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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Hutton Centre Dr., Ste. 500
Santa Ana, California 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 751-7551
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's common stock,
par value $.01 per share, as of January 24, 1997 was 5,836,259.
<PAGE>
AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1996
(unaudited) and June 30, 1996 3
Consolidated Statements of Earnings - Three months and six
months ended December 31, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows - Six months
ended December 31, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
AMPLICON, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
December 31, June 30,
ASSETS 1996 1996
------------ -----------
<S> <C> <C>
Cash and cash equivalents $ 10,194,000 $ 8,614,000
Investment securities 997,000 1,182,000
Net receivables 75,487,000 58,777,000
Inventories, primarily customer 926,000 2,456,000
deliveries in process
Net investment in capital leases 83,139,000 75,945,000
Net equipment on operating leases -0- 35,000
Other assets 1,453,000 1,437,000
Discounted lease rentals assigned to
lenders 314,311,000 313,303,000
------------ ------------
$486,507,000 $461,749,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 20,621,000 $ 10,287,000
Accrued liabilities 4,992,000 3,997,000
Customer deposits 9,043,000 7,711,000
Nonrecourse debt 280,515,000 279,109,000
Deferred interest income 33,796,000 34,194,000
Net deferred income 4,603,000 4,279,000
Income taxes payable, including
deferred taxes 23,892,000 19,507,000
------------ ------------
377,462,000 359,084,000
------------ ------------
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 December 31, 1996
and June 30, 1996 respectively 58,000 58,000
Additional paid in capital 5,543,000 5,588,000
Retained earnings 103,443,000 97,017,000
Investment securities valuation
adjustment 1,000 2,000
------------ ------------
109,045,000 102,665,000
------------ ------------
$486,507,000 $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 Six Months Ended
December 31, December 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales of equipment $ 65,026 $ 58,123 $122,163 $106,787
Interest income 8,989 7,084 17,764 14,418
Investment income 184 197 301 467
Rental income 233 230 661 379
-------- -------- -------- --------
74,432 65,634 140,889 122,051
-------- -------- -------- --------
Cost of equipment sold 57,884 52,172 109,499 96,033
Interest expense on
nonrecourse debt 4,769 4,117 9,405 8,032
Depreciation of equipment
on operating leases 59 23 93 52
-------- -------- -------- --------
62,712 56,312 118,997 104,117
-------- -------- -------- --------
Gross profit 11,720 9,322 21,892 17,934
Selling, general and
administrative expenses 5,308 4,119 10,211 8,192
Interest expense-other 69 2 96 81
-------- -------- -------- --------
Earnings before income taxes 6,343 5,201 11,585 9,661
Income taxes 2,506 2,010 4,576 3,816
-------- -------- -------- --------
Net earnings $ 3,837 $ 3,191 $ 7,009 $ 5,845
======== ======== ======== ========
Net earnings per common
share $ .66 $ .55 $ 1.20 $ 1.00
======== ======== ======== ========
Dividends declared per
common share outstanding $ .05 $ .05 $ .10 $ .10
======== ======== ======== ========
Weighted average number of
common shares outstanding 5,835 5,848 5,835 5,859
======== ======== ======== ========
</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>
Six Months Ended December 31,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 7,009,000 $ 5,845,000
Adjustments to reconcile net earnings
to cash flows (used for) provided by
operating activities:
Depreciation 73,000 52,000
Sales or lease of equipment previously
on operating leases, net 20,000 -0-
Interest accretion of estimated
unguaranteed residual values ( 2,207,000) ( 1,517,000)
Estimated unguaranteed residual values
recorded on leases ( 5,163,000) ( 5,831,000)
Interest accretion of net deferred
income ( 1,908,000) ( 273,000)
Increase in net deferred income 2,232,000 1,291,000
Net increase in income taxes payable,
including deferred taxes 4,385,000 670,000
Net (increase) decrease in net
receivables ( 16,710,000) 1,995,000
Net decrease in inventories 1,530,000 288,000
Net increase (decrease) in accounts
payable and accrued liabilities 11,329,000 ( 1,293,000)
------------ ------------
Net cash provided by operating
activities 590,000 1,227,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale
securities (130,079,000) ( 68,846,000)
Proceeds from sale of available-for-
sale securities 130,263,000 73,686,000
Net increase in minimum lease payments
receivable ( 5,111,000) ( 12,037,000)
Purchase of equipment on operating
leases ( 58,000) ( 43,000)
Net increase in other assets ( 16,000) ( 155,000)
Decrease in estimated unguaranteed
residual values 5,287,000 3,362,000
------------ ------------
Net cash provided by (used for) investing
activities 286,000 ( 4,033,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals -0- 12,120,000
Increase in customer deposits 1,332,000 2,137,000
Purchase of common stock ( 82,000) ( 546,000)
Dividends to stockholders ( 583,000) ( 588,000)
Proceeds from exercise of stock options 37,000 42,000
------------ ------------
Net cash provided by financing activities 704,000 13,165,000
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,580,000 10,359,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 8,614,000 6,312,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 10,194,000 $ 16,671,000
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to
lenders and related nonrecourse debt $ 1,008,000 $ 33,042,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 96,000 $ 81,000
============ ============
Income taxes $ 191,000 $ 3,146,000
============ ============
</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
December 31, 1996 and the statements of earnings and cash flows for the
three and six month periods ended December 31, 1996 and 1995. The results
of operations for the six month period ended December 31, 1996 are not
necessarily indicative of the results of operations to be expected for
the entire fiscal year ending June 30, 1997.
