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, 1996
[ ] 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 incorporation or organization)
(I.R.S. Employer Identification No.)
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 16, 1996 was $36,215,794
Number of shares outstanding as of September 16, 1996: Common Stock 5,833,959.
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.
<PAGE>
AMPLICON, INC.
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 10-25
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 26
PART III
Item 10. Directors and Executive Officers of the Registrant 26
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management 26
Item 13. Certain Relationships and Related Transactions 26
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 27
Signatures 28
Schedule 29
Exhibit Index 30-32
1
<PAGE>
AMPLICON, INC.
PART I
ITEM 1. BUSINESS
General
Amplicon leases 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.
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 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, Inc., Compaq
Computer Corporation, Dell Computer Corporation, Gateway 2000, Inc.,
among many others, and software vendors such as Microsoft Corporation and
Novell, Inc.
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
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, HP,
Intergraph Corporation and Sun Microsystems, Inc. and cost between
$50,000 and $700,000 per system. The Company also leases testing
equipment, copying equipment, retail point of sale systems 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 and production systems, printing presses and
warehouse distribution systems. In addition, the Company leases a wide
variety of personal property in the "non-high technology" area, including
machine tools, trucks and office furniture.
Software. Amplicon leases operating system software products and
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.
2
<PAGE>
AMPLICON, INC.
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 confidential data base of current
and potential users of business 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 1995, Amplicon installed new prospect
management software to further enhance the productivity of its sales
force. Specific information about potential customers is entered into an
on-line proprietary 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 property, and
which require the lessee to maintain and service the property, insure the
property against casualty loss and pay all property, sales and other
taxes. The Company retains ownership of the property 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 property. 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 property 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
leased property 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.
3
<PAGE>
AMPLICON, INC.
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 property until it has received a binding
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 92.4% and 88.8% of the total dollar amount of
new leases entered into by the Company during the fiscal years ended June
30, 1996 and 1995, 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 property in the event the lessee fails to make lease payments or
otherwise defaults under certain terms of the lease. If this occurs, the
Company may not realize its residual investment in the leased property.
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 credit profile 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 senior 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, 1996 and 1995,
the discounted minimum lease payments receivable relative to leases
maintained in the Company's portfolio amounted to $39,427,656 and
$32,107,972, 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 the loss of any one customer would have a material
adverse effect on its operations taken as a whole.
Competition
The Company competes in the lease financing of computer systems and
networks, 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 systems 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, 1996, had 227 employees, including 145
sales managers and account executives and 17 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.
4
<PAGE>
AMPLICON, INC.
ITEM 2. PROPERTIES
At June 30, 1996, 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 $52,859 from July 1996 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
Fiscal year ended June 30, 1996
<S> <C> <C>
First Quarter $17.75 $15.75
Second Quarter 17.00 14.125
Third Quarter 16.00 14.25
Fourth Quarter 16.75 15.00
Fiscal year ended June 30, 1995
First Quarter $21.50 $18.00
Second Quarter 19.75 17.25
Third Quarter 18.50 16.25
Fourth Quarter 17.25 14.00
</TABLE>
The Company had approximately 50 stockholders of record and in
excess of 500 beneficial owners as of September 16, 1996.
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. During each of the
fiscal years ended June 30, 1996 and 1995 the Company declared cash
dividends totaling $.20 per common share.
5
<PAGE>
AMPLICON, INC.
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 1996 1995 1994 1993 1992
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales of equipment $224,818 $178,413 $156,740 $139,384 $103,969
Interest and investment income 31,141 25,794 24,357 23,697 25,668
Rental income 1,280 2,313 263 747 803
Total revenues 257,239 206,520 181,360 163,828 130,440
Gross profit 39,280 32,751 29,453 26,083 23,194
Earnings before income taxes 21,480 19,088 17,352 15,421 14,487
Net earnings $ 12,996 $ 11,548 $ 11,019 $ 9,793 $ 9,111
COMMON SHARE DATA
Net earnings per share $ 2.22 $ 1.97 $ 1.89 $ 1.68 $ 1.57
Weighted average number of
common shares outstanding 5,849 5,860 5,849 5,831 5,813
Cash dividends per share $ .20 $ .20 $ -0- $ -0- $ -0-
SELECTED ANNUAL GROWTH RATES
Sales of equipment 26% 14% 12% 34% (21)%
Total revenues 25 14 11 26 (16)
Net interest and investment income 14 ( 4) 4 ( 5) 22
Gross profit 20 11 13 12 14
Net earnings 13 5 13 7 22
Net earnings per share 13 4 13 7 25
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
BALANCE SHEET DATA 1996 1995 1994 1993 1992
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total assets $460,000 $402,100 $384,584 $347,308 $307,529
Note payable to bank -0- -0- 10,000 -0- -0-
Nonrecourse debt 279,109 238,614 225,746 211,191 193,611
Stockholders' equity 102,665 91,364 80,875 69,772 59,955
Book value per common share $ 17.58 $ 15.57 $ 13.81 $ 11.96 $ 10.29
</TABLE>
6
<PAGE>
AMPLICON, INC.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fiscal Years Ended June 30, 1996 and 1995
REVENUES. Total revenues for the fiscal year ended June 30, 1996
were $257,239,040, an increase of $50,718,790 or 25% from the prior year.
