UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[Fee Required]
For the fiscal year ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in its charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 Hutton Centre Drive, Suite 500
Santa Ana, CA 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)751-7551
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
(Title of each class)
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
and 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. __________________
The aggregate market value of the Common Stock held by nonaffiliates
of the Registrant as of September 15, 1995 was $34,396,408.
Number of shares outstanding as of September 15, 1995:
Common Stock 5,867,959.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from Registrant's
definitive Proxy Statement to be filed with the Commission within 120
days after the close of the Registrant's fiscal year.
Total Number of Pages ___________
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 2
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Item 8. Financial Statements and Supplementary Data 10-24
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 25
PART III
Item 10. Directors and Executive Officers of the Registrant 25
Item 11. Executive Compensation 25
Item 12. Security Ownership of Certain Beneficial Owners
and Management 25
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 26
Signatures 27
Schedule 28
Exhibit Index 29-31
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
General
Amplicon leases and sells mid-range computers, peripherals,
workstations, personal computer networks, telecommunications equipment,
computer automated design and manufacturing equipment, office automation
equipment, computer software and other items of personal property to
customers located throughout the United States. The Company was
incorporated in California in 1977. Unless the context otherwise
requires, the terms "Amplicon" and "Company" as used herein refer to
Amplicon, Inc. and its subsidiaries.
Mid-Range Computers and Computer Networks. The Company concentrates
on the market for mid-range computers and computer networks since this
market is particularly receptive to leasing services. A growing portion
of the Company's business consists of personal computers, workstations,
printers, and software which are integrated into complete networks. Mid-
range computers generally cost between $100,000 and $750,000 and are used
primarily by subsidiaries and divisions of large companies to supplement
mainframe computer systems, by middle-market companies for centralized
data processing, and to upgrade personal computer networks. Mid-range
computer systems typically consist of a central processing unit, multiple
display terminals, printers, disk and tape drives, communications
equipment and operating software. Computer networks typically consist of
a central server, which may be a mid-range computer or high-end
microcomputer, multiple personal computers and workstations, network
communications hardware and software, printers and associated products
for microcomputer based networks. Computer networks generally range in
cost from $100,000 to $3,000,000.
Mid range systems and computer networks are modular and can be
expanded to satisfy additional data processing requirements and perform
additional functions by upgrading the central processing unit and/or
server, and adding data storage devices and workstations to support
additional users. Advances in microcomputer technology and enhancements
to the capabilities of mid-range computer systems have led to the
development of systems that better integrate data processing with word
processing, file and retrieval systems, and electronic mail. The Company
leases and sells mid-range computer systems manufactured primarily by
International Business Machines Corporation ("IBM"), Digital Equipment
Corporation ("DEC"), and Hewlett-Packard Co. ("HP"). Vendors of computer
network products include IBM and HP, as well as AST Research, Compaq,
Gateway, among many others, and software vendors such as Microsoft and
Novell.
Other Electronic Equipment. Advances in microcomputer technology
have also expanded the scope of other electronic equipment utilized by
Amplicon's existing and targeted customer base. Amplicon leases and
sells telecommunications equipment, computer automated design and
computer automated manufacturing ("CAD/"CAM") equipment, and office
automation equipment. The telecommunications equipment leased by the
Company consists primarily of digital private branch equipment, switching
equipment and voice mail systems manufactured by American Telephone &
Telegraph Company, Rolm Corporation and International Telephone &
Telegraph Company and generally costs between $50,000 and $500,000. The
CAD/CAM systems leased by the Company include those produced by IBM,
Hewlett Packard, and Sun Microsystems, Inc. and cost between $50,000 and
$700,000 per system. The Company also leases word processing systems,
copying equipment, retail point of sale equipment and bank automatic
teller machines.
Production Equipment and Other Personal Property. The Company is
leasing an increasing amount of technology related manufacturing and
distribution management systems. These systems include complex computer
controlled manufacturing equipment, printing presses and warehouse
distribution systems. In addition, the Company leases a wide variety of
personal property in the "non-high technology" area, including
manufacturing equipment, trucks and office furniture.
Software. Amplicon leases specialized application software
packages. These application software packages typically cost between
$50,000 and $500,000. In addition to leasing stand-alone software
packages, an increasing percentage of the cost of mid-range computer
systems and networks consists of operating and application software.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
Marketing Strategy
The Company has developed and refined a direct marketing system
utilizing a centralized telemarketing program. The program includes a
system which creates and maintains a data base of current and potential
users of personal property, a comprehensive formal training program to
introduce new marketing employees to Amplicon's telemarketing techniques,
and an in-house computer and telecommunications system.
The Company implemented its current marketing system after having
determined that a centralized telemarketing program would be more cost
effective than field sales representatives. The use of telemarketing
techniques rather than field sales representatives has enabled the
Company to limit selling, general and administrative expenses to seven
percent (7%) or less of revenues during each of its last five fiscal
years and, consequently, allows the Company to offer more competitive
rates to its customers.
Amplicon identifies potential customers through a variety of
methods. The Company purchases lists of computer users from private
sources, conducts direct mail and telephone campaigns to generate sales
leads, and maintains records of contacts made with potential customers by
its account executives. In 1991, Amplicon installed a personal computer
network, and in 1995, installed new prospect management software to
further enhance the productivity of the sales force. Specific information
about potential customers is entered into an on-line data base accessible
to each account executive through the personal computer network. As
potential customers are contacted by account executives, the database is
updated and supplemented with information about what computer and other
equipment they are using, related lease expiration dates and any future
equipment needs or replacement plans. The data base allows account
executives to identify efficiently the most likely purchaser or lessee of
equipment and to concentrate efforts on these prospective customers.
Amplicon's data base, combined with the prospect management
software, and an integrated in-house telecommunications system, permit
the Company's sales management to monitor account executive activity,
daily prospect status and pricing information. The ability to monitor
account activity and offer immediate assistance in negotiating or pricing
a transaction makes it possible for Amplicon to be responsive to its
customers and potential customers.
Leasing and Sales Activities
The Company's leases are generally for terms ranging from two to
five years. All of the Company's leases are noncancelable "net" leases
which contain "hell-or-high-water" provisions under which the lessee must
make all lease payments regardless of any defects in the equipment, and
which require the lessee to maintain and service the equipment, insure
the equipment against casualty loss and pay all property, sales and other
taxes on the equipment. The Company retains ownership of the equipment it
leases, and in the event of default by the lessee, the Company or the
lender to whom the lease had been assigned may declare the lessee in
default, accelerate all lease payments due under the lease and pursue
other available remedies, including repossession of the equipment. Upon
the expiration of the leases, the lessee typically has an option, which
is dependent upon each lease's defined end of term options, to either
purchase the equipment at a mutually agreeable price, or in the case of a
"conditional sales contract", at a predetermined minimum price, or to
renew the lease. If the purchase option is not exercised by the original
lessee, once the equipment is returned to the Company, the Company will
endeavor to locate a new lessee -- however, if a new lessee cannot be
located then the Company seeks to sell the equipment. The terms of the
Company's software leases are substantially similar to its equipment
leases.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
Leasing and Sales Activities (Continued)
The Company conducts its leasing business in a manner designed to
conserve its working capital and minimize its credit exposure. The
Company does not purchase equipment until it has received a noncancelable
lease from its customer and, generally, has determined that the lease can
be discounted with a bank or financial institution on a nonrecourse
basis. Accordingly, a substantial portion of the Company's leases are
discounted to banks or finance companies on a nonrecourse basis at fixed
interest rates that reflect the customers' financial condition.
