FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 October 21, 1996
Common Stock, $.01 par value 5,833,959
<PAGE>
AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996
(unaudited) and June 30, 1996 3
Consolidated Statements of Earnings - Three months
ended September 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows - Three months
ended September 30, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited). 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
2
<PAGE>
AMPLICON, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
September 30, June 30,
ASSETS 1996 1996
<S> <C> <C>
Cash and cash equivalents $ 4,158,000 $ 8,614,000
Investment securities 6,134,000 1,182,000
Net receivables 67,777,000 58,777,000
Inventories, primarily customer
deliveries in process 2,931,000 2,456,000
Net investment in capital leases 81,208,000 75,945,000
Net equipment on operating leases -0- 35,000
Other assets 1,492,000 1,437,000
Discounted lease rentals assigned to lenders 319,189,000 313,303,000
$482,889,000 $461,749,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 19,835,000 $ 10,287,000
Accrued liabilities 3,137,000 3,997,000
Customer deposits 8,818,000 7,711,000
Nonrecourse debt 285,162,000 279,109,000
Deferred interest income 34,027,000 34,194,000
Net deferred income 4,861,000 4,279,000
Income taxes payable, including
deferred taxes 21,580,000 19,507,000
377,420,000 359,084,000
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; 5,833,959 and 5,838,959
issued and outstanding, as of September 30,
1996 and June 30, 1996, respectively 58,000 58,000
Additional paid in capital 5,506,000 5,588,000
Retained earnings 99,897,000 97,017,000
Investment securities valuation adjustment 8,000 2,000
105,469,000 102,665,000
$482,889,000 $461,749,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
AMPLICON, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30,
1996 1995
<S> <C> <C>
Revenues:
Sales of equipment $57,137,000 $48,663,000
Interest income 8,775,000 7,333,000
Investment income 117,000 270,000
Rental income 428,000 150,000
66,457,000 56,416,000
Costs:
Cost of equipment sold 51,614,000 43,860,000
Interest expense on nonrecourse debt 4,636,000 3,916,000
Depreciation of equipment on
operating leases 35,000 29,000
56,285,000 47,805,000
Gross profit 10,172,000 8,611,000
Selling, general and administrative
expenses 4,904,000 4,073,000
Interest expense-other 27,000 78,000
Earnings before income taxes 5,242,000 4,460,000
Income taxes 2,070,000 1,806,000
Net earnings $ 3,172,000 $ 2,654,000
Net earnings per common share $ .54 $ .45
Dividends declared per common share $ .05 $ .05
Weighted average number of common shares
outstanding 5,835,318 5,868,676
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
AMPLICON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,172,000 $ 2,654,000
Adjustments to reconcile net earnings to cash flows
(used for) provided by operating activities:
Depreciation 15,000 29,000
Sale or lease of equipment previously on
operating leases, net 20,000 -0-
Interest accretion of estimated unguaranteed
residual values ( 1,076,000) ( 758,000)
Estimated unguaranteed residual values recorded
on leases ( 2,684,000) ( 1,781,000)
Interest accretion of net deferred income ( 925,000) ( 142,000)
Increase in net deferred income 1,507,000 141,000
Net increase (decrease) in income taxes payable,
including deferred taxes 2,073,000 ( 1,334,000)
Net increase in net receivables ( 9,000,000) ( 246,000)
Net (increase) decrease in inventories ( 475,000) 4,647,000
Net increase (decrease) in accounts payable and
accrued liabilities 8,688,000 ( 6,600,000)
Net cash provided by (used for) operating activities 1,315,000 ( 3,390,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (45,635,000) (38,600,000)
Proceeds from sale of available-for-sale
securities 40,689,000 36,454,000
Net increase in minimum lease payments receivable ( 3,593,000) ( 878,000)
Purchase of equipment on operating leases -0- ( 32,000)
Net increase in other assets ( 55,000) ( 180,000)
Decrease in estimated unguaranteed residual values 2,090,000 1,737,000
Net cash used for investing activities ( 6,504,000) ( 1,499,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in customer deposits 1,107,000 1,744,000
Dividends to stockholders ( 292,000) ( 293,000)
Proceeds from exercise of stock options -0- 42,000
Purchase of Common Stock ( 82,000) -0-
Net cash provided by financing activities 733,000 1,493,000
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 4,456,000) ( 3,396,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,614,000 6,312,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,158,000 $ 2,916,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to lenders and related
nonrecourse debt $ 5,886,000 $10,646,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 27,000 $ 78,000
Income taxes $ 62,000 $ 3,140,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
Annual Report on Form 10-K.
In the opinion of management, the unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the balance sheet as of
September 30, 1996 and the statements of earnings and cash flows for the
three month periods ended September 30, 1996 and 1995. The results of
operations for the three month period ended September 30, 1996 are not
necessarily indicative of the results of operations to be expected for
the entire fiscal year ending June 30, 1997.
Reclassifications
Certain reclassifications have been made to the June 30, 1996
consolidated balance sheet to conform with the presentation of the
consolidated balance sheet as of September 30, 1996.
NOTE 2- BALANCE SHEET
At September 30, 1996, deferred interest income of $34,027,000 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $34,027,000.
