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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
[Fee Required]
For the fiscal year ended June 30, 1994
[ ] 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
5 Hutton Centre Drive, Suite 500
Santa Ana, CA 92707
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)751-7551
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
(Title of each class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes______X______ No________________
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
_____________________
The aggregate market value of the Common Stock held by nonaffiliates
of the Registrant as of September 16, 1994 was $38,077,368.
Number of shares outstanding as of September 16, 1994: Common Stock
5,857,022.
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.
Total Number of Pages ___________
AMPLICON, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 2
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
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Item 8. Financial Statements and Supplementary Data 10-23
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 24
PART III
Item 10. Directors and Executive Officers of the Registrant 24
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners
and Management 24
Item 13. Certain Relationships and Related Transactions 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 25
Signatures 26
Schedules 27-28
Exhibit Index 29-31
AMPLICON, INC. AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
General
Amplicon leases and sells mid-range computers, peripherals, work
stations, personal computer networks, telecommunications equipment,
computer automated design and manufacturing equipment, office automation
equipment, computer software and other items of personal property to
customers located throughout the United States. The Company was
incorporated in California in 1977. Unless the context otherwise
requires, the terms "Amplicon" and "Company" as used herein refer to
Amplicon, Inc. and its subsidiaries.
Mid-Range Computers and Computer Networks. The Company concentrates
on the market for mid-range computers and computer networks since this
market is particularly receptive to leasing services. A growing portion
of the Company's business consists of personal computers, workstations,
printers, and software which are integrated into complete networks. Mid-
range computers generally cost between $100,000 and $750,000 and are used
primarily by subsidiaries and divisions of large companies to supplement
mainframe computer systems, by middle-market companies for centralized
data processing, and to upgrade personal computer networks. Mid-range
computer systems typically consist of a central processing unit, multiple
display terminals, printers, disk and tape drives, communications
equipment and operating software. Computer networks typically consist of
a central server, which may be a mid-range computer or high-end
microcomputer, multiple personal computers and workstations, network
communications hardware and software, printers and associated products
for microcomputer based networks. Computer networks generally range in
cost from $100,000 to $3,000,000.
Mid range systems and computer networks are modular and can be
expanded to satisfy additional data processing requirements and perform
additional functions by upgrading the central processing unit and/or
server, and adding data storage devices and workstations to support
additional users. Advances in microcomputer technology and enhancements
to the capabilities of mid-range computer systems have led to the
development of systems that better integrate data processing with word
processing, file and retrieval systems, and electronic mail. The Company
leases and sells mid-range computer systems manufactured primarily by
International Business Machines Corporation ("IBM"), Digital Equipment
Corporation ("DEC"), and Hewlett-Packard Co. ("HP"). Vendors of computer
network products include IBM and HP, as well as AST Research, Compaq,
Gateway, among many others, and software vendors such as Microsoft and
Novell.
Other Electronic Equipment. Advances in microcomputer technology
have also expanded the scope of other electronic equipment utilized by
Amplicon's existing and targeted customer base. Amplicon leases and
sells telecommunications equipment, computer automated design and
computer automated manufacturing ("CAD/"CAM") equipment, and office
automation equipment. The telecommunications equipment leased by the
Company consists primarily of digital private branch equipment, switching
equipment and voice mail systems manufactured by American Telephone &
Telegraph Company, Rolm Corporation and International Telephone &
Telegraph Company and generally costs between $50,000 and $500,000. The
CAD/CAM systems leased by the Company include those produced by IBM,
Hewlett Packard, and Sun Microsystems, Inc. and cost between $50,000 and
$700,000 per system. The Company also leases word processing systems,
copying equipment, retail point of sale equipment and bank automatic
teller machines.
Production Equipment and Other Personal Property. The Company is
leasing an increasing amount of technology related manufacturing and
production management systems. These systems include complex computer
controlled manufacturing equipment, printing presses and warehouse
distribution systems. In addition, the Company leases a wide variety of
personal property in the "non-high technology" area, including
manufacturing equipment, trucks and office furniture.
Software. Amplicon leases specialized application software
packages. These application software packages typically cost between
$50,000 and $500,000. In addition to leasing stand-alone software
packages, an increasing percentage of the cost of mid-range computer
systems and networks consists of operating and application software.
AMPLICON, INC. AND SUBSIDIARIES
Marketing Strategy
The Company has developed and refined a direct marketing system
utilizing a centralized telemarketing program. The program includes a
system which creates and maintains a data base of current and potential
users of personal property, a comprehensive formal training program to
introduce new marketing employees to Amplicon's telemarketing techniques,
and an in-house computer and telecommunications system.
The Company implemented its current marketing system in 1981 after
having determined that a centralized telemarketing program would be more
cost effective than the field sales representatives it had previously
used to conduct its marketing activities. The use of telemarketing
techniques rather than field sales representatives has enabled the
Company to limit selling, general and administrative expenses to seven
percent (7%) or less of revenues during each of its last five fiscal
years and, consequently, allows the Company to offer more competitive
rates to its customers.
Amplicon identifies potential customers through a variety of
methods. The Company purchases lists of computer users from private
sources, conducts direct mail and telephone campaigns to generate sales
leads, and maintains records of contacts made with potential customers by
its account executives. In 1991, Amplicon installed a personal computer
network and customized software to further enhance the productivity of
the sales force. Specific information about potential customers is
entered into an on-line data base accessible to each account executive
through the personal computer network. As potential customers are
contacted by account executives, the database is updated and supplemented
with information about what computer and other equipment they are using,
related lease expiration dates and any future equipment needs or
replacement plans. The data base allows account executives to identify
efficiently the most likely purchaser or lessee of equipment and to
concentrate efforts on these prospective customers.