Approximately 88.8% and 91.4% of the total dollar amount of new leases
entered into by the Company during the fiscal years ended June 30, 1995
and 1994, respectively, were discounted to financial institutions. The
lender to which a lease has been assigned has no recourse against the
Company, unless the Company is in default of the terms under the
agreement by which a lease was assigned to the lender. The lender to
which a lease has been assigned may take title to the leased equipment in
the event the lessee fails to make lease payments or initiates certain
other defaults under the terms of the lease. If this occurs, the Company
may not realize its residual investment in the leased equipment.
From time to time, the Company invests cash generated from its
activities into lease transactions meeting credit standards set by the
Company. Some of these transactions are entered into when the value of
the underlying property, or the profile rating of the lessee, would not be
acceptable to a financial institution for purposes of making a
nonrecourse loan to the Company. Each of these transactions must meet or
exceed certain profitability requirements as established, on a case by
case basis, by the Company's executive management. In addition the
Company invests in lease transactions which the Company believes could be
placed at a later date with nonrecourse lenders on a lease by lease basis
or in a portfolio debt placement or securitization. At June 30, 1995 and
1994, the discounted minimum lease payments receivable relative to leases
maintained in the Company's portfolio amounted to $32,107,922 and
$31,123,678, respectively.
Customers
The Company's customers are primarily subsidiaries and divisions of
Fortune 1000 companies and middle-market companies with credit ratings
acceptable to the lenders providing nonrecourse loans. The Company does
not believe that theloss of any one customer would have a material
adverse effect on its operations taken as a whole.
Competition
The Company competes in the distribution and lease financing of mid-
range computer equipment and software and other equipment with equipment
brokers and dealers, leasing companies, banks and other financial
institutions and credit corporations which are affiliated with equipment
manufacturers, such as, IBM, DEC and HP. The Company believes that there
is increased competition for new business and that such competition is
heightened during periods when key vendors introduce significant new
products. Changes by the manufacturers of equipment leased by the Company
with respect to pricing, maintenance or marketing practices could
materially affect the Company. In addition, if credit corporations
affiliated with manufacturers become more aggressive with respect to the
financing terms offered, the Company's operations could be adversely
affected. Many of the Company's competitors have substantially greater
resources, capital, and more extensive and diversified operations than
Amplicon. The Company believes the principal competitive factors in the
industry which it serves are price, responsiveness to customer needs,
flexibility in structuring financing arrangements, financial technical
proficiency and the offering of a broad range of financial options.
Employees
The Company, as of June 30, 1995, had 195 employees, including 127
sales managers and account executives and 14 professionals engaged in
finance and credit. None of the Company's employees is represented by a
labor union. The Company believes that its relations with its employees
are satisfactory.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. PROPERTIES
At June 30, 1995, Amplicon occupied approximately 35,000 square feet
of office space in Santa Ana, California leased from unaffiliated
parties. The leases which cover the majority of the office space provide
for monthly rental payments which average $48,555 from July 1995 through
February 1998.
ITEM 3. LEGAL PROCEEDINGS
The Company is sometimes named as a defendant in litigation relating
to the services it provides. Management does not expect the outcome of
any existing suit to have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of Amplicon, Inc. trades on the NASDAQ Stock Market
under the symbol AMPI. The following high and low closing sale prices for
the periods shown reflect interdealer prices without retail markup,
markdown or commissions and may not necessarily reflect actual
transactions.:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal year ended June 30, 1995
First Quarter $21.50 $18.00
Second Quarter 18.75 17.50
Third Quarter 17.875 16.25
Fourth Quarter 16.25 14.00
Fiscal year ended June 30, 1994
First Quarter $20.00 $18.00
Second Quarter 20.25 18.25
Third Quarter 21.50 18.75
Fourth Quarter 21.50 20.00
</TABLE>
The Company had approximately 50 stockholders of record and in
excess of 500 beneficial owners as of September 15, 1995.
In September 1994, after considering the Company's profitability,
liquidity and future operating cash requirements, the Board of Directors
authorized a regular quarterly cash dividend policy. The first quarterly
cash dividend was $.05 per common share and issued on October 7, 1994 to
stockholders of record at the close of business on September 23, 1994.
During the fiscal year ended June 30, 1995 the Company declared cash
dividends totaling $.20 per common share.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data
and operating information of the Company. The selected consolidated
financial data should be read in conjunction with the Consolidated
Financial Statements and notes thereto and Management's Discussion and
Analysis of Results of Operations and Financial Condition contained
herein.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
INCOME STATEMENT DATA 1995 1994 1993 1992 1991
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales of equipment $178,413 $156,740 $139,384 $103,969 $132,414
Interest and investment
income 25,794 24,357 23,697 25,668 22,161
Rental income 2,313 263 747 803 1,153
Total revenues 206,520 181,360 163,828 130,440 155,728
Gross profit 32,751 29,453 26,083 23,194 20,312
Earnings before income taxes 19,088 17,352 15,421 14,487 12,118
Net earnings $ 11,548 $ 11,019 $ 9,793 $ 9,111 $ 7,440
COMMON SHARE DATA
Net earnings per share $ 1.97 $ 1.89 $ 1.68 $ 1.57 $ 1.26
Weighted average number of
common shares outstanding 5,860 5,849 5,831 5,813 5,925
Cash dividends per share $ .20 $ -0- $ -0- $ -0- $ -0-
SELECTED ANNUAL GROWTH RATES
Sales of equipment 14% 12% 34% (21)% ( 7)%
Total revenues 14 11 26 (16) ( 2)
Net interest and investment
income ( 4) 4 ( 5) 22 28
Gross profit 11 13 12 14 10
Net earnings 5 13 7 22 32
Net earnings per share 4 13 7 25 35
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
BALANCE SHEET DATA 1995 1994 1993 1992 1991
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total assets $404,516 $384,584 $347,308 $307,529 $306,399
Note payable to bank -0- 10,000 -0- -0- -0-
Nonrecourse debt 238,614 225,746 211,191 193,611 192,748
Stockholders' equity 91,364 80,875 69,772 59,955 50,724
Book value per common share $ 15.57 $ 13.81 $ 11.96 $ 10.29 $ 8.75
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fiscal Years Ended June 30, 1995 and 1994
REVENUES. Total revenues for the fiscal year ended June 30, 1995
were $206,520,250, an increase of $25,159,959 or 13.9% from the prior
year. This change was primarily the result of increases in sales of
equipment of $21,672,608 and rental income of $2,050,314. The Company
believes the increase in sales of equipment was primarily due to
increased effectiveness of a larger and more experienced salesforce at
obtaining new business. Interest income for the fiscal year ended June
30, 1995 increased to $24,760,159 as compared to $24,003,426 for the
fiscal year ended June 30, 1994, partially due to higher interest income
on discounted lease rentals assigned to lenders (which is offset by
interest expense on nonrecourse debt) of $13,580,355 in the fiscal year
ended June 30, 1995 versus $11,659,414 for the prior year. Investment
income for fiscal year ended June 30, 1995 increased by $680,304 to
$1,033,771 as compared to $353,467 in the prior year primarily as a
result of the Company maintaining higher investment balances throughout
fiscal year 1995.
