UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[Fee Required]
For the fiscal year ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File number 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in its charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 Hutton Centre Drive, Suite 500
Santa Ana, CA 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 751-7551
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
(Title of each class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes _______X________ No________________
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.____________________
The aggregate market value of the Common Stock held by nonaffiliates
of the Registrant as of September 10, 1999 was $51,070,718.
Number of shares outstanding as of September 10, 1999:
Common Stock 11,836,218
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from Registrant's
definitive Proxy Statement to be filed with the Commission within 120
days after the close of the Registrant's fiscal year.
<PAGE>
AMPLICON, INC.
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 2-5
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters 5-6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Item 8. Financial Statements and Supplementary Data 11-26
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the Registrant 27
Item 11. Executive Compensation 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management 27
Item 13. Certain Relationships and Related Transactions 27
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 27
Signatures 28
Schedule II 29
Exhibit Index 30-32
1
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AMPLICON, INC.
PART I
ITEM 1. BUSINESS
General
Amplicon leases and sells computer networks, mid-range computers,
computer software, peripherals, workstations, telecommunications
equipment, computer automated design and manufacturing equipment, office
automation equipment and other items of personal property to customers
located throughout the United States. The Company was incorporated in
California in 1977. Unless the context otherwise requires, the terms
"Amplicon" and "Company" as used herein refer to Amplicon, Inc.
Computer Networks and Mid-Range Computers. The Company concentrates
on the market for computer networks and mid-range computers since this
market is particularly receptive to leasing services. The largest
component of the Company's business consists of personal computers,
workstations, printers, and software which are integrated into complete
networks. Computer networks typically consist of a central server, which
may be a mid-range computer or high-end microcomputer, multiple personal
computers and workstations, network communications hardware and software,
printers and associated products for microcomputer based networks.
Computer networks generally range in cost from $100,000 to $3,000,000.
Mid-range computers generally cost between $100,000 and $750,000 and are
used primarily by subsidiaries and divisions of large companies to
supplement mainframe computer systems, by middle-market companies for
centralized data processing, and to upgrade personal computer networks.
Mid-range computer systems typically consist of a central processing
unit, multiple display terminals, printers, disk and tape drives,
communications equipment and operating software.
Mid-range systems and computer networks are modular and can be
expanded to satisfy additional data processing requirements and perform
additional functions by upgrading the central processing unit and/or
server, and adding data storage devices and workstations to support
additional users. Advances in microcomputer technology and enhancements
to the capabilities of mid-range computer systems have led to the
development of systems that better integrate data processing with word
processing, file and retrieval systems, and electronic mail. The Company
leases and sells mid-range computer systems manufactured primarily by
International Business Machines Corporation ("IBM"), and Hewlett-Packard
Co. ("HP"). Vendors of computer network products include IBM, and HP, as
well as Compaq Computer Corporation ("Compaq"), Dell Computer Corporation
("Dell"), Gateway 2000, Inc., among many others, and software vendors
such as Microsoft Corporation and Novell, Inc.
Software. Amplicon leases operating system software products and
specialized application software packages. These application software
packages typically cost between $50,000 and $500,000. In addition to
leasing stand-alone software packages, an increasing percentage of the
cost of mid-range computer systems and networks consists of operating and
application software.
Other Electronic Equipment. Advances in microcomputer technology
have also expanded the scope of other electronic equipment utilized by
Amplicon's existing and targeted customer base. Amplicon leases and
sells telecommunications equipment, computer automated design and
computer automated manufacturing ("CAD/CAM") equipment, and office
automation equipment. The telecommunications equipment leased by the
Company includes digital private branch equipment, switching equipment
and voice mail systems manufactured by Lucent Technologies, Siemens
Business Communications Systems, Inc. and ITT Industries, as well as
satellite tracking systems manufactured by Qualcomm Incorporated, and
generally costs between $50,000 and $500,000. The CAD/CAM systems leased
by the Company include those produced by IBM, HP, Intergraph Corporation
and Sun Microsystems, Inc. and cost between $50,000 and $700,000 per
system. The Company also leases imaging systems, testing equipment,
copying equipment, retail point-of-sale systems and bank automatic teller
machines.
Production Equipment and Other Personal Property. The Company also
leases technology related manufacturing and distribution management
systems. These systems include complex computer controlled manufacturing
and production systems, printing presses and warehouse distribution
systems. In addition, the Company leases a wide variety of personal
property in the "non-high technology" area, including machine tools,
trucks and office furniture.
2
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AMPLICON, INC.
General (continued)
Marketing Strategy
The Company has developed and refined a direct marketing system
utilizing a centralized telemarketing program. The program includes a
system which maintains a confidential database of current and potential
users of business property, a comprehensive formal training program to
introduce new marketing employees to Amplicon's telemarketing techniques,
and an in-house computer and telecommunications system.
The Company implemented its current marketing system after having
determined that a centralized telemarketing program would be more cost
effective than field sales representatives. The use of telemarketing
techniques rather than field sales representatives has enabled the
Company to limit selling, general and administrative expenses and,
consequently, allows the Company to offer more competitive rates to its
customers.
Amplicon identifies potential customers through a variety of
methods. The Company purchases lists of computer users from private
sources, conducts direct mail and telephone campaigns to generate sales
leads, and maintains proprietary records of contacts made with potential
customers by its account executives. Amplicon utilizes prospect
management software to further enhance the productivity of the sales
force. Specific information about potential customers is entered into an
on-line confidential database accessible to each account executive
through the personal computer network. As potential customers are
contacted by account executives, the database is updated and supplemented
with information about what computer and other equipment they are using,
related lease expiration dates and any future equipment needs or
replacement plans. The database allows account executives to identify
efficiently the most likely purchaser or lessee of capital assets and to
concentrate efforts on these prospective customers.
Amplicon's data base, combined with the prospect management
software, and an integrated in-house telecommunications system, permit
the Company's sales management to monitor account executive activity,
daily prospect status and pricing information. The ability to monitor
account activity and offer immediate assistance in negotiating or pricing
a transaction makes it possible for Amplicon to be responsive to its
customers and prospects.
Leasing and Sales Activities
The Company's leases are generally for terms ranging from two to
five years. All of the Company's leases are noncancelable "net" leases
which contain "hell-or-high-water" provisions under which the lessee must
make all lease payments regardless of any defects in the property, and
which require the lessee to maintain and service the property, insure the
property against casualty loss and pay all property, sales and other
taxes. The Company retains ownership of the property it leases, and in
the event of default by the lessee, the Company or the lender to whom the
lease had been assigned may declare the lessee in default, accelerate all
lease payments due under the lease and pursue other available remedies,
including repossession of the property. Upon the expiration of the
leases, the lessee typically has an option, which is dependent upon each
lease's defined end of term options, to either purchase the property at a
mutually agreeable price, or in the case of a "conditional sales
contract," at a predetermined minimum price, or to renew the lease. If
the purchase option is not exercised by the original lessee, once the
leased property is returned to the Company, the Company will endeavor to
locate a new lessee; however, if a new lessee cannot be located, then the
Company seeks to sell the leased property. The terms of the Company's
software leases are substantially similar to its equipment leases.
The Company conducts its leasing business in a manner designed to
conserve its working capital and minimize its credit exposure. The
Company does not purchase leased property until it has received a binding
noncancelable lease from its customer and, generally, has determined that
the lease can be discounted with a bank or financial institution on a
nonrecourse basis. Accordingly, a substantial portion of the Company's
leases are discounted to banks or finance companies on a nonrecourse
basis at fixed interest rates that reflect the customers' financial
condition. Approximately 89.9% and 93.1% of the total dollar amount of
new leases entered into by the Company during the fiscal years ended June
30, 1999 and 1998, respectively, were discounted to financial
institutions. The institutional lender to which a lease has been assigned
has no recourse against the Company, unless the Company is in default
under the terms of the agreement by which a lease was assigned. The
institution to which a lease has been assigned may take title to the
leased property, but only in the event the lessee fails to make lease
3
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AMPLICON, INC.
Leasing and Sales Activities (Continued)
lessee fails to make lease payments or otherwise defaults under the terms
of the lease. If this occurs, the Company may not realize its residual
investment in the leased property.