NOTE 3- 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 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 September 30,
1996 and 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available-for-sale securities
September 30,1996
Mortgage-backed securities $ 2,388,000 $ 4,000 $ -0- $ 2,392,000
Corporate debt securities 3,738,000 4,000 -0- 3,742,000
$ 6,126,000 $ 8,000 $ -0- $ 6,134,000
September 30, 1995
Mortgage-backed securities $ 5,279,000 $ 6,000 $ -0- $ 5,285,000
Corporate debt securities 6,089,000 7,000 -0- 6,096,000
$11,368,000 $13,000 $ -0- $11,381,000
</TABLE>
6
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The estimated fair value of the available-for-sale securities at
September 30, 1996 and 1995, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
September 30, September 30, _
1996 1996 1995 1995
Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
Available-for-sale securities
Due in 3 months or less $ 6,126,000 $ 6,134,000 $11,368,000 $11,381,000
</TABLE>
Investment income for the three months ended September 30, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
September 30,
1996 1995
<S> <C> <C>
Interest income $ 114,000 $ 266,000
Gross realized gains 3,000 4,000
$ 117,000 $ 270,000
</TABLE>
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended September 30, 1996 and 1995
REVENUES. Total revenues for the three months ended September 30,
1996 were $66,457,000, an increase of $10,041,000 or 17.8% as compared
to the three months ended September 30, 1995. The increase from the prior
year was primarily the result of increases in sales of equipment and
interest income. Sales of equipment increased by $8,474,000 or 17.4% to
$57,137,000 in the quarter ended September 30, 1996 as compared to
$48,663,000 in the quarter ended September 30, 1995. The Company believes
the increase in sales of equipment was primarily due to the increased
volume of new lease transactions as well as strong growth in sales from
lease extensions and property sales. Interest income for the quarter
ended September 30, 1996 increased by $1,442,000 or 19.7% to $8,775,000
as compared to $7,333,000 in the same quarter in the prior year. The
three months ended September 30, 1996 and 1995 included amounts of
$4,636,000 and $3,916,000, respectively, of interest income on discounted
lease rentals assigned to lenders (which is offset by interest expense on
nonrecourse debt). Interest income for the three months ended September
30, 1996, net of interest income on discounted lease rentals assigned to
lenders, increased by $722,000 or 21.1% to $4,139,000 as compared to
$3,417,000 for the three months ended September 30, 1995. This increase
is primarily the result of increased accretion of deferred income and
higher interest income realized from a larger investment in residual
values. Investment income decreased by $153,000 or 56.7% to $117,000 as
compared to $270,000 for the same period in the prior year. This decrease
can be attributed to lower investment in securities during the three
months ended September 30, 1996. Rental income increased by $278,000 to
$428,000 in the three months ended September 30, 1996 as compared to
$150,000 for the three months ended September 30, 1995 due to an increase
in the number of short-term lease renewals.
GROSS PROFIT. Gross profit for the quarter ended September 30, 1996
of $10,172,000, or 15.3% of total revenues, increased by $1,561,000 or
18.1% as compared to $8,611,000, or 15.3% of total revenues, for the
quarter ended September 30, 1995. The principal factors which contributed
to increased gross profit were higher profits from lease extensions and
sales of lease property and higher net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues was 7.4% and
7.2% for the quarters ended September 30, 1996 and 1995, respectively.
Selling, general and administrative expenses increased by $831,000 or
20.4% primarily due to higher expenses related to the sales organization
and increased general and legal costs related to the increased volume of
lease transactions.
TAXES. The Company's tax rate was 39.5% for the quarters ended
September 30, 1996 and 1995 representing its estimated annual tax rate
for the years ending June 30, 1997 and 1996.
(continued)
8
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
Financial and Capital Resources
The Company funds its operating activities through nonrecourse debt
and internally generated funds. Capital expenditures for equipment
purchases are primarily financed by assigning the lease payments to banks
or other financial institutions which are discounted at fixed rates such
that the lease payments are sufficient to fully amortize the aggregate
outstanding debt. The Company generally does not purchase property until
it has received a noncancelable lease from its customer and has
determined that the lease can be discounted on a nonrecourse basis. At
September 30, 1996, the Company had outstanding nonrecourse debt
aggregating $285,162,000 relating to property 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.
From time to time, the Company retains leases in its own portfolio
rather than assigning the leases to financial institutions. During the
three months ended September 30, 1996, the Company increased its net
investment in leases held in its own portfolio by $3,593,000 from June
30, 1996. This increase was primarily due to an increased volume of lease
renewals.
The Company generally funds its equity investments in leased
equipment and interim equipment purchases with internally generated
funds, and if necessary, borrowings under a $20,000,000 general line of
credit. At September 30, 1996 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 60,678 shares remain available for
repurchase.
The need for cash used for operating activities will continue to
grow as the Company expands. The Company believes that existing cash
balances, cash flows from operations, cash flows from its financing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
9
<PAGE>
AMPLICON, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) 8-K Reports
There were no reports on Form 8-K for the three months ended
September 30, 1996.
10
<PAGE>
AMPLICON, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMPLICON, INC.
Registrant
DATE: November 4, 1996 BY: S. LESLIE JEWETT /s/
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 4,158
<SECURITIES> 6,134
<RECEIVABLES> 114,241
<ALLOWANCES> 1,695
<INVENTORY> 2,931
<CURRENT-ASSETS> 0
<PP&E> 2,651
<DEPRECIATION> 1,403
<TOTAL-ASSETS> 482,889
<CURRENT-LIABILITIES> 53,370
<BONDS> 0
0
0
<COMMON> 58
<OTHER-SE> 105,411
<TOTAL-LIABILITY-AND-EQUITY> 482,889
<SALES> 57,137
<TOTAL-REVENUES> 66,457
<CGS> 51,614
<TOTAL-COSTS> 56,285
<OTHER-EXPENSES> 4,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 5,242
<INCOME-TAX> 2,070
<INCOME-CONTINUING> 3,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,172
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