Net interest income (interest and investment income less interest
expense on discounted lease rentals assigned to lenders) for the fiscal
year ended June 30, 1995 decreased by $483,904 or 3.8% to $12,213,575 as
compared to $12,697,479 for fiscal year ended June 30, 1994. This net
decrease resulted primarily from lower interest income earned on the
lease portfolio as more cash was invested in lower yielding investment
securities.
Rental income for the fiscal year ended June 30, 1995 of $2,313,374
increased by $2,050,314 as compared to the fiscal year ended June 30,
1994, as a result of increases in the volume of short-term lease renewals
and increases in post term renewal rentals.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1995
increased by $3,297,460, or 11.2%, to $32,750,884 compared to $29,453,424
for the fiscal year ended June 30, 1994. Gross profit as a percent of
total revenues decreased to 15.9% of total revenues for fiscal 1995
compared to 16.2% of total revenues for the prior year. Additionally, the
cost of equipment sold as a percentage of sales of equipment increased to
89.7% for the fiscal year ended June 30, 1995 versus 89.4% for the fiscal
year ended June 30, 1994. The principal factors which contributed to
higher gross profit were increased profits from lease renewals,
extensions and sales of equipment at the end of the lease term and greater
income earned on new lease transactions, offset by, decreases in net
interest income as described above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 6.5% for
the fiscal year ended June 30, 1995 as compared to 6.6% for the fiscal
year ended June 30, 1994. Selling, general and administrative expenses
for the fiscal year ended June 30, 1995 increased by $1,585,026 or 13.3%
as compared to the prior year. This increase resulted primarily from
higher sales and finance staff personnel costs, and higher variable
office costs related to the greater business volume.
INTEREST EXPENSE-OTHER. Interest expense-other was $149,967 for the
year ended June 30, 1995 as compared to $174,059 for the year ended June
30, 1994. The decrease of $24,092 is primarily the result of lower fiscal
year 1995 interest assessments made as the result of regulatory audits
with various federal, state and local agencies.
TAXES. The Company's tax rate was 39.5% and 36.5% for the fiscal
years ended June 30, 1995 and 1994, respectively, representing its
estimated annual tax rates for the years ending June 30, 1995 and 1994.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
Results of Operations (continued)
Fiscal Years Ended June 30, 1994 and 1993
REVENUES. Total revenues for the fiscal year ended June 30, 1994
were $181,360,291, an increase of $17,532,061 or 10.7% from the prior
year. This change was primarily the result of increases in sales of
equipment of $17,355,868 and interest income of $660,362 offset by lower
rental income of $484,169. The Company believes the increase in sales of
equipment was primarily due to increased effectiveness of a larger and
more experienced salesforce at obtaining new business. Interest and
investment income for the fiscal year ended June 30, 1994 increased to
$24,356,893 as compared to $23,696,531 for the fiscal year ended June 30,
1993, partially due to higher interest income on discounted lease rentals
assigned to lenders (which is offset by interest expense on nonrecourse
debt) of $11,659,414 in the fiscal year ended June 30, 1994 versus
$11,452,119 for the prior year.
Net interest income (interest and investment income less interest
expense on discounted lease rentals assigned to lenders) for the fiscal
year ended June 30, 1994 increased by $453,067 or 3.7% to $12,697,479 as
compared to $12,244,412 for fiscal year ended June 30, 1993. This net
increase resulted primarily from higher amortization of deferred income
and increases in interest accretion due to a larger residual value base.
Rental income for the fiscal year ended June 30, 1994 of $263,060
decreased by $484,169 or 64.8% as compared to the fiscal year ended June
30, 1993, as a result of decreases in the volume of short-term lease
renewals.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1994
increased by $3,370,357, or 12.9%, to $29,453,424 compared to $26,083,067
for the fiscal year ended June 30, 1993. Gross profit as a percent of
total revenues increased to 16.2% of total revenues for fiscal 1994
compared to 15.9% of total revenues for the prior year. Additionally, the
cost of equipment sold as a percentage of sales of equipment decreased to
89.4% for the fiscal year ended June 30, 1994 versus 90.6% for the fiscal
year ended June 30, 1993. The principal factors which contributed to
higher gross profit were increased profits from lease renewals and
extensions, sales of equipment at the end of the lease term and increases
in net interest income as described above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 6.6% for
the fiscal year ended June 30, 1994 as compared to 6.5% for the fiscal
year ended June 30, 1993. Selling, general and administrative expenses
for the fiscal year ended June 30, 1994 increased by $1,354,840 or 12.8%
as compared to the prior year. This increase resulted primarily from
higher sales and finance staff personnel costs, higher variable office
costs related to the greater business volume and additions made to the
management organization to support future growth.
INTEREST EXPENSE-OTHER. Interest expense-other was $174,059 for the
year ended June 30, 1994 as compared to $89,067 for the year ended June
30, 1993. The increase of $84,992 is primarily the result of greater
fiscal year 1994 interest assessments made as the result of regulatory
audits with various federal, state and local agencies.
TAXES. The Company's tax rate was 36.5% for the fiscal years ended
June 30, 1994 and 1993, respectively, representing its estimated annual
tax rates for the years ending June 30, 1994 and 1993. The Company
expects that its tax rate for fiscal years beginning after July 1, 1994
will increase to reflect, as applicable, changes in the Federal statutory
tax rate, various State tax rates and the expiration of certain tax
benefits.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
Liquidity 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. The lease payments are discounted at
fixed rates such that the lease payments are sufficient to fully amortize
the aggregate outstanding debt. The Company does not purchase equipment
until it has received a noncancelable lease from its customer and,
generally, has determined that the lease can be discounted on a
nonrecourse basis. At June 30, 1995, the Company had outstanding
nonrecourse debt aggregating $238,614,209 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 (the "Note") which
was secured by an in process lease transaction. Prior to the due date of
the Note the lease was assigned on a nonrecourse basis at which time the
Note was paid in full (see Note 4 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 fiscal year 1995, the Company increased its net investment in
leases held in its own portfolio by $984,293. This increase was primarily
due to a higher percentage of lease extensions which are retained in the
Company's 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 June 30, 1995, 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. During the year ended June 30, 1995, the Company did not
repurchase any shares. During the year ended June 30, 1994, the Company
repurchased 10,000 shares at an aggregate cost of $188,750. As of
September 15, 1995, 100,678 shares remain available under this
authorization.