From time to time, the Company retains in its own portfolio lease
transactions that meet credit standards set by the Company. Some of
these transactions are entered into when the value of the underlying
leased property, or the credit profile of the lessee, would not be
acceptable to other financial institutions. Each of these transactions
must meet or exceed certain profitability requirements as established, on
a case by case basis, by the Company's senior management. In addition,
the Company invests in lease transactions which the Company believes
could be placed at a later date with nonrecourse lenders on a lease-by-
lease basis or in a portfolio. At June 30, 1999 and 1998, the discounted
minimum lease payments receivable relative to leases maintained in the
Company's portfolio amounted to $44,043,365 and $51,298,521,
respectively.
In certain instances, the Company will make payments to purchase
leased property prior to the commencement of the lease and assignment to
the nonrecourse debt source. The disbursements for such lease
transactions in process are generally made to facilitate the property
implementation schedule of the lessees. The lessee is contractually
obligated to make rental payments directly to the Company during the
period that the transaction is in process, and generally is obligated to
reimburse the Company for all disbursements under certain circumstances.
At June 30, 1999 and 1998, the Company's investment in property acquired
for transactions in process amounted to $35,397,631 and $81,273,524,
respectively.
In June 1999, an application was filed to obtain permission to
organize a national bank, with the Company as the sponsor. The organizers
of the bank and the Company have conducted meetings with certain
regulatory agencies, but have not yet obtained approval. If permission is
granted by the applicable regulatory agencies, it is anticipated that
the bank would operate as a wholly owned subsidiary of Amplicon. In part,
the purpose of the bank would be to provide business loans to fund the
purchase of capital assets that will be leased to corporations located
throughout the United States that meet the credit parameters established
by the bank. It is anticipated that the bank would gather deposits using
electronic means and a centralized location similar to the Company's
existing business methods.
Customers
The Company's customers are primarily subsidiaries and divisions of
Fortune 1000 companies and middle-market companies with credit ratings
acceptable to the lenders providing nonrecourse loans. The Company does
not believe that the loss of any one customer would have a material
adverse effect on its operations taken as a whole.
Competition
The Company competes in the distribution and lease financing of
computer systems and networks, software, and other equipment with
equipment brokers and dealers, other leasing companies, banks and other
financial institutions and credit corporations which are affiliated with
equipment manufacturers, such as, IBM, Dell, Compaq and HP. The Company
believes that there is increased competition for new business and that
such competition is heightened during periods when key vendors introduce
significant new products. Changes by the manufacturers of systems leased
by the Company with respect to pricing, maintenance or marketing
practices could materially affect the Company. In addition, if credit
corporations affiliated with manufacturers become more aggressive with
respect to the financing terms offered, the Company's operations could be
adversely affected. Many of the Company's competitors have substantially
greater resources, capital, and more extensive and diversified operations
than Amplicon. The Company believes the principal competitive factors in
the industry which it serves are price, responsiveness to customer needs,
flexibility in structuring lease financing arrangements, financial
technical proficiency and the offering of a broad range of lease
financing options.
4
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AMPLICON, INC.
Employees
The Company, as of June 30, 1999, had 155 employees, including 93
sales managers and account executives and 22 professionals engaged in
finance and credit. None of the Company's employees are represented by a
labor union. The Company believes that its relations with its employees
are satisfactory.
ITEM 2. PROPERTIES
At June 30, 1999, Amplicon occupied approximately 49,000 square feet
of office space in Santa Ana, California leased from an unaffiliated
party. The lease which covers the majority of the office space provides
for monthly rental payments which average $77,224 from July 1999 through
February 2003.
ITEM 3. LEGAL PROCEEDINGS
The Company is sometimes named as a defendant in litigation relating
to its business operations. Management does not expect the outcome of any
existing suit to have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of Amplicon, Inc. trades on the NASDAQ National
Market System under the symbol AMPI. The following high and low closing
sale prices for the periods shown reflect interdealer prices without
retail markup, markdown or commissions and may not necessarily reflect
actual transactions (adjusted for the Company's 2-for-1 common stock
split effective October 17, 1997):
High Low
Fiscal year ended June 30, 1999
First Quarter.........................................$18.31 $12.25
Second Quarter.........................................16.25 12.75
Third Quarter..........................................16.375 10.375
Fourth Quarter.........................................15.00 8.313
Fiscal year ended June 30, 1998
First Quarter.........................................$16.25 $11.946
Second Quarter.........................................17.25 15.25
Third Quarter..........................................24.00 16.50
Fourth Quarter.........................................24.00 11.875
The Company had approximately 55 stockholders of record and in
excess of 500 beneficial owners as of September 10, 1999.
After considering the Company's profitability, liquidity and future
operating cash requirements, the Board of Directors authorized a regular
quarterly cash dividend policy. During the fiscal years ended June 30,
1999, 1998 and 1997 the Company declared cash dividends totaling $.16,
$.16 and $.10, respectively, per common share.
5
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AMPLICON, INC.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data and operating
information of the Company. Common share data has been adjusted for the
Company's 2-for-1 common stock split effective October 17, 1997. Certain
reclassifications have been made to the fiscal years prior to 1999 to
conform with that years financial statement presentation. The selected
financial data should be read in conjunction with the Financial
Statements and notes thereto and Management's Discussion and Analysis of
Results of Operations and Financial Condition contained herein.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------
INCOME STATEMENT DATA 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Direct financing leases $ 25,432 $ 25,609 $ 21,636 $ 17,733 $ 13,204
Sales-type leases 20,990 21,794 17,857 20,755 18,690
Operating leases 951 716 1,657 1,280 2,313
-------- -------- -------- -------- --------
47,373 48,119 41,150 39,768 34,207
Sales of leased property 21,794 17,066 22,301 8,290 11,566
Interest and other income 2,004 581 637 733 1,034
-------- -------- -------- -------- --------
71,171 65,766 64,088 48,791 46,807
-------- -------- -------- -------- --------
Costs
Sales-type leases 7,005 7,881 9,406 5,786 5,721
Operating leases 86 28 111 266 123
Cost of leased property
sold 12,011 6,765 6,661 3,459 6,787
Provision for credit
losses 3,076 - 852 - 1,425
-------- -------- -------- -------- --------
22,178 14,674 17,030 9,511 14,056
-------- -------- -------- -------- --------
Gross margin 48,993 51,092 47,058 39,280 32,751
Selling, general &
administrative expenses 16,854 19,237 20,825 17,554 13,513
Interest expense-other 57 86 216 246 150
-------- -------- -------- -------- --------
Earnings before income
taxes 32,082 31,769 26,017 21,480 19,088
Income taxes 12,352 12,549 10,277 8,484 7,540
-------- -------- -------- -------- --------
Net earnings $ 19,730 $ 19,220 $ 15,740 $ 12,996 $ 11,548
======== ======== ======== ======== ========
COMMON SHARE DATA
Basic earnings per share $ 1.66 $ 1.63 $ 1.35 $ 1.11 $ .99
======== ======== ======== ======== ========
Diluted earnings per share $ 1.60 $ 1.55 $ 1.31 $ 1.09 $ .96
======== ======== ======== ======== ========
Weighted average common
shares outstanding 11,854 11,800 11,689 11,698 11,720
Diluted common shares
outstanding 12,299 12,368 12,021 11,894 11,986
Cash dividends per share $ .16 $ .16 $ .10 $ .10 $ .10
======== ======== ======== ======== ========
AS OF JUNE 30,
BALANCE SHEET DATA 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(in thousands, except per share data)
Total assets $466,769 $505,626 $482,235 $454,205 $402,100
Note payable to bank - - 10,000 - -
Nonrecourse debt 263,462 297,227 288,682 309,471 266,816
Stockholders' equity 153,493 135,945 117,754 102,665 91,364
Book value per common share $ 12.97 $ 11.49 $ 10.02 $ 8.79 $ 7.79
</TABLE>
6
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AMPLICON, INC.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
General
Amplicon generates revenues from its leasing activities, the sale of
leased property and from interest income earned on its cash and liquid
investments. Direct financing lease revenues include interest income
earned on the Company's investment in lease receivables and residuals and
gains recognized on the sale of leases in which the Company retains no
significant continuing interest. Revenues from sales-type leases consist
of the re-lease of off-lease property ("lease extensions") and new lease
transactions that qualify as sales-type leases, generally where the fair
value of the property subject to the lease differs from the Company's
carrying cost. Revenues from operating leases generally involves the
short-term rental of leased property.
The volume of new lease transactions booked during the year ended
June 30, 1999 was approximately $161 million, compared to $232 million in
fiscal 1998 and $223 million during fiscal 1997. Of the new leases booked
during the fiscal year ended June 30, 1999, approximately 64% were
structured as "true leases" where Amplicon owns the leased asset at the
end of the term, while 36% were structured as "conditional sale leases"
where the lessee generally may purchase the property at a predetermined
minimum amount at the end of the term. For true lease transactions, the
Company books a residual which is an estimate for accounting purposes of
the fair market value of the leased property at lease termination. The
Company's estimates are reviewed continuously to ensure reasonableness.
