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, 1999
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 28, 1999
----- -----------------------------
Common Stock, $.005 par value 11,869,771
<PAGE>
AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Balance Sheets - March 31, 1999
(unaudited) and June 30, 1998 (audited) 3
Statements of Earnings - Three months and nine months
ended March 31, 1999 and 1998 (unaudited) 4
Statements of Cash Flows - Nine months
ended March 31, 1999 and 1998 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
<PAGE>
AMPLICON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
March 31, June 30,
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 50,888,000 $ 15,192,000
Net receivables 58,251,000 87,229,000
Inventories, primarily customer
deliveries in process 2,725,000 2,500,000
Net investment in capital leases 93,714,000 109,149,000
Net equipment on operating leases - -
Other assets 1,342,000 1,308,000
Discounted lease rentals assigned
to lenders 262,869,000 297,227,000
------------ ------------
$469,789,000 $512,605,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Accounts payable $ 12,013,000 $ 25,766,000
Accrued liabilities 5,955,000 8,038,000
Customer deposits 7,415,000 8,175,000
Nonrecourse debt 239,848,000 269,769,000
Deferred interest income 23,021,000 27,458,000
Net deferred income 5,666,000 7,436,000
Income taxes payable, including
deferred taxes 26,418,000 30,018,000
------------ ------------
320,336,000 376,660,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock 2,500,000 shares
authorized; none issued - -
Common stock; $.005 par value;
40,000,000 shares authorized;
11,868,771 and 11,830,618 issued
and outstanding, as of
March 31, 1999 and June 30, 1998,
respectively 59,000 59,000
Additional paid in capital 7,282,000 6,970,000
Retained earnings 142,112,000 128,916,000
------------ ------------
149,453,000 135,945,000
------------ ------------
$469,789,000 $512,605,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
AMPLICON, INC.
STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales of property $49,136 $69,566 $138,204 $210,389
Interest income 10,659 11,859 33,557 32,790
Investment income 560 229 1,310 408
Rental income 204 175 588 466
------- ------- -------- --------
60,559 81,829 173,659 244,053
------- ------- -------- --------
Costs:
Cost of property sold 43,462 62,773 120,382 190,439
Interest expense on
nonrecourse debt 5,163 6,024 16,423 16,315
Depreciation of property
on operating leases 7 22 12 27
------- ------- -------- --------
48,632 68,819 136,817 206,781
------- ------- -------- --------
Gross profit 11,927 13,010 36,842 37,272
Selling, general and
administrative expenses 4,195 5,041 13,022 14,428
Interest expense-other 4 20 50 77
------- ------- -------- --------
Earnings before income taxes 7,728 7,949 23,770 22,767
Income taxes 2,976 3,140 9,152 8,993
------- ------- -------- --------
Net earnings $ 4,752 $ 4,809 $ 14,618 $ 13,774
======= ======= ======== ========
Basic earnings per common
share $ .40 $ .41 $ 1.23 $ 1.17
======= ======= ======== ========
Diluted earnings per common
share $ .39 $ .39 $ 1.19 $ 1.12
======= ======= ======== ========
Weighted average number of
common shares outstanding 11,866 11,810 11,850 11,792
======= ======= ======== ========
Diluted number of common
shares outstanding 12,303 12,431 12,316 12,348
======= ======= ======== ========
Dividends declared per common
share outstanding $ .04 $ .04 $ .12 $ .12
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
AMPLICON, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended March 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 14,618,000 $ 13,774,000
Adjustments to reconcile net earnings to
cash flows provided by operating
activities:
Depreciation 12,000 28,000
Sales or lease of equipment previously
on operating leases, net 4,000 -
Interest accretion of estimated
unguaranteed residual values ( 5,025,000) ( 4,295,000)
Estimated unguaranteed residual values
recorded on leases ( 4,538,000) ( 8,992,000)
Interest accretion of net deferred income ( 3,542,000) ( 3,118,000)
Increase in net deferred income 1,772,000 4,571,000
Net (decrease) increase in income taxes
payable, including deferred taxes ( 3,600,000) 449,000
Net decrease (increase) in net receivables 28,978,000 ( 2,670,000)
Net (increase) decrease in inventories ( 225,000) 115,000
Net (decrease) increase in accounts
payable and accrued liabilities ( 15,836,000) 2,292,000
------------ ------------
Net cash provided by operating activities 12,618,000 2,154,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in minimum lease payments
receivable 13,362,000 566,000
Purchase of available-for-sale securities - ( 264,209,000)
Proceeds from sale of available-for-sale
securities - 264,209,000
Purchases of equipment on operating leases ( 16,000) ( 26,000)
Net increase in other assets ( 34,000) ( 117,000)
Decrease in estimated unguaranteed
residual values 11,636,000 8,910,000
------------ ------------
Net cash provided by investing activities 24,948,000 9,333,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on note payable to bank - ( 10,000,000)
Payment to repurchase common stock - -
(Decrease) increase in customer deposits ( 760,000) 3,596,000
Dividends to stockholders ( 1,422,000) ( 1,415,000)
Proceeds from exercise of stock options 312,000 565,000
------------ ------------
Net cash used for financing activities ( 1,870,000) ( 7,254,000)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 35,696,000 4,233,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 15,192,000 5,780,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 50,888,000 $ 10,013,000
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
(Decrease) increase of lease rentals
assigned to lenders and related
nonrecourse debt ($ 29,921,000) $ 763,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 50,000 $ 77,000
============ ============
Income taxes $ 12,752,000 $ 8,544,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
- -----------------------------
The accompanying unaudited 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 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 financial statements contain
all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the balance sheet as of March 31, 1999
and the statements of earnings for the three and nine month periods and
cash flows for the nine month periods ended March 31, 1999 and 1998. The
results of operations for the nine month period ended March 31, 1999 are
not necessarily indicative of the results of operations to be expected
for the entire fiscal year ending June 30, 1999.