The need for cash used for operating activities will continue to
grow as the Company expands. The Company believes that existing cash
balances, cash flow from operations, cash flows from its financing and
investing 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
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary
financial information are included herein at the pages indicated below:
Page Number
Report of Independent Public Accountants 11
Consolidated Balance Sheets at June 30, 1995 and 1994 12
Consolidated Statements of Earnings for the years ended
June 30, 1995, 1994 and 1993 13
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1995, 1994 and 1993 14
Consolidated Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 15
Notes to Consolidated Financial Statements 16-24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Amplicon, Inc.:
We have audited the accompanying consolidated balance sheets of
Amplicon, Inc. (a California corporation) and subsidiaries as of June
30, 1995 and 1994, and the related consolidated statements of
earnings, stockholders' equity and cash flows for the years ended June
30, 1995, 1994 and 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Amplicon,
Inc. and subsidiaries as of June 30, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in
the period ended June 30, 1995, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in
the index of financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. This schedule
has been subjected to the auditing procedures applied in our audits
the basic financial statements and, in our opinion, fairly states in
all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP /s/
Irvine, California
August 11, 1995
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
ASSETS 1995 1994
<S> <C> <C>
Cash and cash equivalents (Notes 1 & 8) $ 6,311,688 $ 10,255,360
Investment securities (Notes 8 & 9) 9,243,797 19,079,554
Net receivables (Note 2) 55,993,943 39,905,181
Inventories, primarily customer deliveries in process 5,651,210 4,975,392
Net investment in capital leases (Note 3) 59,068,566 59,304,999
Equipment on operating leases, less accumulated
depreciation of $173,647 (1995) and $211,848 (1994) 36,009 50,364
Other assets 1,395,035 1,074,912
Discounted lease rentals assigned to lenders (Note 3) 66,815,903 249,938,300
$404,516,151 $384,584,062
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable to bank (Notes 4 & 8) $ -0- $ 10,000,000
Accounts payable 13,393,415 14,246,006
Accrued liabilities 3,809,317 3,149,416
Customer deposits 6,851,718 7,369,952
Nonrecourse debt (Note 3) 238,614,209 225,746,187
Deferred interest income (Note 5) 28,201,694 24,192,113
Net deferred income (Note 5) 1,912,671 3,743,479
Income taxes payable, including deferred taxes
(Note 6) 20,369,450 15,261,498
313,152,474 303,708,651
Commitments and contingencies (Note 10)
Stockholders' equity (Notes 4 & 7):
Preferred stock; 2,500,000 shares
authorized; none issued -0- -0-
Common stock; $.01 par value; 20,000,000 shares
authorized; 5,867,959 (1995) and 5,857,022 (1994)
issued and outstanding 58,680 58,570
Additional paid in capital 6,091,910 6,001,240
Retained earnings 85,191,545 74,815,601
Investment securities valuation adjustment
(Note 9) 21,542 -0-
91,363,677 80,875,411
$404,516,151 $384,584,062
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Sales of equipment $178,412,946 $156,740,338 $139,384,470
Interest income (Notes 1, 3 & 5) 24,760,159 24,003,426 23,316,170
Investment income (Note 9) 1,033,771 353,467 380,361
Rental income 2,313,374 263,060 747,229
206,520,250 181,360,291 163,828,230
Costs:
Cost of equipment sold 160,065,968 140,186,036 126,276,178
Interest expense on nonrecourse
debt (Notes 1, 3 & 5) 13,580,355 11,659,414 11,452,119
Depreciation of equipment on
operating leases 123,043 61,417 16,866
173,769,366 151,906,867 137,745,163
Gross profit 32,750,884 29,453,424 26,083,067
Selling, general and administrative
expenses 13,512,852 11,927,826 10,572,986
Interest expense-other 149,967 174,059 89,067
Earnings before income taxes 19,088,065 17,351,539 15,421,014
Income taxes (Note 6) 7,540,000 6,333,000 5,628,000
Net earnings $ 11,548,065 $ 11,018,539 $ 9,793,014
Net earnings per common share $ 1.97 $ 1.89 $ 1.68
Dividends declared per common share
outstanding $ .20 $ -0- $ -0-
Weighted average number of common
shares outstanding 5,859,898 5,848,594 5,830,561
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Investment
Additional securities
Common Stock paid in Retained valuation
Shares Amount capital earnings adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1992 5,825,536 $58,255 $5,892,528 $54,004,048 $ -0- $59,954,831
Shares issued -
Stock options
exercised 11,642 117 68,185 -0- -0- 68,302
Shares repurchased ( 2,322) ( 23) (43,965) -0- -0- ( 43,988)
Net Earnings -0- -0- -0- 9,793,014 -0- 9,793,014
Balance,
June 30, 1993 5,834,856 58,349 5,916,748 63,797,062 -0- 69,772,159
Shares issued -
Stock options
exercised 32,166 321 273,142 -0- -0- 273,463
Shares Repurchased ( 10,000) ( 100)( 188,650) -0- -0- ( 188,750)
Net earnings -0- -0- -0- 11,018,539 -0- 11,018,539
Balance,
June 30, 1994 5,857,022 58,570 6,001,240 74,815,601 -0- 80,875,411
Shares issued -
Stock options
exercised 10,937 110 90,670 -0- -0- 90,780
Dividends declared -0- -0- -0- ( 1,172,121) -0- ( 1,172,121)
Investment securities
valuation
adjustment -0- -0- -0- -0- 21,542 21,542
Net earnings -0- -0- -0- 11,548,065 -0- 11,548,065
Balance,
June 30, 1995 5,867,959 $58,680 $6,091,910 $85,191,545 $21,542 $91,363,677
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 11,548,065 $ 11,018,539 $ 9,793,014
Adjustments to reconcile net earnings
to cash flows used for operating activities:
Depreciation 123,043 61,417 16,866
Sale or lease of equipment previously
on operating leases, net 14,200 13,646 59,867
Interest accretion of estimated
unguaranteed residual values ( 3,136,893) ( 3,115,186) ( 2,869,943)
Estimated unguaranteed residual
values recorded on leases ( 5,325,599) ( 7,733,445) ( 6,406,835)
Interest accretion of net deferred
income ( 556,823) ( 984,918) ( 1,241,855)
(Decrease) increase in net
deferred income ( 1,273,986) 2,691,736 1,424,429
Net increase in income taxes payable,
including deferred taxes 5,107,952 988,676 2,992,800
Net increase in net receivables ( 16,088,762) ( 6,835,242) ( 19,260,057)
Net (increase) decrease in inventories ( 675,817) 865,601 ( 2,972,596)
Net (decrease) increase in accounts
payable and accrued liabilities ( 192,690) ( 6,493,379) 9,300,441
Net cash used for operating activities ( 10,457,310) ( 9,522,555) ( 9,163,869)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments -0- -0- 2,513,813
Purchases of available-for-sale
securities (236,143,494) (197,206,966) -0-
Proceeds from sale of available-
for-sale securities 246,000,793 178,127,412 -0-
Net increase in minimum lease
payments receivable ( 984,293) ( 23,476,863) ( 27,353,268)
Purchase of equipment on operating
leases ( 122,889) ( 61,433) ( 57,372)
Net (increase) decrease in other assets( 320,123) 67,181 ( 97,312)
Decrease in estimated unguaranteed
residual values 9,683,219 7,313,130 4,580,601
Net cash provided by (used for)
investing activities 18,113,213 ( 35,237,539) ( 20,413,538)
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals -0- 23,406,774 36,346,343
(Payment) borrowing on note payable
secured by lease ( 10,000,000) 10,000,000 -0-
Payments to repurchase common stock -0- ( 188,750) ( 43,988)
Payments to reduce nonrecourse debt,
excluding lease rentals assigned
to lenders -0- -0- ( 10,159)
(Decrease) increase in customer
deposits ( 518,234) 3,440,128 837,047
Dividends to stockholders ( 1,172,121) -0- -0-
Proceeds from exercise of stock options 90,780 273,463 68,302
Net cash (used for) provided by
financing activities ( 11,599,575) 36,931,615 37,197,545
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 3,943,672) ( 7,828,479) 7,620,138
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,255,360 18,083,839 10,463,701
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 6,311,688 $ 10,255,360 $18,083,839
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to
lenders and related nonrecourse debt $ 12,868,022 $ 14,555,482 $17,589,394
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 149,967 $ 174,059 $ 88,725
Income taxes $ 3,034,283 $ 5,366,715 $ 2,635,200
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1995
Note 1 - Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
For purposes of these statements, cash and cash equivalents includes cash
in banks and cash in demand deposit accounts.
