FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Hutton Centre Dr., Ste. 500
Santa Ana, California 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 751-7551
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at January 25, 1996
Common Stock, $.01 par value 5,838,959
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1995
(unaudited) and June 30, 1995 3
Consolidated Statements of Earnings - Three months and six months
ended December 31, 1995 and 1994 (unaudited) 4
Consolidated Statements of Cash Flows - Six months
ended December 31, 1995 and 1994 (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 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
December 31, June 30,
ASSETS 1995 1995
<S> <C> <C>
Cash and cash equivalents $ 16,671,000 $ 6,312,000
Investment securities 4,389,000 9,244,000
Net receivables 53,999,000 55,994,000
Inventories, primarily customer deliveries
in process 5,363,000 5,651,000
Net investment in capital leases 62,971,000 59,068,000
Net equipment on operating leases 27,000 36,000
Other assets 1,550,000 1,395,000
Discounted lease rentals assigned to lenders 299,858,000 266,816,000
$444,828,000 $404,516,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 12,507,000 $ 13,392,000
Accrued liabilities 3,401,000 3,809,000
Customer deposits 8,989,000 6,852,000
Nonrecourse debt 268,199,000 238,614,000
Deferred interest income 31,659,000 28,202,000
Net deferred income 2,931,000 1,913,000
Income taxes payable, including
deferred taxes 21,040,000 20,370,000
348,726,000 313,152,000
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; 5,838,959 and
5,867,959 issued and outstanding, as of
December 31, 1995 and June 30, 1995,
respectively 59,000 59,000
Additional paid in capital 5,587,000 6,091,000
Retained earnings 90,449,000 85,192,000
Investment securities valuation adjustment 7,000 22,000
96,102,000 91,364,000
$444,828,000 $404,516,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Sales of equipment $58,123 $44,896 $106,787 $ 83,430
Interest income 7,084 6,069 14,418 11,788
Investment income 197 224 467 599
Rental income 230 448 379 544
65,634 51,637 122,051 96,361
Cost of equipment sold 52,172 40,368 96,033 74,430
Interest expense on
nonrecourse debt 4,117 3,198 8,032 6,380
Depreciation of equipment
on operating leases 23 3 52 5
56,312 43,569 104,117 80,815
Gross profit 9,322 8,068 17,934 15,546
Selling, general and
administrative expenses 4,119 3,087 8,192 6,321
Interest expense-other 2 21 81 114
Earnings before income taxes 5,201 4,960 9,661 9,111
Income taxes 2,010 1,959 3,816 3,599
Net earnings $ 3,191 $ 3,001 $ 5,845 $ 5,512
Net earnings per common share $ .55 $ .51 $ 1.00 $ .94
Dividends declared per common
share outstanding $ .05 $ .05 $ .10 $ .10
Weighted average number of common shares
outstanding 5,848 5,857 5,859 5,857
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended December 31,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,845,000 $ 5,512,000
Adjustments to reconcile net earnings to cash
flows provided by (used for) operating
activities:
Depreciation 52,000 5,000
Sale or lease of equipment previously on
operating leases, net -0- 21,000
Interest accretion of estimated unguaranteed
residual values ( 1,517,000) ( 1,595,000)
Estimated unguaranteed residual values recorded
on leases ( 5,831,000) ( 2,471,000)
Interest accretion of net deferred income ( 273,000) ( 330,000)
Increase in net deferred income 1,291,000 1,057,000
Net increase (decrease) in income taxes payable,
including deferred taxes 670,000 1,573,000
Net decrease (increase) in net receivables 1,995,000 ( 6,717,000)
Net decrease in inventories 288,000 1,629,000
Net decrease in accounts payable and accrued
liabilities ( 1,293,000) ( 6,238,000)
Net cash provide by (used for) operating
activities 1,227,000 ( 7,554,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in minimum lease payments
receivable ( 12,037,000) ( 4,360,000)
Purchases of available-for-sale securities ( 68,846,000) ( 112,910,000)
Proceeds from sales of available-for-sale
securities 73,686,000 123,273,000
Purchase of equipment on operating leases ( 43,000) ( 29,000)
Net increase in other assets ( 155,000) ( 317,000)
Decrease in estimated unguaranteed
residual values 3,362,000 3,619,000
Net cash (used for) provided by investing
activities ( 4,033,000) 9,276,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals 12,120,000 -0-
Increase (decrease) in customer deposits 2,137,000 ( 815,000)
Purchase of common stock ( 546,000) -0-
Dividends to stockholders ( 588,000) ( 293,000)
Proceeds from exercise of stock options 42,000 6,000
Net cash provided by (used for) financing
activities 13,165,000 ( 1,102,000)
NET CHANGE IN CASH AND CASH EQUIVALENTS 10,359,000 620,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,312,000 10,255,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,671,000 $ 10,875,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase (decrease) in lease rentals assigned to lenders and related
nonrecourse debt $33,042,000 ($ 654,000)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 81,000 $ 114,000
Income Taxes $ 3,146,000 $ 964,000
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
Annual Report on Form 10-K.