This change was primarily the result of increases in sales of equipment
by $46,405,165 and interest income by $5,512,386 offset by a decrease in
rental income by $1,033,446. The increase in sales of equipment was
primarily due to increased sales from new lease transactions which
increased by 29%. Interest income for the fiscal year ended June 30,
1996 increased to $30,272,545 as compared to $24,760,159 for the fiscal
year ended June 30, 1995, partially due to higher interest income on
discounted lease rentals assigned to lenders (which is offset by interest
expense on nonrecourse debt) of $17,162,307 in the fiscal year ended June
30, 1996 versus $13,580,355 for the prior year. Investment income for
fiscal year ended June 30, 1996 decreased by $165,315 to $868,456 as
compared to $1,033,771 in the prior year primarily as a result of the
Company maintaining lower investment balances throughout fiscal year
1996.
Net interest income (interest and investment income less interest
expense on discounted lease rentals assigned to lenders) for the fiscal
year ended June 30, 1996 increased by $1,765,119 or 14% to $13,978,694 as
compared to $12,213,575 for fiscal year ended June 30, 1995. This net
increase resulted primarily from increases in the amortization of net
deferred income and higher interest income earned on larger residual
investments.
Rental income for the fiscal year ended June 30, 1996 of $1,279,928
decreased by $1,033,446 as compared to the fiscal year ended June 30,
1995, as a result of decreases in the volume of short-term lease
renewals.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1996
increased by $6,529,050, or 19.9%, to $39,279,934 compared to $32,750,884
for the fiscal year ended June 30, 1995. Gross profit as a percent of
total revenues decreased to 15.3% of total revenues for fiscal 1996
compared to 15.9% of total revenues for the prior year. The principal
factors which contributed to the increase in gross margin were improved
profits from lease extensions, renewals and sales of equipment at the end
of the lease term, greater income recognized on new lease transactions,
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 6.8% for
the fiscal year ended June 30, 1996 as compared to 6.5% for the fiscal
year ended June 30, 1995. Selling, general and administrative expenses
for the fiscal year ended June 30, 1996 increased by $4,040,863 or 29.9%
as compared to the prior year. This increase resulted primarily from
higher sales personnel costs, and higher legal, administrative and
variable office costs related to the increased business volume.
INTEREST EXPENSE-OTHER. Interest expense-other was $246,590 for the
year ended June 30, 1996 as compared to $149,967 for the year ended June
30, 1995. The increase of $96,623 is primarily the result of higher
fiscal year 1996 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% for each of the fiscal years
ended June 30, 1996 and 1995 representing its estimated annual tax rates
for the years ending June 30, 1996 and 1995.
7
<PAGE>
AMPLICON, INC.
Results of Operations (continued)
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.
8
<PAGE>
AMPLICON, INC.
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 property
until it has received a binding noncancelable lease from its customer
and, generally, has determined that the lease can be discounted on a
nonrecourse basis. At June 30, 1996, the Company had outstanding
nonrecourse debt aggregating $279,109,254 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 equipment leases in its own
portfolio rather than assigning the leases to financial institutions.
During the fiscal year 1996, the Company increased its net investment in
leases by $7,701,437. This increase was primarily due to a higher volume
of leases which the Company retained in its own lease 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, 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. During the year ended June 30, 1996, the Company
repurchased 35,000 shares at an aggregate cost of $546,913. During the
year ended June 30, 1995, the Company did not repurchase any shares. As
of September 16, 1996, 60,678 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.