However, the amounts the Company may ultimately realize could differ from
such estimated amounts.
The Company's operating results are subject to quarterly and annual
fluctuations resulting from a variety of factors, including the volume of
new lease originations, the volume and profitability from re-marketing
leased property through re-lease or sale, variations in the mix of lease
originations, the credit quality of our portfolio and economic conditions
in general.
The Company conducts its leasing business in a manner designed to
minimize its credit exposures. However, the assumption of risk is a key
source of earnings in the leasing industry and the Company is subject to
risks through its investment in lease transactions in process, investment
in lease receivables held in its own portfolio and residual investments.
The Company establishes reserves to cover such risks and regularly
reviews their adequacy considering levels of non-performing leases,
lessees' financial condition, leased property values as well as general
economic conditions and credit quality indicators.
Fiscal Years Ended June 30, 1999 and 1998
REVENUES. Total revenues for the fiscal year ended June 30, 1999
were $71,171,493, an increase of $5,405,268, or 8%, from the prior year.
This change was primarily the result of increases in sales of leased
property and interest income of $4,728,010 and $1,422,263, respectively.
The increase in sales of leased property was primarily due to a higher
volume of lease transactions coming to end of term during fiscal 1999
where the leased property was sold to the lessee or a third-party. In
addition, during the year the Company terminated one large lease
transaction in process, which resulted in a significant sale of property
to that customer. Interest and other income for fiscal year ended June
30, 1999 increased by $1,422,263 to $2,003,787, as compared to $581,524
in the prior year, primarily as a result of the Company maintaining
higher levels of interest bearing cash and cash equivalents throughout
fiscal 1999.
Leasing revenues declined by $744,905, or 2%, for the fiscal year
ended June 30, 1999. This reduction resulted from a decrease of $176,456
in direct financing revenue to $25,432,201 and a decrease in sales-type
lease revenue of $803,588 to $20,990,135, offset by an increase in
operating lease revenue of $235,119 to $951,292. The reduction in direct
financing revenue can be attributed to lower interest income earned from
a smaller investment in lease receivables held in our own portfolio,
offset by higher unearned income recognized from residual
7
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AMPLICON, INC.
investments and assigned capital leases. The reduction in sales-type
lease revenue can be attributed to a decrease in revenue from lease
extensions, offset by increased revenue from new lease transactions
structured as sales-type leases. The increase to operating lease revenue
can be attributed to an increase in the volume of short-term lease
renewals.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1999
decreased by $2,097,942, or 4%, to $48,993,759 compared to $51,091,701
for the fiscal year ended June 30, 1998. The principal factors that
contributed to the decrease in gross profit was lower profits realized
from lease extensions and an increased provision for credit losses,
offset by higher interest income from cash investments and higher income
earned on sales-type leases. The increase in the provision for credit
losses was primarily due to an increase in identified problems on
residual investments related to assigned lease transactions, as well some
increase in delinquencies on leases held in the Company's own lease
portfolio.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the fiscal year ended June 30, 1999 decreased
by $2,383,153, or 12.4%, as compared to the prior year. This decrease is
the result of lower legal, salary and benefit expenses.
INTEREST EXPENSE-OTHER. Interest expense-other was $57,695 for the
year ended June 30, 1999 as compared to $85,733 for the year ended June
30, 1998. The decrease of $28,038 was primarily the result of lower
fiscal year 1999 interest assessments made as the result of regulatory
audits with various federal, state and local agencies.
TAXES. The Company's tax rate was 38.5% and 39.5% for the fiscal
years ended June 30, 1999 and 1998, respectively, representing its
estimated annual tax rates for each respective year.
Fiscal Years Ended June 30, 1998 and 1997
REVENUES. Total revenues for the fiscal year ended June 30, 1998
were $65,766,225, an increase of $1,677,985, or 3%, from the prior year.
This change was primarily the result of a $6,968,520 increase in leasing
revenues to $48,118,533, offset by a $5,235,335 decline in sales of
leased property to $17,066,168. The 17% increase in leasing revenues for
the fiscal year ended June 30, 1998 resulted from an increase in direct
financing revenue of $3,972,915 to $25,608,657, an increase in sales-type
lease revenue of $3,936,250 to $21,793,723, offset by a decrease of
$940,645 in operating lease revenue to $716,153. The increase in direct
financing revenue can be attributed to increases in unearned income
recognized on a larger investment in lease receivables held in the
Company's own portfolio, on assigned lease transactions as well as from
residual investments. The increase in sales-type lease revenue can be
attributed to an increase in revenue from lease extensions. The decrease
to operating lease revenue can be attributed to a decrease in the volume
of short-term lease renewals.
The decrease in sales of leased property was primarily due to lower
revenues recognized from leased property sales during fiscal 1998 as
compared to a record revenue recognized in fiscal 1997. Interest and
other income for fiscal year ended June 30, 1998 decreased by $55,200 to
$581,524, as compared to $636,724 in the prior year, primarily as a
result of the Company maintaining lower investment balances throughout
fiscal year 1998.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1998
increased by $4,034,044, or 9%, to $51,091,701 compared to $47,057,657
for the fiscal year ended June 30, 1997. The principal factors that
contributed to the increase in gross profit were a higher recognition of
unearned income on direct financing leases, as described above, higher
profits realized from lease extensions and a decline in the provision for
credit losses, offset by lower profits from sales of leased property.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the fiscal year ended June 30, 1998 decreased
by $1,587,492, or 7.6%, as compared to the prior year. This decrease is
the result of lower legal, salary and benefit expenses.
INTEREST EXPENSE-OTHER. Interest expense-other was $85,733 for the
year ended June 30, 1998 as compared to $216,182 for the year ended June
30, 1997. The decrease of $130,449 was primarily the result of
8
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AMPLICON, INC.
lower fiscal year 1998 interest assessments made as the result of
regulatory audits with various federal, state and local agencies.
TAXES. The Company's tax rate was 39.5% for the fiscal years ended
June 30, 1998 and 1997 representing its estimated annual tax rates for
each respective year.
Liquidity 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 certain base term lease
payments to banks or other financial institutions. The assigned lease
payments are discounted at fixed rates such that the lease payments are
sufficient to fully amortize the aggregate outstanding debt. The Company
does not purchase property until it has received a noncancelable lease
from its customer and, generally, has determined that the lease can be
discounted on a nonrecourse basis. At June 30, 1999, the Company had
outstanding nonrecourse debt aggregating $263,461,800 relating to
property under capital 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
fiscal year 1999, the Company decreased its net investment in leases by
$7,255,156. This decrease was primarily due to fewer new lease
transactions being held in the Company's own lease portfolio.
The Company will often make payments to purchase leased property
prior to the commencement of the lease and assignment to other financial
institutions. The disbursements for such lease transactions in process
are generally made to facilitate the property implementation schedule of
the lessees. The lessee is contractually obligated by the lease to make
rental payments directly to the Company during the period that the
transaction is in process, and the lessee is generally obligated to
reimburse the Company for all disbursements under certain circumstances.
At June 30, 1999, the Company's investment in property acquired for
transactions in process decreased by $45,875,893 to $35,397,631. This
decrease was primarily due to the lower volume of new lease transactions
originated during fiscal 1999.
The Company generally funds its equity investments in leased
property and transactions in process with internally generated funds and,
if necessary, borrowings under a $20,000,000 general line of credit. At
June 30, 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 600,000 shares each,
or a total of 1,200,000 of the Company's Common Stock. During the year
ended June 30, 1999, the Company repurchased 54,000 shares at an
aggregate cost of $712,298. As of September 11, 1999, 667,356 shares
remain available under these authorizations.
The need for cash used for operating activities will increase as the
Company expands. The Company believes that existing cash balances, cash
flow from operations, cash flows from its financing and investing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
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.
9
<PAGE>
AMPLICON, INC.
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 completed its assessment of its
internal hardware related to the local area network and the 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 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 currently in the process of
implementing the replacement for this software application, which should
be completed by October 31, 1999. The total costs of the Company's Y2K
project are estimated to be approximately $270,000, a significant portion
of which would have been incurred within normal operating plans for
maintaining the Company's systems. These costs have been funded through
operating cash flows.
