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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
For the fiscal year ended June 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 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 October 6, 2000 was $41,520,523.
Number of shares outstanding as of October 6, 2000:
Common Stock 11,392,328
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.
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 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 8. Financial Statements and Supplementary Data 12-26
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 28
Signatures 29
Schedule II 30
Exhibit Index 31-33
1
AMPLICON, INC.
PART I
ITEM 1. BUSINESS
Amplicon, Inc. ("Amplicon" or the "Company") leases high-
technology and other capital assets to customers located throughout
the United States. Operating from a single location in Santa Ana,
California, the Company delivers leasing services through the use of
telecommunications, the Internet and express delivery services. The
Company is also engaged in the remarketing of leased assets at lease
expiration. The Company was incorporated in California in 1977.
Business Overview
- -----------------
The Company leases and remarkets most capital assets used by
businesses, with a focus on high technology equipment and software
systems. The Company's leases are structured individually and can provide
end-of-term options to accommodate a variety of business objectives.
Approximately 58% of the leases originated in fiscal 2000 involved
computer workstations and networks, mid-range computers, computer
automated design systems and computer software. Other major property
groups included point-of-sale systems, telecommunications systems,
manufacturing equipment and furniture and fixtures.
Computer Systems. The Company concentrates on the market for
computer networks and mid-range computers since this market is
particularly receptive to leasing services. Advances in technology,
including the rapidly expanding capabilities of personal computer systems
and the growth of the Internet, have led to increased demand for more
powerful systems throughout the Company's target markets. 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. Computer networks generally range in cost from
$100,000 to $3,000,000 while mid-range computers generally cost between
$100,000 and $750,000. The Company's leased property is used primarily
by subsidiaries and divisions of large companies to supplement mainframe
computer systems, by middle-market companies for centralized data
processing and by non-profit associations and institutions.
The Company leases computer systems manufactured by Compaq Computer
Corporation ("Compaq"), Dell Computer Corporation ("Dell"), Gateway 2000,
Inc. ("Gateway"), International Business Machines Corporation ("IBM"),
Hewlett-Packard Co. ("HP"), and Sun Microsystems, Inc. ("Sun"), among
many others.
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 computer systems and networks consists of operating and
application software. Amplicon leases software from vendors such as
Microsoft Corporation, Oracle Corporation, J.D. Edwards & Company,
PeopleSoft Inc., Geac Computer Corporation Limited, SAP AG and Novell,
Inc.
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. Retail point-of-sale
systems include those produced by IBM, Knogo Corporation, NCR Corporation
("NCR"), and Fujitsu Limited, while bank automated teller machines also
have been procured from NCR. The telecommunications property 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. The
Company also leases imaging systems, testing equipment, and copying
equipment.
Production Equipment and Other Personal Property. The Company
leases technology related manufacturing and distribution management
systems that 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
AMPLICON, INC.
Recent Developments
- -------------------
In June 1999, an application was filed to obtain permission to
organize a national bank (the "Bank"). The business 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 will gather deposits using electronic means and
a centralized location similar to the Company's existing business
methods.
In April 2000, the Office of the Comptroller of the Currency (the
"OCC") granted preliminary conditional approval to the Bank, which
approval is subject to certain regulatory requirements and conditions. In
July 2000, the Federal Deposit Insurance Corporation (the "FDIC")
approved an application for Federal deposit insurance, subject to the
satisfaction of certain conditions. In April 2000, the Company applied to
the Board of Governors of the Federal Reserve Board (the "FRB") to become
a bank holding company through the acquisition of 100% of the stock of
the newly organized Bank, and to retain certain nonbanking businesses and
thereby engage in certain nonbanking activities. As of October 6, 2000
the Company's application with FRB is still pending, and final approval
has not been received from the OCC. The Company cannot predict whether,
when, or under what conditions final approval might be received.
The acquisition of the Bank, if completed, will subject the Company
to additional risks and regulation. The Bank would be a start-up bank
with no operations prior to the investment by Amplicon. The Bank would be
subject to supervision and regulation by the OCC and the FDIC and the
Company would become regulated and examined by the FRB. In addition,
through its investment in the Bank, the Company would be assuming
additional financial risks, including credit risk, liquidity risk and
interest rate risk. The failure to manage these risks and obligations
appropriately could have a material adverse effect on the Company's
business, financial condition and results of operations.
