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 March 31, 1997
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 April 30, 1997
Common Stock, $.01 par value 5,876,259
<PAGE>
AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1997
(unaudited) and June 30, 1996 3
Consolidated Statements of Earnings - Three months
and nine months ended March 31, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows - Nine months
ended March 31, 1997 and 1996 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited). 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
AMPLICON, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
March 31, June 30,
1997 1996
------------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 916,000 $ 8,614,000
Investment securities 11,140,000 1,182,000
Net receivables 87,028,000 58,777,000
Inventories, primarily customer
deliveries in process 1,471,000 2,456,000
Net investment in capital leases 83,946,000 75,945,000
Net property on operating leases 1,000 35,000
Other assets 1,309,000 1,437,000
Discounted lease rentals assigned to
lenders 303,694,000 313,303,000
------------ ------------
$489,505,000 $461,749,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 29,184,000 $ 10,287,000
Accrued liabilities 4,465,000 3,997,000
Customer deposits 8,001,000 7,711,000
Nonrecourse debt 268,705,000 279,109,000
Deferred interest income 34,989,000 34,194,000
Net deferred income 5,481,000 4,279,000
Income taxes payable, including
deferred taxes 25,732,000 19,507,000
------------ ------------
376,557,000 359,084,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; 2,500,000 shares
authorized; none issued -0- -0-
Common stock; $.01 par value;
20,000,000 shares authorized;
5,836,259 and 5,838,959 issued and
outstanding, as of March 31, 1997
and June 30, 1996, respectively 58,000 58,000
Additional paid in capital 5,543,000 5,588,000
Retained earnings 107,304,000 97,017,000
Investment securities valuation
adjustment 43,000 2,000
------------ ------------
112,948,000 102,665,000
------------ ------------
$489,505,000 $461,749,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
<PAGE>
AMPLICON, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- -----------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales of property $ 66,883 $ 58,190 $189,046 $164,976
Interest income 9,310 7,933 27,076 22,351
Investment income 150 266 450 733
Rental Income 349 453 1,009 833
-------- -------- -------- --------
76,692 66,842 217,581 188,893
-------- -------- -------- --------
Costs:
Cost of property sold 59,275 51,666 168,773 147,699
Interest expense on
nonrecourse debt 4,778 4,544 14,184 12,576
Depreciation of property
on operating leases 10 193 103 245
-------- -------- -------- --------
64,063 56,403 183,060 160,520
-------- -------- -------- --------
Gross profit 12,629 10,439 34,521 28,373
Selling, general and
administrative expenses 5,693 4,869 15,904 13,060
Interest expense-other 66 36 163 118
-------- -------- -------- --------
Earnings before income taxes 6,870 5,534 18,454 15,195
Income taxes 2,714 2,186 7,290 6,002
-------- -------- -------- --------
Net earnings $ 4,156 $ 3,348 $ 11,164 $ 9,193
======== ======== ======== ========
Net earnings per common
share $ .71 $ .57 $ 1.91 $ 1.57
======== ======== ======== ========
Dividends declared per common
share outstanding $ .05 $ .05 $ .15 $ .15
======== ======== ======== ========
Weighted average number of
common shares outstanding 5,836 5,839 5,835 5,852
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
AMPLICON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 11,164,000 $ 9,193,000
Adjustments to reconcile net earnings to
cash flows provided by (used for)
operating activities:
Depreciation 83,000 245,000
Sales or lease of property previously
on operating leases, net 20,000 -0-
Interest accretion of estimated
unguaranteed residual values ( 3,391,000) ( 2,492,000)
Estimated unguaranteed residual values
recorded on leases ( 7,576,000) ( 9,057,000)
Interest accretion of net deferred
income ( 2,937,000) ( 1,737,000)
Increase in net deferred income 4,139,000 3,075,000
Net increase (decrease) in income taxes
payable, including deferred taxes 6,225,000 ( 2,213,000)
Net increase in net receivables ( 28,251,000) ( 1,390,000)
Net decrease in inventories 985,000 4,794,000
Net increase (decrease) in accounts
payable and accrued liabilities 19,365,000 ( 849,000)
------------- -------------
Net cash used for operating activities ( 174,000) ( 431,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in minimum lease payments
receivable ( 5,557,000) ( 17,483,000)
Purchase of available-for-sale
securities ( 200,949,000) ( 165,294,000)
Proceeds from sale of available-for-sale
securities 191,032,000 161,504,000
Purchase of property on operating leases ( 69,000) ( 291,000)
Net decrease (increase) in other assets 128,000 ( 51,000)
Decrease in estimated unguaranteed
residual values 8,523,000 4,874,000
------------- -------------
Net cash used for investing activities ( 6,892,000) ( 16,741,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals -0- 12,120,000
Payments to repurchase common stock ( 82,000) ( 546,000)
Increase in customer deposits 290,000 1,127,000
Dividends to stockholders ( 877,000) ( 879,000)
Proceeds from exercise of stock options 37,000 42,000
------------- -------------
Net cash (used for) provided by financing
activities ( 632,000) 11,864,000
------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 7,698,000) ( 5,308,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 8,614,000 6,312,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 916,000 $ 1,004,000
============= =============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
(Decrease) increase in lease rentals
assigned to lenders and related
nonrecourse debt ($ 10,404,000) $ 33,504,000
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 163,000 $ 118,000
============= =============
Income taxes $ 1,065,000 $ 8,215,000
============= =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
Annual Report on Form 10-K.