The Company has contacted its major debt sources, vendors and
customers with regard to their Y2K compliance and has received responses
from most. All of the Company's major debt sources have advised the
Company that they are or will be Y2K compliant by December 31, 1999. No
vendors or customers have advised the Company that they do not expect to
be compliant. However, almost all have cautioned the Company that they
cannot predict if there might be a negative impact to their operations
due to the non-compliance of an unrelated third party. The Company is in
the process of addressing any material non-responsive customers and
vendors during the first half of fiscal 2000.
Management believes that the Company's internal systems are in
substantial compliance with the Y2K at this time and that the Company
should not have a material business risk as a result of this issue. It
is difficult, however, to predict the effect of any third party non-
readiness on our business. Significant Y2K failures in our systems or in
the systems of third parties (or third parties upon whom they depend)
could have an adverse effect on our financial results and operations.
Potential problems that might occur could include an increase in credit
losses due to Y2K problems for our lessees and disruption in the business
of our debt sources which may result in lease funding delays for the
Company. The amount of these potential credit losses or the degree of
disruption cannot be determined at this time. The Company is currently
finalizing contingency plans in the event that it does experience any
such disruption.
All Year 2000 information provided herein is a "Year 2000 Readiness
Disclosure" as defined in the Year 2000 Information and Readiness
Disclosure Act and is subject to the terms thereof. This Year 2000
information is provided pursuant to securities law requirements and it
may not be relied upon as a form of express or implied covenant,
warranty, representation or guarantee of any kind.
Forward-Looking Statements
This document contain forward-looking statements concerning our
operations, business results and financial condition. These statements
involve management assumptions as well as risks and uncertainties that
may be difficult to predict. 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 or implied in those statements. Factors that could cause such
differences include, but are not limited to: economic conditions and
trends; changes in interest rates; industry cycles and trends; changes in
the market for leasing capital assets and other collateral due to market
conditions, oversupply, obsolescence or other factors; disruptions in the
capital markets; changes in laws or regulations, and competitive
conditions and trends.
10
<PAGE>
AMPLICON, INC.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary financial
information are included herein at the pages indicated below:
Page Number
Reports of Independent Public Accountants 12
Balance Sheets at June 30, 1999 and 1998 13
Statements of Earnings for the years ended
June 30, 1999, 1998 and 1997 14
Statements of Stockholders' Equity for the
years ended June 30, 1999, 1998 and 1997 15
Statements of Cash Flows for the years
ended June 30, 1999, 1998 and 1997 16
Notes to Financial Statements 17-26
Financial Statement Schedule for the years
ended June 30, 1999, 1998, and 1997
Schedule II - Valuation and Qualifying Accounts 28
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Amplicon, Inc.:
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of
Amplicon, Inc. at June 30, 1999, and the results of its operations and
its cash flows for the year ended June 30, 1999 in conformity with
generally accepted accounting principles. In addition, in our opinion,
the financial statement schedule listed in the accompanying index present
fairly, in all material respects, the information set forth therein when
read in conjunction with the related financial statements. These
financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audit. We conducted our audit of these statements
in accordance with generally accepted auditing standards, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion
expressed above.
Newport Beach, California PRICEWATERHOUSECOOPERS LLP
August 13, 1999
To the Board of Directors and Stockholders of Amplicon, Inc.:
We have audited the accompanying balance sheet of Amplicon, Inc. (a
California corporation) as of June 30, 1998, and the related statements
of earnings, stockholders' equity and cash flows for the years ended June
30, 1998 and 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Amplicon,
Inc. as of June 30, 1998, and the results of its operations and its cash
flows for the years ended June 30, 1998 and 1997, in conformity with
generally accepted accounting principles.
As explained in Note 1 to the financial statements, effective January 1,
1997, the Company changed its method of accounting for transfers of
financial assets.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule, for the years ended
June 30, 1998 and 1997, listed in the index of financial statements is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects, the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
Irvine, California ARTHUR ANDERSEN LLP
July 31, 1998
12
<PAGE>
AMPLICON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
----------------------------
<S> <C> <C>
ASSETS 1999 1998
- ------ ------------ ------------
Cash and cash equivalents (Note 1) $ 59,337,426 $ 15,192,477
Net receivables (Note 2) 22,784,507 17,992,343
Property acquired for transactions
in process (Note 1) 35,397,631 81,273,524
Net investment in capital leases (Note 3) 84,617,350 92,632,854
Equipment on operating leases, less
accumulated depreciation of $91,288 (1999)
and $29,708 (1998) 8,537 -
Other assets 1,161,979 1,308,140
Discounted lease rentals assigned to
lenders (Note 3) 263,461,800 297,226,530
------------ ------------
$466,769,230 $505,625,868
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 7,159,049 $ 25,658,503
Accrued liabilities 5,660,610 6,819,631
Customer deposits 7,507,322 9,958,313
Nonrecourse debt (Note 3) 263,461,800 297,226,530
Income taxes payable - including
deferred taxes, net (Note 5) 29,405,562 30,018,030
------------ ------------
313,194,343 369,681,007
------------ ------------
Commitments and contingencies (Notes 4 & 7)
Stockholders' equity (Notes 4 & 6):
Preferred stock; 2,500,000 shares
authorized; none issued - -
Common stock; $.01 par value;
40,000,000 shares authorized;
11,831,918 (1999) and 11,830,618 (1998)
issued and outstanding 118,319 118,306
Additional paid in capital 6,708,936 6,910,912
Retained earnings 146,747,632 128,915,643
------------ ------------
153,574,887 135,944,861
------------ ------------
$466,769,230 $505,625,868
============ ============
</TABLE>
The accompanying notes are an integral
part of these balance sheets.
13
<PAGE>
AMPLICON, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years ended June 30,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Direct financing leases $25,432,201 $25,608,657 $21,635,742
Sales-type leases 20,990,135 21,793,723 17,857,473
Operating leases 951,292 716,153 1,656,798
----------- ----------- -----------
Leasing revenues 47,373,628 48,118,533 41,150,013
Sales of leased property 21,794,078 17,066,168 22,301,503
Interest and other income 2,003,787 581,524 636,724
----------- ----------- -----------
71,171,493 65,766,225 64,088,240
----------- ----------- -----------
Costs:
Sales-type leases 7,004,914 7,881,390 9,406,414
Operating leases 86,187 28,488 110,730
Cost of leased property sold 12,010,579 6,764,646 6,661,439
Provision for credit losses 3,076,054 - 852,000
----------- ----------- -----------
22,177,734 14,674,524 17,030,583
----------- ----------- -----------
Gross profit 48,993,759 51,091,701 47,057,657
Selling, general and
administrative expenses 16,854,189 19,237,342 20,824,834
Interest expense-other 57,695 85,733 216,182
----------- ----------- -----------
Earnings before income taxes 32,081,875 31,768,626 26,016,641
Income taxes 12,352,000 12,549,000 10,277,000
----------- ----------- -----------
Net earnings $19,729,875 $19,219,626 $15,739,641
=========== =========== ===========
Basic earnings per common share $ 1.66 $ 1.63 $ 1.35
=========== =========== ===========
Diluted earnings per common share $ 1.60 $ 1.55 $ 1.31
=========== =========== ===========
Dividends declared per common
share outstanding $ .16 $ .16 $ .10
=========== =========== ===========
Weighted average common shares
outstanding 11,854,441 11,800,206 11,688,980
=========== =========== ===========
Diluted common shares outstanding 12,299,171 12,367,752 12,021,488
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
14
<PAGE>
AMPLICON, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Other
Additional compre-
Common Stock paid in Retained hensive
Shares Amount capital earnings income Total
--------------------- ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30,
1996 11,677,918 $116,780 $5,528,897 $ 97,017,263 $1,596 $102,664,536
Shares
issued -
Stock
options
exer-
cised 84,600 846 603,860 - - 604,706
Shares re-
purchased ( 10,000) ( 100)( 81,775) - - ( 81,875)
Dividends
declared - - - ( 1,171,136) - ( 1,171,136)
Invest-
ment
secu-
rities
valua-
tion
adjust-
ment - - - - (1,596) ( 1,596)
Net
earnings - - - 15,739,641 - 15,739,641
---------- -------- ---------- ------------ ------ -----------
Balance,
June 30,
1997 11,752,518 117,526 6,050,982 111,585,768 - 117,754,276
Shares
issued -
Stock
options
exer-
cised 78,100 780 652,485 - - 653,265
Income
tax
bene-
fit
from
exer-
cise
of
non-
qual-
ified
stock
options - - 207,445 - - 207,445
Dividends
declared - - - ( 1,889,751) - ( 1,889,751)
Net
earnings - - - 19,219,626 - 19,219,626
---------- -------- ---------- ------------ ----- ------------