Marketing Strategy
- ------------------
The Company has developed and refined a direct marketing system
utilizing a centralized marketing program and direct delivery channels,
such as telephone, the Internet, facsimile and express mail. The
marketing 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 marketing techniques, and an in-house computer
and telecommunications system. The Company has augmented its marketing
programs through the development of interactive websites that enable
prospective customers to submit a credit application, review a lease
agreement, calculate lease payments and order computer equipment on-line.
The Company implemented its current marketing system after having
determined that a centralized marketing program is more cost effective
than field sales representatives. Marketing through the telephone or the
Internet, rather than through 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 target market participants and
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 sales professionals.
Amplicon utilizes prospect management software to enhance the
productivity of the sales force. Specific information about potential
customers is entered into an on-line confidential database accessible to
each sales professional through the Company's personal computer network.
As potential customers are contacted, the database is updated and
supplemented with information about what computer and other property they
are using, related lease expiration dates and any future system needs or
replacement plans. The database allows sales professionals to identify
efficiently the most likely purchaser or lessee of capital assets and to
concentrate efforts on these prospective customers.
3
AMPLICON, INC.
Amplicon's database, combined with the prospect management software,
and an integrated in-house telecommunications system, permits 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 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
negotiated 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
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 have been discounted to
banks or finance companies on a nonrecourse basis at fixed interest rates
that reflect the customers' financial condition. During the fiscal years
ended June 30, 2000 and 1999, respectively 79.7% and 89.9% of the total
dollar amount of new leases entered into by the Company 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 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, 2000 and 1999, the discounted
minimum lease payments receivable relative to leases maintained in the
Company's portfolio amounted to $49,111,050 and $45,109,936,
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, 2000 and 1999, the Company's investment in property acquired
for transactions in process amounted to $25,909,137 and $35,397,631,
respectively.
4
AMPLICON, INC.
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.
Employees
- ---------
The Company, as of June 30, 2000, had 157 employees, including 78
sales managers and account executives and 19 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, 2000, 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 $83,051 from July 2000 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.
5
AMPLICON, INC.
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.
High Low
---- ---
Fiscal year ended June 30, 2000
- -------------------------------
First Quarter........................................$15.50 $12.00
Second Quarter........................................12.1875 9.875
Third Quarter.........................................12.50 10.25
Fourth Quarter........................................10.625 8.625
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
The Company had approximately 55 stockholders of record and in
excess of 500 beneficial owners as of October 6, 2000.
After considering the Company's profitability, liquidity and future
operating cash requirements, the Board of Directors authorized a regular
quarterly cash dividend policy. For each of the fiscal years ended June
30, 2000, 1999 and 1998 the Company declared cash dividends totaling
$.16 per common share.
6
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 year's 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.
YEARS ENDED JUNE 30,
------------------------------------------------
INCOME STATEMENT DATA 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands, except per share amounts)
Revenues:
Direct financing leases $ 18,738 $ 25,432 $ 25,609 $ 21,636 $ 17,733
Sales-type leases 21,686 20,990 21,794 17,857 20,755
Operating leases 1,944 951 716 1,657 1,280
-------- -------- -------- -------- --------
42,368 47,373 48,119 41,150 39,768
Sales of leased property 33,190 21,794 17,066 22,301 8,290
Interest and other income 4,556 2,004 581 637 733
-------- -------- -------- -------- --------
80,114 71,171 65,766 64,088 48,791
-------- -------- -------- -------- --------
Costs
Sales-type leases 8,251 7,005 7,881 9,406 5,786
Operating leases 137 86 28 111 266
Cost of leased property
sold 20,837 12,011 6,765 6,661 3,459
Provision for credit
losses 1,510 3,076 - 852 -
-------- -------- -------- -------- --------
30,735 22,178 14,674 17,030 9,511
-------- -------- -------- -------- --------
Gross margin 49,379 48,993 51,092 47,058 39,280
Selling, general &
administrative expenses 16,844 16,911 19,323 21,041 17,800
-------- -------- -------- -------- --------
Earnings before income
taxes 32,535 32,082 31,769 26,017 21,480
Income taxes 12,526 12,352 12,549 10,277 8,484
-------- -------- -------- -------- --------
Net earnings $ 20,009 $ 19,730 $ 19,220 $ 15,740 $ 12,996
======== ======== ======== ======== ========
COMMON SHARE DATA
Basic earnings per share $ 1.72 $ 1.66 $ 1.63 $ 1.35 $ 1.11
======== ======== ======== ======== ========
Diluted earnings per share $ 1.67 $ 1.60 $ 1.55 $ 1.31 $ 1.09
======== ======== ======== ======== ========
Weighted average common
shares outstanding 11,617 11,854 11,800 11,689 11,698
Diluted common shares
outstanding 11,942 12,299 12,368 12,021 11,894
Cash dividends per share $ .16 $ .16 $ .16 $ .10 $ .10
======== ======== ======== ======== ========
AS OF JUNE 30,
BALANCE SHEET DATA 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands, except per share data)
Total assets $409,857 $466,769 $505,626 $482,235 $454,205
Note payable to bank - - - 10,000 -
Nonrecourse debt 196,778 263,462 297,227 288,682 309,471
Stockholders' equity 167,184 153,575 135,945 117,754 102,665
Book value per common
share $ 14.63 $ 12.98 $ 11.49 $ 10.02 $ 8.79
7
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 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, 2000 was approximately $139 million, compared to $204 million in
fiscal 1999 and $230 million during fiscal 1998. Of the new leases booked
during the fiscal year ended June 30, 2000, approximately 63% were
structured as "true leases" where Amplicon owns the leased asset at the
end of the term, while 37% 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 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.