Leases
Capital Leases
The Company engages in the lease and sale of computer hardware and
software, and other equipment. The discounted value of the aggregate
lease rentals is recorded as sales revenue. Equipment cost, less the
discounted value of the residual, if any, is recorded as cost of sales.
Except for capital lease transactions in which the Company no longer has
a continuing interest in the leased equipment, the Company defers gross
profit on new capital leases through a reduction of sales revenue
recognized at lease origination. Gross profit which is deferred together
with the unearned interest income (and interest expense if assigned) is
recognized as interest income (and expense) over the lease term based on
an internal rate of return method. The Company recognizes certain interim
rentals received prior to commencement of capital leases as operating
income.
At the time of closing capital leases, the Company records on its balance
sheet the present value of the lease receivable as minimum lease payments
receivable and, if appropriate, the estimated residual value of the
leased property. The Company typically assigns, on a nonrecourse basis,
the noncancelable lease rentals to financial institutions at fixed
interest rates. When leases are assigned to financial institutions,
without recourse, the discounted value of the lease rentals is recorded
on the balance sheet as discounted lease rentals assigned to lenders. The
related obligation resulting from the discounting of the leases is
recorded as nonrecourse debt. In the event of default by a lessee, the
lender has a first lien against the underlying leased property, with no
further recourse against the Company.
A portion of the Company's selling, general and administrative costs
directly related to originating capital lease transactions during the
period is deferred as an increase in revenues and amortized over the
lease term utilizing the effective interest method. See Note 5.
Operating Leases
Lease contracts which do not meet the criteria of capital leases are
accounted for as operating leases. Property on operating leases is
recorded at cost and depreciated on a straight-line basis over the lease
term to the estimated residual value at the termination of the lease.
Rental income is recorded monthly or quarterly when due. Selling costs
directly associated with the operating leases are deferred and amortized
over the lease term.
Inventories
Inventories, which primarily represent partial deliveries of property on
in-process lease transactions whereby the lessee is legally obligated to
accept, are stated at the lower of cost (first-in, first-out method) or
market value.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Earnings per Common Share
Net earnings per common share are computed based on the weighted average
number of common shares outstanding during each fiscal year (5,859,898 in
1995, 5,848,594 in 1994 and 5,830,561 in 1993).
Reclassifications
Certain reclassifications have been made to the fiscal 1994 and 1993
consolidated financial statements to conform with the presentation of the
fiscal 1995 consolidated financial statements.
Note 2 - Receivables:
The Company's net receivables consist of the following:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Financial institutions $42,061,586 $32,241,312
Lessees 12,179,795 7,640,218
Other 2,590,919 868,976
56,832,300 40,750,506
Less allowance for doubtful accounts ( 838,357) ( 845,325)
Net receivables $55,993,943 $39,905,181
</TABLE>
Note 3 - Capital Leases:
The Company's net investment in capital leases consists of the
following:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Minimum lease payments receivable, less
allowance for doubtful accounts of
$856,585 and $475,000, respectively $36,009,508 $34,370,750
Estimated unguaranteed residual value,
less valuation allowance of $542,274
in each year 33,758,208 35,252,670
69,767,716 69,623,420
Less unearned income ( 10,699,150) ( 10,318,421)
Net investment in capital leases $59,068,566 $59,304,999
</TABLE>
The interest rates used to discount lease payments reflect the
underlying lease rates and range from 6.35% to 14.50%.
The estimated unguaranteed residual value represents the estimated
amount to be received at lease termination from the disposition of
equipment under the capital leases, discounted using the internal rate of
return related to each specific capital lease.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1995, a summary of the installments due on minimum lease
payments receivable and the expected realization of the Company's
estimated unguaranteed residual value is as follows:
<TABLE>
<CAPTION>
Estimated
Minimum unguaranteed
Years ending lease payments residual
June 30, receivable value Total
<S> <C> <C> <C>
1996 $18,611,609 $11,204,093 $ 9,815,702
1997 9,947,068 8,691,983 18,639,051
1998 4,350,613 7,219,014 11,569,627
1999 1,550,656 3,711,688 5,262,344
2000 1,215,604 1,934,686 3,150,290
Thereafter 333,958 996,744 1,330,702
36,009,508 33,758,208 69,767,716
Less unearned income ( 3,901,536) ( 6,797,614) ( 10,699,150)
Net investment in capital leases and
estimated unguaranteed residual
value excluding deferred interest
income $32,107,972 $26,960,594 $59,068,566
</TABLE>
Nonrecourse debt, which relates to the discounting of capital lease
receivables, bears interest at rates ranging from 5.87% to 16.0%.
Maturities of such obligations at June 30, 1995 are as follows:
<TABLE>
<CAPTION>
Years ending Capital
June 30, leases
<S> <C>
1996 $100,282,007
1997 71,649,712
1998 38,872,073
1999 18,034,025
2000 6,646,485
Thereafter 3,129,907
Total nonrecourse debt 238,614,209
Deferred interest (Note 5) 28,201,694
Total discounted lease rentals assigned to lenders $266,815,903
</TABLE>
Note 4 - Notes Payable to Bank:
In August 1993 and as amended in December 1994, the Company
negotiated a $20,000,000 general business loan agreement (the "Agreement")
with a Bank. The Agreement, which provides for borrowings at the Bank's
reference rate or the Bank's Offshore rate plus 1.25%, allows for advances
through December 31, 1996 with rollover provisions to a term note,
provided certain conditions are met by the Company. The term note is to be
secured by certain qualifying leases and is to bear interest at the Bank's
reference rate plus .50% or the Bank's Offshore rate plus 1.75%. The term
note requires repayment in three equal quarterly installments of one
eighth of the outstanding balance at the expiration date, commencing
April 1, 1997, and one final payment on December 31, 1997 for the remaining
balance.