Balance,
June 30,
1998 11,830,618 118,306 6,910,912 128,915,643 - 135,944,861
Shares
issued -
Stock
options
exer-
cised 55,300 553 427,797 - - 428,350
Shares re-
purchased ( 54,000)( 540)( 711,758) - - ( 712,298)
Income
tax
benefit
from
exercise
of non-
qualified
stock
options - - 81,985 - - 81,985
Dividends
declared - - - ( 1,897,886) - ( 1,897,886)
Net
earnings - - - 19,729,875 - 19,729,875
Balance,
June 30,
1999 11,831,918 $118,319 $6,708,936 $146,747,632 $ - $153,574,887
========== ======== ========== ============ ===== ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
15
<PAGE>
AMPLICON, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30,
------------------------------------------
1999 1998 1997
CASH FLOWS FROM OPERATING ------------ ------------ ------------
ACTIVITIES:
<S> <C> <C> <C>
Net earnings $ 19,729,875 $ 19,219,626 $ 15,739,641
Adjustments to reconcile net
earnings to cash flows used
for operating activities:
Depreciation 85,624 28,487 110,729
Sale or lease of equipment
previously on operating
leases, net 4,005 - -
Interest accretion of
estimated unguaranteed
residual values ( 6,616,611) ( 5,893,522) ( 4,634,756)
Decrease in estimated
unguaranteed residual
values 14,671,334 11,639,988 10,396,836
Provision for credit losses 3,076,054 - 852,000
Net (decrease) increase in
income taxes payable,
including deferred taxes ( 530,483) 3,175,874 7,542,529
Net (increase) decrease in
net receivables ( 5,272,164) 2,406,381 2,795,321
Net decrease (increase) in
property acquired for
transactions in process 45,875,893 ( 1,463,905) ( 34,030,208)
Net (decrease) increase in
accounts payable and
accrued liabilities ( 19,658,475) 1,466,867 17,477,783
------------ ------------ ------------
Net cash provided by
operating activities 51,365,052 30,579,796 16,249,875
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of
available-for-sale
securities - ( 180,997,695) ( 235,370,644)
Proceeds from sale of
available-for-sale
securities - 180,997,695 236,551,015
Net decrease (increase) in
minimum lease payments
receivable 7,396,388 ( 209,238) ( 18,299,637)
Purchase of equipment on
operating leases ( 98,166) ( 26,975) ( 77,674)
Net decrease (increase) in
other assets 146,161 ( 119,073) 247,470
Estimated unguaranteed
residual values recorded
on leases ( 10,031,661) ( 11,796,606) ( 10,194,099)
------------ ------------ ------------
Net cash used for investing
activities ( 2,587,278) ( 12,151,892) ( 27,143,569)
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
(Payment) borrowing on note
payable - ( 10,000,000) 10,000,000
Payments to repurchase
common stock ( 712,298) - ( 81,875)
(Decrease) increase in
customer deposits ( 2,450,991) 2,221,099 ( 1,292,398)
Dividends to stockholders ( 1,897,886) ( 1,889,751) ( 1,171,136)
Proceeds from exercise of
stock options 428,350 653,265 604,706
------------ ------------ ------------
Net cash (used for) provided
by financing activities ( 4,632,825) ( 9,015,387) 8,059,297
------------ ------------ ------------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 44,144,949 9,412,517 ( 2,834,397)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 15,192,477 5,779,960 8,614,357
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 59,337,426 $ 15,192,477 $ 5,779,960
============ ============ ============
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
(Decrease) increase in
lease rentals assigned
to lenders and related
nonrecourse debt ($ 33,764,730) $ 8,544,241 ($ 20,788,426)
SUPPLEMENTAL DISCLOSURES ============ ============ ============
OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 57,695 $ 85,733 $ 216,182
============ ============ ============
Income taxes $ 12,882,483 $ 9,373,126 $ 2,734,471
============ ============ ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
16
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1999
Note 1 - Summary of Significant Accounting Policies:
Nature of Operations
Amplicon leases and sells computer networks, mid-range computers,
computer software, peripherals, workstations, telecommunications
equipment, computer automated design and manufacturing equipment, office
automation equipment, and other items of business property to customers
located throughout the United States.
New lease transactions are generally structured as direct financing
leases or sales-type leases. The re-lease of property that has come off
lease may be accounted for as a sales-type lease or as an operating
lease, depending on the terms of the re-lease. Leased property that comes
off lease and is remarketed through a sale to the lessee or a third party
is accounted for as sales of leased property.
Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
For purposes of these statements, cash and cash equivalents includes cash
in banks, cash in demand deposit accounts and money market accounts.
Fair Value of Financial Instruments
The Company has estimated the fair value of its financial instruments in
compliance with Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107").
For cash, the book value is a reasonable estimate of fair value. For
cash equivalents, the estimated fair value is based on respective market
prices which was equal to book value for all periods presented. The fair
value of the Company's net investment in capital leases is not a required
disclosure under SFAS No. 107.
Leases
Capital Leases
For capital leases that qualify as direct financing leases, the aggregate
lease payments receivable and estimated unguaranteed residual value, if
any, are recorded on the balance sheet net of unearned income as net
investment in capital leases. The unearned income is recognized as
direct financing revenue over the lease term on an internal rate of
return method. There are no costs and expenses related to direct
financing leases since leasing revenue is recorded on a net basis.
For capital leases that qualify as sales-type leases, the Company
recognizes profit or loss at lease inception to the extent the fair value
of the property leased differs from the Company's carrying value. The
discounted value of the aggregate lease payments receivable is recorded
as sales-type lease revenue. The property cost, less the discounted value
of the residual, if any, and any initial direct costs are recorded as
sales-type lease costs. For balance sheet purposes, the aggregate lease
payments receivable, and estimated unguaranteed residual value, if any,
are recorded on the balance sheet net of unearned income as net
investment in capital leases. Unearned income is recognized as direct
financing revenue over the lease term on an internal rate of return
method.
The estimated unguaranteed residual value is an estimate for accounting
purposes of the fair market value of the lease property at lease
termination. The estimates are reviewed continuously to ensure
reasonableness, however the amounts the Company may ultimately realize
could differ from the estimated amounts.
17
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
The Company typically assigns, on a nonrecourse basis, the minimum lease
payments receivable to financial institutions at fixed interest rates.
When leases are assigned to financial institutions, without recourse, the
discounted value of the minimum lease payments receivable is
recategorized on the balance sheet as discounted lease rentals assigned
to lenders. The related obligations resulting from the discounting of the
leases are recorded as nonrecourse debt. The unearned income related to
the lease is reduced by the interest expense from the nonrecourse debt.
In the event of default by a lessee, the lender has a first lien against
the underlying leased property with no further recourse against the
Company. If this occurs, the Company may not realize its residual
investment in the leased property.
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 No. 125").
Under the requirements set forth in SFAS No. 125, the Company has
accounted for qualifying transfers of financial assets occurring on or
after January 1, 1997 by derecognizing all assets sold. The Company has
recorded the gain on sale as part of direct financing revenue.
Qualifying transfers which occurred prior to January 1, 1997 were
precluded from adoption of SFAS No. 125 and the discounted value of the
minimum lease payments receivable have been recognized as discounted
lease rentals assigned to lenders.
A portion of the Company's selling, general and administrative costs
directly related to originating direct financing lease transactions is
deferred as an increase to direct financing revenue and amortized over
the lease term as a reduction to direct financing revenue utilizing the
effective interest method.
Operating Leases
Lease contracts which do not meet the criteria of capital leases are
accounted for as operating leases. Property on operating leases is
recorded at cost and depreciated on a straight-line basis over the lease
term to the estimated residual value at the termination of the lease.
Rental income is recorded monthly or quarterly when due. Selling costs
directly associated with the operating leases are deferred and amortized
over the lease term.
Provision for Credit Losses
The reserve for doubtful accounts and residual valuation allowance
("provision for credit losses") is periodically reviewed for adequacy
considering levels of past due leases and nonperforming assets, lessees'
financial condition, leased property values as well as general economic
conditions and credit quality indicators. The provision for credit losses
is intended to provide for future events, which by their nature are
uncertain. Therefore, changes in economic conditions or other events
affecting specific lessees or industries may necessitate additions or
deductions to the reserve for doubtful accounts or the residual valuation
allowance.
