FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No.: 0-15641
AMPLICON, INC.
(Exact name of registrant as specified in charter)
California 95-3162444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Hutton Centre Dr., Ste. 500
Santa Ana, California 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 751-7551
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
The number of shares outstanding of the registrants Common Stock,
par value $.01 per share, as of May 5, 2000 was 11,463,718.
<PAGE>
AMPLICON, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
- ----------------------------- ------
Item 1. Financial Statements
Balance Sheets - March 31, 2000
(unaudited) and June 30, 1999 (audited) 3
Statements of Earnings - Three months and nine months
ended March 31, 2000 and 1999 (unaudited) 4
Statements of Cash Flows - Nine months
ended March 31, 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 7-10
PART II. OTHER INFORMATION
- --------------------------
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
AMPLICON, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
March 31, June 30,
ASSETS 2000 1999
- ------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 72,981,000 $ 59,337,000
Net receivables 15,116,000 22,785,000
Property acquired for transactions
in process 37,766,000 35,398,000
Net investment in capital leases 81,060,000 84,617,000
Net equipment on operating leases 603,000 9,000
Other assets 1,384,000 1,161,000
Discounted lease rentals assigned
to lenders 211,752,000 263,462,000
------------ ------------
$420,662,000 $466,769,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Accounts payable $ 1,657,000 $ 7,507,000
Accrued liabilities 4,703,000 5,661,000
Customer deposits 8,883,000 7,159,000
Nonrecourse debt 211,752,000 263,462,000
Income taxes payable, including
deferred taxes 30,000,000 29,405,000
------------ ------------
256,995,000 313,194,000
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock 2,500,000 shares
authorized; none issued - -
Common stock; $.01 par value;
40,000,000 shares authorized;
11,543,718 and 11,831,918 issued
and outstanding, as of
March 31, 2000 and June 30, 1999,
respectively 115,000 118,000
Additional paid in capital 3,261,000 6,709,000
Retained earnings 160,291,000 146,748,000
------------ ------------
163,667,000 153,575,000
------------ ------------
$420,662,000 $466,769,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
AMPLICON, INC.
STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Direct financing leases $ 4,786 $ 6,565 $15,372 $19,538
Sales-type leases 6,205 5,524 18,981 15,603
Operating leases 549 204 1,382 588
------- ------- ------- -------
Leasing revenues 11,540 12,293 35,735 35,729
Sales of leased property 7,129 4,015 15,786 14,571
Interest and other income 1,189 560 3,134 1,311
-------- ------- ------- -------
19,858 16,868 54,655 51,611
Costs:
Sales-type leases 2,158 2,436 7,344 5,080
Operating leases - 7 78 12
Cost of leased property sold 4,341 2,498 9,161 8,401
Provision for credit losses 600 - 1,210 1,276
------- ------- ------- -------
7,099 4,941 17,793 14,769
------- ------- ------- -------
Gross profit 12,759 11,927 36,862 36,842
Selling, general and
administrative expenses 4,080 4,199 12,569 13,072
------- ------- ------- -------
Earnings before income taxes 8,679 7,728 24,293 23,770
Income taxes 3,342 2,976 9,353 9,152
------- ------- ------- -------
Net earnings $ 5,337 $ 4,752 $14,940 $14,618
======= ======= ======= =======
Basic earnings per common
share $ .46 $ .40 $ 1.28 $ 1.23
======= ======= ======= =======
Diluted earnings per common
share $ .45 $ .39 $ 1.25 $ 1.19
======= ======= ======= =======
Dividends declared per common
share outstanding $ .04 $ .04 $ .12 $ .12
======= ======= ======= =======
Weighted average common
shares outstanding 11,557 11,866 11,663 11,850
======= ======= ======= =======
Diluted common shares
outstanding 11,898 12,303 11,988 12,316
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
AMPLICON, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $14,940,000 $14,618,000
Adjustments to reconcile net earnings
to cash flows provided by (used for)
operating activities:
Depreciation 79,000 12,000
Sales or lease of equipment previously
on operating leases, net - 4,000
Interest accretion of estimated
unguaranteed residual values ( 4,641,000) ( 5,025,000)
Decrease in estimated unguaranteed
residual values 11,275,000 9,905,000
Provision for credit losses 1,210,000 1,276,000
Net increase (decrease) in income taxes
payable, including deferred taxes 595,000 ( 3,600,000)
Net decrease in net receivables 7,669,000 1,965,000
Net (increase) decrease in property
acquired for transactions in process ( 2,368,000) 27,295,000
Net decrease in accounts payable and
accrued liabilities ( 7,060,000) ( 15,324,000)
Increase (decrease) in customer deposits 1,376,000 ( 1,169,000)
----------- -----------
Net cash provided by operating activities 23,075,000 29,957,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease in minimum lease payments
receivable 25,000 13,392,000
Purchase of equipment on operating leases ( 673,000) ( 16,000)
Net increase in other assets ( 223,000) ( 34,000)
Estimated unguaranteed residual values
recorded on leases ( 3,712,000) ( 6,493,000)
----------- -----------
Net cash (used for) provided by investing
activities ( 4,583,000) 6,849,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to repurchase common stock ( 3,488,000) -
Dividends to stockholders ( 1,397,000) ( 1,422,000)
Proceeds from exercise of stock options 37,000 312,000
----------- -----------
Net cash used for financing activities ( 4,848,000) ( 1,110,000)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 13,644,000 35,696,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 59,337,000 15,192,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $72,981,000 $50,888,000
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Decrease in lease rentals assigned to
lenders and related nonrecourse debt ($51,710,000) ($34,358,000)
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 20,000 $ 50,000
=========== ===========
Income taxes $ 8,758,000 $12,752,000
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
- -----------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's latest Annual Report on
Form 10-K.