The Agreement is unsecured and excludes any arrangements for
compensating balances; however, the Bank requires a commitment fee on the
daily average unused amount of the Bank's $20,000,000 commitment. Under
the provisions of the Agreement, the Company must maintain certain net
worth requirements, a defined debt to net worth ratio and a defined ratio
of certain assets to defined debt. As of June 30, 1995 and 1994 there
were no outstanding balances on this Agreement.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 was secured by an in-process lease transaction (the "Lease"). This
Lease was secured by an $11,000,000 letter of credit issued by a different
financial institution. Interest was payable monthly commencing January 15,
1994 and the Note was due on January 31, 1995. The financial institution
which issued the Note has financed the Lease on a nonrecourse basis at
which time the Note was paid in full.
Note 5 - Deferred Interest Income and Net Deferred Income:
At June 30, 1995, deferred interest income of $28,201,694 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $28,201,694. See Note 3.
At June 30, 1995, the expected recognition of net deferred income
(deferred gross margin of $7,818,864 less deferred selling expenses of
$5,906,193) on the Company's future statements of earnings is as follows:
<TABLE>
<CAPTION>
Years ending
June 30,
<S> <C>
1996 $1,207,371
1997 436,845
1998 138,139
1999 88,971
2000 33,766
Thereafter 7,579
$1,912,671
</TABLE>
Note 6 - Income Taxes:
Effective July 1, 1993, the Company adopted Financial Accounting
Standards No. 109 on Accounting for Income Taxes ("SFAS No. 109"). Among
other provisions, this standard requires deferred tax balances to be
determined using the enacted income tax rate for the years in which taxes
will be paid or refunds received. The adoption of SFAS No. 109 did not
result in a charge to net income in 1994. Prior year financial statements
were not restated to reflect the new accounting standard.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Years ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Current tax expense:
Federal $4,618,165 $2,667,000 $3,161,000
State 2,032,998 600,000 1,000,000
6,651,163 3,267,000 4,161,000
Deferred tax expense:
Federal 750,594 2,371,000 1,360,000
State 138,243 695,000 107,000
888,837 3,066,000 1,467,000
$7,540,000 $6,333,000 $5,628,000
</TABLE>
Deferred taxes result principally from the method of recording lease
income on capital leases and depreciation methods for tax reporting, which
differ from financial statement reporting.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the deferred income tax provision (benefit) for
the year ended June 30, 1995 are as follows:
<TABLE>
<CAPTION>
1995
<S> <C>
Tax operating leases $669,126
Deferred selling expenses ( 90,508)
Allowances and reserves ( 514,163)
Alternative minimum tax credits 957,968
Depreciation other than on operating leases ( 45,519)
State income taxes ( 88,067)
Deferred tax expense $888,837
</TABLE>
Deferred income tax liabilities (assets) are composed of the
following:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Deferred income tax liabilities:
Tax operating leases $22,068,849 $21,637,389
Deferred selling expenses 2,421,539 2,512,047
Payments due 3,458,971 -0-
Total liabilities 27,949,359 24,149,436
Deferred income tax assets:
Allowances and reserves ( 1,629,348) ( 1,115,185)
Minimum tax credits/carryforwards ( 5,559,133) ( 6,517,101)
Refunds due -0- ( 997,810)
Depreciation other than on operating leases ( 183,760) ( 138,241)
State income taxes ( 207,668) ( 119,601)
Total assets ( 7,579,909) ( 8,887,938)
Net deferred income tax liabilities $20,369,450 $15,261,498
</TABLE>
The sources of differences between the federal statutory income tax
rate and the Company's effective tax rate are as follows:
<TABLE>
<CAPTION>
Years ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 34.0%
State tax, net of federal benefit 4.8 4.8 4.8
Other ( .3) ( 3.3) ( 2.3)
Effective rate 39.5% 36.5% 36.5%
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Capital Structure:
In September 1986, the Board of Directors and stockholders approved
an increase in the number of authorized shares of common stock to
20,000,000. The Board of Directors and stockholders further authorized the
issuance of 2,500,000 shares of preferred stock from time to time in one
or more series and to fix the voting powers, designations, preferences and
the relative participating, optional or other rights, if any, of any
wholly unissued series of preferred stock.
In September 1984, the Company's stockholders approved a Stock Option
Plan (the "Plan"), which, as amended, provides that stock options may be
granted to officers, employees, consultants and other persons who have
made, or will make, major contributions toward the growth and development
of the Company. Stock options that are granted may entitle the recipient
to purchase shares of the Company's common stock at prices greater than,
equal to or less than the estimated fair market value at the date of the
grant. Under the Plan, stock options become exercisable over a three or
five year period, commencing with the first anniversary of the date of the
grant, and expire ten years from the date of the grant. The Company has
reserved 650,000 shares of common stock for issuance under the Plan.
The following table summarizes the activity in the Plan for the
periods indicated:
<TABLE>
<CAPTION>
Exercise
Options price Options
outstanding per share exercisable
<S> <C> <C> <C>
Outstanding at June 30, 1992 336,133 $ .28 - 15.00
Granted 100,500 11.75 - 19.50
Canceled ( 8,734) 7.00 - 13.00
Exercised ( 11,642) 1.68 - 9.50
Outstanding at June 30, 1993 416,257 .28 - 19.50
Granted 124,667 18.00 - 20.25
Canceled ( 52,867) 7.00 - 20.25
Exercised ( 32,166) 7.00 - 17.25
Outstanding at June 30, 1994 455,891 .28 - 20.25
Granted 149,000 15.75 - 21.00
Canceled (124,604) .28 - 20.25
Exercised ( 10,937) 1.68 - 13.00
Outstanding at June 30, 1995 469,350 $ 7.00 - 21.00 219,013
</TABLE>
Note 8 - Fair Value of Financial Instruments:
The Company has estimated the fair value of its financial instruments
in compliance with Financial Accounting Standards No. 107 on Disclosure
About Fair Value of Financial Instruments. The estimates were made as of
June 30, 1995 and 1994 based on relevant market information at these
respective times.
Fair value is a subjective and imprecise measurement that is based on
assumptions and market data which require significant judgement and may
only be valid at a particular point in time. The use of different market
assumptions or valuation methodologies may have a material effect on the
estimated fair value amounts. Accordingly, management cannot provide
assurance that the fair values presented are indicative of the amounts
that the Company could realize in a current market exchange.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair value of financial instruments and the valuation
techniques used to estimate the fair value were as follows:
<TABLE>
<CAPTION>
June 30,
1995 1995 1994 1994
Estimated Estimated
Book Value Fair Value Book Value Fair Value
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 6,311,688 $ 6,311,688 $10,255,360 $10,255,360
Investment securities 9,222,255 9,243,797 19,079,554 19,152,485
Financial Liabilities:
Note payable to bank -0- -0- 10,000,000 10,000,000
</TABLE>
Cash and Cash Equivalents: For cash, the book value is a reasonable
estimate of fair value. For cash equivalents the estimated fair value is
based on the respective market prices.
Investment Securities: The fair value of investment securities is based
upon the criteria established under SFAS 115 (see Note 9). Book value is
based upon cost.