Property Acquired for Transactions in Process
Property acquired for transactions in process primarily represents
partial deliveries of property which the lessee has accepted on in-
process lease transactions. Such amounts are stated at cost.
Common Stock
On September 12, 1997, the Company's Board of Directors announced a
2-for-1 Common Stock split to be effected on October 17, 1997, to
stockholders of record as of September 26, 1997. These financial
statements have been adjusted to reflect this stock split.
18
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Earnings Per Share
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standard No. 128 "Earnings per Share" ("SFAS No. 128"). SFAS
No. 128 requires the presentation of both basic and diluted net income
per share for financial statement purposes. Basic net income per share
is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding. Diluted net income
per share includes the effect of the potential shares outstanding,
including dilutive stock options, using the treasury stock method. The
following table reconciles the components of the basic net income per
share calculation to diluted net income per share.
<TABLE>
<CAPTION>
Years ended June 30,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net earnings $19,729,875 $19,219,626 $15,739,641
=========== =========== ===========
Weighted average number of
common shares outstanding
assuming no exercise of
outstanding options 11,854,441 11,800,206 11,688,980
Dilutive stock options using
the treasury stock method 444,730 567,546 332,508
----------- ----------- -----------
12,299,171 12,367,752 12,021,488
=========== =========== ===========
Basic earnings per common share $ 1.66 $ 1.63 $ 1.35
=========== =========== ===========
Diluted earnings per share $ 1.60 $ 1.55 $ 1.31
=========== =========== ===========
</TABLE>
Reclassifications
In fiscal 1999, the Company changed its presentation of reporting revenue
and cost of sales on certain capital leases. Historically, for all
capital leases, the Company recorded the discounted present value of the
aggregate lease rentals as sales of equipment and the lease property cost
less the discounted value of the residual, if any, as cost of equipment
sold. The new presentation had no impact on either gross profit or net
income. Total revenues as previously presented in 1998 and 1997, were
$313,789,037 and $299,890,478, respectively. Total cost of sales as
previously presented in 1998 and 1997 were $262,697,336 and $252,832,821,
respectively.
Certain reclassifications have been made to the fiscal 1998 and 1997
financial statements to conform with the presentation of the fiscal 1999
financial statements.
Note 2 - Receivables:
The Company's net receivables consist of the following:
<TABLE>
<CAPTION>
June 30,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Financial institutions $12,665,586 $ 4,955,428
Lessees 10,796,391 13,084,013
Other 493,425 791,759
----------- -----------
23,955,402 18,831,200
Less allowance for doubtful accounts ( 1,170,895) ( 838,857)
----------- -----------
Net receivables $22,784,507 $17,992,343
=========== ===========
</TABLE>
19
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Note 3 - Capital Leases:
The Company's net investment in capital leases consists of the following:
<TABLE>
<CAPTION>
June 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Minimum lease payments receivable,
less allowance for doubtful
accounts of $1,487,236 in 1999
and $856,585 in 1998 $ 51,406,881 $ 60,842,988
Estimated unguaranteed residual
value, less valuation allowance
of $2,816,276 in 1999 and
$1,273,793 in 1998 52,111,083 54,519,202
------------ ------------
103,517,964 115,362,190
Less unearned income ( 18,900,614) ( 22,729,336)
------------ ------------
Net investment in capital leases $ 84,617,350 $ 92,632,854
============ ============
</TABLE>
The minimum lease payments receivable and estimated unguaranteed residual
value are discounted using the internal rate of return method related to
each specific capital lease. Unearned income includes the offset of
initial direct costs of $9,171,547 and $9,878,696 at June 30, 1999 and
1998, respectively.
At June 30, 1999, a summary of the installments due on minimum lease
payments receivable and the expected maturity of the Company's estimated
unguaranteed residual value, net of allowances, is as follows:
<TABLE>
<CAPTION>
Estimated
Minimum unguaranteed
Years ending lease payments residual
June 30, receivable value Total
------------ ----------- ----------- ------------
<S> <C> <C> <C>
2000 $29,427,145 $19,510,850 $ 48,937,995
2001 11,494,945 16,267,424 27,762,369
2002 4,915,614 10,633,240 15,548,854
2003 3,672,041 3,065,498 6,737,539
2004 1,861,142 2,520,865 4,382,007
Thereafter 35,994 113,206 149,200
----------- ----------- ------------
51,406,881 52,111,083 103,517,964
Less unearned income ( 6,296,945) (12,603,669) ( 18,900,614)
----------- ----------- ------------
Net investment in capital leases $45,109,936 $39,507,414 $ 84,617,350
=========== =========== ============
</TABLE>
Included with unearned income on the estimated unguaranteed residual
value is unearned income from assigned leases.
20
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Nonrecourse debt, which relates to the discounting of capital lease
receivables, bears interest at rates ranging from 5.80% to 15.60%.
Maturities of such obligations at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Years ending Capital
June 30, leases
------------ ------------
<S> <C>
2000 $117,104,877
2001 75,194,155
2002 30,360,827
2003 12,570,331
2004 4,233,188
Thereafter 112,550
------------
Total nonrecourse debt 239,575,928
Deferred interest income 23,885,872
------------
Discounted lease rentals assigned to lenders $263,461,800
============
</TABLE>
At June 30, 1999, deferred interest expense of $23,885,872 is amortized
against direct financing revenues related to the Company's discounted
lease rentals assigned to lenders of $263,461,800 using the effective
yield method.
Note 4 - Note Payable to Bank:
In December 1997, the Company negotiated a $20,000,000 general business
loan agreement (the "Agreement") with a Bank. The Agreement, which
provides for borrowings at the Bank's reference rate or the Bank's
Offshore rate plus 1.00%, allows for advances through December 31, 1999
with rollover provisions to a term note, provided certain conditions are
met by the Company. The term note is to be secured by certain qualifying
leases and is to bear interest at the Bank's reference rate plus .25% or
the Bank's Offshore rate plus 1.75%. The term note requires repayment in
three equal quarterly installments of one eighth of the outstanding
balance at the expiration date, commencing April 1, 2000, and one final
payment on December 31, 2000, for the remaining balance.
The Agreement is unsecured and excludes any arrangements for compensating
balances; however, the Bank requires a commitment fee on the daily
average unused amount of the Bank's $20,000,000 commitment. Under the
provisions of the Agreement, the Company must maintain certain net worth
requirements, a defined debt to net worth ratio and a defined ratio of
certain assets to defined debt. As of June 30, 1999 and 1998, there was
no borrowing outstanding on this Agreement.
21
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Note 5 - Income Taxes:
The Company accounts for its income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Among other
provisions, this standard requires deferred tax balances to be determined
using the enacted income tax rate for the years in which taxes will be
paid or refunds received. From time to time, the Company is audited by
various governmental taxing authorities. The Company believes that its
accrual for income taxes is adequate for adjustments, if any, which may
result from these examinations.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
Years ended June 30,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current tax expense:
Federal $ 7,999,798 $ 7,697,441 $ 5,407,310
State 2,075,000 2,200,000 1,500,000
----------- ----------- -----------
10,074,798 9,897,441 6,907,310
----------- ----------- -----------
Deferred tax expense:
Federal 1,808,191 2,620,156 3,177,690
State 469,011 31,403 192,000
----------- ----------- -----------
2,277,202 2,651,559 3,369,690
----------- ----------- -----------
$12,352,000 $12,549,000 $10,277,000
=========== =========== ===========
</TABLE>
Deferred taxes result principally from the method of recording lease
income on capital leases and depreciation methods for tax reporting,
which differ from financial statement reporting.
Deferred income tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
June 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Deferred income tax liabilities:
Tax operating leases $32,747,022 $33,353,407
Deferred selling expenses 3,760,334 4,050,265
Payments due - 1,315,834
----------- -----------
Total liabilities 36,507,356 38,719,506
----------- -----------
Deferred income tax assets:
Refunds due ( 1,137,000) -
Allowances and reserves ( 3,025,280) ( 3,968,978)
Minimum tax credits/carryforwards ( 1,750,000) ( 3,537,117)
Depreciation other than on
operating leases ( 463,264) ( 425,381)
State income taxes ( 726,250) ( 770,000)
----------- -----------
Total assets ( 7,101,794) ( 8,701,476)
----------- -----------
Net deferred income tax
liabilities $29,405,562 $30,018,030
=========== ===========
</TABLE>
The sources of differences between the federal statutory income tax rate
and the Company's effective tax rate are as follows:
<TABLE>
<CAPTION>
Years ended June 30,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State tax, net of federal benefit 4.6 4.6 4.8
Other ( 1.1) ( .1) ( .3)
----- ----- -----
Effective rate 38.5% 39.5% 39.5%
===== ===== =====
</TABLE>
22
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Capital Structure:
In September 1986, the Board of Directors and stockholders approved an
increase in the number of authorized shares of Common Stock to
40,000,000. The Board of Directors and stockholders further authorized
the issuance of 2,500,000 shares of preferred stock, from time to time,
in one or more series and to fix the voting powers, designations,
preferences and the relative participating, optional or other rights, if
any, of any wholly unissued series of preferred stock.
