-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WT2sAB0vMVJpVlylRLuuH2KiFhHYHV1upOOpMSFrbypB40peXsdNxVtWQaojdfC1 a0D18+whTC3eMb9T0LVo+Q== 0000803016-99-000006.txt : 19991227 0000803016-99-000006.hdr.sgml : 19991227 ACCESSION NUMBER: 0000803016-99-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMPLICON INC CENTRAL INDEX KEY: 0000803016 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 953162444 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15641 FILM NUMBER: 99718986 BUSINESS ADDRESS: STREET 1: 5 HUTTON CENTRE DR STE 500 CITY: SANTA ANA STATE: CA ZIP: 92707 BUSINESS PHONE: 7147517551 MAIL ADDRESS: STREET 1: 5 HUTTON CENTER DRIVE STREET 2: SUITE 500 CITY: SANTA ANA STATE: CA ZIP: 92707 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended June 30, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File number 0-15641 AMPLICON, INC. (Exact name of registrant as specified in its charter) California 95-3162444 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5 Hutton Centre Drive, Suite 500 Santa Ana, CA 92707 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714) 751-7551 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (Title of each class) Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _______X________ No________________ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.____________________ The aggregate market value of the Common Stock held by nonaffiliates of the Registrant as of September 10, 1999 was $51,070,718. Number of shares outstanding as of September 10, 1999: Common Stock 11,836,218 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 6 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 Item 8. Financial Statements and Supplementary Data 11-26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 27 PART III Item 10. Directors and Executive Officers of the Registrant 27 Item 11. Executive Compensation 27 Item 12. Security Ownership of Certain Beneficial Owners and Management 27 Item 13. Certain Relationships and Related Transactions 27 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 27 Signatures 28 Schedule II 29 Exhibit Index 30-32 1 AMPLICON, INC. PART I ITEM 1. BUSINESS General Amplicon leases and sells computer networks, mid-range computers, computer software, peripherals, workstations, telecommunications equipment, computer automated design and manufacturing equipment, office automation equipment and other items of personal property to customers located throughout the United States. The Company was incorporated in California in 1977. Unless the context otherwise requires, the terms "Amplicon" and "Company" as used herein refer to Amplicon, Inc. Computer Networks and Mid-Range Computers. The Company concentrates on the market for computer networks and mid-range computers since this market is particularly receptive to leasing services. The largest component of the Company's business consists of personal computers, workstations, printers, and software which are integrated into complete networks. Computer networks typically consist of a central server, which may be a mid-range computer or high-end microcomputer, multiple personal computers and workstations, network communications hardware and software, printers and associated products for microcomputer based networks. Computer networks generally range in cost from $100,000 to $3,000,000. Mid-range computers generally cost between $100,000 and $750,000 and are used primarily by subsidiaries and divisions of large companies to supplement mainframe computer systems, by middle-market companies for centralized data processing, and to upgrade personal computer networks. Mid-range computer systems typically consist of a central processing unit, multiple display terminals, printers, disk and tape drives, communications equipment and operating software. Mid-range systems and computer networks are modular and can be expanded to satisfy additional data processing requirements and perform additional functions by upgrading the central processing unit and/or server, and adding data storage devices and workstations to support additional users. Advances in microcomputer technology and enhancements to the capabilities of mid-range computer systems have led to the development of systems that better integrate data processing with word processing, file and retrieval systems, and electronic mail. The Company leases and sells mid-range computer systems manufactured primarily by International Business Machines Corporation ("IBM"), and Hewlett-Packard Co. ("HP"). Vendors of computer network products include IBM, and HP, as well as Compaq Computer Corporation ("Compaq"), Dell Computer Corporation ("Dell"), Gateway 2000, Inc., among many others, and software vendors such as Microsoft Corporation and Novell, Inc. Software. Amplicon leases operating system software products and specialized application software packages. These application software packages typically cost between $50,000 and $500,000. In addition to leasing stand-alone software packages, an increasing percentage of the cost of mid-range computer systems and networks consists of operating and application software. Other Electronic Equipment. Advances in microcomputer technology have also expanded the scope of other electronic equipment utilized by Amplicon's existing and targeted customer base. Amplicon leases and sells telecommunications equipment, computer automated design and computer automated manufacturing ("CAD/CAM") equipment, and office automation equipment. The telecommunications equipment leased by the Company includes digital private branch equipment, switching equipment and voice mail systems manufactured by Lucent Technologies, Siemens Business Communications Systems, Inc. and ITT Industries, as well as satellite tracking systems manufactured by Qualcomm Incorporated, and generally costs between $50,000 and $500,000. The CAD/CAM systems leased by the Company include those produced by IBM, HP, Intergraph Corporation and Sun Microsystems, Inc. and cost between $50,000 and $700,000 per system. The Company also leases imaging systems, testing equipment, copying equipment, retail point-of-sale systems and bank automatic teller machines. Production Equipment and Other Personal Property. The Company also leases technology related manufacturing and distribution management systems. These systems include complex computer controlled manufacturing and production systems, printing presses and warehouse distribution systems. In addition, the Company leases a wide variety of personal property in the "non-high technology" area, including machine tools, trucks and office furniture. 2 AMPLICON, INC. General (continued) Marketing Strategy The Company has developed and refined a direct marketing system utilizing a centralized telemarketing program. The program includes a system which maintains a confidential database of current and potential users of business property, a comprehensive formal training program to introduce new marketing employees to Amplicon's telemarketing techniques, and an in-house computer and telecommunications system. The Company implemented its current marketing system after having determined that a centralized telemarketing program would be more cost effective than field sales representatives. The use of telemarketing techniques rather than field sales representatives has enabled the Company to limit selling, general and administrative expenses and, consequently, allows the Company to offer more competitive rates to its customers. Amplicon identifies potential customers through a variety of methods. The Company purchases lists of computer users from private sources, conducts direct mail and telephone campaigns to generate sales leads, and maintains proprietary records of contacts made with potential customers by its account executives. Amplicon utilizes prospect management software to further enhance the productivity of the sales force. Specific information about potential customers is entered into an on-line confidential database accessible to each account executive through the personal computer network. As potential customers are contacted by account executives, the database is updated and supplemented with information about what computer and other equipment they are using, related lease expiration dates and any future equipment needs or replacement plans. The database allows account executives to identify efficiently the most likely purchaser or lessee of capital assets and to concentrate efforts on these prospective customers. Amplicon's data base, combined with the prospect management software, and an integrated in-house telecommunications system, permit the Company's sales management to monitor account executive activity, daily prospect status and pricing information. The ability to monitor account activity and offer immediate assistance in negotiating or pricing a transaction makes it possible for Amplicon to be responsive to its customers and prospects. Leasing and Sales Activities The Company's leases are generally for terms ranging from two to five years. All of the Company's leases are noncancelable "net" leases which contain "hell-or-high-water" provisions under which the lessee must make all lease payments regardless of any defects in the property, and which require the lessee to maintain and service the property, insure the property against casualty loss and pay all property, sales and other taxes. The Company retains ownership of the property it leases, and in the event of default by the lessee, the Company or the lender to whom the lease had been assigned may declare the lessee in default, accelerate all lease payments due under the lease and pursue other available remedies, including repossession of the property. Upon the expiration of the leases, the lessee typically has an option, which is dependent upon each lease's defined end of term options, to