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 September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Hutton Centre Dr., Ste. 500
Santa Ana, California 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 751-7551
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding of the Registrant's Common Stock,
par value $.01 per share, as of October 31, 2000 was 11,392,328.
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AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
----------------------------- ------
Item 1. Financial Statements
Balance Sheets - September 30, 2000
(unaudited) and June 30, 2000 (audited) 3
Statements of Earnings - Three months
ended September 30, 2000 and 1999 (unaudited) 4
Statements of Cash Flows - Three months
ended September 30, 2000 and 1999 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
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AMPLICON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
September 30, June 30,
ASSETS 2000 2000
------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 63,463,000 $ 92,540,000
Net receivables 14,890,000 12,747,000
Property acquired for transactions in process 40,317,000 25,909,000
Net investment in capital leases 92,439,000 80,645,000
Net equipment on operating leases 2,000 2,000
Other assets 1,428,000 1,236,000
Discounted lease rentals assigned to lenders 175,418,000 196,778,000
------------ ------------
$387,957,000 $409,857,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Accounts payable $ 3,872,000 $ 1,689,000
Accrued liabilities 5,617,000 5,590,000
Customer deposits 8,767,000 8,345,000
Nonrecourse debt 175,418,000 196,778,000
Income taxes payable, including
deferred taxes 24,020,000 30,271,000
------------ ------------
217,694,000 242,673,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; 2,500,000 shares
authorized; none issued - -
Common stock; $.01 par value;
40,000,000 shares authorized;
11,392,328 and 11,430,718
issued and outstanding
as of September 30, 2000 and
June 30, 2000, respectively 114,000 114,000
Additional paid in capital 4,006,000 4,265,000
Retained earnings 166,143,000 162,805,000
------------ ------------
170,263,000 167,184,000
------------ ------------
$387,957,000 $409,857,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
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AMPLICON, INC.
STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Direct financing leases $ 4,266,000 $ 5,425,000
Sales-type leases 5,314,000 4,962,000
Operating leases 289,000 491,000
----------- -----------
Leasing revenues 9,869,000 10,878,000
Sales of leased property 4,346,000 2,676,000
Interest and other income 1,415,000 903,000
----------- -----------
15,630,000 14,457,000
----------- -----------
Costs:
Sales-type leases 2,154,000 1,634,000
Operating leases - 11,000
Cost of leased property sold 2,546,000 1,568,000
Provision for credit losses - 310,000
----------- -----------
4,700,000 3,523,000
----------- -----------
Gross profit 10,930,000 10,934,000
Selling, general and administrative
expenses 4,497,000 3,913,000
----------- -----------
Earnings before income taxes 6,433,000 7,021,000
Income taxes 2,477,000 2,703,000
----------- -----------
Net earnings $ 3,956,000 $ 4,318,000
=========== ===========
Basic earnings per common share $ .35 $ .36
=========== ===========
Diluted earnings per common share $ .34 $ .35
=========== ===========
Dividends declared per common share
outstanding $ .04 $ .04
=========== ===========
Weighted average common shares
outstanding 11,415,000 11,824,000
=========== ===========
Diluted common shares outstanding 11,496,000 12,216,000
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
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AMPLICON, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,956,000 $ 4,318,000
Adjustments to reconcile net earnings
to cash flows provided by (used for)
operating activities:
Depreciation - 11,000
Interest accretion of estimated
unguaranteed residual values ( 1,178,000) ( 1,560,000)
Decrease in estimated unguaranteed
residual values 4,391,000 2,354,000
Provision for credit losses - 310,000
Net (decrease) increase in income
taxes payable, including deferred
taxes ( 6,251,000) 2,134,000
Net (increase) decrease in net
receivables ( 2,143,000) 4,953,000
Net increase in property acquired
for transactions in process ( 14,408,000) ( 2,156,000)
Net increase (decrease) in accounts
payable and accrued liabilities 2,210,000 ( 4,154,000)
Increase in customer deposits 422,000 1,466,000
----------- -----------
Net cash (used for) provided by
operating activities ( 13,001,000) 7,676,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in minimum
lease payments receivable ( 14,170,000) 2,814,000
Purchase of equipment on operating
leases - ( 466,000)
Net increase in other assets ( 192,000) ( 102,000)
Increase in estimated unguaranteed
residual values recorded on leases ( 837,000) ( 1,451,000)
----------- -----------
Net cash (used for) provided by
investing activities ( 15,199,000) 795,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to repurchase common stock ( 453,000) ( 2,232,000)
Dividends to stockholders ( 456,000) ( 474,000)
Proceeds from exercise of stock options 32,000 37,000
----------- -----------
Net cash used for financing activities ( 877,000) ( 2,669,000)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS ( 29,077,000) 5,802,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 92,540,000 59,337,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $63,463,000 $65,139,000
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Net decrease in lease rentals assigned
to lenders and related nonrecourse debt ($21,360,000) ($28,727,000)
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 23,000 $ 7,000
=========== ===========
Income taxes $ 8,728,000 $ 569,000
=========== ===========
</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 September 30,
2000 and the statements of earnings and cash flows for the three month
periods ended September 30, 2000 and 1999. The results of operations for
the three month period ended September 30, 2000 are not necessarily
indicative of the results of operations to be expected for the entire
fiscal year ending June 30, 2001.