NOTE 2- BALANCE SHEET
- ---------------------
At March 31, 1999, deferred interest income of $23,021,000 is offset by
deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $23,021,000.
6
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Three Months Ended March 31, 1999 and 1998
- ------------------------------------------
REVENUES. Total revenues for the three months ended March 31, 1999
were $60,559,000, a decrease of $21,270,000 or 26% as compared to the
three months ended March 31, 1998. The decrease from the prior year was
the result of decreases in sales of equipment and interest income. Sales
of equipment decreased by $20,430,000 or 29% to $49,136,000 in the
quarter ended March 31, 1999 as compared to $69,566,000 in the quarter
ended March 31, 1998. The decrease in sales of equipment was primarily
due to the decreased volume of new lease transactions. Interest income
for the quarter ended March 31, 1999 decreased by $1,200,000 or 10% to
$10,659,000 as compared to $11,859,000 in the same quarter of the prior
year. The three months ended March 31, 1999 and 1998 included amounts of
$5,163,000 and $6,024,000, respectively, of interest income on discounted
lease rentals assigned to lenders (which is offset by interest expense on
nonrecourse debt). For the three months ended March 31, 1999, interest
income, net of interest expense on discounted lease rentals assigned to
lenders, decreased by $339,000 or 6% to $5,496,000 as compared to
$5,835,000 for the three months ended March 31, 1998. This decrease is
primarily the result of lower interest income earned from a smaller
portfolio of lease receivables, offset by higher interest income realized
from residual values. Investment income increased by $331,000, to
$560,000 as compared to $229,000 for the same period in the prior year.
This increase can be attributed to higher interest bearing cash balances
during the three months ended March 31, 1999. Rental income increased
by $29,000 to $204,000 in the three months ended March 31, 1999, compared
to $175,000 for the three months ended March 31, 1998 due to an increase
in the number of short-term lease renewals.
GROSS PROFIT. Gross profit for the quarter ended March 31, 1999 of
$11,927,000 decreased by $1,083,000 or 8% as compared to $13,010,000 for
the quarter ended March 31, 1998. This decrease reflects decreases in
income recognized from leased property sales while net interest and
investment income were relatively the same.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of total revenues, were 6.9% and
6.2% for the quarters ended March 31, 1999 and 1998, respectively.
Selling, general and administrative expenses decreased by $846,000 or
16.8% from the prior year third quarter. The improvement is the result
of lower legal, and salary and benefit expenses.
TAXES. The Company's tax rate was 38.5% and 39.5% for the quarters
ended March 31, 1999 and 1998, respectively, representing its estimated
annual tax rate for the years ending June 30, 1999 and 1998.
Nine Months Ended March 31, 1999 and 1998
- -----------------------------------------
REVENUES. Total revenues for the nine months ended March 31, 1999
were $173,659,000, a decrease of $70,394,000 or 29% as compared to the
nine months ended March 31, 1998. The decrease from the prior year was
primarily the result of decreases in sales of equipment. Sales of
equipment decreased by $72,185,000 or 34% to $138,204,000 in the nine
months ended March 31, 1999 as compared to $210,389,000 in the same
period ended March 31, 1998. The decrease in sales of equipment was
primarily due to the decreased volume of new lease transactions.
Interest income for the nine months ended March 31, 1999 increased by
$767,000 or 2% to $33,557,0000 as compared to $32,790,000 in the same
period in the prior year. The nine months ended March 31, 1999 and 1998
included amounts of $16,423,000 and $16,315,000, respectively, of
interest income on discounted lease rentals assigned to lenders (which is
offset by interest expense on nonrecourse debt). For the nine months
ended March 31, 1999, interest income, net of interest expense on
discounted lease rentals assigned to lenders, increased by $659,000 or 4%
to $17,134,000 as compared to $16,475,000 for the nine months ended March
31, 1998. This increase is the result of greater accretion of deferred
income and higher interest income realized from residual values offset by
lower interest income earned on the investment in lease receivables.
(continued)
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES (continued). Investment income increased by $902,000 to
$1,310,000 as compared to $408,000 for the same period in the prior year.
This increase can be attributed to a higher interest bearing cash
balances during the nine months ended March 31, 1999. Rental income
increased by $122,000 or 26% to $588,000 in the nine months ended March
31, 1999 as compared to $466,000 for the nine months ended March 31, 1998
due to an increase in the number of short-term lease renewals.