Amplicon's data base, combined with the telemarketing software, and
an integrated in-house telecommunications system, permit the Company's
sales management to monitor account executive activity, daily prospect
status and pricing information. The ability to monitor account activity
and offer immediate assistance in negotiating or pricing a transaction
makes it possible for Amplicon to be responsive to its customers and
potential customers.
Leasing and Sales Activities
The Company's leases are generally for terms ranging from two to
five years. All of the Company's leases are noncancelable "net" leases
which contain "hell-or-high-water" provisions under which the lessee must
make all lease payments regardless of any defects in the equipment, and
which require the lessee to maintain and service the equipment, insure
the equipment against casualty loss and pay all property, sales and other
taxes on the equipment. The Company retains ownership of the equipment 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 equipment. 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 equipment at a mutually agreeable price, or in the case of a
"conditional sales contract", at a predetermined minimum price, or to
renew the lease. If the purchase option is not exercised by the original
lessee, once the equipment 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 equipment. The terms of the
Company's software leases are substantially similar to its equipment
leases.
AMPLICON, INC. AND SUBSIDIARIES
Leasing and Sales Activities (Continued)
The Company conducts its leasing business in a manner designed to
conserve its working capital and minimize its credit exposure. The
Company does not purchase equipment until it has received a noncancelable
lease from its customer and, generally, has determined that the lease can
be discounted with a bank or financial institution on a nonrecourse
basis. Accordingly, a substantial portion of the Company's leases are
discounted to banks or finance companies on a nonrecourse basis at fixed
interest rates that reflect the customers' financial condition.
Approximately 91.4% and 83.6% of the total dollar amount of new leases
entered into by the Company during the fiscal years ended June 30, 1994
and 1993, respectively, were discounted to financial institutions. The
lender to which a lease has been assigned has no recourse against the
Company, unless the Company is in default of the terms under the
agreement by which a lease was assigned to the lender. The lender to
which a lease has been assigned may take title to the leased equipment in
the event the lessee fails to make lease payments or initiates certain
other defaults under the terms of the lease. If this occurs, the Company
may not realize its residual investment in the leased equipment.
From time to time, the Company invests cash generated from its
activities into lease transactions meeting credit standards set by the
Company. Some of these transactions are entered into when the value of
the underlying property, or the credit rating of the lessee, would not be
acceptable to a financial institution for purposes of making a
nonrecourse loan to the Company. Each of these transactions must meet or
exceed certain profitability requirements as established, on a case by
case basis, by the Company's executive management. In addition the
Company invests in lease transactions which the Company believes could be
placed at a later date to nonrecourse lenders on a lease by lease basis
or in a portfolio debt placement or securitization. During the year ended
June 30, 1994, the Company completed three debt placements of lease
receivable portfolios accumulated under such investment guidelines for
aggregate cash proceeds of $23,406,774. At June 30, 1994 and 1993, the
discounted minimum lease payments receivable relative to leases
maintained in the Company's portfolio amounted to $31,123,678 and
$31,052,728, respectively.
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 mid-
range computer equipment and software and other equipment with equipment
brokers and dealers, leasing companies, banks and other financial
institutions and credit corporations which are affiliated with equipment
manufacturers, such as, IBM, DEC 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 equipment 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 financing arrangements, financial technical
proficiency and the offering of a broad range of financial options.
Employees
The Company, as of June 30, 1994, had 196 employees, including 125
sales managers and account executives and 15 professionals engaged in
finance and credit. None of the Company's employees is represented by a
labor union. The Company believes that its relations with its employees
are satisfactory.
AMPLICON, INC. AND SUBSIDIARIES
ITEM 2. PROPERTIES
At June 30, 1994, Amplicon occupied approximately 27,000 square feet
of office space in Santa Ana, California leased from unaffiliated
parties. The lease covering the majority of the space provides for
monthly rental payments which average $30,377 from inception through
January 1998.
ITEM 3. LEGAL PROCEEDINGS
The Company is sometimes named as a defendant in litigation relating
to the services it provides. Management does not expect the outcome of
any existing suit to have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of Amplicon, Inc. trades on the NASDAQ Stock Market
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 30,1994
First Quarter $20.00 $18.00
Second Quarter 20.25 18.25
Third Quarter 21.50 18.75
Fourth Quarter 21.50 20.00
Fiscal year ended June 30, 1993
First Quarter $16.00 $11.50
Second Quarter 16.75 14.00
Third Quarter 21.00 15.50
Fourth Quarter 20.25 18.50
The Company had approximately 48 stockholders of record and in
excess of 500 beneficial owners as of September 16, 1994.
In September, 1994, after considering the Company's profitability,
liquidity and future operating cash requirements, the Board of Directors
authorized a regular quarterly cash dividend policy. The first quarterly
cash dividend will be $.05 per share and issued on October 7, 1994 to
stockholders of record at the close of business on September 23, 1994.