either purchase the property at a mutually agreeable price, or in the case of a "conditional sales contract," at a predetermined minimum price, or to renew the lease. If the purchase option is not exercised by the original lessee, once the leased property is returned to the Company, the Company will endeavor to locate a new lessee; however, if a new lessee cannot be located, then the Company seeks to sell the leased property. The terms of the Company's software leases are substantially similar to its equipment leases. The Company conducts its leasing business in a manner designed to conserve its working capital and minimize its credit exposure. The Company does not purchase leased property until it has received a binding noncancelable lease from its customer and, generally, has determined that the lease can be discounted with a bank or financial institution on a nonrecourse basis. Accordingly, a substantial portion of the Company's leases are discounted to banks or finance companies on a nonrecourse basis at fixed interest rates that reflect the customers' financial condition. Approximately 89.9% and 93.1% of the total dollar amount of new leases entered into by the Company during the fiscal years ended June 30, 1999 and 1998, respectively, were discounted to financial institutions. The institutional lender to which a lease has been assigned has no recourse against the Company, unless the Company is in default under the terms of the agreement by which a lease was assigned. The institution to which a lease has been assigned may take title to the leased property, but only in the event the lessee fails to make lease 3 AMPLICON, INC. Leasing and Sales Activities (Continued) lessee fails to make lease payments or otherwise defaults under the terms of the lease. If this occurs, the Company may not realize its residual investment in the leased property. From time to time, the Company retains in its own portfolio lease transactions that meet credit standards set by the Company. Some of these transactions are entered into when the value of the underlying leased property, or the credit profile of the lessee, would not be acceptable to other financial institutions. Each of these transactions must meet or exceed certain profitability requirements as established, on a case by case basis, by the Company's senior management. In addition, the Company invests in lease transactions which the Company believes could be placed at a later date with nonrecourse lenders on a lease-by- lease basis or in a portfolio. At June 30, 1999 and 1998, the discounted minimum lease payments receivable relative to leases maintained in the Company's portfolio amounted to $44,043,365 and $51,298,521, respectively. In certain instances, the Company will make payments to purchase leased property prior to the commencement of the lease and assignment to the nonrecourse debt source. The disbursements for such lease transactions in process are generally made to facilitate the property implementation schedule of the lessees. The lessee is contractually obligated to make rental payments directly to the Company during the period that the transaction is in process, and generally is obligated to reimburse the Company for all disbursements under certain circumstances. At June 30, 1999 and 1998, the Company's investment in property acquired for transactions in process amounted to $35,397,631 and $81,273,524, respectively. In June 1999, an application was filed to obtain permission to organize a national bank, with the Company as the sponsor. The organizers of the bank and the Company have conducted meetings with certain regulatory agencies, but have not yet obtained approval. If permission is granted by the applicable regulatory agencies, it is anticipated that the bank would operate as a wholly owned subsidiary of Amplicon. In part, the purpose of the bank would be to provide business loans to fund the purchase of capital assets that will be leased to corporations located throughout the United States that meet the credit parameters established by the bank. It is anticipated that the bank would gather deposits using electronic means and a centralized location similar to the Company's existing business methods. Customers The Company's customers are primarily subsidiaries and divisions of Fortune 1000 companies and middle-market companies with credit ratings acceptable to the lenders providing nonrecourse loans. The Company does not believe that the loss of any one customer would have a material adverse effect on its operations taken as a whole. Competition The Company competes in the distribution and lease financing of computer systems and networks, software, and other equipment with equipment brokers and dealers, other leasing companies, banks and other financial institutions and credit corporations which are affiliated with equipment manufacturers, such as, IBM, Dell, Compaq and HP. The Company believes that there is increased competition for new business and that such competition is heightened during periods when key vendors introduce significant new products. Changes by the manufacturers of systems leased by the Company with respect to pricing, maintenance or marketing practices could materially affect the Company. In addition, if credit corporations affiliated with manufacturers become more aggressive with respect to the financing terms offered, the Company's operations could be adversely affected. Many of the Company's competitors have substantially greater resources, capital, and more extensive and diversified operations than Amplicon. The Company believes the principal competitive factors in the industry which it serves are price, responsiveness to customer needs, flexibility in structuring lease financing arrangements, financial technical proficiency and the offering of a broad range of lease financing options. 4 AMPLICON, INC. Employees The Company, as of June 30, 1999, had 155 employees, including 93 sales managers and account executives and 22 professionals engaged in finance and credit. None of the Company's employees are represented by a labor union. The Company believes that its relations with its employees are satisfactory. ITEM 2. PROPERTIES At June 30, 1999, Amplicon occupied approximately 49,000 square feet of office space in Santa Ana, California leased from an unaffiliated party. The lease which covers the majority of the office space provides for monthly rental payments which average $77,224 from July 1999 through February 2003. ITEM 3. LEGAL PROCEEDINGS The Company is sometimes named as a defendant in litigation relating to its business operations. Management does not expect the outcome of any existing suit to have a material adverse effect on the Company's financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common stock of Amplicon, Inc. trades on the NASDAQ National Market System under the symbol AMPI. The following high and low closing sale prices for the periods shown reflect interdealer prices without retail markup, markdown or commissions and may not necessarily reflect actual transactions (adjusted for the Company's 2-for-1 common stock split effective October 17, 1997): High Low Fiscal year ended June 30, 1999 First Quarter.........................................$18.31 $12.25 Second Quarter.........................................16.25 12.75 Third Quarter..........................................16.375 10.375 Fourth Quarter.........................................15.00 8.313 Fiscal year ended June 30, 1998 First Quarter.........................................$16.25 $11.946 Second Quarter.........................................17.25 15.25 Third Quarter..........................................24.00 16.50 Fourth Quarter.........................................24.00 11.875 The Company had approximately 55 stockholders of record and in excess of 500 beneficial owners as of September 10, 1999. After considering the Company's profitability, liquidity and future operating cash requirements, the Board of Directors authorized a regular quarterly cash dividend policy. During the fiscal years ended June 30, 1999, 1998 and 1997 the Company declared cash dividends totaling $.16, $.16 and $.10, respectively, per common share. 5 AMPLICON, INC. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial data and operating information of the Company. Common share data has been adjusted for the Company's 2-for-1 common stock split effective October 17, 1997. Certain reclassifications have been made to the fiscal years prior to 1999 to conform with that years financial statement presentation. The selected financial data should be read in conjunction with the Financial Statements and notes thereto and Management's Discussion and Analysis of Results of Operations and Financial Condition contained herein.