In August 1985, the Company's stockholders approved a Stock Option Plan
(the "1985 Plan"), which, as amended, provided that stock options would
be granted to officers, employees, consultants and other persons who had
made major contributions toward the growth and development of the
Company. Stock options that were granted entitled the recipient to
purchase shares of the Company's common stock at prices greater than,
equal to or less than the estimated fair market value at the date of the
grant. Under the 1985 Plan, stock options become exercisable over a three
or five year period, commencing with the first anniversary of the date of
the grant, and expire ten years from the date of the grant. The Company
had reserved 1,300,000 shares of common stock for issuance under the 1985
Plan. No further grants will be made under the 1985 Plan.
In November 1995, the Company's stockholders approved the 1995 Equity
Participation Plan (the "1995 Plan") which succeeds the 1985 Plan. The
1995 Plan provides for the granting of options, restricted stock and
stock appreciation rights ("SARs") to key employees, directors and
consultants of the Company. Under the 1995 Plan, the maximum number of
shares of Common Stock that may be issued upon the exercise of options or
SARs, or upon the vesting of restricted stock awards, is 1,000,000. The
maximum number of available shares of Common Stock will increase by an
amount equal to 1% of the total number of issued and outstanding shares
of Common Stock as of June 30 of the fiscal year immediately preceding
such fiscal year. Each grant or issuance under the 1995 Plan will be set
forth in a separate agreement and will indicate, as determined by the
stock option committee, the type, terms, vesting period and conditions of
the award.
The following table summarizes the activity in the 1985 and 1995 Plans
for the periods indicated:
<TABLE>
<CAPTION>
For the years ended June 30,
----------------------------------------------------------
1999 1998 1997
--------------------- ----------------- -----------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
---------- -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Options
outstanding at
the beginning of
the year 938,350 $ 7.49 993,900 $ 6.97 969,700 $6.61
Granted 195,250 14.19 64,750 17.18 182,000 9.61
Exercised ( 55,300) 7.75 ( 78,100) 8.36 ( 84,600) 7.14
Canceled ( 62,700) 14.27 ( 42,200) 8.26 ( 73,200) 8.57
---------- ------ -------- ------ -------- -----
Options
outstanding at
the end of
the year 1,015,600 $ 8.35 938,350 $ 7.49 993,900 $6.97
========== ====== ======== ====== ======== =====
Options
exercisable 688,750 656,466 631,832
========== ======== ========
Weighted
average
fair value
of options
granted $ 5.95 $ 6.07 $ 3.41
========== ======== ========
</TABLE>
23
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
For the years ended June 30, 1999
------------------------------------------------------
Options outstanding Options exercisable
-------------------------------- --------------------
Weighted
average
remaining Weighted Weighted
contractual average average
Range of Number life exercise Number exercise
exercise prices outstanding (in years) price exercisable price
------------------ ----------- ---------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 3.50 - $ 3.50 309,000 1.21 $ 3.50 309,000 $ 3.50
6.00 7.875 264,566 4.37 7.42 202,566 7.28
8.00 - 10.50 159,934 4.82 9.53 144,534 9.65
11.375 - 17.75 282,100 8.86 13.86 32,650 12.57
----------------- --------- ---- ------ ------- ------
$ 3.50 - $17.75 1,015,600 4.73 $ 8.35 688,750 6.33
================= ========= ==== ====== ======= ======
</TABLE>
The Company accounts for these Plans under APB Opinion No. 25,
"Accounting for Stocks Issued to Employees," under which no compensation
cost has been recognized. Had compensation cost for these plans been
determined consistent with Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), the
Company's net income and earnings per share would have been reduced to
the following proforma amounts:
<TABLE>
<CAPTION>
For the year ended June 30,
1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Net earnings $19,729,875 $19,219,626 $15,739,641
Proforma compensation cost ( 166,955) ( 48,266) ( 27,392)
----------- ----------- -----------
Proforma net earnings $19,562,920 $19,171,360 $15,712,249
=========== =========== ===========
Proforma Basic EPS $ 1.65 $ 1.66 $ 1.34
=========== =========== ===========
Proforma Diluted EPS $ 1.59 $ 1.55 $ 1.31
=========== =========== ===========
</TABLE>
Since the FASB No. 123 method of accounting has not been applied to
options granted prior to July 1, 1995, the resulting proforma
compensation cost may not be indicative of that to be expected in future
periods.
The fair value of each grant is estimated on the grant date using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1999 and 1998.
<TABLE>
<CAPTION>
For the year ended June 30,
1999 1998
---------------------------
<S> <C> <C>
Risk free
interest rate 5.88% 5.47%
Option life
(in years) 5 5
Dividend yield 1.00% 1.00%
Volatility 42.23% 33.29%
</TABLE>
24
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Note 7 - Commitments and Contingencies:
Leases
The Company leases its corporate offices under operating leases which
expire in fiscal 2002 and 2003. Rent expense was $995,075 (1999),
$774,165 (1998) and $604,559 (1997).
Future minimum lease payments under the operating leases are as follows:
<TABLE>
<CAPTION>
Years ending Future minimum
June 30, lease payments
------------ --------------
<S> <C>
2000 $ 880,642
2001 903,966
2002 1,100,120
2003 691,764
----------
$3,576,492
==========
</TABLE>
Litigation
The Company is party to various legal actions and administrative
proceedings and subject to various claims arising out of the Company's
normal business activities. Management does not expect the outcome of
any of these matters, individually and in the aggregate, to have a
material adverse effect on the financial condition and results of
operations of the Company.
401(k) Plan
Employees of the Company may participate in a voluntary defined
contribution plan (the "401K Plan") qualified under Section 401(k) of the
Internal Revenue Code of 1986. Under the 401K Plan, employees who have
met certain age and service requirements may contribute up to a certain
percentage of their compensation. The Company has made contributions
during the years ended June 30, 1999, 1998, and 1997 of $105,379,
$107,172 and $131,573, respectively.
Note 8- Selected Quarterly Financial Data (Unaudited):
Summarized quarterly financial data for the fiscal years ended June 30,
1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------
September 30, December 31, March 31, June 30,
------------- ------------ --------- --------
(In thousands, except per share amounts)
1999
----
<S> <C> <C> <C> <C>
Total revenues $14,967 $19,775 $16,868 $19,561
Gross profit 12,171 12,743 11,928 12,152
Net earnings $ 4,574 $ 5,291 $ 4,753 $ 5,112
Basic earnings per
common share $ .38 $ .44 $ .41 $ .43
Diluted earnings per
common share $ .37 $ .42 $ .39 $ .42
Dividends declared per
common share $ .04 $ .04 $ .04 $ .04
</TABLE>
25
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------
September 30, December 31, March 31, June 30,
------------- ------------ --------- --------
(In thousands, except per share amounts)
1998
----
<S> <C> <C> <C> <C>
Total revenues $14,933 $18,277 $16,014 $16,542
Gross profit 11,153 13,109 13,010 13,820
Net earnings $ 3,965 $ 5,001 $ 4,809 $ 5,445
Basic earnings per
common share $ .34 $ .42 $ .41 $ .46
Diluted earnings per
common share $ .32 $ .40 $ .39 $ .44
Dividends declared
per common share $ .04 $ .04 $ .04 $ .04
</TABLE>
26
<PAGE>
AMPLICON, INC.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Change in Registrant's Certifying Accountant (incorporated by reference
to Item 5 to the Registrant's September 30, 1998 Form 10Q).
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement to be filed not later than
October 28, 1999 with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement to be filed not later than
October 28, 1999, with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement to be filed not later than
October 28, 1999 with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement to be filed not later than
October 28, 1999 with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report
(1) Financial Statements
All financial statements of the Registrant as set forth under
Part II
Item 8 of this report on Form 10-K
(2) Financial Statement Schedules:
Schedule Number Description Page Number
--------------- ----------- -----------
II. Valuation and Qualifying Accounts 28
All other schedules are omitted because of the absence of conditions
under which they are required or because all material information
required to be reported is included in the financial statements and notes
thereto.