Fiscal Years Ended June 30, 2000 and 1999
- -----------------------------------------
REVENUES. Total revenues for the fiscal year ended June 30, 2000
were $80,113,695, an increase of $8,942,202, or 13%, from the prior year.
This change was primarily the result of an increase of $11,395,526 in
sales of leased property. The increase in sales of leased property was
primarily due to a higher volume of lease transactions coming to end of
term during fiscal 2000 where the leased property was sold to the lessee
or a third-party. In addition, interest and other income for the fiscal
year ended June 30, 2000 increased by $2,551,826 to $4,555,613, as
compared to $2,003,787 in the prior year, primarily as a result of the
Company maintaining higher levels of interest bearing cash and cash
equivalents throughout fiscal 2000.
Leasing revenues declined by $5,005,150, or 11%, for the fiscal year
ended June 30, 2000 compared to the fiscal year ended June 30, 1999.
This reduction resulted from a decrease of $6,694,100 in direct financing
revenue to $18,738,101, offset by an increase of $695,571 in sales-type
lease revenue to $21,685,706, and an increase of $993,379 in operating
lease revenue to $1,944,671. The reduction in direct financing revenue
can be attributed to lower interest income earned from a smaller
investment in capital leases and lower revenue from the lower volume of
new lease originations. The increase in sales-type lease revenue can be
attributed to an increase in
8
AMPLICON, INC.
revenue from lease extensions, offset by a decrease in revenue related
to 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, 2000
increased by $384,865, or 1%, to $49,378,624, compared to $48,993,759 for
the fiscal year ended June 30, 1999. Gross profit benefited from
increased income recognized from leased property sales, a lower provision
for credit losses and higher income from interest bearing cash and cash
equivalents, which gains were offset by decreased income from direct
financing leases.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the fiscal year ended June 30, 2000 decreased
by $68,590, or less than 1%, as compared to the prior year. This
decrease is the result of lower salary and benefit expenses offset by
increases in general office expenses.
TAXES. The Company's tax rate was 38.5% for the fiscal years ended
June 30, 2000 and 1999, representing its estimated annual tax rates for
each respective year.
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 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 as
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 $2,411,191, or 12.5%, as compared to the prior year. This decrease is
the result of lower legal, salary and benefit expenses.
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.
9
AMPLICON, INC.
Liquidity and Capital Resources
- -------------------------------
The Company funds its operating activities through nonrecourse debt
and internally generated funds. The Company does not purchase property
until it has received a noncancelable lease from its customer. 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. At June 30, 2000, the Company had outstanding
nonrecourse debt aggregating $196,777,836 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 2000, the Company's net investment in capital leases
decreased by $3,972,748. This decrease is the result of a $7,973,862
reduction in the investment in estimated unguaranteed residual values,
offset by a $4,001,114 increase in the Company's investment in lease
receivables. The increase in minimum lease payments receivable is
primarily due to more new lease transactions being held in the Company's
own portfolio. During the fiscal year ended June 30, 2000, approximately
20.3% of the total dollar amount of new leases entered into by the
Company were held in its own portfolio, compared to 10.1% during fiscal
1999.