YEARS ENDED JUNE 30, ------------------------------------------------ INCOME STATEMENT DATA 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- (in thousands, except per share amounts) Revenues: Direct financing leases $ 25,432 $ 25,609 $ 21,636 $ 17,733 $ 13,204 Sales-type leases 20,990 21,794 17,857 20,755 18,690 Operating leases 951 716 1,657 1,280 2,313 -------- -------- -------- -------- -------- 47,373 48,119 41,150 39,768 34,207 Sales of leased property 21,794 17,066 22,301 8,290 11,566 Interest and other income 2,004 581 637 733 1,034 -------- -------- -------- -------- -------- 71,171 65,766 64,088 48,791 46,807 -------- -------- -------- -------- -------- Costs Sales-type leases 7,005 7,881 9,406 5,786 5,721 Operating leases 86 28 111 266 123 Cost of leased property sold 12,011 6,765 6,661 3,459 6,787 Provision for credit losses 3,076 - 852 - 1,425 -------- -------- -------- -------- -------- 22,178 14,674 17,030 9,511 14,056 -------- -------- -------- -------- -------- Gross margin 48,993 51,092 47,058 39,280 32,751 Selling, general & administrative expenses 16,854 19,237 20,825 17,554 13,513 Interest expense-other 57 86 216 246 150 -------- -------- -------- -------- -------- Earnings before income taxes 32,082 31,769 26,017 21,480 19,088 Income taxes 12,352 12,549 10,277 8,484 7,540 -------- -------- -------- -------- -------- Net earnings $ 19,730 $ 19,220 $ 15,740 $ 12,996 $ 11,548 ======== ======== ======== ======== ======== COMMON SHARE DATA Basic earnings per share $ 1.66 $ 1.63 $ 1.35 $ 1.11 $ .99 ======== ======== ======== ======== ======== Diluted earnings per share $ 1.60 $ 1.55 $ 1.31 $ 1.09 $ .96 ======== ======== ======== ======== ======== Weighted average common shares outstanding 11,854 11,800 11,689 11,698 11,720 Diluted common shares outstanding 12,299 12,368 12,021 11,894 11,986 Cash dividends per share $ .16 $ .16 $ .10 $ .10 $ .10 ======== ======== ======== ======== ======== AS OF JUNE 30, BALANCE SHEET DATA 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- (in thousands, except per share data) Total assets $466,769 $505,626 $482,235 $454,205 $402,100 Note payable to bank - - 10,000 - - Nonrecourse debt 263,462 297,227 288,682 309,471 266,816 Stockholders' equity 153,493 135,945 117,754 102,665 91,364 Book value per common share $ 12.97 $ 11.49 $ 10.02 $ 8.79 $ 7.79
6 AMPLICON, INC. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations General Amplicon generates revenues from its leasing activities, the sale of leased property and from interest income earned on its cash and liquid investments. Direct financing lease revenues include interest income earned on the Company's investment in lease receivables and residuals and gains recognized on the sale of leases in which the Company retains no significant continuing interest. Revenues from sales-type leases consist of the re-lease of off-lease property ("lease extensions") and new lease transactions that qualify as sales-type leases, generally where the fair value of the property subject to the lease differs from the Company's carrying cost. Revenues from operating leases generally involves the short-term rental of leased property. The volume of new lease transactions booked during the year ended June 30, 1999 was approximately $161 million, compared to $232 million in fiscal 1998 and $223 million during fiscal 1997. Of the new leases booked during the fiscal year ended June 30, 1999, approximately 64% were structured as "true leases" where Amplicon owns the leased asset at the end of the term, while 36% were structured as "conditional sale leases" where the lessee generally may purchase the property at a predetermined minimum amount at the end of the term. For true lease transactions, the Company books a residual which is an estimate for accounting purposes of the fair market value of the leased property at lease termination. The Company's estimates are reviewed continuously to ensure reasonableness. However, the amounts the Company may ultimately realize could differ from such estimated amounts. The Company's operating results are subject to quarterly and annual fluctuations resulting from a variety of factors, including the volume of new lease originations, the volume and profitability from re-marketing leased property through re-lease or sale, variations in the mix of lease originations, the credit quality of our portfolio and economic conditions in general. The Company conducts its leasing business in a manner designed to minimize its credit exposures. However, the assumption of risk is a key source of earnings in the leasing industry and the Company is subject to risks through its investment in lease transactions in process, investment in lease receivables held in its own portfolio and residual investments. The Company establishes reserves to cover such risks and regularly reviews their adequacy considering levels of non-performing leases, lessees' financial condition, leased property values as well as general economic conditions and credit quality indicators. Fiscal Years Ended June 30, 1999 and 1998 REVENUES. Total revenues for the fiscal year ended June 30, 1999 were $71,171,493, an increase of $5,405,268, or 8%, from the prior year. This change was primarily the result of increases in sales of leased property and interest income of $4,728,010 and $1,422,263, respectively. The increase in sales of leased property was primarily due to a higher volume of lease transactions coming to end of term during fiscal 1999 where the leased property was sold to the lessee or a third-party. In addition, during the year the Company terminated one large lease transaction in process, which resulted in a significant sale of property to that customer. Interest and other income for fiscal year ended June 30, 1999 increased by $1,422,263 to $2,003,787, as compared to $581,524 in the prior year, primarily as a result of the Company maintaining higher levels of interest bearing cash and cash equivalents throughout fiscal 1999. Leasing revenues declined by $744,905, or 2%, for the fiscal year ended June 30, 1999. This reduction resulted from a decrease of $176,456 in direct financing revenue to $25,432,201 and a decrease in sales-type lease revenue of $803,588 to $20,990,135, offset by an increase in operating lease revenue of $235,119 to $951,292. The reduction in direct financing revenue can be attributed to lower interest income earned from a smaller investment in lease receivables held in our own portfolio, offset by higher unearned income recognized from residual 7 AMPLICON, INC. investments and assigned capital leases. The reduction in sales-type lease revenue can be attributed to a decrease in revenue from lease extensions, offset by increased revenue from new lease transactions structured as sales-type leases. The increase to operating lease revenue can be attributed to an increase in the volume of short-term lease renewals. GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1999 decreased by $2,097,942, or 4%, to $48,993,759 compared to $51,091,701 for the fiscal year ended June 30, 1998. The principal factors that contributed to the decrease in gross profit was lower profits realized from lease extensions and an increased provision for credit losses, offset by higher interest income from cash investments and higher income earned on sales-type leases. The increase in the provision for credit losses was primarily due to an increase in identified problems on residual investments related to assigned lease transactions, as well some increase in delinquencies on leases held in the Company's own lease portfolio. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the fiscal year ended June 30, 1999 decreased by $2,383,153, or 12.4%, as compared to the prior year. This decrease is the result of lower legal, salary and benefit expenses. INTEREST EXPENSE-OTHER. Interest expense-other was $57,695 for the year ended June 30, 1999 as compared to $85,733 for the year ended June 30, 1998. The decrease of $28,038 was primarily the result of lower fiscal year 1999 interest assessments made as the result of regulatory audits with various federal, state and local agencies. TAXES. The Company's tax rate was 38.5% and 39.5% for the fiscal years ended June 30, 1999 and 1998, respectively, representing its estimated annual tax rates for each respective year. Fiscal Years Ended June 30, 1998 and 1997 REVENUES. Total revenues for the fiscal year ended June 30, 1998 were $65,766,225, an increase of $1,677,985, or 3%, from the prior year. This change was primarily the result of a $6,968,520 increase in leasing revenues to $48,118,533, offset by a $5,235,335 decline in sales of leased property to $17,066,168. The 17% increase in leasing revenues for the fiscal year ended June 30, 1998 resulted from an increase in direct financing revenue of $3,972,915 to $25,608,657, an increase in sales-type lease revenue of $3,936,250 to $21,793,723, offset by a decrease of $940,645 in operating lease revenue to $716,153. The increase in direct financing revenue can be attributed to increases in unearned income recognized on a larger investment in lease receivables held in the Company's own portfolio, on assigned lease transactions as well as from residual investments. The increase in sales-type lease revenue can be attributed to an increase in revenue from lease extensions. The decrease to operating lease revenue can be attributed to a decrease in the volume of short-term lease renewals. The decrease in sales of leased property was primarily due to lower revenues recognized from leased property sales during fiscal 1998 as compared to a record revenue recognized in fiscal 1997. Interest and other income for fiscal year ended June 30, 1998 decreased by $55,200 to $581,524, as compared to $636,724 in the prior year, primarily as a result of the Company maintaining lower investment balances throughout fiscal year 1998. GROSS PROFIT. Gross profit for the fiscal year ended June 30, 1998 increased by $4,034,044, or 9%, to $51,091,701 compared to $47,057,657 for the fiscal year ended June 30, 1997. The principal factors that contributed to the increase in gross profit were a higher recognition of unearned income on direct financing leases, as described above, higher profits realized from lease extensions and a decline in the provision for credit losses, offset by lower profits from sales of leased property. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the fiscal year ended June 30, 1998 decreased by $1,587,492, or 7.6%, as compared to the prior year. This decrease is the result of lower legal, salary and benefit expenses. INTEREST EXPENSE-OTHER. Interest expense-other was $85,733 for the year ended June 30, 1998 as compared to $216,182 for the year ended June 30, 1997. The decrease of $130,449 was primarily the result of 8 AMPLICON, INC. lower fiscal year 1998 interest assessments made as the result of regulatory audits with various federal, state and local agencies. TAXES. The Company's tax rate was 39.5% for the fiscal years ended June 30, 1998 and 1997 representing its estimated annual tax rates for each respective year. Liquidity and Capital Resources The Company funds its operating activities through nonrecourse debt and internally generated funds. Capital expenditures for leased property purchases are primarily financed by assigning certain base term lease payments to banks or other financial institutions. The assigned lease payments are discounted at fixed rates such that the lease payments are sufficient to fully amortize the aggregate outstanding debt. The Company does not purchase property until it has received a noncancelable lease from its customer and, generally, has determined that the lease can be discounted on a nonrecourse basis. At June 30, 1999, the Company had outstanding nonrecourse debt aggregating $263,461,800 relating to property under capital leases. In the past, the Company has been able to obtain adequate nonrecourse funding commitments, and the Company believes it will be able to do so in the future. From time to time, the Company retains leases in its own portfolio rather than assigning the leases to financial institutions. During the fiscal year 1999, the Company decreased its net investment in leases by $7,255,156. This decrease was primarily due to fewer new lease transactions being held in the Company's own lease portfolio. The Company will often make payments to purchase leased property prior to the commencement of the lease and assignment to other financial institutions. The disbursements for such lease transactions in process are generally made to facilitate the property implementation schedule of the lessees. The lessee is contractually obligated by the lease to make rental payments directly to the Company during the period that the transaction is in process, and the lessee is generally obligated to reimburse the Company for all disbursements under certain circumstances. At June 30, 1999, the Company's investment in property acquired for transactions in process decreased by $45,875,893 to $35,397,631. This decrease was primarily due to the lower volume of new lease transactions originated during fiscal 1999. The Company generally funds its equity investments in leased property and transactions in process with internally generated funds and, if necessary, borrowings under a $20,000,000 general line of credit. At June 30, 1999, the Company did not have any borrowings outstanding on this line of credit. In November 1990 and April 1999, the Board of Directors authorized management, at its discretion, to repurchase up to 600,000 shares each, or a total of 1,200,000 of the Company's Common Stock. During the year ended June 30, 1999, the Company repurchased 54,000 shares at an aggregate cost of $712,298. As of September 11, 1999, 667,356 shares remain available under these authorizations. The need for cash used for operating activities will increase as the Company expands. The Company believes that existing cash balances, cash flow from operations, cash flows from its financing and investing activities, available borrowings under its existing credit facility, and assignments (on a nonrecourse basis) of anticipated lease payments will be sufficient to meet its foreseeable financing needs. Inflation has not had a significant impact upon the operations of the Company. Year 2000 The Year 2000 issue ("Y2K") is a problem that relates to the way that computers store, manipulate, and interpret dates that define the year using only two digits. These systems may experience problems handling dates beyond 1999 and therefore, could cause computer or other systems to fail or provide erroneous results. Date information can exist at any level of hardware or software from micro code to application programs, in files and databases, and might be present on any operating platform. 9 AMPLICON, INC. The Company has addressed this issue by implementing a program to assess, remediate and mitigate the potential impact of the Y2K problem. The Company is in the process of systematically addressing the Y2K compliance of its computer related hardware, major application software programs, externally supplied software, and major debt sources, vendors and customers. The Company's computer related hardware consists primarily of servers and desktop computers incorporated into a local area network and a telephone switch. The Company has completed its assessment of its internal hardware related to the local area network and the replacement of non-compliant hardware has been substantially completed. The Company completed an upgrade of its telephone switch and related software to bring it into compliance during the third quarter of fiscal 1999. The Company's major application software programs include three operating systems, four database engines, approximately ten vendor supplied software applications and one internally developed software application. The Company has completed its assessment of these major software application programs. Of these applications, all operating systems and database engines are compliant, as are all but one of the software applications. The Company is currently in the process of implementing the replacement for this software application, which should be completed by October 31, 1999. The total costs of the Company's Y2K project are estimated to be approximately $270,000, a significant portion of which would have been incurred within normal operating plans for maintaining the Company's systems. These costs have been funded through operating cash flows. The Company has contacted its major debt sources, vendors and customers with regard to their Y2K compliance and has received responses from most. All of the Company's major debt sources have advised the Company that they are or will be Y2K compliant by December 31, 1999. No vendors or customers have advised the Company that they do not expect to be compliant. However, almost all have cautioned the Company that they cannot predict if there might be a negative impact to their operations due to the non-compliance of an unrelated third party. The Company is in the process of addressing any material non-responsive customers and vendors during the first half of fiscal 2000. Management believes that the Company's internal systems are in substantial compliance with the Y2K at this time and that the Company should not have a material business risk as a result of this issue. It is difficult, however, to predict the effect of any third party non- readiness on our business. Significant Y2K failures in our systems or in the systems of third parties (or third parties upon whom they depend) could have an adverse effect on our financial results and operations. Potential problems that might occur could include an increase in credit losses due to Y2K problems for our lessees and disruption in the business of our debt sources which may result in lease funding delays for the Company. The amount of these potential credit losses or the degree of disruption cannot be determined at this time. The Company is currently finalizing contingency plans in the event that it does experience any such disruption. All Year 2000 information provided herein is a "Year 2000 Readiness Disclosure" as defined in the Year 2000 Information and Readiness Disclosure Act and is subject to the terms thereof. This Year 2000 information is provided pursuant to securities law requirements and it may not be relied upon as a form of express or implied covenant, warranty, representation or guarantee of any kind. Forward-Looking Statements This document contain forward-looking statements concerning our operations, business results and financial condition. These statements involve management assumptions as well as risks and uncertainties that may be difficult to predict. Consequently, if such management assumptions prove to be incorrect or such risks or uncertainties materialize, the Company's actual results could differ materially from the results forecast or implied in those statements. Factors that could cause such differences include, but are not limited to: economic conditions and trends; changes in interest rates; industry cycles and trends; changes in the market for leasing capital assets and other collateral due to market conditions, oversupply, obsolescence or other factors; disruptions in the capital markets; changes in laws or regulations, and competitive conditions and trends. 10 AMPLICON, INC. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and supplementary financial information are included herein at the pages indicated below: Page Number Reports of Independent Public Accountants 12 Balance Sheets at June 30, 1999 and 1998 13 Statements of Earnings for the years ended June 30, 1999, 1998 and 1997 14 Statements of Stockholders' Equity for the years ended June 30, 1999, 1998 and 1997 15 Statements of Cash Flows for the years ended June 30, 1999, 1998 and 1997 16 Notes to Financial Statements 17-26 Financial Statement Schedule for the years ended June 30, 1999, 1998, and 1997 Schedule II - Valuation and Qualifying Accounts 28 11 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Amplicon, Inc.: In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Amplicon, Inc. at June 30, 1999, and the results of its operations and its cash flows for the year ended June 30, 1999 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. Newport Beach, California PRICEWATERHOUSECOOPERS LLP August 13, 1999 To the Board of Directors and Stockholders of Amplicon, Inc.: We have audited the accompanying balance sheet of Amplicon, Inc. (a California corporation) as of June 30, 1998, and the related statements of earnings, stockholders' equity and cash flows for the years ended June 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amplicon, Inc. as of June 30, 1998, and the results of its operations and its cash flows for the years ended June 30, 1998 and 1997, in conformity with generally accepted accounting principles. As explained in Note 1 to the financial statements, effective January 1, 1997, the Company changed its method of accounting for transfers of financial assets. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule, for the years ended June 30, 1998 and 1997, listed in the index of financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Irvine, California ARTHUR ANDERSEN LLP July 31, 1998 12 AMPLICON, INC. BALANCE SHEETS