Note Payable to Bank: The fair value of the Note payable to bank
approximated book value because the interest rate on this instrument
adjusts with changes in market interest rates due to its short-term
maturity.
The fair value of the Company's net investment in capital leases is
not a required disclosure under SFAS No. 107.
Note 9 - Investment Securities
Effective with the beginning of fiscal year 1995, the Company adopted
SFAS 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 of 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, 1995:
<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 $ 7,262,255 $21,542 $ -0- $ 7,283,797
Corporate debt securities 1,960,000 -0- -0- 1,960,000
$ 9,222,255 $21,542 $ -0- $ 9,243,797
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair value of the available-for-sale securities at June 30,
1995, by contractual maturity, are shown below.
Cost Fair Value
Available-for-sale securities
Due in 3 months or less $ 9,222,255 $ 9,243,797
Investment income for the year ended June 30, 1995 consisted of the
following:
<TABLE>
<CAPTION>
June 30, 1995
<S> <C>
Interest income $ 655,716
Gross realized gains 378,055
$1,033,771
</TABLE>
Note 10 - Commitments and Contingencies:
Leases
The Company leases its corporate offices under several operating
leases which all expire in fiscal 1998. Rent expense was $472,036 (1995),
$419,526 (1994) and $427,327 (1993).
Future minimum lease payments under operating leases are as follows:
<TABLE>
<CAPTION>
Years Ending Future Minimum
June 30, Lease Payments
<S> <C>
1996 $ 629,580
1997 645,324
1998 411,847
$1,686,751
</TABLE>
Litigation
The Company has been named in lawsuits arising out of the Company's
normal business activities. The Company is vigorously defending such
actions. Management does not expect the outcome of any of these lawsuits,
individually and in the aggregate, to have a material adverse effect on
the financial condition and results of operations of the Company.
401(k) Plan
Effective July 1, 1992, employees of the Company may participate in a
voluntary defined contribution plan (the "401K Plan") qualified under
Section 401(k) of the Internal Revenue Code of 1986. Under the 401K Plan,
employees who have met certain age and service requirements may contribute
up to a certain percentage of their compensation. The Company will make
contributions equal to 25 percent of employee contributions which will
completely vest over a seven year period. The Company has made
contributions during the years ended June 30, 1995, 1994, and 1993 of
$38,183, $39,602, and $27,622, respectively.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Selected Quarterly Financial Data (Unaudited):
Summarized quarterly financial data for the fiscal years ended
June 30, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30, December 31, March 31, June 30,
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
1995
Total revenues $44,725 $51,637 $53,503 $56,655
Gross profit 7,479 8,068 8,389 8,815
Net earnings 2,511 3,001 2,940 3,096
Net earnings per common share $ .43 $ .51 $ .50 $ .53
Dividends declared per
common share $ .05 $ .05 $ .05 $ .05
1994
Total revenues $45,746 $50,398 $49,090 $36,126
Gross profit 6,515 7,224 7,749 7,965
Net earnings 2,344 2,712 2,999 2,964
Net earnings per common share $ .40 $ .47 $ .51 $ .51
Dividends declared per
common share $ -0- $ -0- $ -0- $ -0-
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1995 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1995 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1995 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1995 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report
(1) Financial Statements
All financial statements of the Registrant as set forth under
Part II Item 8 of this report on Form 10-K
(2) Financial Statement Schedules:
Schedule Number Description Page Number
II. Valuation and Qualifying Accounts.............28
All other schedules are omitted because of the absence of
conditions under which they are required or because all material
information required to be reported is included in the consolidated
financial statements and notes thereto.
(3) Exhibits:
See Index to Exhibits filed as part of this Form 10-K 29-31
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter
of fiscal 1995.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
By S. Leslie Jewett /s/ Date: September 27, 1995
S. Leslie Jewett
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each of
Patrick E. Paddon, S. Leslie Jewett and Glen T. Tsuma as attorney-in-fact
to sign on his behalf, individually in each capacity stated below, and to
file all amendments and/or supplements to this Annual Report on Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant in the capacities and on the dates indicated.
Signature Title Date
Patrick E. Paddon /s/ President, Chief Executive September 27, 1995
Patrick E. Paddon Officer and Director
Glen T. Tsuma /s/ Vice President, Treasurer, Chief September 27, 1995
Glen T. Tsuma Operating Officer and Director
S. Leslie Jewett /s/ Chief Financial Officer September 27, 1995
S. Leslie Jewett
Michael H. Lowry /s/ Director September 27, 1995
Michael H. Lowry
Harris Ravine /s/ Director September 27, 1995
Harris Ravine
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance Charged to Accounts Balance
Beginning Costs and Written at End of
of Period Expenses Off Period
<S> <C> <C> <C> <C>
Year ended June 30, 1993:
Allowance for doubtful accounts $1,020,125 $ -0- $ -0- $1,020,125
Allowance for valuation of
unguaranteed residual value $ 394,403 $ -0- $ -0- $ 394,403
Year ended June 30, 1994:
Allowance for doubtful accounts $1,020,125 $ 300,200 $ -0- $1,320,325
Allowance for valuation of
unguaranteed residual value $ 394,403 $ 147,871 $ -0- $ 542,274
Year ended June 30, 1995:
Allowance for doubtful accounts $1,320,325 $ 381,085 $ 6,468 $1,694,942
Allowance for valuation of
unguaranteed residual value $ 542,274 $ -0- $ -0- $ 542,274
</TABLE>
Note: The allowance for doubtful accounts includes balances related to
receivables and capital leases described in Notes 2 and 3 of the Notes to
Consolidated Financial Statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
3.1 Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to
Registrant's Registration Statement on Form S-1
File No. 33-9094 (the "Registration Statement on
Form S-1"))
3.2 Certificate of Amendment of Articles of
Incorporation of the Company, filed April 15, 1988
(incorporated by reference to Exhibit 3.2 to
Registrant's 1988 Form 10-K)
3.3 Bylaws of the Company (incorporated by reference
to Exhibit 3.3 to the Registration
Statement on Form S-1)
3.4 Amendment and Restatement of Article VI of the
Bylaws of the Company (incorporated by reference
to Exhibit 3.4 to Registrant's 1988 Form 10-K)
10.1 1984 Stock Option Plan, as amended to date
(incorporated by reference to Exhibit 10.1 to
Registrant's Statement on Form S-8 File No. 33-27283)
10.2 Master Agreement for Lease Arrangement Transactions,
dated as of October 14, 1985, between the Company
and Chrysler Financial Corporation (incorporated
by reference to Exhibit 10.4 to the Registration
Statement on Form S-1)
10.3 Master Loan Agreement, dated as of July 18, 1986,
between the Company and General Electric Credit
Corporation (incorporated by reference to Exhibit
10.5 to the Registration Statement
on Form S-1)
10.4 Master Agreement for Rental Payment Purchase