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 June 30, 2000, the Company's investment in property acquired for
transactions in process was $25,909,137, a decrease of $9,488,494 from
the level at June 30, 1999. This decrease was primarily due to the lower
volume of new lease transactions in process during fiscal 2000.
The Company generally funds its equity investments in leased
property and transactions in process with internally generated funds, or
if necessary, borrowings under a general business loan agreement. During
each of the fiscal years ended June 30, 2000 and 1999, there were no
borrowings under the line of credit. The Company's general business loan
agreement expired on June 30, 2000. In conjunction with the anticipated
acquisition of the Bank, the Company is in the process of negotiating a
new agreement.
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, 2000, the Company repurchased 405,500 shares at an
aggregate cost of $4,582,239. As of October 6, 2000, 214,356 shares
remain available under these authorizations.
At June 30, 2000, the Company's cash and cash equivalents were
$92,539,572. 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.
10
AMPLICON, INC.
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 October 6, 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.
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.
11
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 13
Balance Sheets at June 30, 2000 and 1999 14
Statements of Earnings for the years ended
June 30, 2000, 1999 and 1998 15
Statements of Stockholders' Equity for the
years ended June 30, 2000, 1999 and 1998 16
Statements of Cash Flows for the years
ended June 30, 2000, 1999 and 1998 17
Notes to Financial Statements 18-26
Financial Statement Schedule for the years
ended June 30, 2000, 1999 and 1998
Schedule II - Valuation and Qualifying Accounts 30
12
AMPLICON, INC.
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To the Board of Directors and Stockholders 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, 2000 and 1999, and the results of its
operations and its cash flows for each of the two years in the period
ended June 30, 2000 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion,
the financial statement schedules 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 schedules are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in
the United States of America, 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 audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS, LLP
Orange County, California
August 4, 2000
To the Board of Directors and Stockholders of Amplicon, Inc.:
We have audited the balance sheet of Amplicon, Inc. as of June 30, 1998
(not separately presented herein) and the related statements of earnings,
stockholders' equity and cash flows for the year then ended. 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 audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides 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 year then ended in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule, for the year ended
June 30, 1998, 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
audit 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.
ARTHUR ANDERSEN LLP
Orange County, California
July 31, 1998
13
AMPLICON, INC.
BALANCE SHEETS
June 30,
------------------------------
ASSETS 2000 1999
- ------ ------------ ------------
Cash and cash equivalents (Note 1) $ 92,539,572 $ 59,337,426
Net receivables (Note 2) 12,747,066 22,784,507
Property acquired for transactions
in process (Note 1) 25,909,137 35,397,631
Net investment in capital leases (Note 3) 80,644,602 84,617,350
Equipment on operating leases,
less accumulated depreciation of
$74,566 (2000) and $91,288 (1999) 1,977 8,537
Other assets 1,236,793 1,161,979
Discounted lease rentals assigned to
lenders (Note 3) 196,777,836 263,461,800
------------ ------------
$409,856,983 $466,769,230
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Accounts payable $ 1,688,706 $ 7,159,049
Accrued liabilities 5,590,607 5,660,610
Customer deposits 8,345,133 7,507,322
Nonrecourse debt (Note 3) 196,777,836 263,461,800
Income taxes payable - including deferred
taxes, net (Note 4) 30,270,931 29,405,562
------------ ------------
242,673,213 313,194,343
------------ ------------
Commitments and contingencies (Note 6)
Stockholders' equity (Note 5):
Preferred stock; 2,500,000 shares
authorized; none issued - -
Common stock; $.01 par value;
40,000,000 shares authorized;
11,430,718 (2000) and
11,831,918 (1999)
issued and outstanding 114,307 118,319
Additional paid in capital 4,264,541 6,708,936
Retained earnings 162,804,922 146,747,632
------------ ------------
167,183,770 153,574,887
------------ ------------
$409,856,983 $466,769,230
============ ============
The accompanying notes are an integral
part of these financial statements.
14
AMPLICON, INC.