June 30, ---------------------------- ASSETS 1999 1998 - ------ ------------ ------------ Cash and cash equivalents (Note 1) $ 59,337,426 $ 15,192,477 Net receivables (Note 2) 22,784,507 17,992,343 Property acquired for transactions in process (Note 1) 35,397,631 81,273,524 Net investment in capital leases (Note 3) 84,617,350 92,632,854 Equipment on operating leases, less accumulated depreciation of $91,288 (1999) and $29,708 (1998) 8,537 - Other assets 1,161,979 1,308,140 Discounted lease rentals assigned to lenders (Note 3) 263,461,800 297,226,530 ------------ ------------ $466,769,230 $505,625,868 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Accounts payable $ 7,159,049 $ 25,658,503 Accrued liabilities 5,660,610 6,819,631 Customer deposits 7,507,322 9,958,313 Nonrecourse debt (Note 3) 263,461,800 297,226,530 Income taxes payable - including deferred taxes, net (Note 5) 29,405,562 30,018,030 ------------ ------------ 313,194,343 369,681,007 ------------ ------------ Commitments and contingencies (Notes 4 & 7) Stockholders' equity (Notes 4 & 6): Preferred stock; 2,500,000 shares authorized; none issued - - Common stock; $.01 par value; 40,000,000 shares authorized; 11,831,918 (1999) and 11,830,618 (1998) issued and outstanding 118,319 118,306 Additional paid in capital 6,708,936 6,910,912 Retained earnings 146,747,632 128,915,643 ------------ ------------ 153,574,887 135,944,861 ------------ ------------ $466,769,230 $505,625,868 ============ ============
The accompanying notes are an integral part of these balance sheets. 13 AMPLICON, INC. STATEMENTS OF EARNINGS
Years ended June 30, --------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Revenues: Direct financing leases $25,432,201 $25,608,657 $21,635,742 Sales-type leases 20,990,135 21,793,723 17,857,473 Operating leases 951,292 716,153 1,656,798 ----------- ----------- ----------- Leasing revenues 47,373,628 48,118,533 41,150,013 Sales of leased property 21,794,078 17,066,168 22,301,503 Interest and other income 2,003,787 581,524 636,724 ----------- ----------- ----------- 71,171,493 65,766,225 64,088,240 ----------- ----------- ----------- Costs: Sales-type leases 7,004,914 7,881,390 9,406,414 Operating leases 86,187 28,488 110,730 Cost of leased property sold 12,010,579 6,764,646 6,661,439 Provision for credit losses 3,076,054 - 852,000 ----------- ----------- ----------- 22,177,734 14,674,524 17,030,583 ----------- ----------- ----------- Gross profit 48,993,759 51,091,701 47,057,657 Selling, general and administrative expenses 16,854,189 19,237,342 20,824,834 Interest expense-other 57,695 85,733 216,182 ----------- ----------- ----------- Earnings before income taxes 32,081,875 31,768,626 26,016,641 Income taxes 12,352,000 12,549,000 10,277,000 ----------- ----------- ----------- Net earnings $19,729,875 $19,219,626 $15,739,641 =========== =========== =========== Basic earnings per common share $ 1.66 $ 1.63 $ 1.35 =========== =========== =========== Diluted earnings per common share $ 1.60 $ 1.55 $ 1.31 =========== =========== =========== Dividends declared per common share outstanding $ .16 $ .16 $ .10 =========== =========== =========== Weighted average common shares outstanding 11,854,441 11,800,206 11,688,980 =========== =========== =========== Diluted common shares outstanding 12,299,171 12,367,752 12,021,488 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 14 AMPLICON, INC. STATEMENTS OF STOCKHOLDERS' EQUITY
Other Additional compre- Common Stock paid in Retained hensive Shares Amount capital earnings income Total --------------------- ---------- ------------ ------- ------------ Balance, June 30, 1996 11,677,918 $116,780 $5,528,897 $ 97,017,263 $1,596 $102,664,536 Shares issued - Stock options exer- cised 84,600 846 603,860 - - 604,706 Shares re- purchased ( 10,000) ( 100)( 81,775) - - ( 81,875) Dividends declared - - - ( 1,171,136) - ( 1,171,136) Invest- ment secu- rities valua- tion adjust- ment - - - - (1,596) ( 1,596) Net earnings - - - 15,739,641 - 15,739,641 ---------- -------- ---------- ------------ ------ ----------- Balance, June 30, 1997 11,752,518 117,526 6,050,982 111,585,768 - 117,754,276 Shares issued - Stock options exer- cised 78,100 780 652,485 - - 653,265 Income tax bene- fit from exer- cise of non- qual- ified stock options - - 207,445 - - 207,445 Dividends declared - - - ( 1,889,751) - ( 1,889,751) Net earnings - - - 19,219,626 - 19,219,626 ---------- -------- ---------- ------------ ----- ------------ Balance, June 30, 1998 11,830,618 118,306 6,910,912 128,915,643 - 135,944,861 Shares issued - Stock options exer- cised 55,300 553 427,797 - - 428,350 Shares re- purchased ( 54,000)( 540)( 711,758) - - ( 712,298) Income tax benefit from exercise of non- qualified stock options - - 81,985 - - 81,985 Dividends declared - - - ( 1,897,886) - ( 1,897,886) Net earnings - - - 19,729,875 - 19,729,875 Balance, June 30, 1999 11,831,918 $118,319 $6,708,936 $146,747,632 $ - $153,574,887 ========== ======== ========== ============ ===== ============
The accompanying notes are an integral part of these financial statements. 15 AMPLICON, INC. STATEMENTS OF CASH FLOWS
Years ended June 30, ------------------------------------------ 1999 1998 1997 CASH FLOWS FROM OPERATING ------------ ------------ ------------ ACTIVITIES: Net earnings $ 19,729,875 $ 19,219,626 $ 15,739,641 Adjustments to reconcile net earnings to cash flows used for operating activities: Depreciation 85,624 28,487 110,729 Sale or lease of equipment previously on operating leases, net 4,005 - - Interest accretion of estimated unguaranteed residual values ( 6,616,611) ( 5,893,522) ( 4,634,756) Decrease in estimated unguaranteed residual values 14,671,334 11,639,988 10,396,836 Provision for credit losses 3,076,054 - 852,000 Net (decrease) increase in income taxes payable, including deferred taxes ( 530,483) 3,175,874 7,542,529 Net (increase) decrease in net receivables ( 5,272,164) 2,406,381 2,795,321 Net decrease (increase) in property acquired for transactions in process 45,875,893 ( 1,463,905) ( 34,030,208) Net (decrease) increase in accounts payable and accrued liabilities ( 19,658,475) 1,466,867 17,477,783 ------------ ------------ ------------ Net cash provided by operating activities 51,365,052 30,579,796 16,249,875 ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of available-for-sale securities - ( 180,997,695) ( 235,370,644) Proceeds from sale of available-for-sale securities - 180,997,695 236,551,015 Net decrease (increase) in minimum lease payments receivable 7,396,388 ( 209,238) ( 18,299,637) Purchase of equipment on operating leases ( 98,166) ( 26,975) ( 77,674) Net decrease (increase) in other assets 146,161 ( 119,073) 247,470 Estimated unguaranteed residual values recorded on leases ( 10,031,661) ( 11,796,606) ( 10,194,099) ------------ ------------ ------------ Net cash used for investing activities ( 2,587,278) ( 12,151,892) ( 27,143,569) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: (Payment) borrowing on note payable - ( 10,000,000) 10,000,000 Payments to repurchase common stock ( 712,298) - ( 81,875) (Decrease) increase in customer deposits ( 2,450,991) 2,221,099 ( 1,292,398) Dividends to stockholders ( 1,897,886) ( 1,889,751) ( 1,171,136) Proceeds from exercise of stock options 428,350 653,265 604,706 ------------ ------------ ------------ Net cash (used for) provided by financing activities ( 4,632,825) ( 9,015,387) 8,059,297 ------------ ------------ ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS 44,144,949 9,412,517 ( 2,834,397) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,192,477 5,779,960 8,614,357 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 59,337,426 $ 15,192,477 $ 5,779,960 ============ ============ ============ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES (Decrease) increase in lease rentals assigned to lenders and related nonrecourse debt ($ 33,764,730) $ 8,544,241 ($ 20,788,426) SUPPLEMENTAL DISCLOSURES ============ ============ ============ OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 57,695 $ 85,733 $ 216,182 ============ ============ ============ Income taxes $ 12,882,483 $ 9,373,126 $ 2,734,471 ============ ============ ============