GROSS PROFIT. Gross profit for the nine months ended March 31, 1999
of $36,842,000 decreased by $430,000 or 1% as compared to $37,272,000 for
the nine months ended March 31, 1998. The slight decline is primarily
attributable to the decreases in income recognized from lease extensions
and sales of leased property, offset by an increase in net interest and
investment income and higher profits realized from new lease
transactions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of total revenues, were 7.5% and
5.9% for the nine months ended March 31, 1999 and 1998, respectively.
Selling, general and administrative expenses decreased by $1,406,000, or
9.7%, primarily due to a reduction in legal, and salary and benefit
expenses.
TAXES. The Company's tax rate was 38.5% and 39.5% for the nine
months ended March 31, 1999 and 1998, respectively, representing its
estimated annual tax rate for the years ending June 30, 1999 and 1998.
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. 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
March 31, 1999, the Company had outstanding nonrecourse debt aggregating
$239,848,000 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, 1999, the Company's net investment in leases
held in its own portfolio decreased by $28,978,000 from June 30, 1998.
This decrease was primarily due to fewer new lease transactions being
held in the Company's own portfolio.
The Company generally funds its equity investments in leased
property and interim property purchases with internally generated funds,
and if necessary, borrowings under a $20,000,000 general line of credit.
At March 31, 1999, the Company did not have any borrowings outstanding on
this line of credit.
In November 1990 and April 1999, the Board of Directors authorized
management, at its discretion, to repurchase up to 300,000 and 600,000
shares, respectively, of the Company's Common Stock. Under the
authorizations of November 1990 and April 1999, 121,356 and 600,000
shares, respectively, remain available for repurchase.
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.
8
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year 2000
- ---------
The Year 2000 issue ("Y2K") is a problem that relates to the way
that computers store, manipulate, and interpret dates that define the
year using only two digits. These systems may experience problems
handling dates beyond 1999 and therefore, could cause computer or other
systems to fail or provide erroneous results. Date information can exist
at any level of hardware or software from micro code to application
programs, in files and databases, and might be present on any operating
platform.
The Company has addressed this issue by implementing a program to
assess, remediate and mitigate the potential impact of the Y2K problem.
The Company is in the process of systematically addressing the Y2K
compliance of its computer related hardware, major application software
programs, externally supplied software, and major debt sources, vendors
and customers.
The Company's computer related hardware consists primarily of
servers and desktop computers incorporated into a local area network and
a telephone switch. The Company has substantially completed its
assessment of its internal hardware related to the local area network and
replacement of non-compliant hardware has been substantially completed.
The Company completed an upgrade of its telephone switch and related
software to bring it into compliance during the third quarter of fiscal
1999.
The Company's major application software programs include three
operating systems, four database engines, approximately ten vendor
supplied software applications and one internally developed software
application. The Company has substantially completed its assessment of
these major software application programs. Of these applications, all
operating systems and database engines are compliant, as are all but one
of the software applications. The Company is researching the
replacement for this software application and anticipates its replacement
by September 30, 1999. The costs associated with this program are not
anticipated to be material and should fall within normal operating costs
of maintaining those systems.
The Company is in the process of contacting its major debt sources,
vendors and customers with regard to their Y2K compliance and expects the
assessment to be substantially completed by June 30, 1999. The Company
expects to address any material non-compliance issues during the first
half of fiscal 2000.
Management believes that the Company's internal systems will be in
substantial compliance with the Y2K problems prior to the Year 2000 and
that the Company should not have a material business risk as a result of
this issue. The Company is in the process of monitoring its major
suppliers, service providers, debt sources and customers, over which the
Company has no control, to determine that they address their own Y2K
issues. If appropriate modifications are not made by them on a timely
basis, the Company's operations and financial results could be adversely
affected.
Forward-Looking Statements
- --------------------------
This document contains forward-looking statements which involve
management assumptions, risks and uncertainties. Consequently, if such
management assumptions prove to be incorrect or such risks or
uncertainties materialize, the Company's actual results could differ
materially from the results forecast in the forward-looking statements.
9
<PAGE>
AMPLICON, INC.
PAGE
PART II - OTHER INFORMATION NUMBER
- --------------------------- ------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
27. Financial Data Schedule
(b) 8-K Reports
There were no reports on Form 8-K for the three months ended
March 31, 1999.
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 29, 1999 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> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 50,888
<SECURITIES> 0
<RECEIVABLES> 109,534
<ALLOWANCES> 1,895
<INVENTORY> 2,725
<CURRENT-ASSETS> 0
<PP&E> 2,913
<DEPRECIATION> 1,823
<TOTAL-ASSETS> 469,789
<CURRENT-LIABILITIES> 51,801
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 149,394
<TOTAL-LIABILITY-AND-EQUITY> 469,789
<SALES> 138,204
<TOTAL-REVENUES> 173,659
<CGS> 120,382
<TOTAL-COSTS> 136,817
<OTHER-EXPENSES> 13,022
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 23,770
<INCOME-TAX> 9,152
<INCOME-CONTINUING> 14,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,618
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.19
</TABLE>