9
<PAGE>
AMPLICON, INC.
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, 1996 and 1995 12
Consolidated Statements of Earnings for the years ended
June 30, 1996, 1995 and 1994 13
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1996, 1995 and 1994 14
Consolidated Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994 15
Notes to Consolidated Financial Statements 16-25
10
<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) as of June 30, 1996 and
1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the years ended June 30, 1996,
1995 and 1994. 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. as of June 30, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended
June 30, 1996, 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 of
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
Irvine, California
August 7, 1996
11
<PAGE>
AMPLICON, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
ASSETS 1996 1995
<S> <C> <C>
Cash and cash equivalents (Notes 1 & 8) $ 8,614,357 $ 6,311,688
Investment securities (Notes 8 & 9) 1,181,967 9,243,797
Net receivables (Note 2) 58,777,425 53,959,224
Inventories, primarily customer deliveries
in process 2,456,193 5,651,210
Net investment in capital leases (Note 3) 74,196,115 58,686,813
Equipment on operating leases, less accumulated
depreciation of $152,391 (1996) and
$173,647 (1995) 34,567 36,009
Other assets 1,436,537 1,395,035
Discounted lease rentals assigned to lenders
(Note 3) 313,303,087 266,815,903
$460,000,248 $402,099,679
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable to bank (Note 4) $ -0- $ -0-
Accounts payable 10,287,123 11,411,175
Accrued liabilities 3,996,621 4,722,808
Customer deposits 7,710,851 6,851,718
Nonrecourse debt (Note 3) 279,109,254 238,614,209
Deferred interest income (Note 5) 34,193,833 28,201,694
Net deferred income (Note 5) 2,530,958 564,950
Income taxes payable, including deferred
taxes (Note 6) 19,507,072 20,369,450
357,335,712 310,736,002
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; 5,838,959 (1996) and 5,867,959 (1995)
issued and outstanding 58,390 58,680
Additional paid in capital 5,587,287 6,091,910
Retained earnings 97,017,263 85,191,545
Investment securities valuation adjustment (Note 9) 1,596 21,542
102,664,536 91,363,677
$460,000,248 $402,099,679
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
12
<PAGE>
AMPLICON, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Sales of equipment $224,818,111 $178,412,946 $156,740,338
Interest income (Notes 1, 3 & 5) 30,272,545 24,760,159 24,003,426
Investment income (Note 9) 868,456 1,033,771 353,467
Rental income 1,279,928 2,313,374 263,060
257,239,040 206,520,250 181,360,291
Costs:
Cost of equipment sold 200,531,313 160,065,968 140,186,036
Interest expense on nonrecourse
debt (Notes 1, 3 & 5) 17,162,307 13,580,355 11,659,414
Depreciation of equipment on
operating leases 265,486 123,043 61,417
217,959,106 173,769,366 151,906,867
Gross profit 39,279,934 32,750,884 29,453,424
Selling, general and administrative
expenses 17,553,715 13,512,852 11,927,826
Interest expense-other 246,590 149,967 174,059
Earnings before income taxes 21,479,629 19,088,065 17,351,539
Income taxes (Note 6) 8,484,000 7,540,000 6,333,000
Net earnings $ 12,995,629 $ 11,548,065 $ 11,018,539
Net earnings per common share $ 2.22 $ 1.97 $ 1.89
Dividends declared per common
share outstanding $ .20 $ .20 $ -0-
Weighted average number of common shares
outstanding 5,848,847 5,859,898 5,848,594
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
13
<PAGE>
AMPLICON, INC.