STATEMENTS OF EARNINGS
Years ended June 30,
2000 1999 1998
----------- ----------- -----------
Revenues:
Direct financing leases $18,738,101 $25,432,201 $25,608,657
Sales-type leases 21,685,706 20,990,135 21,793,723
Operating leases 1,944,671 951,292 716,153
----------- ----------- -----------
Leasing revenues 42,368,478 47,373,628 48,118,533
Sales of leased property 33,189,604 21,794,078 17,066,168
Interest and other income 4,555,613 2,003,787 581,524
----------- ----------- -----------
80,113,695 71,171,493 65,766,225
----------- ----------- -----------
Costs:
Sales-type leases 8,251,103 7,004,914 7,881,390
Operating leases 136,563 86,187 28,488
Cost of leased property sold 20,837,405 12,010,579 6,764,646
Provision for credit losses 1,510,000 3,076,054 -
----------- ----------- -----------
30,735,071 22,177,734 14,674,524
----------- ----------- -----------
Gross profit 49,378,624 48,993,759 51,091,701
Selling, general and
administrative expenses 16,843,294 16,911,884 19,323,075
----------- ----------- -----------
Earnings before income taxes 32,535,330 32,081,875 31,768,626
Income taxes 12,526,000 12,352,000 12,549,000
----------- ----------- -----------
Net earnings $20,009,330 $19,729,875 $19,219,626
=========== =========== ===========
Basic earnings per common share $ 1.72 $ 1.66 $ 1.63
=========== =========== ===========
Diluted earnings per common share $ 1.67 $ 1.60 $ 1.55
=========== =========== ===========
Dividends declared per common
share outstanding $ .16 $ .16 $ .16
=========== =========== ===========
Weighted average common shares
outstanding 11,617,102 11,854,441 11,800,206
=========== =========== ===========
Diluted common shares outstanding 11,941,754 12,299,171 12,367,752
=========== =========== ===========
The accompanying notes are an integral
part of these financial statements.
15
AMPLICON, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Common Stock paid in Retained
Shares Amount capital earnings Total
--------------------- ----------- ------------ ------------
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
repur-
chased ( 54,000) ( 540) ( 711,758) - ( 712,298)
Income
tax
bene-
fit
from
exer-
cise
of
non-
qual-
ified
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
Shares
issued -
Stock
options
exer-
cised 4,300 43 37,319 - 37,362
Shares re-
purchased ( 405,500) ( 4,055) ( 2,481,714) ( 2,096,470) ( 4,582,239)
Dividends
declared - - - ( 1,855,570) ( 1,855,570)
Net
earnings - - - 20,009,330 20,009,330
---------- -------- ---------- ------------ ------------
Balance,
June 30,
2000 11,430,718 $114,307 $4,264,541 $162,804,922 $167,183,770
========== ======== ========== ============ ============
The accompanying notes are an integral
part of these financial statements.
16
AMPLICON, INC.
STATEMENTS OF CASH FLOWS
Years ended June 30,
------------------------------------------
2000 1999 1998
----------- ----------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings $20,009,330 $19,729,875 $ 19,219,626
Adjustments to reconcile net
earnings to cash flows used
for operating activities:
Depreciation 136,564 85,624 28,487
Sale or lease of equipment
previously on operating
leases, net - 4,005 -
Interest accretion of
estimated unguaranteed
residual values ( 5,969,816) ( 6,616,611) ( 5,893,522)
Decrease in estimated
unguaranteed residual values 18,366,854 14,671,334 11,639,988
Provision for credit losses 1,510,000 3,076,054 -
Net increase (decrease) in
income taxes payable,
including deferred taxes 865,369 ( 530,483) 3,175,874
Net decrease (increase) in
net receivables 10,037,441 ( 5,272,164) 2,406,381
Net decrease (increase) in
property acquired for
transactions in process 9,488,494 45,875,893 ( 1,463,905)
Net (decrease) increase in
accounts payable and accrued
liabilities ( 5,540,346) ( 19,658,475) 1,466,867
Increase (decrease) in
customer deposits 837,811 ( 2,450,991) 2,221,099
Net cash provided by ----------- ----------- -----------
operating activities 49,741,701 48,914,061 32,800,895
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase for
available-for-sale
securities - - ( 180,997,695)
Proceeds from sale
of available-for-sale
securities - - 180,997,695
Net (increase) decrease
in minimum lease payments
receivable ( 4,678,114) 7,396,388 ( 209,238)
Purchase of equipment on
operating leases ( 730,004) ( 98,166) ( 26,975)
Net (increase) decrease
in other assets ( 74,814) 146,161 ( 119,073)
Estimated unguaranteed
residual values recorded
on leases ( 4,656,176) ( 10,031,661) ( 11,796,606)
Net cash used for investing ----------- ----------- ------------
activities ( 10,139,108) ( 2,587,278) ( 12,151,892)
----------- ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment on note payable - - ( 10,000,000)
Payments to repurchase
common stock ( 4,582,239) ( 712,298) -
Dividends to stockholders ( 1,855,570) ( 1,897,886) ( 1,889,751)
Proceeds from exercise of
stock options 37,362 428,350 653,265
Net cash used for financing ----------- ----------- ------------
activities ( 6,400,447) ( 2,181,834) ( 11,236,486)
----------- ----------- ------------
NET CHANGE IN CASH AND CASH
EQUIVALENTS 33,202,146 44,144,949 9,412,517
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 59,337,426 15,192,477 5,779,960
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $92,539,572 $59,337,426 $ 15,192,477
=========== =========== ============
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
(Decrease) increase in lease
rentals assigned to lenders
and related nonrecourse debt ($66,683,964) ($33,764,730) $ 8,544,241
=========== =========== ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 24,482 $ 57,695 $ 85,733
=========== =========== ============
Income taxes $11,660,631 $12,882,483 $ 9,373,126
=========== =========== ============
The accompanying notes are an integral
part of these financial statements.