Transactions, dated as of July 8, 1982, between the
Company and Wells Fargo Bank, N.A. (incorporated
by reference to Exhibit 10.6 to the Registration
Statement on Form S-1)
10.5 Form of Assignment of Lease - Without Recourse
between the Company and CIT
Group/Equipment Financing, Inc. (incorporated by
reference to Exhibit 10.10 to the Registration
Statement on Form S-1)
10.6 Form of Assignment of Lease - Without Recourse between
the Company and CircleBusiness Credit, Inc. (incorporated by
reference to Exhibit 10.11 to the Registration Statement on
Form S-1)
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
10.7 Master Agreement for Rental Payment Purchase
Transactions, dated as of February 27, 1990, between
the Company and Security Pacific Credit Corporation
(incorporated by reference to Exhibit 10.7 to the
Registrant's 1990 Form 10-K)
10.8 Credit Agreement, dated as of April 13, 1990 (the "Credit
Agreement), between the Company and Security Pacific
National Bank (now Bank of America National Trust and
Savings Association, and together with Security Pacific
National Bank, "Bank of America") (incorporated by
reference to Exhibit 10.8 to the Registrant's 1990 Form
10-K)
10.9 First Amendment to the Credit Agreement, dated
November 19, 1990, between the Company and Bank
of America (incorporated by reference to Exhibit 10.9
to the Registrant's 1991 Form 10-K)
10.10 Second Amendment to the Credit Agreement, dated
December 17, 1991, between the Company and Bank
of America (incorporated by reference to Exhibit 10.10
to the Registrant's 1992 Form 10-K)
10.11 Third Amendment to the Credit Agreement, dated
February 25, 1992, between the Company and Bank
of America (incorporated by reference to Exhibit 10.11
to the Registrant's 1992 Form 10-K)
10.12 Fourth Amendment to the Credit Agreement, dated
April 27, 1992, between the Company and Bank
of America (incorporated by reference to Exhibit 10.12
to the Registrant's 1992 Form 10-K)
10.13 Sublease Agreement and Amendment No. 1, dated October 31,
1990 and November 28, 1990, respectively, between the
Company and Griffin Financial Services (incorporated by
reference to Exhibit 10.13 to the Registrant's 1992
Form 10-K)
10.14 Fifth Amendment to the Credit Agreement, dated
June 28, 1993, between the Company and Bank of America
(incorporated by reference to Exhibit 10.14 to the
Registrant's 1993 Form 10-K)
10.15 Business Loan Agreement, dated as of August 12, 1993,
between the Company and Bank of America (incorporated
by reference to Exhibit 10.15 to the Registrant's
1993 Form 10-K)
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
10.16 Security Agreement dated as of December 23, 1993
and all amendments C, D, & E, dated April 19, 1994,
July 18, 1994 and August 30, 1994, respectively
between the Company and The CIT Group/Equipment
Financing, Inc. (incorporated by reference to Exhibit
10.16 to the Registrant's 1994 Form 10-K.
10.17 Amendment One to Business Loan Agreement,
dated as of December 16, 1994, between the
Company and Bank of America. 32-33
11 Computation of Earnings per Share of Common
Stock 34
22 List of Subsidiaries (incorporated by reference
to Exhibit 22 to the Registrant's 1988 Form 10-K)
AMENDMENT NO. ONE TO LOAN AGREEMENT
This Amendment No. One (the "Amendment") dated as of
December 16, 1994, is between Bank of America National Trust and Savings
Association (the "Bank") and Amplicon, Inc. (the "Borrower").
RECITALS
A. The Bank and the Borrower entered into a certain Loan
Agreement dated as of August 12, 1993 (the "Agreement").
B. The Bank and the Borrower desire to amend the
Agreement.
AGREEMENT
1. Definitions. Capitalized terms used but not defined
in this Amendment shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as
follows:
2.1 Paragraph 1.2 is amended by substituting the date
"December 31, 1996" for the date "December 31, 1994" appearing therein.
2.2 Paragraph 1.4 (b) is amended by substituting the date
"April 1, 1997" for the date "April 1, 1995" appearing therein and by
substituting the date "December 31, 1997" for the date "December 31,
1995" appearing therein.
2.3 The following Paragraph 7.2(h) is hereby added to the
Agreement:
"(h) Within 100 days of the Borrower's 1995 fiscal year
end, a financial forecast for the next two fiscal years to
include a balance sheet, income and expense information, and
cash flow, along with the underlying assumptions in the format
previously provided to Bank.
2.4 Paragraph 7.3 is hereby amended in full to read
as follows:
"7.3 Tangible Net Worth. To maintain on a consolidated
basis tangible net worth equal to at least Seventy Five Million
Dollars ($75,000,000) from September 30, 1994, increasing on a
cumulative basis on the first day of each calendar quarter,
commencing April 1, 1995 by an amount equal to 50% of the
positive net income for previous calendar quarter."
3. Representations and Warranties. When the Borrower
signs this Amendment, the Borrower represents and warrants to the Bank
that: (a) there is no event which is, or with notice or lapse of time or
both would be, a default under the Agreement, and (b) the representations
and warranties in the Agreement are true as of the date of this Amendment
as if made on the date of this Amendment, (c) this Amendment is within
the Borrower's powers, has been duly authorized, and does not conflict
with any of the Borrower's organizational papers, and (d) this Amendment
does not conflict with any law, agreement, or obligation by which the
Borrower is bound.
<PAGE>
4. Conditions. This Amendment will be effective when
the Bank receives the following items, in form and content acceptable to
the Bank:
4.1 This Amendment executed by the Borrower.
5. Effect of Amendment. Except as provided in this
Amendment, all of the terms and conditions of the Agreement shall remain
in full force and effect.
This Amendment is executed as of the date stated at the
beginning of this Amendment.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: Deborah L. Miller /s/
Deborah L. Miller
Title: Vice President
AMPLICON, INC.
By: Patrick E. Paddon /s/
Patrick E. Paddon
Title: President and Chief Executive Officer
By: Glen T. Tsuma /s/
Glen T. Tsuma
Title: Vice President and Chief
Operating Officer
AMPLICON, INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Years Ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Net earnings $11,548,065 $11,018,539 $9,793,014
Weighted average number of common
shares outstanding assuming no
exercise of outstanding options 5,859,898 5,848,594 5,830,561
Dilutive stock options using the
treasury stock method (A) (A) (A)
5,859,898 5,848,594 5,830,561
Net earnings per common share $ 1.97 $ 1.89 $ 1.68
</TABLE>
(A) Dilution is less than 3% and deemed immaterial; therefore, stock
options are not included for earnings per share calculation.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 6312
<SECURITIES> 9243
<RECEIVABLES> 92841
<ALLOWANCES> 1695
<INVENTORY> 5651
<CURRENT-ASSETS> 0
<PP&E> 3313
<DEPRECIATION> 2052
<TOTAL-ASSETS> 404516
<CURRENT-LIABILITIES> 44424
<BONDS> 0
<COMMON> 59
0
0
<OTHER-SE> 91305
<TOTAL-LIABILITY-AND-EQUITY> 404516
<SALES> 178413
<TOTAL-REVENUES> 206520
<CGS> 160066
<TOTAL-COSTS> 173769
<OTHER-EXPENSES> 13513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150
<INCOME-PRETAX> 19088
<INCOME-TAX> 7540
<INCOME-CONTINUING> 11548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11548
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.97
</TABLE>