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, 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
Shares issued -
Stock options
exercised 6,000 60 41,940 -0- -0- 42,000
Shares repurchased ( 35,000) ( 350) ( 546,563) -0- -0- ( 546,913)
Dividends declared -0- -0- -0- ( 1,169,911) -0- ( 1,169,911)
Investment securities
valuation adjustment -0- -0- -0- -0- ( 19,946) ( 19,946)
Net earnings -0- -0- -0- 12,995,629 -0- 12,995,629
Balance,
June 30, 1996 5,838,959 $ 58,390 $5,587,287 $97,017,263 $ 1,596 $102,664,536
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
14
<PAGE>
AMPLICON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings $ 12,995,629 $ 11,548,065 $ 11,018,539
Adjustments to reconcile net earnings to cash flows used for
operating activities:
Depreciation 265,486 123,043 61,417
Sale or lease of equipment previously on
operating leases, net 106,076 14,200 13,646
Interest accretion of estimated unguaranteed
residual values ( 3,471,891) ( 3,136,893) ( 3,115,186)
Estimated unguaranteed residual values recorded
on leases ( 11,622,505) ( 5,325,599) ( 7,733,445)
Interest accretion of net deferred income ( 2,351,292) ( 556,823) ( 984,918)
Increase (decrease) in net deferred income 4,317,300 ( 2,621,706) 2,691,736
Net (decrease) increase in income taxes payable,
including deferred taxes ( 862,378) 5,107,952 988,676
Net increase in net receivables ( 4,818,201) ( 14,054,043) ( 6,835,242)
Net decrease (increase) in inventories 3,195,017 ( 675,817) 865,601
Net decrease in accounts payable and accrued
liabilities ( 1,850,239) ( 1,261,439) ( 6,493,379)
Net cash used for operating activities ( 4,096,998) ( 10,839,060) ( 11,253,757)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (221,323,828) (236,143,494) (197,206,966)
Proceeds from sale of available-for-sale securities 229,365,713 246,000,793 178,127,412
Net increase in minimum lease payments receivable ( 19,821,735) ( 602,543) ( 23,476,863)
Purchase of equipment on operating leases ( 370,119) ( 122,889) ( 61,433)
Net (increase) decrease in other assets ( 41,502) ( 320,123) 67,181
Decrease in estimated unguaranteed residual values 7,286,531 9,683,219 7,313,130
Net cash (used for) provided by investing activities ( 4,904,940) 18,494,963 ( 35,237,539)
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals 12,120,298 -0- 23,406,774
(Payment) borrowing on note payable secured by lease -0- ( 10,000,000) 10,000,000
Payments to repurchase common stock ( 546,913) -0- ( 188,750)
Increase (decrease) in customer deposits 859,133 ( 518,234) 3,440,128
Dividends to stockholders ( 1,169,911) ( 1,172,121) -0-
Proceeds from exercise of stock options 42,000 90,780 273,463
Net cash provided by (used for) financing activities 11,304,607 ( 11,599,575) 36,931,615
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,302,669 ( 3,943,672) ( 7,828,479)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,311,688 10,255,360 18,083,839
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,614,357 $ 6,311,688 $ 10,255,360
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to lenders
and related nonrecourse debt $ 40,495,045 $ 12,868,022 $ 14,555,482
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 246,590 $ 149,967 $ 174,059
Income taxes $ 9,346,378 $ 3,034,283 $ 5,366,715
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
15
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1996
Note 1 - Summary of Significant Accounting Policies:
Nature of Operations
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 business property to
customers located throughout the United States.
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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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.
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.
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 where the lessee is legally obligated to
accept, are stated at the lower of cost (first-in, first-out method) or
market value.
16
<PAGE>
AMPLICON, INC.
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 (5,848,847 in
1996, 5,859,898 in 1995 and 5,848,594 in 1994).
Reclassifications
Certain reclassifications have been made to the fiscal 1995 consolidated
financial statements to conform with the presentation of the fiscal 1996
consolidated financial statements.
Recent Accounting Pronouncements
The Company is required to adopt Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," in fiscal year 1997. The Company
expects that the adoption of this pronouncement will not have a material
impact on its financial position or results of operations.
In fiscal 1997, the Company will adopt Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). This statement establishes financial accounting and reporting
standards for stock-based compensation plans. The Company expects to
continue to account for stock-based employee compensation plans in
accordance with Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", as is permitted under SFAS No. 123, and to
follow the pro forma net income and earnings per share disclosure
requirements set forth in SFAS No. 123. The adoption of SFAS No. 123 will
not impact the Company's results of operations, financial position or cash
flows.
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," will be adopted by the Company for certain lease transactions
occurring after January 1, 1997. The Company does not believe this
adoption will have a material impact on its results of operations or
financial position.