17
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
- ----------------------------------------------------
Nature of Operations
- --------------------
Amplicon leases high-technology and other capital assets to customers
located throughout the United States. The Company is also engaged in the
remarketing of leased assets at lease expiration.
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 or 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.
18
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
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.
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.
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.
Reserve for Credit Losses
- -------------------------
The reserve for doubtful accounts and residual valuation allowance
("reserve") 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 need for reserves is subject to 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.
Earnings Per Share
- ------------------
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.
19
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Years ended June 30,
-----------------------------------------
2000 1999 1998
----------- ----------- -----------
Net earnings $20,009,330 $19,729,875 $19,219,626
=========== =========== ===========
Weighted average number
of common shares
outstanding assuming no
exercise of outstanding
options 11,617,102 11,854,441 11,800,206
Dilutive stock options
using the treasury stock
method 324,652 444,730 567,546
----------- ----------- -----------
11,941,754 12,299,171 12,367,752
=========== =========== ===========
Basic earnings per common
share $ 1.72 $ 1.66 $ 1.63
=========== =========== ===========
Diluted earnings per common
share $ 1.67 $ 1.60 $ 1.55
=========== =========== ===========
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 revenue as previously presented in 1998 was $313,789,037.
Total cost of sales as previously presented in 1998 was $262,697,336.
Certain reclassifications have been made to the fiscal 1998 financial
statements to conform with the presentation of the fiscal 1999 and 2000
financial statements.
Note 2 - Receivables:
- ---------------------
The Company's net receivables consist of the following:
June 30,
----------------------------
2000 1999
----------- -----------
Financial institutions $ 4,369,872 $12,665,586
Lessees 8,252,717 10,796,391
Other 247,650 493,425
----------- -----------
12,870,239 23,955,402
Less allowance for doubtful accounts ( 123,173) ( 1,170,895)
----------- -----------
Net receivables $12,747,066 $22,784,507
=========== ===========
20
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Note 3 - Capital Leases:
- ------------------------
The Company's net investment in capital leases consists of the following:
June 30,
----------------------------
2000 1999
----------- ------------
Minimum lease payments receivable,
less allowance for doubtful
accounts of $2,221,620 in 2000
and $1,487,236 in 1999 $55,300,858 $ 51,406,881
Estimated unguaranteed residual
value, less valuation allowance
of $1,395,329 in 2000 and
$2,816,276 in 1999 40,233,760 52,111,083
----------- ------------
95,534,618 103,517,964
Less unearned income ( 14,890,016) ( 18,900,614)
----------- ------------
Net investment in capital leases $80,644,602 $ 84,617,350
=========== ============
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 $5,881,706 and $9,171,547 at June 30, 2000 and
1999, respectively.
At June 30, 2000, 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:
Estimated
Minimum unguaranteed
Years ending lease payments residual
June 30, receivable value Total
------------ ----------- ----------- -----------
2001 $30,860,139 $18,096,914 $48,957,053
2002 12,504,546 11,786,613 24,291,159
2003 7,182,303 5,817,353 12,999,656
2004 3,594,066 3,287,115 6,881,181
2005 1,090,846 1,121,368 2,212,214
Thereafter 68,958 124,397 193,355
----------- ----------- -----------
55,300,858 40,233,760 95,534,618
Less unearned income ( 6,189,808) ( 8,700,208) ( 14,890,016)
----------- ----------- -----------
Net investment in capital leases $49,111,050 $31,533,552 $80,644,602
=========== =========== ===========
Included with unearned income on the estimated unguaranteed residual
value is unearned income from assigned leases.