AMPLICON, INC. AND SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data
and operating information of the Company. The selected consolidated
financial data should be read in conjunction with the Consolidated
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 1994 1993 1992 1991 1990
(in thousands, except per share amounts)
Revenues:
Sales of equipment $156,740 $139,384 $103,969 $132,414 $141,953
Interest income 24,357 23,697 25,668 22,161 15,616
Rental income 263 747 803 1,153 724
Total revenues 181,360 163,828 130,440 155,728 158,293
Gross profit 29,453 26,083 23,194 20,312 18,429
Earnings before income taxes 17,352 15,421 14,487 12,118 9,180
Net earnings $ 11,019 $ 9,793 $ 9,111 $ 7,440 $ 5,644
COMMON SHARE DATA
Net earnings per share $ 1.89 $ 1.68 $ 1.57 $ 1.26 $ .93
Weighted average number of
common shares outstanding 5,849 5,831 5,813 5,925 6,095
Cash dividends $ -0- $ -0- $ -0- $ -0- $ -0-
SELECTED ANNUAL GROWTH RATES
Sales of equipment 12% 34% (21)% ( 7)% 12%
Total revenues 11 26 (16) ( 2) 15
Net interest income 4 ( 5) 22 28 21
Gross profit 13 12 14 10 18
Net earnings 13 7 22 32 8
Net earnings per share 13 7 25 35 15
AS OF JUNE 30,
BALANCE SHEET DATA 1994 1993 1992 1991 1990
(in thousands, except per share data)
Total assets $384,584 $350,661 $307,529 $306,399 $257,249
Notes payable to bank 10,000 -0- -0- -0- 13
Nonrecourse debt 225,746 211,191 193,611 192,748 158,325
Stockholders' equity 80,875 69,772 59,955 50,724 45,486
Book value per common share $ 13.81 $ 11.96 $ 10.29 $ 8.75 $ 7.60
AMPLICON, INC. AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fiscal Years Ended June 30, 1994 and 1993
REVENUES. Total revenues for the fiscal year ended June 30, 1994
were $181,360,291, an increase of $17,532,061 or 10.7% from the prior
year. This change was primarily the result of increases in sales of
equipment of $17,355,868 and interest income of $660,362 offset by lower
rental income of $484,169. The Company believes the increase in sales of
equipment was primarily due to increased effectiveness of a larger and
more experienced salesforce at obtaining new business. Interest income
for the fiscal year ended June 30, 1994 increased to $24,356,893 as
compared to $23,696,531 for the fiscal year ended June 30, 1993,
partially due to higher interest income on discounted lease rentals
assigned to lenders (which is offset by interest expense on nonrecourse
debt) of $11,659,414 in the fiscal year ended June 30, 1994 versus
$11,452,119 for the prior year.
Net interest income (interest income less interest expense on
discounted lease rentals assigned to lenders) for the fiscal year ended
June 30, 1994 increased by $453,067 or 3.7% to $12,697,479 as compared to
$12,244,412 for fiscal year ended June 30, 1993. This net increase
resulted primarily from higher amortization of deferred income and
increases in interest accretion due to a larger residual value base.
Rental income for the fiscal year ended June 30, 1994 of $263,060
decreased by $484,169 or 64.8% as compared to the fiscal year ended June
30, 1993, as a result of decreases in the volume of short-term lease
renewals.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1994
increased by $3,370,357, or 12.9%, to $29,453,424 compared to $26,083,067
for the fiscal year ended June 30, 1993. Gross profit as a percent of
total revenues increased to 16.2% of total revenues for fiscal 1994
compared to 15.9% of total revenues for the prior year. Additionally, the
cost of equipment sold as a percentage of sales of equipment decreased to
90.4% for the fiscal year ended June 30, 1994 versus 91.1% for the fiscal
year ended June 30, 1993. The principal factors which contributed to
higher gross profit were increased profits from lease renewals and
extensions, sales of equipment at the end of the lease term and increases
in net interest income as described above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 6.6% for
the fiscal year ended June 30, 1994 as compared to 6.5% for the fiscal
year ended June 30, 1993. Selling, general and administrative expenses
for the fiscal year ended June 30, 1994 increased by $1,354,840 or 12.8%
as compared to the prior year. This increase resulted primarily from
higher sales and finance staff personnel costs, higher variable office
costs related to the greater business volume and additions made to the
management organization to support future growth.
INTEREST EXPENSE-OTHER. Interest expense-other was $174,059 for the
year ended June 30, 1994 as compared to $89,067 for the year ended June
30, 1993. The increase of $84,992 is primarily the result of greater
fiscal year 1994 interest assessments made as the result of regulatory
audits with various federal, state and local agencies.
TAXES. The Company's tax rate was 36.5% for both the fiscal years
ended June 30, 1994 and 1993 representing its estimated annual tax rates
for the years ending June 30, 1994 and 1993. The Company expects that
its tax rate for fiscal years beginning after July 1, 1994 will increase
to reflect, as applicable, changes in the Federal statutory tax rate,
various State tax rates and the expiration of certain tax benefits.
AMPLICON, INC. AND SUBSIDIARIES
Results of Operations (continued)
Fiscal Years Ended June 30, 1993 and 1992
REVENUES. Total revenues for the fiscal year ended June 30, 1993
were $163,828,230, an increase of $33,388,084 or 25.6% from the prior
year. This change was primarily the result of increases in sales of
equipment of $35,415,050 offset by lower interest income of $1,970,989.
The Company believes the increase in sales of equipment was primarily due
to increased effectiveness of a larger and more experienced salesforce at
obtaining new business. Interest income for the fiscal year ended June
30, 1993 decreased to $23,696,531 as compared to $25,667,520 for the
fiscal year ended June 30, 1992, partially due to lower interest income
on discounted lease rentals assigned to lenders (which is offset by
interest expense on nonrecourse debt) of $11,452,119 in the fiscal year
ended June 30, 1993 versus $12,818,915 for the prior year.
Net interest income (interest income less interest expense on
discounted lease rentals assigned to lenders) for the fiscal year ended
June 30, 1993 decreased by $604,193 or 4.7% as compared to the fiscal
year ended June 30, 1992. This net decrease resulted primarily from lower
amortization of deferred income and lower investment income, offset by
increases in interest accretion due to a larger residual value base, and
increases in interest recognition on greater minimum lease payments
receivable.
Rental income for the fiscal year ended June 30, 1993 of $747,229
decreased by $55,977 or 7.0% as compared to the fiscal year ended June
30, 1992, as a result of decreases in the volume of short-term lease
renewals.
GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1993
increased by $2,888,741, or 12.5%, to $26,083,067 compared to $23,194,326
for the fiscal year ended June 30, 1992. Gross profit as a percent of
total revenues decreased to 15.9% of total revenues for fiscal 1993
compared to 17.8% of total revenues for the prior year. Additionally, the
cost of equipment sold as a percentage of sales of equipment increased to
91.1% for the fiscal year ended June 30, 1993 versus 90.8% for the fiscal
year ended June 30, 1992. The principal factors which contributed to
higher gross profit were (i) increased profits from lease renewals and
extensions, (ii) higher profits from larger volume of new lease
transactions, and (iii) gains realized from the debt placement of lease
portfolios, offset by (iv) decreases in net interest income as described
above. The lower gross profit margin and higher cost of equipment
percentages reflect a greater percentage of the Company's revenues
derived from new lease transactions and a decrease in the proportion of
revenues from interest income during the most recent fiscal year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of total revenues were 6.5% for
the fiscal year ended June 30, 1993 as compared to 6.6% for the fiscal
year ended June 30, 1992. Selling, general and administrative expenses
for the fiscal year ended June 30, 1993 increased by $1,967,227 or 22.9%
as compared to the prior year. This increase resulted primarily from
higher sales and finance staff personnel costs, higher variable office
costs related to the greater business volume and additions made to the
management organization to support future growth.
INTEREST EXPENSE-OTHER. Interest expense-other was $89,067 for the
year ended June 30, 1993 as compared to $102,044 for the year ended June
30, 1992. The decrease of $12,977 is primarily the result of fewer fiscal
year 1993 interest assessments made as the result of regulatory audits
with various federal, state and local agencies.
TAXES. The Company's tax rate was 36.5% and 37.1% for the fiscal
years ended June 30, 1993 and 1992, respectively, representing its
estimated annual tax rates for the years ending June 30, 1993 and 1992.
AMPLICON, INC. AND SUBSIDIARIES
Liquidity and Capital Resources
The Company funds its operating activities through nonrecourse debt
and internally generated funds. Capital expenditures for equipment
purchases are primarily financed by assigning the lease payments to banks
or other financial institutions. The 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 equipment
until it has received a noncancelable lease from its customer and,
generally, has determined that the lease can be discounted on a
nonrecourse basis. At June 30, 1994, the Company had outstanding
nonrecourse debt aggregating $225,746,187 relating to equipment under
capital and operating leases. In the past, the Company has been able to
obtain adequate nonrecourse funding commitments, and the Company believes
it will be able to do so in the future.
The Company borrowed $10,000,000 in December 1993 which is secured
by an in process lease transaction. The Company has a nonrecourse debt
commitment from the same financial institution to finance the lease
transaction once the lease transaction is completed. The lease is
anticipated to be assigned on a nonrecourse basis prior to the due date
of the note and the commencement of the assignment, at which time the
recourse note will be paid in full (see Note 4 in the Notes to
Consolidated Financial Statements).
From time to time, the Company retains equipment leases in its own
portfolio rather than assigning the leases to financial institutions.
During the fiscal year 1994, the Company increased its net investment in
leases held in its own portfolio by $70,950. This minimal increase was
primarily due to i) a higher percentage of new lease transactions being
assigned on a non-recourse basis, ii) the assignment of three lease
portfolios during fiscal 1994 and iii) the cash flow from the Company's
lease portfolio during fiscal 1994 exceeded the volume of new leases and
renewals.
The Company generally funds its equity investments in leased
equipment and interim equipment purchases with internally generated funds
and, if necessary, borrowings under a $20,000,000 general line of credit.
At June 30, 1994, the Company did not have any borrowings outstanding on
this line of credit.
In November 1990, the Board of Directors authorized management, at
its discretion, to repurchase up to 300,000 shares of the Company's
Common Stock. During the year ended June 30, 1994, the Company
repurchased 10,000 shares at an aggregate cost of $188,750. During the
year ended June 30, 1993, the Company repurchased 2,322 shares at an
aggregate cost of $43,988. As of August 20, 1994, 100,678 shares remain
available under this authorization.
The need for cash used for operating activities will continue to
grow as the Company expands. The Company believes that existing cash
balances, cash flow from operations, cash flows from its financing
activities, available borrowings under its existing credit facility, and
assignments (on a nonrecourse basis) of anticipated lease payments will
be sufficient to meet its foreseeable financing needs.
Inflation has not had a significant impact upon the operations of
the Company.
AMPLICON, INC. AND SUBSIDIARIES
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and supplementary
financial information are included herein at the pages indicated below:
Page Number
Report of Independent Public Accountants 11
Consolidated Balance Sheets at June 30, 1994 and 1993 12
Consolidated Statements of Earnings for the years ended
June 30, 1994, 1993 and 1992 13
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1994, 1993 and 1992 14
Consolidated Statements of Cash Flows for the years
ended June 30, 1994, 1993 and 1992 15
Notes to Consolidated Financial Statements 16-23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Amplicon, Inc.:
We have audited the accompanying consolidated balance sheets of
Amplicon, Inc. (a California corporation) and subsidiaries as of June
30, 1994 and 1993, and the related consolidated statements of
earnings, stockholders' equity and cash flows for the years ended June
30, 1994, 1993 and 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Amplicon,
Inc. and subsidiaries as of June 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in
the period ended June 30, 1994, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed in
the index of financial statements are presented for purposes of
complying with the Securities and Exchange Commission's rules and are
not a required part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly state 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
Irvine, California
August 16, 1994
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30,
ASSETS 1994 1993
Cash and cash equivalents (Notes1 & 8) $ 29,334,914 $ 18,083,839
Net receivables (Note 2) 39,905,181 33,069,938
Inventories, primarily customer deliveries in
process 4,975,392 5,840,993
Net investment in capital leases (Note 3) 59,304,999 55,698,547
Equipment on operating leases, less accumulated
depreciation of $211,848 (1994) and
$303,807(1993) 50,364 63,993
Other assets 1,074,912 1,142,093
Discounted lease rentals assigned to lenders
(Note 3) 249,938,300 233,408,279
TOTAL ASSETS $384,584,062 $347,307,682
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note payable to bank (Notes 4 & 8) $ 10,000,000 $ -0-
Accounts payable 14,246,006 19,696,244
Accrued liabilities 3,149,416 4,192,557
Customer deposits 7,369,952 3,929,824
Nonrecourse debt (Note 3) 225,746,187 211,190,705
Deferred interest income (Note 5) 24,192,113 22,217,574
Net deferred income (Note 5) 3,743,479 2,035,797
Income taxes payable, including deferred
taxes (Note 6) 15,261,498 14,272,822
Total Liabilities 303,708,651 277,535,523
Commitments and contingencies (Note 9)
Stockholders' equity (Notes 4 & 7):
Preferred stock; 2,500,000 shares
authorized; none issued -0- -0-
Common stock; $.01 par value; 20,000,000 shares
authorized; 5,857,022 (1994) and 5,834,856 (1993)
issued and outstanding 58,570 58,349
Additional paid in capital 6,001,240 5,916,748
Retained earnings 74,815,601 63,797,062
Total Stockholders' Equity 80,875,411 69,772,159
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $384,584,062 $347,307,682
The accompanying notes are an integral part
of these consolidated balance sheets.