In the opinion of management, the unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the balance sheet as of
December 31, 1995 and the statements of earnings for the three and six
month periods ended December 31, 1995 and 1994 and the statements of cash
flows for the six months ended December 31, 1995 and 1994. The results of
operations for the six month period ended December 31, 1995 are not
necessarily indicative of the results of operations to be expected for
the entire fiscal year ending June 30, 1996.
NOTE 2- BALANCE SHEET
At December 31, 1995, deferred interest income of $31,659,000 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $31,659,000.
NOTE 3- INVESTMENT SECURITIES
Effective with the beginning of fiscal year 1995, the Company adopted FAS
No. 115, Accounting for Certain Investments in Debt and Equity
Securities (the Statement). The Statement requires certain
disclosures for investments in debt and equity securities regardless of
maturity. The Company had previously classified investments with original
maturities of three months or less as cash and cash equivalents. The
Statement requires that all investments be classified as trading
securities, available-for-sale securities and held-to-maturity
securities. Under the criteria established by the Statement, the Company
has classified all of its investments as available-for-sale securities.
The Statement requires that available-for-sale securities be reported at
fair value and that the unrealized gain or loss be reported as a separate
component of stockholders equity (net of the effect of income taxes)
until the investments are sold. At the time of the sale, the respective
gain or loss, calculated by the specific identification method, will be
recognized as a component of operating results.
The following is a summary of investment securities as of December 31,
1995 and 1994:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
December 31, 1995
<S> <C> <C> <C> <C>
Available-for-sale securities
Mortgage-backed securities $1,397,000 $3,000 $ -0- $1,400,000
Corporate debt securities 2,985,000 4,000 -0- 2,989,000
$4,382,000 $7,000 $ -0- $4,389,000
December 31, 1994
Available-for-sale securities
U.S. Treasury securities and obligations
of U.S. government agencies $8,717,000 $24,000 $ -0- $8,741,000
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The estimated fair value of the available-for-sale securities at December
31, 1995 and 1994, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
December 31, December 31,
1995 1995 1994 1994
Cost Fair Value Cost Fair Value
<S> <C> <C> <C> <C>
Available-for-sale securities
Due in 3 months or less $4,382,000 $4,389,000 $8,717,000 $8,741,000
</TABLE>
Investment income for the three and six months ended December 31, 1995
and 1994 consisted of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income $190,000 $144,000 $456,000 $257,000
Gross realized gains 7,000 80,000 11,000 342,000
$197,000 $224,000 $467,000 $599,000
</TABLE>
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended December 31, 1995 and 1994
REVENUES. Total revenues for the three months ended December 31,
1995 were $65,634,000, an increase of $13,997,000 or 27.1% as compared to
the three months ended December 31, 1994. The increase from the prior
year was primarily the result of increases in sales of equipment. Sales
of equipment increased by $13,227,000 or 29.5% to $58,123,000 in the
quarter ended December 31, 1995 as compared to $44,896,000 in the quarter
ended December 31, 1994. Sales from new lease transactions increased by
34.1%, while sales from lease extensions and property sales were down
slightly. Interest income for the quarter ended December 31, 1995
increased by $1,015,000 or 16.7% to $7,084,000 as compared to $6,069,000
in the same quarter in the prior year. The three months ended December
31, 1995 and 1994 included amounts of $4,117,000 and $3,198,000,
respectively, of interest income on discounted lease rentals assigned to
lenders (which is offset by interest expense on nonrecourse debt).