In the opinion of management, the unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the balance sheet as of
March 31, 1997 and the statements of earnings for the three and nine
month periods ended March 31, 1997 and 1996 and the statements of cash
flows for the nine months ended March 31, 1997 and 1996. The results of
operations for the nine month period ended March 31, 1997 are not
necessarily indicative of the results of operations to be expected for
the entire fiscal year ending June 30, 1997.
RECLASSIFICATIONS
Certain reclassifications have been made to the June 30, 1996
consolidated balance sheet to conform with the presentation of the
consolidated balance sheet as of March 31, 1997.
TRANSFERS OF FINANCIAL ASSETS
Effective January 1, 1997, the Company has adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). Under
the requirements set forth in SFAS 125, the Company has accounted for
qualifying transfers of financial assets occurring after January 1,1997
by recognizing the transfer as a sale and derecognizing all assets sold.
As of March 31, 1997, $16,251,000 of assets derecognized under SFAS
125 would have been previously recognized as discounted lease rentals
assigned to lenders. Qualifying transfers which occurred prior to
January 1, 1997 were precluded from adoption of SFAS 125 and the
discounted value of the lease rentals have been recognized as discounted
lease rentals assigned to lenders.
NOTE 2- BALANCE SHEET
At March 31, 1997, deferred interest income of $34,989,000 is offset by
deferred interest expense related to the discounted lease rentals
assigned to lenders of $34,989,000.
NOTE 3- INVESTMENT SECURITIES
Effective with the beginning of fiscal year 1996, the Company adopted
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (the "Statement").
The Statement requires certain disclosures for investments in debt and
equity securities regardless of maturity. The Statement requires that
all investments be classified as trading securities, available-for-sale
securities and held-to-maturity securities. Under the criteria
established by the Statement, the Company has classified all of its
investments as available-for-sale securities. The Statement requires that
available-for-sale securities be reported at fair value and that the
unrealized gain or loss be reported as a separate component of
stockholders' equity (net of the effect of income taxes) until the
investments are sold. At the time of the sale, the respective gain or
loss, calculated by the specific identification method, will be
recognized as a component of operating results.