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended June 30,
1994 1993 1992
Revenues:
Sales of equipment $156,740,338 $139,384,470 $103,969,420
Interest income (Notes 1, 3 & 5) 24,356,893 23,696,531 25,667,520
Rental income 263,060 747,229 803,206
Total Revenues 181,360,291 163,828,230 130,440,146
Costs:
Cost of equipment sold 140,186,036 126,276,178 94,316,854
Interest expense on nonrecourse debt
(Notes 1, 3 & 5) 11,659,414 11,452,119 12,818,915
Depreciation of equipment on
operating leases 61,417 16,866 110,051
Total Costs 151,906,867 137,745,163 107,245,820
Gross profit 29,453,424 26,083,067 23,194,326
Selling, general and administrative
expenses 11,927,826 10,572,986 8,605,759
Interest expense-other 174,059 89,067 102,044
Earnings before income taxes 17,351,539 15,421,014 14,486,523
Income taxes (Note 6) 6,333,000 5,628,000 5,376,000
Net earnings $ 11,018,539 $ 9,793,014 $ 9,110,523
Net earnings per common share $ 1.89 $ 1.68 $ 1.57
Weighted average number of common
shares outstanding 5,848,594 5,830,561 5,813,291
The accompanying notes are an integral part
of these consolidated financial statements.
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional
Common Stock paid in Retained
Shares Amount capital earnings Total
Balance, June 30, 1991 5,799,093 $57,991 $5,772,765 $44,893,525 $50,724,281
Shares issued-
Stock options exercised 26,443 264 119,763 -0- 120,027
Net earnings -0- -0- -0- 9,110,523 9,110,523
Balance, June 30, 1992 5,825,536 58,255 5,892,528 54,004,048 59,954,831
Shares issued-
Stock options exercised 11,642 117 68,185 -0- 68,302
Shares repurchased ( 2,322)( 23)( 43,965) -0- ( 43,988)
Net earnings -0- -0- -0- 9,793,014 9,793,014
Balance, June 30, 1993 5,834,856 58,349 5,916,748 63,797,062 69,772,159
Shares issued-
Stock options exercised 32,166 321 273,142 -0- 273,463
Shares repurchased ( 10,000)( 100) ( 188,650) -0- ( 188,750)
Net earnings -0- -0- -0- 11,018,539 11,018,539
Balance, June 30, 1994 5,857,022 $58,570 $6,001,240 $74,815,601 $80,875,411
The accompanying notes are an integral part
of these consolidated financial statements.
AMPLICON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 11,018,539 $ 9,793,014 $ 9,110,523
Adjustments to reconcile net earnings to
cash flows used for operating activities:
Depreciation 61,417 16,866 110,051
Sale or lease of equipment previously
on operating leases, net 13,646 59,867 17,322
Interest accretion of estimated
unguaranteed residual values ( 3,115,186) ( 2,869,943) ( 2,492,262)
Estimated unguaranteed residual
values recorded on leases ( 7,733,445) ( 6,406,835) ( 4,110,784)
Interest accretion of net deferred
income ( 984,918) ( 1,241,855) ( 3,074,709)
Increase in net deferred income 2,691,736 1,424,429 156,652
Net increase (decrease) in income taxes
payable, including deferred taxes 988,676 2,992,800 ( 523,336)
Net increase in net receivables ( 6,835,242) (19,260,057) ( 1,072,218)
Net (increase) decrease in inventories 865,601 ( 2,972,596) ( 1,825,064)
Net increase (decrease) in accounts payable
and accrued liabilities ( 6,493,379) 9,300,441 ( 2,325,311)
Net cash used for operating activities ( 9,522,555) ( 9,163,869) ( 6,029,136)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in short
term investments -0- 2,513,813 ( 2,513,813)
Net increase in minimum lease payments
receivable (23,476,863) (27,353,268) ( 4,031,809)
Purchase of equipment on operating
leases ( 61,433) ( 57,372) ( 88,252)
Net decrease (increase) in other assets 67,181 ( 97,312) ( 233,446)
Decrease in estimated unguaranteed
residual values 7,313,130 4,580,601 4,000,232
Net cash used for investing activities (16,157,985) (20,413,538) ( 2,867,088)
CASH FLOWS FROM FINANCING ACTIVITIES:
Assignment of discounted lease rentals 23,406,774 36,346,343 -0-
Borrowing on note payable secured
by lease 10,000,000 -0- -0-
Payments to repurchase common stock ( 188,750) ( 43,988) -0-
Payments to reduce nonrecourse debt, excluding
lease rentals assigned to lenders -0- ( 10,159) ( 16,098)
Increase in customer deposits 3,440,128 837,047 493,823
Proceeds from exercise of stock options 273,463 68,302 120,027
Net cash provided by financing activities 36,931,615 37,197,545 597,752
NET CHANGE IN CASH AND CASH EQUIVALENTS 11,251,075 7,620,138 ( 8,298,472)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 18,083,839 10,463,701 18,762,173
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 29,334,914 $ 18,083,839 $ 10,463,701
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in lease rentals assigned to lenders and related
nonrecourse debt $ 14,555,482 $ 17,589,394 $ 879,114
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 174,059 $ 88,725 $ 100,143
Income taxes $ 5,366,715 $ 2,635,200 $ 5,899,623
The accompanying notes are an integral part
of these consolidated financial statements.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1994
Note 1 - Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Leases
Capital Leases
The Company engages in the lease and sale of computer hardware and
software, and other equipment. The Company adopted Financial Accounting
Standards Board Technical Bulletin No. 88-1 ("88-1") in fiscal year 1989
which addressed certain issues relating to accounting for leases. The
discounted value of the aggregate lease rentals is recorded as sales
revenue. Equipment cost, less the discounted value of the residual, if
any, is recorded as cost of sales. Under 88-1, except for capital lease
transactions in which the Company no longer has a continuing interest in
the leased equipment, the Company defers gross profit on new capital
leases through a reduction of sales revenue recognized at lease
origination. Gross profit which is deferred together with the unearned
interest income (and interest expense if assigned) is recognized as
interest income (and expense) over the lease term based on an internal
rate of return method. The Company recognizes certain interim rentals
received as operating income prior to commencement of capital leases.