The accompanying notes are an integral part of these financial statements. 16 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS THREE YEARS ENDED JUNE 30, 1999 Note 1 - Summary of Significant Accounting Policies: Nature of Operations Amplicon leases and sells computer networks, mid-range computers, computer software, peripherals, workstations, telecommunications equipment, computer automated design and manufacturing equipment, office automation equipment, and other items of business property to customers located throughout the United States. New lease transactions are generally structured as direct financing leases or sales-type leases. The re-lease of property that has come off lease may be accounted for as a sales-type lease or as an operating lease, depending on the terms of the re-lease. Leased property that comes off lease and is remarketed through a sale to the lessee or a third party is accounted for as sales of leased property. Basis of Presentation The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For purposes of these statements, cash and cash equivalents includes cash in banks, cash in demand deposit accounts and money market accounts. Fair Value of Financial Instruments The Company has estimated the fair value of its financial instruments in compliance with Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107"). For cash, the book value is a reasonable estimate of fair value. For cash equivalents, the estimated fair value is based on respective market prices which was equal to book value for all periods presented. The fair value of the Company's net investment in capital leases is not a required disclosure under SFAS No. 107. Leases Capital Leases For capital leases that qualify as direct financing leases, the aggregate lease payments receivable and estimated unguaranteed residual value, if any, are recorded on the balance sheet net of unearned income as net investment in capital leases. The unearned income is recognized as direct financing revenue over the lease term on an internal rate of return method. There are no costs and expenses related to direct financing leases since leasing revenue is recorded on a net basis. For capital leases that qualify as sales-type leases, the Company recognizes profit or loss at lease inception to the extent the fair value of the property leased differs from the Company's carrying value. The discounted value of the aggregate lease payments receivable is recorded as sales-type lease revenue. The property cost, less the discounted value of the residual, if any, and any initial direct costs are recorded as sales-type lease costs. For balance sheet purposes, the aggregate lease payments receivable, and estimated unguaranteed residual value, if any, are recorded on the balance sheet net of unearned income as net investment in capital leases. Unearned income is recognized as direct financing revenue over the lease term on an internal rate of return method. The estimated unguaranteed residual value is an estimate for accounting purposes of the fair market value of the lease property at lease termination. The estimates are reviewed continuously to ensure reasonableness, however the amounts the Company may ultimately realize could differ from the estimated amounts. 17 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS The Company typically assigns, on a nonrecourse basis, the minimum lease payments receivable to financial institutions at fixed interest rates. When leases are assigned to financial institutions, without recourse, the discounted value of the minimum lease payments receivable is recategorized on the balance sheet as discounted lease rentals assigned to lenders. The related obligations resulting from the discounting of the leases are recorded as nonrecourse debt. The unearned income related to the lease is reduced by the interest expense from the nonrecourse debt. In the event of default by a lessee, the lender has a first lien against the underlying leased property with no further recourse against the Company. If this occurs, the Company may not realize its residual investment in the leased property. Effective January 1, 1997, the Company has adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No. 125"). Under the requirements set forth in SFAS No. 125, the Company has accounted for qualifying transfers of financial assets occurring on or after January 1, 1997 by derecognizing all assets sold. The Company has recorded the gain on sale as part of direct financing revenue. Qualifying transfers which occurred prior to January 1, 1997 were precluded from adoption of SFAS No. 125 and the discounted value of the minimum lease payments receivable have been recognized as discounted lease rentals assigned to lenders. A portion of the Company's selling, general and administrative costs directly related to originating direct financing lease transactions is deferred as an increase to direct financing revenue and amortized over the lease term as a reduction to direct financing revenue utilizing the effective interest method. Operating Leases Lease contracts which do not meet the criteria of capital leases are accounted for as operating leases. Property on operating leases is recorded at cost and depreciated on a straight-line basis over the lease term to the estimated residual value at the termination of the lease. Rental income is recorded monthly or quarterly when due. Selling costs directly associated with the operating leases are deferred and amortized over the lease term. Provision for Credit Losses The reserve for doubtful accounts and residual valuation allowance ("provision for credit losses") is periodically reviewed for adequacy considering levels of past due leases and nonperforming assets, lessees' financial condition, leased property values as well as general economic conditions and credit quality indicators. The provision for credit losses is intended to provide for future events, which by their nature are uncertain. Therefore, changes in economic conditions or other events affecting specific lessees or industries may necessitate additions or deductions to the reserve for doubtful accounts or the residual valuation allowance. Property Acquired for Transactions in Process Property acquired for transactions in process primarily represents partial deliveries of property which the lessee has accepted on in- process lease transactions. Such amounts are stated at cost. Common Stock On September 12, 1997, the Company's Board of Directors announced a 2-for-1 Common Stock split to be effected on October 17, 1997, to stockholders of record as of September 26, 1997. These financial statements have been adjusted to reflect this stock split. 18 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS Earnings Per Share Effective December 31, 1997 the Company adopted Statement of Financial Accounting Standard No. 128 "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 requires the presentation of both basic and diluted net income per share for financial statement purposes. Basic net income per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per share includes the effect of the potential shares outstanding, including dilutive stock options, using the treasury stock method. The following table reconciles the components of the basic net income per share calculation to diluted net income per share.
Years ended June 30, ----------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Net earnings $19,729,875 $19,219,626 $15,739,641 =========== =========== =========== Weighted average number of common shares outstanding assuming no exercise of outstanding options 11,854,441 11,800,206 11,688,980 Dilutive stock options using the treasury stock method 444,730 567,546 332,508 ----------- ----------- ----------- 12,299,171 12,367,752 12,021,488 =========== =========== =========== Basic earnings per common share $ 1.66 $ 1.63 $ 1.35 =========== =========== =========== Diluted earnings per share $ 1.60 $ 1.55 $ 1.31 =========== =========== ===========
Reclassifications In fiscal 1999, the Company changed its presentation of reporting revenue and cost of sales on certain capital leases. Historically, for all capital leases, the Company recorded the discounted present value of the aggregate lease rentals as sales of equipment and the lease property cost less the discounted value of the residual, if any, as cost of equipment sold. The new presentation had no impact on either gross profit or net income. Total revenues as previously presented in 1998 and 1997, were $313,789,037 and $299,890,478, respectively. Total cost of sales as previously presented in 1998 and 1997 were $262,697,336 and $252,832,821, respectively. Certain reclassifications have been made to the fiscal 1998 and 1997 financial statements to conform with the presentation of the fiscal 1999 financial statements. Note 2 - Receivables: The Company's net receivables consist of the following:
June 30, --------------------------- 1999 1998 ----------- ----------- Financial institutions $12,665,586 $ 4,955,428 Lessees 10,796,391 13,084,013 Other 493,425 791,759 ----------- ----------- 23,955,402 18,831,200 Less allowance for doubtful accounts ( 1,170,895) ( 838,857) ----------- ----------- Net receivables $22,784,507 $17,992,343 =========== ===========
19 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS Note 3 - Capital Leases: The Company's net investment in capital leases consists of the following:
June 30, ---------------------------- 1999 1998 ------------ ------------ Minimum lease payments receivable, less allowance for doubtful accounts of $1,487,236 in 1999 and $856,585 in 1998 $ 51,406,881 $ 60,842,988 Estimated unguaranteed residual value, less valuation allowance of $2,816,276 in 1999 and $1,273,793 in 1998 52,111,083 54,519,202 ------------ ------------ 103,517,964 115,362,190 Less unearned income ( 18,900,614) ( 22,729,336) ------------ ------------ Net investment in capital leases $ 84,617,350 $ 92,632,854 ============ ============
The minimum lease payments receivable and estimated unguaranteed residual value are discounted using the internal rate of return method related to each specific capital lease. Unearned income includes the offset of initial direct costs of $9,171,547 and $9,878,696 at June 30, 1999 and 1998, respectively. At June 30, 1999, a summary of the installments due on minimum lease payments receivable and the expected maturity of the Company's estimated unguaranteed residual value, net of allowances, is as follows:
Estimated Minimum unguaranteed Years ending lease payments residual June 30, receivable value Total ------------ ----------- ----------- ------------ 2000 $29,427,145 $19,510,850 $ 48,937,995 2001 11,494,945 16,267,424 27,762,369 2002 4,915,614 10,633,240 15,548,854 2003 3,672,041 3,065,498 6,737,539 2004 1,861,142 2,520,865 4,382,007 Thereafter 35,994 113,206 149,200 ----------- ----------- ------------ 51,406,881 52,111,083 103,517,964 Less unearned income ( 6,296,945) (12,603,669) ( 18,900,614) ----------- ----------- ------------ Net investment in capital leases $45,109,936 $39,507,414 $ 84,617,350 =========== =========== ============