21
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Nonrecourse debt, which relates to the discounting of capital lease
receivables, bears interest at rates ranging from 5.84% to 12.87%.
Maturities of such obligations at June 30, 2000 are as follows:
Years ending Capital
June 30, leases
------------ ------------
2001 $ 91,524,678
2002 49,723,213
2003 22,560,076
2004 10,692,921
2005 3,626,943
Thereafter 75,006
------------
Total nonrecourse debt 178,202,837
Deferred interest income 18,574,999
------------
Discounted lease rentals
assigned to lenders $196,777,836
============
At June 30, 2000, deferred interest expense of $18,574,999 is amortized
against direct financing revenues related to the Company's discounted
lease rentals assigned to lenders of $196,777,836 using the effective
yield method.
Note 4 - 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:
Years ended June 30,
----------------------------------------
2000 1999 1998
----------- ----------- -----------
Current tax expense:
Federal $17,706,775 $ 7,999,798 $ 7,697,441
State 3,367,876 2,075,000 2,200,000
----------- ----------- -----------
21,074,651 10,074,798 9,897,441
----------- ----------- -----------
Deferred tax (benefit) expense:
Federal ( 7,182,517) 1,808,191 2,620,156
State ( 1,366,134) 469,011 31,403
----------- ----------- -----------
( 8,548,651) 2,277,202 2,651,559
----------- ----------- -----------
$12,526,000 $12,352,000 $12,549,000
=========== =========== ===========
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.
22
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
Deferred income tax liabilities (assets) are comprised of the following:
June 30,
----------------------------
2000 1999
----------- -----------
Deferred income tax liabilities:
Tax operating leases $24,746,116 $32,747,022
Deferred selling expenses 2,411,499 3,760,334
----------- -----------
Total liabilities 27,157,615 36,507,356
----------- -----------
Deferred income tax assets:
Allowances and reserves ( 1,947,213) ( 3,025,280)
Minimum tax credits/carryforwards ( 759,459) ( 1,750,000)
Depreciation other than on
operating leases ( 532,791) ( 463,264)
State income taxes ( 1,178,757) ( 726,250)
----------- -----------
Total assets ( 4,418,220) ( 5,964,794)
----------- -----------
Net deferred income taxes 22,739,395 30,542,562
Income taxes payable (receivable) 7,531,536 ( 1,137,000)
----------- -----------
Net deferred income tax liabilities $30,270,931 $29,405,562
=========== ===========
The sources of differences between the federal statutory income tax rate
and the Company's effective tax rate are as follows:
Years ended June 30,
------------------------
2000 1999 1998
---- ---- ----
Federal statutory rate 35.0% 35.0% 35.0%
State tax, net of federal benefit 4.6 4.6 4.6
Other ( 1.1) ( 1.1) ( .1)
---- ---- ----
Effective rate 38.5% 38.5% 39.5%
==== ==== ====
Note 5 - 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
23
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
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:
As of June 30,
------------------------------------------------------------
2000 1999 1998
------------------- ------------------- -----------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
--------- -------- --------- --------- ------- --------
Options
outstanding at
the beginning
of the year 1,015,600 $ 8.35 938,350 $ 7.49 993,900 $ 6.97
Granted 149,000 11.80 195,250 14.19 64,750 17.18
Exercised ( 4,300) 8.69 ( 55,300) 7.75 ( 78,100) 8.36
Canceled ( 37,300) 12.40 ( 62,700) 14.27 ( 42,200) 8.26
--------- ------ --------- ------ ------- ------
Options
outstanding at
the end of
the year 1,123,000 $ 8.67 1,015,600 $ 8.35 938,350 $ 7.49
========= ====== ========= ====== ======= ======
Options
exercisable 776,450 688,750 656,466
========= ========= =======
Weighted
average
fair value of
options granted $ 4.97 $ 5.95 $ 6.07
========== ========= =======
As of June 30, 2000
-----------------------------------------------------------
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
- ---------------- ----------- ---------- -------- ----------- --------
$ 3.50 - $ 3.50 309,000 .21 $ 3.50 309,000 $ 3.50
6.00 - 7.875 253,866 3.30 7.40 230,866 7.35
8.00 - 10.50 170,834 4.25 9.53 148,334 9.60
11.375 - 17.75 389,300 8.28 13.23 88,250 13.37
- ----------------- --------- ---- ------ ------- ------
$ 3.50 - $17.75 1,123,000 4.32 $ 8.67 776,450 $ 6.93
================= ========= ==== ====== ======= ======
24
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
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:
For the years ended June 30,
2000 1999 1998
--------------------------------------------
Net earnings $20,009,330 $19,729,875 $19,219,626
Proforma compensation cost ( 274,212) ( 166,955) ( 48,266)
----------- ----------- -----------
Proforma net earnings $19,735,118 $19,562,920 $19,171,360
=========== =========== ===========
Proforma Basic EPS $ 1.70 $ 1.65 $ 1.62
=========== =========== ===========
Proforma Diluted EPS $ 1.65 $ 1.59 $ 1.55
=========== =========== ===========
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 2000, 1999 and 1998.