Reclassifications
-----------------
Certain reclassifications have been made to the first quarter of fiscal
2000 financial statements to conform with the presentation of the first
quarter of fiscal 2001 financial statements.
NOTE 2- RECENT ACCOUNTING PRONOUNCEMENTS
----------------------------------------
The Company has reviewed the Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and for Hedging
Activities", as amended by, Statement of Financial Accounting Standards
No. 137, "Deferral of the Effective Date of FASB Statement No. 133", and
Statement of Financial Accounting Standards No. 138, "Accounting for
Certain Derivative Instruments and Hedging Activities", and determined
that at this time these statements will not have a material impact on
the financial statements of the Company.
6
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AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND 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 involve the
short-term rental of leased property.
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 its 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.
Three Months Ended September 30, 2000 and 1999
----------------------------------------------
REVENUES. Total revenues for the three months ended September 30,
2000 were $15,630,000, an increase of $1,173,000, or 8%, from the same
quarter of the prior fiscal year. The increase in total revenues can be
attributed to increases in sales of leased property of $1,670,000 and
interest and other income of $512,000 offset by a decrease in leasing
revenue of $1,009,000. The increase in sales of leased property was due
to a higher volume of lease transactions coming to end of term where the
leased property was sold to the lessee or a third party. The increase in
interest and other income was due to maintaining higher levels of
interest bearing cash and cash equivalents during the quarter.
The 9% decrease in leasing revenues to $9,869,000 for the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000
resulted from a decrease of $1,159,000 in direct financing revenues to
$4,266,000 and a decrease of $202,000 in operating lease revenue to
$289,000, offset by an increase of $352,000 in sales-type lease revenue
to $5,314,000. The lower revenue earned from direct financing leases
reflects a smaller investment in capital leases at the beginning of the
year, when compared to the prior year, and the increased deferral of
income on certain transactions, as the Company retained a significantly
greater percentage of new leases in its own portfolio during the period.
The increase in sales-type lease revenue can be attributed to an increase
in revenue from lease extensions offset by decreased revenue from new
lease transactions structured as sales-type leases. The decrease in
operating lease revenue results from a decline in the volume of short-
term lease renewals.
GROSS PROFIT. Gross profit for the first quarter of fiscal 2001
decreased $4,000 to $10,930,000 when compared to the first quarter of
fiscal 2000. The gross profit in the quarter ended September 30, 2000
benefited from increased income recognized from sales of leased property,
higher interest income from cash investments and a lower provision for
credit losses, which improvements were offset by decreased income from
direct financing leases.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the quarter ended September 30, 2000 were
$4,497,000, an increase of $584,000, or 15%, when compared to the same
quarter of the prior year. The increase in S,G&A expenses is primarily
due to higher salary and benefit expenses, higher market development
costs and costs related to the bank initiative.
TAXES. The Company's tax rate was 38.5% for the quarters ending
September 30, 2000, and 1999 representing its estimated annual tax rate
for the years ending June 30, 2001 and 2000.
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
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. At September 30, 2000, the Company had outstanding
nonrecourse debt aggregating $175,418,000 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. In an effort
to better utilize cash balances the Company has increased the level of
new lease transactions held in its own lease portfolio. During the three
months ended September 30, 2000, the Company increased its minimum lease
payments receivable by $14,170,000.
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 September 30, 2000, the Company's investment in property acquired for
transactions in process was $40,317,000, an increase of $14,408,000 when
compared to June 30, 2000.
The Company generally funds its equity investments in leased
property and transactions in process with internally generated funds.
In April 1999, the Board of Directors authorized management, at its
discretion, to repurchase up to 600,000 shares of the Company's Common
Stock. During the quarter ended September 30, 2000, the Company
repurchased 47,500 shares at an aggregate cost of $453,000. As of
September 30, 2000, 214,356 shares remain available under the April 1999
authorization.
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, 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.
Forward-Looking Statements
--------------------------
This document contains 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.
8
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AMPLICON, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K during the three months ended
September 30, 2000.
(a) Exhibits
None
9
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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: November 6, 2000 BY: S. LESLIE JEWETT/s/
-------------------
S. LESLIE JEWETT
Chief Financial Officer
(Principal Financial and
Accounting Officer)
9
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