Note 2 - Receivables:
The Company's net receivables consist of the following:
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Financial institutions $45,991,788 $40,026,866
Lessees 13,161,437 12,179,795
Other 463,057 2,591,420
59,616,282 54,798,081
Less allowance for doubtful accounts ( 838,857) ( 838,857)
Net receivables $58,777,425 $53,959,224
</TABLE>
17
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Capital Leases:
The Company's net investment in capital leases consists of the
following:
<TABLE>
<CAPTION>
June 30,
1996 1995
<S> <C> <C>
Minimum lease payments receivable, less
allowance for doubtful accounts of
$856,585 in each year $45,351,427 $36,009,508
Estimated unguaranteed residual value, less
valuation allowance of $542,274 in each year 46,246,743 33,758,208
91,598,170 69,767,716
Less unearned income (17,402,055) (11,080,903)
Net investment in capital leases $74,196,115 $58,686,813
</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.
At June 30, 1996, 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>
1997 $20,804,976 $13,368,633 $34,173,609
1998 11,929,008 8,990,176 20,919,184
1999 7,954,049 12,990,134 20,944,183
2000 2,289,875 6,186,232 8,476,107
2001 2,004,575 3,729,005 5,733,580
Thereafter 368,944 982,563 1,351,507
45,351,427 46,246,743 91,598,170
Less unearned income ( 5,923,771) (11,478,284) (17,402,055)
Net investment in capital leases
and estimated unguaranteed
residual value $39,427,656 $34,768,459 $74,196,115
</TABLE>
18
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nonrecourse debt, which relates to the discounting of capital lease
receivables, bears interest at rates ranging from 5.87% to 18.5%.
Maturities of such obligations at June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Years ending Capital
June 30, leases
<S> <C>
1997 $116,226,867
1998 82,167,946
1999 46,674,354
2000 23,210,595
2001 9,218,157
Thereafter 1,611,335
Total nonrecourse debt 279,109,254
Deferred interest (Note 5) 34,193,833
Total discounted lease rentals assigned to lenders $313,303,087
</TABLE>
Note 4 - Notes Payable to Bank:
In August 1993, and as amended in December 1994 and January 1996, 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, 1997 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, 1998, and one final payment on December 31, 1998 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, 1996 and 1995, there
were no outstanding balances on this Agreement.
Note 5 - Deferred Interest Income and Net Deferred Income:
At June 30, 1996, deferred interest income of $34,193,833 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $34,193,833. See Note 3.
At June 30, 1996, the expected recognition of net deferred income
(deferred gross margin of $9,976,115
less deferred selling expenses of $7,445,157) on the Company's future
statements of earnings is as follows:
<TABLE>
<CAPTION>
Years ending
June 30,
<S> <C>
1997 $1,423,640
1998 691,373
1999 259,486
2000 108,039
2001 41,351
Thereafter 7,069
$2,530,958
</TABLE>
19
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Income Taxes:
The Company accounts for its income taxes under Statement of
Financial Accounting Standards No. 109, "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. From time to time,
the Company is audited by various governmental taxing authorities and is
currently under examination for fiscal years 1992 through 1994 by the
Internal Revenue Service. The Company believes that its accrual for income
taxes is adequate for adjustments, if any, which may result from these
examinations.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Years ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Current tax expense:
Federal $1,626,390 $4,618,165 $2,667,000
State 1,186,017 2,032,998 600,000
2,812,407 6,651,163 3,267,000
Deferred tax expense:
Federal 5,460,980 750,594 2,371,000
State 210,613 138,243 695,000
5,671,593 888,837 3,066,000
$8,484,000 $7,540,000 $6,333,000
</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.
The components of the deferred income tax provision (benefit) for the
years ended June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Tax operating leases $7,387,427 $669,126
Deferred selling expenses 630,975 ( 90,508)
Allowances and reserves 62,486 (514,163)
Alternative minimum tax credits (2,011,064) 957,968
Depreciation other than on operating leases ( 377,176) ( 45,519)
State income taxes ( 21,055) ( 88,067)
Deferred tax expense $5,671,593 $888,837
</TABLE>
20
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax liabilities (assets) are comprised of the
following:
<TABLE>
<CAPTION>
June 30,
1996 1995
Deferred income tax liabilities:
<S> <C> <C>
Tax operating leases $29,456,276 $22,068,849
Deferred selling expenses 3,052,514 2,421,539
Payments due -0- 3,458,971
Total liabilities 32,508,790 27,949,359
Deferred income tax assets:
Allowances and reserves ( 1,566,862) ( 1,629,348)
Minimum tax credits/carryforwards ( 7,570,197) ( 5,559,133)
Refunds due ( 3,075,000) -0-
Depreciation other than on operating leases ( 560,936) ( 183,760)
State income taxes ( 228,723) ( 207,668)
Total assets (13,001,718) ( 7,579,909)
Net deferred income tax liabilities $19,507,072 $20,369,450
</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,
1996 1995 1994
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State tax, net of federal benefit 4.8 4.8 4.8
Other ( .3) ( .3) ( 3.3)
Effective rate 39.5% 39.5% 36.5%
</TABLE>
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 August 1985, the Company's stockholders approved a Stock Option
Plan (the "1985 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 1985 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 1985
Plan. No further grants will be made under the 1985 Plan.