For the years ended June 30,
2000 1999 1998
-------------------------
Risk free interest rate 6.25% 5.88% 5.47%
Option life (in years) 5 5 5
Dividend yield 1.60% 1.00% 1.00%
Volatility 43.90% 42.23% 33.29%
Note 6 - Commitments and Contingencies:
- ---------------------------------------
Leases
- ------
The Company leases its corporate offices under operating leases which
expire in fiscal 2002 and 2003. Rent expense was $972,276, (2000),
$995,075 (1999) and $774,165 (1998).
Future minimum lease payments under the operating leases are as follows:
Years ending Future minimum
June 30, lease payments
------------ --------------
2001 $ 904,535
2002 1,100,120
2003 690,703
----------
$2,695,358
==========
25
AMPLICON, INC.
NOTES TO FINANCIAL STATEMENTS
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, 2000, 1999, and 1998 of $118,521,
$105,379 and $107,172, respectively.
Note 7- Selected Quarterly Financial Data (Unaudited):
- ------------------------------------------------------
Summarized quarterly financial data for the fiscal years ended June 30,
2000 and 1999 is as follows:
Three months ended
---------------------------------------------------
September 30, December 31, March 31, June 30,
------------- ------------ --------- --------
(In thousands, except per share amounts)
2000
- --------------
Total revenues $14,457 $20,340 $19,858 $25,459
Gross profit 10,934 13,169 12,759 12,516
Net earnings $ 4,318 $ 5,285 $ 5,337 $ 5,069
Basic earnings per
common share $ .36 $ .46 $ .46 $ .44
Diluted earnings per
common share $ .35 $ .44 $ .45 $ .43
Dividends declared per
common share $ .04 $ .04 $ .04 $ .04
Three months ended
---------------------------------------------------
September 30, December 31, March 31, June 30,
------------- ------------ --------- --------
(In thousands, except per share amounts)
1999
- --------------
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
26
AMPLICON, INC.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 27, 2000 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 27, 2000, 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 27, 2000 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 27, 2000 with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
27
AMPLICON, INC.
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 29
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 31-33
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
fiscal 2000.
28
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: October 9, 2000
-------------------
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 October 9, 2000
- --------------------
Patrick E. Paddon Officer and Director
Glen T. Tsuma/s/ Vice President, Treasurer, Chief October 9, 2000
- ----------------
Glen T. Tsuma Operating Officer and Director
S. Leslie Jewett/s/ Chief Financial Officer October 9, 2000
- -------------------
S. Leslie Jewett
Michael H. Lowry/s/ Director October 9, 2000
- -------------------
Michael H. Lowry
Harris Ravine/s/ Director October 9, 2000
- ----------------
Harris Ravine
29
AMPLICON, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance charged to Accounts Balance
beginning costs and written at end of
Classifications of period expenses off period
- --------------- ---------- ---------- ---------- ----------
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
Year ended
June 30, 2000:
- ---------------
Allowance for
doubtful accounts $2,658,131 $1,277,000 $ 990,338 $2,944,793
Allowance for
valuation of
unguaranteed
residual value $2,816,276 $ 233,054 $1,653,947 $1,395,329
Note: The allowance for doubtful accounts includes balances related to
receivables, capital leases and operating leases described in Notes 1, 2
and 3 of the Notes to Financial Statements.
30
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)
31
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)
32
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)
10.21 Amendment One to Business Loan Agreement, dated as
of December 20, 1999, between the Company and Bank
of America (incorporated by reference to Exhibit 10.21
to the Registrant's December 31, 1999 Form 10-Q)
33