Reclassifications
Certain reclassifications have been made to the June 30, 1996
consolidated balance sheet to conform with the presentation of the
consolidated balance sheet as of December 31, 1996.
NOTE 2- BALANCE SHEET
At December 31, 1996, deferred interest income of $33,796,000 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $33,796,000.
NOTE 3- INVESTMENT SECURITIES
Effective with the beginning of fiscal year 1995, the Company adopted
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (the "Statement"). The Statement requires certain
disclosures for investments in debt and equity securities regardless of
maturity. The Statement requires that all investments be classified as
trading securities, available-for-sale securities and held-to-maturity
securities. Under the criteria established by the Statement, the Company
has classified all of its investments as available-for-sale securities.
The Statement requires that available-for-sale securities be reported at
fair value and that the unrealized gain or loss be reported as a separate
component of stockholders' equity (net of the effect of income taxes)
until the investments are sold. At the time of the sale, the respective
gain or loss, calculated by the specific identification method, will be
recognized as a component of operating results.
The following is a summary of investment securities as of December 31,
1996 and 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Available-for-sale
securities
December 31, 1996
Corporate debt
securities $ 996,000 $ 1,000 $ -0- $ 997,000
========== ======= ======= ==========
December 31, 1995
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
========== ======= ======= ==========
</TABLE>
6
<PAGE>
AMPLICON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The estimated fair value of the available-for-sale securities at December 31,
1996 and 1995, by contractual maturity, are shown below.
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995 1996 1995
Cost Fair Value Cost Fair Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Available-for-sale
securities
Due in three months
or less $ 996,000 $ 997,000 $4,382,000 $4,389,000
========= ========= ========== ==========
</TABLE>
Investment income for the three and six months ended December 31, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
1996 1995 1996 1995
-------- --------- -------- ----------
<S> <C> <C> <C> <C>
Interest income $182,000 $ 190,000 $296,000 $ 456,000
Gross realized gains 2,000 7,000 5,000 11,000
-------- --------- -------- ----------
$184,000 $ 197,000 $301,000 $ 467,000
======== ========= ======== ==========
</TABLE>
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended December 31, 1996 and 1995
REVENUES. Total revenues for the three months ended December 31,
1996 were $74,432,000 an increase of $8,798,000 or 13.4% as compared to
the three months ended December 31, 1995. The increase from the prior
year was primarily the result of increases in sales of equipment. Sales
of equipment increased by $6,903,000 or 11.9% to $65,026,000 in the
quarter ended December 31, 1996 as compared to $58,123,000 in the quarter
ended December 31, 1995. The primary reason for the increase in sales of
equipment was a significant increase in sales of leased property at the
end of the lease term. Interest income for the quarter ended December
31, 1996 increased by $1,905,000 or 26.9% to $8,989,000 as compared to
$7,084,000 in the same quarter in the prior year. The three months ended
December 31, 1996 and 1995 included amounts of $4,769,000 and $4,117,000
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, 1996, net of
interest expense on discounted lease rentals assigned to lenders,
increased by $1,253,000 or 42.2% to $4,220,000 as compared to $2,967,000
for the three months ended December 31, 1995. This increase is primarily
the result of increased accretion of deferred income and higher interest
income realized from a larger investment in residual values. Investment
income decreased by $13,000 or 6.6% to $184,000 as compared to $197,000
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, 1996. Rental income slightly increased by
$3,000 to $233,000 in the three months ended December 31, 1996, compared
to $230,000 for the three months ended December 31, 1995.
GROSS PROFIT. Gross profit for the quarter ended December 31, 1996
of $11,720,000 increased by $2,398,000 or 25.7% as compared to $9,322,000
for the quarter ended December 31, 1995. As a percent of total revenues,
gross margin increased to 15.7% in the three months ended December 31,
1996 as compared to 14.2% in the same period in the prior year. The
principal factors which contributed to increased gross profit were higher
profits from sales of leased property and higher net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 7.1% and
6.3% for the quarters ended December 31, 1996 and 1995, respectively.