Included with unearned income on the estimated unguaranteed residual value is unearned income from assigned leases. 20 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS Nonrecourse debt, which relates to the discounting of capital lease receivables, bears interest at rates ranging from 5.80% to 15.60%. Maturities of such obligations at June 30, 1999 are as follows:
Years ending Capital June 30, leases ------------ ------------ 2000 $117,104,877 2001 75,194,155 2002 30,360,827 2003 12,570,331 2004 4,233,188 Thereafter 112,550 ------------ Total nonrecourse debt 239,575,928 Deferred interest income 23,885,872 ------------ Discounted lease rentals assigned to lenders $263,461,800 ============
At June 30, 1999, deferred interest expense of $23,885,872 is amortized against direct financing revenues related to the Company's discounted lease rentals assigned to lenders of $263,461,800 using the effective yield method. Note 4 - Note Payable to Bank: In December 1997, the Company negotiated a $20,000,000 general business loan agreement (the "Agreement") with a Bank. The Agreement, which provides for borrowings at the Bank's reference rate or the Bank's Offshore rate plus 1.00%, allows for advances through December 31, 1999 with rollover provisions to a term note, provided certain conditions are met by the Company. The term note is to be secured by certain qualifying leases and is to bear interest at the Bank's reference rate plus .25% or the Bank's Offshore rate plus 1.75%. The term note requires repayment in three equal quarterly installments of one eighth of the outstanding balance at the expiration date, commencing April 1, 2000, and one final payment on December 31, 2000, for the remaining balance. The Agreement is unsecured and excludes any arrangements for compensating balances; however, the Bank requires a commitment fee on the daily average unused amount of the Bank's $20,000,000 commitment. Under the provisions of the Agreement, the Company must maintain certain net worth requirements, a defined debt to net worth ratio and a defined ratio of certain assets to defined debt. As of June 30, 1999 and 1998, there was no borrowing outstanding on this Agreement. 21 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS Note 5 - Income Taxes: The Company accounts for its income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Among other provisions, this standard requires deferred tax balances to be determined using the enacted income tax rate for the years in which taxes will be paid or refunds received. From time to time, the Company is audited by various governmental taxing authorities. The Company believes that its accrual for income taxes is adequate for adjustments, if any, which may result from these examinations. The provision for income taxes is summarized as follows:
Years ended June 30, ----------------------------------------- 1999 1998 1997 ----------- ----------- ----------- Current tax expense: Federal $ 7,999,798 $ 7,697,441 $ 5,407,310 State 2,075,000 2,200,000 1,500,000 ----------- ----------- ----------- 10,074,798 9,897,441 6,907,310 ----------- ----------- ----------- Deferred tax expense: Federal 1,808,191 2,620,156 3,177,690 State 469,011 31,403 192,000 ----------- ----------- ----------- 2,277,202 2,651,559 3,369,690 ----------- ----------- ----------- $12,352,000 $12,549,000 $10,277,000 =========== =========== ===========
Deferred taxes result principally from the method of recording lease income on capital leases and depreciation methods for tax reporting, which differ from financial statement reporting. Deferred income tax liabilities (assets) are comprised of the following:
June 30, ---------------------------- 1999 1998 ----------- ----------- Deferred income tax liabilities: Tax operating leases $32,747,022 $33,353,407 Deferred selling expenses 3,760,334 4,050,265 Payments due - 1,315,834 ----------- ----------- Total liabilities 36,507,356 38,719,506 ----------- ----------- Deferred income tax assets: Refunds due ( 1,137,000) - Allowances and reserves ( 3,025,280) ( 3,968,978) Minimum tax credits/carryforwards ( 1,750,000) ( 3,537,117) Depreciation other than on operating leases ( 463,264) ( 425,381) State income taxes ( 726,250) ( 770,000) ----------- ----------- Total assets ( 7,101,794) ( 8,701,476) ----------- ----------- Net deferred income tax liabilities $29,405,562 $30,018,030 =========== ===========
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, ------------------------ 1999 1998 1997 ---- ---- ---- Federal statutory rate 35.0% 35.0% 35.0% State tax, net of federal benefit 4.6 4.6 4.8 Other ( 1.1) ( .1) ( .3) ----- ----- ----- Effective rate 38.5% 39.5% 39.5% ===== ===== =====
22 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS Note 6 - Capital Structure: In September 1986, the Board of Directors and stockholders approved an increase in the number of authorized shares of Common Stock to 40,000,000. The Board of Directors and stockholders further authorized the issuance of 2,500,000 shares of preferred stock, from time to time, in one or more series and to fix the voting powers, designations, preferences and the relative participating, optional or other rights, if any, of any wholly unissued series of preferred stock. In August 1985, the Company's stockholders approved a Stock Option Plan (the "1985 Plan"), which, as amended, provided that stock options would be granted to officers, employees, consultants and other persons who had made major contributions toward the growth and development of the Company. Stock options that were granted entitled the recipient to purchase shares of the Company's common stock at prices greater than, equal to or less than the estimated fair market value at the date of the grant. Under the 1985 Plan, stock options become exercisable over a three or five year period, commencing with the first anniversary of the date of the grant, and expire ten years from the date of the grant. The Company had reserved 1,300,000 shares of common stock for issuance under the 1985 Plan. No further grants will be made under the 1985 Plan. In November 1995, the Company's stockholders approved the 1995 Equity Participation Plan (the "1995 Plan") which succeeds the 1985 Plan. The 1995 Plan provides for the granting of options, restricted stock and stock appreciation rights ("SARs") to key employees, directors and consultants of the Company. Under the 1995 Plan, the maximum number of shares of Common Stock that may be issued upon the exercise of options or SARs, or upon the vesting of restricted stock awards, is 1,000,000. The maximum number of available shares of Common Stock will increase by an amount equal to 1% of the total number of issued and outstanding shares of Common Stock as of June 30 of the fiscal year immediately preceding such fiscal year. Each grant or issuance under the 1995 Plan will be set forth in a separate agreement and will indicate, as determined by the stock option committee, the type, terms, vesting period and conditions of the award. The following table summarizes the activity in the 1985 and 1995 Plans for the periods indicated:
For the years ended June 30, ---------------------------------------------------------- 1999 1998 1997 --------------------- ----------------- ----------------- Weighted Weighted Weighted average average average exercise exercise exercise Shares price Shares price Shares price ---------- -------- ------ -------- ------ -------- Options outstanding at the beginning of the year 938,350 $ 7.49 993,900 $ 6.97 969,700 $6.61 Granted 195,250 14.19 64,750 17.18 182,000 9.61 Exercised ( 55,300) 7.75 ( 78,100) 8.36 ( 84,600) 7.14 Canceled ( 62,700) 14.27 ( 42,200) 8.26 ( 73,200) 8.57 ---------- ------ -------- ------ -------- ----- Options outstanding at the end of the year 1,015,600 $ 8.35 938,350 $ 7.49 993,900 $6.97 ========== ====== ======== ====== ======== ===== Options exercisable 688,750 656,466 631,832 ========== ======== ======== Weighted average fair value of options granted $ 5.95 $ 6.07 $ 3.41 ========== ======== ========
23 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS
For the years ended June 30, 1999 ------------------------------------------------------ Options outstanding Options exercisable -------------------------------- -------------------- Weighted average remaining Weighted Weighted contractual average average Range of Number life exercise Number exercise exercise prices outstanding (in years) price exercisable price ------------------ ----------- ---------- --------- ----------- -------- $ 3.50 - $ 3.50 309,000 1.21 $ 3.50 309,000 $ 3.50 6.00 7.875 264,566 4.37 7.42 202,566 7.28 8.00 - 10.50 159,934 4.82 9.53 144,534 9.65 11.375 - 17.75 282,100 8.86 13.86 32,650 12.57 ----------------- --------- ---- ------ ------- ------ $ 3.50 - $17.75 1,015,600 4.73 $ 8.35 688,750 6.33 ================= ========= ==== ====== ======= ======
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 year ended June 30, 1999 1998 1997 ------------------------------------------- Net earnings $19,729,875 $19,219,626 $15,739,641 Proforma compensation cost ( 166,955) ( 48,266) ( 27,392) ----------- ----------- ----------- Proforma net earnings $19,562,920 $19,171,360 $15,712,249 =========== =========== =========== Proforma Basic EPS $ 1.65 $ 1.66 $ 1.34 =========== =========== =========== Proforma Diluted EPS $ 1.59 $ 1.55 $ 1.31 =========== =========== ===========
Since the FASB No. 123 method of accounting has not been applied to options granted prior to July 1, 1995, the resulting proforma compensation cost may not be indicative of that to be expected in future periods. The fair value of each grant is estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1999 and 1998.