Interest income for the three months ended December 31, 1995, net of
interest expense on discounted lease rentals assigned to lenders,
increased by $96,000 or 3.3% as compared to the three months ended
December 31, 1994. This increase is primarily the result of higher income
from investment in lease receivables. Investment income decreased by
$27,000 or 12.1% to $197,000 as compared to $224,000 for the same period
in the prior year. This slight decrease can be attributed to lower cash
balances invested in securities during the three months ended December
31, 1995. Rental income decreased by $218,000 to $230,000 in the three
months ended December 31, 1995, compared to $448,000 for the three months
ended December 31, 1994, as the Company recognized lower rental income
from operating leases.
GROSS PROFIT. Gross profit for the quarter ended December 31, 1995
of $9,322,000 increased by $1,254,000 or 15.6% as compared to $8,068,000
for the quarter ended December 31, 1994. As a percent of total revenues,
gross margin decreased to 14.2% in the three months ended December 31,
1995 as compared to 15.6% in the same period in the prior year. The
principal factors which contributed to increased gross profit were higher
profits realized on new lease transactions and higher net interest
income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 6.3% and
6.0% for the quarters ended December 31, 1995 and 1994, respectively.
Selling, general and administrative expenses increased by $1,032,000 or
33.4% primarily due to increases in the number of sales professionals,
higher office costs related to the expansion of the sales organization,
and higher general and legal expenses related to the increase in the
volume of lease transactions.
TAXES. The Company's tax rate was 38.6% and 39.5% for the quarters
ended December 31, 1995 and 1994, respectively, representing its
estimated annual tax rate for the years ending June 30, 1996 and 1995.
Six Months Ended December 31, 1995 and 1994
REVENUES. Total revenues for the six months ended December 31, 1995
were $122,051,000, an increase of $25,690,000 or 26.7% as compared to the
six months ended December 31, 1994. The increase from the prior year was
primarily the result of increases in sales of equipment. Sales of
equipment increased by $23,357,000 or 28.0% to $106,787,000 in the six
months ended December 31, 1995 as compared to $83,430,000 in the same
period ended December 31, 1994. The Company believes the increase in
sales of equipment was primarily due to increases in the size of the
Companys sales force and their greater experience within the leasing
marketplace. Interest income for the six months ended December 31, 1995
increased by $2,630,000 or 22.3% to $14,418,000 as compared to
$11,788,000 in the same period in the prior year. The six months ended
December 31, 1995 and 1994 included amounts of $8,032,000 and $6,380,000,
respectively, of interest income on discounted lease rentals assigned to
lenders (which is offset by interest expense on nonrecourse debt).
Interest income for the six months ended December 31, 1995, net of
interest expense on discounted lease rentals assigned to lenders,
increased by $919,000 or 16.8% to $6,386,000 as compared to $5,467,000
for the six months ended December 31, 1994. This increase is primarily
the result of higher interest income recognized on the lease portfolio.
Investment income decreased by $132,000 or 22.0% to $467,000 as compared
to $599,000 for the same period in the prior year. This decrease can be
attributed to lower investment in securities during the six months ended
December 31, 1995.
(continued)
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
(continued)
REVENUES (continued). Rental income decreased by $165,000 or 30.3%
to $379,000 in the six months ended December 31, 1995 as compared to
$544,000 for the six months ended December 31, 1994 due to lower
recognition of rental income from operating leases.