(3) Exhibits:
See Index to Exhibits filed as part of this Form 10-K 29-32
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
fiscal 1999.
27
<PAGE>
AMPLICON, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMPLICON, INC.
By S. Leslie Jewett/s/ Date: September 27,1999
-------------------
S. Leslie Jewett
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes each of
Patrick E. Paddon, S. Leslie Jewett and Glen T. Tsuma as attorney-in-fact
to sign on his behalf, individually in each capacity stated below, and to
file all amendments and/or supplements to this Annual Report on
Form 10-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
- -------------------- -------------------------------- ------------------
Patrick E. Paddon/s/ President, Chief Executive September 27, 1999
- --------------------
Patrick E. Paddon Officer and Director
Glen T. Tsuma/s/ Vice President, Treasurer, Chief September 27, 1999
- ----------------
Glen T. Tsuma Operating Officer and Director
S. Leslie Jewett/s/ Chief Financial Officer September 27, 1999
- -------------------
S. Leslie Jewett
Michael H. Lowry/s/ Director September 27, 1999
- -------------------
Michael H. Lowry
Harris Ravine/s/ Director September 26, 1999
- -----------------
Harris Ravine
28
<PAGE>
AMPLICON, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance charged to Accounts Balance
beginning costs and written at end of
Classifications of period expenses off period
- --------------- --------- ---------- --------- ---------
Year ended
June 30, 1997:
- ---------------
<S> <C> <C> <C> <C>
Allowance for
doubtful accounts $1,695,442 $ - $ - $1,695,442
Allowance for
valuation of
unguaranteed
residual value $ 542,274 $ 852,000 $ - $1,394,274
Year ended
June 30, 1998:
- ---------------
Allowance for
doubtful accounts $1,695,442 $ - $ - $1,695,442
Allowance for
valuation of
unguaranteed
residual value $1,394,274 $ - $120,481 $1,273,793
Year ended
June 30, 1999:
- ---------------
Allowance for
doubtful accounts $1,695,442 $1,300,000 $337,311 $2,658,131
Allowance for
valuation of
unguaranteed
residual value $1,273,793 $1,776,054 $233,571 $2,816,276
</TABLE>
Note: The allowance for doubtful accounts includes balances related to
receivables and capital leases described in Notes 2 and 3 of the Notes to
Financial Statements.
29
<PAGE>
AMPLICON, INC.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
- ----------------------------------------------------------------------------
3.1 Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to
Registrant's Registration Statement on Form S-1
File No. 33-9094 (the "Registration Statement on
Form S-1"))
3.2 Certificate of Amendment of Articles of
Incorporation of the Company, filed April 15, 1988
(incorporated by reference to Exhibit 3.2 to
Registrant's 1988 Form 10-K)
3.3 Bylaws of the Company (incorporated by reference
to Exhibit 3.3 to the Registration
Statement on Form S-1)
3.4 Amendment and Restatement of Article VI of the
Bylaws of the Company (incorporated by reference
to Exhibit 3.4 to Registrant's 1988 Form 10-K)
10.1 1984 Stock Option Plan, as amended to date
(incorporated by reference to Exhibit 10.1 to
Registrant's Statement on Form S-8 File No. 33-27283)
10.2 Master Agreement for Lease Arrangement Transactions,
dated as of October 14, 1985, between the Company
and Chrysler Financial Corporation (incorporated
by reference to Exhibit 10.4 to the Registration
Statement on Form S-1)
10.3 Master Loan Agreement, dated as of July 18, 1986,
between the Company and General Electric Credit
Corporation (incorporated by reference to Exhibit
10.5 to the Registration Statement on Form S-1)
10.4 Master Agreement for Rental Payment Purchase
Transactions, dated as of July 8, 1982, between the
Company and Wells Fargo Bank, N.A. (incorporated
by reference to Exhibit 10.6 to the Registration
Statement on Form S-1)
10.5 Form of Assignment of Lease - Without Recourse
between the Company and The CIT
Group/Equipment Financing, Inc. (incorporated by
reference to Exhibit 10.10 to the Registration
Statement on Form S-1)
10.6 Form of Assignment of Lease - Without Recourse
between the Company and Circle Business Credit, Inc.
(incorporated by reference to Exhibit 10.11 to the
Registration Statement on Form S-1)
30
<PAGE>
AMPLICON, INC.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
- ----------------------------------------------------------------------------
10.7 Master Agreement for Rental Payment Purchase
Transactions, dated as of February 27, 1990,
between the Company and Security Pacific
Credit Corporation (incorporated by reference
to Exhibit 10.7 to the Registrant's 1990
Form 10-K)
10.8 Credit Agreement, dated as of April 13, 1990
(the "Credit Agreement"), between the Company
and Security Pacific National Bank (now Bank of
America National Trust and Savings Association,
and together with Security Pacific National Bank,
"Bank of America") (incorporated by reference to
Exhibit 10.8 to the Registrant's 1990 Form 10-K)
10.9 First Amendment to the Credit Agreement, dated
November 19, 1990, between the Company and Bank
of America (incorporated by reference to Exhibit 10.9
to the Registrant's 1991 Form 10-K)
10.10 Second Amendment to the Credit Agreement, dated
December 17, 1991, between the Company and Bank
of America (incorporated by reference to Exhibit 10.10
to the Registrant's 1992 Form 10-K)
10.11 Third Amendment to the Credit Agreement, dated
February 25, 1992, between the Company and Bank
of America (incorporated by reference to Exhibit 10.11
to the Registrant's 1992 Form 10-K)
10.12 Fourth Amendment to the Credit Agreement, dated
April 27, 1992, between the Company and Bank
of America (incorporated by reference to Exhibit 10.12
to the Registrant's 1992 Form 10-K)
10.13 Sublease Agreement and Amendment No. 1, dated October 31,
1990 and November 28, 1990, respectively, between the
Company and Griffin Financial Services (incorporated by
reference to Exhibit 10.13 to the Registrant's 1992
Form 10-K)
10.14 Fifth Amendment to the Credit Agreement, dated
June 28, 1993, between the Company and Bank of America
(incorporated by reference to Exhibit 10.14 to the
Registrant's 1993 Form 10-K)
10.15 Business Loan Agreement, dated as of August 12, 1993,
between the Company and Bank of America (incorporated
by reference to Exhibit 10.15 to the Registrant's
1993 Form 10-K)
31
<PAGE>
AMPLICON, INC.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
- ----------------------------------------------------------------------------
10.16 Security Agreement dated as of December 23, 1993
and all amendments C, D, & E, dated April 19, 1994,
July 18, 1994 and August 30, 1994, respectively
between the Company and The CIT Group/Equipment
Financing, Inc. (incorporated by reference to
Exhibit 10.16 to the Registrant's 1994 Form 10-K).
10.17 Amendment One to Business Loan Agreement, dated as
of December 16, 1994, between the Company and Bank of
America (incorporated by reference to Exhibit 10.17
to the Registrant's 1995 Form 10-K).
10.18 Amendment Two to Business Loan Agreement, dated as of
January 23, 1996, between the Company and Bank of
America (incorporated by reference to Exhibit 10.18
to the Registrant's December 31, 1995 Form 10-Q).
10.19 Business Loan Agreement dated as of December 23, 1997
between the Company and Bank of America (incorporated
by reference to Exhibit 10.19 to the Registrant's
December 31, 1997 Form 10-Q).
10.20 Office Lease dated September 17, 1997, between the
Company and GT Partners (incorporated by reference to
Exhibit 10.20 to the Registrant's March 31, 1998
Form 10-Q).
32
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 59,337
<SECURITIES> 0
<RECEIVABLES> 70,553
<ALLOWANCES> 2,658
<INVENTORY> 35,398
<CURRENT-ASSETS> 0
<PP&E> 2,934
<DEPRECIATION> 1,932
<TOTAL-ASSETS> 466,769
<CURRENT-LIABILITIES> 20,327
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 153,457
<TOTAL-LIABILITY-AND-EQUITY> 466,769
<SALES> 21,795
<TOTAL-REVENUES> 71,171
<CGS> 12,010
<TOTAL-COSTS> 19,102
<OTHER-EXPENSES> 16,854
<LOSS-PROVISION> 3,076
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 32,082
<INCOME-TAX> 12,352
<INCOME-CONTINUING> 19,730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,730
<EPS-BASIC> 1.66
<EPS-DILUTED> 1.60
</TABLE>