6
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following is a summary of investment securities as of March 31, 1997
and 1996:
<TABLE>
<CAPTION>
Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
March 31, 1997
Available-for-sale
securities
- ------------------
Mortgage-backed
securities $ 8,074,000 $ 38,000 $ -0- $ -0-
Corporate debt
securities 3,023,000 5,000 -0- 3,028,000
----------- ----------- ----------- -----------
$11,097,000 $ 43,000 $ -0- $11,140,000
=========== =========== =========== ===========
March 31, 1996
Available-for-sale
securities
- ------------------
U.S. Treasury
securities and
obligations of
U.S. government
agencies $ 9,974,000 $ 7,000 $ -0- $ 9,981,000
Mortgage-backed
securities 1,040,000 1,000 -0- 1,041,000
Corporate debt
securities 1,998,000 1,000 -0- 1,999,000
----------- ----------- ----------- -----------
$13,012,000 $ 9,000 $ -0- $13,021,000
=========== =========== =========== ===========
</TABLE>
The estimated fair value of the available-for-sale securities at March 31, 1997
and 1996, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
March 31, March 31,
1997 1997 1996 1996
Cost Fair Value Cost Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available-for-sale
securities
Due in 3 months
or less $11,097,000 $11,140,000 $13,012,000 $13,021,000
=========== =========== =========== ===========
</TABLE>
Investment income for the three and nine months ended March 31, 1997 and 1996
consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income $ 144,000 $ 266,000 $ 439,000 $ 722,000
Gross realized gains 6,000 -0- 11,000 11,000
------------ ----------- ----------- -----------
$ 150,000 $ 266,000 $ 450,000 $ 733,000
============ =========== =========== ===========
</TABLE>
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996
REVENUES. Total revenues for the three months ended March 31, 1997
were $76,692,000, an increase of $9,850,000, or 14.7%, as compared
to the three months ended March 31, 1996. The increase from the prior
year was primarily the result of increases in sales of property and
higher interest income. Sales of property increased by $8,693,000, or
14.9%, to $66,883,000 in the quarter ended March 31, 1997 as compared to
$58,190,000 in the quarter ended March 31, 1996. Most of the increase in
sales of property related to new lease transactions which increased by
14.0%. Interest income for the quarter ended March 31, 1997 increased by
$1,377,000, or 17.4%, to $9,310,000 as compared to $7,933,000 in the same
quarter in the prior year. The three months ended March 31, 1997 and
1996 included amounts of $4,778,000 and $4,544,000, 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 March 31, 1997, net of interest expense on discounted
lease rentals assigned to lenders, increased by $1,143,000, or 33.7%, as
compared to the three months ended March 31, 1996. This increase is
primarily the result of higher interest income recognized from the
amortization of deferred income and from interest accretion on residual
investments. Investment income decreased by $116,000 to $150,000 as
compared to $266,000 for the same period in the prior year. This
decrease can be attributed to lower cash balances invested during the
three months ended March 31, 1997. Rental income decreased by $104,000
to $349,000 in the three months ended March 31, 1997 as compared to
$453,000 for the three months ended March 31,1996 reflecting decreased
rentals from operating leases.
GROSS PROFIT. Gross profit for the quarter ended March 31, 1997 of
$12,629,000, or 16.5% of total revenues, increased by $2,190,000, or
21.0%, as compared to $10,439,000, or 15.6% of total revenues, for the
quarter ended March 31, 1996. The principal factors which contributed to
increased gross profit were higher profits from leased property sales,
lease extensions and higher net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of total revenues, were 7.4% and
7.3% for the quarters ended March 31, 1997 and 1996, respectively.
Selling, general and administrative expenses increased by $824,000, or
16.9%, primarily due to higher salaries, employee benefit costs and legal
expenses.
TAXES. The Company's tax rate was 39.5% for the quarters ended
March 31, 1997 and 1996, representing its estimated annual tax rate for
the years ending June 30, 1997 and 1996.
Nine Months Ended March 31, 1997 and 1996
REVENUES. Total revenues for the nine months ended March 31, 1997
were $217,581,000, an increase of $28,688,000 or 15.2% as compared to the
nine months ended March 31, 1996. The increase from the prior year was
primarily the result of increases in sales of property and higher
interest income. Sales of property increased by $24,070,000, or 14.6%,
to $189,046,000 in the nine months ended March 31, 1997 as compared to
$164,976,000 in the same period ended March 31, 1996. The increase in
sales of property is primarily due to increased volume of new lease
transactions and significant growth in sales of leased property at the
end of the lease term. Interest income for the nine months ended March
31, 1997 increased by $4,725,000, or 21.1%, to $27,076,000 as compared to
$22,351,000 in the same period in the prior year. The nine months ended
March 31, 1997 and 1996 included amounts of $14,184,000 and $12,576,000,
respectively, of interest income on discounted lease rentals assigned to
lenders (which is offset by interest expense on nonrecourse debt).