21
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the 1985 Plan for the
periods indicated:
<TABLE>
<CAPTION>
Exercise
Options price Options
outstanding per share exercisable
<S> <C> <C> <C>
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
Granted -0- N/A
Canceled ( 11,200) 16.25 - 21.00
Exercised ( 6,000) 7.00
Outstanding at June 30, 1996 452,150 $ 7.00 - 21.00 258,183
</TABLE>
In November 1995, the Company's stockholders approved the 1995 Equity
Participation Plan (the "1995 Plan") which succeeds the 1985 Plan. The
1995 Plan provides for the granting of options, restricted stock and stock
appreciation rights ("SARs") to key employees, directors and consultants
of the Company. Under the 1995 Plan, the maximum number of shares of
Common Stock that may be issued upon the exercise of options or SARs, or
upon the vesting of restricted stock awards, is 500,000. The maximum
number of available shares of Common Stock will increase by an amount
equal to one percent (1%) of the total number of issued and outstanding
shares of Common Stock as of June 30 of the fiscal year immediately
preceding such fiscal year. Each grant or issuance under the 1995 Plan
will be set forth in a separate agreement and will indicate, as determined
by the stock option committee, the type, terms, vesting period and
conditions of the award. There have been no grants or issuances during the
year ended June 30, 1996 under the 1995 Plan.
Note 8 - Fair Value of Financial Instruments:
The Company has estimated the fair value of its financial instruments
in compliance with Statement of Financial Accounting Standards No. 107,
"Disclosure About Fair Value of Financial Instruments" ("SFAS No. 107").
The estimates were made as of June 30, 1996 and 1995 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 judgment 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.
22
<PAGE>
AMPLICON, INC.
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,
1996 1996 1995 1995
Estimated Estimated
Book Value Fair Value Book Value Fair Value
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 8,614,357 $8,614,357 $ 6,311,688 $6,311,688
Investment securities 1,180,371 1,181,967 9,222,255 9,243,797
</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 Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," ("SFAS No. 115," see Note 9). Book value is based upon cost.
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 which requires certain disclosures for investments in debt
and equity securities regardless of maturity. SFAS No. 115 requires that
all investments be classified as trading securities, available-for-sale
securities and held-to-maturity securities. Under the criteria
established by SFAS No. 115, the Company has classified all of its
investments as available-for-sale securities. SFAS No. 115 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, 1996
and 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
June 30, 1996 Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available-for-sale securities
Corporate debt securities $1,180,371 $ 1,596 $ -0- $1,181,967
June 30, 1995
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>
23
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair value of the available-for-sale securities at June 30,
1996 and 1995, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
1996 1995
Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
Available-for-sale securities
Due in 3 months or less $1,180,371 $1,181,967 $9,222,255 $9,243,797
</TABLE>
Investment income for the year ended June 30, 1996 and 1995 consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Interest income $ 830,873 $ 655,716
Gross realized gains 37,583 378,055
$ 868,456 $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 $577,416 (1996),
$472,036 (1995) and $419,526 (1994).
Future minimum lease payments under operating leases are as follows:
<TABLE>
<CAPTION>
Years Ending Future Minimum
June 30, Lease Payments
<S> <C>
1997 $ 645,324
1998 411,847
$1,057,171
</TABLE>
Litigation
The Company is party to various legal actions and administrative
proceedings and subject to various claims arising out of the Company's
normal business activities. Management does not expect the outcome of any
of these matters, 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, 1996, 1995, and 1994 of
$16,036, $38,183, and $39,602, respectively.
