories 1,629,000 2,067,000
Net decrease in accounts payable and
accrued liabilities ( 6,238,000) ( 2,774,000)
Net cash used for operating activities ( 7,554,000) ( 11,950,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in minimum lease payments receivable ( 4,360,000) ( 17,995,000)
Purchases of available-for-sale securities (112,910,000) (134,298,000)
Proceeds from sales of available-for-sale
securities 123,273,000 122,897,000
Purchase of equipment on operating leases ( 29,000) ( 11,000)
Net (increase) decrease in other assets ( 317,000) 43,000
Decrease in estimated unguaranteed residual
values 3,619,000 2,064,000
Net cash provided by (used for) investing
activities 9,276,000 ( 27,300,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft -0- 3,743,000
Assignment of discounted lease rentals -0- 7,162,000
Increase in notes payable to bank -0- 13,125,000
Decrease in customer deposits ( 815,000) ( 1,301,000)
Dividends to stockholders ( 293,000) -0-
Proceeds from exercise of stock options 6,000 106,000
Net cash (used for) provided by financing activities( 1,102,000) 22,835,000
NET CHANGE IN CASH AND CASH EQUIVALENTS 620,000 ( 16,415,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,255,000 16,415,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,875,000 $ -0-
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
(Decrease) increase in lease rentals assigned to
lenders and related nonrecourse debt ($654,000) $ 359,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 114,000 $ 82,000
Income Taxes $ 964,000 $ 3,039,000
</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
December 31, 1994 and the statements of earnings for the three and six
month periods ended December 31, 1994 and 1993 and the statements of cash
flows for the six months ended December 31, 1994 and 1993. The results of
operations for the six month period ended December 31, 1994 are not
necessarily indicative of the results of operations to be expected for
the entire fiscal year ending June 30, 1995.
NOTE 2- DEFERRED INTEREST INCOME
At December 31, 1994, deferred interest income of $25,686,000 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $25,686,000.
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 December 31,
1994:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available-for-sale securities
U.S. Treasury securities and
obligations of
U.S. government agencies $8,717,000 $24,000 $ -0- $8,741,000
</TABLE>
The estimated fair value of the available-for-sale securities at
December 31, 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 $8,717,000 $8,741,000
</TABLE>
Investment income for the three and six months ended December 31, 1994
consisted of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
<S> <C> <C>
Interest income $144,000 $257,000
Gross realized gains 80,000 342,000
$224,000 $599,000
</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 December 31, 1994 and 1993
REVENUES. Total revenues for the three months ended December 31,
1994 were $51,637,000, an increase of $1,239,000 or 2.5% as compared to
the three months ended December 31, 1993. The increase from the prior
year was primarily the result of increases in sales of equipment. Sales
of equipment increased by $733,000 or 1.7% to $44,896,000 in the quarter
ended December 31, 1994 as compared to $44,163,000 in the quarter ended
December 31, 1993. Sales from new lease transactions were essentially
unchanged when compared to the prior year, while sales from lease
extensions and property sales were up 10%. Interest income for the
quarter ended December 31, 1994 increased by $9,000 or 0.2% to $6,069,000
as compared to $6,060,000 in the same quarter in the prior year. The
three months ended December 31, 1994 and 1993 included amounts of
$3,198,000 and $2,844,000, 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, 1994, net of interest expense on discounted lease rentals assigned to
lenders, decreased by $345,000 or 12.0% as compared to the three months
ended December 31, 1993. This decrease is primarily the result of lower
interest income from investment in lease receivables. Investment income
increased by $115,000 or 105.5% to $224,000 as compared to $109,000 for
the same period in the prior year. This increase can be attributed to
higher cash balances invested in securities during the three months ended
December 31, 1994. Rental income increased by $382,000 or 578.8% to
$448,000 in the three months ended December 31, 1994 as compared to
$66,000 for the three months ended December 31, 1993 due to an increase
in the number of operating leases.