For the year ended June 30, 1999 1998 --------------------------- Risk free interest rate 5.88% 5.47% Option life (in years) 5 5 Dividend yield 1.00% 1.00% Volatility 42.23% 33.29%
24 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS Note 7 - Commitments and Contingencies: Leases The Company leases its corporate offices under operating leases which expire in fiscal 2002 and 2003. Rent expense was $995,075 (1999), $774,165 (1998) and $604,559 (1997). Future minimum lease payments under the operating leases are as follows:
Years ending Future minimum June 30, lease payments ------------ -------------- 2000 $ 880,642 2001 903,966 2002 1,100,120 2003 691,764 ---------- $3,576,492 ==========
Litigation The Company is party to various legal actions and administrative proceedings and subject to various claims arising out of the Company's normal business activities. Management does not expect the outcome of any of these matters, individually and in the aggregate, to have a material adverse effect on the financial condition and results of operations of the Company. 401(k) Plan Employees of the Company may participate in a voluntary defined contribution plan (the "401K Plan") qualified under Section 401(k) of the Internal Revenue Code of 1986. Under the 401K Plan, employees who have met certain age and service requirements may contribute up to a certain percentage of their compensation. The Company has made contributions during the years ended June 30, 1999, 1998, and 1997 of $105,379, $107,172 and $131,573, respectively. Note 8- Selected Quarterly Financial Data (Unaudited): Summarized quarterly financial data for the fiscal years ended June 30, 1999 and 1998 is as follows:
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
25 AMPLICON, INC. NOTES TO FINANCIAL STATEMENTS
Three months ended ---------------------------------------------------- September 30, December 31, March 31, June 30, ------------- ------------ --------- -------- (In thousands, except per share amounts) 1998 ---- Total revenues $14,933 $18,277 $16,014 $16,542 Gross profit 11,153 13,109 13,010 13,820 Net earnings $ 3,965 $ 5,001 $ 4,809 $ 5,445 Basic earnings per common share $ .34 $ .42 $ .41 $ .46 Diluted earnings per common share $ .32 $ .40 $ .39 $ .44 Dividends declared per common share $ .04 $ .04 $ .04 $ .04
26 AMPLICON, INC. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Change in Registrant's Certifying Accountant (incorporated by reference to Item 5 to the Registrant's September 30, 1998 Form 10Q). PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1999 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1999, with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1999 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated herein by reference to the Company's definitive proxy statement to be filed not later than October 28, 1999 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of this Report (1) Financial Statements All financial statements of the Registrant as set forth under Part II Item 8 of this report on Form 10-K (2) Financial Statement Schedules: Schedule Number Description Page Number --------------- ----------- ----------- II. Valuation and Qualifying Accounts 28 All other schedules are omitted because of the absence of conditions under which they are required or because all material information required to be reported is included in the financial statements and notes thereto. (3) Exhibits: See Index to Exhibits filed as part of this Form 10-K 29-32 (b) Reports on Form 8-K There were no reports on Form 8-K filed during the fourth quarter of fiscal 1999. 27 AMPLICON, INC. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMPLICON, INC. By S. Leslie Jewett/s/ Date: September 27,1999 ------------------- S. Leslie Jewett POWER OF ATTORNEY Each person whose signature appears below hereby authorizes each of Patrick E. Paddon, S. Leslie Jewett and Glen T. Tsuma as attorney-in-fact to sign on his behalf, individually in each capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date - -------------------- -------------------------------- ------------------ Patrick E. Paddon/s/ President, Chief Executive September 27, 1999 - -------------------- Patrick E. Paddon Officer and Director Glen T. Tsuma/s/ Vice President, Treasurer, Chief September 27, 1999 - ---------------- Glen T. Tsuma Operating Officer and Director S. Leslie Jewett/s/ Chief Financial Officer September 27, 1999 - ------------------- S. Leslie Jewett Michael H. Lowry/s/ Director September 27, 1999 - ------------------- Michael H. Lowry Harris Ravine/s/ Director September 26, 1999 - ----------------- Harris Ravine 28 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, 1997: - --------------- Allowance for doubtful accounts $1,695,442 $ - $ - $1,695,442 Allowance for valuation of unguaranteed residual value $ 542,274 $ 852,000 $ - $1,394,274 Year ended June 30, 1998: - --------------- Allowance for doubtful accounts $1,695,442 $ - $ - $1,695,442 Allowance for valuation of unguaranteed residual value $1,394,274 $ - $120,481 $1,273,793 Year ended June 30, 1999: - --------------- Allowance for doubtful accounts $1,695,442 $1,300,000 $337,311 $2,658,131 Allowance for valuation of unguaranteed residual value $1,273,793 $1,776,054 $233,571 $2,816,276
Note: The allowance for doubtful accounts includes balances related to receivables and capital leases described in Notes 2 and 3 of the Notes to Financial Statements. 29 AMPLICON, INC. INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. - ---------------------------------------------------------------------------- 3.1 Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to Registrant's Registration Statement on Form S-1 File No. 33-9094 (the "Registration Statement on Form S-1")) 3.2 Certificate of Amendment of Articles of Incorporation of the Company, filed April 15, 1988 (incorporated by reference to Exhibit 3.2 to Registrant's 1988 Form 10-K) 3.3 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1) 3.4 Amendment and Restatement of Article VI of the Bylaws of the Company (incorporated by reference to Exhibit 3.4 to Registrant's 1988 Form 10-K) 10.1 1984 Stock Option Plan, as amended to date (incorporated by reference to Exhibit 10.1 to Registrant's Statement on Form S-8 File No. 33-27283) 10.2 Master Agreement for Lease Arrangement Transactions, dated as of October 14, 1985, between the Company and Chrysler Financial Corporation (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1) 10.3 Master Loan Agreement, dated as of July 18, 1986, between the Company and General Electric Credit Corporation (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1) 10.4 Master Agreement for Rental Payment Purchase Transactions, dated as of July 8, 1982, between the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1) 10.5 Form of Assignment of Lease - Without Recourse between the Company and The CIT Group/Equipment Financing, Inc. (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1) 10.6 Form of Assignment of Lease - Without Recourse between the Company and Circle Business Credit, Inc. (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1) 30 AMPLICON, INC. INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. - ---------------------------------------------------------------------------- 10.7 Master Agreement for Rental Payment Purchase Transactions, dated as of February 27, 1990, between the Company and Security Pacific Credit Corporation (incorporated by reference to Exhibit 10.7 to the Registrant's 1990 Form 10-K) 10.8 Credit Agreement, dated as of April 13, 1990 (the "Credit Agreement"), between the Company and Security Pacific National Bank (now Bank of America National Trust and Savings Association, and together with Security Pacific National Bank, "Bank of America") (incorporated by reference to Exhibit 10.8 to the Registrant's 1990 Form 10-K) 10.9 First Amendment to the Credit Agreement, dated November 19, 1990, between the Company and Bank of America (incorporated by reference to Exhibit 10.9 to the Registrant's 1991 Form 10-K) 10.10 Second Amendment to the Credit Agreement, dated December 17, 1991, between the Company and Bank of America (incorporated by reference to Exhibit 10.10 to the Registrant's 1992 Form 10-K) 10.11 Third Amendment to the Credit Agreement, dated February 25, 1992, between the Company and Bank of America (incorporated by reference to Exhibit 10.11 to the Registrant's 1992 Form 10-K) 10.12 Fourth Amendment to the Credit Agreement, dated April 27, 1992, between the Company and Bank of America (incorporated by reference to Exhibit 10.12 to the Registrant's 1992 Form 10-K) 10.13 Sublease Agreement and Amendment No. 1, dated October 31, 1990 and November 28, 1990, respectively, between the Company and Griffin Financial Services (incorporated by reference to Exhibit 10.13 to the Registrant's 1992 Form 10-K) 10.14 Fifth Amendment to the Credit Agreement, dated June 28, 1993, between the Company and Bank of America (incorporated by reference to Exhibit 10.14 to the Registrant's 1993 Form 10-K) 10.15 Business Loan Agreement, dated as of August 12, 1993, between the Company and Bank of America (incorporated by reference to Exhibit 10.15 to the Registrant's 1993 Form 10-K) 31 AMPLICON, INC. INDEX TO EXHIBITS Exhibit No. Description of Exhibit Page No. - ---------------------------------------------------------------------------- 10.16 Security Agreement dated as of December 23, 1993 and all amendments C, D, & E, dated April 19, 1994, July 18, 1994 and August 30, 1994, respectively between the Company and The CIT Group/Equipment Financing, Inc. (incorporated by reference to Exhibit 10.16 to the Registrant's 1994 Form 10-K). 10.17 Amendment One to Business Loan Agreement, dated as of December 16, 1994, between the Company and Bank of America (incorporated by reference to Exhibit 10.17 to the Registrant's 1995 Form 10-K). 10.18 Amendment Two to Business Loan Agreement, dated as of January 23, 1996, between the Company and Bank of America (incorporated by reference to Exhibit 10.18 to the Registrant's December 31, 1995 Form 10-Q). 10.19 Business Loan Agreement dated as of December 23, 1997 between the Company and Bank of America (incorporated by reference to Exhibit 10.19 to the Registrant's December 31, 1997 Form 10-Q). 10.20 Office Lease dated September 17, 1997, between the Company and GT Partners (incorporated by reference to Exhibit 10.20 to the Registrant's March 31, 1998 Form 10-Q). 32 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000803016 AMPLICON INC. 1,000 YEAR JUN-30-1999 JUN-30-1999 59,337 0 70,553 2,658 35,398 0 2,934 1,932 466,769 20,327 0 0 0 118 153,457 466,769 21,795 71,171 12,010 19,102 16,854 3,076 57 32,082 12,352 19,730 0 0 0 19,730 1.66 1.60
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