Interest income for the nine months ended March 31, 1997, net of interest
expense on discounted lease rentals assigned to lenders, increased by
$3,087,000, or 31.5%, as compared to the nine months ended March 31,
1996. This increase is primarily the result of higher interest income
realized through the amortization of deferred income and from interest
accretion on residual investments. Investment income decreased by
$283,000, or 38.6%, to $450,000 as compared to $733,000 for the same
period in the prior year. This decrease can be attributed to lower cash
balances invested in securities during the nine months ended March 31,
1997. Rental income increased by $176,000 to $1,009,000 in the nine
months ended March 31, 1997 as compared to $833,000 for the nine months
ended March 31, 1996, reflecting increased rentals from operating leases.
(continued)
8
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GROSS PROFIT. Gross profit for the nine months ended March 31, 1997
of $34,521,000, or 15.9% of total revenues, increased by $6,148,000, or
21.7%, as compared to $28,373,000, or 15.0% of total revenues, for the
nine months ended March 31, 1996. The principal factors which
contributed to increased gross profit were higher profits from leased
property sales, lease extensions and higher net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of total revenues, were 7.3% and
7.0% for the nine months ended March 31, 1997 and 1996, respectively.
Selling, general and administrative expenses increased by $2,844,000, or
21.8%, primarily due to higher salaries, employee benefit costs and legal
expenses.
TAXES. The Company`s tax rate was 39.5% for the nine months ended
March 31, 1997 and 1996 representing its estimated annual tax rate for
the years ending June 30, 1997 and 1996.
Financial and Capital Resources
The Company funds its operating activities through nonrecourse debt
and internally generated funds. Capital expenditures for leased property
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. For many transactions which require staged property
installations, the Company funds the transactions with internal resources
prior to placing the lease rentals on a nonrecourse basis with a
financial institution. The Company does not purchase property until it
has received a noncancelable lease from its customer and has determined
that the lease can be discounted on a nonrecourse basis or the Company's
credit committee has approved the transaction for the Company's
portfolio. At March 31, 1997, the Company had outstanding nonrecourse
debt aggregating $268,705,000 relating to property under capital and
operating leases. In the past, the Company has been able to obtain
adequate nonrecourse funding commitments, and the Company believes it
will be able to do so in the future.
From time to time, the Company retains leases in its own portfolio
rather than assigning the leases to financial institutions. During the
nine months ended March 31, 1997, the Company increased its net
investment in leases held in its own portfolio by $5,557,000. The
increase reflects a higher volume of lease transactions retained in the
Company's portfolio, in line with the growth in the Company's volume of
lease extensions and new lease transactions.
The Company generally funds its equity investments in leased
property and interim leased property purchases with internally generated
funds, and if necessary, borrowings under a $20,000,000 general line of
credit. At March 31, 1997, the Company did not have any borrowings
outstanding on this line of credit.
In November 1990, the Board of Directors authorized management, at
its discretion, to repurchase up to 300,000 shares of the Company's
Common Stock. Under this authorization, 60,678 shares remain available
for repurchase.
As the Company's volume of lease transactions continues to grow, the
amount of working capital required to fund transactions will continue to
expand. The Company believes that existing cash balances, cash flows
from its activities, available borrowings under its existing credit
facility, and assignments (on a nonrecourse basis) of anticipated lease
payments will be sufficient to fund anticipated future growth and
operating requirements.
Inflation has not had a significant impact upon the operations of
the Company.
9
<PAGE>
AMPLICON, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) 8-K Reports
There were no reports on Form 8-K for the three months ended
March 31, 1997.
10
<PAGE>
AMPLICON, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMPLICON, INC.
Registrant
DATE: April 30, 1997 BY: S. LESLIE JEWETT /s/
--------------- ----------------------
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 916
<SECURITIES> 11,140
<RECEIVABLES> 135,456
<ALLOWANCES> 1,695
<INVENTORY> 1,471
<CURRENT-ASSETS> 0
<PP&E> 2,607
<DEPRECIATION> 1,454
<TOTAL-ASSETS> 489,505
<CURRENT-LIABILITIES> 67,382
<BONDS> 0
0
0
<COMMON> 58
<OTHER-SE> 112,890
<TOTAL-LIABILITY-AND-EQUITY> 489,505
<SALES> 189,046
<TOTAL-REVENUES> 217,581
<CGS> 168,773
<TOTAL-COSTS> 183,060
<OTHER-EXPENSES> 15,904
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163
<INCOME-PRETAX> 18,454
<INCOME-TAX> 7,290
<INCOME-CONTINUING> 11,164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,164
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.91
</TABLE>