At the time of closing capital leases, the Company records on its balance
sheet the present value of the lease receivable as minimum lease payments
receivable and, if appropriate, the estimated residual values of the
leased equipment. The Company typically assigns, on a nonrecourse basis,
the noncancelable lease rentals to financial institutions at fixed
interest rates. When leases are assigned to financial institutions,
without recourse, the discounted value of the lease rentals is recorded
on the balance sheet as discounted lease rentals assigned to lenders. The
related obligation resulting from the discounting of the leases is
recorded as nonrecourse debt. In the event of default by a lessee, the
lender has a first lien against the underlying leased equipment, with no
further recourse against the Company.
Effective July 1, 1988, the Company adopted Statement of Financial
Accounting Standards No. 91, "Accounting for Nonrefundable Fees and Costs
Associated With Originating or Acquiring Loans and Initial Direct Costs
of Leases." A portion of the Company's selling, general and
administrative costs directly related to originating capital leases
transactions during the period is deferred as an increase in revenues and
amortized over the lease term utilizing the effective interest method.
See Note 5.
Operating Leases
Lease contracts which do not meet the criteria of capital leases are
accounted for as operating leases. Equipment 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.
Inventories
Inventories, which primarily represent partial deliveries of equipment on
in-process lease transactions whereby the lessee is legally obligated to
accept, are stated at the lower of cost (first-in, first-out method) or
market value.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net Earnings per Common Share
Net earnings per common share are computed based on the weighted average
number of common shares outstanding during each fiscal year (5,848,594 in
1994, 5,830,561 in 1993 and 5,813,291 in 1992).
Reclassifications
Certain reclassifications have been made to the fiscal 1993 and 1992
consolidated financial statements to conform with the presentation of the
fiscal 1994 consolidated financial statements.
Note 2 - Receivables:
The Company's net receivables consist of the following:
June 30,
1994 1993
Financial institutions $32,241,312 $26,611,057
Lessees 7,640,218 5,323,373
Other 868,976 1,680,633
Total before allowances 40,750,506 33,615,063
Less allowance for doubtful accounts ( 845,325) ( 545,125)
Net receivables $39,905,181 $33,069,938
Note 3 - Capital Leases:
The Company's net investment in capital leases consists of the
following:
June 30,
1994 1993
Minimum lease payments receivable, less allowance for
doubtful accounts of $475,000 $34,370,750 $40,450,902
Estimated unguaranteed residual value, less
valuation allowance of $542,274 and
$394,403, respectively 35,252,670 30,492,767
Total before unearned income 69,623,420 70,943,669
Less: unearned income (10,318,421) (15,245,122)
Net investment in capital leases $59,304,999 $55,698,547
The interest rates used to discount lease payments reflect the underlying
lease rates and range from 6.3% to 14.95%.
The estimated unguaranteed residual value represents the estimated
amount to be received at lease termination from the disposition of
equipment under the capital leases, discounted using the internal rate of
return related to each specific capital lease.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 1994, a summary of the installments due on minimum lease
payments receivable and the expected realization of the Company's
estimated unguaranteed residual value is as follows:
Estimated
Minimum unguaranteed
Years ending lease payments residual
June 30, receivable value Total
1995 $ 19,892,304 $ 11,633,273 $ 31,525,577
1996 8,360,097 7,800,020 16,160,117
1997 3,418,093 8,807,799 12,225,892
1998 1,376,563 3,700,452 5,077,015
1999 1,323,693 3,115,975 4,439,668
Thereafter -0- 195,151 195,151
34,370,750 35,252,670 69,623,420
Less unearned income ( 3,247,072) ( 7,071,349) ( 10,318,421)
Net investment in capital leases
and estimated unguaranteed
residual value excluding deferred
interest income $ 31,123,678 $ 28,181,321 $ 59,304,999
Nonrecourse debt, which relates to the discounting of capital lease
receivables, bears interest at rates ranging from 5.87% to 16.5%.