24
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Selected Quarterly Financial Data (Unaudited):
Summarized quarterly financial data for the fiscal years ended
June 30, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30, December 31, March 31, June 30,
(In thousands, except per share amounts)
1996
<S> <C> <C> <C> <C>
Total revenues $56,416 $65,634 $66,842 $68,347
Gross profit 8,611 9,322 10,439 10,908
Net earnings 2,654 3,191 3,348 3,803
Net earnings per common share $ .45 $ .55 $ .57 $ .65
Dividends declared per
common share $ .05 $ .05 $ .05 $ .05
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
</TABLE>
25
<PAGE>
AMPLICON, INC.
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, 1996 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, 1996 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, 1996 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, 1996 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
26
<PAGE>
AMPLICON, INC.
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 29
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 30-32
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
fiscal 1996.
27
<PAGE>
AMPLICON, INC.
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 24, 1996
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 24, 1996
Patrick E. Paddon Officer and Director
Glen T. Tsuma /s/ Vice President, Treasurer, September 24, 1996
Glen T. Tsuma Chief Operating Officer and Director
S. Leslie Jewett /s/ Chief Financial Officer September 24, 1996
S. Leslie Jewett
Michael H. Lowry /s/ Director September 18, 1996
Michael H. Lowry
Harris Ravine /s/
Harris Ravine Director September 20, 1996
28
<PAGE>
AMPLICON, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance Charged to Accounts Balance
Beginning Costs and Written at End of
Classifications of Period Expenses Off Period
<S> <C> <C> <C> <C>
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 $381,585 $ 6,468 $1,695,442
Allowance for valuation of
unguaranteed residual value $ 542,274 $ -0- $ -0- $ 542,274
Year ended June 30, 1996
Allowance for doubtful accounts $1,695,442 $ -0- $ -0- $1,695,442
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.
29
<PAGE>
AMPLICON, INC.
INDEX OF 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 Circle Business Credit, Inc. (incorporated by
reference to Exhibit 10.11 to the Registration Statement on
Form S-1)
30
<PAGE>
AMPLICON, INC.
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)
32
<PAGE>
AMPLICON, INC.
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 (incorporated by reference
to Exhibit 10.17 to the Registrant's 1995 Form 10-K).
10.18 Amendment Two to Business Loan Agreement,
dated as of January 23, 1996, between the
Company and Bank of America (incorporated by reference
to Exhibit 10.18 to the Registrant's December 31, 1995
Form 10-Q).
11 Computation of Earnings per Share of Common Stock 33
22 List of Subsidiaries (incorporated by reference
to Exhibit 22 to the Registrant's 1988 Form 10-K)
33
<PAGE>
AMPLICON, INC.
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Net earnings $12,995,629 $11,548,065 $11,018,539
Weighted average number of common shares
outstanding assuming no exercise of
outstanding options 5,848,847 5,859,898 5,848,594
Dilutive stock options using the
treasury stock method (A) (A) (A)
5,848,847 5,859,898 5,848,594
Net earnings per common share $ 2.22 $ 1.97 $ 1.89
</TABLE>
(A) Dilution is less than 3% and deemed immaterial; therefore, stock
options are not included for earnings per share calculation.
33
AMPLICON, INC.
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Years Ended June 30,
1996 1995 1994
<S> <C> <C> <C>
Net earnings $12,995,629 $11,548,065 $11,018,539
Weighted average number of common shares
outstanding assuming no exercise of
outstanding options 5,848,847 5,859,898 5,848,594
Dilutive stock options using the
treasury stock method (A) (A) (A)
5,848,847 5,859,898 5,848,594
Net earnings per common share $ 2.22 $ 1.97 $ 1.89
</TABLE>
(A) Dilution is less than 3% and deemed immaterial; therefore, stock
options are not included for earnings per share calculation.
33
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 8614
<SECURITIES> 1182
<RECEIVABLES> 99901
<ALLOWANCES> 1695
<INVENTORY> 2456
<CURRENT-ASSETS> 0
<PP&E> 2451
<DEPRECIATION> 1127
<TOTAL-ASSETS> 460000
<CURRENT-LIABILITIES> 41502
<BONDS> 0
0
0
<COMMON> 58
<OTHER-SE> 102606
<TOTAL-LIABILITY-AND-EQUITY> 460000
<SALES> 224818
<TOTAL-REVENUES> 257239
<CGS> 200531
<TOTAL-COSTS> 217959
<OTHER-EXPENSES> 17554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 246
<INCOME-PRETAX> 21480
<INCOME-TAX> 8484
<INCOME-CONTINUING> 12996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12996
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
</TABLE>