GROSS PROFIT. Gross profit for the six months ended December 31,
1995 of $17,934,000 increased by $2,388,000 or 15.4% as compared to
$15,546,000 for the six months ended December 31, 1994. Gross profit
decreased to 14.7% of total revenues during the six months ended December
31, 1995 as compared to 16.1% of total revenues during the same period in
the prior year. The principal factors which contributed to increased
gross profit were higher profits realized on new lease transactions and
higher net interest income, offset by lower profits from lease extensions
and leased property sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 6.7% and
6.6% for the six months ended December 31, 1995 and 1994, respectively.
Selling, general and administrative expenses increased by $1,869,000 or
29.6% primarily due to increases in the number of sales professionals,
higher office costs related to the expansion of the sales organization,
and higher general and legal expenses related to the increase in the
volume of lease transactions.
TAXES. The Company's tax rate was 39.5% for the six months ended
December 31, 1995 and 1994, respectively, representing its estimated
annual tax rate for the years ending June 30, 1996 and 1995.
Financial and Capital Resources
The Company funds its operating activities through nonrecourse debt
and internally generated funds. Capital expenditures for equipment
purchases are primarily financed by assigning the lease payments to banks
or other financial institutions which are discounted at fixed rates such
that the lease payments are sufficient to fully amortize the aggregate
outstanding debt. The Company generally does not purchase equipment until
it has received a noncancelable lease from its customer and has
determined that the lease can be discounted on a nonrecourse basis. At
December 31, 1995, the Company had outstanding nonrecourse debt
aggregating $268,199,000 relating to equipment under capital and
operating leases. In the past, the Company has been able to obtain
adequate nonrecourse funding commitments, and the Company believes it
will be able to do so in the future.
From time to time, the Company retains equipment leases in its own
portfolio rather than assigning the leases to financial institutions.
During the six months ended December 31, 1995, the Company decreased its
net investment in leases held in its own portfolio by $83,000 from June
30, 1995. This decrease was primarily due to a portfolio assignment of
$12,120,000 in the quarter ended December 31, 1995 offset by increases in
new lease transactions and lease extensions held by the Company in its
own portfolio.
The Company generally funds its equity investments in leased
equipment and interim equipment purchases with internally generated
funds, and if necessary, borrowings under a $20,000,000 general line of
credit. At December 31, 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 three months ended December 31, 1995 the Company
purchased 35,000 shares and 65,678 shares remain available for repurchase
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 flows from operations, cash flows from its financing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.18 Amendment Two to Business Loan Agreement,
dated as of January 23, 1996, between the
Company and Bank of America. 12-13
(b) 8-K Reports
There were no reports on Form 8-K for the three months ended
December 31, 1995.
<PAGE>
AMPLICON, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMPLICON, INC.
Registrant
DATE: January 26, 1996 BY: S. LESLIE JEWETT /s/
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 16671
<SECURITIES> 4389
<RECEIVABLES> 87663
<ALLOWANCES> 1695
<INVENTORY> 5363
<CURRENT-ASSETS> 0
<PP&E> 3618
<DEPRECIATION> 2256
<TOTAL-ASSETS> 444828
<CURRENT-LIABILITIES> 45937
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 96043
<TOTAL-LIABILITY-AND-EQUITY> 444828
<SALES> 106787
<TOTAL-REVENUES> 122051
<CGS> 96033
<TOTAL-COSTS> 104117
<OTHER-EXPENSES> 8192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> 9661
<INCOME-TAX> 3816
<INCOME-CONTINUING> 5845
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5845
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
AMENDMENT NO. TWO TO LOAN AGREEMENT
This Amendment No. Two (the Amendment) dated as
of January 23, 1996, 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, as
modified by an amendment dated as December 16, 1994 (as
amended, 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, 1997 for the date December 31, 1996
appearing therein.
2.2 Paragraph 1.4(b) is amended by substituting
the date April 1, 1998 for the date April 1, 1997
appearing therein and by substituting the date December 31,
1998 for the date December 31, 1997 appearing therein.
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].
4. Conditions. This Amendment will be
effective when the Bank receives the following items, in
form and content acceptable to the Bank:
<PAGE>
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/
Title Chief Executive Officer
By Glen T. Tsuma/s/
Title Chief Operating Officer