Maturities of such obligations at June 30, 1994 are as follows:
Years ending Capital
June 30, leases
1995 $ 92,649,791
1996 68,912,031
1997 39,956,428
1998 17,642,059
1999 5,992,138
Thereafter 593,740
225,746,187
Deferred interest (Note 5) 24,192,113
Total discounted lease rentals assigned
to lenders $249,938,300
Note 4 - Notes Payable to Bank:
In August 1993, the Company negotiated a $20,000,000 general business
loan agreement (the "Agreement") with a Bank. The Agreement, which
provides for borrowings at the Bank's reference rate or the Bank's
Offshore rate plus 1.25%, allows for advances through December 31, 1994
with rollover provisions to a term note, provided certain conditions are
met by the Company. The term note is to be secured by certain qualifying
leases and is to bear interest at the Bank's reference rate plus .50% or
the Bank's Offshore rate plus 1.75%. The term note requires repayment in
three equal quarterly installments of one eighth of the outstanding
balance at the expiration date, commencing April 1, 1995, and one final
payment on December 31, 1995 for the remaining balance.
The Agreement is unsecured and excludes any arrangements for
compensating balances; however, the Bank requires a commitment fee on the
daily average unused amount of the Bank's $20,000,000 commitment. Under
the provisions of the Agreement, the Company must maintain certain net
worth requirements, a defined debt to net worth ratio and a defined ratio
of certain assets to defined debt. As of June 30, 1994 there were no
outstanding balances on this Agreement.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 1993, the Company entered into an agreement, as amended
in August 1994, to borrow $10,000,000 (the "Note") at an interest rate
equal to the prime rate. This Note is secured by an in-process lease
transaction (the "Lease"). This Lease is secured by an $11,000,000 letter
of credit issued by a different financial institution. Interest is payable
monthly commencing January 15, 1994 and the Note is due on October 31,
1994. The financial institution which issued the Note has agreed to
finance the Lease on a nonrecourse basis through the due date of the Note.
Note 5 - Deferred Interest Income and Net Deferred Income:
At June 30, 1994, deferred interest income of $24,192,113 is offset
by deferred interest expense related to the Company's discounted lease
rentals assigned to lenders of $24,192,113. See Note 3.
At June 30, 1994, the expected recognition of net deferred income
(deferred gross margin of $9,870,422 less deferred selling expenses of
$6,126,943) on the Company's future statements of earnings is as follows:
Years ending
June 30,
1995 $1,320,749
1996 1,397,680
1997 432,042
1998 443,470
1999 100,494
Thereafter 49,044
Total net deferred income $3,743,479
Note 6 - Income Taxes:
Effective July 1, 1993, the Company adopted Financial Accounting
Standards No. 109 on Accounting for Income Taxes ("SFAS No. 109"). 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. The adoption of SFAS No. 109 did not
result in a charge to net income in 1994. Prior year financial statements
were not restated to reflect the new accounting standard.
The provision for income taxes is summarized as follows:
Years ended June 30,
1994 1993 1992
Current tax expense:
Federal $2,667,000 $3,161,000 $2,811,000
State 600,000 1,000,000 810,000
Total current 3,267,000 4,161,000 3,621,000
Deferred tax expense:
Federal 2,371,000 1,360,000 1,655,000
State 695,000 107,000 100,000
Total deferred 3,066,000 1,467,000 1,755,000
Total provision for income taxes $6,333,000 $5,628,000 $5,376,000
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.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income tax liabilities (assets) are composed of the
following:
June 30, 1994
Deferred income tax liabilities:
Tax operating leases $24,461,748
Other book/tax differences 866,775
Total liabilities 25,328,523
Deferred income tax assets:
Allowances and reserves ( 1,158,522)
Minimum tax credits/carryforwards ( 6,339,043)
Refunds due on overpayments ( 2,369,123)
State income taxes ( 200,337)
Total assets (10,067,025)
Net deferred income tax liabilities $15,261,498
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,
1994 1993 1992
Federal statutory rate 35.0% 34.0% 34.0%
State tax, net of federal benefit 4.8 4.8 4.8
Other (3.3) (2.3) (1.7)
Effective rate 36.5% 36.5% 37.1%
Note 7 - Capital Structure:
In September 1986, the Board of Directors and stockholders approved
an increase in the number of authorized shares of common stock to
20,000,000. 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 September 1984, the Company's stockholders approved a Stock Option
Plan (the "Plan"), which, as amended, provides that stock options may be
granted to officers, employees, consultants and other persons who have
made, or will make, major contributions toward the growth and development
of the Company. Stock options that are granted may entitle 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 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 has
reserved 650,000 shares of common stock for issuance under the Plan.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the Plan for the
periods indicated:
Exercise
Option price Options
outstanding per share exercisable
Outstanding at June 30, 1991 271,654 $ .28 - 16.25
Granted 122,833 13.00 - 15.00
Canceled ( 31,911) 7.00 - 16.25
Exercised ( 26,443) 1.92 - 8.25
Outstanding at June 30, 1992 336,133 .28 - 15.00
Granted 100,500 11.75 - 19.50
Canceled ( 8,734) 7.00 - 13.00
Exercised ( 11,642) 1.68 - 9.50
Outstanding at June 30, 1993 416,257 .28 - 19.50
Granted 124,667 18.00 - 20.25
Canceled ( 52,867) 7.00 - 20.25
Exercised ( 32,166) 7.00 - 17.25
Outstanding at June 30, 1994 455,891 $ .28 - 20.25 218,784
Note 8 - Fair Value of Financial Instruments:
The Company has estimated the fair value of its financial instruments
in compliance with Financial Accounting Standards No. 107 on Disclosure
About Fair Value of Financial Instruments. The estimates were made as of
June 30, 1994 based on relevant market information.
Fair value is a subjective and imprecise measurement that is based on
assumptions and market data which require significant judgement and may
only be valid at a particular point in time. The use of different market
assumptions or valuation methodologies may have a material effect on the
estimated fair value amounts. Accordingly, management cannot provide
assurance that the fair values presented are indicative of the amounts
that the Company could realize in a current market exchange.