GROSS PROFIT. Gross profit for the quarter ended December 31, 1994
of $8,068,000, or 15.6% of total revenues, increased by $844,000 or 11.7%
as compared to $7,224,000, or 14.3% of total revenues, for the quarter
ended December 31, 1993. The principal factor which contributed to
increased gross profit were higher profits from lease extensions and
leased property sales and higher profits realized on new lease
transactions, offset by lower net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 6.0% and
5.7% for the quarters ended December 31, 1994 and 1993, respectively.
Selling, general and administrative expenses increased by $207,000 or
7.2% 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 December 31, 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.
Six Months Ended December 31, 1994 and 1993
REVENUES. Total revenues for the six months ended December 31, 1994
were $96,361,000, an increase of $217,000 or 0.2% as compared to the six
months ended December 31, 1993. The increase from the prior year was
primarily the result of increases in rental income. Sales of equipment
decreased by $235,000 or 0.3% to $83,430,000 in the six months ended
December 31, 1994 as compared to $83,655,000 in the same period ended
December 31, 1993. The Company believes the slight decrease in sales of
equipment was primarily due to a decrease in sales from new lease
transactions during the first quarter of fiscal 1995, offset by an
increase in sales from lease extensions and leased property sales.
Interest income for the six months ended December 31, 1994 decreased by
$367,000 or 3.0% to $11,788,000 as compared to $12,155,000 in the same
period in the prior year. The six months ended December 31, 1994 and 1993
included amounts of $6,380,000 and $5,839,000, 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, 1994, net of interest income on discounted
lease rentals assigned to lenders, decreased by $908,000 or 14.4% to
$5,408,000 as compared to $6,316,000 for the six months ended December
31, 1993. This decrease is primarily the result of lower interest income
from the lease portfolio. Investment income increased by $422,000 or
238.4% to $599,000 as compared to $177,000 for the same period in the
prior year. This increase can be attributed to higher investment in
securities during the six months ended December 31, 1994. (continued)
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
REVENUES (continued). Rental income increased by $397,000 or 270.1%
to $544,000 in the six months ended December 31, 1994 as compared to
$147,000 for the six months ended December 31, 1993 due to an increase in
the number of operating leases.
GROSS PROFIT. Gross profit for the six months ended December 31,
1994 of $15,546,000, or 16.1% of total revenues, increased by $1,807,000
or 13.2% as compared to $13,739,000, or 14.3% of total revenues, for the
six months ended December 31, 1993. The principal factors which
contributed to increased gross profit were higher profits from lease
extensions and leased property sales and higher profits realized on new
lease transactions, offset by lower net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 6.6% and
5.9% for the six months ended December 31, 1994 and 1993, respectively.
Selling, general and administrative expenses increased by $627,000 or
11.0% 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 six months
ended December 31, 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.
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
December 31, 1994, the Company had outstanding nonrecourse debt
aggregating $225,092,000 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 six months ended December 31, 1994, the Company increased its
net investment in leases held in its own portfolio by $4,360,000 from
June 30, 1994. This increase was primarily due to an increased volume of
new lease transactions and lease extensions 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 December 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. Under this authorization 100,678 shares remain available for
repurchase.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
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
December 31, 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: January 24, 1995 BY: S. LESLIE JEWETT /s/
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial
and Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 10,875
<SECURITIES> 8,741
<RECEIVABLES> 82,106
<ALLOWANCES> 1,320
<INVENTORY> 3,346
<CURRENT-ASSETS> 0
<PP&E> 3,088
<DEPRECIATION> 1,856
<TOTAL-ASSETS> 385,920
<CURRENT-LIABILITIES> 44,839
<BONDS> 0
<COMMON> 59
0
0
<OTHER-SE> 85,773
<TOTAL-LIABILITY-AND-EQUITY> 385,920
<SALES> 83,430
<TOTAL-REVENUES> 96,361
<CGS> 74,430
<TOTAL-COSTS> 80,815
<OTHER-EXPENSES> 6,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114
<INCOME-PRETAX> 9,111
<INCOME-TAX> 3,599
<INCOME-CONTINUING> 5,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,512
<EPS-PRIMARY> .94
<EPS-DILUTED> .94
</TABLE>