In the opinion of management, the unaudited financial statements contain
all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the balance sheet as of March 31, 2000
and the statements of earnings for the three and nine month periods and
cash flows for the nine month periods ended March 31, 2000 and 1999. The
results of operations for the nine month period ended March 31, 2000 are
not necessarily indicative of the results of operations to be expected
for the entire fiscal year ending June 30, 2000.
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. Under the new approach, for all capital leases that qualify as
direct financing leases, Amplicon no longer records any sales revenue or
cost of sales at lease inception, but will only recognize the gross
profit (unearned income) on the leases as direct financing lease revenue.
The new presentation had no impact on either gross profit or net income.
Total revenues as previously presented in the three and nine months ended
March 31, 1999 were $60,559,000 and $173,659,000, respectively. Total
cost of sales as previously presented in the three and nine months ended
March 31, 1999 were $48,632,000 and $136,817,000, respectively.
Certain reclassifications have been made to the third quarter of fiscal
1999 financial statements to conform with the presentation of the third
quarter of fiscal 2000 financial statements.
6
<PAGE>
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 involves 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 the 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 March 31, 2000 and 1999
- ------------------------------------------
REVENUES. Total revenues for the three months ended March 31, 2000
were $19,858,000, an increase of $2,990,000, or 18%, from the same
quarter of the prior year. The increase was the result of increases in
sales of leased property of $3,114,000 and interest and other income of
$629,000, offset by a decline of $753,000 in leasing revenues. The
increase in sales of leased property for the quarter ended March 31, 2000
to $7,129,000 as compared to $4,015,000 for the quarter ended March 31,
1999 can be attributed to an increase in the volume of leased property
sales. The increase in interest and other income for the quarter ended
March 31, 2000 to $1,189,000, as compared to $560,000, was the result of
the Company maintaining higher levels of interest bearing cash and cash
equivalents.
The 6% decline in leasing revenues to $11,540,000 for the third
quarter of fiscal 2000 compared to the third quarter of fiscal 1999 of
$12,293,000, resulted from a $1,779,000 decline in direct financing lease
revenue to $4,786,000, offset by increases in sales-type lease revenue
and operating lease revenue of $681,000 and $345,000, respectively. The
reduction in direct financing revenue can be attributed to lower unearned
income from residual investments and assigned capital leases offset by an
increase in interest income from the investment in lease receivables held
in our own portfolio. The increase in sales-type lease revenue is
attributed to a higher volume of lease extensions. The increase in
operating lease revenue can be attributed to an increase in the volume of
short term lease renewals.
GROSS PROFIT. Gross profit for the third quarter of fiscal 2000
increased $832,000, or 7%, to $12,759,000 when compared to the third
quarter of fiscal 1999. The higher gross profit reflected higher profits
from lease property sales and lease extensions and higher income from
cash investments, offset by lower interest income earned from direct
financing leases and a higher provision for credit losses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the quarter ended March 31, 2000 were
$4,080,000, a decrease of $119,000, or 3%, when compared to the same
quarter of the prior year. The decrease in S,G&A expenses reflected
lower legal and general expenses.
TAXES. The Company's tax rate was 38.5% for the quarters ending
March 31, 2000, and 1999 representing its estimated annual tax rate for
the years ending June 30, 2000 and 1999.
(continued)
7
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
Nine Months Ended March 31, 2000 and 1999
- -----------------------------------------
REVENUES. Total revenue for the nine months ended March 31, 2000
were $54,655,000 compared to $51,611,000 for the nine months ended March
31, 1999, an increase of $3,044,000. Interest and other income increased
$1,823,000 to $3,134,000 for the nine month period ended March 31, 2000,
compared to $1,311,000 for the same period of the prior year. Sales of
leased property increased $1,215,000 to $15,786,000 for the nine months
ended March 31, 2000, compared to $14,571,000 for the same period of the
prior year. Leasing revenues remained relatively constant at $35,735,000
for the nine months ended March 31, 2000 compared to $35,729,000 for the
same period of the prior year.