The estimated fair value of financial instruments and the valuation
techniques used to estimate the fair value were as follows:
Estimated
At June 30, 1994 Book Value Fair Value
Financial Assets:
Cash and cash equivalents $29,334,914 $29,407,845
Financial Liabilities:
Note payable to bank 10,000,000 10,000,000
Cash and Cash Equivalents: For cash, the book value is a reasonable
estimate of fair value. For cash equivalents with original maturities less
than three months, the estimated fair value is based on the respective
market prices.
Note Payable to Bank: The fair value of the Note payable to bank
approximates book value because the interest rate on this instrument
adjusts with changes in market interest rates due to its short-term
maturity.
The fair value of the Company's net investment in capital leases is
not a required disclosure under SFAS No. 107.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Commitments and Contingencies:
Leases
The Company leases the majority of its corporate offices under an
operating lease which expires in fiscal 1998. Rent expense was $419,526
(1994), $427,327 (1993) and $386,500 (1992).
Future minimum lease payments under operating leases are as follows:
Years Ending Future Minimum
June 30, Lease Payments
1995 $ 543,221
1996 501,217
1997 501,217
1998 292,377
Thereafter -0-
Total minimum lease payments $1,838,032
Litigation
The Company has been named in lawsuits arising out of the Company's
normal business activities. The Company is vigorously defending such
actions. Management does not expect the outcome of any of these lawsuits,
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
Effective July 1, 1992, 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 will make
contributions equal to 25 percent of employee contributions which will
completely vest over a seven year period. The Company has made
contributions during the years ended June 30, 1994 and 1993 of $39,602 and
$27,622, respectively.
AMPLICON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Selected Quarterly Financial Data (Unaudited):
Summarized quarterly financial data for the fiscal years ended June
30, 1994 and 1993 is as follows:
Three Months Ended
September 30, December 31, March 31, June 30,
1994 (In thousands, except per share amounts)
Total revenues $45,746 $50,398 $49,090 $36,126
Gross profit 6,515 7,224 7,749 7,965
Net earnings 2,344 2,712 2,999 2,964
Net earnings per common share $ .40 $ .47 $ .51 $ .51
1993
Total revenues $40,536 $41,824 $40,511 $40,957
Gross profit 6,076 6,518 6,711 6,778
Net earnings 2,253 2,524 2,489 2,527
Net earnings per common share $ .39 $ .43 $ .43 $ .43
AMPLICON, INC. AND SUBSIDIARIES
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1994 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1994 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1994 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the Company's definitive proxy statement to be filed not
later than October 28, 1994 with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
AMPLICON, INC. AND SUBSIDIARIES
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. Amounts receivable from Related Parties and
Underwriters, Promoters and Employees other
than Related Parties................................. 27
VIII. Valuation and Qualifying Accounts.................... 28
All other schedules are omitted because of the absence of
conditions under which they are required or because all material
information required to be reported is included in the consolidated
financial statements and notes thereto.
(3) Exhibits:
See Index to Exhibits filed as part of this Form 10-K 29-31
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
fiscal 1994.
AMPLICON, INC. AND SUBSIDIARIES
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: Sept. 27, 1994
S. Leslie Jewett
Chief Financial Officer
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 Sept. 27, 1994
Patrick E. Paddon Officer and Director
Glen T. Tsuma /s/ Vice President, Treasurer, Chief Sept. 26, 1994
Glen T. Tsuma Operating Officer and Director
S. Leslie Jewett /s/ Chief Financial Officer Sept. 27, 1994
S. Leslie Jewett
Michael H. Lowry /s/ Director Sept. 22, 1994
Michael H. Lowry
Harris Ravine /s/ Director Sept. 23, 1994
Harris Ravine
AMPLICON, INC. AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
Balance at
Balance at Deductions End of Period Deductions
Beginning Amounts Amounts Not
Name of Debtor of Period Additions Collected Written Off Current Current
Year Ended June 30, 1992:
David E. Brill(1) $ 277,483 $ 8,566 $250,000 -0- $ 36,049 -0-
Year Ended June 30, 1993:
David E. Brill(1) $ 36,049 $ 2,400 -0- -0- $ 38,449 -0-
Year Ended June 30, 1994:
David E. Brill(1) $ 38,449 $ 2,477 -0- -0- $ 40,926 -0-
(1) Interest bearing note at the prime rate plus 1% with principal and
interest due one year after the funding or renewal dates.
AMPLICON, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance Charged to Accounts Balance
Beginning Costs and Written at End
Classifications of Period Expenses Off Period
Year ended June 30, 1992:
Allowance for doubtful accounts $1,020,125 $ -0- $ -0- $1,020,125
Allowance for valuation of
unguaranteed residual value $ 324,368 $ 70,035 $ -0- $ 394,403
Year ended June 30, 1993:
Allowance for doubtful accounts $1,020,125 $ -0- $ -0- $1,020,125
Allowance for valuation of
unguaranteed residual value $ 394,403 $ -0- $ -0- $ 394,403
Year ended June 30, 1994:
Allowance for doubtful accounts $1,020,125 $300,200 $ -0- $1,320,325
Allowance for valuation of
unguaranteed residual value $ 394,403 $147,871 $ -0- $ 542,274
Note: The allowance for doubtful accounts includes balances related to
receivables and capital leases described in Notes 2 and 3 of the Notes to
Consolidated Financial Statements.
AMPLICON, INC. AND SUBSIDIARIES
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 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 CircleBusiness Credit, Inc. (incorporated by
reference to Exhibit 10.11 to the Registration Statement on
Form S-1)
AMPLICON, INC. AND SUBSIDIARIES
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)
AMPLICON, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit Page No.
10.16 Security Agreement dated as of December 23, 1993 32-44
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.
11 Computation of Earnings per Share of Common Stock 45
22 List of Subsidiaries (incorporated by reference
to Exhibit 22 to the Registrant's 1988 Form 10-K)