Selling, general and administrative expenses increased by $1,189,000 or
28.9% primarily due to higher salaries, employee benefit costs and legal
expenses.
TAXES. The Company's tax rate was 39.5% and 38.6% for the quarters
ended December 31, 1996 and 1995, respectively, representing its
estimated annual tax rate for the years ending June 30, 1997 and 1996.
Six Months Ended December 31, 1996 and 1995
REVENUES. Total revenues for the six months ended December 31, 1996
were $140,889,000, an increase of $18,838,000 or 15.4% as compared to the
six months ended December 31, 1995. The increase from the prior year was
primarily the result of increases in sales of equipment. Sales of
equipment increased by $15,376,000 or 14.4% to $122,163,000 in
the six months ended December 31, 1996 as compared to $106,787,000 in the
same period ended December 31, 1995. The increase in sales of equipment
reflected an 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 six months ended December 31,1996 increased by
$3,346,000 or 23.2% to $17,764,000 as compared to $14,418,000 in the same
period in the prior year. The six months ended December 31, 1996 and
1995 included amounts of $9,405,000 and $8,032,000, 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, 1996, net of interest expense on discounted
lease rentals assigned to lenders, increased by $1,973,000 or 30.9% to
$8,359,000 as compared to $6,386,000 for the six months ended December
31,1995. This increase is primarily the result of increased accretion of
deferred income and higher interest income realized from a larger
investment in residual values.
(continued)
8
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES (continued). Investment income decreased by $166,000 or
35.5% to $301,000 as compared to $467,000 for the same period in the
prior year. This decrease can be attributed to a lower investment in
securities during the six months ended December 31,1996. Rental income
increased by $282,000 or 74.4% to $661,000 in the six months ended
December 31, 1996 as compared to $379,000 for the six months ended
December 31, 1995 due to an increase in the number of short-term lease
renewals.
GROSS PROFIT. Gross profit for the six months ended December 31,
1996 of $21,892,000 increased by $3,958,000 or 22.1% as compared to
$17,934,000 for the six months ended December 31,1995. Gross profit
increased to 15.5% of total revenues during the six months ended December
31, 1996 as compared to 14.7 % of total revenues during the same period
in the prior year. The principal factors which contributed to increased
gross profit were higher profits from sales of leased property and higher
net interest income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 7.2% and
6.7% for the six months ended December 31, 1996 and 1995, respectively.
Selling, general and administrative expenses increased by $2,019,000 or
24.6% primarily due to higher salaries, employee benefit costs and legal
expenses.
TAXES. The Company`s tax rate was 39.5% for the six months ended
December 31, 1996 and 1995, respectively, 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 equipment
purchases are primarily financed by assigning the lease payments to banks
or other financial institutions which are discounted at fixed rates such
that the lease payments are sufficient to fully amortize the aggregate
outstanding debt. The Company generally does not purchase property until
it has received a noncancelable lease from its customer and has
determined that the lease can be discounted on a nonrecourse basis. At
December 31, 1996, the Company had outstanding nonrecourse debt
aggregating $280,515,000 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
six months ended December 31, 1996, the Company increased its net
investment in leases held in its own portfolio by $5,111,000 from June
30, 1996. This increase was primarily due to an increased volume of new
lease transactions held 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, 1996 the Company did not have any borrowings
outstanding on this line of credit.
In November 1990, the Board of Directors authorized management, at
its discretion to repurchase up to 300,000 shares of the Company's Common
Stock. Under this authorization 60,678 shares remain available for
repurchase.
The need for cash used for operating activities will continue to
grow as the Company expands. The Company believes that existing cash
balances, cash flows from operations, cash flows from its financing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
9
<PAGE>
AMPLICON, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) 8-K Reports
There were no reports on Form 8-K for the three months ended
December 31, 1996.
10
<PAGE>
AMPLICON, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMPLICON, INC.
Registrant
DATE: FEBRUARY 12, 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 10,194
<SECURITIES> 997
<RECEIVABLES> 123,469
<ALLOWANCES> 1,695
<INVENTORY> 926
<CURRENT-ASSETS> 0
<PP&E> 2,710
<DEPRECIATION> 1,518
<TOTAL-ASSETS> 486,507
<CURRENT-LIABILITIES> 58,548
<BONDS> 0
0
0
<COMMON> 58
<OTHER-SE> 108,987
<TOTAL-LIABILITY-AND-EQUITY> 486,507
<SALES> 122,163
<TOTAL-REVENUES> 140,889
<CGS> 109,499
<TOTAL-COSTS> 118,997
<OTHER-EXPENSES> 10,211
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 11,585
<INCOME-TAX> 4,576
<INCOME-CONTINUING> 7,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,009
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