Leasing revenue for the nine months ending March 31, 2000 reflects a
decrease in revenue from direct financing leases of $4,166,000, or 21%,
to $15,372,000 offset by an increase of $3,378,000, or 22%, in revenues
from sales-type leases. The reduction in direct financing revenue can be
attributed to lower unearned income recognized from residual investments
and assigned capital leases resulting from a decline in such assets. The
increase in sales-type revenue is primarily attributed to increased
volume of lease extensions. Operating lease revenue increased $794,000
to $1,382,000 for the nine months ended March 31, 2000, compared to
$588,000 for the same period of the prior year, due to an increase in the
volume of short term lease renewals.
GROSS PROFIT. Gross profit for the nine months ended March 31, 2000
increased slightly to $36,862,000 compared to $36,842,000 for the nine
months ended March 31, 1999. The higher gross profit was due to higher
income earned from lease extensions and sales of leased property and
higher interest income earned from cash investments, offset by lower
interest income earned on direct financing leases.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased 4%, or $503,000, to $12,569,000 for the
nine months ended March 31, 2000 compared to $13,072,000 for the same
period of the prior year. This was primarily the result of lower salary
and benefit expenses, slightly offset by an increase in general expenses.
TAXES. The Company's tax rate was 38.5% for the nine months ended
March 31, 2000 and 1999 representing its estimated annual tax rate for
the years ending June 30, 2000 and 1999.
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 March 31, 2000, the Company had
outstanding nonrecourse debt aggregating $211,752,000 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. During the
nine months ended March 31, 2000, the Company decreased its minimum lease
payments receivable by $202,000. This was primarily due to fewer lease
transactions being held in the Company's own lease portfolio.
(continued)
8
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
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 lessees' property implementation
schedule. 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 March 31, 2000, the Company's investment in property acquired for
transactions in process increased by $2,368,000 to $37,766,000 when
compared to June 30, 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
March 31, 2000, 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 nine
months ended March 31, 2000, the Company repurchased 292,500 shares at an
aggregate cost of $3,488,000. As of March 31, 2000, 374,856 shares
remain available under the April 1999 authorization.
The Company filed an application to obtain permission to organize a
national bank, with the Company as the sponsor. Preliminary conditional
approval has been received, which approval is subject to certain
regulatory requirements and conditions. The Company, in conjunction with
a group of bank professionals and organizers, can now begin taking steps
necessary for obtaining final approval, but may not begin the business of
banking until final approval has been granted. The organization of a
bank would involve the investment by the Company of at least $20 million
in cash and on-going obligations to provide necessary capital and
liquidity support.
At March 31, 2000, the Company's cash and cash equivalents were
$72,981,000. 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 capital 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 and perform leap year calculations. These
systems may have experienced problems handling dates beyond 1999 and
therefore, could cause computer or other systems to fail or provide
erroneous results. If a system or application will not recognize the
year 2000 as a leap year, then any date after February 29, 2000 will be
offset by one day. Date information can exist at any level of hardware
or software from micro code to application programs, in files and
databases, and might be present on any operating platform.
The Company addressed this issue by implementing a program to
assess, remediate and mitigate the potential impact of the Y2K problem.
The Company systematically addressed the Y2K compliance of its computer
related hardware, major application software programs, externally
supplied software, and major debt sources, vendors and customers. These
efforts are generally described in the 10Q report for the quarter ended
September 30, 1999.
As of May 5, 2000 the Company has not experienced any Y2K related
problems which have impacted operations and is not aware that any of its
major debt sources, customers or vendors have experienced significant Y2K
related problems. However, Y2K compliance has many elements and
potential consequences, some of which may not be foreseeable or may be
realized in future periods. Therefore, there can be no assurance that
unforeseen circumstances may not arise, or that we will not in the future
identify equipment or systems which are not Y2K compliant.
(continued)
9
<PAGE>
AMPLICON, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
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 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.
10
<PAGE>
AMPLICON, INC.
PAGE
PART II - OTHER INFORMATION NUMBER
- --------------------------- ------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K for the three months
ended March 31, 2000.
(a) Exhibits
--------
None
11
<PAGE>
AMPLICON, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMPLICON, INC.
--------------
Registrant
DATE: May 10, 2000 BY: S. Leslie Jewett/s/
-------------------
S. Leslie Jewett
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000803016
<NAME> AMPLICON, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 72,981
<SECURITIES> 0
<RECEIVABLES> 62,663
<ALLOWANCES> 2,640
<INVENTORY> 37,766
<CURRENT-ASSETS> 0
<PP&E> 3,399
<DEPRECIATION> 2,251
<TOTAL-ASSETS> 420,662
<CURRENT-LIABILITIES> 15,243
<BONDS> 0
0
0
<COMMON> 115
<OTHER-SE> 163,552
<TOTAL-LIABILITY-AND-EQUITY> 420,662
<SALES> 35,735
<TOTAL-REVENUES> 54,655
<CGS> 7,422
<TOTAL-COSTS> 16,583
<OTHER-EXPENSES> 12,569
<LOSS-PROVISION> 1,210
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,293
<INCOME-TAX> 9,353
<INCOME-CONTINUING> 14,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,940
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.25
</TABLE>
